Page numbered in accordance with Rule 0-3(b). Page 1 of 11.
There are no exhibits.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A-1
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES ACT OF 1934
For the transition period from to
Commission File Number 0-10329
AW COMPUTER SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
New Jersey 22-1991981
(State or other jurisdiction of (IRS Employer Identifications No.)
incorporation or organization)
9000A Commerce Parkway, Mt. Laurel, New Jersey 08054
(Address of principal executive offices)(Zip Code)
609-234-3939
(Registrant's telephone number, including area code)
N/A
(Former name, address and former fiscal year, if changed since last report)
Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the past 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
As of May 15, 1997, there were issued and outstanding 6,680,567 Class A Common
Shares of the Company.
<PAGE>
Page numbered in accordance with Rule 0-3(b). Page 2 of 11.
PART I
FINANCIAL INFORMATION
Item 1. Interim Financial Statements
Contents:
Consolidated Statements of Operations for three months ended
March 31, 1997 and 1996.
Consolidated Balance Sheets as of March 31, 1997 and December
31, 1996.
Consolidated Statements of Cash Flow for three months ended
March 31, 1997 and 1996.
Notes to Interim Consolidated Financial Statements for three
months ended March 31, 1997.
Item 2. Management's Discussion and Analysis or Plan of Operation
<PAGE>
Page numbered in accordance with Rule 0-3(b). Page 3 of 11.
AW COMPUTER SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Revenues $ 188,854 $ 345,873
Costs of revenues 309,606 395,897
--------- ---------
Gross (Loss) ( 120,752) ( 50,024)
--------- ---------
Selling, general, and
administrative expenses 813,886 765,834
Development expense 18,357 68,332
Interest expense 13,117 18,415
Other (income) - net ( 5,195) ( 7,087)
--------- ---------
840,165 845,494
--------- ---------
Loss before income taxes ( 960,917) ( 895,518)
Income tax (benefit) -- --
Net (loss) $( 960,917) $( 895,518)
========= =========
Per share statistics:
Net (loss) per share $(0.15) $(0.19)
Average shares outstanding 6,680,567 4,642,119
<FN>
The accompanying notes are an integral part of the
consolidated financial statements.
</FN>
</TABLE>
<PAGE>
Page numbered in accordance with Rule 0-3(b). Page 4 of 11.
AW COMPUTER SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND DECEMBER 31, 1996
ASSETS
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 95,489 $ 919,621
Accounts and contract receivable, less allowance for doubtful
accounts of $41,168 in 1997 and $39,697 in 1996 70,824 78,380
Costs and estimated earnings in excess of billings on
uncompleted contracts 212,449 200,015
Inventories 55,089 56,589
Income taxes receivable -- --
Prepaid and other current assets 42,426 36,854
---------- ---------
Total current assets 476,277 1,291,459
Property and equipment, net 478,193 511,579
Computer software, net 669,351 669,351
Due from related parties -- --
Other assets 27,484 27,308
--------- ---------
Total assets $ 1,651,305 $ 2,499,697
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
Current liabilities:
Line of credit $ 570,368 $ 570,368
Current portion of long-term debt -- --
Current portion of lease obligations -- --
Accounts payable 174,091 141,195
Accrued liabilities 235,622 269,371
Accrued compensation 239,862 177,362
Accrued contract costs 408,406 408,406
Other current liabilities 53,583 41,755
--------- ---------
Total current liabilities 1,681,932 1,614,457
Capitalized lease obligations -- --
Deferred compensation payable 162,508 162,508
--------- ---------
Total liabilities 1,844,440 1,776,965
Commitments and contingent liabilities
Shareholders' equity
Preferred Stock - No Par Value:
Authorized 5,000,000 shares in 1997 and in 1996 and
zero issued and outstanding in 1997 and 1996. -- --
Common shares:
Class A, $.01 par; authorized 25,000,000 and 10,000,000
shares; 6,680,567 and 4,816,694 issued and outstanding in
1997 and 1996, respectively 66,806 66,381
Additional paid-in capital 4,476,485 4,431,860
Retained earnings (Deficit) (4,641,426) (3,680,509)
Stock subscription - related party ( 95,000) ( 95,000)
Deferred compensation -- --
--------- ---------
Total shareholders' equity ( 193,135) 722,732
--------- ---------
Total liabilities and shareholders' equity $(1,651,305) $ 2,499,697
========= =========
<FN>
The accompanying notes are an integral part of the
consolidated financial statements.
</FN>
</TABLE>
<PAGE>
Page numbered in accordance with Rule 0-3(b). Page 5 of 11.
