<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1999
--------------------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
------------- --------------
Commission File Number: 0-24283
REGISTRY MAGIC INCORPORATED
- --------------------------------------------------------------------------------
(Exact name of Small Business Issuer as specified in its Charter)
FLORIDA 65-0623427
- -------------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One South Ocean Boulevard, Suite 206, Boca Raton, Florida 33432
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(561) 367-0408
-------------------------------
(Issuer's telephone number)
- --------------------------------------------------------------------------------
(Former Name, former address and former fiscal year,
if changed since last Report.)
Check mark 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 ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes [ ] 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: 5,355,405 shares of Common
Stock as of December 16, 1999.
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REGISTRY MAGIC INCORPORATED
INDEX
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets - October 31, 1999 (unaudited) and
July 31, 1999
Condensed Statements of Operations (unaudited) for the Three
Months Ended October 31, 1999 and 1998
Condensed Statements of Cash Flows (unaudited) for the Three
Months Ended October 31, 1999 and 1998
Notes to Condensed Financial Statements
Item 2. Management's Discussion and Analysis and Plan of
Operation
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
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REGISTRY MAGIC INCORPORATED
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
October 31, July 31,
1999 1999
----------- -----------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ..................................................... $ 3,734,055 $ 4,968,294
Accounts receivable ........................................................... 556,766 602,610
Inventories ................................................................... 261,507 256,234
Other current assets .......................................................... 47,510 22,604
----------- -----------
Total current assets ............................................... 4,599,838 5,849,742
Property and equipment, net ...................................................... 425,209 483,267
Other assets ..................................................................... 34,418 39,148
----------- -----------
$ 5,059,465 $ 6,372,157
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities ...................................... $ 348,027 $ 563,650
----------- -----------
Total current liabilities ......................................... 348,027 563,650
========== ==========
Shareholders' equity:
Preferred stock, $.01 par value; 5,000,000 shares authorized; no shares
outstanding................................................................... -- --
Common stock, $.001 par value; 30,000,000 shares authorized; 5,355,405 and
5,878,000 shares issued and outstanding respectively ......................... 5,355 5,878
Additional paid-in capital ..................................................... 13,973,127 14,029,754
Accumulated deficit ............................................................ (9,267,044) (8,227,125)
----------- -----------
Total shareholders' equity ........................................ 4,711,438 5,808,507
----------- -----------
$ 5,059,465 $ 6,372,157
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
2
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Registry Magic Incorporated
Condensed Statements of Operations
(Unaudited)
For the Three Months Ended
October 31,
----------------------------
1999 1998
---------- -----------
Revenues:
Product sales............................. $ 523,458 $ 282,038
----------- -----------
Total income ............................. 523,458 282,038
Costs and expenses:
Cost of goods sold ....................... 318,738 103,696
General and administrative ............... 964,367 749,458
Research and development ................. 282,324 372,121
Royalty expense .......................... -- 200,000
Depreciation ............................. 55,837 40,349
Interest income, net ..................... (57,889) (120,663)
----------- -----------
Total costs and expenses ................. 1,563,377 1,344,961
----------- -----------
Net loss ................................. $(1,039,919) $(1,062,923)
=========== ===========
Weighted average shares
outstanding ........................ 5,887,649 5,813,000
=========== ===========
Net loss per common share (basic and
diluted) ........................... $ (.18) $ (.18)
=========== ===========
See accompanying notes to condensed financial statements.
