SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 30, 2003.
OR
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from to .
Commission File Number 000-21559
VIISAGE TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
| Delaware |
04-3320515 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| 30 Porter Road, Littleton, MA |
01460 | |
| (Address of principal executive offices) |
(Zip Code) | |
| Registrant’s telephone number, including area code |
(978) 952-2200 |
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. þ Yes ¨ No
Indicate by a check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act) ¨Yes þ No
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
| Class |
Outstanding at May 9, 2003 | |
| Common stock, $.001 par value |
20,345,914 |
FORM 10-Q FOR THE QUARTER ENDED MARCH 30, 2003
| Page | ||
| 1 | ||
| 2 | ||
| PART I—FINANCIAL INFORMATION |
||
| Item 1—Financial Statements |
||
| Consolidated Balance Sheets as of March 30, 2003 and December 31, 2002 |
3 | |
| Consolidated Statements of Operations for the three months ended March 30, 2003 and March 31, 2002 |
4 | |
| Consolidated Statements of Cash Flows for the three months ended March 30, 2003 and March 31, 2002 |
5 | |
| 6 | ||
| Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations |
10 | |
| Item 3—Quantitative and Qualitative Disclosures about Market Risk |
19 | |
| 19 | ||
| PART II—OTHER INFORMATION |
||
| 20 | ||
| 20 | ||
| 20 | ||
| 20 | ||
| 20 | ||
| 20 | ||
| 21 | ||
| 22 |
2
PART 1 – FINANCIAL INFORMATION
ITEM 1 – FINANCIAL STATEMENTS
VIISAGE TECHNOLOGY, INC.
(in thousands)
| March 30, 2003 |
*December 31, 2002 | |||||
| (Unaudited) |
||||||
| Assets |
||||||
| Current Assets: |
||||||
| Cash and cash equivalents |
$ |
1,783 |
$ |
2,212 | ||
| Restricted cash |
|
1,098 |
|
1,241 | ||
| Accounts receivable |
|
5,434 |
|
7,360 | ||
| Costs and estimated earnings in excess of billings |
|
24,128 |
|
23,372 | ||
| Other current assets |
|
680 |
|
339 | ||
| Total current assets |
|
33,123 |
|
34,524 | ||
| Property and equipment, net |
|
14,809 |
|
16,629 | ||
| Intangible assets, net |
|
3,145 |
|
3,147 | ||
| Restricted cash |
|
6,015 |
|
6,163 | ||
| Other assets |
|
792 |
|
726 | ||
| $ |
57,884 |
$ |
61,189 | |||
| Liabilities and Shareholders’ Equity |
||||||
| Current Liabilities: |
||||||
| Accounts payable and accrued expenses |
$ |
6,709 |
$ |
7,017 | ||
| Current portion of project financing |
|
5,204 |
|
5,263 | ||
| Total current liabilities |
|
11,913 |
|
12,280 | ||
| Project financing |
|
8,607 |
|
9,845 | ||
| Total liabilities |
|
20,520 |
|
22,125 | ||
| Shareholders’ equity |
|
37,364 |
|
39,064 | ||
| $ |
57,884 |
$ |
61,189 | |||
* Derived from audited financial statements.
The accompanying notes are an integral part of these financial statements.
3
Viisage Technology, Inc.
Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
| Three Months Ended |
||||||||
| March 30, 2003 |
March 31, 2002 |
|||||||
| Revenues |
$ |
8,591 |
|
$ |
6,399 |
| ||
| Cost of revenues |
|
6,594 |
|
|
5,085 |
| ||
| Gross margin |
|
1,997 |
|
|
1,314 |
| ||
| Operating expenses: |
||||||||
| Sales and marketing |
|
1,411 |
|
|
862 |
| ||
| Research and development |
|
945 |
|
|
506 |
| ||
| General and administrative |
|
1,093 |
|
|
597 |
| ||
| Total operating expenses |
|
3,449 |
|
|
1,965 |
| ||
| Operating loss |
|
(1,452 |
) |
|
(651 |
) | ||
| Interest expense |
|
219 |
|
|
206 |
| ||
| Loss before income taxes |
|
(1,671 |
) |
|
(857 |
) | ||
| Provision for income taxes |
|
63 |
|
|
— |
| ||
| Net loss |
$ |
(1,734 |
) |
$ |
(857 |
) | ||
| Net loss per basic and diluted shares |
$ |
(0.09 |
) |
$ |
(0.04 |
) | ||
| Weighted average basic and diluted shares |
|
20,258 |
|
|
19,822 |
| ||
The accompanying notes are an integral part of these financial statements.
4
VIISAGE TECHNOLOGY, INC.
