SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(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, 1996
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: $21,226,675
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: August 9, 1996: $17,217,129
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: as of August 9, 1996: 30,856,929
Transitional Small Business Disclosure Format (check one): Yes No X
----- -
ITEM 1. DESCRIPTION OF BUSINESS
Business Development
The Registrant (the "Company") was incorporated in the State of New York in
1980.
Effective November 15, 1993, the Company acquired a 75% equity interest in New
Paradigm Software Corporation ("NPSC"). The Company's equity interest in NPSC
was entirely divested in the fiscal year ended April 30, 1996 in consideration
for the cancellation of certain debt.
On July 13, 1994, the Company acquired four companies from Winter Partners
Holding A.G., a Swiss corporation: Winter Partners Limited, a United Kingdom
company with offices in London, England, Winter Partners, Inc., a United States
company with offices in New York, New York, Winter Partners (Pte) Limited, a
Singapore company with offices in Singapore and Winter Partners (HK) Limited, a
Hong Kong company with offices in Hong Kong (collectively, the "Winter Partners
Subsidiaries"). (The acquisition of the Winter Partners Subsidiaries is referred
as the "Winter Partners Acquisition"). Winter Partners, Inc., Winter Partners
(Pte) Limited, and Winter Partners (HK) Limited, were subsequently renamed MTi
Abraxsys Systems, Inc., MTi Abraxsys (Pte) Limited and MTi Abraxsys Systems (HK)
Limited, respectively. The Winter Partners subsidiaries, as renamed, are
referred to as the "Abraxsys division".
In addition, all shares issued and outstanding of Winter Partners Information
Technology (UK) Limited, a dormant wholly owned subsidiary of Winter Partners
Limited at the acquisition of the Winter Partners subsidiaries, were transferred
from Winter Partners Limited to the Company. Winter Partners Information
Technology (UK) Limited was subsequently renamed MTi Holdings (UK) Limited ("MTi
Holdings").
Effective January 1, 1995, the Company and MTi Holdings acquired all the issued
and outstanding shares in Digital Equipment Service Industries Solutions Company
("DESISCo") subsequently renamed MTi Trading Systems Limited ("MTi Trading"),
from Digital Equipment International Limited, Digital Equipment International
bv, Digital Equipment (Holdings) bv, and Digital Equipment Co. Ltd.
By agreement effective as of March 1st, 1996, by and between the Company and
McDonnell Information Systems Group Plc. ("MDIS"), the Company agreed to acquire
(i) certain assets used primarily in the international banking systems business
of the Seller (the "Acquired Assets"), (ii) McDonnell Informatique S.A., a
wholly owned subsidiary of MDIS, and to assume certain rights and obligations of
the Seller under certain contracts between the Seller and certain third parties
(the "Assumed Contracts"). McDonnell Informatique S.A. has been renamed
Management Technologies Informatique S.A. The Acquired Assets include all
equipment, hardware, software, books, records and all rights and interest of the
Seller to all intangible intellectual property rights in certain international
banking software products marketed under the trademarks of IBS Version 5 and
Pro-IV IBS(OpenBank). (Collectively, the acquisition of the Acquired Assets and
the assumption of the Assumed Contracts is referred to as the "MDIS
Acquisition")
The Company's other wholly owned subsidiaries in the United Kingdom, New York,
Massachusetts, Canada and Australia are currently inactive.
The Company's principal executive offices are located at 630 Third Avenue, New
York, New York 10017. The telephone number is (212) 983 5620. Unless the
context otherwise requires, references to the Company include its subsidiaries.
The Company develops, markets, licenses, installs, maintains and supports
software products catering to the needs of international banks and financial
institutions.
Business of the Registrant
Products and Services
- ---------------------
The Company's principal products are Abraxsys, IBS-90, IBS-V5, Pro-IV IBS and
the OpenTrade family of products. Abraxsys, IBS-90, IBS-V5 and Pro-IV IBS are
back office international banking software products running on mid range
computer systems. Abraxsys and IBS-90 are installed at approximately 75
locations in over 30 countries; IBS-V5 and Pro-IV IBS are installed at
approximately 70 locations in over 25 countries. The OpenTrade family of
products comprises OpenTrade, TradeWizard, MediaWizard and EXTRA. OpenTrade is
used by 50 customers supporting 6,000 trading positions. The Company also
markets and licenses a line of integrated software packages for financial
institutions known as ManTec through an agent, Global Financial Systems Limited
("GFS"). The Company no longer directly supports its ManTec product line. GFS
provides support to certain clients. The ManTec product line runs on IBM and
IBM-compatible mainframe computers.
IBS-90
IBS-90 is a comprehensive suite of computer programs designed to support the
back office activities of banks. The product provides transaction processing
support for a bank's foreign exchange and money market business, including
various off-balance sheet instruments such as forward rate agreements, interest
rate swaps, and repurchase agreements; various lending activities including
commercial, syndications, participations and mortgages; trade finance business,
retail or demand deposit accounting business; funds transfer activities and
general ledger and other accounting support.
IBS-90 was a fully developed product of the Winter Partners Subsidiaries at the
time of their acquisition by the Company. It was accounted for as acquired
software technology and is being amortized over the estimated 10 year life of
the product.
The product offers multi-lingual support, multi-branch and multi-currency
processing, right down to profit center level. In addition, the product offers
some front office support to various functional areas in a bank, the most
important of which is teller/cashier support.
IBS-90 reflects some 20 years of an evolutionary development and previous
versions have been marketed under the names of International Banking System
("IBS"), and Arbat Banking System ("ABS").
The product is written in the AIMS computer language, a derivative of the widely
accepted BASIC language. The product runs on any model of Digital Equipment
Corporation's ("Digital") VAX computer processors, under the control of
Digital's proprietary operating system VMS.
IBS-90 was first marketed in 1989, and to date has been licensed to
approximately 50 banks.
From the date of the Winter Partners Acquisition through 30 April, 1996, the
Company has entered into 9 new license agreements.
ABRAXSYS
Abraxsys is a complete redevelopment of IBS-90 and is now marketed as one of the
Company's prime offering to banks to computerize bank's back offices. Abraxsys
was a software product in development by the Winter Partners Subsidiaries at the
time of their acquisition by the Company. It had not reached the technological
feasibility stage at the time of acquisition and was, therefore, treated as
acquired research and development, and the associated costs were expensed during
the year ended April 30, 1995. Developement costs were expensed in the year
ended April 30, 1996.
Abraxsys comprises essentially the same functions as IBS-90, but includes many
enhancements, particularly in the processing support offered to a bank's trade
finance department.
However, the most significant difference between IBS-90 and Abraxsys is that
Abraxsys is written in the industry standard `C' language and runs on a variety
of hardware platforms and operating systems, the most significant of which is
UNIX. This means that Abraxsys can meet the market demand for so-called open
systems, which is not true of IBS-90.
Development of Abraxsys commenced in 1990 and to date over 150 man years of
effort have been involved in the development.
A treasury subset of the product was first announced in September 1993, and the
full product availability was announced in October 1994, however due to
implementation difficulties the first fully live customer came on stream at the
end of 1995/beginning of 1996. Today there are 6 live customers and to date, 9
Abraxsys systems have been licensed. The delay in 1995 resulted in no sales for
Fiscal 1996, however since the successful implementation in Asia Pacific and
especially Eastern and Central Europe there has been significant interest and
the company is close to signing several opportunities.
PRO IV - IBS (OPENBANK)
MTi recently acquired the full rights to the products and assets of MDIS Banking
Systems, and as a result we now support the MDIS customer base, comprising
around 30 leading financial institutions at over 70 locations world-wide. Pro-
IV IBS, a suite of banking products developed by MDIS using state-of-the-art
technology, was added to the MTi portfolio of applications and will be
relaunched in October 1996 under the new name OpenBank.
Key features of OpenBank are as follows:
. direct portability from PC to mini to mainframe
. direct portability of applications development skills between machines and
environments
. reduced software maintenance loads
. interoperability with existing software environments
. access to a wide range of popular databases
. fully integrated system security at all levels
Designed to Open Systems standards, OpenBank is independent of database and GUI,
and runs on almost any platform, including different platforms within the same
bank. The product is a modern fourth generation computer language-based
solution which offers a safe migration path from existing systems. It is
designed to interface easily with existing systems, including older legacy
systems, and can be purchased as a complete system or in modules with selected
functionality.
OpenBank will act as a generic name for the whole portfolio of banking systems
products over time, all new releases will be renamed to fit within this
framework. In addition to being a good fit with the existing OpenTrade range of
trading product, the OpenBank name reflects MTi's modern and innovative approach
to providing the technology of the future to the international financial
industry.
The components making up the Pro-IV IBS suite will be launched as separate
products under the OpenBank framework as each component is released, starting
with OpenBank - Trade Finance, which will be released in September 1996.
Subsequent to that will be the launch of OpenBank products offering support for
Treasury, Capital Markets, Commercial Lending and Securities. The trade finance
functionality of OpenBank is exceptional, so much so that it competes directly
with dedicated trade finance applications on the market. This opens up the US
and Western European Market and today it represents over $3,000,000 in
prospective sales.
IBS-V5
IBS-V5 is an integrated transaction processing and trade support system designed
to enable financial institutions to monitor, evaluate and control banking and
trading activities by supplying critical management information in a timely
manner. The product is a proven and stable international banking system,
representing the latest version of a product launched in 1986 by McDonnell
Information Systems ("MDIS") , prior to its acquisition by the Company.
The initial release of IBS-V5 offered the following functional modules: Customer
Information File; Foreign Exchange; Money Market; Commercial Lending; Letters of
Credit; Bills of Exchange; Centralized Nostro Reconciliation; Demand Deposit
Accounting; General Ledger. Between 1987 and 1990, Precious Metals, Money
Transfer, Futures and Options, and International Securities functionality was
added to the product to enhance its applicability to the marketplace.
The inherent flexibility of IBS-V5 makes it capable of providing benefits in all
these areas of banking operations in terms of risk management, provision of
management information, integration of front and back office and automated
settlements.
In addition to new product sales, there is scope for significant revenue to be
gained from existing clients which bought earlier versions of the software. In
particular, there are a number of IBS-V5 users which purchased the source code
of the software as part of the deal, enabling them to carry out their own
customized developments. These clients are now returning to MTi for assistance
with further development, in order to protect the value of the investment they
have already made and to prolong the life of their systems. Since MTi employs
the large majority of development professionals with expertise in this field, it
is natural that these clients come to us for consultancy services and advice.
Our partnership with IDOM (Deloittes and Touche) further exploits this
opportunity and we are currently about to close on a new client which will
represent the first sale on this product in the last two years.
OPENTRADE
The OpenTrade platform is a software product that provides for the management,
distribution and integration of information to a wide range of users in
financial institutions. Used predominantly as an integration platform for
applications requiring access to real-time financial information from a variety
of sources, OpenTrade offers an open application programming interface ("API")
which conforms to relevant industry standards. In addition, OpenTrade conforms
to Microsoft Corporations 's Windows Open System Architecture Extensions for
Real Time (WOSA/XRT), a set of standards which are steadily becoming industry
standards for the integration of real-time information into Microsoft Windows
based applications. Microsoft Windows is a software product of Microsoft
Corporation. The component based architecture of OpenTrade supports a wide
range of application communication services including: real-time, transactional,
messaging or query orientated, thus ensuring that information and applications
of all types throughout an organization can be integrated in an effective
manner.
OpenTrade was a fully developed product of DESISCo at the time of its
acquisition by the Company. It was accounted for as acquired software
technology and is, therefore, being amortized over the estimated 10 year life of
the product.
Equally at home in a local or wide area network ("LAN" or "WAN") environment,
OpenTrade offers users a high performance, fault tolerant platform for
information and application integration. System management features provide
controls on access to and use of information resources and extensive real-time
and paper-based reporting facilities enable managers to audit system, and data
usage.
Continuously developed since 1979, OpenTrade is currently in use at over 50
sites world-wide supporting some 6,000 traders.
TRADEWIZARD
Developed as a native 32-bit application on Microsoft Corporation's Windows NT
software product and based on object-oriented technologies called object linking
and embedding (OLE) - TradeWizard is an advanced software product designed to
support the integration of information and applications at the user's desktop.
Whether the information is real-time, supplied by the traditional information
providers, is multimedia-based and sourced from other external organizations, or
is in a documentary format from within the organization itself, users can easily
display and manipulate the information in support of effective business solution
making.
Designed to assist users in managing the information overload, TradeWizard is
user configurable. Individual users can tailor the display to their specific
job function and personal preferences. Able to display and manipulate
information from a wide variety of sources, TradeWizard is an information
integration workstation offering users access to real-time digital and video
based data, TV and audio news services, video conferencing, fax and mail
services.
TradeWizard was a software product in development by DESISCo at the time of its
acquisition by the Company. It had not reached the technological feasibility
stage at the time of acquisition and was, therefore, treated as acquired
research and development, and the associated costs were expensed during the year
ended April 30, 1995. During the year ended April 30, 1996, TradeWizard did
reach technological feasibility stage and therefore all additional costs are
being capitalized.
First installed at customer sites in December 1994, TradeWizard is achieving
widespread acceptance in the OpenTrade user community, with some 1,000+
positions already installed.
TradeWizard is written in C++ and is available on Microsoft Windows 95, Windows
NT and all major UNIX operating system platforms.
MEDIAWIZARD
MediaWizard is an advanced multimedia integration and video conferencing system
which enables desktop integration of a variety of information in addition to
digital data feeds, including video-based market data services, television,
graphical and textual data.
The requirement on dealing floors for video information distribution has
remained important despite the growth in the availability and use of digital
information services. Many of our competitors have overlooked this.
MediaWizard is the continuation of the development of the Company's video server
product to a highly sophisticated state.
As a result, the Company now has significant opportunities in the USA and Far
East, where the demand for video remains very strong. The Company has recently
signed up with an agent in the USA to distribute and support this product, and
is also taking partners in Asia-Pacific.
EXTRA
EXTRA is a suite of software components which comprises a real-time electronic
exchange trading, order routing, management, analysis and administration system
for equities and equity derivatives originally developed to the Scandinavian
market by Alfred Berg Fondkommission (a subsidiary of ABN Amro Bank NV), the
largest and most sophisticated private client stockbroking and proprietary
trading house in Sweden. The Company acquired certain rights to the product in
return for a commitment to onward development and support, and has recently
entered into a pilot project with a major European stock exchange utilizing some
components. EXTRA is also being adapted for German and Swiss trading markets.
MANTEC
ManTec is a suite of computer programs designed to support the back office
functions of banks. It addresses substantially the same areas of functions as
IBS-90 Abraxsys. The major differences with ManTec is that it is designed to
run exclusively on IBM and IBM-compatible mainframe computers. The popularity
of mainframe computers in the Company's target markets has declined rapidly over
the past few years.
The Company decided in July 1994, following the acquisition of the IBS-90 and
Abraxsys products, to discontinue directly selling and servicing the ManTec
product line. This decision was based on the view that the market for `open'
systems such as Abraxsys was much larger and expanding versus the contracting
market for mainframe systems.
However, in recognition that a small market exists for the ManTec product it was
decided to allow an agent, Global Financial Systems Ltd. ("GFS"), based in
London, England to continue to sell the ManTec product line. The Company shares
in any license fees GFS may generate through the ManTec line.
In the fiscal year ended April 30, 1996, no new ManTec licenses were sold.
The Company's revenues from transactions in which GFS acted as a distributor for
the Company were $0 and $0 for fiscal 1995 and 1996, respectively.
Markets
- -------
The Company markets its products to the international banking area of domestic
and foreign banks. In the United States, the Company believes there are
approximately 850 banks engaged in international banking activities of
sufficient size to require, at least some of the components of the Company's
products. In Europe, the Middle East and the Far East, the Company believes
that there are in excess of 3,000 banking offices which form the primary market
for the Company's software products.
Data processing has become increasingly important to international banking
activities. Management believes that the market potential for more
sophisticated software systems has increased as a result of declining computer
hardware prices, the high cost of staff and the increasing need to process
transactions promptly so as to be able to adequately assess and control
different types of risks. At the same time, management believes that it has
become increasingly more difficult for users to internally develop the software
necessary for their data processing requirements because of the substantial
expense and commitment of personnel and other resources necessary to design and
maintain such software programs.
