UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 333-75137
PACIFIC SOFTWORKS, INC.
(Exact name of registrant as specified in its charter)
California 77-0390628
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
703 Rancho Conejo Boulevard
Newbury Park, California 91320
(Address of principal executive offices) (Zip Code)
(805) 499-7722
Registrant's telephone number, including area code)
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____
There were 4,500,900 shares outstanding of the
registrant's Common Stock, par value $.001 per share,
as of May 9, 2000.
<PAGE>
PACIFIC SOFTWORKS, INC.
INDEX
Page No.
PART I - FINANCIAL INFORMATION
Item l. Financial Statements (Unaudited):
Balance Sheets at March 31, 2000 and
December 31, 1999 3
Statements of Operations for the three
months ended March 31, 2000 and 1999 5
Statements of Cash Flows for the three
months ended March 31, 2000 and 1999 7
Notes to Condensed Financial Statements 9
Item 2. Management's Discussion and Analysis or
Plan of Operations 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Changes in Securities and Use of Proceeds 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of
Security Holders 17
Item 5. Other Information 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 18
Signatures 19
Exhibits
Exhibit 11 20
Exhibit 27 21
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PACIFIC SOFTWORKS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
2000 1999
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents $1,113,021 $1,661,708
Accounts receivable, net of allowance
of $72,986 and $72,986 460,837 175,751
Note Receivable 1,000,000 1,000,000
Prepaid expenses and other current assets 34,330 75,753
Total current assets 2,608,188 2,913,212
Property and equipment less accumulated
depreciation and amortization of
$456,085 and $426,589 319,133 241,003
Other assets 19,734 13,193
TOTAL ASSETS $2,947,055 $3,167,408
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>
<TABLE>
<CAPTION>
PACIFIC SOFTWORKS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
2000 1999
LIABILITIES AND STOCKHOLDERS'EQUITY
<S> <C> <C>
Current liabilities
Accounts payable and accrued expenses $ 566,113 $ 390,546
________ ________
Total current liabilities 566,113 390,546
Deferred revenues 164,406 149,872
Commitments and contingencies
Stockholders'equity
Preferred stock, par value $.01 per share,
10,000,000 shares authorized; no shares
outstanding
Common stock, par value $.001 per share,
50,000,000 shares authorized; 4,500,900 and
4,402,500 shares issued and outstanding 4,501 4,403
Additional paid in capital 5,591,150 5,042,624
RETAINED EARNINGS (DEFICIT) (3,299,148) (2,445,615)
Cumulative adjustment for currency
translation (79,967) 25,578
Total stockholders' equity 2,216,536 2,626,990
$2,947,055 $3,167,408
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>
<TABLE>
<CAPTION>
PACIFIC SOFTWORKS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS
Ended March 31,
___________________________
2000 1999
<S> <C> <C>
NET REVENUE
SALES $ 558,602 $ 713,059
ROYALTIES AND OTHERS 101,435 58,591
TOTAL 660,037 771,650
COST OF REVENUE PURCHASES AND
Royalty fees 37,624 30,336
Gross profit 622,413 741,314
EXPENSES
Selling, general and administrative 828,823 380,815
Research and development 617,627 323,824
Depreciation and Amortization 29,496 13,460
Former officers consulting and
administrative expense 82,680
Total 1,475,946 800,779
Net loss $ (853,533) $ (59,465)
NET LOSS PER COMMON SHARE
Basic and diluted $ (0.19) $ (0.02)
Weighted average common
stock shares outstanding
Basic and diluted 4,431,104 3,378,888
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>
<TABLE>
<CAPTION>
PACIFIC SOFTWORKS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
Three Months
Ended March 31,
_____________________________
2000 1999
<S> <C> <C>
NET LOSS $( 853,533) $(59,465)
OTHER COMPREHENSIVE INCOME (LOSS)
FOREIGN CURRENCY TRANSLATION
ADJUSTMENT ( 105,545) (28,569)
COMPREHENSIVE LOSS $( 959,078) $(88,034)
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
PACIFIC SOFTWORKS, INC.
