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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
/X/ Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended August 31, 1995
/ / Transition report under to Section 13 or 15(d) of the Securities
Exchange Act
For the transition period from _____________ to ____________
Commission File Number 0-11791
GREENTREE SOFTWARE, INC.
(Name of Small Business Issuer in its Charter)
New York 13-2897997
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
2801 Fruitville Road
Suite 180
Sarasota, Florida 34237
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(Address of Principal Executive (Zip Code)
Offices)
Issuer's Telephone Number, Including Area (941) 954-2210
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Code:
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes /X/ No / /
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
Class Outstanding at August 31, 1995
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COMMON SHARES, PAR VALUE 4,721,790 SHARES
$.04 PER SHARE
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Company for which report is filed: Greentree Software, Inc. (the
"Company")
GREENTREE SOFTWARE, INC.
BALANCE SHEETS
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
AUGUST 31, MAY 31,
1995 1995
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<S> <C> <C>
CURRENT ASSETS:
Cash $ 32,524 $ 157,621
Certificates of deposit -- 775,000
Accounts receivable, net 77,764 71,454
Inventory 13,215 17,114
Prepaid expenses 15,755 8,280
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Total Current Assets 139,258 1,029,469
PROPERTY AND EQUIPMENT:
Leasehold improvements 33,205 33,205
Furniture, fixtures, and equipment 449,494 449,494
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482,699 482,699
Less: Accumulated depreciation 286,853 271,684
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195,846 211,015
OTHER ASSETS
Customer list (net of allowance) 56,005 60,004
Deferred software development costs, net 534,674 513,382
Security deposits 32,055 32,055
Other 70,672 56,877
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693,406 662,318
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TOTAL ASSETS $ 1,028,510 $ 1,902,802
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 362,435 $ 396,802
Notes payable -- 775,000
Accrued expenses 481,682 252,828
Deferred income 169,567 174,341
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Total Current Liabilities 1,013,684 1,598,971
TOTAL LIABILITIES 1,013,684 1,598,971
STOCKHOLDERS' EQUITY:
Common Stock, $0.04 par value,
authorized 6,250,000 shares,
issued 4,750,474 and outstanding
4,721,790 190,019 190,019
Additional paid-in capital 11,447,237 11,447,237
Accumulated deficit (11,533,398) (11,244,393)
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103,858 382,863
Less: 28,684 treasury stock at cost (89,032) (89,032)
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14,826 303,831
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,028,510 $ 1,902,802
------------ ------------
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See Notes to Unaudited Financial Statements.
</TABLE>
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GREENTREE SOFTWARE, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
AUGUST 31, AUGUST 31,
1995 1994
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<S> <C> <C>
NET SALES:
Product $ 32,524 $ 157,621
Services 44,248 69,446
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108,771 136,935
COSTS AND EXPENSES
Cost of sales 86,838 127,431
Selling expenses 164,702 186,084
General and Administrative 143,138 267,353
Interest expense 744 8,160
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395,422 589,028
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Operating loss (286,651) (452,093)
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OTHER INCOME 46 10,556
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LOSS BEFORE INCOME TAXES (286,605) (441,537)
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INCOME TAXES 2,400 --
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NET LOSS (289,005) (441,537)
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LOSS PER SHARE
Net loss per common share $ (0.06) $ (0.11)
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Weighted average shares outstanding 4,721,790 4,197,729
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See Notes to Unaudited Financial Statements.
</TABLE>
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GREENTREE SOFTWARE, INC.
