UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] FORM 10-K/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
for the transition period from _______ to _______
Commission File No. 0-13084
WARRANTECH CORPORATION
______________________________________________________________________________
(Exact name of registrant as specified in its charter)
_____Delaware____ ___13-3178732____
(State or other jurisdiction of (IRS Employer
ncorporation or organization Identification No.)
300 Atlantic Street, Stamford, Connecticut ___06901___
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (203) 975-1100
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of each Exchange on which registered
Common Stock $.007 par value NASDAQ National Market
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.007 par value
______________________________________________________________________________
(Title of Class)
Indicate by checkmark whether the Registrant (1) has filed all reports
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_______
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this form 10-K or any
amendment to this form 10-K [ ].
_______________________________
The number of shares outstanding of the Registrant's common stock is
13,082,181 as of (June 21, 1996).
The aggregate market value of the voting stock held by nonaffiliates
of the Registrant is $35,756,096
(as of June 21, 1996).
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Definitive Proxy Statement for its 1996 Annual
Meeting of Shareholders to be filed pursuant to Regulation 14A promulgated
under the Securities Exchange Act of 1934, as amended are incorporated by
reference in Part III.
Index to Exhibits is on page 45.
Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page No.
Report of Independent Accountants............ 20-21
Consolidated Financial Statements:
Balance Sheets as of March 31, 1996 and 1995 22
Statements of Operations For the Years Ended
March 31, 1996, 1995 and 1994....................... 23
Statements of Common Stockholders' Equity
For the Years Ended March 31, 1996, 1995 and 1994... 24
Statements of Cash Flows
For the Years Ended March 31, 1996, 1995 and 1994... 25-26
Notes to Consolidated Financial Statements.......... 27-40
Consolidated Financial Statement Schedule
Schedule VIII - Valuation and Qualifying Accounts.... 41
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Warrantech Corporation:
We have audited the consolidated financial statements and the financial
statement schedule of Warrantech Corporation and subsidiaries (the "Company")
as of March 31, 1996 and 1995, and for the years then ended as listed in the
accompanying index on page 19. These financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on the 1996 and 1995 financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditin
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Company as of March 31, 1996 and 1995, and the consolidated results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule
as of and for the years ended March 31, 1996 and 1995, when considered in
relation to the basic 1996 and1995 consolidated financial statements taken as
a whole, present fairly, in all material respects the information required to
be included therein.
Coopers & Lybrand L.L.P.
Stamford, Connecticut
June 27, 1996
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Warrantech Corporation
We have audited the consolidated balance sheet of Warrantech Corporation
(the "Company") and subsidiaries as of March 31, 1994 (not separately shown
herein), and the related consolidated statements of operations, common
stockholders' equity, and cash flows for the year then ended. Our audit also
included the financial statement schedule for the year ended March 31, 1994
listed in the Index on page 19. These financial statements and financial
statement schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on the 1994 financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of the Company as of
March 31, 1994, and the results of its operations and its cash flows for the
year ended March 31, 1994 in conformity with generally accepted accounting
principles. Also, in our opinion, such financial statement schedule for the
year ended March 31, 1994, when considered in relation to the basic 1994
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
As discussed in Note 9 to the consolidated financial statements, the
Company is a defendant in certain litigation. The ultimate outcome of this
litigation cannot presently be determined. Accordingly, no provision for any
loss that may result upon resolution of these matters has been made in the
accompanying financial statements.
As discussed in Note 8 to the consolidated financial statements,
the Company changed its method of accounting for income taxes to conform with
Statement of Financial Accounting Standards No. 109 in 1994.
Deloitte & Touche LLP
Stamford, Connecticut
June 29, 1994
<TABLE>
WARRANTECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
AS S E T S
March 31,
-------------------------------
------------- --------------
1996 1995
------------- --------------
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents $ 11,859,487 $ 3,039,361
Investments in marketable securities 824,648 472,344
Accounts receivable, (net of allowances of $450,092
and $126,115, respectively) 16,160,209 12,705,664
Other receivables, net 8,610,919 8,599,198
Prepaid expenses, prepaid income taxes
and other current assets 988,936 1,065,062
------------- --------------
Total Current Assets 38,444,199 25,881,629
------------- --------------
Property and Equipment - Net 6,802,798 2,865,910
------------- --------------
Other Assets:
Excess of cost over fair value of assets acquired
( net of accumulated amortization of
$3,170,089 and $2,723,429, respectively) 4,118,544 3,850,724
Investment in and advances to joint venture 1,885,674 2 ,880,921
Deferred income taxes 2,031,535 1,029,083
Investments in marketable securities 1,363,047 2,671,507
Certificates of deposit and cash trust fund -
restricted 700,000 500,000
Split dollar life insurance policies 683,893 698,338
Receivable from insurance company - long term - 505,606
Notes receivable - long-term 87,760 290,125
Collateral security fund 199,389 199,389
Other assets 296,871 485,314
------------- --------------
Total Other Assets 11,366,713 13,111,007
------------- --------------
Total Assets $56,613,710 $41,858,546
============= ==============
LIABILITIES, PREFERRED STOCK AND COMMON STOCKHOLDERS' EQUITY
March 31,
-----------------
1996 1995
-------------- ---------------
Current Liabilities:
Current maturities of long-term debt and capital lease
obligations $ 648,650 $ 205,200
Insurance premiums payable 16,247,247 9,230,377
Income taxes payable 1,795,018 1,010,878
Accounts and commissions payable 4,809,527 2,641,843
Accrued expenses and other current liabilities 1,722,545 1,725,348
-------------- ---------------
Total Current Liabilities 25,222,987 14,813,646
-------------- ---------------
Deferred Revenues 3,654,794 2,470,449
-------------- ---------------
Long-Term Debt and Capital Lease Obligations 1,124,015 293,648
------------ ---------------
Deferred Rent Payable 534,620 440,245
------------- ---------------
Commitments and Contingencies (See Note 9)
Convertible Exchangeable Preferred Stock
- $.0007 par value
Authorized, 15,000,000 shares
Issued and outstanding - 3,234,697 shares at
March31, 1996 and at March 31, 1995
(Redemption value - $6,430,000) 6,420,363 6,396,795
-------------- ---------------
- -
Common Stockholders' Equity:
Common stock - $.007 par value
Authorized - 30,000,000 shares
Issued and outstanding - 13,082,181 shares
at March 31, 1996 and 13,045,302 shares
at March 31, 1995 89,375 89,117
Additional paid-in-capital 12,212,641 12,097,507
Net unrealized loss on investments, net of income
taxes of $4,389 (15,031) (42,370)
Accumulated translation adjustments (10,520) -
Retained earnings 7,843,332 5,472,039
-------------- ---------------
20,119,797 17,616,293
Less: Deferred compensation (70,116) (23,438)
Treasury stock - at cost, 93,000 shares
at March 31, 1996 and 41,000 shares at
March 31, 1995 (392,750) (149,092)
-------------- ---------------
Total Common Stockholders' Equity 19,656,931 17,443,763
-------------- ---------------
Total Liabilities, Preferred Stock and
Common Stockholders' Equity $56,613,710 $ 41,858,546
============== ===============
See accompanying notes to consolidated financial statements.
