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 September 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: 0-21541
BITSTREAM INC.
(Exact name of registrant as specified in its charter)
| Delaware | 04-2744890 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| 245 First Street, 17th Floor, Cambridge, Massachusetts 02142-1270 | ||
| (Address of principal executive offices) | ||
Registrant’s telephone number, including area code: (617) 497-6222
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
On November 11, 2004, there were 8,735,521 shares of Class A Common Stock, par value $0.01 per share issued, including 125,809 issued and designated as treasury shares, and no shares of Class B Common Stock, par value $0.01 per share, issued or outstanding.
| PAGE NUMBERS | ||||
| PART I. FINANCIAL INFORMATION | ||||
| ITEM 1. |
CONSOLIDATED FINANCIAL STATEMENTS |
|||
| CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2004 AND DECEMBER 31, 2003 |
2 | |||
| 3 | ||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003 |
4 | |||
| 5-12 | ||||
| ITEM 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
13-19 | ||
| ITEM 3. |
20 | |||
| ITEM 4. |
20 | |||
| PART II. OTHER INFORMATION | ||||
| ITEM 1. |
21 | |||
| ITEM 2. |
CHANGES IN SECURITIES, USE OF PROCEEDS, AND ISSUER REPURCHASES OF EQUITY SECURITIES |
21 | ||
| ITEM 3. |
21 | |||
| ITEM 4. |
21 | |||
| ITEM 5. |
22 | |||
| ITEM 6. |
22 | |||
| 22 | ||||
1
BITSTREAM INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
| September 30, 2004 |
December 31, 2003 |
|||||||
| ASSETS |
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| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 4,253 | $ | 4,367 | ||||
| Accounts receivable, net of allowance of $26 at September 30, 2004 and December 31, 2003 |
679 | 1,016 | ||||||
| Prepaid expenses and other current assets |
183 | 61 | ||||||
| Total current assets |
5,115 | 5,444 | ||||||
| Property and equipment, net |
306 | 347 | ||||||
| Other assets: |
||||||||
| Restricted cash |
250 | 250 | ||||||
| Goodwill |
727 | 727 | ||||||
| Intangible assets |
192 | 243 | ||||||
| Total other assets |
1,169 | 1,220 | ||||||
| Total assets |
$ | 6,590 | $ | 7,011 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 232 | $ | 513 | ||||
| Accrued expenses |
931 | 877 | ||||||
| Deferred revenue |
762 | 547 | ||||||
| Total current liabilities |
1,925 | 1,937 | ||||||
| Deferred rent |
202 | 135 | ||||||
| Total liabilities |
2,127 | 2,072 | ||||||
| Commitments and contingencies (Note 6) |
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| Stockholders’ equity : |
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| Preferred stock, $0.01 par value Authorized - 6,000 shares Issued and outstanding- 0 at September 30, 2004 and December 31, 2003 |
— | — | ||||||
| Common stock, $0.01 par value Authorized - 30,500 shares Issued and outstanding- 8,707 and 8,573 at September 30, 2004 and December 31, 2003, respectively |
87 | 86 | ||||||
| Additional paid-in capital |
32,729 | 32,551 | ||||||
| Accumulated deficit |
(27,993 | ) | (27,338 | ) | ||||
| Treasury stock, at cost; 126 shares as of September 30, 2004 and December 31, 2003 |
(360 | ) | (360 | ) | ||||
| Total stockholders’ equity |
4,463 | 4,939 | ||||||
| Total liabilities and stockholders’ equity |
$ | 6,590 | $ | 7,011 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
2
BITSTREAM INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Revenue: |
||||||||||||||||
| Software licenses |
$ | 2,325 | $ | 1,975 | $ | 6,966 | $ | 6,205 | ||||||||
| Services |
447 | 327 | 1,343 | 882 | ||||||||||||
| Total revenue |
2,772 | 2,302 | 8,309 | 7,087 | ||||||||||||
| Cost of revenue: |
||||||||||||||||
| Software licenses |
808 | 587 | 2,285 | 1,735 | ||||||||||||
| Services |
222 | 145 | 597 | 396 | ||||||||||||
| Total cost of revenue |
1,030 | 732 | 2,882 | 2,131 | ||||||||||||
| Gross profit |
1,742 | 1,570 | 5,427 | 4,956 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Marketing and selling |
590 | 730 | 1,965 | 2,055 | ||||||||||||
| Research and development |
914 | 966 | 2,884 | 2,968 | ||||||||||||
| General and administrative |
387 | 469 | 1,317 | 1,467 | ||||||||||||
| Total operating expenses |
1,891 | 2,165 | 6,166 | 6,490 | ||||||||||||
| Operating loss |
(149 | ) | (595 | ) | (739 | ) | (1,534 | ) | ||||||||
| Gain on investment in DiamondSoft, Inc. |
— | 399 | 91 | 591 | ||||||||||||
| Interest and other income, net |
15 | 10 | 58 | 21 | ||||||||||||
| Loss before provision for income taxes |
(134 | ) | (186 | ) | (590 | ) | (922 | ) | ||||||||
| Provision for income taxes |
16 | 5 | 65 | 54 | ||||||||||||
| Net loss |
$ | (150 | ) | $ | (191 | ) | $ | (655 | ) | $ | (976 | ) | ||||
| Basic and diluted net loss per share |
$ | (0.02 | ) | $ | (0.02 | ) | $ | (0.08 | ) | $ | (0.12 | ) | ||||
| Basic and diluted weighted average shares outstanding |
8,551 | 8,377 | 8,495 | 8,359 | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
3
BITSTREAM INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
| Nine Months Ended September 30, |
||||||||
| 2004 |
2003 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net loss |
$ | (655 | ) | $ | (976 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Depreciation |
131 | 145 | ||||||
| Amortization |
69 | 59 | ||||||
| Gain on investment in DiamondSoft, Inc. |
(91 | ) | (591 | ) | ||||
| Loss on disposal of property and equipment |
— | 20 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
337 | (230 | ) | |||||
| Income tax receivable |
— | 134 | ||||||
| Prepaid expenses and other assets |
(122 | ) | 17 | |||||
| Accounts payable |
(281 | ) | 415 | |||||
| Accrued expenses |
113 | 1 | ||||||
| Deferred revenue |
215 | (118 | ) | |||||
| Other long term liabilities |
67 | — | ||||||
| Net cash used in operating activities |
(217 | ) | (1,124 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Proceeds from sale of DiamondSoft stock |
91 | 1,339 | ||||||
| Restricted Cash |
— | 50 | ||||||
| Purchases of property and equipment, net |
(90 | ) | (249 | ) | ||||
| Additions to intangible assets |
(18 | ) | (24 | ) | ||||
| Net cash (used in) provided by investing |
(17 | ) | 1,116 | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
| Proceeds from exercise of stock options |
120 | 82 | ||||||
| Net cash provided by financing |
120 | 82 | ||||||
| Net (Decrease) increase in Cash and Cash Equivalents |
(114 | ) | 74 | |||||
| Cash and Cash Equivalents, beginning of period |
4,367 | 4,828 | ||||||
| Cash and Cash Equivalents, end of period |
$ | 4,253 | $ | 4,902 | ||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
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| Cash paid for interest |
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