**U.S. SECURITIES AND EXCHANGECOMMISSION**

**Washington, D.C. 20549**

** **

**FORM10-QSB**

** **

| **ý**                                                                                                                                                                                                                   | ** ** | **QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF  THE SECURITIES EXCHANGE ACT OF 1934**       |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------|
| ** **                                                                                                                                                                                                                   | ** ** | ** **                                                                                   |
| **For the quarterly period ended September 30,  2004**                                                                                                                                                                       |
| ** **                                                                                                                                                                                                                   | ** ** | ** **                                                                                   |
| **o**                                                                                                                                                                                                                        | ** ** | **TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF  THE SECURITIES EXCHANGE ACT OF 1934** |
| ** **                                                                                                                                                                                                                   | ** ** | ** **                                                                                   |
| **For the transition period from                  to                ** |
| ** **                                                                                                                                                                                                                   | ** ** | ** **                                                                                   |
| **Commission File number 001-10320**                                                                                                                                                                                         |

** **

**TimeAmerica, Inc.**

(Exact name of small business issuer as specified in its charter)

 

| **Nevada**                       | **13-3465289**       |
|----------------------------------|----------------------|
| (State  or other jurisdiction of | (I.R.S.  Employer    |
| incorporation  of organization)  | Identification  No.) |
|                             |                 |

 

**51 West Third Street, Suite 310, Tempe, Arizona 85281**

(Address of principal executive offices)

 

**(480) 296-0400**(Issuer’s telephone number)

 

**N/A**(Former name, former address and former fiscal year, if changed sincelast report)

 

 

Check whether the issuer: (1) filed all reports required to be filed bySection 13 or 15(d) of the Exchange Act during the past 12 months (or forsuch 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 ý  No o

 

State the number of shares outstanding of each of the issuer’s classesof common equity, as of the latest practicable date: At November 5, 2004, theissuer had outstanding 13,601,052 shares of Common Stock, par value $.005 pershare.

 

Transitional Small Business Disclosure Format:   Yes o  No ý

 

 

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**PART I – FINANCIAL INFORMATION**

** **

**Item 1 – Financial Statements.**

**TIME AMERICA, INC. AND SUBSIDIARY**

CONSOLIDATEDBALANCE SHEETS

 
| ** **                                                                                                            | ** ** | **September 30,** | ** ** | **June 30,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|--------------|------------|
| ** **                                                                                                            | ** ** | **2004**          | ** ** | **2004**     | ** ** |
| ** **                                                                                                            | ** ** | **(Unaudited)**   | ** ** | ** **   | ** ** |
| **ASSETS**                                                                                                            |
| **Current Assets:**                                                                                                   |       |              |       |         |       |
| Cash and cash equivalents                                                                                             |       | $                 | 1,840,826  |         | $          | 2,058,929 |   |
| Accounts receivable — trade, net                                                                                 |       | 1,339,294         |       | 1,028,850    |       |
| Inventory                                                                                                             |       | 443,187           |       | 370,784      |       |
| Prepaid expenses and other current assets                                                                             |       | 203,363           |       | 290,546      |       |
|                                                                                                                  |       |              |       |         |       |
| **Total Current Assets**                                                                                              |       | 3,826,670         |       | 3,749,109    |       |
|                                                                                                                  |       |              |       |         |       |
| **Property and equipment, net**                                                                                       |       | 204,372           |       | 203,309      |       |
| **Other Assets**                                                                                                      |       | 212,665           |       | 234,641      |       |
|                                                                                                                  |       |              |       |         |       |
| **Total Assets**                                                                                                      |       | $                 | 4,243,707  |         | $          | 4,187,059 |   |
|                                                                                                                  |       |              |       |         |       |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)**                                                               |
|                                                                                                                  |       |              |       |         |       |
| **Current Liabilities:**                                                                                              |       |              |       |         |       |
| Current portion of long-term debt                                                                                     |       | $                 | 788,032    |         | $          | 756,353 |   |
| Accounts payable                                                                                                      |       | 320,315           |       | 368,230      |       |
| Accrued liabilities                                                                                                   |       | 289,689           |       | 187,385      |       |
| Deferred revenue                                                                                                      |       | 747,310           |       | 416,513      |       |
|                                                                                                                  |       |              |       |         |       |
| **Total Current Liabilities**                                                                                         |       | 2,145,346         |       | 1,728,481    |       |
|                                                                                                                  |       |              |       |         |       |
| **Long-term debt, less current portion**                                                                              |       | 2,169,098         |       | 2,337,345    |       |
|                                                                                                                  |       |              |       |         |       |
| **Total Liabilities**                                                                                                 |       | 4,314,444         |       | 4,065,826    |       |
|                                                                                                                  |       |              |       |         |       |
| **Commitments:**                                                                                                      |       | —            |       | —       |       |
|                                                                                                                  |       |              |       |         |       |
| **Stockholders’ Equity (Deficit):**                                                                              |       |              |       |         |       |
| Common stock, $.005 par value, 50,000,000 shares authorized; 13,601,052  and 13,599,552 shares issued and outstanding |       | 68,006            |       | 67,998       |       |
| Contributed capital                                                                                                   |       | 8,027,474         |       | 8,027,121    |       |
| Accumulated deficit                                                                                                   |       | (8,166,217        | )          | (7,973,886   | )          |
|                                                                                                                  |       |              |       |         |       |
| **Total Stockholders’ Equity (Deficit)**                                                                         |       | (70,737           | )          | 121,233      |       |
|                                                                                                                  |       |              |       |         |       |
| **Total Liabilities and Stockholders’ Equity  (Deficit)**                                                        |       | $                 | 4,243,707  |         | $          | 4,187,059 |   |

