UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period Ending: October 31, 1997
______________
Commission File Number: 0-17623
________
Database Technologies, Inc.
______________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 02-0429620
________________________________________________________________
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
20 Commerce Park North Bedford,NH 03110
________________________________________________________________________
(Address of principal executive offices) (Zip Code)
(603) 628-2888
______________________________________________________________________
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has 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 Registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[x ] Yes [ ] No
Number of shares outstanding of the issuer's classes of
common stock, as of October 31, 1997:
Common stock $.001 par value ...............................2,466,082
Total pages:15
DATABASE TECHNOLOGIES,INC.
FORM 10QSB OCTOBER 31, 1997
________________________________________________________________________________
PART I: FINANCIAL INFORMATION
ITEM 1 - Financial Statments
_____________________________________________________________________________
(following pages)
2
DATABASE TECHNOLOGIES,INC.
BALANCE SHEET
OCTOBER 31, 1997
- ------------------------------------------------------------------------------
OCTOBER 31,1997 APRIL 30,1997
( Unaudited) (*)
- -------------------------------------------------------------------------------
A S S E T S
_____________
CURRENT ASSETS:
Cash $ 1,598 $ 3,805
Accounts Receivable
-trade (Note 8) 7,327 9,161
_____________ ________________
Total current assets 8,925 12,966
-------------- -----------------
PROPERTY AND EQUIPMENT (NOTE 1);
Equipment,Furniture & Fixtures 14,027 14,027
Less: Accumulated depreciation 14,027 14,027
_________________ _______________
Net property and equipment 0 0
_____________ ____________
Total assets $ 8,925 $ 12,966
=============== ============
Continued -1
3
DATABASE TECHNOLOGIES,INC.
BALANCE SHEET
OCTOBER 31, 1997
- -----------------------------------------------------------------------------
OCTOBER 31,1997 APRIL 30,1997
( Unaudited) (*)
- -------------------------------------------------------------------------------
L I A B I L I T I E S A N D
S T O C K H O L D E R S E Q U I T Y
CURRENT LIABILITIES
Notes Payable
- officer/stockholder (Note 2) $ 184,322 $ 184,322
Deferred licensing fee income 3,420 8,388
Accounts payable
- trade 12,351 7,635
Line of credit 4,462 6,080
Accrued payroll - 840
- payroll taxes payable 325 -
Accrued interest expense 5,392 -
_______________ _______________
Total current liabilities 210,272 207,265
STOCKHOLDERS' EQUITY (Note 6)
Common stock-par value $0.001
authorized 2,500,000 shares,
2,466,082 issued 2,466 2,466
Additional paid-in capital 12,179 12,179
Accumulated Deficit (208,944) (208,944)
Net Income (Loss) ( 7,048) -
________________ _______________
Total stockholders' equity (201,347) (194,299)
_________________ _______________
Total liabilities and
stockholders' equity $ 8,925 $ 12,966
_________________ ______________
The accompanying notes to financial statements are an integral
part of this statement.
Concluded -2
___________________________________________________________________________
(*) Condensed from the Company's audited financial statements.
4
DATABASE TECHNOLOGIES,INC.
STATEMENT OF OPERATIONS
THREE MONTHS ENDING OCTOBER 31,1997 and OCTOBER 31,1996
and
SIX MONTHS ENDING OCTOBER 31,1997 and OCTOBER 31,1996
________________________________________________________________________________
Three Months Three Months Six Months Six Months
Ending Ending Ending Ending
Oct.31,1997 Oct.31,1996 Oct.31,1997 Oct. 31,1996
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
________________________________________________________________________________
REVENUE $ 22,924 $ 27,891 $ 52,496 $ 46,066
COST OF REVENUE 3,635 10,648 8,154 13,350
__________ __________ _________ __________
Gross profit 19,289 17,243 44,342 32,716
OPERATING EXPENSES
Selling & Delivery 2,433 6,538 4,336 7,964
General & Admin. 17,848 23,977 41,662 51,249
___________ ___________ __________ __________
Total operating
expenses 20,281 30,515 45,998 59,213
Profit(loss) from
Operations ( 992) (13,272) ( 1,656) (26,497)
Nonoperating expense
Interest expense ( 2,696) 0 ( 5,392) 0
NET PROFIT (LOSS)
before income taxes ( 3,688) (13,272) ( 7,048) (26,497)
(Note 4)
Provision for Income
Taxes (Note 1) 0 0 0 0
NET INCOME (LOSS) $( 3,688) $( 13,272) $(7,048) $(26,497)
============= ============ =========== ===========
PER SHARE (Note 6) ($.0015) ($.005) ($.003) ($.01)
============= ============ =========== ===========
The accompanying notes to financial statements
are an integral part of this statement.
