-----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, PrMy3rVmqTWmw/p5fIaYylPovytGtimYbTwO42FQhwiDLoYjAVkcvag2vQ4BDsFc 6BIJIDN4KawUPL6kRcAEJA== 0000950134-97-003755.txt : 19970514 0000950134-97-003755.hdr.sgml : 19970514 ACCESSION NUMBER: 0000950134-97-003755 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970513 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPATIAL TECHNOLOGY INC CENTRAL INDEX KEY: 0000852437 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 841035353 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-28842 FILM NUMBER: 97602299 BUSINESS ADDRESS: STREET 1: 2425 55TH STREET BLDG A CITY: BOULDER STATE: CO ZIP: 803012 BUSINESS PHONE: 3034490649 MAIL ADDRESS: STREET 1: 2425 55TH STREET STREET 2: BUILDING A CITY: BOULDER STATE: CO ZIP: 80301 10QSB 1 FORM 10-QSB FOR QUARTER ENDED MARCH 31, 1997 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 March 31, 1997 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) 449-0649 (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 April 1, 1997, there were outstanding 7,430,132 shares of the Registrant's Common Stock (par value $0.01 per share). Transitional Small Business Disclosure Format (check one): Yes No X --- --- ================================================================================ 2 SPATIAL TECHNOLOGY INC. INDEX
Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets, December 31, 1996 and March 31, 1997 . . . . . . . . . . . . . . . . . . . 3 Condensed Consolidated Statements of Operations, three months ended March 31, 1996 and 1997 . . . . . . . . . . 4 Condensed Consolidated Statements of Cash Flows, three months ended March 31, 1996 and 1997 . . . . . . . . . . 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 . . . . . . . . . . . . . . . . . . . . . . 9 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2 3 SPATIAL TECHNOLOGY INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except shares) ASSETS
December 31, March 31, 1996 1997 ------------ ------------ (Unaudited) Current Assets: Cash and cash equivalents ........................... $ 8,407 $ 7,687 Accounts receivable, net of allowance of $50 and $75 in 1996 and 1997, respectively ............ 1,542 1,840 Prepaid expenses and other .......................... 341 362 ------------ ------------ Total current assets ........................... 10,290 9,889 Equipment, net ......................................... 423 562 Purchased computer software, net ....................... 358 332 ------------ ------------ $ 11,071 $ 10,783 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable .................................... $ 314 $ 252 Accrued royalties payable ........................... 366 379 Other accrued expenses .............................. 755 647 Deferred revenue .................................... 1,325 1,446 ------------ ------------ Total current liabilities ......................... 2,760 2,724 ------------ ------------ Stockholders' Equity: Common stock, $.01 par value; 22,500,000 shares authorized; 7,369,888 and 7,430,122 shares issued in 1996 and 1997, respectively ......... 74 74 Additional paid-in capital ......................... 23,351 23,542 Accumulated deficit ................................ (15,034) (15,445) Foreign currency translation adjustment ............ (80) (112) ------------ ------------ Total stockholders' equity ................... 8,311 8,059 ------------ ------------ $ 11,071 $ 10,783 ============ ============
See accompanying notes to consolidated financial statements. 3 4 SPATIAL TECHNOLOGY INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (In thousands, except per share amounts)
Three Months Ended March 31, -------------------- 1996 1997 -------- -------- Revenue: License fees ....................................... $ 951 $ 614 Royalties .......................................... 718 767 Maintenance and other .............................. 716 709 -------- -------- Total revenue ................................. 2,385 2,090 -------- -------- Cost of sales: License fees ....................................... 83 68 Royalties .......................................... 65 56 Maintenance and other .............................. 158 69 -------- -------- Total cost of sales ........................... 306 193 -------- -------- Gross profit ........................................... 2,079 1,897 -------- -------- Operating expenses: Sales and marketing ................................ 735 923 Research and development ........................... 861 888 General and administrative ......................... 330 574 -------- -------- Total operating expenses ...................... 1,926 2,385 -------- -------- Earnings (loss) from operations ............... 153 (488) Other income (expense): Interest income .................................... 5 107 Interest expense ................................... (36) (1) Other, net ......................................... 1 (1) -------- -------- Total other income (expense) .................. (30) 105 -------- -------- Earnings (loss) before income taxes ........... 123 (383) Income tax expense ..................................... 64 28 -------- -------- Net earnings (loss) ........................... $ 59 $ (411) ======== ======== Earnings (loss) per common share ....................... $ 0.01 $ (0.05) ======== ======== Weighted average number of common shares and common equivalent shares outstanding ...................... 5,218 7,486 ======== ========
