SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
Date of Report: (Date of earliest event reported):
November 21, 1995 (August 31, 1995)
EXCALIBUR TECHNOLOGIES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 85-0278207
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9255 Towne Centre Drive, 9th Floor, San Diego, California 92121-3042
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(619) 625-7900
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EXCALIBUR TECHNOLOGIES CORPORATION
CURRENT REPORT ON FORM 8-K
FOR THE MONTH ENDED AUGUST 31, 1995
TABLE OF CONTENTS
Page
Item 2. Acquisition or Disposition of Assets:
Merger of Excalibur Technologies Corporation and
ConQuest Software Inc....................................3
Item 7. Financial Statements and Exhibits:
Consolidated Balance Sheets
August 31, 1995 and January 31, 1995 (unaudited).........4
Consolidated Statements of Operations
One and seven month periods
ended August 31, 1995 (unaudited)........................5
Consolidated Statements of Cash Flows
Seven month period ended August 31, 1995 (unaudited).....6
Notes to Consolidated Financial Statements............7-10
Signature ........................................................11
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EXCALIBUR TECHNOLOGIES CORPORATION
CURRENT REPORT ON FORM 8-K
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
The financial statements presented here are being filed in accordance with
the merger agreement between Excalibur and ConQuest pursuant to which Excalibur
agreed to file with the Securities and Exchange Commission its results of
operations for the seven month period ended August 31, 1995, which includes
thirty days of postmerger combined operations. Excalibur completed its
acquisition of ConQuest on July 20, 1995. The publication of these results
satisfies the requirements of ASR No. 135 which prohibits sales of Excalibur
shares by Excalibur affiliates prior to such publication.
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<TABLE>
EXCALIBUR TECHNOLOGIES CORPORATION
CONSOLIDATED BALANCE SHEETS
<CAPTION>
ASSETS August 31, January 31,
1995 1995
----------- -----------
Current Assets:
<S> <C> <C>
Cash and Cash Equivalents .................................. 3,109.412 2,644,742
U.S. government securities, at cost ........................ 1,488,587 2,490,396
Accounts receivable, net of allowance for
doubtful accounts of $391,000 and ....................... 2,161,947 3,650,333
$374,000, respectively
Prepaid expenses and other ................................. 611,957 484,810
----------- -----------
Total current assets .................................. 7,371,903 9,270,281
----------- -----------
U.S. government securities, at cost ........................... 7,759,715 6,114,207
Equipment and leasehold improvements, net ..................... 2,217,484 2,522,622
Other assets .................................................. 44,782 44,782
----------- -----------
$ 17,393,884 $ 17,951,892
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable ........................................... $ 883,894 $ 968,295
Accrued expenses ........................................... 1,683,501 2,936,060
Deferred revenues .......................................... 2,655,992 3,018,199
Deferred compensation ...................................... 1,135,633 1,164,155
Notes payable and capital lease obligations ................ 103,311 307,351
----------- -----------
Total current liabilities ............................. 6,462,331 8,394,060
----------- -----------
Notes payable, net of current portion (Note 4) ................ 67,138 82,138
Shareholders' Equity:
5% Cumulative convertible preferred stock,
$0.01 par value, preference in
liquidation
$10 per share, 1,000,000 shares ....................... 271,797 271,797
authorized,
27,180 shares issued and outstanding
Common stock, par value $0.01, 20,000,000
shares authorized; 11,554,041 and
11,239,380 shares issued and outstanding ................ 115,540 112,394
Deferred compensation ...................................... (13,887) (38,332)
Additional paid-in capital ................................. 47,849,356 44,522,685
Accumulated deficit since September 30, 1985
(date of reorganization) ............................. (37,363,526) (35,366,899)
Cumulative translation adjustment .......................... 5,135 (25,951)
----------- -----------
Total shareholders' equity ............................ 10,864,415 9,475,694
----------- -----------
$ 17,393,884 $ 17,951,892
=========== ===========
</TABLE>
The accompanying notes to the financial statements are an
integral part of these consolidated balance sheets.
