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Heartsoft, Inc.
Special Report on Form 8K
for the year ending March 31, 1997
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) March 31, 1997
HEARTSOFT, INC.
(Exact name of Registrant as specified in its charter)
Delaware 33-23138-D 87-045676 6
(State of Incorporation) (Commission file number) (IRS Employer Number)
3101 Hemlock Circle, Broken Arrow, Oklahoma 74012
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 918/251-1066
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Item 1: Changes in Control of Registrant.
Not Applicable.
Item 2: Acquisition or Disposition of Assets.
Not Applicable.
Item 3: Bankruptcy or Receivership.
Not Applicable.
Item 4: Changes in Registrant's Certifying Accountant
Due to changes in personnel employed by the Company's Certifying
Accountants, Cross & Robinson, Tulsa, Oklahoma, the Company's Board of
Directors is currently considering a change in the Company's certifying
accountants. The Board's consideration of this decision has delayed release
of fiscal 1996's audited financial statement and related 10-K filing.
The Company hopes to remedy this situation and to file its fiscal
1996 10-K within 90 days.
Item 5: Other Events.
During the fourth quarter of fiscal 1996, the company's board of
directors, by unanimous consent, agreed to discontinue the company's
Advanced Technologies Division in Dallas, Texas. Although the division had
been in existence for only 18 months, it was unable to reach profitability,
and the company's board or directors unanimously agree that continued
investment in the division would not cause a turn around in the immediate
future.
The closing of the Advanced Technologies division will have a material
affect on the company's ongoing operations by reducing related expenses and
reducing gross revenues.
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Subsequently, the Board also decided to re-focus all of the company's
resources into the promulgation of its core products division related to the
development and sales of its proprietary educational software products for
schools.
Item 6: Resignation of Registrant's Directors.
During the fourth quarter of fiscal 1996, Charles R. Carlson agreed to
and did resign from the Company's Board of Directors. Mr. Carlson's decision
was related to the Board's unanimous consent to discontinue the operations
of the Company's Advanced Technologies Division in Dallas, Texas. See Item 5
above.
Item 7: Financial Statements and Exhibits.
Financial Statements
Unaudited Financial Statements for the Period ending March 31, 1997
Exhibit A -- Discussion of Financial Results
Item 8: Changes in Fiscal Year.
Not applicable.
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 hereunto duly authorized.
HEARTSOFT, INC.
Dated: June 20, 1997
By: /s/ Benjamin P. Shell, Jr.
Benjamin P. Shell, Jr.
Chief Executive Officer
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HEARTSOFT, INC.
Balance Sheet
As of March 31, 1997 (Unaudited)
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<TABLE>
<CAPTION>
<S> <C>
ASSETS
CURRENT ASSETS
Cash & Accounts Receivable $ 949,141
Inventory 7,860
Other 114,178
Total Current Assets $ 1,071,179
FIXED ASSETS
Furniture, Fixtures, and Computer Equipment
(less Accumulated Depreciation) $ 152,187
INTANGIBLE ASSETS
Developed Computer Software and
Organization Cost $ 689,330
Deferred Income Tax 193,448
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TOTAL ASSETS $ 2,106,144
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LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts Payable and Professional Fees $ 500,827
LONG TERM LIABILITIES
Notes Payable, Shareholder Loans $ 305,142
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TOTAL LIABILITIES $ 805,969
SHAREHOLDERS EQUITY
RETAINED EARNINGS ($987,613)
COMMON STOCK $ 13,893
PAID-IN CAPITAL $ 2,543,331
NET INCOME ($269,436)
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TOTAL STOCKHOLDERS EQUITY $ 1,300,175
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $ 2,106,144
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</TABLE>
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HEARTSOFT, INC.
