SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934
For the quarterly period ended June 30, 1997
Commission file number 1-10751
OBJECTSOFT CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 22-3091075
(State of incorporation) (IRS Employer ID number)
CONTINENTAL PLAZA III, 433 HACKENSACK AVENUE
HACKENSACK, NJ 07601
(Address of principal executive offices) (Zip Code)
(201)343-9100
(Registrant'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 preceding 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__.
(Applicable only to Corporate Issuers)
Indicate the number of shares outstanding of each of the
issuer's classes of common equity, as of the last practicable
date.
Class August 12, 1997
Common Stock, $.0001 par value 4,081,676
Redeemable Class A Warrants 1,366,050
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OBJECTSOFT CORPORATION
INDEX
Page #
Part I. Financial Information
Item 1.Financial statements
Condensed Balance Sheets- 1
June 30, 1997 and December 31, 1996
Condensed Statements of Operations
Three Months and the Six months Ended
June 30, 1997 and 1996 2
Condensed Statements of Cash Flows
Three Months and the Six months Ended
June 30, 1997 and 1996 3
Notes to Condensed Financial Statements 4
Item 2.Management's Discussion and Analysis
of Financial Condition and
Results of Operations 6
Part II Other Information
Item 1.Legal proceedings 9
Item 4.Submission of matters to a vote of security
holders 9
Item 5.Other information 9
Item 6.Exhibits and reports on Form 8-K 9
Signatures 11
Exhibit index 12
Exhibit Exhibit 27, Article 5 Financial
Data Schedule 13
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PART I Financial information
<TABLE>
OBJECTSOFT CORPORATION
CONDENSED BALANCE SHEETS -- JUNE 30, 1997 (Unaudited)
AND DECEMBER 31, 1996
<CAPTION>
June 30, Dec 31,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $16,020 $4,039,358
Marketable securities 2,123,982
Accounts receivable 201,769 5,900
Notes and loan receivable-
officer shareholder 440,000
Loan receivable - InteractiVisions, Inc 100,000
Prepaid expenses and other
current assets 144,074 180,463
------------ ------------
Total current assets 3,025,845 4,225,721
Equipment, at cost, net of
accumulated depreciation 449,219 457,848
Capitalized software and courseware 128,134 168,118
Other assets 100,685 130,474
------------ ------------
T O T A L $3,703,883 $4,982,161
============ ============
LIABILITIES
Current liabilities
Current portion of obligations
under capitalized leases $46,779 $45,740
Accounts payable 131,228 57,309
Accrued liabilities 87,171 101,872
Other current liabilities 12,981 9,785
------------ ------------
Total current liabilities 278,159 214,706
------------ ------------
Obligations under capitalized leases 14,008 38,335
------------ ------------
STOCKHOLDERS' EQUITY
Common stock, $.0001 par value; authorized
20,000,000 shares; issued and
outstanding 4,120,676 shares as of
June 30, 1997 and 4,022,676 shares
as of December 31, 1996 408 402
Additional paid-in capital 6,941,862 6,878,868
Accumulated deficit (3,530,554) (2,150,150)
------------ ------------
Total stockholders' equity 3,411,716 4,729,120
------------ ------------
T O T A L $3,703,883 $4,982,161
============ ============
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</TABLE>
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<TABLE>
OBJECTSOFT CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND THE SIX MONTHS ENDED JUNE 30, 1997 AND JUNE 30, 1996
UNAUDITED
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30 June 30 June 30
1997 1996 1997 1996
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues:
Consulting $61,872 $166,069 $109,401 $258,000
Development and training 14,556 37,954
Rental income 90,270 180,540
Investment income 48,546 84,672
----------- ----------- ------------ -----------
Total revenues 200,688 180,625 374,613 295,954
----------- ----------- ------------ -----------
Expenses:
Cost of Services 170,343 138,247 396,481 173,467
Research and development 188,993 287,608
General and administrative 495,883 186,628 913,960 332,413
Interest expense 3,248 90,346 6,968 90,796
Provision for loss on loan receivable 150,000 150,000
----------- ----------- ------------ -----------
Total expenses 1,008,467 415,221 1,755,017 596,676
----------- ----------- ------------ -----------
NET (LOSS) ($807,779) ($234,596) ($1,380,404) ($300,722)
----------- ----------- ------------ -----------
NET (LOSS) PER SHARE ($0.20) ($0.08) ($0.34) ($0.11)
=========== =========== ============ ===========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 4,065,632 2,800,734 4,050,952 2,800,734
=========== =========== ============ ===========
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</TABLE>
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<TABLE>
OBJECTSOFT CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996 - (UNAUDITED)
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) (1,380,404) ($300,722)
Adjustments to reconcile net loss to net
cash (used in) operating activities:
Depreciation and amortization 159,665 52,719
Amortization of discount on note payable 77,263
Provision for doubtful accounts 9,000
Provision for loss on loan receivable 150,000
Stock options issued for services rendered 4,000 4,000
