SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM 10-QSB/A, No. 1
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
Amending Part I, Item 2.
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 Number 0-13324
JUDICATE, INC.
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(Exact name of small business registrant
as specified in its charter)
Delaware 23-2257354
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(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
1500 Walnut Street, Suite 1300, Philadelphia, PA 19102
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(Address of principal executive offices) (Zip Code)
(215) 546-6200
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(Registrant's telephone number, including area code)
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 ____
As of August 10, 1995, the Registrant had 12,445,749 shares of
Common Stock, $.0001 par value, outstanding.
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JUDICATE, INC.
INDEX
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PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis
or Plan of Operation 3-6
Signature Page 7
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
For the three and six month periods ended June 30, 1995.
The results of operations through June 30, 1995 include the results of
the Company's alternative dispute resolution ("ADR") business and, from April
1, 1995, the operating results of the electronic hardware distribution
("Quest") business acquired by the Company on March 31, 1995 (see Note 2 of
Notes to Consolidated Financial Statements.)
Results of Operations
The following summarizes the results of operations for each of the
Company's businesses for the three month and six month periods ended June 30,
1995:
Three months ended June 30, 1995
Quest ADR Total
----- --- -----
Revenue $2,357,607 $ 73,273 $2,430,880
Costs and expenses 2,013,168 68,500 2,081,668
---------- --------- ---------
Operating income 344,439 4,773 349,212
Interest expense 65,702 7,106 72,808
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Income (loss) before taxes 278,737 (2,333) 276,404
Tax provision 26,440 - 26,440
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Net income $ 252,297 $ (2,333) $ 249,964
========== ========= =========
Six months ended June 30, 1995
Quest ADR Total
----- --- -----
Revenue $2,357,607 $ 180,364 $2,537,971
Costs and expenses 2,013,168 440,188 2,453,356
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Operating income (loss) 344,439 (259,824) 84,615
Interest expense (income) 65,702 (7,726) 57,976
---------- --------- ---------
Income (loss) before taxes 278,737 (252,098) 26,639
Tax provision 26,440 - 26,440
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Net income $ 252,297 $(252,098) $ 199
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The significant growth in the Company's revenues for both the three month
and six month periods ended June 30, 1995 over the comparable 1994 periods is
due to the acquisition of Quest. Revenues for Quest represent a record level
of quarterly sales based on the historical performance of the business when
owned by Arrow Electronics, Inc. Revenues of the ADR business declined by
$137,202 and $312,426 for the three month and six month periods ended June 30,
1995, respectively, compared with the comparable periods in the prior year.
This decline reflects the Company's continuing program of downsizing and
restructuring in response to increased competition and historical losses.
Such restructuring has resulted in bringing the ADR business to breakeven in
the three month period ended June 30, 1995.
The Company's operating income was $349,212 for the quarter ended June
30, 1995 compared with an operating loss of $112,854 for the prior year
quarter. For the six month period ended June 30, 1995, operating income was
$84,615 compared with an operating loss of $220,217 for the comparable prior
year period. These improvements are due to the operating income achieved by
Quest of $344,439 since its acquisition on March 31, 1995, as well as the
significant reductions in costs and expenses of the ADR business. Such
expenses were $68,500 for the quarter ended June 30, 1995 compared with
$323,329 in the prior year quarter. For the six month periods, such expenses
were $440,188 in 1995 compared with $713,007 in 1994. Expenses for the 1995
six month period include a provision for restructuring of $125,000 recorded in
the quarter ended March 31, 1995 (see Note 4 of Notes to Consolidated
Financial Statements). Such provision is attributable to the write-off of
fixed assets and idle equipment associated with the downsizing of the ADR
business, as well as lease termination costs, the relocation to more suitable
office space, forfeiture of security deposits and other costs associated with
the downsizing and restructuring of the ADR business. Quest's operating
income of $344,439 represents 15% of its revenues, a relationship which is
consistent with the historical performance.
Interest expense for the three month and six month periods ended June 30,
1995 amounted to $72,808 and $57,976, respectively, principally reflecting the
cost of borrowings associated with the acquisition of the electronic hardware
distribution business (see Note 3 of Notes to Consolidated Financial
Statements). For the comparable prior year periods, the Company's results
include minor amounts of interest income resulting from the investment of
excess cash.
