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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 2001
---------------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
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Commission file number 033-23138-D
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HEARTSOFT, INC.
- --------------------------------------------------------------------------------
(Name of small business issuer in its charter)
DELAWARE 87-0456766
- ------------------------------------ ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
organization)
3101 NORTH HEMLOCK CIRCLE, BROKEN ARROW, OKLAHOMA 74012
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(Address of principal executive offices)
(918) 362-3600
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(Issuer's Telephone Number)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
As of September 30, 2001, 17,997,946 shares of Heartsoft, Inc. Common Stock,
$0.0005 par value, were outstanding.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
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<Table>
<Caption>
PAGE
PART I. FINANCIAL INFORMATION
Item 1: Balance Sheet as of September 30, 2001 3
Statement of Operations For the Three Month Periods Ended
September 30, 2001 and September 30, 2000 5
Statement of Cash Flows For the Three Month Periods Ended
September 30, 2001 and September 30, 2000 6
Notes to Financial Statements 7
Item 2: Management's Discussion, Analysis of Financial Condition,
and Results of Operations 9
PART II. OTHER INFORMATION
Item 2: Changes in Securities and Use of Proceeds 12
Item 6: Exhibits and Reports on Form 8-K 12
Signature Page 18
</Table>
INTRODUCTORY STATEMENT REGARDING ADOPTION OF FISCAL YEAR:
On August 4, 2000, the Board of Directors of Heartsoft, Inc. changed the
Company's fiscal year end from March 31 to June 30 effective for the fiscal year
beginning July 1, 2000. Therefore, "Fiscal Year 2001" will be for the period
July 1, 2000 to June 30, 2001 and the three months ended September 30, 2000,
December 31, 2000 and March 31, 2001 represents the first, second and third
quarters of Fiscal Year 2001, respectively.
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PART I -- FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
BALANCE SHEET
As of September 30, 2001
(Unaudited)
<Table>
Assets
Current assets:
Accounts receivable, trade, net $ 5,804
Note receivable - officer 250,254
Inventories, at cost 51,377
Other 29,746
------------------------------
Total current assets 337,181
Property and equipment, at cost:
Property and equipment 292,933
Less accumulated depreciation (164,359)
------------------------------
Property and equipment, net 128,574
Other assets:
Developed software, net 930,380
Other 4,668
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Total other assets 935,048
------------------------------
Total assets $ 1,400,803
==============================
</Table>
3
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BALANCE SHEET
As of September 30, 2001
(Unaudited)
<Table>
Liabilities and Stockholders' Equity
Current liabilities:
Cash deficiency $ 31,480
Accounts payable 798,553
Notes payable 1,319,569
Accrued expenses 299,618
------------------------------
Total current liabilities 2,449,220
Long term liabilities:
Notes payable --
------------------------------
Total liabilities 2,449,220
Commitments and contingencies --
Stockholders' deficiency:
Preferred stock, $0.01 par value, 5,000,000 shares
authorized, 642,000 shares issued 6,420
Common stock, $0.0005 par value, 30,000,000
shares authorized, 17,997,946 shares issued 8,999
Additional paid-in capital 7,937,727
Accumulated deficit (9,001,563)
------------------------------
Total stockholders' equity (1,048,418)
------------------------------
Total liabilities and stockholders' equity $ 1,400,803
==============================
</Table>
4
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STATEMENT OF OPERATIONS
(Unaudited)
<Table>
<Caption>
Three Month Periods Ended
September 30,
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2001 2000
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Net sales $ 62,646 $ 97,616
Costs and expenses:
Cost of production 75,310 47,615
Sales and marketing 129,760 201,994
General and administrative 306,368 588,096
Depreciation and amortization 66,809 37,743
--------------------------------------------------
Total operating expenses 578,247 874,748
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Operating loss (515,601) (777,132)
Other income and expense:
Interest expense (144,675) (3,964)
Other, net 6,400 2,038
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(138,275) (1,926)
--------------------------------------------------
Loss before income taxes (653,876) (779,058)
Income taxes -- --
--------------------------------------------------
Net income (loss) $ (653,876) $ (779,058)
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Earnings per share $ (0.04) $ (0.067)
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</Table>
5
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STATEMENT OF CASH FLOWS
Three Month Periods Ended September 30,
(Unaudited)
<Table>
<Caption>
2001 2000
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CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (653,876) $ (779,058)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 13,443 37,743
Changes in:
Accounts receivable 4,731 33,943
Note receivable - officer 10,709
Other assets 18,531 (5,401)
Inventories 5,885 1,823
Accounts payable & accrued expenses 415,765 161,060
Cash deficiency 31,480
--------------------- ---------------------
Net cash used in operating activities (153,334) (549,890)
CASH FLOWS FROM INVESTING ACTIVITIES
Capitalized software development costs - (143,421)
Payments for the purchase of property - (30,126)
--------------------- ---------------------
Net cash used in investing activities - (173,547)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of debt 59,017 79,500
Principal payments of debt - (15,820)
Proceeds from issuance of preferred stock - -
Proceeds from issuance of common stock 94,317 658,129
--------------------- ---------------------
Net cash provided by financing activities 153,334 1,620,521
--------------------- ---------------------
Net increase (decrease) in cash - (1,628)
Cash at beginning of period - 93,820
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Cash at end of period - $ 92,192
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HEARTSOFT, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
(Unaudited)
The accompanying unaudited financial statements have been prepared in
accordance with instructions to Form 10-QSB as prescribed by the Securities and
Exchange Commission. In the opinion of management, all adjustments required to
make a fair presentation of the results of operations of Heartsoft, Inc., a
Delaware corporation ("Heartsoft," or the "Company," including its subsidiary),
for the three month periods ended September 30, 2001 have been included. The
results of operations for the three month period ended September 30, 2001 are
not necessarily indicative of the results of operations that may be achieved for
the remainder of the fiscal year.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CHANGE IN YEAR END
On August 4, 2000, the Board of Directors of the Company changed the
Company's fiscal year end from March 31 to June 30 effective for the fiscal year
beginning July 1, 2000. Therefore, "Fiscal Year 2001" will be for the period
July 1, 2000 to June 30, 2001 and the three months ended September 30, 2000,
December 31, 2000 and March 31, 2001represents the first, second and third
quarters of Fiscal Year 2001, respectively.
NOTE 2 - NOTES PAYABLE
Notes payable consist of the following at September 30, 2001:
<Table>
Notes payable to investors (A) $ 835,164
Notes payable to a finance company, $6,803
monthly, due October 2003 bearing interest at
14.82%, secured by property and equipment 65,388
Notes payable to investors, balloon payments due
December 31, 2001, bearing interest at rates
ranging from 8% to 15% 329,017
Note payable to an investment group, balloon
payment due February 28, 2002, bearing
interest at 8% 40,000
Notes payable to investors, bearing
interest at 8% 50,000
-----------------
Total 1,319,569
Current portion -
-----------------
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Non-current portion $ 1,319,569
=================
</Table>
(A) On September 1, 2001, and October 15, 2001, three noteholders entered into
an extension agreement, and amended and restated note agreements and security
agreements (together, the "Agreements"). Under the Agreements, the principal
balances bear interest at 15% per annum. Principal and interest on each note are
due December 31, 2001, which date would be accelerated upon Heartsoft's
receiving aggregate cumulative proceeds of $1,000,000 from debt, equity or sale
of assets. In consideration of the signed notes, the Company issued the
noteholders an aggregate of 525,000 shares of common stock. In consideration of
the extension agreement, the Company agreed to issue the noteholders an
aggregate of 1,200,000 shares of common stock. The fair value of the common
stock issued is accounted for as additional interest.
NOTE 3 - EARNINGS PER SHARE
Basic and diluted EPS are computed as follows:
<Table>
<Caption>
Three month periods ended
September 30,
2001 2000
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Basic EPS computation:
Net loss $ (653,876) $ (754,715)
Weighted average
Shares outstanding 16,764,234 11,233,093
--------------------------------------------
Basic and diluted
Net loss per share $ (0.04) $ (0.07)
============================================
</Table>
NOTE 4 - UNCERTAINTIES
The Company has experienced recurring net losses and negative cash
flows from operating activities, which amounted to $653,876 and $153,334,
respectively, for the three months ended September 30, 2001.
