Attached files
| file | filename |
|---|---|
| EXCEL - IDEA: XBRL DOCUMENT - DETERMINE, INC. | Financial_Report.xls |
| EX-32.1 - EXHIBIT 32.1 - DETERMINE, INC. | ex32-1.htm |
| EX-31.2 - EXHIBIT 31.2 - DETERMINE, INC. | ex31-2.htm |
| EX-32.2 - EXHIBIT 32.2 - DETERMINE, INC. | ex32-2.htm |
| EX-31.1 - EXHIBIT 31.1 - DETERMINE, INC. | ex31-1.htm |
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 December 31, 2011
|
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 000-29637
SELECTICA, INC.
(Exact Name of Registrant as Specified in Its Charter)
|
DELAWARE
|
77-0432030
|
|
(State of Incorporation)
|
(IRS Employer Identification No.)
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2121 South El Camino Real, 10th Floor, San Mateo, CA 94403 (Address of Principal Executive Offices)
(650) 532-1500
(Registrant’s Telephone Number, Including Area Code)
Indicate by a 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
|
Large accelerated filer
|
¨
|
Accelerated filer
|
¨
|
|
Non-accelerated filer
|
¨ (Do not check if a smaller reporting company)
|
Smaller reporting company
|
x
|
Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes ¨ No x
The number of shares outstanding of the registrant’s common stock, par value $0.002 per share, as of February 6, 2012, was 2,739,072.
SELECTICA, INC.
INDEX
|
PART I FINANCIAL INFORMATION
|
4
|
|
|
ITEM 1: Financial Statements
|
4
|
|
| Condensed Consolidated Balance Sheets as of December 31, 2011 and March 31, 2011 |
4
|
|
| Condensed Consolidated Statements of Operations for the three and nine months ended December 31, 2011 and 2010 |
5
|
|
| Condensed Consolidated Statements of Cash Flows for the nine months ended December 31, 2011 and 2010 |
6
|
|
| Notes to Condensed Consolidated Financial Statements |
7
|
|
|
ITEM 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
15
|
|
|
ITEM 3: Quantitative and Qualitative Disclosures about Market Risk
|
20
|
|
|
ITEM 4: Controls and Procedures
|
20
|
|
|
PART II OTHER INFORMATION
|
20
|
|
|
ITEM 1: Legal Proceedings
|
20
|
|
|
ITEM 1A: Risk Factors
|
20
|
|
|
ITEM 2: Unregistered Sales of Equity Securities and Use of Proceeds
|
20
|
|
|
ITEM 3: Defaults Upon Senior Securities
|
21
|
|
|
ITEM 4: Mine Safety Disclosures
|
21
|
|
|
ITEM 5: Other Information
|
21
|
|
|
ITEM 6: Exhibits
|
21
|
|
|
Signatures
|
22
|
|
Cautionary Statement Pursuant to Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995
The words “Selectica”, “we”, “our”, “ours”, “us”, and the “Company” refer to Selectica, Inc. In addition to historical information, this quarterly report on Form 10-Q contains forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” in Item 1A to Part 1 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2011. You should carefully review the risks described in other documents the Company files from time to time with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on the forward-looking statements, including statements regarding the Company’s expectations, beliefs, intentions or strategies regarding the future, which speak only as of the date of this quarterly report on Form 10-Q. The Company undertakes no obligation to release publicly any updates to the forward-looking statements included herein after the date of this document.
PART I: FINANCIAL INFORMATION
|
ITEM 1:
|
FINANCIAL STATEMENTS
|
SELECTICA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
|
December 31,
2011
(Unaudited)
|
March 31,
2011
|
|||||||
|
Assets
|
||||||||
|
Current assets:
|
||||||||
|
Cash and cash equivalents
|
$
|
15,013
|
$
|
16,822
|
||||
|
Short-term investments
|
199
|
199
|
||||||
|
Accounts receivable, net of allowance for doubtful accounts of $54 and $55 as of December 31, 2011 and March 31, 2011, respectively
|
2,644
|
2,695
|
||||||
|
Prepaid expenses and other current assets
|
371
|
450
|
||||||
|
Total current assets
|
18,227
|
20,166
|
||||||
|
Property and equipment, net
|
381
|
423
|
||||||
|
Other assets
|
39
|
—
|
||||||
|
Total assets
|
$
|
18,647
|
$
|
20,589
|
||||
|
Liabilities and Stockholders’ Equity
|
||||||||
|
Current liabilities:
|
||||||||
|
Credit facility (see Note 8)
|
$
|
6,000
|
$
|
—
|
||||
|
Current portion of note payable to Versata (see Note 7)
|
—
|
786
|
||||||
|
Accounts payable
|
551
|
813
|
||||||
|
Accrued payroll and related liabilities
|
976
|
448
|
||||||
|
Other accrued liabilities
|
44
|
98
|
||||||
|
Deferred revenues
|
3,624
|
3,746
|
||||||
|
Total current liabilities
|
11,195
|
5,891
|
||||||
|
Note payable to Versata, net of current portion (see Note 7)
|
—
|
3,482
|
||||||
|
Other long-term liabilities
|
965
|
574
|
||||||
|
Total liabilities
|
12,160
|
9,947
|
||||||
|
Stockholders’ equity:
|
||||||||
|
Common stock
|
4
|
4
|
||||||
|
Additional paid-in capital
|
266,398
|
265,973
|
||||||
|
Treasury stock (see Note 7)
|
(472)
|
—
|
||||||
|
Accumulated deficit
|
(259,443
|
)
|
(255,335
|
)
|
||||
|
Total stockholders’ equity
|
6,487
|
10,642
|
||||||
|
Total liabilities and stockholders’ equity
|
$
|
18,647
|
$
|
20,589
|
||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
SELECTICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
|
Three Months Ended
December 31,
|
Nine Months Ended
December 31,
|
|||||||||||||||
|
2011
|
2010
|
2011
|
2010
|
|||||||||||||
|
Revenues:
|
||||||||||||||||
|
License
|
$
|
—
|
$
|
664
|
$
|
115
|
$
|
1,804
|
||||||||
|
Services
|
3,259
|
3,291
|
10,430
|
8,983
|
||||||||||||
|
Total revenues
|
3,259
|
3,955
|
10,545
|
10,787
|
||||||||||||
|
