SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
......................................
FORM 10Q
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarter Ended Commission file number 0-6355
September 30, 1995
COMNET Corporation
Incorporated in Delaware IRS EI No. 52-0852578
4200 Parliament Place, Suite 600, Lanham, MD 20706-1860
Telephone Number: (301) 918-0400
Indicate by check mark whether the registrant (1) has filed 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
----------- -----------
Shares Outstanding Effective
Class November 9, 1995
Common Stock, $.50 par value 3,128,999
<PAGE>
<TABLE>
COMNET CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
<CAPTION>
September 30, March 31,
1995 1995
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,335 $ 1,939
Marketable securities 2,109 3,780
Trade and installment accounts receivable,
less allowance of $1,989 and $1,837 16,960 18,457
Income tax benefit 1,347 1,315
Deferred income taxes 1,793 1,489
Prepaid expenses and other assets 2,759 2,824
------- -------
Total current assets 26,303 29,804
Installment accounts receivable, long-term 3,648 3,657
Property and equipment, net 3,075 2,867
Computer software, net of accumulated
amortization of $15,010 and $12,487 20,188 18,726
Other assets 1,268 2,094
------- -------
Total assets $ 54,482 $ 57,148
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,984 $ 2,801
Current portion of long-term debt 606 652
Accrued expenses 3,020 4,861
Accrued compensation 2,028 3,803
Current deferred revenues 11,311 10,900
------- -------
Total current liabilities 18,949 23,017
Long-term debt, net of current portion 318 561
Long-term deferred revenues 3,724 3,714
Deferred income taxes 1,934 1,922
Minority interest in net earnings of
consolidated subsidiary 5,323 5,068
------- -------
Total liabilities 30,248 34,282
------- -------
Commitments and contingent liabilities
Convertible preferred stock 2,846 2,846
------- -------
Stockholders' equity:
Common Stock, $0.50 par value, 10,000
shares authorized, 3,438 and 3,384
shares, issued and outstanding 1,719 1,692
Capital contributed in excess of par value 16,112 15,739
Retained earnings 5,561 4,631
Unrealized loss on investments, net - - - (45)
Cumulative foreign currency translation 11 18
------- -------
23,403 22,035
Less treasury stock at cost, 316 and 316 (2,015) (2,015)
shares
------- -------
Total stockholders' equity 21,388 20,020
------- -------
Total liabilities and stockholders' equity $ 54,482 $ 57,148
======= =======
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
COMNET CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share data)
Unaudited
<CAPTION>
For the Three Month For the Six Month
Period Ended Period Ended
September 30, September 30,
1995 1994 1995 1994
(FY96) (FY95) (FY96) (FY95)
<S> <C> <C> <C> <C>
Revenue:
Software license and related $ 5,084 $ 4,657 $ 9,801 $ 8,286
revenue
Maintenance and other revenue 4,997 4,309 9,664 8,322
------ ------ ------ ------
Total revenue 10,081 8,966 19,465 16,608
------ ------ ------ ------
Costs and expenses:
Software license expense 1,595 1,383 3,566 2,584
Maintenance and service expense 2,010 1,575 3,753 3,084
Research, development and
indirect support 568 400 1,097 839
Selling and marketing 3,386 2,899 6,415 5,578
General and administrative 1,082 1,180 2,236 2,119
Provision for doubtful accounts 358 510 593 760
------ ------ ------ ------
Total costs and expenses 8,999 7,947 17,660 14,964
------ ------ ------ ------
Operating earnings 1,082 1,019 1,805 1,644
Non-operating income (expense), net 111 3 212 (25)
------ ------ ------ ------
Earnings from continuing operations
before provision for income taxes 1,193 1,022 2,017 1,619
Provision for income taxes 437 402 744 629
Minority interest in net earnings
of consolidated subsidiary 152 147 254 229
------ ------ ------ ------
Net earnings from continuing
operations $ 604 $ 473 $ 1,019 $ 761
Discontinued Operations:
Loss from discontinued operations
(net of tax benefit) --- (8) --- (2)
------ ------ ------ ------
Net earnings $ 604 $ 465 $ 1,019 $ 759
Preferred stock dividend
requirements 44 44 88 88
------ ------ ------ ------
Net earnings available to common
shareholders $ 560 $ 421 $ 931 $ 671
====== ====== ====== ======
Earnings per share of common stock $ 0.18 $ 0.14 $ 0.30 $ 0.22
====== ====== ====== ======
Weighted average number of common
and common equivalent shares
outstanding 3,104 3,815 3,092 3,839
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
COMNET CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Unaudited
<CAPTION>
For the Six Month
Period Ended September 30,
1995 1994
(FY96) (FY95)
