SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment No 1 to Form 10-KSB
On Form 10-KSB/A
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 or 15(d) OF THE
SECURITIES ACT OF 1934 (Fee required)
FOR THE FISCAL YEAR ENDED APRIL 30, 1995
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (No fee required)
For the transition period from to
-------------------- -----------------------
COMMISSION FILE NUMBER 0-17206
MANAGEMENT TECHNOLOGIES, INC.
-----------------------------
(Name of small business issuer in its charter)
NEW YORK 13-3029797
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
630 Third Avenue 10017-6705
----------
New York, New York
------------------
(Zip Code)
(Address of principal executive
offices)
Issuer's telephone number, including area code (212) 983 5620
--------------
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, par value $.01 per share (Title of Class)
------------------------------------------------------------
Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year: $18,687,000
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days: July 31, 1995: $13,493,225.
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: as of July 31, 1995: 15,685,669
Transitional Small Business Disclosure Format (check one): Yes No X
----- -
PART I
ITEM 7. FINANCIAL STATEMENTS
MANAGEMENT TECHNOLOGIES, INC.
AND SUBSIDIARIES
Consolidated Financial Statements
April 30, 1995 and 1994
With Independent Auditors' Reports Thereon
MANAGEMENT TECHNOLOGIES, INC.
AND SUBSIDIARIES
Table of Contents
Independent Auditors' Reports
Consolidated Balance Sheet
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Operations
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
KPMG Peat Marwick LLP
345 Park Avenue
New York, NY 10154
Independent Auditors' Report
----------------------------
The Board of Directors and Stockholders
Management Technologies, Inc.:
We have audited the accompanying consolidated balance sheet of Management
Technologies, Inc. and subsidiaries as of April 30, 1995 and the related
consolidated statement of operations, stockholders' equity, and cash flows for
the year 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 audit.
We conducted our audit 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 audit provides 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 Management
Technologies, Inc. and subsidiaries at April 30, 1995, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company has suffered recurring losses from operations
and at April 30, 1995, has a working capital deficiency that raises substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 3. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
August 15, 1995 (Signed) KPMG PEAT MARWICK LLP
KPMG Member firm of Klynveld Peat Marwick Goerdler
GOLDSTEIN AND MORRIS
CERTIFIED PUBLIC ACCOUNTANTS, P.C
501 FIFTH AVENUE
NEW YORK, N.Y. 10017
ALBERT M. GOLDSTEIN
EDWARD B. MORRIS TELEPHONE (212) 682-3378
ALAN J. GOLDBERGER FAX (212) 599-6438
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders
Management Technologies, Inc.
New York, New York
We have audited the accompanying consolidated balance sheet of Management
Technologies, Inc. and subsidiaries as at April 30, 1994 and 1993 and the
consolidated statements of changes in shareholders' equity, operations and cash
flows for the years ended April 30, 1994 and 1993. 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 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 financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Management
Technologies, Inc. and subsidiaries at April 30, 1994 and 1993 and the results
of its operations and its cash flows for the years ended April 30, 1994 and 1993
in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note A to the
financial statements, the Company has incurred substantial losses from
operations and as at April 30, 1994 has a working capital deficiency and a
capital deficiency that raise substantial doubt about its ability to continue as
a going concern. Management's plans in regard to these matters are also
described in Note A. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
New York, New York /s/ Goldstein & Morris
July 26, 1994
MANAGEMENT TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
April 30, 1995
(in $'000)
ASSETS
Current assets:
Cash 833
Accounts receivable; billed; net of allowance for 4,655
doubtful accounts of $473
unbilled; net of 1,618
allowance for doubtful accounts of $488
Prepaid expenses and other current assets 1,803
TOTAL CURRENT ASSETS 8,909
Investment in affiliate -
Property and equipment, net of accumulated depreciation 1,810
Intangible assets, less accumulated amortization 14,663
Other assets 1,839
TOTAL ASSETS 27,221
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable 2,898
Accrued expenses 4,545
Taxes payable 2,053
Note payable on acquisition 3,607
Deferred income 3,632
Other current liabilities 1,180
TOTAL CURRENT LIABILITIES 17,915
Non current note payable on acquisition 1,766
Other long term liabilities 1,521
TOTAL LIABILITIES 21,202
Stockholders' equity
Common stock $.01 par value. Authorized shares, 140
200,000,000 issued shares 14,540,169
Additional paid in capital 42,472