STATEMENT OF CASH FLOWS
(Unaudited)
For the Three Months
Ended March 31,
______________________
2000 1999
<S> <C> <C>
Cash flows from operating activities
Net loss $(853,533) $ ( 59,465)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization 29,496 13,460
(Increase) decrease in assets:
Accounts receivable (285,086) (173,189)
Related party receivable 43,000
Other receivables ( 25,000)
Prepaid expenses 41,423
Other assets (6,541)
Deposits and trademarks ( 539)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 175,567 207,600
Related party payable ( 3,705)
Accrued taxes payable ( 12,348)
CUSTOMER DEPOSITS ( 23,100)
Deferred revenue 14,534 7,000
Net cash provided by (used in)
operating activities (884,140) ( 26,286)
Cash flows from investing activities
Acquisition of fixed assets (107,626) ( 27,982)
Disposition of assets, net
Net cash used in investing activities (107,626) ( 27,982)
Cash flows from financing activities:
Exercise of warrants 548,624
Repayment of borrowings (100,000)
Deferred offering costs ( 81,541)
Private placement of common stock 500,000
Net cash provided by financing activities 548,624 318,459
Effect of exchange rate changes on cash (105,545) ( 27,315)
Net increase (decrease) in cash (548,687) 236,876
Cash - Beginning 1,661,708 224,031
Cash - Ending $ 1,113,021 0 $ 460,907
</TABLE>
Supplemental non-cash financing activities:
During the period ended March 31, 1999
Warrants valued at $200,000 were issued in
connection with the public offering.
See accompanying notes to condensed financial statements.
<PAGE>
PACIFIC SOFTWORKS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
Basis of presentation
The accompanying unaudited consolidated financial
statements of Pacific Softworks, Inc. ("PASW",
"Pacific" or the "Company")have been prepared in
accordance with generally accepted accounting
principles for interim financial information and the
instructions to Form 10-QSB. Accordingly, they do not
include all of the information and footnotes required
by generally accepted accounting principles for
complete financial statements. In the opinion of
management, all adjustments (consisting of only normal
recurring accruals) considered necessary for a fair
presentation of the Company's financial position at
March 31, 2000, the results of operations for the
three months ended March 31, 2000 and March 31, 1999,
and the cash flows for the three months ended March
31, 2000 and March 31, 1999 are included. Operating
results for the three month period ended March 31,
2000 are not necessarily indicative of the results
that may be expected for the year ending December 31,
2000.
The information contained in this Form 10-QSB
should be read in conjunction with audited financial
statements and related notes for the year ended
December 31, 1999 which are contained in the Company's
Annual Report on Form 10-KSB filed with the Securities
and Exchange Commission (the "SEC") on March 29, 2000
and the unaudited financial statements as of March 31,
1999 filed as a part of the Company's Registration
Statement on Form SB-2 filed with the Securities and
Exchange Commission on July 29, 1999. (File 333-
75137).
Earnings per share
The Company adopted SFAS No. 128, "Earnings Per
Share", during 1998. SFAS No. 128 requires
presentation of basic and diluted earnings per share.
Basic earnings per share is computed by dividing
income available to common stockholders by the
weighted average number of common shares outstanding
for the reporting period. Diluted earnings per share
reflects the potential dilution that could occur if
securities or other contracts, such as stock options,
to issue common stock were exercised or converted into
common stock. All prior period weighted average and
per share information has been restated in accordance
with SFAS No. 128.
<PAGE>
(3) Subsequent events
FSPNetwork, Inc.
On October 25, 1999 the Company and FSPNetwork, Inc
("FSPN") signed a Letter of Intent to enter into
discussions with the purpose of entering a strategic
relationship to jointly develop certain internet
applications with financial institutions. The Company
indicated that subject to entering into a definitive
agreement it would invest up to $1,000,000 in FSPN and
under certain conditions up to an additional
$2,000,000. On October 25, 1999 the Company loaned
FSPN $250,000 through a promissory note bearing
interest at ten (10%) percent due in ninety days. The
loan was for general corporate purposes. On December
3, 1999 the Company loaned FSPN an additional $750,000
and converted the $250,000 note evidenced by a
$1,000,000 convertible promissory note. On April 28,
2000 the note was converted into 713,129 shares of
Series A Preferred Stock of FSPN. The stock is equal
to 5% of the outstanding capital stock of FSPN
concurrent with FSPN's closing of an equity financing
on the same time.
PASW, Inc.
