-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A8l9CzuabXqsAZvwGQGiSB83bwcK6GieLVnYlvsgmgYNInSe43/TBF6kmqasvGMW Vw1KaBzMWnCuxwJpfDu3Jw== 0001045969-98-000431.txt : 19980518 0001045969-98-000431.hdr.sgml : 19980518 ACCESSION NUMBER: 0001045969-98-000431 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: GLOBAL MAINTECH CORP CENTRAL INDEX KEY: 0000783738 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPUTERS [3571] IRS NUMBER: 411523657 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-14692 FILM NUMBER: 98624871 BUSINESS ADDRESS: STREET 1: 6468 CITY WEST PARKWAY CITY: EDEN PRAIRIE STATE: MN ZIP: 55344 BUSINESS PHONE: 612-944-04 MAIL ADDRESS: STREET 1: 6468 CITY WEST PKY CITY: EDEN PRAIRIE STATE: MN ZIP: 55344-3245 FORMER COMPANY: FORMER CONFORMED NAME: MIRROR TECHNOLOGIES INC /MN/ DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: COMPUTER AIDED TIME SHARE INC DATE OF NAME CHANGE: 19900122 10QSB 1 FORM 10-QSB U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 1998 Commission File Number 0-14692 ---------------------------------------------- GLOBAL MAINTECH CORPORATION MINNESOTA 41-1523657 State of Incorporation I.R.S. Employer Identification No. 6468 City West Parkway, Eden Prairie, MN 55344 Telephone Number: (612) 944-0400 ---------------------------------------------- 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 [ ] ---------------------------------------------- On April 13, 1998 there were 17,403,258 shares of the Registrant's no par value common stock outstanding. Transitional small business issuer format: No Page 1 of 12 SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This Quarterly Report on Form 10-QSB contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements involve risks and uncertainties that may cause the Company's actual results to differ materially from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, the uncertainty in the Company's ability to operate profitably in the future; failure of the Company to meet its future additional capital requirements; loss of key personnel; inability of the Company to compete in the industry in which it operates; failure of the Company to respond to evolving industry standards and technological changes; lack of market acceptance of the Company's products; failure of the Company to secure adequate protection for the Company's intellectual property rights; and the Company's exposure to product liability claims. The forward-looking statements are qualified in their entirety by the cautions and risk factors set forth in Exhibit 99, under the caption "Cautionary Statement," to this Quarterly Report on Form 10-QSB for the year ended March 31, 1998. - -------------------------------------------------------------------------------- PART I. FINANCIAL INFORMATION - -------------------------------------------------------------------------------- ITEM 1. FINANCIAL STATEMENTS GLOBAL MAINTECH CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited) ASSETS March 31, December 31, 1998 1997 ---------- ---------- CURRENT ASSETS Cash and cash equivalents $ 596,219 $1,726,889 Accounts receivable, less allowance for doubtful accounts of $15,000 1,473,379 576,573 Other receivables 740,085 26,111 Inventories 1,040,838 797,435 Prepaid expenses and other 107,679 77,308 Notes receivable -- 75,000 Current portion of investment in sales-type leases -- 286,997 ---------- ---------- Total current assets 3,958,200 3,566,313 Property and equipment, net 312,961 308,347 Leased equipment 194,552 209,033 Software development costs, net 1,229,198 955,835 Net investment in sales-type leases, net of current portion -- 492,918 Other assets, net 1,050,535 331,003 ---------- ---------- TOTAL ASSETS $6,745,446 $5,863,449 ========== ========== The accompanying notes are an integral part of these consolidated statements. 2 GLOBAL MAINTECH CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
March 31, December 31, 1998 1997 ----------- ----------- CURRENT LIABILITIES Accounts payable $ 474,238 $ 396,159 Current portion of notes payable 100,000 100,000 Accrued liabilities: Compensation and payroll taxes 99,068 123,605 Interest 68,085 -- Other 33,546 10,588 Deferred revenue 65,127 52,443 ----------- ----------- Total current liabilities 840,064 682,795 ----------- ----------- Subordinated notes payable, less current portion 1,900,000 1,900,000 ----------- ----------- Total liabilities 2,740,064 2,582,795 STOCKHOLDERS' EQUITY (DEFICIT) Voting, convertible preferred stock - Series A, convertible into one common stock share for each pre- ferred share, no par value; 887,980 shares authorized; 233,446 shares in 1998 and 244,113 shares in 1997 issued and outstanding; total liquidation preference of outstanding shares-$438,000 109,486 114,489 Common stock, no par value; 49,112,020 shares authorized; 17,403,258 shares in 1998 and 15,248,816 -- -- shares in 1997 issued and outstanding Additional paid-in-capital 5,788,423 5,295,829 Notes receivable-officers (294,500) (294,500) Accumulated deficit (1,598,027) (1,835,164) ----------- ----------- Total stockholders' equity 4,005,382 3,280,654 ----------- ----------- $ 6,745,446 $ 5,863,449 =========== ===========
