FORM 10-QSB/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1 to
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended December 31, 2001
Commission File Number 000-03718
FIELDS TECHNOLOGIES, INC.
(Exact name of small business issuer as identified in its charter)
Delaware 11-2050317
-------- ----------
(State of other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
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 February 10, 2002
----- -----------------------------------
Common Stock, $.01 par value 155,476,564
This amendment on Form 10-QSB/A amends the Items 1 and 2 of Part I of
the Quarterly Report for Fields Technologies, Inc. (the "Company") on Form
10-QSB previously filed for the quarter ended December 31, 2001. Financial
statement information and related disclosures included in this amended filing
reflect, where appropriate, changes as a result of the restatements. All other
information contained in this Quarterly Report on Form 10QSB/A is as of the date
of the original filing.
FIELDS TECHNOLOGIES, INC. AND SUBSUDIARIES
Index to Consolidated Financial Statements
Part 1 - Financial Information
Item 1 - Financial Statements
Consolidated Balance Sheet as of December 31, 2001
(unaudited) 3-4
Consolidated Statement of Operations for the three and
six months ended December 31, 2001 and 2000 (unaudited) 5
Consolidated Statement of Cash Flows for the six months
ended December 31, 2001 and 2000 (unaudited) 6
Notes to Consolidated Financial Statements 7-12
Item 2 - Management's Discussion and Analysis of Financial Condition
and results of Operations 13-18
Part 2 - Other Information
Item 1 - Legal Information 19
Item 2 - Changes in the Securities 19
Item 3 - Defaults Upon Senior Securities 19
Item 4 - Submission of Matter to Vote of Security Holders 20
Item 5 - Other Information 20
Item 6 - Exhibits 20
2
FIELDS TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheet As of December 31, 2001
As Restated (Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 584,531
Receivables, net:
Trade 233,378
Related parties 130,602
Prepaid expenses and other current assets 155,892
Deferred tax asset 126,000
--------------
Total current assets 1,230,403
Property and equipment, net 154,468
Other assets:
Deposits 33,802
Capitalized software costs, net 1,427,222
Deferred tax asset 1,274,000
--------------
Total other assets $ 2,735,024
--------------
$ 4,119,895
==============
See accompanying notes to consolidated financial statements.
3
FIELDS TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheet (Unaudited)
As Restated
Liabilities and Stockholders' Deficit
Current liabilities:
Bank line of credit $ 750,000
Note payable to corporation 183,157
Note payable to individual 2,750,000
Accounts payable 585,065
Accrued liabilities 393,787
Deposits for unissued stock 329,880
Deferred revenue 547,712
--------------
Total current liabilities 5,539,601
Long-term liabilities:
Related party notes payable 3,260,714
Accrued interest on related party notes payable 450,716
--------------
Total long-term liabilities 3,711,430
--------------
Total liabilities 9,251,031
--------------
Commitments
Stockholders' deficit:
Preferred stock, $.01 par value, 20,000,000
shares authorized, no shares issued -
Common stock, $.01 par value, 175,000,000 shares
authorized, 152,076,564 shares issued and outstanding 1,520,766
Additional paid-in capital 2,915,417
Stock subscriptions receivable (1,433,200)
Accumulated deficit (8,134,119)
--------------
Total stockholders' deficit (5,131,136)
--------------
$ 4,119,895
==============
See accompanying notes to consolidated financial statements.
