U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Amendment No. 1)
(Mark One)
|X| Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 1997
|_| Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from to
Commission file number 333-07727
Allegiant Technologies Inc.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Washington 98-0138706
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
9740 Scranton Place, Suite 350, San Diego, California, 92121
(Address of Principal Executive Offices)
(619) 587 - 0500, Extension 105
(Issuer's Telephone Number, Including Area Code)
formerly Suite 300, same street address
(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Check whether the issuer: (1) 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 equity, as of the latest practicable date: Common stock, par value,
$0.01 per share, 8,393,007 shares of common stock outstanding as of
April 30, 1997
Transitional Small Business Disclosure Format (check one):
Yes ______________ No X
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
(Expressed in United States Dollars)
(Unaudited - Prepared by Management)
MARCH 31, 1997
<PAGE>
ALLEGIANT TECHNOLOGIES INC.
BALANCE SHEET
(Expressed in United States Dollars)
AS OF MARCH 31
<TABLE>
<CAPTION>
1996 1997
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 167,325 $ 21,948
Accounts receivable, net of allowance for doubtful accounts of
$13,000 in 1996 and $32,892 in 1997 130,418 59,001
Inventories 97,189 199,367
Prepaid expenses and deposits 39,668 15,387
------------- ------------
Total current assets 434,600 295,703
Deposits 15,709 17,708
Property and equipment, net (Note 2) 293,849 174,451
Intangible assets, net (Note 3) 353,038 228,442
Deferred costs 133,582 15,000
------------- ------------
Total assets $ 1,230,778 $ 731,304
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Debentures payable (Note 5) $ - $ 495,775
Accounts payable 382,348 428,721
Accrued liabilities 34,843 332,124
Deferred revenues 51,713 27,367
Current portion of notes payable 48,058 -
------------- ------------
Total current liabilities 516,962 1,283,987
Deferred rent 23,763 36,502
Notes payable (Note 4) - 100,000
Debentures payable (Note 5) 479,834 -
------------- ------------
Total liabilities 1,020,559 1,420,489
------------- ------------
Shareholders' equity:
Capital stock (Note 6)
Authorized
50,000,000 preferred shares, par value $0.01 per share
100,000,000 common shares, par value $0.01 per share
Issued and outstanding
8,393,007 common shares (1996 - 7,292,295) 72,923 83,930
Additional paid-in capital 2,651,898 4,062,235
Accumulated deficit (2,514,602) (4,835,350)
------------- ------------
Total shareholders' equity 210,219 (689,185)
------------- ------------
Total liabilities and shareholders' equity $ 1,230,778 $ 731,304
============= ============
</TABLE>
Unaudited - See accompanying notes.
<PAGE>
ALLEGIANT TECHNOLOGIES INC.
STATEMENTS OF OPERATIONS
(Expressed in United States Dollars)
THREE MONTHS ENDED MARCH 31
<TABLE>
<CAPTION>
1996 1997
<S> <C> <C>
NET REVENUE $ 470,710 $ 315,512
COST OF REVENUE 100,903 87,575
------------- ------------
GROSS PROFIT 369,807 227,937
------------- ------------
EXPENSES
Sales and marketing 651,561 191,992
Research and development 249,874 162,086
General and administrative 248,791 239,407
Amortization of purchase of intangibles 34,899 31,149
------------- ------------
Total operating expenses 1,185,125 624,634
------------- ------------
Loss from operations (815,318) (396,697)
Interest income 4,132 -
Interest expense (19,352) -
------------- -------------
Net loss $ (830,538) $ (396,697)
============= =============
Loss per share $ (0.16) $ (0.05)
============== =============
Shares used in computing per share amounts 5,042,295 8,107,295
============= ============
</TABLE>
Unaudited - See accompanying notes.
