SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-29672
FORECROSS CORPORATION
CALIFORNIA 94-2823882
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
90 NEW MONTGOMERY STREET
SAN FRANCISCO, CALIFORNIA 94105
Address of principal executive offices)
TELEPHONE: (415) 543-1515
(Registrant's telephone number, including area code)
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 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 .
Shares outstanding of the Registrant's common stock:
Class Outstanding at July 31, 2001
Common Stock, no par value 16,853,380
FORECROSS CORPORATION
FORM 10-Q
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets at June 30, 2001 (unaudited) and September 30, 2000
Statements of Operations (unaudited) for the three and nine months ended
June 30, 2001 and 2000
Statements of Cash Flows (unaudited) for the nine months ended
June 30, 2001 and 2000
Statements of Shareholders' Deficit (unaudited) for the nine months ended
June 30, 2001 and 2000
Notes to Unaudited Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Recent Sales of Unregistered Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signature Page
Exhibit Index
PART I. FINANCIAL INFORMATION
FORECROSS CORPORATION
BALANCE SHEETS
June 30, Sept. 30,
2001 2000
------------ ------------
(Unaudited) (Audited)
ASSETS
Current assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 304,869 $ 18,833
Accounts receivable, including unbilled receivables of $348,000
and $722,000, net of allowance of $20,000 and $20,000, respectively . 684,928 1,043,260
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . 7,008 28,499
------------ ------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . 996,805 1,090,592
Equipment and furniture, net . . . . . . . . . . . . . . . . . . . . . 210,816 310,639
Notes receivable from others . . . . . . . . . . . . . . . . . . . . . 75,249 72,445
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,546 42,746
------------ ------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,325,416 $ 1,516,422
============ ============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 265,769 $ 356,685
Accrued compensation and related benefits . . . . . . . . . . . . . . 950,621 634,903
Accrued liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 55,466 122,149
Accrued commissions and distributors' fees . . . . . . . . . . . . . . 81,499 68,375
Payable to factor . . . . . . . . . . . . . . . . . . . . . . . . . . 163,084 501,243
Accrued warranty costs . . . . . . . . . . . . . . . . . . . . . . . . 45,681 33,922
Capital lease obligations due within one year. . . . . . . . . . . . . 3,189 18,094
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . 249,835 602,210
------------ ------------
Total current liabilities. . . . . . . . . . . . . . . . . . . . . . 1,815,144 2,337,581
Deferred revenue, less current portion . . . . . . . . . . . . . . . . - 415,419
Notes payable to related parties, net . . . . . . . . . . . . . . . . 109,707 101,082
Capital lease obligations, less current portion. . . . . . . . . . . . - 1,610
------------ ------------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 1,924,851 2,855,692
------------ ------------
Commitments and Contingencies
Shareholders' deficit:
Common stock, no par value; authorized 20,000,000 shares; issued and
outstanding 16,853,380 and 15,053,380 . . . . . . . . . . . . . . . . 10,577,253 9,677,253
Additional paid in capital . . . . . . . . . . . . . . . . . . . . . . 1,067,066 983,800
Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . . . . . (12,243,754) (12,000,323)
------------ ------------
Total shareholders' deficit. . . . . . . . . . . . . . . . . . . . . . (599,435) (1,339,270)
------------ ------------
Total liabilities and shareholders' deficit. . . . . . . . . . . . . $ 1,325,416 $ 1,516,422
============ =============
2
FORECROSS CORPORATION
STATEMENTS OF OPERATIONS
For the Three Months Ended For the Nine Months Ended
June 30, June 30,
--------------------------- --------------------------
2001 2000 2001 2000
------------ ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net revenue:
Migration services and consulting . . . $ 997,923 $ 852,318 $ 2,113,196 $ 1,442,808
Year 2000 services . . . . . . . . . . . - - - 1,056,730
Year 2000 software licenses, maintenance
agreements and distributorship fees
from related parties . . . . . . . . . 697,911 141,249 980,409 423,750
------------ ------------ ------------ ------------
Total net revenue . . . . . . . . . . 1,695,834 993,567 3,093,605 2,923,288
Cost of services and maintenance
including fees to related parties of
$0, $0, $0, $18,000. . . . . . . . . . 409,209 202,682 1,187,000 971,000
------------ ------------ ------------ ------------
Gross margin . . . . . . . . . . . . . . 1,286,625 790,885 1,906,605 1,952,288
------------ ------------ ------------ ------------
Operating expenses:
Sales and marketing including fees to
related parties of $0, $0, $0,
$55,000 . . . . . . . . . . . . . . . 226,694 205,408 551,728 523,800
Research and development . . . . . . . . 185,339 294,306 593,183 728,472
General and administrative . . . . . . . 289,528 339,518 878,228 1,553,400
------------ ------------ ------------ ------------
Total operating expenses . . . . . . . . 701,561 839,232 2,023,139 2,805,672