===================================================================================================================================
</TABLE>
<TABLE>
WARRANTECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
For the Years Ended March 31,
-------------------------------------------------------------
1996 1995 1994
----------------- ----------------- -----------------
<S> <C> <C> <C>
Gross revenues $110,246,219 $71,239,070 $46,970,763
Net increase in deferred revenues 1,165,495 699,745 316,290
----------------- ----------------- -----------------
----------------- ----------------- -----------------
Net revenues 109,080,724 70,539,325 46,654,473
----------------- ----------------- -----------------
Costs and expenses:
Direct costs 74,013,324 46,140,548 30,350,722
Service, selling, and general and administrative 27,362,214 20,716,655 14,674,158
Provision for bad debt expense 363,179 427,483 10,955
Depreciation and amortization 1,700,285 1,259,604 1,503,866
----------------- ----------------- -----------------
Total costs and expenses 103,439,002 68,544,290 46,539,701
----------------- ----------------- -----------------
Income from operations 5,641,722 1,995,035 114,772
----------------- ----------------- -----------------
Equity in operations of joint venture (957,748) (298,272) (538,385)
Other income/(expense) (651,620) 3,107,561 1,426,860
----------------- ----------------- -----------------
Income before provision for income taxes 4,032,354 4,804,324 1,003,247
Provision for income taxes 1,637,492 1,908,536 299,656
----------------- ----------------- -----------------
Net Income $ 2,394,862 $2,895,788 $ 703,591
================= ================= =================
Earnings per share:
Primary $.16 $.19 $.05
================= ================= =================
Fully Diluted $.15 $.17 $.04
================= ================= =================
Weighted average number of shares outstanding:
Primary 15,152,043 15,588,145 14,569,479
================= ================= =================
Fully Diluted 16,465,833 16,894,351 16,748,075
================= ================= =================
See accompanying notes to consolidated financial statements.
====================================================================================================================================
</TABLE>
<TABLE>
WARRANTECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY
<CAPTION>
Net Total
Additional Unrealized Accumulated Common
Common Stock Paid-In Loss on Translation Retained Deferred Treasury Stock Stockholders'
-------------------------- -----------------------------------
Shares Par Value Capital Investments Adjustments Earnings Compensation Shares Amount Equity
------------- ----------- --------- ----------- -------- ------------ -------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at April 1, 1993 12,916,802 $88,218 $11,638,418 $1,925,840 $( 57,891)(46,000)$(167,274)$13,427,311
Issuance of common stock
through options 40,500 283 87,454 87,737
Issuance of common stock 8,000 56 22,564 22,620
Issuance of treasury stock 4,318 5,000 18,182 22,500
Amortization of deferred 36,563 36,563
compensation
Net income 703,591 703,591
----------- ------- ---------- --------------- ----------- ---------- -------- --------- ----------
Balance at March 31, 1994 12,965,302 88,557 11,752,754 2,629,431 (21,328) (41,000) (149,092) 14,300,322
Issuance of common stock
through exercise of common
stock options 75,000 525 321,350 - 321,875
Issuance of common stock 5,000 35 23,403 (42,370) (23,438)
Net unrealized loss on
investments (42,370)
Amortization of deferred
compensation 21,328 21,328
Imputed interest on preferred
Stock (53,180) (53,180)
Net income 2,895,788 - 2,895,788
----------- -------- ----------- --------------- ---------- --------- -------- -------- -----------
Balance at March 31, 1995 13,045,302 89,117 12,097,507 (42,370) 5,472,039 (23,438) (41,000) (149,092) 17,443,763
Issuance of common stock
through exercise of common stock
options 25,000 175 62,325 62,500
Issuance of common stock 11,879 83 52,809 (42,142) 10,750
Purchase of treasury shares (56,000) (260,538) (260,538)
Issuance of treasury shares (16,880) 4,000 16,880 -
Net unrealized loss on 27,339
investments 27,339
Translation adjustments (10,520) (10,520)
Amortization of deferred
compensation 12,344 12,344
Imputed interest on preferred (23,569) (23,569)
stock
Net income 2,394,862 2,394,862
=========== ========= =========== ===== ========== =========== ========= ======== ======== ===========
Balance at March 31, 1996 13,082,181 $89,375 $12,212,641$(15,031) (10,520) $7,843,332 $(70,116) (93,000)$(392,750) $19,656,931
=========== ========= =========== ===== ========== =========== ========= ======== ======== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
WARRANTECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended March 31,
------------------ -- ------------------ -- ------------------
1996 1995 1994
------------------ ------------------ ------------------
<S>
Cash flows from operating activities: <C> <C> <C>
Net income $ 2,394,862 $2,895,788 $ 703,591
------------------ ------------------ ------------------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,712,431 1,259,604 1,503,866
Deferred income taxes (1,002,452) (296,601) (688,387)
Increase in deferred rent payable 94,375 76,796 65,674
Loss from equity joint venture 957,748 298,272 538,385
Elimination of intercompany profits with joint venture - (28,038) 176,400
Other (2,822) 116,150 57,301
Increase (decrease) in cash flows as a result of
changes in asset and liability balances:
