AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON August 14, 2000
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
-------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-22970
TREEV, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 54-1590649
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
13900 Lincoln Park Drive, Suite 300, Herndon, Virginia 20171
(Address of principal executive offices)
(703) 478-2260
(Issuer's telephone number)
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 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 [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: 16,067,233 shares of
common stock, $.0001 par value, as of June 30, 2000.
<PAGE>
TREEV, INC.
Form 10-Q
Table of Contents
PART I FINANCIAL INFORMATION
Item 1. Financial Statements.
Balance Sheets at June 30, 2000 (unaudited)
and December 31, 1999 2
Statements of Operations (unaudited) for the three
months ended June 30, 2000 and 1999 3
Statements of Operations (unaudited) for the six
months ended June 30, 2000 and 1999 4
Statement of Changes in Stockholders' Equity (unaudited)
for the three months ended June 30, 2000 5
Statements of Cash Flows (unaudited) for the six
months ended June 30, 2000 and 1999 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. 14
Item 6. Exhibits and Reports on Form 8-K. 14
<PAGE>
TREEV, INC.
BALANCE SHEETS
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---------------- ----------------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,717 $ 1,886
Accounts and notes receivable, net 11,016 13,816
Inventories 737 1,135
Prepaid expenses and other 1,505 1,111
---------------- ----------------
Total current assets 14,975 17,948
Fixed assets, net 1,427 1,237
Long-term notes receivable, net 7 21
Software development costs, net 4,039 3,627
Other assets 369 458
---------------- ----------------
Total assets $ 20,817 $ 23,291
================ ================
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Current debt maturities and obligations under capital leases $ 9,066 $ 7,572
Accounts payable 2,228 2,374
Accrued compensation and expenses 902 1,160
Deferred revenue 4,564 3,143
Other accrued expenses 1,631 1,497
---------------- ----------------
Total current liabilities 18,391 15,746
Long-term debt and obligations under capital leases 325 120
---------------- ----------------
Total liabilities 18,716 15,866
Stockholders' equity:
Convertible preferred stock, $.0001 par value, 20,000,000 shares
authorized; 1,605,025 and 1,610,025 shares issued and outstanding - -
Common stock, $.0001 par value, 100,000,000 shares authorized;
16,067,233 and 14,237,009 shares issued and outstanding 2 1
Additional paid-in-capital 142,129 141,841
Accumulated deficit (140,030) (134,417)
---------------- ----------------
Total stockholders' equity 2,101 7,425
---------------- ----------------
Total liabilities and stockholders' equity $ 20,817 $ 23,291
================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
TREEV, INC.
STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30,
2000 1999
-------------------- -----------------
<S> <C> <C>
Revenue:
Products $ 2,664 $ 4,601
Services 3,243 3,312
-------------------- -----------------
5,907 7,913
-------------------- -----------------
Costs and expenses:
Cost of products sold 1,297 2,361
Cost of services provided 2,171 2,080
Sales and marketing 2,856 2,726
General and administrative 1,007 855
Product development 1,199 1,244
-------------------- -----------------
8,530 9,266
-------------------- -----------------
Loss before interest expense and income taxes (2,623) (1,353)
Interest expense, net (251) (44)
-------------------- -----------------
Loss before income taxes (2,874) (1,397)
Income tax benefit - -
-------------------- -----------------
Net loss (2,874) (1,397)
-------------------- -----------------
Preferred stock dividends (337) (337)
-------------------- -----------------
Net loss applicable to common shares $ (3,211) $ (1,734)
==================== =================
Net loss per common share $ (0.20) $ (0.14)
==================== =================
Weighted average shares outstanding 15,980,806 12,803,488
==================== =================
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
TREEV, INC.
STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
2000 1999
------------------- -----------------
<S> <C> <C>
Revenue:
Products $ 4,315 $ 7,040
Services 6,635 6,404
------------------- -----------------
10,950 13,444
------------------- -----------------
Costs and expenses:
Cost of products sold 2,319 3,726
Cost of services provided 4,267 4,173
Sales and marketing 5,403 5,122
General and administrative 1,969 1,633
Product development 2,133 2,051
------------------- -----------------
16,091 16,705
------------------- -----------------
Loss before interest expense and income taxes (5,141) (3,261)
Interest expense, net (472) (46)
------------------- -----------------
Loss before income taxes (5,613) (3,307)
Income tax benefit - -
------------------- -----------------
Net loss (5,613) (3,307)
------------------- -----------------
Preferred stock dividends (674) (674)
------------------- -----------------
Net loss applicable to common shares $ (6,287) $ (3,981)
=================== =================
Net loss per common share $ (0.41) $ (0.31)
=================== =================
Weighted average shares outstanding 15,438,328 12,777,096
=================== =================
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
TREEV, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Six months ended June 30, 2000
(In thousands, except share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Additional
Preferred Stock Common Stock paid-in Accumulated
Shares Amt. Shares Amt. capital Deficit Total
------------------------- -------------------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1999 1,610,025 $ - 14,237,009 $ 1 $ 141,841 $(134,417) $ 7,425
Issuance of common stock 207,878 - 288 288
Conversion of preferred stock (5,000) - 1,514,938 1 - 1
Dividends on preferred stock (674) (674)
Issuance of common stock in
payment of dividends 107,408 - 674 674
Net loss (5,613) (5,613)
------------------------- -------------------------- --------------- --------------- ---------------
Balance June 30, 2000 1,605,025 $ - 16,067,233 $ 2 $ 142,129 $(140,030) $ 2,101
========================= ========================== =============== =============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
TREEV, INC.
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six months ended June 30,
2000 1999
------------------ ------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (5,613) $ (3,307)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 1,182 1,124
Other non-cash interest fees 510 82
Changes in assets and liabilities:
Accounts and notes receivable 2,631 516
Inventories 398 344
Prepaid expenses and other (389) (83)
Accounts payable (146) 606
Accrued expenses (123) (896)
Deferred revenue 1,421 (1,776)
------------------ ------------------
Net cash used in operating activities (129) (3,390)
------------------ ------------------
Cash flows from investing activities:
Software development costs (791) (850)
Purchases of fixed assets (634) (262)
Cash received from business divestitures and related costs 183 196
------------------ ------------------
Net cash used in investing activities (1,242) (916)
------------------ ------------------
Cash flows from financing activities:
Proceeds from issuance of common stock, net 289 774
Cash dividends paid on preferred stock - (337)
Proceed from issuance of subordinated notes 2,000 2,150
Redemption of convertible notes - (200)
Borrowings from line of credit 13,347 8,029
Repayments of line of credit (14,403) (5,927)
Principal payments on capital lease obligations and debt (31) (87)
------------------ ------------------
Net cash provided by financing activities 1,202 4,402
------------------ ------------------
Net (decrease) increase in cash and cash equivalents (169) 96
Cash and cash equivalents at beginning of year 1,886 1,645
------------------ ------------------
Cash and cash equivalents at June 30, $ 1,717 $ 1,741
================== ==================
Supplemental Cash Flow Information:
Interest paid $ 250 $ 67
================== ==================
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
TREEV, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 and 1999
(In thousands, except share and per share amounts)
(Unaudited)
1. BASIS OF PRESENTATION
The unaudited financial statements presented herein have been prepared in
accordance with the instructions to Form 10-Q and should be read in conjunction
with the financial statements and notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1999, which include
information and note disclosures not included herein. In the opinion of
management all adjustments, which include only those of a normal recurring
nature, necessary to fairly present the Company's financial position, results of
operations and cash flows have been made to the accompanying financial
statements. The results of operations for the six-month period ended June 30,
2000 may not be indicative of the results that may be expected for the year
ending December 31, 2000.
2. ISSUANCE OF SUBORDINATED NOTES
During the second quarter of 2000, the Company issued Subordinated Promissory
Notes (the "Promissory Notes") due October 1, 2000, totaling $2 million and
bearing interest of 13.5%. The Promissory Notes are subordinated to the
Company's revolving line of credit and are collateralized by all of the
Company's accounts receivable, inventory, equipment, general intangibles, and
other personal property assets. Interest payments are due monthly and the
Promissory Notes may be prepaid at any time without premium or penalty. CE
Computer Equipment AG is the lender of the Promissory Notes.