Changes in operating assets and liabilities:
(Increase)in accounts receivable (195,869) (137,795)
Decrease in other current assets 36,389 14,159
(Increase)decrease in other assets 29,789 (8,961)
Increase in accounts payable 73,919 92,680
(Decrease) in accrued expenses and
other liabilities (11,505) (28,914)
(Decrease) in accrued officer compensation (200,000)
------------ -----------
Net cash used in operating activities (1,134,016) (426,571)
------------ -----------
Cash flow from investing activities:
Capital expenditures (83,890) (126,258)
Capitalized software and courseware (27,162) (109,684)
Investment in marketable securities (2,123,982)
Loan receivable Interactivisions,Inc. (250,000)
Increase in notes receivable officer shareholder (440,000)
------------ -----------
Net cash (used in) investing activities (2,925,034) (235,942)
------------ -----------
Cash flow from financing activities
Proceeds from note payable 981,475
Dividends (3,125)
Deferred offering costs (74,036)
Proceeds form issuance of warrants 123,525
Proceeds from exercise of warrants
and issuance of 59,000 shares 59,000
Principal payments on obligations
under capital leases (23,288) (5,262)
------------ -----------
Net cash provided by financing activities 35,712 1,022,577
------------ -----------
NET INCREASE (DECREASE) IN CASH (4,023,338) 360,064
Cash, beginning of period 4,039,358 63,995
------------ -----------
Cash, end of period $16,020 $424,059
============ ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest expense paid $3,248 $1,512
============ ===========
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OBJECTSOFT CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1997
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements
have been prepared in accordance with generally accepted
accounting principles for interim financial information, the
instructions to Form 10-QSB and item 310 (b) of Regulation
SB. Accordingly, they do not include all the information
and footnotes required by generally accepted accounting
principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for fair
presentation have been included. For further information,
refer to the Financial Statements and footnotes thereto
included in the Company's Registration Statement and
Prospectus and Form 10-KSB (for the year ended December 31,
1996) as filed with the Securities and Exchange Commission.
NOTE B -- LOSS PER SHARE
The loss per share amounts in the statement of operations
have been computed in accordance with a Staff Accounting
Bulletin (SAB) of the Securities and Exchange Commission.
According to the SAB, common stock and common stock warrants
issued are to be treated as common stock equivalents
outstanding for all periods presented if such common stock
was issued or such common stock warrants may be exercised,
at a price substantially below the public offering price.
Net loss per share was computed based on the weighted
average number of shares of common stock outstanding during
the period and the net loss for the period ending March 31,
1996 was increased by dividends accruing on the cumulative
preferred stock. Prior to November 13, 1996, certain shares
of common stock and common stock equivalents were issued and
in accordance with certain rules of the Securities and
Exchange Commission all such shares of common stock and
common stock equivalents were considered outstanding through
June 30, 1996. Fully diluted net loss per share is not
shown since it would be anti-dilutive.
-4-
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NOTE C -- NOTES AND LOAN RECEIVABLE OFFICER SHAREHOLDER
In January 1997, with the approval of the board of
directors, the Company loaned $440,000 to the Company's
chairman of the board. The loan which is unsecured, bears
interest at 8% per annum and is due in November 1997. The
chairman of the board used the proceeds for a block purchase
of 80,000 shares of the Company's common stock from the
market maker, who was also the underwriter of the Company's
IPO, in an open market transaction. In February 1997, the
Company loaned the chairman of the board an additional
$197,500 under similar terms. The latter loan was repaid
in June, 1997.
-5-
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OBJECTSOFT CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
Six Months Ended June 30, 1997 Compared With Three Months
and Six Months
Ended June 30, 1996
Special Note Regarding Forward-Looking Statements
A number of statements contained in this filing are
forward - looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 that
involve risks and uncertainties that could cause actual
results to differ materially from those expressed or
implied in the applicable statements. These risks and
uncertainties include but are not limited to the recent
establishment of new business divisions; dependence on new
untested product; risks associated with the marketing of
kiosks and expansion of services; risks related to
technological factors; potential manufacturing difficulties;
dependence on certain third parties and on the Internet;
limited customer base; risk of system failure, security
risks and liability risks; and other risks described in the
Company's Prospectus dated November 12, 1996.
