-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Bt3YBuwniDCKqrz0OWV/eVVqRYcxwOByqj+mTlLprLjjbQmcmGSFcogyVi0qIyjU 92shDEe3p+nHJYASyaUY8g== 0000903893-97-000989.txt : 19970725 0000903893-97-000989.hdr.sgml : 19970725 ACCESSION NUMBER: 0000903893-97-000989 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970531 FILED AS OF DATE: 19970717 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WEBSECURE INC CENTRAL INDEX KEY: 0001003504 STANDARD INDUSTRIAL CLASSIFICATION: 7374 IRS NUMBER: 043296069 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 001-14584 FILM NUMBER: 97642026 BUSINESS ADDRESS: STREET 1: 1711 BROADWY STREET 2: CORPORATE CENTER NORTH CITY: SAUGUS STATE: MA ZIP: 01906 BUSINESS PHONE: 6178672300 MAIL ADDRESS: STREET 1: 1711 BROADWAY CITY: SAUGUS STATE: MA ZIP: 01906 10QSB 1 FORM 10QSB SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB QUARTERLY REPORT FILED UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended Commission File Number May 31, 1997 0-21649 ------------ ------- WEBSECURE, INC. --------------- (Exact Name of Small Business Issuer As Specified In Its Charter) Delaware 04-3296069 -------- ---------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification Number) 1711 Broadway, Saugus, Massachusetts 01906 ------------------------------------------ (Address of Principal Executive Offices) (617) 867-2300 -------------- (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 ------- ------- As of July 14, 1997, the Company had outstanding 5,606,875 shares of Common Stock, $.01 par value per share. WEBSECURE, INC. INDEX
PART I. FINANCIAL INFORMATION PAGE ITEM 1. FINANCIAL STATEMENTS Balance Sheets as of May 31, 1997 (Unaudited) and August 31, 1996 (Audited)................... 3 Statements of Operations for the Three and Nine Month Periods ended May 31, 1997 and 1996 (Unaudited) and cumulative from inception (July 19, 1995) to May 31, 1997.................. 4 Statements of Cash Flows for the Three and Nine Month Periods ended May 31, 1997 and 1996 (Unaudited) and cumulative from inception (July 19, 1995) to May 31, 1997.................. 5-6 Notes to Financial Statements (Unaudited)......................................... 7-8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS ..................................... 9-11 PART II. OTHER INFORMATION ........................................................ 12 ITEM 1. LEGAL PROCEEDINGS......................................................... 12 ITEM 2. CHANGES IN SECURITIES..................................................... 13 ITEM 3. DEFAULTS UPON SENIOR SECURITIES........................................... 13 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS ..................... 13 ITEM 5. OTHER INFORMATION ....................................................... 13 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.......................................... 13 SIGNATURES......................................................................... 14,15
2 WEBSECURE, INC. (A DEVELOPMENT STAGE COMPANY) BALANCE SHEETS
May 31, August 31, 1997 1996 ---- ---- (Unaudited) (Audited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 3,074,631 $ 12,832 Accounts receivable, net 183,238 21,797 Inventories 943 5,971 Due from related parties 84,630 59,776 Prepaid expenses and other 68,402 6,600 Legal retainers and deposit 233,251 -- ----------- ----------- Total Current Assets 3,645,094 106,976 PROPERTY AND EQUIPMENT, NET 1,215,881 1,173,397 RESTRICTED CASH 691,405 -- DEFERRED REGISTRATION COSTS -- 424,060 OTHER ASSETS 122,254 41,515 ----------- ---------- $ 5,674,634 $1,745,948 =========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES: Accounts payable and accrued expenses $ 338,614 $ 679,435 Reserve for software license settlement 791,750 -- Due to related parties -- 125,635 Note payable to related party -- 672,000 Current portion of capital lease obligations 183,432 71,763 ----------- ---------- Total current liabilities 1,313,796 1,548,833 CAPITAL LEASE OBLIGATION, LESS CURRENT MATURITIES 802,951 300,430 ----------- ---------- Total liabilities 2,116,748 1,849,263 ----------- ---------- STOCKHOLDERS' EQUITY (DEFICIT): Preferred stock, $.01 par value; 1,000,000 shares authorized; no shares issued and outstanding -- -- Common stock, $.01 par value; 20,000,000 shares authorized; 5,606,875 and 2,105,000 shares issued and outstanding. 56,069 21,050 Class B common stock, $.01 par value; 2,000,000 shares authorized; 0 and 625,000 shares issued and outstanding -- 6,250 Additional paid-in capital 14,288,131 7,827,025 Deficit accumulated during the development stage (10,786,314) (7,957,640) ----------- ---------- Total stockholders' equity (deficit) 3,557,886 (103,315) ----------- ---------- $ 5,674,634 $1,745,948 =========== ==========
See accompanying notes to financial statements -3- WEBSECURE, INC. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF OPERATIONS
