UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
for the year-ended January 31, 2002
Commission File Number: 0-30121
ULTICOM, INC.
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-2050748
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1020 BRIGGS RD. MT. LAUREL, NJ 08054
(Address of principal executive offices) (Zip Code)
(856) 787-2700
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
Securities registered pursuant to Section 12 (b) of the Act:
Name of each exchange
Title of each class on which registered
- ------------------- -------------------
Not applicable Not applicable
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, NO PAR VALUE PER SHARE
(Title of Class)
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 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.
[X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
[X]
The aggregate market value of the voting stock held by non-affiliates
of the registrant on April 22, 2002 was approximately $77,000,000. The closing
price of the registrant's common stock on the NASDAQ National Market System on
April 22, 2002 was $7.25 per share.
There were 41,321,876 shares of the registrant's common stock
outstanding on April 22, 2002.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant hereby incorporates by reference in this report the
information required by Part III appearing in the registrant's proxy statement
or information statement distributed in connection with the 2002 Annual Meeting
of Shareholders of the registrant or in an amendment to this report on Form
10K/A.
-------------------------
Signalware(R), Nexworx(R) and Ulticom(R) are registered trademarks of
the Company. All other trademarks are the property of their respective owners.
PART I
ITEM 1. BUSINESS.
THE COMPANY
Ulticom, Inc. ("Ulticom" and together with its subsidiary, the
"Company") is a provider of service enabling signaling software for wireline,
wireless and Internet communications. The Company's Signalware call control
products interconnect the complex circuit switching, database and messaging
systems, and manage vital number, routing and billing information that form the
backbone of today's telecommunications networks. The Company's products are used
by equipment manufacturers, application developers and communication service
providers to deploy revenue generating infrastructure, enhanced and mandated
services such as global roaming, voice and text messaging, prepaid calling and
location-based services. Signalware products also are embedded in a range of
packet softswitching products to interoperate or converge voice and data
networks and facilitate services such as voice over the Internet and Internet
offload.
The Company was incorporated in New Jersey on December 18, 1974 as
"Dale, Gesek, McWilliams & Sheridan, Inc.," and was formerly known as "DGM&S
Telecom, Inc." In May 1999, the Company changed its name to "Ulticom, Inc." The
Company completed an initial public offering of its common stock in April 2000
and its common stock is listed on the NASDAQ National Market System under the
symbol "ULCM". The Company is a subsidiary of Comverse Technology, Inc. ("CTI"),
which holds approximately 72% of its outstanding shares. The Company's principal
executive offices are located at 1020 Briggs Road, Mount Laurel, New Jersey
08054, and its telephone number is (856) 787-2700.
THE COMPANY'S PRODUCTS
BACKGROUND
Traditionally, voice networks were based on a technology called "circuit
switching." In circuit switched networks, a dedicated line or circuit is
established for each telephone call and maintained for the duration of the call.
At the conclusion of a circuit switched call, the dedicated line or circuit is
disconnected.
The circuit switched network provides high voice quality and reliability
by separating the voice and signaling portions of a call. The signaling
infrastructure processes in real time the information needed to set up, connect,
route, terminate and bill a call, while also providing a foundation to develop
and offer value-added services. The signaling portion of a telephone network
that controls each call is based on a globally accepted set of standards and
protocols called signaling system #7 ("SS7"). SS7 provides the speed and
reliability required for processing complex call control information.
While SS7 was initially created to support signaling in a wireline or
fixed network, it also has become an essential element for connecting calls and
delivering services in wireless networks. In addition to providing the signaling
link between wireline and wireless networks, SS7 efficiently allows wireless
service providers to register and authenticate subscribers as they move between
mobile cell areas. SS7 signaling also is used as the foundation for enhanced
database services such as prepaid calling and voice and text messaging. SS7 is
designed to be robust, flexible and scalable, enabling service providers to
offer new services quickly and reliably.
While circuit switching has offered dependable, high quality voice
communication, a newer technology called "packet switching" is inherently more
efficient and cost effective than circuit switching. In packet switched
networks, the voice or data transmission is formatted into a series of shorter
digital messages called "packets." These packets of voice or data information
travel over a shared line or circuit. The cost and performance superiority of
packet switching has led certain traditional and new service providers to build
packet networks to handle voice and data traffic.
Because SS7 is the globally accepted signaling standard protocol, it has
become the critical element needed to connect and interoperate packet networks
with the existing circuit network infrastructure. Wireline, wireless and
Internet service providers worldwide have implemented SS7 as an important
component to converge voice and data communications through signaling gateways
that interwork SS7 signaling and packet switching protocols.
SIGNALWARE
Signalware provides the SS7 connectivity required to offer value-added
services. Signalware call control products work within wireless, wireline and
Internet networks to interconnect and interoperate voice and data communication
systems. In addition, Signalware plays a key role in the convergence of
disparate networks by providing a means to bridge circuit and packet technology.
Signalware offers many of the features that are crucial to the connectivity of
communication networks and the rapid delivery of revenue generating services,
including:
o open systems - running applications on multiple software and
hardware platforms;
o service reliability - building systems with no single point of
failure;
o high performance - processing calls at very high rates;
o standards conformance - complying to industry-accepted
standards including IETF, ANSI and ITU;
o scalability - increasing computing and link capacity to match
varying application requirements; and
o global interoperability - creating applications that can run
on various communications networks around the world.
Signalware supports a range of applications in wireline, wireless and
Internet networks. In circuit networks, Signalware has been deployed as part of
wireline services such as voice messaging, 800 number service and caller ID.
2
Signalware enables wireless services that include infrastructure applications
such as global roaming, as well as enhanced services such as voice and text
messaging and prepaid calling. Signalware enables deployment of high capacity
wireless data services made possible by the evolution from second generation
("2G") to third generation ("3G") infrastructures, including an intermediate
generation called "2.5G". Signalware is used to deploy mandated, location based
wireless services, such as emergency-911. Signalware also is used to enable
solutions that ease congestion on existing networks by routing Internet dial-up
traffic to packet infrastructure, and deliver voice over IP services such as
click-to-dial and advanced call forwarding.
Signalware works with multiple SS7 networks, supports a wide variety of
SS7 protocol elements, and enables analog or digital wireline and wireless
transmissions. It provides the functionality needed for call set-up/termination
and call routing/billing. Signalware products also include features that enable
the transition from SS7 signaling to emerging packet signaling standards, such
as Sigtran. New features include a Signalware Sigtran Gateway for circuit-packet
network interoperability, and protocols to carry SS7 signals over IP networks.
Signalware packages run on a range of hardware platforms and operating systems,
including Sun Solaris, IBM AIX and Red Hat Linux. These packages can be used in
single or multiple computing configurations for fault resiliency and
reliability.
Signalware also provides a means to separate the signaling function
from the application development environment, which provides greater flexibility
in service configurations.
Signalware includes interface boards to provide the physical
connection to a signaling network. Signalware boards are configured to support a
wide range of hardware platforms and network links. The bundling of Signalware
interface boards and software allows the Company to control product performance,
capacity and compliance with standards.
New customers begin development of applications and services by
purchasing the appropriate Signalware development kit and a development site
license. A typical kit includes software, an interface board, cables and
documentation. A development maintenance plan for one year is also included with
each development kit. The maintenance plan provides access to customer support
services along with service packs and scheduled release upgrades of the
software. After the initial year, the maintenance plan must be renewed for a fee
in order to continue to receive support and upgrades.
When the application is ready for deployment in a communication service
provider's network, the customer purchases one or more interface boards per
server to stage the application for deployment. After the application is in
operation, the customer reports deployment licenses per installation, while
continuing the development site license and maintenance. In addition, a customer
typically will purchase an annual deployment maintenance and support plan for
each installation for the life of the application.
3
PRODUCT SERVICES
The Company believes that customer support, training and professional
services are integral to building and maintaining strong customer relationships.
Customer support is offered as part of the maintenance agreements.
Customer Support. The Company provides comprehensive technical
support to help customers develop and deploy new services. Customer support
representatives at the help desk interface with customers' technical staff,
answering questions, resolving problems and providing assistance. Services are
available 24 hours a day, 7 days a week. Customer support is managed through
corporate headquarters in Mount Laurel, New Jersey with remote service locations
to provide extended geographic and same-time-zone coverage.
Training Services. The Company offers customers a comprehensive
training program including courses such as application development, and
operations and support. Courses are scheduled throughout the year. Customized
and/or on-site training programs also are provided for an additional fee to meet
the specific needs of customers.
Professional Services. The Company offers fee-based consulting and
development services to create customer-specific enhancements to its products
and assist with deployment of its products in service provider networks. An
experienced engineering staff provides such services. This service assists
customers by accelerating their time-to-market, and also hastens the point in
the development cycle when the Company begins to receive recurring deployment
license revenues.
MARKETS, SALES AND MARKETING
The Company's sales organization operates from the U.S. and Europe.
Account teams comprised of account managers and sales engineers work closely
with product management and development organizations to provide customers with
a consultative sales approach. The consultative approach facilitates the sale of
development kits to enable customers to immediately begin to build prototypes of
their products.
The Company actively works to further enhance market awareness and
acceptance of the Company and its products. The Company identifies market
opportunities in cooperation with customers and develops and enhances products
to seize those opportunities in a timely fashion. Based on market
considerations, the Company may port software products to additional operating
systems, develop new features and functionality, and engage in new strategic
alliances and partnerships.
The Company's market strategy includes enhancing brand awareness for
its products with a web site, promotional literature, direct marketing to
current and prospective customers, advertising, continued participation in
industry relevant trade shows and conferences, and a public relations program
that includes public demonstrations of products and prototypes. Representatives
of the Company also are called upon to address industry symposia and
4
conferences, are quoted in industry publications and may from time to time
author articles about developments in communications technology.
Products are sold primarily to network equipment manufacturers and
application developers, who include the Company's products within their products
and sell them as an integrated solution to service providers. Service providers
will install the solution in their communication networks and offer the service
enabled by such solution to their subscribers. Since the Company and its
customers have a mutual interest in developing solutions that are widely
accepted by subscribers and profitable to service providers, the Company works
closely with customers to support their development efforts and produce
solutions that are unique, reliable, scalable and cost effective.
The Company engages in joint promotion, sales efforts, training,
testing, design, integration and installation with Sun Microsystems and other
information systems providers who use Sun Microsystems' components. The Company
also engages in joint-marketing activities with IBM in support of their
Websphere telecommunication product and their SIMI wireless integration group.
The Company has entered into a distribution agreement with Macnica, Inc. that
has resulted in deployments of the Company's products in wireless and Internet
services in major Japanese service providers.
The Company's products are currently used by over 55 customers and
are deployed by more than 260 service providers in more than 100 countries. The
Company markets its products and services primarily through a direct sales
organization and through key relationships with customers. Customers include:
network equipment manufacturers, such as Alcatel, Ericsson and Siemens;
application developers, such as Comverse, Inc. ("Comverse"), Logica and Sonus;
and service providers, such as Level (3), WorldCom and Telefonica.
The Company currently derives a significant portion of its total
sales from customers outside of the United States. Financial information
regarding the Company's operations in these areas is presented in Note 13 of the
Financial Statements included in Item 14 of this report on Form 10-K.
International transactions involve particular risks, including political
decisions affecting tariffs and trade conditions, rapid and unforeseen changes
in economic conditions in individual countries, turbulence in foreign currency
and credit markets, and increased costs resulting from lack of proximity to the
customer.
For fiscal year 1999, which ended January 31, 2000, Ericsson,
Comverse and its affiliates and Siemens accounted for 20%, 18% and 12%,
respectively, of the Company's revenues. For fiscal year 2000, which ended
January 31, 2001, Ericsson, Comverse and its affiliates and Siemens accounted
for 18%, 16% and 10%, respectively, of the Company's revenues. For fiscal year
2001, which ended January 31, 2002, Ericsson, Comverse, Sonus and Siemens
accounted for 18%, 16%, 11% and 11%, respectively, of the Company's revenues.
