SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
FIRST AMENDMENT TO FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended July 31, 1995
--------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from to
---------------- -----------------
Commission File Number: 0-17206
--------
Management Technologies, Inc.
-----------------------------
(Exact name of Registrant as specified in its Charter)
New York 13-3029797
- -------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification
No.)
incorporation or organization)
630 Third Avenue
New York, New York 10017
------------------------
(Address of principal executive offices)
(212) 983 5620
--------------
(Registrant's telephone number)
(Former Name, Former Address and Former Fiscal Year, if changed since last
Report)
Check whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
---
State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.
Class Outstanding as of September 15, 1995
- -------------------------------------- ------------------------------------
Common Stock, par value $.01 per share 15,651,067
Transitional Small Business Disclosure Format (Check one): Yes No X
---- ---
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The consolidated financial statements included herein are unaudited, but reflect
all adjustments that, in the opinion of management, are necessary to provide a
fair statement of the results for the periods covered. All such adjustments are
of a normal recurring nature.
Index to Financial Statements (Unaudited):
Consolidated Balance Sheet as of July 31, 1995
Consolidated Statement of Change in Stockholders' Equity
Consolidated Statement of Cash Flows
Notes to Financial Statements
MANAGEMENT TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in $'000)
July 31 April 30,
1995 1995
ASSETS (unaudited)
Current assets:
Cash 551 833
Accounts receivable; billed 1,870 4,655
unbilled 2,791 1,618
Prepaid expenses and other current assets 1,885 1,803
TOTAL CURRENT ASSETS 7,097 8,909
Property and equipment, net of accumulated 1,509 1,810
depreciation
Intangible assets, less accumulated 14,142 14,663
amortization
Other assets 0 1,839
TOTAL ASSETS 22,748 27,221
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable 3,162 2,898
Accrued expenses 4,411 4,545
Taxes payable 1,694 2,053
Note payable on acquisition 2,430 3,607
Deferred income 4,022 3,632
Lease liabilities 123
Other current liabilities 1,283 1,180
TOTAL CURRENT LIABILITIES 17,125 17,915
Loans payable 270
Non current note payable on acquisition 0 1,766
Other long term liabilities 227 1,521
TOTAL LIABILITIES 17,622 21,202
Stockholders' equity
Common stock $.01 par value. Authorized
shares, 200,000,000
issued shares 16,362,732 160 140
Additional paid in capital 43,613 42,472
Accumulated deficit (38,218) (36,063)
Foreign currency translation adjustment (429) (530)
TOTAL STOCKHOLDERS' EQUITY 5,126 6,019
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 22,748 27,221
The accompanying notes are an integral part of these financial statements
MANAGEMENT TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(In $000 except share data)
Additional
Common Stock paid in Retained Translation Total
stock amount capital Earnings Adjustment
Balances at April 14,540,169 140 42,472 (36,063) (530) 6,019
30, 1995
Sales of common 839,429 9 523 532
shares
Issuances of common
stock in conversion 271,469 3 377 380
of debt
Shares subscribed 711,665 8 241 249
but not issued
Net income (loss) (2,155) (2,155)
for the year
Translation 101 101
adjustment
Balances at July 16,362,732 160 43,613 (38,218) (429) 5,126
31, 1995
Less shares to be 711,665
issued
Total issued and
outstanding at 15,651,067
July 31, 1995
The accompanying notes are an integral part of these financial statements
MANAGEMENT TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in $'000)
Three months ended July 31,
1995 1994
(unaudited) (unaudited)
Revenues
Software products 2,425 312
Maintenance fees 2,047 354
Customer service fees 1,793 151
TOTAL REVENUE 6,266 817
Cost and expenses
Costs of software products 693 6
Costs of maintenance 1,056 266
Costs of customer service 797 89
Selling, general and administrative 5,137 1,201
Write off of acquired research and 7,000
development
Amortization of Intangible assets 185 16
Depreciation 264 26
TOTAL COSTS AND EXPENSES 8,132 8,604
LOSS FROM OPERATIONS (1,866) (7,787)
Write down of investment in affiliate (1,112)
Interest (expense) (288) (20)
NET LOSS (2,155) (8,919)
Net profit loss per share outstanding (0.14) (1.90)
Weighted average number of common shares 15,451,450 4,697,042
outstanding
The accompanying notes are an integral part of these financial statements
MANAGEMENT TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in $ 000)
Three months ended July 31,
1995 1994
(unaudited) (unaudited)
CASH FLOW FROM OPERATING ACTIVITIES
NET LOSS (2,155) (8,919)
