<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 24, 1997
REGISTRATION NO.333-
================================================================================
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
AMENDMENT NO.1
TO
FORM SB-2
REGISTRATION STATEMENT
Under the Securities Act of 1933
__________________
GLOBAL MAINTECH CORPORATION
(Name of registrant as specified in its charter)
MINNESOTA 41-1523657
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6468 CITY WEST PARKWAY
EDEN PRAIRIE, MINNESOTA 55344
(612) 944-0400
(Address and telephone number of registrant's
principal executive offices)
__________________
Copies to:
DAVID H. MCCAFFREY KENNETH L. CUTLER, ESQ.
CHIEF EXECUTIVE OFFICER SCOTT L. BARRINGTON, ESQ.
GLOBAL MAINTECH CORPORATION DORSEY & WHITNEY LLP
6468 CITY WEST PARKWAY PILLSBURY CENTER SOUTH
EDEN PRAIRIE, MINNESOTA 55344 220 SOUTH SIXTH STREET
(612) 944-0400 MINNEAPOLIS, MINNESOTA 55402
(612) 340-2600
(Name, address and telephone number of agent for service)
__________________
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
Approximate date of proposed sale to the public:
From time to time after the effective date of this registration statement.
__________________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=================================================================================================================
Proposed Proposed
Title of Each Class of Amount to Maximum Offering Maximum Aggregate Amount of
Securities to be Registered be Registered Price per Unit (1) Offering Price(1) Registration Fee(2)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
no par value 3,489,961 shares $ 2.25 $ 7,852,413 $ 2,380(3)
=================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee based
upon the average of the high and low sales prices for such Common Stock on
August 11, 1997 as reported on the over-the-counter bulletin board.
(2) Before deducting expenses estimated at $ 43,380.
(3) Previously paid.
__________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION"), ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE>
PROSPECTUS
GLOBAL MAINTECH CORPORATION
___________
3,489,961 SHARES
OF
COMMON STOCK
__________
This Prospectus relates to an aggregate of 3,489,961 shares (the "Shares")
of Common Stock, no par value (the "Common Stock"), of Global MAINTECH
Corporation, a Minnesota corporation (the "Company"), that may be sold from time
to time by the shareholders named herein (the "Selling Shareholders"). See
"Selling Shareholders." The Company will not receive any proceeds from the sale
of the Shares. The Company has agreed to pay the expenses of registration of the
Shares, including legal and accounting fees.
Any or all of the Shares may be offered from time to time in transactions
on the over-the-counter bulletin board (the "OTC Market") in brokerage
transactions at prevailing market prices or in transactions at negotiated
prices. See "Plan of Distribution."
The Company has registered the Shares for sale to the public in Minnesota,
but does not intend to qualify the Shares for sale under the Blue Sky or
securities laws of any other state. Any broker or dealer should assure itself of
the existence of an exemption from the securities registration or filing
requirements or effectuate such registration or filing as required under
applicable Blue Sky or state securities laws in connection with the offer and
sale of any of the Shares.
The Common Stock is traded on the OTC Market. On September 23, 1997, the
last sale price of the Common Stock as reported on the OTC Market was $2.13 per
share.
__________
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY IS SPECULATIVE AND INVOLVES A
HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 3 HEREIN.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
__________
<TABLE>
<CAPTION>
================================================================================
Price
to Underwriting Proceeds to
Public(1) Discounts Selling Shareholders(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share $2.19 $0.00 $7,643,015
- --------------------------------------------------------------------------------
Total $2.19 $0.00 $7,643,015
================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the Proceeds to Selling
Shareholders based upon the average of the high and low sales prices for
such Common Stock on September 23, 1997 as reported on the over-the-counter
bulletin board.
(2) The Company will not receive any proceeds from the sale of the Shares
offered hereby; however, the Company has agreed to pay the expenses of
registration of the Shares, which are estimated to be $43,380.
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus in connection with
the offer contained herein, and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Company. This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, any securities offered hereby in any
jurisdiction in which it is not lawful or to any person to whom it is not lawful
to make any such offer or solicitation. Neither the delivery of this Prospectus
nor any sale made hereunder shall, under any circumstances, create any
implication that information herein is correct as of any time subsequent to the
date hereof.
The date of this Prospectus is September 24, 1997.
<PAGE>
- --------------------------------------------------------------------------------
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements of Global MAINTECH Corporation, including
the notes thereto, appearing elsewhere in this Prospectus.
THE COMPANY
The Company, through its wholly owned subsidiary Global MAINTECH, Inc.,
designs, develops and markets a computer system, consisting of hardware and
software, which monitors and controls diverse computers in a data center from a
single, master console. The Virtual Command Center ("VCC" or "VCC Unit") can
simultaneously manage mainframes, mid-range computers (e.g., UNIX, Microsoft and
Windows NT platforms) and networks. The VCC is designed to perform three
primary functions: (a) consolidate consoles (computer terminals with access to
the internal operation of a computer) into one monitor, a "virtual console" or
single point of control; (b) monitor and control the computers connected to the
virtual console; and (c) automate most, if not all, of the routine processes
performed by computer operators in data centers. The VCC can be operated from a
remote location and accepts multiple computer platforms and operating systems.
It is an external system that monitors and controls the subject mainframe and
other data center computers from a workstation-quality reduced instruction set
computer ("RISC") which is housed separately from the computers it controls.
VCC 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.
In 1995, the Company installed its first three VCC Units in the data
centers of a large industrial and financial company. In 1996, the Company sold
seven additional VCC Units and added two new customers. As of June 30, 1997,
the Company had sold four additional VCC Units and added two new customers to
its client base.
SYSTEMS MANAGEMENT SOFTWARE
The VCC competes with internal monitoring software, which monitors certain
pieces of hardware in the computer in which it is installed, sold by other
companies. Annual sales of systems-management software were estimated to be
$3 billion as of November 1996. It is believed this market will grow to almost
$9 billion by 2000, which would represent a compound annual growth rate of
approximately 30%.
The Company believes the VCC also is well suited for use in enterprise
computing applications. Enterprise computing is the term associated with the
hardware and software which enables computers that contain different processors
to be linked together. The Company has adapted the VCC and coupled it with its
own proprietary software to form an enterprise computing management system. The
VCC can be used to monitor and control desktops, mid-range servers and
mainframes. Sales of all such UNIX-based systems in 1995 were approximately
$19 billion.
The Company is now engaged solely in the business of manufacturing and
selling VCC Units. This line of business generated 90% of the Company's revenue
in 1995 and all of its revenue in 1996. The Company also expects such business
will generate all of its revenue in 1997.
The Company was incorporated under the laws of the State of Minnesota in
1985 under the name Computer Aided Time Share, Inc. In 1995, the Company
changed its name to Global MAINTECH Corporation. The Company's address is 6468
City West Parkway, Eden Prairie, Minnesota 55344, and its telephone number is
(612)944-0400.
As of June 30, 1997, the Company had no paid employees and its wholly owned
subsidiary, Global MAINTECH, Inc., a Minnesota corporation ("MAINTECH"), had 20
employees.
THE OFFERING
Securities Offered...... 3,489,961 shares of the Company's Common Stock, no par
value, may be offered from time to time for resale by
the persons named as selling shareholders herein.
-2-
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<PAGE>
SAFE HARBOR STATEMENT UNDER THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This Registration Statement on Form SB-2 contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act"), and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). These forward-looking statements
involve risks and uncertainties that may cause the Company's actual results to
differ materially from the results discussed in the forward-looking statements.
Factors that might cause such differences include, but are not limited to, the
uncertainty in the Company's ability to continue to operate profitably in the
future; failure of the Company to meet its future additional capital
requirements; loss of key personnel; failure of the Company to respond to
evolving industry standards and technological changes; inability of the Company
to compete in the industry in which it operates; lack of market acceptance of
the Company's products; failure of the Company to secure adequate protection for
the Company's intellectual property rights; and the Company's exposure to
product liability claims. The forward-looking statements are qualified in their
entirety by the cautions and risk factors set forth in Exhibit 99 to the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1996,
which exhibit is incorporated herein by reference.
RISK FACTORS
DOUBT AS TO THE COMPANY'S ABILITY AS A GOING CONCERN. The Company had
suffered losses prior to 1996. On January 4, 1995, MAINTECH Resources, Inc. was
merged with a wholly owned subsidiary of the Company. See "Business - Merger
Background." MAINTECH Resources, Inc. incurred a substantial loss in 1994, and,
on a post-merger consolidated basis, the Company had negative working capital
and its liabilities exceeded its assets. The prior existence of such conditions
raised doubt about the Company's ability to continue as a going concern.
Management believes that the Company will continue as a going concern and the
Company is currently operating on a profitable basis. The working capital
deficit has declined from approximately $2 million as of December 31, 1994, to
approximately $1 million as of December 31, 1995, and to approximately $400,000
as of December 31, 1996. The Company had positive working capital of
approximately $4,095,000 as of June 30, 1997. As a result of this change to a
positive working capital position, the Company believes it has sufficient
working capital to pay its current liabilities. This depends partially on the
Company's ability to collect its accounts receivable and to continue to make
sales sufficient to realize the full value of its current inventory. Based on
the operating results for the fiscal quarter ending March 31, 1997, management
believes the Company's financial health will continue to improve as additional
sales are realized. Further, its operating plan projects an increase in the
liquidity and capital resources of the Company during 1997. However, in the
event the Company requires additional capital, there can be no assurance such
additional capital could be raised on terms favorable to the Company, or at all.
RELIANCE UPON KEY PERSONNEL. The Company will be relying heavily upon the
abilities of key personnel, in particular, two technicians, Jeff Jensen and Norm
Freedman, and President Bob Donaldson, to further develop the VCC. If any of
these individuals should cease to be employed by the Company or for any reason
be unable to continue in their respective capacities as employees of the
Company, the Company would be required to hire a comparable employee. There can
be no assurance that it would be able to do so quickly and at an affordable
compensation rate. While these three employees have incentive options and are
bound by a confidentiality requirement, the Company cannot guarantee their
continued employment and only has "key man" insurance for Bob Donaldson.
COMPETITIVE CONDITIONS. The Company's industry is characterized by rapidly
evolving technology and intense competition. The Company is aware of several
other competitors that have substantially greater resources and experience in
research and development and marketing than the Company and may therefore
represent significant competition for the Company. However, no competitor of
the Company produces as complete an enterprise computing system as does the
Company, but rather the Company's competitors produce components that could be
combined to form such a system. Management believes that the Company's ability
to produce an integrated whole gives the Company a competitive advantage in this
respect. Nevertheless, there can be no assurance that the Company's competitors
will not succeed in developing or marketing technologies and products that are
more effective than those developed or marketed by the Company or that would
render the Company's technology and products obsolete or noncompetitive.
NEW PRODUCT WITH UNCERTAIN DEMAND. The concept of an external monitor and
control system for computer hardware is relatively new, and the continued demand
for the product is not yet fully known. It is difficult to project the overall
size of the future market for such a product. The Company estimates
-3-
<PAGE>
the current market size for internal systems to be several billion dollars per
year. The Company believes the market for external control systems could be
larger than this based upon the fact that external control systems also soon
could be used to solve networking problems associated with enterprise computing.
Based on recent feedback from the Company's current and potential customers,
management believes the demand for the VCC is significant. However, to date, the
Company has sold to only five customers and there can be no assurance that
additional customers will purchase the Company's products.
DEPENDENCE ON LIMITED PRODUCT OFFERINGS AND CUSTOMER BASE. The Company
currently has a limited number of product offerings and the Company's existing
customers are not required to purchase additional hardware products or to renew
software license and maintenance agreements when such agreements expire.
Accordingly, a significant portion of the Company's revenues are generated from
non-recurring revenue sources, and the success of the Company is dependent, in
part, on its ability to develop sustained demand for its current products and to
develop and sell additional products. There can be no assurance that the
Company will be successful in developing and maintaining such demand or in
developing and selling additional products.
FLUCTUATIONS IN OPERATING RESULTS. The Company's future operating results
may vary substantially from quarter to quarter. At its current stage of
operations, the Company's quarterly revenues and results of operations may be
materially affected by the timing of the development and market acceptance of
the Company's products. Generally, operating expenses will be higher during
periods in which product development costs are incurred and marketing efforts
are commenced. Due to these and other factors, including the general economy,
stock market conditions and product developments and public announcements by the
Company or its competitors, the market price of the Company's securities may be
highly volatile.
PRODUCT UNDER DEVELOPMENT. The Company currently is developing a software
product which monitors networking and communication devices used by mainframes.
Although preliminary tests indicate that this product will perform as intended
and can be integrated with the VCC, there can be no assurance that it will do so
or, even if it does, that the market will demand such a product.
FUTURE CAPITAL REQUIREMENTS; NO ASSURANCE FUTURE CAPITAL WILL BE AVAILABLE.
The proceeds of the Company's recent equity and debt offerings are expected to
fund the Company's operations through at least December 31, 1998. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Recent Developments." Thereafter, the Company may require
additional funds to continue the marketing of its products and meet its working
capital requirements. In order to meet its needs, the Company may be required
to raise additional funding through public or private financings, including
equity and debt financings. Any additional equity financings may be dilutive to
the shareholders of the Company, and debt financing, if available, may involve
restrictive covenants. Whether the Company would be able to secure such
financing and, if so, whether such financing would be available at reasonable
rates and terms is uncertain. Failure to secure such additional financing could
adversely affect the Company.
INTELLECTUAL PROPERTY. The Company regards its products as proprietary and
relies primarily on a combination of statutory and common law patent, copyright,
trademark and trade secret laws, customer licensing agreements, employee and
third-party non-disclosure agreements and other methods to protect its
proprietary rights.
Although the Company currently holds no patents, the Company believes the
VCC will be protected by two patents that are currently under review by the U.S.
Patent and Trademark Office and by a patent that was filed by Circle
Corporation, a Japanese corporation, on December 28, 1993 (the "Circle Corp.
