SECURITIES AND EXCHANGE COMMISSION Washington, D.C.
20549
FORM 10-QSBA
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended: March 31, 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: 33-95782-D
Applied Computer Technology, Inc.
(Exact name of registrant as specified in its charter)
Colorado 84-1164570
(State of incorporation) (I.R.S. Employer ID No.)
2573 Midpoint Drive
Fort Collins, Colorado 80525
(Address of principal executive offices)
(970) 490-1849
(Registrant's telephone number)
Indicate by check mark whether the Registrant (1) has filed all reports
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
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes
X No___
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date.
As of April 30, 1996, the registrant had 3,040,000 shares of
Common Stock, no par value, outstanding.
APPLIED COMPUTER TECHNOLOGY, INC.
FORM 10-QSBA
INDEX
Page Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as of March 31, 1996 and December 31,1995
3-
4
Statements of Operations for the
Three Months Ended March 31, 1996 and
1995....................................
.. 5
Statements of Cash Flows for the Three
Months Ended March 31, 1996 and
1995........................
6-
7
Notes to the Financial
Statements...............................
.. ..
89
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations .............................
10
PART II. OTHER INFORMATION
Item 6. Exhibits and
Reports on Form 8-K..... 11 2
PART I.
FINANCIAL INFORMATION Item 1.
Financial Statements
APPLIED COMPUTER TECHNOLOGY,
INC. BALANCE SHEETS
March 31,
December 31,
1996 1995
(unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 666,468
$1,277,075
Accounts receivable 2,202,579
1,780,054
Inventories 1,798,794
1,442,655
Prepaid expenses 294,594
177,488
Income tax refund
receivable 155,900
155,900
Deferred income tax asset 18,700
18,700
Other current assets 26,913
50,051
Total current assets 5,163,948 4,901,923
PROPERTY AND EQUIPMENT - at cost:
Office and computer
equipment 1,204,361
1,025,000
Vehicles 109,325 109,325
Promotion equipment 28,729 28,729
Leasehold improvements 74,803 74,803
1,417,218 1,237,857
Less accumulated
depreciation (450,151) (402,329)
Net property and
equipment 967,067 835,528
OTHER ASSETS
Trademarks (net of accumulated
amortization of $2,160 in 1996
and $2,544 in 1995) 8,742 9,126
Deposits and other assets 18,427 15,429
Total other assets 27,169 24,555
Total assets $6,158,184
$5,762,006
The accompanying Notes are an integral part of this
financial statement
APPLIED COMPUTER
TECHNOLOGY, INC.
BALANCE SHEETS
(continued)
March 31, December31,
1996 1995
(unaudited)
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES:
Accounts payable $856,020 $ 482,082
Customer deposits 52,502 52,502
Accrued liabilities 144,252 183,583
Current income taxes
payable 13,753 -
Current portion of
long-term liabilities 81,712 100,000
Total current liabilities 1,148,239 818,167
LONG-TERM LIABILITIES:
Notes Payable 666,612 646,577
Obligations under
operating lease 5,359 5,500
Deferred income tax
liability 40,300 40,300
712,271 692,377
Less portion due within
one year (81,712) (100,000)
Net long-term
liabilities 630,559 592,377
Total Liabilities 1,778,798 1,410,544
STOCKHOLDERS' EQUITY
Preferred stock - no par value;
5,000,000 shares authorized;
no shares issued
Common stock - no par value:
25,000,000 shares authorized:
3,040,000 shares issued and
outstanding 4,023,852 4,023,852
Other capital 115,032 115,032
Retained earnings 240,502 212,578
Total stockholders'
equity 4,379,386 4,351,462
Total liabilities and
stockholders' equity $6,158,184 $5,762,006
The accompanying Notes are an integral part of this
financial statement
APPLIED COMPUTER TECHNOLOGY, INC.
STATEMENTS OF OPERATIONS
Three months ended
March 31,
1996 1995
(unaudited) (unaudited)
REVENUES $ 3,642,771 $3,589,622
COST OF GOODS SOLD 2,798,161 2,960,966
GROSS PROFIT 844,610 628,656
OPERATING EXPENSES
Selling, general and
administrative expenses 661,194 503,677
Total Operating Expenses 661,194 503,677
INCOME FROM OPERATIONS 183,416 124,979
OTHER INCOME (EXPENSE):
Other income 15,410 13,862
Interest expense (26,120) (56,401)
Net other income
(expense) (10,710) (42,539)
NET INCOME BEFORE INCOME
TAXES 172,706 82,440
INCOME TAX EXPENSE (48,000) -
NET INCOME $124,706 $82,440
PRO FORMA INFORMATION
Net income before
income taxes $ 172,706 $82,440
Income tax expense $48,000 30,750
Net income $124,706 $51,690
Earnings per common share
Primary $0.04 $0.03
Fully diluted $0.04 $0.03
Shares used in computing
earnings per common share
Primary 3,217,641 1,890,000
Fully diluted 3,306,718 1,961,786
The accompanying Notes are an integral part of this
financial statement
APPLIED COMPUTER TECHNOLOGY, INC.
STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
Three months ended
March 31,
1996 1995
(unaudited)
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $27,924 $82,440
Adjustments to reconcile net
income to net cash used by
operating activities
Depreciation 47,822 28,772
Amortization 384 270
Provision for losses on
accounts receivable - (8,265)
Common stock issued for
services - 5000
Increase (decrease) from changes in
assets and liabilities
Accounts receivable (422,525) (919,488)
Inventories (396,126) 361,112
Prepaid expenses and other
current assets (93,968) (11,630)
Deposits and other assets (2,998) 2,331
Accounts payable 373,938 339,825
Customer deposits - (10,401)
Accrued liabilities (39,331) 18,433
Current income taxes payable 13,753 -
Obligations under operating
leases $ (141) (286)
Net cash used by
operating activities $ (491,268) $(111,887)
The accompanying Notes are an integral part of this financial
statemnt APPLIED COMPUTER
TECHNOLOGY, INC.
STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(continued)
Three months ended
March 31,
1996 1995
(unaudited) (unaudited)
CASH FLOWS FROM INVESTING ACTIVITIES
Equipment acquisitions $(94,374) $(1,848)
Net cash used by investing (94,374) (1,848)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (reduction) in
bank overdraft - (259,911)
Payments on long-term
borrowings (24,965) (23,762)
Net short-term borrowings - 372,681
Net repayments from related
parties - 33,972
Payment of offering costs - (6,394)
Net cash provided by financing
activities (24,965) 116,586
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (610,607) 2,851
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 1,277,075 3,867
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $666,468 $ 6,718
The accompanying Notes are an integral part of this financial
statement APPLIED COMPUTER TECHNOLOGY, INC. NOTES TO FINANCIAL
STATEMENTS
Three months ended March 31, 1996
NOTE 1 - CERTAIN FINANCIAL POLICIES
Financial Information. The unaudited interim financial
statements of Applied Computer Technology, Inc. have been prepared
pursuant to the rules and regulations of the Securities and
Exchange Commission applicable to Regulation S-B. Accordingly,
certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These interim
financial statements should be read in conjunction with the
financial statements and notes included in the Company's Annual
Report on Form 10 KSB.
In the opinion of management, the interim financial statements
reflect all adjustments necessary for a fair presentation of the
interim periods, such adjustments being of a normal recurring
nature. The results of operations for the interim periods are not
necessarily indicative of the results of operations to be expected
for the full year.
Pro forma earnings per common share. Pursuant to Securities
and Exchange Commission Staff Accounting Bulletins common shares
issued at prices substantially less than the offering price of the
Company's initial public offering ($3.50 per share), plus the
number of common equivalent shares issuable pursuant to stock
options granted at prices substantially less than such price, using
the treasury stock method, have been included in the number of
shares used in the calculation of pro forma net income (loss) per
share as if they were outstanding for all periods presented.
Income Taxes. No provision for income taxes have been made in
the financial statements for the quarter ended March 31, 1995
because the Company had elected under Subchapter S of the Internal
Revenue Code to have its income taxed directly to its stockholders.
During June 1995, the Company terminated its election under
Subchapter S of the Internal Revenue Code. Pro forma net income and
earnings (loss) per common share have been determined assuming the
Company had been taxed under Subchapter C of the Internal Revenue
Code for federal and state income tax purposes for all periods
presented.
Commencing in the second quarter of 1995, the Company
recognized deferred tax assets and liabilities for future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax basis. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
NOTE 2 - INVENTORIES
Inventories consist of the following:
March 31, 1996 December 31,
1995 Computer components,
peripherals $ 1,647,774 $ 1,338,655
and software
Completed computer systems 47,020 -
Contracts in process 104,000 104,000
$ 1,798,794 $1,442,655
NOTE 3 - RESTATEMENT
Subsequent to the issuance of the financial statement at March
31, 1996 and for the three months then ended, management discovered
an overstatement of inventories of $171,016, a corresponding
understatement of cost of sales of $131,029, and an understatement
of office and computer equipment of $39,987. The financial
statements have been restated to decrease total assets by $76,329,
increase total liabilities by $20,453 and decrease net income by
$96,782 to record the overstatement, net of income tax effects.
The company hired a Controller during its first quarter ended
March 31, 1996, who identified this overstatement subsequent to
the issuance of the financial statement at March 31, 1996 and
for the three months then ended. With the control measures that
the company now has in place, the company does not expect such
variances in the future.
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
General
Revenues from product and system sales are recognized when title
to the product or system passes to the customer.
Results of Operations
Quarters ended March 31, 1996 and 1995
The Company reported net income of $27,924 for the quarter
ended March 31, 1996 compared to $51,690 for the similar period in
1995. Revenues increased slightly in 1996 by $53,149, and the
gross profit margin increased to approximately 19.6% in 1996
compared to approximately 17.5% during the 1995 quarter,
primarily due to the increased component of networking, training
and service revenues which carry a higher gross profit margin than
sales of hardware. Selling, general and administrative expenses
increased by $157,517 from one year ago primarily due to increased
sales and marketing activities.
Liquidity and Capital Resources
As of March 31, 1996, the company's principal sources of
liquidity were its cash of $666,468, accounts receivable of
$2,202,579, and inventory of $1,798,794 totaling $4,667,841.
The company's total current liabilities at March 31, 1996 were
$1,148,239 and its current ratio was approximately 4.5:1.
Accounts receivable increased by $422,525 during the quarter
ended March 31, 1996 due to large sales to government
accounts at the end of the period. Inventories increased during
the quarter by $356,139 due to increased purchases of components
to achieve certain large quantity purchase discounts. Accounts
payable increased by $373,938 due to the higher volume of inventory
purchases during the quarter and extended credit terms from
vendors.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) There are no exhibits filed as a part of this
report. (b) There were no reports on Form 8-K filed
during the
quarter ended March 31, 1996
SIGNATURES
Pursuant to the requirement of the Securities and Exchange Act
of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
APPLIED COMPUTER TECHNOLOGY, INC.
By s/s Wiley E. Prentice, Jr.
Wiley E. Prentice, Jr.
President, CEO, and Chairman of the Board of
Directors
By s/s Robert Oliphant
Robert Oliphant
Chief Financial Officer,Treasurer and Director
Date: September 10, 1996
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