<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For The Quarterly Period Ended December 31, 1997
or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 000-20865
e-Net, Inc.
(Exact name of small business issuer as specified in its charter)
Delaware 52-1929282
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
12800 Middlebrook Road, Suite 200, Germantown, MD 20874
(Address of principal executive offices) (Zip Code)
(301) 601-8700
(Issuer's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report.)
Check 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 periods 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
--- ---
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: common stock, $.01 par
value per share, outstanding as of February 10, 1997.
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ---
The Exhibit Index Appears in Sequentially Numbered Page N/A
1
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TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
<S> <C>
Item 1. Financial Statements (Unaudited)
Accountants' Review Report............................................................................. 3
Balance Sheets as of December 31 and March 31, 1997.................................................... 4
Statements of Operations for the three months ended December 31, 1997 and 1996......................... 5
Statements of Operations for the nine months ended December 31, 1997 and 1996.......................... 6
Statements of Cash Flows for the nine months ended December 31, 1997 and 1996.......................... 7
Statements of Stockholders' Equity as of December 31, 1997............................................. 8
Notes to Financial Statements.......................................................................... 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................................................... 10
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.................................................................. 13
Signatures................................................................................................ 14
</TABLE>
2
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Board of Directors
e-Net, Inc.
We have reviewed the accompanying balance sheet of e-Net, Inc. (a Delaware
Corporation), as of December 31, 1997, and the related statements of
operations, stockholders' equity and cash flows for nine month periods ended
December 31, 1997 and 1996, and the statements of operations for the three
month periods ended December 31, 1997 and 1996. These financial statements
are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet as of March 31, 1997, and the related statements
of operations, stockholders' equity and cash flows for the year then ended
(not presented herein), and in our report dated May 2, 1997, we expressed an
unqualified opinion on those financial statements. In our opinion, the
information set forth in the accompanying condensed balance sheet as of March
31, 1997, is fairly stated, in all material respects, in relation to the
balance sheet from which it has been derived.
GRANT THORNTON LLP
Vienna, Virginia
January 19, 1998
3
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e-NET, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, 1997 MARCH 31, 1997
----------------- --------------
(UNAUDITED) (AUDITED)
<S> <C> <C>
Current Assets
Cash and cash equivalents......................................... $ 894,650 $ 379,441
Short-term investments............................................ 2,254,180 --
Accounts receivable............................................... 95,729 113,181
Inventory......................................................... 233,144 --
Prepaid expenses.................................................. 86,318 14,800
----------------- --------------
Total Current Assets................................................ 3,564,021 507,422
Deposits and other assets........................................... -- 7,530
Property, Plant and Equipment, Net.................................. 371,152 203,125
Deferred Initial Public Offering Costs.............................. -- 964,706
Other Assets........................................................ 54,000 --
Software Development Costs.......................................... 894,172 520,853
----------------- --------------
$ 4,883,345 $ 2,203,636
----------------- --------------
----------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable--trade........................................... 69,722 105,301
Accrued liabilities............................................... 390,132 330,580
Capital lease obligation.......................................... -- 4,480
----------------- --------------
Total Current Liabilities........................................... 459,854 440,361
Accrued Initial Public Offering Costs............................... -- 887,843
----------------- --------------
Total Liabilities................................................... 459,854 1,328,204
Stockholders' Equity
Common stock, $.01 par value, 50,000,000 shares authorized,
5,750,000 and 4,250,000 shares outstanding at September 30, and
March 31, 1997, respectively.................................... 57,500 42,500
Stock subscriptions............................................... (46) (46)
Additional paid-in capital........................................ 14,163,090 8,307,627
Retained deficit.................................................. (9,797,053) (7,474,649)
----------------- --------------
Total Stockholders' Equity.......................................... 4,423,491 875,432
----------------- --------------
$ 4,883,345 $ 2,203,636
----------------- --------------
----------------- --------------
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
e-NET, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended December 31,
<TABLE>
<CAPTION>
1997 1996
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<S> <C> <C>
Sales
Products............................................................................ $ 99,235 $ --
Services............................................................................ 65,505 114,389
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Total sales........................................................................... 164,740 114,389
Cost of product sold and service provided
Products............................................................................ 32,412 --
Services............................................................................ 65,003 117,739
------------- -----------
Total cost of product sold and service provided....................................... 97,415 117,739
Gross profit.......................................................................... 67,325 (3,350)
Operating Expenses
Selling, general and administrative................................................. 818,544 157,644