While the company released INTERNET SAFARI (R), its new secure Internet
browser in February, 2001, and has seen continued sales of its various product
lines, the company significantly scaled back its operations during the quarter
ending September 30, 2001. In order to finance the continuing costs of product
development and operating losses, management intends to raise additional capital
through equity offerings. However, the Company has no formal commitments for
equity placements. The ability of the Company to implement its operating plan
and to continue as a going concern depends on its ability to raise equity
capital and, ultimately, to achieve profitable operations.
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This Form 10-QSB contains "forward-looking" statements regarding
potential future events and developments affecting the business of Heartsoft,
Inc., a Delaware Corporation ("Heartsoft" or the "Company," including its
subsidiary). Forward-looking statements may be indicated by the words "expects,"
"estimates," "anticipates," "intends," "predicts," "believes" or other similar
expressions. Forward-looking statements appear in a number of places in this
Form 10-QSB and may address the intent, belief or current expectations of
Heartsoft and its Board of Directors and Management with respect to Heartsoft
and its business. Heartsoft's ability to predict results or the effect of any
future events on Heartsoft's operating results is subject to various risks and
uncertainties.
GENERAL INFORMATION
Heartsoft is a publicly held Delaware Corporation, incorporated on
January 15, 1988, and traded in the Over the Counter Bulletin Board (OTCBB)
market under the symbol "HTSF." The Company is a provider of proprietary
educational computer software products distributed to the education and consumer
markets. Its products are sold through an internal sales organization, national
and international resellers, United States based catalogers with an annual
aggregate circulation in excess of 5,000,000 catalogs and online through four
corporate websites, www.heartsoft.com, www.internet-safari.com,
www.thinkology.com, and www.isafari.com.
Through the three month period ended September 30, 2001, the Company's
product line was comprised of approximately 50 educational software programs
that assist young children in pre-kindergarten through the 6th grade to practice
and learn basic curriculum subjects. In February, 2001, the Company released its
new secure Internet browser for children, INTERNET SAFARI(R) Version 1.0. The
release of INTERNET SAFARI(R) has broadened the Company's product line to
include an Internet-based software solution. Further, the Internet Safari(R) was
granted approval from the United States Patent and Trademark Office as a
registered trademark of Heartsoft, Inc. This approval denotes formal status of
Internet Safari as a strongly protected software asset of the company. Prior to
this approval INTERNET SAFARI(R) was protected under the common law copyright
and trademark provisions of U.S. corporate law.
Since its release, INTERNET SAFARI(R) has been well received. Beginning
in January, 2001, the Company's education group has distributed thousands of
copies of a demo version of INTERNET SAFARI(R) at major education conferences in
Florida and Texas, and the feedback from the many educators who have seen or
used the product is highly encouraging. Currently, nearly 50 school districts
have expressed interest in or requested proposals for purchasing INTERNET
SAFARI(R) on a district-wide basis, and several thousand additional leads are in
the sales pipeline to be worked by Heartsoft's in-house sales team.
The Company is currently exploring retail distribution opportunities
for INTERNET SAFARI(R) through two software retailers and expects to make an
announcement regarding specific plans once details have been finalized. The
Company is also in preliminary discussions
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with several original equipment manufacturers (OEMs) which could eventually lead
to INTERNET SAFARI(R) being shipped with certain hardware configurations
directory from the factory.
To date, the Company has received several inquiries from international
distributors regarding the conversion, or localization, of INTERNET SAFARI(R)
into four foreign languages. These opportunities will be explored in the future.
The Company believes that its investment in the development of INTERNET
SAFARI(R) represents a key element of its future and that the Company can become
a leading player in the children's Internet market.
To accelerate the development of the potential of INTERNET SAFARI(R)
and the many related opportunities, the Company began pursuing the private
placement of up to $5 million in additional capital. The capital will be raised
through a long-term convertible preferred stock in order to minimize short-term
dilution to common shareholders while simultaneously providing essential growth
capital.
