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SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal quarter ended May 31, 1997 Commission file number 0-15671
UNICOMP, INC.
(Exact name of Registrant as specified in its charter)
Colorado 84-1023666
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1850 Parkway Place, Suite 925
Marietta, GA 30067
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (770) 424-3684
Indicate by check mark whether the registrant (1) has filed all reports
required to be files 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 the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
6,882,009 Common shares, $0.01 par value, as of July 11, 1997.
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UniComp, Inc.
INDEX
PART I. FINANACIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheets as of May 31, 1997 and
February 28, 1997........................................... 3
Consolidated Statements of Operations for the three months
ended May 31, 1997 and 1996................................. 5
Consolidated Statements of Cash Flows for the three months
ended May 31, 1997 and 1996................................. 6
Notes to the Consolidated Financial Statements................ 7
Item 2. Management's Discussion and Analysis of Results of
Operations, Financial Conditions, and Liquidity and
Capital Resources...................................... 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K......................... 14
Signatures............................................................. 15
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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UniComp, Inc. and Subsidiaries
Consolidated Balance Sheets
ASSETS
<TABLE>
<CAPTION>
(AUDITED)
(UNAUDITED) FEBRUARY 28,
MAY 31, 1997 1997
------------- ----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents ($3 million restricted)......... $ 3,248,259 $ 3,810,195
Accounts and other receivables:
Trade, net of allowance of $247,052 and $222,097 at May 31,
1997 and February 28, 1997, respectively.............. 9,257,543 9,924,738
Receivables from related parties........................ 453,666 353,500
Taxes receivable........................................ 95,784 2,805
Other receivables....................................... 209,587 150,611
Inventory................................................. 1,940,405 1,910,821
Prepaid expenses.......................................... 863,999 802,304
Deferred income taxes..................................... 58,395 58,395
Other..................................................... 362,578 63,655
------------- ----------------
Total current assets.................................. 16,490,216 17,077,024
------------- ----------------
Property and equipment, net................................. 4,298,018 4,124,800
------------- ----------------
Other assets:
Acquired and developed software, net of accumulated
amortization of $3,322,050 and $2,852,779 at May 31, 1997
and February 28, 1997, respectively..................... 6,009,642 5,846,712
Goodwill, net of accumulated amortization of $186,630 and
$125,946 at May 31, 1997 and February 28, 1997,
respectively............................................ 3,252,135 3,161,431
Prepaid pension........................................... 520,093 442,030
Deferred income taxes..................................... 99,346 99,346
Other..................................................... 375,334 307,438
------------- ----------------
Total other assets.................................... 10,256,550 9,856,957
------------- ----------------
Total assets.......................................... $ 31,044,784 $ 31,058,781
------------- ----------------
------------- ----------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
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UniComp, Inc. and Subsidiaries
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(AUDITED)
(UNAUDITED) FEBRUARY 28,
MAY 31, 1997 1997
---------------- ----------------
<S> <C> <C>
Current liabilities:
Accounts payable.................................... $2,795,496 $ 3,210,582
Accrued expenses.................................... 1,157,864 1,186,232
Deferred revenue.................................... 2,706,676 2,092,847
Lines of credit..................................... 6,520,953 7,320,828
Income taxes payable................................ 254,929 175,878
Other accrued taxes................................. 593,526 602,325
Current portion of notes payable.................... 436,544 492,428
---------------- ----------------
Total current liabilities......................... 14,465,988 15,081,120
---------------- ----------------
Long-term liabilities:
Notes payable....................................... 1,222,166 1,169,081
Deferred income taxes............................... 502,204 432,914
Other long-term liabilities......................... 60,000 --
---------------- ----------------
Total long-term liabilities....................... 1,784,370 1,601,995
---------------- ----------------
Total liabilities................................. 16,250,358 16,683,115
---------------- ----------------
Stockholders' equity:
Preferred stock: $1 par value, authorized 5,000,000,
none issued and outstanding at May 31, 1997 and
February 28, 1997, respectively................... -- --
Common stock: $.01 par value, authorized 6,905,345
and 6,887,845 at May 31, 1997 25,000,000,
issued and outstanding and February 28, 1997,
respectively...................................... 69,053 68,878
Additional contributed capital...................... 13,134,128 13,076,378
Retained earnings................................... 2,332,677 2,001,711
--------------- ----------------
15,535,858 15,146,967
Less treasury stock................................. (608,810) (608,810)
Cumulative translation adjustment................... (132,622) (162,491)
--------------- -----------------
Total stockholders' equity........................ 14,794,426 14,375,666
--------------- -----------------
