<PAGE>
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 August 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 30067
Marietta, GA (Zip code)
(Address of principal executive offices)
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.
6,971,274 Common shares, $0.01 par value, as of October 13, 1997.
<PAGE>
UniComp, Inc.
INDEX
<TABLE>
<CAPTION>
PART I. FINANACIAL INFORMATION PAGE
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of August 31, 1997
and February 28, 1997......................................... 3
Consolidated Statements of Operations for the
three months ended August 31, 1997 and 1996................... 5
Consolidated Statements of Operations for the
six months ended August 31, 1997 and 1996..................... 6
Consolidated Statements of Cash Flows for the
six months ended August 31, 1997 and 1996..................... 7
Notes to the Consolidated Financial Statements.................. 8
Item 2. Management's Discussion and Analysis of Results
of Operations, Financial Conditions, and
Liquidity and Capital Resources .............................. 9
PART II. OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security Holders.............. 16
Item 6 Exhibits and Reports on Form 8-K................................. 16
Signatures.................................................................... 17
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UniComp, Inc. and Subsidiaries
Consolidated Balance Sheets
ASSETS
<TABLE>
<CAPTION>
(UNAUDITED) (AUDITED)
AUGUST 31, FEBRUARY 28,
1997 1997
--------------- --------------
<S> <C> <C>
Current assets:
Cash and cash equivalents ($3 million restricted)...................... $ 3,246,330 $ 3,810,195
Accounts and other receivables:
Trade, net of allowance of $307,227 and $222,097 at August 31, 1997 and
February 28, 1997, respectively..................................... 12,356,284 9,924,738
Receivables from related parties...................................... 508,812 353,500
Taxes receivable...................................................... 95,784 2,805
Other receivables..................................................... 275,899 150,611
Inventory.............................................................. 2,535,255 1,910,821
Prepaid expenses....................................................... 668,049 802,304
Deferred income taxes.................................................. 58,395 58,395
Other.................................................................. 285,719 63,655
------------- -------------
Total current assets............................................... 20,030,527 17,077,024
-------------- -------------
Property and equipment, net.............................................. 4,221,649 4,124,800
-------------- -------------
Other assets:
Acquired and developed software, net of accumulated amortization of
$3,828,518 and $2,852,779 at August 31, 1997 and February 28, 1997,
respectively......................................................... 6,066,058 5,846,712
Goodwill, net of accumulated amortization of $239,635 and $125,946 at
August 31, 1997 and February 28, 1997, respectively.................. 3,100,320 3,161,431
Prepaid pension........................................................ 590,093 442,030
Deferred income taxes.................................................. 99,346 99,346
Other.................................................................. 295,548 307,438
------------- -------------
Total other assets.................................................. 10,151,365 9,856,957
------------- -------------
Total assets........................................................ $ 34,403,541 $ 31,058,781
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
UniComp, Inc. and Subsidiaries
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(UNAUDITED) (AUDITED)
AUGUST 31, FEBRUARY 28,
1997 1997
------------- -------------
<S> <C> <C>
Current liabilities:
Accounts payable................................................................. $ 2,999,087 $ 3,210,582
Accrued expenses................................................................. 1,344,109 1,186,232
Deferred revenue................................................................. 2,413,667 2,092,847
Lines of credit.................................................................. 8,360,046 7,320,828
Income taxes payable............................................................. 504,804 175,878
Other accrued taxes.............................................................. 488,253 602,325
Current portion of notes payable................................................. 346,240 492,428
------------- -------------
Total current liabilities..................................................... 16,456,206 15,081,120
------------- -------------
Long-term liabilities:
Notes payable.................................................................... 1,199,315 1,169,081
Deferred income taxes............................................................ 562,049 432,914
Other long-term liabilities...................................................... 45,000 --
------------- -------------
Total long-term liabilities................................................... 1,806,364 1,601,995
------------- -------------
Total liabilities............................................................. 18,262,570 16,683,115
------------- -------------
Stockholders' equity:
Preferred stock: $1 par value, authorized 5,000,000, none issued and
outstanding at August 31, 1997 and February 28, 1997, respectively........... -- --
Common stock: $.01 par value, authorized 25,000,000, issued and outstanding
7,051,276 and 6,878,845 at August 31, 1997 and February 28, 1997,
respectively................................................................. 70,513 68,878
Additional contributed capital................................................... 13,743,102 13,076,378
Retained earnings................................................................ 2,918,200 2,001,711
------------- -------------
16,731,815 15,146,967
Less treasury stock.............................................................. (343,762) (608,810)
Cumulative translation adjustment................................................ (247,082) (162,491)
