-----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, Kz+uklV2YjU9Kbh7CInp4UVkYzAaEka3588AwFwY7dEVABG1dUq7c/gl5sqWL9Px p0YtZY93bOXva2/RGOvK6A== 0001015402-01-502205.txt : 20010814 0001015402-01-502205.hdr.sgml : 20010814 ACCESSION NUMBER: 0001015402-01-502205 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FORECROSS CORP CENTRAL INDEX KEY: 0000916513 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 942823882 STATE OF INCORPORATION: CA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-29672 FILM NUMBER: 1706524 BUSINESS ADDRESS: STREET 1: 90 NEW MONGOMERY STREET CITY: SAN FRANCISCO STATE: CA ZIP: 94105 BUSINESS PHONE: 4155431515 MAIL ADDRESS: STREET 1: 90 NEW MONTGOMERY ST CITY: SAN FRANCISCO STATE: CA ZIP: 94105 10-Q 1 doc1.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-29672 FORECROSS CORPORATION CALIFORNIA 94-2823882 (State or other jurisdiction (I.R.S. Employer incorporation or organization) Identification No.) 90 NEW MONTGOMERY STREET SAN FRANCISCO, CALIFORNIA 94105 Address of principal executive offices) TELEPHONE: (415) 543-1515 (Registrant's telephone number, including area code) 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 . Shares outstanding of the Registrant's common stock: Class Outstanding at July 31, 2001 Common Stock, no par value 16,853,380 FORECROSS CORPORATION FORM 10-Q TABLE OF CONTENTS PART I. FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheets at June 30, 2001 (unaudited) and September 30, 2000 Statements of Operations (unaudited) for the three and nine months ended June 30, 2001 and 2000 Statements of Cash Flows (unaudited) for the nine months ended June 30, 2001 and 2000 Statements of Shareholders' Deficit (unaudited) for the nine months ended June 30, 2001 and 2000 Notes to Unaudited Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II. OTHER INFORMATION Item 1. Legal Proceedings Item 2. Recent Sales of Unregistered Securities Item 3. Defaults Upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K Signature Page Exhibit Index PART I. FINANCIAL INFORMATION
FORECROSS CORPORATION BALANCE SHEETS June 30, Sept. 30, 2001 2000 ------------ ------------ (Unaudited) (Audited) ASSETS Current assets: Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 304,869 $ 18,833 Accounts receivable, including unbilled receivables of $348,000 and $722,000, net of allowance of $20,000 and $20,000, respectively . 684,928 1,043,260 Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . 7,008 28,499 ------------ ------------ Total current assets . . . . . . . . . . . . . . . . . . . . . . . . 996,805 1,090,592 Equipment and furniture, net . . . . . . . . . . . . . . . . . . . . . 210,816 310,639 Notes receivable from others . . . . . . . . . . . . . . . . . . . . . 75,249 72,445 Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,546 42,746 ------------ ------------ Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,325,416 $ 1,516,422 ============ ============ LIABILITIES AND SHAREHOLDERS' DEFICIT Current liabilities: Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 265,769 $ 356,685 Accrued compensation and related benefits . . . . . . . . . . . . . . 950,621 634,903 Accrued liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 55,466 122,149 Accrued commissions and distributors' fees . . . . . . . . . . . . . . 81,499 68,375 Payable to factor . . . . . . . . . . . . . . . . . . . . . . . . . . 163,084 501,243 Accrued warranty costs . . . . . . . . . . . . . . . . . . . . . . . . 45,681 33,922 Capital lease obligations due within one year. . . . . . . . . . . . . 3,189 18,094 Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . 249,835 602,210 ------------ ------------ Total current liabilities. . . . . . . . . . . . . . . . . . . . . . 1,815,144 2,337,581 Deferred revenue, less current portion . . . . . . . . . . . . . . . . - 415,419 Notes payable to related parties, net . . . . . . . . . . . . . . . . 109,707 101,082 Capital lease obligations, less current portion. . . . . . . . . . . . - 1,610 ------------ ------------ Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 1,924,851 2,855,692 ------------ ------------ Commitments and Contingencies Shareholders' deficit: Common stock, no par value; authorized 20,000,000 shares; issued and outstanding 16,853,380 and 15,053,380 . . . . . . . . . . . . . . . . 10,577,253 9,677,253 Additional paid in capital . . . . . . . . . . . . . . . . . . . . . . 1,067,066 983,800 Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . . . . . (12,243,754) (12,000,323) ------------ ------------ Total shareholders' deficit. . . . . . . . . . . . . . . . . . . . . . (599,435) (1,339,270) ------------ ------------ Total liabilities and shareholders' deficit. . . . . . . . . . . . . $ 1,325,416 $ 1,516,422 ============ =============
