Add
HBDT.OB to Portfolio
Set Alert
Email to a
Friend
| |||
|
|
Quotes & Info
|
| HBDT.OB > SEC Filings for HBDT.OB > Form 10-Q on 14-Aug-2009 | All Recent SEC Filings |
14-Aug-2009
Quarterly Report
InsPro Technologies offers InsPro on a licensed and an application service
provider ("ASP") basis. An InsPro software license entitles the purchaser a
perpetual license to a copy of the InsPro software installed at a single client
location, which may be used to drive a production and model office instance of
the application. The ASP Hosting Service enables a client to lease the InsPro
software, paying only for that capacity required to support their business. ASP
clients access an instance of InsPro installed on InsPro Technologies owned
servers located at InsPro Technologies' offices or at a third party's site.
Software maintenance fees apply to both licensed and ASP clients. Maintenance
fees cover periodic updates to the application and the InsPro Help Desk.
Consulting and implementation services are generally associated with the
implementation of an InsPro instance for either an ASP or licensed client, and
cover such activity as InsPro installation, configuration, modification of
InsPro functionality, client insurance plan set-up, client insurance document
design, and system documentation.
Insurint Corporation offers Insurint, which is a proprietary,
professional-grade, web-based agent portal that aggregates real-time quotes and
underwriting information from multiple highly-rated carriers of health and life
insurance and related products. Insurint typically charges its clients a one
time account set up fee, which is recognized as earned when collected and the
service has been provided, and recurring access fees, which are typically
monthly in frequency and are recognized as the service is provided.
The Company recognizes revenues in accordance with AICPA Statement of Position
(SOP) 97-2, Software Revenue Recognition, as amended by SOP 98-9 (Modification
of SOP 97-2, Software Revenue Recognition, With Respect to Certain
Transactions). Revenue from software license agreements is recognized when
persuasive evidence of an agreement exists, delivery of the software has
occurred, the fee is fixed or determinable, and collectibility is probable. The
Company considers fees relating to arrangements with payment terms extending
beyond one year to not be fixed or determinable and revenue for these
arrangements is recognized as payments become due from the customer. In software
arrangements that include more than one InsPro module, the Company allocates the
total arrangement fee among the modules based on the relative fair value of each
of the modules.
License revenue allocated to software products generally is recognized upon
delivery of the products or deferred and recognized in future periods to the
extent that an arrangement includes one or more elements to be delivered at a
future date and for which fair values have not been established. Revenue
allocated to maintenance agreements is recognized ratably over the maintenance
term and revenue allocated to training and other service elements is recognized
as the services are performed.
The unearned portion of InsPro Technologies' and Insurint's revenue, which is
revenue collected or billed but not yet recognized as earned, has been included
in the consolidated balance sheet as a liability for deferred revenue.
Under the criteria set forth in SOP 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" capitalization of software
development costs begins upon the establishment of technological feasibility of
the software. The establishment of technological feasibility and the ongoing
assessment of the recoverability of these costs require considerable judgment by
management with respect to certain external factors, including, but not limited
to, anticipated future gross product revenues, estimated economic life, and
changes in software and hardware technology. Capitalized software development
costs are amortized utilizing the straight-line method over the estimated
economic life of the software not to exceed three years. We regularly review the
carrying value of software development assets and a loss is recognized when the
unamortized costs are deemed unrecoverable based on the estimated cash flows to
be generated from the applicable software.
We review the carrying value of property and equipment and intangible assets for
impairment at least annually or whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Recoverability of long-lived assets is measured by comparison of its carrying
amount to the undiscounted cash flows that the asset or asset group is expected
to generate. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the
property, if any, exceeds its fair market value.