Distribution Methods of the Products and Services
- -------------------------------------------------
The Company has narrowed its focus to specific geographic areas in which
relatively greater interest has been expressed in particular products (although
there can be no assurance that such focus will translate into sales). The areas
the Company is focusing upon are Western Europe, Eastern and Central Europe, the
Far East and North America.
The Company primarily relies upon its own direct sales force to achieve sales.
In certain geographical markets, the Company has sales agents and/or support
agents. Included among these are GFS for the ManTec product; COMAS in Korea
for Abraxsys; Systex Corporation in Taiwan for Abraxsys; IDOM, Inc. for the
support of the IBS-V5 and Pro-IV IBS products in Central and Eastern Europe, the
Commonwealth of Independant States (former republics of the Soviet Union) and
the US; and Itochu Electronics in Japan.
The Company has appointed a number of additional distributors for its OpenTrade
and TradeWizard products, primarily to enhance sales penetration in certain
countries in Western Europe. These distributors include Eta Beta sri in Italy
and IBE S.A. in Switzerland, Finndata in Scandinavia.
Strategic Alliances
- -------------------
NOVELL CORPORATION ("NOVELL")
At the strategic level, the Company has formed partnerships with significant
players in the computer services market in order to leverage the opportunities
presented by their access to the marketplace. The Company has formed a
strategic partnership with TurnQuay Solutions Limited, a designated industry
partner of Novell, to provide the Open Trade platform product as part of a
networking infrastructure based on the widely used NetWare software product, a
product offering of Novell.
The Company receives royalties from Novell for every product sale that
incorporates the OpenTrade product as a component. Currently Novell has over 4
million clients using its networking products and this is expected to lead to
significant recurring revenue for MTi. The Company's investment will entail the
provision of technology and technical support on a non-exclusive basis: this
means that the risk is minimal and the Company will not be inhibited from
directly selling its products.
COMPUTER SCIENCES CORPORATION ("CSC")
A strategic partnership was signed in April 1996 with CSC in the US, to realize
the benefits of combining CSC's market leadership in systems integration with
the Company's product leadership in financial systems. CSC provides an array of
professional services including management consultancy, business reengineering,
information systems integration and outsourcing, producing US$4,200,000,000
revenue in the year ended March 1996. Under this agreement, the Company and
CSC jointly bid for new systems and cooperate in the delivery of software and
services.
Sources of Revenue
- ------------------
SOFTWARE LICENSING
The Company generally licenses software products to its customers for use under
non-exclusive 5 to 25 year license agreements, and perpetual non-exclusive
license for TradeWizard and OpenTrade. Pursuant to the Company's standard form
of license agreement, the customer pays a fixed license fee which varies
depending on the number of users licensed to access the software, and acquires
the non-transferable and non-exclusive right to use the software at a designated
site. If the customer desires to use the software at multiple locations or to
add further users additional license fees are required. The one-time license
fees for the Company's application software packages currently range from
$100,000 to $2,000,000 per site.
The Company is dependent for license revenues upon sales of the IBS-90,
OpenBank, IBS-V5, Abraxsys, OpenTrade, TradeWizard, MediaWizard and EXTRA. The
Company is no longer dependent on sales of ManTec product lines.
MAINTENANCE
As part of the fixed license fee for the Company's software products, customers
receive, a warranty period of typically 90 days after installation, during which
period the Company provides free maintenance services. After that period, the
Company offers maintenance services to its customers based upon an annual fee
reflecting the service provided by the Company. Maintenance fee revenues are
recognized on an incremental basis over the period of the contract. The Company
warrants that its software will conform with documented specifications. To
date, warranty expense has been minimal.
The Company's maintenance agreements generally provide for the maintenance by
MTI of MTI licensed software at a specified site for a period of one to three
years. Under the maintenance agreements, MTI is required to correct or replace
its licensed software and/or provide services necessary to remedy significant
programming errors attributable to it. Fees for a single site maintenance
agreements may range from approximately $30,000 to $400,000 annually, depending
upon the number of licensed users.
The Company has 155 maintenance agreements in force.
CUSTOMER SERVICES
The company provides support services relating to the custom design and
production of modifications to software products to meet the specific needs of a
customer. In addition, the Company offers a full range of customer support
services, including project planning and management, system installation,
software implementation, user training/education, technical support and
documentation and on-site engineering. The Company charges customers for these
services with the exception of documentation. Customer services fees are
recognized as revenue as work is performed and invoiced by the Company.
THIRD PARTY PRODUCTS
The Company also derives revenues from selling other companies' products. Such
arrangements include sales of both hardware and software. Such sales are either
as part of packaged deals or are where other products are embedded within the
Company's product.
a) Hardware
--------
The Company acts as an authorized Value Added Reseller for Digital Equipment
Corporation and on some IBS-90, Abraxsys and Open Trade deals will sell computer
equipment as an Agent to the end user. In the year ended April 30, 1996, the
Company recognized approximately $717,000 of revenues for sales of Hardware
associated with various product sales.
The Company is also a Sun Authorized Reseller, representing Sun Microsystems. No
direct revenues were recognized in relation to Sun hardware although a number of
software products running on Sun hardware were brought to market during the
year.
Additionally the Company is an Authorized Reseller for IBM delivering Banking
and Trading systems to run on IBM hardware. In the year ended April 30, 1996,
the Company recognized approximately $360,000 in revenue in respect of its
agreement with IBM.
b) Software Products
-----------------
i) Synergy: MTi Trading Systems is an Authorized Reseller for Synergy's
range of technical analysis and charting products. These products complement
the TradeWizard information integration workstation by providing specialist
tools for the analysis and manipulation of real-time information. Since
inception in 1992, some 1600 licenses have been sold by MTi Trading Systems.
During the year to April 30 1996 the Company recognized approximately $326,000
in revenues directly attributable this agreement.
ii) Applix: MTi Trading Systems is an authorized Reseller for the Applix
spreadsheet. The Applix spreadsheet is fast becoming the de facto standard for
arithmetic modeling and "what-if" analysis in UNIX based trading rooms and the
financial sector as a whole. Since inception in January 1995, 65 licenses have
been sold and in the year to April 30 1996 approximately $184,000 in revenues
were recognized in relation to Applix products.
iii) Spreadsheet Link: MTi Trading Systems is the only worldwide
distributor of the FxCalcNet. A next generation product, FxCalcNet extends the
functionality of its forerunner, FxCalc, which is the most widely used foreign
exchange and money markets calculation application in the world. The agreement
with Spreadsheet Link adds over 20,000 existing users of FxCalc to the Company's
prospect list for OpenTrade and TradeWizard based FxCalcNet solutions. No
revenues were recognized in relation to this agreement during the year to April
30 1996. The company signed this agreement in March 1996.
iv) Stor/QM: the Company has a marketing agreement in place with US-based
Microbank Software Inc. to distribute Stor/QM, an advanced data storage,
research and analytical application. Stor/QM is COLD-based (Computer Output to
Laser Disk), and enables PC applications to analyze or consolidate data from
multiple host system reports without special programming. No revenues were
recognized in relation to this agreement during the year to April 30 1996 as the
agreement was not formalized until after the end of the year.
Competition
- -----------
The financial institutions software industry is highly competitive. The Company
believes that the principal factors affecting the marketing of software packages
are product availability, advanced technology, comprehensiveness of product
applications, flexibility, ease-of-use to meet customer needs, software
enhancements, maintenance, customer support, training, documentation, efficient
use of computer hardware and customer references. Price is a primary
consideration to penetrate certain market segments, particularly smaller banks
where automation may be postponed if its cost is deemed prohibitive.
The Company encounters its primary competition from other software vendors.
The Company competes with many companies which have greater financial resources,
more technical personnel and more extensive service capabilities than the
Company. The market is highly fragmented; however, the Company views Midas-
Kapiti International Limited ("MKI"), Internet Systems Corp. ("Internet"),
International Banking Information Systems Limited ("IBIS"), Reuters Limited,
Tibco, a subsidiary of Reuters Limited and formerly Teknekron Software Systems,
Inc., Dow Jones Telerate, Inc. and CSK Micrognosis, Inc. as its principal
industry competitors.
The Company is also subject to substantial competition from potential customers
with existing comprehensive applications software packages for international
banking insofar as such companies might elect to modify rather than replace
existing systems. The Company's ability to compete successfully requires that
it continues to develop and maintain the necessary technical proficiency for
easy assimilation of future technological advances, that it continue to offer
marketable and reliable applications software programs which satisfy the
information management and competitive requirements of banks and financial
institutions, and that it provide sufficient customer support and related
services, as to any of which there can be no assurance.
Dependence on a few major customers
- -----------------------------------
Digital owns several subsidiaries which act as prime contractors to many of the
Company's end customers. The Company has no customers which in fiscal year
ended April 30, 1996 contributed 10% or more of the Company's revenue. The
Company does not consider that it is dependent on any one customer for its
future business success.
Foreign Operators
- -----------------
In the year ended April 30, 1996, the Company established an operating
subsidiary in France by the acquisition of MDIS S.A. in Paris. This adds to the
Company's foreign operations in the United Kingdom, Germany, Singapore, and Hong
Kong which were established during fiscal 1995.
Subsidiaries outside the United States account for 88% of the Company's revenues
in the year ended April 30, 1996.
Included in North America revenues for the years ended April 30, 1996 and 1995
were export revenues of $20,000 and $140,000, respectively.
Research and Development
- ------------------------
The Company continues to be engaged in computer software development and
improvements of its existing software products. The development of applications
software packages for banks and financial institutions is a continuous process.
Technological advances in computer hardware, systems software, industry
deregulation and other regulatory changes affecting banking institutions require
software modifications and result in more complex and comprehensive processing
needs. In the event the Company fails to continue to update its product line,
the Company's products may become obsolete. The Company believes that its
principal products remain competitive. However, the Company is continuing to
engage in research and development activities, principally, in the "open
systems" area. Accordingly, the Company is committed to retaining and
developing competitive product lines.
The Company does not have any material contracts relating to third-party
research and development.
Approximately 40% of the Company's staff, or some 99 people, are engaged in
developing products. Of these, nearly 45 are engaged in developing OpenTrade
and TradeWizard, two on Extra, two on Media Wizard which is essentially funded
by the Company. Some 35 people are engaged in developing Abraxsys and PRO-IV
IBS (OpenBank), again funded by the Company. Some 15 people at any one time are
engaged in developing enhancements to Abraxsys and IBS-90, which are
specifically ordered and funded by particular customers. In the year ended
April 30, 1996, research and development expenses amounted to approximately
$10,524,000. This cost amounted to $5,847,000 in the year ended April 30, 1995.
However, at this time it reflected 10 months of Abraxsys and IBS-90 development
and 4 months of OpenTrade and TradeWizard.
Employees
- ---------
As of April 30, 1996 the Company had 223 salaried employees, as compared with
195 employees as of April 30, 1995. The Company increased its staff during the
year ended April 30, 1996 as a result of the MDIS acquisition. The Company's
employees are not represented by any union or other collective bargaining unit.
The Company believes that it has a satisfactory relationship with its employees.
Trademarks, Copyrights and Licenses
- -----------------------------------
The Company owns certain patents, registered trademarks or service marks, or
registered copyrights for TradeWizard, MediaWizard and OpenTrade. The Company
believes that rapid technological advances in the computer software industry
make it impractical for the Company to obtain patent protection for most of its
products and that it must rely principally upon innovative software engineering
skills and contractual safeguards. The Company seeks to protect its proprietary
software products through restrictions in its license agreements which prohibit
resale, transfer, disclosure or reproduction of the software, except for
archival purposes or to provide back-up copies, and which restrict the
customer's use to designated sites. The Company's software cannot be modified
without the source code, which the Company keeps secure. The Company also
requires employees to enter into non-disclosure agreements prior to joining the
Company. To date, the Company has not been required to enforce the contractual
safeguards relating to the use of its software. The Company also retains
exclusive ownership rights to all software it develops. Pursuant to the
indemnification provisions of its license agreements, the Company agrees to
indemnify customers from losses resulting from any third-party claims that the
Company's software infringes upon proprietary rights of such third-party. The
amount of such indemnification is generally limited to the amount of the license
fee paid by such customer. To date, there have been no such claims.
General
- -------
The Company exited the year ended April 30, 1996 with a backlog of orders in
excess of $6,463,000 together with signed maintenance contracts worth nearly
$10,000,000 in revenues for fiscal 1997 against a backlog of orders of
$5,000,000 and signed maintenance of $6,000,000 for fiscal year 1996. New
distribution and partnering agreements have been reached which has resulted in
the Company's prospective sales being approximately $53,000,000. The Company's
business is not seasonal, nor does the Company do any business with the United
States nor any Government
ITEM 2. DESCRIPTIONS OF PROPERTIES
The Company's principal executive offices are located at 630 Third Avenue, New
York, New York. Details of the lease agreement are shown below. The New York
office also houses the sales and support operation for North America.
In addition to its Executive offices the Company has the following facilities:
LONDON, ENGLAND
- ---------------
BONHILL STREET - new facility leased in March 1996 for UK headquarters housing
development, sales, administration and support.
HOP EXCHANGE - formerly Winter Partners office and UK sales and development
base, now vacant. Premises are being actively marketed with either view to relet
or early termination of lease.
HAREFIELD PLACE - building on outer edge of London which houses development and
support groups. Staff in this location will be relocating to a new facility in
the same area in September 1996
OTHER LOCATIONS
- ---------------
FRANKFURT - German sales and support office
PARIS - French sales and support office - will relocate to central Paris in
November 1996
SINGAPORE - Asia/Pacific sales and support office
MOSCOW - Russian sales and support office
The following table summarizes the relevant lease/license agreements relating to
these facilities, apart from Moscow which is a local one year renewable rental
agreement with Digital Russia. Each of the lease agreements is with a non-
affiliate company. The MTi party to the lease/license agreements are the
relevant local entity in that country.
LOCATION AGREEMENT EXPIRY ANNUAL ANNUAL NOTES
& DATE DATE RENT RENT
(LOCAL) (APPROX
. US$)
New York Lease May 31 US$ US$
2001 191,075 191,075
London - Sub Lease March GBP US$ Rent free
England March 1 25 170,000 256,300 until
Bonhill 1996 2006 December
31, 1997
London - Lease December GBP US$ Being relet
England September 31, 1997 216,450 347,000 or
Hop 9 1987 terminated
Exchange
London - License December GBP US$ Terminating
England December 31, 1996 449,040 719,000 license
Harefield 22 1995 September
Place 1996
Singapore Lease August S$ US$
August 30 31 240,900 169,000
1994 1997
Paris - Lease November FFr US$ Notice to
France November 11, 2002 462,708 89,720 terminate
15 1993 issued -
effective
November 11
1996
Frankfurt Lease August DM US$
- - Germany November 31 145,000 95,000
15 1995 1998
ITEM 3. LEGAL PROCEEDINGS
1. Matter involving Barrington Fludgate v. MTI
Barrington J. Fludgate ("Fludgate"), a former Officer and Director of the
Company, commenced an action in the U.S. District Court for the Southern
District of New York against the Company, claiming the Company violated certain
ERISA laws, in addition to damages claimed by Mr. Fludgate as a result of breach
of his employment contract with MTI. Fludgate claimed the sum of $1,900,000 in
damages, in addition to other unspecified damages and legal fees. The action
was dismissed on jurisdictional grounds.
As a result of the dismissal by the Court, Fludgate cannot proceed in the
District Court. On July 26, 1995, Fludgate commenced an action in the New York
State Supreme Court, New York County, claiming breach of contract in violation
of New York State Labor Law. The action claims damages in the sum of $3,500,000
and additional unspecified damages. The claim was dismissed on technical terms.
Fludgate can re-assert his claims against the Company. The Company believes it
has meritorious defenses to Fludgate's claims.
