<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A-1
AMENDMENT NO. 1 TO CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 14, 1999
GLOBAL MAINTECH CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Minnesota 0-14692 41-1523657
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS employer
of incorporation) file number) identification No.)
7578 Market Place Drive, Eden Prairie, MN 55344
- --------------------------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (612) 944-0400
Not Applicable
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
The undersigned registrant, Global MAINTECH Corporation (the "Company"),
hereby amends Item 7 of its Current Report on Form 8-K dated April 14, 1999
(initially filed with the Commission on April 29, 1999) to include the financial
statement information indicated in Item 7 below. The original April 29, 1999
filing of the Form 8-K described the Company's April 14, 1999 acquisition of
Breece Hill Technologies, Inc. ("Breece Hill") pursuant to an Agreement dated as
of March 5, 1999.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired
The following financial statements of Breece Hill and report of
PricewaterhouseCoopers LLP, Breece Hill's independent
accountants, are included in this Report:
1. Report of PricewaterhouseCoopers LLP.
2. Financial statements and accompanying Notes of Breece Hill
Technologies, Inc. as of December 31, 1997 and 1998 and for
the years then ended.
(b) Unaudited Historical and Pro Forma Combined Financial Information
The following unaudited historical and pro forma combined
financial information is included in this Report:
1. Unaudited Historical and Pro Forma Combined Statements of
Operations for the fiscal year ended December 31, 1998 and
the fiscal three month periods ended March 31, 1998 and 1999
and accompanying Notes.
2. Unaudited Historical and Pro Forma Combined Balance Sheet as
of March 31, 1999 and accompanying Notes.
3. Unaudited Historical and Pro Forma Combined Statements of
Cash Flows for the fiscal three month periods ended March
31, 1998 and 1999 and accompanying notes.
(c) Exhibit No. Description
----------- -----------
23.1 Consent of PricewaterhouseCoopers LLP,
independent accountants.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Amendment No. 2 to Current Report to be signed
on its behalf by the undersigned hereunto duly authorized.
Date: August 5, 1999
GLOBAL MAINTECH CORPORATION
By /s/ David McCaffrey
--------------------------------
David McCaffrey
Chief Executive Officer
<PAGE>
Report of Independent Accountants
May 15, 1999
To the Board of Directors and Stockholders
of Breece Hill Technologies, Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations, of changes in stockholders' deficit and of cash flows present
fairly, in all material respects, the financial position of Breece Hill
Technologies, Inc. (the "Company") at December 31, 1998 and 1997, and the
results of its operations and its cash flows for each of the two years in the
period ended December 31, 1998, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from operations
and has a working capital deficit that raise substantial doubt about its ability
to continue as a going concern. Management's plans in regard to this matter are
also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
<PAGE>
Breece Hill Technologies, Inc.
Balance Sheet
- -------------
December 31,
----------------------------
1997 1998
------------ ------------
Assets
Current Assets $ 1,483,524 $ 119,777
Cash and cash equivalents
Accounts receivable, net of an allowance for
doubtful accounts receivable of $525,000
and $720,000, respectively 6,258,170 4,596,291
Inventory, net 4,506,458 3,580,668
Prepaids and other assets 118,182 209,627
------------ ------------
Total current assets 12,366,334 8,506,363
Property and equipment, net 1,357,342 1,023,999
Noncurrent prepaids and other assets 515,331
------------ ------------
Total assets $ 14,239,007 $ 9,530,362
============ ============
Liabilities and Stockholders' Deficit
Current liabilities
Accounts payable $ 5,960,776 $ 10,026,773
Short-term debt 8,896,252 6,962,951
Accrued liabilities 733,768 558,841
------------ ------------
Total liabilities 15,590,796 17,548,565
------------ ------------
Commitments and contingencies (Note 10)
Stockholders' deficit:
Preferred stock, Series A, $.01 par value per
share; 10,000,000 shares authorized;
241,500 and 912,229 shares issued and
outstanding, respectively; $1,505,338
liquidation preference at December 31, 1998 2,415 9,122
Common stock, $.01 par value per share;
30,000,000 shares authorized; 15,367,847
and 15,507,462 shares issued, 15,198,999
and 15,338,614 shares outstanding,
respectively 153,678 155,075
Additional paid-in capital 9,159,447 10,621,457
Treasury stock, at cost (142,225) (142,225)
Subscription receivables (175,369)
Accumulated deficit (10,349,735) (18,661,632)
------------ ------------
Total stockholders' deficit (1,351,789) (8,018,203)
------------ ------------
Total liabilities and stockholders' deficit $ 14,239,007 $ 9,530,362
============ ============
The accompanying notes are an integral part of these financial statements.
<PAGE>
Breece Hill Technologies, Inc.
Statement of Operations
- -----------------------
For the Year
Ended
December 31,
----------------------------
1997 1998
------------ ------------
Sales, net $ 29,042,411 $ 35,140,291
Cost of goods sold (excluding depreciation) (21,766,994) (27,273,205)
Depreciation (1,158,112) (1,735,805)
Selling, general and administrative (8,592,308) (13,116,313)
Research and development (2,435,848) (49,872)
------------ ------------
Loss from operations (4,910,851) (7,034,904)
Interest expense, net (904,239) (1,276,993)
------------ ------------
Loss before income taxes (5,815,090) (8,311,897)
Benefit from income taxes -- --
------------ ------------
Net loss $ (5,815,090) $ (8,311,897)
============ ============
Basic and diluted net loss per share $ (.38) $ (.54)
Weighted-average common shares outstanding 15,110,347 15,393,155
The accompanying notes are an integral part of these financial statements.
<PAGE>
Breece Hill Technologies, Inc.
