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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-QSB
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000.
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission file number: 0-28511
CAPRI CORP.
(Exact Name of Small Business Issuer as Specified in Its Charter)
MINNESOTA 41-1704533
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2301 WEST 22ND STREET, OAK BROOK, ILLINOIS 60523
(Address of Principal Executive Offices)
(630) 645-0145
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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 No X
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The registrant has a single class of common stock, of which there are 12,285,257
shares issued and outstanding as of May 1, 2000
Transitional Small Business Disclosure Format (Alternative 2):
Yes X No
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CAPRI CORP. AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
March 31, 2000
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 2,133,713
Accounts receivable, net of allowance for 3,327,877
doubtful accounts of $ 38,117
Other current assets 36,736
-----------
Total current assets 5,498,326
Computer software development costs, net of accumulated 723,788
amortization of $ 332,300
Fixed assets, net of accumulated depreciation of $323,581 427,214
Other assets 76,484
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Total assets $ 6,725,812
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LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Current Liabilities:
Accounts payable and accrued expenses $ 360,558
Deferred sales 1,072,961
Accrued and deferred income taxes 683,692
-----------
Total current liabilities 2,117,211
Non-current liabilities:
Accrued and deferred income taxes 236,295
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Total liabilities 2,353,506
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Stockholders' equity:
Common stock 122,853
Additional paid in capital 1,197,538
Retained earnings 3,143,134
Accumulated other comprehensive income:
Foreign currency translation adjustments (91,219)
-----------
Total stockholders' equity 4,372,306
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Total liabilities and
stockholders' equity $ 6,725,812
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See notes to condensed consolidated financial statements.
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CAPRI CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
For the Three Months and Nine Months Ended March 31, 2000 and 1999
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------- -------------------------------
MARCH 31, 2000 MARCH 31, 1999 MARCH 31, 2000 MARCH 31, 1999
-------------- -------------- -------------- --------------
REVENUE:
Software sales $ 1,150,616 $ 574,314 $ 2,863,465 $ 2,265,113
Software maintenance 463,245 345,220 1,260,597 946,766
Other 338,723 170,396 1,034,357 728,129
----------- ----------- ----------- -----------
Total revenues 1,952,584 1,089,930 5,158,419 3,940,008
COST OF REVENUES 480,515 293,728 1,388,925 1,124,469
----------- ----------- ----------- -----------
Gross profit 1,472,069 796,202 3,769,494 2,815,539
OTHER OPERATING COST:
Research and development 98,701 103,000 330,843 281,989
Selling and marketing 302,418 201,652 754,980 478,254
General and administrative 538,137 375,410 1,279,221 1,055,464
----------- ----------- ----------- -----------
Operating income 532,813 116,140 1,404,450 999,832
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest income 18,471 17,982 54,414 60,178
Other income/expense 500 (88) 2,084 (629)
----------- ----------- ----------- -----------
Total other income (expense) 18,971 17,894 56,498 59,549
----------- ----------- ----------- -----------
Net income before income taxes 551,784 134,034 1,460,948 1,059,381
INCOME TAX EXPENSE 224,413 43,351 587,391 380,978
----------- ----------- ----------- -----------
Net income $ 327,371 $ 90,683 $ 873,557 $ 678,403
----------- ----------- ----------- -----------
EARNINGS PER SHARE:
Basic $ 0.03 $ 0.01 $ 0.07 $ 0.06
----------- ----------- ----------- -----------
Diluted $ 0.03 $ -- $ 0.07 $ 0.05
----------- ----------- ----------- -----------
See notes to condensed consolidated financial statements.