Patent"). The Circle Corp. Patent relates to certain hardware developed by
Circle Corporation that has been licensed to the Company and incorporated by the
Company into the VCC. This license provides the Company with exclusive
distribution rights to such hardware worldwide, except Japan. The initial term
of this license expires on December 20, 2004.
Despite the foregoing precautions, it may be possible for a third party to
copy or otherwise obtain or use the Company's products or technology without
authorization, or to develop similar products or technology independently. If
unauthorized use or copying of the Company's products were to occur to any
substantial degree, the Company's business and results of operations could be
materially adversely affected. There can be no assurance that the Company's
means of protecting its proprietary rights will be adequate or that the
Company's competitors will not independently develop similar products.
-4-
<PAGE>
The Company requires its consultants and developers to assign their rights
in materials provided to, or made for, the Company and to represent that the
inclusion or use of such materials in the Company's products will not violate
the rights of third parties. Based on such representations, the Company's
relationships with such consultants and developers and initial marketing of the
VCC, the Company has no reason to believe that its products infringe on the
proprietary rights of third parties. The Company has not commissioned an
independent investigation to reaffirm the basis for such belief, however, and
there can be no assurance that third parties will not claim that the Company's
current or future products infringe on the proprietary rights of others. The
Company believes that developers of control systems may increasingly be subject
to such claims as the number of products and competitors in the industry grows
and the functionality of such products in the industry overlaps. Any such
claim, with or without merit, could result in costly litigation and could have a
material adverse effect on the Company.
LACK OF PRODUCT LIABILITY INSURANCE. The Company may be liable for product
liability claims in the event that the use of its products is alleged to have
resulted in damage to its customers. The Company does not currently carry
product liability insurance. There can be no assurance that such insurance will
be available on commercially reasonable terms, or at all, or that such
insurance, even if obtained, would adequately cover any product liability claim.
Although the Company is not aware of any pending or threatened product liability
or other legal claim against it, a product liability or other claim with respect
to uninsured liabilities, or in excess of insured liabilities, could have a
material adverse effect on the business and prospects of the Company.
USE OF PROCEEDS
This Prospectus relates to an aggregate of 3,489,961 shares of Common Stock
that may be sold from time to time by the Selling Shareholders. Although the
Company has agreed to pay the expenses of registration of the Shares, including
legal and accounting fees, the Company will not receive any proceeds from the
sale of the Shares.
SELLING SHAREHOLDERS
The following table sets forth certain information, as of August 1, 1997,
as to the maximum number of Shares that may be sold by each of the Selling
Shareholders pursuant to this Prospectus.
<TABLE>
<CAPTION>
Number Maximum Number
of Shares Number of Shares
Beneficially of Shares to be Beneficially
Owned Prior Sold Pursuant to Owned After
Name to Offering this Prospectus Offering
- -------------------------------------------- -------------- ------------------- ----------------
<S> <C> <C> <C>
JAMES K. ANDERSON........................... 30,000 30,000 (1) 0
ASSOCIATION FOR CULTURAL INTERCHANGE, INC... 66,667 66,667 (2) 0
STEPHEN M. BRZICA, JR....................... 20,000 20,000 (2) 0
GERALD C. AND SANDRA D. DORAN............... 20,000 20,000 (2) 0
EAGLE FORK FUNDING CORP..................... 400,000 400,000 (2) 0
THEODORE R. EDIN............................ 104,000 104,000 (2) 0
RICK ELSTAD................................. 5,000 5,000 (2) 0
JAMES A. FINSTUEN........................... 5,000 5,000 (2) 0
JOHN E. HAUGO............................... 80,000 80,000 (2) 0
LANDON E. HELM.............................. 10,000 10,000 (1) 0
RICHARD L. HEXUM, SR. (IRA)................. 32,467 32,467 (2) 0
RICHARD L. HEXUM, JR........................ 33,333 33,333 (2) 0
WILLIAM J. AND JANICE A. HOWARD-JTEN........ 140,000 140,000 (1)(2) 0
ITEN LEASING COMPANY, INC................... 40,000 40,000 (1) 0
JOSEPH M. ITEN (IRA)........................ 40,000 40,000 (1) 0
MARTIN J. ITEN.............................. 40,000 40,000 (1) 0
MELISSA A. ITEN............................. 10,000 10,000 (2) 0
SAMUEL M. JOY............................... 40,000 40,000 (2) 0
ELLEN KLOS.................................. 10,000 10,000 (2) 0
STEVEN E. KLOS.............................. 150,000 150,000 (1)(2) 0
THOMAS D. KROSSCHELL........................ 186,330 186,330 (3) 0
INGRAM A. LEE............................... 40,000 40,000 (2) 0
</TABLE>
-5-
<PAGE>
<TABLE>
<S> <C> <C> <C>
DOUGLASS S. LORING.......................... 20,000 20,000 (2) 0
GARY L. AND JANICE R. MATTISON.............. 13,333 13,333 (2) 0
MARK D. MARGOLIS............................ 222,000 222,000 (2)(6) 0
JOHN M. AND KAYE METCALFE - JTEN............. 15,000 15,000 (2) 0
DENNIS L. MONROE & PATRICIA M. WELLER....... 6,500 6,500 (2) 0
RONP. OLSON................................. 20,000 20,000 (2) 0
PAUL J. PARK................................ 50,000 50,000 (2) 0
PIONEER EQUITY INVESTMENTS, LLC............. 40,000 40,000 (2) 0
THOMAS J. POHL AND ROBERTA L. THOMPSON...... 10,000 10,000 (2) 0
POTAS FAMILY LIVING TRUST, DATED 8/9/94..... 34,667 34,667 (2) 0
RONALD F. POTAS............................. 2,667 2,667 (2) 0
ROY POTAS FAMILY TRUST, DATED 4/30/90....... 20,000 20,000 (2) 0
STEVE POTAS................................. 20,000 20,000 (2) 0
VIRGIE E. POTAS FAMILY TRUST................ 40,000 40,000 (2) 0
JACK AND MAUREEN W. RAFOUL.................. 400,000 400,000 (1)(2) 0
BONNIE RAGAN (IRA).......................... 106,667 106,667 (2) 0
LINDA M. RAGAN.............................. 13,333 13,333 (2) 0
TANYA RAGAN................................. 13,333 13,333 (2) 0
TODD RAGAN.................................. 13,333 13,333 (2) 0
ROGER W. RANFRANZ........................... 13,333 13,333 (2) 0
RAYMOND H. RICE............................. 5,000 5,000 (2) 0
STEPHEN C. ROBERTS.......................... 329,000 329,000 (2)(4) 0
GENEVIEVE ROBERTS........................... 10,000 10,000 (2) 0
JACK J. SCHNEIDER........................... 40,000 40,000 (2) 0
DANIEL J. SHRADER........................... 227,432 216,330 (1)(5) 11,102
JOSEPH SHUSTER.............................. 60,000 60,000 (1) 0
MARQUETTE TRUST COMPANY, CUSTODIAN
FBO DONALD L. SODERBERG IRA............ 113,600 93,000 (2) 20,600
JOSEPH A. SPELDRICH (IRA)................... 23,000 23,000 (2) 0
ALLAN STRUNC................................ 33,334 33,334 (2) 0
TOFTE LAND COMPANY, INC..................... 40,000 40,000 (2) 0
CRAIG W. WENDLAND........................... 20,000 20,000 (2) 0
BRUCE WHITFIELD............................. 10,000 10,000 (2) 0
WOODLAWN FOUNDATION, INC.................... 33,334 33,334 (2) 0
</TABLE>
______________________
(1) Represents shares issued in connection with a private placement of Common
Stock pursuant to a Confidential Private Placement Memorandum dated as of
August 19, 1996, as amended.
(2) Represents shares issued in connection with a private placement of Common
Stock pursuant to a Confidential Private Placement Memorandum dated as of
November 25, 1996, as amended.
(3) Represents 186,330 shares issued or to be issued upon the exercise of
warrants originally issued to Maven Securities, Inc. as placement agent in
consideration for services rendered in connection with the private placement
of shares pursuant to Confidential Private Placement Memorandums dated
August 19 and November 25, 1996, each as amended, and the Company's private
placement of 1,100,000 shares of Common Stock in July 1997 (the "1997
Private Placement"). Mr. Krosschell is a principal of Maven Securities, Inc.
(4) Represents 329,000 shares issued or to be issued upon the exercise of
warrants originally issued to Maven Securities, Inc. as placement agent in
consideration for services rendered in connection with the private placement
of shares pursuant to Confidential Private Placement Memorandums dated
August 19 and November 25, 1996, each as amended. Mr. Roberts is a former
principal of Maven Securities, Inc.
(5) Represents 186,330 shares issued or to be issued upon the exercise of
warrants originally issued to Maven Securities, Inc. as placement agent in
consideration for services rendered in connection with the private placement
of shares pursuant to Confidential Private Placement Memorandums dated
August 19 and November 25, 1996, each as amended, and the 1997 Private
Placement. Mr. Shrader is the President and a principal of Maven Securities,
Inc.
(6) Includes 120,000 shares issued in connection with a private purchase of
Common Stock by Mr. Margolis in March 1996.
-6-
<PAGE>
PLAN OF DISTRIBUTION
The Shares will be offered and sold by the Selling Shareholders for their
own accounts. The Company will not receive any proceeds from the sale of the
Shares pursuant to this Prospectus. The Company has agreed to pay the expenses
of registration of the Shares, including legal and accounting fees.
The Selling Shareholders may offer and sell the Shares from time to time in
transactions on the OTC Market, in brokerage transactions at prevailing market
prices or in transactions at negotiated prices. Sales may be made to or through
brokers or dealers who may receive compensation in the form of discounts,
concessions or commissions from the Selling Shareholders or the purchasers of
Shares for whom such brokers or dealers may act as agent or to whom they may
sell as principal, or both. As of the date of this Prospectus, the Company is
not aware of any agreement, arrangement or understanding between any broker or
dealer and the Selling Shareholders.
The Selling Shareholders and any brokers or dealers acting in connection
with the sale of the Shares hereunder may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Securities Act, and any commissions received
by them and any profit realized by them on the resale of Shares as principals
may be deemed underwriting compensation under the Securities Act.
BUSINESS
GENERAL
The Company, through its wholly owned subsidiary Global MAINTECH, Inc.,
designs, develops and markets a computer system, consisting of hardware and
software, which monitors mainframe computer operations and consolidates control
of large corporate data centers. This system is called the Virtual Command
Center and is designed to perform three primary functions: (a) consolidate
consoles (computer terminals with access to the internal operation of a
computer) into one monitor, a "virtual console" or single point of control; (b)
monitor and control the computers connected to the virtual console; and (c)
automate most, if not all, of the routine processes performed by computer
operators in data centers. The VCC can be operated from a remote location and
accepts multiple computer platforms and operating systems. 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. VCC 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.
From January 1, 1995 through June 30, 1997, the Company sold an aggregate
of 14 VCC Units to five customers.
The VCC competes with internal monitoring software, which monitors certain
pieces of hardware in the computer in which it is installed, sold by other
companies. Sales were estimated to be $3 billion in November 1996. It is
believed this market will grow to almost $9 billion by 2000, which would
represent a compound annual growth rate of approximately 30%.
The Company believes the VCC also is well suited for use in enterprise
computing applications. Enterprise computing is the term associated with the
hardware and software which enables computers that contain different processors
to be linked together. The Company has adapted the VCC and coupled it with its
own proprietary software to form an enterprise computing management system. The
VCC can be used to monitor and control desktops, mid-range servers and
mainframes. Sales of all such UNIX-based systems in 1995 were approximately
$19 billion.
The Company is now engaged solely in the business of manufacturing and
selling VCC Units. This line of business generated all of the Company's revenue
in 1996 and over 90% of its revenue in 1995.
MERGER BACKGROUND
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
(the "Agreement"), among the Company, Mirror Consolidation Company (a wholly
owned subsidiary of the Company ("Merger Subsidiary")) and MAINTECH (formerly
MAINTECH Resources, Inc.). Under the terms of the
-7-
<PAGE>
Agreement, each share of MAINTECH's common stock was converted into 71.75 shares
of the Company's common stock. As a result, the Company issued 5,740,000 shares
of common stock in exchange for all of the outstanding capital stock of
MAINTECH. At the time of the Merger, MAINTECH's business primarily related to
IBM mainframe computers, including parts and engineering, brokerage and repair
services (the "Mainframe Business"). At such time, MAINTECH also had begun a new
line of business engaged in the development of software and the sale of a
hardware product that, when sold in combination, was designed to consolidate
control and automate the operation of large corporate data centers. This
software and hardware evolved into the Company's current product, the VCC Unit.
Effective December 31, 1995, the Company sold the Mainframe Business.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
David H. McCaffrey 52 Chief Executive Officer and Director
Robert E. Donaldson 54 President and Director
James Geiser 47 Chief Financial Officer and Secretary
</TABLE>
Mr. McCaffrey has served as the Company's Chief Executive Officer since
January 1996, and as a Director of the Company since January 1996. Mr. McCaffrey
also has served as MAINTECH's Chief Executive Officer since December 1994. Prior
to joining MAINTECH in December 1994, Mr. McCaffrey served as President, Chief
Executive Officer and Chief Financial Officer of Rimage Corporation from April
1989 to October 1994. Mr. McCaffrey also served as a director of Rimage
Corporation from November 1992 until October 1994.
Mr. Donaldson has served as the Company's President and as a Director since
January 1996. Mr. Donaldson founded MAINTECH in April 1992 and has served as
its President since inception. Mr. Donaldson also served as MAINTECH's Chief
Executive Officer from April 1992 to December 1994. Prior to founding MAINTECH,
Mr. Donaldson served as a Vice President of Meridian Technology Leasing Corp.
from 1986 to 1991. Prior to 1986, Mr. Donaldson served in various capacities
with Itel Corp. and International Business Machines Corporation.
