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 March 31, 1998
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 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 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.
[X] Yes [ ] No
As of May 1, 1998, there were 17,850,249 shares of Alydaar Software Corporation
common stock, $0.001 par value, outstanding.
1
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PART I. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
- ------- --------------------
Page 3 Consolidated Balance Sheets
Page 4 Consolidated Statements of Operations (Unaudited)
Page 5 Consolidated Statements of Cash Flows (Unaudited)
Page 6 Notes to Unaudited Consolidated Financial Statements
2
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<TABLE>
<CAPTION>
ALYDAAR SOFTWARE CORPORATION
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 DECEMBER 31, 1997
(UNAUDITED) (AUDITED)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash $ 1,530,838 $ 1,526,924
Accounts receivable, net 8,276,960 5,150,617
Costs and estimated earnings in excess
of billings 2,754,925 1,297,986
Prepaid expenses 245,094 249,801
Other receivables - 435,000
Deferred tax asset 600,000 600,000
Loan to shareholder 53,207 51,256
-------------------- -----------------------
13,461,024 9,311,584
PROPERTY AND EQUIPMENT, NET 2,913,777 2,919,077
GOODWILL, NET 6,382,883 6,494,783
OTHER ASSETS 143,931 141,030
-------------------- -----------------------
$ 22,901,615 $ 18,866,474
==================== =======================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 2,907,035 $ 1,807,561
Billings in excess of costs and estimated
earnings on contracts in progress 228,889 49,497
Current portion of capital lease obligation 15,765 21,869
Loans payable, stockholders 1,641,700 966,700
-------------------- -----------------------
4,793,389 2,845,627
-------------------- -----------------------
CAPITAL LEASE OBLIGATION 142,746 101,230
-------------------- -----------------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $.001 par value, 20,000,000
shares authorized, 17,843,349 and 17,808,728
shares issued 17,843 17,809
Additional Paid - In Capital 30,466,557 30,113,284
Deficit (12,394,789) (14,094,107)
Foreign Currency Translation Adjustment (33,686) (26,924)
-------------------- -----------------------
18,055,925 16,010,062
Less: Treasury Stock @ Cost (445) (445)
Receivable from Warrant Exercise (90,000) (90,000)
-------------------- -----------------------
Total Stockholders' Equity 17,965,480 15,919,617
-------------------- -----------------------
$ 22,901,615 $ 18,866,474
==================== =======================
</TABLE>
3
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ALYDAAR SOFTWARE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
EARNED REVENUES: $ 8,407,822 $ 187,500
--------------------- -----------------------
EXPENSES
Payroll and Related Items 4,683,012 2,835,360
Depreciation and Amortization 323,645 134,437
Rent and Occupancy 329,674 155,970
Other Operating Expenses 1,225,446 357,880
Bad Debt Expense 85,000 -
--------------------- -----------------------
6,646,777 3,483,647
--------------------- -----------------------
OPERATING INCOME (LOSS) 1,761,045 (3,296,147)
OTHER INCOME (EXPENSE) (61,727) 1,490
--------------------- -----------------------
NET INCOME (LOSS) $ 1,699,318 $ (3,294,657)
===================== =======================
EARNINGS PER SHARE:
BASIC $ 0.10 $ (0.23)
===================== =======================
DILUTED
$ 0.10 $ (0.23)
===================== =======================
AVERAGE SHARES
OUTSTANDING:
PRIMARY 17,398,349 14,531,614
===================== =======================
DILUTED 17,490,642 14,531,614
===================== =======================
</TABLE>
4
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<TABLE>
<CAPTION>
ALYDAAR SOFTWARE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
1998 1997
CASH FLOW FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Income (Loss) $ 1,699,318 $ (3,294,657)
Adjustments to Reconcile Net Income (Loss)
to net cash used in operating activities:
Stock Based Compensation 76,500 222,500
Allowance for Doubtful Accounts 85,000 -
Depreciation and Amortization 323,645 134,437
Other (6,762) -
(Increase) Decrease in:
Accounts Receivable (3,211,343) 187,500
Costs and Estimated Earnings in Excess of
billings (1,456,939) -
Prepaid Expenses 86,207 6,903
