United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number 0-27138
CATALYST INTERNATIONAL, INC.
--------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 39-1415889
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(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
8989 North Deerwood Drive, Milwaukee, WI 53223
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(Address of Principal Executive Offices) (Zip Code)
(414) 362-6800
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(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) 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 May 10, 1999, 6,974,902 shares of the issuer's common
stock were outstanding.
2
CATALYST INTERNATIONAL, INC.
FORM 10-Q
FOR THE PERIOD ENDED MARCH 31, 1999
INDEX
Page No.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - March 31, 1999 and
December 31, 1998.............................. 3
Statements of Operations - Three months ended
March 31, 1999 and 1998........................ 7
Statements of Cash Flows - Three months ended
March 31, 1999 and 1998........................ 9
Notes to Financial Statements.................... 11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.... 12
Item 3. Quantitative and Qualitative Disclosures about
Market Risk...................................... 22
PART II-OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................. 23
Signatures....................................... 24
3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CATALYST INTERNATIONAL, INC.
Balance Sheets
(in thousands)
ASSETS
March 31, Dec. 31,
1999 1998
(unaudited)
Current Assets:
Cash and cash equivalents $11,033 $ 8,555
Accounts receivable 8,589 9,739
Revenues in excess of billings 653 -
Prepaid expenses 746 503
------- -------
Total Current Assets 21,021 18,797
Equipment and Leasehold Improvements:
Computer hardware and software 5,861 5,421
Office equipment 2,291 2,330
Leasehold improvements 871 872
------- -------
9,023 8,623
Less accumulated depreciation 4,837 4,533
------- -------
Total Equipment and Leasehold
Improvements 4,186 4,090
Purchased software and capitalized
software development costs 1,218 1,025
Intangible assets, net of accumulated
amortization of $88 in 1999 and
$54 in 1998 525 559
4
Goodwill, net of accumulated
amortization of $84 in 1999 and
$44 in 1998 1,046 1,086
------- -------
Total Assets $27,996 $25,557
======= =======
See accompanying notes
5
CATALYST INTERNATIONAL, INC.
Balance Sheets
(in thousands, except per share data)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, Dec. 31,
1999 1998
(unaudited)
Current Liabilities:
Accounts payable $ 2,274 $ 1,744
Income taxes payable 48 100
Accrued liabilities 1,828 2,235
Deferred software license fees - 342
Deferred services and post-contract
customer support 5,627 4,457
Current portion of long-term debt 417 388
------- -------
Total Current Liabilities 10,194 9,266
Noncurrent Liabilities:
Long-term debt 431 412
Deferred services and post-contract
customer support 135 191
Deferred rent 280 285
------- -------
Total Non-Current Liabilities 846 888
------- -------
Total Liabilities 11,040 10,154
Stockholders' Equity:
Preferred Stock, $.01 par value;
2,000,000 shares authorized; none
issued or outstanding - -
Common stock, $.10 par value;
25,000,000 shares authorized;
shares issued: 8,794,000 in 1999
and 8,767,000 in 1998 879 877
Additional paid-in capital 32,840 32,743
6
Accumulated deficit (8,392) (9,846)
Treasury stock, at cost: 1,823,000 shares
of common stock in 1999 and 1998 (8,371) (8,371)
------- -------
Total Stockholders' Equity 16,956 15,403
------- -------
Total Liabilities and Stockholders' Equity $27,996 $25,557
======= =======
See accompanying notes
7
CATALYST INTERNATIONAL, INC.
Statements of Operations
(in thousands, except per share amounts)
(unaudited)
Three Months Ended
March 31,
------------------
1999 1998
---- ----
Revenues:
Software license fees $ 2,861 $ 2,107
Services and post-contract
customer support 6,585 5,123
Hardware and other 1,281 235
------- -------
Total Revenues 10,727 7,465
Operating Expenses:
Cost of software license fees 147 32
Cost of services and post-contract
customer support 3,873 3,724
Cost of hardware and other 1,176 208
Product development 1,584 698
Sales and marketing 1,562 1,424
General and administrative 1,013 1,118
------- -------
Total Operating Expenses 9,355 7,204
------- -------
Income from operations 1,372 261
Other income 81 31
------- -------
Net income $ 1,453 $ 292
======= =======
Net income per share $ 0.19 $ 0.04
8
Shares used in computing net income
per share 7,686 6,988
See accompanying notes
9
CATALYST INTERNATIONAL, INC.
