-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ci8sH4Wx9Rr047Vp9KK+cw0/CXtQVAOLBuAKayPfTPnubIHJltE5463xtRG+nG1C LqPnrIRXmERb34SsclfPyw== 0000806566-97-000012.txt : 19970819 0000806566-97-000012.hdr.sgml : 19970819 ACCESSION NUMBER: 0000806566-97-000012 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970430 FILED AS OF DATE: 19970818 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MANAGEMENT TECHNOLOGIES INC CENTRAL INDEX KEY: 0000806566 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 133029797 STATE OF INCORPORATION: NY FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-17206 FILM NUMBER: 97665392 BUSINESS ADDRESS: STREET 1: 630 THIRD AVE STREET 2: 15TH FL CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2129835620 MAIL ADDRESS: STREET 1: 630 THIRD AVENUE STREET 2: 15TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10017 10KSB 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-KSB (Mark One) [X] ANNUAL REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES ACT OF 1934 (Fee required) FOR THE FISCAL YEAR ENDED APRIL 30, 1997 OR [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (No fee required) For the transition period from to -------------------- ----------------------- COMMISSION FILE NUMBER 0-17206 MANAGEMENT TECHNOLOGIES, INC. ----------------------------- (Name of small business issuer in its charter) NEW YORK (State or other jurisdiction of incorporation or organization) 13-3029797 (I.R.S. Employer Identification No.) 630 Third Avenue New York, New York ------------------ (Address of principal executive offices) 10017-6705 ---------- (Zip Code) Issuer's telephone number, including area code (212) 983 5620 -------------- Securities registered pursuant to Section 12(b) of the Exchange Act: Title of each class Name of each exchange on which registered Securities registered pursuant to Section 12(g) of the Exchange Act: Common Stock, par value $.01 per share (Title of Class) ------------------------------------------------------------ Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will 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-KSB or any amendment to this Form 10-KSB. [ ] State issuer's revenues for its most recent fiscal year: $23,751,664 State the aggregate market value of the voting stock held by non-affiliates computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within the past 60 days: August 8, 1997: $10,036,171 State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: as of August 1, 1997: 139,203,439 Transitional Small Business Disclosure Format (check one): Yes No X ----- - 2 ITEM 1. DESCRIPTION OF BUSINESS Business Development The Registrant (the "Company") was incorporated in the State of New York in 1980. The Company owns all shares issued and outstanding of the following operating subsidiaries: 1.Winter Partners Limited, ("Winter Partners") a United Kingdom company with offices in London, England 2.MTi Abraxsys Systems, Inc, ("Abraxsys Inc.") a United States company with offices in New York, New York 3.MTi Abraxsys Systems (Pte) Limited, ("Abraxsys Pte") a Singapore company with offices in Singapore 4.MTi Abraxsys Systems (HK) Limited ("Abraxsys HK"), a Hong Kong company with offices in Hong Kong 5.MTinnovation S.A. ("MTinnovation"), a French company with offices in Paris, France. 6.MTi Holdings (UK) Limited ("MTi Holding") , a United Kingdom company with offices in London, England 7.Advanced Banking Solutions Limited ("ABS") , a United Kingdom company with offices in London, England In turn, MTi Holding (UK) Limited owns all shares issued and outstanding of MTi Trading Systems Limited ("MTi Trading") United Kingdom company with offices in London, England The Company's other wholly owned subsidiaries in the United Kingdom, New York, Massachusetts, Canada and Australia are currently inactive. By order dated March 19 and March 20, 1997, the High Court of Justice, Chancery Division, Companies Court, in London, England, appointed Messrs. Malcolm Cohen and Peter Supperstone of BDO Stay Hayward as joint administrators of Winter 3 Partners, MTi Holding and MTi Trading, pursuant to the provisions of Section 8 of the English Insolvency Act 1986, for the purposes of (i) the survival of the companies, and the whole or any parts of their undertaking, as a going concern, (ii) the approval of certain voluntary arrangements with the companies' creditors, and (iii) a more advantageous realization of their assets than would be effected on a winding up. Cosequently, the Company ceased to control MTI Trading, Winter Partners and MTi Holding from the date they were put in administration, or to exercise control over the software products owned by MTi Trading. On July 22, 1997, ABS acquired certain assets from Winter Partners, in administration, including intellectual property rights to certain software products, various fixtures and equipment, accounts receivable, and work-in- progress for a total consideration of 257,000 British pounds. In addition ABS assumed certain contracts from Winter Partners, in administration. Certain employees and management of Winter Partners, in administration, were hired by ABS. From July 23, 1997 on, ABS is carrying out in the UK and in certain parts of the world, the business that was formerly that of Winter Partners, defined below as the Banking Systems business. The business defined below as the Trading Systems business was substantially handled by MTi Trading in the UK. The Company's principal executive offices are located at 630 Third Avenue, New York, New York 10017. The telephone number is (212) 983 5620. Unless the context otherwise requires, references to the Company include its subsidiaries. The Company develops, markets, licenses, installs, maintains and supports software products catering to the needs of international banks and financial institutions. Business of the Registrant 4 The Company is engaged in the back office banking software business (the "Banking System" business) and in the trading room software business (the "Trading System" business). Back Office Software Products of the Registrant - ----------------------------------------------- The Company's principal back office banking software products are Abraxsys, IBS-90, IBS-V5, and Pro-IV IBS. Abraxsys, IBS-90, IBS-V5 and Pro-IV IBS are back office international banking software products running on mid range computer systems. Abraxsys and IBS-90 are installed at approximately 75 locations in over 30 countries; IBS-V5 and Pro-IV IBS are installed at approximately 70 locations in over 25 countries. The Company transferred title to its integrated software packages for financial institutions known as ManTec to Global Financial Systems Ltd. ("GFS"), a corporation based in London, England that sells and services the ManTec product line and other products. The Company shares in any license fees GFS may generate through the ManTec line. The Company no longer directly supports its ManTec product line. GFS provides support to certain clients. The ManTec product line runs on IBM and IBM-compatible mainframe computers. The Company's Banking System business is handled through Abraxsys Inc., Abraxsys Pte, Abraxsys HK, Winter Partners and MTinnovation, while intellectual property rights to certain Banking System software products rests with Management Technologies, Inc. IBS-90 5 IBS-90 is a comprehensive suite of computer programs designed to support the back office activities of banks. The product provides transaction processing support for a bank's foreign exchange and money market business, including various off-balance sheet instruments such as forward rate agreements, interest rate swaps, and repurchase agreements; various lending activities including commercial, syndications, participations and mortgages; trade finance business, retail or demand deposit accounting business; funds transfer activities and general ledger and other accounting support. The product offers multi-lingual support, multi-branch and multi-currency processing, right down to profit center level. In addition, the product offers some front office support to various functional areas in a bank, the most important of which is teller/cashier support. IBS-90 reflects some 20 years of an evolutionary development and previous versions have been marketed under the names of International Banking System, and Arbat Banking System. The product is written in the AIMS computer language, a derivative of the widely accepted BASIC language. The product runs on any model of Digital Equipment Corporation's ("Digital") VAX computer processors, under the control of Digital's proprietary operating system VMS. IBS-90 was first marketed in 1989, and to date has been licensed to approximately 50 banks. ABRAXSYS 6 Abraxsys is a complete redevelopment of IBS-90 and is now marketed as one of the Company's prime offering to banks to computerize bank's back offices. Abraxsys comprises essentially the same functions as IBS-90, but includes many enhancements, particularly in the processing support offered to a bank's trade finance department. Abraxsys is written in the industry standard `C' language and runs on a variety of hardware platforms and operating systems, the most significant of which is UNIX, and is targeted to meet the market demand for open systems, i.e. software products that are engineered to run on a variety of hardware platforms and operating systems. PRO IV - IBS Pro-IV IBS is a suite of banking products using state-of-the-art technology. Its key features are as follows: . direct portability from PC to mini to mainframe . direct portability of applications development skills between machines and environments . reduced software maintenance loads . interoperability with existing software environments . access to a wide range of popular databases . fully integrated system security at all levels Designed to meet open systems standards, Pro-IV IBS is independent of database management software and graphic user interface ("GUI"), and runs on almost any 7 hardware and software platform, including different platforms within the same bank. The product is a modern fourth generation computer language-based solution which offers a safe migration path from existing systems. It is designed to interface easily with existing systems, including older legacy systems, and can be purchased as a complete system or in modules with selected functionality. IBS-V5 IBS-V5 is an integrated transaction processing and trade support system designed to enable financial institutions to monitor, evaluate and control banking and trading activities by supplying critical management information in a timely manner. The product is a proven and stable international banking system, representing the latest version of a product launched in 1986 by McDonnell Information Systems Plc ("MDIS"), and acquired by the Company in March of 1996. IBS-V5 offers the following functional modules: Customer Information File; Foreign Exchange; Money Market; Commercial Lending; Letters of Credit; Bills of Exchange; Centralized Nostro Reconciliation; Demand Deposit Accounting; General Ledger, Precious Metals, Money Transfer, Futures and Options, and International Securities. The inherent flexibility of IBS-V5 makes it capable of providing benefits in all these areas of banking operations in terms of risk management, provision of management information, integration of front and back office and automated settlements. MANTEC 8 ManTec is a suite of computer programs designed to support the back office functions of banks. It addresses substantially the same areas of functions as IBS-90 Abraxsys. The major differences with ManTec is that it is designed to run exclusively on IBM and IBM-compatible mainframe computers. The popularity of mainframe computers in the Company's target markets has declined rapidly over the past few years. The Company decided in July 1994, following the acquisition of the IBS-90 and Abraxsys products, to discontinue directly selling and servicing the ManTec product line. This decision was based on the view that the market for `open' systems such as Abraxsys was much larger and expanding versus the contracting market for mainframe systems. However, in recognition that a small market exists for the ManTec product, the Company transferred title to ManTec to Global Financial Systems Ltd. ("GFS"), a corporation based in London, England that sells and services the ManTec product line and other products. The Company shares in any license fees GFS may generate through the ManTec line. Trading Room Software Products of the Registrant - ------------------------------------------------ The Company's principal Trading Systems products are the OpenTrade family of products. The OpenTrade family of products comprises OpenTrade, TradeWizard, MediaWizard and EXTRA. OpenTrade is used by 50 customers supporting 6,000 trading positions. The Company's Trading Systems business is handled though MTi Trading. MTi Trading holds title to the Company's Trading Systems software products. As of 9 March 20, 1997, MTi Trading was put in administration. Accordingly, the Company ceased to exercise control over OpenTrade, TradeWizard, MediaWizard and EXTRA. Markets - ------- The Company markets its products to the international banking area of domestic and foreign banks. In the United States, the Company believes there are approximately 850 banks engaged in international banking activities of sufficient size to require, at least some of the components of the Company's products. In Europe, the Middle East and the Far East, the Company believes that there are in excess of 3,000 banking offices which form the primary market for the Company's software products. Data processing has become increasingly important to international banking activities. Management believes that the market potential for more sophisticated software systems has increased as a result of declining computer hardware prices, the high cost of staff and the increasing need to process transactions promptly so as to be able to adequately assess and control different types of risks. At the same time, management believes that it has become increasingly more difficult for users to internally develop the software necessary for their data processing requirements because of the substantial expense and commitment of personnel and other resources necessary to design and maintain such software programs. Distribution Methods of the Products and Services - ------------------------------------------------- 10 The Company has narrowed its focus to specific geographic areas in which relatively greater interest has been expressed in particular products (although there can be no assurance that such focus will translate into sales). The areas the Company is focusing upon are Western Europe, Eastern and Central Europe, the Far East and North America. The Company primarily relies upon its own direct sales force to achieve sales. In certain geographical markets, the Company has sales agents and/or support agents. Included among these are COMAS in Korea for Abraxsys; Systex Corporation in Taiwan for Abraxsys; IDOM, Inc. for the support of the IBS-V5 and Pro-IV IBS products in Central and Eastern Europe, the Commonwealth of Independent States (former republics of the Soviet Union) and the US; and Itochu Electronics in Japan. Banking Systems Strategic Alliances - ----------------------------------- SOFTSTAR INTERNATIONAL SOLUTIONS, INC. ("SIS") A joint partnership was signed in July of 1997 with SIS to realize the benefits of promoting SIS's multi-currency, multi-language, multi standard database and financial applications to the Company's extensive customer base. SIS is a US based leading supplier of financial and business software applications to businesses operating across language, national and cultural barriers. The agreement provides for a sharing of revenue from any SIS sale to the Company's customers. LANIT, INC. ("LANIT") 11 A joint partnership was signed in July of 1997 with Lanit to realize the benefits of promoting Lanit's wide range of software services to the Company's extensive customer base. Lanit is a Russian leading supplier of financial and business software services in certain areas of the Commonwealth of Independent Republics. The agreement provides for a sharing of revenue from any SIS sale to the Company's customers. GARG DATA INTERNATIONAL, INCORPORATED ("GDI") GDI is a US based leading supplier of systems integration services and certain software products. A joint partnership was signed in July of 1997 with GDI to realize the benefits of promoting GDI's systems integration software services to the Company's extensive customer base. GDI also provides certain development and support services to certain clients of the Company with regard to certain software products of the Company. The agreement provides for a sharing of revenue from any SIS sale to the Company's customers. Sources of Revenue - ------------------ SOFTWARE LICENSING The Company generally licenses Banking Systems software products to its customers for use under non-exclusive 5 to 25 year license agreements, and perpetual non-exclusive license for its Trading Systems software products. Pursuant to the Company's standard form of license agreement, the customer pays a fixed license fee which varies depending on the number of users licensed to access the software, and acquires the non-transferable and non-exclusive right to use the software at a designated site. If the customer desires to use the 12 software at multiple locations or to add further users additional license fees are required. The one-time license fees for the Company's application software packages currently range from $100,000 to $2,000,000. The Company is dependent for license revenues upon sales of its IBS-90, Pro-IV IBS, IBS-V5, and Abraxsys software products. The Company is no longer dependent on sales of ManTec product lines. MAINTENANCE As part of the fixed license fee for the Company's software products, customers receive, a warranty period of typically 90 days after installation, during which period the Company provides free maintenance services. After that period, the Company offers maintenance services to its customers based upon an annual fee reflecting the service provided by the Company. Maintenance fee revenues are recognized ratably over the period of the contract. The Company warrants that its software will conform with documented specifications. To date, warranty expense has been minimal. The Company's maintenance agreements generally provide for the maintenance by MTI of MTI licensed software at a specified site for a period of one to three years. Under the maintenance agreements, MTI is required to correct or replace its licensed software and/or provide services necessary to remedy significant programming errors attributable to it. Maintenance fees range from approximately $30,000 to $400,000 annually, depending upon the number of licensed users. CUSTOMER SERVICES 13 The company provides support services relating to the custom design and production of modifications to software products to meet the specific needs of a customer. In addition, the Company offers a full range of customer support services, including project planning and management, system installation, software implementation, user training/education, technical support and documentation and on-site engineering. The Company charges customers for these services with the exception of documentation. Customer services fees are recognized as revenue as work is performed and invoiced by the Company. THIRD PARTY PRODUCTS The Company also derives revenues from selling other companies' products. Such arrangements include sales of both hardware and software. Such sales are either as part of packaged deals or are where other products are embedded within the Company's product. a) Hardware -------- The Company occasionally acts as an authorized value added reseller ("VAR") for Digital or its distributors, Sun Microsystems ("Sun") and International Business Machine Corporation ("IBM") in connection with the licensing of its IBS-90, Abraxsys and OpenTrade software products. In the year ended April 30, 1997, the Company recognized approximately $212,540 of revenues for sales of hardware associated with certain software product licenses. 