SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT FILED UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended Commission File Number
May 31, 1997 0-21649
------------ -------
WEBSECURE, INC.
---------------
(Exact Name of Small Business
Issuer As Specified In Its Charter)
Delaware 04-3296069
-------- ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
1711 Broadway, Saugus, Massachusetts 01906
------------------------------------------
(Address of Principal Executive Offices)
(617) 867-2300
--------------
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
------- -------
As of July 14, 1997, the Company had outstanding 5,606,875 shares of
Common Stock, $.01 par value per share.
WEBSECURE, INC.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
<S> <C>
ITEM 1. FINANCIAL STATEMENTS
Balance Sheets
as of May 31, 1997 (Unaudited) and August 31, 1996 (Audited)................... 3
Statements of Operations
for the Three and Nine Month Periods ended May 31, 1997 and 1996 (Unaudited)
and cumulative from inception (July 19, 1995) to May 31, 1997.................. 4
Statements of Cash Flows
for the Three and Nine Month Periods ended May 31, 1997 and 1996 (Unaudited)
and cumulative from inception (July 19, 1995) to May 31, 1997.................. 5-6
Notes to Financial Statements (Unaudited)......................................... 7-8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS ..................................... 9-11
PART II. OTHER INFORMATION ........................................................ 12
ITEM 1. LEGAL PROCEEDINGS......................................................... 12
ITEM 2. CHANGES IN SECURITIES..................................................... 13
ITEM 3. DEFAULTS UPON SENIOR SECURITIES........................................... 13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS ..................... 13
ITEM 5. OTHER INFORMATION ....................................................... 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.......................................... 13
SIGNATURES......................................................................... 14,15
</TABLE>
2
WEBSECURE, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
May 31, August 31,
1997 1996
---- ----
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,074,631 $ 12,832
Accounts receivable, net 183,238 21,797
Inventories 943 5,971
Due from related parties 84,630 59,776
Prepaid expenses and other 68,402 6,600
Legal retainers and deposit 233,251 --
----------- -----------
Total Current Assets 3,645,094 106,976
PROPERTY AND EQUIPMENT, NET 1,215,881 1,173,397
RESTRICTED CASH 691,405 --
DEFERRED REGISTRATION COSTS -- 424,060
OTHER ASSETS 122,254 41,515
----------- ----------
$ 5,674,634 $1,745,948
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 338,614 $ 679,435
Reserve for software license settlement 791,750 --
Due to related parties -- 125,635
Note payable to related party -- 672,000
Current portion of capital lease obligations 183,432 71,763
----------- ----------
Total current liabilities 1,313,796 1,548,833
CAPITAL LEASE OBLIGATION, LESS CURRENT MATURITIES 802,951 300,430
----------- ----------
Total liabilities 2,116,748 1,849,263
----------- ----------
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.01 par value; 1,000,000 shares
authorized; no shares issued and outstanding -- --
Common stock, $.01 par value; 20,000,000 shares
authorized; 5,606,875 and 2,105,000 shares issued
and outstanding. 56,069 21,050
Class B common stock, $.01 par value; 2,000,000
shares authorized; 0 and 625,000 shares issued and
outstanding -- 6,250
Additional paid-in capital 14,288,131 7,827,025
Deficit accumulated during the development stage (10,786,314) (7,957,640)
----------- ----------
Total stockholders' equity (deficit) 3,557,886 (103,315)
----------- ----------
$ 5,674,634 $1,745,948
=========== ==========
</TABLE>
See accompanying notes to financial statements
-3-
WEBSECURE, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Cumulative
from Inception
Three Months Ended Nine months Ended (July 19, 1995) to
May 31, May 31, May 31, May 31, May 31,
1997 1996 1997 1996 1997
-------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Revenues $68,410 $17 $216,240 $31,763 $313,495
Cost of revenues 260,315 (24,059) 750,302 77,951 $943,742
----------- ---------- ---------- ----------- ------------
Gross margin (191,905) 24,076 (534,062) (46,188) (630,247)
----------- ----------- ---------- ----------- ------------
Operating expenses:
General and administrative 1,018,026 566,815 1,802,791 948,446 2,381,039
Selling and marketing 74,416 136,659 398,573 204,706 699,199
