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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X]QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
---------------------------
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 August 15, 1998 there were issued and outstanding 6,670,567 Class A Common
Shares of the Company.
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PART I
FINANCIAL INFORMATION
Item 1. Interim Financial Statements - (Unaudited)
Contents: Page
Consolidated Statements of Operations - Going Concern Basis
for the three and six month periods ended June 30, 1998
and June 30, 1997. 3
Consolidated Statement of Assets and Liabilities in
Liquidation as of June 30, 1998. 4
Consolidated Statements of Cash Flows - Going Concern Basis
for the six month periods ended June 30, 1998 and
June 30, 1997. 5
Notes to Interim Consolidated Financial Statements. 6
Management's Discussion and Analysis or Plan of
Operation. 7
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AW COMPUTER SYSTEMS, INC. DEBTOR IN POSSESSION
CONSOLIDATED STATEMENTS OF OPERATIONS
GOING CONCERN BASIS
FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1998 AND JUNE 30, 1997
(UNAUDITED)
Three months ended Six months ended
June 30, June 30,
-------- --------
1 9 9 8 1 9 9 7 1 9 9 8 1 9 9 7
------- ------- ------- -------
Revenues $ -- $ 241,938 $ 304,626 $ 430,792
Cost of revenues -- 370,652 367,069 680,258
----------- ----------- ---------- -----------
Gross profit (loss) -- (128,714) (62,443) (249,466)
----------- ----------- ---------- -----------
Selling, general and
administrative expenses 124,894 640,871 593,302 1,454,757
Development expense -- 11,123 -- 29,480
Interest expense 16,557 13,402 38,012 26,519
Other (income) - net -- (2,326) (208) (7,521)
Loss on Sale of Fixed Assets 9,880 -- 9,880 --
----------- ----------- ---------- -----------
151,331 663,070 640,986 1,503,235
----------- ----------- ---------- -----------
Income (loss) before
income tax (151,331) (791,784) (703,429) (1,752,701)
Income tax (benefit) -- -- -- --
----------- ----------- ---------- -----------
Net (loss) $ (151,331)$ (791,784) $ (703,429) $(1,752,701)
=========== =========== ========== ===========
Per share statistics:
Net loss per share $ (.02)$ (.12) $ (.11) $ (.26)
=========== =========== ========== ===========
Average shares outstanding 6,670,567 6,649,031 6,670,567 6,654,271
=========== =========== ========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
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AW COMPUTER SYSTEMS, INC. DEBTOR IN POSSESSION
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES IN LIQUIDATION
AS OF JUNE 30, 1998
(UNAUDITED)
ASSETS
Current Assets:
Cash and cash equivalents $ 69,206
Accounts and contract receivables, less allowance for doubtful
accounts of $6,817 4,113
-----------
Total Current Assets 73,319
Property and equipment, net 1,000
Total Assets $ 74,319
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable-Post Petition $ 7,977
Current portion of long-term debt-secured 95,448
Liabilities Subject to Chapter 11
Accounts payable 206,881
Accrued liabilities 857,721
Accrued compensation 501,191
Deposits 100,000
Note payable 773,750
Redeemable Preferred Stock 913,700
Deferred compensation payable 181,078
-----------
Total Liabilities subject to Chapter 11 3,534,321
-----------
Total Liabilities 3,637,746
Commitments and contingent liabilities
Net Liabilities- Liquidation Basis $(3,563,427)
The accompanying notes are an integral part of the consolidated financial
statements.
