UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10QSB
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the period ended June 30, 2000
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: 09247
Autotrol Technology Corporation
(Exact name of registrant as specified in its charter)
Colorado 840515221
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
12500 North Washington Street, Denver, Colorado 802412400
(Address of principal executive offices)
(303) 4524919
(Registrant's telephone number, including area code)
Indicate by check mark 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. [X] Yes [ ] No
Number of shares outstanding as of July 28, 2000: 35,523,705.
Page Number
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Part I. Financial Information
Item 1. Financial Statements
Independent Accountants' Report
Consolidated Statements of Operations (unaudited),
three months ended June 30, 2000 and 1999
and nine months ended June 30, 2000 and 1999 1
Consolidated Statements of Comprehensive Loss (unaudited),
three months ended June 30, 2000 and 1999
and nine months ended June 30, 2000 and 1999 1
Consolidated Balance Sheets June 30, 2000 (unaudited),
and September 30, 1999 2
Consolidated Statements of Cash Flows (unaudited),
nine months ended June 30, 2000 and 1999 3
Notes to Consolidated Statements 4-5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6-9
Part II. Other Information, Item 6(b) Reports on Form 8k 10
Signatures 11
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors
Autotrol Technology Corporation
We have reviewed the accompanying consolidated balance sheet of Autotrol
Technology Corporation and subsidiaries as of June 30, 2000 and the related
consolidated statements of operations and comprehensive loss for the three and
nine month periods then ended and the consolidated statement of cash flows for
the nine month period then ended. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical review procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of September 30, 1999, and the
related consolidated statements of operations, comprehensive loss, shareholders'
equity and cash flows for the year then ended (not presented herein); we
expressed an unqualified opinion on those consolidated financial statements,
with an emphasis paragraph describing the majority shareholder's commitment to
provide financial support through December 31, 2000. In our opinion, the
information set forth in the accompanying consolidated balance as of September
30, 1999, is fairly stated in all material respects in relation to the
consolidated balance sheet from which it has been derived.
/s/ GELFOND HOCHSTADT PANGBURN, P.C.
- ------------------------------------
GELFOND HOCHSTADT PANGBURN, P.C.
Denver, Colorado
July 28, 2000
AUTOTROL TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share amounts)
(unaudited)
Three Months Ended Nine Months Ended
June 30, June 30,
------------------ ------------------
2000 1999 2000 1999
------------------ ------------------
Revenues:
Sales............................................... $ 1,140 $ 1,320 $ 2,820 $ 3,335
Service............................................. 1,488 1,207 3,798 5,876
------------------- --------------------
2,628 2,527 6,618 9,211
Costs and expenses:
Cost of sales....................................... 165 275 527 755
Cost of service..................................... 763 415 1,077 1,604
Research and product development.................... 832 1,322 3,695 4,669
Marketing, general and administrative............... 2,055 2,572 6,430 6,932
------------------- --------------------
3,815 4,584 11,729 13,960
Loss from operations................................ (1,187) (2,057) (5,111) (4,749)
Interest income..................................... 16 9 41 76
Interest expense (related party $103, $172, $384,
$555).............................................. (172) (180) (474) (618)
------------------- --------------------
Loss before income taxes................................ (1,343) (2,228) (5,544) (5,291)
------------------ --------------------
Income tax expense...................................... 2 2 9 3
------------------- --------------------
Net loss................................................ $(1,345) $ (2,230) $ (5,553) $ (5,294)
------------------- --------------------
Basic and diluted loss per share........................ (.04) (.13) (.18) (.32)
Weighted average number of basic and diluted
common shares outstanding.............................. 33,000 17,244 31,034 16,453
AUTOTROL TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands except per share amounts)
(unaudited)
Three Months Ended Nine Months Ended
June 30, June 30
------------------ -------------------
2000 1999 2000 1999
------------------ -------------------
Net Loss.......................................... $(1,345) $ (2,230) $ (5,553) $ (5,294)
Other Comprehensive Income/(Loss) net of tax:
Foreign Currency Translation Adjustments....... (390) (433) ( 499) 356
------------------- --------------------
Total Comprehensive Loss.......................... $(1,735) $(2,663) $ (6,052) $ (4,938)
=================== ====================
See Notes to Consolidated Financial Statements
1
AUTOTROL TECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands except per share amounts)
June 30, September
2000 30, 1999
(unaudited)
--------- ---------
ASSETS
Current Assets:
Cash and cash equivalents ........................................ $ 1,738 1,836
Receivables, net of allowance of $41 and $62 ..................... 1,849 2,264
Service Parts and prepaid expenses ............................... 364 260
--------- ---------
Total current assets ........................................ 3,951 4,360
--------- ---------
Property, facilities and equipment:
Land ............................................................. 356 356
Building and improvements ........................................ 8,395 8,404