 

SeeNotes to Consolidated Financial Statements

 

2

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#### ** **

#### **TIMEAMERICA, INC. AND SUBSIDIARY**

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 
| ** **                                        | ** ** | **Three Months Ended September 30,** | ** ** |
|---------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                        | ** ** | **2004**                             | ** ** | **2003** | ** ** |
| **Revenues:**                                     |       |                                 |       |   |   |
| Product sales                                     |       | $                                    | 998,930    |   | $ | 898,328 |   |
| Services revenue                                  |       | 454,895                              |       | 228,069 |   |
|                                              |       |                                 |       |   |   |
| **Total Revenues**                                |       | 1,453,825                            |       | 1,126,397 |   |
|                                              |       |                                 |       |   |   |
| **Cost of Revenues:**                             |       |                                 |       |   |   |
| Product                                           |       | 398,732                              |       | 386,024 |   |
| Services                                          |       | 167,221                              |       | 135,554 |   |
|                                              |       |                                 |       |   |   |
| **Total Cost of Revenues**                        |       | 565,953                              |       | 521,578 |   |
|                                              |       |                                 |       |   |   |
| **Gross Profit**                                  |       | 887,872                              |       | 604,819 |   |
|                                              |       |                                 |       |   |   |
| **Costs and Expenses:**                           |       |                                 |       |   |   |
| Sales and marketing                               |       | 464,103                              |       | 390,293 |   |
| Research and development                          |       | 287,772                              |       | 171,632 |   |
| General and administrative                        |       | 235,579                              |       | 184,649 |   |
|                                              |       |                                 |       |   |   |
| **Total Costs and Expenses**                      |       | 987,454                              |       | 746,574 |   |
|                                              |       |                                 |       |   |   |
| **Net Loss from Operations**                      |       | (99,582                              | )          | (141,755 | ) |
|                                              |       |                                 |       |   |   |
| **Other Income (Expense):**                       |       |                                 |       |   |   |
| Interest expense                                  |       | (98,511                              | )          | (19,811 | ) |
| Other                                             |       | —                               |       | (7 | ) |
| Interest income                                   |       | 5,762                                |       | — |   |
|                                              |       |                                 |       |   |   |
|                                              |       | (92,749                              | )          | (19,818 | ) |
|                                              |       |                                 |       |   |   |
| **Net Loss**                                      |       | $                                    | (192,331   | ) | $ | (161,573 | ) |
|                                              |       |                                 |       |   |   |
| **Basic Loss per Share**                          |       | $                                    | (0.01      | ) | $ | (0.01 | ) |
|                                              |       |                                 |       |   |   |
| **Weighted Average Number of Shares Outstanding** |       | 13,600,188                           |       | 11,476,709 |   |

 

SeeNotes to Consolidated Financial Statements

 

3

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#### **TIMEAMERCIA, INC. AND SUBSIDIARY**

CONSOLIDATEDSTATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

FORTHE YEAR ENDED JUNE 30, 2004 AND

THETHREE MONTH PERIOD ENDED SEPTEMBER 30, 2004 (Unaudited)

 
| ** **                            | ** ** | **Common Stock** | ** ** | **Contributed** | ** ** | **Accumulated** | ** ** | ** **  | ** ** |
|---------------------------------------|------------|------------------|------------|-----------------|------------|-----------------|------------|-------------|------------|
| ** **                            | ** ** | **Shares**       | ** ** | **Amount**      | ** ** | **Capital**     | ** ** | **Deficit** | ** ** | **Total** | ** ** |
| Balance at June 30, 2003              |       | 10,656,057       |       | $               | 53,280     |            | $          | 6,338,351   |       | $ | (6,823,443 | ) | $ | (431,812 | ) |
|                                  |       |             |       |            |       |            |       |        |       |   |   |
| Exercise of Warrants                  |       | 147,500          |       | 738             |       | 28,762          |       | —      |       | 29,500 |   |
| Exercise of stock options             |       | 8,996            |       | 45              |       | 3,328           |       | —      |       | 3,373 |   |
| Issuance of common stock warrants     |       | —           |       | —          |       | 156,200         |       | —      |       | 156,200 |   |
| Issuance of common stock for services |       | 50,000           |       | 250             |       | 54,750          |       | —      |       | 55,000 |   |
| Sale of common stock, net of costs    |       | 2,736,999        |       | 13,685          |       | 1,445,730       |       | —      |       | 1,459,415 |   |
| Net loss                              |       | —           |       | —          |       | —          |       | (1,150,443  | )          | (1,150,443 | ) |
| Balance at June 30, 2004              |       | 13,599,552       |       | 67,998          |       | 8,027,121       |       | (7,973,886  | )          | 121,233 |   |
|                                  |       |             |       |            |       |            |       |        |       |   |   |
| Exercise of stock options             |       | 1,500            |       | 8               |       | 353             |       | —      |       | 361 |   |
| Net loss                              |       | —           |       | —          |       | —          |       | (192,331    | )          | (192,331 | ) |
| Balance at September 30, 2004         |       | 13,601,052       |       | $               | 68,006     |            | $          | 8,027,474   |       | $ | (8,166,217 | ) | $ | (70,737 | ) |

 

See Notes to Consolidated Financial Statements

#### ** **

4

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#### **TIMEAMERICA, INC. AND SUBSIDIARY**

CONSOLIDATEDSTATEMENTS OF CASH FLOWS (UNAUDITED)

 
| ** **                                                                            | ** ** | **Three Months Ended  September 30,** | ** ** |
|---------------------------------------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                                            | ** ** | **2004**                                   | ** ** | **2003** | ** ** |
| **Increase (Decrease) in Cash and Cash  Equivalents:**                                | ** ** | ** **                                 | ** ** | ** ** | ** ** |
| **Cash flows from operating activities:**                                             |       |                                       |       |   |   |
| Net income (loss)                                                                     |       | $                                          | (192,331   | ) | $ | (161,573 | ) |
| Adjustments to reconcile net income (loss) to net cash used by  operating activities: |       |                                       |       |   |   |
| Depreciation                                                                          |       | 18,582                                     |       | 13,302 |   |
| Changes in Assets and Liabilities:                                                    |       |                                       |       |   |   |
| Accounts receivable-trade                                                             |       | (310,444                                   | )          | (258,135 | ) |
| Inventory                                                                             |       | (72,403                                    | )          | (9,689 | ) |
| Prepaid expenses and other current assets                                             |       | 87,183                                     |       | (7,414 | ) |
| Other assets                                                                          |       | 21,976                                     |       | — |   |
| Accounts payable                                                                      |       | (47,915                                    | )          | 9,998 |   |
| Accrued liabilities                                                                   |       | 102,304                                    |       | 23,283 |   |
| Deferred revenue                                                                      |       | 330,796                                    |       | 46,383 |   |
| **Net cash used by operating activities**                                             |       | (62,252                                    | )          | (343,845 | ) |
|                                                                                  |       |                                       |       |   |   |
| **Cash flows from investing activities:**                                             |       |                                       |       |   |   |
| Purchase of property and equipment                                                    |       | (19,644                                    | )          | (48,144 | ) |
| **Net cash used by investing activities**                                             |       | (19,644                                    | )          | (48,144 | ) |
|                                                                                  |       |                                       |       |   |   |
| **Cash flows from financing activities:**                                             |       |                                       |       |   |   |
| Repayment of capital leases                                                           |       | —                                     |       | (2,195 | ) |
| Repayment of debt                                                                     |       | (136,568                                   | )          | (30,333 | ) |
| Proceeds from exercise of options and warrants                                        |       | 361                                        |       | — |   |
| Proceeds from issuance of stock                                                       |       | —                                     |       | 549,397 |   |
| **Net cash provided (used) by financing activities**                                  |       | (136,207                                   | )          | 516,869 |   |
|                                                                                  |       |                                       |       |   |   |
| Net change in cash and cash equivalents                                               |       | (218,103                                   | )          | 124,880 |   |
|                                                                                  |       |                                       |       |   |   |
| Cash and cash equivalents at beginning of period                                      |       | 2,058,929                                  |       | 245,795 |   |
|                                                                                  |       |                                       |       |   |   |
| Cash and cash equivalents at end of period                                            |       | $                                          | 1,840,826  |   | $ | 370,675 |   |
|                                                                                  |       |                                       |       |   |   |
| **Supplemental disclosure of cash flow  information:**                                |       |                                       |       |   |   |
| Interest paid                                                                         |       | $                                          | 98,511     |   | $ | 19,811 |   |
| Income taxes paid                                                                     |       | $                                          | —     |   | $ | — |   |

