SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended: September 30, 1996
Commission File Number: 33-38511-FW
CHEQUEMATE INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Utah 76-0279816
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
57 West 200 South, Suite 350; Salt Lake City, Utah 84101
(Address of principal executive offices)
(801) 322-1111
(Issuer's telephone number)
AUTOMATED COMPLIANCE & TRAINING, INC.
(Former Name, former address and former fiscal year,
if changed since last report)
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
State the number of shares outstanding of each of the Issuer's classes of
common equity, as of the latest practicable date: 12,805,953
Transitional Small Business Disclosure Format: YES NO X
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements. PAGE
ACCOUNTANTS' REPORT 3
UNAUDITED CONSOLIDATED BALANCE SHEETS 4
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS 6
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS 7
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS9
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation.
GENERAL INFORMATION 14
LIQUIDITY AND CAPITAL RESOURCES 16
RESULTS OF OPERATIONS 17
PART II - OTHER INFORMATION
ITEM 5. Other Information 17
ITEM 6. Exhibits and Reports on Form 8-K 17
Attached Exhibits 19
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations.
General Information
From its inception, the Company and its wholly owned subsidiaries have
been development stage companies. They have developed a variety of products,
including OSHA/Safety & Health and Sexual Harassment compliance software
programs, as well as individual, small business and family financial service
products.
For the six months ending September 30, 1996 and 1995 AC & T Direct,
a wholly owned subsidiary of Chequemate International, Inc. (the Registrant)
has been marketing compliance software packages addressing the issues of OSHA,
safety and health and sexual harassment. These products have been marketed to
various medical, dental, mortuary and industrial users. The products are also
marketed through trade associations, government agencies and directly to
businesses. AC&T Direct continues to be active in working with federal OSHA,
and other federal agencies to establish the Safety & Health and Sexual
Harassment compliance software as a federal model for safety compliance and
employee training.
The Missouri Funeral Directors Association has approved AC&T Direct's
Safety & Health Plus program as their primary compliance training vehicle.
Also, the United States Postal Service invited AC&T Direct to Washington D.C.
to demonstrate Safety & Health Plus to a special re-engineering team assigned
the task of implementing an improved system of safety compliance and record
keeping. The re-engineering team is continuing its analysis of the Safety &
Health Plus program.
Sales of Safety & Health Plus have been effected by the cutback in the
congressional OSHA budget. These congressional cutbacks have scaled back
OSHA's regulatory level. At the same time, regulatory reform legislation
remains stalled in Congress limiting the effect of OSHA and creating the
perception that OSHA lacks the power to enforce regulatory compliance.
The Registrant feels that when the stalemate in Washington is concluded,
its OSHA compliance software will again be in strong demand. The windows
version of Safety & Health Plus, which continues to be Beta tested, will add
strength to the national marketing of the product.
For the six months ending September 30, 1996 greater emphasis in
marketing and distribution of the Registrant's Family Finance products has
resulted in an eighty-nine percent increase of sales revenue over the previous
six month period ending September 30, 1995. Chequemate Family Success Centers
continue to be a dynamic source of delivering the Family Finance products on a
national basis. During the second quarter, Chequemate Family Success Centers
expanded to 123 with 18 regions.
The Registrant has become a partner with the American Savings
Education Council (ASEC), which consists of members from over 300 major
U.S. Corporations, representatives from the U.S. Department of Labor and the
Department of Treasury, to work with each member of the council in changing
the consumptive spending habits of Americans. The Family Finance products
will be exposed to each corporate member as the vehicle to begin a behavioral
change in spending habits with a broad base of corporate employers nationwide.
Additional national exposure to the Registrant was created during the past
quarter. This exposure was in conjunction with the first annual National
Parents Day Coalition Conference and satellite broadcast from Walt Disney World
in Orlando Florida. The conference was sponsored by the Registrant, the U.S.
Department of Education, The Disney Institute, and Parent Soup. The national
satellite broadcast featured Chequemate International, Inc., Senator Orin
Hatch, U.S. Secretary of Education Richard W. Riley, and the Covey Leadership
Institute. The broadcast was seen live through down link sites in all fifty
states of the U.S., as well as major cable networks. Rebroadcasts of will be
seen over 126 national stations covering an estimated thirty-seven million
households.
