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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------------- ---------------------
Commission file number 0-23239
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UBICS, INC.
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(Exact name of registrant as specified in its charter)
PENNSYLVANIA 34-1744587
------------------------------- ------------------------------------
(State or other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
333 TECHNOLOGY DRIVE, SUITE 210 SOUTHPOINTE, CANONSBURG, PENNSYLVANIA 15317
---------------------------------------------------------------------------
(Address of Principal Executive Offices)
(Zip Code)
(724) 746-6001
----------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or 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 [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of Common Stock as of the latest practicable date:
Class Outstanding at October 31, 2000
----- -------------------------------
Common Stock, $.01 par value 7,012,151
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UBICS, INC.
Form 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
PART I - - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as of December 31, 1999 and September 30, 2000........................... 3
Statements of Operations for the three months ended September 30, 1999
and 2000 and the nine months ended September 30, 1999 and 2000.......................... 4
Statements of Cash Flows for the nine months ended September 30, 1999 and 2000.......... 5
Notes to Unaudited Financial Statements................................................. 6
Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition... 8
PART II - - OTHER INFORMATION
Item 1. Legal Proceedings........................................................................ 13
Item 2. Changes in Securities and Use of Proceeds................................................ 13
Item 3. Defaults upon Senior Securities.......................................................... 14
Item 4. Submission of Matters to a Vote of Security Holders...................................... 14
Item 5. Other Information........................................................................ 14
Item 6. Exhibits and Reports on Form 8-K......................................................... 14
SIGNATURES........................................................................................ 17
</TABLE>
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UBICS, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1999 2000
------------ -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 12,027 $ 10,613
Accounts receivable, net of allowance for
doubtful accounts of $885
and $1,100, respectively 4,103 5,127
Unbilled receivables 2,363 3,759
Employee advances 52 99
Prepaids and other 299 370
Deferred tax asset 495 495
-------- --------
Total current assets 19,339 20,463
-------- --------
Property and equipment:
Leasehold improvement 40 40
Vehicles 89 89
Computer equipment and software 1,732 2,161
Furniture and fixtures 662 692
Office and other equipment 42 51
-------- --------
Total property and equipment 2,565 3,033
Accumulated depreciation (470) (741)
-------- --------
Net property and equipment 2,095 2,292
-------- --------
Goodwill, net 1,655
Other long term assets 250 983
-------- --------
Total assets $ 21,684 $ 25,393
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable 1,981 2,627
Payroll liabilities 1,717 2,329
Other current liabilities 97 874
Due to affiliates, net -- 108
-------- --------
Total liabilities 3,795 5,938
-------- --------
Common stock subject to redemption, 183,200 shares
issued and outstanding 550
Stockholders' equity:
Preferred stock, $.01 par value, 2,000,000
shares authorized, no shares issued and
outstanding -- --
Common stock, $.01 par value, 20,000,000
shares authorized, 6,500,000 shares and
6,749,121 shares issued, respectively 65 69
Additional paid-in capital 13,160 14,033
Treasury stock - 20,200 shares, at cost (100) (100)
-------- --------
Retained earnings 4,764 4,903
======== ========
Total stockholders' equity 17,889 18,905
-------- --------
Total liabilities and stockholders' equity $ 21,684 $ 25,393
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements
3
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UBICS, INC.
STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
----------------------------- -----------------------------
1999 2000 1999 2000
(unaudited) (unaudited) (unaudited) (unaudited)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 9,603 $ 11,409 $ 28,320 $ 30,776
Cost of revenues 6,893 8,194 20,486 22,351
---------- ---------- ---------- ----------
Gross profit 2,710 3,215 7,834 8,425
Selling, general and
administrative expense 2,254 2,753 6,530 8,378
Merger related expenses -- -- 869 --
---------- ---------- ---------- ----------
Income from operations 456 462 435 47
Interest income (expense), net 136 159 396 488
---------- ---------- ---------- ----------
Income before income taxes 592 621 831 535
Provision for income taxes 256 302 358 396
---------- ---------- ---------- ----------
Net income $ 336 $ 319 $ 473 $ 139
========== ========== ========== ==========
Basic and diluted earnings per share $ 0.05 $ 0.05 $ 0.07 $ 0.02
========== ========== ========== ==========
Weighted average shares outstanding 6,479,800 6,883,954 6,479,800 6,615,501
Diluted average shares outstanding 6,481,234 6,899,290 6,482,153 6,744,655
</TABLE>
The accompanying notes are an integral part of these financial statements
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UBICS, INC.
STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months
Ended September 30,
---------------------------
1999 2000
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 473 $ 138
Adjustments to reconcile net
income to net cash provided by
operating activities--
Depreciation 204 271
Amortization of goodwill 28
Stock based compensation 252
Changes in operating assets and
liabilities--
Accounts receivable, net (631) (943)
Unbilled receivables 144 (1,396)
Employee advances 66 (47)
Other long term asset (50) (733)
Due to affiliates, net (19) 108
Deferred tax asset (53)
Prepaids and other (253) (65)
Accounts payable 669 488
Payroll liabilities 414 559
Accrued taxes and other
current liabilities 38 777
-------- --------
Net cash (used) provided by
operating activities 1,002 (561)
-------- --------
Cash flows from investing activities:
Purchases of property and
equipment (419) (315)
Merger related expenses -- (388)
-------- --------
Net cash used by investing
activities (419) (704)
-------- --------
Net increase (decrease) in cash
and cash equivalents 583 (1,414)
Cash and cash equivalents, at
beginning of period 11,470 12,027
-------- --------
Cash and cash equivalents, at
end of period $ 12,053 $ 10,613
======== ========
Supplemental data:
Cash payments for income taxes $ 750 $ 750
Stock issued for purchase of
Cobalt Creative, Inc. -- 1,175
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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UBICS, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
1. BASIS OF PRESENTATION:
The financial statements of UBICS, Inc. ("UBICS" or the "Company") presented
herein are unaudited. Certain information and footnote disclosures normally
prepared in accordance with generally accepted accounting principles have been
either condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. Although the Company believes that all
adjustments, consisting of only normal recurring adjustments, necessary for a
fair presentation have been made, interim periods are not necessarily indicative
of the financial results of operations for a full year. As such, these financial
statements should be read in conjunction with the financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for its fiscal year
ended December 31, 1999 filed on March 30, 2000.
2. OPERATIONS:
UBICS, a Delaware corporation, provides information technology professional
services to large and mid-sized organizations. The Company provides its clients
with a wide range of professional services in such areas as client/server design
and development, enterprise resource planning package implementation and
customization, e-commerce applications design and development, applications
maintenance programming and database and systems administration.
3. RELATED PARTY TRANSACTIONS:
As of September 30, 2000, the Company had a net payable to the UB Group,
totaling $108, resulting from share of rent payable to the UB Group for premises
occupied by the Company in Sausalito, California and Bangalore, India.
4. EARNINGS PER SHARE:
Under Financial Accounting Standards Board Statement on Financial Accounting
Standards ("SFAS") No. 128, "Earnings Per Share," earnings per share are
classified as basic earnings per share and diluted earnings per share. Basic
earnings per share included only the weighted average common shares outstanding.
Diluted earnings per share included the weighted average common shares
outstanding and any dilutive common stock equivalent shares in the calculation.
All prior periods have been restated to reflect the Company's adoption of SFAS
No. 128. Treasury shares are treated as retired for earnings per share purposes.
