SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
------------------------------
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from --------------------------------
Commission file number 1-11784
The Netplex Group, Inc.
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(Exact name of small business issuer as specified in its charter)
NEW YORK 11-2824578
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
8260 Greensboro Drive, 5th Floor, McLean, Virginia 22102
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(Address of Principal executive officers)
(703) 356-3001
---------------------------
(Issuer's telephone number)
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(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: As of August 11, 1997, there were
6,577,870 shares of Class A common stock, $.001 par value outstanding.
<PAGE>
THE NETPLEX GROUP, INC. AND SUBSIDIARIES
Part I Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - June 30, 1997
and December 31, 1996 . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Operations - Three
and Six Months ended June 30, 1997 and June 30, 1996 . . 4
Condensed Consolidated Statements of Cash Flows - Six Months
ended June 30, 1997 and June 30, 1996 . . . . . . . . . 5
Notes to Condensed Consolidated Financial Statements . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . 9
Part II Other Information
Item 1-6 Other Information . . . . . . . . . . . . . . . . 13
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(2)
<PAGE>
Part I. Financial Information
THE NETPLEX GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
June 30, 1997 and December 31, 1996
Assets
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
(Unaudited) (Audited)
----------- -----------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,292,258 $ 3,691,099
Accounts receivable, net 4,076,878 4,304,662
Prepaids and other current assets 403,496 350,074
----------- -----------
Total current assets 5,772,633 8,345,835
Property and equipment, net 1,038,615 1,090,617
Other assets 89,673 78,988
----------- -----------
Goodwill, net 359,854 373,180
Total assets $ 7,260,775 $ 9,888,620
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 1,098,574 $ 936,865
Accrued expenses 4,212,649 5,166,184
Deferred revenues 57,605 329,267
----------- -----------
Total current liabilities 5,368,828 6,432,316
Other liabilities 214,858 217,016
----------- -----------
Total Liabilities 5,583,685 6,649,332
----------- -----------
Stockholders' equity:
Class A cumulative preferred stock;
$.01 par value; 2,000,000 authorized,
1,650,000 shares outstanding in 1997
and 1,750,000 shares in 1996 16,500 17,500
Common stock $.001 par value
20,000,000 authorized, 6,577,870 shares
outstanding in 1997 and 6,442,903 shares
in 1996 6,578 6,443
Additional paid in capital 5,247,408 5,301,542
Accumulated deficit (3,593,397) (2,086,197)
----------- -----------
Commitments and contingencies
Total stockholders' equity 1,677,089 3,239,288
----------- -----------
Total liabilities and stockholders' equity $ 7,260,775 $ 9,888,620
=========== ===========
</TABLE>
see accompanying notes to the condensed consolidated financial statements
(3)
<PAGE>
THE NETPLEX GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------- -------------------------------
------------ ------------ ------------ ------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 9,930,589 $ 7,610,475 $ 19,708,901 $ 15,786,296
Cost of revenues 8,966,499 6,628,210 17,810,553 13,930,125
------------ ------------ ------------ ------------
Gross profit 964,090 982,265 1,898,348 1,856,171
Selling, general and administrative expenses 1,736,624 1,570,776 3,444,953 2,701,276
------------ ------------ ------------ ------------
Operating loss (772,534) (588,511) (1,546,605) (845,105)
Other income (expense) 31,185 (3,694) 39,405 (2,747)
------------ ------------ ------------ ------------
Loss before income taxes (741,349) (592,205) (1,507,200) (847,852)
Provision for income taxes -- -- -- --
------------ ------------ ------------ ------------
Net loss $ (741,349) $ (592,205) $ (1,507,200) $ (847,852)
============ ============ ============ ============
Earnings (loss) per common share $ (0.13) $ (0.15) $ (0.26) $ (0.23)
============ ============ ============ ============
</TABLE>
see accompanying notes to the condensed consolidated financial statements
(4)
<PAGE>
The Netplex Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------------------
1997 1996
----------- -----------
<S> <C> <C>
Operating activities:
Net loss $(1,507,200) $ (847,852)