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<TABLE>
EXCALIBUR TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
One and seven month periods
ended August 31, 1995
-------------------------------
REVENUES
<S> <C> <C>
Software..................................... $ 454,872 $ 6,758,015
Maintenance.................................. 273,080 1,868,265
----------- -----------
727,952 8,626,280
----------- -----------
EXPENSES
Sales and marketing.......................... 739,220 4,602,274
Research and product development............. 425,315 2,720,957
General and administrative................... 254,322 627,113
Cost of maintenance revenues................. 28,751 300,057
Cost of software revenue .................... 49,565 627,113
Other (Note 7) .............................. - 489,521
------------ -----------
1,497,173 10,743,680
------------ -----------
Operating loss.................................. (769,221) (2,117,400)
OTHER INCOME / (EXPENSE)
Interest income................................. 60,142 336,694
Interest expense................................ (2,872) (34,396)
----------- -----------
Net loss........................................ $ (711,951) $(1,815,102)
=========== ===========
Dividends on preferred stock.................... 1,133 7,927
=========== ===========
Net loss applicable to common stock............. (713,084) (1,823,029)
=========== ===========
Net loss per common share....................... $ (0.06) $ (0.16)
=========== ===========
Weighted-average number of common
shares outstanding.......................... 11,527,168 11,358,705
=========== ===========
</TABLE>
The accompanying notes to the financial statements are an
integral part of these consolidated statements.
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<TABLE>
EXCALIBUR TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
For the seven
month period
ended
August 31, 1995
<S> <C>
Cash Flows from Operating Activities:
Net loss ........................................ $(1,815,102)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization .............. 602,140
Loss on disposal of assets ................. 8,742
Compensation paid in common stock .......... 36,640
Amortization of deferred compensation ...... 24,445
Changes in operating assets and liabilities:
Accounts receivable, net ................... 1,436,247
Prepaid expenses and other ................. (95,558)
Accounts payable and accrued expenses ...... (1,329,855)
Deferred revenues .......................... (356,738)
Deferred compensation ...................... (28,522)
Adjustment for change in fiscal year of ConQuest (181,525)
-----------
Net cash used in operating activities ........... (1,699,086)
-----------
Cash Flows from Investing Activities:
Purchase of investments ......................... (7,644,409)
Proceeds from maturities of investments ......... 7,000,710
Purchases of equipment and leasehold improvements (308,654)
-----------
Net cash used for investing activities .......... (952,353)
-----------
Cash Flows from Financing Activities:
Proceeds from notes payable ..................... 238,000
Proceeds from issuance of common stock .......... 3,293,177
Repayment of notes payable and capital leases ... (457,040)
-----------
Net cash provided by financing activities ....... 3,074,137
-----------
The Effect of Exchange Rate Changes on Cash ........ 41,972
Net Increase in Cash and Cash Equivalents .......... 464,670
Cash and Cash Equivalents, beginning of period ..... 2,644,742
-----------
Cash and Cash Equivalents, end of period ........... $ 3,109,412
===========
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest ........................... $ 3,800
===========
</TABLE>
The accompanying notes to the financial statements are an
integral part of this consolidated statement.
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EXCALIBUR TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) THE COMPANY
The consolidated financial statements include the accounts of Excalibur
Technologies Corporation ("Excalibur"); its wholly-owned subsidiary, Excalibur
Technologies International, Ltd. ("ETIL"); and the acquired company, ConQuest
Software, Inc. ("ConQuest"). These entities are collectively referred to
hereinafter as the "Company." All significant intercompany transactions and
accounts have been eliminated.
The Company designs, develops, markets and supports computer software products
used for the document imaging and multimedia information retrieval marketplaces.
The Company also offers consulting, training, maintenance and systems
integration services in support of its customers' use of its software products.
In addition, the Company performs research and development under contract and
licenses proprietary software products for use in compound-document, digital
library, positive identification, and on-line services and information retrieval
systems. The Company distributes its products through Value Added Resellers
(VARs), System Integrators (SIs), Original Equipment Manufacturers (OEMs),
distributors and a direct sales force.
(2) SIGNIFICANT ACCOUNTING POLICIES
Financial Statement Presentation
These financial statements are unaudited and have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange Commission
regarding interim financial reporting. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements, and it is suggested that these
consolidated financial statements be read in conjunction with the financial
statements, and the notes thereto, included in the Company's Annual Report on
Form 10-K for the fiscal year ended January 31, 1995; its Quarterly Report for
the quarter ended July 31, 1995, as amended; and its Current Report on Form 8-K,
as amended on November 9, 1995. In the opinion of management, the consolidated
financial statements for the one month and seven month periods ended August 31,
1995, include all adjustments that are normal and recurring which are necessary
to a fair statement of the results for the interim periods presented herein. The
results of operations for the periods ended August 31, 1995 are not necessarily
indicative of the results for the entire fiscal year ending January 31, 1996.
In July 1995, Excalibur acquired all of the outstanding common stock of
ConQuest. The business combination was treated for accounting purposes as a
pooling of interests, and accordingly, the accompanying consolidated financial
statements reflect the combined results of the pooled businesses for the
respective periods presented.
