-----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, LZdozvBHmFmjc9FbpzAV8FV/D4KzCInpMT9dYX1cjyhK1QF8q1Rz5GBh00K7P5JQ T1rR/6wo4m33Z8vy5ojP+A== 0000909518-01-500085.txt : 20010516 0000909518-01-500085.hdr.sgml : 20010516 ACCESSION NUMBER: 0000909518-01-500085 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GIGA INFORMATION GROUP INC CENTRAL INDEX KEY: 0000948263 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ENGINEERING, ACCOUNTING, RESEARCH, MANAGEMENT [8700] IRS NUMBER: 061422860 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-21529 FILM NUMBER: 1639747 BUSINESS ADDRESS: STREET 1: 139 MAIN STREET CITY: CAMBRIDGE STATE: MA ZIP: 02142 BUSINESS PHONE: 6179494900 MAIL ADDRESS: STREET 1: 139 MAIN STREET CITY: CAMBRIDGE STATE: MA ZIP: 02142 10-Q 1 the-q.txt UNITED STATES 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 March 31, 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 0-21529 GIGA INFORMATION GROUP, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 06-1422860 ----------------------- --------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 139 MAIN STREET CAMBRIDGE, MA 02142 (617) 949-4900 ------------------------------------------- (Address, including zip code, and telephone number, including area code, of principal executive offices) 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. [X] Yes [ ] No As of May 10, 2001, there were 10,511,756 shares of Common Stock, $.001 par value, of the registrant outstanding. GIGA INFORMATION GROUP, INC. QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 2001 INDEX
PAGE PART I - FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Statements of Operations for the three months ended March 31, 2001 (unaudited) and March 31, 2000 (unaudited) 3. Condensed Consolidated Balance Sheets at March 31, 2001 (unaudited) and December 31, 2000 4. Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2001 (unaudited) and March 31, 2000 (unaudited) 5. Notes to Condensed Consolidated Financial Statements (unaudited) 6. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10. Item 3. Quantitative and Qualitative Disclosures About Market Risk 18. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 19. SIGNATURE PAGE 20. EXHIBIT INDEX 21.
2 PART 1 - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS GIGA INFORMATION GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited, in thousands, except share and per share data)
THREE MONTHS ENDED MARCH 31, 2001 2000 ---------------- --------------- Revenues: Research, advisory and consulting $ 16,472 $ 14,877 Other, principally events 998 1,962 ---------------- --------------- Total revenues 17,470 16,839 Costs and expenses: Cost of services 7,132 7,229 Sales and marketing 7,568 7,739 Research and development 216 646 General and administrative 2,119 2,692 Depreciation and amortization 848 645 ---------------- --------------- Total costs and expenses 17,883 18,951 ---------------- --------------- Loss from operations (413) (2,112) ---------------- --------------- Interest income 30 107 Interest expense (18) (23) Foreign exchange loss (84) (463) ---------------- --------------- Loss from operations before income taxes (485) (2,491) Income tax benefit (20) (27) ---------------- --------------- Net loss $ (465) $ (2,464) ================ =============== Results per common share: Historical - basic and diluted: Net loss $ (0.04) $ (0.24) ================ =============== Weighted average number of shares used to compute Results per common share 10,482,925 10,106,752 ================ ===============
The accompanying unaudited notes are an integral part of the condensed consolidated financial statements. 3 GIGA INFORMATION GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data)
MARCH 31, DECEMBER 31, 2001 2000 ----------------- ------------------- (UNAUDITED) ASSETS Current assets: Cash and cash equivalents $ 1,360 $ 1,640 Restricted cash 663 620 Trade accounts receivable, net of allowance for uncollectible accounts of $372 and $388 at March 31, 2001 and December 31, 2000, respectively 16,638 20,083 Pledged accounts receivable - 1,717 Unbilled accounts receivable 6,324 6,466 Prepaid expenses and other current assets 6,081 6,052 ----------------- ------------------- Total current assets 31,066 36,578 Property and equipment, net 7,177 6,375 Restricted cash 14 61 Other assets 1,276 1,270 ----------------- ------------------- Total assets $ 39,533 $ 44,284 ================= =================== LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Accounts payable $ 3,876 $ 4,337 Deferred revenues 39,211 39,234 Accrued expenses and other current liabilities 6,083 9,669 Current portion of capitalized lease obligations 307 137 Short-term borrowings - 1,352 ----------------- ------------------- Total current liabilities 49,477 54,729 Capitalized lease obligations, net of current portion 500 216 Deferred revenues 1,373 881 ----------------- ------------------- Total liabilities 51,350 55,826 Stockholders' deficit: Preferred Stock, $.001 par value; 5,000,000 shares authorized at March 31, 2001 and December 31, 2000, no shares issued and outstanding at March 31, 2001 and December 31, 2000 - - Common Stock, $.001 par value: 60,000,000 shares authorized at March 31, 2001 and December 31, 2000, 10,492,562 and 10,464,741 shares issued and outstanding at March 31, 2001 and December 31, 2000, respectively 10 10 Additional paid-in capital 82,941 82,896 Deferred compensation (513) (569) Accumulated deficit (95,682) (95,217) Accumulated other comprehensive income 1,427 1,338 ----------------- ------------------- Total stockholders' deficit (11,817) (11,542) ----------------- ------------------- Total liabilities and stockholders' deficit $ 39,533 $ 44,284 ================= ===================
The accompanying unaudited notes are an integral part of the condensed consolidated financial statements. 4 GIGA INFORMATION GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in thousands)
THREE MONTHS ENDED MARCH 31, ------------------------------- 2001 2000 -------------- --------------- Cash flows from operating activities: Net loss $ (465) $ (2,464) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 848 645 Amortization of deferred financing costs 21 - Provision for doubtful accounts (2) (9) Gain on sale of fixed assets (1) - Compensation expense related to stock options 39 523 Change in assets and liabilities: Decrease in billed and unbilled accounts receivable 5,111 5,930 (Increase) decrease in prepaid expenses and other current assets (21) 211 (Increase) decrease in other assets (6) 6 Increase in deferred revenues 699 512 Decrease in accounts payable and accrued liabilities (3,955) (2,566) -------------- --------------- Net cash provided by operating activities 2,268 2,788 -------------- --------------- Cash flows from investing activities: Acquisition of equipment and improvements (1,133) (429) Proceeds from maturities of marketable securities - 801 Other, net 1 2 -------------- --------------- Net cash (used in) provided by investing activities (1,132) 374 -------------- --------------- Cash flows from financing activities: Proceeds from issuance of common stock under option plans 22 205 Proceeds from issuance of common stock due to exercise of warrants - 116 Proceeds from issuance of common stock under employee stock purchase plan 39 - Principal payments on long-term debt - (123) Net short-term payments on Accounts Receivable Financing Agreement (1,352) - Principal payments under capital lease obligations (76) - -------------- --------------- Net cash (used in) provided by financing activities (1,367) 198 -------------- --------------- Effect of exchange rates on cash (49) (48) -------------- --------------- Net (decrease) increase in cash and cash equivalents (280) 3,312 Cash and cash equivalents, beginning of period 1,640 5,065 -------------- --------------- Cash and cash equivalents, end of period $ 1,360 $ 8,377 ============== =============== Noncash investing and financing activities: Purchase of assets under capital lease obligations $ 530 $ -
The accompanying unaudited notes are an integral part of the condensed consolidated financial statements. 5 GIGA INFORMATION GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Interim Condensed Consolidated Financial Statements The accompanying condensed consolidated financial statements of Giga Information Group, Inc. ("Giga") at March 31, 2001 and for the three months ended March 31, 2001 and 2000 are unaudited and have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. All adjustments, consisting only of normal recurring adjustments, have been made which, in the opinion of management, are necessary for a fair presentation. The results of operations for the periods presented are not necessarily indicative of the results that may be expected for any future period. For further information, refer to Giga's audited consolidated financial statements included in its Annual Report on Form 10-K, for the period ended December 31, 2000, as filed with the Securities and Exchange Commission. 2. Historical Net Loss per Common Share Giga computes basic and diluted earnings (loss) per share in accordance with Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share." Basic earnings (loss) per share is based upon the weighted average number of common shares outstanding during the period. Common equivalent shares have been excluded from the computation of diluted loss per share as their effect would be anti-dilutive. Common equivalent shares result from the assumed exercise of outstanding stock options and warrants, the proceeds of which are then assumed to have been used to repurchase outstanding common stock using the treasury stock method. As a result, options and warrants to purchase shares of common stock in the amount of 4,065,097 shares at March 31, 2001 and 3,580,999 shares at March 31, 2000 were excluded from the calculation of diluted net loss per common share. At March 31, 2001, options and warrants for 602,666 shares of common stock had an exercise price that was below the average market value per share of Giga's common stock during the fiscal quarter. 3. Comprehensive Income (Loss) Giga has adopted SFAS No. 130, "Reporting Comprehensive Income," which establishes standards for the reporting and display of comprehensive income (loss) and its components in general purpose financial statements. Comprehensive income (loss) is comprised of net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) includes certain changes in equity that are excluded from net income (loss). At March 31, 2001 and 2000, accumulated other comprehensive income was comprised solely of cumulative foreign currency translation adjustments, which is reflected in the table below (in thousands).
