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 March 31, 2004 |
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 number: 000-26393
Jupitermedia Corporation
(Exact name of Registrant as specified in its charter)
| Delaware | 06-1542480 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| 23 Old Kings Highway South Darien, Connecticut |
06820 | |
| (Address of principal executive offices) | (Zip Code) | |
(203) 662-2800
(Registrant’s telephone number, including area code)
Not Applicable
(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
The number of outstanding shares the Registrant’s common stock, par value $.01 per share, as of May 6, 2004 was 26,250,846.
Jupitermedia Corporation
| Page | ||||
| PART I. | Financial Information |
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| Item 1. | Financial Statements |
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| Unaudited Consolidated Condensed Balance Sheets – December 31, 2003 and March 31, 2004 |
3 | |||
| 4 | ||||
| 5 | ||||
| 6 | ||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
13 | ||
| Item 3. | 24 | |||
| Item 4. | 24 | |||
| PART II. | Other Information |
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| Item 1. | 25 | |||
| Item 2. | 26 | |||
| Item 3. | 26 | |||
| Item 4. | 26 | |||
| Item 5. | 26 | |||
| Item 6. | 26 | |||
| Signatures | 27 | |||
2
Jupitermedia Corporation
Consolidated Condensed Balance Sheets
December 31, 2003 and March 31, 2004
(unaudited)
(in thousands, except share and per share amounts)
| December 31, 2003 |
March 31, 2004 |
|||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 9,567 | $ | 12,703 | ||||
| Accounts receivable, net of allowances of $948 and $1,165, respectively |
10,281 | 10,723 | ||||||
| Unbilled accounts receivable |
1,012 | 1,022 | ||||||
| Prepaid expenses and other |
2,124 | 1,951 | ||||||
| Total current assets |
22,984 | 26,399 | ||||||
| Property and equipment, net of accumulated depreciation of $8,674 and $8,696, respectively |
1,488 | 1,233 | ||||||
| Intangible assets, net |
8,130 | 7,944 | ||||||
| Goodwill |
21,760 | 22,076 | ||||||
| Investments and other assets |
1,676 | 1,516 | ||||||
| Total assets |
$ | 56,038 | $ | 59,168 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 1,494 | $ | 1,487 | ||||
| Accrued payroll and related expenses |
2,482 | 1,992 | ||||||
| Accrued expenses and other |
4,151 | 2,833 | ||||||
| Deferred revenues |
9,211 | 11,449 | ||||||
| Total current liabilities |
17,338 | 17,761 | ||||||
| Long-term liabilities |
341 | 330 | ||||||
| Total liabilities |
17,679 | 18,091 | ||||||
| Stockholders’ equity: |
||||||||
| Preferred stock, $.01 par value, 4,000,000 shares authorized, no shares issued |
— | — | ||||||
| Common stock, $.01 par value, 75,000,000 shares authorized, 25,984,130 and 26,192,741 shares issued at December 31, 2003 and March 31, 2004, respectively |
260 | 262 | ||||||
| Additional paid-in capital |
177,629 | 178,707 | ||||||
| Accumulated deficit |
(139,427 | ) | (137,790 | ) | ||||
| Treasury stock, 65,000 shares at cost |
(106 | ) | (106 | ) | ||||
| Accumulated other comprehensive income |
3 | 4 | ||||||
| Total stockholders’ equity |
38,359 | 41,077 | ||||||
| Total liabilities and stockholders’ equity |
$ | 56,038 | $ | 59,168 | ||||
See notes to consolidated financial statements.
3
Jupitermedia Corporation
Unaudited Consolidated Condensed Statements of Operations
For the Three Months Ended March 31, 2003 and 2004
(in thousands, except per share amounts)
| Three Months Ended March 31, |
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| 2003 |
2004 |
|||||||
| Revenues |
$ | 8,245 | $ | 14,353 | ||||
| Cost of revenues |
4,672 | 6,020 | ||||||
| Gross profit |
3,573 | 8,333 | ||||||
| Operating expenses: |
||||||||
| Advertising, promotion and selling |
2,722 | 3,575 | ||||||
| General and administrative |
1,593 | 2,525 | ||||||
| Depreciation |
363 | 223 | ||||||
| Amortization |
240 | 395 | ||||||
| Total operating expenses |
4,918 | 6,718 | ||||||
| Operating income (loss) |
(1,345 | ) | 1,615 | |||||
| Income (loss) on investments and other, net |
(55 | ) | 14 | |||||
| Interest income |
89 | 18 | ||||||
| Interest expense |
— | (6 | ) | |||||
| Income (loss) before, minority interests and equity income (loss) from venture fund investments and other, net |
(1,311 | ) | 1,641 | |||||
| Minority interests |
4 | (11 | ) | |||||
| Equity income (loss) from venture fund investments and other, net |
(23 | ) | 7 | |||||
| Net income (loss) |
$ | (1,330 | ) | $ | 1,637 | |||
| Basic net income (loss) per share |
$ | (0.05 | ) | $ | 0.06 | |||
| Basic weighted average number of common shares outstanding |
25,283 | 26,026 | ||||||
| Diluted net income (loss) per share |
$ | (0.05 | ) | $ | 0.06 | |||
| Diluted weighted average number of common shares outstanding |
25,283 | 29,544 | ||||||
See notes to consolidated financial statements.