Accounts receivable (3,450,088) (4,744,974) (1,267,393)
Other receivable 5,090 (3,391,088) (3,802,436)
Prepaid expenses, prepaid income taxes and
other current assets 97,536 557,043 (530,854)
Collateral security fund - - (18,566)
Split dollar life insurance policies 14,445 (102,550) (142,779)
Other assets and receivable from insurance company 681,981 423,100 (48,995)
Insurance premiums payable 7,016,870 2,117,103 2,249,239
Income taxes payable 784,140 1,010,878 (459,681)
Accounts and commissions payable 2,102,284 343,073 104,112
Accrued expenses and other current liabilities (18,002) 919,370 154,356
Deferred revenues 1,184,345 699,744 316,291
------------------ ------------------ ------------------
Total adjustments 10,177,881 (742,118) (1,793,467)
------------------
------------------ ------------------ ------------------
Net cash provided by (used in) operating activities 12,572,743 2,153,670 (1,089,876)
------------------ ------------------ ------------------
Cash flows from investing activities:
Proceeds from sale of property and equipment - 23,396 24,000
Purchase of property and equipment (3,489,974) (1,539,093) (449,720)
Net cash paid for acquired company (735,984) - -
Certificates of deposit - 27,000 71,707
Purchase of marketable securities (948,602) (1,038,543) (1,800,000)
Certificates of deposit and cash trust fund - restricted - 157,602 (330,602)
Proceeds from sales redemptions and maturities of
marketable securities 1,730,612 500,000
Investment in and advances to joint venture 37,499 (2,123,440) (1,715,000)
------------------ ------------------ ------------------
Net cash used in investing activities $ (3,406,449) $(3,993,078) $(4,199,615)
------------------ ------------------ ------------------
(Continued)
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
WARRANTECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
<CAPTION>
For the Years Ended March 31,
-------------- ---- ----------------- ---- ----------------
1996 1995 1994
-------------- ---- ----------------- ---- ----------------
<S> <C> <C> <C>
Cash flows from financing activities:
Decrease in notes receivable $ 202,365 $ 600 $ 34,394
Proceeds from exercise of common stock options 62,500 187,500 87,737
Purchase treasury stock (243,658) - -
Proceeds from the sale of preferred stock, net
of underwriting costs - - 6,343,614
Loan payable - officer - - ( 118,383)
Proceeds from borrowings - - 1,500,000
Repayments of borrowings (367,375) ( 333,613) ( 1,846,458)
-------------- ---- ----------------- ---- ----------------
Net cash provided by (used in) financing activities (346,168) ( 145,513) 6,000,904
-------------- ---- ----------------- ---- ----------------
Net increase (decrease) in cash and cash equivalents 8,820,126 ( 1,984,921) 711,413
Cash and cash equivalents at beginning of year 3,039,361 5,024,282 4,312,869
-------------- ---- ----------------- ---- ----------------
Cash and cash equivalents at end of year $11,859,487 $ 3,039,361 $ 5,024,282
============== ==== ================= ==== ================
Supplemental Cash Flow Information:
Cash payments for:
Interest $ 127,616 $ 74,815 $ 137,702
============== ==== ================= ==== ================
Income taxes $1,644,950 $ 1,071,363 $ 1,506,739
============== ==== ================= ==== ================
Non-Cash Investing Activities:
Property and equipment financed through capital leases $1,640,060 $ - $ -
============== ==== ================= ==== ================
See accompanying notes to consolidated financial statements.
</TABLE>
WARRANTECH CORPORATION AND SUBSIDIARIES
- -------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business - Warrantech Corporation ("Warrantech"or the
"Company"), through its wholly-owned subsidiaries, Warrantech
Automotive, Inc., Warrantech Consumer Product Services, Inc.,
Warrantech Direct, Inc., Warrantech Home Service Company and
Warrantech International, Inc. markets and administers service
contract programs for retailers, distributors and manufacturers of
automobiles, recreational vehicles, automotive components, homes, home
appliances, home entertainment products, computers and peripherals,
and office and communication equipment in the United States, Puerto
Rico, Mexico, Canada, and the United Kingdom. Additionally,
third-party administrative services are provided to manufacturers of
consumer and automotive products and other business entities requiring
such services. The predominant terms of the contracts and
manufacturer's warranties range from one (1) to eighty-four (84)
months.
Basis of Presentation and Principles of Consolidation - The
accompanying consolidated financial statements have been prepared on
the basis of generally accepted accounting principles ("GAAP"). These
consolidated financial statements include the accounts of Warrantech
Corporation and its wholly-owned subsidiaries. All intercompany
accounts and transactions have been eliminated in consolidation.
Amounts representing the Company's percentage interest in the
underlying net assets of less than majority-owned companies, in which
a significant equity ownership interest is held, are included in
"investment and advances." The Company's share of the results of
operations of these companies is included in the Consolidated
Statements of Operations caption "Equity in operations of joint
venture."
Risks and Uncertainties - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions which affect the
reporting of assets and liabilities as of the dates of the financial
statements and revenues and expenses during the reporting period.
Actual results could differ from these estimates.