Total liabilities and stockholders' equity........ $31,044,784 $ 31,058,781
--------------- -----------------
--------------- -----------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.UniComp, Inc. and Subsidiaries
4
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UniComp, Inc. and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
(UNAUDITED)
THREE MONTHS ENDED
--------------------------
MAY 31, 1997 MAY 31, 1996
------------ ------------
<S> <C> <C>
Revenue:
Services....................................................... $3,630,449 $2,613,737
Software....................................................... 2,416,454 1,807,962
Equipment...................................................... 4,260,554 1,462,336
------------ ------------
Total revenue................................................ 10,307,457 5,884,035
----------- ------------
Cost of sales:
Services....................................................... 578,965 565,948
Software....................................................... 962,933 745,236
Equipment...................................................... 3,737,367 1,128,866
------------ ------------
Total cost of sales.......................................... 5,279,265 2,440,050
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Gross profit..................................................... 5,028,192 3,443,985
------------ ------------
Selling, general and administrative expenses..................... 4,235,572 2,479,882
Depreciation expense............................................. 321,054 182,354
----------- ------------
Total operating expens....................................... 4,556,626 2,662,236
------------ ------------
Operating income................................................. 471,566 781,749
------------ ------------
Other income (expense):
Other, net..................................................... (4,960) 9,298
Interest, net.................................................. (26,858) (92,804)
------------ ------------
Total other income (expense)................................. (31,818) (83,506)
------------ ------------
Income before provision for income taxes......................... 439,748 698,243
------------ ------------
Provision for income taxes....................................... 108,782 237,683
------------ ------------
Net income....................................................... $ 330,966 $ 460,560
------------ ------------
------------ ------------
Earnings per share............................................... $ 0.05 $ 0.09
------------ ------------
------------ ------------
Weighted average number of shares................................ 7,182,670 5,396,083
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
UniComp, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
(UNAUDITED)
THREE MONTHS ENDED
--------------------------
MAY 31, 1997 MAY 31, 1996
------------ ------------
<S> <C> <C>
Net cash provided (used) by operating activities:
Net income..................................................... $ 330,966 $ 460,560
Adjustments to reconcile net income to net cash provided by
operations:
Depreciation and amortization................................ 801,797 542,472
Allowance for doubtful accounts.............................. 24,955 (16,913)
Deferred income taxes........................................ 72,095 5,825
Changes in assets and liabilities:
Accounts and other receivables............................. 487,480 (309,541)
Inventory.................................................. (29,584) 100,136
Prepaid expenses........................................... (139,758) (67,678)
Accounts payable........................................... (475,086) (411,426)
Accrued expenses........................................... (28,368) (397,405)
Other accrued taxes........................................ (8,799) (74,135)
Deferred revenue........................................... 613,829 (348,228)
Income taxes payable....................................... 79,051 61,369
Other...................................................... (468,995) (51,523)
------------ ------------
Net cash provided (used) by operating activities......... 1,259,583 (506,487)
------------ ------------
Cash flow from investing activities:
Capital expenditures........................................... (494,272) (133,153)
Acquired and developed software................................ (512,201) (497,278)
------------ ------------
Net cash provided (used) by investing activities......... (1,006,473) (630,431)
------------ ------------
Cash flow from financing activities:
Payments on borrowings......................................... (1,456,850) (186,612)
Proceeds from borrowing........................................ 654,176 655,102
Issuance of common stock, net.................................. 57,925 --
Receivables from related parties............................... (100,166) --
------------ ------------
Net cash provided (used) by financing activities......... (844,915) 468,490
------------ ------------
Net increase (decrease) in cash.................................. (591,805) (668,428)
Effect of exchange rate changes on cash.......................... 29,869 15,701
Cash and cash equivalents at beginning of period................. 3,810,195 1,261,153
------------ ------------
Cash and cash equivalents at end of period....................... $3,248,259 $ 608,426
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
In the opinion of management, the information furnished herein reflects
all adjustments which are necessary for the fair presentation of the results
for the periods reported. Certain information and footnote disclosure
normally included in financial statements prepared in accordance with
generally accepted accounting principles has been omitted. It is suggested
that these quarterly consolidated financial read in conjunction with the
financial statements and notes included in the Annual Report on Form 10-K for
the fiscal year ended February 28, 1997.
