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 0-28450
Netopia, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 94-3033136 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
6001 Shellmound Street, 4th Floor
Emeryville, California 94608
(Address of principal executive offices, including Zip Code)
(510) 420-7400
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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
As of January 28, 2005, there were 24,899,119 shares of the Registrant’s common stock outstanding.
Form 10-Q
Table of Contents
| Page | ||||
| PART I. FINANCIAL INFORMATION |
||||
| Item 1. |
1 | |||
| Unaudited condensed consolidated balance sheets at June 30, 2004 and September 30, 2003 |
1 | |||
| 2 | ||||
| 3 | ||||
| Notes to unaudited condensed consolidated financial statements |
4 | |||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
22 | ||
| Item 3. |
41 | |||
| Item 4. |
43 | |||
| PART II. OTHER INFORMATION |
||||
| Item 1. |
45 | |||
| Item 6. |
46 | |||
| 47 | ||||
| Certifications |
||||
PART I — FINANCIAL INFORMATION
Concurrent with the filing of this report on Form 10-Q, we are filing with the Securities and Exchange Commission (“SEC”) our Annual Report on Form 10-K for the fiscal year ended September 30, 2004 (the “2004 10-K”). The 2004 10-K amends our Annual Reports on Form 10-K previously filed for the fiscal years ended September 30, 2003 and September 30, 2002, and our previously filed Form 10-Qs for the fiscal quarters ended March 31, 2004 and December 31, 2003, to reflect the restatements of our consolidated financial statements for all such previously reported periods. This report on Form 10-Q should be read in conjunction with the 2004 10-K, in which we explain the restatements of our consolidated financial statements.
ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NETOPIA, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
| June 30, 2004 |
September 30, 2003* |
|||||||
| (in thousands) | ||||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 23,535 | $ | 22,208 | ||||
| Trade accounts receivable less allowance for doubtful accounts and returns of $112 and $190 at June 30, 2004 and September 30, 2003, respectively |
16,296 | 16,062 | ||||||
| Inventories |
8,946 | 5,738 | ||||||
| Prepaid expenses and other current assets |
919 | 899 | ||||||
| Total current assets |
49,696 | 44,907 | ||||||
| Furniture, fixtures and equipment, net |
3,062 | 3,740 | ||||||
| Acquired technology and other intangible assets, net |
4,428 | 5,251 | ||||||
| Goodwill |
2,133 | 984 | ||||||
| Long-term investments |
1,032 | 1,032 | ||||||
| Deposits and other assets |
1,032 | 1,105 | ||||||
| TOTAL ASSETS |
$ | 61,383 | $ | 57,019 | ||||
| Liabilities and Stockholders’ Equity |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 9,479 | $ | 11,222 | ||||
| Accrued compensation |
2,453 | 1,930 | ||||||
| Accrued liabilities |
1,027 | 1,583 | ||||||
| Deferred revenue |
1,552 | 1,666 | ||||||
| Current portion of borrowings under term loans |
167 | 250 | ||||||
| Other current liabilities |
148 | 113 | ||||||
| Total current liabilities |
14,826 | 16,764 | ||||||
| Long-term liabilities: |
||||||||
| Borrowings under term loans |
— | 104 | ||||||
| Other long-term liabilities |
353 | 328 | ||||||
| Total liabilities |
15,179 | 17,196 | ||||||
| Stockholders’ equity: |
||||||||
| Common stock: $0.001 par value, 50,000,000 shares authorized; 24,053,827 and 21,631,832 shares issued and outstanding at June 30, 2004 and September 30, 2003, respectively |
24 | 22 | ||||||
| Additional paid-in capital |
165,243 | 156,132 | ||||||
| Accumulated other comprehensive (loss) |
(8 | ) | — | |||||
| Accumulated deficit |
(119,055 | ) | (116,331 | ) | ||||
| Total stockholders’ equity |
46,204 | 39,823 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ | 61,383 | $ | 57,019 | ||||
| * | Derived from the restated audited consolidated balance sheet dated September 30, 2003 included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2004. |
See accompanying notes to unaudited condensed consolidated financial statements.
