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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 quarter period ended June 30, 2001
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Exchange Act
For the transition period from _________ to _________
Commission File number 0-16449
RAINING DATA CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-3046892
(State of Incorporation) (IRS Employer Identification No.)
17500 Cartwright Road
Irvine, CA 92614
(Address of principal executive offices)
(949)442-4400
(Registrant's telephone number)
Check whether the issuer: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities 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 August 9, 2001 there were 16,042,835 shares of registrant's Common Stock,
$.10 par value, outstanding.
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RAINING DATA CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
Page No.
--------
Item 1. Financial Statements:
Consolidated Balance Sheets -
June 30, 2001 (Unaudited) and March 31, 2001 3
Consolidated Statements of Operations -
Three months ended June 30, 2001 and 2000
(Unaudited) 4
Consolidated Statements of Cash Flows -
Three months ended June 30, 2001 and 2000
(Unaudited) 5
Condensed Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 13
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RAINING DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, MARCH 31,
2001 2001
------------- -------------
(UNAUDITED)
ASSETS
Current Assets
Cash and Equivalents $ 1,644,000 $ 2,424,000
Trade Accounts Receivable-net of allowance of $313,000
at June 30, 2001 and $245,000 at March 31, 2001 3,202,000 2,700,000
Inventory 17,000 13,000
Other Current Assets 176,000 250,000
------------- -------------
Total Current Assets 5,039,000 5,387,000
Property, Furniture and Equipment-net 1,224,000 1,403,000
Goodwill-net 79,754,000 82,283,000
Other Assets 1,307,000 1,296,000
------------- -------------
Total Assets $ 87,324,000 $ 90,369,000
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ 3,009,000 $ 2,497,000
Accrued Liabilities 4,006,000 4,373,000
Deferred Revenue 4,499,000 4,578,000
Current Portion of Long Term Debt 237,000 328,000
------------- -------------
Total Current Liabilities 11,751,000 11,776,000
Long Term Debt-net of discount of $2,451,000 at June 30, 2001
and $2,883,000 at March 31, 2001 18,023,000 17,208,000
------------- -------------
Total Liabilities 29,774,000 28,984,000
Commitments and Contingencies - -
Stockholders' Equity
Preferred Stock: $1.00 par value; 300,000 shares
authorized, issued, and outstanding 300,000 300,000
Common Stock: $0.10 par value; 30,000,000 shares
authorized, 16,019,546 issued, and outstanding
at June 30, 2001; 16,000,887 issued and
outstanding at March 31, 2001 1,602,000 1,600,000
Paid-in Capital 119,453,000 119,294,000
Deferred Compensation (1,161,000) (1,305,000)
Accumulated Deficit (62,224,000) (58,956,000)
Foreign Currency Translation Adjustment (420,000) 452,000
------------- -------------
Total Stockholders' Equity 57,550,000 61,385,000
------------- -------------
Total Liabilities and Stockholders' Equity $ 87,324,000 $ 90,369,000
============= =============
See accompanying condensed notes to the consolidated financial statements.
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RAINING DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended June 30,
--------------------------------
2001 2000
------------ ------------
Net Revenue
Licenses $ 2,903,000 $ 814,000
Services 3,105,000 172,000
------------ ------------
Total Net Revenue 6,008,000 986,000
------------ ------------
Costs and Expenses
Cost of License Revenue 106,000 34,000
Cost of Service Revenue 1,049,000 231,000
Selling and Marketing 2,112,000 1,365,000
Research and Development 1,216,000 580,000
General and Administrative 3,920,000 706,000
------------ ------------
Total Costs and Expenses 8,403,000 2,916,000
------------ ------------
Operating Loss (2,395,000) (1,930,000)
------------ ------------
Other Expense
Interest Expense-net (823,000) (45,000)
Other Expense (50,000) -
------------ ------------
(873,000) (45,000)
------------ ------------
Loss Before Income Tax Benefit (3,268,000) (1,975,000)
Income Tax Benefit - 1,000
------------ ------------
Net Loss $ (3,268,000) $ (1,974,000)
============ ============
Basic and Diluted
Net Loss Per Share $ (0.20) $ (0.19)
============ ============
Weighted Average Number of
Common Shares Outstanding 16,009,088 10,124,026
============ ============
See accompanying condensed notes to the consolidated financial statements.