4
FIELDS TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statement of Operations (Unaudited)
Three Months Ended Six Months Ended
December 31 December 31
2001 2000 2001 2000
---- ---- ---- ----
(As Restated) (As Restated)
------------- -------------
Revenues:
Software licenses (note 5) $ 362,102 $ 105,190 $ 1,593,660 $ 614,704
Maintenance and support 473,929 592,145 934,858 1,103,065
Consulting and other 6,588 345,043 52,143 460,559
------------ ------------ ------------ -------------
842,619 1,042,378 2,580,661 2,178,328
Cost of revenues 162,952 275,615 356,062 539,666
------------ ------------ ------------ -------------
Gross profit 679,667 766,763 2,224,599 1,638,662
Research and development 142,946 347,620 380,209 661,603
Sales and marketing 426,756 176,266 780,648 387,095
General & administrative expenses 405,712 536,171 778,875 770,020
------------ ------------ ------------ -------------
Income (loss) from (295,747) (293,294) 284,867 (180,056)
------------ ------------ ------------ -------------
operations
Other income (expense):
Interest income - 25,087 - 29,160
Interest expense (169,761) (81,473) (330,178) (129,526)
------------ ------------ ------------ -------------
Loss before income taxes (465,508) (349,680) (45,311) (280,422)
------------ ------------ ------------ -------------
Provision for income taxes:
Current - 52,431 - 52,431
Deferred (164,000) 940,000 - 940,000
------------ ------------ ------------ -------------
Net Loss $ (301,508) $ (1,342,111) $ (45,311) $ (1,272,853)
============ ============ ============ =============
Weighted average shares, basic 150,392,000 109,624,000 149,834,000 109,624,000
============ ============ ============ =============
Weighted average shares, diluted 153,661,000 109,624,000 151,469,000 109,624,000
============ ============ ============ =============
Basic earnings (loss) per share $ (0.00) $ (0.01) $ (0.00) $ (0.01)
============ ============ ============ =============
Diluted earnings (loss) per share $ (0.00) $ (0.01) $ (0.00) $ (0.01)
============ ============ ============ =============
See accompanying notes to consolidated financial statements.
5
FIELDS TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flows (Unaudited)
Six Months Ended December 31
2001 2000
(As Restated)
------------- --------------
Cash flows from operating activities:
Net Loss $ (45,311) $ (1,272,853)
Adjustments to reconcile net loss to net
Cash provided by operating activities:
Depreciation and amortization 87,741 183,437
Loss on sale of assets 4,129 -
Compensation expense on issuance of stock and stock options 16,000 -
Decrease (increase) in:
Deferred tax assets - 940,000
Trade receivables 300,797 642,654
Related party receivables 19,032 (66,167)
Prepaid expenses and other current assets (115,397) (11,339)
(Decrease) increase in:
Accrued interest on long-term related party notes payable 175,380 (2,833)
Accrued liabilities 5,204 153,318
Accounts payable (36,196) 194,428
Deferred revenue (988,030) 169,278
------------- --------------
Net cash provided by (used in) operating activities (576,651) 929,923
Cash flows from investing activities:
Purchases of property and equipment (26,414) (27,770)
Capitalization of software costs (772,265)
------------- --------------
Net cash used in investing activities (798,679) (27,770)
Cash flows from financing activities:
Proceeds from issuance of common stock 891,870 -
Proceeds from collection of common stock subscriptions 206,800 -
Net proceeds from borrowing on line of credit 395,000 150,000
Principal payments on capital leases (3,328) (25,208)
Principal payments on notes payable (78,843) -
Payments on note payable - (137,000)
Deposits for unissued stock 329,880
------------- --------------
Net cash provided by (used in) financing activities 1,741,379 (12,208)
------------- --------------
Net increase in cash and cash equivalents 366,049 889,945
Cash and cash equivalents, beginning of period 218,482 209,297
------------- --------------
Cash and cash equivalents, end of period $ 584,531 $ 1,099,242
============= ==============
See accompanying notes to consolidated financial statements.
6
FIELDS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Restated (Unaudited)
December 31, 2001
1. Summary of Significant Accounting Policies Financial Results and Liquidity
As of December 31, 2001, 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 Action Manager, Fresh Market
Manager, and 4x operating platform, 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 operating platform.
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 six months ended December
31, 2001 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 make the
information presented for the interim periods 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, and 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.
Subsequent to the issuance of the Company's condensed consolidated financial
statements for the period ended December 31, 2001, the Company's management
determined that a change in the Company's interpretation of the accounting
requirements relating certain stock transactions required an amendment to the
Company's form 10-QSB for the quarter ending December 31, 2001.
As a result of this accounting change the amended Form 10-QSB has been restated
and reflects an increase to additional paid in capital of $729,674, an increase
to accumulated deficit of $462,678, revenues have been reduced by $809,316,
compensation expense was reduced by $79,638, resulting in a net loss requiring
reversal of utilization of $267,000 of net operating loss carryforwards
increasing deferred tax assets and increasing earnings for the three months
ended December 31, 2001. Net income has been reduced by $462,678, resulting in
net losses of $301,508 and $45,311 for the three and six months ended December
31, 2001 respectively. Earnings (loss) per share remained unchanged.
