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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2003
Commission file number: 0-20824
INFOCROSSING, INC.
-------------------------------------------------------------
(Exact name of registrant as specified in its Charter)
Delaware 13-3252333
------------------------------ -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2 Christie Heights Street; Leonia, NJ 07605
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201) 840-4700
Check 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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act): [ ] Yes [X] No.
There were 15,131,486 shares of the registrant's Common Stock, $0.01 par value,
outstanding as of November 11, 2003.
Page 1
PART I - FINANCIAL INFORMATION
ITEM 1 - Financial Statements
INFOCROSSING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share
and per share amounts)
September 30, December 31,
2003 2002
---------------- -----------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 7,416 $ 7,026
Trade accounts receivable, net of allowances for
doubtful accounts of $544 and $1,051 3,544 4,369
Due from related parties 223 216
Prepaid license fees 1,049 827
Other current assets 1,936 1,308
----------- -----------
14,168 13,746
PROPERTY and EQUIPMENT, net 19,100 19,437
----------- -----------
OTHER ASSETS:
Deferred software, net 1,360 1,742
Goodwill, net 28,361 28,451
Other intangible assets, net 870 1,142
Security deposits and other non-current assets 990 977
----------- -----------
31,581 32,312
----------- -----------
TOTAL ASSETS $ 64,849 $ 65,495
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 3,011 $ 4,093
Current portion of long-term debt and capitalized lease obligations 2,358 1,741
Current portion of accrued loss on leased facilities 203 208
Accrued expenses 1,893 4,093
Income taxes payable 158 96
Customer deposits, deferred revenue, and other current liabilities 1,220 1,381
----------- -----------
8,843 11,612
----------- -----------
LONG-TERM LIABILITES:
Debentures due in 2005, net of unamortized discount 11,106 9,372
Long-term debt and capitalized lease obligations 1,260 1,506
Accrued loss on leased facilities 781 925
Deferred revenue and other long-term liabilities 997 1,096
----------- -----------
14,144 12,899
----------- -----------
COMMITMENTS AND CONTINGENCIES
REDEEMABLE 8% SERIES A CUMULATIVE CONVERTIBLE PARTICIPATING PREFERRED STOCK;
$0.01 par value; 300,000 shares authorized; 157,115 shares issued and
outstanding (liquidation preference
of $78,407 at September 30, 2003) 60,695 53,189
----------- -----------
STOCKHOLDERS' DEFICIT:
Preferred stock; $0.01 par value; 2,700,000 shares authorized; none issued - -
Common stock; $0.01 par value; 50,000,000 shares authorized; shares issued
of 5,982,406 at September 30, 2003 and 5,973,506 at December 31, 2002 60 60
Additional paid-in capital 61,187 61,135
Accumulated deficit (77,229) (70,549)
----------- -----------
(15,982) (9,354)
Less 594,990 shares of common stock held in treasury, at cost (2,851) (2,851)
----------- -----------
TOTAL STOCKHOLDERS' DEFICIT (18,833) (12,205)
----------- -----------
TOTAL LIABILITES AND STOCKHOLDERS' DEFICIT $ 64,849 $ 65,495
=========== ===========
See Notes to Consolidated Financial Statements (Unaudited).
Page 2
INFOCROSSING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands,
except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------------- ---------------------------------
2003 2002 2003 2002
--------------- --------------- --------------- --------------
REVENUES $ 14,114 $ 12,906 $ 40,825 $ 37,380
----------- ----------- ----------- ----------
COSTS and EXPENSES:
Operating costs 8,868 8,632 25,825 23,214
Selling and promotion costs 906 740 2,551 2,368
General and administrative expenses 1,668 1,744 5,292 5,512
Leased facilities and office closings - (290) - (290)
Depreciation and amortization 1,561 1,474 4,450 4,416
----------- ----------- ----------- ----------
13,003 12,300 38,118 35,220
----------- ----------- ----------- ----------
INCOME FROM OPERATIONS 1,111 606 2,707 2,160
----------- ----------- ----------- ----------
Interest income (15) (36) (52) (173)
Interest expense 641 605 1,871 1,692
----------- ----------- ----------- ----------
626 569 1,819 1,519
----------- ----------- ----------- ----------
INCOME BEFORE INCOME TAXES 485 37 888 641
Income tax expense 34 67 62 67
----------- ----------- ----------- ----------
NET INCOME (LOSS) 451 (30) 826 574
Accretion and dividends on redeemable
preferred stock (2,556) (2,348) (7,506) (6,895)
---------- ---------- ---------- ----------
NET LOSS TO COMMON STOCKHOLDERS $ (2,105) $ (2,378) $ (6,680) $ (6,321)
========== ========== ========== ==========
BASIC AND DILUTED LOSS PER SHARE:
Net loss to common stockholders $ (0.39) $ (0.44) $ (1.24) $ (1.18)
=========== =========== =========== ===========
Weighted average number of common
shares outstanding 5,386 5,354 5,383 5,346
=========== =========== =========== ==========
See Notes to Consolidated Financial Statements (Unaudited).
Page 3
INFOCROSSING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
(Unaudited, in thousands)
Additional Treasury
Paid in Accumulated Stock at
Common Shares Par Value Capital Deficit Cost Total
-------------- ------------- ------------- --------------- ------------- -------------
Balances,
December 31, 2002 5,974 $ 60 $ 61,135 $ (70,549) $ (2,851) $ (12,205)
Exercises of stock options 8 - 52 - - 52
Accretion and dividends on
redeemable preferred stock - - - (7,506) - (7,506)
Net income - - - 826 - 826
----------- ---------- ---------- ----------- ---------- ----------
Balances,
September 30, 2003 5,982 $ 60 $ 61,187 $ (77,229) $ (2,851) $ (18,833)
=========== ========== ========== =========== ========== ==========
See Notes to Consolidated Financial Statements (Unaudited).
