-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AjVuv0yhmzYSsiaU7e+Ot8OCpd7St/s3C0OGjXDmjOy8Kcnaf5MFbysTDjCARbzW Wtv2VewzDQhqz8TJL8txpw== 0000840824-95-000014.txt : 19951120 0000840824-95-000014.hdr.sgml : 19951120 ACCESSION NUMBER: 0000840824-95-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951115 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOFTWARE DEVELOPERS CO INC/DE/ CENTRAL INDEX KEY: 0000840824 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-CATALOG & MAIL-ORDER HOUSES [5961] IRS NUMBER: 042911320 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10139 FILM NUMBER: 95593220 BUSINESS ADDRESS: STREET 1: 90 INDUSTRIAL PARK RD CITY: HINGHAM STATE: MA ZIP: 02043 BUSINESS PHONE: 6177400101 MAIL ADDRESS: STREET 1: 90 INDUSTRIAL PARK ROAD CITY: HINGHAM STATE: MA ZIP: 02043 10-Q 1 1995 FORM 10-Q Securities and Exchange Commission VIA EDGAR LINK Re: The Software Developer's Company, Inc. Commission File No. 1-10139; Quarterly Report on Form 10-Q for the Quarter Ended September 30, 1995 Dear Sir/Madam: Enclosed for filing on behalf of The Software Developer's Company, Inc. is the Company's Form 10-Q for the quarter ended September 30, 1995. The Company is maintaining a copy which has been manually signed by the President and Chief Executive Officer and the Chief Financial Officer of the Company. If you have any questions or comments regarding this filing, please do not hesitate to call me at (617) 740-0101. Very truly yours, James O'Connor, Jr. Vice President and Chief Financial Officer SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 __________________ FORM 10-Q __________________ XX Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, For the quarterly period ended September 30, 1995, 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 1-10139 _____________________________ THE SOFTWARE DEVELOPER'S COMPANY, INC. (Exact name of registrant as specified in its charter) DELAWARE 04-2911320 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 90 INDUSTRIAL PARK ROAD HINGHAM, MASSACHUSETTS 02043 (Address of principal executive offices) (Zip Code) (617) 740-0101 (Registrant's Telephone Number) Securities registered pursuant to Section 12(g) of the Act: NONE _________________________ 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 other 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 XX Yes No As of November 3, 1995 there were 7,529,011 shares of Common Stock outstanding. FORM 10-Q QUARTERLY REPORT TABLE OF CONTENTS Facing Sheet. . .. . . . . . . . . . . . . . . . . . . . . 1 Table of Contents. . . . . . . . . . . . . . . . . . . . . 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheet. . . . . . . . . . . . . . . 3 Statement of Operations. . . . . . . . . . 5 Statement of Cash Flows. . . . . . . . . . 6 Notes to Financial Statements. . . . . . . 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. . . . . . . . . . . . . . . . 11 PART II. OTHER INFORMATION Item 1. Legal Proceedings . . . . . . . . . . . . . . 18 Item 2. Changes in Securities . . . . . . . . . . . . 18 Item 3. Defaults Upon Senior Securities . . . . . . . 18 Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . 18 Item 5. Other Information . . . . . . . . . . . . . . 19 Item 6. Exhibits and Reports on Form 8-K. . . . . . . 19 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . 20 Exhibit 11 - Computation of earnings per share . . . . . . 21 PART I. - FINANCIAL INFORMATION THE SOFTWARE DEVELOPER'S COMPANY, INC. BALANCE SHEETS (Unaudited) ASSETS September 30, March 31, 1995 1995 CURRENT ASSETS: Cash $ 981,233 $ 334,747 Accounts receivable - trade, net of allowance for doubtful accounts of $393,607 and $347,432 at September 30, 1995 and March 31, 1995, respectively 5,144,673 4,413,884 Accounts receivable - product, net of allowance for doubtful accounts of $66,892 and $60,745 at September 30, 1995 and March 31, 1995, respectively 22,147 99,977 Inventory 1,697,293 1,695,993 Other current assets 347,744 339,418 TOTAL CURRENT ASSETS 8,193,090 6,884,019 EQUIPMENT AND LEASEHOLD IMPROVEMENTS, net 448,810 502,873 INTANGIBLE ASSETS, NET, INCLUDING GOODWILL OF $682,139 900,764 967,262 OTHER ASSETS 73,476 88,421 $9,616,140 $8,442,575 The accompanying footnotes are an integral part of the financial statements. THE SOFTWARE DEVELOPER'S COMPANY, INC. BALANCE SHEETS (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY September 30, March 31, 1995 1995 CURRENT LIABILITIES: Accounts payable - trade $4,838,792 $4,063,696 Line of credit 1,423,470 1,423,470 Other accrued expenses 657,106 511,767 Accrued payroll 199,902 163,281 Customer advances 172,799 124,689 Current portion of capitalized lease obligations 7,880 27,011 TOTAL CURRENT LIABILITIES 7,299,949 6,313,914 LONG-TERM NOTES PAYABLE 300,000 300,000 STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value, authorized 5,000,000 shares: Series C, voting, non-cumulative 760,968 shares issued and outstanding at September 30, 1995 (905,968 issued and outstanding at March 31, 1995) 7,610 9,060 Common stock, voting, $.01 par value, 25,000,000 authorized shares; 7,469,599 issued and 7,444,498 outstanding at September 30, 1995 (7,321,599 issued and 7,296,498 outstanding at March 31, 1995) 74,697 73,217 Additional paid-in capital 9,952,185 9,949,566 Cumulative translation adjustment 31,068 22,242 Cumulative deficit (7,965,712) (8,141,767) 2,099,848 1,912,318 Less treasury stock, at cost, 25,101 shares (83,657) (83,657) TOTAL STOCKHOLDERS' EQUITY 2,016,191 1,828,661 $9,616,140 $8,442,575 The accompanying footnotes are an integral part of the financial statements. THE SOFTWARE DEVELOPER'S COMPANY, INC. STATEMENTS OF OPERATIONS (Unaudited) For the three months ended September 30, Restated 1995 1994 Revenues: Product sales $12,042,003 $7,324,955 Marketing services 1,318,693 1,049,434 13,360,696 8,374,389 Costs and expenses: Costs of products sold 10,173,153 5,866,868 Cost of marketing services 707,037 529,277 Selling, general and administrative expenses 2,418,315 1,890,396 13,298,505 8,286,541 NET INCOME BEFORE INTEREST AND MINORITY INTEREST 62,191 87,848 Interest expense, related party 9,000 9,000 Net other expense, including third-party interest expense 32,273 48,370 NET INCOME $ 20,918 $ 30,478 NET INCOME PER SHARE $0.00 $0.00 Weighted average shares outstanding 8,685,000 8,200,000 THE SOFTWARE DEVELOPER'S COMPANY, INC. STATEMENTS OF OPERATIONS (Continued) (Unaudited) For the six months ended September 30, Restated 1995 1994 Revenues: Product sales $23,911,602 $14,294,016 Marketing services 2,655,583 1,964,594 26,567,185 16,258,610 Costs and expenses: Costs of products sold 20,002,253 11,349,445 Cost of marketing services 1,577,346 1,094,254 Selling, general and administrative expenses 4,729,976 3,650,790 26,309,575 16,094,489 NET INCOME BEFORE INTEREST AND MINORITY INTEREST 257,610 164,121 Interest expense, related party 18,000 18,000 Net other expense, including third-party interest expense 63,555 90,347 NET INCOME $ 176,055 $ 55,774 NET INCOME PER SHARE $0.02 $0.01 Weighted average shares outstanding 8,718,000 8,201,000 The accompanying footnotes are an integral part of the financial statements. THE SOFTWARE DEVELOPER'S COMPANY, INC. STATEMENTS OF CASH FLOWS (Unaudited) For the six months ended September 30, Restated 1995 1994 OPERATING ACTIVITIES Net income $ 176,055 $ 55,774 Adjustments to reconcile net income to net cash provided by operating activities: Sale of advertising for product (390,639) (578,544) Depreciation and amortization 237,099 215,464 Provision for doubtful accounts receivable 339,544 34,687 Provision for losses on inventory 83,401 105,000 Changes in operating assets and liabilities: Accounts receivable (965,795) 77,234 Inventory 279,230 804,003 Other current assets (8,326) (17,350) Other assets 14,945 25,417 Accounts payable 775,096 (392,156) Accrued payroll 36,621 (16,864) Other accrued expenses 145,339 69,488 Customer advances 48,110 (139,951) Total adjustments $ 594,625 $ 186,428 Net cash provided by continuing operating activities 770,680 242,202 Net cash used for discontinued operating activities --- (25,310) Net cash provided by operating activities $ 770,680 $ 216,892 The accompanying footnotes are an integral part of the financial statements. THE SOFTWARE DEVELOPER'S COMPANY, INC. STATEMENTS OF CASH FLOWS (Cont.) (Unaudited) For the six months ended September 30, Restated 1995 1994 INVESTING ACTIVITIES Purchase of equipment $ (116,538) $ (84,157) Net cash used for investing activities (116,538) (84,157) FINANCING ACTIVITIES Principal payments under capital lease obligations (19,131) (20,795) Issuance of stock 2,649 2,668 Net cash used for financing activities (16,482) (18,127) Effect of exchange rate changes