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO
NET CASH
PROVIDED BY (USED IN) OPERATING ACTIVITIES
Write off investment in affiliate 0 647
Depreciation and amortization 554 47
Write down of acquired research and development 7,000
Changes in assets and liabilities net of
effects from acquisitions:
Decrease (increase) in accounts receivable 2,756 (360)
Increase (decrease) in unbilled accounts (1,182) (67)
receivable
Increase (decrease) in other current assets (92) (329)
Increase (decrease) in accounts payable 297 786
Decrease in accrued expenses (137) (190)
Decrease (increase) in payroll taxes payable (345) 158
Increase in notes and loans payable 0 1,200
Increase in deferred income 409 200
Decrease (increase) in lease liabilities (163) 17
NET CASH USED IN (PROVIDED BY) OPERATING (58) 190
ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for Winter Partners net of cash acquired (6,694)
Payment for DESISCo net of cash acquired (844)
Proceeds from disposal/(purchase) of fixed assets 29 (19)
NET CASH PROVIDED (USED IN) FROM INVESTING (815) (6,713)
ACTIVITIES:
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from notes payable 0 1,000
Repayment of notes payable (275) (664)
Proceeds from issuance of common stock 803 7,635
NET CASH PROVIDED IN FINANCING ACTIVITIES 528 7,971
EFFECT OF EXCHANGE RATE ON CASH 63 25
INCREASE IN CASH AND CASH EQUIVALENTS (282) 1,473
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 833 190
CASH AND CASH EQUIVALENTS - END OF PERIOD 551 1,663
Supplemental disclosure of cash flow information
Cash paid during the fiscal quarter for interest 20
Non-cash financing activities
Issuance of common stock in conversion of 357
subordinated debt
The accompanying notes are an integral part of these financial statements
Notes to Financial Statements:
1. The accompanying consolidated financial statements should be read in
conjunction with the Company's financial statements for the fiscal year ended
April 30, 1995, included in the Company's Annual Report on form 10-KSB, as
amended. In the opinion of management, the interim statements reflect all
adjustments which are necessary for a fair statement of the results of the
interim period presented. The interim results are not necessarily indicative of
the results for the full year.
2. Net loss per share for the three months ended July 31, 1995 is computed
based upon the weighted average number of common shares outstanding and excludes
common stock equivalents as they would be anti-dilutive.
3. Majority owned affiliate: At the balance sheet date, NPSC was a
majority owned but not controlled affiliate of the Company and is carried and
reported by the equity method. The Company does not have a controlling voting
power commensurate with its equity ownership and may be diluted by NPSC sales of
common equity. The balances in the Company's investment in NPSC and in
receivable from NPSC were entirely written off in the year ended April 30, 1995.
4. Taxes payable comprise payroll deductions plus estimated penalties and
interest for late payment.
5. The Company follows the practices set out in Financial Accounting Standards
Board statement 52 in translating the operations, assets and liabilities of
entities whose accounts are denominated in foreign currencies.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
General
The Company's principal products are IBS-90, Abraxsys, OpenTrade and
TradeWizard. Abraxsys and IBS-90 are back office international banking software
products running on mid range computer systems. Abraxsys and IBS-90 have been
installed at approximately 75 locations in over 30 countries. Abraxsys is a
complete re-development of IBS-90 and is now marketed as the Company's prime
offering to banks to computerize their back office operation. Abraxsys has
reached the technological feasibility phase during the current quarter and its
development costs during the quarter ended July 31, 1995 have been capitalized,
accordingly. Abraxsys is written in the industry standard C language and runs
on a variety of platforms and operating systems, the most significant of which
is UNIX. OpenTrade is a software product that provides a platform for
distributing real-time financial information within the trading room
environment. OpenTrade is used by 50 customers supporting 6,000 trading
positions. TradeWizard is an advanced software product for the integration of
information and applications at the users' desktop. It is installed at some 500
positions. TradeWizard has reached the technological feasibility stage during
the current quarter and its development costs in the quarter ended July 31, 1995
have been capitalized, accordingly. The Company also markets and licenses its
ManTec line of integrated software packages for financial institutions through
an agent. The Company no longer directly supports its ManTec product line.
