SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1954
Date of Report: (Date of earliest event reported):
September 12, 1995 (July 20, 1995)
EXCALIBUR TECHNOLOGIES CORPORATION
(Exact name of issuer as specified in its
charter)
Delaware 0-9747 85-0278207
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
9255 Towne Centre Drive, 9th Floor, San Diego, California 92121
(Address of principle executive offices) (Zip Code)
Registrant's telephone number, including area code:
619-625-7900
<PAGE>
CURRENT REPORT ON FORM 8-K
Excalibur Technologies Corporation
Item 2. Acquisition or Disposition of Assets.
On July 20, 1995 Excalibur Technologies Corporation ("Excalibur")
completed its acquisition of all of the outstanding shares of stock and
options to acquire shares of ConQuest Software, Inc. ("ConQuest"), a
private company located in Columbia, Maryland engaged in the business of
providing natural language text management software tools. Excalibur will
issue approximately 1,427,000 restricted shares of Excalibur common stock,
and options to acquire approximately 576,000 restricted shares of Excalibur
common stock to the former ConQuest shareholders and optionholders. The
Company does not believe that the final consideration will be materially
different than these estimated amounts.
ConQuest provides real-time profiling and retrieval engines, full
Boolean, statistical and heuristic search technologies with natural
language based query functionality in a scaleable distributed software
architecture, semantic network knowledge bases, and a complete set of
application development tools to publishers, vendors and information end-
users.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a)(b) Financial Statements and Pro Forma Financial Information
The acquisition of ConQuest is considered a significant subsidiary
under Regulation S-X. The transaction was not one in a series of related
transactions. The following financial statements and pro forma financial
information omitted from Form 8-K, dated August 4, 1995, in reliance upon
instructions 7(a)(4) and 7(b)(2) of Form 8-K, are filed herewith.
Excalibur Technologies Corporation's fiscal year ends January 31,
while ConQuest Software, Inc.'s fiscal year previously ended December 31.
Accordingly, the pro forma financial information for the interim period
includes the unaudited condensed statement of operations for Excalibur
Technologies Corporation for the three month period ended April 30, 1995,
and, the unaudited condensed statement of operations for ConQuest Software,
Inc. for the period January 1, 1995 through April 30, 1995.
(a) Financial Statements of Businesses Acquired:
Financial Statements of ConQuest Software, Inc. (unaudited) for
the four months ended April 30, 1995:
(i) Balance sheet
(ii) Statement of operations
Financial Statements of ConQuest Software, Inc. for the years
ended December 31, 1994 and 1993:
(i) Reports of independent public accountants
(ii) Balance sheets
(iii) Statements of operations
(iv) Statements of stockholders' deficit
(v) Statements of cash flows
(vi) Notes to consolidated financial statements
(b) Pro Forma Financial Information:
Unaudited Pro Forma Combined Condensed Financial Statements of
Excalibur Technologies Corporation and ConQuest Software, Inc.
(i) Combined condensed statement of operations of Excalibur
Technologies Corporation for the three months ended April 30, 1995 and
ConQuest Software, Inc. for the four months ended April 30, 1995
(ii) Combined condensed statement of operations of Excalibur
Technologies Corporation for the year ended January 31, 1995 and ConQuest
Software, Inc. for the year ended December 31, 1994
(iii) Combined condensed statement of operations of Excalibur
Technologies Corporation for the year ended January 31, 1994 and ConQuest
Software, Inc. for the year ended December 31, 1993
(iv) Combined condensed balance sheet as of April 30, 1995
(v) Notes to Pro Forma Combined Condensed Financial Statements
<PAGE>
(c) Exhibits.
2.01 Agreement and Plan of Merger Between Excalibur Technologies
Corporation, Excalibur Acquisition Corp. and Conquest Software, Inc.
dated as of July 5, 1995. (Filed with Form 8-K Current Report on
August 4, 1995 and incorporated in whole by reference.)
23.01 Consent of Arthur Andersen LLP
23.02 Consent of Price Waterhouse LLP
<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.
EXCALIBUR TECHNOLOGIES CORPORATION
September 12, 1995 By: /s/ Patrick C. Condo
Patrick C. Condo
President
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Businesses Acquired
<PAGE>
CONQUEST SOFTWARE, INC.