THREE MONTHS ENDED MARCH 31, -------------------------------- 2001 2000 --------------- --------------- Net loss $ (465) $ (2,464) Other comprehensive income, net of tax: Foreign currency translation adjustment 89 285 --------------- --------------- Comprehensive loss $ (376) $ (2,179) =============== ===============
6 GIGA INFORMATION GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (UNAUDITED) 4. New Accounting Pronouncement In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No. 140 replaces SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No. 140 addresses certain issues not previously addressed in SFAS No. 125; however, it carries forward most of the provisions of SFAS No. 125 without reconsideration. SFAS No. 140 is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001. This Statement is effective for recognition and reclassification of collateral and for disclosures relating to securitization transactions and collateral for fiscal years ending after December 15, 2000. Giga anticipates that the adoption of SFAS No. 140 will not have a significant effect on its financial position or its results of operations. 5. Restructuring and Exit Costs In February 2000, Giga announced its plan to consolidate operations in its Watford, U.K. and Windsor, U.K. locations into one common facility in the Windsor area. As a result, nine employees from its finance and its conferences groups elected not to relocate to the Windsor area. The relocation is expected to be completed in the third quarter of fiscal 2001. For the year ended December 31, 2000, approximately $91,000 of additional rent expense and lease cancellation fees, $65,000 of incremental salaries and benefits cost and $28,000 of incremental real estate and legal fees were charged to expense. Of the total charges, $68,000 was recorded as cost of services, $67,000 was recorded as sales and marketing expenses and $49,000 was recorded as general and administrative expenses. As of December 31, 2000, $77,000 of the amounts had been paid against these liabilities. As of March 31, 2001, no additional amounts have been paid or charged against these liabilities. 6. Accounts Receivable Financing Agreement In April 2000, Giga established a one-year Accounts Receivable Financing Agreement (the "Financing Agreement") with a bank, under which it could borrow up to the lesser of $5.0 million or 80% of the eligible accounts receivable, as defined by the Financing Agreement. Upon execution of the Financing Agreement, Giga paid fees totaling $30,000. Loans under the Financing Agreement incurred interest at the bank's prime rate plus 1.5 percent. A monthly collateral handling fee of 0.375 percent was charged on the average daily financed receivable balance outstanding. During the first quarter of 2001, Giga pledged approximately $4.2 million of accounts receivable as collateral and received proceeds of approximately $3.3 million. As of March 31, 2001, the entire balance outstanding under the Financing Agreement was repaid. Giga was subject to certain covenants under the Financing Agreement, the most restrictive of which required total revenues to increase on a quarterly basis. Giga was in compliance with these covenants as of March 31, 2001. In April 2001, Giga renewed the Financing Agreement for another one-year period, allowing Giga to continue to borrow up to the lesser of $5.0 million or 80% of the eligible accounts receivable, as defined by the Financing Agreement. Upon renewal of the Financing Agreement, Giga paid fees totaling $25,000. Loans under the Financing Agreement bear interest at the bank's prime rate plus 0.5 percent and a monthly collateral handling fee of 0.375 percent is charged on the average daily financed receivable balance outstanding. Giga is subject to certain covenants under the renewed Financing Agreement, the most restrictive of which requires Giga to maintain an adjusted quick ratio, a ratio of quick assets, which include cash and receivables, to current liabilities minus deferred revenue, of at least 1.25 to 1.00. Giga anticipates that it will be able to maintain compliance with this covenant. 7 GIGA INFORMATION GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (UNAUDITED) 7. Warrants In April 2000, upon execution of the Financing Agreement discussed in Note 6, Giga issued warrants to the bank to purchase 24,000 shares of Giga common stock. The warrants were exercisable at any time at $5.00 per share and are scheduled to expire on May 25, 2005. As of March 31, 2001, none of these warrants were exercised. The estimated fair value of the warrants, at the time of issuance, was approximately $82,000, which was recorded as deferred financing costs and is reported as prepaid expenses and other current assets. These costs were amortized over the term of the Financing Agreement. During the first quarter of 2001, Giga recognized charges of approximately $21,000 for the amortization of the financing costs. In connection with the renewal of the Financing Agreement in April 2001, the terms of the warrants outstanding that were issued upon the original execution of the Financing Agreement have been modified such that the initial exercise price has been reduced to $1.50 per share from $5.00 per share. The fair value of the warrants will be determined based upon a Black-Scholes calculation and any adjustments to amortization of deferred financing costs will be recorded in the financial statements. 8. Listing of Common Stock On January 4, 2001, Giga announced that the listing of its common stock was transferred to the Nasdaq SmallCap Market from the Nasdaq National Market effective as of the opening of business on January 5, 2001. Giga was no longer in compliance with the minimum $50,000,000 market capitalization requirement for continued listing on the Nasdaq National Market. On March 23, 2001, Giga announced that the listing of its common stock was transferred to the OTC Bulletin Board from the Nasdaq SmallCap Market effective as of the opening of business on March 23, 2001. The listing of Giga's common stock was transferred to the OTC Bulletin Board because Giga was not in compliance with the net tangible assets/market capitalization/net income requirement, including the minimum $35,000,000 market capitalization requirement. 9. Segment Information Giga has determined that it operates in one reportable segment, advisory services. This determination is based on Giga's method of internal reporting and the similarities among its products and services. Giga's products and services are similar with regard to financial performance and business risk, targeted customer market, the methods used to market, sell and provide its products and services to customers and their purpose which is to provide customers with objective analyses and advice on developments and trends in information technology and e-Business. Revenues from the products and services within, and in support of, Giga's research, advisory and consulting services are presented in detail in Giga's Condensed Consolidated Statements of Operations. 8 GIGA INFORMATION GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (UNAUDITED) Giga conducts business principally in the United States and United Kingdom. Operations in France (through August 31, 2000, due to the deconsolidation of Giga Information Group S.A., a former wholly-owned subsidiary of Giga, in September 2000), Germany and Italy have been aggregated (collectively "Other International"). Revenues are reflected in the geographic area in which the sales are made. The table below presents information about Giga's reported revenues and total assets for the three months ended March 31, 2001 and 2000, respectively (in thousands).
