Securities and Exchange Commission
VIA EDGAR LINK
Re: The Software Developer's Company, Inc.
Commission File No. 1-10139; Quarterly Report on Form 10-Q
for the Quarter Ended September 30, 1995
Dear Sir/Madam:
Enclosed for filing on behalf of The Software Developer's
Company, Inc. is the Company's Form 10-Q for the quarter ended
September 30, 1995.
The Company is maintaining a copy which has been manually signed
by the President and Chief Executive Officer and the Chief
Financial Officer of the Company.
If you have any questions or comments regarding this filing,
please do not hesitate to call me at (617) 740-0101.
Very truly yours,
James O'Connor, Jr.
Vice President and
Chief Financial Officer<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM 10-Q
__________________
XX Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, For the quarterly
period ended September 30, 1995, or
Transition report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934, For the transition
period from
___________ to ___________
Commission File Number 1-10139
_____________________________
THE SOFTWARE DEVELOPER'S COMPANY, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 04-2911320
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
90 INDUSTRIAL PARK ROAD
HINGHAM, MASSACHUSETTS 02043
(Address of principal executive offices) (Zip Code)
(617) 740-0101
(Registrant's Telephone Number)
Securities registered pursuant to Section 12(g) of the Act: NONE
_________________________
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such other 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 XX Yes No
As of November 3, 1995 there were 7,529,011 shares of Common
Stock outstanding.
<PAGE>
FORM 10-Q
QUARTERLY REPORT
TABLE OF CONTENTS
Facing Sheet. . .. . . . . . . . . . . . . . . . . . . . . 1
Table of Contents. . . . . . . . . . . . . . . . . . . . . 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet. . . . . . . . . . . . . . . 3
Statement of Operations. . . . . . . . . . 5
Statement of Cash Flows. . . . . . . . . . 6
Notes to Financial Statements. . . . . . . 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations. . . . . . . . . . . . . . . . 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . 18
Item 2. Changes in Securities . . . . . . . . . . . . 18
Item 3. Defaults Upon Senior Securities . . . . . . . 18
Item 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . 18
Item 5. Other Information . . . . . . . . . . . . . . 19
Item 6. Exhibits and Reports on Form 8-K. . . . . . . 19
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . 20
Exhibit 11 - Computation of earnings per share . . . . . . 21
<PAGE>
PART I. - FINANCIAL INFORMATION
THE SOFTWARE DEVELOPER'S COMPANY, INC.
BALANCE SHEETS
(Unaudited)
ASSETS
September 30, March 31,
1995 1995
CURRENT ASSETS:
Cash $ 981,233 $ 334,747
Accounts receivable - trade,
net of allowance for doubtful
accounts of $393,607 and
$347,432 at September 30, 1995
and March 31, 1995, respectively 5,144,673 4,413,884
Accounts receivable - product,
net of allowance for doubtful
accounts of $66,892 and $60,745
at September 30, 1995 and
March 31, 1995, respectively 22,147 99,977
Inventory 1,697,293 1,695,993
Other current assets 347,744 339,418
TOTAL CURRENT ASSETS 8,193,090 6,884,019
EQUIPMENT AND LEASEHOLD
IMPROVEMENTS, net 448,810 502,873
INTANGIBLE ASSETS, NET, INCLUDING
GOODWILL OF $682,139 900,764 967,262
OTHER ASSETS 73,476 88,421
$9,616,140 $8,442,575
The accompanying footnotes are an integral part of the financial
statements.<PAGE>
THE SOFTWARE DEVELOPER'S COMPANY, INC.
