SECURITIES
AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
þ
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
o
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 0-020992
INSIGHTFUL CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 04-2842217 | ||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. employer identification no.) |
1700
Westlake Avenue North, Suite 500, Seattle, Washington 98109-3044
(Address of principal
executive offices) (Zip code)
(206)
283-8802
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(g) of the Act:
Common
Stock, $0.01 par value
(Title of class)
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
þ
NO o
Indicate by check mark whether registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES
o NO
þ
The
number of shares outstanding of the Registrant’s Common Stock, $0.01 par
value, was 12,311,475 shares as of September 7, 2004.
TABLE OF CONTENTS
| Page | |||||
| PART I. FINANCIAL INFORMATION | |||||
| ITEM 1. Consolidated Financial Statements (Unaudited) | |||||
| Condensed Consolidated Balance Sheets as of June 30, 2004 and December 31, 2003 | 2 | ||||
| Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2004 and 2003 | 3 | ||||
| Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2004 and 2003 | 4 | ||||
| Notes to Condensed Consolidated Financial Statements | 5 | ||||
| ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 9 | ||||
| ITEM 3. Quantitative and Qualitative Disclosures about Market Risk | 24 | ||||
| ITEM 4. Controls and Procedures | 24 | ||||
| PART II. OTHER INFORMATION | |||||
| ITEM 1. Legal Proceedings | 26 | ||||
| ITEM 4. Submission of Matters to a Vote of Security Holders | 26 | ||||
| ITEM 6. Exhibits and Reports on Form 8-K | 26 | ||||
| SIGNATURES | 27 | ||||
| CERTIFICATIONS | 29 | ||||
Trademarks
Insightful,
Insightful Corporation, the Insightful logo, “Insightful intelligence from data,” S-PLUS,
S-PLUS Analytic Server, StatServer and InFact are registered trademarks of Insightful
Corporation. S, SpatialStats, FinMetrics, GARCH, SeqTrial, Anatolytics, ArrayAnalyzer,
and “Human-like Intelligence,” are trademarks of Insightful Corporation. All
other brand names, trademarks or service marks referred to in the report are the property
of their owners.
i
TABLE OF CONTENTS
PART
I. FINANCIAL INFORMATION
ITEM 1.
CONSOLIDATED FINANCIAL STATEMENTS
INSIGHTFUL CORPORATION AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
| June
30, 2004 |
December
31, 2003 |
|||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | 8,552 | $ | 7,139 | ||||
| Trade accounts receivable, net | 2,276 | 3,210 | ||||||
| Other receivables | 622 | 726 | ||||||
| Prepaid expenses and other current assets | 444 | 422 | ||||||
| Total current assets | 11,894 | 11,497 | ||||||
| Property and equipment, net | 669 | 984 | ||||||
| Purchased technology, net | 1,520 | – | ||||||
| Goodwill | 800 | 800 | ||||||
| Other assets | 54 | 175 | ||||||
| $ | 14,937 | $ | 13,456 | |||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Current portion of long-term debt | $ | 129 | $ | 129 | ||||
| Accounts payable | 1,228 | 914 | ||||||
| Accrued payroll and payroll-related items | 1,187 | 1,372 | ||||||
| Accrued expenses and other current liabilities | 669 | 1,390 | ||||||
| Deferred revenue | 5,346 | 5,633 | ||||||
| Total current liabilities | 8,559 | 9,438 | ||||||
| Long-term debt, less current portion | 96 | 161 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, $0.01 par value– | ||||||||
| Authorized–1,000,000 shares | ||||||||
| Issued and outstanding–none | – | – | ||||||
| Common stock, $0.01 par value– | ||||||||
| Authorized–20,000,000 shares | ||||||||
| Issued
and outstanding–12,311,475 and 11,474,444, shares at June 30, 2004
and December 31, 2003, respectively |
123 | 115 | ||||||
| Additional paid-in capital | 36,170 | 34,319 | ||||||
| Accumulated deficit | (29,929 | ) | (30,454 | ) | ||||
| Other accumulated comprehensive loss- cumulative translation adjustment | (82 | ) | (123 | ) | ||||
| Total stockholders’ equity | 6,282 | 3,857 | ||||||
| $ | 14,937 | $ | 13,456 | |||||
The
accompanying notes are an integral part of these consolidated financial statements.