------------- -------------
Total stockholders' equity.................................................... 16,140,971 14,375,666
------------- -------------
Total liabilities and stockholders' equity.................................... $ 34,403,541 $ 31,058,781
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
UniComp, Inc. and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
(UNAUDITED)
THREE MONTHS ENDED
--------------------------
AUGUST 31, AUGUST 31,
1997 1996
------------ ------------
<S> <C> <C>
Revenue:
Services............................................................................ $ 4,963,721 $ 2,611,264
Software............................................................................ 2,217,358 1,955,105
Equipment........................................................................... 4,126,024 1,169,113
------------ ------------
Total revenue.................................................................... 11,307,103 5,735,482
------------ ------------
Cost of sales:
Services............................................................................ 644,644 565,064
Software............................................................................ 778,109 747,233
Equipment........................................................................... 3,572,721 989,808
------------ ------------
Total cost of sales.............................................................. 4,995,474 2,302,105
------------ ------------
Gross profit.......................................................................... 5,261,565 3,433,377
------------ ------------
Selling, general and administrative expenses.......................................... 4,936,243 2,841,118
Depreciation expense.................................................................. 325,322 168,503
------------ ------------
Total operating expenses......................................................... 5,261,565 3,009,621
Operating income...................................................................... 1,050,064 423,756
------------ ------------
Other income (expense):
Other, net.......................................................................... (4,245) (22,235)
Interest, net....................................................................... (134,704) (57,241)
------------ ------------
Total other income (expense)..................................................... (138,949) (79,476)
------------ ------------
Income before provision for income taxes.............................................. 911,115 344,280
------------ ------------
Provision for income taxes............................................................ 325,597 62,493
------------ ------------
Net income............................................................................ $ 585,518 $ 281,787
------------ ------------
------------ ------------
Earnings per share.................................................................... $ 0.08 $ 0.05
------------ ------------
------------ ------------
Weighted average number of shares..................................................... 7,364,788 5,596,328
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
UniComp, Inc. and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED
--------------------------
AUGUST 31, AUGUST 31,
1997 1996
------------ ------------
<S> <C> <C>
Revenue:
Services............................................................................ $ 8,594,170 $ 5,225,001
Software............................................................................ 4,633,812 3,763,067
Equipment........................................................................... 8,386,578 2,631,449
------------ ------------
Total revenue.................................................................... 21,614,560 11,619,517
------------ ------------
Cost of sales:
Services............................................................................ 1,223,609 1,131,012
Software............................................................................ 1,741,042 1,492,469
Equipment........................................................................... 7,310,088 2,118,674
------------ ------------
Total cost of sales.............................................................. 10,274,739 4,742,155
------------ ------------
Gross profit.......................................................................... 11,339,821 6,877,362
------------ ------------
Selling, general and administrative expenses.......................................... 9,171,815 5,321,000
Depreciation expense.................................................................. 646,376 350,857
------------ ------------
Total operating expenses......................................................... 9,818,191 5,671,857
Operating income...................................................................... 1,521,630 1,205,505
------------ ------------
Other income (expense):
Other, net.......................................................................... (9,205) (12,938)
Interest, net....................................................................... (161,562) (150,045)
------------ ------------
Total other income (expense)..................................................... (170,767) (162,983)
------------ ------------
Income before provision for income taxes.............................................. 1,350,863 1,042,522
------------ ------------
Provision for income taxes............................................................ 434,379 300,176
------------ ------------
Net income............................................................................ $ 916,484 $ 742,346
------------ ------------
------------ ------------
Earnings per share.................................................................... $ 0.13 $ 0.14
------------ ------------
------------ ------------
Weighted average number of shares..................................................... 7,284,961 5,482,705
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
6
<PAGE>
UniComp, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED
------------------------
AUGUST 31, AUGUST 31,
1997 1996