BALANCE SHEETS
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, March 31,
1995 1995
CURRENT LIABILITIES:
Accounts payable - trade $4,838,792 $4,063,696
Line of credit 1,423,470 1,423,470
Other accrued expenses 657,106 511,767
Accrued payroll 199,902 163,281
Customer advances 172,799 124,689
Current portion of capitalized
lease obligations 7,880 27,011
TOTAL CURRENT LIABILITIES 7,299,949 6,313,914
LONG-TERM NOTES PAYABLE 300,000 300,000
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value,
authorized 5,000,000 shares:
Series C, voting, non-cumulative
760,968 shares issued and
outstanding at September 30,
1995 (905,968 issued and
outstanding at March 31, 1995) 7,610 9,060
Common stock, voting, $.01 par
value, 25,000,000 authorized
shares; 7,469,599 issued and
7,444,498 outstanding at
September 30, 1995 (7,321,599
issued and 7,296,498 outstanding
at March 31, 1995) 74,697 73,217
Additional paid-in capital 9,952,185 9,949,566
Cumulative translation adjustment 31,068 22,242
Cumulative deficit (7,965,712) (8,141,767)
2,099,848 1,912,318
Less treasury stock, at cost,
25,101 shares (83,657) (83,657)
TOTAL STOCKHOLDERS' EQUITY 2,016,191 1,828,661
$9,616,140 $8,442,575
The accompanying footnotes are an integral part of the financial
statements.<PAGE>
THE SOFTWARE DEVELOPER'S COMPANY, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
For the three months ended
September 30,
Restated
1995 1994
Revenues:
Product sales $12,042,003 $7,324,955
Marketing services 1,318,693 1,049,434
13,360,696 8,374,389
Costs and expenses:
Costs of products sold 10,173,153 5,866,868
Cost of marketing services 707,037 529,277
Selling, general and
administrative expenses 2,418,315 1,890,396
13,298,505 8,286,541
NET INCOME BEFORE INTEREST
AND MINORITY INTEREST 62,191 87,848
Interest expense, related party 9,000 9,000
Net other expense, including
third-party interest expense 32,273 48,370
NET INCOME $ 20,918 $ 30,478
NET INCOME PER SHARE $0.00 $0.00
Weighted average shares outstanding 8,685,000 8,200,000
<PAGE>
THE SOFTWARE DEVELOPER'S COMPANY, INC.
STATEMENTS OF OPERATIONS (Continued)
(Unaudited)
For the six months ended
September 30,
Restated
1995 1994
Revenues:
Product sales $23,911,602 $14,294,016
Marketing services 2,655,583 1,964,594
26,567,185 16,258,610
Costs and expenses:
Costs of products sold 20,002,253 11,349,445
Cost of marketing services 1,577,346 1,094,254
Selling, general and
administrative expenses 4,729,976 3,650,790
26,309,575 16,094,489
NET INCOME BEFORE INTEREST
AND MINORITY INTEREST 257,610 164,121
Interest expense, related party 18,000 18,000
Net other expense, including
third-party interest expense 63,555 90,347
NET INCOME $ 176,055 $ 55,774
NET INCOME PER SHARE $0.02 $0.01
Weighted average shares outstanding 8,718,000 8,201,000
The accompanying footnotes are an integral part of the financial
statements.<PAGE>
THE SOFTWARE DEVELOPER'S COMPANY, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
For the six months ended
September 30,
Restated
1995 1994
OPERATING ACTIVITIES
Net income $ 176,055 $ 55,774
Adjustments to reconcile net income
to net cash provided by operating
activities:
Sale of advertising for product (390,639) (578,544)
Depreciation and amortization 237,099 215,464
Provision for doubtful
accounts receivable 339,544 34,687
Provision for losses on
inventory 83,401 105,000
Changes in operating assets
and liabilities:
Accounts receivable (965,795) 77,234
Inventory 279,230 804,003
Other current assets (8,326) (17,350)
Other assets 14,945 25,417
Accounts payable 775,096 (392,156)
Accrued payroll 36,621 (16,864)
Other accrued expenses 145,339 69,488
Customer advances 48,110 (139,951)
Total adjustments $ 594,625 $ 186,428
Net cash provided by continuing
operating activities 770,680 242,202
Net cash used for discontinued
operating activities --- (25,310)
Net cash provided by operating
activities $ 770,680 $ 216,892
The accompanying footnotes are an integral part of the financial
statements.<PAGE>
THE SOFTWARE DEVELOPER'S COMPANY, INC.