Cumulative from Inception Three Months Ended Nine months Ended (July 19, 1995) to May 31, May 31, May 31, May 31, May 31, 1997 1996 1997 1996 1997 -------- -------- -------- ------- -------- Revenues $68,410 $17 $216,240 $31,763 $313,495 Cost of revenues 260,315 (24,059) 750,302 77,951 $943,742 ----------- ---------- ---------- ----------- ------------ Gross margin (191,905) 24,076 (534,062) (46,188) (630,247) ----------- ----------- ---------- ----------- ------------ Operating expenses: General and administrative 1,018,026 566,815 1,802,791 948,446 2,381,039 Selling and marketing 74,416 136,659 398,573 204,706 699,199 Research and development 61,447 303,239 147,072 471,937 1,323,443 Charge for acquired research and development --- 5,760,000 --- 5,760,000 5,760,000 ----------- ----------- ----------- ----------- ------------ Total operating expenses 1,153,889 6,766,713 2,348,436 7,385,089 10,163,681 Loss from operations (1,345,794) (6,742,637) (2,882,498) (7,431,277) (10,793,928) Interest income (expense), net 32,002 18,762 53,824 1,890 7,614 ----------- ----------- ----------- ----------- ------------ Loss before income taxes (1,313,792) (6,723,875) (2,828,674) (7,429,387) (10,786,314) Income taxes --- --- --- --- --- ----------- ----------- ----------- ----------- ------------ Net loss $(1,313,792) $(6,723,875) $(2,828,674) $(7,429,387) $(10,786,314) =========== =========== =========== =========== ============ Net loss per common and common equivalent shares (.23) (1.20) (.50) (1.33) (1.92) ==== ===== ==== ===== ===== Weighted Average Shares used in computing net loss per common and common equivalent shares 5,606,496 5,605,750 5,606,129 5,605,750 5,606,875
See accompanying notes to financial statements -4- WEBSECURE, INC. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF CASH FLOWS
Cumulative from Inception Three Months Ended Nine months Ended (July 19, 1995) to May 31, May 31, May 31, May 31, May 31, 1997 1996 1997 1996 1997 ---- ---- ---- ---- ---- Cash flows from operating activities: Net loss $(1,313,792) $(6,723,877) $(2,828,674) $(7,429,386) $ (10,786,314) Adjustments to reconcile net loss to net cash used by operating activities: Charge for acquired research and development --- 5,760,000 --- 5,760,000 5,760,000 Issuance of common stock for professional services --- 79,800 --- 79,800 79,800 Depreciation and amortization 118,038 69,640 326,881 127,920 524,347 Changes in operating assets and liabilities Accounts receivable & other (173,094) 173,506 (161,441) ( 41,484) (183,238) Inventories 29 (3,537) 5,028 ( 10,295) (943) Prepaid expenses and other (112,538) 1,116 (295,052) 9,445 (301,652) Accounts payable and accrued expenses (84,960) 236,095 450,929 1,137,515 1,130,364 ---------- -------- ---------- ---------- ---------- Net cash used by operating activities (1,566,317) (407,257) (2,502,329) (366,485) (3,777,636) ---------- -------- ---------- ---------- ---------- Cash flows from investing activities: Acquisition of property and equipment ( 112,612) ( 119,009) (369,365) (798,614) (1,738,980) Notes Receivable --- 122,110 --- (127,890) --- Deferred registration costs (170,003) 424,060 (224,060) --- Increase (decrease) in other assets (54,154) (24,915) ( 80,739) (21,806) (123,502) ---------- --------- ---------- ---------- ---------- Net cash used in investing activities (166,766) ( 191,817) (26,044) (1,172,370) (1,862,482) ---------- ---------- ---------- ----------- ---------- Cash flows from financing activities: Borrowings under capital leases --- --- 735,431 416,084 1,124,487 Principal payments on capital lease ( 47,839) ( 10,919) ( 121,241) (27,028) (138,104) (Increase) decrease in due from related parties (54,081) 41,580 (24,854) (785,795) (84,630) Subscriptions receivable --- 595,000 --- --- --- Decrease in due to related parties --- --- (125,635) (17,343) --- Decrease (increase) in restricted cash 49,169 --- (691,405) --- (691,405)
See accompanying notes to financial statements 5 WEBSECURE, INC. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF CASH FLOWS (CONTINUED)
Cumulative from Inception Three Months Ended Nine months Ended (July 19, 1995) to May 31, May 31, May 31, May 31, May 31, 1997 1996 1997 1996 1997 ------- ----- --------- ---- ----- Cash flows from financing activities (continued): Proceeds from issuance of common stock --- --- 6,485,375 2,014,535 8,499,900 Proceeds from exercise of common stock options 4,500 --- 4,500 --- 4,500 Proceeds from notes payable to related party --- 105,250 27,083 239,178 1,522,083 Payments of notes payable to related party --- --- (699,083) (168,928) (1,522,083) ---------- -------- ---------- --------- ---------- Net cash provided (used) by financing (48,251) 730,911 5,590,171 1,670,703 8,714,748 ---------- --------- ---------- --------- --------- activities Net increase (decrease) in cash and cash equivalents (1,781,333) 131,839 3,061,799 131,848 3,074,631 Cash and cash equivalents, beginning of period 4,855,964 --- 12,832 --- ---------- --------- ---------- ----------- ---------- Cash and cash equivalents, end of period $3,074,631 $ 131,839 $3,074,631 $ 131,839 $3,074,631 ========== ========= ========== =========== ========== Supplemental cash flow information: Cash paid for interest $ 27,070 $ 16,872 $ 85,040 $ 16,872 $ 125,776