Adjustments to reconcile net loss to net cash
(used in)/provided by operating activities
Depreciation and amortization 127,625 105,479
Provision for doubtful accounts -- 15,600
Change in assets and liabilities:
Accounts receivable 227,784 348,879
Prepaid expenses and other assets (64,104) 656,036
Accounts payable and accrued expenses (738,291) (86,344)
Deferred revenue (271,662) (405,067)
----------- -----------
Net cash used in operating activities (2,225,849) (213,269)
----------- -----------
Investing activities:
Purchases of property and equipment (62,298) (116,748)
----------- -----------
Net cash used in investing activities (62,298) (116,748)
----------- -----------
Financing activities:
Proceeds from the exercise of stock options 70,000 --
Payment of dividends on Class A preferred stock (180,695) --
Principal payments on capital lease obligations -- (2,662)
Cash acquired in merger -- 1,245,062
Proceeds from borrowing under line of credit -- 300,000
Payments on notes receivable -- 65,579
Repayments on notes receivable from officer -- (10,000)
----------- -----------
Net cash used in (provided by) financing activities (110,695) 1,597,979
----------- -----------
Decrease in cash and cash equivalents (2,398,841) 1,267,962
Cash and equivalents at beginning of period 3,691,099 840,711
----------- -----------
Cash and equivalents at end of period $ 1,292,258 $ 2,108,673
=========== ===========
Supplemental information:
Cash paid during the period for:
Interest $ 4,612 $ 6,700
=========== ===========
Income taxes $ -- $ --
=========== ===========
</TABLE>
see accompanying notes to the condensed consolidated financial statements
(5)
<PAGE>
THE NETPLEX GROUP, INC. AND SUBIDIARIES
Notes to the Condensed Consolidated Financial Statements
June 30, 1997
(1) GENERAL:
The accompanying unaudited condensed consolidated financial statements of
The Netplex Group, Inc. and Subsidiaries ( "Netplex" or the "Company")
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, certain
information and note disclosures normally included in the financial
statements presented in accordance with generally accepted accounting
principles have been condensed or omitted. The Company believes the
disclosures made are adequate to make the information presented consistent
with past practices. However, these condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's annual report on
Form 10-KSB for the fiscal year ended December 31, 1996.
In the opinion of the Company, the accompanying condensed consolidated
financial statements reflect all adjustments and reclassifications (which
include only normal recurring adjustments) necessary to present fairly the
financial position of the Company as of June 30, 1997 and December 31,
1996 and the results of its operations and its cash flows for the three
and six months ended June 30, 1997 and 1996. Interim results are not
necessarily indicative of the results that may be expected for the fiscal
year ended December 31, 1997.
BUSINESS:
Netplex provides professional technical services that help organizations
build, manage and protect networked information systems with the following
Network Enabling Services: Virtual Network Integration, Network Systems
Management, Support Center Management, Contingency Planning, Information
Security and Staff Augmentation. By providing the expertise and
information systems to link employees, customers, prospects, suppliers and
manufacturers, Netplex helps customers "network-enable" their
organization.
Prior to the merger discussed in further detail in note 2 below, the
Company was in the computer software development and distribution
business. The Company ceased all software development and distribution
activities with the sale of the WorldLink product technology in December
1996.
BASIS OF PRESENTATION:
The accompanying financial statements include the accounts of Netplex
Systems, Inc. (formerly The Netplex Group, Inc.) America's Work Exchange,
Inc. and its wholly owned subsidiary Software Resources of New Jersey,
Inc. for the three and six months ended June 30, 1997 and 1996. The
accounts of The Netplex Group, Inc. (formerly CompLink, Ltd.) are included
for the three and six months ended June 30, 1997 and for the month of June
1996, as the merger (discussed in note 2 below) was completed on May 31,
1996. The accounts of Technology Development Systems, Inc. (TDS) are also
included for the month of June 1996 due to the merger. The operations of
TDS were discontinued in December 1996 with the completion of the sale of
the WorldLink product technology.