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FORECROSS CORPORATION STATEMENTS OF OPERATIONS For the Three Months Ended For the Nine Months Ended June 30, June 30, --------------------------- -------------------------- 2001 2000 2001 2000 ------------ ------------ ------------ ------------ (Unaudited) (Unaudited) (Unaudited) (Unaudited) Net revenue: Migration services and consulting . . . $ 997,923 $ 852,318 $ 2,113,196 $ 1,442,808 Year 2000 services . . . . . . . . . . . - - - 1,056,730 Year 2000 software licenses, maintenance agreements and distributorship fees from related parties . . . . . . . . . 697,911 141,249 980,409 423,750 ------------ ------------ ------------ ------------ Total net revenue . . . . . . . . . . 1,695,834 993,567 3,093,605 2,923,288 Cost of services and maintenance including fees to related parties of $0, $0, $0, $18,000. . . . . . . . . . 409,209 202,682 1,187,000 971,000 ------------ ------------ ------------ ------------ Gross margin . . . . . . . . . . . . . . 1,286,625 790,885 1,906,605 1,952,288 ------------ ------------ ------------ ------------ Operating expenses: Sales and marketing including fees to related parties of $0, $0, $0, $55,000 . . . . . . . . . . . . . . . 226,694 205,408 551,728 523,800 Research and development . . . . . . . . 185,339 294,306 593,183 728,472 General and administrative . . . . . . . 289,528 339,518 878,228 1,553,400 ------------ ------------ ------------ ------------ Total operating expenses . . . . . . . . 701,561 839,232 2,023,139 2,805,672 ------------ ------------ ------------ ------------ Income (Loss) from operations . . . . . 585,064 ( 48,347) (116,534) (853,384) Interest expense, net. . . . . . . . . . ( 35,259) ( 17,008) (125,297) (275,921) ------------ ------------ ------------ ------------ Income (Loss) before provision for income taxes. . . . . . . . . . . . . 549,805 ( 65,355) (241,831) (1,129,305) Provision for income taxes . . . . . . . - 800 1,600 800 ------------ ------------ ------------ ------------ Net income (loss). . . . . . . . . . . $ 549,805 $ ( 66,155) $ (243,431) $ (1,130,105) ============ ============ ============ ============ Net income (loss) per share - basic and diluted . . . . . . . . . . . . . . . $ 0.04 $ (0.00) $ (0.02) $ (0.08) ============ ============ ============ ============ Weighted average shares used in computing per share data . . . . . . . 15,503,380 15,050,905 15,233,380 13,620,528 ============ ============ ============ ============
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FORECROSS CORPORATION STATEMENTS OF CASH FLOWS For the Nine Months Ended June 30, 2001 2000 ------------ ------------ (Unaudited) (Unaudited) Increase (decrease) in cash resulting from: Cash flows from operating activities: Net loss . . . . . . . . . . . . . . . . . . . $ (243,431) $(1,130,105) Adjustments to reconcile net loss to net cash used in operating activities- Provision for uncollectible amounts . . . . . - (25,000) Non-cash compensation related to private placement . . . . . . . . . . . . . - 652,000 Non-cash compensation to consultants and subsequent adjustments . . . . . . . . . . 18,882 14,650 Non-cash compensation to financial organization. . . . . . . . . . . . . . . . 45,134 - Depreciation and amortization. . . . . . . . . 119,073 195,788 Changes in operating assets and liabilities- Accounts receivable. . . . . . . . . . . . . . 358,332 (121,966) Other assets and accrued interest on notes receivable from officers . . . . . . . . . . 18,887 12,942 Accounts payable and accrued liabilities . . . 65,015 (317,374) Accrued compensation . . . . . . . . . . . . . 126,611 144,387 Deferred revenue from year 2000 distributors . (980,409) (423,750) Deferred revenue from projects . . . . . . . . 