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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q
 
 
(Mark One)
       
x
     
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
      
SECURITIES EXCHANGE ACT OF 1934
      
For the quarterly period ended October 31, 2002
      
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: 1-15529
 
OPTIO SOFTWARE, INC.
(Exact name of registrant as specified in its charter)
 
 
Georgia
   
58-1435435
(State of other jurisdiction of incorporation or organization)
   
(I.R.S. Employer Identification No.)
3015 Windward Plaza, Fairways II, Alpharetta, GA
   
30005
(Address of principal executive offices)
   
(Zip Code)
 
 
Registrant’s telephone number, including area code: (770) 576-3500
 
 
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.    Yes  x    No  ¨
 
There were 19,127,498 shares of the Registrant’s common stock outstanding as of December 13, 2002.
 

Table of Contents
OPTIO SOFTWARE, INC.
 
FORM 10-Q
 
For the Quarterly Period Ended October 31, 2002
 
TABLE OF CONTENTS
 
 
    
Page
PART I – FINANCIAL INFORMATION
     
Item 1.     Financial Statements
   
3
  
14
  
25
Item 4.     Controls and Procedures
   
25
PART II – OTHER INFORMATION
     
Item 1.     Legal Proceedings
  
25
  
26
  
27
  
27
Item 5.     Other Information
   
27
  
27
 

2

Table of Contents
FORWARD-LOOKING STATEMENTS
 
In addition to historical information, this Form 10-Q contains forward-looking statements that involve risks and uncertainties. Such forward-looking statements are made pursuant to the “safe-harbor” provisions of the Private Securities Litigation Reform Act of 1995 and Section 27A of the Securities Act of 1933 and are made based on management’s current expectations or beliefs as well as assumptions made by, and information currently available to, management. These forward-looking statements include, among other things, statements regarding Optio Software, Inc.’s (“Optio”) anticipated costs and expenses, Optio’s capital needs and financing plans, product and service development, Optio’s growth strategies, market demand for Optio’s products and services, relationships with Optio’s strategic marketing alliances, and competition. These forward-looking statements include, among others, those statements including the words “expects,” “anticipates,” “intends,” “believes” and similar language. Optio’s actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, risks associated with Optio’s reliance on strategic marketing and reseller relationships, fluctuations in operating results because of acquisitions or dispositions, changes in competition, delays in developing new software, market acceptance of new products, expectation of achieving and sustaining operating profits and earnings, including the timing of such company performance, disputes regarding Optio’s intellectual property, risks relating to the potential delisting of its stock, possible adverse results of pending or future litigation, or risks associated with Optio’s international operations. These and additional factors are set forth in the “Safe Harbor Compliance Statement for Forward-Looking Statements” included as Exhibit 99.3 to this Quarterly Report on Form 10-Q. You should carefully review these risks and additional risks described in other documents Optio files from time to time with the Securities and Exchange Commission, including the latest Annual Report on Form 10-K that Optio has filed. You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. Optio undertakes no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of this document.
 
 
PART I – FINANCIAL INFORMATION
 
ITEM 1.    FINANCIAL STATEMENTS

3

Table of Contents
Optio Software, Inc.
 
Consolidated Condensed Balance Sheets
 
    
January 31,
2002
     
October 31,
2002
  
ASSETS
            
 
(Unaudited)
 
Current assets:
                  
Cash and cash equivalents
   
$
5,378,000
 
   
$
2,970,000
 
Marketable securities
   
 
205,000
 
   
 
—  
 
Accounts receivable, net
   
 
6,383,000
 
   
 
4,919,000
 
Prepaid expenses and other current assets
   
 
811,000
 
   
 
930,000
 
Current portion of notes receivable
   
 
360,000
 
   
 
360,000
 
    
  
Total current assets
   
 
13,137,000
 
   
 
9,179,000
 
Property and equipment, net
   
 
1,570,000
 
   
 
1,094,000
 
Other assets:
                  
Note receivable from and advances to shareholders
   
 
127,000
 
   
 
89,000
 
Notes receivable, less current portion
   
 
3,640,000
 
   
 
3,370,000
 
Other
   
 
128,000
 
   
 
133,000
 
    
  
Total assets
   
$
18,602,000
 
   
$
13,865,000
 
    
  
LIABILITIES AND SHAREHOLDERS’ EQUITY
                  
Current liabilities:
                  
Accounts payable
   
$
1,329,000
 
   
$
1,119,000
 
Accrued expenses
   
 
3,425,000
 
   
 
3,257,000
 
Notes payable
   
 
53,000
 
   
 
53,000
 
Current portion of capital lease obligations
   
 
91,000
 
   
 
57,000
 
Deferred revenue
   
 
6,115,000
 
   
 
5,522,000
 
    
  
Total current liabilities
   
 
11,013,000
 
   
 
10,008,000
 
Capital lease obligations, less current portion
   
 
224,000
 
   
 
193,000
 
Deferred revenue
   
 
111,000
 
   
 
104,000
 
Shareholders’ equity:
                  
Common stock
   
 
50,171,000
 
   
 
50,264,000
 
Accumulated deficit
   
 
(42,613,000
)
   
 
(46,577,000
)
Accumulated other comprehensive loss
   
 
(291,000
)
   
 
(127,000
)
Unamortized stock compensation
   
 
(13,000
)
   
 
—  
 
    
  
Total shareholders’ equity
   
 
7,254,000
 
   
 
3,560,000
 
    
  
Total liabilities and shareholders’ equity
   
$
18,602,000
 
   
$
13,865,000
 
    
  
 
 
See accompanying notes.
 

