10
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT UNDER 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: 0-23952
AVERT, INC.
(Exact name of small business issuer as specified in its charter)
Colorado 84-1028716
(State or other jurisdiction of (I.R.S.
incorporation or organization) Employer Identification No.)
301 Remington, Fort Collins, CO 80524
(Address of principal executive offices)
970/484-7722
(Registrant's telephone number, including area code)
No Change
(Former name, former address and former fiscal year, if changed from last
report).
Check whether the registrant (1) 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
issuer was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
[ X ] Yes [ ] No
As of April 22, 1996 the issuer had 3,418,250 shares of Common Stock, no
par value, outstanding
Transitional Small Business Disclosure Format.
[ ] Yes [ X ] No
Form 10-QSB
Quarter Ended March 31, 1996
INDEX
PAGE
PART I - FINANCIAL INFORMATION
ITEM 1. Financial statements
Unaudited balance sheets.......................... 3
Unaudited statements of income.................... 4
Unaudited statements of cash flows................ 5
Notes to unaudited financial statements........... 6
ITEM 2. Management's Discussion and Analysis or
Plan of
Operations.................................................. 7
PART II - OTHER INFORMATION
ITEMS 1, 2, 3, 4 and 5 Not applicable...............
ITEM 6 Exhibits and Reports on Form 8-K.............. 9
Signatures.................................................. 10
PART I - FINANCIAL INFORMATION
AVERT, INC.
BALANCE SHEETS
ASSETS
MARCH 31 DECEMBER 31,
1996 1995
(unaudited)
Current assets:
Cash and cash equivalents.............. $ 161,700 $ 159,700
Marketable securities.................. 5,546,900 5,966,500
Accounts receivable, net of allowance.. 758,100 607,900
Prepaid expenses and other............. 198,500 240,600
Total current assets.............. $ 6,665,200 6,974,700
Property and equipment, net................. 1,746,600 1,389,100
Other assets............................ 19,400 19,400
Total assets................................ $ 8,431,200 $ 8,383,200
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable....................... $ 395,100 $ 407,900
Accrued expenses....................... 33,300 81,300
Deferred revenue....................... 52,800 58,600
Total current liabilities......... 481,200 547,800
Shareholders' equity:
Preferred shares, no par value; authorized
1,000,000 shares; none outstanding.... --- ---
Common stock, no par value; authorized
9,000,000 shares; 3,442,250 shares issued
and outstanding....................... 4,960,600 4,960,600
Treasury Stock (76,400) ---
Retained earnings............ .......... 3,065,800 2,874,800
Total shareholders' equity......... 7,950,000 7,385,400
Total liabilities and shareholders' equity... $ 8,431,200 $ 8,383,200
========== ==========
See accompanying notes to the financial statements.
AVERT, INC.
STATEMENTS OF INCOME
(unaudited)
Three Months Ended
March 31,
1996 1995
Net revenues:
Search and product fees.............. $ 1,550,400 $ 1,217,700
Interest and other income............ 101,900 93,600
1,652,300 1,311,300
Expenses:
Search and product costs............ 705,000 507,700
Marketing........................... 272,000 166,400
General and administrative.......... 243,600 202,400
Software development................ 91,100 61,400
Depreciation and amortization....... 32,800 27,200
1,344,500 965,100
Income before income taxes................ 307,800 346,200
Income tax expense................... ( 116,800) (129,100)
Net income................................ $ 191,000 $ 217,100
========== =========
Net income per common share............... $ .06 $ .06
========== =========
Weighted average common
shares outstanding................... 3,437,107 3,442,250
========== =========
See accompanying notes to the financial statements.
AVERT, INC.
STATEMENTS OF CASH FLOWS
(unaudited)
THREE MONTHS ENDED MARCH 31,
1996 1995
Cash Flows From Operating Activities:
Net income........................... $ 191,000 $ 217,100
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization... 32,800 27,200
Bad debt expense................ 7,500 10,500
Increase/(decrease) in marketable securities and
other gains.................... (419,600) (82,100)
Changes in operating assets and liabilities:
Accounts receivable................(157,700) (58,900)
Prepaid expenses and other current assets
........... (300) (38,800)
Other assets.................... --- 3,800
Accounts payable................ (12,600) 71,400
Accrued expenses................ (48,200) (68,100)
Income taxes payable............ 41,700 (25,300)
Deferred revenue and deposits .. (5,700) (5,200)
Net cash provided by operating activities
........... 468,700 51,600
Cash Flows from Investing Activities:
Additions to furniture and equipment. (390,800) (59,700)
Proceeds from sale of furniture and equipment
........... 500 ---
Net cash provided by investing activities
........... (390,300) (59,700)
Cash Flows from Financing Activities:
Purchase of Treasury Stock........... (76,400) ---
Net cash provided by financing activities (76,400) ---
Increase/(Decrease) in Cash and Cash Equivalents
............. 2,000 (8,100)
Cash and Cash Equivalents, beginning of period
............. 159,700 738,300
Cash and Cash Equivalents, end of period.. $ 161,700 $ 730,200
========== ===========
See accompanying notes to the financial statements.
