February 14, 1996
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 December 31, 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
December 31, 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 December 31, 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 February 9, 1996 there were 8,114,341 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 Sheets. . . . . . . . . . . . . 3
Statements of Operations. . . . . . . . 5
Statements of Cash Flows. . . . . . . . 7
Notes to Financial Statements . . . . . 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . 16
Item 2. Changes in Securities . . . . . . . . . . 16
Item 3. Defaults Upon Senior Securities . . . . . 16
Item 4. Submission of Matters to a Vote of
Security Holders. . . . . . . . . . . . . 16
Item 5. Other Information . . . . . . . . . . . . 17
Item 6. Exhibits and Reports on Form 8-K. . . . . 17
SIGNATURES . . . . . . . . . . . . . . . . . . . . . 18
Exhibit 11 - Computation of earnings per share . . . . . 19
<PAGE>
PART I. - FINANCIAL INFORMATION
THE SOFTWARE DEVELOPER'S COMPANY, INC.
BALANCE SHEETS
(Unaudited)
ASSETS
December 31, March 31,
1995 1995
CURRENT ASSETS:
Cash $ 1,258,061 $ 672,386
Accounts receivable -
trade, net of allowance
for doubtful accounts of
$422,138 and $408,177
at December 31, 1995
and March 31, 1995,
respectively 5,194,734 4,693,978
Inventory 2,350,572 1,695,993
Other current assets 288,324 512,158
TOTAL CURRENT ASSETS 9,091,691 7,574,515
EQUIPMENT AND LEASEHOLD
IMPROVEMENTS, net 431,513 540,971
GOODWILL AND OTHER INTANGIBLES 867,515 967,262
OTHER ASSETS 127,372 88,421
$10,518,091 $9,171,169
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
December 31, March 31,
1995 1995
CURRENT LIABILITIES:
Accounts payable - trade $ 5,092,795 $4,389,118
Line of credit 1,423,470 1,423,470
Other accrued expenses 1,585,116 1,107,592
Accrued income taxes 180,000 ---
TOTAL CURRENT LIABILITIES 8,281,381 6,920,180
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
711,876 shares issued and
outstanding at December 31,
1995 (905,968 issued and
outstanding at March 31, 1995) 7,119 9,060
Common stock, voting, $.01 par value,
25,000,000 authorized shares;
8,100,841 issued and 8,075,740
outstanding at December 31, 1995
(7,321,599 issued and 7,296,498
outstanding at March 31, 1995) 81,008 73,217
Additional paid-in capital 10,011,345 9,949,566
Cumulative translation
adjustment 35,376 22,242
Cumulative deficit (8,114,481) (8,019,439)
2,020,367 2,034,646
Less treasury stock, at cost,
25,101 shares (83,657) (83,657)
TOTAL STOCKHOLDERS' EQUITY 1,936,710 1,950,989
$10,518,091 $9,171,169
The accompanying footnotes are an integral part of the financial
statements.<PAGE>
THE SOFTWARE DEVELOPER'S COMPANY, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
For the THREE months ended
December 31,
Restated
1995 1994
Net Revenues:
Product sales $13,168,701 $10,093,517
Marketing services income 1,184,380 1,330,150
14,353,081 11,423,66
Costs and expenses:
Costs of products sold 10,780,429 8,137,762
Cost of marketing services income 695,168 887,827
Selling, general and administrative
expenses 2,890,472 2,047,986
14,366,069 11,073,575
OPERATING INCOME (LOSS) (12,988) 350,092
Interest expense, net 37,046 54,114
Other (income) expense (9,693) 14,332
Total interest and other expense 27,353 68,446
Income (loss) before income tax (40,341) 281,646
Provision for taxes 36,719 ---
NET INCOME (LOSS) $ (77,060) $ 281,646
NET INCOME (LOSS) PER SHARE $(0.01) $0.03
Weighted average shares outstanding 9,261,000 8,209,000
The accompanying footnotes are an integral part of the financial
statements.<PAGE>
THE SOFTWARE DEVELOPER'S COMPANY, INC.
