<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 February 29, 2000
/ / Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from to
---------- ----------
Commission File Number 0-11791
PURCHASESOFT, INC.
-------------------
(Name of Small Business Issuer as Specified in Its Charter)
DELAWARE 13-2897997
- ------------------------------- -----------------------------------
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
7301 OHMS LANE
SUITE 220
EDINA, MN 55439
----------------------------------------
(Address of Principal Executive Offices)
(612) 941-1500
----------------------------------------------
(Issuer's Telephone Number, Including Area 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 April 11, 2000
------------------------ -----------------------------
COMMON STOCK, PAR VALUE 14,624,884 SHARES
$0.01 PER SHARE
<PAGE>
PURCHASESOFT, INC.
INDEX
<TABLE>
<CAPTION>
ITEM PAGE
NUMBER NUMBER
- ------ -------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as of February 29, 2000 and May 31, 1999............................. 3
Statements of Operations for the three and nine months ended
February 29, 2000 and February 28, 1999............................................. 4
Statements of Cash Flows for the nine months ended
February 29, 2000 and February 28, 1999............................................. 5
Notes to the Financial Statements................................................... 6-8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations .......................................................... 8-12
PART II. OTHER INFORMATION
Item 2. Changes in Securities................................................................... 13
Item 4. Submission of Matters to a Vote of Security Holders..................................... 13
Item 6. Exhibits and Reports on Form 8-K........................................................ 13
Signatures .................................................................................... 14
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
COMPANY FOR WHICH REPORT IS FILED: PURCHASESOFT, INC. (THE
"COMPANY")
PURCHASESOFT, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
February 29, 2000 May 31, 1999
--------------------- ----------------------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 1,055,942 $ 3,824,505
Accounts receivable, net 28,547 115,927
Prepaid expenses and other current assets 109,463 121,460
--------------- --------------
Total Current Assets 1,193,952 4,061,892
--------------- --------------
Property and equipment, net 461,179 304,614
--------------- --------------
Other Assets
Security deposits 39,269 38,879
--------------- --------------
Total Other Assets 39,269 38,879
--------------- --------------
Total Assets $ 1,694,400 $ 4,405,385
=============== ==============
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 262,464 $ 411,480
Current obligations under capital leases 57,352 49,428
Accrued expenses 515,773 528,924
Deferred revenues 123,342 163,804
--------------- --------------
Total Current Liabilities 958,931 1,153,636
--------------- --------------
Noncurrent Obligations
Noncurrent obligations under capital leases 53,944 28,878
Noncurrent restructuring charges 0 133,332
--------------- --------------
Total Noncurrent Obligations 53,944 162,210
--------------- --------------
Commitments and Contingencies
Stockholders' Equity
Common stock, $0.01 par value, 25,000,000
shares authorized, 14,419,086 and 13,807,015
issued and outstanding respectively 144,191 138,070
Additional paid-in-capital 25,057,484 24,443,167
Accumulated deficit (24,431,118) (21,402,666)
--------------- --------------
770,557 3,178,571
Less treasury stock (4,780 shares) at cost (89,032) (89,032)
--------------- --------------
Total Stockholders' Equity 681,525 3,089,539
--------------- --------------
Total Liabilities and Stockholders' Equity $ 1,694,400 $ 4,405,385
=============== ==============
</TABLE>
See accompanying notes to financial statements
3
<PAGE>
PURCHASESOFT, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
--------------------------------------- --------------------------------------
February 29, February 28, February 29, February 28,
2000 1999 2000 1999
---------------- ------------------ ---------------- -----------------
<S> <C> <C> <C> <C>
Net revenues:
Product $ 5,000 $ 3,000 $ 116,155 $ 76,750
Services 51,091 45,680 181,132 212,229
------------- ------------- ------------- -------------
Total net revenues 56,091 48,680 297,287 288,979
------------- ------------- ------------- -------------
Costs and expenses:
Cost of revenues 103,446 43,604 280,603 121,843
Sales and marketing 235,658 358,146 974,994 1,033,672
General and administrative 556,624 451,131 1,470,955 1,408,970
Research and development 195,182 235,592 670,312 511,027
Restructuring charge 0 610,453 0 610,453
------------- ------------- ------------- -------------
Total costs and expenses 1,090,910 1,698,926 3,396,864 3,685,965
------------- ------------- ------------- -------------
Operating loss (1,034,819) (1,650,246) (3,099,577) (3,396,986)
