UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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, 1998
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. Employer Identification No.)
incorporation or organization
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 12, 1998 the issuer had 3,449,525 shares of Common Stock, no par
value, outstanding.
Transitional Small Business Disclosure Format.
[ ] Yes [ X ] No
<PAGE>
Form 10-QSB
Quarter Ended June 30, 1998
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, 5 and 6 Not applicable
Signatures........................................................... 12
2
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
AVERT, INC.
BALANCE SHEETS
ASSETS
JUNE 30, DECEMBER 31,
1998 1997
--------- -----------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents ................................................. $ 17,700 $ 580,000
Marketable securities ..................................................... 6,275,300 6,113,000
Accounts receivable, net of allowance ..................................... 1,405,100 1,135,000
Prepaid expenses and other ................................................ 291,500 304,000
----------- -----------
Total current assets ............................................. $ 7,989,600 8,132,000
Property and equipment, net ........................................................ 3,457,000 3,399,000
Other assets ....................................................................... 0 0
----------- -----------
Total assets ....................................................................... $11,446,600 $11,531,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable .......................................................... $ 520,000 $ 388,000
Accrued expenses .......................................................... 108,200 201,000
Deferred revenue .......................................................... 52,000 0
----------- -----------
Total current liabilities ........................................ 680,200 589,000
Deferred Taxes ............................................................ 507,000 507,000
----------- -----------
Total liabilities ................................................ $ 1,187,200 $ 1,096,000
Shareholders' equity:
Preferred shares, no par value; authorized
1,000,000 shares; none outstanding ...................................... -- --
Common stock, no par value; authorized
9,000,000 shares; 3,446,988 shares issued
and outstanding ......................................................... 5,104,800 5,276,000
Retained earnings ......................................................... 5,154,600 5,159,000
----------- -----------
Total shareholders' equity ....................................... $10,259,400 $10,435,000
----------- -----------
Total liabilities and shareholders' equity ......................................... $11,446,600 $11,531,000
=========== ===========
</TABLE>
See accompanying notes to the financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
AVERT, INC.
STATEMENTS OF INCOME
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ -----------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues:
Search and product fees ....................... $ 2,475,700 $ 2,343,400 $ 4,622,200 $ 4,361,800
Interest and other income ..................... 81,500 115,000 167,700 192,600
----------- ----------- ----------- -----------
2,557,200 2,458,400 $ 4,789,900 $ 4,554,400
Expenses:
Search and product costs ...................... 1,174,900 1,051,000 2,216,900 1,946,000
Marketing ..................................... 360,100 405,200 739,200 736,400
General and administrative .................... 399,900 325,300 751,700 618,800
Software development .......................... 177,400 96,600 250,900 199,800
Depreciation and amortization ................. 149,900 113,200 261,200 177,800
----------- ----------- ----------- -----------
2,262,200 1,991,300 $ 4,219,900 $ 3,678,800
----------- ----------- ----------- -----------
Income before income taxes ............................. 295,000 467,100 570,000 875,600
Income tax expense ............................ (116,100) (183,500) (224,200) (343,300)
----------- ----------- ----------- -----------
Net income ............................................. $ 178,900 $ 283,600 $ 345,800 $ 532,300
=========== =========== =========== ===========
Net income per common share ............................ $ .05 $ .08 $ .10 $ .15
=========== =========== =========== ===========
Weighted average common
shares outstanding ............................ 3,522,800 3,493,500 3,529,400 $ 3,455,300
=========== =========== =========== ===========
</TABLE>
See accompanying notes to the financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
AVERT, INC.
