U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1996
Commission File Number 0-14692
______________________________________________
Global MAINTECH Corporation
f/k/a Mirror Technologies, Incorporated
Minnesota 41-1523657
State of Incorporation I.R.S. Employer
Identification No.
6468 City West Parkway, Eden Prairie, MN 55344
Telephone Number: (612) 944-0400
______________________________________________
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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______
______________________________________________
On May 9, 1996 there were 48,337,139 shares of the Registrant's no par value
common stock outstanding.
Transitional small business issuer format: No
Page 1 of 11
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<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GLOBAL MAINTECH CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
<CAPTION>
March 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 26,200 $ 39,364
Accounts receivable, less allowance for
doubtful accounts of $15,950 and $15,000 512,410 321,052
Other receivables 36,345 40,218
Inventory 187,398 186,812
Prepaid expenses and other 24,407 21,004
------------ ------------
Total current assets 786,760 608,450
Assets of discontinued operations
Inventory 0 0
PROPERTY AND EQUIPMENT, NET 8,804 16,300
------------ ------------
$ 795,564 $ 624,750
============ ============
The accompanying notes are an integral part of these consolidated statements
</TABLE>
page 2
<PAGE>
<TABLE>
GLOBAL MAINTECH CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<CAPTION>
March 31, December 31,
1996 1995
------------ ------------
<C> <S> <S>
CURRENT LIABILITIES
Accounts payable $ 739,139 $ 808,430
Current portion of notes payable 476,288 479,038
Convertible subordinated debentures 261,750 261,750
Accrued liabilities
Compensation and payroll taxes 37,726 33,810
Interest 38,183 38,070
Other 35,592 6,430
Deferred revenue 0 0
------------ ------------
Total current liabilities 1,588,678 1,627,528
Notes payable, less current portion 0 58,000
------------ ------------
Total liabilities 1,588,678 1,685,528
STOCKHOLDERS' EQUITY (DEFICIT)
Voting, convertible preferred stock - Series A,
convertible into one common stock share for each pre-
ferred share, no par value; 4,439,900 shares authorized;
4,326,036 shares issued and outstanding; total liquid-
ation preference of outstanding shares-$1,622,000
405,770 405,770
Common stock, no par value; 245,560,100 shares
authorized; 52,438,473 shares issued and outstanding
Additional paid-in-capital 1,071,368 906,658
Accumulated deficit (2,270,252) (2,373,206)
------------ ------------
Total stockholders' deficit (793,114) (1,060,778)
------------ ------------
$ 795,564 $ 624,750
============ ============
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
page 3
<PAGE>
<TABLE>
GLOBAL MAINTECH CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months
March 31
1996 1995
<C> <S> <S>
Net sales $ 492,347 $ 225,750
Cost of sales 199,432 21,915
------------ ------------
Gross profit 292,915 203,835
Operating expenses
Selling, general and administrative 111,673 198,345
Research and development 53,637
------------ ------------
Income from operations 127,605 5,490
Other income (expense):
Interest expense 24,189 53,432
Interest income 0 (5,375)
Other 464 (5,514)
------------ ------------
Total other expense, net 24,653 42,543
------------ ------------
Income from continuing operations
before income taxes 102,952 (37,053)
Provision for income taxes 0 2,500
------------ ------------
Income from continuing operations 102,952 (39,553)
------------ ------------
Discontinued operations
Income from operations 0 123,598
Loss on disposal 0 0
------------ ------------
Loss from discontinued operations 0 123,598
------------ ------------
Net loss $ 102,952 $ 84,045
============ ============
Net earnings (loss) per common and common
equivalent share:
Continuing operations $ 0.002 $ (0.001)
Discontinued operations 0.000 0.002
------------ ------------
Net loss $ 0.002 $ 0.002
============ ============
Weighted average number of common and
common equivalent shares outstanding 52,117,241 49,791,176
The accompanying notes are an integral part of these consolidated statements
</TABLE>
page 4
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<TABLE>
GLOBAL MAINTECH CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
1996 1995
<C> <S> <S>
Cash flows from operating activities:
Net loss $ 102,952 $ 84,045
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 9,586 17,175
(Gain)/Loss on sale of equipment (1,600) (8,173)
Changes in operating assets and liabilities:
Increase in accounts and other receivable (187,485) 72,487
Increase (decrease) in inventory (586) 141,243
Decrease in prepaid expenses (5,493) (9,581)
Increase (decrease) in accounts payable (74,290) (513,090)
Decrease in accrued expenses 38,192 2,615
Increase (decrease) in deferred revenue 0 (148,000)
Increase in other 0 33,710
