U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: February 26, 2003
Commission file number: 0-28471
ENTRADA SOFTWARE, INC.
(Name of small business issuer in its charter)
NEVADA 86-0968364
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
15730 N. PIMA ROAD, #D4-229
SCOTTSDALE, ARIZONA 85260
(Address of principal executive offices)
(602) 616-1453
(Issuer's telephone number)
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
ITEM 5. OTHER EVENTS
FINANCIAL CONDITION AND GOING CONCERN
The Company is in extremely extended financial condition and has defaulted
on outstanding debt obligations, trade accounts payable and other liabilities
that totaled in excess of $2,500,000 at December 31, 2002. The Company was in
default under its lease related to its facility and in dispute with its landlord
regarding agreed to voluntary downsizing. Based upon the defaults, the landlord
evicted the Company from its prior facility. All but one member of prior
management has resigned from the Company. The Company's prior filings with the
Securities and Exchange Commission ("SEC") are deficient. Due to management
changes, the deficiencies are not likely to be cured in the short term, and
maybe not at all. The Company's common stock has been delisted from the OTC
Bulletin Board. Because of these and other issues, the Company believes it is
only a matter of time before vendor, creditor, investor and shareholder actions
are pursued against the Company. These factors raise substantial doubt about the
Company's ability to continue as a going concern without dramatic restructuring.
The Company's subsidiary, Empresa Solutions, Inc. is now conducting almost all
of the Company's operations. See "Empresa Solutions, Inc." below.
The Company is contemplating various options to address its financial
crisis, including but not limited to selling assets, locating new sources of
capital or other debt restructuring. Any new capital will almost certainly be
highly dilutive to existing shareholders. If the Company fails to obtain new
financing or locate new sources of capital, it is unlikely that it will be able
to address its financial crisis. Inability to cure the defaults on its
outstanding debt obligations or aggressive creditor or shareholder action may
result in foreclosure proceedings, forced liquidation of assets or filing for
bankruptcy protection. In either event, the Company's ability to continue
operations will be severely impaired or may cease entirely.
On April 23, 2003, the Company engaged Aztore Holdings, Inc., a
restructuring and financial advisor, to advise it regarding restructuring
options. No final plan of operation or other plan of debt restructuring has been
formulated at this time. The Company does not know if sufficient working capital
can be obtained to allow the Company to restructure its debts without filing for
bankruptcy protection. If bankruptcy proceedings are filed, the Company does not
know if it can successfully reorganize.
MANAGEMENT CHANGES AND RESIGNATION OF DIRECTORS
On February 26, 2003, Bruce Williams resigned as the Company's Chief
Executive Officer. Mr. Williams remained as a director. Stephen D. Haber was
appointed as an additional director and replaced Mr. Williams as the Company's
Chief Executive Officer. Charles W. Trautner, a director since January 2003, was
simultaneously appointed Chairman of the Board.
On April 11, 2003, Terry J. Gustafson resigned as the Company's Chief
Financial Officer, Secretary and Treasurer. On April 11, 2003, Mr. Williams also
resigned as a director. While both Mr. Williams and Mr. Gustafson expressed
disagreement with management regarding the Company's operations, neither
furnished a written document describing such disagreement with a request that
the matters be disclosed. The disagreements expressed were related to Company
operations and business development. Mr. Gustafson also expressed disagreement
with a Company employee issue and with actions and discussions occurring at a
Board of Directors meeting. Management believes that the disagreements are
unfounded. Management also believes that Mr. Gustafson inappropriately refused
to correct minutes of a board meeting and had no authority to comment upon the
Company's decisions with respect to the employee.
On April 15, 2003, John Lewis resigned as an officer of the Company. Mr.
Lewis was a Vice President primarily responsible for technology operations and
product development.
On April 30, 2003, Mr. Haber resigned as the Company's Chief Executive
Officer and as a director and Mr. Trautner resigned as a director. Neither
resignation was precipitated by disagreements regarding financial policies or
procedures.
Terry L. Simpson, the largest common shareholder and a director since 1999,
is the Company's sole remaining officer and director.
Messrs. Williams, Gustafson and Lewis have joined a company or affiliated
companies that have an agreement entered into in 2003 to use software developed
by the Company. The Company is reviewing these arrangements as well as its
confidentiality agreements and other agreements with these individuals. The
Company may assert claims against Messrs. Williams, Gustafson and Lewis as well
as the affiliated companies and other related parties as a result of these
actions.
