Document/Exhibit Description Pages Size
1: 10-K Annual Report for the Year Ended 1/31/96 51 216K
2: EX-10.07 Employment Agreement, 7/20/95 W/ Edwin R.Addison 8± 43K
3: EX-10.09 Conquest Incentive Stock Option Plan, 8/19/93 5± 27K
4: EX-10.10 Office Lease/Little Patuxent Pkwy, Columbia, Md 31 175K
5: EX-10.11 Office Lease (1959 Palomar Oaks Way, Carlsbad, Ca) 30± 114K
6: EX-10.12 Office Lease (1921 Gallows Rd, Vienna, Va) 9 52K
7: EX-22.01 Subsidiaries of Excalibur Technologies Corporation 1 6K
8: EX-23.01 Consent of Arthur Andersen LLP 1 6K
9: EX-23.02 Consent of Price Waterhouse LLP 1 7K
10: EX-27 Article 5 FDS Filed With Form 10-K 1 8K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JANUARY 31, 1996
COMMISSION FILE NUMBER 0-9747
EXCALIBUR TECHNOLOGIES CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 85-0278207
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1921 GALLOWS ROAD, SUITE 200, VIENNA, VIRGINIA 22182
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (703) 790-2110
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK
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 the filing
requirements for the past 90 days. Yes x No __
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. x
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of April 19, 1996 (based on the closing sales price as reported on
the NASDAQ National Market System) was $ 228,840,167.
The number of shares outstanding of the registrant's class of common stock as of
April 19, 1996 was 12,333,417.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for the 1996 Annual Meeting of
Shareholders are incorporated by reference into Part III.
The Index to Exhibits begins on Page 20
EXCALIBUR TECHNOLOGIES CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED JANUARY 31, 1996
TABLE OF CONTENTS
Page
PART I
Item 1. Business........................................... 1
Item 2. Properties......................................... 9
Item 3. Legal Proceedings.................................. 9
Item 4. Submission of Matters to a Vote of Security Holders
7
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters................................ 11
Item 6. Selected Financial Data............................ 12
Item 7. Management's Discussion and Analysis of Financial..
Condition and Results of Operations ............... 14
Item 8. Financial Statements and Supplementary Data........ 21
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................ 21
PART III
Item 10. Directors and Executive Officers of the Registrant. 22
Item 11. Executive Compensation ............................ 24
Item 12. Security Ownership of Certain Beneficial Owners and
Management......................................... 24
Item 13. Certain Relationships and Related Transactions..... 24
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K........................................ 25
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PART I
ITEM 1. BUSINESS.
OVERVIEW
Excalibur Technologies Corporation ("Excalibur") is a leader in the development
and sale of software solutions for information retrieval. Excalibur's software
products combine two complementary technologies: Adaptive Pattern Recognition
Processing (APRP(TM)) and semantic networks. The APRP(TM) technology identifies
and indexes the underlying binary patterns in digital data, providing the
capability to build content-based retrieval applications for any type of digital
information, including text, images, video and sounds. Semantic networks
leverage lexical knowledge, offering a system with built-in knowledgebases to
search for specific word meanings enriched by related terms and concepts.
Integration of these two approaches provides complete and powerful information
retrieval capabilities with accuracy and speed. Excalibur's core technologies
enable highly fault-tolerant fuzzy searching and natural language-based
searching for text, as well as powerful query-by-example capabilities which can
be applied to words, pictures, video clips, fingerprints, facial images and many
other types of multi-media data.
Using these technologies, Excalibur has developed a comprehensive suite of
information retrieval software products, including libraries, services and
applications, called RetrievalWare. RetrievalWare is a unified family of
applications and software components for building retrieval solutions across
multiple information types. Its flexible and modular architecture supports the
full range of Excalibur development tools for value added resellers ("VARs"),
original equipment manufacturers ("OEMs"), systems integrators ("SIs") and
corporate and government information technology departments. Excalibur's
RetrievalWare is a complete software component architecture, enabling developers
to build information retrieval applications for workgroup, enterprises and
across the internet. RetrievalWare platforms include all major UNIX and
Windows/NT servers, with PC and UNIX clients.
In July 1995, Excalibur acquired ConQuest Software, Inc. ("ConQuest"), a private
company located in Columbia, Maryland, engaged in the business of providing
natural language text management software tools, through the issuance of
approximately 1,427,000 restricted shares of Excalibur common stock and options
to purchase approximately 572,000 restricted shares of Excalibur common stock to
the former ConQuest shareholders and option holders in exchange for all of the
outstanding common stock of ConQuest. The transaction has been accounted for as
a pooling of interests. The consolidated results of operations and the
discussion thereof that are presented herein reflect the combined results of the
pooled business for the respective periods presented.
The Company established a wholly-owned subsidiary in the United Kingdom,
Excalibur Technologies International, Ltd. ("ETIL"), which began operations in
July 1992. Except as otherwise noted, Excalibur, ConQuest (the acquired company)
and ETIL are collectively referred to hereinafter as the "Company."
The Company markets and distributes its products through VARs, SIs, OEMs, direct
sales, distribution agreements, and a marketing agreement with IBM. As of
January 31, 1996, more than 600 customers were using the Company's information
retrieval products.
The Company can be contacted on the World Wide Web at http://www.excalib.com
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SOFTWARE RETRIEVAL PRODUCTS
The Excalibur RetrievalWare suite of information retrieval software products
delivers integrated APRP(TM) and semantic network searching in a unified family
of client/server based software components. RetrievalWare enables developers and
integrators to build best-of-breed retrieval solutions across multiple
information types. The RetrievalWare architecture is designed to support the
entire range of the Company's products and capabilities: real-time and
retrospective text searching; fingerprint, facial image and a developing family
of other image and signal retrieval servers; and end-user systems for
applications such as document management and intelligence analysis.
RetrievalWare is licensed as a software developer's kit, a suite of text and
other retrieval servers, a set of optional and third-party components and
end-user applications. A description of each of the Company's products is set
forth below.
RETRIEVALWARE SDK
The RetrievalWare Software Developer's Kit (SDK) is a comprehensive set of tools
for building information retrieval solutions. At its core is a highly scaleable,
distributed client/server architecture. Independent server processes maximize
the efficiency and reliability of document loading, indexing and query handling,
and support security and encryption/decryption features. Dedicated server
processes enable integration of text search and relational database (DBMS)
storage capabilities through an open DBMS gateway. The RetrievalWare client
environment is optimized for the development of graphical interfaces using
industry standard tools. RetrievalWare delivers Windows Visual Basic and Motif
interfaces as source code, as well as Visual Basic Custom Controls and RDBMS
interface DLLs. The RetrievalWare API set includes engine-level, high-level and
client/server APIs.
RETRIEVALWARE TEXT SERVERS
RetrievalWare text servers are built upon an open and extensible pipeline of
processing modules. The RetrievalWare Semantic and Pattern Server includes both
semantic network and APRP(TM) search engines and offers a complete range of text
retrieval options: word meaning-based and pattern recognition-based searching,
natural language searching and fuzzy searching, statistical searching and full
Boolean logic searching. The RetrievalWare Server combines APRP(TM), statistical
and Boolean techniques and is optimized for applications requiring a high level
of fault-tolerance, such as document management applications based upon the
scanning and optical character recognition of large volumes of hard copy
documents.
RETRIEVALWARE WEB SERVER
The RetrievalWare Web Server is a component solution that interfaces with any
HTTP server through a template-based common gateway interface and supports very
large scale distributed electronic publishing and enterprise applications on the
internet and the world wide web. The RetrievalWare Web Server deploys a
dedicated front-end server, providing handling of large volumes of user queries
and extensible functionality through integration with relational databases. The
RetrievalWare Web Server includes an integrated security server and its
functionality is easily extended with the full range of RetrievalWare
components, including the RetrievalWare Profiling Server for real-time
information filtering.
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RETRIEVALWARE PROFILING SERVER
The RetrievalWare Profiling Server is a high performance system for filtering
newswires, electronic mail messages, file transfers and other dynamic
information streams in real-time. Its architecture is optimized for real-time
performance while preserving complete symmetry with RetrievalWare Text Servers.
The design facilitates the development of applications which fully integrate
retrospective searching and real-time content profiling.
RETRIEVALWARE IMAGE SERVERS
RetrievalWare Image Servers utilize APRP(TM) technology to provide tools for
developing applications that can index and retrieve digital images based on
their objective content. Image Servers provide components that automatically
recognize certain types of visual information and offer extensive image
management capabilities. RetrievalWare Image Servers include system components
for building client/server applications that provide parallel network retrieval
operations using the Company's inter-process communication layer. Additionally,
RetrievalWare Image Servers include support for TCL/TK, a popular development
environment and script interpreter that allows experienced programmers to
optimize their image indexing and retrieval applications for a variety of
specific image data types. The Company has developed RetrievalWare image
application demonstrations for fingerprint, faces and character recognition and
is continuing development on components for full-motion video, photographs,
graphics and other digital media.
The RetrievalWare suite of software components and related services accounted
for approximately 30%, 19%, and 20% of total revenues in the fiscal years ended
January 31, 1996, 1995, and 1994, respectively.
ELECTRONIC FILING SOFTWARE (EFS)
The Company's Electronic Filing Software ("EFS") is a multi-platform,
commercial, end-user software application for document imaging and information
retrieval. It is the latest version of the product which was originally
introduced in 1991. Text and images can be entered into the system from computer
files, scanners or facsimile machines (after the scanned image is converted to
text by optical character recognition software) and is automatically filed and
indexed in a replica of a physical file room with file cabinets, drawers,
folders, in-baskets and wastebaskets, utilizing a graphical user interface. EFS
provides users with four methods for document retrieval: retrieval based on the
document contents using APRP(TM); retrieval via relational database query for
document control information such as author and date; content-based queries on
file room labels; and file room retrieval using icons representing cabinets,
drawers and folders that users can open using a computer mouse. Excalibur EFS
operates under the following UNIX operating systems in a client/server
environment: Sun OS and Solaris, HP HP-UX, IBM RISC System/6000 AIX and Digital
Ultrix and OSF/1; and under the Digital VMS and Open VMS operating systems.
Client-only implementations are available on personal computers running
Microsoft Windows and Apple Macintoshes. EFS also provides links to external
databases including Oracle, Informix, Digital Rdb and Ingres. The most recent
release of Excalibur EFS includes a Client API which gives users the ability to
integrate EFS with other software applications and products. EFS is priced based
upon the number of concurrent users on a system.
Earlier versions of Excalibur EFS software programs include Pix Tex/EFS, Pix
Tex/EFS ServerPlus, and PixTex, all of which are no longer being marketed by the
Company, but are still supported under post-contract support agreements.
- 4 -
EFS WEBFILE
The Company's EFS Webfile product is a turnkey document image management
solution for the world wide web. EFS Webfile integrates accurate and robust
search and retrieval, advanced Web server technology and an intuitive interface
to provide organizations with unified, global access to mission critical
document information. In conjunction with the Company's EFS product, EFS Webfile
turns any standard HTML browser into a fully functional EFS client, accessing
the intuitive, file-room graphical interface and advanced server capabilities.
EFS Webfile includes HTML filters to fully leverage the power of HTML encoding.
Users can index HTML files and view those files in native form, including all
images and links to other URLs. The Webfile Server runs on IBM AIX, HP-UX, SunOS
and Solaris, DEC Digital UNIX and VMS platforms.
The Excalibur EFS family of products and related services accounted for
approximately 70%, 81%, and 80% of total revenues in the fiscal years ended
January 31, 1996, 1995, and 1994, respectively.
MARKETING AND DISTRIBUTION
The Company's marketing and distribution strategy has several components. The
primary strategy is to sell through established relationships with VARs, SIs,
OEMs, and distributors that sell licenses to customers to use the Company's
software libraries, servers, toolkits and application products.
The Company's marketing and distribution strategy also includes a direct sales
force and agreements with selected VARs and vertical market suppliers who sell
and distribute the Company's application products. During the past year, the
Company has established relationships with selected VARs and SIs to develop new
geographic and industry markets.