The accompanying notes are an integral part of these consolidated statements. 3 GLOBAL MAINTECH CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended March 31, ------------------------------ 1998 1997 -------------- ------------ Net sales Systems $ 1,322,292 $ 491,385 Maintenance, consulting and other 474,108 215,166 ------------ ------------ Total net sales 1,796,400 706,551 Cost of sales Systems 483,299 105,947 Maintenance, consulting and other 201,171 74,633 ------------ ------------ Total cost of sales 684,470 180,580 ------------ ------------ Gross profit 1,111,930 525,971 Operating expenses Selling, general and administrative 756,170 316,091 Research and development 147,322 44,326 ------------ ------------ Income from operations 208,438 165,554 Other income (expense): Interest expense (74,098) (16,547) Interest income 113,870 -- Other (11,074) -- ------------ ------------ Total other income (expense), net 28,698 (16,547) ------------ ------------ Income from continuing operations before income taxes 237,136 149,007 Provision for income taxes -- 2,500 ------------ ------------ Income from continuing operations 237,136 146,507 Gain from discontinued operations -- 70,000 ------------ ------------ Net income $ 237,136 $ 216,507 ============ ============ Basic earnings per common share: Continuing operations $ 0.014 $ 0.013 Discontinued operations -- 0.005 ------------ ------------ Net earnings $ 0.014 $ 0.018 ============ ============ Diluted earnings per common share: Continuing operations $ 0.012 $ 0.011 Discontinued operations -- 0.004 ------------ ------------ Net earnings $ 0.012 $ 0.015 ============ ============ Shares used in calculations: Basic 16,625,070 13,736,391 Diluted 19,784,645 16,732,492
The accompanying notes are an integral part of these consolidated statements. 4 GLOBAL MAINTECH CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended March 31, ------------------------- 1998 1997 ----------- ---------- Cash flows from operating activities: Net income $ 237,136 $ 216,507 Adjustments to reconcile net income to net cash provided (used) in operating activities: Depreciation and amortization 283,888 82,598 Changes in operating assets and liabilities: Increase in accounts receivable (896,806) (486,859) Increase in other receivables (713,974) -- Increase in inventories (243,403) (38,713) Increase in prepaid expenses and other (30,371) (24,038) Increase (decrease) in accounts payable 78,079 (82,548) Increase (decrease) in accrued liabilities 66,506 (4,276) Increase (decrease) in deferred revenue 12,684 (87,711) ----------- ---------- Cash used by operating and discontinued activities (1,206,261) (425,040) ----------- ---------- Cash flows from investing activities: Sale of investment in sales-type leases 712,332 -- Purchase of property and equipment (59,613) (42,454) Investment in leased equipment -- (10,729) Investment in software development costs (439,428) (263,131) Investment in other assets (700,291) (17,500) Receipt of payment on note receivable 75,000 -- ----------- ---------- Cash used by investing activities (412,000) (333,814) ----------- ---------- Cash flows from financing activities: Disbursements for deferred debt costs Proceeds from issuance of common stock 487,591 1,104,037 Payments of short-term notes payable -- (107,817) Payments of long-term notes payable -- (16,600) ----------- ---------- Cash provided by financing activities 487,591 979,620 ----------- ---------- Net increase (decrease) in cash (1,130,670) 220,766 Cash and cash equivalents at beginning of period 1,726,889 32,890 ----------- ---------- Cash and cash equivalents at end of period $ 596,219 $ 253,656 =========== ========== The accompanying notes are an integral part of these consolidated statements. 5 GLOBAL MAINTECH CORPORATION FOOTNOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) GENERAL The Company, through its wholly owned subsidiary Global MAINTECH, Inc., designs, develops and markets a computer system, consisting of hardware and software, which monitors and controls diverse computers in a data center from a single, master console. The Virtual Command Center ("VCC" or "VCC Unit") can simultaneously manage mainframes, mid-range computers (e.g., UNIX, Microsoft and Windows NT platforms) and networks. The VCC is designed to perform three primary functions: (a) consolidate consoles (computer terminal with access to the internal operation of a computer) into one monitor, a "virtual console" or single point of control: (b) monitor and control the computers connected to the virtual console; and (c) automate most, if not all, of the routine processes performed by computer platforms and operating systems. It is an external system that monitors and controls the subject mainframe and other data center computers from a workstation-quality reduced instruction set computer ("RISC") which is housed separately from the computers it controls. VCC users are able to reduce staffing levels, consolidate all data center operations and technical support functions to a single location regardless of the physical location of the data center(s) and achieve improved levels of operational control and system availability. In 1995, the Company installed its first three