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RAINING DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended June 30,
------------------------------
2001 2000
----------- -----------
Cash flows from operating activities:
Net loss $(3,268,000) $(1,974,000)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation and amortization expense 2,349,000 99,000
Amortization of deferred compensation 286,000 269,000
Change in assets and liabilities:
Trade accounts receivable (514,000) (148,000)
Inventory (4,000) 6,000
Other current and non-current assets 63,000 (565,000)
Accounts payable and accrued liabilities 420,000 1,083,000
Deferred revenue (73,000) 44,000
----------- -----------
Net cash used for operating activities (741,000) (1,186,000)
----------- -----------
Cash flows from investing activities:
Purchase of property, furniture and equipment (21,000) (178,000)
Acquisition of software assets - (1,040,000)
----------- -----------
Net cash used for investing activities (21,000) (1,218,000)
----------- -----------
Cash flows from financing activities:
Proceeds from exercise of Incentive Stock Options 19,000 61,000
Net proceeds from issuance of Common Stock - 900,000
Proceeds from stockholder note - 1,055,000
Repayment of debt (28,000) (47,000)
----------- -----------
Net cash provided by (used in) financing activities (9,000) 1,969,000
----------- -----------
Effect of exchange rate changes on cash (9,000) (41,000)
----------- -----------
Net decrease in cash and equivalents (780,000) (476,000)
Cash and equivalents at the beginning of period 2,424,000 1,238,000
----------- -----------
Cash and equivalents at end of period $ 1,644,000 $ 762,000
=========== ===========
See accompanying condensed notes to the consolidated financial statements.
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RAINING DATA CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2001
(Unaudited)
1. INTERIM FINANCIAL STATEMENTS
The unaudited interim consolidated financial information furnished
herein reflects all adjustments, consisting only of normal recurring
items, which in the opinion of management are necessary to fairly state
the Company's financial position, the results of its operations and the
changes in its financial position for the periods presented. Certain
information and footnote disclosures, normally included in financial
statements prepared in accordance with accounting principles generally
accepted in the United States of America, have been omitted pursuant to
such SEC rules and regulations; nevertheless management of the Company
believes that the disclosures herein are adequate to make the
information presented not misleading. These consolidated financial
statements should be read in conjunction with the Company's audited
financial statements for the year ended March 31, 2001 contained in the
Company's Annual Report on Form 10-K. The results of operations for the
period ended June 30, 2001 are not necessarily indicative of results to
be expected for any other interim period or the fiscal year ending
March 31, 2002.
2. REVENUE RECOGNITION
License revenue is recognized at the time the licensed products are
shipped in accordance with SOP 97-2. Service revenue is recognized
ratably over the life of the service contracts, which is usually a
12-month period. Deferred revenue represents the amount yet to be
earned by the Company over the balance of the service contract.
3. ACCRUED LIABILITIES
Accrued liabilities consisted of the following:
June 30, 2001 March 31, 2001
------------- --------------
(Unaudited)
Accrued Salaries and Benefits $ 683,000 $ 709,000
Accrued Severance 409,000 490,000
Discontinued and redundant facilities
and contracts 2,089,000 2,219,000
Other Accrued Expenses 825,000 955,000
---------- ----------
Total $4,006,000 $4,373,000
========== ==========
4. GOODWILL AND AMORTIZATION
Goodwill is amortized over a ten year period and relates primarily to
the stock acquisition of PickAX on December 1, 2000.
The Company recorded an adjustment to goodwill for $531,000 in the
quarter ended June 30, 2001, for a change in the purchase price
allocation in accordance with APB 16.
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5. RECENT ACCOUNTING PRONOUNCEMENTS
On July 20, 2001, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) 141, Business
Combinations, and SFAS 142, Goodwill and Intangible Assets. SFAS 141 is
effective for all business combinations completed after June 30, 2001.
SFAS 142 is effective for fiscal years beginning after December 15,
2001; however, certain provisions of this Statement apply to goodwill
and other intangible assets acquired between July 1, 2001 and the
effective date of SFAS 142.