The Company entered into an amendment to its General Services Administration
Federal supply contract (the "GSA Contract") with the Federal government
effective October 1, 1995 through September 30, 1996. The GSA Contract provides
a contractual vehicle for government agencies to place orders for EFS with the
Company. It includes information about the Company and its products, and
establishes pricing, terms and conditions of sales. The Company expects to
negotiate a renewal of the amended GSA Contract upon its expiration.
TECHNICAL SUPPORT AND TRAINING
The Company believes that it has established a reputation for excellent customer
technical support by making it one of the Company's top priorities. Technical
support is provided to the Company's customers by its technical support
organization as well as by certain product distributors. Technical support
consists of bug fixing, telephone support and product enhancements. After an
initial 90-day period, during which technical support is provided without
additional charge, technical support is provided typically to customers under a
renewable annual contract.
The Company also provides installation and consulting services to its customers
on-site or through independent Certified Excalibur Consultants who have been
trained and certified by the Company. The Company also conducts training
seminars at its offices in Carlsbad, California, McLean, Virginia, and Columbia,
Maryland for its customers and distribution channel partners.
- 5 -
STRATEGIC ALLIANCES
In January 1995, the Company entered into a development and distribution
agreement with IBM to integrate the RetrievalWare Image Server with certain
versions of IBM's DATABASE 2 (DB2)(TM) database product. The Company will
receive percentage royalties on revenues earned by IBM from licenses of DB2(TM)
that contain the Company's RetrievalWare Image Server, as described in the
agreement. In April 1996, the Company and IBM announced their intent to expand
their existing development relationship to include the integration of
Excalibur's EFS product with IBM's ImagePlus VisualInfo(TM). The combined
products will provide enterprise-wide image and document management, work
management and full-text retrieval on UNIX, OS/2, Windows NT and MVS/ESA.
In July and August 1993, the Company entered into Cooperative Marketing
Agreements with IBM, in the United States and Canada, under which IBM markets
Excalibur's EFS product to IBM's customers. IBM receives a marketing fee equal
to a percentage of the sales IBM generates of EFS. IBM made a guaranteed sales
commitment to the Company for fiscal years 1995 and 1994. In April 1996, the
Company and IBM announced their intent to expand the agreements to include
Excalibur's RetrievalWare products. Under the agreement, IBM will resell and
provide services for Excalibur's RetrievalWare full-text search solutions and
Excalibur's EFS product. IBM will offer these retrieval products in tandem with
its ImagePlus(TM) and FlowMark(TM) product lines to customers and channel
partners in the United States and Canada.
Revenues of approximately $1,538,000, or 12% of total revenues, were
attributable to IBM under the various agreements in the fiscal year ended
January 31, 1995. Such revenues were less than 10% of total revenues in the
fiscal years ended January 31, 1996 and 1994.
The Company signed an agreement with PRC, Inc. ("PRC"), a systems integrator, in
February 1993. Under the agreement, the Company provides its software to PRC as
part of a Federal procurement program. Under this contract, PRC paid to the
Company a minimum $2,000,000 in license and maintenance fees over a period of
two and one-half years. The Company expanded its relationship with PRC in April
1996 forming a strategic alliance to deliver advanced electronic document
management to major manufacturing, utility and government markets. Under an OEM
agreement, PRC will integrate the text search and retrieval functionality of
Excalibur's RetrievalWare technology with its Productivity Edge(TM) electronic
document management solution.
The Company has earned research, development and royalty fees under a series of
contracts with Nikkei Information Systems Co., Ltd. ("NIS"), a Japanese company,
since 1985. Under the current agreement, which was effective June 1, 1993
through January 31, 1996, NIS paid a minimum monthly royalty fee of $34,583
against the royalties on the revenue generated. Through the life of the
contract, the monthly royalties earned by the Company rarely exceeded the
minimum monthly royalty. In February 1996, the Company and NIS agreed to
discontinue the minimum monthly royalty fee and Excalibur will receive
percentage royalties on revenues as NIS license sales are generated. The
agreement also allows for distribution of third party products containing the
Company's software technologies into Japan under a royalty sharing accord with
NIS.
- 6 -
In January 1996, the Company and BTG Incorporated ("BTG") entered into an
agreement designating BTG as the master Federal distributor for the Company's
EFS product. BTG, a major reseller of information technology products and
services to the Federal government, has been the Company's largest VAR in the
Federal market since 1992. The agreement provides exclusive distribution rights
to BTG in the Federal government market for Excalibur's EFS products for a
period of two years. The Company will receive royalties on license sales
including a minimum non-cancelable license royalty fee of $1,800,000 in the
first year of the agreement.
In May 1994, the Company entered into a Software Distribution Agreement with
Professional Computer Systems B.V. ("PCS") that was subsequently amended in
January 1995 to extend the contract expiration date to January 31, 1996. The
agreement granted PCS exclusive rights to license and distribute the Company's
EFS product throughout Belgium, the Netherlands and Luxembourg for a fee of
$1,100,000 that was paid over the term of the agreement, as amended. In January
1996, the Company amended the agreement again to extend the exclusive rights to
license and distribute the Company's EFS product to Belgium, the Netherlands,
Luxembourg and Italy and extended the contract expiration date to January 31,
1997 for a fee of $1,100,000 payable over the twelve months of the contract
extension period. Contemporaneously therewith, the Company executed a letter of
intent to create a joint venture with PCS to market, sell and distribute
Excalibur's EFS product and other products in the countries of Belgium, the
Netherlands, Luxembourg, Germany, Austria, Switzerland, Scandinavia and Italy as
well as to develop, market and distribute new products. This transaction is
subject to further discussions, conditions and approvals, including approval of
the definitive agreements by the boards of directors of each company.
In December 1994, the Company entered into a software development and license
agreement with Informix Software, Inc. ("Informix") to provide text and image
retrieval technology to users of certain Informix products. The agreement calls
for the integration of the Excalibur image and signal server across multiple
platforms supporting certain Informix products. The Company will receive a
percentage of the list price for such products licensed.
PRODUCT DEVELOPMENT AND ADVANCED RESEARCH
The Company's primary technologies are its proprietary adaptive pattern
recognition processing software (APRP(TM)) and semantic networks processing.
APRP(TM) consists of a software architecture for processing digital information
to extract patterns in the primary types of computerized data: text, image,
signal and video. The system provides high-speed pattern recognition that can be
used to store, categorize, retrieve and refine data. The processing of digital
patterns provides users with a way to store and use computerized data faster
with more flexibility and with fewer data storage requirements than competing
systems.
The Company's pattern recognition methods use neural computing techniques to
process data in a non-algorithmic, parallel fashion by generating responses to
input data. Systems utilizing these methods are unlike traditional computer
systems and are now being used in areas where traditional systems have been
inefficient, such as natural language, machine vision, robotics, pattern
matching and signal recognition. Neural computing systems are "trained" by
processing data, not by programming. Once the system has extracted patterns from
the digital data, these patterns can be sorted, labeled and used to make
decisions. The Company has in place a research and development program to
- 7 -
explore and apply its proprietary pattern recognition technology in new areas
such a image recognition, character recognition, forms recognition, fingerprint
matching, facial identification and machine vision. The Company also has a
product development program to enhance the features of its existing software
products to address additional markets. Excalibur's semantic networks leverage
lexical knowledge at the highest level, offering a system to search for specific
word meanings enriched by related terms and concepts. With semantic networks,
users find information using natural language processing. Semantic networks
incorporate syntax, morphology and the actual meaning of words as defined by
published dictionaries and other reference sources.
The Company has conducted research and product development of pattern
recognition and natural language systems since 1980. Research and product
development expenditures for development of new products and enhancements to
existing products were approximately $4,972,000, $5,085,000 and $5,483,000 in
the fiscal years ended January 31, 1996, 1995 and 1994, respectively.
PROTECTION OF PROPRIETARY TECHNOLOGY
The Company regards its software as proprietary and relies primarily on a
combination of copyright, trademark and trade secret laws of general
applicability, employee confidentiality and invention assignment agreements,
distribution and OEM software protection agreements and other intellectual
property protection methods to safeguard its technology and software products.
The Company has not obtained patents on any of its technology. The Company also
relies upon its efforts to design and produce new products, and upon
improvements to existing products, to maintain a competitive position in the
marketplace.
COMPETITION
Competition in the computer and communications industry in general, and the
software development industry in particular, is intense. The Company's
competitors include many companies which are larger and more established and
have substantially more resources than the Company. In the United States, the
Company competes in two basic markets within the computer industry: the document
imaging and information retrieval markets. Both markets have many competitors
who are larger and more established than the Company and have access to greater
resources. The Company considers its principal competitive advantage to be the
performance of its products. The Company differentiates its products by using
new technology to provide benefits such as labor savings from reduced manual
pre-processing or organization of data, faster retrieval, access to many kinds
of data, full integration with network architecture, less start-up training and
more forgiving interaction in retrieving information stored in computers. The
information retrieval market is competitive, with numerous companies offering
products on multiple platforms. Most often, the Company competes with companies
such as Fulcrum Technologies Inc. and Verity, Inc. in this market. In the
document imaging market, the Company competes with large hardware companies and
established software vendors.
The Company's activities currently are subject to no particular regulation by
governmental agencies other than those routinely imposed on corporate
businesses, and no such regulation is now anticipated.
- 8 -
EMPLOYEES
The Company had 125 employees as of January 31, 1996, of whom 47 were in
research and development, 51 in sales and marketing, 14 in technical support,
and 13 in finance and administration. The employees are not covered by
collective bargaining agreements and the management of the Company considers
relations with employees to be good.
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ITEM 2. PROPERTIES.
At January 31, 1996, the Company occupied approximately 6,000 square feet of
space in an office building located at 2000 Corporate Ridge, McLean, Virginia
22102 under a lease agreement relating to 4,000 square feet that expires in May
1997 and a month-to-month arrangement for 2,000 square feet. This facility
recently has served as the Company's corporate headquarters and contains the
executive office and certain administrative and sales functions. The Company has
signed an agreement, that expires in October 1999, to sublease approximately
14,200 square feet of space in an office building located at 1921 Gallows Road,
Vienna, Virginia 22182. The Company intends to move its corporate headquarters
to this location in May 1996.
The Company leases two facilities that serve primarily as software development
and customer support centers. The Company occupies approximately 31,000 square
feet of space in an office building, under a six-year lease that commenced in
November 1995 and expires in November 2001, located at 1959 Palomar Oaks Way,
Carlsbad, California 92009. The Company also occupies approximately 6,700 square
feet of space in an office building located at 10440 Little Patuxent Parkway,
Columbia, Maryland 21044 under a renewed five-year lease that commenced January
1996 and expires in December 2000.
The Company leases office space in Windsor, England and Vitrolles, France in
support of its international sales operation. Under these leases, the Company
occupies approximately 3,400 square feet and 800 square feet, respectively. The
two leases for the Windsor offices expire in 1997, and the Vitrolles lease is
renewable every three years over a nine year period, but may be cancelled with
six months notice.
During the fiscal year ended January 31, 1996, and in connection with the
corporate restructuring that is discussed in Note 7 to the Consolidated
Financial Statements, the Company vacated leased facilities located in San
Diego, California, and Albuquerque, New Mexico that have remaining lease terms
of approximately twenty three
and eleven months, respectively.
The Company believes that its facilities are maintained in good operating
condition and are adequate for its operations.
ITEM 3. LEGAL PROCEEDINGS.
There are no material pending legal proceedings to which the Company is a party.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) The 1995 Annual Meeting of Shareholders was held on November 17,
1995.