BALANCE SHEET
APRIL 30, 1995
(UNAUDITED)
ASSETS
Current Assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . $ 167,875
Trade receivables, net . . . . . . . . . . . . . . . . 164,378
Prepaid expenses and other . . . . . . . . . . . . . . 45,509
Total current assets . . . . . . . . . . . . . . 377,762
Equipment and leasehold improvements, net . . . . . . . . 174,050
$ 551,812
LIABILITIES AND SHAREHOLDERS' DEFICIT
Liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . $ 337,369
Accrued expenses . . . . . . . . . . . . . . . . . . . 752,393
Deferred compensation . . . . . . . . . . . . . . . . . 1,164,155
Deferred revenues . . . . . . . . . . . . . . . . . . . 1,162,748
Total current liabilities . . . . . . . . . . . 3,416,665
Notes payable, net of current portion . . . . . . . . . . 77,138
Shareholders' Deficit:
Common stock, no par value, 2,500,000 shares
authorized; 1,469,127 shares issued and
outstanding . . . . . . . . . . . . . . . . . . . . 2,620,955
Accumulated deficit . . . . . . . . . . . . . . . . . . (5,447,456)
Less 23,595 shares held in treasury, at cost . . . . . (94,380)
Deferred compensation . . . . . . . . . . . . . . . . . (21,110)
Total shareholders' deficit . . . . . . . . . . (2,941,991)
$ 551,812
<PAGE>
CONQUEST SOFTWARE, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE FOUR MONTHS ENDED APRIL 30, 1995
(UNAUDITED)
REVENUES:
Software revenues . . . . . . . . . . . . . . . . . . . $ 900,560
Maintenance revenues . . . . . . . . . . . . . . . . . 77,634
978,194
EXPENSES:
Sales and marketing . . . . . . . . . . . . . . . . . . 569,982
Research and product development . . . . . . . . . . . 236,220
General and administrative . . . . . . . . . . . . . . 265,999
Cost of software revenues . . . . . . . . . . . . . . . 150,960
Cost of maintenance revenues . . . . . . . . . . . . . 54,462
1,277,623
Operating loss . . . . . . . . . . . . . . . . . . . . . (299,429)
Interest expense . . . . . . . . . . . . . . . . . . . . (19,585)
Net loss . . . . . . . . . . . . . . . . . . . . . . . . $ (319,014)
<PAGE>
Report of Independent Public Accountants
To the Board of Directors and Stockholders of
ConQuest Software, Inc.:
We have audited the accompanying balance sheet of ConQuest Software, Inc. (the
"Company", a Maryland corporation), as of December 31, 1994, and the related
statements of operations, stockholders' deficit and cash flows for the year
then ended. 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 an audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. 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 financial statements referred to above present fairly, in
all material respects, the financial position of ConQuest Software, Inc. as of
December 31, 1994, and the results of its operations and its cash flows for the
year then ended 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 Note 1 to the
financial statements, the Company has suffered recurring losses from operations
and has a working capital deficiency and a net capital deficiency that raise
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 1. The
financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amounts and
classification of liabilities that might result should the Company be unable to
continue as a going concern.
Washington, D.C., ARTHUR ANDERSEN LLP
May 26, 1995
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
ConQuest Software, Inc.:
In our opinion, the accompanying balance sheet and the related statements
of operations, of changes in stockholders' deficit and of cash flows
present fairly, in all material respects, the financial position of
ConQuest Software, Inc. at December 31, 1993, and the results of its
operations and its cash flows for the year in conformity with generally
accepted accounting principles. 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 of these statements in accordance with generally
accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for
the opinion expressed above.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from
operations, has a net capital deficiency and has current liabilities in
excess of current assets that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters
are also described in Note 1. These financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
PRICE WATERHOUSE
Washington, D.C.
April 15, 1994
<PAGE>
ConQuest Software, Inc.
Balance Sheets
As of December 31, 1994 and 1993
Assets
1994 1993
Current assets:
Cash $ 30,787 $ 92,659
Accounts receivable, net of allowance of
$59,000 and $0 at December 31, 1994 and 1993,
respectively 305,346 251,195
Other current assets 45,509 77,031
Total current assets 381,642 420,885
Furniture and equipment, net 168,006 158,559
Total assets $ 549,648 $ 579,444
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable $ 122,288 $ 111,203
Accrued expenses 639,590 409,154
Note payable to shareholder 100,000 -
Notes payable, current portion 190,282 67,405
Obligations under capital leases 17,069 22,897
Deferred revenue 874,325 376,032
Deferred compensation (including $534,630 and
$437,678 due to officers/shareholders at
December 31, 1994 and 1993, respectively) 1,164,155 951,640
Total current liabilities 3,107,709 1,938,331
Notes payable, net of current portion 82,138 -
Commitments and contingencies (Note 10)
Stockholders' deficit:
Common stock, no par value, 2,500,000 shares
authorized, 1,469,127 and 1,181,410 shares
issued and outstanding at December 31, 1994 2,620,955 1,308,190
and 1993, respectively
Accumulated deficit (5,128,442) (2,667,077)
Less- 23,595 shares held in treasury at
December 31, 1994, at cost (94,380) -
Deferred compensation (38,332) -
Total stockholders' deficit (2,640,199) (1,358,887)
Total liabilities and stockholders'
deficit $ 549,648 $ 579,444
The accompanying notes are an integral part of these balance sheets
<PAGE>
ConQuest Software, Inc.