VCC Units in the data centers of a large industrial and financial company. In 1996, the Company sold or leased seven additional VCC Units and added two new customers. As of December 31, 1997, the Company had sold or leased a cumulative total of 26 VCC Units to a total of eight customers and had shipped four VCC Units for evaluation purposes to three prospective customers. As of March 31, 1998, the Company had sold an additional 5 VCC Units for a total of 31. The Company's customers include: General Electric Capital Corporation, Burlington Northern Santa Fe Railroad, Storage Technology Corporation, Systems Management Specialists, Inc., Ferntree Computer Corp. (Australia), SAP America, Inc., Deluxe Corporation, Bank One Services Corp., BMC Software, Frontier Information Technologies, Inc., Merrill Lynch & Co. Inc. and Southern California Gas Company. BASIS OF PRESENTATION The interim consolidated financial statements are unaudited, but in the opinion of management, reflect all adjustments necessary for a fair presentation of results for such periods. All such adjustments are of a normal recurring nature. The results of operations for any interim period are not necessarily indicative of results for the full year. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-KSB for the year ended December 31, 1997. BASIC AND DILUTED EARNINGS PER SHARE Basic earnings per share represent earnings, reduced by any dividends on preferred stock, divided by the weighted average number of common shares outstanding for the reporting period. Diluted earnings per share represent earnings divided by the sum of the weighted average number of common shares outstanding plus shares derived from other potentially dilutive securities. For the Company, potentially dilutive securities include "in the money" stock options and warrants for the purchase of shares of common stock and the amount of common shares which would be added by conversion of the outstanding convertible preferred stock. The number of shares added for stock options and warrants is determined by the treasury stock method, which assumes exercise of these securities and the use of any proceeds from these actions to repurchase a portion of these shares at the average market price for the period. When the results of continuing operations are a loss, other potentially dilutive securities will not be included in the calculation of loss per share. 6 GLOBAL MAINTECH CORPORATION FOOTNOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) The weighted average shares and total dilutive shares used in the calculation of basic and diluted earnings per share are as follows: Three Months Ended March 31, 1998 1997 --------------------------------- BASIC EARNINGS PER SHARE Weighted average shares 16,625,070 13,736,391 DILUTED EARNINGS PER SHARE Weighted average shares 16,625,070 13,736,391 Stock options and Warrants 2,926,134 2,630,916 Conversion of preferred stock 233,441 365,185 --------------------------------- Total dilutive shares 19,784,645 16,732,492 ================================= CAPITALIZED SOFTWARE DEVELOPMENT COSTS Capitalized software development costs represent costs incurred after technological feasibility has been established in connection with the development of enhancements to one or more particular software programs. The establishment of technological feasibility and the ongoing assessment of the recoverability of these costs require considerable judgment by management with respect to certain external factors, including, but not limited to, anticipated future gross product revenues, estimated economic life, and changes in software and hardware technology. The software development costs are being amortized using the straight-line method over the estimated economic life of the software not to exceed three years. OTHER ASSETS Other assets is comprised of patents, capitalized software license fees, and capitalized debt issuance costs. Patents and capitalized software license fees are stated at cost and are amortized over their useful life of three to five years using the straight-line method. Capitalized debt issuance costs are stated at cost and are amortized over the term of the related debt agreement. Recorded amounts for patents and license fees are regularly reviewed and recoverability assessed. The review considers factors such as whether the amortization of these capitalized amounts can be recovered through forecasted undiscounted cash flows. ASSET PURCHASE AND SOFTWARE LICENSE On February 27, 1998 the Company licensed certain software and purchased certain assets relating to the system software business of Infinite Graphics Incorporated ("IGI"), a Minnesota corporation based in Minneapolis. The acquisition has been recorded as an asset purchase. The acquisition agreement provides for an initial payment of $500,000 and additional payments of up to $3,500,000, the payment of which is contingent on the future revenue generated by this business segment and is determinable as of May 31, 1999. In the twelve months ended December 31, 1997 the unaudited revenue of IGI's software segment was $1,683,000 and the gross margin was $621,000. 