The additional capital will allow the Company to strengthen its brand
name awareness and position and utilize its technological infrastructure and
software development capabilities to continue refining and upgrading its current
and future products. Accordingly, the Company intends to use the capital to
invest heavily in marketing and advertising, new partnerships and strategic
alliances, and its technology infrastructure. The Company believes that this
program of expansion is necessary to continue building its brand recognition and
ability to generate revenues.
Further, if the investments mentioned above are successful, the Company
anticipates that it will see an increase in revenues and a narrowing of losses
as percentage of revenues. The Company expects that the combination of increased
revenues and decreased expenses as percentage of revenues will lead to
profitability.
RESULTS OF OPERATIONS
THREE MONTH PERIOD ENDED SEPTEMBER 30, 2001 VS. THREE MONTH PERIOD ENDED
SEPTEMBER 30, 2000
NET REVENUE
Revenue for the three months ended September 30, 2001 decreased to
$62,646 from $97,616 for the months ended September 30, 2000, a decrease of
$34,970 or 36%. The decrease significantly resulted from changes in the prior
method used by the Company to record sales of product ordered under binding
purchase orders with certain return provisions by customers as well as other
factors. The decrease was also impacted by reduction in staff of the Company's
direct sales force as technology purchasing within the United States fell across
the board due to economic and war-time factors.
COST OF PRODUCTION
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Cost of production includes all costs associated with the acquisition
of raw materials, assembly of finished products, warehousing, shipping, and
payroll associated with production and shipping of finished products. This
expense category also includes labor costs associated with maintaining and
implementing enhancements to existing educational programs (software maintenance
costs) as well as miscellaneous costs related to the needs of the Production
Department. Cost of production for the three months ended , 2001 was $75,310
compared to $47,615 for the three months ended September 30, 2000, an increase
of $27,635 or 58%.
SALES AND MARKETING
Sales and marketing expenses for the three months ended September 30,
2001 were $129,760 versus $201,994 for the three months ended September 30,
2000, a decrease of $72,234 or 55%.
GENERAL AND ADMINISTRATIVE
Total general and administrative (G&A) expense for the three months
ended September 30, 2001 was $306,368 compared to $588,096 for the same period
in 2000, a decrease of $281,728.
INTEREST EXPENSE
Interest expense for the three months ended September 30, 2001 was
$144,675 compared to $3,964 for the same period in 2000, an increase of
$140,711. The primary reason for this increase relates to recording interest
expense for shares of the Company's common stock issued to senior debt holders
as consideration to renegotiate and extend debt as discussed in Financial
Footnote, Note 2 - Notes Payable.
LIQUIDITY AND CAPITAL RESOURCES
In order to maintain current level of operations, the Company will need
to secure additional funding sources to meet its operating expenses. Such
funding sources may include, but are not limited to, additional private
placements of common or convertible equities, placement of debt with banks,
private or public investors, or other lending institutions and/or licensing
agreements with strategic partners. The Company believes that through a
combination of outside sources of capital and revenues generated from product
sales it will have sufficient sources of capital to meet its operating needs.
However, any substantial delays in receipt of or failure to obtain such capital
may prevent the Company from operating as a going concern, given its limited
revenues and capital reserves.
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SUMMARY OF RISK FACTORS
To date, the Company has funded its operations primarily through
revenues generated by various products and equity financings. The Company will
need additional capital before INTERNET SAFARI(R) begins generating a sufficient
cash flow to sustain operations and anticipated growth. Additionally, Heartsoft
is subject to other risks and uncertainties. A summary of risk factors is
discussed in Part III of Heartsoft's Form 10-KSB for fiscal year ending June 30,
2001.
PART II -- OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
RECENT SALES OF UNREGISTERED SECURITIES
During the three months ended September 30, 2001, the Company has
issued the following securities without registering the securities under the
Securities Act of 1933:
<Table>
<Caption>
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CLASS OF PERSONS CONSIDERATION
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Individuals and Investment Partnerships An aggregate of 1,200,000 shares of common stock was issued to
senior debt holders as consideration for due-date extension of
$800,000.