Page 4
INFOCROSSING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Nine Months Ended
September 30,
-------------------------------------
2003 2002
---------------- -----------------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 826 $ 574
Adjustments to reconcile net income to cash provided by (used in)
operating activities:
Depreciation and amortization 4,450 4,416
Accretion of discounted Debentures 424 355
Leased facilities and office closings - (290)
Decrease (increase) in:
Trade accounts receivable 825 (1,210)
Prepaid license fees and other current assets (850) (290)
Security deposits and other non-current assets (21) 69
Increase (decrease) in:
Accounts payable (1,082) 307
Income taxes payable 62 67
Accrued expenses (450) (1,975)
Payments on accrued loss on leased facilities (111) (1,849)
Customer deposits, deferred revenue, and other liabilities (260) (976)
----------- -----------
Net cash provided by (used in) operating activities 3,813 (802)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (1,253) (3,238)
Purchase of the outstanding stock of AmQUEST, Inc. and payments
of related costs (350) (20,746)
Increase in deferred software costs (90) (101)
----------- -----------
Net cash used in investing activities (1,693) (24,085)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of Debentures - 10,000
Repayment of debt and capitalized leases (1,737) (4,437)
Exercises of stock options and warrants 52 199
Advances to related parties, net (7) (16)
------------ -----------
Net cash (used in) provided by financing activities (1,692) 5,746
----------- -----------
Net cash provided by (used in) continuing operations 428 (19,141)
----------- -----------
CASH FLOWS FROM DISCONTINUED OPERATIONS:
Payments on portion of accrued loss on leased facilities relating to
discontinued operations (38) (39)
----------- -----------
Net increase (decrease) in cash and equivalents 390 (19,180)
Cash and equivalents, beginning of period 7,026 24,344
----------- -----------
Cash and equivalents, end of the period $ 7,416 $ 5,164
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 334 $ 530
=========== ===========
Income taxes $ 132 $ 7
=========== ===========
SUPPLEMENTAL DISCLOSURE OF NON-CASH OPERATING ACTIVITY:
Forfeiture of security deposit in partial settlement of lease $ - $ 1,460
=========== ===========
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITY:
Fees and other costs accrued in connection with the purchase
Of AmQUEST, Inc. $ - $ 407
=========== ===========
Equipment acquired subject to a capital lease $ 2,108 $ 1,245
=========== ===========
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
Treasury shares received in payment of a stock option exercise $ - $ 95
=========== ===========
Additional Debentures issued in lieu of a cash payment of interest $ 1,310 $ 600
=========== ===========
See Notes to Consolidated Financial Statements (Unaudited).
Page 5
INFOCROSSING, INC. AND SUBSIDIAIRES
NOTES TO THE CONSOLIDATED INTERIM
FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The consolidated balance sheets as of September 30, 2003, the consolidated
statements of operations for the three and nine months ended September 30, 2003
and 2002, the consolidated statement of stockholders' deficit for the nine
months ended September 30, 2003, and the consolidated statements of cash flows
for the nine months ended September 30, 2003 and 2002 have not been audited. In
the opinion of management, all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the financial position, results of
operations, and cash flows for the periods indicated have been made. The results
of operations for the periods ended September 30, 2003 and 2002 are not
necessarily indicative of the operating results for the full years.
Certain reclassifications have been made to the prior periods to conform to the
current presentation.
Certain disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States
have been condensed or omitted. These consolidated interim financial statements
should be read in conjunction with the Company's Annual Report on Form 10-K for
the year ended December 31, 2002.
The consolidated financial statements include the accounts of Infocrossing, Inc.
and its wholly owned subsidiaries, including, subsequent to its acquisition on
February 5, 2002, the accounts of AmQUEST, Inc. (collectively, the "Company").
All significant intercompany balances and transactions have been eliminated.
2. STOCK-BASED COMPENSATION
The Company accounts for stock options granted to employees and directors under
the Plan in accordance with Accounting Principles Board Opinion No. 25 and
related Interpretations. Accordingly, no compensation cost has been recognized
for stock option awards. Had compensation cost been determined in accordance
with Statement of Financial Accounting Standard No. 123 "Accounting for
Stock-Based Compensation", the Company's income (loss) in thousands of dollars
and income (loss) per common share for the three and nine months ended September
31, 2003 and 2002 would have been as follows:
Three Months Nine Months
Ended September 30, Ended September 30,
--------------------------------- ---------------------------------
2003 2002 2003 2002
-------------- --------------- -------------- ---------------
Net loss to common stockholders:
As reported $ (2,105) $ (2,378) $ (6,680) $ (6,321)
Deduct: stock-based
employee compensation,
net of taxes (499) (525) (1,523) (1,562)
----------- ----------- ----------- -----------
Pro forma $ (2,604) $ (2,903) $ (8,203) $ (7,883)
=========== =========== =========== ===========
Net loss to common stockholders per share:
As reported $ (0.39) $ (0.44) $ (1.24) $ (1.18)
=========== =========== =========== ===========
Pro forma $ (0.48) $ (0.54) $ (1.52) $ (1.48)
=========== =========== =========== ===========
Page 6
3. ACQUISITION
On February 5, 2002, the Company purchased all of the outstanding capital stock
of AmQUEST, a Georgia corporation, from its former parent company American
Software, Inc. As consideration for the purchase of AmQUEST's shares, the
Company paid approximately $19,634,000 in cash. In addition, the Company
incurred approximately $612,000 in professional fees and other costs related to
the acquisition.
The Company acquired client contracts valued at $1,200,000. This intangible
asset is being amortized over five years using an accelerated method to
approximate the anticipated decline in the revenues of the acquired contracts as
they expire over that time. The acquisition also generated $20,624,000 in
goodwill. This goodwill is not amortizable for tax purposes.
The following unaudited condensed consolidated pro forma financial statement of
operations is presented to illustrate the effects of the acquisition of AmQUEST
as if such transaction had occurred on January 1, 2002. The pro forma statement
of operations may not be indicative of the results that actually would have
occurred had the combination been in effect on the date indicated, nor does it
purport to indicate the results that may be obtained in the future.