The Company refined its strategic focus during 1999
in order to enhance its positioning and flexibility in
the rapidly growing market for Internetworking
technology and to improve the utilization of its assets
and competencies. In conjunction with this strategy on
April 19, 2000 the Board of Directors of the Company
voted to change its name to PASW, Inc. The name change
is subject to shareholder approval and will brought to
a vote at the Company's Annual Meeting scheduled for May
26, 2000.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Cautionary Note Regarding Forward-Looking Statements
Except for historical information contained
herein, the statements in this report (including
without limitation, statements indicating that the
Company "expects," "estimates," anticipates," or
"believes" and all other statements concerning future
financial results, product offerings, proposed
acquisitions or combinations or other events that have
not yet occurred) are forward-looking statements that
are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995,
Section 21E of the Securities Exchange Act of 1934, as
amended, and Section 27A of the Securities Act of
1933, as amended. Forward-looking statements involve
known and unknown factors, risks and uncertainties,
which may cause the Company's actual results in future
periods to differ materially from forecasted results.
Those factors, risks and uncertainties include, but
are not limited to: the positioning of the Company's
products in the Company's market segments; the
Company's ability to effectively manage its various
businesses in a rapidly changing environment; the
timing of new product introductions; sell-through of
the Company's products; the continued emergence of the
internet resulting in new competition and changing
customer demands; the Company's ability to adapt and
expand its product offerings in light of changes to
and developments in the internet environment; growth
rates of the Company's market segments; variations in
the cost of, and demand for, customer service and
technical support; price pressures and competitive
environment; the possibility of programming errors or
other "bugs' in the Company's software; the timing and
customer acceptance of new product releases and
services (including current users' willingness to
upgrade from older versions of the Company's
products); the consummation of possible acquisitions
or combinations; and the Company's ability to
integrate acquired or combined operations with its
existing business and otherwise manage growth; and the
Company's ability to generate or obtain additional
capital resources to fund its operations and growth.
Additional information on these and other risk factors
are included in the "Factors That May Affect Future
Results" section in the Company's Annual Report on
Form 10-KSB filed with the SEC on March 29, 2000 and
the risks discussed in the Company's other filings
with the SEC. Readers are cautioned not to place undue
reliance on these forward-looking statements, which
reflect management's analysis, judgement, belief and
expectations only as of the date hereof. The Company
undertakes no obligation to publicly revise these
forward-looking statements to reflect events or
circumstances that arise after the date hereof.
GENERAL
THE COMPANY COMPLETED AN INITIAL PUBLIC OFFERING OF
950,000 UNITS CONSISTING OF ONE SHARE OF COMMON STOCK
AND ONE WARRANT ON JULY 29, 1999. AN ADDITIONAL 142,500
UNITS REPRESENTING THE UNDERWRITER'S OVERALLOTMENT WAS
SOLD ON SEPTEMBER 13, 1999. THE COMPANY DEVELOPS AND
LICENSES SOFTWARE WHICH ENABLES INTERNET AND WEB BASED
COMMUNICATIONS. THE SOFTWARE PRODUCTS ARE EMBEDDED INTO
SYSTEMS AND "INFORMATION APPLIANCES" DEVELOPED OR
MANUFACTURED BY OTHERS. INFORMATION APPLIANCES ARE
INTERNET-CONNECTED VERSIONS OF EVERY DAY PRODUCTS SUCH
AS TELEPHONES, FAX MACHINES, PERSONAL DIGITAL ASSISTANTS
AND OTHER DIGITALLY BASED DEVICES. THE COMPANY HAS
DEVELOPED A NEW PROPRIETARY INTERNET BROWSER FOR USE
WITHIN INDEPENDENT, "NON WINDOWSREGISTERED TRADEMARK" INFORMATION
APPLIANCES. THE BROWSER MAY BE EFFECTIVELY PLACED IN USE
WITHOUT AN OPERATING SYSTEM AND DOES NOT REQUIRE
SUBSTANTIAL AMOUNTS OF MEMORY. THE COMPANY BEGAN
MARKETING THE INITIAL VERSION OF THIS BROWSER DURING THE
FIRST QUARTER OF 2000.
THE COMPANY REFINED ITS STRATEGIC FOCUS IN THE
FOURTH QUARTER OF 1999 IN ORDER TO ENHANCE ITS
POSITIONING AND FLEXIBILITY IN THE RAPIDLY GROWING
MARKET FOR INTERNETWORKING TECHNOLOGY AND TO IMPROVE
THE UTILIZATION OF ITS ASSETS AND COMPETENCIES. KEY
ELEMENTS OF THE BUSINESS STRATEGY INVOLVE THE
SEGREGATION OF THE COMPANY'S CORE TECHNOLOGY INTO
SEPARATE BUSINESS UNITS AND IDENTIFYING STRATEGIC
INVESTMENT OPPORTUNITIES AND/OR ASSOCIATIONS WITH
OTHER OPERATING COMPANIES.