Revenue Recognition Policy - The Company's revenue recognition policy
is based on the proportional performance method which recognizes
revenues in direct proportion to the costs incurred in providing the
service contract programs to the Company's clients. Only revenues in
an amount sufficient to meet future administrative costs and a
reasonable gross profit thereon are deferred.
Direct Costs - Direct costs are those costs directly related to the
production and acquisition of service contracts. Those costs are
insurance premium and commission expenses.
Profit Sharing Arrangement - Pursuant to agreements with its insurers,
the Company is eligible to share a portion of the insurers' profits on
the Company's service contract programs. The amounts to be
received, if any, are determined by loss experience, by the type of
program and by policy year. The amounts recorded are based on
contractual arrangements and management's best estimate of the
Company's expected ultimate loss experience. Any adjustments to those
estimates will be reflected in income, when known.
Provision for Bad Debts Expense - An allowance for doubtful accounts
is provided when accounts are determined to be uncollectible. The
provision for bad debt expense results from the write-off of accounts
considered uncollectible.
Earnings Per Share - Earnings per share is calculated by dividing net
income less imputed interest on preferred stock, where applicable, by
the weighted average number of common shares outstanding and
common share equivalents outstanding during the period.
Cash and Cash Equivalents - Cash and cash equivalents for the purpose
of reporting cash flows for all periods presented include cash on
deposit and certificates of deposit. There were no cash equivalents
at March 31, 1996 or 1995. At March 31, 1996, the Company had on
deposit $11,256,100 of cash in excess of federally insured limits.
Investments in Marketable Securities - Effective March 31, 1995, the
Company adopted Statement of Financial Accounting Standards No. 115
("SFAS 115"), Accounting for Certain Investments in Debt and
Equity Securities. As a result, all investments have been classified
as available-for-sale and are carried at fair value with changes in
unrealized gains and losses being reflected as a separate
component of Stockholders' Equity, net of tax.
Property and Equipment - Property and equipment are stated at cost.
Depreciation is provided using a straight-line method over the
estimated useful lives of the assets ranging between 3 to 7 years.
Excess of Cost Over Fair Value of Assets Acquired - The excess of cost
over fair value of the assets acquired is a result of the purchases o
Dealer Based Services, Inc. in 1989, and Home Guarantee Corporation,
PLC in July 1995 and is being amortized on a straight-line basis over
fifteen and ten years, respectively. Amortization expense charged to
operations for the years ended March 31, 1996, 1995 and 1994 amounted
to $458,728, $401,815 and $525,648, respectively.
Deferred Compensation - Certain operating officers have been issued
shares of the Company's common stock as part of their compensation
under their employment agreements. Such compensation is to be
earned by the officers and charged to operations over five years, the
term of the employment agreements. In addition, certain employees
have been issued restricted shares of the Company's common stock
as compensation. Such compensation is amortized over the restriction
period which is generally two years.
Income Taxes - Effective April 1, 1993, the Company adopted Statement
of Financial Accounting Standards No. 109 ("SFAS 109"), Accounting
for Income Taxes. Under SFAS 109, the deferred taxes are determined
under the liability method. Under this method, deferred tax assets
and liabilities are recognized for the expected tax effect of
temporary differences between the financial statement carrying
amount and the tax basis of assets and liabilities using presently
enacted tax rates in effect for the years in which the differences
are expected to reverse.
Foreign Currency Translation -Financial statement accounts expressed
in foreign currencies are translated into U.S. dollars in accordance
with Statement of Financial Accounting Standards No. 52 "Foreign
Currency Translation". The functional currency for the Company's
United Kingdom operations is the British pound. Transaction gains
and losses are reflected in operations, while translation gains and
losses are reflected as a separate component of equity.
Reclassification - Certain amounts from the prior years have been
reclassified to conform with the current year's presentation.
2. CERTIFICATES OF DEPOSIT AND CASH TRUST FUND - RESTRICTED
At March 31, 1996 $700,000 is on deposit with a Florida regulatory
agency to comply with its state insurance laws. These funds are
classified as non-current.
3. INVESTMENTS IN MARKETABLE SECURITIES
<TABLE>
At March 31, 1996, investments in marketable securities are comprised of the following:
<CAPTION>
Amortized Gross Unrealized Aggregate Fair Carrying Amount
Cost Gains (Losses) Value Short Term Long Term
<S> <C> <C> <C> <C> <C> <C>
Municipal Bonds $1,880,633 $2,660 $(13,913) $1,869,380 $506,333 $1,363,047
Common Stock 330,880 - (12,565) 318,315 318,315 -
------------- ------------- ------------- ------------- ------------- -------------
Total
Investments
in Marketable $2,211,513 $2,660 $(26,478) $2,187,695 $824,648 $1,363,047
Securities
============= ============= ============= ============= ============= =============
At March 31, 1995, investments in marketable securities are comprised of the following:
</TABLE>
<TABLE>
<CAPTION>
Amortized Gross Unrealized Aggregate Fair Carrying Amount
Cost Gains (Losses) Value Short Term Long Term
<S> <C> <C> <C> <C> <C> <C>
Corporate Bonds $ 336,325 $ 962 $ (606) $ 336,681 $ 272,344 $ 64,337
Municipal Bonds 2,676,985 221 (70,036) 2,607,170 - 2,607,170
Callable
Preferred -
Stock 200,000 - - 200,000 200,000
-------------- -------------- ------------- -------------- -------------- =============
Total
Investments
in Marketable
Securities $ 3,213,310 $ 1,183 $(70,642) $ 3,143,851 $472,344 $2,671,507
============== ============== ============= ============== ============== =============
</TABLE>
As discussed in Note 1, the Company adopted SFAS 115 as of March 31, 1995.
All of the above investments are considered "available for sale". The
resultant differences between cost and fair value, net of taxes, have been
reflected as a separate component of Stockholders' Equity.
The amortized cost and estimated fair value of marketable securities, by
contractual maturity date, are listed below. Expected maturities may differ
from contracted maturities because borrowers may have the right to call or
prepay obligations with or without penalties.