EARNINGS (LOSS) PER SHARE:
Earnings (loss) per share is computed on the basis of the weighted average
number of common shares outstanding plus the effect of outstanding options
and warrants, using the treasury stock method. The effect of average
common stock equivalents (stock options and warrants) outstanding during
the period has not been considered, as their effect on the computation is
not dilutive.
(6)
<PAGE>
Weighted average common shares outstanding for the three months ended June
30, 1997 and 1996 were 6,577,870 and 4,019,037, respectively and were
6,157,750 and 3,608,322 for the six months ended June 30, 1997 and 1996,
respectively.
(2) THE MERGER:
On June 7, 1996 the Company (formerly known as "CompLink") acquired and
merged with The Netplex Group, Inc. and America's Work Exchange
(collectively referred to as "Netplex") in a reverse merger transaction by
issuing approximately 3,245,000 shares of its common stock or 50.4% of the
outstanding stock after giving effect for the merger. CompLink also issued
options to purchase 1,691,000 shares of its common stock in exchange for
outstanding options to purchase Netplex common stock.
The merger was accounted for under the purchase method of accounting as a
reverse merger, since the shareholders of Netplex, which had common
control, received the larger portion of the voting rights of the combined
entity. As a result Netplex was deemed the acquirer for accounting
purposes.
The mergers resulted in a recapitalization of the Company, so that the
resulting capitalization of the Company after the merger is that of
CompLink's giving effect to the issuance of new shares and elimination of
CompLink's deficit. In addition, the par value of the Company's common
stock was decreased from $0.01 per share to $0.001 per share.
Prior to the merger the Company's fiscal year end was changed from July 31
to December 31. Coincident with the merger, the Company's name was changed
from CompLink, Ltd. to The Netplex Group, Inc. The entity known as The
Netplex Group, Inc. prior to the merger, changed its name to Netplex
Systems, Inc.
(3) LINE OF CREDIT:
The Company entered into a new line of credit facility with a bank on July
2, 1997. This line of credit facility provides for advances of up to 80%
of eligible accounts receivable (as defined in the agreement) up to
$2,000,000. Amounts outstanding on the line of credit facility bear
interest at the bank's prime rate plus 0.75%. The line of credit facility
expires on July 1, 1998.
The new line of credit facility replaced the line of credit facility with
a bank that expired on July 1, 1997, which allowed for advances of up to
75% of eligible accounts receivable (as defined in the agreement) up to
$750,000 and was personally guaranteed by the Chief Executive Officer of
the Company. Amounts outstanding under the line of credit facility were
charged interest at the bank's prime rate plus 1.0%.
The Company had no outstanding borrowings under its line of credit
facilities as of June 30, 1997 or December 31, 1996.
(4) CLASS A CUMULATIVE PREFERRED STOCK:
0n September 19, 1996, the Company raised approximately $3,000,000 through
the completion of a private placement offering of units of equity
securities. Each unit of equity securities consisted of one share of $.01
par value class A convertible preferred stock (the "preferred stock") and
one common stock warrant to purchase one share of the Company's $0.001 par
value common stock at an exercise price of $2.50.
Each share of preferred stock is convertible into one share of common
stock at any time, at the discretion of the holder. The preferred stock
earns cumulative dividends at 10% per annum, payable on a quarterly basis
in either cash or additional shares of preferred stock at the Company's
option.
Subject to the conversion rights, the Company may redeem the preferred
stock at its stated value plus all accrued and unpaid dividends upon: (1)
registration of the shares underlying the preferred stock,
(7)
<PAGE>
and (2) 30 days written notice given at any time upon attaining certain
per share trading prices and sustaining such prices for a specified
period. The preferred stock has a per share liquidation preference of the
greater of: (i) two times the par value plus any accrued and unpaid
dividends, or (ii) the amount that would have been received if such shares
were converted to common stock on the business day immediately prior to
liquidation.
The common stock warrants are presently exercisable until September 19,
2001. The Company has the right to call the warrants at a redemption price
of $.01 per share upon: (1) registration of the shares underlying the
warrant (2) 30 days written notice given at any time upon attaining
certain per share trading prices and sustaining such prices for a
specified period.