2. Claim of Registration Rights for Unit Holders of the Company
The Company completed a private placement of units consisting of one (1) share
of Common Stock and three (3) Class "C" Warrants to purchase three (3) shares of
Common Stock at $1.19 per share, on a pre-split basis ("Unit"), in 1993 and 1994
(the "Private Placement"). The Private Placement terms provided for the Company
to use its best efforts to register the primary shares and the shares underlying
the Class "C" Warrants ("Warrant Shares") for Private Placement participants
("Unit Holders"). The Company filed a Form S-3 Registration Statement for the
underlying shares and was compelled to withdraw the Registration Statement in
April 1995 with the understanding that it would refile a new registration for
the Unit Holders within a reasonable time. The Company extended an offer to the
Unit Holders to issue two additional pre-split shares per Unit as compensation
for any damages they may have suffered due to delays in registering shares
subscribed and Warrant Shares. A number of Unit Holders accepted the Company's
offer and were issued such compensation shares.
The Company is not a party to any other material litigation.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock are traded in the over-the-counter market under the
National Association of Securities Dealers Automated Quotation System ("NASDAQ")
symbols MTCI. The Company's Class "A" Warrants and Class "B" Warrants expired on
January 31, 1994. The Class "A" Warrants were traded in the over the counter
market under the NASDAQ symbol MTCW. The Company's Class "C" Warrants and other
warrants are not publicly traded. Class "C" Warrants and other warrants are
described in Item 7, Note 15. On April 28, 1995, the Company's shareholders
resolved to reverse split the Company's issued and outstanding common stock on a
one for seven basis. The reverse split took effect on May 15, 1995. The
following sets forth the high and low closing bid prices for Common Stock and
Class "A" Warrants for the four quarters ending April 30, 1995 as reported by
NASDAQ, adjusted to give effect to the May 15, 1995 reverse split, and the high
and low trade prices for the four quarters ending April 30, 1996, as reported by
NASDAQ. Such prices represent prices between dealers without adjustment for
retail mark-ups, mark-downs or commissions and may not necessarily represent
actual transactions.
COMMON COMMON
STOCK STOCK
HIGH LOW
($) ($)
MAY 1-JUL 5 1/4 3 15/16
31, 1994
AUG 1-OCT 4 3/8 3 9/32
31, 1994
NOV 1-JAN 4 3/8 1 31/32
31, 1995
FEB 1-APR 2 13/32 1 31/32
30, 1995
MAY 1-JUL 2 13/16
31, 1995
AUG 1-OCT 1 1/16 1/2
31, 1995
NOV 1-JAN 1 5/8
31, 1996
FEB 1-APR 1 15/16 23/32
30, 1996
On July 31, 1996 the closing bid prices of the Common Stock was $9/16
Te approximate number of stockholders of record on May 14, 1996, was 403, and a
substantial number of shares are held in "street-name" by approximately 3,000
individuals or entities.
The Company has never paid any cash dividends on its Common Stock. The Company
does not anticipate paying any dividends in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF AND RESULTS OF OPERATIONS
FINANCIAL CONDITIONS.
GENERAL
The Company's revenue consists of license fees from the Company's software
products, which include agency commissions, maintenance fees and customer
service fees.
The Company recognizes revenue for licensing of its IBS-90 and Abraxsys products
according to the standards set forth in Statement of Position 91-1 ("SOP 91-1")
and it is therefore recognizing license fees as revenues upon delivery 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. Revenues from
licensing the Open Trade product are recognized on the percentage of completion
method of accounting as costs are incurred in conformity to the standard set
forth in Statement of Position 81-1 ("SOP 81-1").
The Company's IBS-90 licenses with its customers typically provide for payments
to be made pursuant to specified schedules, certain of which payments are
generally received prior to delivery to the customer. Such payments prior to
delivery are not recognized by the Company as revenue, by are reflected as
deferred income on the Company's Consolidated Balance Sheet.
Maintenance fee revenues are recognized ratably over the period of the contract;
the unrecognized portion is recorded as deferred income. There was deferred
income of $3,035,000 as of April 30, 1996.
Customer service fees are recognized as revenue as work is performed under the
service arrangement.
The Company's revenues and results of operations are subject to significant
fluctuations, depending primarily on the number of software components delivered
in any period. License fees range from $100,000 to $2,000,000 on a per-site
basis. As is typical in the software industry, maintenance fees are a more
stable source of revenue.
Starting with the year ended April 30, 1996, costs of software products consist
of the cost of third party products resold with the Company's products and the
amortization of acquired software technology. Other costs of software products,
such as the costs of duplicating products from product masters and physical
packaging of the Company's software, are immaterial. The costs of providing
maintenance and customer service are allocated between maintenance and customer
service fees in proportion to their respective revenues. Management believes
that such allocations are reasonable.
The following table shows a breakdown of license, maintenance and service
revenues, expressed in $000:
LICENSE MAINTENANCE SERVICE TOTAL
96 95 96 95 96 95 96 95
Abraxsys 2,403 (150) 1,950 (150) 4,353
IBS 90 3,184 5,985 3,149 2,762 1,410 186 7,743 8,933
IBS V
Open Bank
OpenTrade 2,732 3,513 4,437 1,794 6,392 94 13,561 5,401
EXTRA
3rd Party
TradeWizard
MediaWizard
Open Trade
Synergy
APPLIX
Spreadsheet
Link
Other 73 0
Revenue
TOTAL 5,916 11,901 7,586 4,556 7,652 2,230 21,227 18,687
PRODUCT PERFORMANCE
In the past MTi has been more a project company than a product company which
depending on when the project is completed can cause large fluctuations in
revenue and profits. Since December 1995 the Company has made the decision to
focus on products and will only sell both directly and through distributors
already built products.
ABRAXSYS
Between FY95 and FY96 there was a $4,500,000 decrease in revenues (see above).
This product had the most significant effect on both the banking division and
the Company as a whole. During 1995 four significant contracts were signed in
what is known as the former Soviet Union. At the end of FY95, the Company
estimated that the costs to complete these projects were immaterial and
recognized $4,400,000 in revenue. During 1996 it became apparent that the cost
to complete these projects were under estimated due to the following reasons: a)
customer inexperience with systems of this type; b) cultural and language
problems; c) lack of technology infrastructure in this part of the world; d)
under estimation of the extent the system needed to be customized to support
local language and banking practices. During 1996 the company expended
approximately $5,500,000 in additional costs to correct the problems
encountered due to the above and has not recorded any additional revenue.
Management believes that it has now provided for all losses on these contracts.
By completing these four projects we find ourselves in a very advantageous
position in the Soviet region:
a) We have a completed product with all the specific requirements for this
region;
b) We have a full Russian language product, unique amongst our competitors;
c) We already have two excellent reference sites;
d) We have a significant prospect list which totals in excess of $20,000,000.
The second half of FY97 and the following year should see us take full advantage
of our past efforts and should reflect in significant license revenue. However,
there is no guarantee that such revenues will materialize.
IBS-90
The enthusiasm to launch the new Abraxsys product resulted in the Company
effectively retiring the IBS-90 product even though it continues to be
functionally rich and extremely competitive. Even against this backdrop the
product was sold and license fees of approximately $2,400,000 were recognized in
FY96. Anticipating the reduction in license fees the Company took the approach
of ensuring that there was an appropriate increase in maintenance and service
revenue to compensate for the reduction in license fees. The figures above
reflect that this strategy was successful and there was only a minimal drop in
overall revenue for this product and the initiatives that were embarked upon in
the second half of FY96 will result in further increases in both our maintenance
and service revenue to beyond the figures achieved in FY95. Our strategic
alliance with IDOM (Deloitte + Touche) has provided us with further
opportunities to increase our revenues in this product.
OPEN TRADE
This is a highly competitive area of our business with the main competition
coming from Reuters. To ensure a profitable future the Company has repositioned
this product more towards Transaction Highway and Risk Management capabilities
creating a differentiation and attracting a strategic client base. There has
been a focus on existing accounts to protect our market share while
repositioning our product and adding applications that will provide real value
to our customers. The maintenance revenue has been increased from $1,800,000 to
$4,400,000 and should increase again in FY97 as new accounts come out of
warranty. The service revenue has gone from $100,000 to $6,400,000. However,
approximately $1,000,000 of this relates to small amounts of license revenues
which have been reflected as service revenue. The license revenue has
effectively remained the same. Significant R&D has occurred during this last
financial year to provide value added applications so that we can provide
solutions to our clients.
With the introduction of the other complimentary applications either with Open
Trade or as independent stand-alone products, MTi's ability to provide solutions
in the trading world have been greatly enhanced.
Above we list several new applications in the product performance table. These
new applications have just been introduced and should help to increase our
license and service revenues in the coming year.
COMPARISON OF FISCAL YEARS
The Company's total revenues were $21,227,000 and $18,687,000 for the years
ended April 30, 1996 and 1995, respectively. This increase in revenue is due to
(i) an increase in maintenance revenues to $7,586,000 from $4,556,000 in the
years ended April 30, 1996 and 1995, respectively, and (ii) an increase in
customer services fees to $7,652,000 from $2,230,000 in years ended April 30
1996 and 1995, respsectively. However, there was a reduction in the license
revenue from $11,901,000 in the year ended April 30, 1995 to $5,916,000 in
the year ended April 30, 1996. At the end of FY95 the Company had a very
small sales force as the Company's operating units had been bought from
large organizations which had independent global sales capabilities. There
was no real distribution for its products and no significant sales prospects.
During FY96 the Company has grown its sales and distribution capability to
represent 20% of its costs. New distribution and partnering agreements have
been reached which has resulted in our prospective sales being approximately
$53,000,000. There is no guarantee that such prospective sales will
materialize. The Company's license revenues are subject to significant
fluctuation due to the relatively high cost of license fees on sales, as a
result of this one additional product site could significantly affect
revenues. In addition, differing installation schedules for different
components and systems, may result in revenues being recognized at different
dates.
The cost of software products were $2,598,000 and $1,063,000 for the years ended
April 30, 1996 and 1995, respectively. The increase in cost of software
products is result of (i) a full year of amortization versus three quarters of
amortization of software technology acquired in connection with the Winter
Partners Acquisition in the years ended April 30, 1996 and 1995, respectively,
and (ii) a full year of amortization versus one quarter of amortization of
software technology acquired in connection with the DESISCo Acquisition in the
years ended April 30, 1996 and 1995, respectively.
Costs of maintenance were $3,884,000 and $2,893,000 for fiscal year 1996 and
1995 respectively. The increase in the cost of maintenance is a result of the
additional clients who have come out of warranty during fiscal 1996.
Costs of customers' services fees were $3,824,000 and $968,000 for the fiscal
year 1996 and 1995 respectively. The increase in the cost of customer service
is a result of additional Abraxsys, IBS-90 and OpenTrade products added to the
Company's offerings.
The Company's selling general and administrative expenses (which included
research and development in the amounts of $10,763,000 and $5,847,000) were
$20,242,000 and $14,036,000 or 95% and 75% of revenue in the years ended April
30, 1996 and 1995, respectively. This increase is a result of a full year of
DESISCo (MTi Trading Systems) and a full year of Winter Partners (MTi Abraxsys).
The Company recognized a net loss of $10,802,000 in 1996 which includes
$5,500,000 on the four Russian contracts noted above and a non-recurring gain of
$1,064,000. This compares to $12,687,000 in 1995. The loss in 1995 includes
$8,740,000 in one time charges for the write off of acquired research and
development costs in connection with the 1995 acquisitions and a write off of
$1,112,000 related to an investment in an affiliate. The Company currently
conducts its business in currencies other than United States dollars, although a
large part of the Company's business abroad is conducted in United States
Dollars. The revenue from subsidiaries outside the United States amounts to 88%
of the Company's revenue in the year ended April 30 1996 and 86% in year ended
April 30 1995.
The Company is not aware of any current or expected impact of new tax laws or
the issuance of FASB Statements.
LIQUIDITY AND CAPITAL RESOURCES
At April 30 1996 the Company had a working capital deficiency of $6,993,000.
The Company had a net loss of $10,802,000 and $12,687,000 in the years ended
April 30, 1996 and 1995, respectively. A net of $8,762,000 and $4,666,000 was
used in operating activities in the years ended April 30, 1996 and 1995,
repsectively. A net of $0 and $16,344,000 was used in investing activities in
the years neded April 30, 1996 and 1995, respectively, primarely in Winter
Partners and DESISCo Acquisitions. Financing activities provided $8,245,000 and
$21,692,000 in the years ended April 30, 1996 and 1995, respectively, primaraly
from proceeds of private placement of the Company's common equity and from the
placement of convertible debentures.
At April 30 1996 the Company had net operating loss carry-forwards for federal
income tax purposes in the United States of $17,205,000 subject to Internal
Revenue Service review, which are available to offset future federal taxable
income, if any, through 2011 and are subject to annual limitations in use.
In the year ended April 30 1996, the Company issued an aggregate of 10,145,915
shares of Common Stock and 575,000 Warrants to private investors for on
aggregate consideration of $7,449,000.
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 and it may, in
the future, attempt to arrange an offering through a private placement agent or
underwriter.
The Company's long-term liquidity and its ability to continue as a going concern
will ultimately depend upon the Company's ability to generate sufficient
cashflow from operations.
ITEM 7. FINANCIAL STATEMENTS
MANAGEMENT TECHNOLOGIES, INC.
AND SUBSIDIARIES
Consolidated Financial Statements
April 30, 1996 and 1995
With Independent Auditors' Report Thereon
MANAGEMENT TECHNOLOGIES, INC.
AND SUBSIDIARIES
Table of Contents
Independent Auditors' Report
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, 1996 and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the years ended April 30, 1996 and 1995. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Management
Technologies, Inc. and subsidiaries at April 30, 1996, and the results of their
operations and their cash flows for the years ended April 30, 1996 and 1995 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, 1996 has a net 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.
