U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31,1999
[ ] Transition Report Under Section 13 or 15(d) of the
Exchange Act
For the transition period from __________ to __________
Commission file number: 0-20102
CELERITY SOLUTIONS, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 52-1283993
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation)
270 Bridge Street, Suite 301
Dedham, MA 02026
(Address of principal executive office)
(781) 329-1900
Issuer's telephone number
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:
Number Outstanding Shares
Title of Class as of February 12, 2000
-------------- -----------------------
Common Stock, $.10 Par Value 9,592,886
Transitional Small Business Disclosure Format: Yes _____ No __X__
Exhibit Index on Page 12
Page 1 of 13
<PAGE>
CELERITY SOLUTIONS, INC.
DECEMBER 31, 1999
FORM 10-QSB
TABLE OF CONTENTS
<TABLE>
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Page
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PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Consolidated Financial Statements (unaudited)
Condensed Consolidated Balance Sheets as of December 31, 1999
and March 31,1999 (unaudited) 3
Condensed Consolidated Statements of Operations for the three
and nine months ended December 31, 1999 and 1998 (unaudited) 5
Condensed Consolidated Statements of Cash Flows for the
nine months ended December 31, 1999 and 1998 (unaudited) 6
Notes to Condensed Consolidated Financial Statements 7
ITEM 2. Management's Discussion and Analysis, and Plan of
Operation 8
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 12
ITEM 2. Changes in Securities 12
ITEM 3. Defaults Upon Senior Securities 12
ITEM 4. Submission of Matters to a Vote of Security Holders 12
ITEM 5. Other Information 12
ITEM 6. Exhibits and Reports on Form 8-K 12
Signatures 13
</TABLE>
Page 2 of 13
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Celerity Solutions, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
December 31 March 31
1999 1999
-----------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 209,993 $ 401,376
Short-term investments 13,557 13,251
Accounts receivable, net 1,011,889 2,774,327
Income taxes receivable - 42,301
Notes receivable 98,711 98,711
Notes and guaranteed royalties receivable - 12,500
Prepaid expenses and other current assets 136,443 125,915
-----------------------------
Total current assets 1,470,593 3,468,381
Property and equipment, at cost 1,647,271 1,593,133
Less accumulated depreciation and amortization (1,213,053) (970,149)
-----------------------------
Net property and equipment 434,218 622,984
Capitalized software, net 710,259 785,923
Goodwill, net 889,121 995,017
Other long-term assets 113,134 84,057
-----------------------------
Total assets $ 3,617,325 $5,956,362
=============================
</TABLE>
Page 3 of 13
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Celerity Solutions, Inc.
Condensed Consolidated Balance Sheets (continued)
(Unaudited)
<TABLE>
<CAPTION>
December 31 March 31
1999 1999
--------------------------------
<S> <C> <C>
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued liabilities $ 1,067,062 $ 2,437,361
Current portion of notes payable to related parties 426,099 593,318
Short term notes payable - 199,186
Unearned revenue and other current liabilities 178,448 391,684
-------------------------------
Total current liabilities 1,671,609 3,621,549
Notes payable to related parties net of current portion 719,952 1,019,952
Deferred rent 59,031 62,406
--------------------------------
Total liabilities 2,450,592 4,703,907
Shareholders' equity:
Common stock, $.10 par value 959,289 959,289
Additional paid-in capital 19,038,245 19,038,245
Accumulated deficit (16,904,707) (16,818,985)
--------------------------------
3,092,827 3,178,549
Less treasury stock, at cost (1,926,094) (1,926,094)
--------------------------------
Total shareholders' equity 1,166,733 1,252,455
-------------------------------
Total liabilities and shareholders' equity $ 3,617,325 $ 5,956,362
================================
</TABLE>
Page 4 of 13
<PAGE>
Celerity Solutions, Inc.
