<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1997
Commission File Number 333-5753
Exigent International, Inc.
(Exact name of registrant as specified in its charter)
Delaware 59-3379927
(State of incorporation) (IRS Employer
Identification Number)
1225 Evans Road
Melbourne, Florida 32904-2314
(Address of principal executive offices)
(407) 723-3999
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
The number of shares outstanding of the registrants' only class of common
stock on December 8, 1997 was 3,793,927.
<PAGE>
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
Page
----
<S> <C>
Item 1. Financial Statements. 2
Consolidated Balance Sheets - October 31, 1997 and January 31, 1997 2
Consolidated Statements of Income - For the Nine Months Ended October 31,
1997 and 1996 4
Consolidated Statements of Income - For the Three Months Ended October 31,
1997 and 1996 5
Consolidated Statements of Cash Flows - For the Nine Months Ended
October 31, 1997 and 1996 6
Notes to Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 11
Item 3. Quantitative and Qualitative Disclosures about Market Risk. 14
PART II - OTHER INFORMATION 14
Item 2. Changes in Securities and Use of Proceeds. 14
Item 6. Exhibits and Reports on Form 8-K. 15
SIGNATURES 16
</TABLE>
<PAGE>
EXIGENT INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
October 31, 1997 January 31,
(unaudited) 1997
--------------------- ---------------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 865,302 $ 428,705
Accounts receivable, pledged 3,353,642 2,909,746
Costs and estimated earnings in excess of
billings on uncompleted contracts, pledged 3,374,951 3,836,828
Prepaid expenses 42,814 60,428
Deferred income taxes 434,000 333,000
Income taxes receivable 421,476 796,143
--------------------- ---------------------
TOTAL CURRENT ASSETS 8,492,185 8,364,850
--------------------- ---------------------
PROPERTY AND EQUIPMENT
Cost 4,000,855 4,043,152
Accumulated depreciation (2,715,331) (2,195,150)
--------------------- ---------------------
NET PROPERTY AND EQUIPMENT 1,285,524 1,848,002
--------------------- ---------------------
OTHER ASSETS
Intangible assets, net of accumulated amortization 2,192,370 663,599
Organizational costs 11,398 11,398
Deposits 43,476 40,611
Cash surrender value of life insurance 17,028 20,269
--------------------- ---------------------
TOTAL OTHER ASSETS 2,264,272 735,877
--------------------- ---------------------
TOTAL ASSETS $ 12,041,981 $ 10,948,729
===================== =====================
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE>
EXIGENT INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
October 31, 1997 January 31,
(unaudited) 1997
-------------------------- ---------------------
CURRENT LIABILITIES
<S> <C> <C>
Line of credit $ - $ 182,000
Accounts payable 40,661 1,100,123
Accrued expenses 2,707,052 2,179,200
Billings in excess of costs and estimated earnings
on uncompleted contracts 143,477 418,426
Income taxes payable 27,300 --
Current portion, long-term debt 511,111 248,775
-------------------------- ---------------------
TOTAL CURRENT LIABILITIES 3,429,601 4,128,524
-------------------------- ---------------------
LONG-TERM LIABILITIES
Long-term debt, less current portion 600,000 311,111
Deferred income taxes 810,000 246,000
Other liabilities 5,616 5,541
-------------------------- ---------------------
TOTAL LONG-TERM LIABILITIES 1,415,616 562,652
-------------------------- ---------------------
TOTAL LIABILITIES 4,845,217 4,691,176
-------------------------- ---------------------
STOCKHOLDERS' EQUITY
Class A Preferred Shares, $.01 par value 5,000,000
shares authorized, 697,320 issued and outstanding
at October 31, 1997 and January 31, 1997, respectively
at $2.50 per share liquidation/dissolution preference 6,973 6,973
Common Shares, $.01 par value, 30,000,000 shares
authorized, 3,793,627 and 3,786,600 issued and
outstanding at October 31, 1997 and January 31, 1997,
respectively 37,866 37,866
Class B Common Shares, $.01 par value 600,000 shares
authorized, no shares issued or outstanding - -
Paid in capital 1,427,905 1,407,915
Retained earnings 5,724,020 4,804,799
-------------------------- ---------------------
TOTAL STOCKHOLDERS' EQUITY 7,196,764 6,257,553
-------------------------- ---------------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 12,041,981 $ $10,948,729
========================== =====================
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
EXIGENT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the Nine Months
Ended October 31,
----------------------------
1997 1996
(unaudited) (unaudited)
------------ ------------
<S> <C> <C>
REVENUES FROM SERVICES $ 25,912,356 $ 22,763,366
COST OF SALES (19,850,950) (17,926,933)
------------ ------------
GROSS PROFIT 6,061,406 4,836,433
GENERAL AND ADMINISTRATIVE EXPENSES (4,513,068) (3,644,354)
RESEARCH AND DEVELOPMENT COSTS - (67,545)
------------ ------------