Mr. Geiser has served as the Secretary of the Company since September 1993
and Chief Financial Officer of the Company since January 1994. Since 1991,
Mr. Geiser has served as President of G&B Financial Advisory Services, a firm
engaged in providing financial consulting services to corporations requiring
financial restructuring. From 1989 until January 1992, Mr. Geiser served as
Chief Financial Officer and consultant to International Broadcasting
Corporation, an owner and operator of family entertainment attractions including
the Harlem Globetrotters and Ice Capades touring shows and three regional
amusement parks. From 1987 until October 1989, Mr. Geiser was Vice President
and Treasurer of Washington Square Capital, Inc., an investment management
company and subsidiary of Northwestern National Life Insurance Company. From
1979 until 1987, Mr. Geiser held various positions with Gelco Corporation,
including the position of Assistant Treasurer of Gelco Corporation, and Vice
President and Treasurer of Gelco Finance Corporation.
The Board of Directors does not have any standing audit, compensation,
stock option or nominating committees. The Board of Directors administers the
Company's 1989 Stock Option Plan and approves awards of stock options and
restricted stock awards made thereunder.
The Company at present does not pay any director's fees. The Company may
reimburse its outside directors for expenses actually incurred in attending
meetings of the Board of Directors.
-8-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The consolidated financial statements that accompany this discussion show
the operating results of the Company for the fiscal quarters ended June 30, 1996
and 1997, for the six month periods ended June 30, 1996 and 1997 and for the
years ended December 31, 1995 and 1996. These results include the operations of
MAINTECH, the Company's wholly owned operating subsidiary, which prior to
December 1995 had been engaged in the Mainframe Business. In December 1995, the
Mainframe Business was sold and the Company discontinued this line of business.
The Company now is engaged solely in the business of manufacturing and selling
VCC Units.
RESULTS OF OPERATIONS
Fiscal quarters and six month periods ended June 30, 1996 and 1997
Sales for the fiscal quarter ended June 30, 1997 were approximately
$869,000 compared to sales of continuing operations for the second quarter of
1996 of approximately $558,000. Sales for the first six months of 1997 were
approximately $1,575,000 compared to $1,050,000 in the first six months of 1996.
The increase in sales for the second quarter of 1997 is primarily due to an
increase in product sales of approximately $211,000 and an increase in ongoing
licensing fees of approximately $80,000. The increase in sales for the six
month period ended June 30, 1997 is primarily due to an approximate $240,000
increase in product sales, an approximate $210,000 increase in ongoing licensing
fees and an increase in consulting fees. The gross profit margin percentage in
the second quarter of 1997 was approximately 75% compared to approximately 67%
in the second quarter of 1996 and approximately 75% for the six month period
ended June 30, 1997 compared to approximately 64% in the same period in 1996.
The increase in gross profit margin is due primarily to increases in ongoing
licensing and consulting fees.
Selling, general and administrative expenses for the second quarter of 1997
were approximately $381,000 compared to approximately $197,000 for the second
quarter of 1996. Selling, general and administrative expenses for the first
sixth months of 1997 were approximately $703,000 compared to approximately
$309,000 for the same period in 1996. This increase is due in part to increases
in salaries and an increase in professional and technical expenses. The salary
increase is entirely due to an increase in the number of employees, primarily
due to the addition of employees in the areas of sales and sales support. The
increase in professional and technical expenses in 1997 is partially due to the
settlement in the prior year of old claims from continuing operations at less
than the accrued amount and is also due to increases in audit and financial
public relations expenses which the Company attributes to higher levels of
corporate governance activities.
Research and development costs in the second quarter of 1997 were
approximately $43,000 compared to $92,000 in the second quarter of 1996. For
the first six months of 1997, research and development costs were approximately
$81,000 compared to $146,000 in the same period in the prior year. These
decreases are largely due to changes in salary expenses. The Company reduced
its administrative engineering activities and increased its focus on
enhancements to existing products, the costs of which are recorded in costs of
goods sold.
Non-operating expenses in both periods under comparison primarily consisted
of interest expense. Interest expense increased in the three and six month
periods ending June 30, 1997 compared to the same periods in the prior year in
spite of decreases in the level of debt in 1997 compared to 1996. This is due
to the settlement in 1996 of accrued interest expense at less than the accrued
amount. Prior to the issuance on June 19, 1997 of subordinated debt in the
amount of $2,000,000, the debt of the Company had declined approximately
$200,000 since June 1996.
-9-
<PAGE>
Net cash used in operating and discontinued activities for the first six
months of 1997 was approximately $592,000. Cash provided from net income,
before depreciation and amortization, was approximately $428,000. Cash was used
to fund increases in current assets, primarily accounts receivable and
inventory, totaling approximately $833,000 and to reduce accounts payable,
accrued expenses and deferred revenue totaling approximately $358,000. In the
quarter ended March 31, 1996, the Company used cash to fund an increase in
accounts receivable and to reduce accounts payable which were partially offset
by cash sources such as income and depreciation. In the same period in the
prior year, operating activities generated cash of approximately $164,000 which
was largely due to net income of $192,410.
Cash used by investing activities of approximately $748,000 for the first
six months of 1997 consists primarily of investments of approximately $425,000
in capitalized computer software development costs, which represent costs
incurred after technological feasibility has been established in connection with
the development of enhancements to one or more particular software programs.
The Company also incurred costs of approximately $211,000 in connection with the
issuance in June 1997 of five-year subordinated notes payable totalling
$2,000,000. These costs will be amortized on a straight-line basis over the
term of the related debt. In addition, the Company purchased approximately
$89,000 of additional machinery and equipment during the first six months of
1997. During the first six months of 1996, the Company invested only $4,000 in
equipment.
Net cash provided by financing activities for the first six months of 1997
was approximately $4,294,000. This is due primarily to the receipt of net
proceeds from the issuance of common stock of approximately $2,670,000 in two
private placements and the issuance of five-year subordinated notes payable
totalling $2,000,000. The private placements of common stock occurred in
February 1997 at a per share price of $0.75 and in June 1997 at a per share
price of $1.40. Offsetting this increase was a payment of approximately
$358,000 to reduce notes payable. In the first six months of 1996, the Company
raised approximately $169,000 from the issuance of common stock, which amount
was offset by a reduction of notes payable of approximately $252,000, resulting
in a net use of cash by financing activities of approximately $83,000.
Years ended December 31, 1995 and 1996
Sales for the year ended December 31, 1996 were approximately $2,130,000
compared to sales from continuing operations of approximately $1,174,000 for the
year ended December 31, 1995. Sales for the year ended December 31, 1996
reflect business activity generated by the Company's new product, the VCC Unit.
VCC Unit sales were approximately $1,820,000 in 1996 compared to approximately
$1,174,000 in 1995. Maintenance fees of approximately $206,000 on previously
sold systems were generated for the first time during 1996. The remainder of
revenue for 1996 of approximately $103,000 was primarily the result of
miscellaneous computer parts sales to existing customers. In 1995, revenue of
approximately $174,000 was derived from remote facility support, which amount
was in addition to VCC Unit sales. This activity has been replaced with VCC
support and maintenance fees. The gross margin on sales was approximately 71%
in 1996 compared to 70% in 1995. The components of gross margin in the two
years are similar and the Company considers the gross margin comparison to be
essentially unchanged.
Selling, general and administrative expenses for the year ended December
31, 1996 were approximately $962,000 compared to approximately $764,000 for the
prior year. This increase was primarily due to an increase in salary expense
which reflects an increase in the number of employees from six to sixteen.
Advertising and travel expense and equipment lease expenses all were higher in
1996 compared to 1995. This reflects increased activities in the business:
advertising and travel expense is directly related to increased selling
activities, and the increased equipment lease expense is related to the lease of
two IBM development computers with a mainframe operating system. Professional
and technical expense, depreciation expense, insurance expense and building rent
all declined in 1996 compared to 1995. Professional and technical expense
decreased due to the settlement or elimination of
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<PAGE>
litigation from prior business activities and reduced professional activities
associated with the discontinuance of certain businesses. Depreciation expense
declined due to the use of a rapid depreciation rate and the age of equipment.
The Company uses a double declining depreciation rate and most of the
depreciable equipment reached the end of an average three-year life in 1996.
Insurance expense declined because the Company received an unexpected insurance
refund and a commensurate reduction in insurance rates during 1996. The reduced
building expense is due to the Company's move to a smaller office space in
December 1995. This was partially offset by the addition of a small office in
Irvine, California in August 1996. Research and development expense in 1996 and
1995 relates to the ongoing maintenance of existing software and consists of
salaries and consulting fees for technical expertise. In 1996 this expense was
approximately $37,000 higher than in 1995.
Non-operating expenses for the year ended December 31, 1996 consisted
primarily of interest expense, including accrued interest on the Company's
convertible subordinated debentures, notes payable to vendors, a bank, and an
individual. Total debt outstanding declined 58% or approximately $419,000
(which amount includes $260,000 of debt converted to common stock) from December
31, 1995 to December 31, 1996.
Net cash provided in operating and discontinued activities for the year
ended December 31, 1996 was approximately $56,000 compared to a use of cash of
approximately $651,000 for such activities in the year ended December 31, 1995.
During the year ended December 31, 1996 cash was provided by net income and
deferred revenue. This increase of net cash was substantially offset by a
reduction in the Company's accounts payable of approximately $412,000, an
increase in accounts receivable of approximately $112,000, and an increase in
leased equipment of approximately $107,000.
During 1996, cash used for investing activities of approximately $579,000
reflects investments of approximately $474,000 in capitalized computer software
development costs, which represent costs incurred after technological
feasibility has been established in connection with the development of
enhancements to one or more particular software programs, and approximately
$68,000 of patent costs. The Company also purchased approximately $37,000 of
machinery and equipment during 1996. In 1995 the Company generated proceeds
from the sale of a building producing net cash of approximately $125,000. Cash
received during 1995 from the merger with MAINTECH was approximately $637,000.
Net cash of approximately $516,000 was provided by financing activities for
the year ended December 31, 1996. This is the result of net proceeds from the
issuance of common stock of $675,000 (in connection with three separate private
placements during the year at per share prices of $0.30, $0.50 and $0.75),
offset by a reduction of notes payable of approximately $159,000. Also, common
stock valued at a total of $260,000 was issued to converting debtholders during
1996. In the year ended December 31, 1995, cash was used by financing
activities partially due to the sale of the Company's building in January 1995,
a substantial portion of which was used to repay the mortgage for such building
and to reduce other notes payable by the Company. Cash was raised through the
sale of common stock in 1995 of approximately $427,000.
LIQUIDITY AND CAPITAL RESOURCES
Fiscal quarters and six month periods ended June 30, 1996 and 1997
As of June 30, 1997, the Company had positive working capital of
approximately $4,095,000 compared to negative working capital as of December 31,
1996 of approximately $400,000. The working capital position was substantially
enhanced during the first six months of 1997 by receipt of net proceeds of
approximately $4,670,000 from the issuance of Common Stock and the issuance of
five-year subordinated notes payable. The Company used a portion of these
proceeds to pay all other outstanding debt, a portion of which had been
delinquent as to principal payments.
-11-
<PAGE>
During the first six months of 1997, the Company's liquidity and capital
resources were substantially improved. As a result of this change, management
believes the Company's liquidity and capital resources currently appear adequate
to meet the expected needs of the Company's operations. This depends partially
on the Company's ability to collect its accounts receivable and to continue to
make sales sufficient to realize the full value of its current inventory. Based
on the Company's current gross margins, management believes the Company's
financial health will continue to improve as additional sales are realized.
Accordingly, the Company has continued to purchase additional inventory in
anticipation of additional sales. The Company's operating plan for the year
ending December 31, 1997 anticipates an increase in sales over the year ended
December 31, 1996, with a commensurate increase in net income. As a result,
this operating plan projects a significant increase in the liquidity and capital
resources of the Company. While management believes in the viability of this
operating plan and currently anticipates that such plan will be achieved, there
can be no assurances to that effect. To the extent this plan is delayed, the
Company will seek the forbearance of its creditors or will seek to raise
additional capital; however, there can be no assurance such additional capital
can be raised on terms favorable to the Company, or at all.
Years ended December 31, 1995 and 1996
As of December 31, 1996, the Company had negative working capital of
approximately $400,000 compared to negative working capital of approximately
$1,019,000 as of December 31, 1995. The negative working capital as of December
31, 1996 primarily was due to the existence of current notes payable of
approximately $212,000 and convertible subordinated debentures of approximately
$152,000. As of December 31, 1996, the Company was delinquent in principal
payments on $283,000 of this debt.
During 1996, the Company's liquidity and capital resources were
substantially improved compared to 1995.
-12-
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of Common Stock and Preferred Stock, as of September 1, 1997, by (i)
each person known to the Company to be the beneficial owner of 5% or more of
outstanding Common Stock and Preferred Stock, (ii) each of the Company's
directors, (iii) the executive officers named in the Summary Compensation Table
above and (iv) the directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
Number of Percentage of Number of Percentage of
Shares of Shares of Shares of Shares of
Common Stock Common Stock Preferred Stock Preferred Stock
Beneficially Beneficially Beneficially Beneficially
Name and Address (1) Owned (2) Owned (2) Owned (2) Owned (2)
- --------------------- -------------- -------------- --------------- ----------------
<S> <C> <C> <C> <C>
Robert E. Donaldson 3,350,000 18.9% -- --
David H. McCaffrey 1,640,000 9.2% -- --
Arthur James Hatch -- -- 26,667 7.8%
4288 Sanctuary Way
Bonita Springs, FL 33923
Donald Fraser -- -- 26,667 7.8%
14713 77th Place North
Maple Grove, MN 55369
Dale Ragan 430,931 2.5% 59,201 17.4%
4204 Country Wood Drive, SE
Rochester, MN 55904 (3)
James Geiser 240,000 1.4% -- --
John E. Haugo 80,000 0.5% -- --
All officers and directors 5,310,000 28.5% -- --
as a group (4 persons)
</TABLE>
____________________
(1) Unless otherwise indicated, the address of each of the following
individuals is 6468 City West Parkway, Eden Prairie, Minnesota 55344.
