-----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, BcCusmkcjayEUMyRNNlBs1yDTsKcgHyfeFeUfedtkJI+7jUX6XAvrhYNqdPIQrWG JiMNiclyilMQKKU+TasVEw== 0000950144-99-006003.txt : 19990517 0000950144-99-006003.hdr.sgml : 19990517 ACCESSION NUMBER: 0000950144-99-006003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990514 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: 99622687 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 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, 1999 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 12, 1999: ------------------------------ Common Stock, no par value 5,154,819 Shares 2 FIRSTWAVE TECHNOLOGIES, INC. FORM 10-Q For the quarter ended March 31, 1999 INDEX
Page No. -------- Part I. Financial Information Item 1. Financial Statements Consolidated Balance Sheet - December 31, 1998 and March 31, 1999 3 Consolidated Statement of Operations - For the Three Months ended March 31, 1998 and March 31, 1999 4 Consolidated Statement of Changes in Shareholders' Equity - For the Three Months Ended March 31, 1999 5 Consolidated Statement of Cash Flows - For the Three Months Ended March 31, 1998 and March 31, 1999 6 Notes to Financial Statements 7 Item 2. Management's Discussion and Analysis of 8 Financial Condition and Results of Operations Part II. Other Information 11
2 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS FIRSTWAVE TECHNOLOGIES, INC. CONSOLIDATED BALANCE SHEET (in thousands)
DEC 31, MAR 31, 1998 1999 ---------------- ------------ (UNAUDITED) ASSETS Current assets: Cash and cash equivalents $2,245 $2,926 Accounts receivable, less allowance for doubtful accounts of $425 and $632, respectively 3,146 2,235 Other assets 395 307 ---------------- -------------- Total Current Assets 5,786 5,468 Property and equipment, net 1,501 1,185 Deferred income tax benefit 2,621 2,621 Software development costs, net 770 972 Intangible asset 644 595 ---------------- -------------- $11,322 $10,841 ================ ============== Liabilities and Shareholders' Equity Current liabilities: Accounts payable $1,354 $997 Deferred revenue 1,581 1,370 Accrued employee compensation and benefits 284 323 Other accrued liabilities 343 280 ---------------- ------------- Total current liabilities 3,562 2,970 Deposit on preferred stock offering 0 1,000 Shareholders' equity 7,760 6,871 ---------------- ------------- $11,322 $10,841 ================ =============
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, 1998 1999 ------------- ------------- Net revenues Software $1,319 $1,171 Services 889 959 Maintenance 1,303 1,233 Other 99 99 ------------- ------------- 3,610 3,462 ------------- ------------- Cost and expenses Cost of revenues Software 167 205 Services 719 633 Maintenance 396 301 Other 99 95 Sales and marketing 1,699 1,379 Product development 525 624 General and administrative 615 1,079 ------------- ------------- 4,220 4,316 ------------- ------------- Operating loss (610) (854) Interest income 54 18 ------------- ------------- Loss before income taxes (556) (836) Income tax (17) (4) ------------- ------------- Net Loss ($573) ($840) ============= ============= Basic and diluted net loss per share ($0.11) ($0.16) ============= ============= Basic and diluted weighted average shares outstanding 5,102 5,160 ============= =============
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, 1999
COMMON STOCK ---------------------- ADD'L COMPRE- OTHER PAID-IN HENSIVE COMPREHENSIVE ACCUMULATED SHARES AMOUNT CAPITAL LOSS INCOME/(LOSS) DEFICIT TOTAL ---------- -------- -------- --------- ---------------- ----------- --------- Balance at December 31, 1998 5,151,322 $10 $19,813 $0 $34 ($12,097) $7,760 Employee Stock Purchase 1,266 3 3 Comprehensive loss Net loss (840) (840) (840) Foreign currency translation adj (52) (52) (52) -------- Comprehensive Loss (892) -------- ---------- -------- -------- --------------- --------- --------- Balance At March 31, 1999 5,152,588 $10 $19,816 ($18) ($12,937) $6,871 ========== ======== ======== =============== ========= =========
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, 1998 MAR 31, 1999 ------------------ ------------------ Cash flows provided by operating activities $ 415 $ 94 ------------------ ------------------ Cash flows from investing activities Software development costs 0 (344) Purchases of property and equipment (208) (20) ------------------ ------------------ Net cash used in investing activities (208) (364) ------------------ ------------------ Cash flows from financing activities Proceeds from employee stock purchase plan 6 3 Proceeds from deposit on preferred stock offering 0 1,000 Exercise of common stock options 10 0 ------------------ ------------------ Net cash provided by financing activities 16 1,003 ------------------ ------------------ Foreign currency translation adjustment 0 (52) ------------------ ------------------ Increase in cash 223 681 Cash and cash equivalents, beginning of period 4,969 2,245 ------------------ ------------------ Cash and cash equivalents, end of period $5,192 $2,926 ================== ================== Supplemental disclosure of cash flow information Cash paid during the period for income taxes $ 17 $ 4 ================== ==================
