UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 2002
Commission File Number 000-03718
FIELDS TECHNOLOGIES, INC.
----------------------------------------------------------------
(Exact name of small business issuer as identified in its charter)
Delaware 11-2050317
------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
333 Main Street, Park City, Utah 84060
-----------------------------------------------
(Address of principal executive offices) (Zip Code)
(435) 649-2221
--------------------------------------------------
(Registrant's telephone number, including area code)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding as of May 14, 2002
----- ------------------------------
Common Stock, $.01 par value 162,509,898
FIELDS TECHNOLOGIES, INC.
Index to Consolidated Financial Statements
Table of Contents Page
PART I -FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Consolidated Balance Sheet as of March 31, 2002 (unaudited) 3-4
Consolidated Statement of Operations for the three and nine
months ended March 31, 2002 and 2001 (unaudited) 5
Consolidated Statement of Cash Flows for the nine months ended
March 31, 2002 and 2001 (unaudited) 6
Consolidated Statement of Shareholders' Deficit for the nine
months ended March 31, 2002 and 2001 (unaudited) 7
Notes to Consolidated Financial Statements 8-12
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 13-17
PART II - OTHER INFORMATION 17
ITEM 1 - LEGAL INFORMATION 17
ITEM 2 - CHANGES IN THE SECURITIES 17
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES 17
ITEM 4 - SUBMISSION OF MATTER TO VOTE OF SECURITY HOLDERS
17
ITEM 5 - OTHER INFORMATION 18
ITEM 6 - EXHIBITS 18
2
PART I
ITEM 1
FIELDS TECHNOLOGIES, INC.
Consolidated Balance Sheet (Unaudited)
March 31, 2002
ASSETS
Current assets:
Cash and cash equivalents $ 1,523,268
Receivables, net of allowance:
Trade 1,547,160
Related parties 81,387
Prepaid expenses and other current assets 141,511
Deferred tax asset 126,000
------------
Total Current Assets 3,419,326
Property and equipment, net 136,761
Other assets:
Capitalized software development costs 1,903,863
Deferred tax asset 1,222,000
Other 116,215
------------
Total Other Assets 3,242,078
------------
Total Assets $ 6,798,165
============
See accompanying notes to consolidated financial statements.
3
FIELDS TECHNOLOGIES, INC.
Consolidated Balance Sheet (Unaudited)
March 31, 2002
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Bank line of credit $ 750,000
Notes payable and capital lease obligations 2,024,807
Accounts payable 703,726
Accrued liabilities 453,068
Deferred revenue 1,125,618
------------
Total Current Liabilities 5,057,219
LONG-TERM LIABILITIES:
Notes payable and capital lease obligations, less current portion 4,782,550
Accrued interest on related party notes payable 534,071
------------
Total Long-term Liabilities 5,316,621
Total Liabilities 10,373,840
Commitments -
SHAREHOLDERS' DEFICIT
Preferred stock, $.01 par value, 5,000,000,
shares authorized, no shares issued -
Common stock, $.01 par value, 175,000,000 shares
authorized 162,509,898 shares issued and outstanding 1,626,100
Additional paid-in capital 3,909,289
Stock subscriptions receivable (1,068,200)
Treasury stock (30,000)
Accumulated deficit (8,012,864)
------------
Total Shareholders' Deficit (3,575,675)
------------
Total liabilities and Shareholders' Deficit $ 6,798,165
============
See accompanying notes to consolidated financial statements.
4
FIELDS TECHNOLOGIES, INC.