Condensed Consolidated Pro Forma Statement of Operations
(In Thousands except Per Share Data)
Nine Months Ended
September 30, 2002
-----------------------
Revenues $ 38,855
==================
Net income $ 449
==================
Net loss to common stockholders $ (6,446)
==================
Net loss to common stockholders per
basic and diluted share $ (1.21)
==================
4. DEBENTURES
On February 1, 2002, the Company issued Senior Subordinated Debentures (the
"Debentures") and warrants to purchase, initially, 2,000,000 shares of the
common stock of the Company (the "Initial Camden Warrants") to a group of
private investors in exchange for $10,000,000. The proceeds from this
transaction were used to partially fund the acquisition of AmQUEST discussed in
Note 3. On October 21, 2003, the Debentures were repaid in full and 937,500
Initial Camden Warrants were cancelled (See Note 7).
The Debentures had an initial maturity of three years from February 1, 2002 (the
"Issuance Date"), with the right to extend the term of the Debentures for one
additional year at the Company's sole option. Pursuant to the terms of the
Debentures, the Company was required to make semi-annual interest payments of
12% per annum for the first two years, 13% per annum for the period commencing
on February 1, 2004 and ending on February 1, 2005, and (if the Company elected
to extend the maturity date as described above), 14% per annum from February 1,
2005. The Company had the option to pay interest in the form of (a) cash, (b)
additional Debentures, or (c) a combination of cash and additional Debentures.
Page 7
The initial carrying values of the Debentures ($8,280,000) and Initial Camden
Warrants ($1,720,000) were determined by apportioning an amount equal to the
proceeds from the private sale multiplied by the relative value of each item as
of the Issuance Date. The difference between the carrying value and the face
value of the Debentures has been recorded as additional interest expense through
February 1, 2005 (the initial maturity date of the Debentures) using the
interest method.
The Initial Camden Warrants were issued pursuant to a Warrant Agreement dated as
of February 1, 2002 by and between the Company and the investors (the "Warrant
Agreement") and are subject to certain customary anti-dilution adjustments. The
exercise price of the Initial Camden Warrants is $5.86. The Camden Warrants
expire on January 31, 2007 and may be cancelled, in part, upon the prepayment of
the Debentures as more fully described in the Warrant Agreement.
On July 31, 2002, January 31, 2003, and July 31, 2003, the Company made the
interest payment then due by issuing additional Debentures totaling $600,000,
$636,000, and $674,160, respectively. The additional Debentures were subject to
the same interest rates and other terms as the original Debentures.
5. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In July 2002, the FASB issued Statement of Financial Accounting Standards No.
146, "Accounting for Costs Associated with Exit or Disposal Activities" ("SFAS
146"). SFAS 146 provides guidance on the timing of the recognition of costs
associated with exit or disposal activities, requiring such costs to be
recognized when incurred. Previous guidance required the recognition of costs at
the date of commitment to an exit or disposal plan. The provisions of SFAS 146
are to be adopted prospectively after December 31, 2002. Although SFAS 146 may
impact the accounting for costs related to exit or disposal activities the
Company may enter into in the future, particularly the timing of the recognition
of these costs, the adoption of the statement did not have an impact on the
Company's current financial condition or results of operations.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation -- Transition and Disclosure, an amendment of FASB Statement No.
123," which amends SFAS No. 123, "Accounting for Stock-Based Compensation," to
provide alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock-based employee compensation. The
transition and annual disclosure provisions of SFAS No. 148 are effective for
fiscal years ending after December 15, 2002. In addition, SFAS No. 148 amends
the disclosure requirements of SFAS No. 123 to require prominent disclosures in
both annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. The Company has adopted the disclosure provisions of SFAS No. 148 and
continues to account for stock-based compensation to employees under APB Opinion
No. 25 and related interpretations.
In April 2003, FASB issued SFAS 149, "Amendment of Statement 133 on Derivative
Instruments and Hedging Activities", which amends and clarifies financial
accounting and reporting for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging activities
under SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities." This statement is effective for contracts entered into or modified
and for hedging relationships designated after June 30, 2003. The adoption of
this statement had no effect on the Company's operating results or financial
position.
In May 2003, the Financial Accounting Standards Board, or FASB, issued SFAS 150,
"Accounting for Certain Financial Instruments with Characteristics of Both
Liabilities and Equity". The statement improves the accounting for three types
of financial instruments that were previously accounted for as equity -
mandatory redeemable shares, instruments that may require the issuer to buy back
shares and certain obligations that can be settled with shares. The statement
requires that those instruments be accounted for as liabilities in the statement
of financial position. The statement is effective for all financial instruments
entered into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003. The
adoption of this statement had no affect on the Company's operating results or
financial position.
Page 8
6. BASIC AND DILUTED EARNINGS PER COMMON SHARE
Statement of Financial Accounting Standards No. 128 "Earnings per Share" ("SFAS
128") requires the presentation of basic and diluted earnings per share ("EPS").
Basic EPS is computed by dividing income available to common stockholders by the
weighted average number of common shares outstanding during each period. Diluted
EPS is computed using the weighted average number of common shares plus the
dilutive effect of common stock equivalents. Common stock equivalents that are
antidilutive are excluded from the computation of weighted average shares
outstanding. Certain common stock equivalents that are currently antidilutive
may be dilutive in the future. In determining the diluted loss per common share
for the three and nine month periods ended September 30, 2003 and 2002, common
stock equivalents of approximately 3,488,000 and 3,253,000 for the three and
nine month periods ended September 30, 2003, respectively, and 3,294,000 and
2,861,000 for the three and nine month periods ended September 30, 2002,
respectively, have been ignored since the effect of including such equivalents
would have been antidilutive.
7. SUBSEQUENT EVENTS
PRIVATE OFFERING OF SHARES
On October 21, 2003 (the "Closing Date"), in a private placement, the Company
issued 9,739,111 shares of common stock and five year warrants to purchase
3,408,689 shares of common stock at $7.86 per share in exchange for $76,549,405.
The private placement was made only to accredited investors in a transaction
exempt from the registration requirements of the Securities Act of 1933.
Investors who had participated in the private placement received certain
registration rights with respect to (a) the common stock issued in the private
placement and (b) the common stock issuable pursuant to the exercise of the
warrants issued in the private placement. The proceeds of the private placement
were principally used to fund the recapitalization and debenture repayment
discussed below. The remainder of the amount raised will be used for the payment
of fees and expenses of the offering and recapitalization transactions and for
working capital purposes.
