UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10/Q
Quarterly Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1997
Commission File Number: 0-22325
ALYDAAR SOFTWARE CORPORATION
(Exact name of registrant as specified in its charter)
North Carolina 87-0399301
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2101 Rexford Road, Suite 250 West Charlotte, NC 28211
(Address of principal executive offices) (Zip Code)
704-365-2324
(Registrants telephone number, including are 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 and Exchange Act of 1934
during the proceeding 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 (Not Subject)
As of September 29, 1997, there were 16,905,576 shares of Alydaar Software
Corporation common stock, $0.001 par value, outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
Page 3 Unaudited Balance Sheets
Page 4 Unaudited Statements of Operations
Page 5 Unaudited Statements of Cash Flows
Page 6 Notes to Unaudited Financial Statements
2
<PAGE>
ALYDAAR SOFTWARE CORPORATION
BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, JUNE 30, DECEMBER 31,
1997 1996 1996
---- ---- ----
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash $4,694,825 $325,059 $379,382
Accounts receivable 2,061,176 - - 187,500
Notes receivable 300,000 - - 490,000
Prepaid expenses 84,656 4,142 6,903
Loan to shareholder - - 51,256 51,256
--------------- -------------- -----------------
7,140,657 380,457 1,115,041
PROPERTY AND EQUIPMENT, NET 1,935,562 200,405 1,694,029
SECURITY DEPOSITS 126,975 48,222 60,222
--------------- -------------- -----------------
$9,203,194 $629,084 $2,869,292
=============== ============== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $1,592,099 $171,032 $2,184,435
Unearned revenue - - - - 150,000
Notes payable, shareholders 252,724 3,980 507,530
--------------- -------------- -----------------
1,844,823 175,012 2,841,965
--------------- -------------- -----------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value, 20,000,000 shares
authorized, 16,294,782, 11,272,890 and 13,983,282 shares
issued and outstanding, including 640,000 and 795,000
treasury shares at June 30, 1997 and
December 31, 1996, respectively 16,295 11,273 13,983
Additional paid-in capital 19,102,646 2,626,383 6,311,079
Deficit (11,759,930) (2,183,584) (6,296,940)
--------------- -------------- -----------------
7,359,011 454,072 28,122
Less: treasury stock @ cost (640) - - (795)
--------------- -------------- -----------------
7,358,371 454,072 27,327
$9,203,194 $629,084 $2,869,292
=============== ============== =================
</TABLE>
3
<PAGE>
ALYDAAR SOFTWARE CORPORATION
STATEMENTS OF OPERATIONS (UNAUDTIED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
6/30/97 6/30/96 6/30/97 6/30/96
<S> <C> <C> <C> <C>
REVENUES $2,120,769 $ - - $2,308,269 $ - -
----------------- ----------------- --------------- ---------------
EXPENSES
Payroll and related costs 3,629,629 325,289 6,393,733 521,336
Depreciation 125,669 9,912 260,106 27,130
Other operating expense 721,790 314,992 1,130,396 473,355
----------------- ----------------- --------------- ---------------
4,477,088 650,193 7,784,235 1,021,821
----------------- ----------------- --------------- ---------------
OPERATING LOSS (2,356,319) (650,193) (5,475,966) (1,021,821)
OTHER INCOME 11,485 - - 12,975 2,334
----------------- ----------------- --------------- ---------------
Net Loss ($2,344,834) ($650,193) ($5,462,991) ($1,019,487)
================= ================= =============== ===============
Loss Per Share ($0.16) ($0.06) ($0.39) ($0.09)
================= ================= =============== ===============
Weighted Average
No. of Shares 14,558,032 11,126,511 14,051,709 11,230,132
================= ================= =============== ===============
</TABLE>
4
<PAGE>
ALYDAAR SOFTWARE CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
6/30/97 6/30/96 6/30/97 6/30/96
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATIONS
Net loss ($2,344,834) ($650,193) ($5,462,991) ($1,019,487)
Depreciation 125,669 9,912 260,106 27,130
Stock based compensation - - - - 100,000 51,900
(Increase) Decrease in:
Accounts receivable (2,061,176) - - (1,873,676) - -
Prepaid expense (84,656) (4,142) (77,753) - -
Increase (Decrease) in:
Accounts payable and accrued
expenses (1,313,881) (126,274) (592,336) (78,320)
Unearned revenues - - - - (150,000) - -
--------------------- --------------------- -------------------- --------------------
Net Cash From Operations (5,678,878) (770,697) (7,796,650) (1,018,777)
--------------------- --------------------- -------------------- --------------------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of property and (100,206) (145,976) (501,639) (172,517)
equipment
Notes receivable (300,000) - - (300,000) - -
Increase in security deposits - - (40,516) (66,752) (40,516)
--------------------- --------------------- -------------------- --------------------
Net Cash From Investing (400,206) (186,492) (868,391) (213,033)
Activities
--------------------- --------------------- -------------------- --------------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Issuance of stock 11,219,135 - - 13,184,034 1,541,799
Net advances from stockholder (496,020) 2,637 (203,550) (10,365)
Other - - (49,200) - - - -
--------------------- --------------------- -------------------- --------------------
10,723,115 (46,563) 12,980,484 1,531,434
--------------------- --------------------- -------------------- --------------------
NET INCREASE IN CASH 4,644,031 (1,003,752) 4,315,443 299,624
CASH AND EQUIVALENTS,
beginning of period 50,794 1,328,811 379,382 25,435
===================== ===================== ==================== ====================
CASH AND EQUIVALENTS, end of $4,694,825 $325,059 $4,694,825 $325,059
period
===================== ===================== ==================== ====================
Interest paid $ - - $ - - $9,084 $ - -
===================== ===================== ==================== ====================
</TABLE>
5
<PAGE>
ALYDAAR SOFTWARE CORPORATION
NOTES TO UNAUDITED FINANCIALS
1. The interim unaudited financial statements as of June 30, 1997 and
1996 and for the three-and six-month periods then ended, reflect
all adjustments which are, in the opinion of management, necessary
to a fair statement of the results for the interim periods
presented. All adjustments were of a normal recurring nature.