OPERATING INCOME 1,548,338 1,124,534
------------ ------------
OTHER INCOME (EXPENSE)
Interest income 26,065 49,066
Interest expense (67,117) (37,415)
------------ ------------
TOTAL OTHER INCOME (EXPENSES) (41,052) 11,651
------------ ------------
INCOME BEFORE INCOME TAXES 1,507,286 1,136,185
INCOME TAX EXPENSE (588,065) (551,000)
------------ ------------
NET INCOME $ 919,221 $ 585,185
============ ============
EARNINGS PER SHARE--PRIMARY $ 0.20 $ 0.13
============ ============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING--PRIMARY 4,709,468 4,483,920
============ ============
EARNINGS PER SHARE--FULLY DILUTED $ 0.19 $ 0.13
============ ============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING--FULLY DILUTED 4,801,019 4,483,920
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
EXIGENT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the Three Months Ended October 31,
--------------------------------------
1997 1996
(unaudited) (unaudited)
----------- -----------
<S> <C> <C>
REVENUES FROM SERVICES $ 9,140,753 $ 8,366,921
COST OF SALES (6,879,072) (6,360,585)
----------- -----------
GROSS PROFIT 2,261,681 2,006,336
GENERAL AND ADMINISTRATIVE EXPENSES (1,820,129) (1,283,810)
RESEARCH AND DEVELOPMENT COSTS - (67,545)
----------- -----------
OPERATING INCOME 441,552 654,981
----------- -----------
OTHER INCOME (EXPENSE)
Interest income 23,719 18,432
Interest expense (20,872) (15,021)
----------- -----------
TOTAL OTHER INCOME (EXPENSES) 2,847 3,411
----------- -----------
INCOME BEFORE INCOME TAXES 444,399 658,392
INCOME TAX EXPENSE (172,935) (364,661)
----------- -----------
NET INCOME $ 271,464 $ 293,731
=========== ===========
EARNINGS PER SHARE--PRIMARY $ 0.06 $ 0.07
=========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING--PRIMARY 4,709,468 4,483,920
=========== ===========
EARNINGS PER SHARE--FULLY DILUTED $ 0.06 $ 0.07
=========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING--FULLY DILUTED 4,801,019 4,483,920
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
EXIGENT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Nine Months Ended October 31,
-------------------------------------
1997 1996
(unaudited) (unaudited)
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Cash received from customers $ 25,658,629 $ 20,937,551
Interest received 26,065 49,066
Cash paid to suppliers and employees (24,212,165) (20,126,999)
Interest paid (67,117) (37,415)
Income taxes paid - (831,700)
Income tax refunds received 276,902 -
------------ ------------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES 1,682,314 (9,497)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for acquisition of capital assets (137,061) (727,017)
Cash paid for capitalized research and development (1,497,871) (117,513)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (1,634,932) (844,530)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under line of credit (182,000) 800,000
Proceeds from exercise of stock options 19,990 --
Net borrowings (principal payments) on long-term debt 551,225 (182,877)
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 389,215 617,123
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 436,597 (236,904)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 428,705 270,084
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 865,302 $ 33,180
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE>
EXIGENT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
For the Nine Months Ended October 31,
------------------------------------------
1997 1996
(unaudited) (unaudited)
----------------- ---------------
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net income $ 919,221 $ 585,185
----------------- ---------------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 668,825 558,114
Public offering costs - 17,497
Increase in accounts receivable (443,896) (2,475,942)
Decrease in costs and estimated earnings in excess of
billings on uncompleted contracts 461,877 847,331
Decrease in prepaid expenses 17,614 90,492
Increase in deferred income tax asset (101,000) (84,000)
Decrease in income taxes receivable 374,667 -
Increase in deposits (2,865) (8,665)
Decrease in cash surrender value of life insurance 3,241 1,135
Increase in cash overdraft - 384,488
Decrease in accounts payable (1,059,462) (137,134)
Increase in accrued expenses 527,666 346,670
Decrease in billings in excess of costs and estimated earnings
on uncompleted contracts (274,949) (198,339)
Increase (decrease) in income taxes payable 27,300 (196,700)
Increase in deferred income tax liability 564,000 -
Increase in other liabilities 75 86
Non cash stock bonus - 260,285
----------------- ---------------
Total adjustments 763,093 (594,682)
----------------- ---------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ 1,682,314 $ (9,497)
================= ===============
</TABLE>
The accompanying notes are an integral part of these statements.