The Company actively participates in industry activities to define
the technology to facilitate the convergence of telephony networks with the
Internet. As a member of the Internet Engineering Task Force, Ulticom has worked
to develop a set of signaling transport standards called Sigtran to enable
communication service providers to cost effectively and more easily implement
services that span existing circuit switched networks and packet networks using
5
Internet Protocol. The Company also participates in the standards activities of
the Third Generation Partnership Project ("3GPP"), which works with standards
bodies to produce globally acceptable technical specifications for the evolution
to a packet-based 3G wireless infrastructure. It is a founding member, along
with British Telecom, Microsoft, Nortel and Siemens, of the Parlay Group, an
industry consortium to specify an open interface to enable secure public access
to core capabilities of voice data networks. The Company also is a founding
member of JAIN, the Java API Integrated Networks industry initiative, which
defines common interfaces between Intelligent Network and SS7 environments so
that services and protocols can run anywhere in the network.
RESEARCH AND DEVELOPMENT
The Company continues to enhance the features and performance of
existing products and introduce new products. The Company believes that its
future success depends on a number of factors, which includes the Company's
ability to:
o identify and respond to emerging technological trends in target
markets;
o develop and maintain competitive solutions that meet customers'
changing needs; and
o enhance existing products by adding features and functionality
that differentiate the Company's products from those of its
competitors.
As a result, the Company has made and intends to continue to make
investments in research and development. Research and development resources are
allocated in response to market research and customer demands for additional
features and products. The development strategy involves rolling out initial
releases of products and adding features over time. The Company continuously
incorporates feedback it receives from customers into the product development
process. Accordingly, longer-term initiatives, such as Nexworx, a next
generation initiative, may be deferred in favor of nearer-term opportunities.
While it is expected that new products will continue to be developed internally,
the Company may, based on timing and cost considerations, acquire or license
technologies, products or applications from third parties.
The Company's research and development expenses were approximately
$6.0 million, $10.3 million, and $14.2 million for the years ended January 31,
2000, 2001 and 2002, respectively. Research and development activities are
located in the U.S. and France. As of January 31, 2002, there were 134 employees
engaged in research and development activities. The Company believes that
recruiting and retaining highly skilled engineering personnel is essential to
its success.
INTELLECTUAL PROPERTY RIGHTS
The Company has accumulated a significant amount of proprietary
know-how and expertise over the years in developing network signaling software
and signaling system #7 protocol technology for communication services. Its
continued success is dependent, in part, upon its ability to protect proprietary
6
rights to the technologies used in its products. If the Company is not
adequately protected, competitors could use the intellectual property that it
has developed to enhance competing products and services, which could harm the
Company's business. To safeguard its proprietary technology, the Company relies
on a combination of technical innovation, trade secret, copyright and trademark
laws, restricted licensing arrangements and non-disclosure agreements, each of
which affords only limited protection, and in the future the Company may rely on
patents. As of January 31, 2002, the Company had one patent application pending.
The Company conducts periodic reviews of new areas of technology with its patent
attorneys to determine whether they are patentable. However, there can be no
assurance that the Company will receive any patents.
The Company licenses software from third parties that is incorporated
into some versions of Signalware.
Due to the value of intellectual property rights, the Company
generally does not make its proprietary software code available to customers.
Exceptions to this principle were made in the past, in limited circumstances,
for large customers where adequate control mechanisms were in place to protect
the Company's intellectual property rights.
The Company has granted Comverse a perpetual, royalty-free,
non-exclusive license to use and operate software products for incorporation
into any of Comverse's products.
In January 2000, an affiliate, Comverse Patent Holding, Inc. ("CPH")
and Lucent Technologies GRL Corp. ("Lucent") entered into a non-exclusive
cross-licensing arrangement covering current and certain future patents issued
to CPH and its affiliates, including the Company, and a portfolio of current and
certain future patents in the area of telecommunications technology issued to
Lucent and its affiliates. The Company is entitled to utilize the licensed
patent rights, and is obligated to provide licenses under any patents it may
hold, pursuant to a royalty-free license agreement with CPH.
COMPETITION
The market for network signaling software is intensely competitive,
both in the U.S. and internationally. The Company expects competition to
persist, intensify and increase in the future, especially with the convergence
of voice and data networks.
The Company's primary competition comes from in-house development
organizations within its customers who seek, in a build-versus-buy decision, to
develop substitutes for the Company's products. The Company also competes with a
number of U.S. and international suppliers that vary in size and in the scope
and breadth of the products and services offered.
Competitors include a number of companies ranging from signaling system
#7 software solution providers, such as SS8 Networks, formerly ADC NewNet, and
Trillium Digital Systems, an Intel company, to vendors of communication and
network infrastructure equipment, such as Hewlett Packard and Compaq. The
Company believes it competes principally on the basis of:
7
o product performance and functionality;
o product quality and reliability;
o customer service and support; and
o price.
The Company believes its success will depend primarily on its ability
to provide technologically advanced and cost effective signaling solutions.
Additionally, the Company must provide its customers with prompt and responsive
customer support. Furthermore, should competition intensify, the Company may
have to reduce the prices of its products.
MANUFACTURING
The Company's Signalware products typically have two components:
software and interface boards. Software is duplicated in house and provided to
customers via several media, primarily CD-ROM. Each software shipment is
configured to provide the specific operating system version and features
requested by the customer. Each order is tracked by purchase order number and
documented according to internal quality standards.
The Company has been working to achieve compliance with TL 9000, a set
of common quality system requirements and measurements designed specifically for
the telecommunications industry for the design, development, production,
delivery, installation and maintenance of products and services. TL 9000
encompasses the International Standard Organization's ("ISO") ISO 9001:2000 and
best practices. As of January 31, 2002, the Company had completed its
preparatory work and scheduled a certification audit.
Subcontractors who are ISO certified perform assembly of the Company's
printed circuit interface boards. Periodic audits are performed to ensure
adherence to quality standards. Subcontractors are responsible for purchasing,
inspecting, installing and assembling components of interface boards. Completed
assemblies are burned-in, inspected, tested and packaged in the Company's
facility according to ISO standards. All inspection, test, repair, revision and
shipping information is tracked by product type and serial number and maintained
in the Company's tracking database.
The Company works closely with interface board component suppliers to
monitor component changes and availability. However, there are no long term
supply agreements with these suppliers to ensure uninterrupted supply of
components. Under certain circumstances, the Company may place blanket orders to
ensure availability of discontinued components. In the event of a reduction or
an interruption in the supply of components, a significant amount of time could
be required to qualify alternate suppliers and to receive an adequate supply of
replacement components.
8
The Company does not have any long term agreements with any of its
manufacturers, some of whom are small, privately held companies. In the event
that these manufacturers experience financial, operational or quality assurance
difficulties, the Company's business could be adversely affected until an
alternate manufacturer could be found.
There is no assurance that an alternate manufacturer will be able to
meet the Company's requirements or that existing or alternate sources for
interface boards will continue to be available at favorable prices.
EMPLOYEES
As of January 31, 2002, the Company had approximately 315 employees.
Our employees are not covered by any collective bargaining agreement and the
Company considers its relationship with its employees to be good. On April 24,
2002, the Company issued a press release announcing a revision to its first
quarter outlook for fiscal year 2002 and that it intends to reduce its workforce
by approximately 20 percent.
ITEM 2. PROPERTIES.
The Company's headquarters and development facilities are located in
Mount Laurel, New Jersey where it leases approximately 54,000 square feet of
office space. The Company also leases approximately 13,000 square feet of office
space in Dallas, Texas, and sales offices in Chicago, Illinois, and Boston,
Massachusetts. The Company's French subsidiary leases approximately 8,300 square
feet of office space in Sophia-Antipolis.
The Company believes that its facilities currently under lease are
adequate for current operations and that additional facilities can be acquired
to provide for future expansion of the Company's operations as may be warranted.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the security holders during
the fourth quarter of the last fiscal year.
9
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.
The Company's common stock trades on the NASDAQ National Market System
under the symbol "ULCM". The following table sets forth the range of closing
prices of the Company's common stock as reported on NASDAQ for the period from
April 5, 2000 through January 31, 2002.
FISCAL YEAR FISCAL QUARTER LOW HIGH
- ----------- -------------- --- ----
2001 02/1/01 - 04/30/01 $15.06 $44.56
05/1/01 - 07/31/01 $16.28 $34.81
08/1/01 - 10/31/01 $ 7.52 $20.86
11/1/01 - 01/31/02 $ 8.44 $11.80
2000 04/5/00* - 04/30/00 $14.81 $33.00
05/1/00 - 07/31/00 $22.06 $53.44
08/1/00 - 10/31/00 $29.19 $60.98
11/1/00 - 01/31/01 $25.50 $53.63
*Stock began trading on April 5, 2000, the date of the Company's initial public
offering.
There were 30 holders of record of the Company's common stock on
April 22, 2002. Such record holders include a number who are nominees for an
undetermined number of beneficial owners. The Company believes that the number
of beneficial owners of the shares of common stock outstanding at such date was
approximately 3,500.
The Company does not expect to pay any cash dividends on its equity
securities in the foreseeable future, but rather intends to retain its earnings
to finance the development and growth of its business. Any future determination
as to the declaration and payment of dividends will be made by the Board of
Directors in its discretion, and will depend upon the Company's earnings,
financial condition, capital requirements and other relevant factors. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources."
10
ITEM 6. SELECTED FINANCIAL DATA.
The following tables present selected consolidated financial data for
the Company for the year ended December 31, 1997, the one month period ended
January 31, 1998, and each of the years in the four years ended January 31,
2002. Such information has been derived from the Company's audited consolidated
financial statements and should be read in conjunction with the Company's
consolidated financial statements and the notes to the consolidated financial
statements included elsewhere in this report.
YEAR ONE MONTH
ENDED ENDED
DECEMBER 31, JANUARY 31, YEAR ENDED JANUARY 31,
------------- ----------- ----------------------
1997 1998 1999 2000 2001 2002
---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXPECT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Sales $ 14,559 $ 212 $ 18,629 $ 25,831 $ 47,441 $ 58,156
Cost of sales 4,495 294 6,131 8,883 15,489 19,536
---------- ---------- ---------- ---------- ---------- ----------
Gross profit 10,064 (82) 12,498 16,948 31,952 38,620
Research and development 2,398 205 4,706 6,015 10,325 14,236
Selling, general and administrative 3,891 348 4,948 8,124 13,271 15,861
---------- ---------- ---------- ---------- ---------- ----------
Income (loss) from operations 3,775 (635) 2,844 2,809 8,356 8,523
Interest income (expense), net (507) (45) (350) (271) 6,282 8,761
---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes 3,268 (680) 2,494 2,538 14,638 17,284
Income tax provision (benefit) 1,213 (249) 927 964 5,561 6,447
---------- ---------- ---------- ---------- ---------- ----------
Net income (loss) $ 2,055 $ (431) $ 1,567 $ 1,574 $ 9,077 $ 10,837
========== ========== ========== ========== ========== ==========
Earnings (loss)
per share--
diluted $ 0.06 ($0.01) $ 0.05 $ 0.05 $ 0.22 $ 0.25
Weighted average number of common
and common equivalent shares
outstanding - diluted 32,727 32,727 33,087 33,759 40,715 43,246
AS OF AS OF JANUARY 31,
----- -----------------
DECEMBER 31,
------------
1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ----
BALANCE SHEET DATA:
Cash and cash equivalents $ 1,030 $ 584 $ 2,544 $ 6,299 $ 183,303 $ 140,260
Working capital (deficit) (2,999) (3,513) (2,236) 742 195,369 212,946
Total assets 7,319 6,878 8,883 17,364 232,187 240,675
Long-term debt -- -- -- 3,800 -- --
Shareholders' equity (deficit) (1,333) (2,021) (454) 1,120 207,049 224,024
Dividend to parent -- 256 -- -- -- --
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
INTRODUCTION
Ulticom, Inc. designs, develops, markets, licenses and supports
service enabling signaling software for wireline, wireless and Internet
communications. These products are sold through a direct sales force to network
equipment manufacturers, application developers and service providers who
include the Company's products within their products. Signalware product sales
consist of software licenses, printed circuit interface boards, training and
support revenues. In certain limited circumstances, the Company sells Signalware
development services typically under fixed-fee arrangements with its customers.