Machinery and equipment .......................................... 5,496 5,261
Furniture, fixtures and leasehold improvements ................... 854 851
--------- ---------
15,101 14,872
Less accumulated depreciation and amortization ................... 9,809 (9,256)
--------- ---------
5,292 5,616
Purchased software, net of accumulated amortization of $1,071 and $981 363 239
Other assets ......................................................... 49 55
--------- ---------
Total assets ................................................ $ 9,655 $ 10,270
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of longterm debt ................................. $ 240 $ 240
Current portion of capital lease obligations ..................... 40 40
Accounts payable ................................................. 250 678
Accrued interest payable, related party portion $276 and $532 .... 316 548
Unearned service revenue and customer deposits ................... 1,427 1,056
Accrued compensation and related taxes ........................... 237 350
Other liabilities ................................................ 709 844
--------- ---------
Total current liabilities ................................... 3,219 3,756
Longterm debt, related party portion $5,050 and $4,050 ............... 6,010 5,010
Capital lease obligations ............................................ 28 54
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Total liabilities ........................................... 9,257 8,820
--------- ---------
Shareholders' equity:
Common stock, $.02 par value; authorized 40,000,000 shares; issued 711 585
35,523,705 and 29,273,172 shares ...............................
Additional paidin capital ........................................ 107,780 102,905
Accumulated other comprehensive loss ............................. (814) (315)
Accumulated deficit .............................................. (107,279) (101,725)
--------- ---------
Total shareholders' equity .................................. 398 1,450
--------- ---------
$ 9,655 $ 10,270
========= =========
See Notes to Consolidated Financial Statements
2
AUTOTROL TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended
June 30,
2000 1999
-------- -------
Cash flow from operating activities:
Net loss ............................................................ $(5,553) $(5,294)
Adjustments to reconcile net loss to net cash used by operating
activities:
Depreciation and amortization ....................................... 667 581
Provision for bad debt .............................................. 23
Loss (gain) on disposal of property, facilities and equipment ....... 5 0
Changes in operating assets and liabilities
Receivables .................................................... 273 (45)
Service parts and prepaid expenses ............................. (95) 81
Accounts payable ............................................... (464) (189)
Accrued interest payable ....................................... (232) 137
Unearned service revenue and customer deposits ................. 392 (192)
Other liabilities .............................................. (221) (651)
------- -------
Net cash used by operating activities ..................................... (5,205) (5,572)
Cash flows from investing activities:
Capital expenditures ................................................ (482) 9
Other assets ........................................................ (459) (87)
------- -------
Net cash used by investing activities ..................................... (941) (78)
Cash flows from financing activities:
Proceeds from issuance of notes payable ............................. 6,000 4,625
Payments on notes payable, capital leases and longterm debt ......... (26) 0
Proceeds from issuance of common stock .............................. 1 0
------- -------
Net cash provided by financing activities ................................. 5,975 4,625
Effect of exchange rate changes on cash ................................... 73 (13)
------- -------
Net increase (decrease) in cash and cash equivalents ...................... (98) (1,038)
Cash and cash equivalents at the beginning of the year .................... 1,836 1,325
------- ------
Cash and cash equivalents at the end of the period ........................ $ 1,738 $ 287
======= =======
Supplemental disclosure of cash flow information:
Cash paid for interest during the period ............................ $ 706 $ 456
======= =======
Supplemental schedule of noncash investing and financing activities:
Conversion of related party debt to common stock .................... $ 5,000 $ 4,000
======= =======
See Notes to Consolidated Financial Statements
3
AUTOTROL TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 2000 (unaudited)
(1) Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for the
interim financial information and with the instructions to Form 10QSB and the
rules and regulations of the Securities and Exchange Commission (SEC). Financial
information as of September 30, 1999 has been derived from the audited
consolidated financial statements of Autotrol Technology Corporation and
subsidiaries (the Company).
The accompanying unaudited condensed consolidated financial statements do not
include all information and notes required by generally accepted accounting
principles for complete financial statements. However, except as disclosed
herein, there has been no material change in the information disclosed in the
notes to the consolidated financial statements as of and for the year ended
September 30, 1999 included in Form 10KSB previously filed with the SEC. In the
opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included in the
accompanying condensed consolidated financial statements. Operating results for
the three and nine month periods ending June 30, 2000 are not necessarily
indicative of the results that may be expected for the year ending September 30,
2000.
