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, 1999
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 2, 1999 the issuer had 3,323,025 shares of Common Stock, no
par value, outstanding.
Transitional Small Business Disclosure Format.
[ ] Yes [ X ] No
<PAGE>
Form 10-QSB
Quarter Ended June 30, 1999
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 ............................................................. 14
2
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
AVERT, INC.
BALANCE SHEETS
ASSETS
JUNE 30, DECEMBER 31,
1999 1998
----------- -----------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents............................$ 492,000 $ 531,000
Marketable securities ................................ 6,151,000 6,006,000
Accounts receivable, net of allowance ................ 1,499,000 1,061,000
Prepaid expenses and other ........................... 169,000 172,000
----------- -----------
Total current assets ........................ $ 8,311,000 7,770,000
Property and equipment, net ................................... 3,076,000 3,138,000
Other assets .................................................. 29,000 0
----------- -----------
Total assets .................................................. $11,416,000 $10,908,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ..................................... $ 380,000 $ 297,000
Accrued expenses ..................................... 282,000 119,000
Deferred revenue ..................................... 2,000 5,000
----------- -----------
Total current liabilities ................... 664,000 421,000
Deferred Taxes ....................................... 476,000 476,000
----------- -----------
Total liabilities ........................... $ 1,140,000 $ 897,000
Shareholders' equity:
Preferred shares, no par value; authorized
1,000,000 shares; none outstanding ................. -- --
Common stock, no par value; authorized
9,000,000 shares; 3,323,025 shares issued
and outstanding .................................... 4,462,000 4,462,000
Retained earnings .................................... 5,814,000 5,549,000
----------- -----------
Total shareholders' equity .................. $10,276,000 $10,011,000
----------- -----------
Total liabilities and shareholders' equity .................... $11,416,000 $10,908,000
=========== ===========
</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,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues:
Search and product fees ....................... $ 2,896,000 $ 2,475,700 $ 5,312,500 $ 4,622,200
Interest and other income ..................... 81,200 81,500 156,900 167,700
----------- ----------- ----------- -----------
$ 2,977,200 $ 2,557,200 $ 5,469,400 $ 4,789,900
Expenses:
Search and product costs ...................... 1,297,000 1,204,200 2,396,000 2,271,300
Marketing ..................................... 310,700 360,100 659,700 739,200
General and administrative .................... 406,000 370,600 749,500 697,300
Software development .......................... 106,800 177,400 238,400 250,900
Depreciation and amortization ................. 149,700 149,900 298,500 261,200
----------- ----------- ----------- -----------
2,270,200 2,262,200 $ 4,342,100 $ 4,219,900
----------- ----------- ----------- -----------
Income before income taxes ............................. 707,000 295,000 $ 1,127,300 570,000
Income tax expense ............................ (277,700) (116,100) (442,800) (224,200)
----------- ----------- ----------- -----------
Net income ............................................. $ 429,300 $ 178,900 $ 684,500 $ 345,800
=========== =========== =========== ===========
Net income per common share ............................ $ .13 $ .05 $ .21 $ .10
=========== =========== =========== ===========
Weighted average common
shares outstanding ............................ 3,323,024 3,522,800 3,323,024 3,529,400
=========== =========== =========== ===========
</TABLE>
See accompanying notes to the financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
AVERT, INC.