Increase (Decrease) in:
Accounts Payable and Accrued Expenses 1,230,382 768,016
Billings in Excess of Costs and Estimated
Earnings 179,392 (150,000)
----------------- -------------------
Net Cash Used in Operations (994,600) (2,125,301)
----------------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Equipment (164,929) (401,433)
Increase in Other Assets (2,901) (66,753)
Decrease in Other Receivables 435,000 490,000
----------------- -------------------
Net Cash from Investing Activities 267,170 21,814
----------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Issuance of Stock 64,399 1,474,899
Advances to Shareholder (1,951) -
Loans from Shareholders 700,000 300,000
Repayment of Stockholders' Loans (25,000) -
Repayment of Capital Lease Obligations (6,104) -
----------------- -------------------
Net Cash from Financing Activities 731,344 1,774,899
----------------- -------------------
NET INCREASE (DECREASE) IN CASH 3,914 (328,588)
CASH @ BEGINNING OF PERIOD 1,526,924 379,382
----------------- -------------------
CASH @ END OF PERIOD $ 1,530,838 $ 50,794
================= ===================
</TABLE>
5
<PAGE>
ALYDAAR SOFTWARE CORPORATION AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. The interim unaudited financial statements as of March 31, 1998
and 1997 and for the three 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. The Company acquired a 100% interest in Alydaar International, PLC
during the third quarter of 1997. Accordingly, the Company's
financial statements include the accounts of Alydaar
International, PLC from the date of acquisition of that subsidiary
(July 1, 1997). All significant intercompany transactions and
accounts have been eliminated as part of the consolidation of the
financial information. This combination was accounted for as a
purchase as required under APB 16.
3. Federal and state income tax provision for the three month period
ended March 31, 1998 ($680,000) was offset by an increase in the
estimated deferred tax benefit for the same amount. No tax benefit
was recorded at March 31, 1997, due to uncertainty of realization.
4. The Company has adopted Financial Accounting Standards Board
("FASB") Statement No. 128, "Earnings per Share". Basic earnings
per common share is computed by dividing the net earnings (loss)
by the weighted average number of shares of common stock
outstanding during the period. Diluted earnings per share gives
effect to stock options and warrants which are considered to be
dilutive common stock equivalents. Treasury shares have been
excluded from the weighted average number of shares. Earnings
(loss) per share were retroactively restated to reflect FASB No.
128 for the three months ended March 31, 1997.
6
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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, trade receivables and costs and estimated earnings in excess of billings
increased $4.6 million from December 31, 1997 to March 31, 1998. This increase
was the result of increased receivables generated through a $2.2 million
increase in revenues in the first quarter, 1998, compared with the fourth
quarter of 1997, and an increase in work-in-progress as of March 31, 1998
compared with December 31, 1997. Working capital totaled $8.7 million at March
31, 1998, as compared with working capital of $6.5 million at December 31, 1997.
The improvement was also primarily due to increased revenues. During the first
quarter of 1998, two officers loaned the Company a total of $700,000. The
Company believes that cash generated from operations will be sufficient to meet
its future working capital requirements.
RESULTS OF OPERATIONS - FIRST QUARTER 1998 COMPARED WITH FIRST QUARTER 1997.
THREE MONTH PERIOD ENDED MARCH 31, 1998 AND 1997
- ------------------------------------------------
The results for the first quarter of March 31, 1998 and 1997 are not
comparable because in the first quarter of 1997, the Company was primarily
engaged in research and development. The following schedule illustrates the
non-comparability of the two quarters:
3 MONTHS ENDED
----------------------------------------------------------
MARCH 31, 1998 MARCH 31, 1997
- -------------------- ----------------------------- ----------------------------
Avg. # Employees 313 142
- -------------------- ----------------------------- ----------------------------
Avg. Space Occupied 62K sq.ft. 40K sq.ft.
