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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
MARK ONE
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------- -----------------
Commission File Number 0-8345
---------------------------
4FRONT TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 84-0675510
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6300 South Syracuse Way, Suite 293
Englewood, Colorado 80111
(Address of principal executive offices)
Registrant's telephone number, including area code: (303) 721-7341
---------------------------
Securities registered pursuant to Section 12(b) of the Act: None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, PAR VALUE $.001 PER SHARE
(TITLE OF CLASS)
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
---- ----
The number of shares outstanding of each of the Registrant's classes of Common
Stock at June 13, 2000, was 12,112,596 shares of Common Stock, $.001 par value.
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<PAGE>
ITEM 1. FINANCIAL STATEMENTS
4FRONT TECHNOLOGIES, INC. AND SUBSIDIARIES
THREE MONTH PERIOD ENDED APRIL 30, 2000
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets as of January 31, 2000
and April 30, 2000 (unaudited) 1
Condensed Consolidated Statements of Operations for the
three months ended April 30, 1999 and 2000 (unaudited) 3
Condensed Consolidated Statements of Changes in Stockholders'
Equity for the three months ended April 30, 2000 (unaudited) 4
Condensed Consolidated Statements of Comprehensive Income
(loss) for the three months ended April 30, 1999 and 2000 (unaudited) 4
Condensed Consolidated Statements of Cash Flows for the
three months ended April 30, 1999 and 2000 (unaudited) 5
Notes to the Condensed Consolidated Financial Statements 6
</TABLE>
<PAGE>
4FRONT TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
JANUARY 31, APRIL 30,
2000 2000
-------- --------
$ `000'S $ `000'S
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 23,086 $ 15,427
Accounts receivable, net of allowance
for doubtful accounts of $1,047 and
$1,082 respectively 64,495 68,019
Deposits 51 51
Inventories 30,101 30,759
Prepaid expenses 7,728 8,674
Income taxes receivable 17 17
Other current assets 2,244 2,299
-------- --------
Total current assets 127,722 125,246
PROPERTY AND EQUIPMENT, net 12,801 12,401
INTANGIBLE ASSETS, net 63,027 62,007
DEFERRED INCOME TAX 4,901 4,882
OTHER ASSETS 557 565
-------- --------
TOTAL ASSETS $209,008 $205,101
======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
-1-
<PAGE>
4FRONT TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
JANUARY 31, APRIL 30,
2000 2000
--------- ---------
$ `000'S $ `000'S
(UNAUDITED)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 55,509 $ 50,643
Accrued liabilities 17,889 18,253
Lines of credit-bank 11,288 16,707
Notes payable 3,195 5,133
Capital lease obligations, current portion 697 679
Income taxes payable 8,801 8,324
Deferred revenue 23,199 20,954
--------- ---------
Total current liabilities 120,578 120,693
CAPITAL LEASE OBLIGATIONS, less current portion 873 879
LONG TERM LIABILITIES 25,103 25,115
--------- ---------
TOTAL LIABILITIES 146,554 146,687
--------- ---------
COMMITMENTS AND CONTINGENCIES:
STOCKHOLDERS' EQUITY:
Common stock, par value $.001, 30,000,000
shares authorized 11,765,602 and 11,958,448
shares issued and outstanding, respectively 12 12
Additional paid-in capital 60,435 61,567
Retained earnings (deficit) 2,716 (1,812)
Other accumulated comprehensive loss (709) (1,353)
--------- ---------
Total stockholders' equity 62,454 58,414
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 209,008 $ 205,101
========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
-2-
<PAGE>
4FRONT TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
APRIL 30, APRIL 30,
1999 2000
-------- --------
$ `000'S $ `000'S
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
REVENUES
Services $ 38,429 $ 55,199
Products 18,897 2,880
-------- --------
57,326 58,079
-------- --------
Cost of Services 18,486 30,475
Cost of Products 16,242 2,594
-------- --------
34,728 33,069
-------- --------
GROSS PROFIT
Services 19,943 24,724
Products 2,655 286
-------- --------
22,598 25,010
-------- --------
OPERATING EXPENSES
Selling, general and administrative expenses 18,024 21,520
Depreciation 434 881
Amortization 760 1,431
Re-organization and restructuring costs -- 5,018
-------- --------
Total operating expenses 19,218 28,850
-------- --------
INCOME (LOSS) BEFORE INTEREST, INCOME