RECAPITALIZATION
On the Closing Date, holders of all 157,114.7 outstanding shares of the
redeemable 8% Series A Cumulative Convertible Participating Preferred Stock due
2007 (the "Series A Stock") and series A warrants tendered to the Company for
cancellation all such outstanding securities in exchange for $25.0 million in
aggregate principal amount of new senior secured term loans and $55.0 million in
cash. The shares of the Series A Stock, which were convertible into 2,283,455
shares of the Company's common stock (including conversion in respect of accrued
dividends), and the series A warrants exercisable for 2,806,539 shares of common
stock, were cancelled. The new senior secured loans bear interest at 9% per
year, payable quarterly, and mature in October 2008. The loans are secured by
substantially all of the Company's assets and all the capital stock and assets
of its direct and indirect subsidiaries.
In connection with the recapitalization, four members of the Company's board of
directors, who had been nominated by the holders of the Series A Stock and
elected in accordance with the Company's certificate of incorporation and an
existing stockholders agreement, resigned on the Closing Date. In addition, the
existing stockholders agreement among the Company, the holders of the Series A
Stock and other parties was terminated on the Closing Date.
REPAYMENT OF DEBENTURES
On the Closing Date, the Company repaid the outstanding Debentures and accrued
interest in the amount of $12,227,329. In connection with this repayment, the
Company cancelled 937,500 of the 2,000,000 Initial Camden Warrants originally
issued to the debentureholders, with the balance of these warrants to remain
outstanding. In addition, because the Debentures were repaid before February 1,
2004, the Additional Camden Warrants discussed in Note 3 will not be issued.
Page 9
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Infocrossing is a leading provider of information technology and business
process outsourcing services to enterprise clients. We deliver a full suite of
managed and outsourced solutions that enable clients to leverage our
infrastructure and process expertise to improve their efficiency and reduce
their operating costs. We have gained significant expertise in managing complex
computing environments, beginning with traditional data center outsourcing
services and evolving to a comprehensive set of managed solutions. We support a
variety of clients, including Global 2000 companies, and help assure the optimal
performance, security, reliability, and scalability of our clients' mainframes,
distributed servers, and networks, irrespective of where the systems' components
are located. Due to rapid changes and increasing complexities in information
technology, we believe outsourcing is an efficient solution for many businesses
and continues to be a growing trend. We have grown through strategic
acquisitions as well as organic growth.
SIGNIFICANT SUBSEQUENT EVENTS
Private Offering Of Shares
On October 21, 2003 (the "Closing Date"), in a private placement, we issued
9,739,111 shares of common stock and five year warrants to purchase 3,408,689
shares of common stock at $7.86 per share in exchange for $76,549,405. The
private placement was made only to accredited investors in a transaction exempt
from the registration requirements of the Securities Act of 1933. Investors who
had participated in the private placement received certain registration rights
with respect to (a) the common stock issued in the private placement and (b) the
common stock issuable pursuant to the exercise of the warrants issued in the
private placement. The proceeds of the private placement were principally used
to fund the recapitalization and debenture repayment discussed below. The
remainder of the amount raised will be used for the payment of fees and expenses
of the offering and recapitalization transactions and for working capital
purposes.
Recapitalization
On the Closing Date, holders of all 157,114.7 outstanding shares of the
redeemable 8% Series A Cumulative Convertible Participating Preferred Stock due
2007 (the "Series A Stock") and series A warrants tendered to us for
cancellation all such outstanding securities in exchange for $25.0 million in
aggregate principal amount of new senior secured term loans and $55.0 million in
cash. The shares of the Series A Stock, which were convertible into 2,283,455
shares of our common stock (including conversion in respect of accrued
dividends), and the series A warrants exercisable for 2,806,539 shares of our
common stock, were cancelled. The new senior secured loans bear interest at 9%
per year, payable quarterly, and mature in October 2008. The loans are secured
by substantially all of our assets and all the capital stock and assets of our
direct and indirect subsidiaries.
In connection with the recapitalization, four members of our board of directors,
who had been nominated by the holders of the Series A Stock and elected in
accordance with our certificate of incorporation and an existing stockholders
agreement, resigned on the Closing Date. In addition, the existing stockholders
agreement among us, the holders of the Series A Stock and other parties was
terminated on the Closing Date.
Repayment of Debentures
On the Closing Date, we repaid outstanding debentures and accrued interest in
the amount of $12,227,329. In connection with this repayment, we cancelled
937,500 of the 2,000,000 Initial Camden Warrants originally issued to the
debentureholders, with the balance of these warrants to remain outstanding.
ACQUISITION IN 2002
On February 5, 2002, we completed the acquisition of AmQUEST, Inc., an
Atlanta-based IT outsourcing company, for approximately $19.6 million in cash
(the "AmQUEST Acquisition"). This acquisition combined two highly complementary
businesses and enabled us to benefit from increased scale, enhanced services,
and expanded geographic reach. The combination strengthened our position as one
of the leading providers of IT outsourcing solutions for large and mid-size
companies across a broad range of industries including financial services,
security, publishing, healthcare, telecommunications and manufacturing.
Page 10
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2003 and 2002
Net income improved by $481,000 on 9% higher revenues, from a loss of $30,000
for the three months ended September 30, 2002 (the "Prior Quarter") to $451,000
for the three months ended September 30, 2003 (the "Current Quarter").
For the Current Quarter, revenues increased $1,208,000 (9%) to $14,114,000 from
$12,906,000 for the Prior Quarter. This growth is primarily attributable to new
customer contracts added during the past twelve months.
Operating costs increased $236,000 (3%) to $8,868,000 during the Current Quarter
compared with $8,632,000 for the Prior Quarter, primarily due to expanded
business activities related to higher revenues.
Selling and promotion costs increased $166,000 (22%) to $906,000 in the Current
Quarter from $740,000 for the Prior Quarter, largely as a result of commissions
paid for new customer contracts signed.
General and administrative expenses decreased $76,000 (4%) to $1,668,000 for the
Current Quarter from $1,744,000 for the Prior Quarter, primarily due to
continued cost savings initiatives.
