10
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDED FORM 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
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: 0-23952
AVERT, INC.
(Exact name of small business issuer as specified in its charter)
Colorado 84-1028716
(State or other jurisdiction of (I.R.S.
incorporation or organization) Employer Identification No.)
301 Remington, Fort Collins, CO 80524
(Address of principal executive offices)
970/484-7722
(Registrant's telephone number, including area code)
No Change
(Former name, former address and former fiscal year, if changed from last
report).
Check whether the registrant (1) 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 shorter period that the
issuer was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
[ X ] Yes [ ] No
As of November 11, 1996 the issuer had 3,400,000 shares of Common Stock, no
par value, outstanding
Transitional Small Business Disclosure Format.
[ ] Yes [ X ] No
Form 10-QSB
Quarter Ended September 30, 1996
INDEX
PAGE
PART I - FINANCIAL INFORMATION
ITEM 1. Financial statements
Unaudited balance sheets.......................... 3
Unaudited statements of income.................... 4
Unaudited statements of cash flows................ 5
Notes to unaudited financial statements........... 6
ITEM 2. Management's Discussion and Analysis or
Plan of
Operations.................................................. 7
PART II - OTHER INFORMATION
ITEMS 1, 2, 3, 4 and 5 Not applicable...............
ITEM 6 Exhibits and Reports on Form 8-K.............. 11
Signatures.................................................. 12
PART I - FINANCIAL INFORMATION
AVERT, INC.
BALANCE SHEETS
ASSETS
SEPTEMBER 30, DECEMBER 31,
1996 1995
(unaudited)
Current assets:
Cash and cash equivalents.............. $ 243,500 $ 159,700
Marketable securities.................. 5,500,400 5,966,500
Accounts receivable, net of allowance.. 1,002,900 607,900
Prepaid expenses and other............. 150,400 240,600
Total current assets.............. $ 6,897,200 6,974,700
Property and equipment, net................. 2,136,000 1,389,100
Other assets............................ 16,200 19,400
Total assets................................ $ 9,049,400 $ 8,383,200
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable....................... $ 359,500 $ 407,900
Accrued expenses....................... 170,000 81,300
Deferred revenue....................... 53,000 58,600
Total current liabilities......... 582,500 547,800
Shareholders' equity:
Preferred shares, no par value; authorized
1,000,000 shares; none outstanding.... --- ---
Common stock, no par value; authorized
9,000,000 shares; 3,442,250 shares issued
and outstanding....................... 4,960,600 4,960,600
Treasury Stock (168,200) ---
Retained earnings............ .......... 3,674,500 2,874,800
Total shareholders' equity......... 8,466,900 7,835,400
Total liabilities and shareholders' equity... $ 9,049,400 $ 8,383,200
========== ==========
See accompanying notes to the financial statements.
AVERT, INC.
STATEMENTS OF INCOME
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
Net revenues:
Search and product fees... $2,054,900 $1,578,000 $5,466,800 $4,158,000
Interest and other income.....158,900 106,800 367,100 303,500
2,213,800 1,684,800 5,833,900 4,461,500
Expenses:
Search and product costs..... 892,700 740,400 2,385,100 1,841,300
Marketing.....................374,100 213,900 984,300 578,100
General and administrative....259,400 231,300 774,700 670,800
Software development.......... 91,500 53,800 268,400 168,000
Depreciation and amortization..50,100 26,100 130,600 79,900
1,667,800 1,265,500 4,543,100 3,338,100
Income before income taxes.........546,000 419,300 1,290,800 1,123,400
Income tax expense......... ( 207,900) (159,100) (491,100) (422,400)
Net income.................. $ 338,100 $ 260,200 $ 799,700 $ 701,000
========== ========= ======== ========
Net income per common share..$ .10 $ .08 $ .23 $ .20
========== ========= ======== ========
Weighted average common
shares outstanding..........3,422,797 3,442,250 3,423,893 3,442,250
========== ========= ========= =========
See accompanying notes to the financial statements.
AVERT, INC.
