UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
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, 2003
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 000-30389
EXE TECHNOLOGIES, INC.
| Delaware | 751719817 | |||
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
8787 Stemmons Freeway
Dallas, Texas 75247
(Address including zip code of principal executive offices)
(214) 775-6000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by 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 [ ]
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).
YES [ ] NO [X]
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of July 31, 2003.
Common stock, $0.01 par value, 6,665,681 shares outstanding.
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
| PART I. | FINANCIAL INFORMATION | |||
| Item 1. | Financial Statements | 3 | ||
| Consolidated Balance Sheets | 3 | |||
| Consolidated Statements of Operations | 4 | |||
| Consolidated Statements of Cash Flows | 5 | |||
| Notes to Consolidated Financial Statements | 6 | |||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 11 | ||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 28 | ||
| Item 4. | Controls and Procedures | 28 | ||
| PART II. | OTHER INFORMATION | |||
| Item 2. | Changes in Securities and Use of Proceeds | 29 | ||
| Item 6. | Exhibits and Reports on Form 8-K | 30 | ||
| Signatures | 31 | |||
| Index to Exhibits and Exhibits | 32 | |||
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| As of | As of | ||||||||||
| December 31, | June 30, | ||||||||||
| 2002 | 2003 | ||||||||||
| (unaudited) | |||||||||||
Assets |
|||||||||||
Current assets: |
|||||||||||
Cash and cash equivalents |
$ | 20,815,464 | $ | 32,006,559 | |||||||
Marketable securities, short-term |
16,628,465 | — | |||||||||
Accounts receivable, net of allowance for doubtful accounts and adjustments of
approximately $4,161,000 and $4,182,000 at December 31, 2002 and June 30, 2003 |
16,904,889 | 14,994,227 | |||||||||
Other receivables and advances |
329,568 | 783,773 | |||||||||
Prepaid and other current assets |
2,747,074 | 2,489,265 | |||||||||
Total current assets |
57,425,460 | 50,273,824 | |||||||||
Property and equipment, net |
4,432,882 | 3,504,069 | |||||||||
Goodwill, net |
5,265,685 | 5,265,685 | |||||||||
Intangible assets, net |
1,499,891 | 1,166,557 | |||||||||
Other assets |
1,745,532 | 909,154 | |||||||||
Total assets |
$ | 70,369,450 | $ | 61,119,289 | |||||||
Liabilities and Stockholders’ Equity |
|||||||||||
Current liabilities: |
|||||||||||
Accounts payable |
$ | 9,094,823 | $ | 7,140,480 | |||||||
Accrued expenses |
11,326,722 | 8,694,066 | |||||||||
Accrued payroll and benefits |
1,688,815 | 1,957,310 | |||||||||
Deferred revenue |
7,885,223 | 8,727,632 | |||||||||
Current portion of long-term debt and capital lease obligations |
521,458 | 511,189 | |||||||||
Total current liabilities |
30,517,041 | 27,030,677 | |||||||||
Long-term debt and capital lease obligations, net of current portion |
416,598 | 158,317 | |||||||||
Long-term accrued expenses, net of current portion |
8,888,841 | 7,629,606 | |||||||||
Minority interest |
198,779 | 163,413 | |||||||||
Commitments and contingencies |
|||||||||||
Stockholders’ equity: |
|||||||||||
Preferred stock, $.01 par value: shares authorized - 20,000,000; none
issued or outstanding |
— | — | |||||||||
Common stock, voting, $.01 par value: shares authorized - 150,000,000; shares
issued - 6,807,813 and 6,822,099 at December 31, 2002 and June 30, 2003 |
68,078 | 68,221 | |||||||||
Additional paid-in capital |
178,871,117 | 178,926,832 | |||||||||
Treasury stock, at cost, 156,418 shares of common stock
at December 31, 2002 and June 30, 2003 |
(3,645,859 | ) | (3,645,859 | ) | |||||||
Accumulated deficit |
(143,402,453 | ) | (147,463,973 | ) | |||||||
Deferred compensation |
(809,338 | ) | (498,338 | ) | |||||||
Other comprehensive loss |
(733,354 | ) | (1,249,607 | ) | |||||||
Total stockholders’ equity |
30,348,191 | 26,137,276 | |||||||||
Total liabilities and stockholders’ equity |
$ | 70,369,450 | $ | 61,119,289 | |||||||
See accompanying notes.
