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, 2000
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, 2000
Common Stock, $.0001 par value 4,296,503
Redeemable Class A Warrants 1,366,050
Transitional Small Business Disclosure Format (check one):
Yes ___ No X
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OBJECTSOFT CORPORATION
INDEX
Page #
Part I. Financial Information
Item 1.Financial statements
Condensed Balance Sheets-
March 31, 2000 1
Condensed Statements of Operations
Three Months Ended March 31, 2000
and 1999 2
Condensed Statements of Cash Flows
Three Months Ended March 31, 2000
and 1999 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 9
Signatures 10
Exhibit index 11
Exhibit 27 Article 5 Financial Data Schedule 12
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<TABLE>
PART I Financial information
OBJECTSOFT CORPORATION
CONDENSED BALANCE SHEETS -- MARCH 31, 2000 (Unaudited)
<CAPTION>
March
31, 2000
------------
ASSETS
<S> <C>
Current assets:
Cash and cash equivalents $926,809
Marketable securities 323,094
Accounts receivable 9,418
Prepaid expenses and other
current assets 286,847
Deferred tax asset 308,003
------------
Total current assets 1,854,171
Equipment, at cost, net of
accumulated depreciation 2,310,524
Capitalized software 302,251
Loans receivable-
officer/ shareholder 291,882
Other assets 80,261
Deferred tax asset- non current 200,000
------------
T O T A L 5,039,089
============
LIABILITIES
Current liabilities
Current portion of long-term
debt 10,045
Current portion of obligations
under capital lease 163,731
Accounts payable 452,606
Accrued expenses 145,714
Other current liabilities 1,117
------------
Total current liabilities 773,213
Long-term debt
Obligations under capital lease 311,505
------------
Total Liabilities 1,084,718
------------
STOCKHOLDERS' EQUITY
6% non-voting convertible preferred G
stock, $100 par, authorized 30,000 shares
issued and outstanding 26,500 shares 2,650,000
Common stock, $.001 par value; authorized
50,000,000 shares; issued and outstanding
4,296,503 shares at March 31, 2000 430
Additional paid-in capital 16,314,413
Accumulated deficit (15,010,472)
------------
Total stockholders' equity 3,954,371
------------
T O T A L $5,039,089
============
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<TABLE>
OBJECTSOFT CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND MARCH 31, 1999
UNAUDITED
<CAPTION>
Three Months Ended March 31,
2000 1999
------------ ------------
<S> <C> <C>
Sales and services $36,418 $45,350
------------ ------------
Expenses:
Cost of sales and services 276,340 141,785
Research and development 84,888 78,911
General and administrative 811,533 568,154
------------ ------------
Total expenses 1,172,761 788,850
------------ ------------
Loss from operations (1,136,343) (743,500)
------------ ------------
Other income(expense):
Realized and unrealized (loss) on
marketable securities 1,153 (10,265)
Interest and dividend income 23,472 2,800
Interest expense (52,107) (6,119)
------------ ------------
Total other income (expense) (27,482) (13,584)
------------ ------------
(Loss) before income tax benefit (1,163,825) (757,084)
Income tax benefit 50,000 120,000
------------ ------------
NET (LOSS) ($1,113,825) ($637,084)
============ ============
Net (loss) available to common
stockholders
BASIC AND DILUTED NET (LOSS) PER SHARE ($0.67) ($0.55)
============ ============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 4,277,322 1,154,070
============ ============
</TABLE>
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<TABLE>
OBJECTSOFT CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
UNAUDITED
Three Months Ended March 31,
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) ($1,113,825) ($637,084)
Adjustments to reconcile net loss to net
cash (used in) operating activities:
Depreciation and amortization 207,494 115,288
Deferred tax benefit (50,000) (120,000)
Warrants issued for services rendered 26,121
Unrealized (gain) loss on marketable securities (2,735)
Changes in operating assets and
liabilities:
(Increase) decrease in:
Marketable securities 2,559 (504,256)
Accounts receivable 19,916 (2,886)
Other current assets 51,127 (142,457)
Loan receivable-officer (16,827)
Other assets 13,865 41,846
Increase (decrease) in:
Accounts payable 107,317 (281,968)
Accrued expenses and
other liabilities (28,831) 17,242
------------ ------------
Net cash used in operating activities (783,819) (1,514,275)
------------ ------------
Cash flow from investing activities:
Capital expenditures (891,777) (289,570)
Capitalized software and courseware (129,243) (68,260)
------------ ------------
Net cash (used in) investing activities (1,021,020) (357,830)
------------ ------------
Cash flow from financing activities:
Proceeds from exercise of warrants
and non-employee options 10,023 38,413
Proceeds from issuance of preferred stock 450,000 1,840,000
Principal payments on obligations
under capital leases (36,246) (6,308)
Repayment of long-term debt (2,771) (4,668)
------------ ------------
Net cash provided by financing activities 421,006 1,867,437
------------ ------------
NET (DECREASE) IN CASH (1,383,833) (4,668)
Cash, beginning of period 2,310,642 982,006
------------ ------------
Cash, end of period $926,809 $977,338
============ ============
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW INFORMATION
Interest expense paid $34,148 $6,119
============ ============
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OBJECTSOFT CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2000
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, 1999 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.
