<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
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 0-288-42
SPATIAL TECHNOLOGY INC.
(Exact name of registrant as specified in its charter)
DELAWARE 84-1035353
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2425 55th STREET, SUITE 100, BOULDER, COLORADO 80301
(address of principal executive offices) (Zip Code)
(303) 544-2900
(Registrant's telephone number, including area code)
Indicate by check whether the registrant (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
--- ---
As of July 1, 1998, there were outstanding 7,782,964 shares of the
Registrant's Common Stock (par value $0.01 per share).
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
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SPATIAL TECHNOLOGY INC.
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets, December 31, 1997
and June 30, 1998.................................................. 3
Condensed Consolidated Statements of Operations, three and six
months ended June 30, 1997 and 1998................................ 4
Condensed Consolidated Statements of Cash Flows, six
months ended June 30, 1997 and 1998................................ 5
Notes to Condensed Consolidated Financial Statements..................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................. 7
PART II. OTHER INFORMATION....................................................... 11
Signatures........................................................................ 12
</TABLE>
2
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SPATIAL TECHNOLOGY INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except shares)
<TABLE>
<CAPTION>
ASSETS
December 31, June 30,
1997 1998
------------ ------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents ...................................... $ 5,736 $ 4,625
Accounts receivable, net of allowance of $82 and $66 in 1997
and 1998, respectively ................................... 2,415 3,356
Prepaid expenses and other ..................................... 402 393
------------ ------------
Total current assets ..................................... 8,553 8,374
Equipment, net ....................................................... 1,112 1,135
Purchased computer software, net ..................................... 670 691
------------ ------------
$ 10,335 $ 10,200
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable ............................................... $ 209 $ 266
Accrued royalties payable ...................................... 317 372
Other accrued expenses ......................................... 1,172 776
Deferred revenue ............................................... 1,470 1,706
------------ ------------
Total current liabilities ................................ 3,168 3,120
------------ ------------
Stockholders' Equity:
Common stock, $.01 par value; 22,500,000 shares authorized;
7,741,348 and 7,782,964 shares issued in 1997 and 1998,
respectively ............................................. 77 78
Additional paid-in capital ..................................... 24,057 24,139
Accumulated deficit ............................................ (16,852) (17,010)
Foreign currency translation adjustment ........................ (115) (127)
------------ ------------
Total stockholders' equity ............................... 7,167 7,080
------------ ------------
$ 10,335 $ 10,200
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
SPATIAL TECHNOLOGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- ---------------------------
1997 1998 1997 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue:
License fees .................................. $ 956 $ 1,280 $ 1,570 $ 2,001
Royalties ..................................... 532 925 1,299 1,904
Maintenance and other ......................... 697 806 1,406 1,627
----------- ----------- ----------- -----------
Total revenue ........................ 2,185 3,011 4,275 5,532
----------- ----------- ----------- -----------
Cost of sales:
License fees .................................. 83 69 151 128
Royalties ..................................... 40 4 96 11
Maintenance and other ......................... 59 62 128 137
----------- ----------- ----------- -----------
Total cost of sales .................. 182 135 375 276
----------- ----------- ----------- -----------
Gross profit ......................... 2,003 2,876 3,900 5,256
----------- ----------- ----------- -----------
Operating expenses:
Sales and marketing ........................... 977 1,127 1,900 2,256
Research and development ...................... 1,116 1,188 2,004 2,215
General and administrative .................... 820 556 1,394 953
----------- ----------- ----------- -----------
Total operating expenses ............. 2,913 2,871 5,298 5,424
----------- ----------- ----------- -----------
Earnings (loss) from operations ...... (910) 5 (1,398) (168)
Other income (expense)
Interest income ............................... 100 64 207 129
Interest expense .............................. -- -- (1) --
Other, net .................................... (1) (2) (2) (3)
----------- ----------- ----------- -----------
Total other income (expense) ......... 99 62 204 126
----------- ----------- ----------- -----------
Earnings (loss) before income taxes .. (811) 67 (1,194) (42)
Income tax expense (benefit) ..................... (7) 24 21 116
----------- ----------- ----------- -----------