___________________________________________________________________________
(*) Condensed from the Company's audited financial statements.
5
DATABASE TECHNOLOGIES,INC.
STATEMENT OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDING OCTOBER 31, 1997
- ------------------------------------------------------------------------------
Additional
Common Stock Paid-in Retained
Shares Amount Capital Earnings Total
- -----------------------------------------------------------------------------
BALANCE AT
April 30,1997 2,466,082 $2,466 $12,179 ($208,944) ($194,299)
Net Loss ( 7,048) ( 7,048)
___________ _________ ________ ___________ _________
BALANCE AT
Oct.31,1997 2,466,082 $2,466 $12,179 ($215,992) ($201,347)
The accompanying notes to financial statements
are an integral part of this statement.
___________________________________________________________________________
(*) Condensed from the Company's audited financial statements.
6
DATABASE TECHNOLOGIES,INC.
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDING OCTOBER 31, 1997 and OCTOBER 31, 1996
and
FOR THE SIX MONTHS ENDING OCTOBER 31, 1997 and OCTOBER 31,1996
- -------------------------------------------------------------------------------
Three Months Three Months Six Months Six Months
Ending Ending Ending Ending
Oct.31, 1997 Oct.31,1996 Oct.31,1997 Oct.31,1996
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
_______________________________________________________________________________
CASH FLOW FROM OPERATING ACTIVITES;
Net Income (Loss) ($3,688) ($13,272) ($7,048) ($26,497)
Adjustments to reconcile
net income (loss) to net
cash provided by operating
activities:
Depreciation & Amortizatio n 0 0 0 0
(Increase) Decrease in the
following:
Assets:
Accounts Receivable
Trade (2,092) (2,652) 2,234 (1,847)
(Decrease) Increase in the
following liabilities:
Accounts payable:
Trade 4,523 2,188 4,716 (5)
Stockholder 0 3,500 0 (831)
Deferred revenue (1,548) 0 (4,968) 0
Accrued Expenses ( 730) 610 ( 515) 0
_________ ___________ ___________ __________
Net cash used in
Operating Activities (3,535) (9,626) (5,581) (29,180)
CASH FLOWS FROM
FINANCING ACTIVITIES:
Note Payable
-officer/stockholder 0 13,200 0 25,200
Line of credit
advance ( 717) 0 187 0
___________ __________ ___________ _________
NET INCREASE (DECREASE)
IN CASH (4,252) 3,574 (5,403) ( 3,980)
CASH,Beginning of period 2,654 545 3,805 8,099
__________ ___________ _________ _________
CASH, End of Period 1,598 4,119 1,598 4,119
___________ ___________ ___________ _________
The accompanying notes to financial statements
are an integral part of this statement.
7
DATBASE TECHNOLOGIES,INC.
Notes to Financial Statements
April 30, 1997 and 1996
Background
__________
Database Technologies, Inc. (the Company) was incorporated under the laws of the
State of Delaware on November 4, 1988. The company operates a computerized
database containing current prices of certain electronic merchandise from
various vendors. The Company provides this information to assist insurance
company adjusters in processing claims. The Company's sources of revenue are
licensing fees obtained from various insurance companies for the use of its
database and sales of merchandise to its customers for the purposes of settling
claims with their policyholders.
1. Summary of Significant Accounting Policies
__________________________________________
Revenue and Expense Recognition
_______________________________
The financial statements are prepared on the accrual basis of accounting;
revenue is recognized when earned and expenses are recognized when goods and
services are received or liabilities are incurred. Licensing fee income for the
use of its database may be on an annual, monthly, or per use basis. Revenue is
recognized when earned. Customer payments received but not earned are reflected
as deferred licensing fee income, a current liability.
Use of Estimates
________________
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash and Cash Equivalents
_________________________
For purposes of reporting the statements of cash flows, the Company considers
all cash accounts, which are not subject to withdrawal restrictions or
penalties, and all highly liquid investments with a maturity of three months or
less to be cash equivalents.
Equipment
_________
Property and equipment purchased is depreciated by the straight-line method over
the estimated useful lives of the respective assets. Equipment acquired under
capital leases is amortized by the straight-line method over the estimated
useful lives of the respective assets.
8
DATABASE TECHNOLOGIES,INC.
NOTES TO FINANCIAL STATEMENTS
April 30, 1997 and 1996
1. Summary of Significant Accounting Policies (Concluded)
______________________________________________________
Income Taxes
____________
Deferred income taxes are provided for the expected tax effects of differences
between the financial statements and tax basis of assets and liabilities.