STATEMENTS OF CASH FLOWS
(unaudited)
NINE MONTHS ENDED SEPTEMBER 30,
1996 1995
Cash Flows From Operating Activities:
Net income........................... $ 799,700 $ 701,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization... 130,600 79,900
Bad debt expense................ 22,500 21,500
Increase/(decrease) in marketable securities and
other gains.................... (76,600) (259,400)
Changes in operating assets and liabilities:
Accounts receivable................(417,500) (286,200)
Prepaid expenses and other current assets
........... 90,200 (88,600)
Other assets.................... 3,200 11,300
Accounts payable................ (48,400) 167,200
Accrued expenses................ (36,900) (38,600)
Income taxes payable............ 125,600 (173,500)
Deferred revenue and deposits .. (5,600) (25,900)
Net cash provided by operating activities
........... 586,800 108,700
Cash Flows from Investing Activities:
Additions to furniture and equipment. (877,500) (677,500)
Sale of marketable securities........ 542,700 ---
Net cash provided by investing activities
........... (334,800) (677,500)
Cash Flows from Financing Activities:
Purchase of Treasury Stock........... (168,200) ---
Net cash provided by financing activities(168,200) ---
Increase/(Decrease) in Cash and Cash Equivalents
............. 83,800 (568,800)
Cash and Cash Equivalents, beginning of period
............. 159,700 738,300
Cash and Cash Equivalents, end of period.. $ 243,500 $ 169,500
========== ===========
See accompanying notes to the financial statements.
AVERT, INC.
NOTES TO FINANCIAL STATEMENTS
On June 22, 1994, the Company completed an initial public offering
("IPO") of 1,000,000 units ("Units"), each consisting of one share of
Common Stock and one Redeemable Warrant. The Units separated on December
7, 1994, and the Common Stock and the Redeemable Warrants began trading
separately as of that date. Two Redeemable Warrants entitle the holder to
purchase one share of Common Stock at a price of $6.50 per share (subject
to adjustment) for a nine month period originally stated as March 22, 1995
and ending December 22, 1995. On October 11, 1995, the Company announed
that it extended the expiration date of its Redeemable Warrants from
December 22, 1995 to April 30, 1996. The expiration date was further
extended to April 30, 1997, as announced on Form 8-K dated March 6, 1996.
All of the other terms of the Redeemable Warrants remain the same. The
Redeemable Warrants are redeemable by the Company at a redemption price of
$0.05 per Redeemable Warrant at any time commencing March 22, 1995, on at
least 30 days prior written notice, provided that the closing price of the
Common Stock equals or exceeds $7.50 per share for a period of 15
consecutive trading days ending within 15 days prior to the notice of
redemption. Net proceeds from the IPO totalled approximately $4,382,300.
The financial information contained herein is unaudited, but includes
all adjustments (consisting of only normal recurring accruals) which, in
the opinion of management, are necessary to present fairly the information
set forth. The financial statements should be read in conjunction with the
Notes to Financial Statements which are included in the Annual Report on
Form 10-KSB of the Company for the year ended December 31, 1995.