Effective January 1, 2006, we adopted the provisions of SFAS No. 123(R),
"Share-Based Payment," under the modified prospective method. SFAS No. 123(R)
eliminates accounting for share-based compensation transactions using the
intrinsic value method prescribed under APB Opinion No. 25, "Accounting for
Stock Issued to Employees," and requires instead that such transactions be
accounted for using a fair-value-based method. Under the modified prospective
method, we are required to recognize compensation cost for share-based payments
to employees based on their grant-date fair value from the beginning of the
fiscal period in which the recognition provisions are first applied. For periods
prior to adoption, the financial statements are unchanged, and the pro forma
disclosures previously required by SFAS No. 123, as amended by SFAS No. 148,
will continue to be required under SFAS No. 123(R) to the extent those amounts
differ from those in the Statement of Operations.
RESULTS OF OPERATIONS FOR THREE MONTHS ENDED JUNE 30, 2009 COMPARED TO THE THREE
MONTHS ENDED JUNE 30, 2008
Revenues
For the three months ended June 30, 2009 ("Second Quarter 2009"), we earned
revenues of $1,535,271 compared to $1,409,467 for the three months ended
June 30, 2008 ("Second Quarter 2008"), an increase of $125,804 or 9%. The
increase in consulting and implementation services is attributable to an
increase in work modification enhancements and data conversion required for
additional clients. The increase in ASP revenue is due to the implementation of
two new ASP agreements. The increase in maintenance fee revenue is due to two
clients with maintenance agreements. Revenues include the following:
For the Three Months Ended June 30,
2009 2008
Consulting and implementation services $ 985,534 $ 967,173
ASP revenue 349,469 293,294
Maintenance revenue 144,500 99,000
Insurint technology fees 46,768 50,000
Sub-leasing revenue 9,000 -
Total $ 1,535,271 $ 1,409,467
|
Consulting and implementation services are from seven InsPro clients. Implementation services provided to these clients included assisting clients in setting up their insurance products in InsPro, providing modifications to InsPro's functionality to support the client's business, interfacing InsPro with the client's other systems, automation of client correspondence to their customers and data conversion from the client's existing systems to InsPro.
In Second Quarter 2009 we earned ASP revenue from seven InsPro clients. ASP hosting service enables a client to lease the InsPro software, paying only for that capacity required to support their business. ASP clients access InsPro installed on InsPro Technologies owned servers located at InsPro Technologies' offices or at a third party's site.
In Second Quarter 2009 we earned maintenance revenues from four clients compared to two clients in Second Quarter 2008.
In Second Quarter 2009 we earned revenue of $46,768 relating to Insurint technology fees. The Company's Insurint subsidiary provides a proprietary, professional-grade, web based agent portal to support and assist insurance agents in the business of marketing and selling health insurance and related products. Insurint's technology fees commenced in the second quarter of 2008.
In Second Quarter 2009 we earned Sub-leasing revenue of $9,000 from the sub leasing of space in our Radnor office, which commenced in the first quarter of 2009.
Total Operating Expenses
Our total operating expenses for Second Quarter 2009 was $3,543,394 as compared
to $3,105,362 for Second Quarter 2008 for an increase of $438,032 or 14% as
compared to Second Quarter 2008. The primary reason for the increase in
operating expenses is attributable to an increase in InsPro Technologies'
staffing and technology consultants needed to support additional client
requirements and planned growth. Total operating expenses consisted of the
following:
For the Three Months Ended June 30,
2009 2008
Salaries, employee benefits and related taxes $ 1,820,438 $ 1,782,906
Advertising and other marketing 37,384 20,770
Depreciation and amortization 287,045 221,030
Rent, utilities, telephone and communications 205,847 157,247
Professional fees 811,066 573,944
Other general and administrative 381,614 349,465
Total $ 3,543,394 $ 3,105,362
|
In Second Quarter 2009 we incurred salaries, employee benefits and related taxes of $1,820,438 as compared to $1,782,906 for Second Quarter 2008, an increase of $37,532 or 2%. Salaries, commission and related taxes consisted of the following:
For the Three Months Ended June 30,
2009 2008
Salaries, wages and bonuses 1,497,163 $ 1,079,005
Share based employee and director compensation 90,315 506,691
Commissions to employees 17,095 -
Employee benefits 60,421 56,528
Payroll taxes 98,755 98,853
Severance and other compensation 20,191 13,329
Directors' compensation 36,498 28,500
Total $ 1,820,438 $ 1,782,906
|
Salaries, wages and bonuses were $1,497,163 in Second Quarter 2009 as compared to $1,079,005 in Second Quarter 2008, an increase of $418,158 or 39%. The increase is the result of the hiring of additional staff in InsPro Technologies' sales and technology departments and Insurint's sales departments to promote the growth in revenue and to service an expanding client base.