14 b) Third Party Software Products Licensed in Conjunction with Banking Systems -------------------------------------------------------------------------- Licenses - -------- The Company has a marketing agreement in place with Microbank Software, Inc. to distribute Stor/QM, an advanced data storage, research and analytical application. Competition - ----------- The financial institutions software industry is highly competitive. The Company believes that the principal factors affecting the marketing of software packages are product availability, advanced technology, comprehensiveness of product applications, flexibility, ease-of-use to meet customer needs, software enhancements, maintenance, customer support, training, documentation, efficient use of computer hardware and customer references. Price is a primary consideration to penetrate certain market segments, particularly smaller banks where automation may be postponed if its cost is deemed prohibitive. The Company encounters its primary competition from other software vendors. The Company competes with many companies which have greater financial resources, more technical personnel and more extensive service capabilities than the Company. The market is highly fragmented; however, the Company views Midas- Kapiti International Limited ("MKI"), Internet Systems Corp. ("Internet"), International Banking Information Systems Limited ("IBIS") as its principal Banking Systems industry competitors. 15 The Company is also subject to substantial competition from potential customers with existing comprehensive applications software packages for international banking insofar as such companies might elect to modify rather than replace existing systems. The Company's ability to compete successfully requires that it continues to develop and maintain the necessary technical proficiency for easy assimilation of future technological advances, that it continue to offer marketable and reliable applications software programs which satisfy the information management and competitive requirements of banks and financial institutions, and that it provide sufficient customer support and related services, as to any of which there can be no assurance. Dependence on a few major customers - ----------------------------------- Digital owns several subsidiaries which act as prime contractors to many of the Company's end customers. The Company has no customers which in fiscal year ended April 30, 1997 contributed 10% or more of the Company's revenue. The Company does not consider that it is dependent on any one customer for its future business success. Foreign Operations - ------------------ The Company has foreign operations in the United Kingdom, France, Singapore, and Hong Kong. Subsidiaries outside the United States accounted for 91% of the Company's revenues in the year ended April 30, 1997. 16 Included in North America revenues for the years ended April 30, 1997 and 1996 were export revenues of $203,000 and $20,000, respectively. Research and Development - ------------------------ The Company continues to be engaged in computer software development and improvements of its existing software products. The development of applications software packages for banks and financial institutions is a continuous process. Technological advances in computer hardware, systems software, industry deregulation and other regulatory changes affecting banking institutions require software modifications and result in more complex and comprehensive processing needs. In the event the Company fails to continue to update its product line, the Company's products may become obsolete. The Company believes that its principal products remain competitive. However, the Company is continuing to engage in research and development activities, principally, in the "open systems" area. Accordingly, the Company is committed to retaining and developing competitive product lines. In the year ended April 30, 1997, the Company capitalized approximately $476,000 of software development. The Company does not have any material contracts relating to third-party research and development . Employees - --------- As of July 30, 1997 the Company had 62 salaried employees, as compared with 233 employees as of April 30, 1996, excluding the employees of MTi Trading, in 17 administration. The Company decreased its staff since April 30, 1996 as a result of the restructuring of its operations in the UK through the administration proceedings and various cost cutting measures in other companies of the group. The Company's employees are not represented by any union or other collective bargaining unit. The Company believes that it has a satisfactory relationship with its employees. Trademarks, Copyrights and Licenses - ----------------------------------- The Company believes that rapid technological advances in the computer software industry make it impractical for the Company to obtain patent protection for most of its products and that it must rely principally upon innovative software engineering skills and contractual safeguards. The Company seeks to protect its proprietary software products through restrictions in its license agreements which prohibit resale, transfer, disclosure or reproduction of the software, except for archival purposes or to provide back-up copies, and which restrict the customer's use to designated sites. The Company's software products cannot be modified without the source code, which the Company keeps secure. The Company also requires employees to enter into non-disclosure agreements prior to joining the Company. To date, the Company has not been required to enforce the contractual safeguards relating to the use of its software. The Company also retains exclusive ownership rights to all software it develops. Pursuant to the indemnification provisions of its license agreements, the Company agrees to indemnify customers from losses resulting from any third-party claims that the Company's software infringes upon proprietary rights of such third-party. The amount of such indemnification is 18 generally limited to the amount of the license fee paid by such customer. To date, there have been no such claims. General - ------- The Company's business is not seasonal, nor does the Company do any business with the United States government nor any other government ITEM 2. DESCRIPTIONS OF PROPERTIES The Company's principal executive offices are located at 630 Third Avenue, New York, New York. The New York office also houses the sales and support operation for North America. In addition to its Executive offices the Company has the following facilities: LONDON, ENGLAND - --------------- BONHILL STREET - facility leased in March 1996 for UK headquarters housing development, sales, administration and support. Effective July 22, 1997, approximately half of this facility is used by ABS and the other half by Trading Systems, in adminstration. OTHER LOCATIONS - --------------- PARIS - MTinnovation sales and support office 19 SINGAPORE - Abraxsys Pte and Abraxsys HK Asia/Pacific sales and support office The following table summarizes the relevant lease/license agreements relating to these facilities, apart from Moscow which is a local one year renewable rental agreement with Digital Russia. Each of the lease agreements is with a non- affiliate company. The party to the lease/license agreements are the relevant local entity in that country. LOCATION AGREEMENT & EXPIRY DATE ANNUAL RENT ANNUAL RENT NOTES DATE (LOCAL) (APPROX. US$) New York Lease May 31 2001 US$ 191,075 US$ 191,075 London - Sub Lease Month to GBP 170,000 US$ 256,300 Rent free England March 1 1996 month until Bonhill December 31, 1997 Singapore Lease August August 15 , S$ 60,000 US$42,384 15, 1997 2000 Paris - Lease October, FFr 540,000 US$ 89,720 France October 1996 1999 20 ITEM 3. LEGAL PROCEEDINGS 1. Claim of Sharon F. Merrill ("Merrill") Merrill filed suit against the Company in the Superior Court of the Commonwealth of Massachusetts. In 1994, Merrill received 250,000 shares of restricted stock of the Company in exchange for all shares issued and outstanding of MTi Merken, Inc., with certain registration rights. Merrill alleges that the Company did not register her shares in a timely fashion and that she sustained losses as a result of a decline in the price of the stock of the Company. Merrill claims damages in the amount of $180,000 plus interest and treble damages in the amount of $631,000. The Company is defending vigorously and disclaiming any liability for any losses claimed by Merrill. The Company is not a party to any other material litigation. ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's Common Stock are traded in the over-the-counter market under the National Association of Securities Dealers Automated Quotation System ("NASDAQ") symbols MTCI. The Company's Class "C" Warrants expired on April 28, 1997. The Company's other warrants are not publicly traded. Class "C" Warrants and other warrants are described in Item 7, Note 12. On April 28, 1995, the Company's 21 shareholders resolved to reverse split the Company's issued and outstanding common stock on a one for seven basis. The reverse split took effect on May 15, 1995. The following sets forth, and the high and low trade prices for the eight quarters ending April 30, 1997, as reported by NASDAQ, adjusted to give effect to the May 15, 1995 reverse split. Such prices represent prices between dealers without adjustment for retail mark-ups, mark-downs or commissions and may not necessarily represent actual transactions. COMMON STOCK COMMON STOCK HIGH LOW ($) ($) MAY 1-JUL 31, 1995 2 13/16 AUG 1-OCT 31, 1995 1 1/16 1/2 NOV 1-JAN 31, 1996 1 5/8 FEB 1-APR 30, 1996 1 15/16 23/32 MAY 1-JUL 31, 1996 1 3/32 1/2 AUG 1-OCT 31, 1996 3/4 3/32 NOV 1-JAN 31, 1997 1/4 3/64 FEB 1-APR 30, 1997 1/8 1/32 On August 8, 1997 the closing bid prices of the Common Stock was $3/32 The approximate number of stockholders of record on April 30, 1997, was 324, and a substantial number of shares are held in "street-name" by approximately 6,000 individuals or entities. 22 The Company has never paid any cash dividends on its Common Stock. The Company does not anticipate paying any dividends in the foreseeable future. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF AND RESULTS OF OPERATIONS FINANCIAL CONDITIONS. GENERAL The Company's revenue consists of license fees from the Company's software products, maintenance fees and customer service fees. Billings made in advance of delivery are recorded as deferred income. The amount by which recognized revenue exceeds billings to customers is shown as unbilled accounts receivable. The Company recognizes revenue for licensing of its IBS-90 and Abraxsys products in compliance with Statement of Position 91-1 ("SOP 91-1"); accordingly, it recognizes license revenues upon delivery provided that no significant vendor obligations remain and collection of the resulting receivable is deemed probable. The Company's contracts with its customers provide for payment to be made on specified schedules that may differ from the timing by which revenue is recognized. Revenues from licensing the Open Trade product were recognized on the percentage of completion method of accounting as costs are incurred in compliance with Statement of Position 81-1 ("SOP 81-1"). Maintenance fee revenues are recognized ratably over the period of the contract. Customer service fees are recognized as revenue as work is performed under the service arrangement. 23 The Company's revenues and results of operations are subject to significant fluctuations, depending primarily on the number of software components delivered in any period. License fees range from $100,000 to $2,000,000. As is typical in the software industry, maintenance fees are a more stable source of revenue. Costs of software products consist of the cost of third party products resold with the Company's products and the amortization of acquired software technology and of capitalized software. Other costs of software products, such as the costs of duplicating products from product masters and physical packaging of the Company's software, are immaterial. The costs of providing maintenance and customer service are allocated between maintenance and customer service fees in proportion to their respective revenues. Management believes that such allocations are reasonable. COMPARISON OF FISCAL YEARS In the year ended April 30, 1997, the business of the Company was substantially affected as a result of administration proceedings of its subsidiaries MTi Trading, MTi Holding and Winter Partners. It is likely that the Company's business in the year ending April 30, 1998, will be substantially different from that in the years ended April 30, 1997 and 1996. The consolidated results for the year ended April 30, 1997 include results for MTi Trading, MTi Holding and Winter Partners for the period from May 1, 1996 to March 19 and 20, 1997, and twelve months of operation for Management Technologies, Inc., Abraxsys Inc., Abraxsys Pte, Abraxsys HK and MTinnovation. The Company's total revenues were $23,750,000 and $21,227,000 for the years ended April 30, 1997 and 1996, respectively. This increase in revenue is due to (i) an increase in license revenues to $6,602,000 from $5,916,000 in the years 24 ended April 30, 1997 and 1996, respectively, and (ii) an increase in customer services fees to $9,304,000 from $7,652,000 in years ended April 30 1996 and 1995, respectively. However, there was a reduction in the maintenance revenue to $7,105,000 in the year ended April 30, 1997 from $7,586,000 in the year ended April 30, 1996. The Company's license revenues are subject to significant fluctuation due to the relatively high cost of license fees. The cost of software products increased to $3,856,000 from $2,598,000 for the years ended April 30, 1997 and 1996, respectively. Costs of maintenance increased to $8,433,000 from $3,884,000 for the years ended April 30, 1997 and 1996 respectively. The increase in the cost of maintenance is a result of new clients who have come out of warranty during the period and the addition of the IBS version 5 and the IBS Pro-IV product lines. Costs of customers' services fees increased to $9,646,000 from $3,824,000 for the years ended April 30, 1997 and 1996, respectively. The increase in the cost of services is a result of the addition of the IBS version 5 and the IBS Pro-IV product lines. The Company's selling general and administrative expenses decreased to $10,957,000 from $20,242,000 in the years ended April 30, 1997 and 1996, respectively. This decrease is a result of the Company's efforts to control costs. The Company recognized a net loss of $16,523,000 for the year ended April 30, 1997, inclusive of a loss on disposition of its UK subsidiaries in the amount of $6,139,000. The Company recognized a loss from operations of $10,297,000 in the year ended April 30, 1997 as compared to a loss of $10,965,000 for the year ended April 30, 1996. The Company currently conducts its business in currencies other than United States dollars, although a large part of the Company's business abroad is conducted in United States Dollars. The revenue from subsidiaries outside the 25 United States amounts to 91% of the Company's revenue in the year ended April 30 1997 and 88% in year ended April 30 1996. LIQUIDITY AND CAPITAL RESOURCES At April 30 1997 the Company had a working capital deficiency of $3,513,000. The Company had a net loss of $10,384,000 and $10,802,000 before loss from disposition of subsidiaries, in the years ended April 30, 1997 and 1996, respectively. Net cash of $9,864,000 and $8,762,000 was used in operating activities in the years ended April 30, 1997 and 1996, respectively. Net of 472,000 and $0 was used in investing activities in the years ended April 30, 1997 and 1996, respectively. Financing activities provided $10,411,000 and $8,245,000 in the years ended April 30, 1997 and 1996, respectively, primarily from proceeds of private placement of the Company's common equity and from the placement of convertible debentures. At April 30, 1997, the Company had net operating loss carry-forwards for federal income tax purposes in the United States of $20,174,000 subject to Internal Revenue Service review, which are available to offset future federal taxable income, if any, through 2011 and may be subject to annual limitations in use due to the Company's equity issuances. In the year ended April 30 1997, the Company issued convertible debentures pursuant to Regulation S in the aggregate gross amount of $9,911,000 and issued 91,925,535 shares in conversion of debt. The Company further sold 1,000,000 shares of common stock pursuant to Regulation S for a gross consideration of $500,000, and issued 92,000 shares in compensation for services. The Company believes that until such time as it may experience a substantially expanded cash flow from operations, it will be required to seek alternative sources of funds for working capital and to fund the continuation of its development and marketing efforts. The Company intends, to the extent required to provide working capital and to satisfy all outstanding debt, to continue to sell its securities directly to investors in private placements and it may, in 26 the future, attempt to arrange an offering through a private placement agent or underwriter. The Company's long-term liquidity and its ability to continue as a going concern will ultimately depend upon the Company's ability to generate sufficient cashflow from operations. ITEM 7. FINANCIAL STATEMENTS MANAGEMENT TECHNOLOGIES, INC. AND SUBSIDIARIES Consolidated Financial Statements April 30, 1997 and 1996 With Independent Auditors' Report Thereon 27 MANAGEMENT TECHNOLOGIES, INC. AND SUBSIDIARIES Table of Contents Independent Auditors' Report Consolidated Balance Sheet Consolidated Statements of Stockholders' Equity Consolidated Statements of Operations Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements KPMG Peat Marwick LLP 345 Park Avenue New York, NY 10154 INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders Management Technologies, Inc.: We have audited the accompanying consolidated balance sheet of Management Technologies, Inc. and subsidiaries as of April 30, 1997 and the related consolidated statements of operations, stockholders' equity, and cash flows for the years ended April 30, 1997 and 1996. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards 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. 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 provide a reasonable basis for our opinion. 29 In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Management Technologies, Inc. and subsidiaries at April 30, 1997, and the results of their operations and their cash flows for the years ended April 30, 1997 and 1996 in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 4 to the financial statements, the Company has suffered recurring losses from operations and at April 30, 1997 has a net capital deficiency that raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 4. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ KPMG PEAT MARWICK LLP New York, New York August 13, 1997 Member Firm of Klynveld Peat Marwick Goerdeler MANAGEMENT TECHNOLOGIES, INC. 30 AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET April 30, 1997 (in $000) ASSETS Current assets: Cash 371 Accounts receivable 514 Prepaid expenses and other current assets 290 TOTAL CURRENT ASSETS 1,175 Property and equipment, net of accumulated depreciation 162 Intangible assets, less accumulated amortization 5,403 Other assets 31 TOTAL ASSETS 6,771 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable 1,014 31 Accrued expenses 2,086 Taxes payable 432 Deferred income 1,152 Other current liabilities 4 TOTAL CURRENT LIABILITIES 4,688 Convertible debentures 3,699 Other long term liabilities 48 TOTAL LIABILITIES 8,435 Stockholders' equity Common stock $.01 par value. Authorized shares 1,177 200,000,000, issued shares 117,703,439 Additional paid in capital 60,464 Accumulated deficit (63,388) Foreign currency translation adjustment 83 TOTAL STOCKHOLDERS' EQUITY (1,664) TOTAL LIABILITIES AND STOCKHOLDERS' 6,771 EQUITY The accompanying notes are an integral part of these financial statements 32 MANAGEMENT TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (in $000 except share data) Number Commo Additi n onal of stock paid Accumula Tran Total in ted slat ion shares par capita deficit adju value l stme nt Balances at April 14,540,169 145 42,467 (36,063) (530 6,019 30, 1995 ) Issuance of common 672,700 7 507 514 stock for compensation and services Issuance of common stock in conversion of 4,456,749 45 2,452 2,497 convertible debentures 33 Issuance of common 100,000 1 99 100 stock on exercise of warrants Issuance of common 4,916,466 49 4,289 4,338 stock Net loss for the (10,802) (10,802) year Translation 963 963 adjustment Balances at April 24,686,084 247 49,814 (46,865) 433 3,629 30, 1996 Issuance of common stock for compensation and 92,000 1 29 30 services Issuance of common stock for cancellation of 91,925,355 919 10,131 11,050 subordinated notes 34 Issuance of common 1,000,000 10 490 500 stock for sale Net loss for the (16,523) (16,523) year Translation (350 (350) adjustment ) Balances at April 117,703,439 1,177 60,464 (63,388) 83 (1,664) 30, 1997 The accompanying notes are an integral part of these financial statements MANAGEMENT TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Years ended April 30, 1997 and 1996 (in $000) 35 1997 1996 Revenues Software products 6,602 5,916 Maintenance fees 7,105 7,586 Customer service fees 9,304 7,652 Other income 739 73 Total revenues 23,750 21,227 Cost and expenses Cost of software products 3,856 2,598 Cost of maintenance 8,433 3,884 Costs of customer service 9,646 3,824 Selling, general and administrative 10,957 20,242 Amortization of intangible assets 484 730 Depreciation 671 914 Total costs and expenses 34,047 32,192 LOSS FROM OPERATIONS (10,297) (10,965) Interest expense (66) (901) Income taxes (21) - Other income - 1,064 Loss from disposition of subsidiaries (6,139) - 36 NET LOSS (16,523) (10,802) Net loss per share (0.24) (0.58) Weighted average number of common shares 67,615,622 18,669,728 outstanding The accompanying notes are an integral part of these financial statements MANAGEMENT TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended April 30, 1997 and 1996 (in $000) 1997 1996 Cash flow from operating activities Net loss (16,523) (10,802) Adjustments to reconcile net loss to net cash 37 used in operating activities Depreciation and amortization 1,313 2,073 Loss from disposition of subsidiaries 6,139 - Gain on affiliate - (1,064) Issuance of common stock for compensation 30 514 Write off of property, plant & equipment 62 - Changes in assets and liabilities net of effects from acquisitions: Decrease (increase) in accounts 6,177 (1,421) receivable Decrease in prepaid & other assets 1,987 1,857 Decrease in accounts payable & (3,435) (1,020) accrued expenses (Decrease) increase in taxes payable (3,421) 2,899 Decrease in deferred income (1,541) (518) Decrease in other liabilities (652) (1,280) Net cash used in operating activities (9,864) (8,762) Cash flows from investing activities: Capitalized software costs (472) - Net cash used in investing activities (472) - Cash flow from financing activities Proceeds from notes payable and convertible 9,911 7,802 debentures Repayment of notes payable - (1,745) Proceeds from issuance of common stock 500 2,188 38 Net cash provided by financing activities 10,411 8,245 Effect of exchange rate on cash (17) (3) Increase (decrease) increase in cash and cash 58 (520) equivalents Cash and cash equivalents - beginning of period 313 833 Cash and cash equivalents - end of period 371 313 Supplemental disclosure of cash flow information Non-cash financing activities Settlement of acquisition note with accounts 2,564 - receivable Issuance of common stock in conversion of debt 11,050 2,497 Issuance of common stock for MDIS acquisition - 2,250 The accompanying notes are an integral part of these financial statements 39 All monetary figures in the notes to the financial statements are expressed in US $ unless otherwise noted. (1) Summary of Significant Accounting Policies ------------------------------------------ DESCRIPTION OF BUSINESS The primary business of Management Technologies, Inc. and of its subsidiaries (collectively, the "Company") is the development, installation, marketing, maintenance and support of an integrated line of standardized, international, banking application software packages. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Management Technologies, Inc. and its wholly-owned subsidiaries, for the periods during which such subsidiaries were controlled by Management Technologies, Inc. Accordingly, the financial statements include the accounts of MTi Trading Limited ("MTi Trading") and MTi Holding (UK) Limited ("MTi Holding") through March 19, 1997 and the accounts of Winter Partners Limited ("Winter Partners") through March 20, 1997. All significant inter-company balances and transactions have been eliminated in consolidation. As used hereafter, "Company" refers to Management Technologies Inc., and its consolidated subsidiaries unless otherwise stated. REVENUE RECOGNITION 40 The Company accounts for revenue in conformity with Statements of Position (SOP) 91-1 and 81-1. Billings made in advance of delivery are recorded as deferred income. The amount by which recognized revenue exceeds billings to customers is shown as unbilled accounts receivable. In accordance with SOP 91-1, revenues from IBS-90 and Abraxsys licenses are recognized on delivery to the customer, provided that no significant vendor obligations remain and collection of the resulting receivable is deemed probable. The Company's contracts with its customers provide for payment to be made on specified schedules that may differ from the timing by which revenue is recognized. Revenues form OpenTrade, TradeWizard, MediaWizard, EXTRA and Pro-IV IBS licenses are recognized on the percentage-of-completion method of accounting as costs are incurred (cost to cost basis) in conformity with SOP 81-1. An estimate is made of the revenue attributable to work completed and is recognized once the outcome of the contract can be assessed with reasonable certainty. Maintenance fees are recognized proportionately over the term of the maintenance agreement. Customer service fees represent fees charged to customers for modifications of standard software to customer specifications or work charged on the basis of the time spent on the task as required by 41 customers. Customer services fees are recognized as revenue as work is performed and invoiced by the Company. FOREIGN CURRENCY TRANSLATION Foreign currency transactions and financial statements of foreign subsidiaries are translated into US dollars at prevailing or current rates respectively except for revenues, costs and expenses that are translated at average current rates during each reporting period. Gains and losses resulting from foreign currency transactions are included in income currently. Gains and losses resulting from the translation of financial statements are excluded from the statement of income and are credited or charged directly to a separate component of stockholders' equity. PRODUCT RESEARCH AND DEVELOPMENT Costs associated with product research, development and enhancement are recorded as follows: . Speculative technical research, usually incurred as input to discussions related to product planning, are expensed until the point at which the product reaches technological feasibility. Subsequent costs incurred to the point where the product is available for general release to the customer are capitalized. . The costs of development specific to individual customers and not generally applicable to other customers are expensed. 42 . Development costs applicable to core products, which are predominantly of a maintenance nature, are expensed as incurred. Such development is generally designed to insure that products are kept up to date with regulatory requirements, accounting policies and banking practices and do not result in new salable products. PROPERTY, PLANT AND EQUIPMENT Property, plant, and equipment are stated at cost. Plant and equipment under capital leases are stated at the present value of minimum lease payments. Plant and equipment under capital leases are depreciated straight line over the shorter of the lease term or estimated useful life of the assets. Depreciation on plant and equipment is calculated on the straight-line method over the estimated useful lives of the assets as follows: Computer Equipment two to five years Furniture, fixtures and fittings four to five years Leasehold improvements over the minimum period of the lease Motor vehicles four years 43 INCOME TAXES The Company conforms to the provisions of Statement of Financial Accounting Standards No. 109 ("Statement 109"), Accounting for Income Taxes. Under the asset and liability method of Statement 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under Statement 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. LOSS PER COMMON SHARE Loss per common share is calculated using the weighted average number of common shares outstanding for each period. USE OF ESTIMATES The Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities as well as revenues and expenses, and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with 44 generally accepted accounting principles. Actual results could differ from those estimates. IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF The Company adopted the provisions of Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, on May 1, 1996. This Statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future earnings expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceed the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Adoption of this Statement did not have a material impact on the Company's financial position, results of operations, or liquidity. STOCK OPTION Prior to May 1, 1996, the Company accounted for its stock option plan in accordance with the provisions of Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. As such, compensation expense would be recorded on the date of grant only if the current market price of the 45 underlying stock exceeded the exercise price. On May 1, 1996, the Company adopted Statement of Financial Accounting Standards No. 123 ("Statement 123"), Accounting for Stock-Based Compensation, which permits entities to recognize as expense over the vesting period the fair value of all stock-based awards on the date of grant. Alternatively, Statement 123 also allows entities to continue to apply the provisions of APB Opinion No. 25 and provide pro forma net income and pro forma earnings per share disclosures for employee stock option grants made in 1996 and future years as if the fair-value-based method defined in SFAS No. 123 had been applied. The Company has elected to continue to apply the provisions of APB Opinion No. 25 and provide the pro forma disclosure provisions of Statement 123. (2) Subsidiaries in Administration ------------------------------ By order dated March 19 and March 20, 1997, the High Court of Justice, Chancery Division, Companies Court, in London, England, appointed Messrs. Malcolm Cohen and Peter Supperstone of BDO Stay Hayward as joint administrators of Winter Partners, MTi Holding and MTi Trading, pursuant to the provisions of Section 8 of the English Insolvency Act 1986, for the purposes of (i) the survival of the companies, and the whole or any parts of their undertaking, as a going concern, (ii) the approval of certain voluntary arrangements with the companies' creditors, and (iii) a more advantageous realization of their assets than would be effected on a winding up. On July 22, 1997, Advanced Banking Solutions, Limited ("ABS"), a wholly owned subsidiary of Management Technologies, Inc., acquired certain assets from Winter Partners, in administration, including intellectual 46 property rights to certain software products, various fixtures and equipment, accounts receivable, work-in-progress. In addition ABS assumed certain contracts from Winter Partners, in administration, and related liabilities in the approximate amount of 55,000 British pounds. ABS paid a total consideration of 257,454 British pounds for the acquired assets and the assumed contracts. Certain employees and management of Winter Partners, in administration, were hired by ABS. From July 23, 1997 on, ABS is carrying out in the UK and in certain parts of the world, the Banking Systems business that was formerly that of Winter Partners. Winter Partners was acquired in July of 1994 in an acquisition transaction that included Abraxsys, Inc., Abraxsys Pte and Abraxsys HK. The Company paid a total of $12,800,000, and incurred certain additional costs of approximately $325,000. The transaction was accounted for as a purchase and resulted in a one-time charge of $7,000,000 for acquired research and development that was in process at the time of acquisition. The Company recognized $1,300,000 in acquired software technology and recorded goodwill of $5,270,000 as the excess of the purchase price over the fair value the net assets acquired. The Company believes that it will recover the net original cost of acquired software technology through the activities of ABS, Abraxsys, Inc., Abraxsys Pte and Abraxsys HK. The Company wrote off $3,450,000 of the $5,270,000 originally recorded as goodwill. In the years ended April 30, 1995, 1996 and 1997, Winter Partners incurred losses of $5,038,147, $6,070,311 and $1,954,026, respectively. No dividend was paid to Management Technologies, Inc. in conjunction with the liquidation of Winter Partners. Accordingly, at April 30, 1997, the Company's apportioned investment in, and advances to, Winter Partners are valued at zero. The Company recognized a loss of 47 approximately $172,000 on disposition of Winter Partners to reflect the difference between accumulated losses and the investment in, and advances to, Winter Partners. These financial statements reflect $1,820,000 in goodwill related to Abraxsys, Inc., Abraxsys Pte and Abraxsys HK, which the Company believes will be recovered through the activities of those subsidiaries. There is no remaining actual or contingent liability to Management Technologies, Inc. related to Winter Partners except for a certain lease guarantee for approximately $72,000. MTi Trading was acquired in January of 1995 for a total consideration of $10,169,000 by MTi Holding, a wholly owned subsidiary of Management Technologies, Inc. The transaction was accounted for as a purchase and resulted in a one-time charge of $1,740,000 for acquired research and development that was in process at the time of acquisition. The Company recognized $3,000,000 in acquired software technology and recorded goodwill of $5,700,000 as the excess of the purchase price over the fair value of the net assets acquired. In the years ended April 30, 1995, 1996 and 1997, MTi Trading incurred losses of $1,977,217, $3,510,638 and $4,123,537, respectively. There is no guarantee that Management Technologies, Inc. will receive any dividend from the disposition of the assets of MTi Trading. Accordingly, at April 30, 1997, the Company's investment in, and advances to, MTi Trading and MTi Holding, in administration, were valued to zero. Any dividend received in the liquidation of MTi Trading and MTi Holding, in administration, will be treated as a gain in the period in which it occurs. The Company recognized a loss of approximately $5,967,000 on disposition of MTi Trading to reflect the difference between accumulated losses and the investment in, and advances to, MTi Trading. 48 There is no remaining actual or contingent liability to Management Technologies, Inc. related to MTi Trading and MTi Holding. At April 30, 1997, the Company owned all shares issued and outstanding of MTi Trading, Winter Partners and MTi Holding; effective March 19 and March 20, 1997, court appointed administrators controlled the affairs of these wholly owned subsidiaries. Results of these subsidiaries for the period from May 1, 1996 to March 19 and 20, 1997 are consolidated in these financial statements. The following is a summary of the results of MTi Trading and Winter Partners for the consolidated period. MTi Holding did not have any significant income or loss during the consolidated period. Winter Partners MTi Trading Total Revenue $6,640,842 $12,990,905 $19,631,747 Cost of Sales $6,891,832 $13,259,129 $20,150,961 Other Costs $1,390,631 $3,855,313 $5,245,944 Net Loss $1,641,621 $4,123,537 $5,765,158 (3) Acquisitions ------------ MDIS ACQUISITION - INTERNATIONAL BANKING SYSTEMS BUSINESS OF MDIS 49 Effective March 1 1996, the Company acquired the international banking systems business of MDIS. The acquisition involved the transfer of certain assets including the rights to PRO-IV IBS, a newly developed back office banking system which had not yet been brought to market, the assumption of MDIS rights and obligations under certain contracts, and the transfer of all shares issued and outstanding of McDonnell Informatique S.A., a French corporation since renamed MTinnovation S.A. The consideration for the acquisition was a maximum of two million common shares issuable to MDIS on the Company recognizing at least $6,000,000 of revenue from the acquired business. Shares are issuable on a pro-rata basis at the rate of one thousand shares for every $3,000 of revenues. The first issuance of these shares is due in February 1997, and then quarterly up to April 1999. The Company has valued the two million shares at $2,250,000. In addition, a further one million shares become issuable if the Company achieves a profit in excess of $10,000,000 in the fiscal year ending April 30 1999. The additional shares have not been recorded at this time, as management does not believe that it is probable that they will be issued. Through April 30, 1997, the Company had recognized $670,000 of revenue with respect to the acquired business. Accordingly, approximately 224,000 shares were issuable to MDIS as of April 30, 1997. The Company currently believes that it will recognize $6,000,000 in revenues on the acquired business and will issue the 2,000,000 consideration shares. 50 The Company recognized $2,532,645 in acquired software technology in this transaction related to the PRO-IV IBS product. This will be amortized over the expected life of the PRO IV IBS product of ten (10) years. The prime reason for the MDIS acquisition was to obtain a newly developed PRO-IV IBS banking system software product. The other assets acquired included IBS V5, the forerunner to PRO-IV IBS, a small number of desktop PC's and other fixed assets of negligible value in terms of the acquisition. IBS V5 is no longer actively marketed. (4) Liquidity --------- The Company has suffered losses from operations in the fiscal years ended April 30, 1997 and 1996, and has a working capital deficiency of approximately $3,513,000 as of April 30, 1997. . The Company believes that until such time as it may experience a substantially expanded cash flow from operations, it will be required to seek alternative sources of funds for working capital and to fund the continuation of its development and marketing efforts. The Company intends, to the extent required to provide working capital and to satisfy all outstanding debt, to continue to sell its securities directly to investors in private placements and it may, in the future, attempt to arrange an offering through a private placement agent or underwriter. 