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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-K
- -----
| x | ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
- ----- SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended DECEMBER 31, 1997
-----------------
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 no. 0-3677
DATATAB, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEW YORK 13-1917838
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
49 EAST 21ST STREET, NEW YORK, NEW YORK 10010
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 228-6800
-------------
Securities registered pursuant to Section 12(b) of the Act: NONE
----
Securities registered pursuant to Section 12(g) of the Act:
COMMON SHARES, PAR VALUE $1.00 PER SHARE
- --------------------------------------------------------------------------------
(Title of class)
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.
Yes X No
---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. ( )
- --------------------------------------------------------------------------------
The number of common shares, $1.00 par
value, outstanding at March 20, 1997 was 705,836.
PART I
ITEM 1. BUSINESS.
- -----------------
(a) GENERAL DEVELOPMENT OF BUSINESS.
The Registrant was incorporated on June 5, 1959 as a New
Jersey corporation, commenced business operations in May, 1960, and was
re-incorporated on March 29, 1965 as a New York corporation.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS.
For the past three years, market research accounted for 100%
of consolidated operating revenues. No other segment accounted for as much as
15% of consolidated operating revenues during the last three years.
(c) NARRATIVE DESCRIPTION OF BUSINESS.
1. SERVICES
--------
The Registrant operates a data processing service center in
New York City, providing a variety of services principally utilizing computer
packages for the processing of data for use in market research. These packages
can be marketed to many different clients with only very limited program
adaptation.
Market research data processing performed by the Registrant
includes the processing of public opinion, readership audience, political,
consumer, and general survey research data for manufacturers, market research
companies, advertising agencies, governmental agencies, financial and
educational institutions, and foundations. The Registrant also designs, prints,
mails, and processes surveys for use in large database research. Data supplied
by the Registrant's clients is refined by the Registrant into statistics
designed to be of assistance to the client.
The above applications utilize computer software licensed to
the Registrant. (See Item 2, INFRA.)
I - 1
2. SOURCES OF RAW MATERIALS
------------------------
The Registrant's major equipment suppliers are Gateway
Computers, Hewlett-Packard, IBM, Megadata Corporation, and Qualstar Corporation.
The Registrant has been granted a perpetual license to use
copies of World Research Systems' ("WRS") UNCLE software for cross tabulations
as a result of a marketing agreement between the two companies under which the
Registrant was given the right to market software developed by WRS.
3. DEPENDENCE ON CERTAIN CUSTOMERS
-------------------------------
In 1997, there was one client who accounted for more than 10%
of consolidated operating revenues. This client reflected 72% of the
consolidated operating revenues. Management believes that the loss of any one or
a few of its largest clients would have a material adverse effect upon the
Registrant.
4. COMPETITION
-----------
The data processing service industry is highly competitive.
The Registrant conducts business in direct competition with many companies
(including both independent service bureaus and diversified companies with
service divisions) which offer a wide range of general data processing services,
including those performed by the Registrant. Some of the Registrant's
competitors are smaller, and some are larger and possess greater financial
resources. Another competitive factor in the data processing service business is
"in-house" data processing, in which a company installs its own data processing
equipment. The increasing availability and lower prices of mini- and
micro-computers have permitted companies to install their own data processing
equipment and to perform their own processing.
I - 2
Companies in the industry compete on the basis of a number of
factors, including price, quality of service, and product features. Management
believes the Registrant's particular strengths are its reputation and expertise
in a wide variety of applications, a well qualified staff, and its advanced
software. The Registrant provides extensive staff support to its clients while
maintaining a competitive price structure within the industry.
5. RESEARCH AND DEVELOPMENT
------------------------
The Registrant did not engage in any research and development
activities during the last fiscal year and Registrant has not engaged in any
customer-sponsored research activities relating to the development or
improvement of products or services during such period.
6. EMPLOYEES
---------
As of March 20, 1998, the Registrant had 5 full-time
employees. Part-time personnel are employed as needed.
(c) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC
------------------------------------------------
OPERATIONS AND EXPORT SALES.
----------------------------
Not applicable.
ITEM 2. PROPERTIES.
