UNITED STATES OF AMERICA
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 April 30, 2003
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number: 0-29757
VERSATA, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 68-0255203 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
300 Lakeside Drive Suite 1500
Oakland, CA 94612
(Address including zip code, of principal executive offices)
(510) 238-4100
(Registrant’s telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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 Exchange Act).
Yes ¨ No x
As of May 30, 2003, the total number of outstanding shares of the Registrant’s common stock was 7,431,944.
VERSATA, INC.
FORM 10-Q QUARTERLY REPORT
| Page | ||
| PART I. FINANCIAL INFORMATION | ||
| Item 1. Financial Statements (Unaudited): |
||
| Condensed Consolidated Balance Sheets as of April 30, 2003 and October 31, 2002 |
3 | |
| 4 | ||
| Condensed Consolidated Statements of Cash Flows for the Six Months Ended April 30, 2003 and 2002 |
5 | |
| 6 | ||
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
10 | |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk |
24 | |
| 25 | ||
| PART II. OTHER INFORMATION | ||
| 26 | ||
| 26 | ||
| 28 | ||
| 29 | ||
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(Unaudited)
| April 30, 2003 |
October 31, 2002 |
|||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 13,527 | $ | 12,287 | ||||
| Short-term investments |
2,923 | 4,478 | ||||||
| Accounts receivable, net |
2,703 | 3,153 | ||||||
| Unbilled receivables |
84 | 195 | ||||||
| Prepaid expenses and other current assets |
1,202 | 989 | ||||||
| Total current assets |
20,439 | 21,102 | ||||||
| Restricted cash |
4,964 | 5,261 | ||||||
| Property and equipment, net |
2,911 | 3,877 | ||||||
| Intangibles, net |
1,004 | 1,994 | ||||||
| Other assets |
93 | 122 | ||||||
| Total assets |
$ | 29,411 | $ | 32,356 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 330 | $ | 750 | ||||
| Accrued liabilities |
3,139 | 3,740 | ||||||
| Current portion of accrued restructuring and other |
1,909 | 1,037 | ||||||
| Current portion of deferred revenue |
3,662 | 3,848 | ||||||
| Current portion of long-term debt |
38 | 134 | ||||||
| Total current liabilities |
9,078 | 9,509 | ||||||
| Accrued restructuring and other, less current portion |
1,324 | 1,104 | ||||||
| Deferred revenue, less current portion |
1,283 | 1,649 | ||||||
| Long-term debt, less current portion |
— | 158 | ||||||
| Total liabilities |
11,685 | 12,420 | ||||||
| Stockholders’ equity: |
||||||||
| Common stock |
44 | 43 | ||||||
| Additional paid-in capital |
215,902 | 216,001 | ||||||
| Treasury stock |
(40 | ) | (46 | ) | ||||
| Notes receivable from shareholders |
(23 | ) | (23 | ) | ||||
| Unearned stock-based compensation |
(135 | ) | (528 | ) | ||||
| Accumulated other comprehensive loss |
(336 | ) | (164 | ) | ||||
| Accumulated deficit |
(197,686 | ) | (195,347 | ) | ||||
| Total stockholders’ equity |
17,726 | 19,936 | ||||||
| Total liabilities and stockholders’ equity |
$ | 29,411 | $ | 32,356 | ||||
The accompanying notes are an integral part of these
condensed consolidated financial statements.