The Company has deferred tax asset which is attributable primarily to net
operating loss carryforwards. Since it is more probable than not that the
deferred tax asset will not be realized, a valuation allowance for the
entire amount has been recorded as of April 30, 1997 and 1996.
No provision for income taxes was required due to the current year loss. The
following are net operating losses available and their expiration dates.
Year Carryforward
Amount Expires
$13,161 2008
36,149 2009
48,293 2010
62,010 2011
Pension and Profit Sharing Plans
________________________________
The Company established a profit sharing plan which covers all employees of the
Company. No contributions were made in fiscal years ended 1997 or 1996.
Company's Future Plans
_______________________
The Company's future operations are being affected by its current financial
position. Specifically, its low level of cash, total assets, and its negative
capital. The Company anticipates operating cash flow will be insufficient to
finance operations. It anticipates cash to be provided from its principal
stockholder/officer in the form of loans to enable the Company to meet
operating cash flow requirements. The Company intends to explore possible
asset sales and/or a merger transaction.
9
DATABASE TECHNOLOGIES,INC.
Notes to Financial Statements
April 30, 1997 and 1996
2. Notes Payable- Stockholder
_______________________________
Notes Payable - stockholder totaled $184,322 and $127,530 as of April 30,1997
and 1996, respectively. These notes bear interest at 5.85% and 12% for the
years ended April 30, 1997 and 1996, respectively. All notes payable to
stockholder are due April 30, 1998.
3. Operating Leases
________________
Facilities
__________
The Company leases its facilities from a trust controlled by the majority
stockholder. The lease agreement requires monthly payments of approximately
$350 plus insurance, maintenance,and plus insurance,maintenance and operating
expenses.The initial term of the lease expires December 1997. Rent expires
December 1997. Rent expense for the year ended April 30, 1997 amounted
to $5,400.
Vehicles and Equipment
______________________
The Company currently leases a vehicle and computer from the majority
stockholder. The monthly lease payments are $450 and $175, respectively. The
vehicle and equipment lease expenses for the year ended April 30, 1997 are
$5,400 and $1,750, respectively, and the leases expire in May 1999 and June
1998, respectively.
Future minimum lease payments under noncancelable operating leases as of
April 30, 1997 are:
1998 $5,350
1999 350
4. Major Customer
_______________
The Company had one major customer who accounted for 21% of the total revenue
during the year ended April 30, 1997. No major customer accounted for more
than 10% of the total revenue during the year ended April 30, 1996.
10
DATABASE TECHNOLOGIES,INC.
Notes to Financial Statements
April 30, 1997 and 1996
5. Licensing and Marketing Agreements
____________________________________
On February 28, 1994, the Company entered into a licensing agreement with ADP
Property Claims Services, Inc. (ADP). This agreement was to continue in effect
until December 31, 1998. However on October 30, 1995, ADP terminated the
contract with the Company.Under this agreement,ADP was to market the Company's
database products combined with its own products. The companies are attempting
to reach a new agreement.
On December 13, 1993, the Company entered into a marketing agreement with David
A. Johnson & Associates. This agreement will continue in effect until December
12, 1998 and may be extended for an additional five years.Under this agreement,
David A. Johnson & Associates will market the Company's database products
combined with its own products.
6. Income (Loss) Per Share
________________________
The loss per common share for the years ended April 30, 1997 and 1996 has been
computed based on the weighted average number of shares outstanding of
2,466,082.
11
DATABASE TECHNOLOGIES, INC.
Notes to Financial Statements
April 30, 1997 and 1996
7. Prior Period Adjustments
_______________________
The statement of changes in stockholders' deficit contains a 110,000 share
adjustment to common stock. This transaction arose as a result of litigation
settlement in a prior year. The common stock adjustment was not recorded in
that prior year and is reflected in the reconciliation of stockholders' deficit
for the year ended April 30, 1996 and subsequent.
The April 30, 1996 accumulated deficit was restated for a correction of an error
in the prior year's revenue recognition, which casued the Company to recognize
deferred licensing fee income as income instead of as a liability. Additionally,
25,0000 shares of treasury stock was acquired in a prior year at no cost to the
Company. Accordingly, common stock, additional paid-in capital, and accumulated
deficit are restated as follows:
Additional
Common Paid-In Accumulated
Stock Capital Deficit
________ __________ ___________
April 30, 1996, as
previously reported $ 2,381 $ 12,154 $ (136,000)
Correction of error 110 - (8,498)
Treasury stock (25) 25 -
_____________ ____________ _____________
April 30, 1996,as restated $ 2,466 $ 12,179 $ (144,498)
8. Line of Credit
________________
The Company has a revolving line of credit in the form of a corporated credit
card with an interest rate of 15.4%. The line of credit was established to
cover the operating expenses of the business. The Company remits principal and
interest payments directly to the credit card company on a monthly basis.