The registration of the shares underlying the conversion of the Class A
Preferred Stock to common stock and the exercise of the underlying common
stock warrants was completed in November 1996.
As of June 30, 1997, preferred shareholders have converted 100,000 shares
of the Class A preferred stock into common stock. No holders of the
Company's preferred stock have exercised their warrants. The Company
declared cash dividends payable to the holders of record of its preferred
stock on January 15 and April 15 of $.056 per share and $0.05 per share,
respectively. The Company had accrued dividends payable of approximately
$98,000 and $82,500 at December 31, 1996 and June 30, 1997, respectively.
(4) RECENT ACCOUNTING PRONOUNCEMENTS:
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No.128, "Earnings per
Share", which is effective for all interim and annual periods ending after
December 15, 1997. This statement replaces "primary" and "fully-diluted"
earnings per share (EPS) with "basic" and "diluted" EPS on the face of the
statement of operations. The Company does not expect the adoption of SFAS
No. 128 to have a material effect on its financial position or results of
operations.
In February 1997, FASB issued SFAS No. 129, "Disclosure of Information
about Capital Structure" which is effective for the year ending December
31, 1998. This statement continues the previous requirements to disclose
certain information about an entity's capital structure found in
Accounting Principles Board (APB) Opinion No. 10, "Omnibus Opinion -1966"
and No. 15, "Earnings per Share" and FASB Statement No. 47, "Disclosure of
Long-Term Obligations." The Company has been subject to the requirements
of those standards and as a result does not expect the adoption of SFAS
No. 129 to have a material impact on the Company's financial statements.
In June 1997, FASB issued SFAS No. 130 "Reporting Comprehensive Income",
which is effective for the year ending December 31, 1998. This statement
establishes standards for the reporting and display of comprehensive
income and its components in the financial statements. Earlier application
of this standard is permitted; however, upon adoption the Company will be
required to reclassify previously reported annual and interim financial
statements. The Company believes that the disclosure of comprehensive
income in accordance with the provisions of SFAS No. 130 will impact the
manner of presentation of its financial statements as currently and
previously reported.
In June 1997, FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information", which is effective for the year
ending December 31, 1998. This statement requires companies to present
certain information about operating segments and related information,
including geographic and major customer data, in its annual financial
statements and in condensed financial statements for interim periods. The
Company does not believe that the adoption of SFAS No. 131 will have a
material impact on its financial statements.
(8)
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The Netplex Group, Inc. (the "Company") provides professional technical services
that help organizations build, manage and protect networked information systems.
The Company provides the expertise and information systems to link employees,
customers, prospects, suppliers and manufacturers to help "network-enable"
organizations. Netplex provides the following network enabling services: Virtual
Network Integration, Network Systems Management, Support Center Management,
Contingency Planning, Information Security and Staff Augmentation. Occasionally,
the Company must re-sell technology products in order to deliver customers fully
integrated system-solutions as part of its service offerings.
The Company is headquartered in McLean, Virginia and has branch offices in the
New York City, Central New Jersey, and Chicago metropolitan markets.
In June 1996, the Company (formerly known as CompLink, Ltd.) acquired and merged
(the "Merger") with America's Work Exchange, its wholly owned subsidiary
Software Resources of New Jersey, and The Netplex Group, Inc. (collectively
referred to as "Netplex") in a reverse merger transaction by issuing
approximately 3,245,000 shares of Common Stock, or 50.4% of the Company's then
outstanding Common Stock after giving effect for the Merger. The Merger
agreement provided for the Company to issue options to purchase 1,691,000 shares
of the Company's Common Stock in exchange for options to purchase 1,691,000
shares of Netplex's Common Stock. As a result, Netplex was considered the
acquirer for accounting purposes.
The assets and liabilities of CompLink and its wholly owned subsidiary,
Technology Development Systems (TDS) were recorded by the Company at merger date
at book value which approximated fair value. At Merger, CompLink's operations
consisted primarily of the distribution of WorldLink remote and mobile workforce
automation software developed by TDS.
