FORM 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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

FOR THE QUARTERLY PERIOD ENDED: June 30, 2003

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: 0-30309

PINNACOR INC.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE		13-4042678
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)		(I.R.S. EMPLOYER IDENTIFICATION NO.)

601 WEST 26TH ST., NEW YORK, NY 10001
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)

REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 691-7900

(FORMER NAME, FORMER ADDRESS, AND FORMER 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 ý No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in rule 12b-2 of the Exchange Act)

Yes o No ý

As of August 4, 2003 there were 40,826,156 shares of the Registrant’s common stock outstanding.

PINNACOR INC.

FORM 10-Q

QUARTER ENDED JUNE 30, 2003

TABLE OF CONTENTS

PART I.	FINANCIAL INFORMATION	3

Item 1.	Condensed Consolidated Financial Statements	3

	Condensed Consolidated Balance Sheets – June 30, 2003 (unaudited) and December 31, 2002	3

	Condensed Consolidated Statements of Operations – Three and six months ended June 30, 2003 (unaudited) and 2002 (unaudited)	4

	Condensed Consolidated Statements of Cash Flows – Six months ended June 30, 2003 (unaudited) and 2002 (unaudited)	5

	Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39

Item 4.	Controls and Procedures	39

PART II.	OTHER INFORMATION	39

Item 1.	Legal Proceedings	39

Item 2.	Changes in Securities and Use of Proceeds	39

Item 3.	Defaults upon Senior Securities	40

Item 4.	Submission of Matters to a Vote of Security Holders	40

Item 5.	Other Information	41

Item 6.	Exhibits and Reports on Form 8-K	41

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

PINNACOR INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30, 2003			December 31, 2002
	(Unaudited)
ASSETS

CURRENT ASSETS:

Cash and cash equivalents	$	22,151,266		$	15,098,184

Marketable securities	25,784,015			35,611,212

Accounts receivable, net of allowance for doubtful accounts of $570,000 and $620,000 as of June 30, 2003 and December 31, 2002, respectively	4,135,454			5,253,667

Prepaid expenses	1,492,914			1,142,691

Total current assets	53,563,649			57,105,754

PROPERTY AND EQUIPMENT-Net of accumulated depreciation and amortization	4,775,411			5,791,930

GOODWILL	34,887,862			34,874,692

OTHER INTANGIBLE ASSETS-Net of accumulated amortization	2,064,583			2,302,083

OTHER ASSETS	656,525			793,866

TOTAL ASSETS	$	95,948,030		$	100,868,325

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:

Accounts payable and accrued expenses	$	3,687,408		$	4,610,897

Accrued restructuring and other expenses	616,955			765,292

Deferred revenue	5,655,384			8,333,593

Current portion of capital lease obligations	1,099,576			1,576,174

Total current liabilities	11,059,323			15,285,956

NONCURRENT LIABILITIES:

Capital lease obligations, less current portion	654,302			1,181,496

Total liabilities	11,713,625			16,467,452

STOCKHOLDERS’ EQUITY:

Common stock, $0.01 par value, 100,000,000 shares authorized and 45,215,265 and 44,848,386 issued and 40,790,486 and 40,539,207 outstanding at June 30, 2003 and December 31, 2002	452,153			448,484

Additional paid-in capital	225,477,121			225,121,104

Warrants	1,708,304			1,708,304

Deferred compensation	(350,746		)	(118,233		)

Treasury stock, 4,424,779 and 4,309,179 shares at June 30, 2003 and December 31, 2002, respectively, at cost	(4,301,299		)	(4,146,680		)

Accumulated deficit	(138,981,023		)	(138,962,620		)

Accumulated other comprehensive income	229,895			350,514

Total stockholders’ equity	84,234,405			84,400,873

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	95,948,030		$	100,868,325

See accompanying notes to condensed consolidated financial statements.

PINNACOR INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)