Amounts above the minimum are remitted as cash flow allows.
9. Disclosure About Fair Value of Financial Instruments
_____________________________________________________
The Company's financial instruments consist of cash, short-term trade
receivables and payables, and short-term debt. The carrying value of all
instruments approximates their fair value.
12
DATABASE TECHNOLOGIES,INC.
FORM 10-QSB OCTOBER 31, 1997
_____________________________________________________________________________
PART I: FINANCIAL INFORMATION
ITEM 2- Management's Discussion and Analysis of Financial
Condition and Results of Operations.
_______________________________________________________________________________
Revenues
The Registrant's revenues for the second quarter ended October 31,
1997 were $22,924 which reflects a decrease of almost $5,000
over the $27,891 in revenues for the same quarter ended October 31,
1996. For the six month period ended October 31, 1997 the revenues
were $52,496 and is an increase of $6,000 from the prior six month
period ended October 31, 1996 in which the revenues were $46,066.
This represents a stabilzation of the revenues and slowing of the
downtrend from the previous several years in which the Registrant
experienced a continual loss of clients. The cost of revenue for
the quarter ended October 31, 1997 was a lower percentage of the
revenue, 16% than in the previous quarter ended October 31,1996 in
which the cost of revenue percentage was 38% of the revenue. For
the six months ended October 31, 1997 the cost of revenue was 16%
in contrast to the cost of revenue for the six months ended October
31, 1996 which was 29% of the revenue.
Operating Expenses
The Registrant's total operating expenses for the quarter ended
October 31, 1997 were $20,281 or $10,000 lower when compared to the
same quarter of the prior year, October 31, 1996, in which expenses
were $30,515. For the six month period ended October 31, 1997 the
operating expenses were $45,998 as compared to $59,213 for the same
six month period ended October 31, 1996, a decrease almost $14,000.
This would indicate the expenses of the Registrant are probably as
low as they can go without major changes in day to day operations.
An analysis of the two components reveals selling and delivery
expenses decrease proportionately with revenues generated while G&A
decreased because of additional cost cutting measures by management.
Income Tax
The Registrant has not made provisions for Federal corporate
income taxes because of its tax loss carryforward.
Liquidity and Capital Resources
The Registrant is of the opinion increased revenues will not be
generated until the last quarter of the 1997 fiscal period when
the marketing efforts and sales to new clients for its systems
may take effect. The Registrant continues both the research and
development on both a Windows system and an internet product but
with the limited financial resources of the Registrant the roll-
out has taken longer than anticipated and is not expected to be
released until the last quarter of 1997 or the first quarter of
1998.
The Registrant is of the opinion that even with the reduction in
revenues currently being realized, cash flow will be sufficient
to maintain the daily level of operations. Debt reduction has
been suspended and all cash generated through revenues has been
augmented through loans from the Chairman and CEO for use in the
daily operation of the business. Management is of the opinion
the infusion of loans from the Chairman will be sufficient to
allow the Registrant to maintain operation at an acceptable rate
until increased revenues can be generated.
13
DATABASE TECHNOLOGIES,INC.
FORM 10-Q OCTOBER 31, 1997
- ------------------------------------------------------------------------------
PART II OTHER INFORMATION
- ------------------------------------------------------------------------------
ITEM 1 - Legal Proceedings
None
ITEM 2 - Changes in Securities
None
ITEM 3 - Defaults Upon Senior Securities
None
ITEM 4 - Submission of Matter to a Vote of Security Holders
None
ITEM 5 - Other Information
Not Applicable
ITEM 6 - Exhibits and Reports on Form 8-K
a. Exhibits
None
b. Reports on Form 8-K (all incorporated by reference)
None
14
DATABASE TECHNOLGIES,INC.
FORM 10-Q OCTOBER 31, 1997
----------------------------------------------------------------------------
Pursuant to 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.
DATABASE TECHNOLOGIES,INC.
--------------------------
(Registrant)
Deceember 15, 1997 s/ Allan S. Wolfe
-----------------------------------------------------------------------------
( Date ) (Signature)
Allan S. Wolfe
Chairman of the Board,
President, Chief Executive
Officer, Chief Financial
Officer, and a Director
15