Research and development 61,447 303,239 147,072 471,937 1,323,443
Charge for acquired
research and development --- 5,760,000 --- 5,760,000 5,760,000
----------- ----------- ----------- ----------- ------------
Total operating expenses 1,153,889 6,766,713 2,348,436 7,385,089 10,163,681
Loss from operations (1,345,794) (6,742,637) (2,882,498) (7,431,277) (10,793,928)
Interest income (expense), net 32,002 18,762 53,824 1,890 7,614
----------- ----------- ----------- ----------- ------------
Loss before income taxes (1,313,792) (6,723,875) (2,828,674) (7,429,387) (10,786,314)
Income taxes --- --- --- --- ---
----------- ----------- ----------- ----------- ------------
Net loss $(1,313,792) $(6,723,875) $(2,828,674) $(7,429,387) $(10,786,314)
=========== =========== =========== =========== ============
Net loss per common and
common equivalent shares (.23) (1.20) (.50) (1.33) (1.92)
==== ===== ==== ===== =====
Weighted Average Shares used in computing
net loss per common and common
equivalent shares 5,606,496 5,605,750 5,606,129 5,605,750 5,606,875
</TABLE>
See accompanying notes to financial statements
-4-
WEBSECURE, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Cumulative
from Inception
Three Months Ended Nine months Ended (July 19, 1995) to
May 31, May 31, May 31, May 31, May 31,
1997 1996 1997 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $(1,313,792) $(6,723,877) $(2,828,674) $(7,429,386) $ (10,786,314)
Adjustments to reconcile net loss
to net cash used
by operating activities:
Charge for acquired research and
development --- 5,760,000 --- 5,760,000 5,760,000
Issuance of common stock for
professional services --- 79,800 --- 79,800 79,800
Depreciation and amortization 118,038 69,640 326,881 127,920 524,347
Changes in operating assets and
liabilities
Accounts receivable & other (173,094) 173,506 (161,441) ( 41,484) (183,238)
Inventories 29 (3,537) 5,028 ( 10,295) (943)
Prepaid expenses and other (112,538) 1,116 (295,052) 9,445 (301,652)
Accounts payable and accrued
expenses (84,960) 236,095 450,929 1,137,515 1,130,364
---------- -------- ---------- ---------- ----------
Net cash used by
operating activities (1,566,317) (407,257) (2,502,329) (366,485) (3,777,636)
---------- -------- ---------- ---------- ----------
Cash flows from investing activities:
Acquisition of property and equipment ( 112,612) ( 119,009) (369,365) (798,614) (1,738,980)
Notes Receivable --- 122,110 --- (127,890) ---
Deferred registration costs (170,003) 424,060 (224,060) ---
Increase (decrease) in other assets (54,154) (24,915) ( 80,739) (21,806) (123,502)
---------- --------- ---------- ---------- ----------
Net cash used in investing
activities (166,766) ( 191,817) (26,044) (1,172,370) (1,862,482)
---------- ---------- ---------- ----------- ----------
Cash flows from financing activities:
Borrowings under capital leases --- --- 735,431 416,084 1,124,487
Principal payments on capital lease ( 47,839) ( 10,919) ( 121,241) (27,028) (138,104)
(Increase) decrease in due
from related parties (54,081) 41,580 (24,854) (785,795) (84,630)
Subscriptions receivable --- 595,000 --- --- ---
Decrease in due to related parties --- --- (125,635) (17,343) ---
Decrease (increase) in restricted cash 49,169 --- (691,405) --- (691,405)
</TABLE>
See accompanying notes to financial statements
5
WEBSECURE, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
Cumulative
from Inception
Three Months Ended Nine months Ended (July 19, 1995) to
May 31, May 31, May 31, May 31, May 31,
1997 1996 1997 1996 1997
------- ----- --------- ---- -----
<S> <C> <C> <C> <C> <C>
Cash flows from financing activities (continued):
Proceeds from issuance of common stock --- --- 6,485,375 2,014,535 8,499,900
Proceeds from exercise of common stock
options 4,500 --- 4,500 --- 4,500
Proceeds from notes payable to related
party --- 105,250 27,083 239,178 1,522,083
Payments of notes payable to related
party --- --- (699,083) (168,928) (1,522,083)
---------- -------- ---------- --------- ----------
Net cash provided (used) by financing (48,251) 730,911 5,590,171 1,670,703 8,714,748
---------- --------- ---------- --------- ---------
activities
Net increase (decrease) in cash and
cash equivalents (1,781,333) 131,839 3,061,799 131,848 3,074,631
Cash and cash equivalents,
beginning of period 4,855,964 --- 12,832 ---
---------- --------- ---------- ----------- ----------
Cash and cash equivalents, end of period $3,074,631 $ 131,839 $3,074,631 $ 131,839 $3,074,631
========== ========= ========== =========== ==========
Supplemental cash flow
information:
Cash paid for interest $ 27,070 $ 16,872 $ 85,040 $ 16,872 $ 125,776
</TABLE>
See accompanying notes to financial statements
6
WEBSECURE, INC.
