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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 SEPTEMBER 30, 2001
( ) 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
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The registrant has a single class of common stock, of which there are 12,908,091
shares issued and outstanding as of November 1, 2001
Transitional Small Business Disclosure Format (Alternative 2):
Yes X No
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
2
CAPRI CORP. AND SUBSIDIARIES
Consolidated Balance Sheet
September 30, 2001
(Unaudited)
ASSETS
Current Assets:
Cash and Cash Equivalents $ 691,272
Trade Receivables, Net of Allowance for 2,090,131
Doubtful Accounts of $94,200
Recoverable Income Taxes 1,169,259
Other Current Assets 88,630
----------
Total Current Assets 4,039,292
Unamortized Software Development Costs 1,140,750
Fixed Assets, Net of Accumulated Depreciation of $627,061 670,984
Other Assets 19,421
----------
Total Assets $5,870,447
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Current Liabilities:
Accounts Payable and Accrued Expenses $ 688,955
Deferred Sales 759,779
Other Current Liabilities 21,698
----------
Total Current Liabilities 1,470,432
Non-Current Liabilities and Non-Current Deferred Income Taxes 549,538
----------
Total Liabilities 2,019,970
----------
Stockholders' Equity:
Common Stock 129,081
Additional Paid in Capital 1,307,010
Retained Earnings 2,558,851
Accumulated Other Comprehensive Income (Loss):
Foreign Currency Translation Adjustments (144,465)
----------
Total Stockholders' Equity 3,850,477
----------
Total Liabilities and Stockholders' Equity $5,870,447
==========
See accompanying notes to Consolidated Financial Statements
3
CAPRI CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
For the Three Months Ended September 30, 2001 and 2000
(Unaudited)
THREE MONTHS ENDED
---------------------------
2001 2000
---------- ----------
REVENUE:
Software Sales $ 782,307 $ 190,259
Software Maintenance 590,579 546,584
Other 213,953 454,875
---------- ----------
Total Revenues 1,586,839 1,191,718
COST OF REVENUES: 513,439 663,348
---------- ----------
Gross Profit 1,073,400 528,370
OTHER OPERATING COST:
Research and Development 91,174 112,929
Selling and Marketing 286,096 283,493
General and Administrative 585,828 512,755
---------- ----------
Operating Income (Loss) 110,302 (380,807)
---------- ----------
OTHER INCOME (EXPENSE):
Interest Income 2,928 7,832
Other Income/Expense 2,212 (78,767)
---------- ----------
Total Income (Expense) 5,140 (70,935)
---------- ----------
Net Income (Loss) Before Income Taxes 115,442 (451,742)
INCOME TAX BENEFIT 63,180 109,272
---------- ----------
Net Income (Loss) $ 178,622 $ (342,470)
========== ==========
EARNINGS (LOSS) PER SHARE:
Basic $ 0.01 $ (0.03)
========== ==========
Diluted $ 0.01 $ (0.03)
========== ==========
See accompanying notes to Consolidated Financial Statements
4
CAPRI CORP. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
For the Three Months Ended September 30, 2001 and 2000
(Unaudited)
Accumulated
Additional Other
Common Paid-In Retained Comprehensive
Total Stock Capital Earnings Income
---------- -------- ---------- ---------- -------------
Balance July 1, 2000 $4,606,427 $129,081 $1,307,010 $3,277,232 $ (106,896)
Comprehensive Loss:
Net Loss (342,470) - - (342,470) -
Other Comprehensive Loss:
Foreign Currency Translation (5,395) - - - (5,395)
Adjustment ---------- -------- ---------- ---------- ---------
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)
========== ======== ========== ========== =========
Balance July 1, 2001 $3,674,653 $129,081 $1,307,010 $2,380,229 $(141,667)
Comprehensive Income (Loss):
Net Income 178,622 - - 178,622 -
Other Comprehensive Loss:
Foreign Currency Translation (2,798) - - - (2,798)
Adjustment ---------- -------- ---------- ---------- ---------
Total Comprehensive Income 175,824 - - 178,622 (2,798)
---------- -------- ---------- ---------- ---------
Balance September 30, 2001 $3,850,477 $129,081 $1,307,010 $2,558,851 $(144,465)
========== ======== ========== ========== =========
See accompanying notes to Consolidated Financial Statements
5
CAPRI CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
or Three Months Ended September 30, 2001 and 2000
(Unaudited)
2001 2000
--------- -----------
Cash Flows From Operating Activities:
Net Income (Loss) $ 178,622 $ (342,470)
--------- -----------
Adjustments to Reconcile Net (Loss) Income
to Net Cash Provided by (Used in) Operating Activities:
Depreciation and Amortization 132,254 90,431
Loss Provisions 30,000 103,840
Deferred Income Taxes 8,002 (601,515)
(Increase) Decrease in:
Accounts Receivables (1,400) (118,321)
