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: December 31, 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: 12,971,773
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 STATEMENTS 9
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation.
GENERAL INFORMATION 12
LIQUIDITY AND CAPITAL RESOURCES 13
RESULTS OF OPERATIONS 14
PART II - OTHER INFORMATION
ITEM 5. Other Information 14
ITEM 6. Exhibits and Reports on Form 8-K 17
<PAGE>
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 nine months ending December 31, 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 work 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 nine months ending December 31, 1996 greater emphasis in
marketing and distribution of the Registrant's Family Finance products has
resulted in an one hundred thirty (130%) percent increase of sales revenue
over the previous nine month period ending December 31, 1995. Chequemate
Family Success Centers continue to be a dynamic source of delivering the
Family Finance products on a national basis.
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.
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. has
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. Through
the use of pilot programs, the Registrant has been able to learn valuable
information 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 December 31, 1996, reflect
the consolidated financial position of the Registrant and its subsidiary
entities. December 31, 1995 totals have also been consolidated. As of
December 31, 1996, the Registrant had current assets of $661,755 with
current liabilities of $282,171. This represents positive working capital of
$379,584. At December 31, 1995 current assets were $234,574 with current
liabilities of $269,869 which represented negative working capital of $35,295.
The working capital ratio of current assets to current liabilities as of
December 31, 1996 was 2.35 compared to .87 on December 31, 1995. The increase
in working capital is primarily due to the receipt of cash from the sale of
capital stock. Additionally, an increase in sales figures has had a positive
effect. The current ratio of 2.35 as of December 31, 1996 reflects
a positive trend when compared to the .75 current ratio as of fiscal year end
March 31, 1996.
At December 31, 1996, long term debt was $148,994 compared to $432,418
at December 31, 1995, a reduction of $283,424 or 66 percent since
December 31, 1995. This reduction was accomplished by converting certain
shareholder/Director debt to paid in capital and by additional sales of
common stock.
At December 31, 1996, stockholders' equity was $588,602 versus $(78,971)
at December 31, 1995. The substantial increase in stockholders' equity from
December 31, 1995 to December 31, 1996 reflects cash received in 1996 from
the sale of capital stock. During fiscal year 1997, stockholder equity has
increased $468,429 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 nine months of fiscal year 1997 (ending December 31, 1996), the
Registrant has derived $1,375,350 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 nine month period ending December 31, 1996 were
$551,942 an increase of $311,721 or 130 percent over the $240,221 for the
prior nine month period ending December 30, 1995.
Operating losses of $976,706 for the nine month period ending
December 31, 1996 represent a reduction of $444,210 or 31.3 percent compared
to losses of $1,420,916 for the previous nine month period ending
December 31, 1995. The 31 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.
Sales of Equity Securities Pursuant to Regulation S.
The following table shows sales of securities of the Registrant sold in
the last three years pursuant to Regulation S. The sales transactions were
generally completed pursuant to written subscription agreements. The
subscription agreements were executed in reliance upon the transaction
exemption afforded by Regulation S. The facts relied upon to satisfy the
exemption were as follows:
(a) The Regulation S stock purchasers (the "Purchasers") were not U.S.
persons as that term is defined under Regulation S.
(b) At the time the buy order was originated, Purchasers were outside
the U.S. and were outside the U.S. as of the date of the execution and
delivery of the subscription agreements.
(c) Purchasers purchased the shares for their own accounts and not on
behalf of any U.S. person; the sales had not been pre-arranged with a
purchaser in the U.S.; and all offers and resales of the securities were
only made in compliance with the provisions of Regulation S.
(d) The Purchasers were not entities organized under foreign law by a
U.S.person, as defined in Regulation S Rule 902(o), for the purpose of
investing in unregistered securities, unless the Purchasers were
organized and owned by accredited investors, as defined in Regulation D,
Rule 501(a), who are not natural persons, estates or trusts.
(e) The transactions were not purchases pursuant to a fiduciary account
where a U.S. person, as defined in Regulation S Rule 902(o), had
discretion to make investment decisions for the account.
(f) To the knowledge of the Registrant, all offers and sales of the
Regulation S shares by Purchasers prior to the expiration of a 40-day
restricted period were only to be made in compliance with the safe
harbor contained in Regulation S, pursuant to registration of securities
under the 1933 Act, or pursuant to an exemption from registration.
All offers and sales after the expiration of the restricted period were
to be made only pursuant to such a registration or to such exemption
from registration. The restricted period referred to herein began on
the closing of the offering or upon the completion of the distribution
of the offering, as announced by the Registrant to all purchasers under
the offering.
