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 AND
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 1997
/ / TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT
For the transition period from __________ to _______________
Commission file number: 1-13360
ENTERACTIVE, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 22-3272662
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
25 West 45th Street, Suite 306, New York, NY 10036
(Address of Principal Executive Offices)
(212) 768-7100
(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 / /
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
Number Outstanding
Title of Class as of December 22, 1997
-------------- -----------------------
Common Stock, $.01 Par Value 8,019,555
Transitional Small Business Disclosure Format: Yes / / No /X/
1
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TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Page
Item 1 Financial Statements
Consolidated Balance Sheets at November 30, 1997 and May 31, 1997 3
Consolidated Statements of Operations for the three months
and six months ended November 30, 1997 and 1996 4,5
Consolidated Statements of Cash Flows for the six months ended
November 30, 1997 and 1996 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II - OTHER INFORMATION
Page
Item 1. Legal Proceedings 11
Item 2. Change in Securities 11
Item 3. Defaults upon Senior Securities 11
Item 4. Submissions of Matters to a Vote by Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
2
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ENTERACTIVE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
November 30 May 31
1997 1997
ASSETS (unaudited)
---------------------------------------------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 1,351,500 $ 4,952,900
Accounts receivable 232,200 224,400
Assets held for sale 19,900 100,000
Prepaid expenses and other 225,200 93,800
------------------ --------------------
Total current assets 1,828,800 5,371,100
Affiliation Rights, net 562,500 593,800
Property and equipment, net 505,500 154,900
Other 119,300 61,500
------------------ --------------------
$ 3,016,100 $ 6,181,300
================== ====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $415,900 $287,900
Accrued restructuring expenses 336,300 -
Accrued payroll and related expenses 93,600 -
Other accrued expenses 424,400 623,900
Deferred revenue - 69,500
Current maturities of long-term debt 104,700 40,200
------------------ --------------------
Total current liabilities 1,374,900 1,021,500
Long-term debt 104,300 -
------------------ --------------------
Total liabilities 1,479,200 1,021,500
Commitments and contingencies
Stockholders' Equity
Preferred Stock $.01 par value,
2,000,000 shares authorized and 6,720
shares issued and outstanding 100 100
Common Stock $.01 par value, 50,000,000
shares authorized; 8,019,555 and
7,679,441 shares issued and outstanding for
November 30, 1997 and May 31, 1997 respectively 80,200 76,800
Additional paid-in capital 28,249,500 28,038,400
Accumulated deficit (26,792,900) (22,955,500)
------------------ --------------------
Total stockholders' equity 1,536,900 5,159,800
$ 3,016,100 $ 6,181,300
================== ====================
</TABLE>
See notes to consolidated financial statements
3
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ENTERACTIVE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three Months Ended November 30
1997 1996
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(unaudited) (unaudited)
<S> <C> <C>
Net product sales $ - $ 441,500
Internet services revenues 376,000 -
Software licensing and royalty revenue 98,000 197,600
-------------------------------------------
Total revenues 474,000 639,100
Cost of product sales - 219,900
Amortization of capitalized software - 107,100
Cost of Internet services revenues 319,300 -
Cost of licensing and royalty revenue 22,200 9,400
Research and development expenses 484,100 619,400
Marketing and selling expenses 953,500 1,109,300
General and administrative expenses 492,400 468,200
Restructuring expenses 427,700 -
-------------------------------------------
Total costs and expenses 2,699,200 2,533,300
Operating loss (2,225,200) (1,894,200)
-------------------------------------------
Other income (expense):
Interest expense (3,400) (4,800)
Other income - 6,900
Interest income 25,400 26,400
-------------------------------------------
Loss before income taxes (2,203,200) (1,865,700)
Income tax expense - -
-------------------------------------------
Net loss $ (2,203,200) $ (1,865,700)
-------------------------------------------
Loss per common and
common equivalent share $ (0.28) $ (0.24)
-------------------------------------------
Weighted average shares of common
stock and common stock equivalents 7,828,751 7,679,441
</TABLE>
See notes to consolidated financial statements
4
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ENTERACTIVE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Six Months Ended November 30
1997 1996
----------------- ---------------
(unaudited) (unaudited)
<S> <C> <C>
Net product sales $ - $ 766,100
Product development revenue - 40,700
Internet revenues 518,300 -
Software licensing and royalty revenue 132,400 375,300
----------------------------------------
Total revenues 650,700 1,182,100
Cost of product sales - 348,900
Amortization of capitalized software - 214,200
Cost of internet revenues 418,800 -
Cost of licensing and royalty revenue 22,200 37,000
Research and development expenses 883,600 1,440,200
Marketing and selling expenses 1,752,500 1,805,800