Consolidated Statement of Operations (Unaudited)
Three Months Ended Nine Months Ended
March 31 March 31
2002 2001 2002 2001
------------ ------------ ------------ ------------
REVENUES:
Software licenses $ 918,094 $ 499,036 $ 2,511,754 $ 1,113,740
Maintenance and support 429,684 503,374 1,364,542 1,606,439
Consulting and other 149,729 122,160 201,872 582,719
------------ ------------ ------------ ------------
1,497,507 1,124,570 4,078,168 3,302,898
Cost of revenues 189,316 251,824 545,378 791,490
------------ ------------ ------------ ------------
Gross profit 1,308,191 872,746 3,532,790 2,511,408
OPERATING EXPENSES:
Research and development 174,361 355,211 554,570 1,016,814
Sales and marketing 444,870 275,801 1,230,368 662,896
General & administrative expenses 367,739 328,783 1,141,764 1,098,803
------------ ------------ ------------ ------------
Total operating expenses 986,970 959,795 2,926,702 2,778,513
Income (loss) from operations 321,221 (87,049) 606,088 (267,105)
Other income (expense):
Interest income 576 10,072 576 39,232
Interest expense (148,542) (165,658) (478,720) (295,184)
------------ ------------ ------------ ------------
Income (loss) before income taxes 173,255 (242,635) 127,944 (523,057)
(Provision) for income taxes:
Current - (880) - (53,311)
Deferred (52,000) - (52,000) (940,000)
------------ ------------ ------------ ------------
Net Income (loss) $ 121,255 $ (243,515) $ 75,944 $ (1,516,368)
Preference dividend to shareholders (670,000) - (670,000) -
------------ ------------ ------------ ------------
Net Loss available to common shareholders $ (548,745) $ (243,515) $ (594,056) $ (1,516,368)
============ ============ ============ ============
WEIGHTED AVERAGE SHARES
Basic and Diluted 155,504,000 109,624,000 151,697,000 109,624,000
============ ============ ============ ============
Basic and Diluted earnings (loss) per share $ (0.00) $ (0.00) $ (0.00) $ (0.01)
============ ============ ============ ============
See accompanying notes to consolidated financial statements.
5
FIELDS TECHNOLOGIES, INC.
Consolidated Statement of Cash Flows (Unaudited)
Nine Months Ended March 31
2002 2001
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 75,944 $ (1,516,368)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 117,172 214,022
Loss on sale of assets 4,133 -
Stock issued for payment of service 38,000 -
Decrease (increase) in:
Trade receivables (1,012,985) 546,007
Related party receivables 4,235 (137,755)
Prepaid expenses and other current assets (113,016) (11,438)
Other assets (82,413) -
Deferred tax assets 52,000 940,000
(Decrease) Increase in:
Accounts payable 82,465 302,885
Accrued liabilities 70,079 60,101
Deferred revenue (410,124) (462,920)
Accrued interest on long-term related party notes payable 259,412 (33,254)
------------- -------------
Net cash used in operating activities (915,098) (98,720)
-
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (38,138) (37,185)
Capitalization of software development costs (1,248,906) -
------------- -------------
Net cash used in investing activities (1,287,044) (37,185)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 1,921,750 -
Collection of common stock subscriptions receivable 461,800 -
Net proceeds from borrowing on line of credit 395,000 150,000
Proceeds from issuance of note payable 1,750,000 -
Principal payments on notes payable and capital lease obligations (991,622) (189,163)
Purchase of Treasury Stock (30,000) -
------------- -------------
Net cash provided by (used in) financing activities 3,506,928 (39,163)
Net increase (decrease) in cash and cash equivalents 1,304,786 (175,068)
Cash and cash equivalents, beginning of period 218,482 209,297
------------- -------------
Cash and cash equivalents, end of period $ 1,523,268 $ 34,229
============= =============
See accompanying notes to consolidated financial statements.
6
FIELDS TECHNOLOGIES, INC.
Consolidated Statement Of Shareholders' Deficit (Unaudited)
Nine Months Ended March 31, 2002
Common Stock
----------------------- Additional Paid Subscription Treasury Stock Accumulated
Description Shares Amount In Capital Receivable Deficit Total
----------- ----------- ---------- --------------- ------------ -------------- ----------- -----------
Balance, June 30, 2001 149,276,564 $1,492,766 $1,829,539 $(1,323,200) $ - $(8,088,808) $(6,089,703)
Net income (loss) 75,944 75,944
Common Stock Issued
Pursuant to
Subscription Agreements
with Preference Rights 6,800,000 68,000 1,613,750 - - - 1,681,750
Common Stock Issued for
Consulting 400,000 4,000 44,000 - - - 48,000
Subscriptions
Receivable Receipt - - - 255,000 - - 255,000
Common Stock
Issued Pursuant
To Private Placement 1,666,667 16,667 233,333 - - - 250,000
Treasury Stock Purchase (100,000) - - - (30,000) - (30,000)
Dividend to
Shareholders with
Preference rights in
Exchange for
Cancellation of such
Rights 4,466,667 44,667 (44,667) - - - -
Debt Issued with
Conversion feature - - 233,334 - - - 233,334
----------- ---------- ---------- ----------- -------- ----------- -----------
Balance, March 31, 2002 162,509,898 $1,626,100 $3,909.289 $(1,068,200) $(30,000) $(8,012,864) $(3,575,675)
=========== ========== ========== =========== ======== =========== ===========
See accompanying notes to consolidated financial statements.