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission, and includes generally voting and
investment power with respect to securities. Shares of Common Stock or
Preferred Stock subject to options or warrants currently exercisable or
exercisable within sixty (60) days of the date of determination are deemed
outstanding for purposes of computing the percentage of shares beneficially
owned by the person holding such options or warrants, but are not deemed to
be outstanding for purposes of computing such percentage for any other
person. Unless otherwise indicated by footnote, each person or group
identified has sole voting and investment power with respect to all shares
of Common Stock and Preferred Stock shown as beneficially owned by such
person.
(3) Includes 134,264 shares which could be acquired upon the exercise of
options and warrants within 60 days of August 1, 1997. Excludes 146,666
shares which are owned by Mr. Ragan's spouse or children; Mr. Ragan
disclaims beneficial ownership of these shares.
-13-
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the cash compensation awarded to or earned
by the Chief Executive Officer and an employee who earned in excess of $100,000
during the year ended December 31, 1996. No executive officer of the Company
earned salary and bonus in excess of $100,000 during the year ended December
31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
-----------------------
Name and Other
Principal Position Year Salary Compensation
------------------------ ------ -------- --------------
<S> <C> <C> <C>
David H. McCaffrey
Chief Executive Officer 1996 $ 95,470 $ --
Steven J. McDowall
Chief Software Architect 1996 $134,360 $ --
</TABLE>
STOCK OPTIONS
There were no option grants during the year ended December 31, 1996 made to
the persons named in the "Summary Compensation Table" above (the "Named
Executive Officers").
AGGREGATED OPTION EXERCISES IN 1996 AND YEAR END OPTION VALUES
The following table provides information concerning stock option exercises
and the value of unexercised options at December 31, 1996 for the Named
Executive Officers.
<TABLE>
<CAPTION>
Number of Value of
Securities Underlying Unexercised
Unexercised Options at In-The-Money Options
Year End (3) at Year end ($) (2) (3)
---------------------- -------------------------
Shares Value
Acquired on Realized Exercis- Unexercis- Exercis- Unexercis-
Name Exercise(#) ($) (1) (3) able able able able
- ------------------ ----------- ----------- -------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
David H. McCaffrey 840,000 $ -- -- 840,000 $ -- $ --
Steven J. McDowall 100,000 $ 110,000 200,000 -- $140,000 $ --
</TABLE>
_________________
(1) Calculated using the difference between the fair market value of such
shares at the time of exercise and the exercise price.
(2) Calculated using the difference between the fair market value of such
shares at December 31, 1996 and the exercise price.
(3) The Company believes Mr. McCaffrey's stock options whether exercised or
exercisable have no value, based on the low trading volume of the Common
Stock and the restricted trading rules applicable to insiders. For
instance, Mr. McCaffrey exercised his stock options on December 27, 1996
when the daily volume of shares traded was 6,100. The average daily trading
volume in the three months ended December 31, 1996 was approximately 13,200
shares. Accordingly, the Company believes the market price is not
indicative of the value of a large volume of shares sold or to be sold by
an officer of the Company. Notwithstanding the foregoing, for reporting
purposes only, Mr. McCaffrey's option exercise would have realized a value
of $924,000 and his unexercisable in-the-money options would have a value
of $714,000 as of December 31, 1996.
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<PAGE>
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock trades on the OTC Market under the symbol
"GLBM". Prior to November 12, 1996, the Company's Common Stock traded under the
symbol "GBMT". The Company effected a one-for-five reverse split on November
12, 1996 (the "Reverse Stock Split").
The following are the high and low bid quotations for the Company's Common
Stock as reported on the OTC Market during each quarter of the fiscal years
ended December 31, 1996 and 1995. These quotations represent prices quoted
between dealers as if the Reverse Stock Split had occurred on January 1, 1995,
without retail mark-up, mark-down or commission, and may not necessarily
represent actual transactions.
QUARTERS ENDED MARCH 31 AND JUNE 30, 1997
<TABLE>
<CAPTION>
Common Stock
Quarter Low High
--------- ----- ------
<S> <C> <C>
First $1.44 $ 2.56
Second 1.50 2.75
YEAR ENDED DECEMBER 31, 1996
Common Stock
Quarter Low High
--------- ----- ------
First $0.30 $ 0.75
Second 0.40 1.60
Third 0.65 1.30
Fourth 0.90 1.81
YEAR ENDED DECEMBER 31, 1995
Common Stock
Quarter Low High
--------- ----- ------
First $0.30 $ 0.65
Second 0.25 0.55
Third 0.15 0.40
Fourth 0.29 0.45
</TABLE>
As of August 1, 1997, the Company had approximately 2,970 shareholders of
record. The Company has not paid cash dividends on its Common Stock and does
not anticipate paying cash dividends in the foreseeable future.
-15-
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The Company effected the Reverse Stock Split on November 12, 1996. As a
result of the Reverse Stock Split, the aggregate number of authorized shares of
the Company's capital stock was reduced from 250,000 to 50,000. As of June 30,
1997, the authorized capital stock of the Company consisted of 49,112,020 shares
of Common Stock, no par value, and 887,980 shares of series A convertible
preferred stock, no par value (the "Preferred Stock"). As of June 30, 1997,
there were 16,613,884 shares of Common Stock outstanding, which were held of
record by approximately 2,940 shareholders, and 340,112 shares of undesignated
Preferred Stock outstanding, which were held of record by approximately 30
shareholders.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of shareholders. There is no
cumulative voting for the election of directors so that the holders of more than
50% of the aggregate voting power of the outstanding Common Stock and Preferred
Stock can elect all directors. See "-- Preferred Stock". Subject to
preferences that may be applicable to any outstanding Preferred Stock, holders
of Common Stock are entitled to receive ratably such dividends as may be
declared by the Board of Directors of the Company out of funds legally available
therefor and in liquidation proceedings. Holders of Common Stock have no
preemptive or subscription rights and there are no redemption rights with
respect to such shares.
PREFERRED STOCK
The holders of Preferred Stock are entitled to vote on all matters
submitted to a vote of shareholders the number of votes for each share held of
record equal to the number of shares of Common Stock into which such share of
Preferred Stock is then convertible. There is no cumulative voting for the
election of directors so that the holders of more than 50% of the aggregate
voting power of the outstanding Common Stock and Preferred Stock can elect all
directors. Holders of Preferred Stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors of the Company out of
funds legally available therefor and in liquidation proceedings. Holders of
Preferred Stock have no preemptive or subscription rights and there are no
redemption rights with respect to such shares.
Under Minnesota law and the Company's Amended and Restated Articles of
Incorporation, the Board of Directors is authorized, without further shareholder
action, to issue preferred stock in one or more classes or series and to fix the
voting rights, liquidation preferences, dividend rights, repurchase rights,
conversion rights, redemption rights and terms, including sinking fund
provisions, and certain other rights and preferences, of the preferred stock.
Accordingly, although it has no current intention of doing so, the Board of
Directors of the Company may, with the approval of the holders of a majority of
the voting power of the then outstanding Preferred Stock, issue shares of a
class or series of preferred stock with voting and conversion rights which could
adversely affect the voting power and the dividend and other rights of the
holders of Common Stock.
WARRANTS AND OPTIONS
As of June 30, 1997, the Company had outstanding options to purchase
3,208,663 shares of Common Stock that had been issued to employees, directors
and consultants to the Company pursuant to the 1989 Stock Option Plan, as
amended, with a weighted average exercise price of $0.55 per share. Such
options expire between March 1998 and May 2006. As of June 30, 1997, the
Company also had outstanding warrants to purchase a total of 1,853,400 shares of
Common Stock that have been granted to third parties outside of the 1989 Stock
Option Plan with a weighted average exercise price of $1.69 per share. Such
third-party warrants are all currently exercisable and expire on dates ranging
from January 2000 to June 2004. All agreements embodying such outstanding
third-party warrants and options provide for antidilution adjustments in the
event of certain mergers, consolidations, reorganizations, recapitalizations,
stock dividends, stock splits or other changes in the corporate structure of the
Company.
ANTI-TAKEOVER PROVISIONS OF THE MINNESOTA BUSINESS CORPORATION ACT
Certain provisions of Minnesota law described below could have an anti-
takeover effect. These provisions are intended to provide management
flexibility, to enhance the likelihood of continuity and stability in the
composition of the Board of Directors and in the policies formulated by the
Board of Directors and to discourage an unsolicited takeover of the Company if
the Board of Directors determines that such a takeover is not in the best
interests of the Company and its shareholders.
-16-
<PAGE>
However, these provisions could have the effect of discouraging certain attempts
to acquire the Company, which could deprive the Company's shareholders of
opportunities to sell their shares of Common Stock at prices higher than
prevailing market prices.
Section 302A.671 of the Minnesota Business Corporation Act (the "MBCA")
provides that, unless the acquisition of certain new percentages of voting
control of the Company (in excess of 20%, 33 1/3% or 50%) by an existing
shareholder or other person is approved by a majority of the disinterested
shareholders of the Company, the shares acquired above such new percentage level
of voting control will not be entitled to voting rights. The Company is
required to hold a special shareholders' meeting to vote on any such acquisition
within 55 days after the delivery to the Company by the acquiror of an
information statement describing, among other things, the acquiror and any plans
of the acquiror to liquidate or dissolve the Company and copies of definitive
financing agreements for any financing of the acquisition not to be provided by
funds of the acquiror. If any acquiror does not submit an information statement
to the Company within ten days after acquiring shares representing a new
threshold percentage of voting control of the Company, or if the disinterested
shareholders vote not to approve such an acquisition, the Company may redeem the
shares so acquired by the acquiror at their market value. Section 302A.671
generally does not apply to a cash offer to purchase all shares of voting stock
of the issuing corporation if such offer has been approved by a majority vote of
disinterested board members of the issuing corporation.
Section 302A.673 of the MBCA restricts certain transactions between the
Company and a shareholder who becomes the beneficial holder of 10% or more of
the Company's outstanding voting stock (an "interested shareholder") unless a
majority of the disinterested directors of the Company have approved, prior to
the date on which the shareholder acquired a 10% interest, either the business
combination transaction suggested by such a shareholder or the acquisition of
shares that made such a shareholder a statutory interested shareholder. If such
prior approval is not obtained, the statute imposes a four-year prohibition from
the statutory interested shareholder's share acquisition date on mergers, sales
of substantial assets, loans, substantial issuances of stock and various other
transactions involving the Company and the statutory interested shareholder or
its affiliates.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar with respect to the Common Stock is
Norwest Bank, Minnesota, N.A.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Amended and Restated Articles of Incorporation and the
statutes of the State of Minnesota require the Company to indemnify any
director, officer, employee or agent who was or is a party to any threatened,
pending or completed action, suit or proceedings, whether civil, criminal,
administrative or investigative, against certain liabilities and expenses
incurred in connection with the action, suit or proceeding, except where such
persons have not acted in good faith or did not reasonably believe that the
conduct was in the best interests of the Company.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or other persons controlling the Company
pursuant to the foregoing provisions, or otherwise, the Company has been
informed that in the opinion of the SEC, such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
CERTAIN TRANSACTIONS
On December 16, 1996, pursuant to the advice of the Company's financial
advisor, Bob Donaldson, David McCaffrey and Jim Geiser exercised certain stock
options to purchase 730,000, 840,000 and 240,000 shares of Common Stock,
respectively. Messrs. Donaldson, McCaffrey and Geiser paid their respective
exercise prices totalling $109,000, $126,000 and $59,000 in the form of personal
promissory notes payable to the Company. Each of these promissory notes bears an
interest rate of 5.75% per annum and will be repaid no later than the
termination date of the option to which the note related. Bob Donaldson is a
director of the Company. David McCaffrey is a director of the Company and its
Chief Executive Officer. Jim Geiser is the Company's Chief Financial Officer and
Secretary.
-17-
<PAGE>
On June 15, 1994, Paul F. Burger, Mr.Donaldson's brother-in-law, loaned
$250,000 to MAINTECH pursuant to the terms of a demand promissory note. The
promissory note required MAINTECH to repay the loan within 180 days of any
demand by Mr.Burger. The promissory note bore an interest rate of 13% per
annum and required monthly interest payments. In connection with the loan,
MAINTECH, granted a security interest in its parts inventory to Mr. Burger. On
December 28, 1996, Mr. Burger agreed to cancel the June 15, 1994 promissory
note. In return, he received $50,000 cash, a new $100,000 unsecured promissory
note and 334,000 shares of Common Stock. The new promissory note dated December
31, 1995 was payable in 12 monthly installments and bore an interest rate of 13%
per annum. This note was paid in full in January 1997.
Effective December 31, 1995, the Company sold its brokerage line of
business for $123,000 to Norcom Resources, Inc., a privately held corporation
whose sole shareholder is Michael Erickson, a former officer and a current
shareholder of the Company. This sale resulted in a loss on disposal of
$420,630. Due to the uncertainty of collection, the Company treated payments
under this sale as income when received. The sales proceeds were secured by up
to 416,000 shares of the Company's Common Stock held by Mr. Erickson. In
connection with the sale, the Company removed this former officer as personal
guarantor from a certain note payable in the principal amount of $190,000. In
March 1997, Norcom Resources paid the Company in full the amount of $70,000
pursuant to notes payable issued to the Company as part of the sale of the
brokerage line of business. The Company will record the collection on these
notes payable as income from discontinued operations in 1997.
Management of the Company believes that the terms of the transactions
described above were no less favorable to the Company than would have been
obtained from an unaffiliated third party. Any future material transactions and
loans with officers, directors or 5% beneficial shareholders of the Company's
Common Stock, or affiliates of such persons, will be on terms no less favorable
to the Company than could be obtained from unaffiliated third parties and will
be approved by a majority of the outside members of the Company's Board of
Directors who do not have an interest in the transactions.
The Company has agreed with Minnesota Department of Commerce that so long
as the Shares are registered in the State of Minnesota, or one year from the
date of this Prospectus, whichever is longer, the Company will not make loans to
its officers, directors, employees, or principal shareholders, except for loans
made in the ordinary course of business, such as travel advances, expense
account advances, relocation advances, or reasonable salary advances and except
that officers and employees may in the future pay the exercise price of options
by delivering promissory notes to the Company, as provided in Section 6(c) of
the 1989 Stock Option Plan of the Company; provided that each such note has a
maturity date not later than 90 days after the termination date of the option to
which the note relates.