------------ ------------
Cash used by operating and discontinued
activities (118,724) (327,569)
Cash flows from investing activities:
Proceeds (payment) from sale (purchase) of
property and equipment 1,600 743,389
Net cash received in merger 0 637,071
------------ ------------
Cash provided (used) by investing activities 1,600 1,380,460
Cash flows from financing activities:
Proceeds from issuance of common stock 164,710
Decrease in short-term notes payable (2,750) (56,991)
Principal payments on mortgage note payable 0 (620,000)
Increase (decrease) of notes payable (58,000) (157,531)
------------ ------------
Cash provided (used) by financing activities 103,960 (834,522)
Net increase (decrease) in cash (13,164) 218,369
Cash/cash equivalents at beginning of period 39,365 24,309
------------ ------------
Cash and cash equivalents at end of period $ 26,200 $ 242,678
============ ============
Supplemental disclosures of cash flow information:
Cash paid during the year for: Interest $ 13,805 $ 53,432
Taxes $ 0 $ 0
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
page 5
<PAGE>
FOOTNOTES TO INTERIM CONSOLIDATED FINANCIAL STAEMENTS
(Unaudited)
General
The Company was incorporated under the laws of the State of Minnesota
in 1985. In May 1995, the Company's name was changed to Global MAINTECH
Corporation from Mirror Technologies, Incorporated. Global MAINTECH, Inc.,
formerly MAINTECH Resources, Inc., a Minnesota corporation ("MAINTECH"),
is the principal subsidiary of the Company.
Effective January 1, 1995, the Company merged with MAINTECH
(the "Merger"), pursuant to the terms of an Agreement and Plan of Merger,
dated December 6, 1994, as amended (the "Agreement"), among the Company,
Mirror Consolidation Company, a Minnesota corporation and wholly owned
subsidiary of Mirror ("Mirror Subsidiary"), and MAINTECH. Under the
terms of the Agreement, each share of MAINTECH's common stock was
converted into 358.75 shares of the Company's common stock. As a result,
the Company issued 28,700,001 shares of common stock in exchange for all
of the outstanding capital stock of MAINTECH. MAINTECH had four operating
units all related to the IBM mainframe computer business which included
engineering, brokerage, parts and services to users of IBM mainframe
computers ("Brokerage") and a start up unit engaged in the development of
software and the sale of a hardware product when sold in combination is
designed to automate the operation of large corporate data centers ("ECS").
Effective December 31, 1995, the Company sold its Brokerage business,
including over $400,000 in related inventory, to one of the Company's
former executives. The Company recorded losses from discontinued operations
of approximately $600,000 in connection with the Brokerage business
including a loss on the sale. The effect of this loss was partially offset
by debt forgiveness of $400,000 by two of the Company's executive officers
which was recorded as additional paid-in-capital.
Global MAINTECH, Inc., a wholly owned subsidiary of the Company, is the
operating entity resulting from the Merger. For the fiscal years 1992,
1993 and 1994 the majority of the Company's activity had been in buying
and selling used IBM mainframes, parts and features. During this time the
Company changed its business strategy and began to maintain and monitor
computer equipment in large data centers. In late 1994, the Company became
the exclusive distributor, outside of Japan, of the monitoring system of
Circle Corporation of Japan. In 1995, The Company adapted this monitoring
system which is oriented to single-unit users and to simple functions, to
meet the more complex requirements of the U.S. market. While the Company
continues to buy some hardware and software from Circle Corporation, the
Company has added significant architecture, compiling and source code.
The updated system provides enhanced operational control over computer
hardware and software. In 1995, the Company made its first three
installations of this system, now called the Enterprise Control System or
ECS, in the data centers of a large industrial and financial company.
The ECS is a tool designed to automate many of the processes associated
with the physical and operational attributes of mainframe-based data
centers. It is an external system that monitors and controls the subject
mainframe and other data center computers from a workstation quality RISC
computer, which is housed separately from the computers it controls. ECS
users are able to reduce staffing levels, consolidate all data center
operations and technical support functions to a single location regardless
of the physical location of the data center(s) and achieve improved levels
of operational control and system availability.
The ECS competes with internal monitoring systems (which monitor certain
pieces of hardware internally) sold by other companies. Sales of internal
monitoring systems within the U.S. were estimated at $700 million for 1994.
