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UNITED STATES
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 September 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 November 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 nine month periods ended September 30, 1998 and
September 30, 1997. 3
Consolidated Statement of Assets and Liabilities in Liquidation
as of September 30, 1998. 4
Consolidated Statements of Cash Flows - Going Concern Basis
for the nine month periods ended September 30, 1998
and September 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 NINE MONTH PERIODS ENDED SEPTEMBER 30, 1998 AND
SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
Three months ended Nine months ended
September 30, September 30,
------------- -------------
1 9 9 8 1 9 9 7 1 9 9 8 1 9 9 7
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues $ -- $ 385,228 $ 304,626 $ 816,020
Cost of revenues -- 289,540 367,069 969,798
----------- ----------- ---------- -----------
Gross profit (loss) -- 95,688 (62,443) (153,778)
----------- ----------- ---------- -----------
Selling, general and administrative
expenses 134,391 486,267 727,693 1,941,024
Development expense -- 11,141 -- 40,621
Interest expense 2,612 28,327 40,624 54,846
Other (income) - net (766) ( 1,297) (974) (8,818)
Loss on Sale of Fixed Assets -- -- 9,880 --
----------- ----------- ---------- -----------
136,237 524,438 777,223 2,027,673
----------- ----------- ---------- -----------
Loss before income tax (136,237) (428,750) (839,666) (2,181,451)
Income tax (benefit) -- -- -- --
----------- ----------- ---------- -----------
Net loss $ (136,237)$ (428,750) $ (839,666) $(2,181,451)
=========== =========== ========== ===========
Per share statistics:
Net loss per share $ (.02) $ (.07) $ (.13) $ (.33)
========== =========== ========== ===========
Average shares outstanding 6,670,567 6,670,567 6,670,567 6,659,703
=========== =========== ========== ===========
</TABLE>
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 SEPTEMBER 30, 1998
(UNAUDITED)
ASSETS
Current Assets:
Cash and cash equivalents $ 62,110
Accounts and contract receivables, less allowance for doubtful
accounts of $6,162 --
-----------
Total Current Assets 62,110
Property and equipment, net 1,000
Total Assets $ 63,110
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and Accrued Expenses-Post Petition $ 9,505
Current portion of long-term debt-secured 95,448
-----------
104,953
Liabilities Subject to Chapter 11:
Accounts payable 206,881
Accrued liabilities 857,721
Accrued compensation 611,191
Deposits 100,000
Note payable 773,750
Redeemable Preferred Stock 913,700
Deferred compensation payable 194,578
-----------
Total Liabilities subject to Chapter 11 3,657,821
-----------
Total Liabilities 3,762,774
Commitments and contingent liabilities --
Net Liabilities- Liquidation Basis $(3,699,664)
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 NINE MONTH PERIODS ENDED SEPTEMBER 30, 1998
AND SEPTEMBER 30, 1997
(UNAUDITED)
Nine months ended
September 30,
1 9 9 8 1 9 9 7
------- -------
Cash flows, from operating activities:
Net loss: $ (839,666) $(2,181,451)
Adjustments to reconcile net income to net
cash providedby/(used in) operating activities:
Depreciation and amortization -- 180,669
Decrease (increase) in:
Accounts receivable 178,826 (152,312)
Costs and estimated earnings
on uncompleted contracts -- 200,015
Inventories -- 5,000
Prepaid expenses 23,861 11,487
Increase (decrease) in:
Accounts payable 124,418 (42,342)
Accrued liabilities 192,896 118,368
Accrued cost -- (100,000)
Other liabilities 235,837 58,855
---------- -----------
Net cash (used in) operating activities (83,828) (1,901,711)
---------- -----------
Cash flows, from investing activities:
Capital (expenditures) disposals 39,000 12,864
---------- -----------
Cash flows, from financing activities: Net
borrowing (payments):
Long-term debt and lease obligations -- (474,920)
Net (advances) repayments of note payables -- 773,750
Proceeds from issuance of common shares -- 34,240
Proceeds from issuance of preferred shares -- 635,600
Payment of dividend -- (20,075)
Additional paid in capital from debt exchange -- 69,720
---------- -----------
Net cash provided by (used in) financing activities -- 1,018,315
---------- -----------
Decrease in cash and cash equivalents (44,828) (870,532)
Cash and cash equivalents:
Beginning of period 106,938 919,621
---------- -----------
End of period $ 62,110 $ 49,089
========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 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 September 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, 1997 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: December 17, 1998 \s\ Charles J. McMullin
------------------ ---------------------------------
Charles J. McMullin
Chairman
Date: December 17, 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> 9-mos
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-END> Sep-30-1998
<CASH> 62,110
<SECURITIES> 0
<RECEIVABLES> 6,162
<ALLOWANCES> 6,162
<INVENTORY> 0
<CURRENT-ASSETS> 62,110
<PP&E> 1,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 63,110
<CURRENT-LIABILITIES> 2,849,074
<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> 1,094,762
<OTHER-EXPENSES> 8,906
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40,624
<INCOME-PRETAX> (839,666)
<INCOME-TAX> 0
<INCOME-CONTINUING> (839,666)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (839,666)
<EPS-PRIMARY> (.13)
<EPS-DILUTED> 0
</TABLE>