REVENUES TOTAL ASSETS ----------------------------------------- ---------------------------------------- THREE MONTHS ENDED MARCH 31, MARCH 31, ----------------------------------------- ---------------------------------------- 2001 2000 2001 2000 ------------------- -------------------- ------------------- ------------------- United States $ 14,329 $ 13,409 $ 34,180 $ 32,131 United Kingdom 2,363 2,488 3,838 5,190 Other International 778 942 1,515 3,187 ------------------- -------------------- ------------------- ------------------- Consolidated $ 17,470 $ 16,839 $ 39,533 $ 40,508 =================== ==================== =================== ===================
9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 INFORMATION INCLUDED IN THIS QUARTERLY REPORT ON FORM 10-Q MAY CONTAIN FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. FORWARD-LOOKING STATEMENTS ARE NOT STATEMENTS OF HISTORICAL FACTS, BUT RATHER REFLECT GIGA'S CURRENT EXPECTATIONS CONCERNING FUTURE EVENTS AND RESULTS. GIGA GENERALLY USES THE WORDS "BELIEVES," "EXPECTS," "INTENDS," "PLANS," "ANTICIPATES," "LIKELY," "WILL" AND SIMILAR EXPRESSIONS TO IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH FORWARD-LOOKING STATEMENTS, INCLUDING THOSE CONCERNING GIGA'S EXPECTATIONS, INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS, SOME OF WHICH ARE BEYOND GIGA'S CONTROL, WHICH MAY CAUSE GIGA'S ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS, OR INDUSTRY RESULTS, TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE, OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. IN EVALUATING SUCH STATEMENTS AS WELL AS THE FUTURE PROSPECTS OF GIGA, SPECIFIC CONSIDERATION SHOULD BE GIVEN TO VARIOUS FACTORS INCLUDING THE FOLLOWING: GIGA'S PRIOR HISTORY OF LOSSES; GIGA'S NEED TO ATTRACT AND RETAIN QUALIFIED PERSONNEL; GIGA'S DEPENDENCE ON SALES AND RENEWALS OF SUBSCRIPTION-BASED SERVICES; GIGA'S ABILITY TO ACHIEVE AND SUSTAIN HIGH RENEWAL RATES; GIGA'S ABILITY TO MANAGE AND SUSTAIN GROWTH; GIGA'S FUTURE CAPITAL NEEDS AND THE RISKS OF WORKING CAPITAL DEFICIENCY; GIGA'S DEPENDENCE ON KEY PERSONNEL; COMPETITION FROM OTHER COMPANIES INCLUDING THOSE WITH GREATER RESOURCES THAN GIGA; THE RISKS ASSOCIATED WITH THE DEVELOPMENT OF NEW SERVICES AND PRODUCTS; THE POTENTIAL FOR SIGNIFICANT FLUCTUATIONS IN QUARTERLY OPERATING RESULTS; CONTINUED MARKET ACCEPTANCE OF AND DEMAND FOR GIGA SERVICES; UNCERTAINTIES RELATING TO PROPRIETARY RIGHTS; GIGA'S DEPENDENCE ON THE INTERNET INFRASTRUCTURE; THE RISK OF SYSTEM FAILURE; THE RISKS RELATED TO CONTENT; AND THE RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS. IN EVALUATING SUCH FORWARD-LOOKING STATEMENTS, AS WELL AS THE FUTURE PROSPECTS OF GIGA, SPECIFIC CONSIDERATION SHOULD BE GIVEN TO THE VARIOUS FACTORS DISCUSSED IN THIS QUARTERLY REPORT ON FORM 10-Q. OVERVIEW Giga provides objective research, advice and continuous coaching on technology for e-Business. Giga's integrated suite of offerings helps clients make strategic decisions about the technologies, people and processes needed to excel in the new digital economy. Emphasizing close interaction among analysts and clients, Giga delivers support with the speed and scope necessary for e-Business. Giga's four principal products and services are (i) Advisory Service, which includes ExperNet and Advisory Consulting, (ii) ePractices, (iii) Events and Conferences, and (iv) Web Site ScoreCard. Giga's services are designed to be accessed through GigaWeb, partner Web sites and consultation with Giga's analysts and advisors. Giga introduced its Advisory Service and GigaWeb in April 1996. In July 1996, Giga introduced its ePractices services. Advisory Consulting was introduced in September 1997. Giga's Events and Conferences product line was acquired with the acquisition of BIS Strategic Decisions ("BIS") in April 1995. Giga's Web Site ScoreCard offering was launched in the third quarter of 1999. For financial reporting purposes, revenues from (i) Advisory Service, ePractices services, Advisory Consulting and Web Site ScoreCard are aggregated into Research, advisory and consulting and (ii) Events and Conferences are aggregated into Other, principally events. Giga's principal products, Advisory Service and ePractices services, are typically sold through annual contracts that generally provide for payment at the commencement of the contract period. A portion of these contracts, however, is billed quarterly or monthly. Amounts billed in advance of services provided are reflected in Giga's financial statements as deferred revenues and are recognized monthly on a pro-rata basis over the term of the contract. Revenues from project consulting and Web Site ScoreCard are recognized as such services are performed. Revenues from events are recognized as they occur. Unbilled receivables, the majority of which are due within one year, are primarily recorded as a result of contractual extended billing terms offered in connection with Giga's annual contracts. Giga also records the related commission obligation upon acceptance of a contract and amortizes the corresponding deferred commission over the contract period in which the related revenues are earned. With the consistent application of these accounting policies as well as growth in contract value and volume, trade accounts receivable, deferred revenues, unbilled accounts receivable and deferred commissions are expected to increase. 10 Essentially all of Giga's current international operations are located in the European Community and Canada. Giga operates in the European Community primarily through wholly-owned subsidiaries in the United Kingdom and Germany. These subsidiaries manage direct sales personnel in other countries in the European Community as well. In Canada, Giga uses a direct sales force and provides business support to these salespersons through its operations in the United States. In France, Giga resells its services through GigaGroup S.A., an entity that was formerly a wholly-owned subsidiary of Giga, named Giga Information Group, S.A. As a result of issuing shares of Giga Information Group S.A. to new investing parties, Giga's ownership of Giga Information Group S.A. decreased from 100% to 19.9%. Substantially all of Giga's revenues from the European Community are denominated in foreign currencies, particularly the British pound, while essentially all of Giga's revenues from Canada are denominated in U.S. dollars. Giga also markets its products in Israel, Korea, Argentina, Brazil, Australia, India, Hong Kong and Japan through representatives. Revenues from these representatives have been and are expected to continue to be denominated in U.S. dollars. To date, however, such revenues have been insignificant. As a result of fluctuations in exchange rates, transactions denominated in foreign currencies have inherent financial risk. To date, however, Giga's cumulative translation adjustments have been slightly favorable, although there can be no assurance that this trend will continue in the future. Giga does not currently hedge its exposure to foreign currency adjustments. Giga believes that a leading measure of its business volume is revenue run rate ("Revenue Run Rate"). Revenue Run Rate is defined as the cumulative annualized subscription value of Giga's Advisory Services and ePractices contracts in effect at a given point in time ("Annualized Value" or "AV"), plus the previous 12 months' revenues from services not included in AV. At March 31, 2001, Revenue Run Rate increased 14% to $77.7 million from $68.3 million at March 31, 2000. Annualized Value at March 31, 2001 increased 15% to $70.1 million from $60.9 million at March 31, 2000. A majority of Giga's contracts renew automatically unless the customer cancels the subscription. Giga's experience is that substantial portions of customers renew expiring contracts for an equal or greater level of total fees each year. Historically, a substantial portion of new business, upgrades and renewals for a given year has been generated by Giga in the last two calendar quarters, particularly in the last month of the last quarter. As a result of this quarterly trend in business volume, trade accounts receivable, unbilled accounts receivable, deferred revenues and deferred commissions typically increase substantially at quarter end and at the fiscal year end. Giga's operating expenses consist of cost of services, sales and marketing, research and development, general and administrative, and depreciation and amortization. Cost of services consists primarily of the direct costs associated with the delivery of Giga's research, advisory and consulting, and other services. These direct costs include personnel expenses for analysts and other personnel, direct expenses for events and conferences, royalties to third party information providers and costs to design, print and distribute conference brochures and course materials. Sales and marketing expenses include personnel expenses, promotional expenses, and sales commissions. Sales commissions are typically deferred when paid and recorded to expense as the related revenue is recognized. Research and development expenses consist of personnel, consulting and other expenses to develop, enhance and operate GigaWeb. General and administrative expenses are primarily personnel costs and fees for professional services supporting the operational and administrative functions of Giga. Depreciation and amortization costs consist primarily of depreciation of computer equipment, furniture and fixtures and leasehold improvements, and amortization of software and assets under capital lease obligations. In February 2000, Giga announced its plan to consolidate operations in its Watford, U. K. and Windsor, U. K. locations into one common facility. Pursuant to this plan, approximately $68,000 was recorded as cost of services, $67,000 was recorded as sales and marketing expense and $49,000 was recorded as general and administrative expenses for the year ended December 31, 2000. As of December 31, 2000, approximately $77,000 of these amounts had been paid against these liabilities. As of March 31, 2001, no additional amounts have been paid or charged against these liabilities. See Note 5 to the Condensed Consolidated Financial Statements. Since its inception, Giga has incurred substantial costs to develop its products and services, establish its GigaWeb system, build a management team and recruit, employ and train research analysts, sales personnel and support staff for its business. Giga has incurred substantial tax loss carryforwards since its inception, and acquired certain tax loss carryforwards. Due to the magnitude of these existing tax loss carryforwards and substantial uncertainties associated with its business, Giga is unable to conclude that it is more likely 11 than not that the deferred tax associated with these tax loss carryforwards will be realized. Accordingly, this deferred tax asset has been fully reserved. This valuation allowance will be reduced and the deferred tax asset will be recognized when and if it becomes more likely than not that the deferred tax asset will be realized. 12 RESULTS OF OPERATIONS The following table sets forth certain statement of operations data as a percentage of revenues for the periods indicated:
