<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment #1 to
FORM 10-QSB
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For Period Ended September 30, 1999
----------------------------------------------------
[ ] 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 00-23527
---------------------------------------------
eSoft, Inc.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 84-0938960
------------------------ ------------------------
(State of Incorporation) (IRS Employer ID Number)
295 Interlocken Boulevard #500 Broomfield, CO 80021
- --------------------------------- --------------------------------
(Address of principle executive offices) (city) (state) (zip code)
(303) 444-1600
-------------------------------------------------
Registrant's telephone number including area code
---------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
----- -----
Transitional Small Business Disclosure format (check one):
YES NO X
----- -----
The number of shares outstanding of the Registrant's $0.01 par value common
stock on October 31, 1999 was 10,963,942.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
ESOFT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 732,384 $ 1,965,284
Investment securities 2,174,730 -
Accounts receivable:
Trade, net of allowance for doubtful accounts 2,830,981 3,001,020
Other - 306,000
Inventories 1,617,889 834,210
Prepaid expenses and other 259,696 160,160
----------- -----------
Total current assets 7,615,680 6,266,674
----------- -----------
PROPERTY AND EQUIPMENT
Computer equipment 546,720 652,350
Furniture and equipment 328,333 327,330
Manufacturing tools and equipment 26,423 26,423
Leasehold Improvements 175,915 176,314
----------- -----------
1,077,391 1,182,417
Less accumulated depreciation 483,495 575,410
----------- -----------
Net property and equipment 593,896 607,007
----------- -----------
OTHER ASSETS
Capitalized software costs, net of accumulated
amortization of $314,453 and $439,932 867,072 744,243
Restricted cash and cash equivalents 85,000 -
Deferred financing costs - 780,891
-
Other assets 7,039 32,984
----------- -----------
Total other assets 959,111 1,558,118
----------- -----------
TOTAL ASSETS $ 9,168,687 $ 8,431,799
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
2
<PAGE>
ESOFT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------- -------------
(UNAUDITED)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,497,276 $ 1,891,542
Margin loan on investments 39,544 -
Marketing loan agreement 356,060 459,855
Current portion of long-term debt 136,865 28,182
Deferred revenue 259,307 282,603
Customer deposits 248,287 -
Accrued expenses:
Payroll and payroll taxes 258,184 149,740
Legal fees 53,400 200,000
Other 310,666 546,915
------------ ------------
Total current liabilities 3,159,589 3,558,837
LONG TERM LIABILITIES
Long-term debt, less current portion - 2,949,455
------------ ------------
Total liabilities 3,159,589 6,508,292
------------ ------------
STOCKHOLDERS' EQUITY
Common stock, par value $.01 per share; 96,947 109,580
authorized 50,000,000 shares; 9,694,673
and 10,957,985 issued and outstanding
December 31, 1998 and September 30, 1999,
respectively
Additional paid-in capital 10,215,840 14,234,281
Notes receivable - (152,420)
Accumulated deficit (4,303,689) (12,267,934)
------------ ------------
Total stockholders' equity 6,009,098 1,923,507
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 9,168,687 $ 8,431,799
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
3
<PAGE>
ESOFT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1999 1998 1999
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUE $2,932,041 $ 2,233,872 $ 7,371,531 $ 6,040,710
COST OF GOODS SOLD 1,140,208 859,235 2,949,809 2,761,928
---------- ----------- ----------- -----------
GROSS PROFIT 1,791,833 1,374,637 4,421,722 3,278,782
---------- ----------- ----------- -----------
EXPENSES
Sales and marketing expense 1,303,634 1,033,505 2,929,561 4,836,333
General & administrative expense 1,069,840 1,515,914 2,581,963 5,006,055
Engineering expense 286,831 332,074 694,301 1,047,163
Software amortization costs 54,695 41,826 156,788 125,479
Research and development 179,740 137,885 466,591 493,594
---------- ----------- ----------- -----------
2,894,740 3,061,204 6,829,204 11,508,624
---------- ----------- ----------- -----------
OTHER INCOME (EXPENSE)
Other income (expense) 64 95,063 (7,032) 10,898