See accompanying notes to financial statements 6 WEBSECURE, INC. NOTES TO FINANCIAL STATEMENTS 1. GENERAL WebSecure, Inc. (the "Registrant") is in the development stage, and as such, success of future operations is subject to a number of risks similar to those of other companies in the same stage of development. Principal among these risks are the Company's limited operating history, history of operating losses, early stage of market development, competition from substitute products, larger more established competitors and rapid technological change. The accompanying unaudited financial statements have been prepared in accordance with the instructions for Form 10-QSB and therefore do not include all information and footnotes necessary for a fair presentation of financial position, results of operations and changes in cash flows in conformity with generally accepted accounting principles. The unaudited financial statements should be read in conjunction with the financial statements and related notes included in the Registrant's Form SB-2 Registration Statement as filed with the Securities and Exchange Commission (the "SEC") on December 4, 1996. In the opinion of management, the unaudited financial statements contain all adjustments necessary for a fair presentation of the Registrant's financial condition and results of operations for the interim periods presented and all such adjustments are of a normal and recurring nature. The results of operations for the nine months ended May 31, 1997 are not necessarily indicative of the results which may be expected for the entire fiscal year. COMPUTATION OF NET LOSS PER COMMON AND COMMON EQUIVALENT SHARES The net loss per common and common equivalent shares is computed by dividing the net loss by the weighted average number of shares outstanding during each period presented, as adjusted for the effects of application of SEC Staff Accounting Bulletin No. 83 ("SAB No. 83"). Pursuant to SAB No. 83, all common stock and common stock equivalents issued within twelve months prior to the initial filing of the registration statement relating to the Company's initial public offering (the "IPO") at a price less than the IPO price have been treated as outstanding for all reported periods. The number of shares used in the computation also includes the conversion of outstanding Class B Common Stock into four shares of Common Stock, which occurred on the date of filing of the Registrant's Form SB-2 Registration Statement with the SEC. INITIAL PUBLIC OFFERING On December 10, 1996 the Company consummated a public offering of 1,000,000 shares of common stock at a price of $8.00 per share and redeemable warrants to purchase 1,000,000 shares of common stock at $9.60 per share, at a price of $.20 per warrant. The gross proceeds from the public offering of $8,200,000 was reduced by the underwriting discount and non-accountable expense allowance totaling $1,066,000 and legal, printing, accounting and other registration costs of $648,625. 7 2. REVERSAL OF REVENUE FROM MANADARIN TRADING CO. LTD. As a result of an investigation conducted in the prior quarter at the Company's request, by the Boston law firm of Hill & Barlow, the Company restated its revenues for the first quarter ended November 30, 1996. During the first quarter, the Company previously reported sales of approximately $887,000; approximately $792,000 of said sales were for licensing software that the Company believed it had purchased in exchange for stock from Manadarin Trading Company, Ltd., an Irish corporation. Based upon the Hill & Barlow investigation, the Company determined that it never received any software from Manadarin, and even though it received approximately $792,000 from two purported sublicensees of the software, WebSecure never delivered any software to them. The Company has booked the money received from the sublicensees as cash, instead of revenue, and simultaneously recorded the approximately $792,000 as a liability on its books. Subsequently on June 30, 1997 the Company repaid one of the sublicensees $266,750 and $7,308 of interest. WebSecure is considering what further action to take and intends to report its findings to proper authorities and will cooperate fully with any further investigation. 3. ACCOUNTS RECEIVABLE On April 18, 1997 the Company entered into a factoring agreement with Cauldron Corporation which calls for WebSecure to factor up to $200,000 of Cauldron's accounts receivable. The agreement specifies that WebSecure is to receive a fee of 2% of the face value of the accounts receivable factored and that WebSecure fund 80% of the value of each account and hold 20% in reserve to be applied against charge-backs or any obligations of Cauldron to WebSecure. Cauldron Corporation is owned in principle by an employee of WebSecure. WebSecure earned $3,106 on the factored receivables during the quarter ended May 31, 1997. Factored receivables were $133,255 at May 31, 1997. 