The results for interim periods are not necessarily indicative of
results to be expected for the fiscal year of the Company ending December
31, 1996. The Company believes that the six month report filed on Form
10-QSB is representative of its financial position, its results of
operations and its cash flows as of and for the periods ended September 30,
1996 and 1995 covered thereby.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations
Comparison of quarters ended September, 1996 and September 30, 1995
Net revenues increased from $1,684,800 for the three month period
ended September 30, 1995,to $2,213,800 for the comparable three month period
in 1996 or 31%. The breakdown of net revenues, exclusive of product discounts
and other miscellaneous income items, is as follows:
Three Months Ended Three Months Ended Percent of
Septemer 30, 1996 Septemer 30, 1995 Increase
Revenues % total Revenues % total (Decrease)
Products:
Workers compensation histories
$ 354,600 16.0% $ 350,200 20.8% 1.3%
Criminal history reports
$1,114,200 50.3% $ 831,800 49.4% 34.0%
Previous employment reports/credit reports
$ 246,400 11.1% $ 165,900 9.9% 48.5%
Motor vehicle driving records
$ 256,700 11.6% $ 202,300 12.0% 26.9%
Other products $ 111,100 5.0% $ 75,300 4.5% 147.5%
Interest income $ 76,700 3.5% $ 93,200 5.5% (17.7)%
NET REVENUES $2,213,800 $1,684,800 31.4%
Moderate to strong growth in sales of all of the Company's products
continued during the third quarter of 1996 with the exception of Workers'
Compensation reports. Although sales of Workers' Compensation histories
only increased approximately 1.3% from third quarter 1995 to third
quarter 1996, it is still the second largest product line respresenting
$354,600 for the third three months of 1996 and $350,200 for the comparable
period in 1995. Sales of Workers' Compensation histories are expected to
continue to be a viable product as the Company new markets, continues to
educate customers, continues workers' compensation marketing campaigns, and
locates new data sources, but to continue to decrease as a percentage of total
revenues. In terms of dollars, Criminal History reports contributed the
largest increase in net revenues and represented strong growth of approximately
34% in the quarter ended September 30, 1995 over the quarter ended September
30, 1996. The Criminal History product line represented approximately 50.3%
of net revenues in the third quarter of 1996 as compared to approximately
49% of net revenues in the third quarter of 1995. There was an approximate
48% growth from third quarter 1995 to third quarter 1996 in the area of
Previous Employment/Credit. These products represent approximately 11.1%
of net revenues in the quarter ended September 30, 1996 as compared to
approximately 9.9% of net revenues in the same quarter in 1995.
The category above titled as "Other Products" consists of four products:
Education/Credential Verification, Name Link, Employment Applications, and
First Check. While these products do not represent a material amount of
dollars, they continue to experience strong growth and represent approximately
5% of net revenues and $111,100 in revenues in the quarter ended September 30,
1996, as compared to approximately 4.5% of net revenue and $75,300 in revenue
for the quarter ended September 30, 1995.
Income before income taxes increased from $419,300 in the period
ended September 30, 1995 to $546,000 in the period ended September 30, 1996 or
approximately 30.2% and represented approximately 24.7% of net revenues in
the third quarter 1996 compared to approximately 24.9% in the third quarter
1995.
Total expenses increased from $1,265,500 for the three month period
ended September 30, 1995 to $1,667,800 for the comparable period in 1996. A
breakdown in expenses is as follows:
Three Months Ended Three Months Ended Increase (Decrease)
September 30, 1996 September 30, 1995 % of Revenues
Expense % of Expense % of 1995 over 1994
Revenue Revenue
Search and product $ 892,700 40.3% $ 740,400 43.9% (3.6)%
Marketing 374,100 16.9 213,900 12.7 4.2
General and administration
259,400 11.7 231,300 13.7 (2.0)
Software development 91,500 4.1 53,800 3.2 0.9
Depreciation and amortization
50,100 2.3 26,100 1.6 0.7
Expenses $ 1,667,800 75.3% $1,265,500 75.1% .20%
======== ====== ========== ====== ===========
The expenses for both third quarter periods in 1996 and 1995 remained
stable as a whole in terms of percentage of revenue. The Company experienced
an approximate 3.6% decrease in product costs and 2.0% decrease in general
and administrative costs. These decreases were offset by the increase
primarily in marketing expenses. This increase was primarily associated with
the generation of new customer leads and the hiring and training of
additional sales personnel needed for implementation of the Company's
nationwide marketing efforts.
Income taxes remained consistent between the respective three month
periods at the expected combined federal and state statutory rate of
approximately 38%, resulting in net income of $338,100 or $.10 per share on
3,422,800 shares for the third quarter ended September 30, 1996, as compared
to net income of $260,200 or $.08 per share on 3,442,250 shares for the third
quarter ended September 30, 1996.