Cost of revenues:
|
||||||||||||||||
|
License
|
—
|
136
|
164
|
320
|
||||||||||||
|
Services
|
1,290
|
957
|
3,954
|
3,369
|
||||||||||||
|
Total cost of revenues
|
1,290
|
1,093
|
4,118
|
3,689
|
||||||||||||
|
Gross profit
|
1,969
|
2,862
|
6,427
|
7,098
|
||||||||||||
|
Operating expenses:
|
||||||||||||||||
|
Research and development
|
801
|
816
|
2,507
|
2,205
|
||||||||||||
|
Sales and marketing
|
1,518
|
1,144
|
4,112
|
3,135
|
||||||||||||
|
General and administrative
|
1,065
|
915
|
2,840
|
2,750
|
||||||||||||
|
Fees related to Comprehensive Settlement Agreement (see Note 7)
|
—
|
—
|
500
|
—
|
||||||||||||
|
Total operating expenses
|
3,384
|
2,875
|
9,959
|
8,090
|
||||||||||||
|
Loss from operations
|
(1,415
|
)
|
(13
|
)
|
(3,532
|
)
|
(992
|
)
|
||||||||
|
Loss on early extinguishment of note payable (see Note 7)
|
—
|
—
|
470
|
—
|
||||||||||||
|
Interest and other income (expense), net
|
(18
|
)
|
(41
|
)
|
(106
|
)
|
(137
|
)
|
||||||||
|
Loss before provision for income taxes
|
(1,433
|
)
|
(54
|
)
|
(4,108
|
)
|
(1,129
|
)
|
||||||||
|
Provision for income taxes
|
—
|
—
|
—
|
4
|
||||||||||||
|
Net loss
|
$
|
(1,433
|
)
|
$
|
(54
|
)
|
$
|
(4,108
|
)
|
$
|
(1,133
|
)
|
||||
|
Basic and diluted net loss per share
|
$
|
(0.52
|
)
|
$
|
(0.02
|
)
|
$
|
(1.47
|
)
|
$
|
(0.40
|
)
|
||||
|
Weighted-average shares of common stock used in computing basic and diluted net loss per share
|
2,737
|
2,827
|
2,796
|
2,818
|
||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
SELECTICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
|
Nine Months Ended
December 31,
|
||||||||
|
2011
|
2010
|
|||||||
|
Operating activities
|
||||||||
|
Net loss
|
$
|
(4,108
|
)
|
$
|
(1,133
|
)
|
||
|
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
|
||||||||
|
Depreciation and amortization
|
201
|
243
|
||||||
|
Loss on disposition of property and equipment
|
13
|
—
|
||||||
|
Stock-based compensation
|
432
|
360
|
||||||
|
Changes in assets and liabilities:
|
||||||||
|
Accounts receivable, net
|
51
|
789
|
||||||
|
Prepaid expenses and other current assets
|
79
|
(86
|
)
|
|||||
|
Other assets
|
(39
|
)
|
24
|
|||||
|
Accounts payable
|
(262
|
)
|
218
|
|||||
|
Restructuring liability
|
—
|
(7
|
)
|
|||||
|
Accrued payroll and related liabilities
|
528
|
19
|
||||||
|
Other accrued liabilities and other long-term liabilities
|
337
|
272
|
||||||
|
Deferred revenues
|
(122
|
)
|
(404
|
)
|
||||
|
Net cash (used in) provided by operating activities
|
(2,890
|
)
|
295
|
|||||
|
Investing activities
|
||||||||
|
Purchase of property and equipment
|
(172
|
)
|
(183
|
)
|
||||
|
Proceeds from maturities of short-term investments
|
1,398
|
—
|
||||||
|
Purchase of short-term investments
|
(1,398
|
)
|
(4,349
|
)
|
||||
|
Net cash used in investing activities
|
(172
|
)
|
(4,532
|
)
|
||||
|
Financing activities
|
||||||||
|
Payments on note payable to Versata (see Note 7)
|
(4,268
|
)
|
(600
|
)
|
||||
|
Proceeds from issuance of common stock, net of repurchase
|
4
|
(24
|
)
|
|||||
|
Purchase of treasury shares (see Note 7)
|
(472
|
)
|
—
|
|||||
|
Borrowings under credit facility (see Note 8)
|
6,000
|
—
|
||||||
|
Common stock issuance costs, net (See Note 6)
|
(11
|
)
|
(183
|
)
|
||||
|
Net cash provided by (used in) financing activities
|
1,253
|
(807
|
)
|
|||||
|
Net decrease in cash and cash equivalents
|
(1,809
|
) |
(5,044
|
)
|
||||
|
Cash and cash equivalents at beginning of the period
|
16,822
|
16,957
|
||||||
|
Cash and cash equivalents at end of the period
|
$
|
15,013
|
$
|
11,913
|
||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
SELECTICA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Presentation
The condensed consolidated balance sheet as of December 31, 2011, the condensed consolidated statements of operations for the three and nine months ended December 31, 2011 and 2010, and the condensed consolidated statements of cash flows for the nine months ended December 31, 2011 and 2010 have been prepared by the Company and are unaudited. In the opinion of management, all necessary adjustments (which include normal recurring adjustments) have been made to present fairly the financial position at December 31, 2011, and the results of operations and cash flows for the three and nine months ended December 31, 2011 and 2010, respectively. Interim results are not necessarily indicative of the results for a full fiscal year. The condensed consolidated balance sheet as of March 31, 2011 has been derived from the audited consolidated financial statements at that date.
Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended March 31, 2011.
The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the Company’s condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates.
2. Summary of Significant Accounting Policies
There have been no material changes to any of the Company’s significant accounting policies and estimates as disclosed in the Company’s Annual Report on Form 10-K for the year ended March 31, 2011.
Customer Concentrations
A limited number of customers have historically accounted for a substantial portion of the Company’s revenues.
Customers who accounted for at least 10% of total revenues were as follows:
|
Three Months Ended
December 31,
|
Nine Months Ended
December 31,
|
|||||||||||||||
|
2011
|
2010
|
2011
|
2010
|
|||||||||||||
|
Customer A
|
18
|
%
|
15
|
%
|
16
|
%
|
16
|
%
|
||||||||
|
Customer E
|
*
|
10
|
%
|
*
|
*
|
|||||||||||
|
*
|
Less than 10% of total revenues.
