(Mark One)
ý |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2003
OR
| o | 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: 000-25590
DATASTREAM SYSTEMS, INC.
Incorporated pursuant to the laws of the State of Delaware
Internal Revenue Service — Employer Identification No. 57-0813674
50 DATASTREAM PLAZA, GREENVILLE, SC 29605
(864) 422-5001
NOT APPLICABLE
(Former Name, Former Address, if changed since last report)
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 ý No o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes ý No o
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date: November 11, 2003: 20,216,129 shares, $0.01 par value.
2
From time to time, we make oral and written statements that may constitute “forward looking statements” (rather than historical facts) as defined in the Private Securities Litigation Reform Act of 1995 or by the Securities and Exchange Commission (the “SEC”) in its rules, regulations and releases, including Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We desire to take advantage of the “safe harbor” provisions in the Private Securities Litigation Reform Act of 1995 for forward looking statements made from time to time, including, but not limited to, the forward looking statements made in this Quarterly Report on Form 10-Q (the “Report”), as well as those made in other filings with the SEC.
Forward looking statements can be identified by our use of forward looking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “believe,” “continue” or other similar words. Such forward looking statements are based on management’s current plans and expectations and are subject to risks, uncertainties and changes in plans that could cause actual results to differ materially from those described in the forward looking statements. In the preparation of this Report, where such forward looking statements appear, we have sought to accompany such statements with meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those described in the forward looking statements. Such factors include, but are not limited to: a highly competitive market; our ability to keep pace with rapid technological changes and demands in our markets; volatility of our quarterly results due to increasing sales cycles; solutions that require longer implementations and other professional services engagements; reduced profitability due to our hosting services strategy; our ability to generate revenue and profits from our electronic procurement solution; significant delays in product development and our ability to be an innovator in the industry; third party relationships on which our success is substantially dependent; third party technologies on which our future success is substantially dependent; our ability to detect software bugs or errors to avoid a correction to or delay in the release of our products; our ability to manage our international operations; deterioration of economic and political conditions; continued acceptance of the Internet for business transactions; recruiting and retaining key employees; our ability to adequately protect our proprietary rights; security risks and concerns that may deter use of the Internet for our applications; fluctuations in our stock price since our initial public offering; and our exposure to foreign exchange rate fluctuations. The preceding list of risks and uncertainties, however, is not intended to be exhaustive, and should be read in conjunction with other cautionary statements that we make herein including, but not limited to, the “Risk Factors” set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Form 10-K for the fiscal year ended December 31, 2002, as well as other risks and uncertainties identified from time to time in our SEC reports, registration statements and public announcements.
We do not have, and expressly disclaim, any obligation to release publicly any updates or any changes in our expectations or any changes in events, conditions or circumstances on which any forward-looking statement is based.
3
ITEM 1. Consolidated Financial Statements
| December 31, 2002 |
September 30, 2003 |
|||||||
|---|---|---|---|---|---|---|---|---|
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 34,721,471 | $ | 42,450,137 | ||||
| Accounts receivable, net of allowance for doubtful accounts of | ||||||||
| $1,396,984 and $1,393,398 in 2002 and 2003, respectively | 18,116,426 | 16,691,163 | ||||||
| Unbilled revenue, net of allowance of | ||||||||
| $100,000 in 2002 and 2003 | 2,003,107 | 1,383,931 | ||||||
| Prepaid expenses | 1,033,465 | 1,237,081 | ||||||
| Inventories | 26,992 | 17,540 | ||||||
| Income tax receivable | 472,841 | -- | ||||||
| Deferred income taxes | 929,438 | 929,438 | ||||||
| Other assets | 1,536,663 | 1,349,169 | ||||||
| Total current assets | 58,840,403 | 64,058,459 | ||||||
Investment |
2,000,000 | 501,983 | ||||||
| Property and equipment, net | 10,696,968 | 11,192,302 | ||||||
| Deferred income taxes | 5,287,633 | 5,872,842 | ||||||
| Other long term assets | 83,758 | 123,147 | ||||||
| Total assets | $ | 76,908,762 | $ | 81,748,733 | ||||
See accompanying notes to consolidated financial statements.