Share based employee and director compensation expense was $90,315 in Second Quarter 2009 as compared to $506,691 in Second Quarter 2008, a decrease of $416,376 or 82%. The decrease is primarily attributable to expense pertaining to an option grant to Mr. Alvin Clemens, who is the Company's former CEO, in the Second Quarter 2008, and to a lesser extent the vesting of stock grants and options to directors and employees. Share based employee and director compensation consist of stock option and restricted stock grants, which are valued at fair-value at the date of the grant and expensed over the stock option's vesting period or the duration of employment, whichever is shorter.
Commissions to employees represents commissions paid to InsPro Technologies and Insurint sales personnel.
Employee benefits expense increased as a result of the hiring of additional staff in InsPro Technologies and Insurint. The Company's employee benefit cost consists of the company paid portion of group medical, dental and life insurance coverage and partial Company matching of employee contributions to a 401(k) plan. The increase was the result of an increase in InsPro Technologies' and Insurint's staffing.
Advertising and other marketing in Second Quarter 2009 was $37,384 as compared to $20,770 in Second Quarter 2008. The increase was due to the use of outside agencies for services rendered in connection with the development of InsPro Technologies' marketing strategy including creating the corporate brand and message and redesign of all sales and marketing material, company web site, brochures and sales presentation.
Depreciation and amortization expense consisted of the following:
For the Three Months Ended June 30,
2009 2008
Amortization of intangibles acquired as a result of the
InsPro acquisition $ 117,019 $ 117,021
Amortization of software and website development for
external marketing 21,787 -
Amortization of software and website development for
internal use 67,042 50,232
Depreciation expense 81,197 53,777
Total $ 287,045 $ 221,030
|
In Second Quarter 2009 we incurred amortization expense of $117,019 for the intangible assets acquired from InsPro Technologies on October 1, 2007. Intangible assets acquired from InsPro Technologies were assigned the following values:
value of client contracts and relationships other than license with an assigned value of $1,089,223 amortized straight line over five years
value of purchased software for sale and licensing value with an assigned value of $644,449 amortized straight line over five years
employment and non-compete agreements acquired with an assigned value of $364,000 amortized straight line over three years.
In Second Quarter 2009 we incurred amortization expense of $21,787 for software development cost for external marketing pertaining to InsPro Technologies' InsPro system.
In Second Quarter 2009 we incurred amortization expense of $67,042 as compared to $50,232 in Second Quarter 2008 for software and website development for internal use pertaining to Insurint.
In Second Quarter 2009 we incurred depreciation expense of $81,197 as compared to $53,777 in Second Quarter 2008. The decrease was due to the impairment of assets on discontinued operations.
In Second Quarter 2009 we incurred rent, utilities, telephone and communications expense of $205,848 as compared to $157,247 in Second Quarter 2008, an increase of $48,600 or 31%. Rent, utilities, telephone and communications expenses consisted of the following:
For the Three Months Ended June 30,
2009 2008
Rent, utilities and other occupancy $ 165,237 $ 124,976
Telephone and communications 40,611 32,271
Total $ 205,848 $ 157,247
|
In Second Quarter 2009 we had an increase in rent, utilities and other occupancy due to the leasing of additional space to accommodate the increase in staffing in InsPro Technologies' Eddystone office.