51 The Company's long-term liquidity and its ability to continue as a going concern will ultimately depend upon the Company's ability to generate sufficient cashflow from operations. (5) Prepaid expenses and other current assets ----------------------------------------- Prepaid expenses and other current assets consist principally of the following items: $000 Rent deposits 135 Deferred financing charges 65 Corporate tax refund 10 Other 80 Total 290 52 (6) Property, plant and equipment ----------------------------- Balances of major classes of assets owned by Management Technologies, Inc. and subsidiaries under its control at April 30, 1997, and allowances for depreciation and amortization are as follows: COST ACCUMULATED NET DEPRECIATION VALUE Computer Equipment 482,617 451,744 30,873 Leasehold improvement 196,311 148,570 47,741 Office Furniture and 393,488 309,965 83,523 Equipment 1,072,417 910,280 162,137 Depreciation expense was approximately $671,000 and $914,000 in the years ended April 30, 1997 and 1996, respectively. 53 (7) Intangible Assets ----------------- Intangible assets as of April 30, 1997 are made up of software products and goodwill: $ Goodwill less accumulated amortization of 1,477,000 $343,000 Software products less accumulated 3,926,000 amortization of $512,000 5,403,000 See also note 2. 54 (8) Accrued expenses ---------------- The major components of accrued expenses are as follows: $000 Accrued interest 456 Provision for litigation 370 Accrued legal, professional and other fees 339 Staff related costs 274 Accrued cost of product sold 182 Rent 67 Other accrued expenses 396 2,086 (9) Taxes Payable ------------- Taxes payable comprise payroll deductions plus estimated penalties and interest for late payment. (10) Deferred income --------------- Deferred income consists entirely of deferred maintenance income. The Company expects to recognize as revenue all deferred income within the next fiscal year. 55 (11) Convertible Debentures ---------------------- 56 At April 30, 1997, the Company had $3,698,000 in outstanding convertible debentures from a total issued of $16,863,000. $3,906,000 were converted in the year ended April 30, 1996, and $9,259,000 in the year ended April 30, 1997. $1,380,000 of the balance at April 30,1997 matures on July, 1999, $1,103,000 on August of 1997 and the balance in December, 1997. Interest on the convertible debentures is payable quarterly through the terms of the notes. The Series SA debentures have been entirely placed with the staff and management of the Company; all other debentures were placed with unrelated parties. The principal and interest of the convertible debentures are convertible into shares of the Company's common stock at the holder's option on or before the due date of the note. The Company is entitled to require the holders to convert principal and interest balances before maturity except for the RBB and the SA convertible debenture, in the total amount of $2,256,000 at April 30, 1997, where the holder is entitled to be paid in cash at maturity. Debentures are convertible pursuant to their terms as follows: SERIES CONVERTIBLE AT THE LOWER OF A 62.5 % of the market price over $0.48 per share SA the 5 business days immediately preceding the date of conversion B 62.5 % of the market price over $0.53 per share the 5 business days immediately 57 preceding the date of conversion C 62.5 % of the market price over $0.85 per share the 5 business days immediately preceding the date of conversion D 62.5 % of the market price over $0.60 per share the 5 business days immediately preceding the date of conversion E 62.5 % of the market price over $0.60 per share the 5 business days immediately preceding the date of conversion H 65 % of the market price over 100 % of the the 5 business days immediately market price preceding the date of over the 5 conversion business days immediately preceding the date of the debenture X 65 % of the market price over 65 % of the the 5 business days immediately market price preceding the date of over the 5 58 conversion business days immediately preceding the date of the debenture Y 70 % of the market price over 100 % of the the 5 business days immediately market price preceding the date of over the 5 conversion business days immediately preceding the date of the debenture Z 70 % of the market price over 85 % of the the 5 business days immediately market price preceding the date of over the 5 conversion business days immediately preceding the date of the debenture RBB 70 % of the market price over 100 % of the the 5 business days immediately market price preceding the date of over the 5 conversion business days immediately 59 preceding the date of the debenture (12) Shareholders' Equity -------------------- (1) Warrants The Company's C Warrants expired on April 28, 1997. The Company has the following additional warrants outstanding: Number of shares Exercise Expiration date price 675,000 $0.69 various dates 1,295,002 $1.00 July 10, 2000 3,085,714 $1.75 November 4, 1997 95,238 $4.55 none 95,238 $4.90 none 133,810 $5.25 none (2) Options 60 At April 30, 1997, the Company had outstanding options as follows:- NUMBER OF EXERCISE NOTE SHARES PRICE Qualified Stock Options Plan - Employees Shares under option at April 1,857 $7.00-$7.84 (a) 30, 1996 Granted 0 Lapsed (429) Exercised 0 Shares under option at April 1,428 $7.00 30, 1997 Options exercisable at April 1,428 $7.00 30, 1997 Non qualified Stock Options (b) Plan for Directors, Officers and Consultants Shares under option at April 146,429 $0.01-$8.75 30, 1996 Granted 0 $0.01 Lapsed (146,429) Exercised 0 Shares under option at April 0 61 30, 1997 Options exercisable at April 0 30, 1997 Non qualified Stock Options (c) Plan for Key Employees Shares under option at April 7,142 $3.50-$7.00 30, 1996 Granted 0 Lapsed (7,142) Exercised 0 Shares under option at April 0 30, 1997 Other Stock Options (d) Shares under option at April 0 30, 1996 Granted 15,750,000 $0.03-$0.16 Lapsed (0) Exercised (0) --- Shares under option at April 15,750,000 $0.03-$0.16 30, 1997 Options exercisable at April 0 62 30, 1997 Options to purchase C (e) Warrants Warrants under option at 71,428 $3.43 April 30, 1996 Granted 0 Lapsed 71,428 Exercised 0 Warrants under option at April 30, 1997 0 (a) The Company adopted a qualified stock option plan under which the granting of options to purchase up to 8,000,000 shares has been authorized. The exercise price of the options is determined by the Option Committee appointed by the Board of Directors, but can be no less than 85% of the fair market value of the Company's stock on the date the option is granted. The maximum period during which each option may be exercised cannot exceed five years from the date of grant. (b) The Company adopted a non qualified stock option plan for directors, officers and consultants under which the granting of options to purchase up to 15,000,000 shares has been authorized. The exercise price of the options is determined by the Option Committee appointed by the Board of Directors. In the year ended April 30, 1996 granted below market options and recognized compensation expense in the amount of 63 approximately $149. The maximum period during which each option may be exercised cannot exceed five years from the date of grant. (c) The Company adopted a non qualified stock option plan for key employees under which the granting of options to purchase up to 10,000,000 shares has been authorized. The exercise price of the options is determined by the Option Committee appointed by the Board of Directors. The maximum period during which each option may be exercised cannot exceed five years from the date of grant. (d) The Company granted options at market rate to purchase common shares to key executives in connection with their employment agreements. These options will vest as follows: . 5,250,000 when the Company achieves annual sales of $50,000,000 and $3,500,000 in pre-tax profits; . 5,250,000 when the Company achieves annual sales $100,000,000 and $7,000,000 in pre-tax profits; . 5,250,000 when the Company achieves annual sales of $150,000,000 and $10,000,000 in pre-tax profits; (e) The Company has issued options to purchase C Warrants to a former officer of the Company in connection with his employment agreement. The option entitles its holder to purchase one Class C warrant at $3.01 per warrant. The Class C Warrants expired on April 28, 1997, causing the option to purchase such Class C Warrants to lapse. 64 The Company applies APB Opinion No. 25 in accounting for its stock options. For the years ended April 30, 1997 and 1996, no compensation cost was incurred for its stock options in the financial statements. Had the Company determined compensation cost based on the fair value at the grant date for its stock options under Statement 123, the Company's net income would not have been affected. 65 (13) Leases ------ The Company has various non cancelable operating leases, primarily for office premises, that expire over the next three to five years. These leases generally contain renewal options for periods ranging from three to five years and require the Company to pay all costs such as maintenance and insurance. Future minimum lease payments under non cancelable operating leases (with initial or remaining lease terms in excess of one year) as of April 30, 1997 are: OPERATING LEASES $ Year ending April 30 1998 323,179 1999 323,179 2000 270,842 2001 205,203 2002 15,922 Later years 0 Total minimum lease payments $1,138,326 66 (14) Income Taxes ------------ At April 30, 1997, the Company had net operating loss carry-forwards for federal income tax purposes in the United States of $20,174,000 which, subject to I.R.S. review, will be available to offset future federal taxable income, if any, through 2011 and are subject to annual limitations in use due to the Company's equity issuances. The Company has provided a valuation allowance equal to the estimated future benefit to be derived from the net operating loss carry forward as it is more likely than not that the losses will not be utilized. (15) Pension Benefits ---------------- Abraxsys, Inc. , has a 401(k) and contributes 25% of the employee's contribution up to 6% of the employee's salary. Abraxsys, Inc. recognized expenses related to its contribution to its 401(k) plan in the amount of $11,000. The employees of the Company's subsidiaries in the UK are entitled to receive additional compensation equivalent to 7% of their annual base salaries in lieu of any other pension provision by the Company. Expenses related to such additional compensation amount to approximately $710,000. Abraxsys Pte contributes to the Government of Singapore Central Provident Fund in respect of all employees. The rate paid during the year ended April 30, 1997, was 20% of the employees' gross compensation 67 subject to monthly maximum payments. Abraxsys Pte recognized expenses related to its pension contributions in the amount of $65,000. (16) Business and Credit Concentrations ---------------------------------- Most of the Company's customers are located in Europe and in the countries of the former Soviet Union. No customers accounted for more than ten percent of the Company's revenues in the years ended April 30, 1997 and 1996. 68 (17) Industry Segment and Geographic Information ------------------------------------------- The Company operates in one principal industry segment; the design, production, sales and maintenance of computer systems and software together with the provision of associated services to international banking and financial institutions. The Company derived 91% and 88% of its gross revenues from its international subsidiaries, primarily in the UK in the years ended April 30, 1997 and 1996, respectively. (18) Commitments and Contingencies ----------------------------- The Company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company's consolidated financial position, results of operations or liquidity. ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None PART III 69 ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT. The information required by Item 9 with respect to the Company's directors and executive officers is as follows: POSITION(S) HELD ---------------- NAME AGE WITH COMPANY PERIOD ---- --- ------------ ------ Michael Awerbuch 39 Director March 1996 to January 1997 Anthony J. Cataldo 46 President December 1991 to June 1994 Chairman of the Board June 1994 to & Chief Executive July 1995 Officer Director November 1991 to July 1995 Michael J. Edison 52 President and Chief February 1997 to Executive present Director February 1997 to present Paul Ekon 38 Chief Executive October 1995 to Officer February 1997 Director October 1995 to 70 present Patrick Huguenin 50 Chief Financial April 1997 to Officer present Director April 1997 to present Peter Morris 41 President November 1995 to March 1997 Chief Operating November 1995 to Officer March 1997 Director November 1995 to March 1997 John Ridley 40 Director March 1996 to March 1997 Peter Svennilson 35 Director October 1994 to November 1995 Chairman of the Board July 1995 to November 1995 Chief Executive September to Officer November 1995 S. Keith Williams 47 President & Chief July 1994 to Operating Officer September 1995 Director November 1994 to September 1995 71 MICHAEL AWERBUCH served as a Director of the Company from March 1996 to January 1997. Mr. Awerbuch also served as a consultant to the Company during that period. From 1987 to 1992, Mr. Awerbuch worked as a broker with Kaplan and Stewart, Ltd. in Johannesburg, South Africa. From 1993 to 1994, Mr. Awerbuch worked as a broker with Taglich Brothers, D'Amadeo and Wagner & Co, Inc. in New York. From 1994 to 1996, Mr. Awerbuch served as Vice President for Sales of New World Technologies, Inc., a New York computer distribution and sales company. ANTHONY J. CATALDO, joined the Company as its President and a Director in November 1991. He served as Chairman of the Board and Chief Executive Officer from June 1994 to July 1995. From March 1986 to November 1991, Mr. Cataldo was President of Internet Systems Japan, a producer of software for financial institutions, where he was responsible for Japanese sales and marketing. MICHAEL J. EDISON has served as a Director, Chief Executive Officer and President of the Company from February of 1997. Mr. Edison served as Chairman and Chief Executive Officer of the Edison Companies Inc. since 1991. Mr. Edison founded Insur USA in 1984 and served as its Chairman from 1984 to 1991. PAUL EKON was appointed a Director and Chief Executive of the Company in October of 1995. Mr. Ekon was engaged in various manufacturing and marketing businesses in South Africa since 1990. PATRICK HUGUENIN has served as Chief Financial Officer and as Director from April of 1997. Mr. Huguenin served as Vice President for Finance and Administration and in various management positions with the Company since 1985. He holds a law degree and an Master of Business Administration. PETER MORRIS served as a Director and as President and Chief Operating Officer of the Company from November of 1995 to March of 1997. Mr. Morris served as managing director of DESISCo, re-named MTi Trading Systems, from 1993 to November 1995, and as director of sales of DESISCo from 1992 to 1993. He served as a Director and Chief Operating Officer for Security Pacific, Hoare 72 Govett from 1990 to 1992, Chairman and Chief Executive Officer for Fulcrum Management Consultancy Plc, from 1987 to 1990, and Director and Chief Operating Officer for Shearson Lehman Brothers International, from 1982 to 1987. JOHN RIDLEY held the positions of Systems Architect, Product Manager and Head of Product Development for DESISCo, since renamed MTi Trading. He served as a Director of the Company from March of 1996 to March of 1997 PETER SVENNILSON served as Director of the Company from October 1994 to November 1995, as Chairman of the Board from July 1995 to November 1995 and as Chief Executive Officer from September to November 1995. From 1983 to 1993, Mr. Svennilson was an Associate Managing Director for Nomura International Plc. in London, England. From 1993 to the present, Mr. Svennilson served as a Managing Director of Stoneporch Limited, in London, England. Stoneporch Limited, under the trade name of Irongate, provides strategic advice to several US and European corporations. Mr. Svennilson is also a non-executive Director of Skandigen AB, a public Swedish biotechnology company. S. KEITH WILLIAMS was appointed President and Chief Operating Officer in July of 1994, and a Director in November of 1994 and served in those capacities through September 1995. Mr. Williams was employed as General Manager of the Winter Partners subsidiaries for the five years preceding his employment with the Company. Each of the directors of the Company has been elected for up to a one year term, expiring at the next annual meeting of the shareholders of the Company. COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT The Company has received a copy of reports on Form 5 filed by Messrs. Edison, Huguenin and Ekon, and has not received copies of any other Form 5 with respect to the fiscal year ended April 30, 1997 or any representations from any other officer or director or 10% shareholder of the Company, that any such Form 5 was not required to be filed. Accordingly, Messrs. Morris, Ridley, Awerbuch, as well as any other person who, at any time during such fiscal year, was a 73 director, officer or beneficial owner of more than ten percent of the Company's Common Stock may not have filed, on a timely basis, reports required by Section 16(a) during the most recent fiscal year. ITEM 10 EXECUTIVE COMPENSATION The following table shows, for the years ended April 30, 1996, 1995 and 1994, the total cash compensation paid by the Company to its chief executive officers and most highly compensated executive officers. SUMMARY COMPENSATION TABLE ANNUAL COMPENSATION LONG-TERM COMPENSATION NAME AND FISCALSALARY BONUS OTHER RESTRICTED SECURITIES LTIP ALL PRINCIPAL YEAR ($) ($) ANNUAL STOCK UNDERLYING PAY- OTHER POSITION COMPEN- AWARD(S) OPTIONS OUT COMP SATION ($) SARS ($) ENSA ($) (#) TION Anthony J. 1996 54,167 4,498 287,108 Cataldo, 1995 225,000 10,000 52,896 400,000 Chief Executive Officer, President 74 (1) Michael J. 1997 68,400 Edison (2) Paul Ekon 1997 90,598 0 (3) 1996 105,916 16,714 Peter 1997 338,434 Morris, 1996 252,650 108,000 0 President 1995 77,000 124,500 and Chief Operating Officer (4) Peter 1996 0 0 0 Svennilson 1995 0 0 0 Chairman, Chief Executive Officer and Director John 1997 164,941 Ridley S. Keith 1996 100,104 0 16,114 75 Williams, 1995 196,389 99,511 34,546 President and Chief Operating Officer (5) (1) Effective December 31, 1991, Mr. Cataldo entered into an employment agreement with the Company to serve as its President. The term of the agreement expired on July 31, 1995, and was extended to July 31, 1997 by an Amendment and Extension Agreement dated August 1, 1994 (the "Amendment and Extension Agreement"). Under the terms of Mr. Cataldo's original employment contract, he received an annual salary of $150,000, plus a bonus equal to 2% of the Company's annual revenues as reported in the Company's annual report. Mr. Cataldo was also entitled to receive an expense allowance of $2,000 per month. Pursuant to his employment agreement, Mr. Cataldo also received options, to purchase 700,000 shares of Common Stock at $0.25 per share and options to purchase 700,000 Class C Warrants at $0.43 per warrant. The employment agreement provided that options to purchase 150,000, 200,000, 200,000 and 150,000 options of each type are to be exercisable as of December 31, 1991, 1992, 1993 and 1994, respectively. Mr. Cataldo received $12,500 for consulting services rendered in November and December of 1991. On September 22, 1993 and September 15, 1994, Mr. Cataldo exercised options to purchase 75,000 and 100,000 shares of Common Stock, respectively, at an exercise price of $.25 per share. Under the terms of the Amendment and Extension Agreement, Mr. Cataldo's contract was extended to August 1, 1997. He was entitled to a annual compensation of $250,000 and to an expense allowance of $25,000 per annum. He no longer received a bonus. In addition, the Amendment and Extension Agreement provided for the grant, each year, of options to purchase 400,000 common shares of the Company at $0.625 each. 76 Effective July 13, 1995, Mr. Cataldo resigned as Chairman and Chief Executive Officer. By Separation Agreement and Release dated July 6 and 7, 1995 (the "Separation Agreement"), the Company agreed to pay Mr. Cataldo $300,000 in consulting fees in twelve $25,000 monthly installments, to be applied against fees for financial consulting services Mr. Cataldo may render to the Company; in addition, the Company agreed to grant Mr. Cataldo a non-recourse, interest free $280,000 loan to purchase common shares of the Company; the loan is secured by said common shares. The Separation Agreement also provides that Mr. Cataldo relinquishes all stock options and warrants granted to him under his employment agreements. By amendment to the Separation Agreement, Mr. Cataldo and the Company agreed to cancel the $280,000 non-recourse loan granted Cataldo and to retire the common shares subscribed by Cataldo and pledged to secure said loan. The Company further agreed to pay Mr. Cataldo $20,000 in addition to $105,000 previously paid to Cataldo under the Separation Agreement and to issue Mr. Cataldo 212,700 shares of common stock of the Company in full and final satisfaction of the Company's obligations to Mr. Cataldo. (2) Effective December 18, 1996, Mr. Edison entered into an employment agreement with the Company to serve as its President and Chief Executive Officer. for a period ending December 18, 1999. Mr. Edison is entitled to a bas compensation of 10,000 British pounds per month, or approximately $195,000 per annum. In addition, Mr. Edison was granted 10,000,000 shares of common stock of the Company, in lieu of additional compensation. Mr. Edison is entitled to a performance bonus of (i) 5,000,000 shares of common stock of the Company in the event the market price of the Company's common stock closes at or above $0.25 for ten consecutive trading days, and (ii) 5,000,000 shares of common stock of the Company in the event the market price of the Company's common stock closes at or above $0.50 for ten consecutive trading days. The Company is obligated to register one half of the shares granted to Mr. Edison as soon as practical. 