(b) The following individuals were elected to serve as the Board of Directors
for terms expiring at the 1996 Annual Meeting:
Number of Shares Voted
----------------------
For Against Abstain
--- ------- -------
Richard M. Crooks, Jr 8,977,924 170,769 --
J. M. Kennedy ....... 8,967,499 181,194 --
Edwin R. Addison .... 9,025,018 123,675 --
James W. Dowe, III .. 9,034,409 114,284 --
Jay H. Diamond ...... 8,965,206 183,487 --
W. Frank King, III .. 9,033,193 115,500 --
Philip J. O'Reilly .. 8,965,206 183,487 --
(c) In the only other matter voted upon, the shareholders voted 8,677,296 shares
in the affirmative and 358,943 shares in the negative to approve, for purposes
of Section 422 of the Internal Revenue Code, the adoption of the Company's 1995
Stock Option Plan authorizing the granting of options to purchase up to 400,000
shares of the Company's common stock pursuant to which options to purchase
324,150 shares of the Company's common stock were granted to employees of the
Company who were previously employed by ConQuest Software, Inc.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's common stock is traded in the over-the-counter market and is
listed on the National Market System of the NASDAQ System under the symbol EXCA.
The following table sets forth, for the period February 1, 1994 through January
31, 1996, the high and low sale prices for the common stock as reported by the
National Market System of NASDAQ. The number of shareholders of record as of
January 31, 1996, was 1,295. The Company has never declared or paid dividends on
its common stock, and anticipates that, for the foreseeable future, it will not
pay dividends on its common stock.
High Low
Fiscal 1995 (02/01/94-01/31/95)
First Quarter................ $12 $10 1/4
Second Quarter .............. 11 5 3/4
Third Quarter................ 8 1/2 6
Fourth Quarter............... 8 1/4 4 3/4
Fiscal 1996 (02/01/95-01/31/96)
First Quarter................ $12 3/4 $ 7
Second Quarter .............. 18 1/2 11 3/4
Third Quarter................ 18 13 1/4
Fourth Quarter............... 39 3/4 15 3/4
ITEM 6. SELECTED FINANCIAL DATA.
The selected financial data presented below are derived from the Company's
consolidated financial statements and should be read in conjunction with such
consolidated financial statements and notes thereto included elsewhere in this
Annual Report on Form 10-K. The selected financial data presented below as of
January 31, 1994, 1993 and 1992 and for the fiscal years ended January 31, 1993
and 1992 has been derived from consolidated financial statements of the Company
not contained herein. All of the historical information has been restated to
reflect the pooling of interests with ConQuest Software, Inc.
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[Download Table]
Fiscal Years Ended January 31
----------------------------------------------------
1996 1995 1994 1993 1992
(in thousands, except per share data)
Statements of Operations Data:
Revenues:
Software.................$ 15,004 $ 10,133 $ 10,878 $ 7,943 $ 4,725
Maintenance............ 3,671 2,505 1,407 563 237
--------- --------- --------- --------- ---------
18,675 12,638 12,285 8,506 4,962
--------- --------- --------- --------- ---------
Expenses:
Sales and marketing.... 8,791 9,399 10,124 7,859 3,994
Research and product
development.......... 4,972 5,085 5,483 5,483 3,367
General and
administrative....... 3,330 5,597 3,758 3,148 2,161
Cost of software
revenues............. 1,294 1,197 1,359 569 191
Cost of maintenance
revenues............. 573 524 343 285 184
Restructuring costs.... 653 776 - - -
Merger costs........... 490 - - - -
--------- --------- --------- --------- ---------
20,103 22,578 21,067 17,344 9,897
--------- --------- --------- --------- ---------
Operating loss........... (1,428) (9,940) (8,782) (8,838) (4,935)
Interest income.......... 601 431 485 631 800
Interest expense......... (57) (87) (22) (42) (11)
Other income............. - 208 - - -
--------- --------- --------- --------- ---------
Net loss................. (884) (9,388) (8,319) (8,249) (4,146)
Preferred stock
dividends................ 14 14 14 14 14
--------- --------- --------- --------- ---------
Net loss applicable to
common stock.........$ (898) $ (9,402) $ (8,333) $ (8,263) $ (4,160)
========= ========= ========= ========= =========
Net loss per share of
common stock.........$ (.08) $ (0.85) $ (0.79) $ (0.85) $ (0.52)
========= ========= ========= ========= =========
Weighted average number
of shares of common
stock outstanding.... 11,496 11,094 10,532 9,763 7,985
========= ========= ========= ========= =========
- 13 -
[Download Table]
Fiscal Years Ended January 31
----------------------------------------------------
1996 1995 1994 1993 1992
(in thousands, except per share data)
Balance Sheet Data
(at end of period)(1):
Cash and cash
equivalents..............$ 2,903 $ 2,645 $ 1,280 $ 1,928 $ 1,241
Working capital.......... 12,973 6,908 1,788 4,631 4,356
Total assets............. 23,046 17,951 18,015 21,125 14,041
Accumulated deficit...... (36,446) (35,367) (25,965) (17,646) (9,384)
Total shareholders'
equity (2)............... 15,251 9,475 12,363 17,138 12,096
<FN>
(1) The Company had no significant long-term debt for any of the periods
presented.
(2) No dividends have been declared or paid on the Company's common stock.
</FN>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
OVERVIEW
In July 1995, Excalibur Technologies Corporation ("Excalibur") acquired ConQuest
Software, Inc. ("ConQuest"), a private company located in Columbia, Maryland
engaged in the business of providing natural language text management software
tools. The acquisition was effected through the issuance of Excalibur common
stock and options to purchase Excalibur common stock to the former ConQuest
shareholders and optionholders in exchange for all of the outstanding common
stock of ConQuest. The business combination was accounted for as a pooling of
interests and, accordingly, the Company's consolidated financial statements and
the discussion and analysis of such statements contained herein reflect the
combined results of the pooled businesses for the respective periods presented.
Prior to its acquisition by Excalibur, ConQuest reported operating results on a
calendar year basis. ConQuest's separate results for prior years have not been
restated to conform to the fiscal year of Excalibur. Therefore, the results of
operations contained in the consolidated financial statements for the fiscal
years ended January 31, 1995 and 1994 combine those of Excalibur for these
periods, as previously reported, with those of ConQuest for the calendar years
ended December 31, 1994 and 1993, respectively. ConQuest's separate results of
operations for the month ended January 31, 1995 are not reflected in the
consolidated statement of operations for the current fiscal year. The revenues,
operating loss and net loss of ConQuest for the month ended January 31, 1995
were $138,000, $177,000 and $181,000, respectively. The Company's consolidated
balance sheet at January 31, 1995 combines the consolidated balance sheet of
Excalibur and Excalibur Technologies International ("ETIL") as of January 31,
1995 and the balance sheet of ConQuest as of December 31, 1994.
The Company principally earns revenue from licensing its software to system
integrators and original equipment manufacturers through its distributors, to
value-added resellers, to strategic partners and to customers through a direct
sales force. Revenues are provided from sales to new customers and sales to
current customers for additional users, upgrades to newer product versions,
telephone support, and other services. Revenues generated from product licenses
can vary significantly within a period due to the relatively long sales cycle,
variations in the size of license agreements, and the number of shipments made.
Historically, the volume of customer orders and product shipments is greatest at
the end of a reporting period, and the Company often recognizes a significant
portion of license revenue towards the end of each fiscal period. Deferred
revenues of $2,759,000 at January 31, 1996, related primarily to maintenance
agreements and training, is not expected to cause significant fluctuations in
future quarterly revenue.
RESULTS OF OPERATIONS
For the fiscal year ended January 31, 1996, total revenues were $18,675,000, an
increase of 48% over total revenue of $12,638,000 in the prior year. Net loss
for the fiscal year ended January 31, 1996 was $884,000 or $.08 per common share
compared to a net loss of $9,388,000 or $.85 per common share last year.
Included in expenses for the current fiscal year were charges of $653,000
related to the restructuring that is discussed below and $490,000 related to the
acquisition of ConQuest.
- 15 -
[Download Table]
REVENUES FY `96 Change FY '95 Change FY'94
(in thousands) ------ ------ ------ ------ -----
Software $15,004 $ 4,871 48% $10,133 $ (745) (7)% $10,878
Maintenance 3,671 1,166 47% 2,505 1098 78% 1,407
-------- -------------- -------- -------------- ---------
Total $18,675 6,037 48% $12,638 $ 353 3% $ 12,285
======== ============== ======== ============== =========
In fiscal year 1996 compared with fiscal 1995, the Company experienced overall
increases in revenues for both software products and maintenance of
approximately 48% and 47%, respectively, to $15,004,000 and $3,671,000,
respectively. Revenues from the sale of EFS and related products exceeded
revenues of last year, primarily because international product revenues grew at
a rate approximating 60%. In North America, revenues derived from the sale of
EFS products to commercial and Federal customers grew at a rate of approximately
15% in the current fiscal year. The Company is working to establish a strong
network of resellers to market the EFS products to customers in certain segments
of the market, or franchises. Consistent with that direction, the Company
recently entered into an agreement with a large systems integrator granting the
exclusive right to resell the EFS product in the Federal market.
The Company is continuing to focus direct sales and marketing efforts on the
sale of its family of core technologies to customers looking for tools to build
specialized applications that require, for example, a powerful search and
retrieval engine. The rapid expansion of the internet and the proliferation of a
variety of online service providers has presented new opportunities for the
application of the Company's technologies in this manner. The Company licensed
its RetrievalWare technology to several such providers in the current year,
contributing to an overall increase in RetrievalWare product revenues from
fiscal year 1995 to fiscal year 1996 of approximately 131%.
Despite a 47% increase in product sales to international customers experienced
in fiscal year 1995 compared with fiscal 1994, total software revenues declined
in the prior year by 7%. This decline reflected the early effects of the shift
in focus for the EFS product from direct sales to resellers. As a percentage of
total revenues, the revenues related to the sale of RetrievalWare products and
services did not change in fiscal year 1995 compared with fiscal year 1994.
The growth of product maintenance revenues in the current fiscal year is
consistent with the increase in software product revenues reflecting most
significantly the expanding installed base of EFS customers. Maintenance
revenues increased 78% in the prior fiscal year compared with the previous year
due, in part, to the Company's efforts to keep customers current on annual
maintenance contracts.
Sales to international customers are made primarily by ETIL. As a percentage of
total consolidated revenues, ETIL's results represented 19%, 18%, and 12% in
each of the past three fiscal years, respectively. The continued growth in
international operations is a result of a well established reseller network,
including certain resellers with exclusive licenses to sell EFS in a particular
country or region with guaranteed minimum sales levels. In February 1995, ETIL
opened an office in Vitrolles, France to better penetrate markets in central
Europe. Additionally, the political changes in Eastern Europe have opened new
- 16 -
markets for the Company's products, and ETIL has begun establishing resellers
and generating sales in areas formerly under Communist rule.
Tighter overall expense controls and reductions in personnel that took place in
fiscal 1995 resulted in a $2.5 million, or 11%, decrease in operating expenses
during fiscal 1996 compared to fiscal 1995. Excluding merger and restructuring
charges, expenses decreased 13% between fiscal years. Fiscal 1995 operating
expenses increased $1.5 million, or 7%, compared to the prior year primarily due
to restructuring costs and litigation expenses. Due to both the increase in
revenues and the decrease in operating expenses, total operating expenses as a
percentage of total revenues dropped to 108% in fiscal 1996 compared to 179% and
171% in fiscal years 1995 and 1994, respectively.
[Download Table]
EXPENSES FY `96 Change FY '95 Change FY '94
(in thousands) ------ ------ ------ ------ ------
Sales and
marketing $ 8,791 (6)% $ 9,399 (7)% $10,124
Percentage of
total revenues 47% 74% 82%
-------------------------------------------------------------------
Research & product
development $ 4,972 (2)% $ 5,085 (7)% $ 5,483
Percentage of
total revenues 27% 40% 45%
-------------------------------------------------------------------
General and
administrative $ 3,330 (41)% $ 5,597 49% $ 3,758
Percentage of
total revenues 18% 44% 31%
-------------------------------------------------------------------
Total operating
expenses $20,103 11% $22,578 7% $21,067
Percentage of
total revenues 108% 179% 171%
-------------------------------------------------------------------
Sales and marketing expenses were 47% of total revenues for fiscal year 1996
compared to 74% and 82% in the previous two fiscal years, respectively. Total
sales and marketing expenses decreased $608,000, or 6%, and $725,000, or 7%, in
fiscal years 1996 and 1995, respectively, compared in each case to the preceding
year. The decreases occurred in the United States where the Company channeled
more sales through its resellers in both fiscal 1996 and second half of fiscal
1995, thereby reducing its direct selling costs. Additionally, in fiscal year
1996, the marketing group operated with a smaller average number of personnel
under a tighter budget for product promotion and other similar expenses than in
the previous years.