New customers begin development of applications and services by purchasing the
appropriate Signalware development kit, which includes a development site
license, an interface board, and a one-year maintenance plan. At deployment, the
customer generally purchases one or more deployment licenses, additional
interface boards and a deployment maintenance and support plan.
CRITICAL ACCOUNTING POLICIES
Critical accounting policies are those that are both most important to
the portrayal of a company's financial position and results of operations, and
require management's most difficult, subjective or complex judgments. Although
not all of the Company's significant accounting policies require management to
make difficult, subjective or complex judgments or estimates, the following
policies and estimates are those that the Company deems most critical.
In accordance with Statement of Position 97-2, "Software Revenue
Recognition," product revenues are generally recognized in the period in which
the products are delivered and accepted by the customer, the fee is fixed and
determinable, and collection is considered probable. When the Company has
significant obligations subsequent to shipment, revenues are not recognized
until the obligations are fulfilled. Revenues from arrangements that include
significant acceptance terms are not recognized until acceptance has occurred.
Revenues from product support services, including those included in initial
licensing fees, are recognized ratably over the contract period. Post-contract
support services included in the initial licensing fee are allocated from the
total contract amount based on the relative fair value determined using
vendor-specific objective evidence.
The Company's cost of sales include material costs, salary and related
benefits for the operations and service departments, depreciation and
amortization of equipment used in the operations and service departments,
amortization of capitalized software costs and an overhead allocation. Research
and development costs include salaries and related benefits as well as travel,
depreciation and amortization of research and development equipment, an overhead
allocation, as well as other costs associated with research and development
activities. Selling, general and administrative costs include salary and related
benefits, travel, depreciation and amortization, marketing and promotional
materials, recruiting expenses, professional fees, corporate services provided
12
by CTI, facility costs, as well as other costs associated with sales, marketing,
finance and administrative departments.
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 revenue and expense during the reporting
period. Actual results could differ from those estimates.
RELATED PARTY TRANSACTIONS
The Company sells products and provides services to other
subsidiaries of CTI. Sales to related parties were approximately $9.0 million,
$7.6 million and $4.7 million for the years ended January 31, 2002, 2001 and
2000, respectively.
As of January 31, 2002 and 2001, amounts due from subsidiaries of CTI
were approximately $1.8 million and $1.0 million, respectively.
The Company was charged interest on balances owed to CTI amounting to
approximately $0, $0, and $362,000 for the years ended January 31, 2002, 2001
and 2000, respectively.
The Company has a services agreement with CTI. Under this agreement,
CTI provides the Company with various administrative and consulting services.
The Company has agreed to pay to CTI a quarterly fee of $150,000, payable in
arrears at the end of each fiscal quarter, in consideration for all services
provided by CTI during such fiscal quarter. The Company was charged $600,000 in
each of the years ended January 31, 2002, 2001 and 2000 for consulting and other
corporate services provided by CTI. In addition, the Company has agreed to
reimburse CTI for any out-of-pocket expenses incurred by CTI in providing the
services. The term of the agreement extends to January 31, 2003 and is
automatically extended for additional twelve-month periods unless terminated by
either party.
In January 2000, the Company secured a bank loan in the amount of
$3.8 million in order to repay debt owed to CTI. A portion of the proceeds from
the Company's initial public offering was used to repay the bank loan in July
2000.
RECENT EVENTS
On April 24, 2002, the Company issued a press release in which it
revised its outlook for the first quarter of fiscal year 2002, which will end on
January 31, 2003. The Company announced anticipated sales for its first quarter
of fiscal 2002, ending April 30, 2002, of approximately $7 million, resulting in
an estimated loss of approximately $0.03 per share. The Company also announced
that it intends to reduce its workforce by approximately 20 percent and expects
to take a one-time charge of up to $3 million for staff reductions and
restructuring in its second quarter ending July 31, 2002.
13
RESULTS OF OPERATIONS
YEAR-ENDED JANUARY 31, 2002 COMPARED TO YEAR-ENDED JANUARY 31, 2001
Sales. Sales for the fiscal year ended January 31, 2002, or fiscal
2001, increased by approximately $10.7 million to approximately $58.2 million,
or approximately 23%, compared to the fiscal year ended January 31, 2001, or
fiscal 2000. The increase is attributable to a higher volume of sales and
deployments of Signalware products worldwide, especially to customers who
provide wireless communication services or who sell products enabling the
convergence of voice and data networks. Sales to international customers
represented approximately 62% of sales in both fiscal 2001 and fiscal 2000.
Cost of Sales. Cost of sales increased by approximately $4.0 million
to approximately $19.5 million, or approximately 26%, in fiscal 2001 compared to
fiscal 2000. The increase is primarily attributable to an increase of
approximately $4.8 million in personnel-related costs due to the hiring of
additional personnel, and an increase in depreciation and amortization expense
of approximately $0.8 million for fiscal 2001 compared to fiscal 2000. This was
partially offset by a decrease in material and production costs of approximately
$1.8 million due to volume discounts and cost containment measures. Gross
margins (expressed as a percentage of sales) decreased from approximately 67% in
fiscal 2000 to approximately 66% in fiscal 2001.
Research and Development Expenses. Research and development expenses
increased in fiscal 2001 by approximately $3.9 million to approximately $14.2
million, or approximately 38% in fiscal 2001 compared to fiscal 2000 due to the
overall growth of research and development operations and the increase in new
research and development projects. The increase is primarily attributable to an
increase in personnel-related costs of approximately $4.7 million due to the
hiring of additional personnel and increased compensation and benefits for
existing personnel. This was partially offset by decreased material costs
related to research and development activities of approximately $0.7 million.
Selling, General & Administrative Expenses. Selling, general and
administrative expenses increased by approximately $2.6 million to approximately
$15.9 million, or approximately 20%, in fiscal 2001 compared to fiscal 2000, and
as a percentage of sales decreased to approximately 27% in fiscal 2001 from
approximately 28% in fiscal 2000. The increase in the dollar amount of these
expenses is primarily attributable to an increase in personnel-related costs of
approximately $1.8 million due to the hiring of additional personnel and
increased compensation and benefits for existing personnel. In addition,
administrative expenses increased by approximately $0.8 million due to the
overall growth and expansion of operations.
Interest Income (Expense), Net. Interest income (expense), net
increased by approximately $2.5 million to approximately $8.8 million or
approximately 39% in fiscal 2001 as compared to fiscal 2000. The principal
reason for this increase was additional interest income earned from the
investment of proceeds from the Company's public offerings in the fiscal 2000
period, which was outstanding for a full year in fiscal 2001 as compared to
fiscal 2000.
14
Income Tax Provision. Provision for income taxes increased by
approximately $0.9 million to approximately $6.4 million, or approximately 16%,
due to the increased pre-tax income. The Company's overall effective tax rate
was approximately 37% for fiscal 2001 as compared to approximately 38% for
fiscal 2000.
Net Income. Net income increased by approximately $1.8 million to
approximately $10.8 million or approximately 19% in fiscal 2001 compared to
fiscal 2000, while net income as a percentage of sales was approximately 19% in
both fiscal 2000 and 2001. The changes resulted primarily from the factors
described above.
YEAR-ENDED JANUARY 31, 2001 COMPARED TO YEAR-ENDED JANUARY 31, 2000
Sales. Sales for fiscal 2000, increased by approximately $21.6
million to approximately $47.4 million, or approximately 84%, compared to the
fiscal year ended January 31, 2000, or fiscal 1999. The increase is attributable
to a higher volume of sales and deployments of Signalware products worldwide,
especially to customers who provide wireless communication services or who sell
products enabling the convergence of voice and data networks. Sales to
international customers represented approximately 62% of sales in fiscal 2000
and approximately 63% of sales in fiscal 1999.
Cost of Sales. Cost of sales increased by approximately $6.6 million
to approximately $15.5 million, or approximately 74%, for fiscal 2000 compared
to fiscal 1999. The increase is primarily attributable to an increase of
approximately $2.6 million in personnel-related costs due to the hiring of
additional personnel. Depreciation and amortization increased by approximately
$0.9 million for fiscal 2000 compared to fiscal 1999. Material and production
costs increased approximately $2.6 million due to increased sales. Gross margins
(expressed as a percentage of sales) increased from approximately 66% in fiscal
1999 to approximately 67% in fiscal 2000.
Research and Development Expenses. Research and development expenses
increased in fiscal 2000 by approximately $4.3 million to approximately $10.3
million, or approximately 72%, compared to fiscal 1999 due to the overall growth
of research and development operations and the increase in new research and
development projects. The increase is primarily attributable to an increase in
personnel-related costs of approximately $3.0 million due to the hiring of
additional personnel and increased compensation and benefits for existing
personnel. Material costs related to research and development activities
increased by approximately $1.3 million.
Selling, General & Administrative Expenses. Selling, general and
administrative expenses increased by approximately $5.1 million to approximately
$13.3 million, or approximately 63%, in fiscal 2000 compared to fiscal 1999, and
as a percentage of sales decreased to approximately 28% in fiscal 2000 from
approximately 31% in fiscal 1999. The increase in the dollar amount of these
expenses is primarily attributable to an increase in personnel-related costs of
approximately $2.5 million due to the hiring of additional personnel. In
addition, expenses related to overall administrative costs increased by
approximately $1.6 million due to the overall growth and expansion of
operations.
15
Interest Income (Expense), Net. Interest income (expense), net for
fiscal 2000 increased by approximately $6.6 million as compared to fiscal 1999.
The principal reason for the increase was the interest income earned from the
investment of proceeds from the Company's public offerings in fiscal 2000.
Income Tax Provision. Provision for income taxes increased by
approximately $4.6 million, or approximately 477%, due to the increased pre-tax
income. The Company's overall effective tax rate was approximately 38% for both
fiscal 2000 and fiscal 1999.
Net Income. Net income increased by approximately $7.5 million in
fiscal 2000 compared to fiscal 1999, while net income as a percentage of sales
increased to approximately 19% in fiscal 2000 from approximately 6% in fiscal
1999. The changes resulted primarily from the factors described above.
LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital at January 31, 2002 and 2001 of
approximately $212.9 million and $195.4 million, respectively. At January 31,
2002 and 2001, the Company had cash and cash equivalents and short-term
investments of approximately $217.1 million and $208.9 million, respectively.
Operations for fiscal 2001, fiscal 2000 and fiscal 1999, after adding
back non-cash items, provided cash of approximately $14.6 million, $11.4 million
and $3.0 million, respectively. Other changes in operating assets and
liabilities provided (used) cash of approximately ($5.2) million, $9.6 million
and $4.1 million, for fiscal 2001, 2000 and 1999, respectively.