RECENT DEVELOPMENTS
The historical financial statements appearing elsewhere in this Prospectus
do not reflect certain sales of securities by the Company that occurred in July
of 1997. On June 6, 1997, the Company offered for purchase up to 1,100,000
shares of the Company's Common Stock at $1.40 per share, as adjusted for the
Reverse Stock Split. All 1,100,000 shares were sold pursuant to this offering in
July 1997. The proceeds from such sale were used by the Company to repay
approximately $250,000 of short-term debt and the remainder of such proceeds
will be used to fund research and development expenses and the Company's future
working capital needs.
CHANGE IN ACCOUNTANTS
On March 17, 1995, the Board of Directors retained KPMG Peat Marwick LLP as
independent auditors for the Company for the fiscal year ended December 31,
1995, thereby replacing McGladrey & Pullen LLP as the Company's independent
auditors. The reports of McGladrey & Pullen LLP regarding the Company's
financial statements for fiscal years 1994 and 1993 did not contain any adverse
opinion or disclaimer of opinion, and were not qualified or modified as to audit
scope or accounting principles. During the same period, McGladrey & Pullen
LLP's reports on the Company's financial statements were modified to include an
uncertainty regarding substantial doubt about the Company's ability to continue
as a going concern. The Company and McGladrey & Pullen LLP have not had any
disagreements on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure during the Company's two
most recent fiscal years or during any subsequent interim period.
LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
-18-
<PAGE>
DESCRIPTION OF PROPERTY
The Company conducts its business in a 3,100 square foot office at 6468
City West Parkway, Eden Prairie, Minnesota 55344. The lease for this facility
provides for monthly payments through July 31, 1998 without extension or
renewal. In August 1996 the Company entered into an office lease with 1,545
square feet at 17310 Redhill Avenue, Suite 115, Irvine, CA 92714. This lease
provides for monthly payments through July 30, 1998 and is used as a sales and
technical development office. The Company is responsible for utilities,
insurance and other operating expenses at both locations.
EXPERTS
The financial statements of Global MAINTECH Corporation as of December 31,
1996 and 1995 and for each of the years in the two-year period ended December
31, 1996, have been included herein and in the registration statement in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.
The report of KPMG Peat Marwick LLP covering the December 31, 1996
financial statements contains an explanatory paragraph that states that the
entity's working capital deficit and accumulated deficit raise substantial doubt
about the entity's ability to continue as a going concern. The consolidated
financial statements do not include any adjustments that might result from the
outcome of that uncertainty.
LEGAL MATTERS
The validity of the Shares offered hereby has been passed upon for the
Company by Dorsey & Whitney LLP, 220 South Sixth Street, Minneapolis, Minnesota
55402.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
SB-2 under the Securities Act with respect to the Common Stock offered hereby.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information filed by the
Company can be inspected and copied at the public reference facilities of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices at 7 World Trade Center, Suite 1300, New York, New
York 10048 and CitiCorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The Commission also maintains a Web site that
contains reports, proxy statements, information statements and other information
concerning the Company at the site located at http://www.sec.gov. This
Prospectus does not contain all the information set forth in the Registration
Statement and exhibits thereto which the Company has filed with the Commission
under the Securities Act, and to which reference is hereby made.
-19-
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Independent Auditors' Report.......................................................... F-2
Consolidated Balance Sheets as of December 31, 1995 and 1996.......................... F-3
Consolidated Statements of Operations for the Years Ended December 31, 1995 and 1996.. F-5
Consolidated Statements of Stockholders' Equity (Deficit)
for the Years Ended December 31, 1995 and 1996...................................... F-6
Consolidated Statements of Cash Flows for the Years Ended December 31, 1995 and 1996.. F-8
Notes to Consolidated Financial Statements............................................ F-9
Unaudited Consolidated Balance Sheet as of June 30, 1997.............................. F-17
Unaudited Consolidated Statements of Operations
for the Three Months Ended June 30, 1996 and 1997................................... F-19
Unaudited Consolidated Statements of Cash Flows
for the Three Months Ended June 30, 1996 and 1997................................... F-20
Notes to Unaudited Financial Statements............................................... F-21
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Global MAINTECH Corporation
We have audited the accompanying consolidated balance sheets of Global
MAINTECH Corporation and subsidiary as of December 31, 1995 and 1996, and the
related consolidated statements of operations, stockholders' equity (deficit),
and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. 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 audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Global
MAINTECH Corporation and subsidiary as of December 31, 1995 and 1996, and the
results of their operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that Global MAINTECH Corporation will continue as a going concern. As
discussed in note 3, the Company's 1996 working capital deficit and accumulated
deficit raise substantial doubt about the entity's ability to continue as a
going concern. Management's plans in regard to these matters are also described
in note 3. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
February 14, 1997
F-2
<PAGE>
GLOBAL MAINTECH CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31, December 31,
1995 1996
-------------- --------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 39,364 $ 32,890
Accounts receivable, less allowance
for doubtful accounts of $15,000 321,052 451,599
Other receivables 40,218 21,519
Inventory 186,812 217,943
Prepaid expenses and other 21,004 26,706
-------------- --------------
Total current assets 608,450 750,657
Property and equipment, net 16,300 31,221
Leased equipment, net (note 9) -- 82,377
Patent costs, net (note 1) -- 61,779
Software development costs, net (note 1) -- 425,519
-------------- --------------
TOTAL ASSETS $624,750 $1,351,553
============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
GLOBAL MAINTECH CORPORATION
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
December 31, December 31,
1995 1996
-------------- --------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 808,430 $ 396,004
Current portion of notes payable (note 6) 479,038 211,613
Convertible subordinated debentures (note 5) 261,750 151,750
Accrued liabilities:
Compensation and payroll taxes 33,810 79,655
Interest (notes 5 and 6) 38,070 13,960
Other 6,430 38,325
Deferred revenue -- 259,747
-------------- --------------
Total current liabilities 1,627,528 1,151,054
-------------- --------------
Notes payable, less current portion (note 6) 58,000 16,600
------------- --------------
Total liabilities 1,685,528 1,167,654
STOCKHOLDERS' EQUITY (DEFICIT)
Voting, convertible preferred stock - Series A,
convertible into one common share for each
preferred share, no par value; 887,980 shares
authorized; 865,207 in 1995 and 700,667 shares
in 1996 issued and outstanding; total liquidation
preference of outstanding shares-$1,314,000 405,770 328,601
Common stock, no par value; 49,112,020 shares
authorized; 10,487,695 in 1995 and 13,260,533
shares in 1996 issued and outstanding -- --
Additional paid-in capital 906,658 2,243,438
Notes receivable-officers -- (324,500)
Accumulated deficit (2,373,206) (2,063,640)
-------------- --------------
Total stockholders' equity (deficit) (1,060,778) 183,899
-------------- --------------
Commitments and contingencies (notes 4 and 9)
$ 624,750 $ 1,351,553
============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
GLOBAL MAINTECH CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended
December 31,
-------------------------
1995 1996
------------ ------------
<S> <C> <C>
Net sales $ 1,173,744 $ 2,129,503
Cost of sales 350,585 625,467
----------- -----------
Gross Profit 823,159 1,504,036
Operating expenses:
Selling, general and administrative 763,807 962,398
Research and development 113,234 150,273
----------- -----------
Income (loss) from operations (53,882) 391,365
Other income (expense):
Interest expense (134,453) (60,745)
Interest income 7,309 --
Other (7,770) (2,554)
----------- -----------
Total other expense, net (134,914) (63,299)
----------- -----------
Income (loss) from continuing
operations before income taxes (188,796) 328,066
Provision for income taxes 5,850 18,500
----------- -----------
Income (loss) from continuing
operations (194,646) 309,566
----------- -----------
Discontinued operations (note 4):
Income from operations (174,578) --
Loss on disposal (420,630) --
----------- -----------
Loss from discontinued operations (595,208) --
----------- -----------
Net income (loss) $ (789,854) $ 309,566
=========== ===========
Net earnings (loss) per common and common
equivalent share (notes 2, 4 and 7):
Continuing operations $ (0.019) $ 0.022
Discontinued operations (0.059) --
----------- -----------
Net earnings (loss) $ (0.078) $ 0.022
=========== ===========
Weighted average number of common and
common equivalent shares outstanding 10,128,098 14,268,610
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
GLOBAL MAINTECH CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
Preferred stock Common stock
----------------------------- --------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1994 -- $ -- 80,000 $ 800
Net loss -- -- -- --
Stockholder debt forgiveness (note 10) -- -- -- --
Subsidiary common stock retired in
connection with merger (note 2) -- -- (80,000) (800)
Common stock issued in connection
with merger (note 2) -- -- 9,070,361 --
Common stock issued (note 7) -- -- 1,558,000 --
Stock subscriptions receivable (note 7) -- -- (163,333) --
Stock issue costs (note 7) -- -- -- --
Preferred stock related to merger (note 2) 887,874 416,400 -- --
Converted preferred shares (note 7) (22,667) (10,630) 22,667 --
- -----------------------------------------------------------------------------------------------------
Balance at December 31, 1995 865,207 405,770 10,487,695 --
Net income -- -- -- --
Common stock issued (note 7) -- -- 1,609,965 --
Stock issue costs (note 7) -- -- -- --
Voluntary stock reduction (note 7) -- -- (1,340,000) --
Conversion of notes payable (note 7) -- -- 200,000 --
Conversion of subordinated debentures (note 7) -- -- 168,333 --
Common stock options and warrants exercised
(note 7) -- -- 1,970,000 --
Exercise officer stock options (note 7) -- -- -- --
Converted preferred shares (note 7) (164,540) (77,169) 164,540 --
- -----------------------------------------------------------------------------------------------------
Balance at December 31, 1996 700,667 $328,601 13,260,533 $ --
=====================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
GLOBAL MAINTECH CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(CONTINUED FROM PREVIOUS PAGE)
<TABLE>
<CAPTION>
Additional Notes
paid-in Receivable- Accumulated
capital Officers deficit Total
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1994 $ 79,200 $ -- $(1,583,352) $(1,503,352)
Net loss -- -- (789,854) (789,854)
Stockholder debt forgiveness (note 7) 400,000 -- -- 400,000
Subsidiary common stock retired in
connection with merger (note 2) -- -- -- (800)
Common stock issued in connection
with merger (note 2) 21,471 -- -- 21,471
Common stock issued (note 7) 456,200 -- -- 456,200
Stock subscriptions receivable (note 7) (47,000) -- -- (47,000)
Stock issue costs (note 7) (13,843) -- -- (13,843)
Preferred stock related to merger (note 2) -- -- -- 416,400
Converted preferred shares (note 7) 10,630 -- -- --
- ----------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 906,658 -- (2,373,206) (1,060,778)
Net income -- -- 309,566 309,566
Common stock issued (note 7) 777,545 -- -- 777,545
Stock issue costs (note 7) (119,434) -- -- (119,434)
Voluntary stock reduction (note 7) -- -- -- --
Conversion of notes payable (note 7) 150,000 -- -- 150,000
Conversion of subordinated debentures (note7) 110,000 -- -- 110,000
Common stock options and warrants exercised
(note 7) 341,500 -- -- 341,500
Exercise officer stock options (note 7) -- (324,500) -- (324,500)
Converted preferred shares (note 7) 77,169 -- --
- ----------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 $2,243,438 $ (324,500) $(2,063,640) $ 183,899
==========================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
GLOBAL MAINTECH CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended
December 31,
-------------------------
1995 1996
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (789,854) $ 309,566
Adjustments to reconcile net income (loss)
to net cash provided (used) in operating activities:
Depreciation and amortization 76,253 101,215
Loss on disposal of discontinued operations 420,630 --
Changes in operating assets and liabilities:
(Increase) decrease in accounts
and other receivables (109,741) (111,848)
(Increase) decrease in inventory (33,830) (31,131)
Increase in leased equipment -- (107,140)
(Increase) decrease in prepaid expenses 1,453 (5,702)
Decrease in accounts payable (48,970) (412,426)
Increase (decrease) in accrued expenses (39,739) 53,630
Increase (decrease) in deferred revenue (148,000) 259,747
Increase in other 20,467 --
---------- ---------
Cash provided (used) by operating and
discontinued activities (651,331) 55,911
---------- ---------
Cash flows from investing activities:
Proceeds (payment) from sale (purchase) of
property and equipment 764,454 (37,173)
Investment in patent costs -- (67,779)
Investment in software development costs -- (473,719)
Net cash received in merger 637,071 --
---------- ---------
Cash provided (used) by investing
activities 1,401,525 (578,671)
---------- ---------
Cash flows from financing activities:
Net proceeds from issuance of common stock 426,658 675,111
Decrease in short-term notes payable (109,266) (117,425)
Principal payments on mortgage note payable (620,000) --
Decrease in long-term notes payable (432,531) (41,400)
---------- ---------
Cash provided (used) by
financing activities (735,139) 516,286
---------- ---------
Net increase (decrease) in cash 15,055 (6,474)
Cash and cash equivalents at beginning
of year 24,309 39,364
---------- ---------
Cash and cash equivalents at end of year $ 39,364 $ 32,890
=========- =========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 125,517 $ 62,686
Taxes 8,126 --
Supplemental disclosure of noncash investing and financing activities:
During 1996, $260,000 of notes payable and convertible subordinated
debentures were converted to common stock.
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
<PAGE>
GLOBAL MAINTECH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
NOTE 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of business: At the Company's annual shareholders meeting on May 15,
1995, the shareholders approved, among other things, the change of its name to
Global MAINTECH Corporation from Mirror Technologies, Incorporated.
Global MAINTECH, Inc. ("MAINTECH") is the operating entity resulting from the
merger between MAINTECH and Mirror Technologies, Incorporated ("Mirror")
effective January 1, 1995 (see note 2). 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 Virtual Command Center or VCC, in the data centers of a large industrial and
financial company. In 1996 the Company sold an additional seven systems and
added two additional customers.