The provision for income taxes for the three and six month periods ended
June 30, 1995 principally reflects state income tax provisions for states in
which Quest does business.
Net income for the quarter ended June 30, 1995 amounted to $249,964
compared with a loss of $108,988 in the comparable
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prior year quarter. Net income for the six month period ended June 30, 1995
was $199 compared with a loss of $213,930 in the comparable 1994 period.
These improvements reflect the operating income of Quest, partially reduced by
interest expense and income taxes, and the reduction in operating expenses of
the ADR business.
Liquidity and Capital Resources
As of June 30, 1995, the Company had $58,010 in cash and short-term
investments, compared to $1,520,730 as of December 31, 1994. As of June 30,
1995 the Company had working capital of $1,868,440, compared with working
capital of $1,439,105 as of December 31, 1994. The Company's decrease in cash
and short-term investments at June 30, 1995 compared to December 31, 1994 is
principally due to the Company's March 31, 1995 acquisition of Quest
Electronic Hardware, Inc. (see Note 2 of Notes to Consolidated Financial
Statements). The net cash consideration paid for the acquired business
amounted to $5,229,847, which was funded by $2,500,000 in borrowings
(including $2,200,000 of long- term bank borrowings), $1,501,961 in net
proceeds derived from the private placement of the Company's common stock, and
available cash. In addition, the Company repaid $137,500 of bank debt during
the quarter.
For the six months ended June 30, 1995, the net cash used in the
Company's operating activities amounted to $413,314, principally reflecting
increased accounts receivable associated with the business of Quest. For the
six months ended June 30, 1994, the net cash used in the Company's operating
activities amounted to $251,243, principally reflecting operating losses of
the ADR business. As previously discussed, the Company is evaluating its
alternatives with respect to the future operations of the ADR business and
there can be no assurance that the Company will continue its ADR operations.
In conjunction with the acquisition of the electronic hardware
distribution business, Quest obtained an $800,000 working capital line of
credit, of which $100,000 was borrowed and outstanding at June 30, 1995 and
$700,000 is fully available for future working capital needs. Amounts
outstanding under such working capital line of credit shall bear interest at a
rate equal to: (i) 1.5% above the lender's prime rate should Quest's tangible
net worth be less than or equal to $1,750,000; or (ii) 1.0% above the lender's
prime rate should Quest's tangible net worth be in excess of $1,750,000. As
of August 10, 1995, the interest rate on the amount outstanding under the
working capital line of credit was 10.25%. In order to secure the obligations
of Quest under the working capital line of credit and a related loan from the
lender, the Company entered into a stock pledge agreement with the lender
whereby the Company pledged to the lender the shares of capital stock of Quest
which the Company held at the date of such agreement and any shares of Quest
in which the Company may thereafter acquire
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an interest. In addition, Quest granted a security interest in substantially
all of its assets to the lender.
The Company intends to identify and evaluate potential merger and
acquisition candidates engaged in lines of business complementary to the
distribution of fasteners and electronic hardware business conducted by Quest.
While certain of such potential acquisition opportunities are at various
stages of consideration and evaluation, none are at any definitive stage at
this time. Management believes that its working capital, funds available
under its credit agreement, and funds generated from operations will be
sufficient to meets its obligations through 1996, exclusive of any cash
requirements which may come about as a result of other business acquisitions.
On May 4, 1995, in consideration of the payment of $3,000 by the Company
to the remaining defendant in a pending matter, a settlement was agreed to
between the Company and such defendant. On May 24, 1995, a stipulation
discontinuing such action, as against the Company and the defendant, was filed
with the Court. It is management's belief that said settlement will not have
a material adverse effect on the liquidity or capital resources of the
Company.
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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.
JUDICATE, INC.
Dated: September 15, 1995 /s/ STEPHEN J. DRESCHER
Stephen J. Drescher,
Chairman, Chief Executive
Officer
(Principal Executive Officer)
Dated: September 15, 1995 /s/ MILTON M. ADLER
Milton M. Adler,
Treasurer
(Principal Financial and
Accounting Officer)
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