7
FIELDS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Restated (Unautidted)
December 31, 2001
1. Summary of Significant Accounting Policies Financial Results and Liquidity
continued.
Three Months Ended Six Months Ended
December 31, 2001 December 31, 2001
Consolidated Income As Previously As Previously
Statement: Reported As Restated Reported As Restated
-------------------- -------------- ------------ -------------- -------------
Revenue $ 1,651,935 $ 842,619 $ 3,389,977 $ 2,580,661
Gross Profit 1,488,983 679,667 3,033,915 2,224,599
Income (loss) from Operations 433,931 (295,747) 1,014,541 284,867
Loss before income taxes 264,170 (465,508) 684,363 (45,311)
Net Income (Loss) 161,170 (301,508) 417,363 (45,311)
The following is a summary of the effects of such restatements on the Company's
consolidated balance sheet and cash flow statements for the six months ended
December 31, 2001.
As Previously Reported As Restated
---------------------- -----------
Consolidated balance sheet:
Other assets $ 2,468,024 $ 2,735,024
Total assets 3,852,895 4,119,895
Total stockholders' deficit (5,398,136) (5,131,136)
Consolidated Statement of Cash Flows:
Net Income (Loss) $ 417,363 $ (45,311)
Net cash provided by (used in) operating activities 232,665 (576,651)
Net cash provided by (used in) financing activities 932,063 1,741,379
Net Earnings (Loss) Per Common Share: Net earnings (loss) per common share for
the three months and six months ended December 31, 2001 and 2000 is based on the
weighted average number of shares outstanding during the period.
2. Supplemental Disclosure of Cash Flow Information
Interest paid during the six months ended December 31, 2001 and 2000 was
$124,352, and $79,793, respectively. Income taxes paid during the six months
ended December 31, 2001 and 2000 was $0.7
8
FIELDS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Restated (Unaudited)
December 31, 2001
2. Supplemental 2001 Disclosure of Cash Flow Information continued
During the six months ended December 31, 2001, the Company issued shares of
common stock pursuant to Subscription Agreements. The investors received a
combination of shares of common stock, options to purchase shares of common
Continued stock and license agreements for certain of the Company's Action
Manager software products. The net proceeds of the common stock issuances are as
follows:
Gross cash received $1,240,000
Less: deposits for unissued stock (329,880)
Less: offering costs (18,250)
----------
Net cash proceeds from issuance of common stock $ 891,870
==========
The Company also issued 2,175,000 options to purchase shares of common stock
pursuant to the Stock Subscription Agreements.
The Company issued 400,000 shares of common stock pursuant to a Consulting
Agreement, and will recognize $48,000 of expense over the agreement.
The Company also settled a note payable currently in default during the six
months ended December 31, 2001, and incurred $12,000 of legal and miscellaneous
costs which were added to the principal balance of the note payable.
2000
During the six months ended December 31, 2000, the Company entered into a
capital lease obligation for the acquisition of equipment with a cost of
$16,350.
3. Notes Payable
The Company has the following short-term notes payable at December 31, 2001:
Note payable to a former owner 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 (former parent and beneficially owned by
the Company's major stockholder) and an officer and the major
shareholder of the Company. $ 2,750,000
Note payable to a partnering company with an interest rate of
10%, due through August 2002 and secured by the Company's assets 183,157
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 March 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
-----------
$ 3,683,157
===========
9
FIELDS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Restated (Unaudited)
December 31, 2001
3. Notes Payable continued.
Financial statement presentation is as follows at
December 31, 2001:
Note payable to individual $ 2,750,000
Bank line of credit 750,000
Note payable to corporation 183,157
-----------
$ 3,683,157
===========
4. Related Party Notes Payable
The Company had the following related party notes payable at December 31, 2001
Notes payable to a stockholder at an interest rate of 10% due in April 2003 and
unsecured $3,260,714
5. Stock Subscriptions Receivable
The Company sold stock to individuals and as of December 31, 2001 has not
received all of the proceeds related to the stock sales. The unreceived proceeds
have been recorded as Stock Subscriptions Receivable and included as an increase
to Stockholders' Deficit in the consolidated financial statements.
6. Recent Accounting Pronouncements
In July 2001, SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill
and Other Intangible Assets" were issued. SFAS 142 addresses financial
accounting and reporting for acquired goodwill and other intangible assets. It
requires, among other things, that companies no longer amortize Accounting
goodwill, but instead test goodwill for impairment at least annually. SFAS
Pronounce- 142 is required to be applied for fiscal years beginning after
December 15, 2001. The Company will assess how the adoption of SFAS 141 will
affect the recording of any future acquisitions.