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,019 $ 759
Adjustments to reconcile earnings from
operations to net cash from operating
activities:
Amortization expense 2,541 1,859
Depreciation expense 420 380
Provision for doubtful accounts 593 760
Deferred income taxes (292) 250
Gain on disposal of assets --- (7)
Minority interest in earnings of
consolidated subsidiary 254 229
Change in assets and liabilities:
Accounts receivable 914 (214)
Other current assets 65 (482)
Tax benefit (32) 55
Other assets 826 232
Accounts payable (817) 167
Accrued expenses (3,616) (76)
Deferred revenues 421 (306)
------ ------
Net cash provided by operating activities: 2,296 3,606
------ ------
Cash flows from investing activities:
Purchase and development of computer software (3,985) (2,894)
Purchase of equipment and improvements (646) (267)
Purchase of marketable securities --- (3,650)
Sale of marketable securities 1,716 ---
------ ------
Net cash used in investing activities (2,915) (6,811)
------ ------
Cash flows from financing activities:
Proceeds from short-term borrowings 4,566 ---
Reduction of short-term borrowings (4,566) ---
Reduction of long-term debt (289) (319)
Proceeds from exercise of common stock options 400 18
Payment of preferred stock dividends (89) (88)
------ ------
Net cash provided by (used in) financing 22 (389)
activities
------ ------
Effect of exchange rate changes on cash (7) ---
------ ------
Net decrease in cash and cash equivalents (604) (3,594)
Cash and cash equivalents at beginning of period 1,939 5,834
------ ------
Cash and cash equivalents at end of period $ 1,335 $ 2,240
====== ======
</TABLE>
See notes to consolidated financial statements.
<PAGE>
COMNET CORPORATION
Notes to Consolidated Financial Statements
1. The financial statements for the three and six months ended September 30,
1995 and 1994, are unaudited. In the opinion of management, all adjustments
considered necessary for a fair presentation have been included. Limited
footnote information is presented, in accordance with quarterly reporting
requirements. The results of operations for the three and six months ended
September 30, 1995, are not necessarily indicative of the results for the year
ended March 31, 1996. The information contained in the audited financial
statements and the notes thereto for the year ended March 31, 1995, should be
read in connection with this unaudited interim financial information.
2. Research and development expense, before the capitalization of computer
software development costs, amounted to approximately $4,438,000 and $3,420,000
for the six months ended September 30, 1995 and 1994, respectively.
3. Earnings per share of common stock is computed based on the weighted
average number of common and common equivalent shares outstanding divided into
the earnings available to common shareholders, which is modified, under the
aggregate method, for the effects of computed net earnings from the proceeds of
stock options assumed to have been exercised during the period. Loss per share
from discontinued operations are less than $0.01 per share and therefore not
presented on the statements of earnings.
4. In October, 1995, Statement of Financial Accounting Standard Number
123, "Accounting for Stock-based Compensation" was issued. This
pronouncement changes the financial accounting and reporting for stock
based employee compensation plans. The Company has yet to quantify the
impact of adopting this new standard.
5. Certain amounts have been reclassified to conform with the current
period presentation.
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition
Results of Operations
The Company sold its COM-MED Systems subsidiary as of March 31, 1995.
The Company's consolidated financial statements have been restated to report
separately, as a discontinued operation, the results of operations of COM-MED
Systems. The Company's remaining business unit is Group 1 Software, Inc. an
81% owned subsidiary, which develops, acquires, markets and supports
specialized marketing and mail management software. For the quarter ended
September 30, 1995, the Company's revenue was $10.1 million compared with $9.0
million the prior year. The Company's net earnings from continuing operations
for the three month period were $0.6 million or $0.18 per share compared with
$0.5 million or $0.14 per share the prior year. For the six months ended
September 30, 1995, the Company's revenue was $19.5 million compared with $16.6
million the prior year. The Company's net earnings from continuing operations
for the six month period were $1.0 million or $0.30 per share compared with
$0.8 million or $0.22 per share the prior year.