The Registrant is finalizing negotiations with several national marketing
organizations to create a partnership of national distribution involving over
two million home based businesses. The implementation of the agreements will
offer the Chequemate Family and Business Finance systems to business
entrepreneurs throughout the U.S.
To capitalize on the recent growth and demand from the corporate sector,
and to be better prepared to take advantage of the national exposure, the
Registrant has created two separate marketing divisions. One division will
focus efforts on marketing and selling through the existing Regional and Center
Manager structure. The other division will concentrate on developing the recent
national exposure to home based businesses and corporate markets. The creation
of the two marketing divisions has allowed the company to expand upon the
national acceptance of the Chequemate family and small business finance
products.
The alliance of Chequemate and Safeguard Business Systems, Inc. will
enhance the relationship with Safeguard's customers by adding our coded
computerized reporting and feed-back system as an addition to the service
Safeguard presently supplies through their One Write Check System." We have
been marketing CashFlow Plus to the clients of the Safeguard Regional Office in
Salt Lake City. We have moved from the pilot stage to a national endorsement
from Safeguard, where Safeguard distributors are assigned to work with our
Regional and Center Directors around the United States in promoting and
marketing the CashFlow Plus small business product. Each Center Director will
work with the Safequard Distributors to introduce CashFlow Plus to the
distributors' client base.
The Registrant and its subsidiary company (AC&T Direct) have faced a
variety of challenges during the fiscal year 1997 in entering products into
separate markets. Although certain synergies are inherent between the
products, the main target markets for each product are distinct. The pilot
programs that have been running since July 1995 have provided valuable
information. The Registrant has been able to use this information from the
pilot centers to strengthen marketing efforts and produce positive trends
in the financial reports of the Registrant.
Liquidity and Capital Resources
The unaudited financial statements, as of September 30, 1996, reflect the
consolidated financial position of the Registrant and its subsidiary entities.
September 30, 1995 totals have also been consolidated. As of September 30,
1996, the Registrant had current assets of $365,245 with current liabilities of
$253,323. This represents positive working capital of $144,259. At September
30, 1995 current assets were $605,670 with current liabilities of $193,254 which
represented working capital of $412,416.
The working capital ratio of current assets to current liabilities as of
September 30, 1996 was 1.44 compared to 3.13 on September 30, 1995. The
reduction in working capital is primarily a timing difference of cash received
in 1995 from the sale of capital stock. The current ratio of 1.44 as of
September 30, 1996 reflects a positive trend when compared to the .75 current
ratio as of fiscal year end March 31, 1996.
At September 30, 1996, long term debt was $156,766 compared to
$467,254 at September 30, 1995, a reduction of $310,488, or 66 percent since
September 30, 1995. This reduction was accomplished by converting certain
shareholder/Director debt to paid in capital and by additional sales of common
stock.
At September 30, 1996, stockholders' equity was $280,176 versus
$350,252 at September 30, 1995. The modest decrease in stockholders' equity
from September 30, 1995 to September 30, 1996 reflects a timing difference of
cash received in 1995 for the sale of capital stock. During fiscal year 1997,
stockholder equity has increased $160,003 from fiscal year ending March 31,
1996.
Current operations of the Registrant are being financed through the
Registrant's sales revenues and the continued sale of restricted common stock.
For the first six months of fiscal year 1997 (ending September 30, 1996), the
Registrant has derived $730,000 from the sale of restricted common stock of the
Registrant. A majority of this stock has been sold to non-U.S. persons
pursuant to the Regulation S ("Reg. S"), promulgated by the SEC. A limited
number of shares have also been sold in Regulation D ("Reg. D") transactions in
the United States. Due to the restricted nature of the Reg. S and Reg. D
stock, the selling price by the Registrant has been discounted from the current
stock price as reflected on the NASD electronic bulletin board.
The 1995 Reg. S offering to limited offshore investors expired December
31, 1995. However, a 1996 Reg. S offshore offering is currently being persued.
Management feels that the 1996 offering will be sufficient to support the
operations of the Registrant through fiscal year 1997. To the knowledge of the
Registrant, none of the shares sold in off shore transactions for 1995 or 1996
have been sold back into the United States.