All material intercompany balance and transactions have been eliminated in
consolidation. Certain amounts previously presented in the consolidated
financial statements have been reclassified to conform to current
presentation.
7
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS,
FINANCIAL CONDITIONS, AND LIQUIDITY AND CAPITAL RESOURCES:
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the Company's
consolidated results of operations and financial condition. The discussion
should be read in conjunction with the Company's consolidated financial
statements and notes thereto contained in Item 1 of this report and with the
Company's annual report on Form 10-K for the fiscal year ended February 28,
1997. Except for the historical information contained herein, this discussion
contains forward-looking statements that are subject to risks and
uncertainties including economic, competitive and technological factors
affecting the Company's operations, markets, products, services and prices as
well as other factors discussed in the Notes to the Consolidated Financial
Statements and the Company's annual report on Form 10-K. These and other
factors may cause actual results to differ materially from those anticipated.
OVERVIEW
UniComp provides information technology products and services to
businesses located primarily in Northern Ireland and platform-migration
software and payment-processing systems to users worldwide. In the first
quarter of fiscal year ending February 28, 1998, the Company generated $10.3
million in total revenue, of which $3.6 million was derived from information
technology services and $4.3 million was derived from sales of computer
equipment. The remaining $2.4 million in revenue was derived from license and
support fees for the Company's platform-migration software,
payment-processing systems and other vertical market software products. The
Company expects revenue from software licensing to increase as a percentage
of total revenue in the future as the Company's relatively new software
products penetrate their target markets and gain market acceptance.
Cost of sales for information technology services includes supplies, parts,
subcontractors and other direct costs of delivering the services, except for
salary costs, which are included in selling, general and administrative costs.
Cost of sales for computer equipment consists of the actual cost of the products
sold. Cost of sales for software includes amortization of capitalized software
development costs, as well as royalties payable on embedded technologies and any
other direct costs of providing its software products and support. The Company
amortizes capitalized software development costs over the estimated life of the
product, generally three to four years.
Selling, general and administrative expenses include salaries and related
costs for all employees, travel, internal equipment, sales commissions, premises
and marketing costs, as well as general office and administrative costs.
Development grants received from the government of Northern Ireland have been
recorded as a reduction in selling, general and administrative expenses, or a
reduction in capitalized development costs, and are anticipated to remain
relatively constant for the foreseeable future. Although the Company expects the
dollar amount of selling, general and administrative expenses to increase as the
Company grows, it anticipates that these expenses will remain constant or
decrease as a percentage of total revenue.
During last fiscal year, the Company began investing additional resources
in sales and marketing efforts associated with the introduction and promotion
of several new products and services which were released including UNIBOL400,
UNIBOL36 NT, and year 2000 conversion services. The Company also continues to
expand its payment processing and platform migration operations particularly
increasing the
8
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number of employees associated with sales, marketing, programming, support
and installation services. Additionally, the Company anticipates the hiring
of additional sales and technical service personnel as the Company further
rolls out its year 2000 solutions. These activities have increased selling,
general, and administrative expenses in advance of increases in revenue.
While these expenditures will continue for the foreseeable future, the
Company believes that additional revenue will be generated as the result of
these activities and that these expenditures as a percentage of total revenue
will begin to decline.