ESTABLISHING SEPARATE BUSINESS UNITS FOR THE CORE
TECHNOLOGY WILL FACILITATE THE ABILITY TO DEVELOP AND
COMMERCIALIZE THE UNDERLYING TECHNOLOGY AND WILL ALSO
ALLOW FOR EITHER PRIVATE OR PUBLIC INVESTMENT, JOINT
VENTURES OR MERGERS THAT ARE BENEFICIAL TO SUCH
DEVELOPMENT AND COMMERCIALIZATION. ACCORDINGLY, THE
COMPANY TRANSFERRED THE OPERATING ASSETS AND
TECHNOLOGY THAT REPRESENTED THE HISTORICAL BUSINESS OF
THE COMPANY INTO TWO WHOLLY OWNED SUBSIDIARIES. THE
TECHNOLOGY AND PERSONNEL RESPONSIBLE FOR THE INTERNET
AND WEB RELATED SOFTWARE AND SOFTWARE DEVELOPMENT
TOOLS NOW OPERATE AS PACIFIC SOFTWORKS. THE TECHNOLOGY
AND PERSONNEL RESPONSIBLE FOR THE EMBEDDED WEB BROWSER
AND SERVER NOW OPERATE AS PSI WEB TECHNOLOGIES, INC.
DURING 1999 THE COMPANY ALSO ESTABLISHED
IAPPLIANCENET.COM ("IAPPLIANCENET") A DEVELOPMENT
STAGE COMPANY AND A WHOLLY-OWNED SUBSIDIARY, TO
PROVIDE INTERNET-ACTIVE MERCHANDISE AND SERVICE STORE
DISPLAYS AND THE INFRASTRUCTURE THAT SUPPORTS THEM.
THE COMPANY ALSO COMMENCED A PROGRAM OF
IDENTIFYING STRATEGIC INVESTMENT OPPORTUNITIES AND/OR
ASSOCIATIONS WITH OPERATING COMPANIES THAT ARE
COMPATIBLE AND COMPLEMENTARY TO THE PLAN OF
OPERATIONS. IN ACCORDANCE WITH THIS PROGRAM, THE
COMPANY MADE AN INVESTMENT IN FSPNETWORK, INC.
("FSPN") IN DECEMBER 1999 AND SIGNED A LETTER OF
INTENT TO INVEST IN REDFLAG, INC. ("REDFLAG") IN EARLY
2000. THE GOAL OF THIS STRATEGY IS TO BOTH INCREASE
SHAREHOLDER VALUE AND TO CREATE AN OPERATING GROUP OF
COMPANIES THAT HAVE MUTUALLY BENEFICIAL TECHNOLOGY AND
BUSINESSES. FUTURE INVESTMENTS AND/OR ASSOCIATIONS, IF
ANY, WILL FOCUS ON COMPANIES THAT:
HAVE A STRONG INTERNET/WEB PRESENCE THAT ARE
SYNERGISTIC WITH THE COMPANY'S CORE BUSINESSES AND
THAT CAN UTILIZE THE COMPANY'S INTERNET AND WEB
TECHNOLOGY IN THE IMPLEMENTATION OF THEIR INTERNET
STRATEGIES;
HAVE A STRONG INTERNET/WEB PRESENCE THAT ARE
SYNERGISTIC WITH THE BUSINESSES OF COMPANIES IN
WHICH THE COMPANY HAS AN INVESTMENT/AND OR
AFFILIATION ("PSI NETWORK COMPANIES") AND THAT CAN
UTILIZE THE TECHNOLOGY OF THE PSI NETWORK COMPANIES
IN THE IMPLEMENTATION OF THEIR INTERNET STRATEGIES;
PRESENT CROSS LICENSING OPPORTUNITIES FOR THE
COMPANY'S TECHNOLOGY;
ARE PAST THE START-UP PHASE OF OPERATIONS, HAVE
REVENUES AND EARNINGS AND ARE NEAR TERM CANDIDATES
FOR AN INITIAL PUBLIC OFFERING; AND
CAN BENEFIT FROM THE COMPANY'S FINANCIAL AND
OPERATIONAL RESOURCES IN SECURING BOTH PRIVATE AND
PUBLIC INVESTMENT CAPITAL.
THE COMPANY OPERATES IN ONE BUSINESS SEGMENT. THE
COMPANY'S FISCAL YEAR ENDS ON DECEMBER 31.