Net earnings (loss) .................. $ (804) $ 43 $ (1,215) $ (158)
=========== =========== =========== ===========
Earnings (loss) per common share
Basic ...................................... $ (0.11) $ 0.01 $ (0.16) $ (0.02)
Diluted .................................... $ (0.11) $ 0.01 $ (0.16) $ (0.02)
Shares outstanding
Basic ...................................... 7,430 7,783 7,422 7,773
Diluted .................................... 7,430 7,877 7,422 7,773
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
SPATIAL TECHNOLOGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------------
1997 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss .......................................................... $ (1,215) $ (158)
Adjustments to reconcile net loss to net cash
used by operating activities:
Provision for impairment of purchased computer software ........ 200 --
Depreciation and amortization .................................. 152 236
Changes in operating assets and liabilities:
Accounts receivable ......................................... (534) (941)
Prepaid expenses and other .................................. (94) 9
Accounts payable ............................................ 25 57
Accrued expenses ............................................ 207 (341)
Deferred revenue ............................................ 21 236
------------ ------------
Net cash used by operating activities .................... (1,238) (902)
------------ ------------
Cash flows from investing activities:
Additions to equipment ............................................ (419) (179)
Additions to purchased computer software .......................... -- (101)
------------ ------------
Net cash used by investing activities .................... (419) (280)
------------ ------------
Cash flows from financing activities:
Proceeds from issuance of stock ................................... 188 83
------------ ------------
Net cash provided by financing activities ................ 188 83
------------ ------------
Foreign currency translation adjustment affecting cash ............... (10) (12)
------------ ------------
Net decrease in cash and cash equivalents ................ (1,479) (1,111)
Cash and cash equivalents at beginning of period ..................... 8,407 5,736
------------ ------------
Cash and cash equivalents at end of period ........................... $ 6,928 $ 4,625
============ ============
Supplemental disclosures:
Cash paid for interest ............................................ $ 1 $ --
============ ============
Cash paid for income taxes ........................................ $ 44 $ 118
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
SPATIAL TECHNOLOGY INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 1998
A. FINANCIAL STATEMENT PRESENTATION
The accompanying audited and unaudited condensed consolidated financial
statements of the Company have been prepared by the Company pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in the financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. The
Company believes the disclosures included in the condensed consolidated
financial statements, when read in conjunction with the Company's consolidated
financial statements and notes thereto included in the Company's annual report
on Form 10-KSB for the year ended December 31, 1997, are adequate to make the
information presented not misleading.
B. EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share is computed using the weighted average
number of common shares outstanding during the period. Diluted earnings per
share is computed on the basis of the weighted average number of common shares
outstanding plus the dilutive effect of potential common stock. Except for the
three months ended June 30, 1998, diluted loss per share is the same as basic
loss per share, as the effect of potential common stock is antidilutive.
The effect of potential common stock for the quarter ended June 30, 1998 is not
significant.
C. ACCOUNTING POLICIES
Revenue Recognition
Effective for the fiscal year beginning January 1, 1998, the Company
adopted Statement of Position 97-2, "Software Revenue Recognition" ("SOP 97-2")
which requires that revenue for licensing, selling, leasing, or otherwise
marketing computer software be recognized when certain criteria are met.
In March 1998, the AICPA issued Statement of Position No. 98-4 ("SOP
98-4"), "Deferral of the Effective Date of a Provision of SOP 97-2." SOP 98-4
defers, for one year, the application of certain passages in SOP 97-2, which
limit what is considered vendor-specific objective evidence necessary to
recognize revenue for software licenses in multiple-element arrangements when
undelivered elements exist. Additional guidance is expected to be provided prior
to adoption of any resulting final amendments related to the deferred provisions
of SOP 97-2.
The Company does not expect the effect of adopting the remaining
provisions of SOP 97-2 will have a material effect on the Company's financial
statements given the Company's policy of utilizing standard contracts and
allocating revenue to each element in a given contract based on an established
price list.
Comprehensive Income
The Company has adopted the provisions of Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income," effective
January 1, 1998. This statement requires the disclosure of comprehensive income
and its components in a full set of general-purpose financial statements.
