SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
|X| Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended April 30, 1996
|_| 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 0-19280
COMPUTER PETROLEUM CORPORATION
(Exact Name of Small Business Issuer as Specified in Its Charter)
Minnesota 41-1348422
(State of Incorporation) (I.R.S. Employer
Identification No.)
510 World Trade Center, 30 E. 7th Street, St. Paul, MN 55101
(Address of Principal Executive Offices) (Zip Code)
(612) 225-9550
(Issuer's Telephone Number, Including Area Code)
not applicable
Former name, address, and/or fiscal year, if changed since last report
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15 (d) of the Securities Exchange Act of 1934 during the past 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 _____
At May 15, 1996 2,904,009 shares of the issuer's common stock, $.01 par value,
were outstanding.
Transitional Small Business Disclosure Format Yes __X__ No _____
COMPUTER PETROLEUM CORPORATION
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION PAGE NUMBER
Item 1. Financial Statements
Statements of Operations -
Three Months Ended April 30, 1996 and 1995 3
Balance Sheets -
April 30, 1996 and January 31, 1996 4
Statements of Cash Flow -
Three Months Ended April 30, 1996 and 1995 5
Notes to Financial Statements 6, 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8, 9
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURE 11
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
COMPUTER PETROLEUM CORPORATION
Statements of Operations
Three Months Ended
April 30,
1996 1995
----------- ----------
(unaudited)
REVENUES $ 1,272,521 $ 1,060,888
COSTS AND EXPENSES:
Product 554,911 631,976
General and administrative 208,979 174,607
Selling and marketing 394,781 237,466
Total 1,158,671 1,044,049
INCOME FROM OPERATIONS 113,850 16,839
----------- ----------
INTEREST INCOME (EXPENSE):
Interest income 1,086 4,966
Interest expense (14,022) (11,232)
----------- ----------
Total (12,936) (6,266)
----------- ----------
INCOME BEFORE INCOME TAXES 100,914 10,573
INCOME TAXES (Note F) -- --
----------- ----------
NET INCOME $ 100,914 $ 10,573
=========== ==========
NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE $ 0.03 $ 0.00
=========== ==========
AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 2,904,009 2,904,009
=========== ==========
See notes to financial statements
COMPUTER PETROLEUM CORPORATION
BALANCE SHEETS
April 30, January 31,
ASSETS 1996 1996
---------- ----------
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents (Note D & E) $ 350,797 $ 390,810
Accounts receivable, net of allowance for doubtful
accounts of $59,000 in April and $34,000 in January 636,990 533,980
Prepaid expenses and other current assets 83,027 89,146
---------- ----------
Total current assets 1,070,814 1,013,936
PROPERTY AND EQUIPMENT, net 480,785 520,210
SOFTWARE DEVELOPMENT COSTS, net of amortization 825,953 806,516
INTANGIBLE AND OTHER ASSETS, net of amortization (Note C) 363,633 387,654
---------- ----------
$2,741,185 $2,728,316
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank line of credit (Note B) $ 250,000 $ 250,000
Current maturities of long-term debt 155,102 186,305
Accounts payable 262,307 280,824
Accrued expenses and other current liabilities 36,107 73,739
Deferred revenue 90,873 74,806
---------- ----------
Total current liabilities 794,389 865,674
---------- ----------
LONG-TERM DEBT, less current maturities (Note D) 312,930 326,565
---------- ----------
SHAREHOLDERS' EQUITY:
Preferred Stock (Note B):
Authorized 10,000,000 non-voting,convertible shares at
$ .01 par value: issued and outstanding: 75,000 shares 750 750
Common Stock:
Authorized 22,058,600 shares at.01 par value;
issued and outstanding: 2,904,009 shares 29,041 29,041
Additional paid-in capital 7,577,378 7,577,378
Accumulated deficit (5,973,303) (6,071,092)
---------- ----------
Total shareholders' equity (Note F) 1,633,866 1,536,077
---------- ----------
$2,741,185 $2,728,316
========== ==========
See notes to financial statements.