Condensed Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31 December 31
1999 1998 1999 1998
--------------------------------------------------------------------
------Unaudited------ ------Unaudited------
<S> <C> <C> <C> <C>
Revenues:
Services $ 1,054,219 $ 2,236,310 $ 4,558,015 $ 6,359,623
Software licenses 293,674 346,577 1,344,328 1,638,762
Hardware and other 44,377 2,508 59,372 1,022,989
--------------------------------------------------------------------
Total revenue 1,392,270 2,585,395 5,961,715 9,021,374
Cost of revenues:
Services 903,768 1,427,901 3,079,598 4,423,305
Hardware and related 15,000 5,594 42,500 873,871
Amortization of capitalized software 52,497 43,266 157,491 129,798
--------------------------------------------------------------------
Total cost of revenues 971,265 1,476,761 3,279,589 5,426,974
--------------------------------------------------------------------
Gross margin 421,005 1,108,634 2,682,126 3,594,400
Operating expenses:
Research and development 128,806 255,408 1,069,133 818,373
General and administrative 284,630 582,905 930,881 1,888,230
Sales and marketing 213,419 509,322 725,600 1,348,999
Amortization of goodwill 35,299 34,770 105,896 104,313
Restructuring expense (81,783) -- (81,783) --
--------------------------------------------------------------------
Total operating expenses 580,371 1,382,405 2,749,727 4,159,915
Operating loss (159,366) (273,771) (67,601) (565,515)
Other income (expense):
Interest and other income 35,214 30,404 39,667 118,292
Interest expense (20,378) (56,383) (57,788) (180,833)
--------------------------------------------------------------------
Loss before income taxes (144,530) (299,750) (85,722) (628,056)
Income tax benefit -- 69,250 -- 122,250
--------------------------------------------------------------------
Net loss $ (144,530) $ (230,500) $ (85,722) $ (505,806)
====================================================================
Loss per common share:
Net loss per share $ (0.02) $ (0.03) $ (0.01) $ (0.06)
====================================================================
Weighted average shares outstanding 9,592,886 8,035,189 9,592,886 8,023,616
====================================================================
</TABLE>
Page 5 of 13
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Celerity Solutions, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
December 31
1999 1998
----------------------------
<S> <C> <C>
Operating Activities
Net loss $ (85,722) $ (505,806)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Sale oflsoftwaretlicensecinsexchangehforenotesnpayableytolrelatedlpartiesrties (400,000) --
Depreciation and amortization of property and equipment 244,090 241,157
Amortization of goodwill and developed software 263,387 234,110
Changes in operating assets and liabilities unsold:
Accounts receivable 1,762,438 (1,416,292)
Prepaid expenses and other current assets (10,528) (37,690)
Short and long-term notes receivable 12,500 914,093
Other long-term assets (29,077) (53,232)
Accounts payable and accrued liabilities (1,370,299) 506,668
Income tax receivable (payable) 42,301 (148,950)
Short-term notes to related parties (199,186) (570,710)
Unearned revenue, deferred rent and other current liabilities (216,611) (240,272)
----------------------------
Net cash provided by (used in) operating activities 13,293 (1,076,924)
Investing Activities
(Purchase) proceeds from short term investments (306) 983,834
Purchase of property and equipment (55,324) (298,652)
Capitalized software costs (81,827) (160,012)
----------------------------
Net cash (used in) provided by investing activities (137,457) 525,170
Financing Activities
Proceeds from sale of stock -- 18,603
Notes payable to related parties, net (67,219) --
----------------------------
Net cash (used in) provided by financing activities (67,219) 18,603
Net decrease in cash and cash equivalents (191,383) (533,151)
Cash and cash equivalents at beginning of period 401,376 1,347,246
----------------------------
Cash and cash equivalents at end of period $ 209,993 $ 814,095
============================
</TABLE>
Page 6 of 13
<PAGE>
CELERITY SOLUTIONS, INC.