STATEMENTS OF CASH FLOWS
(unaudited)
SIX MONTHS ENDED JUNE 30
------------------------
1998 1997
---- ----
<S> <C> <C>
Cash Flows From Operating Activities:
Net income .................................................... $ 345,800 $ 532,300
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ............................ 261,200 177,800
Bad debt expense ......................................... 13,100 8,100
Increase/(decrease) in marketable securities and
other gains ..................................... (162,300) (144,000)
Changes in operating assets and liabilities:
Accounts receivable ................................. (283,200) (371,000)
Prepaid expenses and other current assets ........... 12,500 (17,300)
Accounts payable .................................... 180,100 115,600
Accrued expenses .................................... (52,800) 346,200
Income taxes payable ................................ (40,000) (30,400)
Deferred revenue and deposits ....................... 3,100 94,600
--------- ---------
Net cash provided by operating activities ................ $ 277,500 711,900
Cash Flows from Investing Activities:
Additions to furniture and equipment ......................... (319,200) (909,400)
Proceeds from sale of furniture and equipment ................ -- --
--------- ---------
Net cash provided by investing activities .............. (319,200) (909,400)
Cash Flows from Financing Activities:
Purchase of Treasury Stock ............................... (171,200) --
Warrants exercised ....................................... -- 530,800
Dividends declared ....................................... (349,400) --
--------- ---------
Net cash provided by financing activities .............. (520,600) 530,800
Increase/(Decrease) in Cash and Cash Equivalents .................. 562,300 (333,300)
Cash and Cash Equivalents, beginning of period .................... 580,000 360,300
--------- ---------
Cash and Cash Equivalents, end of period .......................... $ 17,700 $ 693,600
========= =========
</TABLE>
See accompanying notes to the financial statements.
5
<PAGE>
AVERT, INC.
NOTES TO FINANCIAL STATEMENTS
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, 1997.
The results for interim periods are not necessarily indicative of results
to be expected for the fiscal year of the Company ending December 31, 1998. The
Company believes that the three 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, 1998 and 1997 covered thereby.
"The Company" or "Avert" is used in this report to refer to Avert, Inc. The
Company may from time to time make written or oral forward-looking statements,
including statements contained in the Company's filings with the Securities and
Exchange Commission and its reports to shareholders. This document may contain
forward-looking statements that are made pursuant to the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995. These
statements include, without limitation, statements relating to Avert's growth
and business strategies, regulatory matters affecting Avert, other plans and
objectives of Avert, management for future operations and activities, expansion
and growth of Avert's operations and other such matters. The words "believes,"
"expects," "intends," "strategy," "considers" or "anticipates" and similar
expressions identify forward-looking statements. The Company does not undertake
to update, revise or correct any of the forward-looking information.
Impact of recently issued accounting standards. Statement of Financial
Accounting Standards 128, "Earnings per Share" and Statement of Financial
Accounting Standards 129 "Disclosure of Information About an Entity's Capital
Structure". Statement 128 provides a different method of calculating earnings
per share than is currently used in accordance with Accounting Principles Board
Opinion 15 "Earnings per Share". Statement 128 provides for the calculation of
"basic" and "diluted" earnings per share. Basic earnings per share includes no
dilution and is computed by dividing income available to common shareholders by
the weighted average number of common shares outstanding for the period. Diluted
earnings per share reflect the potential dilution of securities that could share
in the earnings of an entity, similar to fully diluted earnings per share.
Statement 129 establishes standards for disclosing information about an entity's
capital structure. Statements 128 and 129 are effective for financial statements
issued for periods ending after December 15, 1997. Their implementation is not
expected to have a material effect on the financial statements.
Statement of Financial Accounting Standards 130. "Reporting Comprehensive
Income" and Statement of Financial Accounting Standards 131 "Disclosures About
Segments of an Enterprise and Related Information". Statement 130 establishes
standards for reporting and display of comprehensive income, its components and
accumulated balances. Comprehensive income is defined to include all changes in
equity except those resulting from investments by owners and distributions to
owners. Among other disclosures, Statement 130 requires that all items that are
required to be recognized under current accounting standards as components of
comprehensive income be reported in a financial statement that displays with the
same prominence as other financial statements. Statement 131 supersedes
Statement of Financial Accounting Standards 14 "Financial Reporting for Segments
of a Business Enterprise". Statement 131 establishes standards on the way that
public companies report financial information about operating segments in annual
financial statements and requires reporting of selected information about
operating segments in interim financial statements issued to the public. It also
establishes standards for disclosures regarding products and services,
geographic areas and major customers. Statement 131 defines operating segments
as components of a company about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance.
