UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q/A No. 1
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITITES EXCHANGE ACT OF1934
For the Quarterly Period Ended March 31, 2000
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Commission File number 000-30654
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APROPOS TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
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Illinois 36-3644751
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
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One Tower Lane, 28th Floor
Oakbrook Terrace, Illinois 60181
(630) 472-9600
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
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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. X Yes No
On April 18, 2000, approximately 15,593,993 of the Registrant's Common Shares,
$0.01 par value, were outstanding.
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EXPLANATORY NOTE: THIS 10Q/A NO. 1 IS BEING FILED TO CHANGE THE NUMBER OF SHARES
OUTSTANDING SET FORTH ON THE COVER PAGE OF THIS FORM 10-Q, IN PART I - ITEM 1
AND IN EXHIBITS 11 AND 27, DUE TO THE INADVERTENT OMISSION OF STOCK OPTIONS
EXERCISED IN THE FIRST QUARTER OF 2000. AS A RESULT, THE BASIC AND DILUTED NET
LOSS PER SHARE SET FORTH IN PART I - ITEM 1 AND IN EXHIBITS 11 AND 27 HAS ALSO
CHANGED.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
APROPOS TECHNOLOGY, INC.
<CAPTION>
CONDENSED CONSOLIDATED BALANCE SHEETS
IN THOUSANDS, EXCEPT PER SHARE DATA
March 31, December 31,
2000 1999
Assets (Unaudited) (Note 1)
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<S> <C> <C>
Current assets :
Cash and cash equivalents $ 70,117 $ 3,467
Accounts receivable, less allowance for doubtful accounts of
$462 in 1999 and $492 in 2000 9,498 8,942
Inventory 474 364
Prepaid and other current assets 578 371
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Total current assets 80,667 13,144
Equipment, net 1,934 1,618
Note receivable from shareholder 57 54
Other assets 91 618
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Total assets $ 82,749 $ 15,434
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Liabilities and shareholders' equity (deficit)
Current liabilities :
Revolving line of credit $ -- $ 3,216
Subordinated convertible promissory notes 28 1,474
Bridge loan -- 3,485
Accounts payable 1,626 1,094
Accrued expenses 1,553 1,808
Accrued compensation and related accruals 1,227 1,292
Advance payments from customers 625 584
Deferred revenues 1,606 1,355
Current portion of capital lease obligations 121 122
Current portion of long-term debt -- 186
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Total current liabilities 6,786 14,616
Capital lease obligations 29 54
Long-term debt, less current portion -- 314
Convertible preferred shares, $0.01 par value, none authorized, issued and outstanding at
March 31, 2000, 3,995,483 authorized, issued and outstanding at December 31 , 1999 -- 16,079
Shareholders' equity (deficit) :
Preferred shares, $0.01 par value, 5,000,000 authorized, no shares issued and
outstanding -- --
Common shares, $0.01 par value, 60,000,000 authorized, 15,419,336 issued and
outstanding at March 31, 2000, 3,055,883 issued and outstanding at December 31, 1999
140 53
Additional paid-in capital
98,736 2,932
Accumulated deficit (22,942) (18,614)
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Total shareholders' equity (deficit) 75,934 (15,629)
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Total liabilities and shareholders' equity $ 82,749 $ 15,434
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See notes to condensed consolidated financial statements.
</TABLE>
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APROPOS TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
IN THOUSANDS, EXCEPT PER SHARE DATA
Three Months Ended March 31,
2000 1999
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Revenue :
Software licenses $ 3,502 $ 1,710
Services and other 2,340 1,582
Total revenue 5,842 3,292
Costs and expenses :
Cost of software 100 36
Cost of services and other 1,896 1,219
Research and development 1,643 869
Sales and marketing 3,218 2,408
General and administrative 1,991 905
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Total costs and expenses 8,848 5,437
Loss from operations (3,006) (2,145)
Other income (expense) :
Interest income 455 22
Interest expense (1,778) (16)
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Total other income (expense) (1,323) 6
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Net loss $(4,329) $(2,139)
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Basic and diluted net loss per share $ (0.46) $ (0.72)
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Shares used in computing basic and diluted net
loss per share 9,370 2,975
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See notes to condensed consolidated financial statements.
