1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 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.)
2651 WARRENVILLE ROAD, SUITE 560, DOWNERS GROVE, ILLINOIS 60515
(Address of Principal Executive Offices)
(630) 874-5500
(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 X No
--- ---
The registrant has a single class of common stock, of which
there are 12,908,091 shares issued and
outstanding as of November 7, 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 SUBSIDIARY
Condensed Consolidated Balance Sheet
September 30, 2000
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 1,750,449
Trade receivables, net of allowance for 2,019,516
doubtful accounts of $50,894
Prepaid income taxes 105,924
Other current assets 114,296
-----------
Total current assets 3,990,185
Unamortized software development costs 830,495
Fixed assets, net of accumulated depreciation of $419,384 711,464
Other assets, net of reserve for loss of $484,391 95,241
-----------
Total assets $ 5,627,385
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Current Liabilities:
Accounts payable and accrued expenses $ 321,795
Deferred sales 814,300
Other current liabilities 1,532
-----------
Total current liabilities 1,137,627
Non-current liabilities:
Accrued and deferred income taxes 231,196
-----------
Total liabilities 1,368,823
-----------
Stockholders' equity:
Common stock 129,081
Additional paid in capital 1,307,010
Retained earnings 2,934,762
Accumulated other comprehensive income (loss):
Foreign currency translation adjustments (112,291)
-----------
Total stockholders' equity 4,258,562
-----------
Total liabilities and
stockholders' equity $ 5,627,385
===========
See notes to condensed consolidated financial statements.
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CAPRI CORP. AND SUBSIDIARY
Condensed Consolidated Statements of Operations
For the Three Months Ended September 30, 2000 and 1999
(Unaudited)
THREE MONTHS ENDED
--------------------------
2000 1999
----------- -----------
REVENUE:
Software sales $ 190,259 $ 382,123
Software maintenance 546,584 370,819
Other 454,875 378,853
----------- -----------
Total revenues 1,191,718 1,131,795
COST OF REVENUES 663,348 437,551
----------- -----------
Gross profit 528,370 694,244
OTHER OPERATING COST:
Research and development 112,929 87,626
Selling and marketing 283,493 218,353
General and administrative 512,755 319,489
----------- -----------
Operating income (loss) (380,807) 68,776
----------- -----------
OTHER INCOME (EXPENSE):
Interest income 7,832 20,751
Other income/expense (78,767) (38)
----------- -----------
Total income (expense) (70,935) 20,713
----------- -----------
Net income (loss) before income taxes (451,742) 89,489
INCOME TAX EXPENSE (BENEFIT) (109,272) 17,000
----------- -----------
Net income (loss) $ (342,470) $ 72,489
=========== ===========
EARNINGS (LOSS) PER SHARE:
Basic $ (0.03) $ 0.01
=========== ===========
Diluted $ (0.03) $ 0.01
=========== ===========
See notes to condensed consolidated financial statements.
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CAPRI CORP. AND SUBSIDIARY
Condensed Consolidated Statements of Stockholders' Equity
For the Three Months Ended September 30, 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 72,489 -- -- 72,489 --
Other comprehensive income:
Foreign currency translation adjustment 11,675 -- -- -- 11,675
----------- ----------- ----------- ----------- -----------
Total comprehensive income 84,164 -- -- 72,489 11,675
----------- ----------- ----------- ----------- -----------
Balance, September 30, 1999 $ 3,605,368 $ 122,853 $ 1,197,538 $ 2,342,066 $ (57,089)
=========== =========== =========== =========== ===========
Balance, July 1, 2000 $ 4,606,427 $ 129,081 $ 1,307,010 $ 3,277,232 $ (106,896)
Comprehensive income (loss):
Net loss (342,470) -- -- (342,470) --
Other comprehensive income (loss):
Foreign currency translation adjustment (5,395) -- -- -- (5,395)
----------- ----------- ----------- ----------- -----------
Total comprehensive loss (347,865) -- -- (342,470) (5,395)
----------- ----------- ----------- ----------- -----------
Balance, September 30, 2000 $ 4,258,562 $ 129,081 $ 1,307,010 $ 2,934,762 $ (112,291)
=========== =========== =========== =========== ===========
See notes to condensed consolidated financial statements.
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CAPRI CORP. AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
For Three Months Ended September 30, 2000 and 1999
(Unaudited)
THREE MONTHS ENDED
--------------------------
2000 1999
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (342,470) $ 72,489
----------- -----------
Adjustments to reconcile net income (loss) to cash
provided by (used in) operating activities:
Depreciation and amortization 90,431 49,438
Loss provisions 103,840 6,000
Foreign currency translation
adjustment (5,395) 11,675
(Increase) decrease in:
Trade receivables (118,321) 96,733
Unamortized software
development costs (110,693) (75,000)
Other current assets (42,021) (2,056)
Other assets (58,471) --
Increase (decrease) in:
Accounts payable and accrued expenses (490,645) (114,644)
Deferred sales (172,531) (116,781)
Other current liabilities 1,532 --
Accrued and deferred income
taxes payable (707,439) (98,000)
----------- -----------
Total adjustments (1,509,713) (242,635)
----------- -----------
Net cash provided by
(used in) operating activities (1,852,183) (170,146)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (165,240) (70,732)
----------- -----------
Net cash used in investing activities (165,240) (70,732)
----------- -----------
Net increase (decrease) in cash
and cash equivalents (2,017,423) (240,878)
CASH AND CASH EQUIVALENTS:
Beginning of period 3,767,872 1,769,628
----------- -----------
End of period $ 1,750,449 $ 1,528,750
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Income taxes $ 595,000 $ 115,000
=========== ===========
See notes to condensed consolidated financial statements.
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CAPRI CORP. 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 subsidiary Cimnet Systems, Inc. ("the
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, 2000. 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.
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 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.
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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
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.
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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
------------------
September 30, 2000 September 30, 1999
------------------ ------------------
Net income (loss) $ (342,470) $ 72,489
=========== ===========
Weighted average shares outstanding
12,908,091 12,285,257
Dilutive effect of the common stock
option plan 714,667 977,501
----------- -----------
Diluted shares outstanding 13,622,758 13,262,758
=========== ===========
Basic earnings per share $ (0.03) $ 0.01
Diluted earnings per share $ (0.03) $ 0.01
4. 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.
5. AVAILABLE LINE OF CREDIT
On October 30, 2000 the Company amended the revolving credit agreement with
American National Bank and Trust Company of Chicago, dated October 30, 1999
which provides an open line of credit of up to five hundred thousand dollars
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($500,000). This line of credit, which expires on October 31, 2001, provides for
interest at one percent over the published prime rate of the bank on funds used,
and is secured by the assets (excluding intellectual property) of the Company
and its domestic subsidiary. As of September 30, 2000, the Company 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.
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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
None.
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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: November 13, 2000
By:/s/ Mehul J. Dave
-------------------------------------------
Mehul J. Dave, Chairman of the Board,
President and Chief Executive Officer
(Principal Financial Officer)