3
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REGISTRY MAGIC INCORPORATED
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
October 31,
--------------------------------
1999 1998
----------- ------------
<S> <C> <C>
Operating Activities:
Net loss ................................... $(1,039,919) $ (1,062,923)
Adjustments to reconcile net loss to
net cash in operating activities:
Depreciation and amortization .............. 55,837 40,349
Decrease in accounts receivable ............ 45,844 18,400
Increase in inventories .................... (5,273) (45,283)
Increase in other current assets ........... (24,906) (15,203)
Decrease in other assets ................... 4,730 10,835
Decrease in accounts
payable and accrued expenses ............. (215,623) (411,399)
------------ ------------
Net cash used in operating
activities ..................... (1,179,310) (1,465,224)
------------ ------------
Investing Activities:
Purchase of equipment ...................... -- (139,809)
Sale of equipment .......................... 2,221 --
Deferred patent costs ...................... -- (411)
------------ ------------
Net cash from (used in)investing
activities ...................... 2,221 (140,220)
------------ ------------
Financing Activities:
Exercise of stock options .................. 2,850 --
Repurchase of common stock ................. (60,000) --
------------ ------------
Net cash from financing activities (57,150) --
------------ ------------
Net decrease in cash ............. (1,234,239) (1,605,444)
Cash beginning of period ....................... 4,968,294 10,252,511
------------ ------------
Cash end of period ......................... $ 3,734,055 $ 8,647,067
============ ============
Supplemental disclosures:
Cash paid for interest: .................... $ -- $ 76
============ ============
</TABLE>
See accompanying notes to condensed financial statements.
4
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Registry Magic Incorporated
Notes to Condensed Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying condensed financial statements have been prepared in
accordance with generally accepted accounting principals for interim financial
information and with instructions to Form 10-QSB. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principals for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. The results of operations
for the three-month period ended October 31, 1999 are not necessarily indicative
of the results to be expected for the year ended July 31, 2000. The condensed
interim financial statements should be read in conjunction with the audited
financial statements and notes, contained in the Company's Annual Report on Form
10-KSB for the year-end July 31, 1999.
2. Stockholders Equity
In August 1999 a former employee of the Company exercised 90,000 stock
options to purchase 77,405 shares of common stock at an exercise price of $.50
per share of common stock. The purchase price consisted of a cash-less exercise
provision utilizing 12,595 shares of common stock and $2,850.
On October 28, 1999 the Company entered into Settlement Agreements and
General Releases with two former employees. Under the terms of these agreements
the employees sold to the Company 600,000 shares of Common Stock for $60,000.
The Company has retired these shares of common stock.
3. SUBSEQUENT EVENTS
On December 16, 1999 the Company and Synergex International, of Gold
River, Calif., announced the signing of a Letter of Intent that would result in
a merger of the two entities. Financial details of the agreement are in the
process of being finalized. The merger is subject to, among other things,
execution of a definitive agreement and approval of each company's shareholders.
Synergex is a privately held company that develops and markets
Synergy/DE, an integrated set of high-productivity application development tools
for building, integrating, and deploying enterprise applications, an increasing
number of which are being delivered via Web interfaces.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
THIS QUARTELY REPORT FORM 10-QSB CONTAINS "FORWARD-LOOKING STATEMENTS"
WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS
AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED. ALL STATEMENTS, OTHER THAN STATEMENTS OF HISTORICAL FACTS,
INCLUDED IN OR INCORPORATED BY REFERENCE INTO THIS FORM 10-QSB, ARE
FORWARD-LOOKING STATEMENTS. IN ADDITION, WHEN USED IN THIS DOCUMENT,
THE WORDS "ANTICIPATE," "ESTIMATE," "PROJECT" AND SIMILAR EXPRESSIONS
ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE
FORWARD-LOOKING STATEMENTS ARE SUBJECT TO CERTAIN RISKS, UNCERTAINTIES
ANDASSUMPTIONS INCLUDING THOSE RISKS DESCRIBED IN THE COMPANY'S ANNUAL
REPORT ON FORM 10-KSB AS WELL AS IN THIS REPORT ON FORM 10-QSB SHOULD
ONE OR MORE OF THESE RISKS OR UNCERTAINTIES MATERIALIZE, OR SHOULD
UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY VARY
MATERIALLY FROM THOSE ANTICIPATED, ESTIMATED OR PROJECTED. ALTHOUGH THE
COMPANY BELIEVES THAT THE EXPECTATIONS WE INCLUDE IN SUCH
FORWARD-LOOKING STATEMENTS ARE REASONABLE, WE CANNOT ASSURE YOU THAT
THESE EXPECTATIONS WILL PROVE TO BE CORRECT.
