<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1997 Commission File Number 0-8254
-------------------------- -------------------------------
WESTF0RD GROUP, INC.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 31-0854431
- ---------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
20 East Broad Street, Columbus, Ohio 43215
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (614) 228-2800
-------------------
None
- ------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
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 twelve 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 of each of the issuer's classes of
common stock, as of the last practicable date.
Class Outstanding at September 30, 1997
- -------------------------------- ---------------------------------
Common stock, without par value 1,336,206
<PAGE> 2
WESTFORD GROUP, INC.
AND SUBSIDIARY
INDEX
Page
PART I - FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheets as of September
30, 1997 (unaudited) and December 31, 1996 3
Consolidated Statements of Operations for the three months and nine
months ended September 30, 1997 and 1996 (unaudited) 5
Consolidated Statements of Cash Flows for the nine months ended
September 30, 1997 and 1996 (unaudited) 6
Notes to Consolidated Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures About
Market Risk Not Applicable
PART II - OTHER INFORMATION AND SIGNATURES
Item 1. Legal Proceedings 10
Item 2. Changes in Securities Not Applicable
Item 3. Default upon Senior Securities Not Applicable
Item 4. Submission of Matter to a Vote
of Security Holders Not Applicable
Item 5. Other Information Not Applicable
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
WESTFORD GROUP, INC.
AND SUBSIDIARY
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
Assets 1997 1996
- ------ -------------- -------------
(Unaudited)
<S> <C> <C>
Current:
Cash $ 136,855 $ 138,711
Accounts receivable - trade 225,941 207,335
Costs and estimated earnings in excess of billings
on uncompleted codification contracts 147,008 120,057
Costs of uncompleted code supplements 30,128 39,161
Deferred taxes 15,062 24,762
Other assets 2,451 2,287
-------------- -------------
Total current assets 557,445 532,313
Deferred taxes 14,536 14,536
Property and equipment, net 61,817 58,312
Intangible asset, net of accumulated amortization of
$40,378 in 1997 and $37,272 in 1996 125,276 128,382
-------------- -------------
Total assets $ 759,074 $ 733,543
============== =============
</TABLE>
(Continued)
3
<PAGE> 4
WESTFORD GROUP, INC.
AND SUBSIDIARY
Consolidated Balance Sheets, Continued
<TABLE>
<CAPTION>
September 30, December 31,
Liabilities and Shareholders' Equity 1997 1996
- ------------------------------------ ------------- ------------
(Unaudited)
<S> <C> <C>
Current Liabilities:
Note payable - bank $ 3,575 $ 3,575
Accounts payable 71,759 53,453
Accrued salaries, commissions and payroll taxes
payable 51,110 66,185
Billings in excess of costs and estimated earnings on
uncompleted codification contracts 15,315 16,626
Current portion of capital lease obligations 5,551 5,130
----------- ------------
Total current liabilities 147,310 144,969
Capital lease obligations, less current portion 3,408 7,641
Debenture payable 50,000 50,000
----------- -----------
Total liabilities 200,718 202,610
----------- -----------
Commitments
Series two serial redeemable preference stock, 500
shares authorized - -
----------- -----------
Shareholders' equity:
Serial preference stock, without par value:
Series one serial preference, authorized 100 shares;
none issued - -
Class A preferred shares, par value $2,285; authorized
500 shares; none issued - -
Class B preferred shares, par value $500; authorized
4,000 shares; none issued - -
Common stock, without par value; authorized 2,000,000
shares; 1,434,202 shares issued 871,286 871,286
Additional paid-in capital 785,619 788,739
Accumulated deficit (1,073,269) (1,099,943)
----------- ------------
583,636 560,082
Less: Treasury stock, at cost (97,996 common shares
at September 30, 1997 and 112,996 at December
31, 1996) (25,280) (29,149)
----------- ------------
Total shareholders' equity 558,356 530,933
----------- ------------
Total liabilities and shareholders' equity $ 759,074 $ 733,543
=========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
WESTFORD GROUP, INC.
AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine months Ended
September 30, September 30,
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Sales $ 341,477 $ 414,813 $1,103,760 $1,172,713
Cost of sales 189,165 195,063 583,590 632,123
--------- --------- --------- ---------
152,312 219,750 520,170 540,590
--------- --------- --------- ---------
Selling, general and administrative
expenses:
Salaries and related costs 83,453 86,438 262,376 220,634
Professional fees 13,566 20,207 43,797 54,639
Other 59,838 44,266 172,872 155,756
--------- --------- --------- ---------
156,857 150,911 479,045 431,029
--------- --------- --------- ---------
Nonoperating expense:
Interest expense 1,558 1,806 4,751 8,015
--------- --------- --------- ---------
Income (loss) before federal income
taxes (6,103) 67,033 36,374 101,546
Federal income tax (benefit) expense (1,915) 16,088 9,700 24,371
========= ========= ========= =========
Net income (loss) $ (4,188) $ 50,945 $ 26,674 $ 77,175
========= ========= ========= =========
Net income per common share $ .00 $ .03 $ .02 $ .05
--------- --------- --------- ---------
Weighted average number of common
shares and equivalents outstanding 1,681,206 1,666,217 1,681,151 1,666,223
--------- --------- --------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
WESTFORD GROUP, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1997 1996
---------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 26,674 $ 77,175
Adjustments to reconcile net loss to cash
provided by operating activities:
Net realized gain on disposal of equipment - (29)
Depreciation and amortization 24,631 21,686
Deferred federal income tax expense 9,700 24,371
(Increase) decrease in accounts receivable - trade (18,606) 58,165
(Increase) decrease in costs and estimated earnings
in excess of billings on uncompleted codification
contracts (26,951) 28,850
(Increase) decrease in costs of uncompleted code
supplements 9,033 (8,647)
Increase in other assets (164) (560)
Increase in accounts payable 18,306 5,783
Increase (decrease) in accrued salaries,
commissions, and payroll taxes payable (15,075) 2,609
Decrease in billings in excess of costs and estimated
earnings on uncompleted codification contracts (1,311) (21,359)
---------- ----------
Net cash provided by operating activities 26,237 188,044
---------- ----------
Cash flows from investing activities:
Purchase of property and equipment (25,031) (12,538)
Sale of equipment - 120
---------- ----------
Net cash used in investing activities (25,031) (12,418)
---------- ----------
Cash flows from financing activities:
Proceeds from note payable to bank - 68,981
Repayment of note payable to bank - (149,000)
Principal payments under capital lease obligations (3,812) (13,858)
Issuance of treasury stock 750 (7)
---------- ----------
Net cash used in financing activities (3,062) (93,884)
---------- ----------
Net increase (decrease) in cash (1,856) 81,742
Cash at December 31 138,711 26,794
---------- ----------
Cash at September 30 $ 136,855 $ 108,536
========== ==========
Supplemental cash flow disclosure:
Interest paid $ 4,751 $ 8,015
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
WESTFORD GROUP, INC.
AND SUBSIDIARY
Notes To Consolidated Financial Statements (Unaudited)
1. The Consolidated Balance Sheets as of September 30, 1997, the Consolidated
Statements of Operations for the three and nine months ended September 30, 1997
and 1996, and the Consolidated Statements of Cash Flows for the nine months
then ended have been prepared by Westford Group, Inc. (the "Company") without
an audit. In the opinion of Company's management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly the
financial position, results of operations, and cash flow at September 30, 1997
and for all periods presented have been made.
2. Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. It is suggested that these unaudited Consolidated Financial
Statements be read in conjunction with the financial statements and notes
thereto included in the Company's Form 10-K for the year ended December 31,
1996. The results of operations for the period ended September 30, 1997 are not
necessarily indicative of the results of operations for the full year.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
7
<PAGE> 8
WESTFORD GROUP, INC.
AND SUBSIDIARY
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Summary
- -------
The following table sets forth changes in certain items reflected in the
financial data as compared to the indicated prior period.
<TABLE>
<CAPTION>
Period to Period Increase (Decrease)
Nine Months Ended September 30,
1996-97
-------------------------------------
<S> <C>
Sales $(68,953)
Cost of sales (48,533)
Selling, general and administrative expenses 47,987
</TABLE>
Results of Operations
The Company's business is principally carried on through its wholly-owned
subsidiary, ALP Corporation. ALP Corporation's sales decreased 17.7% during the
three months ended September 30, 1997 as compared to the three months ending
September 30, 1996 and sales decreased 5.9% during the nine months ended
September 30, 1997 as compared to the nine months ended September 30, 1996
primarily due to a decline in new contract sales and one time republication for
a significant customer during the third quarter of 1996. Codification revenue
decreased from $143,599 for the three months ended September 30, 1996 as
compared to $91,396 for the three months ended September 30, 1997. Codification
revenue of $336,748 decreased 15.5% during the first nine months of 1997 as
compared to $398,805 during the first nine months of 1996 due to a decline in
new contract sales. Subscriptions services on existing codes of ordinances
remained relatively constant during the nine months ended September 30, 1997 as
compared to the nine months ended September 30, 1996. Cost of sales decreased
3.0% during the three months ended September 30, 1997 as compared to the three
months ended September 30, 1996 due to decreases in production salaries,
supplies and shipping. Cost of sales decreased 7.7% due to decreases in
production salaries, supplies and shipping during the nine months ended
September 30, 1997 when compared to the same period ended September 30, 1996.
Selling, general and administrative expenses increased 3.9% for the three
months ended September 30, 1997 as compared to the three months ended September
30, 1996 due to increases in administrative salaries and travel. Selling,
general and administrative expenses increased 11.1% during the first nine
months of 1997 as compared to the first nine months of 1996 due to increases in
administrative salaries and related costs, and travel related expenses.