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<PAGE>
PART II
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: history and expectation of future losses and an
accumulated deficit; possibility of cut back or cessation of operations
if unable to obtain needed funding; uncertainty of new product
profitability; dependence on securing sufficient profitable locations
for the Company's products; dependence on the Company's continuing
relationship with DoubleClick; dilution of the value of the Company's
common stock as a result of the reservation of common stock for further
issuances ; no assurance of continued Nasdaq listing; if delisted from
Nasdaq, would be subject to penny stock regulations; dependence on
certain licenses, installation and maintenance services; technical
disruptions in the Company's and third parties' products could be
costly and detrimental to the Company's competitiveness; possible
liability and loss of business for unauthorized use of the Company's
information and injuries resulting from the Company's products;
possible disruptions in the Company's services due to technical and
operational systems failures; need to be continuously accepted in
rapidly changing markets; significant competition; difficulty complying
with government contract requirements and government regulation;
reliance on strategic relationship with Microsoft; dependence on
Microsoft's windows operating system; dependence upon common carriers and
Internet access providers; dependence on the Internet; dependence on a
single customer for a significant portion of revenues; dependence on
retaining subcontractors; potential fluctuation in the Company's
quarterly operating results; dependence upon key members of the Company's
management and employees; dependence on ability to adequately protect
proprietary technology; risk of liability due to future regulation of
the Internet access industry; no anticipation of the payment of
dividends; the possible negative effect of anti-takeover provisions, and
other risks described elsewhere herein and in Amendment No. 1 to the
Company's registration statement of Form S-3 dated April 6, 2000.
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<PAGE>
Overview
The Company provides Internet-connected, advertising-supported,
interactive kiosks which are public access computer terminals that offer
entertainment as well as information and the ability to execute
financial transactions. The Company originally provided consulting
and training services, but changed its focus in mid-1994 to its
current transactional, fee-based and advertising-supported products
and services. The Company has sustained net losses in each of the
last two fiscal years with a net loss of $3,920,000 in 1999 and a
net loss of $2,515,000 in 1998. In July, 1996 the Company
introduced its SmartStreet kiosks and in October 1998 its FastTake kiosks were
introduced. The Company has recognized only limited
income to date from its kiosks. Although the Company anticipates
that it will begin to recognize greater revenues from the FastTake
kiosks during 2000, it cannot predict the actual timing or amount of
such revenues.
Results of Operations
Three Months Ended March 31, 2000 Compared With Three
Months Ended March 31, 1999
As of March 31, 2000, 100 FastTake kiosks were installed in stores,
30 were in the process of being installed, and an additional 300
have been ordered and are being manufactured. In addition, the
Company entered into an advertising agreement with DoubleClick which
is expected to begin generating revenues in the second quarter of
2000.
The results of operations for the three months ended March 31,
2000 are not necessarily indicative of the results that may
be expected for any other interim period or for the fiscal
year ending December 31, 2000.