Depreciation and amortization of fixed assets and other intangibles increased
$87,000 (6%), from $1,474,000 for the Prior Quarter to $1,561,000 for the
Current Quarter, primarily as a result of depreciation on additional computer
equipment acquired to support the higher revenues.
Net interest expense of $626,000 was recorded for the Current Quarter compared
with $569,000 for the Prior Quarter. The net change of $57,000 reflects an
increase of $36,000 in interest expense on a larger average outstanding debt
balance than in the Prior Quarter and a decrease in interest income of $21,000,
primarily due to a lower average balance of interest-earning assets during the
Current Quarter. Also, to a lesser extent the decrease in interest income
results from lower interest rates.
In the Current Quarter, estimated state income tax expense of $34,000 was
recorded, compared with state income tax expense of $67,000 recorded in the
Prior Quarter. At December 31, 2002, we had net operating loss carryforwards
("NOLs") of approximately $34.9 million for federal income tax purposes that
begin to expire in 2019. As a result of the recapitalization discussed above,
the timing and use of these NOLs in future years is expected to be limited in
any one year. In addition, we have approximately $8 million of net operating
loss carryforwards acquired in the AmQUEST Acquisition. The timing and the use
of the net operating loss carryforwards from the AmQUEST Acquisition may also be
affected under current tax rules. Any future tax benefit generated by the use of
the net operating loss acquired in the AmQUEST Acquisition will be treated as a
reduction of goodwill. The Company's net deferred tax assets, including the
benefit from the NOLs, have been fully offset by a valuation allowance due to
the uncertainty of realizing such tax benefits.
We had net income of $451,000 for the Current Quarter compared with a loss of
$30,000 for the Prior Quarter. Net loss to common stockholders after accretion
and accrued dividends on preferred stock was $2,105,000 for the Current Quarter
compared with $2,378,000 for the Prior Quarter. The loss per common share was
$0.39 for the Current Quarter compared with $0.44 for the Prior Quarter, on both
a basic and diluted basis. Common stock equivalents were ignored in determining
the net loss per share for both periods, since the inclusion of such equivalents
would be antidilutive.
NINE MONTHS ENDED SEPTEMBER 30, 2003 and 2002
Net income improved by 44% on $3,445,000 in additional revenues, from $574,000
for the nine months ended September 30, 2002 (the "Prior Period") to $826,000
for the nine months ended September 30, 2003 (the "Current Period").
For the Current Period, revenues increased $3,445,000 (9%) to $40,825,000 from
$37,380,000 for the Prior Period. This revenue growth is primarily attributable
to new customer contracts added during the past twelve months.
Page 11
Operating costs increased $2,611,000 (11%) to $25,825,000 during the Current
Period compared with $23,214,000 for the Prior Period. Operating costs for the
Prior Period reflect a settlement of certain claims with a software licensor
whereby we received benefits of $2,796,000 consisting of $2,000,000 in credits
that were applied against the cost of future purchases and $796,000 in the
reversal of accrued expenses relating to maintenance and support. Excluding
these benefits, operating costs decreased by $185,000 (1%) during the Current
Period compared with the Prior Period.
Selling and promotion costs increased $184,000 (8%) to $2,551,000 in the Current
Period from $2,367,000 in the Prior Period, largely as a result of new personnel
and commissions paid for new customer contracts signed.
General and administrative expenses decreased $220,000 (4%) to $5,292,000 for
the Current Period from $5,512,000 for the Prior Period, primarily due to
continued cost savings initiatives.
Depreciation and amortization for fixed assets and other intangibles increased
$34,000 (1%), from $4,416,000 for the Prior Period to $4,450,000 for the Current
Period, primarily as a result of depreciation on additional computer equipment
acquired to support the higher revenues.
Net interest expense of $1,819,000 was recorded for the Current Period compared
with $1,519,000 for the Prior Period. The net change of $300,000 reflects an
increase of $179,000 in interest expense on a larger average outstanding debt
balance than in the Prior Period and a decrease in interest income of $121,000,
primarily due to a lower average balance of interest-earning assets during the
Current Period. Also, to a lesser extent the decrease in interest income results
from lower interest rates.
In the Current Period, we recorded estimated state income tax expense of
$62,000, compared with state income tax expense of $67,000 in the Prior Period.
At December 31, 2002, we had net operating loss carryforwards ("NOLs") of
approximately $34.9 million for federal income tax purposes that begin to expire
in 2019. As a result of the recapitalization discussed above, the timing and use
of these NOLs in future years is expected to be limited in any one year. In
addition, we have approximately $8 million of net operating loss carryforwards
acquired in the AmQUEST Acquisition. The timing and the use of the net operating
loss carryforwards from the AmQUEST Acquisition may also be affected under
current tax rules. Any future tax benefit generated by the use of the net
operating loss acquired in the AmQUEST Acquisition will be treated as a
reduction of goodwill. The Company's net deferred tax assets, including the
benefit from the NOLs, have been fully offset by a valuation allowance due to
the uncertainty of realizing such tax benefits.
We had net income of $826,000 for the Current Period compared with $574,000 for
the Prior Period. Net income for the Prior Period included $2,796,000 related to
the settlement of a dispute with a software licensor, as previously described.
Excluding the settlement of the dispute in the Prior Period, net income
increased by $3,048,000. Net loss to common stockholders after accretion and
accrued dividends on preferred stock was $6,680,000 for the Current Period
compared with $6,321,000 for the Prior Period. The loss per common share was
$1.24 for the Current Period compared with $1.18 for the Prior Period, on both a
basic and diluted basis. Common stock equivalents were ignored in determining
the net loss per share for both periods, since the inclusion of such equivalents
would be antidilutive.
The recapitalization discussed above is expected to affect future earnings in
the following ways:
(a) interest expense will increase due to a higher debt balance, partially
offset by a lower interest rate;
(b) net income will no longer be reduced by accretion and dividend accruals on
the Series A Stock; and
(c) the weighted average number of common shares and share equivalents will
increase.