Principles of consolidation: As a result of the merger described in note 2, the
consolidated financial statements represent the historical financial information
of MAINTECH and include the accounts of Mirror since the date of the merger.
All significant intercompany accounts and transaction have been eliminated in
consolidation.
Cash and cash equivalents: The Company considers all highly liquid investments
purchased with an original maturity of three months or less to be cash
equivalents.
Inventory: Inventory is stated on a first in, first out (FIFO) basis at the
lower of cost or market (net realizable value).
Property and equipment: Property and equipment is recorded at cost.
Depreciation is provided for principally using the double declining method,
based on the estimated useful lives of the respective assets which generally
have lives of three years.
Maintenance and repairs are charged to expense as incurred. Renewals and
betterments are capitalized and depreciated over their estimated useful service
lives.
Revenue recognition: Revenue is recognized upon the latter of shipment or final
acceptance. Deferred revenue is recorded when the Company receives customer
payments before shipment or acceptance. The Company sells maintenance
agreements which require minor updates of software to be delivered to the
customers free of charge. New versions of the Company's software representing a
major upgrade are not a part of the maintenance agreements. The Company
expenses the costs of minor updates to its software as incurred.
Patents: Patents are stated at cost and are amortized over three years using the
straight-line method.
Capitalized Software Development Costs: Under the criteria set forth in SFAS
No.86, Accounting for the Costs of Computer Software to be Sold, Leased or
Otherwise Marketed, capitalization of software development costs begins upon the
establishment of technological feasibility of the product. The establishment of
technological feasibility and the ongoing assessment of the recoverability of
these costs require considerable judgment by management with respect to certain
external factors, including, but not limited to, anticipated future gross
product revenues, estimated economic life, and changes in software and hardware
technology.
In 1996, upon attaining technological feasibility of certain software products
and enhancements, the Company capitalized subsequent software development costs.
Software development costs capitalized will be amortized utilizing the straight-
line method over the estimated economic life of the software not to exceed three
years. Under SFAS No.86, amortization of capitalized software costs commences
upon the general release of the software which occurred in fourth quarter 1996.
Amortization of $48,200 of software development costs was recorded in 1996.
F-9
<PAGE>
GLOBAL MAINTECH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
Research and development: Research and development costs are expensed as
incurred.
Stock Based Compensation: The Company has adopted the disclosure requirements
under Statement of Financial Accounting Standards No.123 (SFAS No.123),
Accounting and Disclosure of Stock-Based Compensation. As permitted under SFAS
No.123, the Company applies Accounting Principles Board Opinion No.25 (APB
No.25), Accounting for Stock Issued to Employees and related interpretations in
accounting for is plans. Accordingly, no compensation expense has been
recognized for its stock-based compensation plans.
Reverse Stock Split: The Company effected a reverse stock split of 1 share of
the Company's Common Stock or Series A Preferred Stock for each 5 shares of the
Company's Common or Preferred Stock, as appropriate, on November12, 1996. As a
result, the aggregate number of authorized shares of the Company was reduced
from 250,000,000 to 50,000,000 shares. Excluding the Preferred Stock, the
aggregate number of authorized shares is now 49,112,020. The effect of the
stock split has been retroactively reflected in the accompanying consolidated
financial statements and notes thereto.
The reverse stock split does not adversely affect the rights or preferences of
the holders of outstanding shares of any class or series of the Company's
capital stock.
Net income (loss) per share: The net income (loss) per common share and common
share equivalents is computed by dividing net income (loss) by the weighted
average number of shares and dilutive common share equivalents outstanding
during each period. Common equivalents result from dilutive stock options and
warrants computed using the treasury stock method. Common equivalent shares are
excluded for 1995 because of their anti-dilutive effect.
Income taxes: Deferred taxes are provided on a liability method for temporary
differences and operating loss and tax credit carryforwards. Temporary
differences are the differences between the reported amounts of assets and
liabilities and their tax bases. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that
some portion or all of the deferred tax assets will not be realized. Deferred
tax assets and liabilities are adjusted for the effects of changes in tax laws
and rates on the date of enactment.
Fair value of instruments: All financial instruments are carried at amounts that
approximate estimated fair values.
Use of estimates: Management of the company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare these consolidated
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from these estimates.
NOTE 2. MERGER TRANSACTION
Effective January 1, 1995, Mirror merged with MAINTECH, a Minnesota corporation
(the "Merger"), pursuant to the terms of an Agreement and Plan of Merger, dated
December 6, 1994, as amended (the "Agreement"). Under the terms of the
Agreement, each share of MAINTECH's common stock was converted into 71.75 (post-
reverse stock split) shares of Mirror's common stock. As a result, Mirror
issued 5,740,000 shares of common stock in exchange for all of the outstanding
capital stock of MAINTECH.
In connection with the Merger, outstanding options of MAINTECH to purchase
68,214 shares of MAINTECH's common stock converted into the right to purchase
approximately 4,894,401 shares of Mirror's common stock at an exercise price of
$0.15 per share. Stock for the purchase of options covering 4,840,000 shares of
Mirror's common stock will vest on June 1, 1999, or earlier, subject to the
merged business (the "Company") attaining certain earnings levels. Subsequent
to December 1995, options to purchase approximately 740,000 shares were canceled
due to the departure of an officer of the Company.
As a result of this Merger and prior to the dilution of subsequent issues of
common stock, the former shareholders of MAINTECH held unregistered stock
comprising approximately 58 percent of the
F-10
<PAGE>
GLOBAL MAINTECH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
common stock and common stock equivalents of the Company and if the options to
purchase common stock are exercised, these shareholders will hold approximately
70 percent of the outstanding shares of the Company. The Merger resulted in the
former shareholders of MAINTECH having majority common stock ownership and
majority board of directors representation in the surviving entity. Accordingly,
for financial statement purposes, the transaction has been accounted for as if
MAINTECH acquired Mirror. This transaction was accounted for as a reverse
acquisition but Mirror remained as the surviving legal entity. The Merger was
accounted for as a purchase of the net assets of Mirror by MAINTECH. Mirror
assets consisted principally of cash with book value approximating fair value.
During 1996, certain shareholders of MAINTECH voluntarily forfeited 1,340,000
shares of common stock pursuant to an agreement related to the November 1, 1995
Private Placement Memorandum. As a result the percentage currently held by
these particular stockholders is approximately 43 percent. Two of the officers
of MAINTECH were elected to the Board of Directors of the Company subsequent to
the consummation of the Merger.
NOTE 3. GOING CONCERN
As of December 31, 1996 the Company had negative working capital of
approximately $400,000 and was substantially current with its accounts payable.
However, it was delinquent in principal payments under all but one debt
facility. In January 1997, the Company brought all accounts payable to current
status and cured its delinquent principal payment status under all but the
subordinated convertible debt outstanding.
As of December 31, 1995, the Company had negative working capital of
approximately $1,019,000. Due to cash flow constraints the Company was
delinquent under each of the contractual liabilities in notes 5 and 6 at
December 31, 1995 and was slow to pay certain of its accounts payable. And the
Company's assets were insufficient to satisfy the existing debts as they became
due.
During 1996, the Company raised additional capital through the issuance of
common stock in the approximate amount, net of expenses, of $675,000. The new
capital was raised, in part, to offset net losses from operations and pay its
remaining debt obligations from prior years. The Company believes increased
sales of its VCC product will provide additional operating capital to satisfy
some of these requirements. There can be no assurance that either sufficient
sales increases will occur or that, if sales are insufficient, the Company will
be able to raise additional capital. If the Company is not successful in one or
both of these areas, the affect on the business would be material and adverse.
During 1996 and 1995, 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 December 31, 1996, the Company had no debt outstanding from its
principal bank.
The timing of any new sales of VCC units and, in the absence of sufficient
sales, the Company's ability to raise additional capital is uncertain. 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.
NOTE 4. DISCONTINUED OPERATIONS, SALE AND BASIS OF ACCOUNTING
During the fourth quarter of 1995, the Company's Board of Directors made the
decision to discontinue that portion of the operations which brokers and sells
parts for IBM mainframe computers ("Brokerage") due to poor financial
performance. In addition, the prospects for future profitability were poor.
Effective December 31, 1995 the Company sold the Brokerage inventory and certain
selected liabilities for a total of $123,000 to Norcom Resources, Inc., a
privately held corporation whose sole shareholder is a former officer and a
major shareholder of the Company. This sale resulted in a loss on disposal of
$420,630. Due to the uncertainty of collection, the Company will treat payments
under this sale as income when received. The sales proceeds are secured by
approximately 416,000 shares of the Company's common stock held by this former
officer. In conjunction with the sale, the Company negotiated to remove this
former officer as personal guarantor from a certain note payable in the
F-11
<PAGE>
GLOBAL MAINTECH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
amount of $190,000 (as of December 31, 1995) in April 1996. In March 1997 the
Company collected $70,000 as payment on a note receivable related to the sale of
Brokerage inventory. Previously, the Company had treated this note receivable as
uncollectible. As a result, during the first fiscal quarter 1997, the Company
will record a recovery related to this discontinued business.
Selected financial information for the discontinued operations for the year
ended December 31, 1995, is as follows:
<TABLE>
<CAPTION>
Year Ended
December 31,
1995
------------
<S> <C>
Revenue $6,138,316
Cost of sales 5,590,976
------------
Gross Profit 547,340
Operating expenses 721,918
-----------
Operating loss from discontinued operations $ (174,578)
===========
</TABLE>
NOTE 5. CONVERTIBLE SUBORDINATED DEBENTURES
The Company's 11 percent convertible subordinated debentures were due July 1,
1996, with interest due semiannually, and prior to maturity were redeemable by
the Company or convertible at the option of the holder into 41,880 common shares
at a price per share of $6.25. During the year, debentures valued at $110,000
converted to equity pursuant to conversion terms other than the original $6.25
per share. Since maturity on July 1, 1996, the Company has paid interest
monthly on the overdue and unconverted principal. In February 1997, the Company
paid one-third of the principal outstanding pro rata to all debentureholders
along with the monthly interest payment calculated at 11% per year. Expenses
associated with the original issuance of the unconverted debentures were fully
amortized as of July 1, 1996.
F-12
<PAGE>
GLOBAL MAINTECH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
NOTE 6. NOTES PAYABLE
Notes payable at December 31, 1995 and 1996 are comprised of the following:
<TABLE>
<CAPTION>
1995 1996
------------------------ ----------------------------
Interest Interest
Amount rate Amount rate
----------- ---------- ----------- ---------------
<S> <C> <C> <C> <C>
Notes payable to First Bank,
due in quarterly installments
of $25,000 through December 31,
1996 and $16,600 through
March31, 1997 $ 174,750 10.50% $ 83,000 10.25%
Note payable to related party,
due in monthly installments
beginning January 1, 1995 100,000 13.00% 16,667 13.00%
Note payable to vendor, due in
monthly installments of $9,447
through April 25, 1997, at
which date the remaining
balance is due 190,246 13.50% 108,532 16.50%
Note payable to officer -- -- 15,000 18.00%
Note payable to vendor due in
quarterly installments of
$19,000 plus interest until paid 72,042 6.00% 5,014 6.00%
----------- -----------
537,038 228,213
Less current portion (479,038) (211,613)
----------- -----------
$ 58,000 $ 16,600
=========== ===========
</TABLE>
The interest rate on the note payable to First Bank is based on the prime rate
plus 2%.
The Company was technically in default pursuant to the terms of the notes
payable of $108,532, $16,667 and $5,014. The default conditions in notes
payable were cured by the Company in January 1997. Two notes payable ($108,532
and $16,667) are guaranteed by one of the officers of the Company.
The long term portion of the notes payable is due in 1997.
NOTE 7. STOCKHOLDERS' EQUITY
Common stock warrants: The Company has or, subsequent to year end, will issue
warrants in conjunction with common stock issued pursuant to the Private
Placement Memorandum dated November25, 1996. These warrants are exercisable at
$0.75 per share and expire on February 28, 2002. During the year the Company
also issued warrants pursuant to Private Placement Memoranda in November 1995
and August 1996 exercisable at $0.36 and $0.50 per share, respectively and
expiring on or before November 30, 2001. As of December 31, 1996, the Company
had approximately 214,000 warrants to purchase common stock outstanding which
are exercisable at per share prices between $0.36 and $0.75 and expiring on or
before the year 2002. Subsequent to December 31, 1996, the Company issued
additional warrants to purchase an approximate 1,100,000 common shares
exercisable at per share prices of $0.75 to $3.00 and expiring on or before
February 28, 2002.
Common stock options: The Company's stock option plan ("Plan"), provides for
granting to the Company's employees, directors and consultants, qualified
incentive and nonqualified options to
F-13
<PAGE>
GLOBAL MAINTECH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
purchase common shares of stock. The Plan was amended during 1995 to increase
the number of aggregate options which can be issued to 10,000,000 shares of
common stock. Qualified incentive options must be granted with exercise prices
equal to the fair market value of the stock at the date of grant. Nonqualified
options must be granted with exercise prices equal to at least 85% percent of
the fair market value of the stock at the date of grant.
The Company applies APB No.25, Accounting for Stock Issued to Employees, and
related interpretations in accounting for its stock options. As a result no
compensation expense has been recognized for stock-based compensation plans.
Had the Company determined compensation cost based on the fair value at the
grant date for its stock options under SFAS No.123, Accounting and Disclosure of
Stock-Based Compensation, the Company's net income and earnings per share would
have been reduced by an immaterial amount in both 1995 and 1996. The Company
made this calculation using the Black-Scholes option pricing model with the
following assumptions: volatility of 224%, risk-free interest rate of 5.75%, and
an expected life of 5 years.
This pro forma effect does not include the compensation cost of stock options
currently issued but which do not vest until future years nor does it include
the compensation cost of stock options issued prior to 1995. Therefore, the
full impact of calculating compensation cost for stock options under SFAS No.123
is not reflected in the pro forma net income amounts presented above.