For the quarter ended September 30, 1995 (the second fiscal
quarter), Group 1's revenue of $10,081,000 increased 12% from the
$8,966,000 reported for the comparable period in the prior year. For the
six month period of fiscal 1996, revenue totaled $19,466,000 compared
with $16,608,000 for the first six month period the prior year. Net
earnings for the quarter ended September 30, 1995 were $808,000 as compared
with $781,000 in fiscal 1995. For the six month period of fiscal 1996, net
earnings were $1,346,000 compared with $1,220,000 the prior year.
Software license fees and related revenues of $5,084,000 for the
second fiscal quarter increased 9% from the prior year. For the six
month period, software license fees and related revenues of $9,801,000
were 18% above the prior year. Sales of DOC1, the statement preparation
software, and NADIS, the data integrity software, represented $764,000
and $1,684,000 for the three and six month periods, respectively; there
was no revenue for these systems in the prior year. License fees from
all other large systems products, including Open Systems software,
decreased $90,000 for the three month period but increased $234,000 over
the prior year six month period. Licensing of PC software decreased
$243,000 in the quarter versus the same period the prior year, and
decreased $403,000 for the six month period; these decreases were due to
delays in new product releases. Maintenance and other revenues of
$4,997,000 for the quarter increased 16% over the prior year, and for the
six month period, at $9,664,000, were 16% above the comparable period the
prior year. Maintenance contract revenue increased over the prior year
by $377,000 for the three months and $732,000 for the six months of 1996.
Professional service and other revenue increased in the second quarter
and six month period ending September 30, 1995 by $311,000 and $611,000,
respectively. These increases in revenues were due primarily to
professional services associated with the DOC1 system.
Revenues from international markets of $548,000 and $1,769,000 for
the quarter and six month periods represented 5% and 9% of total revenue,
respectively, up from 1% and 2% in the comparable periods of the prior
year. A significant portion of the increase in international revenues in
the first six months of fiscal 1996 arose from Group 1 Software Europe,
Ltd. (previously Archetype Systems, Ltd.), a wholly-owned subsidiary of
Group 1, acquired as of December 31, 1995, for which there is no prior
year comparison.
During the current quarter, total operating costs and expenses of
$8,999,000 amounted to 89% of total revenue as compared with $7,947,000
or 89% of total revenue during the comparable period in the prior year.
Total operating costs and expenses for the Company were 91% and 90% of total
revenue for the six months ended September 30, 1995 and 1994,
respectively. The current year operating costs and expenses versus the
prior year include Group 1 Software Europe, Ltd. for which there is no
prior year comparison.
Software license expense increased to $1,595,000 for the three
months ended September 30, 1995, from $1,383,000 in the comparable prior
year period, representing 31% of software license and related revenue, in
the current period and 30% in the prior year period. For the six months
ended September 30, 1995 and 1994, software license expense represented
36% and 31% of software license and related revenue, respectively.
Maintenance and service expense increased to $2,010,000 in the current
period from $1,575,000 in fiscal 1995, representing 40% and 37% of
maintenance and service revenue, respectively. For the six months ended
September 30, 1995 and 1994, maintenance and service expense represented
39% and 37% of maintenance and service revenue, respectively. The current
year expenses reflect increased staffing and support costs related to the
DOC1 and NADIS products and services for which there is no prior year
comparison. Additionally, amortization expense for the current quarter
increased $335,000 and for the six month period increased $605,000,
reflecting new and enhanced product releases for all computer platforms
as well as the amortization of acquired software. Amortization increased
as a percent of total revenue to 12% for both the three and six month
period compared with 10% in both periods of the prior year. Group 1
expects amortization of software to continue to increase as a percent of
revenue due to continuing capitalization of internal software development
expenditures and the costs related to existing software acquisition
agreements. During the quarter, other direct costs associated with new
customer orders and existing customer updates decreased to approximately
8% and 9% for the three and six month periods in the current year versus
10% in the same periods of the prior year. Other direct costs as a
percent of revenue decreased versus the prior year due to the mix of
products sold this year which directly affects fulfillment and
distribution costs as well as royalty expense. Group 1 expects the
cost of maintenance and other services to increase as the customer base
expands.
Research, development and indirect support expenses totaled $568,000
in the second quarter of fiscal 1996, and $400,000 in the comparable
period of fiscal 1995, representing 6% and 4% of total revenue,
respectively. For the six month period, research development and
indirect support expenses were 6% and 5% of total revenue, respectively.
These expense increases over the prior year were due to support
requirements for Group 1's expanded variety of computer platforms served,
as well as its internal network system.