Statements of Operations
For the Years Ended December 31, 1994 and 1993
1994 1993
Revenues:
Products $ 1,049,994 $ 616,964
Services 505,698 728,237
Grants 241,384 274,716
1,797,076 1,619,917
Operating expenses:
Cost of revenues 731,906 1,089,219
Sales and marketing 1,765,783 1,129,028
Research and development 591,155 220,000
General and administrative 1,291,363 837,708
4,380,207 3,275,955
Loss from operations (2,583,131) (1,656,038)
Other income (expense):
Other income 208,964 -
Interest expense (87,198) (22,142)
121,766 (22,142)
Net loss $ (2,461,365) $ (1,678,180)
The accompanying notes are an integral part of these financial statements
<PAGE>
<TABLE>
ConQuest Software, Inc.
Statements of Changes in Stockholders' Deficit
For the Years Ended December 31, 1994 and 1993
<CAPTION>
Common Stock Accumulated Treasury Deferred
Shares Amount Deficit Stock Compensation Total
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 926,413 $ 422,552 $ (988,897) $ - $ - $ (566,345)
Conversion of notes payable 46,250 185,000 - - - 185,000
Conversion of deferred
compensation 14,937 59,748 - - - 59,748
Issuance of common stock in
exchange for services 59,547 137,327 - - - 137,327
Sales of common stock 113,000 455,000 - - - 455,000
Issuance of common stock for
fixed assets 21,263 48,563 - - - 48,563
Net loss - - (1,678,180) - - (1,678,180)
Balance, December 31, 1993 1,181,410 1,308,190 (2,667,077) - - (1,358,887)
Conversion of notes payable 7,256 29,024 - - - 29,024
Conversion of deferred
compensation 22,143 42,589 - - - 42,589
Sales of common stock 113,500 554,000 - - - 554,000
Issuance of common stock in
exchange for services 161,955 608,820 - - - 608,820
Issuance of common stock for
antidilution protection in
stock agreement 6,458 - - - - -
Purchase of treasury stock (23,595) - - (94,380) - (94,380)
Deferred compensation in
connection with stock option
grants - 78,332 - - (78,332) -
Amortization of deferred
compensation - - - - 40,000 40,000
Net loss - - (2,461,365) - - (2,461,365)
Balance, December, 31, 1994 1,469,127 $ 2,620,955 $ (5,128,442) $ (94,380) $ (38,332) $ (2,640,199)
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
ConQuest Software, Inc.
Statements of Cash Flows
For the Years Ended December 31, 1994 and 1993
1994 1993
Cash flows from operating activities:
Net loss $(2,461,365) $(1,678,180)
Adjustments to reconcile net loss to cash used in
operating activities
Depreciation 40,000 28,143
Amortization of deferred compensation 40,000 -
Common stock issued for services rendered 608,820 137,327
Changes in operating assets and liabilities:
Accounts receivable (54,151) (153,520)
Other current assets 31,522 (62,746)
Accounts payable 11,085 63,242
Accrued expenses 323,460 327,291
Deferred revenue 498,293 338,032
Deferred compensation 255,104 412,355
Net cash used in operating activities (707,232) (588,056)
Cash flows from investing activities:
Purchases of furniture and equipment (49,447) (44,939)
Cash flows from financing activities:
Proceeds from issuance of notes payable 188,782 252,405
Proceeds from stock issuances 554,000 455,000
Repayments of notes payable (42,147) -
Repayments of obligations under capital leases (5,828) -
Net cash provided by financing activities 694,807 707,405
Net increase in cash (61,872) 74,410
Cash, beginning of year 92,659 18,249
Cash, end of year $ 30,787 $ 92,659
Supplemental disclosures of cash flow
information:
Cash paid during the year for interest $ 7,498 $ 12,142
Supplemental disclosures of noncash investing and
financing activities:
Conversion of notes payable into common stock $ 29,024 $ 185,000
Conversion of deferred compensation into common 42,589 59,748
stock
Issuance of notes in exchange for repurchase of 94,380 -
treasury stock
Issuance of notes in relation to severance 89,000 -
agreements
Issuance of common stock for fixed assets - 48,563
The accompanying notes are an integral part of these financial statements
<PAGE>
ConQuest Software, Inc.
Notes to Financial Statements
As of December 31, 1994
1.Operations, Liquidity and Risk Factors
ConQuest Software, Inc. (formerly Synchronetics, Inc.), was incorporated in the
state of Maryland on May 16, 1989. ConQuest Software, Inc. (the "Company" or
"ConQuest") is engaged in the development and sale of text retrieval and text
management computer software products. Major customers include Federal
government agencies, publishers and information providers, law firms and
corporate legal departments and large corporations. Applications include
business and consumer online services, financial news profiling, document and
editorial management, litigation support, government and business intelligence,
research, help desk systems, publishing and regulatory filings.