Realized gain on sale of investments 194,185 - 194,185 109,895
Unrealized gain on sale of investments 44,692 - 80,873 -
Interest income 95,062 6,518 114,958 43,161
Interest expense (6,687) (223,306) (18,449) (283,297)
---------- ----------- ----------- -----------
327,316 (121,725) 364,535 (119,343)
---------- ----------- ----------- -----------
NET LOSS $ (775,591) $(1,808,292) $(2,042,947) $(8,349,185)
========== =========== =========== ===========
BASIC AND DILUTED LOSS
PER COMMON SHARE $ (0.08) $ (0.17) $ (0.26) $ (0.81)
========== =========== =========== ===========
BASIC AND DILUTED WEIGHTED AVERAGE SHARES
OUTSTANDING 9,590,216 10,751,198 7,972,581 10,302,233
========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
4
<PAGE>
ESOFT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
---------------------- PAID-IN NOTES ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL RECEIVABLE DEFICIT EQUITY
----------- -------- ------------ ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1999 9,694,673 $ 96,947 $10,215,840 $ - ($4,303,689) $6,009,098
Issuance of options to consultant - - 45,383 - - 45,383
Issuance of compensatory options - - 40,420 - - 40,420
Exercise of warrants and options 879,853 8,798 853,121 - - 861,919
Issuance of stock pursuant to private
placement, May 1999 156,250 1,563 498,437 - - 500,000
Issuance of common stock for payment of
accounts payable 5,500 55 21,945 - - 22,000
Issuance of warrants pursuant to private
placement of debt, June 1999 - - 1,478,325 - - 1,478,325
To reclassify the undistributed losses
of Technologic, Inc. (an S-Corporation
through the date of merger) to
additional paid-in capital - - (384,940) - 384,940 -
Issuance of common stock to brokers 75,000 750 289,875 - - 290,625
Issuance of warrants pursuant to private
placement of debt, September 1999 - - 968,308 - - 968,308
Issuance of notes receivable for exercise of
options and warrants, net of collections 146,709 1,467 207,567 (152,420) - 56,614
Net loss for the nine months ended
September 30, 1999 - - - - (8,349,185) (8,349,185)
---------- -------- ----------- ---------- ------------- ----------
BALANCE, September 30, 1999 10,957,985 $109,580 $14,234,281 ($152,420) ($12,267,934) $1,923,507
========== ======== =========== ========== ============= ==========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
5
<PAGE>
ESOFT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
1998 1999
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss from operations $ (2,042,947) $ (8,349,185)
Adjustments to reconcile net loss to net cash used in
operating activities
Depreciation & software amortization 268,000 217,394
Realized gain from sale of trading securities (194,185) (109,445)
Proceeds from sale of trading securities 194,185 292,634
Unrealized (gain) from trading securities (80,873) -
Gain on sale of fixed assets (611) (450)
Provision for losses on accounts receivable 174,598 151,639
Interest income on subscription receivable - (1,009)
Amortization of discount on investments - (8,459)
Amortization of debt discounts and financing costs - 204,150
Issuance of compensatory options 46,400 40,420
Issuance of consultant options - 45,383
Issuance of common stock to brokers - 290,625
Amortization of warrant valuation granted for
prepaid consulting 51,466 101,767
Changes in operating assets and liabilites:
Accounts receivable - trade (2,776,327) (627,678)
Inventories (317,405) 783,679
Other assets 8,932 (25,945)
Prepaid expenses (408,724) (2,231)
Accounts payable 903,003 416,266
Accrued expenses 296,003 26,120
Deferred revenue 99,373 23,296
------------- ------------
Net cash used in operating activities (3,779,112) (6,531,029)
------------- ------------
INVESTING ACTIVITIES
Proceeds from investments - 2,000,000
Purchase of equipment (452,337) (141,873)
Proceeds from sale of assets 4,217 37,296
Restricted cash - 85,000
Capitalized software costs (60,000) (2,650)
------------- ------------
Net cash (used in) provided by investing activities (508,120) 1,977,773
------------- ------------
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
6
<PAGE>
ESOFT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<S> <C> <C>
CASH FLOW FROM FINANCING ACTIVITIES
Due to related party 100,000 -
Payment on related party borrowings (20,000) -
Proceeds from subscription receivable 200,000 56,487
Payments on short term debt (121,955) (159,151)