Investing activities for fiscal 2001, fiscal 2000 and fiscal 1999
used cash of approximately $55.1 million, $35.4 million and $3.5 million,
respectively. These amounts included (i) additions of property and equipment in
fiscal 2001, fiscal 2000 and fiscal 1999 of approximately $3.8 million, $4.3
million and $2.9 million, respectively; (ii) capitalization of software
development costs in fiscal 1999 of approximately $0.6 million; and (iii)
maturities and sales (purchases) of short-term investments, net in the amount of
approximately ($51.3) million and ($31.1) million, respectively, in fiscal 2001
and 2000.
Financing activities for fiscal 2001, fiscal 2000 and fiscal 1999
provided cash of approximately $2.7 million, $191.4 million, and $0.1 million,
respectively. These amounts include (i) approximately $195.2 million of net
proceeds from the issuance of common stock in connection with the Company's
public offerings in fiscal 2000; (ii) proceeds from the exercise of stock
options and employee stock purchase plan in the amount of approximately $2.7
million and $0.5 million in fiscal 2001 and fiscal 2000, respectively, (iii)
repayments to related parties of approximately $0.6 million, and $3.7 million in
fiscal 2000 and fiscal 1999, respectively, and (iv) the borrowing of bank debt
of approximately $3.8 million in fiscal 1999 and the repayment of such debt in
fiscal 2000.
The Company leases office space under non-cancelable operating
leases. As of January 31, 2002, the minimum rent obligations of the Company were
approximately $1.0 million, $0.9 million, $1.0 million, $0.9 million and $0.3
16
million, respectively, for fiscal years 2002, 2003, 2004, 2005, and 2006 and
thereafter.
Although there are no present understandings, commitments or
agreements with respect to acquisitions of other businesses, products or
technologies, the Company may in the future consider such transactions, which
may require additional debt or equity financing. The issuance of debt or equity
securities could be expected to have a dilutive impact on the Company's
shareholders, and there can be no assurance as to whether or when any acquired
business would contribute positive operating results commensurate with the
associated investment.
The Company may pursue acquisitions of businesses, products or
technologies in the future to expand its business and the products it offers.
Any material acquisition could result in a decrease in working capital depending
upon the amount, timing and nature of the consideration paid.
The Company believes that the proceeds from its public offerings
during fiscal 2000, together with the potential cash flow from operations, will
be sufficient to meet anticipated cash needs for working capital, capital
expenditures and other activities for the foreseeable future. Thereafter, if
current sources are not sufficient to meet the Company's needs, it may seek
additional debt or equity financing.
CERTAIN TRENDS AND UNCERTAINTIES
The Company derives substantially all of its revenue from the
telecommunications industry, which is facing an unprecedented recession. This
has resulted in a significant reduction of capital expenditures made by
equipment manufacturers, application developers and communication service
providers. The Company's operating results and financial condition have been,
and will continue to be, adversely affected by the severe decline in technology
purchases and capital expenditures by these entities and by unfavorable global
economic conditions. Consequently, the Company's operating results have
deteriorated significantly in recent periods and may continue to deteriorate in
future periods if such conditions remain in effect. For these reasons and the
risk factors outlined below, it has been and continues to be very difficult for
the Company to accurately forecast future revenues and operating results.
The Company's business is dependent on the strength of the
telecommunications industry. The telecommunications industry, in general, and
the Company, in particular, have been negatively affected by, among other
factors, the high costs and large debt positions incurred by communication
service providers to expand capacity and enable the provision of future services
(and the corresponding risks associated with the development, marketing and
adoption of these services as discussed below), including the cost of
acquisitions of licenses to provide future broadband services and reductions in
actual and projected revenues and deterioration in actual and projected
operating results. Accordingly, these entities have significantly reduced their
actual and planned expenditures to expand their equipment and delayed and
reduced the deployment of services. A number of communication service providers
have indicated the existence of conditions of excess capacity in certain markets
and have delayed the planned introduction of new services. The Company's sales
17
to equipment manufacturers and application developers who supply the
telecommunications industry are adversely affected by the slowdown of
infrastructure purchases by communication service providers and by declines in
technology expenditures. The continuation and/or exacerbation of these trends
will have an adverse effect on the Company's future results. In addition to loss
of revenue, weakness in the telecommunications industry has affected and will
continue to affect the Company's business by increasing the risks of credit or
business failures of suppliers, customers or distributors, by delays and
defaults in customer or distributor payments, and by price reductions instituted
by competitors to retain or acquire market share.
The Company's current plan of operations is predicated in part on a
recovery in capital expenditures by equipment manufacturers, application
developers and communication service providers. In the absence of such
improvement, the Company would experience further deterioration in its operating
results, and may determine to modify its plan for future operations accordingly,
which will include, among other things, additional reductions in its workforce.
The Company intends to continue to make significant investment in its
business, and to examine opportunities for growth through acquisitions of
businesses, products or technologies and other strategic investments. These
activities may involve significant expenditures and obligations that cannot
readily be curtailed or reduced if anticipated growth in demand for the
associated products does not materialize or is delayed. The impact of these
decisions on future profitability cannot be predicted with assurance, and the
Company's commitment to growth may increase its vulnerability to downturns in
its markets, technology changes and shifts in competitive conditions. The
Company also may not be able to identify future suitable merger or acquisition
candidates, and even if the Company does identify suitable candidates, it may
not be able to make these transactions on commercially acceptable terms, or at
all. If the Company does make acquisitions, it may not be able to successfully
incorporate the personnel, operations and customers of these companies into the
Company's business. In addition, the Company may fail to achieve the anticipated
synergies from the combined businesses, including marketing, product
integration, distribution, product development and other synergies. The
integration process may further strain the Company's existing financial and
managerial controls and reporting systems and procedures. This may result in the
diversion of management and financial resources from the Company's core business
objectives. In addition, an acquisition or merger may require the Company to
utilize cash reserves, incur debt or issue equity securities, which may result
in a dilution of existing shareholders, and the Company may be negatively
impacted by the assumption of liabilities of the merged or acquired company. Due
to rapidly changing market conditions, the Company may find the value of its
acquired technologies and related intangible assets, such as goodwill as
recorded in the Company's financial statements, to be impaired, resulting in
charges to operations. The Company may also fail to retain the acquired or
merged companies' key employees and customers.
The telecommunications industry is subject to rapid technological
change. The introduction of new technologies in the telecommunications market
and new alternatives for the delivery of services are having, and can be
expected to continue to have, a profound effect on competitive conditions in the
market and the success of market participants, including the Company. The
Company's success will depend on the ability to correctly anticipate
technological trends, to react quickly and effectively to such trends and to
enhance its existing product line and to introduce new products on a timely and
18
cost-effective basis. As a result, the life cycle of the Company's product line
is difficult to estimate. In addition, changing industry and market conditions
may dictate strategic decisions to restructure some business units and
discontinue others. Discontinuing a business unit or product line may result in
the Company recording accrued liabilities for special charges, such as costs
associated with a reduction in workforce. These strategic decisions could result
in changes to determinations regarding a product's useful life and the
recoverability of the carrying basis of certain assets.
The Company's products involve sophisticated technology that performs
critical functions to highly demanding standards. There can be no assurance that
the Company's current or future products will not develop operational problems,
which could have a material adverse effect on the Company. The Company relies on
a limited number of suppliers and manufacturers for specific components and may
not be able to obtain substitute suppliers and manufacturers on terms that are
as favorable if supplies are interrupted.
The telecommunications industry continues to undergo significant
change as a result of deregulation and privatization worldwide, reducing
restrictions on competition in the industry. Unforeseen changes in the
regulatory environment also may have an impact on the Company's revenues and/or
costs in any given part of the world. The Company believes that existing
competitors will continue to present substantial competition, and that other
companies, many with considerably greater financial, marketing and sales
resources than the Company, may enter the markets for the Company's products.
Moreover, as the Company enters into new markets as a result of its own research
and development efforts or acquisitions, it is likely to encounter new
competitors.
The Company's products are dependent upon their ability to operate on
new hardware and operating systems of other companies. Any modifications to the
Company's software needed to adapt to these hardware and operating system
changes may prove to be costly, time-consuming and may not be successful.
Undetected defects could result in lost sales, adverse publicity and other
claims against the Company.
The Company's current products are designed to support signaling
system #7. If future networks do not utilize this signaling system and the
Company is unable to adapt its products to work with other appropriate signaling
protocols, its products will become less competitive or obsolete. A reduction in
the demand for these products could affect adversely the Company's business and
operating results.
The Company has made and continues to make significant investments in
the areas of sales and marketing and research and development. The Company's
research and development activities include ongoing significant investment in
the development of additional features and functionality for its products,
including products based on emerging open standards for Internet protocol that
facilitate the convergence of voice and data signaling. However, the Company
also has ceased, curtailed or delayed certain longer-term initiatives, such as
its Nexworx product, pending a recovery in its business. The success of these
initiatives will be dependent upon, among other things, the emergence of a
market for these types of products and their acceptance by existing and new
customers. Despite delays in the adoption of new features and functionality as a
19
result of the telecommunications recession and the other factors described
herein, the Company believes that expenditures on these initiatives are
necessary to enhance its products in order to remain competitive, provide future
growth opportunities and to maintain the Company's presence in the market. The
Company's product initiatives reflect the Company's continuing analysis of the
future demand for new products and services, and the Company from time to time
is required to reprioritize or otherwise modify its product plans based on such
analysis. The Company's business may be adversely affected by its failure to
correctly anticipate the emergence of a market demand for certain products or
services, or delays or changes in the evolution of market opportunities. If a
sufficient market does not emerge for new or enhanced products developed by the
Company, or the Company is not successful in marketing such products, the
Company's continued growth could be adversely affected and its investment in
those products may be lost.
Historically, a limited number of customers have contributed a
significant percentage of the Company's revenues. The Company anticipates that
its operating results in any given period will continue to depend significantly
upon revenues from a small number of customers. The loss of any of these
customers could have a materially adverse effect on the Company's business.
The Company currently derives a significant portion of its total
sales from customers outside of the United States. International transactions
involve particular risks, including political decisions affecting tariffs and
trade conditions, rapid and unforeseen changes in economic conditions in
individual countries, turbulence in foreign currency and credit markets, and
increased costs resulting from lack of proximity to the customer.
To date, international sales have been denominated in U.S. dollars.
Accordingly, the Company has not been exposed to fluctuations in foreign
currency exchange rates. However, the Company expects that in future periods, a
portion of international sales may be denominated in currencies other than U.S.
dollars, which could expose it to gains and losses on foreign currency
transactions. The Company may choose to limit its exposure by utilizing hedging
strategies. There can be no assurance that any such hedging strategies that it
undertakes would be successful in avoiding exchange rate losses.
In order to increase the Company's revenues, it will need to attract
additional customers on an ongoing basis. In addition, since the Company's
products have long sales cycles that typically range from six to twelve months,
its ability to forecast the timing and amount for specific sales is limited. The
loss or deferral of one or more significant sales could have a material adverse
effect on the Company's operating results in any fiscal quarter, especially if
there are significant sales and marketing expenses associated with the deferred
or lost sales. The Company's software products are primarily sold to equipment
manufacturers and application developers, who integrate its products with their
products and sell them to communications service providers. The success of the
Company's business and operating results is dependent upon its channel and
marketing relationships with these manufacturers and developers and the
successful development and deployment of their products. If the Company cannot
successfully establish channel and marketing relationships with leading
equipment manufacturers and application developers or maintain these
relationships on favorable terms, or the Company's sales channels are affected
by economic weakness, its business and operating results may suffer.
20
Because the Company relies on a limited number of independent
manufacturers to produce boards for its products, if these manufacturers
experience financial, operational or other difficulties, the Company may
experience disruptions to its product supply. The Company may not be able to
find alternate manufacturers that meet its requirements and existing or
alternative sources for boards may not continue to be available at favorable
prices. The Company also relies on a limited number of suppliers for its board
components and it does not have any long term supply agreements. Thus, if there
is a shortage of supply for these components, the Company may experience an
interruption in its product supply.