7
FIELDS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2002 (Unaudited)
1. Summary of Significant Accounting Policies.
Financial Results and Liquidity
As of March 31, 2002, the Company had current liabilities in excess of current
assets. As current and potential customers have anticipated the general release
of the Company's major revisions of its ActionManager, Fresh Market Manager, and
the replacement of the applications' technical foundation identified as version
4x, ongoing communications with and commitments from the Company's current
customers and potential customers indicate sales of the revised products could
increase significantly upon general release of the revised applications and
technical foundation.
The Company believes that cash flow from increased sales, as well as the ability
and commitment of its majority shareholder to contribute funds necessary for the
Company to continue to operate, will allow the Company to fund its currently
anticipated working capital, capital spending, and debt service requirements
during the next twelve months. The financial statements do not reflect any
adjustment should the Company's anticipated changes in the operations not be
achieved.
Unaudited Financial Statements
In the opinion of the Company's management, the accompanying unaudited
consolidated financial statements contain all normal recurring adjustments
necessary to present fairly the Company's financial position for the interim
period. Results of operations for the three months and nine months ended March
31, 2002 are not necessarily indicative of results to be expected for the full
fiscal year ending June 30, 2002.
The accompanying unaudited financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
for annual financial statements. Although the Company believes that the
disclosures in these unaudited financial statements are adequate to insure the
information presented for the interim periods is not misleading, certain
information and footnote information normally included in annual financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted pursuant to the
rules and regulations of the Securities and Exchange Commission. These financial
statements should be read in conjunction with the Company's audited annual
financial statements included in the Company's June 30, 2001 Annual Report on
Form 10-KSB/T.
Net Earnings (Loss) Per Common Share
Net earnings (loss) per common share is based on the weighted average number of
shares outstanding during the period. Net earnings (loss) per common share
diluted is based upon the weighted average number of shares of common stock and
common stock equivalents, entirely comprised of stock options, outstanding
during each period. Common stock equivalents were excluded from the weighted
average shares outstanding calculation because they were anti-dilutive.
8
FIELDS TECHNOLOGIES, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2002 (Unaudited)
2. Supplemental Disclosure of Cash Flow Information.
During the nine months ended March 31, 2002, the Company issued shares of common
stock pursuant to Subscription Agreements. The investors received a combination
of shares of common stock, and options to purchase shares of common stock. The
net proceeds of the common stock issuances are as follows:
Gross cash received $ 1,940,000
Less: offering costs (18,250)
-----------
Net cash proceeds from issuance
of common stock $ 1,921,750
===========
The Company issued 400,000 shares of common stock pursuant to a Consulting
Agreement, and will recognize $48,000 of expense over the term of the agreement
based upon the fair market value of the Company's common stock on the date the
agreement was entered into.
3. Notes Payable
The Company has the following short-term notes payable at March 31, 2002:
Note payable to a former owner of FMM at an interest rate of 12%,
due through October 2002 and secured by Company stock, a
condominium owned by an officer and major shareholder of the
Company, and guarantees by Riverview Financial Corp. (a major
shareholder of the Company and beneficially owned by the
Company's chief executive officer) and the chief executive
officer of the Company. $1,875,000
Note payable to a partnering company with an interest rate of
10%, due through August 2002 and secured by the Company's assets. 144,213
Line-of-credit payable to a bank with an interest rate of the
bank's prime lending rate of 7%, total available of $250,000, due
in June 2002 and secured by the Company's cash, securities,
financial assets and other investment property. 250,000
Line of credit payable to a bank at an interest rate of 8% (the
bank's prime lending rate plus 1%), total available of $500,000,
due May 2002, and secured by a personal guarantee of the
Company's major shareholder. 500,000
----------
Other current portion of Capital Lease Obligation 5,594
----------
$2,774,807
==========
9
FIELDS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2002 (Unaudited)
3. Notes Payable continued.
Financial statement presentation is as follows at
March 31, 2002:
Notes payable and capital lease obligations $2,024,807
Bank line of credit 750,000
----------
$2,774,807
==========
4. Long-Term Debt
March 28, 2002, the Company completed a private offering consisting of a $1.75
million promissory note to AW Fields Acquisition ("AW"). Principal and interest
are payable by the issuance of 11,666,667 of the Company's common stock.