Research and development............................................................ 310,470 54,342
------------- -----------
Loss from Operations.................................................................. (1,061,689) (215,336)
Other Income (Expense)
Interest and financing expense...................................................... -- 7,219
Other expenses...................................................................... (20,404) (20,250)
Interest income..................................................................... 48,128 4,773
------------- -----------
Loss Before Income Taxes.............................................................. (1,033,965) (223,594)
Income Tax Provision.................................................................. -- --
------------- -----------
Net Loss.............................................................................. $ (1,033,965) $ (223,594)
------------- -----------
------------- -----------
Loss per Share........................................................................ $ (.18) $ (.06)
------------- -----------
------------- -----------
Weighted Average Shares Outstanding................................................... 5,750,000 4,000,000
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
e-NET, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
Nine Months Ended December 31,
<TABLE>
<CAPTION>
1997 1996
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<S> <C> <C>
Sales
Products.......................................................................... $ 128,176 $ 24,000
Services.......................................................................... 250,079 414,517
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Total sales......................................................................... 378,255 438,517
Cost of product sold and service provided
Products.......................................................................... 48,017 12,822
Services.......................................................................... 160,045 290,487
------------- -------------
Total cost of product sold and service provided..................................... 208,062 303,309
Gross profit........................................................................ 170,193 135,208
Operating Expenses
Selling, general and administrative............................................... 1,990,798 593,971
Research and development.......................................................... 573,651 158,684
------------- -------------
Loss from Operations................................................................ (2,394,256) (617,447)
Other Income (Expense)
Interest expense--bridge financing................................................ -- (5,385,135)
Cost of abandoned stock registration.............................................. -- (284,575)
Interest and financing expense.................................................... (5,158) (15,581)
Other expenses.................................................................... (101,082) (41,849)
Interest income................................................................... 178,092 15,019
------------- -------------
Loss Before Income Taxes............................................................ (2,322,404) (6,329,568)
Income Tax Provision................................................................ -- --
Net Loss............................................................................ $ (2,322,404) $ (6,329,568)
------------- -------------
------------- -------------
Loss per Share...................................................................... $ (.41) $ (1.59)
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------------- -------------
Weighted Average Shares Outstanding................................................. 5,695,455 3,972,727
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE>
e-NET, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended December 31,
<TABLE>
<CAPTION>
1997 1996
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<S> <C> <C>
Increase (Decrease) in Cash and
Cash Equivalents
Cash Flows from Operating Activities
Net loss........................................................... $(2,322,404) $(6,329,568)
Adjustments to reconcile net loss to net
cash from operating activities
Interest expense--bridge financing............................. -- 5,385,135
Depreciation and amortization.................................. 128,976 28,011
Stock-Based Compensation....................................... 62,244 --
Changes in operating assets and liabilities
(Increase) Decrease in accounts receivable................... 17,452 (76,364)
(Increase) in inventory...................................... (233,144) --
(Increase) in prepaid expenses, deposits receivable and
other assets.............................................. (117,987) (25,530)
Increase in accounts payable
and accrued liabilities.................................... 23,972 127,183
(Decrease) in deferred revenue............................... -- (20,000)
------------- -------------
Net Cash Used in Operating Activities................................ (2,440,891) (911,133)
------------- -------------
Cash Flows from Investing Activities
Capital expenditures............................................... (290,353) (94,580)
Capitalized software development costs............................. (379,969) (367,598)
Investment in short term securities................................ (2,254,180) --
------------- -------------
Net Cash Used in Investing Activities................................ (2,924,502) (462,178)
------------- -------------
Cash Flows from Financing Activities
Net proceeds from initial public offering of common stock.......... 5,870,082 --
Issuance of common stock........................................... 15,000 --
Payment of shareholder/officer loans............................... -- (12,050)
Proceeds from issuance of bridge notes payable..................... -- 500,000
Proceeds from issuance of long-term debt........................... -- 1,000,000
Payments on capital leases......................................... (4,480) (3,719)
------------- -------------
Net Cash Provided by Financing Activities............................ 5,880,602 1,484,231
------------- -------------
Net Increase in Cash and Cash Equivalents............................ 515,209 110,920
Cash and Cash Equivalents at Beginning of Period..................... 379,441 557,960
------------- -------------
Cash and Cash Equivalents at End of Period........................... $ 894,650 $ 668,880
------------- -------------
------------- -------------
Supplemental Disclosures:
Income Taxes Paid.................................................. $ -- $ --
------------- -------------
------------- -------------
Interest Paid...................................................... $ 158 $ 6,284
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these statements.
