UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OF 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period Ending: January 31, 1998
______________
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 03110-6911
________________________________________________________________________
(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 January 31, 1998:
Common stock $.001 par value ...............................2,466,082
Total pages: 16
DATABASE TECHNOLOGIES,INC.
FORM 10QSB JANUARY 31, 1998
________________________________________________________________________________
PART I: FINANCIAL INFORMATION
ITEM 1 - Financial Statments
_____________________________________________________________________________
(following pages)
2
DATABASE TECHNOLOGIES,INC.
BALANCE SHEET
JANUARY 31, 1998
- ------------------------------------------------------------------------------
JANUARY 31,1998 APRIL 30,1997
( Unaudited) (*)
- -------------------------------------------------------------------------------
A S S E T S
CURRENT ASSETS:
Cash $ 5,377. $ 3,805.
Accounts Receivable
-trade (Note 8) 10,362. 9,161.
_____________ ________________
Total current assets 15,739. 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 $ 15,739. $ 12,966.
Continued -1
3
DATABASE TECHNOLOGIES,INC.
BALANCE SHEET
JANUARY 31, 1998
- ------------------------------------------------------------------------------
JANUARY 31,1998 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 8,388. 8,388.
Accounts payable
- trade 36,844. 7,635.
Line of credit 7,502. 6,080.
Accrued payroll 275. 840.
- payroll taxes payable 325. -
Accrued interest payable 8,088. -
______________ _______________
Total current liabilities $ 245,744. $ 207,265.
STOCKHOLDERS' EQUITY
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) ( 35,706.) -
________________ _______________
Total stockholders' equity ( 230,005.) ( 194,299.)
_________________ _______________
Total liabilities and
stockholders' equity $ 15,739. $ 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 INCOME
THREE MONTHS ENDING JANUARY 31, 1998 and January 31, 1997
and
NINE MONTHS ENDING JANUARY 31,1998 and January 31, 1997
________________________________________________________________________________
Three Months Three Months Nine Months Nine Months
Ending Ending Ending Ending
Jan.31,1998 Jan.31,1997 Jan.31,1998 Jan. 31,1997
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
________________________________________________________________________________
REVENUE (note 6) $ 39,896. $ 23,142. $ 92,393. $69,208.
COST OF REVENUE 26,273. 4,473. 34,427. 17,823.
Gross profit 13,623. 18,669. 57,966. 51,385.
OPERATING EXPENSES
Selling & Delivery 7,349. 3,211. 11,685. 12,011.
General & Admin. 29,540. 25,125. 73,898. 76,374.
Total operating
expenses 36,889. 28,336. 85,583. 88,385.
Profit(loss) from
Operations (23,266.) ( 9,667.) (27,617.) ( 37,000.)
OTHER INCOME (EXPENSE)
Interest Expense ( 2,696.) 0. ( 8,088.) 0.
Other Expense 0. 0. 0. 0.
NET PROFIT (LOSS)
before income taxes (25,962.) ( 9,667.) ( 35,706.) (37,000.)
(Note 4)
Provision for Income 0. 0. 0. 0.
Taxes (Note 1)
State Income Tax 0. 0. 0. 1,401.
NET INCOME (LOSS) ( $25,962.) ( $ 9,667.) ( $35,706.) ( $38,401.)
NET PROFIT (LOSS) ( $.01) ($.0048) ( $.0143) ($.0163)
PER SHARE (Note 6)
The accompanying notes to financial statements
are an integral part of this statement.
5
DATABASE TECHNOLOGIES,INC.
STATEMENT OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED JANUARY 31,1998
_________________________________________________________________________________
Common Stock Additional
Shares Amount Paid-in Retained
Capital Earnings Total
________________________________________________________________________________
BALANCE AT
April 30, 1998 2,466,082 $2,466. $12,179. ($208,944.) ($194,299.)
Net Loss ( 35,706) ( 35,706.)
__________ _______ _________ _________ _________
BALANCE AT
Jan.31,1998 2,466,082 $2,466. $12,179. ($244,650.) ($230,005.)
The accompanying notes to financial statements
are an integral part of this statement.
6
DATABASE TECHNOLOGIES,INC.
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDING JANUARY 31, 1998 and JANUARY 31, 1997
and
FOR THE NINE MONTHS ENDING JANUARY 31, 1998 and JANUARY 31, 1997
- -----------------------------------------------------------------------------
Three Months Three Months Nine Months Nine Months
Ending Ending Ending Ending
Jan.31, 1998 Jan.31,1997 Jan.31,1998 Jan.31,1997
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
_______________________________________________________________________________
CASH FLOW FROM OPERATING ACTIVITES;
Net Income (Loss) ($25,692.) ($ 9,667.) ($35,706.) ($38,401.)