Statement of Changes in Stockholders' Deficit
- ---------------------------------------------
<TABLE>
<CAPTION>
Preferred Common Additional
---------------- -------------------- Paid-in
Shares Amount Shares Amount Capital
------- ------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 15,036,547 $150,365 $ 8,019,430
Stock issued for cash and
subscription receivables 241,500 $2,415 254,553 2,546 829,274
Stock issued for prepayment
of interest on promissory notes 66,433 664 90,644
Treasury stock purchased
Stock issued for services 10,314 103 16,915
Detachable stock warrants issued
in conjunction with debt 203,184
Net loss
------- ------ ---------- -------- -----------
Balance at December 31, 1997 241,500 2,415 15,367,847 153,678 9,159,447
Stock issued for cash 670,729 6,707 195,901 1,960 1,157,061
Stock issued for prepayment of
interest on promissory notes 57,121 571 73,686
Cancellation of stock issued for
subscription receivable (113,407) (1,134 ) (174,235)
Detachable stock warrants issued
in conjunction with debt 405,498
Net Loss
------- ------ ---------- -------- -----------
Balance at December 31, 1998 912,229 $9,122 15,507,462 $155,075 $10,621,457
======= ====== ========== ======== ===========
<CAPTION>
Treasury
------------------- Subscription Accumulated
Shares Amount Receivables Deficit Total
--------- --------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 (59,000) $ (15,900) $(169,718) $(4,534,645) $ 3,449,532
Stock issued for cash and
subscription receivables (81,684) 752,551
Stock issued for prepayment
of interest on promissory notes 91,308
Treasury stock purchased (109,848) (126,325) 76,033 (50,292)
Stock issued for services 17,018
Detachable stock warrants issued
in conjunction with debt 203,184
Net loss (5,815,090) (5,815,090)
-------- --------- --------- ------------ -----------
Balance at December 31, 1997 (168,848) (142,225) (175,369) (10,349,735) (1,351,789)
Stock issued for cash 1,165,728
Stock issued for prepayment of
interest on promissory notes 74,257
Cancellation of stock issued for
subscription receivable 175,369
Detachable stock warrants issued
in conjunction with debt 405,498
Net Loss (8,311,897) (8,311,897)
-------- --------- --------- ------------ -----------
Balance at December 31, 1998 (168,848) $(142,225) $ -- $(18,661,632) $(8,018,203)
======== ========= ========= ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Breece Hill Technologies, Inc.
Statement of Cash Flows
- -----------------------
For the Year Ended
December 31,
----------------------------
1997 1998
------------ ------------
Cash Flows From Operating Activities
Net loss $ (5,815,090) $ (8,311,897)
Adjustments to reconcile net loss to net cash
used in operating activities:
Stock issued for prepayment of interest on 17,018 74,257
promissory notes
Noncash interest expense 488,479 708,856
Provision for losses on accounts receivable 450,000 195,000
Provision for excess and obsolete inventory 379,799 120,201
Depreciation 1,158,112 1,735,805
Loss on disposal of property and equipment 657,184
Changes in:
Accounts receivable (2,744,365) 1,466,879
Inventory 988,408 383,300
Prepaids and other assets (82,833) 123,672
Accounts payable 1,241,650 4,065,996
Accrued liabilities 320,333 (174,927)
------------ ------------
Net cash provided by (used in) (2,941,305) 387,142
operating activities
------------ ------------
Cash Flows From Investing Activities
Purchases of property and equipment (973,870) (983,316)
------------ ------------
Net cash used in investing activities (973,870) (983,316)
------------ ------------
Cash Flows From Financing Activities
Proceeds from line of credit 2,874,647 32,391,091
Payments on line of credit (46,023) (34,987,163)
Proceeds from issuances of promissory notes 1,125,000 1,280,000
Payments on promissory notes (625,000) (617,229)
Proceeds from issuances of preferred stock 398,635 1,106,763
Proceeds from issuance of common stock 237,500 58,965
Proceeds from payments on subscription 116,416
receivables
Treasury stock purchases (50,292)
------------ ------------
Net cash provided by (used in) 4,030,883 (767,573)
financing activities
------------ ------------
Net increase (decrease) in cash and cash 115,708 (1,363,747)
equivalents
Cash and cash equivalents at beginning of year 1,367,816 1,483,524
------------ ------------
Cash and cash equivalents at end of year $ 1,483,524 $ 119,777
============ ============
Supplemental Disclosure of Cash Flow
Information
Interest paid with cash $ 414,349 $ 526,151
The accompanying notes are an integral part of these financial statements.
<PAGE>
1. Organization, Financial Condition and Summary of Significant Accounting
Policies
Organization
Breece Hill Technologies, Inc. (the "Company"), a Delaware corporation,
engages in the design, development, manufacture and marketing of computer
magnetic tape subsystems for general commercial application. The Company's
customers are value-added resellers ("VARs") and distributors. On April 15,
1999, the Company was acquired by Global MAINTECH Corporation.
Financial Condition
The Company has a working capital deficit and a total stockholders' deficit
at December 31, 1998, and has subsequently incurred additional losses.
These factors, as well as other factors, raise substantial doubt about
whether the Company can continue as a going concern. Management is
currently attempting to obtain additional financing to fund future
operations. The accompanying financial statements do not include any
adjustments relating to the recoverability and classification of recorded
assets and liabilities that might be necessary should the Company be unable
to continue as a going concern.
Cash and Cash Equivalents
The Company considers all highly-liquid instruments purchased with original
maturities of three or fewer months to be cash equivalents.
Inventory
Inventory is stated at the lower of cost or market, cost being determined
by the first-in, first-out cost flow assumption.
Property and Equipment
Property and equipment are recorded at cost and depreciated using the
straight-line method over the estimated useful lives of the respective
assets. Leasehold improvements are generally amortized over the shorter of
their useful lives or the terms of the related leases, which amounts are
included in depreciation expense. Maintenance and repairs are expensed as
incurred.
Revenue Recognition and Product Warranty
Revenue from sales of products is generally recognized when shipment is
made, with provision made for estimated returns and price protection
pursuant to contractual provisions. The Company also provides for the
estimated costs to repair or replace products under warranty at the time of
sale.
Concentration of Credit Risk and Sales to Major Customers
The Company has concentrations of credit risk, primarily in accounts
receivable which are concentrated in the computer and peripherals industry.