2. Subsequent Event - During July 1997, the Company acquired 100% of
the shares outstanding of Alydaar International, plc., in an
exchange of stock valued at approximately $7.5 million. The
Company had a marketing agreement with Alydaar International since
December, 1996.
6
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION AND LIQUIDITY:
Alydaar Software Corporation's principal liquid resources, comprising
cash and trade receivables, increased $6.2 million from December 31, 1996 to
June 30, 1997. This resulted primarily from cash from sales of stock and
receivables generated during the second quarter from operations. Working capital
totaled $5.3 million at June 31, 1997, as compared with negative working capital
of $1.7 million at December 31, 1996. The significant improvement was due to
$13.2 million raised from sales of stock and exercise of warrants and an
increase in receivables of $1.9 million resulting from revenue generated
primarily in the second quarter.
RESULTS OF OPERATIONS - SECOND QUARTER AND FIRST HALF 1997 COMPARED WITH SECOND
QUARTER AND FIRST HALF 1996:
THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1997 AND 1996
The results for the three and six month periods ended June 30, 1997 and
1996 are not comparable due to the following:
<TABLE>
<CAPTION>
3 MONTHS ENDED 6 MONTHS ENDED
-------------- --------------
<S> <C> <C> <C> <C>
JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1997 JUNE 30, 1996
----------------------- ------------------ ------------------- -------------------- ----------------
Avg. # Employees 240 22 220 18
----------------------- ------------------ ------------------- -------------------- ----------------
Avg. Space Occupied 50K sq.ft. 18K sq.ft. 31K sq.ft 11K sq.ft
----------------------- ------------------ ------------------- -------------------- ----------------
Revenues $2.1 million -0- $2.3 million -0-
----------------------- ------------------ ------------------- -------------------- ----------------
Total Assets $9.2 million $0.6 million $9.2 million $0.6 million
----------------------- ------------------ ------------------- -------------------- ----------------
</TABLE>
The Company was essentially a research and development company until
the end of the first quarter, 1997. At that time, the Company began working on
billable pilots and contract awards. The Company and it's customers had expected
that the flow of code for remediation would be at a rate of one million or more
lines of code per month, per customer. That rate of flow would have produced
sufficient revenues for the Company to be cash flow positive by June, 1997.
However, the rate of flow of code has been approximately 1/4 of expectations,
which produced revenues of $2,308,000 and a loss of $5,463,000 for the first
half of 1997. The Company has taken the following steps to accelerate the cash
flow from operations to exceed cash requirements:
1. Launched a $1 million advertising campaign in late June.
2. Expanded its sales force to 19 from 3 during late June and July.
3. Added contract language to reward flow of code in excess of 1
million lines and penalize flow of less than 800,000 lines.
4. Established in-house expertise to assist customers in packaging
large chunks of code to exceed 1 million lines per month.
The prospect for favorable results from these actions is excellent
based upon preliminary third quarter performance. The benefits of the actions in
terms of much stronger revenues and cash flows will likely be evident in fourth
quarter results.
7
<PAGE>
PART II. OTHER INFORMATION
ITEM 2: CHANGES IN SECURITIES
c) During the second quarter, warrants for 725, 000 shares of stock
were exercised at prices of $1.50 to $2.00 per share. The shares
bear a restrictive legend and are resaleable under available
exemptions from registration.
ITEM 5: OTHER INFORMATION.
During the second quarter, the Company sold a total of 1,331,500 shares of stock
to "non-U.S. persons", as defined in Rule 902(o) of Regulation S, principally to
foreign banks. The shares were not registered under the U.S. Securities Act of
1933 (Act), as amended, and are resaleable in the United States or to a "U.S.
person" only if they are registered under the Act or an exemption from
registration is available. The shares were sold at $9 per share for total
proceed of $11,983,500. The Company received a total of $9,335,470 and
underwriters received $2,648,830 in commissions, fees and expenses.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits.
i) Statement on computation of per share earnings.
b) Reports on Form 8-K.
No reports were filed during the quarter.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
ALYDAAR SOFTWARE CORPORATION
(Registrant)
Date: September 29, 1997 /s/V. Hollis Scott
------------------
V. Hollis Scott,
Chief Financial Officer
Date: September 29, 1997 /s/Michael Racaniello
------------------
Michael Racaniello,
Controller
8
<PAGE>
EXHIBIT 6(a) i )
ALYDAAR SOFTWARE CORPORATION
COMPUTATION OF EARNINGS PER SHARE (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Three Months Six Six
Ended Ended Months Months
6-30-97 06-30-97 Ended Ended
06-30-97 06-30-97
--------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Primary (Loss) Per
Share
-------------------- --------------- --------------- -------------- ---------------
Net Loss ($2,344,834) ($650,193) ($5,462,991) ($1,019,487)
-------------------- --------------- --------------- -------------- ---------------
Avg Number Shares
Outstanding
14,558,032 11,126,511 14,051,709 11,230,132
-------------------- --------------- --------------- -------------- ---------------
Primary (Loss) Per
Share ($0.16) ($0.06) ($0.39) ($0.09)
--------------- --------------- -------------- ---------------
</TABLE>
Fully diluted loss per shares is anti-dilutive and, accordingly, is not
presented.
9