Page 12
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was approximately $3,813,000 for the
nine months ended September 30, 2003. During the Current Period, we had $826,000
of net income, $4,450,000 of depreciation and amortization, and $424,000 of
debenture discount amortization. Improved collections resulted in a decrease in
accounts receivable, offset by an increase in other current assets as payments
for items with quarterly or annual renewals such as software maintenance
contracts and business insurance exceeded the straight-line expense for those
items so far this year. Among other working capital items, accounts payable and
accrued expenses declined $1,532,000 as a result of payments for equipment and
software acquired late in 2002 and the payment of certain accrued costs related
to the AmQUEST Acquisition.
On October 21, 2003, in a private placement, we issued 9,739,111 shares of
common stock and five year warrants to purchase 3,408,689 shares of common stock
at $7.86 per share in exchange for $76,549,405. The proceeds of the private
placement were principally used to repay outstanding debentures and accrued
interest in the amount of $12,227,000 and to fund a recapitalization whereby we
exchanged $25.0 million in aggregate principal amount of new senior secured term
loans and $55.0 million in cash for all outstanding shares of the redeemable 8%
Series A Cumulative Convertible Participating Preferred Stock and series A
warrants. The remainder of the amount raised will be used for the payment of
fees and expenses of the offering and recapitalization transactions and for
working capital purposes.
Principal investing activities during the nine months ended September 30, 2003
include $1,253,000 for the purchase of property and equipment. During the first
nine months of 2003, we also entered into capital leases of approximately
$2,108,000.
Principal financing activities during the nine months ended September 30, 2003
include $1,737,000 in payments of principal with respect to debt and capital
lease obligations.
On February 1, 2002, we issued Senior Subordinated Debentures (the "Debentures")
and warrants to purchase, initially, 2,000,000 shares of our common stock (the
"Initial Camden Warrants") to a group of private investors in exchange for
$10,000,000. The proceeds from this transaction were used to partially fund the
AmQUEST Acquisition. As discussed above, on October 21, 2003, we repaid the
outstanding Debentures including accrued interest in the amount of $12,227,000.
The Debentures had an initial maturity of three years from February 1, 2002 (the
"Issuance Date"), with the right to extend the term of the Debentures for one
additional year at our sole option. Pursuant to the terms of the Debentures, we
were required to make semi-annual interest payments of 12% per annum for the
first two years, 13% per annum for the period commencing on February 1, 2004 and
ending on February 1, 2005, and (if we elected to extend the maturity date as
described above), 14% per annum from February 1, 2005. We had the option to pay
interest in the form of (a) cash, (b) additional Debentures, or (c) a
combination of cash and additional Debentures.
On July 31, 2002, January 31, 2003, and July 31, 2003, we made the interest
payment then due by issuing additional Debentures totaling $600,000, $636,000,
and $674,160, respectively. The additional Debentures were subject to the same
interest rates and other terms as the original Debentures.
PRO FORMA STATEMENT OF FINANCIAL POSITION
Also as discussed above, on October 21, 2003 we closed a private placement and
issued 9,739,111 shares of common stock and five year warrants to purchase
3,408,689 shares of common stock for $7.86 per share in exchange for
$76,549,405. The proceeds of the private placement were used to fund the
Debenture repayment and the following recapitalization, whereby holders of all
157,114.7 outstanding shares of our redeemable 8% Series A Cumulative
Convertible Participating Preferred Stock due 2007 (the "Series A Stock") and
series A warrants tendered to us for cancellation all such outstanding
securities in exchange for $25.0 million in aggregate principal amount of new
senior secured term loans and $55.0 million in cash. The new senior secured
loans bear interest at 9% per year, payable quarterly, and mature in October
2008. The loans are secured by substantially all of our assets and all the
capital stock and assets of our direct and indirect subsidiaries. The remainder
of the amount raised will be used for the payment of fees and expenses of the
offering and recapitalization transactions and for working capital purposes.
Page 13
The following unaudited pro forma statement of financial position illustrates
the impact of the private placement, the recapitalization, and the repayment of
the Debentures as though these transactions had occurred on September 30, 2003.
Our management believes that the presentation of this statement provides useful
information to investors because it shows the impact of the private placement,
the recapitalization, and the repayment of the Debentures on our financial
condition as of such date.
September 30,
2003 as September 30,
Reported Pro Forma Adjustments 2003 - Pro Forma
---------------- -- --------------------------- -----------------
ASSETS
Cash $ 7,416 $ 1,813 (a)(c)(d) $ 9,229
Other current assets 6,752 (89) (c) 6,663
Other assets 50,681 500 (a)(f) 51,181
----------- --------- -----------
TOTAL ASSETS $ 64,849 $ 2,224 $ 67,073
=========== ========= ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities $ 8,843 $ (170) (a)(c) $ 8,673
Debentures due in 2005, net of unamortized discount 11,106 (11,106) (c) -
New long term notes - 24,031 (b)(d) 24,031
Other long term liabilities 3,038 - 3,038
----------- --------- -----------
TOTAL LIABILITIES 22,987 12,755 35,742
----------- --------- -----------
REDEEMABLE 8% SERIES A CUMULATIVE
CONVERTIBLE PARTICIPATING PREFERRED STOCK 60,695 (60,695) (d)(e) -
----------- ---------- ----------
Common stock 60 97 (a) 157
Additional paid-in capital 61,187 49,526 (a)(b)(c)(d) 110,713
Accumulated deficit (77,229) 541 (c)(e) (76,688)
----------- --------- -----------
(15,982) 50,164 34,182
Less shares of common stock held in treasury, at cost (2,851) - (2,851)
----------- --------- -----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (18,833) 50,164 31,331
----------- --------- -----------
TOTAL LIABILITES AND
STOCKHOLDERS' EQUITY (DEFICIT) $ 64,849 $ 2,224 $ 67,073
=========== ========= ===========
a) We raised $69,040,000 in a private placement after the payment of fees,
of which $500,000 is treated as deferred financing costs (see Note f).