------------ ------------ ------------ ------------
Income (Loss) from operations . . . . . 585,064 ( 48,347) (116,534) (853,384)
Interest expense, net. . . . . . . . . . ( 35,259) ( 17,008) (125,297) (275,921)
------------ ------------ ------------ ------------
Income (Loss) before provision for
income taxes. . . . . . . . . . . . . 549,805 ( 65,355) (241,831) (1,129,305)
Provision for income taxes . . . . . . . - 800 1,600 800
------------ ------------ ------------ ------------
Net income (loss). . . . . . . . . . . $ 549,805 $ ( 66,155) $ (243,431) $ (1,130,105)
============ ============ ============ ============
Net income (loss) per share - basic and
diluted . . . . . . . . . . . . . . . $ 0.04 $ (0.00) $ (0.02) $ (0.08)
============ ============ ============ ============
Weighted average shares used in
computing per share data . . . . . . . 15,503,380 15,050,905 15,233,380 13,620,528
============ ============ ============ ============
3
FORECROSS CORPORATION
STATEMENTS OF CASH FLOWS
For the Nine Months
Ended June 30,
2001 2000
------------ ------------
(Unaudited) (Unaudited)
Increase (decrease) in cash resulting from:
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . . . $ (243,431) $(1,130,105)
Adjustments to reconcile net loss to net cash
used in operating activities-
Provision for uncollectible amounts . . . . . - (25,000)
Non-cash compensation related to
private placement . . . . . . . . . . . . . - 652,000
Non-cash compensation to consultants and
subsequent adjustments . . . . . . . . . . 18,882 14,650
Non-cash compensation to financial
organization. . . . . . . . . . . . . . . . 45,134 -
Depreciation and amortization. . . . . . . . . 119,073 195,788
Changes in operating assets and liabilities-
Accounts receivable. . . . . . . . . . . . . . 358,332 (121,966)
Other assets and accrued interest on notes
receivable from officers . . . . . . . . . . 18,887 12,942
Accounts payable and accrued liabilities . . . 65,015 (317,374)
Accrued compensation . . . . . . . . . . . . . 126,611 144,387
Deferred revenue from year 2000 distributors . (980,409) (423,750)
Deferred revenue from projects . . . . . . . . 212,616 ( 40,162)
------------ ------------
Net cash used in operating activities. . . . . (259,290) (1,038,590)
------------ ------------
Cash flows from investing activities:
Fixed asset acquisition. . . . . . . . . . . . - (7,332)
------------ ------------
Net cash used in investing activities. . . . . - (7,332)
Cash flows from financing activities:
Proceeds from factoring of accounts receivable 1,257,695 1,152,760
Repayment of borrowings under factoring
arrangement . . . . . . . . . . . . . . . . . (1,595,854) (1,789,089)
Repayment of borrowings under notes payable
-officers. . . . . . . . . . . . . . . . . . - (51,269)
Repayment of borrowings under capitalized leases (16,515) (16,021)
Net proceeds from issuance of common shares . 900,000 1,832,075
------------ ------------
Net cash provided by financing
activities . . . . . . . . . . . . . . . . . 545,326 1,128,456
------------ ------------
Net increase in cash . . . . . . . . . . . . . 286,036 82,534
Cash at beginning of period. . . . . . . . . . 18,833 2,740
------------ ------------
Cash at end of period . . . . . . . . . . . . $ 304,869 $ 85,274
============ ============
Supplemental disclosures of cash flow information:
Cash paid during the period for interest . . . $ 142,497 $ 173,274
============ ============
Supplemental disclosures of non-cash investing
and financing activities:
Accrued interest on notes payable to officers
and related parties . . . . . . . . . . . . . $ 8,625 $ 59,333
============ ============
4
FORECROSS CORPORATION
STATEMENTS OF SHAREHOLDERS' DEFICIT
(unaudited)
Common Stock Additional Accumulated
Shares Amount Paid in Capital Deficit Total
----------- ------------ --------------- ------------- ------------
Balances at October 1, 2000. . . . . 15,053,380 $ 9,677,253 $ 983,800 $(12,000,323) $(1,339,270)
Issuance of common stock for cash. . 1,800,000 900,000 - - 900,000
Issuance of options to consultants . - - 38,132 - 38,132
Issuance of warrants to financial
organization. . . . . . . . . . . - - 45,134 - 45,134
Net loss . . . . . . . . . . . . . . - - - (243,431) (243,431)
----------- ------------ ------------- -------------- ------------
Balances at June 30, 2001. . . . . . 16,853,380 $10,577,253 $ 1,067,066 $ (12,243,754) $( 599,435)
=========== ============ ============= ============== ============
FORECROSS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. UNAUDITED INTERIM FINANCIAL STATEMENTS:
The unaudited interim financial statements of Forecross Corporation have been
prepared in conformity with generally accepted accounting principles, consistent
in all material respects with those applied in the Annual Report on Form 10-K
for the year ended September 30, 2000. The interim financial information is
unaudited, but in the opinion of management, includes all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the information set forth therein. The interim financial statements should be
read in connection with the financial statements and notes in the Company's
Annual Report on Form 10-K for the year ended September 30, 2000. The interim
period results are not necessarily indicative of the results for the year ending
September 30, 2001.