In February 1997, the Company completed its acquisition of CEM Computers
Limited ("CEM") a provider of computer equipment and software support and
systems integration primarily in Northern Ireland and is a reseller of computer
equipment primarily to the education and corporate marketplace. The acquisition
has been accounted for by the purchase method. As such, CEM's results of
operations have been included since the date of acquisition. The results of
operations for the three months ended May 31, 1997 include the first full
quarter of activity from this acquisition.
RESULTS OF OPERATIONS
The following table summarizes the Company's results of operations in
dollars and as a percentage of total revenue for the three months ended May 31,
1997 and 1996.
THREE MONTHS ENDED
----------------------------------------------
5/31/97 5/31/96
--------- -----------
(IN THOUSANDS, EXCEPT PERCENTAGE DATA)
Total Revenue............... $ 10,307 100.0% $ 5,884 100.0%
Cost of sales............... 5,279 51.2 2,440 41.5
--------- ----- --------- ---------
Gross profit................ 5,028 48.8 3,444 58.5
Operating expenses.......... 4,556 44.2 2,662 45.2
--------- ----- --------- ---------
Operating income............ 472 4.6 782 13.3
Other expense............... 32 0.3 84 1.4
Income before taxes......... 440 4.3 698 11.9
Provision for taxes......... 109 1.1 238 4.1
--------- ----- --------- ---------
Net income.................. $ 331 3.2% $ 460 7.8%
--------- ----- --------- ---------
--------- ----- --------- ---------
Three Months Ended May 31, 1997 Compared to Three Months Ended May 31,
1996
REVENUE. Revenue for the three months ended May 31, 1997 increased to $10.3
compared to $5.9 million for the three months ended May 31, 1996, an increase of
$4.4 million, or 75.2%. This revenue increase is primarily due to the
acquisition of CEM in February 1997 which accounted for approximately $4.2
million in revenue for the three months ended May 31, 1997.
Revenue from information technology services increased to $3.6 million for
the three months ended May 31, 1997 from $2.6 million for the comparable period
in the prior fiscal year, an increase of $1.0 million, or 38.5%. This increase
was due to $950,000 of service revenue generated by CEM for the three months
ended May 31, 1997. Additionally, during the three months ended May 31, 1997,
the Company generated $200,000 of revenue from year 2000 conversion services.
The majority of the revenue generated from year 2000 conversion services is
attributable to a long-term contract with DHL Worldwide Express which is
estimated to generate an additional $2.8 to $3.0 million in revenue over the
next 18-24 months.
The Company anticipates revenue from its year 2000 conversion services to
increase during the year as the Company begins work on new customer contracts
and work continues on existing contracts. In order to further its opportunities
in providing year 2000 solutions, the Company has begun efforts to productize
its solutions and expand its offering to include tools and services for the
AS/400 platform.
9
<PAGE>
The following table summarizes the revenue generated from sales of computer
equipment for the three months ended May 31, 1997 and the comparable period from
the prior fiscal year.
THREE MONTHS ENDED INCREASE/(DECREASE)
-------------------- --------------------
5/31/97 5/31/96 $ %
--------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PERCENTAGE DATA)
Educational Equipment.......... $ 1,765 $ 0 $ 1,765 100.0%
Other Equipment................ 2,496 1,462 1,034 70.7
--------- --------- --------- ---------
Total Equipment Revenue........ $ 4,261 $ 1,462 $ 2,799 191.5%
--------- --------- --------- ---------
--------- --------- --------- ---------
CEM is one of the largest resellers of computer equipment into the
educational sector in Northern Ireland and accounts for all of the $1.8 million
of new revenue generated from the sale of educational computer equipment. The
increase in other equipment, which is generally supplied as an adjunct to
software and services customers, is also due to the acquisition of CEM which
accounted for $1.4 million of other equipment revenue during the three month
period ending May 31, 1997. This increase is offset by $400,000 of decreases in
equipment sales from the Company's other operations. Sales of computer equipment
can vary from quarter to quarter based on customer needs. However, due to their
relatively low profit margin, these quarterly variations generally do not
significantly impact the overall results of operations.
