-----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, RHbpX7p4a+lSedcMOLjq7Om9sSjJWPNM3Vu1f/RmvBvnIQKvt/EtoJhaoR9JFyDJ lMyJkTkyOiqMSduT+z7Fqg== 0000950144-01-502326.txt : 20010516 0000950144-01-502326.hdr.sgml : 20010516 ACCESSION NUMBER: 0000950144-01-502326 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRSTWAVE TECHNOLOGIES INC CENTRAL INDEX KEY: 0000897078 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 581588291 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-21202 FILM NUMBER: 1635387 BUSINESS ADDRESS: STREET 1: 2859 PACES FERRY RD STREET 2: STE 1000 CITY: ATLANTA STATE: GA ZIP: 30339 BUSINESS PHONE: 7704311200 MAIL ADDRESS: STREET 1: 2859 PACES FERRY RD STREET 2: STE 1000 CITY: ATLANTA STATE: GA ZIP: 30339 FORMER COMPANY: FORMER CONFORMED NAME: BROCK INTERNATIONAL INC DATE OF NAME CHANGE: 19960227 FORMER COMPANY: FORMER CONFORMED NAME: BROCK CONTROL SYSTEMS INC DATE OF NAME CHANGE: 19930208 10-Q 1 g69364e10-q.txt FIRSTWAVE TECHNOLOGIES, INC. 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED MARCH 31, 2001 COMMISSION FILE NUMBER 0-21202 FIRSTWAVE TECHNOLOGIES, INC. 7372 GEORGIA 58-1588291 (Primary Std. Ind. (State of incorporation) (IRS Employer Classification Code #) Identification #) 2859 PACES FERRY ROAD, SUITE 1000 ATLANTA, GEORGIA 30339 (Address of principal executive offices) (770-431-1200) (Telephone number of registrant) 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 [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Outstanding as of May 14, 2001 ------------------------------ Common Stock, no par value 6,300,841 Shares 2 FIRSTWAVE TECHNOLOGIES, INC. FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2001 INDEX -------------
Page No. -------- Part I. Financial Information Item 1. Financial Statements Consolidated Balance Sheet - December 31, 2000 and March 31, 2001 3 Consolidated Statement of Operations - For the Three Months Ended March 31, 2000 and March 31, 2001 4 Consolidated Statement of Changes in Shareholders' Equity - For the Three Months Ended March 31, 2001 5 Consolidated Statement of Cash Flows - For the Three Months Ended March 31, 2000 and March 31, 2001 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Part II. Other Information 13
2 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS FIRSTWAVE TECHNOLOGIES, INC. CONSOLIDATED BALANCE SHEET (IN THOUSANDS)
DEC 31, MAR 31, 2000 2001 -------- ----------- (UNAUDITED) ASSETS CURRENT ASSETS: CASH AND CASH EQUIVALENTS $ 1,281 $ 557 RESTRICTED CASH 2,200 2,200 INVESTMENT SECURITIES, HELD TO MATURITY 0 300 ACCOUNTS RECEIVABLE, LESS ALLOWANCE FOR DOUBTFUL ACCOUNTS OF $287 AND $307, RESPECTIVELY 1,774 1,170 PREPAID EXPENSES AND OTHER ASSETS 444 404 -------- -------- TOTAL CURRENT ASSETS 5,699 4,631 PROPERTY AND EQUIPMENT, NET 717 577 SOFTWARE DEVELOPMENT COSTS, NET 2,580 2,527 GOODWILL 311 268 -------- -------- $ 9,307 $ 8,003 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: ACCOUNTS PAYABLE $ 679 $ 392 DEFERRED REVENUE 1,047 908 ACCRUED EMPLOYEE COMPENSATION AND BENEFITS 216 175 BORROWINGS 2,836 3,176 DIVIDENDS PAYABLE 113 97 OTHER ACCRUED LIABILITIES 188 150 -------- -------- TOTAL CURRENT LIABILITIES 5,079 4,898 REDEEMABLE PREFERRED STOCK 1,702 1,702 SHAREHOLDERS' EQUITY 2,526 1,403 -------- -------- $ 9,307 $ 8,003 ======== ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 3 4 FIRSTWAVE TECHNOLOGIES, INC. CONSOLIDATED STATEMENT OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
FOR THE THREE MONTHS ENDED -------------------------- MAR 31, MAR 31, 2000 2001 -------- -------- NET REVENUES SOFTWARE $ 737 $ 132 SERVICES 672 750 MAINTENANCE 1,094 703 OTHER 66 28 -------- -------- 2,569 1,613 -------- -------- COST AND EXPENSES COST OF REVENUES SOFTWARE 295 284 SERVICES 637 469 MAINTENANCE 430 272 OTHER 64 18 SALES AND MARKETING 963 791 PRODUCT DEVELOPMENT 242 195 GENERAL AND ADMINISTRATIVE 731 663 -------- -------- 3,362 2,692 -------- -------- OPERATING LOSS (793) (1,079) INTEREST INCOME/(EXPENSE) 43 (30) GAIN/(LOSS) ON INVESTMENTS 0 (12) -------- -------- LOSS BEFORE INCOME TAXES (750) (1,121) INCOME TAXES (20) 0 -------- -------- NET LOSS $ (770) $ (1,121) ======== ======== DIVIDENDS ON PREFERRED STOCK (45) (38) -------- -------- NET LOSS APPLICABLE TO COMMON SHAREHOLDERS $ (815) $ (1,159) ======== ======== BASIC AND DILUTED NET LOSS PER SHARE $ (0.14) $ (0.18) ======== ======== BASIC AND DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 5,752 6,294 ======== ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 4 5 FIRSTWAVE TECHNOLOGIES, INC. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (IN THOUSANDS, EXCEPT SHARE DATA) (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31, 2001