7
<PAGE>
e-NET, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
COMMON STOCK STOCK
--------------------- SUBSCRIPTIONS ADDITIONAL TOTAL
NO. OF AND NOTES PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT RECEIVABLE CAPITAL DEFICIT EQUITY
---------- --------- --------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, April 1, 1997................. 4,250,000 $ 42,500 $ (46) $ 8,307,627 $ (7,474,649) $ 875,432
Sale of common stock in initial public
offering............................. 1,500,000 15,000 -- 5,793,219 -- 5,808,219
Stock-based compensation............... -- -- -- 62,244 -- 62,244
Net loss............................... -- -- -- -- (2,322,404) (2,322,404)
---------- --------- --------------- ------------- ------------- ------------
Balance, December 31, 1997............. 5,750,000 $ 57,500 $ (46) $ 14,163,090 $ (9,797,053) $4,423,491
---------- --------- --------------- ------------- ------------- ------------
---------- --------- --------------- ------------- ------------- ------------
</TABLE>
The accompanying notes are an integral part of these statements.
8
<PAGE>
e-NET, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A--BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited financial statements include the accounts of
e-Net, Inc. (the "Company"). Such statements have been prepared in accordance
with generally accepted accounting principles for interim financial
information and pursuant to the regulations of the Securities and Exchange
Commission; accordingly, they do not include all of the information and notes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments considered
necessary for a fair presentation (consisting of normal recurring accruals)
have been included. The results of operations for the quarter and nine months
ended December 31, 1997 are not necessarily indicative of the results for the
fiscal year ending March 31, 1998. The accompanying unaudited financial
statements should be read in conjunction with the financial statements and
notes thereto included in the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1997.
INVENTORY--Inventory is stated at the lower of cost or market value. Cost is
determined by the first-in, first-out method. The elements of cost include
subcontracted costs and materials handling charges.
SOFTWARE DEVELOPMENT COSTS--The Company has capitalized certain software
development costs incurred after establishing technological feasibility.
Software costs are amortized over the estimated useful life of the software
once the product is available for general release to customers. At December
31, 1997, the Company has capitalized $900,822, net of accumulated
amortization of $ 6,650. Should sufficient product sales fail to materialize,
the carrying amount of capitalized software costs may be reduced accordingly
in the future. The costs associated with development of a software product
prior to reaching the point of technological feasibility and with a product's
post-general availability support are charged to research and development
expense in the period incurred.
REVENUE RECOGNITION--Revenue is recognized on the sale of software products
upon shipment unless future obligations exist wherein a portion of the
revenue is deferred until the obligation is satisfied. Revenue from services
rendered is recognized either as the services are rendered based upon fixed
hourly rates or at contractually determined fixed monthly fees. The Company
has recorded, as an element of cost of product sales, an estimated accrual
for product warranty costs.
NOTE B--INITIAL PUBLIC OFFERING
In April 1997, the Company completed an initial public offering of
securities consisting of 1,500,000 shares of common stock and 1,725,000
common stock warrants. In connection with the offering, the Company received
proceeds of $5,808,219 net of all expenses associated with the offering.
NOTE C--LINE OF CREDIT FACILITY
On May 31, 1997, the Company signed a one (1) year promissory note for a
$1,000,000 line of credit facility that is collateralized by investments,
receivables and fixed assets of the Company. To date, the Company has not
borrowed on this facility.
NOTE D--NON-QUALIFIED STOCK OPTION PLAN
In April, 1997, the Board of Directors approved the adoption of the
e-Net, Inc. 1997 Non-Qualified Stock Option Plan, including the allocation of
up to 500,000 shares for option grants. The options are exercisable at fair
market value measured at the grant date with varying vesting schedules.
