-----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, S8WoaEp5vU+KlneQ9qWIfpE6xbwHZPZ36jNNmfXgPKk5onEbRuxylMHofkw9MhKc ggyQ/mQyYR6GkwL0jiGdmg== /in/edgar/work/20000913/0000883946-00-000013/0000883946-00-000013.txt : 20000922 0000883946-00-000013.hdr.sgml : 20000922 ACCESSION NUMBER: 0000883946-00-000013 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 20000913 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TREEV INC CENTRAL INDEX KEY: 0000883946 STANDARD INDUSTRIAL CLASSIFICATION: [7373 ] IRS NUMBER: 541590649 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 001-11135 FILM NUMBER: 722278 BUSINESS ADDRESS: STREET 1: 13900 LINCOLN PARK DR CITY: HERNDON STATE: VA ZIP: 20171 BUSINESS PHONE: 7034782260 MAIL ADDRESS: STREET 1: 13900 LINCOLN PARK DR CITY: HERNDON STATE: VA ZIP: 20171 FORMER COMPANY: FORMER CONFORMED NAME: NETWORK IMAGING CORP DATE OF NAME CHANGE: 19930328 10-Q/A 1 0001.txt TREEV 3/31/00 FORM 10Q/A AMENDMENT NO. 2 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1999 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-22970 TREEV, INC. (Exact name of small business issuer as specified in its charter) Delaware 54-1590649 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 13900 Lincoln Park Drive, Suite 300, Herndon, Virginia 20171 (Address of principal executive offices) (703) 478-2260 (Issuer's telephone number) 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 past 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: 12,801,943 shares of common stock, $.0001 par value, as of April 16, 1999. Subsequent to filing a Form 10-Q with the Securities and Exchange Commission ("SEC") on April 29, 1999, which included the quarterly financial statements of TREEV, Inc. (the "Company") for the three month period ended March 31, 1999, the Company became aware that the timing and amount of reported earned revenues from license transactions in 1999 required revision. Accordingly, the Company has determined to restate its quarterly financial statements for the three month period ended March 31, 1999. This Form 10-Q/A includes in Item 1 of Part I such restated financial statements and related notes thereto for the three month period ended March 31, 1999, and other information relating to such restated financial statements. Except for Items 1 and 2 of Part I and Exhibit 27.1, no other information included in the original report on Form 10-Q is amended by this Form 10-Q/A. TREEV, INC. Form 10-Q/A Table of Contents PART I FINANCIAL INFORMATION Item 1. Financial Statements. Balance Sheets at March 31, 1999 (unaudited and restated) and December 31, 1998 2 Statements of Operations (unaudited and restated)for the three months ended March 31, 1999 and 1998 3 Statement of Changes in Stockholders' Equity (unaudited and restated)for the three months ended March 31, 1999 4 Statements of Cash Flows (unaudited and restated)for the three months ended March 31, 1999 and 1998 5 Notes to Financial Statements (unaudited and restated) 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 9 PART II. OTHER INFORMATION Item 1. Legal Proceedings. 15 Item 6. Exhibits and Reports on Form 8-K. 15 TREEV, INC. BALANCE SHEETS (In thousands, except share and per share amounts) March 31, December 31, 1999 1998 --------- --------- (Unaudited and restated) ASSETS Current assets: Cash and cash equivalents $ 2,642 $ 1,645 Accounts and notes receivable, net 9,741 11,419 Inventories 844 911 Prepaid expenses and other 723 490 --------- --------- Total current assets 13,950 14,465 Fixed assets, net 1,341 1,578 Long-term notes receivable, net 40 47 Software development costs, net 3,420 2,978 Goodwill, net 291 332 Other assets 122 122 --------- --------- Total assets $ 19,164 $ 19,522 ========= ========= LIABILITIES & STOCKHOLDERS' EQUITY Current liabilities: Current debt maturities and obligations under capital leases $ 2,159 $ 342 Accounts payable 2,129 2,327 Accrued compensation and expenses 1,035 1,448 Deferred revenue 5,828 5,887 Other accrued expenses 1,920 1,945 --------- --------- Total current liabilities 13,071 11,949 Long-term debt and obligations under capital leases 33 43 --------- --------- Total liabilities 13,104 11,992 Commitments Stockholders' equity: Convertible preferred stock, $.0001 par value, 20,000,000 shares authorized; 1,610,025 shares issued and outstanding -- -- Common stock, $.0001 par value, 100,000,000 shares authorized; 12,801,943 and 12,367,888 shares issued and outstanding 1 1 Additional paid-in-capital 139,750 139,310 Accumulated deficit (133,691) (131,781) --------- --------- Total stockholders' equity 6,060 7,530 --------- --------- Total liabilities and stockholders' equity $ 19,164 $ 19,522 ========= ========= The accompanying notes are an integral part of these financial statements. -2- TREEV, INC. STATEMENTS OF OPERATIONS (In