Comparison of nine months ended September 30, 1996 and September 30, 1995
Net revenues increased from $4,461,500 for the nine month period ended
September 30, 1995, to $5,833,900 for the comparable nine month period in 1996
or approximately 30.8%. The breakdown of net revenues, exclusive of
product discounts and other miscellaneous income items, is as follows:
Nine Months Ended Nine Months Ended Percent of
September 30, 1996 September 30, 1995 Increase
Revenues % total Revenues % total (Decrease)
Products:
Workers' compensation histories
$ 964,800 16.5% $ 982,000 22.0% ( 1.8)%
Criminal history reports
$2,982,900 51.1% $2,125,400 47.6% 40.3%
Previous employment reports/credit report
$ 645,200 11.1% $ 379,900 8.5% 69.9%
Motor vehicle driving records
$ 704,800 12.1% $ 583,500 13.1% 20.8%
Other products $ 320,100 5.5% $ 198,100 4.4% 161.6%
Interest income $ 237,700 4.1% $ 270,000 6.1% ( 12.0)%
NET REVENEUS $5,833,900 $4,461,500 30.8%
Moderate to strong growth in sales of all of the Company's products
continued during the first nine months of 1996 with the exception of
Workers' Compensation reports. Although sales of Workers' Compensation
histories actually decreased approximately 1.8% from the nine month period
ended September 30, 1995 to the same nine month period in 1996, it is still
the second largest product line representing $964,800 for nine months of 1996
and $982,000 for nine months of 1995. Sales of Workers' Compensation
histories are expected to continue to be a viable product as the Company
enters new markets, continues to educate customers, continues workers'
compensation marketing campaigns, and locates new data sources, but to
continue to decrease as a percentage of total revenues. Very strong growth
of approximately 40.3% continued in the Criminal History product line
representing approximately 51.1% of net revenues in the first nine month
period of 1996 as compared to approximately 47.6% of net revenues in the
first nine month period of1995. There was an approximate 69.9% growth from
the nine month period ended September 30, 1995 to the nine month period ended
September 30, 1996 in the area of Previous Employment/Credit. These products
represent approximately 11.1% of net revenues in the nine months ended
September 300, 1996 as compared to approximately 8.5% of net revenues in the
same period in 1995.
The category above labeled "Other Products" consists of four products:
Education/Credential Verification, Name Link, Employment Applications, and
First Check. These products continue to experience strong growth and
represent approximately 5.5% of net revenues or $320,100 in revenues in the
nine month period ended September 30, 1996, as compared to approximately
4.4% of net revenues, or $198,100 in the same nine month period in 1995.
Income before income taxes increased from $1,123,400 in the nine month
period ended September 30, 1995 to $1,290,800 in the nine month period ended
September 30, 1996 or approximately 14.9% and represented approximately 22.1%
of net revenues in the first nine months of 1996 compared to approximately
25.2% in the first nine months of 1995.
Total expenses increased from $3,338,100 for the nine month period
ended September 30, 1995, to $4,543,100 for the comparable period in 1996.
A breakdown in expenses is as follows:
Nine Months Ended Nine Months Ended Increase(Decrease)
September 30, 1996 September 30, 1995 % of Revenues
Expenses % of Expense % of 1996 over 1995
Revenue Revenue
Search and product..$2,385,100 40.9% $1,841,300 41.2% (0.3)%
Marketing 984,300 16.9 578,100 13.0 3.9
General and administration
774,700 13.3 670,800 15.0 (1.7)
Software development 268,400 4.6 168,000 3.8 0.8
Depreciation and amortization
130,600 2.2 79,900 1.8 0.4
Expenses $4,543,100 77.9% $3,338,100 74.8% 3.1%
========== ===== ========== ===== ====
The expenses for the nine month period ended September 30, 1996
increased approximately 3.1% as a percentage of revenues over the same nine
month period in 1995. Additional marketing expenses accounted for the
majority of the increase. Those expenses are primarily associated with the
generation of new customer leads and the hiring and training of additional
sales personnel needed for implementation of the Company's nationwide
marketing efforts. The Company experienced an approximate 1.7% decrease
in product and general and administrative costs. Other areas of expense
remained relatively stable.