Results of Operations
Gross revenues for the six month period ending September 30, 1996 were
$318,581 an increase of $149,923 or 89 percent over the $168,658 for the prior
six month period ending September 30, 1995.
Operating losses of $641,290 for the six month period ending September
30, 1996 represent a reduction of $220,353 or 25.5 percent compared to losses of
$861,693 for the previous six month period ending September 30, 1995. The 25
percent reduction in operating losses reflects the positive impact the
Chequemate Family Finance products are having on the operations of the
Registrant.
Part II - Other Information
Item 5. Other Information.
At the regular scheduled Annual Shareholder's Meeting held August 9,
1996 at the Registrant's corporate headquarters in Salt Lake City, Utah, an
Amendment to the Articles of Incorporation of the Registrant to change the name
Automated Compliance & Training, Inc., to Chequemate International, Inc. was
presented for a vote with an affirmative vote of at least a majority needed to
effect the Amendment. The Amendment was passed with an effective date of
September 1, 1996 on the affirmative vote of 9,147,042 shares or 72.2% of
outstanding stock of the Registrant.
Current market analysis and feedback has shown that the Chequemate
System has application in a wide range of market segments ranging from large
corporations to banks and all areas of the financial community. Therefore, the
name change was recommended to capitalize on the potential of the Chequemate
patented system. The new corporate structure will increase market penetration
and enhance market name recognition.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(2) Agreement of Merger and Plan of Reorganization
(3) Ammendment to the Articles of Incorporation
(21) Subsidiaries of the Registrant
AC&T Direct, Inc. : Organized in the State of Utah
Families in Focus, Inc. : Organized in the State of Utah
(b) Reports on Form 8-K -- None
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: November 14, 1996 By:/s/ Lavar Butler
Lavar Butler, President
Dated: November 14, 1996 By:/s/ John Garrett
John Garrett, C.F.O.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS DOCUMENT CONTAINS UNAUDITED FINANCIAL DATA FOR THE SIX MONTH PERIOD ENDING
SEPTEMBER 30, 1996, AND FOR THE SIX MONTH PERIOD ENDING SEPTEMBER 30, 1995.
</LEGEND>
<S> <C> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS YEAR
<FISCAL-YEAR-END> MAR-31-1997 MAR-31-1996 MAR-31-1996
<PERIOD-END> SEP-30-1996 SEP-30-1995 MAR-31-1996
<CASH> 181,424 429,611 30,380
<SECURITIES> 0 0 0
<RECEIVABLES> 61,395 55,104 54,862
<ALLOWANCES> 1,775 2,458 2,457
<INVENTORY> 110,800 120,955 83,881
<CURRENT-ASSETS> 365,245 605,670 184,661
<PP&E> 88,552 99,080 93,533
<DEPRECIATION> (132,054) (104,312) (103,173)
<TOTAL-ASSETS> 690,265 1,010,760 546,403
<CURRENT-LIABILITIES> 253,323 193,254 243,929
<BONDS> 0 0 0
<COMMON> 1,281 1,236 1,267
0 0 0
0 0 0
<OTHER-SE> 6,586,681 4,998,483 5,785,695
<TOTAL-LIABILITY-AND-EQUITY> 690,265 1,010,760 546,403
<SALES> 318,581 168,658 382,137
<TOTAL-REVENUES> 318,581 168,658 382,137
<CGS> 137,553 62,375 167,566
<TOTAL-COSTS> 811,664 950,810 2,031,698
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> (10,454) (16,916) (61,588)
<INCOME-PRETAX> (641,090) (861,443) (1,878,715)
<INCOME-TAX> 200 250 300
<INCOME-CONTINUING> 0 0 0
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (641,290) (861,693) (1,879,015)
<EPS-PRIMARY> (.05) (.07) (.15)
<EPS-DILUTED> 0 0 0
</TABLE>
ARTICLES OF MERGER
OF AUTOMATED COMPLIANCE &
TRAINING, INC.,
HEREAFTER KNOWN AS
CHEQUEMATE INTERNATIONAL, INC.