THREE MONTHS ENDED MARCH 31, ------------------------------ 2001 2000 -------------- --------------- Revenues: Research, advisory and consulting 94% 88% Other, principally events 6% 12% -------------- --------------- Total revenues 100% 100% ============== =============== Costs and expenses: Cost of services 41% 43% Sales and marketing 43% 46% Research and development 1% 4% General and administrative 12% 16% Depreciation and amortization 5% 4% -------------- --------------- Total costs and expenses 102% 113% -------------- --------------- Loss from operations (2%) (13%) -------------- --------------- Interest income - 1% Interest expense - - Foreign exchange loss (1%) (3%) -------------- --------------- Loss from operations before income taxes (3%) (15%) Income tax benefit - - -------------- --------------- Net loss (3%) (15%) ============== ===============
Generally, the year-on-year decreases in Giga's operating expenses, expressed as a percentage of total revenues in the table above, are primarily due to leveraging those expenses over increased revenues derived from a growing customer base. 13 THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO THREE MONTHS ENDED MARCH 31, 2000 Revenues. Total revenues increased 4% to $17.5 million for the three months ended March 31, 2001 from $16.8 million for the same three-month period in 2000. The increase in total revenues was primarily due to the increase in Research, advisory and consulting revenues. Revenues from Research, advisory and consulting increased 11% to $16.5 million for the three months ended March 31, 2001 from $14.9 million for the same three-month period in 2000. The increase in revenues was primarily due to growing market acceptance of Giga's services and revenue growth in international markets. Other revenues, principally events decreased 49% to $998,000 for the three months ended March 31, 2001 from $2.0 million for the same three-month period in 2000. The decrease was primarily due to decreased revenues for events registrations and sponsorships, since fewer events were held in the first quarter of 2001. Cost of services. Cost of services decreased 1% to $7.1 million for the three months ended March 31, 2001 from $7.2 million for the same three-month period in 2000. The decrease in costs was primarily due to decreased expenses for events since fewer events were held in the first quarter of 2001, offset by increased expenses related to the Customer Advocacy Group that was expanded in the fourth quarter of 2000. Cost of services as a percentage of revenues declined to 41% for the three months ended March 31, 2001 from 43% for the same period of 2000, primarily due to leveraging these costs over increased revenues. Sales and marketing. Sales and marketing expenses decreased 2% to $7.6 million for the three months ended March 31, 2001 from $7.7 million for the same three-month period in 2000. The decrease was principally due to the reduction of costs associated with Giga Information Group S.A., a former wholly-owned subsidiary of Giga. In September 2000, Giga Information Group S.A., issued 482,484 shares of its common stock to new investing parties for 4,467,802 Euros or 9.26 Euros per share. As a result of the transaction, Giga's ownership of Giga Information Group S.A. decreased from 100% to 19.9%. As Giga no longer exercises significant influence over that entity, now called GigaGroup S.A., its accounts are no longer included in the consolidated financial results of Giga. Sales and marketing expenses as a percentage of revenues declined to 43% for the three months ended March 31, 2001 from 46% of revenues for the same period of 2000, primarily due to leveraging these costs over increased revenues. Research and development. Research and development expenses decreased 67% to $216,000 for the three months ended March 31, 2001 from $646,000 for the same three-month period in 2000. The decrease was primarily due to the capitalization of costs associated with the development of a new enhanced version of GigaWeb during the first quarter in 2001, in accordance with Emerging Issues Task Force Issue No. 00-02, "Accounting for Web Site Development Costs" ("EITF 00-02"), compared to those costs associated with the completion of GigaWeb 3.0 that were expensed during the first quarter of 2000. General and administrative. General and administrative expenses decreased 21% to $2.1 million for the three months ended March 31, 2001 from $2.7 million for the same three-month period in 2000. The decrease was primarily due to a decrease in compensation expense related to stock option plans and a decrease in professional fees. Depreciation and amortization. Depreciation and amortization expense increased 31% to $848,000 for the three months ended March 31, 2001 from $645,000 for the same three-month period in 2000. The increase was primarily due to increased amortization costs for a sales force automation system deployed in the fourth quarter of 2000 and for assets acquired under capital leases in the second half of 2000. Depreciation costs also increased due to purchases of computer equipment for new hires and to upgrade equipment for existing staff. Interest income and expense. Interest income decreased to $30,000 for the three months ended March 31, 2001 from $107,000 for the same three-month period in 2000 due to lower cash balances available for investment. Interest expense decreased to $18,000 for the three months ended March 31, 2001 from $23,000 for the same three-month period in 2000. The decrease was primarily due to lower interest rates in the first quarter of 2001 versus the first quarter of 2000. 14 Foreign exchange loss. Foreign exchange losses recorded for the three months ended March 31, 2001 were $84,000 compared to $463,000 for the same three-month period in 2000 due primarily to realized losses upon payment of foreign currency denominated expenses and upon receipt of foreign currency denominated trade accounts receivable. LIQUIDITY AND CAPITAL RESOURCES At March 31, 2001, Giga had cash and cash equivalents of approximately $1.4 million. During the three months ended March 31, 2001, Giga's capital expenditures totaled approximately $1.1 million, primarily for computer equipment and new and enhanced software applications and associated implementation costs. Giga expects that additional purchases of computer equipment and software will be made and placed into service as Giga continues to enhance its infrastructure and as its customer base grows. As of December 31, 2000, Giga entered into an agreement for the customization and deployment of a new enhanced version of GigaWeb. The total cost of this contract is currently estimated at $1.3 million for fiscal year 2001. Currently, this project is expected to be completed during July 2001. As of March 31, 2001, approximately $409,000 of these costs have been capitalized in accordance with EITF 00-02. Except for this agreement, Giga does not currently expect the rate of capital spending through the end of fiscal 2001 to vary significantly from fiscal 2000. Net cash provided by operating activities was approximately $2.3 million for the three months ended March 31, 2001 compared to $2.8 million for the same three-month period in 2000. The decrease in net cash provided by operating activities was due principally to a decrease in compensation expense related to stock options and to changes in various balance sheet accounts, particularly billed and unbilled accounts receivable and accounts payable and accrued liabilities. Net cash used in investing activities was approximately $1.1 million for the three-month period ended March 31, 2001 compared to net cash provided by investing activities of $374,000 for the same three-month period in 2000. The net cash used in investing activities was primarily due to purchases of capital items and lower proceeds from maturities of marketable debt securities. Net cash used in financing activities was approximately $1.4 million for the three months ended March 31, 2001, compared to net cash provided by financing activities of approximately $198,000 for the same three-month period in 2000. The net cash used in financing activities was primarily due to the net payments of $1.4 million on short-term borrowings under the Accounts Receivable Financing Agreement during the first three months of 2001. To date, Giga has spent substantial amounts on capital and operating expenditures, which have contributed to an accumulated deficit of $95.7 million as of March 31, 2001. Giga expects capital and operating expenditures to increase due to numerous factors, including Giga's plans to increase marketing efforts for its services and expand its international operations, to attract and retain qualified employees to support its customer base, to develop and market new services and products, and to continually enhance the GigaWeb system. In April 2000, Giga established a one-year Accounts Receivable Financing Agreement (the "Financing Agreement") with a bank, under which Giga could borrow up to the lesser of $5.0 million or 80% of the eligible accounts receivable, as defined by the Financing Agreement. Upon execution of the Financing Agreement, Giga paid fees totaling $30,000. Loans under the Financing Agreement incurred interest at the bank's prime rate plus 1.5 percent. A monthly collateral handling fee of 0.375 percent was charged on the