AVERT, INC.
NOTES TO FINANCIAL STATEMENTS
On June 22, 1994, the Company completed an initial public offering
("IPO") of 1,000,000 units ("Units"), each consisting of one share of
Common Stock and one Redeemable Warrant. The Units separated on December
7, 1994, and the Common Stock and the Redeemable Warrants began trading
separately as of that date. Two Redeemable Warrants entitle the holder to
purchase one share of Common Stock at a price of $6.50 per share (subject
to adjustment) for a nine month period originally stated as March 22, 1995
and ending December 22, 1995. On October 11, 1995, the Company announed
that it extended the expiration date of its Redeemable Warrants from
December 22, 1995 to April 30, 1996. The expiration date was further
extended to April 30, 1997, as announced on Form 8-K dated March 6, 1996.
All of the other terms of the Redeemable Warrants remain the same. The
Redeemable Warrants are redeemable by the Company at a redemption price of
$0.05 per Redeemable Warrant at any time commencing March 22, 1995, on at
least 30 days prior written notice, provided that the closing price of the
Common Stock equals or exceeds $7.50 per share for a period of 15
consecutive trading days ending within 15 days prior to the notice of
redemption. Net proceeds from the IPO totalled approximately $4,382,300.
The financial information contained herein is unaudited, but includes
all adjustments (consisting of only normal recurring accruals) which, in
the opinion of management, are necessary to present fairly the information
set forth. The financial statements should be read in conjunction with the
Notes to Financial Statements which are included in the Annual Report on
Form 10-KSB of the Company for the year ended December 31, 1995.
The results for interim periods are not necessarily indicative of
results to be expected for the fiscal year of the Company ending December
31, 1996. The Company believes that the three month report filed on Form
10-QSB is representative of its financial position, its results of
operations and its cash flows as of and for the periods ended March 31,
1996 and 1995 covered thereby.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations
Comparison of quarters ended March 31, 1996 and March 31, 1995
Net revenues increased from $1,311,300 for the three month period
ended March 31, 199,to $1,652,300 for the comparable three month period in
1996 or 26%. The breakdown of net revenues, exclusive of product discounts
and other miscellaneous income items, is as follows:
Three Months Ended Three Months Ended Percent of
March 31, 1996 March 31, 1995 Increase
Revenues % total Revenues % total (Decrease)
Products:
Workers compensation histories
$ 283,700 17.2% $ 299,100 22.8% ( 5.4%)
Criminal history reports
$ 841,400 50.9% $ 605,600 46.2% 38.9%
Previous employment reports/credit reports
$ 176,000 10.7% $ 95,600 7.3% 84.1%
Motor vehicle driving records
$ 217,800 13.2% $ 185,500 14.2% 17.4%
Other products $ 106,100 6.4% $ 59,200 4.5% 79.2%
Interest income $ 82,900 5.0% $ 85,400 6.5% ( 3.0)%
NET REVENUES $1,652,300 $1,311,300 26.0%
Moderate to strong growth in sales of all of the Company's products
continued during the first quarter of 1996 with the exception of workers'
compensation reports. Although sales of workers' compensation histories
actually decreased approximatley 5.4% from first quarter 1995 to first
quarter 1996, it is still the second largest product line respresenting
$283,700 for the first three months of 1996 and $299,100 for the comparable
period in 1995. The Company believes that sales of this product will
gradually increase as the Company enters new markets, continues to educate
customers, starts workers' compensation marketing campaigns, and locates
new data sources, but will continue to decrease as a percentage of total
revenues. Very strong growth of approximately 38.9% continued in the
Criminal History product line representing apprxomately 50.9% of net
revenues in the first quarter of 1996 as compared to approximately 46.2% of
net revenues in the first quarter of 1995. There was an approxi mate 84.1%
growth from first quarter 1995 to first quarter 1996 in the area of
Previous Employment/Credit. These products represent approximately 10.7%
of net revenues in the quarter ending March 31, 1996 as compared to
approximately 7.3% of net revenues in the same quarter in 1995.