2. BASIS OF PRESENTATION AND GOING CONCERN:
Through June 30, 2001, the Company had sustained recurring losses from
operations and, at June 30, 2001, had a shareholders' deficit of $599,000
and a net working capital deficiency of $818,000. These conditions raise
substantial doubt about the ability of the Company to continue as a going
concern. The opinion of the Company's independent certified public accountants
on the audited financial statements for the year ended September 30, 2000 also
contained an explanatory paragraph regarding this doubt about the Company's
ability to continue as a going concern. During fiscal 2001, the Company expects
to meet its working capital and other cash requirements with cash derived from
operations, short-term receivables and other financing as required, sales of
shares of common stock, and software license fees from organizations desiring
access to the Company's various product offerings. The Company's continued
existence is dependent upon its ability to achieve and maintain profitable
operations by controlling expenses and obtaining additional business. Management
believes that the return of migration contracts combined with increased
automation of its services for migration projects and cost reduction actions
previously implemented should improve the Company's profitability in fiscal
2001. However, there can be no assurance that the Company's efforts to achieve
and maintain profitable operations will be successful. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures;
contingent assets and liabilities at the date of the financial statements; and
the reported amounts of revenue and expenses during the reporting period.
Accordingly, actual results could differ from those estimates. The most
significant estimates subject to future uncertainties are those relating to
calculations of percentage of completion for projects in process and estimations
of warranty liability. It is at least reasonably possible that the significant
estimates used will change within a year.
RECLASSIFICATIONS:
Certain prior-year amounts have been reclassified to conform to current year
presentation.
5
4. CONCENTRATIONS OF CREDIT RISK AND FOREIGN SALES:
The Company performs ongoing credit evaluations of its customers and generally
does not require collateral on accounts receivable as the majority of the
Company's customers are large, well-established companies. In the following
table, revenues from the Company's Distributors are treated as resulting from
one customer.
CONCENTRATIONS OF ACCOUNTS RECEIVABLE
At June 30, At September 30,
------------------------------ -------------------------------
2001 2000 2000 1999
-------------- -------------- --------------- --------------
Accounts Receivable
Number of Customers Represented 2 2 2 4
Percentages of Total Accounts
Receivable . . . . . . . . . 51%, 40% 61%, 26% 75%, 22% 30%, 18%, 16%
and 13%
CONCENTRATIONS OF REVENUE GENERATION
For the Three Months Ended For the Nine Months Ended
June 30, June 30,
------------------------------ -------------------------------
2001 2000 2001 2000
-------------- -------------- --------------- --------------
Revenue
Number of Customers Represented 5 3 5 4
Percentages of Total Revenue 41%, 17%, 16%, 44%, 31%, 14% 32%, 28%, 13%, 19%, 17%, 17%
14% and 11% 12% and 11% and 14%
Revenue by Geographic Area
Canada Percentage of Total Revenue - - - 11%
Europe Percentage of Total Revenue 12% - 13% -
5. ISSUANCE OF STOCK AND WARRANTS:
In March 2001, the Company signed an agreement modifying its factoring terms to
reduce the interest rate and fees charged. As part of the agreement, the Company
granted to the financial organization 100,000 warrants to purchase shares of
the Company's stock. These warrants have an exercise price of $1.12 per share,
and an expiration date of September 1, 2005. The company has recorded $45,000 in
expense to date for these warrants.
