U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: July 31, 1998
Commission file number: 0-20824
COMPUTER OUTSOURCING SERVICES, INC.
(Exact name of small business issuer as specified in its charter)
New York 13-3252333
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
360 West 31st Street New York, New York 10001
(Address of principal executive offices)
(212) 564-3730
(Issuer's telephone number)
Check whether the registrant (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 [ ]
There were 4,255,115 shares of the registrant's Common Stock, $0.01 par value,
outstanding as of September 1, 1998.
Transitional Small Business Disclosure Form (check one); Yes [ ] No [X]
Page 1 of 4
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PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
COMPUTER OUTSOURCING SERVICES, INC. AND SUBSIDIARIES
AMENDED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended July 31,
------------------------------
1998 1997
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations ............. $ 1,573,496 $ 486,048
Adjustments to reconcile income from continuing
operations to cash (used in)/provided by
operating activities:
Depreciation and amortization ............... 1,010,635 1,098,900
Increase/(reduction) in deferred income taxes (35,355) 175,545
Decrease/(increase) in:
Trade accounts receivable ................. (714,865) (730,271)
Prepaid expenses and other current assets . (369,889) (289,759)
Security deposits and other noncurrent
assets .................................. (48,992) (184,453)
Increase/(decrease) in:
Accounts payable .......................... (162,218) 96,767
Income taxes payable ...................... 120,092 (27,939)
Accrued expenses .......................... (36,198) 34,853
Customer deposits and other current
liabilities ............................. (78,295) (58,152)
Deferred lease credits ...................... (53,965) -
---------- ----------
Net cash provided by operating activities . 1,204,448 601,539
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment .......... (1,227,425) (281,976)
Disposal of equipment ....................... 14,960 2,074
Proceeds from the sale of the Payroll
Division .................................. 12,210,000 -
Payment of expenses related to the sale of
the Payroll Division ...................... (1,795,898) -
Proceeds from a covenant not to compete ..... 1,440,000 -
Settlement of contingencies relating to
acquisitions .............................. - (423,938)
Increase in deferred software costs ......... (603,311) (353,772)
----------- -----------
Net cash provided by/(used in) investing
activities .............................. $ 10,038,326 $ (1,057,612)
----------- -----------
Continued on Next Page
See Notes to Consolidated Interim Financial Statements
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COMPUTER OUTSOURCING SERVICES, INC. AND SUBSIDIARIES
AMENDED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - Continued)
Nine Months Ended July 31,
------------------------------
1998 1997
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt ................. $ (2,080,188) $ (789,928)
Proceeds from the exercise of options and
warrants .................................. 1,662,186 -
Proceeds from longterm debt ................. - 500,000
Repayments from/(borrowings by) related
parties, net .............................. (47,218) 22,735
Repayments of capital leases ................ (17,047) (77,935)
----------- ----------
Net cash used in financing activities ..... (482,267) (345,128)
----------- ----------
CASH FLOWS FROM DISCONTINUED OPERATIONS:
Income/(loss) from discontinued operations .. (60,509) 27,452
Adjustments to reconcile income/(loss) from
discontinued operations to cash (used in)/
provided by discontinued operations:
Depreciation and amortization ............. 151,118 627,380
Increase in net assets of discontinued
operations .............................. (307,813) (459,701)
----------- -----------
Net cash (used in)/provided by discontinued
operations .............................. $ (217,204) $ 195,131
----------- -----------
Net increase/(decrease) in cash and cash
equivalents ............................. 10,543,303 (606,070)
Cash and cash equivalents at the beginning
of the period ........................... 972,459 857,204
----------- -----------
Cash and cash equivalents at the end of the
period .................................. $ 11,515,762 $ 251,134
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest .................................. $ 110,622 $ 205,906
=========== ===========
Income taxes .............................. $ 1,013,106 $ 91,958
=========== ===========
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Capitalized leases for data processing
equipment ................................. - 81,312
========== ===========
Note received in connection with the sale
of the Payroll Division (Note 2) .......... $ 750,000 $ -
========== ===========
For the nine months ended July 31, 1997, $19,594 (net of tax benefits) was
accreted through a charge to retained earnings in connection with a stock
option.
See Notes to Consolidated Interim Financial Statements
Page 3 of 4
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COMPUTER OUTSOURCING SERVICES, INC. AND SUBSIDIARIES
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.
COMPUTER OUTSOURCING SERVICES, INC.
/s/
-----------------------------------
September 25, 1998 Zach Lonstein
Principal Executive Officer
/s/
-----------------------------------
September 25, 1998 Laurence L. Carpenter
Acting Principal Accounting Officer
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