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 April 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 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 19,157,498 shares of the Registrant’s common stock outstanding as of June 11, 2003.
OPTIO SOFTWARE, INC.
FORM 10-Q
For the Quarterly Period Ended April 30, 2003
| Page | ||||
| PART I—FINANCIAL INFORMATION |
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| Item 1. | 4 | |||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
15 | ||
| Item 3. | 22 | |||
| Item 4. | 22 | |||
| PART II—OTHER INFORMATION |
||||
| Item 1. | 23 | |||
| Item 2. | 24 | |||
| Item 3. | 24 | |||
| Item 4. | 24 | |||
| Item 5. | 25 | |||
| Item 6. | 25 | |||
2
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 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, changes in economic conditions in the U.S. and in other countries in which Optio currently does business (both general and relative to the technology industry), delays or inability in developing new or unique software products, market acceptance of new products, the failure of new products to operate as anticipated, expectation of achieving and sustaining operating profits and earnings, including timing of such cash flows and company performance, disputes regarding Optio’s intellectual property, risks relating to the delisting of Optio’s 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 “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 in this document, 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.
3
PART I—FINANCIAL INFORMATION
Optio Software, Inc.
Consolidated Condensed Balance Sheets
| January 31, 2003 |
April 30, 2003 |
|||||||
| (Unaudited) | ||||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 3,902,000 | $ | 3,792,000 | ||||
| Accounts receivable, net |
4,112,000 | 4,122,000 | ||||||
| Prepaid expenses and other current assets |
765,000 | 508,000 | ||||||
| Receivable on insurance claim |
750,000 | 750,000 | ||||||
| Notes receivable from related party |
90,000 | 60,000 | ||||||
| Current portion of note receivable |
101,000 | 178,000 | ||||||
| Total current assets |
9,720,000 | 9,410,000 | ||||||
| Property and equipment, net |
912,000 | 776,000 | ||||||
| Other assets: |
||||||||
| Note receivable, less current portion |
3,571,000 | 3,494,000 | ||||||
| Other |
240,000 | 237,000 | ||||||
| Total assets |
$ | 14,443,000 | $ | 13,917,000 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 1,656,000 | $ | 1,076,000 | ||||
| Accrued expenses |
2,782,000 | 2,364,000 | ||||||
| Accrued settlement of lawsuit |
875,000 | 875,000 | ||||||
| Notes payable |
53,000 | 53,000 | ||||||
| Current portion of capital lease obligations |
65,000 | 51,000 | ||||||
| Deferred revenue |
5,849,000 | 6,235,000 | ||||||
| Total current liabilities |
11,280,000 | 10,654,000 | ||||||
| Capital lease obligations, less current portion |
167,000 | 167,000 | ||||||
| Deferred revenue |
92,000 | 16,000 | ||||||
| Other long-term liabilities |
130,000 | 101,000 | ||||||
| Shareholders’ equity: |
||||||||
| Common stock |
50,264,000 | 50,264,000 | ||||||
| Accumulated deficit |
(47,455,000 | ) | (47,262,000 | ) | ||||
| Accumulated other comprehensive loss |
(35,000 | ) | (23,000 | ) | ||||
| Total shareholders’ equity |
2,774,000 | 2,979,000 | ||||||
| Total liabilities and shareholders’ equity |
$ | 14,443,000 | $ | 13,917,000 | ||||
See accompanying notes.
4
Optio Software, Inc.