- 17 -
Research and product development costs were 27% of revenues in fiscal year 1996
compared to 40% in fiscal year 1995 and 45% in fiscal 1994. Total research and
development costs decreased $113,000, or 2%, in fiscal year 1996 from fiscal
year 1995. These declines were the results of the restructuring during fiscal
1995 that included a reduction in the number of employees in research and
development, primarily in the testing area, following a major release of the
Excalibur EFS software. Additionally, the write-off of obsolete equipment in the
second quarter of fiscal 1995 resulted in a reduction in depreciation expense
during fiscal 1996. The decrease in expenses as a percentage of revenues was
also due to ConQuest maintaining its development staff at a fairly constant
level through fiscal 1995 and well into the current year. Total research and
product development expenses decreased $398,000, or 7%, in fiscal year 1995
compared to 1994 primarily due to reductions in employee costs, depreciation and
other equipment costs.
General and administrative costs were 18% of revenues in fiscal year 1996
compared to 44% in fiscal year 1995 and 31% in fiscal year 1994. Included in the
fiscal 1995 costs were litigation expenses, representing 7% of total revenues in
the year, that related to a lawsuit settled at the beginning of fiscal 1996. A
significant portion of the $2.3 million, or 41%, drop in general and
administrative costs in fiscal 1996 compared to fiscal 1995 reflected the
absence of such costs in the current year. Also, during fiscal 1995, the Company
expensed $850,000 of compensation paid in the form stock grants and options to
purchase stock at below market prices and recorded bad debt expense of $361,000.
These expenses were $36,000 and $91,000, respectively for fiscal 1996. The $1.8
million, or 49%, increase in general and administrative expenses in fiscal 1995
compared to fiscal 1994 was the result of the litigation costs, stock
compensation, and bad debt provision.
[Download Table]
COST OF REVENUES FY `96 Change FY `95 Change FY `94
(in thousands) ---------------------------------------------
Software costs $ 1,294 8% $ 1,197 (12)% $ 1,359
Percentage of
software revenues 9% 12% 12%
------------------------------------------------------------------
Maintenance costs $ 573 9% $ 524 53% $ 343
Percentage of
maintenance revenues 16% 21% 24%
------------------------------------------------------------------
Cost of software revenues increased $97,000, or 8%, in fiscal year 1996 from
fiscal year 1995, and was 9% of software revenues for fiscal 1996 compared to
12% of software revenues in fiscal 1995. Fiscal year 1995 expenses included the
costs of new software documentation for the new version of Excalibur EFS and
other products, as well as the design and production of new product packaging.
Cost of software revenues dropped $162,000, or 12%, in fiscal 1995 compared to
fiscal 1994, but was 12% as a percentage of the related software revenues for
each of the prior year periods. The decrease in costs in fiscal 1995 compared to
fiscal 1994 was due primarily to a reduction in the amount of development work
performed under contract by ConQuest.
- 18 -
Cost of maintenance revenues as a percentage of maintenance revenues dropped in
each of the past two fiscal years. The Company's cost of generating maintenance
revenues fluctuates with personnel costs. Such costs remained relatively flat in
fiscal 1996 compared to fiscal 1995 and increased at a slower rate than
maintenance revenues in fiscal year 1995 compared to fiscal 1994. Cost of
maintenance revenues increased $49,000, or 9%, in fiscal year 1996 compared to
fiscal year 1995 and the costs increased $181,000, or 53%, in fiscal year 1995
from fiscal year 1994, compared to increases of $1.2 million, or 47%, and $1.1
million, or 78%, respectively, in the associated revenues for the same reporting
periods.
Transaction costs totaling approximately $490,000 were paid in connection with
the merger with ConQuest. These costs, which included primarily legal and
accounting fees incurred by both Excalibur and ConQuest, were recorded in the
second fiscal quarter of the current year as an operating expense.
As discussed in Note 7 to the Consolidated Financial Statements, in the fourth
quarter of fiscal year 1996, the Company completed an assessment of its
personnel and facilities requirements and finalized a corporate restructuring
and relocation plan. This plan included the relocation of the Company's
headquarters from California to the Washington, D.C. area and the consolidation
of the product development and related customer support teams into two
facilities. The relocation moved corporate management closer to the Company's
major domestic and European customers and better organized the technical staff
to support the major product initiatives of the combined Company. In connection
with this plan, the Company vacated leased facilities in San Diego, California,
and Albuquerque, New Mexico, and consolidated employees on the west coast into a
new leased facility in Carlsbad, California. In May 1996, the Company is
scheduled to move into new leased office space, located in Vienna, Virginia,
that will serve as the Company's corporate headquarters. In the fourth quarter,
the Company also renewed the lease for its Columbia, Maryland, location
(formerly the offices of ConQuest) that serves as the text products development
center. The Company recorded a restructuring charge of $653,000 in the fourth
quarter of the current fiscal year, consisting primarily of severance payments
to terminated employees and lease abandonment costs. At January 31, 1996,
payments under the plan of $215,000 had been made and the net costs of leasehold
improvements at the vacated facilities had been written-off. The Company expects
that substantially all of the remaining costs will be paid in fiscal year 1997.
The Company also conducted restructuring activities in the prior year under a
separate and distinct plan to consolidate a remote development facility,
resulting in a restructuring charge of $312,000. Additionally, the Company
recorded a charge of $464,000 for the write-off of equipment no longer meeting
the requirements of the product development plan.
Despite the restructuring and merger costs, total operating expenses were
reduced by $2,475,000, or 11%, to $20,103,000 in fiscal year 1996. Total
operating costs increased in fiscal year 1995 by $1,511,000, or 7%, to
$22,578,000 due, in part, to the total restructuring costs of $776,000 recorded
in fiscal 1995. Interest income increased $170,000, or 39%, in fiscal 1996
compared to fiscal 1995 primarily due to higher rates of return on invested
funds. Interest income dropped $54,000, or 11%, in fiscal 1995 compared to
fiscal 1994 as the amount of invested funds declined during the year.
Interest expense of $57,000, $87,000, and $22,000 in fiscal years 1996, 1995 and
1994, respectively, represents primarily amounts accrued on the borrowings of
ConQuest.
- 19 -
Other income in fiscal 1995 consists of approximately $208,000 received from
ConQuest's former landlord as an incentive for ConQuest to terminate a lease for
office space.
LIQUIDITY AND CAPITAL RESOURCES
At January 31, 1996, the Company had a balance of cash and cash equivalents of
$2,903,000 compared to a balance of $2,645,000 at the end of the previous fiscal
year, which represents an increase between years of $258,000. In fiscal year
1995, the balance of cash and cash equivalents increased by $1,365,000. In
fiscal year 1994, the balance declined by $648,000. Marketable security
investments, which are not considered cash equivalents, consisted entirely of
U.S. Treasury Bills with maturities of less than one year at January 31, 1996.
Investments increased by $1,736,000 during the year. The balance of investments
declined by $746,000 and $3,479,000, respectively, during fiscal years 1995 and
1994. The combined increase in cash, cash equivalents and marketable securities
for the current fiscal year was $1,994,000, compared with a net increase in the
combined balance of $619,000 in fiscal year 1995 and a net decrease of
$4,127,000 in the combined balance in fiscal year 1994. The total of cash, cash
equivalents and marketable securities was $13,244,000 at January 31, 1996.
The net positive cash flows in the last two fiscal years were due primarily to
the sale of common stock to employees and investors. In fiscal year 1996, the
Company raised cash proceeds of $6,688,000 from the exercise of stock options by
employees and directors. In fiscal year 1995, the exercise of employee stock
options and the private sale of common stock to investors provided cash proceeds
of approximately $5,678,000. The Company also raised $2,877,000 in cash
primarily from the exercise of employee stock options in fiscal year 1994. There
can be no assurance that the Company will be able to obtain such funds from
employees and investors in the future, if required. Subsequent to January 31,
1996, the Company was successful in closing a private placement sale of its
common stock which provided net cash proceeds of approximately $8,388,000.
The Company has used cash in its operating activities in each of the last three
fiscal years. Net cash used in operations was $3,940,000, $4,469,000 and
$6,063,000, respectively, for fiscal years 1996, 1995 and 1994. The usage of
cash in the prior year periods was due primarily to the large net losses
incurred in those years. In the current fiscal year, the amount of net loss was
reduced substantially, however, the Company experienced a significant increase
in the balance of accounts receivable.
Accounts receivable increased by approximately $3,289,000, or 80%, in fiscal
year 1996. The increase was due to several factors including the overall
increase in the Company's revenues between years of approximately 48%, an
increase in the amount of sales negotiated with extended customer payment terms,
and an increase in the percentage of fourth quarter sales booked close to the
end of the period. The effect of these factors was an increase in the amount of
days sales outstanding at year end, although this measurement stayed at a
constant level between the end of the previous fiscal year and the end of the
current year's third quarter.
Although the balance of accounts receivables increased during the year, the
balance of the allowance for doubtful accounts increased by only $1,000 to
$375,000. Management carefully reviewed the customer account balances at year
end, noted payments made by customers after year end and considered the
infrequent write-offs that the Company has experienced. Based on this analysis,
it believes that the allowance is adequate at January 31, 1996.
- 20 -
The Company used $549,000 cash to pay-off several high-interest bearing notes
payable that were obligations of ConQuest during the current fiscal year. The
Company's current balances of cash, cash equivalents and investments, together
with funds anticipated from future operations, are expected to provide
sufficient cash to meet the Company's current projected needs in the next fiscal
year, including the payment of the remaining restructuring costs, the future
costs associated with the move into the new corporate headquarters, and the
costs of providing computer equipment to new employees. Cash used to purchase
computer equipment and leasehold improvements in the fiscal years ended January
31, 1996, 1995 and 1994 was $567,000, $695,000 and $1,202,000, respectively.
FACTORS THAT MAY AFFECT FUTURE RESULTS
The market for the Company's software products is growing rapidly and the
Company's business environment is characterized by rapid technological changes,
changes in customer requirements, new emerging market segments and increased
competition. Consequently, to compete effectively, the Company must make
frequent new product introductions and enhancements and deploy sales and
marketing resources to take advantage of new business opportunities. The ability
of the Company to achieve and manage the expected growth of the business and to
develop new products will depend on the Company's success in retaining its key
personnel and adding new employees with appropriate skills at the right times.
Failure to make timely product introductions and enhancements or to capitalize
on new market opportunities as they emerge may adversely affect future operating
results.
The Company's operations are also subject to certain other risks and
uncertainties including, among others, the effectiveness of actual and potential
competition, the success of the Company's relationships with its strategic
partners and other distributors of the Company's products, and the risks
associated with acquisitions and international expansion. The Company's business
is seasonal. Typically, revenues in the first half of the fiscal year,
particularly in the first quarter, are lower than total revenues in the second
half of the fiscal year.
The Company has incurred cumulative losses of approximately $18,591,000 over the
last three fiscal years and the accumulated deficit of the Company at January
31, 1996 was $36,446,000.
As explained in Note 5 to the Consolidated Financial Statements, the Company has
significant net operating loss carryforwards ("NOL's") related to Excalibur and
ConQuest of approximately $48,737,000 and $2,855,000, respectively. The deferred
tax assets representing the benefits of the NOL's have been offset completely by
a valuation allowance due to the Company's lack of an earnings history. The
realization of the benefits of the NOL's is dependent on sufficient taxable
income in future fiscal years. Lack of future earnings, or a change in the
ownership of the Company, could adversely affect the Company's ability to
utilize the NOL's. Further, because there was a change in the ownership of
ConQuest during fiscal year 1996, the Company's ability to utilize the ConQuest
NOL's may be limited. Despite the NOL carryforwards, the Company may have income
tax liability in future years due to the application of the alternative minimum
tax rules of the Internal Revenue Code.