There is approximately $146,000 in accrued fees yet to be paid. We
issued 9,739,111 shares of common stock, par value $0.01, in the
private placement, which increases common stock by $97,000 and
additional paid in capital by $69,297,000.
b) This pro forma statement of financial position assumes that 250,000
warrants will be issued in connection with the $25 million term loan,
and that the original book value of the term loan will be reduced by
the fair value of these warrants, estimated to be $969,000. The
difference between the face value of the term loan and the original
book value will be amortized over time, using the interest method, by
means of a charge to interest expense. These warrants will only be
issued if certain conditions occur in the first year after the closing
of the recapitalization.
c) We repaid the Debentures, amounting to $12,227,000 at September 30,
2003 including $317,000 in accrued interest thereon, and expensed the
remaining balance of $89,000 of certain costs originally incurred in
connection with the issuance of the Debentures. We also cancelled
937,500 Initial Camden Warrants, granted in connection with the
issuance of the Debentures, valued at $806,000.
Page 14
d) In the recapitalization, we exchanged $55 million of cash and the $25
million term loans noted above for all of the currently outstanding
Series A Stock and all of the warrants, valued at $19,934,000,
originally issued in connection with the Series A Stock.
e) The fair value of the Series A Preferred Stock and dividends payable
thereon at September 30, 2003 has been estimated at approximately
$60,066,000, and the difference between the current accreted book value
and the computed fair value has been recorded as an adjustment to
accretion expense in the income statement.
f) Professional fees of $500,000 have been treated as deferred financing
costs and will be amortized as interest expense over the five-year term
of the $25 million term loan.
As of September 30, 2003, we had cash and equivalents of $7,416,000. On a pro
forma basis, after the private placement, the recapitalization, and the
repayment of the Debentures, we had cash and equivalents of approximately $9.2
million. We believe that our cash, cash remaining from the private placement,
current assets, and cash generated from future operating activities will provide
adequate resources to fund our ongoing operating requirements. We would need to
obtain additional financing to fund any significant acquisitions or other
substantial investments.
EBITDA
Another measure of a company's ability to generate cash from its operations is
earnings before interest, taxes, depreciation, and amortization ("EBITDA"). For
the nine months ended September 30, 2003, our EBITDA was $7,157,000 compared
with $6,576,000 in the Prior Period. EBITDA for the Prior Period includes
$2,796,000 related to the settlement of a dispute with a software licensor, as
previously described. Excluding the settlement of the dispute in the Prior
Period, the significant improvement in EBITDA reflects the contribution of
AmQUEST to our operations along with organic revenue growth and the additional
cost savings noted above.
The following table reconciles EBITDA to net income for the Current and Prior
Periods.
Reconciliation - in Thousands
Nine Months Ended September 30,
2003 2002
----------------- -----------------
NET INCOME $ 826 $ 574
Add back:
Tax expense 62 67
Net interest expense 1,819 1,519
Depreciation and amortization 4,450 4,416
----------- -----------
EBITDA $ 7,157 $ 6,576
=========== ===========
Our management believes that the presentation of EBITDA for the nine-month
periods ended September 30, 2003 and 2002 provides useful information to
investors because it is a common financial metric indicating our ability to
generate cash from operations. EBITDA should not be considered as an alternative
to operating income, as defined by accounting principles generally accepted in
the United States, as an indicator of our operating performance, or to cash
flows, as a measure of liquidity.
NEW FINANCIAL ACCOUNTING STANDARDS
In July 2002, the FASB issued Statement of Financial Accounting Standards No.
146, "Accounting for Costs Associated with Exit or Disposal Activities" ("SFAS
146"). SFAS 146 provides guidance on the timing of the recognition of costs
associated with exit or disposal activities, requiring such costs to be
recognized when incurred. Previous guidance required the recognition of costs at
the date of commitment to an exit or disposal plan. The provisions of SFAS 146
are to be adopted prospectively after December 31, 2002. Although SFAS 146 may
impact the accounting for costs related to exit or disposal activities we may
enter into in the future, particularly the timing of the recognition of these
costs, the adoption of the statement will not have an impact on our current
financial condition or results of operations.
Page 15
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation -- Transition and Disclosure, an amendment of FASB Statement No.
123," which amends SFAS No. 123, "Accounting for Stock-Based Compensation," to
provide alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock-based employee compensation. The
transition and annual disclosure provisions of SFAS No. 148 are effective for
fiscal years ending after December 15, 2002. In addition, SFAS No. 148 amends
the disclosure requirements of SFAS No. 123 to require prominent disclosures in
both annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. We have adopted the disclosure provisions of SFAS No. 148 and continue
to account for stock-based compensation to employees under APB Opinion No. 25
and related interpretations.
In April 2003, FASB issued SFAS 149, "Amendment of Statement 133 on Derivative
Instruments and Hedging Activities", which amends and clarifies financial
accounting and reporting for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging activities
under SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities." This statement is effective for contracts entered into or modified
and for hedging relationships designated after June 30, 2003. The adoption of
this statement had no affect on our operating results or financial position.
In May 2003, the Financial Accounting Standards Board, or FASB, issued SFAS 150,
"Accounting for Certain Financial Instruments with Characteristics of Both
Liabilities and Equity". The statement improves the accounting for three types
of financial instruments that were previously accounted for as equity -
mandatory redeemable shares, instruments that may require the issuer to buy back
shares and certain obligations that can be settled with shares. The statement
requires that those instruments be accounted for as liabilities in the statement
of financial position. The statement is effective for all financial instruments
entered into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003. The
adoption of this statement had no effect on our operating results or financial
position.
Page 16
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
General
Our Consolidated Financial Statements are prepared in accordance with accounting
principles generally accepted in the U. S., which require the selection and
application of significant accounting policies, and which require management to
make significant estimates and assumptions. We believe that the following are
some of the more critical judgment areas in the application of our accounting
policies.
Revenue Recognition
The majority of revenues are invoiced on a monthly recurring basis under
long-term contracts, typically ranging from one to five years in length,
providing for either fixed monthly fees or time and material billings. Revenue
is recognized under these contracts when we process the agreed upon transactions
in accordance with the contractual performance standards, or perform the
services, and collection is reasonably assured. Application of these standards
can involve management's judgments, including judgment as to the collection of
invoiced amounts.
Allowance for Doubtful Accounts
We maintain allowances for doubtful accounts for estimated losses resulting from
the inability of our customers to make required payments. If the financial
condition of our customers were to deteriorate, resulting in an impairment of
their ability to make payments, additional allowances may be required.