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 has tangible long-lived assets and will assess how the
adoption of SFAS 143 will impact its financial position and future operations.
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 has tangible long-lived assets and will assess how the
adoption of SFAS 143 will impact its financial position and future operations.
10
FIELDS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Restated (Unaudited)
December 31, 2001
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 has not determined the potential impact its financial position or
results of operations.
Forward-Looking Statements
This quarterly report on Form 10-QSB contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. The words or phrases "would be," "will allow,"
"intends to," "will likely result," "are expected to," "will continue," "is
anticipated," "estimate," "project," or similar expressions are intended to
identify "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Actual results could differ materially
from those projected in the forward looking statements as a result of a number
of risks and uncertainties, including those risks factors contained in our Form
10-KSB annual report at June 30, 2001. Statements made herein are as of the date
of the filing of this Form 10-QSB with the Securities and Exchange Commission
and should not be relied upon as of any subsequent date. Unless otherwise
required by applicable law, we do not undertake, and specifically disclaim any
obligation, to update any forward-looking statements to reflect occurrences,
developments, unanticipated events or circumstances after the date of such
statement.
Item 2. Management's Discussion and Analysis or Plan of Operation.
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 "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; ii) our June 30, 2001 Annual Report on Form 10-KSB, and
iii) our September 30, 2001 Quarterly Report on Form 10-QSB, 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.
11
FIELDS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Restated (Unaudited)
December 31, 2001
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 Action Manager and
Fresh Market Manager software and our 4x operating platform was established. In
accordance with U.S. generally accepted accounting principles, development costs
incurred from January 2001 through December 31, 2001, totaling $1,427,222 has
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 June
2002. 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 Action Manager
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. Through December 31, 2001, we have
accumulated consolidated losses totaling $8,134,119 , which in part, includes
consolidated net loss of $45,311 for the six months ended December 31, 2001. The
net income for the six months ended December 31, 2001 consisted of consolidated
income from operations of $284,867, with net interest expense of $330,178. 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.
12
Management Discussion and Analysis Financial Position
We had $584,531 in cash and cash equivalents as of December 31, 2001 compared
with $218,482 at June 30, 2001, representing an increase of $366,049. This
increase in cash for the six months ended December 31, 2001 relates principally
to prepaid annual maintenance revenues received prior to year-end as well as
cash received from sales revenues and financing activities.
Working capital deficit as of December 31, 2001 increased to $4,309,198 as
compared to $3,483,012 at June 30, 2001. This $826,186 increase in the working
capital deficit for the six months ended December 31, 2001 is principally
attributable to: i) approximately $1,250,000 of previously Long-term debt
becoming a current liability ii) deposits of $329,880 for future issuances of
common stock iii) an additional $395,000 being drawn on the bank lines of credit
iv) recognition of deferred revenue of $988,830 during the six months ended
December 31, 2001.
Results of Operations
Six Months Ended December 31, 2001 and 2000
The consolidated financial statements presented in Item 1 as of and for the six
months ended December 31, 2001 include the financial position and results of
operations for Fields Technologies, Inc. and its subsidiaries, Park City Group,
Inc. (PCG) and Fresh Market Manager, LLC (FMM). The statement of operations for
the six months ended December 31, 2000 includes only the operating results of
PCG, since FMM was not acquired by PCG until April 5, 2001.
During the six months ended December 31, 2001, we had total revenues of $
2,580,661 compared to $2,178,328 for the six months ended December 31, 2000. The
difference in total revenue amounts presented is principally attributable to
increased license sales.
Research and development expenses for the six months ended December 31, 2001
were $380,209 compared with $661,603 during the comparable six-month period
ended December 31, 2000. The reduction in expense is primarily attributable to
costs associated with the significant revisions to our Action Manager products
and the 4x operating platform that were determined to be technologically
feasible and were capitalized in accordance with U.S. generally accepted
accounting principles. No software development costs were capitalized during the
six months ended December 31, 2000. Overall software research and development
costs, when considering both capitalized research and development costs and
expensed research and development expenses, increased during the six months
ended December 31, 2001 when compared to the six months ended December 31, 2000,
including related costs incurred by FMM recognized after its acquisition in
April 2001.