See accompanying notes to consolidated financial statements. 4 5 SPATIAL TECHNOLOGY INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (In thousands)
Three Months Ended March 31, -------------------- 1996 1997 -------- -------- Cash flows from operating activities: Net earnings (loss) ........................................... $ 59 $ (411) Adjustments to reconcile net earnings (loss) to net cash provided (used) by operating activities: Depreciation and amortization ............................... 59 70 Changes in operating assets and liabilities: Accounts receivable ....................................... (528) (298) Prepaid expenses and other ................................ 1 (21) Accounts payable .......................................... (56) (62) Accrued expenses .......................................... 145 (95) Deferred revenue .......................................... 450 121 -------- -------- Net cash provided (used) by operating activities ....... 130 (696) -------- -------- Cash flows from investing activities: Additions to equipment ........................................ (34) (183) -------- -------- Net cash used by investing activities .................. (34) (183) -------- -------- Cash flows from financing activities: Principal payments on notes payable ........................... (275) -- Proceeds from factored accounts receivable .................... 361 -- Proceeds from issuance of stock ............................... 1 191 -------- -------- Net cash provided by financing activities .............. 87 191 -------- -------- Foreign currency translation adjustment affecting cash .......... (7) (32) -------- -------- Net increase (decrease) in cash and cash equivalents ... 176 (720) Cash and cash equivalents at beginning of period ................ 153 8,407 -------- -------- Cash and cash equivalents at end of period ...................... $ 329 $ 7,687 ======== ======== Supplemental disclosures: Cash paid for interest ........................................ $ 21 $ -- ======== ======== Cash paid for income taxes .................................... $ 44 $ 29 ======== ========
See accompanying notes to consolidated financial statements. 5 6 SPATIAL TECHNOLOGY INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) March 31, 1997 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, 1996, are adequate to make the information presented not misleading. Certain prior year financial statement balances have been reclassified to conform to the 1997 presentations. B. EARNINGS (LOSS) PER SHARE Earnings (loss) per share is computed using the weighted average number of shares of common and common equivalent shares resulting from outstanding options and warrants. Fully diluted earnings per share are the same as primary earnings per share. 6 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, 1996, 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 March 31, 1997 decreased 12% to $2.1 million from $2.4 million reported for the quarter ended March 31, 1996. This decrease resulted from decreased license fee revenue, and maintenance and other revenue, which was partially offset by higher royalty revenue. License fees decreased 35% to $614,000 for the first quarter of 1997 from $951,000 reported in the first quarter of 1996. The decrease in license fees is attributed primarily to fewer new license contracts in the Asia Pacific and Western United States sales regions in 1997 as compared to 1996. Royalties increased 7%, growing to $767,000 for the first quarter of 1997 from $718,000 reported for the same quarter in 1996. Maintenance and other revenue decreased slightly to $709,000 for the quarter ended March 31, 1997 as compared to $716,000 reported for the quarter ended March 31, 1996. International revenue represented 53% of total revenue for the first quarter of 1997 as compared to 49% for the first quarter of 1996. Cost of Sales Cost of sales consists of royalty payments by the Company to third party developers, support costs, manufacturing costs (primarily media duplication, manuals, and shipping) and amortization of purchased computer software. Total cost of sales decreased 37% to $193,000 for the quarter ended March 31, 1997 from $306,000 reported in the comparable prior year period. The decrease reflects a $49,000 decrease in manufacturing costs resulting from the Company's transition to CD-ROM based media as its primary media format and to the use of on-line documentation, as well as a $37,000 decrease in royalty expenses. These decreases were partially offset by increased amortization of purchased computer software. As a percent of total revenue, cost of sales decreased to 9% for the three month period ended March 31, 1997 as compared to 13% for the comparable period in 1996. Operating Expenses Sales and marketing expense increased 26% to $923,000 for the fiscal quarter ended March 31, 1997 as compared to $735,000 reported in the fiscal quarter ended March 31, 1996. The increase is attributable to increased staffing and promotional activity related to the introduction of a new product, 3D Building Blox(TM), in the first quarter of 1997. As a percent of total revenue, sales and marketing expense increased to 44% for the quarter ended March 31, 1997 as compared to 31% for the comparable prior year period. Research and development expense increased slightly to $888,000 for the quarter ended March 31, 1997 from $861,000 reported in the same prior year quarter. As a percent of total revenue, research and development expense increased to 42% for the quarter ended March 31, 1997 from 36% for the comparable prior year quarter. 