(g) All offering documents received by Purchasers included statements
to the effect that the shares had not been registered under the 1933
Act and may not be offered or sold in the United States or to U.S.
persons unless the shares are registered under the Securities Act of
1933 or an exemption from the registration requirements was available.
(h) The Purchasers acknowledged that the purchase of the shares
involved a high degree of risk and further acknowledged that they could
bear the economic risk of the purchase of the shares, including the
total loss of their investment.
(I) The Purchasers understood that the shares were being offered and
sold to them in reliance on specific exemptions from the registration
requirements of United States Federal and State securities laws and
that the Registrant was relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and
understandings of the Purchasers set forth in the subscription agreements
in order to determine the applicability of such exemptions and the
suitability of the Purchasers to acquire shares.
Date of Sale
Title of
Security
Amount of
Securities
Offering
Price
Nov-07-1994
Common Stock
40,000
$2.50
Nov-22-1994
Common Stock
20,000
$2.50
Dec-1-1994
Common Stock
40,000
$2.50
Dec-21-1994
Common Stock
40,000
$2.50
Dec-21-1994
Common Stock
20,000
$2.50
Jan-06-1995
Common Stock
60,000
$2.50
Feb-02-1995
Common Stock
54,545
$2.75
Mar-02-1995
Common Stock
60,000
$2.5
Apr-04-1995
Common Stock
44,444
$3.375
May-11-1995
Common Stock
42,857
$3.50
Jun-06-1995
Common Stock
41,379
$3.625
Jun-29-1995
Common Stock
41,379
$3.625
Aug-10-1995
Common Stock
110,345
$3.625
Sep-06-1995
Common Stock
160,000
$3.75
Dec-28-1995
Common Stock
28,571
$3.50
Jan-16-1996
Common Stock
14,285
$3.50
Jan-30-1996
Common Stock
29,070
$3.44
Feb-23-1996
Common Stock
27,548
$3.63
Mar-12-1996
Common Stock
27,548
$3.63
Apr-02-1996
Common Stock
27,548
$3.63
May-01-1996
Common Stock
41,322
$3.63
May-31-1996
Common Stock
28,571
$3.50
Jul-01-1996
Common Stock
28,571
$3.50
Aug-01-1996
Common Stock
29,630
$3.38
Aug-08-1996
Common Stock
20,000
2,500
17,500
$3.25
$3.25
$3.25
Sep-04-96
Common Stock
29,091
$3.44
Oct-02-96
Common Stock
28,571
$3.50
Nov-13-1996
Common Stock
29,586
$3.38
Nov-26-1996
Common Stock
57,692
$3.38
Nov-29-1996
Common Stock
73,964
$3.38
P.T. Dolok Permai and Oxford International Asset Management, Inc.
purchased substantial portions of the Regulation S stock for their own
account. Such entities may have acted as underwriters with regard to other
portions of the Regulation S shares which were sold as reflected in the
foregoing table.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(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
<PAGE>
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: February 14, 1996 By: /s/ Lavar Butler
Lavar Butler, President
Dated: February 14, 1996 By: /s/ John Garrett
John Garrett, C.F.O.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS YEAR
<FISCAL-YEAR-END> MAR-31-1997 MAR-31-1996 MAR-31-1996
<PERIOD-END> DEC-31-1996 DEC-31-1995 MAR-31-1996
<CASH> 440,627 74,282 30,380
<SECURITIES> 0 0 0
<RECEIVABLES> 54,982 46,660 54,862
<ALLOWANCES> 1,775 2,456 2,457
<INVENTORY> 162,821 100,138 83,881
<CURRENT-ASSETS> 661,755 234,574 184,661
<PP&E> 111,949 97,172 93,533
<DEPRECIATION> 0 0 (103,173)
<TOTAL-ASSETS> 1,019,767 623,316 546,403
<CURRENT-LIABILITIES> 282,171 269,869 243,929
<BONDS> 0 0 0
<COMMON> 1,297 1,248 1,267
0 0 0
0 0 0
<OTHER-SE> 7,232,014 5,128,471 5,785,695
<TOTAL-LIABILITY-AND-EQUITY> 1,019,767 623,316 546,403
<SALES> 551,942 240,221 382,137
<TOTAL-REVENUES> 551,942 240,221 382,137
<CGS> 219,072 99,998 167,566
<TOTAL-COSTS> 1,296,335 1,529,919 2,031,698
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> (12,941) (30,970) (61,588)
<INCOME-PRETAX> (976,706) (1,420,916) (1,879,015)
<INCOME-TAX> 300 250 300
<INCOME-CONTINUING> 0 0 0
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (976,706) (1,420,916) (1,879,015)
<EPS-PRIMARY> (.08) (.11) (.15)
<EPS-DILUTED> 0 0 0
</TABLE>