Statements of Cash Flows
(in thousands)
(unaudited)
Three months ended
March 31,
------------------
1999 1998
---- ----
Operating Activities:
Net income $ 1,453 $ 292
Adjustments to reconcile net income to net
Cash provided by operating activities:
Depreciation and amortization 437 308
Compensation expense on stock options 7 6
Gain on disposal of fixed assets (11) -
Changes in operating assets and liabilities:
Accounts receivable 1,150 339
Prepaid expenses (243) (87)
Accounts payable 530 (448)
Accrued liabilities (459) 10
Deferred services and maintenance 1,114 691
Revenues in excess of billings (995) (542)
Deferred rent (5) (4)
------- -------
Total adjustments 1,525 273
------- -------
Net cash provided by operating activities 2,978 565
Investing Activities:
Purchase of equipment and leasehold improvements (307) (148)
Capitalization of software costs (193) -
------- -------
Net cash used in investing activities (500) (148)
Financing Activities:
Payments on long-term debt (93) (14)
Proceeds from exercise of stock options 93 5
------- -------
Net cash used in financing activities - (9)
------- -------
Net increase in cash 2,478 408
Cash and cash equivalents at the beginning of period 8,555 4,256
------- -------
10
Cash and cash equivalents at the end of the period $11,033 $ 4,664
======= =======
Noncash investing and financing activities:
During the first quarter of 1999, the Company acquired $141,000
of computer hardware under capital leases.
See accompanying notes
11
CATALYST INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
(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-Q 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. Certain amounts in the 1998 financial statements have
been reclassified to conform to 1999 presentation. Operating
results for the three month period ended March 31, 1999 are not
necessarily indicative of the results that may be expected for
the year ended December 31, 1999. For further information,
refer to the financial statements and footnotes thereto included
in the Catalyst International, Inc. Annual Report on Form 10-K
for the year ended December 31, 1998.
2. Net Income Per Share of Common Stock
The Company has presented net income per share in accordance
with Statement of Financial Accounting Standards (SFAS) No. 128,
"Earnings Per Share." The following table sets forth the
computation of basic and diluted earnings per share.
March 31,
1999 1998
---- ----
(in thousands)
DENOMINATOR
Denominator for basic earnings
per share - weighted average
common shares 6,964 6,660
12
Effect of diluted securities -
stock options and warrants 722 328
----- -----
Denominator for diluted earnings
per share 7,686 6,988
===== =====
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation
The following discussion contains forward-looking statements
that are subject to risks and uncertainties that could cause
actual results to differ materially from those anticipated by
such statements. These statements use words such as
"anticipate," "estimate," or "future," or may be identified as
"the Company expects" or "the Company believes" or otherwise
stated as the Company's predictions for the future. These
statements, as with any predictions of the future, involve
certain risk factors beyond the Company's control. The
Company's actual results may differ materially from the results
discussed in the forward-looking statements, and any such
differences could have a material negative impact on the
Company's share price. Factors that might cause such a
difference include, but are not limited to, a decrease in demand
for the Company's products, delays in the timely availability of
new features and releases of the Company's products, a too rapid
increase in the Company's level of spending, actions taken by
competitors, technological changes, those herein identified,
those discussed in the Company's Registration Statement on Form
SB-2 filed with the SEC, and other factors identified from time
to time as risks in the Company's reports filed with the SEC.
Total Revenues
The Company's revenues are derived from software license fees,
services and post-contract customer support ("PCS"), and
hardware sales and other. Total revenues for the first quarter
of 1999 were $10.7 million, which represented an increase of
43.7% over first quarter 1998 total revenues of $7.5 million.
The increase in total revenues for the three month period is due
13
primarily to an increase in the number of projects sold and a
greater base of installed customers who provided PCS revenues.
International revenues were $2.5 million in the first quarter of
1999, compared to international revenues of $832,000 in the
first quarter of 1998. International revenues represented 23.4%
of total revenues for the first quarter of 1999 compared to
11.1% in the same period of 1998. The increase in international
revenues was due to increased sales and services in the
international market.
The Company has been focusing on creating a global network of
Value Added Resellers (VARs) who would market, sell, implement,
and support the Company's products in their respective
countries. This strategy reduces cost and risk substantially,
while offering an opportunity to expand sales in those markets.