General and administrative expenses 1,058,800 907,500
Restructuring expenses 427,700 -
----------------------------------------
Total costs and expenses 4,563,600 4,753,600
Operating loss (3,912,900) (3,571,500)
----------------------------------------
Other income (expense):
Interest expense (3,400) (22,200)
Other income (expense) - 83,400
Interest income 78,900 6,900
----------------------------------------
Loss before income taxes (3,837,400) (3,503,400)
Income tax expense -
----------------------------------------
Net loss $ (3,837,400) $(3,503,400)
========================================
Loss per common and
common equivalent share $ (0.49) $ (0.46)
========================================
Weighted average shares of common
stock and common stock equivalents 7,754,096 7,679,441
</TABLE>
See notes to consolidated financial statements
5
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ENTERACTIVE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended November 30
1997 1996
------------------------------------
(unaudited) (unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (3,837,400) $ (3,503,400)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization 109,400 297,600
Stock Option Consulting expense - 237,500
Changes in assets and liabilities
Accounts receivable (7,800) (499,000)
Assets held for sale 80,100 -
Inventories - (156,300)
Prepaid expenses and other (131,400) (232,100)
Other assets (57,800) -
Accounts payable 128,000 (61,600)
Accrued expenses 230,400 (739,400)
Deferred revenue (69,500) -
------------------------------------
Net cash used in operating activities (3,556,100) (4,656,700)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (428,700) (33,700)
------------------------------------
Net cash (used in ) provided by investing activities (428,700) (33,700)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options 214,500 73,800
Proceeds from sale and leaseback of equipment 168,800 -
Principal payments under long-term debt - (110,400)
------------------------------------
Net cash provided by financing activities 383,400 (36,600)
------------------------------------
Net decrease in cash and cash equivalents (3,601,400) (4,727,000)
CASH AND CASH EQUIVALENTS
Beginning of period 4,952,900 6,005,400
------------------------------------
End of period $ 1,351,500 $ 1,278,400
====================================
</TABLE>
See notes to consolidated financial statements
6
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ENTERACTIVE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. GENERAL
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-QSB and in the opinion of
management contain all adjustments (consisting of only normal recurring
entries) necessary to present fairly the Company's financial position
as of November 30, 1997, and the results of its operations and its cash
flows for the six month and three month periods ended November 30,
1997. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted. The interim financial
statements should be read in conjunction with the Company's financial
statements and related notes in the May 31, 1997 Annual Report on Form
10-KSB. The results for the six month period ended November 30, 1997
are not necessarily indicative of the results to be obtained for the
full year.
2. BUSINESS
Headquartered in New York, New York, Enteractive, Inc. (the "Company")
offers products and services to customers for the design, development,
operation and maintenance of customer Intranets or sites on the
Internet and World Wide Web and publishes multimedia titles to the
home.The Company sold its domestic distribution rights, inventory and
certain accounts receivable from its interactive multimedia publishing
business to a third party. The Company's address is 25 West 45th
Street, Suite 306, New York, New York 10036 and its telephone number is
(212) 768-7100. Its World Wide Web site address is
http://www.crstone.com.
Throughout the first half of fiscal 1997 the Company was primarily
engaged in the development, publishing and marketing of multimedia
interactive software with an emphasis on the CD-ROM platform. As a
result of a rigorous review of the CD-ROM market, the Company's
performance and the related risks of continuing to develop and market
interactive multimedia titles, the Company concluded that it could
capitalize on what the Company believes to be a vibrant market and upon
its expertise in development by redirecting its business to provide
network and web-related solutions, products and services to businesses
and other entities.
The Company, directly or in cooperation with third parties, designs,
develops, installs, maintains and hosts customer Intranets or sites on
the Internet and World Wide Web. According to an August 1996 report by
Forrester Research the number of Web sites is projected to grow from
43,000 at the end of 1996 to 657,000 at the end of 2000. In addition,
businesses are demanding more complex Web sites, as these sites become
increasingly important first points of contact with current and
prospective customers. Accordingly, the Company believes that a
company's web site is becoming a mission-critical component of the
enterprise. Companies are also increasingly deploying Intranets to
manage their internal corporate communications because they enable
employees and business associates to receive corporate information and
training efficiently, communicate through e-mail, use the internal
network's client applications and access proprietary information and
legacy databases.