212,616 ( 40,162) ------------ ------------ Net cash used in operating activities. . . . . (259,290) (1,038,590) ------------ ------------ Cash flows from investing activities: Fixed asset acquisition. . . . . . . . . . . . - (7,332) ------------ ------------ Net cash used in investing activities. . . . . - (7,332) Cash flows from financing activities: Proceeds from factoring of accounts receivable 1,257,695 1,152,760 Repayment of borrowings under factoring arrangement . . . . . . . . . . . . . . . . . (1,595,854) (1,789,089) Repayment of borrowings under notes payable -officers. . . . . . . . . . . . . . . . . . - (51,269) Repayment of borrowings under capitalized leases (16,515) (16,021) Net proceeds from issuance of common shares . 900,000 1,832,075 ------------ ------------ Net cash provided by financing activities . . . . . . . . . . . . . . . . . 545,326 1,128,456 ------------ ------------ Net increase in cash . . . . . . . . . . . . . 286,036 82,534 Cash at beginning of period. . . . . . . . . . 18,833 2,740 ------------ ------------ Cash at end of period . . . . . . . . . . . . $ 304,869 $ 85,274 ============ ============ Supplemental disclosures of cash flow information: Cash paid during the period for interest . . . $ 142,497 $ 173,274 ============ ============ Supplemental disclosures of non-cash investing and financing activities: Accrued interest on notes payable to officers and related parties . . . . . . . . . . . . . $ 8,625 $ 59,333 ============ ============
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FORECROSS CORPORATION STATEMENTS OF SHAREHOLDERS' DEFICIT (unaudited) Common Stock Additional Accumulated Shares Amount Paid in Capital Deficit Total ----------- ------------ --------------- ------------- ------------ Balances at October 1, 2000. . . . . 15,053,380 $ 9,677,253 $ 983,800 $(12,000,323) $(1,339,270) Issuance of common stock for cash. . 1,800,000 900,000 - - 900,000 Issuance of options to consultants . - - 38,132 - 38,132 Issuance of warrants to financial organization. . . . . . . . . . . - - 45,134 - 45,134 Net loss . . . . . . . . . . . . . . - - - (243,431) (243,431) ----------- ------------ ------------- -------------- ------------ Balances at June 30, 2001. . . . . . 16,853,380 $10,577,253 $ 1,067,066 $ (12,243,754) $( 599,435) =========== ============ ============= ============== ============
FORECROSS CORPORATION NOTES TO FINANCIAL STATEMENTS (Unaudited) 1. UNAUDITED INTERIM FINANCIAL STATEMENTS: The unaudited interim financial statements of Forecross Corporation have been prepared in conformity with generally accepted accounting principles, consistent in all material respects with those applied in the Annual Report on Form 10-K for the year ended September 30, 2000. The interim financial information is unaudited, but in the opinion of management, includes all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the information set forth therein. The interim financial statements should be read in connection with the financial statements and notes in the Company's Annual Report on Form 10-K for the year ended September 30, 2000. The interim period results are not necessarily indicative of the results for the year ending September 30, 2001. 2. BASIS OF PRESENTATION AND GOING CONCERN: Through June 30, 2001, the Company had sustained recurring losses from operations and, at June 30, 2001, had a shareholders' deficit of $599,000 and a net working capital deficiency of $818,000. These conditions raise substantial doubt about the ability of the Company to continue as a going concern. The opinion of the Company's independent certified public accountants on the audited financial statements for the year ended September 30, 2000 also contained an explanatory paragraph regarding this doubt about the Company's ability to continue as a going concern. During fiscal 2001, the Company expects to meet its working capital and other cash requirements with cash derived from operations, short-term receivables and other financing as required, sales of shares of common stock, and software license fees from organizations desiring access to the Company's various product offerings. The Company's continued existence is dependent upon its ability to achieve and maintain profitable operations by controlling expenses and obtaining additional business. Management believes that the return of migration contracts combined with increased automation of its services for migration projects and cost reduction actions previously implemented should improve the Company's profitability in fiscal 2001. However, there can be no assurance that the Company's efforts to achieve and maintain profitable operations will be successful. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: 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 disclosures; contingent assets and liabilities at the date of the financial statements; and the reported amounts of revenue and expenses during the reporting period. Accordingly, actual results could differ from those estimates. The most significant estimates subject to future uncertainties are those relating to calculations of percentage of completion for projects in process and estimations of warranty liability. It is at least reasonably possible that the significant estimates used will change within a year. RECLASSIFICATIONS: Certain prior-year amounts have been reclassified to conform to current year presentation. 5 4. CONCENTRATIONS OF CREDIT RISK AND FOREIGN SALES: The Company performs ongoing credit evaluations of its customers and generally does not require collateral on accounts receivable as the majority of the Company's customers are large, well-established companies. In the following table, revenues from the Company's Distributors are treated as resulting from one customer.
CONCENTRATIONS OF ACCOUNTS RECEIVABLE At June 30, At September 30, ------------------------------ ------------------------------- 2001 2000 2000 1999 -------------- -------------- --------------- -------------- Accounts Receivable Number of Customers Represented 2 2 2 4 Percentages of Total Accounts Receivable . . . . . . . . . 51%, 40% 61%, 26% 75%, 22% 30%, 18%, 16% and 13%
CONCENTRATIONS OF REVENUE GENERATION For the Three Months Ended For the Nine Months Ended June 30, June 30, ------------------------------ ------------------------------- 2001 2000 2001 2000 -------------- -------------- --------------- -------------- Revenue Number of Customers Represented 5 3 5 4 Percentages of Total Revenue 41%, 17%, 16%, 44%, 31%, 14% 32%, 28%, 13%, 19%, 17%, 17% 14% and 11% 12% and 11% and 14% Revenue by Geographic Area Canada Percentage of Total Revenue - - - 11% Europe Percentage of Total Revenue 12% - 13% -
5. ISSUANCE OF STOCK AND WARRANTS: In March 2001, the Company signed an agreement modifying its factoring terms to reduce the interest rate and fees charged. As part of the agreement, the Company granted to the financial organization 100,000 warrants to purchase shares of the Company's stock. These warrants have an exercise price of $1.12 per share, and an expiration date of September 1, 2005. The company has recorded $45,000 in expense to date for these warrants. In June 2001, the Company completed a private placement of 1,800,000 shares of common stock at $0.50 per share, resulting in gross proceeds of $900,000. With each share the Company also issued a warrant to purchase one half share of stock at $0.75 per share at a future date. The warrants expire upon the earlier of three years, or 10 days after the 20-day trading average closing price of the Company's common stock equals or exceeds $1.25 per share (if a registration statement covering the underlying shares has been declared effective.) 6. DEFERRED REVENUE: Deferred Revenues related to Y2K license agreements were recognized during the quarter ended June 30, 2001 as year 2000 work effectively ceased during late 1999, and all remaining clean-up and documentation work was completed by March 2000. The Company has no remaining obligations or continuing obligations with respect to its prior arrangements with Y2K distributors or customers. Remaining deferred revenues relate to migration projects for which amounts have been billed or funds received in advance of revenues earned under the percentage of completion method. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ------- ------------------------------------------------- The following summary of our material activities for the three and nine months ended June 30, 2001 and 2000 is qualified by, and should be read in conjunction with more detailed information along with the financial statements and related notes and other information contained in this report. Each recipient of this document is urged to read it in its entirety. The financial results reported herein do not indicate the financial results that we may achieve in any future period. Other than the historical facts contained in this document, this Quarterly Report contains statements that are forward- looking, such as statements relating to plans for future activities. Such forward-looking information involves important risks and uncertainties that could significantly affect results in the future and, accordingly, such results may differ from those expressed in any forward-looking statements made by us or on our behalf. These risks and uncertainties include concentration of credit, outstanding indebtedness, dependence on expansion, activities of competitors, changes in federal or state laws and the administration of such laws, protection of trademarks and other proprietary rights and the general condition of the economy and its effect on the securities markets. For a discussion of such risks and uncertainties see our Annual Report on Form 10-K for the fiscal year ended September 30, 2000. 