on cash 8,826 29,008 Net increase in cash 646,486 143,616 Cash at beginning of period 334,747 550,560 Cash at end of period $ 981,233 $ 694,176 Supplemental disclosures of cash flow information: Interest paid $ 81,511 $ 102,913 Supplemental schedule of noncash investing and financing activities: Collection of products in satisfaction of accounts receivable - product $ 363,931 $ 589,746 The accompanying footnotes are an integral part of the financial statements. THE SOFTWARE DEVELOPER'S COMPANY, INC. NOTES TO FINANCIAL STATEMENTS Note 1 - The unaudited financial information furnished herein reflects all adjustments which are of a normal recurring nature, which in the opinion of management are necessary to fairly state the Company's financial position, cash flows and the results of its operations for the periods presented. Certain information and footnote disclosure normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. This information should be read in conjunction with the Company's audited financial statements for the fiscal year ended March 31, 1995, included in Form 10-K filed on July 14, 1995. Note 2 - The results of operations for the three-month and six-month periods ended September 30, 1995 are not necessarily indicative of the results to be expected for the entire year ending March 31, 1996. Note 3 - Minority interest represents the minority shareholders' proportionate share of their equity of Personal Computing Tools, Inc. (PCT). At September 30, 1995, the Company owned 94% of the capital stock of PCT. Note 4 - Net income per share is based upon the weighted average number of common shares outstanding including the dilutive effects of options and warrants. Note 5 - The Company provides for income taxes during interim reporting periods based on reported earnings before income taxes using an estimate of the annual effective tax rate. Deferred income taxes reflect the impact of temporary differences between the amount of assets and liabilities recognized for tax purposes. These deferred taxes are measured by applying currently enacted tax laws. Note 6 - Effective April 1, 1994, the Company changed its method of accounting for income taxes from the deferred method to the liability method required by FASB Statement No. 109 "Accounting for Income Taxes". The effect of the adoption of this statement had no impact on the operating results, components of the income tax expense, or financial position of the Company. The principal components of the Company's deferred tax assets and liabilities as of April 1, 1995 consisted of the following (in thousands): Deferred Tax Assets: Expenses not currently deductible $ 462 Operating loss carryforwards 3,004 3,466 Deferred tax liabilities --- 3,466 Valuation allowance (3,466) Net --- There was no change to the valuation allowance during the first six months of fiscal 1996. Note 7 - On October 18, 1995 the Company announced that it had entered into an agreement with Internet Security Corporation (ISC), a privately held reseller of security products for the Internet, to acquire all of the outstanding stock of ISC in a pooling of interests transaction. The agreement calls for ISC to receive Common Stock of the Company valued at $750,000 at a price per share equal to the lower of $1.61 or the average closing price of the Company's Common Stock for the ten trading days prior to closing. The closing is expected to occur mid-November, 1995. The Company expects to incur a third quarter charge of approximately $150,000 for legal and audit fees related to the transaction. THE SOFTWARE DEVELOPER'S COMPANY, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The Company's revenues are generated by marketing and distributing specialty PC-based software and hardware to technical and professional PC users through its catalog operations: The Programmer's SuperShop (TPS), Personal Computing Tools SuperShop (PCT), and New Media SuperShop (NMS). In addition, SDC Communications (SDCC) provides marketing services to third-party manufacturers, developers and publishers of the products the Company distributes. Marketing services are designed to generate sales leads, increase market visibility and assist in the launch of new products. RESULTS OF OPERATIONS The following information should be read in conjunction with the consolidated financial statements and notes thereto: Three-month period ended September 30, 1995 vs. % to Net Revenue % Change September 30, 1994 1995 1994 95 v. 94 Net Revenues: Product sales (TPS, PCT, NMS) 90% 87% 64% Marketing services (SDCC) 10% 13% 26% 100% 100% 60% Gross Margins: Product sales (TPS, PCT, NMS) 16% 20% 33% Marketing services (SDCC) 46% 50% 18% 19% 24% 25% Selling, general and administrative expenses 18% 23% 28% Net income * * (31)% * Less than 1% Revenues: Total net revenues in the second quarter ended September 30, 1995 increased $4,987,000, or 60%, to $13,361,000 from $8,374,000 in the second quarter ended September 30, 1994. Net product sales increased $4,717,000, or 64%, to $12,042,000 in the second quarter of fiscal 1996 from $7,325,000 in the second quarter of fiscal 1995. The increase in product revenue was primarily derived from the Company's corporate sales group. The corporate sales group's aggressive outbound selling effort has enabled the Company to successfully establish major account relationships. Product revenue growth was accelerated by an improving market for software development tools. Marketing services revenue increased $270,000, or 26%, to $1,319,000 in the second quarter ended September 30, 1995 from $1,049,000 in the second quarter ended September 30, 1994. This increase was mainly attributable to the quarterly marketing programs designed for low-cost promotion of software manufacturers' products. Gross Margin: Total gross margin increased $503,000, or 25%, to $2,481,000 in the quarter ended September 30, 1995 from $1,978,000 in the quarter ended September 30, 1994. Gross margin from product sales increased $411,000, or 28%, to $1,869,000 in the second quarter of fiscal 1996 from $1,458,000 in the second quarter of fiscal 1995. The increase in product gross margin was a result of the increased sales volume generated by the Company's corporate sales group. As a percent of sales, however, gross margin from product revenue declined to 16% from 20%. This decrease was caused by the continued competitive pricing pressures that exist in the software distribution market coupled with the volume discounts offered to corporate customers. Gross margin from marketing services increased $92,000, or 18%, to $612,000 in the quarter ended September 30, 1995 from $520,000 in the same period last year. This increase was mainly attributable to the quarterly marketing programs focused on building major advertising account relationships. These programs tend to yield higher gross margins than the Company's catalogs. Selling, General and Administrative Expenses: Selling, general and administrative (SGA) expenses increased $528,000, or 28%, to $2,418,000 in the second quarter of fiscal 1996 from $1,890,000 in the second quarter of fiscal 1995. The increase in expenses reflects planned headcount additions in the corporate sales group in an effort to produce increased revenues. SG&A as a percent of net revenue declined to 18% from 23% reflecting the Company's ability to leverage its existing operations to grow revenue. Interest Expense: Net interest expense decreased $16,000, or 28%, to $41,000 in the second quarter of fiscal 1996 from $57,000 in the second quarter of fiscal 1995. This decrease was mainly attributable to lower interest rates offered to the Company on its line of credit. The Company's quarterly operating results have varied and may continue to vary significantly depending on factors such as the timing of significant product marketing programs, the timing of new product introductions, and the mix of service and product sales. Substantially all of the Company's product revenue in a given quarter is derived from orders received in that particular quarter. Accordingly, delays in orders are likely to result in the associated revenue not being realized by the Company in the period. Moreover, the Company's expense levels are based in part on expectations of future revenue levels, and a shortfall in expected revenue could therefore result in a disproportionate decrease in the Company's net income. Six-month period ended September 30, 1995 vs. % to Net Revenue % Change September 30, 1994 1995 1994 95 v. 94 Net Revenues: Product sales (TPS, PCT, NMS) 90% 88% 67% Marketing services (SDCC) 10% 12% 35% 100% 100% 63% Gross Margins: Product sales (TPS, PCT, NMS) 16% 21% 33% Marketing services (SDCC) 41% 44% 24% 19% 23% 31% Selling, general