TAXES: 3,380 (3,840)
Interest income 264 263
Interest expense (222) (713)
-------- --------
INCOME (LOSS) BEFORE INCOME TAXES: 3,422 (4,290)
INCOME TAXES 1,437 238
-------- --------
NET INCOME (LOSS) $ 1,985 $ (4,528)
-------- --------
NET INCOME (LOSS) PER COMMON SHARE
(BASIC) $ 0.19 $ (0.38)
NET INCOME (LOSS) PER COMMON SHARE
(DILUTED) $ 0.17 $ (0.38)
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
-3-
<PAGE>
4FRONT TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Other
Retained Accumulated
Earnings Comprehensive
Shares Amount (Deficit) (Loss) Total
---------- ---------- ---------- ---------- ----------
$'000's $'000's $'000's $'000's
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 31, 2000 11,765,602 $ 60,447 $ 2,716 $ (709) $ 62,454
Exercise of warrants and stock
options 192,846 1,132 -- -- 1,132
Net income (loss) for the period -- -- (4,528) -- (4,528)
Other comprehensive loss -- -- -- (644) (644)
---------- ---------- ---------- ---------- ----------
BALANCE, APRIL 30, 2000 11,958,448 $ 61,579 $ (1,812) $ (1,353) $ 58,414
(UNAUDITED) ========== ========== ========== ========== ==========
</TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME/(LOSS)
<TABLE>
<CAPTION>
APRIL 30, APRIL 30,
1999 2000
------- -------
$ `000'S $ `000'S
<S> <C> <C>
Net income/(loss) $ 1,985 $(4,528)
Foreign currency translation adjustment (20) (644)
------- -------
Comprehensive income/(loss) $ 1,965 $(5,172)
======= =======
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- 4 -
<PAGE>
4FRONT TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
APRIL 30, APRIL 30,
1999 2000
-------- --------
$ `000'S $ `000'S
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,985 $ (4,528)
Adjustments to reconcile net income to net cash
provided (used) by operating activities
Depreciation 434 881
Amortization 760 1,431
Non-cash restructuring charges -- 3,227
Gain on disposal of fixed assets (21) (10)
Change in accounts receivable 1,188 (3,524)
Change in inventories (5,549) (657)
Change in prepaid expenses (319) (946)
Change in income taxes 1,046 (477)
Change in other current assets 190 (55)
Change in deferred income tax 563 19
Change in accounts payable 1,008 (5,645)
Change in accrued liabilities 326 364
Change in deferred revenue (2,914) (2,245)
-------- --------
Net cash used by operating activities (1,303) (12,165)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (1,361) (325)
Proceeds from disposal of equipment 31 36
Acquisition of subsidiaries (475) (346)
Capitalization of software development costs (105) --
Change in other assets 86 (8)
-------- --------
Net cash used by investing activities (1,824) (643)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in lines of credit-bank 535 5,419
Changes in notes payable (455) 1,936
Repayment of loan for CVSI acquisition -- (2,500)
Payments of capital lease obligations (310) (194)
Net proceeds from exercise of share options 405 1,132
-------- --------
Net cash from financing activities 175 5,793
-------- --------
Effect of exchange rate changes on cash (20) (644)
-------- --------
NET DECREASE IN CASH (2,972) (7,659)
Cash at beginning of period 26,162 23,086
-------- --------
Cash at end of period $ 23,190 $ 15,427
======== ========
Cash paid for interest expense $ 222 $ 713
======== ========
Cash paid for taxes $ -- $ 696
======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- 5 -
<PAGE>
4FRONT TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - NATURE OF BUSINESS
4Front Technologies, Inc. and subsidiaries (the "Company" or "4Front")
is a leading provider of information technology solutions, which consist of
specialized computer services and complementary products, primarily to blue chip
corporations and government authorities in the United Kingdom, Continental
Europe and USA. The Company's solutions include hardware maintenance, help desk
support, network servers, specialized software services and products.
NOTE 2 - BASIS OF PRESENTATION
The accompanying interim unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with Rule 10-01 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements.
In the opinion of management, the accompanying interim unaudited
condensed consolidated financial statements contain all material adjustments
consisting only of normal recurring adjustments necessary to present fairly the
financial condition, the results of operations, the changes in stockholders'
equity and cash flows of 4Front Technologies, Inc. for the interim periods
presented.