Income before income taxes decreased from $346,200 in the period
ending March 31, 1995 to $307,800 in the period ending March 31, 1996 or
approximately 11.1% and represented approximately 18.6% of net revenues in
the first quarter 1996 compared to approximately 26.4% in the first quarter
1995. The decrease from 1996 to 1995 in the percentage of income before
income taxes to total net revenues was primarily attributable to: (1)
marketing expenses up over appoximately 63%, with costs associated with
additional personnel and lead generating activities; 2) a continuing change
in product mix, with a larger percentage of revenue generated from lower
margin products; 3) additional personnel in all areas of the organization,
and 4) the Company's customer base changing to a higher percentage of large
customers which generally received volume discounts.
Total expenses increased from $965,100 for the three month period
ended March 31, 1995 to $1,344,500 for the comparable period in 1996. A
breakdown in expenses is as follows:
Three Months Ended Three Months Ended Increase (Decrease)
March 31, 1996 March 31, 1995 % of Revenues
Expense % of Expense % of 1995 over 1994
Revenue Revenue
Search and product $ 705,000 42.7% $ 507,700 38.7% 4.0%
Marketing 272,000 16.5 166.400 12.7 3.8
General and administration
243,600 14.7 202,400 15.5 (0.8)
Software development 91,100 5.5 61,400 4.7 0.8
Depreciation and amortization
32,800 2.0 27,100 2.1 (0.1)
Expenses $ 1,344,500 81.4% $ 965,100 73.7% 7.7%
======== ====== ========== ====== ===========
The decrease in gross margin and the increase in marketing expense
accounted for an increase in total expenses of 7.8% as a percentage of
total net revenues. All other areas of expenses remained relatively stable
despite the costs associated with the move of the Company's headquarters
in February, 1996.
Income taxes remained consistent between the respective three month
periods at the expected combined federal and state statutory rate of
approximately 38%, resulting in net income of $191,000 or $.06 per share on
3,437,107 shares for the first quarter ended March 31, 1996, as compared to
net income of $217,100 or $.06 per share on 3,442,250 shares for the first
quarter ended March 31, 1996.
Liquidity and Capital Resources
The Company's financial position at March 31, 1996 remained strong
with working capital at that date of $6,184,000 compared to $6,426,900 at
December 31 1995. Cash and cash equivalents at March 31, 1996 were
$5,546,900 and decreased from $5,966,500 at December 31, 1995. Net cash
provided from operations for the three month period ended March 31, 1996
was $468,700 and consisted primarily of net income of $191,000 less a
$419,600 decrease in marketable securities, a $157,700 increase in accounts
receivable, and a $48,200 decrease in accrued expenses. The Company had
capital expenditures of $390,800 for the three month period ended March 31,
1996 as compared to $1,005,800 for the year ended December 31, 1995. The
majority of the capital expenditures during the three month ended March 31,
1996 was attributable to the actual construction and purchase of assets for
an approximate 14,600 square feet office building for use as its
headquarters. The estimate total construction costs were $1.2 million.
Construction was financed by current available cash derived from past
operations. No proceeds from the IPO was used for the land or the
construction of the building. Completion was March, 1996.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
NONE
ITEM 6. Exhibits and Reports on Form 8-K
(a) None
(b) Reports on Form 8-K
The registrant filed the following reports on Form 8-K during the
first quarter, 1996:
(i) Form 8-K dated January 16, 1996 announcing a program to
repurchase up to $500,000 of its shares in the operamarket.
(ii) Form 8-K dated February 29, 1996, reporting Avertt Inc.'s
move to new headquarters
(iii) Form 8-K dated March 4, 1996, reporting fourth quarter
and year-end results, and,
(iv) Form 8-K dated March 6, 1996, regarding the extenion of
expiration date of Avert's Redeemable Warrants.
SIGNATURES
In accordance with 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.
AVERT, INC.
DATE: April 26, 1996 BY:___________Dean A. Suposs
Dean A. Suposs, President
DATE: April 26, 1996 BY: __________ Jamie M.Burgat____
Jamie M. Burgat, Vice President of
Operations and Chief Financial
Officer