77 Mr. Edison was granted options to purchase 15,000,000 shares common stock of the Company at $0.16. Such options shall vest as follows: . 5,000,000 when the Company achieves annual sales of $50,000,000 and $3,500,000 in pre-tax profits; . 5,000,000 when the Company achieves annual sales $100,000,000 and $7,000,000 in pre-tax profits; 5 . 5,000,000 when the Company achieves annual sales of $150,000,000 and $10,000,000 in pre-tax profits; (3) Mr. Ekon serves as the Company's Chief Executive Officer. His base salary is 60,000 British Pounds per year or approximately $93,000. Mr. Ekon is also entitled to a car allowance of 6,000 British Pounds per year, or approximately $9,300. Mr. Ekon's contract was terminated effective September 30, 1996 by agreement between Mr. Ekon and the Company. Mr. Ekon served as Chief Executive Officer through February, 1997 and continues to serve as a Director of the Company. (4) Effective January 20, 1995, Mr. Morris entered into an employment agreement with the Company to serve as Managing Director of its wholly owned subsidiary, MTi Trading Systems. Under the terms his employment contract, Mr. Morris was entitled to an annual base salary of 150,000 British Pounds or approximately $230,000 and to a stock option equivalent to half of one percent of the Company's registered shares, plus a 50,000 British Pounds or approximately $77,500 sign on bonus. Subsequent to Mr. Morris' appointment as the Company's President and Chief Operating Officer, the Company agreed to raise Mr. Morris' base salary to 200,000 British Pounds or approximately $310,000 and to grant Mr. Morris a 100,000 British Pound or approximately $155,000 bonus and a 50,000 British Pounds or approximately $77,500 success bonus on completion of the MDIS Acquisition, in exchange for unpaid sign on bonus plus cancellation of his stock options. The MDIS Acquisition was closed on March 1, 1996. Mr. Morris is also entitled to the use of a company car at a cost of 7,500 British Pounds or 78 approximately $11,000. Mr. Morris' employment contract can be terminated by either party on a one year notice. Mr. Morris resigned as a director and as an officer of the Company effective April 1, 1997. The Company agreed to pay Mr. Morris 63,941.99 British pounds as full and final settlement under his employment agreement. (5) On July 12, 1994, Mr. Williams entered into an employment agreement with the Company which was due to terminate on May 31, 1997, providing for a minimum base salary of 155,000 British pounds per annum, or approximately $248,000. Mr. Williams resigned on September 25, 1995. OPTION GRANTS IN LAST FISCAL YEAR The Company granted options to purchase 15,000,000 common shares to Mr. Edison and options to purchase 750,000 common shares to Mr. Huguenin. These options will vest as follows: . One third when the Company achieves annual sales of $50,000,000 and $3,500,000 in pre-tax profits; . One third when the Company achieves annual sales $100,000,000 and $7,000,000 in pre-tax profits; . One third when the Company achieves annual sales of $150,000,000 and $10,000,000 in pre-tax profits; No options or SAR's were exercised by officers or directors of the Company during the year ended April 30, 1997. The Company does not have Long-Term incentive plans. Other than health, life and 401(k) plan benefits available to all employees, and the stock option plans described below which the Company may determine to pay to officers and/or employees, the Company does not currently have in effect any pension, profit sharing or other employee benefit plans. The Company does not have a Directors and Officers liability insurance policy in force. 79 COMPENSATION OF DIRECTORS The Company pays $5,000 per year to non-employee directors and reimburses them for travel and lodging expenses incurred in connection with their services in that capacity. In addition, Mr. Guazzoni, a Director of the Company from February 1994 to March 1996, was granted 50,000 warrants exercisable at $0.01 from July 15, 1996 to January 15, 1997 as additional compensation for his services as a Director of the Company. He exercised these warrants. QUALIFIED INCENTIVE STOCK OPTION PLAN On April 20, 1990 the shareholders of the Company approved a qualified incentive stock option plan (the "QISOP"). The QISOP provides for the granting of options, at the Board of Directors' discretion, to purchase up to an aggregate of 1,000,000 shares of Common Stock to eligible employees at an exercise price determinable at the discretion of the Option Committee (the "Committee") as appointed by the Company's Board of Directors but no less than 85% of the market value of the common stock on the date the option is granted. Options may be granted to all salaried employees of the Company and its subsidiaries. Options granted under the QISOP are exercisable according to a vesting schedule which is determined by the Committee. Subject to the provisions of the Options Plan with respect to death and termination, the maximum period each option may be exercised shall be fixed by the committee at the time the option is granted, but shall not exceed five years. On April 28, 1995, the shareholders of the Company approved an increase in the number of stock options under the QISOP from 1,000,000 to 8,000,000, at $0.01 par value. As of April 30, 1997, there were outstanding options to purchase a total of 1,428 shares, at an average exercise price of $7.00, under the QISOP. KEY EXECUTIVE STOCK BONUS GRANT 80 Concurrently with the approval of the QISOP, the shareholders of the Company approved a Key Executive Stock Bonus Grant Plan (the "Bonus Plan") for key executives. The Bonus Plan provides for the issuance of up to an aggregate of 100,000 shares of Common Stock to officers or key employees of the Company for little or no consideration. The grants require the approval of the Board of Directors. Qualification criteria are established by the Board of Directors and are based on the Key Executive's potential and dedication to the Company. The grants are subject to a two year vesting period and terminate if the executive's employment with the Company terminates during the vesting period. As of the fiscal year ended April 30, 1997, there were no outstanding grants under the Bonus Plan. NON QUALIFIED STOCK OPTION PLAN FOR KEY EMPLOYEES The shareholders of the Company approved a non qualified stock option plan for key employees(the "NSOPKEY") on April 20, 1990. The NSOPKEY provides for the granting of options to purchase up to an aggregate of 1,000,000 shares of Common Stock to key employees of the Company, with an exercise price determined by an option committee at the time of grant. No part of any option granted under the NSOPKEY will be exercisable more than five years after the date of grant. On April 28, 1995, the shareholders of the Company approved an increase in the number of stock options under the NSOPKEY from 1,000,000 to 10,000,000, at $0.01 par value. As of the fiscal year ended April 30, 1997, there were no outstanding options under the NSOPKEY. NON QUALIFIED STOCK OPTION PLAN FOR DIRECTORS, OFFICERS AND CONSULTANTS The shareholders of the Company approved a non qualified stock option plan for Directors, Officers and Consultants (the "NSOPDOC") on April 20, 1990. The NSOPDOC provides for the granting of options to purchase up to an aggregate of 2,000,000 shares of Common Stock to consultants and non-employee directors of the Company. No part of any option granted under the NSOPDOC will be 81 exercisable more than five years after the date of grant. On April 28, 1995, the shareholders of the Company approved an increase in the number of stock options under the NSOPDOC from 2,000,000 to 15,000,000, at $0.01 par value. As of the fiscal year ended April 30, 1997, there were no outstanding options under the NSOPDOC. 401(K) PLAN AND OTHER PENSION PLANS MTi Abraxsys Systems, Inc., a wholly owned subsidiary of the Company, has a 401(k) savings plan for its employees. MTi Abraxsys Systems, Inc. contributes 25% of the employee's contribution, up to 25% of 6% of the employee's salary. The employees of the Company's subsidiaries in the UK are entitled to receive additional compensation equivalent to 7% of their annual base salaries in lieu of any other pension provision by the Company. The Company's Singapore subsidiary contributes to the Government of Singapore Central Provident Fund in respect to all employees matching employee contributions, currently 8.75% of the employees' gross compensation. All officers have executed non-compete agreements which provide that the individual will not compete with the Company during employment or for a period of one year following termination. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of July 31, 1997, certain information regarding beneficial ownership of Common Stock (i) by each person who is known to the Company to be the beneficial owner of more than 5% of the Common Stock, (ii) by each of the directors and executive officers of the Company and (iii) by all directors and executive officers of the Company as a group. Ownership is expressed in post May 15, 1995 split shares: 82 Name and Address of Amount and Nature of Percent of Beneficial Holder or Beneficial Ownership Class Identity of Group Common stock Common Stock(1) Michael Awerbuch 0 0 216 Seventh Avenue, # 4A New York, NY 10011 Anthony J. Cataldo 212,985 0.2% 63 North East Village Rd Concord, NH 03301 Paul Ekon 35,714 0.0% 22 Wellington Garden Hampstead London NW3 Michael J. Edison 10,000,000 (2) 7.2% 3540 W Sahara, Suite 469 Las Vegas, Nevada 89102 Patrick Huguenin 500,000 (3) 0.4% 319 East 78th Street, Apt 2A New York, NY 10021 Peter Morris 0(4) 0 Shottley Hall Church Walk 83 Shottley United Kingdom John Ridley 0 (5) 0 117 Highfield Way Rickmansworth Hertfordshire WD3 2TL England Peter Svennilson 0 0 12 Old Bond Street London, England S. Keith Williams 0 0 18 Broomfield Road Oxshott, Surrey England All Officers and Directors as 10,748,699 7.72% a Group (9 persons) (1) Based on an aggregate of post May 15, 1995 split shares of Common Stock ("Shares") outstanding as of August 8, 1997 of 139,203,435. (2) Excluding options to purchase 15,000,000 common shares of the Company, not vested as of April 30, 1997. (3) Excluding options to purchase 750,000 common shares of the Company, not vested as of April 30, 1997. 84 (4) Excluding shares issuable on conversion of $310,000 of Series SA convertible debenture held by Mr. Morris. See Note 11 to the Financial Statements for conversion terms. (5) Excluding shares issuable on conversion of $7,750 of Series SA convertible debenture subscribed by Mr. Ridley. See Note 11 to the Financial Statements for conversion terms. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS PETER J. MORRIS Mr. Morris was appointed President and Chief Operating Officer of the Company in November of 1995. On February 14, 1996, the Company issued Mr. Morris a Series SA convertible debenture in the amount of $310,000 in settlement of all bonuses due Mr. Morris at that date. The convertible debenture is convertible into common shares of the Company at the lower of $0.48 or 62.5% of the average close bid for the Company's common stock for the five days immediately preceding the declaration of conversion. The Series SA convertible debenture yields 9% interest and matures on December 31, 1997. JOHN RIDLEY On February 13, 1996, Mr. Ridley subscribed to a Series SA convertible debenture in the amount of $7,750. The convertible debenture is convertible into common shares of the Company at the lower of $0.48 or 62.5% of the average close bid for the Company's common stock for the five days immediately preceding the declaration of conversion. The Series SA convertible debenture yields 9% interest and matures on December 31, 1997. 85 ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K. (a) The following documents are filed as part of this report: 1. Financial Statements Page No. Independent Auditors' Report 25 Consolidated Balance Sheet 27 Consolidated Statements of 28 Stockholder's Equity Consolidated Statements of Operations 29 Consolidated Statements of Cash Flows 30 Notes to Consolidated Financial 32 Statements 2. Exhibits Exhibit Number -------------- 3.1 Restated Articles of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to Amendment No. 4 on Form 8 to Registrant's Annual Report on Form 10- K for the fiscal year ended April 30, 1992, filed with the Commission on February 24, 1993 ("Amendment No. 4")). 3.2 Form of Amendment to Certificate of Incorporation (incorporated by reference to Exhibit 3.2 to the Registrant's Registration Statement on Form S-1 (File No. 33-25528) filed with the Commission on November 15, 86 1988). 3.3 Certificate of Amendment to Certificate of Incorporation, dated May, 1995. 3.4 By-Laws of the Registrant (incorporated by reference to Exhibit 3.5 to the Registrant's Registration Statement on Form S-18 (File No. 33-10342-NY) dated May 13, 1987 (the "Form S-18")). 3.5 By-Laws of the Registrant, as amended. 10.1 Form of Warrant Agreement dated May 21, 1987 between the Company, D.H. Blair & Co., Inc. and American Stock Transfer & Trust Company (incorporated by reference to Exhibit 10.4 to the Form S-18). 10.2 Class C Warrant Agreement dated as of February 28, 1992 among the Company, D.H. Blair & Co., Inc. and American Stock Transfer & Trust Company (the "Class C Warrant Agreement") (incorporated by reference to Exhibit C to the Company's Current Report on Form 8-K dated March 11, 1992 (the "March 11 8-K")). 10.3 Amendment dated as of July 20, 1992 to the Class C Warrant Agreement (incorporated by reference to Exhibit C to the Registrant's Current Report on Form 8-K dated July 24, 1992 (the "July 24 8-K")). 10.4 Amendment dated as of August 24, 1992 to the Class C Warrant Agreement (incorporated by reference to Exhibit 10.4 to Amendment No. 4). 10.5 Amendment dated as of December 11, 1992 to the Class C Warrant Agreement (incorporated by reference to Exhibit 10.5 to Amendment No. 4). 10.5.1 Amendment dated as of February 22, 1993 to the Class 87 Warrant Agreement (incorporated by reference to Exhibit 10.5.1 to the Registrant's Current Report on Form 8-K dated February 22, 1993). 10.5.2 Form of Underwriting Agreement dated May 14, 1987 between the Company and D.H. Blair & Co., Inc. (incorporated by reference to Exhibit 1.1 to the Form S-18). 10.5.3 Form of Agency Agreement dated February 6, 1993 between the Company and D.H. Blair & Co., Inc. (incorporated by reference to Exhibit A to the March 11 8-K). 10.6 Form of Subordinated Convertible Note (incorporated by reference to Exhibit B to the March 11 8-K). 10.6.1 Unit Purchase Option dated January 28, 1992 made by the Company to D.H. Blair & Co., Inc. (incorporated by reference to Exhibit 10.6.1 to Amendment No. 5 on Form 8 to the Registrant's Annual Report on Form 10-K for the fiscal year ended April 30, 1992, filed with the Commission on April 5, 1993 ("Amendment No. 5")). 10.7 8% Subordinated Mortgage Note dated April 28, 1989 made by the Company to D.H. Blair Holdings, Inc. (incorporated by reference to Exhibit B to the Registrant's Current Report on Form 8-K dated May 2, 1989 (the "May 2 8-K")). 10.8 Amendment No. 1 to the 8% Subordinated Mortgage Note held by D.H. Blair Holdings, Inc. (incorporated by reference to Exhibit E to the March 11 8-K). 10.9 Security Agreement and Chattel Mortgage between the Company and D.H. Blair & Co., Inc. (incorporated by reference to Exhibit A to the May 2 8-K). 10.10 Assignment of Software Codes as Security for Subordinated Mortgage Note made by the Company to D.H. Blair & Co., 88 Inc. (incorporated by reference to Exhibit C to the May 2 8-K). 10.11 Pledge Agreement made by Barrington J. Fludgate to D.H. Blair & Co., Inc. (incorporated by reference to Exhibit D to the May 2 8-K). 10.12 Promissory Note dated February 7, 1992 made by the Company to D.H. Blair Holdings, Inc., as amended (incorporated by reference to Exhibit 10.12 to Amendment No. 4). 10.13 Loan Agreement dated May 26, 1992 between the Company and D.H. Blair Investment Banking Corp. (incorporated by reference to Exhibit A to the Company's Current Report on Form 8-K dated May 26, 1992 (the "May 26 8-K")). 10.14 Promissory Note dated May 26, 1992 made by the Company to D.H. Blair Investment Banking Corp., as amended (incorporated by reference to Exhibit 10.14 to Amendment No. 4). 10.15 Letter Agreement dated December 31, 1992 between D.H. Blair Investment Banking Corp. and the Company (incorporated by reference to Exhibit 10.15 to Amendment No. 4). 10.16 Letter Agreement dated December 3, 1991 between the Company and ABN/AMRO Bank N.V. ("ABN") (incorporated by reference to Exhibit 10.16 to Amendment No. 4). 10.17 Promissory Note dated December 13, 1991 made by the Company to ABN (incorporated by reference to Exhibit 10.17 to Amendment No. 4). 10.18 General Liability Agreement dated November 27, 1991 between the Company and ABN, with attached Guaranty dated 89 November 27, 1991 given by Barrington J. Fludgate to ABN (incorporated by reference to Exhibit 10.18 to Amendment No. 4). 10.19 Security Agreement dated November 27, 1991 between the Company and ABN (incorporated by reference to Exhibit 10.19 to Amendment No. 4). 