Major provisions of these Statements and their effective dates for the
Company are as follows:
o all business combinations initiated after June 30, 2001 must use
the purchase method of accounting. The pooling of interest method
of accounting is prohibited except for transactions initiated
before July 1, 2001.
o intangible assets acquired in a business combination must be
recorded separately from goodwill if they arise from contractual or
other legal rights or are separable from the acquired entity and
can be sold, transferred, licensed, rented or exchanged, either
individually or as part of a related contract, asset or liability.
o goodwill, as well as intangible assets with indefinite lives,
acquired after June 30, 2001, will not be amortized. Effective
April 1, 2002 all previously recognized goodwill and intangible
assets with indefinite lives will no longer be subject to
amortization.
o effective April 1, 2002 goodwill and intangible assets with
indefinite lives will be tested for impairment annually and
whenever there is an impairment indicator.
o all acquired goodwill must be assigned to reporting units for
purposes of impairment testing and segment reporting.
The Company will continue to amortize goodwill recognized prior to July
1, 2001 under its current method until April 1, 2002 at which time
annual and quarterly goodwill amortization of approximately $8,596,000
and $2,149,000, respectively, will no longer be recognized. By March
31, 2003 the Company will have completed a transitional fair value
based impairment test of goodwill as of April 1, 2002. Impairment
losses, if any, resulting from the transitional testing will be
recognized in the quarter ended June 30, 2002 as a cumulative effect of
a change in accounting principle.
6. DEBT
In August 2000, the Company obtained $750,000 in unsecured promissory
notes from three private parties unrelated to the Company. The notes
bear interest at 4% per annum. The two-year term notes and any accrued
interest are convertible into the Company's common stock at $6.17 per
share.
In September 2000, the Company obtained $250,000 in unsecured
promissory notes from a trust of which an individual, who was then a
Director of the Company, was a trustee and beneficiary. The two-year
note bears interest at 10% per annum.
In November 2000, as part of the PickAX acquisition, the Company
entered into a replacement two year term promissory note for
$18,525,000 with Astoria Capital Partners in exchange for PickAX's
promissory note and accrued interest to Astoria. The replacement note
accrues interest at an annual interest rate of 8% which is all due and
payable at maturity. In consideration for this exchange, the Company
issued to Astoria 500,000 warrants to purchase Company common stock at
an exercise price of $7.00 per share. The Company valued the warrants
at $6.92 per share using the Black-Scholes option pricing model. The
Company recorded the total of $3,460,000 for these warrants as a
discount to the replacement note and is amortizing the discount over
the life of the note. The note due Astoria Capital Partners is secured
by substantially all of the assets of the Company.
7. PRO FORMA FINANCIAL INFORMATION
Had the Company acquired PickAX at the beginning of the Company's
fiscal year on April 1, 2000, after making adjustments for the monthly
goodwill amortization expense arising from the acquisition and the
savings in interest from the Astoria note conversion, the unaudited pro
forma results for the three months ending June 30, 2001, would have
been approximately as follows:
Revenue $ 4,881,000
Operating Loss (5,301,000)
Net Loss Before Tax (6,075,000)
Loss per share $ (0.42)
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Item 2, as well as other portions of this document, contains
forward-looking statements about the Company's business, revenues, expenditures,
research and development efforts, operating and capital requirements, changes in
operations, integration of the acquisition of PickAX, products, cost savings and
reductions, and ability to raise capital in the future. In addition,
forward-looking statements may be included in various other Company documents to
be issued concurrently or in the future and in oral or other statements made by
representatives of the Company to investors and others from time to time.
Forward-looking statements are subject to risks and uncertainties which could
cause actual results to differ materially from predicted results.
Such risks include, among others, that the Company may not be able to integrate
the technologies, products, and operations of the two companies in a timely and
effective way; that the Company may not be able to achieve the cost reductions
or eliminate the duplicate and redundant facilities and contracts; that the
Company may not introduce new or improved products in a timely fashion or at
all; that the marketplace may not accept any new or improved products; that the
presence of competitors with greater technical, marketing and financial
resources may significantly limit the growth and impact of the Company; or that
the Company may not be able to retire the debt due in two years.
The outline of risks mentioned above and this discussion should be read in
conjunction with the discussion of "Risk Factors" in the Company's 10-KSB for
the fiscal year ended March 31, 2001.