4. SUBSEQUENT EVENTS On July 10, 1997 WebSecure appointed the firm of Reznick Fedder & Silverman as the Company's independent accountants to replace BDO Seidman, LLP. During the year ended August 31, 1996 and the period from inception (July 19, 1995) to August 31, 1995, and the subsequent interim period through April 21, 1997 (the date of BDO Seidman, LLP's resignation as the Company's independent accountants), there were no disagreements with BDO Seidman, LLP on any matters of accounting principles or practices, financial statement disclosure or auditing scope or procedure or any "reportable events" with the accountants as described in Items 304(a)(1)(iv) and (v) of Regulation S-K. The independent accountant reports of BDO Seidman, LLP on the Company's financial statements for the year ended August 31, 1996 and period from inception (July 19, 1995) to August 31, 1995 each expressed a going concern opinion. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS ------------------------------------ OVERVIEW The Registrant, a development stage Company, offers Internet access and support services for secure communications and commercial transactions over the Internet. The Company provides general Internet services, such as connectivity and communications services. The financial results for the period from inception (July 19, 1995) to May 31, 1997 primarily relate to the Company's initial organization and establishment of infrastructure. The Company has had limited revenues since inception and working capital of $2,331,298 at May 31, 1997. The results for the quarter ended May 31, 1997 are not necessarily indicative of the results of the Company's operations that may be expected for the fiscal year ending August 31, 1997. The Company completed its IPO on December 10, 1996. The Company sold 1,000,000 shares of common stock and 1,150,000 redeemable warrants, and received net proceeds of approximately $6,485,000. The Company's plan of operations for the next twelve months will principally involve the sale of connectivity and the provision of Internet access services in addition to web site development and internet commerce. The Company continues to use a portion of the IPO proceeds to hire additional personnel, including marketing, sales and customer service personnel, as well as to continue to upgrade its Internet access infrastructure and services. RESULTS OF OPERATIONS Revenues. The Company had revenues of $216,240 during the nine month period ended May 31, 1997 compared to $31,673 during the nine months ended May 31, 1996, an increase of $184,477 primarily related to increased connectivity, communications services and web site development. The Company anticipates it will derive revenues primarily from connectivity charges, hosting services, web site development and intranet networking. Cost of revenues. The Company's cost of revenues have exceeded revenues since inception. The negative gross margin of ($534,062) primarily relates to the Company's early stages of development. As sales revenues increase, the cost of revenues is expected to decline as a percentage of revenue. General and Administrative. The Company had general and administrative expenses of $1,802,791 during the nine month period ended May 31, 1997 compared to $948,446 during the nine months ended May 31, 1996, an increase of $854,345. This increase consists primarily of legal, compensation expense for increased personnel, rent and insurance expenses. From inception through March 31, 1997, approximately $1,679,000 of the general and administrative expenses were paid to Employee Resource, Inc. ("ERI"), an employee leasing Company owned by the Company's former President and Chief Executive Officer which leased to the Company all of its employees, including the officers of the Company. The Company terminated its agreement with ERI on March 31, 1997 and entered into a similar agreement with Genesis Consolidated Services, Inc., an unaffiliated company. Selling and Marketing. The Company had selling and marketing expenses of $398,573 during the nine 9 month period ended May 31, 1997 compared to $204,706 during the nine months ended May 31, 1996, an increase of $193,867. This increase consisted of primarily of salaries and advertising costs. Research and Development. The Company's research and development efforts are focused on development of the Company's co-hosting capabilities. The Company is also developing intranet models for intraorganization communications that can be used by multi-site organizations as well as a communications infrastructure to allow for daily information transfer to the Company for periodic back-up of customer files for disaster control purposes. The Company had research and development expenses of $147,072 during the nine month period ended May 31, 1997 