The Company performs ongoing credit evaluations of its customers' financial
condition and, generally, requires no collateral from its customers.
During the years ended December 31, 1997 and 1998, the respective
percentages of sales to each major customer were as follows:
1997 1998
----------- -----------
Customer A (stockholder) 25% 12%
Customer B 16% 32%
Customer C (stockholder) 13% 11%
Accounts receivable from these customers accounted for approximately 18%
and 27% of the Company's total accounts receivable as of December 31, 1997
and 1998, respectively. A loss of any of these customers could adversely
impact the Company's results; however, the Company expects these business
relationships to continue in the foreseeable future.
Advertising and Research and Development Costs
Advertising and research and development costs are expensed as incurred.
The total amount charged to advertising expense during 1997 and 1998 was
$585,817 and $159,090, respectively.
<PAGE>
Fair Value of Financial Instruments
The Company's financial instruments include cash and cash equivalents,
accounts receivable, accounts payable, accrued liabilities, a revolving
line of credit and promissory notes payable. Except for the promissory
notes payable, the carrying amounts of financial instruments approximate
fair value due to their short maturities and/or variable rates of interest.
The fair values of the promissory notes payable at December 31, 1998, based
on rates available for similar types of arrangements, were not materially
different than the carrying amounts.
Stock Option Compensation
The Company applies Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees, and related interpretations in accounting
for its stock option plans and, accordingly, does not recognize
compensation cost for options granted to employees and directors whose
exercise price is equal to or exceeds the fair value of common stock as of
the grant date. Compensation expense is recognized on options to non-
employees over the related service period based on the fair value of such
options as of the grant date.
Income Taxes
Deferred income taxes are recognized for the tax consequences in future
years of differences between the tax bases of assets and liabilities and
their financial reporting amounts at each year end based on enacted tax
laws and statutory tax rates applicable to the periods in which the
differences are expected to affect taxable earnings. Valuation allowances
are established when necessary to reduce deferred tax assets to the amount
more likely than not to be realized.
Basic and Diluted Net Loss per Share
Basic net loss per share is computed using the weighted-average number of
common shares outstanding during the period. Diluted net loss per share is
computed using the weighted-average number of common and common equivalent
shares outstanding during the period. Common equivalent shares consist of
the incremental common shares issuable upon conversion of convertible
preferred stock (using the if-converted method) and shares issuable upon
the exercise of stock options and warrants (using the treasury stock
method). Common equivalent shares in 1998 and 1997 were excluded from the
computation as their effect was anti-dilutive.
Use of Estimates
The Company has prepared these financial statements in conformity with
generally accepted accounting principles, which require the use of
management's estimates. Actual results could differ from the estimates
used.
2. Inventory
Inventory consists of the following at December 31:
1997 1998
---------- ----------
Raw materials $3,608,188 $2,319,295
Work-in-process 308,858 175,529
Finished goods 969,211 1,585,844
Obsolescence reserve (379,799) (500,000)
---------- ----------
$4,506,458 $3,580,668
========== ==========
3. Property and Equipment
Property and equipment consists of the following at December 31:
Useful Lives 1997 1998
------------ ----------- -----------
Demonstration units 2 $ 666,051
Computer equipment 3 788,268 $ 1,279,423
<PAGE>
Manufacturing equipment 5-7 1,152,522 1,551,483
Furniture and fixtures 7 121,421 192,596
Leasehold improvements 2 130,369 151,107
----------- -----------
2,858,631 3,174,609
Less accumulated depreciation (1,501,289) (2,150,610)
----------- -----------
$ 1,357,342 $ 1,023,999
=========== ===========
4. Short-Term Debt and Warrants Issued with Debt
Short-term debt consists of the following at December 31:
1997 1998
---------- ----------
Promissory notes issued September 30, 1996 $3,000,000 $2,318,605
Revolving line of credit 5,545,592 2,996,125
Promissory note issued January 10, 1997 500,000 414,826
Promissory note issued January 22, 1998 800,000
Promissory note issued March 4, 1998 200,000
Promissory note issued June 15, 1998 100,000
Promissory note issued July 13, 1998 150,000
Promissory note issued July 13, 1998 30,000
Unamortized debt discount (149,340) (46,605)
---------- ----------
$8,896,252 $6,962,951
========== ==========
On January 22, 1998 and March 4, 1998, the Company executed two
subordinated promissory notes with an affiliate of a significant
stockholder. Total principal of $800,000 and $200,000 was originally due on
the maturity dates of July 22, 1998 and September 4, 1998, respectively. In
conjunction with the issuance of these promissory notes, the Company issued
a warrant to purchase 200,000 shares of the Company's common stock with an
exercise price of $1.65 per share and a term of five years. On July 22,
1998, the Company amended the two subordinated promissory notes by
extending their maturity dates to January 4, 1999. Interest for both notes
was prepaid through the issuance of 57,121 shares of the Company's common
stock. In conjunction with the amendment of these promissory notes, the
Company issued an additional warrant to purchase 200,000 shares of the
Company's common stock with an exercise price of $1.65 per share and a term
of five years. In August 1998, the payment terms of the notes were further
amended and an additional warrant to purchase 60,231 shares of the
Company's common stock with an exercise price of $1.65 per share and a term
of three years was issued. The fair value of the warrants was recorded as a
debt discount. Note that the Company is currently in default on the
payments due under these promissory notes.
On June 15, 1998 and July 13, 1998, the Company executed three promissory
notes with affiliated stockholders in the amounts of $100,000, $150,000 and
$30,000. The notes accrue interest at the rate of 9.00% per annum and were
originally due in full on November 15, 1998 and October 15, 1998. See note
11 regarding their conversion of the promissory notes into common stock
subsequent to December 31, 1998.
On January 10, 1997, the Company executed a $500,000 subordinated
promissory note with an affiliate of a significant stockholder. Principal
payments of $27,778 are due monthly, beginning May 1, 1998, through the
maturity date of October 1, 1999. Interest has been prepaid through the
issuance of 59,144 shares of the Company's common stock. In conjunction
with the issuance of the promissory note, the Company issued a warrant to
purchase 100,000 shares of the Company's common stock with an exercise
price of $1.65 per share and a term of five years. The fair value of the
warrant was recorded as a debt discount.