thousands, except share and per share amounts) (Unaudited) Three Months Ended March 31, 1999 1998 ------------ ------------ (Restated) Revenues: Products $ 2,438 $ 3,539 Services 3,092 2,661 ------------ ------------ 5,530 6,200 ------------ ------------ Costs and expenses: Cost of products sold 1,364 1,815 Cost of services provided 2,093 1,845 Sales and marketing 2,397 2,734 General and administrative 777 1,176 Product development 808 996 ------------ ------------ 7,439 8,566 ------------ ------------ Loss before interest (expense) income and income taxes (1,909) (2,366) Interest (expense) income, net (1) (68) ------------ ------------ Loss before income taxes (1,910) (2,434) Income tax benefit -- -- ------------ ------------ Net loss (1,910) (2,434) ------------ ------------ Preferred stock dividends (337) (337) ------------ ------------ Net loss applicable to common shares $ (2,247) $ (2,771) ============ ============ Net loss per common share $ (0.18) $ (0.40) ============ ============ Weighted average shares outstanding 12,750,410 6,872,014 ============ ============ The accompanying notes are an integral part of these financial statements. -3- TREEV, INC. CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY Three months ended March 31, 1999 (In thousands, except share amounts) (Unaudited and restated)
Additional Preferred Stock Common Stock paid-in Accumulated Shares Amt. Shares Amt. capital Deficit Total --------------------- ----------------------- ------------ ------------ ------------ Balance December 31, 1998 1,610,025 $ - 12,367,888 $ 1 $ 139,310 $(131,781) $ 7,530 Issuance of common stock, net of offering costs of $71 434,055 766 766 Issuance of warrants 11 11 Dividends on preferred stock (337) (337) Net loss (1,910) (1,910) --------------------- ----------------------- ------------ ------------ ------------ Balance March 31, 1999 1,610,025 $ - 12,801,943 $ 1 $ 139,750 $(133,691) $ 6,060 ===================== ======================= ============ ============ ============
The accompanying notes are an integral part of these financial statements. -4- TREEV, INC. STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Three months ended March 31, 1999 1998 ------- ------- (Restated) Cash flows from operating activities: Net loss $(1,910) $(2,434) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 522 636 Other non-cash adjustments 19 14 Changes in assets and liabilities: Accounts and notes receivable 1,590 2,413 Inventories 67 (74) Prepaid expenses and other (183) 114 Accounts payable (198) 511 Accrued expenses (775) (1,235) Deferred revenue (59) 1,629 ------- ------- Net cash (used in) provided by operating activities (927) 1,574 ------- ------- Cash flows from investing activities: Software development costs (617) (353) Purchases of fixed assets (69) (183) Cash received from business divestitures and related costs 95 7,076 ------- ------- Net cash (used in) provided by investing activities (591) 6,540 ------- ------- Cash flows from financing activities: Proceeds from issuance of common stock, net 766 1,049 Redemption of Redeemable Series F preferred stock -- (6,548) Redemption of convertible notes (200) (1,300) Borrowings from revolving credit agreement 2,275 -- Repayment of revolving credit agreement (272) -- Principal payments on capital lease obligations (54) (320) ------- ------- Net cash provided by (used in) financing activities 2,515 (7,119) ------- ------- Net increase in cash and cash equivalents 997 995 Cash and cash equivalents at beginning of year 1,645 3,816 ------- ------- Cash and cash equivalents at March 31, $ 2,642 $ 4,811 ======= ======= Supplemental Cash Flow Information: Interest paid $ 16 $ 120 The accompanying notes are an integral part of these financial statements. -5- TREEV, INC. NOTES TO FINANCIAL STATEMENTS March 31, 1999 and 1998 (Unaudited and restated) 1. BASIS OF PRESENTATION The unaudited financial statements presented herein have been prepared in accordance with the instructions to Form 10-Q and should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1998, which include information and note disclosures not included herein. In the opinion of management all adjustments, which include only those of a normal recurring nature, necessary to fairly present the Company's financial position, results of operations and cash flows have been made to the accompanying financial statements. The results of operations for the three month period ended March 31, 1999 may not be indicative of the results that may be expected for the year ending December 31, 1999. 