/s/ KPMG PEAT MARWICK LLP
New York, New York
August 13, 1996
Member Firm of Klynveld Peat Marwick Goerdeler
MANAGEMENT TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
April 30, 1996
(in $000)
ASSETS
Current assets:
Cash 313
Accounts receivable; billed; net of allowance for 6,048
doubtful accounts of $473
unbilled; net of allowance for 1,862
doubtful accounts of $488
Prepaid expenses and other current assets 2,002
------
TOTAL CURRENT ASSETS 10,225
Property and equipment, net of accumulated depreciation 895
Intangible assets, less accumulated amortization 15,520
------
TOTAL ASSETS 26,640
======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable 2,835
Accrued expenses 3,433
Taxes payable 4,613
Note payable on acquisition 2,564
Deferred income 3,035
Lease liabilities 73
Other current liabilities 665
-----
TOTAL CURRENT LIABILITIES 17,218
Convertible debentures 5,682
Other long term liabilities 111
-----
TOTAL LIABILITIES 23,011
------
Stockholders' equity
Common stock $.01 par value. Authorized shares 247
200,000,000, issued shares 24,686,084
Additional paid in capital 49,814
Accumulated deficit (46,865)
Foreign currency translation adjustment 433
------
TOTAL STOCKHOLDERS' EQUITY 3,629
------
TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY 26,640
======
The accompanying notes are an integral part of these financial statements
MANAGEMENT TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in $000 except share data)
Number Common Additional
of stock paid in Retained Trans Total
lation
shares par capital earnings adjust
value ment
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 99 19,104 19,203
stock
Net loss for the (12,687) (12,687)
year
Translation (530) (530)
adjustment
--------- --- ------ -------- ---- -----
Balances at April 14,540,169 145 42,467 (36,063) (530) 6,019
30, 1995
Issuance of common 672,700 7 507 514
stock for
compensation and
services
Issuance of common
stock in
conversion of 4,456,749 45 2,452 2,497
convertible
debentures
Issuance of common 100,000 1 99 100
stock on exercise of
warrants
Issuance of common 4,916,466 49 4,289 4,338
stock
Net loss for the (10,802) (10,802)
year
Translation 963 963
adjustment
---------- --- ------ ------- --- -----
Balances at April 24,686,084 247 49,814 (46,865) 433 3,629
30, 1996 ---------- --- ------ -------- --- -----
The accompanying notes are an integral part of these financial statements
MANAGEMENT TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended April 30, 1996 and 1995
(in $000)
1996 1995
Revenues
Software products 5,916 11,901
Maintenance fees 7,586 4,556
Customer service fees 7,652 2,230
Other income 73 0
------ ------
Total revenues 21,227 18,687
------ ------
Cost and expenses
Cost of software products 2,598 1,063
Cost of maintenance 3,884 2,893
Costs of customer service 3,824 968
Selling, general and administrative 20,242 14,036
Amortization of intangible assets 730 409
Depreciation 914 571
Severance costs 0 760
Acquired research and development 0 8,740
------ ------
Total costs and expenses 32,192 29,440
------ ------
LOSS FROM OPERATIONS (10,965) (10,753)
Interest expense (901) (822)
Other income (loss) 1,064 (1,112)
-------- --------
NET LOSS (10,802) (12,687)
======== ========
Net loss per share (0.58) (1.70)
Weighted average number of common shares 18,669,728 7,445,421
outstanding
The accompanying notes are an integral part of these financial
statements
MANAGEMENT TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended April 30, 1996 and 1995
(in $000)
1996 1995
Cash flow from operating activities (10,802) (12,687)
Net loss
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 2,073 1,183
Other (income) loss on affiliate (1,064) 647
Issuance of common stock for 514 -
compensation
Write off of purchased research and - 8,740
development
Write off of property, plant & - 102
equipment
Provision for doubtful accounts - 491
Changes in assets and liabilities net
of effects from acquisitions:
Increase in accounts receivable (1,421) (3,247)
Decrease (increase) in prepaid 1,857 (654)
& other assets
Decrease (increase) in accounts (1,020) 3,120
payable & accrued expenses
Increase in taxes payable 2,899 1,036
Decrease in deferred income (518) (2,902)
Decrease in other liabilities (1,280) (495)
------- -------
Net cash used in operating activities (8,762) (4,666)
------- -------
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 of fixed assets - 531
----- --------
Net cash used in from investing activities - (16,344)
----- --------
Cash flow from financing activities
Proceeds from notes payable and convertible 7,802 3,033
debentures
Repayment of notes payable (1,745) (764)
Proceeds from issuance of common stock 2,188 19,423
------- ------
Net cash provided by financing activities 8,245 21,692
------- ------
Effect of exchange rate on cash (3) (39)
------ ------
(Decrease) increase in cash and cash (520) 643
equivalents
Cash and cash equivalents - beginning of period 833 190
----- -----
Cash and cash equivalents - end of period 313 833
===== =====
Supplemental disclosure of cash flow
information
Interest paid - 53
Non-cash investing and financing activities
Issuance of common stock for MDIS 2,250 -
acquisition
Issuance of common stock in conversion of 2,497 730
debt
Issuance of common stock for cancellation - 66
of debt
Capital lease obligation - 517
The accompanying notes are an integral part of these financial statements
All monetary figures in the notes to the financial statements are expressed in
$000
(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 made in fiscal 1995
noted below, the Company decided to discontinue directly selling and
supporting its former product known as ManTec during fiscal 1995.
The Company is now organized and managed as one operating unit with
product lines centered around back office banking systems and front
office trading systems.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
Management Technologies, Inc. and its wholly-owned subsidiaries. All
significant inter-company balances and transactions have been
eliminated in consolidation.
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 some contracts, primarily
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
when the work is completed.
Revenues and profits on the remaining contracts, primarily OpenTrade,
TradeWizard, MediaWizard, EXTRA and Pro-IV IBS products, are
recognized on the percentage-of-completion method of accounting as
costs are incurred (cost to cost basis) in conformity with SOP 81-1.
An 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. 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.
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:
. 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 expenses which are included in selling,
general and administrative expenses amounted to $10,763 and $5,847 for
the years ended April 30, 1996 and 1995, respectively. In the year
ended April 30, 1995 the Company had a one time charge of $8,740 for
in-process research and development costs as discussed in Note 2 .
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 and fittings four to five years
Leasehold improvements over the minimum period of
the lease
Motor vehicles four years
INCOME TAXES
The Company conforms to the provisions of Statement of Financial
Accounting Standards No. 109 ("Starement 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 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
Loss per common share is calculated using the weighted average number
of common shares outstanding for each period.
INTANGIBLES
The Company recorded the fair value of software technology acquired as
a result of the purchases of Winter Partners, DESISCo and MDIS
acquisitions. 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
products.
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
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.
USE OF ESTIMATES
The Company has made a number of estimates and assumptions relating to
the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these consolidated
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain reclassifications of prior year amounts were made to conform
with 1996 presentation.
(2) Acquisitions
------------
MDIS ACQUISITION - INTERNATIONAL BANKING SYSTEMS BUSINESS OF MDIS.
Effective March 1 1996, the Company acquired the international banking
systems business of MDIS. The acquisition involved the transfer of
certain assets including the rights to PRO-IV IBS, a newly developed
back office banking system which had not yet been brought to market,
and the assumption of MDIS's rights and obligations under certain
contracts.
The consideration for the acquisition was a maximum of two million
common shares issuable to MDIS on the Company recognizing at least
$6,000 of revenue from the acquired business. Shares are issuable on a
pro-rata basis at the rate of one thousand shares for every $3 of
revenues. The first issuance of these shares is due in February 1997,
and then quarterly up to April 1999. The Company has valued the two
million shares at $2,250. In addition, a further one million shares
become issuable if the Company achieves a profit in excess of $10,000
in fiscal year ending April 30 1999. The additional shares have not
been recorderd at this time, as they are considered contingent.
The Company recognized $2,250 in acquired software technology in this
transaction related to the PRO-IV IBS product. This will be amortized
over the expected life of the PRO IV IBS product of ten (10) years.
The prime reason for the MDIS acquisition was to obtain a newly
developed PRO-IV IBS banking system software product. The other assets
acquired included IBS V5, the forerunner to PRO-IV IBS, a small number
of desktop PC's and other fixed assets of negligible value in terms of
the acquisition. IBS V5 is no longer actively marketed. In addition, a
number of customer contracts with attached commitments were assumed.
The net revenue to be received on such assumed contracts for IBS V5 is
expected to be $200 for fiscal 1997.
As this was an acquisition of a newly developed product and not of a
line of business, no historical financial information regarding sales
and operations was available.
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.
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. A
submission had been made to the UK Revenue and we are awaiting their
execution of this request.
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
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.
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.
(3) Liquidity
---------
The Company has suffered losses from operations in the fiscal years
ended April 30, 1996 and 1995, and has a working capital deficiency of
approximately $6,993 as of April 30, 1996. As of July 31, 1996, the
Company placed equity and convertible debentures in the amount of
$5,560.
. 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 and it may, in the future,
attempt to arrange an offering through a private placement agent or
underwriter.
The Company's long-term liquidity and its ability to continue as a going
concern will ultimately depend upon the Company's ability to generate
sufficient cashflow from operations.
(4) Prepaid expenses and other current assets
-----------------------------------------
Prepaid expenses and other current assets consist principally of the
following items:
Deferred financing charges 610
Corporate tax refund 209
VAT refund 125
Employee advances 125
Rent deposits 523
Other 410
------
2,002
-----
(5) Investment in Affiliated Company
--------------------------------
At April 30, 1995, the Company owned approximately sixty-one per cent
of New Paradigm Software Corporation, Inc. ("NPSC"). In the year ended
April 30, 1995, the Company fully wrote off its investment in, and
advances to, NPSC, in the amount of $1,112. In the year ended April
30, 1996, the Company transferred its interest in NPSC to Midland
Associates ("Midland") in full and final settlement of a note held by
Midland. The settlement resulted in income of $1,064.
(6) Property, plant and equipment
-----------------------------
Balances of major classes of assets and allowances for depreciation and
amortization are as follows:
COST ACCUMULATED NET
DEPRECIATION VALUE
Computer Equipment 1,836 1,124 712
Leasehold improvement 90 19 71
Office Furniture and 54 51 3
Equipment
Automobiles 225 116 109
------ ----- -----
2,205 1,310 895
----- ----- ---
Depreciation expense were $914 and $571 in the years ended April 30
1996 and 1995, respectively.
(7) Intangible Assets
-----------------
Intangible assets as of April 30, 1996 are made up of software products
acquired with the Winter Partners, DESISCo and MDIS acquisitions and
goodwill.
$
Goodwill less accumulated amortization of $1,134 9,673
Acquired software technology less accumulated amortization 5,847
of $ 618 ------
15,520
------
See also notes 2, 8 and 11.
(8) Accrued expenses
----------------
The major components of accrued expenses are as follows:
Staff related costs 912
Accrued legal, professional and other fees 334
Accrued interest 532
Accrued cost of product sold 103
Provision for litigation 700
Other accrued expenses 852
-----
3,433
(9) Taxes Payable -----
-------------
Taxes payable comprise payroll deductions plus estimated penalties and
interest for late payment.
(10) Notes payable on acquisition
----------------------------
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.
The current receivables due from Digital subsidiaries now exceed the
outstanding payment due to Digital Equipment in respect of the
acquisition of DESISCo. The Company has proposed a settlement of all
outstanding balances with Digital which is currently under
consideration. The proposal from the Company includes assignment of
some specific trade receivables, the proceeds of which would be applied
against the outstanding payment.
See also notes 2, 7, and 8.
(11) Deferred income
---------------
Deferred income consists entirely of deferred maintenance income. The
Company expects to recognize as revenue all deferred income within the
next fiscal year.
(12) Other current liabilities
-------------------------
Other current liabilities consist of the following:
8% convertible note payable due July 31, 1996 270
11% note payable due July 31, 1995 250
Other current liabilities 145
----
665
---
Interest on the 8% convertible note is payable semi-annually on January
31 and July 31 through July 31, 1996. The note converted pursuant to
its terms on July 31, 1996 resulting in 584,810 conversion shares
issuable to the note holder.
The Company is negotiating the settlement of the 11% note.
(13) Convertible Debentures
----------------------
At April 30, 1996, the following amounts were outstanding on the
convertible debentures:
Series Original Amount Converted during Outstanding as
year ended of April 30,
April 30, 1996 1996
$ $ $
A 1,850 1,470 380
B 1,500 0 1,500
C 3,550 650 2,900
SA 902 0 902
Other 377 377 0
------- ------ --------
8,179 2,497 5,682
------ ----- -----
Interest on the 9% Series A, B, C, and SA convertible debentures is
payable quarterly through the terms of the notes. All debentures are
due December 31, 1997. The Series A, B, and C were placed with
unrelated parties, while the SA debentures have been entirely placed
with the staff and management of the Company. The principal and
interest of the convertible debentures are 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 the lower of (i) 62.5 %
of the market price over the 5 business days immediately preceding the
date of conversion or (ii) $0.48 for the Series A and SA debentures,
$0.53 for the Series B debentures, $0.85 for the Series C debentures.
The other convertible debentures were converted pursuant to their terms
by issuance of 271,469 shares.
(14) 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, 1996, the Company has outstanding Class C warrants as
follows:
Number of shares Exercise price Expiration date
2,696,333 $8.33 February 28, 1997
Each Class C warrant entitles the holder to purchase one share of
common stock. 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 price Expiration date
675,000 $0.69 various dates
1,295,002 $1.00 July 10, 2000
3,085,714 $1.75 November 4, 1997
95,238 $4.55 none
95,238 $4.90 none
133,810 $5.25 none
(2) Options
At April 30, 1996, the Company had outstanding options as follows:-
NUMBER OF EXERCISE NOTE
SHARES PRICE
Qualified Stock Options Plan
- Employees
Shares under option at April 6,857 $1.75-$7.84 (a)
30, 1995
Granted 0
Lapsed (5,000)
Exercised
0
------
Shares under option at April 1,857
30, 1996
Options exercisable at April 1,857 $7.00-$7.84
30, 1996
Non qualified Stock Options (b)
Plan for Directors, Officers
and Consultants
Shares under option at April 239,343 $0.01-$8.75
30, 1995
Granted 200,000 $0.01
Lapsed (142,914)
Exercised (150,000)
---------
Shares under option at April 146,429 $0.01-$8.75
30, 1996
Options exercisable at April 146,429
30, 1996
Non qualified Stock Options (c)
Plan for Key Employees
Shares under option at April 140,813 $1.75-$15.75
30, 1995
Granted 0
Lapsed (133,671)
Exercised
0
-------
Shares under option at April 7,142 $3.50-$7.00
30, 1996
Options exercisable at April 7,142
30, 1996
Other Options (d)
Warrants under option at 600,000 $3.43
April 30, 1995
Granted 0
Lapsed 528,572
Exercised
0
------
Warrants under option at 71,428 $3.43
April 30, 1996
(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 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 plan 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 Committee appointed by
the Board of Directors. In the year ended April 30, 1996 granted below
market options and recognized compensation expense in the amount of
approximately $149. 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 plan 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 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.
(d) The Company has issued options to purchase C Warrants to a
former officer of the Company in connection with his employment
agreement. The option entitles its holder to purchase one Class C
warrant at $3.01 per warrant.
(15) Leases
------
The Company has various non cancelable operating leases, primarily for
office 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) as of
April 30, 1996 are:
OPERATING LEASES
$
Year ending April 30
1997 1,162
1998 505
1999 447
2000 447
2001 431
Later years 1,025
-------
Total minimum lease payments $4,017
------
Rental expense, net of sub lease income under operating leases, were $
1,366 and $1,337 for the years ended April 30, 1996 and 1995,
respectively.
(16) Income Taxes
------------
At April 30, 1996, the Company had net operating loss carry-forwards
for federal income tax purposes in the United States of $ 17,205 which,
subject to I.R.S. review, will be available to offset future federal
taxable income, if any, through 2011 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.
(17) Pension Benefits
----------------
The Company has a non-employer contributory 401(k) plan.
MTi Abraxsys Systems, Inc., a wholly owned subsidiary of the Company,
has a 401(k) and 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 rate
paid during the year ended April 30, 1996, was 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, 1996 were $ 734. The equivalent costs for the
year ended April 30, 1995 were $ 431.
(18) Business and Credit Concentrations
----------------------------------
Most of the Company's customers are located in Europe and in the
countries of the former Soviet Union. No customers accounted for more
than ten percent of the Company's revenues in the years ended April
30, 1996 and 1995.
(19) 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 derived 88% and 86% of its gross revenues from its
international subsidiaries, primarily in the UK in the years ended
April 30 1996 and 1995, respectively. These subsidiaries produced 71%
and 87% of net income before allocation of corporate overhead, write-
off of in-process research and development, interest and taxes in the
years ended April 30 1996 and 1995, respectively. Assets of these
subsidiaries represent 84% and 93% of the Company's assets at April 30,
1996 and 1995, respectively.
(20) 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.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.
The information required by Item 9 with respect to the Company's directors and
executive officers is as follows:
POSITION(S) HELD
NAME AGE WITH COMPANY PERIOD
---- --- ------------ ------
Michael 38 Director March 1996 to present
Awerbuch
Anthony J. 45 President December 1991 to June 1994
Cataldo
Chairman of the Board & June 1994 to July 1995
Chief Executive Officer
Director November 1991 to July 1995
Paul Ekon 37 Chief Executive Officer October 1995 to present
Director October 1995 to present
Peter Morris 40 President November 1995 to present
Chief Operating Officer November 1995 to present
Director November 1995 to present
John Ridley 39 Director March 1996 to present
Peter 34 Director October 1994 to November
Svennilson 1995
Chairman of the Board July 1995 to November 1995
Chief Executive Officer September to November 1995
S. Keith 46 President & Chief July 1994 to September 1995
Williams Operating Officer
Director November 1994 to September
1995
MICHAEL AWERBUCH was appointed a Director of the Company in March 1996. Mr.
Awerbuch also serves as a consultant to the Company. From 1987 to 1992, Mr.
Awerbuch worked as a broker with Kaplan and Stewart, Ltd. in Johannesburg, South
Africa. From 1993 to 1994, Mr. Awerbuch worked as a broker with Taglich
Brothers, D'Amadeo and Wagner & Co, Inc. in New York. From 1994 to 1996, Mr.
Awerbuch served as Vice President for Sales of New World Technologies, Inc., a
New York computer distribution and sales company.