3. ISSUANCE OF COMMON STOCK
During the first quarter of 2000, all 4,000 outstanding shares of Series M Stock
were converted into 1,177,219 shares of Common Stock.
During first quarter of 2000, all 1,000 outstanding shares of Series M1 Stock
were converted into 337,719 shares of Common Stock.
During the first and second quarters of 2000, the Company issued 192,172 shares
of Common Stock attributable to exercises of previously granted stock options
and warrants.
During the first quarter of 2000, the Company issued 15,706 shares of Common
Stock under the Company's Employee Stock Purchase Plan ("the Plan"). Employees
can choose to have up to 10% of their annual earnings withheld to purchase the
Company's Common Stock. Under the terms of the Plan, there are two six-month
offering periods beginning on January 1st and July 1st of each year during which
employees can participate. The purchase price is determined by taking 85% of the
lower of (a) the average of the high and low market prices on the offering
commencement date and (b) the average of the high and low market prices on the
7
<PAGE>
offering termination date. The terms of the Plan require that the purchaser hold
the shares purchased under the Plan for a minimum of six months from the date
the offering period ends.
During the second quarter of 2000, the Company issued 107,408 shares of Common
Stock as quarterly dividends to the shareholders of the Company's Series A
Cumulative Convertible Preferred Stock.
4. BUSINESS SEGMENTS
The Company's reportable segments are strategic business units that sell its
products and services to a wide variety of customers throughout the United
States. The products segment includes sales of software licenses of the
Company's TREEV Suite of document management software and computer equipment.
The services segment includes sales of software maintenance contracts,
installation, training, and customization. In addition, corporate related items
and expenses not allocated to reportable segments are shown separately as
"Corporate."
The following table sets forth summarized financial information concerning the
Company's reportable segments for the periods ended June 30, 2000 and 1999 (in
thousands).
<TABLE>
<CAPTION>
Products Services Corporate Total
------------------- ------------------ ------------------ ----------------
2000
<S> <C> <C> <C> <C>
Revenues $4,315 $6,635 $ --- $10,950
Segment profit (loss) (973) (2,199) (1,969) (5,141)
1999
Revenues $7,040 $6,404 $ --- $13,444
Segment profit (loss) (442) (1,186) (1,633) (3,261)
</TABLE>
5. BUSINESS COMBINATIONS
The Company has entered into an Agreement and Plan of Merger dated as of
November 19, 1999 (the "Merger Agreement") with CE Computer Equipment AG, a
German corporation. CE Computer Equipment and the Company amended and restated
the Merger agreement as of May 8, 2000, to reflect that they no longer intend to
account for the transaction as a pooling of interests and expect that they will
account for the acquisition as a purchase transaction. Provided that certain
conditions are met, as set forth in the Merger Agreement, at the conclusion of
the merger, the Company will become a wholly owned subsidiary of CE Computer
Equipment. Under the terms of the Merger Agreement, CE Computer Equipment will
issue a total of 1,330,000 Ordinary Shares in the form of American Depositary
Shares ("ADSs") in exchange for the outstanding shares of the Company's Common
Stock and Preferred Stock and for the outstanding warrants and options for the
Company's Common Stock. The merger is subject to governmental and shareholder
approvals and customary closing conditions. Shareholders owning more than 33% of
the Company's Common Stock have agreed to vote their shares in favor of the
merger, which is expected to be completed in the third quarter of 2000.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statements and Certain Risk Factors
This "Management's Discussion and Analysis of Financial Condition and
Results of Operations" section of this Quarterly Report on Form 10-Q contains
certain forward looking statements that are subject to a number of risks and
uncertainties. In addition, the Company may publish or make forward looking
statements from time to time relating to such matters as anticipated financial
performance, business prospects and strategies, sales and marketing efforts,
technological developments, new products, research and development activities,
and similar matters. The Private Securities Litigation Reform Act of 1995
provides a safe harbor for forward-looking statements. In order to comply with
the terms of the safe harbor, the Company notes that a variety of factors could
cause the Company's actual results to differ materially from the anticipated
results or other expectations made in the Company's forward looking statements
in this Quarterly Report or elsewhere. Readers should carefully review the risk
factors described in other documents the Company files from time to time with
the Securities and Exchange Commission, specifically; any Current Reports on
Form 8-K. Some risks and uncertainties of the Company that should be considered
by the reader include:
The Company has had net losses in each period of its operations since
its inception, except for four quarters, and it had an accumulated deficit at
June 30, 2000, of $140 million. Although the Company expects improved operating
results in the future, there can be no assurances that the Company will not
experience adverse results of operations in the future.