- ------------------
The Registrant maintained its executive offices and data
center operations at 80 Fifth Avenue, New York, New York under a lease which
expired on December 30, 1996. In addition to the basic annual rent, the
Registrant was responsible for all taxes, assessments, water and sewer rents,
insurance, etc.. The Registrant shared this space with its parent company, Data
Probe, Inc.
I - 3
The Registrant, effective December 27, 1996, currently
maintains its executive offices and data center operations at 49 East 21 Street,
New York, New York. The Registrant's parent company, Data Probe, Inc. acquired a
lease for this location, and the Registrant will be renting space on a month to
month basis. (See Item 13, INFRA.)
The Registrant owns two Megadata 8300 Model 4's, a Megadata
8300 Model 6, a Gateway2000 Pentium PC, and various IBM display terminals and
Hewlett Packard Printers.
ITEM 3. LEGAL PROCEEDINGS.
- --------------------------
NONE.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- ------- ----------------------------------------------------
No matter was submitted to a vote of security holders during
the fourth quarter.
I - 4
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
- -----------------------------------------------------------------------
MATTERS.
--------
a) MARKET INFORMATION.
-------------------
The Registrant's common shares are traded in the
over-the-counter market and listed on the National Quotation Bureau's "Pink
Sheets" (symbol: "DTAB"). The following table sets forth the range of high and
low closing bid quotations for the Registrant's common shares for each quarterly
period during the Registrant's last two fiscal years, as reported by the
National Quotation Bureau:
PERIOD CLOSING BID PRICES
------ ------------------
Fiscal Year Ended
December 31, 1997
HIGH LOW
---- ---
First Quarter N/A * N/A *
Second Quarter N/A * N/A *
Third Quarter N/A * N/A *
Fourth Quarter N/A * N/A *
Fiscal Year Ended
December 31, 1996
HIGH LOW
---- ---
First Quarter N/A * N/A *
Second Quarter N/A * N/A *
Third Quarter N/A * N/A *
Fourth Quarter N/A * N/A *
- ---------------
* Quotations were not available for the period indicated.
(b) HOLDERS.
-------
The number of equity security holders of record at March 20,
1997 was 579.
(c) DIVIDENDS.
---------
The Registrant has never paid cash dividends on its shares.
The Registrant does not anticipate paying cash dividends in the foreseeable
future.
II - 1
DATATAB, INC. AND SUBSIDIARIES
------------------------------
SELECTED FINANCIAL DATA
-----------------------
YEAR ENDED DECEMBER 31,
- --------------------------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- -------
For the year:
Total Revenue $ 496,301 $ 520,854 $ 665,529 $ 608,340 $ 224,435
========== ========== ========== ========== ==========
Net income
(loss) $ (48,761) $ 3,991 $ (27,110) $ (32,548) $ (176,108)
========== ========== ========== =========== ===========
Income (loss)
per share $(.07) $ .01 $(.04) $(.05) $(.25)
====== ====== ====== ====== ======
Average number
of shares
used in
computing
earnings or
loss per
share 705,836 705,836 705,836 705,836 705,836
---------- ---------- ---------- ---------- ----------
At year end:
Total assets $ 302,440 $ 429,807 $ 351,985 $ 517,965 $ 428,420
---------- ---------- ---------- ---------- ----------
Working
capital $ 143,888 $ 190,797 $ 142,432 $ 159,964 $ 183,799
---------- ---------- ---------- ---------- ----------
Long-term
indebtedness $ 18,600 $ 22,600 $ 22,600 $ 30,600 $ 36,600
---------- ---------- ---------- ---------- ----------
Shareholders'
equity $ 130,545 $ 179,306 $ 174,315 $ 202,425 $ 234,973
---------- ---------- ---------- ---------- ----------
Book value
per share $ .18 $ .25 $ .25 $ .29 $ .33
----- ----- ----- ----- -----
Cash dividends
declared per
common share NONE NONE NONE NONE NONE
---- ---- ---- ---- ----
II - 2
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- ---------------------------------------------------------------------
AND RESULTS OF OPERATION.