ANTHONY J. CATALDO, joined the Company as its President and a Director in
November 1991. He served as Chairman of the Board and Chief Executive Officer
from June 1994 to July 1995. From March 1986 to November 1991, Mr. Cataldo was
President of Internet Systems Japan, a producer of software for financial
institutions, where he was responsible for Japanese sales and marketing.
PAUL EKON was appointed a Director and Chief Executive of the Company in
October of 1995. Mr. Ekon was engaged in various manufacturing and marketing
businesses in South Africa since 1990.
PETER MORRIS has served as a Director and as President and Chief Operating
Officer of the Company from November of 1995. Mr. Morris served as managing
director of DESISCo, re-named MTi Trading Systems, from 1993 to November 1995,
and as director of sales of DESISCo from 1992 to 1993. He served as a Director
and Chief Operating Officer for Security Pacific, Hoare Govett from 1990 to
1992, Chairman and Chief Executive Officer for Fulcrum Management Consultancy
Plc, from 1987 to 1990, and Director and Chief Operating Officer for Shearson
Lehman Brothers International, from 1982 to 1987.
JOHN RIDLEY has held the positions of Systems Architect, Product Manager and
Head of Product Development for DESISCo, since renamed MTi Trading Systems
Limited.
PETER SVENNILSON served as Director of the Company from October 1994 to November
1995, as Chairman of the Board from July 1995 to November 1995 and as Chief
Executive Officer from September to November 1995. From 1983 to 1993, Mr.
Svennilson was an Associate Managing Director for Nomura International Plc. in
London, England. From 1993 to the present, Mr. Svennilson served as a Managing
Director of Stoneporch Limited, in London, England. Stoneporch Limited, under
the trade name of Irongate, provides strategic advice to several US and European
corporations. Mr. Svennilson is also a non-executive Director of Skandigen AB,
a public Swedish biotechnology company.
S. KEITH WILLIAMS was appointed President and Chief Operating Officer in July of
1994, and a Director in November of 1994 and served in those capacities through
September 1995. Mr. Williams was employed as General Manager of the Winter
Partners subsidiaries for the five years preceding his employment with the
Company.
Each of the directors of the Company has been elected for up to a one year term,
expiring at the next annual meeting of the shareholders of the Company.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The Company has received a copy of reports on Form 5 filed by Messrs. Awerbuch,
Ridley, and Morris, and has not received copies of any Form 5 with respect to
the fiscal year ended April 30, 1996 or any representations from any officer or
director or 10% shareholder of the Company, that any such Form 5 was not
required to be filed. Accordingly, Messrs. Cataldo, Cole, Ekon, Guazzoni,
Meaney, Sladden, Stone, Svennilson and Williams, as well as any other person
who, at any time during such fiscal year, was a director, officer or beneficial
owner of more than ten percent of the Company's Common Stock may not have filed,
on a timely basis, reports required by Section 16(a) during the most recent
fiscal year.
ITEM 10 EXECUTIVE COMPENSATION
The following table shows, for the years ended April 30, 1996, 1995 and 1994,
the total cash compensation paid by the Company to its chief executive officers
and most highly compensated executive officers.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
NAME AND FISCALSALARY BONUS OTHER RESTRICTSECURITIES LTIP ALL
PRINCIPAL YEAR ($) ($) ANNUAL STOCK UNDERLYING PAY- OTHER
POSITION COMPEN- AWARD(S)OPTIONS OUT COMP
SATION ($) SARS ($) ENSA
($) (#) TION
($)
Anthony J. 1996 54,167 4,498 287,108
Cataldo, 1995 225,000 10,000 52,896 400,000
Chief 1994 150,000 46,399
Executive
Officer,
President
(1)
Paul Ekon 1996 105,916 0 16,714
(2)
Peter 1996 252,650 108,000 0
Morris, 1995 77,000 124,500
President
and Chief
Operating
Officer
(3)
Peter 1996 0 0 0
Svennilson 1995 0 0 0
Chairman,
Chief
Executive
Officer
and
Director
S. Keith 1996 100,104 0 16,114
Williams, 1995 196,389 99,511 34,546
President
and Chief
Operating
Officer
(4)
(1) Effective December 31, 1991, Mr. Cataldo entered into an employment
agreement with the Company to serve as its President. The term of the agreement
expired on July 31, 1995, and was extended to July 31, 1997 by an Amendment and
Extension Agreement dated August 1, 1994 (the "Amendment and Extension
Agreement"). Under the terms of Mr. Cataldo's original employment contract, he
received an annual salary of $150,000, plus a bonus equal to 2% of the Company's
annual revenues as reported in the Company's annual report. Mr. Cataldo was
also entitled to receive an expense allowance of $2,000 per month. Pursuant to
his employment agreement, Mr. Cataldo also received options, to purchase 700,000
shares of Common Stock at $0.25 per share and options to purchase 700,000 Class
C Warrants at $0.43 per warrant. The employment agreement provided that options
to purchase 150,000, 200,000, 200,000 and 150,000 options of each type are to be
exercisable as of December 31, 1991, 1992, 1993 and 1994, respectively. Mr.
Cataldo received $12,500 for consulting services rendered in November and
December of 1991. On September 22, 1993 and September 15, 1994, Mr. Cataldo
exercised options to purchase 75,000 and 100,000 shares of Common Stock,
respectively, at an exercise price of $.25 per share. Under the terms of the
Amendment and Extension Agreement, Mr. Cataldo's contract was extended to August
1, 1997. He was entitled to a annual compensation of $250,000 and to an expense
allowance of $25,000 per annum. He no longer received a bonus. In addition,
the Amendment and Extension Agreement provided for the grant, each year, of
options to purchase 400,000 common shares of the Company at $0.625 each.
Effective July 13, 1995, Mr. Cataldo resigned as Chairman and Chief Executive
Officer. By Separation Agreement and Release dated July 6 and 7, 1995 (the
"Separation Agreement"), the Company agreed to pay Mr. Cataldo $300,000 in
consulting fees in twelve $25,000 monthly installments, to be applied against
fees for financial consulting services Mr. Cataldo may render to the Company;
in addition, the Company agreed to grant Mr. Cataldo a non-recourse, interest
free $280,000 loan to purchase common shares of the Company; the loan is
secured by said common shares. The Separation Agreement also provides that Mr.
Cataldo relinquishes all stock options and warrants granted to him under his
employment agreements. By amendment to the Separation Agreement, Mr. Cataldo
and the Company agreed to cancel the $280,000 non-recourse loan granted Cataldo
and to retire the common shares subscribed by Cataldo and pledged to secure said
loan. The Company further agreed to pay Mr. Cataldo $20,000 in addition to
$105,000 previously paid to Cataldo under the Separation Agreement and to issue
Mr. Cataldo 212,700 shares of common stock of the Company in full and final
satisfaction of the Company's obligations to Mr. Cataldo.
(2) Mr. Ekon serves as the Company's Chief Executive Officer. His base salary
is 60,000 British Pounds per year or approximately $93,000. Mr. Ekon is also
entitled to a car allowance of 6,000 British Pounds per year, or approximately
$9,300. Mr. Ekon's contract can be terminated by either party on a one year
notice.
(3) Effective January 20, 1995, Mr. Morris entered into an employment agreement
with the Company to serve as Managing Director of its wholly owned subsidiary,
MTi Trading Systems. Under the terms his employment contract, Mr. Morris was
entitled to an annual base salary of 150,000 British Pounds or approximately
$230,000 and to a stock option equivalent to half of one percent of the
Company's registered shares, plus a 50,000 British Pounds or approximately
$77,500 sign on bonus. Subsequent to Mr. Morris' appointment as the Company's
President and Chief Operating Officer, the Company agreed to raise Mr. Morris'
base salary to 200,000 British Pounds or approximately $310,000 and to grant Mr.
Morris a 100,000 British Pound or approximately $155,000 bonus and a 50,000
British Pounds or approximately $77,500 success bonus on completion of the MDIS
Acquisition, in exchange for unpaid sign on bonus plus cancellation of his
stock options. The MDIS Acquisition was closed on March 1, 1996. Mr. Morris is
also entitled to the use of a company car at a cost of 7,500 British Pounds or
approximately $11,000. Mr. Morris' employment contract can be terminated by
either party on a one year notice.
(4) On July 12, 1994, Mr. Williams entered into an employment agreement with
the Company which was due to terminate on May 31, 1997, providing for a minimum
base salary of 155,000 British pounds per annum, or approximately $248,000. Mr.
Williams resigned on September 25, 1995.
OPTION GRANTS IN LAST FISCAL YEAR
No options were granted to officers or directors of the Company during the year
ended April 30, 1996.
No options or SAR's were exercised by officers or directors of the Company
during the year ended April 30, 1996.
The Company does not have long-term incentive plans.
Other than health, life and 401(k) plan benefits available to all employees, and
the stock option plans described below which the Company may determine to pay to
officers and/or employees, the Company does not currently have in effect any
pension, profit sharing or other employee benefit plan.
The Company does not have a Directors and Officers liability insurance policy in
force.
COMPENSATION OF DIRECTORS
The Company pays $5,000 per year to non-employee directors and reimburses them
for travel and lodging expenses incurred in connection with their services in
that capacity.
In addition, Mr. Guazzoni, a Director of the Company from February 1994 to March
1996, was granted 50,000 warrants exercisable at $0.01 from July 15, 1996 to
January 15, 1997 as additional compensation for his services as a Director of
the Company.
QUALIFIED INCENTIVE STOCK OPTION PLAN
On April 20, 1990 the shareholders of the Company approved a qualified incentive
stock option plan (the "QISOP"). The QISOP provides for the granting of
options, at the Board of Directors' discretion, to purchase up to an aggregate
of 1,000,000 shares of Common Stock to eligible employees at an exercise price
determinable at the discretion of the Option Committee (the "Committee") as
appointed by the Company's Board of Directors but no less than 85% of the market
value of the common stock on the date the option is granted. Options may be
granted to all salaried employees of the Company and its subsidiaries. Options
granted under the QISOP are exercisable according to a vesting schedule which is
determined by the Committee. Subject to the provisions of the Options Plan with
respect to death and termination, the maximum period each option may be
exercised shall be fixed by the committee at the time the option is granted, but
shall not exceed five years. On April 28, 1995, the shareholders of the Company
approved an increase in the number of stock options under the QISOP from
1,000,000 to 8,000,000, at $0.01 par value.
As of April 30, 1996, there were outstanding options to purchase a total of
1,857 shares, at an average exercise price of $7.14, under the QISOP.
KEY EXECUTIVE STOCK BONUS GRANT
Concurrently with the approval of the QISOP, the shareholders of the Company
approved a Key Executive Stock Bonus Grant Plan (the "Bonus Plan") for key
executives. The Bonus Plan provides for the issuance of up to an aggregate of
100,000 shares of Common Stock to officers or key employees of the Company for
little or no consideration. The grants require the approval of the Board of
Directors. Qualification criteria are established by the Board of Directors and
are based on the Key Executive's potential and dedication to the Company. The
grants are subject to a two year vesting period and terminate if the executive's
employment with the Company terminates during the vesting period.
As of the fiscal year ended April 30, 1996, there were no outstanding grants
under the Bonus Plan.
NON QUALIFIED STOCK OPTION PLAN FOR KEY EMPLOYEES
The shareholders of the Company approved a non qualified stock option plan for
key employees(the "NSOPKEY") on April 20, 1990. The NSOPKEY provides for the
granting of options to purchase up to an aggregate of 1,000,000 shares of Common
Stock to key employees of the Company, with an exercise price determined by an
option committee at the time of grant. No part of any option granted under the
NSOPKEY will be exercisable more than five years after the date of grant. On
April 28, 1995, the shareholders of the Company approved an increase in the
number of stock options under the NSOPKEY from 1,000,000 to 10,000,000, at $0.01
par value.
As of the fiscal year ended April 30, 1996, there were outstanding options to
purchase a total of 7,142 shares, at an average exercise price of $5.25, under
the NSOPKEY.
NON QUALIFIED STOCK OPTION PLAN FOR DIRECTORS, OFFICERS AND CONSULTANTS
The shareholders of the Company approved a non qualified stock option plan for
Directors, Officers and Consultants (the "NSOPDOC") on April 20, 1990. The
NSOPDOC provides for the granting of options to purchase up to an aggregate of
2,000,000 shares of Common Stock to consultants and non-employee directors of
the Company. No part of any option granted under the NSOPDOC will be
exercisable more than five years after the date of grant. On April 28, 1995, the
shareholders of the Company approved an increase in the number of stock options
under the NSOPDOC from 2,000,000 to 15,000,000, at $0.01 par value.
As of the fiscal year ended April 30, 1996, there were outstanding options to
purchase a total of 146,429 shares, at an average exercise price of $5.77, under
the NSOPDOC.
OTHER OPTIONS
The Company has issued 71,428 options to purchase Class C Warrants at a price of
$3.01 per warrant to one former officer of the Company in connection with their
employment arrangements.
401(K) PLAN AND OTHER PENSION PLANS
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 25% of 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 to all employees matching employee
contributions, currently 8.75% of the employees' gross compensation.
All officers have executed non-compete agreements which provide that the
individual will not compete with the Company during employment or for a period
of one year following termination.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of July 31, 1995, certain information
regarding beneficial ownership of Common Stock (i) by each person who is known
to the Company to be the beneficial owner of more than 5% of the Common Stock,
(ii) by each of the directors and executive officers of the Company and (iii) by
all directors and executive officers of the Company as a group. Ownership is
expressed in post May 15, 1995 split shares:
Name and Address of Amount and Nature Percent of
Beneficial Holder or of Class
Identity of Group Beneficial Common Stock(1)
Ownership
Common stock
Anthony J. Cataldo 212,985 0.7%
63 North East
Village Rd
Concord, NH 03301
Peter Morris 0(2) 0
Shottley Hall
Church Walk
Shottley
United Kingdom
Paul Ekon 35,714 0.1%
22 Wellington Garden
Hampstead
London NW3
Michael Awerbuch 0 0
216 Seventh Avenue,
# 4A
New York, NY 10011
John Ridley 0 (3) 0
117 Highfield Way
Rickmansworth
Hertfordshire
WD3 2TL
England
Peter Svennilson 0 0
12 Old Bond Street
London, England
S. Keith Williams 0 0
18 Broomfield Road
Oxshott, Surrey
England
All Officers and 248,699 0.08%
Directors as a Group
(7 persons)
(1) Based on an aggregate of post May 15, 1995 split shares of Common Stock
("Shares") outstanding as of August 1, 1996 of 31,256,929.
(2) Excluding shares issuable on conversion of $310,000 of Series SA
convertible debenture held by Mr. Morris. See Note 13 to the Financial
Statements for conversion terms.
(3) Excluding shares issuable on conversion of $7,750 of Series SA convertible
debenture subscribed by Mr, Ridley. See Note 13 to the Financial Statements for
conversion terms.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PETER SVENNILSON, DANIEL SLADDEN, THE WELLBOURNE TRUST
Mr. Peter Svennilson served as a Director of the Company from October 1994 to
November 1995, and as Chairman of the Company from July 1995 to November 1996.
Mr. Svennilson is the Managing Director of Stoneporch Limited ("Stoneporch") and
an advisor to the Wellbourne Trust. Stoneporch conducts business under the
trading name of Irongate. Mr. Daniel Sladden served as a Director of the
Company from April to September 1995. Mr. Sladden is an advisor to the
Wellbourne Trust.
In July of 1994, the Company sold equity to the Wellbourne Trust for an
aggregate consideration of $6,150,000; the subscription, by agreement between
the Wellbourne Trust and the Company, was subsequently reduced to $5,550,000.
The Wellbourne Trust received 2,550,000 warrants expiring in November of 1997 to
purchase 2,550,000 shares of common stock at $1.75 per share. Mr. Svennilson
assisted in arranging this transaction. Mr. Svennilson, Mr. Sladden and /or
Stoneporch represented to the Company that they were not compensated for their
efforts in arranging this transaction.
In November of 1994, the Company sold equity to the Wellbourne Trust for an
aggregate consideration of $1,726,562. Mr. Svennilson arranged this
transaction. Mr. Svennilson, Mr. Sladden and /or Stoneporch represented to the
Company that they were not compensated for their efforts in arranging this
transaction.