The following table reflects the calculation of earnings per share under
SFAS No. 128:
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<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30 1999 2000
------------------------------- --------- ---------
(Dollars in thousands, except per share data)
<S> <C> <C>
BASIC EARNINGS PER SHARE
Net income $ 336 $ 319
DIVIDED BY:
Weighted average common shares 6,479,800 6,883,954
Basic earnings per share $0.05 $0.05
--------- ---------
DILUTED EARNINGS PER SHARE:
Net income $ 336 $ 319
DIVIDED BY:
Weighted average common shares 6,479,800 6,883.954
Dilutive effect of options 1,434 15,336
--------- ---------
Dilutive average common shares 6,481,234 6,899,290
Diluted earnings per share $0.05 $0.05
NINE MONTHS ENDED SEPTEMBER 30 1999 2000
------------------------------ --------- ---------
(Dollars in thousands, except per share data)
BASIC EARNINGS PER SHARE
Net income $ 473 $ 139
DIVIDED BY:
Weighted average common shares 6,479,800 6,615,501
Basic earnings per share $0.07 $0.02
--------- ---------
DILUTED EARNINGS PER SHARE:
Net income $ 473 $ 139
DIVIDED BY:
Weighted average common shares 6,479,800 6,615,501
Dilutive effect of options 2,353 129,154
--------- ---------
Dilutive average common shares 6,482,153 6,744,655
Diluted earnings per share $0.07 $0.02
</TABLE>
The exercise price of stock options to purchase an aggregate of 391,000
shares for the three months and nine months ended September 30, 1999 and
1,111,000 shares and 411,000 shares for the comparable period in 2000,
respectively, is less than the average stock price for the period and such
options have been excluded from the calculation of diluted earnings per share as
the effect would be anti-dilutive.
5. ACQUISITION:
The Company completed the acquisition of Cobalt Creative, Inc., an Arizona
corporation, on July 7, 2000 by issuing 432,351 shares of the Company's Common
Stock for 100% of Cobalt.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following discussion should be read in conjunction with, and is
qualified in its entirety by, the financial statements and notes thereto
included in Item 1 of this report.
The following Management's Discussion and Analysis of Results of
Operations and Financial Condition contains certain forward looking statements
that involve substantial risks and uncertainties. When used in this section, the
words "anticipate," "believe," "estimate," "expect" and similar expressions as
they relate to the Company or its management are intended to identify such
forward looking statements. The factors that may cause actual results to differ
materially from the forward-looking statements include ability to recruit and
maintain qualified IT professionals, changes in laws and regulations
specifically immigration laws, competition and economic conditions in the
geographic regions in which the Company conducts its operations, general
economic conditions, success of the Company's marketing efforts and the demand
for outsourced IT professionals. The Company's actual results, performance or
achievements could differ materially from the results expressed in, or implied
by, these forward looking statements.
OVERVIEW
UBICS, Inc. ("UBICS" or the "Company"), founded in 1993, provides IT
professional services to large and mid-sized organizations. UBICS provides its
clients with a wide range of professional services in such areas as
client/server design and development, enterprise resource planning ("ERP")
package implementation and customization, e-commerce applications design and
development, applications maintenance programming and database and systems
administration. UBICS' services are provided primarily on a time-and-materials
basis to client-managed projects, with UBICS IT professionals providing integral
support as project team members. With respect to website design and development
projects, UBICS' services are provided on a fixed price basis. The Company
completed the acquisition of Cobalt Creative, Inc., an Arizona corporation, in
July 2000. The Company currently has offices in the Pittsburgh, Pennsylvania,
San Francisco, California and Scottsdale, Arizona areas. UBICS is an affiliate
of the UB Group, a multinational group of companies headquartered in India (the
"UB Group").
The Company's revenues are based on the hourly billing of its IT
professional services and on the fixed prices for its website design and
development services. Revenue is recognized as services are provided. The
Company has increased the average billing rates of its IT professionals as the
demand for skilled and experienced professionals has expanded, in particular for
IT professionals placed on ERP package implementation and customization
projects. As of September 30, 2000, 69 IT professionals, or over one-fifth of
the Company's deployed IT professionals, were placed on such projects.
UBICS effectively minimizes the number of days IT professionals are not
assigned to projects by proactively marketing these professionals to clients.
Resource managers closely monitor the availability of IT professionals and
utilize subcontractors when UBICS IT professionals are unavailable. The Company
maintains strong relationships with nearly 80 subcontractors located worldwide.
