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Table of Contents
UNITED STATES
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 June 30, 2002
   
  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 0-28450
 
Netopia, Inc.
(Exact name of registrant as specified in its charter)
 
Delaware   94-3033136
(State or other jurisdiction of
incorporation or organization)		   (I.R.S. Employer
Identification Number)
 
2470 Mariner Square Loop
Alameda, California 94501
(Address of principal executive offices, including Zip Code)
 
(510) 814-5100
(Registrant’s telephone number, including area code)

          Indicate by ü check 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.

Yes     ü     No   __________

          As of June 30, 2002 there were 18,659,237 shares of the Registrant’s common stock outstanding.

Table of Contents

NETOPIA, INC.    
Form 10-Q    
Table of Contents   Page
         
PART I.   FINANCIAL INFORMATION    
         
Item 1.   Unaudited Condensed Consolidated Financial Statements   2
         
    Condensed consolidated balance sheets at June 30, 2002 (unaudited)
and September 30, 2001 (audited)		   2
         
    Unaudited condensed consolidated statements of operations for the three and nine
months ended June 30, 2002 and 2001		   3
         
    Unaudited condensed consolidated statements of cash flows for the three and nine
months ended June 30, 2002 and 2001		   4
         
    Notes to unaudited condensed consolidated financial statements   5
         
Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations   15
         
Item 3.   Quantitative and Qualitative Disclosures About Market Risk   36
         
PART II.   OTHER INFORMATION    
         
Item 6.   Exhibits and Reports on Form 8-K   37
         
SIGNATURE       38
         
         

1

Table of Contents
PART I.   FINANCIAL INFORMATION    
Item 1.   Unaudited Condensed Consolidated Financial Statements    

NETOPIA, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets

    June 30,   September 30,  
    2002   2001  
   
 
 
    (unaudited)   (audited)  
    (in thousands, except share and
per share amounts)
Assets              
Current assets:              
    Cash and cash equivalents   $ 22,352   $ 35,703  
    Short -term investments     4,009     13,293  
    Trade accounts receivable less allowance for doubtful accounts and returns
      of $1,458 at June 30, 2002 and $641 at September 30, 2001		     9,442     9,550  
    Inventories, net     5,907     7,156  
    Prepaid expenses and other current assets     1,218     1,634  
   
 
 
       Total current assets     42,928     67,336  
   Furniture, fixtures and equipment, net     5,912     5,770  
   Intangible assets, net     18,514     2,758  
   Long-term investments     3,006     4,000  
   Deposits and other assets     1,837     2,848  
   
 
 
    $ 72,197   $ 82,712  
   
 
 
Liabilities and Stockholders’ Equity              
Current liabilities:              
   Accounts payable   $ 6,337   $ 4,713  
   Accrued compensation     2,388     2,148  
   Accrued liabilities     2,795     1,116  
   Deferred revenue     1,850     2,589  
   Other current liabilities     177     177  
   
 
 
      Total current liabilities     13,547     10,743  
Long-term liabilities:              
   Borrowings under credit facility     3,000     —  
   Other long-term liabilities     128     256  
   
 
 
      Total long-term liabilities     3,128     256  
   
 
 
      Total liabilities     16,675     10,999  
               
Commitments and contingencies              
               
Stockholders’ equity:              
   Common stock: $0.001 par value, 50,000,000 shares authorized;
      18,659,237 and 18,076,812 shares issued a nd outstanding at		              
          June 30, 2002 and September 30, 2001, respectively     19     17  
   Additional paid-in capital     147,186     144,886  
   Accumulated deficit     (91,683 )   (73,190 )
   
 
 
      Total stockholders’ equity     55,522     71,713  
   
 
 
    $ 72,197   $ 82,712  
   
 
 

See accompanying notes to unaudited condensed consolidated financial statements.


2

Table of Contents

NETOPIA, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations

    Three months ended     Nine months ended  
    June 30,     June 30,  
   
   
 
    2002     2001     2002     2001  
   
   
   
   
 
    (in thousands, except per share amounts)  
Revenues:                                
  Internet equipment   $ 10,096     $ 14,478     $ 33,146     $ 45,781  
  Web platform licenses and services     5,468       4,483       14,012       14,401  
   
   
   
   
 
         Total revenues     15,564       18,961       47,158       60,182  
                                 
Cost of revenues:                                
  Internet equipment     7,740       9,653       23,051       30,293  
  Web platform licenses and services     154       182       463       608  
   
   
   
   
 
        Total cost of revenues     7,894       9,835       23,514       30,901  
   
   
   
   
 
                                 
Gross profit     7,670       9,126       23,644       29,281  
                                 
Operating expenses:                                
   Research and development     4,546       3,444       13,042       10,376  
   Selling and marketing     6,204       6,577       18,306       21,266  
   General and administrative     1,466       2,010       3,707       6,513  
   Restructuring costs     —       —       482       1,073  
   Integration costs     —       —       309       —  
   Terminated merger costs     —       —       —       2,640  
   Acquired in-process research and development     —       —       4,058       —  
   Amortization of intangible assets     374       2,996       1,123       8,988  
   
   
   
   
 
        Total operating expenses     12,590       15,027       41,027       50,856  
   
   
   
   
 
                                 
        Operating loss     (4,920 )     (5,901 )     (17,383 )     (21,575 )
                                 
Other income:                                
   Loss on impaired securities     —       —       (1,400 )     (1,000 )
   Other income, net     54       509       290       2,070  
   
   
   
   
 
        Total other income, net     54       509       (1,110 )     1,070  
   
   
   
   
 
                                 
   Loss from continuing operations before                                
   cumulative effect from adoption of Staff Accounting                                
   Bulletin 101     (4,866 )     (5,392 )     (18,493 )     (20,505 )
                                 
Cumulative effect from adoption of Staff Accounting                                
Bulletin 101     —       —       —       (1,555 )
   
   
   
   
 
                                 
          Net loss   $ (4,866 )   $ (5,392 )   $ (18,493 )   $ (22,060 )
   
   
   
   
 
                                 
Per share data, net loss:                                
     Basic and diluted net loss per share   $ (0.26 )   $ (0.30 )   $ (1.01 )   $ (1.24 )
   
   
   
   
 
    Shares used in the per share calculations     18,648       17,882       18,331       17,769  
   
   
   
   
 

See accompanying notes to unaudited condensed consolidated financial statements.


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Table of Contents

NETOPIA, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows

  Nine months ended
  June 30,
 
  2002   2001
 
 
  (in thousands)
Cash flows from operating activities:              
Net loss $ (18,493 )   $ (22,060 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:              
   Depreciation and amortization   5,548       11,473  
   Charge for acquired in-process research and development   4,058       —  
   Unrealized loss on impaired securities   1,400       1,000  
   Changes in allowance for doubtful accounts and returns on trade accounts receivable   816       752  
   Changes in operating assets and liabilities:              
      Trade accounts receivable   (708 )     6,303  
      Inventories   1,249       638  
      Prepaid expenses and other current assets   417       1,306  
      Deposits and other assets   2       61  
      Accounts payable and accrued liabilities   2,349       (2,483 )
      Deferred revenue   (844 )     546  
      Other liabilities   1,172       (852 )
 
   
 
         Net cash used in operating activities   (3,034 )     (3,316 )
 
   
 
               
Cash flows from investing activities: