UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
| (Mark One) | ||
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the Quarter Ended July 31, 2002 | ||
| OR | ||
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
Commission File Number 0-29251
FIREPOND, INC.
| Delaware (State or Other Jurisdiction of Incorporation or Organization) |
41-1462409 (I.R.S. Employer Identification No.) |
| 8009 S. 34th Avenue, Minneapolis, MN (Address of principal executive offices) |
55425 (Zip Code) |
(952) 229-2555
(Registrant’s telephone number, including area code)
890 Winter Street, Waltham, Massachusetts 02451
(Former name or 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 x | No o |
As of July 31, 2002 there were 3,685,010 shares of the Registrant’s Common Stock outstanding.
FIREPOND, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED July 31, 2002
TABLE OF CONTENTS
| Page No. | ||||||||
| PART I | FINANCIAL INFORMATION |
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| Item 1. | Financial Statements (unaudited) |
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Condensed Consolidated Balance Sheets -
October 31, 2001 and July 31, 2002 |
3 | |||||||
Condensed Consolidated Statements of Operations -
Three Months and Nine Months Ended July 31, 2001 and 2002 |
4 | |||||||
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended July 31, 2001 and 2002 |
5 | |||||||
Notes to Condensed Consolidated Financial Statements |
6 | |||||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and
Results of Operations |
19 | ||||||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
37 | ||||||
| PART II | OTHER INFORMATION |
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| Item 1. | Legal Proceedings |
37 | ||||||
| Item 2. | Changes in Securities and Use of Proceeds |
38 | ||||||
| Item 3. | Defaults Upon Senior Securities |
38 | ||||||
| Item 4. | Submission of Matters to a Vote of Security Holders |
38 | ||||||
| Item 5. | Other Information |
38 | ||||||
| Item 6. | Exhibits and Reports on Form 8-K |
38 | ||||||
SIGNATURES |
39 | |||||||
CERTIFICATION |
40 | |||||||
2
FIREPOND, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(unaudited)
| October 31, | July 31, | ||||||||||
| 2001 | 2002 | ||||||||||
ASSETS |
|||||||||||
Current assets: |
|||||||||||
Cash and cash equivalents |
$ | 34,660 | $ | 22,064 | |||||||
Short-term investments |
9,593 | 9,159 | |||||||||
Accounts receivable, net |
10,310 | 2,731 | |||||||||
Unbilled revenue |
594 | 616 | |||||||||
Restricted cash |
— | 498 | |||||||||
Prepaid expenses and other current assets |
2,118 | 1,732 | |||||||||
Total current assets |
57,275 | 36,800 | |||||||||
Property and equipment, net |
5,356 | 2,500 | |||||||||
Goodwill and other intangible assets, net |
11,114 | 163 | |||||||||
Restricted cash |
550 | 190 | |||||||||
Other assets |
843 | 790 | |||||||||
| $ | 75,138 | $ | 40,443 | ||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
|||||||||||
Note payable |
$ | — | $ | 293 | |||||||
Accounts payable |
1,790 | 1,313 | |||||||||
Accrued liabilities |
7,752 | 6,444 | |||||||||
Accrued merger and restructuring |
6,179 | 3,368 | |||||||||
Deferred revenue |
10,802 | 4,622 | |||||||||
Total current liabilities |
26,523 | 16,040 | |||||||||
Long-term accrued merger and restructuring |
1,102 | 3,619 | |||||||||
Stockholders’ equity (see Note 10): |
|||||||||||
Preferred stock, $0.10 par value — |
|||||||||||
| Authorized — 5,000,000 shares;
Issued and outstanding — none at October 31, 2001 and July 31, 2002 |
— | — | |||||||||
Common stock, $0.10 par value — |
|||||||||||
| Authorized — 100,000,000 shares at October 31, 2001 and July 31, 2002;
Issued and outstanding — 3,731,691 shares at October 31, 2001 and
3,685,010 shares at July 31, 2002 |
373 | 369 | |||||||||
Additional paid-in capital |
202,231 | 198,932 | |||||||||
Accumulated deficit |
(148,416 | ) | (172,664 | ) | |||||||
Loans receivable |
(4,407 | ) | (4,287 | ) | |||||||
Deferred compensation |
(1,285 | ) | (69 | ) | |||||||
Other comprehensive loss |
(983 | ) | (1,497 | ) | |||||||
Total stockholders’ equity |
47,513 | 20,784 | |||||||||
| $ | 75,138 | $ | 40,443 | ||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
FIREPOND, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)
| Three Months | Nine Months | ||||||||||||||||||
| Ended July 31, | Ended July 31, | ||||||||||||||||||
| 2001 | 2002 | 2001 | 2002 | ||||||||||||||||
Revenue: |
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Product-related revenue: |
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License |
$ | 3,924 | $ | 638 | $ | 11,589 | $ | 4,851 | |||||||||||
Services and maintenance |