The Company now has such VAR relationships either in place or in
progress in Europe, the Middle East, South America, and Asia,
and has plans for further expansion elsewhere.
Software License Fees
Software license fee revenues consist of revenues from software
license agreements for the Company's products, related add-on
products, and third party software. The first quarter of 1999
software license fee revenues of $2.9 million represented an
increase of 35.8% over first quarter of 1998 software license
fee revenues of $2.1 million. This increase is attributable
to increased sales and installation activity compared to the
first quarter of 1998.
The Company follows the software revenue recognition practices
set forth in Statement of Position 97-2, "Software Revenue
Recognition," issued by the American Institute of Certified
Public Accountants. For projects requiring "significant"
modifications (modifications costing more than 5% of the
software license fees) to the software, the Company uses contract
accounting procedures based upon percentage of completion to
recognize revenue, provided that such amounts are reasonably
collectable. Revenue for projects with no modifications or
modifications costing less than 5% of the software license fees
are recognized upon delivery of the software, to the extent that
payment is fixed and determinable and payment is likely within
120 days. The Company believes that license fee revenues should
14
increase in the future due to increased worldwide sales and
marketing efforts, the introduction of new products, and efforts
to deliver standard packaged solutions that meet the requirements
of its five vertical markets.
Services and PCS
Services and PCS revenues are derived from software
modifications, professional services, and PCS agreements.
Services and PCS revenues increased 28.5% to $6.6 million in the
first quarter of 1999, up from $5.1 million in the first quarter
of 1998. The components of services and PCS revenues as a
percentage of total revenues in the first quarter of 1999 were
18.1% for software modifications, 28.1% for professional
services, and 15.2% for PCS agreements compared with 18.3%,
32.0%, and 18.3%, respectively in the first quarter of 1998.
Services and PCS revenues increased in the first quarter of 1999
due to the combined effect of an increased number of the
Company's product implementations, rollouts of additional sites,
upgrades to new releases of the Company's products, and renewals
of PCS agreements.
Software modifications are determined during the customer's
Conference Room Pilot (CRP) and consist of changes to the
software to facilitate specific functionality desired by a
customer. The Company believes that while a certain amount of
software modifications will continue, future modifications
revenues as a percentage of total revenues will decrease due to
the increased functionality of newer releases of the Company's
products. As is indicated by recent trends, the Company
believes that the percentage which software modifications
represent of total revenues will continue to decrease in the
future.
Professional services revenues are derived from training,
technical services, performance of the CRP, on-site support,
project management, and implementation services. While the
Company continues to improve its Catalyst Implementation
Methodology and Plan (CIMPL), the Company expects that
professional services revenues will continue to increase due to
expected implementations of new customer sites and multi-site
roll-outs for existing customers. The increase in professional
services revenue was due to increased sales of the Company's
15
products and an effort on the part of the Company to sell
upgrades, training, and other services to existing customers.
Revenue for professional services is recognized based on the
number of days of work actually performed.
Customers typically enter into a one-year agreement for PCS at
the time they first license the products and, once installed,
pay for the first year of PCS fees in advance. The increase in
PCS revenues was due primarily to growth in the installed
customer base for the Company's products and current customers
renewing their PCS agreements. Revenue on PCS is recognized
ratably over the term of the PCS agreement. The Company
believes that PCS revenues will increase in the future as more
of the Company's products are implemented, resulting in the
execution of corresponding PCS agreements and renewal of
existing PCS agreements.
Hardware and Other
Hardware and other revenues consist of products that the Company
sold to its customers on behalf of other manufacturers.
Hardware and other revenues consist of computer hardware, radio
frequency equipment, and printers. Hardware and other revenues
increased to $1.3 million in the first quarter of 1999 from
$235,000 during the same period of 1998. The increase in
hardware and other revenue is due to an increase in the resale
of hardware to meet a desire by certain customers for a turnkey
solution.
Cost of Software License Fees
Cost of software license fees consists of the cost of third-
party software products sold by the Company. In the first
quarter of 1999, cost of software license fees increased to
$147,000 from $32,000 in the same period of 1998 due to an
increase in revenues from the sale of third party software.