Approximately 36% of the Company's revenues were derived from IT professionals
deployed from subcontractors for the three months ended September 30, 2000. As
of September 30, 2000, IT professionals deployed from subcontractors comprised
122 of the Company's 337 deployed IT professionals. The Company believes that
its network of subcontractors enables it to maintain closer relationships with
clients by fulfilling more of their needs for IT professional services.
Management believes that as the Company increases its investment in recruiting
and retaining qualified IT professionals, the ratio of UBICS IT professionals to
subcontractor IT professionals will increase.
Since inception the Company has developed relationships with 550
clients in a range of industries and currently has IT professionals deployed at
over 190 of these clients. The Company's five largest clients accounted for
approximately 21% of revenues for the third quarter of 2000. While this revenue
concentration has remained fairly constant over the last four quarters, the
Company believes that continuing growth in its client base and revenues should
reduce the percentage of revenue attributable to its largest clients. The
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Company's strategy is to continue to provide services to clients across the U.S.
in a range of industries, in order to reduce credit risk from conditions or
occurrences within any specific industry or region in which these clients
operate.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected
statements of operations data as a percentage of revenues:
<TABLE>
<CAPTION>
PERCENTAGE OF REVENUES
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------- -------------------
1999 2000 1999 2000
----- ----- ----- -----
<S> <C> <C> <C> <C>
Revenues ................... 100.0% 100.0% 100.0% 100.0%
Cost of revenues ........... 71.8 71.8 72.3 72.6
----- ----- ----- -----
Gross profit ............... 28.2 28.2 27.7 27.4
Selling, general and
administrative expense.... 23.4 24.2 23.0 27.2
Merger related expenses .... -- -- 3.1 --
----- ----- ----- -----
Income from operations ..... 4.8 4.0 1.6 0.2
Interest income net ........ 1.4 1.4 1.4 1.6
----- ----- ----- -----
Income before income taxes.. 6.2 5.4 3.0 1.8
Provision for income taxes.. 2.7 2.6 1.3 1.3
----- ----- ----- -----
Net income ................. 3.5% 2.8% 1.7% 0.5%
===== ===== ===== =====
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1999.
Revenues
Revenues for the quarter ended September 30, 2000 were $11.4 million,
compared to $9.6 million for the quarter ended September 30, 1999, an increase
of $1.8 million, or 19%. The increase in revenues was due to an increase in the
number of IT professionals deployed to provide services to new and existing
clients.
Gross Profit
Gross profit for the third quarter of 2000 was $3.2 million, compared
to $2.7 million for the third quarter of 1999, an increase of $0.5 million, or
19%. Gross profit as a percentage of revenues remained at 28.2% for the two
comparable quarters.
Selling, General and Administrative Expense
Selling, general and administrative expense for the quarter ended
September 30, 2000 was $2.8 million, compared to $2.2 million for the same
quarter of 1999, an increase of $0.5 million, or 22%. Selling, general and
administrative expense as a percentage of revenues increased to 24.2% for the
third quarter of 2000 from 23.4% for the third quarter of 1999. The increase in
expense was primarily due to greater salary expense due to staff and executive
restructurings in 2000.
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Interest Income Net
Interest income for the third quarter of 2000 was $159,000, compared to
interest income of $136,000 for the third quarter of 1999. The increase resulted
from reinvesting of interest earned on the short term investments.
Provision for Income Taxes
The Company's effective tax rate was 48.6% for the third quarter ended
September 30, 2000 compared to 43.2% for the quarter ended September 30, 1999.
The increase is mainly due to book losses in foreign countries and various
states offset by the Company establishing valuation allowance against these
losses.
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1999.
Revenues
Revenues for the nine months ended September 30, 2000 were $30.8
million, compared to $28.3 million for the nine months ended September 30, 1999,
an increase of $2.5 million, or 9%. The increase in revenues was due to an
increase in the number of IT professionals deployed to provide services to new
and existing clients.
Gross Profit
Gross profit for the first nine months of 2000 was $8.4 million,
compared to $7.8 million for the first nine months of 1999, an increase of $0.6
million, or 8%. Gross profit as a percentage of revenues decreased to 27.4% for
the nine months ended September 30 2000, compared to 27.7% for the same period
of 1999. The decrease in gross profits as a percentage of revenues was due to an
increase in the number of employee professionals waiting to be deployed.
