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 December 31, 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 No. 0-30260
eGAIN COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 77-0466366 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
624 E. Evelyn Avenue, Sunnyvale, CA
(Address of principal executive offices)
94086
(Zip Code)
(408) 212-3400
(Registrant’s telephone number, including area code)
N/A
(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 ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act): Yes ¨ No x.
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Class |
Outstanding at December 31, 2003 | |
| Common Stock $0.001 par value |
3,691,180 |
eGAIN COMMUNICATIONS CORPORATION
| Page | ||||
| PART I. |
1 | |||
| Item 1. |
1 | |||
| Condensed Consolidated Balance Sheets at December 31, 2003 and June 30, 2003 |
1 | |||
| 2 | ||||
| Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2003 and 2002 |
3 | |||
| 4 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
13 | ||
| Item 3. |
35 | |||
| Item 4. |
36 | |||
| PART II. |
37 | |||
| Item 1. |
37 | |||
| Item 2. |
37 | |||
| Item 3. |
37 | |||
| Item 4. |
37 | |||
| Item 5. |
37 | |||
| Item 6. |
38 | |||
| 39 | ||||
| ITEM 1. | FINANCIAL STATEMENTS |
eGAIN COMMUNICATIONS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
| December 31, 2003 |
June 30, 2003 |
|||||||
| (unaudited) | ||||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 3,730 | $ | 4,407 | ||||
| Restricted cash |
315 | 791 | ||||||
| Accounts receivable, net |
2,328 | 3,270 | ||||||
| Prepaid and other current assets |
2,356 | 2,897 | ||||||
| Total current assets |
8,729 | 11,365 | ||||||
| Property and equipment, net |
570 | 1,192 | ||||||
| Goodwill, net |
4,880 | 4,880 | ||||||
| Intangible assets, net |
591 | 1,204 | ||||||
| Other assets |
202 | 397 | ||||||
| $ | 14,972 | $ | 19,038 | |||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 1,209 | $ | 1,486 | ||||
| Accrued compensation |
841 | 864 | ||||||
| Accrued liabilities |
1,266 | 1,918 | ||||||
| Deferred revenue |
3,578 | 4,333 | ||||||
| Current portion of accrued restructuring |
713 | 1,194 | ||||||
| Current portion of bank borrowings |
526 | 1,649 | ||||||
| Current portion of notes payable |
30 | 78 | ||||||
| Current portion of capital lease obligations |
16 | 15 | ||||||
| Total current liabilities |
8,179 | 11,537 | ||||||
| Related party notes payable |
3,953 | 1,964 | ||||||
| Capital lease obligations, net of current portion |
1 | 10 | ||||||
| Accrued restructuring, net of current portion |
1,298 | 1,203 | ||||||
| Other long term liabilities |
246 | 243 | ||||||
| Total liabilities |
13,677 | 14,957 | ||||||
| Commitments |
||||||||
| Stockholders’ equity: |
||||||||
| Series A cumulative convertible preferred stock; Aggregate liquidation preference of $110,919 at December 31, 2003 |
105,021 | 101,371 | ||||||
| Common stock |
4 | 37 | ||||||
| Additional paid-in capital |
210,225 | 213,620 | ||||||
| Notes receivable from stockholders |
(105 | ) | (102 | ) | ||||
| Deferred stock compensation |
— | (38 | ) | |||||
| Accumulated other comprehensive income (loss) |
(266 | ) | (185 | ) | ||||
| Accumulated deficit |
(313,584 | ) | (310,622 | ) | ||||
| Total shareholders’ equity |
1,295 | 4,081 | ||||||
| $ | 14,972 | $ | 19,038 | |||||
See accompanying notes
-1-
eGAIN COMMUNICATIONS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