Sales and marketing expenses of $780,648 were incurred during the six months
ended December 31, 2001, compared with $387,095 during the comparable six-month
period ended December 31, 2000. The difference relates primarily to an increase
in sales personnel from 2 to 7 employees and related travel and other costs
along with a general increase in marketing expenditures in anticipation of the
release of the new 4x operating platform and the significant revisions to the
Action Manager and Fresh Market Manager application programs. In addition, sales
and marketing expenditures associated with FMM were included in the related
expenditures for the six months ended December 31, 2001, but were excluded from
the activity for the six months ended December 31, 2000. General and
administrative expenses for the six months ended December 31, 2001 were $778,875
compared with $770,020 for the six months ended December 31, 2000.
13
Net interest expense for the six months ended December 31, 2001 was $330,178
compared to $129,526 for the six months ended December 31, 2000. The net
interest expense increase is attributable principally to: (i) interest
associated with the debt acquired during the 2001 period related to the
acquisition of Fresh Market Manager, LLC; (ii) additional interest related to an
increase in the average outstanding balance on the line of credit during the
2001 period; and (iii) interest related to an increase in the balance of the
obligations due to our principal shareholder.
Three Months Ended December 31, 2001 and 2000
The consolidated financial statements presented in Item 1 as of and for the
three months ended December 31, 2001 include the financial position and results
of operations for Fields Technologies, Inc. and its subsidiaries, Park City
Group, Inc. (PCG) and Fresh Market Manager, LLC (FMM). The statement of
operations for the three months ended December 31, 2000 includes only the
operating results of PCG, since FMM was not acquired by PCG until April 5, 2001.
During the three months ended December 31, 2001, we had total revenues of
$842,619 compared to $1,042,378 for the three months ended December 31, 2000.
The difference in total revenue amounts presented is principally attributable to
consulting revenue in the prior year.
Research and development expenses for the three months ended December 31, 2001
were $142,946 compared with $347,620 during the comparable three-month period
ended December 31, 2000. The reduction in expense is primarily attributable to
costs associated with the significant revisions to our Action Manager products
and the 4x operating platform that were determined to be technologically
feasible and were capitalized in accordance with U.S. generally accepted
accounting principles. No software development costs were capitalized during the
three months ended December 31, 2000. Overall software research and development
costs, when considering both capitalized research & development costs and
expensed research and development expenses, increased during the three months
ended December 31, 2001 when compared to the three months ended December 31,
2000, including related costs incurred by FMM recognized after its acquisition
in April 2001.
Sales and marketing expenses of $426,756 were incurred during the three months
ended December 31, 2001, compared with $176,266 during the comparable
three-month period ended December 31, 2000. The difference relates primarily to
an increase in sales personnel from 2 to 7 employees and related travel and
other costs along with a general increase in marketing expenditures in
anticipation of the release of the new 4x operating platform and the significant
revisions to the Action Manager and Fresh Market Manager application programs.
In addition, sales and marketing expenditures associated with FMM were included
in the related expenditures for the three months ended December 31, 2001, but
were excluded from the activity for the three months ended December 31, 2000 as
feasibility had not been reached.
General and administrative expenses for the three months ended December 31, 2001
were $405,712 compared with $536,171 for the three months ended December 31,
2000. The reduction is primarily attributable to one-time costs incurred during
the three months ended December 31, 2000.
Interest expense for the three months ended December 31, 2001 was $169,761
compared to $81,473 for the three months ended December 31, 2000. The interest
expense increase is attributable principally to: (i) interest associated with
the debt acquired during the 2001 period related to the acquisition of Fresh
Market Manager, LLC; (ii) additional interest related to an increase in the
average outstanding balance on the line of credit during the 2001 period; and
(iii) interest related to an increase in the balance of the obligations due to
our principal shareholder.