and administrative expenses 18% 22% 30% Net income 1% * 316% * Less than 1% Revenues: Total net revenues for the six months ended September 30, 1995 increased $10,308,000, or 63%, to $26,567,000 from $16,259,000 in the six months ended September 30, 1994. Net product sales increased $9,618,000, or 67%, to $23,912,000 in the six months ended September 30, 1995 from $14,294,000 in the prior year period. The increase in product sales was primarily due the growth of the Company's corporate sales group whose outbound selling effort has successfully established major account relationships. The growth in product sales was accelerated by an improving software development tools market and the expansion of the Company's corporate sales group. Marketing services revenue increased by $691,000, or 35%, to $2,656,000 in the first six months of fiscal 1996 from $1,965,000 in the first six months of fiscal 1995. The increase in marketing services revenue was the result of the Company's newly developed quarterly marketing programs designed for the low-cost promotion of software manufacturers' products. Gross Margins: Total gross margin increased $1,173,000, or 31%, to $4,988,000 in the first six months of fiscal 1996 from $3,815,000 in the comparable period in fiscal 1995. Gross margin from product sales increased $964,000, or 33%, to $3,909,000 in the six month period ended September 30, 1995 from $2,945,000 in the same period last year. The increase in gross margin was a result of the sales volume growth generated from the Company's corporate sales group. As a percent of sales, however, gross margin from product revenue for the six month period declined to 16% from 21% a year ago. This decrease was caused by the continued competitive pricing pressures that exist in the software distribution market coupled with the volume discounts offered to corporate customers. Gross margin from marketing services increased 24%, or $208,000 to $1,078,000 for the first six months of fiscal 1996 from $870,000 for the same period in fiscal 1995. The increase in marketing services gross margin was attributable to the Company's quarterly marketing programs focused on building major account relationships. These programs tend to yield higher gross margins than the Company's catalog publications. Selling, General and Administrative Expenses: Selling, general and administrative (SGA) expenses increased $1,079,000, or 30%, in the first six months of fiscal 1996 to $4,730,000 from $3,651,000 in the same period in fiscal 1995. The increase in SGA expenses was mainly attributable to planned headcount additions in the corporate sales group designed to produce increased revenues. As a percentage of sales, however, SGA expenses decreased to 18% from 22% for the six month periods, reflecting the Company's ability to leverage its existing operations to grow revenue. Interest Expense: Interest expense decreased by $26,000, or 24%, to $82,000 for the six month period ended September 30, 1995 from $108,000 for the same period last year. The decline in interest expense was the result of lower interest rates offered to the Company on its line of credit. LIQUIDITY AND CAPITAL RESOURCES (in thousands, except ratios) September 30, March 31, Financial Condition as of 1995 1995 Cash and cash equivalents $981 $335 Working capital 893 570 Current ratio 1.12 1.09 Cash Flow Activity Summary for September 30, September 30, the Six Months Ended 1995 1994 Net cash provided by continuing operating activities $771 $242 Net cash used for discontinued operating activities -- (25) Net cash used for investing activities (117) (84) Net cash used for financing activities (16) (18) The Company's net cash balance increased $646,000 to $981,000 at September 30, 1995 from $335,000 at March 31, 1995. Cash generated by operating activities of $771,000 was achieved during the first six months of fiscal 1996 primarily from net income from operations. Accounts receivable-trade increased 17% to $5,145,000 at September 30, 1995 from $4,414,000 at March 31, 1995. This increase resulted from the Company's revenue growth. The Company continues to maintain an expanded collections program that has yielded favorable collection results. The Company has a $2,000,000 secured bank line of credit under which borrowings bear interest at the bank's prime rate plus 1%. The line is