-----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, Tte86cW5jhmLWW3FOHtfWpVYOLod4xfIUeiDYtoExSa51WG3rhfimx8vOB1h0q4F b7cjoa1SFyt4wftUz1Y3jw== 0000891554-96-000531.txt : 19960816 0000891554-96-000531.hdr.sgml : 19960816 ACCESSION NUMBER: 0000891554-96-000531 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960815 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACROSS DATA SYSTEMS INC CENTRAL INDEX KEY: 0000945384 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING SERVICES [7371] IRS NUMBER: 112920559 STATE OF INCORPORATION: NY FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-92230 FILM NUMBER: 96615514 BUSINESS ADDRESS: STREET 1: 382 MAIN ST CITY: SALEM STATE: NH ZIP: 03079 BUSINESS PHONE: 6038989800 10-Q 1 PERIOD ENDED JUNE 30, 1996 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark one) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996. [ ] 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 0-26392 ACROSS DATA SYSTEMS, INC. (Exact name of registrant as specified in its charter) NEW YORK 11-2920559 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number) 382 Main Street, Salem, New Hampshire 03079 (Address of principal executive offices) (Zip Code) (603)898-9800 (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 15d 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 __ Indicate the number of shares outstanding in each of the issuer's classes of common stock, as of the latest practicable date. 6,169,756 common shares, $.01 par value, were outstanding as of July 31, 1996. ACROSS DATA SYSTEMS, INC. INDEX PART I. FINANCIAL INFORMATION Page # Item 1. Financial Statements (unaudited) Condensed Consolidated Balance Sheets at June 30, 1996 and December 31, 1995 3 Condensed Consolidated Statements of Operations for the three and six months ended June 30, 1996 and 1995 4-5 Condensed Consolidated Statements of Cash Flows for the three months ended June 30, 1996 and 1995 6-7 Notes to Condensed Consolidated Financial Statements 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Part II. OTHER INFORMATION 9-11 2 ACROSS DATA SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
June 30, December 31, 1996 1995 ------------ ------------ ASSETS CURRENT ASSETS Cash and cash equivalents $ 2,547,000 $ 3,147,509 Marketable securities -- 2,044,962 Accounts receivable, net 2,197,305 1,423,603 Income taxes receivable 240,103 -- Inventory 168,662 125,334 Prepaid expenses and other assets 122,315 157,054 Deferred income taxes 254,800 268,000 ------------ ------------ Total current assets 5,530,185 7,166,462 ------------ ------------ PROPERTY AND EQUIPMENT, NET 885,050 586,881 ------------ ------------ OTHER ASSETS Excess of cost over net assets acquired, net 3,445,792 3,717,393 Service contracts acquired, net 1,888,438 2,016,850 Software development costs, net 2,411,773 1,505,169 Deferred income taxes -- 26,400 Deposits 60,499 40,043 ------------ ------------ 7,806,502 7,305,855 ------------ ------------ $ 14,221,737 $ 15,059,198 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Current maturities of long-term debt $ 16,887 $ 36,131 Current maturities of loans from related companies 150,000 117,000 Accounts payable 531,661 514,249 Accrued expenses 369,262 444,841 Income taxes payable 45,454 88,412 Customer deposits 250,651 213,221 Deferred revenue 1,738,654 1,648,987 ------------ ------------ Total current liabilities 3,102,569 3,062,841 ------------ ------------ LONG TERM DEBT, NET OF CURRENT MATURITIES 35,409 43,975 ------------ ------------ LOANS FROM RELATED COMPANIES 391,753 453,847 ------------ ------------ SHAREHOLDERS' EQUITY Preferred stock -- -- Common stock 59,229 59,224 Additional paid-in-capital 10,371,673 10,371,302 Retained earnings 271,266 1,096,222 Unearned compensation (14,909) (33,323) Foreign currency translation adjustments 4,747 5,110 ------------ ------------ 10,692,006 11,498,535 ------------ ------------ $ 14,221,737 $ 15,059,198 ============ ============
See notes to condensed consolidated financial statements. 3 ACROSS DATA SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended June 30, 1996 and 1995 (Unaudited) 1996 1995 ----------- ----------- REVENUE Consulting and service $ 2,400,413 $ 2,044,142 Software 371,848 630,324 Other 184,104 364,418 ----------- ----------- 2,956,365 3,038,884 ----------- ----------- COST OF REVENUE Consulting and service 1,270,213 990,852 Software 200,955 72,014 Other 140,194 288,513 ----------- ----------- 1,611,362 1,351,379 ----------- ----------- GROSS MARGIN 1,345,003 1,687,505 OPERATING EXPENSES 1,906,909 1,162,450 ----------- ----------- OPERATING INCOME (LOSS) (561,906) 525,055 ----------- ----------- OTHER INCOME (EXPENSE) Interest income 29,380 907 Interest expense (7,259) (17,595) ----------- ----------- 22,121 (16,688) ----------- ----------- INCOME (LOSS) BEFORE INCOME TAXES (539,785) 508,367 INCOME TAX EXPENSE 18,200 127,600 ----------- ----------- NET INCOME (LOSS) $ (557,985) $ 380,767 =========== =========== NET INCOME (LOSS) PER COMMON SHARE $ ( 0.09) $ 0.10 =========== =========== WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES 5,922,956 3,839,166 =========== =========== See notes to condensed consolidated financial statements. 4 ACROSS DATA SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Six Months Ended June 30, 1996 and 1995 (Unaudited)
