UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
(AMENDMENT NO. 2)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1995
Commission File Number: 33-15370-D
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CUSA Technologies, Inc.
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(Exact name of the small business as specified in charter)
Nevada 87-0439511
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State of Incorporation IRS Identification Number
986 West Atherton Drive, Salt Lake City, Utah 84123
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(Address of principal executive offices)
(801) 263-1840
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(Telephone of issuer including area code)
Check whether the Issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act during
the past 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.
Yes ___X___ No ________
As of February 20, 1996, the Issuer had 8,791,933 shares of
its common stock, par value $0.001 per share, issued and outstanding.
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CUSA Technologies, Inc. (the "Company"), has included the condensed
consolidated balance sheets of the Company and its subsidiaries as of
December 31, 1995 (unaudited) and June 30, 1995 (the Company's most
recent fiscal year), unaudited condensed consolidated statements of
earnings for the three months ended December 31, 1994
and 1995 and unaudited condensed consolidated statements of earning
and cash flows for the six months ended December 31, 1994 and
1995, together with unaudited condensed notes thereto.
In the opinion of management of the Company, the financial
statements reflect all adjustments, all of which are normal
recurring adjustments, necessary to fairly present the
financial condition of the Company for the interim periods
presented. The financial statements included in this
report on form 10-QSB should be read in conjunction with
the audited financial statements of the Company and the
notes thereto included in the annual report of the Company
on form 10-KSB for the year ended June 30, 1995.
CUSA TECHNOLOGIES, INC.
Consolidated Balance Sheets
December 31, June 30,
1995 1995
ASSETS (Unaudited)
__________ _________
Current Assets:
Cash $ 1,317,104 818,883
Trade accounts receivable, net of
allowance for doubtful accounts 8,044,458 5,141,582
Inventories 898,157 1,274,088
Prepaid expenses and other assets 384,497 288,310
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Total current assets 10,644,216 7,522,863
Property and equipment:
Land 297,688 297,688
Buildings and improvements 2,454,852 2,431,778
Furniture, fixtures and equipment 2,581,036 2,133,952
Other 531,818 230,427
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Total property and equipment 5,865,394 5,093,845
Less accumulated depreciation
and amortization 1,386,682 988,663
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Net property and equipment 4,478,712 4,105,182
Equipment under capital lease
obligations, net 346,298 461,834
Receivables from related parties 352,207 330,054
Software development and acquisition
costs, net 3,906,162 3,084,047
Excess of purchase price over fair value
of net tangible and identifiable
intangible assets acquired, net 13,108,384 13,431,054
Other assets 183,493 183,842
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$ 33,019,472 29,118,876
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The accompanying notes are an integral part of these statements.
CUSA TECHNOLOGIES, INC.
Consolidated Balance Sheets
December 31, June 30,
1995 1995
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited)
__________ ___________
Current liabilities:
Lines of credit with banks $ 44,036 373,247
Current installments of long-term debt 822,781 870,668
Current installments of obligations
under capital leases 156,817 170,334
Accounts payable 4,277,785 3,235,658
Accrued liabilities and deposits 3,357,451 2,841,168
Income taxes payable 30,195 50,256
Payables to related parties 1,565,129 1,962,155
Deferred revenue 6,826,316 5,515,623
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Total current liabilities 17,080,510 15,019,109
Long-term debt with related parties 2,445,000 1,145,000
Long-term debt, excluding current
installments 1,751,866 1,852,471
Obligations under capital leases,
excluding current installments 135,436 226,356
Deferred income taxes 1,362,642 956,266
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Total liabilities 22,775,454 19,199,202
Minority interest 1,864 (1,323)
Commitments and contingent liabilities - -
Stockholders' equity:
Series A convertible preferred stock,
$.001 par value;authorized 1,500,000
shares; issued 1,000,000 shares 1,000 1,000
Common stock, $.001 par value;
authorized 25,000,000 shares;
issued 8,600,589 shares at December 31,
1995 and 8,509,516 shares at June 30,
1995 8,601 8,510
Additional paid-in capital 9,431,225 9,116,807
Retained earnings 801,328 794,680
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Total stockholders' equity 10,242,154 9,920,997
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$ 33,019,472 29,118,876
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The accompanying notes are an integral part of these statements.
CUSA TECHNOLOGIES, INC.
Condensed Consolidated Statements of Earnings
(Unaudited)
Three months ended Six months ended
December 31, December 31,
1995 1994 1995 1994
____________ ____________ ____________ ____________
Net sales, service revenue, and
rental income $ 13,088,191 8,286,037 23,818,390 13,243,505
Cost of goods sold and other
direct costs 6,898,224 4,349,392 12,503,355 6,754,987
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Gross profit 6,189,967 3,936,645 11,315,035 6,488,518
Product development costs 701,441 503,234 1,336,052 742,453
Selling, general and administrative
expenses 4,992,272 2,692,732 9,266,973 4,688,783
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Operating income 496,254 740,679 712,010 1,057,282
Other income (expense):
Interest expense (142,045) (92,778) (262,708) (175,066)
Interest income 24,739 18,858 26,909 33,046
Other, net (2,943) 6,717 (3,187) 5,802
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Income before income taxes 376,005 673,476 473,024 921,064
Income taxes 272,176 277,646 406,376 345,504
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Net earnings $ 103,829 395,830 66,648 575,560
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Earnings per common and common
equivalent share
Primary $ 0.01 0.05 0.01 0.09
Fully diluted $ 0.01 0.05 0.01 0.09
Weighted average common and common
equivalent shares
Primary 9,814,539 7,760,787 9,721,645 6,660,182
Fully diluted 9,921,639 7,760,787 9,885,194 6,660,182
The accompanying notes are an integral part of these statements.