10.20 Corporate Guarantee dated November 26, 1991 from Management Technologies Financial Consultants Pty. to ABN (incorporated by reference to Exhibit 10.20 to Amendment No. 4). 10.21 Corporate Guarantee dated November 26, 1991 from Management Technologies Trade Services, Inc. to ABN (incorporated by reference to Exhibit 10.21 to Amendment No. 4). 10.22 Purchase Agreement dated as of July 17, 1992 between the Company and Michael Bollag, as amended (incorporated by reference to Exhibit A to the July 24 8-K and Exhibit D to the September 17 8-K). 10.23 Registration Rights Agreement dated as of July 23, 1992 between the Company and Michael Bollag (incorporated by reference to Exhibit B to the July 24 8-K). 10.24 Purchase Agreement dated as of September 15, 1992 among the Company, Michael Bollag, Naomi Bollag and William Karon (incorporated by reference to Exhibit B to the September 17 8-K). 10.25 Registration Rights Agreement dated as of September 5, 1992 among the Company, Michael Bollag, Naomi Bollag and William Karon (incorporated by reference to Exhibit B to the September 17 8-K). 90 10.26 Purchase Agreement dated as of October 6, 1992 between the Company and S. Sungyull Koo (incorporated by reference to Exhibit 4.18 to the Company's Registration Statement on Form S-3, Registration Nos. 33-25528 and 33- 52074). 10.27 Subscription Agreement dated as of December 14, 1992 between the Company and Robert Trump (incorporated by reference to Exhibit 10.27 to Amendment No. 4). 10.28 Purchase Agreement dated as of December 18, 1992 between the Company and Clarion Capital (incorporated by reference to Exhibit 10.28 to Amendment No. 4). 10.29 Software Distribution License Agreement dated May 28, 1991 between the Company and Global Financial Systems Inc. (the "Distribution Agreement"), as amended (incorporated by reference to Exhibit 10.29 to Amendment No. 4). 10.30 Software Development and Marketing Agreement dated December 23, 1992 between the Company and Hewlett Packard Company (incorporated by reference to Exhibit 10.30 to Amendment No. 5). 10.31 Employment Agreement dated December 31, 1991 between the Company and Anthony Cataldo (incorporated by reference to Exhibit F to the Company's Current Report on Form 8-K dated March 11, 1992 (the "March 11 8-K")). 10.32 Employment Agreement dated December 31, 1991 between the Company and Clifford Brune (incorporated by reference to Exhibit G to the March 11 8-K). 10.33 Employment Agreement dated April 30, 1992 between the Company and Barrington Fludgate (incorporated by 91 reference to Exhibit A to the Company's Current Report on Form 8-K dated May 13, 1992). 10.34 Employment Agreement dated October 31, 1992 between the Company and Mark Blundell (incorporated by reference to Exhibit 10.34 to Amendment No. 4). 10.35 Severance Agreement dated June 15, 1992 between the Company and Peter Lore (incorporated by reference to Exhibit B to the May 26 8-K). 10.36 Agreement dated January 1993 between the Company and Blundell & Associates, Inc., as supplemented (incorporated by reference to Exhibit 10.36 to Amendment No. 4). 10.37 Incentive Stock Option Plans (incorporated by reference to Exhibit 10.37 to Amendment No. 4). 10.38 Lease for the Company's premises at One Penn Plaza, New York, New York (incorporated by reference to Exhibit 10.4 to the Form S-18). 10.39 Lease Termination Agreement dated February 3, 1993 by and between the Company and Delta Airlines (incorporated by reference to Exhibit 3 to the Company's Current Report on Form 8-K dated February 26, 1993 (the "February 26 8- K")). 10.40 Agreement of Sublease dated February 26, 1993 between BT North America, Inc. and the Company (incorporated by reference to Exhibit 2 to the February 26 8-K). 10.41 Subscription Agreement dated as of February 22, 1993 between the Company and D.H. Blair Holdings, Inc. (incorporated by reference to Exhibit 3 to the Company's Current Report on Form 8-K dated February 22, 1993). 92 10.42 Irrevocable Voting Proxy dated February 23, 1993 from D.H. Blair Investment Banking Corp. in favor of Anthony J. Cataldo (incorporated by reference to Exhibit 1 to the February 26 8-K). 10.43 Mutual Release and Hold Harmless Agreement dated January 19, 1993 between MCN-CSI Computer Services, Inc. and the Company (incorporated by reference to 10.43 to Amendment No. 5). 10.44 Subscription Agreement dated April 26, 993, between Robert S. Trump and the Company (incorporated by reference to Exhibit A to the Company's Current Report on Form 8-K dated April 30, 1993 (the "April 30 8-K")). 10.45 Letter Agreement dated April 36, 1993, between Robert S. Trump and the Company dated April 26, 1993 (incorporated by reference to Exhibit B to the April 30 8-K). 10.46 Letter Agreement dated April 26, 1993 between Gerald Franz and the Company (incorporated by reference to Exhibit C to the April 30 8-K). 10.47 Escrow Agreement dated April 26, 1993 among Gerald Franz, Baratta & Goldstein, as escrow agent, and the Company (incorporated be reference to Exhibit D to the April 30 8-K). 10.48 Letter Agreement dated April 26, 1993 between Gerald Franz and the Company (incorporated by reference to Exhibit E to the April 30 8-K). 10.49 Letter Agreement dated April 26, 1993 between Gerald Franz and the Company (incorporated by reference to Exhibit F to the Company's April 30 8-K). 10.50 $50,000 Convertible Note executed by the Company in favor 93 of Gerald Franz dated April 26, 1993 (incorporated by reference to Exhibit G to the Company's April 30 8-K). 10.51 Letter Agreement dated August 13, 1993 between Sharon S. Merrill and the Company (incorporated be reference to Exhibit A to the July 29, 1993 8-K). 10.52 Subscription Agreement dated July 30, 1993 between D.H. Blair Holdings, Inc. and the Company (incorporated by reference to Exhibit A to the August 6, 1993 8-K). 10.53 Subscription Agreement dated August 6, 1993 between Bruno Guazzoni and the Company (incorporated by reference to Exhibit B to the Company's August 25, 1993 8-K). 10.54 Subscription Agreement dated August 9, 1993 between Duncan Robertson and the Company (incorporated by reference to Exhibit B to the Company's August 25, 1993 8-K). 10.55 Subscription Agreement dated August 9, 1993 between Caisse Centrale des Banques Populaires and the Company (incorporated by reference to Exhibit B to the Company's August 25, 1993 8-K). 10.56 Stock Purchase Agreement dated July 29, 1993 among the MTI Merken Corporation, Sharon F. Merrill and the Company (incorporated by reference to Exhibit A to the Company's September 16, 1993 8-K). 10.57 Agreement dated August 30, 1993 between Mark Blundell Associates, Inc. and New Paradigm Software Corp. (incorporated by reference to Exhibit 1 to the Company's November 30, 1993 8-K). 10.58 Agreement dated August 25, 1993 between New Paradigm Software Corp. and the Company (incorporated by reference 94 to Exhibit 2 to the Company's November 30, 1993 8-K). 10.59 Agreement dated August 25, 1993 between New Paradigm Software Corp. and the Company (incorporated by reference to Exhibit 3 to the Company's November 30, 1993 8-K). 10.60 Proxy dated November 19, 1993 by the Company (incorporated by reference to Exhibit 4 to the Company's November 30, 1993 8-K). 10.61 Letter Agreement dated November 19, 1993 between New Paradigm Software Corp. and the Company (incorporated by reference to Exhibit 5 to the Company's November 30, 1993 8-K). 10.62 Heads of Agreement dated February 10, 1994 between Winter Partners Holding A.G. and the Company (incorporated by reference to Exhibit 2 to the Company's February 7, 1994 8-K). 10.63 Subscription Agreement dated July 8, 1994 between Edelson Partners III and the Company (incorporated by reference to Exhibit A to the Company's July 12, 1994 8-K). 10.64 Employment Agreement dated July 12, 1994 between Keith Williams and the Company (incorporated by reference to Exhibit 2 to the Company's July 13, 1994 8-K). 10.65 Purchase and Sale Agreement dated July 13, 1994 between Winter Partners Holding A.G. and the Company (incorporated by reference to Exhibit 1 to the Company's July 13, 1994 8-K). 10.66 Purchase of Stock Agreement dated July 11, 1994 between Robert Trump and the Company (incorporated by reference to Exhibit A to the Company's July 13, 1994 8-K). 10.67 Amendment to Option Agreement dated July 11, 1994 between 95 Robert Trump and the Company (incorporated by reference to Exhibit B to the Company's July 13, 1994 8-K). 10.68 Secured Promissory Note in favor of Midland Associates dated July 11, 1994 (incorporated by reference to Exhibit C to the Company's July 13, 1994 8-K). 10.69 Pledge Agreement and Corporate Guarantees dated July 11, 1994 between Midland Associates and the Company (incorporated by reference to Exhibit D to the Company's July 13, 1994 8-K). 10.70 Common Stock Purchase Warrant dated July 11, 1994 (incorporated by reference to Exhibit E to the Company's July 13, 1994 8-K). 10.71 Promissory Note by the Company in favor if FINMANAGEMENT dated July 7, 1994 (incorporated by reference to Exhibit A to the Company's July 13, 1994 8-K). 10.72 Common Stock Purchase Warrant (incorporated by reference to Exhibit B to the Company's July 13, 1994 8-K). 10.73 Agreement pursuant to Regulation "S" dated July 8, 1994 between Wellbourne Trust and the Company (incorporated by reference to Exhibit A to the Company's July 13, 1994 8- K). 10.74 Common Stock Purchase Warrant (incorporated by reference to Exhibit B to the Company's July 13, 1994 8-K). 10.75 Promissory Note by the Company in favor if Edelson Technology Partners III dated July 25, 1994 (incorporated by reference to Exhibit 1 to the Company's July 27, 1994 8-K). 10.76 Offshore Subscription Agreement between Bruno Guazzoni and the Company dated March 3rd, 1994 (incorporated by 96 reference to Exhibit 2 to the Company's July 25, 1994 8- K). 10.77 Offshore Subscription Agreement between COUTTS & Co and the Company dated March 10, 1994 (incorporated by reference to Exhibit 3 to the Company's July 25, 1994 8- K). 10.78 Offshore Subscription Agreement between Caisse Centrale des Banques Populaires and the Company dated March 10, 1994 (incorporated by reference to Exhibit 4 to the Company's July 25, 1994 8-K). 10.79 Letter Subscription Agreement between Edelson Technology Partners III and the Company dated August 23, 1994 (incorporated by reference to Exhibit 1 to the Company's August 23, 1994 8-K). 10.80 Offshore Subscription Agreement between Credit Suisse (Hong Kong) and the Company dated September 9, 1994 (incorporated by reference to Exhibit 1 to the Company's September 13, 1994 8-K). 10.81 Letter Agreement between Metrend Limited and the Company dated September 16, 1994 (incorporated by reference to Exhibit 2 to the Company's September 13, 1994 8-K). 10.82 Agreement between NPSC and the Company dated September 6, 1994 (incorporated by reference to Exhibit 1 to the Company's September 6, 1994 8-K). 10.83 Form of Subordinated Promissory Note by NPSC (incorporated by reference to Exhibit 2 to the Company's September 6, 1994 8-K). 10.84 Offshore Subscription Agreement between Credit Suisse (Hong Kong) and the Company dated October 5, 1994 97 (incorporated by reference to Exhibit 1 to the Company's October 5, 1994 8-K). 10.85 Offshore Subscription Agreement between Roberto Jimenez Collie and the Company dated October 11, 1994 (incorporated by reference to Exhibit 1 to the Company's October 11, 1994 8-K). 10.86 Offshore Subscription Agreement between Toteam Ltd Inc. and the Company dated October 11, 1994 (incorporated by reference to Exhibit 2 to the Company's October 11, 1994 8-K). 10.87 Offshore Subscription Agreement between Bruno Guazzoni and the Company dated October 11, 1994 (incorporated by reference to Exhibit 3 to the Company's October 11, 1994 8-K). 10.88 Offshore Subscription Agreement between Wellbourne Trust and the Company dated November 1, 1994 (incorporated by reference to Exhibit A to the Company's November 3, 1994 8-K). 10.89 Offshore Subscription Agreement between Toteam Ltd., Inc. and the Company dated July 15, 1993 (incorporated by reference to Exhibit 1 to the Company's November 4, 1994 8-K). 10.90 Offshore Subscription Agreement between Toteam Ltd., Inc. and the Company dated June 3rd, 1993 (incorporated by reference to Exhibit 1 to the Company's November 4, 1994 8-K). 10.91 Offshore Subscription Agreement between Roberto Jimenez Collie and the Company dated June 7, 1993 (incorporated by reference to Exhibit 2 to the Company's November 4, 98 1994 8-K). 10.92 Offshore Subscription Agreement between Bruno Guazzoni and the Company dated November 1, 1994 (incorporated by reference to Exhibit 3 to the Company's November 4, 1994 8-K). 10.93 Offshore Subscription Agreement between Bruno Guazzoni and the Company dated June 10, 1993 (incorporated by reference to Exhibit 3 to the Company's November 4, 1994 8-K). 10.94 Agreement between M.H. Meyerson & Co. and the Company dated December 7, 1994 (incorporated by reference to Exhibit 1 to the Company's December 7, 1994 8-K). 10.95 Heads of Agreement between Digital Equipment International Limited, Digital Equipment International bv, Digital Equipment (Holdings) bv, and Digital Equipment Co. Ltd. and the Company dated December 12, 1994 (incorporated by reference to Exhibit 3 to the Company's December 12, 1994 8-K). 10.96 Stock Purchase and Sale Agreement between Digital Equipment International Limited, Digital Equipment International bv, Digital Equipment (Holdings) bv, and Digital Equipment Co. Ltd., MTi Holding and the Company dated December 22, 1994 (incorporated by reference to Exhibit 1 to the Company's December 22, 1994 8-K). 10.97 Assignment of Secured Loan between Digital Equipment Co. Ltd., MTi Holding and the Company dated December 22, 1994 (incorporated by reference to Exhibit 2 to the Company's December 22, 1994 8-K). 10.98 Letter Agreement between Midland Associates and the 99 Company dated January 23, 1995 (incorporated by reference to Exhibit 1 to the Company's February 16, 1995 8-K). 10.99 Letter Agreement between Digital Equipment Co. Ltd, MTi Holding and the Company dated March 2nd, 1995 (incorporated by reference to Exhibit 3 to the Company's March 10, 1995 8-K/A). 10.100 Offshore Subscription Agreement between Wellbourne Trust and the Company dated February 23, 1995 (incorporated by reference to Exhibit 1 to the Company's February 28, 1995 8-K). 10.101 Promissory Note in favor of Howard Schraub dated February 17, 1995 (incorporated by reference to Exhibit 1 to the Company's March 10, 1995 8-K). 10.102 Letter Agreement between Howard Schraub and the Company dated February 17, 1995 (incorporated by reference to Exhibit 2 to the Company's March 10, 1995 8-K). 10.103 Non-qualified Stock Option Agreement between Howard Schraub and the Company (incorporated by reference to Exhibit 3 to the Company's March 10, 1995 8-K). 10.104 Non-qualified Stock Option Agreement between Howard Schraub and the Company (incorporated by reference to Exhibit 4 to the Company's March 10, 1995 8-K). 10.105 Promissory Note in favor of Bruno Guazzoni dated January 5, 1995 (incorporated by reference to Exhibit 5 to the Company's March 10, 1995 8-K). 10.106 Offshore Subscription Agreement between Wellbourne Trust and the Company dated February 23, 1995 (incorporated by reference to Exhibit 1 to the Company's March 28, 1995 8- K). 100 10.107 Offshore Subscription Agreement between Parkland Limited and the Company dated April 4th, 1995 (incorporated by reference to Exhibit 1 to the Company's May 3rd, 1995 8- K). 10.108 Offshore Subscription Agreement between Hillside Industries, Inc. and the Company dated May 25, 1995 (incorporated by reference to Exhibit 1 to the Company's May 23, 1995 8-K). 10.108 Offshore Subscription Agreement between Hillside Industries, Inc. and the Company dated May 25, 1995 (incorporated by reference to Exhibit 2 to the Company's May 23, 1995 8-K). 10.109 Separation Agreement and Release between Anthony J. Cataldo and the Company dated July 6 and 7, 1995 (incorporated by reference to exhibit (a) to the Company's August 9, 1995 8-K) 10.110 Pledge-Escrow Agreement between Anthony J. Cataldo and the Company (incorporated by reference to exhibit (c) to the Company's August 9, 1995 8-K) 10.111 Non-recourse Promissory Note by Anthony J. Cataldo date July 17, 1995 (incorporated by reference to exhibit (b) to the Company's August 9, 1995 8-K) 10.112 Settlement Agreement by and between the Company and MCI dated August 31, 1995 (incorporated by reference to exhibit 10.112 to the Company's August 31, 1995 8-K) 10.113 Settlement Agreement by and between the Company and Midland Associates dated September 13, 1995 (incorporated by reference to exhibit 10.113 to the Company's September 29, 1995 8-K) 101 10.115. Copy of Letter Agreement dated December 15, 1995 with Israel Trading Fund, Ltd. and Select Capital Advisors, Inc. (incorporated by reference to exhibit 10.115 to the Company's March 14, 1996 8-K) 10.116. Copy of Letter Agreement dated December 22, 1995 with Israel Trading Fund, Ltd. and Select Capital Advisors, Inc. (incorporated by reference to exhibit 10.116 to the Company's March 14, 1996 8-K) 10.117 Copy of Agreement For Consulting Services with Barrocas and Behzadi Investments dated November 27, 1995. (incorporated by reference to exhibit 10.117 to the Company's March 14, 1996 8-K) 10.118 Copy of 9% Convertible A Debenture issued to Torah Vachesed Lezra Vesad dated December 19, 1995. (incorporated by reference to exhibit 10.118 to the Company's March 14, 1996 8-K) 10.119 Copy of Escrow Agreement with Barry B. Globerman, dated December 20, 1995. (incorporated by reference to exhibit 10.119 to the Company's March 14, 1996 8-K) 10.120 Copy of a Treasury Order dated December 20, 1995. (incorporated by reference to exhibit 10.120 to the Company's March 14, 1996 8-K) 10.121 Copy of an Offshore Securities Subscription Agreement with Torah Vachesed Lezra Vesad dated December 20, 1995. (incorporated by reference to exhibit 10.121 to the Company's March 14, 1996 8-K) 10.122 Copy of 9% Convertible A Debenture issued to Schulamit Pritzker dated December 19, 1995. (incorporated by reference to exhibit 10.122 to the Company's March 14, 102 1996 8-K) 10.123 Copy of Escrow Agreement with Barry B. Globerman, dated December 20, 1995. (incorporated by reference to exhibit 10.123 to the Company's March 14, 1996 8-K) 10.124 Copy of a Treasury Order dated December 20, 1995. (incorporated by reference to exhibit 10.124 to the Company's March 14, 1996 8-K) 10.125 Copy of an Offshore Securities Subscription Agreement with Schulamit Pritzker dated December 20, 1995 (incorporated by reference to exhibit 10.125 to the Company's March 14, 1996 8-K) 10.126 Copy of 9% Convertible A Debenture issued to Aaron Meyer Gee dated December 22, 1995. (incorporated by reference to exhibit 10.126 to the Company's March 14, 1996 8-K) 10.127 Copy of Escrow Agreement with Barry B. Globerman, dated December 22, 1995. (incorporated by reference to exhibit 10.127 to the Company's March 14, 1996 8-K) 10.128 Copy of a Treasury Order dated December 20, 1995. (incorporated by reference to exhibit 10.128 to the Company's March 14, 1996 8-K) 10.129 Copy of an Offshore Securities Subscription Agreement with Aaron Meyer Gee dated December 22, 1995 (incorporated by reference to exhibit 10.129 to the Company's March 14, 1996 8-K) 10.130 Copy of 9% Convertible A Debenture issued to Dovasar S.A., dated December 29, 1995. (incorporated by reference to exhibit 10.130 to the Company's March 14, 1996 8-K) 10.131 Copy of Escrow Agreement with Barry B. Globerman, dated December 29, 1995. (incorporated by reference to exhibit 103 10.131 to the Company's March 14, 1996 8-K) 10.132 Copy of a Treasury Order dated December 29, 1995. (incorporated by reference to exhibit 10.132 to the Company's March 14, 1996 8-K) 10.133 Copy of an Offshore Securities Subscription Agreement with Dovasar S.A. dated December 29, 1995 (incorporated by reference to exhibit 10.133 to the Company's March 14, 1996 8-K) 10.134 Copy of 9% Convertible A Debenture issued to Chava Fischman, dated December 29, 1995. (incorporated by reference to exhibit 10.133 to the Company's March 14, 1996 8-K) 10.135 Copy of Escrow Agreement with Barry B. Globerman, dated December 29, 1995. (incorporated by reference to exhibit 10.135 to the Company's March 14, 1996 8-K) 10.136 Copy of a Treasury Order dated December 29, 1995. (incorporated by reference to exhibit 10.136 to the Company's March 14, 1996 8-K) 10.137 Copy of an Offshore Securities Subscription Agreement with Shava Fischman dated December 29, 1995 (incorporated by reference to exhibit 10.137 to the Company's March 14, 1996 8-K) 10.138 Copy of 9% Convertible B Debenture issued to Henry Zieleniec, dated January 25, 1996. (incorporated by reference to exhibit 10.138 to the Company's March 14, 1996 8-K) 10.139 Copy of Escrow Agreement with Barry B. Globerman, dated January 25, 1996. (incorporated by reference to exhibit 10.139 to the Company's March 14, 1996 8-K) 104 10.140 Copy of a Treasury Order dated January 25, 1996. (incorporated by reference to exhibit 10.140 to the Company's March 14, 1996 8-K) 10.141 Copy of an Offshore Securities Subscription Agreement with Henry Zieleniec dated January 25, 1996. (incorporated by reference to exhibit 10.141 to the Company's March 14, 1996 8-K) 10.142 Copy of 9% Convertible B Debenture issued to Raphael Lapidus, dated January 29, 1996. (incorporated by reference to exhibit 10.142 to the Company's March 14, 1996 8-K) 10.143 Copy of Escrow Agreement with Barry B. Globerman, dated January 29, 1996. (incorporated by reference to exhibit 10.143 to the Company's March 14, 1996 8-K) 10.144 Copy of a Treasury Order dated January 29, 1996. (incorporated by reference to exhibit 10.144 to the Company's March 14, 1996 8-K) 10.145 Copy of an Offshore Securities Subscription Agreement with Raphael Lapidus dated January 29, 1996. (incorporated by reference to exhibit 10.145 to the Company's March 14, 1996 8-K) 10.146 Copy of 9% Convertible B Debenture issued to Miriam Herzel, dated January 29, 1996. (incorporated by reference to exhibit 10.146 to the Company's March 14, 1996 8-K) 10.147 Copy of Escrow Agreement with Barry B. Globerman, dated January 29, 1996. (incorporated by reference to exhibit 10.147 to the Company's March 14, 1996 8-K) 10.148 Copy of a Treasury Order dated January 29, 1996. 