<TABLE>
<CAPTION>
Amortized Aggregate
Cost Fair Value
--------------- ---------------
<S> <C> <C>
Investments available for sale:
Due in one year or less $ 506,679 $ 506,633
Due after one year through five years 1,373,954 1,363,047
Due after five years through ten - -
years
Due after ten years - -
=============== ===============
$ 1,880,633 $ 1,869,380
=============== ===============
</TABLE>
<TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment is summarized as follows:
<CAPTION>
March 31,
--------------------------------------------
1996 1995
<S> <C> <C>
Automobiles $ $
97,811 16,901
Equipment, furniture and fixtures 8,101,861 4,725,444
Leasehold improvements 382,938 300,272
-------------------- -------------------
8,582,610 5,042,617
Less: Accumulated depreciation
and amortization 3,550,346 2,639,234
-------------------- -------------------
5,032,264 2,403,383
-------------------- -------------------
Assets under capital leases:
Cost 3,300,093 1,657,220
Less: Accumulated amortization 1,529,559 1,194,693
-------------------- -------------------
1,770,534 462,527
-------------------- -------------------
Total Property and Equipment, net $ $ 2,865,910
6,802,798
==================== ===================
</TABLE>
Amortization expense on assets under capital leases for the years ended
March 31, 1996, 1995 and 1994 was $334,866, $289,765, and $357,370,
respectively. Depreciation expense on property and equipment other than under
capital leases for the years ended March 31, 1996, 1995 and 1994 was $911,112,
$515,596, and $584,285, respectively.
During fiscal 1996, the Company capitalized $2,918,076 related to the
development and implementation of its proprietary relational database and
interactive operating software. The Company is amortizing the cost of this
software over its estimated useful life not to exceed five years.
5. COLLATERAL SECURITY FUND
At March 31, 1996 and 1995, a former insurance carrier of the Company, is
holding $199,389 in escrow accounts as collateral for the performance of the
administrative runoff of outstanding contracts. Such amounts are returnable to
the Company when the contracts expire under this policy.
6. SPLIT DOLLAR LIFE INSURANCE POLICIES
As of March 31, 1996 and 1995, the Company made payments on split dollar
insurance policies on the lives of five officers of the Company. Included in
other assets non-current is the cash surrender value of these policies totaling
$683,893 and $698,338, as of March 31, 1996 and 1995 respectively. The Company
will receive a refund of all split-dollar premiums advanced. The Company is
the beneficiary of any proceeds of the policies up to the amount of premiums
paid and interest earned thereon.
<TABLE>
7. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
Long-term debt and capital lease obligations consists of the following:
<CAPTION>
March 31,
------------------------------------------
1996 1995
<S> <C> <C>
Capital lease obligations - for property and
equipment payable monthly with interest
rates ranging from 9.1% to 13.4% through 2001 $ 1,768,475 $ 490,343
Installment note - secured by equipment with
an undepreciated cost of $5,164 payable
in equal monthly installments of $393
including interest at 5.44% through
February, 1997. 4,190 8,505
-------------------- ------------------
1,772,665 498,848
Less: Current maturities 648,650 205,200
-------------------- ------------------
Long-term portion $ 1,124,015 $ 293,648
==================== ==================
The aggregate amounts of maturities at March 31, 1996 were as follows:
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year Installment Note Minimum Future
Lease Payments
<S> <C> <C>
1997 $ 4,190 $ 806,507
1998 - 657,842
1999 - 384,195
2000 - 187,932
2001 - 53,105
Thereafter - -
------------------------ ------------------------
4,190 2,089,581
Less amount representing
interest - 321,106
======================== ========================
Net $ 4,190 $1,768,475
======================== ========================
</TABLE>
The capital lease obligations are collateralized by the property and
equipment related to the underlying leases.
<TABLE>
8. INCOME TAXES
A reconciliation of the income tax provision to the amount computed
using the federal statutory rate is as follows:
<CAPTION>
March 31,
-------------------------------- -- ---------------------------- --- ------------------------------
1996 1995 1994
-------------------------------- -- ---------------------------- --- ------------------------------
<S> <C> <C> <C> <C> <C> <C>
Federal statutory rate $ 1,411,324 35.0% $ 1,681,513 35.0% $ 351,000 35.0%
State and local income
taxes net of federal tax
benefit 123,728 3.0 101,141 2.1 70,000 6.9
Amortization of excess cost
over net assets acquired 90,647 2.3 90,648 1.9 - -
Other (323,419) (8.0) (69,161) (1.5) 2,656 0.2
Benefit for recognition of
tax deductibility of prior
years' amortization of
acquired customer list - - - - (312,000) (31.0)
Loss of foreign joint venture 335,212 8.3 104,395 2.2 188,000 18.7
------------- ----------- ------------- ------------ ------------ ------------
Provision for income taxes $1,637,492 40.6% $ 1,908,536 39.7% $299,656 29.8%
============= =========== ============= ============ ============ ============
</TABLE>
<TABLE>
The components of tax expense are as follows:
For the Year Ended 3/31/96:
<CAPTION>
Current Deferred Provision
----------------- ----------------- ----------------
<S> <C> <C> <C>
Federal $ 2,479,759 $ (966,087) $ 1,513,672
State 160,185 ( 36,365) 123,820
----------------- ----------------- ----------------
Total $ 2,639,944 $ (1,002,452) $ 1,637,492
================= ================= ================
For the Year Ended 3/31/95:
Current Deferred Provision
-------------- ----------------- ----------------
Federal $ 2,076,907 $ (242,100) $ 1,834,807
State 101,141 ( 27,412) 73,729
-------------- ----------------- ----------------
Total $ 2,178,048 $ (269,512) $ 1,908,536
============== ================= ================
For the Year Ended 3/31/94:
Current Deferred Provision
-------------- ----------------- ----------------
Federal $ 527,656 $ (294,000) $ 233,656
State 99,000 (33,000) 66,000
-------------- ----------------- ----------------
Total $ 626,656 $ (327,000) $ 299,656
============== ================= ================
</TABLE>
In accordance with SFAS 109, deferred income tax assets and liabilities reflect
the impact of temporary differences between values recorded as assets and
liabilities for financial reporting purposes and values utilized for
remeasurement in accordance with tax laws. The components of the net deferred
asset are as follows:
<TABLE>
<CAPTION>
March 31,
------------------- -- -------------------
1996 1995
<S> <C> <C>
Deferred Tax Assets:
Deferred revenue $ 1,418,018 $ 963,475
Deferred rent 169,857 171,696
Provision for doubtful accounts 156,000 -
Reserve for customer refunds 159,327 -
Unrealized loss on securities 4,389 27,089
Foreign loss benefit 1,111,804 -
Other 60,959 55,283
------------------- -------------------
------------------- -------------------
Total assets 3,080,354 1,217,543
------------------- -------------------
Deferred Tax Liabilities:
Excess of tax over book depreciation 44,500 102,659
Section 174 expense 1,004,319
Installment sales - 85,801
------------------- -------------------
Total liabilities 1,048,819 188,460
------------------- -------------------
Net deferred tax assets $ 2,031,535 $ 1,029,083
=================== ===================
</TABLE>
Section 174 expense represents research and experimental expenses related to
the development of proprietary relational data base and interactive software.