The accompanying notes are an integral part of these financial statements. 6 7 FIRSTWAVE TECHNOLOGIES, INC. NOTES TO FINANCIAL STATEMENTS MARCH 31, 1999 A. BASIS OF PRESENTATION The accompanying unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal occurring accruals) considered necessary for a fair presentation have been included. B. ACCOUNTING POLICIES 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 were the only securities issued which would have been included in the diluted loss per share calculation had they not been antidilutive. FOREIGN CURRENCIES Assets and liabilities recorded in foreign currencies are translated at the exchange rate on the balance sheet date and the effects of foreign currency translation adjustments are included as a component of stockholders' equity. 7 8 ITEM 2. FIRSTWAVE TECHNOLOGIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - THE THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 1998. First quarter 1999 yielded total revenues of $3,462,000 and a net loss of $840,000, slightly better than market expectations. The Company's April 30, 1998 acquisition of its largest international distributor, Co-cam UK, affects the comparisons between the first quarter of 1998 and the first quarter of 1999. During the first quarter of 1998 Co-cam UK operated as an independent international distributor. However, during the first quarter of 1999, these operations are included in the consolidated financial statements as a wholly owned subsidiary, Firstwave UK. Total revenues decreased 4.1% from $3,610,000 in the first quarter of 1998 to $3,462,000 in the first quarter of 1999. Total software revenues decreased 11.2% from $1,319,000 in the first quarter of 1998 to $1,171,000 in the same period of 1999. The first quarter's revenues reflect increased sales of domestic software license revenues, while international software license revenues decreased. The Company's quarter-to-quarter revenues are significantly dependent upon the timing of the closing of license agreements. Revenues from international license sales decreased 35.7 % from $1,210,000 in the first quarter of 1998 to $778,000 in the corresponding quarter of 1999 as a result of lower sales by international distributors. As a percentage of total revenues, international license revenues decreased from 33.5% in the first quarter of 1998 to 22.5% in first quarter of 1999. During the first quarter of 1999, revenue generated from sales in the United Kingdom and Australia each exceeded 10% of total revenue. Services revenues increased 7.9% from $889,000 in the first quarter of 1998 to $959,000 in the first quarter of 1999 due to the addition of services revenues generated by Firstwave UK. Maintenance revenues decreased 5.4% from $1,303,000 in first quarter of 1998 to $1,233,000 in the first quarter of 1999 due to cancellations of domestic maintenance agreements. Cost of software revenues increased 22.8% from $167,000 in the first quarter of 1998 to $205,000 in the first quarter of 1999. The increase is the result of increased amortization expense due to the increased capitalization of costs associated with the Netgain product line and increased third party software costs. Cost of software revenues include amortization of capitalized software, costs of third party software, and costs of packaging and documentation materials and related media costs. Cost of revenues for services decreased 12.0% from $719,000 in the first quarter of 1998 to $633,000 in the first quarter of 1999 due to decreases in domestic payroll and 8 9 related costs partially offset by an increase in payroll related to the addition of Firstwave UK. Cost of revenues for maintenance decreased 24.0% from $396,000 in the first quarter of 1998 to $301,000 in the first quarter of 1999. The decrease is primarily due to a decrease in international maintenance costs from the acquisition of Firstwave UK. Previously, while operating as a distributor, a portion of the maintenance revenue was retained by the distributor and recorded as a cost of maintenance by the Company. Now as a wholly owned subsidiary, the full amount of the maintenance revenue is retained by the Company. This decrease in maintenance costs was partially offset by increases in payroll and related costs due to the addition of Firstwave UK personnel. Sales and marketing expense decreased 18.8% from $1,699,000 in the first quarter of 1998 to $1,379,000 in the first quarter of 1999. The decrease was a result of decreases in commissions associated with the decrease in international license revenue and decreases in marketing expenses related to the new corporate identity and name change from Brock International, Inc. to Firstwave Technologies, Inc. which occurred during the first quarter of 1998. The Company's product innovation and development expenditures increased 18.9% from $525,000 in the first quarter of 1998 to $624,000 in the first quarter of 1999. The increase is due to increased payroll costs and contract services expense related to the increased development efforts on the Netgain(TM) Enterprise and TakeControl(R)Today products. During the first quarter of 1999, $344,000 in software costs were capitalized. No capitalization occurred in the first quarter of 1998. General and administrative expenses increased 75.4% from $615,000 in the first quarter of 1998 to $1,079,000 in the first quarter of 1999. The increase is attributed to the addition of Firstwave UK administrative personnel, the costs associated with maintaining the London office, and increased provisions for bad debts. BALANCE SHEET Net accounts receivable decreased 29.0% from $3,146,000 at December 31, 1998, to $2,235,000 at March 31, 1999, primarily as a result of the collection of outstanding receivables. Property and equipment, net decreased 21.1% from $1,501,000 at December 31, 1998 to $1,185,000 at March 31, 1999 due to depreciation and write off of some obsolete computer equipment. Capitalized software increased 26.2% from $770,000 at December 31, 1998 to $972,000 at March 31, 1999 due to additional capitalization of $344,000 in development costs during the first quarter of 1999 net of $142,000 of amortization. Accounts payable decreased 26.4% from $1,354,000 at December 31, 1998 to $997,000 at March 31, 1999 due to payments made on outstanding payables. Deferred revenue decreased 13.3% from $1,581,000 at December 31, 1998 to $1,370,000 at March 31, 1999 due to recognition of first quarter 1999 maintenance revenues related to annual contracts billed in advance at year end. The deposit on preferred stock offering was $1,000,000 at March 31, 1999, which represents the receipt of funds in advance of the Company's April 26, 1999 closing of its private placement offering of Series A Convertible Preferred Stock. 