Interest income 12,126 862 71,125 48,111
------------- ------------- ------------- -------------
Net loss $ (1,022,693) $ (1,649,384) $ (3,028,452) $ (3,348,875)
============= ============= ============= =============
Net loss per common share
(Basic and diluted) $ (0.07) $ (0.20) $ (0.22) $ (0.41)
============= ============= ============= =============
Weighted average
shares outstanding 14,103,546 8,169,408 13,905,498 8,117,788
============= ============= ============= =============
</TABLE>
See accompanying notes to financial statements
4
<PAGE>
PURCHASESOFT, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
-----------------------------------------------
February 29, 2000 February 28, 1999
-------------------- ---------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (3,028,452) $ (3,348,875)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 69,333 50,661
Provision for bad debts 5,945 --
Stock compensation for shares issued for services 30,000 --
Changes in operating assets and liabilities:
Accounts receivable 81,435 (9,870)
Prepaid expenses and other assets (18,003) (76,659)
Accounts payable (149,016) 9,069
Accrued expenses (146,482) 475,782
Deferred revenue (40,462) 32,306
------------ --------------
Net cash used in operating activities (3,195,702) (2,867,586)
------------ --------------
Cash flows from investing activities:
Additions to property and equipment (148,955) (215,860)
Increase in security deposits (390) (30,110)
------------ --------------
Net cash used in investing activities (149,345) (245,970)
------------ --------------
Cash flows from financing activities:
Net proceeds from exercise of option/warrant 620,438 142,500
Proceeds from financing equipment -- 50,508
Proceeds form issuance of note payable -- 2,000,000
Payment of capital leases (43,954) (22,433)
------------ --------------
Net cash provided by financing activities 576,484 2,170,575
------------ --------------
Net decreases in cash and cash equivalents (2,768,563) (942,981)
Cash and cash equivalents, beginning of year 3,824,505 2,918,548
------------ --------------
Cash and cash equivalents, end of period $ 1,055,942 $ 1,975,567
============ ==============
Supplemental disclosure of cash flow information:
Cash paid for interest $ 9,818 $ 7,349
Cash paid for income taxes $ -- $ --
============ ==============
Supplemental disclosure of non-cash transaction:
Stock compensation award -- 50,000
Capital lease obligation incurred $ 76,946 $ 61,533
============ ==============
</TABLE>
See accompanying notes to financial statements
5
<PAGE>
PURCHASESOFT, INC.
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 29, 2000
NOTE 1. GENERAL INFORMATION:
The Financial Statements included herein have been prepared by the
Company without audit except the May 31, 1999 balance sheet, which was
audited. The Statements have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission and reflect all
adjustments, consisting of only normal recurring accruals which are, in the
opinion of management, necessary for a fair statement of the results of
operations for the periods shown. These statements do not include all
information required by Generally Accepted Accounting Principles to be
included in a full set of Financial Statements. These Financial Statements
should be read in conjunction with the May 31, 1999 Financial Statements and
notes thereto included in the Company's latest report on Form 10-KSB.
The Company is considered a Small Business (SB) filer pursuant to
Securities and Exchange Commission (SEC) regulations. As such, the accompanying
financial statements, are not intended to, nor do they, include all disclosures
required by the SEC's Regulation S-X.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES:
(a) Accounting Estimates
Management is required to make estimates and assumptions during the
preparation of financial statements in conformity with Generally Accepted
Accounting Principles. These estimates and assumptions affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements. They also affect the
reported amounts of net income (loss) during the period. Actual results could
differ materially from these estimates and assumptions.
(b) Revenue Recognition and Accounts Receivable
The Company recognizes revenue in accordance with the provisions of
Statement of Position (SOP) No. 97-2, "Software Revenue Recognition," as amended
by SOP 98-4 and SOP 98-9. The Company recognizes software license revenue at the
point when evidence of an arrangement exists, the software product has been
shipped, there are no uncertainties surrounding product acceptance, the fees are
fixed and determinable and collection of the related receivable is considered
probable. Service revenues are comprised of revenues derived from software
maintenance agreements and professional services. Maintenance fees are recorded
as deferred revenue and recognized ratably over the maintenance period, which is
usually twelve months. Professional service revenue is recognized as the
services are performed.
