NETOPIA INC - 10-Q Quarterly Report

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 December 31, 2002

		OR

o		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 0-28450

Netopia, Inc.
(Exact name of registrant as specified in its charter)

Delaware		94-3033136
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

Marketplace Tower
6001 Shellmound Street, 4^th Floor
Emeryville, California 94608
(Address of principal executive offices, including Zip Code)

(510) 420-7400
(Registrant’s telephone number, including area code)

Indicate by x check 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

As of December 31, 2002 there were 18,906,973 shares of the Registrant’s common stock outstanding.

NETOPIA, INC.
Form 10-Q
Table of Contents		Page

PART I.	FINANCIAL INFORMATION

Item 1.	Unaudited Condensed Consolidated Financial Statements	2

	Unaudited condensed consolidated balance sheets at December 31, 2002 and September 30, 2002	2

	Unaudited condensed consolidated statements of operations for the three months ended December 31, 2002 and 2001	3

	Unaudited condensed consolidated statements of cash flows for the three months ended December 31, 2002 and 2001	4

	Notes to unaudited condensed consolidated financial statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34

Item 4.	Controls and Procedures	36

PART II.	OTHER INFORMATION

Item 6.	Exhibits and Reports on Form 8-K	36

Signatures		37

Certifications		38

PART I. FINANCIAL INFORMATION
Item 1. Unaudited Condensed Consolidated Financial Statements

NETOPIA, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets

			December 31, 2002			September 30, 2002*

			(in thousands)
ASSETS
Current assets:
	Cash and cash equivalents		$	24,291		$	25,022

	Trade accounts receivable less allowance for doubtful accounts and returns of $547 and $567 at December 31 and September 30, 2002, respectively			10,623			9,950
	Inventory			8,200			6,259
	Prepaid expenses and other current assets			1,279			1,731

		Total current assets		44,393			42,962
Furniture, fixtures and equipment, net				5,015			5,507
Acquired technology, net				5,250			5,538
Other intangible assets and goodwill, net				1,933			2,157
Long-term investments				1,463			1,463
Deposits and other assets				1,425			1,368

		TOTAL ASSETS	$	59,479		$	58,995

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Accounts payable		$	10,391		$	7,088
	Accrued compensation			2,355			2,736
	Accrued liabilities			2,702			2,245
	Deferred revenue			1,694			2,223
	Other current liabilities			52			42

		Total current liabilities		17,194			14,334
Long-term liabilities:
Borrowings under credit facility				6,000			4,428
Other long-term liabilities				174			186

Total liabilities				23,368			18,948

Commitments and contingencies
Stockholders’ equity:
	Common stock: $0.001 par value, 50,000,000 shares authorized; 18,906,973 and 18,905,223 shares issued and outstanding at December 31 and September 30, 2002, respectively			19			19
	Additional paid-in capital			147,487			147,485
	Accumulated deficit			(111,395	)		(107,457	)

		Total stockholders’ equity		36,111			40,047

		TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	59,479		$	58,995

* Derived from the audited consolidated balance sheet dated September 30, 2002 included in the Company’s 2002 Annual Report on Form 10-K. See accompanying notes to unaudited condensed consolidated financial statements.

NETOPIA, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations

Three months ended December 31,				2002			2001

			(in thousands, except per share amounts)
REVENUES:
	Internet equipment		$	14,596		$	11,811
	Web platform licenses and services			5,007			4,074

		Total revenues		19,603			15,885

COST OF REVENUES:
	Internet equipment			10,711			7,383
	Web platform licenses and services			429			164
		Total cost of revenues		11,140			7,547

GROSS PROFIT				8,463			8,338

OPERATING EXPENSES:
	Research and development			3,983			4,148
	Research and development project cancellation costs			606			—
	Selling and marketing			5,661			6,128
	General and administrative			1,428			973
	Amortization of intangible assets			374			374
	Restructuring costs			342			482
	Acquired in-process research and development			—			2,150
	Integration costs			—			309

		Total operating expenses		12,394			14,564

OPERATING LOSS				(3,931	)		(6,226	)
Other income (loss), net				(7	)		156

		NET LOSS	$	(3,938	)	$	(6,070	)

Per share data, net loss:
	Basic and diluted net loss per share		$	(0.21	)	$	(0.34	)

	Common shares used in the per share calculations			18,906			18,092

See accompanying notes to unaudited condensed consolidated financial statements.

NETOPIA, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows

Three months ended December 31,					2002			2001

				(in thousands)
Cash flows from operating activities:
Net loss				$	(3,938	)	$	(6,070	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
	Depreciation and amortization				1,438			2,593
	Charge for in-process research and development				—			2,150
	Write-off of capitalized software development costs				16			—
	Changes in allowance for doubtful accounts and returns on accounts receivable				(20	)		427
	Changes in operating assets and liabilities:
		Trade accounts receivable			(653	)		313
		Inventories			(1,941	)		(2,063	)
		Prepaid expenses and other current assets			452			(120	)
		Deposits and other assets			(129	)		3
		Accounts payable and accrued liabilities			3,390			6,774
		Deferred revenue			(540	)		(443	)
		Other liabilities			(1	)		14

			Net cash provided by (used in) operating activities		(1,926	)		3,578

Cash flows from investing activities:
	Purchase of short-term investments				—			147
	Proceeds from the sale of short-term investments				—			13,113
	Purchase of furniture, fixtures and equipment				(379	)		(2,576	)
	Acquisition of businesses				—			(17,729	)

			Net cash used in investing activities		(379	)		(7,045	)

Cash flows from financing activities:
	Borrowings under credit facility				1,572			—
	Proceeds from the issuance of common stock				2			156
			Net cash provided by financing activities		1,574			156

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