0000889812-95-000512.txt : 19950918 0000889812-95-000512.hdr.sgml : 19950918 ACCESSION NUMBER: 0000889812-95-000512 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950915 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: JUDICATE INC CENTRAL INDEX KEY: 0000732152 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-LEGAL SERVICES [8111] IRS NUMBER: 232257354 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-13324 FILM NUMBER: 95574244 BUSINESS ADDRESS: STREET 1: 200 S BROAD ST STE 800 CITY: PHILADELPHIA STATE: PA ZIP: 19102 BUSINESS PHONE: 2155466200 MAIL ADDRESS: STREET 1: 200 S BROAD ST STE 800 CITY: PHILADELPHIA STATE: PA ZIP: 19102 10QSB/A 1 AMENDMENT NO. 2 TO QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _______________________ FORM 10-QSB/A, No. 2 (Mark One) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1995 Amending Part I, Item 1 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to _____________ Commission File Number 0-13324 JUDICATE, INC. --------------------------------------------------------------------------- (Exact name of small business registrant as specified in its charter) --------------------------------------------------------------------------- Delaware 23-2257354 ---------------------------- -------------------- (State or other jurisdiction (I.R.S. Employer of incorporation or Identification No.) organization) 1500 Walnut Street, Suite 1300, Philadelphia, PA 19102 --------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (215) 546-6200 --------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 May 10, 1995, the Registrant had 12,445,749 shares of Common Stock, $.0001 par value, outstanding. JUDICATE, INC. AND SUBSIDIARIES INDEX
Page No. -------- PART I. Financial Information Item 1. Financial Statements (unaudited) Consolidated Balance Sheet - March 31, 1995 and December 31, 1994 2 Consolidated Statement of Operations - Three Months Ended March 31, 1995 and 1994 3 Consolidated Statement of Cash Flows - Three Months Ended March 31, 1995 and 1994 4 Notes to Consolidated Financial Statements 5-8 Signature Page 9
PART I - FINANCIAL INFORMATION Item 1. Financial Statements (unaudited). JUDICATE, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET MARCH 31, 1995 AND DECEMBER 31, 1994
ASSETS March 31, December 31, 1995 1994 ---- ---- Current assets: Cash and cash equivalents $ 455,891 $ 1,520,730 Account receivable trade, net 932,061 72,201 Other receivables 206,237 55,445 Inventories 2,252,000 - Prepaid expenses 19,796 109,480 ----------- ----------- Total current assets 3,865,985 1,757,856 Property and equipment, net of accumulated depreciation 379,606 50,069 Cost in excess of net assets of business acquired 6,477,005 - Other assets 82,855 65,202 ----------- ----------- Total assets $10,805,451 $ 1,873,127 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable $ 300,000 $ - Accounts payable and accrued expenses 1,507,729 287,954 Deferred income 20,150 30,797 Current portion of long-term debt 550,000 - ----------- ----------- Total current liabilities 2,377,879 318,751 Long-term debt 1,750,000 - ----------- ----------- Total liabilities 4,127,879 318,751 ----------- ----------- Shareholders' equity: Preferred Stock $.01 par value; authorized 1,000,000 shares; issued and outstanding 25,000 shares 250 1,400 Common Stock $.0001 par value; authorized 20,000,000 shares; issued and outstanding 11,995,749 shares 1,200 673 Additional paid-in capital 22,634,134 17,260,549 Accumulated deficit (15,958,012) (15,708,246) ----------- ----------- Total shareholders' equity 6,677,572 1,554,376 ----------- ----------- Total liabilities and shareholders' equity $10,805,451 $ 1,873,127 =========== ===========
See notes to consolidated financial statements. 2
JUDICATE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1995 AND 1994 Three Months Ended March 31, ----------------- 1995 1994 ---- ---- Fee income $ 107,092 $ 282,315 --------- --------- Operating costs and expenses: Cost of service 40,680 78,879 Sales commissions and marketing 30,390 131,573 General and administrative 175,620 179,226 Provision for restructuring 125,000 - --------- --------- 371,690 389,678 --------- --------- Loss from operations (264,598) (107,363) Investment income, net 14,832 2,421 --------- --------- Net loss $(249,766) $(104,942) ========= ========= Loss per common share $ (.04) $ (.06) ========= ========= Weighted average number of common shares outstanding 6,844,138 1,758,077
See notes to consolidated financial statements. 3
JUDICATE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 1995 AND 1994 March 31, March 31, 1995 1994 ---- ---- Cash flows from operating activities: Net loss $ (249,766) $ (104,942) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 11,000 16,500 Provision for losses on accounts receivable 4,500 33,000 Change in assets and liabilities: (Increase) in accounts receivable (148,152) (32,155) Decrease in prepaid expenses and deposits 89,684 41,733 Increase (decrease) in accounts payable, accrued expenses and other liabilities 355,781 (48,641) ---------- ---------- Net cash provided by (used in) operating activities 63,047 (94,505) ---------- ---------- Cash flows from investing activities: Net cash consideration paid for acquired business (5,229,847) - ---------- ---------- Net cash used in investing activities (5,229,847) - ---------- ---------- Cash flows from financing activities: Proceeds from short-term borrowings 300,000 900,000 Proceeds from long-term borrowings 2,300,000 - Proceeds from private placement 1,740,000 145,590 Costs associated with private placement (238,039) (15,181) ---------- ---------- Net cash provided by financing activities 4,101,961 1,030,409 ---------- ---------- (Decrease) increase in cash and cash equivalents (1,064,839) 935,904 Cash and cash equivalents at beginning of period 1,520,730 643,029 ---------- ---------- Cash and cash equivalents at end of period $ 455,891 $1,578,933 ========== ==========
