-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RfljSFGM6NQwZz1jAtLpzOKP9RRVGFn3KV/U/D7KCX9z+IcICTm0HL5S1Igrgbfm LTHvc8guOMhiUrG3ge6pRA== 0000912057-96-015812.txt : 19960731 0000912057-96-015812.hdr.sgml : 19960731 ACCESSION NUMBER: 0000912057-96-015812 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960730 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: LORONIX INFORMATION SYSTEMS INC CENTRAL INDEX KEY: 0000925538 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 330248747 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-24738 FILM NUMBER: 96601190 BUSINESS ADDRESS: STREET 1: 820 AIRPORT RD CITY: DURANGO STATE: CO ZIP: 81301 BUSINESS PHONE: 9702596161 MAIL ADDRESS: STREET 1: 820 AIRPORT RD CITY: DURANGO STATE: CO ZIP: 81301 10QSB 1 FORM 10-QSB UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC. 20549 FORM 10-QSB (MARK ONE) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996, OR [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT FOR THE TRANSITION PERIOD FROM ________ TO ________. COMMISSION FILE NUMBER: 0-24738 LORONIX INFORMATION SYSTEMS, INC. (EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER) NEVADA 33-0248747 (STATE OR OTHER JURISDICTION OF (IRS EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 820 AIRPORT ROAD, DURANGO, COLORADO 81301 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) ISSUER'S TELEPHONE NUMBER: (970) 259-6161 CHECK WHETHER THE ISSUER (1) FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITY EXCHANGE ACT OF 1934 DURING THE PAST 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO --- --- AS OF JULY 10, 1996, THERE WERE 4,667,936 SHARES OF THE ISSUER'S COMMON STOCK OUTSTANDING. LORONIX INFORMATION SYSTEMS, INC. INDEX PART I. FINANCIAL INFORMATION PAGE NO. ITEM 1. FINANCIAL STATEMENTS CONDENSED CONSOLIDATED BALANCE SHEET 1 FOR JUNE 30, 1996 CONDENSED CONSOLIDATED STATEMENTS 3 OF OPERATIONS FOR THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND JUNE 30, 1995 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 4 FOR SIX MONTHS ENDED JUNE 30, 1996 AND JUNE 30, 1995 NOTES TO CONDENSED CONSOLIDATED FINANCIAL 5 STATEMENTS ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF 6 FINANCIAL CONDITION AND RESULTS OF OPERATIONS PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY 11 HOLDERS ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12 SIGNATURES 13 PART I - FINANCIAL INFORMATION LORONIX INFORMATION SYSTEMS, INC. CONDENSED CONSOLIDATED BALANCE SHEET ASSETS JUNE 30, 1996 -------------- (UNAUDITED) Current assets: Cash and cash equivalents $4,570,414 Accounts receivable: Trade, net of allowance for doubtful accounts of $191,461 2,325,280 Officers and employees 148,445 Contracts in progress with earned revenue exceeding related progress billings 3,193,912 Inventory, net 1,052,311 Prepaid expenses and other assets 107,779 Deferred income taxes 154,000 -------------- Total current assets 11,552,141 Property and equipment, net of accumulated depreciation of $688,238 2,883,732 Software development costs, net of accumulated amortization of $446,188 430,712 Deposits and other assets 33,203 Goodwill, net of accumulated amortization of $46,083 11,361 Total assets $14,911,149 -------------- -------------- See accompanying notes to condensed consolidated financial statements 1 LORONIX INFORMATION SYSTEMS, INC. CONDENSED CONSOLIDATED BALANCE SHEET LIABILITIES AND STOCKHOLDERS' EQUITY JUNE 30, 1996 -------------- (UNAUDITED) Current liabilities: Accounts payable $1,211,141 Accrued commission payable 261,893 Income tax payable 123,000 Accrued liabilities 132,564 Customer deposits 24,520 -------------- Total current liabilities 1,753,118 Deferred maintenance revenue 32,817 -------------- Total liabilities 1,785,935 Stockholders' equity: Preferred stock, $.001 par value, authorized 2,000,000 shares, no shares issued and outstanding - Common stock, $.001 par value, authorized 20,000,000 shares, issued and outstanding, 4,667,936 shares 4,668 Additional paid-in capital 15,288,676 Notes receivable from stockholders (244,231) Accumulated deficit (1,923,899) -------------- Total stockholders' equity 13,125,214 -------------- Total liabilities and stockholders' equity $14,911,149 -------------- -------------- See accompanying notes to condensed consolidated financial statements 2 LORONIX INFORMATION SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 1996 1995 1996 1995 --------------------------- --------------------------- (UNAUDITED) (UNAUDITED) Systems, supplies and maintenance revenue $2,822,268 $1,924,406 $5,544,279 $2,982,463 ------------ ------------ ------------ ------------ Operating costs and expenses: Cost of products sold 1,276,294 966,107 2,621,084 1,484,208 Operations and customer support 261,559 236,025 506,007 442,011 Selling, general and administrative 802,710 694,376 1,558,549 1,338,463 Research and development 231,363 199,069 446,978 368,667 ------------ ------------ ------------ ------------ Total cost and expenses 2,571,926 2,095,577 5,132,618 3,633,349 