9 10 LIQUIDITY AND CAPITAL RESOURCES At March 31, 1999, the Company had cash and cash equivalents of $2,926,000 and believes that its present liquidity position, recent equity infusions and the available line of credit are sufficient to finance the Company's operations during 1999 and beyond. During the first quarter of 1999, the Company renewed its $3,000,000 line of credit for another one-year term, which now expires March 14, 2000. The line of credit bears interest at the prime rate and is secured by the assets of the Company. As of March 31, 1999 there were no borrowings against the line of credit. SUBSEQUENT EVENTS The Company raised $2 million through the sale of Series A Convertible Preferred Stock in a private placement offering which closed on April 26, 1999. The Company received $1 million in March 1999 in advance of the closing of this offering. 10 11 PART II. OTHER INFORMATION Item 1. Legal Proceedings Not Applicable Item 2. Changes 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 Exhibit 3.1 Amended and Restated Articles of Incorporation, as amended. Exhibit 27 Financial Data Schedule (for SEC use only). 11 12 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 12, 1999 /s/ Judith A. Vitale -------------------------------------------- Judith A. Vitale Vice President of Finance and Administration 12 EX-3.1 2 AMENDED AND RESTATED ARTICLES OF INCORPORATION 1 ARTICLES OF AMENDMENT TO AMENDED AND RESTATED ARTICLES OF INCORPORATION OF FIRSTWAVE TECHNOLOGIES, INC. 1. The name of the Corporation is Firstwave Technologies, Inc. 2. The Corporation hereby amends Article II of its Amended and Restated Articles of Incorporation to designate a class of Series A Convertible Preferred Stock consisting of 20,000 shares, no par value per share, as provided on Exhibit A attached hereto. 3. These Articles of Amendment were duly adopted by the unanimous written consent of the Board of Directors of the Corporation, dated as of April 26, 1999. No shareholder approval was required to approve the amendment to Article II of the Corporation's Amended and Restated Articles of Incorporation. IN WITNESS WHEREOF, the undersigned, being the President of the Corporation, has executed these Articles of Amendment on behalf of the Corporation on April 28, 1999. FIRSTWAVE TECHNOLOGIES, INC. By:/s/ Richard T. Brock ----------------------------------------- Name: Richard T. Brock Title: President 2 EXHIBIT A CERTIFICATE OF DESIGNATION OF SERIES A CONVERTIBLE PREFERRED STOCK OF FIRSTWAVE TECHNOLOGIES, INC. A GEORGIA CORPORATION (the "Corporation") --------------------------------------------------------- Twenty thousand (20,000) shares of the Corporation's Preferred Stock, no par value per share, designated as "Series A Convertible Preferred Stock" ("Series A Preferred Stock"), are authorized for issuance with the voting powers, preferences and other special rights, qualifications, limitations and restrictions thereof set forth below: 1. Dividends. Each holder of shares of Series A Preferred Stock shall be entitled to receive, with respect to each share of Series A Preferred Stock registered in his, her or its name on the stock transfer books of the Corporation, cumulative dividends at a rate of $9 per annum. Dividends on Series A Preferred Stock shall be paid annually on December 31 of each year to holders of record as of December 15 of such year (except that any holder that converts such holder's shares of Series A Preferred Stock pursuant to Section 3 hereof shall be paid, on the date of conversion, cumulative dividends dating only through the last full fiscal quarter prior to the date of conversion), shall accrue on each share beginning on the date of issuance, and shall be cumulative. Dividends payable on the Series A Preferred Stock shall be paid in cash or, at the election of the Corporation, in shares of the common stock, no par value per share (the "Common Stock") of the Corporation. If the Corporation elects to pay a dividend in shares of Common Stock, the number of shares of Common Stock to be paid for each such dividend shall equal the number of shares that could be purchased by an equivalent cash dividend at a price per share equal to the average closing prices for the Common Stock for the last 20 trading days preceding the record date on the principal trading market for the Common Stock. If there is no trading market for the Common Stock, the shares shall be valued for this purpose in good faith by the Board of Directors of the Corporation whose determination thereof shall be conclusive and binding on the holders of Series A Preferred Stock. Any payment made by the Corporation on unpaid cumulative dividends, if less than the total amount of such dividends, shall be applied first to those dividends which have been accrued for the longest time. No dividend or other distribution shall be paid on or declared or set apart for payment on any shares of the Common Stock of the Corporation or any shares of any other class or series or issue of preferred stock that 3 is junior to Series A Preferred Stock as long as any accrued dividends on the Series A Preferred Stock remain unpaid. 