The Company has incurred losses since inception totaling approximately $5.1
million, including a loss of approximately $2.5 million in 1994. As set forth
in the accompanying financial statements, the Company had current liabilities in
excess of current assets of $2.7 million and a net capital deficit of
approximately $2.6 million at December 31, 1994. Although the Company believes
that many of its current liabilities (deferred revenues and deferred
compensation) will not require the use of cash within the next year, the Company
is currently unable to meet its obligations as they become due.
The Company is in the early stages of establishing a market for its products.
The market for text retrieval and text management software is very competitive
and subject to rapid technological change. The Company believes that its
ability to compete successfully and achieve profitability depends upon a number
of factors including its ability to further develop and penetrate the markets
for its products. The Company has expended substantial funds to develop its
products and to fund its sales and marketing efforts, but will need additional
capital to further these efforts and to fund its operations. There can be no
assurance that such financing will be available to the Company. If adequate
funds are not available, the Company may have to delay, scale back or eliminate
certain of its operations, product research and development or its sales and
marketing activities. Although it cannot be assured that the Company will be
able to continue as a going concern, management believes that alternative
sources of financing are available to the Company that should enable the Company
to meet its obligations and sustain operations. The Company has no commitments
or understandings with respect to other sources of financing. In the event that
the Company is unable to continue as a going concern, amounts realized upon the
liquidation or disposition of its assets may be substantially less than the
amounts recorded in the accompanying financial statements.
2.Summary of Significant Accounting Policies:
The significant accounting policies followed by the Company are described as
follows.
Revenue Recognition
Revenue from license fees for standard software products is recognized when the
software is delivered, provided no significant future obligations exist and
collection is probable. Service revenue and revenue from products involving
installation or other services are recognized as the services are performed.
Product support contracts entitle customers to telephone support, bug fixing and
the right to receive software updates as they are released. Revenue from
product support contracts, including product support included in initial license
fees, is recognized ratably over the contract period.
Approximately 44 and 58 percent of the Company's revenue during 1994 and 1993,
respectively, were derived from contracts with the Federal government. The
Company's contracts with the Federal government are primarily cost plus fixed
fee and firm fixed price contracts. For cost plus fixed fee contracts, revenues
are recorded to the extent costs have been incurred including a percentage of
the fixed fee, in accordance with the contract provisions. Revenues from firm
fixed price contracts are recorded using the percentage of completion method.
Losses on contracts are recorded in full when they become known.
During 1994 and 1993, the Company recorded revenue of approximately $241,000 and
$275,000, respectively, in connection with a grant under the U.S. Federal
Government Small Business Innovative Research Program. Grant revenue is
recognized to the extent the funds received have been expended in accordance
with terms specified in the grant.
Concentrations of Credit Risk
Financial instruments that subject the Company to credit risk consist
principally of accounts receivable. The Company extends credit to its
customers, which consist of the Federal government and commercial companies in
various industries, under normal payment terms. Provisions for estimated
uncollectible accounts have been recorded.
Other Current Assets
Included in other current assets is approximately $40,000 of prepaid rent at
December 31, 1994. Included in other current assets is approximately $27,000
and $24,000 for employee advances and deposits, respectively, at December 31,
1993.
Research and Development
All costs incurred in the development of new software products and enhancements
to existing products are expensed as research and development costs in the
period incurred. No software development costs have been capitalized, since the
Company has determined that technological feasibility of new products is not
established until approximately upon the release of the products to its
customers.
Reclassifications
Certain reclassifications have been made prior year financial statements to
conform with the current year presentation.
3.Furniture and Equipment:
Furniture and equipment are stated at cost. Depreciation is provided for
financial reporting purposes using the straight-line method over the estimated
useful life of the assets of five years. Furniture and equipment at December 31
consists of the following.
1994 1993
Computer and office equipment $ 198,698 $ 162,559
Purchased computer software 48,184 34,876
246,882 197,435
Less Accumulated depreciation (78,876) (38,876)
$ 168,006 $ 158,559
4.Accrued Expenses:
Accrued expenses at December 31 consists of the following.
1994 1993
Commissions $ 191,771 $ 129,554
Accrued taxes on deferred 155,674 118,178
compensation
Employee expenses payable 50,535 27,481
Accrued pension plan 42,908 -
Accrued vacation 33,114 48,000
Accrued interest (including $14,868
due to officer/shareholder at 24,523 -
December 31, 1994)
Royalties payable 10,500 1,783
Other accrued expenses 130,565 84,158
$ 639,590 $ 409,154
5.Notes Payable:
During 1993, the Company entered into a loan agreement with the state of
Maryland that provided for borrowings totaling $50,000. The loan is due in 1998
and accrues interest at 7 percent per annum. The Company had also obtained
equipment loans totaling $17,405 that bear interest at rates ranging from 12 to
18 percent as of December 31, 1993. All equipment loans were repaid in 1994.
