SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-K
- -----
| x | ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
- ----- SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended DECEMBER 31, 1998
-----------------
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 no. 0-3677
DATATAB, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEW YORK 13-1917838
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
49 EAST 21ST STREET, NEW YORK, NEW YORK 10010
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 228-6800
-------------
Securities registered pursuant to Section 12(b) of the Act: NONE
----
Securities registered pursuant to Section 12(g) of the Act:
COMMON SHARES, PAR VALUE $1.00 PER SHARE
- --------------------------------------------------------------------------------
(Title of class)
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
---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. ( )
- --------------------------------------------------------------------------------
The aggregate market value of the voting shares of the Registrant held
by non-affiliates as at March 22, 1999 was $3,758.
The number of common shares, $1.00 par value, outstanding
at March 22, 1999 was 705,836.
<PAGE>
PART I
ITEM 1. BUSINESS.
- -----------------
(a) GENERAL DEVELOPMENT OF BUSINESS.
The Registrant was incorporated on June 5, 1959 as a New
Jersey corporation, commenced business operations in May, 1960, and was
re-incorporated on March 29, 1965 as a New York corporation.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS.
For the past three years, market research accounted for 100%
of consolidated operating revenues. No other segment accounted for as much as
15% of consolidated operating revenues during the last three years.
(c) NARRATIVE DESCRIPTION OF BUSINESS.
1. SERVICES
--------
The Registrant operates a data processing service center in
New York City, providing a variety of services principally utilizing computer
packages for the processing of data for use in market research. These packages
can be marketed to many different clients with only very limited program
adaptation.
Market research data processing performed by the Registrant
includes the processing of public opinion, readership audience, political,
consumer, and general survey research data for manufacturers, market research
companies, advertising agencies, governmental agencies, financial and
educational institutions, and foundations. The Registrant also designs, prints,
mails, and processes surveys for use in large database research. Data supplied
by the Registrant's clients is refined by the Registrant into statistics
designed to be of assistance to the client.
The above applications utilize computer software licensed to
the Registrant. (See Item 2, INFRA.)
I - 1
<PAGE>
2. SOURCES OF RAW MATERIALS
------------------------
The Registrant's major equipment suppliers are Gateway
Computers, Hewlett-Packard, IBM, Megadata Corporation, and Qualstar Corporation.
The Registrant has been granted a perpetual license to use
copies of World Research Systems' ("WRS") UNCLE software for cross tabulations
as a result of a marketing agreement between the two companies under which the
Registrant was given the right to market software developed by WRS.
3. DEPENDENCE ON CERTAIN CUSTOMERS
-------------------------------
In 1998, there were two clients who accounted for more than
10% of consolidated operating revenues. These clients reflected 39% and 14% of
the consolidated operating revenues. Management believes that the loss of any
one or a few of its largest clients would have a material adverse effect upon
the Registrant.
4. COMPETITION
-----------
The data processing service industry is highly competitive.
The Registrant conducts business in direct competition with many companies
(including both independent service bureaus and diversified companies with
service divisions) which offer a wide range of general data processing services,
including those performed by the Registrant. Some of the Registrant's
competitors are smaller, and some are larger and possess greater financial
resources. Another competitive factor in the data processing service business is
"in-house" data processing, in which a company installs its own data processing
equipment. The increasing availability and lower prices of mini- and
micro-computers have permitted companies to install their own data processing
equipment and to perform their own processing.
I - 2
<PAGE>
Companies in the industry compete on the basis of a number of
factors, including price, quality of service, and product features. Management
believes the Registrant's particular strengths are its reputation and expertise
in a wide variety of applications, a well qualified staff, and its advanced
software. The Registrant provides extensive staff support to its clients while
maintaining a competitive price structure within the industry.
5. RESEARCH AND DEVELOPMENT
------------------------
The Registrant did not engage in any research and development
activities during the last fiscal year and Registrant has not engaged in any
customer-sponsored research activities relating to the development or
improvement of products or services during such period.
6. EMPLOYEES
---------
As of March 22, 1999, the Registrant had 4 full-time
employees. Part-time personnel are employed as needed.
(c) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC
------------------------------------------------
OPERATIONS AND EXPORT SALES.
----------------------------
Not applicable.
ITEM 2. PROPERTIES.
- ------------------
The Registrant maintained its executive offices and data
center operations at 80 Fifth Avenue, New York, New York under a lease which
expired on December 30, 1996. In addition to the basic annual rent, the
Registrant was responsible for all taxes, assessments, water and sewer rents,
insurance, etc.. The Registrant shared this space with its parent company, Data
Probe, Inc.
I - 3
<PAGE>
The Registrant, effective December 27, 1996, currently
maintains its executive offices and data center operations at 49 East 21 Street,
New York, New York. The Registrant's parent company, Data Probe, Inc. acquired a
lease for this location, and the Registrant will be renting space on a month to
month basis. (See Item 13, INFRA.)