CUSA TECHNOLOGIES, INC.
Consolidated Statements of Cash Flows
Six months ended December 31,
(Unaudited)
1995 1994
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Cash flows from operating activities:
Net earnings $ 66,648 575,560
Adjustments to reconcile net earnings to
net cash provided by operating
activities:
Depreciation and amortization 1,523,663 740,614
Minority interest in earnings of subsidiary 3,187 1,961
Net change in assets and liabilities:
Accounts receivable (2,944,787) (2,453,879)
Inventories 364,015 (64,550)
Prepaid expenses and other assets (96,187) (89,615)
Accounts payable 1,025,045 (510,747)
Accrued liabilities and deposits 503,611 588,993
Deferred revenue 1,270,367 1,640,347
Income taxes payable (20,061) 299,680
Deferred income taxes 406,376 39,547
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Net cash provided by operating activities 2,101,877 767,911
Cash flows from investing activities:
Purchase of property and equipment (787,096) (167,379)
Cash received from (paid for) business acquisitions,
including acquisition costs, less cash acquired (52,885) 102,116
Software development costs (904,764) (241,462)
Decrease (increase) in other assets (29,754) 20,945
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Net cash used in investing activities (1,774,499) (285,780)
Cash flows from financing activities:
Proceeds from debt with related party 1,300,000 995,000
Proceeds from long-term debt - 2,000,000
Repayment of debt with related party - (1,405,000)
Repayment of lines of credit (329,211) (260,000)
Repayment of obligations under capital leases (104,437) (82,712)
Repayment of long-term debt (148,492) (67,641)
Reduction of payables to related parties (439,026) (598,301)
Payments to retire common stock (50,000) -
Sale of common stock and exercise of stock options 2,009 109,340
Preferred stock dividends (60,000) (62,666)
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Net cash provided by financing activities 170,843 628,020
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Net increase in cash and cash equivalents 498,221 1,110,151
Cash and cash equivalents at beginning of period 818,883 379,091
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Cash and cash equivalents at end of period $ 1,317,104 1,489,242
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The accompanying notes are an integral part of these statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Overview
The Company develops and markets information systems,
including software, hardware, installation, training, and
software and hardware maintenance, to the financial industry
(primarily credit unions), the healthcare industry, and the
equipment rental business. Since June 30, 1994, the Company
has significantly expanded its customer base and software
offerings through the acquisition of a number of business
entities. These acquisitions were completed at various
dates through December 31, 1995, and, with the exception of
Medical Computer Management, Inc. ("MCMI"), all were
accounted for according to the rules of purchase accounting.
(For a discussion of the acquired entities, please refer to
the Company's report on Form 10-KSB dated June 30, 1995)
Thus, except for MCMI, the results of operations for the
three and six months ended December 31, 1994, do not include
the results of the operations of the entities acquired
during the 12 months ending December 31, 1995.
Net sales, service revenue, and rental income
Net sales, service income and rental income primarily
consists of new and upgrade computer system sales (including
hardware, software, installation and training), amounts
earned pursuant to hardware maintenance and software support
agreements, and the sale of related products such as
statement and government form printing. The Company's
revenues increased 58 percent from $8,286,037 for the
quarter ended December 31, 1994 to $13,088,191 for the
quarter ended December 31, 1995 and 80 percent from
$13,243,505 for the six month period ended December 31,
1994 to $23,818,390 for the six month period ended December
31, 1995. These increases are the result of increased
sales of computer systems, maintenance and support
agreements, and related products and the inclusion of the
revenues for the entities acquired during the 12 months
ended December 31, 1995 in the results from operations for
the three and six months ended December 31, 1995. The
Company's revenues for the three months ended December 31,
1995 also reflect seasonally high year end sales of new and
upgraded computer systems, and were boosted by significant
sales of the Companies new medical records product Carepoint
for Clinics.
Cost of goods sold and other direct costs
Cost of goods sold and other direct costs reflect mainly the
cost of hardware and software purchased for resale, the
amortization of capitalized software development costs, the
expense of supporting and installing hardware and software,
and the cost of training customers to use the Company's
software. Costs of goods sold increased 59 percent from
$4,349,392 for the quarter ended December 31, 1994 to
$6,898,224 for the quarter ended December 31, 1995, and 85
percent from $6,754,987 for the six months ended December
31, 1994 to $12,503,355 for the six months ended December
31, 1995. Management anticipates slightly reduced
cost of good sold in future periods through newly negotiated
hardware discounts and the elimination of software royalty
payments to an outside vendor for sales of medical practice
management software.