7 GLOBAL MAINTECH CORPORATION FOOTNOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) These software and assets will be used by the Company to design, assemble and market computer-aided design and manufacturing software systems that operate on a variety of mid-range and personal computer platforms. Assets purchased in the acquisition include inventory, machinery, equipment, furniture and fixtures, used in IGI's system software business. In connection with such transaction, the Company also obtained a perpetual exclusive software license of a majority of IGI's software products used in IGI's system software business and a non-exclusive license of certain software used in IGI's remaining business segment. The Company has recorded the initial payment of $500,000 primarily as software licenses to be amortized over a useful life not to exceed five years. IGI will reimburse the Company for the liabilities of IGI explicitly assumed by the Company in connection with the acquisition. The Company also agreed to satisfy IGI's unrecorded service obligations to the software end users in return for which the Company expects to receive support payments from such end users. COMMON STOCK ISSUANCE In February 1998 the Company began a 400,000 share private placement of common stock at $1.90 per share and had issued 280,000 of such shares as of March 31, 1998. Maven Securities, Inc. is acting as the placement agent wherein the Company agreed to pay the placement agent a 10% commission, a 3% fee for expenses and to issue to such agent a warrant to purchase up to 10% of the number of shares of common stock issued in connection with such offering at an exercise price of $1.90 per share. The shares of common stock issued pursuant to this issuance are exempt from registration under Rule 506 of Regulation D of the Securities Act of 1933, as amended. RECLASSIFICATIONS Certain amounts previously reported in 1997 have been reclassified to conform to the 1998 presentation. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Sales from continuing operations for the first quarter ended March 31, 1998 were approximately $1,796,000 compared to sales from continuing operations for the first quarter of 1997 of approximately $707,000. The $1,089,000 increase is primarily related to an increase of $831,000 in unit sales of the Virtual Command Center (VCC) and an increase of $137,000 in software license and hardware maintenance fees. The Company also recorded sales of $116,000 for the first time from its new computer-aided design software line of business (the "CAD" Business). See "Footnotes to Interim Consolidated Financial Statements--Asset Purchase and Software License." Cost of sales increased in the first quarter ended March 31, 1998 to 38% from 26% in the first quarter of 1997. This increase is related to increased distribution costs, increased amounts of software amortization and an increase in the cost of parts. Distribution costs increased because certain of the sales in the first quarter of 1998 were made through a third party distributor. The Company had no third party distribution arrangements in the first quarter of 1997. Software amortization increased in 1998 as a result of increases in capitalized software development costs. The increase in equipment cost is related to an upgrade of computer parts made to the VCC after March 31, 1997. As a result, the gross margin in the first quarter of 1998 was 62% compared to 74% in the first quarter of 1997. Selling, general and administrative costs in the first quarter of 1998 were approximately $756,000 compared to $316,000. The increase of $440,000 is primarily due to an increase in salaries of $274,000. The salary increase is substantially due to an increase in the number of employees, the majority of which are in sales and sales support. The remaining portion of the increase, $166,000, is primarily due to increases in travel and related costs of approximately $43,000, marketing and advertising costs of approximately $12,000, depreciation and equipment costs of approximately $66,000, and building and utility costs of approximately $38,000. The increased sales activity is reflected in the increases in travel and entertainment costs, and marketing and advertising costs increases reflects the effort by the Company to facilitate sales. However, the increase in the number of employees to 18 in March 1998 from 10 in March 1997 is the primary activity to which the cost increases relate. The depreciation and equipment cost increases are the result of increased purchases of furniture and equipment for the new employees and the increases in rented square footage for these new employees is reflected in the increased rent and utility costs. Research and development costs in the first quarter of 1998 were approximately $147,000 compared to $44,000 in the first quarter of 1997. The increase of $103,000 is due to increases in search firm fees of $45,000 paid to acquire some of the additional employees with software expertise. The remaining increase is due to salaries paid for product research and development. Non-operating expenses consist of interest expense, amortization of debt issue costs and interest income. The increase in interest expense and amortization of debt issue costs