- -------------------------
RESULTS OF OPERATIONS:
- ----------------------
Operating revenues for the three most recent fiscal years
ended December 31, were $496,301 in 1997, $520,854 in 1996, and $665,529 in
1995.
Operating revenues decreased by 4.7%, or $24,553 for the
period ending December 31, 1997 as compared to a decrease of 21.7% in 1996.
The decrease in revenue in 1997 was a combination of two
factors. The Registrants major client's revenue fell by 13% to $359,000, or 72%
in 1997, from 80% of the Registrants revenue in 1996. That decrease was mostly
offset by several increases in work from smaller existing clients along with the
addition of a few new clients. The decrease in revenue in 1996 is mostly
attributable to reduced revenue from the Registrant's largest client.
In 1996 this client accounted for 80%, or $410,987, of the
Registrant's revenue as compared with 82%, or $507,632 in 1995. This $96,645
decrease in revenue accounted for 67% of the total decrease in overall revenue.
The Registrant is continuously trying to add clients to its
base. However, the key is to add repetitive work as opposed to one time work.
While the Registrant added several new clients during fiscal 1997, a few other
clients either did not repeat their studies or reduced the amount of work sent
to the Registrant.
For the past three years market research accounted for 100% of
the Registrant's consolidated revenue.
Operating costs increased by 2.2%, or $9,669, in 1997. These
same costs decreased by 23.3%, or $135,928 in 1996. The
II - 3
increase in 1997 costs is attributable to the Registrant's dependance on outside
suppliers to assist in completing it's projects. A significant portion of the
decrease in 1996 is attributable to those operating costs directly associated
with the reduction in revenue. Operating costs expended on outside contractors
directly related to revenue production in 1996 decreased significantly over the
comparative period of 1995. The Registrant is continuously monitoring the
remainder of the overall operating cost structure and implementing cost saving
programs wherever appropriate.
Selling and administrative expenses increased by 28.4%, or
$27,279 in 1997. This increase was a direct result of the lower management fee
charged to the Registrant's parent company, Data Probe, Inc. The same costs
decreased by 32.5%, or $46,368 in 1996 as compared to 1995. The decrease in this
aggregate 1996 expense section was the result of an increased management fee
charged to the Registrant's parent company, Data Probe, Inc.
The Registrant operated at a loss in 1997. This loss was a
result of a reduced revenue base.
The Registrant operated at a slight profit in 1996. In 1996
the decrease in both operating and selling and administrative expenses offset
the decrease in revenue.
The Registrant had no capital expenditures in 1997 and 1996
and does not anticipate any capital expenditures in the near future.
In the opinion of management, inflation has not had a material
impact on the operations of the Registrant.
LIQUIDITY AND CAPITAL RESOURCES.
- --------------------------------
Working capital was decreased by approximately $47,000 in
1997. The working capital at December 31, 1997 was approximately
II - 4
$144,000 as compared to approximately $191,000 at December 31, 1996.
The Registrant's balance sheet at December 31, 1997 reflects
a receivable from its parent company, Data Probe, Inc., which represents a
significant portion of its current assets and therefore its working capital. The
collectability of this receivable is uncertain.
The Registrant's continued losses have greatly reduced its
working capital. If the loss trends continue, or if additional revenues cannot
be generated, or if significant operating costs cannot be reduced, the
Registrant's ability to continue to operate would be severely affected in the
absence of securing some type of supplemental financing, the availability of
which there can be no assurance.
II - 5
GHASSEMI, PHOEL & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
23 Langdon Place
Lynbrook, NY 11563
Phone: 516-887-4444
Fax: 516-887-4450
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Datatab, Inc.:
We have audited the accompanying consolidated balance sheet of Datatab, Inc. and
subsidiaries as of December 31, 1997 and 1996 and the related consolidated
statements of operations, retained earnings (deficit) and cash flows for each of
the years in the three-years period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Datatab, Inc. and
subsidiaries at December 31, 1997, and 1996, and result of their operations and
their cash flows for each of the three years in the period ended December 31,
1997, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in the notes to the
financial statements, the Company has suffered recurring losses from operations
that raise substantial doubt about its ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
/S/ GHASSEMI, PHOEL & CO.