2
INSIGHTFUL
CORPORATION AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
| Three
Months Ended June 30, |
Six
Months Ended June 30, |
|||||||||||||
|
|
|
|||||||||||||
| 2004 | 2003 | 2004 | 2003 | |||||||||||
| Revenues: | ||||||||||||||
| Software licenses | $ | 1,851 | $ | 1,908 | $ | 4,019 | $ | 3,711 | ||||||
| Software maintenance | 1,621 | 1,720 | 3,253 | 3,383 | ||||||||||
| Professional services and other | 1,005 | 702 | 1,540 | 1,545 | ||||||||||
| Total revenues | 4,477 | 4,330 | 8,812 | 8,639 | ||||||||||
| Cost of revenues: | ||||||||||||||
| Software related | 448 | 534 | 865 | 1,062 | ||||||||||
| Professional services and other | 572 | 754 | 1,108 | 1,464 | ||||||||||
| Total cost of revenues | 1,020 | 1,288 | 1,973 | 2,526 | ||||||||||
| Gross profit | 3,457 | 3,042 | 6,839 | 6,113 | ||||||||||
| Operating expenses: | ||||||||||||||
| Sales and marketing | 1,659 | 1,810 | 3,152 | 3,608 | ||||||||||
| Research and development | 1,241 | 1,767 | 2,650 | 3,457 | ||||||||||
| Less–Funded research | (777 | ) | (1,112 | ) | (1,789 | ) | (2,085 | ) | ||||||
| Research and development, net | 464 | 655 | 861 | 1,372 | ||||||||||
| General and administrative | 1,019 | 867 | 2,238 | 1,716 | ||||||||||
| Total operating expenses | 3,142 | 3,332 | 6,251 | 6,696 | ||||||||||
| Income (loss) from operations | 315 | (290 | ) | 588 | (583 | ) | ||||||||
| Other income (expense), net | 2 | 10 | (35 | ) | 20 | |||||||||
| Income (loss) before income taxes | 317 | (280 | ) | 553 | (563 | ) | ||||||||
| Income tax expense | (17 | ) | (20 | ) | (28 | ) | (92 | ) | ||||||
| Income (loss) from continuing operations | 300 | (300 | ) | 525 | (655 | ) | ||||||||
| Loss from discontinued operations, net of tax | – | (137 | ) | – | (137 | ) | ||||||||
| Net income (loss) | $ | 300 | $ | (437 | ) | $ | 525 | $ | (792 | ) | ||||
| Basic and diluted net income (loss) per share – continuing operations | $ | 0.02 | $ | (0.03 | ) | $ | 0.04 | $ | (0.06 | ) | ||||
| Basic and diluted net loss per share – discontinued operations | $ | – | $ | (0.01 | ) | $ | – | $ | (0.01 | ) | ||||
| Basic and diluted net income (loss) per share | $ | 0.02 | $ | (0.04 | ) | $ | 0.04 | $ | (0.07 | ) | ||||
| Weighted average common shares outstanding | 12,238 | 11,404 | 11,946 | 11,392 | ||||||||||
| Weighted average common shares assuming dilution | 13,207 | 11,404 | 12,564 | 11,392 | ||||||||||
The
accompanying notes are an integral part of these consolidated financial statements.
3
INSIGHTFUL
CORPORATION AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Six
Months Ended June 30, |
||||||||
| 2003 | 2004 | |||||||
| Operating activities: | ||||||||
| Net income (loss) | $ | 525 | $ | (792 | ) | |||
| Less–Loss from discontinued operations | – | 137 | ||||||
| Loss from continuing operations | 525 | (655 | ) | |||||
| Adjustments to reconcile net income (loss) from continuing operations to net cash provided by (used in) | ||||||||
| operating activities: | ||||||||
| Depreciation, amortization and other non-cash charges | 705 | 575 | ||||||
| Changes in current assets and liabilities: | ||||||||
| Trade and other accounts receivable | 1,084 | 193 | ||||||
| Prepaid expenses and other assets | (23 | ) | (550 | ) | ||||
| Accounts payable | (194 | ) | (21 | ) | ||||
| Accrued expenses, payroll and other current liabilities | (919 | ) | (97 | ) | ||||
| Deferred revenue | (343 | ) | 10 | |||||
| Net cash provided by (used in) operating activities | 835 | (545 | ) | |||||
| Investing activities: | ||||||||