On April 1, 1997, the Company amended the payment terms of a $625,000
subordinated promissory note issued in 1996, extending the maturity date to
September 30, 1997. Interest for the extension period was prepaid through
the issuance of 7,289 shares of the Company's common stock. In conjunction
with the amendment of the promissory note, the Company issued a warrant to
purchase 125,000 shares of the
<PAGE>
Company's common stock with an exercise price of $1.65 per share and a term
of six years. The fair value of the warrant was recorded as a debt
discount.
On September 30, 1996, the Company executed a $3,000,000 subordinated
promissory note with an affiliate of a significant stockholder. Principal
payments of $166,667 are due monthly, beginning May 1, 1998, through the
maturity date of October 1, 1999. Interest has been prepaid through the
issuance of 387,109 shares of the Company's common stock. In conjunction
with the issuance of the promissory note, the Company issued a warrant to
purchase 600,000 shares of the Company's common stock with an exercise
price of $1.65 per share and a term of five years. The fair value of the
warrant was recorded as a debt discount.
During 1998, the Company amended its secured revolving line-of-credit
agreement by extending the expiration date to October 31, 1999. In
conjunction with the extension, the Company issued a warrant to purchase
17,210 shares of the Company's common stock with an exercise price of $1.65
per share and a term of five years. The fair value of the warrant was
recorded as a debt discount. The maximum borrowing limit is the lesser of
$8,000,000 or an amount determined as a percentage of the Company's
eligible accounts receivable and inventory. The line of credit bears
interest at the highest LIBOR rate in effect each month, plus 4.88% (10.50%
at December 31, 1998) provided that the interest rate in effect each month
is not less than 8.00%. The interest charged each month shall be a minimum
of $10,000, regardless of the amount of obligations outstanding. As of
December 31, 1998, the Company had no availability under the line of
credit.
The Company's debt arrangements contain certain covenants, including, among
others, limitations on the incurrence of additional debt and restrictions
on the payment of dividends to stockholders. The Company has violated its
covenants regarding providing its lenders with audited financial statements
within 90 days of the end of its fiscal year. No covenant waivers have been
obtained and accordingly, all of the Company's debt arrangements are
callable by the lenders. The debt arrangements are secured by the assets of
the Company, with the line of credit ranking senior to the subordinated
promissory notes in liquidation.
5. Capital Stock and Warrants Issued with Equity
Preferred Stock
All preferred stock is convertible, at the option of the holder, into
common stock at a conversion rate of one-for-one, subject to adjustment in
certain circumstances. At the option of the Company, all of the preferred
stock will automatically convert into shares of common stock immediately
prior to the first to occur of the following events: (i) closing of the
initial public offering of the Company's common stock or (ii) closing of a
sale of not less than 80% of the stock or substantially all of the assets
of the Company if the purchase price is in excess of $1.65 per share of
common stock.
In the event of liquidation of the Company, the holders of preferred stock
will be entitled to be paid out of the assets, prior and in preference to
any payment to common stock, the initial sales price per share plus all
accrued or declared but unpaid dividends thereon. If assets available for
distribution are insufficient to make payment in full on the liquidation
preferences, the assets will be distributed ratably based on each share's
percentage of the aggregate liquidation preference. Any remaining assets
legally available for distribution shall be distributed ratably to the
holders of the common stock.
Voting Rights and Board Seats
Each share of common and preferred stock are entitled to one vote, on an as
converted basis, and vote together as a single class upon any matter
submitted to stockholders for a vote.
Dividend Rights
The holders of common and preferred stock are entitled to receive, out of
funds legally available, cash dividends, when, as and if declared by the
Company's board of directors. The holders of the preferred stock are
entitled to receive cash dividends in an amount equal to the common
equivalent per share dividend declared on the common stock prior to the
payment of any cash dividends on the common stock. There are no declared
but unpaid dividends to date.
<PAGE>
Common Stock Subscription Receivables
In 1997, the Company had financed, for certain stockholders, the purchase
of shares of the Company's common stock. In 1998, the outstanding
subscription receivables and related stock issued were cancelled.
Warrants Issued with Equity
During 1995, the Company sold common stock in a private placement. The
stockholders also received warrants to purchase additional 852,803 shares
of common stock at $1.50 per share. These warrants originally expired in
1997; however, the maturity dates were extended to the earlier of 45 days
following the date the warrant holders are notified by mail that they will
expire or May 31, 2000. Also during 1995, warrants were issued to
purchase 143,470 and 54,804 shares of common stock at $.85 and $1.38 per
share, respectively, as a commission for the private placement of the
Company's preferred stock. These warrants expire in December 1999.
During 1997, warrants for the purchase of 60,380 shares of common stock at
$1.65 were issued in conjunction with the preferred stock private
placement. These warrants expire on April 17, 1999. Also, during 1997,
additional warrants for the purchase of 176,471 shares of common stock at
$1.50 per share were issued with the sale of common stock. These warrants
expire in May 2000. A consultant was issued a warrant for services
performed to purchase an additional 50,000 shares at $1.65 which expire in
March 2002.
During 1998, in conjunction with the preferred stock private placement,
preferred stockholders also received warrants to purchase an additional
167,683 shares of common stock at $1.65 per share. An additional issuance
of warrants to purchase 150,020 shares of common stock at $1.65 per share
were issued to agents of the Company for payment of services rendered in
connection with the private placement of the Company's preferred stock.
These warrants expire on April 17, 1999.
6. Stock Options and Stock Warrants
The Board of Directors has authorized the issuance of stock options to
employees, including officers and directors, to purchase shares of common
stock under a 1993 non-qualified stock option plan and a 1995 qualified
stock option plan and reserved 2,550,000 shares of common stock for
issuance thereto. In November 1997, the board of directors adopted a 1997
Stock Option/Stock Issuance Plan for the issuance of stock and stock
options to employees, directors and consultants and has since reserved
3,700,000 shares of common stock for issuance thereto.