Comprehensive income is defined as net income plus revenues, expenses, gains and
losses that, under generally accepted accounting principles, are excluded from
net income. The components of comprehensive income, which are excluded from net
income, are not significant individually or in aggregate, and therefore, no
separate statement of comprehensive income has been presented.
6
<PAGE> 7
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Except for the historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
presented here. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in this section and those
discussed in the Company's Form 10-KSB for the year ended December 31, 1997,
particularly those contained in "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
RESULTS OF OPERATIONS
Revenue
Total revenue for the quarter ended June 30, 1998 increased 38% to $3.0
million from $2.2 million reported for the quarter ended June 30, 1997,
reflecting an increase in all revenue categories. License fees increased 34% to
$1.3 million for the second quarter of 1998 from $956,000 reported in the second
quarter of 1997. Increased license fees in the second quarter of 1998 as
compared to the same prior year quarter were primarily due to new license
contracts in Europe. Royalties increased 74%, to $925,000 for the second quarter
of 1998 versus $532,000 reported for the same quarter in 1997. Increased
royalties for the quarter ended June 30, 1998 as compared to the comparable
quarter in 1997 was the result of two factors: 1) an increase in the number of
the Company's customers shipping ACIS(R)-enabled software applications, and 2)
increased non-refundable royalties. Maintenance and other revenue increased 16%
to $806,000 for the quarter ended June 30, 1998 as compared to $697,000 reported
for the quarter ended June 30, 1997. Total recurring revenue, which is comprised
of royalty revenue and maintenance fees, increased 41% from the prior-year
period and represented 57% of total revenue during the second quarter of 1998.
For the six month period ended June 30, 1998 total revenue increased 29%
to $5.5 million as compared to $4.3 million reported for the same six month
period in 1997, resulting from increases in all three revenue categories.
License fees increased 27% to $2.0 million in the six month period ended June
30, 1998 as compared to $1.6 million reported for the comparable prior year
period. The increase in license fees was primarily attributable to an increase
in new license contracts in North America and Europe in 1998 as compared to
1997. Royalties increased 47%, growing to $1.9 million for the six month period
ended June 30, 1998 versus $1.3 million reported for the six month period ended
June 30, 1997. Increased royalties for 1998 as compared to 1997 resulted from an
increase in the number of the Company's customers shipping ACIS-enabled software
applications. Maintenance and other revenue increased 16% to $1.6 million for
the six month period ended June 30, 1998 as compared to $1.4 million reported
for the comparable period in 1997 resulting primarily from an increase in
renewed maintenance contracts.
Geographically, international revenue increased 56% for the quarter ended
June 30, 1998 and represented 50% of revenue as compared to 44% for the quarter
ended June 30, 1997. Increased international revenue for the second quarter of
1998 reflects an increase in the number of license contracts in Europe. For the
six month period ended June 30, 1998 international revenue increased 20% and
represented 45% of total revenue as compared to 48% for the comparable prior
year period. The decline in the ratio of international revenue for this six
month period is a result of the growth in recurring revenue in the United
States, including both royalties and maintenance revenue.
7
<PAGE> 8
Cost of Sales
Cost of sales consists of support costs, royalty payments by the Company
to third party developers, manufacturing costs (primarily media duplication,
manuals, and shipping) and amortization of purchased computer software. Total
cost of sales decreased 26% to $135,000 for the quarter ended June 30, 1998 from
$182,000 reported for the quarter ended June 30, 1997. For the six month period
ended June 30, 1998 cost of sales decreased 26% to $276,000 from $375,000
reported in the comparable prior year period. The decrease in cost of sales for
all periods presented was primarily due to a decrease in royalty expenses to
third party developers, partially offset by increased amortization of purchased
computer software. Decreased royalty expense in 1998 as compared to 1997 was due
to the acquisition of certain intellectual property rights in the fourth quarter
of 1997, which resulted in the elimination of a royalty obligation of the
Company. In connection with the acquisition of these intellectual property
rights, the Company capitalized certain assets as purchased computer software
and is amortizing these assets over a period of seven years, which resulted in
an increase in amortization in 1998 as compared to 1997. As a percent of total
revenue, cost of sales decreased to 4% and 5% for the three and six months ended
June 30, 1998, respectively, as compared to 8% and 9% for the comparable periods
in 1997, respectively.