105 (incorporated by reference to exhibit 10.148 to the Company's March 14, 1996 8-K) 10.149 Copy of an Offshore Securities Subscription Agreement with Miriam Herzel dated January 29, 1996 (incorporated by reference to exhibit 10.149 to the Company's March 14, 1996 8-K) 10.150 Copy of 9% Convertible B Debenture issued to Yosef Yud, dated January 29, 1996. (incorporated by reference to exhibit 10.150 to the Company's March 14, 1996 8-K) 10.151 Copy of Escrow Agreement with Barry B. Globerman, dated January 29, 1996. (incorporated by reference to exhibit 10.151 to the Company's March 14, 1996 8-K) 10.152 Copy of a Treasury Order dated January 29, 1996 (incorporated by reference to exhibit 10.152 to the Company's March 14, 1996 8-K) 10.153 Copy of an Offshore Securities Subscription Agreement with Yosef Yud dated January 29, 1996. (incorporated by reference to exhibit 10.153 to the Company's March 14, 1996 8-K) 10.154 Copy of 9% Convertible B Debenture issued to Menachem M. Begun, dated January 30, 1996. (incorporated by reference to exhibit 10.154 to the Company's March 14, 1996 8-K) 10.155 Copy of Escrow Agreement with Barry B. Globerman, dated January 30, 1996. (incorporated by reference to exhibit 10.155 to the Company's March 14, 1996 8-K) 10.156 Copy of a Treasury Order dated January 30, 1996 (incorporated by reference to exhibit 10.156 to the Company's March 14, 1996 8-K) 10.157 Copy of an Offshore Securities Subscription Agreement 106 with Menachem M. Begun dated January 30, 1996. (incorporated by reference to exhibit 10.157 to the Company's March 14, 1996 8-K) 10.159 Letter Agreement between the Company, ITF and Select Capital dated February 28, 1996 (incorporated by reference to exhibit 10.159 to the Company's July 11, 1996 8-K/A) 10.160 Copy of 9% Convertible C Debenture issued to Shulamit Pritzker, dated February 28, 1996. (incorporated by reference to exhibit 10.160 to the Company's March 26 8- K/A) 10.161 Copy of Escrow Agreement with Barry B. Globerman, dated February 28, 1996. (incorporated by reference to exhibit 10.161 to the Company's March 26 8-K/A) 10.162 Copy of a Treasury Order dated February 27, 1996 (incorporated by reference to exhibit 10.162 to the Company's March 26 8-K/A) 10.163 Copy of an Offshore Securities Subscription Agreement with Shulamit Pritzker dated February 27, 1996. (incorporated by reference to exhibit 10.163 to the Company's March 26 8-K/A) 10.164 Copy of 9% Convertible C Debenture issued to Joseph Weinburg, dated February 28, 1996. (incorporated by reference to exhibit 10.164 to the Company's March 26 8- K/A) 10.165 Copy of Escrow Agreement with Barry B. Globerman, dated February 28, 1996. (incorporated by reference to exhibit 10.165 to the Company's March 26 8-K/A) 10.166 Copy of a Treasury Order dated February 28, 1996 107 (incorporated by reference to exhibit 10.166 to the Company's March 26 8-K/A) 10.167 Copy of an Offshore Securities Subscription Agreement with Joseph Weinburg dated February 28, 1996. (incorporated by reference to exhibit 10.167 to the Company's March 26 8-K/A) 10.168 Copy of 9% Convertible C Debenture issued to Torah Vachesed Lezra Vesad, dated February 28, 1996. (incorporated by reference to exhibit 10.168 to the Company's March 26 8-K/A) 10.169 Copy of Escrow Agreement with Barry B. Globerman, dated February 27, 1996. (incorporated by reference to exhibit 10.169 to the Company's March 26 8-K/A) 10.170 Copy of a Treasury Order dated February 27, 1996 (incorporated by reference to exhibit 10.170 to the Company's March 26 8-K/A) 10.171 Copy of an Offshore Securities Subscription Agreement with Torah Vachesed Lezra Vesad, dated February 28, 1996. (incorporated by reference to exhibit 10.171 to the Company's March 26 8-K/A) 10.172 Copy of 9% Convertible C Debenture issued to Yosef Yud, dated February 28, 1996. (incorporated by reference to exhibit 10.172 to the Company's March 26 8-K/A) 10.173 Copy of Escrow Agreement with Barry B. Globerman, dated February 28, 1996. (incorporated by reference to exhibit 10.173 to the Company's March 26 8-K/A) 10.174 Copy of a Treasury Order dated February 28, 1996. (incorporated by reference to exhibit 10.174 to the Company's March 26 8-K/A) 108 10.175 Copy of an Offshore Securities Subscription Agreement with Yosef Yud, dated February 28, 1996. (incorporated by reference to exhibit 10.175 to the Company's March 26 8- K/A) 10.176 Copy of 9% Convertible C Debenture issued to Aaron Meyer Gee, dated February 28, 1996. (incorporated by reference to exhibit 10.176 to the Company's March 26 8-K/A) 10.177 Copy of Escrow Agreement with Barry B. Globerman, dated February 28, 1996. (incorporated by reference to exhibit 10.177 to the Company's March 26 8-K/A) 10.178 Copy of a Treasury Order dated February 28, 1996. (incorporated by reference to exhibit 10.178 to the Company's March 26 8-K/A) 10.179 Copy of an Offshore Securities Subscription Agreement with Aaron Meyer Gee, dated February 28, 1996. (incorporated by reference to exhibit 10.179 to the Company's March 26 8-K/A) 10.180 Copy of 9% Convertible C Debenture issued to Dovasar S.A., dated February 29, 1996. (incorporated by reference to exhibit 10.180 to the Company's March 26 8-K/A) 10.181 Copy of Escrow Agreement with Barry B. Globerman, dated February 29, 1996. (incorporated by reference to exhibit 10.181 to the Company's March 26 8-K/A) 10.182 Copy of a Treasury Order dated February 29, 1996. (incorporated by reference to exhibit 10.182 to the Company's March 26 8-K/A) 10.183 Copy of an Offshore Securities Subscription Agreement with Dovasar S.A., dated February 29, 1996. (incorporated by reference to exhibit 10.183 to the Company's March 26 109 8-K/A) 10.184 Letter from Management Technologies, Inc. to Barry B. Globerman dated December 15, 1995. (incorporated by reference to exhibit 10.184 to the Company's March 26 8- K/A) 10.185 Letter from MTi Abraxsys Systems, Inc. to Management Technologies, Inc. dated December 15, 1995. (incorporated by reference to exhibit 10.186 to the Company's March 26 8-K/A) 10.186 Asset purchase agreement between McDonnell Information Systems Group Plc. and Management Technologies, Inc., dated March 1, 1996. (incorporated by reference to exhibit 10.186 to the Registrant's current report on Form 8-K dated June 18, 1996) 10.187 Copy of 9% Convertible C Debenture issued to Israel Daniel Levy, dated March 26, 1996. (incorporated by reference to exhibit 10.187 to the Company's July 11, 1996 8-K/A) 10.188 Copy of Escrow Agreement with Barry B. Globerman, dated March 26, 1996. (incorporated by reference to exhibit 10.188 to the Company's July 11, 1996 8-K/A) 10.189 Copy of a Treasury Order dated March 26, 1996 (incorporated by reference to exhibit 10.189 to the Company's July 11, 1996 8-K/A) 10.190 Copy of an Offshore Securities Subscription Agreement with Israel Daniel Levy, dated March 26, 1996. (incorporated by reference to exhibit 10.190 to the Company's July 11, 1996 8-K/A) 10.191 Copy of 9% Convertible C Debenture issued to Joseph Yud, 110 dated March 26, 1996. (incorporated by reference to exhibit 10.191 to the Company's July 11, 1996 8-K/A) 10.192 Copy of Escrow Agreement with Barry B. Globerman, dated March 26, 1996. (incorporated by reference to exhibit 10.192 to the Company's July 11, 1996 8-K/A) 10.193 Copy of a Treasury Order dated March 26, 1996 (incorporated by reference to exhibit 10.193 to the Company's July 11, 1996 8-K/A) 10.194 Copy of an Offshore Securities Subscription Agreement with Joseph Yud, dated March 26, 1996. (incorporated by reference to exhibit 10.194 to the Company's July 11, 1996 8-K/A) 10.195 Copy of 9% Convertible C Debenture issued to Mary Park Properties, Ltd., dated March 26, 1996. (incorporated by reference to exhibit 10.195 to the Company's July 11, 1996 8-K/A) 10.196 Copy of Escrow Agreement with Barry B. Globerman, dated March 26, 1996. (incorporated by reference to exhibit 10.196 to the Company's July 11, 1996 8-K/A) 10.197 Copy of a Treasury Order dated March 26, 1996 (incorporated by reference to exhibit 10.197 to the Company's July 11, 1996 8-K/A) 10.198 Copy of an Offshore Securities Subscription Agreement with Mary Park Properties, Ltd., dated March 26, 1996. (incorporated by reference to exhibit 10.198 to the Company's July 11, 1996 8-K/A) 10.199 Copy of 9% Convertible D Debenture issued to Michal Alif, dated May 2, 1996. (incorporated by reference to exhibit 10.199 to the Company's July 11, 1996 8-K/A) 111 10.200 Copy of Escrow Agreement with Barry B. Globerman, dated May 2, 1996. (incorporated by reference to exhibit 10.200 to the Company's July 11, 1996 8-K/A) 10.201 Copy of a Treasury Order dated May 2, 1996 (incorporated by reference to exhibit 10.201 to the Company's July 11, 1996 8-K/A) 10.202 Copy of an Offshore Securities Subscription Agreement with Michal Alif, dated May 2, 1996. (incorporated by reference to exhibit 10.202 to the Company's July 11, 1996 8-K/A) 10.203 Copy of 9% Convertible E Debenture issued to AT Investements SA, dated May 7, 1996. (incorporated by reference to exhibit 10.203 to the Company's July 15, 1996 8-K) 10.204 Copy of an Offshore Securities Subscription Agreement with AT Investements SA, dated May 7, 1996. (incorporated by reference to exhibit 10.204 to the Company's July 15, 1996 8-K) 10.205 Copy of a Regulation S Distribution Agreement between the Company and U.S. Milestone Corporation dated June 4, 1996 (incorporated by reference to exhibit 10.205 to the Company's July 30, 1996 8-K) 10.206 Copy of an amendment to Distribution Agreement between the Company and U.S. Milestone Corporation dated June 11, 1996 (incorporated by reference to exhibit 10.206 to the Company's July 30, 1996 8-K) 10.207 Copy of an Offshore Securities Subscription Agreement between the Company and Silverstone International Corp. dated June 4, 1996. (incorporated by reference to exhibit 112 10.207 to the Company's July 30, 1996 8-K) 10.208 Copy of 6.75% Convertible Denbenture issued to RBB dated July 5, 1996. (incorporated by reference to exhibit 10.208 to the Company's August 7, 1996 8-K) 10.209 Copy of an Offshore Securities Subscription Agreement with RBB dated July 5, 1996 (incorporated by reference to exhibit 10.208 to the Company's July 30, 1996 8-K) 10.210 Form of H Convertible Denbenture. (incorporated by reference to exhibit 10.210 to the Company's August 8, 1996 8-K) 10.211 Form of Offshore Securities Subscription Agreement (incorporated by reference to exhibit 10.211 to the Company's August 8, 1996 8-K) 10.212 Form of X Convertible Denbenture. (incorporated by reference to exhibit 10.212 to the Company's August 9, 1996 8-K) 10.213 Form of Offshore Securities Subscription Agreement (incorporated by reference to exhibit 10.213 to the Company's August 9, 1996 8-K) 10.214 Form of Y Convertible Denbenture. (incorporated by reference to exhibit 10.214 to the Company's Ocotber 30, 1996 8-K) 10.215 Form of Offshore Securities Subscription Agreement (incorporated by reference to exhibit 10.215 to the Company's October 30, 1996 8-K) 10.216 Form of Z Convertible Denbenture. (incorporated by reference to exhibit 10.216 to the Company's October 31, 1996 8-K) 10.217 Form of Offshore Securities Subscription Agreement 113 (incorporated by reference to exhibit 10.217 to the Company's October 31, 1996 8-K) 16.01 Letter on change of certifying accountant from Goldstein & Morris dated May 10, 1995, (incorporated by reference to exhibit 1 to the Company's May 9, 1995 8-K). 17.01 Resignation letter from Barrington J. Fludgate, dated September 15, 1995 (incorporated by reference to exhibit 10.185 to the Company's July 11, 1996 8-K/A) 17.02 Resignation letter from Robert Oxenberg, dated December 13, 1995 (incorporated by reference to exhibit (1) of the Company's December 13, 1995 8-K) 17.03 Resignation letter from Dan Sladden dated September 11, 1995, (incorporated by reference to exhibit 17.03 of the Company's October 4, 1995 8-K) 17.04 Resignation letter from Keith Williams dated October 3, 1995, (incorporated by reference to exhibit 17.04 of the Company's October 4, 1995 8-K) 17.05 Resignation letter from Anthony J. Cataldo dated November 30, 1995, (incorporated by reference to exhibit 17.05 of the Company's December 1, 1995 8-K) 17.06 Resignation letter from Peter Svennilson dated November 29, 1995, (incorporated by reference to exhibit 17.06 of the Company's December 1, 1995 8-K) 17.07 Resignation letter from Edward Stone dated November 22, 1995, (incorporated by reference to exhibit 17.06 of the Company's December 1, 1995 8-K) 17.08 Resignation letter from Claudio Guazzoni dated March 26, 1996 (incorporated by reference to exhibit 17.08 to the Company's March 27, 1996 8-K) 114 17.09 Resignation letter of Michael Awerbuch dated January 3, 1997 (incorporated by reference to exhibit 17.09 to the Company's January 6, 1997 8-K) 22.01 List of the Company's Subsidiaries 23.02 Consent by KPMG Peat Marwick LLP dated August 13, 1996 (incorporated by reference to exhibit 23.01 to the Company's 10K-SB dated August 20, 1995) 23.03 Consent by KPMG Peat Marwick LLP dated August 13, 1997 99.01 Resignation letter from Nigel Cole, undated, (incorporated by reference to exhibit 99.01 of the Company's October 4, 1995 8-K) (B) CURRENT REPORTS ON FORM 8-K FILED DURING THE QUARTER ENDED APRIL 30, 1996: FINANCIAL STATEMENT FORM REPORT DATE ITEM REPORTED FILED 8-K April 2, 1997 3, Bankrupcy or None receivership 5, Extension of C Warrants and other matters 115 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. MANAGEMENT TECHNOLOGIES, INC. By: /s/ Michael J. Edison -------------------- Michael J. Edison President & Chief Executive Officer Date: August 15, 1997 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 --------- ----- ---- President & Chief Executive August 15, 1997 /s/ Michael J Edison Officer and Director ------------------ (Principal Executive Officer) Michael J. Edison /s/ Patrick Huguenin Chief Financial Officer, August 15, 1997 -------------------- Director (Principal Patrick Huguenin Accounting Officer) 116 /s/ Paul Ekon Director August 15, 1997 --------------- Paul Ekon EX-27 2 EXHIBIT 27
5 This schedule contains summary financial information extracted from the consolidated financial statements of Management Technologies, Inc. and subsidiaries for the years ended April 30, 1997 and 1996, and is qualified in its entirety by reference to such financial statements. 0000806566 MANAGEMENT TECHNOLOGIES, INC. 1,000 YEAR YEAR APR-30-1997 APR-30-1996 APR-30-1997 APR-30-1996 371 313 0 0 514 8,871 0 961 0 0 1,175 10,225 1,072 2,205 910 1,310 6,771 26,640 4,688 17,218 3,699 8,246 0 0 0 0 1,177 247 (2,841) 3,382 6,771 26,640 23,751 21,227 23,751 21,227 21,935 10,306 34,048 32,192 0 (162) 0 0 66 901 (10,405) (10,802) 21 0 (10,405) (12,687) 0 0 0 0 0 0 (16,523) (10,802) (0.24) (1.70) (0.24) (1.70)