The Company's agent provides support to certain clients. The ManTec product
line runs on IBM and IBM-compatible mainframe computers.
The Company's revenues consist of license fees for the Company's software
components, maintenance fees and customer service fees. In addition, the Company
earns revenues from the selling other companies' hardware and software products.
The Company accounts for revenue in conformity with Statements of Position
("SOP") 91-1 and 81-1.
In accordance with SOP 91-1, revenue from IBS-90 and Abraxsys license fees
are recognized upon delivery to the customer, provided no significant vendor
obligations remain and collection of the resulting receivable is deemed
probable.
The Company recognizes revenues from its OpenTrade and TradeWizard products
according to the percentage of completion method as costs are incurred (cost to
cost basis) in conformity with SOP 81-1. A prudent estimate is made of the
profit attributable to work completed and is recognized once the outcome of the
contract can be assessed with reasonable certainty. If the estimate indicates a
loss, the entire loss is accrued immediately. The amount by which revenue
exceeds billings to customers is shown as unbilled accounts receivable.
Maintenance revenues are recognized on an incremental basis over the period
of the contract, the unrecognized portion is recorded as deferred income.
Customer service revenues are recognized as revenue as work is performed and
invoiced by the Company. The Company's contracts with its customers typically
provide for payments to be made pursuant to specified schedules, some of which
payments are received prior to delivery to the customer. Such payments received
prior to delivery are not recognized by the Company as revenue, but are
reflected as deferred income on the Company's consolidated balance sheet.
Revenues recognized in accordance with SOP-91-1 or SOP-81-1 and not yet invoiced
are recorded as accrued income on the Company's consolidated balance sheet.
Cost of software products consisted of the amortization of capitalized
software products, of the cost of third party products included in the Company's
contractual deliverables and of agency commission incurred. Other costs of
software products, such as the costs of making copies from the product masters
and physical packing of the Company's software are immaterial. Costs are
allocated to maintenance and customer service revenues in proportion to their
respective revenues. Management believes that such allocations are reasonable.
Comparison of fiscal quarters
The increase in revenues from $817,000 for the three month period ending
July 31, 1994 to $6,266,000 for the three month period ending July 31, 1995 is
primarily due to revenues of the operating subsidiaries acquired during the
fiscal year ended April 30, 1995.
Costs of software products increased from $6,000 for the three months ended
July 31, 1994 to $693,000 for the three months ended July 31, 1995 due to the
incorporation of costs of third party products delivered with the Company's
products in the three month period ended July 31, 1995 and a full quarter's
amortization of software recognized on the acquisition of the operating
subsidiaries purchased during the year ended April 30, 1995.
Cost of maintenance and customer services increased from $266,000 for the
three months ended July 31, 1994 to $1,056,000 for the three months ended July
31, 1995 mainly due to the addition of the maintenance and customer service
costs of the operating subsidiaries acquired during the fiscal year ended April
30, 1995.
Selling, general and administrative costs increased from $1,201,000 for the
three months ended July 31, 1994 to $5,137,000 for the three months ended July
31, 1995, mainly due to the addition of the selling, general and administrative
costs of the operating subsidiaries acquired during the fiscal year ended April
30, 1995. Selling, general and administrative costs as a percentage of revenue
decreased from 147% for the three months ended July 31, 1994 to 82% for the
three months ended July 31, 1995 due to greater operating efficiency realized
through the restructuring of the Company in the fiscal year ended April 30,
1995.
The Company's profit after costs of revenue, consisting of total revenues
minus costs of software products, costs of maintenance and costs of customer
service, was $3,720,000 for the three month period ended July 31, 1995 as
compared to $456,000 for the three month period ended July 31, 1994. This
improvement is a result of the gross contribution of the operating subsidiaries
acquired during the fiscal year ended April 30, 1995.