Pursuant to the provisions of 16-10a-1101 and 16-10a-1105 UCA, known as
the Utah Revised Business Corporation Act, the undersigned domestic
corporations have adopted the following Articles of Merger for the purpose of
merging the corporations to complete a change of the conduct and organization
of the business of Automated Compliance & Training, Inc.
1. The names of the undersigned Utah corporations;
Name of Corporations
Automated Compliance & Training, Inc. ("New Chequemate")
Chequemate International, Inc. ("Chequemate II")
2. The laws of the State of Utah, 16-10a-1101 et. seq., allow this
merger of the two (2) corporations.
3. The name of the surviving corporation is and shall be CHEQUEMATE
INTERNATIONAL, INC., a Utah corporation, and it is to be governed by the laws
of the State of Utah. Chequemate International, Inc. was formerly known as
Automated Compliance & Training, Inc. For purposes of clarification it is
sometimes referred to herein as "New Chequemate".
4. Attached as Exhibit "A" is the Plan of Merger which was approved by
the directors of the undersigned domestic corporations on August 9, 1996 in
the manner prescribed by the laws of the State of Utah in the Utah Code
Annotated 16-10a-1104.
5. Prior to the merger, Chequemate II had issued and outstanding 317,880
shares of common voting stock. No voting group was entitled to vote separately
on the plan of merger. New Chequemate owned and controlled the voting on all
outstanding shares of Chequemate II. The shares of the subsidiary company were
not required to vote on the merger, in accordance with the provisions of UCA
16-10a-1104(3). Prior to the merger, New Chequemate had issued and
outstanding 12,666,053 shares of common voting stock without any voting group
<PAGE>
entitled to vote separately on the plan of merger. The shares of New
Chequemate were not required to vote on the merger, in accordance with the
provisions of UCA 16-10a-1103(7).
6. Immediately prior to the merger, New Chequemate was the parent
corporation to Chequemate II. As a parent corporation, it owned 100% of the
outstanding shares of its subsidiary.
7. The effective date of the merger shall be September 1, 1996. The
effective date complies with the provisions of 16-10a-1104(5) UCA.
Dated this 30th day of November, 1996.
Automated Compliance & Training, Inc.
(New Chequemate)
By /s/ Lavar M. Butler
Its: President
Chequemate International, Inc.
(Chequemate II)
By /s/ Blaine Harris
Its: CEO
<PAGE>
AGREEMENT OF MERGER AND
PLAN OF REORGANIZATION
Between
AUTOMATED COMPLIANCE & TRAINING, INC.
and
CHEQUEMATE INTERNATIONAL, INC., a Utah corporation
This Agreement of Merger and Plan of Reorganization is dated the 30th
day of August, 1996 by and between Automated Compliance & Training, Inc., a
Utah corporation (hereinafter sometimes called the "surviving corporation" or
"New Chequemate"), and Chequemate International, Inc., a Utah corporation
(hereinafter sometimes called the "absorbed corporation" or Chequemate II).
New Chequemate and Chequemate II are referred to collectively herein as the
"constituent corporations."
RECITALS
A. New Chequemate is a corporation duly organized, in good standing
with the Division of Corporations and existing under the laws of the State of
Utah, with its principal executive office located at 57 West 200 South, Suite
350; Salt Lake City, Utah, 84101.
B. New Chequemate has a capitalization of 500,000,000 authorized shares
of common stock, having a par value of $0.0001 per share, of which 12,666,053
shares are issued and outstanding.
C. Chequemate II is a corporation duly organized, in good standing with
the Division of Corporations and existing under the laws of the State of Utah,
with its principal executive office located at 57 West 200 South, Suite 350;
Salt Lake City, Utah, 84101.
D. Chequemate II has a capitalization of 500,000 authorized shares of
common stock, having a par value of $1.00 per share, of which 317,880 shares
are issued and outstanding. New Chequemate owns all outstanding shares of
Chequemate II.
E. The boards of directors of the constituent corporations deem it
desirable and in the best interests of the constituent corporations that
Chequemate II be merged into New Chequemate, in accordance with the provisions
of Section 16-10a-1101 and Section 16-10a-1104 UCA, in order that the
transaction qualify as a "reorganization" within the meaning of Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended.
