UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Form 10-Q
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(Mark One)
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the Quarter Ended July 31, 2003 | ||
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
Commission File Number 0-29251
Firepond, Inc.
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Delaware
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41-1462409 | |
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(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
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| 8009 S. 34th Avenue, Minneapolis, MN | 55425 | |
| (Address of principal executive offices) | (Zip Code) | |
(952) 229-2300
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 þ No o
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
As of September 11, 2003 there were 3,671,983 shares of the Registrant’s Common Stock outstanding.
FIREPOND, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
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| PART I FINANCIAL INFORMATION | ||||||
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Item 1.
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Financial Statements (unaudited) | |||||
| Condensed Consolidated Balance Sheets — July 31, 2003 and October 31, 2002 | 2 | |||||
| Condensed Consolidated Statements of Operations — Three Months and Nine Months Ended July 31, 2003 and 2002 | 3 | |||||
| Condensed Consolidated Statements of Cash Flows — Nine Months Ended July 31, 2003 and 2002 | 4 | |||||
| Notes to Condensed Consolidated Financial Statements | 5 | |||||
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Item 2.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 14 | ||||
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Item 3.
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Quantitative and Qualitative Disclosures about Market Risk | 28 | ||||
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Item 4.
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Controls and Procedures | 28 | ||||
| PART II OTHER INFORMATION | ||||||
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Item 1.
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Legal Proceedings | 29 | ||||
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Item 6.
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Exhibits and Reports on Form 8-K | 30 | ||||
| SIGNATURES | 31 | |||||
| CERTIFICATIONS | ||||||
1
FIREPOND, INC. AND SUBSIDIARIES
| July 31, | October 31, | |||||||||
| 2003 | 2002 | |||||||||
| (Unaudited) | ||||||||||
| (In thousands, except share | ||||||||||
| and per share data) | ||||||||||
| ASSETS | ||||||||||
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Current assets:
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Cash and cash equivalents
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$ | 13,504 | $ | 13,479 | ||||||
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Short-term investments
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6,143 | 15,690 | ||||||||
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Accounts receivable, net of allowance for
doubtful accounts of $190 and $463
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1,766 | 2,798 | ||||||||
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Unbilled revenue
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153 | 268 | ||||||||
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Restricted cash
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— | 199 | ||||||||
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Prepaid expenses and other current assets
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1,822 | 982 | ||||||||
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Total current assets
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23,388 | 33,416 | ||||||||
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Property and equipment, net
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998 | 2,105 | ||||||||
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Other intangible assets, net
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60 | 137 | ||||||||
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Restricted cash
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190 | 190 | ||||||||
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Other assets
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489 | 511 | ||||||||
| $ | 25,125 | $ | 36,359 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
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Current liabilities:
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Accounts payable
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$ | 363 | $ | 1,546 | ||||||
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Accrued liabilities
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3,534 | 5,062 | ||||||||
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Accrued restructuring
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657 | 2,266 | ||||||||
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Deferred revenue
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4,343 | 5,952 | ||||||||
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Total current liabilities
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8,897 | 14,826 | ||||||||
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Long-term accrued restructuring
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116 | 160 | ||||||||
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Stockholders’ equity:
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Preferred stock, $0.10 par value —
Authorized — 5,000,000 shares; |
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Issued and outstanding — none at
July 31, 2003 and October 31, 2002
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— | — | ||||||||
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Common stock, $0.10 par value —
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Authorized — 100,000,000
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Issued and outstanding —
3,671,983 shares at July 31, 2003 and
3,684,983 shares at October 31, 2002
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367 | 369 | ||||||||
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Additional paid-in capital
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198,899 | 198,935 | ||||||||
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Accumulated deficit
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(176,819 | ) | (172,094 | ) | ||||||
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Loans receivable
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(4,015 | ) | (4,287 | ) | ||||||
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Deferred compensation
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(5 | ) | (10 | ) | ||||||
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Accumulated other comprehensive loss
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(2,315 | ) | (1,540 | ) | ||||||
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Total stockholders’ equity
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16,112 | 21,373 | ||||||||
| $ | 25,125 | $ | 36,359 | |||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
FIREPOND, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| Three Months | Nine Months | |||||||||||||||||
| Ended July 31, | Ended July 31, | |||||||||||||||||
| 2003 | 2002 | 2003 | 2002 | |||||||||||||||
| (Unaudited) | ||||||||||||||||||
| (In thousands, except per share data) | ||||||||||||||||||
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Revenue:
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License
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$ | 111 | $ | 638 | $ | 1,666 | $ | 4,851 | ||||||||||
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Services and maintenance
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2,156 | 3,680 | 7,727 | 12,367 | ||||||||||||||
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Total revenue
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2,267 | 4,318 | 9,393 | 17,218 | ||||||||||||||
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Cost of revenue:
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License
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57 | 4 | 97 | 101 | ||||||||||||||
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Services and maintenance(1)
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979 | 2,306 | 3,846 | 8,213 | ||||||||||||||
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Total cost of revenue
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1,036 | 2,310 | 3,943 | 8,314 | ||||||||||||||
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Gross profit
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1,231 | 2,008 | 5,450 | 8,904 | ||||||||||||||
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Operating expenses:
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Sales and marketing(1)
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1,052 | 2,036 | 3,396 | 6,247 | ||||||||||||||
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Research and development(1)
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1,077 | 2,290 | 3,252 | 7,801 | ||||||||||||||
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General and administrative(1)
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1,110 | 1,992 | 3,421 | 5,648 | ||||||||||||||