<PAGE>
ALLEGIANT TECHNOLOGIES INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
(Expressed in United States Dollars)
<TABLE>
<CAPTION>
Additional Total
Number Paid-in Accumulated Shareholders'
of Shares Par Value Capital Deficit Equity
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1994 5,634,000 $ 56,340 $ 1,205,660 $ (626,698) $ 635,302
Net loss (42,187) (42,187)
------------- ------------- ------------- ------------- -----------
Balances at March 31, 1995 5,634,000 56,340 1,205,660 (668,885) 593,115
Shares issued - cash 875,000 8,750 866,250 875,000
- corporate finance fee 64,545 645 63,900 64,545
- exercise of warrants 218,750 2,188 216,562 218,750
- conversion of note payable 250,000 2,500 247,500 250,000
- issuance of warrants 39,000 39,000
Offering costs (234,474) (234,474)
Net loss (1,015,179) (1,015,179)
------------- ------------- ------------- ------------- -----------
Balances at December 31, 1995 7,042,295 70,423 2,404,398 (1,684,064) 790,757
Shares issued - cash 250,000 2,500 247,500 250,000
Net loss (830,538) (830,538)
------------- ------------- ------------- ------------- -----------
Balances at March 31, 1996 7,292,295 72,923 2,651,898 (2,514,602) 210,219
Share issued - cash 815,000 8,150 1,621,850 1,630,000
Offering costs (308,656) (308,656)
Net loss (1,924,051) (1,924,051)
------------- ------------- ------------- ------------- -----------
Balances at December 31, 1996 8,107,295 81,073 3,965,092 (4,438,653) (392,488)
Shares issued cash 285,712 2,857 97,143 100,000
Net loss (396,697) (396,697)
------------- ------------- ------------- ------------- -----------
Balances at March 31, 1997 8,393,007 $ 83,930 $ 4,062,235 $ (4,835,350) $ (689,185)
============= ============= ============= ============= ===========
</TABLE>
Unaudited - See accompanying notes.
<PAGE>
ALLEGIANT TECHNOLOGIES INC.
STATEMENTS OF CASH FLOWS
(Expressed in United States Dollars)
THREE MONTHS ENDED MARCH 31
<TABLE>
<CAPTION>
1996 1997
----------------- ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (830,538) $ (396,697)
Adjustments to reconcile net loss to net cash
used in operating activities
Amortization and depreciation 72,782 56,739
Changes in operating assets and liabilities
Accounts receivable (23,609) (21,917)
Inventories 2,178 836
Prepaid expenses and deposits 45,905 32,734
Accounts payable and accrued liabilities 171,251 49,873
Deferred revenues (2,085) (7,196)
------------- ------------
Net cash used for operating activities (564,116) (285,628)
------------- ------------
INVESTING ACTIVITIES
Purchase of property and equipment (59,269) -
------------- ------------
FINANCING ACTIVITIES
Proceeds from issuance of capital stock 250,000 100,000
Proceeds from notes payable - 100,000
Payments on notes payable (12,436) (9,034)
Deferred costs (61,082) -
Deferred rent (2,640) -
------------- ------------
Net cash provided by financing activities 173,842 190,966
------------- ------------
Decrease in cash and cash equivalents (449,543) (94,662)
Cash and cash equivalents, beginning of period 616,868 116,610
------------- ------------
Cash and cash equivalents, end of period $ 167,325 $ 21,948
============= ============
</TABLE>
Unaudited - See accompanying notes.
<PAGE>
ALLEGIANT TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
MARCH 31, 1997
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Allegiant Technologies Inc. was incorporated in Washington State,
U.S.A. on December 28, 1993 and was registered to carry on business
in the State of California on March 23, 1994.
The Company's principal line of business is developing, marketing and
supporting interactive multimedia development software.
Basis of Presentation
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles, in the United States,
which contemplates the continuation of the Company as a going concern.
However, the Company has sustained substantial operating losses in
recent years. In addition, the Company has used substantial amounts of
working capital in its operations. Further, at March 31, 1997, current
liabilities exceed current assets by $1,088,287, and total liabilities
exceed total assets by $689,185.
In view of these conditions, additional working capital will need to be
raised through other debt and/or equity financings; however, there can
be no assurances that this can be accomplished, which may impact the
Company's ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the
outcome of this uncertainty.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amount of revenues and expenses
recorded during the reporting period. Actual results could differ from
those estimates.
Inventories
Inventories consist primarily of software media, manuals and related
packing materials. Inventories are valued at standard cost, which
approximates the lower of cost, determined on a first-in, first-out
basis, or market.