2. Liquidation. Upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of the shares of Series A Preferred Stock shall be entitled, before any distribution or payment is made upon the Common Stock or upon any other class or series or issue of preferred stock of the Corporation that is junior to the Series A Preferred Stock, to be paid an amount equal to $100 per share of Series A Preferred Stock, plus all accrued but unpaid dividends (such amounts being herein sometimes referred to as the "Liquidation Payments"). Thereafter, the holders of the Series A Preferred Stock shall not be entitled to any further payment. If upon such liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the assets to be distributed to the holders of the Series A Preferred Stock are insufficient to permit payment to the holders of Series A Preferred Stock of the full amount of the Liquidation Payments, then the entire assets of the Corporation to be distributed shall be distributed ratably per share among the holders of Series A Preferred Stock. Upon any such liquidation, dissolution or winding up of the Corporation, after the holders of the Series A Preferred Stock have been paid in full the amounts to which they are entitled, the remaining assets of the Corporation shall be distributed ratably to the remaining holders of the Corporation's capital stock in accordance with their respective rights and preferences under the Corporation's Articles of Incorporation. The Corporation must give written notice of such liquidation, dissolution or winding up (stating a payment date, the amount of the Liquidation Payment and the place where said sums shall be payable) by first class mail, postage prepaid, not less than 30 or more than 60 days prior to the payment date stated therein, to the holders of record of the Series A Preferred Stock and the Common Stock, such notice to be addressed to each shareholder at its mailing address as shown by the records of the Corporation. A sale, lease, exchange or transfer of all or substantially all of the assets of the Corporation shall be regarded as a liquidation, dissolution or winding up of the affairs of the Corporation within the meaning of this Section 2. 3. Conversion. 3.1 Right to Convert. Subject to the terms and conditions of this Section 3, the holder of any share or shares of Series A Preferred Stock shall have the right, at such holder's option at any time after April 25, 2000, to convert any such shares of Series A Preferred Stock (except that upon any liquidation, dissolution or winding up of the Corporation the right of conversion shall terminate at the close of business on the last full business day preceding the date fixed for payment of the Liquidation Payments) into such number of fully paid and nonassessable whole shares of Common Stock at a conversion price determined by dividing $100 by $2.06 (the "Conversion Price") (which equals 120% of the weighted average of the closing prices for the Common Stock for the last 20 trading days prior to the subscription for the Series A Preferred Stock for the holder thereof). If there is no trading market for the Common Stock, the shares shall be valued for this purpose in good faith by the Board of Directors of the Corporation whose determination thereof shall be conclusive and binding on the holders of Series A Preferred Stock. Such rights of conversion may be exercised by the holder thereof by giving written notice to the Corporation that the holder elects to convert a stated number of shares of Series A Preferred Stock into Common Stock and by surrender of a certificate or certificates for the shares so to be 2 4 converted to the Corporation at its principal office (or such other office or agency of the Corporation as the Corporation may designate by notice in writing to the holder or holders of the Series A Preferred Stock) at any time during its usual business hours on the date set forth in such notice, together with a statement of the name or names (with address), subject to compliance with applicable laws to the extent such designation shall involve a transfer, in which the certificate or certificates for shares of Common Stock are to be issued. The number of whole shares of Common Stock into which the Preferred Stock may be converted as determined hereinabove shall be adjusted to reflect any recapitalization of the Common Stock of the Corporation, including as a result of a stock dividend (other than shares of Common Stock paid to holders of Series A Preferred Stock as dividend payments) or a stock split. 3.2 Issuance of Certificates; Time Conversion Effected. Promptly after the receipt by the Corporation of the written notice referred to in subsection 3.1 and the certificate or certificates for the share or shares of the Series A Preferred Stock to be converted, the Corporation shall issue and deliver, or cause to be issued and delivered, to the holder, registered in such name or names as such holder may direct, subject to compliance with applicable laws to the extent such designation shall involve a transfer, a certificate or certificates for the number of whole shares of Common Stock issuable upon the conversion of such share or shares of Series A Preferred Stock. To the extent permitted by law, such conversion shall be deemed to have been effected and the Conversion Price shall be determined as of the close of business on the date on which the Corporation receives such written notice and the certificate or certificates for such share or shares shall have been surrendered as aforesaid, and at such time the rights of the holder of such share or shares of Series A Preferred Stock shall cease (with respect to the shares of Series A Preferred Stock), and the person or persons in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the shares represented thereby. 