Income (loss) from operations 250,342 (171,171) 411,661 (650,886) Other income (expense): Interest income 66,083 114,987 157,534 239,120 Other 276 (180) (769) (418) ------------ ------------ ------------ ------------ 66,359 114,807 156,765 238,702 ------------ ------------ ------------ ------------ Income (loss) before income taxes 316,701 (56,364) 568,426 (412,184) Income (tax) benefit (48,213) - (124,013) 106,300 ------------ ------------ ------------ ------------ Net income (loss) $268,488 ($56,364) $444,413 ($305,884) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Income (loss) per share - primary and fully diluted $0.06 ($0.01) $0.10 ($0.07) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Weighted average shares outstanding 4,667,936 4,670,936 4,667,936 4,670,936 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
See accompanying notes to condensed consolidated financial statements 3 LORONIX INFORMATION SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
SIX MONTHS ENDED JUNE 30, 1996 1995 ------------------------------- (UNAUDITED) (UNAUDITED) Cash flows from operating activities: Net income (loss) $444,413 ($305,884) Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization 393,674 211,400 Changes in operating assets and liabilities: Increase in accounts receivable, net (452,984) (322,452) Increase in contracts in progress with earned revenue exceeding related progress billings (2,303,450) Decrease in inventory, net 230,267 306,945 Decrease (increase) in prepaid expenses 13,052 (21,023) Increase in deferred income taxes - (106,000) Increase (decrease) in accounts payable 515,921 (51,404) Increase (decrease) in accrued liabilities 69,711 (64,540) Increase (decrease) in customer deposits 24,520 (2,719) Decrease in deferred revenue (6,320) (14,798) -------------- -------------- Net cash used in operating activities (1,071,196) (370,475) -------------- -------------- Cash flows from investing activities: Capital expenditures (424,667) (443,600) Deposits (893) 2,049 Software development costs (149,600) (89,200) -------------- -------------- Net cash used in investing activities (575,160) (530,751) -------------- -------------- Cash flows from financing activities: Payments on notes payable - (63,216) Payments for offering costs - (1,332) -------------- -------------- Net cash used in financing activities - (64,548) -------------- -------------- Net decrease in cash and cash equivalents (1,646,356) (965,774) Cash and cash equivalents, beginning of period 6,216,770 8,887,944 -------------- -------------- Cash and cash equivalents, end of period $4,570,414 $7,922,170 -------------- -------------- -------------- -------------- Noncash investing activities: In 1996, the Company transferred inventory valued at $12,551 to property and equipment.
See accompanying notes to condensed consolidated financial statements 4 LORONIX INFORMATION SYSTEMS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (JUNE 30, 1996 - UNAUDITED) NOTE 1: BASIS OF PRESENTATION The accompanying condensed consolidated financial statements have been prepared in accordance with Securities and Exchange Commission requirements for interim financial statements. Therefore, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The financial statements should be read in conjunction with Loronix Information Systems, Inc's. Form 10-KSB for the year ended December 31, 1995. The results of operations for the interim periods shown in this report are not necessarily indicative of results to be expected for the full year. In the opinion of management, the information contained herein reflects all adjustments necessary to make the results of operations for the interim periods a fair statement of such operations. All such adjustments are of a normal recurring nature. 5 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with Loronix Information Systems, Inc.'s (the "Company") condensed financial statements and the notes related thereto included herein. RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE MONTHS ENDED JUNE 30, 1995 REVENUE The Company's revenue is derived from sales of systems and supplies and from maintenance services. Historically, systems and supplies have accounted for greater than 90% of total revenue, with system sales accounting for a substantial majority of total revenue. The Company expects this trend to continue for the foreseeable future. Revenue increased from $1.9 million in the second quarter of 1995 to $2.8 million in the second quarter of 1996, representing a 47% increase. Original Equipment Manufacturer ("OEM") sales decreased from $801,000 in the second quarter of 1995 to $122,000 in the second quarter of 1996, while sales from all other channels increased from $1.1 million in the second quarter of 1995 to $2.7 million in the second quarter of 1996. The decline in OEM revenue is primarily attributable to two factors. First, one of the Company's OEMs has elected to produce its own imaging products. Second, two of the Company's OEMs are