Operating Expenses
Sales and marketing expense increased 15% to $1.1 million for the quarter
ended June 30, 1998 as compared to $977,000 reported in the quarter ended June
30, 1997. For the six month period ended June 30, 1998 sales and marketing
expense increased 19% to $2.3 million from $1.9 million reported for the six
month period ended June 30, 1997. Increased sales and marketing expense in 1998
as compared 1997 was due to increased commissions and travel related costs
associated with increased revenue. As a percent of total revenue, sales and
marketing expense decreased to 37% and 41% for the three and six month periods
ended June 30, 1998, respectively, as compared to 45% and 44% for the comparable
periods in 1997, respectively.
Research and development expense increased 6% to $1.2 million for the
quarter ended June 30, 1998 from $1.1 million reported in the same prior year
quarter. For the six month period ended June 30, 1998 research and development
expense increased 11% to $2.2 million from $2.0 million reported in the
comparable prior year period. Increased research and development expense was due
to increased staffing in support of increased development efforts for existing
products, as well as for new product offerings, including the ACIS(R) 3D Open
Viewer and the ACIS(R) Healing Husk. Further, research and development expense
in the second quarter of 1997 included a $200,000 charge for a write-down of
purchased computer software, which was due to a change in the Company's
development strategy. Excluding this non-recurring charge of $200,000, research
and development expense increased 30% and 23% for the three and six month
periods ended June 30, 1998, respectively, as compared to the comparable periods
in 1997. As a percent of total revenue, research and development expense
decreased to 39% and 40% for the three and six month periods ended June 30,
1998, respectively, from 51% and 47% for the comparable prior year periods,
respectively. The Company accounts for research and development expense in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 86,
under which the Company is required to capitalize software development costs
after technological feasibility is established. Capitalizable software
development costs incurred to date have not been significant; therefore, the
Company has expensed all of these costs in the periods incurred.
General and administrative expense decreased 32% to $556,000 for the
quarter ended June 30, 1998 from $820,000 reported for the same quarter in 1997.
For the six month period ended June 30, 1998 general and administrative expense
decreased 32% to $953,000 from $1.4 million reported for the comparable prior
year period. Decreased general and administrative expense was due to a decrease
in staffing and lower professional fees in 1998 as compared to 1997. In
addition, general and administrative expense in the second quarter of 1997
included a charge of approximately $198,000 in connection with expenses
associated with the resignation of the former president of the Company.
Excluding these non-recurring charges, general and administrative expense
decreased 11% and 20% for the three and six month periods ended June 30, 1998,
respectively, as compared to the comparable periods in 1997. As a percent of
total revenue, general and administrative expense decreased to 18% and 17% for
the three and six month periods ended June 30, 1998, respectively, as compared
to 38% and 33% for the comparable prior year periods, respectively.
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Other Income (Expense), net
Other income decreased to $62,000 for the second quarter of 1998 as
compared to $99,000 reported for the second quarter of 1997 and to $126,000 for
the six month period ended June 30, 1998 from $204,000 for the comparable prior
year period. Decreased other income reflects lower interest income, as a result
of lower cash balances in 1998 as compared to 1997.
Income Tax Expense
Income tax expense increased to $24,000 for the fiscal quarter ended June
30, 1998 as compared to a benefit of $7,000 reported for the same quarter in
1997. The benefit recognized in 1997 reflects an adjustment for actual payments
less than originally accrued for contracts executed in prior periods. For the
six month period ended June 30, 1998 income tax expense increased to $116,000
from $21,000 for the same period in 1997 due primarily to income tax liabilities
in Japan. Historically, income tax expense included only withholding taxes on
foreign sales. Beginning in 1998, the Company began incurring an income tax
liability for its Japanese subsidiary.
