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 June 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 August 13, 1996 the issuer had 3,414,250 shares of Common Stock, no
par value, outstanding
Transitional Small Business Disclosure Format.
[ ] Yes [ X ] No
Form 10-QSB
Quarter Ended June 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
JUNE 30, DECEMBER 31,
1996 1995
(unaudited)
Current assets:
Cash and cash equivalents.............. $ 73,800 $ 159,700
Marketable securities.................. 5,423,800 5,966,500
Accounts receivable, net of allowance.. 926,800 607,900
Prepaid expenses and other............. 153,000 240,600
Total current assets.............. $ 6,577,400 6,974,700
Property and equipment, net................. 2,028,700 1,389,100
Other assets............................ 19,400 19,400
Total assets................................ $ 8,625,500 $ 8,383,200
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable....................... $ 310,700 $ 407,900
Accrued expenses....................... 72,900 81,300
Deferred revenue....................... 55,500 58,600
Total current liabilities......... 439,100 547,800
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 (110,400) ---
Retained earnings............ .......... 3,336,200 2,874,800
Total shareholders' equity......... 8,186,400 7,835,400
Total liabilities and shareholders' equity... $ 8,625,500 $ 8,383,200
========== ==========
See accompanying notes to the financial statements.
AVERT, INC.
STATEMENTS OF INCOME
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
Net revenues:
Search and product fees... $1,861,700 $1,362,200 $3,412,000 $2,579,900
Interest and other income.....106,100 103,100 208,100 196,700
1,967,800 1,465,300 3,620,100 2,776,600
Expenses:
Search and product costs..... 788,000 550,400 1,492,400 1,047,200
Marketing.....................330,900 197,200 610,100 363,500
General and administrative....280,300 280,800 515,400 494,100
Software development.......... 83,900 52,500 176,900 113,900
Depreciation and amortization..47,700 26,600 80,500 53,800
1,530,800 1,107,500 2,875,300 2,072,500
Income before income taxes.........437,000 357,800 744,800 704,100
Income tax expense......... ( 166,500) (134,100) (283,300) (263,300)
Net income.................. $ 270,500 $ 223,700 $ 461,500 $ 440,800
========== ========= ======== ========
Net income per common share..$ .08 $ .06 $ .13 $ .13
========== ========= ======== ========
Weighted average common
shares outstanding..........3,418,500 3,442,250 3,427,800 3,442,250
========== ========= ========= =========
See accompanying notes to the financial statements.
AVERT, INC.
STATEMENTS OF CASH FLOWS
(unaudited)
SIX MONTHS ENDED JUNE 30,
1996 1995
Cash Flows From Operating Activities:
Net income........................... $ 461,500 $ 440,800
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization... 80,500 53,800
Bad debt expense................ 15,000 11,000
Increase/(decrease) in marketable securities and
other gains.................... --- (169,700)
Changes in operating assets and liabilities:
Accounts receivable................(333,800) (125,200)
Prepaid expenses and other current assets
........... 87,300 (70,100)
Other assets.................... --- (2,500)
Accounts payable................ (97,000) 170,700
Accrued expenses................ (16,800) (50,800)
Income taxes payable............ 8,200 (184,000)
Deferred revenue and deposits .. (3,000) (17,900)
Net cash provided by operating activities
........... 201,900 56,100
Cash Flows from Investing Activities:
Additions to furniture and equipment. (720,100) (387,400)
Sale of marketable securities........ 542,700 ---
Net cash provided by investing activities
........... (177,400) (387,400)
Cash Flows from Financing Activities:
Purchase of Treasury Stock........... (110,400) ---
Net cash provided by financing activities(110,400) ---
Increase/(Decrease) in Cash and Cash Equivalents
............. (85,900) (331,300)
Cash and Cash Equivalents, beginning of period
............. 159,700 738,300
Cash and Cash Equivalents, end of period.. $ 73,800 $ 407,000
========== ===========
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 June 30,
1996 and 1995 covered thereby.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations
Comparison of quarters ended June, 1996 and June 30, 1995
Net revenues increased from $1,465,300 for the three month period
ended June 30, 1995,to $1,967,800 for the comparable three month period in
1996 or 34%. 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
June 30, 1996 June 30, 1995 Increase
Revenues % total Revenues % total (Decrease)
Products:
Workers compensation histories
$ 326,500 16.6% $ 332,800 22.7% ( 1.9%)
Criminal history reports
$1,027,300 52.2% $ 688,000 47.0% 49.3%
Previous employment reports/credit reports
$ 222,800 11.3% $ 118,400 8.1% 88.2%
Motor vehicle driving records
$ 230,300 11.7% $ 195,700 13.4% 17.7%
Other products $ 122,000 6.2% $ 63,600 3.8% 91.8%
Interest income $ 78,100 4.0% $ 91,400 6.2% (14.6)%
NET REVENUES $1,967,800 $1,465,300 34.3%
Moderate to strong growth in sales of all of the Company's products
continued during the second quarter of 1996 with the exception of workers'
compensation reports. Although sales of workers' compensation histories
actually decreased approximatley 1.9% from second quarter 1995 to second
quarter 1996, it is still the second largest product line respresenting
$326,500 for the second three months of 1996 and $332,800 for the comparable
period in 1995. The Company believes that sales of this product will
gradually increase as the Company enters new markets, continues to educate
customers, continues workers' compensation marketing campaigns, and locates
new data sources, but will continue to decrease as a percentage of total
revenues. Very strong growth of approximately 49.3% continued in the
Criminal History product line representing apprxomately 52.2% of net
revenues in the second quarter of 1996 as compared to approximately 47% of
net revenues in the second quarter of 1995. There was an approximate 88.2%
growth from second quarter 1995 to second quarter 1996 in the area of
Previous Employment/Credit. These products represent approximately 11.3%
of net revenues in the quarter ended June 30, 1996 as compared to
approximately 8.1% of net revenues in the same quarter in 1995.