Accumulated deficit (36,063)
Foreign currency translation adjustment (530)
Total stockholders' equity 6,019
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 27,221
The accompanying notes are an
integral part of these financial statements
MANAGEMENT TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(in $000 except share data)
Additi
onal
Common Stock paid Retai Transl Total
in ned ation
stock amount capital Earni Adjust
ngs ment
Balances at April 2,083,388 21 14,604 (15,326) (701)
30, 1993
Issuance of common 20,911 0 218 218
stock for
compensation and
services
Sale of common 1,108,316 11 4,554 4,565
shares
Issuance of common 46,286 1 304 305
stock for
cancellation of
indebtedness
Issuance of common 493,669 7 2,034 2,041
stock for
cancellation of
subordinated notes
Issuance of common 35,714 0 625 625
stock for business
acquisition
Shares paid for and 182,857 0
yet to be issued
Net loss for the (8,050) (8,050)
year
Balances at April 3,971,141 40 22,339 (23,376) 0 (997)
30, 1994
Issuance of common
stock for
compensation and 84,236 1 285 286
services
Issuance of common
stock for
cancellation of 549,056 5 739 744
subordinated notes
Issuance of Common 9,935,736 94 19,109 19,203
Stock
Net loss for the (12,687) (12,687)
year
Translation (530) (530)
adjustment
Balances at April 14,540,169 140 42,472 (36,063) (530) 6,019
30, 1995
The accompanying notes are an integral part of these financial
statements
MANAGEMENT TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
Years ended April 30, 1995 and 1994
(in $'000)
1995 1994
Revenues
Software products 11,901 912
Maintenance Fees 4,556 1,141
Customer service fees 2,230 267
Total Revenues 18,687 2,320
Cost and expenses
Cost of software products 1,063 1,076
Cost of maintenance 2,893 635
Costs of customer service 968 153
Selling, general and administrative 14,036 4,055
Amortization of Goodwill 409
Write down of program development costs 2,893
Depreciation 571 333
Restructuring charges 655
Severance costs 760
Acquired research and development 8,740
Total costs and expenses 29,440 9,800
Loss from operations (10,753) (7,480)
Share of loss in affiliate (1,112) (403)
Interest expense (822) (167)
Net loss (12,687) (8,050)
Net loss per share outstanding (1.70) (2.79)
Weighted average number of common shares 7,445,421 2,886,777
outstanding
The accompanying notes are an integral part of these financial
statements
MANAGEMENT TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Twelve months ended April 30, 1995 and 1994
(in $000)
1995 1994
Cash flow from operating activities (12,687) (8,050)
Net income (loss)
Adjustments to reconcile net income
(loss) to net cash
provided by (used in) operating
activities
Write off of purchased research and 8,740
development
Write off investment in affiliate 647
Depreciation and amortization 1,183 1,409
Amortization of financing costs 196
Write off of property, plan & 102
equipment
Provision for doubtful accounts 491
receivable
Accrued interest maturing with long 163
term debt
Write down of program development 2,893
costs
Issuance of stock for compensation 243
Changes in assets and liabilities
net of effects from acquisitions:
(Increase) Decrease in accounts (1,633) 99
receivable
(Increase) Decrease in unbilled (1,614)
accounts receivable
(Increase) Decrease in other (729) 367
current assets
(Increase) Decrease in other 75 5
assets
Increase (Decrease) in accounts 1,521 (199)
payable
Increase (Decrease) in accrued 1,599
expenses
Increase (Decrease) in payroll 1,036 (103)
taxes payable
Increase (Decrease) in deferred (2,902) (694)
income
Increase (Decrease) in other (495)
liabilities
Net cash provided by (used in) operating (4,666) (3,671)
activities
Cash flows from investing activities:
Payment for Winter Partners net of cash (10,944)
acquired
Payment for DESISCo net of cash acquired (5,931)
Proceeds from sale (acquisition) of fixed 531 (49)
assets
Investment in affiliate (647)
Net cash provided (used in) from investing (16,344) (696)
activities:
Cash flow from financing activities
Proceeds from notes payable 3,033
Repayment of notes payable (764) (60)
Reduction in bank overdraft 0 (50)
Proceeds from issuance of common stock 19,423 4,565
Net cash provided in financing activities 21,692 4,455
Effect of exchange rate on cash (39)
INCREASE IN CASH AND CASH EQUIVALENTS 643 88
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 190 102
CASH AND CASH EQUIVALENTS - END OF PERIOD 833 190
Supplemental disclosure of cash flow
information
Cash paid during the year for interest 53 4
Non-cash financing activities
Issuance of common stock for business 0 625
acquisition
Issuance of common stock in conversion of 0 2,041
subordinated debt
Issuance of common stock in conversion of 730
debt
Issuance of common stock for cancellation 66
of debt
Capital lease obligations 517
The accompanying notes are an integral part of these financial
statements
(1) Summary of Significant Accounting Policies
------------------------------------------
DESCRIPTION OF BUSINESS
The primary business of Management Technologies, Inc. is the
development, installation, marketing, maintenance and support of an
integrated line of standardized, international, banking application
software packages.
