<PAGE>
THIS DOCUMENT IS A COPY OF THE 10-QSB PREVIOUSLY FILED ON FEBRUARY 14, 1997
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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 December 31, 1996
[_] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number: 0-21477
JAVELIN SYSTEMS, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
STATE OF DELAWARE 52-1945748
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2882C TUSTIN AVE.
TUSTIN, CALIFORNIA 92780
(Address of Principal Executive Offices) (Zip Code)
(714) 734-1390
(Issuer's Telephone Number, Including Area code)
N/A
--------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
Check whether the issuer (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
--- ---
(APPLICABLE ONLY TO CORPORATE ISSUERS)
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
Title Date Outstanding
Common Stock, $.01 par value January 31, 1997 2,954,250
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ---
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JAVELIN SYSTEMS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1996*
------------ ------------
<S> <C> <C>
(UNAUDITED)
ASSETS
Current assets:
Cash $ 762,178 $ 6,404
Accounts receivable - net 1,131,872 693,679
Inventories 1,704,648 209,350
Other current assets 60,762 4,107
------------ ------------
Total current assets 3,659,460 913,540
Property and equipment, net 77,799 27,922
Other assets, net 10,421 9,851
------------ ------------
Total assets $3,747,680 $ 951,313
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit $ 206,552
Accounts payable $ 383,678 356,769
Accrued expenses 48,619 32,973
Current maturities of notes payable
to stockholders 65,000
Current portion of long-term debt 20,000
------------ ------------
Total current liabilities 432,297 681,294
Notes payable to stockholders, net of
current portion 25,000
Long-term debt, net of current portion 50,000
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value:
authorized shares--1,000,000
issued and outstanding shares--none
Common stock, $.01 par value:
authorized shares--10,000,000
issued and outstanding at
June 30, 1996--2,104,250
issued and outstanding at
December 31, 1996--2,954,250 4,328,406 369,206
Deferred charge related to warrants
issued in connection with notes
payable (119,845)
Deferred compensation (166,464)
Accumulated deficit (846,559) (54,342)
------------ ------------
</TABLE>
2
<PAGE>
<TABLE>
<S> <C> <C>
Total stockholders' equity 3,315,383 195,019
------------ ------------
Total liabilities and stockholders'
equity $3,747,680 $ 951,313
============ ============
</TABLE>
*The balance sheet at June 30, 1996 has been derived from audited financial
statements.
See accompanying notes.
3
<PAGE>
JAVELIN SYSTEMS, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS ENDED
ENDED DECEMBER 31
DECEMBER 31,
1996 1995* 1996 1995*
<S> <C> <C> <C> <C>
Net sales $1,283,527 $ 2,407 $2,635,249 $ 2,407
Cost of sales 1,029,555 2,591 2,078,156 2,591
------------ ------------ ------------ ------------
Gross profit 253,972 (184) 557,093 (184)
Operating expenses:
Research and development 86,080 5,975 139,644 5,975
Selling and marketing 95,810 2,501 152,675 2,501
General and administrative 216,743 72,516 358,910 72,516
------------ ------------ ------------ ------------
Total operating expenses 398,633 80,992 651,229 80,992
------------ ------------ ------------ ------------
Operating loss (144,661) (81,176) (94,136) (81,176)
Interest expense (551,509) (704,459)
Interest income 6,378 6,378
------------ ------------ ------------ ------------
Net loss $ (689,792) $ (81,176) $ (792,217) $ (81,176)
============ ============ ============ ============
Net loss per share $ (0.26) $ (.04) $ (0.33) $ (.04)
============ ============ ============ ============
Shares used in computing net loss
per share 2,670,917 2,086,260 2,387,583 2,086,260
============ ============ ============ ============
</TABLE>
*The Company commenced business on September 19, 1995.
See accompanying notes.