|
Customers who accounted for at least 10% of gross accounts receivable were as follows:
|
December 31,
2011
|
March 31,
2011
|
|||||||
|
Customer B
|
*
|
10
|
%
|
|||||
|
Customer C
|
*
|
16
|
%
|
|||||
|
Customer D
|
13
|
%
|
*
|
|||||
| * Less than 10% of total accounts receivable. | ||||||||
7
SELECTICA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(UNAUDITED)
Fair Value Measurements
The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of December 31, 2011 (in thousands):
|
Description
|
Balance as of December 31, 2011
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
Significant Other
Observable Inputs
(Level 2)
|
|||||||||
|
Cash equivalents:
|
||||||||||||
|
Money market fund
|
$
|
4
|
$
|
4
|
$
|
—
|
||||||
|
Short-term investments:
|
||||||||||||
|
Certificates of deposit
|
199
|
—
|
199
|
|||||||||
|
Total
|
$
|
203
|
$
|
4
|
$
|
199
|
||||||
The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of March 31, 2011 (in thousands):
|
Description
|
Balance as of March 31, 2011
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
Significant Other
Observable Inputs
(Level 2)
|
|||||||||
|
Cash equivalents:
|
||||||||||||
|
Money market fund
|
$
|
804
|
$
|
804
|
$
|
—
|
||||||
|
Commercial paper
|
13,799
|
13,799
|
—
|
|||||||||
|
Short-term investments:
|
||||||||||||
|
Certificates of deposit
|
199
|
—
|
199
|
|||||||||
|
Total
|
$
|
14,802
|
$
|
14,603
|
$
|
199
|
||||||
The Company’s financial assets and liabilities are valued using market prices on both active markets (Level 1) and less active markets (Level 2). Level 1 instrument valuations are obtained from real-time quotes for transactions in active exchange markets involving identical assets. Level 2 instrument valuations are obtained from readily-available pricing sources for comparable instruments. As of December 31, 2011 and March 31, 2011, the Company did not have any assets or liabilities without observable market values that would require a high level of judgment to determine fair value (Level 3).
Segment Information
The Company operates as one business segment.
8
SELECTICA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(UNAUDITED)
3. Income Taxes
At December 31, 2011, the Company had approximately $2.0 million of unrecognized tax benefits. As these unrecognized tax benefits relate to deferred tax assets with a full valuation allowance, there will be no effect on the Company’s effective tax rate if these amounts are recognized.
The Company’s Federal, state, and foreign tax returns may be subject to examination by the tax authorities from 1997 to 2011 due to net operating losses and tax carryforwards unutilized from such years.
4. Stock-Based Compensation
Equity Incentive Program
The Company’s equity incentive program is a broad-based, retention program comprised of stock options, restricted stock units and an employee stock purchase plan designed to align stockholder and employee interests. For a description of the Company’s equity plans, see the notes to consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the year ended March 31, 2011.
During the three months ended December 31, 2011 and 2010, there were 6,000 and 0 restricted stock units granted, respectively.
9
SELECTICA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(UNAUDITED)
Valuation Assumptions
The Company calculated the fair value of its employee stock options at the date of grant with the following weighted average assumptions:
|
Three Months Ended
December 31,
|
Nine Months Ended
December 31,
|
|||||||||||||||
|
2011
|
2010
|
2011
|
2010
|
|||||||||||||
|
Risk-free interest rate
|
0.42
|
%
|
1.09
|
%
|
0.62
|
%
|
0.87
|
%
|
||||||||
|
Dividend yield
|
0.00
|
%
|
0.00
|
%
|
0.00
|
%
|
0.00
|
%
|
||||||||
|
Expected volatility
|
83.20
|
%
|
83.20
|
%
|
82.02
|
%
|
83.21
|
%
|
||||||||
|
Expected option life in years
|
3.27
|
3.16
|
3.26
|
3.11
|
||||||||||||
|
Weighted average fair value at grant date
|
$
|
2.04
|
$
|
2.81
|
$
|
2.71
|
$
|
3.01
|
||||||||
Forfeitures are estimated at the time of grant and revised if necessary in subsequent periods if actual forfeitures differ from those estimates. Based on the Company’s estimates of future forfeiture rates, the Company has assumed an annualized forfeiture rate of 23.91% for its options.
The following table summarizes activity under the equity incentive plans for the indicated periods:
|
Options and RSU’s Outstanding
|
||||||||||||
|
Shares available
for grant
|
Number of shares
|
Weighted-average
exercise price
|
||||||||||
|
(in thousands except for per share amount)
|
||||||||||||
|
Outstanding at September 30, 2011
|
1,150
|
550
|
$
|
7.56
|
||||||||
|
Options granted
|
(23
|
)
|
23
|
3.70
|
||||||||
|
Restricted stock units granted
|
(6
|
)
|
6
|
—
|
||||||||
|
Restricted stock units released
|
—
|
(3
|
)
|
—
|
||||||||
|
Options cancelled
|
34
|
(34
|
)
|
5.59
|
||||||||
|
Restricted stock units cancelled
|
—
|
(3
|
)
|
—
|
||||||||
|
Outstanding at December 31, 2011
|
1,155
|
539
|
$
|
7.46
|
||||||||
The weighted average term for exercisable options is 5.70 years. The intrinsic value is calculated as the difference between the market value as of December 31, 2011 and the exercise price of the shares. The market value of the Company’s common stock as of December 31, 2011 was $2.89 as reported by the NASDAQ Capital Market. The aggregate intrinsic value of stock options outstanding at December 31, 2011 and 2010 was $0.
The options outstanding and exercisable at December 31, 2011 were in the following exercise price ranges:
|
Options Outstanding
|
Options Vested
|
|||||||||||||||
|
Range of Exercise Prices per share
|
Number of Shares
|
Weighted-Average
Remaining
Contractual
Life (in years)
|
Number of Shares
|
Weighted-Average
Exercise
Price per share
|
||||||||||||
|
(in thousands except for per share amount)
|
||||||||||||||||
|
$3.70 — $5.20
|
78
|
7.99
|
11
|
$
|
5.19
|
|||||||||||
|
$5.21 — $5.26
|
51
|
9.57
|
—
|
—
|
||||||||||||
|
$5.27 — $5.60
|
49
|
8.61
|
18
|
5.40
|
||||||||||||
|
$5.61 — $18.90
|
55
|
5.94
|
39
|
11.44
|
||||||||||||
|
$18.91 — $42.40
|
11
|
2.78
|
11
|
33.64
|
||||||||||||
|
$3.70 — $42.40
|
244
|
7.75
|
79
|
$
|
12.34
|
|||||||||||
10
SELECTICA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(UNAUDITED)
The effect of recording stock-based compensation expense for each of the periods presented was as follows (in thousands):
|
Three Months Ended
December 31,
|
Nine Months Ended
December 31,
|
|||||||||||||||
|
2011
|
2010
|
2011
|
2010
|
|||||||||||||
|
Cost of revenues
|
$
|
18
|
$
|
15
|
$
|
42
|
$
|
40
|
||||||||
|
Research and development
|
24
|
16
|
90
|
33
|
||||||||||||
|
Sales and marketing
|
38
|
15
|
123
|
26
|
||||||||||||
|
General and administrative
|
64
|
73
|
177
|
261
|
||||||||||||
|
Impact on net loss
|
$
|
144
|
$
|
119
|
$
|
432
|
$
|
360
|
||||||||
As of December 31, 2011, the unrecorded share-based compensation balance related to stock options outstanding excluding estimated forfeitures was $1.5 million and will be recognized over an estimated weighted average amortization period of 3.0 years. The amortization period is based on the expected remaining vesting term of the options.