The Company's success is dependent on recruiting and retaining key
management and highly skilled technical, managerial, sales, and marketing
personnel. The competition for highly skilled personnel remains very competitive
despite the current economic conditions. The Company's ability to attract and
retain employees also may be affected by recent cost control actions, including
reductions in the Company's workforce and the associated reorganization of
operations.
The occurrence or perception of security breaches within the Company
could harm the Company's business, financial condition and operating results.
While the Company implements sophisticated security measures, third parties may
attempt to breach the Company's security through computer viruses, electronic
break-ins and other disruptions. If successful, confidential information,
including passwords, financial information, or other personal information may be
improperly obtained and the Company may be subject to lawsuits and other
liability. Even if the Company is not held liable, a security breach could harm
the Company's reputation, and even the perception of security risks, whether or
not valid, could inhibit market acceptance of the Company's products.
While the Company generally requires employees, independent
contractors and consultants to execute non-competition and confidentiality
agreements, the Company's intellectual property or proprietary rights could be
infringed or misappropriated, which could result in expensive and protracted
litigation. The Company relies on a combination of patent, copyright, trade
secret and trademark law to protect its technology. Despite the Company's
efforts to protect its intellectual property and proprietary rights,
unauthorized parties may attempt to copy or otherwise obtain and use its
products or technology. Effectively policing the unauthorized use of the
Company's products is time-consuming and costly, and there can be no assurance
that the steps taken by the Company will prevent misappropriation of its
technology, particularly in foreign countries where in many instances the local
laws or legal systems do not offer the same level of protection as in the United
States.
If others claim that the Company's products infringe their
intellectual property rights, the Company may be forced to seek expensive
licenses, reengineer its products, engage in expensive and time-consuming
litigation or stop marketing its products. The Company attempts to avoid
infringing known proprietary rights of third parties in its product development
efforts. The Company does not regularly conduct comprehensive patent searches to
determine whether the technology used in its products infringes patents held by
third parties, however. There are many issued patents as well as patent
applications in the fields in which the Company is engaged. Because patent
applications in the United States are not publicly disclosed until the patent is
21
issued, applications may have been filed which relate to the Company's software
and products. If the Company were to discover that its products violated or
potentially violated third-party proprietary rights, it might not be able to
obtain licenses to continue offering those products without substantial
reengineering. Any reengineering effort may not be successful, nor can the
Company be certain that any licenses would be available on commercially
reasonable terms.
Substantial litigation regarding intellectual property rights exists
in the telecommunications industry, and the Company expects that its products
may be increasingly subject to third-party infringement claims as the number of
competitors in its industry segments grows and the functionality of software
products in different industry segments overlaps. In addition, the Company has
agreed to indemnify customers in certain situations should it be determined that
its products infringe on the proprietary rights of third parties. Any
third-party infringement claims could be time consuming to defend, result in
costly litigation, divert management's attention and resources, cause product
and service delays or require us to enter into royalty or licensing agreements.
Any royalty or licensing arrangements, if required, may not be available on
terms acceptable to the Company, if at all. A successful claim of infringement
against the Company and its failure or inability to license the infringed or
similar technology could have a material adverse effect on its business,
financial condition and results of operations.
The Company holds a large proportion of its net assets in cash
equivalents and short-term investments. Such investments subject the Company to
the risks inherent in the capital markets generally, and to the performance of
other businesses over which it has no direct control. Given the relatively high
proportion of the Company's liquid assets relative to its overall size, the
results of its operations are materially affected by the results of the
Company's capital management and investment activities and the risks associated
with those activities. In addition, reduction in prevailing interest rates due
to economic conditions or government policies has had and may continue to have
an adverse impact on the Company's results of operations.
The Company benefited from the rise in the public trading price of
its shares in various ways, including its ability to use equity incentive
arrangements as a means of attracting and retaining the highly qualified
employees necessary for its business and its ability to raise capital on
relatively attractive conditions. The decline in the price of the Company's
shares, and the overall decline in equity prices generally, and in the shares of
technology companies in particular, can be expected to make it more difficult
for the Company to rely on equity incentive arrangements as a means to recruit
and retain talented employees, and negatively has impacted the ability of the
Company to raise capital on terms as advantageous to the Company as in the past.
The trading price of the Company's shares has been affected by the
factors disclosed herein as well as prevailing economic and financial trends and
conditions in the public securities markets. Share prices of companies in
technology-related industries, such as the Company, tend to exhibit a high
degree of volatility. The announcement of financial results that fall short of
the results anticipated by the public markets could have an immediate and
significant negative effect on the trading price of the Company's shares in any
given period. Such shortfalls may result from events that are beyond the
Company's immediate control, can be unpredictable and, since a significant
proportion of the Company's sales during each fiscal quarter tend to occur in
22
the latter stages of the quarter, may not be discernible until the end of a
financial reporting period. These factors may contribute to the volatility of
the trading value of its shares regardless of the Company's long-term prospects.
The trading price of the Company's shares may also be affected by developments,
including reported financial results and fluctuations in trading prices of the
shares of other publicly-held companies in the telecommunications industry in
general, and the Company's business segment in particular, which may not have
any direct relationship with the Company's business or prospects.
EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS
In 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities" which was subsequently
amended by SFAS Nos. 137 and 138 (collectively "SFAS 133"). SFAS 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivatives embedded in other contracts, and hedging activities and requires
that an entity recognize all derivatives as either assets or liabilities and
measure those instruments at fair value. Under SFAS 133, certain contracts that
were not formerly considered derivatives may now meet the definition of a
derivative. SFAS 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 2000. The Company adopted SFAS 133 effective February
1, 2001. The adoption of SFAS 133 did not have a material effect on the
Company's financial statements.
In June 2001, the FASB issued SFAS No. 141, "Business Combinations".
SFAS No. 141 applies prospectively to all business combinations initiated after
June 30, 2001 and to all business combinations accounted using the purchase
method for which the date of acquisition is July 1, 2001, or later. This
statement requires all business combinations to be accounted for using one
method, the purchase method. Under previously existing accounting rules,
business combinations were accounted for using one of two methods, the
pooling-of-interests method or the purchase method. The adoption of SFAS No. 141
did not have a material effect on the Company's financial statements.
In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets". SFAS No. 142 addresses financial accounting and reporting
for acquired goodwill and other intangible assets. Under SFAS No. 142, goodwill
and some intangible assets will no longer be amortized, but rather reviewed for
impairment on a periodic basis. The provisions of this Statement are required to
be applied starting with fiscal years beginning after December 15, 2001. This
Statement is required to be applied at the beginning of the Company's fiscal
year and to be applied to all goodwill and other intangible assets recognized in
its financial statements at that date. Impairment losses for goodwill and
certain intangible assets that arise due to the initial application of this
Statement are to be reported as resulting from a change in accounting principle.
Goodwill and intangible assets acquired after June 30, 2001, will be subject
immediately to the provisions of this Statement. The adoption of SFAS No. 142 is
not expected to have a material effect on the Company's financial statements.
In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations". SFAS No. 143 establishes accounting standards for
recognition and measurement of a liability for an asset retirement obligation
and the associated asset retirement cost. SFAS No. 143 applies to legal
23
obligations associated with the retirement of a tangible long-lived asset that
result from the acquisition, construction, or development and/or the normal
operation of a long-lived asset. This Statement is effective for fiscal years
beginning after June 15, 2002, however early adoption is encouraged. The
adoption of SFAS No. 143 is not expected to have a material effect on the
Company's financial statements.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
SFAS No. 144 supercedes certain provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" and
Accounting Principles Board Opinion No. 30, "Reporting the Results of
Operations--Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions." SFAS
No. 144 is effective for financial statements issued for fiscal years beginning
after December 15, 2001, and interim periods within those fiscal years. Early
application is encouraged. The adoption of SFAS No. 144 is not expected to have
a material effect on the Company's financial statements.
FORWARD-LOOKING STATEMENTS
From time to time, the Company makes forward-looking statements.
Forward-looking statements include financial projections, statements of plans
and objectives for future operations, statements of future economic performance,
and statements of assumptions relating thereto.
The Company may include forward-looking statements in its periodic
reports to the Securities and Exchange Commission on Forms 10-K, 10-Q, and 8-K,
in its annual report to shareholders, in its proxy statements, in its press
releases, in other written materials, and in statements made by employees to
analysts, investors, representatives of the media, and others.
By their very nature, forward-looking statements are subject to
uncertainties, both general and specific, and risks exist that predictions,
forecasts, projections and other forward-looking statements will not be
achieved. Actual results may differ materially due to a variety of factors
including, without limitation, those discussed under "Certain Trends and
Uncertainties" and elsewhere in this report. Investors and others should
carefully consider these factors and other uncertainties and events, whether or
not the statements are described as forward-looking.
Forward-looking statements made by the Company are intended to apply
only at the time they are made, unless explicitly stated to the contrary.
Moreover, whether or not stated in connection with a forward-looking statement,
the Company undertakes no obligation to correct or update a forward-looking
statement should the Company later become aware that it is not likely to be
achieved. If the Company were in any particular instance to update or correct a
forward-looking statement, investors and others should not conclude that the
Company will make additional updates or corrections thereafter with respect to
that or any other forward-looking statement.
24
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company is exposed to market risk from changes in interest rates.
Various financial instruments held by the Company are sensitive to changes in
interest rates. Interest rate changes would result in gains or losses in the
market value of the Company's investments in debt securities due to differences
between the market interest rates and rates at the date of purchase of these
financial instruments. Neither a 100 basis point increase nor decrease from
current interest rates would have a material effect on the Company's financial
position, results of operations or cash flows.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial information required by Item 8 is in the "Financial
Statements" included in Item 14 of this report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
25
PART III
The information required by Part III is omitted pursuant to instruction G (3).
26
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
Page(s)
(a) Documents filed as part of this report.
(1) Financial Statements.
Index to Consolidated Financial Statements F-1
Independent Auditors' Report F-2
Consolidated Balance Sheets as of January 31, 2001 F-3
and 2002
Consolidated Statements of Income F-4
For the Years Ended January 31, 2000,
2001 and 2002
Consolidated Statements of Shareholders' F-5
Equity (Deficit) For the Years Ended
January 31, 2000, 2001 and 2002
Consolidated Statements of Cash Flows for the F-6
Years Ended January 31, 2000, 2001 and 2002
Notes to Consolidated Financial Statements F-7
(2) Financial Statement Schedules.
None
(3) Exhibits.
The Index of Exhibits commences on the
following page.
(b) Reports on Form 8-K - No reports on Form
8-K were filed by the registrant during
the quarterly period ended January 31,
2002.
27
INDEX TO EXHIBITS
NO. DESCRIPTION
- --- -----------
3 Articles of Incorporation and By-Laws:
3.1* Amended and Restated Certificate of Incorporation of Ulticom,
Inc. (Incorporated by reference from the Registrant's
Registration Statement on Form S-1 under the Securities Act of
1933, Registration No. 333-94873)
3.2* Amended and Restated Bylaws of Ulticom, Inc. (Incorporated by
reference from the Registrant's Registration Statement on Form
S-1 under the Securities Act of 1933, Registration No. 333-94873)
4 Instruments defining the rights of security holders including
indentures:
4.1* Specimen Common Stock certificate. (Incorporated by reference
from the Registrant's Registration Statement on Form S-1 under
the Securities Act of 1933, Registration No. 333-94873)
4.2* See Exhibit 3.1 for provisions defining the rights of holders of
common stock of the Registrant.