----------- -----------
<S> <C> <C>
Net cash provided (used) by operating activities:
Net income........................................................................... $ 916,484 $ 742,346
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization...................................................... 1,735,810 1,078,802
Allowance for doubtful accounts.................................................... 85,130 8,174
Deferred income taxes.............................................................. 131,940 212,563
Changes in assets and liabilities:
Accounts and other receivables................................................... (2,737,747) 66,608
Inventory........................................................................ (624,434) (138,949)
Prepaid expenses................................................................. (13,808) 127,156
Accounts payable................................................................. (271,497) (783,067)
Accrued expenses................................................................. 157,877 (286,959)
Other accrued taxes.............................................................. (114,072) (109,880)
Deferred revenue................................................................. 320,820 (310,387)
Income taxes payable............................................................. 328,926 (49,323)
Other............................................................................ (262,752) (212,537)
----------- -----------
Net cash provided (used) by operating activities.............................. (347,323) 344,547
----------- -----------
Cash flow from investing activities:
Capital expenditures................................................................. (743,225) (403,340)
Acquired and developed software...................................................... (1,090,086) (1,037,400)
----------- -----------
Net cash provided (used) by investing activities.............................. (1,833,311) (1,440,740)
----------- -----------
Cash flow from financing activities:
Payments on borrowings............................................................... (1,781,031) (157,744)
Proceeds from borrowing.............................................................. 2,704,297 747,292
Issuance of common stock, net........................................................ 933,406 --
Deferred stock offering costs........................................................ -- (525,153)
Receivables from related parties..................................................... (155,312) --
----------- -----------
Net cash provided (used) by financing activities.............................. 1,701,360 64,395
----------- -----------
Net increase (decrease) in cash........................................................ (479,274) (1,031,798)
Effect of exchange rate changes on cash................................................ (84,591) (3,373)
Cash and cash equivalents at beginning of period....................................... 3,810,195 1,261,153
----------- -----------
Cash and cash equivalents at end of period............................................. $ 3,246,330 $ 225,982
----------- -----------
----------- -----------
Cash paid for interest................................................................. $ 227,645 $ 162,230
Cash paid for taxes.................................................................... $ 86,422 $ 82,325
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
7
<PAGE>
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 statements and notes be 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.
8
<PAGE>
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. The statements contained herein that are not purely
historical are forward looking statements within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934, including statements regarding the Company's expectations, hopes,
beliefs, intentions or strategies regarding the future. These forward looking
statements and remarks relative to future events and financial performance
are subject to the risks and uncertainties described in reports filed with
the Securities and Exchange Commission, including Form 10-K filed for the
year ended February 28, 1997, Form 10-Q filed for the period ended May 31,
1997, as well as registration statements filed in November 1996 and from time
to time. These documents contain and identify important factors that could
cause actual results to differ materially from those contained in our forward
looking statements. These factors include, but are not limited to, timely
development and market acceptance of its products (and upgrades to those
products) and services, the impact of competitive products, pricing, and the
fact that the company's software product license revenue can fluctuate from
quarter to quarter as a result of various factors and conditions. The company
maintains minimal backlog, thus any weakening of customer demand can have an
immediate adverse effect on the company's operating results. All forward
looking statements included in this document are based on information
available to the Company on the date hereof, and the Company assumes no
obligation to update any such forward looking statements.
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. For the six
months ended August 31, 1997, the Company generated $21.6 million in revenue,
of which $8.6 million was derived from information technology services and
$8.4 million was derived from sales of computer equipment. The remaining $4.6
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, costs associated with internal equipment, sales
commissions, premises and marketing costs, as well as
9
<PAGE>
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 the 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 number of employees associated with sales,
marketing, programming, support and installation 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.
In February 1997, the Company completed its acquisition of CEM Computers
Limited ("CEM") a provider of computer equipment, software support and
systems integration primarily in Northern Ireland and 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.