compared to $471,937 during the nine months ended May 31, 1996, a decrease of $324,865. The decrease in research and development expenses is due primarily to the fact that the majority of the initial infrastructure development has been accomplished. Net Interest Income (Expense). Net interest income was $32,002 for the three month period ended May 31, 1997 compared to interest income of $18,762 for the three months ended May 31, 1996. Net interest income was $53,824 for the nine month period ended May 31, 1997 compared to interest income of $1,890 for the nine month period ended May 31, 1996 an increase of $51,934. The increase in interest income was from investment of the proceeds of the Company's IPO in interest bearing instruments and cash equivalent securities. Interest expense decreased as a result of the payoff of Notes Payable to related parties in January 1997. Income Taxes. Since inception, the Company has generated tax benefits related to its operating loss carry-forwards and of research and development costs. The deferred asset related to such benefits was fully reserved as of May 31, 1997 due to the significant doubt about the realization of the deferred tax asset. Accordingly, there has been no income tax expense or benefit reflected on the accompanying statements of operations since inception. LIQUIDITY AND CAPITAL RESOURCES Since its inception, the Company has financed its activities primarily by the IPO which closed on December 10, 1996 and raised approximately $6,485,000, as well as by loans from a stockholder, and the sale of its Common Stock to private investors. As a result of the IPO, working capital at May 31, 1997 was $2,331,298. The Company has three capital lease agreements which are secured by fixed assets. The outstanding balance as of May 31, 1997 for one of these agreements was approximately $319,000 and matures in December 2000. In September 1996, the Company entered into two additional capital lease agreements under which it may borrow up to an aggregate of $1,000,000 of which approximately $668,000 was outstanding at May 31, 1997. These obligations mature in October 2001. On December 10, 1996, the Company deposited, as collateral, a portion of the proceeds from the IPO equal to the amount outstanding under the September 1996 agreements. For the three months ended May 31, 1997, cash of approximately $1,566,000 was used by operating activities compared to cash used by operating activities of approximately $407,000 for the three months ended May 31, 1996. The Company used cash of approximately $2,502,000 during the nine month period ended May 31, 1997 compared to approximately $366,000 during the nine months ended May 31, 1996, an increase of $2,136,000, due primarily to the Company's net loss of approximately $2,829,000, compared to $1,670,000 (excluding non-cash charges of $5,760,000) for the nine months ended May 31, 1996, a 10 reduction in accounts payable and accrued expenses of approximately $687,000 and increase of approximately of $305,000 in prepaid expenses. During the period from inception to May 31, 1997, the Company recorded a non-cash charge of $5,760,000 against earnings for acquired research and development, which was a substantial component of the Company's overall net loss for the period of approximately $10,786,000. On December 10, the Company consummated a public offering of 1,000,000 shares of common stock at a price of $8.00 per share and redeemable warrants to purchase 1,000,000 shares of common stock at $9.60 per share, at a price of $.20 per warrant. The gross proceeds from the public offering of $8,200,000 was reduced by the underwriting discount and non-accountable expense allowance totaling $1,066,000 and legal, printing, accounting and other registration costs of $648,625. In addition the Company has raised approximately $2,014,500 from the sale of Common Stock and private offerings to third party investors during the year ended August 31, 1996. The Company has borrowed approximately $1,522,000 from related parties since inception, all of which has been repaid as of January 17, 1996. Management believes that the net proceeds from the IPO and anticipated revenues from operations will be sufficient to meet the Company's anticipated cash needs and finance its plans for expansion for at least the next twelve months. Thereafter, the Company anticipates that it may require additional financing to meet its current plans for expansion. No assurance can be given of the Company's ability to obtain such financing on favorable terms, if at all. If the Company is unable to obtain additional financing, its ability to meet its current plans for expansion could be materially adversely affected. IMPACT OF INFLATION Inflation has not had a material adverse effect on the Company's business. NEW ACCOUNTING STANDARDS Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of," issued by the Financial Accounting Standards Board ("FASB"), is effective for financial statements for fiscal