Page 1
NETOPIA, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
| Three Months Ended June 30, |
Nine Months Ended June 30, |
|||||||||||||||
| 2004 |
2003 (Restated) |
2004 (Restated) |
2003 (Restated) |
|||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||||
| REVENUES: |
||||||||||||||||
| Broadband equipment |
$ | 21,891 | $ | 17,718 | $ | 63,426 | $ | 46,771 | ||||||||
| Broadband software and services |
3,543 | 4,114 | 12,074 | 13,233 | ||||||||||||
| Total revenues |
25,434 | 21,832 | 75,500 | 60,004 | ||||||||||||
| COST OF REVENUES: |
||||||||||||||||
| Broadband equipment |
16,757 | 12,808 | 45,780 | 34,671 | ||||||||||||
| Broadband software and services |
267 | 316 | 706 | 1,090 | ||||||||||||
| Amortization of acquired technology |
300 | 288 | 900 | 864 | ||||||||||||
| Total cost of revenues |
17,324 | 13,412 | 47,386 | 36,625 | ||||||||||||
| GROSS PROFIT |
8,110 | 8,420 | 28,114 | 23,379 | ||||||||||||
| OPERATING EXPENSES: |
||||||||||||||||
| Research and development |
3,846 | 3,764 | 11,854 | 11,758 | ||||||||||||
| Research and development project cancellation costs |
— | — | — | 606 | ||||||||||||
| Selling and marketing |
5,199 | 4,855 | 15,262 | 15,265 | ||||||||||||
| General and administrative |
1,184 | 961 | 3,591 | 3,464 | ||||||||||||
| Amortization of intangible assets |
86 | 86 | 259 | 258 | ||||||||||||
| Restructuring costs |
— | 130 | — | 472 | ||||||||||||
| Total operating expenses |
10,315 | 9,796 | 30,966 | 31,823 | ||||||||||||
| OPERATING LOSS |
(2,205 | ) | (1,376 | ) | (2,852 | ) | (8,444 | ) | ||||||||
| Other income (loss), net |
||||||||||||||||
| Loss on impaired securities |
— | — | — | (457 | ) | |||||||||||
| Other income (expense), net |
(52 | ) | (3 | ) | 193 | (15 | ) | |||||||||
| Other income (loss), net |
(52 | ) | (3 | ) | 193 | (472 | ) | |||||||||
| Income (loss) before income taxes |
(2,257 | ) | (1,379 | ) | (2,659 | ) | (8,916 | ) | ||||||||
| Provision for income taxes |
(19 | ) | — | (65 | ) | — | ||||||||||
| NET LOSS |
$ | (2,276 | ) | $ | (1,379 | ) | $ | (2,724 | ) | $ | (8,916 | ) | ||||
| Per share data, net loss: |
||||||||||||||||
| Basic and diluted net loss per share |
$ | (0.09 | ) | $ | (0.07 | ) | $ | (0.12 | ) | $ | (0.47 | ) | ||||
| Shares used in the per share calculations |
24,033 | 19,370 | 23,247 | 19,059 | ||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
Page 2
NETOPIA, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
| Nine months ended June 30, |
2004 |
2003 (Restated) |
||||||
| (in thousands) | ||||||||
| Cash flows from operating activities: |
||||||||
| Net income (loss) |
$ | (2,724 | ) | $ | (8,916 | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
||||||||
| Depreciation and amortization |
3,344 | 4,257 | ||||||
| Loss on impaired securities |
— | 457 | ||||||
| (Capitalization)/Write-off of capitalized software development costs |
— | 273 | ||||||
| Changes in allowance for doubtful accounts and returns on |
||||||||
| Accounts receivable |
(79 | ) | (376 | ) | ||||
| Changes in operating assets and liabilities: |
||||||||
| Trade accounts receivable |
(155 | ) | (4,901 | ) | ||||
| Inventory |
(3,208 | ) | 1,834 | |||||
| Prepaid expenses and other current assets |
(20 | ) | 202 | |||||
| Deposits and other assets |
72 | (752 | ) | |||||
| Accounts payable and accrued liabilities |
(1,220 | ) | 2,583 | |||||
| Deferred revenue |
(114 | ) | (713 | ) | ||||
| Other liabilities |
(504 | ) | 80 | |||||
| Net cash used in operating activities |
(4,608 | ) | (5,972 | ) | ||||
| Cash flows from investing activities: |
||||||||
| Purchase of long-term investments |
— | (26 | ) | |||||
| Purchase of furniture, fixtures and equipment |
(1,296 | ) | (1,131 | ) | ||||