The Registrant owns two Megadata 8300 Model 4's, a Megadata
8300 Model 6, a Gateway2000 Pentium PC, and various IBM display terminals and
Hewlett Packard Printers.
ITEM 3. LEGAL PROCEEDINGS.
- --------------------------
NONE.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- ------- ----------------------------------------------------
No matter was submitted to a vote of security holders during
the fourth quarter.
I - 4
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
- -----------------------------------------------------------------------
MATTERS.
--------
a) MARKET INFORMATION.
-------------------
The Registrant's common shares are traded in the
over-the-counter market and listed on the National Quotation Bureau's "Pink
Sheets" (symbol: "DTAB"). The following table sets forth the range of high and
low closing bid quotations for the Registrant's common shares for each quarterly
period during the Registrant's last two fiscal years, as reported by the
National Quotation Bureau:
PERIOD CLOSING BID PRICES
------ ------------------
Fiscal Year Ended
December 31, 1998
HIGH LOW
---- ---
First Quarter N/A * N/A *
Second Quarter N/A * N/A *
Third Quarter .02 .02
Fourth Quarter .02 .02
Fiscal Year Ended
December 31, 1997
HIGH LOW
---- ---
First Quarter N/A * N/A *
Second Quarter N/A * N/A *
Third Quarter N/A * N/A *
Fourth Quarter N/A * N/A *
- ---------------
* Quotations were not available for the period indicated.
(b) HOLDERS.
-------
The number of equity security holders of record at March 20,
1998 was 579.
(c) DIVIDENDS.
---------
The Registrant has never paid cash dividends on its shares.
The Registrant does not anticipate paying cash dividends in the foreseeable
future.
II - 1
<PAGE>
<TABLE>
<CAPTION>
DATATAB, INC. AND SUBSIDIARIES
------------------------------
SELECTED FINANCIAL DATA
-----------------------
YEAR ENDED DECEMBER 31,
- -----------------------------------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- -------
For the year:
<S> <C> <C> <C> <C> <C>
Total Revenue $ 394,947 $ 496,301 $ 520,854 $ 665,529 $ 608,340
========== ========== ========== ========== ==========
Net income
(loss) $ (84,368) $ (48,761) $ 3,991 $ (27,110) $ (32,548)
========== ========== ========== =========== ===========
Income (loss)
per share $(.12) $(.07) $ .01 $(.04) $(.05)
====== ====== ====== ====== ======
Average number
of shares
used in
computing
earnings or
loss per
share 705,836 705,836 705,836 705,836 705,836
---------- ---------- ---------- ---------- ----------
At year end:
Total assets $ 215,909 $ 302,440 $ 429,807 $ 351,985 $ 517,965
---------- ---------- ---------- ---------- ----------
Working
capital $ 59,271 $ 143,888 $ 190,797 $ 142,432 $ 159,964
---------- ---------- ---------- ---------- ----------
Long-term
indebtedness $ 16,600 $ 18,600 $ 22,600 $ 22,600 $ 30,600
---------- ---------- ---------- ---------- ----------
Shareholders'
equity $ 46,177 $ 130,545 $ 179,306 $ 174,315 $ 202,425
---------- ---------- ---------- ---------- ----------
Book value
per share $ .06 $ .18 $ .25 $ .25 $ .29
----- ----- ----- ----- -----
Cash dividends
declared per
common share NONE NONE NONE NONE NONE
---- ---- ---- ---- ----
</TABLE>
II - 2
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- ---------------------------------------------------------------------
AND RESULTS OF OPERATION.
- -------------------------
RESULTS OF OPERATIONS:
- ----------------------
Operating revenues for the three most recent fiscal years
ended December 31, were $394,947 in 1998, $496,301 in 1997, and $520,854 in
1996.
During fiscal year ending December 31, 1998 operating revenues
decreased by 20.4%, or $101,354. During fiscal year 1997 operating revenues
decreased by 4.7% when compared to the revenues in fiscal year 1996.
The decrease in revenue in fiscal year 1998 is mainly due to a
69% reduction in revenue from the Registrant's largest client. Only a small
portion of this decrease was offset by increased revenue from other existing
clients. The lower level of revenue during fiscal year 1997 was due to a
reduction of 13% in revenue from the Registrant's main client. That decrease was
partly offset by several increases in work from smaller existing clients along
with the addition of new clients.
In 1998 the Registrant's largest client accounted for 39%, or
$122,000 of the Registrant's revenue as compared with 80%, or $410,987 in 1997.
The $289,000 decrease in revenue was the main reason for the decrease in overall
revenue.
The Registrant is continuously trying to add clients to its
base. However, the key is to add repetitive work as opposed to one time work.
While the Registrant added several new clients during fiscal 1998, a few other
clients either did not repeat their studies or reduced the amount of work sent
to the Registrant.
For the past three years market research accounted for 100% of
the Registrant's consolidated revenue.