Prior to its acquisition by Excalibur, ConQuest reported operating results on a
calendar year basis. ConQuest's separate results for the prior year have not
been restated to conform to the fiscal year of Excalibur. Therefore, the
Company's consolidated balance sheet at January 31, 1995 combines the
consolidated balance sheet of Excalibur and ETIL as of January 31, 1995 and the
balance sheet of ConQuest as of December 31, 1994. Further, ConQuest's separate
results of operations for the month ended January 31, 1995 are not reflected in
the consolidated statement of operations for the current fiscal year. The
revenues, operating loss and net loss of ConQuest for the month ended January
31, 1995 were $137,578, $176,630 and $181,525, respectively.
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Revenue Recognition
In December 1991, the American Institute of Certified Public Accountants issued
a Statement of Position on Software Revenue Recognition. This statement provides
guidance on applying generally accepted accounting principles to the
determination of revenue on software transactions. The Company believes that its
revenue recognition practices comply with the statement in all material
respects.
Revenues from royalties and license fees are recognized at contract signing if
they contain no future performance requirents. Revenues related to agreements
with customers which contain future performance requirements are recognized in
accordance with such performance requirements. Revenues from product sales
typically are recognized at the time of shipment. Maintenance revenues related
to ongoing services are deferred and recognized ratably over the term of the
respective agreements. Maintenance revenues that are bundled with initial
licensing fees are deferred and recognized over the term of the related
maintenance periods, typically 90 days.
Research and Development Costs
Product development costs related to the Company's software products are
expensed when incurred until technological feasibility has been established for
the product. Thereafter, up until the general release of the products to
customers, all product development costs, if any, are capitalized, reported at
the lower of unamortized cost or estimated net realizable value and amortized on
a straight-line basis over the remaining estimated economic life of the product.
No product development costs were capitalized, and there were no capitalized
costs not yet amortized during the periods ended August 31, 1995.
Net Loss Per Common Share
Net loss per common share is calculated based on the weighted-average number of
common shares outstanding during each period, after deducting the dividends on
preferred stock. Common stock equivalents (stock options, warrants and
cumulative convertible preferred stock) were excluded from the net loss per
share computations because of their anti-dilutive effect.
Statements of Cash Flows
U.S. government securities, which consist of U.S. Treasury Bills with varying
maturities of up to one year, are considered investments and are excluded from
cash equivalents regardless of their maturities. Cash equivalents include funds
deposited in money market accounts.
(3) DEFERRED COMPENSATION
ConQuest entered into arrangements with many of its officers, employees and
independent consultants to defer a portion of their compensation. Deferred
compensation payable to employees is restricted for use in the exercise of stock
options. However, if the related options have expired because the term has
lapsed or because employment has been terminated, the optionholder may request
cash redemption one year after expiration, with 90 days notice. Generally,
interest accrues on the deferred compensation of independent consultants only.
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(4) NOTES PAYABLE
In March 1994, March 1995 and June 1995, ConQuest entered into loan agreements
to meet its short term cash flow requirements. The loans accrued interest at 24
percent per annum and were due upon demand.
These loans were paid in full in August 1995.
In June 1994, ConQuest obtained a $100,000 loan from a stockholder. The note was
due on September 1, 1994, and accrued interest at 24 percent per annum and was
secured by the Company's receivables. This note was paid in full in August 1995.
ConQuest issued notes as part of severance agreements with three employees. The
remaining balances, totaling $103,000 at August 31, 1995, bear interest at rates
ranging between 0 and 6 percent and are payable in monthly installments.
(5) ISSUANCE OF STOCK AND RELATED EVENTS
During the first quarter of the current fiscal year, Excalibur issued 85,100
shares of common stock upon the exercise of options ranging from $7.36 to $11.64
per share, resulting in total proceeds to the Company of $705,000 and issued
options at fair market value to purchase 60,000 shares of common stock to a
director and an officer, at an exercise price of $7.44 per share. Of these
options, 10,000 vested immediately and 50,000 vest over a four year period.
During the second quarter of the current fiscal year, Excalibur issued 180,961
shares of common stock upon the exercise of options ranging from $7.36 to $15.75
per share, resulting in total proceeds to the Company of $2,052,000. Excalibur
issued options at fair market value to purchase 100,000 shares of common stock
to an officer of the Company at an exercise price of $12.41 per share. These
options vest over a four year period. In the month of August 1995, the Company
issued 48,600 shares of common stock upon the exercise of options ranging from
$7.36 to $12.68 per share, resulting in total proceeds to the Company of
$621,000. The Company also issued options at fair market value to purchase
61,000 shares of common stock at an exercise price of $16.16 per share, vesting
over a four year period.