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Public and Investor Relations Services A total of 300,000 shares of common stock was issued for payment
Firm of public and investor relations services
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Investment Group A total of 330,493 shares of common stock were issued in
conversion of preferred stock
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</Table>
The Company relied on the exemption set forth in Section 4(2) of the
Securities Act of 1933, as amended, in connection with the issuances of stock
set forth above. All parties listed above are sophisticated persons or entities,
performed services for the Company or had prior or existing relationships with
members of Company's management staff at the time of the transactions listed
above.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
<Table>
<Caption>
EXHIBIT NO. DESCRIPTION
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3.1 Articles of Incorporation of the Company. (Incorporated by
reference to the Company's Form 10-KSB/A for the period
ended March 31, 1999, which was filed on January 22, 2000.)
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3.2 By-Laws of the Company. (Incorporated by reference to the
Company's Form 10-KSB/A for the period ended March 31, 1999,
which was filed on January 22, 2000.)
4.1 Specimen of Certificate for Heartsoft, Inc. Common Stock.
(Incorporated by reference to the Company's Form 10-KSB/A
for the period ended March 31, 1999, which was filed on
January 22, 2000.)
10.1 Equipment Lease with Auto & Equipment Leasing by Flex, Inc.
dated February 12, 1998. (Incorporated by reference to the
Company's Form 10-KSB/A for the period ended March 31, 1999,
which was filed on January 22, 2000.)
10.2 Software Agreement dated May 16, 1997 between Heartsoft,
Inc. and Heartsoft 1997 Limited Partnership. (Incorporated
by reference to the Company's Form 10-KSB/A for the period
ended March 31, 1999, which was filed on January 22, 2000.)
10.3 Acquisition Note dated May 16, 1997 from Heartsoft 1997
Limited Partnership. (Incorporated by reference to the
Company's Form 10-KSB/A for the period ended March 31, 1999,
which was filed on January 22, 2000.)
10.4 Assumption Agreement dated April 30, 1997 by and among
Heartsoft 1997 Limited Partnership, Heartsoft, Inc. and
Limited Partners. (Incorporated by reference to the
Company's Form 10-KSB/A for the period ended March 31, 1999,
which was filed on January 22, 2000.)
10.5 Joint Venture Agreement dated May 16, 1997 between
Heartsoft, Inc. and Heartsoft 1997 Limited Partnership.
(Incorporated by reference to the Company's Form 10-KSB/A
for the period ended March 31, 1999, which was filed on
January 22, 2000.)
10.6 Software Agreement dated July 30, 1997 between Heartsoft,
Inc. and Heartsoft II 1997 Limited Partnership.
(Incorporated by reference to the Company's Form 10-KSB/A
for the period ended March 31, 1999, which was filed on
January 22, 2000.)
10.7 Acquisition Note dated July 30, 1997 from Heartsoft II 1997
Limited Partnership. (Incorporated by reference to the
Company's Form 10-KSB/A for the period ended March 31, 1999,
which was filed on January 22, 2000.)
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10.8 Assumption Agreement dated July 30, 1997 by and among
Heartsoft II Limited Partnership, Heartsoft, Inc. and
Limited Partners. (Incorporated by reference to the
Company's Form 10-KSB/A for the period ended March 31, 1999,
which was filed on January 22, 2000.)
10.9 Joint Venture Agreement dated July 30, 1997 between
Heartsoft, Inc. and Heartsoft II 1997 Limited Partnership.
(Incorporated by reference to the Company's Form 10-KSB/A
for the period ended March 31, 1999, which was filed on
January 22, 2000.)
10.10 Software Agreement dated October 28, 1997 between Heartsoft,
Inc. and Heartsoft III 1997 Limited Partnership.
(Incorporated by reference to the Company's Form 10-KSB/A
for the period ended March 31, 1999, which was filed on
January 22, 2000.)
10.11 Acquisition Note dated October 28, 1997 from Heartsoft III
1997 Limited Partnership. (Incorporated by reference to the
Company's Form 10-KSB/A for the period ended March 31, 1999,
which was filed on January 22, 2000.)
10.12 Assumption Agreement dated July 30, 1997 by and among
Heartsoft III 1997 Limited Partnership, Heartsoft, Inc. and
Limited Partners. (Incorporated by reference to the
Company's Form 10-KSB/A for the period ended March 31, 1999,
which was filed on January 22, 2000.)
10.13 Joint Venture Agreement dated October 28, 1997 between
Heartsoft, Inc. and Heartsoft III 1997 Limited Partnership.