Operating costs decreased by 17.3%, or $79,075, in 1998. These
same costs increased by 2.2%, or $9,669 in 1997. The decrease in 1998 costs is
II - 3
<PAGE>
attributable to the lower sales volume during the fiscal year. The Registrant
depends on outside suppliers to assist in completing it's projects and a
significant portion of the decrease in 1998 is attributable to the reduction in
outside supplier costs. The Registrant is continuously monitoring its operating
cost structure and implementing cost saving programs wherever appropriate.
Selling and administrative expenses were 2% lower in fiscal
Year 1998. Selling and administrative expenses increased by 28.4%, or $27,279 in
fiscal year 1997 as compared to 1996.
The Registrant operated at a loss in fiscal years 1998 and
1997. These losses were a result of a reduced revenue base.
The Registrant operated at a slight profit in 1996. In 1996
the decrease in both operating and selling and administrative expenses offset
the decrease in revenue.
The Registrant had no capital expenditures in 1998 and 1997
and does not anticipate any capital expenditures in the near future.
In the opinion of management, inflation has not had a material
impact on the operations of the Registrant.
THE YEAR 2000 ISSUE
- -------------------
The Registrant has diligently studied the impact of the year
2000 on the software and services it sells as well as its own internal systems.
It was concluded that the software and services provided by
the Registrant are Year 2000 compliant. The Registrant is scheduled to upgrade
its accounting and payroll systems to be fully compliant on or before June 30,
1999. The cost of such upgrades will not exceed $4,000. The Registrant has
determined that at that time it will be fully compliant under the Year 2000
requirements.
To date, the Registrant has not found any area where a Year
2000 compliance problem with either its internal systems or outside providers
could have a material adverse impact on any part of the Registrant's business
operations.
LIQUIDITY AND CAPITAL RESOURCES.
- --------------------------------
Working capital at December 31, 1998 amounted to approximately
$59,000. Working capital was decreased by approximately $85,000 in 1998.
II - 4
<PAGE>
as compared to approximately $144,000 at December 31, 1997.
The Registrant's balance sheet at December 31, 1998 reflects a
receivable from its parent company, Data Probe, Inc., which represents a
significant portion of its current assets and therefore its working capital. The
collectability of this receivable is uncertain.
The Registrant's continued losses have greatly reduced its
working capital. If the loss trends continue, or if additional revenues cannot
be generated, or if significant operating costs cannot be reduced, the
Registrant's ability to continue to operate would be severely affected in the
absence of securing some type of supplemental financing, the availability of
which there can be no assurance.
II - 5
<PAGE>
GHASSEMI, PHOEL & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
23 Langdon Place
Lynbrook, NY 11563
Phone: 516-887-4444
Fax: 516-887-4450
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Datatab, Inc.:
We have audited the accompanying consolidated balance sheet of Datatab, Inc. and
subsidiaries as of December 31, 1998 and 1997 and the related consolidated
statements of operations, retained earnings (deficit) and cash flows for each of
the years in the three-years period ended December 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Datatab, Inc. and
subsidiaries at December 31, 1998, and 1997, and result of their operations and
their cash flows for each of the three years in the period ended December 31,
1998, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in the notes to the
financial statements, the Company has suffered recurring losses from operations
that raise substantial doubt about its ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
/S/ GHASSEMI, PHOEL & CO.
Certified Public Accountants
Lynbrook, New York
March 16, 1999
II - 6
<PAGE>
DATATAB, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS
DECEMBER 31,
1998 1997
------------ ---------
Current Assets:
<S> <C> <C>
Cash ...................................... $ 11,071 $ 8,682
Accounts Receivable ....................... 18,605 27,520
Receivable from Data Probe, Inc ........... 181,562 259,781
Inventories of work
in process and supplies ................. 1,165 1,200
-------- --------
Total current assets ............................... 212,403 297,183
Furniture, fixtures, equipment
and improvements (at cost, less
accumulated depreciation
of $ 123,801 in 1998
and $122,050 in 1997) ..................... 2,879 4,630
Other assets ....................................... 627 627
-------- --------
$215,909 $302,440
======== ========
</TABLE>
(CONTINUED)
II - 7
<PAGE>
DATATAB, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
LIABILITIES
DECEMBER 31,
1998 1997
------------ ------------
Current Liabilities:
<S> <C> <C>
Accounts Payable ........................ $ 31,149 $ 42,289
Accrued expenses and taxes .............. 121,983 94,606
Customer advances ....................... - 16,400
----------- -----------
Total Current Liabilities ........................ 153,132 153,295
Other liabilities ................................ 16,600 18,600
----------- -----------
169,732 171,895
----------- -----------
STOCKHOLDERS' EQUITY
Preferred shares - authorized 500,000
shares, par value $1 a share;
none issued ............................. -- --
Common shares - authorized 2,000,000 shares, par value $1 a share; issued
788,955 shares (including
shares held in treasury) ............... 788,955 788,955
Additional paid-in capital ....................... 2,490,471 2,490,471
Deficit .......................................... (3,101,792) (3,017,424)
----------- -----------
177,634 262,002
Less cost of 83,119 common shares
held in treasury ........................ 131,457 131,457
----------- -----------
46,177 130,545
----------- -----------
$ 215,909 $ 302,440
=========== ===========
</TABLE>
The notes to financial statements are made a part hereof.