Selling and marketing expenses totaled $3,386,000, or 34% of total
revenue in the second quarter of fiscal 1996, as compared with
$2,899,000, or 32% of total revenue in the same period of the prior year.
For the six month period, selling and marketing expenses were 33% and 34%
of total revenue for fiscal years 1996 and 1995. The increase in
expenses in the current quarter and for the six month period compared
with the prior year reflects increased staffing and related costs to
support changing requirements in the selling of the highly technical DOC1
and NADIS products.
General and administrative expenses decreased $98,000 to $1,082,000
for the quarter and increased by $117,000 to $2,236,000 for the six month
period ended September 30, 1995 versus the prior year. While
compensation expense decreased the administrative expenses in both the
quarter and the six month period ended September 30, 1995, these
decreases were partially offset by the addition of administrative support
costs associated with Group 1 Software Europe, Ltd. for which there is no
prior year comparison. The provision for doubtful accounts was $358,000
and $593,000 in fiscal year 1996 compared with $510,000 and $760,000 in
fiscal year 1995, for the three and six month periods, respectively. The
reduction in the provision for doubtful accounts reflects Group 1's
experience to date.
Net non-operating income of $212,000 for the six month period
includes gains on investments of $163,000 and net interest income of
$57,000, offset by other expenses of $8,000. For the prior year six
month period, net non-operating expense of $25,000 was comprised of net
interest income of $35,000, a loss on investments of $69,000 and other
income items of $9,000.
The Company's effective tax rate was 37% and 39% in fiscal 1996 and
1995, respectively. The Company believes that its effective tax rate for
fiscal 1996 may increase, if the research and development credits
available under tax regulations which expired June 30, 1995 are not
extended.
Liquidity and Capital Resources
The Company's working capital on September 30, 1995, was $7,354,000 as
compared with $6,787,000 at March 31, 1995. The current ratio was 1.4 to 1 on
September 30, 1995 and 1.3 to 1 on March 31, 1995.
The Company provides for its cash requirements through cash funds
generated from operations. Additionally, the Company maintains an
uncollateralized $5,000,000 line of credit arrangement with Signet Bank
(Maryland), a major Mid-Atlantic regional bank, with interest at the bank's
prime rate. At September 30, 1995, there were no borrowings under this
facility.
Net earnings of $1,019,000 plus non-cash expenses of $3,516,000 provided a
total of $4,535,000 cash from operating activities. Additionally, the decrease
in accounts receivable provided cash of $914,000. Cash was decreased by a
reduction in accrued expenses and accounts payable of $4,433,000; all other
working capital items increased cash provided by operating activities by
$1,280,000. Expenditures for investments in software development and capital
equipment of $4,631,000 were offset by proceeds from the sale of short-term
investments of $1,716,000 resulting in cash flows used in investing activities
of $2,915,000. Cash flows from financing activities of $22,000 represent
decreases of $378,000 in long-term debt and payment of preferred stock
dividends, offset by proceeds from the exercise of stock options of $400,000.
Group 1's practice of accepting license agreements under installment
payment arrangements substantially increases its working capital requirements.
Generally, these arrangements are for a period from three to five years after a
down payment of 10% of the principal amount of the contract. Interest
typically ranges from 9.5% to 13.0%. Installment receivables included in
accounts receivable were $8,250,000 and $8,834,000 at September 30,1995, and
March 31, 1995, respectively. The installment receivable balance, in addition
to the Company's policy of offering competitive trade terms of payment, makes
it difficult to accurately portray a relationship between the outstanding
accounts receivable balance and the current period revenues.
Group 1 continually evaluates the credit and market risks associated with
outstanding receivables. In the course of this review, Group 1 considers
many factors specific to the individual client as well as the concentration of
receivables within industry groups. Group 1's installment receivables are
predominately with clients (service bureaus) who provide computer services to
the direct marketing industry. Typically, these clients have limited capital
and insufficient assets to secure their liability to Group 1. The service
bureaus are highly dependent on Group 1's software and services to offer
their customers the economic benefits of postal discounts and mailing
efficiency. To qualify for the U. S. Postal Service and Canada Post
Corporation postal discounts, service bureaus require continuous regulatory
product updates by Group 1. The service bureau industry is also highly
competitive and subject to general economic cycles as they impact advertising
and direct marketing expenditures. Group 1 is aware of no current market
risk associated with the installment receivables. These clients represent
approximately $6,820,000, or 83% of the installment receivables at September
30, 1995.