COMPUTER PETROLEUM CORPORATION
Statements of Cash Flow
Three Months Ended
April 30,
--------------------
1996 1995
--------- ---------
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 100,914 $ 10,573
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 47,914 45,782
Amortization 46,024 27,573
Forgiveness of note payable to City of St Paul (5,832) (5,832)
Change in:
Accounts receivable (103,010) 16,530
Prepaid expenses and other current assets 6,119 (75,829)
Other non current assets -- 30,000
Accounts payable (18,517) (16,755)
Accrued expenses and other current liabilities (37,632) (1,197)
Deferred revenue 16,067 8,859
--------- ---------
Net cash provided by operating activities 52,047 39,704
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for software development costs (41,440) (109,213)
Payments for purchases of property and equipment (8,489) (27,991)
--------- ---------
Net cash used in investing activities (49,929) (137,204)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Preferred stock dividends (3,125) --
Repayment of bank notes and other debt (39,006) (28,622)
--------- ---------
Net cash used in financing activities (42,131) (28,622)
--------- ---------
DECREASE IN CASH & CASH EQUIVALENTS (40,013) (126,122)
CASH & CASH EQUIVALENTS AT BEGINNING OF PERIOD 390,810 576,243
--------- ---------
CASH & CASH EQUIVALENTS AT END OF PERIOD $ 350,797 $ 450,121
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 14,022 $ 11,232
========= =========
See notes to financial statements.
COMPUTER PETROLEUM CORPORATION
NOTES TO FINANCIAL STATEMENTS
(unaudited)
NOTE A
In the opinion of management, the unaudited financial statements contain all
adjustments, consisting only of normal recurring accruals, necessary to present
fairly the financial position of the Company as of April 30, 1996, and the
results of its operations and cash flows for the three months ended April 30,
1996 and 1995. These results are not necessarily indicative of the results to be
expected for the full fiscal year.
The financial information presented herein should be read in conjunction with
the financial statements and notes included in the Annual Report to Stockholders
for the year ended January 31, 1996.
NOTE B - Acquisition
On October 9, 1995, the registrant purchased the assets of the software
development business of Payne & Associates for a total purchase price of
$352,721 composed of cash in the amount of $222,971, 75,000 shares of
convertible preferred stock of the registrant with a value of $84,750, and a
payable to seller of $45,000. The total purchase price was determined through
arms-length negotiations. The registrant used a short term bank line of credit
for the cash payment. In addition, the registrant will pay 40% of the annual
pre-tax profit derived from the operation of the business for a period of 5
years from the date of close. The assets purchased include customer base,
equipment, trade names and trademarks and the software products of Payne &
Associates. The equipment purchased includes computers (various servers and
networks), copiers, facsimile machines, office furniture and fixtures, and
printers, which will continue to be used by the registrant in the operation of
the business. The acquisition was accounted for as a purchase business
combination, and the results of operations since the date of acquisition are
included in the statements of operations.
The following reflects the Company's results of operations for the three months
ended April 30, 1995 on a pro forma basis assuming the purchase had occurred on
February 1, 1995.
Three Months Ended April 30,
1995
----
Revenue $1,226,438
Net Loss $ (20,479)
Net Loss Per Share $ (.01)
Note C - Intangible Assets
Intangible assets consist of covenants not to compete, customer lists and trade
namesand excess of purchase price over assets acquired. The intangible assets
are amortized on a straight-line basis over periods of from 3 to 7 years.
NOTE D - Long Term Debt
Long-term debt consists of the following at April 30, 1996:
Bank Notes $388,844
Capital Leases 245,002
City of St. Paul 42,800
--------
676,646
Less: Current Portion (405,102)
--------
$271,544
========
A portion of the Company's long term debt is secured by a 90 day renewable
certificate of deposit.