II - 8
<PAGE>
DATATAB, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Sales ................................... $ 394,947 $ 496,301 $ 520,854
Cost of sales ........................... 378,575 457,650 447,981
--------- --------- ---------
Gross profit ............................ 16,372 38,651 72,873
Selling and administrative
expenses ....................... 120,989 123,466 96,187
--------- --------- ---------
Loss from operations .................... (104,617) (84,815) (23,314)
Interest income, net of
related expenses ............... 20,249 36,054 27,305
--------- --------- ---------
Net income (loss)........................ $ (84,368) $ (48,761) $ 3,991
========= ========= =========
Income (loss) per share ................. $ (.12) $ (.07) $ .01
========= ========= =========
Weighted average number of
shares outstanding ............. 705,836 705,836 705,836
========= ========= =========
</TABLE>
The notes to financial statements are made a part hereof.
II - 9
<PAGE>
DATATAB, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF RETAINED EARNINGS (DEFICIT)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
(Deficit) - January 1 ............. $(3,017,424) $(2,968,663) $(2,972,654)
Net income (loss)
for the year ............. (84,368) (48,761) 3,991
----------- ----------- -----------
(Deficit) - December 31 ........... $(3,101,792) $(3,017,424) $(2,968,663)
=========== =========== ===========
</TABLE>
The notes to financial statements are made a part hereof.
II - 10
<PAGE>
DATATAB, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows provided by
(used in) operating
activities:
Cash received from
customers ................. $ 403,862 $ 444,089 $ 565,604
Cash paid to suppliers
and employees ............. (499,941) (590,070) (485,072)
Interest received,
net ....................... 20,249 36,054 27,305
--------- --------- ---------
Net cash provided by
(used in) operating
activities ......................... (75,830) (109,927) 107,837
--------- --------- ---------
Cash flows provided by
(used in) investing
activities:
Disposition (purchase)
of equipment .............. -- 1,438 --
Advances from (to)
an affiliate ............... 78,219 90,636 (90,600)
--------- --------- ---------
Net cash provided by (used in)
investing activities ............... -- 92,074 (90,600)
--------- --------- ---------
Net (decrease)
increase in cash ................... 2,389 (17,853) 17,237
Cash at beginning
of period .......................... 8,682 26,535 9,298
--------- --------- ---------
Cash at end
of period .......................... $ 11,071 $ 8,682 $ 26,535
========= ========= =========
</TABLE>
(CONTINUED)
II - 11
<PAGE>
DATATAB, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1998 1997 1996
---- ---- ----
Reconciliation of net income to net cash provided by operating activities:
<S> <C> <C> <C>
Net income (loss) ....................... $ (84,368) $ (48,761) $ 3,991
Adjustments to reconcile net
loss to net cash
provided by operating
activities:
Depreciation and
amortization ......... 1,751 4,374 17,108
Decrease (increase)
in accounts
receivable ........... 8,915 9,461 (16,424)
Decrease (increase)
in inventories ....... 35 75 225
Decrease (increase)
in prepaid expenses
and other assets ..... -- 3,530 29,106
(Decrease) increase
in accounts
payable .............. (11,140) (11,824) (22,639)
(Decrease) increase
in accrued expenses,
taxes and other
liabilities .......... 8,977 (66,782) 96,470
--------- --------- ---------
Net cash provided by (used in)
operating activities ........... $( 75,830) $(109,927) $ 107,837
========= ========= =========
</TABLE>
The notes to financial statements are made a part hereof.
II - 12
<PAGE>
DATATAB, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
- -------------------------------------------
Principles of Consolidation - The consolidated financial statements
include the accounts of the Company and its subsidiaries (all of which are
wholly-owned) after elimination of intercompany investments, advances and
transactions.
Inventory - Inventoried costs of uncompleted jobs represents unbilled
labor and overhead charges. Inventories of supplies are stated at the lower of
cost (first-in, first-out method) or market.
Furniture, Fixtures, Equipment and Improvements - Furniture, fixtures,
equipment and improvements are recorded at cost. At the time assets are sold or
otherwise disposed of, the cost and accumulated depreciation are eliminated from
the asset and depreciation accounts; profits and losses on such dispositions are
reflected in current operations. Expenditures for maintenance and repairs are
charged to operations; replacements, renewals and betterments are capitalized.
Depreciation for financial accounting purposes is computed on the
Straight-line method to amortize the cost of various classes of assets over
their estimated useful lives. Leasehold improvements are amortized over the
shorter of the life of the related asset or the life of the lease.