4

Table of Contents
 
Optio Software, Inc.
 
Consolidated Condensed Statements of Operations
(Unaudited)
 
    
Three Months Ended October 31,
  
    
2001
     
2002
  
Revenue:
                  
License fees
   
$
3,550,000
 
   
$
2,577,000
 
Services, maintenance, and other
   
 
4,700,000
 
   
 
4,517,000
 
    
  
    
 
8,250,000
 
   
 
7,094,000
 
Costs of revenue:
                  
License fees
   
 
69,000
 
   
 
104,000
 
Services, maintenance, and other
   
 
2,091,000
 
   
 
1,746,000
 
    
  
    
 
2,160,000
 
   
 
1,850,000
 
    
  
    
 
6,090,000
 
   
 
5,244,000
 
Operating expenses:
                  
Sales and marketing
   
 
3,153,000
 
   
 
2,929,000
 
Research and development
   
 
1,281,000
 
   
 
1,015,000
 
General and administrative
   
 
2,165,000
 
   
 
1,529,000
 
Depreciation and amortization
   
 
326,000
 
   
 
232,000
 
    
  
    
 
6,925,000
 
   
 
5,705,000
 
    
  
Loss from operations
   
 
(835,000
)
   
 
(461,000
)
Other income (expense):
                  
Interest income
   
 
64,000
 
   
 
57,000
 
Interest expense
   
 
(28,000
)
   
 
(10,000
)
Other
   
 
1,000
 
   
 
(12,000
)
    
  
    
 
37,000
 
   
 
35,000
 
Loss before income taxes and loss from discontinued operations
   
 
(798,000
)
   
 
(426,000
)
Income tax expense
   
 
(13,000
)
   
 
—  
 
    
  
Loss from continuing operations
   
 
(811,000
)
   
 
(426,000
)
Loss from discontinued operations
   
 
(12,546,000
)
   
 
—  
 
    
  
Net loss
   
$
(13,357,000
)
   
$
(426,000
)
    
  
Loss per share from continuing operations –
basic and diluted
   
$
(0.04
)
   
$
(0.02
)
    
  
Loss per share from discontinued operations –
basic and diluted
   
$
(0.68
)
   
$
(0.00
)
    
  
Net loss per share – basic and diluted
   
$
(0.72
)
   
$
(0.02
)
    
  
Weighted average shares outstanding – basic and diluted
   
 
18,524,884
 
   
 
19,127,498
 
    
  
Comprehensive loss:
                  
Net loss
   
$
(13,357,000
)
   
$
(426,000
)
Foreign currency translation adjustment
   
 
24,000
 
   
 
(4,000
)
Unrealized loss on marketable securities available for sale
   
 
(19,000
)
   
 
—  
 
    
  
Comprehensive loss
   
$
(13,352,000
)
   
$
(430,000
)
    
  
 
 
See accompanying notes.

5

Table of Contents
Optio Software, Inc.
 
Consolidated Condensed Statements of Operations
(Unaudited)
 
    
Nine Months Ended October 31,
  
    
2001
     
2002
  
Revenue:
                  
License fees
   
$
9,843,000
 
   
$
7,983,000
 
Services, maintenance, and other
   
 
13,473,000
 
   
 
13,292,000
 
    
  
    
 
23,316,000
 
   
 
21,275,000
 
Costs of revenue:
                  
License fees
   
 
331,000
 
   
 
362,000
 
Services, maintenance, and other
   
 
7,974,000
 
   
 
6,261,000
 
    
  
    
 
8,305,000
 
   
 
6,623,000
 
    
  
    
 
15,011,000
 
   
 
14,652,000
 
Operating expenses:
                  
Sales and marketing
   
 
12,555,000
 
   
 
10,039,000
 
Research and development
   
 
3,430,000
 
   
 
3,390,000
 
General and administrative
   
 
5,669,000
 
   
 
5,097,000
 
Depreciation and amortization
   
 
982,000
 
   
 
704,000
 
    
  
    
 
22,636,000
 
   
 
19,230,000
 
    
  
Loss from operations
   
 
(7,625,000
)
   
 
(4,578,000
)
Other income (expense):
                  
Interest income
   
 
209,000
 
   
 
179,000
 
Interest expense
   
 
(89,000
)
   
 
(30,000
)
Write-down of ec-Hub investment
   
 
(200,000
)
   
 
—  
 
Other
   
 
14,000
 
   
 
23,000
 
    
  
    
 
(66,000
)
   
 
172,000
 
Loss before income taxes and loss from discontinued operations
   
 
(7,691,000
)
   
 
(4,406,000
)