Proceeds from short term debt 365,984 114,719
Proceeds from issuance of convertible debt - 4,950,000
Payment of dividends (249,998) -
Debt offering costs paid - (538,953)
Proceeds from exercise of options and warrants and sale
of stock 7,779,797 1,363,054
------------- ------------
Net cash provided by financing activities 8,053,828 5,786,156
------------- ------------
INCREASE IN CASH 3,766,596 1,232,900
CASH: BEGINNING OF PERIOD 1,228,143 732,384
------------- ------------
CASH: END OF PERIOD $ 4,994,739 $ 1,965,284
============= =============
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
Common Stock issued for subscriptions receivable - $ 209,034
Warrants issued in connection with debt offering - $ 2,466,633
Issuance of notes receivable for exercise of options and warrants - $ 62,049
Common stock issued for payment of accounts payable - $ 22,000
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
7
<PAGE>
ESOFT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Presentation
The consolidated interim financial statements include the accounts of
eSoft, Inc. and its two wholly-owned subsidiaries, Apexx Technology,
Inc. ("Apexx") and Technologic, Inc. ("Technologic"), (collectively
eSoft or the "Company") and have been prepared by the Company, without
audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes
that the disclosures are adequate to make the information presented not
misleading.
These statements reflect all adjustments, consisting of normal
recurring adjustments, which in the opinion of management, are
necessary for fair presentation of the information contained therein.
It is suggested that these consolidated financial statements be read in
conjunction with the financial statements and notes thereto included in
the Company's Annual Report on Form 10-KSB for the year ended December
31, 1998. The Company follows the same accounting policies in
preparation of interim reports.
The consolidated financial statements of the Company for the three and
nine months ended September 30, 1999 and 1998 have been restated to
give retroactive effect to the mergers with Apexx on May 25, 1999 and
Technologic on September 10, 1999, which have been accounted for using
the pooling of interests method and, as a result, the financial
position, results of operations and cash flows are presented as if the
combining companies had been consolidated for all periods presented and
the consolidated statement of stockholders' equity reflect the accounts
of eSoft as if the additional common stock issued in connection with
the mergers had been issued for all periods presented. It is further
suggested that these consolidated financial statements be read in
conjunction with the supplemental consolidated financial statements and
notes thereto included in the Company's Current Report on Form 8-K
and 8-K/A filed with the Securities & Exchange Commission on
August 9, 1999 and with an amendment to the Company's Current Report
on Form 8-K filed with the Securities & Exchange Commission on
September 27, 1999, which will be filed with the Commission within
75 days after September 10, 1999.
Results of operations for the interim periods are not necessarily
indicative of annual results.
2. Business Acquisitions
Effective May 25, 1999, the Company completed the merger with Apexx
located in Boise, Idaho which provided for the exchange of all of the
outstanding stock of Apexx for 1,591,365 shares of eSoft common stock
and for the conversion of all Apexx stock options into
8
<PAGE>
ESOFT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
eSoft stock options to acquire 1,356,003 shares of eSoft common stock.
The Merger has been accounted for as a pooling of interests.
Effective September 10, 1999, the Company completed the merger with
Technologic located in Norcross, Georgia which provided for the
exchange of all of the outstanding stock of Technologic for 1,244,436
shares of eSoft common stock and for the conversion of all Technologic
stock options into eSoft stock options to acquire 180,565 shares of
eSoft common stock. This Merger also issued 75,000 shares of the
Company's common stock to the investment bankers of Technologic in
connection with the Merger. The Merger has been accounted for as a
pooling of interests. Merger costs of about $725,000 in relation to
this merger were expensed during the third quarter, which include
bankers fees, audit fees, legal fees, and printing fees.