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CAPRI CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders' Equity
For the Nine Months Ended March 31, 2000 and 1999
(Unaudited)
FOREIGN
ADDITIONAL CURRENCY
COMMON PAID-IN RETAINED TRANSLATION
TOTAL STOCK CAPITAL EARNINGS ADJUSTMENTS
----------- ----------- ----------- ----------- -----------
Balance, July 1, 1999 $ 3,521,204 $ 122,853 $ 1,197,538 $ 2,269,577 $ (68,764)
Comprehensive income:
Net income 873,557 -- -- 873,557 --
Other comprehensive income:
Foreign currency translation adjustment (22,455) -- -- -- (22,455)
----------- ----------- ----------- ----------- -----------
Total comprehensive income 851,102 -- -- 873,557 (22,455)
----------- ----------- ----------- ----------- -----------
Balance, March 31, 2000 $ 4,372,306 $ 122,853 $ 1,197,538 $ 3,143,134 $ (91,219)
=========== =========== =========== =========== ===========
Balance, July 31, 1998 $ 2,693,314 $ 122,753 $ 1,197,238 $ 1,425,376 $ (52,053)
Comprehensive income:
Net income 678,403 -- -- 678,403 --
Other comprehensive income:
Foreign currency translation adjustment (3,211) -- -- -- (3,211)
----------- ----------- ----------- ----------- -----------
Total comprehensive income 675,192 -- -- 678,403 (3,211)
----------- ----------- ----------- ----------- -----------
Common stock issued 400 100 300 -- --
----------- ----------- ----------- ----------- -----------
Balance, March 31, 1999 $ 3,368,906 $ 122,853 $ 1,197,538 $ 2,103,779 $ (55,264)
=========== =========== =========== =========== ===========
See notes to condensed consolidated financial statements.
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CAPRI CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
For Three Months and Nine Months Ended March 31, 2000 and 1999
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
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MARCH 31, 2000 MARCH 31, 1999 MARCH 31, 2000 MARCH 31, 1999
-------------- -------------- -------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 327,371 $ 90,683 $ 873,557 $ 678,403
----------- ----------- ----------- -----------
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 95,822 31,645 200,975 130,935
Provision for bad debt 4,000 6,000 16,000 18,000
Foreign currency translation
adjustment (7,700) (31,567) (21,293) (3,211)
(Increase) decrease in:
Accounts receivables (574,559) 28,740 (1,260,369) (187,282)
Unamortized software
development costs (75,000) (145,000) (225,000) (285,000)
Other current assets 50,787 (11,172) 3,543 (53,577)
Other assets (20,928) (1,215) -- (1,215)
Increase (decrease) in:
Accounts payable and accrued expenses 11,225 16,196 (119,617) 324,157
Deferred sales 998,156 366,592 868,961 137,536
Accrued and deferred income
taxes payable 88,798 (207,131) 210,888 48,660
----------- ----------- ----------- -----------
Total adjustments 570,601 53,088 (325,912) 129,003
----------- ----------- ----------- -----------
Net cash provided by operating activities 897,972 143,771 547,645 807,406
----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (53,146) (3,001) (183,560) (75,511)
----------- ----------- ----------- -----------
Net cash used in investing activities (53,146) (3,001) (183,560) (75,511)
----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock issued -- 400 -- 400
----------- ----------- ----------- -----------
Net cash provided by financing activities -- 400 -- 400
----------- ----------- ----------- -----------
Net increase in cash and cash equivalents 844,826 141,170 364,085 732,295
CASH AND CASH EQUIVALENTS:
Beginning of period 1,288,887 1,816,792 1,769,628 1,225,667
----------- ----------- ----------- -----------
End of period $ 2,133,713 $ 1,957,962 $ 2,133,713 $ 1,957,962
=========== =========== =========== ===========
See notes to condensed consolidated financial statements.
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CAPRI CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
1. BASIS OF PRESENTATION
The unaudited condensed consolidated financial statements include the accounts
of Capri Corp. and its wholly-owned subsidiaries Cimnet Systems, Inc. and
InterConexus.com, Inc. ("Company") after eliminating material intercompany
balances and transactions. These statements and related notes have been prepared
pursuant to the rules and regulations of the U.S. Securities and Exchange
Commission. Accordingly, certain information and footnote disclosures normally
included in the financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to such rules and
regulations. The accompanying condensed consolidated financial statements and
related notes should be read in conjunction with the audited financial
statements of the Company, and notes thereto, for the fiscal year ended June 30,
1999. The following information reflects, in the opinion of management, all
adjustments, consisting of normal recurring accruals, necessary for a fair
presentation of the interim period results. Operating results for interim
periods are not necessarily indicative of results, which may be expected for the
year as a whole.