- -------------------- ----------------------------- ----------------------------
Revenues $8,408,000 $187,000
- -------------------- ----------------------------- ----------------------------
Total Assets $22.9 million $2.2 million
- -------------------- ----------------------------- ----------------------------
Revenues were $8.4 million for first quarter 1998, while First quarter
1997 revenues totaled $.2 million, as the Company emerged from research and
development.
Total operating expenses increased $3,163,000. Payroll and related
costs increased $1,848,000. Rent and occupancy costs increased $174,000.
Advertising increased $119,000, as the Company ramped up its business. Travel
increased $190,000, due to the cost of 24 direct sales and support staff versus
2 last year. Telephone costs increased $115,000, related to increase in people
and 12 additional sales offices. Costs of new sales offices were $47,000. Legal
and professional fees increased $137,000, due primarily to defense costs related
to a lawsuit described in the Company's 1997 Form 10-K. Computer supplies,
postage, computer maintenance, office supplies, and training costs increased
$138,000 related to increased personnel. Other operating expenses increased
$343,000 due to new operating activities, increased personnel and increased
space. Depreciation increased $77,000 due to a full quarter depreciation on
first quarter 1997 acquisitions, depreciation on other 1997 acquisitions and
$112,000 goodwill amortization.
The statements made in this quarterly report on Form 10-Q that
are not historical facts contain "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995, which
can be identified by the use of forward-looking terminology such as
"may", "will", "anticipates", "expects", "projects", "estimates"
"believes" or "continue", the negative thereof, other variations or
comparable terminology. Important factors, including certain risks and
uncertainties, with respect to such forward looking statements that
could cause actual results to differ materially from those reflected in
such forward looking statements include, but are not limited to, the
impact of competitive products and services, the ability of customers to
package code in a timely manner, the Company's ability to manage growth
and acquisitions of technology or people, the effect of economic and
business conditions, including risks inherent in international
operations and the ability to attract and retain technical personnel.
7
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PART II. OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
- ----------------------------------------
(a) Exhibits:
11. Computation of Earnings Per Share...Unaudited
27. Financial Data Schedule
(b) Reports on Form 8-K: Not applicable
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: May 12, 1998 /s/Robert F. Gruder
------------ Robert F. Gruder,
Chief Executive Officer
Date: May 12, 1998 /s/V. Hollis Scott
------------
V. Hollis Scott,
Chief Financial Officer
8
<PAGE>
EXHIBIT 6 a) 11.
ALYDAAR SOFTWARE CORPORATION
COMPUTATION OF EARNINGS PER SHARE
(UNAUDITED)
----------------------------- ----------------------------
Three Months Ended Three Months Ended
03/31/98 03/31/97
- -------------------- ----------------------------- ----------------------------
Net Income (Loss) $1,699,318 ($3,294,657)
- -------------------- ----------------------------- ----------------------------
Avg Number Shares
Outstanding 17,398,349 14,531,614
- -------------------- ----------------------------- ----------------------------
Diluted Avg number of
Shares Outstanding 17,490,642 14,531,614
- -------------------- ----------------------------- ----------------------------
Basic Earnings (Loss)
Per Share $0.10 ($0.23)
- -------------------- ----------------------------- ----------------------------
Diluted Earnings Per
Share $0.10 ($0.23)
- -------------------- ----------------------------- ----------------------------
9
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,531
<SECURITIES> 0
<RECEIVABLES> 8,477
<ALLOWANCES> 200
<INVENTORY> 0
<CURRENT-ASSETS> 13,461
<PP&E> 3,948
<DEPRECIATION> 1,034
<TOTAL-ASSETS> 22,902
<CURRENT-LIABILITIES> 4,793
<BONDS> 143
0
0
<COMMON> 18
<OTHER-SE> 17,947
<TOTAL-LIABILITY-AND-EQUITY> 22,902
<SALES> 8,408
<TOTAL-REVENUES> 8,408
<CGS> 0
<TOTAL-COSTS> 4,683
<OTHER-EXPENSES> 653
<LOSS-PROVISION> 85
<INTEREST-EXPENSE> 33
<INCOME-PRETAX> 1,699
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,699
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,699
<EPS-PRIMARY> 0.10
<EPS-DILUTED> 0.10
</TABLE>