The Company's securities are listed on the Nasdaq National Market which
requires companies to comply with certain listing and maintenance requirements.
In 1997, the Company fell below the requirement to maintain net tangible assets
of at least $4 million. The Company appealed to a Nasdaq Listing Qualifications
Panel, who allowed the Company to continue to trade on Nasdaq but required the
Company to have a minimum of $6 million in net tangible assets to ensure long
term compliance with the requirement. The Company achieved net tangible assets
in excess of $6 million at the end of 1997, and the Company has since that time
maintained net tangible assets over $4 million. As of June 30, 2000, the Company
again fell below the net tangible asset requirement. In the event that the
contemplated merger with CE Computer Equipment AG is not effected, the Company
will consider additional offerings of equity securities and/or further
reductions of operating expenses (such as travel, marketing, consulting and
salaries) to achieve compliance with the Nasdaq requirement. Although the
Company believes it can raise additional capital if necessary, there can be no
assurance that financing, if sought, will be available.
The computer industry, including the information access, document
management, imaging and optical disk storage segments, is highly competitive,
and is characterized by rapid and continuous technological change. The Company's
future profitability will depend on, among other things, market acceptance of
the Company's products and on the Company's ability to develop in a timely
fashion enhancements to existing products or new products. There can be no
assurance that the Company will be able to market successfully its current
products, develop and market enhancements to existing products or introduce new
products.
Impact of Year 2000
In prior years, the Company discussed the nature and progress of its
plans to become Year 2000 ready. In late 1999, the Company completed its
remediation and testing of systems. As a result of those planning and
implementation efforts, the Company experienced no significant disruptions in
mission critical information technology and non-information technology systems
and believes those systems successfully responded to the Year 2000 date change.
The Company is not aware of any material problems resulting from Year 2000
issues, either with its products, its internal systems, or the products and
services of third parties. The Company will continue to monitor its mission
critical computer applications and those of its suppliers and vendors throughout
the year 2000 to ensure that any latent Year 2000 matters that may arise are
addressed promptly.
9
<PAGE>
Year 2000 Information and Readiness Disclosure Act
The section captioned "Impact of Year 2000," as well as other
statements herein or otherwise relating to the Year 2000 issues, are "Year 2000
Readiness Disclosures" pursuant to the "Year 2000 Information and Readiness
Disclosure Act."
Results of Operations - Six months ended June 30, 2000 and 1999
Revenues. Total revenues were $11.0 million and $13.4 million
for the six months ended June 30, 2000 and 1999, respectively. The $2.5 million
decrease in revenue was the result of a decrease in product revenue of $2.7
million, or 39%, offset by an increase in service revenue of $200,000, or 4%.
The decrease in product revenue was attributable to postponed contracts from
prospective customers who have delayed implementation of new systems due to the
impending merger of the Company. The increase in service revenue was
attributable to increased staffing and continued management emphasis on the
professional services business.
Profit margins. Profit margins for product sales decreased 1%
for the six months ended June 30, 2000, compared to the same period in 1999, as
cost of products sold increased from 53% to 54% of sales. The decrease in
product sales margins from 47% to 46% was due to a decrease in hardware margin
contribution as a result of competitive pressures. Profit margins for service
sales increased 1% for the six months ended June 30, 2000, compared to the same
period in 1999, as the cost of services decreased from 65% to 64% of sales. The
increase in service sales margins from 35% to 36% was due the continued growth
of maintenance revenue and professional services business, which provided more
contribution towards its fixed costs.
Sales and marketing. Sales and marketing expenses were $5.4
million, or 49% of revenue, for the six months ended June 30, 2000, compared to
$5.1 million, or 38% of revenue, for the same period in 1999. The increase of
$300,000, or 5%, was the result of the development and implementation of a new
marketing strategy and corporate identity program, as well as increased trade
show and advertising costs.