7
<PAGE>
EXIGENT INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS (CONTINUED)
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES
At January 31, 1996 the Company had accrued $1,375,959 in bonus and ESOP
payments. The Company paid $175,188 of this amount in cash during the nine
months ended October 31, 1996. In addition, the Company issued 46,986 shares of
treasury stock at a cost of $4.25 per share for accrued bonuses of $199,690 and
38,600 shares of treasury stock at a cost of $4.25 per share for the ESOP
payable of $164,050. The remaining balance $837,031, representing the difference
between the cost and market value of the treasury stock issued, was recorded as
additional paid in capital when the shares were issued.
On May 29, 1996 the Company accrued a $260,285 bonus and issued 18,552 shares of
treasury stock at a cost of $4.25 per share, or $78,846, for bonus and
management incentive awards. The Company's stock was valued at $14.03 on the
date of the issuance; therefore, the difference between cost and market of
$181,439 was recorded as additional paid in capital.
These activities and valuations occurred prior to the stock for stock exchange
which was effective on January 30, 1997.
The accompanying notes are an integral part of these statements.
8
<PAGE>
EXIGENT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - GENERAL
The condensed consolidated financial statements for the nine month and three
month periods ended October 31, 1997 and October 31, 1996 are unaudited and
reflect all adjustments (consisting only of normal recurring adjustments) which
are, in the opinion of management, necessary for a fair presentation of the
financial position and operating results for the interim periods. The condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto, together with management's
discussion and analysis of financial condition and results of operations,
contained in the Company's annual report on Form 10-K for the fiscal year ended
January 31, 1997. The results of operations for the nine months ended October
31, 1997 are not necessarily indicative of the results for the entire fiscal
year ending January 31, 1998.
NOTE 2 - LINE OF CREDIT
STI had a $1,800,000 line of credit available from a bank as of October 31, 1997
and January 31, 1997, respectively. The note bears interest on the unpaid
principal balances at an interest rate per annum equal to the bank's prime rate
plus .25%. As of October 31, 1997 and January 31, 1997 the outstanding draws
against the lines were $0 and $182,000, respectively. The line of credit was
renewed effective August 15, 1997. The prime rate at October 31, 1997 and
January 31, 1997 was 8.50% and 8.25%, respectively. All accounts receivable,
equipment, furniture and fixtures of STI are pledged as collateral on the line
of credit.
An additional line of credit was entered into for $500,000 to fund the startup
expenses associated with the new FotoTag/TM/ entity. This note will bear the
same terms as the previously discussed line of credit. The note was signed in
August with an effective date of June 15, 1997. No amounts have been drawn as of
October 31, 1997.
The weighted average interest rate on short-term borrowings outstanding at
October 31, 1997 and January 31, 1997 was 8.69% and 8.50%, respectively.
NOTE 3 - LONG-TERM DEBT
In August 1997 the Company entered into a term loan of $800,000 for the purchase
of capital equipment. The note bears interest at an interest rate per annum
equal to the bank's prime rate plus .375% which was 8.875% at October 31, 1997.