In December 1996, the Company completed the sale of its interest in the
WorldLink product technology and discontinued the operations of TDS. Since the
completion of the sale, the Company's operations have been concentrated on
providing technical services to users of networked information systems.
RESULTS OF OPERATIONS
The Company operates in a single business segment as a provider of Information
Technology Services. These services are delivered to customers in several
formats ranging from fixed-price projects to consulting engagements to staff
augmentation assignments (which include an array of independent employee
services). The Company occasionally resells technology products in conjunction
with the delivery of services it provides.
THREE MONTHS ENDED JUNE 30, 1997 AND JUNE 30, 1996
Revenues for the three months ended June 30, 1997 were approximately $9,930,000
compared to approximately $7,610,000 for the same period in 1996, an increase of
$2,320,000 or 30%. The increase is primarily the net result of increased sales
of staff augmentation services of approximately $2,840,000, offset by, decreased
product resales of approximately $243,000 and the elimination of WorldLink
software license revenues of $121,000 resulting from the Company's sale of the
WorldLink product in December 1996.
Gross Profit decreased by approximately $18,000 to approximately $964,000 for
the three months ended June 30, 1997 as compared to approximately $982,000 for
the same period in 1996. The decreased gross profit is primarily due to the
elimination the WorldLink software license revenues which decreased gross profit
by $45,000.
(9)
<PAGE>
Gross Margin decreased to 10% in the three months ended June 30, 1997 from 13%
for the comparable period in 1996. This decrease results primarily from the
increase in independent employee service revenues which generate lower margins
than other staff augmentation services provided by the as well as the
elimination of the WorldLink software license revenue as discussed above.
Selling, general and administrative expense increased approximately $166,000 to
approximately $1,737,000 during the three months ended June 30, 1997 from
approximately $1,571,000 for the three months ended June 30, 1996. The primary
reason for the increase in selling, general and administrative expenses is the
additional marketing support, expansion of the sales and recruiting forces,
additional information systems capacity and corporate support that occurred
after the Merger. Selling, general and administrative expenses for the quarter
ended June 30, 1996 included the post-merger operating expenses of TDS and the
associated development costs for the WorldLink software which totaled
approximately $300,000 for the period. In addition, selling, general and
administrative expenses for the three months ended June 30, 1997 was favorably
impacted by the reversal of approximately $400,000 in accruals for costs
associated with the sale of the WorldLink software.
Operating losses were approximately $773,000 for the quarter ended June 30,
1997, compared to $589,000 for the same period of the prior year, an increased
loss of $184,000. The components of this increased loss are discussed above.
Other income(expense) increased approximately $35,000 to approximately $31,000
for the quarter ended June 30, 1997 from $4,000 of other expense in the
comparable 1996 period. This increase is primarily due to interest earned on the
Company's cash balances obtained primarily from the sale of WorldLink and the
Company's private placement transaction.
No provisions for income taxes were required for the three months ended June 30,
1997 and 1996, due to the net loss for the period then ended.
SIX MONTHS ENDED JUNE 30, 1997 AND JUNE 30, 1996
Revenues for the six months ended June 30, 1997 were approximately $19,709,000
compared to approximately $15,786,000 for the same period in 1996, an increase
of $3,922,000 or 25%. The increase is the result of increased services revenues
of approximately $4,768,000 offset by decreased product resales of approximately
$725,000 and the elimination of $121,000 of WorldLink software license revenues.
Gross Profit increased $42,000 to approximately $1,898,000 for the six months
ended June 30, 1997 as compared to approximately $1,856,000 for the same period
in 1996. The increased gross profit is primarily the result of increased sales
of staff augmentation services offset in part by decreased product resales and
WorldLink software license revenues.
Gross Margin decreased to 10% in the six months ended June 30, 1997 from 12% for
the comparable period in 1996. This decrease results primarily from the increase
in independent employee service revenues which generate lower margins than other
staff augmentation services provided by the Company as well as the elimination
of the WorldLink software license revenue as discussed above.