The following table summarizes the revenue from software licensing and
support.
THREE MONTHS ENDED INCREASE/(DECREASE)
-------------------- --------------------
5/31/97 5/31/96 $ %
--------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PERCENTAGE DATA)
Initial License Fees:
Platform Migration........... $ 767 $ 341 $ 426 124.9%
Payment Processing........... 424 514 (90) (17.5)
Other........................ 268 158 110 69.6
--------- --------- --------- ---------
Total Initial License Fees..... 1,459 1,013 446 44.0
--------- --------- --------- ---------
Software Support Fees:
Platform Migration........... $ 329 $ 361 $ (32) (8.9)
Payment Processing........... 42 10 32 320.0
Other........................ 586 424 162 38.2
--------- --------- --------- ---------
Total Software Support Fees.... 957 795 162 20.4
--------- --------- --------- ---------
Total Software Revenue......... $ 2,416 $ 1,808 $ 608 33.6%
--------- --------- --------- ---------
--------- --------- --------- ---------
Revenue generated from initial license fees for platform migration software
increased to $767,000 for the three months ended May 31, 1997 compared to
$341,000 for the comparable period in the prior fiscal year, an increase of
$426,000 or 124.9%. UNIBOL36 licensing increased to $424,000 for the three
months ended May 31, 1997 compared to $341,000 for the comparable period in the
prior fiscal year. The utions, which began to be marketed during the first
quarter of the current fiscal year, are initially being marketed to its
installed base of UNIBOL36 customers and the estimated 90,000 remaining System
36 users. As a result of these efforts, the Company has experienced an increased
interest from businesses to migrate from the System/36 to open platforms such as
UNIX and Windows NT which has resulted in increased licensing of its UNIBOL36
product. The revenue generated by licensing of UNIBOL400 increased as well
totaling $343,000 for the three months ended May 31, 1997. There was no revenue
generated during the comparable period in the prior fiscal year since the
product was released in
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February 1996 and was in the beginning stages of its product cycle. Revenue
generated from software support for platform migration software remained
relatively consistent during the three months ended May 31, 1997, decreasing
slightly to $329,000 from $361,000 for the comparable period in the prior
fiscal year, a decrease of $32,000 or 8.9%.
Revenue generated from initial license fees of payment-processing systems
decreased slightly to $424,000 for the three months ended May 31, 1997 compared
to $514,000 for the comparable period in the prior fiscal year, a decrease of
$90,000, or 17.5%. Revenue generated from payment-processing systems has
decreased due to the Company beginning a program to allow key customers the
ability to outsource the installation, help desk, deployment and on-site support
to the Company, thereby allowing these customers to focus on processing
transactions rather than installing and maintaining equipment. Under the new
program, one time license fees are replaced by monthly processing fees which
ties the Company into a longer-term, recurring revenue relationship with these
customers. The Company is beginning to realize the benefits of the long-term
contracts as payment processing support fees increased slightly for the three
months ended May 31, 1997 as compared to the three months ended May 31, 1996.
Revenue generated from other software sales primarily consist of vertical
market software products such as the Company's Distributex product as well as
other third party software products. These revenues increased to $854,000 for
the three months ended May 31, 1997 compared to $582,000 for the comparable
period in the prior fiscal year, an increase of $272,000 or 46.7%. Revenues for
these products vary depending on customer demands and product mix.
INTERNATIONAL REVENUE. Revenue from international operations, principally
in Northern Ireland, increased to $9.3 million for the three months ended May
31, 1997 from $4.9 million for the comparable period in the prior fiscal year,
an increase of $4.4 million or 89.8%. This revenue increase is primarily due to
the acquisition of CEM which accounted for $4.2 million in revenue for the three
months ended May 31, 1997. Revenue from domestic operations remained relatively
consistent at $1.0 million for the three months ended May 31, 1997 and 1996.