The results of the three months ended April 30, 2000 are not
necessarily indicative of the results of operations for the full year. These
interim unaudited condensed consolidated financial statements and related
footnotes should be read in conjunction with the financial statements and
footnotes thereto included in the Company's Form 10-K for the year ended January
31, 2000.
NOTE 3 - EARNINGS (LOSS) PER SHARE
<TABLE>
<CAPTION>
FOR THE MONTHS ENDED
----------------------------------
APRIL 30, 1999 APRIL 30, 2000
-------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
BASIC EARNINGS (LOSS) PER SHARE
Net income/(loss) $ 1,985,092 $ (4,527,803)
------------ ------------
Weighted Average Number of Common Shares
outstanding 10,665,743 11,858,418
------------ ------------
Net income (loss) per Common Share Basic $ 0.19 $ (0.38)
============ ============
DILUTED EARNINGS (LOSS) PER SHARE
Net income/(loss) $ 1,985,092 $ (4,527,803)
------------ ------------
Weighted Average Number of Common Shares
outstanding 10,665,743 11,858,418
Additional Shares to be Issued upon Assumed
Exercise of Options and Warrants 3,134,765 --
Shares Hypothetically Repurchased at the Average
Market Price with the Proceeds of Exercise (1,914,273) --
------------ ------------
Adjusted Shares for Dilution 11,886,235 11,858,418
------------ ------------
Net income per Common Share Diluted $ 0.17 $ (0.38)
============ ============
</TABLE>
- 6 -
<PAGE>
4FRONT TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - INVENTORIES
<TABLE>
<CAPTION>
Inventories consist of the following: JANUARY 31, 2000 APRIL 30, 2000
---------------- --------------
(UNAUDITED)
<S> <C> <C>
Computer hardware $30,095 $30,759
Computer software 6 --
------- -------
$30,101 $30,759
======= =======
</TABLE>
NOTE 5 - INCOME TAXES
The Company files a separate U.S. federal income tax return for its
domestic operations and a local tax returns for its foreign operations. The non
US subsidiaries compute taxes at rates in effect in their local jurisdiction and
become payable when assessed by the local tax authorities. Deferred federal
income taxes are not provided on the undistributed earnings of its foreign
subsidiaries to the extent the Company intends to permanently reinvest such
earnings.
The Company has provided income tax for the three months ended April
30, 1999 of $1,437,000 on the profits (loss) of its operations, and for the
three months to April 30, 2000 of $238,000.
NOTE 6 - RESTRUCTURING AND REORGANIZATION
During the quarter ended April 30, 2000, the Company took a charge of $5.02
million in relation to the restructuring and reorganization program of the
business. This program resulted in the involuntary termination of 46 positions
across the Company, and the vacating and closure of 2 properties.
The following tables depicts the activity for both the Q4 fiscal 2000 and the Q1
fiscal 2001 restructuring program through April 30, 2000:-
<TABLE>
<CAPTION>
ACCRUED ACCRUED
BALANCE CASH BALANCE AT
JAN 31, 2000 PAYMENTS APR 30, 2000
Q4 FISCAL 2000 PLAN $'000'S $'000'S $'000'S
<S> <C> <C> <C>
Severance and related charges 350 (350) --
Lease termination costs 5,103 (128) 4,975
------- ------- -------
$ 5,453 $ (478) $ 4,975
======= ======= =======
<CAPTION>
CHARGED ACCRUED
IN APR 30 CASH BALANCE AT
QUARTER PAYMENTS APR 30, 2000
Q1 FISCAL 2001 PLAN $'000'S $'000'S $'000'S
<S> <C> <C> <C>
Severance and related charges 1,468 (1,340) 128
Lease termination costs 3,550 (323) 3,227
------- ------- -------
$ 5,018 $(1,663) $ 3,355
======= ======= =======
</TABLE>
- 7 -
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The Company is a leading provider of information technology solutions,
which consist of specialized computer services and complementary products
primarily to blue chip corporations and government authorities in the United
Kingdom and in Continental Europe. The Company's solutions include hardware
maintenance, help desk support, network services, specialized software services
and products and the supply of high-end storage systems.
The Company has grown rapidly due, in large part, to acquisitions.
Datapro Computers Group Limited ("Datapro") was acquired in fiscal 1997 with
Firstpoint Limited ("Firstpoint") and Eurosystems France S.A. ("Eurosystems")
being acquired in fiscal 1998. Decision Systems ("DS"), Memorex Telex Italia
("Memorex"), Penagen Training Ltd ("Penagen") and I-NEA S.A. ("I-NEA") were
acquired in fiscal 1999. The SIL Group of companies ("SIL") and CVSI, Inc.