STATEMENTS OF CASH FLOW
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended
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August 31, August 31,
1995 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (289,005) $ (441,538)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Depreciation and amortization 19,168 21,752
Amortization of deferred software costs 24,206 85,915
Increase in reserve for bad debts -- 2,591
(Increase) in accounts receivable (6,310) (108,131)
Decrease in inventories 3,899 14,902
(Increase) in prepaid expenses (7,475) (23,466)
(Increase)in other assets (13,795) --
Deferred software development costs (45,498) (167,893)
Decrease in security deposits -- 1,813
(Decrease)in accounts payable (34,367) (9,433)
Increase (decrease)in accrued expenses 228,854 (84,522)
Increase in deferred income (4,774) 85,398
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Cash used in operating activities (125,097) (622,612)
CASH FLOW FROM INVESTING ACTIVITIES
Retirement of certificate of deposit 775,000 --
Additions to property and equipment -- (55,040)
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Cash provided (used) in investing
activities (775,000) (55,040)
CASH FLOW FROM FINANCING ACTIVITIES
Net proceeds from private placement -- 157,088
Note payable reduction (775,000) --
Payment of capital lease obligations
and other -- (3,733)
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Cash (used) provided by financing activities (775,000) 153,355
Increase (Decrease) in cash (125,097) (524,297)
Cash balance - beginning 157,621 1,068,235
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Cash balance - ending $ 32,524 $ 543,938
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See Notes to Unaudited Financial Statements.
</TABLE>
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GREENTREE SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1995
(UNAUDITED)
1. BASIS OF PRESENTATION. In the opinion of the Company's
management, the unaudited financial statements include all adjustments
(consisting only of normal adjustments) necessary for a fair presentation of
the financial position of the Company at August 31, 1995 and the results of
its operations and cash flows for the three months ended August 31, 1995 and
1994.
It is suggested that the unaudited financial statements and notes
thereto in this Report be read in conjunction with the financial statements
and notes thereto in the Company's Annual Report on Form 10-KSB for the
fiscal year ended May 31, 1995 (the "1995 Annual Report") which was
previously filed.
ACCOUNTS RECEIVABLE. As of August 31, 1995, the reserve for bad
debts amounted to $11,683.
DEFERRED SOFTWARE DEVELOPMENT COSTS. The Company is engaged in
extensive research and development activities in the area of computer
software. In accordance with generally accepted accounting principles, all
costs incurred prior to determination of technological feasibility have been
considered research and development and treated as a period cost and,
accordingly, charged to operations. Once technological feasibility has been
established, development costs, including improvements to existing products
and certain new products, are capitalized and amortized over the estimated
economic lives of the respective products. The Company has determined that
the estimated useful life of the products is three years. For the three
months ended August 31, 1995 and 1994, the Company capitalized $45,498 and
$167,893, respectively, of deferred software development costs. Amortization
changed to operations amounted to $24,206 and $85,195 for the three months
ended August 31, 1995 and 1994, respectively.
REVENUE RECOGNITION. The Company recognizes product revenue at the
time products are shipped provided that no significant support obligations
remain outstanding and collection of the resulting receivable is deemed
probable by management. Insignificant support obligations remaining at the
time of shipment are accrued. Service revenues are comprised primarily of
revenues derived from maintenance agreements. Maintenance revenue is
amortized over the maintenance period which is usually 12 months. Deferred
revenue represents billings for maintenance in excess of revenue recognized.
The Company recognizes revenue from a "site license" upon the acceptance of
programs by the customer. Cost of sales expenses are predominantly
associated with product sales and are nominal with respect to services.
STATEMENTS OF CASH FLOWS. For the purposes of disclosure in the
statements of cash flows, management treats liquid investments with
maturities of three months or less to be cash equivalents.
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Interest paid during the three months ended August 31, 1995 and 1994,
amounted to $744 and $8,160, respectively.
EARNINGS PER SHARE. Earnings per Common Share is computed by dividing
the net loss by the weighted average number of Common Shares outstanding during
the period. For the three months ended August 31, 1995 and 1994, common stock
options and warrants are anti-dilutive and not included in the weighted average
of Common Shares used in determining pay share amounts.
2. PRIVATE PLACEMENT. Effective October 17, 1995, the Company is
entering into a Stock Purchase Agreement to sell 2,375,000 shares of Common
Stock to one investor at $.40 per share. Additionally, the Company is
engaged in a private placement to sell up to 5,125,000 additional shares at $
.40 per share.
