UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 2000
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________to______________.
Commission File Number 0-22735
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ROBOCOM SYSTEMS INTERNATIONAL INC.
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(Name of small business issuer as specified in its charter)
New York 11-2617048
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(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
511 Ocean Avenue, Massapequa, New York 11758
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(Address of principal executive offices)
516-795-5100
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(Issuer's telephone number)
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 |_|
As of October 13, 2000, 4,495,984 shares the issuer's common stock were
outstanding.
Transitional Small Business Disclosure Format (check one); Yes |_| No |X|
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ROBOCOM SYSTEMS INTERNATIONAL INC.
FORM 10-QSB
INDEX
PART I. Financial Information
Item 1. Financial Statements: Page no.
Balance Sheets - August 31, 2000 and May 31, 2000 ............ 3
Statements of Operations - Three months ended
August 31, 2000 and 1999 .................................... 4
Statements of Cash Flows - Three months ended
August 31, 2000 and 1999 .................................... 5
Notes to Financial Statements ................................ 6
Item 2. Management's Discussion and Analysis or Plan of Operation .... 7
PART II. Other Information:
Item 6. Exhibits and Reports on Form 8-K ............................. 9
Signatures ............................................................ 9
2
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ROBOCOM SYSTEMS INTERNATIONAL INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
August 31, 2000 May 31, 2000
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(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents .................................... $ 42,926 $ 60,673
Short-term investments ....................................... 345,587 463,833
Accounts receivable, net ..................................... 827,198 1,352,736
Unbilled revenue ............................................. 141,886 172,023
Deferred taxes ............................................... 72,353 72,353
Other current assets ......................................... 172,026 177,183
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Total current assets ............................................. 1,601,976 2,298,801
Property and equipment, net ...................................... 211,250 241,474
Software development costs, net .................................. 4,176,658 4,417,100
Other assets ..................................................... 19,275 81,999
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Total assets ..................................................... $ 6,009,159 $ 7,039,374
============ ============
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable ............................................. $ 261,448 $ 455,985
Accrued expenses ............................................. 664,695 885,388
Deferred revenue ............................................. 540,649 509,345
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Total current liabilities ........................................ 1,466,792 1,850,718
Deferred tax liabilities ......................................... 116,491 116,492
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Total liabilities ................................................ 1,583,283 1,967,210
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Shareholders' equity:
Preferred stock, $.01 par value; 1,000,000 shares authorized;
None issued ................................................ -- --
Common stock, $.01 par value; 10,000,000 shares authorized;
4,495,984 shares issued and outstanding at August
31, 2000 and at May 31, 2000 ............................... 44,960 44,960
Additional paid-in capital ................................... 11,832,246 11,832,246
Accumulated deficit .......................................... (7,447,143) (6,796,355)
Deferred compensation ........................................ (4,187) (8,687)
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Total shareholders' equity ....................................... 4,425,876 5,072,164
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Total liabilities and shareholders' equity ....................... $ 6,009,159 $ 7,039,374
============ ============
</TABLE>
See accompanying notes.
3
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ROBOCOM SYSTEMS INTERNATIONAL INC.
STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three months ended August 31,
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2000 1999
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<S> <C> <C>
Revenues:
Software license fees ........................ $ 231,986 $ 192,857
Services ..................................... 353,623 280,560
Hardware ..................................... 122,433 217,165
Maintenance .................................. 333,704 350,445
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Total revenues ............................... 1,041,746 1,041,027
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Cost of revenues:
Cost of license fees ......................... 41,643 49,525
Cost of services ............................. 292,648 307,586
Cost of hardware ............................. 114,247 183,035
Cost of maintenance .......................... 301,924 280,920
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Total cost of revenues ....................... 750,462 821,066
Amortization of software development costs ..... 401,185 352,482
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1,151,647 1,173,548
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Gross margin ................................... (109,901) (132,521)
Selling, general and administrative expenses ... 549,759 880,803
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Loss from operations ........................... (659,660) (1,013,324)
Interest income and other ...................... 8,872 15,263
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Loss before provision (benefit) for income taxes (650,788) (998,061)
Provision (benefit) for income taxes ........... -- --
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Net loss ....................................... $ (650,788) $ (998,061)
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Net loss per basic and diluted share ........... $ (.14) $ (.29)
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Weighted average shares outstanding ............ 4,495,984 3,467,984
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</TABLE>
See accompanying notes.
4
<PAGE>
ROBOCOM SYSTEMS INTERNATIONAL INC.
STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Three months ended August 31,
-----------------------------
2000 1999
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<S> <C> <C>
Operating activities
Net loss .................................................... $ (650,788) $ (998,061)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization of property and equipment 28,524 28,516
Amortization of software development costs ............ 401,186 352,482
Amortization of deferred compensation ................. 4,500 18,975
Changes in operating assets and liabilities:
Accounts receivable ................................. 525,538 858,549
Unbilled revenue .................................... 30,137 145,431
Gain on sale of property and equipment .............. (13,167) --
Other current assets and other ...................... 19,326 18,508
Accounts payable .................................... (194,537) (116,723)
Accrued expenses .................................... (169,704) (67,296)
Deferred revenue .................................... 31,304 19,667
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Net cash provided by operating activities ................... 12,319 260,048
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Investing activities
Software development costs .................................. (160,744) (305,522)
Purchase of short-term investments .......................... -- (1,209,240)
Redemption of short-term investments ........................ 118,246 1,449,183
Proceeds from the sale of property and equipment ............ 22,558 --
Capital expenditures ........................................ (7,691) (1,674)
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Net cash used in investing activities ....................... (27,631) (67,253)
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Financing activities
Deferred costs related to private placement in process ...... (2,435) --
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Net cash used in financing activities ....................... (2,435) --
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(Decrease) increase in cash and cash equivalents ............ (17,747) 192,795
Cash and cash equivalents at beginning of year .............. 60,673 101,148
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Cash and cash equivalents at end of year .................... $ 42,926 $ 293,943
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid for interest .................................... $ 469 $ 8,068
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</TABLE>
See accompanying notes.
5
<PAGE>
ROBOCOM SYSTEMS INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS
August 31, 2000
(unaudited)
1. Background and Basis of Financial Statement Presentation
The accompanying unaudited financial statements of Robocom Systems
International Inc. (the "Company") have been prepared in accordance with
accounting principles generally accepted in the United States for interim
financial reporting and with the instructions to Form 10-QSB and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States 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 Company's operations consist of the
development, marketing and support of advanced warehouse management software
solutions that enable companies to realize significant cost savings by
automating their warehouse operations and providing inventory visibility
throughout the supply chain. The Company's primary product, RIMS, is a
client-configurable software solution that enables a company's warehouse to
respond to a customer order with greater accuracy and in a more timely manner,
thereby turning the warehouse into a competitive advantage. RIMS operates in an
open system environment and interfaces with an organization's existing
information systems. In addition to providing RIMS software licenses, the
Company provides installation, training, implementation support and maintenance
services and resells related hardware.
Operating results for the three-month period ended August 31, 2000 are not
necessarily indicative of the results that may be expected for the year ended
May 31, 2001. For further information, refer to the financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-KSB for the
year ended May 31, 2000.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Certain statements in this Report constitute "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Factors
that might cause such a difference include, among others, availability, terms
and deployment of capital; uncertainties relating to general economic and
business conditions; industry trends; changes in demand for the Company's
product; uncertainties relating to customer plans and commitments and the timing
of orders received from customers; announcements or changes in pricing policies
by the Company or its competitors; unanticipated delays in the development,
market acceptance or installation of the Company's products; availability of
management and other key personnel; relationships with third-party equipment
suppliers; governmental export and import policies; global trade policies; and
worldwide political stability and economic growth. The words "believe",
"expect", "anticipate", "intend" and "plan" and similar expressions identify
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date the statement
was made.
RESULTS OF OPERATIONS
Comparison of Three Months Ended August 31, 2000 and August 31, 1999
Revenues. Total revenues were flat at $1,041,746 in the three months ended
August 31, 2000 as compared to $1,041,027 in the three months ended August 31,
1999. Software license fees increased by approximately 20% during the 2000
period as compared to the 1999 period, primarily due to higher sales of RIMS
software licenses sold. Software license sales for the 2000 period were
primarily through an international distributor. Service revenues increased by
approximately 26% for the 2000 period as compared to the 1999 period, primarily
due to higher revenues from services related to installations with a large
number of RIMS users. Hardware revenues decreased by approximately 44% during
the 2000 period as compared to the 1999 period, primarily due to the lower sales
of computer systems network and office hardware in the 2000 period. Maintenance
revenues decreased approximately 5% for the 2000 period as compared to the 1999
period, due to the election by several customers to discontinue hardware
maintenance on older equipment and higher research and development expenditures
in the 2000 period, offset by a larger number of maintenance contracts in
operation.