Following, and as a result of the acquisitions noted below, the Company
decided to discontinue directly selling and supporting its former
product known as ManTec. The Company is organized into two operating
divisions (Abraxsys Systems and Trading Systems) reflecting the
Company's principal product lines.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
Management Technologies, Inc. and its wholly-owned subsidiaries. All
significant intercompany balances and transactions have been eliminated
in consolidation. The results of the Company include the operations of
its subsidiaries that were acquired during the course of the year as
follows:-
Winter Partners from July 14, 1994.
companies
DESISCo from January 1, 1995.
As used hereafter, ``Company'' refers to Management Technologies Inc.,
and its consolidated subsidiaries unless otherwise stated.
REVENUE RECOGNITION
The Company accounts for revenue in conformity with Statements of
Position (SOP) 91-1 and 81-1.
In accordance with SOP 91-1, revenue from IBS-90 and Abraxsys license
fees are recognized on delivery to the customer, provided that no
significant vendor obligations remain and collection of the resulting
receivable is deemed probable. The Company's contracts with its
customers provide for payment to be made on specified schedules that
may differ from the timing by which revenue is recognized. Billings
made in advance of delivery are recorded as deferred income. The
amount by which recognized revenue exceeds billings to customers is
shown as unbilled accounts receivable.
Customer service fees represent fees charged to customers for
modifications of standard software to customer specifications or work
charged on the basis of the time spent on the task as required by
customers. Such fees are billed to customers and revenue is recognized
as the work is performed.
Revenues and profits on delivery of the OpenTrade product are
recognized on the percentage-of-completion method of accounting as
costs are incurred (cost to cost basis) in conformity with SOP 81-1. A
19
prudent estimate is made of the profit attributable to work completed
and is recognized once the outcome of the contract can be assessed with
reasonable certainty. If the estimate indicates a loss, the entire
loss is accrued immediately. The amount by which recognized revenue
exceeds billings to customers is shown as unbilled accounts
receivable.
Maintenance fees are recognized proportionately over the term of the
maintenance agreement. Maintenance fees that have yet to be recognized
as income are recorded as deferred income.
FOREIGN CURRENCY TRANSLATION
Foreign currency transactions and financial statements of foreign
subsidiaries are translated into US dollars at prevailing or current
rates respectively except for revenues, costs and expenses that are
translated at average current rates during each reporting period.
Gains and losses resulting from foreign currency transactions are
included in income currently. Gains and losses resulting from the
translation of financial statements are excluded from the statement of
income and are credited or charged directly to a separate component of
shareholders' equity.
PRODUCT RESEARCH AND DEVELOPMENT
Costs associated with product research, development and enhancement are
recorded as follows:
20
. Speculative technical research, usually incurred as input to
discussions related to product planning are expensed until the
point at which the product reaches technological feasibility.
Subsequent costs incurred to the point where the product is
available for general release to the customer are capitalized.
. The costs of development specific to individual customers and not
generally applicable to other customers are expensed.
. Development costs applicable to core products, which are
predominantly of a maintenance nature, are expensed as incurred.
Such development is generally designed to insure that products are
kept up to date with regulatory requirements, accounting policies
and banking practices and do not result in new sellable products.