Depreciation for income tax purposes is computed substantially on
accelerated methods; deferred income taxes have been provided on the difference
between depreciation expense for financial accounting and income tax purposes;
however, deferred taxes previously provided were eliminated as a result of
accumulated net losses.
Systems Development Costs - Systems development costs are charged to
operations as incurred.
(Continued)
II - 13
<PAGE>
DATATAB, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
- -------------------------------------------------------
Earnings or Loss per Share - Earnings or loss per share is based on the
average number of shares of common stock outstanding each year after deducting
treasury shares.
Cash and Cash Equivalents - All highly liquid investments with a
maturity of three months or less at date of purchase are carried at fair value
and are considered to be cash equivalents.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect certain report amounts and
disclosures. Accordingly, actual results could differ from those estimates.
Fair Value of Financial Instruments - The carrying value of financial
instruments approximate their fair value.
RECEIVABLE FROM DATA PROBE, INC.:
- ---------------------------------
Data Probe, Inc., the majority stockholder, is indebted to the Company for
advances made. For the year ended December 31, 1998 and 1997 total interest
earned on the advances amounted to $20,249 and $35,834 respectively.
INVENTORIES:
- ------------
Inventories are summarized as follows:
DECEMBER 31,
------------
1998 1997
---- ----
Work in process . . . . . . $ 1,165 $ 1,200
======= =======
(Continued)
II - 14
<PAGE>
DATATAB, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
FURNITURE, FIXTURES, EQUIPMENT AND IMPROVEMENTS:
- ------------------------------------------------
Furniture, fixtures, equipment and improvements comprise the following:
COST AND BOOK VALUE
DECEMBER 31,
------------
ESTIMATED
USEFUL
1998 1997 LIVES
---- ---- -----
Computer data
processing
equipment . . . $118,033 $118,033 7 to 10 years
Furniture,
fixtures and
improvements. . 8,647 8,647 5 to 10 years
-------- --------
126,680 126,680
Less accumulated
depreciation. . 123,801 122,050
------- -------
Net . . $ 2,879 $ 4,630
======== ========
INCOME TAXES:
- -------------
At December 31, 1998, the Company has available net operating loss
carryforwards in excess of $1,061,000, of which $116,000 expires in 1999,
$320,000 in 2000, $175,000 in 2001, $199,000 in 2002, $120,000 in 2003, $ 87,000
in 2004 and the balance in 2005 and thereafter.
The Company has provided a valuation allowance in its entirety to
offset potential benefit derived with the utilization of the net operating loss
carryforwards and tax credits available.
The consolidated federal income tax returns of the Company and its
subsidiaries have been examined by the Treasury Department through 1977.
(Continued)
II - 15
<PAGE>
DATATAB, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
TRANSACTIONS WITH RELATED PARTIES:
- ----------------------------------
Data Probe, Inc. charged the Company for the following:
TOTAL SERVICES RENT
----- -------- ----
1998. . . $161,166 $ 95,123 $ 66,043
1997. . . 218,034 177,796 40,238
1996. . . 116,091 116,091 -
In addition, the Company charged Data Probe, Inc. for the following:
TOTAL SERVICES RENT INTEREST
----- -------- ---- --------
1998. . . $ 68,249 $ 48,000 $ - $ 20,249
1997. . . 95,834 60,000 - 35,834
1996. . . 230,870 120,000 84,843 26,027
COMMITMENTS:
- ------------
As of January 1, 1997, Data Probe, Inc. acquired a lease for new
office space, and the Company will be renting its offices from them on a month
to month basis.
GOING CONCERN:
- --------------
As reflected in the accompanying financial statements, the Company
incurred net operating losses of $84,368 and $48,761 for each of the two years
ended December 31, 1998 and 1997. Adverse economic conditions have limited the
ability of the Company to market its services at amounts sufficient to recover
operating and administrative cost. Continued losses have and will exhaust the
remaining net working capital in the near future. Working capital had been
supplemented by the collections of a note receivable, which was fully collected
as of December 31, 1994. Because of the conditions surrounding the Company and
its inability to generate profit, there is doubt about the Company's ability to
continue as a going concern. The financial statements do not include any
adjustments that might be necessary should the Company be unable to continue as
a going concern.
II - 16
<PAGE>
ITEM #9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE:
- -------- -----------------------------------------------------
Not applicable.
II - 17
<PAGE>
Part III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
(a), (b) IDENTIFICATION OF DIRECTORS AND EXECUTIVE
OFFICERS.
DIRECTOR OFFICER
NAME AGE POSITION SINCE SINCE
---- --- -------- ----- -----
Yitzhak N. Bachana 66 President, Treasurer, 1983 1983
and Director
James R. Sheridan 53 Executive Vice President, 1983 1983
Secretary, and Director
Herbert E. Shaver 44 Director 1989
Each director is elected to serve as a director until the next
succeeding annual meeting of shareholders and until his successor is duly
elected and qualified. Each executive officer is elected to serve at the
pleasure of the Board of Directors.