- 21 -
The preparation of financial statements in conformity with generally accepted
accepted principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The Company believes that inflation has not had a material effect on the results
of its operations to date.
ADOPTION OF NEW ACCOUNTING STANDARDS
In October 1995, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation." It encourages, but does not require, companies to
recognize compensation expense for grants of stock and stock options to
employees based on new fair value accounting rules. Companies that choose not to
adopt the new rules will continue to apply the existing accounting rules.
However, fair value accounting is required for transactions involving the
issuance of stock options or other equity instruments to acquire goods or
services from nonemployees. SFAS No. 123 will be effective for the Company's
fiscal year 1997 consolidated financial statements. Currently, the Company does
not expect to adopt the new fair value accounting rules of SFAS No. 123 for
employee stock options.
However, SFAS No. 123 will require the Company, in its fiscal 1997 financial
statements, to disclose pro forma net income/loss and earnings per share under
the fair value accounting method for stock option grants that occurred
subsequent to January 31, 1995. In addition, the Company will be required to
expand its disclosure about plan terms, exercise prices and the assumptions used
in measuring the fair value of stock-based grants. Although the Company has not
performed the pro forma calculation required by SFAS No. 123 for fiscal year
1996, it expects that the pro forma results will be lower than the historical
results reported herein.
In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment of
Long-lived Assets and for Long-lived Assets to be Disposed of." SFAS No. 121
requires that long-lived assets and certain identifiable intangibles held and
used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The impact of adopting this statement is not expected to be
material to the Company's results of operations or financial position.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Financial statements and supplementary data of the Company are submitted as a
separate section of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None
- 22 -
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information on directors of the Company will be included under the heading
"Election of Directors" of the Company's definitive Proxy Statement relating the
Annual Meeting of Shareholders to be held on June 28, 1996 (the "Proxy
Statement") which is incorporated herein by reference.
The directors of the Company are elected each year at the Annual Meeting of
Shareholders to serve for the ensuing year until the next annual meeting and
until their respective successors are elected and qualified. There are no family
relationships between any of the executive officers of the Company. The
following information indicates the position and age of the present members of
the Board of Directors and the other executive officers at April 15, 1996 and
their business experience.
Name Age Position
Richard M. Crooks, Jr. 56 Chairman of the Board of
Directors
Patrick C. Condo 39 President and Chief Executive Officer,
Director
James H. Buchanan 40 Vice President, Chief
Financial Officer, Secretary
and Treasurer
Edwin R. Addison 39 Executive Vice President,
Director
James W. Dowe, III 54 Chief Scientist, Director
Jay H. Diamond 44 Director
J. M. Kennedy 49 Director
W. Frank King III 56 Director
Philip J. O'Reilly 58 Director
Richard M. Crooks, Jr. has been Chairman of the Board of Directors and
a Director of the Company since June 1990. Mr. Crooks has been
President of RMC Consultants, a financial advisory services firm, since
June 1990. Mr. Crooks is a director of and consultant to Allen &
Company Incorporated ("Allen"), a privately held investment banking
firm, which is the Company's principal shareholder. Mr. Crooks served
as a Managing Director of Allen for more than five years prior to June
1990. Mr. Crooks is a director of IMRE Corporation, a biotechnology
company engaged in developing, manufacturing and marketing products for
the treatment of immune-related diseases and cancers.
- 23 -
Patrick C. Condo was named President and Chief Executive Officer in November
1995, and a Director in January 1996. Mr. Condo was President from May 1995 to
November 1995. He became Executive Vice President in January 1995 after being
the Director of Business Development since November 1992. From October 1987 to
November 1992, Mr. Condo held several manager level positions for Digital
Equipment Corporation's Image, Video and Voice Business Unit and Software
Business Group in New Hampshire.
James H. Buchanan joined the Company as Chief Financial Officer in September
1995. Mr. Buchanan was elected Secretary and Treasurer of the Company on
November 17, 1995. From March 1991 to August 1995, Mr. Buchanan was Vice
President Controller and Treasurer of Legent Corporation, a software development
company. Prior to that, he held several financial management positions with
Norfolk Southern Corporation and PepsiCo. Mr. Buchanan is a certified public
accountant.
Edwin R. Addison became the Executive Vice President and a Director of the
Company in July 1995 in connection with the Company's acquisition of ConQuest
Software, Inc., which Mr. Addison helped to found in 1989. Mr. Addison was the
President of ConQuest. Prior to ConQuest, Mr. Addison was a Senior Associate at
Booz Allen & Hamilton and a Senior Program Manager with Westinghouse Electric
Corporation. He has served from time to time as a part-time graduate instructor
in Computer Science and Electrical Engineering at the Johns Hopkins University
in Baltimore, Maryland.
James W. Dowe III has been the Company's Chief Scientist since its formation in
February 1980 and from February 1980 until June 1990, Chairman of the Board. He
was also President and Chief Executive Officer from the date of the Company's
formation until July 1984. Mr. Dowe is a consultant to the Company and is a
frequent keynote speaker at industry events.
Jay H. Diamond has been a Director of the Company since February 1989. Mr.
Diamond has been a partner in the law firm of Tenzer, Greenblatt, LLP since
February 1996. Prior to that, he was a partner in the law firm of Holtzmann,
Wise & Shepard, in New York, New York, where he had been in practice for more
than five years.
J. M. Kennedy has been a Director of the Company since March 1992. He also held
the position of Chief Executive Officer of the Company from January 1992 to
November 1995, and he was President of the Company from May 1992 until May 1995.
From January 1990 to January 1992, Mr. Kennedy was a partner in Geneva Group
International, a management consulting and search firm specializing in emerging
software companies. Prior to that, he held several sales, marketing and
management positions with Cullinet Inc., Seagate Technology, GRID Systems and
IBM.
W. Frank King III was elected a Director of the Company in June 1992. He is
presently President and a Director of PSW Technologies, formerly Pencom
Software, a leading provider of technology and resources for open systems
computing. From 1988 to November 1991, Dr. King was a Senior Vice President of
Development of Lotus Development Corporation, a software company. Prior to
joining Lotus, Dr. King held various positions with IBM over 17 years, the most
recent as Vice President of Development in its Entry Systems Division. Dr. King
is a director of Weitek Corporation, a semiconductor company, State of the Art,
Inc., a developer of high-end microcomputer accounting software, SystemSoft
Corporation, a software engineering company, and Auspex, Inc, a computer server
manufacturer.
- 24 -
Philip J. O'Reilly has been a Director of the Company since April 1988. Mr.
O'Reilly is a partner in the law firm of O'Reilly, Marsh, Kearney & Corteselli
P.C., in Mineola, New York. Mr. O'Reilly has been in private practice for more
than the past five years. Mr. O'Reilly is a director of IMRE Corporation, a
biotechnology company engaged in developing, manufacturing and marketing
products for the treatment of immune-related diseases and cancers.
ITEM 11. EXECUTIVE COMPENSATION.
Information on executive compensation will be included under the heading
"Executive Compensation" of the Proxy Statement incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information of beneficial ownership of the Company's voting securities by each
director and all officers and directors as a group, and by any person known to
beneficially own more than 5% of any class of voting security of the Company
will be included under the heading "Security Ownership of Certain Beneficial
Owners and Management" in the Proxy Statement incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information relating to certain relationships and related transactions will be
included under the heading "Certain Relationships and Related Transactions" in
the Proxy Statement incorporated herein by reference.
- 25 -
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K.
(A) DOCUMENTS FILED AS PART OF FORM 10-K
1. FINANCIAL STATEMENTS:
The following financial statements of the Company are submitted in a
separate section pursuant to the requirements of Form 10-K, Part I,
Item 8 and Part IV, Items 14(a) and 14(d):
Index to Consolidated Financial Statements
Reports of Independent Public Accountants
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
2. SCHEDULES SUPPORTING FINANCIAL STATEMENTS:
The following schedule is filed as part of this Annual Report on Form
10-K and should be read in conjunction with the Company's financial
statements:
Schedule II, Valuation and Qualifying Accounts
All other schedules are omitted because they are not required,
inapplicable, or the information is otherwise shown in the financial
statements or notes to the financial statements.
3. EXHIBITS:
EXHIBIT NUMBER AND DESCRIPTION
2.01 Agreement and Plan of Merger Between Excalibur
Technologies Corporation, Excalibur Acquisition Corp.
and ConQuest Software, Inc., dated July 5, 1995. (4)
3.01 Certificate of Incorporation of Excalibur
Technologies Corporation. (2)
3.02 Bylaws of Excalibur Technologies Corporation. (2)
10.01 Savvy Research and Development Agreement between
Excalibur Technologies Corporation and Nikkei
Information Systems, signed on May 25, 1989. (2)
10.02 Savvy Programs Software Development and Marketing
Agreement between Excalibur Technologies Corporation
and Nikkei Information Systems, signed on May 25,
1989. (2)
- 26 -
10.03 Producer Licensed, Digital Distributed Software Agreement,
dated as of April 6, 1990, between Excalibur Technologies
Corporation and Digital Equipment Corporation, as amended by
First Amendment, dated December 26, 1990, and as modified by
Amendment, dated December 31, 1991. (3)
10.04 Consulting Agreement with James W. Dowe III, dated
July 1, 1990. (2)
10.05 Incentive Stock Option Plan, dated April 1989. (2)
10.06 Agreement and Plan of Merger Between Excalibur
Technologies Corporation, Excalibur Acquisition Corp.
and ConQuest Software, Inc., dated July 5, 1995. (4)
10.07 Employment Agreement, dated July 20, 1995, with Edwin
R. Addison.
10.08 1995 Incentive Plan, dated November 1995. (5)
10.09 ConQuest Incentive Stock Option Plan, dated August 19, 1993.
10.10 Office Lease (10440 Little Patuxent Parkway, Suite
800, Columbia, MD), commencing January 1, 1996.
10.11 Office Lease (1959 Palomar Oaks Way, Carlsbad, CA),
commencing November 15, 1995.
10.12 Office Lease (1921 Gallows Road, Vienna, VA), commencing in
May 1996.
22.01 Subsidiaries of Excalibur Technologies Corporation.
23.01 Consent of Arthur Andersen LLP, Independent Public
Accountants.
23.02 Consent of Price Waterhouse LLP, Independent
Accountants.
-----------------------
(1) Incorporated herein by reference to Form 10-K for the year ended January
31, 1990, filed May 1, 1990.
(2) Incorporated herein by reference to Form 10-K for the year ended January
31, 1991, filed April 22, 1991.
(3) Incorporated herein by reference to the Registration Statement on
Form S-3 (Registration No. 33-44287) of the Company, effective
February 18, 1992.
(4) Incorporated herein by reference to Form 8-K, filed August 4, 1995.
(5) Incorporated herein by reference to the Proxy Statement for the 1995
Annual Meeting of Shareholders, dated October 16, 1995.
- 27 -
(B) REPORTS ON FORM 8-K.
On March 25, 1996, the Company filed a report on Form 8-K announcing new
customers and partners for its RetrievalWare searching and profiling software
tools and its EFS turnkey document image management solution.
On November 22, 1995, the Company filed a Report on Form 8-K containing its
unaudited results of operations for the seven month period ended August 31,
1995, which included thirty days of postmerger combined operations. The
publication of these results satisfied the requirement of ASR No. 135 which
prohibited sales of Excalibur shares by Excalibur affiliates prior to such
publication. Excalibur completed its acquisition of ConQuest Software, Inc. on
July 20, 1995.
On November 9, 1995, the Company filed an amendment to its Report on Form 8-K
dated August 4, 1995, containing the audited financial statements and required
pro forma financial information relating to the Company's acquisition of
ConQuest Software, Inc.