Certified Public Accountants
Lynbrook, New York
March 17, 1998
II - 6
DATATAB, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
DECEMBER 31,
1997 1996
------------ ---------
Current Assets:
Cash ...................................... $ 8,682 $ 26,535
Accounts Receivable ....................... 27,520 36,981
Receivable from Data Probe, Inc ........... 259,781 350,417
Inventories of work
in process and supplies ................. 1,200 1,275
Prepaid expenses and other
current assets .......................... -- 3,490
-------- --------
Total current assets ............................... 297,183 418,698
Furniture, fixtures, equipment
and improvements (at cost, less
accumulated depreciation
of $ 122,050 in 1997
and $117,676 in 1996) ..................... 4,630 10,442
Other assets ....................................... 627 667
-------- --------
$302,440 $429,807
======== ========
(CONTINUED)
II - 7
DATATAB, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
LIABILITIES
DECEMBER 31,
1997 1996
------------ ------------
Current Liabilities:
Accounts Payable ........................ $ 42,289 $ 54,113
Accrued expenses and taxes .............. 94,606 95,715
Customer advances ....................... 16,400 78,073
----------- -----------
Total Current Liabilities ........................ 153,295 227,901
Other liabilities ................................ 18,600 22,600
----------- -----------
171,895 250,501
----------- -----------
STOCKHOLDERS' EQUITY
Preferred shares - authorized 500,000
shares, par value $1 a share;
none issued ............................. -- --
Common shares - authorized 2,000,000
shares, par value $1 a share;
issued 788,955 shares (including
shares held in treasury) ............... 788,955 788,955
Additional paid-in capital ....................... 2,490,471 2,490,471
Deficit .......................................... (3,017,424) (2,968,663)
----------- -----------
262,002 310,763
Less cost of 83,119 common shares
held in treasury ........................ 131,457 131,457
----------- -----------
130,545 179,306
----------- -----------
$ 302,440 $ 429,807
=========== ===========
The notes to financial statements are made a part hereof.
II - 8
DATATAB, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995
---- ---- ----
Sales ................................... $ 496,301 $ 520,854 $ 665,529
Cost of sales ........................... 457,650 447,981 583,909
--------- --------- ---------
Gross profit ............................ 38,651 72,873 81,620
Selling and administrative
expenses ....................... 123,466 96,187 142,555
--------- --------- ---------
Loss from operations .................... (84,815) (23,314) (60,935)
Interest income, net of
related expenses ............... 36,054 27,305 33,825
--------- --------- ---------
Net income (loss) ....................... $ (48,761) $ 3,991 $ (27,110)
========= ========= =========
Income (loss) per share ................. $ (.07) $ .01 $ (.04)
========= ========= =========
Weighted average number of
shares outstanding ............. 705,836 705,836 705,836
========= ========= =========
The notes to financial statements are made a part hereof.
II - 9
DATATAB, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF RETAINED EARNINGS (DEFICIT)
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995
---- ---- ----
(Deficit) - January 1 ............. $(2,968,663) $(2,972,654) $(2,945,544)
Net income (loss)
for the year ............. (48,761) 3,991 (27,110)
----------- ----------- -----------
(Deficit) - December 31 ........... $(3,017,424) $(2,968,663) $(2,972,654)
=========== =========== ===========
The notes to financial statements are made a part hereof.