As of September 30, 1995, the Company's capital resource commitments
consisted primarily of non-cancelable operating lease commitments for office
space and equipment. The Company believes that its current debt services,
minimum lease obligations and other short-term and long-term liquidity needs
can be met from cash flows from operations. The Company believes that its
long-term liquidity needs are minimal and no large capital expenditures are
anticipated, except for the continuing capitalized software development costs
which the Company believes can be funded from operations. Historically, the
Company has been able to negotiate capital leases for its acquisition of
equipment.
In August, 1995, Group 1 entered into a definitive agreement with
DataDesigns, Inc. of Las Vegas, Nevada to acquire certain assets including
title to all of its software products. Group 1 paid $484,000 in cash at
closing and will pay a percentage of Group 1's sales of these products
during the subsequent five years.
Recent Accounting Developments
In October, 1995, Statement of Financial Accounting Standard Number 123,
"Accounting for Stock-based Compensation" was issued. This pronouncement
changes the financial accounting and reporting for stock based employee
compensation plans. The Company has yet to quantify the impact of adopting
this new standard
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
On March 31, 1995, the assets of the Company's subsidiary, COM-MED
Systems, Inc., were sold for a payment stream of from zero dollars to
a maximum of $4,500,000, representing a percentage of the acquiring
company's future revenues. On September 22, 1995, the acquiring
company ceased operations. The Company has instituted legal
proceedings against the acquiring company and its principals.
Management of the Company believes that it will prevail in its
attempt to recover its security from these proceedings.
Item 2. Changes in Securities
NONE
Item 3. Defaults Upon Senior Securities
NONE
Item 4. The following matters were submitted to, and approved by, the
required vote of security holders of the Company at the Company's
most recent annual Shareholder's meeting held on
September 21, 1995.
(1) To elect three (3) directors to hold office until the
third annual meeting of stockholders of the Company
following their election and until the election and
qualification of their successors.
Withheld
Nominees For Authority
Richard H. Eisenberg 2,878,251 95,570
Carl I. Kanter 2,876,653 97,168
James V. Manning 2,878,251 95,570
(2) To approve the adoption of the Company's 1995 Incentive Stock
Option, Non-Qualified Stock Option and Stock Appreciation Unit
Plan
For Against Abstain
2,764,542 194,559 14,720
(3) To approve the adoption of the Company's 1995 Non-Employee
Directors' Stock Option Plan.
For Against Abstain
2,756,383 194,253 23,185
Item 5. Other information.
None
Item 6. Exhibits and reports on Form 8-K.
The Company did not file any reports on Form 8-K during the
quarter ended September 30, 1995.
<PAGE>
PART IV
Listing of Exhibits
3.01 Articles of Incorporation and Bylaws, as amended - 1985, (incorporated
by reference to Exhibit 3.7 to the Company's Annual Report on Form 10-K
for the year ended March 31, 1991).
3.02 Bylaws - Amended as of January 22 1992, (incorporated by reference to
Exhibit 3.8 to the Company's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1991).
3.03 Bylaws - Amended as of January 22, 1993.
3.04 Amendments to Certificate of Incorporation filed January 22, 1993.
3.05 Amendment to By-Laws.
4.01 Purchase Agreement between the Company and Medco Containment Services,
Inc., dated as of January 28, 1992 (incorporated by reference to
Exhibit 4.47 to the Company's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1991).
4.02 Agreement Regarding Satisfaction of Debt, Release of Pledge and
Issuance of Stock between the Company and Robert S. Bowen, dated as of
January 28, 1992, (incorporated by reference to Exhibit 4.48 to the
Company's Quarterly Report on Form 10-Q for the quarter ended December
31, 1991).
4.03 Agreement Regarding Satisfaction of Debt, Release of Pledge and
Issuance of Stock between the Company and Dr. Milton Kaplan, dated as
of January 28, 1992, (incorporated by reference to Exhibit 4.49 to the
Company's Quarterly Report on Form 10-Q for the quarter ended December
31, 1991).
4.04 Agreement Regarding Satisfaction of Debt, Release of Pledge and
Issuance of Stock between the Company and John Spohler, dated as of
January 28, 1992, (incorporated by reference to Exhibit 4.50 to the
Company's Quarterly Report on Form 10-Q for the quarter ended December
31, 1991).