average daily financed receivable balance outstanding. During the first quarter of 2001, Giga pledged approximately $4.2 million of accounts receivable as collateral and received proceeds of approximately $3.3 million pursuant to the Financing Agreement. As of March 31, 2001, the entire balance outstanding under the Financing Agreement was repaid. Giga was subject to certain covenants under the Financing Agreement, the most restrictive of which required total revenues to increase on a quarterly basis. Giga was in compliance with these covenants as of March 31, 2001. In connection with the Financing Agreement, Giga issued warrants to purchase 24,000 shares of Giga common stock. The warrants were exercisable at any time at $5.00 per share and are scheduled to expire on May 25, 2005. As of March 31, 2001, none of these warrants were exercised. The estimated fair value of the warrants, at the time of issuance, was approximately $82,000, which was recorded as deferred financing costs and is reported as prepaid expenses and 15 other current assets. These costs were amortized over the term of the Financing Agreement. During the first quarter of 2001, Giga recognized charges of approximately $21,000 for the amortization of the financing costs. In April 2001, Giga renewed the Financing Agreement for another one-year period, allowing Giga to continue to borrow up the lesser of $5.0 million or 80% of the eligible accounts receivable, as defined by the Financing Agreement. Upon renewal of the Financing Agreement, Giga paid fees totaling $25,000. Loans under the Financing Agreement bear interest at the bank's prime rate plus 0.5 percent and a monthly collateral handling fee of 0.375 percent is charged on the average daily financed receivable balance outstanding. Giga is subject to certain covenants under the renewed Financing Agreement, the most restrictive of which requires Giga to maintain an adjusted quick ratio, a ratio of quick assets, which include cash and receivables, to current liabilities minus deferred revenue, of at least 1.25 to 1.00. Giga anticipates that it will be able to maintain compliance with this covenant. In connection with the renewal of the Financing Agreement, the terms of the warrants outstanding that were issued upon the original execution of the Financing Agreement have been modified such that the initial exercise price has been reduced to $1.50 per share from $5.00 per share. The fair value of the warrants will be determined based upon a Black-Scholes calculation and any adjustments to amortization of deferred financing costs will be recorded in the financial statements. Giga believes that its existing cash and cash equivalents, cash expected to be generated from operations net of the repayment of short-term borrowings, and its Financing Agreement will be sufficient to fund Giga's cash needs at least through the second fiscal quarter of 2002. However, in the event that Giga encounters difficulties in collecting accounts receivable or collecting unbilled accounts receivable generated as a result of extended billing terms, experiences low or reduced subscription renewal rates or otherwise has revenues that are lower than planned, or expenses that are higher than planned, Giga might require additional working capital. If necessary, Giga will consider various sources of additional financing, including, but not limited to, private placements, the sale of assets and strategic alliances, but there can be no assurance that such financing would be available to Giga on terms that are acceptable, if at all. If adequate funds are not available, Giga may be required to reduce its fixed costs and delay, scale back or eliminate certain of its services, any of which could have a material adverse effect on Giga's business, financial condition and results of operations. On January 4, 2001, Giga announced that the listing of its common stock was transferred to the Nasdaq SmallCap Market from the Nasdaq National Market effective as of the opening of business on January 5, 2001. Giga was no longer in compliance with the minimum $50,000,000 market capitalization requirement for continued listing on the Nasdaq National Market. On March 23, 2001, Giga announced that the listing of its common stock was transferred to the OTC Bulletin Board from the Nasdaq SmallCap Market effective as of the opening of business on March 23, 2001. The listing of Giga's common stock was transferred to the OTC Bulletin Board because Giga was not in compliance with the net tangible assets/market capitalization/net income requirement, including the minimum $35,000,000 market capitalization requirement. 16 RECENTLY ISSUED ACCOUNTING STANDARDS In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No. 140 replaces SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No. 140 addresses certain issues not previously addressed in SFAS No. 125; however, it carries forward most of the provisions of SFAS No. 125 without reconsideration. SFAS No. 140 is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001. This Statement is effective for recognition and reclassification of collateral and for disclosures relating to securitization transactions and collateral for fiscal years ending after December 15, 2000. Giga anticipates that the adoption of SFAS No. 140 will not have a significant effect on its financial position or its results of operations. 17 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Exposure Based on Giga's overall interest exposure at March 31, 2001, including all interest rate sensitive instruments, a near-term change in interest rates would not materially affect Giga's consolidated results of operations or financial position. Currency Rate Exposure Foreign currency fluctuations have not had a significant impact on the comparison of the results of operations for the periods presented. The costs and expenses of Giga's international subsidiaries are generally denominated in currencies other than the United States dollar. However, since the functional currency of Giga's international subsidiaries is the local currency, foreign currency translation adjustments do not impact operating results, but instead are reflected as a component of stockholders' equity. To the extent Giga expands its international operations or changes its pricing practices to denominate prices in foreign currencies, Giga will be exposed to increased risk of currency fluctuation. 18 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) EXHIBITS 10.1 Second Amendment, dated February 2, 2001, to the sublease dated June 28, 1999, between the Registrant and InCert Software Corporation, with respect to the premises at One Kendall Square, Cambridge, Massachusetts 10.2 Accounts Receivable Financing Modification Agreement, dated April 6, 2001, between the Registrant and Silicon Valley Bank 10.3 Intellectual Property Security Agreement, dated April 6, 2001, between the Registrant and Silicon Valley Bank 10.4 Amendment to Warrant Agreement, dated April 6, 2001, between the Registrant and Silicon Valley Bank 11 Statement of Computation of Per Share Earnings (B) REPORTS ON FORM 8-K Giga filed a Current Report on Form 8-K, dated January 5, 2001, pertaining to a press release announcing that the listing of Giga's common stock was transferred to the Nasdaq SmallCap Market from the Nasdaq National Market effective as of the opening of business on January 5, 2001. Giga filed a Current Report on Form 8-K, dated February 15, 2001, pertaining to a press release announcing Giga's results of operations for the quarter ended and year ended December 31, 2000. Giga filed a Current Report on Form 8-K, dated March 26, 2001, pertaining to a press release announcing that the listing of its common stock was transferred to the OTC Bulletin Board from the Nasdaq SmallCap Market as of the opening of business on March 23, 2001. 19 SIGNATURE 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. GIGA INFORMATION GROUP, INC. May 15, 2001 By: /s/ Daniel M. Clarke ---------------------------- Daniel M. Clarke Senior Vice President. Chief Financial Officer, Secretary and Treasurer (Principal Financial and Accounting Officer) 20 EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION OF DOCUMENTS - ------ ------------------------ 10.1 Second Amendment, dated February 2, 2001, to the sublease dated June 28, 1999, between the Registrant and InCert Software Corporation, with respect to the premises at One Kendall Square, Cambridge, Massachusetts 10.2 Accounts Receivable Financing Modification Agreement, dated April 6, 2001, between the Registrant and Silicon Valley Bank 10.3 Intellectual Property Security Agreement, dated April 6, 2001, between the Registrant and Silicon Valley Bank 10.4 Amendment to Warrant Agreement, dated April 6, 2001, between the Registrant and Silicon Valley Bank 11 Statement of Computation of Per Share Earnings 21 EX-10 2 ex10-1.txt 10.1 EXHIBIT 10.1 SECOND AMENDMENT OF SUBLEASE Reference is made to that certain sublease entitled SUBLEASE (the "Sublease") dated June 28, 1999, between GIGA INFORMATION GROUP, INC. (hereinafter "Sublessor") and INCERT SOFTWARE CORPORATION (hereinafter "Sublessee"), relating to that certain premises comprised of approximately 7,868 square feet of space and located on the first floor of Building No. 1400, One Kendall Square in Cambridge, Massachusetts (hereinafter the "Premises"). WHEREAS, Sublessor and Sublessee wish to extend the term of this Sublease on the same terms and conditions as those set forth in the Sublease, except as modified herein. WHEREAS, Sublessor has extended the term of the Master Lease by a First Amendment dated August 7, 2000 (as so amended, the "Master Lease") and extended the term of the Sublease by a First Amendment of Sublease dated October 12, 2000 ("First Amendment"). NOW, THEREFORE, in consideration of the mutual promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, Sublessor and Sublessee hereby agree as follows: 1. Effective upon signing this Amendment, Section 1A of the Sublease is modified by replacing the first sentence with the following: "Sublessor hereby leases to Sublessee and Sublessee hereby sublets from Sublessor the Premises for a term of eleven (11) months (hereinafter the "Term") commencing on November 1, 2000 and ending September 30, 2001, unless sooner terminated as herein provided. Commencing October 1, 2001, the Term of this Sublease shall be extended on a month-to-month basis pursuant to all its terms and conditions. Either party may terminate this Sublease upon ninety (90) days written notice for any termination date from and after September 30, 2001." 