Income before income taxes increased from $357,800 in the period
ended June 30, 1995 to $437,000 in the period ended June 30, 1996 or
approximately 22.1% and represented approximately 22.2% of net revenues in
the second quarter 1996 compared to approximately 24.4% in the second quarter
1995.
Total expenses increased from $1,107,500 for the three month period
ended June 30, 1995 to $1,530,800 for the comparable period in 1996. A
breakdown in expenses is as follows:
Three Months Ended Three Months Ended Increase (Decrease)
June 30, 1996 June 30, 1995 % of Revenues
Expense % of Expense % of 1995 over 1994
Revenue Revenue
Search and product $ 788,000 40.0% $ 550,400 37.6% 2.4%
Marketing 330,900 16.8 197,200 13.4 3.4
General and administration
280,300 14.3 280,800 19.2 (4.9)
Software development 83,900 4.3 52,500 3.6 0.7
Depreciation and amortization
47,700 2.4 26,600 1.8 (0.6)
Expenses $ 1,530,800 77.8% $1,107,500 75.6% 2.2%
======== ====== ========== ====== ===========
The decrease in gross margin and the increase in marketing expense
accounted for an increase in total expenses of 6.8% as a percentage of
total net revenues. There was an approximate 4.9% decrease of general and
administrative expenses in the second quarter ended June 30, 1996 from the
same period ended June 30, 1995. All other areas of expenses remained
relatively stable.
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 $270,500 or $.08 per share on
3,418,500 shares for the second quarter ended June 30, 1996, as compared to
net income of $223,700 or $.06 per share on 3,442,250 shares for the second
quarter ended June 30, 1996.
Comparison of six months ended June 30, 1996 and June 30, 1995
Net revenues increased from $2,776,600 for the six month period ended
June 30, 1995, to $3,620,100 for the comparable six month period in 1996
or approximately 30.4%. The breakdown of net revenues, exclusive of
product discounts and other miscellaneous income items, is as follows:
Six Months Ended Six Months Ended Percent of
June 30, 1996 June 30, 1995 Increase
Revenues % total Revenues % total (Decrease)
Products:
Workers' compensation histories
$ 610,200 16.9% $ 631,800 22.8% ( 3.4)%
Criminal history reports
$1,868,700 51.6% $1,293,600 46.6% 44.5%
Previous employment reports/credit report
$ 398,900 11.0% $ 214,000 7.7% 86.4%
Motor vehicle driving records
$ 448,100 12.4% $ 381,200 13.7% 17.5%
Other products $ 256,100 7.0% $ 122,800 4.4% 208.5%
Interest income $ 161,000 4.5% $ 176,800 6.4% ( 8.9)%
NET REVENEUS $3,620,100 $2,776,600 30.4%
Moderate to strong growth in sales of all of the Company's products
continued during the first six months of 1996 with the exception of
workers' compensation reports. Although sales of workers' compensation
histories actually decreased approximately 3.4% from the six month period
ended June 30, 1995 to the same six month period in 1996, it is still the
second largest product line representing $610,200 for six months of 1996
and $631,800 for six months of 1995. The Company believes that sales of
this product will gradually increase as the Company enters new markets,
continues to educate customers, continues workers' compensation marketing
campaigns, and locates new data sources, but will continue to decrease as
a percentage of total revenues. Very strong growth of approximately 44.5%
continued in the Criminal History product line representing approximately
51.6% of net revenues in the first six month period of 1996 as compared
to approximately 46.6% of net revenues in the first six month period of
1995. There was an approximate 86.4% growth from the six month period
ended June 30, 1995 to the six month period ended June 30, 1996 in the
area of Previous Employment/Credit. These products represent approximately
11.0% of net revenues in the six months ended June 30, 1996 as compared
to approximately 7.7% of net revenues in the same period in 1995.