1996 1995 ----------- ----------- REVENUE Consulting and service $ 4,503,224 $ 3,484,208 Software 661,646 1,482,938 Other 350,919 469,138 ----------- ----------- 5,515,789 5,436,284 ----------- ----------- COST OF REVENUE Consulting and service 2,325,298 1,604,935 Software 333,699 202,354 Other 272,814 376,970 ----------- ----------- 2,931,811 2,184,259 ----------- ----------- GROSS MARGIN 2,583,978 3,252,025 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 3,477,851 2,136,798 ----------- ----------- OPERATING INCOME (LOSS) (893,873) 1,115,227 ----------- ----------- OTHER INCOME (EXPENSE) Interest income 80,811 2,162 Interest expense (15,094) (33,571) ----------- ----------- 65,717 (31,409) ----------- ----------- INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTEREST (828,156) 1,083,818 INCOME TAX EXPENSE (BENEFIT) (3,200) 319,000 ----------- ----------- INCOME (LOSS) BEFORE MINORITY INTEREST (824,956) 764,818 MINORITY INTEREST IN INCOME OF CONSOLIDATED SUBSIDIARY 0 15,291 ----------- ----------- NET INCOME (LOSS) $ (824,956) $ 749,527 =========== =========== NET INCOME (LOSS) PER COMMON SHARE $ (0.14) $ 0.20 =========== =========== WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES 5,922,902 3,839,166 =========== ===========
See notes to condensed consolidated financial statements. 5 ACROSS DATA SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended June 30, 1996 and 1995 (Unaudited)
1996 1995 ---------- -------- OPERATING ACTIVITIES Net income (loss) $ (824,956) $749,527 Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities: Depreciation 87,811 54,241 Amortization 538,954 235,939 Tax effect of utilizing deferred tax assets that were fully reserved at date of acquisition 49,600 307,200 Deferred income taxes 39,600 (403,300) Minority interest in income of consolidated subsidiary -- 15,291 Changes in operating assets and liabilities: Accounts receivable (773,702) 811,585 Inventory (43,328) (24,645) Prepaid expenses and other assets 24,075 (128,885) Income taxes receivable (240,103) -- Deposits (20,456) (40,169) Accounts payable and accrued expenses (58,167) (481,775) Income taxes payable (42,958) 137,901 Deferred revenue and customer deposits 127,097 130,292 ---------- -------- Net cash provided (used) by operating activities (1,136,533) 1,363,202 ---------- -------- INVESTING ACTIVITIES Redemption of marketable securities 2,044,962 -- Purchases of property and equipment (385,980) (47,209) Software development costs (1,079,253) (236,132) Employee repayments 10,664 6,758 Advances to former shareholders of acquired subsidiary -- (294,622) Payments to former shareholders of acquired subsidiary -- (445,056) Cash acquired in acquisition -- 5,669 Cost of acquisition -- (2,088,217) ---------- -------- Net cash provided (used) by investing activities 590,393 (3,098,809) ---------- -------- FINANCING ACTIVITIES Payments on long-term debt (27,810) (41,263) Proceeds from issuance of long-term debt -- 31,912 Loans from related companies -- 1,513,007 Payments on loans from related companies (29,094) (250,000) Proceeds from issuance of common stock -- 528,400 Proceeds from exercise of stock options 376 -- Deferred public offering and other costs -- (255,280) ---------- -------- Net cash provided (used) by financing activities (56,528) 1,526,776 ---------- -------- (continued)
See notes to condensed consolidated financial statements 6 ACROSS DATA SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) Six Months Ended June 30, 1996 and 1995 (Unaudited)
1996 1995 EFFECT OF EXCHANGE RATE CHANGES ON CASH $ 2,159 $ 19,186 ---------- -------- NET DECREASE IN CASH AND CASH EQUIVALENTS (600,509) (189,645) CASH AND CASH EQUIVALENTS Beginning of period 3,147,509 691,305 ---------- -------- End of period $2,547,000 $501,660 ========== ========