In February of 1995, the Company sold equity to the Wellbourne Trust for an
aggregate consideration of $4,500,000. Mr. Svennilson arranged this
transaction. Mr. Svennilson, Mr. Sladden and /or Stoneporch represented to the
Company that they were not compensated for their efforts in arranging this
transaction.
In March of 1995, the Company sold equity to the Wellbourne Trust for an
aggregate consideration of $1,531,000. Mr. Svennilson arranged this
transaction. Mr. Svennilson, Mr. Sladden and /or Stoneporch represented to the
Company that they were not compensated for their efforts in arranging this
transaction.
The Company requested that Mr. Svennilson and its affiliates produce a full
accounting of all above described transactions. They have not produced such an
accounting as of the date of this report.
The Wellbourne Trust was paid $100,000 in fees and expenses in relationship to
the financing of the Winter Partners and DESISCo acquisitions.
PETER J. MORRIS
Mr. Morris was appointed President and Chief Operating Officer of the Company in
November of 1995. On February 14, 1996, the Company issued Mr. Morris a Series
SA convertible debenture in the amount of $310,000 in settlement of all bonuses
due Mr. Morris at that date. The convertible debenture is convertible into
common shares of the Company at the lower of $0.48 or 62.5% of the average close
bid for the Company's common stock for the five days immediately preceding the
declaration of conversion. The Series SA convertible debenture yields 9%
interest and matures on December 31, 1997.
JOHN RIDLEY
On February 13, 1996, Mr. Ridley subscribed to a Series SA convertible debenture
in the amount of $7,750. The convertible debenture is convertible into common
shares of the Company at the lower of $0.48 or 62.5% of the average close bid
for the Company's common stock for the five days immediately preceding the
declaration of conversion. The Series SA convertible debenture yields 9%
interest and matures on December 31, 1997.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this report:
1. Financial Statements Page No.
Independent Auditors' Report
Consolidated Balance Sheet
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Operations
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
2. Exhibits
Exhibit Number
--------------
3.1 Restated Articles of Incorporation of the
Registrant (incorporated by reference to Exhibit
3.1 to Amendment No. 4 on Form 8 to Registrant's
Annual Report on Form 10-K for the fiscal year
ended April 30, 1992, filed with the Commission on
February 24, 1993 ("Amendment No. 4")).
3.2 Form of Amendment to Certificate of Incorporation
(incorporated by reference to Exhibit 3.2 to the
Registrant's Registration Statement on Form S-1
(File No. 33-25528) filed with the Commission on
November 15, 1988).
3.3 Certificate of Amendment to Certificate of
Incorporation, dated May, 1995.
3.4 By-Laws of the Registrant (incorporated by
reference to Exhibit 3.5 to the Registrant's
Registration Statement on Form S-18 (File No. 33-
10342-NY) dated May 13, 1987 (the "Form S-18")).
10.1 Form of Warrant Agreement dated May 21, 1987
between the Company, D.H. Blair & Co., Inc. and
American Stock Transfer & Trust Company
(incorporated by reference to Exhibit 10.4 to the
Form S-18).
10.2 Class C Warrant Agreement dated as of February 28,
1992 among the Company, D.H. Blair & Co., Inc. and
American Stock Transfer & Trust Company (the
"Class C Warrant Agreement") (incorporated by
reference to Exhibit C to the Company's Current
Report on Form 8-K dated March 11, 1992 (the
"March 11 8-K")).
10.3 Amendment dated as of July 20, 1992 to the Class C
Warrant Agreement (incorporated by reference to
Exhibit C to the Registrant's Current Report on
Form 8-K dated July 24, 1992 (the "July 24 8-K")).
10.4 Amendment dated as of August 24, 1992 to the Class
C Warrant Agreement (incorporated by reference to
Exhibit 10.4 to Amendment No. 4).
10.5 Amendment dated as of December 11, 1992 to the
Class C Warrant Agreement (incorporated by
reference to Exhibit 10.5 to Amendment No. 4).
10.5.1 Amendment dated as of February 22, 1993 to the
Class Warrant Agreement (incorporated by reference
to Exhibit 10.5.1 to the Registrant's Current
Report on Form 8-K dated February 22, 1993).
10.5.2 Form of Underwriting Agreement dated May 14, 1987
between the Company and D.H. Blair & Co., Inc.
(incorporated by reference to Exhibit 1.1 to the
Form S-18).
10.5.3 Form of Agency Agreement dated February 6, 1993
between the Company and D.H. Blair & Co., Inc.
(incorporated by reference to Exhibit A to the
March 11 8-K).
10.6 Form of Subordinated Convertible Note
(incorporated by reference to Exhibit B to the
March 11 8-K).
10.6.1 Unit Purchase Option dated January 28, 1992 made
by the Company to D.H. Blair & Co., Inc.
(incorporated by reference to Exhibit 10.6.1 to
Amendment No. 5 on Form 8 to the Registrant's
Annual Report on Form 10-K for the fiscal year
ended April 30, 1992, filed with the Commission on
April 5, 1993 ("Amendment No. 5")).
10.7 8% Subordinated Mortgage Note dated April 28, 1989
made by the Company to D.H. Blair Holdings, Inc.
(incorporated by reference to Exhibit B to the
Registrant's Current Report on Form 8-K dated May
2, 1989 (the "May 2 8-K")).
10.8 Amendment No. 1 to the 8% Subordinated Mortgage
Note held by D.H. Blair Holdings, Inc.
(incorporated by reference to Exhibit E to the
March 11 8-K).
10.9 Security Agreement and Chattel Mortgage between
the Company and D.H. Blair & Co., Inc.
(incorporated by reference to Exhibit A to the May
2 8-K).
10.10 Assignment of Software Codes as Security for
Subordinated Mortgage Note made by the Company to
D.H. Blair & Co., Inc. (incorporated by reference
to Exhibit C to the May 2 8-K).
10.11 Pledge Agreement made by Barrington J. Fludgate to
D.H. Blair & Co., Inc. (incorporated by reference
to Exhibit D to the May 2 8-K).
10.12 Promissory Note dated February 7, 1992 made by the
Company to D.H. Blair Holdings, Inc., as amended
(incorporated by reference to Exhibit 10.12 to
Amendment No. 4).
10.13 Loan Agreement dated May 26, 1992 between the
Company and D.H. Blair Investment Banking Corp.
(incorporated by reference to Exhibit A to the
Company's Current Report on Form 8-K dated May 26,
1992 (the "May 26 8-K")).
10.14 Promissory Note dated May 26, 1992 made by the
Company to D.H. Blair Investment Banking Corp., as
amended (incorporated by reference to Exhibit
10.14 to Amendment No. 4).
10.15 Letter Agreement dated December 31, 1992 between
D.H. Blair Investment Banking Corp. and the
Company (incorporated by reference to Exhibit
10.15 to Amendment No. 4).
10.16 Letter Agreement dated December 3, 1991 between
the Company and ABN/AMRO Bank N.V. ("ABN")
(incorporated by reference to Exhibit 10.16 to
Amendment No. 4).
10.17 Promissory Note dated December 13, 1991 made by
the Company to ABN (incorporated by reference to
Exhibit 10.17 to Amendment No. 4).
10.18 General Liability Agreement dated November 27,
1991 between the Company and ABN, with attached
Guaranty dated November 27, 1991 given by
Barrington J. Fludgate to ABN (incorporated by
reference to Exhibit 10.18 to Amendment No. 4).
10.19 Security Agreement dated November 27, 1991 between
the Company and ABN (incorporated by reference to
Exhibit 10.19 to Amendment No. 4).
10.20 Corporate Guarantee dated November 26, 1991 from
Management Technologies Financial Consultants Pty.
to ABN (incorporated by reference to Exhibit 10.20
to Amendment No. 4).
10.21 Corporate Guarantee dated November 26, 1991 from
Management Technologies Trade Services, Inc. to
ABN (incorporated by reference to Exhibit 10.21 to
Amendment No. 4).
10.22 Purchase Agreement dated as of July 17, 1992
between the Company and Michael Bollag, as amended
(incorporated by reference to Exhibit A to the
July 24 8-K and Exhibit D to the September 17 8-
K).
10.23 Registration Rights Agreement dated as of July 23,
1992 between the Company and Michael Bollag
(incorporated by reference to Exhibit B to the
July 24 8-K).
10.24 Purchase Agreement dated as of September 15, 1992
among the Company, Michael Bollag, Naomi Bollag
and William Karon (incorporated by reference to
Exhibit B to the September 17 8-K).
10.25 Registration Rights Agreement dated as of
September 5, 1992 among the Company, Michael
Bollag, Naomi Bollag and William Karon
(incorporated by reference to Exhibit B to the
September 17 8-K).
10.26 Purchase Agreement dated as of October 6, 1992
between the Company and S. Sungyull Koo
(incorporated by reference to Exhibit 4.18 to the
Company's Registration Statement on Form S-3,
Registration Nos. 33-25528 and 33-52074).
10.27 Subscription Agreement dated as of December 14,
1992 between the Company and Robert Trump
(incorporated by reference to Exhibit 10.27 to
Amendment No. 4).
10.28 Purchase Agreement dated as of December 18, 1992
between the Company and Clarion Capital
(incorporated by reference to Exhibit 10.28 to
Amendment No. 4).
10.29 Software Distribution License Agreement dated May
28, 1991 between the Company and Global Financial
Systems Inc. (the "Distribution Agreement"), as
amended (incorporated by reference to Exhibit
10.29 to Amendment No. 4).
10.30 Software Development and Marketing Agreement dated
December 23, 1992 between the Company and Hewlett
Packard Company (incorporated by reference to
Exhibit 10.30 to Amendment No. 5).
10.31 Employment Agreement dated December 31, 1991
between the Company and Anthony Cataldo
(incorporated by reference to Exhibit F to the
Company's Current Report on Form 8-K dated March
11, 1992 (the "March 11 8-K")).
10.32 Employment Agreement dated December 31, 1991
between the Company and Clifford Brune
(incorporated by reference to Exhibit G to the
March 11 8-K).
10.33 Employment Agreement dated April 30, 1992 between
the Company and Barrington Fludgate (incorporated
by reference to Exhibit A to the Company's Current
Report on Form 8-K dated May 13, 1992).
10.34 Employment Agreement dated October 31, 1992
between the Company and Mark Blundell
(incorporated by reference to Exhibit 10.34 to
Amendment No. 4).
10.35 Severance Agreement dated June 15, 1992 between
the Company and Peter Lore (incorporated by
reference to Exhibit B to the May 26 8-K).
10.36 Agreement dated January 1993 between the Company
and Blundell & Associates, Inc., as supplemented
(incorporated by reference to Exhibit 10.36 to
Amendment No. 4).
10.37 Incentive Stock Option Plans (incorporated by
reference to Exhibit 10.37 to Amendment No. 4).
10.38 Lease for the Company's premises at One Penn
Plaza, New York, New York (incorporated by
reference to Exhibit 10.4 to the Form S-18).
10.39 Lease Termination Agreement dated February 3, 1993
by and between the Company and Delta Airlines
(incorporated by reference to Exhibit 3 to the
Company's Current Report on Form 8-K dated
February 26, 1993 (the "February 26 8-K")).
10.40 Agreement of Sublease dated February 26, 1993
between BT North America, Inc. and the Company
(incorporated by reference to Exhibit 2 to the
February 26 8-K).
10.41 Subscription Agreement dated as of February 22,
1993 between the Company and D.H. Blair Holdings,
Inc. (incorporated by reference to Exhibit 3 to
the Company's Current Report on Form 8-K dated
February 22, 1993).
10.42 Irrevocable Voting Proxy dated February 23, 1993
from D.H. Blair Investment Banking Corp. in favor
of Anthony J. Cataldo (incorporated by reference
to Exhibit 1 to the February 26 8-K).
10.43 Mutual Release and Hold Harmless Agreement dated
January 19, 1993 between MCN-CSI Computer
Services, Inc. and the Company (incorporated by
reference to 10.43 to Amendment No. 5).
10.44 Subscription Agreement dated April 26, 993,
between Robert S. Trump and the Company
(incorporated by reference to Exhibit A to the
Company's Current Report on Form 8-K dated April
30, 1993 (the "April 30 8-K")).
10.45 Letter Agreement dated April 36, 1993, between
Robert S. Trump and the Company dated April 26,
1993 (incorporated by reference to Exhibit B to
the April 30 8-K).
10.46 Letter Agreement dated April 26, 1993 between
Gerald Franz and the Company (incorporated by
reference to Exhibit C to the April 30 8-K).
10.47 Escrow Agreement dated April 26, 1993 among Gerald
Franz, Baratta & Goldstein, as escrow agent, and
the Company (incorporated be reference to Exhibit
D to the April 30 8-K).
10.48 Letter Agreement dated April 26, 1993 between
Gerald Franz and the Company (incorporated by
reference to Exhibit E to the April 30 8-K).
10.49 Letter Agreement dated April 26, 1993 between
Gerald Franz and the Company (incorporated by
reference to Exhibit F to the Company's April 30
8-K).
10.50 $50,000 Convertible Note executed by the Company
in favor of Gerald Franz dated April 26, 1993
(incorporated by reference to Exhibit G to the
Company's April 30 8-K).
10.51 Letter Agreement dated August 13, 1993 between
Sharon S. Merrill and the Company (incorporated be
reference to Exhibit A to the July 29, 1993 8-K).
10.52 Subscription Agreement dated July 30, 1993 between
D.H. Blair Holdings, Inc. and the Company
(incorporated by reference to Exhibit A to the
August 6, 1993 8-K).
10.53 Subscription Agreement dated August 6, 1993
between Bruno Guazzoni and the Company
(incorporated by reference to Exhibit B to the
Company's August 25, 1993 8-K).
10.54 Subscription Agreement dated August 9, 1993
between Duncan Robertson and the Company
(incorporated by reference to Exhibit B to the
Company's August 25, 1993 8-K).
10.55 Subscription Agreement dated August 9, 1993
between Caisse Centrale des Banques Populaires and
the Company (incorporated by reference to Exhibit
B to the Company's August 25, 1993 8-K).
10.56 Stock Purchase Agreement dated July 29, 1993 among
the MTI Merken Corporation, Sharon F. Merrill and
the Company (incorporated by reference to Exhibit
A to the Company's September 16, 1993 8-K).
10.57 Agreement dated August 30, 1993 between Mark
Blundell Associates, Inc. and New Paradigm
Software Corp. (incorporated by reference to
Exhibit 1 to the Company's November 30, 1993 8-K).
10.58 Agreement dated August 25, 1993 between New
Paradigm Software Corp. and the Company
(incorporated by reference to Exhibit 2 to the
Company's November 30, 1993 8-K).
10.59 Agreement dated August 25, 1993 between New
Paradigm Software Corp. and the Company
(incorporated by reference to Exhibit 3 to the
Company's November 30, 1993 8-K).
10.60 Proxy dated November 19, 1993 by the Company
(incorporated by reference to Exhibit 4 to the
Company's November 30, 1993 8-K).
10.61 Letter Agreement dated November 19, 1993 between
New Paradigm Software Corp. and the Company
(incorporated by reference to Exhibit 5 to the
Company's November 30, 1993 8-K).
10.62 Heads of Agreement dated February 10, 1994 between
Winter Partners Holding A.G. and the Company
(incorporated by reference to Exhibit 2 to the
Company's February 7, 1994 8-K).
10.63 Subscription Agreement dated July 8, 1994 between
Edelson Partners III and the Company (incorporated
by reference to Exhibit A to the Company's July
12, 1994 8-K).
10.64 Employment Agreement dated July 12, 1994 between
Keith Williams and the Company (incorporated by
reference to Exhibit 2 to the Company's July 13,
1994 8-K).
10.65 Purchase and Sale Agreement dated July 13, 1994
between Winter Partners Holding A.G. and the
Company (incorporated by reference to Exhibit 1 to
the Company's July 13, 1994 8-K).
10.66 Purchase of Stock Agreement dated July 11, 1994
between Robert Trump and the Company (incorporated
by reference to Exhibit A to the Company's July
13, 1994 8-K).
10.67 Amendment to Option Agreement dated July 11, 1994
between Robert Trump and the Company (incorporated
by reference to Exhibit B to the Company's July
13, 1994 8-K).