The following table summarizes stock option and stock warrant activity for
1997 and 1998:
Weighted- Weighted-
Number of Average Number of Average
Stock Exercise Stock Exercise
Options Price Warrants Price
--------- --------- ---------- ---------
Outstanding at December 31, 1996 2,734,759 $ .66 1,748,254 $1.50
Granted 2,627,850 1.65 561,851 1.60
Exercised (241,000) .28
Forfeited (1,472,009) .71
---------- ---------
Outstanding at December 31, 1997 3,649,600 1.30 2,310,105 1.53
Granted 1,918,000 1.65 795,644 1.65
Exercised (153,750) .11
Forfeited (2,106,350) 1.60
---------- ---------
Outstanding at December 31, 1998 3,307,500 1.36 3,105,749 1.31
========== =========
<PAGE>
The weighted-average grant-date fair values of stock options granted during
1997 and 1998 were $.98 and $.40, respectively. The weighted-average
grant-date fair values of stock warrants granted during 1997 and 1998 were
$.44 and $.38, respectively. As of December 31, 1998, there were stock
options for 1,769,297 shares of the Company's common stock available for
grant under the plans, and the weighted-average remaining contractual life
of stock options outstanding and the weighted-average exercise price of
stock options exercisable were 9.0 years and $.42 per share, respectively.
Stock options vest over periods determined by the Company's Board of
Directors, generally two to four years. All stock warrants outstanding are
exercisable and the weighted-average contractual life of stock warrants
outstanding was 2.0 years.
The fair value of each stock option grant was estimated on the date of
grant using the Black-Scholes minimum-value option-pricing model with the
following weighted-average assumptions used for grants in the years ended
December 31, 1997 and 1998: dividend yield of zero; expected volatility of
zero; risk-free interest rates ranging from 5.50% to 6.38%; and an expected
term of five years. The risk-free interest rate used in the calculation is
the yield on the grant date of the U.S. Treasury Strip with a maturity
equal to the expected term of the option.
The fair value of each stock warrant grant was estimated on the date of
grant using the Black-Scholes pricing model with the following weighted-
average assumptions used for grants in the years ended December 31, 1997
and 1998: dividend yield of zero; expected volatility of 55%; risk-free
interest rates ranging from 5.50% to 6.38%; and an expected life of three
to five years.
Had the Company recognized compensation cost for stock options granted to
employees and directors based on the fair value of the stock options
granted as of the grant date as prescribed by SFAS No. 123, net loss would
have been increased to the pro forma amounts indicated in the table below:
1997 1998
----------- -----------
Net loss -- as reported $(5,815,090) $(8,311,897)
Net loss -- pro forma (5,939,897) (8,507,695)
Basic and diluted net loss
per share -- as reported (.38) (.54)
Basic and diluted net loss
per share -- pro forma (.39) (.55)
7. Income Taxes
The Company's net deferred tax assets consist of the following at December
31:
1997 1998
------------ -----------
Net operating loss carryforwards $ 3,193,398 $ 6,133,815
Temporary differences 602,240 522,171
Research and development credits 51,775 51,775
------------ -----------
Gross deferred tax assets 3,847,413 6,707,761
Less valuation allowance (3,847,413) (6,707,761)
------------ -----------
Net deferred tax assets $ -- --
============ ===========
The Company has net operating loss carryforwards aggregating approximately
$16,444,466, which expire from 2008 through 2018. The Company's research
and development credits expire from 2008 through 2018. The Internal Revenue
Code places certain limitations on the annual amount of net operating loss
carryforwards and research and development credits which can be utilized if
certain changes in the Company's ownership occur. The Company believes that
with the acquisition by Global MAINTECH Corporation, pursuant to Section
382 of the Internal Revenue Code, there has been a change in the ownership
and the net operating loss carryforwards and research and development
credits may be significantly limited. Future changes in the Company's
ownership may further limit the use of such benefits. The Company has
recorded a valuation allowance against its deferred tax assets as it
believes it is currently more likely than not that such benefits will not
be realized.
<PAGE>
The income tax benefit differs from the amount computed by applying the
U.S. federal income tax rate of 34% to loss before income taxes for the
following reasons:
Year Ended December 31,
-----------------------------
1997 1998
----------- -----------
U.S. federal income tax benefit
at statutory rate $ 1,977,130 $ 2,826,045
Change in valuation allowance (2,141,774) (2,860,348)
State income tax benefit, net
of federal expense 196,550 259,354
Other nondeductible items (31,906) (225,051)
----------- -----------
Income tax benefit $ -- $ --
=========== ===========
8. Retirement Plan
During 1996, the Company adopted a 401(k) plan effective January 1, 1997,
covering all eligible employees meeting certain age and service
requirements. The plan provides for discretionary matching contributions
by the Company equal to 50% of the participant's contributions, up to a
maximum of 3% of the employee's compensation. Total Company contributions
to this plan totaled $69,578 and $70,246 during 1997 and 1998,
respectively.
9. Other Related Party Transactions
Two of the Company's customers owned 3.8% of the Company's outstanding
common stock as of December 31, 1998. Sales to these distributors during
1997 and 1998 were $10,757,726 and $7,888,986, respectively. As of
December 31, 1997 and 1998, these distributors owed the Company $1,392,197
and $1,225,883, respectively.
10. Commitments and Contingencies
The Company leases its office, production and sales facility and certain
office equipment under non-cancelable operating leases. Rent expense
aggregated $540,105 and $612,171 in 1997 and 1998, respectively. Future
minimum lease payments under non-cancelable operating lease arrangements
are as follows:
1999 $ 651,718
2000 630,456
2001 354,368
2002 30,408
2003 6,195
----------
$1,673,145
==========
The Company has been named as the defendant in a wrongful termination
action filed by a former Chief Executive Officer. Management believes the
action is without merit but is currently unable to determine the ultimate
outcome of resolution of the action or estimate reasonably the amount of
loss, if any, which may result from resolution of this matter.