4
<PAGE>
JAVELIN SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
1996 1995*
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (792,217) $ (81,176)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 9,988 1,051
Amortization of deferred charge
related to warrants 636,097
Amortization of deferred compensation 31,833
Changes in operating assets and
liabilities:
Accounts receivable (438,193)
Inventories (1,495,298) (60,404)
Other current assets (56,655) (1,450)
Accounts payable 26,909 8,377
Accrued expenses 15,646 13,778
------------ ------------
Net cash used in operating activities (2,061,890) (119,824)
INVESTING ACTIVITIES
Purchase of equipment (59,697) (15,070)
FINANCING ACTIVITIES
Net payments under line of credit (206,552)
Net proceeds from issuance of notes payable 585,000 156,261
Re-payment of notes payable (745,000)
Net proceeds from initial public offering 3,243,913
Proceeds from issuance of common stock 4,175
------------ ------------
Net cash provided by financing activities 2,877,361 160,436
INCREASE IN CASH AND CASH EQUIVALENTS 755,774 25,542
Cash and cash equivalents at beginning of
period 6,404
------------ ------------
Cash and cash equivalents at end of period $ 762,178 $ 25,542
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Income tax paid $ $
============ ============
Interest paid $ 68,362 $
============ ============
</TABLE>
*The Company commenced business on September 19, 1995.
See accompanying notes.
5
<PAGE>
JAVELIN SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
Javelin Systems, Inc. ("the Company") was incorporated in the State of
Delaware under the name of Sunwood Research, Inc. on September 19, 1995. The
Company designs, develops, markets and sells open systems touch screen point-of-
sale ("POS") computers.
The Company has incurred losses of $ 846,559 from inception, primarily due
to the start-up nature of its business and non-recurring interest expenses
attributable to the imputation of interest based upon the fair market value of
certain warrants issued in connection with debt.
On November 1, 1996, the Company completed an initial public offering (the
"IPO") of 850,000 shares of its common stock at $5.00 per share, netting
proceeds to the Company of approximately $3.2 million. Proceeds to the Company
were used to repay debt with an outstanding balance of approximately $745,000
and general corporate purposes. The remaining proceeds will be used for the
purposes described in the Company's Prospectus dated October 25, 1996 (the
"Prospectus") in connection with the IPO.
BASIS OF PRESENTATION
The accompanying financial statements have been prepared by the Company
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission (the "SEC"). Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to the
rules and regulations of the SEC. In the opinion of the Company's management,
all adjustments necessary for a fair presentation of the accompanying unaudited
financial statements are reflected herein. All such adjustments are normal and
recurring in nature. Interim results are not necessarily indicative of the
results for the full year. For more complete financial information, these
financial statements should be read in conjunction with the audited financial
statements included in the Company's Registration Statement on Form SB-2 filed
with the SEC.
6
<PAGE>
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the accompanying financial
statements. Actual results could differ from these estimates.
INVENTORIES
Inventories consist primarily of computer hardware and components and are
stated at the lower of cost (first-in, first-out) or market as follows:
<TABLE>
<CAPTION>
December 31, June 30,
1996 1996
------------ -----------
<S> <C> <C>
Raw materials $ 1,579,313 $ 203,950
Finished goods 125,335 5,400
------------ -----------
$ 1,704,648 $ 209,350
============ ===========
</TABLE>
CONCENTRATION OF BUSINESS AND CREDIT RISK
The Company operates within an industry that is subject to rapid
technological advancements, intense competition and uncertain market acceptance.
The introduction of new technologies, competitors' alternative products and
ultimate market acceptance of the products sold by the Company, could have a
substantial impact on the future operations of the Company.
Financial instruments which potentially subject the Company to a
concentration of credit risk consist primarily of trade receivables. In the
normal course of business, the Company provides credit terms to its customers
and collateral is generally not required. Accordingly, the Company performs
ongoing credit evaluations of its customers and maintains allowances for
potential losses which, when realized, have historically been within the range
of management's expectations. As of December 31, 1996, four customers accounted
for 58% of total accounts receivable whereas four customers accounted for 68% of
the total accounts receivables as of June 30, 1996.
Sales to four customers represented, in the aggregate, 64% of net sales for
the six months ended December 31, 1996. One customer represented 100% of net
sales for the period ended December 31, 1995.