General and administrative. General and administrative
expenses were $2.0 million, or 18% of revenue, for the six months ended June 30,
2000, compared to $1.6 million, or 12% of revenue, for the same period in 1999.
The increase of $400,000, or 21%, was due to increased Company operating
expenses related to merger costs, employee benefits, business taxes, legal fees,
rent and utilities.
Product development. The Company's expenditures on software
research and development activities for the six months ended June 30, 2000, were
$3.2 million, of which $1.1 million were capitalized and $2.1 million were
expensed. Research and development expenditures for the same period in 1999 were
$2.9 million, of which $800,000 were capitalized and $2.1 million were expensed.
The $300,000 increase in research and development expenditures was due to the
Company's continued development of new products and enhancements to existing
products to maintain the Company's competitive product and market position.
10
<PAGE>
Net loss. The Company's net loss for the six months ended
June 30, 2000, was $5.6 million as compared to $3.3 million for the comparable
period in 1999. The net loss increase of $2.3 million was due to the decrease in
revenue and the increases in sales and marketing and general and administrative
expenses as described above, as well as a $400,000 increase in interest expense.
Net loss applicable to Common Shares. The net loss applicable
to common shares includes adjustments for dividend amounts related to the
Company's preferred shares. The net loss applicable to common shares was $6.3
million, or $.41 per share, for the six months ended June 30, 2000, as compared
to $4.0 million or $.31 per share, for the comparable period in 1999. The
increase in net loss applicable to common shares is attributable to the increase
in net loss described above.
Results of Operations - Three months ended June 30, 2000 and 1999
Revenues. Total revenues were $5.9 million and $7.9 million
for the three months ended June 30, 2000 and 1999, respectively. The $2.0
million decrease in revenue was the result of a decrease in product revenue of
$1.9 million, or 42%, and a decrease in service revenue of $100,000, or 2%. The
decrease in product revenue was attributable to postponed contracts from
prospective customers who have delayed implementation of new systems due to the
impending merger of the Company. The decrease in service revenue was
attributable to the decreased product revenue during the period, which resulted
in lower installation and associated services revenue.
Profit Margins. Profit margins for product sales increased 2%
for the three months ended June 30, 2000, compared to the same period in 1999,
as cost of products sold decreased from 51% to 49% of sales. The increase in
product sales margins from 49% to 51% was primarily due to the increased sales
mix of software, which carries higher margins. Profit margins for service sales
decreased 4% for the three months ended June 30, 2000, compared to the same
period in 1999, as the cost of services increased from 63% to 67% of sales. The
decrease in service sales margins from 37% to 33% was due to the decreased
service revenues discussed above, which provided less contribution towards the
group's fixed costs.
Sales and marketing. Sales and marketing expenses were $2.9
million, or 48% of revenue, for the three months ended June 30, 2000, compared
to $2.7 million, or 34% of revenue, for the same period in 1999. The increase of
$200,000, or 5%, was the result of the development and implementation of a new
marketing strategy and corporate identity program, as well as increased trade
show and advertising costs.
General and administrative. General and administrative
expenses were $1.0 million, or 17% of revenue, for the three months ended June
30, 2000, compared to $900,000, or 11% of revenue, for the same period in 1999.
The increase of $100,000, or 18%, was due to increased Company operating
expenses related to merger costs, employee benefits, business taxes, legal fees,
rent and utilities.
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<PAGE>
Product development. The Company's expenditures on software
research and development activities in the three months ended June 30, 2000,
were $1.7 million, of which $500,000 were capitalized and $1.2 million were
expensed. Research and development expenditures for the same period in 1999 were
$1.5 million, of which $200,000 were capitalized and $1.3 million were expensed.
The $200,000 increase in research and development expenditures was due to the
Company's continued development of new products and enhancements to existing
products to maintain the Company's competitive product and market position.
Net loss. The Company's net loss for the three months ended
June 30, 2000, was $2.9 million as compared to $1.4 million for the comparable
period of 1999. The net loss increase of $1.5 million the first quarter of 2000
as compared to the same period in 1999 was due to the decrease in revenue and
the increases in sales and marketing and general and administrative expenses as
described above, as well as a $200,000 increase in interest expense.