See notes to consolidated financial statements. 4 JUDICATE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) THREE MONTHS ENDED MARCH 31, 1995 AND 1994 Note 1. Basis of presentation. The accompanying unaudited consolidated financial statements include the accounts of the Company and its subsidiaries. The consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with the instructions for Form 10- QSB. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 1995 are not necessarily indicative of the results that may be expected for the year ending December 31, 1995. The accompanying consolidated balance sheet as of December 31, 1994 is unaudited; however, it has been derived from the audited financial statements at that date. For further information, refer to the financial statements and footnotes thereto included in the Company's annual report on Form 10-KSB for the year ended December 31, 1994. Note 2. Acquisition of electronic hardware distribution business. On March 31, 1995, the Company acquired Quest Electronic Hardware, Inc. ("Quest"), a specialized distributor of fasteners and electronic hardware sold to electronic equipment manufacturers, in exchange for 3,872,000 shares of the Company's common stock. Simultaneously, the Company contributed to Quest cash of $2,850,000 as additional paid-in capital and Quest purchased the fasteners distribution business from Arrow Electronics, Inc. ("Arrow") for net cash consideration of $5,229,847. In connection with these transactions, the Company recorded $6,477,005 of cost in excess of net assets of business acquired. The Company does not expect that Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets, will have any impact on the Company's Consolidated Financial Statements. Note 3. Long-term debt. In connection with the acquisition by Quest of the fasteners distribution business from Arrow, Quest entered into a loan agreement with a bank which provided for a $2,200,000 term loan to finance a portion of the purchase price. In addition, the loan agreement provides for a revolving credit facility of $800,000, which was fully available to Quest at March 31, 1995. The term 5 loan, which bears interest at the rate of 2.0% above the Prime Rate, is payable in equal quarterly installments over a four year period. The revolving credit facility bears interest at the rate of 1.5% above the Prime Rate. Note 4. Provision for restructuring. As a result of declining revenues of the Company's ADR business, stemming in part from increased competition, and the resultant historical losses, the Company undertook a plan of action to downsize and restructure its ADR business in order to establish a more acceptable relationship of expenses of that business to its revenues. The Company's operating results for the three month period ended March 31, 1995 include a provision for restructuring of $125,000. More than $60,000 of such provision is attributable to the write-off of fixed assets and idle equipment associated with the downsizing of the ADR business. The balance of the provision is associated with lease termination costs, the relocation of the ADR business to more suitable office space, forfeiture of security deposits, and other costs associated with the downsizing and restructuring of the ADR business. During August 1995, the Company will relocate the office of the ADR business to more suitable space. The Company is evaluating its alternatives with respect to the future operation of its ADR business, including the possible sale, disposition or discontinuance of the business. 6 Note 5. Pro forma financial information. The following pro forma financial information gives effect to the acquisition described in Note 2 as if such acquisition had been made as of January 1, 1995: Pro Forma Combined Statement of Operations For the three months ended March 31, 1995 (In thousands, except per share data) Fasteners Pro Forma Pro Forma Judicate Quest Business Adjustments Combined -------- ----- -------- ----------- -------- Sales $ 107 $ - $ 2,180 $ 2,287 Cost of Sales 41 - 1,281 1,322 ------ ---- ------- ------- Gross Profit 66 - 899 965 Selling, General and Administrative Expenses 331 - 500 $ 2 (A) 895 41 (B) 21 (E) ------ ---- ------- ------ ------- Operating Income (Loss) (265) - 399 (64) 70 Interest Expense (Income) (15) - - 55 (C) 47 7 (D) ------ ---- ------- ------ ------- Income (Loss) Before Taxes (250) - 399 (126) 23 Income Taxes - - 154 (154)(F) - ------ ---- ------- ------ ------- Net Income (Loss) $ (250) $ - $ 245 $ 28 $ 23 ====== ==== ======= ====== ======= Income (Loss) Per Common Share $ (.04) $ - ====== ======= The following are the explanations of the above pro forma adjustments: Quarterly ---------- (In Thousands) (A) To reflect additional charges for depreciation $ 2 (B) To reflect additional charges for amortization of goodwill $ 41 (C) To record interest on acquisition debt: The term loan acquisition debt is to be paid off in quarterly installments of $137.50 $ 55 The average interest rate expected to be incurred on the acquisition debt is 10.5%. (D) To record interest on short-term financing $ 7 The average interest rate expected to be incurred on the short-term financing is 9%. 7 (E) To record net additional G & A charges: Estimated additional general and administrative charges related to the Fasteners Business $ 21 The statement of operations for the three months ended March 31, 1995 of the Fasteners Business does not include charges for general and administrative services that were provided by Arrow, but does include charges for certain costs that are not expected to be incurred in the future. If the Fasteners Business had been a stand alone entity as of the beginning of the period presented, it is estimated that the net amount of such costs would have resulted in additional charges of approximately $ 21 (F) To reflect utilization of net operating loss carryforward $ 154 8 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this amendment to this report to be signed on its behalf by the undersigned, thereunto duly authorized. JUDICATE, INC. Dated: September 15, 1995 By:STEPHEN J. DRESCHER Stephen J. Drescher, Chairman, Chief Executive Officer (Principal Executive Officer) Dated: September 15, 1995 By:MILTON M. ADLER Milton M. Adler, Treasurer (Principal Financial and Accounting Officer) 9