Adjustments to reconcile
net income (loss) to net
cash provided by operating
activities:
Depreciation & Amortization 0. 0. 0. 0.
(Increase) Decrease in the
following:
Assets:
Accounts Receivable
Trade (3,035.) 3,094. (1,201.) 1,247.
Other Assets 0. 0. 0. 422.
(Decrease) Increase in the
following liabilities:
Accounts payable:
Trade 24,492. 4,771. 29,208. 4,766.
Line of Credit 3,040. 0. 1,422. 0.
Deferred Income 2,278. 0. 0. 0.
Customer Deposits 0. 0. 0. (1,663.)
Accrued Expenses 0. 0. 0. ( 668.)
Accrued Payroll 0. 0. (565.) 0.
-Payroll taxes 0. 448. 325. 145.
Accrued interest
expense 2,696. 0. 8,088. 0.
_________ ___________ ___________ __________
Net cash used in
Operating Activities 3,779. 3,677. 1,572. 33,243.
___________ _________ ___________ _________
Continued -1
7
DATABASE TECHNOLOGIES,INC.
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDING JANUARY 31, 1998 and JANUARY 31, 1997
and
FOR THE NINE MONTHS ENDING JANUARY 31, 1998 and JANUARY 31, 1997
- -------------------------------------------------------------------------------
Three Months Three Months Nine Months Nine Months
Ending Ending Ending Ending
Jan.31,1998 Jan.31,1997 Jan.31,1998 Jan.31,1997
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
_______________________________________________________________________________
CASH FLOWS FROM
INVESTING ACTIVITIES:
Payments on lease
receivable 0 0 0 0
Capital expenditures 0 0 0 0
________ __________ ___________ _________
Net cash used in
investing activities 0 0 0 0
CASH FLOWS FROM
FINANCING ACTIVITIES:
Payment Note Payable
-officer/stockholder 0 3,870. 0 29,070.
Payment of interest 0. 0. 0. 0.
NET INCREASE (DECREASE)
IN CASH 3,779. (193.) 1,572. (4,173.)
CASH,Beginning of period 1,598. 4,119. 3,805. 8,099.
__________ ___________ _________ ______
CASH, End of Period 5,377. 3,926. 5,377. 3,926.
=========== ============ ========== =======
The accompanying notes to financial statements
are an integral part of this statement.
Concluded-2
8
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.
9
DATBASE 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 bases of assets and
liabilities.
The Company has deferred tax asset which is attributable primarily to net
operating loss carryforwards. Since, at this time,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.
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.
2. Transactions with Related Party
Notes Payable - Stockholder
The notes payable to stockholder of $127,530 are unsecured and bear interest
at a rate of 12% per annum and were issued prior to April 30, 1996. Notes
issued after May 1, 1996 amount to $56,793 and bear interest at a rate of 5.85%.
All notes payable to stockholder are due April 30, 1998. Notes payable -
stockholder totaled $184,322 and $127,530 for the years ended April 30, 1997
and 1996, respectively.
10
</PAGE
DATBASE TECHNOLOGIES,INC.
Notes to Financial Statements
April 30, 1997 and 1996
Facilities
As discussed in Note 3, the Company leases its facilities and vehicle from
related parties.
3. Operating Leases
Facilities
The Company leases its facilities from a related entity. The lease agreement
requires monthly payments of approximately $450 plus insurance, maintenance,
and operating expenses. The initial term of the lease expires December 1997.
Rent expense for the year ended April 30, 1997 amounted to $5,400.
Vehicles
The Company currently leases one vehicle from a related person. The monthly
lease payment is $450. Vehicle lease expense for the year ended April 30,1997
is $5,400.
4. Major Customer
The Company had one major customer who accounted for more than 10% of the total
revenue during the year ended April 30, 1997. That customer accounted for 21%
of total revenue. No major customer accounted for more than 10% of the total
revenue during the year ended April 30, 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
2,491,082.
11
</PAGE
DATBASE TECHNOLOGIES,INC.
Notes to Financial Statements
April 30, 1997 and 1996
7. Equity
The statement of changes in stockholders's 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 stockholder's
deficit for the year ended April 30, 1997.
8. Prior Period Adjustment
The April 30, 1996 accumulated deficit was restated for a correction of an
error in the prior year's revenue recognition, which caused the Company to
recognize deferred licensing fee income as income instead of a liability.
Accordingly, accumulated deficit is restated as follows:
Accumulated deficit, April 30, 1996, as previously reported $ (136,000)
Correction of error ( 8,388)
_________
Accumulated deficit, April 30, 1996, as restated $ (144,388)
_________
_________
9. Line of Credit
The Company has a revolving line of credit established with American Express
in the form of a corporated credit card with an interest rate of 15.4%. The
line of credit was established to cover operating expenses of the business.