evaluating their internal product strategies to determine which of the Company's products they will continue to offer. To address this decline in OEM sales the Company has increased its direct sales efforts, established a nationwide dealer network and is evaluating other potential OEM relationships. Revenue in the second quarter of 1996 included approximately $1.8 million associated with a contract between the Company and a U.S. subsidiary of a Middle Eastern multinational corporation which provides for the sale of security systems (the "Middle East Contract"). The Company believes it will record substantially all of the revenue under its Middle East Contract by year-end 1996. In July 1996, the Company received its first payment of $1.8 million under the terms of the Middle East Contract. COSTS AND EXPENSES COST OF PRODUCTS SOLD. The cost of products sold, consisting principally of the costs of hardware components and supplies as well as software amortization, increased from $966,000 in the second quarter of 1995 to $1.3 million in the second quarter of 1996, and represented 50% and 45% of revenue, respectively. The margin improvement is primarily attributed to increased margins on supplies and hardware items. OPERATIONS AND CUSTOMER SUPPORT. Operations and customer support expenses increased from $236,000 in the second quarter of 1995 to $262,000 in the second quarter of 1996, and represented 12% and 9% of revenue, respectively. The increase in such expenses resulted primarily from compensation-related increases and an increase in travel expenses. 6 SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative expenses increased from $694,000 in the second quarter of 1995 to $803,000, net of expense credits associated with the Middle East Contract, in the second quarter of 1996, and represented 36% and 28% of revenue, respectively. Of the $109,000 increase, $80,000 is attributable to the Company's United Kingdom subsidiary which did not exist in the second quarter of 1995. RESEARCH AND DEVELOPMENT. Research and development expenses, net of capitalized software costs, increased from $199,000 in the second quarter of 1995 to $231,000 in the second quarter of 1996, net of expense credits associated with the Middle East Contract, and represented 10% and 8% of revenue, respectively. The increase in such expenses resulted primarily from headcount and compensation-related increases and an increase in depreciation. INTEREST INCOME. Interest income decreased from $115,000 in the second quarter of 1995 to $66,000 in the second quarter of 1996. This decrease was due to a reduction in cash available for investment. INCOME TAX. There was no income tax provision for the second quarter of 1995. Income tax expense of $48,000 for the second quarter of 1996 was estimated to be 15% of pretax earnings. The Company's U.S. tax rate is less than the statutory federal rate of 34% primarily because of the benefit of net operating loss carry-forwards and research and experimentation credits. SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995 REVENUE Revenue increased from $3.0 million in the first six months of 1995 to $5.5 million in the first six months of 1996, representing an 83% increase. OEM sales decreased from $1.4 million in the first six months of 1995 to $606,000 in the first six months of 1996, while sales from all other channels increased from $1.6 million in the first six months of 1995 to $4.9 million in the first six months of 1996. Revenue in the first six months of 1996 included approximately $3.3 million associated with the Middle East Contract. COSTS AND EXPENSES COST OF PRODUCTS SOLD. The cost of products sold increased from $1.5 million in the first six months of 1995 to $2.6 million in the first six months of 1996, and represented 50% and 47% of revenue, respectively. The margin improvement is primarily attributed to increased margins on supplies and hardware items. OPERATIONS AND CUSTOMER SUPPORT. Operations and customer support expenses increased from $442,000 in the first six months of 1995 to $506,007, net of expense credits associated with the Middle East Contract, in the first six months of 1996, and represented 15% and 9% of revenue, respectively. The increase in expenses resulted primarily from compensation-related increases. 