The following discussion and analysis should be read in conjunction
with the financial statements of the Company and the notes thereto appearing
elsewhere.
OVERVIEW
Registry Magic Incorporated, was organized to design, develop,
commercialize and market proprietary products and professional services that
exploit recent advances in speech recognition technologies. The products
currently marketed or under development by the Company have the objective of
enabling a user to speak into a telephone or to a computer in a natural
conversational manner and, in turn, have the product listen, understand and
respond by performing tasks or retrieving information.
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The Company's products and services, among other things, will (i)
substantially eliminate the need for touch-tone menus, (ii) allow for the
automation of telephone systems internationally where touch-tone may not be
prevalent, (iii) reduce operational costs by performing repetitive tasks of live
employees and (iv) allow for the access of information from anywhere and at
anytime through speech. The Company's business strategy is to focus on products
and pricing models that produce revenue on a transaction or recurring basis.
While the Company is beginning to generate some limited revenues and
anticipates increased revenues during its 2000 fiscal year, the Company's
expenses continue to significantly exceed revenues currently and for the
foreseeable future. There can be no assurance that product installations,
royalties or licensing will generate sufficient revenues to enable the Company
to operate profitably during its 2000 fiscal year or thereafter.
The Company is subject to all of the risks inherent in the
establishment of a new business enterprise. To address these risks, the Company
must, among other things, increase the number of key customer installations,
enter into successful distribution arrangements, expand into the international
market, respond to competitive developments, and attract, retain and motivate
qualified personnel. Failure to achieve one or more of these goals could have a
material adverse effect upon the Company's business, operating results and
financial condition.
RESULTS OF OPERATIONS
Since its inception in October 1995, the Company's efforts have been
principally devoted to research, development and design of products, marketing
activities and raising capital. Beginning in fiscal 1998 the Company began
selling its initial product, the Virtual Operator.
For the three months ended October 31, 1999, product sales were
$523,458 compared to $282,038 for the three months ended October 31, 1998.
For the three months ended October 31, 1999, cost of sales amounted to
$318,738 representing hardware costs associated with the Company's Virtual
Operator. For the three months ended October 31, 1998 cost of sales amounted to
$103,696 on sales of hardware representing costs associated with the Company's
Virtual Operator.
General and administrative expense increased by $214,909 to $964,367
from $749,458 for the three months ended October 31, 1998. The Company has
incurred additional salary and commission expense in the three months ended
October 31, 1999 for additional employees hired to market and sell the Virtual
Operator, sales commissions and additional office support staff. Effective
October 1, 1999 the Company has significantly decreased its administrative and
sales staff in order to reduce expenses.
Research and development expenses for the three months ended October
31, 1999 were $282,324 compared to $372,121 for the three months ended October
31, 1999 a decrease of $89,797. This was due to the Company reducing its
development staff. Research and development expenses incurred in the course of
establishing technological feasibility of the Company's software applications
have been charged to operations pursuant to Statement of Financial Accounting
Standards SFAS No.86 Accounting for the Costs of Computer Software to be Sold,
Leased, or Otherwise Marketed.
Depreciation expense increased $15,488 for the three months ended
October 31, 1999 to $55,837 from $40,349 for the three months ended October 31,
1998, primarily due to the Company purchasing additional computer hardware.
Interest income net for the three months ended October 31, 1999
amounted to $57,889 compared to $120,663 of interest income net for the three
months ended October 31, 1998. The decrease in interest income was due to the
Company's reduction in cash balances.
