PHASE FORWARD INC - 10-Q Quarterly Report

Item 1. Condensed Consolidated Financial Statements (unaudited)

Phase Forward Incorporated and Subsidiaries
Condensed Consolidated Balance Sheets
(unaudited)
(in thousands, except per share amounts)

	As of December 31, 2004				As of March 31, 2005
Assets
Current assets:
Cash and cash equivalents		$	53,485		$	61,009
Short-term investments		4,735			4,327
Accounts receivable, net of allowance of $391 and $289 in 2004 and 2005, respectively		19,682			14,875
Deferred set up costs, current portion		783			950
Prepaid commissions and royalties, current portion		3,035			3,289
Prepaid expenses and other current assets		2,335			2,518
Total current assets		84,055			86,968
Property and equipment, net		5,717			5,508
Deferred set up costs, net of current portion		665			715
Prepaid commissions and royalties, net of current portion		2,756			2,600
Goodwill		21,817			21,354
Other assets		240			192
Total assets		$	115,250		$	117,337
Liabilities and Stockholders’ Equity
Current Liabilities:
Current portion of notes payable		$	2,558		$	—
Accounts payable		1,619			1,188
Accrued expenses		11,658			9,362
Restructuring accrual		344			—
Deferred revenue, current portion		35,350			41,590
Deferred rent, current portion		142			291
Total current liabilities		51,671			52,431
Notes payable, net of current portion		1,849			—
Deferred revenue, net of current portion		1,002			1,350
Deferred rent, net of current portion		1,481			1,527
Total liabilities		56,003			55,308
Contingencies (Note 13)
Stockholders’ equity:
Preferred stock, $0.1 par value:
Authorized—5,000 shares
Issued—0 shares		—			—
Common stock, $.01 par value:
Authorized—100,000 shares
Issued—32,399 and 32,764 shares in 2004 and 2005, respectively		324			328
Additional paid-in capital		165,462			166,512
Subscription receivable		(127		)	—
Deferred stock-based compensation		(1,755		)	(1,456		)
Treasury stock, 37 shares at cost		(111		)	(111		)
Accumulated other comprehensive loss		(160		)	(326		)
Accumulated deficit		(104,386		)	(102,918		)
Total stockholders’ equity		59,247			62,029
Total liabilities and stockholders’ equity		$	115,250

Delaware	04-3386549
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
880 Winter Street Waltham, Massachusetts	02451
(Address of principal executive offices)	(Zip Code)

		Page Number
Part I—Financial Information
Item 1.	Condensed Consolidated Financial Statements (unaudited)		3
	Condensed Consolidated Balance Sheets as of December 31, 2004 and March 31, 2005		3
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2004 and 2005		4
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2004 and 2005		5
	Notes to Condensed Consolidated Financial Statements		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		17
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		43
Item 4.	Controls and Procedures		43
Part II—Other Information
Item 1.	Legal Proceedings		45
Item 5.	Other Information		45
Item 6.	Exhibits		46
Signatures			47
Exhibit Index			48