10 Material Contracts:
10.1* Services Agreement, dated as of February 1, 1998, between
Comverse Technology, Inc. and Ulticom, Inc. (Incorporated by
reference from the Registrant's Registration Statement on Form
S-1 under the Securities Act of 1933, Registration No. 333-94873)
10.2* Federal Income Tax Sharing Agreement, dated as of December 21,
1999, between Comverse Technology, Inc. and Ulticom, Inc.
(Incorporated by reference from the Registrant's Registration
Statement on Form S-1 under the Securities Act of 1933,
Registration No. 333-94873)
10.3* Patent License Agreement, dated January 12, 2000, between
Comverse Patent Holding Company, Inc. and Ulticom, Inc.
(Incorporated by reference from the Registrant's Registration
Statement on Form S-1 under the Securities Act of 1933,
Registration No. 333-94873)
10.4* License Agreement, dated as of February 1, 2000, between Comverse
Technology, Inc. and Ulticom, Inc. (Incorporated by reference
from the Registrant's Registration Statement on Form S-1 under
the Securities Act of 1933, Registration No. 333-94873)
28
10.5* Registration Rights Agreement, dated as of January 1, 2000,
between Comverse Technology, Inc. and Ulticom, Inc. (Incorporated
by reference from the Registrant's Registration Statement on Form
S-1 under the Securities Act of 1933, Registration No. 333-94873)
10.6* Business Opportunities Agreement, dated as of January 1, 1999,
between Comverse Technology, Inc. and Ulticom, Inc. (Incorporated
by reference from the Registrant's Registration Statement on Form
S-1 under the Securities Act of 1933, Registration No. 333-94873)
10.7* Form of Indemnification Agreement. (Incorporated by reference
from the Registrant's Registration Statement on Form S-1 under
the Securities Act of 1933, Registration No. 333-94873)
10.8* 1998 Stock Incentive Compensation Plan (Incorporated by reference
from the Registrant's Registration Statement on Form S-1 under
the Securities Act of 1933, Registration No. 333-94873)
10.9* Employment Agreement, dated as of February 1, 2000 between Shawn
Osborne and Ulticom, Inc. (Incorporated by reference from the
Registrant's Registration Statement on Form S-1 under the
Securities Act of 1933, Registration No. 333-94873)
10.10* 2000 Employee Stock Purchase Plan (Incorporated by reference from
the Registrant's Registration Statement on Form S-8 under the
Securities Act of 1933, Registration No. 333-56522)
21.1** Subsidiaries of Ulticom, Inc.
23.1** Consent of Deloitte and Touche LLP
- -------------------------
* Incorporated by reference
** Filed with this report on Form 10-K
29
ULTICOM, INC. AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Independent Auditors' Report....................................................................... F-2
Consolidated Balance Sheets as of January 31, 2001 and 2002........................................ F-3
Consolidated Statements of Income for the years ended January 31, 2000, 2001 and 2002.............. F-4
Consolidated Statements of Shareholders' Equity (Deficit) for the years ended January 31,
2000, 2001 and 2002............................................................................... F-5
Consolidated Statements of Cash Flows for the years ended January 31, 2000, 2001 and
2002 .............................................................................................. F-6
Notes to the Consolidated Financial Statements..................................................... F-7
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
Ulticom, Inc.
Mt. Laurel, New Jersey
We have audited the accompanying consolidated balance sheets of Ulticom, Inc.
and subsidiary (the "Company") as of January 31, 2001 and 2002, and the related
consolidated statements of income, shareholders' equity (deficit), and cash
flows for each of the three years in the period ended January 31, 2002. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of January 31, 2001
and 2002, and the results of their operations and their cash flows for each of
the three years in the period ended January 31, 2002 in conformity with
accounting principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
Jericho, New York
March 7, 2002
F-2
ULTICOM, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
JANUARY 31, JANUARY 31,
2001 2002
---- ----
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 183,303 $ 140,260
Short-term investments 25,577 76,827
Accounts receivable, net of allowance for doubtful accounts of
$425 and $849 8,483 8,422
Inventories 1,625 446
Prepaid expenses and other current assets 720 2,546
Deferred tax asset 332 1,096
--------- ---------
Total current assets 220,040 229,597
Property and equipment, net 5,728 5,270
Investments 5,500 5,550
Deferred tax asset 422 55
Other assets 497 203
--------- ---------
Total assets $ 232,187 $ 240,675
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 14,023 $ 12,972
Deferred revenue 10,648 3,679
--------- ---------
Total current liabilities 24,671 16,651
--------- ---------
LONG-TERM LIABILITIES:
Deferred tax liability 467 --
--------- ---------
COMMITMENTS AND CONTINGENCIES (Note 14)
SHAREHOLDERS' EQUITY:
Undesignated stock, no par value, 10,000,000 shares authorized, no
shares issued and outstanding -- --
Common stock, no par value, 200,000,000 authorized,
40,510,965 and 41,121,505 issued and outstanding -- --
Additional paid-in capital 196,862 202,557
Accumulated other comprehensive income -- 443
Retained earnings 10,187 21,024
--------- ---------
Total shareholders' equity 207,049 224,024
--------- ---------
Total liabilities and shareholders' equity $ 232,187 $ 240,675
========= =========
See notes to consolidated financial statements
F-3
ULTICOM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED JANUARY 31,
2000 2001 2002
------- ------- -------
Sales $25,831 $47,441 $58,156
Cost of sales 8,883 15,489 19,536
------- ------- -------
Gross profit 16,948 31,952 38,620
Operating expenses:
Research and development 6,015 10,325 14,236
Selling, general and administrative 8,124 13,271 15,861
------- ------- -------
Income from operations 2,809 8,356 8,523
Interest income (expense), net (271) 6,282 8,761
------- ------- -------
Income before income taxes 2,538 14,638 17,284
Income tax provision 964 5,561 6,447
------- ------- -------
Net income $ 1,574 $ 9,077 $10,837
======= ======= =======
Earnings per share:
Basic $ 0.05 $ 0.24 $ 0.26
======= ======= ======
Diluted $ 0.05 $ 0.22 $ 0.25
======= ======= ======
See notes to consolidated financial statements
F-4
ULTICOM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
YEARS ENDED JANUARY 31, 2000, 2001 AND 2002
(IN THOUSANDS, EXCEPT SHARE DATA)
Accumulated Other
Comprehensive Income Total
Common Stock ------------------------ Share-
------------ Additional Unrealized Cumulative holders'
Number of Par Paid-in Retained Gains Translation Equity
Shares Value Capital Earnings (Losses) Adjustment (Deficit)
------ ----- ------- -------- -------- ---------- ---------
BALANCE, FEBRUARY 1, 1999 32,727 $-- $ 10 $ (464) $-- $-- $ (454)
Net income & total comprehensive income 1,574 1,574
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCE, JANUARY 31, 2000 32,727 -- 10 1,110 -- -- 1,120
Net income & total comprehensive income 9,077 9,077
Exercise of stock options 53 546 546
Proceeds from sale of stock 7,731 195,231 195,231
Tax benefit of dispositions of stock options 1,075 1,075
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCE, JANUARY 31, 2001 40,511 -- 196,862 10,187 -- -- 207,049
Comprehensive income:
Net income 10,837
Unrealized gain on available-for-sale
securities 287
Translation adjustment 156
Total comprehensive income 11,280
Common stock issued for employee
stock purchase plan 60 -- 769 769
Exercise of stock options 551 -- 1,927 1,927
Tax benefit of dispositions of stock options 2,999 2,999
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCE, JANUARY 31, 2002 41,122 $ -- $202,557 $21,024 $ 287 $ 156 $224,024
====== ====== ======== ======= ===== ===== ========
See notes to consolidated financial statements
F-5
ULTICOM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
JANUARY 31,
2000 2001 2002
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,574 $ 9,077 $ 10,837
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 1,689 2,448 4,612
Deferred income taxes (258) (119) (864)
Changes in assets and liabilities:
Accounts receivable, net (984) (4,597) 61
Inventories (939) 187 1,179
Prepaid expenses and other current assets (335) (27) (1,826)
Accounts payable and accrued expenses 2,071 10,873 1,948
Deferred revenue 4,819 3,210 (6,969)
Other (507) (35) 402
------- -------- --------
Net cash provided by operating activities 7,130 21,017 9,380
------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net (2,853) (4,296) (3,819)
Maturities and sales (purchases) of investments, net -- (31,077) (51,300)
Capitalization of software development costs (632) -- --
------- -------- --------
Net cash used in investing activities (3,485) (35,373) (55,119)
------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock in connection with
exercise of stock options and employee stock purchase plan -- 546 2,696
Proceeds from sale of common stock in connection
with public offerings -- 195,231 --
Note payable, bank 3,800 (3,800) --
Repayments to related parties (3,690) (617) --
------- -------- --------
Net cash provided by financing activities 110 191,360 2,696
------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,755 177,004 (43,043)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,544 6,299 183,303
------- -------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 6,299 $183,303 $140,260
======= ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ -- $ 114 $ --
======= ======== ========
Cash paid for taxes $ 48 $ 2,954 $ 7,464
======= ======== ========
See notes to consolidated financial statements
F-6
ULTICOM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 2000, 2001 AND 2002
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
COMPANY BUSINESS AND BACKGROUND - Ulticom, Inc., ("the Company"),
formerly DGM&S Telecom, Inc., a New Jersey corporation and subsidiary of
Comverse Technology, Inc. ("CTI"), is engaged in the design, development,
manufacture, marketing and support of software and hardware for use in the
communications industry. In May 1999, the Company amended its certificate of
incorporation to change its name from DGM&S Telecom, Inc. to Ulticom, Inc.
RECAPITALIZATION - In March 2000, the Company amended its certificate
of incorporation in connection with its initial public offering to increase its
authorized capital stock to 210,000,000 shares without par, of which 200,000,000
have been designated as common stock and 10,000,000 shares have been authorized
without designation and available for issuance with such designations and
relative rights, preferences and limitations as may be specified from time to
time by the Board of Directors.
On March 13, 2000, the Board of Directors declared a stock dividend
on the Company's outstanding common stock at the rate of 2.2727 shares of common
stock for each outstanding share of common stock. All references to per share
amounts and the number of shares in these financial statements have been
adjusted to reflect the increase in authorized capital stock and the stock
dividends referred to above.
PUBLIC OFFERINGS - On April 5, 2000, the Company issued 4,250,000
shares of common stock to the public at a price of $13.00 per share. The
underwriters exercised their option to purchase 637,500 additional shares to
cover over-allotments. The net proceeds of the offering were approximately
$58,062,000. On October 17, 2000 the Company issued an additional 2,843,375
shares of common stock in an offering to the public at a price of $50.00 per
share. The net proceeds of this offering were approximately $137,169,000.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
include the accounts of the Company and its wholly owned subsidiary. All
material intercompany balances and transactions have been eliminated.
CASH AND CASH EQUIVALENTS - The Company considers all highly liquid
investments purchased with original maturities of three months or less to be
cash equivalents.
SHORT-TERM INVESTMENTS - As of January 31, 2002, the Company
classifies all of its short-term investments as available-for-sale, accounted
for at fair value, with resulting unrealized gains or losses reported as a
separate component of shareholders' equity. During the year ended January 31,
2001, the Company classified all of its short term investments as held to
maturity and were stated at cost, adjusted for amortization of premiums and
discounts to maturity. Interest and amortization of premiums and discounts are
included in interest income.
F-7
FAIR VALUE OF FINANCIAL INSTRUMENTS - The estimated fair value
amounts have been determined by the Company, using available market information
and appropriate valuation methodologies. However, considerable judgment is
necessarily required in interpreting market data to develop the estimates of
fair value. Accordingly, the estimates presented herein are not necessarily
indicative of the amounts that the Company could realize in a current market
exchange. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts.