<TABLE>
<CAPTION>
Pooling Company Nature of Operations Merger Date
--------------- -------------------- -----------
<S> <C> <C>
Apexx Technology, Inc. Internet connectivity solutions May 25, 1999
Technologic, Inc. Internet connectivity solutions September 10, 1999
</TABLE>
Revenue, net loss and net loss per common share of eSoft, Apexx and
Technologic as consolidated for the periods presented are as follows:
<TABLE>
<CAPTION>
---------------------------------------------- ---------------- -----------------
REVENUE:
Three Months Ended September 30, 1998 1999
---------------------------------------------- ---------------- -----------------
restated
---------------------------------------------- ---------------- -----------------
<S> <C> <C>
---------------------------------------------- ---------------- -----------------
eSoft $1,480,199 $ 1,086,657
---------------------------------------------- ---------------- -----------------
Apexx 918,706 442,564
---------------------------------------------- ---------------- -----------------
Technologic 533,136 710,147
---------------------------------------------- ---------------- -----------------
Eliminations - (5,496)
---------------------------------------------- ---------------- -----------------
---------------------------------------------- ---------------- -----------------
eSoft, consolidated $2,932,041 $2,233,872
---------------------------------------------- ---------------- -----------------
---------------------------------------------- ---------------- -----------------
---------------------------------------------- ---------------- -----------------
Nine Months Ended September 30, 1998 1999
---------------------------------------------- ---------------- -----------------
Restated
---------------------------------------------- ---------------- -----------------
---------------------------------------------- ---------------- -----------------
eSoft $3,335,139 $2,116,145
---------------------------------------------- ---------------- -----------------
Apexx 2,624,441 2,598,003
---------------------------------------------- ---------------- -----------------
Technologic 1,411,951 1,827,765
---------------------------------------------- ---------------- -----------------
Eliminations - (501,203)
---------------------------------------------- ---------------- -----------------
</TABLE>
9
<PAGE>
<TABLE>
<S> <C> <C>
---------------------------------------------- ---------------- -----------------
eSoft, consolidated $7,371,531 $6,040,710
---------------------------------------------- ---------------- -----------------
---------------------------------------------- ---------------- -----------------
---------------------------------------------- ---------------- -----------------
NET LOSS:
---------------------------------------------- ---------------- -----------------
Three Months Ended September 30, 1998 1999
---------------------------------------------- ---------------- -----------------
restated
---------------------------------------------- ---------------- -----------------
---------------------------------------------- ---------------- -----------------
eSoft $(651,528) $(2,011,228)
---------------------------------------------- ---------------- -----------------
Apexx (235,988) 310,607
---------------------------------------------- ---------------- -----------------
Technologic 111,925 (104,649)
---------------------------------------------- ---------------- -----------------
Eliminations - (3,022)
---------------------------------------------- ---------------- -----------------
---------------------------------------------- ---------------- -----------------
eSoft, consolidated $(775,591) $(1,808,292)
---------------------------------------------- ---------------- -----------------
---------------------------------------------- ---------------- -----------------
Nine Months Ended September 30, 1998 1999
---------------------------------------------- ---------------- -----------------
restated
---------------------------------------------- ---------------- -----------------
---------------------------------------------- ---------------- -----------------
eSoft $(1,479,448) $(7,635,798)
---------------------------------------------- ---------------- -----------------
Apexx (485,051) 168,876
---------------------------------------------- ---------------- -----------------