11. Subsequent Events
In January 1999, the Company issued 60,606 shares of common stock to a
stockholder as compensation for services rendered in conjunction with the
Company's issuance of preferred stock in 1998.
On March 9, 1999, the Company issued 297,151 shares of common stock as
payment for principal and interest related to the $280,000 promissory notes
from affiliated stockholders.
During April 1999, the Company was acquired by Global MAINTECH Corporation,
a Minneapolis based Company in the business of enterprise management
software for data centers and received $1.9 million of cash from Global
MAINTECH Corporation to fund operations.
<PAGE>
UNAUDITED HISTORICAL AND PRO FORMA COMBINED FINANCIAL STATEMENTS
Introduction
The historical interim consolidated financial statements of the Company and
the historical interim financial statements of Breece Hill Technologies, Inc.
("BHT") 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 unaudited pro forma combined
financial statements give effect to the Company's acquisition (the
"Acquisition") of BHT, have been prepared on the basis of assumptions described
below and include assumptions relating to the allocation of the consideration
paid for BHT to the consolidated assets and liabilities of BHT based on
preliminary estimates of their respective fair values. The actual allocation of
such consideration may differ from that reflected in the pro forma combined
financial statements after an appropriate review of the fair values of the
assets and liabilities of BHT has been completed. Amounts allocated will be
based upon the estimated fair values at the time of the Acquisition which could
vary significantly from the amounts reflected in the unaudited pro forma
financial statements. The Acquisition has been accounted for using the purchase
method of accounting.
Historical and Pro Forma Combined Statements of Operations (Unaudited)
The following unaudited pro forma combined statement of operations for the
fiscal year ended December 31, 1998 has been prepared by combining the unaudited
historical consolidated statement of operations of the Company for the fiscal
year ended December 31, 1998 with the unaudited historical statement of
operations of BHT for the fiscal year ended December 31, 1998, adjusted to give
effect for the Acquisition as if it had occurred on January 1, 1998. The
following unaudited pro forma combined statement of operations for the first
quarter of fiscal 1998 ended March 31, 1998 has been prepared by combining the
unaudited historical consolidated statement of operations of the Company and the
unaudited historical statement of operations of BHT for the quarter ended March
31, 1998, adjusted to give effect to the Acquisition as if it had occurred on
January 1, 1998. The following unaudited pro forma combined statement of
operations for the first quarter of fiscal 1999 ended March 31, 1999 has been
prepared by combining the unaudited historical consolidated statement of
operations of the Company and the unaudited historical statement of operations
of BHT for the quarter ended March 31, 1999, adjusted to give effect to the
Acquisition as if it had occurred on January 1, 1999. The unaudited pro forma
combined financial statements may not necessarily reflect the actual results of
operations of the Company which would have resulted had the purchase of BHT
occurred as of the dates presented. The unaudited pro forma information is not
necessarily indicative of future results of operations for the combined
companies.
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------------------------
December 31, December 31, 1998
1998 December 31, -------------------------
the 1998 Pro Forma Pro Forma
Company BHT Adjustments Combined
----------- ------------ ----------- ---------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales $ 6,209 $35,140 $ $ 41,349
------- ------- ------- --------
Costs and expenses:
Cost of sales (excluding
depreciation and amortization) 2,323 27,273 494 (1) 30,090
Selling, general and administrative expenses 5,705 14,902 2,020 (1) 22,627
Interest, net 184 1,277 167 (2) 1,628
------- ------- ------- --------
Total costs and expenses 8,212 43,452 2,681 54,345
------- ------- ------- --------
Loss before taxes (2,003) (8,312) (2,681) (12,996)
Provisions for income taxes - - -
Net loss attributable to common stockholders $(2,034) $(8,312) $(2,681) $(13,027)
======= ======= ======= ========
Net loss per common share -- basic and diluted $(0.11) $(0.54) $(0.71)
Weighted-average common shares outstanding 18,352 15,393 18,352
</TABLE>
See accompanying Notes to the Unaudited Historical and Pro Forma Combined
Financial Statements below.
<PAGE>
<TABLE>
<CAPTION>
Quarter Ended
-------------------------------------------------------
March 31, March 31, March 31, 1998
1998 1998 -------------------------
Company BHT Pro Forma Pro Forma
Adjustments Combined
----------- ------------ ----------- ---------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Net Sales $ 1,796 $10,042 $ $11,838
------- ------- ------- -------
Costs and expenses:
Cost of sales (excluding
depreciation and amortization) 684 7,007 494 (1) 8,185
Selling and administrative expenses 904 2,754 505 (1) 4,163
Interest, net (29) 504 41 (2) 516
Total costs and expenses 1,559 10,265 1,040 12,864
------- ------- ------- -------
Earnings (loss) before taxes 237 (223) (1,040) (1,026)
Provisions for income taxes - - - -
Net earnings (loss) $ 237 $ (223) $(1,040) $(1,026)
======= ======= ======= =======
Net earnings (loss) per common
share -- basic 0.014 (0.015) (0.062)
Net earnings (loss) per common
share -- diluted 0.012 (0.015) (0.062)
Weighted-average common
shares outstanding-basic 16,625 15,308 16,625
Weighted-average common shares
outstanding-diluted 19,785 15,308 16,625
</TABLE>
See accompanying Notes to the Unaudited Historical and Pro Forma Combined
Financial Statements below.