II - 10
DATATAB, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995
---- ---- ----
Cash flows provided by
(used in) operating
activities:
Cash received from
customers ................. $ 444,089 $ 565,604 $ 680,976
Cash paid to suppliers
and employees ............. (590,070) (485,072) (850,649)
Interest received,
net ....................... 36,054 27,305 33,825
--------- --------- ---------
Net cash provided by
(used in) operating
activities ......................... (109,927) 107,837 (135,848)
--------- --------- ---------
Cash flows provided by
(used in) investing
activities:
Disposition (purchase)
of equipment ................... 1,438 -- (714)
Advances from (to)
an affiliate ............... 90,636 (90,600) 11,637
--------- --------- ---------
Net cash provided by
(used in)
investing activities ............... 92,074 (90,600) 10,923
--------- --------- ---------
Net (decrease)
increase in cash ................... (17,853) 17,237 (124,925)
Cash at beginning
of period .......................... 26,535 9,298 134,223
--------- --------- ---------
Cash at end
of period .......................... $ 8,682 $ 26,535 $ 9,298
========= ========= =========
(CONTINUED)
II - 11
DATATAB, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995
---- ---- ----
Reconciliation of net income
to net cash provided
by operating activities:
Net income (loss) ....................... $ (48,761) $ 3,991 $ (27,110)
Adjustments to reconcile net
loss to net cash
provided by operating
activities:
Depreciation and
amortization ......... 4,374 17,108 18,968
Decrease (increase)
in accounts
receivable ........... 9,461 (16,424) 15,447
Decrease (increase)
in inventories ....... 75 225 250
Decrease (increase)
in prepaid expenses
and other assets ..... 3,530 29,106 (4,533)
(Decrease) increase
in accounts
payable .............. (11,824) (22,639) 37,530
(Decrease) increase
in accrued expenses,
taxes and other
liabilities .......... (66,782) 96,470 (176,400)
--------- --------- ---------
Net cash provided by (used in)
operating activities ........... $(109,927) $ 107,837 $(135,848)
========= ========= =========
The notes to financial statements are made a part hereof.
II - 12
DATATAB, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
- -------------------------------------------
Principles of Consolidation - The consolidated financial statements
include the accounts of the Company and its subsidiaries (all of which are
wholly-owned) after elimination of intercompany investments, advances and
transactions.
Inventory - Inventoried costs of uncompleted jobs represents unbilled
labor and overhead charges. Inventories of supplies are stated at the lower of
cost (first-in, first-out method) or market.
Furniture, Fixtures, Equipment and Improvements - Furniture, fixtures,
equipment and improvements are recorded at cost. At the time assets are sold or
otherwise disposed of, the cost and accumulated depreciation are eliminated from
the asset and depreciation accounts; profits and losses on such dispositions are
reflected in current operations. Expenditures for maintenance and repairs are
charged to operations; replacements, renewals and betterments are capitalized.
Depreciation for financial accounting purposes is computed on the
straight-line method to amortize the cost of various classes of assets over
their estimated useful lives. Leasehold improvements are amortized over the
shorter of the life of the related asset or the life of the lease.
Depreciation for income tax purposes is computed substantially on
accelerated methods; deferred income taxes have been provided on the difference
between depreciation expense for financial accounting and income tax purposes;
however, deferred taxes previously provided were eliminated as a result of
accumulated net losses.
Systems Development Costs - Systems development costs are charged to
operations as incurred.
(Continued)
II - 13
DATATAB, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
- -------------------------------------------------------
Earnings or Loss per Share - Earnings or loss per share is based on the
average number of shares of common stock outstanding each year after deducting
treasury shares.
Cash and Cash Equivalents - All highly liquid investments with a
maturity of three months or less at date of purchase are carried at fair value
and are considered to be cash equivalents.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect certain report amounts and
disclosures. Accordingly, actual results could differ from those estimates.
Fair Value of Financial Instruments - The carrying value of financial
instruments approximate their fair value.
RECEIVABLE FROM DATA PROBE, DATATAB, INC. AND SUBSIDIARIES:
- -----------------------------------------------------------
Data Probe, Inc., the majority stockholder, is indebted to the Company for
advances made. For the year ended December 31, 1997 and 1996 total interest
earned on the advances amounted to $35,834 and $26,027 respectively.