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AW COMPUTER SYSTEMS, INC. DEBTOR IN POSSESSION
CONSOLIDATED STATEMENTS OF CASH FLOWS
GOING CONCERN BASIS
FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1998 AND JUNE 30, 1997
(UNAUDITED)
Six months ended
June 30,
1 9 9 8 1 9 9 7
------- -------
Cash flows, from operating activities:
Net income (loss): $ (703,429) $(1,752,701)
Adjustments to reconcile net income to net
cash provided by/(used in) operating activities:
Depreciation and amortization -- 108,765
Decrease (increase) in:
Accounts receivable 174,713 6,202
Costs and estimated earnings
on uncompleted contracts -- (58,205)
Inventories -- 5,000
Prepaid expenses 23,861 (3,370)
Other assets -- --
Increase (decrease) in:
Accounts payable 122,890 (53,582)
Accrued liabilities 192,896 55,530
Accrued cost -- (50,000)
Other liabilities 112,337 99,832
---------- -----------
Net cash provided by (used in) operating activities (76,732) (1,642,529)
---------- -----------
Cash flows, from investing activities:
Capital (expenditures) disposals 39,000 (5,663)
Computer software capitalized -- --
---------- -----------
Net cash (used in) investing activities 39,000 (5,663)
---------- -----------
Cash flows, from financing activities: Net borrowing
(payments):
Long-term debt and lease obligations -- (474,920)
Net (advances) repayments of note payables -- 750,000
Proceeds from issuance of common shares -- 45,050
Proceeds from issuance of preferred shares -- 635,600
Payment of dividend -- (4,183)
Additional paid in capital from debt exchange -- 69,720
---------- -----------
Net cash provided by (used in) financing activities -- 1,021,267
---------- -----------
Increase (decrease), cash and cash equivalents (37,732) (626,925)
Cash and cash equivalents:
Beginning of period 106,938 919,621
---------- -----------
End of period $ 69,206 $ 292,696
========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
(UNAUDITED)
1. On May 5, 1998 AW Computer Systems, Inc filed for court protection under
Chapter 11 of the Federal Bankruptcy Code. On March 10, 1998 the Company
adopted liquidation basis accounting. The accompanying consolidated
statement of assets and liabilities as of June 30, 1998 has been prepared
using that basis.
2. These statements should be read in conjunction with the Summary of
Significant Accounting Policies and other notes included in the Notes to
Consolidated Financial Statements in the Company's 1997 Annual Report on
Form 10-KSB.
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Item 2 Management's Discussion and Analysis or Plan of Operation
On May 5, 1998 AW Computer Systems, Inc., a New Jersey corporation,
filed for court protection under Chapter 11 of the Federal Bankruptcy Code. As
previously reported AW discontinued operations on March 10, 1998. The Company's
efforts to obtain long term financing had not been successful nor was the
company able to increase the sales of its products. The Company's efforts to
sell or franchise its software products have been hindered by its current
position in Chapter 11. The Company continues its efforts to realize value from
its software products. Subsequently, the Company has reached an agreement with
the landlord to return the leased property for a full release for all past due
and future rent obligations. This agreement has been finalized and the company
has vacated the property. The Company has sold substantially all of its
furniture and office equipment.
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PART II
OTHER INFORMATION
Item 1. Legal Proceedings
On May 5, 1998 AW Computer Systems, Inc filed for court protection
under Chapter 11 of the Federal Bankruptcy Code.
Item 2. Changes in Securities - None.
Item 3. Defaults Upon Senior Securities.
The Company did not make the required payment of $95,448 plus
interest on its secured debt due December 31, 1998 and has not made the
required interest payments. The facility is collateralized by
substantially all the company's assets.
The Company did not make the required payment of $773,750 plus
interest on its unsecured note due March 19, 1998.
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
a. Exhibits: None
b. Reports on Form 8-K -May 6,1998
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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.
AW COMPUTER SYSTEMS, INC.
(REGISTRANT)
Date: September 2, 1998 \s\ Charles J. McMullin
Charles J. McMullin
Chairman
Date: September 2, 1998 \s\ Charles F. Trapp
Charles F. Trapp
Vice President, Finance
Principal Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial data extracted from the consolidated
balance sheet and the consolidated statement of operations and is qualified in
its entirety by reference to such statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-END> Jun-30-1998
<CASH> 69,206
<SECURITIES> 0
<RECEIVABLES> 10,930
<ALLOWANCES> 6,817
<INVENTORY> 0
<CURRENT-ASSETS> 73,319
<PP&E> 1,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 74,319
<CURRENT-LIABILITIES> 2,724,046
<BONDS> 0
913,700
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 304,626
<TOTAL-REVENUES> 304,626
<CGS> 367,069
<TOTAL-COSTS> 960,371
<OTHER-EXPENSES> 9,672
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38,012
<INCOME-PRETAX> (703,429)
<INCOME-TAX> 0
<INCOME-CONTINUING> (703,429)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (730,429)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> 0
</TABLE>