(c) IDENTIFICATION OF CERTAIN SIGNIFICANT EMPLOYEES.
None.
(d) FAMILY RELATIONSHIPS.
None.
(e) BUSINESS EXPERIENCE.
The following sets forth the business experience during the
past five years of each director and officer:
Mr. Bachana has been President, Treasurer, and a director of
Data Probe, Inc., a publicly-traded, New York based computer service bureau and
parent of Data Probe Acquisition Corp., for more than the past five years. Mr.
Bachana has been a director of the Board of Megadata Corporation since April 20,
1976 and has been President and Chief Executive Officer of Megadata Corporation
since June 3, 1980. On October 2, 1998, Mr. Bachana has resigned his post as
President of Megadata. Megadata Corporation's securities are registered under
Section 12(g) of the Securities Exchange Act of 1934, as amended.
III - 1
<PAGE>
Mr. Sheridan has been Executive Vice President and served as a
supervisor and operations manager of Data Probe, Inc. for more than the past
five years.
Mr. Shaver has been Vice President and Controller of the
Registrant Until his termination on September 1, 1998. Mr. Shaver remains as a
director and has been so for more than the past five years. Mr. Shaver served as
the Controller of Data Probe, Inc. for more than the past five years until his
termination from Datatab, Inc. Mr. Shaver has served as the Controller of
Megadata Corporation since September 1993 in a consulting capacity. As of
September 1, 1998, Mr. Shaver became controller of Megadata Corporation on an
exclusive basis.
(f) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS.
The Registrant knows of no event which occurred during the
past five years and which is described in Item 401(f) of Regulation S-K relating
to any director or officer of the Registrant.
III - 2
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.
(a) COMPENSATION.
The following table sets forth all compensation paid to the
executive officers of the Registrant as a group for such fiscal year.
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------
(A) (B) (C) (D) (E)
- --------------------------------------------------------------------------------
NAME AND PRINCIPAL OTHER
POSITION YEAR SALARY BONUS COMPENSATION
- ------------------ ---- -------- ----- ------------
Yitzhak N. Bachana - President 1998 $ 6,346 (1) - $ 62,305 (2)
1997 55,000 - 10,577 (3)
1996 44,423 (4) - 10,577 (5)
James R. Sheridan - 1998 $ 48,500 (6) - $ 37,362 (7)
Executive Vice President 1997 63,500 (8) - 32,090 (9)
1996 54,225 (10) - 19,058 (11)
Herbert E. Shaver (12) 1998 $ 44,887 - $ -
1997 61,111 - -
1996 61,119 - -
- --------------------------------------------------------------------------------
(1) Does not include earned but unpaid salary of $51,728 as of December 31,
1998. (2) Represents earned but unpaid salary through December 31, 1998. (3)
Represents earned but unpaid salary through December 31, 1996. (4) Does not
include earned but unpaid salary of $10,577 as of December 31, 1996. (5)
Represents earned but unpaid salary through December 31, 1996.
(6) Does not include earned but unpaid commission of $5,272 as of December 31,
1998. (7) Represents earned but unpaid commission through December 31, 1998. (8)
Does not include earned but unpaid commission as of December 31, 1997 (9)
Represents earned but unpaid commission through December 31, 1997. (10) Does not
include earned but unpaid commission as of December 31, 1996 (11) Represents
earned but unpaid commission through December 31, 1996.
(12) Mr. Shaver was terminated as an employee of the Registrant on September 1,
1998.
(b) (1) COMPENSATION PURSUANT TO PLANS.
The Registrant's employees (including officers) are all
employed on a month-to-month basis.
(2) PENSION TABLE.
Not applicable.
(3) ALTERNATIVE PENSION PLAN DISCLOSURE.
Not applicable.
(4) STOCK OPTION AND STOCK APPRECIATION RIGHT
PLANS. Not applicable.
(c) OTHER COMPENSATION.
None.
III - 3
<PAGE>
(d) COMPENSATION OF DIRECTORS.
1. STANDARD ARRANGEMENTS.
None.
2. OTHER ARRANGEMENTS.
None.
(e) TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENT.
None.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS.
The following chart sets forth the name and address of the
person known to the Registrant to be the beneficial owner of more than 5% of the
Registrant's common shares, par value $1.00, at March 22, 1999.
AMOUNT OF
NAME AND ADDRESS OF BENEFICIAL PERCENT
BENEFICIAL OWNER OWNERSHIP OF CLASS
- ---------------- --------- --------
Data Probe
Acquisition Corp. 517,959(1)(2) 73.38
49 East 21 Street
NEW YORK, NEW YORK 10010
- ----------
(1) All shares are owned of record and beneficially.
