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 March 31, 1999
Commission file number 1-10751
OBJECTSOFT CORPORATION
(Exact Name of Small Business Issuer 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)
(201)343-9100
(Issuer's Telephone Number Including Area Code)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the
past 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes X
NO ___ .
(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 May 12, 1999
Common Stock, $.0001 par value 7,152,238
Redeemable Class A Warrants 1,366,050
Transitional Small Business Disclosure Format (check one):
Yes ___ No X
<PAGE>
OBJECTSOFT CORPORATION
INDEX
Page #
Part I. Financial Information
Item 1.Financial statements
Condensed Balance Sheets-
March 31, 1999 and December 31, 1998 1
Condensed Statements of Operations
Three Months Ended March 31, 1999
and 1998 2
Condensed Statements of Cash Flows
Three Months Ended March 31, 1999
and 1998 3
Notes to Condensed Financial Statements 4
Item 2.Management's Discussion and Analysis
or Plan of Operation 5
Part II Other Information
Item 6.Exhibits and reports on Form 8-K 10
Signatures 11
Exhibit index 12
Exhibit 27 Article 5 Financial Data Schedule 13
<PAGE>
PART I Financial information
<TABLE>
OBJECTSOFT CORPORATION
CONDENSED BALANCE SHEETS --MARCH 31, 1999 (Unaudited)
AND DECEMBER 31, 1998
<CAPTION>
March December
31, 1999 31, 1998
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $977,338 $982,006
Marketable securities 504,256
Accounts receivable 80,326 77,440
Prepaid expenses and other
current assets 337,824 195,367
Note receivable - other
Deferred tax asset 480,000 360,000
------------ ------------
Total current assets 2,379,744 1,614,813
Equipment, at cost, net of
accumulated depreciation 881,075 666,994
Capitalized software 87,251 58,790
Notes receivable-
officer/ shareholder 440,000 440,000
Other assets 114,664 156,510
------------ ------------
T O T A L 3,902,734 2,937,107
============ ============
LIABILITIES
Current liabilities
Current portion of long-term
debt $13,597 $15,494
Current portion of obligations
under capital lease 22,659 21,268
Accounts payable 240,415 522,383
Accrued expenses 137,583 118,401
Other current liabilities 2,473 4,413
------------ ------------
Total current liabilities 416,727 681,959
------------ ------------
Long-term debt 10,045 12,816
Obligations under capital lease 40,922 48,621
------------ ------------
Total Liabilities 467,694 743,396
------------ ------------
STOCKHOLDERS' EQUITY
6% non-voting convertible preferred
stock, $100 par, authorized 20,000 shares
issued and outstanding 10,500 shares 1,050,000 1,050,000
6% non-voting convertible preferred
stock, $100 par, authorized 25,000 shares
issued and outstanding 21,000 shares 2,100,000
Common stock, $.0001 par value; authorized
20,000,000 shares; issued and outstanding
6,850,769 shares at December 31, 1998,
and 6,960,135 at March 31, 1999 696 685
Additional paid-in capital 8,106,120 8,327,718
Accumulated deficit (7,821,776) (7,184,692)
------------ ------------
Total stockholders' equity 3,435,040 2,193,711
------------ ------------
T O T A L $3,902,734 $2,937,107
============ ============
-1-
</TABLE>
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<TABLE>
OBJECTSOFT CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND MARCH 31, 1998
UNAUDITED
<CAPTION>
Three Months Ended March 31,
1999 1998*
------------ ------------
<S> <C> <C>
Sales and services $45,350 $44,291
------------ ------------
Expenses:
Cost of sales and services 187,351 183,356
Research and development 78,911 147,340
General and administrative 522,588 468,812
------------ ------------
Total expenses 788,850 799,508
------------ ------------
Loss from operations (743,500) (755,217)
------------ ------------
Other income(expense):
Realized and unrealized (loss) on
marketable securities (10,265) (1,846)
Interest and dividend income 2,800 34,371
Interest expense (6,119) (2,927)
------------ ------------
Total other income (expense) (13,584) 29,598
------------ ------------
Loss before income tax benefit (757,084) (725,619)
Income tax benefit 120,000 90,000
------------ ------------
NET (LOSS) ($637,084) ($635,619)
------------ ------------
BASIC AND DILUTED NET (LOSS) PER SHARE ($0.18) ($0.16)
============ ============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 6,924,421 4,082,676
============ ============
* Adjusted for year end audit adjustments
-2-
</TABLE>
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<TABLE>
OBJECTSOFT CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
UNAUDITED
<CAPTION>
Three Months Ended March 31,
1999 1998*
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) ($637,084) ($635,619)