Currently the Company does not have sufficient authorized shares to allow for
the exchange of common shares to convert the note. However, in April 2002, by
written shareholder consent shareholders collectively owning a majority of the
outstanding shares approved the increase of authorized shares to a level
sufficient to allow for the conversion of the debt to equity effective May,
2002.
Upon payment of the note by the issuance of 11,666,667 common shares, AW will be
granted a warrant to purchase an additional 11,666,667 common shares at $.17 per
share, and have a representative on the Board of Directors.
If the Company does not exchange 11,666,667 shares for the note by October 31,
2002, Riverview Financial Corp., an affiliate of Fields' chief executive
officer, has granted AW an option to exchange the note for 17,500,000 of
Riverviews' shares in the Company.
On March 27, 2002, date of note, the Company's shares market value averaged $.17
per share. As a result, $233,334 of the $1,750,000 was charged against
additional paid in capital reflecting the value assigned to the conversion
option of the note. The $233,334 will be amortized over seven months increasing
the note to the $1,750,000 principal balance due by October 31, 2002, the first
date of conversion and increasing interest expense over the same period.
Long-term debt at March 31, 2002:
Exchangeable note to AW, at a 10% interest , principal and
interest due October 31, 2005, secured by 17,500,000 shares of a
major shareholder $1,516,666
Note payable to Riverview Financial Corp. at 10% interest, due
April 2003, unsecured 3,260,714
Capital lease obligations, net of current portion 5,170
----------
$4,782,550
==========
10
FIELDS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2002 (Unaudited)
5. Equity
In the second fiscal quarter of 2002, the Company issued shares of common stock
pursuant to Subscription Agreements. The investors received a combination of: o
Shares of common stock o License agreements for certain of the Company's
software products o Options to purchase additional shares at $.25 per share o
Assured annualized rate of return of 50% o Puts to the major shareholders to
sell their shares under certain events o Registration rights
In March 2002, the Company exchanged certain of the above rights, leaving these
shareholders with common shares, license agreements of certain of the companies
software products, and piggyback registrative rights in exchange for additional
shares of common stock. The additional shares were granted at an exchange ratio
of 1 to .66 shares. On the original sale of 6,800,000 common shares a total of
4,466,667 additional shares were issued. The net proceeds for the original
Subscription Agreements were $1,681,750 and after the stock dividend a total of
11,266,667 common shares were issued.
As a result of the preferences granted to these certain shareholders, the
exchange to eliminate these preferential rights is reflected as a preferred
dividend reducing income to common stockholders in the Statement of Operations.
The preferred dividend was valued using the market price on the day the
preferences attached to the common stock.
The Company exercised their call option to reacquire 100,000 shares at $.30 per
share which cancelled all rights under the Subscription Agreement related to
those shares.
In March 2002, the Company sold an additional 1,666,667 common shares at $.15
per share for a total of $250,000 under a Subscription Agreement. The
shareholders under this agreement were granted an option to purchase an equal
number of shares at $.25 per share. These options expire September 15, 2002.
6. Recent Accounting Pronouncements
In July 2001, SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill
and Other Intangible Assets" were issued. SFAS No. 142 addresses financial
accounting and reporting for acquired goodwill and other intangible assets. It
requires, among other things, that companies no longer amortize goodwill, but
instead test goodwill for impairment at least annually. SFAS No. 142 is required
to be applied for fiscal years beginning after December 15, 2001. The Company
will apply the principles of SFAS No. 141 in the recording of future
acquisitions, if any.
11
FIELDS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2002 (Unaudited)
The FASB recently issued FASB Statement No. 143 Accounting for Asset Retirement
Obligations. This Statement addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. This Statement applies to all entities. It
applies to legal obligations associated with the retirement of long-lived assets
that result from the acquisition, construction, development and (or) the normal
operation of a long-lived asset, except for certain obligations of leases. This
Statement amends SFAS 19. The effective date for this Statement is June 15,
2002. The Company does not believe the adoption of SFAS No. 143 will have a
material effect on its financial position and future operations.
The FASB recently issued FASB Statement No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets. The new guidance resolves significant
implementation issues related to FASB Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of.