4.05 Agreement Regarding Satisfaction of Debt, Release of Pledge and
Issuance of Stock between the Company and Leonard J. Smith, dated as of
January 28, 1992, (incorporated by reference to Exhibit 4.51 to the
Company's Quarterly Report on Form 10-Q for the quarter ended December
31, 1991).
4.06 Stock Option Agreement between the Company and James V. Manning, dated
as of August 16, 1991, (incorporated by reference to exhibit 4.53 to
the Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1991).
4.07 Stock Option Agreement between the Company and James Marden, dated as
of August 16, 1991, (incorporated by reference to Exhibit 4.55 to the
Company's Quarterly Report on Form 10-Q for the quarter ended December
31, 1991).
4.08 Stock Option Agreement between the Company and Robert S. Bowen, dated
as of August 16, 1991, (incorporated by reference to Exhibit 4.56 to
the Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1991).
4.09 Stock Option Agreement between the Company and Ronald F. Friedman,
dated as of August 16, 1991, (incorporated by reference to Exhibit 4.57
to the Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1991).
4.10 Stock Option Agreement between the Company and Charles A. Crew, dated
as of August 16, 1991, (incorporated by reference to Exhibit 4.58 to
the Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1991).
4.11 Stock Option Agreement between the Company and Charles J. Sindelar,
dated as of August 16, 1991, (incorporated by reference to Exhibit 4.59
to the Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1991).
4.12 Agreement among the Company and Robert S. Bowen, Milton Kaplan, Leonard
Smith and John Spohler regarding certain registration rights, dated as
of January 28, 1992, (incorporated by reference to Exhibit 4.60 to the
Company's Quarterly Report on Form 10-Q for the quarter ended December
31, 1991).
4.13 Certificate of Designation of 6% Convertible Preferred Stock, filed
January 22 1993.
10.01 Technology Purchase Agreement between COMNET Corporation and Andy
Bellinghieri - 1985, as amended and restated in May, 1994,
(incorporated by reference to Exhibit 10.52 to the Company's Annual
Report on Form 10-K for the year ended March 31, 1991).
10.02 Revolving Line of Credit between Group 1 Software, Inc. as Borrowers,
and Signet Bank/Maryland as Lender, dated November 9, 1989,
(incorporated by reference to Exhibit 10.88 to the Company's Annual
Report on Form 10-K for the year ended March 31, 1991).
10.03 Employment Agreement between Ronald F. Friedman and Group 1 Software,
Inc. dated October 31, 1990, (incorporated by reference to Exhibit
10.94 to the Company's Annual Report on Form 10-K for the year ended
March 31, 1991).
10.04 Management and Services Agreement between Group 1 Software, Inc. and
COMNET Corporation dated April 1, 1994.
10.05 Tax Sharing Agreement among Group 1 Software, Inc., COM-MED Systems,
Inc., ADMS, Inc. and COMNET Corporation, dated April 1, 1991,
(incorporated by reference to Exhibit 10.97 to the Company's Annual
Report on Form 10-K for the year ended March 31, 1991).
10.06 First Amendment to Employment Agreement by and between Group 1
Software, Inc. and Ronald F. Friedman dated June 24, 1991,
(incorporated by reference to Exhibit 10.96 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 3, 1991).
10.07 Amendment to the Management Services Agreement as of August 1, 1991 by
and between Computer Network Systems, Inc. and COMNET Corporation,
(incorporated by reference to Exhibit 10.98 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 31, 1991).
10.08 Fee Agreement between the Company and James B. Manning, dated as of
January 28, 1992, (incorporated by reference to Exhibit 10.100 to the
Company's Quarterly Report on Form 10-Q for the quarter ended December
31, 1991).
10.09 Fee Agreement between the Company and Robert S. Bowen, dated as of
January 28, 1992, (incorporated by reference to Exhibit 10.102 to the
Company's Quarterly Report on Form 10-Q for the quarter ended December
31, 1991).
10.10 Fee Agreement between the Company and Ronald F. Friedman, dated as of
January 28, 1992, (incorporated by reference to Exhibit 10.103 to the
Company's Quarterly Report on Form 10-Q for the quarter ended December
31, 1991).
10.11 Indemnification Agreement between the Company and James V. Manning,
(incorporated by reference to Exhibit 10.105 to the Company's Quarterly
Report on Form 10-Q for the quarter ended December 31, 1991).
10.12 Indemnification Agreement between the Company and James Marden,
(incorporated by reference to Exhibit 10.107 to the Company's Quarterly
Report on Form 10-Q for the quarter ended December 31, 1991.)