Selling, general and administrative expense increased by approximately $744,000
to approximately $3,445,000 during the six months ended June 30, 1997 from
approximately $2,701,000 for the six months ended June 30, 1996. The primary
reason for the increase in selling, general and administrative expenses is the
additional marketing support, expansion of the sales and recruiting forces,
additional information systems capacity and corporate support that occurred
after the Merger. Selling, general and administrative expenses for six months
ended June 30, 1996 included the post-merger operating expenses of TDS and the
associated development costs for the WorldLink software which totaled
approximately $300,000 for the period. In addition, selling, general and
administrative expenses for the six months ended
(10)
<PAGE>
June 30, 1997 was favorably impacted by the reversal of approximately $400,000
in accruals for costs associated with the sale of the WorldLink software.
Operating losses were approximately $1,547,000 for the six months ended June 30,
1997, compared to $845,000 for the same period of the prior year, an increased
loss of $702,000. The components of this increased loss are discussed above.
Other income (expense) increased by approximately $42,000 for the quarter ended
June 30, 1997 to other income of approximately $40,000 from other expense of
$2,000 in 1996. This increase is primarily due to interest earned on the
Company's cash balances obtained primarily from the sale of WorldLink and the
Company's private placement transaction.
No provisions for income taxes were required for the six months ended June 30,
1997 and 1996, due to the net loss for the period then ended.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997, the Company has cash and cash equivalents of approximately
$1,245,000.
For the six months ended June 30, 1997 the Company's operating activities used
approximately $2.2 million of the Company's cash. This cash usage was primarily
the result of the Company's net loss of approximately $1.5 million for the
period and the effect of decreased accounts payable and accrued expenses and
deferred revenues.
The Company funded its operations, purchased property and equipment, made
payments on its capital lease obligations and made dividend payments to the
shareholders of its Class A preferred stock by using the cash it had on hand at
December 31, 1996 and cash received from the exercise of stock options.
At December 31, 1996, the Company had a bank line of credit that allowed it to
borrow 75% of its eligible accounts receivable up to $750,000 borrowings under
the line of credit were subject to interest at the bank's prime rate of interest
plus 1.0%. On July 1, 1997, the credit line was increased to the lesser of
$2,000,000 or 80% of eligible accounts receivable. Borrowings under the line of
credit bear interest at the bank's prime rate of interest plus 0.75%.
The Company has no outstanding balance on its line of credit facility at June
30, 1997 or December 31, 1996 and it has no long-term debt.
Capital expenditures for the six months ended June 30, 1997 were approximately
$62,000. Capital expenditures for the balance of 1997 are anticipated to be
approximately $100,000.
The Company is expected to incur operating losses until such time that it
attains higher levels of productivity from its sales force. While it cannot be
certain as to when such levels of productivity can be attained, the Company
anticipates that its sales force will operate at levels below full productivity
through at least the end of 1997. The Company will continue to make significant
investments in marketing, training and infrastructure to increase productivity,
build its core competency technical staff skill base and foster growth of its
operations.
The Company anticipates that the cash on hand will not be adequate to meet the
Company's expected cash requirements for the next 12 months. The Company is
assessing its cash needs and evaluating alternative ways to obtain this
additional cash. The Company will seek to enter into a transaction or
transactions to raise additional cash during the third or fourth quarter of
1997, however, there is no assurance that additional financing will be available
to the Company.
(11)
<PAGE>
FORWARD-LOOKING STATEMENTS
This Form 10-QSB contains certain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, which are intended to be covered by
the safe harbors created thereby. Investors are cautioned that all
forward-looking statements involve risks and uncertainty, (including without
limitation, future financings and expenses, as well as general market
conditions) though the Company believes that the assumptions underlying the
forward-looking statements contained herein are reasonable, any of the
assumptions could be inaccurate, and therefore, there can be no assurance that
the forward-looking statements included in this Form 10-QSB will prove to be
accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by the Company or any other person
that the objectives and plans of the Company will be achieved.
INFLATION
Inflation has not had and the Company does not expect inflation to have a
significant adverse impact on its operations.