On December 4, 1996, the Company entered into an agreement (the
"Enteractive Affiliates Agreement") with USWeb Corporation ("USWeb")
pursuant to which the Company became an affiliate of USWeb and a member
of USWeb's network of independent affiliates (the "USWeb Network").
Under the Affiliates Agreement, the Company paid $625,000 for the right
to operate USWeb affiliate offices in certain localities for 10 years
as provided below. USWeb is a public company whose principal investors
include Intel, Softbank Corporation, which owns Comdex and Ziff-Davis
Publishing, 21st Century Communications Partners L.P., Wheatly Partners
L.P. and Reuters. USWeb is seeking to capitalize on the service
opportunities presented by the increasing use of the Internet and
Intranets as commercial tools. The Company has formed a subsidiary,
Enteractive Network Solutions Inc., doing business as USWeb
Cornerstone, which is intended to provide a full range of Internet and
Intranet-based business solutions, including Web Site design, hosting
and management, design and implementation of database and e-commerce
solutions, educational programs and Web-related strategic consulting
and marketing. The Company is obligated to pay USWeb monthly royalty
and service and marketing and advertising fees equal in the aggregate
to 7% of Adjusted Gross Revenues from this business, as defined in the
agreement, but not less than certain contractual fee levels.
The Company has been granted exclusive rights to develop new USWeb
Affiliate offices in Long Island (Nassau-Suffolk County), Philadelphia,
Baltimore, Stamford, CT, and Bergen County and Newark, NJ. The Company
has established a USWeb Affiliate office in New York City and in each
of the above territories. The exclusive rights granted to the Company
are subject to certain minimum performance standards set forth in the
Affiliates Agreement. If the Company is unable to meet these minimum
performance standards, its exclusive rights may be terminated.
7
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3. AFFILIATE RIGHTS
Fees for affiliation rights were paid to USWeb for the right to join
the USWeb network and operate as an affiliate in the territories
indicated in note 2. The fee is being amortized over the 10 year life
of the agreement with USWeb. Affiliate rights at November 30, 1997 were
net of accumulated amortization of $62,500.
4. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and
liabilities and disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amount of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
6. WARRANT EXCHANGES
On September 16, 1997, the Company offered to exchange (the "Exchange
Offer") twenty of its publicly-traded Common Stock Purchase Warrants
(the "Warrants") expiring October 20, 1997 for one share of
newly-issued Common Stock, $.01 par value. On September 16, 1997, there
were 5,121,468 Warrants outstanding. The purpose of the Exchange Offer
was to (i) reduce the overhang to the market for the Company's Common
Stock and (ii) offer Warrant holders the opportunity to participate in
any long term appreciation of the Company's securities, since absent
the Exchange Offer, it is likely that the Warrants have would expired
unexercised on October 20, 1997. On October 14, 1997 the company issued
248,864 shares of common stock, $.01 par value in exchange of 4,977,280
warrants which were exchanged as part of the Exchange Offer. The
balance of the outstanding Warrants expired unexercised.
On November 19, 1997 the Company offered to the holders of 4,200,000
common stock purchase warrants to issue one share of its par value $.01
common stock for 2.8 warrants. The exchange offer is conditioned on all
holders of the warrants agreeing to the exchange and expires on January
20, 1998, unless extended. The warrants subject to the offer entitled
the registered holder to purchase through December 13, 2001 one share
of common stock at $4.00 per share. As a condition to closing the
exchange offer, the Company is seeking the consent of all the holders
of its Convertible Preferred Stock to (1) delay the date when the
Preferred Stock can first be converted into Common Stock from April 30,
1998 until any time after June 30, 1999 and (2) modify the redemption
feature so that one-third, rather than 50%, of the net proceeds from
any public equity offering consummated by the Company prior to January
1, 2000 will be used to redeem the outstanding Preferred Stock and if
the closing price of the Company's common Stock is at least $6.00 for
10 trading days in any 30 day period, the Company will use its best
efforts to complete an underwritten offering of its Common Stock. All
holders of Preferred Stock who approve the delay in the conversion date
will receive a special monthly interest payment equal to 12% per annum
of the stated value of the Preferred Stock ($1,250 per share) for the
period commencing April 30, 1998 and ending the earlier of (1) June 30,
1999 or (2) the redemption date, if any of the Preferred Stock. Such
payment may be made, at the Company's option in either cash or
additional shares of its Common Stock or a combination thereof. Such
payments will be made at the later of (1) the time it redeems the
Preferred Stock, or (2) July 10, 1999 (if the Company does not redeem
the Preferred Stock on or before June 30, 1999)
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The discussion and analysis below should be read in conjunction with
the Financial Statements of Enteractive and the Notes to Financial
Statements included elsewhere in this Form 10-QSB.