FLUCTUATIONS IN QUARTERLY RESULTS
The Company has experienced in the past and expects to continue to
experience in the future significant fluctuations in quarterly operating results
due to a number of factors that are difficult to forecast, including, among
others, the volume of orders received within a quarter, demand for the Company's
products, the product mix purchased by the Company's customers, competing
capital budget considerations of the Company's customers, introduction and
enhancement of products by the Company and its competitors, market acceptance of
new products, reviews in the industry press concerning the products of the
Company or its competitors, changes or anticipated changes in pricing by the
Company or its competitors and general economic conditions. Due to the foregoing
factors, it is possible that the Company's operating results for some future
quarters may fall below the expectations of securities analysts and investors.
YEAR 2000 CAPABILITY
Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish 21st century dates from
20th century dates. As a result, in less than two years, computer systems and/or
software used by many companies may need to be upgraded to comply with such
"Year 2000" requirements.
The Company has evaluated Year 2000 compliance issues and believes that
with respect to the Company's products and internal management information
systems it will not be materially adversely impacted by such issues. The
Company's software products do not incorporate date-sensitive algorithms. Any
date codes contained in the Company's software do not affect the functionality
of the products. The Company also incorporates third party software with its
core product. The Company has concluded that any date codes contained in such
third party software will not materially adversely impact the Company's
products. In addition, the Company has evaluated whether its management
information systems are Year 2000 compliant and has concluded that they are.
Moreover, the number of transactions that the Company manages is relatively low
because it depends on low volume, high value orders. As a result, the Company
believes that any date-sensitive material contained in its software would not
have a material adverse effect on the Company's management information systems
software. However, to the extent that any of the Company's foregoing assessments
are incorrect, there can be no assurance that the cost necessary to update the
performance of software will not have a material adverse effect on the Company's
business, financial condition and results of operations.
Moreover, there can be no assurance that Year 2000 compliance issues
affecting the Company's customers products and internal management information
systems will not have a material adverse effect on the Company's business,
financial condition and results of operations. As an OEM provider the
9
<PAGE> 10
Company's products may be incorporated directly into its customers' products,
which may contain date-sensitive processes that may affect the ability of the
Company's customers to sell end-user products.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1998, the Company had $4.6 million in cash and cash
equivalents. Cash and cash equivalents decreased $1.1 million for the six months
ended June 30, 1998, as compared to $1.5 million for the comparable prior year
period.
Net cash used by operating activities was $902,000 for the six month
period ended June 30, 1998 as compared to $1.2 million for the six month period
ended June 30, 1997. Net cash used by operations in 1998 was primarily the
result of increased accounts receivable and decreased accrued expenses,
partially offset by increased deferred revenue. Cash used by operations in the
six month period ended June 30, 1997 was primarily due to the net loss, combined
with an increase in accounts receivable, partially offset by the non-cash
write-down of purchased computer software and increased accrued expenses.
Net cash used by investing activities totaling $280,000 for the six month
period ended June 30, 1998 reflects $179,000 used for equipment purchases and
$101,000 used for purchased computer software, including technology included in
certain new product offerings during 1998. Cash used for the comparable period
in 1997 totaling $419,000 reflects equipment purchases.
Net cash provided by financing activities was $83,000 for the six months
ended June 30, 1998, due to proceeds in connection with the Company's employee
stock purchase plan. Net cash provided by financing activities in the six month
period ended June 30, 1997 was $188,000 reflecting the issuance of stock in
connection with the exercise of stock options, as well as the Company's employee
stock purchase plan.
In August 1998 the Company amended its revolving line of credit with a
bank. The amended line of credit provides for maximum borrowings of $1,500,000
through August 2, 1999. The line of credit bears interest at the bank's prime
rate. The Company currently has no borrowings under the line of credit.