Technologic (78,448) (601,667)
---------------------------------------------- ---------------- -----------------
Eliminations - (280,596)
---------------------------------------------- ---------------- -----------------
---------------------------------------------- ---------------- -----------------
eSoft, consolidated $(2,042,947) $(8,349,185)
---------------------------------------------- ---------------- -----------------
---------------------------------------------- ---------------- -----------------
---------------------------------------------- ---------------- -----------------
NET LOSS PER COMMON SHARE:
---------------------------------------------- ---------------- -----------------
Three Months Ended September 30, 1998 1999
---------------------------------------------- ---------------- -----------------
restated
---------------------------------------------- ---------------- -----------------
---------------------------------------------- ---------------- -----------------
As previously reported:
---------------------------------------------- ---------------- -----------------
Basic and diluted $ (0.10) N/A
---------------------------------------------- ---------------- -----------------
---------------------------------------------- ---------------- -----------------
Consolidated:
---------------------------------------------- ---------------- -----------------
Basic and diluted $(0.08) $ (0.17)
---------------------------------------------- ---------------- -----------------
---------------------------------------------- ---------------- -----------------
---------------------------------------------- ---------------- -----------------
Nine Months Ended September 30, 1998 1999
---------------------------------------------- ---------------- -----------------
---------------------------------------------- ---------------- -----------------
As previously reported:
---------------------------------------------- ---------------- -----------------
Basic and diluted $ (0.29) N/A
---------------------------------------------- ---------------- -----------------
---------------------------------------------- ---------------- -----------------
Consolidated:
---------------------------------------------- ---------------- -----------------
Basic and diluted $ (0.26) $ (0.81)
---------------------------------------------- ---------------- -----------------
</TABLE>
10
<PAGE>
ESOFT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. Trade Receivables
The following information summarizes accounts receivable:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1999
----------- -----------
<S> <C> <C>
Accounts Receivable $ 3,144,222 $ 3,465,900
Allowance for doubtful accounts (313,241) (464,880)
----------- -----------
$ 2,830,981 $ 3,001,020
=========== ===========
</TABLE>
The Company did not have any customers which accounted for 10% or
more of the sales through the nine months ending September 30, 1999.
One customer represented 48% of total accounts receivable at
September 30, 1999. The Company has seven distributors which accounted
for 16% of the Company's sales through the nine months ending
September 30, 1999.
The Company with regard to its foreign sales does not take the risk of
foreign currency fluctuation. All sales are designated as payment in US
denominated funds at the time of sale.
4. Subscription Receivable
The Company issued two promissory notes receivable in the amounts of
$56,487 and $75,411 on March 10, 1999 and March 24, 1999 resulting from
the exercise of 49,550 and 66,150 warrants with an exercise price of
$1.15, by Transition Partners Limited and Copeland Consulting Group,
Inc., respectively. At the time of exercise, $1,157 was paid in cash.
The notes are due in March 2000 without interest and at 12% penalty
interest thereafter and are secured by the shares of common stock being
issued. At September 30, 1999, $56,487 has been paid on these notes
receivable and $1,009 of interest receivable has been recognized. The
Company also issued promissory notes receivable in the amount of
$76,000 to employees during June 1999. The notes are due in June 2001
with annual interest at the rate of 5.75% due upon maturity and are
secured by the shares of common stock being issued. The notes become
due and payable upon termination of employment.