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APROPOS TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
IN THOUSANDS
Three Months Ended March 31,
2000 1999
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Cash flows from operating activities :
Net loss $ (4,329) $ (2,139)
Adjustments to reconcile net loss to net cash used for
operating activities :
Depreciation and amortization 165 132
Provision for doubtful accounts 30 16
Stock compensation expense 254 --
Amortization of debt discount 1,577 --
Changes in operating assets and liabilities :
Accounts receivable (585) (240)
Inventory (110) (69)
Prepaid expenses and other current assets (207) (14)
Other assets 518 25
Notes receivable from shareholder (2) (1)
Accounts payable 532 491
Accrued expenses (256) 202
Accrued compensation and related accruals (64) (94)
Advanced payments from customers 42 275
Deferred revenue 251 20
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Net cash used for operating activities (2,184) (1,396)
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Cash flows from investing activities :
Purchases of equipment (481) (285)
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Net cash used for investing activities (481) (285)
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Cash flows from financing activities :
Payment on revolving line of credit (3,216) --
Payment on bridge loan (5,000) --
Payment on subordinated promissory notes (1,500) --
Repayments of notes payable (500) --
Principal payments of capital lease obligations (26) --
Proceeds from exercise of options 212 2
Net proceeds from issuance of common shares 79,345 --
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Net cash provided by financing activities 69,315 2
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Net change in cash and cash equivalents 66,650 (1,679)
Cash and cash equivalents, beginning of period 3,467 3,170
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Cash and cash equivalents, end of period $ 70,117 $ 1,491
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See notes to condensed consolidated financial statements.
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APROPOS TECHNOLOGY, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
March 31, 2000
1. NATURE OF BUSINESS AND BASIS OF PRESENTATION
Apropos Technology, Inc. ("the Company") is engaged in the business of
developing and selling software, implementation, maintenance, and training
services to companies in diversified industries. The Company's product enables
customer interaction management for multimedia contact centers. The Company's
core competency is its skill in developing advanced software applications and
successfully linking those applications to a number of telephone systems,
networks, and databases. Principal operations of the Company commenced during
1995. The Company currently derives substantially all of its revenues from
licenses of its product and related services.
On June 9, 1997, the Company established a wholly owned subsidiary in the United
Kingdom, Apropos Technology, Limited. The purpose of this entity is to market
the Company's product throughout Europe.
The accompanying unaudited condensed consolidated financial statements have been
prepared in conformity with generally accepted accounting principles for interim
financial information and with the instructions for Form 10-Q and Article 10 of
Regulation S-X. Accordingly, 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 the
rules and regulations of the Securities and Exchange Commission. In our opinion,
the statements include all adjustments necessary (which are of a normal and
recurring nature) for the fair presentation of the results of the interim
periods presented.
The balance sheet at December 31, 1999 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
These financial statements should be read in conjunction with our audited
consolidated financial statements for the year ended December 31, 1999, included
in the Company's Registration Statement on Form S-1 declared effective by the
Securities and Exchange Commission on February 16, 2000. Our results of
operations for the interim periods presented are not necessarily indicative of
the results of operations to be expected for any other interim period or for the
full fiscal year.
2. LOSS PER SHARE
Basic loss per share is calculated based on the weighted-average number of
outstanding common shares. Diluted loss per share is calculated based on the
weighted-average number of outstanding common shares plus the effect of dilutive
potential common shares. The Company's calculation of diluted loss per share
excludes potential common shares as the effect would be antidilutive. Potential
common shares are composed of common shares of the Company issuable upon the
exercise of stock options. Options to purchase 2,129,354 common shares with
exercise prices of $0.10 to $5.94 per share were outstanding as of March 31,
2000 and options to purchase 2,979,004 common shares with exercise prices of
$0.10 to $0.91 per share were outstanding as of March 31, 1999.
3. SHAREHOLDERS' EQUITY
On February 23, 2000, the Company completed an initial public offering of
3,977,500 shares at an offering price of $22.00 per share. The net proceeds to
the Company from the public offering after deducting the underwriting discounts
and commissions and offering expenses payable by the Company, were approximately
$79.3 million. The Company used approximately $10.5 million to repay principal
and interest on debt. The balance of the net proceeds were predominantly held in
short-term municipal securities and commercial paper at March 31, 2000.