10.13 Indemnification Agreement between the Company and Ronald F. Friedman
,(incorporated by reference to Exhibit 10.108 to the Company's
Quarterly Report on Form 10-Q for the quarter ended December 31, 1991).
10.14 Indemnification Agreement between the Company and Charles A. Crew,
(incorporated by reference to Exhibit 10.109 to the Company's Quarterly
Report on Form 10-Q for the quarter ended December 31, 1991).
10.15 Indemnification Agreement between the Company and Robert S. Bowen,
(incorporated by reference to Exhibit 10.110 to the Company's Quarterly
Report on Form 10-Q for the quarter ended December 31, 1991).
10.16 Stockholder Voting Agreement among Medco Containment Services, Inc. and
Robert S. Bowen, Charles A. Crew, Ronald F. Friedman, Milton Kaplan,
Perry E. Morrison, Leonard J. Smith and John Spohler, dated as of
January 28, 1992, (incorporated by reference to Exhibit 10.111 to the
Company's Quarterly Report on Form 10-Q for the quarter ended December
31, 1991).
10.17 Advisory Committee Agreement between the Company and Leonard J. Smith,
dated as of January 28, 1992, (incorporated by reference to Exhibit
10.112 to the Company's Quarterly Report on Form 10-Q for the quarter
ended December 31, 1991).
10.18 Advisory Committee Agreement between the Company and Milton Kaplan,
dated as of January 28, 1992, (incorporated by reference to Exhibit
10.113 to the Company's Quarterly Report on Form 10-Q for the quarter
ended December 31, 1991).
10.19 Advisory Committee Agreement between the Company and Perry E. Morrison,
dated as of January 28, 1992, (incorporated by reference to Exhibit
10.114 to the Company's Quarterly Report on Form 10-Q for the quarter
ended December 31, 1991).
10.20 Agreement between the Company and Robert S. Bowen, dated as of January
23, 1992, (incorporated by reference to Exhibit 10.115 to the Company's
Quarterly Report on Form 10-Q for the quarter ended December 31, 1991).
10.21 Loan Agreement and three notes in the amount of $78,334 each between
the Company as Holder and Robert S. Bowen as Maker, dated as of January
23, 1992, (incorporated by reference to Exhibit 10.117 to the Company's
Quarterly Report on Form 10-Q for the quarter ended December 31, 1991).
10.22 Amended and Restated Employment Agreement between Robert S. Bowen and
the Company, dated as of January 28, 1992, (incorporated by reference
to Exhibit 10.118 to the Company's Quarterly Report on Form 10-Q for
the quarter ended December 31, 1991).
10.23 Amended and Restated Employment Agreement between Robert S. Bowen and
Group 1 Software, Inc., dated as of January 28, 1992, (incorporated by
reference to Exhibit 10.119 to the Company's Quarterly Report on Form
10-Q for the quarter ended December 31, 1991).
10.24 Indemnification Agreement, dated January 22, 1993, between COMNET
Corporation and Carl I. Kanter.
10.25 Loan Agreement, dated March 1, 1993, between COMNET Corporation and
Ronald F. Friedman.
10.26 Indemnification Agreement, dated February 24, 1992, between COMNET
Corporation and Charles A. Mele.
10.27 Indemnification Agreement between COMNET Corporation and Charles
Sindelar.
10.28 Lease covering Company office facilities in Lanham, MD - 1993.
10.29 Letter of Intent between Group 1 Software, Inc. and Archetype Systems,
Ltd., dated as of April 15, 1994.
10.30 Agreement between Group 1 Software, Inc. and Archetype Systems, Ltd.
for acquisition of the entire share capital of Archetype Systems, Ltd.,
dated as of December 30, 1994.
10.31 Fourth Amendment to Employment Agreement, dated as of March 1, 1994, by
and between Group 1 Software, Inc., and Ronald F. Friedman.
10.32 Sublease, dated March 1, 1994, by and between COMNET Corporation and
Group 1 Software, Inc.
10.33 Agreement to Extend Management and Services Agreement, dated April 1,
1994, by and between COMNET Corporation and Group 1 Software, Inc.
10.34 Sales agreement for COM-MED Systems, Inc.
10.35 Letter of Agreement between the Company and MEDCOM Acquisition
Corporation, dated May 8, 1995.
10.36 Amended Letter of Agreement between the Company and MEDCOM Acquisition
Corporation, dated June 9, 1995.