STATEMENTS OF CASH FLOWS
(unaudited)
SIX MONTHS ENDED JUNE 30,
1999 1998
---- ----
<S> <C> <C>
Cash Flows From Operating Activities:
Net income ............................................................. $ 684,500 $ 345,800
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ..................................... 298,500 261,200
Bad debt expense .................................................. 36,600 13,100
Increase/(decrease) in marketable securities and
other gains .............................................. (145,000) (162,300)
Changes in operating assets and liabilities:
Accounts receivable .......................................... (474,900) (283,200)
Prepaid expenses and other current assets .................... (26,100) 12,500
Accounts payable ............................................. 83,000 180,100
Accrued expenses ............................................. 117,600 (52,800)
Income taxes payable ......................................... 45,400 (40,000)
Deferred revenue and deposits ................................ (3,000) 3,100
--------- ---------
Net cash provided by operating activities ......................... $ 616,600 $ 277,500
Cash Flows from Investing Activities:
Additions to furniture and equipment .................................. (236,300) (319,200)
Proceeds from sale of furniture and equipment ......................... -- --
--------- ---------
Net cash provided by investing activities ....................... (236,300) (319,200)
--------- ---------
Cash Flows from Financing Activities:
Purchase of Treasury Stock ........................................ -- (171,200)
Dividends declared ........................................ (419,300) 349,400
--------- ---------
Net cash provided by financing activities ....................... (419,300) (520,600)
Increase/(Decrease) in Cash and Cash Equivalents ........................... (39,000) (562,300)
Cash and Cash Equivalents, beginning of period ............................. 531,000 580,000
--------- ---------
Cash and Cash Equivalents, end of period ................................... $ 492,000 $ 17,700
========= =========
</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, 1998.
The results for interim periods are not necessarily indicative of results
to be expected for the fiscal year of the Company ending December 31, 1999. 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, 1999 and 1998 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.
New Pronouncement. SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," was issued in June 1998. This statement establishes
accounting and reporting standards for derivative instruments and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value. This statement is effective for the Company's
financial statements for the year ended June 30, 200 and the adoption of this
standard is not expected to have a material effect on the Company's financial
statements.
SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits," was issued in February 1998. This statement revises the disclosure
requirement for pensions and other postretirement benefits. This statement is
effective for the Company's financial statements for the year ended June 30,
1999 and the adoption of this standard is not expected to have a material effect
on the Company's financial statements.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," was issued in June 1997. This statement establishes standards for
the way public business enterprises report information about operating segments.
It also establishes standards for related disclosure about products and
services, geographical areas and major customers. This statement is effective
for the company's financial statements for the year ended June 30, 1999 and the
adoption of this standard is not expected to have a material effect on the
Company's financial statements.
SFAS No. 130, "Reporting Comprehensive Income" was issued in June 1997. This
statement 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 components of comprehensive income shall be classified based
on their nature and shall be reported in the financial statements in the period
in which they are recognized. A total amount for comprehensive income shall be
displayed in the financial statements where the components of other
comprehensive income are reported. This statement is effective for the Company's
financial statements for the year ended June 30, 1999 and the adoption of this
standard is not expected to have a material effect on the Company's financial
statements.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations
Comparison of quarters ended June 30, 1999 and June 30, 1998
Total net revenues increased from $2,557,200 for the three-month period
ended June 30, 1998, to $2,977,200 for the comparable three-month period in
1999, or approximately 16.4%. This increase was primarily due to the overall
growth of its customer base and their increased membership in Avert programs.
There were 6350 customers that actually used Avert services the second three
months of 1999, as compared to 5,296 the second three months of 1998,
representing approximately a 20% increase. The dollars spent per customer in the
second quarter 1999 was $457 as compared to $463 in the second quarter 1998,
representing an approximate 1.4% decrease. The Company believes that there
continues to be a very low unemployment rate job market where there are
substantially fewer job applicants to screen than in a higher unemployment rate
job market.