STATEMENTS OF CASH FLOWS (Cont.)
(Unaudited)
For the six months ended
September 30,
Restated
1995 1994
INVESTING ACTIVITIES
Purchase of equipment $ (116,538) $ (84,157)
Net cash used for investing
activities (116,538) (84,157)
FINANCING ACTIVITIES
Principal payments under capital
lease obligations (19,131) (20,795)
Issuance of stock 2,649 2,668
Net cash used for financing activities (16,482) (18,127)
Effect of exchange rate changes on cash 8,826 29,008
Net increase in cash 646,486 143,616
Cash at beginning of period 334,747 550,560
Cash at end of period $ 981,233 $ 694,176
Supplemental disclosures of
cash flow information:
Interest paid $ 81,511 $ 102,913
Supplemental schedule of noncash
investing and financing activities:
Collection of products in
satisfaction of accounts
receivable - product $ 363,931 $ 589,746
The accompanying footnotes are an integral part of the financial
statements.<PAGE>
THE SOFTWARE DEVELOPER'S COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1 - The unaudited financial information furnished
herein reflects all adjustments which are of a normal recurring
nature, which in the opinion of management are necessary to
fairly state the Company's financial position, cash flows and the
results of its operations for the periods presented. Certain
information and footnote disclosure normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted.
This information should be read in conjunction with the Company's
audited financial statements for the fiscal year ended March 31,
1995, included in Form 10-K filed on July 14, 1995.
Note 2 - The results of operations for the three-month and
six-month periods ended September 30, 1995 are not necessarily
indicative of the results to be expected for the entire year
ending March 31, 1996.
Note 3 - Minority interest represents the minority
shareholders' proportionate share of their equity of Personal
Computing Tools, Inc. (PCT). At September 30, 1995, the Company
owned 94% of the capital stock of PCT.
Note 4 - Net income per share is based upon the weighted
average number of common shares outstanding including the
dilutive effects of options and warrants.
Note 5 - The Company provides for income taxes during
interim reporting periods based on reported earnings before
income taxes using an estimate of the annual effective tax rate.
Deferred income taxes reflect the impact of temporary differences
between the amount of assets and liabilities recognized for tax
purposes. These deferred taxes are measured by applying
currently enacted tax laws.
Note 6 - Effective April 1, 1994, the Company changed its
method of accounting for income taxes from the deferred method to
the liability method required by FASB Statement No. 109
"Accounting for Income Taxes". The effect of the adoption of
this statement had no impact on the operating results, components
of the income tax expense, or financial position of the Company.
<PAGE>
The principal components of the Company's deferred tax
assets and liabilities as of April 1, 1995 consisted of the
following (in thousands):
Deferred Tax Assets:
Expenses not currently deductible $ 462
Operating loss carryforwards 3,004
3,466
Deferred tax liabilities ---
3,466
Valuation allowance (3,466)
Net ---
There was no change to the valuation allowance during the
first six months of fiscal 1996.
Note 7 - On October 18, 1995 the Company announced that it
had entered into an agreement with Internet Security Corporation
(ISC), a privately held reseller of security products for the
Internet, to acquire all of the outstanding stock of ISC in a
pooling of interests transaction.
The agreement calls for ISC to receive Common Stock of the
Company valued at $750,000 at a price per share equal to the
lower of $1.61 or the average closing price of the Company's
Common Stock for the ten trading days prior to closing. The
closing is expected to occur mid-November, 1995.
The Company expects to incur a third quarter charge of
approximately $150,000 for legal and audit fees related to the
transaction.
<PAGE>
THE SOFTWARE DEVELOPER'S COMPANY, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company's revenues are generated by marketing and
distributing specialty PC-based software and hardware to
technical and professional PC users through its catalog
operations: The Programmer's SuperShop (TPS), Personal Computing
Tools SuperShop (PCT), and New Media SuperShop (NMS). In
addition, SDC Communications (SDCC) provides marketing services
to third-party manufacturers, developers and publishers of the
products the Company distributes. Marketing services are
designed to generate sales leads, increase market visibility and
assist in the launch of new products.