3.3 Fractional Shares; Dividends; Partial Conversion. (a) No fractional shares shall be issued upon conversion of the Series A Preferred Stock into Common Stock and the number of shares of Common Stock to be issued shall be rounded to the nearest whole share, and no payment or adjustment shall be made upon any conversion on account of any cash dividends on the Series A Preferred Stock so converted or the Common Stock issued upon such conversion. In case the number of shares of Series A Preferred Stock represented by the certificate or certificates surrendered pursuant to subsection 3.1 exceeds the number of shares converted, the Corporation shall, upon such conversion, execute and deliver to the holder thereof, at the expense of the Corporation, a new certificate or certificates for the number of shares of Series A Preferred Stock, represented by the certificate or certificates surrendered which are not to be converted. (b) Upon conversion of any shares of Series A Preferred Stock, the holder of the shares of Series A Preferred Stock so converted shall be entitled to receive any dividends declared but unpaid with respect to such shares of Series A Preferred Stock provided that such dividends shall have been declared by the Board of Directors of the Corporation and the record date for such dividends shall have been on or before the date such shares shall have been 3 5 converted. No payment or adjustment shall be made on account of dividends declared and payable to holders of Common Stock of record on a date prior to the date of conversion. 3.4 Other Notices. If at any time: (a) the Corporation declares any dividend upon its Common Stock payable in cash or stock or makes any other distribution to the holders of the Common Stock; (b) the Corporation offers for subscription pro rata to the holders of its Common Stock any additional shares of stock of any class or other rights; (c) there is any reclassification of the capital stock of the Corporation, or a consolidation or merger of the Corporation with, or a sale of all or substantially all its assets to, another corporation; or (d) there is a voluntary or involuntary dissolution, liquidation or winding up of the Corporation; then the Corporation shall give, by first class mail, postage prepaid, addressed to each holder of any shares of Series A Preferred Stock at the address of such holder as shown on the books of the Corporation, (a) at least 15 days' prior written notice of the date on which the books of the Corporation shall close or a record shall be taken for such dividend, distribution or subscription rights or for determining rights to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up, and (b) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up, at least 15 days' prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause (a) shall also specify, in the case of any such dividend, distribution or subscription rights, the date on which the holders of Common Stock shall be entitled thereto, and such notice in accordance with the foregoing clause (b) shall also specify the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up, as the case may be. 3.5 Stock to be Reserved. The Corporation must at all times reserve and keep available out of its authorized but unissued Common Stock, solely for the purpose of issuance upon the conversion of the Series A Preferred Stock as herein provided, such number of shares of Common Stock as shall then be issuable upon the conversion of all outstanding shares of Series A Preferred Stock. All shares of Common Stock which shall be so issued shall be duly and validly issued and fully paid and nonassessable and free from all taxes, liens and charges arising out of or by reason of the issue thereof, and, without limiting the generality of the foregoing, the Corporation covenants that it will from time to time take all such action as may be requisite to assure that the par value per share of the Common Stock is at all times equal to or less than the effective Conversion Price. The Corporation will take all such action within its control as may be necessary on its part to assure that all such shares of Common Stock may be so issued without violation of any applicable law or regulation, or of any requirement of any 4 6 national securities exchange upon which the Common Stock of the Corporation may be listed. If at any time the number of authorized but unissued shares of Common Stock are insufficient to effect the conversion of all of the then outstanding shares of Series A Preferred Stock, the Corporation shall take such corporate actions as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes. 3.6 No Reissuance of Series A Preferred Stock. Shares of Series A Preferred Stock that are converted into shares of Common Stock as provided herein shall not be reissued. 3.7 Issue Tax. The issuance of certificates for shares of Common Stock upon conversion of the Series A Preferred Stock shall be made without charge to the holders thereof for any issuance tax in respect thereof, provided that the Corporation shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of the holder of the Series A Preferred Stock which is being converted. 3.8 Closing of Books. The Corporation will at no time close its transfer books against the transfer of any Series A Preferred Stock or of any shares of Common Stock issued or issuable upon the conversion of any shares of Series A Preferred Stock in any manner which interferes with the timely conversion of such Series A Preferred Stock. 3.9 Definition of Common Stock. As used in this Section 3, the term "Common Stock" means and includes the Corporation's authorized Common Stock as constituted on the date of filing of this Certificate of Designation and shall also include any capital stock of any class of the Corporation thereafter authorized that shall not be limited to a fixed sum in respect of the rights of the holders thereof to participate in dividends or in the distribution of assets upon the voluntary or involuntary liquidation, dissolution or winding up of the Corporation; provided, however, that such term, when used to describe the securities receivable upon conversion of shares of the Series A Preferred Stock of the Corporation, shall include only shares designated as Common Stock of the Corporation on the date of filing of this Certificate of Designation. 