NOTES TO FINANCIAL STATEMENTS
1. GENERAL
WebSecure, Inc. (the "Registrant") is in the development stage, and as such,
success of future operations is subject to a number of risks similar to those of
other companies in the same stage of development. Principal among these risks
are the Company's limited operating history, history of operating losses, early
stage of market development, competition from substitute products, larger more
established competitors and rapid technological change.
The accompanying unaudited financial statements have been prepared in accordance
with the instructions for Form 10-QSB and therefore do not include all
information and footnotes necessary for a fair presentation of financial
position, results of operations and changes in cash flows in conformity with
generally accepted accounting principles. The unaudited financial statements
should be read in conjunction with the financial statements and related notes
included in the Registrant's Form SB-2 Registration Statement as filed with the
Securities and Exchange Commission (the "SEC") on December 4, 1996. In the
opinion of management, the unaudited financial statements contain all
adjustments necessary for a fair presentation of the Registrant's financial
condition and results of operations for the interim periods presented and all
such adjustments are of a normal and recurring nature. The results of operations
for the nine months ended May 31, 1997 are not necessarily indicative of the
results which may be expected for the entire fiscal year.
COMPUTATION OF NET LOSS PER COMMON AND COMMON EQUIVALENT SHARES
The net loss per common and common equivalent shares is computed by dividing the
net loss by the weighted average number of shares outstanding during each period
presented, as adjusted for the effects of application of SEC Staff Accounting
Bulletin No. 83 ("SAB No. 83"). Pursuant to SAB No. 83, all common stock and
common stock equivalents issued within twelve months prior to the initial filing
of the registration statement relating to the Company's initial public offering
(the "IPO") at a price less than the IPO price have been treated as outstanding
for all reported periods. The number of shares used in the computation also
includes the conversion of outstanding Class B Common Stock into four shares of
Common Stock, which occurred on the date of filing of the Registrant's Form SB-2
Registration Statement with the SEC.
INITIAL PUBLIC OFFERING
On December 10, 1996 the Company consummated a public offering of 1,000,000
shares of common stock at a price of $8.00 per share and redeemable warrants to
purchase 1,000,000 shares of common stock at $9.60 per share, at a price of $.20
per warrant. The gross proceeds from the public offering of $8,200,000 was
reduced by the underwriting discount and non-accountable expense allowance
totaling $1,066,000 and legal, printing, accounting and other registration costs
of $648,625.
7
2. REVERSAL OF REVENUE FROM MANADARIN TRADING CO. LTD.
As a result of an investigation conducted in the prior quarter at the Company's
request, by the Boston law firm of Hill & Barlow, the Company restated its
revenues for the first quarter ended November 30, 1996. During the first
quarter, the Company previously reported sales of approximately $887,000;
approximately $792,000 of said sales were for licensing software that the
Company believed it had purchased in exchange for stock from Manadarin Trading
Company, Ltd., an Irish corporation.
Based upon the Hill & Barlow investigation, the Company determined that it
never received any software from Manadarin, and even though it received
approximately $792,000 from two purported sublicensees of the software,
WebSecure never delivered any software to them.
The Company has booked the money received from the sublicensees as cash,
instead of revenue, and simultaneously recorded the approximately $792,000 as a
liability on its books. Subsequently on June 30, 1997 the Company repaid one of
the sublicensees $266,750 and $7,308 of interest.
WebSecure is considering what further action to take and intends to report
its findings to proper authorities and will cooperate fully with any further
investigation.
