<PAGE>
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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 November 30, 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
- ------------------------------------ ------------------------------------
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
2801 Fruitville Rd.
Suite 180
Sarasota, FL 34237
- --------------------------------- ---------------------------------
(Address of Principal Executive (Zip Code)
Offices)
Issuer's Telephone Number, Including Area Code: (941) 954-2210
--------------
201 Boston Post Road West
Suite 201
Marlboro, MA
------------------------------------------
(Former Address of Principal Executive Offices)
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 January 10, 1996
- -------------------------------- -------------------------------------
Common Shares, par value 8,133,457 shares
$.04 per share
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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)
<TABLE>
<CAPTION>
November 30 May 31,
1995 1995
<S> <C> <C>
ASSETS
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CURRENT ASSETS:
Cash $ 7,698 $ 157,621
Certificates of deposit -- 775,000
Accounts receivable, net 214,495 71,454
Inventory 12,499 17,114
Prepaid expenses 27,273 8,280
------------ ------------
Total Current Assets 261,965 1,029,469
PROPERTY AND EQUIPMENT:
Leasehold improvements -- 33,205
Furniture, fixtures, and equipment 458,487 449,494
------------ ------------
458,487 482,699
Less: Accumulated depreciation 289,857 271,684
------------ ------------
168,630 211,015
OTHER ASSETS
Customer list (net of allowance) 52,006 60,004
Deferred software development costs, net 700,085 513,382
Security deposits 8,341 32,055
Other 70,466 56,877
------------ ------------
830,898 662,318
------------ ------------
TOTAL ASSETS $ 1,261,493 $ 1,902,802
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 275,903 $396,802
Notes payable -- 775,000
Accrued expenses 487,979 252,828
Deferred income 192,094 174,341
------------ ------------
Total Current Liabilities 955,976 1,598,971
TOTAL LIABILITIES 955,976 1,598,971
STOCKHOLDERS' EQUITY:
Common Stock, $0.04 par value, authorized 15,000,000 shares,
outstanding 6,066,006 at November 30, 1995, and 4,721,790
at May 31, 1995 243,788 190,019
Additional paid-in capital 11,898,894 11,447,237
Accumulated deficit (11,748,133) (11,244,393)
------------ ------------
394,549 392,863
Less: 28,684 treasury stock, at cost (89,032) (89,032)
------------ ------------
305,517 303,831
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,261,493 $ 1,902,802
============ ============
See Notes to Unaudited Financial Statements.
</TABLE>
1
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GREENTREE SOFTWARE, INC.
STATEMENT OF OPERATIONS
------------------------
(Unaudited)
<TABLE>
<CAPTION>
For The Three Months Ended For The Six Months Ended
November 30 November 30
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET SALES
Product $ 87,025 $ 145,391 $ 151,548 $ 212,879
Services 46,915 70,367 91,163 139,813
------------ ------------ ------------ ------------
133,940 215,758 242,711 352,692
------------ ------------ ------------ ------------
COSTS AND EXPENSES
Cost of sales 39,951 147,003 126,789 279,588
Selling expenses 96,798 289,891 261,500 470,821
General and administrative 211,937 201,295 355,075 468,648
Interest expense - 9,011 744 17,171
------------ ------------ ------------ ------------
348,686 647,200 744,108 1,236,228
------------ ------------ ------------ ------------
Operating loss (214,746) (431,442) (501,397) (883,536)
------------ ------------ ------------ ------------
OTHER INCOME 12 14,224 58 24,780
------------ ------------ ------------ ------------
LOSS BEFORE INCOME TAXES (214,734) (417,218) (501,339) (858,756)
------------ ------------ ------------ ------------
INCOME TAXES - - 2,400 -
------------ ------------ ------------ ------------
NET LOSS $ (214,734) $ (417,218) $ (503,739) $ (858,756)
============ ============ ============ ============
LOSS PER SHARE
Net loss per common share $ (0.04) $ (0.10) $ (0.10) $ (0.20)
============ ============ ============ ============
Weighted average shares outstanding 5,235,311 4,205,664 4,975,697 4,201,675
============ ============ ============ ============
</TABLE>
2
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GREENTREE SOFTWARE, INC.