5,329 | 3,302 | 21,509 | 11,179 | |||||||||||||||
Total product-related revenue |
9,253 | 3,940 | 33,098 | 16,030 | |||||||||||||||
Custom development services |
861 | 378 | 3,878 | 1,188 | |||||||||||||||
Total revenue |
10,114 | 4,318 | 36,976 | 17,218 | |||||||||||||||
Cost of revenue: |
|||||||||||||||||||
License |
145 | 4 | 369 | 101 | |||||||||||||||
Product-related services and maintenance (1) |
6,381 | 2,148 | 24,176 | 7,686 | |||||||||||||||
Custom development services (1) |
217 | 158 | 1,039 | 527 | |||||||||||||||
Total cost of revenue |
6,743 | 2,310 | 25,584 | 8,314 | |||||||||||||||
Gross profit |
3,371 | 2,008 | 11,392 | 8,904 | |||||||||||||||
Operating expenses: |
|||||||||||||||||||
Sales and marketing (1) |
6,574 | 2,036 | 21,985 | 6,247 | |||||||||||||||
Research and development (1) |
4,540 | 2,290 | 15,816 | 7,801 | |||||||||||||||
General and administrative (1) |
2,904 | 1,992 | 8,838 | 5,648 | |||||||||||||||
Stock-based compensation (credit) |
1,472 | (701 | ) | 2,840 | 734 | ||||||||||||||
Amortization of goodwill and other intangibles |
1,331 | 26 | 2,278 | 460 | |||||||||||||||
Restructuring and other special charges |
8,129 | 5,894 | 11,150 | 5,894 | |||||||||||||||
Settlement of claim |
— | — | 1,211 | — | |||||||||||||||
Acquired in-process research and development |
— | — | 6,200 | — | |||||||||||||||
Impairment of developed technology and know-how |
— | — | — | 3,120 | |||||||||||||||
Total operating expenses |
24,950 | 11,537 | 70,318 | 29,904 | |||||||||||||||
Loss from operations |
(21,579 | ) | (9,529 | ) | (58,926 | ) | (21,000 | ) | |||||||||||
Interest income |
605 | 144 | 3,385 | 484 | |||||||||||||||
Other income (expense), net |
(381 | ) | 308 | (1,062 | ) | 240 | |||||||||||||
Loss before cumulative effect of a change in
accounting principle |
(21,355 | ) | (9,077 | ) | (56,603 | ) | (20,276 | ) | |||||||||||
Cumulative effect of a change in accounting principle |
— | — | — | (3,973 | ) | ||||||||||||||
Net loss |
$ | (21,355 | ) | $ | (9,077 | ) | $ | (56,603 | ) | $ | (24,249 | ) | |||||||
Net loss per share: |
|||||||||||||||||||
Basic and diluted loss per share before cumulative
effect of a change in accounting principle |
$ | (5.90 | ) | $ | (2.46 | ) | $ | (15.74 | ) | $ | (5.54 | ) | |||||||
Cumulative effect of a change in accounting principle |
— | — | — | (1.08 | ) | ||||||||||||||
Basic and diluted net loss per share |
$ | (5.90 | ) | $ | (2.46 | ) | $ | (15.74 | ) | $ | (6.62 | ) | |||||||
Basic and diluted weighted average common shares
outstanding |
3,620 | 3,684 | 3,595 | 3,665 | |||||||||||||||
| (1) | The following summarizes the departmental allocation of the stock-based compensation charge: |
| Three Months | Nine Months | ||||||||||||||||
| Ended July 31, | Ended July 31, | ||||||||||||||||
| 2001 | 2002 | 2001 | 2002 | ||||||||||||||
Cost of revenue |
$ | 50 | $ | (40 | ) | $ | 70 | $ | 72 | ||||||||
Operating expenses: |
|||||||||||||||||
Sales and marketing |
124 | (30 | ) | 171 | 2 | ||||||||||||
Research and development |
138 | (77 | ) | 254 | 110 | ||||||||||||
General and administrative |
1,160 | (554 | ) | 2,345 | 550 | ||||||||||||
Total stock-based compensation |
$ | 1,472 | $ | (701 | ) | $ | 2,840 | $ | 734 | ||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
FIREPOND, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
| Nine Months | ||||||||||||
| Ended July 31, | ||||||||||||
| 2001 | 2002 | |||||||||||
Cash flows from operating activities: |
||||||||||||
Net loss |
$ | (56,603 | ) | $ | (24,249 | ) | ||||||
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities: |
||||||||||||
Acquired in-process research and development |
6,200 | — | ||||||||||
Settlement of claim |
(389 | ) | — | |||||||||
Non-cash restructuring and other special charges |
1,644 | 1,165 | ||||||||||
Stock-based compensation expense |
2,840 | 734 | ||||||||||
Depreciation and amortization |
5,793 | 2,413 | ||||||||||
Impairment of developed technology and know-how |
— | 3,120 | ||||||||||
Cumulative effect of change in accounting principle |
— | 3,973 | ||||||||||
Changes in assets and liabilities, net of acquisition: |
||||||||||||
Accounts receivable |
6,809 | 7,281 | ||||||||||
Unbilled revenue |
864 | (22 | ) | |||||||||
Prepaid expenses and other current assets |
(3,838 | ) | 371 | |||||||||
Accounts payable |
(4,434 | ) | (607 | ) | ||||||||
Accrued liabilities |
(6,262 | ) | (1,425 | ) | ||||||||
Deferred revenue |
(5,460 | ) | (6,180 | ) | ||||||||
Accrued merger and restructuring |
3,863 | (294 | ) | |||||||||
Net cash used in operating activities |
(48,973 | ) | (13,720 | ) | ||||||||
Cash flows from investing activities: |
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