Use of Estimates
Preparation of the Company's financial statements requires management to make
estimates and assumptions that affect reported amounts of assets and liabilities
and related revenues and expenses. Actual results could differ from the
estimates used by management.
Reclassification of Expenses
Certain reclassifications of March 31, 1999 balances have been made to conform
with the March 31, 2000 presentation; there was no impact on net income or
stockholders' equity.
2. SELECTED SIGNIFICANT ACCOUNTING POLICIES
Software development costs
The Company accounts for its software development costs in accordance with
Statement of Financial Accounting Standards (SFAS) No. 86, "Accounting for the
cost of computer software to be sold, leased, or marketed". Initial costs are
charged to operations as research and development until such time as the Company
has established technological feasibility of the computer software product.
Technological feasibility is established when a product and detail
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program design is complete, resources have been allocated to the project, the
detail program specifications are confirmed to be consistent with the product
design and the detail program design does not contain any high risk development
issues. Thereafter, the Company capitalizes certain payroll costs, payroll
related costs, outside contracted services and costs to obtain certain
third-party licenses associated with the development of the software program.
Amortization of capitalized costs starts when the product is available for
general release to the public. The Company's policy is to amortize capitalized
costs by the greater of (a) the ratio that the current gross revenue for a
product bear to the total of current and anticipated future gross revenue for
that product, or (b) the straight-line method over the remaining estimated
economic life of the product including the period being reported upon.
Unamortized software costs are carried at the lower of book value or the net
realizable value, as determined by management.
Revenue recognition
The Company recognizes revenue from software using the provisions of the
American Institute of Certified Public Accountants (AICPA) Statement of Position
(SOP) 97-2, "Software Revenue Recognition" and Statement of Position (SOP) 98-9,
"Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain
Transactions". Under these provisions, revenue from software sales is recognized
when all of the following criteria are met: pervasive evidence of an arrangement
exists, delivery of the software has occurred, the fee is fixed or determinable,
and collectibility is probable.
The Company has identified the elements that may exist within a sales
arrangement as software, software maintenance, hardware and services. The
Company uses vendor specific objective evidence ("VSOE") to determine the fair
value to assign to the software maintenance, hardware and service elements when
it exist within the sales arrangement. VSOE is established by using the price
the Company charges other customers when the same element is sold separately.
The Company uses the residual method to determine the value of the sale
arrangement to assign to the software sale. Under this method, all other
elements within the sales arrangement are identified and valued using VSOE. The
total of all the identified elements are pulled-out of the total sales
arrangement value and the remaining amount is assigned to the software.
Revenue from software sales is recognized when the software is delivered and has
been installed onto the customer's computer. In the event a customer is granted
a right to return the software, recognition of revenue is deferred until such
time as the right to return expires.
Software maintenance is charged to the customer as an annual fee, based on a
predetermined percentage of the original software costs and is recognized
monthly, on a straight-line basis. Maintenance is usually billed to the customer
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quarterly and continues to be provided to the customer for as long as they pay
for the maintenance.
Other revenue includes revenue from the sale of hardware and other services,
such as installation, implementation, training or customization and is
recognized at the time the product or service is delivered.
3. EARNINGS PER SHARE
Basic earnings per share is calculated using the weighted average number of
shares outstanding during the period. Diluted earnings per share is computed on
the basis of the weighted average number of common shares outstanding plus the
diluted effect of shares associated with the common stock option plan, treated
as if they were exercised.