The maturity date of the loan is three years from closing and monthly payments
began on September 15, 1997. The maturity schedule for this note follows:
9
<PAGE>
Note payable to bank, secured by computing equipment, payable in thirty-six
month installments of $22,222.22 plus interest at the aforementioned rate.
Future maturities of this note as of October 31, 1997 are as follows:
<TABLE>
<CAPTION>
Amount
------------
<S> <C>
1997 $111,111
1998 266,667
1999 266,667
2000 155,555
------------
$800,000
============
</TABLE>
NOTE 4 - COMMITMENTS AND CONTINGENCIES
The Company had outstanding purchase commitments of $580,583 and $1,622,159 as
of October 31, 1997 and January 31, 1997, respectively. These represent
outstanding purchase orders for which neither the item nor invoice has been
received.
The Company entered into an additional lease of facilities in Colorado Springs,
Colorado during June 1997. This additional space is required to satisfy
anticipated market requirements.
In August 1997 the Company entered into an operational lease for additional
current and future computing resources. The lease has a credit line of $600,000
and covers computer hardware and software, LAN equipment and furniture. The term
of the lease is three years from the execution date of each increment. At the
date of closing the Monthly Equivalent Lease Rate Factor ("MELRF") of 0.2859 may
be adjusted upward in direct relation with any movement of the average yield of
equally maturing U.S. Treasury Notes as quoted in the Wall Street Journal from a
base rate of 5.75%.
During August 1997 the Company entered into employment agreements with key
directors and officers of Exigent. Under these agreements the employees are
entitled to eighteen months of pay under certain termination conditions. The
potential liability is in the $0 to $325,000 range. The actual liability, if
any, is unknown at this time given that it is contingent on employees separating
from employment with the Company. Therefore no liability has been accrued for
these contracts. In addition there are 600,000 stock options which are
exercisable at $2.25 per share.
NOTE 5 - RECLASSIFICATION
Fringe and overhead expenses previously included in the July 31, 1997 quarterly
report have been reclassified to general and administrative expenses to ensure
comparability with the January 1997 annual report.
10
<PAGE>
NOTE 6 - EARNINGS PER SHARE
Weighted average shares outstanding used in the calculation of earnings per
share include options available in two separate option plans. The dilutive
effect on the Primary EPS as well as the Fully Diluted EPS is $0.01 per share.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following is management's discussion and analysis of (i) the consolidated
financial condition as of October 31, 1997 as compared with the fiscal year
ended January 31, 1997; and (ii) the consolidated results of operations for the
nine months and the three months ended October 31, 1997 and 1996, of Exigent
International, Inc. and its subsidiaries (collectively "Exigent"). It should be
read together with Exigent's annual report or Form 10-K for fiscal year 1997.
Liquidity. As of October 31, 1997, Exigent's ratio of current assets to current
liabilities was 2.5 compared to 2.0 for the year ended January 31, 1997. The
quick liquidity ratios were up slightly to 2.2 from 1.7 for the nine months
ended October 31, 1997 versus the year ended January 31, 1997, respectively.
These increases in the ratios were due to the reduction in the line of credit
and the reduction in accounts payable in the first nine months of fiscal year
1998.
Exigent's cash portfolio (cash and cash equivalents) increased $436,597 at
October 31, 1997. The increase was due to cash provided in operating activities
of $1,682,314, cash used in investing activities of $(1,634,932) and cash
provided in financing activities of $389,215. Exigent's cash portfolio decreased
$(236,904) at October 31, 1996. The decrease was due to cash used in operating
activities of $(9,497), cash used in investing activities of $(844,530) and cash
provided by financing activities of $617,123. The increase in cash provided by
operating activities from October 31, 1996 to October 31, 1997 was primarily the
result of a lower receivable balance in the first nine months of fiscal year
1998 when compared to the first nine months of fiscal year 1997 due to the
timing of collections as well as an increase in the earnings after tax. The
increase in cash used for investing activities was due to two product
developments currently underway.
In the nine months ended October 31, 1997, Exigent acquired $137,061 of capital
assets compared to $727,017 in the nine months ended October 31, 1996. This was
due primarily to the wholly owned subsidiary, Software Technology, Inc. ("STI"),
acquiring capital assets in the first half of fiscal year 1997, specifically
computing resources, required under commercial contracts obtained by STI during
that period. Capital for equipment needs is expected to continue, as Exigent
remains current with modern computing technologies. This expansion will be
funded in part through an operating lease set up for a period of three years
from receipt of each piece of equipment drawn against the funding limit of
$600,000.