Selling, General and Administrative Expense
Selling, general and administrative expense for the nine months ended
September 30, 2000 was $8.4 million, compared to $6.5 million for the same
period of 1999, an increase of $1.9 million or 28%. Selling, general and
administrative expense as a percentage of revenues increased to 27.2% for the
nine months ended September 30, 2000 from 23.0% for the nine months ended
September 30, 1999. The increase in expense was primarily due to one-time
expenses aggregating $0.9 million and greater salary expense due to staff and
executive restructurings in 2000. The one-time expenses included $450,000
payable to the Company's former Chief Executive Officer as part of his severance
agreement, $100,000 paid to the Company's new Chief Executive Officer as a
signing bonus pursuant to his employment agreement and $352,000 representing the
value of 100,000 shares of common stock granted to the Company's new Chief
Executive Officer pursuant to his employment agreement.
Merger Related Expenses
Merger related expenses for the nine months ended September 30, 1999
were $0.9 million. These expenses as a percentage of revenue were 3.1%. These
expenses relate to the aborted acquisition of privately held R Systems, Inc and
are one-time in nature.
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Interest Income Net
Interest income for the first nine months of 2000 was $488,000,
compared to interest income of $396,000 for the first nine months of 1999. The
increase resulted from reinvesting of interest earned on the short term
investments.
Provision for Income Taxes
The Company's effective tax rate was 74.3% for the nine months ended
September 30, 2000 compared to 43.1% for the nine months ended September 30,
1999. The increase is mainly due to book losses in foreign countries and
various states offset by the Company establishing valuation allowance against
these losses.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal uses of $13.2 million generated out of the
Company's initial public offering in 1997 (the "Offering") cash have been to
fund receivables and other working capital, reflecting the Company's growth. Net
cash used by operating activities was $710,000 for the first nine months of 2000
compared to net cash generated by operating activities of $1,002,000 for the
same period in 1999.
Capital expenditures for the first nine months of 2000 and 1999 were
$315,000 and $419,000, respectively. The Company intends to use approximately
$2.0 million of the remaining net proceeds of the Offering to expand its
existing operations, including approximately $1.2 million for the expansion of
the Company's recruiting and training center in India. The initial phase of the
center was placed in operation in the fall of 1998 and the expansion is expected
to be operational by the end of 2000 (including additional purchase of hardware
and software with respect thereto). Because the Company currently has a
sufficient supply of IT professionals awaiting deployment, as well as a shift in
the Company's strategic focus in favor of domestic sales growth, the Company has
deferred previously disclosed plans to establish offshore recruiting offices in
various foreign locations. Except as set forth above, the Company currently has
no material commitments for capital expenditures.
The Company currently anticipates that the remaining net proceeds from
the Offering, together with the existing sources of liquidity and cash generated
from operations, will be sufficient to satisfy its cash needs at least through
the next twelve months.
RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS No. 133). The Statement establishes
accounting and reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability measured at its
fair value. The Statement requires that the changes in the derivative's fair
value be recognized currently in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows a derivative's
gains and losses to offset related results on the hedged item in the income
statement, and requires that a company must formally document, designate, and
assess the effectiveness of transactions that receive hedge accounting. SFAS No.
133 was originally effective for fiscal years beginning after June 15, 1999.
In June 1999, the FASB issued Statement of Financial Accounting
Standards No. 137, "Accounting for Derivative Instruments and Hedging Activities
- Deferral of the Effective Date of FASB Statement No. 133" ("SFAS 137")
delaying the effective date of SFAS 133 for all fiscal years beginning after
June 15, 2000.
The Company does not believe there will be a material impact on the
financial statements related to this FASB.