AW COMPUTER SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net (loss): $( 960,917) $( 895,518)
Adjustments to reconcile net (loss) to
net cash provided by (used in) operating
activities:
Depreciation and amortization 37,777 71,119
Amortization of unearned compensation -- 17,431
Decrease (increase) in:
Accounts receivable 7,556 411,769
Costs incurred and estimated earnings
on uncompleted contracts ( 12,434) 47,012
Inventories 1,500 3,269
Income taxes receivable -- 280,445
Prepaid expenses ( 5,748) 55,128
Increase (decrease) in:
Accounts payable 26,896 ( 102,241)
Accrued liabilities ( 33,749) 29,859
Accrued cost ( 55,876)
Accrued compensation 62,500 24,591
Billing in excess of costs incurred and
estimated earnings on uncompleted
contracts -- --
Other current liabilities 11,828 ( 475)
--------- ---------
Net cash (used in) operating activities ( 864,791) ( 113,487)
--------- ---------
Cash flows from investing activities:
Capital expenditures ( 4,391) ( 89,484)
Computer software capitalized -- ( 24,178)
--------- ---------
Net cash (used in) investing activities ( 4,391) ( 113,662)
--------- ---------
Cash flows from financing activities:
Net borrowing (payments):
Payments on long-term debt -- ( 133,333)
Payments on lease obligations -- ( 1,469)
Net (advances) repayments of related party
loans -- --
Proceeds from issuance of common shares 45,050 625,559
--------- ---------
Net cash provided (used) by financing activities 45,050 490,757
--------- ---------
Increase (Decrease) in cash and equivalents ( 824,132) 263,608
Cash and cash equivalents, beginning of year 919,621 848,560
--------- ---------
Cash and cash equivalents, end of period $ 95,489 $ 1,112,168
========= =========
<FN>
The accompanying notes are an integral part of the
consolidated financial statements.
</FN>
</TABLE>
<PAGE>
Page numbered in accordance with Rule 0-3(b). Page 6 of 11.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
1. The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary. All significant inter-company
transactions and balances have been eliminated. All adjustments
consisting only of normal recurrent adjustments which, in the opinion
of management, are necessary for a fair statement of the results for
this interim period have been made.
2. Prior year balance sheet and cash flow statements are restated to
conform to present year presentation.
3. During the quarter ending March 31, 1997, the Company maintained a
$550,000 Line of Credit with interest at the Bank's prime rate (8.25%
at March 31, 1997) plus one percent and an additional credit facility
of $20,368 with an interest rate of prime plus 2%. The Line of Credit
had an outstanding balance of $570,368 on March 31, 1997.
The credit facilities are collateralized by substantially all of the
Company's assets. The carrying amount of the Company's credit
arrangements approximate their fair value.
<PAGE>
Page numbered in accordance with Rule 0-3(b). Page 7 of 11.
Item 2 Management's Discussion and Analysis or Plan of Operation
AW's future is dependent on the successful completion and receipt
of a significant deposit on an order(s) for either or both of the Company's new
products, The Checker Productivity Analyzer ("CPA") and/or the Wizard of
Point-of-Sale ("Wizard"), or on the Company's ability to raise additional
capital to maintain its operations until these products are completed. The
Company expects that its existing capital resources will enable it to maintain
its current operations through the second quarter of 1997. Thereafter, the
Company will need to raise substantial additional capital to remain in business.
The Company intends to seek such additional funding through collaborative or
partnering arrangements or through public or private equity or debt financing,
as well as attempting to obtain deposits from customers. There can be no
assurance that additional financing will be available on acceptable terms or at
all.
As of May 13, 1997, AW had a backlog of firm orders for delivery
within one year of $424 thousand compared to $700 thousand at May 13, 1996.
Because of the size of the backlog the Company believes that the volume of
operations will remain at the relatively low level experienced in the first
quarter of this year until the successful completion and market acceptance of
either CPA or Wizard. Acceptance of either or both of these products would
generate future revenues, however, there can be no assurance that the Company
will not continue to experience delays with these products or that the Company's
marketing efforts will be successful.
The development of the Company's computer vision-based CPA product
is substantially complete and the Company has commenced live testing in an
actual supermarket environment. The live testing is on-going and there can be no
assurances when testing will be completed or that the testing will be
successful. There can also be no assurance that the CPA product will achieve
commercial acceptance.
Operations
Revenues for the first quarter of 1997 were $189 thousand (or 64%)
lower than revenues in the first quarter of 1996 due primarily to: (i) only $35
thousand in contract revenue from contracts in progress. Most of the revenue
generated during the quarter was from software services ($86 thousand) and from
software maintenance ($68 thousand).
The Company experienced a negative gross profit of ($175,355)
compared to ($50,024) for the same period last year. The negative gross profit
was due to approximately $241 thousand in cost related to the development of the
CPA contract with corresponding revenue from the contract of only $28 thousand.
As of March 31, 1997, $1,564,000 and $3,734,000 have been recognized as revenues
and cost under the CPA Agreement respectively. The Project has exceeded its
$1,700,000 contractual budget, as such, the Company has recognized an additional
loss provision of $400,000 representing the estimated cost to complete the
project. Due to uncertainties inherent in the estimation process, it is
reasonably possible that the completion costs for the Project will be further
revised in the near term.