("CVSI") were acquired in fiscal 2000. These acquisitions have been accounted
for under the purchase method of accounting and are included on a consolidated
basis in the Company's financial statements for periods ending after the
effective date of such acquisitions. As used herein, references to a "fiscal
year" refer to January 31 of such year. For example, fiscal 2000 refers to the
year ended January 31, 2000.
Because of the effect upon the Company's results of operations for the
year ended January 31, 2000 of acquisitions made during that period, direct
comparison of the Company's results of operations for the periods ended April
30, 1999 and April 30, 2000 will not, in the view of management of the Company,
prove meaningful. Instead, a summary of the elements which management of the
Company believes essential to an analysis of the results of operations for such
periods is presented below.
RESULTS OF OPERATIONS
THREE MONTHS ENDED APRIL 30, 2000 COMPARED WITH THE THREE MONTHS ENDED APRIL 30,
1999
REVENUES
Revenues for the three months ended April 30, 2000 were $58.1 million,
an increase of $0.8 million, or approximately 1.3% compared to $57.3 million for
the three months ended April 30, 1999. Revenues from services were $55.2
million, or 95% of the total revenue, with revenues from the supply of products
at $2.9 million, or 5% of the total revenues. In the comparable period of the
prior year, services' revenues were 67.0% of total revenues and products'
revenues were 33.0% of the total revenues.
In the quarter, the acquisition of CVSI and SIL contributed $17.2
million and $5.0 million of services revenues respectively. Our UK product
business, "Hammer", which was sold in the last quarter of fiscal 2000,
contributed $14.2 million of product revenue in the quarter to April 30, 1999
and $0 in the quarter to April 30, 2000.
GROSS PROFIT
Gross profit for the three months ended April 30, 2000 was $25.0
million, an increase of $2.4 million, or 10.7% compared to $22.6 million for the
three months ended April 30, 1999. Gross margin increased from 39.4% for the
three months ended April 30, 1999 to 43.06% for the three months ended April 30,
2000. Gross profit for services increased 24% from $19.9 million for the three
months ended April 30, 1999 to $24.7 million for the three months ended April
30, 2000. Gross profit for products decreased $2.4 million from $2.7 million for
the three months ended April 30, 1999 to $0.3 million for the three months to
April 30, 2000. This decrease was due to the sale of the "Hammer" product
business.
- 8 -
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses were $21.5 million, an
increase of $3.5 million, or 19.4% compared to $18.0 million for the three
months ended April 30, 1999. As a percentage of revenues, selling, general and
administrative expenses increased to 37.1% from 31.4% in the three months ended
April 30, 2000. Selling general and administrative expenses increased primarily
as a result of a growth in infrastructure necessary to support the expansion and
integration of the Company's businesses.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expense for the three months ended April
30, 2000 was $2.3 million, an increase of $1.1 million, or 93.6% compared to
$1.2 million for the three months ended April 30, 1999. This increase arose
principally from the acquisitions of SIL and CVSI. Depreciation was $0.9, an
increase of $447,000 or 102.9%, from $434,000 for the prior period. Amortization
expense was $1.4 million, an increase of $671,000, or 88.3%, from $760,000 for
the prior period. An amortization period of between ten and fifteen years is
utilized with respect to acquisitions.
REORGANIZATION AND RESTRUCTURING
In our press release of March 29, 2000, we stated that we would expect to take
up to $15.0 million in charges within the first half of 2001. During the first
quarter of 2001, we have taken $5.02 million as part of the restructuring and
reorganization. $1.0 million of this charge relates to severance and termination
costs with regards to involuntary termination of employees and $3.5 million
relates to the lease termination and costs associated with the vacating of
duplicate leased premises. It is anticipated that, if the specific closures
which are currently under review happen, approximately $10.0 million will be
taken in the second quarter of 2001, resulting in approximately $15.0 million of
charges for the first half year to July 31, 2000.
EARNINGS (LOSS) BEFORE INTEREST INCOME AND EXPENSE, INCOME TAXES
Loss before interest expense and income taxes for the three months
ended April 30, 2000 was a loss of $3.8 million, a decrease of $7.2 million,
compared to $3.4 million income for the three months ended April 30, 1999. As a
percentage of revenues, earnings before interest expense and income taxes
decreased from 5.9% in the three months ended April 30, 1999 to a loss of (6.6)%
for the three months ended April 30, 2000.