During 1994, the Company entered into a loan agreement to meet its short term
cash flow requirements. The loan accrues interest at 24 percent per annum and
is due upon demand. The balance of the loan at December 31, 1994, was $39,040.
The loan is secured by the Company's receivables, intangibles, and investments.
During 1994, the Company obtained at $100,000 a loan from a stockholder. The
note became due on September 1, 1994, but remained unpaid at May 26, 1995. The
note accrues interest at 24 percent per annum and is secured by the Company's
receivables. The weighted average interest rate on short-term borrowings was 24
percent at December 31, 1994.
Also during 1994, the Company issued notes as part of severance agreements with
three employees. The notes, totaling $183,380 at December 31, 1994, bear
interest at rates ranging between 0 and 6 percent and are payable in monthly
installments for periods ranging from 7 months to 3 years.
The following table summarizes all future maturities of the Company's notes as
of December 31, 1994.
Year Ending December 31,
1995 $ 290,282
1996 15,414
1997 16,360
1998 50,364
372,420
Less Current portion of shareholder note (100,000)
Current portion of other notes (190,282)
Notes payable, net of current portion $ 82,138
6.Deferred Compensation:
The Company has entered into arrangements with many of its officers, employees
and independent consultants to defer a portion of their compensation. During
1994, the Company amended the deferred compensation agreement such that deferred
compensation to employees is restricted for use in the exercise of stock
options. However, if the employees' options have expired because the term has
lapsed or because employment has been terminated, the employee may request cash
redemption one year after expiration, with 90 days notice. During 1994 and 1993,
deferred compensation of $42,589 and $59,748, respectively, was settled through
the exercise of options to purchase stock. Effective January 1, 1993, the
Company revised the deferred compensation arrangements and discontinued the
payment of interest on the deferred compensation balance for employees only.
Interest continues to accrue on deferred compensation due to independent
consultants. Accrued interest, which is included in the deferred compensation
balances totaled $66,662 and $34,011 at December 31, 1994 and 1993.
7.Stockholders' Deficit:
On August 31, 1993, the Company increased the number of common shares authorized
for issuance to 2,500,000 and decreased the par value from $1.00 per share to no
par value. In addition, 115,000 and 52,500 shares of Series A and B convertible
preferred stock, respectively, outstanding at December 31, 1992, were converted
into common stock at a rate of 1.1 shares of common stock for each share of
preferred stock and the preferred stock was canceled. The conversion of the
preferred stock to common stock, the change in par value and the increase in
authorized shares has been reflected in the statement of changes in
stockholders' deficit at December 31, 1992.
During 1993, the Company entered into a loan agreement with an investor that
provided for borrowings up to $350,000 through August 31, 1993, with interest at
10 percent per annum. As of August 31, 1993, the Company had borrowed $187,340
including accrued interest under this loan agreement. In accordance with the
terms of the note, the holder of the note converted the outstanding borrowings
into 46,835 shares of common stock of the Company during 1993. This investor
also acquired an additional 78,165 shares of common stock for $312,660 in cash.
During 1993, the Company recorded compensation expense of $137,327 in connection
with the issuance of 59,547 shares of common stock to certain employees for
services rendered. The Company also issued 21,263 shares of common stock to
certain employees for various fixed assets with a fair value of $48,563. In
addition, the Company issued 34,250 shares of common stock for $140,000 in cash
under private placement agreements and issued 14,937 shares of common stock in
lieu of payment of deferred compensation payable to a director of the Company
totaling $59,748.
During 1994, the Company entered into a $25,000 loan agreement with an employee
that accrued interest at 24 percent per annum. The employee converted the loan
and accrued interest of $4,024 into 7,256 shares of common stock. The Company
also repurchased 23,595 shares of common stock from a former officer in
connection with a severance agreement. In exchange, the Company issued the
officer a note for $94,380 (Note 9).
During 1994, the Company recorded compensation expense of $608,820 in connection
with the issuance of 161,955 shares of common stock to certain employees,
directors and consultants for services rendered.
Under the terms of certain stock purchase agreements, certain outside investors
of the Company have dilution protection. If shares are sold in a major
investment, as defined in the respective stock purchase agreements, at less than
the price paid by the outside investor or at an agreed upon protected price, the
outside investor will be granted additional shares of the Company's common
stock. In 1994, the Company issued 6,458 shares pursuant to such an agreement.
In addition, the Company has a stock purchase agreement with an outside investor
who holds 32,291 shares of common stock which provides the shareholder the right
under certain conditions, through September 15, 1996, to sell back to the
Company up to 25 percent of his then-currently held shares at the greater of
$5.00 per share, the then-current price, or the book value per share of the
common stock.