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Stock-based compensation (credit)
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4 | (701 | ) | 240 | 734 | |||||||||||||
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Amortization of intangible assets
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26 | 26 | 78 | 460 | ||||||||||||||
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Restructuring charge
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391 | 5,894 | 1,041 | 5,894 | ||||||||||||||
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Impairment of developed technology and know-how
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— | — | — | 3,120 | ||||||||||||||
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Total operating expenses
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3,660 | 11,537 | 11,428 | 29,904 | ||||||||||||||
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Loss from operations
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(2,429 | ) | (9,529 | ) | (5,978 | ) | (21,000 | ) | ||||||||||
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Interest income
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71 | 144 | 260 | 484 | ||||||||||||||
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Other income (expense), net
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273 | 308 | 993 | 240 | ||||||||||||||
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Loss before cumulative effect of a change in
accounting principle
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(2,085 | ) | (9,077 | ) | (4,725 | ) | (20,276 | ) | ||||||||||
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Cumulative effect of a change in accounting
principle
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— | — | — | (3,973 | ) | |||||||||||||
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Net loss
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$ | (2,085 | ) | $ | (9,077 | ) | $ | (4,725 | ) | $ | (24,249 | ) | ||||||
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Net loss per share:
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Basic and diluted loss per share before
cumulative effect of a change in accounting principle
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$ | (0.57 | ) | $ | (2.46 | ) | $ | (1.28 | ) | $ | (5.54 | ) | ||||||
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Cumulative effect of a change in accounting
principle
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— | — | — | (1.08 | ) | |||||||||||||
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Basic and diluted net loss per share applicable
to common stockholders
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$ | (0.57 | ) | $ | (2.46 | ) | $ | (1.28 | ) | $ | (6.62 | ) | ||||||
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Basic and diluted weighted average common shares
outstanding
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3,672 | 3,684 | 3,677 | 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, | ||||||||||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||||||||||
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Cost of revenue
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$ | — | $ | (40 | ) | $ | 83 | $ | 72 | ||||||||
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Operating expenses:
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Sales and marketing
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— | (30 | ) | — | 2 | ||||||||||||
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Research and development
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— | (77 | ) | 3 | 110 | ||||||||||||
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General and administrative
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4 | (554 | ) | 154 | 550 | ||||||||||||
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Total stock-based compensation
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$ | 4 | $ | (701 | ) | $ | 240 | $ | 734 | ||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
FIREPOND, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| Nine Months | ||||||||||||
| Ended July 31, | ||||||||||||
| 2003 | 2002 | |||||||||||
| (Unaudited) | ||||||||||||
| (In thousands) | ||||||||||||
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Cash flows from operating activities:
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Net loss
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$ | (4,725 | ) | $ | (24,249 | ) | ||||||
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Adjustments to reconcile net loss to net cash
used in operating activities:
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Non-cash restructuring and other special charges
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— | 1,165 | ||||||||||
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Stock-based compensation expense
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240 | 734 | ||||||||||
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Depreciation and amortization
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1,375 | 2,413 | ||||||||||
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Impairment of developed technology and know-how
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— | 3,120 | ||||||||||
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Cumulative effect of a change in accounting
principle
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— | 3,973 | ||||||||||
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Changes in assets and liabilities:
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Accounts receivable
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907 | 7,281 | ||||||||||
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Unbilled revenue
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111 | (22 | ) | |||||||||
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Prepaid expenses and other assets
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(1,173 | ) | 371 | |||||||||
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Accounts payable
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(1,200 | ) | (607 | ) | ||||||||
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Accrued liabilities
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(1,828 | ) | (1,425 | ) | ||||||||
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Accrued restructuring
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(1,653 | ) | (294 | ) | ||||||||
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Deferred revenue
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(1,796 | ) | (6,180 | ) | ||||||||
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Net cash used in operating activities
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(9,742 | ) | (13,720 | ) | ||||||||
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Cash flows from investing activities:
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Purchases of short-term investments
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(997 | ) | (24,127 | ) | ||||||||
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Proceeds from the sale and maturities of
short-term investments
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10,581 | 24,550 | ||||||||||
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Purchases of property and equipment
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(57 | ) | (248 | ) | ||||||||
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Decrease (increase) in restricted cash
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199 | (138 | ) | |||||||||
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Return of cash from the Brightware acquisition
escrow
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— | 617 | ||||||||||
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Net cash provided by investing activities
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9,726 | 654 | ||||||||||
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Cash flows from financing activities:
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Borrowings on note payable
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— | 880 | ||||||||||
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Payments on note payable
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— | (591 | ) | |||||||||
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Proceeds from stock options and warrants exercised
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— | 79 | ||||||||||
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Net cash provided by financing activities
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— | 368 | ||||||||||
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Effect of exchange rate changes on cash and cash
equivalents
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41 | 102 | ||||||||||
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Net increase (decrease) in cash and cash
equivalents
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25 | (12,596 | ) | |||||||||
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Cash and cash equivalents, beginning of period
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13,479 | 34,660 | ||||||||||
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Cash and cash equivalents, end of period
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$ | 13,504 | $ | 22,064 | ||||||||