Statement 144 is effective for fiscal years beginning after December 15, 2001.
Management does not believe the adoption of SFAS No. 144 will have a material
effect on its financial position or results of operations.
On November 15, 2001, the FASB issued Topic No. D-103, "Income Statement
Characterization of Reimbursements received For Out-of-Pocket Expenses
Incurred." The FASB will require in 2002 companies to report these disbursements
as revenues, versus a reduction of cost of sales. The Company does not believe
such reimbursed cost are material to its financial statements as of
March 31, 2002.
12
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's Discussion and Analysis.
The following discussion and analysis provides information that we believe is
relevant to an assessment and understanding of our consolidated results of
operations and financial condition. The terms "Fields" "Company", "we", "our" or
"us" are used in this discussion to refer to Fields Technologies, Inc. (formerly
AmeriNet Group.com, Inc.) and its wholly owned subsidiary, Park City Group, Inc.
(PCG) along with PCG's wholly owned subsidiary, Fresh Market Manager, LLC, (FMM)
on a consolidated basis, except where the context clearly indicates otherwise.
This information should be read in conjunction with our: i) Form 8-K and 8-K/A
dated June 13, 2001; our June 30, 2001 Annual Report on Form 10-KSB/T, our
September 30, 2001 Quarterly Report on Form 10-QSB, and our December 31, 2001
Quarterly Report on Form 10-QSB/A including the related consolidated financial
statements.
OVERVIEW
Our principal business is the design, development, marketing and support of our
proprietary software products. These software products are designed to be used
in retail businesses having multiple locations by assisting individual store
locations and corporate management with managing daily business operations and
communicating results of those operations in a timely manner.
In accordance with U.S. generally accepted accounting principles, we have
expensed all software development costs as incurred through December 31, 2000
with our software having been viewed as an evolving product. During January
2001, technological feasibility of a major revision to our ActionManager and
Fresh Market Manager software and our technical foundation was established.
In accordance with U.S. generally accepted accounting principles, development
costs relating to these products incurred from January 2001 through March 31,
2002, totaling $1,903,863 have been capitalized. These costs will be amortized
on a straight-line basis over a period of four years. Amortization will begin
when the products are available for general release to the public, which is
anticipated in approximately September 2002. Software research and development
costs incurred, not related to these products, continue to be expensed as
incurred at such time as products being developed attain technological
feasibility, the Company will, in accordance with U.S. generally accepted
accounting principles, capitalize any future development costs.
13
FIELDS TECHNOLOGIES, INC.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
In addition, our consolidated balance sheet does not reflect any value
attributable to intellectual property, the cost of which has been expensed as
incurred. To date, development and intellectual property expenditures have
resulted in the development of 20 different applications of our ActionManager
software and different applications of our Fresh Market Manager software along
with five granted software patents and three patent applications with numerous
separate trademarks and copyrights.
We plan to actively market our current software products both domestically and
internationally. We also intend to enhance our existing software products and
develop new software applications to augment our existing portfolio of products.
In addition, we are actively pursuing potential acquisitions of existing
technologies and businesses that are compatible with our existing business
operations and products.
RESULTS OF OPERATIONS
Nine Months Ended March 31, 2002 and 2001
Revenues for the nine months ended March 31, 2002 increased $775,000 or 24% over
the comparable period in 2001. The increase is due to increased software license
sales. During the same period gross profit increased 41%, due to the change in
revenue mix of increased software licenses and decreased consulting revenue and
consulting costs.
Research and development expenses before capitalization of software development
costs, increased 34% for the nine months ended March 31, 2002 over the
comparable period in 2001. This was due to the Company's focus of completing the
FMM and the ActionManager applications and the technical foundation (version
4x). Both products reached technological feasibility in January 2001, and the
Company began capitalizing software development costs related to these products
resulting in $1,249,000, and $327,000 reduction of Research and Development
expenses for the nine months ended March 31, 2002 and 2001, respectively.
Sales and marketing expenses for the nine months ended March 31, 2002 increased
86% over the comparable period in 2001. The increase is the result of
Management's plan to grow the Company's revenues and the need to grow the sales
and marketing functions in order to achieve desired results. The increase in
sales and marketing expenses are the result of increasing personnel and the
related travel costs.
General and administrative expenses for the nine months ended March 31, 2002
increased 4% over the same period of 2001. This is the result of an increase in
headcount and an increase in facility and utilities costs.