OVERVIEW
Enteractive was formed in December 1993 to develop, publish and market
interactive multimedia software products. On December 4, 1996 the
Company signed an agreement with USWeb Corporation under which the
Company has established a subsidiary to operate in New York and the
exclusive rights in Long Island, Philadelphia, Baltimore, Stamford, CT
and Bergen County and Newark, NJ. USWeb Cornerstone, the subsidiary,
provides a full range of Internet and Intranet-based business
solutions; including Web site design, hosting and management, design
and implementation of database and e-commerce solutions, and
Web-related strategic consulting and marketing.
QUARTERLY RESULTS
Since signing the affiliate agreement with USWeb Corporation, the
Company has been building infrastructure to support anticipated sales.
The Company monitors and adjusts expense levels to support the revenue
stream. By May 31, 1997, the Company no longer utilized significant
resources for development or marketing of multimedia products and
consequently most comparisons to the previous years' periods are not
applicable.
8
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By November 30, 1997 the Company, with the approval of USWeb, decided
that it could more cost effectively service the territories covered
under the franchise agreement with USWeb by closing offices in New
Jersey, Long Island, NY Philadelphia, PA and Stamford CT and operate
from offices located in New York City and Baltimore, Maryland. The
statement of operations for the three month period ended November 30,
1997 reflects expenses totaling $427,700 to reflect the Company's
estimated losses from subleasing the closed offices and the severance
associated with eliminating positions deemed unnecessary by management.
The Company expects its quarterly results to vary significantly in the
future. The number of customer contracts signed and fulfilled
significantly influence revenues. Further market acceptance of the
Company's offerings is dependent on (1) the growth and utilization of
the Internet as a medium for commerce, (2) the success of USWeb
establishing and positioning the USWeb brand in the territories where
the Company operates and (3) the success of offerings by competitors.
The Company does not expect seasonal factors to be a significant
influence on revenues.
RESULTS OF OPERATIONS - QUARTER AND SIX MONTHS ENDED NOVEMBER 30, 1997
Net product sales for the three and six month periods ended November
30, 1997 were $0 compared to $441,500 and $766,100 for the three and
six month periods ended November 30, 1996. The decrease is due to the
Company's decision to license others to market and distribute it's
interactive multimedia products. Revenues from these relationships are
reflected as royalties. Prospectively, the Company does not expect any
revenues from CD-ROM title sales other than royalty income as discussed
below.
Internet services revenue for the three and six month periods ended
November 30, 1997 were $376,000 and $518,300 respectively compared to
$0 and $0 for the three and six month periods ended November 30, 1996.
These are consulting and services revenues from USWeb Cornerstone,
which began operations in the current fiscal year.
Royalty revenue for the three and six month periods ended November 30,
1997 were $98,000 and $132,400 respectively compared to $197,600 and
$375,300 for the three and six month periods ended November 30, 1996.
The decrease is the result of the Company's decision to focus on the
Internet business of USWEB Cornerstone. The royalties relate to sales
of titles all of which were first marketed over 12 months ago. This
revenue stream is expected to continue to diminish as the titles
continue to age.
Cost of Internet services revenue for the three and six month periods
ended November 30, 1997 were $319,300 and $418,800 respectively
compared to $0 for the three and six month periods ended November 30,
1996. These costs include the labor (salary and benefits) and overhead
related to the provision of consulting and development services and
cost of equipment resold to clients.
Research and development expenses for the three and six month periods
ended November 30, 1997 were $484,100 and $883,600 respectively
compared to $619,400 and $1,440,200 for the three and six month periods
ended November 30, 1996. The decrease is due to the reduction in
interactive multi-media product development and fewer number of people
performing development. These amounts may increase in the short term,
but, relative to revenue, should decrease over time as development
resources are utilized to fulfill contracts.