CONCENTRATION OF CREDIT RISK - Financial instruments, which
potentially expose the Company to a concentration of credit risk, consist
primarily of cash and cash equivalents, short-term investments and accounts
receivables. The Company places its cash investments with high credit-quality
financial institutions and currently invests primarily in bank time deposits,
money market funds placed with major banks and financial institutions, and U.S.
government and municipal obligations. The Company believes no significant
concentration of credit risk exists with respect to these cash investments. The
Company sells its products to customers who are dispersed across many geographic
regions and who are principally in the communications industry. The Company had
three customers, Comverse, Inc. ("Comverse"), an affiliate, Ericsson and
Siemens, that represented approximately 52% of gross accounts receivable as of
January 31, 2002. The Company had one customer that represented 14% of gross
accounts receivable as of January 31, 2001. The Company believes no significant
concentration of credit risk exists with respect to these accounts receivable.
The carrying amount of these financial instruments is a reasonable estimate of
their fair value.
INVENTORIES - Inventories are stated at the lower of cost or market.
Cost is determined by the first in, first out (FIFO) method.
PROPERTY AND EQUIPMENT - Property and equipment are recorded at cost
less accumulated depreciation and amortization. The Company depreciates its
transportation equipment, furniture and equipment using straight-line
depreciation over periods ranging from three to seven years. Leasehold
improvements are amortized over the lesser of the term of the respective lease
or the estimated useful lives of the improvements (7 years). The cost of
maintenance and repairs are charged to operations as incurred. Significant
renewals and betterments are capitalized.
During the year ended January 31, 2002, the Company changed its
accounting estimates relating to depreciation of certain equipment. The
estimated service lives for these assets were reduced from 5 years to 3 years.
As a result of this change, net income was reduced by approximately $0.8
million, or $0.02 per diluted share.
INCOME TAXES - The Company accounts for income taxes under the asset
and liability method. Under this method, deferred tax assets and liabilities are
determined based on differences between the financial reporting and the tax
bases of assets and liabilities, and are measured using the enacted tax rates
and laws that are expected to be in effect when the differences are expected to
reverse. For federal income tax purposes in the years ended January 31, 2000 and
January 31, 2001, the Company's results were included in the CTI consolidated
F-8
tax return for the period that CTI retained beneficial ownership of at least 80%
of the total voting power and value of the outstanding common stock of the
Company. Income taxes were determined as if the Company was a separate taxpayer.
Income tax currently payable was charged to accounts payable and
accrued expenses in the period that the liability arose and the Company was
included in the CTI consolidated return. Under the tax sharing agreement between
the Company and CTI, the Company does not receive any benefit for losses that it
incurs. Upon completion of the Company's public offering on October 17, 2000,
CTI's ownership was reduced below 80% of the total voting power and value of the
outstanding Company common stock. The Company prepared its return on a
stand-alone basis for the period from October 17, 2000 through January 31, 2001
and for the fiscal year ending January 31, 2002.
REVENUE AND EXPENSE RECOGNITION - Revenues from product sales are
generally recognized upon shipment. The Company provides its customers with
post-contract support services, which generally consist of bug-fixing and
telephone access to the Company's technical personnel, but may also include the
right to receive product updates, upgrades and enhancements. Revenue from these
services is recognized ratably over the contract period. Post-contract support
services included in the initial licensing fee are allocated from the total
contract amount based on the relative fair value of vendor specific objective
evidence ("VSOE"). For multi-element arrangements, VSOE of fair value is
determined based on the price charged when the same element is sold separately
or, for elements not yet being sold separately, the price established by
management having the relevant authority. If VSOE of fair value does not exist
for one or more delivered elements of a multi-element arrangement and VSOE of
fair value exists for all undelivered elements, then revenue is recognized using
the "residual method."
Deferred revenue consists primarily of amounts billed to customers
pursuant to terms specified in contracts but for which revenue has not been
recognized.
Included in sales are license revenues amounting to approximately
$5,270,000, $11,642,000 and $16,287,000 for the years ended January 31, 2000,
2001 and 2002, respectively. The related costs of revenues associated with these
license revenues were not material in each of the periods presented.
Expenses incurred in connection with research and development
activities, other than certain software development costs that are capitalized,
and selling, general and administrative expenses are charged to operations as
incurred.
SOFTWARE DEVELOPMENT COSTS - Software development costs are
capitalized upon the establishment of technological feasibility and are
amortized over the estimated useful life of the software, which has been four
years or less. Amortization begins in the period when the product is available
for general release to customers. Amortization expenses amounted to
approximately $287,000, $323,000 and $335,000 for the years ended January 31,
2000, 2001 and 2002, respectively.
F-9
LONG-LIVED ASSETS - The Company reviews for the impairment of
long-lived assets and certain identifiable intangibles whenever events change,
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. An impairment loss would be recognized when estimated future
cash flows expected to result from the use of an asset and its eventual
disposition is less than its carrying amount. The Company has identified no such
impairment losses.
PERVASIVENESS OF ESTIMATES - The preparation of the 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 disclosures 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.
RECENT ACCOUNTING PRONOUNCEMENTS - In 1998, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
("SFAS") SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities" which was subsequently amended by SFAS Nos. 137 and 138
(collectively "SFAS 133"). SFAS 133 establishes accounting and reporting
standards for derivative instruments, including certain derivatives embedded in
other contracts, and hedging activities and requires that an entity recognize
all derivatives as either assets or liabilities and measure those instruments at
fair value. Under SFAS 133, certain contracts that were not formerly considered
derivatives may now meet the definition of a derivative. SFAS 133 is effective
for all fiscal quarters of fiscal years beginning after June 15, 2000. The
Company adopted SFAS 133 effective February 1, 2001. The adoption of SFAS 133
did not have a material effect on the Company's financial statements.
In June 2001, the FASB issued SFAS No. 141, "Business Combinations".
SFAS No. 141 applies prospectively to all business combinations initiated after
June 30, 2001 and to all business combinations accounted using the purchase
method for which the date of acquisition is July 1, 2001, or later. This
statement requires all business combinations to be accounted for using one
method, the purchase method. Under previously existing accounting rules,
business combinations were accounted for using one of two methods, the
pooling-of-interests method or the purchase method. The adoption of SFAS No. 141
did not have a material effect on the Company's financial statements.
In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets". SFAS No. 142 addresses financial accounting and reporting
for acquired goodwill and other intangible assets. Under SFAS No. 142, goodwill
and some intangible assets will no longer be amortized, but rather reviewed for
impairment on a periodic basis. The provisions of this Statement are required to
be applied starting with fiscal years beginning after December 15, 2001. This
Statement is required to be applied at the beginning of the Company's fiscal
year and to be applied to all goodwill and other intangible assets recognized in
its financial statements at that date. Impairment losses for goodwill and
certain intangible assets that arise due to the initial application of this
Statement are to be reported as resulting from a change in accounting principle.
Goodwill and intangible assets acquired after June 30, 2001, will be subject
F-10
immediately to the provisions of this Statement. The adoption of SFAS No. 142 is
not expected to have a material effect on the Company's financial statements.
In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations". SFAS No. 143 establishes accounting standards for
recognition and measurement of a liability for an asset retirement obligation
and the associated asset retirement cost. SFAS No. 143 applies to legal
obligations associated with the retirement of a tangible long-lived asset that
result from the acquisition, construction, or development and/or the normal
operation of a long-lived asset. This Statement is effective for fiscal years
beginning after June 15, 2002, however early adoption is encouraged. The
adoption of SFAS No. 143 is not expected to have a material effect on the
Company's financial statements.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
SFAS No. 144 supercedes certain provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" and
Accounting Principles Board Opinion No. 30, "Reporting the Results of
Operations--Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions." SFAS
No. 144 is effective for financial statements issued for fiscal years beginning
after December 15, 2001, and interim periods within those fiscal years. Early
application is encouraged. The adoption of SFAS No. 144 is not expected to have
a material effect on the Company's financial statements.
RECLASSIFICATIONS - Certain prior year balances have been
reclassified to conform with the current year classification.
2. SHORT-TERM INVESTMENTS
The Company classifies all of its short-term investments as
available-for-sale securities. The following is a summary of available-for-sale
securities as of January 31, 2002:
GROSS GROSS
ESTIMATED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------------------------------------------------------------------------
(IN THOUSANDS)
U.S. Government
agency bonds $ 72,640 $ 287 $ - $ 72,927
Municipal bonds 3,900 - - 3,900
----------- ----------- ----------- -----------
Total debt securities $ 76,540 $ 287 $ - $ 76,827
=========== =========== =========== ===========
During the year ended January 31, 2001, the Company classified all of
its short term investments as held to maturity and were stated at cost, adjusted
for amortization of premiums and discounts to maturity. Interest and
amortization of premiums and discounts are included in interest income. As of
January 31, 2001, all of the Company's short-term investments consisted of U.S.
government agency and municipal bonds with a fair value of approximately
$25,037,000.
F-11
For both fiscal year 2001 and fiscal 2002, all short-term investments
have a contractual maturity of one year or less. The Company has no realized
gains or losses for the years ended January 31, 2001 and 2002, respectively.
3. INVENTORIES
Inventories consist of the following:
JANUARY 31,
2001 2002
---- ----
(IN THOUSANDS)
Work in process $ 847 $ --
Finished goods 778 446
------- -------
$ 1,625 $ 446
======= =======
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
JANUARY 31,
2001 2002
---- ----
(IN THOUSANDS)
Furniture and equipment $ 8,087 $11,462
Transportation equipment 17 17
Leasehold improvements 523 515
------- -------
8,627 11,994
Less: accumulated depreciation (2,899) (6,724)
------- -------
$ 5,728 $ 5,270
======= =======
5. OTHER ASSETS
Other assets consist of the following:
JANUARY 31,
2001 2002
---- ----
(IN THOUSANDS)
Software development costs, net of accumulated
amortization of $2,754 and $3,089 $ 335 $ --
Other assets 162 203
------- -------
$ 497 $ 203
======= =======
F-12
6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
JANUARY 31,
2001 2002
---- ----
(IN THOUSANDS)
Accounts payable $ 2,415 $ 1,901
Accrued salaries and benefits 3,943 4,437
Income taxes payable 2,283 743
Other 5,382 5,891
------- -------
$14,023 $12,972
======= =======
7. RELATED PARTY TRANSACTIONS
The Company sells products and provides services to other
subsidiaries of CTI. Sales to related parties were approximately $4,679,000,
$7,600,000 and $9,026,000 for the years ended January 31, 2000, 2001 and 2002,
respectively.
As of January 31, 2001 and 2002 amounts due from subsidiaries of CTI
were approximately $1,012,000 and $1,768,000, respectively.
The Company was charged interest on balances owed to CTI amounting to
approximately $362,000, $0 and $0 for the years ended January 31, 2000, 2001 and
2002, respectively.
The Company has a services agreement with CTI. Under this agreement,
CTI provides the Company with various administrative and consulting services.
The Company has agreed to pay to CTI a quarterly fee of $150,000, payable in
arrears at the end of each fiscal quarter, in consideration for all services
provided by CTI during such fiscal quarter. The Company was charged $600,000 in
each of the years ended January 31, 2000, 2001 and 2002 for consulting and other
corporate services provided by CTI. In addition, the Company has agreed to
reimburse CTI for any out-of-pocket expenses incurred by CTI in providing the
services. The term of the agreement extends to January 31, 2003 and is
automatically extended for additional twelve-month periods unless terminated by
either party.
In January 2000, the Company secured a bank loan in the amount of
$3.8 million in order to repay debt owed to CTI. A portion of the proceeds from
the Company's initial public offering was used to repay the bank loan in July
2000.
F-13
8. STOCK OPTIONS
EMPLOYEE STOCK OPTIONS - At January 31, 2002, 3,917,363 shares of
common stock were reserved for issuance upon exercise of options then
outstanding and 1,978,560 options were available for future grant under the
Company's stock option plan. Options under the plan may be granted to key
employees, directors, and other persons rendering services to the Company.