Research and development expense for the year ended April 30, 1995,
amounted to $5,847 which is included in selling, general and
administrative expenses. In addition, the Company had a one time charge
of $8,740 of in-process research and development as a result of the
acquisitions and as discussed in note 2. There were no such costs for
the year ended April 30, 1994. No research and development costs were
capitalized during the year ended April 30, 1995.
21
PROPERTY, PLANT AND EQUIPMENT
Property, plant, and equipment are stated at cost. Plant and equipment
under capital leases are stated at the present value of minimum lease
payments.
Plant and equipment under capital leases are depreciated straight line
over the shorter of the lease term or estimated useful life of the
assets.
Depreciation on plant and equipment is calculated on the straight-line
method over the estimated useful lives of the assets as follows:
Computer Equipment two to five years
Furniture, fixtures four to five years
and fittings
Leasehold over the minimum period of
improvements the lease
Motor vehicles four years
INCOME TAXES
The Company conforms to the provisions of Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes. Under the
asset and liability method of Statement 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable
to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and
22
operating loss and tax credit carry-forwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. Under Statement 109, the effect
on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
INCOME (LOSS) PER COMMON SHARE
Income (loss) per common share is calculated using the weighted average
number of common shares outstanding for each period adjusted for
incremental shares assumed issued for common stock equivalents using
the treasury stock method, provided that the effect is not anti-
dilutive.
INTANGIBLES
The Company recorded the fair value of software technology acquired as
a result of the purchase of Winter Partners and DESISCo. Software
technology is amortized straight line over its estimated useful life of
ten years. Amortization expense of acquired software technology is
included as a component of cost of software product.
The Company has recorded as goodwill, the cost in excess of the fair
value of net assets of companies acquired in purchase transactions.
Goodwill is amortized straight line over fifteen years.
The Company annually evaluates whether the goodwill is fully
recoverable based on undiscounted projected net cash flows of the
23
related businesses. In the event that the Company determines that
unamortized balances of goodwill are not likely to be fully recovered,
the Company will recognize the consequent impairment of the value of
goodwill in its operating results.
(2) Acquisitions
------------
The Winter Partners companies
-----------------------------
On July 14, 1994, the Company acquired Winter Partners Limited, Winter
Partners, Inc, (subsequently renamed MTi Abraxsys Systems, Inc), Winter
Partners Pte Limited (subsequently renamed MTi Abraxsys Systems Pte
Limited), and Winter Partners (HK) Limited (subsequently renamed MTi
Abraxsys Systems (HK) Limited) from Winter Partners Holding AG. The
companies, hereafter referred to as the WP companies, formed the
international banking software division of Winter Partners, a Zurich,
Switzerland based company.
The Company paid a total of $ 12,800 for the WP companies. The Company
financed the acquisition through a combination of cash from its own
resources, short term borrowings and proceeds from new share issuances.
The transaction was accounted for as a purchase and on this basis
resulted in a one-time charge of $7,000 for purchased research and
development that was in process at the date of acquisition. The
Company recognized $1,300 in acquired software technology in this
transaction and recorded goodwill of $5,270 as the excess of the
purchase price over the fair value of the net assets acquired.
24
In the twelve months ended April 30, 1994, the WP companies generated
net revenues after the cost of products sold of $ 9,760 and income
before interest, taxes and write-off of research and development, of $
450. The Company included in its results for the year ended April 30,
1995, the results of the Winter Partners companies for the period July
14, 1994,(date of acquisition) to April 30, 1995, inclusive. During
that period the Winter Partners companies recorded revenues of
approximately $ 12,500 and income before interest, taxes and the write-
off of in-process research and development of approximately $1,460.
The Company has not yet registered the acquisition of Winter Partners
Limited with, or paid the appropriate ad valorem duties to, the
regulatory authorities in the United Kingdom. Accordingly, the
official records in the UK continue to show the ownership of Winter
Partners Limited as Winter Partners Holding AG, its former parent
company. However, Winter Partners Holding has no further claim against
the Company, nor can it reclaim ownership of Winter Partners Limited.
Digital Equipment Service Industries Solutions Company Limited
--------------------------------------------------------------
Effective January 1, 1995, the Company acquired all the issued and
outstanding shares of Digital Equipment Service Industries Solutions
Company Limited (``DESISCo'') (subsequently renamed MTi Trading Systems
Limited) from Digital Equipment Co. Limited and associated companies.
