SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM 10-QSB/A, No. 2
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
Amending Part I, Item 1
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)
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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 May 10, 1995, the Registrant had 12,445,749 shares of Common Stock,
$.0001 par value, outstanding.
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JUDICATE, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
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<S> <C> <C>
PART I. Financial Information
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheet -
March 31, 1995 and December 31, 1994 2
Consolidated Statement of Operations -
Three Months Ended March 31, 1995 and 1994 3
Consolidated Statement of Cash Flows -
Three Months Ended March 31, 1995 and 1994 4
Notes to Consolidated Financial Statements 5-8
Signature Page 9
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited).
JUDICATE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, 1995 AND DECEMBER 31, 1994
<TABLE>
<CAPTION>
ASSETS
March 31, December 31,
1995 1994
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<S> <C> <C>
Current assets:
Cash and cash equivalents $ 455,891 $ 1,520,730
Account receivable trade, net 932,061 72,201
Other receivables 206,237 55,445
Inventories 2,252,000 -
Prepaid expenses 19,796 109,480
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Total current assets 3,865,985 1,757,856
Property and equipment, net of
accumulated depreciation 379,606 50,069
Cost in excess of net assets
of business acquired 6,477,005 -
Other assets 82,855 65,202
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Total assets $10,805,451 $ 1,873,127
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<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Notes payable $ 300,000 $ -
Accounts payable and accrued expenses 1,507,729 287,954
Deferred income 20,150 30,797
Current portion of long-term debt 550,000 -
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Total current liabilities 2,377,879 318,751
Long-term debt 1,750,000 -
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Total liabilities 4,127,879 318,751
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Shareholders' equity:
Preferred Stock $.01 par value;
authorized 1,000,000 shares;
issued and outstanding
25,000 shares 250 1,400
Common Stock $.0001 par value;
authorized 20,000,000 shares;
issued and outstanding
11,995,749 shares 1,200 673
Additional paid-in capital 22,634,134 17,260,549
Accumulated deficit (15,958,012) (15,708,246)
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Total shareholders' equity 6,677,572 1,554,376
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Total liabilities and shareholders'
equity $10,805,451 $ 1,873,127
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</TABLE>
See notes to consolidated financial statements.
2
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<TABLE>
<CAPTION>
JUDICATE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1995 AND 1994
Three Months Ended
March 31,
-----------------
1995 1994
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<S> <C> <C>
Fee income $ 107,092 $ 282,315
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Operating costs and expenses:
Cost of service 40,680 78,879
Sales commissions and marketing 30,390 131,573
General and administrative 175,620 179,226
Provision for restructuring 125,000 -
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371,690 389,678
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Loss from operations (264,598) (107,363)
Investment income, net 14,832 2,421
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Net loss $(249,766) $(104,942)
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Loss per common share $ (.04) $ (.06)
========= =========
Weighted average number of
common shares outstanding 6,844,138 1,758,077
</TABLE>
See notes to consolidated financial statements.
3
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<TABLE>
<CAPTION>
JUDICATE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1995 AND 1994
March 31, March 31,
1995 1994
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<S> <C> <C>
Cash flows from operating activities:
Net loss $ (249,766) $ (104,942)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 11,000 16,500
Provision for losses on accounts receivable 4,500 33,000
Change in assets and liabilities:
(Increase) in accounts receivable (148,152) (32,155)
Decrease in prepaid expenses and deposits 89,684 41,733
Increase (decrease) in accounts payable,
accrued expenses and other liabilities 355,781 (48,641)
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Net cash provided by (used in)
operating activities 63,047 (94,505)
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Cash flows from investing activities:
Net cash consideration paid for
acquired business (5,229,847) -
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Net cash used in investing activities (5,229,847) -
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Cash flows from financing activities:
Proceeds from short-term borrowings 300,000 900,000
Proceeds from long-term borrowings 2,300,000 -
Proceeds from private placement 1,740,000 145,590
Costs associated with private placement (238,039) (15,181)
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Net cash provided by financing activities 4,101,961 1,030,409
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(Decrease) increase in cash and cash equivalents (1,064,839) 935,904
Cash and cash equivalents at
beginning of period 1,520,730 643,029
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Cash and cash equivalents at end of period $ 455,891 $1,578,933
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</TABLE>
See notes to consolidated financial statements.
4
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JUDICATE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1995 AND 1994
Note 1. Basis of presentation.
The accompanying unaudited consolidated financial statements include the
accounts of the Company and its subsidiaries. The consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and in accordance with the
instructions for Form 10- QSB. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
In the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation have been
included. Operating results for the three months ended March 31, 1995 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1995. The accompanying consolidated balance sheet as of December
31, 1994 is unaudited; however, it has been derived from the audited financial
statements at that date. For further information, refer to the financial
statements and footnotes thereto included in the Company's annual report on
Form 10-KSB for the year ended December 31, 1994.