Adjustments to reconcile net loss to net
cash (used in) operating activities:
Depreciation and amortization 115,288 81,825
Changes in operating assets and
liabilities:
(Increase) decrease in:
Marketable securities (504,256) 583,703
Accounts receivable (2,886) 167,995
Other current assets (142,457) (15,807)
Note receivable- other 8,360
Deferred tax asset (120,000) (90,000)
Other assets 41,846
Increase (decrease) in:
Accounts payable (281,968) (160,061)
Accrued expenses and
other liabilities 17,242 25,629
------------ ------------
Net cash used in operating activities (1,514,275) (33,975)
------------ ------------
Cash flow from investing activities:
Capital expenditures (289,570) (23,869)
Capitalized software and courseware (68,260) (24,500)
------------ ------------
Net cash (used in) investing activities (357,830) (48,369)
------------ ------------
Cash flow from financing activities:
Proceeds from exercise of warrants
and nonemployee options 38,413
Proceeds from issuance of preferred stock 1,840,000
Principal payments on obligations
under capital leases (6,308) (12,249)
Repayment of long-term debt (4,668) (2,104)
------------ ------------
Net cash provided by financing activities 1,867,437 (14,353)
------------ ------------
NET (DECREASE) IN CASH (4,668) (96,697)
Cash, beginning of period 982,006 209,455
------------ ------------
Cash, end of period $977,338 $112,758
============ ============
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW INFORMATION
Interest expense paid $6,119 $2,927
============ ============
* Adjusted for year end audit adjustments
-3-
</TABLE>
<PAGE>
OBJECTSOFT CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1999
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
Form 10-KSB for the year ended December 31, 1998 as filed with
the Securities and Exchange Commission.
NOTE B -- LOSS PER SHARE
Basic and diluted 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 increased by the dividends
accruing on the cumulative preferred stock.
Note C - Subsequent Events
In April, 1999, the Company entered into a sale and leaseback
agreement in which the Company received $123,200. The net book value
of the assets sold was approximately $85,000.
-4-
<PAGE>
Item 2.
OBJECTSOFT CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Special Note Regarding Forward-Looking Statements
A number of statements contained in this report 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: limited operating history; history and
expectation of future losses and an accumulated deficit;
dilution of the value of the Company's common shares as a
result of the conversion of the Series D and Series E
preferred stock and the exercise of the warrants issued in the
December 1998 and March 1999 private placements; need for
additional financing; the uncertainty of acquiring additional
financing; change in the Company's operating focus; dependence
on a new untested product; dependence on certain licenses,
installation and maintenance services ; uncertainty about the
Company's product development ; vulnerability to technological
changes; need to be continuously accepted in rapidly changing
markets; significant competition; difficulty complying with
government contract requirements and government regulation ;
strategic relationship with Microsoft affects the Company's
sales, marketing, support activities and product development;
dependence upon common carriers and Internet access providers;
dependence on the Internet; limited customer base; risk
involved in manufacturing activities; potential fluctuation in
the Company's quarterly operating results; dependence upon key
members of the Company's management; dependence on ability to
attract and retain employees and contract providers ;
dependence upon proprietary technology; exposure to risk of
system failure; risks associated with the security of the
Company's systems and liability risks; risk of liability due
to future regulation of the Internet access industry; current
management has continuing control of the Company; no
anticipation of the payment of dividends; shares that are
eligible for sale in the future may affect the market price of
the Company's common stock; no assurance of continued Nasdaq
listing; subject to penny stock regulations; risk related to
the year 2000 issue ; the possible negative effect of anti-
takeover provisions, a staggered board and provisions relating
to stockholder actions; limitations on the liability of
directors and officers of the Company general economic
conditions, and other risks described elsewhere herein and in and in
the Company's Registration Statement on Form S-3 which was declared
effective by the Securities and Exchange Commission on April 30, 1999.