Product development costs
Product development costs represent the uncapitalized cost
of software development. Uncapitalized costs include the
time and materials required for fixing system operational
errors and maintenance software upgrades. Product development
and maintenance costs increased from $503,234 to
$701,441 for the three months ended December 31, 1994 and
1995, and from $742,453 to $1,336,052 for the six months
ended December 31, 1994 and 1995, respectively.
Selling, general and administrative expense
Selling, general and administrative expenses include direct
and indirect selling costs, general corporate overhead,
depreciation, and the amortization of intangible assets.
Selling, general and administrative expenses increased 85
percent from $2,692,732 for the quarter ended December 31,
1994 to $4,992,272 for the quarter ended December 31, 1995
and 98 percent from $4,688,783 for the six months ended
December 31, 1994 to $9,266,973 for the six months ended
December 31, 1995. Selling, general and administrative
expenses as a percentage of revenues increased from 32
percent for the quarter ended December 31, 1994 to 38
percent for the quarter ended December 31, 1995. This
percentage increase reflects the administrative costs
associated with the Company's high rate of acquisition
activity. As acquisition related expenses are reduced and
synergies are recognized, the Company expects selling,
general and administrative expenses as a percentage of
revenues to decline.
Significant portions of the purchase price of the
acquisitions have been allocated to intangible software
acquisition costs and excess of the purchase price over the
fair value of the net tangible and identifiable intangible
assets acquired (collectively referred to herein as "Acquired
Intangibles."). The excess of the purchase price over the fair
value of the net tangible and identifiable intangible assets
acquired relates principally to the customer base of the acquired
businesses. The software acquisition costs are amortized over the
estimated life of the software acquired (principally three
to five years). The portion of the Acquired Intangibles
that is related to the customer base of the acquired
companies is amortized using the straight line method over an
estimated life of 15 years. During the three and six months
ended December 31, 1994 and 1995, total amortization of the
excess purchase price increased from $126,252 to $247,593
and $213,165 to $461,880 respectively, and amortization
of software development and acquisition costs increased from
$123,074 to $336,645 and $163,562 to $545,685, respectively.
The Company periodically reviews the value assigned to the
separate components that comprise the total of Acquired
Intangibles through comparison to anticipated, undiscounted
future cash flows. Outside circumstances which could
effect the anticipated future cash flows from major components of
the Company's acquired medical and credit union related software
and customer bases caused some uncertainty as to the current
valuation of the Company's Acquired Intangibles.
Net Earnings and Income Taxes
Income before income taxes was $376,005 and $473,024 for the
three and six months ended December 31, 1995 respectively,
compared to $673,476 and $921,064 for the three and six
months ended December 31, 1994. Income taxes for 1995 were
$272,176 and $406,376 for the three and six months ended
December 31, 1995, the payment of which is substantially all
deferred into future periods because of the utilization of
acquired net operating losses or other income tax elections
that allow for such deferral. The effective income tax
rates for the three and six months ended December 31, 1995
were respectively 72 and 86 percent, which exceed the
federal statutory rate of 35 percent principally due to the
nondeductibility of the amortization of the excess purchase
price over the fair value of assets acquired associated with
all of the acquisitions except the VERSYSS Credit Union
division.
Capital resources and liquidity
At December 31, 1995 the Company had current assets of
$10,644,216 and current liabilities of $17,080,510. Thus,
current liabilities exceeded current assets by $6,436,294.
Current liabilities include $6,826,316 of deferred revenue
which primarily represents customer prepayment of hardware
and software maintenance services. As discussed below, the
Company has access to a line of credit of $1,500,000, from
which it had not drawn as of December 31, 1995.
The Company has two loans in the aggregate amount of
$2,000,000 and a line of credit with a bank. The line of
credit, currently $1,500,000, bears an interest rate of
prime plus one and one half percent and is secured by
accounts receivable, inventory and a trust deed on real
estate, and matures in January of 1997. In addition to the
financing described above, the Company was advanced $995,000
from certain individual investors through a company
affiliated with an officer and director of the Company
pursuant to a subordinated line of credit which is secured
by accounts receivable.
From June 20, 1995 to October 6, 1995, the Company received
$1,450,000 pursuant to the issuance of debentures to an
entity controlled by an officer and director of the Company.
The debentures, due June 30, 1998, are convertible into the
Company's common stock at any time at the discretion of the
holders at a rate of $3.00 per share during the first year,
$3.50 per share during the second year, and $4.00 per share
during the final year, and bear an interest rate of 8
percent per annum, payable quarterly.
The Company anticipates that its current financing sources,
together with cash flow from operations will be sufficient
to meet the cash requirements of current operations through
September of 1996. The Company will continue to seek ways
to increase its working capital and to provide necessary
cash for the operation of its business.
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the
Securities and Exchange Act of 1934 as amended, the Company has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: May 29, 1996
CUSA Technologies, Inc.
By /s/ D. Jeff Peck
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D. Jeff Peck, Chief Financial Officer