Accounts receivable is presented net of an allowance for uncollectible
accounts of $41,708 and $55,000 at February 29, 2000 and May 31, 1999,
respectively. Bad debt expense is recorded in general and administrative
expenses.
6
<PAGE>
(c) Research and Development
The Company is engaged in research and development activities in the
area of computer software. In accordance with generally accepted accounting
principles, costs incurred prior to determination of technological feasibility
are considered research and development and expensed as incurred. As of May 31,
1998, all capitalized development costs were fully amortized. Since June 1,
1998, the Company's research and development costs primarily relate to software
development during the period prior to technological feasibility and have been
charged to expense as incurred. Costs otherwise capitalizable after
technological feasibility is achieved have also been expensed because they have
been insignificant.
(d) Cash and Cash Equivalents
The Company considers all highly liquid investments with original
maturities of 90 days or less to be cash equivalents for financial statement
purposes.
(e) Property and Equipment
Property and equipment are stated at cost, less accumulated
depreciation. Depreciation is charged to operations over the estimated useful
lives of the related assets, generally five to seven years, using the
straight-line method. Depreciation and amortization expense was $69,333 and
$50,661 for the nine months ended February 29, 2000, and February 28, 1999,
respectively.
(f) Income Taxes
The Company accounts for income taxes using the liability method in
accordance with the provisions of the Statement of Financial Accounting Standard
(SFAS) No. 109, "Accounting for Income Taxes." SFAS No. 109 requires that
deferred income taxes reflect the tax consequences on future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts.
(g) Loss Per Common Share
The Company accounts for income (loss) per share in accordance with
SFAS No. 128, "Earnings Per Share." SFAS No. 128 requires dual presentation of
basic and diluted earnings per share for entities with complex capital
structures. Basic earnings per share includes no dilution and is computed by
dividing net income (loss) available to common stockholders by the weighted
average number of Common Stock outstanding for the period. Diluted earnings per
share reflects the potential dilution of securities that could share in the
earnings of an entity. Due to the Company's continued net losses there has been
no impact from unexercised stock options and warrants on diluted net loss per
share as the effect would be anti-dilutive.
(h) Stock-Based Compensation
The Company accounts for stock-based compensation arrangements in
accordance with the provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and complies with the disclosure
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation."
7
<PAGE>
(i) Recently Issued Accounting Standards
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The new statement establishes accounting
and reporting standards for derivative instruments and hedging activities. SFAS
No. 133 is effective for all fiscal quarters of fiscal years beginning after
June 15, 2000. The Company does not expect SFAS No. 133 to materially affect its
financial position or results of operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Except for the historical information contained herein, this Quarterly
Report on Form 10-QSB may contain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, including, but not limited to, (i) the Company's belief in
the growth of electronic commerce software solutions and (ii) expectations for
the Company's strategy and future performance. Investors are cautioned that
forward-looking statements are inherently uncertain. Actual performance and
results of operations may differ materially from those projected or suggested in
the forward-looking statements due to certain risks and uncertainties,
including, but not limited to, the following risks and uncertainties: (i) the
Company's history of losses and accumulated deficit, limited revenues, and the
uncertainty of future profitability; (ii) the uncertainty of market acceptance
of PurchaseSoft-TM-, PurchaseSmart-TM-, and SourceSmart-TM- software; (iii) new
management and the ability to develop strategic partnerships and alliances,
establish resellers of the Company's products, and recruit sales, service,
implementation personnel; (iv) the intense competition in the software field;
(v) the dependence on a single product line and rapid technological change in
the industry; (vi) new product development; and (vii) fluctuations in quarterly
operating results. Additional information concerning certain risks and
uncertainties that would cause actual results to differ materially from those
projected or suggested in the forward-looking statements is contained in the
Company's filings with the Securities and Exchange Commission, including those
risks and uncertainties discussed under the caption "Risk Factors" in the
Company's Annual Report on Form 10-KSB for the year ended May 31, 1999. The
forward-looking statements contained herein represent the Company's judgment as
of the date of this Quarterly Report on Form 10-QSB, and the Company cautions
readers not to place undue reliance on such statements.