The Company's operating loss was $1,866,000 for the three month period
ended July 31, 1995 as compared to an operating loss of $7,786,000 for the three
month period ended July 31, 1994. This improvement is a result of the
contribution of the operating subsidiaries acquired during the fiscal year ended
April 30, 1995, and of the write off of acquired in-process development in the
amount of $7,000,000 in the three month period ended July 31, 1994. There was
no such write off in the three month period ended July 31, 1995.
The Company incurs expenses in British Pounds, Hong Kong dollars, Singapore
dollars and United States dollars. Similarly, revenues are invoiced in a
variety of currencies, the most significant of which are British Pounds, United
States dollars, Deutsche Marks and Swiss Francs. The Company does not engage in
any hedging activity.
The Company is not aware of any current or expected future impact as a
result of new tax laws or the issuance of FASB statements.
Liquidity and Capital Resources
During the three month period ended July 31, 1995 the Company issued stock
for a total consideration of approximately $1,161,000 used to fund working
capital requirements and in the conversion of subordinated debt.
At July 31, 1995, the Company had a working capital deficiency of
approximately $10,028,000 as compared to a working capital deficiency of
$9,006,000 at April 30, 1995. Certain liabilities formerly recorded as long
term, have repayment dates that are less than one year and consequently have
been reclassified, at July 31, 1995, as current.
The Company expects to fund continuing operations from current revenues.
It intends, however, to the extent required to re-finance outstanding debt in
fiscal 1996, 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
placement agent or underwriter.
Since July 31, 1995, the Company has sold its securities to investors for
an aggregate consideration of approximately $1,250,000. The Company has agreed
a revised repayment schedule with Digital Equipment Co. Limited, the former
owner of the Company's subsidiary MTi Trading Systems Limited. Under the
revised schedule, the Company will make monthly payments, completing the
acquisition at the end of January 1996.
The Company's long-term liquidity and its ability to continue as a going
concern will ultimately depend upon the Company's ability to realize sufficient
revenues from operations.
The Company has pledged all accounts receivables of one of its US
subsidiaries and has agreed to pledge all of its UK, Singapore and Honk Kong
subsidiaries' accounts receivable, its stock ownership in New Paradigm Software
Corp. ("NPSC") and a software product known as Genesis to secure a $950,000
promissory note.
The Company has pledged all the tangible and intangible assets of MTi
Trading Systems Limited to Digital Equipment Co. Limited to guarantee its
performance under a certain stock purchase agreement and loan assignment.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Matter involving Barrington Fludgate v. MTI
On July 26, 1995, Fludgate commenced an action in the New York State Supreme
Court, New York County, claiming breach of contact and a violation of New York
State Labor Law. The action claims specific damages of an aggregate of
$3,500,000 and additional unspecified damages. The Company has interposed an
answer to the complaint, which includes specific affirmative defenses as well as
a counterclaim.
The legal action in the New York State Supreme Court is in the preliminary
stages, and based upon the information provided by the Company and the prior
legal action which was dismissed in the United States District Court, there
appears to be a meritorious defense to the claim of Mr. Fludgate in this action.
Claim of Howard Schraub
Howard Schraub instituted an action against the Company in the New York State
Supreme Court, New York County, for the sum of $122,000. The Company has agreed
to a tentative settlement agreement with Mr. Schraub wherein the Company will
pay the amount due to him and, at its option, provide a portion of the
settlement amount in shares of common stock of the Company which contain
registration rights. The settlement has not yet been finalized, and it is
anticipated that the claim will be settled prior to September 30, 1995.
Claim of Edelson Technology Partners, III ("Edelson")
Edelson instituted a suit in the New York State Supreme Court, New York County,
claiming the sum of $250,000 plus interest and attorneys' fees. The basis of
the suit was a promissory note issued by the Company. The Company has entered
into a settlement arrangement with Edelson based upon the payment of the sum
under the Note due plus interest, and, in addition, Edelson has agreed to
provide consulting services for the Company. Edelson agreed to suspend its suit
as a result of the settlement arrangement.