(Incorporated by reference to the Company's Form 10-KSB/A
for the period ended March 31, 1999, which was filed on
January 22, 2000.)
10.14 Letter Agreement by and between Heartsoft, Inc. and the
Weather Channel Enterprises, Inc. dated September 1, 1999.
(Incorporated by reference to the Company's Form 10-KSB for
the period ended March 31, 2000, which was filed on July 14,
2000.)
10.15 Co-branding Program Agreement by and between Heartsoft, Inc.
and Ask Jeeves, Inc. dated September 16, 1999. (Incorporated
by reference to the Company's Form 10-KSB for the period
ended March 31, 2000, which was filed on July 14, 2000.)
10.16 Lease dated November, 1999 for commercial office space in
Broken Arrow, Oklahoma. (Incorporated by reference to the
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Company's Form 10-KSB for the period ended March 31, 2000,
which was filed on July 14, 2000.)
10.17 Lease dated January, 2000 for commercial office space in
Broken Arrow, Oklahoma. (Incorporated by reference to the
Company's Form 10-KSB for the period ended March 31, 2000,
which was filed on July 14, 2000.)
10.18 Stock Purchase Agreement by and between Heartsoft, Inc. and
Hi-Tel Group, Inc. dated March 1, 2000 with Certificate of
Designation of the Series A Convertible Preferred Stock
attached as Exhibit A and Common Share Purchase Warrant
between Heartsoft, Inc. attached as Exhibit B. (Incorporated
by reference to the Company's Form 10-KSB for the period
ended March 31, 2000, which was filed on July 14, 2000.)
10.19 Web Service Agreement by and between Heartsoft, Inc. and
Gaggle, Inc. dated June 9, 2000. (Incorporated by reference
to the Company's Form 10-KSB for the period ended March 31,
2000, which was filed on July 14, 2000.)
10.20 Amendment to Stock Purchase Agreement by and between
Heartsoft, Inc. and Hi-Tel Group, Inc. dated September 27,
2000. (Incorporated by reference to the Company's Form
10-KSB for the transition period ended June 30, 2000 which
was filed on September 28, 2000.)
10.21 Amendment to Heartsoft, Inc. Common Share Purchase Warrant
by and between Heartsoft, Inc. and Hi-Tel Group, Inc. dated
September 27, 2000 (Incorporated by reference to the
Company's Form 10-KSB for the transition period ended June
30, 2000, which was filed on September 28, 2000.)
10.22 Original Equipment Manufacturing (OEM) Licensing Agreement
by and between Heartsoft, Inc. and International Academy of
Science dated April 28, 2000. (Incorporated by reference to
the Company's Form 10-QSB for the period ended September 30,
2000, which was filed on November 14, 2000.)
10.23 Co-Branding License Agreement by and between Heartsoft Inc
and Merriam-Webster, Incorporated dated August 14, 2000.
(Incorporated by reference to the Company's Form 10-QSB for
the period ended September 30, 2000, which was filed on
November 14, 2000.)
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10.24 Promissory Note dated August 18, 2000 between Heartsoft,
Inc. and Hi-Tel Group, Inc. (Incorporated by reference to
the Company's Form 10-QSB for the period ended September 30,
2000, which was filed on November 14, 2000.)
10.25 Equipment Lease with Auto & Equipment Leasing by Flex, Inc.
dated July 31, 2000. (Incorporated by reference to the
Company's Form 10-QSB for the period ended September 30,
2000, which was filed on November 14, 2000.)
10.26 Trademark License Agreement by and between Heartsoft, Inc.
and Ask Jeeves dated September 8, 2000. (Incorporated by
reference to the Company's Form 10-QSB for the period ended
September 30, 2000, which was filed on November 14, 2000.)
10.27 Letter Agreement granting Benjamin Shell, CEO of Heartsoft,
Inc., a non-exclusive license to use the Yahooligans logo
dated September 19, 2000. (Incorporated by reference to the
Company's Form 10-QSB for the period ended September 30,
2000, which was filed on November 14, 2000.)