8
<PAGE>
RESULTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
OVERVIEW
The Company reported a net loss for the quarter of $1,022,693.
In December 1999, the Company restructured certain positions and
redirected its sales and marketing efforts to give greater emphasis to the
development of strategic partnerships and alliances. Pamela Cabalka, who served
as Vice President of Sales and acting CEO tendered her resignation from the
Company. The position of CEO was eliminated and the number of direct sales
representatives was reduced. Based on feedback the Company has received from
e-commerce industry experts and input from potential partners, the Company
believes that the development of a larger indirect sales network is the most
effective way to reach customers. The Company is increasing its efforts to
develop these partner-level relationships in key industries and anticipates that
much of its future growth will come through the leverage gained in these
relationships.
On January 24, 2000, the Company announced its partnership with
USinternetworking (Nasdaq: USIX), a leading Application Service Provider, to
provide PurchaseSmart-TM- and SourceSmart-TM- software as an Internet service
through USi's AppHost program. This agreement was entered into by PurchaseSoft
and USi to respond to the market need for affordable, fully featured, web-based
procurement software. Under the agreement, USi will host PurchaseSoft's
business-to-business e-commerce applications via its AppHost model.
Purchasesoft's clients will be able to obtain and operate PurchaseSmart-TM- and
SourceSmart-TM- software as a subscription service over USi's network of
enterprise data centers, eliminating the need to build out additional in-house
infrastructure to support the application and speeding up the implementation
process.
On January 31, 2000, the Company announced the hiring of Mr. P.
Gopalakrishnan as Senior Vice President of Business Development replacing Robyn
Thompson who left the Company to pursue other interests. He will continue to
build and expand the Company's partnerships, alliance networks, reseller
programs and marketing efforts. Before joining PurchaseSoft he was a Principal
Consultant for PricewaterhouseCoopers Management Consulting Services
specializing in e-commerce best practices and major project implementation and
management. Mr. Gopalakrishnan has over eighteen years experience in information
technology. He has concentrated on electronic commerce design, development and
implementation for multinational and multi-location e-commerce projects for the
last nine years. Mr. Gopalakrishnan received his BSc from the University of
Delhi, an FBA from the Canadian School of Management, Toronto and an MBA from
City University, Seattle, WA.
On March 7, 2000, subsequent to the third quarter, which ended on February
29, 2000, the Company announced the appointment of Jeffrey B. Pinkerton as
Chief Executive Officer of the Corporation. Mr. Pinkerton joined the Company
in 1987 and continues to serve as the Company's President. Mr. Pinkerton
joined PurchaseSoft as an experienced procurement professional, having held
various industrial positions in materials management and procurement systems
analysis. In addition, he has published numerous articles on Purchasing and
Purchasing Applications, taught a Computers In Purchasing course at Baruch
College in New York and authored two books on the subject. Mr. Pinkerton has
guided the Company's development of its software products from the early DOS
based product CAP (Computer Aided Purchasing) through its Windows based
products, GT PurchasePro and PurchaseSoft-TM- and its current offerings
PurchaseSmart-TM- and SourceSmart-TM-, which are completely web-enabled,
written in Java and HTML.
On March 23, 2000, subsequent to the third quarter, which ended on February 29,
2000, the Company borrowed $5,000,000 from L-R Global Partners, L.P. and signed
a demand promissory note in return. Under the terms of this note, the Company
must repay the principal and interest due at any time upon the demand of L-R
Global. The Company is continuing discussions with strategic partners and other
sources to raise additional capital to fund the Company's operations for fiscal
year 2001. The Company intends to repay the L-R Global demand promissory note
with any new capital raised.
9
<PAGE>
REVENUES
Total revenue for the three months ended February 29, 2000, was
$56,091, compared to revenue of $48,680 for the three months ended February 28,
1999, an increase of $7,411 or 15.2%. Product revenues for the three months
ended February 29, 2000, were $5,000 compared to revenues of $3,000 for the
three months ended February 28, 1999, an increase of $2,000 or 66.7%. Service
revenues were $51,091 for the three months ended February 29, 2000, compared to
$45,680 for the three months ended February 28, 1999, an increase of $5,411 or
11.8%.