| Three Months Ended December 31, |
Six Months Ended December 31, |
|||||||||||||||
| 2003 |
2002 |
2003 |
2002 |
|||||||||||||
| Revenue: |
||||||||||||||||
| License |
1,254 | 1,819 | 2,044 | 3,636 | ||||||||||||
| Support and Services |
3,836 | 4,004 | 7,619 | 7,858 | ||||||||||||
| Total revenue |
5,090 | 5,823 | 9,663 | 11,494 | ||||||||||||
| Cost of license |
432 | 432 | 865 | 865 | ||||||||||||
| Cost of support and services |
1,741 | 2,181 | 3,268 | 5,164 | ||||||||||||
| Cost of revenue – acquisition related |
— | 300 | — | 600 | ||||||||||||
| Gross profit |
2,917 | 2,910 | 5,530 | 4,865 | ||||||||||||
| Operating costs and expenses: |
||||||||||||||||
| Research and development |
660 | 1,381 | 1,725 | 3,314 | ||||||||||||
| Sales and marketing |
2,011 | 2,224 | 4,136 | 5,698 | ||||||||||||
| General and administrative |
939 | 1,213 | 1,848 | 2,663 | ||||||||||||
| Amortization of other intangible assets |
306 | 337 | 612 | 674 | ||||||||||||
| Amortization of deferred compensation |
— | 39 | — | 105 | ||||||||||||
| Restructuring |
46 | (1,285 | ) | 167 | (238 | ) | ||||||||||
| Total operating costs and expenses |
3,962 | 3,909 | 8,488 | 12,216 | ||||||||||||
| Loss from operations |
(1,045 | ) | (999 | ) | (2,958 | ) | (7,351 | ) | ||||||||
| Non-operating income (expense) |
155 | 262 | (4 | ) | 196 | |||||||||||
| Net loss |
(890 | ) | (737 | ) | (2,962 | ) | (7,155 | ) | ||||||||
| Dividends on convertible preferred stock |
(1,825 | ) | (1,708 | ) | (3,650 | ) | (3,416 | ) | ||||||||
| Net loss applicable to common stockholders |
$ | (2,715 | ) | $ | (2,445 | ) | $ | (6,612 | ) | $ | (10,571 | ) | ||||
| Per Share information: |
||||||||||||||||
| Basic and diluted net loss per common share |
$ | (0.74 | ) | $ | (0.67 | ) | $ | (1.80 | ) | $ | (2.89 | ) | ||||
| Weighted average shares used in computing basic and diluted net loss per common share |
3,688 | 3,663 | 3,682 | 3,662 | ||||||||||||
See accompanying notes
-2-
eGAIN COMMUNICATIONS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| Six Months Ended December 31, |
||||||||
| 2003 |
2002 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | (2,962 | ) | $ | (7,155 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Depreciation |
724 | 2,402 | ||||||
| (Gain) / loss on disposal of fixed assets |
(5 | ) | 31 | |||||
| Amortization of other intangible assets |
613 | 1,274 | ||||||
| Amortization of deferred compensation |
— | 105 | ||||||
| Accrued interest and amortization of discount on related party notes |
184 | — | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Restricted cash |
476 | (1,371 | ) | |||||
| Accounts receivable |
942 | 939 | ||||||
| Prepaid and other current assets |
541 | 936 | ||||||
| Other assets |
195 | 921 | ||||||
| Accounts payable |
(277 | ) | (430 | ) | ||||
| Accrued compensation |
(23 | ) | (1,407 | ) | ||||
| Accrued liabilities |
(652 | ) | (332 | ) | ||||
| Accrued restructuring |
(386 | ) | (2,473 | ) | ||||
| Deferred revenue |
(755 | ) | 364 | |||||
| Other long term liabilities |
3 | 46 | ||||||
| Other |
— | (3 | ) | |||||
| Net cash (used in) operating activities |
(1,382 | ) | (6,153 | ) | ||||
| Cash flows from investing activities: |
||||||||
| Proceeds from sale of property and equipment |
— | 221 | ||||||
| Purchases of property and equipment |
(97 | ) | (37 | ) | ||||
| Net cash provided by (used in) investing activities |
||||||||