is due to the $2,000,000 of subordinated debt issued in June 1997. Interest income is from short-term investments and from the sale in March 1998 of certain sales-type leases held by the Company. Net cash used in operating and discontinued activities for the quarter ended March 31, 1998 was approximately $1,206,000 compared to a use of cash of approximately $425,000 for such activities in the quarter ended March 31, 1997. Cash was provided from net income, depreciation and amortization totaling approximately $521,000 in the quarter ended March 31,1998 compared to approximately $299,000 from the same sources in the quarter ended March 31, 1997. Cash was used to fund the approximate increases in accounts receivable of $897,000, inventory of $243,000, prepaid expenses of $30,000. In addition, the Company entered into a contract to sell its sales-type leases on a non-recourse basis which sale was recorded in current other receivables and resulted in the increase of $714,000. Cash was also provided by increases in accounts payable of approximately $78,000, accrued expenses of approximately $67,000 and deferred revenue of approximately $13,000. In the quarter ended March 31, 1997, the Company used cash to fund an increases in accounts receivable, inventory and prepaid expenses and to reduce accounts payable, accrued expenses and deferred revenue which were partially offset by cash sources from income and depreciation. Cash used by investing activities of approximately $412,000 reflects investments of $439,000 in capitalized computer software development costs, which represent costs incurred after technological feasibility 9 has been established in connection with the development of enhancements to one or more particular software programs, and approximately $500,000 in software license costs which reflect the allocation of the purchase price related to the acquisition of the CAD Business. The Company also purchased approximately $60,000 of additions to machinery and equipment during the first quarter of 1998. Finally, cash was provided by the receipt of payment of $75,000 on a note receivable and by the non-recourse sale of the Company's investment in sales- type leases. During the first quarter of 1997, cash used in investing activities totaled $334,000, the majority of which was in investments in software development costs of $263,000 and purchases of property and equipment of approximately $42,000. Net cash provided by financing activities in the first quarter of 1998 was approximately $488,000. This is primarily due to the receipt of net proceeds from the issuance of common stock of approximately 280,000 shares at a per share price of $1.90 in connection with a private offering of such securities. In the first quarter of 1997, the Company raised $1,104,000 from the issuance of common stock at a per share price of $0.75 which was partially offset by a reduction of notes payable of $125,000. LIQUIDITY AND CAPITAL RESOURCES As of March 31, 1998, the Company had positive working capital of approximately $3,118,000 compared to positive working capital as of December 31, 1997 of $2,884,000. Working capital was improved by net income and non-cash depreciation totaling approximately $521,000, the non-recourse sale of the investment in sales-type leases and the net proceeds from the common stock issuance. Working capital was negatively affected by approximately $500,000 of software license costs incurred in connection with the purchase of the CAD Business and the additional investment in software development costs, both of which are classified as long-term assets. During the quarter ended March 31, 1998, the Company's liquidity and capital resources were reduced by cash investments in accounts receivable and inventory and cash was invested in long-term assets as described above. As a result the Company's liquidity was moderately reduced from year-end 1997. The Company is now more dependent on the collection of its accounts receivable and the liquidation of its inventory through sales. The growing demand for the Company's technology from new customers suggests the Company will continue to invest in inventory and accounts receivable during the remainder of the year. Accordingly, management expects cash will continue to be invested in short-term assets. The Company's operating plan for the year ending December 31, 1998 anticipates an increase in sales over the year ended December 31, 1997 with a commensurate increase in net income. As a result, this operating plan projects the working capital of the Company will increase. Furthermore, the Company is committed to making long-term investments in the form of additional software development, additional purchases of software licenses, such as the IGI software business, and additional purchases of property and equipment. As a result of the growth in short-term and long-term investments, Management expects the Company will continue to raise cash in the capital markets. While Management believes in the viability of its operating plan and currently anticipates that its operating plan will be achieved, there can be no assurances to that effect, nor can Management provide any assurance of the Company's continued access to the capital markets. At this point Management believes the Company's growth will be funded by a combination of operating income and access to outside capital. Management believes these sources will be sufficient to meet the Company's liquidity needs for the foreseeable future. 