Total revenue for the nine months ended February 29, 2000, was
$297,287, compared to revenue of $288,979 for the nine months ended February 28,
1999, an increase of $8,308 or 2.9%. Product revenues for the nine months ended
February 29, 2000, were $116,155 compared to revenues of $76,750 for the nine
months ended February 28, 1999, an increase of $39,405 or 51.3%. Service
revenues were $181,132 for the nine months ended February 29, 2000, compared to
$212,229 for the nine months ended February 28, 1999, a decrease of $31,097 or
14.7%.
EXPENSES
The cost of revenues for the three months ended February 29, 2000, was
$103,446, compared to $43,604 for the three months ended February 28, 1999, an
increase of $59,842 or 137.2%. This increase was primarily due to higher
compensation and benefit costs associated with staffing our professional
services and customer support department.
The cost of revenues for the nine months ended February 29, 2000, was
$280,603, compared to $121,843 for the nine months ended February 28, 1999, an
increase of $158,760 or 130.3%. This increase was primarily due to higher
compensation and benefit costs associated with staffing our professional
services and customer support department, development of implementation
methodologies and strategic partnership expenses related to imaging software.
Sales and marketing expense for the three months ended February 29,
2000, was $235,658, compared to $358,146 for the three months ended February
28, 1999, a decrease of $122,488 or 34.2 %. This decrease was primarily due
to lower compensation costs and travel expenses resulting from the Company's
restructuring of its sales organization in December 1999 and was offset in
part by higher marketing consulting, public relations fees and trade show
expenses.
Sales and marketing expense for the nine months ended February 29,
2000, was $974,994, compared to $1,033,672 for the nine months ended February
28, 1999, a decrease of $58,678 or 5.7 %. This decrease was primarily due to
lower compensation costs and travel expenses resulting from the Company's
restructuring of its sales organization in December 1999 and was offset in
part by higher marketing consulting, public relations fees and trade show
expenses.
General and administrative expense for the three months ended February
29, 2000, was $556,624, compared to $451,131 for the three months ended February
28, 1999, an increase of $105,493 or 23.4%. This increase was primarily due to
higher compensation costs relating to severance that was accrued for
administrative restructuring and was offset in part by decreases in legal fees,
general business consulting fees and office rent.
10
<PAGE>
General and administrative expense for the nine months ended February
29, 2000, was $1,470,955, compared to $1,408,970 for the nine months ended
February 28, 1999, an increase of $61,985 or 4.4%. This increase was primarily
due to higher compensation costs relating to severance that was accrued for
administrative restructuring and general business expenses and was offset in
part by lower telephone costs, office rent, the absence of legal fees relating
to the reincorporation in Delaware from New York in the prior fiscal year,
general business consulting fees and recruiting fees.
Research and development expense for the three months ended February
29, 2000, was $195,182, compared to $235,592 for the three months ended February
28, 1999, a decrease of $40,410 or 17.1%. This decrease was primarily due to
lower compensation and benefit costs.
Research and development expense for the nine months ended February 29,
2000, was $670,312, compared to $511,027 for the nine months ended February 28,
1999, an increase of $159,285 or 31.2%. This increase was primarily due to
increased compensation and benefit costs.
Restructuring charges for the three and nine months ended February 29,
2000, was $0, compared to $610,453 for the three months ended February 28, 1999,
a decrease of $610,453 or 100.0%. In the quarter ended February 28, 1999, the
Company completed a reorganization of its executive management and workforce in
order to refocus the Company on its core competencies, particularly its deep
domain expertise in end-to-end organizational procurement. The restructuring
charge covered severance pay and other restructuring costs.
NET LOSS
For the three months ended February 29, 2000, the Company reported a
net loss of $1,022,693 (or $0.07 per share) as compared to a net loss of
$1,649,384 (or $0.20 per share) for the three month period ended February 28,
1999. This loss was caused by the continuation of low revenues, which were not
sufficient to cover operating costs. The loss for the three months ended
February 29, 2000 was less than the loss for the three month period ended
February 28, 1999 primarily due to the absence of restructuring charges
associated with the reorganization of the Company's executive management and
workforce. The loss per share decreased primarily due to lower operating
expenses relating to restructuring charges and an increase in the average
outstanding shares for the three months ended February 29, 2000 to 14,103,546
shares as compared to average outstanding shares for the three months ended
February 28, 1999 of 8,169,408 shares. This increase in average outstanding
shares was primarily due to the shares issued in conjunction with the rights
offering which was completed in May 1999.