Statements 130 and 131 are effective for financial statements for periods
beginning after December 15, 1997 and require comparative information for
earlier years to be restated. Because of the recent issuance of these standards,
management has been unable to fully evaluate the impact, if any, the standards
may have on the future financial statement disclosures. Results of operations
and financial position, however, will be unaffected by implementation of these
standards.
6
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations
Comparison of quarters ended June 30, 1998 and June 30, 1997
Total net revenues increased from $2,458,400 for the three month period
ended June 30, 1997 to $2,557,200 for the comparable three month period in 1998
or approximately 4.0%. A key element in second quarter depressed revenue growth
was that Avert's focus continued the shift toward managing conversion activities
and communicating features and enhancements of the new computer system
implemented in April, 1998, as opposed to new product growth and development and
general marketing efforts. See "Liquidity and Capital Resources" in this item
below. The breakdown of net revenues, exclusive of product discounts and other
miscellaneous income items, is as follows:
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
June 30, 1998 June 30, 1997 Percent of
--------------------- --------------------- Increase
Revenues % total Revenues % total (Decrease)
-------- ------- -------- ------- ----------
<S> <C> <C> <C> <C> <C>
Products:
Workers compensation histories ........... $ 251,000 9.8% $ 299,600 12.2% (16.2)%
Criminal history reports ................. $1,462,000 57.2% $1,253,200 51.0% 16.7%
Previous employment reports/ ............. $ 286,000 11.2% $ 293,600 11.9% (2.6)%
credit reports
Motor vehicle driving records ............ $ 255,700 10.0% $ 260,900 10.6% (2.0)%
Other products ........................... $ 99,300 3.9% $ 118,000 4.8% (15.8)%
Services: .................................. $ 123,800 4.8% $ 118,800 4.8% 4.2%
Interest income ............................ $ 80,800 3.2% $ 77,200 3.1% 4.7%
NET REVENUES ...................... $2,557,200 $2,458,400 4.0%
</TABLE>
The largest product growth of approximately 16.7% occurred in Criminal
history reports. This product accounts for approximately 57.2% of total net
revenues for 2nd quarter 1998 as compared to approximately 51.0% of total net
revenues for 2nd quarter 1997.
As predicted, sales in the Workers' compensation histories product line
continues to decrease and represents approximately $251,000 in revenue in the
three month period ended June 30, 1998 as compared to $299,600 in revenue in the
same three month period of 1997. The Company believes this decrease is a result
of increased regulation requirements, causing a background check of this type to
be slower than desired for employers' need for quick hiring.
Service sales experienced approximately 4.2% revenue growth from $118,800
in second quarter 1997 to $123,800 in second quarter 1998. This is primarily
attributable to growth of the customer base membership in the Avert Advantage
program, which increased from $37,600 in revenues for the second three month
period in 1997, to $48,700 in revenues for the second three month period in
1998. In addition, membership fees were added for both the partner and reseller
customers in second quarter 1998, representing approximately $18,300, as
compared to $0 in the second quarter 1997. Two partner relationships, ADP and
Restrak were formed in second quarter 1998 and are considered a focus for the
remainder of 1998.
Growth in the remaining sales categories remained flat as a percentage of
total net revenues in the three month period ended June 30, 1998 as compared to
the same three month period in 1997.
Income before income taxes decreased from $467,100 in second quarter 1997
to $295,000 in second quarter 1998, or approximately 36.8% and represented
approximately 19.0% of total net revenues in 1997 compared to approximately
11.5% in 1998, resulting from increases in several expense categories as well as
depressed revenue growth.