1999 Employee Stock Purchase Plan (“ESPP”)
The price paid for the Company’s common stock purchased under the ESPP is equal to 85% of the lower of the fair market value of the Company’s common stock at the beginning of each offering period or at the end of each offering period. The compensation expense in connection with the ESPP for the three and nine months ended December 31, 2011 was $0 and $4,620, respectively. The compensation expense in connection with the ESPP for the three and nine months ended December 31, 2010 was $22,113 and $12,083, respectively. During the nine months ended December 31, 2011 and 2010, there were 1,000 and 1,400 shares issued under the ESPP, respectively.
11
SELECTICA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(UNAUDITED)
5. Computation of Basic and Diluted Net Loss per Share
Basic and diluted net loss per share has been computed using the weighted-average number of shares of common stock outstanding during the period.
The Company excludes potentially dilutive securities from its diluted net loss per share computation when their effect would be antidilutive to net loss per share amounts. The following common stock equivalents were excluded from the net loss per share computation:
|
Three Months Ended
December 31,
|
Nine Months Ended
December 31,
|
|||||||||||||||
|
2011
|
2010
|
2011
|
2010
|
|||||||||||||
|
(In thousands)
|
(In thousands)
|
|||||||||||||||
|
Options excluded due to the exercise price exceeding the average fair market value of the Company’s common stock during the period
|
247
|
191
|
214
|
155
|
||||||||||||
|
Options excluded for which the exercise price was at or less than the average fair market value of the Company’s common stock during the period but were excluded as inclusion would decrease the Company’s net loss per share
|
—
|
—
|
5
|
4
|
||||||||||||
|
Total common stock equivalents excluded from diluted net loss per common share
|
247
|
191
|
219
|
159
|
||||||||||||
12
SELECTICA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(UNAUDITED)
6. Litigation and Contingencies
From time to time, the Company is subject to certain routine legal proceedings, as well as demands, claims and threatened litigation, that arise in the normal course of its business. The Company believes that the ultimate amount of liability, if any, for any pending claims of any type (either alone or combined) will not materially affect its financial position, results of operations or liquidity.
Rights Agreement
On December 22, 2008, the Company filed suit in the Court of Chancery of the State of Delaware against Trilogy, Inc. and certain related parties, including Versata Enterprises, Inc. (collectively, “Trilogy”) seeking declaratory relief that the Company’s Rights Agreement as amended on November 16, 2008 was an appropriate measure to protect a valuable asset – the Company’s net operating loss carryforwards and related tax credits – from being limited as to utilization as provided under Section 382 of the Internal Revenue Code (IRC) which could in turn substantially reduce the value of that asset to all of the Company’s shareholders. The Company sued Trilogy after it amended the Rights Agreement on November 16, 2008 to reduce the ownership threshold that would trigger a rights offering under the Rights Agreement and Trilogy increased its beneficial ownership beyond the threshold. As a result, on January 2, 2009, a special committee of the Company’s Board of Directors declared Trilogy an “Acquiring Person” under the Rights Agreement, exchanged the rights (other than those belonging to Trilogy) for new shares of common stock under the Exchange Provision in the Rights Agreement, adopted an amended Rights Agreement and declared a new dividend of rights under the amended Rights Agreement. On January 16, 2009, the defendants in this action, Trilogy, filed an answer to the Company’s complaint and a counterclaim alleging that the Company’s Board of Directors had breached fiduciary duties in amending the Rights Agreement, in exchanging the rights, in adopting the amended Rights Agreement and in declaring a new dividend of rights. On February 26, 2010, the Delaware Court of Chancery issued a memorandum opinion that determined, among other things (i) that the actions taken by the Company’s Board of Directors and its special committee were lawful and appropriate under the circumstances, and (ii) that Trilogy was not entitled to relief for its counterclaims. An appeal from this decision was filed with the Delaware Supreme Court. On October 11, 2010, the Delaware Supreme Court issued an opinion that affirmed the Court of Chancery’s ruling in the Company’s favor, confirming the validity of the actions the Board of Directors and its special committee took to preserve the Company’s net operating losses. On November 11, 2010, the Company filed suit in the Delaware Court of Chancery against Trilogy seeking a declaratory judgment that the Company is not obligated to pay more than $1 million in fees demanded by Trilogy in connection with an alleged “investigation” into the Company’s corporate governance policies and procedures. On January 13, 2011, Trilogy answered the Company’s complaint and asserted a counterclaim for such fees. On September 20, 2011, the Company and Trilogy entered into a Comprehensive Settlement Agreement (the “Settlement Agreement”) providing for both the settlement of existing claims as well as the restriction of future claims between the parties. The Settlement Agreement provides for, among other things, (i) the repayment by the Company of all outstanding amounts payable to Trilogy under the previous Settlement, Release and License Agreement dated October 5, 2007 entered into between the Company and Versata (the “2007 Settlement Agreement”), (ii) the purchase by the Company of all shares of Company common stock held by Versata and related standstill requirement whereby Versata would not be able to purchase any further shares of Company common stock for a 25 year period and (iii) the entry into a consulting agreement between the Company and one of Versata’s affiliated entities whereby the Company could utilize certain services of such entity. As a result of the Settlement Agreement, the claims and counterclaims referenced above were dismissed by the parties.
As the costs of this litigation and related legal work are directly related to the issuance of shares under the Company’s Rights Agreement, these costs have historically been charged as issuance costs against the additional paid-in capital (APIC) account on the Company’s balance sheet, less a reserve for both received and anticipated recoveries from the Company’s Director’s and Officer’s insurance policy. Anticipated recoveries are reflected in prepaid expenses and other current assets on the Company’s balance sheet.