The Company believes that cash generated from operations, together with
existing cash, will be sufficient to meet the Company's operating and capital
requirements for the foreseeable future including at least the next twelve
months.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings:
None
Item 2. Changes in Securities:
None
Item 3. Defaults on Senior Securities:
Not Applicable
Item 4. Submission of Matters to Vote of Security Holders:
The Annual Meeting of the Company's Stockholders was held on May 7,
1998 in Boulder, Colorado for the following purposes:
a) To approve amendments to the Company's 1996 Equity Incentive Plan to
increase the aggregate number of shares of Common Stock authorized
thereunder from 1,000,000 to 1,125,000 and to permit the Company under
Section 162(m) of the Internal Revenue Code to continue to be able to
deduct as a business expense certain compensation attributable to the
exercise of stock options. The following votes were cast by the Company's
stockholders with respect to the amendment to the Equity Incentive Plan:
<TABLE>
<CAPTION>
Shares Voted For Shares Voted Against Shares Voted Withheld Abstentions Broker Non-Votes
---------------- -------------------- --------------------- ----------- ----------------
<S> <C> <C> <C> <C>
4,414,734 52,093 0 22,050 0
</TABLE>
The foregoing votes resulted in the adoption of such proposal.
(b) To approve an amendment to the Company's Employee Stock Purchase Plan to
increase the aggregate number of shares of Common Stock authorized for
issuance thereunder from 100,000 to 175,000. The following votes were cast
by the Company's stockholders with respect to the amendment to the
Employee Stock Purchase Plan.
<TABLE>
<CAPTION>
Shares Voted For Shares Voted Against Shares Voted Withheld Abstentions Broker Non-Votes
---------------- -------------------- --------------------- ----------- ----------------
<S> <C> <C> <C> <C>
4,442,627 25,050 0 21,200 0
</TABLE>
The foregoing votes resulted in the adoption of such proposal.
(c) To ratify the selection of KPMG Peat Marwick LLP as the Company's
independent auditors for the fiscal year ending December 31, 1998. The
following votes were cast by the Company's stockholders with respect to
the ratification of the Company's auditors:
<TABLE>
<CAPTION>
Shares Voted For Shares Voted Against Shares Voted Withheld Abstentions Broker Non-Votes
---------------- -------------------- --------------------- ----------- ----------------
<S> <C> <C> <C> <C>
4,461,802 5,675 0 21,400 0
</TABLE>
The foregoing votes resulted in the adoption of such proposal.
Item 5. Other Information:
None
Item 6. Exhibits and Reports on Form 8-K:
a) Exhibits
10.30 Amendment to Loan and Security Agreement between
the Registrant and Silicon Valley Bank, dated as of
August 15, 1995, as amended.
27 Financial Data Schedule
b) Reports on Form 8-K None
None
11
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SPATIAL TECHNOLOGY INC.
Date August 14, 1998 /s/ R. BRUCE MORGAN
--------------- ------------------------------------
R. Bruce Morgan
President, Chief Operating Officer,
and Director (Principal Financial
and Accounting Officer)
12
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EXHIBIT INDEX
Exhibits
10.30 Amendment to Loan and Security Agreement between the Registrant
and Silicon Valley Bank, dated as of August 15, 1995, as amended.
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 10.30
AMENDMENT
TO
LOAN AND SECURITY AGREEMENT
This Amendment to Loan and Security Agreement is entered into as of
August 3, 1998 by and between Silicon Valley Bank ("Bank") and Spatial
Technology Inc. ("Borrower").
RECITALS
Borrower and Bank are parties to an Amended and Restated Loan and
Security Agreement dated as of August 15, 1995, as amended from time to time
(the "Agreement"). The parties desire to amend the Agreement in accordance with
the terms of this Amendment.
NOW, THEREFORE, the parties agree as follows:
1. The following definitions contained in Section 1.1 are
amended to read as follows:
"Committed Line" means One Million Five Hundred Thousand
Dollars ($1,500,000).
"Revolving Maturity Date" means August 2, 1999.
2. Section 2.3(a) is amended to read as follows:
(a) Interest Rate. Except as set forth in
Section 2.3(b), any Advances shall bear interest, on the
average Daily Balance, at a rate equal to the Prime Rate.