INVENTORIES:
- ------------
Inventories are summarized as follows:
DECEMBER 31,
------------
1997 1996
---- ----
Work in process . . . . . . $ 1,200 $ 1,275
======= =======
(Continued)
II - 14
DATATAB, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
FURNITURE, FIXTURES, EQUIPMENT AND IMPROVEMENTS:
- ------------------------------------------------
Furniture, fixtures, equipment and improvements comprise the following:
COST AND BOOK VALUE
DECEMBER 31,
------------
ESTIMATED
USEFUL
1997 1996 LIVES
---- ---- -----
Computer data
processing
equipment . . . $118,033 $118,033 7 to 10 years
Furniture,
fixtures and
improvements. . 8,647 10,085 5 to 10 years
-------- --------
126,680 128,118
Less accumulated
depreciation. . 122,050 117,676
------- -------
Net . . $ 4,630 $ 10,442
======== ========
INCOME TAXES:
- -------------
At December 31, 1997, the Company has available net operating loss
carryforwards in excess of $2,371,000, of which $974,000 expires in 1998,
$116,000 in 1999, $320,000 in 2000, $175,000 in 2001, $199,000 in 2002, $120,000
in 2003 and the balance in 2004 and thereafter. In addition, the Company has
approximately $1,000 of investment tax credit carryforwards which expire in
1998.
The Company has provided a valuation allowance in its entirety to
offset potential benefit derived with the utilization of the net operating loss
carryforwards and tax credits available.
The consolidated federal income tax returns of the Company and its
subsidiaries have been examined by the Treasury Department through 1977.
(Continued)
II - 15
DATATAB, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
TRANSACTIONS WITH RELATED PARTIES:
- ----------------------------------
Data Probe, Inc. charged the Company for the following:
TOTAL SERVICES RENT
----- -------- ----
1997. . . $218,034 $177,796 $ 40,238
1996. . . 116,091 116,091 -
1995. . . 194,375 194,375 -
In addition, the Company charged Data Probe, Inc. for the following:
TOTAL SERVICES RENT INTEREST
----- -------- ---- --------
1997. . . $ 95,834 $ 60,000 $ - $ 35,834
1996. . . 230,870 120,000 84,843 26,027
1995. . . 201,327 84,000 82,276 30,051
COMMITMENTS:
- ------------
The Company had offices in New York City for which it was obligated
under a net operating lease which expired December 31, 1996. In addition to the
basic annual rent the Company was subject to all taxes, assessments, water and
sewer rents, insurance, etc. Furthermore, the Company rented space to Data
Probe, Inc. As of January 1, 1997, Data Probe, Inc. acquired a lease for new
office space, and the Company will be renting its offices from them on a month
to month basis.
GOING CONCERN:
- --------------
As reflected in the accompanying financial statements, the Company
incurred net operating losses of $48,761 and $27,110 for each of the two years
ended December 31, 1997 and 1995. Adverse economic conditions have limited the
ability of the Company to market its services at amounts sufficient to recover
operating and administrative cost. Continued losses have and will exhaust the
remaining net working capital in the near future. Working capital had been
supplemented by the collections of a note receivable, which was fully collected
as of December 31, 1994. Because of the conditions surrounding the Company and
its inability to generate profit, there is doubt about the Company's ability to
continue as a going concern. The financial statements do not include any
adjustments that might be necessary should the Company be unable to continue as
a going concern.
II - 16
ITEM #9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE:
- -------- -----------------------------------------------------
Not applicable.
II - 17
Part III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
(a), (b) IDENTIFICATION OF DIRECTORS AND EXECUTIVE
OFFICERS.
DIRECTOR OFFICER
NAME AGE POSITION SINCE SINCE
---- --- -------- ----- -----
Yitzhak N. Bachana 65 President, Treasurer, 1983 1983
and Director
James R. Sheridan 52 Executive Vice President, 1983 1983
Secretary, and Director
Herbert E. Shaver 44 Vice President,
Controller, and Director 1989 1981
Each director is elected to serve as a director until the next
succeeding annual meeting of shareholders and until his successor is duly
elected and qualified. Each executive officer is elected to serve at the
pleasure of the Board of Directors.
(c) IDENTIFICATION OF CERTAIN SIGNIFICANT EMPLOYEES.
None.
(d) FAMILY RELATIONSHIPS.
None.
(e) BUSINESS EXPERIENCE.
The following sets forth the business experience during the
past five years of each director and officer:
Mr. Bachana has been President, Treasurer, and a director of
Data Probe, Inc., a publicly-traded, New York based computer service bureau and
parent of Data Probe Acquisition Corp., for more than the past five years. Mr.