2. RESTATEMENT OF FINANCIAL STATEMENTS Subsequent to filing a Form 10-Q with the SEC which included the Company's quarterly financial statements for the three month period ended March 31, 1999, the Company became aware that the timing and amount of reported earned revenues from license transactions in 1999 required revision. During 1999, TREEV initiated relationships with new customers under its Business Alliance Program (the "BAP") which allowed the customers to purchase licenses of the Company's software products at discounted rates based on commitments from the BAP customers to meet certain volume requirements. The terms and conditions of the BAP agreements were consistent with prior agreements entered into with longstanding customers in similar lines of business. The Company anticipated these BAP customers, primarily value added resellers, systems integrators, and original equipment manufacturers, would increase the distribution and market share of its document management solutions. The Company's management evaluated the new BAP customers' credit ratings, business reputation, and ability to comply with the terms of the BAP agreements prior to initiating the relationships. However, during the fourth quarter of 1999, the Company experienced a significant number of new BAP customers not complying with the financial obligations under the BAP agreements as amounts became due in full. The Company's management initiated a review of these relationships to determine the degree of correlation among the new BAP customers and lack of financial performance in a timely manner. In addition, the Company considered the lack of financial performance of the new BAP customers, as a class, to the collectibility criteria of SOP 97-2 and determined that the software revenues related to such arrangements no longer met that criteria as amounts due by this class of customers were generally not paid in full when due. Based on the results of management's review of new BAP customers, the Company, after consultation with its independent auditors, determined that certain revenues previously recognized should be reversed and recognized when payments are received from new BAP customers until sufficient history with specific customers is achieved to determine the likelihood that the new BAP customers' financial obligations will be met in accordance with the original terms of such agreement. In addition to the reversal of certain revenues as discussed above, the Company reversed related costs of revenue and commissions attributable to such transactions and certain other expenses related thereto. The Company also reversed legal fees that had been accrued during the quarter attributable to certain litigation that was resolved in the third quarter of 1999, as such amounts were not paid. -6- Accordingly, such financial statements for the periods presented in this Form 10-Q/A have been restated as follows (in thousands): Three months ended March 31, 1999 ------------------------------------------ As Reported Restated --------------------- -------------------- Statement of Operations Data Product revenues $ 2,828 $ 2,438 Cost of products sold 1,349 1,364 Selling, general and administrative 3,464 3,174 Net loss per common share $ (0.17) $ (0.18) March 31, 1999 ------------------------------------------ As Reported Restated --------------------- -------------------- Balance Sheet Data Accounts and notes receivable, net $ 10,131 $ 9,741 Inventories 859 844 Accrued compensation 1,210 1,035 Other accrued expenses 2,035 1,920 Accumulated deficit (133,576) (133,691) 3. LINE OF CREDIT During the first quarter of 1999, the Company secured a $5 million revolving line of credit from a commercial bank. The Company can draw up to $5 million on the line of credit for working capital needs based on 80% of its eligible receivables. The line of credit bears interest at a rate equal to prime plus 2%. The agreement shall remain in effect until February 28, 2000, and automatically renews for successive additional terms of one year each. The line of credit is collateralized by all of the Company's accounts receivable, inventory, equipment, general intangibles, and other personal property assets. At March 31, 1999, the Company had $2,053,000 outstanding under the line of credit. 4. CONVERTIBLE NOTES REDEMPTION During the first quarter of 1999, the Company redeemed in cash the remaining $200,000 of the 8% Convertible Notes (the "Notes") due August 20, 2002. At March 31, 1999, all of the Notes had been converted or redeemed. 