Another key element in the improved second quarter 1999 revenue growth, was
that the Company was able to focus on obtaining 1,034 new customers as compared
to 499 in the second quarter 1998. Additional focus has been on implementation
of improvements in order processing, and other features and enhancements made
possible by the new computer system implemented in April, 1998. 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, 1999 June 30, 1998 Percent of
------------------------- ----------------------- Increase
Revenues % total Revenues % total (Decrease)
-------- ------- -------- ------- ----------
<S> <C> <C> <C> <C> <C>
Products:
Workers compensation histories ........... $ 225,000 7.6% $ 251,000 9.8% (10.4)%
Criminal history reports ................. $1,715,200 57.6% $1,462,000 57.2% 17.3%
Reference Check reports/ ................. $ 295,500 9.9% $ 287,700 11.3% 2.7%
Credit reports
Motor vehicle driving records ............ $ 345,900 11.6% $ 255,700 10.0% 35.3%
Other products ........................... $ 146,400 4.9% $ 97,600 3.8% 50.0%
Services: .................................. $ 184,700 6.2% $ 123,800 4.8% 49.2%
Interest income ............................ $ 75,200 2.5% $ 80,800 3.2% (6.9)%
NET REVENUES ...................... $2,977,200 $2,557,200 16.4%
</TABLE>
The largest single product growth of approximately 35.3% occurred in Motor
Vehicle Driving records. This product line accounted for approximately $345,900
or approximately 11.6% of total net revenues in the three-month period ended
June 30, 1999, as compared to approximately $255,700 or 10.0% in the same
three-month period of 1998. Internal enhancements specific to this product line,
improving turnaround time were implemented in first quarter 1999, positively
impacting the customer base in their quest for quicker hiring decisions.
Enhanced automated features made possible by the new computer system implemented
in second quarter 1998, currently being piloted by several customers has
increased the usage of this product.
7
<PAGE>
The Criminal History product line experienced growth of approximately 17.3%
in second quarter 1999 over second quarter 1998. The product contributed
$1,715,200 to total net revenues in the second quarter 1999, as compared to
$1,462,000 to total net revenues in the second quarter 1998. The Company
believes there continues to be a nationwide trend to check prospective
employees' criminal records and it continues to have as a key initiative,
obtaining the quickest, most accurate data available.
There was an increase as a percentage of total net revenues of
approximately 50.0% in "Other Products", representing $146,400 in the second
three-month period of 1999, and $97,600 in the second three-month period of
1998. This increase was primarily due to a new product called Instant Address
Link, just introduced in first quarter 1999. Through its links with the service
bureaus this product offers an address locator service that identifies up to
three known addresses for an applicant, based on social security number usage.
Customers can match the findings of the report with information provided by the
applicant. Additionally,
Instant Address Link can be used to "build" a ready-to-go order for
criminal records searches that match the addresses identified. Customers can
order the criminal records on-line with just a click of the mouse.
There was relative flat revenue growth of approximately 2.7% generated in
the areas of education/credential verification and credit reports, which
increased from $287,700 in the second quarter of 1998 to $295,500 in the second
quarter of 1999.
Workers' compensation histories continued to decline as a percentage of net
revenues as previously predicted. In second quarter, 1999 workers' compensation
reports, represented $225,000 or approximately 7.6% of total net revenues, as
compared to $251,000 for the second three months of 1999, or approximately 9.8%
of total net revenues. The Company believes it will continue to decrease as a
percentage of total net revenues.
Service sales experienced approximately 49.2% revenue growth from $123,800
in the three-month period ended June 30, 1999, to $184,700 in the three-month
period ended June 30, 1999. This increase is primarily attributable to growth of
the customer base membership in the Avert Advantage and Avert Advantage On-line
programs, which increased from $67,000 in revenues for the second quarter 1998
to $108,900 for the second quarter in 1999.
Income before income taxes increased from $295,000 in second quarter 1998,
to $707,000 in second quarter 1999 or approximately 139.7% and represented
approximately 11.5% in 1998, as compared to approximately 23.8% in 1999. The
Company believes that decreases in all expenses areas was a direct result of
decreased head count, and increased internal efficiencies and capacity made
possible by the new computer system implemented in April 1998.