Marketing and selling expenses for the three and six month periods
ended November 30, 1997 were $953,500 and $1,752,500 respectively
compared to $1,109,300 and $1,805,800 for the three and six month
periods ended November 30, 1996. Throughout most of the quarter ended
November 30, 1997, the Company incurred costs to staff and equip
multiple sales offices. However, as mentioned earlier, the Company has
recently consolidated its sales operations and selling expense as a
percentage of revenues should decrease.
General and administrative expenses for the three and six month periods
ended November 30, 1997 were $492,400 and $1,058,800 respectively
compared to $468,200 and $907,500 for the three and six month periods
ended November 30, 1996. General and administrative expenses include
costs for accounting, information systems, human resources, legal,
general facilities and senior executives.
Interest and other income includes interest and dividend payments on
cash balances. Interest and other income for the three and six month
periods ended November 30, 1997 were $25,400 and $78,900 respectively
compared to $33,300 and $90,300 for the three and six month periods
ended November 30, 1996 due to lower cash balances.
9
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No income tax benefit was recorded for the quarter ended November 30,
1997. The Company does not believe it will generate taxable income for
the period ending May 31, 1998. Beyond such time, using the standards
set forth in Financial Accounting Standard No. 109, management cannot
currently determine whether the Company will generate taxable income
during the period that the Company's net operating loss carry forward
may be applied towards the Company's taxable income, if any.
Accordingly, the Company has established a valuation allowance against
its deferred tax asset.
LIQUIDITY AND CAPITAL RESOURCES
Since June 1, 1995, the Company's principal sources of capital have
been as follows:
On December 12, 1996 the Company completed a private placement of 84
units each consisting of 80 shares of Preferred Stock and 50,000 Common
Stock Purchase Warrants to purchase in the aggregate 4,200,000 shares
of common stock at an exercise price of $4.00 per share. Proceeds were
approximately $7,869,000, net of related expenses of $531,000. The
Preferred Stock has a stated value of $1,250 per share and each share
is convertible at any time after April 30, 1998 into such whole number
of shares of common stock equal to the aggregate stated value of the
Preferred Stock to be converted divided by the lesser of (i) $2.00 or
(ii) 50% of the average closing sale price for the common stock for the
last ten trading days in the fiscal quarter of the Company prior to
such conversion. The Company must use 50% of the proceeds from any
equity financing, to redeem the Preferred Stock at 110% of the stated
value. The Company also has the option to redeem the Preferred Stock at
any time upon 30 days prior written notice, at a redemption price equal
to 110% of the stated value.
In May 1996, the Company consummated an agreement with certain of its
officers pursuant to which the Company repurchased 1,000,000 shares of
Common Stock at $1.00 per share. Under the purchase agreement as
amended, the Company paid all but $40,200 of the purchase price by
November 30, 1997.
During the second quarter of fiscal 1998, the Company completed a three
year sale/leaseback agreement with a leasing company secured by the net
book value of specific equipment. The Company received $168,800 which
approximated the net book value of the equipment. The current portion
of the $168,800 is $104,700. The effective interest rate of the lease
is 8 1/2% and the monthly payment is $6,400.
At November 30, 1997, the Company had cash and cash equivalents of
$1,351,500. The decrease of $3,601,400 in cash and cash equivalents
from May 31, 1997 reflects the funding of operating activities of
$3,556,100 and the purchase of fixed assets of $428,700.
Capital expenditures were $428,700 for the six months ended November
30,1997 compared to $33,700 for the six months ended November 30, 1996.
The Company's higher fiscal 1998 capital expenditures result from
acquiring equipment required for the US Web affiliate sales offices.
The Company does not anticipate significant capital expenditures for
the remaining of the fiscal year other than for the development center
which will grow relative to sales volume.
In August 1997, Nasdaq enacted new standards for the listing of its
member companies on its Small Cap Market. These standards, which take
effect on February 23, 1998, require listed companies to maintain
certain financial and corporate governance criterion for continued
listing on the SmallCap market. As of November 30, 1997, the Company
would not meet one of the financial criterion which require it to
maintain certain minimum tangible net asset amounts and, thus, would
not meet the new standards for continued listing on the SmallCap
market. After such standards take effect, companies that do not meet
the new standards could be subject to de listing from the SmallCap
market. The Company is actively pursuing its options to ensure that it
attains at least the minimum standards for continued listing on the
SmallCap Market before the six month period expires, however, there can
be no assurances that the Company will be successful in achieving the
new standards and maintaining its SmallCap listing.
