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 April 30, 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: 1-15529
OPTIO SOFTWARE, INC.
(Exact name of registrant as specified in its charter)
| Georgia | 58-1435435 | |
| (State of other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| 3015 Windward Plaza, Fairways II, Alpharetta, GA | 30005 | |
| (Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code: (770) 576-3500
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 126-2 of the Securities Exchange Act of 1934). Yes ¨ No x
There were 19,529,387 shares of the Registrant’s common stock outstanding as of June 3, 2004.
FORM 10-Q
For the Quarterly Period Ended April 30, 2004
TABLE OF CONTENTS
| Page | ||||
| PART I – FINANCIAL INFORMATION | ||||
| Item 1. |
Financial Statements | 4 | ||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 13 | ||
| Item 3. |
Quantitative and Qualitative Disclosures About Market Risk | 19 | ||
| Item 4. |
Controls and Procedures | 19 | ||
| PART II – OTHER INFORMATION | ||||
| Item 1. |
Legal Proceedings | 20 | ||
| Item 2. |
Changes in Securities and Use of Proceeds | 20 | ||
| Item 3. |
Defaults Upon Senior Securities | 20 | ||
| Item 4. |
Submission of Matters to a Vote of Security Holders | 20 | ||
| Item 5. |
Other Information | 21 | ||
| Item 6. |
Exhibits and Reports on Form 8-K | 21 | ||
2
FORWARD-LOOKING STATEMENTS
In addition to historical information, this Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. Such forward-looking statements are made pursuant to the “safe-harbor” provisions of the Private Securities Litigation Reform Act of 1995 and are made based on management’s current expectations or beliefs as well as assumptions made by, and information currently available to, management. These forward-looking statements include, among other things, statements regarding Optio Software, Inc.’s (“Optio”) anticipated costs and expenses, Optio’s capital needs and financing plans, product and service development, Optio’s growth strategies, market demand for Optio’s products and services, relationships with Optio’s strategic marketing alliances, and competition. These forward-looking statements include, among others, those statements including the words “expects,” “anticipates,” “intends,” “believes” and similar language. Optio’s actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, risks associated with Optio’s reliance on strategic marketing and reseller relationships, collectibility of accounts receivable and notes receivable, fluctuations in operating results because of acquisitions or dispositions, changes in competition, changes in economic conditions in the U.S. and in other countries in which Optio currently does business (both general and relative to the technology industry), delays or inability in developing new or unique software products, market acceptance of new products, the failure of new products to operate as anticipated, expectation of achieving and sustaining operating profits and earnings, including timing of such cash flows and company performance, disputes regarding Optio’s intellectual property, risks relating to the delisting of Optio’s stock, possible adverse results of pending or future litigation, or risks associated with Optio’s international operations. These and additional factors are set forth in “Safe Harbor Compliance Statement for Forward-Looking Statements” included as Exhibit 99.1 to this Quarterly Report on Form 10-Q. You should carefully review these risks and additional risks described in other documents Optio files from time to time with the Securities and Exchange Commission, including the Annual Report on Form 10-K that Optio has filed. You are cautioned not to place undue reliance on the forward-looking statements in this document, which speak only as of the date of this Quarterly Report on Form 10-Q. Optio undertakes no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of this document.
3
PART I – FINANCIAL INFORMATION
Optio Software, Inc.
Consolidated Condensed Balance Sheets
| January 31, 2004 |
April 30, 2004 |
|||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 5,328,000 | $ | 5,991,000 | ||||
| Accounts receivable, net |
5,293,000 | 4,736,000 | ||||||
| Prepaid expenses and other current assets |
283,000 | 458,000 | ||||||
| Notes receivable from related party |
5,000 | 5,000 | ||||||
| Current portion of note receivable from M2 |
310,000 | 310,000 | ||||||
| Total current assets |
11,219,000 | 11,500,000 | ||||||
| Property and equipment, net |
541,000 | 543,000 | ||||||
| Other assets: |
||||||||
| Note receivable from M2, net, less current portion |
2,376,000 | 2,292,000 | ||||||
| Other |
110,000 | 103,000 | ||||||
| Total assets |
$ | 14,246,000 | $ | 14,438,000 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 812,000 | $ | 1,014,000 | ||||
| Accrued expenses |
2,627,000 | 1,943,000 | ||||||
| Current portion of capital lease obligations |
76,000 | 76,000 | ||||||
| Deferred revenue |
6,256,000 | 6,273,000 | ||||||
| Total current liabilities |
9,771,000 | 9,306,000 | ||||||
| Capital lease obligations, less current portion |
87,000 | 69,000 | ||||||
| Other long-term liabilities |
101,000 | 97,000 | ||||||
| Total liabilities |
9,959,000 | 9,472,000 | ||||||
| Shareholders’ equity: |
||||||||
| Common stock |
50,291,000 | 50,435,000 | ||||||
| Accumulated deficit |
(46,084,000 | ) | (45,515,000 | ) | ||||
| Accumulated other comprehensive income |
80,000 | 46,000 | ||||||
| Total shareholders’ equity |
4,287,000 | 4,966,000 | ||||||
| Total liabilities and shareholders’ equity |
$ | 14,246,000 | $ | 14,438,000 | ||||
See accompanying notes.
4
Optio Software, Inc.