Note 2. Acquisition of electronic hardware distribution business.
On March 31, 1995, the Company acquired Quest Electronic Hardware, Inc.
("Quest"), a specialized distributor of fasteners and electronic hardware sold
to electronic equipment manufacturers, in exchange for 3,872,000 shares of the
Company's common stock. Simultaneously, the Company contributed to Quest cash
of $2,850,000 as additional paid-in capital and Quest purchased the fasteners
distribution business from Arrow Electronics, Inc. ("Arrow") for net cash
consideration of $5,229,847. In connection with these transactions, the
Company recorded $6,477,005 of cost in excess of net assets of business
acquired. The Company does not expect that Statement of Financial Accounting
Standards No. 121, Accounting for the Impairment of Long-Lived Assets, will
have any impact on the Company's Consolidated Financial Statements.
Note 3. Long-term debt.
In connection with the acquisition by Quest of the fasteners distribution
business from Arrow, Quest entered into a loan agreement with a bank which
provided for a $2,200,000 term loan to finance a portion of the purchase
price. In addition, the loan agreement provides for a revolving credit
facility of $800,000, which was fully available to Quest at March 31, 1995.
The term
5
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loan, which bears interest at the rate of 2.0% above the Prime Rate, is
payable in equal quarterly installments over a four year period. The
revolving credit facility bears interest at the rate of 1.5% above the Prime
Rate.
Note 4. Provision for restructuring.
As a result of declining revenues of the Company's ADR business, stemming
in part from increased competition, and the resultant historical losses, the
Company undertook a plan of action to downsize and restructure its ADR
business in order to establish a more acceptable relationship of expenses of
that business to its revenues. The Company's operating results for the three
month period ended March 31, 1995 include a provision for restructuring of
$125,000. More than $60,000 of such provision is attributable to the
write-off of fixed assets and idle equipment associated with the downsizing of
the ADR business. The balance of the provision is associated with lease
termination costs, the relocation of the ADR business to more suitable office
space, forfeiture of security deposits, and other costs associated with the
downsizing and restructuring of the ADR business. During August 1995, the
Company will relocate the office of the ADR business to more suitable space.
The Company is evaluating its alternatives with respect to the future
operation of its ADR business, including the possible sale, disposition or
discontinuance of the business.
6
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Note 5. Pro forma financial information.
The following pro forma financial information gives effect to the
acquisition described in Note 2 as if such acquisition had been made as of
January 1, 1995:
Pro Forma Combined Statement of Operations
For the three months ended March 31, 1995
(In thousands, except per share data)
Fasteners Pro Forma Pro Forma
Judicate Quest Business Adjustments Combined
-------- ----- -------- ----------- --------
Sales $ 107 $ - $ 2,180 $ 2,287
Cost of Sales 41 - 1,281 1,322
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Gross Profit 66 - 899 965
Selling, General and
Administrative
Expenses 331 - 500 $ 2 (A) 895
41 (B)
21 (E)
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Operating Income (Loss) (265) - 399 (64) 70
Interest Expense (Income) (15) - - 55 (C) 47
7 (D)
------ ---- ------- ------ -------
Income (Loss) Before
Taxes (250) - 399 (126) 23
Income Taxes - - 154 (154)(F) -
------ ---- ------- ------ -------
Net Income (Loss) $ (250) $ - $ 245 $ 28 $ 23
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Income (Loss) Per
Common Share $ (.04) $ -
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The following are the explanations of the above pro forma adjustments:
Quarterly
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(In Thousands)
(A) To reflect additional charges for depreciation $ 2
(B) To reflect additional charges for amortization of goodwill $ 41
(C) To record interest on acquisition debt:
The term loan acquisition debt is to be paid off in
quarterly installments of $137.50 $ 55
The average interest rate expected to be incurred on
the acquisition debt is 10.5%.
(D) To record interest on short-term financing $ 7
The average interest rate expected to be incurred on
the short-term financing is 9%.
7
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(E) To record net additional G & A charges:
Estimated additional general and administrative charges
related to the Fasteners Business $ 21
The statement of operations for the three months ended
March 31, 1995 of the Fasteners Business does not
include charges for general and administrative
services that were provided by Arrow, but does include
charges for certain costs that are not expected to be
incurred in the future. If the Fasteners Business had
been a stand alone entity as of the beginning of the
period presented, it is estimated that the net amount
of such costs would have resulted in additional charges
of approximately $ 21
(F) To reflect utilization of net operating loss carryforward $ 154
8
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
JUDICATE, INC.
Dated: September 15, 1995 By:STEPHEN J. DRESCHER
Stephen J. Drescher,
Chairman, Chief Executive
Officer
(Principal Executive Officer)
Dated: September 15, 1995 By:MILTON M. ADLER
Milton M. Adler,
Treasurer
(Principal Financial and
Accounting Officer)
9