<TABLE>
<CAPTION>
Quarter Ended
-------------------------------------------------------
March 31, March 31, March 31, 1998
1998 1998 -------------------------
Company BHT Pro Forma Pro Forma
Adjustments Combined
----------- ------------ ----------- ---------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Net Sales $ 2,580 $ 9,217 $ $11,797
------- ------- ------- -------
Costs and expenses:
Cost of sales (excluding
depreciation and amortization) 751 6,935 494 (1) 8,180
Selling and administrative expenses 1,886 1,894 505 (1) 4,285
Interest, net 218 255 41 (2) 514
------- ------- ------- -------
Total costs and expenses 2,855 9,084 1,040 12,979
------- ------- ------- -------
Earnings (loss) before taxes
and accounting change (275) 133 (1,040) (1,182)
Provisions for income taxes - - - -
Earnings (loss) before cumulative effect
of accounting change attributable to
common stockholders $ (318) $ 133 $(1,040) $(1,225)
======= ======= ======= =======
Earnings (loss) per common
share -- basic (0.011) 0.009 (0.064)
Earnings (loss) per common
share -- diluted (0.011) 0.008 (0.064)
Weighted-average common
shares outstanding 19,026 15,339 19,026
Weighted-average common shares
outstanding 19,026 17,472 19,026
</TABLE>
See accompanying Notes to the Unaudited Historical and Pro Forma Combined
Financial Statements below.
<PAGE>
Historical and Pro Forma Interim Combined Balance Sheet (Unaudited)
The following unaudited pro forma combined balance sheet as of March 31,
1999 has been prepared by combining the unaudited historical consolidated
balance sheet of the Company as of March 31, 1999 with the unaudited historical
balance sheet of BHT as of March 31, 1999 adjusted to give effect to the
Acquisition as if it had occurred on March 31, 1999. The unaudited pro forma
financial statements may not necessarily reflect the actual financial position
of the Company which would have resulted had the purchase of BHT occurred as of
the date presented. The unaudited pro forma information is not necessarily
indicative of the future financial position for the combined companies.
<TABLE>
<CAPTION>
March 31, March 31,
1999 1999 Pro Forma Pro Forma
the Company BHT Adjustments Combined
----------- --------- ----------- ---------
(In thousands)
<S> <C> <C> <C> <C>
Cash $ 2,260 571 $ $ 2,831
Receivables, net 3,000 4,852 7,852
Inventories, net 1,013 2,500 494 (1) 4,007
Other current assets 974 183 1,157
------- -------- ------- -------
Total current assets 7,247 8,106 494 15,847
------- -------- ------- -------
Software development costs, net 2,782 2,782
Purchased technology and other intangibles, net 1,352 13,862 (1) 15,214
Net property, plant and equipment 1,086 775 1,861
Other assets 310 310
------- -------- ------- -------
Total assets $12,777 $ 8,881 $14,356 $36,014
======= ======== ======= =======
Notes payable $ 1,002 $ 7,414 $(4,013)(2) $ 4,403
Accounts payable 1,186 9,146 (2,000)(2) 8,332
Current maturities of long-term debt 225 225
Other current liabilities 797 207 1,004
Total current liabilities 3,210 16,767 (6,013) 13,964
------- -------- ------- -------
Subordinated notes payable, less current portion 1,625 4,733 (2) 6,358
Preferred stock of subsidiary 1,000 (2) 1,000
Preferred stock 3,748 9 (9)(1) 3,748
Common stock - 155 (155)(1) -
Additional paid-in capital 8,281 10,621 (3871)(1) 15,031
Treasury stock - (142) 142 (1) -
Retained earnings (4,087) (18,529) 18,529 (1) (4,087)
------- -------- ------- -------
Total stockholders' equity 7,942 (7,886) 14,636 14,692
------- -------- ------- -------
Total liabilities and stockholders' equity $12,777 $ 8,881 $14,356 $36,014
======= ======== ======= =======
</TABLE>
See accompanying Notes to the Unaudited Historical and Pro Forma Combined
Financial Statements below.
<PAGE>
Historical and Pro Forma Interim Combined Statements of Cash Flows (Unaudited)
The following unaudited pro forma combined statements of cash flows for the
fiscal three month periods ended March 31, 1998 and 1999 have been prepared by
combining the unaudited historical consolidated statements of cash flows of the
Company for the three month fiscal periods ended March 31, 1998 and 1999,
respectively, with the unaudited historical statements of cash flows of BHT for
the three month fiscal periods ended March 31, 1998 and 1999, respectively,
adjusted to give effect to the Acquisition as if it had occurred at the
beginning of the respective periods. The unaudited pro forma combined financial
statements may not necessarily reflect the actual results of cash flows of the
Company which would have resulted had the purchase of BHT occurred as of the
dates presented. The unaudited pro forma information is not necessarily
indicative of cash flows for the combined companies.
<TABLE>
<CAPTION>
As of March 31, 1998
The Pro-forma Pro-forma
Company BHT Adjustments Combined
------- ------- ----------- ---------
(In thousands)
Cash flows from operating activities:
<S> <C> <C> <C> <C>
Net income (loss) $ 237 $ (223) $(1,040) $(1,026)
Adjustments to reconcile net income to
Net cash provided (used) in operating activities:
Depreciation and amortization 284 152 1,040 1,476
Changes in operating assets and liabilities:
Accounts receivable (897) (630) (1,527)
Inventories (243) (314) (557))
Other assets (743) (647) (1,390)
Accounts payable 78 (2,549) (2,000)(2) (4,471)
Accrred expenses and other 79 4,197 4,276
------- ------- ------- -------
Cash provided (used) by operations (1,205) (14) (2,000) (3,219)
------- ------- ------- -------
Cash flows from investing activities:
Purchase of property and equipment (60) (454) (514)
Investment in software development costs (439) (439)
Reduction in other assets 87 516 603
------- ------- ------- -------
Cash provided (used) by investing activities (412) 62 - (350)
------- ------- ------- -------
Cash flows from financing activities:
Proceeds from issuance of preferred stock 275 725 (2) 1,000
Proceeds from issuance/(repurchase) of common stock 487 109 275 (1) 871
Issuance/(payments) of short-term notes payable (1,101) (1,101)
Issuance/(payments) of long-term notes payable 1,000 (2) 1,000
------- ------- ------- -------
Cash provided by financing activities 487 (717) 2,000 1,770
------- ------- ------- -------
Net increase (decrease) in cash (1,130) (669) - (1,799)
Cash and cash equivalents at beginning of period 1,726 1,484 - 3,210
------- ------- ------- -------
Cash and cash equivalents at
end of period $ 596 $ 815 - $ 1,411
======= ======= ======= =======
</TABLE>
See accompanying Notes to the Unaudited Historical and Pro Forma Combined
Financial Statements below.