NOTE E - Cash and Cash Equivalents
Cash and Cash equivalents ($350,797 and $390,810 at April 30, 1996 and January
31, 1996, respectively) consist of cash and highly liquid investments purchased
with an original maturity of three months or less.
NOTE F - Income Taxes
Deferred income taxes reflect the net tax effects of (a) temporary differences
between the financial statement and tax basis of assets and liabilities using
enacted tax rates in effect in the years in which the differences are expected
to reverse, and (b) operating loss carryforwards. A valuation allowance has been
recorded, but not booked, for the effect of net operating loss carryforwards
aggregating approximately $5,300,000 at both April 30, 1996 and January 31,
1996.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations- Three Months Ended April 30, 1996
Revenues for the quarter ended April 30, 1996 increased 19.9 percent to $
1,272,521 compared to the same period the prior year and 4.6 percent compared to
the previous quarter. The revenue increases were due to higher sales in the
Publications, Software Services and Transportation product lines.
No customer represented ten percent or more of the Company's revenues.
Marketing efforts in Publications and Transportation were increased during the
period in response to a more volatile petroleum market place resulting in
increased sales. In the Software Services area, the release and introduction of
two new software products resulted in several new license agreements and
programming projects.
Beta testing continued on the new client server database system as planned. Back
loading of the historical data bases began in the first quarter and is expected
to be complete by the end of the second quarter. A number of customers have been
accessing their daily files through the new communications portion of the
network application. A Graphic User Interface that will facilitate ease of use
should be completed early in the third quarter.
Gross Margin for the quarter was 56.4 percent compared to 40.4 percent for the
same period a year ago. The increases in gross margin are a result of increased
sales of Transportation products and software licenses.
Product expenses for the period decreased 12.2 percent from the same period last
year due to the assignment of the TranscommNet operation to a third party and
the implementation of additional cost control measures.
General and Administrative costs for the first quarter were 19.7 percent higher
than a year ago due to an increase in the reserve for bad debt and earned
incentives. Increases in the reserve for bad debt was a result of increased
sales and anticipated higher accounts receivable balance in the Software
Services group.
Sales and Marketing expenses increased 66.2 percent for the first quarter
compared to last year. The addition of the Software Services group and higher
advertising expenses account for the majority of the increase.
Interest income, net of expenses, decreased $6,970 compared to last year. This
was due primarily to lower cash balance and higher debt.
As a result of the above, first quarter net income was $100,914 compared to
$10,573 for the same period last year.
Liquidity and Capital Resources
At April 30, 1996, cash and cash equivalent balances totaled $ 350,797, and the
Company had a current ratio of 1.4 to 1. The Company generated approximately $
52,000 in cash from the operation of the business through the first three
months. The Company believes that its current cash balance and projected sales
volume should provide adequate capital to fund its planned level of operations
for the remainder of fiscal 1997. Completion of the new database platform,
hardware and software, may require additional capital which would come from bank
borrowing and/or equipment leasing.
Revenue growth for the year is projected to be approximately 20 percent with net
income in the range of 6 to 8 percent of revenue. These projections are based on
historical gross margins for the various revenue streams, the continued
acceptance of the Company's "Contract Average Price" as the pricing benchmark in
the trucking industry, the ability of several third party software marketing
firms to meet their stated sales objectives, the acceptance of site-specific
retail prices and stability in the wholesale pricing market. Outside the product
area, changes in governmental regulations in the petroleum industry that would
adversely effect their need for information and changes in the competitive
environment will influence the Company's ability to achieve its forecasts.
Forecasts and projections presented here are intended to be forward looking,
involve risks and uncertainties and should be considered in conjunction with the
information above.
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
27 - Financial Data Schedule
b) Reports on Form 8-K
None
SIGNATURE
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.
Date: June 13, 1996
COMPUTER PETROLEUM CORPORATION
By: /s/Gary C. Thomas
Gary C. Thomas
Vice President of Finance and
Chief Financial Officer
(principal financial and
accounting officer)