2. This Amendment shall be effective upon the consent of the Master Landlord as required under the Master Lease. Except as modified by the First Amendment and this Second Amendment of Sublease, the Sublease shall remain unmodified and in full force and effect. EXECUTED as a sealed instrument the 2nd day of February, 2001. SUBLESSOR: GIGA INFORMATION GROUP, INC. By: /s/ VICTORIA M. LYNCH ----------------------------------------- Its: Vice President and Corporate Controller ---------------------------------------- SUBLESSEE: INCERT SOFTWARE CORPORATION By: /s/ DAVID M. SLATCHER ---------------------------------------- Its: Corporate Controller --------------------------------------- 2 EX-10 3 ex10-2.txt 10.2 EXHIBIT 10.2 ACCOUNTS RECEIVABLE FINANCING MODIFICATION AGREEMENT This Accounts Receivable Financing Modification Agreement is entered into as of April 6, 2001, by and between GlGA INFORMATION GROUP, INC. (the "Borrower") whose address is 139 Main Street, Cambridge, MA 02142 and Silicon Valley Bank ("Bank"), whose address is 3003 Tasman Drive, Santa Clara, CA 95054. 1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among other documents, a Accounts Receivable Financing Agreement, dated April 7, 2000 by and between Borrower and Bank, as may be amended from time to time (the "Accounts Receivable Financing Agreement"). Capitalized terms used without definition herein shall have the meanings assigned to them in the Accounts Receivable Financing Agreement. Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as the "Indebtedness" and the Accounts Receivable Financing Agreement and any and all other documents executed by Borrower in favor of Bank shall be referred to as the "Existing Documents." 2. DESCRIPTION OF CHANGE IN TERMS. A. Modification(s) to Accounts Receivable Financing Agreement, effective as of the date first written above: 1. The following defined terms in Section 1 are hereby amended to read as follows: "ADVANCE RATE" is 80% or another percentage as Bank establishes under Section 2.2, provided however, in the event the Borrower is unable to maintain the Adjusted Quick Ratio as of the Reconciliation Date then effective the first calendar day of the month following the missed Adjusted Quick Ratio the Advance Rate will be 80% net of Deferred Maintenance Revenue and offsets related to each specific Account Debtor. "APPLICABLE RATE" is a rate per annum equal to the "Prime Rate" plus .50 percentage point. "FACILITY PERIOD" is the period beginning on this date and continuing until April 5, 2002, unless the period is terminated sooner by Bank with notice to Borrower. 2. Section 1 entitled definitions is hereby amended to include the following definitions: "CONTINGENT OBLIGATION" is, for any Person, any direct or indirect liability. contingent or not, of that Person for (i) any Indebtedness, lease, dividend, letter of credit or other obligation of another such as an obligation directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by that Person, or for which that Person is directly or indirectly liable; (ii) any obligations for undrawn letters of credit for the account of that Person; and (iii) all obligations from any interest rate, currency or commodity swap agreement, interest rate cap or collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; but "Contingent Obligation" does not include endorsements in the ordinary course of business. The amount of a Contingent Obligation is the stated or determined amount of the primary obligation for which the Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated liability for it determined by the Person in good faith; but the amount may not exceed the maximum of the obligations under the guarantee or other support arrangement. "INDEBTEDNESS" is (a) indebtedness for borrowed money or the deferred price of property or services, such as reimbursement and other obligations for surety bonds and letters of credit, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease obligations and (d) Contingent Obligations. "PERSON" is any individual, sole proprietorship, partnership, limited liability company, joint venture, company, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or government agency. 3. Section 6.2 entitled AFFIRMATIVE COVENANTS is hereby amended as follows: Subsection (K) is hereby amended in its entirety to read as follows: (K) Semi-annually Borrower will allow Bank to audit Borrower's Collateral, including but not limited to Borrower's Accounts, at Borrower's expense. Provided however, if an Event of Default has occurred, Bank may audit Borrower's Collateral, including but not limited to Borrower's Accounts at Bank's sole discretion and without notification and authorization from Borrower. 2 Subsection (M) is hereby deleted and replaced with the following: (M) Borrower to increase the annual value of its contract value of subscriptions on a quarterly basis. Borrower's annual value as of December 31, 2000 was $67,328,163. Included the following Subsections: (N) Provide Bank with, no later than 30 days following each calendar quarter, a Revenue Run Rate Report. (O) Borrower will maintain an Adjusted Quick Ratio of at least 1.25 to 1.00. 3. CONSISTENT CHANGES. The Existing Documents are each hereby amended wherever necessary to reflect the changes described above. 4. NO DEFENSES OF BORROWER. Borrower agrees that, as of this date, it has no defenses against the obligations to pay any amounts under the Indebtedness. 5. PAYMENT OF LINE FEE. Borrower shall pay Bank a fee in the amount of $25,000 ("Line Fee") plus all out-of-pocket expenses. 6. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the existing Indebtedness, Bank is relying upon Borrower's representations, warranties, and agreements, as set forth in the Existing Documents. Except as expressly modified pursuant to this Accounts Receivable Financing Modification Agreement, the terms of the Existing Documents remain unchanged and in full force and effect. Bank's agreement to modifications to the existing Indebtedness pursuant to this Accounts Receivable Financing Modification Agreement in no way shall obligate Bank to make any future modifications to the Indebtedness. Nothing in this Accounts Receivable Financing Modification Agreement shall constitute a satisfaction of the Indebtedness. It is the intention of Bank and Borrower to retain as liable parties all makers and endorsers of Existing Documents, unless the party is expressly released by Bank in writing. No maker, endorser, or guarantor will be released by virtue of this Accounts Receivable Financing Modification Agreement. The terms of this paragraph apply not only to this Accounts Receivable Financing Modification Agreement, but also to any subsequent Accounts Receivable Financing modification agreements. 7. CONDITIONS. The effectiveness of this Accounts Receivable Financing Modification Agreement is conditioned upon payment of the Line Fee and Borrower executing and returning to Bank the attached Intellectual Property Security Agreement. 3 This Accounts Receivable Financing Modification Agreement is executed as of the date first written above. BORROWER: BANK: Giga Information Group, Inc. Silicon Valley Bank By: /s/ V.M. LYNCH By: /s/ MIKE FIELD ------------------------------------- ---------------------- Name: Victoria M. Lynch Name: Mike Field Title: Vice President & Corporate Title: SVP Controller & Assistant Secretary 4 EX-10 4 ex10-3.txt 10.3 EXHIBIT 10.3 INTELLECTUAL PROPERTY SECURITY AGREEMENT This Intellectual Property Security Agreement (this "IP Agreement") is made as of April 6, 2001 by and between GIGA INFORMATION GROUP, INC. ("Grantor"), and Silicon Valley Bank, a California banking corporation ("Bank"). RECITALS A. Bank will make advances to Grantor ("Advances") as described in the Accounts Receivable Financing Agreement (the "Financing Agreement"), but only if Grantor grants Bank a security interest in its Copyrights, Trademarks, Patents, and Mask Works. Defined terms used but not defined herein shall have the same meanings as in the Financing Agreement. B. Pursuant to the terms of the Financing Agreement. Grantor has granted to Bank a security interest in all of Grantor's right, title and interest, whether presently existing or hereafter acquired in, to and under all of the Collateral. NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby acknowledged and intending to be legally bound, as collateral security for the prompt and complete payment when due of Grantor's Indebtedness under the Financing Agreement, Grantor hereby represents, warrants, covenants and agrees as follows: 1. Grant of Security Interest. As collateral security for the prompt and complete payment and performance of all of Grantor's present or future Indebtedness, obligations and liabilities to Bank, Grantor hereby grants a security interest in all of Grantor's right, title and interest in, to and under its Intellectual Property Collateral (all of which shall collectively be called the "Intellectual Property Collateral"), including, without limitation, the following: (a) Any and all copyright rights, copyright applications, copyright registrations and like protections in each work or authorship and derivative work thereof, whether published or unpublished and whether or not the same also constitutes a trade secret, now or hereafter existing, created, acquired or held, including without limitation those set forth on Exhibit A attached hereto (collectively, the "Copyrights"); (b) Any and all trade secrets, and any and all intellectual property rights in computer software and computer software products now or hereafter existing, created, acquired or held; (c) Any and all design rights which may be available to Grantor now or hereafter existing, created, acquired or held; (d) All patents, patent applications and like protections including, without limitation, improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same, including without limitation the patents and patent applications set forth on Exhibit B attached hereto (collectively, the "Patents"); (e) Any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and like protections, and the entire goodwill of the business of Grantor connected with and symbolized by such trademarks, including without limitation those set forth on Exhibit C attached hereto (collectively, the "Trademarks"); (f) All mask works or similar rights available for the protection of semiconductor chips, now owned or hereafter acquired, including, without limitation those set forth on Exhibit D attached hereto (collectively, the "Mask Works"); (g) Any and all claims for damages by way of past, present and future infringements of any of the rights indicated above, with the right, but not the obligation, to sue for and collect such damages for said use or infringement of the intellectual property rights identified above; (h) All licenses or other rights to use any of the Copyrights, Patents, Trademarks, or Mask Works and all license fees and royalties arising from such use to the extent permitted by such license or rights; and (i) All amendments, extensions, renewals and extensions of any of the Copyrights, Trademarks, Patents, or Mask Works; and (j) All proceeds and products of the foregoing, including without limitation all payments under insurance or any indemnity or warranty payable in respect of any of the foregoing. 