REVENUE RECOGNITION
Revenues from sales of products are recognized upon shipment of the
products. The Company generally does not have any significant remaining
obligations upon shipment of the products. Product returns and sales
allowances, which historically have not been significant, are provided for at
the date of sale.
7
<PAGE>
NET LOSS PER COMMON SHARE
Net loss per common share is computed using the weighted average number of
common shares outstanding during the period. Common share equivalents were not
included in the computation since their effect would have been anti-dilutive.
Common share equivalents result from the effect of outstanding options and
warrants to purchase common stock.
2. LINE OF CREDIT
The Company has a line of credit with a financial institution under which
it may borrow up to 80% of the Company's eligible accounts receivable (as
defined) with monthly interest based upon the prime rate of a national financial
institution. Borrowings under the line of credit are collateralized by
substantially all the assets of the Company. There were no borrowings
outstanding under the line as of December 31, 1996.
3. INCOME TAXES
No provision for federal or state income taxes is required since the
Company incurred taxable losses for the six months ended December 3, 1996.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
GENERAL
Javelin Systems, Inc. (the "Company") designs, develops, markets and sells
open system touch screen POS computers primarily for the foodservice industry.
The following discussion and analysis addresses the results of the
Company's operations for the three and six months ended December 31, 1996. A
comparison to the results of operations for the period September 19,1995 (date
of incorporation) to December 31, 1995 is not provided since the Company's
activities for such period were primarily limited to the raising of capital and
the design and refinement of its NexDisplay-4 system. On November 1, 1996 the
Company consummated an initial public offering (the "IPO") of 850,000 shares of
its common stock, resulting in net proceeds of approximately $3.2 million.
This Quarterly Report on Form 10-QSB contains certain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"), and the
Company intends that such forward-looking statements be subject to the safe
harbors created thereby. The Company may experience significant fluctuations in
future operating results due to a number of factors, including, among other
things, the size and timing of customer orders, new or increased competition,
delays in new product enhancements and new product introductions, quality
control difficulties, changes in manufacturing systems, supplies, or vendors,
changes in market demand, market acceptance of new products, product returns,
seasonality in product sales, and pricing trends in the industry in general, and
in the specific markets in which the Company is active. Any of these factors
could cause operating results to vary significantly from prior periods.
Significant variability in orders during any period may have a material adverse
impact on the Company's cash flow, and any significant decrease in orders could
have a material adverse impact on the Company's results of operations and
financial condition. As a result, the Company believes that period-to-period
comparisons of its results of operations are not necessarily meaningful and
should not be relied upon as any indication of future performance. Fluctuations
in the Company's operating results could cause the price of the Company's Common
Stock to fluctuate substantially.
Assumptions relating to the foregoing involve judgments with respect to,
among other things, future economic, competitive and market conditions, all of
which are difficult or impossible to predict accurately, and many of which are
beyond the control of the Company. In addition, the business and operations of
the Company are subject to substantial risks which increase the uncertainty
inherent in the forward-looking statements. In light of the significant
uncertainties inherent in the forward-looking information included herein, the
inclusion of such information should not be regarded as a representation by the
Company or any other person that the objectives or plans of the Company will be
achieved.
9
<PAGE>
RESULTS OF OPERATIONS
Net sales for the three and six months ended December 31, 1996 totaled
$1,283,527 and $2,635,249, respectively. These net sales were realized from the
sale of 780 Nex-Display-4 systems to 64 customers during the three months ended
December 31, 1996 and 2,311 systems to 77 customers during the six months ended
December 31, 1996. One such customer accounted for the sale of 713 of these
systems during the six months ended December 31, 1996 accounting for
approximately $1.1 million in sales for that period.
Management intends to introduce two additional products in the current
fiscal year: the Nex-Display-P system in February 1997, and the Wheelman
kitchen monitor in March 1997. The Nex-Display-P system is the Pentium version
of the Nex-Display-4. The modular design of the Nex-Display-4 enables the unit
to be upgraded to a Pentium version by replacing the system board which slides
out on rails. The Nex-Display-P will be optimized to run process-intensive
operating systems like Windows 95 and Windows NT.