The Company expects to continue to expense the cost of
developing new releases of its primary product offering, the
Catalyst UNIX WMS, and therefore anticipates that the cost of
software license fees for that product and related third party
software will remain approximately the same in the future as a
percentage of total software license fee revenues. To comply
with recent trends in the treatment of accounting for
16
acquisitions, the Company capitalized the appraised value of the
NT-based product it acquired with its 1998 purchase of Kearney
Systems, Inc. The cost of further development of this product
was also capitalized, and the total will be amortized over a
period of seven years, commencing with the general release of
the product.
Cost of Services and PCS
Cost of services and PCS consists primarily of personnel costs
for the performance of software modifications, professional
services, and PCS.
The cost of services and PCS increased 4.0% to $3.9 million in
the first quarter of 1999 from $3.7 million for the first
quarter of 1998. The cost of services and PCS increased due to
the growth in revenues from these services. As a percentage of
services and PCS revenues, the cost of services and PCS
decreased from 72.7% of related revenues for the first quarter
of 1998 to 58.8% of services and PCS revenues for the current
quarter, reflecting improvement and efficiencies in the delivery
of these services.
Cost of Hardware and Other
Cost of hardware and other consists primarily of the cost of
products sold by the Company on behalf of other manufacturers.
The Company does not inventory, service, or discount hardware
items, but makes them available to customers who desire a
turnkey solution. Sales of third party hardware in the first
quarter of 1999 had a cost of $1.2 million compared to $208,000
for the first quarter of 1998. The increase in cost is
attributable to the increase in sales of third party hardware
and other.
Product Development
Product development costs include expenses associated with
research and development, including costs of engineering
personnel and related development expenses such as development
software tools, training, and documentation. Product
development expenses as a percentage of total revenues for the
17
first quarter of 1999 increased to 14.8% from 9.4% in the first
quarter of 1998. Actual product development expenses were $1.6
million in the first quarter of 1999, compared to $698,000 in
the first quarter of 1998. The increase in product development
costs was primarily due to the Company's current efforts to
enhance its product offerings as well as develop new features
and functions in its key verticals. The Company continues to
expense all software development costs on its Unix product as
incurred. On its NT-based product, the Company capitalized
$193,000 in additional development costs for the first quarter
of 1999, and also expects there may be additional capitalization
before the product is available for general release. The
Company believes that product development costs should decrease
slightly as a percentage of total revenues in the future.
Sales and Marketing
Sales and marketing expenses consist primarily of salaries and
commissions, marketing and promotional tools and expenses, and
travel expenses. Sales and marketing expenses as a percentage
of total revenues for the first quarter of 1999 decreased to
14.6% from 19.1% in the first quarter of 1998. Actual sales and
marketing expenses increased to $1.6 million in the first
quarter of 1999 from $1.4 million in the first quarter of 1998.
The decrease in sales and marketing expenses as a percentage of
total revenues in the first quarter of 1999 is due to the large
increase in revenues over the comparable quarter. The increase
in actual sales and marketing expense was primarily due to
increased marketing activities.
General and Administrative
General and administrative expenses consist primarily of the
salaries of administrative, executive, finance, and quality
assurance personnel. General and administrative expenses as a
percentage of total revenues for the first quarter of 1999
decreased to 9.4% from 15.0% in the first quarter of 1998.
Actual general and administrative expenses decreased to $1.0
million in the first quarter of 1999 from $1.1 million in the
first quarter of 1998. The decrease in general and
administrative expenses in the current quarter was partially the
result of the capitalization of NT-related development costs, a
18
portion of which was overhead expenses. Expenses for the first
quarter of 1998 included a $150,000 reserve for the
restructuring of the Company's international offices, which was
completed in 1998. The Company expects that general and
administrative expenses may increase in the future, but should
continue to decrease as a percentage of total revenues.
Other Income and Expense
Other income and expense consists primarily of interest income
and interest expense and does not have a material impact on
operating results. Interest income for the first quarter of
1999 was $109,000, offset by $28,000 of interest on equipment
leases and other expenses compared to $35,000 of interest income
offset by $4,000 of interest and other expense in the first
quarter of 1998. The increase in interest income was due to
higher cash levels in the first quarter of 1999. Interest
expense in the first quarter of 1999 has increased compared to
the first quarter of 1998 due to additional computer equipment
leases entered into in the second half of 1998 and the first
quarter of 1999. The Company expects other income and expense
to remain relatively constant in the future since invested cash
balances are increasing but interest rates earned have been
decreasing.