For the nine months ended February 29, 2000, the Company reported a net
loss of $3,028,452 (or $0.22 per share) as compared to a net loss of $3,348,875
(or $0.41 per share) for the nine month period ended February 28, 1999. This
loss was caused by the continuation of low revenues, which were not sufficient
to cover operating costs. The loss for the nine months ended February 29, 2000
was less than the loss for the nine month period ended February 28, 1999
primarily due to lower operating expenses because the Company recorded a
$610,453 restructuring charge in the nine months ended February 28, 1999 and did
not have a comparable charge in the nine months ended February 29, 2000 but was
offset in part by higher cost of revenues, general and administrative expenses
and research and development expenses during this period. The loss per share
decreased primarily due to lower operating expenses and an increase in the
average outstanding shares for the nine months ended February 29, 2000 to
13,905,498 shares as compared to average outstanding shares for the nine months
ended February 28, 1999 of 8,117,788 shares. This increase in average
outstanding shares was primarily due to the shares issued in conjunction with
the rights offering which was completed in May 1999.
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
As of February 29, 2000, the Company had cash and cash equivalents
totaling $1,055,942 and working capital of $235,021. The Company used $3,195,702
of cash in operating activities during the nine month period ended February 29,
2000, of which a substantial portion was used to fund the net loss for the
period of $3,028,452. The Company used $149,345 of cash in investing activities
primarily to acquire property and equipment during the nine month period ended
February 29, 2000. The Company generated $576,484 of cash in financing
activities during the nine month period ended February 29, 2000 of which
approximately $620,000 was received from the proceeds of the exercise of stock
options and warrants and was offset in part by the payment of capital lease
obligations.
The Company made $225,901 in capital expenditures during the nine month
period ended February 29, 2000, which included a $76,946 expenditure financed as
a capital lease over a thirty-six month term with a monthly payment of $2,452.
The Company had no significant commitments as of February 29, 2000 for capital
expenditures.
On March 23, 2000, the Company borrowed $5,000,000 from L-R Global
Partners, L.P. and signed a demand promissory note in return. Under the terms of
this note, the Company must repay the principal and interest due at any time
upon the demand of L-R Global. The Company is continuing discussions with
strategic partners and other sources to raise additional capital to fund the
Company's operations for fiscal year 2001. New capital raised will first be used
to repay the L-R Global demand promissory note. The Company believes that if it
is successful in raising additional capital with minimum proceeds of $5,000,000
in addition to its existing capital resources, anticipated revenue from software
sales and services, interest income, and anticipated proceeds from the exercise
of stock options, that these resources will be sufficient to fund its planned
operating expenses and capital requirements through the end of fiscal 2001.
There can be no assurance that minimum capital proceeds of $5,000,000
will be raised, and if so, that this new capital plus its existing capital
resources, anticipated revenue from software sales and services, interest
income, and anticipated proceeds from the exercise of stock options will be
sufficient to meet the Company's operating expenses and capital requirements
during such period. The Company's actual cash requirements may vary materially
from those now planned and will depend upon numerous factors, including the
results of the Company's software development efforts, the level of resources
the Company commits to marketing programs, the development of its partnership
and alliance network and its reseller programs, the ability of the Company to
maintain existing and develop new customers, and activities of competitors and
other factors.
12
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
On February 9, 2000, the Company issued 12,333 shares
of the Company's Common Stock upon the exercise of warrants
held by a non-reporting person at exercise prices ranging from
$1.14 to $1.26 per share, for the aggregate sum of $14,540.
The issuance of the Common Stock was made in reliance on
Section 4(2) of the Securities Act of 1933, as amended.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On January 25, 2000, the Company held a Special
Meeting in Lieu of the 2000 Annual Meeting of Stockholders. At
this meeting, the security holders re-elected Jeffrey B.
Pinkerton, J. Murray Logan, Donald S. LaGuardia and Brad I.
Markowitz as directors of the Company to serve until the next
annual meeting of stockholders. In addition, the stockholders
voted upon and approved a proposal to increase the maximum
number of shares that may be made available upon exercise of
stock options under the PurchaseSoft, Inc. 1997 Stock Option
Plan from 3,500,000 to 4,500,000.