RESULTS OF OPERATIONS
THREE AND SIX MONTHS ENDED AUGUST 31, 1997 COMPARED TO THREE AND SIX
MONTHS ENDED AUGUST 31, 1996
The following table summarizes the Company's results of operations in
dollars and as a percentage of total revenue for the three and six month periods
ended August 31, 1997 and 1996.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
---------------------- --------------------
8/31/97 8/31/96 8/31/97 8/31/96
------- ------- ------- -------
(IN THOUSANDS, EXCEPT PERCENTAGE DATA) (IN THOUSANDS, EXCEPT PERCENTAGE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenue................................... $ 11,307 100.0% $ 5,735 100.0% $ 21,614 100.0% $ 11,619 100.0%
Cost of sales................................... 4,995 44.2 2,302 40.1 10,275 47.5 4,742 40.8
--------- ----- --------- ----- --------- ----- --------- -----
Gross profit.................................... 6,312 55.8 3,433 59.9 11,339 52.5 6,877 59.2
Operating expenses.............................. 5,262 46.5 3,009 52.5 9,818 45.4 5,672 48.8
--------- ----- --------- ----- --------- ----- --------- -----
Operating income................................ 1,050 9.3 424 7.4 1,521 7.0 1,205 10.4
Other expense................................... 139 1.2 80 1.4 171 0.8 163 1.4
--------- ----- --------- ----- --------- ----- --------- -----
Income before taxes............................. 911 8.1 344 6.0 1,350 6.2 1,042 9.0
Provision for taxes............................. 326 2.9 62 1.1 434 2.0 300 2.6
--------- ----- --------- ----- --------- ----- --------- -----
Net income...................................... $ 585 5.2% $ 282 4.9% $ 916 4.2% $ 742 6.4%
--------- ----- --------- ----- --------- ----- --------- -----
--------- ----- --------- ----- --------- ----- --------- -----
</TABLE>
REVENUE. Revenue from information technology services increased to $5.0
million for the three months ended August 31, 1997 from $2.6 million for the
for the comparable period in the prior fiscal year and to $8.6 million from
$5.2 million for the six months ended August 31, 1997 as compared to the same
period in the prior fiscal year. This increase of $2.4 million or 90.1% for
the three months ended August 31, 1997 and $3.4 million or 64.5% for the six
month period ended August 31, 1997 was in part due to $0.9 million and $1.8
million of service revenue generated by CEM for the three and six month
periods ended August 31, 1997, respectively. Additionally, during the three
and six months ended August 31, 1997, the
10
<PAGE>
Company generated $1.5 million and $1.7 million, respectively, 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 expected to generate a total of $3
million in revenue. Progress on this contract is ahead of initial
expectations and the contract is expected to be substantially completed by
the end of the current fiscal year.
The following table summarizes the revenue generated from sales of computer
equipment for the three and six months ended August 31, 1997 and the comparable
periods from the prior fiscal year.
<TABLE>
<CAPTION>
THREE MONTHS ENDED INCREASE/(DECREASE)
-------------------- --------------------
8/31/97 8/31/96 $ %
--------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PERCENTAGE DATA)
<S> <C> <C> <C> <C>
Educational Equipment......................... $ 2,604 $ 0 $ 2,604 100.0%
Other Equipment............................... 1,522 1,169 353 30.2
--------- --------- ---------
Total Equipment Revenue....................... $ 4,126 $ 1,169 $ 2,957 253.0%
--------- --------- ---------
--------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED INCREASE/ (DECREASE)
-------------------- --------------------
8/31/97 8/31/96 $ %
------- ------- ------ -----
(IN THOUSANDS, EXCEPT PERCENTAGE DATA)
<S> <C> <C> <C> <C>
Educational Equipment......................... $ 4,369 $ 0 $ 4,369 100.0%
Other Equipment............................... 4,018 2,631 1,387 52.7
--------- --------- ---------
Total Equipment Revenue....................... $ 8,387 $ 2,631 $ 5,756 218.8%
--------- --------- ---------
--------- --------- ---------
</TABLE>
In connection with the acquisition of CEM, the Company became a reseller
of computer equipment to the educational marketplace in Northern Ireland
which accounts for all of the 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 principally due
to the acquisition of CEM. Sales of computer equipment can vary from quarter
to quarter based on customer needs, purchases by the Northern Ireland School
Board, and political influences impacting the purchases of educational
computer equipment.