6 RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 2001 COMPARED TO THREE MONTHS ENDED JUNE 30, 2000 Total revenue for the three months ended June 30, 2001 was $1,696,000 as compared to $994,000 for the same period of 2000, an increase of 71%. Migration services revenue for the period contributed $810,000 as compared to $807,000 a year ago. Project revenue is recognized on the percentage-of- completion method, using estimates of the costs remaining. Revenue from consulting totaled $188,000 as compared to $45,000 in 2000, and revenue from the amortization of deferred year 2000 distributor licenses, fees and maintenance was $701,000 for the current period compared to $141,000 a year ago. The year 2000 distributor revenue increased $560,000 since the remaining year 2000 deferred revenue was recognized in the current period (see Note 6). Backlog was $3,375,000 at June 30, 2001, as compared to $993,000 at September 30, 2000 and $1,862,000 at June 30, 2000. Gross margin was $1,287,000 and $791,000 for the three months ended June 30, 2001 and 2000, respectively. Gross margin percentages were 76% and 80% for these periods. Excluding all year 2000 distributor revenue, gross margin was $589,000 or 59% for 2001 and $650,000 or 76% for 2000. Sales and marketing expenses were $227,000 in the three months ended June 30, 2001 as compared to $205,000 in the same period of 2000. Research and development expenses were $185,000 at June 30, 2001 compared to $294,000 in the corresponding period of 2000. A larger portion of the current period department expenses were project related and were included in cost of revenue. General and administrative expenses were $290,000 and $340,000, in the three months ended June 30, 2001 and 2000, respectively. Net interest expense was $35,000 for the three months ended June 30, 2001 as compared to $17,000 in the 2000 quarter. The overall net income for the three months ended June 30, 2001 was $550,000 or $0.04 per share compared with a net loss of $66,000 or $0.00 per share for the three months ended June 30, 2000 (based on the weighted average number of shares outstanding during the respective periods). Excluding the incremental $557,000 year 2000 deferred revenue recognized in this period, the overall net loss would have been $7,000, or $0.00 per share. 7 NINE MONTHS ENDED JUNE 30, 2001 COMPARED TO NINE MONTHS ENDED JUNE 30, 2000 Total revenue for the nine months ended June 30, 2001 was $3,094,000 as compared to $2,923,000 for the same period of 2000, an increase of 6%. Migration services revenue was $1,725,000 as compared to $1,213,000 a year ago. There was no Year 2000 project revenue in the current nine months, compared to $1,057,000 for the same period a year ago. Revenue from development and consulting totaled $388,000 as compared to $229,000 in 2000. Revenue from the amortization of deferred year 2000 distributor licenses, fees and maintenance was $980,000 in 2001 compared to $424,000 in 2000. As previously noted, the year 2000 distributor revenue increased $560,000 since the remaining year 2000 deferred revenue was recognized in the current period (see Note 6). Gross margin was $1,907,000 and $1,952,000 for the nine months ended June 30, 2001 and 2000, respectively. Gross margin percentages were 62% and 67% for these periods. Excluding all year 2000 distributor revenue, gross margin was $1,248,000 or 59% for 2001 and $1,529,000 or 61% for 2000. Sales and marketing expenses were $552,000 for the nine months ended June 30, 2001 as compared to $524,000 for the same period of 2000. Year to date research and development expenses were $593,000 as compared to $728,000 in the prior year. General and administrative expenses were $878,000 and $1,553,000, for the year to date periods. The 2000 period