Options granted and vested under the plan in the nine months ended December
31, 1997 were recorded as compensation expense of $62,244. Since the plan's
inception the Company has granted 255,323 options, of which 115,990 are
exercisable at December 31, 1997.
NOTE E--INCOME TAXES
The Company has generated net operating losses since its inception. At
December 31, 1997, the Company recorded a valuation allowance in an amount
equal to the deferred tax asset due to the uncertainty of generating future
taxable income.
NOTE F--CONCENTRATION
Approximately 56% of the Company's accounts receivable balance at
December 31, 1997, and approximately 75% of the Company's sales for the nine
months ended December 31, 1997, are from one customer.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
This information should be read in conjunction with the Management's
Discussion and Analysis of Financial Condition and Results of Operations and
the consolidated financial statements and notes thereto contained in the
Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1997.
RESULTS OF OPERATIONS
THIRD QUARTER ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996
SALES
Sales for the third quarter ended December 31, 1997 were approximately
$164,700, an increase of 44% over the approximately $114,400 recorded for the
corresponding quarter of 1996. The revenue increase was due to the general
availability of the Company's T2000 product line. Product sales for the
T2000 product line resulted in approximately $99,000 of sales for the third
quarter ended December 31, 1997, compared to $-0- of product sales for the
corresponding quarter of 1996. The services revenue decline was due
primarily to the completion of several installation and support services
contracts in 1996. Services sales for the quarter ended December 31, 1997,
were primarily from one customer.
GROSS PROFIT
Gross profits for the third quarter ended December 31, 1997 were
approximately $67,300 or 40% of sales, compared to the approximately $(3,300)
or (3)% of sales for the corresponding quarter of 1996. The gross profit
increase was due to the increased emphasis on product sales that have a
higher gross profit contribution than software installation and support
services sales.
OPERATING EXPENSES
Selling, general & administrative expenses for the third quarter ended
December 31, 1997, were approximately $818,500, an increase of 419% over the
approximately $157,600 recorded for the corresponding quarter of 1996. The
dollar increase in these expenses over the prior year reflected additional
spending for personnel and programs consistent with the Company's emphasis on
the T2000 product line. The increased spending level in the third quarter of
1997 also reflected higher spending for programs and promotions needed to
generate and support product roll-out of, as well as substantial marketing
expenditures made in connection with the general availability of, the
Company's T2000 product line.
Research & development expenses for the third quarter ended December 31,
1997, were approximately $310,500, a 471% increase over the approximately
$54,300 recorded for the corresponding quarter of 1996. The increased
expenditures for research and development are due to the increase in number
of employees and other expenditures devoted to the general development of the
Company's technology products.
OTHER INCOME (EXPENSE)
Other income (expense) for the third quarter ended December 31, 1997, was
approximately $27,700, an increase over the approximately $(8,300) recorded
for the corresponding quarter of 1996. In the third quarter ended December
31, 1997, the Company's other income and expenses included interest income
earned on investments in marketable securities, which did not exist in the
corresponding quarter in 1996.
NINE MONTHS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996
SALES
Sales for the nine months ended December 31, 1997 were approximately
$378,300, a decrease of 14% from the approximately $438,500 recorded for the
corresponding nine months of 1996. The revenue decline was due primarily to
the completion of several installation and support services contracts in
1996, and an increased emphasis on development and preparation for the
general availability of the Company's T2000 product line. The services sales
for the nine months ended December 30, 1997, were primarily from one customer.
GROSS PROFIT
Gross profits for the nine months ended December 31, 1997 were
approximately $170,100 or 45% of sales, compared to the approximately
$135,200 or 31% of sales for the corresponding quarter of 1996. The gross
profit percentage increase was due to the increased emphasis on product sales
that have a higher gross profit contribution than software installation and
support service sales.