5. ISSUANCE OF COMMON STOCK During the first quarter of 1999, the Company completed a private placement of 388,500 shares of Common Stock pursuant to Regulation D under the Securities Act of 1933. Proceeds from the offering were $777,000 and offering costs were approximately $70,000. During the first quarter of 1999, the Company issued 45,555 shares of Common Stock under the Company's Employee Stock Purchase Plan ("the Plan"). Employees can choose to have up to 10% of their annual earnings withheld to purchase the Company's Common Stock. Under the terms of the Plan, there are two six-month offering periods beginning on January 1st and July 1st of each year during which employees can participate. The purchase price is determined by taking 85% of the lower of (a) the average of the high and low market prices on the offering commencement date and (b) the average of the high and low market prices on the offering termination date. The terms of the Plan require that the purchaser hold the shares purchased under the Plan for a minimum of six months from the date the offering period ends. -7- 6. BUSINESS SEGMENTS The Company's reportable segments are strategic business units that sell its products and services to a wide variety of customers throughout the United States. The products segment includes sales of software licenses of the Company's TREEV Suite of document management software and computer equipment. The services segment includes sales of software maintenance contracts, installation, training, and customization. The following table sets forth summarized financial information concerning the Company's reportable segments for the quarters ended March 31, 1999 and 1998 (in thousands). The "Corporate" column includes corporate related items and expenses not allocated to reportable segments, such as sale of subsidiaries and restructuring costs.
Products Services Corporate Total ------------------- ------------------ ------------------ ---------------- 1999 Revenues $2,438 $3,092 $ --- $5,530 Segment profit (loss) (339) (793) (777) (1,909) 1998 Revenues $3,539 $2,661 $ --- $6,200 Segment profit (loss) (400) (790) (1,176) (2,366)
-8- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward Looking Statements and Certain Risk Factors This "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of this Quarterly Report on Form 10-Q contains certain forward looking statements that are subject to a number of risks and uncertainties. In addition, the Company may publish or make forward looking statements from time to time relating to such matters as anticipated financial performance, business prospects and strategies, sales and marketing efforts, technological developments, new products, research and development activities, and similar matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward looking statements. In order to comply with the terms of the safe harbor, the Company notes that a variety of factors could cause the Company's actual results to differ materially from the anticipated results or other expectations made in the Company's forward looking statements in this Quarterly Report or elsewhere. Readers should carefully review the risk factors described in other documents the Company files from time to time with the Securities and Exchange Commission, specifically any Current Reports on Form 8-K filed by the Company. Some risks and uncertainties of the Company that should be considered by the reader include: The adverse results of operations that the Company has experienced have been declining. Although the Company expects the trend of improved operating results to continue, there can be no assurances that the Company will not experience adverse results of operations in the future. The Company has had net losses in each period of its operations since its inception, except for two quarters, and it had an accumulated deficit at March 31, 1999, of $134 million. The computer industry, including the information access, document management, imaging and optical disk storage segments, is highly competitive, and is characterized by rapid and continuous technological change. The Company's future profitability will depend on, among other things, market acceptance of the Company's products and on the Company's ability to develop, in a timely fashion, enhancements to existing products or new products. There can be no assurance that the Company will be able to market successfully its current products, develop and market enhancements to existing products or introduce new products. -9- Year 2000 Readiness The Year 2000 computer problem originated from programmers writing software code that used two digits instead of four to represent the year. After December 31, 1999, computers and software may incorrectly assume that the year is "1900" rather than "2000." This could lead to system failures and disruptions to activities and operations. In addition, Year 2000 is a leap year, which may further exacerbate incorrect calculations, functions or system failures. At this time it is difficult to predict the effects such disruptions could have and the liabilities that any company may face as a result of these failures. Moreover, companies must not only consider their own products and computer systems, but also the Year 2000 readiness of any third parties, including principal vendors. State of Readiness The Company became aware in 1997 of its potential