included a non-recurring $652,000 non-cash compensation expense for beneficial pricing to employees, distributors and a director related to the issuance of common stock and warrants in the March 2000 stock private placement and debt conversion. Net interest expense was $125,000 for the nine months ended June 30, 2001 as compared to $276,000 in 2000, reflecting the elimination of debt to the company's senior officers and to year 2000 distributors as part of the March 2000 debt conversion. The overall net loss for the nine months ended June 30, 2001 was $243,000 or $0.02 per share compared with a loss of $1,130,000 or $0.08 per share for the nine months ended June 30, 2000 (based on the weighted average number of shares outstanding during the respective periods). The change from a year ago is due in large part to the $652,000 non-cash charge for warrant expense in 2000, coupled with the recognition of the remaining $557,000 year 2000 distributor revenue in 2001 (see Note 6). Excluding the incremental $557,000 year 2000 deferred revenue recognized in the quarter ended June 30, 2001, the overall net loss would have been $800,000, or $0.05 per share in 2001. 8 LIQUIDITY AND CAPITAL RESOURCES Through June 30, 2001, we sustained recurring losses from operations and, at June 30, 2001, we had a shareholders' deficit of $599,000 and a net working capital deficiency of $818,000. These conditions raise substantial doubts about our ability to continue as a going concern. Also, the opinion of our independent certified public accountants on the audited financial statements for the year ended September 30, 2000 contained an explanatory paragraph regarding this doubt about our ability to continue as a going concern. For the nine months ended June 30, 2001, operations were funded by the sale of common stock for cash, by a payment received for future consulting services, by collection of accounts receivable, and by deferral of salaries of senior officers. In December 2000, we received an advance payment of $300,000 from a client, for future XML-related consulting services. As of June 30, 2001, $129,000 or 43% of the advance has been earned and recognized in revenues. We expect the balance to be earned over the next two quarters. In June 2001, we completed a private placement of common stock which resulted in gross proceeds of $900,000. During May 2001, an existing client signed a contract for an additional $3,000,000 of migration services, bringing the total value of the project to $3,500,000. We believe this will improve our cash position as the work is performed. A factoring agreement with a financial institution allows us to obtain financing by borrowing against our accounts receivable on a recourse basis. At June 30, 2001, $163,000 was outstanding under the agreement and at September 30, 2000, $501,000 was outstanding. The agreement, established in October 1995, may be terminated by either the factor or us at any time. We are aggressively pursuing new opportunities for migration services, including developing products and services specifically marketable to businesses currently using legacy systems but needing to migrate to more web-friendly platforms. We expect additional revenue in the fourth quarter of fiscal 2001 from some of the migration contracts currently under negotiation. We are closely monitoring our sales pipeline, work in progress, collections and cash requirements to determine whether the existing sources of financing are adequate to support our operations or whether additional means of financing, including debt or equity financing, may be required to satisfy our working capital and other cash requirements. If we can obtain the anticipated level of new business, and continue the use of short-term receivables financing, we believe we will have sufficient funds to meet our needs through the balance of fiscal 2001. Cash from operations and the other sources described above may not be achieved or may not be sufficient for our needs. While we have not experienced difficulty in attracting or retaining qualified personnel in the past, any future problems in this area may have a material negative effect on our results of operations. We anticipate that our capital expenditures for fiscal 2001 will be under $50,000. Cash and cash equivalents on hand at June 30, 2001 were $305,000 as compared to $19,000 at September 30, 2000. 