Capital Assets
Capital assets are recorded at cost. Depreciation is provided over the
estimated useful lives ranging from three to seven years using the
straight-line method.
Intangible Assets
Intangible assets are recorded at cost. Amortization is provided over
the estimated useful lives of five years using the straight-line method.
Management evaluates the future realization of intangible assets
quarterly and writes down any amounts that management deems unlikely to
be recovered through future product sales. To date no write downs have
been recorded to intangible assets acquired from Aldus Corporation.
Deferred Costs
Deferred costs will be offset against the proceeds of equity financing
or amortized over the period of debt financing.
<PAGE>
ALLEGIANT TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
MARCH 31, 1997
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(cont'd.....)
Capitalized Software Costs
Financial accounting standards provide for capitalization of certain
software development costs after technical feasibility of the software
is attained. No such costs were capitalized in 1994, 1995 or 1996
because the impact on the financial statements would not be material.
Revenue Recognition
Revenue is derived from product sales and licenses, maintenance
contracts and consulting, training and other services. Revenues from
product sales and licenses are recognized upon shipment of the products.
Revenue from software maintenance contracts is recognized on a
straight-line basis over the term of the contract, generally one year.
Revenue from consulting, training and other services are recognized in
the period in which services are performed and earned in accordance with
the respective agreements. To the extent that an engagement is projected
to be completed at a loss, a provision for the full amount of the loss
is provided at that time.
The Company may enter into agreements whereby it licenses products or
provides customers the right to multiple copies. Such agreements
generally provide for non-refundable fixed fees which are recognized at
delivery of the product master or the first copy. Per copy royalties in
excess of the fixed minimum amounts and refundable license fees are
recognized as revenue when such amounts are reported to the Company and
no longer refundable.
The Company will sell its products throughout the world, however, the
most significant geographical area is the United States. The Company
performs ongoing credit evaluations of its customers and generally does
not require collateral on domestic sales. The Company maintains an
allowance for potential credit losses. Additionally, the Company
maintains an allowance for anticipated returns on products sold to
distributors.
Foreign Currency Translation
The Company translates foreign currency transactions and balances using
the temporal method. Under this method, monetary assets and liabilities
are translated at period-end rates whereas non-monetary assets and
liabilities are recorded at rates prevailing at the transaction dates.
Revenue and expenses are translated at the average monthly rate
throughout the period. Currency gains and losses are reflected in the
results of operations for the periods and were not significant.
Accounting for Long Lived Assets
On January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and For Long-Lived Assets to be Disposed of (SFAS
121). The adoption of SFAS 121 did not impact the financial position or
the results of operations of the Company in 1996.
Stock Options
The Company has elected to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock options because as
discussed in Note 8, alternative fair value accounting provided under
FASB Statement No. 123, "Accounting for Stock Based Compensation"
(Statement 123), requires the use of option value models that were not
developed for use in valuing employee stock options. Under APB 25,
because the exercise price of the Company's employee stock options
equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized.
<PAGE>
ALLEGIANT TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
MARCH 31, 1997
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(cont'd.....)
United States Generally Accepted Accounting Principles
Accounting under United States and Canadian generally accepted
accounting principles is substantially the same with respect to the
accounting principles used by the Company in the preparation of these
financial statements.
2. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
1996 1997
<S> <C> <C>
Property and Equipment consists of:
Furniture and fixtures $ 154,240 $ 154,240
Office equipment 23,723 23,723
Computer equipment 187,473 187,473
------------- ------------
365,436 365,436
Accumulated depreciation (165,395) (190,985)
------------- ------------
$ 200,041 $ 174,451
============= ============
</TABLE>
3. INTANGIBLE ASSETS
<TABLE>
<CAPTION>
1996 1997
<S> <C> <C>
Intangible assets consist of:
Acquisition costs of SuperCard $ 498,000 $ 498,000
Royalty buyout 100,000 100,000
------------- ------------
598,000 598,000
Accumulated amortization (338,409) (369,558)
------------- ------------
$ 259,591 $ 228,442
============= ============
</TABLE>
Acquisition costs include goodwill, product technology and related
acquisition costs. On February 4, 1994 the Company purchased from a
non-related party, the rights to a product sold under the name
"SuperCard" and the underlying software technology for cash and other
consideration.