- 28 -
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PAGE
Reports of Independent Public Accountants F-1
Consolidated Balance Sheets
As of January 31, 1996 and 1995 F-3
Consolidated Statements of Operations
For the fiscal years ended January 31, 1996, 1995, and 1994 F-4
Consolidated Statements of Shareholders' Equity
For the fiscal years ended January 31, 1996, 1995, and 1994 F-5
Consolidated Statements of Cash Flows
For the fiscal years ended January 31, 1996, 1995, and 1994 F-6
Notes to Consolidated Financial Statements F-8
Schedule II - Valuation and Qualifying Accounts
For the fiscal years ended January 31, 1996, 1995, and 1994 F-17
- F1 -
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Excalibur Technologies Corporation:
We have audited the accompanying consolidated balance sheets of Excalibur
Technologies Corporation (a Delaware corporation) and subsidiaries as of January
31, 1996 and 1995, and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended January 31, 1996. These consolidated financial statements and the schedule
referred to below are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and schedule based on our audits. We did not audit the financial
statements for the year ended December 31, 1993, of ConQuest Software, Inc., a
company acquired during fiscal year 1996 in a transaction accounted for as a
pooling of interests, as discussed in Note 1. Such statements are included in
the consolidated financial statements of Excalibur Technologies Corporation and
subsidiaries for the fiscal year ended January 31, 1994 and reflect total
revenues of 13 percent and net loss of 20 percent of the related consolidated
totals for that fiscal year. These statements were audited by other auditors
whose report, dated April 15, 1994, has been furnished to us, and our opinion,
insofar as it relates to amounts included for ConQuest Software, Inc., is based
solely upon the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the report of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Excalibur Technologies Corporation
and subsidiaries as of January 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
January 31, 1996, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The schedule listed in the
index to consolidated financial statements is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic consolidated financial statements. This schedule has been subjected to
the auditing procedures applied in the audits of the basic consolidated
financial statements and, in our opinion, fairly states in all material
respects, the financial data required to be set forth therein in relation to the
basic consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Washington, D.C.,
March 22, 1996
- F2 -
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
ConQuest Software, Inc.
In our opinion, the statements of operations, of changes in stockholders'
deficit and of cash flows of ConQuest Software, Inc. (not presented separately
herein) present fairly, in all material respects, the results of its operations
and its cash flows for the year ended December 31, 1993, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
The financial statements have been prepared assuming that the Company will
continue as a going concern. As discussed in Note 2 (not presented separately
herein) to the financial statements, the Company has suffered recurring losses
from operations, has a net capital deficiency and has current liabilities in
excess of current assets that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 2. These financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
PRICE WATERHOUSE LLP
Washington, D.C.
April 15, 1994
- F3 -
[Download Table]
EXCALIBUR TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
January 31
------------------------
ASSETS 1996 1995
--------- ---------
Current Assets:
Cash and cash equivalents.................... $ 2,903 $ 2,645
U.S. government securities, at cost.......... 10,341 8,605
Accounts receivable, net..................... 6,849 3,650
Prepaid expenses and other .................. 675 484
--------- ---------
Total current assets.................... 20,768 15,384
Equipment and Leasehold Improvements, net....... 1,943 2,523
Other Assets.................................... 335 44
--------- ---------
$ 23,046 $ 17,951
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable............................. $ 1,005 $ 968
Accrued expenses............................. 2,999 3,326
Deferred revenues............................ 2,759 3,018
Deferred compensation........................ 1,032 1,164
--------- ---------
Total current liabilities............... 7,795 8,476
--------- ---------
Shareholders' Equity:
5% Cumulative convertible preferred stock,
$0.01 par value, preference in liquidation
$10 per share, 1,000 shares authorized;
27 shares issued and outstanding........ 271 271
Common stock, $0.01 par value, 20,000
shares authorized; 11,953 and 11,231
shares issued and outstanding.......... 119 112
Additional paid-in capital................... 51,272 44,523
Deferred compensation........................ - (38)
Accumulated deficit ......................... (36,446) (35,367)
Cumulative translation adjustment............ 35 (26)
--------- ---------
Total shareholders' equity.............. 15,251 9,475
--------- ---------
$ 23,046 $ 17,951
========= =========
The accompanying notes to the financial statements are an integral
part of these consolidated balance sheets.
- F4 -
[Download Table]
EXCALIBUR TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
For the Fiscal Years Ended January 31
----------------------------------------
1996 1995 1994
---- ---- ----
Revenues:
Software...................... $ 15,004 $ 10,133 $ 10,878
Maintenance................... 3,671 2,505 1,407
--------- --------- ---------
18,675 12,638 12,285
--------- --------- ---------
Expenses:
Sales and marketing........... 8,791 9,399 10,124
Research and product
development................... 4,972 5,085 5,483
General and
administrative................ 3,330 5,597 3,758
Cost of software revenues..... 1,294 1,197 1,359
Cost of maintenance revenues.. 573 524 343
Restructuring costs........... 653 776 -
Merger costs.................. 490 - -
--------- --------- ---------
20,103 22,578 21,067
--------- --------- ---------
Operating loss................... (1,428) (9,940) (8,782)
Other income / (expenses):
Interest income............... 601 431 485
Interest expense.............. (57) (87) (22)
Other income.................. - 208 -
--------- --------- ---------
Net loss......................... (884) (9,388) (8,319)
Dividends on preferred stock..... 14 14 14
--------- --------- ---------
Net loss applicable to
common stock................ $ (898) $ (9,402) $ (8,333)
========= ========= =========
Net loss per common share........ $ (0.08) $ (0.85) $ (0.79)
========= ========= =========
Weighted-average number of
common shares outstanding..... 11,496 11,094 10,532
========= ========= =========
The accompanying notes to the financial statements are an
integral part of these consolidated statements.
- F5 -
[Enlarge/Download Table]
EXCALIBUR TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands)
Preferred Stock Common Stock Add'l Cumulative
--------------- ------------ Paid-in Deferred Accumulated Translation
Shares $ Shares $ Capital Comp. Deficit Adjust. Total
Balance, ------ ----- ----- ---- -------- ------- --------- ------ --------
January 31,1993 as
previously reported....... 27 $ 271 8,842 $ 88 $33,992 $ - $(16,658) $ 10 $17,703
Adjustment for pooling
of interests (Note 1)..... - - 894 9 414 - (988) - (565)
------ ----- ------ ---- -------- ------- --------- ------ --------
Balance as restated....... 27 $ 271 9,736 $ 97 $34,406 $ - $(17,646) $ 10 $17,138
Conversion of
notes payable............. - - 45 - 185 - - - 185
Issuance of common stock
upon exercise of options.. - - 305 3 2,479 - - - 2,482
Sales of common stock..... - - 109 1 454 - - - 455
Compensation paid
in common stock........... - - 57 1 377 - - - 378
Issuance of common stock
for fixed assets.......... - - 21 - 48 - - - 48
Translation
adjustment................ - - - - - - - (4) (4)
Net loss.................. - - - - - - (8,319) - (8,319)
------ ----- ------ ---- -------- ------- --------- ------ --------
Balance, January 31, 1994 27 $ 271 10,273 $102 $37,949 $ - $(25,965) $ 6 $12,363
Conversion of
notes payable............. - - 7 - 29 - - - 29
Sales of common stock,
net of offering costs..... - - 735 7 5,328 - - - 5,335
Compensation paid
in common stock........... - - 156 2 848 - - - 850
Issuance of common stock
upon exercise of options.. - - 76 1 463 (78) - - 386
Issuance of common stock
for antidilution
protection in agreement... - - 6 - - - - - -
Treasury stock purchase... - - (22) - (94) - - - (94)
Amortization of deferred
compensation.............. - - - - - 40 - - 40
Accrued dividends paid.... - - - - - - (14) - (14)
Translation adjustment.... - - - - - - - (32) (32)
Net loss.................. - - - - - - (9,388) - (9,388)
------ ----- ------ ---- -------- ------- --------- ------ --------
Balance,January 31, 1995.. 27 $271 11,231 $112 $44,523 $ (38) $(35,367) $ (26) $ 9,475
Issuance of common stock
upon exercise of options.. - - 714 7 6,726 - - - 6,733
Issuance of common stock
for services.............. - - 8 - 36 - - - 36
Amortization of deferred
compensation.............. - - - - (13) 38 - - 25
Accrued dividends paid.... - - - - - - (14) - (14)
Translation adjustment.... - - - - - - - 61 61
Adjustment for change in
ConQuest fiscal year...... - - - - - - (181) - (181)
Net loss.................. - - - - - - (884) - (884)
------ ----- ------ ---- -------- ------- --------- ------ --------
Balance,January 31, 1996.. 27 $ 271 11,953 $119 $51,272 - $(36,446) $ 35 $15,251
====== ===== ====== ==== ======== ======= ========= ====== ========
The accompanying notes to the financial statements are an integral
part of these consolidated statements.
- F6 -
[Download Table]
EXCALIBUR TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the Fiscal Years Ended
January 31
---------------------------------
1996 1995 1994
--------- --------- ---------
Cash Flows from Operating Activities:
Net loss ................................... $ (884) $ (9,388) $ (8,319)
Adjustments to reconcile net loss to
net
cash used in operating activities:
Depreciation and amortization ........... 1,048 1,084 1,173
Loss on disposal of assets .............. 66 450 4
Compensation paid in common stock ....... 36 850 378
Amortization of deferred compensation ... 25 40 -
Changes in operating assets and liabilities:
Accounts receivable, net ................ (3,289) (266) (1,065)
Prepaid expenses and other .............. (476) 131 111
Accounts payable and accrued expenses ... 47 1,196 50
Deferred revenues ....................... (244) 1,179 1,193
Deferred compensation ................... (88) 255 412
Adjustment for change in fiscal year of
ConQuest ................................... (181) - -
--------- --------- ---------
Net cash used in operating activities ... (3,940) (4,469) (6,063)
--------- --------- ---------
Cash Flows from Investing Activities:
Purchase of investments ................. (12,023) (8,903) (12,285)
Proceeds from maturities of
investments ............................. 10,287 9,649 15,764
Purchases of equipment and leasehold
improvements ............................ (567) (695) (1,202)
Proceeds from disposal of assets ........ 26 42 14
--------- --------- ---------
Net cash (used in) provided by
investing activities .................... (2,277) 93 2,291
--------- --------- ---------
Cash Flows from Financing Activities:
Proceeds from notes payable ............. 238 189 252
Proceeds from the issuance
of common stock ......................... 6,688 5,678 2,877
Dividends paid .......................... (14) (14) -
Repayment of notes payable .............. (549) (48) -
--------- --------- ---------
Net cash provided by financing
activities .............................. 6,363 5,805 3,129
--------- --------- ---------
The Effect of Exchange Rate Changes on
Cash ....................................... 112 (64) (5)
--------- --------- ---------
Net Increase (Decrease) in Cash and
Cash Equivalents ........................... 258 1,365 (648)
Cash and Cash Equivalents, beginning of
period ..................................... 2,645 1,280 1,928
-------- -------- --------
Cash and Cash Equivalents, end of period ... $ 2,903 $ 2,645 $ 1,280
======== ======== ========
The accompanying notes to the financial statements are an
integral part of these consolidated statements.
- F7 -
[Download Table]
EXCALIBUR TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued, in thousands)
For the Fiscal Years Ended
January 31
-----------------------------
1996 1995 1994
------ ------ -------
Supplemental Disclosures of Cash Flow
Information:
Cash paid for interest ........................ $ 61 $ 8 $ 13
===== ===== =====
Supplemental Disclosures of Noncash
Investing and Financing Activities:
Purchase of treasury stock with note payable... $ - $ 94 $ -
===== ===== =====
Stock options exercised under deferred
compensation arrangements...................... $ 45 $ 43 $ 60
===== ===== =====
Conversion of notes payable into common stock.. $ - $ 29 $ 185
===== ===== =====
Issuance of notes in relation to severance
agreements..................................... $ - $ 89 $ -
===== ===== =====
Issuance of common stock for fixed assets...... $ - $ - $ 48
===== ===== =====
The accompanying notes to the financial statements are an
integral part of these consolidated statements.
- F8 -
EXCALIBUR TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) THE COMPANY
OPERATIONS AND ORGANIZATION
The Company designs, develops, markets and supports computer software products
used for the document imaging and multimedia information retrieval marketplaces.
The Company also offers consulting, training, maintenance and systems
integration services in support of its customers' use of its software products.
