UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-27138
CATALYST INTERNATIONAL, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 39-1415889
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification No.)
8989 North Deerwood Drive, Milwaukee, WI 53223
(Address of principal executive offices) (Zip Code)
(414) 362-6800 FAX (414) 377-6263
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended, 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 [ ]
As of May 3, 1996, 8,135,760 shares of the issuer's common stock
were outstanding.
<PAGE>
CATALYST INTERNATIONAL, INC.
FORM 10-QSB
INDEX
Page
PART I. Financial Information No.
Item 1. Financial Statements:
Balance Sheet - March 31, 1996 and
December 31, 1995 3
Statement of Operations - three months
ended March 31, 1996 and 1995 5
Statement of Cash Flows - three months
ended March 31, 1996 and 1995 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis or
Plan of Operation 8
PART II. Other Information:
Item 6. Exhibits and Reports on Form 8-K 12
Signature 13
<PAGE>
PART I
Item 1. Financial Statements
CATALYST INTERNATIONAL, INC.
Balance Sheet
(in thousands)
ASSETS
March 31, December 31,
1996 1995
(unaudited)
Current Assets:
Cash and cash equivalents $ 555 $ 3,730
Short-term investments 21,327 19,883
Accounts receivable 8,987 6,835
Refundable income taxes - 88
Prepaid expenses 416 374
------- -------
Total Current Assets 31,285 30,909
Equipment and Leasehold Improvements:
Computer hardware and software 2,245 2,141
Office equipment 2,020 1,730
Leasehold improvements 725 476
------- -------
4,989 4,347
Less accumulated depreciation 1,355 1,277
------- -------
Total Equipment and
Leasehold Improvements 3,634 3,070
Other Assets:
Capitalized software development costs 88 106
------- -------
Total Other Assets 88 106
------- -------
Total Assets $35,007 $34,084
======= =======
See accompanying notes
<PAGE>
CATALYST INTERNATIONAL, INC.
Balance Sheet
(in thousands, except share data)
LIABILITIES AND STOCKHOLDER'S EQUITY
March 31, December 31,
1996 1995
(unaudited)
Current Liabilities:
Accounts payable $ 1,417 $ 1,114
Accrued liabilities 722 477
Deferred software license fees 120 297
Deferred services and maintenance 1,652 1,770
Current portion of long-term debt 124 123
------- -------
Total Current Liabilities 4,035 3,781
Noncurrent Liabilities:
Long-term debt 290 324
Deferred service and maintenance 435 385
Deferred rent 339 344
------- -------
Total Non-Current Liabilities 1,064 1,052
------- -------
Total Liabilities 5,099 4,834
Stockholders' Equity:
Common stock, $.10 Par Value;
25,000,000 shares authorized; 843 842
shares issued: 8,430,594 in 1996
and 8,421,323 in 1995
Additional paid-in capital 31,049 31,124
Accumulated deficit (934) (1,665)
Treasury stock, at cost-300,000
shares Of common stock (1,050) (1,050)
------- -------
Total Stockholder's Equity 29,908 29,251
------- -------
Total Liabilities and Stockholder's Equity $35,007 $34,084
======= =======
See accompanying notes
<PAGE>
CATALYST INTERNATIONAL, INC.
Statement of Operations
(in thousands, except per share amounts)
(unaudited)
Three Months Ended
March 31, March 31,
1996 1995
Revenues:
Software license fees $3,258 $2,062
Services and maintenance 3,161 1,705
Hardware and other 1 13
------ ------
Total Revenues 6,420 3,780
Operating Expenses:
Cost of license fees 84 140
Cost of services and maintenance 2,894 2,120
Cost of hardware and other - 1
Product development 954 492
Sales and marketing 1,199 1,059
General and administrative 570 406
------ ------
Total Operating Expenses 5,701 4,218
------ ------
Income (loss) from operations 719 (438)
Other income and (expense) 252 (13)
------ ------
Income (loss) before provision
for income taxes 971 (451)
Provision for income taxes 240 -
------ ------
Net income (loss) $ 731 $ (451)
====== ======
Net income (loss) per share $ 0.09 $(0.09)
Shares used in computing net
income (loss) per share 8,438 6,363
See accompanying notes
<PAGE>
CATALYST INTERNATIONAL, INC.