EX-3 3 EXHIBIT 3.5 BY-LAWS -OF- MANAGEMENT TECHNOLOGIES, INC. ARTICLE I --------- OFFICES ------- SECTION 1. Principal Office - ---------------------------- The principal office of the Corporation shall be in the city, incorporated village or town and the county within the State of New York as is designated in the Certificate of Incorporation. SECTION 2. Additional Offices - ------------------------------ The Corporation may also have offices and places of business at such other places, within or without the State of New York, as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II ---------- MEETINGS OF SHAREHOLDERS ------------------------ SECTION 1. Time and Place - -------------------------- Meetings of the shareholders of the Corporation may be held at such time and place within or without the State of New York as shall be stated in the notice of the meeting, or in duly executed waiver of notice thereof. SECTION 2. Annual Meeting - -------------------------- The annual meeting of the shareholders shall be held in each year on the anniversary of the date of filing of the Certificate of Incorporation, and the shareholders shall then elect a Board of Directors and transact such other business as may properly be brought before the meeting. SECTION 3. Notice of Annual Meeting - ------------------------------------ Written notice of the place, date and hour of the annual meeting of shareholders shall be given personally or by mail to each shareholder entitled to vote thereat, not less than ten (10) nor more than fifty (50) days prior to the meeting. SECTION 4. Special Meetings - ---------------------------- Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by law or by the Certificate of Incorporation, may be called by the President or the Board of Directors, and shall be called by the President at the written request of shareholders holding at least twenty percent (20%) in amount of shares of the Corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting. SECTION 5. Notice of Special Meeting - ------------------------------------- Written notice of a special meeting of shareholders, stating the place, date and hour of the meeting, the purpose or purposes for which the meeting is called, and by or at whose direction it is being issued, shall be given personally or by mail to each shareholder entitled to vote thereat, not less than ten (10) nor more than fifty (50) days prior to the meeting. SECTION 6. Quorum - ------------------ Except as otherwise provided by law or by the Certificate of Incorporation or these By-Laws, the holders of a third of the shares of the Corporation issued and outstanding and entitled to vote thereat shall be necessary to and shall constitute a quorum for the transaction of business at all meetings of the shareholders: provided, however, that when a specified item of business is required to be voted on by a class or series, voting as a class, the holders of a majority of the shares of such class or series issued and outstanding and entitled to vote thereat shall constitute a quorum for the transaction of such specified item of business. If a quorum shall not be present at any meeting of the shareholders, the shareholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, until a quorum shall be present. At any such adjourned meeting at which a quorum may be present any business may be transacted which might have been transacted at the meeting as originally notified. SECTION 7. Voting - ------------------ (a) At any meeting of the shareholders every shareholder having the right to vote shall be entitled to vote in person or by proxy. Each shareholder shall have one (1) vote for each share of stock having voting power which is registered in his name on the books of the Corporation. Except where another date shall have been fixed as a record date for the determination of its shareholders entitled to vote, no share of stock shall be voted at any election of Directors which shall have been transferred on the books of the Corporation within twenty (20) days next preceding such election of Directors. (b) Except as otherwise provided by law or by the Certificate of Incorporation or these By-Laws, all elections of Directors shall be decided by a plurality of the votes cast, and all other matters shall be decided by a majority of the votes cast. SECTION 8. Proxies - ------------------- A proxy, to be valid, shall be executed in writing by the shareholder or by his attorney-in-fact. No proxy shall be valid after the expiration of eleven (11) months from the date thereof, unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the shareholder executing it, except in those cases where an irrevocable proxy is permitted by law. SECTION 9. Written Consents - ---------------------------- Whenever shareholders are required or permitted to take any action by vote, such action may be taken without a meeting on written consent, setting forth the action so taken, signed by the holders of all outstanding shares entitled to vote thereon. ARTICLE III ----------- DIRECTORS --------- SECTION 1. Board of Directors - ------------------------------ Subject to any provision in the Certificate of Incorporation, the business of the Corporation shall be managed by its Board of Directors, each of whom shall be at least eighteen (18) years of age. SECTION 2. Number: Tenure - --------------------------- (a) The number of Directors constituting the entire Board of Directors shall be fixed from time to time by resolution of the shareholders, but shall in no event be less than three (3), except that where all the shares of the Corporation are owned beneficially and of record by less than three (3) Shareholders, the number of Directors may be less than three (3) but not less than the number of shareholders. The Board of Directors shall initially be composed of three (3) Director(s). (b) Directors shall be elected at the annual meeting of the shareholders, except as provided in Section 3 of this Article III. Except as otherwise provided by the Certificate of Incorporation, each Director shall be elected to serve until the next annual meeting of shareholders and until his successor has been elected and qualified. SECTION 3. Resignation: Removal - --------------------------------- Any Director may resign at any time. Except as otherwise provided by law, the Board of Directors may, by majority vote of all Directors then in office, remove a Director for cause. Subject to applicable provisions of law, any or all of the Directors may be removed with or without cause by vote of the shareholders. SECTION 4. Vacancies - --------------------- Except as otherwise provided by the Certificate of Incorporation, if any vacancies occur in the Board of Directors by reason of the death, resignation, retirement, disqualification or removal from office of any Director with cause, or if any new directorships are created, all of the Director's then in office, although less than a quorum, may, by majority vote, choose a successor or successors, or fill the newly created directorships, and the Directors so chosen shall hold office until the next annual meeting of the shareholders and until their successors shall be duly elected and qualified, unless sooner displaced: provided, however, that if in the event of any such vacancy, the Directors remaining in office shall be unable, by majority vote, to fill such vacancy within thirty (30) days of the occurrence thereof, the President or the Secretary may call a special meeting of the shareholders at which such vacancy shall be filled. In the event of any vacancy created by removal from office of any Director without cause, such special meeting of the shareholders shall be so called within thirty (30) days of the occurrence thereof, at which meeting such vacancy may be filled. ARTICLE IV ---------- MEETINGS OF THE BOARD --------------------- SECTION 1. Place - ----------------- Except as otherwise provided by the Certificate of Incorporation, and subject to the provisions of Section 6 of this Article IV, the Board of Directors of the Corporation may hold meetings, both regular and special, either within or without the State of New York as may be determined by the Board of Directors. Any one or more members of the Board of Directors or any committee thereof may participate in a meeting of the Board of Directors or such committee by means of a conference, telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at a meeting. SECTION 2. Regular Meetings - ---------------------------- Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the Board of Directors. SECTION 3. Special Meetings - ---------------------------- Special meetings of the Board of Directors may be called by the Chairman of the Board, if any, or by the President on two (2) days notice to each Director, either personally or by mail or by telegram: special meetings shall be called by the Chairman, President or Secretary in like manner and on like notice on the written request of one (1) Director. SECTION 4. Quorum: Voting - --------------------------- At all meetings of the Board of Directors a majority of the entire Board shall be necessary to constitute a quorum for the transaction of business, and the vote of a majority of the Directors present at the time of the vote if a quorum is present shall be the act of the Board of Directors, except as may be otherwise specifically provided by law. If a quorum shall not be present at any meeting of the Board of Directors, the Directors present thereat may adjourn the meeting from time to time until a quorum shall be present. Notice of any such adjournment shall be given to any Directors who were not present and, unless announced at the meeting, to the other Directors. SECTION 5. Compensation - ------------------------ Directors, as such, shall not receive any stated salary for their services, but, by resolution of the Board of Directors, a fixed fee and expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board; provided, however, that nothing herein contained shall be construed to preclude any Director from serving the Corporation in any other capacity and receiving compensation therefor. SECTION 6. Written Consents - ---------------------------- Unless otherwise restricted by the Certificate of Incorporation, any action required to be taken by the Board of Directors may be taken without a meeting if all members of the Board of Directors consent in writing to the adoption of a resolution authorizing the action. The resolution and written consents thereto by the members of the Board of Directors shall be filed with the minutes of the proceedings of the Board of Directors. ARTICLE V --------- NOTICES ------- SECTION 1. Form: Delivery - --------------------------- Notices to Directors and shareholders shall be in writing and may be delivered personally or by mail or telegram. Notice by mail shall be deemed to be given at the time when deposited in the post office or a letter box, in a post-paid sealed wrapper, and addressed to Directors or shareholders at their addresses appearing on the records of the Corporation. SECTION 2. Waiver - ------------------ Whenever a notice is required to be given by any statute, the Certificate of Incorporation or these By-Laws, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to such notice. In addition, any shareholder attending a meeting of shareholders in person or by proxy without protesting prior to the conclusion of the meeting the lack of notice thereof to him, and any Director attending a meeting of the Board of Directors without protesting prior to the meeting or at its commencement, such lack of notice shall be conclusively deemed to have waived notice of such meeting. ARTICLE VI ---------- OFFICERS -------- SECTION 1. Officers - -------------------- The officers of the Corporation shall be a President, one or more Vice- Presidents, a Secretary, a Treasurer, and such other officers including a Chairman of the Board as may be determined by the Board of Directors. Any two (2) or more offices may be held by the same person, except the offices of President and Secretary: provided, however, that if all of the issued and outstanding stock of the Corporation is owned by one (1) person, such person may hold all or any combination of offices. SECTION 2. Authority and Duties - -------------------------------- All officers, as between themselves and the Corporation, shall have such authority and perform such duties in the management of the Corporation as may be provided in these By-Laws, or to the extent not so provided, by the Board of Directors. SECTION 3. Term of Office: Removal - ------------------------------------ All officers shall be elected by the Board of Directors and each shall hold office until the meeting of the Board of Directors following the next annual meeting of shareholders, and until his successor has been elected or appointed and qualified. SECTION 4. Compensation - ------------------------ The compensation of all officers of the Corporation shall be fixed by the Board of Directors, and the compensation of agents shall either be so fixed or shall be fixed by officers thereunto duly authorized. SECTION 5. Vacancies - --------------------- If an office becomes vacant for any reason, the Board of Directors shall fill the vacancy. Any officer so appointed or elected by the Board of Directors shall serve only until the unexpired term of his predecessor shall have expired unless re-elected by the Board of Directors. SECTION 6. The President - ------------------------- The President shall be the Chief Executive Officer of the Corporation: in the absence of the Chairman of the Board, or if there be no Chairman, he shall preside at all meetings of the shareholders and directors; he shall be ex- officio, a member of all standing committees, shall have general and active management and control of the business and affairs of the Corporation, subject to the control of the Board of Directors, and shall see that all orders and resolutions of the Board of Directors are carried into effect. SECTION 7. The Vice-President - ------------------------------ The Vice-President or, if there be more than one, the Vice-Presidents, in the order of their seniority or in any other order determined by the Board of Directors, shall, in the absence or disability of the President, perform the duties and exercise the powers of the President, and shall generally assist the President and perform such other duties as the Board of Directors or the President shall prescribe. SECTION 8. The Secretary - ------------------------- The Secretary shall attend all meetings of the Board of Directors and all meetings of the shareholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the shareholders and special meetings of the Board of Directors and shall perform such other duties as may be prescribed by the Board of Directors or President, under whose supervision he shall act. He shall keep in safe custody the seal of the Corporation and, when authorized by the Board, affix the same to any instrument requiring it and, when so affixed, it shall be attested by his signature or by the signature of the Treasurer or an Assistant Treasurer or Assistant Secretary. He shall keep in safe custody the certificate books and shareholder records and such other books and records as the Board may direct and shall perform all other duties incident to the office of the Secretary. SECTION 9. The Assistant Secretary - ----------------------------------- During the absence or disability of the Secretary, any Assistant Secretary, or if there be more than one, the one so designated by the Secretary or by the Board of Directors, shall have all the powers and functions of the Secretary. SECTION 10. The Treasurer - -------------------------- The Treasurer shall have the care and custody of the corporate funds, and other valuable effects, including securities, and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation is such depositories as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and Directors, at the regular meeting of the Board of Directors, or whenever they may require it, an account of all his transactions as Treasurer and of the financial condition of the Corporation. SECTION 11. The Assistant Treasurer - ------------------------------------ During the absence or disability of the Treasurer, any Assistant Treasurer, or if there be more than one, the one so designated by the Treasurer or by the Board of Directors, shall have all the powers and functions of the Treasurer. SECTION 12. Bonds - ------------------ In case the Board of Directors shall so require, any officer or agent of the Corporation shall give the Corporation a bond for such term, in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation. ARTICLE VII ----------- SHARE CERTIFICATES ------------------ SECTION 1. Form: Signature - ---------------------------- The certificates for shares of the Corporation shall be in such form as shall be determined by the Board of Directors and shall be numbered consecutively and entered in the books of the Corporation as they are issued. Each certificate shall exhibit the registered holder's name and the number and class of shares, and shall be signed by the Chairman or a Vice-Chairman of the Board of Directors, if there be any, or the President or a Vice-President and the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary, and shall bear the seal of the Corporation or a facsimile thereof. SECTION 2. Lost Certificates - ----------------------------- The Board of Directors may direct a new share certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost or destroyed. SECTION 3. Registration of Transfer - ------------------------------------ Upon surrender to the Corporation or any transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation or such transfer agent to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. SECTION 4. Registered Shareholders - ----------------------------------- Except as otherwise provided by law, the Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends or other distributions, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or legal claim to or interest in such share or shares on the part of any other person, whether or not it has actual or other notice thereof, except as otherwise provided by the laws of the State of New York. SECTION 5. Record Date - ----------------------- For the purpose of determining the shareholders entitled to notice of or to vote at any meeting of shares or any adjournment thereof, or to express consent to or dissent from any proposal without a meeting, or for the purpose of determining shareholders entitled to receive payment of any dividend or the allotment of any rights, or for the purpose of any other action affecting the interests of shareholders, the Board of Directors may fix, in advance, a record date. Such date shall not be more than fifty (50) nor less than ten (10) days before the date of any such meeting, nor more than fifty (50) days prior to any other action. SECTION 5. Record Date (cont'd) - ------------------------ In each such case, except as otherwise provided by law, only such persons as shall be shareholders of record on the date so fixed shall be entitled to notice of, and to vote at, such meeting and any adjournment thereof, or to express such consent or dissent, or to receive payment of such dividend, or such allotment of rights, or otherwise to be recognized as shareholders for the related purpose, notwithstanding any registration of transfer of shares on the books of the Corporation after any such record date so fixed. ARTICLE VIII ------------ GENERAL PROVISIONS ------------------ SECTION 1. Fiscal Year - ----------------------- The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors. SECTION 2. Dividends - --------------------- Dividends upon the capital stock of the Corporation may be declared by the Board of Directors at any regular or special meeting and may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation and the law. SECTION 3. Reserves - -------------------- Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Directors from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purposes as the Board of Directors shall deem conducive to the interest of the Corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created. SECTION 4. Checks - ------------------ All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. SECTION 5. Seal - ---------------- The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal New York." The seal may be used by causing it or a facsimile thereof to be impressed or affixed or otherwise reproduced. ARTICLE IX ---------- AMENDMENTS ---------- SECTION 1. Adoption: Amendment: Repeal - ----------------------------------------- By-Laws of the Corporation may be adopted, amended or repealed by vote of the holders of the shares at the time entitled to vote in the election of any Directors. By-Laws of the Corporation may also be adopted, amended or repealed by the Board of Directors, but any By-Law adopted by the Board of Directors, may be amended or repealed by the shareholders entitled to vote thereon as herein provided. SECTION 2. Amendments Affecting Election of Directors: - ------------------------------------------------------- NOTICE - ------ If any By-Law regulating an impending election of Directors is adopted, amended or repealed by the Board, there shall be set forth in the notice of the next meeting of shareholders for the election of Directors the By-Law so adopted, amended or repealed, together with a concise statement of the changes made. EX-23 4 EXHIBIT 23.03 Exhibit 23.03 INDEPENDENT AUDITORS' CONSENT The Board of Directors Management Technologies, Inc.: We consent to incorporation by reference in the registration statements (No. 33-25528 and 33-52074) on Form S-1 and Form S-3 respectively of Management Technologies, Inc. of our report dated August 13, 1997, relating to the consolidated balance sheet of Management Technologies, Inc. and subsidiaries as of April 30, 1997, and the related consolidated statements of operations, stockholders' equity, and cash flows for the years ended April 30, 1997 and 1996, which report appears in the April 30, 1997 annual report on Form 10-KSB of Management Technologies, Inc. and subsidiaries. Our report dated August 13, 1997 contains an explanatory paragraph that states that the Company has suffered recurring losses from operations and at April 30, 1997 has a working capital deficiency that raises substantial doubt about its ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result form the outcome of that uncertainty. /s/ KPMG PEAT MARWICK LLP New York, New York August 13, 1997 -----END PRIVACY-ENHANCED MESSAGE-----