UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| 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 |
OR
| ¨ | 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 000-25977
LIQUID AUDIO, INC.
(Exact name of registrant as specified in its charter)
| Delaware |
77-0421089 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| 800 Chesapeake Drive, Redwood City, CA |
94063 | |
| (Address of principal executive offices) |
(Zip Code) |
(650) 549-2000
(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) had 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 Exchange Act). Yes ¨ No x
As of May 12, 2003, there were 23,175,036 shares of registrant’s Common Stock outstanding.
INDEX
| 1 | ||||
| ITEM 1. |
1 | |||
| Condensed Consolidated Balance Sheets as of March 31, 2003 and December 31, 2002 |
||||
| Condensed Consolidated Statements of Operations for the three months ended March 31, 2003 and 2002 |
||||
| Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2003 and 2002 |
||||
| ITEM 2. |
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
12 | ||
| ITEM 3. |
22 | |||
| ITEM 4. |
22 | |||
| 23 | ||||
| ITEM 1. |
23 | |||
| ITEM 2. |
25 | |||
| ITEM 4. |
25 | |||
| ITEM 5. |
26 | |||
| ITEM 6. |
26 | |||
| 28 | ||||
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands; unaudited)
| March 31, 2003 |
December 31, 2002 |
|||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ |
14,119 |
|
$ |
73,985 |
| ||
| Accounts receivable, less allowance for doubtful accounts of $146 for 2003 and 2002 |
|
35 |
|
|
60 |
| ||
| Other current assets |
|
806 |
|
|
1,361 |
| ||
| Total current assets |
|
14,960 |
|
|
75,406 |
| ||
| Restricted cash |
|
826 |
|
|
826 |
| ||
| Property and equipment, net |
|
111 |
|
|
558 |
| ||
| Other assets |
|
8 |
|
|
7 |
| ||
| Total assets |
$ |
15,905 |
|
$ |
76,797 |
| ||
| Liabilities and stockholders’ equity |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ |
595 |
|
$ |
1,218 |
| ||
| Accrued liabilities |
|
880 |
|
|
2,151 |
| ||
| Distribution payable to stockholders |
|
— |
|
|
57,771 |
| ||
| Deferred revenue |
|
— |
|
|
39 |
| ||
| Total current liabilities |
|
1,475 |
|
|
61,179 |
| ||
| Stockholders’ equity: |
||||||||
| Common stock |
|
23 |
|
|
23 |
| ||
| Additional paid-in capital |
|
146,040 |
|
|
146,039 |
| ||
| Accumulated other comprehensive loss |
|
(76 |
) |
|
(75 |
) | ||
| Accumulated deficit |
|
(131,557 |
) |
|
(130,369 |
) | ||
| Total stockholders’ equity |
|
14,430 |
|
|
15,618 |
| ||
| Total liabilities and stockholders’ equity |
$ |
15,905 |
|
$ |
76,797 |
| ||
See accompanying notes to condensed consolidated financial statements
1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts; unaudited)
| Three Months Ended March 31, |
||||||||
| 2003 |
2002 |
|||||||
| Net revenues: |
||||||||
| License |
$ |
4 |
|
$ |
36 |
| ||
| Services |
|
39 |
|
|
99 |
| ||
| Total net revenues |
|
43 |
|
|
135 |
| ||
| Cost of net revenues: |
||||||||
| License |
|
5 |
|
|
97 |
| ||
| Services |
|
2 |
|
|
128 |
| ||
| Non-cash cost of revenue |
|
— |
|
|
33 |
| ||
| Total cost of net revenues |
|
7 |
|
|
258 |
| ||
| Gross profit (loss) |
|
36 |
|
|
(123 |
) | ||
| Operating expenses: |
||||||||
| Sales and marketing |
|
265 |
|
|
1,158 |
| ||
| Non-cash sales and marketing |
|
— |
|
|
11 |
| ||
| Research and development |
|
78 |
|
|
3,023 |
| ||
| Non-cash research and development |
|
— |
|
|
5 |
| ||
| General and administrative |
|
3,009 |
|
|
1,106 |
| ||
| Restructuring |
|
842 |
|
|
— |
| ||
| Total operating expenses |
|
4,194 |
|
|
5,303 |
| ||
| Loss from operations |
|
(4,158 |
) |
|
(5,426 |
) | ||
| Other income (expense), net |
|
105 |
|
|
533 |
| ||
| Gain on sale of digital music fulfillment business |
|
2,865 |
|
|
— |
| ||
| Net loss |
$ |
(1,188 |
) |
$ |
(4,893 |
) | ||
| Net loss per share: |
||||||||
| Basic and diluted |
$ |
(0.05 |
) |
$ |
(0.22 |
) | ||
| Weighted average shares |
|
23,145 |
|
|
22,709 |
| ||
See accompanying notes to condensed consolidated financial statements
2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands; unaudited)
| Three Months Ended March 31, |
||||||||
| 2003 |
2002 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ |
(1,188 |
) |
$ |
(4,893 |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Depreciation and amortization |
|
112 |
|
|
646 |
| ||
| Amortization of unearned compensation |
|
— |
|
|
16 |
| ||
| Gain on sale of digital music fulfillment business and related assets |
|
(2,865 |
) |
|
— |
| ||
| Non-cash cost of revenue |
|
— |
|
|
33 |
| ||
| Changes in assets and liabilities: |
||||||||
| Accounts receivable from third parties |
|
25 |
|
|
(4 |
) | ||
| Other assets |
|
554 |
|
|
143 |
| ||
| Accounts payable |
|
(623 |
) |
|
(258 |
) | ||
| Accrued liabilities |
|
(1,271 |
) |
|
(746 |
) | ||
| Deferred revenue |
|
(39 |
) |
|
(12 |
) | ||
| Net cash used in operating activities |
|
(5,295 |
) |
|
(5,075 |
) | ||
| Cash flows from investing activities: |
||||||||
| Acquisition of property and equipment |
|
— |
|
|
(37 |
) | ||
| Proceeds from sale of digital music fulfillment business and related assets |
|
3,200 |
|
|
— |
| ||
| Net cash provided by (used in) investing activities |
|
3,200 |
|
|
(37 |
) | ||
| Cash flows from financing activities: |
||||||||
| Cash distribution to stockholders |
|
(57,771 |
) |
|
— |
| ||
| Proceeds from issuance of common stock, net of repurchases |
|
1 |
|
|
4 |
| ||
| Payments made under capital leases |
|
— |
|
|
(7 |
) | ||
| Payments made under equipment loan |
|
— |
|
|
(122 |
) | ||
| Net cash used in financing activities |
|
(57,770 |
) |
|||||