1. Statement of Information Provided
The accompanying unaudited condensed consolidated financial statements, which
are for interim periods, have been prepared in accordance with Form 10-QSB
instructions and do not include all disclosures provided in the annual
consolidated financial statements. In the opinion of management, all adjustments
consisting of normal recurring accruals and adjustments considered necessary for
a fair presentation have been included. These unaudited, condensed,
consolidated, financial statements should be read in conjunction with the
consolidated financial statements and the footnotes thereto contained in the
Annual Report on Form 10-KSB for the fiscal year ended March 31, 1999 of
Celerity Solutions, Inc. (the "Company"), as filed with the Securities and
Exchange Commission. These results have been determined on the basis of
generally accepted accounting principles and practices applied consistently with
those used in the preparation of the Company's March 31, 1999 Annual Report on
Form 10-KSB. The March 31, 1999 balance sheet was derived from audited
consolidated financial statements, but does not include all disclosures required
by generally accepted accounting principles.
2. Income (loss) Per Share
The following table sets forth the computation of basic and diluted income
(loss) per share:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31 December 31
1999 1998 1999 1998
-------------------------- --------------------------
<S> <C> <C> <C> <C>
Numerator:
Net loss $ (144,530) $ (230,500) $ (85,722) $ (505,806)
Numerator for loss per common share - assuming dillution $ (144,530) $ (230,500) $ (85,722) $ (505,806)
-------------------------- --------------------------
Denominator:
Denominator for income (loss) per common
share, weighted-average shares outstanding 9,592,886 8,035,189 9,592,886 8,023,616
Effect of Dilutive securities: * * * *
Denominator for diluted loss per share- Adjusted
weighted-average shares 9,592,886 8,035,189 9,592,886 8,023,616
-------------------------- --------------------------
Loss per common share $ (0.02) $ (0.03) $ (0.01) $ (0.06)
========================== ==========================
Loss per common share - assuming dilution $ (0.02) $ (0.03) $ (0.01) $ (0.06)
========================== ==========================
</TABLE>
* Options and warrants to purchase shares of common stock were excluded from the
calculation of diluted net loss per share as the effect of their inclusion would
be antidilutive.
Page 7 of 13
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CELERITY SOLUTIONS, INC.
3. Related Party Transactions
During March and July 1999, two notes payable to related parties over $20,000.00
were renegotiated as follows:
The note payable to Mr. Carr, with a balance of $1,025,798 at March 31, 1999,
including imputed interest to be paid, has been reduced by $200,000 in the
quarter ended September 30, 1999 for the sale of a source code license to Mr.
Carr related to the CSTI software. The Mr. Carr is prohibited from transferring
this license to a third party by a non-compete agreement which extends 12 months
from termination of employment. The note payable had been reduced by the
conversion of $300,000 of the debt into equity at $0.40 per share and reflected
in the March 31, 1999 results. The remaining $538,048 is to be paid over 42
months at an interest rate of 8% with monthly payments of approximately $14,681.
Another note payable to Mr. Ringuette, with a balance of $439,960, including
accrued interest, has been reduced by $200,000 in the quarter ended September
30, 1999 for the sale of a source code license to the Mr. Ringuette for the
warehouse management software acquired in the Somerset acquisition. The balance
of $239,960 is to be paid over 36 months at 8% with monthly payments of $7,494.
These payments are offset by royalty fees earned from a 5-year royalty
agreement. If there is a balance remaining at the end of the 5-year agreement,
the Company must pay that balance.
During November 1999 Mr. Ringuette and Mr. Carr each loaned an additional
$50,000 to the Company. The proceeds were used to partially fund a $125,000
payment to Ms. Luda Kopekina, the former CEO of Celerity. The payment was made
as part of a settlement agreement reached with Ms. Kopekina regarding a
severance claim. These loans were added to the outstanding balance on the notes
held by Mr. Ringuette and Mr. Carr described above.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion should be read in conjunction with the condensed
unaudited financial statements included elsewhere within this quarterly report.