In June 2001, the Company completed a private placement of 1,800,000 shares of
common stock at $0.50 per share, resulting in gross proceeds of $900,000. With
each share the Company also issued a warrant to purchase one half share of stock
at $0.75 per share at a future date. The warrants expire upon the earlier of
three years, or 10 days after the 20-day trading average closing price of the
Company's common stock equals or exceeds $1.25 per share (if a registration
statement covering the underlying shares has been declared effective.)
6. DEFERRED REVENUE:
Deferred Revenues related to Y2K license agreements were recognized during the
quarter ended June 30, 2001 as year 2000 work effectively ceased during late
1999, and all remaining clean-up and documentation work was completed by March
2000. The Company has no remaining obligations or continuing obligations with
respect to its prior arrangements with Y2K distributors or customers. Remaining
deferred revenues relate to migration projects for which amounts have been
billed or funds received in advance of revenues earned under the percentage of
completion method.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
------- -------------------------------------------------
The following summary of our material activities for the three and nine months
ended June 30, 2001 and 2000 is qualified by, and should be read in conjunction
with more detailed information along with the financial statements and related
notes and other information contained in this report. Each recipient of this
document is urged to read it in its entirety.
The financial results reported herein do not indicate the financial results that
we may achieve in any future period. Other than the historical facts contained
in this document, this Quarterly Report contains statements that are forward-
looking, such as statements relating to plans for future activities. Such
forward-looking information involves important risks and uncertainties that
could significantly affect results in the future and, accordingly, such results
may differ from those expressed in any forward-looking statements made by us or
on our behalf. These risks and uncertainties include concentration of credit,
outstanding indebtedness, dependence on expansion, activities of competitors,
changes in federal or state laws and the administration of such laws, protection
of trademarks and other proprietary rights and the general condition of the
economy and its effect on the securities markets. For a discussion of such
risks and uncertainties see our Annual Report on Form 10-K for the fiscal year
ended September 30, 2000.
6
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2001 COMPARED TO THREE MONTHS ENDED JUNE 30, 2000
Total revenue for the three months ended June 30, 2001 was $1,696,000 as
compared to $994,000 for the same period of 2000, an increase of 71%.
Migration services revenue for the period contributed $810,000 as compared to
$807,000 a year ago. Project revenue is recognized on the percentage-of-
completion method, using estimates of the costs remaining. Revenue from
consulting totaled $188,000 as compared to $45,000 in 2000, and revenue from the
amortization of deferred year 2000 distributor licenses, fees and maintenance
was $701,000 for the current period compared to $141,000 a year ago. The year
2000 distributor revenue increased $560,000 since the remaining year 2000
deferred revenue was recognized in the current period (see Note 6). Backlog was
$3,375,000 at June 30, 2001, as compared to $993,000 at September 30, 2000 and
$1,862,000 at June 30, 2000.
Gross margin was $1,287,000 and $791,000 for the three months ended June 30,
2001 and 2000, respectively. Gross margin percentages were 76% and 80% for these
periods. Excluding all year 2000 distributor revenue, gross margin was $589,000
or 59% for 2001 and $650,000 or 76% for 2000.
Sales and marketing expenses were $227,000 in the three months ended June 30,
2001 as compared to $205,000 in the same period of 2000.
Research and development expenses were $185,000 at June 30, 2001 compared to
$294,000 in the corresponding period of 2000. A larger portion of the current
period department expenses were project related and were included in cost of
revenue.
General and administrative expenses were $290,000 and $340,000, in the three
months ended June 30, 2001 and 2000, respectively.
Net interest expense was $35,000 for the three months ended June 30, 2001 as
compared to $17,000 in the 2000 quarter.
The overall net income for the three months ended June 30, 2001 was $550,000 or
$0.04 per share compared with a net loss of $66,000 or $0.00 per share for the
three months ended June 30, 2000 (based on the weighted average number of
shares outstanding during the respective periods). Excluding the incremental
$557,000 year 2000 deferred revenue recognized in this period, the overall net
loss would have been $7,000, or $0.00 per share.