3. ACCOUNTS RECEIVABLE
On April 18, 1997 the Company entered into a factoring agreement with Cauldron
Corporation which calls for WebSecure to factor up to $200,000 of Cauldron's
accounts receivable. The agreement specifies that WebSecure is to receive a fee
of 2% of the face value of the accounts receivable factored and that WebSecure
fund 80% of the value of each account and hold 20% in reserve to be applied
against charge-backs or any obligations of Cauldron to WebSecure. Cauldron
Corporation is owned in principle by an employee of WebSecure. WebSecure earned
$3,106 on the factored receivables during the quarter ended May 31, 1997.
Factored receivables were $133,255 at May 31, 1997.
4. SUBSEQUENT EVENTS
On July 10, 1997 WebSecure appointed the firm of Reznick Fedder & Silverman as
the Company's independent accountants to replace BDO Seidman, LLP. During the
year ended August 31, 1996 and the period from inception (July 19, 1995) to
August 31, 1995, and the subsequent interim period through April 21, 1997 (the
date of BDO Seidman, LLP's resignation as the Company's independent
accountants), there were no disagreements with BDO Seidman, LLP on any matters
of accounting principles or practices, financial statement disclosure or
auditing scope or procedure or any "reportable events" with the accountants as
described in Items 304(a)(1)(iv) and (v) of Regulation S-K. The independent
accountant reports of BDO Seidman, LLP on the Company's financial statements for
the year ended August 31, 1996 and period from inception (July 19, 1995) to
August 31, 1995 each expressed a going concern opinion.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
------------------------------------
OVERVIEW
The Registrant, a development stage Company, offers Internet access and
support services for secure communications and commercial transactions over the
Internet. The Company provides general Internet services, such as connectivity
and communications services.
The financial results for the period from inception (July 19, 1995) to
May 31, 1997 primarily relate to the Company's initial organization and
establishment of infrastructure. The Company has had limited revenues since
inception and working capital of $2,331,298 at May 31, 1997. The results for the
quarter ended May 31, 1997 are not necessarily indicative of the results of the
Company's operations that may be expected for the fiscal year ending August 31,
1997.
The Company completed its IPO on December 10, 1996. The Company sold
1,000,000 shares of common stock and 1,150,000 redeemable warrants, and received
net proceeds of approximately $6,485,000.
The Company's plan of operations for the next twelve months will
principally involve the sale of connectivity and the provision of Internet
access services in addition to web site development and internet commerce. The
Company continues to use a portion of the IPO proceeds to hire additional
personnel, including marketing, sales and customer service personnel, as well as
to continue to upgrade its Internet access infrastructure and services.
RESULTS OF OPERATIONS
Revenues. The Company had revenues of $216,240 during the nine month period
ended May 31, 1997 compared to $31,673 during the nine months ended May 31,
1996, an increase of $184,477 primarily related to increased connectivity,
communications services and web site development. The Company anticipates it
will derive revenues primarily from connectivity charges, hosting services, web
site development and intranet networking.
Cost of revenues. The Company's cost of revenues have exceeded revenues since
inception. The negative gross margin of ($534,062) primarily relates to the
Company's early stages of development. As sales revenues increase, the cost of
revenues is expected to decline as a percentage of revenue.
General and Administrative. The Company had general and administrative expenses
of $1,802,791 during the nine month period ended May 31, 1997 compared to
$948,446 during the nine months ended May 31, 1996, an increase of $854,345.
This increase consists primarily of legal, compensation expense for increased
personnel, rent and insurance expenses. From inception through March 31, 1997,
approximately $1,679,000 of the general and administrative expenses were paid to
Employee Resource, Inc. ("ERI"), an employee leasing Company owned by the
Company's former President and Chief Executive Officer which leased to the
Company all of its employees, including the officers of the Company. The Company
terminated its agreement with ERI on March 31, 1997 and entered into a similar
agreement with Genesis Consolidated Services, Inc., an unaffiliated company.
Selling and Marketing. The Company had selling and marketing expenses of
$398,573 during the nine
9
month period ended May 31, 1997 compared to $204,706 during the nine months
ended May 31, 1996, an increase of $193,867. This increase consisted of
primarily of salaries and advertising costs.