10 - -------------------------------------------------------------------------------- PART II. OTHER INFORMATION - -------------------------------------------------------------------------------- ITEM 2. CHANGES IN SECURITIES During the first quarter of 1998, the Company issued 280,000 shares of common stock to certain accredited investors at a purchase price of $1.90 per share in a private offering pursuant to the terms of a private placement agency agreement dated February 19, 1998. Maven Securities, Inc. ("Maven") acted as placement agent for such sale and was paid a 10% commission and a 3% fee for expenses. As additional compensation, the Company issued Maven a warrant to purchase up to 10% of the number of shares of common stock issued in connection with such offering at an exercise price of $1.90 per share. The aggregate offering price for such shares was $532,000 and the aggregate placement agent commissions and expenses were $69,160. The shares issued were exempt from registration under Rule 506 of Regulation D of the Securities Act of 1933, as amended. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 27--Financial Data Schedule 99--Cautionary Statement (b) Reports on Form 8-K None. 11 SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. GLOBAL MAINTECH CORPORATION May 14, 1998 By: /s/ James Geiser ---------------------------------- James Geiser Chief Financial and Chief Accounting Officer In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. May 14, 1998 By: /s/ David McCaffrey ---------------------------------- David McCaffrey Chief Executive Officer 12 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 596 0 1,473 0 1,041 3,958 313 0 6,745 840 1,900 0 109 5,494 (1,598) 6,745 1,796 1,796 684 903 (102) 0 74 237 0 237 0 0 0 237 0.014 0.012
EX-99 3 CAUTIONARY STATEMENT Exhibit 99 CAUTIONARY STATEMENT The Company, or persons acting on behalf of the Company, or outside reviewers retained by the Company making statements on behalf of the Company, or underwriters, from time to time, may make, in writing or orally, "forward- looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. When used in conjunction with an identified forward-looking statement, this Cautionary Statement is for the purpose of qualifying for the "safe harbor" provisions of such sections and is intended to be a readily available written document that contains factors which could cause results to differ materially from such forward-looking statements. These factors are in addition to any other cautionary statements, written or oral, which may be made or referred to in connection with any such forward-looking statement. The following matters, among others, may have a material adverse effect on the business, financial condition, liquidity, results of operations or prospects, financial or otherwise, of the Company. Reference to this Cautionary Statement in the context of a forward-looking statement or statements shall be deemed to be a statement that any or more of the following factors may cause actual results to differ materially from those in such forward-looking statement or statements: Liquidity and Capital Resources. As of March 31, 1998, the Company had working capital of approximately $3,118,000. The Company believes it has sufficient working capital to pay its current liabilities. The Company believes its working capital will be sufficient to fund its liabilities and believes its working capital may improve as the Company's profitability improves and access to capital markets remains available to the Company. Nevertheless, the Company can provide no assurance as to its continued profitability and access to the capital markets. Reliance Upon Key Personnel. The Company will be relying heavily upon the abilities of key personnel, in particular, two technicians. Jeff Jensen and Norm Freedman, and division head Bob Donaldson, to further develop the VCC. If any of these employees should cease to be employed by the Company or for any reason be unable to continue in their respective capacities as employees of the Company, the Company would be required to hire a comparable employee. There can be no assurance that it would be able to do so quickly and at an affordable compensation rate. While these three employees have incentive options and are bound by a confidentiality requirement, the Company does not have "key man" insurance for them and cannot guarantee their continued employment. Competitive Conditions. The Company's industry is characterized by rapidly evolving technology and intense competition. The Company is aware of several other competitors. These competitors have substantially greater resources and experience in research and development and marketing than the Company and may therefore represent significant competition for the Company. However, unlike the Company, no competitor produces a complete enterprise computing system, but rather components that