Total expenses, when expressed as a percentage of total net revenues,
decreased from approximately 88.4% in the second three-month period of 1998,
representing $2,262,200 to approximately 76.3% in the second three-month period
of 1999, representing $2,270,200. A breakdown in expenses is as follows:
8
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended Increase (Decrease)
June 30, 1999 June 30, 1998 % of Revenues
---------------------------- ------------------------- -------------------
Expenses % of Revenue Expenses % of Revenue 1999 over 1998
---------------------------- --------- -------------- -------------------
<S> <C> <C> <C> <C> <C>
Search and product ........................ $1,297,000 43.6% $1,204,200 47.1% (3.5)%
Marketing ................................. 310,700 10.5 360,100 14.1 (3.6)
General and administration ................ 406,000 13.6 370,600 14.4 (0.8)
Software development ...................... 106,800 3.6 177,400 6.9 (3.3)
Depreciation and amortization ............. 149,700 5.0 149,900 5.9 (0.9)
---------- ---- ---------- ---- ----
Expenses ......................... $2,270,200 76.3% $2,262,200 88.4% (12.1)%
========== ===== ========== ==== ====
</TABLE>
Search and product fees decreased approximately 3.5% as a percentage of net
revenues in the second quarter 1999 over the second quarter 1998. The majority
of the decrease was attributable to the improved automation of the Company's
supply chain, specifically decreasing costs of obtaining criminal history
information from sources. Despite the level of increased product growth
mentioned above, the Company was able to decrease head count in the operations
area of 16.1 full-time equivalents, or approximately 32.1%, in second quarter
1999, as compared to second quarter 1998. This was also due to improved internal
efficiencies brought about by the new computer system.
There was an approximate 3.6% decrease as a percentage of total net
revenues in marketing expenses, in the second three- month period of 1999 as
compared to the same period 1998. This resulted primarily from a decrease of 2.1
full-time equivalents, or approximately 12.9%, as well as decreased costs
associated with lead generation activities, in the second quarter 1999 as
compared to the second quarter 1998. The reduction in marketing staff is a
result of the Company's emphasis on partnership selling to large corporate
accounts. During the second quarter in 1999, several new corporate account
customers were signed through partnerships.
The company has reduced expenditures in certain lead generation activities
such as yellow pages advertising and broadcast fax as it transitions its
marketing activities to web-based lead generation programs. Examples of
web-based lead generation activities include web site links with other human
resource providers, banner advertisements, listings on Internet portals, email
messages sponsored by human resource publications, and additional information
services on our own web site.
General and Administrative expenses decreased approximately .8% as a
percentage of total net revenues in the second three months ended June 30, 1999,
representing approximately 13.6%, as compared to the second three months ended
June 30, 1998 representing 14.4% of total net revenues. There was a decrease of
2.0 full-time equivalents, or approximately 17.7%, from second quarter 1999 over
second quarter 1998, as well as reduced expenditures for temporary personnel.
There was a decrease in software development and maintenance expenses
expressed as a percentage of total net revenues to approximately 3.6% in second
quarter 1999 from approximately 6.9% in the comparable period of 1998. The
primary reason for the reduction of expenses is the decrease in second quarter
1999 of expenditures associated with outside consultants required for the
computer system implementation in second quarter 1998. In addition, a portion of
personnel costs were capitalized in the second three-month period of 1999, as
compared to the second three-month period of 1998, in which all personnel costs
were expensed. These personnel costs in second quarter 1999 were directly
9
<PAGE>
associated with the development and implementation of software required for the
joint marketing venture with ADP recently announced. The software provides for
enhanced capabilities for volume specifically in the areas of customer setup,
customer management and order processing. The software will be put into actual
production during third quarter 1999, at which point depreciation costs will
begin. The Company continues to focus on making technology its strategic
advantage in its relationships with customers, partners and suppliers.
There was a decrease in depreciation and amortization expenses when
expressed as a percentage of total net revenues, from approximately 5.9% in the
second three months of 1998, to approximately 5.0% in the comparable period of
1999. This decrease was primarily due to the decrease of depreciation as a
result of the sale of an automobile.