Net loss applicable to Common Shares. The net loss applicable
to common shares includes adjustments for dividend amounts related to the
Company's preferred shares. The net loss applicable to common shares was $3.2
million, or $0.20 per share, for the three months ended June 30, 2000, as
compared to $1.7 million or $0.14 per share, for the comparable period in 1999.
The increase in net loss applicable to common shares is attributable to the
increase in net loss described above.
Liquidity and Capital Resources
As of June 30, 2000, the Company had $1.7 million in cash and cash
equivalents, as compared to $1.9 million in cash and cash equivalents at
December 31, 1999. Net working capital was $(3.4) million at June 30, 2000 and
$2.2 million at December 31, 1999. The Company's net tangible assets were $2.1
million and $7.4 million as of June 30, 2000 and December 31, 1999,
respectively.
For the six months ended June 30, 2000, the $200,000 decrease in cash
and cash equivalents resulted from $100,000 in cash used in operating activities
and $1.3 million in cash used in investing activities, offset by $1.2 million in
cash provided by financing activities.
The $100,000 used in operating activities arose primarily from the $5.6
million loss from operations, offset by the $1.4 million increase in deferred
revenue, $2.6 million decrease in accounts and notes receivable and the $1.2
million in depreciation and amortization charges. The $1.3 million used in
investing activities arose primarily from capitalized software development costs
and the purchases of fixed assets. The $1.2 million provided by financing
activities arose primarily from the $2 million proceeds from the issuance of the
promissory note and $200,000 proceeds from the issuance of common stock, offset
by the $1.1 million in repayments of the Company's revolving line of credit.
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<PAGE>
During the first quarter of 1999, the Company secured a $5 million
revolving line of credit from a commercial bank. The Company can draw up to $5
million on the line of credit for working capital needs based on 80% of its
eligible receivables. The line of credit bears interest at a rate equal to prime
plus 2%. The line of credit shall remain in effect until September 30, 2000, and
automatically renews for successive additional terms of one year each. The line
of credit is collateralized by all of the Company's accounts receivable,
inventory, equipment, general intangibles, and other personal property assets.
Although the Company expects improved operating results in the future,
there can be no assurances that the Company will not experience adverse results
of operations in the future. The Company believes that its existing cash, cash
flows from operations and availability under its line of credit should provide
sufficient resources to fund its activities through the next twelve months and
to maintain net tangible assets of at least $4.0 million, which is required for
continued inclusion of the Company's securities on the Nasdaq National Market.
Anticipated cash flows from operations are largely dependent upon the Company's
ability to achieve its sales and gross profit objectives for its TREEV suite of
products. If the Company is unable to meet these objectives, it will consider
alternative sources of liquidity, such as additional offerings of debt or equity
securities and/or further reductions of operating expenses (such as travel,
marketing, consulting and salaries).
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not involved in any legal proceedings, other than those
proceedings and matters incidental to the business.
Item 2. Changes in Securities
During the first quarter of 2000, the Company issued 15,706 shares of
Common Stock under the Company's Employee Stock Purchase Plan.
During the first quarter of 2000, all 4,000 outstanding shares of
Series M Stock were converted into 1,177,219 shares of Common Stock.
During the first quarter of 2000, all 1,000 outstanding shares of
Series M1 Stock were converted into 337,719 shares of Common Stock.
During the first and second quarters of 2000, the Company issued
192,172 shares of Common Stock attributable to exercises of previously granted
stock options and warrants.
During the second quarter of 2000, the Company issued 107,408 shares of
Common Stock as quarterly dividends to the shareholders of the Company's Series
A Cumulative Convertible Preferred Stock.
Item 3. Changes Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
27.1 Financial data schedule
(b) Reports on Form 8-K.
Form 8-K filed on May 9, 2000, to report that the Company had
entered into an amended and restated Agreement and Plan of Merger dated May 8,
2000, with CE Computer Equipment AG.
14
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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 hereunto duly authorized.
TREEV, INC.
(Registrant)
Date: August 14, 2000 By /s/ Thomas A. Wilson
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Thomas A. Wilson
President and Chief Executive Officer
Date: August 14, 2000 By /s/ Brian H. Hajost
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Brian H. Hajost
Executive Vice President, Finance and Corporate
Development
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