STATEMENT OF OPERATIONS (Continued)
(UNAUDITED)
For the NINE months ended
December 31,
Restated
1995 1994
Net Revenues:
Product sales $38,517,400 $24,582,722
Marketing services income 3,839,963 3,294,744
42,357,363 27,877,466
Costs and expenses:
Costs of products sold 31,716,097 19,582,703
Cost of marketing services income 2,272,514 1,982,081
Selling, general and administrative
expenses 8,005,634 5,733,641
41,994,245 27,298,425
OPERATING INCOME (LOSS) 363,118 579,041
Interest expense, net 118,850 155,425
Other (income) expense (16,671) 21,367
Total interest and other expense 102,179 176,792
Income before income tax 260,939 402,249
Provision for taxes 98,979 ---
NET INCOME $ 161,960 $ 402,249
NET INCOME PER SHARE $0.02 $0.05
Weighted average shares outstanding 8,791,000 8,206,000
The accompanying footnotes are an integral part of the financial
statements.<PAGE>
THE SOFTWARE DEVELOPER'S COMPANY, INC.
STATEMENT OF CASH FLOWS
(Unaudited)
For the nine months ended
December 31,
Restated
1995 1994
OPERATING ACTIVITIES
Net income from continuing
operations $161,960 $ 402,249
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Sale of advertising
for product (680,375) (865,804)
Depreciation and amortization 342,269 333,657
Provision for doubtful
accounts receivable 516,540 149,625
Provision for inventory
obsolescence 115,000 151,800
Change in assets and liabilities:
(Increase) in accounts
receivable (500,756) (1,399,013)
(Increase) decrease
in inventory (654,579) 846,524
Decrease in other current
assets 223,834 136,878
Increase in accounts payable 703,677 430,100
Increase (decrease) in other
accrued expenses 477,524 154,035
Increase in accrued
income taxes 180,000 ---
Total adjustments $ 723,134 $ (62,198)
Net cash provided by continuing
operating activities 885,094 340,051
Net cash (used for) discontinued
operating activities --- (47,896)
Net cash provided by operating
activities 885,094 292,155
The accompanying footnotes are an integral part of the financial
statements.<PAGE>
THE SOFTWARE DEVELOPER'S COMPANY, INC.
STATEMENT OF CASH FLOWS (Continued)
(Unaudited)
For the nine months ended
December 31,
Restated
1995 1994
INVESTING ACTIVITIES
Capital expenditures for
equipment $ (129,487) $ (156,585)
Net cash used for investing
activities (129,487) (156,585)
FINANCING ACTIVITIES
Principal payments under capital
lease obligations (27,011) (31,605)
Dividend payments (231,000) ---
Issuance of common stock 74,945 5,701
Net cash provided by (used for)
financing activities (183,066) (25,904)
Effect of exchange rate changes
on cash 13,134 23,056
Net increase (decrease) in cash 585,675 132,722
Cash at beginning of period 672,386 550,560
Cash at end of period $1,258,061 $ 683,282
Supplemental disclosures of cash
flow information:
Interest paid $ 137,454 $ 153,213
Income taxes paid $ 13,500 ---
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 - Net income per share is based upon the weighted
average number of common shares outstanding including the
dilutive effects of options and warrants.
Note 3 - 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 4 - 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.
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 nine months of fiscal 1996.
<PAGE>
Note 5 - Interest payments of $9,000 and $27,000 were paid
to a related party for the three-month and nine-month periods
ended December 31, 1995, respectively. Interest was on a
$300,000 note payable which is due December, 1996.
Note 6 - On November 16, 1995, the Company (SDC) acquired
100% of the outstanding capital stock of Internet Security
Corporation (ISC) in exchange for 465,838 shares of the Company's
Common Stock. ISC, a Massachusetts corporation, markets and
distributes certain software products and services under
distribution and reseller agreements with third-party software
companies. A Form 8-K was duly filed with the Securities and
Exchange Commission on November 30, 1995, a Form 8-KA was filed
on January 30, 1996.
The acquisition was accounted for as a "pooling of
interests" transaction and, accordingly, prior financial results
of SDC have been restated to reflect the consolidation of ISC
herewith. Selected financial information for each company,
stated separately, is shown below:
For the three months For the nine months
ended December 31, ended December 31,
1995 1994 1995 1994
Net revenues:
SDC 13,271,815 10,824,650(1) 39,961,517 27,083,260(1)
ISC 1,081,266 599,017 2,395,846 794,206(2)
Net income (loss):
SDC (200,677) 152,130(1) (26,022) 207,905(1)
ISC 123,617 129,516 187,982 194,344(2)
(1) Reflects SDC's restated financial results from 1994
audit adjustments.
