SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[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 _____
033-36198
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Commission File Number
RETURN ON INVESTMENT CORPORATION
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(Name of Small Business Issuer in its Charter)
DELAWARE 22-3038309
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1825 BARRETT LAKES BLVD, SUITE 260, KENNESAW, GEORGIA 30144
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (770) 517-4750
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
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PART I. FINANCIAL INFORMATION
Page
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets (unaudited) as of
September 30, 2000 and June 30, 1999 2-4
Consolidated Statements of Operations (unaudited) for
the three months ended September 30, 2000 and 1999 4
Consolidated Statements of Cash Flows (unaudited) for the three
months ended September 30, 2000 and 1999 5
Notes to Consolidated Financial Statements 5-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-9
PART II. OTHER INFORMATION 9-10
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
Signatures 10
PART I. - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements included herein have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
The consolidated balance sheet as of September 30, 2000; the consolidated
statements of operations for the three months ended September 30, 2000 and
September 30, 1999; and the consolidated statements of cash flows for the three
months ended September 30, 2000 and September 30, 1999 have been prepared
without audit. The consolidated balance sheet as of June 30, 2000 has been
examined by independent certified public accountants. 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 such rules and regulations, although the Company believes
that the disclosures herein are adequate to make the information presented not
misleading. It is suggested that these consolidated financial statements be read
in conjunction with the financial statements and the notes thereto included in
the Company's Form 8-KA filed on October 26, 2000.
In the opinion of the Company, the statements for the unaudited interim periods
presented include all adjustments, which were of a normal recurring nature,
necessary to present a fair statement of the results of such interim periods.
The results of operations for the interim periods presented are not necessarily
indicative of the results of operations for the entire year.
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RETURN ON INVESTMENT CORPORATION
CONSOLIDATED BALANCE SHEETS
Sept 30, June 30,
2000 2000
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(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 4,451,587 $ 28,568
Accounts receivable 724,769 612,308
Other 155,717 131,503
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Total current assets 5,332,073 772,379
Property and equipment, net 935,773 939,685
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$ 6,267,846 $ 1,712,064
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See accompanying notes to consolidated financial statements.
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RETURN ON INVESTMENT CORPORATION
CONSOLIDATED BALANCE SHEETS
Sept. 30, June 30,
2000 2000
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(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 105,747 $ 104,673
Accrued expenses 248,045 230,076
Deferred revenue 490,576 683,062
Current portion of
long-term debt-due shareholder -- 198,484
Current portion of
long-term debt-other -- 22,292
Note Payable -- 200,000
Other long term liabilities 72,000 72,000
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Total current liabilities 916,368 1,510,587
Long-term debt due shareholder,
less current portion -- 490,548
Long-term debt-other,
less current portion -- 16,701
Other long-term liabilities 257,025 257,025
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Total liabilities 1,173,393 2,274,861
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SHAREHOLDERS' EQUITY (CAPITAL DEFICIT)
Common stock $.01 par value; 100,000,000
shares authorized; 9,239,352 and 6,606,851
shares issued and outstanding, respectively 31,039 5,039
Additional paid-in capital 5,911,550 84,511
Deficit (848,136) (652,347)
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Total shareholders' equity 5,094,453 (562,797)
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$ 6,267,846 $ 1,712,064
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See accompanying notes to consolidated financial statements.
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RETURN ON INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(Unaudited)
Three Months Ended
Sept. 30, Sept. 30,
2000 1999
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Revenues
License fees $ 676,109 $ 307,023
Support and update services 203,968 101,970
Other 145 15,980
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Total revenues 880,222 424,973
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Expenses
General and administrative 742,912 397,455
Merger Expense 246,294 --
Sales and marketing 96,866 55,246
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Total operating expenses 1,086,072 452,701
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Loss from operations (205,850) (27,728)
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Interest income(expense) 10,061 (22,056)
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Net loss before taxes (195,789) (49,784)
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Taxes on loss -- --
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Net loss $ (195,789) $ (49,784)
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Basic and diluted loss
per common share $ (0.03) $ (0.01)
============ ============
Basic and diluted weighted -
average common shares
outstanding 7,815,780 6,443,340
============ ============
See accompanying notes to consolidated financial statements.
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RETURN ON INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(Unaudited)
Three Months Ended
Sept. 30, Sept. 30,
2000 1999
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Operating activities
Net loss $ (195,789) $ (49,784)
Adjustments to reconcile net
loss to cash used in
operating activities
Depreciation and
amortization 79,795 80,096
Changes in operating
assets and liabilities:
Accounts receivable (112,461) 123,254
Other assets (24,214) --
Accounts payable and
accrued expenses 19,043 (67,883)
Deferred revenue (192,486) 27,234
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Cash used in operating
activities (426,112) 112,917
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Investing activity
Capital expenditures (75,883) --
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Financing activities
Payments on note payable (200,000) --
(Payments on) additions to (728,025) 11,915
long-term debt
Net proceeds from sale of
common stock 5,853,039 --
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Cash provided by
financing activities 4,925,014 11,915
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Increase/(decrease) in cash 4,423,019 124,832
Cash, beginning of period 28,568 --
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Cash, end of period $ 4,451,587 $ 124,832
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See accompanying notes to consolidated financial statements.