11
<PAGE>
For the period ended October 31, 1997, Exigent had drawn down $250,000 against
this line of credit. In the nine months ended October 31, 1997 and October 31,
1996, Exigent also spent $1,497,871 and $117,513, respectively, in capitalized
research and development costs to develop new products. The increase in the
first nine months of fiscal year 1998 resulted from costs incurred in developing
FotoTag/TM/ and developing product additions for the OS/COMET/TM/ product
family. Exigent used $182,000 of cash during the first nine months of fiscal
year 1998 to reduce its line of credit and increased its long-term debt by
$800,000, offset by payments against long term debt of $248,775, to fund the
research products. For the first nine months of fiscal year 1997, Exigent
borrowed $800,000 under the line of credit to fund the costs of going public and
reduced long-term debt by $182,877.
There is a change in the classification of general and administrative expenses
from the previous quarterly report. Fringe and overhead expenses previously
included in general and administrative expenses are now reflected in cost of
goods sold. General and administrative expenses for the nine months ended
October 31, 1997 were $4,513,068, 24% or $868,714 higher than expenses of
$3,644,354 for the nine months ended October 31, 1996. This increase resulted
mainly from a $289,000 increase in professional fees, financial public relations
costs, and other business expenses related to regulatory filings, a $120,000
increase in recruiting costs, and an increase in the general and administrative
labor expenses of $474,000 commensurate with the growth in revenue. Management
believes existing cash, funds generated by operations and the available line of
credit will be sufficient to meet Exigent's current operating and debt service
requirements through fiscal year 1998.
Results of Operations for the nine months ended October 31, 1997 and 1996. Sales
for the nine months ending October 31, 1997 were $25,912,356 up 14% from sales
of $22,763,366 for the nine months ended October 31, 1996 due in large part to
growth in the government contracts. The breakdown between government and
commercial sales for each of the nine-month periods follows:
<TABLE>
<CAPTION>
October 31, 1997 October 31, 1996
--------------------- ---------------------
<S> <C> <C> <C> <C>
Government $ 15,942,207 62% $ 13,489,274 59%
Commercial 9,970,149 38% 9,274,092 41%
------------- ------ ------------- ------
$ 25,912,356 100% $ 22,763,366 100%
============= ====== ============= ======
</TABLE>
Gross profit was up slightly at $6,061,406 (23.4% of sales) compared to
$4,836,433 (21.3% of sales) for the nine months ended October 31, 1997 and
October 31, 1996, respectively. Net income was up significantly at $919,221
(3.5% of sales) for the nine months ended October 31, 1997 versus $585,185 (2.6%
of sales) for the nine months ended October 31, 1996.
Results of Operations for the three months ended October 31, 1997 and 1996.
Sales for the three months ending October 31, 1997 were $9,140,753 up 9.2% from
sales of $8,366,921 for the three months ended October 31, 1996. The breakdown
between government and commercial sales for each of the three-month periods
follows:
12
<PAGE>
<TABLE>
<CAPTION>
October 31, 1997 October 31, 1996
------------------ ------------------
<S> <C> <C> <C> <C>
Government $ 5,738,706 63% $ 4,705,937 56%
Commercial 3,402,047 37% 3,660,984 44%
------------------ ---- ------------------ ----
$ 9,140,753 100% $ 8,366,921 100%
================== ==== ================== ====
</TABLE>
Gross profit was consistent at $2,261,681 (25% of sales) compared to $2,006,336
(24% of sales) for the three months ended October 31, 1997 and October 31, 1996,
respectively. Net income was down slightly at $271,464 (3.0% of sales) for the
three months ended October 31, 1997 versus $293,731 (3.5% of sales) for the
three months ended October 31, 1996. This slight decrease was due to the
increase in the indirect expenses during this fiscal year.
