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, 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 000-25269
VERTICALNET, INC.
(Exact name of registrant as specified in its charter)
| Pennsylvania | 23-2815834 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| 400 CHESTER FIELD PARKWAY MALVERN, PENNSYLVANIA |
19355 | |
| (Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code: (610) 240-0600
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 registrant’s classes of common stock, as of the latest practicable date:
The number of shares outstanding of the registrant’s common stock as of August 6, 2004 was 33,919,984 (1).
(1) The balance includes 5,100,000 shares that have not yet been issued by the Company, which it has agreed to issue pursuant to a merger that has been completed.
VERTICALNET, INC.
FORM 10-Q
For the Quarterly Period Ended June 30, 2004
| Page | ||||||
| Part I. |
FINANCIAL INFORMATION | |||||
| Item 1. | 1 | |||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
16 | ||||
| Item 3. | 31 | |||||
| Item 4. | 31 | |||||
| Part II. |
OTHER INFORMATION | |||||
| Item 1. | 32 | |||||
| Item 2. | Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities |
33 | ||||
| Item 3. | 33 | |||||
| Item 4. | 33 | |||||
| Item 5. | 33 | |||||
| Item 6. | 34 | |||||
| 35 | ||||||
PART I. FINANCIA L INFORMATION
ITEM 1. CONS OLIDATED FINANCIAL STATEMENTS
VERTICALNET, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
| June 30, 2004 |
December 31, 2003 |
|||||||
| (Unaudited) | ||||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 6,966 | $ | 4,408 | ||||
| Accounts receivable, net |
6,181 | 2,457 | ||||||
| Prepaid expenses and other current assets |
873 | 520 | ||||||
| Total current assets |
14,020 | 7,385 | ||||||
| Property and equipment, net |
1,037 | 116 | ||||||
| Other investments |
606 | 606 | ||||||
| Goodwill |
4,924 | — | ||||||
| Other intangible assets, net |
3,442 | 900 | ||||||
| Other assets |
472 | 116 | ||||||
| Total assets |
$ | 24,501 | $ | 9,123 | ||||
| Liabilities and Shareholders’ Equity |
||||||||
| Current liabilities: |
||||||||
| Current portion of long-term debt and convertible notes |
$ | 1,259 | $ | 757 | ||||
| Accounts payable and accrued expenses |
4,045 | 2,806 | ||||||
| Deferred revenues |
1,146 | 992 | ||||||
| Other current liabilities |
— | 147 | ||||||
| Total current liabilities |
6,450 | 4,702 | ||||||
| Long-term debt |
61 | — | ||||||
| Total liabilities |
6,511 | 4,702 | ||||||
| Commitments and contingencies (see Notes 2, 6, and 7) |
||||||||
| Shareholders’ equity: |
||||||||
| Preferred stock $.01 par value, 10,000,000 shares authorized, none issued at June 30, 2004 and December 31, 2003 |
— | — | ||||||
| Common stock $.01 par value, 100,000,000 shares authorized, 25,867,203 shares issued at June 30, 2004 and 19,454,126 shares issued at December 31, 2003 |
259 | 195 | ||||||
| Additional paid-in capital |
1,203,185 | 1,184,691 | ||||||
| Deferred compensation |
(1,927 | ) | (405 | ) | ||||
| Accumulated other comprehensive loss |
(338 | ) | (352 | ) | ||||
| Accumulated deficit |
(1,182,384 | ) | (1,178,903 | ) | ||||
| 18,795 | 5,226 | |||||||
| Treasury stock at cost, 65,636 shares at June 30, 2004 and December 31, 2003 |
(805 | ) | (805 | ) | ||||
| Total shareholders’ equity |
17,990 | 4,421 | ||||||
| Total liabilities and shareholders’ equity |
$ | 24,501 | $ | 9,123 | ||||
See accompanying notes to consolidated financial statements.