Statement of Cash Flows
(in thousands)
(unaudited)
Three months ended
March 31,
1996 1995
Operating Activities:
Net income (loss) $ 731 $ (451)
Adjustments to reconcile net income
(loss) to net cash used by
operating activities:
Depreciation and amortization 96 116
Compensation expense on stock options 7 4
Changes in operating assets and liabilities:
Accounts receivable (2,152) 134
Prepaid expenses (42) (27)
Accounts payable 303 109
Deferred services and maintenance (68) (187)
Deferred rent (5) 35
Deferred software license fees (177) (229)
Income taxes 232 (68)
Accrued liabilities 101 (92)
------ ------
Total adjustments (1,705) (205)
Net cash used by operating activities (974) (656)
Investing Activities:
Purchase of equipment and leasehold
improvements (642) (646)
Purchases of short term investments (1,444) -
Additions to capitalized software costs - (32)
Net cash used by investing activities (2,086) (678)
Financing Activities:
Proceeds from long-term debt - 500
Payments on long-term debt (33) (44)
Expenses related to initial public offering (85) -
Proceeds from stock options exercised 1 -
Dividends paid - (20)
------ ------
Net cash provided (used) by
financing activities (117) 436
Net increase (decrease) in cash (3,177) (898)
Cash at the beginning of quarter 3,730 1,359
Cash at the end of the quarter $ 555 $ 460
See accompanying notes
<PAGE>
CATALYST INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
(Unaudited)
1. Basis of Presentation
The accompanying unaudited financial statements have been
prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-QSB and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
for fiscal year end financial statements. In the opinion of
management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. Operating results for the three month period ended
March 31, 1996 are not necessarily indicative of the results that
may be expected for the year ended December 31, 1996. For
further information, refer to the financial statements and
footnotes thereto included in the Catalyst International, Inc.
annual report on Form 10-KSB for the year ended December 31,
1995.
2. Stock Options and Warrants
The Company has adopted Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation"
(SFAS 123). The Company has elected, as allowed under SFAS 123,
to continue to apply Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" for determining annual
compensation charges and will disclose the impact of fair value.
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Total Revenues
The Company's total revenues for the first quarter of 1996 were
$6.4 million, which represented an increase of 69.8% over first
quarter 1995 total revenues of $3.8 million, and resulted
principally from the growth in sales of the Company's warehouse
management system software, the expansion of the Company's direct
sales force, and the Company's expansion into international
markets.
International revenues increased 23.4% from $1.0 million in the
first quarter of 1995 to $1.3 million in the first quarter of
1996; however, the percentage of total revenues represented by
international revenues declined from 27.1% in the first quarter
of 1995 to 19.7% in the first quarter of 1996. The Company
anticipates that international revenues will continue to increase
in future periods.
Software License Fees
The first quarter of 1996 software license fee revenues of $3.3
million represented an increase of 58.0% over the first quarter
of 1995 license fee revenues of $2.1 million. This increase is a
result of the increased number of software licenses sold and the
increased market acceptance of the Company's annual release of
its warehouse management system software. The Company introduced
Catalyst WMS Release 6.0 to the market in January of 1996, the
impact of which should be seen in future periods.
Services and Maintenance
The first quarter of 1996 services and maintenance revenues of
$3.2 million represented an increase of 85.4% over the first
quarter of 1995 services and maintenance revenues of $1.7
million. The increase in services and maintenance revenues was
due primarily to an increase in the number of Catalyst WMS
implementations and customers beginning their maintenance
agreement phase. For the first quarter of 1996, the components
of services and maintenance revenues as a percentage of total
revenues were 21.1% for software modifications, 18.4% for
professional services, and 9.7% for maintenance agreements
compared with 16.7%, 33.4% and 4.7% in the first quarter of 1995.
The increase in software modification revenues from 1995 to 1996
is due primarily to a contract that was terminated in the first
quarter of 1995.
Hardware and Other
Hardware and other revenues do not represent a material
percentage of total revenues in the first quarter of either 1996
or 1995. The Company anticipates that hardware and other
revenues will increase slightly in future periods as a result of
the Company's acquisition of Information Strategies Incorporated,
a re-seller of certain hardware products.
Cost of Software License Fees
The first quarter of 1996 cost of software license fees of
$84,000 represented a 40.0% decrease over the first quarter of
1995 of $140,000. The Company continues to expense all software
development costs as research and development expenditures as
incurred and anticipates doing so in future periods.
Cost of Services and Maintenance
The first quarter of 1996 cost of services and maintenance of
$2.9 million represented a 36.5% increase over the first quarter
of 1995 of $2.1 million. The increase is due primarily to the
increased staffing of engineers to implement and support current
and previous releases of Catalyst WMS. The Company's services
and maintenance organization consisted of 107 and 161 at March
31, 1995 and March 31, 1996, respectively.
Cost of Hardware and Other
Cost of hardware and other is not a material portion of the
Company's costs. The Company anticipates that the cost of
hardware and other may increase in future periods as a result of
the Company's acquisition of Information Strategies Incorporated,
a re-seller of certain hardware products.
Sales and Marketing
Sales and marketing expenses decreased from 28.0% of total
revenues in the first quarter of 1995 to 18.7% in the first
quarter of 1996. Actual spending increased from $1.1 million in
1995 to $1.2 million in 1996, or 13.3%, in order to support
worldwide sales and marketing efforts, including increased direct
sales force and promotional activities. The Company expects to
continue to emphasize sales and marketing of its products to
promote Catalyst WMS's competitive position.
Product Development
Product development expenses as a percentage of total revenues
for the first quarter of 1996 increased to 14.9% from 13.0% in
the first quarter of 1995. Actual product development expenses
increased by 93.9% from $492,000 to $954,000 for the first
quarters of 1995 and 1996, respectively, due to increased
personnel costs to support the development of new and enhanced
products. The Company anticipates that product development
expenses will continue to increase during the year as a result of
the Company's acquisition of Information Strategies Incorporated.
