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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 September 30, 2002
 
OR
 
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
Commission file number 000-23043
 
PERVASIVE SOFTWARE INC.
(Exact name of registrant as specified in its charter)
 
Delaware
 
74-2693793
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification Number)
 
12365 Riata Trace Parkway, Bldg. B
Austin, Texas 78727
(Address of principal executive offices)
 

 
(512) 231-6000
(Registrant’s telephone number, including area code)
 

 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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
 
(1)
    
Yes
    
þ
    
No
    
¨
(2)
    
Yes
    
þ
    
No
    
¨
 
As of November 12, 2002 there were 16,605,485 shares of the Registrant’s common stock outstanding.
 

 


Table of Contents
 
PERVASIVE SOFTWARE INC.
 
FORM 10-Q
 
INDEX
 
PART I.    FINANCIAL INFORMATION
  
PAGE

Item 1.
     
3
       
3
       
4
       
5
       
6
Item 2.
     
8
Item 3.
     
13
Item 4.
     
22
PART II.     OTHER INFORMATION
  
24
Item 4.
     
24
Item 6.
     
24
  
26
  
27
 

2


Table of Contents
 
PART I.    FINANCIAL INFORMATION
 
Item 1.    Financial Statements
 
Pervasive Software Inc.
Condensed Consolidated Balance Sheets
(in thousands)
 
    
September 30, 2002

    
June 30, 2002

 
    
 
(Unaudited
)
        
Assets
                 
Current assets:
                 
Cash and cash equivalents
  
$
27,209
 
  
$
22,215
 
Marketable securities
  
 
8,849
 
  
 
11,973
 
Trade accounts receivable, net
  
 
4,302
 
  
 
4,263
 
Notes receivable from related parties
  
 
102
 
  
 
102
 
Prepaid expenses and other current assets
  
 
1,005
 
  
 
1,209
 
    


  


Total current assets
  
 
41,467
 
  
 
39,762
 
Property and equipment, net
  
 
2,565
 
  
 
2,922
 
Notes receivable from related parties
  
 
268
 
  
 
306
 
Other assets
  
 
184
 
  
 
369
 
    


  


Total assets
  
$
44,484
 
  
$
43,359
 
    


  


Liabilities and Stockholders’ Equity
                 
Current liabilities:
                 
Trade accounts payable
  
$
376
 
  
$
268
 
Accrued payroll and payroll related costs
  
 
1,716
 
  
 
1,740
 
Deferred rent and lease related accruals
  
 
1,698
 
  
 
1,494
 
Other accrued expenses
  
 
3,539
 
  
 
3,234
 
Deferred revenues
  
 
2,086
 
  
 
2,147
 
Liabilities of discontinued operations
  
 
260
 
  
 
684
 
    


  


Total current liabilities
  
 
9,675
 
  
 
9,567
 
Stockholders’ equity:
                 
Common stock
  
 
58,698
 
  
 
59,096
 
Retained deficit
  
 
(23,889
)
  
 
(25,304
)
    


  


Total stockholders’ equity
  
 
34,809
 
  
 
33,792
 
    


  


Total liabilities and stockholders’ equity
  
$
44,484
 
  
$
43,359
 
    


  


 
See accompanying notes.

3


Table of Contents
 
Pervasive Software Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
 
    
Three months ended September 30,

 
    
2002

    
2001

 
Revenues
  
$
9,176
 
  
$
8,965
 
Costs and expenses:
                 
Cost of revenues and technical support
  
 
1,550
 
  
 
1,665
 
Sales and marketing
  
 
3,190
 
  
 
3,083
 
Research and development
  
 
1,964
 
  
 
1,938
 
General and administrative
  
 
1,177
 
  
 
1,351
 
    


  


Total costs and expenses
  
 
7,881
 
  
 
8,037
 
    


  


Operating income from continuing operations
  
 
1,295
 
  
 
928
 
Interest and other income, net
  
 
162
 
  
 
229
 
Income tax provision
  
 
(150
)
  
 
(175
)
    


  


Income from continuing operations before effect of adoption of new accounting principle
  
 
1,307
 
  
 
982
 
Effect of adoption of new accounting principle
  
 
—  
 
  
 
(676
)
    


  


Income from continuing operations
  
 
1,307
 
  
 
306
 
Gain from discontinued operations
  
 
159
 
  
 
—  
 
    


  


Net income
  
$
1,466
 
  
$
306
 
    


  


Basic earnings per share:
                 
Income from continuing operations before effect of adoption of new accounting principle
  