GROSS PROFIT. The following table summarizes the Company's gross profit
information in dollars and as a percentage of the associated revenues for the
three months ended May 31, 1997 and the comparable period for the prior fiscal
year.
THREE MONTHS ENDED
-------------------------------
5/31/97 5/31/96
--------- ---------
(IN THOUSANDS, EXCEPT PERCENTAGE DATA)
GROSS PROFIT GROSS PROFIT
-------------------- --------------------
$ % $ %
--------- --------- --------- ---------
Information technology services.. $ 3,051 84.1 $ 2,048 78.3
--------- --- --------- ---
Equipment:
Educational Equipment.......... 140 7.9 $ 0 0.0
Other Equipment................ 383 15.4 333 22.8
--------- --- --------- ---
Total Equipment.................. 523 12.3 333 22.8
--------- --- --------- ---
Software:
Platform Migration............. 646 59.8 $ 356 50.7
Payment Processing............. 358 77.1 381 72.7
Other.......................... 450 52.7 326 56.0
--------- --- --------- ---
Total Software................... 1,454 60.2 1,063 55.8
--------- --- --------- ---
Total Gross Margin............... $ 5,028 48.8 $ 3,444 58.5
--------- --- --------- ---
--------- --- --------- ---
11
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Gross profit for information technology services, which does not include
salary costs, increased to 84.1% of services revenue for the three months ended
May 31, 1997 from 78.3% for the comparable period in the prior fiscal year.
Gross profit for equipment declined to 12.3% of equipment revenue for the three
months ended May 31, 1997 compared to 22.8% for the comparable period in the
prior fiscal year. This decrease is primarily attributable to educational
hardware sales which provide less gross profit margin. Gross profit margins for
services and equipment vary depending on customer demands and product mix.
Gross profit for software increased to 60.2% of software revenue for the
three months ended May 31, 1997 compared to 55.8% for the comparable period in
the prior fiscal year. The increase for platform migration software is due to
there being no revenue for the UNIBOL400 product for the three months ended May
31, 1996, after its initial release in February 1996, while the development
costs had begun amortization during this time. Gross margins for software can
increase significantly as software licensing revenues increase over amortization
costs. These margins are expected to continue to improve in future periods as
UNIBOL400 gains market acceptance and licensing revenues increase.
OPERATING EXPENSES. Operating expenses increased to $4.6 million for the
three months ended May 31, 1997 compared to $2.7 million for the comparable
period in the prior fiscal year, an increase of $1.9 million or 71.2%. $1.0
million of this increase was related to operating expenses associated with CEM,
with the remainder of the increase relating to the Company beginning to invest
additional resources in sales and marketing efforts associated with the
introduction and promotion of several new products and services which were
released near the end of fiscal year 1997, including UNIBOL400, UNIBOL36 NT, and
year 2000 conversion services. The Company also continues to expand its payment
processing operations, particularly increasing the number of employees
associated with sales, marketing, programming, support and installation
services. Additionally, the Company anticipates the hiring of additional sales
and technical service personnel as the Company further rolls out its year 2000
conversion services. These activities have increased selling, general, and
administrative expenses in advance of increases in revenue. While these
expenditures will continue for the foreseeable future, the Company believes that
additional revenue will be generated as the result of these activities and that
these expenditures as a percentage of total revenue will begin to decline.
Operating expenses as a percentage of total revenue improved slightly to 44.2%
for the three months ended May 31, 1997 as compared to 45.2% for the comparable
period in the prior fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
The Company has experienced significant growth with total revenue growing to
$10.3 million for the three months ended May 31, 1997, from $5.9 million for the
comparable period in the prior fiscal year. During this period, the Company has
met its liquidity requirements primarily through operations, placements of debt
and equity securities, bank financing and grants from the government of Northern
Ireland.
The Company generated positive operating cash flows of $1.3 million for the
three months ended May 31, 1997. At May 31, 1997, the Company had approximately
$3.2 million in cash and equivalents as compared to $608,000 at May 31, 1996.