Research and Development. The Company's research and development efforts are
focused on development of the Company's co-hosting capabilities. The Company is
also developing intranet models for intraorganization communications that can be
used by multi-site organizations as well as a communications infrastructure to
allow for daily information transfer to the Company for periodic back-up of
customer files for disaster control purposes. The Company had research and
development expenses of $147,072 during the nine month period ended May 31, 1997
compared to $471,937 during the nine months ended May 31, 1996, a decrease of
$324,865. The decrease in research and development expenses is due primarily to
the fact that the majority of the initial infrastructure development has been
accomplished.
Net Interest Income (Expense). Net interest income was $32,002 for the three
month period ended May 31, 1997 compared to interest income of $18,762 for the
three months ended May 31, 1996. Net interest income was $53,824 for the nine
month period ended May 31, 1997 compared to interest income of $1,890 for the
nine month period ended May 31, 1996 an increase of $51,934. The increase in
interest income was from investment of the proceeds of the Company's IPO in
interest bearing instruments and cash equivalent securities. Interest expense
decreased as a result of the payoff of Notes Payable to related parties in
January 1997.
Income Taxes. Since inception, the Company has generated tax benefits related to
its operating loss carry-forwards and of research and development costs. The
deferred asset related to such benefits was fully reserved as of May 31, 1997
due to the significant doubt about the realization of the deferred tax asset.
Accordingly, there has been no income tax expense or benefit reflected on the
accompanying statements of operations since inception.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has financed its activities primarily
by the IPO which closed on December 10, 1996 and raised approximately
$6,485,000, as well as by loans from a stockholder, and the sale of its Common
Stock to private investors. As a result of the IPO, working capital at May 31,
1997 was $2,331,298. The Company has three capital lease agreements which are
secured by fixed assets. The outstanding balance as of May 31, 1997 for one of
these agreements was approximately $319,000 and matures in December 2000. In
September 1996, the Company entered into two additional capital lease agreements
under which it may borrow up to an aggregate of $1,000,000 of which
approximately $668,000 was outstanding at May 31, 1997. These obligations mature
in October 2001. On December 10, 1996, the Company deposited, as collateral, a
portion of the proceeds from the IPO equal to the amount outstanding under the
September 1996 agreements.
For the three months ended May 31, 1997, cash of approximately
$1,566,000 was used by operating activities compared to cash used by operating
activities of approximately $407,000 for the three months ended May 31, 1996.
The Company used cash of approximately $2,502,000 during the nine month period
ended May 31, 1997 compared to approximately $366,000 during the nine months
ended May 31, 1996, an increase of $2,136,000, due primarily to the Company's
net loss of approximately $2,829,000, compared to $1,670,000 (excluding non-cash
charges of $5,760,000) for the nine months ended May 31, 1996, a
10
reduction in accounts payable and accrued expenses of approximately $687,000 and
increase of approximately of $305,000 in prepaid expenses. During the period
from inception to May 31, 1997, the Company recorded a non-cash charge of
$5,760,000 against earnings for acquired research and development, which was a
substantial component of the Company's overall net loss for the period of
approximately $10,786,000.
On December 10, the Company consummated a public offering of 1,000,000
shares of common stock at a price of $8.00 per share and redeemable warrants to
purchase 1,000,000 shares of common stock at $9.60 per share, at a price of $.20
per warrant. The gross proceeds from the public offering of $8,200,000 was
reduced by the underwriting discount and non-accountable expense allowance
totaling $1,066,000 and legal, printing, accounting and other registration costs
of $648,625.
In addition the Company has raised approximately $2,014,500 from the
sale of Common Stock and private offerings to third party investors during the
year ended August 31, 1996. The Company has borrowed approximately $1,522,000
from related parties since inception, all of which has been repaid as of January
17, 1996.
Management believes that the net proceeds from the IPO and anticipated
revenues from operations will be sufficient to meet the Company's anticipated
cash needs and finance its plans for expansion for at least the next twelve
months. Thereafter, the Company anticipates that it may require additional
financing to meet its current plans for expansion. No assurance can be given of
the Company's ability to obtain such financing on favorable terms, if at all. If
the Company is unable to obtain additional financing, its ability to meet its
current plans for expansion could be materially adversely affected.