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 in 1993 and 1994. The Private Placement terms
involved registration rights to the Unit Holders which further provided for the
Company to use its best efforts to register the shares and the additional shares
underlying the Class "C" Warrants for 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
file a new registration for Unit Holders within a reasonable time. A number of
Unit Holders have made claims against the Company, alleging that the Company
agreed to afford Unit Holders options to purchase shares of Common Stock at a
below market price as a form of compensation to Unit Holders for losses
occurring as a result of the Company's not proceeding with the Registration of
their shares. The Company has issued an offer to Unit Holders to issue to those
Unit Holders who were included in the registration statement which was
withdrawn, two shares of the Company's common stock per unit so that Unit
Holders would be compensated for any loss sustained as a result of the
registration which was withdrawn by the Company. The Company is awaiting a
response from the Unit Holders as to whether or not they will agree to the
proposed settlement.
Claim of Sharon F. Merrill
Ms. Merrill received 250,000 shares of restricted stock as a result of the
acquisition of the shares of MTI Merken, Inc. in 1992. In that regard, the
Company agreed to use its best efforts to register Ms. Merrill's shares within
180 days from the acquisition date. A claim has been made that the Company has
not used its best efforts and that Ms. Merrill has sustained losses as a result
of the price of the shares of MTI and, resultantly, Ms. Merrill has claimed a
loss of $450,000. The Company's position is that it has used its best efforts
with respect to the registration of the shares owned by Ms. Merrill. The
Company is currently negotiating a resolution with Ms. Merrill.
The Company is not a party to any other material litigation.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
Exhibit 27. Financial Data Schedule
Current reports on Form 8-K filed during the quarter ended July 31, 1995:
FORM REPORT DATE ITEM REPORTED FINANCIAL
STATEMENTS FILED
8-K April 28, 1995 5, election of new directors None
8-K April 28, 1995 5, annual shareholders' meeting None
8-K May 3, 1995 5, equity financing None
8-K May 9, 1995 4, change of accountant None
8-K May 23, 1995 5, equity financing None
8-K June 16, 1995 5, debt conversion None
8-K August 9, 1995 5, resignation of an officer None
SIGNATURE
Pursuant to the requirements of Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized:
Dated: New York, New York
November 5, 1995
Management Technologies, Inc.
(Registrant)
By:/s/ Peter Morris
-----------------------------------------
Peter Morris
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Consolidated
Financial Statements of Management Technologies, Inc. and subsidiaries for the
quarterly period ended July 31, 1995 and is qualified in its entirety by
referenceto such financial statements.
</LEGEND>
<RESTATED>
<CIK> 0000806566
<NAME> MANAGEMENT TECHNOLOGIES, INC.
<MULTIPLIER> 1,000
<CURRENCY> USD
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> APR-30-1996 APR-30-1995
<PERIOD-START> MAY-01-1995 MAY-01-1994
<PERIOD-END> JUL-31-1996 JUL-31-1995
<EXCHANGE-RATE> 1.0 1.0
<CASH> 551 833
<SECURITIES> 0 0
<RECEIVABLES> 5,637 7,234
<ALLOWANCES> 975 961
<INVENTORY> 0 0
<CURRENT-ASSETS> 7,097 8,909
<PP&E> 2,000 2,355
<DEPRECIATION> 491 545
<TOTAL-ASSETS> 22,748 27,221
<CURRENT-LIABILITIES> 17,125 17,915
<BONDS> 0 0
0 0
0 0
<COMMON> 160 140
<OTHER-SE> 4,966 5,879
<TOTAL-LIABILITY-AND-EQUITY> 22,748 27,221
<SALES> 6,266 817
<TOTAL-REVENUES> 6,266 817
<CGS> 2,546 361
<TOTAL-COSTS> 8,132 8,604
<OTHER-EXPENSES> 0 1,112
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 288 20
<INCOME-PRETAX> (2,155) (8,919)
<INCOME-TAX> (2,155) (8,919)
<INCOME-CONTINUING> (2,155) (8,919)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,155) (8,919)
<EPS-PRIMARY> (0.14) (1.90)
<EPS-DILUTED> (0.14) (1.90)
</TABLE>