Net revenues decreased by $8,932 or 20% to $36,418 for the
three months ended March 31, 2000 from $45,350 for the three
months ended March 31, 1999. The change was due to lower revenues
from consulting services offset by an increase in revenues resulting from
advertising revenue generated from the Company's FastTake products.
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<PAGE>
Cost of sales and services increased by $134,555 or 95% to $276,340
for the three months ended March 31, 2000 from $141,785 for the
three months ended March 31, 1999, due to an increase in
depreciation and amortization of costs related to the development
and purchase of FastTake related products.
Research and development expenses increased by $5,977 or 8%
to $84,888 for the three months ended March 31, 2000 from
$78,911 for the three months ended March 31, 1999, due to an
increase in personnel devoted to research and development in
connection with the development and improvement of FastTake
products.
General and administrative expenses increased by $243,379 or
43% to $811,533 for the three months ended March 31, 2000 from
&568,154 for the three months ended March 31, 1999, due
to the hiring of marketing staff to accommodate the expansion of
sales opportunities related to FastTake products.
Other expense increased by $13,898 to ($27,482)for the three
months ended March 31, 2000 from ($13,584) for the three months
ended March 31, 1999, due to an increase in interest expense
resulting from the leasing of kiosks, offset by an increase in
interest and dividend income, and gain from securities.
The net loss increased by $238,939 or 29% to $1,057,020 for the
three months ended March 31, 2000 from $818,081 for the three
months ended March 31, 1999, due to an increase in the development,
and marketing expenses related to FastTake.
Liquidity and Capital Resources
For the three months ended March 31, 2000 the Company incurred
a net loss of $1,057,020. The accumulated deficit increased to
$14,860,136 as the Company continued to incur operating losses
as expenses exceeded revenue. The Company had working capital
of $1,119,458 as of March 31, 2000 as compared to $2,588,315 as
of December 31, 1999, or a decrease of $1,468,857. Capital
expenditures and capitalized software amounted to $1,021,020.
-7-
<PAGE>
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 and from equipment leasing, equity and/or
debt financing. 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 intends to meet its long-term liquidity needs
through available cash and cash flow as well as through additional
financing from outside sources. 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, giving effect to the sale of
$2,000,000 of Series G Preferred Stock consummated on December 30,
1999 and the sale of an additional $500,000 of Series G Preferred
Stock consummated in February 2000, together with proceeds from anticipated
equipment financing arrangements and cash flow from operations, the Company's
existing working capital will be sufficient to fund its operations
at least through March 31,2001. Continuing operations thereafter will
depend on cash flow from 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.
Inflation and Seasonality
The rate of inflation was insignificant during the quarter
ended March 31, 2000. The Company continually reviews its
costs in relation to the pricing of its products and services.
The Company's business is not seasonal.
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<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit 27 -Financial Data Schedule
(b) Reports on Form 8-K
The Company filed on January 4, 2000 a report on Form 8-K
dated December 30, 1999, relating to the sale of Series G
Preferred Stock.
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<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 /s/ _ David E. Y. Sarna
David E. Y. Sarna, Co-Chief
Executive Officer and Principal
Financial Officer
May 15, 2000
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<PAGE>
OBJECTSOFT CORPORATION
Exhibit Index
Exhibit Number Page #
27 Financial Data Schedule 12
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 926,809
<SECURITIES> 323,094
<RECEIVABLES> 138,918
<ALLOWANCES> 129,500
<INVENTORY> 0
<CURRENT-ASSETS> 1,854,171
<PP&E> 3,502,426
<DEPRECIATION> 1,191,902
<TOTAL-ASSETS> 5,039,089
<CURRENT-LIABILITIES> 773,213
<BONDS> 0
0
2,650,000
<COMMON> 430
<OTHER-SE> 16,314,413
<TOTAL-LIABILITY-AND-EQUITY> 5,039,089
<SALES> 36,418
<TOTAL-REVENUES> 36,418
<CGS> 276,340
<TOTAL-COSTS> 1,172,761
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 52,107
<INCOME-PRETAX> (1,163,825)
<INCOME-TAX> 50,000
<INCOME-CONTINUING> (1,113,825)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,113,825)
<EPS-BASIC> (.67)
<EPS-DILUTED> (.67)
</TABLE>