The purchase price for DESISCo, hereafter referred to as MTi Trading
Systems, was $10,169. The Company financed the acquisition through a
25
combination of short term borrowings, its own resources, new share
issuances and deferred payment arrangements. The Company expects to
meet payments due under the deferred payment arrangement through a
combination of its own cash resources and proceeds from new share
issuances.
The transaction was accounted for as a purchase and on this basis
resulted in a one-time charge of $1,740 for purchased research and
development that was in process at the date of acquisition. The
Company recognized $3,000 in acquired software technology in this
transaction and recorded goodwill of $5,700 as the excess of the
purchase price over the fair value of net assets acquired.
In the twelve months ended June 30, 1994, DESISCo reported net revenues
after cost of product sold of $ 14,000 and losses before interest,
taxes and charge for research and development, of $8,800. The Company
included in its results for the year ended April 30, 1995, the results
of MTi Trading Systems for the period January 1, 1995,(date of
acquisition) to April 30, 1995, inclusive. During that period MTi
Trading Systems recorded revenues of approximately $5,400 and income
before interest, taxes and the charge for in-process research and
development of approximately $185.
See also notes 7, 8 and 11.
(3) Liquidity
---------
26
The Company has suffered recurring losses from operations and at April
30, 1995, has a working capital deficiency of $ 9,006.
The Company believes that until such time as it may experience a
substantially expanded cash flow from operations, it will be required to
seek alternative sources of funds for working capital and to fund the
continuation of its development and marketing efforts. The Company
intends, to the extent required to provide working capital and to
satisfy all outstanding debt, to continue to sell its securities
directly to investors in private placements. It may, in the future,
attempt to arrange an offering through a private placement agent or
underwriter.
The Company believes that it will be able to arrange sufficient debt
and/or equity financing that it anticipates will, together with funds
generated from operations, be sufficient for the Company's requirements
for the coming year. There is, however, no certainty that it will be
successful in making such arrangements.
(4) Prepaid expenses and other current assets
-----------------------------------------
Prepaid expenses and other current assets consist principally of
prepaid expenses and other items.
27
(5) Investment in Affiliated Company
--------------------------------
The Company owns approximately sixty-one per cent (1994 - 68%) of New
Paradigm Software Corporation, Inc. (``NPSC''), which is a non-public
company engaged in software development. The Company does not have a
controlling voting power commensurate with its equity ownership. The
Company accounts for its investment in accordance with the equity
accounting convention and accordingly has fully written off its
investment in and advances to NPSC in the year ended April 30, 1995.
The Company does not have any additional financial obligation to NPSC
and therefore has not recorded losses in excess of its total investment
in NPSC.
Summarized financial information of NPSC at March 31, 1995,(NPSC's
fiscal year end) is shown below on a 100 per cent basis.
$
Current assets 424
Non current 628
assets
Current (433)
liabilities
Long-term debt (1,820)
Stockholders' (1,200)
equity
Revenues 70
28
Expenses 2,644
--
Net loss (2,574)
-------
MTI's aggregated investment in and advances to NPSC at April 30, 1995,
and 1994 were $0 and $894 respectively.
29
(6) Property, plant and equipment
-----------------------------
Balances of major classes of assets and allowances for depreciation and
amortization are as follows:
1995
----
Computer Equipment 1,738
Leasehold improvement 90
Office Furniture and Equipment 77
Automobiles 450
-
2,355
less accumulated depreciation and 545
amortization
-
1,810
-
30
(7) Intangible Assets
-----------------
Intangible assets as of April 30, 1995 are made up of software products
acquired with the Winter Partners and DESISCo businesses and goodwill.
$
Goodwill 10,566
less accumulated
depreciation
(1955 of $404)
Acquired software 4,097
technology
less accumulated
amortization
(1995 of $203)
--
14,663
------
See also notes 2, 8 and 11.
(8) Other assets
------------
Other assets relate to a receivable from Digital Equipment Co. Ltd
(``Digital'') and affiliated companies. Under the purchase agreement,
31
Digital will repay $ 1,839 (1,143 pounds sterling), the cash held in
MTi Trading Systems immediately prior to the date of acquisition, once
the Company has paid the full purchase price for MTi Trading Systems.
The Company anticipates making the final payment by 30 June 1996 in
accordance with the terms of the purchase agreement, unless a different
schedule is agreed with Digital.