During the three months ended May 31, 1997, the Company expended $494,000
for capital improvements. During this fiscal year's first quarter, the Company
consolidated certain of its operations in the United Kingdom to achieve
efficiencies, as well as, future cost savings. In the course of the
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consolidation, increased capital expenditures were necessary to upgrade the
Company's equipment and facilities to accommodate the growth in the business, as
well as, additional employees.
Due to the cash generated from operations during the three months ended May
31, 1997, the Company was able to repay approximately $800,000, net of
borrowings, in indebtedness.
The Company received grants to fund research and development from the
government of Northern Ireland of approximately $94,000 for the three months
ended May 31, 1997. These grants are subject to the legislative rules and
regulations of Northern Ireland and the United Kingdom. Management does not
anticipate that the receipt of grants will diminish significantly in the
foreseeable future; however, there can be no assurance that the Company will be
able to continue to receive such grants.
The Company believes that cash generated from operations and available
credit, if necessary, will be sufficient to meet its working capital needs both
on a short and a long-term basis. However, the Company's capital needs will
depend on many factors, including the Company's ability to maintain profitable
operations, the need to develop and improve products, and various other factors.
Depending on its working capital requirements, the Company may seek additional
financing through debt or equity offerings in the private or public markets at
any time. The Company's ability to obtain additional financing will depend on
its results of operations, financial condition and business prospects, as well
as conditions then prevailing in the relevant capital markets. There can be no
assurance that financing will be available or, if available, will be on terms
acceptable to the Company.
SEASONALITY AND INFLATION
The Company's operations have not proven to be significantly seasonal,
although quarterly revenues and net income could be expected to vary. Although
the Company cannot accurately determine the amounts attributable thereto, the
Company has been affected by inflation through increased costs of employee
compensation and other operating expenses. The Company believes that these have
not had a material effect on the Company's results of operations or financial
condition.
FACTORS THAT MAY AFFECT FUTURE RESULTS
The business of the Company is subject to national and worldwide economic
and political influences such as recession, political instability, the economic
strength of governments, and rapid change in technology. The Company's operating
results are dependent on its ability to rapidly develop, manufacture, and market
innovative products that meet customers demands. Inherent in this process are a
number of risks that the Company must manage in order to achieve favorable
operating results. The process of developing new high technology products is
complex and uncertain, requiring innovative designs and features that anticipate
customer needs and technological trends. The products, once developed, must be
manufactured and distributed in sufficient volumes at acceptable costs to meet
demand.
This report contains both historical facts and forward-looking statements.
Any forward-looking statements involve risks and uncertainties, including but
not limited to risk of product demand, market acceptance, economic conditions,
competitive products and pricing, difficulties in product development,
commercialization, technology, and other risks detailed in this filing. Although
the Company believes it has the product offerings and resources for continued
success, future revenue and margin trends cannot be reliably predicted. Factors
external to the Company can result in volatility of the Company's common stock
price. Because of the forgoing factors, recent trends are not necessarily
reliable indicators of future stock prices or financial performance.
13
<PAGE>
PART II. OTHER INFORMATION
ITEMS 1, 2, 3, 4 and 5 are not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A Form 8-K filed March 6, 1997, was filed to announce the acquisition of CEM
Computers Limited, a United Kingdom corporation, pursuant to a Share Sale
Agreement dated February 20, 1997.
A Form 8-K/A filed May 5, 1997 was filed to amend the Form 8-K mentioned
above to include the relevant financial statements and exhibits.
Exhibits:
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
3.1 Articles of Incorporation of the Registrant (previously filed with Form S-18, filed April 15, 1986 (Reg.
No. 33-04906-D) and incorporated herein by reference)
3.2 Amendment to Articles of Incorporation changing the Registrant's name from Liberty Ventures, Ltd. to
UniComp, Inc. (previously filed with Form S-18, filed April 15, 1986 (Reg. No. 33-04906-D) and
incorporated herein by reference)
3.3 Amended and Restated Bylaws of the Registrant (previously filed with Form S-1, dated September 18, 1996,
as amended, (Reg. No. 333-12209) and incorporated herein by reference)
10.1 End-User Purchase Agreement between the Registrant and Hewlett-Packard dated October 25, 1994
(previously filed with Form 10-K/A amendment no. 2 for the fiscal year ended February 28, 1994 and
incorporated herein by reference)
10.2 Business Partner Agreement between the Registrant and IBM dated March 1, 1994 (previously filed with
Form 10-K/A amendment no. 2 for the fiscal year ended February 28, 1994 and incorporated herein by
reference)
10.3 Agreement between the Registrant and Siemens Nixdorf dated January 3, 1995 (previously filed with Form
10-K for the fiscal year ended February 28, 1995 and incorporated herein by reference)
10.4 Agreement for Sale of a Business between the Registrant and Euro Software Limited dated September 25,
1995 for the acquisition of the assets of Advec Limited (previously filed with Form 10-K for the fiscal
year ended February 29, 1996 and incorporated herein by reference)
10.5 Offshore Warrant Agreement between the Registrant and First Bermuda Securities, Ltd. dated December 20,
1995 (previously filed with Form 10-K for the fiscal year ended February 29, 1996 and incorporated
herein by reference)
10.6 Form of 7% Convertible Promissory Notes dated December 20, 1995 issued by the Registrant to certain
offshore investors (previously filed with Form 10-K for the fiscal year ended February 29, 1996 and
incorporated herein by reference)
14
<PAGE>
10.7 Stock Purchase Agreement between the Registrant and Smoky Mountain Technologies, Inc., dated April 16,
1996 (previously filed with Form 8-K dated May 1, 1996, as amended, and incorporated herein by
reference)
10.8 Employment Agreements, dated April 16, 1996 between the Registrant and each of B. Michael Wilson and
George Gruber, (previously filed with Form 8-K dated May 1, 1996, as amended, and incorporated herein by
reference)
10.9 Form of Indemnification Agreement used between the Registrant and members of the Board of Directors and
executive officers of the Registrant (previously filed with Form S-1, dated September 18, 1996, as
amended, (Reg. No. 333-12209) and incorporated herein by reference)
10.10 Agreement between Smoky Mountain Technologies, Inc. and the Atalla Division of Tandem, Inc. dated
October 30, 1996 (previously filed with Form S-1, dated September 18, 1996, as amended, (Reg. No.
333-12209) and incorporated herein by reference)
10.11 Stock Purchase Agreement between the Registrant and Eurodis
Electron Plc, dated February 20, 1997 (previously filed with Form 8-K on March 6, 1997 and incorporated
herein by reference)
21.1 Subsidiaries of the Registrant (previously filed with Form 10-K for the fiscal year ended February 28,
1997 and incorporated herein by reference)
27.1 Financial Data Schedule (for SEC use only)
</TABLE>
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.
UNICOMP, INC.
/s/ L. Allen Plunk July 15, 1997
- -------------------------------------------- --------------------------
L. Allen Plunk Date
Chief Financial Officer
15
<PAGE>
Exhibit 27.1
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> MAR-01-1997
<PERIOD-END> MAY-31-1997
<CASH> 3,248,259
<SECURITIES> 0
<RECEIVABLES> 9,504,595
<ALLOWANCES> 247,052
<INVENTORY> 1,940,405
<CURRENT-ASSETS> 16,490,216
<PP&E> 8,559,468
<DEPRECIATION> 4,261,450
<TOTAL-ASSETS> 31,044,784
<CURRENT-LIABILITIES> 14,465,988
<BONDS> 0
0
0
<COMMON> 69,053
<OTHER-SE> 14,725,373
<TOTAL-LIABILITY-AND-EQUITY> 31,044,784
<SALES> 4,260,554
<TOTAL-REVENUES> 10,307,457
<CGS> 3,737,367
<TOTAL-COSTS> 5,279,265
<OTHER-EXPENSES> 4,588,444
<LOSS-PROVISION> 20,614
<INTEREST-EXPENSE> 101,741
<INCOME-PRETAX> 439,748
<INCOME-TAX> 108,782
<INCOME-CONTINUING> 330,966
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 330,966
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