<PAGE>
<TABLE>
<CAPTION>
As of March 31, 1999
The Pro-forma Pro-forma
Company BHT Adjustments Combined
------- ------- ----------- ---------
(In thousands)
Cash flows from operating activities:
<S> <C> <C> <C> <C>
Net income (loss) $ (174) $ 133 $(1,040) $(1,081)
Adjustments to reconcile net income to
Net cash provided (used) in operating activities:
Depreciation and amortization 684 216 1,040 1,940
Changes in operating assets and liabilities:
Accounts receivable (717) (256) (973)
Inventories (151) 1,081 930
Other assets (206) 26 (180)
Accounts payable 319 (1,899) (2,000)(2) (3,580)
Accrred expenses and other 226 666 892
------- ------- ------- -------
Cash provided (used) by operations (19) (33) (2,000) (2,052)
------- ------- ------- -------
Cash flows from investing activities:
Sale/(Purchase) of property and equipment (142) 33 (109)
Investment in software development costs (865) (865)
Reduction in other assets (3) (3)
------- ------- ------- -------
Cash provided (used) by investing activities (1,010) 33 - (977)
------- ------- ------- -------
Cash flows from financing activities:
Proceeds from issuance of preferred stock 1,504 1,000 (2) 2,504
Proceeds from issuance/(repurchase) of common stock 564 280 (2) 844
Issuance/(payments) of short-term notes payable 607 451 (4,013)(2) (2,955)
Issuance/(payments) of long-term notes payable (50) 4,733 (2) 4,683
------- ------- ------- -------
Cash provided by financing activities 2,625 451 2,000 5,076
------- ------- ------- -------
Net increase (decrease) in cash 1,596 451 - 2,047
Cash and cash equivalents at beginning of period 664 120 784
------- ------- ------- -------
Cash and cash equivalents at
end of period $ 2,260 $ 571 - $ 2,831
======= ======= ======= =======
</TABLE>
See accompanying Notes to the Unaudited Historical and Pro Forma Combined
Financial Statements below.
<PAGE>
Notes to the Unaudited Historical and Pro Forma
Combined Financial Statements
General
The Company, Global MAINTECH Corporation, through its wholly owned
subsidiaries, Global MAINTECH, Inc. ("GMI") and SinglePoint Systems, Inc.
("SSI"), 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 terminal 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 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. Beginning in 1999, the Company began selling some of its products
as stand-alone software products without the hardware delivery features also
embodied in the VCC.
Breece Hill Technologies, Inc.("BHT"), a wholly owned subsidiary as of
April 14, 1999, engages in the design, development, manufacture and marketing of
computer magnetic tape subsystems for general commercial application.
Basis of Presentation
The historical interim consolidated financial statements of the Company and
the historical interim financial statements of BHT 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 of the Company contained in the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1998 and with the audited financial statements
and the notes thereto of BHT contained herein.
Earnings (Loss) Per Share
Basic and diluted net earnings (loss) per share is computed by dividing the
net earnings (loss) by the weighted-average number of shares of common stock
outstanding during the period for the Company and BHT, respectively. During
1999, dilutive shares were excluded from the net loss per share computation as
their effect is antidilutive.
Purchased Technology and Other Intangibles
The Company has recorded the excess of purchase price over net tangible
assets as purchased technology and customer lists based on the fair value of
these intangibles at the date of purchase. These assets are amortized over their
estimated economic lives of five years using the straight-line method. Recorded
amounts for purchased technology are regularly reviewed and recoverability
assessed. The review considers factors such as whether the amortization of
these capitalized amounts can be recovered through forecasted undiscounted cash
flows.
Reclassifications
<PAGE>
Certain amounts previously reported by the Company and BHT in 1998 have
been reclassified to conform to the 1999 presentation.
Acquisition of Breece Hill Technologies, Inc.
The Acquisition was effective April 1, 1999 and accounted for using the
purchase method of accounting. The Company issued 4,500,000 warrants to purchase
common stock of the Company exercisable at $1.50 as initial compensation to the
shareholders of BHT. Management has estimated that these warrants have a fair
value of $6,750,000. Additional compensation may be due to the shareholders of
BHT on or about the anniversary date of the Acquisition depending on BHT's
revenues over the twelve months following the acquisition as well as certain
other factors. The amount of additional compensation is indeterminate but may
include cash and a maximum of 5,500,000 shares of common stock of the Company.
The Company has remained as the surviving entity as its Stockholders have
retained the majority of voting control.
The pro forma adjustments are as follows:
1. To reflect the preliminary estimates of the adjustments necessary to record
the BHT assets acquired and liabilities assumed at their respective fair
values, as required by Accounting Principles Board Opinion No. 16. The
step-up of inventory in the amount of $494,000 would have resulted in
additional costs of sales (excluding depreciation) during each period. The
excess of purchase cost over the estimated fair value of the BHT assets
acquired and liabilities assumed in the amount of $13,862,000 has been
reflected as purchased technology, which has been amortized over an average
period of seven years.
2. To reflect the issuance of a $2,000,000 noncurrent note payable, bearing
interest of 9.75% per annum, the extension of payment terms and additional
interest on $2,733,000 of existing notes payable, the conversion of
$1,000,000 of existing notes payable into Series B preferred stock of BHT
and the conversion of $280,000 of existing notes payable into common stock
of BHT, all of which were consummated as a condition of the Acquisition.
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Item
- ------ ----
23.1 Consent of PricewaterhouseCoopers LLP, independent accountants
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-33576) of Global MAINTECH Corporation of our
report dated May 15, 1999 relating to the financial statements of Breece Hill
Technologies, Inc., which appears in Amendment No. 2 on Form 8-K/A of Global
MAINTECH Corporation dated April 14, 1999.
/s/ PricewaterhouseCoopers LLP
Broomfield, Colorado
August 5, 1999