Fluctuations in annual and quarterly operating results may occur as a result of
certain factors, such as the size and timing of customer contracts and
competition. Due to such fluctuations, historical results and percentage
relationships are not necessarily indicative of the results for any future
period. Statements, which are not historical facts contained in this report, are
forward-looking statements that involve risks and uncertainties that could cause
actual results to differ materially from projected results. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
reflect management's analysis only as of the date hereof. The Company undertakes
no obligation to publicly release the results of any revision to these
forward-looking statements, which may be made to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.
Business Developments
During March 1999 through July 1999, all notes payable to related parties over
$20,000 were renegotiated. This renegotiation resulted in the reclassification
of $1,293,281 of current liabilities to long term, with $700,000 being
transferred in the form of debt conversions into equity and revenue. All payment
schedules also include provisions to defer payments up to 6 months. This
deferral of 6 months of principal payments results in $205,000 of current
liabilities deferred on a roll forward basis. This deferral includes note
payments as well as severance pay outs of $80,000 scheduled over the next year,
which is reflected in accrued liabilities and can also be deferred. As of
December 31, 1999, five note payments have been deferred. The severance payments
have not been deferred. The final severance payment is due in February of 1999.
Page 8 of 13
<PAGE>
CELERITY SOLUTIONS, INC.
Revenues
Revenues from services decreased $1,182,091, or 53%, and $1,801,608, or
28%, for the three month and nine month periods ended December 31, 1999
respectively, versus the same periods in 1998. These decreases were attributable
to the completion of several projects that incurred non-billable time during the
second quarter and the delay by the Company in the start of new projects.
Management expects that as a result of workforce reductions, service revenues
for the current fiscal year will decrease below fiscal 1999 levels.
Revenues from software license sales decreased $52,903 or 15%, and
decreased $241,584, or 18%, for the three-month and nine-month periods ended
December 31, 1999 respectively, versus the same periods in 1998. Management
believes that license revenues continue to trail last year as a result of
delayed sales decisions of customers related to the year 2000 changeover.
Revenues from hardware and related sales increased $41,869 and decreased
$963,617 for the three and nine-month periods ended December 31, 1999
respectively. Management believes that the nine month decrease is attributable
to the completion in 1998 of two large hardware sales. Hardware sales fluctuate
with the installation of new systems where the customer requires that the
Company's software be integrated with hardware. Hardware sales are not expected
to be significant in fiscal 2000.
The level of net sales realized by the Company in any quarter is
principally dependent on the portion of projects completed. The purchase of
supply chain and warehouse management solutions requires a significant
commitment of capital and resources on the part of the customer, the sales
cycles are long and average from six to nine months. As a result, revenue is
subject to many risks such as budgetary cycles of customers, changes in the
business of a customer and overall economic trends that are not controllable by
the Company. Quarterly results have varied significantly in the past and are
likely to fluctuate in the future as a result of the timing of new orders,
product development expenditures, and the number and timing of new product
completions. Significant portions of the Company's operating expenses are fixed
and planned expenditures in any given quarter are based on sales and revenue
forecasts. Accordingly, if net sales do not meet the Company's expectations in
any given quarter, operating results and financial condition could be adversely
and disproportionately affected. As a result of these and other factors, the
Company's results of operations and financial condition for any period are
inherently difficult to predict. The Company expects that revenues in fiscal
2000 will decrease below those reported in fiscal 1999, due to the year 2000
change over slowing purchase decisions for customers and potential customers of
the Company along with a decrease in service billings associated with the work
force reductions.
Cost of Revenues
Cost of services are incurred in connection with the sale of supply chain
and warehouse management software. Cost of services consists of costs primarily
associated with consulting and implementation services that are sold as part of
a total supply chain and warehouse management solution, and costs associated
with providing support to customers. These costs decreased $524,133, or 37%, and
$1,343,707, or 30%, during the three and nine-month periods ended December 31,
1999 respectively, versus the same periods in 1998. Cost of services as a
percent of revenue from services increased from 64% to 86% and decreased from
70% to 68% for the three and six month periods ended December 31,1999
respectively, versus the same periods in 1998. The Company has decreased its
consulting staff and subcontractors and deployed employees from R&D to work on
service related revenues as a result of decreased revenue expectations for the
current fiscal year.