(2) Reflects ISC's activity from date of inception (June 15,
1994) through December 31, 1994.
ISC prepares financial statements on a calendar year basis.
Beginning April 1, 1996, ISC will change to a fiscal year end of
March 31 to conform with the Company's fiscal year.
Note 7 - In a prior press release the Company reported
revenues for the quarter ended December 31, 1995 of $13,623,000
and net income of $11,000, which only included ISC's results of
operations from November 17, 1995 through December 31, 1995. The
Company was later advised by its accountants that the Company
should report the full impact of ISC's operating results for the
period. ISC's full results of operations for the periods ended
December 31, 1995 and December 31, 1994 are reflected herein.
Note 8 - SUBSEQUENT EVENT: On February 9, 1996, the
Company decided to cease publication of the "New Media SuperShop"
catalog. The Company booked a $100,000 charge to cover any
possible write down of inventory related to this decision.
Although the Company will attempt to vigorously sell off all of
the remaining inventory related to this catalog, the Company has
fully reserved for the inventory. There were no additional costs
associated with this decision. The impact of transferring
employees assigned to New Media SuperShop into the Company's
general operations will be immaterial.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Private Securities Litigation Reform Act of 1995
contains certain safe harbors regarding forward-looking
statements. In that context, the discussion in this Item 2
contains forward-looking statements which involve certain degrees
of risk and uncertainties, including statements relating to
liquidity and capital resources. Except for the historical
information contained herein, the matters discussed in this
section are such forward-looking statements that involve risks
and uncertainties, including the impact of competitive pricing
within the software industry, the effect any reaction to such
competitive pressures has on current inventory valuations, the
need for and effect of any business restructuring, the presence
of competitors with greater financial resources, product
commercialization risks, capacity and supply constraints or
difficulties and the Company's continuing need for improved
profitability and liquidity. Additional factors which could
affect the Company's financial results are included in the
Company's report on Form 10-K for the period ended March 31,
1995, which was filed with the Securities and Exchange Commission
on July 14, 1995.
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 of 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. Through the newly acquired
Internet Security Corporation (ISC), the Company provides product
integration and consulting support services in the area of
network security to companies doing business on the Internet.
<PAGE>
RESULTS OF OPERATIONS
The following information should be read in conjunction
with the consolidated financial statements and notes thereto:
Three-month period ended
December 31, 1995 vs. % to Net Revenue % Change
December 31, 1994 1995 1994 95 v. 94
Net Revenues:
Product sales 92% 88% 31%
Marketing services 8% 12% (11%)
Combined 100% 100% 26%
Gross Margins:
Product sales 18% 19% 22%
Marketing services 41% 33% 11%
Combined 20% 21% 20%
Selling, general and
administrative expenses 20% 18% 41%
Net income (1%) 3% (127%)
Revenues: Total net revenues for the third quarter ended
December 31, 1995 increased by $2,929,414, or 26%, to $14,353,081
from $11,423,667 for the same period last year.
Net product sales increased by $3,075,184, or 31%, to
$13,168,701 in the third quarter of fiscal 1996 from $10,093,517
in the third quarter of fiscal 1995. The increase in net product
sales was primarily generated by the continued growth in the
Company's corporate sales group, The Programmer's Shop Catalog
and the addition of ISC. The Company's PCT catalog has
experienced a large drop in sales from the same period last year.
Marketing services revenue decreased by $145,770, or, 11%,
to $1,184,380 for the quarter ended December 31, 1995 from
$1,330,150 for the same period last year. This decrease was
primarily due to an overall reduction in new product releases in
the marketplace along with a general rollback of vendor
sponsored advertising.
Gross Margins: Total gross margin increased by $479,406, or 20%,
to $2,877,484 for the quarter ended December 31, 1995 from
$2,398,078 for the same period in 1994.
<PAGE>
Gross margin from product sales increased by $432,517, or
22%, to $2,388,272 in the third quarter of fiscal 1996 from
$1,955,755 for the same period in fiscal 1995. Product gross
margin, as a percent of sales, decreased to 18% for the quarter
ended December 31, 1995 from 19% for the same period last year.
The decline in gross margin percent, despite sales growth, was
the result of continued competition in the marketplace and a
greater number of upgrades being released by software
manufacturers, which resulted in lower selling prices.