See also notes 2, 7 and 11.
(9) Accrued expenses
----------------
Accrued expenses include payroll, severance and other staff related
liabilities. The major components of accrued expenses are as follows:-
$
Staff related costs 1,514
Accrued Legal, professional and 731
other fees
Restructuring/severance 1,113
Accrue interest 140
Accrued cost of product sold 345
Other accrued expenses 702
---
4,545
-----
(10) Taxes Payable
-------------
32
Taxes payable comprise payroll deductions plus estimated penalties and
interest for late payment.
(11) Notes payable on acquisition
----------------------------
As discussed in Note 2, the Company has agreed to a deferred payment
schedule with Digital Equipment in respect of its acquisition of
DESISCo. Interest is due at the rate of 10% per annum until the debt
is fully repaid. Payments under this arrangement are as follows:
$
Due June 30, 1995 1,998
Due December 31, 1995 1,609
-----
Total due in less than one year 3,607
Due June 30, 1996 1,766
-----
Total deferred purchase liability 5,373
-----
Digital Equipment has agreed, in principle, to a proposal from the
Company with respect to rescheduling the payment due June 30, 1995.
The proposal from the Company includes assignment of some specific
trade receivables, the proceeds of which would be applied against the
outstanding payment. However, no specific details of the rescheduling
have been agreed.
See also notes 2, 7, and 8.
33
(12) Deferred income
---------------
Deferred income consists of the following:-
$
Deferred maintenance 3,548
income
Deferred rent benefit 84
--
3,632
-----
The Company expects to recognize as revenue all deferred income within
the next fiscal year.
(13) Other current liabilities
-------------------------
Other current liabilities consist of the following:-
$
Notes payable 634
Subordinated convertible 357
debt
Lease liabilities 189
---
1,180
-----
34
Subsequent to April 30, 1995, the Company made payments of $ 275 on the
notes payable. The Company is currently negotiating with the holders
of approximately $ 360 of the notes to extend their terms.
Subsequent to April 30, 1995, the subordinated convertible note
together with accumulated interest was converted into shares of the
Company's common stock.
(14) Other long term liabilities
---------------------------
Other long term liabilities consist of the following
$
14.75% note due July 11, 1996 923
8% convertible note payable 270
July 31, 1996
Lease liabilities 328
---
1,521
-----
Under the terms of the original agreement, interest on the 14.75% note
was payable on October 1, 1994, January 1, 1995, and April 1, 1995.
Repayment of the note was due July 11, 1995. Further to the Company's
failure to pay interest installments due October 1, 1994, and January
1, 1995, by a new agreement dated January 23, 1995, the term of the
note was extended to July 11, 1996, and the principal sum increased to
35
incorporate the unpaid interest installments. Under the new agreement,
interest is due on July 1, 1995, October 1, 1995, January 1, 1996,
April 1, 1996 and July 1, 1996. The new agreement also calls for
payments of principal calculated as 10% of the Company's reported
income, before taxes, for each fiscal quarter; such payments are to be
made 90 days after the end of each fiscal quarter. Accordingly, the
Company paid $ 102 in principal repayment in respect of the Company's
fiscal quarter ended January 31, 1995. At August 11, 1995, the Company
has not made payment of the interest due on July 1, 1995.
36
Interest on the 8% note is payable semi-annually on January 31 and July
31 through the term of the note. The note is convertible into shares
of the Company's common stock at the holder's option on or before the
due date of the note; the conversion price being 70% of the market
price over the 20 business days immediately preceding the date of
conversion. The note automatically converts, on the same terms, on the
due date. Of the initial sum of $1,000 borrowed by the Company, the
holder elected to convert $ 730 plus accrued interest, effective April
30, 1995.
(15) Shareholders' Equity
--------------------
Effective May 15, 1995, the Company reverse split its common stock on a
1 for 7 basis. All share data given in these statements is calculated
on the post reverse split basis. Any data given for prior years has
been restated accordingly.
(1) Warrants
At April 30, 1995, the Company has outstanding Class C warrants as
follows:
Number of Exercise Expiration
shares price date
2,696,333 $8.33 February 28,
1997
37
Each Class C warrant entitles the holder to purchase one share of
common stock. The expiration date is February 28, 1997. The warrants
are redeemable at the option of the Company at $ 0.35 per warrant under
certain circumstances.