Analysis of Operations. Fiscal year 1995 saw Exigent's wholly owned and primary
operating subsidiary, STI obtain its first significant commercial contracts from
Motorola, Inc. when it was engaged to provide satellite ground station software
for a constellation of satellites that will provide a direct link with portable
handsets for worldwide cellular telephone service. The Motorola, Inc. multi year
contract allowed STI to leverage its technology into the commercial arena. In
fiscal year 1996, STI repeated this feat by winning a contract to provide
similar software for the Global Positioning Satellite (GPS) System. With these
two contracts, STI is involved in the two premier satellite endeavors taking
place today.
The current contract base provides sufficient backlog to maintain STI through
fiscal year 1998. The backlog as of October 31, 1997 for commercial and
government contracts was $19,266,702 of which $2,695,541 is unfunded. STI
invested in excess of $2,500,000 over the last two years in its premier software
product OS/COMET/TM/. This investment facilitated the significant contract
awards that management believes would have been impossible otherwise. The
Company is committed to continued support of this product.
Exigent continued development on a new commercial software product, FotoTag/TM/,
and has invested approximately $350,000 over the last two fiscal years.
Management is committed to support the development of this product, which is
planned to continue through the end of fiscal year 1998.
Exigent completed expansion of its corporate headquarters in February of 1996
and has signed a lease on a new building, currently under construction, to
further expand its Florida facilities due to increased contract activity. It is
anticipated the current expansion will be complete late in fiscal year 1998. In
addition, Exigent signed a lease in June of 1997 to accommodate program
requirements in Colorado Springs, Colorado. These increased facility costs
should not affect Exigent's overhead as these increases were made to accommodate
existing needs. The commercial satellite business is projected to continue with
strong sales worldwide and is expected to show increases throughout the end of
the decade, providing additional opportunities for Exigent.
13
<PAGE>
Demand for software engineers is expected to provide new opportunities for
Exigent, but will place a premium on the efforts to retain the current work
force. This risk will put additional pressure on overall payroll costs, but is
an industry wide phenomenon. Management believes that benefits offered by
Exigent remain above the level of its competition and should help to stabilize
its workforce. Overhead costs for benefits should remain flat and maintain the
same percentage of wages for fiscal year 1998. Management believes it is
important that Exigent not reduce benefits. To do so and hold costs stable has
been a management challenge and will continue to be so in the near future.
Maintaining Exigent's comprehensive benefit plan will also facilitate its
ability to sustain an effective recruiting campaign.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Exigent does not have any market risk sensitive instruments.
PART II - OTHER INFORMATION
Item 2. Changes in Securities.
There have been no changes in the instruments defining the rights of holders of
any class of securities of Exigent or material limitations or qualifications of
the rights evidenced by any class of securities of Exigent.
On June 11, 1997, Exigent adopted an incentive stock option plan under which
options to purchase Exigent Common Shares have been granted to certain of its
management. The options were granted to employees in return for services and
entitle the employee to purchase Common Shares for $2.25 per share for thirty-
six months from June 11, 1997. Options to purchase up to 600,000 Common Shares
have been granted to ten employees. Exigent claimed an exemption from
registration under Section 4(2) of the Securities Act of 1933 due to the small
number and nature of the employees involved. The Common Shares underlying the
options have been registered on Form S-8.
In connection with certain financing, Exigent is prohibited from declaring or
paying dividends in excess of the lesser of 25% of net income or $100,000
without prior approval by the lender.
14
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits Index
<TABLE>
<CAPTION>
Exhibit Page
Table Number Number
------------------ ------------
<S> <C> <C>
I. Articles of Incorporation and Bylaws 3
(i) Certificate of Incorporation of Exigent (i) *
International, Inc.
(ii) Amended and Restated Certificate of Incorporation (i) +
of Exigent International, Inc.
(iii) Bylaws of Exigent International, Inc. (ii) *
II. Instruments Defining the Rights of Security Holders 4
(i) Common Stock Purchase Warrant Agreement Between
Exigent International, Inc. and Warrant Agent *
III. Material Contracts Corporation 10
(i) Agreement Between Exigent International, Inc. and
Transfer Agent *
(ii) Contract Between Motorola, Inc. Government and
Systems Technology Group, Satellite Communications
Division and Software Technology, Inc. x
(iii) Contract Between Naval Research Laboratory and
Software Technology, Inc. *
(iv) Subcontract/Purchase Order Between Lockheed-
Martin Federal Systems Company and Software
Technology, Inc. x
(v) Purchase Orders from Allied Signal Technical
Services Corporation +
IV. Statement Re Computation of Per Share Earnings 11 17
V. Financial Data Schedule 27 18
* Previously filed as an exhibit to the Registration Statement on Form S-1 of
Exigent International, Inc. which became effective January 30, 1997.