years beginning after December 15, 1995. The new standard establishes new guidelines regarding when impairment losses on long-lived assets, which include plant and equipment and certain identifiable intangible assets and goodwill, should be recognized and how impairment losses should be measured. The adoption of the standard did not have a material effect on its financial position or results of operations. In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation." The Company has determined that it will continue to account for stock-based compensation for employees under Accounting Principles Board Opinion No. 25 and elect the disclosure-only alternative under SFAS No. 123. The Company will be required to disclose the pro forma net income or loss and per share amounts in the notes to the financial statements using the fair-value-based method beginning in the year ending August 31, 1997, with comparable disclosures for the year ended August 31, 1996. The Company has not determined the impact of these pro forma adjustments. 11 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. 1. The Registrant has been named as a defendant in five almost identical proceedings brought in the United States District Court for the District of Massachusetts (Nager v. WebSecure, Inc. et al); (Krause and Krause v. WebSecure, Inc., et al); (Miller, Weberman and Fisher v. WebSecure, Inc. et al); (Lifshitz v. WebSecure, Inc. et al); and (Friedman v. WebSecure, Inc. et al). The actions were commenced between March and May 1997. Also named as defendants were certain current and former officers and directors of the Registrant, Coburn & Meredith, Inc. and Shamrock Partners, Ltd., the underwriters of the Registrant's initial public offering (the "IPO"), and Centennial Technologies, Inc. ("Centennial"). The complaints allege inter alia that the registration statement filed by the Registrant in connection with the IPO contains certain false and misleading statements concerning the Registrant and its operations and in certain cases that the stock price of the Registrant was artificially inflated. The complaints seek compensatory damages, attorney's fees, and other damages. 2. The Registrant has responded to subpoena duces tecum by the Massachusetts Securities Division (the "Division"), which inquiry was commenced on March 19, 1997. The Division is seeking additional information concerning the relationship between the Registrant and Centennial. Also named as subjects of the inquiry are Coburn & Meredith, Inc. and Shamrock Partners, Ltd. In addition, the Office of the U.S. Attorney for Massachusetts has issued a subpoena to the Registrant to produce certain documents in connection with the above-described relationship and related matters. 3. On April 7, 1997, the Company received a letter from the Securities and Exchange Commission ("SEC") requesting the voluntary production of documents and information in connection with an informal inquiry captioned In the Matter of WebSecure, Inc. (MB-930). The Company is cooperating with the SEC and is in the process of producing the requested documents and information. 4. On June 12, 1997 the Registrant received notification from NASDQ that the Company's shares of common stock and warrants were delisted from the NASDQ SmallCap Market as a result of its' failure to meet the public interest requirement as stated in the Marketplace Rule 4330(a)(03). On June 18, 1997 the Company requested that the decision of the Listings qualification Panel be reviewed by the Hearings Review Committee and reversed. The Registrant has also received notification from the Philadelphia Stock Exchange that the Company's common stock will be delisted on the Philadelphia Stock Exchange as well based upon similar rationale. The Company is currently in the process of taking actions to rectify the problems which resulted in the NASDQ and Philadelphia Stock Exchange delisting decisions. 12 ITEM 2. CHANGES IN SECURITIES. None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. ITEM 5. OTHER INFORMATION. None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) EXHIBITS. None. (b) REPORTS ON FORM 8-K. The Registrant filed reports on Form 8-K on April 2 and April 9, 1997 under Item 5 ("Other Events") and on April 28, 1997 under Item 4 ("Changes in Registrants Certifying Accountants"). No financial statements were filed with that report. 13 SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WEBSECURE, INC. Date: July 16, 1997 By: /s/ Carroll M. Lowenstein -------------------------- Carroll M. Lowenstein President and Secretary By: /s/ Neil G. Howland --------------------------- Neil G. Howland Director 14 EX-27 2 FINANCIAL DATA SCHEDULE
5 9-MOS AUG-31-1997 MAR-01-1997 MAY-31-1997 3,766,036 0 183,238 0 943 3,645,094 1,736,905 521,024 5,674,634 338,151 802,951 0 0 56,069 0 5,674,364 216,240 216,240 55,069 750,302 2,348,436 0 0 (2,828,674) 0 (2,828,674) 0 0 0 (2,828,674) (.50) (.50)
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