The following table sets forth the computation of basic and diluted earnings per
share:
THREE MONTHS ENDED NINE MONTHS ENDED
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MARCH 31, 2000 MARCH 31, 1999 MARCH 31, 2000 MARCH 31, 1999
-------------- -------------- -------------- --------------
Net income $ 327,371 $ 90,683 $ 873,557 $ 678,403
=========== =========== =========== ===========
Weighted average shares
outstanding 12,285,257 12,285,257 12,285,257 12,278,542
Dilutive effect of the common
stock option plan 760,834 730,000 760,834 736,715
---------- ---------- ---------- ----------
Diluted shares outstanding 13,046,091 13,015,257 13,046,091 13,015,257
========== ========== ========== ==========
Basic earnings per share $ .03 $ .01 $ .07 $ .06
Diluted earnings per share $ .03 $ -- $ .07 $ .05
4. COMPREHENSIVE INCOME
As of July 1, 2000, the Company adopted Statement of Financial Accounting
Standards No. 130 ("SFAS 130"), "Reporting Comprehensive Income." SFAS 130
establishes standards for the reporting of comprehensive income and its
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components. There is no effect on net income or stockholders' equity as it is
presented in the financial statements. Comprehensive income includes foreign
currency translation adjustments that had previously been excluded from net
income and instead had been reflected in stockholders' equity.
The following table sets forth the calculation of comprehensive income on an
interim basis:
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------------- ---------------------------------
MARCH 31, 2000 MARCH 31, 1999 MARCH 31, 2000 MARCH 31, 1999
-------------- -------------- -------------- --------------
Net income (loss) $ 327,371 $ 90,683 $ 873,557 $ 678,403
Foreign currency translation
adjustments (8,862) (31,567) (22,455) (3,211)
--------- --------- --------- ---------
Total comprehensive income
$ 318,509 $ 59,116 $ 851,102 $ 675,192
========= ========= ========= =========
5. SEGMENT INFORMATION
The Company has adopted Statement of Financial Accounting Standards (SFAS) No.
131, "Disclosures about Segments of an Enterprise and Related Information". The
Company's chief operating decision-makers recognize that all revenue sources are
dependent on the sale of its software product, Paradigm(R). Accordingly, the
Company considers it has only one business segment.
6. OPERATING LEASES
On February 9, 2000, the Company entered into a new operating lease for its
corporate office. The lease requires monthly payments thru July 31, 2007,
totaling $1,106,673 plus taxes and operating expenses. No payments are required
under this lease during the fiscal year ending June 30, 2000.
7. AVAILABLE LINE OF CREDIT
On October 30, 1999 the Company entered into a revolving credit agreement with
American National Bank and Trust Company of Chicago, which replaced the
Company's previous revolving line of credit. This new agreement provides an
open line of credit of up to five hundred thousand dollars ($500,000). This line
of credit, which expires on October 30, 2000, provides for interest at one
percent over the published prime rate of the bank on funds used, and is secured
by the assets of the Company and its domestic subsidiary. As of March 31, 2000,
the Company
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has utilized $160,000 of the line in the form of an irrevocable letter
of credit issued as security against renovations to the Company's new
headquarters location. Assuming no events of default occur, the letter
automatically reduces by $40,000 every six months, and fully expires in 2002.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Registrant relied upon Alternative 2 in its registration statement
filed on Form 10-SB. There is no information to provide in response to Item
6(a)(3)(i) to Model B of Form 1-A.
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Ex. 27 Financial Data Schedule
(b) Reports on Form 8-K
The Registrant filed a current report on Form 8-K on March 31,
2000 reporting pursuant to Item 5 the filing of a registration
statement on Form 10-SB for InterConexus.com, Inc., a
wholly-owned subsidiary of the Registrant
("InterConexus.com"), as well as the contemplated distribution
of InterConexus.com common stock to the shareholders of the
Registrant upon the effectiveness of InterConexus.com's
registration statement.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CAPRI CORP.
(Registrant)
Date: May 10, 2000
By: /s/ Mehul J. Dave
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Mehul J. Dave, Chairman of the Board,
President and Chief Executive Officer
(Principal Financial Officer)