Income before income taxes increased from $704,100 in the six month
period ended June 30, 1995 to $744,800 in the six month period ended June
30, 1996 or approximately 5.8% and represented approximately 20.6% of net
revenues in the first six months of 1996 compared to approximately 25.4%
in the first six months of 1995.
Total expenses increased from $2,072,500 for the six month period
ended June 30, 1995, to $2,875,300 for the comparable period in 1996. A
breakdown in expenses is as follows:
Six Months Ended Six Months Ended Increase(Decrease)
June 30, 1996 June 30, 1995 % of Revenues
Expenses % of Expense % of 1996 over 1995
Revenue Revenue
Search and product..$1,492,400 41.2% $1,047,200 37.7% 3.5%
Marketing 610,100 16.9 363,500 13.1 3.8
General and administration
515,400 14.2 494,100 17.8 (3.6)
Software development 176,900 4.9 113,900 4.1 0.8
Depreciation and amortization
80,500 2.2 53,800 1.9 0.3
Expenses $2,875,300 79.4% $2,072,500 74.6% 4.8%
========== ===== ========== ===== ====
The decrease in gross margin and the increase in marketing expenses
accounted for an increase in total expenses of 7.3% as a percentage of
total net revenues. There was an approximate 3.6% decrease of general and
administrative expenses in the six month period ended June 30, 1996 from
the same period ended June 30, 1995. Other areas of expenses remained
relatively stable.
Income taxes remained consistent between the respective six month
periods at the expected combined federal and state statutory rate of
approximately 38%, resulting in net income of $461,500 or $.13 per share
on 3,427,800 shares for the six months ended June 30, 1996, as compared
to net income of $440,800 or $.13 per share on 3,442,250 shares for the
six months ended June 30, 1995.
Liquidity and Capital Resources
The Company's financial position at June 30, 1996 remained strong
with working capital at that date of $6,138,300 compared to $6,426,900 at
December 31 1995. Cash and cash equivalents at June 30, 1996 were
$73,800 and decreased from $159,700 at December 31, 1995. Net cash
provided from operations for the six month period ended June 30, 1996
was $201,900 and consisted primarily of net income of $461,500, a $330,800
increase in accounts receivable, and a $97,000 decrease in accounts payble.
The Company had capital expenditures of $720,100 for the six month period
ended June 30, 1996 as compared to $387,400 for the year ended December 31,
1995. The majority of the capital expenditures during the six months ended
June 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 $1.2 million.
Construction was financed by available cash derived from past operations.
No proceeds from the IPO was used for the land or the construction of the
building. Completion was March, 1996. In addition, computer hardware and
software development costs were incurred during the first six month period
of 1996.
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 April 4, 1996 announcing the addition of
independent sales representatives
(ii) Form 8-K dated June 3, 1996 announcing increased product
revenue growth for first two months of second quarter, 1996
(iii)Form 8-K dated June 24, 1996, reporting the hiring of Jerry
thurber as Director of Information Technology
(iv) Form 8-K dated July 1, 1996, announcing the new Avertadvantage
Program and price increase, and,
(v) Form 8-K dated July 23, 1996, announcing second quarter and
six month period results
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: August 14, 1996 BY: Dean A. Suposs
Dean A. Suposs, President
DATE: August 14, 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] APR-01-1996
[PERIOD-TYPE] 3-MOS
[FISCAL-YEAR-END] DEC-31-1996
[PERIOD-END] JUN-30-1996
[CASH] 73,800
[SECURITIES] 5,423,800
[RECEIVABLES] 926,800
[ALLOWANCES] 0
[INVENTORY] 0
<CURRENT ASSETS> 6,577,400
[PP&E] 2,028,700
[DEPRECIATION] 0
<TOTAL ASSETS> 8,625,500
<CURRENT LIABILITIES> 439,100
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 4,960,600
[OTHER-SE] 3,225,800
[TOTAL-LIABILITY-AND-EQUITY] 8,625,500
[SALES] 1,861,700
[TOTAL-REVENUES] 1,967,800
[CGS] 0
[TOTAL-COSTS] 1,530,800
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 0
[INCOME-PRETAX] 437,000
[INCOME-TAX] 166,500
[INCOME-CONTINUING] 0
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 270,500
[EPS-PRIMARY] .08
[EPS-DILUTED] .08