$
0.08
 
  
$
0.06
 
Effect of adoption of new accounting principle
  
 
—  
 
  
 
(0.04
)
Gain from discontinued operations
  
 
0.01
 
  
 
—  
 
    


  


Net income
  
$
0.09
 
  
$
0.02
 
    


  


Diluted earnings per share:
                 
Income from continuing operations before effect of adoption of new accounting principle
  
$
0.07
 
  
$
0.06
 
Effect of adoption of new accounting principle
  
 
—  
 
  
 
(0.04
)
Gain from discontinued operations
  
 
0.01
 
  
 
—  
 
    


  


Net income
  
$
0.08
 
  
$
0.02
 
    


  


 
See accompanying notes.
 

4


Table of Contents
 
Pervasive Software Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
 
    
Three months ended September 30,

 
    
2002

    
2001

 
Cash from continuing operations
                 
Income from continuing operations
  
$
1,307
 
  
$
306
 
Adjustments to reconcile income from continuing operations to net cash provided by continuing operations:
                 
Depreciation and amortization
  
 
407
 
  
 
595
 
Effect of adoption of new accounting principle
  
 
—  
 
  
 
676
 
Other non cash items
  
 
8
 
  
 
—  
 
Change in current assets and liabilities:
                 
Increase in trade accounts receivable
  
 
(38
)
  
 
(28
)
Decrease in prepaid expenses and other current assets
  
 
185
 
  
 
1,179
 
Increase (decrease) in accounts payable and accrued liabilities
  
 
598
 
  
 
(500
)
Increase (decrease) in deferred revenue
  
 
(61
)
  
 
122
 
    


  


Net cash provided by continuing operations
  
 
2,406
 
  
 
2,350
 
Cash from discontinued operations
                 
Gain from discontinued operations
  
 
159
 
  
 
—  
 
Decrease in liabilities of discontinued operations
  
 
(424
)
  
 
(133
)
    


  


Net cash used in discontinued operations
  
 
(265
)
  
 
(133
)
Cash from investing activities
                 
Purchase of property and equipment
  
 
(73
)
  
 
(216
)
Sales and purchases of marketable securities, net
  
 
3,123
 
  
 
1,619
 
Investment in business venture
  
 
50
 
  
 
(351
)
(Increase) decrease in other assets
  
 
176
 
  
 
(141
)
    


  


Net cash provided by investing activities
  
 
3,276
 
  
 
911
 
Cash from financing activities
                 
Proceeds from issuance of stock, net of issuance costs
  
 
87
 
  
 
9
 
Acquisition of treasury stock
  
 
(493
)
  
 
(684
)
    


  


Net cash used in financing activities
  
 
(406
)
  
 
(675
)
Effect of exchange rate on cash and cash equivalents
  
 
(17
)
  
 
96
 
    


  


Increase in cash and cash equivalents
  
 
4,994
 
  
 
2,549
 
Cash and cash equivalents at beginning of period
  
 
22,215
 
  
 
20,593
 
    


  


Cash and cash equivalents at end of period
  
$
27,209
 
  
$
23,142
 
    


  


 
See accompanying notes.
 

5


Table of Contents
 
PERVASIVE SOFTWARE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(Unaudited)
 
1.    General and Basis of Financial Statements
 
The unaudited interim condensed consolidated financial statements include the accounts of Pervasive Software Inc. and its majority-owned subsidiaries (collectively, the “Company” or “Pervasive”). All material intercompany accounts and transactions have been eliminated in consolidation.
 
The financial statements included herein reflect all adjustments, consisting only of normal recurring adjustments, which in the opinion of management are necessary to fairly state the Company’s financial position, results of operations and cash flows for the periods presented. These financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto for the year ended June 30, 2002, which are contained in the Company’s Annual Report filed on Form 10-K on September 27, 2002 (File No. 000-23043). The results of operations for the three month periods ended September 30, 2002 and 2001 are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year.
 
2.    Earnings Per Share
 
The following table sets forth the computation of basic and diluted earnings per share before the effect of discontinued operations and adoption of new accounting principle (in thousands, except per share data):
 
    
Three months ended September 30,

    
2002

  
2001

Numerator:
             
Income from continuing operations before effect of adoption of new accounting principle
  
$
1,307
  
$
982
    

  

Denominator:
             
Denominator for basic earnings per share – weighted average shares
  
 
16,736
  
 
16,919
Effect of dilutive securities:
             
Employee stock options
  
 
906
  
 
593