LIQUIDITY AND CAPITAL RESOURCES
As of October 31, 1999, the Company had approximately $3,734,055 in
cash and cash equivalents. The Company does not have any available lines of
credit. Since inception, and until completion of the Company's public offering
in June 1998,the Company financed its operations through loans from the
Company's Chairman and his wife and from private placements of both debt and
equity. On June 2, 1998, the Company closed an initial public offering of Common
Stock. The Company offered and sold 1,600,000 shares of Common Stock at an
offering price of $7.25 per share, raising proceeds, net of offering costs, of
approximately $9,900,000. On June 26, 1998, through the underwriter's exercise
of an over-allotment, the Company sold an additional 220,000 shares of Common
Stock raising net proceeds of approximately $1,400,000.
Net cash used in operating activities decreased by $285,914 to
$1,179,310 for the three months ended October 31, 1999 as compared with
$1,465,224 during the three months ended October 31, 1998. Net cash used in
operating activities was primarily related to the Company's continued expansion
of its research and development and sales and marketing efforts.
Net cash from(used in) investing activities during the three months
ended October 31, 1999 and 1998 were $2,221 and ($140,220) respectively. The
decrease in expenditures relates to a reduction in purchases of computer
equipment and patent application costs.
Net cash used by financing activities during the three months ended
October 31, 1999 and 1998 amounted to $57,150 and $0 respectively. For the three
months ended October 31, 1999 The Company repurchased 600,000 shares of common
stock from two former employees, the Company also received $2,850 from the
exercise of stock options.
IMPACT OF THE "YEAR 2000" ON COMPANY PRODUCTS
Computers, software and other equipment utilizing microprocessors that
use only two digits to identify a year in a date field may be unable to process
accurately certain date-based information at or after the year 2000. The Company
recognizes the need to insure that its operations will not be adversely affected
by "Year 2000" software failures. Software failures due to processing errors
potentially arising from calculations using the year 2000 date are a recognized
risk, and the Company is addressing this issue on several different fronts.
6
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The Company is in contact with its suppliers to assess their
compliance. The Company believes based on representations from its suppliers
that there products are year 2000 compliant, but there can be no assurance that
there will not be a material adverse effect on the Company if third parties do
not convert their systems in a timely manner and in a way that is compatible
with the Company's systems. The Company believes that its actions with suppliers
will minimize these risks.
Through October 31, 1999, the Company has not incurred material
expenses relating to "Year 2000" compliance efforts and believes that the
expenses associated with completing its "Year 2000" compliance plans will not
have a material adverse impact on the Company's operations. Internal and
external expenses specifically associated with modifying internal-use software
for the "Year 2000" will be expensed as incurred. The Company's current
estimates of the amount of time and expenses necessary to implement and test its
computer systems are based on the facts and circumstances existing at this time.
Nevertheless, achieving "Year 2000" compliance is dependent on many factors,
some of which are not completely within the Company's control. Should either the
Company's internal system or the internal systems of one or more significant
vendors or suppliers fail to achieve "Year 2000" compliance, the Company's
business and its results of operations could be adversely affected.
PART II. OTHER INFORMATION
ITEM 2. Changes in Securities and Use of Proceeds
On August 30, 1999 a former employee of the Company
exercised stock options to purchase 77,405 shares of common
stock.
In October 1999 the Company entered into Settlement
Agreements and General Releases with two former employees.
Under the terms of these agreements the employees sold to the
Company 600,000 shares of Common Stock for $60,000.
ITEM 5. OTHER INFORMATION
On December 16, 1999 The Company and Synergex
International, of Gold River, Calif., announced the signing of
a Letter of Intent that would result in a merger of the two
entities. Financial details of the agreement are in the
process of being finalized. The merger is subject to, among
other things, execution of a definitive agreement and approval
of each company's shareholders.