The following table summarizes the revenue from software licensing and
support.
<TABLE>
<CAPTION>
THREE MONTHS ENDED INCREASE/ (DECREASE)
-------------------- --------------------
8/31/97 8/31/96 $ %
--------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PERCENTAGE DATA)
<S> <C> <C> <C> <C>
Initial License Fees:
Platform Migration...................................... $ 381 $ 554 $ (173) (31.2%)
Payment Processing...................................... 580 543 37 6.8
Other................................................... 289 185 104 56.2
--------- --------- ---------
Total Initial License Fees................................ $ 1,250 $ 1,282 $ (32) (2.5)%
--------- --------- ---------
Software Support Fees:
Platform Migration...................................... $ 322 $ 300 $ 22 7.3%
Payment Processing...................................... 40 13 27 207.7
Other................................................... 605 360 245 68.1
--------- --------- ---------
Total Software Support Fees............................... $ 967 $ 673 $ 294 43.7%
--------- --------- ---------
Total Software Revenue.................................... $ 2,217 $ 1,955 $ 262 13.4%
--------- --------- ---------
--------- --------- ---------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED INCREASE/ (DECREASE)
-------------------- --------------------
8/31/97 8/31/96 $ %
--------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PERCENTAGE DATA)
<S> <C> <C> <C> <C>
Initial License Fees:
Platform Migration................................................. $ 1,148 $ 972 $ 176 18.1%
Payment Processing................................................. 1,004 1,057 (57) 5.4
Other.............................................................. 557 343 214 62.4
--------- --------- ---------
Total Initial License Fees........................................... $ 2,709 $ 2,372 $ 337 14.2%
--------- --------- ---------
Software Support Fees:
Platform Migration................................................. $ 651 $ 584 $ 67 11.5%
Payment Processing................................................. 82 24 58 241.7
Other.............................................................. 1,192 783 409 52.2
--------- --------- ---------
Total Software Support Fees.......................................... $ 1,925 $ 1,391 $ 533 38.3%
--------- --------- ---------
Total Software Revenue............................................... $ 4,634 $ 3,763 $ 871 23.1%
--------- --------- ---------
--------- --------- ---------
</TABLE>
The UNIBOL400 product generated revenues of $241,000 and $678,000 for the
three and six month periods ended August 31, 1997 as compared to $214,000 for
the three and six months ended August 31, 1996. Sales of the UNIBOL400
product have slowed for the second quarter of the current fiscal year as
end-users are waiting for new releases of the product which interface with
ORACLE databases. The Company anticipates completing these enhancements by
the end of the current fiscal year and does not anticipate substantial
UNIBOL400 revenue to be generated until next fiscal year.
Revenue relating to the UNIBOL36 product declined to $462,000 and $1.1
million for the three and six months ended August 31, 1997, respectively as
compared to $640,000 and $1.3 million for the comparative periods in the
prior fiscal year. The Company hopes to slow the decline in UNIBOL36 product
sales in the future through marketing the product as part of its year 2000
conversion services. Revenue is still being generated from the UNIBOL36
product and is expected to continue for the next few years, however, they may
be fairly volatile from quarter to quarter during this period.
Revenue generated from payment-processing systems remained relatively
consistent for the three and six month periods ending August 31, 1997 as
compared to the comparable periods in the prior fiscal year. During the three
months ended August 31, 1997, the Company recognized $550,000 of revenue
associated with a large sale to a single customer.
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. Revenues for these products vary
depending on customer demands and product mix.