Royalty buyout represents a fixed sum payment for the termination of the
royalty interest on SuperCard sales. The buyout option was negotiated as
part of the original acquisition of SuperCard.
<PAGE>
ALLEGIANT TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
MARCH 31, 1997
4. NOTES PAYABLE
<TABLE>
<CAPTION>
1996 1997
<S> <C> <C>
Note payable - On February 13, 1997 the Company issued a note payable
(the "Note") in connection with a proposed private placement of debt
securities in the amount of $750,000. To date, the Company has been
advanced the sum of $100,000 under the Note. The Note is secured by a
general charge over the assets of the Company and bears interest at
the First National Bank & Trust Company of Chicago prime rate plus 2%
per annum, which is payable quarterly commencing on July 15, 1997.
Amounts advanced under the Note, together with accrued interest, are
due on the earlier of the date on which the Company completes any
offering of equity securities for an amount of not less
than $1,500,000, and February 13, 1999. $ - $ 100,000
Note payable on buyout of royalty on SuperCard sales, payable over two
years in equal monthly installments commencing March 1, 1995
with interest at 9% per annum. 9,034 -
Less: current portion 9,034 -
------------- ------------
Notes payable, net of current portion $ - $ 100,000
============= ============
</TABLE>
5. DEBENTURES PAYABLE
<TABLE>
<CAPTION>
1996 1997
<S> <S> <S>
The Company issued debentures in the aggregate amount of $500,000 which
which may be converted into Units of the Issuer at a price $1.96
until December 18, 1997, at the option of the holder. Each Unit
consists of one common share and one share purchase warrant entitling
the holder to purchase an additional common share at $1.96 until
December 18, 1997. The debentures, if not converted into Units, are
due on December 18, 1997.
The debentures are no longer secured by a general charge over the assets
of the Company and no longer bears interest effective
September 20, 1996. $ 500,000 $ 500,000
Less: discount (4,225) (4,225)
------------- ------------
495,775 495,775
Less: current portion (495,775) (495,775)
------------- ------------
Debentures payable, net of current portion $ - $ -
============= ============
</TABLE>
<PAGE>
ALLEGIANT TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
MARCH 31, 1997
6. CAPITAL STOCK
Authorized
50,000,000 preferred stock, par value $0.01 per share. The Board
of Directors has the authority to divide the shares
into one or more series and to determine their
attributes at the time of issuance.
100,000,000 common stock, par value $0.01 per share
Performance shares
Included in issued and outstanding common shares are 2,000,000
performance shares to be released from escrow on the basis of 1 share
for every $0.52 Cdn of pre-tax cash earned by the Company on a
cumulative basis. Of the performance shares, 675,000 shares have further
vesting provisions attached to them in addition to the earn-out
provisions. The value of these performance shares will be charged to
expense at the time of their release from escrow. These shares are not
included in the determination of loss per share until there is
reasonable certainty that they will be released from escrow.
Stock options
The Company established a stock option plan ("the Plan") to grant
options to purchase common stock to employees, officers, non-employee
directors of the Company and certain other individuals. The Plan
authorizes the Company to issue or grant and incentive stock options to
purchase up to 2,187,688 shares of its common stock as of March 31,
1997. There are 260,188 options available that may be granted in the
future under the stock option plan.
Under the terms of the Plan, incentive options may be granted to
employees, officers, directors and consultants at prices not less than
the fair market value on the date of grant. Options vest over various
terms not exceeding four years and expire five years from the date of
grant.
At March 31, 1997, there are 1,927,500 options outstanding at an
exercise price of $0.75 per share expiring from periods ranging from May
24, 2000 to November 26, 2001
As of March 31, 1997, the Company has outstanding share purchase
warrants entitling the holders to purchase a total of 727,235 common
shares of the Company as follows:
<TABLE>
<CAPTION>
Number Exercise
of Shares Price Expiry Date
<S> <C> <C>
88,235 $ 1.96 December 18, 1997
150,000 Cdn 3.15 to April 25, 1997
Cdn 3.62 from April 26, 1997
to April 25, 1998 April 25, 1998
489,000 2.30 April 26, 1998
-------------
727,235
=============
</TABLE>
<PAGE>
ALLEGIANT TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
MARCH 31, 1997
7. RELATED PARTY TRANSACTIONS
During the three months ended March 31, 1997, the Company paid or
accrued $15,000 (1996 - $15,000) in management fees to companies
controlled by certain directors of the Company.