3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except per share data)
(Unaudited)
| Three Months Ended |
Six Months Ended |
|||||||||||||||
| April 30, 2003 |
April 30, 2002 |
April 30, 2003 |
April 30, 2002 |
|||||||||||||
| Revenue: |
||||||||||||||||
| Software license |
$ | 1,878 | $ | 994 | $ | 4,586 | $ | 4,128 | ||||||||
| Maintenance and support |
1,542 | 1,511 | 2,913 | 2,728 | ||||||||||||
| Professional services |
1,057 | 2,037 | 2,078 | 4,095 | ||||||||||||
| Total revenue |
4,477 | 4,542 | 9,577 | 10,951 | ||||||||||||
| Cost of revenue: |
||||||||||||||||
| Software license |
138 | 38 | 186 | 106 | ||||||||||||
| Maintenance and support (excluding stock-based compensation of $56 and $94 for the three months ended April 30, 2003 and 2002 and $117 and $260 for the six months ended April 30, 2003 and 2002, respectively) |
422 | 361 | 786 | 700 | ||||||||||||
| Professional services (excluding stock-based compensation of $4 and $15 for the three months ended April 30, 2003 and 2002 and $10 and $25 for the six months ended April 30, 2003 and 2002, respectively) |
892 | 1,676 | 1,872 | 3,431 | ||||||||||||
| Total cost of revenue |
1,452 | 2,075 | 2,844 | 4,237 | ||||||||||||
| Gross profit |
3,025 | 2,467 | 6,733 | 6,714 | ||||||||||||
| Operating expense: |
||||||||||||||||
| Sales and marketing (excluding stock-based compensation of $68 and $140 for the three months ended April 30, 2003 and 2002 and $127 and $268 for the six months ended April 30, 2003 and 2002, respectively) |
1,646 | 2,331 | 3,253 | 5,332 | ||||||||||||
| Product development (excluding stock-based compensation of $78 and $108 for the three months ended April 30, 2003 and 2002 and $97 and $161 for the six months ended April 30, 2003 and 2002, respectively) |
1,248 | 1,369 | 2,695 | 2,878 | ||||||||||||
| General and administrative (excluding stock-based compensation of $34 and $58 for the three months ended April 30, 2003 and 2002 and $62 and $196 for the six months ended April 30, 2003 and 2002, respectively) |
657 | 1,388 | 1,475 | 2,682 | ||||||||||||
| Stock-based compensation |
121 | 350 | 294 | 562 | ||||||||||||
| Amortization of intangibles |
500 | 538 | 973 | 1,015 | ||||||||||||
| Restructuring and other (excluding the benefit of $119 and $65 for the three months ended April 30, 2003 and 2002 and $119 and $348 for the six months ended April 30, 2003 and 2002 relating to the reversal of previously recorded stock-based compensation related to employees terminated in the restructuring) |
83 | 579 | 406 | 888 | ||||||||||||
| Total operating expense |
4,255 | 6,555 | 9,096 | 13,357 | ||||||||||||
| Loss from operations |
(1,230 | ) | (4,088 | ) | (2,363 | ) | (6,643 | ) | ||||||||
| Interest income, net |
41 | 106 | 122 | 243 | ||||||||||||
| Other non-operating income (expense), net |
13 | 9 | 23 | (31 | ) | |||||||||||
| Loss before provision for taxes |
(1,176 | ) | (3,973 | ) | (2,218 | ) | (6,431 | ) | ||||||||
| Benefit (provision) for taxes |
7 | (39 | ) | (121 | ) | (67 | ) | |||||||||
| Net loss |
$ | (1,169 | ) | $ | (4,012 | ) | $ | (2,339 | ) | $ | (6,498 | ) | ||||
| Other comprehensive income (loss): |
||||||||||||||||
| Change in unrealized loss on marketable securities |
(6 | ) | 5 | (8 | ) | 3 | ||||||||||
| Change in foreign currency translation adjustments |
(85 | ) | (106 | ) | (165 | ) | 731 | |||||||||
| Comprehensive loss |
$ | (1,260 | ) | $ | (4,113 | ) | $ | (2,512 | ) | $ | (5,764 | ) | ||||
| Basic and diluted net loss per share |
$ | (0.16 | ) | $ | (0.56 | ) | $ | (0.32 | ) | $ | (0.92 | ) | ||||
| Weighted-average common shares outstanding |
7,326 | 7,102 | 7,294 | 7,086 | ||||||||||||
The accompanying notes are an integral part of these
condensed consolidated financial statements.
4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
| Six Months Ended |
||||||||
| April 30, 2003 |
April 30, 2002 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | (2,339 | ) | $ | (6,498 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Depreciation and amortization |
1,922 | 2,038 | ||||||
| Provision for doubtful accounts |
(261 | ) | 176 | |||||
| Loss on disposal of property and equipment |
34 | 22 | ||||||
| Stock-based compensation |
294 | 562 | ||||||
| Cancellation of promissory note |
— | 263 | ||||||
| Change in operating assets and liabilities: |
||||||||
| Accounts receivable |
711 | 1,124 | ||||||
| Unbilled receivables |
111 | 89 | ||||||
| Prepaid expenses and other current assets |
(213 | ) | (717 | ) | ||||
| Other assets |
29 | 15 | ||||||