-5-
<PAGE>
Results of Operations
Three Months Ended March 31, 1999 Compared With Three
Months Ended March 31, 1998
The results of operations for the three months ended March 31,
1999 are not necessarily indicative of the results that may
be expected for any other interim period or for the fiscal
year ending December 31, 1999.
Net revenues increased by $1,059 or 2% to $45,350 for the
three months ended March 31, 1998 from $44,291 for the three
months ended March 31, 1997. The change was due to the initial
shipment of FastTake product in March, 1999. Significant shipments
of FastTake began in April, 1999, which are not reflected in these
financial statements
Cost of services increased by $3,995 or 2% to $187,351 for the
three months ended March 31, 1999 from $183,356 for the three
months ended March 31, 1998, due to normal increases in
expenses.
Research and development expenses decreased by $68,429 or 46%
to $78,911 for the three months ended March 31, 1999 from
$147,340 for the three months ended March 31, 1998, due to a
decrease in personnel devoted to research and development in
connection with the Company's expansion into San Francisco,
which was terminated in March,1999.
General and administrative expenses increased by $53,776 or
11% to $522,588 for the three months ended March 31, 1999 from
$468,812 for the three months ended March 31, 1998, due
principally to increases in marketing expenses relating to the
Company's new product FastTake.
Other income decreased by $43,182 to ($13,584)for the three
months ended March 31, 1999 from $29,598 for the three months
ended March 31, 1998, due to lower investments.
The net loss increased by $1,465 or .2% to $637,084 for the
three months ended March 31, 1999 from $635,619 for the three
months ended March 31, 1998, due to an increase in marketing
expenses related to FastTake offset by a decrease in research and
development related to the Company's expansion into San Francisco.
-6-
<PAGE>
Liquidity and Capital Resources
For the three months ended March 31, 1999 the Company incurred
a net loss of $637,084. The accumulated deficit increased to
$7,821,776 as the Company continues to incur operating losses
as expenses exceed revenue. The Company had working capital
of $1,963,017 as of March 31, 1999 as compared to $932,854 as
of December 31, 1998, or a increase of $1,030,163. Capital
expenditures and capitalized software amounted to $357,830.
The Company expects to fund the deployment of additional
FastTake and other kiosks, 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.
The Company raised $1,800,000 (net of expenses) in
connection with a private financing of Series E Preferred
Stock consummated on March 17, 1999. The Company intends to
meet its long-term liquidity needs through available cash and
cash flow as well as through additional financing from outside
sources. On February 19, 1999, the Company entered into a
letter of intent with a New York Stock Exchange member firm
for a proposed underwritten secondary public offering of up to
$20 million of Common Stock. The proposed public offering
would be made only by means of a prospectus. However, no
assurance can be given that the Company will be successful in
consummating such an offering or raising any additional
capital. Further, there can be no assurance, assuming the
Company successfully raises additional funds, that the Company
will achieve profitability or positive cash flows. If the
Company is not successful in raising additional funds, it
might be forced to curtail the scope of its operations.
The Company anticipates that it's existing working capital
will be sufficient to fund its operations at least through
October 31, 1999. Continuing operations thereafter will depend
on cash flow operations and the ability to raise additional
funds through equity, debt or other financing. There can be no assurance,
however, that such funds will be available.