10.28 Amendment to Promissory Note between Heartsoft, Inc. and
Hi-Tel Group, Inc. dated November 8, 2000. (Incorporated by
reference to the Company's Form 10-QSB for the period ended
September 30, 2000, which was filed on November 14, 2000.)
10.29 Promissory Note dated November 9, 2000 between Heartsoft,
Inc. and Alan W. Carlton Revocable Living Trust.
(Incorporated by reference to the Company's Form 10-QSB for
the period ended September 30, 2000, which was filed on
November 14, 2000.)
10.30 Letter Agreement dated November 9, 2000 between Heartsoft,
Inc. and Alan W. Carlton Revocable Living Trust.
(Incorporated by reference to the Company's Form 10-QSB for
the period ended September 30, 2000, which was filed on
November 14, 2000.)
10.31 Promissory Note dated November 9, 2000 between Heartsoft,
Inc. and June Limited Partnership. (Incorporated by
reference to the Company's Form 10-QSB for the period ended
September 30, 2000, which was filed on November 14, 2000.)
10.32 Letter Agreement dated November 9, 2000 between Heartsoft,
Inc. and June Limited Partnership. (Incorporated by
reference to the Company's Form 10-QSB for the period ended
September 30, 2000, which was filed on November 14, 2000.)
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10.33 Joint Security Agreement dated November 9, 2000 between
Heartsoft, Inc., Benjamin Shell, Alan W. Carlton Revocable
Living Trust, and June Limited Partnership. (Incorporated by
reference to the Company's Form 10-QSB for the period ended
September 30, 2000, which was filed on November 14, 2000.)
10.34 Amended and Restated Engagement Agreement by and between
Heartsoft, Inc. and Juanita Seng dated September 7, 1999.
10.35 Employment Agreement by and between Heartsoft, Inc. and
Rodger Graham dated August 28, 2000.
10.36 Amended and Restated Engagement Agreement by and between
Heartsoft, Inc. and Dana Swift dated October 6, 2000.
10.37 Promissory Note by and between Benjamin P. Shell and
Heartsoft, Inc., dated November 13, 2000.
10.38 Electronic Agreement Summary dated November 14, 2000
granting Heartsoft, Inc. permission to use Binney & Smith's
Crayola logo and link to it's web sight.
10.39 Equipment Lease with Auto & Equipment Leasing by Flex, Inc.
dated November 15, 2000.
10.40 Letter Agreement dated November 20, 2000 granting Heartsoft,
Inc., a non-exclusive license to use CBS Sportsline.com
(SPLN) logos.
10.41 Electronic Agreement Summary dated November 27, 2000
granting Heartsoft, Inc. permission to use Timeforkids.com's
logo and link to it's web sight.
10.42 Non-Qualified Stock Option Agreement by and between
Heartsoft, Inc. and Rodger Graham dated December 4, 2000.
10.43 Non-Qualified Stock Option Agreement by and between
Heartsoft, Inc. and Juanita Seng dated December 4, 2000.
10.44 Non-Qualified Stock Option Agreement by and between
Heartsoft, Inc. and Dana Swift dated December 4, 2000.
10.45 Letter Agreement by and between Heartsoft, Inc., and The
Glenn A. Chalker Revocable Trust dated January 24, 2001.
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<Page>
10.46 Security Agreement by and between Heartsoft, Inc. and The
Glenn A. Chalker Revocable Trust dated January 24, 2001.
10.47 Convertible Promissory Note by and between Heartsoft, Inc.
and The Glenn A. Chalker Revocable Trust dated January 24,
2001.
21.1 Subsidiaries of Heartsoft. (Incorporated by reference to the
Company's Form 10-KSB/A for the period ended March 31, 1999,
which was filed on January 22, 2000.)
</Table>
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the three-month period ended
September 30, 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.
HEARTSOFT, INC.
--------------------------------------------
(Registrant)
Date: 1/13/02 /s/ Benjamin P. Shell
--------------------- --------------------------------------------
Benjamin P. Shell, Chairman of the Board,
President, and Chief Executive Officer
(Principal Executive Officer)
Date: 1/13/02 /s/ Benjamin P. Shell
--------------------- --------------------------------------------
Benjamin P. Shell, Chief Financial Officer
(Principal Financial Officer)
18