11
<PAGE>
ESOFT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5. Long-term debt
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ -------------
<S> <C> <C>
Note payable to bank, payable in monthly installments of
$3,171, including interest at prime plus 1.5% (9.25% at
December 31, 1998), maturing March 15, 2002, equipment,
inventory, and accounts receivable are provided as collateral,
due on demand as a result of the Apexx merger. $ 104,309 $ 15,160
Note payable to bank, payable in monthly installments of
$2,170, including interest at prime plus 2% (9.75% at December
31, 1998), maturing March 10, 2000, collateralized by
guarantees from certain shareholders, due on demand as a
result of the Technologic merger. 32,556 13,022
</TABLE>
12
<PAGE>
<TABLE>
<S> <C> <C>
Term note payable to a small business investment company. Interest is
at 5% per annum, payable quarterly. Principal is due June 2002. The
note, in the principal amount of $5,000,000, has been discounted by
$2,146,270. The discount, which is being amortized through June 2002,
represents the value assigned to 1,277,955 stock purchase warrants
which were granted to the lender and a 2.5% discount on the $2,000,000
note payable. The value of the discount has been calculated using the
Black-Scholes option pricing model. The stock purchase warrants are
exercisable through June 2002 to purchase an equal number of common
shares at a per share price of $4.4994. The unamortized discount at
September 30, 1999 was $2,050,545. The note is convertible at any time
at the investor's option into a fixed number of shares of eSoft common
stock at $3.9125 per share, subject to certain anti-dilution
provisions and adjustments. The Company has the ability, under certain
circumstances, to obligate the investor to convert the debentures into
common stock and to exercise the warrants. The investor has the option
to purchase an additional $3 million of debentures, together with
associated warrants, in the final tranche. The final tranche of $3
million of debentures would be convertible at the lower of (i) the
Company's then current market price or (ii) $5.50, but in no event
less than $3.9125 per share. This tranche of debentures would be
accompanied by warrants with an exercise price of 115% of the
debenture conversion price. The debentures are manditorily convertible
if the average per share market value over thirty consecutive trading
days exceeds 200% of the exercise price of the warrants. - 2,949,455
---------- -----------
Total long term debt 136,865 2,977,637
136,865 28,182
Less current portion ---------- -----------
$ - $ 2,949,455
Total long term debt ========== ===========
</TABLE>
13
<PAGE>
ESOFT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
6. Net Loss per Share
Basic loss per share is calculated by dividing the net loss by the
weighted average common shares outstanding during the period. For
purposes of computing diluted earnings per share, dilutive securities
are not included when the effect is anti-dilutive.
Options and warrants to purchase 3,132,986 and 4,933,140 shares of
common stock and notes convertible into 0 and 1,277,955 shares of
common stock were not included in the computation of diluted earnings
per share because their effect was anti-dilutive for the period ending
September 30, 1998 and 1999.
14
<PAGE>
FORWARD-LOOKING STATEMENTS
Statements made in this Form 10-QSB that are not historical or
current facts are "forward-looking statements" made pursuant to the
safe harbor provisions of Section 27A of the Securities Act of 1933
("The ACT") and Section 21E of the Securities Exchange Act of 1934.
These statements often can be identified by the use of terms such as
"may," "will," "expect," "believes," "anticipate," "estimate,"
"approximate" or "continue," or the negative thereof. The Company
intends that such forward-looking statements be subject to the safe
harbors for such statements. The Company wishes to caution readers not
to place undue reliance on any such forward-looking statements, which
speak only as of the date made. Any forward-looking statements
represent management's best judgment as to what may occur in the
future. However, forward-looking statements are subject to risks,
uncertainties and important factors beyond the control of the Company
that could cause actual results and events to differ materially from
historical results of operations and events and those presently
anticipated or projected. These factors include adverse economic
conditions, entry of new and stronger competitors, inadequate capital,
unexpected costs, failure to gain product approval in foreign countries
and failure to capitalize upon access to new markets. Additional risks
and uncertainties which may affect forward-looking statements about the
Company's business and prospects include the possibility that a
competitor will develop a more comprehensive or less expensive
solution, delays in market awareness of eSoft and its products,
possible delays in eSoft's marketing strategy, which could have an
immediate and material adverse effect by placing eSoft behind its
competitors. The Company disclaims any obligation subsequently to
revise any forward-looking statements to reflect events or
circumstances after the date of such statement or to reflect the
occurrence of anticipated or unanticipated events.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
eSoft, Inc.
(Registrant)
Date: November 15, 1999 /s/ Jeffrey Finn
----------------- -----------------
Jeffrey Finn
President, Chief Operating
Officer
Date: Date: November 15, 1999 /s/ Amy Beth Hansman
----------------- ---------------------
Amy Beth Hansman
Chief Accounting Officer
16