Gross margin from marketing services increased by $46,899,
or 11%, to $489,212 for the quarter ended December 31, 1995 from
$442,323 for the same period last year. The increase in gross
margin was mainly due to an increase in advertising related to
auxiliary programs.
Selling, General and Administrative Expenses (SG&A): Selling,
general and administrative expenses increased by $842,486, or
41%, to $2,890,472 in the third quarter of fiscal 1996 from
$2,047,986 in the third quarter of fiscal 1995. SG&A expenses,
as a percent of sales, increased to 20% for the quarter ended
December 31, 1995 from 18% in the same period in 1994. The
increase in expenses reflects additional charges for professional
fees related to the acquisition of ISC and increases in headcount
to support the Company's growth.
Interest Expense: Net interest expense decreased by $17,068 to
$37,046 in the third quarter of fiscal 1996 from $54,114 for the
same period last year. This decrease was due to lower interest
rates in effect on the Company's line of credit and approximately
$7,000 in interest income provided by ISC.
Nine-month period ended
December 31, 1995 vs. % to Net Revenue % Change
December 31, 1994 1995 1994 95 v. 94
Net Revenues:
Product sales 91% 88% 57%
Marketing services 9% 12% 17%
Combined 100% 100% 52%
Gross Margins:
Product sales 18% 20% 36%
Marketing services 41% 40% 19%
Combined 20% 23% 33%
Selling, general and
administrative expenses 19% 21% 40%
Net income * 1% (60%)
* Less than 1%
<PAGE>
Revenues: Total net revenues for the nine months ended December
31, 1995 increased by $14,479,897, or 52%, to $42,357,363 from
$27,877,466 in the nine months ended December 31, 1994.
Net product sales increased by $13,934,678, or 57%, to
$38,517,400 for the first nine months of fiscal 1996 from
$24,582,722 in the comparable period last year. Sales growth was
primarily generated by continued growth in the Company's
corporate sales group, The Programmer's Shop Catalog and the
addition of ISC.
Marketing services revenue increased by $545,219, or 17%,
to $3,839,963 in the first nine months of fiscal 1996 from
$3,294,744 for the same period in fiscal 1995. This increase was
the net result of supplemental marketing and promotional
initiatives in the first six months of fiscal 1996.
The Company has experienced a reduction in the most recently
reported quarter.
Gross Margins: Total gross margin increased by $2,056,070, or
33%, to $8,368,752 in the first nine months of fiscal 1996 from
$6,312,682 for the same period in fiscal 1995.
Gross margin from product sales increased by $1,801,284, or
36%, to $6,801,303 in the nine months ended December 31, 1995
from $5,000,019 for the same period last year. The increase in
gross margin was derived from the acquisition of ISC and the
continued growth in the Company's corporate sales group.
Gross margin from marketing services increased by $254,786,
or 19%, to $1,567,449 in the first nine months of fiscal 1996
from $1,312,663 for the same period in fiscal 1995. This
increase was attributable to the sale of supplemental marketing
and promotional activities.
Selling, General and Administrative Expenses (SG&A): Selling,
general and administrative expenses increased by $2,271,993, or
40%, to $8,005,634 in nine month period ended December 31, 1995
from $5,733,641 for the same period last year. SG&A expenses, as
a percent of sales, decreased to 19% from 21% in the prior year.
The increase in SG&A expenses was the result of additional
charges for professional fees related to the acquisition of ISC
and increases in headcount to support the continued growth of the
Company.
Interest Expense: Net interest expense decreased by $36,575, or
24%, to $118,850 for the nine months ended December 31, 1995 from
$155,425 for the same period last year. This decrease was due to
lower interest rates in effect on the Company's line of credit
with borrowing levels that were comparable to the same period
last year and approximately $14,000 in interest income provided
by ISC.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
(in thousands, except ratios)
Financial Condition as of
December 31, March 31,
1995 1995
Cash and cash equivalents $1,258 $672
Working capital 810 654
Current ratio 1.10 1.09
Cash Flow Activity Summary for
Nine Months Ended
December 31,
1995 1994
Net cash provided by continuing
operating activities $885 $340
Net cash (used for) discontinued
operating activities --- (48)
Net cash (used for) investing
activities (129) (157)
Net cash (used for) financing
activities (183) (26)
The Company's net cash balance increased $585,675 to
$1,258,061 at December 31, 1995 from $672,386 at March 31, 1995.