Information with respect to stock options under the plan are summarized as
follows:
<TABLE>
<CAPTION>
Incentive Stock Options Nonqualified Options
------------------------ ----------------------------
Weighted Weighted
average average
exercise exercise
Shares price Shares price
------------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Total outstanding at December 31, 1995 4,232,000 $ 0.35 83,000 $ 5.87
Granted 941,000 $ 0.59 -- $ --
Canceled (620,000) $ 0.30 -- $ --
Exercised (1,938,000) $ 0.17 -- $ --
------------- -------- ----------- ---------
Total outstanding at December 31, 1996 2,615,000 $ 0.49 83,000 $ 5.87
============= ======== =========== =========
</TABLE>
Options for 1,719,000 shares of common stock were exercisable at a weighted
average exercise price of $0.17 as of December 31, 1996.
Common stock issued: In 1996 the Company issued a combined total amount of
common stock of approximately 3,948,000 shares. These shares were issued as a
result of the following activities: due to three separate Private Placement
Memoranda ("PPM"); due to the conversion of debt; and due to the exercise of
qualified stock options and warrants. The stock issued pursuant to the PPMs was
partially offset by a voluntary stock reduction by certain officers of the
Company in the amount of 1,340,000 shares. In addition, 164,540 shares (and
22,667 shares in 1995) of common stock were issued to holders of preferred stock
series A on a one-for-one exchange conversion in accordance with terms of the
preferred stock.
Specifically, the Company issued 590,000 shares of common stock at $0.30 per
share pursuant to the PPM dated November 1995 in addition to 1,395,000 shares in
1995; 700,000 shares of common stock at $0.50 per share under the PPM dated
August 1996; and 653,000 shares of common stock at $0.75 per share under a PPM
dated November 1996. Included in these private placement issues is the
conversion into common stock of notes payable and certain convertible
subordinated debentures. Another 35,000 shares of common stock were issued to
subordinated debentureholders who accepted a conversion offer from the Company
at $1.00 per share. In addition, 1,938,000 shares of common stock were issued
due to the exercise of qualified stock options pursuant to notes receivable
issued by certain officers and employees of the Company and 32,000 shares of
common stock were issued to a converting warrantholder. In
F-14
<PAGE>
GLOBAL MAINTECH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
January 1996 two current and one former officer of the Company voluntarily
reduced their common stock holdings in the amount of 1,340,000 shares of common
stock in consideration for the shares issued pursuant to the PPM dated
November1, 1995. Stock issue costs were $13,843 and $119,434 in 1995 and 1996,
respectively.
Prior to the merger on January 1, 1995 described in note 2, Company issued two
subordinated notes of $200,000 each for cash received individually from the
president of Company, and an executive vice president of Company. During 1996,
the executive vice president left the employ of the Company in connection with
the purchase of the Brokerage inventory by Norcom Resources, Inc. During the
year ended December 31, 1995 the $400,000 balance due was forgiven by these two
individuals for no additional consideration. Accordingly, the Company reflected
the debt forgiveness as an addition to paid-in capital in the Consolidated
Statements of Stockholders' Equity (Deficit) for the year ended December 31,
1995.
In 1997 the Company issued an additional 1,632,801 shares of common stock at
$0.75 per share and realized proceeds net of stock issue costs of approximately
$1.1 million. These shares were issued pursuant to a Private Placement
Memorandum dated November25, 1996 and terminating February 28, 1997, as amended.
NOTE 8. INCOME TAXES
At December 31, 1996, the Company had a net operating loss carryforward of
approximately $9.2 million. As a result of the January 1, 1995 ownership change
as described in note 2 and prior ownership changes, approximately $8.7million of
the net operating loss carryforward will be subject to an annual limitation as
defined by Section 382 of the Internal Revenue Code. The annual limitation for
losses incurred prior to January 1, 1995 is approximately $200,000. Due to this
limitation, approximately $5.2 million of the net operating loss will expire
prior to utilization. In addition, the utilization of these losses may be
further limited by application of the separate return limitation year rules.
Subsequent and future equity transactions could further limit the net operating
losses available in any one year.
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and liabilities as of December 31, 1995 and 1996 are
shown as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1995 1996
------------ -------------
<S> <C> <C>
Deferred tax assets
Allowance for doubtful accounts $ 5,000 $ 5,000
Net operating loss carryforward 1,440,000 1,454,000
------------ -------------
Subtotal 1,445,000 1,459,000
Less valuation allowance for
deferred tax asset (1,445,000) (1,306,000)
------------ -------------
0 153,000
Deferred tax liabilities 0 (153,000)
------------ -------------
Net deferred tax assets $ 0 $ 0
============ =============
</TABLE>
F-15
<PAGE>
GLOBAL MAINTECH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
The provision for income taxes consists of the following for the years ended
December 31, 1995 and 1996:
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1995 1996
------------ --------------
<S> <C> <C>
Current Federal $ 41,750 $ 9,500
Current State (35,900) 9,000
------------ --------------
Total 5,850 18,500
Deferred -- --
------------ --------------
Total $ 5,850 $ 18,500
============ ==============
</TABLE>
The income tax expense (benefit) differed from the amounts computed by applying
the U.S. federal income tax rate of 34% as a result of the following:
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1995 1996
------------ ------------
<S> <C> <C>
Expense (benefit) at statutory rate $ (268,600) $ 112,000
State income tax benefit,
net of federal (23,700) 6,000
Change in valuation allowance (2,249,000) (139,000)
Effect of change in ownership on
net operating loss carryforward 2,541,300 --
Other 5,850 39,500
------------ ------------
Actual tax expense (benefit) $ 5,850 $ 18,500
============ ============
</TABLE>
NOTE 9. OPERATING LEASES
Company as Lessor: The Company began leasing its VCC to customers in 1996. The
Company is flexible in the terms of the lease to meet the customers'
preferences. In some cases the lease may be classified as an operating lease on
the Company's financial statements. Generally, the terms requiring operating
lease classification on the Lessor's/Company's financial statements are that the
lease extends for a term less than the full economic life of the product and the
Lessor retains a residual interest at the end of the lease term. Conversely, in
these circumstances the lease contract requires the lessee to pay fair market
value for the product if it chooses to purchase the VCC at the end of the lease
term. Since the Lessor/Company is the manufacturer and seller of the VCC, the
Company is comfortable with the risk of retaining a residual interest. The net
investment in leased equipment was $107,140 less accumulated depreciation of
$24,763 for a net investment of $82,377.
The above lease stream was assigned to a third party, on a non-recourse basis,
for a lump sum payment to the Company. Under the terms of this assignment, the
Company retained a residual value in the equipment under lease. The present
value of the cash received was recorded as deferred revenue, and is being
recognized into revenue over the term of the lease. Lease revenue recorded in
1996 was $91,000 and the future lease revenue in 1997 and 1998 is $114,000 and
$23,000, respectively.
Company as Lessee: The Company has operating leases for an automobile, telephone
equipment, certain development related IBM computers and its offices. The
rental payments under these leases are charged to expense as incurred. All the
leases provide that the Company pay taxes, maintenance, insurance, and other
operating expenses applicable to the leases. Lease expense in 1995 and 1996 was
approximately $91,000 and $103,000, respectively. The future minimum lease
payments are approximately $98,000, $53,000 and $16,000 for the years 1997, 1998
and 1999, respectively.
F-16
<PAGE>
GLOBAL MAINTECH CORPORATION
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
June 30,
1997
----------
<S> <C>
CURRENT ASSETS
Cash and cash equivalents $2,987,232
Accounts receivable, less allowance
for doubtful accounts of $15,000 1,183,808
Other receivables 46,179
Inventory 281,938
Prepaid expenses and other 30,520
----------
Total current assets 4,529,677
Property and equipment, net 100,875
Leased equipment, net 70,869
Patent costs, net 72,085
Deferred subordinated debt costs 211,472
Software development costs, net 730,605
----------
TOTAL ASSETS $5,715,583
==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-17
<PAGE>
GLOBAL MAINTECH CORPORATION
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
June 30,
1997
-----------
<S> <C>
CURRENT LIABILITIES
Accounts payable $ 222,278
Current portion of notes payable --
Convertible subordinated debentures --
Accrued liabilities:
Compensation and payroll taxes 91,659
Interest 304
Other 19,680
Deferred revenue 100,325
-----------
Total current liabilities 434,246
-----------
Subordinated notes payable, less current portion 2,000,000
-----------
Total liabilities 2,434,246
STOCKHOLDERS' EQUITY (DEFICIT)
Voting, convertible preferred stock - Series A,
convertible into one common stock share for each
preferred share, no par value; 887,980 shares
authorized; 340,112 shares issued and outstanding;
total liquidation preference of
outstanding shares-$638,000 159,513
Common stock, no par value; 49,112,020 shares
authorized; 16,613,884 shares issued and
outstanding --
Additional paid-in capital 5,051,767
Notes receivable-officers (294,500)
Accumulated deficit (1,635,443)
-----------
Total stockholders' equity 3,281,337
-----------
Commitments and contingencies $ 5,715,583
===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-18
<PAGE>
GLOBAL MAINTECH CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
1996 1997 1996 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 557,654 $ 868,836 $ 1,050,001 $ 1,575,387
Cost of sales 181,597 216,513 381,030 397,093
Gross profit 376,057 652,323 668,972 1,178,294
----------- ----------- ----------- -----------
Operating expenses:
Selling, general and administrative 197,312 380,553 308,983 702,644
Research and development 92,472 42,681 146,109 81,007
----------- ----------- ----------- -----------
Income from operations 86,273 229,089 213,879 394,643
Other income (expense):
Interest expense 5,274 (17,399) (18,915) (33,946)
Interest income -- -- -- --
Other (2,089) -- (2,554) --
----------- ----------- ----------- -----------
Total other expense, net 3,185 (17,399) (21,469) (33,946)
----------- ----------- ----------- -----------
Income from continuing
operations before income taxes 89,458 211,690 192,410 360,697
Provision for income taxes -- -- -- 2,500
----------- ----------- ----------- -----------
Income from continuing
operations 89,458 211,690 192,410 358,197
----------- ----------- ----------- -----------
Discontinued operations:
Recovery of discontinued operations -- -- -- 70,000
----------- ----------- ----------- -----------
Gain from discontinued operations -- -- -- --
----------- ----------- ----------- -----------
Net income $ 89,458 $ 211,690 192,410 428,197
=========== =========== =========== ===========
Net income per common and common
equivalent share:
Continuing operations $0.006 $0.012 $0.014 $ 0.024
Discontinued operations -- -- -- 0.005
----------- ----------- ----------- -----------
Net income per share $0.006 $0.012 $0.014 $ 0.029
=========== =========== =========== ===========
Weighted average number of common and
common equivalent shares outstanding 14,236,033 17,057,874 13,712,591 14,639,009
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-19
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------
1996 1997
--------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 192,410 $ 428,197
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization 21,621 171,580
Changes in operating assets and liabilities:
Increase (decrease) in accounts
and other receivables 131,268 (756,869)
Increase in inventory (120,408) (63,996)
Increase in leased equipment (61,048) (8,584)
Increase in prepaid expenses (18,740) (3,815)
Decrease in accounts payable (382,623) (166,939)
Increase (decrease) in accrued expenses 20,402 (32,097)
Increase (decrease) in deferred revenue 380,658 (159,422)
Increase in other -- --
--------- ----------
Cash provided (used) by operating and
discontinued activities 163,540 (591,945)
--------- ----------
Cash flows from investing activities:
Purchase of property and equipment (4,325) (89,142)
Increase in deferred debt costs -- (211,472)
Investment in software development costs -- (425,086)
Investment in patent costs -- (22,306)
--------- ----------
Cash provided (used) by investing
activities (4,325) (748,006)
--------- ----------
Cash flows from financing activities:
Net proceeds from issuance of common stock 168,911 2,669,242
Decrease in short-term notes payable (194,470) (358,349)
Increase (decrease) in long-term notes payable (58,000) 1,983,400
--------- ----------
Cash provided (used) by
financing activities (83,559) 4,294,293
--------- ----------
Net increase (decrease) in cash 75,656 2,954,342
Cash and cash equivalents at beginning
of period 39,365 32,890
--------- ----------
Cash and cash equivalents at end of period $ 115,021 $2,987,232
========= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-20
<PAGE>
GLOBAL MAINTECH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997
GENERAL
At the Company's annual shareholders' meeting on May 15, 1995, the
shareholders approved, among other things, the change of the Company's name to
Global MAINTECH Corporation from Mirror Technologies, Incorporated.
Global MAINTECH, Inc. ("MAINTECH") is the operating entity resulting from
the merger between MAINTECH and Mirror Technologies, Incorporated ("Mirror")
effective January 1, 1994 (see note 2). 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 Virtual Command Center or VCC, in the data centers of a large industrial and
financial company. In 1996 the Company sold an additional seven systems and
added two additional customers.
The VCC is a tool designed to do three functions: the first is to
consolidate consoles (computer terminals with access to the internal operation
of a computer) into one monitor, a "virtual console" or single point of control;
the second is to monitor and control the computers connected to the virtual
console; and, the third is to automate most, if not all, of the routine
processes performed by computer operators in data centers. The VCC can be
operated from a remote location and accepts multiple computer platforms and
operating systems. 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. VCC
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.
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 for the year
ended December 31, 1996.
REVERSE STOCK SPLIT
The Company effected a one-for-five reverse stock split of the Company's
Common Stock and Series A Preferred Stock on November 12, 1996. As a result, the
aggregate number of authorized shares of the Company was reduced form
250,000,000 to 50,000,000 shares. Excluding the Preferred Stock, the aggregate
number of authorized shares is now 49,112,020.
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 can expect to participate in the appreciation of the value of the
Common Stock. Accordingly, the weighted average common and common equivalent
shares outstanding for the quarter ended June 30, 1997 include the weighted
average of 13,817,122 common shares outstanding, 340,112 shares of Preferred
Stock outstanding since their issuance on September 13,
F-21
<PAGE>
1994, and stock options and warrants which have a dilutive effect. The stock
options and warrants included as common equivalent shares outstanding total
2,560,528 shares and are computed by application of the treasury stock
method.