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4. STOCK COMPENSATION
The Company uses the intrinsic value method of accounting for its employee
stock-based compensation plans. Accordingly, no compensation cost is recognized
for any of its stock options when the exercise price of each option equals or
exceeds the fair value of the underlying common shares as of the grant date for
each stock option. The Company has recorded stock compensation of $552,000 since
inception through March 31, 2000 for the difference at the grant date between
the exercise price and the fair value of the common shares underlying the
options. The Company recorded $254,000 of stock compensation for the three
months ended March 31, 2000. This amount is being amortized in accordance with
Financial Accounting Standards Board (FASB) Interpretation No. 28 over the
vesting period of the individual options, generally 4 years.
5. GEOGRAPHIC INFORMATION
Revenues derived from customers outside of North America accounted for
approximately 30.5% and 17.5% of the Company's total revenues for the three
months ended March 31, 2000 and 1999, respectively.
The Company attributes its revenues to countries based on the country in which
the client is located. The Company's long-lived assets located outside the
United States are not considered material.
6. CONTINGENCIES
The Company had a dispute with a former reseller in which the reseller alleged
that the Company had breached a contract between the two companies. The dispute
was submitted to a binding resolution by an arbitrator. On September 15, 1999,
the arbitrator ruled that the Company had breached its contract with a former
reseller. The Company is awaiting the ruling of the damages phase by the
arbitrator. The Company has recorded a provision for the settlement of this
arbitration. Management believes this amount is not material. Management does
not believe this arbitration will have a material adverse affect on the
Company's financial condition.
Beginning in June 1999, the Company received letters from Rockwell Electronic
Commerce Corporation claiming that the Company's product utilizes technologies
pioneered and patented by that competitor and suggesting that the Company
discuss the terms of a potential license of their technologies. On January 5,
2000, Rockwell filed a complaint in the United States District Court for the
Northern District of Illinois asserting that the Company had infringed four of
its patents identified in Rockwell's previous correspondence. The complaint
seeks a permanent injunction and unspecified damages. Based upon the initial
review by its patent counsel of the claims being asserted by Rockwell, the
Company believes that it likely has meritorious defenses to such claims and it
intends to vigorously defend its position.
As part of the Company's initial public offering of common shares, the Company
and its underwriters made available up to 370,000 common shares at the initial
public offering price for directors, business associates and related persons
associated with the Company (the "directed share program"). On November 24,
1999, prior to effectiveness of the Company's registration statement, the
Company sent an electronic mail message with respect to the proposed directed
share program to all of the Company's 147 employees setting forth procedural
aspects of the directed share program and informing the recipients that their
immediate families might have an opportunity to participate in the proposed
directed share program. The Company did not deliver a preliminary prospectus
prior to distribution of this electronic mail as required by the Securities Act
of 1933. In addition, the electronic mail message may have constituted a
non-conforming prospectus under the Securities Act of 1933. As a result, the
Company may have a contingent liability under Section 5 of the Securities Act of
1933. Any liability would depend upon the number of common shares purchased by
the recipients of the electronic mail. The recipients of the electronic mail
message who purchased common shares in the initial public offering may have a
right for a period of one year from the date of the purchase to obtain recovery
of the consideration paid in connection with their purchase of common shares or,
if they had already sold the shares, file a claim against the Company for
damages resulting from their purchase of the common shares. If any liability is
asserted with respect to the electronic mail message, the Company will contest
the matter vigorously. However, if all of the purchasers in the directed share
program are awarded damages after an entire or substantial loss of their
investment, the damages could total up to approximately $8.1 million plus
interest based on the initial public offering price of $22.00 per share.
Although there can be no assurance as to the ultimate disposition of this
matter, it is the opinion of the Company's management, based upon the
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information available at this time, that the expected outcome of this matter
will not have a material adverse effect on the results of operations and
financial condition of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a)The following exhibits are included herein :
(11) Statement Regarding Computation of Per Share Earnings
(27) Financial Data Schedule
(b)The Company did not file any reports on Form 8-K during the three months
ended March 31, 2000.
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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.
APROPOS TECHNOLOGY, INC.
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(REGISTRANT)
Date : August 11, 2000 By : /s/ Francis J. Leonard
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Francis J. Leonard
Chief Financial Officer