7
NINE MONTHS ENDED JUNE 30, 2001 COMPARED TO NINE MONTHS ENDED JUNE 30, 2000
Total revenue for the nine months ended June 30, 2001 was $3,094,000 as compared
to $2,923,000 for the same period of 2000, an increase of 6%. Migration
services revenue was $1,725,000 as compared to $1,213,000 a year ago. There
was no Year 2000 project revenue in the current nine months, compared to
$1,057,000 for the same period a year ago. Revenue from development and
consulting totaled $388,000 as compared to $229,000 in 2000. Revenue from
the amortization of deferred year 2000 distributor licenses, fees and
maintenance was $980,000 in 2001 compared to $424,000 in 2000. As previously
noted, the year 2000 distributor revenue increased $560,000 since the remaining
year 2000 deferred revenue was recognized in the current period (see Note 6).
Gross margin was $1,907,000 and $1,952,000 for the nine months ended June 30,
2001 and 2000, respectively. Gross margin percentages were 62% and 67% for
these periods. Excluding all year 2000 distributor revenue, gross margin was
$1,248,000 or 59% for 2001 and $1,529,000 or 61% for 2000.
Sales and marketing expenses were $552,000 for the nine months ended June 30,
2001 as compared to $524,000 for the same period of 2000.
Year to date research and development expenses were $593,000 as compared to
$728,000 in the prior year.
General and administrative expenses were $878,000 and $1,553,000, for the year
to date periods. The 2000 period included a non-recurring $652,000 non-cash
compensation expense for beneficial pricing to employees, distributors and a
director related to the issuance of common stock and warrants in the March
2000 stock private placement and debt conversion.
Net interest expense was $125,000 for the nine months ended June 30, 2001 as
compared to $276,000 in 2000, reflecting the elimination of debt to the
company's senior officers and to year 2000 distributors as part of the March
2000 debt conversion.
The overall net loss for the nine months ended June 30, 2001 was $243,000 or
$0.02 per share compared with a loss of $1,130,000 or $0.08 per share for the
nine months ended June 30, 2000 (based on the weighted average number of shares
outstanding during the respective periods). The change from a year ago is due
in large part to the $652,000 non-cash charge for warrant expense in 2000,
coupled with the recognition of the remaining $557,000 year 2000 distributor
revenue in 2001 (see Note 6). Excluding the incremental $557,000 year 2000
deferred revenue recognized in the quarter ended June 30, 2001, the overall net
loss would have been $800,000, or $0.05 per share in 2001.
8
LIQUIDITY AND CAPITAL RESOURCES
Through June 30, 2001, we sustained recurring losses from operations and,
at June 30, 2001, we had a shareholders' deficit of $599,000 and a net
working capital deficiency of $818,000. These conditions raise substantial
doubts about our ability to continue as a going concern. Also, the opinion
of our independent certified public accountants on the audited financial
statements for the year ended September 30, 2000 contained an explanatory
paragraph regarding this doubt about our ability to continue as a going concern.
For the nine months ended June 30, 2001, operations were funded by the sale of
common stock for cash, by a payment received for future consulting services, by
collection of accounts receivable, and by deferral of salaries of senior
officers.
In December 2000, we received an advance payment of $300,000 from a client, for
future XML-related consulting services. As of June 30, 2001, $129,000 or 43%
of the advance has been earned and recognized in revenues. We expect the
balance to be earned over the next two quarters.
In June 2001, we completed a private placement of common stock which resulted in
gross proceeds of $900,000.
During May 2001, an existing client signed a contract for an additional
$3,000,000 of migration services, bringing the total value of the project to
$3,500,000. We believe this will improve our cash position as the work is
performed.
A factoring agreement with a financial institution allows us to obtain
financing by borrowing against our accounts receivable on a recourse basis. At
June 30, 2001, $163,000 was outstanding under the agreement and at September
30, 2000, $501,000 was outstanding. The agreement, established in October 1995,
may be terminated by either the factor or us at any time.
We are aggressively pursuing new opportunities for migration services, including
developing products and services specifically marketable to businesses currently
using legacy systems but needing to migrate to more web-friendly platforms. We
expect additional revenue in the fourth quarter of fiscal 2001 from some of the
migration contracts currently under negotiation. We are closely monitoring our
sales pipeline, work in progress, collections and cash requirements to determine
whether the existing sources of financing are adequate to support our operations
or whether additional means of financing, including debt or equity financing,
may be required to satisfy our working capital and other cash requirements.
If we can obtain the anticipated level of new business, and continue the use of
short-term receivables financing, we believe we will have sufficient funds to
meet our needs through the balance of fiscal 2001. Cash from operations and the
other sources described above may not be achieved or may not be sufficient for
our needs. While we have not experienced difficulty in attracting or retaining
qualified personnel in the past, any future problems in this area may have a
material negative effect on our results of operations.