(2) Yitzhak N. Bachana, President of the Registrant, owns 57.22% of the
outstanding shares of Data Probe, Inc., the parent of Data Probe Acquisition
Corp., and by virtue thereof may be deemed to be the beneficial owner of more
than 5% of the Registrant's outstanding shares.
III - 4
<PAGE>
(b) SECURITY OWNERSHIP OF MANAGEMENT.
The following chart sets forth the number of the Registrant's
common shares, $1.00 par value, beneficially owned by all of the directors of
the Registrant and by the directors and officers of the Registrant as a group at
March 22, 1999:
NAME OF AMOUNT OF
BENEFICIAL BENEFICIAL PERCENT
OWNER OWNERSHIP (1) OF CLASS
- ----- ------------- --------
Yitzhak N. Bachana 0 (2) 0
James R. Sheridan 0 0
Herbert E. Shaver 800 0
Officers and Directors
as a Group
(3 PERSONS) 800 (2)(3) 0
- ----------------------------
(1) All shares are owned of record and beneficially.
(2) Yitzhak N. Bachana is the President, Chairman of the Board, and majority
shareholder of Data Probe, Inc., the parent of Data Probe Acquisition Corp.,
which owns 517,959 common shares of the Registrant (or 73.38% of all issued and
outstanding shares) which are excluded from the foregoing table.
(c) CHANGES IN CONTROL.
Not applicable.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
(a) TRANSACTIONS WITH MANAGEMENT AND OTHERS.
The Registrant, up until December 30, 1996, maintained its
executive offices and data center operations at 80 Fifth Avenue, New York, New
York. The Registrant shared this space with its parent company, Data Probe, Inc.
pursuant to an allocation arrangement providing that Data Probe, Inc. pay the
Registrant $84,843 for the fiscal year ended December 31, 1996.
Since December 27, 1996 The Registrant, located its executive
offices at 49 East 21 Street, New York, New York, where it shares space with its
parent company, Data Probe, Inc. Data Probe acquired a lease for this location,
III - 5
<PAGE>
and the Registrant has been renting space pursuant to an allocation arrangement
providing that the Registrant pay Data Probe, Inc. on a month to month basis
approximately $5,500. (See Item 13, INFRA.)
From time to time the Registrant and Data Probe, Inc. hire
each other's employees for specific projects. For the fiscal year ended December
31, 1998, the Registrant incurred expenses of $95,123 with respect to these
transactions. The Registrant was charged $66,043 for rent pursuant to an
allocation arrangement. The Registrant charged Data Probe, Inc. $48,000 for
services and $20,249 for interest in 1998.
All fees are determined on a project-by-project basis and, in
the opinion of Registrant's management, are no less favorable to the Registrant
than those which could be obtained from unrelated third parties.
(b) CERTAIN BUSINESS RELATIONSHIPS.
None.
(c) INDEBTEDNESS OF MANAGEMENT.
None.
(d) TRANSACTIONS WITH PROMOTERS.
Not applicable.
III - 6
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM
8-K.
PAGE
----
(a) 1. FINANCIAL STATEMENTS
Included in Part II of this report:
Selected Financial Data at
December 31, 1998, 1997, 1996,
1995, 1994 II-2
Report of Independent Certified
Public Accountants II-6
Consolidated Balance Sheets at
December 31, 1998 and 1997 II-7
Consolidated Statements of Operations
for the years ended December 31,
1998, 1997, and 1996 II-9
Consolidated Statements of Retained
Earnings (Deficit) for the years
ended December 31, 1998, 1997,
and 1996 II-10
Consolidated Statements of Cash
Flows for the years ended December 31,
1998, 1997, and 1996 II-11
Notes to Consolidated Financial
Statements II-13
2. Financial Statements Schedules
Included in Part IV of this report:
Accountant's report on financial
statement schedules IV-4
Schedule V-Equipment and
Improvements for the years ended
December 31, 1998, 1997, and 1996 IV-5
Schedule VI-Depreciation and
Amortization of Equipment and
Improvements for the years ended
December 31, 1998, 1997, and 1996 IV-6
IV - 1
<PAGE>
Schedules, other than those listed above, have been omitted
since they are not required or the information required therein has been
presented elsewhere in the financial statements.
Separate financial statements of Datatab, Inc. (parent) have
been omitted since the conditions for omission have been met.
(b) REPORTS FILED ON FORM 8-K.
None
(c) EXHIBITS
None
IV - 2
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
DATATAB, INC.
Dated: March 31, 1999 By: /S/ YITZHAK N. BACHANA
----------------------
Yitzhak N. Bachana,
President
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated:
Dated: March 31, 1999 /S/ YITZHAK N. BACHANA
----------------------
Yitzhak N. Bachana, President,
Treasurer, Principal Executive
Officer, Principal Financial
Officer, Director
Dated: March 31, 1999 /S/ JAMES R. SHERIDAN
---------------------
James R. Sheridan, Executive Vice
President, Director
Dated: March 31, 1999 /S/ HERBERT E. SHAVER
---------------------
Herbert E. Shaver,
Director
IV - 3
GHASSEMI, PHOEL & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
23 Langdon Place
Lynbrook, NY 11563
Phone: 516-887-4444
Fax: 516-887-4450
Board of Directors and Shareholders
Datatab, Inc.