The following table reflects the total charges to APIC for the periods indicated (in thousands):
|
Nine Months Ended
December 31, 2011
|
Years Ended
March 31, 2011, 2010 and 2009
|
Total
|
||||||||||
|
Gross legal and related costs incurred
|
$
|
11
|
$
|
5,409
|
$
|
5,420
|
||||||
|
Less: received and anticipated reimbursement
|
—
|
(1,779
|
)
|
(1,779
|
)
|
|||||||
|
Net amounts charged to APIC
|
$
|
11
|
$
|
3,630
|
$
|
3,641
|
||||||
13
SELECTICA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(UNAUDITED)
7. Versata Note Payable
Pursuant to the Settlement Agreement, as of December 31, 2011, the Company has paid to Versata the following payments: (i) $4.5 million for the repayment of all outstanding amounts payable under the 2007 Settlement Agreement, (ii) $472,000 for the repurchase of the Company common stock held by Versata and (iii) $500,000 for the consulting services to be provided by Versata’s affiliated entity, with an additional $500,000 payable within five business days after the one year anniversary of the Settlement Agreement.
During the nine months ended December 31, 2011, the Company recorded a $470,000 charge on the early extinguishment of the note payable, as well as a $500,000 charge relating to the consulting services paid as part of the Settlement Agreement.
8. Credit Facility
On September 29, 2011, the Company entered into a Business Financing Agreement (the “Credit Facility”) with a financial institution. The Credit Facility provides a revolving receivables financing facility in an amount up to $2.0 million (the “Receivables Financing Facility”) and a revolving cash secured financing facility in an amount up to $4.0 million (the “Working Capital Facility”), for an aggregate revolving credit facility of up to $6.0 million.
The Receivables Financing Facility may be drawn in amounts up to $2.0 million in the aggregate, subject to a minimum borrowing base requirement equal to 80% of the Company’s eligible accounts receivable as determined under the 2011 Credit Facility. The Working Capital Facility may be drawn in such amounts as requested by the Company, not to exceed $4.0 million in the aggregate. The 2011 Credit Facility terminates on September 29, 2012, provided, however, that in the event of an early termination by the Company, a penalty of 1.0% of the total credit facility would be triggered.
All amounts borrowed under the Credit Facility are secured by a general security interest on the assets of the Company and are subject to a 1.75 Current Ratio of (i) cash and cash equivalents plus all eligible receivables in relation to (ii) the Company’s current liabilities excluding current deferred revenue.
Except as otherwise set forth in the Credit Facility, borrowings made under the Receivables Financing Facility will bear interest at a rate equal to the prime rate or 3.25%, whichever is greater, plus 0.25%, and borrowings made under the Working Capital Facility will bear interest at a rate equal to the financial institution’s certificate of deposit 30-day rate plus 200 basis points, with the total minimum monthly interest to be charged being $2,000.
As of December 31, 2011, the Company owes $6.0 million under the Credit Facility.
9. Recent Accounting Pronouncements
In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2011-04,“Fair Value Measurements (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs,” (“ASU 2011-04”). ASU 2011-04 changes the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements to ensure consistency between U.S. GAAP and IFRS. ASU 2011-04 also expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. This new guidance is to be applied prospectively for reporting periods beginning on or after December 15, 2011. The adoption is not expected to have a material impact to the Company’s consolidated financial statements.
In June 2011, the FASB issued Accounting Standards Update No. 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income,” (“ASU 2011-05”). ASU 2011-05 eliminates the option to report other comprehensive income and its components in the statement of changes in equity. ASU 2011-05 requires that all nonowner changes in stockholders’ equity be presented in either a single continuous statement of comprehensive income or in two separate but consecutive statements. This new guidance is to be applied retrospectively for interim and annual periods beginning after December 15, 2011. The adoption is not expected to have a material impact to the Company’s consolidated financial statements.
14
In addition to historical information, this quarterly report contains forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as in the “Risk Factors” in Item 1A to Part 1 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2011 (the “Form 10-K”). They include the following: the level of demand for Selectica’s products and services; the intensity of competition; Selectica’s ability to effectively manage product transitions and to continue to expand and improve internal infrastructure; risks associated with potential acquisitions; and adverse financial, customer and employee consequences that might result to us if litigation were to be resolved in an adverse manner to us. For a more detailed discussion of the risks relating to our business, readers should refer to 1A to Part 1 in the Form 10-K entitled “Risk Factors.” Readers are cautioned not to place undue reliance on the forward-looking statements, including statements regarding our expectations, beliefs, intentions or strategies regarding the future, which speak only as of the date of this quarterly report. We assume no obligation to update these forward-looking statements.
Overview
We provide Contract Management (CM) and Sales Configuration (SCS) software solutions that allow enterprises to efficiently manage business processes. Our solutions include software, on demand hosting, professional services and expertise.
Our CM products enable customers to create, manage and analyze contracts in a single, easy to use repository and are offered as an on-premise or hosted solution. Our software enables any and all corporate departments (e.g. Sales, Services, Procurement, Finance, IT and others) to model their specific contracting processes using our application and to manage the lifecycle of the department’s relationships with the counterparty from creation through closure.
Our SCS products enable customers to increase revenues and reduce costs through seamless, web-enabled automation of the “quote to contract” business processes, which reside between legacy Customer Relationship Management (CRM) and Enterprise Resource Planning (ERP) systems. These products are built using Java technology and utilize a unique business logic engine, repository, and a multi-threaded architecture. This design reduces the amount of memory used to support new user sessions and to deploy a cost-effective, robust and highly scalable, Internet-enhanced sales channel.
Quarterly Financial Overview
For the three months ended December 31, 2011, our revenues were approximately $3.3 million. Services revenues represented 100% of total revenues, which further demonstrates the shift in the market preference to cloud deployment models. In addition, approximately 34% of our quarterly revenues came from three customers. Services margins for the quarter were 60%. Net loss for the quarter was approximately $1.4 million, or $(0.52) per share. For the three months ended December 31, 2010, our revenues were approximately $3.9 million with license revenues representing 17% and services revenues representing 83% of total revenues. Approximately 31% of our quarterly revenues came from three customers. License margins for the quarter were 80% and services margins were 71%. Net loss for the quarter was approximately $54,000, or $(0.02) per share.
Critical Accounting Policies and Estimates
There have been no material changes to any of our critical accounting policies and estimates as disclosed in our Annual Report on Form 10-K for the year ended March 31, 2011.