7 SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative expenses increased from $1.3 million in the first six months of 1995 to $1.6 million, net of expense credits associated with the Middle East Contract, in the first six months of 1996, and represented 45% and 28% of revenue, respectively. Of the $300,000 increase, $150,000 is attributable to the Company's United Kingdom subsidiary which did not exist in the first six months of 1995. The remaining $150,000 increase resulted primarily from compensation-related increases and increases in expenses associated with product promotions and depreciation. RESEARCH AND DEVELOPMENT. Research and development expenses, net of capitalized software costs, increased from $369,000 in the first six months of 1995 to $447,000, net of expense credits associated with the Middle East Contract, in the first six months of 1996, and represented 12% and 8% or revenue, respectively. The increase in such expenses resulted primarily from headcount and compensation-related increases and an increase in depreciation. INTEREST INCOME. Interest income decreased from $239,000 in the first six months of 1995 to $158,000 in the first six months of 1996. This decrease was due to a reduction of cash available for investment. INCOME TAX/BENEFIT. An income tax benefit for the first six months of 1995 was estimated to be 26% of the pretax loss. An income tax expense of $124,000 for the first six months of 1996 was estimated to be 22% of the pretax earnings. The Company's U.S. tax rate is less than the statutory federal rate of 34% primarily because of the benefit of net operating loss carry-forwards and research and experimentation credits. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES During the six months ended June 30, 1995 and 1996, the Company financed its operations primarily from working capital. The Company's principal uses of cash during the six months ended June 30, 1995 and 1996 were to (i) fund operating activities; (ii) acquire property and equipment; (iii) invest in the development of software; and (iv) in 1995, repay debt. During the first six months of 1995, the Company's cash and cash equivalents decreased from $8,887,944 at December 31, 1994 to $7,922,170 at June 30, 1995. Net cash used in operating activities of $370,475 consisted primarily of a net loss of $305,884, increases in accounts receivable and deferred income taxes and decreases in accounts payable and accrued liabilities of $544,696, offset by a decrease in inventory of $306,945. Net cash used in investing activities of $530,751 consisted primarily of $443,600 in capital expenditures and $89,200 in software development costs. Net cash used in financing activities of $64,548 consisted primarily of a final payment for land purchased in June 1992. During the first six months of 1996, the Company's cash and cash equivalents decreased from $6,216,770 at December 31, 1995 to $4,570,414 at June 30, 1996. Net cash used in operating activities of $1,071,196 consisted primarily of net income of $444,413, a decrease in inventory of $230,267 and increases in accounts payable and accrued liabilities of $585,632, offset by increases in accounts receivable and contracts in progress billings of $2,756,434. Net cash 8 used in investing activities of $575,160 consisted primarily of $424,293 of capital expenditures and $149,600 of software development costs. The Company anticipates capital expenditures for the remainder of 1996 of approximately $600,000. The Company believes it has sufficient cash to meet its capital requirements and fund operations for at least the next twelve months. CERTAIN FACTORS BEARING ON FUTURE RESULTS The statements in the third sentence and the second to last sentence under the caption "Revenue" on page 6 and in the second sentence of the fifth paragraph under the caption "Financial Condition, Liquidity and Capital Resources" on page 9 are forward-looking statements. In addition, the Company may from time to time make oral forward-looking statements. The following are important factors that could cause results to differ materially from those projected in any such forward-looking statements. OEM RELATIONSHIPS. Sales through OEMs have historically accounted for a significant portion of the Company's revenue. The Company believes its success in penetrating markets for its digital identification and video image management systems depends in large part on its ability to maintain its OEM relationships and to cultivate additional, similar relationships. There can be no assurance that OEMs, most of which have significantly greater financial and marketing resources than the Company, will not develop and market products in competition with the Company or will not otherwise discontinue their relationships with the Company. One of the Company's OEMs has elected to produce its own imaging products and may compete with the Company in the future. The loss of any further OEM relationships could have a negative impact on the Company's revenue stream. INTERNATIONAL SALES. The Company is seeking to expand its international presence by developing new distribution channels in certain foreign countries where it has not previously had a presence. For instance, the Company has established a wholly owned subsidiary in the United Kingdom and entered into the Middle East Contract. International sales are subject to a number of risks, including political and economic instability, unexpected changes in regulatory requirements, tariffs and other trade barriers, fluctuating exchange rates and the possibility of greater difficulty in accounts receivable collection. There can be no assurance that these and other factors will not have a material adverse effect on