Additionally, the Company intends to continue recruiting and
hiring experienced software developers and will consider
complementary software technologies and businesses for possible
acquisition.
General and Administrative
General and administrative expenses decreased from 10.7% of total
revenues in the first quarter of 1995 to 8.9% in the first
quarter of 1996. Actual general and administrative expenses
increased by 40.4% from $406,000 in the first quarter of 1995 to
$570,000 in first quarter of 1996. This increase resulted from
higher personnel costs and expenses incurred to support the
Company's increased operations and infrastructure.
Other Income and Expense
Interest income for the first quarter was $261,000 which was
offset by $11,000 of interest expense, compared to $6,000 of
interest income offset by $22,000 of interest expense in the
first quarter of 1995. The increase in interest income was due
primarily to investment of the proceeds from the Company's
initial public offering.
Income Tax Expense
The Company's effective income tax rate was 24.7% in the first
quarter of 1996. This is lower than the anticipated statutory
rate due to the expected utilization of net operating losses
carryforwards and general business credits during 1996. No tax
expense was recorded for the first quarter of 1995 due to the
Company's net loss position. No deferred tax expense has been
recorded in either quarter as the Company continues to record a
valuation allowance to reserve for net deferred tax asset.
Liquidity and Capital Resources
Cash, cash equivalents and marketable securities, which consist
primarily of high-quality municipal bonds, totaled $21.9 million
at March 31, 1996 compared to $23.6 million at December 31, 1995.
The decrease in cash, cash equivalents and marketable securities
was due primarily to the cash used to perform renovations to the
Company's existing facility and capital equipment for said
facility, an increase in accounts receivable, partially offset by
net income.
On April 3, 1996, the Company acquired all outstanding common
stock of Information Strategies Incorporated ("ISI") of Dallas,
Texas for cash. ISI produces and sells TracWare , a Microsoft
Windows NT based software system for the distribution and
logistics market. The software technology acquired from ISI will
be charged during the second quarter as purchased Research and
Development and should not exceed $1.5 million. Catalyst will
maintain the ISI Texas office and use this facility as a research
and development laboratory; in addition, Catalyst has offered
employment to all ISI employees. The Company does not believe
that the acquisition will have a material impact on the Company's
liquidity needs for 1996.
Longer term cash requirements, other than normal operating
expenses, are anticipated for the development of new software
products and enhancement of existing products; the finance of
anticipated growth; potential repurchases of the Company's common
stock; and possible acquisition of software products or
technologies complementary to the Company's business. The
Company believes that its existing cash, cash equivalents,
marketable securities and available line of credit, along with
anticipated cash generated from operations will be sufficient to
satisfy its cash requirements for at least the next 12 months.
<PAGE>
PART II
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Number Description
11 Statement re: Computation of Per Share Earnings.
27 Financial Data Schedules.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the first quarter of 1996.
<PAGE>
SIGNATURE
In accordance with the requirement of the Securities Exchange Act of
1934, as amended, the registrant caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CATALYST INTERNATIONAL, INC.
Date May [ ], 1996 By: /s/ Vaemond H. Crane
Vaemond H. Crane
President and Chief Executive Officer
Signing on behalf of the registrant
and as principal executive officer.
Date May [ ], 1996 By: /s/ Lisa Sanregret-Williams
Lisa Sanregret-Williams
Vice President and Chief Financial Officer
Signing on behalf of the registrant
and as principal financial officer.
<PAGE>
Exhibit 11
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(amounts in thousands, except per share amounts)
Three months ended March 31,
1996 1995
Average shares outstanding 8,124 1,295
Net effect of conversion of
options and warrants (a) 314 (d)
Net effect of conversion of
preferred stock (b) - 4,764
Stock, options and warrants
issued within one year of
initial filing (c) - 304
Total 8,438 6,363
===== =====
Net income (loss) applicable
to common stock $ 731 ($451)
Dividends on preferred stock - 123)
----- -----
$ 731 ($574)
===== =====
Net income (loss) per share
to common stock $0.09 ($0.09)
===== =====
- -----------------------
(a) Computed using the "treasury stock" method
(b) Computed using the "if-converted" method
(c) Included in accordance with Staff Accounting Bulletin No. 83
(d) Common stock equivalents and other potentially dilutive
securities were anti-dilutive in this period
<PAGE>
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
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<PERIOD-END> MAR-31-1996
<CASH> 555
<SECURITIES> 21327
<RECEIVABLES> 8987
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 31285
<PP&E> 4989
<DEPRECIATION> 1355
<TOTAL-ASSETS> 35007
<CURRENT-LIABILITIES> 4035
<BONDS> 0
0
0
<COMMON> 843
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 35007
<SALES> 6420
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<CGS> 0
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<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
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<CHANGES> 0
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<EPS-PRIMARY> .09
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