Factors Affecting Operating Results
A small number of customers account for a significant portion of our total revenues. We expect that our revenues will continue to depend upon a limited number of customers. If we were to lose a large customer, it would have a significant impact upon future revenues. Customers who accounted for at least 10% of total revenues were as follows:
|
Three Months Ended
December 31,
|
Nine Months Ended
December 31,
|
|||||||||||||||
|
2011
|
2010
|
2011
|
2010
|
|||||||||||||
|
Customer A
|
18
|
%
|
15
|
%
|
16
|
%
|
16
|
%
|
||||||||
|
Customer E
|
*
|
10
|
%
|
*
|
*
|
|||||||||||
|
*
|
Less than 10% of total revenues.
|
15
We have incurred significant losses since inception and, as of December 31, 2011, we had an accumulated deficit of approximately $259 million. We believe our success depends on the growth of our customer base and the development of the emerging contract management and compliance markets and the stability of our sales configuration customer base.
We believe that period-to-period comparisons of revenues and operating results are not necessarily indicative of future performance. Our operating results have historically been dependent on a few significant customer transactions which make predicting future performance difficult.
Because our services tend to be specific to each customer and how that customer will use our products, and because each customer sets different acceptance criteria, it is difficult for us to accurately forecast the amount of revenue that will be recognized on any particular customer contract during any quarter or fiscal year. As a result, we base our revenue estimates, and our determination of associated expense levels, on our analysis of the likely revenue recognition events under each contract during a particular period. Although the value of customer contracts signed during any particular quarter or fiscal year is not an accurate indicator of revenues that will be recognized during any particular quarter or fiscal year, in general, if the value of customer contracts signed in any particular quarter or fiscal year is lower than expected, revenue recognized in future quarters and fiscal years will likely be negatively affected.
Results of Operations (unaudited):
Revenues
|
Three Months Ended
December 31,
|
Nine Months Ended
December 31,
|
|||||||||||||||||||||||
|
2011
|
2010
|
Change
|
2011
|
2010
|
Change
|
|||||||||||||||||||
|
(in thousands, except percentages)
|
||||||||||||||||||||||||
|
License
|
$
|
—
|
$
|
664
|
$
|
(664
|
)
|
$
|
115
|
$
|
1,804
|
$
|
(1,689
|
)
|
||||||||||
|
Percentage of total revenues
|
0
|
%
|
17
|
%
|
(100
|
)%
|
1
|
%
|
17
|
%
|
(94
|
)%
|
||||||||||||
|
Services
|
$
|
3,259
|
$
|
3,291
|
$
|
(32
|
)
|
$
|
10,430
|
$
|
8,983
|
$
|
1,447
|
|||||||||||
|
Percentage of total revenues
|
100
|
%
|
83
|
%
|
(1)
|
%
|
99
|
%
|
83
|
%
|
16
|
%
|
||||||||||||
|
Total revenues
|
$
|
3,259
|
$
|
3,955
|
$
|
(696
|
)
|
$
|
10,545
|
$
|
10,787
|
$
|
(242
|
)
|
||||||||||
License. License revenues consist of revenue from licensing our software products. For the three and nine months ending December 31, 2011, license revenues decreased $0.7 million and $1.7 million, respectively, compared to the three and nine months ending December 31, 2010 due to fewer license transactions. We expect license revenues to continue to fluctuate in future periods as a percentage of total revenues and in absolute dollars depending on the number and size of new license contracts.
Services. Services revenues are comprised of fees from consulting, maintenance, hosting, training, subscription revenues and out-of-pocket reimbursements. During the three months ended December 31, 2011, services revenues were flat. During the nine months ended December 31, 2011, services revenues increased $1.4 million compared to the nine months ended December 31, 2010 primarily due to a higher level of consulting services delivered to our customers. In addition, we recognized higher subscription revenues from a larger number of customers. Maintenance revenues represented 51% and 50% of total services revenues for the three months ended December 31, 2011 and December 31, 2010, respectively, and 47% and 53% of total services revenues for the nine months ended December 31, 2011 and December 31, 2010, respectively.
We expect services revenues to continue to fluctuate in future periods as a percentage of total revenues and in absolute dollars. This will depend on the number and size of new software implementations and follow-on services to our existing customers. We expect maintenance revenues to fluctuate in absolute dollars and as a percentage of services revenues based on the number of maintenance renewals, and number and size of new contracts. In addition, maintenance renewals are extremely dependent upon customer satisfaction and the level of need to make changes or upgrade versions of our software by our customers. Fluctuations in services revenues are also due to timing of achievement of milestones, customer acceptance, changes in scope, and additional services.
Cost of revenues
|
Three Months Ended
December 31,
|
Nine Months Ended
December 31,
|
|||||||||||||||||||||||
|
2011
|
2010
|
Change
|
2011
|
2010
|
Change
|
|||||||||||||||||||
|
(in thousands, except percentages)
|
||||||||||||||||||||||||
|
Cost of license revenues
|
$
|
—
|
$
|
136
|
$
|
(136
|
)
|
$
|
164
|
$
|
320
|
$
|
(156)
|
|||||||||||
|
Percentage of license revenues
|
—
|
20
|
%
|
(100
|
)%
|
143
|
%
|
18
|
%
|
(49
|
)%
|
|||||||||||||
|
Cost of services revenues
|
$
|
1,290
|
$
|
957
|
$
|
333
|
$
|
3,954
|
$
|
3,369
|
$
|
585
|
||||||||||||
|
Percentage of services revenues
|
40
|
%
|
29
|
%
|
35
|
%
|
38
|
%
|
38
|
%
|
17
|
%
|
||||||||||||
Cost of License Revenues. Cost of license revenues consists primarily of a fixed allocation of our research and development costs, reseller referral fees, and costs of purchased third party licenses sold to customers as part of a bundled arrangement. During the three months ended December 31, 2011, cost of license revenues decreased by $0.1 million compared to the three months ended December 31, 2010 primarily due to a referral fee paid to a reseller on a new customer arrangement in the prior year. During the nine months ended December 31, 2011, cost of license revenues decreased by $0.2 million compared to the nine months ended December 31, 2010 primarily due to the delivery of third party licenses sold to a customer in the prior year. We expect cost of license revenues to maintain a consistent level in absolute dollars in fiscal 2012.
16
Cost of Services Revenues. Cost of services revenues is comprised mainly of salaries and related expenses of our services organization, our data center costs, plus certain allocated expenses. During the three and nine months ended December 31, 2011, cost of services revenues increased $0.3 million and $0.6 million, respectively, compared to the three and nine months ended December 31, 2010 primarily due to an increase in the use of outside contractors.
We expect cost of services revenues to be reasonably consistent as a percentage of service revenues in fiscal year 2012.