Cost of sales from hardware and related sales increased $9,406 and
decreased $831,371 for the three and nine month periods ended December 31, 1999
respectively, versus the same periods in 1998. This decrease is attributable to
the completion of two large hardware sales during 1998. Hardware sales fluctuate
with the installation of new systems where the customer requires that the
Company's software be integrated with hardware. Hardware sales are not expected
to be significant in fiscal 2000.
Research and Development
Research and development expenses decreased $126,602, or 50%, and increased
$250,760, or 31%, during the three and nine month periods ended December 31,
1999 respectively, versus the same period in 1998. Development increased during
fiscal 1999 as the Company accelerated the project of integrating the supply
chain and warehouse management products. This effort has reached technological
feasibility, however, there can be no assurances that the Company will be able
to develop and market new products or product enhancements that respond to the
technological change or evolving standards, that new products will be released
on schedule, or that released products will achieve any degree of market
acceptance.
Page 9 of 13
<PAGE>
CELERITY SOLUTIONS, INC.
General and Administrative
General and administrative expenses decreased $298,275, or 51%, and
$957,349, or 51%, during the three and nine-month periods ended December 31,
1999 respectively, versus the same periods in 1998. These decreases are due to
the restructuring that occurred during March 1999.
Sales and Marketing
Sales and marketing expenses decreased $295,903, or 58%, and $623,399, or
46%, during the three and nine month periods ended December 31, 1999
respectively, versus the same periods in 1998. This item includes personnel
related costs, as well as those costs related to facilities, travel, trade
shows, advertising and promotions. These decreases are due to the restructuring
that occurred during March 1999.
Liquidity and Capital Resources
The Company's primary sources of liquidity are cash, and cash equivalents.
During the nine months ended December 31, 1999, cash and cash equivalents
decreased $191,383, or 48%, to $209,993.
Accounts receivable decreased $1,762,438, or 64%, to $1,011,889 for the
nine months ended December 31, 1999. Of the total decrease, approximately
$350,000 resulted from the settlement of a disputed, past due balance with one
major customer. The Company can attribute additional decreases to the decrease
in revenues for the nine months ended December 31, 1999 and the improved cash
collection effort.
Other long term assets increased $29,077,or 35% for the nine months ended
December 31, 1999. This increase was due to a $54,827 rent deposit related to a
new lease signed for the Company's corporate offices in Dedham MA. This deposit
was partially offset by a $25,000 decrease in the lease deposit for the
Company's Irvine California facility.
Accounts payable and accrued liabilities decreased $1,370,299, or 56%, to
$1,067,062 for the nine months ended December 31, 1999. The Company had slowed
payments with several vendors in the last two quarters of fiscal 1999. Most of
these vendors were brought up-to-date during the first nine months of fiscal
2000.
Notes payable to related parties decreased $300,000 for the nine months
ended December 31, 1999. The Company reduced notes payable to related parties by
$400,000 in a non-cash transaction, as a result of source code sales to Paul
Carr and Luc Ringuette in the amount of $200,000 each. The Company increased
notes payable to related parties by $100,000 as the result of an additional
$50,000 each loaned to the Company by Paul Carr and Luc Ringuette during the
three month period ended December 31, 1999. The Company has the option of paying
interest only on the notes for six months. The Company has exercised this
interest only option for five months during the nine months ended December 31,
1999.
Short-term notes payable has decreased $199,186 for the nine months ended
December 31, 1999. The Company paid the balance due to Imperial Bank under the
terms of the Company's factoring agreement. The Company was notified in August
that Imperial Bank will not fund additional advances under this agreement until
Celerity provides Imperial Bank with copyright documentation for Celerity's
software products required under the security provisions of the agreement. The
failure of Imperial Bank to fund future advances on receivables under this
agreement is not expected to have an adverse effect on the Company's operations.