In addition, the Company performs research and development under contract and
licenses proprietary software products for use in compound-document, digital
library, positive identification, and on-line services and information retrieval
systems. Distribution of the Company's products occurs through value added
resellers, system integrators, original equipment manufacturers, other
distributors and a direct sales force to North American and international
customers including commercial firms in various industries and government
agencies.
The Company has incurred cumulative losses of approximately $18.6 million over
the last three fiscal years and the accumulated deficit of the Company at
January 31, 1996 was $36,446,000. The Company's operations are subject to
certain risks and uncertainties including, among others, actual and potential
competition by entities with greater financial resources, experience and market
presence than the Company; the success of the Company's product marketing and
product distribution strategies; risks associated with acquisitions and
international expansion; the need to manage growth and certain technology risks.
The consolidated financial statements include the accounts of Excalibur
Technologies Corporation ("Excalibur"); its wholly-owned subsidiary, Excalibur
Technologies International, Ltd. ("ETIL"); and the acquired company, ConQuest
Software, Inc. ("ConQuest"). These entities are collectively referred to
hereinafter as the "Company." All significant intercompany transactions and
accounts have been eliminated. Certain amounts presented in the prior years'
financial statements have been reclassified to conform with the fiscal 1996
presentation.
ACQUISITION OF CONQUEST SOFTWARE, INC.
In July 1995, the Company acquired ConQuest, a private company located in
Columbia, Maryland, engaged in the business of providing natural language text
management software tools. The former shareholders of ConQuest received
approximately 1,427,000 shares of common stock of Excalibur in exchange for all
of the common stock of ConQuest. Outstanding options to purchase common stock of
ConQuest were converted into options to purchase approximately 572,000 shares of
Excalibur common stock. The acquisition was accounted for as a pooling of
interests and, as such, the accompanying consolidated financial statements
reflect the combined results of the pooled businesses for the respective periods
presented. The Company recorded a charge of approximately $490,000 for the
estimated transaction costs to complete the merger between Excalibur and
ConQuest. The costs included legal, accounting and other professional fees of
$363,000 and other costs of $127,000. These costs were paid by January 31, 1996.
- F9 -
Separate results of Excalibur and ConQuest for the periods preceding the
acquisition are as follows (in thousands):
[Download Table]
Fiscal quarter Fiscal years
ended ended January 31
April 30, 1995 1995 1994
Revenues: ---------- ---------- ----------
Excalibur, previously reported ... $ 2,801 $ 10,841 $ 10,665
ConQuest.......................... 840 1,797 1,620
---------- ---------- ----------
Total, as restated................... $ 3,641 $ 12,638 $ 12,285
========== ========== ==========
Net Loss:
Excalibur, previously reported ... $ (466) $ (6,926) $ (6,641)
ConQuest.......................... (137) (2,462) (1,678)
---------- ---------- ----------
Total, as restated................... $ (603) $ (9,388) $ (8,319)
========== ========== ==========
Prior to its acquisition by Excalibur, ConQuest reported operating results on a
calendar year basis. ConQuest's separate results for prior years have not been
restated to conform to the fiscal year of Excalibur. Therefore, the Company's
consolidated balance sheet at January 31, 1995 combines the consolidated balance
sheet of Excalibur and ETIL as of January 31, 1995 and the balance sheet of
ConQuest as of December 31, 1994. Further, ConQuest's separate results of
operations for the month ended January 31, 1995 are not reflected in the
consolidated statement of operations for the current fiscal year. The revenues,
operating loss and net loss of ConQuest for the month ended January 31, 1995
were $138,000, $177,000 and $181,000, respectively. The results of operations
contained in these consolidated financial statements for the fiscal years ended
January 31, 1995 and 1994 combine those of Excalibur for the periods, as
previously reported, with those of ConQuest for the calendar years ended
December 31, 1994 and 1993, respectively.
(2) SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
- F10 -
REVENUE RECOGNITION
Revenues from the sale of computer software licenses are recognized upon
shipment of product provided that no significant vendor obligations remain and
that collection of the resulting receivable is considered probable. Revenues
related to agreements with customers that contain future performance
requirements are recognized in accordance with such performance requirements.
Revenues related to customer support agreements are deferred and recognized
ratably over the term of the respective agreements, usually one year.
Maintenance revenues that are bundled with initial licensing fees are deferred
and recognized over the term of the related maintenance periods, typically 90
days.
RESEARCH AND DEVELOPMENT COSTS
No product development costs were capitalized, and there were no capitalized
costs not yet amortized, during the fiscal years ended January 31, 1996, 1995
and 1994.
CASH AND CASH EQUIVALENTS
For purposes of the balance sheets and statements of cash flows, the Company
considers all highly liquid investments purchased with a maturity of three
months or less to be cash equivalents. U.S. government securities are considered
investments and are excluded from cash equivalents regardless of their
maturities. Cash equivalents consist of funds deposited in money market
accounts. Consequently, the carrying amount of cash and cash equivalents
approximates fair value.
MARKETABLE SECURITIES
Under the Statement of Financial Accounting Standard ("SFAS") No. 115,
"Accounting For Certain Investments in Debt and Equity Securities," that was
adopted February 1, 1994, the Company classifies its marketable securities as
held-to-maturity securities. Accordingly, marketable securities, consisting
entirely of U.S. government securities, are carried at cost, adjusted for
premium and discount amortization. At January 31, 1996 and 1995, the aggregate
fair value of the securities based upon quoted market prices was $10,345,000 and
$8,583,000, respectively. The Company's adoption of SFAS No. 115 did not have an
impact on the Company's consolidated financial statements as marketable
securities previously were carried at cost.
INCOME TAXES
Deferred taxes are provided utilizing the liability method as prescribed by SFAS
No. 109, "Accounting for Income Taxes," whereby deferred tax assets are
recognized for deductible temporary differences and operating loss and tax
credit carryforwards, and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases. Deferred tax
assets and liabilities are adjusted for the effects of changes in tax laws and
rates on the date of enactment. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that
some portion or all of the deferred tax assets will not be realized.
- F11 -
DEPRECIATION AND AMORTIZATION
Depreciation of office furniture and equipment is provided over the estimated
useful lives of the assets on a straight-line basis. Lives range from three to
ten years. Amortization of leasehold improvements is provided on a straight-line
basis over the term of the applicable lease. Accumulated depreciation and
amortization of office furniture and equipment and leasehold improvements as of
January 31, 1996 and 1995 was approximately $2,838,000 and $1,912,000,
respectively.
NET LOSS PER COMMON SHARE
Net loss per common share is calculated based on the weighted-average number of
common shares outstanding during each period, after deducting the dividends on
preferred stock (see Note 3). Common stock equivalents (stock options, warrants
and cumulative convertible preferred stock) were excluded from the net loss per
share computations for all periods presented herein because of their
anti-dilutive effect.
TRANSLATION OF FOREIGN FINANCIAL STATEMENTS
Assets and liabilities of foreign operations are translated at the year-end rate
of exchange. Statements of operations are translated at the average rates of
exchange during the year. Gains or losses from translating foreign currency
financial statements are accumulated in a separate component of shareholders'
equity.
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations of
credit risk consist primarily of cash equivalents, marketable securities, and
accounts receivable. The Company's investment policy limits its exposure to
concentrations of credit risk. The Company sells its products primarily to U.S.
government agencies and to major corporations, including value-added resellers
that serve a wide variety of U.S. and foreign markets. The Company extends
credit to its corporate customers based on an evaluation of the customer's
financial condition, generally without requiring a deposit or collateral.
Exposure to losses on receivables is principally dependent on each customer's
financial condition. The Company monitors its exposure for credit losses and
maintains allowances for anticipated losses. The allowance for doubtful accounts
was $375,000 and $374,000, respectively, at January 31, 1996 and 1995.
ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board ("FASB") issued SFAS No.
121, "Accounting for the Impairment of Long-lived Assets and for Long-lived
Assets to be Disposed of," that will be effective for the Company's fiscal year
1997 consolidated financial statements. SFAS No. 121 requires that long-lived
assets and certain identifiable intangibles held and used by an entity be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. The impact of
adopting this statement is not expected to be material to the Company's results
of operations or financial position.
- F12 -
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." Effective with the Company's fiscal year 1997 consolidated
financial statements, this statement will require new disclosures about certain
employee stock options based on their fair value at the date of grant. Companies
may also base the recognition of compensation cost for new and modified options
on these fair values. Currently, the Company plans to continue to apply existing
accounting rules for stock-based compensation pertaining to employees as allowed
under SFAS No. 123. However, fair value accounting will be required for
transactions involving the issuance of stock options or other equity instruments
to acquire goods or services from nonemployees.
(3) CAPITALIZATION
STOCK OFFERINGS
On March 8, 1996, the Company completed a private placement of 350,000 shares of
the Company's common stock at an offering price of $25.00 per share, resulting
in net proceeds of approximately $8,388,000. Allen & Company Incorporated
("Allen"), a shareholder of the Company, acted as the placement agency in this
transaction and received a fee of approximately $350,000.
On April 25, 1994, the Company completed a private placement of 625,000 shares
of the Company's common stock to an unaffiliated institutional investor, at an
offering price of $8.00 per share, resulting in net proceeds of approximately
$4,800,000 to the Company. Allen acted as the placement agency in this
transaction and received a fee of $200,000.
CUMULATIVE CONVERTIBLE PREFERRED STOCK
The cumulative convertible preferred stock is convertible into common stock at
the rate of 10 shares of common stock per share of cumulative convertible
preferred stock. Holders of the cumulative convertible preferred stock are
entitled to receive cumulative dividends of $0.50 per share per annum, payable
annually on April 1 if declared by the Board of Directors, in cash or shares of
common stock (to be determined by the Board of Directors) valued at the lower of
$1.00 per share or the market price on the date of declaration. The amount of
accumulated dividends which have not been declared or accrued at January 31,
1996 is approximately $14,000.
In the event of voluntary liquidation, dissolution or winding-up of the Company
or upon any distribution of assets, whether voluntary or involuntary, holders of
the convertible preferred stock would have a liquidation preference of $10 per
share, plus accrued and unpaid dividends.
- F13 -
(4) EMPLOYEE BENEFIT PLANS
STOCK OPTIONS
The Company has an Incentive Stock Option Plan (the "Plan"), to attract, retain
and reward key employees of the Company by offering such key employees
performance-based stock incentives and/or other equity interest or equity-based
incentives in the Company, as well as performance-based incentives payable in
cash. The Plan is administered by a Committee appointed by the Board of
Directors, which has the authority, among other things, to determine which
officers, directors and key employees are eligible for awards under the Plan,
the type and amount of incentives to be awarded, and the restrictions and terms
of such incentives. In June 1993, the Company's shareholders approved an
increase in the number of shares reserved for issuance under the Plan from
1,600,000 to 2,450,000. At January 31, 1996, 455,563 shares remain available for
issuance under the Plan.
The Plan provides for the issuance of qualified and non-qualified stock options.
Qualified Incentive Stock Options are granted at an exercise price equal to the
fair market value of the common stock, calculated as an average of the closing
price on the ten trading days prior to the date of grant, have ten-year terms,
and vest over four-year periods. Non-qualified options are granted at an
exercise price at or below the fair market value of the common stock at the date
of grant and may be immediately exercisable. The Company records compensation
expense equal to the difference between the fair market value of the stock at
the date of grant and the exercise price, over the vesting period.
The Plan also provides that optionees may be granted stock appreciation rights
(SARs) at the discretion of the Board of Directors. To date, no SARs have been
granted. The vesting schedule of outstanding options, and SARs outstanding for
at least six months, would accelerate under the Plan in the event of the
occurrence of certain events constituting a change in control of the Company. In
addition to the options awarded under the Plan, the Directors award and
authorize additional options as they deem appropriate. During fiscal year 1996,
no stock options were granted outside the Plan.