See notes to condensed consolidated financial statements. 7 ACROSS DATA SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation In the opinion of the Company, these unaudited condensed consolidated financial statements contain all normal recurring adjustments necessary to present fairly the financial position of the Company as of June 30, 1996 and December 31, 1995 and the results of operations for the three and six months ended June 30, 1996 and 1995. The results of operations for the three and six months ended June 30, 1996 are not necessarily indicative of the results to be expected for the year ending December 31, 1996, or any other period. For further information, refer to the consolidated financial statements and notes included in the Company's annual report on Form 10-K for the year ended December 31, 1995. 2. Principles of Consolidation The condensed consolidated financial statements include the accounts of Across Data Systems, Inc. (Across), its 100% wholly-owned subsidiary ProfitKey International, Inc. (ProfitKey), its 100% wholly-owned Canadian subsidiary, 3077934 Canada, Inc. and its 100% wholly-owned subsidiary, Bizware Computer Systems (Canada) Inc. (Bizware), its 100% wholly-owned subsidiary, Level 8 Systems, Inc. (Level 8) and its ASU consulting division (ASU). Financial information of Level 8 is included from the date of acquisition, April 1, 1995. All intercompany accounts and transactions are eliminated in consolidation. 3. Reclassification Certain items in the 1995 financial statements have been reclassified in order to conform to the 1996 presentaion. 8 ACROSS DATA SYSTEMS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview Across Data Systems, Inc., through its wholly-owned subsidiaries ProfitKey, Bizware, and Level 8 and its ASU consulting division, develops and markets business software and provides consulting and ancillary services. The Company's products and services include: transactional messaging middleware and distributed object technology, which facilitate communication among applications that reside on distributed and often incompatible hardware and software; industry specific ("vertical") software applications the Company has developed for manufacturers and for the petroleum and convenience store industry; and consulting services for enterprise messaging and for the manufacturing and financial services industries. Results of Operations Revenue for the three and six months ended June 30, 1996 was approximately $2,956,000 and $5,516,000 respectively, compared to revenue for the three and six months ended June 30, 1995 of approximately $3,039,000 and $5,436,000, respectively. Level 8 was acquired on April 1, 1995 and therefore is included in the six months ended June 30, 1995 only since the acquisition date. The decrease in revenue for the three months ended June 30, 1996 of $83,000 is primarily related to decreases at ProfitKey and Bizware of approximately $193,000, and $305,000, respectively. These decreases were offset by increases at Level 8 and ASU of $352,000 and $63,000, respectively. The decrease at ProfitKey is primarily from reduced hardware sales and the decrease at Bizware is related to reduced software sales and reduced service revenue. The increase at Level 8 is primarily attributed to increased consulting services from its Florida location which opened in April 1996. The increase in ASU revenue is attributed to additional services provided to existing and new clients. The increase for the six months ended June 30, 1996 of $80,000 is related to increases at Level 8 and ASU of $970,000 and $140,000, respectively. These increases were offset by decreases in revenue at ProfitKey and Bizware of approximately $308,000 and $722,000, respectively. The increase in Level 8 revenue is related to the addition of a Florida office in the second quarter of 1996 and that Level 8 was only included since its acquisition date in 1995. The increase in ASU revenue is attributed to additional services provided to existing and new clients. The decrease in ProfitKey revenue is attributed to a reduction of new software system installations and reduced hardware sales. Bizware's revenue decreased as a result of decreased software revenue related to the completion of a major contract in early 1995. Gross margin for the three and six months ended June 30, 1996 was 45.5% and 46.8%, respectively, compared to gross margin for the three and six months ended June 30, 1995 of 55.5% and 59.8%, respectively. The decrease is related to reduced margins in consulting and service and software sales. Consulting and service margin decreased from the three months ended June 30, 1995 to June 30, 1996 from 51.5% to 47.1% and for the six months ended June 30, 1995 to June 30, 1996 from 53.9% to 48.4% due to reduced margins at Bizware and Level 8. In addition, the software margin decreased due to lower sales and higher amortization of software development costs at Bizware and ProfitKey. Operating expenses for the three and six months ended June 30, 1996 were approximately $1,907,000 and $3,478,000, respectively, compared to operating expenses for the three and six months ended June 30, 1995 of approximately $1,162,000 and $2,137,000, respectively. The increase for the three months ended June 30, 1996 is the result of an increase in non-cash amortization charges, the addition of Level 8 operating expenses associated with the start up of the Florida location and increased staffing levels at ProfitKey as a result of new products and services being prepared for release. Interest income for the three and six months ended June 30, 1996 increased by approximately $28,000 and $79,000, respectively. The increase is the result of investing approximately $3,000,000 in three month treasury bills. 