CAPITALIZED COMPUTER SOFTWARE COSTS
As of June 30, 1997, the Company had capitalized software development
costs, net of amortization, of $730,605, which represent costs incurred after
technological feasibility has been established in connection with the
development of enhancements to one or more particular software programs. The
establishment of technological feasibility and the ongoing assessment of the
recoverability of these costs require considerable judgment by management with
respect to certain external factors, including, but not limited to, anticipated
future gross product revenues, estimated economic life, and changes in software
and hardware technology. The software development costs are being amortized over
a 36 month period using the straight-line method.
OPERATING LEASES
The Company began leasing its VCC to customers in 1996. The Company offers
flexible lease terms to meet its customers' preferences. In some cases the
lease may be classified as an operating lease on the Company's financial
statements. Generally, a lease will be classified as an operating lease if the
lease extends for a term less than the full economic life of the product and the
Company retains a residual interest at the tend of the least term. Operating
leases require the lessee to pay fair market value for the product if it chooses
to purchase the VCC at the end of the lease term. Since the Company is the
manufacturer and seller of the VCC, the Company is comfortable with the risk of
retaining a residual interest. The net investment in leased equipment was
$117,869 less accumulated depreciation of $47,000 for a total of $70,869.
A majority of the Company's VCC leases were assigned to a third party, on a
non-recourse basis, for a lump sum payment to the Company in 1996. Under the
terms of this assignment, the Company retained a residual value in the equipment
under lease. The present value of the case received was recorded as deferred
revenue, and is being recognized into revenue over the term of the lease. Lease
revenue assigned to third parties recorded in 1996 and the quarter ended
June 30, 1997 was $91,000 and $57,000, respectively. The annual lease revenue
in 1997 and 1998 is $114,000 and $23,000, respectively.
F-22
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____________________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Prospectus Summary....................................................... 2
Safe Harbor Statement Under The
Private Securities Litigation
Reform Act of 1995...................................................... 3
Risk Factors............................................................. 3
Use of Proceeds.......................................................... 5
Selling Shareholders..................................................... 5
Plan of Distribution..................................................... 7
Business................................................................. 7
Management............................................................... 8
Management's Discussion and Analysis
of Financial Conditions and Results
of Operations........................................................... 9
Security Ownership of Certain
Beneficial Owners and
Management.............................................................. 13
Executive Compensation................................................... 14
Market for Common Equity and
Related Stockholder Matters............................................. 15
Description of Capital Stock............................................. 16
Certain Transactions..................................................... 17
Recent Developments...................................................... 18
Change in Accountants.................................................... 18
Legal Proceedings........................................................ 18
Description of Property.................................................. 19
Experts.................................................................. 19
Legal Matters............................................................ 19
Available Information.................................................... 19
Financial Statements..................................................... F-1
____________________
</TABLE>
Until October 20, 1997 (25 days after the date of this Prospectus), all
dealers effecting transactions in the Common Stock offered hereby, whether or
not participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as Underwriters and with respect to their unsold allotments to
subscriptions.
3,489,961 Shares
GLOBAL
MAINTECH
CORPORATION
COMMON STOCK
_____________________
PROSPECTUS
_____________________
September 24, 1997
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article Seven of the Company's Amended and Restated Articles of
Incorporation provides that a director shall not be liable to the Company or its
stockholders for monetary damages for a breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
Company or its shareholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Sections 302A.559 or 80A.23 of the Minnesota Statutes, (iv) for any transaction
from which the director derived an improper personal benefit, or (v) for any act
or omission occurring prior to the date when such Article Seven became
effective.
The Bylaws of the Company, as amended, provide that the officers and
directors of the Company and certain others shall be indemnified to
substantially the same extent permitted by Minnesota law.
Section 302A.521 of the Minnesota Business Corporation Act provides that a
corporation shall indemnify any person who was or is made or is threatened to be
made a party to any proceeding, by reason of the former or present official
capacity (as defined) of such person, against judgments, penalties, fines,
settlements and reasonable expenses, including attorneys' fees and
disbursements, incurred by such person in connection with the proceeding if
certain statutory standards are met. "Proceeding" means a threatened, pending
or complete civil, criminal, administrative, arbitration or investigative
proceeding, including one by or in the right of the corporation. Section
302A.521 contains detailed terms regarding such right of indemnification and
reference is made thereto for a complete statement of such indemnification
rights.
The Company maintains a standard policy of officers' and directors'
insurance.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
SEC Registration Fee $ 2,380
Accounting Fees and Expenses..... 15,000
Legal Fees and Expenses.......... 15,000
Blue Sky Fees and Expenses....... 6,000
Printing and Engraving Expenses.. 5,000
------
Total....................... $43,380
</TABLE>
All fees and expenses other than the SEC registration fee are estimated.
The expenses listed above will be paid by the Company.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
The Company issued a Private Placement Memorandum dated November1, 1995, as
amended (the "1995 Memorandum"), offering for purchase up to 1,650,000 shares of
the Company's Common Stock at $0.30 per share, as adjusted for the Reverse Stock
Split. In connection with this offering, the Company issued a total of
1,160,400 shares. R. J. Steichen & Company acted as the placement agent. The
Company paid the placement agent a 10% commission, a 3% fee for expenses and to
issue to such agent a warrant to purchase up to 10% of the number of shares of
Common Stock issued in connection with such offering at an exercise price of
$0.36 per share. The shares of Common Stock issued pursuant to the 1995
Memorandum were exempt from registration under Rule 506 of Regulation D of the
Securities Act.
The Company issued a Private Placement Memorandum dated August 19, 1996, as
amended (the "August 1996 Memorandum"), offering for purchase up to 600,000
shares of the Company's Common Stock at $0.50 per share, as adjusted for the
Reverse Stock Split. In connection with this offering, the Company issued a
total of 600,000 shares. Maven Securities, Inc. acted as the placement agent.
The Company paid the placement agent a 10% commission, a 3% fee for expenses and
to issue to such agent a warrant to purchase up to 10% of the number of shares
of Common Stock issued in connection with such offering at an exercise price of
$0.50 per share. The shares of Common Stock issued pursuant to the
II-1
<PAGE>
August 1996 Memorandum were exempt from registration under Rule 506 of
Regulation D of the Securities Act of 1933.
The Company issued a Private Placement Memorandum dated November 25, 1996,
as amended (the "November 1996 Memorandum"), offering for purchase up to
2,415,000 shares of the Company's Common Stock at $0.75 per share, as adjusted
for the Reverse Stock Split. As of December 31, 1996, 653,500 shares were issued
pursuant to the November 1996 Memorandum. During January and February 1997, the
Company issued an additional 1,632,801 shares in connection with such offering.
Maven Securities, Inc. acted as the placement agent. The Company paid the
placement agent a 10% commission, a 3% fee for expenses and to issue to such
agent a warrant to purchase up to 10% of the number of shares of Common Stock
issued in connection with such offering at an exercise price of $0.75 per share.
The shares of Common Stock issued pursuant to the November 1996 Memorandum were
exempt from registration under Rule 506 of Regulation D of the Securities Act of
1933.
On June 6, 1997, the Company offered for purchase up to 1,100,000 shares of
the Company's Common Stock at $1.40 per share, as adjusted for the Reverse Stock
Split. All 1,100,000 shares were sold pursuant to this offering in July 1997.
The Company did not use a placement agent with respect to such offering. The
shares of Common Stock issued in connection with this offering were exempt from
registration under Rule 506 of Regulation D of the Securities Act.
On June 19, 1997, the Company issued a promissory note in the amount of
$1,000,000 to each of two accredited investors in exchange for a secured
subordinated loan in the total amount of $2,000,000. The Company also issued a
warrant to purchase 500,000 shares of the Company's Common Stock at a purchase
price of $1.80 per share, as adjusted for the Reverse Stock Split, to one of
these accredited investors as a condition to such investor's loan.
ITEM 27. LIST OF EXHIBITS
<TABLE>
<CAPTION>
DESCRIPTION EXHIBIT NUMBER
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<S> <C>
Agreement and Plan of Merger dated December 6, 1994, as 2
amended, among the Company, Mirror Consolidation Company,
and MAINTECH Resources, Inc. (the Articles of Merger are
attached thereto as Exhibit A) (incorporated herein by
reference to the Registrant's Form 8-K filed with the
Commission on January 19, 1995 (File No.0-14692)).
Bylaws of the Company, as amended (incorporated herein by 3.1
reference to the Registrant's Form S-1 (File No.33-34894)).
Restated Articles of Incorporation of the Company, as amended 3.2
in May 15, 1995 annual meeting of common stockholders
(corporate name change and increase in authorized stock)
(incorporated herein by reference to the Registrant's Form
10-KSB for the year ended December31, 1995 (File No.0-14692)).
Amendment to Amended and Restated Articles of Incorporation 3.3
of the Company, filed November 12, 1996 (incorporated
herein by reference to the Registrant's Form 10-KSB for the
year ended December 31, 1995 (File No.0-14692)).
Form of 11% Convertible Subordinated Debenture due July 4.1
1, 1996 (incorporated herein by reference to the Registrant's
Form 10-K for the year ended March 31, 1991 (File No.0-14692)).
Form of Registration Agreement between the Company and 4.2
holders of the Company's 11% Convertible Subordinated
Debentures Due July 1, 1996 (incorporated herein by
reference to the Registrant's Form 10-K for the year ended
March 31, 1991 (File No.0-14692)).
Form of Certificate of the Company's Series A convertible 4.3
Preferred Stock (incorporated herein by reference to the
Registrant's Form 10-KSB for the year ended December 31, 1994
(File No.0-14692)).
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C>
Form of Certificate of the Company's Common Stock following 4.4
change of corporate name change (incorporated herein by
reference to the Registrant's Form 10-KSB for the year ended
December 31, 1995 (File No.0-14692)).
Form of Promissory Note, dated June 19, 1997, issued to each of 4.5 (a)
Marquette Bancshares, Inc. and Mezzanine Capital Partners, Inc.
Opinion of Dorsey & Whitney LLP. 5 (a)
The Company's 1989 Stock Option Plan (incorporated herein by 10.1
reference to Exhibit 28 to the Registrant's Registration
Statement on Form S-8 (File No. 33-33576)).
Amendments No. 1 and 2, dated October 17, 1991 and April 24, 10.2
1992, respectively, to the Company's 1989 Stock Option Plan
(incorporated herein by reference to the Registrant's Form
10-K for the year ended March 31, 1992 (File No.0-14692)).
Mirror Technologies, Incorporated 401(K) Plan effective April 1, 10.3
1992 (incorporated herein by reference to the Registrant's
Form 10-K for the year ended March 31, 1992 (File No.0-14692)).
Office Lease Agreement between the Company and Physician's and 10.4
Surgeon's Capital Corporation dated October 1, 1994
(incorporated herein by reference to the Registrant's Form
10-KSB for the year ended December 31, 1994 (File No.0-14692).
Exclusive Distributor and Licensing Agreement between Yutaka 10.5
Takagi and Circle Corporation and MAINTECH Resources, Inc.
and Global MAINTECH, Inc. dated December 20, 1994 (incorporated
herein by reference to the Registrant's Form 10-KSB for the
year ended December 31, 1994 (File No. 0-14692)).
Office Lease Agreement between the Company and Charles and 10.6
Sharron Mills dated December 12, 1995 (incorporated herein
by reference to the Registrant's Form 10-KSB for the year ended
December 31, 1995 (File No.0-14692)).
Brokerage Asset Purchase Agreement between Norcom Resources, 10.7
Inc. and Global MAINTECH, Inc. dated December 31, 1995
(incorporated herein by reference to the Registrant's Form
10-KSB for the year ended December 31, 1995 (File No.0-14692)).
Amendment No.3, dated May 15, 1995 to the Company's 1989 Stock 10.8
Option Plan (incorporated herein by reference to the
Registrant's Form 10-KSB for the year ended December 31, 1995
(File No.0-14692)).
Sale contract between Burlington Northern Railroad Company and 10.9
Global MAINTECH, Inc. dated March 21, 1996 (incorporated herein
by reference to the Registrant's Form 10-KSB for the year ended
December 31, 1995 (File No.0-14692)).
Subsidiaries of the Registrant (incorporated herein by reference 21
to the Registrant's Form 10-KSB for the year ended December 31,
1994 (File No.0-14692)).
Consent of KPMG Peat Marwick LLP. 23.1
Consent of Dorsey & Whitney LLP (included in Exhibit 5 to this 23.2(a)
Registration Statement).
</TABLE>
II-3
<PAGE>
<TABLE>
<S> <C>
Cautionary Statement (incorporated herein by reference to the 99
Registrant's Form 10-KSB for the year ended December 31, 1996
(File No.0-14692)).
--------------
(a) Previously filed.
</TABLE>
ITEM 28. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change in the information set forth in the
registration statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if
the registration statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the
registrant pursuant to section 13 or section 15(d) of the Exchange Act
that are incorporated by reference in the registration statement.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that, in the opinion of the Commission, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form SB-2 and has duly caused this amendment to the
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Minneapolis, State of Minnesota, on
September 24, 1997.
Global MAINTECH Corporation
By /s/ David H. McCaffrey
----------------------
David H. McCaffrey
Chief Executive Officer
Pursuant to the requirements of the Securities Act, this amendment to the
registration statement has been signed by the following persons in the
capacities indicated on September 24, 1997.
NAME TITLE
- ---- -----
/s/ David H. McCaffrey Chief Executive Officer
- -------------------- (Principal Executive Officer) and
David H. McCaffrey Director
/s/ James Geiser Chief Financial Officer and Secretary
- ----------------- (Principal Financial and Accounting
James Geiser Officer)
/s/ Robert E. Donaldson Director
- ------------------------
Robert E. Donaldson
II-5
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Global MAINTECH Corporation:
We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in the Prospectus.
Our report dated February 14, 1997, contains an explanatory paragraph that
states that the Company's working capital deficit and accumulated deficit raise
substantial doubt about the entity's ability to continue as a going concern. The
consolidated financial statements do not include any adjustments that might
result from the outcome of that uncertainty.
/s/ KPMG Peat Marwick LLP
Minneapolis, Minnesota
September 24, 1997
