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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 June 30, 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 000-29357

Chordiant Software, Inc.  

(Exact name of Registrant as specified in its Charter)

 

Delaware

93-105328

  (State or Other Jurisdiction of Incorporation or Organization) 

(I.R.S. Employer Identification Number)

20400 Stevens Creek Boulevard, Suite 400
Cupertino, CA    95014
(Address of Principal Executive Offices including Zip Code)

(408) 517-6100
(Registrant's Telephone Number, Including Area Code)

(Former name, former address and former fiscal year if changed since last report)

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 [  ]

The number of shares of the Registrant's common stock outstanding as of August 5, 2003 was 63,382,873.

CHORDIANT SOFTWARE, INC.
QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 2003
TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION (unaudited)

Page No.
Item 1. Condensed Consolidated Financial Statements

 
  Condensed Consolidated Balance Sheets - June 30, 2003 and December 31, 2002 3
  Condensed Consolidated Statements of Operations - Three and Six Months ended June 30, 2003 and 2002 4
  Condensed Consolidated Statements of Cash Flows - Six Months ended June 30, 2003 and 2002 5
  Notes to Condensed Consolidated Financial Statements   6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 18
Item 3. Quantitative and Qualitative Disclosures about Market Risk 41
Item 4. Controls and Procedures 42
     
PART II. OTHER INFORMATION 42
Item 1. Legal Proceedings 43
Item 2. Changes in Securities and Use of Proceeds 43
Item 3. Defaults Upon Senior Securities 43
Item 4. Submission of Matters to a Vote of Security Holders 43
Item 5. Other Information 43
Item 6. Exhibits and Reports on Form 8-K 43
 
SIGNATURES   44

 

Table of Contents

PART I -- FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

 CHORDIANT SOFTWARE,  INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)

 
   June 30, 2003
   December 31, 2002
 
ASSETS              

Current assets:
 
 
 
 
 
 
 
  Cash and cash equivalents   $ 30,718   $ 30,731  
  Short-term investments and restricted cash     1,097     9,245  
  Accounts receivable, net     18,711     15,343  
  Prepaid expenses and other current assets     4,263     3,162  
   
 
 
    Total current assets     54,789     58,481  
Restricted cash     1,500     1,500  
Property and equipment, net     3,728     5,069  
Goodwill, net     24,874     24,874  
Intangible assets, net     3,194     4,975  
Other assets     1,350     1,788  
   
 
 
    Total assets   $ 89,435   $ 96,687  
   
 
 

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
 
 
 

Current liabilities:
 
 
 
 
 
 
 
  Borrowings   $ 1,583   $ 1,114  
  Accounts payable     3,387     5,936  
  Accrued expenses     6,300     9,450  
  Accrued restructuring     3,847     4,557  
  Deferred revenue     20,588     15,990  
   
 
 
    Total current liabilities     35,705     37,047  
Deferred revenue, long-term

6,286

8,532
Borrowings, long-term    

1,215

    

136

  
Other liabilities

119

161
   
 
 
    Total liabilities     43,325     45,876  
   
 
 
Stockholders' equity:              
  Common stock     55     55  
  Treasury stock     (332 )   (332 ) 
  Additional paid-in capital     231,639     230,192  
  Notes receivable from stockholders     --     (496 )
  Deferred stock-based compensation     (4,004 )   (6,750 )
  Accumulated deficit     (182,840 )   (172,503 ) 
  Accumulated other comprehensive income     1,592     645  
   
 
 
    Total stockholders' equity     46,110     50,811  
   
 
 
  Total liabilities and stockholders' equity   $ 89,435   $ 96,687  
   
 
 

The accompanying notes are an integral part of these condensed consolidated financial statements.