We anticipate that our capital expenditures for fiscal 2001 will be
under $50,000. Cash and cash equivalents on hand at June 30, 2001 were $305,000
as compared to $19,000 at September 30, 2000.
9
PART II-OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Recent Sales of Unregistered Securities
In March 2001, the Company signed an agreement modifying its
factoring terms to reduce the interest rate and fees charged.
As part of the agreement, the Company granted to the financial
organization 100,000 warrants to purchase shares of the
Company's stock. These warrants have an exercise price of
$1.12 per share, and an expiration date of September 1, 2005.
The Company has recorded $45,000 to date related to the
warrants. The grant of warrants was exempt from the registration
requirements of the Securities Act of 1933, as amended, pursuant
to Section 4(2) of such Act.
In June 2001, the Company completed a private placement of
1,800,000 shares of common stock at $0.50 per share, resulting
in gross proceeds of $900,000. With each share the Company also
issued a warrant to purchase one half share of stock at $0.75
per share at a future date. The warrants expire upon the
earlier of three years, or 10 days after the 20-day trading
average closing price of the Company's common stock equals or
exceeds $1.25 per share (if a registration statement covering
the underlying shares has been declared effective.)
Item 3. Defaults Upon Senior Securities
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Report on Form 8-K
(a). Index and Description of Exhibits
Exhibit No. Description
- ----------- --------------------------------------------------------------------------------
3.1+ Restated Articles of Incorporation
3.2+ By-Laws
10.1+ Lease Agreement, dated January 1, 1997
between the Company and The Canada Life Assurance Company
10.2+ Form of Indemnification Agreement entered into
between the Company and each of its officers and
directors
10.3+ 1993 Restricted Stock Purchase Plan
10.4+ 1994 Stock Option Plan and Form of Option Agreement
10.5* Exclusive Distributor Agreement between the
Company and Gardner Solution 2000, L.L.C., and
Amendment
10.6* Exclusive Distributor Agreement between the
Company and Y2K Solutions, L.P.,
10.7* Software License Agreement between the Company
and Y2K Solutions, L.P.
10.8+ Factoring Agreement, dated October 30, 1995, between
the Company and Silicon Valley Financial Services
10.9+ Lease Expansion Proposal dated November 17, 1997, between
the Company and The Canada Life Assurance Company
10.10+ Factoring Modification Agreement, dated January 13, 1998,
between the Company and Silicon Valley Financial Services
10.11* Exclusive Distributor Agreement between the Company and
CY2K Solutions, L.L.C.
10.12* Software License Agreement between the Company and
CY2K Solutions, L.L.C.
10.13* Exclusive Distributor Agreement between the Company and
PY2K Solutions, L.L.C.
10.14* Software License Agreement between the Company and PY2K
Solutions, L.L.C.
16.1+ Notice of Change of Auditor dated September 23, 1997, issued
to all holders of common shares of Forecross Corporation
10
16.2+ Letter dated September 23, 1997 from BDO Seidman, LLP to the
British Columbia Securities Commission and to the Vancouver
Stock Exchange confirming the accuracy of the information
contained in the Notice of Change of Auditor of Forecross
Corporation dated September 23, 1997
16.3+ Letter dated September 23, 1997 from Coopers & Lybrand, L.L.P.
to the British Columbia Securities Commission and to the
Vancouver Stock Exchange confirming the accuracy of the information
contained in the Notice of Change of Auditor of Forecross
Corporation dated September 23, 1997
16.4+ Letter dated September 23, 1997 from the Board of Directors of
Forecross Corporation to the shareholders of Forecross Corporation,
the British Columbia Securities Commission and the Vancouver Stock
Exchange confirming the review of the Board of Directors of the
Notice of Change of Auditor and the related letter dated September
23, 1997 from BDO Seidman, LLP and Coopers & Lybrand, L.L.P.
<FN>
+ Previously filed as part of the Company's Form 10/A, effective June
16, 1998.
The Company has requested that certain portions of the documents
be given confidential treatment. The entire documents, including
the redacted portions, have been filed with the SEC.
(b). Reports on Form 8-K
None
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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, thereunto duly authorized.
Registrant
FORECROSS CORPORATION
August 13, 2001 BY: /S/ Bernadette C. Castello
---------------------------------
Bernadette C. Castello
Senior Vice President and Chief Financial Officer
12