9 PART II-OTHER INFORMATION Item 1. Legal Proceedings None. Item 2. Recent Sales of Unregistered Securities In March 2001, the Company signed an agreement modifying its factoring terms to reduce the interest rate and fees charged. As part of the agreement, the Company granted to the financial organization 100,000 warrants to purchase shares of the Company's stock. These warrants have an exercise price of $1.12 per share, and an expiration date of September 1, 2005. The Company has recorded $45,000 to date related to the warrants. The grant of warrants was exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(2) of such Act. In June 2001, the Company completed a private placement of 1,800,000 shares of common stock at $0.50 per share, resulting in gross proceeds of $900,000. With each share the Company also issued a warrant to purchase one half share of stock at $0.75 per share at a future date. The warrants expire upon the earlier of three years, or 10 days after the 20-day trading average closing price of the Company's common stock equals or exceeds $1.25 per share (if a registration statement covering the underlying shares has been declared effective.) Item 3. Defaults Upon Senior Securities Not Applicable. Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Information None. Item 6. Exhibits and Report on Form 8-K (a). Index and Description of Exhibits
Exhibit No. Description - ----------- -------------------------------------------------------------------------------- 3.1+ Restated Articles of Incorporation 3.2+ By-Laws 10.1+ Lease Agreement, dated January 1, 1997 between the Company and The Canada Life Assurance Company 10.2+ Form of Indemnification Agreement entered into between the Company and each of its officers and directors 10.3+ 1993 Restricted Stock Purchase Plan 10.4+ 1994 Stock Option Plan and Form of Option Agreement 10.5* Exclusive Distributor Agreement between the Company and Gardner Solution 2000, L.L.C., and Amendment 10.6* Exclusive Distributor Agreement between the Company and Y2K Solutions, L.P., 10.7* Software License Agreement between the Company and Y2K Solutions, L.P. 10.8+ Factoring Agreement, dated October 30, 1995, between the Company and Silicon Valley Financial Services 10.9+ Lease Expansion Proposal dated November 17, 1997, between the Company and The Canada Life Assurance Company 10.10+ Factoring Modification Agreement, dated January 13, 1998, between the Company and Silicon Valley Financial Services 10.11* Exclusive Distributor Agreement between the Company and CY2K Solutions, L.L.C. 10.12* Software License Agreement between the Company and CY2K Solutions, L.L.C. 10.13* Exclusive Distributor Agreement between the Company and PY2K Solutions, L.L.C. 10.14* Software License Agreement between the Company and PY2K Solutions, L.L.C. 16.1+ Notice of Change of Auditor dated September 23, 1997, issued to all holders of common shares of Forecross Corporation 10 16.2+ Letter dated September 23, 1997 from BDO Seidman, LLP to the British Columbia Securities Commission and to the Vancouver Stock Exchange confirming the accuracy of the information contained in the Notice of Change of Auditor of Forecross Corporation dated September 23, 1997 16.3+ Letter dated September 23, 1997 from Coopers & Lybrand, L.L.P. to the British Columbia Securities Commission and to the Vancouver Stock Exchange confirming the accuracy of the information contained in the Notice of Change of Auditor of Forecross Corporation dated September 23, 1997 16.4+ Letter dated September 23, 1997 from the Board of Directors of Forecross Corporation to the shareholders of Forecross Corporation, the British Columbia Securities Commission and the Vancouver Stock Exchange confirming the review of the Board of Directors of the Notice of Change of Auditor and the related letter dated September 23, 1997 from BDO Seidman, LLP and Coopers & Lybrand, L.L.P. + Previously filed as part of the Company's Form 10/A, effective June 16, 1998. The Company has requested that certain portions of the documents be given confidential treatment. The entire documents, including the redacted portions, have been filed with the SEC.
(b). Reports on Form 8-K None 11 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. Registrant FORECROSS CORPORATION August 13, 2001 BY: /S/ Bernadette C. Castello --------------------------------- Bernadette C. Castello Senior Vice President and Chief Financial Officer 12 -----END PRIVACY-ENHANCED MESSAGE-----