It is believed the market recently has been expanding at a rapid rate,
growing over 30% in recent years. The Company believes the ECS is well
suited for use in enterprise computing applications. Enterprise computing
is the term associated with the hardware and software that enables computers
that contain different processors to be linked together. The Company has
adapted the ECS and coupled it with proprietary software to form an
enterprise computing management system. The market size for computer
networking systems, which is one segment of the enterprise computing
management system market, is $15 billion per year within the U.S. The
ECS can also be used to monitor and control desktop and mid-range servers.
page 6
<PAGE>
Basis of Presentation
The interim consolidated financial statements are unaudited, but in the
opinion of management, reflect all adjustments necessary for a fair
presentation of results for such periods. All such adjustments are of a
normal recurring nature.
The results of operations for any interim period are not necessarily
indicative of results for the full year. These financial statements should
be read in conjunction with the audited consolidated financial statements
and notes thereto contained in the Company's Annual Report on Form 10-KSB/A-1
for the year ended December 31, 1995.
Reclassifications
Certain reclassifications have been made to the fiscal 1995 data to
conform with the fiscal 1995 presentation.
Common Equivalent Shares Outstanding
The preferred stock is, because of its terms and the circumstances under
which it was issued, in substance a common stock equivalent. The preferred
stockholders can convert, at their option, to common stock on a one-for-one
basis and accordingly can expect to participate in the appreciation of the
value of the common stock. Accordingly, the weighted average common and
common equivalent shares outstanding include the 47,791,205 common stock
outstanding and the preferred stock of 4,326,036 outstanding since its
issuance on September 13, 1994.
page 7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Net cash used in operations for the three month period ended March 31,
1996 was approximately $119,000. Cash was generated from net income for
the first quarter ended March 31, 1996 of approximately $103,000. In
addition, cash was provided from a decrease in accrued expenses. Cash
was used to fund an increase in accounts receivable of approximately
$187,000 and to reduce accounts payable of approximately $74,000.
Sales for the first quarter were approximately $500,000 compared to
sales of approximately $225,000 in the same period ended March 31, 1995.
The increase in sales was due to new sales of the Company's Enterprise
Control System ("ECS") product. In the prior year's period, the Company
recorded sales of $166,000 of its data base maintenance software programs
with substantially no additional cost of sales. Accordingly, the sales
comparison between periods is not strictly comparable. Nevertheless, the
gross profit margin for the three month period ended March 31, 1996 was
59% and was 90% in the same period ended March 31, 1995.
Selling and general and administrative costs were approximately $112,000
for the first quarter ended March 31, 1996 and approximately $198,000 in
the same period ended March 31, 1995. The $86,000 decrease is primarily
related to declines in salary and professional expenses which were partially
offset by an increase in travel and entertainment expense. Salary expense
declined due to a decrease in personnel and professional expenses decreased
primarily due to a decline in legal expenses. In the prior period ended March
31, 1995, the Company incurred legal expenses in connection with the merger
with MAINTECH Resources, Inc. Travel and entertainment expenses increased
in the current period ended March 31, 1996 due to increased activity related
to new sales. Research and development expenses incurred in the current
period relate entirely to the continuing development of the ECS product.
There was no comparable activity in the prior three month period ended
March 31, 1995.
Non-operating expenses in the first quarter ended March 31, 1996 and
March 31, 1995 primarily consisted of interest expense. Interest expense
includes accrued interest on the Company's convertible subordinated
debentures, notes payable to vendors, a bank, and individuals. The decline
in interest expense of approximately $29,000 is substantially due to a
decline in total debt. Between March 31, 1996 and March 31, 1995 debt
declined by approximately $640,000, of which $400,000 is due to the
forgiveness, in 1995, of subordinated debt held by certain officers of
the Company.
Cash was provided by financing activities primarily due to the issuance
of common stock of approximately $165,000 during January 1996. A portion
of these common stock proceeds were used to reduce approximately $60,000
of debt.
Liquidity and Capital Resources
As of March 31, 1996, the Company had negative working capital of
approximately $800,000 compared to negative working capital as of
December 31, 1995 of $1,019,000. The negative working capital is
primarily due to the approximately $738,000 of debt obligations due
in the next twelve months. This includes convertible subordinated
debentures of $261,750 ("debentures") due on July 1, 1996. Another
$392,000 of debt is due in monthly or quarterly installments through
December 31, and a final $84,000 of debt is due after December 31, 1996.
If the assumption that earnings for the remainder of the year continue
at a level equal to the first fiscal quarter, the Company believes
the cash flow from its current operating activities will continue to be
sufficient to satisfy its current liabilities as they become due, with
the possible exception of the debentures.
During the first quarter ended March 31, 1995, the Company used its cash
to reduce current liabilities and in other cases offered new payment
terms on certain other liabilities. In April the Company successfully
completed negotiations on a note payable in the amount of $190,246
which had been in default. The terms provide for reduced monthly
installments with final payments in early 1997 and a $60,000 forgiveness
of debt contingent on full payment. As a result, this debt forgiveness
will not be recorded until the contingency is removed. Secondly, in April,
the Company settled a liability related to the former brokerage business
for an amount less than the recorded liability, which reduction will be
recorded in the second fiscal quarter. It is expected the Company will
continue to use cash provided from its current business to settle old
liabilites.
page 8
<PAGE>
The Company's past losses from discontinued operations and its remaining
debt obligations, indicate additional capital will be needed to fund the
Company's future cash needs, particularly the maturing debentures. The
Company believes increased sales of its ECS product will provide operating
capital to satisfy some of these requirements. However, it is likely
additional capital will be needed to satisfy all the obligations as they
become due. There can be no assurance that either sufficient sales
increases will occur or that additional sources of new capital will be
found. If the Company does not succeed in one or both of these areas,
the affect on the business could be material and adverse. During the
last nine months, the Company borrowed from time to time against its
accounts receivable from its principal bank and may continue to do so
in the future. As of March 31, 1996, the Company had no debt outstanding
from its principal bank but, on April 25, 1996, a 45 day loan advance
of $120,000 was made by such bank to the Company.
During 1995, the Company began to focus its activities on the computer
monitoring and control systems operations and to reduce its Brokerage
operations. In 1995, the Company discontinued and, effective December 31,
1995, sold its Brokerage operations.
The liquidity and capital resources of the Company have been diminished
as a result of the discontinued operations and a substantial portion of
the accounts payable and current interest bearing obligations that remain
with the Company as of March 31, 1996 relate to the Brokerage activities
not assumed by the buyer of the discontinued operations. The Company's
ability to renegotiate or convert portions of its notes payable and to
attract additional capital to facilitate these negotiations is uncertain,
as is the timing of the new sales of ECS units. While the Company believes
in the viability of its operating plan and currently anticipates that its
operating plan will be achieved, there can be no assurances to that effect.
To the extent this plan is delayed, the Company will seek the continued
forbearance of its lenders.
page 9
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On April 17, 1996 the Company settled a suit which was commenced on
February 21, 1996 by MFP Technology Services Inc. ("MFP"). The settlement
amount was less than the amount the Company had provided for in its
financial statements. The settlement is a full and final compromise,
settlement and satisfaction of the suit and the issue will never be pursued
in any way. The amount by which the Company's liabilities exceeded the
settlement amount will be taken into income in the Company's second fiscal
quarter.
ITEM 2.CHANGES IN SECURITIES
A. During the first quarter ended March 31, 1996 the Company
completed issuing additional stock under the November 1, 1995 Private
Placement Memorandum, collected cash from the stock subscriptions
receivable subscribed thereunder prior to December 31, 1995 and completed
the 6.7 million common stock reductions from the former owners of MAINTECH
Resources, Inc. all as described in the Company's December 31, 1995
Form 10-KSB/A-1. As a result, 1,782,000 shares of common stock were issued
after December 31, 1996 pursuant to the Private Placement Memorandum;
cash was received for the collection of common stock subscriptions
receivable for 816,667 shares; and, 6,700,000 shares of common stock
were retired without further consideration. Subsequently, the Company
issued another 600,000 shares of common stock in March 1996 at $.06
per share.
page 10
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GLOBAL MAINTECH CORPORATION
May 9, 1996 By:/s/ James Geiser
------------------------
James Geiser
Chief Financial and
Chief Accounting Officer
In accordance with the requirements of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
May 9, 1996 By:/s/ David McCaffrey
------------------------
David McCaffrey
Chief Executive Officer
End of 10-QSB for the quarterly period ended March 31, 1996.
page 11
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
March 31, 1996 SEC Form 10-QSB and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<RESTATED>
<CIK> 0000783738
<NAME> GLOBAL MAINTECH CORPORATION
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-01-1996
<CASH> 26
<SECURITIES> 0
<RECEIVABLES> 549
<ALLOWANCES> 0
<INVENTORY> 187
<CURRENT-ASSETS> 787
<PP&E> 9
<DEPRECIATION> 0
<TOTAL-ASSETS> 796
<CURRENT-LIABILITIES> 1589
<BONDS> 0
<COMMON> 1071
0
406
<OTHER-SE> (2,270)
<TOTAL-LIABILITY-AND-EQUITY> 796
<SALES> 492
<TOTAL-REVENUES> 492
<CGS> 199
<TOTAL-COSTS> 128
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24
<INCOME-PRETAX> 103
<INCOME-TAX> 0
<INCOME-CONTINUING> 103
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 103
<EPS-PRIMARY> 0.002
<EPS-DILUTED> 0.002
</TABLE>