Unearned revenue decreased $213,236 for the nine months ended December 31,
1999, reflecting the net recognition of support maintenance fees that are
greater than the receipts taken in on new yet-to-be recognized support fees.
The Company believes its existing cash and cash equivalent balances,
short-term investment balances, and cash generated from operations will satisfy
the Company's working capital and capital expenditure requirements for at least
the next twelve months.
The Company does not currently have plans for major capital expenditures,
but does have $1,146,051 in notes payable to related parties from the
acquisitions of SAI and CSTI. These notes are payable in various amounts ending
June 2002. The Company believes that existing cash and cash equivalent balances,
short-term investment balances and potential cash flow from operations will
satisfy this long-term liability.
Looking forward to fiscal 2001, the Company expects sales to increase as
decisions delayed by the year 2000 change over are made. The Company is
investigating as to whether an additional investment in sales and marketing will
increase the rate and amount of new sales. However, there can be no assurances
that the Company will make
Page 10 of 13
<PAGE>
CELERITY SOLUTIONS, INC.
investments in additional sales and marketing areas. Any material investment
would require the Company to obtain additional sources of financing.
Year 2000 Compliance Issues
Many older computer systems and software products in use today were
programmed with a two -digit date code field. These systems or software products
need to be modified, upgraded or replaced to distinguish the Year 2000 in order
to avoid the possibility of erroneous results or system failures. The effects of
this issue and the efforts by companies to address it are uncertain. The risk
for Celerity exists in four areas: systems used by the Company to run its
business, systems used by the Company's vendors, potential warranty or other
claims from the Company's customers, and the potential reduced spending by
others companies as a result of significant information systems spending on Year
2000 issues.
The Company has inventoried and evaluated its internal systems, equipment,
and facilities and established a schedule to replace or upgrade systems that are
known to be Year 2000 non-compliant. The Company utilizes outside providers for
services such as payroll processing and 401(k) benefit administration, which may
or may not be Year 2000 compliant. The Company has requested and received from a
majority of its vendors written confirmation of their knowledge of or plans for
Year 2000 compliance. The Company has taken steps to make sure that its internal
systems will function in the year 2000, but failure of any critical
technological component to operate properly may have an adverse impact on
business operations or require the Company to incur unanticipated expenses to
remedy any problems. The Company does not expect Year 2000 related compliance
costs to be material, but can not assure that such costs will be
inconsequential. The Company has not identified alternative contingency plans,
but will do so as it continues to assess the Year 2000 risk.
The Company's software products have been modified to be Year 2000
compliant. However, the Company's products are complex and might contain
undetected errors or failures even though intended to be Year 2000 compliant.
There can be no assurance that the Company's software products contain or will
contain all necessary date code changes or that errors will not be found in new
products or product releases, resulting in loss of or delay in product
acceptance. If the Company is unable, or is delayed in its efforts to make the
necessary date code changes, there could be a material adverse effect upon the
Company's business, operating results, financial condition and cash flows.
Many companies are expending significant resources to modify or upgrade
their existing software and hardware for Year 2000 compliance. This might reduce
funds available to purchase other software products such as the Company's supply
chain management software. Additionally, Year 2000 problems in a customer's
other software products might significantly limit the customer's realized
benefit from the supply chain management software. These events could result in
a material adverse effect on the Company's business, operating results,
financial condition and cash flows.
Future Operating Results (Statutory Safe Harbor Disclosure)
This report contains forward-looking statements. For this purpose, any
statement, contained herein that are not statements of historical fact may be
deemed to be forward-looking statements. Without limiting the foregoing, the
words "believes", "anticipates", "plans", "expects", and similar expressions are
intended to identify forward-looking statements.