10.68 Secured Promissory Note in favor of Midland
Associates dated July 11, 1994 (incorporated by
reference to Exhibit C to the Company's July 13,
1994 8-K).
10.69 Pledge Agreement and Corporate Guarantees dated
July 11, 1994 between Midland Associates and the
Company (incorporated by reference to Exhibit D to
the Company's July 13, 1994 8-K).
10.70 Common Stock Purchase Warrant dated July 11, 1994
(incorporated by reference to Exhibit E to the
Company's July 13, 1994 8-K).
10.71 Promissory Note by the Company in favor if
FINMANAGEMENT dated July 7, 1994 (incorporated by
reference to Exhibit A to the Company's July 13,
1994 8-K).
10.72 Common Stock Purchase Warrant (incorporated by
reference to Exhibit B to the Company's July 13,
1994 8-K).
10.73 Agreement pursuant to Regulation "S" dated July 8,
1994 between Wellbourne Trust and the Company
(incorporated by reference to Exhibit A to the
Company's July 13, 1994 8-K).
10.74 Common Stock Purchase Warrant (incorporated by
reference to Exhibit B to the Company's July 13,
1994 8-K).
10.75 Promissory Note by the Company in favor if Edelson
Technology Partners III dated July 25, 1994
(incorporated by reference to Exhibit 1 to the
Company's July 27, 1994 8-K).
10.76 Offshore Subscription Agreement between Bruno
Guazzoni and the Company dated March 3rd, 1994
(incorporated by reference to Exhibit 2 to the
Company's July 25, 1994 8-K).
10.77 Offshore Subscription Agreement between COUTTS &
Co and the Company dated March 10, 1994
(incorporated by reference to Exhibit 3 to the
Company's July 25, 1994 8-K).
10.78 Offshore Subscription Agreement between Caisse
Centrale des Banques Populaires and the Company
dated March 10, 1994 (incorporated by reference to
Exhibit 4 to the Company's July 25, 1994 8-K).
10.79 Letter Subscription Agreement between Edelson
Technology Partners III and the Company dated
August 23, 1994 (incorporated by reference to
Exhibit 1 to the Company's August 23, 1994 8-K).
10.80 Offshore Subscription Agreement between Credit
Suisse (Hong Kong) and the Company dated September
9, 1994 (incorporated by reference to Exhibit 1 to
the Company's September 13, 1994 8-K).
10.81 Letter Agreement between Metrend Limited and the
Company dated September 16, 1994 (incorporated by
reference to Exhibit 2 to the Company's September
13, 1994 8-K).
10.82 Agreement between NPSC and the Company dated
September 6, 1994 (incorporated by reference to
Exhibit 1 to the Company's September 6, 1994 8-K).
10.83 Form of Subordinated Promissory Note by NPSC
(incorporated by reference to Exhibit 2 to the
Company's September 6, 1994 8-K).
10.84 Offshore Subscription Agreement between Credit
Suisse (Hong Kong) and the Company dated October
5, 1994 (incorporated by reference to Exhibit 1 to
the Company's October 5, 1994 8-K).
10.85 Offshore Subscription Agreement between Roberto
Jimenez Collie and the Company dated October 11,
1994 (incorporated by reference to Exhibit 1 to
the Company's October 11, 1994 8-K).
10.86 Offshore Subscription Agreement between Toteam Ltd
Inc. and the Company dated October 11, 1994
(incorporated by reference to Exhibit 2 to the
Company's October 11, 1994 8-K).
10.87 Offshore Subscription Agreement between Bruno
Guazzoni and the Company dated October 11, 1994
(incorporated by reference to Exhibit 3 to the
Company's October 11, 1994 8-K).
10.88 Offshore Subscription Agreement between Wellbourne
Trust and the Company dated November 1, 1994
(incorporated by reference to Exhibit A to the
Company's November 3, 1994 8-K).
10.89 Offshore Subscription Agreement between Toteam
Ltd., Inc. and the Company dated July 15, 1993
(incorporated by reference to Exhibit 1 to the
Company's November 4, 1994 8-K).
10.90 Offshore Subscription Agreement between Toteam
Ltd., Inc. and the Company dated June 3rd, 1993
(incorporated by reference to Exhibit 1 to the
Company's November 4, 1994 8-K).
10.91 Offshore Subscription Agreement between Roberto
Jimenez Collie and the Company dated June 7, 1993
(incorporated by reference to Exhibit 2 to the
Company's November 4, 1994 8-K).
10.92 Offshore Subscription Agreement between Bruno
Guazzoni and the Company dated November 1, 1994
(incorporated by reference to Exhibit 3 to the
Company's November 4, 1994 8-K).
10.93 Offshore Subscription Agreement between Bruno
Guazzoni and the Company dated June 10, 1993
(incorporated by reference to Exhibit 3 to the
Company's November 4, 1994 8-K).
10.94 Agreement between M.H. Meyerson & Co. and the
Company dated December 7, 1994 (incorporated by
reference to Exhibit 1 to the Company's December
7, 1994 8-K).
10.95 Heads of Agreement between Digital Equipment
International Limited, Digital Equipment
International bv, Digital Equipment (Holdings) bv,
and Digital Equipment Co. Ltd. and the Company
dated December 12, 1994 (incorporated by reference
to Exhibit 3 to the Company's December 12, 1994 8-
K).
10.96 Stock Purchase and Sale Agreement between Digital
Equipment International Limited, Digital Equipment
International bv, Digital Equipment (Holdings) bv,
and Digital Equipment Co. Ltd., MTi Holding and
the Company dated December 22, 1994 (incorporated
by reference to Exhibit 1 to the Company's
December 22, 1994 8-K).
10.97 Assignment of Secured Loan between Digital
Equipment Co. Ltd., MTi Holding and the Company
dated December 22, 1994 (incorporated by reference
to Exhibit 2 to the Company's December 22, 1994 8-
K).
10.98 Letter Agreement between Midland Associates and
the Company dated January 23, 1995 (incorporated
by reference to Exhibit 1 to the Company's
February 16, 1995 8-K).
10.99 Letter Agreement between Digital Equipment Co.
Ltd, MTi Holding and the Company dated March 2nd,
1995 (incorporated by reference to Exhibit 3 to
the Company's March 10, 1995 8-K/A).
10.100 Offshore Subscription Agreement between Wellbourne
Trust and the Company dated February 23, 1995
(incorporated by reference to Exhibit 1 to the
Company's February 28, 1995 8-K).
10.101 Promissory Note in favor of Howard Schraub dated
February 17, 1995 (incorporated by reference to
Exhibit 1 to the Company's March 10, 1995 8-K).
10.102 Letter Agreement between Howard Schraub and the
Company dated February 17, 1995 (incorporated by
reference to Exhibit 2 to the Company's March 10,
1995 8-K).
10.103 Non-qualified Stock Option Agreement between
Howard Schraub and the Company (incorporated by
reference to Exhibit 3 to the Company's March 10,
1995 8-K).
10.104 Non-qualified Stock Option Agreement between
Howard Schraub and the Company (incorporated by
reference to Exhibit 4 to the Company's March 10,
1995 8-K).
10.105 Promissory Note in favor of Bruno Guazzoni dated
January 5, 1995 (incorporated by reference to
Exhibit 5 to the Company's March 10, 1995 8-K).
10.106 Offshore Subscription Agreement between Wellbourne
Trust and the Company dated February 23, 1995
(incorporated by reference to Exhibit 1 to the
Company's March 28, 1995 8-K).
10.107 Offshore Subscription Agreement between Parkland
Limited and the Company dated April 4th, 1995
(incorporated by reference to Exhibit 1 to the
Company's May 3rd, 1995 8-K).
10.108 Offshore Subscription Agreement between Hillside
Industries, Inc. and the Company dated May 25,
1995 (incorporated by reference to Exhibit 1 to
the Company's May 23, 1995 8-K).
10.108 Offshore Subscription Agreement between Hillside
Industries, Inc. and the Company dated May 25,
1995 (incorporated by reference to Exhibit 2 to
the Company's May 23, 1995 8-K).
10.109 Separation Agreement and Release between Anthony
J. Cataldo and the Company dated July 6 and 7,
1995 (incorporated by reference to exhibit (a) to
the Company's August 9, 1995 8-K)
10.110 Pledge-Escrow Agreement between Anthony J. Cataldo
and the Company (incorporated by reference to
exhibit (c) to the Company's August 9, 1995 8-K)
10.111 Non-recourse Promissory Note by Anthony J. Cataldo
date July 17, 1995 (incorporated by reference to
exhibit (b) to the Company's August 9, 1995 8-K)
10.112 Settlement Agreement by and between the Company
and MCI dated August 31, 1995 (incorporated by
reference to exhibit 10.112 to the Company's
August 31, 1995 8-K)
10.113 Settlement Agreement by and between the Company
and Midland Associates dated September 13, 1995
(incorporated by reference to exhibit 10.113 to
the Company's September 29, 1995 8-K)
10.115. Copy of Letter Agreement dated December 15, 1995
with Israel Trading Fund, Ltd. and Select Capital
Advisors, Inc. (incorporated by reference to
exhibit 10.115 to the Company's March 14, 1996 8-
K)
10.116. Copy of Letter Agreement dated December 22, 1995
with Israel Trading Fund, Ltd. and Select Capital
Advisors, Inc. (incorporated by reference to
exhibit 10.116 to the Company's March 14, 1996 8-
K)
10.117 Copy of Agreement For Consulting Services with
Barrocas and Behzadi Investments dated November
27, 1995. (incorporated by reference to exhibit
10.117 to the Company's March 14, 1996 8-K)
10.118 Copy of 9% Convertible A Debenture issued to Torah
Vachesed Lezra Vesad dated December 19, 1995.
(incorporated by reference to exhibit 10.118 to
the Company's March 14, 1996 8-K)
10.119 Copy of Escrow Agreement with Barry B. Globerman,
dated December 20, 1995. (incorporated by
reference to exhibit 10.119 to the Company's March
14, 1996 8-K)
10.120 Copy of a Treasury Order dated December 20, 1995.
(incorporated by reference to exhibit 10.120 to
the Company's March 14, 1996 8-K)
10.121 Copy of an Offshore Securities Subscription
Agreement with Torah Vachesed Lezra Vesad dated
December 20, 1995. (incorporated by reference to
exhibit 10.121 to the Company's March 14, 1996 8-
K)
10.122 Copy of 9% Convertible A Debenture issued to
Schulamit Pritzker dated December 19, 1995.
(incorporated by reference to exhibit 10.122 to
the Company's March 14, 1996 8-K)
10.123 Copy of Escrow Agreement with Barry B. Globerman,
dated December 20, 1995. (incorporated by
reference to exhibit 10.123 to the Company's March
14, 1996 8-K)
10.124 Copy of a Treasury Order dated December 20, 1995.
(incorporated by reference to exhibit 10.124 to
the Company's March 14, 1996 8-K)
10.125 Copy of an Offshore Securities Subscription
Agreement with Schulamit Pritzker dated December
20, 1995 (incorporated by reference to exhibit
10.125 to the Company's March 14, 1996 8-K)
10.126 Copy of 9% Convertible A Debenture issued to Aaron
Meyer Gee dated December 22, 1995. (incorporated
by reference to exhibit 10.126 to the Company's
March 14, 1996 8-K)
10.127 Copy of Escrow Agreement with Barry B. Globerman,
dated December 22, 1995. (incorporated by
reference to exhibit 10.127 to the Company's March
14, 1996 8-K)
10.128 Copy of a Treasury Order dated December 20, 1995.
(incorporated by reference to exhibit 10.128 to
the Company's March 14, 1996 8-K)
10.129 Copy of an Offshore Securities Subscription
Agreement with Aaron Meyer Gee dated December 22,
1995 (incorporated by reference to exhibit 10.129
to the Company's March 14, 1996 8-K)
10.130 Copy of 9% Convertible A Debenture issued to
Dovasar S.A., dated December 29, 1995.
(incorporated by reference to exhibit 10.130 to
the Company's March 14, 1996 8-K)
10.131 Copy of Escrow Agreement with Barry B. Globerman,
dated December 29, 1995. (incorporated by
reference to exhibit 10.131 to the Company's March
14, 1996 8-K)
10.132 Copy of a Treasury Order dated December 29, 1995.
(incorporated by reference to exhibit 10.132 to
the Company's March 14, 1996 8-K)
10.133 Copy of an Offshore Securities Subscription
Agreement with Dovasar S.A. dated December 29,
1995 (incorporated by reference to exhibit 10.133
to the Company's March 14, 1996 8-K)
10.134 Copy of 9% Convertible A Debenture issued to Chava
Fischman, dated December 29, 1995. (incorporated
by reference to exhibit 10.133 to the Company's
March 14, 1996 8-K)
10.135 Copy of Escrow Agreement with Barry B. Globerman,
dated December 29, 1995. (incorporated by
reference to exhibit 10.135 to the Company's March
14, 1996 8-K)
10.136 Copy of a Treasury Order dated December 29, 1995.
(incorporated by reference to exhibit 10.136 to
the Company's March 14, 1996 8-K)
10.137 Copy of an Offshore Securities Subscription
Agreement with Shava Fischman dated December 29,
1995 (incorporated by reference to exhibit 10.137
to the Company's March 14, 1996 8-K)
10.138 Copy of 9% Convertible B Debenture issued to Henry
Zieleniec, dated January 25, 1996. (incorporated
by reference to exhibit 10.138 to the Company's
March 14, 1996 8-K)
10.139 Copy of Escrow Agreement with Barry B. Globerman,
dated January 25, 1996. (incorporated by reference
to exhibit 10.139 to the Company's March 14, 1996
8-K)
10.140 Copy of a Treasury Order dated January 25, 1996.
(incorporated by reference to exhibit 10.140 to
the Company's March 14, 1996 8-K)
10.141 Copy of an Offshore Securities Subscription
Agreement with Henry Zieleniec dated January 25,
1996. (incorporated by reference to exhibit 10.141
to the Company's March 14, 1996 8-K)
10.142 Copy of 9% Convertible B Debenture issued to
Raphael Lapidus, dated January 29, 1996.
(incorporated by reference to exhibit 10.142 to
the Company's March 14, 1996 8-K)
10.143 Copy of Escrow Agreement with Barry B. Globerman,
dated January 29, 1996. (incorporated by reference
to exhibit 10.143 to the Company's March 14, 1996
8-K)
10.144 Copy of a Treasury Order dated January 29, 1996.
(incorporated by reference to exhibit 10.144 to
the Company's March 14, 1996 8-K)
10.145 Copy of an Offshore Securities Subscription
Agreement with Raphael Lapidus dated January 29,
1996. (incorporated by reference to exhibit 10.145
to the Company's March 14, 1996 8-K)
10.146 Copy of 9% Convertible B Debenture issued to
Miriam Herzel, dated January 29, 1996.
(incorporated by reference to exhibit 10.146 to
the Company's March 14, 1996 8-K)
10.147 Copy of Escrow Agreement with Barry B. Globerman,
dated January 29, 1996. (incorporated by reference
to exhibit 10.147 to the Company's March 14, 1996
8-K)
10.148 Copy of a Treasury Order dated January 29, 1996.
(incorporated by reference to exhibit 10.148 to
the Company's March 14, 1996 8-K)
10.149 Copy of an Offshore Securities Subscription
Agreement with Miriam Herzel dated January 29,
1996 (incorporated by reference to exhibit 10.149
to the Company's March 14, 1996 8-K)
10.150 Copy of 9% Convertible B Debenture issued to Yosef
Yud, dated January 29, 1996. (incorporated by
reference to exhibit 10.150 to the Company's March
14, 1996 8-K)
10.151 Copy of Escrow Agreement with Barry B. Globerman,
dated January 29, 1996. (incorporated by reference
to exhibit 10.151 to the Company's March 14, 1996
8-K)
10.152 Copy of a Treasury Order dated January 29, 1996
(incorporated by reference to exhibit 10.152 to
the Company's March 14, 1996 8-K)
10.153 Copy of an Offshore Securities Subscription
Agreement with Yosef Yud dated January 29, 1996.