ACCUMULATED COMMON STOCK ADD'L COMPRE- OTHER -------------------- PAID-IN HENSIVE COMPREHENSIVE ACCUMULATED SHARES AMOUNT CAPITAL LOSS LOSS DEFICIT TOTAL --------- ------ -------- ------- ------------- ----------- ------- BALANCE AT DECEMBER 31, 2000 6,288,472 $ 12 $ 22,587 $ 0 $ (28) $(20,045) $ 2,526 EXERCISE OF COMMON STOCK OPTIONS 1,700 3 3 EMPLOYEE STOCK PLAN PURCHASES 4,822 4 4 COMPREHENSIVE LOSS: NET LOSS (1,121) (1,121) (1,121) UNREALIZED LOSS ON INVESTMENT SECURITIES (4) (4) (4) FOREIGN CURRENCY TRANSLATION ADJUSTMENT (5) (5) (5) ------- ACCUMULATED COMPREHENSIVE LOSS (1,130) ------- --------- ---- -------- ----- -------- ------- BALANCE AT MARCH 31, 2001 6,294,994 $ 12 $ 22,594 $ (37) $(21,166) $ 1,403 ========= ==== ======== ===== ======== =======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 5 6 FIRSTWAVE TECHNOLOGIES, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
FOR THE THREE MONTHS ENDED ---------------------------------- MAR 31, 2000 MAR 31, 2001 ------------ ------------ CASH FLOWS USED IN OPERATING ACTIVITIES $ (47) $ (517) CASH FLOWS FROM INVESTING ACTIVITIES SOFTWARE DEVELOPMENT COSTS (500) (224) PURCHASES OF PROPERTY AND EQUIPMENT (77) (21) PURCHASE OF INVESTMENT SECURITIES (493) (711) PROCEEDS FROM SALE/MATURITY OF INVESTMENT SECURITIES 1,646 395 LOSS ON INVESTMENT SECURITIES 0 12 -------- -------- NET CASH PROVIDED BY/(USED IN) INVESTING ACTIVITIES 576 (549) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES PROCEEDS FROM EMPLOYEE STOCK PURCHASE PLAN 1 4 PAYMENT OF DIVIDENDS ON PREFERRED STOCK (123) (16) PROCEEDS FROM BORROWINGS 0 750 REPAYMENT OF BORROWINGS 0 (410) EXERCISE OF COMMON STOCK OPTIONS 192 3 -------- -------- NET CASH PROVIDED BY FINANCING ACTIVITIES 70 331 -------- -------- -------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH 1 11 -------- -------- INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 600 (724) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,029 1,281 -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,629 $ 557 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -------- -------- CASH PAID FOR INCOME TAXES $ 20 $ 0 ======== ======== CASH PAID FOR INTEREST $ 0 $ 60 ======== ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 6 7 FIRSTWAVE TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2001 A. BASIS OF PRESENTATION Firstwave Technologies, Inc. (the "Company") is a provider of Internet customer relationship management solutions. The Firstwave eCRM (Internet-based Customer Relationship Management) Suite is an integrated, Internet-based suite of applications created to fulfill and manage the e-business relationship needs of a company in the areas of sales, marketing, and support. The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, the consolidated financial statements do not include all of the information and footnotes required by generally accepted accounting principles and should be read in conjunction with the consolidated financial statements contained in the Company's Form 10-K for the period ended December 31, 2000. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the consolidated financial statements have been included. The consolidated financial statements include the accounts of Firstwave Technologies, Inc. and its wholly owned subsidiary Firstwave Technologies UK, Ltd. All significant intercompany transactions and balances have been eliminated in consolidation. B. ACCOUNTING POLICIES REVENUE RECOGNITION Revenue from software product sales is recognized upon shipment of the product when the Company has a signed contract, the fees are fixed and determinable, no significant obligations remain and collection of the resulting receivable is probable. The Company accrues for estimated warranty costs at the time it recognizes revenue. Services revenue is recognized as services are performed. Maintenance revenue is recognized on a pro rata basis over the term of the maintenance agreements. International revenues are primarily generated by Firstwave UK and independent distributors who offer licenses of the Company's products in specific geographic areas. Under the terms of the Company's international distributor agreements, international distributors collect license fees and maintenance revenues on behalf of the Company, and generally remit 50% to 60% of standard license fees and maintenance revenues they produce. The Company recognizes international sales at the gross license amount, with the amount paid to the distributors reflected as a selling expense. The Company's international maintenance fees are reflected as maintenance revenues, with the amount retained by distributors shown as a cost of maintenance revenue. Revenues from nonmonetary exchanges are recorded at the fair value of the products and services provided or received, whichever is more clearly evident. 7 8 Advanced billings for services and maintenance contracts are recorded as deferred revenue on the Company's balance sheet, with revenue recognized as the services are performed and on a pro-rata basis for maintenance. BASIC AND DILUTED NET LOSS PER COMMON SHARE Basic net loss per common share is based on the weighted average number of shares of common stock outstanding during the period. Stock options and convertible preferred stock would have been included in the diluted earnings per share calculation had they not been antidilutive. Net loss applicable to common shareholders includes a charge for dividends related to the Company's outstanding preferred stock. FOREIGN CURRENCY TRANSLATION The financial statements of the Company's international subsidiary are translated into U.S. dollars at current exchange rates, except for revenues and expenses, which are translated at average exchange rates during each reporting period. Currency transaction gains or losses, which are included in the results of operations, are insignificant for all periods presented. Net exchange gains or losses resulting from the translation of assets and liabilities are included as a component of accumulated other comprehensive income in shareholders' equity. 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 amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. IMPAIRMENT OF LONG-LIVED ASSETS The Company evaluates impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. If the sum of the expected future undiscounted cash flows is less than the carrying amount of the asset, an impairment loss would be recognized. Measurement of an impairment loss for long-lived assets would be based on the fair value of the asset. SEGMENT REPORTING Management believes that it has only a single segment consisting of software sales with related services and support. The information presented in the consolidated statement of operations reflects the revenues and costs associated with this segment that management uses to make operating decisions and assess performance. RECENT ACCOUNTING PRONOUNCEMENT In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"). SFAS 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. The Company adopted SFAS 133 effective January 1, 2001 and it did not have a material impact on the consolidated financial statements. 