Tangible and Intangible Assets
We have significant tangible and intangible assets on our balance sheet,
primarily property and equipment, deferred software costs, and intangible
assets, primarily goodwill, related to acquisitions. The assignment of useful
lives to these assets and the valuation and classification of intangible assets
involves significant judgments and the use of estimates. The testing of these
tangible and intangibles under established accounting guidelines for impairment
also requires significant use of judgment and assumptions. Our assets are tested
and reviewed for impairment on an ongoing basis under the established accounting
guidelines. Changes in business conditions or changes in the decisions of
management as to how assets will be deployed in our operations could potentially
require future adjustments to asset valuations.
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended. As such, final results
could differ from estimates or expectations due to risks and uncertainties
including, but not limited to: incomplete or preliminary information; changes in
government regulations and policies; continued acceptance of our products and
services in the marketplace; competitive factors; new products; technological
changes; our dependence on third party suppliers; intellectual property rights;
and other risks. For any of these factors, we claim the protection of the safe
harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995, as amended.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
We are not exposed to material gains or losses related to the impact of interest
rate changes, foreign currency fluctuations, or changes in the market values of
our investments. We generally invest in fixed income securities - typically
commercial paper, certificates of deposit, and money market accounts issued only
by major corporations and financial institutions of recognized strength and
security - and hold all investments to maturity.
Page 17
At September 30, 2003, our outstanding fixed rate debt was approximately
$15,528,000. As of October 22, 2003, after the recapitalization and the
repayment of the outstanding debentures, our outstanding fixed rate debt was
approximately $28,618,000. If market rates decline, we run the risk that the
related required payments on the fixed rate debt will exceed those that would be
paid based on current market rates.
Market Risk
Our accounts receivable are subject, in the normal course of business, to
collection risks. We regularly assess these risks and have policies and business
practices to mitigate the adverse effects of collection risks. As a result, we
do not anticipate any material losses in this area in excess of the recorded
allowance for doubtful accounts.
Foreign Currency Risks
We have no material foreign operations.
ITEM 4 - CONTROLS AND PROCEDURES
An evaluation was performed under the supervision and with the participation of
our management, including the Chief Executive Officer and Senior Vice President
of Finance, of the effectiveness of the design and operation of our disclosure
controls and procedures. Based on that evaluation, our management, including the
Chief Executive Officer and the Senior Vice President of Finance, concluded that
our disclosure controls and procedures were effective as of September 30, 2003.
There have been no changes in our internal controls over financial reporting
that occurred during our last fiscal quarter that has materially affected, or is
reasonably likely to materially affect, our internal controls over financial
reporting.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
None.
Page 18
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
3.1A Restated Certificate of Incorporation, incorporated by reference
to Exhibit 3.1 to the Company's Form 10-KSB for the period ended
October 31, 1999.
3.1B Certificate of Amendment to the Company's Certificate of
Incorporation, filed May 8, 2000, to increase the authorized
shares and to remove Article 11, incorporated by reference to the
Company's report on Form 10-Q for the period ended April 30, 2000.
3.1C Certificate of Amendment to the Company's Certificate of
Incorporation, filed as of June 5, 2000, to change the name of the
Company to Infocrossing, Inc., incorporated by reference to the
Company's report on Form 10-Q for the period ended April 30, 2000.
3.2 Amended and Restated By-Laws, incorporated by reference to Exhibit
3.2 to the Company's Form 10-KSB for the period ended October 31,
1999.
4.1 Securities Purchase Agreement dated as of February 1, 2002 by and
between the Company and the Purchasers named therein, incorporated
by reference to Exhibit 4.1 to a Current Report on Form 8-K filed
February 5, 2002.
4.2 Warrant Agreement dated as of February 1, 2002 by and between the
Company and the Warrantholders party thereto, incorporated by
reference to Exhibit 4.3 to a Current Report on Form 8-K filed
February 5, 2002.
4.3 Second Amended and Restated Stockholders Agreement dated as of
February 1, 2002 by and between the Company and the Stockholders
named therein, incorporated by reference to Exhibit 99.5 to a
Current Report on Form 8-K filed February 5, 2002.
4.4 Securities Purchase Agreement, dated as of October 16, 2003, by
and among the Company and certain purchasers of common stock and
warrants, incorporated by reference to Exhibit 4.1 to a Current
Report on Form 8-K filed October 22, 2003.
4.5 Registration Rights Agreement, dated as of October 16, 2003, by
and among the Company and certain purchasers of common stock and
warrants, incorporated by reference to Exhibit 4.2 to a Current
Report on Form 8-K filed October 22, 2003.
4.6 Exchange Agreement, dated as of October 16, 2003, by and among the
Company and holders of series A preferred stock and series A
warrants, incorporated by reference to Exhibit 4.3 to a Current
Report on Form 8-K filed October 22, 2003.
4.4 Second Amended and Restated Registration Rights Agreement, dated
as of October 21, 2003, by and among the Company and certain
stockholders of the Company, incorporated by reference to Exhibit
4.4 to a Current Report on Form 8-K filed October 22, 2003.
10.1 Term Loan Agreement, dated as of October 21, 2003, by and among
the Company, the Lenders named therein, and Infocrossing Agent,
Inc., incorporated by reference to Exhibit 10.1 to a Current
Report on Form 8-K filed October 22, 2003.
10.2 Guaranty and Security Agreement, dated as of October 21, 2003, by
and among the Company, the Company's subsidiaries, and
Infocrossing Agent, Inc., incorporated by reference to Exhibit
10.2 to a Current Report on Form 8-K filed October 22, 2003.
31 Certifications required by Rule 13a-14(a) to be filed.
32 Certifications required by Rule 13a-14(b) to be furnished but not
filed.
Page 19
(b) Reports on Form 8-K:
On August 6, 2003, the Company reported the results for the quarter ended
June 31, 2003 under Item 12 of Form 8-K.
On September 19, 2003, the Company revised its guidance for 2003 under Item
9 of Form 8-K.
Page 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
INFOCROSSING, INC.
November 14, 2003 /s/
------------------------------------------
Zach Lonstein
Chairman & Chief Executive Officer
November 14, 2003 /s/
------------------------------------------
William J. McHale
Senior Vice President of Finance
Page 21