At the meeting, a total of 12,368,755 shares were
present or represented by proxy, which represented 89.6% of
the shares qualified to vote. The tabulation of the voting for
the matters submitted for a vote was as follows:
<TABLE>
<CAPTION>
VOTES CAST FOR AGAINST ABSTAIN
---------- --- ------- --------
<S> <C> <C> <C> <C> <C>
1. To elect directors:
LaGuardia 12,368,755 12,062,837 305,918 --
Logan 12,368,755 12,362,946 5,809 --
Markowitz 12,368,755 12,062,837 305,918 --
Pinkerton 12,368,755 12,362,946 5,809 --
2. To approve an increase
in the Company's 1997
Stock Option Plan
from 3,500,000 to
4,500,000 shares. 12,368,755 11,061,328 67,228 11,436
</TABLE>
The proposals are described in greater detail in the Company's
Definitive Proxy Statement for the Special Meeting in Lieu of
the 2000 Annual Meetng of Stockholders held on January 25,
2000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Promissory Note, dated March 23, 2000, of
PurchaseSoft, Inc. to L-R Global Partners, L.P. filed
herewith
27.1 Financial Data Schedule filed herewith
(b) Reports on Form 8-K
None
13
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
PURCHASESOFT, INC.
Date: April 14, 2000 By: /s/ Jeffrey B. Pinkerton
-------------------------------------------------
Name: Jeffrey B. Pinkerton
Title: President and Chief Executive Officer
Date: April 14, 2000 By: /s/ Philip D. Wolf
-------------------------------------------------
Name: Philip D. Wolf
Title: Treasurer, Chief Financial Officer
and Assistant Secretary
14
<PAGE>
EXHIBIT 10.1
DEMAND PROMISSORY NOTE
$5,000,000 March 23, 2000
FOR VALUE RECEIVED, PURCHASESOFT, INC, a Delaware
corporation ("Borrower"), promises to pay to the order of L-R GLOBAL
PARTNERS, L.P., a New York limited partnership ("Lender"), at such place as
the holder hereof may designate, in lawful money of the United States of
America, the principal sum of Five Million Dollars ($5,000,000), plus
interest as hereinafter provided, on demand. This Note shall bear interest on
the unpaid principal amount hereof at the rate of 6% per annum; PROVIDED,
that interest shall accrue at the rate of 8% per annum on any principal or
accrued interest that is not paid within five days of written demand, from
the date of such demand until the date of payment.
Borrower waives presentment, demand, protest, notice of
protest, notice of dishonor, notice of nonpayment, any and all other notices
and demands in connection with the delivery, acceptance, performance, default
or enforcement of this Note. No delay by the holder hereof in exercising any
power or right in respect of this Note shall operate as a waiver of such or
any other power or right.
Borrower may at any time prepay in whole or in part, from
time to time, the outstanding principal amount all of this Note, together
with accrued interest to date of payment on the principal amount so prepaid.
Borrower shall pay the holder hereof all costs and expenses
of collection of this Note, including without limitation reasonable
attorneys' fees.
This Note shall be deemed to be made under and shall be
construed in accordance with and governed by the laws of the State of New
York.
PURCHASESOFT, INC.
By /s/ Jeffrey Pinkerton
------------------------
Jeffrey Pinkerton
President and CEO
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-2000
<PERIOD-START> JUN-01-1999
<PERIOD-END> FEB-29-2000
<CASH> 1,055,942
<SECURITIES> 0
<RECEIVABLES> 28,547
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,193,952
<PP&E> 461,179
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,694,400
<CURRENT-LIABILITIES> 958,931
<BONDS> 0
0
0
<COMMON> 144,191
<OTHER-SE> 537,334
<TOTAL-LIABILITY-AND-EQUITY> 1,694,400
<SALES> 116,155
<TOTAL-REVENUES> 297,287
<CGS> 0
<TOTAL-COSTS> 280,603
<OTHER-EXPENSES> 3,116,261
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (71,125)
<INCOME-PRETAX> (3,028,452)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,028,452)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,028,452)
<EPS-BASIC> (.22)
<EPS-DILUTED> (.22)
</TABLE>