(2) Loss Per Share
Basic loss per share is computed on the basis of weightedaverage common shares
outstanding. Diluted loss per share is the same as basic loss per share for the
three and nine month periods ending June 30, 2000 and 1999, as no dilutive
common stock equivalents were outstanding.
(3) Changes in Borrowings and Shareholder's Equity
An additional $6.0 million was borrowed from the related party for the nine
months ended June 30, 2000. $5.0 million of the debt to the related party was
converted to 6,225,641 shares of common stock during the nine months ended June
30, 2000. At the conversion dates, the per share conversion prices were greater
than or equal to the quoted market prices of the Company's stock. During the
quarter ended June 30, 2000, the Company also issued 171 shares of common stock
for approximately $1,000.
4
(4) Litigation
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material effect on the financial
statements of the Company.
On March 17, 1982, the Company entered into a License/Exchange Agreement ("the
Agreement") with J. Fox Inc., an independent third party which provided the
Company with a license to certain computer programs. Under the terms of the
Agreement, the Company was required to pay royalties based on a percentage of
revenues from sales and maintenance for the computer programs sold. Subsequent
to the execution of the Agreement, the computer programs became obsolete. In
February 1999, the Company filed a motion with the Denver District Court to
declare the agreement terminated. Upon filing this motion, a counter claim was
initiated against the Company for approximately $2,000,000. On May 19, 2000, the
Court dismissed the counter claim. It is unknown if the Court's decision will be
appealed by J. Fox Inc. It is the opinion of the Company's management that any
appeal will fail and will not have a material adverse effect in the Company's
consolidated financial statements.
5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Except for the historical information contained herein, the following
discussions contain forwardlooking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed here. The Company undertakes no obligation to revise any
forwardlooking statements in order to reflect events or circumstances that may
subsequently arise. Some additional factors, among others, are: the likelihood
that actual future revenues that are realized may differ from those inferred
from existing total backlog; the ability of the Company to attract and retain
highly trained professional employees; the delay or deferral of customer
implementations; the Company's success in expanding its direct sales force and
indirect distribution channels; the timing of new product introductions and
product enhancements by the Company and its competitors; the mix of products and
services sold; levels of international sales; the ability of the Company to
develop and market new products and control costs and general domestic and
international economic and political conditions.
Results of Operations
Overview
Net loss for the third quarter ended June 30, 2000 continued but decreased
$885,000 as compared to the third quarter ended June 30, 1999. The company
continues to believe that its Product Data Management (PDM), Electronic
Publishing Solutions (EPS) and when it is completed, network configuration
products, will present a unique complementary combination that will
differentiate the Company from its competitors.
Due to the nature of the software industry, the future operating results of the
Company depend largely on its ability to rapidly and continuously develop and
deliver new software products that are competitively priced and offer enhanced
performance. The Company believes that its products are competitive both
functionally and from a pricing perspective. However, the Company is unable to
predict the impact of new products or the effect that industry economic
conditions will have on future results of operations.
The three months ended June 30, 2000 compared to three months ended June 30,
1999
- ----------------------------------------------------------------------------
Revenues For the quarter ended June 30, 2000, total sales and service revenue
increased $101,000 or 4.0%, from the quarter ended June 30, 1999.
In Thousands
Three Months Ended Increase/
June 30, 2000 June 30, 1999 Decrease %
------------- ------------- ------- -------
Sales Revenue: $1,140 $1,320 $ (180) (13.6%)
Service Revenue: 1,488 1,207 281 23.3%
------ ------ ------- -------
$2,628 $2,527 $101 4.0%
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS(continued)
Gross Profit Sales and Service For the third quarter ended June 30, 2000, gross
profit margins on total revenue decreased to 64.7% from 72.7% for the third
quarter ended June, 1999.
In Thousands
Three Months Ended Increase/
June 30, 2000 June 30, 1999 (Decrease) %
------------- ------------- ----------- ------------
Sales
Gross Profit $ 975 $ 1,045 $ (70) (7%)
Service
Gross Profit 725 792 (67) (8%)
------------- ------------- ----------- ------------
$ 1,700 $ 1,837 $ (137) (7.5%)
Research and Product Development - Research and development expenses were
approximately 32% of revenue for the quarter ended June 30, 2000 and 52.3% of
revenue for the quarter ended June 30, 1999. Total research and development
expense decreased by 37% or $490,000 in the third quarter ended June 30, 2000
compared to the previous year's third quarter.
Marketing, General, and Administrative - In the third quarter ended June 30,
2000, marketing, general and administrative expenses decreased $517,000, or 20%,
from the third quarter ended June 30, 1999.