8. GEOGRAPHIC INFORMATION
Substantially all the Company's operations, employees and assets are
located in the United States.
A significant portion of the Company's sales are to customers in foreign
countries:
<TABLE>
<CAPTION>
1996 1997
<S> <C> <C>
Sales by geographical region:
Japan $ 29,951 $ 21,335
Europe 106,678 64,786
Other 45,157 14,812
------------- ------------
Total export sales 181,786 100,933
United States 288,924 214,579
------------- ------------
Net sales $ 470,710 $ 315,512
============= ============
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
The Company has a limited history of operations. It was incorporated on December
28, 1993, acquired SuperCard together with its customer franchise, from Aldus
Corporation ("Aldus") on February 4, 1994, and released its first product
upgrade in June 1994. The Company has incurred substantial start up, development
and other expenses in excess of revenues which has resulted in cumulative net
losses to March 31, 1997 of $4,835,350 The Company's revenues to date have been
substantially derived from the sale of SuperCard and to a much lesser extent the
sale of Marionet, both for the Macintosh platform. There can be no assurance
that product sales will either continue at historical rates or increase or that
the Company's products under development will achieve market acceptance.
The results of operation for the first quarter of 1997 were significantly
impacted by three factors: (1) the Company was unable to secure adequate
financing to complete product development and maintain marketing efforts, (2)
the Company's development schedule did not provide for the release of a version
of SuperCard for the Windows operating system, and (3) the continuing decline in
the sales of Macintosh computers and related Macintosh software in general.
On January 17, 1997, the Company announced that it had entered into an agency
agreement whereby the placement agent would use its best efforts to secure
additional capital for the Company in the amount of $750,000 by way of a bridge
loan which was to be repaid out of proceeds from the subsequent sale of equity
securities. As of April 30, 1997, the Company was advanced the sum of $100,000
under the agreement. The Company no longer expects that it will receive the
balance of funding as contemplated. The Company's ability to satisfy projected
working capital and capital expenditure requirements is dependent upon its
ability to secure additional funding through public or private sales of
securities, including equity securities of the Company, and the success of its
future operations.
In view of this circumstance, management has undertaken the following steps
subsequent to March 31, 1997.
1. Termination notices were issued to a majority of employees. Currently,
there remains 9 employees, including all of senior management, who have
agreed to defer a substantial portion or all of their salaries allowing
operations to continue in order that a feasible plan of reorganization may
be developed.
2. The Company has terminated its premises lease, at no cost or penalty, and
sub-leased smaller premises for a one year term at no cost in exchange for
the transfer of an equivalent value of furniture no longer in use by the
Company.
3. Measures have been taken to reduce all costs where possible.
4. Negotiations have been commenced with a secured and other major creditor of
the Company to amend the terms of their respective loan agreements and to
secure additional capital necessary to complete the development of the
SuperCard for Windows product and to commence a plan of reorganization. A
result of such negotiations may be a significant change in management
of the Company.
<PAGE>
The lack of available financial resources, coupled with a significant decline in
Macintosh software sales, have impacted the Company's ability to successfully
market and sell its current products effectively. Management is reviewing
various means by which it can generate incremental revenues at reduced cost,
however, it is expected that sales in the immediate future will be adversely
affected.
Though management is attempting to secure the additional capital necessary for
the Company to continue its operation as a going concern, there are no
assurances that the Company will be able to secure the required capital on terms
favorable to the Company or on any terms. In addition, even in the event the
necessary capital is made available to the Company, there are no assurances that
it can retain or, if necessary, hire key personnel to implement a plan of
reorganization successfully nor are there any assurances that a plan of
reorganization will gain the acceptance of the Company's creditors. As a result
there exists a substantial risk that the Company will have to discontinue its
operations. The financial statements presented as at March 31, 1997 do not
include any adjustments that might result from the outcome of this uncertainty.