4
Jupitermedia Corporation
Unaudited Consolidated Condensed Statements of Cash Flows
For the Three Months Ended March 31, 2003 and 2004
(in thousands)
| Three Months Ended March 31, |
||||||||
| 2003 |
2004 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net income (loss) |
$ | (1,330 | ) | $ | 1,637 | |||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities- |
||||||||
| Depreciation and amortization |
603 | 618 | ||||||
| Barter transactions, net |
(228 | ) | — | |||||
| Provision for losses on accounts receivable |
6 | 217 | ||||||
| Minority interests |
(4 | ) | 11 | |||||
| Equity income (loss) from venture fund investments, net |
23 | (7 | ) | |||||
| (Income) loss on investments and other, net |
55 | (14 | ) | |||||
| Changes in current assets and liabilities (net of business acquired): |
||||||||
| Accounts receivable |
1,478 | (645 | ) | |||||
| Unbilled accounts receivable |
351 | (10 | ) | |||||
| Prepaid expenses and other |
(318 | ) | 196 | |||||
| Accounts payable and accrued expenses |
(1,400 | ) | (965 | ) | ||||
| Deferred revenues |
943 | 2,203 | ||||||
| Net cash provided by operating activities |
179 | 3,241 | ||||||
| Cash flows from investing activities: |
||||||||
| Additions to property and equipment |
(91 | ) | (61 | ) | ||||
| Acquisitions of businesses and other |
(393 | ) | (1,273 | ) | ||||
| Distribution from internet.com venture funds |
— | 144 | ||||||
| Proceeds from sales of assets and other |
50 | 5 | ||||||
| Net cash used in investing activities |
(434 | ) | (1,185 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Proceeds from exercise of stock options |
23 | 1,080 | ||||||
| Net cash provided by financing activities |
23 | 1,080 | ||||||
| Net increase (decrease) in cash and cash equivalents |
(232 | ) | 3,136 | |||||
| Cash and cash equivalents, beginning of period |
25,451 | 9,567 | ||||||
| Cash and cash equivalents, end of period |
$ | 25,219 | $ | 12,703 | ||||
| Supplemental disclosures of cash flow: |
||||||||
| Cash paid for income taxes |
$ | 3 | $ | — | ||||
| Cash paid for interest |
$ | — | $ | 6 | ||||
See notes to consolidated financial statements.
5
Jupitermedia Corporation
Notes to Consolidated Condensed Financial Statements
March 31, 2004
(unaudited)
| 1. | THE COMPANY |
Jupitermedia is a global provider of original online information, images, research and events for information technology (“IT”), business and creative professionals. JupiterWeb, the online business of Jupitermedia, operates four distinct online networks: internet.com and EarthWeb.com for IT and business professionals; DevX.com for software and Web developers and ClickZ.com for interactive marketers. JupiterImages, formerly ArtToday, Inc. (“ArtToday”), is a Web-based image resource serving creative professionals with products like Photos.com, ClipArt.com and FlashComponents.com. Jupitermedia also includes JupiterResearch, an international market research and advisory business specializing in business and technology market research. In addition, JupiterEvents produces offline conferences and trade shows focused on IT and business-specific topics.
| 2. | BASIS OF PRESENTATION |
The accompanying unaudited consolidated financial statements have been prepared from the books and records of Jupitermedia in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. The consolidated statement of operations for the three months ended March 31, 2004 is not necessarily indicative of the results to be expected for the full year. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2003 included in Jupitermedia’s Annual Report on Form 10-K for the year ended December 31, 2003. In the opinion of management, all adjustments considered necessary for a fair presentation of the results for the interim periods presented have been reflected in such consolidated financial statements.
The consolidated financial statements include the accounts of Jupitermedia and its majority-owned and wholly-owned subsidiaries. All intercompany transactions have been eliminated.
6
3. STOCK BASED COMPENSATION
Jupitermedia grants stock options with an exercise price equal to the fair value of the shares at the date of grant. Jupitermedia accounts for stock option grants in accordance with Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees”, and accordingly, recognizes no compensation expense for such grants. If Jupitermedia determined compensation cost for its stock options based on the fair value at the date of grant under the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation”, its pro forma net income (loss) and net income (loss) per share would be as follows (in thousands, except per share amounts):
| Three Months Ended March 31, |
||||||||
| 2003 |
2004 |
|||||||
| Net income (loss) |
$ | (1,330 | ) | $ | 1,637 | |||
| Less: Total stock-based employee compensation expense determined under fair value based method for all awards |
(1,658 | ) | (813 | ) | ||||
| Pro forma net income (loss) |
$ | (2,988 | ) | $ | 824 | |||
| Basic net income (loss) per share |
||||||||
| As reported |
$ | (0.05 | ) | $ | 0.06 | |||
| Pro forma |
$ | (0.12 | ) | $ | 0.03 | |||
| Diluted net income (loss) per share |
||||||||
| As reported |
$ | (0.05 | ) | $ | 0.06 | |||
| Pro forma |
$ | (0.12 | ) | $ | 0.03 | |||
Those pro forma amounts may not be representative of future disclosures since the estimated fair value of stock options is amortized to expense over the vesting period and additional options may be granted in future years.
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used for grants during the three months ended March 31, 2003 and 2004: risk-free interest rates of 1.96% and 2.17%, respectively; expected lives of three years; expected dividend rate of zero; and expected volatility of 125% and 123%, respectively.