Year 2000 issues and established a plan to assess its Year 2000 issues and develop an overall strategy. In 1998, the Company began an assessment of its products, its own information technology ("IT") and non-IT systems and the Company's vendors to determine whether they are or will be Year 2000 ready. To ensure that the IT and non-IT systems are, or will be, Year 2000 ready, surveys of the Company's products, services and systems were conducted. These included: audits and analyses of the Company's internal IT systems including hardware and software; assessment of critical non-IT systems; and surveys on principal vendors as to Year 2000 readiness. The Company identified several internal IT and non-IT systems that were not Year 2000 ready. These internal systems have either been replaced or modified with Year 2000 ready systems or will be upgraded to the Year 2000 ready product. All internal system upgrades are expected to be completed by the third quarter of 1999. The Company has received written assurances from material principal vendors as to Year 2000 readiness within that timeframe. The majority of the Company's efforts regarding Year 2000 readiness focused on the Company's products, specifically software applications. As an integral part of the Company's assessment of whether its software products are Year 2000 ready it has established a Year 2000 test force (the "Test Force"). The Test Force has been tasked with providing testing and validation of the Company's Year 2000 readiness of its software products currently being sold to its customers. The Company believes that the current versions of the TREEV Suite of software products are Year 2000 ready. Customers using versions other than current versions of the software products have been given the opportunity, pursuant to maintenance plans or upgrade options, to receive current versions of the software. -10- Costs to Address Year 2000 Readiness Issues The calculation of costs incurred has been limited to bringing the Company's software products, and its own IT and non-IT systems to Year 2000 readiness or to accelerating replacement systems to become Year 2000 ready. Costs incurred in the normal maintenance of the Company's IT and non-IT systems are not included. The total cost of the Year 2000 readiness project is estimated at $740,000 and is being funded through operating cash flows. Of the total project cost, approximately $260,000 is attributable to enhancements of the Company's software products and the purchase of new IT and non-IT systems which will be capitalized. The remaining $480,000 which will be expensed as incurred, is not expected to have a material impact on the results of operations. To date, the Company has incurred approximately $565,000 ($170,000 capitalized and $395,000 expensed) related to the assessment and validation efforts on the Year 2000 readiness project and the development of a modification plan and purchase of new IT and non-IT systems and systems modifications. The costs of the Year 2000 readiness project and the date by which the Company believes it will complete the Year 2000 readiness modifications are based on management's best estimates and are based on certain assumptions of future events, including the continued availability of certain resources and other factors. However, there can be no guarantee that these estimates will be achieved and actual results could differ materially from those anticipated. Specific factors that might cause such material differences include, but are not limited to, the availability and cost of personnel trained in the Year 2000 readiness area and the ability to locate and correct all relevant computer codes. Company's Contingency Plans At the present time, the Company anticipates that essential software products and IT and non-IT systems will be validated as Year 2000 ready in all material respects. This belief is based on the progress to date and the assessed degree of difficulty associated with the remaining phases to achieve Year 2000 readiness. Contingency plans are under development and the Company anticipates that acceptable alternatives will be available in the event that a contingency arises. These contingency plans generally anticipate use of alternative vendors for hardware and operating systems. Nevertheless, it is not possible for the Company to fully assess the likelihood or magnitude of consequences of Year 2000 issues, should representations made by vendors prove to be in error. Year 2000 Information and Readiness Disclosure Act This section captioned "Year 2000 Readiness," as well as other statements herein or otherwise relating to the Year 2000 issues, are "Year 2000 Readiness Disclosures" pursuant to the "Year 2000 Information and Readiness Disclosure Act." -11- Results of Operations - Three months ended March 31, 1999 and 