Total expenses increased from $1,991,300 for the three month period ended
June 30, 1997 to $2,262,200 for the comparable period in 1998 or approximately
12.0%. A breakdown in expenses is as follows:
7
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended Increase (Decrease)
June 30, 1998 June 30, 1997 % of Revenues
-------------------------- ------------------------ ------------------
Expenses % of Revenue Expenses % of Revenue 1998 over 1997
-------- ------------ -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Search and product ........................... $1,174,900 45.9% $1,051,000 42.8% 3.1%
Marketing .................................... 360,100 14.1 405,200 16.5 (2.4)
General and administration ................... 399,900 15.6 325,300 13.2 2.4
Software development ......................... 177,400 6.9 96,600 3.9 3.0
Depreciation and amortization ................ 149,900 5.9 113,200 4.6 1.3
---------- ---- ---------- ---- ---
Expenses ............................ $2,262,200 88.4% $1,991,300 81.0% 7.4%
========== ==== ========== ==== ===
</TABLE>
Search and product fees increased approximately 3.1% as a percentage of net
revenues in the second quarter 1998 over the second quarter 1997. The majority
of the increase was attributable to the increasing costs from sources of
obtaining criminal history information, as well as the criminal history product
as the one most susceptible to market pricing pressures. Another main area of
increased expenses in this category resulted from increased personnel costs
associated with staffing an expanded customer service department to improve
customer coverage, and increased temporary staffing for the labor intensive
products such as reference checks and education verifications. Additional labor
costs, associated with the computer conversion, were approximately $16,600 for
the second quarter 1998. In addition, there was a small increase in computer
telephone costs associated with a greater percentage of customers moving to
remote order placement and retrieval. There was a decrease in expenses when
expressed as a percentage of total net revenues in the areas of motor vehicle
records, workers' compensation reports, and name link reports.
There was an approximate 2.4% decrease in marketing expenses as a
percentage of total net revenues, in the second three months of 1998 as compared
to the second three months of 1997. Though there is an on-going marketing
campaign designed to target lead generation, marketing communication and market
development for both current customers and new customers, as stated previously,
the focus for all Avert personnel in second quarter 1998 was to manage the
computer conversion and its impact on Avert customers. There were no outgoing
marketing activities due to the implementation of the new computer system, its
features and benefits. See "Liquidity and Capital Resources" below in this item
for further discussion. Marketing personnel costs decreased as a percentage of
total net revenues from approximately 7.3% in second quarter 1998 from 10.8% in
second quarter 1997.
General and Administrative expenses increased approximately $74,600 in the
second three month period ended June 30, 1998, representing approximately 15.6%
of total net revenues, as compared to the second three month period ended June
30, 1997 quarter 1997, representing 13.2% of total net revenues. The increase
was primarily due to several main areas. Firstly, an additional $12,000 per
quarter is being accrued for potential uncollectible accounts due to a
substantial reseller write-off in accounts receivable. Secondly, Avert has
increased personnel and their associated costs in the area of compliance to
better staff the Help Desk resulting from the increased membership in the Avert
Advantage programs. Lastly, there are additional costs of approximately $5,200
associated with errors and omission insurance, obtained during the first quarter
of 1998 that was not in effect in second quarter 1997.
The increase of approximately 3.0% in software development expenses as a
percentage of total net revenues in the three month period ended June 30, 1998
as compared to the three month period ended June, 1997, resulted from the
expenses related to the development of new software and upgrade of existing
software. See "Liquidity and Capital Resources" below in this Item for further
discussion. Increased staff and consultants to complete the conversion
represented an approximate $61,000 increase in associated expenses from second
quarter 1998 over second quarter 1997. In addition, additional education
expenses were incurred in the three months ended June 30 1998 over 1997. These
additional costs associated with enhancements will continue through 1998 as
well.
8
<PAGE>
The depreciation and amortization expenses have increased by approximately
1.3% of total net revenues in the three month period in 1998 as compared to the
same period in 1997 due to the fact that the software previously developed had
been put into actual use fully on April 1, 1998. Capitalization occurred in the
software development activities as well as additional computer hardware
purchases required for the computer conversion.
Income taxes remained stable for the combined federal and state statutory
rate at approximately 39% for both second quarter 1998 and second quarter 1997,
resulting in net income of $283,600 or $.08 per share on 3,493,484 shares for
the second three months ended June 30, 1997, as compared to net income of
$178,900 or $.05 per share on 3,522,799 shares for the second three months ended
June 30, 1998.