Liquidity and Capital Resources
The Company has sustained substantial operating losses and has used substantial
amounts of working capital in its operations to March 31, 1997. As of March 31,
1997 the Company had cash equivalents of $21,948 and a working capital deficit
of $988,284 which includes unsecured convertible debentures in the aggregate
amount of $500,000 due in December, 1997. Total liabilities exceed the book
value of total assets by $689,185. The Company's ability to satisfy projected
working capital and capital expenditure requirements is dependent upon its
ability to secure additional funding through public or private sales of
securities, including equity securities of the Company, and the success of its
future operations.
The Company's primary future needs for capital are for expanded product
development, marketing and selling expenses and working capital. The Company's
working capital requirements may vary depending upon numerous factors including
the progress of the Company's product development, competitive and technological
advances, marketing acceptance of the Company's products and other factors.
<PAGE>
Results of Operation
The following table sets forth, for the periods indicated, certain operating
data as a percentage of net revenue.
<TABLE>
<CAPTION>
Three
Months Ended
March 31
1996 1997
------------- ------------
<S> <C> <C>
Net revenues 100% 100%
Cost of revenue 21
-------------
Cost of revenues 21 28
------------- ------------
Gross profit 89 72
------------- ------------
Expenses:
Sales and marketing 138 61
Research and development 53
Research and development 53 51
General and administrative 53 76
Amortization 7
-------------
Amortisation 7 10
------------- ------------
Total operating expenses 251 198
------------- ------------
Loss from operations (162) (126)
Net interest income (expense) (14) -
-------------- -------------
Net loss (176)% (126)%
</TABLE>
<PAGE>
Three Months Ended March 31, 1997 Compared to Three Months Ended March 31, 1996
Net revenue includes revenues from sales of software products and services, less
reserves for anticipated product returns and future vendor support services.
Total net revenues decreased by 33% from $470,710 for the three months ended
March 31, 1996 to $315,512 for the three months ended March 31, 1997. The
decrease is due to the following factors: (1) the Company did not have adequate
financial resources to implement effective sales and marketing strategies, and
(2) the continuing decline in the sales of Macintosh computers and Macintosh
software in general.
Cost of revenue includes the cost of manuals, diskettes and their duplication,
packaging materials, assembly, paper goods, bundled products, and shipping as
well as royalties and reserves for inventory obsolescence. Cost of revenue
decreased from $100,903 to $87,575 (as a percentage of revenue it increased from
21% of net revenues to 28%) for the first three months of 1997 as compared to
1996. The absolute dollar decrease is due to the reduction in sales. The
percentage increase is primarily due to the change in costs associated with
other vendor products that were bundled with SuperCard from time to time.
Sales and marketing expenses include the costs of advertising, promotion, trade
shows and printed collateral materials, salaries and the costs of contracted
services. Total sales and marketing costs decreased from $651,561 to $191,992
(139% of net revenues to 61%) for the first three months of 1997 as compared to
1996. The reduction in expenditures is a direct result of inadequate financial
resources.
Research and development expenditures consisted of personnel expenses, costs of
independent contractors and supplies required to conduct the Company's
development efforts. Research and development expenditures decreased from
$249,874 to $162,086 (from 53% of net revenues to 51%) for the first three
months of 1997 as compared to 1996. The decrease in research and development
costs is directly attributable to the decrease in engineering and support level
staff.
General and administrative expenses consist primarily of the costs of the
Company's finance and administrative personnel, including the chief executive
officer. General and administrative expenses decreased from $248,791 to $239,407
(as a percentage of revenues it increased from 53% of net revenues to 76%) for
the first three months of 1997 as compared to 1996. General and administrative
expenses remained relatively fixed in absolute terms but are expected to
decrease substantially as a result of steps undertaken by management to reduce
costs.
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None filed during the period ended March 31, 1997.
Items 1, 2, 3, 4, AND 5 OF PART II ARE NOT APPLICABLE AND HAVE BEEN OMITTED.
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SIGNATURE
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, in the City of San Diego,
State of California, on May 12, 1997.
ALLEGIANT TECHNOLOGIES INC.
By: /s/ Joel Staadecker
Joel Staadecker President and
Chief Executive Officer