In December 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin No. 101, "Revenue Recognition" ("SAB No. 101"), to provide
guidance on the recognition, presentation and
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disclosure of revenue in financial statements. SAB No. 101 explains the SEC's
general framework for revenue recognition. SAB No. 101 does not change existing
literature on revenue recognition, but rather clarifies the SEC's position on
preexisting literature. This SAB must be adopted by the Company by December 31,
2000. While the Company has not completed the review of the effect of the SAB,
management does not presently believe that its adoption will have a significant
impact on financial position or results of operations.
U.S. REGULATION OF IMMIGRATION
The Company's services historically have been performed in the U.S. and
the Company has recruited most of its IT professionals outside the U.S. The
Company's business, therefore, is subject to U.S. immigration laws. Over 90% of
the Company's IT professionals are citizens of other countries, with most of
those in the U.S. working under H-1B temporary work permits. There is a limit on
the number of new H-1B permits that may be approved in any U.S. government
fiscal year. In the federal fiscal year ended September 30, 1999, this limit was
reached in June and in the federal fiscal year ended September 30, 2000, this
limit was reached in March. The inability to obtain additional H-1B permits
during the federal fiscal years ended September 30, 1999 and 2000 resulted in
increased use of subcontractor professionals by UBICS.
In October 2000, the U.S. government increased the limit of new H-1B
permits to 195,000 for each of the next three federal fiscal years starting from
fiscal year 2001.
In the current federal fiscal year, and in future years where the limit
on H-1B permits is reached, the Company may again be unable to obtain enough
H-1B permits to meet its requirements. If the Company were unable to obtain H-1B
permits for its IT professionals in sufficient quantities or at a sufficient
rate, the Company's business, operating results and financial condition could be
materially adversely affected.
The U.S. Government, in connection with its increase in the limit on
H-1B permits, also imposed a fee to be paid by companies for new approvals and
for renewals. UBICS does not anticipate that the imposition of such fees will
have a material adverse impact on its results of operations.
Congress and administrative agencies with jurisdiction over immigration
matters have periodically expressed concerns over the levels of legal and
illegal immigration into the U.S. These concerns have often resulted in proposed
legislation, rules and regulations aimed at reducing the number of work permits
that may be issued. Any changes in such laws making it more difficult to hire
foreign nationals or limiting the ability of the Company to retain foreign
employees could require the Company to incur additional unexpected labor costs
and expenses. Any such restrictions or limitations on the Company's hiring
practices could have a material adverse effect on the Company's business,
operating result and financial condition.
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PART II -- OTHER INFORMATION
Item 1. Legal Proceedings -- Not Applicable
Item 2. Changes in Securities and Use of Proceeds -- Not applicable
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) The following information relates to the Company's use of
the net proceeds of the Company's initial public offering (the
"Offering"):
On October 27, 1997, the Company's registration statement on
Form S-1, No. 333-35171, became effective. The Company sold a total of
1,500,000 shares of common stock, par value $.01 per share at a price
per share of $10.00 pursuant to the Offering. The Offering, which was
managed by Parker/Hunter Incorporated, as lead underwriter, and Scott &
Stringfellow, Inc., as co-manager, closed on November 4, 1997.
The following table summarizes the expenses incurred for the
Company's account in connection with the Offering:
Underwriting discounts $1,050,000
Finder's fees --
Expenses paid to or for underwriters --
Other expenses 775,000
----------
TOTAL $1,825,000
The following table summarizes the amount of net offering
proceeds to the Company ($13,175,000) used for the purposes
listed below:
Construction of plant, building
and facilities $0
Purchase and installation of machinery
and equipment 3,205,000
Acquisition of other business(es) 0
Repayment of indebtedness 775,000
Working capital 0
Temporary investments* 9,195,000
Other Purposes 0
-----------
Total $13,175,000
------------
* Approximately $5,500,000 of such amount is currently invested in a
Prudential money market mutual fund with the balance invested in
certificates of deposit with PNC Bank.