14
Liquidity and Capital Resources
To date, we have financed our operations principally through revenues from
software licensing, maintenance and support, consulting and related services
along with short term bank borrowings, loans from a majority shareholder and
more recently, private placements of equity securities. We generated $1,741,379
in net cash provided through financing activities during the six months ended
December 31, 2001, compared with $12,208 used in financing activities during the
six months ended December 31, 2000. During the six months ended December 31,
2001, we used $798,679 of net cash in investing activities compared with $27,770
of net cash used in investing activities during the six months ended December
31, 2000. The difference is mainly attributable to $772,265 of software costs
capitalized in the six months ending in December 31, 2001. No software costs
were capitalized in the six months ending December 31, 2000. We utilized
$576,651 of net cash in operating activities during the six months ended
December 31, 2001 compared with $929,923 of net cash provided by operating
activities during the six months ended December 31, 2000. As of December 31,
2001, we had cash and cash equivalents amounting to $584,531, total current
assets totaled $1,230,403 and current liabilities totaled $5,539,601. As such,
these amounts represent an overall increase of $1,005,151 in working capital
deficit during the three months ended December 31, 2001.
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 December 31, 2001, 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. In addition, at December
31, 2001, we had outstanding certain capital lease obligations related to
certain equipment. We are obligated to pay $3,840 during 2002 related to those
capital leases. At December 31, 2001, we had debt obligations outstanding in the
principal amounts of $6,943,871 plus accrued interest. These loans bear interest
at various rates between 6 percent per annum and 17.4 percent per annum. Of
these outstanding debt obligations, a total of $3,260,714 plus accrued interest
is payable to our majority shareholder, Riverview Financial Corp. In addition,
and in connection with the acquisition of the 100% interest in Fresh Market
Manager, LLC, we have an obligation to pay $2,750,000 to Cooper Capital, LLC.
This obligation has since been renegotiated and is payable in installments of
$500,000 on January 2nd, 2002 (which was paid), $100,000 on January 20th 2002
(which was paid), $125,000 on February 20th, 2002, $150,000 on March 20th, 2002,
$175,000 on April 20th, 2002, $200,000 on May 20th, 2002, $500,000 on June 20th,
2002 and four equal installments of $250,000 on the 20th of each of the
subsequent four months. Interest on this loan accrues at a rate of 12% on any
unpaid balance and is payable monthly. 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.
As of December 31, 2001, we had outstanding stock options and warrants to sell
3,786,073 shares of common stock with exercise prices varying from $.14 to $1.44
per share. 3,411,073 of the options and warrants are fully vested at December
31, 2001. The exercise of all of these outstanding options and warrants would
result in an equity infusion of $1,455,502. There is no assurance that any of
these options or warrants will be exercised.
15
Equity Financings
During the last two quarters, the Company raised capital through the sale of its
securities in private offerings. The purchasers of such securities were
accredited investors. The terms of the various transactions differed and are
described below. Some of the transactions included the sale only of shares of
common stock; others included common stock and options to purchase common stock.
All transactions included an "assured" rate of return which is payable in
additional shares of common stock. In connection with some of these
transactions, licenses for the Company's proprietary software were sold to the
investor. The following information describes each offering:
Quarter Ended September 30, 2001. During the Quarter Ended September 30, 2001,
the Company entered into Subscription Agreements with two investors for the sale
of 1,200,000 shares of the Company's common stock. At September 30, 2001 the
Company had received deposits from such sale transaction. One of these investors
was the Company's chief executive officer who made deposits for 400,000 of these
shares. The other investor was subsequently made an officer in October 2001. In
addition to the issuance of these 1,200,000 shares, the investors were granted
certain licenses from part of the deposits to the Company's proprietary software
subsequent to September 30, 2001. The total cash received by the Company for
these transactions was $300,000, which was recorded at September 30, 2001 as a
deposit for unissued stock.
These two investors were granted options to purchase 1,200,000 shares in total
of the Company's common stock at $0.25 per share, as additional consideration
for their investment. The options are exercisable at $.25 per share and expire
October 31, 2003.
Each of these sales of shares included an "assured" annualized rate of return of
50%, which is further described below.
Quarter Ended December 31, 2001. During the quarter ended December 31, 2001, the
Company sold, 4,600,000 shares of its common stock to 11 investors. In addition
to the issuance of these 4,600,000 shares, the investors were granted certain
licenses to the Company's proprietary software. The total cash to be received by
the Company for these transactions is $1,150,000 of which $940,000 was received
prior to December 31, 2001. Upon receipt of all cash proceeds, they will be
allocated to the purchase of the shares, . The investors donated the licenses to
the State of Utah.
Four of the investors were granted options to purchase a total of 1,200,000
shares of the Company's common stock at $0.25 per share, as additional
consideration for their investment. The options are exercisable at $.25 per
share and expire October 31, 2003.