8.Stock Option Plan:
In 1991, the Company adopted a Stock Option Plan (the "Plan") that reserved
750,000 shares of common stock for granting of options through 2001 and provides
for the issuance of qualified and nonqualified stock options. Qualified stock
options granted pursuant to the Plan expire 10 years from the date of grant and
vest in one year. Nonqualified stock options granted pursuant to the Plan
expire in 5 years from the date of grant and vest immediately. Generally, the
exercise price on options granted under the Plan is the fair market value (as
determined by the Board of Directors) of the Company's stock on the date of
grant. Compensation expense is recognized for the difference between the
exercise price of the options granted and the fair market value of the Company's
common stock. Total compensation expense of $40,000 and $0 was recorded
relating to option grants in 1994 and 1993, respectively.
The following table summarizes the activity in the Company's stock options.
Exercise
Options Price
Balance, December 31, 1992 542,476 $1.00-$4.00
Granted 102,152 4.00
Exercised -
Canceled -
Balance, December 31, 1993 644,628 1.00- 4.00
Granted 57,271 2.00- 4.00
Exercised (39,298) 1.00- 3.00
Canceled (69,479) 1.00- 4.00
Balance, December 31, 1994 593,122 $1.00- $4.00
At December 31, 1994, options to purchase 529,407 shares were exercisable at
$1.00-4.00 per share, and 48,101 reserved shares were available for issuance
under the Plan.
Under the terms of the employment agreements with two officers of the Company,
if shares are sold at a price which is less than the price of any unexercised
options held by these officers, such option price will be either adjusted
downward to the sale price, or the number of shares that can be purchased at the
aggregate option amount will be adjusted upward to reflect such a price. Any
such adjustment of the option price or number of shares under these agreements
must be approved by the stockholders of the Company. At December 31, 1994,
264,541 options were subject to these terms.
9.Income Taxes:
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). The
Company has incurred losses for both financial and income tax reporting purposes
since inception. Accordingly, no provision or benefit for income taxes has been
recorded in the accompanying financial statements.
At December 31, 1994 and 1993, the Company had deferred tax assets totaling
approximately $1.9 and $1.0 million, respectively, relating primarily to its net
operating loss carryforwards. The Company has provided a full valuation
allowance for deferred tax assets at both dates, since the realization of these
future benefits is not reasonably assured.
The components of the Company's net deferred tax assets are as follows.
As of December 31,
1994 1993
Net operating loss carryforwards $ 1,275,000 $ 640,000
Deferred compensation and other 674,000 360,000
liabilities
Total deferred assets 1,949,000 1,000,000
Less valuation reserve (1,949,000) (1,000,000)
Net deferred tax assets $ - $ -
As of December 31, 1994, the Company had net operating loss carryforwards for
income tax reporting purposes of approximately $3.4 million that will result in
deductions for income tax reporting purposes in future periods. The net
operating loss carryforwards expire beginning in the year 2008 and may be used
to offset the Company's taxable income; however, the Company may be subject to
an alternative minimum tax. The Company's ability to utilize the net operating
loss carryforwards may be subject to certain annual limitations in future
periods due to changes in control of the Company.
10. Commitments and Contingencies:
Leases
The Company leases certain office space and furniture and equipment used in its
operations. The following is a schedule of the future minimum lease payments
under operating and capital leases.
Year Ending December 31, Operating Capital
1995 $ 133,319 $ 15,260
1996 35,926 4,419
1997 25,830 -
1998 7,391 -
Total $ 202,466 19,679
Less portion attributable to interest (2,610)
Capital lease obligations $ 17,069
Rent expense, net of sublease income, was $114,594 and $75,254 in 1994 and 1993,
respectively.
During 1994, the Company received approximately $200,000 from its former
landlord as an incentive for the Company to terminate its lease for office
space. This amount is included in other income in the accompanying financial
statements.
Employment Agreements
The Company has employment agreements with five of its officers and key
executives for periods of six months to one year with annual remuneration
ranging from approximately $90,000 to $150,000. At December 31, 1994, the
commitment under these agreements amounted to approximately $550,000. The
Company is also committed to issue 3,333 shares of common stock to an employee
over the next two years.
Contract Costs
Revenues earned from government contracts are subject to audit and possible
adjustment by the Federal government. No contract costs have been examined nor
settled by the Federal government for any period since the Company's inception.
In the opinion of management, the outcome of any such audit will not have a
material effect on the Company's financial position or its results of future
operations.