-7-
<PAGE>
Year 2000
General
Many currently installed computer systems and software
products are coded to accept only two digit entries in the
date code field. Beginning in the year 2000, these date code
fields will need to accept four digit entries to distinguish
the twenty-first century dates from the twentieth century
dates. The Company uses software and related technologies
that will be effected by the "Year 2000 problem." The Company
began the process of identifying the changes required to
their computer programs and hardware during 1996. The
Company believes that all of its major programs and hardware
are Year 2000 compliant. The Company believes that it will
not incur any significant costs between now and January 1,
2000 to resolve Year 2000 issues. However, there can be no
assurance that other companies' computer systems and
applications on which the Company's operations rely, will be
timely converted, or that any such failure to convert by
another company would not have a material adverse effect on
the Company's systems and operations. Furthermore, there can
be no assurance that the software that the Company uses which
has been designed to be Year 2000 compliant contains all
necessary date code changes.
Third Parties
The Company has also initiated formal communications with
significant suppliers and other key third parties to
determine the extent to which the Company is vulnerable to
those third parties' failure to resolve their own Year 2000
compliance issues. There can be no assurance that the
systems of other companies on which the Company's systems
rely will be timely converted, or that a failure to convert
by another company, or a conversion that is incompatible with
the Company's systems, would not have a material adverse
effect on the Company's results of operations.
-8-
<PAGE>
Risk Assessment/Contingency Planning
At this time, the Company believes its most reasonable likely
worst case scenario would include (i) a key material vendor
or service provider experiencing problems with delivery of
materials, components or services; or (ii) the failure of
infrastructure services provided by government agencies and
other third parties (e.g., electricity, telephone,
transportation, Internet services, etc.). As noted above,
the Company is evaluating the Year 2000 compliance status of
its key third-party vendors to identify potential risks for
contingency planning purposes. The Company anticipates that
appropriate contingency plans will be prepared throughout
1999 as determined to be necessary.
Inflation and Seasonality
The rate of inflation was insignificant during the quarter
ended March 31, 1999. The Company continually reviews its
costs in relation to the pricing of its products and services.
The Company's business is not seasonal.
-9-
<PAGE>
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits -
Exhibit 27- Financial Data Schedule
(b) Reports on Form 8-K
On January 15, 1999, the Company filed a report on
Form 8-K regarding the financing through the issuance of
$1,000,000 of 6% Series D Preferred Convertible Stock.
On March 23, 1999, the Company filed a report on
Form 8-K regarding the financing through the issuance of
$2,000,000 of 6% Series E Preferred Convertible Stock.
-10-
<PAGE>
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 __________________________________________
David E. Y. Sarna, Co-Chief
Executive Officer and Secretary
May 17, 1999
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<PAGE>
OBJECTSOFT CORPORATION
Exhibit Index
Exhibit Number Page #
27 Financial Data Schedule 13
-12-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 977,338
<SECURITIES> 504,256
<RECEIVABLES> 155,326
<ALLOWANCES> 75,000
<INVENTORY> 0
<CURRENT-ASSETS> 2,379,444
<PP&E> 1,557,321
<DEPRECIATION> 676,246
<TOTAL-ASSETS> 3,902,734
<CURRENT-LIABILITIES> 416,727
<BONDS> 0
0
3,150,000
<COMMON> 696
<OTHER-SE> 8,106,120
<TOTAL-LIABILITY-AND-EQUITY> 3,902,734
<SALES> 45,350
<TOTAL-REVENUES> 45,350
<CGS> 187,351
<TOTAL-COSTS> 788,850
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,119
<INCOME-PRETAX> (757,084)
<INCOME-TAX> (120,000)
<INCOME-CONTINUING> (637,084)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (637,084)
<EPS-PRIMARY> (0.18)
<EPS-DILUTED> (0.18)
</TABLE>