Cash generated by operating activities of $885,094 was achieved
during the first nine months of fiscal 1996 primarily from
increased credit support from vendors.
Accounts receivable-trade increased $500,756 to $5,194,734
at December 31, 1995 from $4,693,978 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 2.5%. The line was recently renewed on February 9, 1996.
Available borrowings under the line are based on 65% of eligible
accounts receivable. Covenants under the line of credit require
the Company to maintain certain net worth and financial ratios.
The Company was in default of certain financial covenants and has
received a written waiver for the period December 31, 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 have renegotiated the line of credit and the
covenants governing the agreement which have caused past
defaults. The renegotiation resulted in the credit line being
reset to the $2,000,000 limit.
<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 June 30, 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 improved 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
June 30, 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 in June 1995, with respect to
the year ended March 31, 1994.
<PAGE>
The effect on the results of the restatement of the quarter
ended December 31, 1994, prior to the pooling of ISC, is as
follows:
Quarter Ended
December 31, 1994
As Reported As Restated
Net revenues $10,840,929 $10,824,650
SG&A expenses 1,934,596 1,946,877
Net income 180,691 152,130
Net income per share 0.02 0.02
Accounts receivable 3,772,620 3,756,341
Total current assets 6,108,357 6,092,078
Total assets 7,715,660 7,699,381
Other accrued expenses 518,664 530,945
Total current liabilities 4,942,070 4,954,351
Accumulated deficit (7,473,215) (7,501,775)
Total stockholders' equity 2,469,952 2,441,392
Total liabilities and
stockholders' equity 7,715,660 7,699,381
<PAGE>
PART II. - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not currently involved in any material legal
proceedings.
ITEM 2. CHANGES IN SECURITIES
There have been no changes in securities during the
quarter ended December 31, 1995.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
At December 31, 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 December 31, 1995 and has
renegotiated the line of credit as of February 9, 1995. The line
has been reinstated to the $2,000,000 level and will expire in
July 1996.
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.
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.
<PAGE>
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
Not applicable.
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: On November 30, 1995, the
Company filed a Form 8-K relating to the acquisition of Internet
Security Corporation, and a subsequent Form 8-KA filed on
January 30, 1996.
<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: February 14, 1996 THE SOFTWARE DEVELOPER'S
COMPANY, INC.
By: /s/ Barry N. Bycoff
Barry N. Bycoff
President and Chief
Executive Officer
(Principal Executive
Officer)
Date: February 14, 1996 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
December 31,
Restated
1995 1994
Weighted average shares outstanding 8,583 8,202
Net effect of dilutive stock options
and warrants - based on the treasury
stock method using the average
market price 678 7
Total 9,261 8,209
Net income for EPS computation $ (77) $ 282
Net income per share $(0.01) $0.03
Nine months ended
December 31,
Restated
1995 1994
Weighted average shares outstanding 8,300 8,202
Net effect of dilutive stock options
and warrants - based on the treasury
stock method using the average
market price 491 4
Total 8,791 8,206
Net income for EPS computation $ 162 $ 402
Net income per share $ 0.02 $ 0.05
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC Form
10-Q ended December 31, 1995 and is qualified in its entirety by reference to
such financial statements. This schedule should be read in conjunction with
footnotes as they are an integral part of the financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> DEC-31-1995
<CASH> 1,258,061
<SECURITIES> 0
<RECEIVABLES> 5,616,872
<ALLOWANCES> 422,138
<INVENTORY> 2,350,572
<CURRENT-ASSETS> 9,091,691
<PP&E> 2,194,564
<DEPRECIATION> 1,763,051
<TOTAL-ASSETS> 10,518,091
<CURRENT-LIABILITIES> 8,281,381
<BONDS> 0
<COMMON> 81,008
0
7,119
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 10,518,091
<SALES> 14,353,081
<TOTAL-REVENUES> 14,353,081
<CGS> 11,475,597
<TOTAL-COSTS> 14,366,069
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 36,719
<INTEREST-EXPENSE> 37,046
<INCOME-PRETAX> (40,341)
<INCOME-TAX> 0
<INCOME-CONTINUING> (77,060)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (77,060)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