RESULTS OF OPERATIONS
The following information should be read in conjunction
with the consolidated financial statements and notes thereto:
Three-month period ended
September 30, 1995 vs. % to Net Revenue % Change
September 30, 1994 1995 1994 95 v. 94
Net Revenues:
Product sales (TPS, PCT, NMS) 90% 87% 64%
Marketing services (SDCC) 10% 13% 26%
100% 100% 60%
Gross Margins:
Product sales (TPS, PCT, NMS) 16% 20% 33%
Marketing services (SDCC) 46% 50% 18%
19% 24% 25%
Selling, general and administrative
expenses 18% 23% 28%
Net income * * (31)%
* Less than 1%
Revenues: Total net revenues in the second quarter ended
September 30, 1995 increased $4,987,000, or 60%, to $13,361,000
from $8,374,000 in the second quarter ended September 30, 1994.
<PAGE>
Net product sales increased $4,717,000, or 64%, to
$12,042,000 in the second quarter of fiscal 1996 from $7,325,000
in the second quarter of fiscal 1995. The increase in product
revenue was primarily derived from the Company's corporate sales
group. The corporate sales group's aggressive outbound selling
effort has enabled the Company to successfully establish major
account relationships. Product revenue growth was accelerated by
an improving market for software development tools.
Marketing services revenue increased $270,000, or 26%, to
$1,319,000 in the second quarter ended September 30, 1995 from
$1,049,000 in the second quarter ended September 30, 1994. This
increase was mainly attributable to the quarterly marketing
programs designed for low-cost promotion of software
manufacturers' products.
Gross Margin: Total gross margin increased $503,000, or 25%, to
$2,481,000 in the quarter ended September 30, 1995 from
$1,978,000 in the quarter ended September 30, 1994.
Gross margin from product sales increased $411,000, or 28%,
to $1,869,000 in the second quarter of fiscal 1996 from
$1,458,000 in the second quarter of fiscal 1995. The increase in
product gross margin was a result of the increased sales volume
generated by the Company's corporate sales group. As a percent
of sales, however, gross margin from product revenue declined to
16% from 20%. This decrease was caused by the continued
competitive pricing pressures that exist in the software
distribution market coupled with the volume discounts offered to
corporate customers.
Gross margin from marketing services increased $92,000, or
18%, to $612,000 in the quarter ended September 30, 1995 from
$520,000 in the same period last year. This increase was mainly
attributable to the quarterly marketing programs focused on
building major advertising account relationships. These programs
tend to yield higher gross margins than the Company's catalogs.
Selling, General and Administrative Expenses: Selling, general
and administrative (SGA) expenses increased $528,000, or 28%, to
$2,418,000 in the second quarter of fiscal 1996 from $1,890,000
in the second quarter of fiscal 1995. The increase in expenses
reflects planned headcount additions in the corporate sales group
in an effort to produce increased revenues. SG&A as a percent of
net revenue declined to 18% from 23% reflecting the Company's
ability to leverage its existing operations to grow revenue.
Interest Expense: Net interest expense decreased $16,000, or
28%, to $41,000 in the second quarter of fiscal 1996 from $57,000
in the second quarter of fiscal 1995. This decrease was mainly
attributable to lower interest rates offered to the Company on
its line of credit.
The Company's quarterly operating results have varied and
may continue to vary significantly depending on factors such as
the timing of significant product marketing programs, the timing
of new product introductions, and the mix of service and product
sales. Substantially all of the Company's product revenue in a
given quarter is derived from orders received in that particular
quarter. Accordingly, delays in orders are likely to result in
the associated revenue not being realized by the Company in the
period. Moreover, the Company's expense levels are based in
part on expectations of future revenue levels, and a shortfall in
expected revenue could therefore result in a disproportionate
decrease in the Company's net income.