Consolidated Condensed Statements of Operations
(Unaudited)
| Three Months Ended April 30, |
||||||||
| 2003 |
2004 |
|||||||
| Revenue: |
||||||||
| License fees |
$ | 2,070,000 | $ | 2,881,000 | ||||
| Services, maintenance, and other |
4,445,000 | 4,325,000 | ||||||
| 6,515,000 | 7,206,000 | |||||||
| Costs of revenue (exclusive of depreciation and amortization shown separately below): |
||||||||
| License fees |
118,000 | 149,000 | ||||||
| Services, maintenance, and other |
1,603,000 | 1,586,000 | ||||||
| 1,721,000 | 1,735,000 | |||||||
| 4,794,000 | 5,471,000 | |||||||
| Operating expenses: |
||||||||
| Sales and marketing |
2,381,000 | 2,695,000 | ||||||
| Research and development |
964,000 | 1,085,000 | ||||||
| General and administrative |
1,123,000 | 1,053,000 | ||||||
| Depreciation and amortization |
179,000 | 71,000 | ||||||
| 4,647,000 | 4,904,000 | |||||||
| Income from operations |
147,000 | 567,000 | ||||||
| Other income (expense): |
||||||||
| Interest income |
49,000 | 42,000 | ||||||
| Interest expense |
(3,000 | ) | (4,000 | ) | ||||
| Other |
6,000 | 21,000 | ||||||
| 52,000 | 59,000 | |||||||
| Income before income taxes |
199,000 | 626,000 | ||||||
| Income tax expense |
6,000 | 57,000 | ||||||
| Net income |
$ | 193,000 | $ | 569,000 | ||||
| Net income per share – basic |
$ | 0.01 | $ | 0.03 | ||||
| Net income per share – diluted |
$ | 0.01 | $ | 0.02 | ||||
| Weighted average shares outstanding – basic |
19,140,644 | 19,399,918 | ||||||
| Weighted average shares outstanding – diluted |
20,595,179 | 23,002,374 | ||||||
| Comprehensive income: |
||||||||
| Net income |
$ | 193,000 | $ | 569,000 | ||||
| Foreign currency translation adjustment |
12,000 | (34,000 | ) | |||||
| Comprehensive income |
$ | 205,000 | $ | 535,000 | ||||
See accompanying notes.
5
Optio Software, Inc.
Consolidated Condensed Statement of Shareholders’ Equity
(Unaudited)
| Common Stock |
Accumulated Deficit |
Accumulated Other Income |
Total Shareholders’ Equity |
||||||||||||||
| Shares |
Amount |
||||||||||||||||
| Balance at February 1, 2004 |
19,261,144 | $ | 50,291,000 | $ | (46,084,000 | ) | $ | 80,000 | $ | 4,287,000 | |||||||
| Comprehensive income, net of tax: |
|||||||||||||||||
| Net income |
— | — | 569,000 | — | 569,000 | ||||||||||||
| Foreign currency translation adjustment |
— | — | — | (34,000 | ) | (34,000 | ) | ||||||||||
| Comprehensive income |
535,000 | ||||||||||||||||
| Exercise of stock options |
203,231 | 144,000 | — | — | 144,000 | ||||||||||||
| Balance at April 30, 2004 |
19,464,375 | $ | 50,435,000 | $ | (45,515,000 | ) | $ | 46,000 | $ | 4,966,000 | |||||||
See accompanying notes.
6
Optio Software, Inc.
Consolidated Condensed Statements of Cash Flows
(Unaudited)
| Three Months Ended April 30, |
||||||||
| 2003 |
2004 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net income |
$ | 193,000 | $ | 569,000 | ||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
||||||||
| Depreciation and amortization |
179,000 | 71,000 | ||||||
| Provision for doubtful accounts |
(67,000 | ) | 16,000 | |||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
93,000 | 480,000 | ||||||
| Prepaid expenses and other current assets |
257,000 | (189,000 | ) | |||||
| Accounts payable |
(573,000 | ) | 212,000 | |||||
| Accrued expenses |
(460,000 | ) | (672,000 | ) | ||||
| Deferred revenue |
291,000 | 55,000 | ||||||
| Net cash provided by (used in) operating activities |
(87,000 | ) | 542,000 | |||||
| Cash flows from investing activities: |
||||||||
| Purchases of property and equipment |
(40,000 | ) | (74,000 | ) | ||||
| Repayment of note receivable from M2 Systems |
— | 83,000 | ||||||
| Repayments from related parties under notes receivable |
29,000 | — | ||||||
| Net cash provided by (used in) investing activities |
(11,000 | ) | 9,000 | |||||
| Cash flows from financing activities: |
||||||||
| Payments of notes payable and capital lease obligations |
(14,000 | ) | (19,000 | ) | ||||
| Proceeds from exercise of stock options |
— | 144,000 | ||||||
| Net cash provided by (used in) financing activities |
(14,000 | ) | 125,000 | |||||
| Impact of foreign currency rate fluctuations on cash |
2,000 | (13,000 | ) | |||||
| Net increase (decrease) in cash and cash equivalents |
(110,000 | ) | 663,000 | |||||
| Cash and cash equivalents at beginning of period |
3,902,000 | 5,328,000 | ||||||
| Cash and cash equivalents at end of period |
$ | 3,792,000 | $ | 5,991,000 | ||||
| Supplemental disclosures of cash flow information: |
||||||||
| Cash paid during the year for: |
||||||||
| Interest paid |
$ | 23,000 | ||||||