The Company has other warrants as follows:
Number of shares Exercise Expiration date
price
3,085,714 $1.75 November 4, 1997
571,429 $2.10 July 10, 2000
95,238 $4.55 none
95,238 $4.90 none
162,381 $5.25 none
(2) Options
At April 30, 1995, the Company had outstanding options as follows:-
NUMBER EXERCISE NOT
OF PRICE E
SHARES
Qualified Stock
38
Options Plan -
Employees
Shares under option 26,657 $1.75- (a)
at April 30, 1994 $7.84
Granted 0
Lapsed (19,372)
Exercised (428)
-----
Shares under option 6,857
at April 30, 1995
Options exercisable 6,857
at April 30, 1995
Non qualified Stock (b)
Options Plan for
Directors, Officers
and Consultants
Shares under option 245,357 $1.75-
at April 30, 1994 $8.75
Granted 307,428
Lapsed (120,357)
Reclassified (64,2280
Exercised (128,85)
-------
39
7)
--
Shares under option 239,343
at April 30, 1995
Options exercisable 235,771
at April 30, 1995
Non qualified Stock
Options Plan for Key
Employees
Shares under option 76,585 $1.75-
at April 30, 1994 $15.75
Granted 57,142
Lapsed (42,857)
Reclassified 64,228
Exercised (14,285)
-------
Shares under option 140,813
at April 30, 1995
Options exercisable 65,236
at April 30, 1995
Other Options (d)
Warrants under 600,000
40
option at April 30,
1994
Granted -
Lapsed -
Exercised -
Warrants under 600,000
option at April 30,
1995
(a) The Company adopted a qualified stock option plan under
which the granting of options to purchase up to 8,000,000 shares has
been authorized. The exercise price of the options is determined by
the Option's Committee appointed by the Board of Directors, but can be
no less than 85% of the fair market value of the Company's stock on the
date the option is granted. The maximum period during which each
option may be exercised cannot exceed five years from the date of
grant.
(b) The Company adopted a non qualified stock option plans for
directors, officers and consultants under which the granting of options
to purchase up to 15,000,000 shares has been authorized. The exercise
price of the options is determined by the Option's Committee appointed
by the Board of Directors. The maximum period during which each option
may be exercised cannot exceed five years from the date of grant.
(c) The Company adopted a non qualified stock option plans for
key employees under which the granting of options to purchase up to
10,000,000 shares has been authorized. The exercise price of the
options is determined by the Option's Committee appointed by the Board
41
of Directors. The maximum period during which each option may be
exercised cannot exceed five years from the date of grant.
(d) The Company has issued options to two former officers of
the Company in connection with their employment and severance
arrangements. The Company has issued an option to purchase the
Company's common stock and Class ``C'' warrants to an investor. The
Company has 600,000 outstanding options for C warrants. Of this total,
428,572 options entitle the holder to purchase 142,857 units made up of
1 share of common stock and 3 Class C warrants at $7.00 per unit. The
balance of 171,428 options entitle the holders to purchase one Class C
warrant at $3.01 per warrant.
(3) Conversion shares
The Company has 307,186 shares issuable upon conversion of certain
debt.
42
(16) Leases
------
The Company has various non cancelable operating leases, primarily for
leasehold premises, that expire over the next three to five years.
These leases generally contain renewal options for periods ranging from
three to five years and require the Company to pay all costs such as
maintenance and insurance.
Future minimum lease payments under non cancelable operating leases
(with initial or remaining lease terms in excess of one year) and
future minimum capital lease payments as of April 30, 1995, are:
OPERATIN CAPIT
G LEASES AL
LEASE
S
$ $
Year ended April 30
1996 1,259 194
1997 1,029 152
1998 449 118
1999 207 62
2000 207 3
Later years through 0
2001
Total minimum lease 3,151 529
43
payments
Rental expense under operating leases was $ 1,337 net of sublease
income of $66 in the year ended April 30, 1995, and $ 270 in the year
ended April 30, 1994.
(17) Income Taxes
------------
At April 30, 1995, the Company had net operating loss carry-forwards
for federal income tax purposes in the United States of $ 32,600 which,
subject to I.R.S. review, will be available to offset future federal
taxable income, if any, through 2010 and are subject to annual
limitations in use.
