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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 September 30, 2002
 
OR
 
¨
 
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Commission File Number: 0-30925
 
BLUE MARTINI SOFTWARE, INC.
(Exact name of registrant as specified in its charter)
 
Delaware
  
94-3319751
(State or other jurisdiction of
  
(I.R.S. Employer
incorporation or organization)
  
Identification No.)
 
2600 Campus Drive
San Mateo, California 94403
(Address of principal executive offices)
 
Telephone Number (650) 356-4000
(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) has been subject to such filing requirements for the past 90 days:  Yes  x  No  ¨
 
As of November 12, 2002, there were approximately 74,024,000 shares of the registrant’s common stock outstanding.
 

Table of Contents
 
BLUE MARTINI SOFTWARE, INC.
 
INDEX
 
PART I.
   
FINANCIAL INFORMATION
   
Page No.
Item 1.
   
Condensed Consolidated Financial Statements:
     
       
3
       
4
       
5
       
6
Item 2.
      
13
Item 3.
      
30
Item 4.
      
30
PART II.
   
OTHER INFORMATION
     
Item 1.
      
30
Item 6.
      
32
       
33
       
34

2

Table of Contents
 
PART I.    FINANCIAL INFORMATION
 
ITEM 1.    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
BLUE MARTINI SOFTWARE, INC.
Condensed Consolidated Balance Sheets
(In thousands, except per share data)
 
    
September 30, 2002
     
December 31, 2001
  
    
(Unaudited)
         
ASSETS
                  
Current assets:
                  
Cash and cash equivalents, including restricted cash of $5,857 in 2002 and $2,399 in 2001
   
$
25,638
 
   
$
12,945
 
Short-term investments
   
 
45,629
 
   
 
84,554
 
Accounts receivable, net
   
 
6,135
 
   
 
5,558
 
Prepaid expenses and other current assets
   
 
647
 
   
 
2,370
 
    
  
Total current assets
   
 
78,049
 
   
 
105,427
 
Property and equipment, net
   
 
887
 
   
 
4,654
 
Intangible assets and other, net
   
 
966
 
   
 
12,340
 
    
  
Total assets
   
$
79,902
 
   
$
122,421
 
    
  
LIABILITIES AND STOCKHOLDERS’ EQUITY
                  
Current liabilities:
                  
Accounts payable
   
$
1,168
 
   
$
1,848
 
Accrued employee compensation
   
 
6,643
 
   
 
6,354
 
Other current liabilities
   
 
5,652
 
   
 
6,696
 
Deferred revenues
   
 
4,480
 
   
 
5,061
 
    
  
Total current liabilities
   
 
17,943
 
   
 
19,959
 
Stockholders’ equity:
                  
Common stock, $0.001 par value, authorized 500,000 shares, issued and outstanding 73,672 shares in 2002 and 68,414 shares in 2001
   
 
256,696
 
   
 
254,014
 
Deferred stock compensation
   
 
(2,452
)
   
 
(8,000
)
Accumulated other comprehensive income
   
 
244
 
   
 
595
 
Accumulated deficit
   
 
(192,529
)
   
 
(144,147
)
    
  
Total stockholders’ equity
   
 
61,959
 
   
 
102,462
 
    
  
Total liabilities and stockholders’ equity
   
$
79,902
 
   
$
122,421
 
    
  
 
See accompanying notes to condensed consolidated financial statements.

3

Table of Contents
 
BLUE MARTINI SOFTWARE, INC.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
 
    
Three Months Ended September 30,
     
Nine Months Ended September 30,
  
    
2002
     
2001**
     
2002
     
2001**
  
Revenues:
                                    
License
   
$
1,414
 
   
$
3,365
 
   
$
4,027
 
   
$
17,421
 
Service
   
 
7,116
 
   
 
8,358
 
   
 
21,536
 
   
 
32,127
 
    
  
  
  
Total revenues
   
 
8,530
 
   
 
11,723
 
   
 
25,563
 
   
 
49,548
 
Cost of revenues:
                                    
License—Amortization of licensed technology
   
 
1,463
 
   
 
500
 
   
 
2,788
 
   
 
1,500
 
License—Other
   
 
248
 
   
 
376
 
   
 
703
 
   
 
1,733
 
Service*
   
 
5,104
 
   
 
6,935
 
   
 
15,718
 
   
 
32,039
 
    
  
  
  
Total cost of revenues
   
 
6,815
 
   
 