STATEMENTS OF CASH FLOWS
------------------------
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended November 30
1995 1994
----------------- -----------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net loss $ (503,739) $ (858,756)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Depreciation and amortization 59,375 43,731
Amortization of deferred software costs 48,413 183,327
Increase in reserve for bad debts - 3,978
(Increase) in accounts receivable (143,041) (93,743)
Decrease in inventories 4,615 21,043
(Increase)decrease in prepaid expenses (18,993) 2,650
(Increase) in other assets (13,589) -
Deferred software expenditures (235,116) (358,630)
Decrease in security deposits 23,714 1,813
Increase (Decrease) in accounts payable (120,899) 69,980
Increase (decrease) in accrued expenses 235,151 (17,083)
Increase in deferred income 17,753 92,753
----------------- -----------------
Cash used in operating activities (646,356) (908,937)
CASH FLOW FROM INVESTING ACTIVITIES
Retirement of certificate of deposit 775,000 775,000
Additions to property and equipment (8,993) (61,627)
----------------- -----------------
Cash provided (used) in investing activities 766,007 713,373
CASH FLOW FROM FINANCING ACTIVITIES
Net proceeds from private placement 505,426 157,088
Note payable reduction (775,000) (775,000)
Payment of capital lease obligations and other - (4,268)
----------------- -----------------
Cash (used) provided by financing activities (269,574) (622,180)
Increase (Decrease) in cash (149,923) (817,744)
Cash balance - beginning 157,621 1,068,235
----------------- -----------------
Cash balance - ending $ 7,698 $ 250,491
================= =================
</TABLE>
See Notes to Unaudited Financial Statements.
3
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GREENTREE SOFTWARE INC.
NOTES TO FINANCIAL STATEMENTS
November 30, 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 November 30, 1995 and the results of its operations and cash
flow statements for the three and six months ended November 30, 1995 and 1994.
The unaudited financial statements and notes therto in this report
should be read in conjunction with the financial statements and notes therto 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 November 30, 1995, the reserve for bad
-------------------
debts amounted to $11,863.
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 an estimated product useful life of
three years is reasonable for amortization purposes. For the three months ended
November 30, 1995 and 1994, the Company capitalized $189,618 and $190,737
respectively, of deferred software development costs. Amortization charged to
operations amounted to $24,207 and $98,132 for the three months ended November
30, 1995 and 1994, respectively. For the six months ended November 30, 1995,
the Company capitalized $235,116 of deferred software development costs compared
to $358,630 for the same period in 1994. Amortization charged to operations
amounted to $48,413 for the six months ended November 30, 1995 and $183,327 for
the same period in 1994.
Revenue recognition The Company recognizes 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. The Company recognizes revenue from a "site
license" upon the completion and acceptance of programs by the customer. Cost of
sales expenses are predominantly associated with product sales and are nominal
with respect to services.
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Deferred Income The Company defers maintenance income billings and
---------------
recognizes over the contract lives which are usually twelve months. Billings
amounted to $63,382 and $66,286 for the three months ended November 30, 1995 and
1994, respectively. For the six months ended November 30, 1995 the billings
were $102,461 compared to $136,073 for the same period in 1994.
Statements of Cash Flows For the purposes of disclosure in the
------------------------
statements of cash flows, management treats liquid investment with maturities of
three months or less to be cash equivalents. There was no interest paid during
the three months ended November 30, 1995 compared to $9,011 for the same period
in 1994. For the six months ended November 30, 1995 and 1994 interest paid
amounted to $744 and $17,171, respectively.
Earnings per share Earnings per Common Share is computed by dividing
------------------
the income or loss by the weighted average number of Common Shares outstanding
during the period. For the three and six month periods ended November 30, 1995
and 1994, common stock options and warrants are anti-dilutive and not included
in the weighted average of Common Shares used in determining per share amounts.
5
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Item 2. Management's Discussion and Analysis or Plan of Operations
Results of Operations
For the Three and Six Months Ended November 30, 1995 Versus 1994
Total sales for the three months ended November 30, 1995 were $133,940
compared to $215,758 for the three months ended November 30, 1994,
reflecting a decrease of $81,817 or 37.9%. Product revenues for the three
months ended November 30, 1995 were $87,025 compared to $145,391 for the
three months ended November 30, 1994, a decline of $58,366 or 40.1%.
Service revenues were $46,915 in the three months ended November 30, 1995
compared to $70,367 for the three months ended November 30, 1994, a
decrease of $23,452 or 33.3%.
As indicated in Item 6 (Management's Discussion and Analysis or Plan
Of Operations) in the Company's Annual Report filed on Form 10-KSB for the
period ended May 31, 1995, the Company has experienced problems in
developing the GT Purchase PRO product. Because of "bugs" encountered in
one of the RAD tools used to develop GT Purchase PRO the Company has been
unable to bring a completely acceptable product to market. As a result,
sales of the Company's products and services have generally declined.
The Company is now using an outside consulting firm to complete
development work on the GT Purchase PRO product line and expects to have a
product acceptable to the marketplace no later than the end of February
1996.
The cost of sales for the three months ended November 30, 1995
decreased from $147,003 for the same period in 1994 to $39,951, a decrease
of $107,052 or 72.8%. For the six months ended November 30, 1995 cost of
sales was $126,789 compared to $279,588 in the same period of 1994. The
decrease in cost of sales was due primarily to the reduction in the
amortization of software development costs, as well as a reduction in sales
volume. At November 30, 1995, the Company had recorded approximately
$700,100 of net costs associated with the ongoing development 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 November 30, 1995, were
$96,798 compared with $289,891 for the prior year, a decrease of $193,093
or 66.6%. For the six months ended November 30, 1995, selling expenses
were $261,500 compared to $470,821 in the prior year, a decrease of 44.5%.