Comparison of six months ended June 30, 1998 and June 30, 1997
Net revenues increased from $4,554,400 for the six month period ended June
30, 1997, to $4,789,900 for the comparable six month period in 1998 or
approximately 5.2%. The breakdown of net revenues, exclusive of product
discounts and other miscellaneous income items, is as follows:
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
June 30, 1998 June 30, 1997 Percent of
------------------- ------------------- Increase
Revenues % total Revenues % total (Decrease)
-------- ------- -------- ------- ----------
<S> <C> <C> <C> <C> <C>
Products:
Workers compensation histories ........... $ 492,800 10.3% $ 596,200 13.1% (17.3)%
Criminal history reports ................. $2,577,500 53.8% $2,265,500 49.7% 13.8%
Previous employment reports/ ............. $ 554,300 11.6% $ 523,200 11.5% 6.0%
credit reports
Motor vehicle driving records ............ $ 507,100 10.6% $ 522,400 11.5% (2.9)%
Other products ........................... $ 245,100 5.1% $ 223,600 4.9% 10.0%
Services: .................................. $ 248,900 5.2% $ 233,200 5.1% 6.7%
Interest income ............................ $ 164,700 3.4% $ 154,400 3.4% 6.7%
NET REVENUES ...................... $4,789,900 $4,554,400 5.2%
</TABLE>
Moderate growth in sales of most all of the Company's products occurred
during the first six months of 1998 with the largest increase being Criminal
history reports. They represented approximately 53.8% of total net revenues, or
$2,577,500 in the first six months of 1998, as compared to approximately 49.7%
of total net revenues, or $2,265,500 in the first six months of 1997.
Workers' compensation reports continued its downward trend, decreasing from
$596,200 in revenues for the six month period ended June 30, 1997 to $492,800 in
revenues for the six month period ended June 30, 1998. . The regulation
requirements of this product have made it less viable in the marketplace.
The Services category increased as a percentage of total net revenues by
approximately 6.7% when comparing first six months of 1998 to first six months
of 1997. The increase resulted primarily from increased membership in Avert
Advantage programs, along with the implementation of the partner and reseller
equivalent programs. Partner relationships will continue to be a focus of Avert
through the end of 1998.
9
<PAGE>
The category of "Other Products" experienced an increase of approximately
10% of total net revenues in the first six months ended June 30, 1998 as
compared to the first six months ended June 30, 1997. This increase was a result
of increased employment applications sales and package sales. Packages are a
direct result of increased capabilities made possible by the recent computer
conversion, allowing customers to set up custom packages, comprised of products
and services to allow ease of order entry. Avert believes this area will have a
positive impact on future revenues.
Income before income taxes decreased from $875,600 in the six month
period ended June 30, 1997 to $570,000 in the six month period ended June 30,
1998 or approximately 34.9% and represented approximately 11.9% of net revenues
in the first six months of 1998 compared to approximately 19.2% in the first six
months of 1997.
Total expenses increased from $3,678,800 for the six month period ended
June 30, 1997 to $4,219,900 for the comparable period in 1997. A breakdown in
expenses is as follows:
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended Increase (Decrease)
June 30, 1998 June 30, 1997 % of Revenues
------------------------- -------------------------- ------------------
Expense % of Revenue Expense % of Revenue 1998 over 1997
------- ------------ -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Search and product .................. $2,216,900 46.3% $1,946,000 42.7% 3.6%
Marketing ........................... 739,200 15.4 736,400 16.2 (0.8)
General and administration .......... 751,700 15.7 618,800 13.6 2.1
Software development ................ 250,900 5.2 199,800 4.4 0.8
Depreciation and amortization ....... 261,200 5.5 177,800 3.9 1.6
---------- ---- ---------- ---- ---
Expenses ................... $4,219,900 88.1% $3,678,800 80.8% 7.3%
========== ==== ========== ==== ===
</TABLE>
Total expenses increased approximately 7.3% as a percentage of total net
revenues in the first six month period of 1998 as compared to the first six
month period of 1997. The primary increase was in the area of Search and
Products costs, which increased due to an increasingly large proportion of
criminal history reports in Avert's product mix resulting in an increased
proportion of product costs. In addition, this product is susceptible to a high
degree of market pricing pressure, and there have been increases in data costs
directly from public sources.