Income taxes remained consistent between the respective nine month
periods at the expected combined federal and state statutory rate of
approximately 38%, resulting in net income of $799,700 or $.23 per share
on 3,423,900 shares for the nine months ended September 30, 1996, as compared
to net income of $701,000 or $.20 per share on 3,442,250 shares for the
nine months ended September 30, 1995.
Liquidity and Capital Resources
The Company's financial position at September 30, 1996 remained strong
with working capital at that date of $6,314,700 compared to $6,426,900 at
December 31 1995. Cash and cash equivalents at September 30, 1996 were
$243,500 and increased from $159,700 at December 31, 1995. Net cash
provided from operations for the nine month period ended September 30, 1996
was $586,800 and consisted primarily of net income of $799,700, a $417,000
increase in accounts receivable, and a $125,600 increase in income taxes
payable. The Company had capital expenditures of $877,500 for the nine
month period ended September 30, 1996 as compared to $387,400 for the year
ended December 31,1995. The majority of the capital expenditures during the
nine months ended September 30, 1996 was attributable to the final phase of
construction and purchase of assets for an approximate 14,600 square feet
office building for use as its headquarters. The total construction costs
were approximately $1.2 million. Construction was financed entirely by
available cash derived from past operations. No proceeds from the IPO was
used for the purchase of the land or the construction of the building.
Construction was completed in March, 1996. In addition, Avert has now
internally committed to spend up to $1.5 million to develop new software and
upgrade its existing software. The Company expects the new software and
upgrade of its existing sfotware to allow the Company to: (1) manage its
higher volume with a lower cost per transaction; (2) introduce new products
and services at a much quicker pace; (3) directly integrate the Company's
information technology systems with strategic partners, suppliers, and
large customers; and (4) maintain the Company's competitive position and
provide leading edge, but safe and proven, technology for its customers.
Development and upgrade of the software will be financed by available cash
derived from past or continued operations. No proceeds from the IPO or this
offering will be used for development of this new software and upgrade of the
Company's existing software. Development and upgrading of the software
presently is expected to be complete in late 1997 or early 1998, with
scheduled software releases occurring prior to that time.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
NONE
ITEM 6. Exhibits and Reports on Form 8-K
(a) None
(b) Reports on Form 8-K
The registrant filed the following reports on Form 8-K during the
second quarter, 1996:
(i) Form 8-K dated July 1, 1996 announcing the Avertadvantage
Program and price increase.
(ii) Form 8-K dated July 23, 1996 announcing financial results for
the second quarter and six month period.
(iii)Form 8-K dated November 11, 1996 announcing financial results
for the third quarter and nine month period.
SIGNATURES
In accordance with 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.
AVERT, INC.
DATE: November 11, 1996 BY: Dean A. Suposs
Dean A. Suposs, President
DATE: November 11, 1996 BY: Jamie M.Burgat
Jamie M. Burgat, Vice President of
Operations and Chief Financial
Officer
[TYPE] EX-27
[SROS] NASD
[FILER]
[ARTICLE] 5
[CIK] 0000920909
[CCC] gjw8ap@p
[FILER]
[NAME] AVERT, INC.
[PERIOD-START] JUL-01-1996
[PERIOD-TYPE] 3-MOS
[FISCAL-YEAR-END] DEC-31-1996
[PERIOD-END] JUN-30-1996
[CASH] 243,500
[SECURITIES] 5,500,400
<RECEIVABLES, NET> 1,002,900
[ALLOWANCES] 0
[INVENTORY] 0
<CURRENT ASSETS> 6,897,200
<PP&E, NET> 2,136,000
[DEPRECIATION] 0
<TOTAL ASSETS> 9,049,400
<CURRENT LIABILITIES> 582,500
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 4,960,600
[OTHER-SE] 3,506,300
[TOTAL-LIABILITY-AND-EQUITY] 9,049,400
[SALES] 2,054,900
[TOTAL-REVENUES] 2,213,800
[CGS] 0
[TOTAL-COSTS] 1,667,800
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 0
[INCOME-PRETAX] 546,000
[INCOME-TAX] 207,900
[INCOME-CONTINUING] 0
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 338,100
[EPS-PRIMARY] .10
[EPS-DILUTED] .08