Recoverable Income Taxes (83,680) (105,924)
Unamortized Software Development Costs (137,764) (110,693)
Other Current Assets 17,044 (42,021)
Other Assets 178 (58,471)
(Increase) Decrease in:
Accounts Payable (69,934) (170,018)
Deferred Revenue 116,391 (172,531)
Accrued Expenses 84,821 (320,627)
Other Current Liabilities 1,013 1,532
Income Taxes Payable - -
--------- -----------
Total Adjustments 96,925 (1,504,318)
Net Cash Provided by (Used in) Operating Activities 275,547 (1,846,788)
--------- -----------
Cash Flows From Investing Activities:
Expenditures for Property, Plant & Equipment (24,120) (165,240)
--------- -----------
Net Cash Used in Investing Activities (24,120) (165,240)
--------- -----------
Cumulative Effect of Foreign Currency Translation
Adjustment (2,798) (5,395)
--------- -----------
Net Increase (Decrease) in Cash and
Cash Equivalents 248,629 (2,017,423)
Cash and Cash Equivalents, Beginning of Period 442,643 3,767,872
--------- -----------
Cash and Cash Equivalents, End of Period $ 691,272 $ 1,750,449
========= ===========
See accompanying notes to Consolidated Financial Statements
6
Note 1: Summary of Selected Significant Accounting Policies
Principles of Consolidation
The unaudited condensed consolidated financial statements include the
accounts of Capri Corp. (the "Company") and its consolidated
wholly-owned subsidiaries, after eliminating material inter-company
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, 2001.
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.
Management's Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from the estimates.
Nature of Operations
The Company's operating subsidiaries are in the business of developing
computer software and then licensing the rights for the use of its
software product. In addition, the subsidiaries distribute certain
computer hardware and provide technical support and training for their
software product. The computer software is primarily designed for
companies engaged in the manufacture of printed circuit boards. The
subsidiaries grant credit to their customers who are located throughout
the world.
Basic and Diluted Earnings (Loss) Per Share
Basic earnings (loss) per share is computed by dividing income (loss)
available to common shareholders by the weighted-average number of
common shares outstanding. Diluted earnings per share follows the
computation of basic earnings per share and gives effect to all
dilutive potential common shares that were outstanding during the year.
For the quarter ended September 30, 2001 and 2000, outstanding common
stock options of 714,667 have been excluded from the computation as
their effect would be anti-dilutive.
7
A reconciliation of net income (loss) and shares outstanding relating
to the calculation of basic and diluted earnings (loss) per share
follows:
Weighted
Average
Net Shares Earnings
Income Outstanding Per-Share
-------- ----------- ---------
For the Three Months Ended September 30, 2001:
Basic and Diluted $178,622 12,908,091 $ 0.01
======== ========== ======
Weighted
Average
Net Shares Loss
Loss Outstanding Per-Share
-------- ----------- ---------
For the Three Months Ended September 30, 2000:
Basic and Diluted $(342,470) 12,908,091 $(0.03)
========= ========== ======
Recent Pronouncements
In October 2001, the Financial Accounting Standards Board issued SFAS
144 "Accounting for the Impairment or Disposal of Long-Lived Assets:
("FAS 144"). This Statement addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. This
Statement supersedes FASB Statement No 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of, and the accounting and reporting provisions of APB Opinion
No. 30, Reporting the Results of Operations - Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions, for the disposal of a
segment of a business. The provisions of FAS 144 will be effective for
fiscal years beginning after December 15, 2001. The Company is
currently evaluating the implications of adoption of FAS 144 and
anticipates adopting its provisions in fiscal year 2003.
Note 2. Available Line of Credit
During the quarter ended September 30, 2001, the Company had a
revolving line of credit at American National Bank, which provided an
open line of credit of up to five hundred thousand ($500,000). No
amounts were outstanding under this agreement at September 30, 2001.
Subsequent to September 30, 2001, American National Bank allowed this
line of credit to expire as of October 31, 2001 and does not intend to
renew the agreement. American National Bank has agreed to honor an
irrevocable letter of credit totaling approximately $80,000 issued as
security against renovations to the Company's headquarters location.