Messrs. Williams, Gustafson and Lewis have asserted claims against the
Company related to deferred compensation, unsecured notes and other alleged
agreements totaling approximately $450,000. Mr. Gustafson alleges that he may be
due treble damages. The Company has claims for advances made to these three
parties totaling approximately $88,500. The Company is also evaluating these
mutual claims and the alleged underlying agreements.
EVICTION AND OFFICE RELOCATION
On April 21, 2003, the Company was evicted from its facility and can now be
contacted at 15730 North Pima Road, #D4-229, Scottsdale, Arizona 85260-1929. The
Company's phone number is (602) 616-1453 and its fax number is (413) 812-7270.
This relocation was precipitated by a dispute with the Company's landlord
regarding the downsizing of the Company's facilities and the Company's defaults
in past due lease payments.
EMPLOYMENT TAX ISSUES
In the Company's last published financial statements included in its Annual
Report on Form 10-KSB for the year ended December 31, 2002 filed with the SEC on
March 24, 2003 (the "FORM 10-KSB"), the Company accrued amounts due for
employment and withholding taxes related to advances paid to employees. However,
the Company has neither remitted nor reported employment nor withholding taxes
related to the payrolls for which the advances were paid. The Company could be
liable for interest and penalties on such unpaid and unreported taxes. The
Company believes that the total accrued liabilities reported in its Form 10-KSB
were adequate to cover such liability, including the potential penalties and
interest. The Company is consulting with tax advisors as to the existence or
2
seriousness of this problem and is evaluating alternatives to address its
potential tax liability.
POTENTIAL DISCLOSURE DEFICIENCIES
The Company believes the Form 10-KSB has inadequate disclosures regarding
certain transactions with officers and directors and potential conflicts of
interest related to Messrs. Williams, Gustafson and Lewis. See "Management
Changes and Resignation of Directors" above. The Company is evaluating amending
the Form 10-KSB filing.
REPORTING REQUIREMENTS UNDER THE EXCHANGE ACT OF 1934
The SEC notified the Company in writing that its Form 10-KSB as well as its
Quarterly Report on Form 10-QSB for the three-months ended September 30, 2002 is
deficient because the Company did not provide the disclosures required by Item
307 of Regulation S-B. Item 307 requires disclosure by a principal executive
officer and a principal financial officer regarding the effectiveness of the
Company's disclosure controls and procedures based on their evaluation of these
controls and procedures as of a date within 90 days of the filing date of the
quarterly or annual report. Mr. Williams, the Chief Executive Officer, and Mr.
Gustafson, the Chief Financial Officer, did not provide such disclosures.
In addition, the SEC informed the Company that these filings also lacked
the required certifications of the principal executive officer and the principal
accounting officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section
906 of Sarbanes-Oxley Act. Mr. Williams, the Chief Executive Officer, and Mr.
Gustafson, the Chief Financial Officer, have refused to provide the required
Sarbanes-Oxley certifications. Due to its management changes, the Company is not
able to cure this deficiency timely.
In addition, the Company's Quarterly Report on Form 10-QSB for the
three-months ended March 31, 2003 has not yet been filed and is now delinquent.
DELISTING OF COMMON STOCK FROM OTC BULLETIN BOARD
As a result of the Company's deficient SEC filings, the NASD delisted the
Company's common stock from trading on the OTC Bulletin Board on June 6, 2003.
In all likelihood, the Company's shareholders will experience a decrease in
liquidity in their Company shares. The Company is evaluating whether it will
attempt to reinstate its listing on the OTC Bulletin Board.
EMPRESA SOLUTIONS, INC.
On May 5, 2003, the Company formed a wholly owed subsidiary Empresa
Solutions, Inc., and executed a non-exclusive source code license with this
subsidiary related to the eChange document management software business. The
subsidiary assumed certain liabilities directly related to the eChange business
and hired certain Company employees and others directly related to this
business. The Company is also evaluating forming another subsidiary to focus its
traceability software business.
3
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.
Dated: June ___, 2003. ENTRADA SOFTWARE, INC.
By: /s/ Terry L. Simpson
------------------------------------
Terry L. Simpson
Chief Executive Officer and Director
4