The examination referred to in our opinion dated March 16, 1999 of the financial
statements as of December 31, 1998 and for each of the three years then ended
included the related supplemental financial schedules as listed in Item 11(a)2,
which, when considered in relation to the basic financial statements, presents
fairly in all material respects the information shown therein.
/S/ GHASSEMI, PHOEL & CO.
- -------------------------
Certified Public Accountants
Lynbrook, New York
March 16, 1999
IV - 4
DATATAB, INC. AND SUBSIDIARIES
EQUIPMENT AND IMPROVEMENTS
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- -------- -------- -------- -------- -------- --------
SALES,
DISPOSALS
BALANCE AT AND FULLY BALANCE
BEGINNING ADDITIONS ABANDONMENT DEPRECIATED AT END
CLASSIFICATION OF YEAR AT COST OF ASSETS ASSETS OF YEAR
- -------------- ------- ------- --------- ------ -------
Year ended
December 31,
1998:
Computers
& other data
processing
equipment $ 118,033 $ - $ - $ - $ 118,033
Furniture
& improve-
ments 8,647 - - - 8,647
---------- ---------- --------- --------- ---------
$ 126,680 $ - $ - $ - $ 126,680
========== ========== ========= ========= =========
Year ended
December 31,
1997:
Computers
& other data
processing
equipment $ 118,033 $ - $ - $ - $ 118,033
Furniture
& improve-
ments 10,085 - 1,438 - 8,647
---------- --------- --------- --------- ---------
$ 128,118 $ - $ 1,438 $ - $ 126,680
========== ========= ========= ========= =========
Year ended
December 31,
1996:
Computers
& other data
processing
equipment $ 118,353 $ - $ 320 $ - $ 118,033
Furniture
& improve-
ments 41,451 - 31,366 - 10,085
---------- --------- --------- ---------- ---------
$ 159,804 $ - 31,686 $ - $ 128,118
========== ========= ========= ========== =========
The notes to financial statements are made a part hereof.
IV - 5
<PAGE>
DATATAB, INC. AND SUBSIDIARIES
DEPRECIATION AND AMORTIZATION OF
EQUIPMENT AND IMPROVEMENTS
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- -------- -------- -------- -------- -------- --------
SALES,
DISPOSALS
BALANCE AT ADDITIONS AND FULLY BALANCE
BEGINNING CHARGED TO ABANDONMENTS DEPRECIATED AT END
CLASSIFICATIOn OF YEAR OPERATIONS OF ASSETS ASSETS OF YEAR
- -------------- ------- ---------- --------- ------ -------
Year ended
December 31,
1998:
Computers
& other
data
processing
equipment $ 114,202 $ 1,547 $ - $ - $ 115,749
Furniture
& improve-
ments 7,848 204 - - 8,052
---------- ---------- --------- --------- ----------
$ 122,050 $ 1,751 $ - $ - $ 123,801
========== ========== ========= ========= ==========
Year ended
December 31,
1997:
Computers
& other
data
processing
equipment $ 110,106 $ 4,096 $ - $ - $ 114,202
Furniture
& improve-
ments 7,570 278 - - 7,848
---------- ---------- ---------- --------- ----------
$ 117,676 $ 4,374 $ - $ - $ 122,050
========== ========== ========== ========= ==========
Year ended
December 31,
1996:
Computers
& other
data
processing
equipment $ 96,193 $ 14,233 $ 320 $ - $ 110,106
Furniture
& improve-
ments 36,061 2,875 31,366 - 7,570
---------- ---------- ---------- ---------- ----------
$ 132,254 $ 17,108 $ 31,686 $ - $ 117,676
========== ========== ========== ========== ==========
The notes to financial statements are made a part hereof.
IV - 6
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000027099
<NAME> DATATAB, INC.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 11,071
<SECURITIES> 0
<RECEIVABLES> 200,167
<ALLOWANCES> 0
<INVENTORY> 1,165
<CURRENT-ASSETS> 212,403
<PP&E> 126,680
<DEPRECIATION> 123,801
<TOTAL-ASSETS> 215,909
<CURRENT-LIABILITIES> 153,132
<BONDS> 0
788,955
0
<COMMON> 788,955
<OTHER-SE> (658,410)
<TOTAL-LIABILITY-AND-EQUITY> 215,909
<SALES> 394,947
<TOTAL-REVENUES> 415,196
<CGS> 378,575
<TOTAL-COSTS> 499,564
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (84,368)
<INCOME-TAX> 0
<INCOME-CONTINUING> (84,368)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (84,368)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> (.12)
</TABLE>