INTERNATIONAL REVENUE. Revenue from international operations,
principally in Northern Ireland, increased to $19.6 million for the six
months ended August 31, 1997 from $9.4 million for the comparable period in
the prior fiscal year, an increase of $10.2 million or 108.5%. This revenue
increase is primarily due to the acquisition of CEM which accounted for
approximately $8.4 million in revenue for the six months ended August 31,
1997. The remainder of the increase is primarily due to year 2000 conversion
services which accounted for $1.7 million of revenue during the six month
period ended August 31, 1997. Revenue from domestic operations decreased to
$2.0 million for the six months ended August 31, 1997 as compared to $2.2
million for the comparable period in the prior fiscal year, due primarily to
decreased revenues relating to platform migration software.
12
<PAGE>
GROSS PROFIT. The following tables summarizes the Company's gross profit
information in dollars and as a percentage of the associated revenues for the
three and six months ended August 31, 1997 and the comparable periods for the
prior fiscal year.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------
8/31/97 8/31/96
-------- -------
(IN THOUSANDS, EXCEPT PERCENTAGE DATA)
GROSS PROFIT GROSS PROFIT
------------ ------------
$ % $ %
--------- ------ -------- -----
<S> <C> <C> <C> <C>
Information Technology Services................................... $ 4,320 87.0% $ 2,047 78.4%
--------- ---------
Equipment:
Educational Equipment........................................... $ 269 10.3% $ 0 0.0%
Other Equipment................................................. 284 18.7 179 15.3
--------- ---------
Total Equipment................................................... $ 553 13.4% $ 179 15.3%
--------- ---------
Software:
Platform Migration.............................................. $ 317 53.5% $ 474 55.5%
Payment Processing.............................................. 498 80.3 435 78.2
Other........................................................... 624 69.8 298 54.7
--------- ---------
Total Software.................................................... $ 1,439 64.9% $ 1,207 61.8%
--------- ---------
Total Gross Profit................................................ $ 6,312 55.8% $ 3,433 59.9%
--------- ---------
--------- ---------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------------------------
8/31/97 8/31/96
-------- -------
(IN THOUSANDS, EXCEPT PERCENTAGE DATA)
GROSS PROFIT GROSS PROFIT
------------ ------------
$ % $ %
--------- ------ -------- -----
<S> <C> <C> <C> <C>
Information Technology Services................................... $ 7,371 85.8% $ 4,094 78.4%
--------- ---------
Equipment:
Educational Equipment........................................... $ 409 9.4% $ 0 0.0%
Other Equipment................................................. 667 16.6 513 19.5
--------- ---------
Total Equipment................................................... $ 1,076 12.8% $ 513 19.5%
--------- ---------
Software:
Platform Migration.............................................. $ 962 53.5% $ 830 53.3%
Payment Processing.............................................. 857 78.9 816 83.4
Other........................................................... 1,074 61.4 624 55.4
--------- ---------
Total Software.................................................... $ 2,893 62.4% $ 2,270 60.3%
--------- ---------
Total Gross Profit................................................ $ 11,340 52.4% $ 6,877 59.2%
--------- ---------
--------- ---------
</TABLE>
Gross profit margins for services and equipment may vary from quarter to
quarter depending on customer demands and product mix. Information technology
services gross profit margin, which does not include salary costs, increased
for the three and six month periods due primarily to substantial year 2000
services revenue generated during those periods. Profit margins for equipment
declined slightly due to lower profit margins associated with the sale of
educational equipment and generally declining margins on equipment sales.
Platform-migration profit margins remained relatively consistent for the
three and six month periods ended August 31, 1997 compared to the same
periods in the prior fiscal year. These margins are expected to
13
<PAGE>
improve in future periods as the enhanced versions of the UNIBOL400 product
are released, the product begins to gain market acceptance and licensing
revenues increase.
Payment-processing gross profit margins remained relatively consistent
for both the three and six month periods ending August 31, 1997 compared to
the same periods in the prior fiscal year. Gross margins for other software
products increased to 69.8% and 61.4% for the three and six months ended
August 31, 1997, respectively, compared to 54.7% and 55.4% for the comparable
periods in the prior fiscal year. Other software primarily consist of
vertical market software products such as the Company's Distributex product
as well as other third party software products. Gross margins for these
products vary depending on customer demands and product mix.