2. Authorization and Request. Grantor authorizes and requests that the Register of Copyrights and the Commissioner of Patents and Trademarks record this IP Agreement. 3. Covenants and Warranties. Grantor represents, warrants, covenants and agrees as follows: (a) Grantor is now the sole owner of the Intellectual Property Collateral, except for non-exclusive licenses granted by Grantor to its customers in the ordinary course of business. (b) Performance of this IP Agreement does not conflict with or result in a breach of any IP Agreement to which Grantor is bound, except to the extent that certain intellectual property agreements prohibit the assignment of the rights thereunder to a third party without the licensor's or other party's consent and this IP Agreement constitutes a security interest. 2 (c) During the term of this IP Agreement, Grantor will not transfer or otherwise encumber any interest in the Intellectual Property Collateral, except for non-exclusive licenses granted by Grantor in the ordinary course of business or as set forth in this IP Agreement; (d) To its knowledge, each of the Patents is valid and enforceable, and no part of the Intellectual Property Collateral has been judged invalid or unenforceable, in whole or in part, and no claim has been made that any part of the Intellectual Property Collateral violates the rights of any third party; (e) Grantor shall promptly advise Bank of any material adverse change in the composition of the Collateral, including but not limited to any subsequent ownership right of the Grantor in or to any Trademark, Patent, Copyright, or Mask Work specified in this IP Agreement; (f) Grantor shall (i) protect, defend and maintain the validity and enforceability of the Trademarks, Patents, Copyrights, and Mask Works, (ii) use its best efforts to detect infringements of the Trademarks, Patents, Copyrights, and Mask Works and promptly advise Bank in writing of material infringements detected and (iii) not allow any Trademarks, Patents, Copyrights, or Mask Works to be abandoned, forfeited or dedicated to the public without the written consent of Bank, which shall not be unreasonably withheld, unless Grantor determines that reasonable business practices suggest that abandonment is appropriate. (g) Grantor shall promptly register the most recent version of any of Grantor's Copyrights, if not so already registered, and shall, from time to time, execute and file such other instruments, and take such further actions as Bank may reasonably request from time to time to perfect or continue the perfection of Bank's interest in the Intellectual Property Collateral; (h) This IP Agreement creates, and in the case of after acquired Intellectual Property Collateral, this IP Agreement will create at the time Grantor first has rights in such after acquired Intellectual Property Collateral, in favor of Bank a valid and perfected first priority security interest in the Intellectual Property Collateral in the United States securing the payment and performance of the obligations evidenced by the Note and the Financing Agreement upon making the filings referred to in clause (i) below; (i) To its knowledge, except for, and upon, the filing with the United States Patent and Trademark office with respect to the Patents and Trademarks and the Register of Copyrights with respect to the Copyrights and Mask Works necessary to perfect the security interests created hereunder and except as has been already made or obtained, no authorization, approval or other action by, and no notice to or filing with, any U.S. governmental authority of U.S. regulatory body is required either (i) for the grant by Grantor of the security interest granted hereby or for the execution, delivery or performance of this IP 3 Agreement by Grantor in the U.S. or (ii) for the perfection in the United States or the exercise by Bank of its rights and remedies thereunder; (j) All information heretofore, herein or hereafter supplied to Bank by or on behalf of Grantor with respect to the Intellectual Property Collateral is accurate and complete in all material respects. (k) Grantor shall not enter into any agreement that would materially impair or conflict with Grantor's obligations hereunder without Bank's prior written consent, which consent shall not be unreasonably withheld. Grantor shall not permit the inclusion in any material contract to which it becomes a party of any provisions that could or might in any way prevent the creation of a security interest in Grantor's rights and interest in any property included within the definition of the Intellectual property Collateral acquired under such contracts, except that certain contracts may contain anti-assignment provisions that could in effect prohibit the creation of a security interest in such contracts. (l) Upon any executive officer of Grantor obtaining actual knowledge thereof. Grantor will promptly notify Bank in writing of any event that materially adversely affects the value of any material Intellectual Property Collateral, the ability of Grantor to dispose of any material Intellectual Property Collateral of the rights and remedies of Bank in relation thereto, including the levy of any legal process against any of the Intellectual Property Collateral. 4. Bank's Rights. Bank shall have the right, but not the obligation, to take, at Grantor's sole expense, any actions that Grantor is required under this IP Agreement to take but which Grantor fails to take, after fifteen (15) days' notice to Grantor. Grantor shall reimburse and indemnify Bank for all reasonable costs and reasonable expenses incurred in the reasonable exercise of its rights under this section 4. 5. Inspection Rights. Grantor hereby grants to Bank and its employees, representatives and agents the right to visit, during reasonable hours upon prior reasonable written notice to Grantor, and any of Grantor's plants and facilities that manufacture, install or store products (or that have done so during the prior six-month period) that are sold utilizing any of the Intellectual Property Collateral, and to inspect the products and quality control records relating thereto upon reasonable written notice to Grantor and as often as may be reasonably requested, but not more than one (1) in every six (6) months: provided, however, nothing herein shall entitle Bank access to Grantor's trade secrets and other proprietary information, 6. Further Assurances; Attorney in Fact. (a) On a continuing basis, Grantor will, subject to any prior licenses, encumbrances and restrictions and prospective licenses, make, execute, acknowledge and deliver, and file and record in the proper filing and recording places in the United States, all such instruments, including appropriate financing and continuation statements and collateral agreements and filings with 4 the United States Patent and Trademarks Office and the Register of Copyrights, and take all such action as may reasonably be deemed necessary or advisable, or as requested by Bank, to perfect Bank's security interest in all Copyrights, Patents, Trademarks, and Mask Works and otherwise to carry out the intent and purposes of this IP Agreement, or for assuring and confirming to Bank the grant or perfection of a security interest in all Intellectual Property Collateral. (b) Grantor hereby irrevocably appoints Bank as Grantor's attorney-in-fact, with full authority in the place and stead of Grantor and in the name of Grantor, Bank or otherwise, from time to time in Bank's discretion, upon Grantor's failure or inability to do so, to take any action and to execute any instrument which Bank may deem necessary or advisable to accomplish the purposes of this IP Agreement, including: (i) To modify, in its sole discretion, this IP Agreement without first obtaining Grantor's approval of or signature to such modification by amending Exhibit A, Exhibit B, Exhibit C, and Exhibit D hereof, as appropriate, to include reference to any right, title or interest in any Copyrights, Patents, Trademarks or Mask Works acquired by Grantor after the execution hereof or to delete any reference to any right, title or interest in any Copyrights, Patents, Trademarks, or Mask Works in which Grantor no longer has or claims any right, title or interest; and (ii) To file, in its sole discretion, one or more financing or continuation statements and amendments thereto, relative to any of the Intellectual Property Collateral without the signature of Grantor where permitted by law. 7. Events of Default. The occurrence of any of the following shall constitute an Event of Default under this IP Agreement: (a) An Event of Default occurs under the Financing Agreement; or (b) Grantor breaches any warranty or agreement made by Grantor in this IP Agreement. 