The results of operations for the six months ended June
30, 1997 are not necessarily indicative of the results that
may be expected for any other interim period or for the
fiscal year ending December 31, 1997.
Net revenue for the three months ended June 30, 1997
increased by 11% over the three months ended June 30, 1996
(from $180,625 to $200,688) and net revenue for the six
months ended June 30, 1997 increased by 27% over the six
months ended June 30, 1996 (from $295,954 to $374,613).
Revenue for the six months increased due to interest and
dividend income earned on short term investments and revenue
received from the New York City Kiosk Demonstration Program.
This was offset by a reduction in consulting and training
revenue as the Company continued its shift away from fee-
based consulting, training and custom development activities
and redirected its resources towards the development of
transactional, fee- based and advertising-supported products
and services. Revenue changes were not a result of increases
or decreases in prices.
-6-
<PAGE>
Cost of services for the three months ended June 30,
1997 increased by 23% over the three months ended June 30,
1996 (from $138,247 to $170,343) and the cost of services
for the six months ended June 30, 1997 increased by 129%
over the six months ended June 30, 1996 (from $173,467 to
$396,481) due to higher personnel expenses and kiosk
expenses.
Research and development expenses for the three months
ended June 30, 1997 compared to the three months ended June
30, 1996, increased to $188,993 from zero, and to $287,608
from zero for the six months ended June 30, 1997 compared to
the six months ended June 30, 1996 due to the expensed
development costs for the SmartStreet(TM) operations.
General and administrative expenses for the three
months ended June 30, 1997 increased by 166% (from $186,628
to $495,883) compared to the three months ended June 30,
1996, and by 175% for the six months ended June 30, 1997
compared to the six months ended June 30, 1996 (from
$332,413 to $913,960) due principally to increases in
salaries and personnel related expenses, professional fees
and insurance for directors and officers.
The Company has also provided for a loss on a loan
receivable to InteractiVision, Inc. in the amount of
$150,000 (See below Liquidity and Capital Resources).
The net loss for the three months ended June 30, 1997
compared to the three months ended June 30, 1996, increased
by 244% (from $234,596 to $807,779) and by 359% for the six
months ended June 30, 1997 compared to the six months ended
June 30, 1996 (from $300,722 to $1,380,404). This change is
primarily due to increases in costs associated with the
Company's newer emphasis on transactional and advertising-
supported products and services, an increase in research and
development expenses, an increase in general and
administrative expenses due to higher costs associated with
being a public company and to support the redirection in
revenue sources, and a provision for loss on loan
receivable.
Liquidity and Capital Resources
For the six months ended June 30, 1997 the Company
incurred a net loss of $1,380,404. The accumulated deficit
increased to $3,530,554 as the Company continues to incur
operating losses as expenses exceed revenue. The Company
had working capital of $2,747,686 as of June 30, 1997 as
compared to $4,011,015 as of December 31, 1996, or a
decrease of $1,263,329. Capital expenditures and
capitalized software amounted to $111,052.
-7-
<PAGE>
In November 1996, the Company completed the sale in a
public offering of 1,366,050 Units, from which it received
net proceeds of approximately $5,465,000. Of such amount,
approximately $1,583,000 was applied to the repayment of
certain bridge loans and redemption of Preferred Stock. The
Company expects to fund the deployment of additional
SmartStreet (TM) kiosks in New York City and elsewhere, and
make kiosk related acquisitions, from available working
capital and from funds that will be derived from future
operating revenues. However, there can be no assurance
that future revenues will be generated in sufficient amounts
or that additional funds will not be required for the
expansion of operations. The Company intends to lease
equipment whenever possible on acceptable terms.
On May 5, 1997, the Company and InteractiVisions, Inc.
("InteractiVisions") signed a letter of intent which
contemplates the acquisition of all the outstanding stock of
InteractiVisions in exchange for the issuance of 600,000
shares of the Company's Common Stock, subject to certain
adjustments. Simultaneous with the signing of the letter of
intent, the Company loaned InteractVisions $250,000, payable
60 days after the termination of the letter of intent,
together with interest at the prime rate plus 3 points. On
August 8, 1997, the Company terminated the letter of intent.
The Company has provided an allowance for loss on the loan
receivable of $150,000.
