PARTHUSCEVA INC - 10-Q Quarterly Report

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended: September 30, 2002

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: 000-49842

PARTHUSCEVA, INC.

Exact Name of Registrant as Specified in Its Charter

Delaware		77-0556376
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

2033 Gateway Place, Suite 150, San Jose, California		95110-1002
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code: (408) 514-2900

Indicate by check whether the registrant: (1) has filed all reports 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 ¨ No x

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act. Yes ¨ No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date: 18,040,738 shares of common stock, $0.001 par value, as of December 13, 2002

TABLE OF CONTENTS



PART I.	FINANCIAL INFORMATION

	Item 1.	FINANCIAL STATEMENTS

		Interim Consolidated Balance Sheets at September 30, 2002 (unaudited) and December 31, 2001 (audited)

		Unaudited Interim Consolidated Statements of Income for the nine months and three months ended September 30, 2002 and 2001

		Unaudited Interim Statements of Changes in Stockholders’ Equity and Parent Company Investment for the nine months ended September 30, 2002

		Unaudited Interim Consolidated Statements of Cash Flows for the nine months ended September 30, 2002 and 2001

		Notes to the Unaudited Interim Consolidated Financial Statements

	Item 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

	Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

	Item 4.	CONTROLS AND PROCEDURES

PART II.	OTHER INFORMATION

	Item 6.	EXHIBITS AND REPORTS ON FORM 8-K

SIGNATURES

CERTIFICATIONS

INTRODUCTION

This Quarterly Report on Form 10-Q contains the financial statements and Management’s Discussion and Analysis for the DSP cores licensing business of ParthusCeva for the quarter ended September 30, 2002. This business was part of DSP Group, Inc. until November 1, 2002, on which date (1) DSP Group contributed this business to ParthusCeva (formerly known as Ceva, Inc.), which was then a wholly owned subsidiary of DSP Group; (2) DSP Group distributed all of the existing common stock of ParthusCeva to the stockholders of DSP Group; and (3) ParthusCeva immediately thereafter combined with Parthus Technologies plc. These transactions are described in detail in the Report on Form 8-K of ParthusCeva dated November 1, 2002, as amended, as well as the Registration Statement on Form S-1 of ParthusCeva filed on October 30, 2002. This discussion assumes that the DSP cores licensing business had operated as a stand-alone entity for the periods presented. This discussion does not give effect to the combination of this business with Parthus.

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

INTERIM CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands

	December 31, 2001		September 30, 2002
	Note 1c		(unaudited)
ASSETS
CURRENT ASSETS:
Trade receivables	$	8,115	$	8,181
Other accounts receivable and prepaid expenses		319		3,104
Deferred income taxes		240		240
Inventories		50		60

Total current assets		8,724		11,585

LONG-TERM INVESTMENT:
Severance pay fund		1,084		1,234
Long-term lease deposits		190		167

		1,274		1,401

PROPERTY AND EQUIPMENT, NET		2,199		2,336

Total assets	$	12,197	$	15,322

LIABILITIES, STOCKHOLDERS’ EQUITY AND PARENT COMPANY INVESTMENT
CURRENT LIABILITIES:
Trade payables	$	707	$	935
Employees and payroll accruals		2,006		1,274
Income tax payable		3,496		1,201
Accrued expenses		519		543
Deferred revenues		—		245

Total current liabilities		6,728		4,198

ACCRUED SEVERANCE PAY		1,124		1,256


COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY AND PARENT COMPANY INVESTMENT:
Common Stock:
$ 0.001 par value: 100,000,000 shares authorized at December 31, 2001, and September 30, 2002; 20,000,000 shares issued and outstanding at December 31, 2001 and September 30, 2002		20		20
Parent Company’s investment		4,325		9,848
Retained earnings		—		—

Total stockholders’ equity and parent Company investment		4,345		9,868

Total liabilities, stockholders’ equity and parent company investment	$	12,197	$	15,322

The accompanying notes are an integral part of the interim consolidated financial statements.

INTERIM CONSOLIDATED STATEMENTS OF INCOME

U.S. dollars in thousands

	Nine months ended September 30,				Three months ended September 30,
	2001		2002		2001		2002
	(unaudited)
Revenues:
License and royalties	$	17,583	$	10,915	$	6,917	$	3,921
Technical support, maintenance and other		3,217		2,619		895		931

Total revenues		20,800		13,534		7,812		4,852

Cost of revenues		951		938		344		322

Gross profit		19,849		12,596		7,468		4,530

Operating expenses:
Research and development, net		3,979		4,624		1,291		1,408
Sales and marketing		1,984		2,227		654		734
General and administrative		2,163		2,367		809		1,013

Total operating expenses		8,126		9,218		2,754		3,155

Operating income		11,723		3,378		4,714		1,375
Financial income, net		346		75		125		25

Income before taxes on income		12,069		3,453		4,839		1,400
Taxes on income		2,802		961		1,679		419

Net income	$	9,267	$	2,492	$	3,160	$	981

The accompanying notes are an integral part of the interim consolidated financial statements.

INTERIM STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

AND PARENT COMPANY INVESTMENT

U.S. dollars in thousands (except share data)

(unaudited)

	Common stock			Parent company investment		Retained earnings			Total stockholders’ equity and parent company investment
	Shares	Amount		Parent company investment		Retained earnings
Balance as of January 1, 2001 (Note 1c)	20,000,000	$	20	$	2,000	$	—		$	2,020
Net income (unaudited)	—		—		—		9,267			9,267
Capital return to Parent Company (unaudited)	—		—		—		(9,267	)		(9,267	)
Contribution from Parent Company (unaudited)	—		—		3,506		—			3,506

Balance as of September 30, 2001 (unaudited)	20,000,000	$	20	$	5,506	$	—		$	5,526

	Common stock			Parent company investment		Retained earnings			Total stockholders’ equity and parent company investment
	Shares	Amount		Parent company investment		Retained earnings
Balance as of January 1, 2002 (Note 1c)	20,000,000	$	20	$	4,325	$	—		$	4,345
Net income (unaudited)	—		—		—		2,492			2,492
Capital return to Parent Company (unaudited)	—		—		—		(2,492	)		(2,492	)
Contribution from Parent Company (unaudited)	—		—		5,523		—			5,523

Balance as of September 30, 2002 (unaudited)	20,000,000	$	20	$	9,848	$	—		$	9,868

The accompanying notes are an integral part of the interim consolidated financial statements.

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

	Nine months ended September 30,
	2001			2002
	(unaudited)
Cash flows from operating activities:
Net income		9,267			2,492
Adjustments required to reconcile net income to net cash provided by (used in) operating activities:
Depreciation		477			697
Increase in trade receivables		(2,468	)		(66	)
Increase in other accounts receivable and prepaid expenses		(68	)		(2,785	)
Increase in inventories		(9	)		—
Increase in deferred income taxes		(69	)		(10	)
Increase in trade payables		194			228
Increase in deferred revenues		56			245
Increase (decrease) in employees and payroll accruals		120			(732	)
Increase (decrease) in accrued expenses		(56	)		24
Decrease in income tax payable		(636	)		(2,295	)

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