In Second Quarter 2009 we incurred professional fees of $811,066 as compared to $573,944 in Second Quarter 2008, an increase of $237,122 or 41%. Professional fees consisted of the following:
For the Three Months Ended June 30,
2009 2008
Accounting and auditing $ 64,110 $ 64,237
Legal 196,069 114,931
Technology 494,507 273,924
All other 56,379 120,852
$ 811,065 $ 573,944
|
In Second Quarter 2009 we had an increase in legal fees as compared to Second Quarter 2008, which was primarily due to increased external legal support in general corporate matters
In Second Quarter 2009 we had an increase in technology fees as compared to Second Quarter 2008, which was attributable to an increase in technology consultants needed to support additional InsPro client requirements.
All other consulting consists of recruiting, investor relations and general management consulting expense, which decreased as a result of expense reduction actions in all three areas.
In Second Quarter 2009 we incurred other general and administrative expenses of $381,614 as compared to $349,464 in Second Quarter 2008, an increase of $32,150 or 9%. Other general and administrative expenses consisted of the following:
For the Three Months Ended June 30,
2009 2008
Office expenses $ 103,352 $ 93,986
Travel and entertainment 33,151 68,861
Insurance 22,799 21,367
Computer processing, hardware and software 161,442 117,225
Other 60,870 48,025
Total $ 381,614 $ 349,464
|
In Second Quarter 2009 office expense increased compared to Second Quarter 2008 due to costs associated with additional leased space at InsPro Technologies' Eddystone office.
We incur travel and entertainment expense in connection with marketing, sales and implementation of InsPro at client locations.
We incur computer processing fees associated with ASP hosting services. InsPro Technologies has a hosting services contract with a third party, which can be terminated with notice and payment of a termination fee. This third party provides InsPro Technologies with hosting services for our client's ASP production and test environments. In Second Quarter 2009 computer processing fees increased compared to Second Quarter 2008 due to the implementation of two additional ASP hosting agreements.
Loss from operations
As a result of the aforementioned factors, we reported a loss from operations of
$2,008,123 or $0.05 loss from operations per share in Second Quarter 2009 as
compared to a loss from operations of $1,695,895 or $0.04 loss per share in
Second Quarter 2008.
Gain (loss) on discontinued operations
Results from discontinued operations were as follows:
For the Three Months Ended June 30,
2009 2008
Revenues:
Commission and other revenue from carriers $ 369,189 $ 4,841,258
Gain recognized upon the execution of the Agreement - -
Transition policy commission pursuant to the Agreement 552,517 -
Lead sale revenue 51 103,176
Sub-lease revenue 323,578 40,535
1,245,335 4,984,969
Operating expenses:
Salaries, commission and related taxes 122,807 2,395,808
Lead, advertising and other marketing 5,223 1,049,995
Depreciation and amortization - 386,684
Rent, utilities, telephone and communications 2,438,615 532,444
Professional fees 109,484 94,437
Loss on impairment of property and equipment - -
Loss on impairment of intangible assets - -
Other general and administrative 137,742 182,787
(Gain) on disposal of property and equipment (8,665 ) -
2,805,206 4,642,155
Gain (loss) from discontinued operations $ (1,559,871 ) $ 342,814
|
During the first quarter of 2009, the Company ceased the direct marketing and
sale of health and life insurance and related products to individuals and
families in its Telesales call center. The Company also determined to
discontinue selling health and life insurance and related products to
individuals and families through its non employee ISG agents. During the first
quarter of 2009 the Company's Telesales business segment eliminated 43 positions
including all of its licensed employee sales agents along with other Telesales
service and support personnel and eliminated another 20 positions in Telesales
through attrition.
On February 20, 2009 (the "Closing Date"), the Company entered into and
completed the sale of the Company's Telesales call center produced agency
business (the "Agency Business") to eHealth, an unaffiliated third party,
. . .
|
|