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 March 31, 2003
¨ 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 0-21958
QRS Corporation
(Exact name of registrant as specified in its charter)
| Delaware (State of incorporation) |
68-0102251 (I.R.S. Employer Identification No.) |
1400 Marina Way South, Richmond, CA 94804
(Address of principal executive offices, including zip code)
(510) 215-5000
(Registrant’s phone 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 x No ¨
As of May 2, 2003, 15,843,637 shares of the issuer’s common stock, par value $.001 per share, were outstanding.
FORM 10-Q
TABLE OF CONTENTS
| Page Number | ||||
| PART I—FINANCIAL INFORMATION |
||||
| Item 1. |
Financial Statements (Unaudited): |
|||
| Condensed Consolidated Balance Sheets as of March 31, 2003 and December 31, 2002 |
1 | |||
| 2 | ||||
| Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2003 and 2002 |
3 | |||
| 4 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
10 | ||
| Item 3. |
30 | |||
| Item 4. |
30 | |||
| PART II—OTHER INFORMATION |
||||
| Item 1. |
30 | |||
| Item 2. |
31 | |||
| Item 3. |
31 | |||
| Item 4. |
31 | |||
| Item 5. |
31 | |||
| 32 | ||||
| 33 | ||||
ITEM 1. Financial Statements
QRS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2003 AND DECEMBER 31, 2002
(Dollars in thousands, except share and per share amounts)
(Unaudited)
| March 31, 2003 |
December 31, 2002 |
|||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ |
32,139 |
|
$ |
35,358 |
| ||
| Current portion of marketable securities available-for-sale |
|
1,753 |
|
|
1,998 |
| ||
| Accounts receivable—net of allowance for doubtful accounts of $1,472 at March 31, 2003 and $1,613 at December 31, 2002 |
|
14,880 |
|
|
14,907 |
| ||
| Prepaid expenses and other |
|
3,634 |
|
|
3,061 |
| ||
| Total current assets |
|
52,406 |
|
|
55,324 |
| ||
| Property and equipment: |
||||||||
| Furniture and fixtures |
|
1,782 |
|
|
1,780 |
| ||
| Equipment |
|
14,812 |
|
|
13,547 |
| ||
| Leasehold improvements |
|
1,936 |
|
|
1,921 |
| ||
|
|
18,530 |
|
|
17,248 |
| |||
| Less accumulated depreciation and amortization |
|
(9,831 |
) |
|
(8,703 |
) | ||
| Total property and equipment |
|
8,699 |
|
|
8,545 |
| ||
| Marketable securities available-for-sale |
|
1,717 |
|
|
2,230 |
| ||
| Capitalized service and product development costs—net of accumulated amortization of $7,192 at March 31, 2003 and $6,934 at December 31, 2002 |
|
3,490 |
|
|
2,282 |
| ||
| Goodwill |
|
1,113 |
|
|
1,113 |
| ||
| Other intangible assets—net of accumulated amortization of $16,117 at March 31, 2003 and $15,268 at December 31, 2002 |
|
9,008 |
|
|
9,857 |
| ||
| Other assets |
|
1,621 |
|
|
2,598 |
| ||
| Total assets |
$ |
78,054 |
|
$ |
81,949 |
| ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ |
6,892 |
|
$ |
8,870 |
| ||
| Accrued compensation |
|
3,846 |
|
|
6,289 |
| ||
| Accrued vacation |
|
2,340 |
|
|
2,044 |
| ||
| Deferred acquisition payments |
|
2,500 |
|
|
2,500 |
| ||
| Deferred revenue |
|
1,811 |
|
|
1,605 |
| ||
| Current portion of sublease loss accruals related to business restructuring |
|