OVERVIEW
Effective December 1, 2000 the Company completed the acquisition of PickAX, Inc,
a Delaware corporation ("PickAX"), pursuant to an Agreement and Plan of Merger
dated August 23, 2000. Concurrent with the acquisition, the Company changed its
name to Raining Data Corporation. The principal asset of PickAX is Pick Systems,
now a wholly owned subsidiary, which PickAX acquired from the estate of Richard
Pick, the founder of Pick Systems, in March 2000. Pick Systems was incorporated
in California in November 1982.
The Company's principal business is the design, development, sale, and support
of two major software products: a suite of Rapid Application Development ("RAD")
software tools; and an established multi-dimensional database management system.
The Company's products allow customers to quickly develop flexible software
solutions that can be continuously enhanced to respond to changing business and
technical needs. The Company's products support the full lifecycle of
application development and are designed for rapid development and deployment of
sophisticated Web, client/server and mobile computing applications. The
Company's RAD products are advanced, object-oriented, component-based tools,
providing the ability to deploy applications on the most popular operating
system platforms (e.g., Windows, Unix and Linux) as well as the most popular
database environments (e.g., Oracle, DB2, Sybase, Microsoft SQL Server and other
Open Data Base Connectivity ("ODBC") compatible database management systems),
including the Company's own multi-dimensional products. Similarly, the Company's
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multi-dimensional database products are designed to transparently operate in the
most popular operating environments (e.g., Windows, Unix, Linux).
The Company's products are used by in-house corporate development teams,
commercial application developers, system integrators, independent software
vendors and independent consultants to deliver pre-packaged and custom software
solutions for a wide range of users, including e-commerce, enterprise resource
planning ("ERP"), manufacturing, distribution, human resources, retail,
healthcare, insurance, government, financial management, banking, decision
support, executive information, sales and marketing, and multi-media authoring
systems.
The Company licenses its software on both a per-server basis and a per-user
basis. Additional servers and users, as applicable, on existing systems increase
the Company's revenues from its installed base of licenses.
In addition to computer software products, the Company provides continuing
maintenance and customer service contracts, as well as professional services,
technical support and training to help plan, analyze, implement and maintain
application software based on the Company's products.
The Company has direct sales offices in the United States, United Kingdom,
France and Germany, and maintains distributor relationships in many other parts
of the world. The office in South Africa was closed at the end of June 2001.
As a result of the acquisition of PickAX, the Company has begun to develop and
market a series of products that combine the best features of RAD tools and the
multi-dimensional database software. These tools are designed to allow existing
customers to quickly modify their current applications or build new database
applications by utilizing the Company's object-oriented development environment
to create graphical user interfaces ("GUI") and Internet browser based
interfaces. The Company believes that the initial market for these products will
be the multi-dimensional database market where value added resellers,
application developers, system integrators, and large end-users are seeking to
upgrade their existing, highly functional multi-dimensional database
applications for deployment in a Web or client/server environment.
RESULTS OF OPERATIONS
As a result of the acquisition of PickAX on December 1, 2000, the results of
operations for the three month period ended June 30, 2001 differ materially from
the same period in the prior year. Consequently, the results of prior periods
are not comparable to this period or future periods.
Net Revenues: Total net revenues for the three month period ended June 30, 2001
increased 509% from $986,000 to $6,008,000 over the same three month period in
the prior year. License revenues increased 257% from $814,000 to $2,903,000
while services revenues increased 1,705% from $172,000 to $3,105,000 over the
same three month period in the prior year. The increase in net revenues in total
and by category is due to the acquisition of PickAX in December 2000. Prior to
the acquisition of PickAX, the Company's revenues had been declining. In the
early part of the fiscal year ended March 31, 2001, the Company reduced the
price of its products
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in an effort to increase demand for the Company's products. That strategy was
not successful in increasing the Company's revenues.
As a result of the PickAX acquisition, the mix of revenues also changed.
Services revenues increased from 17.4% of total revenues for the same three
month period in the prior year to 51.7% of total year revenues for the three
months ended June 30, 2001. PickAX was more active in providing consulting and
training services than the Company up to the time of acquisition.