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Item 2. Management's Discussion and Analysis or Plan of Operation
RESULTS OF OPERATIONS
FOR THE THREE MONTH ENDED AUGUST 31, 1995 VERSUS 1994
Total sales for the three months ended August 31, 1995 were $108,771
compared to $136,935 for the three months ended August 31, 1994, reflecting a
decrease of $28,164 or 20.1%. Product revenues for the three months ended
August 31, 1995 were $64,523 compared to $67,489 for the three months ended
August 31, 1994, a decline of $2,966 or 4.4%. Maintenance revenues were
$42,248 in the three months ended August 31, 1995 compared to $54,481 for the
three months ended August 31, 1994, a decrease of $12,233 or 22.4%. Training and
other revenues were $2,000 for the three months ended August 31, 1995 versus
$14,965 for the comparable period of 1994.
Because of the problems the Company has experienced with the GT
Purchase PRO product, sales of the Company's products and services have
generally declined. A new version of the GT Purchase PRO product line is in
process of development. As of October 6, 1995, the Company has received orders
of approximately $140,000, has made proposals for product totaling
approximately $810,000 and has had expressions of interest for GT Purchase
PRO from existing customers and prospects for approximately $1,500,000.
There is no assurance that any of the potential customers with whom
the Company is in the proposal stage or who have expressed interest in the
product will purchase the GT Purchase PRO product.
The cost of sales for the three months ended August 31, 1995 decreased
from $127,431 in the three months ended August 31, 1994 to $86,838, a decrease
of $40,593 or 31.9%. This decrease was due primarily to the reduction in the
amortization of software development costs. On August 31, 1995, the Company had
recorded approximately $534,700 of net costs associated with the ongoing
developments of GT Purchase PRO. Management believes that these costs are
recoverable with the expected increased sales of GT Purchase PRO; however,
should revenues not increase to the levels expected by management, these amounts
would have to be written down to their realizable values which could result in a
material charge against earnings.
Selling expenses for the three months ended August 31, 1995 were
$164,702 compared with $186,084 for the prior year, a decrease of $21,382 or
11.5%. This increase was primarily due to decreased personnel costs and
advertising and marketing costs.
General and administrative expenses for the three months ended
August 31, 1995 were $143,138 compared with $267,353 for the prior year, a
decrease of $124,215 or 46.5%. The decrease was due primarily to staffing
reductions.
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Interest expense for the three months ended August 31, 1995 was $774
compared with $8,160 for the prior year, a decrease of $7,386 or 90.5%. This
decrease was the result of the liquidation of the Company's debt during the
quarter.
For the three months ended August 31, 1995, the Company reported a
net loss of $289,005 (or $.06 per share) as compared to a net loss of $441,537
(or $.11 per share) for the prior year. This loss was caused by continued low
sales volume (see comments above) but was reduced when compared to the prior
year by decreased personnel costs and amortization of software development
costs.
LIQUIDITY AND CAPITAL RESOURCES
The Company has a deficit in working capital of $874,426 at August 31,
1995 as compared to a deficit of $569,502 at May 31, 1995, a decrease in working
capital of $304,924. The primary cause for the decrease in working capital was
the loss for the quarter. Cash at August 31, 1995 was $32,524 compared to
$157,621 on May 31, 1995, a decrease of $125,097. Accounts receivable
increased $6,310 or 8.8% compared to May 31, 1995.
The Company had no capital expenditures for the three months ended
August 31, 1995 and $55,040 for the three months ended August 31, 1994.
The Company was notified that it was not in full compliance with all
requirements of the National Association of Securities Dealers, Inc. (the
"NASD") for continued listing of the Common Shares in the NASDAQ System,
particularly with respect to the minimum total assets, capital and surplus and
bid price requirements. The Company met with representatives of the NASD on
October 5, 1995 to discuss the Company's plan of operation to meet the
requirements. On October 10, 1995, the NASD granted the Company's request to an
exception to these requirements through November 30, 1995.
The Company is engaged in raising up to $3 million through the sale of
its common stock at $ .40 per share. Effective October 17, 1995 the company is
entering into a stock purchase agreement to sell 2,375,000 shares of common
stock and intends to receive $950,000 from this private placement shortly.