11. 401(k) Plan:
Effective January 1, 1994, the Company established an employee contribution plan
(the "Plan") intended to be a qualified plan under Section 401 (k) of the
Internal Revenue Code (the "Code"). Each participant may elect salary
deferrals, up to the maximum percentage allowable by the Plan and under the
Code, in pretax contributions. There are no age or service requirements for
plan eligibility. The Company's matching contribution is discretionary and
there was no contribution made in 1994.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(b) Pro Forma Financial Information
<PAGE>
<TABLE>
UNAUDITED PRO FORMA COMBINED
CONDENSED BALANCE SHEET
AS OF APRIL 30, 1995
<CAPTION>
Excalibur
Technologies ConQuest Pro Forma Pro Forma
ASSETS Corporation Software, Inc. Adjustments Combined
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents . . . . . . . . . $ 4,881,837 $ 167,875 $ 8,500 <F1> $ 5,058,212
Investments-
U.S. government securities, at cost . . . 2,240,034 - - 2,240,034
Trade receivables, net . . . . . . . . . . 2,875,511 164,378 - 3,039,889
Prepaid expenses and other . . . . . . . . 577,380 45,509 - 622,889
Total current assets . . . . . . . . . 10,574,762 377,762 8,500 10,961,024
U.S. government securities, at cost . . . . . 3,866,251 - - 3,866,251
Equipment and leasehold improvements, net . . 2,191,009 174,050 - 2,365,059
Other assets . . . . . . . . . . . . . . . . 44,782 - - 44,782
$ 16,676,804 $ 551,812 $ 8,500 $ 17,237,116
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable . . . . . . . . . . . . . $ 832,740 $ 337,369 $ 8,500 <F1> $ 1,178,609
Accrued expenses and other liabilities . . 1,343,226 752,393 - 2,095,619
Deferred compensation . . . . . . . . . . . - 1,164,155 - 1,164,155
Deferred revenues . . . . . . . . . . . . . 2,159,320 1,162,748 - 3,322,068
Total current liabilities . . . . . . 4,335,286 3,416,665 8,500 7,760,451
Notes payable, net of current portion . . . . - 77,138 - 77,138
Shareholders' Equity:
Preferred stock . . . . . . . . . . . . . . . 271,797 - - 271,797
Common stock . . . . . . . . . . . . . . . . 98,976 2,620,955 (2,606,685) <F2> 113,246
Treasury stock . . . . . . . . . . . . . . . - (94,380) 94,380 <F2> 0
Additional paid-in capital . . . . . . . . . 42,714,294 - 2,512,305 <F2> 45,226,599
Accumulated deficit . . . . . . . . . . . . . (30,704,796) (5,447,456) - (36,152,252)
Deferred compensation . . . . . . . . . . . . - (21,110) - (21,110)
Cumulative translation adjustment . . . . . . (38,753) - - (38,753)
Total shareholders' equity . . . . . . 12,341,518 (2,941,991) 0 9,399,527
$ 16,676,804 $ 551,812 $ 8,500 $ 17,237,116
<FN>
<F1> To reverse the payment of merger costs.
<F2> To record the issuance of 1,427,000 shares of Excalibur's common stock,
$.01 par valur, in exchange for all the outstanding shares of ConQuest
common stock.
</FN>
</TABLE>
<PAGE>
<TABLE>
UNAUDITED PRO FORMA COMBINED
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Excalibur
Technologies ConQuest
Corporation Software, Inc.
Three months Four months
ended ended Pro Forma Pro Forma
April 30, 1995 April 30, 1995 Adjustments Combined
<S> <C> <C> <C> <C>
REVENUES:
Software revenues . . . . . . . . . . . . . . . . . . 2,138,512 900,560 - 3,039,072
Maintenance revenues . . . . . . . . . . . . . . . . 662,342 77,634 - 739,976
2,800,854 978,194 0 3,779,048
OPERATING EXPENSES:
Sales and marketing. . . . . . . . . . . . . . . . . . 1,660,313 569,982 - 2,230,295
Research and product development . . . . . . . . . . . 958,164 236,220 - 1,194,438
General and administrative . . . . . . . . . . . . . . 539,198 265,999 - 805,197
Cost of software revenues . . . . . . . . . . . . . . 148,463 150,960 - 299,423
Cost of maintenance revenues . . . . . . . . . . . . . 89,484 54,462 - 143,946
3,395,622 1,277,623 0 4,673,245
Operating loss . . . . . . . . . . . . . . . . . . . . (594,768) (299,429) 0 (894,197)
OTHER INCOME / (EXPENSE)
Interest income . . . . . . . . . . . . . . . . . . . . 128,429 - - 128,429
Interest expense . . . . . . . . . . . . . . . . . . . - (19,585) - (19,585)
Net loss . . . . . . . . . . . . . . . . . . . . . . . (466,339) (319,014) 0 (785,353)
Dividends declared, and undeclared
accumulated dividends on preferred
stock . . . . . . . . . . . . . . . . . . . . . . . . 3,397 - - 3,397
Net loss applicable to common stock . . . . . . . . . . $ (469,736) $ (319,014) $ 0 $ (788,750)
Net loss per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.07)
Weighted-average number of common
shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,260,445
</TABLE>
<PAGE>
<TABLE>
UNAUDITED PRO FORMA COMBINED
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Excalibur
Technologies ConQuest
Corporation Software, Inc.