10.37 Bill of Sale between the Company and MEDCOM Acquisition Corporation,
dated March 31, 1995, for the sale of substantially all of the assets
of COM-MED Systems, Inc. and CMEDS, Inc.
10.38 Line of Credit between the Company and MEDCOM Acquisition Corporation,
dated March 31, 1995.
10.39 Fifth Amendment to Employment Agreement, dated as of April 1, 1995, by
and between Group 1 Software, Inc. and Ronald F. Friedman.
10.40 COMNET Corporation, Deferred Compensation Plan.
10.41 COMNET Corporation, Deferred Compensation Plan.
*10.42 Definitive Agreement for purchase of assets of DataDesigns, Inc., dated
August 23, 1995.
*11.0 Computation of earnings per share.
16.1 Change in Registrant's Independent Accountant on Form 8-K dated January
26, 1990, (incorporated by reference to Exhibit 16.1 of the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1991).
22. Subsidiaries of COMNET Corporation.
23. Consent of Independent Accountants.
_______________________________
* Filed herewith.
<PAGE>
<TABLE>
Exhibit 11
COMNET CORPORATION
Computation of Earnings Per Share
(in thousands, except per share data)
Unaudited
<CAPTION>
For the Three For the Six
Month Period Ended Month Period Ended
September 30, September 30,
1995 1994 1995 1994
(FY96) (FY95) (FY96) (FY95)
<S> <C> <C> <C> <C>
Net earnings: $ 604 $ 465 $ 1,019 $ 759
Plus: Excess funding, net
of income taxes 96 184
Less: Preferred Stock dividend (44) (44) (88) (88)
------ ------ ------ ------
Primary earnings $ 560 $ 517 $ 931 $ 855
====== ====== ====== ======
Plus: Preferred Stock dividend 44 88
Plus: Excess funding, net
of income taxes 80 196
------ ------ ------ ------
Fully diluted earnings $ 640 $ 561 $ 1,127 $ 943
====== ====== ====== ======
Weighted average shares
outstanding 3,104 2,991 3,092 2,989
Dilutive common stock equivalents
for primary earnings per share - - - 824 - - - 850
------ ------ ------ ------
Weighted average shares and
common equivalent shares
outstanding for primary
earnings per share 3,104 3,815 3,092 3,839
====== ====== ====== ======
Additional equivalent shares
assuming full dilution 461 148 443 148
------ ------ ------ ------
Weighted average shares and
common equivalent shares for
fully diluted earnings per
share 3,565 3,963 3,535 3,987
====== ====== ====== ======
Earnings per share <F1>
Primary $ 0.18 $ 0.14 $ 0.30 $ 0.22
====== ====== ====== ======
Fully diluted <F2> $ 0.18 $ 0.14 $ 0.30 $ 0.22
====== ====== ====== ======
<FN>
<F1> Loss per share from discontinued operations are less than $0.01
per share and therefore not presented on the statements of earnings.
<F2> Not presented on the Consolidated Statements of Earnings because
fully diluted earnings per share had a differential less than
primary earnings share.
</TABLE>
<PAGE>
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.
COMNET Corporation
Date: November 14, 1995 /s/Charles A. Crew
Charles A. Crew
Executive Vice President
Chief Financial Officer
<PAGE>
Index of Exhibits
PAGE
NUMBER
*10.42 Definitive Agreement for purchase of
assets of DataDesigns, Inc., dated as
of August 23, 1995. 18
*11.0 Computation of earnings per share. 15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE SECOND
QUARTER 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> SEP-30-1995
<CASH> 1,335
<SECURITIES> 2,109
<RECEIVABLES> 22,597
<ALLOWANCES> 1,989
<INVENTORY> 0
<CURRENT-ASSETS> 26,303
<PP&E> 6,906
<DEPRECIATION> 3,831
<TOTAL-ASSETS> 54,482
<CURRENT-LIABILITIES> 18,949
<BONDS> 0
<COMMON> 1,719
0
2,846
<OTHER-SE> 19,669
<TOTAL-LIABILITY-AND-EQUITY> 54,482
<SALES> 19,465
<TOTAL-REVENUES> 19,465
<CGS> 17,660
<TOTAL-COSTS> 17,660
<OTHER-EXPENSES> (212)
<LOSS-PROVISION> 593
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,017
<INCOME-TAX> 744
<INCOME-CONTINUING> 1,019
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1019
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
</TABLE>