IMPACT OF INFLATION
Inflation has not had a material adverse effect on the Company's
business.
NEW ACCOUNTING STANDARDS
Statement of Financial Accounting Standards ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of," issued by the Financial Accounting Standards Board ("FASB"), is
effective for financial statements for fiscal years beginning after December 15,
1995. The new standard establishes new guidelines regarding when impairment
losses on long-lived assets, which include plant and equipment and certain
identifiable intangible assets and goodwill, should be recognized and how
impairment losses should be measured. The adoption of the standard did not have
a material effect on its financial position or results of operations.
In October 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation." The Company has determined that it will continue to
account for stock-based compensation for employees under Accounting Principles
Board Opinion No. 25 and elect the disclosure-only alternative under SFAS No.
123. The Company will be required to disclose the pro forma net income or loss
and per share amounts in the notes to the financial statements using the
fair-value-based method beginning in the year ending August 31, 1997, with
comparable disclosures for the year ended August 31, 1996. The Company has not
determined the impact of these pro forma adjustments.
11
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
1. The Registrant has been named as a defendant in five almost
identical proceedings brought in the United States District
Court for the District of Massachusetts (Nager v. WebSecure,
Inc. et al); (Krause and Krause v. WebSecure, Inc., et al);
(Miller, Weberman and Fisher v. WebSecure, Inc. et al);
(Lifshitz v. WebSecure, Inc. et al); and (Friedman v.
WebSecure, Inc. et al). The actions were commenced between
March and May 1997. Also named as defendants were certain
current and former officers and directors of the Registrant,
Coburn & Meredith, Inc. and Shamrock Partners, Ltd., the
underwriters of the Registrant's initial public offering (the
"IPO"), and Centennial Technologies, Inc. ("Centennial"). The
complaints allege inter alia that the registration statement
filed by the Registrant in connection with the IPO contains
certain false and misleading statements concerning the
Registrant and its operations and in certain cases that the
stock price of the Registrant was artificially inflated. The
complaints seek compensatory damages, attorney's fees, and
other damages.
2. The Registrant has responded to subpoena duces tecum by the
Massachusetts Securities Division (the "Division"), which
inquiry was commenced on March 19, 1997. The Division is
seeking additional information concerning the relationship
between the Registrant and Centennial. Also named as subjects
of the inquiry are Coburn & Meredith, Inc. and Shamrock
Partners, Ltd. In addition, the Office of the U.S. Attorney
for Massachusetts has issued a subpoena to the Registrant to
produce certain documents in connection with the
above-described relationship and related matters.
3. On April 7, 1997, the Company received a letter from the
Securities and Exchange Commission ("SEC") requesting the
voluntary production of documents and information in
connection with an informal inquiry captioned In the Matter of
WebSecure, Inc. (MB-930). The Company is cooperating with the
SEC and is in the process of producing the requested documents
and information.
4. On June 12, 1997 the Registrant received notification from
NASDQ that the Company's shares of common stock and warrants
were delisted from the NASDQ SmallCap Market as a result of
its' failure to meet the public interest requirement as stated
in the Marketplace Rule 4330(a)(03). On June 18, 1997 the
Company requested that the decision of the Listings
qualification Panel be reviewed by the Hearings Review
Committee and reversed. The Registrant has also received
notification from the Philadelphia Stock Exchange that the
Company's common stock will be delisted on the Philadelphia
Stock Exchange as well based upon similar rationale. The
Company is currently in the process of taking actions to
rectify the problems which resulted in the NASDQ and
Philadelphia Stock Exchange delisting decisions.
12
ITEM 2. CHANGES IN SECURITIES. None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None.
ITEM 5. OTHER INFORMATION. None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS. None.
(b) REPORTS ON FORM 8-K. The Registrant filed reports
on Form 8-K on April 2 and April 9, 1997 under Item 5
("Other Events") and on April 28, 1997 under Item 4
("Changes in Registrants Certifying Accountants").
No financial statements were filed with that report.
13
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WEBSECURE, INC.
Date: July 16, 1997 By: /s/ Carroll M. Lowenstein
--------------------------
Carroll M. Lowenstein
President and Secretary
By: /s/ Neil G. Howland
---------------------------
Neil G. Howland
Director
14
<TABLE> <S> <C>
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