1998 Revenues. Total revenues were $5.5 million and $6.2 million for the three months ended March 31, 1999 and 1998, respectively. The $700,000 decrease in revenue was the result of a decrease in product revenue of $1.1 million, or 31%, offset by an increase in service revenue of $400,000, or 16%. The decrease in product revenue was attributable to postponed contracts from prospective government and banking customers who have delayed implementation of new systems due to fiscal funding appropriations or completion of Year 2000 readiness. The increase in service revenue was attributable to increased staffing and continued management emphasis on the professional services business. Profit Margins. Profit margins for product sales decreased 5 percentage points for the three months ended March 31, 1999, compared to the same period in 1998, as cost of products sold increased from 51% to 56% of sales. The decrease in product sales margins from 49% to 44% was primarily due to the increased sales mix of hardware. Profit margins for service sales increased 2 percentage points for the three months ended March 31, 1999, compared to the same period in 1998, as the cost of services decreased from 70% to 68% of sales. The increase in service sales margins from 30% to 32% was due to the Company's increasing emphasis on its custom development and professional services. Sales and marketing. Sales and marketing expenses were $2.4 million, or 43% of revenue, for the three months ended March 31, 1999, compared to $2.7 million, or 44% of revenue, for the same period in 1998. The decrease of $300,000, or 12%, was the result of reduced sales expenses attributable to the decrease in product revenue combined with continuing cost reduction efforts by the Company. General and administrative. G&A expenses were $800,000, or 14% of revenue, for the three months ended March 31, 1999, compared to $1.2 million, or 19% of revenue, for the same period in 1998. The decrease of $400,000, or 34%, was due to the Company's continued cost reduction efforts. Product development. The Company's expenditures on software research and development activities ("R&D") in the three months ended March 31, 1999, were $1.4 million, of which $600,000 was capitalized and $800,000 was expensed. R&D expenditures for the same period in 1998 were also $1.4 million, of which $400,000 was capitalized and $1.0 million was expensed. The $200,000 increase in capitalized R&D expenditures was attributable the development of the Company's new TREEV 2000 Suite of integrated document management software, which was completed in April 1999. -12- Net loss. The Company's net loss for the three months ended March 31, 1999, was $1.9 million as compared to $2.4 million for the comparable period of 1998. The net loss decrease of $500,000 in the first quarter of 1999 as compared to the same period in 1998 was due to the decreases in sales and marketing and G&A expenses described above. Net loss applicable to Common Shares. The net loss applicable to common shares includes adjustments for dividend amounts related to the Company's preferred stock. The net loss applicable to common shares was $2.2 million, or $0.18 per share, for the three months ended March 31, 1999, as compared to $2.8 million or $0.40 per share, for the comparable period in 1998. The decrease in net loss applicable to common shares is attributable to the decrease in net loss described above. Liquidity and Capital Resources As of March 31, 1999, the Company had $2.6 million in cash and cash equivalents, as compared to $1.6 million in cash and cash equivalents at December 31, 1998. Net working capital was $900,000 at March 31, 1999 and $2.5 million at December 31, 1998. For the three months ended March 31, 1999, the $1.0 million increase in cash and cash equivalents resulted from $900,000 in cash used in operating activities and $600,000 in cash used in investing activities, offset by $2.5 million in cash provided by financing activities. The $900,000 used in operating activities arose primarily from the $1.9 million loss from operations, the $800,000 decrease in accrued expenses, offset by the $1.6 million increase in accounts and notes receivable. The $600,000 used in investing activities arose primarily from capitalized software development costs. The $2.5 million provided by financing activities arose primarily from the $700,000 proceeds from the issuance of Common Stock and the $2.0 million in borrowings under the revolving line of credit. During the first quarter of 1999, the Company secured a $5 million revolving line of credit from a commercial bank. The Company can draw up to $5 million on the line of credit for working capital needs based on 80% of its eligible receivables. The line of credit bears interest at a rate equal to prime plus 2%. The line of credit shall