could be combined to form such a system. The Company's management believes that the Company's ability to produce an integrated whole gives the Company a competitive advantage. Nevertheless, there can be no assurance that the Company's competitors will not succeed in developing or marketing technologies and products that are more effective than those developed or marketed by the Company or that would render the Company's technology and products obsolete or noncompetitive. New Product with Uncertain Demand. The concept of an external monitor and control system for computer hardware is relatively new, and the demand for the product is not yet fully know. It is difficult to project the overall size of the future market for such a product. The Company estimates the market size for internal systems to be several billion dollars per year. The Company believes the market for an external system could be much larger based upon the fact that external control systems also soon could be used to solve networking problems associated with linking computers containing different processors together, a process commonly called enterprise computing. Based on recent feedback from the Company's current and potential customers, management believes the demand for the VCC is large. However, to date, the Company has sold to only eight customers, and there is no certainty that additional customers will purchase the Company's products. Product Under Development. The Company currently is developing a software product which monitors networking and communication devices used by mainframes. Although preliminary tests indicate that this product will perform as intended and can be integrated with the VCC, there can be no assurance that it will do so or, even if it does, that the Company will be able to establish a market for such a product. Future Capital Requirements; No Assurance Future Capital Will Be Available. If the current capital of the Company is insufficient to meet its operating and working capital needs the Company may be required to raise additional funding through public or private financings, including equity financings. Any additional equity financings may be dilutive to the shareholders of the Company, and debt financing, if available, may involve restrictive covenants. Adequate funds for the Company's operations, whether from financial markets or from other sources, may not be available when needed on terms attractive to the Company, or at all. Whether the Company would be able to secure such financing and, if so, whether such financing would be available at reasonable rates and terms is uncertain. Failure to secure such additional financing could adversely affect the Company. Intellectual Property Rights. The Company holds no patents. However, applications are being prepared, and the Company believes the VCC will be protected by a patent that is currently under review by the U.S. Patent and Trademark Office. This patent was filed by Circle Corporation, a Japanese corporation, on December 28, 1993 and the Company licenses the product from Circle Corporation. The license agreement provides the Company with exclusive distribution rights outside of Japan. Dependence on Diversification of Product Offerings. The Company currently has a limited number of product offerings, and none of the existing customers of the Company's products are required to purchase additional products. Accordingly, a significant portion of the Company's revenues are generated from non-recurring revenue sources, and the success of the Company is dependent, in part, on its ability to develop sustained demand for its current products and to develop and sell additional products. There can be no assurance that the Company will be successful in developing and maintaining such demand or in developing and selling additional products. Fluctuations in Operating Results. The Company's future operating results may vary substantially from quarter to quarter. At its current stage of operations, the Company's quarterly revenues and results of operations may be materially affected by the timing of the development and market acceptance of the Company's products. Generally, operating expenses will be higher during periods in which product development costs are incurred and marketing efforts are commenced. Due to these and other factors, including the general economy, stock market conditions and announcements by the Company or its competitors, the market price of the Company's securities may be highly volatile. Lack of Product Liability Insurance. The Company may face a risk of exposure to product liability claims in the event that use of its products is alleged to have resulted in damage to its customers. The Company does not currently carry product liability insurance. There can be no assurance that such insurance will be available on commercially reasonable terms, or at all, or that such insurance, even if obtained, would adequately covers any product liability claim. A product liability or other claim with respect to uninsured liabilities or in excess of insured liabilities could have a material adverse effect on the business and prospects of the Company. -----END PRIVACY-ENHANCED MESSAGE-----