The rate of inflation was insignificant during the
quarter ended June 30, 1997. In the past, the effects of
inflation on personnel costs have been offset by the
Company's ability to increase its charges for services
rendered. The Company anticipates that it will be able to
continue to do so in the near future. The Company
continually reviews its costs in relation to the pricing
of its products and services.
The Company anticipates that its existing working
capital will be sufficient to fund its operations at least
through the end of 1997.
-8-
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In or about January 1997, the Company commenced an
action in the United States District Court for the District
of New Jersey against Harvey Bayard ("Bayard"), a former
stockholder, officer and director of the Company. In its
complaint, the Company alleges, among other things, that
Bayard wrongfully induced certain shareholders and investors
to repudiate and breach their commitments to enter into lock-
up agreements in connection with the Company's November 1996
initial public offering, that Bayard wrongfully interfered
with the Company's contractual relations with Renaissance
Financial Securities Corporation, that Bayard breached his
own agreement with the Company and his own agreement to
execute a lock-up agreement, and that Bayard breached
certain of his fiduciary obligations to the Company and
engaged in other actionable conduct that damaged the
Company. The Company seeks compensatory damages in excess
of $3,500,000.00 and punitive damages. In April 1997,
Bayard asserted a counterclaim against the Company and David
E.Y. Sarna ("Sarna"), the Chairman of the Board of the
Company. Bayard's counterclaim alleges, among other things,
that the Company and Sarna commenced a scheme to coerce
Bayard into entering into a lock-up agreement (which Bayard
never signed) with respect to his shares in the Company and
to compel him to act on the Company's behalf in inducing
other shareholders to enter into lock-up agreements. Bayard
also alleges that the Company and Sarna communicated with
his business associates for the purpose, among other things,
of damaging Bayard's professional reputation. Bayard seeks
compensatory and punitive damages in an unspecified amount.
The Company has moved to dismiss the counterclaim and
intends to vigorously prosecute its claims against Bayard.
-9-
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
The annual meeting of shareholders of the Company (the
"Meeting") was held on May 14, 1997. Proxies for the
Meeting were solicited pursuant to Regulation 14A of the
Securities Exchange Act of 1934, as amended, and there was
no solicitation in opposition.
At the Meeting, David E.Y. Sarna and Gunther E. Less
were elected as Class I directors of the Company to serve
until the Company's 1999 annual meeting of shareholders and
until their respective successors are elected and qualified.
In addition, at the Meeting, the appointment of Richard A.
Eisner & Company, LLP as independent auditors of the
Company for the fiscal year ending December 31, 1997 was
ratified. The votes for each of such proposals were as
follows:
Shares Voted
1. Election of Directors For Withheld
David E.Y. Sarna 3,197,068 56,000
Gunther E. Less 3,197,068 56,000
2. Over 95% of the votes cast at the Meeting voted in
favor of the ratification of Richard A. Eisner & Company,
LLP as independent auditors.
ITEM 5. OTHER INFORMATION
On August 8, 1997, the Company terminated negotiations
and discussions (and a related letter of intent dated May 5,
1997) with InteractiVisions, Inc. ("InteractiVisions"),
regarding the possible acquisition by the Company of all the
outstanding capital stock of InteractiVisions. In that connection,
the Company has provided for a loss of $150,000 on a $250,000 loan
receivable from InteractiVisions.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The Company filed a Current Report on Form 8-K with the
Commission on May 13, 1997. The following item was reported
by the Company on the Form 8-K: On May 5, 1997, the Company
entered into a letter of intent with InteractiVisions, which
contemplated the acquisition by the Company of all of the
outstanding capital stock of InteractiVisions. In addition,
the Company loaned $250,000 to InteractiVisions.
-10-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
OBJECTSOFT CORPORATION
BY /s/ George J. Febish
George J. Febish, Co-Chief
Executive Officer and
President
Date: August 14, 1997
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OBJECTSOFT CORPORATION
Exhibit Index
Exhibit Number Page #
27 Financial Data Schedule 13
-12-
<PAGE>
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<ARTICLE> 5
<S> <C>
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
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<RECEIVABLES> 201769
<ALLOWANCES> 0
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<PP&E> 670344
<DEPRECIATION> 221125
<TOTAL-ASSETS> 3703883
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0
0
<COMMON> 408
<OTHER-SE> 6941862
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<CGS> 0
<TOTAL-COSTS> 1755017
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<INCOME-PRETAX> (1380404)
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