Four of these investors were granted "put" options requiring the majority
shareholder of the Company to repurchase the shares purchased at a price of
$.275 per share if the shares are not registered within 12 months after issuance
or listed on NASDAQ or an exchange. The total number of shares subject to the
put option is 1,200,000. For each share in which the Company granted a put
option, the Company has a call option, which entitles the Company to repurchase
the shares under certain conditions.
Each of these sales of shares included an "assured" annualized rate of return of
50%, which is further described below.
Assured Rate of Return. As additional consideration for the purchasers of shares
of the Company's common stock during the last two quarters, the Company has
agreed to issue additional shares ("Assurance Shares") in connection with an
"assured rate of return to the investors. Typical terms of the Assurance Shares,
as set forth in the private offering transaction documents, are as follows:
16
Annualized Rate of Return Assurance
Upon our acceptance of a subscription, we agree to provide the Subscriber with a
certain rate of return assurances as to the Shares (the "Assurance"). The terms
of our Assurance are as follows:
Term of Assurance. The Assurance will be for a period that will commence (the
"Commencement Date") on the earlier of:
The date the registration statement registering the shares, as described in
below in "Description of Offering - Registration Rights," is declared effective,
The date the shares may be sold in market transaction under Rule 144 of the
Securities Act of 1933 (the "Securities Act"), or January 31, 2003.
The Assurance will terminate on the date that is exactly three (3) months after
the Commencement Date (the "Assurance Term"). Under no circumstances may a
Subscriber transfer or otherwise assign or convey the Assurance rights.
Amount of Assurance. Subject to the terms described below, if during the
Assurance Term, a Subscriber sells all or any portion of the Shares (the
"Subscribed Shares") and the gross proceeds of such sale or sales provide the
Subscriber with less than a fifty percent (50%) annualized rate of return on the
Purchase Price of the shares sold, the Company will issue to the Subscriber
additional shares of its restricted common stock (the "Assurance Shares") to
provide Investor with such a return.
The Assurance Shares to be issued will be valued as of the date the Investor
sells the Subscribed Shares at a market value per share equal to the actual sale
price if sold on the OTC Bulletin Board or on such other exchange as our common
stock may then be trading, or the closing price of our common stock on the OTC
Bulletin Board or on such other exchange as the Company's common stock may then
be trading if sold other than on the OTC Bulletin Board or on such other
exchange. Where the calculation of Assurance Shares would result in the issuance
of a fractional share, the fractional share will be rounded to a whole share.
Examples of how the Assurance will be conducted are as follows:
First Example: If, during the Assurance Term, the Subscriber sells, in one
transaction, Subscribed Shares having an initial Purchase Price of $100,000, and
the sales proceeds of such sale are $115,000 ($.2875 per share), we will issue
Assurance Shares to the Subscriber valued at $35,000 (121,740 shares at $.2875
per share, rounded up), so that the Subscriber receives a fifty percent
annualized rate of return on the purchase price of such shares.
Second Example: If, during the Assurance Term, the Subscriber sells in one
transaction Subscribed Shares having an initial Purchase Price of $75,000 and in
another Subscribed Shares having an initial Purchase Price of $25,000, and the
sales proceeds of such sale are $100,000 ($.33 1/3 per share) and 15,000 ($.15
per share) respectively, the Assurance Shares we will issue to the Subscriber
are determined as follows: with respect to the first transaction, shares valued
at $12,500 (37,500 shares at $.33 1/3 per share), and with respect to the second
transaction, shares valued at $22,500 (150,000 shares at $.15 per share) so that
the Subscriber receives a fifty percent annualized rate of return on the
purchase price of the shares sold in each of the two sales transactions.
Proof of Sale. Before we will issue the Assurance Shares to the Subscriber, the
Subscriber must provide proof to us of the Subscriber's sale of the Subscribed
Shares in a bona fide, arm's length transaction in compliance with federal and
state securities laws. Such proof must include the Subscriber's confirmation and
statement indicating (1) the gross amount realized from the sale and (2) that
the Subscriber has reported to us all sales of Subscribed Shares that occurred
during the Assurance Term.
17
Assurance Shares Cap. Notwithstanding the foregoing, we will only issue a
maximum of three Assurance Shares and/or Second Assurance Shares for each
Subscribed Share.