Six-month period ended
September 30, 1995 vs. % to Net Revenue % Change
September 30, 1994 1995 1994 95 v. 94
Net Revenues:
Product sales (TPS, PCT, NMS) 90% 88% 67%
Marketing services (SDCC) 10% 12% 35%
100% 100% 63%
Gross Margins:
Product sales (TPS, PCT, NMS) 16% 21% 33%
Marketing services (SDCC) 41% 44% 24%
19% 23% 31%
Selling, general and administrative
expenses 18% 22% 30%
Net income 1% * 316%
* Less than 1%
Revenues: Total net revenues for the six months ended September
30, 1995 increased $10,308,000, or 63%, to $26,567,000 from
$16,259,000 in the six months ended September 30, 1994.
Net product sales increased $9,618,000, or 67%, to
$23,912,000 in the six months ended September 30, 1995 from
$14,294,000 in the prior year period. The increase in product
sales was primarily due the growth of the Company's corporate
sales group whose outbound selling effort has successfully
established major account relationships. The growth in product
sales was accelerated by an improving software development tools
market and the expansion of the Company's corporate sales group.
Marketing services revenue increased by $691,000, or 35%,
to $2,656,000 in the first six months of fiscal 1996 from
$1,965,000 in the first six months of fiscal 1995. The increase
in marketing services revenue was the result of the Company's
newly developed quarterly marketing programs designed for the
low-cost promotion of software manufacturers' products.
Gross Margins: Total gross margin increased $1,173,000, or 31%,
to $4,988,000 in the first six months of fiscal 1996 from
$3,815,000 in the comparable period in fiscal 1995.
Gross margin from product sales increased $964,000, or 33%,
to $3,909,000 in the six month period ended September 30, 1995
from $2,945,000 in the same period last year. The increase in
gross margin was a result of the sales volume growth generated
from the Company's corporate sales group. As a percent of sales,
however, gross margin from product revenue for the six month
period declined to 16% from 21% a year ago. This decrease was
caused by the continued competitive pricing pressures that exist
in the software distribution market coupled with the volume
discounts offered to corporate customers.
Gross margin from marketing services increased 24%, or
$208,000 to $1,078,000 for the first six months of fiscal 1996
from $870,000 for the same period in fiscal 1995. The increase
in marketing services gross margin was attributable to the
Company's quarterly marketing programs focused on building major
account relationships. These programs tend to yield higher gross
margins than the Company's catalog publications.
Selling, General and Administrative Expenses: Selling, general
and administrative (SGA) expenses increased $1,079,000, or 30%,
in the first six months of fiscal 1996 to $4,730,000 from
$3,651,000 in the same period in fiscal 1995. The increase in SGA
expenses was mainly attributable to planned headcount additions
in the corporate sales group designed to produce increased
revenues. As a percentage of sales, however, SGA expenses
decreased to 18% from 22% for the six month periods, reflecting
the Company's ability to leverage its existing operations to grow
revenue.
Interest Expense: Interest expense decreased by $26,000, or 24%,
to $82,000 for the six month period ended September 30, 1995 from
$108,000 for the same period last year. The decline in interest
expense was the result of lower interest rates offered to the
Company on its line of credit.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
(in thousands, except ratios)
September 30, March 31,
Financial Condition as of 1995 1995
Cash and cash equivalents $981 $335
Working capital 893 570
Current ratio 1.12 1.09
Cash Flow Activity Summary for September 30, September 30,
the Six Months Ended 1995 1994
Net cash provided by continuing
operating activities $771 $242
Net cash used for discontinued
operating activities -- (25)
Net cash used for investing
activities (117) (84)
Net cash used for financing
activities (16) (18)
The Company's net cash balance increased $646,000 to
$981,000 at September 30, 1995 from $335,000 at March 31, 1995.
Cash generated by operating activities of $771,000 was achieved
during the first six months of fiscal 1996 primarily from net
income from operations.
Accounts receivable-trade increased 17% to $5,145,000 at
September 30, 1995 from $4,414,000 at March 31, 1995. This
increase resulted from the Company's revenue growth. The Company
continues to maintain an expanded collections program that has
yielded favorable collection results.