 

SeeNotes to Consolidated Financial Statements

## ** **

5

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## **SUMMARY OF SIGNIFICANTACCOUNTING POLICIES**

 

**Basis of Presentation and Interim Consolidated Financial Statements**

 

The accompanying unaudited consolidated financialstatements of Time America, Inc. and subsidiary (“Time America” or the “Company”)have been prepared in accordance with generally accepted accounting principles(“GAAP”), pursuant to the rules and regulations of the Securities and ExchangeCommission, and are unaudited. Accordingly, they do not include all the information and footnotesrequired by GAAP for complete financial statements.  In the opinion of management, all adjustments(which include only normal recurring adjustments) necessary for a fairpresentation of the results for the interim periods presented have beenmade.  The results for the three monthperiod ended September 30, 2004, may not be indicative of the results for theentire year.  These financial statementsshould be read in conjunction with the Company’s Annual Report on Form 10-KSBfor the fiscal year ended June 30, 2004.

 

The preparation of financial statements in conformity withgenerally accepted accounting principles requires management to make estimatesand assumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the financialstatements and the reported amounts of revenues and expenses during the reportingperiod.  Actual results could differ fromthese estimates.

 

**Income(Loss) Per Share:**

 

Basicincome (loss) per share of common stock was computed bydividing the net income (loss) by the weighted average number of shares ofcommon stock outstanding.

 

Dilutedearnings per share are computed based on the weighted average number of sharesof common stock and dilutive securities outstanding during the period.  Dilutive securities are options and warrantsthat are freely exercisable into common stock at less than the prevailingmarket price. Dilutive securities are not included in the weighted averagenumber of shares when inclusion would increase the earnings per share ordecrease the loss per share.

 

**Stock Based Compensation:**

 

The Company accounts forstock-based compensation arrangements in accordance with the provisions ofAccounting Principles Board Opinion No. 25, “Accounting for Stock Issued toEmployees”, (“APB 25”).  Under APB 25, nocompensation expense is recognized because the exercise price of the Company’semployee stock options equals the market price of the underlying stock on thedate of grant.

 

The Company has adoptedthe disclosure-only provisions, as permitted by Statement of FinancialAccounting Standards No. 123 (“SFAS 123”). Under SFAS 123, companies can, but are not required to, elect torecognize compensation expense for all stock-based awards using a fair valuemethodology. Had compensation expense for stock-based compensation beendetermined based on the fair value of the options at the grant dates consistentwith the calculation methodology of SFAS 123, the Company’s net loss and lossper share would have been adjusted to the pro forma amounts presented below:

 