The lower costs for the 1995 quarter and six month periods were primarily
due to decreased personnel and advertising costs.
6
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General and administrative ("G&A") expenses for the three months ended
November 30, 1995 were $211,937 compared with $201,295 for the prior year,
a increase of $10,642 or 5.3%. For the six months ended November 30, 1995,
G&A expenses were $355,075 compared with $468,648 for the same period in
1994, a decrease of $113,573 or 24.2%. Personnel and other expenses were
generally lower for the three and six months ended November 30, 1995 as
compared to the same 1994 periods. The increase in the three months ended
November 30, 1995 over 1994 was due to $101,370 in costs arising from the
relocation of the Company's offices.
Interest expense for the six months ended November 30, 1995 was $744
compared with $17,171 for the prior year, a decrease of $16,427 or 95.7%.
This decrease was the result of the liquidation of the Company's debt
during the first quarter.
For the three months ended November 30, 1995, the Company reported a
net loss of $214,734 (or $.04 per share) as compared to a net loss of
$417,218 (or $.10 per share) for the prior year. For the six months ended
November 30, 1995, the Company reported a net loss of $503,739 (or $.10
per share) as compared to a net loss of $858,756 (or $.20 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, amortization of software development costs, and
advertising costs.
Liquidity and Capital Resources
The Company had a deficit in working capital of $694,011 at
November 30, 1995 as compared a deficit of $569,502 at May 31, 1995, a
decrease in working capital of $124,509. The primary cause for the decrease
in working capital was the loss for the six month period and continued
product development expenditures. These were partly offset by additional
capital received from the October 27, 1995 private placement. As a result,
cash decreased from $157,621 at May 31, 1995 to $7,698 at November 30,
1995, a decrease of $149,923. The $775,000 received from retirement of a
certificate of deposit was used to redeem a $775,000 bank note. Accounts
receivable increased $143,041 or 200.2% compared to May 31, 1995
principally due to product and service billings that ocurred in the month
of November.
The Company spent $8,993 on capital expenditures for the six months
ended November 30, 1995 and $61,627 for the same period in 1994.
As previously indicated, the Company was attempting to raise capital
through the sale of its common stock at $.40 per share, and expected to
complete a private placement in October for $950,000. On October 27, 1995
the Company closed on $537,686 of this funding. An additional $26,314 was
received on December 5, 1995 bringing the total funding to $564,000 for
1,410,000 shares.
7
<PAGE>
The funding was not sufficient for the Company to maintain its listing
on the National Association of Securities Dealers (NASD) Small Cap Market.
The Company had been trading under an exception from the minimum total
assets, capital and surplus, and bid requirements. On December 6, 1995 the
NASD notified the Company that it would be delisted from trading in the
Small Cap Market effective with opening of trading on December 7, 1995.
On December 13, 1995 the Company initiated another private placement
offering ("Offering") to accredited investors for a minimum of 2,000,000
shares and a maximum of 4,166,667 shares at $.30 per share. On December 28,
1995 the Company sold 2,001,667 shares and received gross proceeds of
$600,500. The Offering was extended from December 31, 1995 to January 30,
1996 and the Company anticipates that it will receive additional gross
proceeds of at least $100,000.
The Company believes the above fundings will be sufficient to enable
it to complete development of its product and bring it to market. However,
there can be no assurance that the Company will attain a sales level
necessary to generate profitability and positive cash flow. If the
applicable sales level is not attained, there can be no assurance that
additional financing will be available to allow time to reach a profitable
sales level.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See Part I Item 3 of the Company's Annual Report on Form 10KSB
regarding a lawsuit instituted by one of the Company's former executives.The
matter has been settled and documented.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
On August 24, 1995, November 13, 1995, and January 2, 1996 the Company
filed reports on form 8-K which are hereby included by reference.
8
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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: /s/ Arnold Muhlbach
-------------------------
Arnold Muhlbach
Chief Financial Officer and
Treasurer
January 15, 1996
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> NOV-30-1995
<CASH> 7,698
<SECURITIES> 0
<RECEIVABLES> 226,358
<ALLOWANCES> 11,863
<INVENTORY> 12,499
<CURRENT-ASSETS> 261,965
<PP&E> 458,487
<DEPRECIATION> 289,857
<TOTAL-ASSETS> 1,261,493
<CURRENT-LIABILITIES> 955,976
<BONDS> 0
<COMMON> 243,788
0
0
<OTHER-SE> 61,729
<TOTAL-LIABILITY-AND-EQUITY> 1,261,493
<SALES> 151,548
<TOTAL-REVENUES> 242,711
<CGS> 126,789
<TOTAL-COSTS> 126,789
<OTHER-EXPENSES> 617,319
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 744
<INCOME-PRETAX> (501,339)
<INCOME-TAX> 2,400
<INCOME-CONTINUING> (503,739)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (503,739)
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