Cost of Revenues. Total cost of revenues decreased by approximately 9% to
$750,462 in the three months ended August 31, 2000 as compared to $821,066 in
the three months ended August 31, 1999. As a percentage of revenues, total cost
of revenues decreased to approximately 72% in the 2000 period as compared to
approximately 79% in the 1999 period. As a percentage of license fee revenues,
cost of license fees in the 2000 period decreased primarily due to lower third
party software fees. The cost of license fees in the 1999 period primarily
reflected third party software and certain fixed costs. As a percentage of
services revenues, the cost of services was significantly lower in the 2000
period as compared to the 1999 period primarily due to higher billable support
services and higher services revenues for modifications, offset, in part, by
fewer installations of computer systems networks and office software in the 2000
period. As a percentage of hardware revenues, the cost of hardware was higher in
the 2000 period due to the fixed hardware expenses as applied to lower hardware
revenues. As a percentage of maintenance revenues, the cost of maintenance was
higher in the 2000 period as compared to the 1999 period due to higher
maintenance costs relating to RIMS Version 4.3, which was released in the 2000
period, offset, in part, by a larger number of maintenance contracts in
operation in the 2000 period.
Amortization of Software Development Costs. Amortization of software
development costs increased by approximately 14% to $401,185 in the three months
ended August 31, 2000 as compared to $352,482 in the three months ended August
31, 1999. The increase was due to the inclusion of amortization of capitalized
software development costs for RIMS Version 4.2 and Version 4.3 in the 2000
period. Version 4.3 was first available for sale in the 2000 period. As a
percentage of revenue, the amortization of software development costs was
approximately 39% in the 2000 period and 34% in the 1999 period.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (continued)
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased by approximately 38% to $549,759 in the three
months ended August 31, 2000 as compared to $880,803 in the three months ended
August 31, 1999. Several reductions in selling, general and administrative
expenses were reflected in the operating costs of the Company's international
offices, professional fees and sales and marketing expenses.
Interest Income and Other, net. Interest income decreased to $8,872 in the
three months ended August 31, 2000 as compared to $15,263 in the three months
ended August 31, 1999. The decrease is primarily due to the reduction of the
remaining net proceeds from the Company's public offering, which were utilized
for software development and working capital requirements, offset, in part, by
interest earned on the net proceeds of the private placement completed in fiscal
2000.
Benefit for Income Taxes. Since the Company is operating at a loss, no
provision or benefit is reflected in the 2000 or 1999 period. No deferred tax
expense has been recorded in the 2000 or the 1999 period as the Company
continues to record a valuation allowance to reserve for its net deferred tax
assets.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $12,319 in the three months
ended August 31, 2000 and net cash provided by operating activities was $260,048
in the three months ended August 31, 1999. Cash flows from operations decreased
in the 2000 period primarily due to lower accounts receivable collections, and
decreases in accounts payable and accrued expenses primarily related to hardware
purchases, offset, in part, by a lower loss from operations.
The Company capitalized $160,744 and $305,522 in the three months ended
August 31, 2000 and 1999, respectively, for software development costs. The
Company did not have any material commitments for software development costs as
of August 31, 2000. The Company expended $7,691 and $1,674 for property and
equipment in the three months ended August 31, 2000 and 1999, respectively.
As of August 31, 2000, the Company had $42,926 in cash and cash
equivalents, $345,587 in marketable securities, and working capital of $135,184.
As of September 19, 2000, the Company obtained lines of credit from three
shareholders of the Company. These lines of credit provide for borrowings of up
to $1,050,000 and expire on September 19, 2001. Borrowings bear interest at the
prime rate plus two percent (11.50% at September 19, 2000). On September 25,
2000, the Company had drawn down $500,000 from these lines.
To fund working capital and provide for future growth, management is
currently seeking to raise additional capital through a private financing. The
inability of the Company to raise additional funds when needed will have a
material adverse effect on its business, operating results and financial
condition. The Company's capital requirements depend on many factors, including
the expansion of sales and marketing, new product development and the level and
timing of revenue.
Management believes that cash flows from operations, existing cash, cash
equivalents and marketable securities, and the additional funds available to the
Company ability to borrow from the lines of credit from the shareholders will be
sufficient to meet the Company's currently anticipated working capital and
software development requirements for the next 12 months.
8
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PART II. OTHER INFORMATION:
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit Number Description
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27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the first quarter of fiscal 2001.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized, in Massapequa, New
York, on October 13, 2000.
ROBOCOM SYSTEMS INTERNATIONAL INC.
By: /s/ C. Kenneth Morrelly
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C. Kenneth Morrelly
President and Chief Executive Officer
By: /s/ Elizabeth A. Burke
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Elizabeth A. Burke
Vice President - Finance and Chief
Financial Officer
9