6

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| ** **                                                                                                                                       | ** ** | **Three Months Ended September 30,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                                                                                                                       | ** ** | **2004**                                  | ** ** | **2003** | ** ** |
| **Net loss:**                                                                                                                                    |       |                                      |       |   |   |
| As reported                                                                                                                                      |       | $                                         | (192,331   | ) | $ | (161,573 | ) |
|                                                                                                                                             |       |                                      |       |   |   |
| Deduct: Total stock-based employee compensation expense determined  under the fair value based method for all awards, net of related tax effects |       | (46,573                                   | )          | (22,843 | ) |
|                                                                                                                                             |       |                                      |       |   |   |
| Pro forma                                                                                                                                        |       | $                                         | (238,904   | ) | $ | (184,416 | ) |
|                                                                                                                                             |       |                                      |       |   |   |
| **Loss per share:**                                                                                                                              |       |                                      |       |   |   |
| As reported                                                                                                                                      |       | $                                         | (0.01      | ) | $ | (0.01 | ) |
| Pro forma                                                                                                                                        |       | $                                         | (0.02      | ) | $ | (0.02 | ) |

 

The fair value of option grants isestimated as of the date of grant utilizing the Black-Scholes option-pricingmodel with the following weighted average assumptions:

 
| ** **                | ** ** | **Three Months Ended September 30,** | ** ** |
|---------------------------|------------|-------------------------------------------|------------|
| ** **                | ** ** | **2004**                                  | ** ** | **2003** | ** ** |
| Expected volatility       |       | 76.0                                      | %          | 25.0 | % |
| Risk-free interest rate   |       | 4.0                                       | %          | 7.0 | % |
| Expected lives (in years) |       | 3.0                                       |       | 3.0 |   |

 

**Long-term Debt:**

 

In September 2004, the Company and a shareholderagreed to extend the balloon payment on a promissory note from October 1, 2004to October 1, 2005.  All other terms ofthe agreement remained unchanged.

 

**Subsequent Event:**

 

OnOctober 2004, the Company entered into a five year non-cancelable leaseagreement for facilitates that commences in January 1, 2005.  Annual expense under the agreement isapproximately $275,000 per year.

 

7

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**Item2. Management’s Discussion And Analysis Or Plan Of Operation.**

 

### **Critical AccountingPolicies**

 

Our significant accountingpolicies are described in the audited consolidated financial statements andnotes thereto included in theCompany’s Annual Report on Form 10-KSB for the year ended June 30, 2004.  We believe our most critical accountingpolicies are revenue recognition, software development costs and the allowancefor potentially uncollectible accounts receivable.

The Company derives its revenues from the sale offrontline labor management systems as well as sales of application software,parts and components.  The Company’ssystems consist of fully integrated software and intelligent data collectionterminals.  The Company also derivesrevenues by providing maintenance, professional and educational services to itscustomers.   The Company recognizesrevenues from sales of its systems, application software, parts and componentsat the time of shipment, unless the Company has significant obligationsremaining.  When significant obligationsremain, revenue is not recognized until such obligations have been completed orare no longer significant.  The Companyrecognizes revenues from its sales-type leases of systems at the time ofshipment.  Service and maintenancerevenues are recognized ratably over the contractual period or as the servicesare performed.

 

The Company provides installation services and certain warranties toits customers. It also provides, without additional charge, certain software product enhancements for customers coveredunder software maintenance contracts. The provision for these expenses are made at the time revenues arerecognized.

 

The Company capitalizes software development costs in accordance withStatement of Financial Accounting StandardsNo. 86, “Accounting for the Costs of Computer Software to be Sold, Leased, orOtherwise Marketed.” Capitalization of software development costs begins uponthe establishment of technological feasibility of the product.  The establishment of technologicalfeasibility and the ongoing assessment of the recoverability of these costsrequires considerable judgment by management with respect to certain externalfactors including, but not limited to, anticipated future gross productrevenue, estimated economic life, and changes in software and hardwaretechnology.  Amortization of capitalizedsoftware development costs begins when the products are available for generalrelease to customers and is computed on a product-by-product basis using straight-lineamortization with useful lives of five years or, if less, the remainingestimated economic life of the product. Amounts related to internal software development that could becapitalized under this statement were immaterial.

 

The Company provides for potentially uncollectible accounts receivableby use of the allowance method. The allowance is provided based upon a reviewof the individual accounts outstanding, and the Company’s prior history ofuncollectible accounts receivable. It is the Company’s practice to record anestimated allowance for sales returns and adjustments based on historicalexperience and to record individual charges for sales returns and adjustmentsdirectly to revenue as incurred.