INCOME TAXES
Income taxes charged for the quarter ended April 30, 2000, was a net
charge of $238,000. This is a combination of a tax charge of $646,000 on taxable
profits for the quarter and a tax credit of $408,000 taken for the cash element
of the restructuring charge. No credit has been taken for the accrued non-cash
element of the organization charge. Income taxes charged on profits for the
quarter ended April 30, 1999, was $1.4 million, there was no comparative
restructuring charge in this quarter.
INTEREST
Interest expense for the three months ended April 30, 2000 was $713,000
compared to $222,000 for the three months ended April 30, 1999. This increase
was primarily on the loan taken in the fourth quarter of fiscal 2000 to assist
in the acquisition of CVSI. Interest income for the three months ended April 30,
2000 remained comparable to that for April 30, 1999.
- 9 -
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
From inception until June 1996, the Company's sources of capital had
been cash flows from operations, private placements of securities, primarily
from its controlling stockholders and related parties, and borrowings from
banks. On June 19, 1996, the Company completed a public offering (the
"Offering") of 3,000,000 shares of the Company's Common Stock at a price of
$5.75 per share. On July 2, 1998, the Company completed a secondary public
offering through a further sale of 3.4 million shares of Common Stock. As a
result of this offering, the Company raised net proceeds of $31.0 million.
As of April 30, 2000, the Company had lines of credit with UK, French,
Italian, Japanese, Dutch and Belgian banks in the aggregate amount of $12.5
million. As of April 30, 2000 $11.3 million was outstanding.
In November 1999, we borrowed $25.0 million to assist us in the
purchase of CVSI. This money was borrowed from a UK Bank at an average rate of
7.62% interest. Capital repayments of $2.5 million, plus any accrued interest,
are to be made at 6 month intervals starting March 31, 2000. The first repayment
was made on March 31, 2000. $5.4 million (including $0.4 million interest) of
this loan is recorded as a current liability with the remaining $17.5 million as
a long-term debt.
The outstanding credit facilities are secured by the assets of the
Company and are periodically reviewed by the issuing institution. Management
expects to be able to maintain these credit arrangements for the foreseeable
future, although no assurance can be given.
The Company's Italian subsidiary "Memorex" discounts invoices with
various Italian banks. These amounts vary during the year and are subject to
interest rates ranging from 4% to 8.5%. The amounts discounted are secured by
the related receivables of "Memorex". At April 30, 2000, $5.1 million under
these agreements were outstanding.
The Company's working capital decreased from $7.1 million surplus at
January 31, 2000 to a surplus of $4.5 million at April 30, 2000.
Net cash used by operating activities during the three months ended
April 30, 2000 was $12.2 million, which reflected the net effect of a decrease
in net accounts payable, and deferred revenues and an increase in accounts
receivable. Net cash used by investing activities was $0.6 million, for the
three months ended April 30, 2000, primarily reflecting cash used for the
purchase of equipment. Net cash provided by financing activities was $5.8
million for the three months ended April 30, 2000, resulting primarily from
increase of bank lines of credit and payments of outstanding obligations and the
receipts from stock options which were exercised during the period.
The Company believes that the net cash flows from operations and
borrowing availability under its credit facilities, will satisfy the Company's
anticipated working capital requirements through at least the next twelve
months. To the extent the Company raises additional capital by issuing equity or
convertible debt securities, ownership dilution to the Company's stockholders
will result. In the event that adequate funds are not available, the Company's
business may be adversely affected.
INFLATION
Inflation has not had a material effect upon the Company's results of
operations to date. In the event the rate of inflation should accelerate in the
future, it is expected that costs in connection with the provision by the
Company of its services and products will increase, and, to the extent such
increased costs are not offset by increased revenues, the operations of the
Company may be adversely affected.
- 10 -
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
Item 2. Change In Securities
Not Applicable
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27
(b) Reports on Form 8-K
Not Applicable
- 11 -
<PAGE>
4FRONT TECHNOLOGIES, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed by the undersigned,
thereunto duly authorized.
June 14, 2000 4FRONT TECHNOLOGIES, INC.
BY: /S/ STEPHEN MCDONNELL
--------------------------
Stephen McDonnell
Chief Financial Officer
- 12 -
