UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 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 31 March 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 0-26376
ON TECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware |
04-3162846 | |
| (State of incorporation) |
(IRS Employer Identification Number) |
Waltham Woods
880 Winter Street, Building 4
Waltham, Massachusetts 02451-1449
(781) 487-3300
(Address and telephone of principal executive offices)
Indicate by check mark whether 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, and (2) has been subject to such filing requirements for the past 90 days.
YES x NO ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12-b-2 of the Exchange Act)
YES ¨ NO x
23,825,406 shares of the registrant’s Common Stock, $0.01 par value, were outstanding as of May 13, 2003.
THIS DOCUMENT CONTAINS 32 PAGES.
ON TECHNOLOGY CORPORATION
FORM 10-Q, March 31, 2003
| Item Number |
Page | |
| PART I: FINANCIAL INFORMATION |
||
| Item 1. Consolidated Financial Statements (unaudited) |
||
| 3 | ||
| 4 | ||
| 5 | ||
| 6-10 | ||
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
11-28 | |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk |
28 | |
| 29 | ||
| PART II: OTHER INFORMATION |
||
| 29 | ||
| 29 | ||
| 29 | ||
| 29 | ||
| 29 | ||
| 29 | ||
| 30 | ||
| 31-32 | ||
| 33 |
2
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements
CONSOLIDATED BALANCE SHEET
(in thousands, except share data)
(unaudited)
| March 31, 2003 |
December 31, 2002 |
|||||||
| Assets |
||||||||
| Current Assets: |
||||||||
| Cash and cash equivalents |
$ |
13,426 |
|
$ |
13,636 |
| ||
| Restricted cash |
|
100 |
|
|
100 |
| ||
| Accounts receivable, net of allowances of $550 and $830, respectively |
|
6,215 |
|
|
8,473 |
| ||
| Prepaid expenses and other current assets |
|
920 |
|
|
1,256 |
| ||
| Deferred tax asset |
|
520 |
|
|
501 |
| ||
| Total current assets |
|
21,181 |
|
|
23,966 |
| ||
| Property and equipment, net |
|
1,154 |
|
|
1,097 |
| ||
| Deferred tax asset |
|
520 |
|
|
501 |
| ||
| Other assets and deposits |
|
173 |
|
|
237 |
| ||
| Total assets |
$ |
23,028 |
|
$ |
25,801 |
| ||
| Liabilities and Stockholders’ Equity |
||||||||
| Current Liabilities: |
||||||||
| Accounts payable |
$ |
1,999 |
|
$ |
2,574 |
| ||
| Accrued expenses |
|
3,707 |
|
|
4,180 |
| ||
| Capital lease obligations |
|
48 |
|
|
48 |
| ||
| Deferred revenue |
|
7,142 |
|
|
7,265 |
| ||
| Total current liabilities |
|
12,896 |
|
|
14,067 |
| ||
| Long term portion of capital lease obligations |
|
34 |
|
|
45 |
| ||
| Other liabilities |
|
1,572 |
|
|
1,514 |
| ||
| Total liabilities |
|
14,502 |
|
|
15,626 |
| ||
| Stockholders’ Equity: |
||||||||
| Preferred stock, $0.01 par value – 2,000,000 shares authorized – No shares issued and outstanding |
|
— |
|
|
— |
| ||
| Common stock, $0.01 par value – 50,000,000 shares authorized – 23,819,594 and 23,757,754 shares issued and 23,804,594 and 23,742,754 shares, outstanding, respectively |
|
238 |
|
|
238 |
| ||
| Additional paid-in capital |
|
81,212 |
|
|
81,123 |
| ||
| Deferred stock-based compensation |
|
(61 |
) |
|
(74 |
) | ||
| Accumulated deficit |
|
(73,503 |
) |
|
(71,695 |
) | ||
| Accumulated other comprehensive income |
|
687 |
|
|
630 |
| ||
| Treasury stock – 15,000 shares at cost |
|
(47 |
) |
|
(47 |
) | ||
| Total stockholders’ equity |
|
8,526 |
|
|
10,175 |
| ||
| Total liabilities and stockholders’ equity |
$ |
23,028 |
|
$ |
25,801 |
| ||
The accompanying notes are an integral part of these consolidated financial statements.
3
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share data)
(unaudited)
| Three Months Ended March 31, |
||||||||
| 2003 |
2002 |
|||||||
| Revenue: |
||||||||
| Net software licenses |
$ |
4,029 |
|
$ |
4,225 |
| ||
| Service and maintenance |
|
3,600 |
|
|
2,723 |
| ||
| Hardware |
|
9 |
|
|
1,282 |
| ||
| Total revenue |
|
7,638 |
|
|
8,230 |
| ||
| Cost of Revenue: |
||||||||
| Cost of software licenses revenue |
|
640 |
|
|
353 |
| ||
| Cost of service and maintenance revenue |
|
1,018 |
|
|
666 |
| ||
| Cost of hardware revenue |
|
4 |
|
|
754 |
| ||
| Total cost of revenue |
|
1,662 |
|
|
1,773 |
| ||
| Gross Profit |
|
5,976 |
|
|
6,457 |
| ||
| Operating expenses: |
||||||||
| Sales and marketing |
|
4,166 |
|
|
3,013 |
| ||
| Research and development |
|
1,946 |
|
|
1,977 |
| ||
| General and administrative |
|
1,370 |
|
|
1,075 |
| ||
| Total operating expenses |
|
7,482 |
|
|
6,065 |
| ||
| Income (loss) from operations |
|
(1,506 |
) |
|
392 |
| ||
| Interest income (expense), net |
|
35 |
|
|
7 |
| ||
| Other income (expense), net |
|
156 |
|
|
(104 |
) | ||
| Income (loss) before provision for income taxes |
|
(1,315 |
) |
|
295 |
| ||
| Provision for income taxes |
|
493 |
|
|
205 |
| ||
| Net income (loss) |
$ |
(1,808 |
) |
$ |
90 |
| ||
| Basic net income (loss) per share |
$ |
(0.08 |
) |
$ |
0.00 |
| ||
| Diluted net income (loss) per share |
$ |
(0.08 |
) |
$ |
0.00 |
| ||
| Weighted average common shares outstanding – basic |
|
23,775 |
|
|
22,794 |
| ||
| Weighted average common shares outstanding – diluted |
|
23,775 |
|
|
24,200 |
| ||
The accompanying notes are an integral part of these consolidated financial statements.
4
ON TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(unaudited)
| Three Months |
||||||||
| Ended March 31, |
||||||||
| 2003 |
2002 |
|||||||
| Cash Flows from Operating Activities: |
||||||||
| Net income (loss) |
$ |
(1,808 |
) |
$ |
90 |
| ||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
||||||||
| Depreciation and amortization |
|
226 |
|
|
179 |
| ||
| Non-cash impact associated with the revaluation of intercompany loans to foreign subsidiaries (Note 5) |
|
(312 |
) |
|
105 |
| ||
| Stock-based compensation expense |
|
13 |
|
|
21 |
| ||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
|
2,258 |
|
|
1,455 |
| ||
| Prepaid expenses and other current assets |
|
336 |
|
|
(63 |
) | ||
| Accounts payable |
|
(575 |
) |
|
(161 |
) | ||
| Accrued expenses |
|
(415 |
) |
|
(769 |
) | ||
| Deferred revenue |
|
(123 |
) |
|
21 |
| ||
| Net cash provided by (used in) operating activities |
|
(400 |
) |
|
878 |
| ||
| Cash Flows from Investing Activities: |
||||||||
| Change in other assets and deposits |
|
11 |
|
|
||||