Management believes that it is more likely than not that the deferred tax
assets will be realized and therefore no valuation allowance is considered
necessary. Management expects to realize the foreign loss benefit, which has
an indefinite carryforward period, against the gain on the sale of its foreign
joint venture interest to be recognized in the first quarter of fiscal 1997
(see Note 12) and other future foreign income.
As discussed in Note 1, the Company adopted SFAS No. 109, during the fiscal
year ended March 31, 1994. The effect of adopting SFAS No. 109 did not have a
material impact on the Company's financial position or results of operations
for the year ended March 31, 1994.
9. COMMITMENTS AND CONTINGENCIES
Operating Lease Commitments - The Company leases office and warehouse
space under noncancellable operating leases. These leases include
scheduled rent increases over their respective terms. The
accompanying consolidated statements of operations reflect rent
expense on a straight-line basis over the lease terms, which differ
from the cash payments required. Rent expense charged to operations
for the years ended March 31, 1996, 1995 and 1994 was $1,371,446,
$894,121, and $730,917, respectively.
Future minimum lease commitments as at March 31, 1996 are as follows:
1997 $1,476,552
1998 1,483,001
1999 1,432,358
2000 1,081,294
2001 972,757
Thereafter through 2004 2,538,208
================
$8,984,170
================
Employment Contracts - The Company entered into employment agreements
with its officers and certain key employees which will provide for
aggregate annual salaries of approximately $1,752,150. Certain
agreements call for (i) annual increases (ii) cost of living
increases, and (iii) additional compensation, but only if certain
defined performance levels are attained. This additional compensation
is tobe paid in the form of cash and or Company common stock.
Bonus Incentive Plans - The Company has bonus incentive plans designed
to reward key management personnel with bonuses based on the
attainment of specified operating goals. Total bonuses under the
bonus incentive plans for the years ended March 31, 1996, 1995 and
1994, were $ 405,948, $1,413,057, and $46,669, respectively.
Profit Sharing Arrangement - For the fiscal years ended March 31,
1996, 1995 and 1994 the Company accrued for profit sharing in the
amounts of $(865,000), $2,676,001, and $1,364,089, respectively.
Such amounts are included in the financial statements in other income/
(expense). (refer to Note 11)
The accrued profit sharing due the Company as of March 31, 1996 and
1995 is $1,820,791 and $4,467,104, and such amounts are included in
other receivables.
Bank Line of Credit - The Company has a revolving credit agreement
with a bank which provides for a maximum aggregate borrowing up to
$10,000,000 with interest at the bank's prime rate or LIBOR plus 2%.
As of March 31, 1996 the Company had no outstanding borrowings under
this agreement.
Letters of Credit - At March 31, 1996, the Company was contingently
liable for letters of credit which are as follows:
(i) Standby letter of credit in the amount of $42,623 issued to
the landlord in lieu of a rent security deposit.
(ii) Standby letter of credit in the amount of $16,339 issued to a
lessor on certain equipment leased. The Company has pledged
funds in a certificate of deposit as collateral for the
letter of credit.
Litigation -
(i) In 1989, a lawsuit was filed in an Illinois court against a
subsidiary of the Company by a former agent alleging breach
of contract. While the complaint does not specify the dollar
amounts of its alleged damages, the Plaintiff retained an
expert witness who estimates the Plaintiff's damages in
excess of $9 million. Recently, the District Court ruled
that the report from Plaintiff's damage expert was not
admissible at trial. This ruling would preclude Plaintiff's
expert from offering trial testimony based on legal theories
contained in his report. The Company has retained its own
economic expert who will directly refute the magnitude of
the plaintiff's damages. The Company's expert has concluded
that the maximum amount recoverable by the Plaintiff, if any,
is less than $1 million after allowances of all appropriate
offsets. The Company intends to vigorously defend this
lawsuit. No trial date has been set as yet.
In February 1996, the Plaintiff in this matter filed another
lawsuit in an Illinois court against a subsidiary of the
Company, the parent Company, the parent Company's Chairman
and the parent Company's President alleging that the
Defendants tortuously interfered with the Plaintiff's
business relationships after the Plaintiff was terminated as
an agent. The Plaintiff seeks to recover
commissions that it contends it would have earned if the
Defendants had not precluded the Plaintiff from servicing
certain accounts after the Plaintiff's termination.In the
Complaint the Plaintiff is seeking $8 million in compensatory
damages. The Plaintiff also seeks to recover punitive damages
in the amount of $24 million. All of the Defendants deny and
dispute Plaintiff's claims against them in this case, and
they intend to vigorously defend and oppose those claims.