Liquidity and Capital Commitments
Although it is impossible to estimate accurately the future cash flow from the
operations of the Registrant's codification business, management believes the
Registrant's effective capital costs may increase. Management is actively
exploring further avenues for preserving capital and improving liquidity. As of
September 30, 1997, the Company had a revolving credit agreement with a bank to
provide a $250,000 note. The credit facility has a maturity date of April 30,
1998, and bears interest at the banks prime rate (8.5% per annum at September
30, 1997). The Company anticipates such agreement will be renewed. Management
does not know of any trends, events or uncertainties that will have or that are
reasonable likely to have material effect on the Registrant's liquidity,
capital resources or results of operations.
8
<PAGE> 9
WESTFORD GROUP, INC.
AND SUBSIDIARY
Management's Discussion and Analysis of
Financial Condition and Results of Operations, Continued
Deferred Taxes
The Company has substantial tax loss carryforwards and temporary differences at
September 30, 1997, which give rise to deferred tax assets. Based on an
analysis of the likelihood of realizing the Company's gross deferred tax asset,
the Company has determined that the recognition criteria set forth in SFAS No.
109, "Accounting for Income Taxes", are not met for the entire gross deferred
tax asset and, accordingly, the gross deferred tax asset is reduced by a
valuation allowance.
Intangible Asset
The excess of net assets acquired in a business combination over the purchase
price of approximately $160,000 was allocated to a database acquired. The
database is comprised of the municipal code data and related files. Provision
for amortization of the database is based on an estimated useful life of forty
years reflecting the long-lived nature of municipal codes.
Inflation
Management does not consider the impact of changing prices to be material in
the analysis of the Company's overall operation.
Safeharbor Statement Under the Private Securities Litigation Reform Act of 1995
Except for the historical information contained herein, the matters discussed
in this Form 10-Q includes forward-looking statements that involve risks and
uncertainties, including, but not limited to, quarterly fluctuations in
results, the management of growth, and other risks detailed from time to time
in the Company's Securities and Exchange Commission filings. Actual results may
differ materially from management's expectations.
Trends
The Company's results of operations have varied from quarter to quarter
principally because of fluctuations in production results. The Company's
experience indicates that sales increase during the second and third quarters
as a result of sales to basic code subscribers. The Company expects that such
quarterly fluctuations may lessen as the percentage of the Company's new sales
are made to clients with fiscal years other than December 31, although there
can be no assurance that this will occur.
9
<PAGE> 10
WESTFORD GROUP, INC.
AND SUBSIDIARY
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
Two discrimination charges were filed by an employee against ALP Corporation
with the Federal Equal Employment Opportunity Commission ("EEOC"). In the first
charge, filed on June 21, 1996, the employee alleged discrimination in pay on
the basis of age, sex and disability. The employee also alleged denial of
accommodation for alleged disabilities and oral intimidation and harassment in
retaliation for the employee's internal complaints. In the second
discrimination charge, filed on November 21, 1996, the employee claimed
American Legal Publishing Corporation has retaliated against the employee for
pursuing the first charge. ALP Corporation has submitted responses to both
discrimination charges. No determination has been made as yet by the EEOC on
either charge.
On or about January 27, 1997, a tort claim was filed on behalf of the same
employee of ALP Corporation, in the Court of Common Pleas, Hamilton County,
Ohio. The complaint alleges that the employee's supervisors are guilty of
"intentional or negligent infliction of emotional distress" by their "verbal
and emotion abuse" of the employee. The Complaint also alleges a claim on
behalf of the employee's spouse for loss of consortium. ALP Corporation has
filed an Answer and will contest these claims vigorously since it believes it
has strong defenses to the claims.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
--------
Item 27 Financial Data Schedule
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed by the Registrant during the
quarter ended September 30, 1997.
10
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WESTFORD GROUP, INC.
------------------------
(Registrant)
Date: November 5, 1997 By: Si Sokol
----------------------- --------------------
Si Sokol
President,
Chairman of Board of Directors,
and Chief Executive Officer
(Principal Executive Officer)
Date: November 5, 1997 By: Sally Cress
------------------------ --------------------
Sally Cress
Treasurer, Secretary,
Chief Financial Officer
and Chief Accounting Officer
(Principal Financial and
Accounting Officer)
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 136,855
<SECURITIES> 0
<RECEIVABLES> 225,941
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 557,445
<PP&E> 194,411
<DEPRECIATION> 132,594
<TOTAL-ASSETS> 759,074
<CURRENT-LIABILITIES> 147,310
<BONDS> 0
0
0
<COMMON> 871,286
<OTHER-SE> (312,930)
<TOTAL-LIABILITY-AND-EQUITY> 759,074
<SALES> 1,103,760
<TOTAL-REVENUES> 1,103,760
<CGS> 583,590
<TOTAL-COSTS> 1,062,635
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,751
<INCOME-PRETAX> 36,374
<INCOME-TAX> 9,700
<INCOME-CONTINUING> 26,674
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,674
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