Fiscal year Fiscal Year
ended ended Pro Forma Pro Forma
January 31, 1995 Dec. 31, 1994 Adjustments Combined
<S> <C> <C> <C> <C>
REVENUES;
Software revenues . . . . . . . . . . . . . . . . . 8,493,883 1,639,291 - 10,133,174
Maintenance revenues . . . . . . . . . . . . . . . 2,347,340 157,785 - 2,505,125
10,841,223 1,797,076 0 12,638,299
EXPENSES:
Sales and marketing . . . . . . . . . . . . . . . . 7,633,292 1,765,783 - 9,399,075
Research and product development . . . . . . . . . 4,494,219 591,155 - 5,085,374
General and administrative . . . . . . . . . . . . 4,306,058 1,291,363 - 5,597,421
Cost of software revenues . . . . . . . . . . . . . 616,495 580,215 - 1,196,710
Cost of maintenance revenues . . . . . . . . . . . 372,508 151,691 - 524,199
Other . . . . . . . . . . . . . . . . . . . . . . . 775,949 - - 775,949
18,198,521 4,380,207 0 22,578,728
Operating loss . . . . . . . . . . . . . . . . . . . (7,357,298) (2,583,131) 0 (9,940,429)
OTHER INCOME (EXPENSE):
Interest income . . . . . . . . . . . . . . . . . . 431,052 - - 431,052
Other income . . . . . . . . . . . . . . . . . . . . - 208,964 - 208,964
Interest expense . . . . . . . . . . . . . . . . . . - (87,198) - (87,198)
431,052 121,766 0 552,818
Net loss . . . . . . . . . . . . . . . . . . . . . . (6,926,246) (2,461,365) 0 (9,387,611)
Dividends declared, and undeclared
accumulated dividends on preferred
stock . . . . . . . . . . . . . . . . . . . . . . . 13,590 - - 13,590
Net loss applicable to common stock . . . . . . . . . $ (6,939,836) $ (2,461,365) $ 0 $ (9,401,201)
Net loss per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.85)
Weighted-average number of common
shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,093,873
</TABLE>
<PAGE>
<TABLE>
UNAUDITED PRO FORMA COMBINED
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Excalibur
Technologies ConQuest
Corporation Software, Inc.
Fiscal year Fiscal Year
ended ended Pro Forma Pro Forma
January 31, 1994 Dec. 31, 1993 Adjustments Combined
<S> <C> <C> <C> <C>
REVENUES;
Software revenues . . . . . . . . . . . . . . . . . 9,288,892 1,589,767 - 10,878,659
Maintenance revenues . . . . . . . . . . . . . . . 1,376,672 30,150 - 1,406,822
10,655,564 1,619,917 0 12,285,481
EXPENSES:
Sales and marketing . . . . . . . . . . . . . . . . 8,998,385 1,129,028 - 10,124,413
Research and product development . . . . . . . . . 5,262,868 220,000 - 5,482,868
General and administrative . . . . . . . . . . . . 2,920,357 837,708 - 3,758,065
Cost of software revenues . . . . . . . . . . . . . 270,233 1,089,219 - 1,359,452
Cost of maintenance revenues . . . . . . . . . . . 343,095 - - 343,095
17,791,938 3,275,955 0 21,067,893
Operating loss . . . . . . . . . . . . . . . . . . . (7,126,374) (1,656,038) 0 (8,782,412)
OTHER INCOME (EXPENSE):
Interest income . . . . . . . . . . . . . . . . . . 485,357 - - 485,357
Interest expense . . . . . . . . . . . . . . . . . . - (22,142) - (22,142)
485,357 (22,142) 0 463,215
Net loss . . . . . . . . . . . . . . . . . . . . . . (6,641,017) (1,678,180) 0 (8,319,197)
Dividends declared, and undeclared
accumulated dividends on preferred
stock . . . . . . . . . . . . . . . . . . . . . . . 13,590 - - 13,590
Net loss applicable to common stock . . . . . . . . . $ (6,654,607) $(1,678,180) $ 0 $ (8,332,787)
Net loss per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.72)
Weighted-average number of common
shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,532,315
</TABLE>
Notes to Combined Condensed Balance Sheet and Statement of Operations
Neither ConQuest or Excalibur recorded any merger costs in the period ended
April 30, 1995. The costs of the merger, which are expected to approximate
$500,000 wil be expensed in the fiscal quarter ended July 31, 1995.
See the footnotes regarding merger costs on the Pro Forma Combined Condensed
Balance Sheet as of April 30, 1995.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report included in this form 8-K, into the Company's previously filed
Registration Statement File No.33-89144.
Arthur Andersen LLP
Washington, D.C.
September 7, 1995
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement (No. 33-89144) on Form S-8 of Excalibur Technologies Corporation of
our report dated April 15, 1994 relating to the financial statements of ConQuest
Software, Inc., which appears in the Current Report on Form 8-K/A of Excalibur
Technologies Corporation.
PRICE WATERHOUSE LLP
Washington, D.C.,
September 7, 1995