Gross Margins
Gross margin percentages for services revenues and license revenues for the respective periods are as follows:
|
Three Months Ended
December 31,
|
Nine Months Ended
December 31,
|
|||||||||||||||
|
2011
|
2010
|
2011
|
2010
|
|||||||||||||
|
License
|
—
|
80
|
%
|
(43)
|
%
|
82
|
%
|
|||||||||
|
Services
|
60
|
%
|
71
|
%
|
62
|
%
|
62
|
%
|
||||||||
Gross Margin — Licenses. Because we have certain license costs that are fixed, margins will vary based on gross license revenue, the nature of the license agreements and product mix. Gross margin decreased to (43)% for the nine months ended December 31, 2011 compared to 82% for the nine months ended December 31, 2010. This was primarily due to fewer license transactions as well as a referral fee paid to a reseller on a new customer arrangement.
Gross Margin — Services. During the three months ended December 31, 2011, gross margin from services decreased to 60% compared to 71% for the three months ended December 31, 2010. The decrease was largely due to increases in the use of outside contractors. During the nine months ended December 31, 2011, gross margin was flat compared to the nine months ended December 31, 2010.
We expect that our overall gross margins will continue to fluctuate due to the timing of services and license revenue recognition and will continue to be adversely affected by lower margins associated with services revenues. The impact on our gross margin will depend on the mix of services we provide, whether the services are performed by our in-house staff or third party consultants, and the overall utilization rates of our professional services organization.
Operating Expenses
Research and Development Expenses
|
Three Months Ended
December 31,
|
Nine Months Ended
December 31,
|
|||||||||||||||||||||||
|
2011
|
2010
|
Change
|
2011
|
2010
|
Change
|
|||||||||||||||||||
|
(in thousands, except percentages)
|
||||||||||||||||||||||||
|
Research and development
|
$
|
801
|
$
|
816
|
$
|
(15)
|
$
|
2,507
|
$
|
2,205
|
$
|
302
|
||||||||||||
|
Percentage of total revenues
|
25
|
%
|
21
|
%
|
(2)
|
%
|
24
|
%
|
20
|
%
|
14
|
%
|
||||||||||||
Research and development expenses consist primarily of salaries and related costs of our engineering, quality assurance, technical publication efforts and certain allocated expenses. Research and development expenses remained flat during the three months ending December 31, 2011 compared to same period in 2010. Research and development expenses increased $0.3 million during the nine months ended December 31, 2011 compared to the same period in 2010. The increase is primarily due to ongoing investments into our Ukraine research and operations center.
We expect research and development expenditures to increase modestly in absolute dollars over the next year as we continue to invest in research in development as evidenced by the Ukraine research and operations center. This facility continues to represent a significant investment for us as we look to execute on our global expansion strategy.
17
Sales and Marketing
|
Three Months Ended
December 31,
|
Nine Months Ended
December 31,
|
|||||||||||||||||||||||
|
2011
|
2010
|
Change
|
2011
|
2010
|
Change
|
|||||||||||||||||||
|
(in thousands, except percentages)
|
||||||||||||||||||||||||
|
Sales and marketing
|
$
|
1,518
|
$
|
1,144
|
$
|
374
|
$
|
4,112
|
$
|
3,135
|
$
|
977
|
||||||||||||
|
Percentage of total revenues
|
47
|
%
|
29
|
%
|
33
|
%
|
39
|
%
|
29
|
%
|
31
|
%
|
||||||||||||
Sales and marketing expenses consist primarily of salaries and related costs for our sales and marketing organization, sales commissions, expenses for travel and entertainment, trade shows, public relations, collateral sales materials, advertising and certain allocated expenses. For the three and nine months ended December 31, 2011, sales and marketing expenses increased $0.4 million and $1.0 million, respectively, compared to the same periods in 2010. These increases are primarily due to our 2011 annual Fusion conference, increased marketing headcount, as well as other trade show expenses.
We expect modest increases in sales and marketing expenses in fiscal 2012 in absolute dollars and as a percentage of total revenues as a result of our focus on lead generation efforts.
General and Administrative
|
Three Months Ended
December 31,
|
Nine Months Ended
December 31,
|
|||||||||||||||||||||||
|
2011
|
2010
|
Change
|
2011
|
2010
|
Change
|
|||||||||||||||||||
|
(in thousands, except percentages)
|
||||||||||||||||||||||||
|
General and administrative
|
$
|
1,065
|
$
|
915
|
$
|
150
|
$
|
2,840
|
$
|
2,750
|
$
|
90
|
||||||||||||
|
Percentage of total revenues
|
33
|
%
|
23
|
%
|
16
|
%
|
27
|
%
|
25
|
%
|
3
|
%
|
||||||||||||
General and administrative expenses consist mainly of personnel and related costs for general corporate functions, including finance, accounting, legal, human resources, bad debt expense and certain allocated expenses. General and administrative expenses for the three and nine months ended December 31, 2011 increased $0.2 million and $0.1 million, respectively, compared to the same periods in 2010. These increases were primarily due to an increase in compensation charges relating to the incentive bonus program. We expect modest increases in general and administrative expenses in fiscal 2012 in absolute dollars and as a percentage of total revenues.
Fees Related To Comprehensive Settlement Agreement
Fees related to our Comprehensive Settlement Agreement consist of a $0.5 million charge for consulting services as part of our settlement with Versata, as discussed further in Note 7 of the Notes to Condensed Consolidated Financial Statements.
Loss on Early Extinguishment of Note Payable
Loss on early extinguishment of note payable relates to a $0.5 million charge resulting from the Versata note payoff, as discussed further in Note 7 of the Notes to Condensed Consolidated Financial Statements.
Interest and Other Income (Expense), Net
Interest and other income (expense), net consists primarily of interest earned on cash balances and short-term investments, interest expense on our note payable to Versata (which was settled during the nine months ended December 31, 2011 as discussed further in Note 7 of the Notes to Condensed Consolidated Financial Statements), foreign currency fluctuations, and other miscellaneous expenditures. Interest and other income (expense), net remained flat for all periods presented.
Provision for Income Taxes
During the three and nine months ended December 31, 2011 and during the three months ended December 31, 2010, we did not record an income tax provision. During the nine months ended December 31, 2010, we recorded an income tax provision of approximately $4,000, which relates to nominal state minimum and franchise taxes.