+ Previously filed as an exhibit to Pre-Effective Amendment No. 1 to the above described Registration Statement.
x Previously filed as an exhibit to Pre-Effective Amendment No. 2 to the above-described Registration Statement.
(b) (i) On June 23, 1997, filed Form 8-K to report the implementation of
Incentive Stock Option Plan 2Q by Exigent International, Inc.
(ii) On October 27, 1997, filed Form 8-K to report the Exigent International, Inc. Non-
Qualified Incentive Stock Option Plan 1(N) Q.
</TABLE>
15
<PAGE>
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.
Exigent International, Inc.
By: "Bernie Smedley"
-----------------------------------------------
B. R. "Bernie" Smedley, Chief Executive Officer
Date: December 9, 1997
By: "Don F. Riordan, Jr."
-----------------------------------------------
Don F. Riordan, Jr., Chief Financial Officer
Date: December 9, 1997
16
<PAGE>
EXHIBIT 11
EXIGENT INTERNATIONAL, INC.
CALCULATION OF EARNINGS PER SHARE
FOR THE NINE MONTHS ENDED OCTOBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
For the Nine Months
Ended October 31,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
Primary Earnings per Share
- --------------------------
Net Income $ 919,221 $ 585,185
========== ==========
Weighted average number of shares outstanding 4,484,962 4,483,920
Effect of assumed exercise of outstanding stock
options 224,506 -
---------- ----------
Average number of shares assuming
exercise of stock options 4,709,468 4,483,920
========== ==========
Primary Earnings per Share $ 0.20 $ 0.13
========== ==========
Fully Diluted Earnings per Share
- --------------------------------
Net Income $ 919,221 $ 585,185
========== ==========
Weighted average number of shares outstanding 4,484,962 4,483,920
Effect of assumed exercise of outstanding stock
options 316,057 -
---------- ----------
Average number of shares assuming
exercise of stock options 4,801,019 4,483,920
========== ==========
Fully diluted earnings per share $ 0.19 $ 0.13
========== ==========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
Exigent International, Inc. Financial Statements for the nine months ended
October 31, 1997 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> JAN-31-1998 JAN-31-1997
<PERIOD-START> FEB-01-1997 FEB-01-1996
<PERIOD-END> OCT-31-1997 OCT-31-1996
<CASH> 865 0<F1>
<SECURITIES> 0 0<F1>
<RECEIVABLES> 6,729<F2> 0<F1>
<ALLOWANCES> 0 0<F1>
<INVENTORY> 0 0<F1>
<CURRENT-ASSETS> 8,492 0<F1>
<PP&E> 4,001 0<F1>
<DEPRECIATION> 2,715 0<F1>
<TOTAL-ASSETS> 12,042 0<F1>
<CURRENT-LIABILITIES> 3,430 0<F1>
<BONDS> 1,416 0<F1>
0 0<F1>
7 0<F1>
<COMMON> 38 0<F1>
<OTHER-SE> 7,152 0<F1>
<TOTAL-LIABILITY-AND-EQUITY> 12,042 0<F1>
<SALES> 0 0
<TOTAL-REVENUES> 25,912 22,763
<CGS> 0 0
<TOTAL-COSTS> 19,851 17,927
<OTHER-EXPENSES> 4,513 3,712
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 67 37
<INCOME-PRETAX> 1,507 1,136
<INCOME-TAX> 588 551
<INCOME-CONTINUING> 1,548 1,125
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 919 585
<EPS-PRIMARY> 0.20 0.13
<EPS-DILUTED> 0.19 0.13
<FN>
<F1> Nine month period for fiscal 1997 balance sheet items not included in
filing.
<F2> Including costs and estimated earnings in excess of billings on uncompleted
contracts.
</FN>
</TABLE>