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Item 3. Defaults Upon Senior Securities -- Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders -- Not Applicable
Item 5. Other Information -- Not Applicable
Item 6. Exhibits and Reports on Form 8-K
<TABLE>
<CAPTION>
(a) Exhibits:
<S> <C>
3(i) Amended and Restated Certificate of Incorporation of UBICS, Inc. (1)
3(ii) Amended and Restated Bylaws of UBICS, Inc. (1)
10.1 UBICS, Inc. 1997 Stock Option Plan (2)
10.2 Noncompetition Agreement dated October 27, 1997 among the Company,
Vijay Mallya and UB Information Consultancy Services, Ltd. (3)
10.3 Employment Agreement between the Registrant and Vijay Mallya(3)
10.4 Employment Agreement between the Registrant and Manohar B. Hira (3)
10.6 Employment Agreement between the Registrant and Babu Srinivas (3)
10.7 Employment Agreement dated September 1, 1999 between the Registrant and
Dennis M. Stocker (4)
10.8 Agreement of Severance, Waiver and Release dated March 18, 1999 between the
Company and Manohar B. Hira (5)
10.9 Services Agreement dated October 27, 1997 among the Company,
Vijay Mallya and United Breweries Limited (3)
10.10 Form of Director Indemnification Agreement (3)
10.11 Form of Sublease and Consent among the Company, Marin Executive Park and
United Breweries of American, Inc. (3)
10.12 Noncompetition Agreement dated October 27, 1997 among the Company, Vijay
Mallya and United Breweries Limited (3)
10.13 Noncompetition Agreement dated October 27, 1997 among the
Company, Vijay Mallya and UB International Limited (3)
10.14 Services Agreement dated October 27, 1997 among the Company, Vijay Mallya and
UB International Limited (3)
10.15 Lease Agreement dated June 30, 1998 between the Company and Stealth Technology
Associates (6)
</TABLE>
14
<PAGE> 15
<TABLE>
<CAPTION>
<S> <C>
10.16 Amendment to Agreement of Severance Waiver and Release dated December 1, 1999
between the Company and Manohar B. Hira (7)
10.17 Amendment No. 2 to Agreement of Severance Waiver and Release dated as of
March 31, 1999 between the Company and Manohar B. Hira (7)
10.18 Amendment No. 3 to Agreement of Severance Waiver and Release dated as of
March 31, 1999 between the Company and Manohar B. Hira (8)
10.19 Employment Agreement dated June 22, 1998 between the Company and
Patrick Ghilani (8)
10.20 Agreement dated August 20, 1999 between the Company and Patrick Ghilani (8)
10.21 Amendment to Employment Agreement dated as of January 1, 2000 between the
Company and Babu Srinivas (8)
10.22 Employment Agreement dated June 7, 2000 between the Company and Robert C.
Harbage (9)
10.22 Acquisition and Stock Exchange Agreement dated July 5, 2000 among the Company,
Cobalt Creative, Inc. and the Shareholders of Cobalt Creative, Inc. (9)
27 Financial Data Schedule
</TABLE>
(1) Incorporated by reference to the registrant's Registration Statement on
Form S-1, No. 333-35171, filed September 8, 1997.
(2) Incorporated by reference to the registrant's Schedule 14A filed on
November 5, 1999.
(3) Incorporated by reference to Post-Effective Amendment No. 1 to the
registrant's Registration Statement on Form S-1, No. 333-35171, filed
October 29, 1997.
(4) Incorporated by reference to the registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1999.
(5) Incorporated by reference to the registrant's Annual Report on Form 10-K for
the year ended December 31, 1998.
(6) Incorporated by reference to the registrant's Quarterly Report on Form 10-A
for the quarter ended September 30, 1998.
(7) Incorporated by reference to the registrant's Annual Report on Form 10-K
for the year ended December 31, 1998.
(8) Incorporated by reference to the registrant's Quarterly Report on Form 10-Q
for the quarter ended March 31, 2000.
(9) Incorporated by reference to the registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 2000.
15
<PAGE> 16
(b) Reports on Form 8-K:
No reports on Form 8-K were filed for the three months ended
September 30, 2000.
16
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has caused the report to be signed on its behalf by the
undersigned thereunto duly authorized.
UBICS, Inc.