7,811
 
   
 
19,209
 
   
 
35,272
 
    
  
  
  
Gross profit
   
 
1,715
 
   
 
3,912
 
   
 
6,354
 
   
 
14,276
 
    
  
  
  
Operating expenses:
                                    
Sales and marketing*
   
 
6,973
 
   
 
9,037
 
   
 
22,059
 
   
 
38,603
 
Research and development*
   
 
3,289
 
   
 
3,943
 
   
 
10,698
 
   
 
15,052
 
General and administrative*
   
 
1,991
 
   
 
2,270
 
   
 
5,552
 
   
 
9,417
 
Amortization of deferred stock compensation
   
 
732
 
   
 
950
 
   
 
(377
)
   
 
10,598
 
Impairment of long-lived assets and goodwill
   
 
16,785
 
   
 
—  
 
   
 
16,785
 
   
 
—  
 
In process research and development
   
 
—  
 
   
 
—  
 
   
 
800
 
   
 
—  
 
Restructuring charges
   
 
530
 
   
 
4,150
 
   
 
1,233
 
   
 
6,257
 
    
  
  
  
Total operating expenses
   
 
30,300
 
   
 
20,350
 
   
 
56,750
 
   
 
79,927
 
Loss from operations
   
 
(28,585
)
   
 
(16,438
)
   
 
(50,396
)
   
 
(65,651
)
Interest income and other, net
   
 
543
 
   
 
1,461
 
   
 
2,014
 
   
 
5,215
 
    
  
  
  
Net loss
   
$
(28,042
)
   
$
(14,977
)
   
$
(48,382
)
   
$
(60,436
)
    
  
  
  
Basic and diluted net loss per common share
   
$
(0.39
)
   
$
(0.23
)
   
$
(0.69
)
   
$
(0.95
)
    
  
  
  
Shares used in computing basic and diluted net loss per common share
   
 
72,420
 
   
 
64,500
 
   
 
70,250
 
   
 
63,380
 
    
  
  
  
*
 
Amounts exclude amortization of deferred stock compensation for the three and nine months ended September 30, 2002 and 2001 as follows:
Cost of service revenues: $120 and $302 in 2002; $1,409 and $3,322 in 2001.
Sales and marketing: $7 and $(202) in 2002; $(30) and $1,600 in 2001.
Research and development: $187 and $561 in 2002; $(105) and $1,150 in 2001.
General and administrative: $418 and $(1,038) in 2002; $(324) and $4,526 in 2001.
 
**
 
2001 amounts have been reclassified to conform to the 2002 presentation, including (1) reclassification to revenues and cost of revenues as required by EITF Topic Q-103 and (2) presentation of amortization of deferred stock compensation as a separate line item.
 
See accompanying notes to condensed consolidated financial statements.

4

Table of Contents
 
BLUE MARTINI SOFTWARE, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
    
Nine Months Ended September 30,
  
    
2002
     
2001
  
Operating activities:
                  
Net loss
   
$
(48,382
)
   
$
(60,436
)
Adjustments to reconcile net loss to net cash used in operating activities:
                  
Depreciation of property and equipment and amortization of intangible and other assets
   
 
8,171
 
   
 
9,696
 
Amortization of deferred stock compensation
   
 
(377
)
   
 
10,598
 
Provision for doubtful accounts
   
 
565
 
   
 
1,175
 
Impairment of long-lived assets and goodwill
   
 
16,785
 
   
 
—  
 
In-process research and development
   
 
800
 
   
 
—  
 
Non-cash restructuring charges
   
 
—  
 
   
 
3,285
 
Changes in operating assets and liabilities:
                  
Accounts receivable
   
 
(818
)
   
 
7,230
 
Prepaid expenses and other current assets
   
 
2,040
 
   
 
2,399
 
Accounts payable, accrued employee compensation and other current liabilities
   
 
(3,564
)
   
 
(8,718
)
Deferred revenues
   
 
(738
)
   
 
(8,410
)
    
  
Net cash used in operating activities
   
 
(25,518
)
   
 
(43,181
)
    
  
Cash flows from investing activities:
                  
Cash acquired in acquisition
   
 
152
 
   
 
—  
 
Purchases of property and equipment
   
 
(368
)
   
 
(5,348
)
Purchases of short-term investments
   
 
(1,800
)
   
 
(4,250
)
Sales and maturities of short-term investments
   
 
40,415
 
   
 
30,826