3
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| Three Months Ended | Six Months Ended | |||||||||||||||||
| June 30, | June 30, | |||||||||||||||||
| 2002 | 2003 | 2002 | 2003 | |||||||||||||||
Revenue: |
||||||||||||||||||
Software license |
$ | 3,122,592 | $ | 3,464,701 | $ | 7,266,664 | $ | 6,140,504 | ||||||||||
Services and maintenance |
12,831,201 | 12,659,741 | 24,694,834 | 23,663,851 | ||||||||||||||
Resale of software and equipment |
2,000,300 | 3,241,443 | 5,099,369 | 4,540,912 | ||||||||||||||
Reimbursable expenses |
477,017 | 456,690 | 1,006,215 | 890,376 | ||||||||||||||
Total revenue |
18,431,110 | 19,822,575 | 38,067,082 | 35,235,643 | ||||||||||||||
Costs and expenses: |
||||||||||||||||||
Cost of software licenses |
86,305 | 170,275 | 199,381 | 470,144 | ||||||||||||||
Cost of services and maintenance |
8,042,909 | 7,894,070 | 16,218,209 | 14,998,686 | ||||||||||||||
Cost of resale of software and equipment |
1,655,829 | 2,651,260 | 4,228,063 | 3,630,576 | ||||||||||||||
Estimated loss on resale equipment sold to
company in bankruptcy |
— | — | — | 456,866 | ||||||||||||||
Cost of reimbursable expenses |
477,017 | 456,690 | 1,006,215 | 890,376 | ||||||||||||||
Sales and marketing |
4,914,140 | 4,118,430 | 9,969,243 | 8,041,114 | ||||||||||||||
Research and development |
2,907,218 | 2,234,622 | 5,960,601 | 4,797,067 | ||||||||||||||
General and administrative |
3,018,315 | 3,009,549 | 6,195,616 | 5,733,063 | ||||||||||||||
Amortization of intangible assets |
280,293 | 166,668 | 561,300 | 333,335 | ||||||||||||||
Warrant and stock compensation expense
allocated to: |
||||||||||||||||||
Cost of services and maintenance |
87,946 | 69,402 | 175,892 | 138,804 | ||||||||||||||
Sales and marketing |
45,446 | 22,400 | 90,892 | 44,800 | ||||||||||||||
Research and development |
45,446 | 33,416 | 90,892 | 66,832 | ||||||||||||||
General and administrative |
89,847 | 30,282 | 179,694 | 116,422 | ||||||||||||||
Loss on lease abandonment |
3,998,862 | — | 3,998,862 | — | ||||||||||||||
Employee severance and other facility
closure costs |
2,487,769 | — | 2,487,769 | — | ||||||||||||||
Total costs and expenses |
28,137,342 | 20,857,064 | 51,362,629 | 39,718,085 | ||||||||||||||
Operating loss |
(9,706,232 | ) | (1,034,489 | ) | (13,295,547 | ) | (4,482,442 | ) | ||||||||||
Other income (expense): |
||||||||||||||||||
Interest income |
302,356 | 84,110 | 633,333 | 247,579 | ||||||||||||||
Interest expense |
(20,928 | ) | (14,862 | ) | (50,816 | ) | (30,792 | ) | ||||||||||
Other |
807,198 | 357,447 | 753,693 | 609,991 | ||||||||||||||
Total other income (expense) |
1,088,626 | 426,695 | 1,336,210 | 826,778 | ||||||||||||||
Loss before minority interest and taxes |
(8,617,606 | ) | (607,794 | ) | (11,959,337 | ) | (3,655,664 | ) | ||||||||||
Minority interest in subsidiary (income) loss |
(4,150 | ) | (14,843 | ) | (9,171 | ) | 35,366 | |||||||||||
Loss before taxes |
(8,621,756 | ) | (622,637 | ) | (11,968,508 | ) | (3,620,298 | ) | ||||||||||
Income tax provision |
178,821 | 199,856 | 178,821 | 441,222 | ||||||||||||||
Net loss |
$ | (8,800,577 | ) | $ | (822,493 | ) | $ | (12,147,329 | ) | $ | (4,061,520 | ) | ||||||
Net loss per common share - basic and diluted |
(1.34 | ) | (0.12 | ) | (1.85 | ) | (0.61 | ) | ||||||||||
Weighted average number of common shares
outstanding - basic and diluted |
6,578,519 | 6,665,681 | 6,568,880 | 6,662,348 | ||||||||||||||
See accompanying notes.