(incorporated by reference to exhibit 10.153 to
the Company's March 14, 1996 8-K)
10.154 Copy of 9% Convertible B Debenture issued to
Menachem M. Begun, dated January 30, 1996.
(incorporated by reference to exhibit 10.154 to
the Company's March 14, 1996 8-K)
10.155 Copy of Escrow Agreement with Barry B. Globerman,
dated January 30, 1996. (incorporated by reference
to exhibit 10.155 to the Company's March 14, 1996
8-K)
10.156 Copy of a Treasury Order dated January 30, 1996
(incorporated by reference to exhibit 10.156 to
the Company's March 14, 1996 8-K)
10.157 Copy of an Offshore Securities Subscription
Agreement with Menachem M. Begun dated January 30,
1996. (incorporated by reference to exhibit 10.157
to the Company's March 14, 1996 8-K)
10.159 Letter Agreement between the Company, ITF and
Select Capital dated February 28, 1996
(incorporated by reference to exhibit 10.159 to
the Company's July 11, 1996 8-K/A)
10.160 Copy of 9% Convertible C Debenture issued to
Shulamit Pritzker, dated February 28, 1996.
(incorporated by reference to exhibit 10.160 to
the Company's March 26 8-K/A)
10.161 Copy of Escrow Agreement with Barry B. Globerman,
dated February 28, 1996. (incorporated by
reference to exhibit 10.161 to the Company's March
26 8-K/A)
10.162 Copy of a Treasury Order dated February 27, 1996
(incorporated by reference to exhibit 10.162 to
the Company's March 26 8-K/A)
10.163 Copy of an Offshore Securities Subscription
Agreement with Shulamit Pritzker dated February
27, 1996. (incorporated by reference to exhibit
10.163 to the Company's March 26 8-K/A)
10.164 Copy of 9% Convertible C Debenture issued to
Joseph Weinburg, dated February 28, 1996.
(incorporated by reference to exhibit 10.164 to
the Company's March 26 8-K/A)
10.165 Copy of Escrow Agreement with Barry B. Globerman,
dated February 28, 1996. (incorporated by
reference to exhibit 10.165 to the Company's March
26 8-K/A)
10.166 Copy of a Treasury Order dated February 28, 1996
(incorporated by reference to exhibit 10.166 to
the Company's March 26 8-K/A)
10.167 Copy of an Offshore Securities Subscription
Agreement with Joseph Weinburg dated February 28,
1996. (incorporated by reference to exhibit 10.167
to the Company's March 26 8-K/A)
10.168 Copy of 9% Convertible C Debenture issued to Torah
Vachesed Lezra Vesad, dated February 28, 1996.
(incorporated by reference to exhibit 10.168 to
the Company's March 26 8-K/A)
10.169 Copy of Escrow Agreement with Barry B. Globerman,
dated February 27, 1996. (incorporated by
reference to exhibit 10.169 to the Company's March
26 8-K/A)
10.170 Copy of a Treasury Order dated February 27, 1996
(incorporated by reference to exhibit 10.170 to
the Company's March 26 8-K/A)
10.171 Copy of an Offshore Securities Subscription
Agreement with Torah Vachesed Lezra Vesad, dated
February 28, 1996. (incorporated by reference to
exhibit 10.171 to the Company's March 26 8-K/A)
10.172 Copy of 9% Convertible C Debenture issued to Yosef
Yud, dated February 28, 1996. (incorporated by
reference to exhibit 10.172 to the Company's March
26 8-K/A)
10.173 Copy of Escrow Agreement with Barry B. Globerman,
dated February 28, 1996. (incorporated by
reference to exhibit 10.173 to the Company's March
26 8-K/A)
10.174 Copy of a Treasury Order dated February 28, 1996.
(incorporated by reference to exhibit 10.174 to
the Company's March 26 8-K/A)
10.175 Copy of an Offshore Securities Subscription
Agreement with Yosef Yud, dated February 28, 1996.
(incorporated by reference to exhibit 10.175 to
the Company's March 26 8-K/A)
10.176 Copy of 9% Convertible C Debenture issued to Aaron
Meyer Gee, dated February 28, 1996. (incorporated
by reference to exhibit 10.176 to the Company's
March 26 8-K/A)
10.177 Copy of Escrow Agreement with Barry B. Globerman,
dated February 28, 1996. (incorporated by
reference to exhibit 10.177 to the Company's March
26 8-K/A)
10.178 Copy of a Treasury Order dated February 28, 1996.
(incorporated by reference to exhibit 10.178 to
the Company's March 26 8-K/A)
10.179 Copy of an Offshore Securities Subscription
Agreement with Aaron Meyer Gee, dated February 28,
1996. (incorporated by reference to exhibit 10.179
to the Company's March 26 8-K/A)
10.180 Copy of 9% Convertible C Debenture issued to
Dovasar S.A., dated February 29, 1996.
(incorporated by reference to exhibit 10.180 to
the Company's March 26 8-K/A)
10.181 Copy of Escrow Agreement with Barry B. Globerman,
dated February 29, 1996. (incorporated by
reference to exhibit 10.181 to the Company's March
26 8-K/A)
10.182 Copy of a Treasury Order dated February 29, 1996.
(incorporated by reference to exhibit 10.182 to
the Company's March 26 8-K/A)
10.183 Copy of an Offshore Securities Subscription
Agreement with Dovasar S.A., dated February 29,
1996. (incorporated by reference to exhibit 10.183
to the Company's March 26 8-K/A)
10.184 Letter from Management Technologies, Inc. to Barry
B. Globerman dated December 15, 1995.
(incorporated by reference to exhibit 10.184 to
the Company's March 26 8-K/A)
10.185 Letter from MTi Abraxsys Systems, Inc. to
Management Technologies, Inc. dated December 15,
1995. (incorporated by reference to exhibit 10.186
to the Company's March 26 8-K/A)
10.187 Copy of 9% Convertible C Debenture issued to
Israel Daniel Levy, dated March 26, 1996.
(incorporated by reference to exhibit 10.187 to
the Company's July 11, 1996 8-K/A)
10.188 Copy of Escrow Agreement with Barry B. Globerman,
dated March 26, 1996. (incorporated by reference
to exhibit 10.188 to the Company's July 11, 1996
8-K/A)
10.189 Copy of a Treasury Order dated March 26, 1996
(incorporated by reference to exhibit 10.189 to
the Company's July 11, 1996 8-K/A)
10.190 Copy of an Offshore Securities Subscription
Agreement with Israel Daniel Levy, dated March 26,
1996. (incorporated by reference to exhibit 10.190
to the Company's July 11, 1996 8-K/A)
10.191 Copy of 9% Convertible C Debenture issued to
Joseph Yud, dated March 26, 1996. (incorporated by
reference to exhibit 10.191 to the Company's July
11, 1996 8-K/A)
10.192 Copy of Escrow Agreement with Barry B. Globerman,
dated March 26, 1996. (incorporated by reference
to exhibit 10.192 to the Company's July 11, 1996
8-K/A)
10.193 Copy of a Treasury Order dated March 26, 1996
(incorporated by reference to exhibit 10.193 to
the Company's July 11, 1996 8-K/A)
10.194 Copy of an Offshore Securities Subscription
Agreement with Joseph Yud, dated March 26, 1996.
(incorporated by reference to exhibit 10.194 to
the Company's July 11, 1996 8-K/A)
10.195 Copy of 9% Convertible C Debenture issued to Mary
Park Properties, Ltd., dated March 26, 1996.
(incorporated by reference to exhibit 10.195 to
the Company's July 11, 1996 8-K/A)
10.196 Copy of Escrow Agreement with Barry B. Globerman,
dated March 26, 1996. (incorporated by reference
to exhibit 10.196 to the Company's July 11, 1996
8-K/A)
10.197 Copy of a Treasury Order dated March 26, 1996
(incorporated by reference to exhibit 10.197 to
the Company's July 11, 1996 8-K/A)
10.198 Copy of an Offshore Securities Subscription
Agreement with Mary Park Properties, Ltd., dated
March 26, 1996. (incorporated by reference to
exhibit 10.198 to the Company's July 11, 1996 8-
K/A)
10.199 Copy of 9% Convertible D Debenture issued to
Michal Alif, dated May 2, 1996. (incorporated by
reference to exhibit 10.199 to the Company's July
11, 1996 8-K/A)
10.200 Copy of Escrow Agreement with Barry B. Globerman,
dated May 2, 1996. (incorporated by reference to
exhibit 10.200 to the Company's July 11, 1996 8-
K/A)
10.201 Copy of a Treasury Order dated May 2, 1996
(incorporated by reference to exhibit 10.201 to
the Company's July 11, 1996 8-K/A)
10.202 Copy of an Offshore Securities Subscription
Agreement with Michal Alif, dated May 2, 1996.
(incorporated by reference to exhibit 10.202 to
the Company's July 11, 1996 8-K/A)
10.203 Copy of 9% Convertible E Debenture issued to AT
Investements SA, dated May 7, 1996. (incorporated
by reference to exhibit 10.203 to the Company's
July 15, 1996 8-K)
10.204 Copy of an Offshore Securities Subscription
Agreement with AT Investements SA, dated May 7,
1996. (incorporated by reference to exhibit 10.204
to the Company's July 15, 1996 8-K)
10.205 Copy of a Regulation S Distribution Agreement
between the Company and U.S. Milestone Corporation
dated June 4, 1996 (incorporated by reference to
exhibit 10.205 to the Company's July 30, 1996 8-K)
10.206 Copy of an amendment to Distribution Agreement
between the Company and U.S. Milestone Corporation
dated June 11, 1996 (incorporated by reference to
exhibit 10.206 to the Company's July 30, 1996 8-K)
10.207 Copy of an Offshore Securities Subscription
Agreement between the Company and Silverstone
International Corp. dated June 4, 1996.
(incorporated by reference to exhibit 10.207 to
the Company's July 30, 1996 8-K)
16.01 Letter on change of certifying accountant from
Goldstein & Morris dated May 10, 1995,
(incorporated by reference to exhibit 1 to the
Company's May 9, 1995 8-K).
17.01 Resignation letter from Barrington J. Fludgate,
dated September 15, 1995 (incorporated by
reference to exhibit 10.185 to the Company's July
11, 1996 8-K/A)
17.02 Resignation letter from Robert Oxenberg, dated
December 13, 1995 (incorporated by reference to
exhibit (1) of the Company's December 13, 1995 8-
K)
17.03 Resignation letter from Dan Sladden dated
September 11, 1995, (incorporated by reference to
exhibit 17.03 of the Company's October 4, 1995 8-
K)
17.04 Resignation letter from Keith Williams dated
October 3, 1995, (incorporated by reference to
exhibit 17.04 of the Company's October 4, 1995 8-
K)
17.05 Resignation letter from Anthony J. Cataldo dated
November 30, 1995, (incorporated by reference to
exhibit 17.05 of the Company's December 1, 1995 8-
K)
17.06 Resignation letter from Peter Svennilson dated
November 29, 1995, (incorporated by reference to
exhibit 17.06 of the Company's December 1, 1995 8-
K)
17.07 Resignation letter from Edward Stone dated
November 22, 1995, (incorporated by reference to
exhibit 17.06 of the Company's December 1, 1995 8-
K)
17.08 Resignation letter from Claudio Guazzoni dated
March 26, 1996 (incorporated by reference to
exhibit 17.08 to the Company's March 27, 1996 8-K)
22.01 List of the Company's Subsidiaries
23.01 Consent by KPMG Peat Marwick LLP dated August 15,
1995, incorporated by reference to exhibit 23.01
to the Company's 10K-SB dated August 15, 1995)
23.02 Consent by KPMG Peat Marwick LLP dated August 13,
1996
99.01 Resignation letter from Nigel Cole, undated,
(incorporated by reference to exhibit 99.01 of the
Company's October 4, 1995 8-K)
(B) CURRENT REPORTS ON FORM 8-K FILED DURING THE QUARTER ENDED APRIL 30,
1996:
FINANCIAL
STATEMENT
FORM REPORT DATE ITEM REPORTED FILED
8-K/A March 4, 1996 5, settlement agreement None
8-K March 27, 1996 5, appointment of directors None
6, resignation of directors
8-K/A March 26, 1996 5, convertible debenture None
8-K March 27, 1996 5, resignation of director None
6, appointment of director
8-K March 28, 1995 5, equity financing None
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/ Paul Ekon
---------
Paul Ekon
Chief Executive Officer
Date: August 20, 1996
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
- --------- ----- ----
Chief Executive August 20 ,1996
/s/ Paul Ekon Officer and
----------
Director
Paul Ekon
(Principal
Executive Officer)
/s/ Peter Morris President, Chief August 20, 1996
-------------
Operating Officer,
Peter Morris
Director
(Principal
Accounting
Officer)
August 20, 1996
/s/ Michael Awerbuch Director
-----------------
Michael Awerbuch
/s/ John Ridley Director August 20, 1996
-----------
John Ridley
EXHIBIT 22.01
SUBSIDIARIES OF MANAGEMENT TECHNOLOGIES, INC. AS OF AUGUST 15,
1996
. MTi Abraxsys Systems, Inc.
. Winter Partners Limited
. MTi Abraxsys Systems (Pte) Limited
. MTi Abraxsys Systems (HK) Limited
. MTi Holdings (UK) Limited
. MTi Trading Systems Limited
. MTi Merken, Inc.
. Management Technologies Trade Services, Inc.
. MTi Financial Systems (Europe) Ltd.
. MTI Management Technologies International Ltd.
. Management Technologies Financial Consultants Pty. Ltd (Australia)
. Management Technologies Informatique S.A.
Exhibit 23.02
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Management Technologies, Inc.:
We consent to incorporation by reference in the registration statements (No. 33-
25528 and 33-52074) on Form S-1 and Form S-3 respectively of Management
Technologies, Inc. of our report dated August 13, 1996, relating to the
consolidated balance sheet of Management Technologies, Inc. and subsidiaries as
of April 30, 1996, and the related consolidated statements of operations,
stockholders' equity, and cash flows for the years ended April 30, 1996 and
1995, which report appears in the April 30, 1996 annual report on Form 10-KSB of
Management Technologies, Inc. and subsidiaries.
Our report dated August 13, 1996 contains an explanatory paragraph that states
that the Company has suffered recurring losses from operations and at April 30,
1996 has a working capital deficiency that raises substantial doubt about its
ability to continue as a going concern. The consolidated financial statements
do not include any adjustments that might result form the outcome of that
uncertainty.
/s/ KPMG PEAT MARWICK LLP
New York, New York
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the consolidated financial statements of Management Technologies, Inc.
and subsidiaries for the years ended April 30, 1996 and 1995, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000806566
<NAME> MANAGEMENT TECHNOLOGIES, INC.
<MULTIPLIER> 1,000
<CURRENCY> USD
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> APR-30-1996 APR-30-1995
<PERIOD-START> MAY-01-1995 MAY-01-1994
<PERIOD-END> APR-30-1996 APR-30-1995
<EXCHANGE-RATE> 1 1
<CASH> 313 833
<SECURITIES> 0 0
<RECEIVABLES> 8,871 7,234
<ALLOWANCES> 961 961
<INVENTORY> 0 0
<CURRENT-ASSETS> 10,225 1,803
<PP&E> 2,205 2,355
<DEPRECIATION> 1,310 545
<TOTAL-ASSETS> 26,640 27,221
<CURRENT-LIABILITIES> 17,218 17,915
<BONDS> 8,246 8,074
0 0
0 0
<COMMON> 247 140
<OTHER-SE> 49,814 42,472
<TOTAL-LIABILITY-AND-EQUITY> 26,640 27,221
<SALES> 21,227 18,687
<TOTAL-REVENUES> 21,227 18,687
<CGS> 10,306 4,924
<TOTAL-COSTS> 32,192 29,440
<OTHER-EXPENSES> (162) 1,934
<LOSS-PROVISION> 0 636
<INTEREST-EXPENSE> 901 822
<INCOME-PRETAX> (10,802) (12,687)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (10,802) (12,687)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (10,802) (12,687)
<EPS-PRIMARY> (0.58) (1.70)
<EPS-DILUTED> (0.58) (1.70)
</TABLE>