(12)
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Nothing to Report
Item 2. Changes in Securities
Nothing to Report
Item 3. Defaults Upon Senior Securities
Nothing to Report
Item 4. Submission of Matters to a Vote of Security Holders
Nothing to Report
Item 5. Other Information
Nothing to Report
Item 6. Exhibits and Reports on Form 8-K
(a). EXHIBITS:
11 - Statement re: Computation of Per Share Earnings
27 - Financial Data Schedule
(b). REPORTS IN FORM 8-K:
Nothing to Report
(13)
<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.
The Netplex Group, Inc.
Date: August 14, 1997 By: /s/ Gene Zaino
------------------------------------------
Gene Zaino, President and CEO
(Principal Executive Officer) and Chairman
of the Board
Date: August 14, 1997 By: /s/ Matthew G. Jones
------------------------------------------
Matthew G. Jones, Chief Financial Officer
(Principal Accounting Officer)
THE NETPLEX GROUP, INC. EXHIBIT 11
SCHEDULE RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Primary Earnings(Loss) Per Share:
Weighted average number of common shares outstanding 6,577,870 4,019,037 6,517,750 3,608,322
Common stock equivalents from outstanding stock options -(3) - -(3) -
----------- ----------- ----------- -----------
Average shares outstanding 6,577,870 4,019,037 6,517,750 3,608,322
=========== =========== =========== ===========
Net loss (741,349) (592,205) (1,507,200) (847,852)
Preferred dividends 82,500 - 165,000 -
----------- ----------- ----------- -----------
Loss attributable to Common $ (823,849) $ (592,205) $(1,672,200) $ (847,852)
=========== =========== =========== ===========
Primary Loss per share $ (0.11) $ (0.15) $ (0.23) $ (0.23)
=========== =========== =========== ===========
Fully Diluted Earnings (Loss) Per Share: (2)
Weighted average number of common shares outstanding 6,577,870 4,019,037 6,517,750 3,608,322
Preferred stock convertible into common shares (1) -(3) - -(3) -
Common stock equivalents from outstanding stock options -(3) -(3) -(3) -(3)
----------- ----------- ----------- -----------
Average shares outstanding 6,577,870 4,019,037 6,517,750 3,608,322
=========== =========== =========== ===========
Net loss $ (741,349) $ (592,205) $(1,507,200) $ (847,852)
Preferred dividends 82,500 - 165,000 -
----------- ----------- ----------- -----------
Loss attributable to Common $ (823,849) $ (592,205) $(1,672,200) $ (847,852)
=========== =========== =========== ===========
Fully Diluted Loss Per Share (2) $ (0.13) $ (0.15) $ (0.26) $ (0.23)
=========== =========== =========== ===========
</TABLE>
(1) The Company's convertible preferred stock is not a common stock equivalent.
(2) Fully -diluted EPS is within 3% of Primary EPS and is,thus, not required to
be disclosed on the Condensed Consolidated Statement of Operations.
(3) As the Company is in a net loss position the effect of all options and
warrants, including common stock equivalents is anti-dilutive and is thus
not presented in the computations of loss per common share.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS CONTAINED IN THE COMPANY'S 10-QSB FOR THE PERIOD
ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,292,258
<SECURITIES> 0
<RECEIVABLES> 4,242,884
<ALLOWANCES> (166,006)
<INVENTORY> 0
<CURRENT-ASSETS> 5,772,663
<PP&E> 1,848,620
<DEPRECIATION> (810,005)
<TOTAL-ASSETS> 7,260,775
<CURRENT-LIABILITIES> (5,368,828)
<BONDS> 0
0
(16,500)
<COMMON> (6,578)
<OTHER-SE> (1,654,011)
<TOTAL-LIABILITY-AND-EQUITY> (7,260,775)
<SALES> (19,708,901)
<TOTAL-REVENUES> (19,708,901)
<CGS> 17,810,553
<TOTAL-COSTS> 3,444,953
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (39,405)
<INCOME-PRETAX> 1,507,200
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,507,200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,507,200
<EPS-PRIMARY> (0.26)
<EPS-DILUTED> (0.26)
</TABLE>