Interest - In the third quarter ended June 30, 2000, interest expense decreased
$8,000 from the quarter ended June 30, 1999 as a result of debt conversion.
Interest income increased $7,000 as compared to the third quarter of fiscal
1999.
The nine months ended June 30, 2000 compared to nine months ended June 30, 1999
- -------------------------------------------------------------------------------
Revenues - For the nine months ended June 30, 2000, total sales and service
revenue decreased $2,593,000 or 28.2%, from the nine months ended June 30, 1999.
In Thousands
Nine Months Ended Increase/
March 31, 2000 March 31, 1999 Decrease %
-------------- -------------- ----------- -----------
Sales Revenue: $ 2,820 $ 3,335 $ (515) (15.4%)
Service Revenue: 3,798 5,876 (2,078) (35.4%)
-------------- -------------- ----------- -----------
$ 6,618 $ 9,211 $(2,593) (28.2%)
Cost of Sales and Service - For the nine months ended June 30, 2000, gross
profit margins on total revenue increased to 75.8% from 74.4% for the nine
months ended June 30, 1999. Gross profit margins on sales revenue for the nine
months ending June 30, 2000, increased to 81.3% from 77.4% for the nine months
ended June 30, 1999.
Gross profit margins for total service revenue in the nine months of fiscal 2000
decreased to 71.6% from 72.8% in the nine months of fiscal 1999.
7
Research and Product Development - Research and development expenses were
approximately 55.8% of revenue for the nine months ended June 30, 2000 and 51%
of revenue for the nine months ended June 30, 1999. Total research and
development expense decreased by 21% or $974,000 in the first nine months ended
June 30, 2000 compared to the previous year's nine months.
Marketing, General, and Administrative - In the nine months ended June 30, 2000,
marketing, general and administrative expenses decreased $502,000, or 7.2%, from
the nine months ended June 30, 1999.
Interest - In the nine months ended June 30, 2000, interest expense decreased
$144,000 from the nine months ended June 30, 1999 as a result of debt to equity
conversion and loan reduction. Interest income decreased $35,000 as compared to
the nine months of fiscal 1999, due to reduced investments.
Liquidity and Capital Resources
Financial Condition - At June 30, 2000, the Company had approximately $1,738,000
in cash and cash equivalents, which was 5.33% lower than cash balances of
$1,836,000 at September 30, 1999. The Company's net working capital was $732,000
at June 30, 2000, as compared to a working capital of $604,000 at September 30,
1999. Other than the uncertainty of future profitability, there are no known
demands, commitments, events, or uncertainties that will result in the Company's
liquidity increasing or decreasing in any material way. At June 30, 2000, the
Company had outstanding related party debt of $5,050,000 from an affiliate of
Howard B. Hillman, the Company's President, Chairman of the Board and principle
shareholder. The Company will require additional funds from its majority
shareholder to continue to fund future operating losses. The shareholder has
committed, in writing, to continue providing financial support at least through
December 31, 2000. If the Company does not achieve profitability in the near
future, it will continue to be dependent on its majority shareholder for
additional funding and to continue as a going concern. The Company's long term
viability will be in jeopardy if it is not able to achieve financial
independence through improved results, or should support from its majority
shareholder not continue after December 31, 2000.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS(continued)
Currency Fluctuations
The Company has three wholly owned International subsidiaries and one branch
operation. The three subsidiaries are located in Germany, Canada and the United
Kingdom; the branch is located in Australia. The Company does business in the
local currencies of these countries, in addition to other countries where the
subsidiaries may have customers, such as Norway, Switzerland, Japan and Italy.
These local currency revenues and expenses are translated into dollars for U.S.
reporting and consolidation purposes.
The Company does not use foreign exchange contracts, interest rate swaps, or
option contracts. Foreign currency risk for the Company is limited to
outstanding debt owed to the Company by the subsidiaries. The Company invoices
its subsidiaries in their local currencies for products that are sold to the
subsidiaries' end customers. Upon receipt of payment from the subsidiaries, a
foreign currency gain or loss can occur. For the nine months ended June 30,
2000, the Company had realized a loss of approximately $35,500 through payments
it had received from its subsidiaries as compared to a $13,000 loss for the same
period in 1999.
9
PART II. OTHER INFORMATION
Item 6(b) Reports on Form 8k
No reports on Form 8k were filed during the quarter for which this report is
filed.
10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AUTOTROL TECHNOLOGY CORPORATION
(Registrant)
Date: August 2, 2000 /s/ HOWARD B. HILLMAN
---------------------
Howard B. Hillman,
Chairman of the Board, President
Principal Executive and Financial Officer and
Principal Accounting Officer)
11