Total operating expenses after the capitalization of software development costs
increased 3% for the nine months ended March 31, 2002 over the same period in
2001, the result of Management allocating resources to areas needed to meet
their operating goals.
Net interest expense for the nine months ended March 31, 2002, increased 87%
over the same period of the prior year. The Company financed the acquisition of
FMM with debt, and continues to finance operations with debt from the majority
stockholder and banks. Only during the six months ended March 31, 2002 has the
Company been successful at financing its capital needs through equity financing.
14
FIELDS TECHNOLOGIES, INC.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Deferred tax expense for the nine months ended March 31, 2001 reflects a charge
for the write down of deferred tax assets of $940,000, compared to a deferred
tax expense of $52,000 for the comparable period in 2002.
For the first nine months of 2002, net earnings of the company before
capitalization of software development costs improved 36%. The improvement in
earnings was due mainly to increase in revenue and decrease of deferred tax
expense.
Three Months Ended March 31, 2002 and 2001
Revenues for the three months ended March 31, 2002 increased $373,000 or 33%
over the comparable period in 2001. The increase is due to increased software
license sales. During the same period gross profit increased 50%, due to the
change in revenue mix of increased software licenses and decreased consulting
revenue and consulting costs.
Research and development expenses before capitalization of software development
costs, decreased 5% for the three months ended March 31, 2002 over the
comparable period in 2001. The decrease was due to a reduction of outside
contractor services. FMM and ActionManager reached technological feasibility in
January 2001, and the Company began capitalizing software development costs
resulting in $476,000 and $327,000 reduction of Research and Development
expenses for the three months ended March 31, 2002.
Sales and marketing expenses for the three months ended March 31, 2002 increased
61% over the comparable period in 2001. The increase is the result of
Management's plan to grow the Company's revenues and the need to grow the sales
and marketing functions in order to achieve those plans. The increase in sales
and marketing expenses are the result of increasing personnel and the related
travel costs.
General and administrative expenses for the three months ended March 31, 2002
increased 12% over the same period of 2001. The change is the result of an
increase in outside consulting fees.
Total operating expenses after the capitalization of software costs increased 3%
for the three months ended March 31, 2002 over the same period in 2001, the
result of Management allocating resources to areas needed to meet their
operating needs and limiting costs in other areas.
Net interest expense for the three months ended March 31, 2002, decreased 5%
over the same period of the prior year. The Company financed the acquisition of
FMM with debt and has been reducing this debt through cash provided by equity
financing.
For the third quarter 2002, net earnings of the company before capitalization of
software development costs improved 37%. The improvement in earnings was due to
increased sales and managing the costs of operations to maintain margins.
15
FIELDS TECHNOLOGIES, INC.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
Financial Position
The Company had $1,523,000 in cash and cash equivalents as of March 31, 2002
compared with $218,000 at June 30, 2001, representing an increase of $1,305,000.
This increase in cash for the nine months ended March 31, 2002 relates
principally to recent debt financings.
Working capital deficit as of March 31, 2002 decreased to $1,638,000 as compared
to $3,483,000 at June 30, 2001. This $1,845,000 decrease in the working capital
deficit for the nine months ended March 31, 2002 is principally attributable to:
o Net proceeds from financing in the form of long-term debt of $1,649,000. o
Increase in accounts receivable of $930,000 related to third quarter license
sales o Decrease in deferred revenue of approximately $400,000
To date, the Company has financed operations principally through revenues along
with short term bank borrowings, loans from a majority shareholder and more
recently, private placements of equity securities and long-term convertible
debt. We generated $3,507,000 in net cash provided through financing activities
during the nine months ended March 31, 2002, compared with $39,000 used in
financing activities during the nine months ended March 31, 2001. During the
nine months ended March 31, 2002, we used $1,287,000 of net cash in investing
activities compared with $37,000 of net cash used in investing activities during
the nine months ended March 31, 2001. The difference is mainly attributable to
$1,249,000 of software development costs capitalized in the nine months ending
in March 31, 2002.
Our working capital and other capital requirements for the foreseeable future
will vary based upon a number of factors, including: (i) changes in the software
industry and environment which may require additional modifications to our
software and platforms; (ii) the pace at which our products are accepted by and
sold into the market and the related sales effort and support requirements, and
(iii) changes in existing financing arrangements. We intend to investigate
opportunities to expand into compatible businesses through possible acquisitions
or alliances. In addition, there may be unanticipated additional working capital
and other capital requirements to consummate such transactions and oversee
related operations. There can be no assurance that the Company will be
successful in developing additional working capital.