10
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OPERATING EXPENSES
Selling, general & administrative expenses for the nine months ended
December 31, 1997, were approximately $1,990,800, an increase of 235% over
the approximately $594,000 recorded for the corresponding nine months of
1996. The dollar increase in these expenses over the prior year reflected
additional spending for personnel and programs consistent with the Company's
emphasis on the T2000 product line. The increased spending level in the nine
months of 1997 also reflected higher spending for programs and promotions
needed to generate and support product roll-out of, as well as substantial
marketing expenditures made in connection with the general availability of,
the Company's T2000 product line.
Research & development expenses for the nine months ended December 31,
1997, were approximately $573,700, a 262% increase over the approximately
$158,700 recorded for the corresponding nine months of 1996. The increased
expenditures for research and development are due to the increase in number
of employees and other expenditures devoted to the general development of the
Company's technology products.
OTHER INCOME (EXPENSE)
Other income (expense) charges for the nine months ended December 31,
1997, were approximately $71,900, a decrease from the approximately
$(5,712,100) recorded for the corresponding nine months of 1996. In the nine
months ended December 31, 1996, the Company's other income and expenses
included several one-time charges associated with the issuance of bridge
loans which were subsequently converted to equity of approximately
$5,385,100, and with the cost of an abandoned stock registration of
approximately $284,600. The Company also had an increase in funds invested
over the same period in 1996.
OTHER
To date, inflation and seasonality have not had a material impact on the
Company's results of operations.
LIQUIDITY AND CAPITAL RESOURCES
In the nine months ended December 31, 1997, the Company received net
proceeds of approximately $5,885,100 from an initial public offering of the
Company's common stock and common stock warrants. The Company also secured a
$1,000,000 one year credit facility in the nine months ended December 31,
1997, which is secured by investments, receivables and fixed assets. The
Company used approximately $(2,131,200) in cash flows from operating
activities, excluding changes in assets and liabilities, during the nine
months ended December 31, 1997, compared to approximately $(916,400) for the
corresponding nine months of 1996. The increase in cash flows used in
operating activities excluding changes in assets and liabilities was mainly
due to the increase in selling, general and administrative expenses and
research and development expenses discussed above. The total net cash used by
operating activities was approximately $(2,440,900) for the nine months ended
December 31, 1997, compared to approximately $(911,100) for the corresponding
nine months of 1996.
Cash used by investing activities totalled approximately $2,924,500 for
the nine months ended December 31, 1997 as compared to approximately $462,200
for the corresponding nine months of 1996. The main component of that
investing activity was the investment in short-term securities of
approximately $2,254,200, as well as continued expenditures for capitalized
software development and property and equipment of approximately $290,400 and
$380,000, respectively. The majority of the expenditures related to continued
development of the T2000 product line.
Cash provided by financing activities totalled approximately $5,880,600
for the nine months ended December 31, 1997, compared to approximately
$1,484,200 for the corresponding period of 1996. The Company successfully
completed an initial public offering in April 1997, which yielded net
proceeds of approximately $5,885,100. The Company has access to a $1,000,000
credit line secured by investments, fixed assets and receivables, but did not
borrow against that line of credit during the nine months ended December 31,
1997.
The Company expects to continue to make significant investments in the
future to support its overall growth. Currently, it is anticipated that
ongoing operations will be financed primarily from net proceeds of the
initial public offering, the line of credit facility, from internally
generated funds and from other potential financing sources under
consideration. The Company presently has a line of credit, investments, and
cash and cash equivalents on hand and believes that these will be sufficient
to meet short-term cash requirements as needed. However, as indicated in the
Company's most recent Annual Report on Form 10-KSB, while operating
activities have provided and may provide cash in certain periods, to the
extent the Company has experienced or experiences growth, the Company's
operating and product development activities have used and may use cash and
consequently, such growth may require the Company to obtain additional
sources of financing. There can be no assurances that unforeseen events may
not require more working capital than the Company currently has at its
disposal, or that the Company will be able to obtain financing from
additional sources.
11
<PAGE>
FUTURE OPERATING RESULTS
The preceding paragraphs and the following discussion include
forward-looking statements regarding the Company's future financial position
and results of operations. Actual financial position and results of
operations may differ materially from these statements. All such statements
are qualified by the following cautionary statements.
The Company has invested significant amounts in the research and
development and the initial product roll-out marketing and selling for the
T2000 product line. The emphasis, attention, and dedication of Company's
limited resources for the T2000 product line have caused and, in management's
view, will continue to cause negative operating earnings. However, the
Company believes that the value and sales potential of the T2000 product line
outweighs the risk of continued operating losses.