Income Tax Expense
No federal and state tax expense was recorded for the quarters
ended March 31, 1999 and 1998 due to the Company's federal and
state net operating loss position. No deferred tax expense was
recorded in the quarters ended March 31, 1999 and 1998 as the
Company continues to have a substantial net operating loss
carryforward. The Company recorded a valuation allowance to
reserve for the net deferred tax assets.
Liquidity and Capital Resources
Net cash provided by operating activities was $3.0 million for
the three months ended March 31, 1999, compared to $565,000
during the three months ended March 31, 1998. The increase
during this period is due primarily to the increase in net
income at March 31, 1999 and the decrease in days sales
outstanding in accounts receivable from 95 days at March 31,
1998 to 73 days at March 31, 1999.
19
Cash used for investing activities increased to $500,000 during
the three months ended March 31, 1999 from $148,000 during the
three months ended March 31, 1998 due to increased equipment and
leasehold improvement purchases and capitalized software costs.
Financing activities generated no cash in the first three months
of 1999 compared to $9,000 used in the first three months of
1998. Payments on long term debt were offset by proceeds from
the exercise of stock options.
As of March 31, 1999, the Company had $11.0 million in cash and
cash equivalents, which consisted primarily of money market
funds and commercial paper. In addition, the Company has a $1.0
million line of credit (the "Revolving Credit Facility") with
Bank One, Milwaukee, Wisconsin. As of March 31, 1999, there
were no amounts outstanding under the Revolving Credit Facility.
Longer term cash requirements, other than normal operating
expenses, are anticipated for the development of new software
products and enhancement of existing products, the financing of
anticipated growth, and possible acquisition of software
products or technologies complementary to the Company's
business. The Company believes that its existing cash, cash
equivalents, 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. The Company has never paid cash dividends on its common
stock. The Company's policy has been to retain cash from
operations to provide funds for the operation and expansion of
its business. Accordingly, the Company does not anticipate
paying cash dividends in the foreseeable future.
Impact of Year 2000
The Year 2000 issue is the result of computer programs using two
digits rather than four to define the applicable year. Any of
the Company's computer programs, either internal or sold to
customers, that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000.
This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a
temporary inability to process transactions, send invoices, or
engage in normal business activities.
20
The Company's primary software offering, the Catalyst WMS, is
written to store the year in the database using four digits to
allow data entry in an unambiguous manner and to process program
functions in four digits. The Company has certified that its
most recent product offerings are capable of processing date-
related data in four digits. The Company has extensively tested
these products and has not to date found any material errors
which could affect Year 2000 processing. However, due to the
fact that the Company's products are integrated with different
combinations of third party software and hardware products, any
Year 2000 problem occurring within these third party software
and hardware products may impact the operation of the Company's
products which, in turn, may lead to claims against the Company.
The potential for and outcome of such claims and impact on the
Company cannot be estimated at this time.
In mid-1997, the Company began a proactive program of offering
to its existing customers assistance in assessing whether the
customer's fully integrated system is Year 2000 compliant and
coordinating the remediation of non-compliant systems. The
Company has contacted all customers with pre-release 7.0 of the
Catalyst WMS and notified them that, because their systems
interface with third party software and hardware products, their
entire system should be reviewed for compliance. This effort is
ongoing and certain customers have retained the Company to
perform an assessment of and/or a coordination of the
remediation work for their entire system.
With respect to the Company's internal computer systems and
equipment, the Company continues to conduct a comprehensive
review to ensure that all such systems are, or prior to the end
of 1999 will be, Year 2000 compliant. The Company's Year 2000
readiness plan includes the following phases: (i) conducting an
inventory of the Company's internal systems, including
information technology systems and non-information technology
systems (which include office and facilities' environment-
related systems) and the systems acquired or to be acquired by
the Company from third parties; (ii) assessing and prioritizing
any required remediation; (iii) remediating any problems by
repairing or, if appropriate, replacing the non-compliant
systems; (iv) testing of all remediated systems; and (v)
developing a contingency plan. The Company has completed its
inventory and assessment phases of this plan and is actively
21
engaged in completing the remaining phases. The Company expects
to complete all phases of its readiness plan before the end of
1999.