4. Voting. Except as otherwise provided by law and herein, the holders of Series A Preferred Stock shall vote together with the holders of Common Stock on all matters to be voted on by the shareholders of the Corporation, and each holder of Series A Preferred Stock shall be entitled to one vote for each share of Common Stock that would be issuable to such holder upon the conversion of all the shares of Series A Preferred Stock held by such holder on the record date for the determination of shareholders entitled to vote. 5. Restrictions. At any time when shares of Series A Preferred Stock are outstanding, and in addition to any other vote of shareholders required by law or by the Corporation's Articles of Incorporation, without the prior consent of the holders of a majority of the outstanding Series A Preferred Stock, given in person or by proxy, either in writing, at an annual meeting or at a special meeting called for that purpose, at which meeting the holders of the shares of such Series A Preferred Stock shall vote together as a class: 5 7 (a) The Corporation will not: (i) create or authorize the creation of any additional class or series of shares unless the same ranks junior to the Series A Preferred Stock both as to dividends and as to the distribution of assets on liquidation; (ii) increase the authorized amount of the Series A Preferred Stock, or increase the authorized amount of any additional class or series of shares unless the same ranks junior to the Series A Preferred Stock both as to dividends and as to the distribution of assets on liquidation; or (iii) create or authorize any obligations or securities convertible into shares of Series A Preferred Stock or into shares of any other class unless the same ranks junior to the Series A Preferred Stock both as to dividends and as to the distribution of assets on liquidation, in each case whether any such creation or authorization or increase shall be by means of amendment of the Corporation's Articles of Incorporation, merger, consolidation or otherwise. (b) The Corporation will not amend, alter or repeal the Corporation's Articles of Incorporation or Bylaws in any manner, or file any directors' resolutions pursuant to the Georgia Business Corporation Code containing any provision, in either case which affects the respective preferences, voting power, qualifications, special or relative rights or privileges of the Series A Preferred Stock or which in any manner adversely affects the Series A Preferred Stock or the holders thereof as a class. 6. Redemption. 6.1 Call for Redemption. So long as dividends for all past dividend periods shall have been paid on all outstanding shares of Series A Preferred Stock prior to any notice of redemption being given and the full dividends thereon for the then current dividend period shall have been paid or declared and amounts sufficient for the payment thereof set aside (or shares of Common Stock for such purpose shall have been reserved if the Corporation shall have elected to pay such dividend in such shares), commencing April 26, 2001, and at any time thereafter the Corporation, at the option of the Board of Directors, may redeem in whole or in part the shares of Series A Preferred Stock at the time outstanding, at any time or from time to time, upon notice given as hereinafter specified, at a redemption price of $100 per share. In case of any redemption of only a part of the shares of Series A Preferred Stock at the time outstanding, the redemption shall be pro rata. 6.2 Notice. Notice of redemption of shares of Series A Preferred Stock shall be mailed by first class mail, postage prepaid, addressed to the holders of record of the shares to be redeemed at their respective last addresses as they shall appear on the books of the Corporation. Such mailing shall be at least 20 days and not more than 60 days prior to the date fixed for redemption. Any notice which is mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the stockholder receives such notice, but 6 8 failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any holder of shares of Series A Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series A Preferred Stock. 6.3 Procedure. If such notice of redemption shall have been duly given or if the Corporation shall have given to the bank or trust company hereinafter referred to irrevocable authorization promptly to give such notice, and if on or before the redemption date specified therein all funds necessary for such redemption shall have been set aside by the Corporation, separate and apart from its other funds, in trust for the pro rata benefit of the holders of the shares called for redemption, so as to be and continue to be available therefor, or, at the option of the Corporation, deposited by the Corporation with such bank or trust company in trust for the pro rata benefit of the holders of the shares called for redemption, then, notwithstanding that any certificate for shares so called for redemption shall not have been surrendered for cancellation, on and after such redemption date, all shares so called for redemption, not theretofore converted and outstanding on the redemption date, shall no longer be deemed to be outstanding and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the holders thereof to receive the amount payable on redemption thereof, without interest. The aforesaid bank or trust company shall be organized and in good standing under the laws of the United States of America or of the State of Georgia, shall be doing business in Georgia, and shall be identified in the notice of redemption. Any interest accrued on such funds shall be paid to the Corporation from time to time. Any funds so deposited and unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released or repaid to the Corporation, after which time the holders of the shares so called for redemption shall look only to the Corporation for payment thereof. Any funds so deposited or set aside by the Corporation which shall not be required for such redemption because of the exercise of any right of conversion pursuant to Section 3 hereof shall be released or repaid to the Corporation forthwith. 