The Company has a $2,000,000 secured bank line of credit
under which borrowings bear interest at the bank's prime rate
plus 1%. The line is subject to renewal on January 5, 1996.
Available borrowings under the line are based on 80% of eligible
accounts receivable. Covenants under the line of credit require
the Company to maintain certain net worth and financial ratios.
The Company is currently in default of certain financial
covenants and has received a written waiver for the period
September 30, 1995 with the condition that the maximum borrowings
under the credit facility be limited to the current outstanding
balance until such time as a new credit restructuring is agreed
upon. The Company and the bank are currently in the process of
renegotiating the line of credit and the covenants governing the
agreement which have caused past defaults.
<PAGE>
The Company anticipates that its existing cash resources,
cash flow from operations and the continued availability of its
bank line of credit will be sufficient to fund its operations
through March 31, 1996, provided it meets its operating plan and
remains in compliance with its credit agreement. The Company's
ability to finance its operations will be dependent on its
ability to renegotiate its bank line of credit for a continued
availability of borrowing thereunder. There can be no assurance
that the Company will be successful in renegotiating its line of
credit or that the bank will permit continued borrowings under
its line of credit. If the Company is unsuccessful in
renegotiating its line of credit with the bank, it will need to
seek alternative financing for working capital. Future capital
requirements will depend on many factors, including cash
flow from continuing operations, competition from larger catalog
distributors and market developments, and the Company's ability
to distribute products and marketing services successfully. To
the extent cash flow from operations is insufficient to fund the
Company's activities, it may be necessary to raise additional
funds through equity or debt financing. The Company is exploring
additional sources of capital; however, there are currently no
firm commitments at this time. Additional debt financings will
likely result in higher interest charges. Additional
equity financings will likely result in dilution of stockholders'
interests. The Company's ability to generate cash from
operations depends upon, among other things, revenue growth,
improvements in operating productivity, its credit and payment
terms with vendors and collections of accounts receivable. The
Company's ability to borrow under this facility is dependent upon
satisfying certain financial covenants, and there can be no
assurances that the Company will remain in compliance. If such
sources of cash prove insufficient, the Company will be required
to make changes in its operations or to seek additional debt or
equity financing. There can be no assurances that cash generated
from operations and borrowings under its credit facility will be
sufficient to meet its operating requirements, or if required,
that additional debt or equity financing will be available
on terms acceptable to the Company. The Company currently
anticipates that its available cash, expected cash flow from
operations, and its borrowing capacity will be sufficient to fund
operations through March 31, 1996.
In June 1995, the Company became aware of information
indicating that cash and other accrued expenses had been reported
improperly in fiscal 1994 and fiscal 1995 by the accounting staff
while implementing controls and procedures associated with the
new computerized transaction processing system installed in
fiscal 1994. As a result of this information, the Company
restated its financial statements for the year ended March 31,
1994.
<PAGE>
The effect on the results of the restatement of the quarter
ended September 30, 1994 is as follows:
Quarter Ended
September 30, 1994
As Reported As Restated
Net revenues $8,389,424 $8,374,389
SG&A expenses 1,882,991 1,890,396
Net income (loss) 52,918 (34,478)
Net income (loss) per share 0.01 (0.00)
Accounts receivable 2,844,470 2,829,435
Total current assets 5,332,460 5,317,425
Total assets 6,981,330 6,966,295
Other accrued expenses 402,517 409,922
Total current liabilities 4,346,012 4,353,417
Accumulated deficit (7,653,906) (7,676,346)
Total stockholders' equity 2,294,679 2,272,239
Total liabilities and
stockholders' equity 6,981,330 6,966,295
<PAGE>
PART II. - OTHER INFORMATION
THE SOFTWARE DEVELOPER'S COMPANY, INC.
ITEM 1. LEGAL PROCEEDINGS
The Company is not involved in any material legal
proceedings.