OPERATING EXPENSES. Operating expenses increased to $5.3 million and
$9.8 million for the three and six months ended August 31, 1997 respectively,
as compared to $3.0 million and $5.7 million for the comparable periods in
the prior fiscal year. This is an increase of $2.3 million and $4.1 million
or 76.7% and 71.9% for the three and six months ended respectively. $1.0
million and $2.1 million of the increase for the three and six month periods
respectively 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. 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 to
46.5% and 45.4% for the three and six months ended August 31, 1997
respectively as compared to 52.5% and 48.8% for the comparable periods in the
prior fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
The Company has experienced significant growth with total revenue growing
to $21.6 million for the six months ended August 31, 1997 from $11.6 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 negative operating cash flows of $347,000 for the
six months ended August 31, 1997. This negative operating cash flow was
funded primarily through cash generated from the exercise of stock options
and warrants, and borrowing against the Company's revolving credit facilities.
The Company maintains two revolving credit facilities which are its
primary sources of liquidity. The facilities allow the Company to borrow
based on current levels of accounts receivable and inventory and contain
financial covenants including, but not limited to, requirements with respect
to minimum net worth and debt to net worth ratios. The Company does not
anticipate difficulty in complying with these covenants, and while there can
be no assurance, expects to be able to renew or replace these facilities in
the ordinary course of business.
During the six months ended August 31, 1997, the Company expended
$743,000 for capital improvements. During the first quarter of the current
fiscal year, the Company consolidated certain of its operations in the United
Kingdom to achieve operational efficiencies, as well as, future cost savings.
In the
14
<PAGE>
course of the 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.
The Company received grants to fund research and development from the
government of Northern Ireland of approximately $129,000 for the six months
ended August 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 available credit 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 and other public filings. 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.
15
<PAGE>
PART II. OTHER INFORMATION
ITEMS 1, 2, 3 and 5 are not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Shareholders, held on August 29, 1997,
the Company's shareholders ratified the Company's Director Incentive Plan,
approved an increase of the number of shares issuable under the Company's
Long-term Incentive Plan from 1.2 million to 1.7 million shares, and approved
the election of five Directors. The following is a summary of the voting for
the Directors who were elected:
<TABLE>
<CAPTION>
VOTES CAST FOR VOTES CAST AGAINST ABSTENSIONS
-------------- ------------------ -----------
<C> <C> <C>
Stephen A. Hafer................................... 6,321,421 757 43,892
Thomas W. Zimmerer................................. 6,321,487 491 44,092
Nelson Millar...................................... 6,320,921 757 44,392
J. Patrick Henry................................... 6,314,887 7,091 44,092
B. Michael Wilson.................................. 6,125,478 196,700 43,892
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K have been filed.
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)
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
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)
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 OCTOBER 15, 1997
- ------------------------------------- -------------------------------------
L. ALLEN PLUNK DATE
CHIEF FINANCIAL OFFICER
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> MAR-01-1997
<PERIOD-END> AUG-31-1997
<CASH> 3,246,330
<SECURITIES> 0
<RECEIVABLES> 12,663,511
<ALLOWANCES> 307,227
<INVENTORY> 2,535,255
<CURRENT-ASSETS> 20,030,527
<PP&E> 8,540,512
<DEPRECIATION> 4,318,863
<TOTAL-ASSETS> 34,403,541
<CURRENT-LIABILITIES> 16,456,206
<BONDS> 0
0
0
<COMMON> 70,513
<OTHER-SE> 16,070,458
<TOTAL-LIABILITY-AND-EQUITY> 34,403,541
<SALES> 8,386,578
<TOTAL-REVENUES> 21,614,560
<CGS> 7,310,088
<TOTAL-COSTS> 10,274,739
<OTHER-EXPENSES> 9,818,191
<LOSS-PROVISION> 86,265
<INTEREST-EXPENSE> 280,277
<INCOME-PRETAX> 1,350,863
<INCOME-TAX> 434,379
<INCOME-CONTINUING> 916,484
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 916,484
<EPS-PRIMARY> 0.13
<EPS-DILUTED> 0.13
</TABLE>
