UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| 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
Commission File Number: 000-25291
TUT SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 94-2958543 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| 5200 Franklin Drive, Suite 100, Pleasanton, California |
94588 | |
| (Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code: (925) 490-3900
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 ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes x No ¨
As of July 28, 2003, 19,991,689 shares of the Registrant’s common stock, par value $0.001 per share, were issued and outstanding.
TUT SYSTEMS, INC.
FORM 10-Q
| PART I. | FINANCIAL INFORMATION |
|||
| Item 1. | Condensed Consolidated Financial Statements (unaudited): |
|||
| Condensed Consolidated Balance Sheets as of June 30, 2003 and December 31, 2002 |
3 | |||
| 4 | ||||
| 5 | ||||
| Notes to Unaudited Condensed Consolidated Financial Statements |
6 | |||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
16 | ||
| Item 3. | 38 | |||
| Item 4. | 38 | |||
| PART II. | OTHER INFORMATION |
|||
| Item 1. | 39 | |||
| Item 2. | 40 | |||
| Item 3. | 40 | |||
| Item 4. | 40 | |||
| Item 5. | 40 | |||
| Item 6. | 40 | |||
| Signatures | 42 | |||
2
PART I. FINANCIAL INFORMATION
| ITEM 1. | CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
TUT SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
| June 30, 2003 |
December 31, 2002 |
|||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 15,682 | $ | 25,571 | ||||
| Accounts receivable, net of allowance for doubtful accounts of $7 and $10 in 2003 and 2002, respectively |
4,892 | 1,972 | ||||||
| Inventories, net |
2,596 | 3,888 | ||||||
| Prepaid expenses and other |
1,454 | 1,082 | ||||||
| Total current assets |
24,624 | 32,513 | ||||||
| Property and equipment, net |
1,658 | 1,630 | ||||||
| Intangibles and other assets |
4,542 | 5,586 | ||||||
| Total assets |
$ | 30,824 | $ | 39,729 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 1,086 | $ | 1,272 | ||||
| Accrued liabilities |
1,888 | 5,924 | ||||||
| Deferred revenue |
399 | 921 | ||||||
| Total current liabilities |
3,373 | 8,117 | ||||||
| Note Payable |
3,390 | 3,262 | ||||||
| Deferred revenue, net of current portion |
— | 35 | ||||||
| Other liabilities |
75 | 84 | ||||||
| Total liabilities |
6,838 | 11,498 | ||||||
| Commitments and contingencies (Note 6) |
||||||||
| Stockholders’ equity: |
||||||||
| Common stock, $0.001 par value, 100,000 shares authorized, 19,992 and 19,796 shares issued and outstanding in 2003 and 2002, respectively |
20 | 20 | ||||||
| Additional paid-in capital |
304,899 | 304,888 | ||||||
| Accumulated other comprehensive loss |
(141 | ) | (141 | ) | ||||
| Accumulated deficit |
(280,792 | ) | (276,536 | ) | ||||
| Total stockholders’ equity |
23,986 | 28,231 | ||||||
| Total liabilities and stockholders’ equity |
$ | 30,824 | $ | 39,729 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
TUT SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2003 |
2002 |
2003 |
2002 |
|||||||||||||
| Revenues: |
||||||||||||||||
| Product |
$ | 7,700 | $ | 2,314 | $ | 14,101 | $ | 4,476 | ||||||||
| License and royalty |
165 | 200 | 365 | 396 | ||||||||||||
| Total revenues |
7,865 | 2,514 | 14,466 | 4,872 | ||||||||||||
| Cost of goods sold: |
||||||||||||||||
| Product |
4,015 | 6,568 | 7,274 | 8,091 | ||||||||||||
| Total cost of goods sold |
4,015 | 6,568 | 7,274 | 8,091 | ||||||||||||
| Gross margin (loss) |
3,850 | (4,054 | ) | 7,192 | (3,219 | ) | ||||||||||
| Operating expenses: |
||||||||||||||||
| Sales and marketing |
1,927 | 2,466 | 3,854 | 4,782 | ||||||||||||
| Research and development |
2,248 | 3,499 | 4,334 | 6,786 | ||||||||||||
| General and administrative |
1,105 | 1,245 | 2,307 | 3,203 | ||||||||||||
| Impairment of intangible assets |
128 | — | 128 | — | ||||||||||||
| Amortization of intangible assets |
459 | 299 | 918 | 599 | ||||||||||||
| Total operating expenses |
5,867 | 7,509 | 11,541 | 15,370 | ||||||||||||
| Loss from operations |
(2,017 | ) | (11,563 | ) | (4,349 | ) | (18,589 | ) | ||||||||
| Impairment of certain equity investments |
— | (592 | ) | — | (592 | ) | ||||||||||
| Interest and other (expense) income, net |
(8 | ) | 183 | 93 | 428 | |||||||||||
| Net loss |
$ | (2,025 | ) | $ | (11,972 | ) | $ | (4,256 | ) | $ | (18,753 | ) | ||||
| Net loss per share, basic and diluted (Note 3) |
$ | (0.10 | ) | $ | (0.73 | ) | (0.21 | ) | $ | (1.14 | ) | |||||
| Shares used in computing net loss per share, basic and diluted (Note 3) |
19,894 | 16,455 | 19,848 | 16,431 | ||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
TUT SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| Six Months Ended June 30, |
||||||||
| 2003 |
2002 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | (4,256 | ) | $ | (18,753 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Depreciation and other |
488 | 1,750 | ||||||
| Provision (recovery) for doubtful accounts |
3 | (735 | ) | |||||
| Provision for excess and obsolete inventory and abandoned products |
15 | 5,124 | ||||||
| Write off of certain equity investments |
— | 592 | ||||||
| Impairment of intangibles |
128 | — | ||||||
| Amortization of intangibles |
918 | 599 | ||||||
| Change in operating assets and liabilities, net of businesses acquired: |
||||||||
| Accounts receivable |
(2,923 | ) | 422 | |||||
| Inventories |
1,277 | 1,615 | ||||||
| Prepaid expenses and other assets |
(372 | ) | (610 | ) | ||||
| Accounts payable and accrued liabilities |
(4,231 | ) | (1,594 | ) | ||||
| Deferred revenue |
(559 | ) | (513 | ) | ||||
| Net cash used in operating activities |
(9,512 | ) | (12,103 | ) | ||||
| Cash flows from investing activities: |
||||||||
| Purchase of property and equipment |
(516 | ) | (296 | ) | ||||
| Proceeds from maturities of short-term investments |
— | 3,105 | ||||||
| Net cash (used in) provided by investing activities |
(516 | ) | 2,809 | |||||
| Cash flows from financing activities: |
||||||||
| Proceeds from issuances of common stock, net |
11 | 67 | ||||||
| Deferred interest on note payable |
128 | — | ||||||
| Repayment of note receivable |
— | 33 | ||||||
| Net cash provided by financing activities |
139 | 100 | ||||||
| Net decrease in cash and cash equivalents |
(9,889 | ) | (9,194 | ) | ||||
| Cash and cash equivalents, beginning of period |
||||||||