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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 September 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 October 29, 2003 was 64,674,358.

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

PART I. FINANCIAL INFORMATION (unaudited)

Page No.

Item 1. Condensed Consolidated Financial Statements

 

  Condensed Consolidated Balance Sheets - September 30, 2003 and December 31, 2002 3
  Condensed Consolidated Statements of Operations - Three and Nine Months ended September 30, 2003 and 2002 4
  Condensed Consolidated Statements of Cash Flows - Nine Months ended September 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 42
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)

 
   September 30, 2003
  December 31, 2002
 
ASSETS              

Current assets:
 
 
 
 
 
 
 
  Cash and cash equivalents   $ 32,094   $ 30,731  
  Short-term investments and restricted cash     581     9,245  
  Accounts receivable, net     15,226     15,343  
  Prepaid expenses and other current assets     3,096     3,162  
   
 
 
    Total current assets     50,997     58,481  
Restricted cash     1,500     1,500  
Property and equipment, net     3,313     5,069  
Goodwill, net     24,874     24,874  
Intangible assets, net     2,304     4,975  
Other assets     2,308     1,788  
   
 
 
    Total assets   $ 85,296   $ 96,687  
   
 
 

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
 
 
 

Current liabilities:
 
 
 
 
 
 
 
  Borrowings   $ 1,191   $ 1,114  
  Accounts payable     2,797     5,936  
  Accrued expenses     11,327     14,007  
  Deferred revenue     16,722     15,990  
   
 
 
    Total current liabilities     32,037     37,047  
Deferred revenue, long-term

5,241

8,532
Borrowings, long-term    

940

    

136

  
Other liabilities

90

161
   
 
 
    Total liabilities     38,308     45,876  
   
 
 
Stockholders' equity:              
  Common stock     55     55  
  Treasury stock     (332 )   (332 ) 
  Additional paid-in capital     233,774     230,192  
  Notes receivable from stockholders     --     (496 )
  Deferred stock-based compensation     (3,446 )   (6,750 )
  Accumulated deficit     (184,969 )   (172,503 ) 
  Accumulated other comprehensive income     1,906     645  
   
 
 
    Total stockholders' equity     46,988     50,811  
   
 
 
  Total liabilities and stockholders' equity   $ 85,296   $ 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

Nine Months Ended

  
       
   
 

September 30, 2003

September 30, 2002

September 30, 2003

September 30, 2002

  

Revenues:
 

License

$

6,642

$

8,625

$

17,266

$

25,747

  

Service

11,124

10,276

31,400

31,038

  
     
   
   
   
 

Total revenues

17,766

18,901

48,666

56,785

  
 

Cost of revenues:

  

License

267

163

847

1,218

  

Service

6,406

7,018

18,356

23,177

 

Non-cash compensation expense

343

62

1,121

233

 
     
   
   
   
 

Total cost of revenues

7,016

7,243

20,324

24,628

  
     
   
   
   
 
 

Gross profit

10,750

11,658

28,342

32,157

 
     
   
   
   
 

Operating expenses:

  

Sales and marketing:

  

Non-cash compensation expense

304

77

995

313

 

Other sales and marketing expense

4,995

7,619

15,728

25,038

  

Research and development:

  

Non-cash compensation expense

414

212

1,279

602

  

Other research and development expense

4,110

5,281

12,075

15,382

  

Purchased in-process research and development

--

--

--

997

 

General and administrative:

  

Non-cash compensation expense

675

61

1,653

222

  

Other general and administrative expense

1,432

2,323

4,942

6,448

  

Amortization of intangible assets

890

954

2,671

2,732

  
  Restructuring expense  

--

    

225

    

1,161

    

4,723

  
     
   
   
   
 

Total operating expenses

12,820

16,752

40,504

56,457

  
     
   
   
   
 

Loss from operations

(2,070

 )

(5,094

 )

(12,162

 )

(24,300

 )
 

Interest expense

(37

 )

(68

 )

(131

 )

(161

 )

Other income (expense), net

(22

)

194

(173

 )

736

  
     
   
   
   
 

Net loss

$

(2,129

 )

$

(4,968

 )

$

(12,466

 )

$

(23,725

 )
     
   
   
   
 

Net loss per share:

  

Basic and diluted

$

(0.04

 )

$

(0.09

 )

$

(0.22

 )

$

(0.43

 )
     
   
   
   
 

Shares used in per share calculation:

                      
  Basic and diluted   60,037     55,547     57,327     54,726  

 
   
   
   
 

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)

 
   Nine Months Ended
 
 
   September 30, 2003
  September 30, 2002
 
Cash flows from operating activities:              
  Net loss   $ (12,466 )  $ (23,725 )
  Adjustments to reconcile net loss to net cash used in operating activities:              
    Depreciation and amortization     2,088     2,915  
    Amortization of intangibles     2,671     2,732  
    Non-cash compensation expense     5,048     1,369  
    Provision for doubtful accounts     21     554  
    Warrants issued to customers     55     --  
    (Gain) loss on disposal of assets     88     (7 ) 
    Purchased in-process research and development     --     997  
    Changes in assets and liabilities:              
      Accounts receivable     96     6,790