At March 31, 2002, we had not committed any funds for capital expenditures. We
have committed to spend $230,655 and $239,882 in operating lease payments for
physical facilities for 2002 and 2003, respectively. At March 31, 2002, we had
debt obligations outstanding in the principal amounts of $7,557,000 plus accrued
interest. These loans bear interest at various rates between 6 % and 12%per
annum. Of these outstanding debt obligations, a total of $3,261,000 plus accrued
interest is payable to our majority shareholder, Riverview Financial Corp. In
connection with the acquisition of Fresh Market Manager, LLC, we have an
obligation to pay $1,875,000 to Cooper Capital, LLC. This obligation is payable
in variable installments through October 2002. In addition to the generation of
net income from operations to finance our operations and satisfy debt
obligations, we expect that we will also require additional capital infusions to
be derived from debt or equity financings.
16
FIELDS TECHNOLOGIES, INC.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
As of March 31, 2002, the Company had outstanding stock options and warrants to
sell 8,546,606 shares of common stock with exercise prices varying from $.10 to
$1.43 per share, 8,272,634 of the options and warrants are fully vested at March
31, 2002. The exercise of all of these outstanding options and warrants would
result in an equity infusion of $2,046,321. There is no assurance that any of
these options or warrants will be exercised.
Inflation
We do not expect the impact of inflation on our operations to be significant.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There have been no significant changes from what was reported in the Company's
December 31, 2001 10-QSB/A.
ITEM 2. CHANGES IN SECURITIES.
On April 8, 2002 the shareholders representing 67% of the outstanding shares of
the Company's Common Stock, approved an amendment to the Company's Certificate
of Incorporation to increase the authorized number of shares of Common Stock,
$.01 par value per share, from 175,000,000 to 300,000,000, and to increase the
authorized number of shares of Preferred Stock, $.01 par value per share, from
5,000,000 to 30,000,000.
The Board of Directors subsequently approved the increase in authorized shares.
The Company mailed the Definitive Information Statement Form 14C on May 9, 2002
and anticipates it will be effective May 30, 2002.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.
On April 8, 2002 the shareholders who collectively hold 67% of the voting power
of the Company's Common stock approved increasing the authorized number of
shares of Common Stock, $.01 par value per share, from 175,000,000 to
300,000,000, and increasing the authorized number of shares of Preferred Stock,
$.01 par value per share, from 5,000,000 to 30,000,000 by written consent. A
Definitive Information Statement on Form 14c was mailed on May 9, 2002 to all
shareholders of record on April 8, 2002, but did not solicit a proxy.
On May 8, 2002 the shareholders who collectively hold 67% of the voting power of
the Company's Common Stock approved by Written Consent (1) a proposal to change
the Company's name to Park City Group, Inc. and (2) a proposal to change the
domicile of the Company from the State of Delaware to the State of Nevada
through a re-incorporation merger.
17
FIELDS TECHNOLOGIES, INC.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Board of Directors subsequently approved the proposals. The Company will
file an Information Statement on Form 14c to shareholders of record on June 6,
2002 with an anticipated mailing date on or around June 13, 2002. The company
will not be soliciting a proxy.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
3.8 Certificate of Amendment to Articles of
Incorporation, April 9, 2002 (increased authorized
shares). (Incorporated by reference Exhibit 1 of the
Company's Report 14c, dated May 9, 2002).
10.1 Securities Purchase Agreement dated March 27, 2002.
(Incorporated by reference Exhibit 10.1 of the
Company's Report on 8-K, dated April 5, 2002.)
10.2 Promissory Note dated March 27, 2002 (incorporated by
reference Exhibit 10.2 of the Company's Report on
8-K, dated April 5, 2002).
(b) Reports on Form 8-K:
Form 8-K dated April 5, 2002 is incorporated by reference.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: May 14, 2002 FIELDS TECHNOLOGIES, INC.
By /s/ Randall K. Fields
-------------------------------
Randall K. Fields, President and
Chief Executive Officer
Date: May 14, 2002 By /s/ Barbara J. Ray
-------------------------------
Barbara J. Ray, Chief Financial
Officer, Secretary
18