8 9 C. BORROWINGS On February 12, 2001 the Company executed a promissory note with its President and Chief Executive Officer in the amount of $750,000. The note bears interest at 9% and is payable in full with interest on January 15, 2002. The note is secured by a junior lien on all of the Company's assets, subordinate to the Company's bank line of credit. D. SUBSEQUENT EVENTS On April 5, 2001, the Company liquidated its $1,500,000 US Treasury bill and paid off the related $1,500,000 line of credit. On April 16, 2001, the Company liquidated its $700,000 certificate of deposit and paid off the related $700,000 promissory note. On May 8, 2001, the Company paid off the remaining balance on its revolving line of credit and the agreement was terminated. On May 8, 2001 the Company signed a term sheet with the same commercial bank for a line of credit for up to $500,000 based on the Company's eligible accounts receivable, as defined in the agreement. Said line of credit will expire one year from execution, bear interest at 1.85% per month, and be secured by the assets of the Company. 9 10 ITEM 2. FIRSTWAVE TECHNOLOGIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Firstwave Technologies, Inc. provides Internet-based customer relationship management (eCRM) solutions. The Company is based in Atlanta, Georgia with an office located in London, England. Firstwave offers powerful applications that optimize the sales, marketing and customer service functions through a series of solutions. The Company supports three product lines: Firstwave eCRM, Takecontrol(R), and Firstwave for Unix. RESULTS OF OPERATIONS Total revenues decreased 37.2% from $2,569,000 in the first quarter of 2000 to $1,613,000 in the first quarter of 2001. Software revenues decreased 82.1% from $737,000 in the first quarter of 2000 to $132,000 in the first quarter of 2001 due to decreased sales. As a percentage of total revenues, international license revenues decreased from 17.6% in the first quarter of 2000 to 7.1% in the first quarter of 2001. Services revenues increased 11.6% from $672,000 in the first quarter of 2000 to $750,000 in the first quarter of 2001. The increase in services revenues is due primarily to increased services engagements by the UK operation. Maintenance revenues decreased 35.7% from $1,094,000 in the first quarter of 2000 to $703,000 in the first quarter of 2001. Maintenance revenues are the result of renewal agreements from previous software license sales and implementation of new agreements from software license sales. The decrease is primarily due to a decrease in the Company's Takecontrol installed base of systems covered under maintenance agreements. Cost of software revenues decreased 3.7% from $295,000 in the first quarter of 2000 to $284,000 in the first quarter of 2001. The decrease is the result of decreased third party software costs consistent with lower software revenue, offset by increased amortization of capitalized software associated with the Firstwave eRM product line. Cost of software revenues include costs of third party software, amortization of capitalized software costs, media costs, and documentation materials. Cost of revenues for services decreased 26.4% from $637,000 in the first quarter of 2000 to $469,000 in the first quarter of 2001 due to decreased payroll and related costs. Cost of revenues for maintenance decreased 36.7% from $430,000 in the first quarter of 2000 to $272,000 in the first quarter of 2001. The decrease in cost of maintenance is primarily due to decreased cost of international maintenance consistent with decreased international maintenance revenue. 10 11 Sales and marketing expense decreased 17.9% from $963,000 in the first quarter of 2000 to $791,000 in the first quarter of 2001. The decreases are due to changes in the Company's marketing strategy. The Company's product innovation and development expenditures, which includes amounts capitalized, decreased 43.5% from $742,000 in the first quarter of 2000 to $419,000 in the first quarter of 2001. The decrease is primarily due to decreased contract services expense. Software development costs capitalized during the three months ended March 31, 2000 and 2001 were $500,000 and $224,000 respectively. General and administrative expenses decreased 9.3% from $731,000 in the first quarter of 2000 to $663,000 in the first quarter of 2001 due to a decrease in personnel and personnel related costs. Net interest income decreased 169.8% from $43,000 net interest income in the first quarter of 2000 to $30,000 