Bachana has been a director of the Board of Megadata Corporation since April 20,
1976 and has been President and Chief Executive Officer of Megadata Corporation
since June 3, 1980. Megadata Corporation's securities are registered under
Section 12(g) of the Securities Exchange Act of 1934, as amended.
III - 1
Mr. Sheridan has been Vice President and served as a
supervisor and operations manager of Data Probe, Inc. for more than
the past five years.
Mr. Shaver has been Vice President, Controller, and a
director of the Registrant for more than the past five years. Mr.
Shaver has served as the Controller of Data Probe, Inc. for more than
the past five years. Mr. Shaver has served as the Controller of
Megadata Corporation since September 1993.
(f) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS.
The Registrant knows of no event which occurred during the
past five years and which is described in Item 401(f) of Regulation S-K relating
to any director or officer of the Registrant.
III - 2
ITEM 11. EXECUTIVE COMPENSATION.
(a) COMPENSATION.
The following table sets forth all compensation paid to the
executive officers of the Registrant as a group for such fiscal year.
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------
(A) (B) (C) (E)
- --------------------------------------------------------------------------------
COMPENSATION
------------
NAME OF INDIVIDUAL PRINCIPAL POSITION SALARY OTHER
- ------------------ ------------------ ------ -----
Yitzhak N. Bachana President $ 44,433 $ 10,577 (*)
Herbert E. Shaver VP, Controller $ 61,111 $ --
James R. Sheridan Executive VP $ 63,500 $ 32,090(**)
- --------------------------------------------------------------------------------
Executive Officers
as a Group (3 persons) $ 169,044 $ 42,667
- --------------------------------------------------------------------------------
(*) Represents salary accrued but unpaid as of December 31, 1997.
(**) Represents commissions earned but unpaid as of December 31, 1997.
(b) (1) COMPENSATION PURSUANT TO PLANS.
The Registrant's employees (including officers) are all
employed on a month-to-month basis.
(2) PENSION TABLE.
Not applicable.
(3) ALTERNATIVE PENSION PLAN DISCLOSURE.
Not applicable.
(4) STOCK OPTION AND STOCK APPRECIATION RIGHT
PLANS. Not applicable.
(c) OTHER COMPENSATION.
None.
III - 3
(d) COMPENSATION OF DIRECTORS.
1. STANDARD ARRANGEMENTS.
None.
2. OTHER ARRANGEMENTS.
None.
(e) TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENT.
None.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS.
The following chart sets forth the name and address of the
person known to the Registrant to be the beneficial owner of more than 5% of the
Registrant's common shares, par value $1.00, at March 20, 1998.
AMOUNT OF
NAME AND ADDRESS OF BENEFICIAL PERCENT
BENEFICIAL OWNER OWNERSHIP OF CLASS
- ---------------- --------- --------
Data Probe
Acquisition Corp. 517,959(1)(2) 73.38
49 East 21 Street
NEW YORK, NEW YORK 10010
- ----------
(1) All shares are owned of record and beneficially.
(2) Yitzhak N. Bachana, President of the Registrant, owns 57.22% of the
outstanding shares of Data Probe, Inc., the parent of Data Probe Acquisition
Corp., and by virtue thereof may be deemed to be the beneficial owner of more
than 5% of the Registrant's outstanding shares.
III - 4
(b) SECURITY OWNERSHIP OF MANAGEMENT.
The following chart sets forth the number of the Registrant's
common shares, $1.00 par value, beneficially owned by all of the directors
of the Registrant and by the directors and officers of the Registrant as a
group at March 20, 1998:
NAME OF AMOUNT OF
BENEFICIAL BENEFICIAL PERCENT
OWNER OWNERSHIP (1) OF CLASS
- ----- ------------- --------
Yitzhak N. Bachana 0 (2) 0
James R. Sheridan 0 0
Herbert E. Shaver 800 0
Officers and Directors
as a Group
(3 PERSONS) 800 (2)(3) 0
- ----------------------------
(1) All shares are owned of record and beneficially.