ITEM 2. CHANGES IN SECURITIES
There have been no changes in securities during the quarter
ended September 30, 1995.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
At September 30, 1995, the Company was in default of
certain financial covenants relating to its line of credit and a
note payable to a related party. The Company has obtained a
written waiver for the period September 30, 1995 with the
condition that the maximum borrowings under the credit facility
be limited to the current outstanding balance until such time as
a new credit restructuring is agreed upon. There can be no
assurance that the Company will be successful in renegotiating
its line of credit.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On September 14, 1995 the Board of Directors caused to be
distributed to stockholders of record as of September 1, 1995, a
Notice of Annual Meeting of Stockholders, Proxy and a Proxy
Statement for the Annual Meeting, held on October 18, 1995. As
of the record date, 7,443,748 shares of Common Stock (excluding
treasury shares) were outstanding and entitled to vote.
Additionally, there were 760,968 shares of Series C Preferred
Stock that were outstanding and entitled to vote.
At the meeting, the stockholders acted upon the following
proposals: (i) election of directors; and (ii) ratification of
the firm of Coopers & Lybrand as independent auditors for the
fiscal year ending March 31, 1996. All of the above matters were
approved by the stockholders.
<PAGE>
Votes "For" represent affirmative votes and do not include
abstentions or broker non-votes. In cases where a signed proxy
was submitted without direction, the shares represented by the
proxy were voted "For" each proposal in the manner disclosed in
the proxy statement and Proxy.
Voting results were as follows:
I. Election of Directors:
FOR WITHHELD
Stephen L. Watson 5,910,239 177,488
Barry N. Bycoff 5,910,239 177,488
Aaron Kleiner 5,910,239 177,488
Gustav H. Koven 5,910,239 177,488
Milton J. Pappas 5,910,239 177,488
Ralph B. Wagner 5,767,071 320,656
Michael L. Mark 5,910,239 177,488
II. Ratification of Independent Auditors:
FOR AGAINST ABSTAIN
5,929,489 157,938 300
ITEM 5. OTHER INFORMATION
On October 18, 1995 the Company announced that it had
entered into an agreement with Internet Security Corporation
(ISC), a privately held reseller of security products for the
Internet, to acquire all of the outstanding stock of ISC in a
pooling of interests transaction.
The agreement calls for ISC to receive Common Stock of the
Company valued at $750,000 at a price per share equal to the
lower of $1.61 or the average closing price of the Company's
Common Stock for the ten trading days prior to closing. The
closing is expected to occur mid-November, 1995.
The Company expects to incur a third quarter charge of
approximately $150,000 for legal and audit fees related to the
transaction.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits: Exhibit No. 11 - Computation of earnings
per share.
(b) Report on Form 8-K: No reports on Form 8-K were
filed during the quarter ended September 30, 1995.<PAGE>
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.
Date: November 14, 1995 THE SOFTWARE DEVELOPER'S
COMPANY, INC.
By: /s/ Barry N. Bycoff
Barry N. Bycoff
President and Chief Executive
Officer (Principal Executive
Officer)
Date: November 14, 1995 By: /s/ James O'Connor, Jr.
James O'Connor, Jr.
Vice President, Finance and
Chief Financial Officer
(Principal Financial and
Chief Accounting Officer)
<PAGE>
EXHIBIT 11
THE SOFTWARE DEVELOPER'S COMPANY, INC.
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share data)
Three months ended
September 30,
Restated
1995 1994
Weighted average shares outstanding 8,285 8,199
Net effect of dilutive stock
options and warrants - based on
the treasury stock method using
the average market price 400 1
Total 8,685 8,200
Net income for EPS computation $ 21 $ 30
Net income per share $0.00 $0.00
Six months ended
September 30,
Restated
1995 1994
Weighted average shares outstanding 8,309 8,199
Net effect of dilutive stock
options and warrants - based on
the treasury stock method using
the average market price 409 2
Total 8,718 8,201
Net income for EPS computation $ 176 $ 56
Net income per share $0.02 $0.01