<PAGE>
RESULTS OF OPERATIONS
THE FOLLOWING TABLE SETS FORTH, FOR THE PERIODS
INDICATED, THE PERCENTAGE RELATIONSHIP TO NET REVENUE
OF CERTAIN ITEMS IN THE CONSOLIDATED STATEMENTS OF
OPERATIONS AND COMPREHENSIVE INCOME:
UNAUDITED
THREE MONTHS ENDED
MARCH 31,
2000 1999
Net revenue 100.00% 100.00%
COST OF REVENUE 5.70 3.93
GROSS PROFIT 94.30 96.07
SELLING, GENERAL AND
ADMINISTRATIVE 125.59 49.35
RESEARCH AND DEVELOPMENT 93.57 41.97
DEPRECIATION AND AMORTIZATION 4.45 1.74
FORMER OFFICER CONSULTINGAND
AND ADMINISTRATIVE EXPENSE 0.00 10.71
TOTAL OPERATING EXPENSES 223.61 103.77
NET LOSS FROM OPERATIONS (129.31) (7.70)
FOREIGN CURRENCY TRANSLATION
ADJUSTMENT (15.99) (3.71)
COMPREHENSIVE LOSS (145.30%) (11.41%)
THE FOLLOWING TABLE SETS FORTH, FOR THE PERIODS
INDICATED, THE PERCENTAGE OF NET REVENUE BY PRINCIPAL
GEOGRAPHIC AREA TO TOTAL REVENUE:
Unaudited
Three Months Ended
March 31,
2000 1999
United States 58% 43%
UNITED KINGDOM AND EUROPE 28 42
JAPAN AND ASIA 12 14
OTHER 2 1
TOTAL 100% 100%
<PAGE>
THREE MONTHS ENDED MARCH 31, 2000 AND 1999.
Net revenue
For the three months ended March 31, 2000
revenues decreased 14% to $660,037 from $771,650 for
the three months ended March 31, 1999. Sales of
licenses decreased 22% for the three months ended
March 31, 2000 due to lower sales in the United
Kingdom partially offset by the initial sale of the
Company's FUSION WebPilot Micro Browsertrademark in February
2000. Royalty revenue increased by $42,844 for the
three months ended March 31, 2000 from $58,591 for the
three months ended March 31, 1999 principally due to
higher revenue in Japan.
Cost of revenue
The cost of revenue for the three months ended
March 31, 2000 was $37,624 or 5.7% of sales compared
to $30,336 or 3.9% of sales for the three months ended
March 31, 1999. The increase in cost of sales related
to direct and indirect costs for production and
duplication of manuals and media for software products
charged against lower sales for the three months ended
March 31, 2000.
<PAGE>
Selling, general and administrative
Selling, general and administrative expense
increased $448,008 to $828,823 for the three months
ended March 31, 2000 from $380,815 for the three
months ended March 31, 1999. This increase is the
result of increases in the sales and marketing staffs
which were expanded after the receipt of funds from
the Company's initial public offering in July, 1999,
an increase in administrative costs for expenses
associated with the Company becoming a public company
and the employment of a consulting team to assist the
Company in refocusing its business strategies. Because
of the 14% decrease in net revenues the cost of these
expenses as a percentage of revenue increased to 126%
of net revenue for the three months ended March 31,
2000 from 49% for the three months ended March 31,
1999.
Research and development expense
Research and development expense increased to
$617,627 or 94% of revenue for the three months ended
March 31, 2000 from $323,824 or 42% of revenue for the
three months ended March 31, 1999. The increase is
principally attributable to a continuation of
development of the Fast Track product line, the
development of the FUSION WebPilot Micro Browsertrademark
begun in 1998 and research and development expenses
associated with the initial operation of the Company's
iApplianceNet subsidiary.
<PAGE>
Depreciation and amortization
Depreciation and amortization increased to
$29,496 in the three months ended March 31, 2000 from
$13,460 for the three months ended March 31, 1999.
This increase was attributable to an increase of
$79,654 in capital additions for the three months
ended March 31, 2000 over capital additions of $27,982
in the three months ended March 31, 1999.
Former officer's consulting and administrative expense
The former officer's consulting and
administrative expense decreased to zero for the three
months ended March 31, 2000 from $82,680 for the three
months ended March 31, 1999. This agreement plus an
agreement not to compete and a consulting agreement
with the former officer expired in September 1999.