The slight decrease in Marketing expenses in the six month period ended
June 30, 1998 over the six month period ended June 30, 1997 resulted primarily
from a decrease in outgoing marketing activities due to the in-house computer
conversion activities.
There was an increase of approximately 2.1% of total net revenues in
general and administrative expenses in the first six month period ended June 30,
1998 as compared to the same period in 1997, resulting primarily from increased
accruals for uncollectible accounts, and increased personnel costs for
compliance.
Due to the development of new software used in revenue generation
activities and increased computer hardware costs associated with this software,
depreciation and amortization expenses have increased approximately 1.6% of
total net revenues from the six month period ended June 30, 1997 to the six
month period ended June 30, 1998. Phase I of the software began depreciating in
the second quarter 1997, and Phase II software depreciation began in April,
1998.
10
<PAGE>
Income taxes varied slightly for the combined federal and state statutory
rate of approximately 39% in both of the first six months of 1997 and 1998. This
resulted in a decrease of net income of $532,300 or $.15 per share on 3,455,300
shares for the six months ended June 30, 1997, to net income of $345,800 or $.10
per share on 3,529,400 shares for the six months ended June 30, 1998.
Liquidity and Capital Resources
The Company's financial position at June 30, 1998 remained strong with
working capital at that date of $7,309,400 compared to $7,543,000 at December
31,1997. Cash and cash equivalents and marketable securities at June 30, 1998
were $6,293,000 and decreased from $6,693,000 at December 31, 1997. Net cash
provided from operations for the six month period ended June 30, 1998 was
$277,500 and consisted primarily of net income of $345,800, a $283,200 increase
in accounts receivable, a $180,100 increase in accounts payable, and a $261,200
increase in depreciation expenses. The Company had capital expenditures of
$319,200 for the six month period ended June 30, 1998 as compared to $909,400
for the six months ended June 30, 1997. The majority of the capital expenditures
during the six months ended June 30, 1998 were attributable to the development
of new software and upgrade of existing hardware and software. The Company
expects ongoing enhancements to its computer system through 1998. Such
enhancements are believed to be necessary in order to foster cost-effective
partnerships. Other enhancements are expected to directly enhance Avert's
ability to produce a higher volume of reports without incurring additional
staffing expenses. Development and upgrade of the software will be financed by
available cash derived from past or continued operations. Implementation of the
new software was April, 1998 with ongoing enhancements throughout 1998. Net cash
used in financing activities for the six month period ended June 30, 1998 was
$520,600 and consisted of $171,200 for stock repurchased and $349,400 for the
special dividend declared in first quarter, 1998.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
NONE
ITEM 6. Exhibits and Reports on Form 8-K
(a) 4th Quarter and Year-End Results
(b) Errors and Omissions Insurance Coverage
11
<PAGE>
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 13, 1998 BY: /s/ Dean A. Suposs
--------------------------------------
Dean A. Suposs, President
DATE: August 13, 1998 BY: /s/ Jamie M. Burgat
--------------------------------------
Jamie M. Burgat, Vice President of
Operations and Chief Financial Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 17,700
<SECURITIES> 6,275,300
<RECEIVABLES> 1,522,700
<ALLOWANCES> (119,000)
<INVENTORY> 0
<CURRENT-ASSETS> 7,989,600
<PP&E> 4,672,900
<DEPRECIATION> (1,215,900)
<TOTAL-ASSETS> 11,446,600
<CURRENT-LIABILITIES> 680,200
<BONDS> 0
0
0
<COMMON> 5,104,800
<OTHER-SE> 5,154,600
<TOTAL-LIABILITY-AND-EQUITY> 11,446,600
<SALES> 2,475,700
<TOTAL-REVENUES> 2,557,200
<CGS> 1,174,900
<TOTAL-COSTS> 2,262,200
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 295,000
<INCOME-TAX> 116,100
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 178,900
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