7 9 ARTICLES OF AMENDMENT TO THE RESTATED ARTICLES OF INCORPORATION OF BROCK INTERNATIONAL, INC. 1. The name of the corporation is BROCK INTERNATIONAL, INC. (hereinafter the "Corporation"). 2. The Restated Articles of Incorporation of the Corporation are hereby amended by deleting Article I. in its entirety and substituting the following in lieu thereof: "I. The name of the corporation is FIRSTWAVE TECHNOLOGIES, INC." 3. All other provisions of the Restated Articles of Incorporation shall remain in full force and effect. 4. This amendment to the Restated Articles of Incorporation was duly adopted by a unanimous written consent of the Board of Directors of the Corporation dated January 27, 1998. 5. Pursuant to Section 14-2-1002(6) of the Georgia Business Corporation Code,shareholder approval is not required for such an amendment. 6. The effective date of the foregoing amendment shall be March 1, 1998. 10 IN WITNESS WHEREOF, the undersigned does hereby set his hand effective this 29th day of January, 1998. BROCK INTERNATIONAL, INC. /s/ Kenneth D. Barwick ----------------------------------------- Kenneth D. Barwick, Senior Vice President ATTEST: /s/ G. William Speer - ----------------------------------- G. William Speer, Secretary 11 ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF BROCK CONTROL SYSTEMS, INC. -------------------------------------------------- 1. The name of the corporation is BROCK CONTROL SYSTEMS, INC. (hereinafter the "Corporation"). 2. The Articles of Incorporation of the Corporation are hereby amended by deleting Article I. in its entirety and substituting the following in lieu thereof: "I. The name of the corporation is BROCK INTERNATIONAL, INC." 3. This amendment to the Articles of Incorporation was duly adopted by unanimous written consent of the Board of Directors of the Corporation on January 31, 1996. 4. Pursuant to Section 14-2-1002(6) of the Georgia Business Corporation Code, shareholder approval is not required for such an amendment. IN WITNESS WHEREOF, the undersigned does hereby set his hand effective this 2nd day of February, 1996. BROCK CONTROL SYSTEMS, INC. /s/ Richard T. Brock ------------------------------------- Richard T. Brock, Chairman and President ATTEST: /s/ G. William Speer - ----------------------------------- G. William Speer, Secretary [CORPORATE SEAL] 12 BROCK CONTROL SYSTEMS, INC. ARTICLES OF AMENDMENT AND RESTATEMENT 1. The name of the corporation is BROCK CONTROL SYSTEMS, INC. 2. The Articles of Incorporation of Brock Control Systems, Inc., as filed with the Georgia Secretary of State on October 1, 1984, as amended by those certain Articles of Amendment filed with the Georgia Secretary of State on May 9, 1990, are hereby amended and restated in their entirety as follows: I. The name of the Corporation is BROCK CONTROL SYSTEMS, INC. II. The Corporation shall have authority to issue 11,00,000 shares of stock, of which 1,000,000 shares shall be designated "Preferred Stock," no par value, and 10,000,000 shares shall be designated "Common Stock," no par value. The designations and preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption of the shares of stock are as follows: Preferred Stock The Preferred Stock may be issued from time to time by the Board of Directors as shares of one or more series. The description of shares of each series of Preferred Stock, including any preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption shall be as set forth in 13 resolutions adopted by the Board of Directors, and articles of amendment shall be filed with the Georgia Secretary of State as required by law to be filed with respect to issuance of such Preferred Stock, prior to the issuance of any such shares. The Board of Directors is expressly authorized at any time to adopt resolutions providing for the issuance of, or providing for a change in the number of, shares of any particular series of Preferred Stock and, if and to the extent from time to time required by law, to file articles of amendment which are effective without shareholder action to increase or decrease the number of shares included in each series of Preferred Stock (but not to decrease the number of shares in any series below the number of shares then issued), and to set or change in any one or more respects the designations, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, or terms and conditions of redemption relating to the shares of each series. Common Stock Subject to all of the rights of the Preferred Stock as expressly provided herein, by law or by the Board of Directors pursuant to this Article II, the Common Stock of the Corporation shall possess all such rights and privileges as are afforded to capital stock by applicable law in the absence of any express grant of rights or privileges provided for herein, including, but not limited to, the following rights and privileges: (a) Dividends may be declared and paid or set apart for payment upon the Common Stock out of any assets or funds of the Corporation legally available for the payment of dividends; (b) The holders of Common Stock shall have the right to vote for the election of directors and on all other matters requiring shareholder action, each share being entitled to one vote; and (c) Upon the voluntary or involuntary liquidation, dissolution or winding-up of the Corporation, the net assets of the Corporation available for distribution shall be 2 14 distributed pro rata to the holders of the Common Stock in accordance with their respective rights and interests. III. The registered office of the Corporation shall be at 229 Peachtree Street, N.E., Suite 2100, Atlanta, Georgia 30303 in Fulton County. The registered agent of the Corporation at such address shall be Joe G. Davis, Jr. IV. The name and address of the incorporator