3,980 |
|
|
2,788 |
| ||
| Other accrued liabilities |
|
4,046 |
|
|
3,762 |
| ||
| Current portion of note payable |
|
1,097 |
|
|
1,070 |
| ||
| Total current liabilities |
|
26,512 |
|
|
28,928 |
| ||
| Sublease loss accruals related to business restructuring |
|
4,411 |
|
|
6,315 |
| ||
| Note payable |
|
— |
|
|
290 |
| ||
| Deferred rent and other |
|
2,182 |
|
|
2,285 |
| ||
| Total liabilities |
|
33,105 |
|
|
37,818 |
| ||
| Commitments and contingencies (Note 7) |
||||||||
| Stockholders’ equity: |
||||||||
| Preferred stock: $.001 par value; 10,000,000 shares authorized; none issued and outstanding |
|
— |
|
|
— |
| ||
| Common stock: $.001 par value; 60,000,000 shares authorized; 16,032,353 shares issued and 15,801,253 shares outstanding at March 31, 2003 and December 31, 2002 |
|
252,097 |
|
|
251,914 |
| ||
| Deferred compensation |
|
(312 |
) |
|
(157 |
) | ||
| Treasury stock: 231,100 shares at March 31, 2003 and December 31, 2002 |
|
(5,548 |
) |
|
(5,548 |
) | ||
| Accumulated other comprehensive earnings (loss): |
||||||||
| Unrealized gain on marketable securities available-for-sale |
|
30 |
|
|
26 |
| ||
| Cumulative translation adjustments |
|
(263 |
) |
|
(229 |
) | ||
| Accumulated deficit |
|
(201,055 |
) |
|
(201,875 |
) | ||
| Total stockholders’ equity |
|
44,949 |
|
|
44,131 |
| ||
| Total liabilities and stockholders’ equity |
$ |
78,054 |
|
$ |
81,949 |
| ||
See Notes to Condensed Consolidated Financial Statements
1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(Dollars in thousands, except share and per share amounts)
(Unaudited)
| Three Months Ended March 31, |
||||||||
| 2003 |
2002 |
|||||||
| Revenues: |
||||||||
| Software applications |
$ |
8,141 |
|
$ |
9,454 |
| ||
| Trading community management |
|
16,666 |
|
|
19,089 |
| ||
| Global services |
|
5,996 |
|
|
6,907 |
| ||
| Total revenues |
|
30,803 |
|
|
35,450 |
| ||
| Cost of revenues: |
||||||||
| Software applications |
|
2,287 |
|
|
3,117 |
| ||
| Trading community management |
|
8,057 |
|
|
9,995 |
| ||
| Global services |
|
5,311 |
|
|
6,467 |
| ||
| Total cost of revenues |
|
15,655 |
|
|
19,579 |
| ||
| Gross profit |
|
15,148 |
|
|
15,871 |
| ||
| Operating expenses: |
||||||||
| Sales and marketing |
|
5,787 |
|
|
8,981 |
| ||
| Service and product development |
|
2,997 |
|
|
3,880 |
| ||
| General and administrative |
|
4,772 |
|
|
6,518 |
| ||
| Amortization of other intangible assets |
|
849 |
|
|
872 |
| ||
| Total operating expenses |
|
14,405 |
|
|
20,251 |
| ||
| Operating income (loss) |
|
743 |
|
|
(4,380 |
) | ||
| Interest income |
|
117 |
|
|
201 |
| ||
| Interest expense |
|
(40 |
) |
|
— |
| ||
| Income (loss) from operations before income taxes |
|
820 |
|
|
(4,179 |
) | ||
| Income tax benefit |
|
— |
|
|
(998 |
) | ||
| Net income (loss) |
|
820 |
|
|
(3,181 |
) | ||
| Other comprehensive income (loss) — |
||||||||
| Unrealized gain (loss) on marketable securities available-for-sale, net of tax |
|
4 |
|
|
(47 |
) | ||
| Change in cumulative translation adjustments |
|
(34 |
) |
|
(10 |
) | ||
| Total comprehensive income (loss) |
$ |
790 |
|
|||||