The Company remits principal and interest payments directly to American
Express on a monthly basis.
12
DATABASE TECHNOLOGIES,INC.
FORM 10QSB JANUARY 31,1998
_____________________________________________________________________________
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 third quarter ended January 31,
1998 were $39,896., an increase of 58% over revenues for the
same quarter ended January 31,1997 for the prior year of $23,142.
In addition revenues for the nine month period ended January 31,
1998 were $92,393. or 33% higher than the revenues for the same
nine month period ended January 31, 1997 for the prior year of
$ 69,208. This increase in revenues indicates the Registrant is
experiencing an increase in sales and may have reversed the
downtrend in sales of the prior periods. However, one quarter may
not indicate the trend has turned around and the Registrant would
look at the trend of future quarters to determine if the downward
sales curve has been reversed.
The cost of revenue for the third quarter ended January 31, 1998
increased by approximately $22,000. over the same quarter of the
prior year and the cost of producing this revenue was 66% of the
revenues. This is in contrast to a 20% cost of revenue for the
same quarter the prior year.For the nine months ended January 31,
1998 the cost of producing revenue was 37% of the revenues. This
is in contrast to the cost of producing revenue of 25% for the
same nine month period ended January 31, 1997 of the prior year.
This is an indication that because revenues had decreased during
those periods the costs of producing those revenues decreased
substantially because training or support are not required when
systems are not installed. The added development costs associated
with producing systems and/or enhancing existing systems was not
a factor in the prior periods for support of those systems.
OPERATING EXPENSES
The Registrant's total operating expenses for the quarter ended
January 31, 1998 were $36,889.as compared to the same quarter of
prior year of $28,336. This increase of approximately $8500.
indicates the Registrant experienced as sharp increase in costs
attributed to increased legal and accounting costs in the third
quarter. During the third quarter the Registrant was actively
engaged in an attempt to acquire the assets and management of
another company in an effort to diversify the operations of the
Registrant. An analysis of the two components of the operating
expense indicates the selling expense portion increased $4000.
in the quarter ended January 31, 1998, over the same quarter of
the prior year. The nine month selling expenses for both the
January 31, 1998 quarter and the January 31, 1997 quarter were
almost the same. G&A expenses in the quarter ended January 31,
rose almost $4,500. over the same quarter the prior year.
13
For the nine month period ended January 31, 1998, G&A expenses
were $2,500. lower than the nine month period of the prior year.
The loss on operations for the quarter ended January 31, 1998
was $25,962. and is much greater than the loss for the same
quarter of the year prior period ended January 31,1997 by almost
$14,000. For the nine month period ended January 31, 1998 the
Registrant's was close to the loss for the same period of the
prior year.
The Registrant expects revenues will not recover sufficiently
in the fiscal year ended April 30, 1998, to enable the Company
to show a profit on operations, based on the first nine months
performance, for the year.
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 the revenues currently being
generated will be insufficient to produce a positive cash flow
during the next quarter and estimates for the first two quarters
of the next fiscal period are uncertain because cash flow will
be dependent on the Registrant's ability to increase sales. The
Registrant hopes negotiations Management has been conducting to
acquire the assets of another company in a non-allied business
will be able to generate positive cash flow. 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 these loans from the Chairman will be sufficient
to allow the Registrant to maintain operations at an acceptable
rate until new revenues can be generated.
The exclusive agreement between the Registrant and ADP has been
terminated therefore only the existing contracts produce royalty
income for the Registrant. The time lost in marketing and sales
during period of the ADP agreement cannot be recovered and only
with renewed marketing and sales effort will the Registrant be
able to penetrate the market. The Registrant is developing an
open environment approach to the market with a product which it
believes can lead to increased sales and acceptance of its claim
handling products. However, the insurance claims market into
which the Registrant sells its products is becoming increasingly
competitive. Larger and better capitalized competitors than the
Registrant are entering the market with products that offer many
of the same features the Registrant has been offering.
14
DATABASE TECHNOLOGIES,INC.
FORM 10QSB JANUARY 31, 1998
- ------------------------------------------------------------------------------
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
15
DATABASE TECHNOLOGIES,INC.
FORM 10QSB JANUARY 31, 1998
- --------------------------------------------------------------------------
SIGNATURES
- --------------------------------------------------------------------------
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)
February 26,1998
---------------------------------------------------------------------------
Dated (Signature)
Allan S. Wolfe
Chairman of the Board,
President, Chief Executive
Officer, Chief Financial