Provision for taxes
Commencing in 1995 the Company elected to be
treated as a subchapter S corporation. Through 1998
all federal tax liabilities were recognized at the
individual stockholder level. In February 1999 the
Company terminated the S election and became subject
to taxation at the corporate level. Had the Company
been subject to taxation as a C corporation in 1998,
it would have received a pro forma tax benefit of
$1,099. For the three months ended March 31, 2000 the
Company had no income tax liability.
<PAGE>
Liquidity and capital resources
At March 31, 2000 and December 31, 1999 the
Company had working capital of $2,042,075 and
$2,522,666 and cash and cash equivalents of $1,113,021
and $1,661,708.
The Company used $884,140 in cash flow from
operating activities in the three months ended March
31, 2000 compared to using $26,286 in the three months
ended March 31, 1999. The increase in use of cash of
$857,854 was the result of an increase of $18,746 in
accounts receivable, an increase of $18,807 in prepaid
expenses, an increase of $9,521 in other assets, an
increase in accounts payable and other accrued
expenses of $168,687, a decrease of $25,000 in other
receivables, and an increase of $50,532 in deferred
revenue.
Investing activities in the three months ended
March 31, 2000 consisted of purchase of fixed assets
of $107,626 compared to the purchase of assets of
$27,982 in the three months ended March 31, 1999.
The Company provided $548,624 from financing
activities in the three months ended March 31, 2000
through the exercise of warrants. Financing activities
for the three months ended March 31, 1999 consisted of
$500,000 from a private placement of common stock
offset by repayment of borrowings of $100,000 and
deferred offering costs of $81,541 associated with the
Company's Initial Public Offering.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
IN APRIL 1999 THE COMPANY WAS NOTIFIED THAT A
MERCHANT BANKER, GOLENBERG & CO., HAD ASSERTED RIGHTS
UNDER A JUNE 1998 LETTER AGREEMENT TO PURCHASE 10% OF
THE THEN OUTSTANDING COMMON STOCK OF THE COMPANY FOR
$400,000. IN JUNE 1999 COUNSEL FOR GOLENBERG & CO.
REITERATED THIS DEMAND AND ADVISED THE COMPANY THAT
THESE CLAIMS WERE BEING EVALUATED FOR POSSIBLE LEGAL
ACTION. TO DATE NO ACTION HAS BEEN TAKEN BY GOLENBERG &
CO.
THE COMPANY IS NOT CURRENTLY INVOLVED IN ANY
LITIGATION THAT IS EXPECTED TO HAVE A MATERIAL ADVERSE
EFFECT ON THE COMPANY'S BUSINESS OR FINANCIAL POSITION.
THERE CAN BE NO ASSURANCE, HOWEVER, THAT THIRD PARTIES
WILL NOT ASSERT INFRINGEMENT OR OTHER CLAIMS AGAINST THE
COMPANY IN THE FUTURE WHICH, REGARDLESS OF THE OUTCOME,
COULD HAVE AN ADVERSE IMPACT ON THE COMPANY AS A RESULT
OF DEFENSE COSTS, DIVERSION OF MANAGEMENT RESOURCES AND
OTHER FACTORS.
ITEM 2. CHANGES IN SECURITIES.
NOT APPLICABLE.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
NOT APPLICABLE.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS.
NOT APPLICABLE
ITEM 5. OTHER INFORMATION.
NOT APPLICABLE.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
THE FOLLOWING EXHIBITS ARE INCLUDED
HEREWITH
EXHIBIT 11 - WEIGHTED AVERAGE OF COMMON STOCK SHARES
OUTSTANDING
EXHIBIT 27 - FINANCIAL DATA SCHEDULE
THE COMPANY FILED NO REPORTS ON FORM 8-K
DURING THE QUARTER FOR WHICH THIS FORM IS FILED.
<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.
DATE: MAY 10, 2000 PACIFIC SOFTWORKS, INC.
WILLIAM E. SLINEY
PRESIDENT AND CHIEF
FINANCIAL OFFICER
(DULY AUTHORIZED OFFICER
AND PRINCIPAL
FINANCIAL AND ACCOUNTING
OFFICER)
EXHIBIT 11
PACIFIC SOFTWORKS, INC.
COMPUTATION OF WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING
Three Months
Total Number Ended
Of Shares March 31, 2000
Outstanding shares
as of January 1, 2000 4,402,500 4,402,500
Exercise of warrants 98,400 28,604
TOTAL WEIGHTED AVERAGE
shares outstanding 4,500,900 4,431,104
Net loss $(853,533)
NET LOSS PER COMMON SHARE
basic and diluted $ (0.19)