Profit and Loss Statement
As of March 31, 1997 (Unaudited)
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<TABLE>
<CAPTION>
Quarter Ending Year to Date
Amount Amount
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<S> <C> <C>
REVENUE
Sales - Core Products $ 203,705 $ 729,239
Sales - Adv. Tech. Group 40,285 689,198
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Gross Sales $ 243,990 $ 1,418,428
Returns & Discounts $ 313 $ (21,380)
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Net Sales $ 244,293 $ 1,397,038
Cost of Goods Sold $ 28,094 $ 697,875
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Gross Margin $ 216,199 $ 699,163
EXPENSES
Payroll Expense $ 111,749 $ 347,225
General & Administrative 301,404 668,921
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Total Operating Expenses $ 413,153 $ 1,016,146
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Net Operating Income (Loss) ($196,954) ($316,983)
Income Tax Benefit $ 29,543 $ 47,547
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NET INCOME (LOSS) AFTER TAXES $ (167,411) $ (269,436)
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</TABLE>
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HEARTSOFT, INC.
Statement of Cash Flows
For the Year Ending March 31, 1997 (Unaudited)
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<TABLE>
<CAPTION>
<S> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net Income (Loss) $ (269,436)
Change in Current Assets
Net Receivables (778,972)
Inventory 3,356
Other Current Assets 12,670)
Change in Current Liabilities
Accounts Payable 39,612
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Total Cash Flow for Operating Activities ($1,018,110)
CASH FLOW FROM INVESTING ACTIVITIES
Property, Plant & Equipment (63,709)
Depreciation and Amortization 90,000
Developed Software (231,190)
Other Intangibles (47,547)
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Total Cash flow for Investing Activities ($ 252,446)
CASH FLOW FROM FINANCING ACTIVITIES
Long Term Debt $ 266,738
Additional Paid-In Capital 989,052
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Total Cash Flow from Financing Activities $ 1,255,790
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Net Increase (Decrease) In Current Assets (14,766)
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Beginning Cash $ 19,922
Net Increase (Decrease) in Cash (14,766)
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Ending Cash $ 5,156
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</TABLE>
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HEARTSOFT, INC.
Management Discussion of
Financial Results
For the Year Ending March 31, 1997 (Unaudited)
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NET REVENUES
For the Fiscal Year ended March 31, 1997, Heartsoft, Inc. recorded total
revenues of $1,397,038 versus year earlier levels of $802,124 a 74% increase.
The Company recorded a net loss of $(269,436) for the year ending compared to
a net loss of ($97,007) for the year ending March 31, 1996.
Although net revenues increased 74%, the net loss widened due to increased
R&D expenses related to the development of the company's new software
products to be released during the Fall of 1997 and expenses related to the
closing of the Company's Advanced Technology Division in Dallas, Texas.
During the last quarter of fiscal 1996, the Company instituted cost savings
measures which reduced fixed overhead by approximately 40%. These savings
were the results of the discontinuation of the company's Dallas operation
which had never generated a profit as well as job consolidation and other
cost savings measures.
The changes have been made as the company re-focused its business strategy on
its core product division and the development and sales of curriculum based
educational software products.
COST OF GOODS SOLD
The Company includes in cost of goods sold, all costs associated with the
acquisition of components, assembly of finished products, shipping and
amortization. During 1996, this figure also included the cost of licensed
products for the company's discontinued Advanced Technologies Division.
For the 12 months ending March 31, 1997, cost of goods sold was $697,875
compared to $157,471. Again, the significant increase was related to
inclusion of the costs of products resold through the Advanced Technologies
Division during 1996.
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Management anticipates that Costs of Goods sold should return to a traditional
percentage of gross sales of approximately 20% or less in the future as the
company concentrates on its core products division.
OPERATING EXPENSES
General operating expenses increased across the board from $769,055 during
the 12 months ending March 31, 1997 to $1,016,146 for the same period
ending one year ago. The increase of 32% was related to the increase in
R&D expenses as well as the cost of the company's discontinued Advanced
Technology Division.
Again, as the company's re-focuses on its core products division and the
impact of cost savings measure affected during the fourth quarter of fiscal
1996, management anticipates that operating expenses shall decrease as a
percentage of net revenues during fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1997, the Company's principle sources of liquidity included
cash and accounts receivables of $949,141 as well as a revolving line of
credit of $250,000. This figure represented an increase of 267% compared to
the figure of $258,380 for the year ending March 31, 1996. The significant
increase is related to the sales of third party licensed product by the
Company's discontinued Advanced Technology Products. Management believes that
this figure will be significantly adjusted downward during the anticipated
audit by the Company's auditing accountants.