4
| December 31, 2002 |
September 30, 2003 |
|||||||
|---|---|---|---|---|---|---|---|---|
| Current liabilities: | ||||||||
| Accounts payable | $ | 2,913,611 | $ | 3,167,789 | ||||
| Other accrued liabilities | 9,348,113 | 8,313,968 | ||||||
| Income taxes payable | -- | 458,672 | ||||||
| Unearned revenue | 15,105,756 | 16,629,447 | ||||||
| Total liabilities | 27,367,480 | 28,569,876 | ||||||
Stockholders' equity: |
||||||||
| Preferred stock, $1 par value, 1,000,000 shares authorized; | ||||||||
| none issued | -- | -- | ||||||
| Common stock, $.01 par value, 40,000,000 shares authorized; | ||||||||
| 21,090,200 shares issued at December 31, 2002, | ||||||||
| 21,401,695 shares issued at September 30, 2003 | 210,902 | 214,017 | ||||||
| Additional paid-in capital | 87,196,093 | 89,200,844 | ||||||
| Accumulated deficit | (28,761,966 | ) | (26,323,102 | ) | ||||
| Other accumulated comprehensive loss | (1,877,654 | ) | (1,774,587 | ) | ||||
| Treasury stock, at cost; | ||||||||
| 1,028,600 shares at December 31, 2002, | ||||||||
| 1,176,400 shares at September 30, 2003 | (7,226,093 | ) | (8,138,315 | ) | ||||
| Total stockholders' equity | 49,541,282 | 53,178,857 | ||||||
| Total liabilities and stockholders' equity | $ | 76,908,762 | $ | 81,748,733 | ||||
See accompanying notes to consolidated financial statements.
5
| September 30, 2002 |
September 30, 2003 | |||||||
|---|---|---|---|---|---|---|---|---|
| Revenues: | ||||||||
| Software product | $ | 6,040,013 | $ | 6,210,698 | ||||
| Services and support | 15,935,403 | 16,178,367 | ||||||
| Total revenues | 21,975,416 | 22,389,065 | ||||||
Cost of revenues: | ||||||||
| Cost of product revenues | 234,916 | 281,614 | ||||||
| Cost of services and support revenues | 8,128,439 | 7,208,993 | ||||||
| Total cost of revenues | 8,363,355 | 7,490,607 | ||||||
| Gross profit | 13,612,061 | 14,898,458 | ||||||
Operating expenses: | ||||||||
| Sales and marketing | 8,347,083 | 7,005,412 | ||||||
| Product development | 2,647,870 | 3,360,052 | ||||||
| General and administrative | 2,216,055 | 2,726,454 | ||||||
| Total operating expenses | 13,211,008 | 13,091,918 | ||||||
| Operating income | 401,053 | 1,806,540 | ||||||
Other income, net | 123,156 | 83,713 | ||||||
| Income before income taxes | 524,209 | 1,890,253 | ||||||
Income tax expense | 183,476 | 661,589 | ||||||
| Net income | $ | 340,733 | $ | 1,228,664 | ||||
| Basic net income per share | $ | .02 | $ | .06 | ||||
| Diluted net income per share | $ | .02 | $ | .06 | ||||
| Basic weighted average number of common shares outstanding | 20,155,027 | 20,225,325 | ||||||
| Diluted weighted average number of common shares outstanding | 20,517,169 | 20,965,681 | ||||||
See accompanying notes to consolidated financial statements.
6
| September 30, 2002 |
September 30, 2003 | |||||||
|---|---|---|---|---|---|---|---|---|
| Revenues: | ||||||||
| Software product | $ | 18,670,826 | $ | 19,003,979 | ||||
| Services and support | 47,715,128 | 49,557,877 | ||||||
| Total revenues | 66,385,954 | 68,561,856 | ||||||
Cost of revenues: | ||||||||
| Cost of product revenues | 860,455 | 884,562 | ||||||
| Cost of services and support revenues | 23,870,626 | 22,318,130 | ||||||
| Total cost of revenues | 24,731,081 | 23,202,692 | ||||||
| Gross profit | 41,654,873 | 45,359,164 | ||||||
Operating expenses: | ||||||||
| Sales and marketing | 25,193,322 | 22,231,766 | ||||||
| Product development | 7,949,168 | 9,250,362 | ||||||
| General and administrative | 7,731,330 | 8,923,406 | ||||||
| Total operating expenses | 40,873,820 | 40,405,534 | ||||||
| Operating income | 781,053 | 4,953,630 | ||||||
Other income (expense), net |
268,043 | (1,175,922 | ) | |||||
| Income before income taxes | 1,049,096 | 3,777,708 | ||||||
Income tax expense | 365,368 | 1,338,844 | ||||||
| Net income | $ | 683,728 | $ | 2,438,864 | ||||
| Basic net income per share | $ | .03 | $ | .12 | ||||
| Diluted net income per share | $ | .03 | $ | .12 | ||||
| Basic weighted average number of common shares outstanding | 20,152,443 | 20,109,414 | ||||||
| Diluted weighted average number of common shares outstanding | 20,607,078 | 20,599,767 | ||||||