<PAGE>
SECTION ONE
MERGER
In consideration of the mutual covenants, and subject to the terms and
conditions hereinafter set forth, the constituent corporations agree that
Chequemate II shall merge with and into New Chequemate, and New Chequemate
shall be the surviving corporation. New Chequemate shall exchange one share
of common stock of New Chequemate for each share of common stock of Chequemate
II. The newly issued shares of New Chequemate shall be held as treasury shares
of New Chequemate.
SECTION TWO
TERMS AND CONDITIONS
On the effective date of the merger, the separate existence of the
absorbed corporation shall cease, and the surviving corporation shall
succeed to all the contracts, rights, privileges, immunities, and franchises,
and all the property, real, personal and mixed, of the absorbed corporation,
without the necessity for any separate transfer. The surviving corporation
shall thereafter be responsible and liable for all liabilities and obligations
of the absorbed corporation, and neither the rights of creditors nor any liens
on the property of the absorbed corporation shall be impaired by the merger.
SECTION THREE
ARTICLES OF INCORPORATION
The articles of incorporation of the surviving corporation shall continue
to be its articles of incorporation following the effective date of the merger.
SECTION FOUR
BYLAWS
The bylaws of the surviving corporation shall continue to be its bylaws
following the effective date of the merger.
SECTION FIVE
NO APPROVAL OF SHAREHOLDERS
Pursuant to UCA 16-10a-1103(7) and 16-10a-1104(3), shareholder approval
of neither of the constituent corporations is required.
<PAGE>
SECTION SIX
EFFECTIVE DATE
The effective date of this merger shall be the 1st day of September, 1996.
SECTION SEVEN
ABANDONMENT OF MERGER
This agreement of merger may be abandoned by action of the board of
directors of either the surviving or the absorbed corporation at any time
prior to the effective date.
SECTION EIGHT
COMPLIANCE WITH UNITED STATES SECURITIES LAWS
It is the belief and intention of the parties that the exchange of New
Chequemate shares for Chequemate II shares will be exempt from registration
under the Securities Act of 1933, by virtue of Section 4(2) thereof, and
under the Utah Uniform Securities Act, by virtue of Section 61-1-14(2)(n)
thereof.
SECTION NINE
EXECUTION OF AGREEMENT
This agreement of merger may be executed in any number of counterparts,
and each such counterpart shall constitute an original instrument.
Executed on behalf of the parties by their officers, respectively,
pursuant to the authorization of their respective boards of directors on the
date first written above.
Automated Comliance & Training, Inc.
(New Chequemate)
By /s/ Lavar M. Butler
Its: President
Chequemate International, Inc.
(Chequemate II)
By /s/ Blaine Harris
Its: President
ArtMrg2.491
AMENDED ARTICLES OF INCORPORATION
OF
AUTOMATED COMPLIANCE & TRAINING, INC.
(HEREAFTER KNOWN AS)
CHEQUEMATE INTERNATIONAL, INC.
The undersigned person, acting as agent for Automated Compliance &
Training, Inc., under the direction of the Board of Directors, and after
shareholder vote on the proposed Amendment to the Articles of Incorporation
of Automated Compliance & Training, Inc. under the provisions of the Revised
Utah Business Corporation Act, adopts the following amendment to the Articles
of Incorporation:
Article I
The name of this corporation shall be Chequemate International, Inc.
(the "Corporation").
This amendment was adopted on the 9th day of August, 1996. The
effective date of this amendment shall be the 1st day of September, 1996. The
date of adoption complies with the provisions of UCA 16-10a-1006. The Amended
Articles of Incorporation were adopted by the Board of Directors of Automated
Compliance & Training, Inc. At the time of the meeting of the shareholders
when this amendment was adopted there were 12,666,053 total shares of common
stock outstanding. Of the shares represented at the shareholders' meeting,
shareholders cast 9,147,042 votes in favor of the amendment and 51,500 votes
against the amendment, and 11,428 shares abstained from voting on the
amendment. The voting of the shareholders in favor of the amendment complies
with UCA 16-10a-1006(6).
DATED this 30th day of August, 1996.
Automated Compliance & Training, Inc.
By /s/ Lavar M. Butler
Its President
ArtAmnd.491