subject to renewal on January 5, 1996. Available borrowings under the line are based on 80% of eligible accounts receivable. Covenants under the line of credit require the Company to maintain certain net worth and financial ratios. The Company is currently in default of certain financial covenants and has received a written waiver for the period September 30, 1995 with the condition that the maximum borrowings under the credit facility be limited to the current outstanding balance until such time as a new credit restructuring is agreed upon. The Company and the bank are currently in the process of renegotiating the line of credit and the covenants governing the agreement which have caused past defaults. The Company anticipates that its existing cash resources, cash flow from operations and the continued availability of its bank line of credit will be sufficient to fund its operations through March 31, 1996, provided it meets its operating plan and remains in compliance with its credit agreement. The Company's ability to finance its operations will be dependent on its ability to renegotiate its bank line of credit for a continued availability of borrowing thereunder. There can be no assurance that the Company will be successful in renegotiating its line of credit or that the bank will permit continued borrowings under its line of credit. If the Company is unsuccessful in renegotiating its line of credit with the bank, it will need to seek alternative financing for working capital. Future capital requirements will depend on many factors, including cash flow from continuing operations, competition from larger catalog distributors and market developments, and the Company's ability to distribute products and marketing services successfully. To the extent cash flow from operations is insufficient to fund the Company's activities, it may be necessary to raise additional funds through equity or debt financing. The Company is exploring additional sources of capital; however, there are currently no firm commitments at this time. Additional debt financings will likely result in higher interest charges. Additional equity financings will likely result in dilution of stockholders' interests. The Company's ability to generate cash from operations depends upon, among other things, revenue growth, improvements in operating productivity, its credit and payment terms with vendors and collections of accounts receivable. The Company's ability to borrow under this facility is dependent upon satisfying certain financial covenants, and there can be no assurances that the Company will remain in compliance. If such sources of cash prove insufficient, the Company will be required to make changes in its operations or to seek additional debt or equity financing. There can be no assurances that cash generated from operations and borrowings under its credit facility will be sufficient to meet its operating requirements, or if required, that additional debt or equity financing will be available on terms acceptable to the Company. The Company currently anticipates that its available cash, expected cash flow from operations, and its borrowing capacity will be sufficient to fund operations through March 31, 1996. In June 1995, the Company became aware of information indicating that cash and other accrued expenses had been reported improperly in fiscal 1994 and fiscal 1995 by the accounting staff while implementing controls and procedures associated with the new computerized transaction processing system installed in fiscal 1994. As a result of this information, the Company restated its financial statements for the year ended March 31, 1994. The effect on the results of the restatement of the quarter ended September 30, 1994 is as follows: Quarter Ended September 30, 1994 As Reported As Restated Net revenues $8,389,424 $8,374,389 SG&A expenses 1,882,991 1,890,396 Net income (loss) 52,918 (34,478) Net income (loss) per share 0.01 (0.00) Accounts receivable 2,844,470 2,829,435 Total current assets 5,332,460 5,317,425 Total assets 6,981,330 6,966,295 Other accrued expenses 402,517 409,922 Total current liabilities 4,346,012 4,353,417 Accumulated deficit (7,653,906) (7,676,346) Total stockholders' equity 2,294,679 2,272,239 Total liabilities and stockholders' equity 6,981,330 6,966,295 PART II. - OTHER INFORMATION THE SOFTWARE DEVELOPER'S