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
| Three Months Ended |
||||||||
| March 30, 2003 |
March 31, 2002 |
|||||||
| Cash Flows from Operating Activities: |
||||||||
| Net loss |
$ |
(1,734 |
) |
$ |
(857 |
) | ||
| Adjustments to reconcile net loss to net cash provided by (used for) |
||||||||
| Depreciation and amortization |
|
1,968 |
|
|
1,558 |
| ||
| Directors fees paid in common stock |
|
30 |
|
|
65 |
| ||
| Change in operating assets and liabilities: |
||||||||
| Accounts receivable |
|
1,926 |
|
|
(957 |
) | ||
| Costs and estimated earnings in excess of billings |
|
(756 |
) |
|
(2,257 |
) | ||
| Other current assets |
|
(371 |
) |
|
(271 |
) | ||
| Accounts payable and accrued expenses |
|
(308 |
) |
|
783 |
| ||
| Net cash provided by (used for) operating activities |
|
755 |
|
|
(1,936 |
) | ||
| Cash Flows from Investing Activities: |
||||||||
| Decrease in restricted cash |
|
291 |
|
|
— |
| ||
| Additions to property and equipment |
|
(29 |
) |
|
(568 |
) | ||
| Cash paid for an acquisition |
|
— |
|
|
(2,422 |
) | ||
| Increase in other assets |
|
(183 |
) |
|
(15 |
) | ||
| Net cash provided by (used for) investing activities |
|
79 |
|
|
(3,005 |
) | ||
| Cash Flows from Financing Activities: |
||||||||
| Net revolving credit borrowings |
|
— |
|
|
— |
| ||
| Principal payments on project financing |
|
(1,297 |
) |
|
(1,112 |
) | ||
| Net proceeds from issuance of common stock |
|
34 |
|
|
195 |
| ||
| Net cash used for financing activities |
|
(1,263 |
) |
|
(917 |
) | ||
| Net decrease in cash and cash equivalents |
|
(429 |
) |
|
(5,858 |
) | ||
| Cash and cash equivalents, beginning of period |
|
2,212 |
|
|
20,662 |
| ||
| Cash and cash equivalents, end of period |
$ |
1,783 |
|
$ |
14,804 |
| ||
| Supplemental Cash Flow Information: |
||||||||
| Cash paid during the period for interest |
$ |
236 |
|
$ |
162 |
| ||
| Non Cash Activities: |
||||||||
| Directors fees paid in common stock |
$ |
30 |
|
$ |
65 |
| ||
| Services paid in common stock |
$ |
— |
|
$ |
320 |
| ||
| Net assets acquired from Lau Technologies |
$ |
— |
|
$ |
1,598 |
| ||
The accompanying notes are an integral part of these financial statements
5
VIISAGE TECHNOLOGY, INC.
1. DESCRIPTION OF BUSINESS
We are the leading provider of advanced technology solutions for identity verification. We focus on identification solutions that improve personal convenience and security, deter fraud, and reduce identification program costs. We combine our systems integration and software design capabilities with our proprietary software and hardware products and other industry standard products to create complete customized solutions. These turnkey solutions integrate image and data capture, create relational databases, incorporate multiple biometrics and improve our customers’ ability to move and manage information. Applications can include driver’s licenses, voter registration, national ID’s, law enforcement, social services, access control and PC network and internet access security. Our primary customers have been government agencies with particular penetration in Departments of Motor Vehicles.
Our patented face-recognition technology is focused on three major product application areas.
| • | FaceEXPLORER™, our technology for image retrieval and analysis, is recognized for its leadership technology performance in real-time and large-database applications. FaceEXPLORER™ is deployed in the world’s largest face-recognition application with a database of more than 12.1 million enrolled images and is growing by 15,000 new images per day. |
| • | FacePASS™ for physical access control and keyless entry; and |
| • | FaceFINDER™ for surveillance and identification. |
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial data as of March 30, 2003 and December 31, 2002, and for the three month periods ended March 30, 2003 and March 31, 2002, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The December 31, 2002 balance sheet was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. These financial statements should be read in conjunction with the financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2002.
The financial statements as of and for the three months ended March 31, 2002 include the assets and liabilities of Biometrica Systems, Inc. (“Biometrica”) as of March 31, 2002 and the results of its operations and its cash flows from March 18, 2002 (date of acquisition) to March 31, 2002. All inter-company accounts and transactions have been eliminated in consolidation.
In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows as of March 30, 2003 and for the three month periods ended March 30, 2003 and March 31, 2002, have been made. The results of operations for the period ended March 30, 2003 are not necessarily indicative of the operating results for the full year.
6