(Registrant)
Date: November 14, 2000
By: /s/ Robert C. Harbage
------------------------------------
Robert C. Harbage
President
By: /s/ Babu Srinivas
------------------------------------
Babu Srinivas
Vice President - Finance and
Acting Chief Financial Officer
17
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<CAPTION>
No. Description Page
--- ----------- ----
<S> <C> <C>
3(i) Amended and Restated Certificate of Incorporation of UBICS, Inc. (1)
3(ii) Amended and Restated Bylaws of UBICS, Inc. (1)
10.1 UBICS, Inc. 1997 Stock Option Plan (2)
10.2 Noncompetition Agreement dated October 27, 1997 among the Company, Vijay
Mallya and UB Information Consultancy Services , Ltd. (3)
10.3 Employment Agreement between the Registrant and Vijay Mallya (3)
10.4 Employment Agreement between the Registrant and Manohar B. Hira (3)
10.6 Employment Agreement between the Registrant and Babu Srinivas(3)
10.7 Employment Agreement dated September 1, 1999 between the Registrant and Dennis
M. Stocker (4)
10.8 Agreement of Severance, Waiver and Release dated March 18, 1999 between the
Company and Manohar B. Hira (5)
10.9 Services Agreement dated October 27, 1997 among the Company, Vijay Mallya and
United Breweries Limited (3)
10.10 Form of Director Indemnification Agreement (3)
10.11 Form of Sublease and Consent among the Company, Marin Executive Park and
United Breweries of American, Inc. (3)
10.12 Noncompetition Agreement dated October 27, 1997 among the Company,
Vijay Mallya and United Breweries Limited(3)
10.13 Noncompetition Agreement dated October 27, 1997 among the
Company, Vijay Mallya and UB International Limited (3)
10.14 Services Agreement dated October 27, 1997 among the Company, Vijay Mallya and
UB International Limited (3)
10.15 Lease Agreement dated June 30, 1998 between the Company and Stealth Technology
Associates (6)
10.16 Amendment to Agreement of Severance Waiver and Release dated December 1, 1999
between the Company and Manohar B. Hira (7)
10.17 Amendment No. 2 to Agreement of Severance Waiver and Release dated as of
March 31, 1999 between the Company and Manohar B. Hira (7)
</TABLE>
18
<PAGE> 19
EXHIBIT INDEX
<TABLE>
<CAPTION>
No. Description Page
--- ----------- ----
<S> <C> <C>
10.18 Amendment No. 3 to Agreement of Severance Waiver and Release dated as of
March 31, 1999 between the Company and Manohar B. Hira (8)
10.19 Employment Agreement dated June 22, 1998 between the Company and
Patrick Ghilani (8)
10.20 Agreement dated August 20, 1999 between the Company and Patrick Ghilani (8)
10.21 Amendment to Employment Agreement dated as of January 1, 2000 between the
Company and Babu Srinivas (8)
10.22 Employment Agreement dated June 7, 2000 between the Company and
Robert C. Harbage (9)
10.22 Acquisition and Stock Exchange Agreement dated July 5, 2000 among the Company,
Cobalt Creative, Inc. and the Shareholders of Cobalt Creative, Inc. (9)
27 Financial Data Schedule
</TABLE>
(1) Incorporated by reference to the registrant's Registration Statement on
Form S-1, No. 333-35171, filed September 8, 1997.
(2) Incorporated by reference to the registrant's Schedule 14A filed on
November 5, 1999.
(3) Incorporated by reference to Post-Effective Amendment No. 1 to the
registrant's Registration Statement on Form S-1, No. 333-35171, filed
October 29, 1997.
(4) Incorporated by reference to the registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1999.
(5) Incorporated by reference to the registrant's Annual Report on Form 10-K
for the year ended December 31, 1998.
(6) Incorporated by reference to the registrant's Quarterly Report on Form 10-A
for the quarter ended September 30, 1998.
(7) Incorporated by reference to the registrant's Annual Report on Form 10-K
for the year ended December 31, 1998.
(8) Incorporated by reference to the registrant's Quarterly Report on Form 10-Q
for the quarter ended March 31, 2000.
(9) Incorporated by reference to the registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 2000.
19