The typical fast food restaurant uses 4 POS workstations like the Nex-
Display-4 and 7 kitchen monitors. A kitchen monitor receives POS orders via a
local area network from the front counter and displays the order to the food
preparers in the kitchen. This high speed communication allows the restaurant
production team to operate more efficiently. The Company intends to release a
state of the art kitchen monitor called the Wheelman which integrates a
networked single board computer with a small footprint LCD touch screen that can
be mounted on the wall, the counter, or an articulated arm.
Cost of sales for the three and six months ended December 31, 1996 totaled
$1,029,555 and $2,078,156, respectively. Commencing July 1996, substantially
all of the Company's manufacturing and assembly process was being performed by
outside contractors. In December 1996, management concluded that such
outsourcing of the final test and assembly of the NexDisplay-4 was not conducive
to the short lead times demanded by the market. Therefore, the Company returned
the assembly process back to its corporate warehouse. Management believes that
responsiveness, quality, and profitability will improve because of this change.
The Company continues to evaluate outsourcing partners who may be able to offer
the responsiveness required. Furthermore, management anticipates in 1997 a
decrease in the cost per unit as the Company's sales continue to increase, due
primarily to reductions in prices from the Company's suppliers and contract
manufacturers resulting from increased volume of purchases by the Company.
Research and development expenses for the three and six months ended
December 31, 1996 totaled $86,080 and $139,644, respectively, and consisted
primarily of payroll expenses and consulting expenses. Management anticipates a
substantial increase in product development costs primarily due to the
anticipated introduction of several product enhancements and new products as
described above.
10
<PAGE>
Selling and marketing expenses for the three and six months ended December
31, 1996 totaled $95,810 and $152,675, respectively. Such expenses consisted
primarily of payroll and travel costs. Management anticipates that such expenses
will continue to increase as the Company implements its strategy to expand its
product line, distribution network and markets.
General and administrative expenses for the three and six months ended
December 31, 1996 totaled $216,743 and $358,910, respectively. Such expenses
consisted primarily of payroll costs, professional services, utilities, supplies
and rent . Management anticipates a substantial increase in general and
administrative costs, primarily related to payroll and legal costs, as the
Company expands its personnel and costs associated with being a public company.
Interest expense for the three and six months ended December 31, 1996
totaled $551,509 and $704,459, respectively. Such expense included interest of
$522,867 and $636,097, respectively, related to warrants issued in connection
with certain promissory notes. This non-recurring interest expense is
attributable to the imputation of interest based upon the fair market value of
the warrants and did not represent a cash expense to the Company.
A provision for federal and state income taxes was not required since the
Company incurred taxable losses for the three and six months ended December 31,
1996.
LIQUIDITY AND CAPITAL RESOURCES
On November 1, 1996, the Company completed its IPO of 850,000 shares of its
common stock at $5 per share, netting proceeds to the Company of approximately
$3.2 million. A portion of the proceeds were used to repay debt of approximately
$745,000. The remaining proceeds will be used for the purposes described in the
Company's Prospectus dated October 25, 1996 in connection with the IPO.
11
<PAGE>
As of December 31, 1996, the Company had cash of $762,178. Cash used in
operating activities for the six months ended December 31, 1996 totaled
$2,061,890. Cash used in investing activities for the six months ended December
31, 1996 totaled $59,697. Cash provided by financing activities for the six
months ended December 31, 1996 totaled $2,877,361. The Company has obtained a
line of credit providing for borrowings of up to 80% of eligible accounts
receivable (as defined) bearing interest at the prime rate. As of December 31,
1996, borrowings available under the line of credit amounted to approximately
$600,000 and none were outstanding.
The Company believes that the net proceeds of the initial public offering,
combined with other available funds, will be adequate to meet the Company's cash
needs during the next 12 months.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) 3.1 Amended and Restated Certificate of Incorporation (incorporated herein
by reference to Exhibit No. 3.1 to the Registrant's Registration Statement on
Form SB-2 filed with the Securities and Exchange Commission (the "SEC") on
August 30, 1996 (the "Form SB-2").
3.2 Amended and Restated Bylaws of Registrant (incorporated by reference
to Exhibit No. 3.2 to the Form SB-2).