<PAGE>
Page numbered in accordance with Rule 0-3(b). Page 8 of 11.
Selling, general and administrative expenses ("SG&A") were $48
thousand (or 6.2%) higher in the first quarter of 1997 than in the same period
last year. As a percentage of revenues, these expenses were 431% versus 221% in
the first quarter of 1996.
Development expense was $18 thousand (or 74%) lower in the March
quarter of 1997 compared to the first quarter of 1996, this is primarily due to
reduced development activities on the Company's new products until completion of
the CPA project.
In the first quarter of 1997 and 1996, the effective income tax
benefit was 0% of the Net Loss before income taxes. This is due to the lack of a
net loss carryback provision in New Jersey State Income Tax code and the
inability to carryback any additional losses to offset past income for Federal
Income Tax purposes.
As a result of the factors discussed above, operations in the
first quarter of 1997 resulted in a loss of $961 thousand (or $0.15 per share)
compared to net loss of $896 thousand (or $0.19 per share) in the same period
last year.
Liquidity
During the quarter, working capital decreased $879 thousand to
($1.202 million) compared to ($323 thousand) at December 31, 1996. Current
Assets decreased $811 thousand primarily due to decreases in cash of $824
thousand. Current Liabilities increased $68 thousand primarily due to increases
in Accrued Compensation of $63 thousand, an increase in Other Liabilities of $12
thousand, an increase in Accounts Payable of $33 thousand and a decrease in
Accrued Liabilities of $37 thousand.
During the first quarter of 1996, working capital decreased $236
thousand to $846 thousand (or 42 days of costs and expenses) compared to $1,082
thousand (or 54 days of costs and expenses) at December 31, 1995. Current Assets
decreased $537 thousand primarily due to decreases in Accounts Receivable of
$412 thousand, Prepaid Assets of $58 thousand, and Costs in Excess of Billing of
$47 thousand. Current Liabilities decreased $300 thousand primarily due to
decreases in current debt of $133 thousand, decrease in Accounts Payable of $100
thousand and a decrease in Accrued Contract Costs of $56 thousand.
<PAGE>
Page numbered in accordance with Rule 0-3(b). Page 9 of 11.
Financial Resources
The Company expects to require continued significant product
development efforts and capital expenditures for equipment in 1997. The Company
believes its competitive position must be maintained by the development of new
proprietary hardware and software products. Expenditures for these items will be
funded from cash flow and from potential future financing as can be arranged.
There can be no assurance that additional financing will be available on
acceptable terms or at all.
During the quarter ending March 31, 1997, the Company maintained a
$550,000 Line of Credit with interest at the Bank's prime rate (8.25% at March
31, 1997) plus one percent and an additional credit facility of $20,368 with an
interest rate of prime plus 2%. The Line of Credit had an outstanding balance of
$570,368 on March 31, 1997.
The credit facilities are collateralized by substantially all of
the Company's assets. The carrying amount of the Company's credit arrangements
approximate their fair value.
<PAGE>
Page numbered in accordance with Rule 0-3(b). Page 10 of 11.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings - No material developments.
Item 2. Changes in Securities - None.
Item 3. Defaults Upon Senior Securities - None.
Item 4. Submission of Matters to a Vote of Security Holders - None.
Item 5. Other Information - None.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits - None.
b. Reports on Form 8-K - None.
<PAGE>
Page numbered in accordance with Rule 0-3(b). Page 11 of 11.
Signatures
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
AW COMPUTER SYSTEMS, INC.
(REGISTRANT)
Date: August 15, 1997 \s\Charles Welch
Charles Welch
Chief Executive Officer/President
Date: August 15, 1997 \s\Charles F. Trapp
Charles F. Trapp
Vice President, Finance
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The accompanying notes are an integral part of the consolidated financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 95,489
<SECURITIES> 0
<RECEIVABLES> 70,824
<ALLOWANCES> 41,168
<INVENTORY> 55,089
<CURRENT-ASSETS> 476,277
<PP&E> 478,193
<DEPRECIATION> 37,777
<TOTAL-ASSETS> 1,651,305
<CURRENT-LIABILITIES> 1,681,932
<BONDS> 0
0
0
<COMMON> 66,806
<OTHER-SE> (259,941)
<TOTAL-LIABILITY-AND-EQUITY> (1,651,305)
<SALES> 188,854
<TOTAL-REVENUES> 188,854
<CGS> 309,606
<TOTAL-COSTS> 1,154,966
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,117
<INCOME-PRETAX> (960,917)
<INCOME-TAX> 0
<INCOME-CONTINUING> (960,917)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (960,917)
<EPS-PRIMARY> $(0.15)
<EPS-DILUTED> $(0.15)
</TABLE>