In addition to assessing its internal systems, the Company has
initiated communications with its material service providers,
suppliers, and critical business partners to assess their Year
2000 readiness. The Company plans to continue assessing its
service providers, suppliers, and business partners to ensure
Year 2000 readiness. Despite the Company's diligence, there can
be no guarantee that the non-compliant systems of other entities
which the Company relies upon in its day to day operations will
not have a material adverse impact on the Company. The actual
impact on the Company resulting therefrom cannot be determined
at this time.
During the first quarter of 1999, the Company retained an
external auditor to review the procedures used by the Company in
assessing its Year 2000 readiness. Upon completion of this
review, the Company intends to address any potential exposures
identified and commence developing its Year 2000 contingency
plan. The Company believes that this is an appropriate time
frame for developing the contingency plan and that efforts prior
to that time should be focused on the remediation and testing
phases of the Company's Year 2000 readiness plan.
To date, the Company has expended approximately $250,000 in
conjunction with its Year 2000 readiness plan. The Company
expects that the cost of completing this Year 2000 readiness
plan, including replacement of all necessary computer systems,
will not exceed an additional $100,000.
The Company has limited the scope of its risk assessment to
those factors upon which it can reasonably be expected to have
an influence. The Company has made the assumption that
government agencies, utility companies, and national
telecommunication providers will continue to operate. The lack
of such services could have a material impact on the Company's
ability to operate; however, the Company has little, if any,
ability to influence such an outcome, or to make alternative
arrangements in advance for such services if they are
unavailable. Additionally, the Company believes that
disruptions in the economy generally resulting from Year 2000
22
issues could have a material adverse impact on the Company. The
amount of potential liability or loss of revenue to the Company
cannot be reasonably estimated at this time.
The information contained herein, as well as all information
previously filed by the Company regarding its Year 2000
readiness, are designated as Year 2000 readiness disclosures as
defined by the Year 2000 Information and Readiness Disclosure
Act.
Economic and Monetary Union in Europe (EMU)
EMU refers to the movement toward economic and monetary union in
Europe with the ultimate goal of introducing a single currency
called the euro. While the European monetary union will have
profound financial and political implications, the Company
believes that the formation of EMU will not impact the Company's
earnings in any material way.
Item 3. Quantitative and Qualitative Disclosures about Market
Risk
The Company does not believe it has material exposure to market
risk with respect to any of its investments as the Company does
not use market rate sensitive instruments for trading or other
purposes. For purposes of the Consolidated Statements of Cash
Flows, the Company considers all highly liquid investments with
a maturity of three months or less when purchased to be cash
equivalents. Cash equivalents consist principally of
investments in corporate debt securities and repurchase
agreements. The cost of these securities, which are considered
as "available for sale" for financial reporting purposes,
approximates fair value at both March 31, 1999 and 1998. There
were no realized gains or losses in the periods ended March 31,
1999 or 1998.
23
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Number Description
3.1 Amended and Restated Certificate of Incorporation (1)
3.2 Amended and Restated By-Laws (1)
10.1 1993 Stock Option Plan, as amended, of Catalyst USA,
Inc.* (1)
10.2 1997 Director Stock Option Plan of Catalyst
International, Inc.* (2)
27 Financial Data Schedule
- ----------
* Represents a compensation plan.
(1) Incorporated by reference to Registration Statement 33-
97522C on Form SB-2.
(2) Incorporated by reference to Exhibit 4.1 of Registration
Statement 33-97522C on Form S-8 dated September 26, 1997.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the first quarter of
1999.
24
SIGNATURES
Pursuant the requirements of the Securities Exchange Act of
1934, the registrant had duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CATALYST INTERNATIONAL, INC.
Dated: May 13, 1999 By: /s/ Sean P. McGowan
--------------------------
Sean P. McGowan
President and Chief Executive
Officer
Signing on behalf of the
registrant and as principal
executive officer.
Dated: May 13, 1999 By: /s/ Thomas G. Hickinbotham
--------------------------
Thomas G. Hickinbotham
Vice President and Chief
Financial Officer
Signing on behalf of the
registrant and as principal
financial officer.
Dated: May 13, 1999 By: /s/ Linda D. Sullivan
--------------------------
Linda D. Sullivan
Controller
(Principal Accounting Officer)