is: R. Hunt Dunlap, Jr. Cashin & Davis 229 Peachtree Street, N.E. Suite 2100 Atlanta, Georgia 30303 V. The mailing address of the principal office of the Corporation is: Brock Control Systems, Inc. 2859 Paces Ferry Road Suite 1000 Atlanta, Georgia 30339 VI. (a) The number of directors of the Corporation shall be not less than two (2) and not more than eleven (11) as determined from time to time by the Board of Directors. If the number of directors fixed by the Board of Directors is less than six (6), all directors shall be deemed to belong to the same class and shall hold office until the next annual shareholders' meeting following their election or appointment. If the number of directors fixed by the Board of Directors is six (6) or more, the directors shall be divided into three classes (designated as "Class 3 15 I," "Class II" and "Class III") as nearly equal in number as possible. The directors in Class I first chosen shall hold office until the first annual meeting of the shareholders following their election or appointment. The directors in Class II first chosen shall hold office until the second annual meeting of the shareholders following their election or appointment. Directors in Class III first chosen shall hold office until the third annual meeting of the shareholders following their election or appointment. At each annual meeting of the shareholders held thereafter, directors shall be chosen for a term of three (3) years to succeed those whose terms expire. (b) Any vacancy in the Board of Directors resulting from the death, resignation or retirement of a director, or any other cause other than removal by the shareholders or increase in the number of directors, shall be filled by a majority vote of the remaining directors, though less than a quorum, for a term corresponding to the unexpired term of his predecessor in office. (c) Newly created directorships resulting from any increase in the authorized number of directors shall be filled by a majority vote of the remaining directors, though less than a quorum, and the directors so chosen shall hold office for a term expiring at the next annual meeting of shareholders at which a successor shall be elected and shall qualify. (d) At any meeting of the shareholders called for the purpose, the entire board of directors or any individual director may, by the vote of eighty percent (80%) of all of the shares of the Corporation outstanding and entitled to vote for election of directors, be removed from office for cause. (e) Notwithstanding anything contained in these Articles of Incorporation to the contrary, the affirmative vote of the holders of at least eighty percent (80%) of the shares of the Corporation entitled to vote for election of directors shall be required to amend or repeal, or to adopt any provision inconsistent with, this Article VI. VII. No director shall have any personal liability to the Corporation or to its shareholders for monetary damages for breach of duty of care or other duty as a director, by reason of any act or 4 16 omission occurring subsequent to the date when this provision becomes effective, except that this provision shall not eliminate or limit the liability of a director for: (a) Any appropriation of any business opportunity of the Corporation in violation of his duties; (b) Acts or omissions which involve intentional misconduct or a knowing violation of law; (c) Liabilities of a director imposed by Section 14-2-832 of the Georgia Business Corporation Code; or (d) Any transaction from which the director derived an improper personal benefit. VIII. Notwithstanding any provision of law to the contrary, the affirmative vote of two-thirds of all of the votes entitled to be cast on the matter shall be sufficient, valid and effective, after due authorization, approval or advise of such action by the Board of Directors, as required by law, to approve and authorize the following acts of the Corporation: (a) amendment of the Articles of Incorporation of the Corporation; (b) consolidation of the Corporation with one or more corporations to form a new consolidated corporation; (c) merger of the Corporation into another corporation or the merger of one or more other corporations into the Corporation; (d) sale, lease, exchange or other transfer of all, or substantially all, of the property and assets of the Corporation, including its goodwill; (e) the voluntary or involuntary liquidation, dissolution or winding-up of the Corporation; or (f) any other transaction that Section 14-2-1110 of the Georgia Business Corporation Code defines as a "Business Combination". 5 17 IX. Any action required by law or by the Bylaws of the Corporation to be taken at a meeting of the shareholder of the Corporation, and any action which may be taken at a meeting of the shareholders, may be taken without a meeting if a written consent, setting forth the action so taken, shall be signed by all the shareholders entitled to vote on the action. IN WITNESS WHEREOF, BROCK CONTROL SYSTEMS, INC. has caused these Amended and Restated Articles of Incorporation to be executed, its corporate seal affixed and the foregoing to be attested, all by duly authorized officers on the 4th day of February 1993. BROCK CONTROL SYSTEMS, INC. By: /s/ Rodger L. Johnson ------------------------------------ Rodger L. Johnson, President Attest: /s/ Donna M. Eckman ------------------------------------ Donna M. Eckman, Secretary 6 EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM 10-Q OF FIRSTWAVE TECHNOLOGIES, INC. FOR THE QUARTER ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S. DOLLARS 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 1 2,926 0 2,235 0 0 5,468 1,185 0 10,841 2,970 0 0 0 10 6,861 10,841 1,171 3,462 205 1,234 3,082 201 0 (836) (4) (840) 0 0 0 (840) (.16) (.16) A/R AND PPE ASSET VALUES REPRESENT NET AMOUNTS
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