The Company has provided a valuation allowance equal to the estimated
future benefit to be derived from the net operating loss carry forward
as it is more likely than not that the losses will not be utilized.
44
(18) Pension Benefits
----------------
Effective May 1, 1992 the Company commenced a non-employer
contributory 401(k) plan.
MTi Abraxsys Systems, Inc., a wholly owned subsidiary of the Company,
has a 401(k) savings plan for its employees. MTi Abraxsys Systems, Inc.
contributes 25% of the employee's contribution up to 6% of the
employee's salary.
The employees of the Company's subsidiaries in the UK are entitled to
receive additional compensation equivalent to 7% of their annual base
salaries in lieu of any other pension provision by the Company.
The Company's Singapore subsidiary contributes to the Government of
Singapore Central Provident Fund in respect of all employees. The rates
paid during the year ended April 30, 1995, varied between 18.5% and 20%
of the employees' gross compensation subject to monthly maximum
payments.
The aggregated payments for pension and equivalent benefits during the
year ended April 30, 1995, were $ 431. There were no such costs for
the year ended April 30, 1994.
(19) Business and Credit Concentrations
----------------------------------
45
Most of the Company's customers are located in Europe and the countries
of the former Soviet Union. No customers accounted for more than ten
percent of the Company's revenues in 1995. Three customers accounted
for 69% of total revenue in the year ended April 30, 1994.
(20) Industry Segment and Geographic Information
-------------------------------------------
The Company operates in one principal industry segment; the design,
production, sales and maintenance of computer systems and software
together with the provision of associated services to international
banking and financial institutions.
The Company derives 86% of its gross revenues from its international
subsidiaries, primarily in the UK. Those companies produced 87% of net
income before allocation of corporate overhead, the write-off of in-
process research and development, interest and taxes. These companies
represent 93% of the Company's assets.
(21) Commitments and Contingencies
-----------------------------
The Company is involved in various claims and legal actions arising in
the ordinary course of business. In the opinion of management, the
ultimate disposition of these matters will not have a material adverse
effect on the Company's consolidated financial position, results of
operations or liquidity.
(22) Quarterly Financial Data (Unaudited)
------------------------------------
46
The following represents the company's unaudited quarterly financial
results. For the first three quarters of 1995, amounts have been
restated to reflect the allocation of the purchase price of the Winter
partners and DESISCo acquisitions to in-process research and
development, acquired software technology and goodwill (see Note 2).
The entire purchase price had previously been reported as goodwill,
until such time as the company had the necessary information to make an
allocation. In addition, the earnings per share figures have been
restated for 1995 to reflect the 1 for 7 reverse stock split (see Note
15). Earnings per share are computed independently for each of the
quarters presented. Therefore, the sum of the quarterly earnings per
share in 1995 does not equal the total computed for the year due to
stock transactions which occurred during 1995.
FIRST SECOND THIRD FOURTH
1995 QUARTER QUARTER QUARTER QUARTER TOTAL
REVENUES 817 4,949 6,354 6,567 18,687
OPERATING
(LOSS)/ (7,786) 973 (685) (3,255) (10,753)
PROFIT
NET (LOSS)/
INCOME (8,919) 868 (782) (3,854) (12,687)
NET (LOSS)/
EARNINGS
PER (1.90) .15 (.10) (.33) (1.70)
SHARE
47
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
MANAGEMENT TECHNOLOGIES, INC.
By: /s/ S. Keith Williams
------------------------
S. Keith Williams, President
and Chief Operating Officer
Date: September 13, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant, and
in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
President, Chief September 13,1995
/s/ S. Keith Operating Officer
------------
and Director
Williams
--------
(Principal Executive
S. Keith Williams Officer)
Chief Financial September 13, 1995
48
/s/ Nigel J. Cole Officer and
-----------------
Principal Accounting
Nigel J. Cole
Officer
/s/ Peter Svennilson Chairman of the September 13, 1995
-----------------
Board and Director
Peter Svennilson
/s/ Daniel Sladden Director September 13, 1995
--------------
Daniel Sladden
Claudio Guazzoni Director September , 1995
September , 1995
----------------
Director
Edward S. Stone
/s/ William L. Meaney
--------------
Director September 13, 1995
William L. Meaney
49
Director September , 1995
-----------------
Anthony J. Cataldo