3. Section 6.3 is amended to read as follows:
6.3 Financial Statements, Reports, Certificates. Borrower
shall deliver to Bank: (a) as soon as available, but in any event
within forty-five (45) days after the end of each fiscal quarter, a
company prepared balance sheet and income statement covering
Borrower's consolidated operations during such period, certified by
a Responsible Officer; (b) as soon as available, but in any event
within ninety (90) days after the end of Borrower's fiscal year,
audited consolidated financial statements of Borrower prepared in
accordance with GAAP, consistently applied, together with an
unqualified opinion on such financial statements of an independent
certified public accounting firm reasonably acceptable to Bank; (c)
within five (5) days upon becoming available, copies of all
statements, reports and notices sent or made available generally by
Borrower to its security holders or to any holders of Subordinated
Debt and all reports on Form 10-K and 10-Q filed with the Securities
and Exchange Commission; (d) promptly upon receipt of notice
thereof, a report of any legal actions pending or threatened against
Borrower or any Subsidiary that could result in damages or costs to
Borrower or any Subsidiary of One Hundred Thousand Dollars
($100,000) or more; (e) prompt notice of any material change in the
composition of the Intellectual Property Collateral, including, but
not limited to, any subsequent ownership right of the Borrower in or
to any Copyright, Patent or Trademark not specified in any
intellectual property security agreement between Borrower and Bank
or knowledge of an event that materially adversely effects the value
of the Intellectual Property Collateral; and (f) such budgets, sales
projections, operating plans or other financial information as Bank
may reasonably request from time to time.
Borrower shall deliver to Bank with the quarterly financial
statements a Compliance Certificate signed by a Responsible Officer
in substantially the form of Exhibit D hereto.
4. Sections 6.9 and 6.10 are amended to read as follows:
6.9 Tangible Net Worth. Borrower shall maintain, as of the
last day of each fiscal quarter, a Tangible Net Worth of not less
than Four Million Five Hundred Thousand Dollars ($4,500,000).
6.10 Profitability. Borrower must have a net profit of
at least One Dollar ($1.00) as of the last day of the fiscal year,
provided however, that beginning with the fiscal quarter ended
June 30, 1998, Borrower may not suffer a cumulative
<PAGE> 2
net loss in the aggregate amount of Five Hundred Thousand Dollars
($500,000) or more for the four (4) consecutive fiscal quarters
through June 30, 1999.
5. Section 6.12 is deleted in its entirety.
6. Unless otherwise defined, all capitalized terms in this
Amendment shall be as defined in the Agreement. Except as amended, the Agreement
remains in full force and effect.
7. Borrower represents and warrants that the Representations and
Warranties contained in the Agreement are true and correct as of the date of
this Amendment (except such representations and warranties to be expressly true
as of a specific date), and that no Event of Default has occurred and is
continuing.
8. This Amendment may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one instrument.
9. As a condition to the effectiveness of this Amendment, Borrower
shall pay Bank a fee of Four Thousand Dollars ($4,000) plus all Bank Expenses
incurred in connection with the preparation of this Amendment.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as
of the first date above written.
SPATIAL TECHNOLOGY INC.
By: /s/ R. BRUCE MORGAN
---------------------------------------
Title: President & Chief Operating Officer
-----------------------------------
SILICON VALLEY BANK
By: /s/ FRANK AMOROSO
---------------------------------------
Title: Assistant Vice President
-----------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 4,625
<SECURITIES> 0
<RECEIVABLES> 3,422
<ALLOWANCES> (66)
<INVENTORY> 0
<CURRENT-ASSETS> 8,374
<PP&E> 3,277
<DEPRECIATION> (2,142)
<TOTAL-ASSETS> 10,200
<CURRENT-LIABILITIES> 3,120
<BONDS> 0
0
0
<COMMON> 78
<OTHER-SE> 7,002
<TOTAL-LIABILITY-AND-EQUITY> 10,200
<SALES> 0
<TOTAL-REVENUES> 5,532
<CGS> 0
<TOTAL-COSTS> 276
<OTHER-EXPENSES> 5,409
<LOSS-PROVISION> 15
<INTEREST-EXPENSE> 126
<INCOME-PRETAX> (42)
<INCOME-TAX> 116
<INCOME-CONTINUING> (158)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (158)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