### ** **

8

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### ** **

### **Comparisonof the Three Months Ended September 30, 2004 and September 30, 2003**

 

*Revenues*.  Revenue for the three month period endedSeptember 30, 2004 (the “reporting period”) rose 29% to $1,453,825, compared torevenue of $1,126,397 for the three month period ended September 30, 2003 (the “comparableperiod”).  The Company’s product salesincreased by 11% and services revenue increased by 99% over the comparableperiod.  The Company believes that theincrease in product revenue is primarily due to increased investments in salespersonnel and marketing programs.  Theincrease in services revenue was driven by a large service order in thequarter.

 

*                GrossProfit*.  Gross profit as a percentageof revenues increased to 61% in the reporting period, compared to 54% in thecomparable period.  The gross profitpercentage on product sales increased by 3% over the comparable period and thegross profit percentage on services revenue increased by 22% over thecomparable period.  The increase in thegross profit percentage on services revenue is due to the 99% increase inservices revenue while limiting the cost of services increase to only 23%.

 

                Thechange in the gross profit percentage on products is within the Company’snormal range of gross profit percentages. The Company’s gross profit percentage on products is typically between55% to 60% depending upon the mix of software versus hardware sales and themakeup of hardware sales.  The Company’sproduct revenue is comprised of software and hardware sales, with hardwaresales yielding a significantly lower gross profit than software sales.   Hardware revenue is principally comprised oftwo versions of general data collection terminals, badge terminals andbiometric units.  The gross profit isgreater on badge terminals than biometric units because we add value to ourbadge terminals by installing software on the terminals.

 

*Expenses*.  Total costs and expenses were $987,454, or68% of revenues, in the reporting period, compared to $746,574, or 66% ofrevenues, in the comparable period.  Theincrease in costs and expenses as a percentage of revenue in the reportingperiod is primarily due to a 68% increase in research and development expensesin the current period. Sales and marketing expenses were $464,103, or 32% ofrevenues, in the reporting period, compared to $390,293, or 35% of revenues, inthe comparable period. Research and development expenses were $287,772, or 20%of revenues, in the reporting period, compared to $171,632, or 15% of revenues,in the comparable period.  The increasein research and development expenses is primarily attributable to the hiring ofadditional technology personnel to assist in generating new technologies forthe Company. General and administrative expenses were $235,579, or 16% ofrevenues, in the reporting period, compared to $184,649, or 16% of revenues, inthe comparable period.

 

# **Liquidity and CapitalResources**

 

At September 30, 2004, theCompany had working capital of $1,681,324, compared to $371,097 at September30, 2003.  Cash and cash equivalents atthose dates amounted to $1,840,826 and $370,675, respectively.  The Company has funded its operations for thepast six years primarily through a combination of sales of equity securitiesand debt financing.

 

*Operations*.  Net cash used by operations improved to$62,252 in the reporting period, compared to net cash used by operations of$343,845 in the comparable period.  Thenet cash used in the current period was primarily attributable to the net lossalong with increases in accounts receivable and inventory and was offset byincreases in accrued liabilities and deferred revenue.

 

9

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*Investment Activities*.  For the reporting period, the Company used$19,644 to purchase property and equipment, compared to $48,144 of property andequipment purchases in the comparable period.

 

*Financing Activities.*  For the reporting period, the Company used$136,207 in financing activities primarily due to repayment of debt.  In the comparable period, the Companygenerated $516,869 in financing activities primarily due to proceeds fromissuance of common stock.

 

The Company’sliquidity is affected by many factors, some based on the normal ongoingoperations of the business and others related to the uncertainties of the timeand attendance industry and global economies. Although the Company’s cash requirements will fluctuate based on thetiming and extent of these factors, management believes that its current cashreserves, cash generated from operations, and the Company’s borrowing capacityunder its two credit facilities, will be sufficient to satisfy commitments forcapital expenditures and other cash requirements for the next 12 months.  The Company may, however, seek to obtainadditional capital through a line of credit at a financial institution orthrough additional debt or equity offerings during this time period.  The raising of additional capital in publicor private markets will primarily be dependent upon prevailing marketconditions and the demand for the Company’s products and services.  No assurance can be given that the Companywill be able to raise additional capital, when needed or at all, or that suchcapital, if available, will be on acceptable terms.