Options which are designated as "incentive stock options" under the option plan
may be granted with an exercise price not less than the fair market value of the
underlying shares at the date of grant and are subject to certain quantity and
other limitations specified in Section 422 of the Internal Revenue Code. Options
which are not intended to qualify as incentive stock options may be granted at
any price, but not less than the par value of the underlying shares, and without
restriction as to amount. The options and the underlying shares are subject to
adjustment in accordance with the terms of the plan in the event of stock
dividends, recapitalizations and similar transactions.
The changes in the number of options were as follows:
YEARS ENDED JANUARY 31,
-----------------------
2000 2001 2002
---- ---- ----
Outstanding at beginning of period 2,899,612 3,272,700 3,802,471
Granted during the period 877,084 843,723 913,591
Exercised during the period -- (53,090) (550,987)
Canceled, terminated and expired (503,996) (260,862) (247,712)
---------- ---------- ----------
Outstanding at end of period 3,272,700 3,802,471 3,917,363
========== ========== ==========
Substantially all of the options outstanding as of January 31, 2002
vest in four equal annual increments from the date on which the Company
completed the initial public offering of its common stock, or for options issued
after the initial public offering, in four equal annual increments from the date
of grant. Weighted average option exercise price information was as follows:
YEARS ENDED JANUARY 31,
-----------------------
2000 2001 2002
---- ---- ----
Outstanding at beginning of period $ 2.21 $ 2.57 $ 5.49
Granted during the period 3.71 16.84 16.76
Exercised during the period -- 10.28 3.52
Canceled, terminated and expired 2.51 4.62 10.78
Outstanding at end of period $ 2.57 $ 5.49 $ 8.06
Significant option groups outstanding at January 31, 2002 and
related weighted average price and life information were as follows:
F-14
WEIGHTED AVERAGE WEIGHTED WEIGHTED
RANGE OF NUMBER REMAINING AVERAGE NUMBER AVERAGE
EXERCISE PRICE OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
-------------- ----------- ---------------- -------------- ----------- --------------
$ 1.99 - $ 1.99 1,382,719 6.01 $ 1.99 157,919 $ 1.99
$ 2.75 - $ 3.97 1,010,535 7.08 3.22 99,924 3.32
$ 9.38 - $19.56 1,306,359 8.93 15.24 99,730 13.00
$22.56 - $27.47 202,750 8.69 25.74 41,125 25.99
$29.25 - $29.25 15,000 9.10 29.25 -- --
--------- ------- -------- --------- ---------
3,917,363 7.41 $ 8.06 398,698 $ 7.55
========= ======= ======== ========= =========
The Company applies Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations in
accounting for its option plans. Accordingly, as all options have been granted
at exercise prices equal to fair market value on the date of grant, no
compensation expense has been recognized by the Company in connection with its
stock-based compensation plans. Had compensation cost for the Company's stock
plans been determined based upon the fair value at the date of grant for awards
under these plans consistent with the methodology prescribed under SFAS No. 123,
"Accounting for Stock-Based Compensation", the Company's net income and earnings
per share would be reduced by approximately $297,447, $2,107,109 and $4,039,341
or $0.01, $0.05 and $0.09 per diluted share for the years ended January 31,
2000, 2001 and 2002, respectively.
The weighted average fair value of the options granted during the
years ended January 31, 2000, 2001 and 2002 is estimated at $1.21, $12.29 and
$12.09, respectively, on the date of grant (using the Black-Scholes option
pricing model) assuming an expected life of seven years for the years ended
January 31, 2000 and five years for the year ended January 31, 2001 and 2002 and
assuming the following weighted average assumptions: (i) volatility of 0% and
risk free interest rate of 5.8% for the year ended January 31, 2000; (ii)
volatility of 90% and risk free interest rate of 5.6% for the year ended January
31, 2001; and (iii) volatility of 95% and risk free interest rate of 4.7% for
the year ended January 31, 2002.
9. EMPLOYEE STOCK PURCHASE PLAN
Upon completion of the Company's initial public offering, the Company
adopted the 2000 Employee Stock Purchase Plan. Under the terms of this plan, an
employee, who has been employed for at least three months, may apply up to 10%
of his or her base salary to purchase shares of the Company's common stock. The
price of the stock is 85% of the last sale price on NASDAQ on the first or last
day of the offering period. The first plan offering period began in September
2000. There are 600,000 shares available under this plan and 59,902 have been
issued as of January 31, 2002.
F-15
10. EARNINGS PER SHARE ("EPS")
Basic earnings per share is determined by using the weighted average
number of shares of common stock outstanding during each period. Diluted
earnings per share further assumes the issuance of common shares for all
dilutive potential shares outstanding. The calculation for earnings per share
for the years ended January 31, 2000, 2001, and 2002 was as follows:
JANUARY 31, 2000 JANUARY 31, 2001 JANUARY 31, 2002
----------------- ----------------- ----------------
PER SHARE PER SHARE PER SHARE
INCOME SHARES AMOUNT INCOME SHARES AMOUNT INCOME SHARES AMOUNT
------ ------ ------ ------ ------ ------ ------ ------ ------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
BASIC EPS
Net income $ 1,574 32,727 $ 0.05 $ 9,077 37,602 $0.24 $ 10,837 40,929 $0.26
========== ===== =====
Effect of dilutive
securities-options -- 1,032 -- 3,113 -- 2,317
------- ------ ------- ------ -------- ------
DILUTED EPS $ 1,574 33,759 $ 0.05 $ 9,077 40,715 $0.22 $ 10,837 43,246 $0.25
======= ====== ========== ======= ====== ===== ======== ====== =====
11. INTEREST INCOME (EXPENSE), NET
Interest income (expense), net consists of the following:
YEARS ENDED JANUARY 31,
-----------------------
2000 2001 2002
---- ---- ----
(IN THOUSANDS)
Interest income $ 103 $ 6,396 $ 8,761
Interest expense (374) (114) --
------ ------- -------
Net $ (271) $ 6,282 $ 8,761
====== ======= =======
F-16
12. INCOME TAXES
The provision for income taxes consists of the following:
YEARS ENDED JANUARY 31,
-----------------------
2000 2001 2002
---- ---- ----
Current: (IN THOUSANDS)
Federal $ 1,075 $ 4,916 $ 6,729
Foreign -- -- 7
State 147 764 575
-------- -------- --------
Total current 1,222 5,680 7,311
-------- -------- --------
Deferred (benefit):
Federal (246) (37) (736)
State (12) (82) (128)
-------- -------- --------
Total deferred (258) (119) (864)
-------- -------- --------
$ 964 $ 5,561 $ 6,447
======== ======== ========
The reconciliation of the U.S. Federal statutory tax rate to the
Company's effective rate is as follows:
YEARS ENDED JANUARY 31,
-----------------------
2000 2001 2002
---- ---- ----
U.S. Federal statutory rate 34% 34% 35%
State taxes, net 4% 3% 3%
Other -- 1% (1%)
-------- -------- --------
Company's effective tax rate 38% 38% 37%
======== ======== ========
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. The tax effects
of significant items comprising the Company's deferred tax asset and liability
at January 31, 2001 and 2002 are as follows:
JANUARY 31,
-----------
2001 2002
---- ----
(IN THOUSANDS)
Deferred tax asset:
Accrued liabilities and other $ 608 $ 835
Allowance for doubtful accounts 146 316
------- --------
Total deferred tax asset 754 1,151
------- --------
Deferred tax liability:
Depreciation (467) --
------- --------
Total deferred tax liability (467) --
------- --------
Net deferred tax asset $ 287 $ 1,151
======= ========
F-17
13. BUSINESS SEGMENT INFORMATION
The Company is engaged in one business segment: the design,
development, manufacture, marketing and support of special software and hardware
for the communications industry.
Sales by country, as a percentage of total sales, is as follows:
YEARS ENDED JANUARY 31,
-----------------------
2000 2001 2002
---- ---- ----
United States 37% 38% 38%
Germany 12% 10% 9%
Israel 18% 16% 16%
Sweden 16% 15% 12%
Other 17% 21% 25%
---- ---- ----
Total 100% 100% 100%
==== ==== ====
For the year ended January 31, 2000, Ericsson, Comverse and its
affiliates, and Siemens accounted for approximately 20%, 18% and 12%,
respectively, of the Company's sales. For the year ended January 31, 2001,
Ericsson, Comverse and its affiliates, and Siemens accounted for approximately
18%, 16% and 10%, respectively, of the Company's sales. For the year ended
January 31, 2002, Ericsson, Comverse, Sonus and Siemens accounted for
approximately 18%, 16%, 11% and 11%, respectively, of the Company's sales.
The Company had long-lived assets of $9,772,000 in the United States
and $1,306,000 in France at January 31, 2002.
F-18
14. COMMITMENTS AND CONTINGENCIES
LEASES - The Company leases office space under non-cancelable
operating leases. Rent expense for all leased premises approximated $593,000,
$847,000 and $1,169,000 for the years ended January 31, 2000, 2001 and 2002,
respectively.
As of January 31, 2002, the minimum rent obligations of the Company
were approximately as follows:
YEARS ENDING JANUARY 31, AMOUNT
- ------------------------ ------
(IN THOUSANDS)
2003 $1,023
2004 949
2005 969
2006 888
2007 and thereafter 348
-------
$4,177
=======
F-19
15. QUARTERLY INFORMATION (UNAUDITED)
The following table shows selected results of operations of each of
the fiscal quarters during the years ended January 31, 2001 and 2002:
FISCAL QUARTER ENDED
---------------------------------------------------------------------------------------------
APR. 30, JULY 31, OCT. 31, JAN. 31, APR. 30, JULY 31, OCT. 31, JAN. 31,
2000 2000 2000 2001 2001 2001 2001 2002
---- ---- ---- ---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Sales $ 8,826 $10,591 $ 12,823 $ 15,201 $ 17,033 $17,926 $ 13,013 $ 10,184
Gross Profit 5,879 7,095 8,658 10,320 11,617 12,333 8,024 6,646
Net income 961 1,716 2,306 4,094 4,144 4,199 1,482 1,012
Diluted earnings per share $ 0.03 $ 0.04 $ 0.06 $ 0.09 $ 0.10 $ 0.10 $ 0.03 $ 0.02
======== ======== ======== ======== ======== ======== ======== ========
F-20
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Ulticom, Inc.
By: /s/ Shawn K. Osborne
---------------------------------------------
Name: Shawn K. Osborne
Date: April 29, 2002
Title: President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the Registrant
and in the capacities on the dates indicated:
Signature Title Date
- --------- ----- ----
/s/ Kobi Alexander Chairman of the Board and Director April 26, 2002
- ---------------------------
Kobi Alexander
/s/ Shawn K. Osborne President and Chief Executive Officer April 29, 2002
- ---------------------------
Shawn K. Osborne
/s/ Mark A. Kissman Chief Financial Officer April 29, 2002
- ---------------------------
Mark A. Kissman
/s/ David Kreinberg Director April 26, 2002
- ---------------------------
David Kreinberg
/s/ William F. Sorin Director April 26, 2002
- ---------------------------
William F. Sorin
/s/ Paul D. Baker Director April 29, 2002
- ---------------------------
Paul D. Baker
/s/ Yaacov Koren Director April 29, 2002
- ---------------------------
Yaacov Koren
/s/ Ron Hiram Director April 29, 2002
- ---------------------------
Ron Hiram
/s/ Rex A. Mc Williams Director April 29, 2002
- ---------------------------
Rex A. McWilliams
/s/ Zvi Bar-on Director April 25, 2002
- ---------------------------
Zvi Bar-on