Given the Company's anticipation of continued losses and its need to
attain compliance with the new SmallCap listing standards, the Company
is assessing alternative ways to raise capital. The Company will seek
to enter into a transaction or transactions to raise additional capital
during January and February of 1998 to ensure that it has sufficient
capital resources to carry it through the end of 1998. The can be no
assurances that additional financing will be available to the Company.
10
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FORWARD LOOKING STATEMENTS
This Form 10-QSB contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended and
Section 21E of the Securities Exchange Act of 1934, as amended, which
are intended to be covered by the safe harbors created thereby.
Investors are cautioned that all forward-looking statements involve
risks and uncertainty, including without limitation, the ability of the
Company to develop its products, the success of its USWeb Cornerstone
subsidiary as well as general market conditions, competition and
pricing. Although the Company believes that the assumptions underlying
the forward-looking statements contained herein are reasonable, any of
the assumptions could be inaccurate, and therefore, there can be no
assurance that the forward-looking statements included in this Form
10-QKSB will prove to be accurate. In light of significant
uncertainties inherent in the forward-looking statements included
herein, the inclusion of such information should not be regarded as a
representation by the Company or any other person that the objectives
and plans of the Company will be achieved.
INFLATION
The past and expected future impact of inflation on the financial
statements is not significant.
Item 1. Legal Proceedings
None
Item 2. Change in Securities
As described in Note 6 to Notes to Condensed Consolidated Financial
Statements, the Company completed the Exchange Offer during the quarter
ended November 30, 1997.
Item 3. Defaults upon Senior Securities
None
Item 4. Submissions of Matters to a Vote Security Holders
None
Item 5. Other Information
On December 17, 1997, the Company announced that Ed Schroeder was
promoted to President and Chief Executive Officer and named to the
Company's Board of Directors. Since September 1997 Mr. Schroeder has
been a Vice President and General Manager of USWEB Cornerstone. Before
joining Enteractive, Mr. Schroeder had been affiliated with IBM
Corporation for over 25 years. Most recently he was the Vice President,
Northeast Area. In this capacity he directed 250 employees and 150
contractors which generated $450 million in services and hardware
revenues. Prior to that he was General Manager of IBM Long Island with
P&L responsibility for an annual $250 million business providing
hardware, software and professional services. Mr. Andrew Gyenes will
continue as the Chairman of the Board focusing on acquisitions and the
long term strategic direction of the Company.
The Company also announced that in addition to Mr. Schroeder, Ronald E.
Cuneo has joined the Company's Board of Directors. They are replacing
Messrs. Michael Alford and Randal Hujar who have resigned from the
Board. Mr. Cuneo has experience as a CEO working with acquisitions,
growing and transitioning businesses. Most recently Mr. Cuneo was
President of Wang Federal, Inc. a major worldwide systems integrator
and provider of software services and products to the Federal
Government. Prior to that Mr. Cuneo had 25 years of increasing senior
management experience in various divisions of Honeywell.
Item 6. Exhibits and Reports on Form 8-K
None
11
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SIGNATURES
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.
ENTERACTIVE, INC.
-----------------
(Registrant)
Date January 14, 1997 /s/ Kenneth Gruber
------------------------------
Kenneth Gruber
Chief Financial Officer and
Principal Accounting Officer
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED FINANCIAL STATEMENTS FOR THE QUARTER ENDED NOVEMBER 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> NOV-30-1997
<CASH> 1,351,500
<SECURITIES> 0
<RECEIVABLES> 232,200
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,828,800
<PP&E> 1,508,300
<DEPRECIATION> 1,002,300
<TOTAL-ASSETS> 3,016,100
<CURRENT-LIABILITIES> 1,374,900
<BONDS> 0
0
100
<COMMON> 80,200
<OTHER-SE> 1,536,900
<TOTAL-LIABILITY-AND-EQUITY> 3,016,100
<SALES> 474,000
<TOTAL-REVENUES> 474,000
<CGS> 341,500
<TOTAL-COSTS> 2,699,200
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,203,200)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,203,200)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,203,200)
<EPS-PRIMARY> (.28)
<EPS-DILUTED> (.28)
</TABLE>