Numerous factors may affect the Company's business and its results of
operations. These factors include the potential for significant fluctuations in
quarterly results, dependence on new products and rapid technological change,
risk of software errors or failures, the level and intensity of competition,
lack of product diversification, dependence on certain distribution channels,
proprietary intellectual property rights, limited operating history in the
supply chain management software industry, integration of acquisitions, loss of
key employees, lack of profitability, sustaining a public trading market,
absence of dividends, and international operations. For a discussion of these
and other factors that may affect the Company's future results, see the Form
10-KSB for March 31, 1999 filed by the Company with the SEC in July 1999.
Page 11 of 13
<PAGE>
CELERITY SOLUTIONS, INC.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See the Companies 10QSB for the period ended June 30, 1999, filed on August 23,
1999.
The Company settled a claim filed by Ms. Luda Kopekina the former President and
CEO of the Company, related to a severance dispute. Under the terms of the
settlement Ms. Kopekina received a payment of $120,000 in November, and is
scheduled to receive an additional $100,000 in 12 monthly payments of $8,750
beginning January 2000.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On September 10, 1999 the registrant held its 1999 Annual Meeting of
Stockholders at the Company's corporate offices located at 270 Bridge Street
Suite 301, Dedham, Massachusetts. The following voting matters were approved at
the meeting:
<TABLE>
<CAPTION>
Against/ Broker
For Withheld Abstain Non-Vote
--- -------- ------- --------
<S> <C> <C> <C> <C>
1. Election of five persons to the Board of Directors
to hold office until the next Annual Meeting or until
their successors have been elected and qualified or
their earlier resignation or removal:
Luc Ringuette 6,042,898 41,525 -- --
Paul Carr 6,040,958 43,465 -- --
Harold H. Leach Jr. 6,042,898 41,525 -- --
Richard J. Santigati 6,042,898 41,525 -- --
Edward B. Merino 6,042,898 41,525 -- --
2. Approval of Amendment to Celerity Solutions, Inc.'s
Amended and Restated 1992 Non-Qualified Stock
Option Plan for Non-Employee Directors increasing
compensation for director services for the director of
the Compensation and Audit committees from 20,000
stock options to 30,000 stock options. 5,910,187 122,851 34,385 17,000
3. Approval of Ernst & Young LLP as Celerity Solutions, Inc.
auditors for fiscal 2000. 6,069,823 9,507 5,093
</TABLE>
ITEM 5. OTHER INFORMATION
Not applicable.
Page 12 of 13
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.1 Dedham, MA office lease agreement
10.2 Irvine, CA office lease amendment
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
none
SIGNATURE
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.
CELERITY SOLUTIONS, INC.
------------------------
(Registrant)
Date: February 12, 1999 /s/Tricia McGillicudy
-------------------------------------------
Tricia McGillicudy
Chief Accountant (Principal Accounting
Officer)
Date: February, 1999 /s/Paul Carr
-------------------------------------------
Paul Carr
President & Chief Financial Officer
Page 13 of 13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONDENSED
CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 1999 AND THE CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED DECEMBER 31, 1999 FOUND ON
PAGES 3-5 OF THE COMPANY'S FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> OCT-1-1999
<PERIOD-END> DEC-31-1999
<CASH> 209,993
<SECURITIES> 13,557
<RECEIVABLES> 1,170,013
<ALLOWANCES> (158,124)
<INVENTORY> 0
<CURRENT-ASSETS> 1,470,593
<PP&E> 1,647,271
<DEPRECIATION> (1,213,053)
<TOTAL-ASSETS> 3,617,325
<CURRENT-LIABILITIES> 1,671,609
<BONDS> 0
0
0
<COMMON> 959,289
<OTHER-SE> 19,038,245
<TOTAL-LIABILITY-AND-EQUITY> 3,617,325
<SALES> 0
<TOTAL-REVENUES> 5,961,715
<CGS> 3,279,589
<TOTAL-COSTS> 6,047,437
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 57,788
<INCOME-PRETAX> (85,721)
<INCOME-TAX> 0
<INCOME-CONTINUING> (85,721)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (85,721)
<EPS-BASIC> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