The first products of the T2000 product line became generally available
during the second quarter of fiscal 1998 and the Company believes that
revenues will continue to grow as contracts are finalized and products are
delivered over the remainder of fiscal 1998 and into fiscal 1999. The
protracted process of obtaining governmental regulatory approval of products
(i.e. Federal Communication Commission product certification) and
difficulties in hiring of senior telecommunications sales and technical staff
in the current low-unemployment-rate economy have caused, and may continue to
cause, an effect on the delivery of the Company's products to market. To
date the Company has achieved all regulatory approvals, which it has sought,
and has been able to hire senior telecommunications sales and technical
staff, although no assurance can be given to such results in the future.
The Company does not expect revenue growth to occur ratably over the 1998
and 1999 fiscal years; instead, the Company expects that the major impact of
the T2000 product introduction on revenues and earnings will occur during
fiscal 1999. Revenue growth in fiscal 1999 will depend to a large extent on
the timing of the Company's rollout for products in the T2000 product line.
The Company's revenue growth and profitability in fiscal 1999 will depend
on many factors beyond the Company's control. These include the timing and
market acceptance of the T2000 product line and other new products and
features announced and introduced by the Company and its competitors, and the
extent to which the Company is successful in implementing its ongoing
strategy of providing high fidelity or "toll quality" data telephony. Other
factors include rapid changes in technologies and standards relating to
telecommunications and data telephony.
The foregoing forward-looking statements involve a number of risks and
uncertainties. In addition to the factors discussed above, among the other
factors that could cause actual results to differ materially are those listed
in the Company's most recent Annual Report on Form 10-KSB under the headings
"Item 1-- Description of Business--Forward-Looking and Cautionary Statements"
and "Item 6--Management's Discussion and Analysis of Financial Condition and
Results of Operations" and in the Company's Registration Statement on Form
SB-2, effective April 7, 1997, under the headings "Risk Factors" and
"Business", which are incorporated by reference herein, and included from
time to time in other documents filed by the Company with the Securities and
Exchange Commission.
Because of the foregoing uncertainties affecting the Company's future
operating results, past performance should not be considered to be a reliable
indicator of future performance. The use of historical trends to anticipate
results or trends in future periods may be inappropriate. In addition, the
Company's participation in a highly dynamic industry may result in
significant volatility in the price of the Company's common stock.
The Company cautions that the preceding list of cautionary statements is
not exclusive. The Company does not undertake to update any forward-looking
statements that may be made from time to time by or on behalf of the Company.
12
<PAGE>
PART II--OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibit Description
None.
(b) Since the end of its most recent fiscal year on March 31, 1997,
e-Net, Inc. has filed the following reports on Form 8-K:
Date of Report Item Reported
None.
13
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SIGNATURES
Pursuant to the requirements of the Exchange Act, the Registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
e-Net, Inc.
(Registrant)
DATE: February 11, 1998 /s/ Donald J. Shoff
-------------------------
Donald J. Shoff
Vice President and Chief Financial Officer
(Principal Financial Officer)
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEET AT DECEMBER 31, 1997 (UNAUDITED) AND STATEMENT OF OPERATIONS FOR THE NINE
MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED)
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 894,650
<SECURITIES> 2,254,180
<RECEIVABLES> 95,729
<ALLOWANCES> 0
<INVENTORY> 233,144
<CURRENT-ASSETS> 3,564,021
<PP&E> 551,546
<DEPRECIATION> 180,394
<TOTAL-ASSETS> 4,883,345
<CURRENT-LIABILITIES> 459,854
<BONDS> 0
0
0
<COMMON> 57,500
<OTHER-SE> 4,365,991
<TOTAL-LIABILITY-AND-EQUITY> 4,883,345
<SALES> 128,176
<TOTAL-REVENUES> 378,755
<CGS> 48,017
<TOTAL-COSTS> 208,062
<OTHER-EXPENSES> 2,564,449
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,158
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,322,404)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,322,404)
<EPS-PRIMARY> (.41)
<EPS-DILUTED> (.41)
</TABLE>