3.3 Certificate of Amendment of Amended and Restated Certificate of
Incorporation of Registrant (incorporated by reference to Exhibit No. 3.3 to
Amendment No. 1 to the Form SB-2 filed with the SEC on October 3, 1996)(the
"Amendment No. 1 to Form SB-2").
3.4 Amendment to Amended and Restated Bylaws of Registrant (incorporated
by reference to Exhibit No. 3.4 to Amendment No. 1 to the Form SB-2).
12
<PAGE>
4.1 Form of Representative's Warrant Agreement by and between the
Registrant and Meridian Capital Group, Inc. (incorporated by reference to
Exhibit No. 4.1 to Amendment No. 2 to Form SB-2 filed with the SEC on October
25, 1996 (the "Amendment No. 2 to Form SB-2").
4.2 Form of certificate evidencing shares of Registrant's common stock
(incorporated by reference to Exhibit No. 4.2 to Amendment No. 1 to Form SB-2).
27.1 Financial Data Schedule in accordance with Article 5 of Regulation SX.
(b) No reports on Form 8-K were filed during the three months ended December
31, 1996.
13
<PAGE>
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.
Javelin Systems, Inc.
February 14, 1997 /s/ RICHARD P.STACK
- -------------------- -----------------------
Date Richard P. Stack
Chief Executive Officer
and President
February 14, 1997 /s/ LAWRENCE W. McCORKLE
- -------------------- --------------------------------------------
Date Lawrence W. McCorkle
Controller
(Principal Accounting and Financial Officer)
14
<PAGE>
EXHIBIT INDEX
-------------
3.1 Amended and Restated Certificate of Incorporation (incorporated
herein by reference to Exhibit No. 3.1 to the Registrant's Registration
Statement on Form SB-2 filed with the Securities and Exchange Commission (the
"SEC") on August 30, 1996 (the "Form SB-2").
3.2 Amended and Restated Bylaws of Registrant (incorporated by
reference to Exhibit No. 3.2 to the Form SB-2).
3.3 Certificate of Amendment of Amended and Restated Certificate of
Incorporation of Registrant (incorporated by reference to Exhibit No. 3.3 to
Amendment No. 1 to the Form SB-2 filed with the SEC on October 3, 1996)(the
"Amendment No. 1 to Form SB-2").
3.4 Amendment to Amended and Restated Bylaws of Registrant
(incorporated by reference to Exhibit No. 3.4 to Amendment No. 1 to
the Form SB-2.
4.1 Form of Representative's Warrant Agreement by and between the
Registrant and Meridian Capital Group, Inc. (incorporated by reference to
Exhibit No. 4.1 to Amendment No. 2 to Form SB-2 filed with the SEC on October
25, 1996 (the "Amendment No. 2 to Form SB-2").
4.2 Form of certificate evidencing shares of Registrants common stock
(incorporated by reference to Exhibit No. 4.2 to Amendment No. 1 to Form SB-2).
27.1 Financial Data Schedule in accordance with Article 5 of
Regulation SX.
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The unaudited financial statements of the company as of and for the three months
ended December 31, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 762,178
<SECURITIES> 0
<RECEIVABLES> 1,144,372
<ALLOWANCES> 12,500
<INVENTORY> 1,704,648
<CURRENT-ASSETS> 3,659,460
<PP&E> 90,693
<DEPRECIATION> 12,894
<TOTAL-ASSETS> 3,747,680
<CURRENT-LIABILITIES> 432,297
<BONDS> 0
0
0
<COMMON> 4,328,406
<OTHER-SE> (1,013,023)
<TOTAL-LIABILITY-AND-EQUITY> 3,747,680
<SALES> 1,283,527
<TOTAL-REVENUES> 1,283,527
<CGS> 1,029,555
<TOTAL-COSTS> 1,029,555
<OTHER-EXPENSES> 385,755
<LOSS-PROVISION> 6,500
<INTEREST-EXPENSE> 551,509
<INCOME-PRETAX> (689,792)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (689,792)
<EPS-PRIMARY> (.26)
<EPS-DILUTED> (.26)
</TABLE>