COMPANY, INC. ITEM 1. LEGAL PROCEEDINGS The Company is not involved in any material legal proceedings. ITEM 2. CHANGES IN SECURITIES There have been no changes in securities during the quarter ended September 30, 1995. ITEM 3. DEFAULTS UPON SENIOR SECURITIES At September 30, 1995, the Company was in default of certain financial covenants relating to its line of credit and a note payable to a related party. The Company has obtained a written waiver for the period September 30, 1995 with the condition that the maximum borrowings under the credit facility be limited to the current outstanding balance until such time as a new credit restructuring is agreed upon. There can be no assurance that the Company will be successful in renegotiating its line of credit. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On September 14, 1995 the Board of Directors caused to be distributed to stockholders of record as of September 1, 1995, a Notice of Annual Meeting of Stockholders, Proxy and a Proxy Statement for the Annual Meeting, held on October 18, 1995. As of the record date, 7,443,748 shares of Common Stock (excluding treasury shares) were outstanding and entitled to vote. Additionally, there were 760,968 shares of Series C Preferred Stock that were outstanding and entitled to vote. At the meeting, the stockholders acted upon the following proposals: (i) election of directors; and (ii) ratification of the firm of Coopers & Lybrand as independent auditors for the fiscal year ending March 31, 1996. All of the above matters were approved by the stockholders. Votes "For" represent affirmative votes and do not include abstentions or broker non-votes. In cases where a signed proxy was submitted without direction, the shares represented by the proxy were voted "For" each proposal in the manner disclosed in the proxy statement and Proxy. Voting results were as follows: I. Election of Directors: FOR WITHHELD Stephen L. Watson 5,910,239 177,488 Barry N. Bycoff 5,910,239 177,488 Aaron Kleiner 5,910,239 177,488 Gustav H. Koven 5,910,239 177,488 Milton J. Pappas 5,910,239 177,488 Ralph B. Wagner 5,767,071 320,656 Michael L. Mark 5,910,239 177,488 II. Ratification of Independent Auditors: FOR AGAINST ABSTAIN 5,929,489 157,938 300 ITEM 5. OTHER INFORMATION On October 18, 1995 the Company announced that it had entered into an agreement with Internet Security Corporation (ISC), a privately held reseller of security products for the Internet, to acquire all of the outstanding stock of ISC in a pooling of interests transaction. The agreement calls for ISC to receive Common Stock of the Company valued at $750,000 at a price per share equal to the lower of $1.61 or the average closing price of the Company's Common Stock for the ten trading days prior to closing. The closing is expected to occur mid-November, 1995. The Company expects to incur a third quarter charge of approximately $150,000 for legal and audit fees related to the transaction. ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits: Exhibit No. 11 - Computation of earnings per share. (b) Report on Form 8-K: No reports on Form 8-K were filed during the quarter ended September 30, 1995. 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. Date: November 14, 1995 THE SOFTWARE DEVELOPER'S COMPANY, INC. By: /s/ Barry N. Bycoff Barry N. Bycoff President and Chief Executive Officer (Principal Executive Officer) Date: November 14, 1995 By: /s/ James O'Connor, Jr. James O'Connor, Jr. Vice President, Finance and Chief Financial Officer (Principal Financial and Chief Accounting Officer) EXHIBIT 11 THE SOFTWARE DEVELOPER'S COMPANY, INC. COMPUTATION OF EARNINGS PER SHARE (In thousands, except per share data) Three months ended September 30, Restated 1995 1994 Weighted average shares outstanding 8,285 8,199 Net effect of dilutive stock options and warrants - based on the treasury stock method using the average market price 400 1 Total 8,685 8,200 Net income for EPS computation $ 21 $ 30 Net income per share $0.00 $0.00 Six months ended September 30, Restated 1995 1994 Weighted average shares outstanding 8,309 8,199 Net effect of dilutive stock options and warrants - based on the treasury stock method using the average market price 409 2 Total 8,718 8,201 Net income for EPS computation $ 176 $ 56 Net income per share $0.02 $0.01 -----END PRIVACY-ENHANCED MESSAGE-----