1
VERTICALNET, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data)
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Revenues: |
||||||||||||||||
| Software license |
$ | 180 | $ | 35 | $ | 319 | $ | 274 | ||||||||
| Services and maintenance |
6,355 | 2,142 | 10,752 | 5,334 | ||||||||||||
| Total revenues |
6,535 | 2,177 | 11,071 | 5,608 | ||||||||||||
| Cost of revenues: |
||||||||||||||||
| Cost of software license |
44 | 15 | 54 | 43 | ||||||||||||
| Cost of services and maintenance |
2,641 | 482 | 4,427 | 1,119 | ||||||||||||
| Amortization of acquired technology and customer contracts |
325 | 225 | 650 | 450 | ||||||||||||
| Total cost of revenues |
3,010 | 722 | 5,131 | 1,612 | ||||||||||||
| Gross profit |
3,525 | 1,455 | 5,940 | 3,996 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Research and development |
1,248 | 903 | 2,445 | 2,022 | ||||||||||||
| Sales and marketing |
1,459 | 590 | 2,525 | 1,248 | ||||||||||||
| General and administrative |
1,341 | 867 | 2,835 | 2,356 | ||||||||||||
| Restructuring reversal |
— | (302 | ) | — | (309 | ) | ||||||||||
| Stock-based compensation (a) |
450 | 102 | 921 | 193 | ||||||||||||
| Amortization of other intangible assets |
246 | — | 377 | — | ||||||||||||
| Total operating expenses |
4,744 | 2,160 | 9,103 | 5,510 | ||||||||||||
| Operating loss |
(1,219 | ) | (705 | ) | (3,163 | ) | (1,514 | ) | ||||||||
| Interest and other expense, net |
33 | 465 | 318 | 849 | ||||||||||||
| Net loss |
$ | (1,252 | ) | $ | (1,170 | ) | $ | (3,481 | ) | $ | (2,363 | ) | ||||
| Basic and diluted loss per common share |
$ | (0.05 | ) | $ | (0.09 | ) | $ | (0.14 | ) | $ | (0.17 | ) | ||||
| Weighted average common shares outstanding: |
||||||||||||||||
| Basic and diluted |
25,598 | 13,676 | 24,500 | 13,539 | ||||||||||||
| (a) | For the three and six months ended June 30, 2004 and 2003, stock-based compensation expense, net of the effects of cancellations, is attributable to various expense categories as follows (in thousands): |
| Three Months Ended June 30, |
Six Months Ended June 30, | |||||||||||
| 2004 |
2003 |
2004 |
2003 | |||||||||
| Cost of revenues |
$ | 133 | $ | 16 | $ | 334 | $ | 34 | ||||
| Research and development |
115 | 1 | 185 | 1 | ||||||||
| Sales and marketing |
57 | 8 | 127 | 17 | ||||||||
| General and administrative |
145 | 77 | 275 | 141 | ||||||||
| Total |
$ | 450 | $ | 102 | $ | 921 | $ | 193 | ||||
See accompanying notes to consolidated financial statements.
2
VERTICALNET, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
| Six Months Ended June 30, |
||||||||
| 2004 |
2003 |
|||||||
| Operating activities: |
||||||||
| Net loss |
$ | (3,481 | ) | $ | (2,363 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Depreciation and amortization |
1,211 | 761 | ||||||
| Realized loss (gain) on investments |
35 | (113 | ) | |||||
| Other non-cash items |
1,202 | (813 | ) | |||||
| Change in assets and liabilities, net of effect of acquisition: |
||||||||
| Accounts receivable |
(614 | ) | 76 | |||||
| Prepaid expenses and other assets |
480 | 377 | ||||||
| Accounts payable and accrued expenses |
441 | (3,329 | ) | |||||
| Deferred revenues |
111 | 73 | ||||||
| Net cash used in operating activities |
(615 | ) | (5,331 | ) | ||||
| Investing activities: |
||||||||
| Acquisition, net of cash acquired |
(3,826 | ) | — | |||||
| Purchase of short-term investments |
(3,000 | ) | — | |||||
| Proceeds from sale of short-term investments |
2,980 | 979 | ||||||
| Proceeds from sale of available-for-sale investments |
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