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 increased 74% to $574,000 for the quarter ended March 31, 1997 from $330,000 reported for the same quarter in 1996. The increase is attributable to increased spending on insurance, professional fees and other costs associated with the Company's reporting obligations as a public company. As a percent of total revenue, general and administrative expense increased to 27% for the first quarter of 1997 as compared to 14% for the first quarter of 1996. 7 8 Other Income (Expense), net Other income increased to $105,000 for the quarter ended March 31, 1997 as compared to an expense of $30,000 reported for the quarter ended March 31, 1996. Increased other income reflects higher interest income resulting from the investment of proceeds from the Company's initial public offering which was completed in October 1996. Income Tax Expense Income tax expense decreased to $28,000 for the fiscal quarter ended March 31, 1997 from $64,000 reported for the same quarter in 1996 reflecting lower license fee revenue in Japan. Income tax expense for these periods included only withholding taxes on foreign sales. FLUCTUATIONS IN QUARTERLY RESULTS The Company has experienced in the past and expects to continue to experience 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. LIQUIDITY AND CAPITAL RESOURCES As of March 31, 1997, the Company had $7.7 million in cash and cash equivalents. Cash and cash equivalents decreased $720,000 for the three months ended March 31, 1997, as compared to an increase in cash and cash equivalents of $176,000 for the comparable prior year period. Net cash used by operating activities was $696,000 for the three month period ended March 31, 1997 as compared to cash provided by operations of $130,000 for the three month period ended March 31, 1996. Net cash used for operations in 1997 was primarily the result of the quarter's net loss combined with an increase in accounts receivable. Cash provided by operations in the period ended March 31, 1996 was primarily due to an increase in deferred revenue and accrued expenses, which was partially offset by increased accounts receivable. Net cash used by investing activities totaling $183,000 and $34,000 for the three month periods ended March 31, 1997 and 1996, respectively, reflects cash used for capital equipment purchases. Net cash provided by financing activities was $191,000 for the three months ended March 31, 1997, reflecting primarily the issuance of stock in connection with the exercise of stock options. Net cash provided by financing activities in the three month period ended March 31, 1996 of $87,000 was primarily due to proceeds from factored accounts receivable, partially offset by cash used for principal payments on notes payable. The Company has a revolving line of credit with a bank providing for maximum borrowings of $500,000 through June 1997. The line of credit bears interest at the bank's prime rate plus 0.75%. As of March 31, 1997, the Company had no borrowings under this line of credit. The Company believes 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. 8 9 PART II. OTHER INFORMATION Item 1. Legal Proceedings: On April 30, 1997, the Company filed a Complaint for Damages and Injunctive Relief and Jury Demand in the District Court of Boulder County, Colorado against Rolf Fischer, Ronald E. Davidson and Hyper Tree Technologies, L.L.C. Both Mr. Fischer and Mr. Davidson were employees of the Company until their resignations effective on March 31, 1997. Additionally, Mr. Davidson served as an executive officer of the Company as Vice President, Pacific Rim Sales. In the Complaint, the Company alleges that Messrs. Fischer and Davidson have acted to deprive the Company of its rights to a technology known as "Lean Design". The Company is seeking relief against the defendants for breach of contract and employment duties, unfair competition, fraud, misappropriation of trade secrets and conspiracy, among other items, and has requested a jury trial to resolve the issues in dispute. Item 2. Changes in Securities: None Item 3. Defaults on Senior Securities: Not Applicable Item 4. Submission of Matters to Vote of Security Holders: None Item 5. Other Information: None Item 6. Exhibits and Reports on Form 8-K: a) Exhibits 27 - Financial Data Schedule b) Reports on Form 8-K None 9 10 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 May 13, 1997 /s/ Mark C. Vellequette ------------ ----------------------------- Mark C. Vellequette Vice President, Finance and Administration and Secretary (Principal Financial and Accounting Officer) 10 11 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 27 - Financial Data Schedule
EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 7,687 0 1,915 (75) 0 9,889 2,400 (1,838) 10,783 2,724 0 0 0 74 7,985 10,783 0 2,090 0 193 2,356 29 105 (383) 28 (411) 0 0 0 (411) (.05) (.05)
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