Income taxes for the combined federal and state statutory rate was
approximately 39% in both second quarter periods of 1999 and 1998. The result
was net income of $429,300 or $.13 per share on 3,323,024 shares (weighted
average shares plus common stock equivalents) for the second three months ended
June 30, 1999, as compared to net income of $178,900 or $.05 per share on
3,522,800 shares (weighted average shares plus common stock equivalents) for the
second three months ended June 30, 1998. The increased net income generated in
second quarter 1999 represented an approximate 140% increase over the net income
generated in second quarter 1998.
Comparison of six months ended June 30, 1999 and June 30, 1998
Net revenues increased from $4,789,900 for the six-month period ended June
30, 1998, to $5,469,400 for the comparable six-month period in 1999 or
approximately 14.2%. 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, 1999 June 30, 1998 Percent of
----------------------------- ----------------------------- Increase
Revenues % total Revenues % total (Decrease)
-------- ------- -------- ------- ----------
<S> <C> <C> <C> <C> <C>
Products:
Workers compensation histories ...... $ 429,600 7.9% $ 492,800 10.3% (12.8)%
Criminal history reports ............ $3,119,700 57.0% $2,560,000 53.4% 21.9%
Reference Check reports/ ............ $ 536,300 9.8% $ 583,900 12.2% (8.2)%
Credit reports
Motor vehicle driving records ....... $ 628,100 11.5% $ 507,100 10.6% 23.9%
Other products ...................... $ 271,400 5.0% $ 215,500 4.5% 25.9%
Services: ............................. $ 371,600 6.8% $ 226,400 4.7% 64.1%
Interest income ....................... $ 149,300 2.7% $ 164,700 3.4% (9.4)%
--------- --------- -----
NET REVENUES ................. $5,469,400 $4,789,900 14.2%
========= ========= =====
</TABLE>
The largest single product line growth of approximately 23.9%, during the
first six months of 1999 over the first six month of 1998, was Motor vehicle
driving records. It represented approximately 11.5% of total net revenues, or
$628,100 in the first six months of 1999, as compared to approximately 10.6% of
total net revenues, or $507,100 in the first six months of 1998. The Criminal
History product line experienced continued growth of approximately 21.9% in the
six-month period ended June 30, 1999 as compared to the six-month period ended
June 30, 1998. It has increased as a percentage of total net revenues from
approximately 53.4% in the first six months of 1998, representing $2,560,000, to
approximately 57.0% in the same period of 1999, representing $3,119,700.
10
<PAGE>
Workers' compensation reports continued its downward trend, decreasing from
$492,800 in revenues for the six-month period ended June 30, 1998 to $429,600 in
revenues for the six-month period ended June 30, 1999. 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 64.1% when comparing the first six months of 1999 to the first six
months of 1998. The increase resulted primarily from increased membership in
Avert Advantage and Avert Advantage On-line programs, along with the partner
equivalent programs. Partner relationships have continued to be a focus of Avert
in 1999, as evidenced by the recent announcements of ADP joint venture
relationship and national rollout.
The category of "Other Products" experienced an increase of approximately
25.9% of total net revenues in the first six months ended June 30, 1999 as
compared to the first six months ended June 30, 1998. This increase was
primarily a result of the new product Instant Address Link introduced in first
quarter 1999 which is an address locator service that identifies up to three
known addresses for an applicant, based on social security number usage. These
addresses can be used by customers to "buil criminal history orders in those
geographical areas. In addition, package sales increased approximately 42.7% in
the first six months of 1999, as compared to the same period in 1998. Packages
are a direct result of increased capabilities made possible by the computer
conversion in April 1998, 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, and has been the model
for the ADP joint marketing venture.
Income before income taxes increased from $570,000 in the six-month period
ended June 30, 1998 to $1,127,300 in the six- month period ended June 30, 1999
or approximately 97.8%. This represented approximately 11.9% of net revenues in
the first six months of 1998 compared to approximately 20.6% in the first six
months of 1999.