3


Table of Contents

 CHORDIANT SOFTWARE,  INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

Three Months Ended

Six Months Ended

  
       
   
 

June 30, 2003

June 30, 2002

June 30, 2003

June 30, 2002

  

Revenues:
 

License

$

6,486

$

6,038

$

10,624

$

17,122

  

Service

10,599

9,037

20,276

20,762

  
     
   
   
   
 

Total revenues

17,085

15,075

30,900

37,884

  
 

Cost of revenues:

  

License

319

488

580

1,055

  

Service

6,024

6,606

11,950

16,159

 

Non-cash compensation expense

314

74

778

171

 
     
   
   
   
 

Total cost of revenues

6,657

7,168

13,308

17,385

  
     
   
   
   
 
 

Gross profit

10,428

7,907

17,592

20,499

 
     
   
   
   
 

Operating expenses:

  

Sales and marketing:

  

Non-cash compensation expense

277

100

691

236

 

Other sales and marketing expense

4,717

8,305

10,733

17,419

 

Research and development:

  

Non-cash compensation expense

370

193

865

390

  

Other research and development expense

3,895

5,166

7,965

10,101

 

Purchased in-process research and development

--

997

--

997

 

General and administrative:

  

Non-cash compensation expense

512

74

978

160

 

Other general and administrative expense

1,950

1,935

3,510

4,126

 

Amortization of intangible assets

891

954

1,781

1,778

 
  Restructuring expense  

1,161

    

939

    

1,161

    

4,498

  
     
   
   
   
 

Total operating expenses

13,773

18,663

27,684

39,705

  
     
   
   
   
 

Loss from operations

(3,345

 )

(10,756

 )

(10,092

 )

(19,206

 )
 

Interest expense

(47

 )

(88

 )

(94

 )

(92

 )

Other income (expense), net

1

296

(151

 )

541

 
     
   
   
   
 

Net loss

$

(3,391

 )

$

(10,548

 )

$

(10,337

 )

$

(18,757

 )
     
   
   
   
 

Net loss per share:

  

Basic and diluted

$

(0.06

 )

$

(0.19

 )

$

(0.18

 )

$

(0.35

 )
     
   
   
   
 

Shares used in per share calculation:

                      
  Basic and diluted   58,567     54,756     57,894     54,307  

 
   
   
   
 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

Table of Contents

 CHORDIANT SOFTWARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

 
   Six Months Ended
  
 
   June 30, 2003
   June 30, 2002
 
Cash flows from operating activities:              
  Net loss   $ (10,337 )  $ (18,757 )
  Adjustments to reconcile net loss to net cash used in operating activities:              
    Depreciation and amortization     1,492     1,965  
    Amortization of intangibles     1,781     1,778  
    Non-cash compensation expense     3,312     957  
    Provision for doubtful accounts     21     554  
    Warrants issued to customers     21     --  
    Loss on disposal of assets     49     --  
    Purchased in-process research and development     --     997  
    Changes in assets and liabilities:              
      Accounts receivable     (3,389 )   6,927  
      Prepaid expenses and other current assets     (1,101 )   2,025  
      Other assets     438     (206 )
      Accounts payable     (2,549 )   (1,133 )
      Accrued expenses     (3,150 )   (3,125 )
      Accrued restructuring     (582 )   3,510  
      Deferred revenue     2,352     (2,969 ) 
      Other liabilities     (42 )   (699 ) 
   
 
 
Net cash used in operating activities     (11,684 )   (8,176 ) 
   
 
 
Cash flows from investing activities:              
  Property and equipment purchases     (218 )   (836 )
  Proceeds from disposal of property and equipment     18     88  
  Cash used for acquisition, net of cash acquired     --     (4,772 ) 
  Restricted cash     44     --  
  Purchases of short-term investments     (576 )   (9,044 )
  Proceeds from sales and maturities of short-term investments     8,680     19,650  
   
 
 
Net cash provided by investing activities     7,948   5,086
   
 
 
Cash flows from financing activities:              
  Exercise of stock options     58     1,463  
  Proceeds from issuance of common stock     --     3,029  
  Proceeds from issuance of common stock for employee stock purchase plan     674     981  
  Proceeds from borrowings     3,491     444  
  Repayment of notes receivable     496     --  
  Repayment of borrowings     (1,943 )   (669 )