8. Remedies. Upon the occurrence and continuance of an Event of Default, Bank shall have the right to exercise all the remedies of a secured party under the California Uniform Commercial Code, including without limitation the right to require Grantor to assemble the Intellectual Property Collateral and any tangible property in which Bank has a security interest and to make it available to Bank at a place designated by Bank. Bank shall have a nonexclusive, royalty free license to use the Copyrights, Patents, Trademarks, and Mask Works to the extent reasonably necessary to permit Bank to exercise its rights and remedies upon the occurrence of an Event of Default. Grantor will pay any expenses (including reasonable attorney's fees) incurred by Bank in connection with the exercise of any of Bank's rights hereunder, including without limitation any expense incurred in disposing of the Intellectual Property Collateral. All of Bank's rights and remedies with respect to the Intellectual Property Collateral shall be cumulative. 5 9. Indemnity. Grantor agrees to defend, indemnify and hold harmless Bank and its officers, employees, and agents against: (a) all obligations, demands, claims, and liabilities claimed or asserted by any other party in connection with the transactions contemplated by this IP Agreement, and (b) all losses or expenses in any way suffered, incurred, or paid by Bank as a result of or in any way arising out of, following or consequential to transactions between Bank and Grantor, whether under this IP Agreement or otherwise (including without limitation, reasonable attorneys fees and reasonable expenses), except for losses arising from or out of Bank's gross negligence or willful misconduct. 10. Reassignment. At such time as Grantor shall completely satisfy all of the obligations secured hereunder, Bank shall execute and deliver to Grantor all deed, assignments, and other instruments as may be necessary or proper to reinvest in Grantor full title to the property assigned hereunder, subject to any disposition thereof which may have been made by Bank pursuant hereto. 11. Course of Dealing. No course of dealing, nor any failure to exercise, nor any delay in exercising any right, power or privilege hereunder shall operate as a waiver thereof. 12. Attorneys' Fees. If any action relating to this IP Agreement is brought by either party hereto against the other party, the prevailing party shall be entitled to recover reasonable attorneys' fees, costs and disbursements. 13. Amendments. This IP Agreement may be amended only by a written instrument signed by both parties hereto. 14. Counterparts. This IP Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute the same instrument. 15. Law and Jurisdiction. This IP Agreement shall be governed by and construed in accordance with the laws of the State of California, without regard for choice of law provisions. Grantor and Bank consent to the nonexclusive jurisdiction of any state or federal court located in Santa Clara County, California. 16. Confidentiality. In handling any confidential information, Bank shall exercise the same degree of care that it exercises with respect to its own proprietary information of the same types to maintain the confidentiality of any non-public information thereby received or received pursuant to this IP Agreement except that the disclosure of this information may be made (i) to the affiliates of the Bank, (ii) to prospective transferee or purchasers of an interest in the obligations secured hereby, provided that they have entered into comparable confidentiality agreement in favor of Grantor and have delivered a copy to Grantor, (iii) as required by law, regulation, rule or order, subpoena judicial order or similar order and (iv) as may be required in connection with the examination audit or similar investigation of Bank. 6 IN WITNESS WHEREOF, the parties hereto have executed this IP Agreement on the day and year first above written. ADDRESS OF GRANTOR: GRANTOR: 139 Main Street Cambridge, Massachusetts 02142 GIGA INFORMATION GROUP, INC. By: /s/ V.M. LYNCH ------------------------------ Name: Victoria M. Lynch Title: Vice President & Corporate Controller & Assistant Secretary 7 Exhibit "A" attached to that certain Intellectual Property Security Agreement dated April 6, 2001 EXHIBIT "A" COPYRIGHTS SCHEDULE A - ISSUED COPYRIGHTS - ------------------------------ COPYRIGHT REGISTRATION DATE OF DESCRIPTION NUMBER ISSUANCE - ----------- ------ -------- None SCHEDULE B - PENDING COPYRIGHT APPLICATIONS - ------------------------------------------- FIRST DATE COPYRIGHT APPLICATION DATE OF OF PUBLIC DESCRIPTION NUMBER FILING CREATION DISTRIBUTION - ----------- ------ ------ -------- ------------ None
SCHEDULE C - UNREGISTERED COPYRIGHTS (Where No Copyright Application is Pending) - ------------------------------------------- DATE AND RECORDATION NUMBER OF IP AGREEMENT TO OWNER OF ORIGINAL AUTHOR OR GRANTOR (IF ORIGINAL OWNER OF COPYRIGHT AUTHOR OR OWNER OF COPYRIGHT DATE OF FIRST DATE OF (IF DIFFERENT FROM COPYRIGHT IS DIFFERENT DESCRIPTION CREATION DISTRIBUTION GRANTOR) FROM GRANTOR) - ----------- -------- ------------ -------- ------------- (a) Content on Various Various Giga Web since since April 1996 April 1996 (b) Marketing Various Various since Literature since April 1996 April 1996
Exhibit "B" attached to that certain Intellectual Property Security Agreement dated April 6, 2001 EXHIBIT "B" PATENTS PATENT DESCRIPTION DOCKET NO. COUNTRY SERIAL NO. FILING DATE STATUS - ----------- ---------- ------- ---------- ----------- ------ None Exhibit "C" attached to that certain Intellectual Property Security Agreement dated April 6, 2001 EXHIBIT "C" TRADEMARKS TRADEMARK DESCRIPTION COUNTRY SERIAL NO. REG. NO STATUS - ----------- ------- ---------- ------- ------ See Attached TM's for Giga Information Group
TM Description Country Serial No. Reg. No. Status - --------------------------------------------- ------------ ---------------------- ------------------ --------- GIGA ADVISORY U.S. 75-220,674 2,185,404 Reg. GIGANOTES U.S. 75-220,529 2,185,402 Reg. GIGAWEB U.S. 75-220,525 2,185,401 Reg. GIGABOTS U.S. 75-261,680 2,213,817 Reg. GIGATELS U.S. 75-220,379 2,125,583 Reg. GIGA GIGA INFORMATION GROUP & DESIGN U.S. 75-326,147 2,258,561 Reg. GIGA GIGA INFORMATION GROUP & DESIGN U.S. 75-326,137 2,193,545 Reg. EPRACTICES U.S. 75-786,908 2,407,491 Reg. INTRAGIGA U.S. 75-784,799 2,395,541 Reg. GIGA GIGA INFORMATION GROUP & DESIGN Mexico 662596 Reg. GIGA GIGA INFORMATION GROUP & DESIGN Mexico 649990 Reg. GIGA GIGA INFORMATION GROUP & DESIGN Mexico 647702 Reg. GIGA GIGA INFORMATION GROUP & DESIGN Mexico 648417 Reg. EPRACTICES Mexico 654410 Reg. GIGA GIGA INFORMATION GROUP & DESIGN Benelux Reg. GIGA GIGA INFORMATION GROUP & DESIGN Benelux Reg. GIGA GIGA INFORMATION GROUP & DESIGN Benelux Reg. GIGA GIGA INFORMATION GROUP & DESIGN Benelux Reg. GIGA GIGA INFORMATION GROUP & DESIGN Benelux Reg. EGIGA U.S. Pending EGIGA U.S. Pending GIGA GIGA INFORMATION GROUP & DESIGN U.S. Pending INTRAGIGA Mexico Pending EPRACTICES Argentina Pending INTRAGIGA Argentina Pending GIGA GIGA INFORMATION GROUP & DESIGN Argentina Pending GIGA GIGA INFORMATION GROUP & DESIGN Argentina Pending GIGA GIGA INFORMATION GROUP & DESIGN Argentina Pending GIGA GIGA INFORMATION GROUP & DESIGN Argentina Pending GIGA GIGA INFORMATION GROUP & DESIGN Argentina Pending EPRACTICES Brazil Pending INTRAGIGA Brazil Pending GIGA GIGA INFORMATION GROUP & DESIGN Brazil Pending GIGA GIGA INFORMATION GROUP & DESIGN Brazil Pending GIGA GIGA INFORMATION GROUP & DESIGN Brazil Pending GIGA GIGA INFORMATION GROUP & DESIGN Brazil Pending EPRACTICES CTM Pending INTRAGIGA CTM Pending GIGA GIGA INFORMATION GROUP & DESIGN CTM Pending GIGA GIGA INFORMATION GROUP & DESIGN CTM Pending GIGA GIGA INFORMATION GROUP & DESIGN CTM Pending GIGA GIGA INFORMATION GROUP & DESIGN CTM Pending
EX-10 5 ex10-4.txt 10.4 EXHIBIT 10.4 AMENDMENT TO WARRANT AGREEMENT This Amendment to Warrant Agreement (the "Agreement") is made as of APRIL 6, 2001 by and between Silicon Valley Bank ("Holder") and GIGA INFORMATION GROUP, INC. ("Company"). RECITALS A. Company and Holder are parties to a Warrant to Purchase Stock, dated MAY 25, 2000, together with all schedules and exhibits thereto (the "Warrant Agreement"). B. Company has agreed to modify the Initial Exercise Price as defined in the Warrant Agreement. NOW, THEREFORE, the parties agree as follows: 1. THE INITIAL EXERCISE PRICE IS $1.50 PER SHARE 2. LEGAL EFFECT; INTERPRETATION. This Agreement amends certain terms of the Warrant Agreement. Company confirms that, except as amended by this Agreement, the Warrant Agreement remain in full force and effect. Unless otherwise defined, all terms capitalized in this Agreement shall have the meanings assigned in the Warrant Agreement. This Agreement, together with the Warrant Agreement, constitutes the entire agreement of the parties with respect to the subject matter hereof, and supersedes all prior agreements and negotiations. 3. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and all of which shall constitute one and the same instrument. 4. TIME OF ESSENCE. Time is of the essence for the performance of all obligations set forth in this Agreement. IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first written above. COMPANY: HOLDER: GIGA INFORMATION GROUP, INC. SILICON VALLEY BANK By: /s/ V.M. LYNCH By: /s/ MIKE FIELD ------------------------------------- ------------------ Name: Victoria M. Lynch Name: Mike Field Title: Vice President & Corporate Title: SVP Controller EX-11 6 ex-11.txt Exhibit 11 STATEMENT OF COMPUTATION OF PER SHARE EARNINGS
NET LOSS PER SHARE Net loss per share is calculated as follows: (in thousands, except per share data) THREE MONTHS ENDED MARCH 31, ------------------------------------- 2001 2000 ------------------ ----------------- Net loss $ (465) $ (2,464) ================== ================= BASIC: Weighted average common shares outstanding 10,483 10,107 ================== ================= Net loss per common share $ (0.04) $ (0.24) ================== ================= DILUTED: Weighted average common shares outstanding 10,483 10,107 Effect of dilutive securities: Convertible notes - - Stock options - - Warrants - - ------------------ ----------------- Weighted average common and common equivalent shares outstanding 10,483 10,107 ================== ================= Net loss per common and common equivalent share $ (0.04) $ (0.24) ================== =================
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