Consolidated Condensed Statements of Operations
(Unaudited)
| Three Months Ended April 30, |
||||||||
| 2002 |
2003 |
|||||||
| Revenue: |
||||||||
| License fees |
$ | 2,669,000 | $ | 2,070,000 | ||||
| Services, maintenance, and other |
4,126,000 | 4,445,000 | ||||||
| 6,795,000 | 6,515,000 | |||||||
| Costs of revenue (exclusive of depreciation and amortization shown separately below): |
||||||||
| License fees |
128,000 | 118,000 | ||||||
| Services, maintenance, and other |
2,326,000 | 1,603,000 | ||||||
| 2,454,000 | 1,721,000 | |||||||
| 4,341,000 | 4,794,000 | |||||||
| Operating expenses: |
||||||||
| Sales and marketing |
3,432,000 | 2,381,000 | ||||||
| Research and development |
1,243,000 | 964,000 | ||||||
| General and administrative |
1,792,000 | 1,123,000 | ||||||
| Depreciation and amortization |
237,000 | 179,000 | ||||||
| 6,704,000 | 4,647,000 | |||||||
| Income (loss) from operations |
(2,363,000 | ) | 147,000 | |||||
| Other income (expense): |
||||||||
| Interest income |
61,000 | 49,000 | ||||||
| Interest expense |
(12,000 | ) | (3,000 | ) | ||||
| Other |
60,000 | 6,000 | ||||||
| 109,000 | 52,000 | |||||||
| Income (loss) before income taxes and loss from discontinued operations |
(2,254,000 | ) | 199,000 | |||||
| Income tax expense |
13,000 | 6 | ||||||
| Income (loss) from continuing operations |
(2,267,000 | ) | 193,000 | |||||
| Loss from discontinued operations |
(34,000 | ) | — | |||||
| Net income (loss) |
$ | (2,301,000 | ) | $ | 193,000 | |||
| Income (loss) per share from continuing operations—basic and diluted |
$ | (0.12 | ) | $ | 0.01 | |||
| Loss per share from discontinued operations—basic and diluted |
$ | 0.00 | $ | 0.00 | ||||
| Net income (loss) per share—basic and diluted |
$ | (0.12 | ) | $ | 0.01 | |||
| Weighted average shares outstanding—basic |
18,607,374 | 19,140,644 | ||||||
| Weighted average shares outstanding—diluted |
18,607,374 | 20,595,179 | ||||||
| Comprehensive loss: |
||||||||
| Net income (loss) |
$ | (2,301,000 | ) | $ | 193,000 | |||
| Foreign currency translation adjustment |
37,000 | 12,000 | ||||||
| Comprehensive income (loss) |
$ | (2,264,000 | ) | $ | 205,000 | |||
See accompanying notes.
5
Optio Software, Inc.
Consolidated Condensed Statement of Shareholders’ Equity
(Unaudited)
| Common Stock |
Accumulated Deficit |
Accumulated Other (Loss) Income |
Total Shareholders’ Equity | |||||||||||||
| Shares |
Amount |
|||||||||||||||
| Balance at February 1, 2003 |
19,127,498 | $ | 50,264,000 | $ | (47,455,000 | ) | $ | (35,000 | ) | $ | 2,774,000 | |||||
| Comprehensive income, net of tax: |
||||||||||||||||
| Net income |
— | — | 193,000 | — | 193,000 | |||||||||||
| Foreign currency translation adjustment |
— | — | — | 12,000 | 12,000 | |||||||||||
| Comprehensive income |
205,000 | |||||||||||||||
| Exercise of stock options |
30,000 | — | — | — | — | |||||||||||
| Balance at April 30, 2003 |
19,157,498 | $ | 50,264,000 | $ | (47,262,000 | ) | $ | (23,000 | ) | $ | 2,979,000 | |||||
See accompanying notes.
6
Optio Software, Inc.
Consolidated Condensed Statements of Cash Flows
(Unaudited)
| Three Months Ended April 30, |
||||||||
| 2002 |
2003 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net income (loss) |
$ | (2,301,000 | ) | $ | 193,000 | |||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: |
||||||||
| Depreciation and amortization |
237,000 | 179,000 | ||||||
| Provision for doubtful accounts |
(60,000 | ) | (67,000 | ) | ||||
| Non-cash compensation and interest |
(2,000 | ) | — | |||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
1,955,000 | 93,000 | ||||||
| Prepaid expenses and other current assets |
(338,000 | ) | 257,000 | |||||
| Accounts payable |
156,000 | (573,000 | ) | |||||
| Accrued expenses |
(138,000 | ) | (461,000 | ) | ||||
| Income taxes payable |
26,000 | 1,000 | ||||||
| Deferred revenue |
(316,000 | ) | 291,000 | |||||
| Net cash used in operating activities |
(781,000 | ) | (87,000 | ) | ||||
| Cash flows from investing activities: |
||||||||
| Proceeds from the sale of marketable securities |
205,000 | — | ||||||
| Purchases of property and equipment |
(125,000 | ) | (40,000 | ) | ||||
| Repayment of notes receivable |
90,000 | — | ||||||
| Repayments from related parties under notes receivable |
32,000 | 29,000 | ||||||
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