Total expenses increased from $4,219,900 for the six-month period ended
June 30, 1998 to $4,342,100 for the comparable period in 1999. A breakdown in
expenses is as follows:
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended Increase (Decrease)
June 30, 1999 June 30, 1998 % of Revenues
------------------------ --------------------------- ------------------
Expense % of Revenue Expense % of Revenue 1998 over 1997
------- ------------ ------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
Search and product ................. $2,396,000 43.7% $2,271,300 47.4% (3.7)%
Marketing .......................... 659,700 12.1 739,200 15.4 (3.3)
General and administration ......... 749,500 13.7 697,300 14.6 (0.9)
Software development ............... 238,400 4.4 250,900 5.2 (0.8)
Depreciation and amortization ...... 298,500 5.5 261,200 5.5 0.0
---------- ----- ---------- ----- -----
Expenses .................. $4,342,100 79.4% $4,219,900 88.1% (8.7)%
========== ===== ========== ===== =====
</TABLE>
11
<PAGE>
Total expenses decreased approximately 8.7% as a percentage of total net
revenues in the first six-month period of 1999 as compared to the first
six-month period of 1998. One of the primary decreases was in the area of Search
and Products costs, which decreased as a result of increased efficiencies and
decreased head count directly enabled by the new computer system implemented in
second quarter 1998. The other primary area in which expenses decreased was
Marketing, which resulted from a decrease in head count and costs associated
with lead generation activities.
There was a slight decrease as a percentage of total net revenues in both
general and administrative and software development expenses in the first
six-month period ended June 30, 1999 as compared to the same period in 1998.
These decreases resulted primarily from a decrease in head count in general and
administration area, and amortized personnel costs associated with the
development and implementation of software required for the recently announced
ADP joint marketing venture in the software development area.
Income taxes for the combined federal and state statutory rate remained at
approximately 39% in both the first six months of 1998 and 1999. The result was
an increase of net income of approximately 97.9%, representing $345,800 or $.10
per share on 3,529,400 shares for the six months ended June 30, 1998, as
compared to $684,500 or $.21 per share on 3,323,024 shares for the six months
ended June 30, 1999.
Liquidity and Capital Resources
The Company's financial position at June 30, 1999 remained strong with
working capital at that date of $7,647,000 compared to $7,349,000 at December
31,1998. Cash and cash equivalents and marketable securities at June 30, 1999
were $6,151,000 and increased from $6,006,000 at December 31, 1998. Net cash
provided from operations for the six-month period ended June 30, 1999 was
$616,600 and consisted primarily of net income of $684,500, a $474,900 increase
in accounts receivable, and a $117,600 increase in accrued expenses. The Company
had capital expenditures of $236,300 for the six-month period ended June 30,
1999 as compared to $319,200 for the six months ended June 30, 1998. The
majority of the capital expenditures during the six months ended June 30, 1999
were attributable to the development of new software and upgrade of existing
hardware for the ADP joint marketing venture and ongoing enhancements. Net cash
used in financing activities for the six-month period ended June 30, 1999 was
$419,300 and consisted of a cash dividend of $.12 per common share payable on
March 24, 1999 to shareholders of record on March 15, 1999.
12
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
NONE
ITEM 6. Exhibits and Reports on Form 8-K
(a) 1998 Avert Index
(b) Leaders OnLine from Heidrick & Struggles Internet Partnership
(c) 1st Quarter 1999 Results
(d) Avert/ADP Joint Marketing Venture with Emerging Business Services
Division
13
<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 2, 1999 BY: /s/ Dean A. Suposs
--------------------------------------
Dean A. Suposs, President
DATE: August 2, 1999 BY: /s/ Jamie M. Burgat
--------------------------------------
Jamie M. Burgat, Vice President of
Operations and Chief Financial Officer
14
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1999
<CASH> 492,000
<SECURITIES> 6,151,000
<RECEIVABLES> 1,592,000
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0
0
<COMMON> 4,462,000
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<SALES> 2,896,000
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