<PAGE>
RETURN ON INVESTMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Summary of Significant Accounting Policies
The Company
Return On Investment Corporation d/b/a ROI Corporation (the "Company") develops
software for the IBM ISERIES (formerly IBM AS/400) computer system and provides
related services. The software is categorized as "e-transaction middleware,"
meaning that it processes electronic transactions primarily related to credit
card and check processing as part of retail, mail order, and Internet e-commerce
applications.
On August 10, 2000, the Company completed a reverse merger that merged Results
Oriented Integration Corporation ("ROI") into Net/Tech International, Inc.
("NTTI"), a public company that had no operations and changed the name of the
public company to Return On Investment Corporation. As a result of the reverse
merger, ROI's shareholders have a controlling interest in the Company, ROI
management replaced the Company's management, and the name of the Company was
changed to Return On Investment Corporation, d/b/a ROI Corporation. As such, the
transaction will be accounted for as a reverse merger. The historical financial
statements of ROI replaced the financial statements of NTTI and ROI's year end
of June 30 has been adopted by the Company. In accordance with the agreement,
NTTI issued (after a 1-for-20 reverse split) a total of 6,118,918 shares of
NTTI's Common Stock in exchange for all of the issued and outstanding shares of
ROI common stock. All share and per share data have been restated to reflect the
stock issuance as a recapitalization of ROI.
Consolidation
The accompanying consolidated financial statements included herein the accounts
of the Company and its wholly owned subsidiary. All intercompany accounts and
transactions have been eliminated in the consolidated financial statements.
Revenue Recognition
The Company recognizes product revenue upon shipment if persuasive evidence of
an arrangement exists, delivery has occurred, the fees are fixed and
determinable and collectibility is probable. During the periods presented, a
majority of revenues were derived from the shipment of software (license fees).
License fees are recognized as revenue once the underlying software is accepted
by the customer and/or installed. This is the time at which the Company believes
that revenue as described above, has occurred. Maintenance and support revenue
is deferred and recognized ratably over the contractual maintenance period,
generally one year.
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 reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Loss Per Share
Basic earnings per share is computed using the weighted-average number of common
shares outstanding during the period. Diluted earnings per share is computed
using the weighted-average number of common and common equivalent shares
outstanding during the period, if dilutive. As a result of the net losses
incurred during the periods presented, all common share equivalents were
antidilutive and accordingly, were excluded from the computation of loss per
share.
2. Private Placement Offering
In August 2000, the Company completed a $6.5 million confidential private
placement of 2,600,000 shares. After expenses, net proceeds amounted to
approximately $5.9 million. The sale of the confidential private placement units
was made in reliance upon an exemption from registration under rule 144 of the
Securities Act of 1933.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995:
Statements in this Quarterly Report which are not historical fact, including
those concerning our expectations of future sales revenues, gross profits,
research and development, sales and marketing, and administrative expenses,
product introductions and cash requirements are "forward-looking" statements.
These "forward-looking" statements are subject to risks and uncertainties that
may cause our actual results to differ from expectations including variations in
the level of orders, general economic conditions in the markets served by our
customers, international economic and political climates, timing of future
product releases, difficulties or delays in product functionality or
performance, our failure to respond adequately to either changes in technology
or customer preferences, or to changes in our pricing or that of our competitors
and our ability to manage growth. All of the above factors constitute
significant risks to our company. There can be no assurance that our results of
operations will not be adversely affected by one or more of these factors. As a
result, our actual results may vary materially from our expectations.
General
The Company markets software that processes electronic payment transactions for
companies selling through Internet e-commerce, retail outlets, and mail order
call centers. The Company's primary software is "e-transaction middleware" that
is certified to provide access to credit card and check authorization networks
for application software by companies such as Binary Tree, Computer Associates,
J.D. Edwards, Friedman Corporation, HarrisData, Intentia, LANSA, VAI, and dozens
more. The Company's customers range from small to large Internet marketers and
retailers, including companies such as Alltel, Brunswick, 800.com, IBM, and
Skytel.
The Company currently provides credit card processing software only for IBM
ISERIES (formerly IBM AS/400) computer systems in the United States. The Company
intends to continue to market the software to the IBM ISERIES marketplace in the
United States. The Company intends to use some of the capital provided its
August 10, 2000 $5,853,039 private placement offering to pay off existing debt
and to develop versions of its software for other computer systems, such as
Unix, Linux, and Windows systems. The Company also intends to expand
internationally and to pursue acquisitions of other software companies whose
products are complementary to the Company's products.
On August 10, 2000, the Company completed a reverse merger that merged Results
Oriented Integration Corporation ("ROI") into Net/Tech International, Inc.
("NTTI"), a public company that had no operations and changed the name of the
public company to Return On Investment Corporation. As a result of the reverse
merger, ROI's shareholders have a controlling interest in the Company, ROI
management replaced the Company's management, and the name of the Company was
changed to Return On Investment Corporation, d/b/a ROI Corporation. As such, the
transaction will be accounted for as a reverse merger. The historical financial
statements of ROI replaced the financial statements of NTTI and ROI's year end
of June 30 has been adopted by the Company.