net interest expense in the first quarter of 2001 due to the decrease in invested cash balances and increased level of borrowings. The net loss applicable to common shareholders includes a charge for dividends related to the Company's outstanding convertible preferred stock. The amounts for first quarter 2000 and first quarter 2001 were $45,000 and $38,000, respectively. The above factors combined to result in a 42.2% increase in net loss from $815,000 in the first quarter of 2000 to a net loss applicable to common shareholders of $1,159,000 in the first quarter of 2001, and a net loss per share of $0.14 for the first quarter of 2000 compared to a net loss per share of $0.18 for the first quarter of 2001. BALANCE SHEET Net accounts receivable decreased 34.0% from $1,774,000 at December 31, 2000 to $1,170,000 at March 31, 2001 due to collection of outstanding receivables and decreased billings consistent with lower revenues. Property and equipment decreased 19.5% from $717,000 at December 31, 2000 to $577,000 at March 31, 2001, due to year to date depreciation offset by additional fixed asset purchases. Accounts payable decreased 42.3% from $679,000 to $392,000 due to vendor payments made during the first quarter and decreased marketing expenses during the first quarter. Deferred revenue decreased 13.2% from $1,047,000 at December 31, 2000 to $908,000 at March 31, 2001 primarily due to the recognition of three months of maintenance revenues related to annual contracts billed in advance at year end. LIQUIDITY AND CAPITAL RESOURCES As of March 31, 2001, the balance of cash, cash equivalents and investments was $857,000. compared to $1,281,000 at December 31, 2000. The Company has implemented several measures in an effort to reduce the Company's expenses and to help the Company preserve cash. In addition, the Company is actively pursuing additional long-term equity and/or debt financing. The Company's future capital requirements will depend on many factors, including its ability to increase revenue levels and reduce costs of operations to generate positive cash flows, as well 11 12 as the timing and extent of spending to support product development efforts and expansion of sales and marketing, and market acceptance of the Company's products. As a result, it will likely be necessary for the Company to raise additional capital. Although the Company has historically been able to satisfy its cash requirements, there can be no assurance that efforts to obtain sufficient financing for operations will be successful in the future. The Company's future capital needs will be highly dependent upon the Company's ability to control expenses and generate additional software license revenues, and any projections of future cash needs and cash flows are subject to substantial uncertainty. The ability to raise additional capital may be negatively impacted in the event the Company does not maintain Nasdaq listing requirements. If the Company is unable to obtain the necessary additional capital, it may be required to reduce the scope of planned product development and sales and marketing efforts, as well as reduce the size of current staff, all of which could have a material adverse effect on its business, financial condition, and the Company's ability to reduce losses or generate profits. On February 12, 2001 the Company executed a promissory note with its President and Chief Executive Officer in the amount of $750,000. The note bears interest at 9% and is payable in full with interest on January 15, 2002. The note is secured by a junior lien on all of the Company's assets, subordinate to the Company's bank line of credit. 12 13 PART II. OTHER INFORMATION Item 1. Legal Proceedings Not Applicable Item 2. Changes in Securities None 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 13 14 SIGNATURES 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. FIRSTWAVE TECHNOLOGIES, INC. DATE: May 14, 2001 /s/ Judith A. Vitale ----------------------------------------- Judith A. Vitale Vice President of Finance and Administration 14 -----END PRIVACY-ENHANCED MESSAGE-----