Registration Rights of Assurance Shares. The Assurance Shares will have the same
piggyback registration rights that are applicable to the Subscribed Shares. To
compensate the Subscriber for any decrease in the market price between the date
of issuance of the Assurance Shares and the date that the Assurance sales may be
sold in market transactions either under Rule 144 or as a result of
registration, the Company will issue additional shares of its restricted common
stock to the Subscriber (the "Second Assurance Shares") equal in value to the
decrease in market value between the date the Assurance Shares are issued and
the date the Assurance Shares may be sold in market transactions. In no event
will the total number of Assurance Shares and Second Assurance Shares issued for
a Subscribed Share exceed three.
The Second Assurance Shares will be valued as of the date they may be sold in
market transactions either under Rule 144 or as a result of registration. The
value shall be the closing price of our common stock on the OTC Bulletin Board
or on such other exchange as our common stock may then be trading on such date.
Prior to our issuance of the Assurance Shares or the Second Assurance Shares,
the Subscriber agrees to update the representations and warranties contained
herein, if necessary.
Cash Option. In lieu of issuing the Assurance Shares or the Second Assurance
Shares, we may pay the Subscriber the value of such shares in cash, at our sole
discretion.
The Company anticipates that the maximum number of shares, which may be issued
as Assurance Shares, and Second Assurance Shares is 17,400,000.
Inflation
We do not expect the impact of inflation on our operations to be significant.
18
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is involved in legal proceedings as previously described in Part II,
"Item 1. Legal Proceedings" of the Company's Form 10-QSB for the fiscal quarter
ended September 30, 2001. In addition, the Company is involved in the following
legal proceedings:
Debra Elenson vs. Fields Technologies, Randall K. Fields and Sorenson Vance &
Company (Filed -January 2002, in the Circuit Court of the 11th Judicial Circuit
in and for Dade County, Florida): The plaintiff alleges, among other causes of
actions, that a private placement memorandum pursuant to which the plaintiff had
purchase shares of Fields Technologies, contained financial statements which
were not prepared in accordance with generally accepted accounting principles
and the requirements of SEC regulation S-X. The plaintiff alleges fraud,
misrepresentation, unregistered sales of securities and other causes of actions.
The plaintiff seeks a rescission of her investment in the company, damages and
legal fees. The defendants deny each of plaintiff's allegations, belief that the
plaintiff's claims have no merit and will vigorously defend the matter. The
defendants will seek to have the case removed to federal district court in
Florida.
Lawrence A. Locke et al vs. Market Watch Corporation, and Fields Technologies,
Inc. (Filed - September 2001, in the Circuit Court of Oregon in Multnomah
County): The plaintiff alleges, among other causes of action, that the
defendants sent or caused to be sent unsolicited facsimile advertisement in
violation of the Telephone Consumer Protection Act. The plaintiff is seeking to
have the case certified as a class action and is looking for damages caused by
wear and tear of his facsimile machine and use of phone lines, toner, ink,
paper, etc. Defendant Fields denies the allegations, will defend the matter and
is looking to Market Watch to get the matter resolved.
Settlement of 3Com Corporation Litigation: In December 2001, the Company entered
into a Settlement Agreement with 3Com Corporation pursuant to which the Company
and 3Com Corporation agreed to settle and terminate litigation between them that
had been reported upon in the Company's Form 10-QSB for the quarter ended
September 30, 2001. Pursuant to the Settlement Agreement the Company and 3Com
dropped their respective claims against each other, neither the Company nor 3Com
admitted liability as to any matter. Pursuant to the Settlement Agreement, the
Company agreed to pay a total of$309,583 to 3Com payable over a period of
approximately nine months. The Company's agreement to make monthly payments of
the settlement amount is secured by the assets of the Company.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
19
Item 4. Submission of Matters to Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
11.1 Statement re: computation of per share earnings
(incorporated by reference to footnote 1 to the
financial statements which are incorporated herein by
reference to Item 1 of Part I herein)
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Company during the
quarter ended December 31, 2001.
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 15, 2002 FIELDS TECHNOLOGIES, INC.
By /s/ Randall K. Fields
---------------------------------------
Randall K. Fields,
President and Chief Executive Officer
Date: May 15, 2002 By /s/ Barbara J. Ray
---------------------------------------
Barbara J. Ray,
Chief Financial Officer & Secretary
20