9 Liquidity and Capital Resources The Company's net losses have been funded from proceeds from its initial public offering. Operating and financing activities for the three and six months ended June 30, 1996 used net cash of approximately $782,000 and $1,193,000 respectively. At June 30, 1996, the Company had working capital of approximately $2,428,000 and a current ratio of 1.8. The Company continued new product development at ProfitKey, Bizware and Level 8. During the three months ended June 30, 1996, the Company spent approximately $580,000 on software development. Total spending on software development costs for the six months ended June 30, 1996 were approximately $1,079,000. In addition to software development the Company used cash to fund its $824,956 loss, which included establishing a Level 8 sales and systems integration office in Florida, and purchase approximately $386,000 of property and equipment On July 26, 1996, the Company and Candle Corporation (Candle), signed an investment agreement whereby Candle acquired, for $2,714,800, four percent of the Company's common stock at a price of $11.00 per share and signed a letter of intent that initiates a strategic alliance between the two companies. Funds were received by the Company on July 30, 1996. 10 Part II ACROSS DATA SYSTEMS, INC. AND SUBSIDIARIES OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities None Item 3. Default Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security-Holders (a) The annual meeting of shareholders of Across Data Systems, Inc. was held on May 2, 1996. (b) A vote was proposed to (1) elect the Board of Directors to serve for the ensuing year, and (2) to ratify the selection of Lurie, Besikof, Lapidus and Co. LLP as independent auditors for the fiscal year ending December 31, 1996. The shareholders voting results are as follows:
Votes For Against Withheld Abstained --- ------- -------- --------- (1) Robert R. MacDonald 5,537,602 N/A 12,207 N/A Arik Kilman 5,537,602 N/A 12,207 N/A Samuel Somech 5,537,602 N/A 12,207 N/A Theodore Fine 5,537,602 N/A 12,207 N/A Lenny Recanati 5,537,602 N/A 12,207 N/A Frank Klein 5,537,602 N/A 12,207 N/A (2) Lurie, Besikof, Lapidus and Co. LLP 5,536,229 8,700 4,880
Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K Exhibits: (11) Statement regarding computation of earnings per share (27) Financial Data Schedule Reports on Form 8-K: None 11 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date August 12, 1996 ACROSS DATA SYSTEMS, INC. ----------------------- ------------------------- (Registrant) /s/ Robert R. MacDonald ------------------------------ Robert R. MacDonald, President /s/ Joseph J. Di Zazzo ------------------------------ Joseph J. Di Zazzo, Controller and Chief Accounting Officer EX-11.0 2 COMPUTATION OF EARNINGS PER SHARE ACROSS DATA SYSTEMS, INC. AND SUBSIDIARIES WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENTS EXHIBIT 11.0
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, JUNE 30, JUNE 30, PRIMARY: 1996 1995 1996 1995 --------------------- --------------------- WEIGHTED AVERAGE COMMON SHARES 5,922,956 2,911,863 5,922,902 2,911,863 COMMON STOCK EQUIVALENTS 177,795 177,795 COMMON STOCK EQUIVALENTS PURSUANT TO SAB TOPIC 4D 749,508 749,508 --------------------- --------------------- WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES 5,922,956 3,839,166 5,922,902 3,839,166 ===================== ===================== FULLY DILUTED: WEIGHTED AVERAGE COMMON SHARES 5,922,956 2,911,863 5,922,902 2,911,863 COMMON STOCK EQUIVALENTS 177,795 177,795 COMMON STOCK EQUIVALENTS PURSUANT TO SAB TOPIC 4D 749,508 749,508 --------------------- --------------------- WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES 5,922,956 3,839,166 5,922,902 3,839,166 ===================== =====================
EX-27 3 FDS -- PERIOD ENDED JUNE 30, 1996
5 6-MOS DEC-31-1996 JUN-30-1996 2,547,000 0 2,197,305 0 168,662 5,530,185 885,050 0 14,221,737 3,102,569 0 0 0 59,229 0 14,221,737 5,515,789 5,515,789 2,931,811 6,409,622 0 0 15,094 (828,156) (3,200) (824,956) 0 0 0 (824,956) (.14) (.14)
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