the Company's future international sales, if any, and, consequently, the Company's business, operating results and financial condition. DEPENDENCE ON A SINGLE CUSTOMER. The Middle East Contract accounted for 59% of the Company's revenue in the first six months of 1996, and it is expected to continue to account for a substantial percentage of the Company's revenue through September, 1996. The Company currently has no reason to believe that it will not be successful in fulfilling all of its obligations due to be performed under the Middle East Contract or receiving all the payments to be made thereunder; however, there can be no assurance that events or conditions may not occur which could threaten the Company's ability to complete the Middle East Contract or collect all amounts owed thereunder. If such events or conditions occur, the Company's business, operating results and financial condition would be materially adversely affected. In addition, there can be no assurance that any further revenue will arise after September 1996 from this customer. 9 COMPETITION. The Company's competitors include a broad range of companies that develop and market products for the identification market including: (i) in the film-based systems market, Polaroid Corporation and Eastman Kodak, Co., and (ii) in the digital identification and badge issuance systems market, Polaroid Corporation, Eastman Kodak, Co., Data Card Corporation, Dactek International, Inc., Image Base, Inc., G&A Imaging, Goddard Technology Corporation and Laminex, Inc. Certain of the Company's current and prospective competitors have substantially greater technical, financial and marketing resources than the Company. In addition, there can be no assurance that the Company's products will be competitive in the face of advances in product technology developed by the Company's current or future competitors. Moreover, while the Company believes that the price/performance characteristics of its products are currently competitive, increased competition from low-cost, low-functionality identification systems have created, and will continue to create, pricing pressures which could materially and adversely affect the Company's business, operating results and financial condition. PROPRIETARY RIGHTS. The Company is not aware that its products, trademarks or other proprietary rights infringe on the proprietary rights of any third parties. However, there can be no assurance that third parties will not assert infringement claims against the Company in the future with respect to current or future products. As the number of software products in the industry increases and the functionality of these products further overlaps, the Company believes that software developers may become increasingly subject to infringement claims. Any such claims, with or without merit, could result in costly litigation or might require the Company to enter into royalty or licensing agreements. Such royalty and licensing agreements, if required, may not be available on terms acceptable to the Company. PRODUCT OBSOLESCENCE. The Company's current products and products under development are limited in number and concentrated primarily in the markets for identification and surveillance products. The life cycles of the Company's products are difficult to estimate due in large measure to changing and developing technology as well as the unknown future effect of products introduced by the Company's competition. Price reductions or declines in demand for the Company's products, whether as a result of competition, technological change or otherwise, would have a materially adverse effect on the Company's results of operations or financial position. DEPENDENCE ON NEW PRODUCTS. The market for the Company's products is characterized by ongoing technological development and evolving industry standards. The Company's success will depend upon its ability to enhance its current products and to introduce new products which address technological and market developments and satisfy the increasingly sophisticated needs of customers. There can be no assurance that the Company will be successful in developing and marketing, on a timely basis, fully functional product enhancements of new products that respond to the technological advances by others, or that the Company's new products will be accepted by customers. VARIABILITY OF OPERATING RESULTS. The Company's revenue and operating results have fluctuated significantly from quarter to quarter, and may continue to fluctuate, due to a combination of factors. These factors include relatively long sales cycles for certain products, the timing or cancellation of orders from major customers, the timing of new product introductions by the Company or its competitors, the Company's use of third-party distribution channels, the 10 fulfillment of large on-time orders to particular customers and general economic conditions and other factors affecting capital spending. Additionally, the Company generally ships orders