If the Company completes the remainder of the private placement,
The Company's projections reflect that it will be in full compliance with
all NASD maintenance requirements through fiscal 1996; however, maintaining
compliance assumes certain levels of revenue being achieved during the third
quarter of 1996 and, if these levels are not achieved, there is a possibility
that the Company may not
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be incompliance with certain of the maintenance
criteria. If the Company does not complete the private place by November 30,
1995, or should the Company otherwise not be in compliance with the NASD
maintenance criteria and is unable to cure any default within any allowable
time frames that the NASD permits, the Common Shares would be subject to
deletion from the NASDAQ System.
If a deletion from the NASDAQ System thereafter occurred because of
the Company's failure to comply with the NASD's maintenance criteria (after any
period during which the NASD grants a temporary exemption), the Common Shares
would continue to be traded in the over-the-counter market and reported in the
NASD's OTC Bulletin Board or in the "pink sheets" as reported by the National
Quotation Bureau, Inc. However, because the bid price of the Common Shares has
been below $5.00 per share and if the bid price continues to be below $5.00 per
share when the Common Shares are delisted from the NASDAQ System, the Common
Shares, when recommended by a broker-dealer, will become subject to the
limitations of Rule 15g-9 under the Exchange Act, which Rule imposes additional
sales practices requirements on broker-dealers which sell the Common Shares to
persons other than existing customers with a previous history of trading through
such broker-dealer and institutional accredited investors asset forth in Rule
501(a) under the Securities Act. For transactions under Rule 15g-9, the broker-
dealer must obtain information from the prospective purchaser as to his or her
financial situation, investment experience and investment objectives and, based
on such information, reasonably determine that transactions in the security is
suitable for that person and that the prospective investor (or his or her
independent advisor) has sufficient knowledge and experience in financial
matters so as to be reasonably expected to be capable of evaluating the risks of
transaction in such security. The broker-dealer must also receive the
purchaser's written agreement to the transaction prior to the sale. Certain
broker-dealers, particularly if they are market makers in the Common Shares,
will have to comply with the disclosure requirements of Rules 15g-2, 15g-4,
15g-5 and 15g-6 under the Exchange Act. Consequently, Rule 15g-9 and these
other Rules may adversely affect the ability of broker-dealers to sell the
Common Shares if delisted.
There is no assurance that the Company's projections as to an increase
in sales and attaining profitability, as well as producing a positive cash flow,
will be realized, or that financing will be available to meet working capital
requirements if future sales projections are not attained or that the Company
will make timely and effective expense reductions.
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<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See Note 3 to Unaudited Financial Statements in the Quarterly Report
on Form 10-KSB for the year ended May 31, 1995, regarding status of a lawsuit
instituted by one of the Company's former executives.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
On August 24, 1995, the Company filed a report on Form 8-K which
is hereby included by reference
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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.
GREENTREE SOFTWARE, INC.
By:
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October 13, 1995
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<TABLE> <S> <C>
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S AUGUST 31, 1995 BALANCE SHEET, THE STATEMENT OF OPERATIONS AND THE
STATEMENT OF CASH FLOW, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-START> JUN-01-1995
<PERIOD-END> AUG-31-1995
<CASH> 35,524
<SECURITIES> 0
<RECEIVABLES> 77,764
<ALLOWANCES> 0
<INVENTORY> 13,215
<CURRENT-ASSETS> 139,258
<PP&E> 482,699
<DEPRECIATION> 286,853
<TOTAL-ASSETS> 1,028,510
<CURRENT-LIABILITIES> 1,013,684
<BONDS> 0
<COMMON> 190,019
0
0
<OTHER-SE> 11,447,237
<TOTAL-LIABILITY-AND-EQUITY> 1,028,510
<SALES> 108,771
<TOTAL-REVENUES> 108,771
<CGS> 86,838
<TOTAL-COSTS> 251,540
<OTHER-EXPENSES> 143,138
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 744
<INCOME-PRETAX> (286,605)
<INCOME-TAX> 2,400
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (289,005)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