In accordance with the agreement, NTTI issued (after a 1-for-20 reverse split) a
total of 6,118,918 shares of NTTI's Common Stock in exchange for all of the
issued and outstanding shares of common stock of ROI. These shares are not
registered under the Securities Act of 1933, as amended, and must be held for a
minimum of two years. 2,352,988 of these shares were delivered at closing and
3,765,930 of these shares were held in escrow, with a portion released each year
based on the Company's net income before income taxes for each fiscal year
through 2005. Each year's released shares must be held for a minimum of one
year. Except for the minimum holding period, all of these shares are subject to
piggyback registration rights which will enable the holder of such shares to
have such shares registered along with any possible future registration of
shares of the Company.
<PAGE>
Results of Operations
Three Months Ended September 30, 2000 as compared to the Three Months Ended
September 30, 1999
Revenues:
Revenues increased by $455,249 from $424,973 in the first quarter of 1999 to
$880,222 in the comparable period this year. The growth in revenues resulted
from an increase in licensing income due to (i) a new product release, and (ii)
an increase in marketing activities.
Sales and marketing expenses:
Sales and marketing expenses increased by 75% to $96,866 for the first quarter
of 2000 as compared to $55,246 for the prior comparable period. The increase
reflects our hiring of additional sales and marketing personnel together with
costs for the development of marketing materials.
General and administrative expenses:
General and administrative expenses increased by 147% to $742,912 for the three
months ended September 30, 2000 from $397,455 for the comparable period in 1999.
The increase was primarily attributable to increases in our infrastructure cost
and management hiring.
Merger expenses:
Merger expenses of $246,294 were incurred for the three months ended September
30, 2000 as a result of the merger with ROI.
Interest Income (net):
Net interest income was $10,061 for the three months ended September 30, 2000 as
compared to net interest expense of $22,056 for the comparable 1999 period. The
change was primarily attributable the repayment of all outstanding financial
institution debt offset by the investment of net proceeds from the private
placement discussed in Part II.
Net loss:
As a result of the foregoing, we experienced a net loss of $195,789 for the
quarter ended September 30, 2000 as compared to a net loss of $49,784 for the
comparable period in 1999.
Liquidity and Capital Resources:
Since inception we have financed our capital resource requirements through loans
from financial institutions in addition to operating revenues.
Operating cash flow for the quarter ended September 30, 2000 has been reduced
substantially as compared to the comparable period in 1999 due to the operating
loss and decreased accounts receivable together with increased deferred revenue
accounts. These results for operating cash flow resulted from a combination of
improved procedures in accounts receivable management and increased revenue
deferral for annual support and update service revenue.
Investing increased for the quarter ended September 30, 2000 over the comparable
period in 1999. The Company's has invested in new equipment consistent with the
goals outlined in our August 10, 2000 private placement.
Financing activities for the quarter ended September 30, 2000 include the net
proceeds from our August 10, 2000 private placement of $5,853,059 less
substantial retirement of debt in place at the end of the quarter ended
September 30, 1999. Our current indebtedness includes the capitalized portion of
the seller financed software acquisitions completed in 1999.
The Company will be using the net proceeds of $5,853,059 from our August 10,
2000 private placement to supplement our operating revenues. The Company intends
to use the proceeds from the private placement offering as follows:
approximately $1,500,000 to pay certain long-term debts, approximately $500,000
for marketing activities, approximately $2,000,000 for development of software
for the international market and for Unix, Linux and Windows systems, and the
balance for working capital. If additional funds are available, the Company
intends to use them for further marketing and international expansion, and
potential acquisitions of companies whose products are complementary to the
Company's products. As a result of the use of funds from the private placement
offering, net income from interest will likely decrease.
<PAGE>
PART II. - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On August 10, 2000 the Company completed a $6,500,000 private placement of
2,600,000 shares of common stock. First Montauk Securities Corporation acted as
the placement agent ("Placement Agent"). After reimbursement to the Placement
Agent of $38,207 of expenses and the payment of other offering expenses of
approximately $608,754, we received net proceeds of approximately $5,853,039.
The sale was made in reliance upon an exemption from registration under rule 144
of the Securities Act of 1933. See Part I - Item 2. "Management's Discussion and
Analysis" for a discussion of the use of proceeds of the private placement.
ITEM 6. EXHIBITS AND REPORTS FILED ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
(i) The Company filed a Form 8-K dated August 25, 2000 related
to a merger with Results Oriented Integration Corporation.
(ii) The Company filed a Form 8-K/A dated October 26, 2000
disclosing the audited financial statements for Results
Oriented Integration Corporation.
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SIGNATURES
Pursuant to the requirements 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.
Dated:
Return On Investment Corporation
(Registrant)
By: /s/ Charles Pecchio
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Charles Pecchio
President
By: /s/ Guy Wilcox
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Guy Wilcox
Chief Financial Officer