Synergex is a privately held company that develops
and markets Synergy/DE, an integrated set of high-productivity
application development tools for building, integrating, and
deploying enterprise applications, an increasing number of
which are being delivered via Web interfaces.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits required by item 601 of Regulation S-B
The following exhibits are filed as part of this report:
27.1 Financial Data Schedule
99.1 Press release dated December 16, 1999.
(b) Reports on Form 8-K
On August 6, 1999 the Company filed a current report on
Form 8-K disclosing the resignations of two directors of the Company.
On August 25, 1999 the Company filed a current report on Form 8-K
announcing the filing of a lawsuit against the Company's former President. On
October 29, 1999 the Company filed a current report on Form 8-K announcing that
the Company entered a Settlement Agreement and General Releases with the
Company's former President which included a buyback of common stock.
Additionally, the Company announced an agreement with aformer Vice President to
buy back common stock. The parties also exchanged mutual general releases.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Companyhas duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
REGISTRY MAGIC INCORPORATED
By: /s/ Bruce Carlsmith
-------------------------------------
Bruce Carlsmith
President and Chief Executive Officer
By: /s/ Martin Scott
-------------------------------------
Martin Scott, Secretary,
Treasurer and Principal Financial
and Accounting Officer
DATED: December 20, 1999
8
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-START> AUG-01-1999
<PERIOD-END> OCT-31-1999
<CASH> 3,734,055
<SECURITIES> 0
<RECEIVABLES> 900,464
<ALLOWANCES> (343,698)
<INVENTORY> 261,507
<CURRENT-ASSETS> 4,599,838
<PP&E> 753,337
<DEPRECIATION> (328,128)
<TOTAL-ASSETS> 5,059,465
<CURRENT-LIABILITIES> 348,027
<BONDS> 0
0
0
<COMMON> 5,355
<OTHER-SE> 4,706,083
<TOTAL-LIABILITY-AND-EQUITY> 5,059,465
<SALES> 523,458
<TOTAL-REVENUES> 523,458
<CGS> 318,738
<TOTAL-COSTS> 318,738
<OTHER-EXPENSES> 1,302,528
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (57,889)
<INCOME-PRETAX> (1,039,919)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,039,919)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,039,919)
<EPS-BASIC> (.18)
<EPS-DILUTED> (.18)
</TABLE>
<PAGE> 1
Exhibit 99.1
FOR IMMEDIATE PRESS
REGISTRY MAGIC AND SYNERGEX INTERNATIONAL SIGN LOI
DEAL SPEEDS TIME TO MARKET FOR REGISTRY'S MOBILE VOICE OFFERINGS
CONTACT: CONTACT:
Bruce Carlsmith Mary Cate O'Malley
REGISTRY MAGIC SYNERGEX
Voice: (561) 367-0408 Voice: (916) 635-7300
E-mail: [email protected] E-mail: [email protected]
Web: WWW.REGISTRYMAGIC.COM Web:WWW.SYNERGEX.COM
BOCA RATON, FLA.--DEC. 16, 1999--Registry Magic of Boca Raton, Fla., and
Synergex International, of Gold River, Calif., today announce the signing of a
Letter of Intent that would result in a merger of the two entities. Financial
details of the agreement were not released. The merger is subject to, among
other things, execution of a definitive agreement and approval of each company's
shareholders.
"This event will make it possible for Registry Magic to more quickly provide
applications that bridge Internet and voice solutions," said Bruce Carlsmith,
CEO of Registry Magic. "Increasingly, taking our applications to vertical
markets requires integration with business applications. Synergex has been
focused on the integration and enablement of vertical business applications for
over 10 years and provides a strong complement to our voice recognition
expertise."
Besides the benefits of Synergex's application integration expertise, Registry
Magic gains access to a management team with the experience to greatly speed the
completion and marketing of existing and new products. Synergex also brings a
strong base of over 500 independent software vendors covering a range of
vertical markets including healthcare, resort management, banking and
manufacturing.
Synergex is a privately held company that develops and markets Synergy/DE, an
integrated set of high-productivity application development tools for building,
integrating, and deploying enterprise applications, an increasing number of
which are being delivered via Web interfaces.