During the second quarter of the current fiscal year, ConQuest issued 9,160
shares of common stock at $4.00 for payment of consulting services received.
These shares were later converted to Excalibur shares.
As consideration for the acquisition of all of the outstanding shares of stock
and options to acquire shares of ConQuest, the Company issued 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. In July 1995, the Company issued
options at fair market value to purchase 324,150 shares of common stock to
employees of ConQuest under the Company's 1995 Incentive Stock Option Plan at an
exercise price of $15.23 per share. These options are restricted shares, and
vest over a four year period.
(6) PRODUCT DISTRIBUTION AND OTHER CONTRACTS
In August 1995, the Company entered into a worldwide integration agreement with
KPMG Peat Marwick LLP (KPMG) which provides for KPMG to integrate and distribute
the Excalibur TRS(TM) Text Retrieval Server. KPMG will integrate Excalibur TRS
for text retrieval along with FileNet Corporation's document imaging and
workflow products for large-scale production solutions for the automation,
storage, tracking and retrieval of both structured an unstructured information.
Excalibur will recognize license fees on systems sold. To date no revenue has
been recognized under this contract.
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In February 1995, the Company signed a one year Country License Reseller
Agreement with Zeta Holdings Limited, which granted Zeta Holdings exclusive
rights to license and distribute Excalibur EFS throughout the U.K. The contract
provided that $800,000 was to be paid to Excalibur, which amount would be
recognized ratably over the contract period of 12 months. However, the contract
was mutually terminated on July 31, 1995, with Zeta remaining as an authorized
reseller with non-exclusive distribution rights. A total of $190,000 in revenue
was recognized under this contract.
In January 1995, the Company entered into a development and distribution
agreement with International Business Machines Corporation (IBM) to integrate
Excalibur/XRS(TM) Image Retrieval Software with certain versions of IBM's
DATABASE 2 (DB2)(TM) database product. The Company will receive percentage
royalties on revenues recorded by IBM from licenses of DB2 that contain
Excalibur/XRS Image Retrieval Software, as described in the agreement. Through
August 31, 1995, $125,000 in revenue has been recognized under this contract.
In May of 1994, the Company entered into a Software Distribution Agreement with
Professional Computer Systems B.V. (PCS). The contract was subsequently amended
in January of 1995 to extend the contract expiration date to January 31, 1996.
The agreement grants PCS exclusive rights to license and distribute Excalibur
EFS(R) throughout Belgium, The Netherlands, and Luxembourg. The contract
provides for $1,000,000 to be paid to the Company, which is being recognized
ratably over the contract period of twenty-one months.
On May 19, 1994, the Company signed a developer agreement with IBM for a
nonexclusive, worldwide license to IBM of the object code for Excalibur TRL Text
Retrieval Library and Excalibur TRS Text Retrieval Server for a period of seven
years after the date of delivery. IBM will embed Excalibur TRL and Excalibur TRS
as add-on features of their text retrieval product, SearchManager. Excalibur
will receive percentage royalties against revenue received by IBM from licenses
of SearchManager containing Excalibur TRL and/or TRS technology. No revenue has
been recognized under this agreement through August 31, 1995.
The Company signed an agreement with PRC, Inc. (PRC), a systems integrator, in
February 1993, under which the Company provides its software to PRC as part of a
federal procurement. This contract represents a minimum of $2 million in
revenues from PRC, payable periodically through the end of fiscal 1996. Revenues
of $10,000 and $77,000 were recognized in the one and seven month periods of the
current year. Aggregate revenue recognized to date is $1,672,000.
The Company has earned research, development and royalty fees under a series of
contracts with Nikkei Information Systems Co., Ltd. (NIS), a Japanese company,
since 1985. Under the current agreement, which is effective June 1, 1993 through
January 31, 1996, with automatic extensions of successive one-year periods, NIS
pays a minimum monthly royalty fee of $34,583 through January 31, 1996, against
royalties on the revenue generated. To date, the monthly royalties earned by the
Company have rarely exceeded the minimum monthly royalty, and it is anticipated
that the minimums will not be exceeded in the foreseeable future. The agreement
also allows for distribution of third party products containing the Company's
software technologies into Japan under a royalty sharing accord with NIS.
(7) OTHER EXPENSES
In July 1995, the Company recorded a charge of approximately $490,000 for the
estimated costs to complete the merger between Excalibur and ConQuest. The
estimated costs include: legal and accounting fees of $363,000; facilities
consolidation of $100,000; and other costs of $27,000.
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SIGNATURE
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
November 21, 1995 By: /s/ Patrick C. Condo
---------------------
Patrick C. Condo
President