in the quarter in which such orders are received, and accordingly, revenue in any quarter is substantially dependent on the orders booked and shipped in that quarter. A small variation in revenue can cause significant variations in operating results from quarter to quarter and may result in losses. LEGAL PROCEEDINGS. The Company is currently involved in litigation with the Company's former Vice President of Marketing and Sales, who filed a lawsuit against the Company alleging breach of contract and fraud. This individual, who terminated his employment with the Company in May 1994 alleges that he was promised, but never received, options to purchase shares of the Company's Common Stock at a significant discount from fair market value and that he was deprived of certain sales commissions. A jury trial was scheduled to begin on April 29, 1996 but it was postponed and is currently scheduled to begin on September 30, 1996. Although the Company believes that this individual's claims are without merit and is defending this action vigorously, an adverse result in the litigation could have a negative impact on the results of operations. MANAGEMENT AND EMPLOYEES. The Company's future success depends in significant part upon the continued service of its key technical and senior management personnel and its continuing ability to attract and retain highly qualified technical and managerial personnel in the future. The Company has in the past encountered some difficulties in fulfilling its hiring needs in the Durango, Colorado employment market, and there can be no assurance that the Company will be successful in hiring and retaining qualified employees in the future. CAPITAL REQUIREMENTS. The Company believes that it has sufficient cash to meet its requirements for at least the next twelve months. While operating activities may provide cash in certain periods, to the extent the Company experiences growth in the future, it anticipates that it may require additional cash in its operating and investing activities, and accordingly, the Company may require additional capital resources. There can be no assurance that such capital resources will be available to the Company on favorable terms, if at all. VOLATILITY OF STOCK PRICE. In recent months, the stock market in general, and the market for shares of technology companies in particular, have experienced extreme price fluctuations, which have often been unrelated to the operating performance of the affected companies. In addition, factors such as quarterly variations in operating results, announcements of technological innovations or new products by the Company or its competitors, as well as other events or factors, may have a significant impact on the market price of the Company's Common Stock. There can be no assurance that the trading price of the Company's stock will remain at or near its current level. PART II. OTHER INFORMATION Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Matters submitted for a vote by security holders at the Company's May 20, 1996 annual meeting of stockholders included: 11 a) approval of the minutes of the 1994 annual meeting of stockholders; b) election of directors; c) ratification and approval of a 250,000 share increase in the Common Stock issuable under the 1992 Stock Plan; and d) ratification of the appointment of KPMG Peat Marwick LLP as independent auditors. The results of the stockholders votes was as follows: a) The minutes of the prior year's annual meeting of stockholders' were approved. Votes Votes Votes Votes For Against Withheld Abstained -------------------------------------------- b) Election of Directors: Edward Jankowski 3,476,763 24,136 M. Dean Gilliam 3,476,763 24,136 George M. Duffy 3,476,763 24,136 C. Rodney Wilger 3,476,763 24,136 Don W. Stevens 3,476,763 24,136 c) Increase in shares 2,022,855 121,089 7,564 issuable under the 1992 Stock Plan d) Appointment of KPMG 3,456,322 21,500 16,400 Peat Marwick LLP Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibit 27 - Financial Data (b) No reports on Form 8-K were filed by the Company during the quarter ended June 30, 1996. 12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Loronix Information Systems, Inc. July 30, 1996 /s/ Jonathan C. Lupia - ------------- --------------------- Date Jonathan C. Lupia Chief Financial Officer 13 EX-27 2 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATI0N EXTRACTED FROM THE LORONIX CONDENSED CONSOLIDATED BALANCE SHEET, STATEMENT OF OPERATIONS AND CASH FLOWS FROM ITS 10-QSB FOR THE QUARTER ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-1996 APR-01-1996 JUN-30-1996 4,570,414 0 2,516,741 191,461 1,052,311 11,552,141 3,571,970 688,238 14,911,149 1,753,118 0 0 0 4,668 13,120,546 14,911,149 2,822,268 2,822,268 1,276,294 1,276,294 1,295,632 0 0 316,701 48,213 268,488 0 0 0 268,488 0.06 0.06 The Company has two outstanding letters of credit collateralized by certificates of deposit totaling approximately $50,000.
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