4
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Six Months Ended | ||||||||||||
| June 30, | ||||||||||||
| 2002 | 2003 | |||||||||||
Cash Flow from Operating Activities: |
||||||||||||
Net loss |
$ | (12,147,329 | ) | $ | (4,061,520 | ) | ||||||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
||||||||||||
Depreciation and amortization |
2,277,576 | 1,399,877 | ||||||||||
Write-down of property and equipment |
1,032,408 | — | ||||||||||
Provision for losses on receivables |
1,581,825 | 332,889 | ||||||||||
Amortization of deferred compensation |
537,370 | 366,858 | ||||||||||
Minority interest |
9,171 | (35,366 | ) | |||||||||
Changes in operating assets and liabilities: |
||||||||||||
Accounts receivable |
5,958,741 | 1,577,773 | ||||||||||
Other receivables and advances |
126,826 | (454,205 | ) | |||||||||
Prepaids and other current assets |
(681,054 | ) | 257,809 | |||||||||
Other long-term assets |
840,225 | 836,378 | ||||||||||
Accounts payable |
(11,035 | ) | (1,954,343 | ) | ||||||||
Accrued payroll and benefits |
281,684 | 268,495 | ||||||||||
Deferred revenue |
922,068 | 842,409 | ||||||||||
Accrued expenses |
1,841,161 | (3,891,891 | ) | |||||||||
Other |
(566,652 | ) | (553,602 | ) | ||||||||
Net cash provided by (used in) operating activities |
2,002,985 | (5,068,439 | ) | |||||||||
Cash Flow from Investing Activities: |
||||||||||||
Purchases of property and equipment |
(452,463 | ) | (100,381 | ) | ||||||||
Purchase of marketable securities |
(6,210,000 | ) | — | |||||||||
Proceeds from sale and maturities of marketable securities |
9,503,794 | 16,628,465 | ||||||||||
Net cash provided by investing activities |
2,841,331 | 16,528,084 | ||||||||||
Cash Flow from Financing Activities: |
||||||||||||
Issuance of common stock for options and warrants |
384,394 | — | ||||||||||
Payments on long-term debt and capital lease obligations |
(218,628 | ) | (268,550 | ) | ||||||||
Net cash provided by (used in) financing activities |
165,766 | (268,550 | ) | |||||||||
Net increase in cash and cash equivalents |
5,010,082 | 11,191,095 | ||||||||||
Cash and cash equivalents at beginning of period |
30,250,156 | 20,815,464 | ||||||||||
Cash and cash equivalents at end of period |
$ | 35,260,238 | $ | 32,006,559 | ||||||||
See accompanying notes.
5
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Principles of Consolidation and Basis of Presentation
EXE Technologies, Inc. (the Company or EXE) provides software that drives customers’ supply chain execution processes, including fulfillment, warehousing, distribution, and inventory management. The Company operates from its headquarters in Dallas, Texas, and through its various subsidiary and sales offices serving North America, Europe, the Middle East, Asia and Australia. The accompanying unaudited consolidated financial statements include the accounts of EXE Technologies, Inc. and its majority-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for fiscal year end financial statements. In the opinion of management, all adjustments (consisting only of normal recurring entries) considered necessary for a fair presentation of the results have been included for the interim periods presented. Operating results for the three and six month periods ended June 30, 2003 are not necessarily indicative of the results that may be expected for any other interim period or for the year ending December 31, 2003. These statements should be read in conjunction with the Company’s audited financial statements included in the Company’s Form 10-K for the year ended December 31, 2002.
All share and per share amounts in the accompanying financial statements and footnotes have been adjusted to reflect the Company’s one for seven reverse stock split which was effective January 2, 2003.
2. Net Loss Per Share
The Company computes net income (loss) per share in accordance with the provisions of Statement of Financial Accounting Standards No. 128, “Earnings per Share” (SFAS 128). Basic net income (loss) per common share is computed using the weighted average number of shares of common stock outstanding during each period.
Diluted net income (loss) per common share is computed using the weighted average number of shares of common stock outstanding during each period and common equivalent shares consisting of preferred stock, warrants and stock options (using the treasury stock method), if dilutive. Diluted loss per common share is the same as basic loss per common share for all periods presented because all potentially dilutive securities were anti-dilutive. The following table sets forth anti-dilutive securities that have been excluded from diluted earnings per share for the periods presented:
| As of June 30, | ||||||||
| 2002 | 2003 | |||||||
Common stock options |
1,298,100 | 1,414,596 | ||||||
Warrants |
2,143 | 145,000 | ||||||
Total anti-dilutive securities excluded |
1,300,243 | 1,559,596 | ||||||
6
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
3. Comprehensive Loss
Comprehensive loss includes foreign currency translation gains (losses) and unrealized gains (losses) on securities available for sale. The following table sets forth the calculation of comprehensive loss for the periods presented:
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2002 | 2003 | 2002 | 2003 | |||||||||||||
Net loss |
$ | (8,800,577 | ) | $ | (822,493 | ) | $ | (12,147,329 | ) | $ | (4,061,520 | ) | ||||
Foreign currency translation losses |
(566,259 | ) | (284,949 | ) | (483,796 | ) | (460,473 | ) | ||||||||
Unrealized loss on securities available for sale |
(12,032 | ) | — | (128,355 | ) | (55,780 | ) | |||||||||
Total comprehensive loss |
$ | (9,378,868 | ) | $ | (1,107,442 | ) | $ | (12,759,480 | ) | $ | (4,577,773 | ) | ||||
| & | ||||||||||||||||