(ii) In December 1993, a lawsuit was filed by a former officer and
director of the Company, David Robertson, against the Compan
and one of its subsidiaries in a Texas Court. The matter is
currently pending before the American Arbitration Association
in Connecticut. Robertson has alleged that the Company
wrongfully terminated an employment agreement between
Robertson and WDBS, and that the Company engaged in tortuous
interference and fraud. Robertson has requested damages
ranging from $450,000 to $5 million which includes his
request for punitive damages. The Company has denied
all material allegations in the claims. The Company has
asserted a counterclaim in the amount of approximately
$340,000 for reimbursement of attorneys' fees advanced by it
on behalf of Robertson in connection with certain other
actions. Management intends to vigorously defend against
Robertson's claims and to vigorously prosecute its
counterclaims. No hearing is presently scheduled on this
matter.
Management believes that the ultimate outcome of these
matters will not have a substantial impact on the operations
of the Company.
10. CAPITAL STOCK
Stock Options and Stock Option Plan - Under the Employee Incentive Stock Option
Plan (the "Plan"), there are 300,000 shares of the Company's common stock
reserved for issuance to employees (including officers). The options are to be
granted at an exercise price not less than 100% of the fair market value of the
Company's common stock at date of grant. The number of shares granted, terms
of exercise, and expiration dates are to be decided at the date of grant of
each option by the Company's Board of Directors. The Plan will terminate in
November 1998 unless sooner terminated by the Board of Directors.
On April 16, 1992 the Company's Board of Directors and subsequently on
October 22, 1992 the shareholders of the Company at the annual meeting voted
to approve stock options to three directors (two of whom are officers and one
is a former officer of the Company). The stock options entitle the three
Directors to purchase an aggregate of 3,000,000 shares of the Company's common
stock at an exercise price of $2.6875 per share; the market price at the date
of grant.
The term of the options is five (5) years from the date on which they become
exercisable or thirty days after termination of employment, whichever occurs
earlier. Of the total options granted, fifty percent (50%) may be exercised
beginning one year following October 22, 1992 in increments of 10% per year for
a five-year period.
The portions of the options that are based upon the Company's earnings,
consisting of fifty percent (50%) of the total options granted, became
exercisable on October 22, 1995.
Stock options granted during the years ended March 31, are as follows:
<TABLE>
<CAPTION>
March 31,
----------------- -- ------------------ -- ---------------------
1996 1995 1994
<S> <C> <C> <C>
Options outstanding at beginning of
year - shares 3,233,500 3,237,833 3,214,500
Options granted 9,524 91,667 121,833
Options canceled - (21,000) (58,000)
Options exercised (25,000) (75,000) (40,500)
----------------- ------------------ ---------------------
Options outstanding
at end of year 3,218,024 3,233,500 3,237,833
================= ================== =====================
Exercise price options outstanding $1.63-$6.38 $1.63-$6.38 $1.63-$6.38
================= ================== =====================
Exercise price of options exercised $2.50 $2.50 $1.63-$2.50
================= ================== =====================
</TABLE>
In October 1995 the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation. This statement establishes new financial accounting and
reporting standards for stock-based employee compensation plans, including
stock option and stock purchase plans. Compensation resulting from the award
of stock-based compensation must be determined based on the fair value of
consideration received or fair value of the equity instrument issued, whichever
is more reliably measurable. Such compensation expense, net of income taxes,
may be recognized in the Statement of Operations over the service period of the
employee (generally the vesting period). In lieu of recording such compensatio
expense, entities are permitted to disclose its pro-forma impact, net of income
taxes, on reported net income and earnings per share. Entities choosing such
disclosure will continue to measure compensation expense from stock-based
compensation in the Statement of Operations based on the intrinsic value method
prescribed in Accounting Principles Board No. 25, Accounting for Stock Issued
to Employee.
Management is evaluating the effect of the new pronouncement on its stock
option plans and has not determined which option will be utilized when
implemented.
<TABLE>
11. OTHER INCOME/(EXPENSE)
Other income/(expense) is comprised of the following:
<CAPTION>
March 31,
-------------------------------------------------------------
1996 1995 1994
<S> <C> <C> <C>
Interest and dividend income $622,873 $519,592 $209,301
Interest expense (182,523) (88,032) (146,530)
Profit sharing (refer to Note 9) (865,000) 2,676,001 1,364,089
Write-off note receivable (222,845) - -
Miscellaneous (4,125) - -
------------------ ----------------- -----------------
$(651,620) $3,107,561 $1,426,860
================== ================= =================
Profit Sharing amounts were reflected as a component of Direct Costs in prior
years' financial statements.
</TABLE>
12. JOINT VENTURE AGREEMENT AND SALE
In July, 1993, the Company and American International Group Inc. ("AIG") formed
a corporate joint venture, Techmark Services Ltd. ("Techmark" or the "Joint
Venture") owned fifty-one percent (51%) by AIG and forty-nine percent (49%) by
the Company.
In conjunction with the foregoing alliance, in October, 1993, AIG purchased,
for a price of $6,430,000, options and a special issue of preferred stock which
was convertible into an issue of new shares of common stock which, subsequent
to its issuance, would be equivalent to twenty percent (20%) of the Company's
issued and outstanding common stock. Under the terms of the purchase
agreement, AIG had the right to purchase an increased interest in the Company,
to a maximum of thirty percent (30%) of the Company's issued and outstanding
common stock, if certain operating goals were achieved by the Company.
On April 18, 1996, the Company and AIG consumated an agreement for the
termination of the Techmark Joint Venture (the "Agreement"). Under the terms
of the Agreement, AIG agreed to purchase the Company's forty-nine (49%)
interest in the joint venture for approximately $3.8 million and for the
Company to repurchase the 3,234,697 shares of convertible preferred stock
held by AIG for its original redemption value of $6,430,000 and further
relinquish their rights to other options under the original agreement.
As a result of this transaction, the Company no longer has any investment in o
liability to the Joint Venture and will no longer record any equity in the
operations of the Joint Venture. The redemption value will be offset by the
amount due the Company from the sale of its investment, with the net amount
due AIG of $2,395,960 resulting in a three year, non-interest bearing note
payable in 11 equal quarterly installments of $205,000 commencing June 30, 1996
with a final installment of $140,960 due March 1999. In the event of default
by the Company under the note payable, the Company would be required to reissue
to AIG preferred stock for the remaining amount due at the default date.
At March 31, 1996, the Company's carrying value of its investment amounted to
$1,885,674 which will result in a gain on the sale of the investment of
]$1,876,480, the excess of the proceeds over the carrying value, to be
recognized in the first quarter of fiscal 1997.
Also, as part of the agreement, AIG paid the Company $1,480,000 related to
amounts due the Company as of March 31, 1996, under its profit sharing
arrangement. In connection with this payment, the Company issued an
irrevocable letter of credit to the benefit of AIG through December 2002 which
can be drawn upon by AIG in the event the ultimate profit sharing amount due
the Company is less than the amount previously paid. It is anticipated that no
amounts will be due AIG under the letter of credit.
13. ACQUISITION
In July of 1995, Warrantech International, Inc., acquired Home Guarantee
Corporation Plc (subsequently renamed Warrantech Europe Plc.) a British
Company, which markets home warranty products, as well as, other warranty
products similar to those marketed by the Company in the United States.
The acquisition was accounted for as a purchase and the resultant goodwill
amounting to $695,800 is being amortized over a 10 year period.
14. SIGNIFICANT CUSTOMERS
The Company has two significant customers that accounted for approximately
19% of consolidated gross revenues for the year ended March 31, 1996 and one
customer that accounted for approximately 10% and 11% of consolidated gross
revenues for the years ended March 31, 1995 and 1994, respectively.
15. RELATED PARTY TRANSACTION
During the years ended March 31, 1996 and 1995 the Company recognized net
insurance expense of $27,774,163, $15,893,173, respectively for insurance
coverage provided by AIG for certain service contract programs. At
March 31, 1996 and 1995 the Company had a receivable for accrued profit sharing
from AIG of $1,480,000 and $1,524,920, respectively.
===============================================================================
16. Quarterly Financial Data (Unaudited)
================================================================================
The following fiscal 1996 quarterly financial information for each of the three
month periods ended June 30, September 30, December 31, 1995 and 1994 and
March 31, 1996 and 1995 is unaudited. However, in the opinion of management,
all adjustments (consisting of normal recurring adjustments) necessary to
present fairly the results of operations for such periods, have been made for
a fair presentation of the results shown.
<TABLE>
<CAPTION>
Quarter Ended Quarter Ended Quarter Ended Quarter Ended
June 30, September 30, December 31, March 31,
1995 1994 1995 1994 1995 1994 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues $19,994,221 $13,939,184 $23,417,612 $17,018,432 $34,396,845 $20,202,935 $31,272,046 $19,378,774
Income from
operations 1,487,194 52,333 1,410,907 289,917 2,780,482 678,391 (36,861) 974,394
Income
before provision
for income taxes 1,390,502 968,155 1,095,485 834,275 3,016,148 1,271,041 (1,469,781)(1)1,730,853
Net income $650,460 $ 618,813 $607,503 $539,652 $1,626,809 $1,032,696 $ (489,910)(2)$704,627(3)
Earnings per
share:
Primary $.04 $.04 $.04 $.04 $.10 $.07 ($.04) $.04
Fully Diluted $.04 $.04 $.04 $.03 $.09 $.06 ($.03) $.04
</TABLE>
(1) As a result of renegotiation of the Company's profit sharing
agreements, and a reexamination of it's current experience, the Company
recorded a charge of $1,300,000 during the fourth quarter of fiscal
1996. In addition, the Company reserved for the potential
uncollectability of a note receivable in the amount of $222,845 related
to a prior year's sale of a business.
(2) Based on the agreement to sell the Techmark Joint Venture
(see Note 12), which will result in a gain to be recorded in fiscal
1997, a tax benefit of $627,000 was recorded in the fourth quarter
related to equity losses of Techmark recognized by the Company.
(3) As a result of reviews with its insurers of profit sharing
calculations, the Company increased its profit sharing income by
approximately $700,000 in the fourth quarter of fiscal 1995.
<TABLE>
WARRANTECH CORPORATION AND SUBSIDIARIES
FINANCIAL STATEMENT SCHEDULE
SCHEDULE VIII-VALUATION AND QUALIFYING ACCOUNTS
<CAPTION>
- ------------------------------------------------------------ -------------------------------------------------- -----------------
Column Column Column Column Column
A B C D E
- ------------------------------------------------------ ----------------------- --------------------------------------------------
- ------------------------------------------------------ ----------------------- --------------------------------------------------
Description Balance at Additions Deductions- Balance at
Beginning of-------------------------------------------------
Year ------------------------- ------------------------
Charged to Costs Charged to Other End of
and Expense (a) Accounts-Describe Describe (b) Year
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year Ended March 31, 1996:
- - Allowance for doubtful accounts $ 126,115 $ 363,179 $ - $ 39,202 $ 450,092
Year Ended March 31, 1995:
Allowance for doubtful accounts - 427,483 - 301,368 126,115
Year Ended March 31, 1994:
Allowance for doubtful accounts 5,000 10,995 - 15,995 -
(a) Bad debt expense charged to operations pertaining to accounts receivable.
(b) Amount of write-offs during the year.
</TABLE>