(2) Yitzhak N. Bachana is the President, Chairman of the Board, and majority
shareholder of Data Probe, Inc., the parent of Data Probe Acquisition Corp.,
which owns 517,959 common shares of the Registrant (or 73.38% of all issued and
outstanding shares) which are excluded from the foregoing table.
(c) CHANGES IN CONTROL.
Not applicable.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
(a) TRANSACTIONS WITH MANAGEMENT AND OTHERS.
The Registrant, up until December 30, 1996, maintained its
executive offices and data center operations at 80 Fifth Avenue, New York, New
York. The Registrant shared this space with its parent company, Data Probe, Inc.
pursuant to an allocation arrangement providing that Data Probe, Inc. pay the
Registrant $84,843 for the fiscal year ended December 31, 1996.
The Registrant, effective December 27, 1996, currently
maintains its executive offices and data center operations at 49 East 21 Street,
New York, New York. The Registrant's parent company, Data Probe, Inc.
III - 5
acquired a lease for this location, and the Registrant has been renting space
pursuant to an allocation arrangement providing that the Registrant pay Data
Probe, Inc. on a month to month basis approximately $5,000 commencing April 1,
1997. (See Item 13, INFRA.)
From time to time the Registrant and Data Probe, Inc. hire
each other's employees for specific projects. For the fiscal year ended December
31, 1997, the Registrant incurred expenses of $177,796 with respect to these
transactions. The Registrant was charged $40,238 for rent pursuant to an
allocation arrangement. The Registrant charged Data Probe, Inc. $60,000 for
services and $35,834 for interest in 1997.
All fees are determined on a project-by-project basis and, in
the opinion of Registrant's management, are no less favorable to Registrant than
those which could be obtained from unrelated third parties.
(b) CERTAIN BUSINESS RELATIONSHIPS.
None.
(c) INDEBTEDNESS OF MANAGEMENT.
None.
(d) TRANSACTIONS WITH PROMOTERS. Not applicable.
III - 6
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM
8-K.
PAGE
----
(a) 1. FINANCIAL STATEMENTS
Included in Part II of this report:
Selected Financial Data at
December 31, 1997, 1996, 1995,
1994, 1993 II-2
Report of Independent Certified
Public Accountants II-6
Consolidated Balance Sheets at
December 31, 1997 and 1996 II-7
Consolidated Statements of Operations
for the years ended December 31,
1997, 1996, and 1995 II-9
Consolidated Statements of Retained
Earnings (Deficit) for the years
ended December 31, 1997, 1996,
and 1995 II-10
Consolidated Statements of Cash
Flows for the years ended December 31,
1997, 1996, and 1995 II-11
Notes to Consolidated Financial
Statements II-13
2. Financial Statements Schedules
Included in Part IV of this report:
Accountant's report on financial
statement schedules IV-4
Schedule V-Equipment and
Improvements for the years ended
December 31, 1997, 1996, and 1995 IV-5
Schedule VI-Depreciation and
Amortization of Equipment and
Improvements for the years ended
December 31, 1997, 1996, and 1995 IV-6
IV - 1
Schedules, other than those listed above, have been omitted
since they are not required or the information required therein has been
presented elsewhere in the financial statements.
Separate financial statements of Datatab, Inc. (parent) have
been omitted since the conditions for omission have been met.
(b) REPORTS FILED ON FORM 8-K.
None
(c) EXHIBITS
None
IV - 2
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
DATATAB, INC.
Dated: March 27, 1998 By: /S/ YITZHAK N. BACHANA
----------------------
Yitzhak N. Bachana,
President
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated:
Dated: March 27, 1998 /S/ YITZHAK N. BACHANA
----------------------
Yitzhak N. Bachana, President,
Treasurer, Principal Executive
Officer, Principal Financial
Officer, Director
Dated: March 27, 1998 /S/ JAMES R. SHERIDAN
---------------------
James R. Sheridan, Executive Vice
President, Director
Dated: March 27, 1998 /S/ HERBERT E. SHAVER
---------------------
Herbert E. Shaver,
Vice President, Controller,
Principal Accounting Officer,
Director
IV - 3