remain in effect until February 28, 2000, and automatically renews for successive additional terms of one year each. The line of credit is collateralized by all of the Company's accounts receivable, inventory, equipment, general intangibles, and other personal property assets. -13- The adverse results of operations that the Company has experienced have been declining. Although the Company expects the trend of improved operating results to continue, there can be no assurances that the Company will not experience adverse results of operations in the future. The Company believes that its existing cash, cash flows from operations and availability under its line of credit should provide sufficient resources to fund its activities through the next twelve months and to maintain net tangible assets of at least $4.0 million, which is required for continued inclusion of the Company's securities on the Nasdaq National Market. Cash flows from operations are largely dependent upon the Company's ability to achieve its sales and gross profit objectives for its TREEV suite of products. If the Company is unable to meet these objectives, it will consider alternative sources of liquidity, such as additional offerings of equity securities and/or further reductions of operating expenses (such as travel, marketing, consulting and salaries). Due to the collapse and delayed recovery of the Asian financial market, one of TREEV's customers in Malaysia was unable to fulfill the original payment terms of its agreement with the Company. In order to comply with standard accounting rules, the Company reversed the revenue associated with the agreement in the amounts of $841,000 in the second quarter of 1998 and $1,659,000 in the third quarter of 1998, thereby decreasing revenue in those quarters. Accordingly, in March 1999, the Company filed amendments to its quarterly reports on Form 10-Q for the second and third quarters of 1998. Nasdaq announced new listing requirements on February 23, 1998, for continued inclusion on the Nasdaq National Market. Specifically, Nasdaq requires, effective February 23, 1998, that common and preferred stock trading on its National Market continuously have a minimum bid price of $1.00. At times in 1997 and 1998, the Company's Common Stock had a minimum bid price below $1.00 before the one-for-four reverse stock split in December 1998. The Company's Preferred Stock has consistently traded with a minimum bid price of over $1.00. Although the Company's Common Stock is currently trading with a minimum bid price above $1.00, there can be no assurance that the Company's Common Stock will continue to trade with such a minimum bid price. In the event that the Company's Common Stock has a minimum bid price below $1.00, the Company believes it can propose and effect a plan to achieve compliance; however, there can be no assurance that the Company will be able to stay in compliance with the Nasdaq requirement. While the Company believes that it can continue to meet the requirements of the Nasdaq Stock Market, any ability to trade on a national exchange could adversely impact the value of the Company's stock. -14- PART II. OTHER INFORMATION Item 1. Legal Proceedings The Company is not involved in any legal proceedings, other than those proceedings and matters incidental to the business. Item 2. Changes in Securities During the first quarter of 1999, the Company completed a private placement of 388,500 shares of Common Stock pursuant to Regulation D under the Securities Act. Proceeds from the offering were $777,000. During the first quarter of 1999, the Company issued 45,555 shares of Common Stock under the Company's Employee Stock Purchase Plan. Item 3. Changes Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders None. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. 27.1 Financial data schedule (b) Reports on Form 8-K. None. -15- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. TREEV, INC. (Registrant) Date: September 13, 2000 By /s/ Thomas A. Wilson ------------------------------------------ Thomas A. Wilson President and Chief Executive Officer Date: September 13, 2000 By /s/ Brian H. Hajost ------------------------------------------ Brian H. Hajost Executive Vice President, Finance and Corporate Development EX-27.1 2 0002.txt FDS FOR TREEV, INC. 3/31/99
5 This schedule contains summary financial information extracted from SEC Form 10-Q and is qualified in its entirety by reference to such financial statements as of and for the three months ended March 31, 1999. 0000883946 TREEV INC 1,000 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 2,642 0 10,985 (1,204) 844 13,949 7,433 (6,092) 19,164 13,071 0 0 0 1 6,059 19,164 5,530 5,530 3,457 3,457 3,981 0 1 (1,910) 0 (1,910) 0 0 0 (1,910) (0.18) (0.18)
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