Assuming no events of default in the lease occur, the letter
automatically reduces by $40,000 every six months, and fully expires in
2002.
8
Note 3. Income Taxes
The provision for income taxes consists of the following:
2001 2000
-------- ---------
Income Tax Benefit (Expense):
Current:
Federal $ 64,719 $ 137,790
State 13,020 18,410
Foreign (11,731) (2,915)
Deferred and Non-current:
Federal (2,296) (39,613)
State (532) (4,400)
-------- ---------
$ 63,180 $ 109,272
======== =========
In fiscal 2000, The Company was a cash basis taxpayer. In fiscal 2001,
The Company converted to an accrual basis taxpayer.
A reconciliation of income taxes calculated using the Federal statutory
income tax rate of 34% to the income taxes as reported in the
consolidated statements of operations follows:
2001 % of Pretax 2000 % of Pretax
Amount Income Amount Income
-------- ----------- --------- -----------
Income Tax Benefit (Expense) at the
Federal Statutory Rate $(39,250) (34.0%) $ 153,592 34.0%
State Income Tax Benefit (Expense),
Net of Federal Benefit (5,553) (4.8) 21,729 4.8
Difference in Foreign Tax Rates 109,769 95.1 (65,197) (14.4)
Other, Net (1,786) (1.5) (852) (0.2)
-------- ---- --------- ----
$ 63,180 54.8% $ 109,272 24.2%
======== ==== ========= ====
Note 4. Stockholders' Equity
The Company's certificate of incorporation authorizes 20,000,000 shares
of common stock and 10,000,000 shares of undesignated stock, each with
a par value of $.01. As of September 30, 2001 and 2000, there were
12,908,091 shares of common stock issued and outstanding. There were no
share of undesignated stock issued as of September 30, 2001 and 2000.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Registrant relied upon Alternative 2 in its annual report on Form
10-KSB for the fiscal year ended June 30, 2001. 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
Index to Exhibits
Exhibit No. Description
----------- -----------
2.1 Articles of Incorporation of Capri Corp. [Incorporated by
reference to Exhibit (2)(a) to the Company's Form 1-A
(SEC File No. 24-C-4467)]
2.2 Bylaws of Capri Corp. [Incorporated by reference to
Exhibit (2)(b) to the Company's Form 1-A
(SEC File No. 24-C-4467)]
3.1 Specimen Certificate for Common Stock [Incorporated by
reference to Exhibit (3) to the Company's Form 1-A
(SEC File No. 24-C-4467)]
6.1 Stock Option Plan of Capri Corp. [Incorporated by reference
to Exhibit 6.1 to the Company's Registration Statement on
Form 10-SB (SEC File No. 0-28511)]
6.2 Mehul J. Dave Employment Agreement [Incorporated by
reference to Exhibit 6.2 to the Company's Registration
Statement on Form 10-SB (SEC File No. 0-28511)]
6.3 P. Balasubramanian Employment Agreement [Incorporated by
reference to Exhibit 6.3 to the Company's Registration
Statement on Form 10-SB (SEC File No. 0-28511)]
6.4 David L. Harris Employment Agreement [Incorporated by
reference to Exhibit 6.4 to the Company's Registration
Statement on Form 10-SB (SEC File No. 0-28511)]
6.5 Schedule A to Mehul J. Dave Employment Agreement
[Incorporated by reference to Exhibit 6.5 to the Company's
Annual Report on Form 10-KSB for the fiscal year
ended June 30, 2000 (SEC File No. 0-28511)]
6.6 Schedule A to P Balasubramanian Employment [Incorporated
by reference to Exhibit 6.6 to the Company's Annual Report
on Form 10-KSB for the fiscal year ended June 30, 2000
(SEC File No. 0-28511)]
6.7 Promissory Note (Secured) by and among American National
Bank and Trust of Chicago, Capri Corp. and Cimnet dated
October 30,
10
Exhibit No. Description
----------- -----------
1999 [Incorporated by reference to Exhibit 6.5 to the
Company's Registration Statement on Form 10-SB (SEC File
No. 0-28511)]
6.8 Amendment to Stock Option Plan of Capri Corp. [Incorporated
by reference to Exhibit 6.6 to the Company's Registration
Statement on Form 10-SB (SEC File No. 0-28511)]
(B) REPORTS ON FORM 8-K
None.
11
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, 2001
By: /s/ Mehul J. Dave
----------------------------------------
Mehul J. Dave, Chairman of the Board,
President and Chief Executive Officer
(Principal Financial Officer)
12