 

 

**Item3. Controls and Procedures.**

 

                As of the end of the period covered by thisreport, the Company carried out an evaluation, under the supervision and withthe participation of its Chief Executive Officer and Chief Financial Officer,of the effectiveness of the Company’s disclosure controls and procedures.Disclosure controls and procedures are designed to ensure that informationrequired to be disclosed in the periodic reports filed or submitted under theSecurities Exchange Act of 1934 is recorded, processed, summarized and reportedwithin the time periods specified in the Securities and Exchange Commission’srules and forms. Based upon that evaluation, the Chief Executive Officer andChief Financial Officer concluded that the Company’s disclosure controls andprocedures were effective as of the end of the quarterly period covered by thisreport.  No change in the internalcontrol over financial reporting occurred during the last fiscal quarter thathas materially affected, or is likely to materially affect, the internalcontrol over financial reporting.

# ** **

# **FORWARD-LOOKINGINFORMATION**

 

The statementscontained in this Quarterly Report on Form 10-QSB that are not historical factare forward-looking statements (as such term is defined in the PrivateSecurities Litigation Reform Act of 1995), which the Company believes arewithin the meaning of Section 27A of the Securities Act of 1933, as amended,and Section 21E of the Securities Exchange Act of 1934, as amended.  The forward-looking statements containedherein are based on current expectations that involve a number of risks anduncertainties.  These statements can beidentified by the use of forward-looking terminology such as “believes,” “expects,”“may,” “will,” “should,” or “anticipates,” or the negative thereof or othervariations thereon or comparable terminology, or by discussions of strategythat involve risks and uncertainties. The Company wishes to caution the reader that these forward-lookingstatements that are not historical facts are only predictions.  No assurances can be given that the futureresults indicated, whether expressed or implied, will be achieved.  While sometimes presented with numericalspecificity, these projections and other forward-looking statements are basedupon a variety of assumptions relating to the business of the

 

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Company, which, althoughconsidered reasonable by the Company, may not be realized.  Because of the number and range ofassumptions underlying the Company’s projections and forward-lookingstatements, many of which are subject to significant uncertainties andcontingencies that are beyond the reasonable control of the Company, some ofthe assumptions inevitably will not materialize, and unanticipated events andcircumstances may occur subsequent to the date of this report.  These forward-looking statements are based oncurrent expectations and the Company assumes no obligation to update thisinformation.  Therefore, the actualexperience of the Company and the results achieved during the period covered byany particular projections or forward-looking statements may differsubstantially from those projected. Consequently, the inclusion of projections and other forward-lookingstatements should not be regarded as a representation by the Company or any otherperson that these estimates and projections will be realized, and actualresults may vary materially.  There canbe no assurance that any of these expectations will be realized or that any ofthe forward-looking statements contained herein will prove to be accurate.

 

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##### **PARTII — OTHER INFORMATION**

 

**Item1. Legal Proceedings.**

 

The Company is from timeto time involved in legal proceedings arising from the normal course ofbusiness.   As of the date of thisreport, the Company is not currently involved in any legal proceedings.

 

 

**Item6. Exhibits And Reports On Form 8-K**

 

(a)         The following exhibits are filedherewith pursuant to Regulation S-B.

 
| **No.** | ** ** | **Description**                                       |
|---------|------------|-------------------------------------------------------|
|    |       |                                                  |
| 31.1    |       | Section  302 Certification of Chief Executive Officer |
|    |       |                                                  |
| 31.2    |       | Section 302 Certification  of Chief Financial Officer |
|    |       |                                                  |
| 32      |       | Section 906 Certifications                            |

 

(b)        Reports on Form 8-K

 

             On August 5, 2004, the Companyfurnished a Current Report on Form 8-K under Item 12 thereof, containing a copyof its earnings release, dated August 4, 2004, for the period ended June 30,2004.

 

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**SIGNATURES**

 

In accordance with the requirements of the Securities Exchange Act of1934, the registrant caused this report to be signed on its behalf by the undersigned,thereunto duly authorized.

 
|                     | TIME AMERICA, INC. |
|--------------------------|--------------------|
|                     |               |
|                     |               |
| Dated: November 15, 2004 |               |   |
|                     | By                 | /s/ Craig J. Smith |
|                     |               | Craig  J. Smith |
|                     |               | Chief Financial Officer |
|                     |               | (Principal Accounting Officer) |

 

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