Cost of License Revenues: Total cost of license revenues increased 212% from
$34,000 for the three month period in the prior fiscal year to $106,000 for the
three months ended June 30, 2001 reflecting the results of the PickAX
acquisition. At the same time, cost of license revenues decreased from 4.2% of
license revenues for the same three month period in the prior fiscal year to
3.7% of license revenue for the three months ended June 30, 2001. The decrease
in total costs reflects the efforts of the Company to move the product
documentation process to CD-ROM and to Web-based downloading thus, the Company
was able to reduce the cost of manufacturing and shipping of the Company
products.
Cost of Service Revenues: Total cost of service revenues increased 354% from
$231,000 for the same three month period in the prior fiscal year to $1,049,000
for the three months ended June 30, 2001 reflecting the results of the PickAX
acquisition. At the same time, cost of service revenues decreased from 134% of
service revenue for the same three month period in the prior fiscal year to 34%
of service revenue for the three months ended June 30, 2001. This reflects the
continuing efforts of the Company to improve the financial contribution of the
services businesses to the Company including customer support, professional
consulting services, and training and education.
Selling and Marketing Expenses: Selling and marketing expenses increased 55%
from $1,365,000 for the same three month period in the prior fiscal year to
$2,112,000 for the three months ended June 30, 2001 reflecting the results of
the PickAX acquisition. At the same time, sales and marketing expenses decreased
from 138% of total revenues for the same three month period in the prior fiscal
year to 35% of total revenues for the three months ended June 30, 2001.
Research and Development Expenses: Research and development expenses increased
110% from $580,000 for the same three month period in the prior fiscal year to
$1,216,000 for the three months ended June 30, 2001 reflecting the results of
the PickAX acquisition. During the three month period ended June 30, 2001, the
Company began changing the mix of its research and development efforts to
include a significant focus on technologies, markets and products outside its
historical market, specifically XML-based products for internet infrastructure.
There can be no assurance that such shifts will result in new products or that
any new products will be successful.
General and Administrative Expenses: General and administrative expenses
increased 455% from $706,000 for the same three month period in the prior fiscal
year to $3,920,000 for the three months ended June 30, 2001 reflecting the
results of the PickAX acquisition. At the same time, general and administrative
expenses decreased from 72% of total revenue for the same three month period in
the prior fiscal year to 65% of total revenue for the three months ended June
30, 2001. For the three month period ended June 30, 2001, general and
administrative expenses
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included $200,000 in depreciation and non-goodwill amortization, $286,000 in
non-cash compensation charges, and $2,149,000 in goodwill amortization. For the
same three month period in the prior fiscal year, general and administrative
expenses included $99,000 in depreciation and amortization and $269,000 in
non-cash compensation charges. The Company had no goodwill amortization in the
same three month period in the prior fiscal year.
Operating Loss: The Company's operating loss increased from $1,930,000 for the
same three month period in the prior fiscal year to $2,395,000 for the three
months ended June 30, 2001. The operating loss of $2,395,000 for the same three
months ended June 30, 2001 reflects $2,149,000 in goodwill amortization expense.
The Company had no goodwill amortization expense in the same three month period
in the prior fiscal year.
Interest and Other Expense: Net interest expense increased from $45,000 for the
same three month period in the prior fiscal year to $823,000 for the three
months ended June 30, 2001. The increase reflects the increase in debt of the
Company (see Note 5 to the consolidated financial statements). Other expense of
$50,000 for the three months ended June 30, 2001 resulted primarily from foreign
exchange transaction losses.
Net Loss: The net loss increased from $1,974,000 for the same three month period
in the prior fiscal year to a net loss of $3,268,000 for the three months ended
June 30, 2001. At the same time, the net loss decreased from 200% of total
revenues for the same three month period in the prior fiscal year to 54% of
total revenues for the three months ended June 30, 2001. Moreover, the
$3,268,000 loss reflects $2,149,000 in goodwill amortization expense for the
three month period ended June 30, 2001. The Company had no goodwill amortization
expense in the same three month period in the prior fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
The Company had $1,644,000 in cash and equivalents at June 30, 2001.
The Company does not have a line of credit with a bank. The recent financial
performance of the Company makes such a line of credit unlikely at the present
time. Astoria is the primary secured party of substantially all of the Company's
assets in relation to the replacement note assumed in the December 1, 2000
acquisition of PickAX. The note does not provide for any further borrowings. The
note requires certain payments in the event of a public or private common or
preferred stock offering and gives Astoria certain rights to approve any future
acquisitions. There can be no assurances that the Company will have sufficient
cash to pay the note at maturity or in the event of an offering.
