SAFENET INC - 10-Q Quarterly Report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended June 30, 2002

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 0-20634

SAFENET, INC.

(Exact name of registrant as specified in its charter)

Delaware			52-1287752
(State or other jurisdiction of incorporation or organization)			(IRS Employer Identification No.)

8029 Corporate Drive, Baltimore, Md. 21236
(Address of principal executive offices)

410-931-7500
(Registrant’s telephone number)

Indicate by a check mark whether the issuer (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 twelve 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 ý No o

APPLICABLE ONLY TO CORPORATE ISSUERS

The number of shares outstanding of the issuer’s Common Stock as of August 14, 2002 was 7,737,309.

TABLE OF CONTENTS

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Consolidated Balance Sheets as of June 30, 2002 and December 31, 2001

	Consolidated Statements of Operations for the three months ended June 30, 2002 and 2001, and the six months ended June 30, 2002 and 2001

	Consolidated Statement of Stockholders’ Equity for the six months ended June 30, 2002

	Consolidated Statements of Cash Flows for the six months ended June 30, 2002 and 2001

	Consolidated Statements of Comprehensive Income (Loss) for the three months ended June 30, 2002 and 2001, and the six months ended June 30, 2002 and 2001

	Notes to 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

PART II.	OTHER INFORMATION

Item 4.	Submission of Matters to a Vote of Security Holders

Item 6.	Exhibits and Reports on Form 8-K

SIGNATURES

SAFENET, INC.

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands except share and per share data)

	June 30, 2002			December 31, 2001
	(unaudited)			(restated)
Assets
Current assets:
Cash and cash equivalents	$	5,522		$	14,819
Short-term investments	20,414			15,865
Accounts receivable, net of allowance for doubtful accounts of $171 and $150	3,407			3,529
Inventories, net of reserve of $872 and $481	1,471			1,260
Other current assets	1,087			546
Current assets of discontinued operations	39			784
Total current assets	31,940			36,803
Equipment and leasehold improvements, net of accumulated depreciation and amortization of $4,067 and $3,124	1,492			969
Computer software development costs, net of accumulated amortization of $3,452 and $3,113	487			727
Goodwill	11,158			—
Intangible assets, net of accumulated amortization of $702 and $0	1,422			—
Other assets	394			841
Non-current assets of discontinued operations	—			537
	$	46,893		$	39,877

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	1,395		$	988
Accrued salaries and commissions	1,369			713
Other accrued expenses	957			577
Advance payments and deferred revenue	1,237			1,918
Current liabilities of discontinued operations	674			222
Total liabilities	5,632			4,418
Commitments and contingencies	—			—

Stockholders' equity:
Preferred stock, $.01 par value per share. Authorized 500,000 shares, none issued and outstanding	—			—
Common stock, $.01 par value per share. Authorized 50,000,000 shares, issued 7,692,434 shares in 2002 and 7,107,533 shares in 2001	77			71
Additional paid-in capital	63,115			52,400
Accumulated deficit	(23,164		)	(15,486		)
Accumulated other comprehensive income (loss)	1,233			(1,526		)
Net stockholders' equity	41,261			35,459
	$	46,893		$	39,877

See accompanying notes to consolidated financial statements.

SAFENET, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited - in thousands, except per share amounts)

	Three Months Ended June 30,				Six Months Ended June 30,
	2002		2001		2002		2001
			(restated)				(restated)
Revenue
Licenses and royalties	$	1,695	$	788	$	3,345	$	2,436
Products	5,061		1,623		8,868		4,861
Service and maintenance	672		723		1,369		1,478
Total revenue	7,428		3,134		13,582		8,775

Cost of revenue
Licenses and royalties	279		234		426		406
Products	1,715		871		3,414		1,975
Service and maintenance	67		339		174		552
Total cost of revenue	2,061		1,444		4,014		2,933

Gross profit	5,367		1,690		9,568		5,842