- F14 -
The following table summarizes the Company's stock option activity:
Number Price Range Per Share
------ ---------------------
Balance, January 31, 1993 2,044,705 $ .35 - 17.02
Granted 324,000 11.64 - 15.33
Exercised (290,705) .35 - 10.00
Canceled (96,100) 7.36 - 16.91
---------
Balance, January 31, 1994 1,981,900 1.00 - 17.02
Granted 145,000 6.34 - 11.60
Exercised (55,000) 6.25 - 6.25
Canceled (228,450) 8.47 - 16.64
----------
Balance, January 31, 1995 1,843,450 1.00 - 17.02
Granted 588,000 7.44 - 26.21
Exercised (702,661) 1.00 - 16.91
Canceled (183,963) 7.44 - 16.64
----------
Balance, January 31, 1996 1,544,826 $ 6.34 - 26.21
==========
At January 31, 1996, options to purchase a total of 933,189 shares were
immediately exercisable at prices ranging from $6.34 to $20.56 per share.
The Company also adopted the 1995 Incentive Plan (the "1995 Plan") in November
1995, under which Excalibur employees formerly employed by ConQuest were granted
incentive stock options to purchase 324,150 restricted shares of Excalibur
common stock at an exercise price of $15.23 per share; of these, 13,400 were
canceled during fiscal 1996. The 1995 Plan authorizes the granting of options to
purchase up to 400,000 shares of the Company's common stock. The terms of the
1995 Plan are identical to the terms of the Plan described above, except that
the 1995 Plan does not provide for the award of stock appreciation rights. At
January 31, 1996, options to purchase 38,844 shares were exercisable under the
1995 Plan.
Pursuant to the merger with ConQuest, outstanding options to purchase common
stock of ConQuest were converted into options to purchase 572,481 restricted
shares of Excalibur common stock. The ConQuest Stock Option Plan (the "ConQuest
Plan") was adopted in 1991 and provided for the issuance of qualified and
nonqualified stock options.
- F15 -
The following table summarizes the activity under the ConQuest Plan, as
converted to Excalibur shares:
Number Price Range Per Share
------ ---------------------
Balance, January 31, 1993 523,598 $ 1.04 - 4.14
Granted 98,597 4.14 - 4.14
Exercised - -
Canceled - -
------
Balance, January 31, 1994 622,195 1.04 - 4.14
Granted 55,278 2.07 - 4.14
Exercised (37,930) 1.04 - 3.11
Canceled (67,062) 1.04 - 4.14
--------
Balance, January 31, 1995 572,481 1.04 - 4.14
Granted - -
Exercised (11,944) 4.14 - 4.14
Canceled - -
------
Balance, January 31, 1996 560,537 $ 1.04 - 4.14
=======
At January 31, 1996, all of the outstanding options to purchase Excalibur shares
under the ConQuest Plan were exercisable.
DEFERRED COMPENSATION
ConQuest entered into arrangements with certain of its officers, employees and
independent consultants to defer a portion of their compensation. Deferred
compensation to employees is restricted for use in the exercise of stock
options. However, if the employees' options have expired because the term has
lapsed or because employment has been terminated, the employee may request cash
redemption one year after expiration, with 90 days notice. During fiscal years
1996, 1995 and 1994, deferred compensation of $45,000, $43,000 and $60,000,
respectively, was settled through the exercise of options to purchase stock.
Pursuant to the merger with ConQuest, deferred compensation of $88,000 was paid
in cash. Effective January 1, 1993, ConQuest revised the deferred compensation
arrangements and discontinued the accrual of interest on deferred compensation
balances for employees only. Interest continues to accrue on deferred
compensation payable to independent consultants. Accrued interest, which is
included in the deferred compensation balances, totaled $60,000 and $67,000,
respectively at January 31, 1996 and 1995.
EMPLOYEE SAVINGS PLANS
The Company has an employee savings plan which qualifies under Section 401(k) of
the Internal Revenue Code (the "Code"). Under the plan, participating U.S.
employees may defer up to 20 percent of their pre-tax salary, but not more than
statutory limits. During fiscal year 1996, the Company made a discretionary
contribution of $3,000 to the savings plan.
- F16 -
Effective January 1, 1994, ConQuest established an employee contribution plan
intended to be a qualified plan under Section 401 (k) of the Code. Each
participant may elect pre-tax salary deferrals, up to the maximum percentage
allowable by the plan and under the Code. Matching contributions are
discretionary and none were made through the end of fiscal 1996.
(5) INCOME TAXES
Since the Company incurred pretax losses for the fiscal year periods presented
herein, there are no income taxes provided in the accompanying statements of
operations. Though management believes that future net operating income and
taxable income of the Company may be sufficient to realize the benefits of the
Company's net operating loss carryforwards and to utilize the associated
deferred tax asset, a valuation allowance has been recorded to offset completely
the carrying value of such deferred tax asset due to the Company's lack of prior
earnings and the size of the accumulated deficit.
As of January 31, 1996, the Company had net operating loss carryforwards of
approximately $48,737,000 that expire at various dates beginning in fiscal year
1997 through fiscal year 2011. Realization of the benefits of the net operating
loss carryforwards may be limited in the event of future changes in the
ownership of the Company. At the same date, the Company also had net operating
loss carryforwards relating to ConQuest of approximately $2,855,000. Because
there was a change in ownership of ConQuest, as defined by the Code, during
fiscal year 1996, the Company's future realization of the benefits of these net
operating loss carryforwards, that begin to expire in fiscal year 2009, also may
be limited. Despite the NOL carryfowards, the Company may have income tax
liability in future years due to the application of the alternative minimum tax
rules of the Code.
(6) COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS
The Company conducts its operations using leased office facilities. The leases
terminate at various dates through fiscal year 2002. The Company also has
operating leases for automobiles at its foreign subsidiary which are included in
the figures below. Future minimum rental payments under noncancelable operating
leases as of January 31, 1996, net of sublease payments, are as follows (in
thousands):
Year Ending
January 31
1997 $ 1,154
1998 996
1999 936
2000 849
2001 714
2002 480
===========
$ 5,129
===========
- F17 -
Total rental expense under operating leases, net of sublease income, was
approximately $870,000, $873,000, and $877,000 in the fiscal years 1996, 1995
and 1994, respectively. In fiscal year 1995, other income included approximately
$208,000 that ConQuest received from its former landlord as incentive for
ConQuest to terminate its lease for office space.
EMPLOYMENT AGREEMENTS
In connection with the merger with ConQuest, the Company entered into employment
agreements with four former officers of ConQuest. The employement agreements,
which expire in July 1997, provide for aggregate minimum annual salary
compensation of $548,000 plus incentive compensation.
(7) RESTRUCTURING COSTS
In the fourth quarter of fiscal year 1996, the Company completed an assessment
of its personnel and facilities requirements and finalized a corporate
restructuring and relocation plan. This plan included the relocation of the
Company's corporate headquarters from San Diego, California to McLean, Virginia
and the consolidation of the product development and related customer support
teams into two facilities. The relocation was made to move corporate management
closer to the Company's major domestic and European customers and to better
organize the technical staff to support major product development initiatives.
Consequently, the Company recorded a restructuring charge of $653,000 in the
fourth quarter of the current fiscal year. This charge consisted of severance
payments to terminated employees, including a balance payable to the Company's
former Chief Executive Officer under an employment agreement, and lease
abandonment costs. A substantial amount of the balance accrued at January 31,
1996 should be paid during fiscal year 1997.
During fiscal year 1995, the Company recorded a charge of $312,000 for a
corporate restructuring that included the consolidation of a remote development
facility. Additionally, the Company reviewed its computer equipment
requirements, and consistent with its strategic direction, recorded a $464,000
charge for equipment no longer meeting the requirements of its current product
development.
- F18 -
(8) OPERATIONS BY GEOGRAPHIC AREA
The major portion of the international sales of the Company for the past three
years were made by the Company's foreign subsidiary, ETIL, which was established
in the United Kingdom during fiscal year 1993. The following table presents
information about the Company's operations by geographical area (in thousands):
[Download Table]
Fiscal Years Ended January 31
--------------------------------------
1996 1995 1994
---- ---- ----
Sales to unaffiliated customers:
North American operations $15,124 $10,416 $10,867
ETIL 3,551 2,222 1,418
----- ----- -----
$18,675 $12,638 $12,285
======= ======= =======
Net loss:
North American operations $ (597) $(9,069) $(7,899)
ETIL (287) (319) (420)
----- ----- -----
$ (884) $(9,388) $(8,319)
========= ======== ========
Identifiable assets:
North American operations $20,528 $16,324 $16,970
ETIL 2,518 1,627 1,045
----- ----- -----
$23,046 $17,951 $18,015
======= ======= =======
- F19 -
(9) OTHER FINANCIAL DATA
a) Equipment and leasehold improvements at January 31 consist of the
following (in thousands):
1996 1995
---- ----
Computer equipment $4,061 $3,664
Office furniture 631 615
Leasehold improvements 89 156
------- ------
4,781 4,435
Less accumulated 2,838 1,912
----- -----
depreciation
$1,943 $2,523
====== ======
b) Accrued liabilities at January 31 consist of the following ( in
thousands):
1996 1995
---- ----
Accrued salaries, bonuses
and commissions $1,413 1,331
Taxes payable 655 308
Accrued restructuring 473 130
costs
Accrued legal costs 15 716
Other 443 841
--- ---
$2,999 $3,326
====== ======
c) The Company paid legal fees and expenses totaling approximately $361,000,
$487,000 and $60,000, respectively, in fiscal 1996, 1995 and 1994 to a law firm
in which a director of the Company is a partner.
d) Revenues derived from contracts and orders issued by agencies of the U.S.
government were approximately $4,255,000, $3,668,000 and $3,578,000,
respectively, in the fiscal years ended January 31, 1996, 1995 and 1994. These
revenues, expressed as a percentage of total revenues for the fiscal year, were
approximately 23%, 29% and 29%, respectively. The Company has distribution and
cooperative marketing arrangements with International Business Machines
Corporation (IBM). Under these agreements, the Company recognized revenues of
approximately $1,538,000, or 12% of total revenues, in the fiscal year ended
January 31, 1995. Revenues related to these agreements were less than 10% of
total revenues in fiscal years 1996 and 1994.
- F20 -
SCHEDULE II
EXCALIBUR TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR FISCAL YEARS ENDED JANUARY 31, 1996, 1995 AND 1994
[Download Table]
Translation
Balance at Additions Deductions Adjustment Balance
Beginning Charged From During at End
Description of Year to Expense Reserves the Period of Year
----------- -------- ---------- ---------- ---------- -------
1996
----
Deducted from accounts
receivable: For
doubtful accounts $374,000 $ 91,000 $96,000 (a) $ 6,000 $375,000
1995
----
Deducted from accounts
receivable: For
doubtful accounts $100,000 $361,000 $87,000 (a) $ - $374,000
1994
----
Deducted from accounts
receivable: For
doubtful accounts $100,000 $ - $ - $ - $100,000
<FN>
Note (a) - Uncollected receivables written off, net of recoveries.
</FN>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
EXCALIBUR TECHNOLOGIES CORPORATION
By: /s/Patrick C. Condo
------------------------
Patrick C. Condo
President and Chief Executive Officer
Date: April 26, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/Patrick C. Condo
---------------------- President, Chief Executive
Patrick C. Condo Officer and Director
(Principal Executive Officer) April 26, 1996
/s/Richard M. Crooks, Jr.
---------------------- Chairman of the Board of
Richard M. Crooks, Jr. Directors April 26, 1996
/s/James H. Buchanan Chief Financial Officer
---------------------- Secretary and Treasurer
James H. Buchanan (Principal Financial Officer
and Principal Accounting Officer) April 26, 1996
---------------------- Chief Scientist and Director
James W. Dowe III
/s/Edwin R. Addison
---------------------- Director April 26, 1996
Edwin R. Addison
/s/Jay H. Diamond
---------------------- Director April 26, 1996
Jay H. Diamond
/s/J.M. Kennedy
---------------------- Director April 26, 1996
J.M. Kennedy
/s/W. Frank King III
---------------------- Director April 26, 1996
W. Frank King III
/S/Philip J. O'Reilly
---------------------- Director April 26, 1996
Philip J. O'Reilly
Dates Referenced Herein and Documents Incorporated by Reference
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