The Company had a working capital deficit of $6,712,000 at June 30, 2001. Of
this total deficit, approximately $4,499,000 represents deferred revenue which
the Company earns over the remaining life of the underlying service contracts as
more fully discussed in Note 2 to the consolidated financial statements. In
addition, approximately $2,089,000 represents accruals established by the
Company with respect to facilities and contracts which the Company has
determined are redundant and the use of which has been discontinued. The Company
expects through negotiation and compromise to reduce or defer payment on these
liabilities. However, no assurance can be given that the Company will be
successful in such negotiation and compromise.
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Management believes that the Company's working capital and future cash flow from
operating activities will be sufficient to meet the Company's operating and
capital expenditure requirements for at least the next twelve months. However,
in the longer term, or in the event the Company experiences a decrease in
revenue or increase in expenses or other unforeseen event, the Company may
require additional funds to support its working capital requirements and may
seek to raise such funds through public or private equity financing or bank
lines of credit or from other sources. No assurance can be given that additional
financing will be available or that, if available, such financing will be on
terms favorable to the Company.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
COMPASS LITIGATION - Since 1994, the Company and Compass Software (Compass) have
been in litigation over software copyright infringement and related claims in
the courts of the State of Washington. The Company has generally prevailed in
these matters. In the most recent action, the US District Court for the Western
District of the State of Washington awarded statutory damages to the Company in
the amount of approximately $150,000 in addition to injunctive relief and
attorney fees from Compass. The Company obtained a motion for judgment to
collect the $150,000 judgment awarded and for an additional $245,000 in legal
fees. In February 2001, Earl Asmus, the principal in Compass, sued the Company
in the Central District of California on a number of issues related to the State
of Washington court proceedings. In early April 2000, the suit was dismissed,
with leave to amend. Mr. Asmus amended his complaint and the Company's motion to
strike the amended complaint is before the Court.
PACE-NORTHERN IRELAND LITIGATION - In July 2000, Park Applications Computer
Engineering, Ltd. (PACE) sued the Company in the Queen's Bench Division Company
of the High Court of Justice in Northern Ireland. PACE is seeking damages of
$800,000 plus penalties and interest for breach of contract relating to the
purchase by Pick Systems of software from PACE. The previous management of Pick
Systems, prior to the acquisition by PickAX in March 2000, made the purchase.
[The Company believes the suit is without merit and intends to defend the suit
vigorously.] Discovery is in its final stages. A trial date has not been set.
GENERAL AUTOMATION LITIGATION - In May 2001, General Automation initiated
litigation in Superior Court of the State of California for the County of Orange
against the Company for breach of contract relating to the Pick Systems purchase
of selected assets of General Automation in August 2000. General Automation
seeks approximately $690,000 plus penalties and interest. The Company has
prevailed in two preliminary hearings sought by General Automation. The Company
believes that the suit is without merit and intends to defend the suit
vigorously.
The Company is from time to time subject to claims and suits arising in the
ordinary course of business. In the Company's opinion, the ultimate resolution
of these matters will not have a material adverse effect on its financial
position, results of operations, or liquidity.
ITEM 5. OTHER INFORMATION
Ms. Gwyneth M. Gibbs resigned as an officer of the Company effective June 30,
2001. However, the effective date for the resignation of Ms. Gibbs as an
employee of the Company was amended from June 30, 2001 to March 31, 2002
pursuant to a Settlement Agreement attached to this Form 10-QSB as Exhibit
10.19. In addition, effective as August 14, 2001, Ms. Gibbs resigned as a
director of the Company.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.19 Settlement Agreement between the Company and Gwyneth M. Gibbs.
(b) Reports on Form 8-K.
None
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
Date: August 20, 2001
RAINING DATA CORPORATION
/s/ SCOTT K. ANDERSON, JR.
--------------------------------------------------
Scott K. Anderson, Jr.
Vice President Finance, Treasurer and Secretary
(Principal Financial and Accounting Officer)
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.19 Settlement Agreement by and between the Company and Gwyneth M.
Gibbs made on August 14, 2001.