18
Liquidity and Capital Resources
|
December 31,
2011
|
March 31,
2011
|
|||||||
|
(in thousands)
|
||||||||
|
Cash, cash equivalents and short-term investments
|
$
|
15,212
|
$
|
17,021
|
||||
|
Working capital
|
$
|
7,032
|
$
|
14,275
|
||||
|
Nine Months Ended
December 31,
|
||||||||
|
2011
|
2010
|
|||||||
|
(in thousands)
|
||||||||
|
Net cash (used in) provided by operating activities
|
$
|
(2,890
|
)
|
$
|
295
|
|||
|
Net cash used in investing activities
|
$
|
(172
|
)
|
$
|
(4,532
|
)
|
||
|
Net cash provided by (used in) financing activities
|
$
|
1,253
|
$
|
(807
|
)
|
|||
Our primary sources of liquidity consisted of approximately $15.2 million in cash, cash equivalents and short-term investments as of December 31, 2011 compared to approximately $17.0 million in cash, cash equivalents and short-term investments as of March 31, 2011.
Net cash used in operating activities was $2.9 million for the nine months ended December 31, 2011, resulting primarily from our year-to-date net loss of $4.1 million offset by a $0.5 million increase in accrued payroll and related liabilities, a $0.3 million increase in other accrued liabilities and other long-term liabilities, and $0.4 million in stock-based compensation expenses.
Net cash provided by operating activities was $0.3 million for the nine months ended December 31, 2010, resulting primarily from a $0.8 million decrease in accounts receivable, net resulting from strong cash collection efforts during the year, a $0.5 million increase in accounts payable and other accrued liabilities and long-term liabilities, and $0.6 million in non-cash charges for depreciation and stock-based compensation expense. These increases were partially offset by our year to date net loss of $1.1 million, and a $0.4 million decrease in deferred revenues.
Net cash used in investing activities was $0.2 million for the nine months ended December 31, 2011, resulting primarily from capital asset purchases.
Net cash used in investing activities was $4.5 million for the nine months ended December 31, 2010, resulting primarily from short-term investment purchases.
As a result of current adverse financial market conditions, investments in some financial instruments may pose risks arising from liquidity and credit concerns. Although we believe our current investment portfolio has very little risk of impairment, we cannot predict future market conditions or market liquidity and can provide no assurance that our investment portfolio will remain unimpaired.
Net cash provided by financing activities was $1.3 million for the nine months ended December 31, 2011, resulting from $6.0 million received from our credit facility borrowings, offset by our $4.3 million payments to Versata, as well as $0.5 million in purchased treasury shares.
Net cash used in financing activities was $0.8 million for the nine months ended December 31, 2010, resulting from $0.6 million of payments on our note payable to Versata, as well as $0.2 million in costs to defend our Rights Agreement.
We expect to incur significant operating costs for the foreseeable future. We expect to fund our operating costs, as well as our future capital expenditures and liquidity needs, from a combination of available cash balances, our credit facility, and internally generated funds. We have no outside debt other than our credit facility, and do not have any plans to enter into any additional borrowing arrangements. As a result, our net cash flows will depend heavily on the level of future sales, changes in deferred revenues, and our ability to manage costs.
We believe our cash, cash equivalents, and short-term investment balances as of December 31, 2011 are adequate to fund our operations through at least December 31, 2012. However, given the significant changes in our business and results of operations in the last 12 months, the fluctuation in cash and investment balances may be greater than presently anticipated. After the next 12 months, we may find it necessary to obtain additional funds. In the event additional funds are required, we may not be able to utilize either our Receivables Financing Facility or our Working Capital Facility or obtain additional financing on favorable terms or at all.
Contractual Obligations
We had no significant commitments for capital expenditures as of December 31, 2011.
We do not anticipate any significant capital expenditures, payments due on long-term obligations, or other contractual obligations other than the repayment of our credit facility balance and the $0.5 million payable to Versata in September 2012 in connection with agreed upon consulting services. However, management is continuing to review our cost structure to minimize expenses and use of cash as we implement our planned business model changes. This activity may result in additional restructuring charges or severance and other benefits.
19
Our contractual obligations and commercial commitments at December 31, 2011, are summarized as follows:
|
Payments Due By Period
|
||||||||||||||||||||
|
Contractual Obligations:
|
Total
|
Less Than
1 Year
|
1-3
Years
|
4-5
Years
|
After 5
Years
|
|||||||||||||||
|
(in thousands)
|
||||||||||||||||||||
|
Operating leases
|
$
|
756
|
$
|
246
|
$
|
508
|
$
|
2
|
$
|
—
|
||||||||||
|
Versata consulting services
|
500
|
500
|
—
|
—
|
—
|
|||||||||||||||
|
Credit facility
|
6,000
|
6,000
|
—
|
—
|
—
|
|||||||||||||||
|
Total
|
$
|
7,256
|
$
|
6,746
|
$
|
508
|
$
|
2
|
$
|
—
|
||||||||||
|
ITEM 3:
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
We are a “smaller reporting company” as defined by Regulation S-K and as such, are not required to provide the information contained in this item pursuant to Regulation S-K.
|
ITEM 4:
|
CONTROLS AND PROCEDURES
|
Disclosure Controls and Procedures
Pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), our management, including the President and Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of the period ending December 31, 2011. Based upon this evaluation, our President and Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2011.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 of the Exchange Act that was conducted during the quarter ended December 31, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II: OTHER INFORMATION
Not applicable.
|
ITEM 1A:
|
RISK FACTORS
|
Not applicable.
Purchases of Equity Securities by the Issuer
We have granted shares of restricted common stock that allow statutory tax withholding obligations incurred upon vesting of those shares to be satisfied by forfeiting a portion of those shares to us. The following table shows the shares acquired by us upon forfeiture of restricted shares during the quarter ended December 31, 2011.
|
ISSUER PURCHASES OF EQUITY SECURITIES
|
||||||||||||||||
|
Period
|
Total Number
of Shares
Purchased
|
Average Price
Paid per Share
|
Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs
|
Maximum Number
(or Approximate
Dollar Value)
of Shares That
May Yet be
Purchased
Under the Plans
or Program
|
||||||||||||
|
October 1, 2011— October 31, 2011
|
—
|
$
|
—
|
—
|
—
|
|||||||||||
|
November 1, 2011— November 30, 2011
|
—
|
—
|
—
|
—
|
||||||||||||
|
December 1, 2011— December 31, 2011
|
1,488
|
3.01
|
—
|
—
|
||||||||||||
|
Total
|
1,488
|
$
|
3.01
|
—
|
—
|
|||||||||||
20
|
ITEM 3:
|
DEFAULTS UPON SENIOR SECURITIES
|
Not applicable.
|
ITEM 4:
|
MINE SAFETY DISCLOSURES
|
Not applicable.
Not applicable.
|
ITEM 6:
|
EXHIBITS
|
|
Exhibit
No.
|
|
Description
|
|
|
4.1
|
Amendment 3 dated December 28, 2011 between the Company and Wells Fargo Bank, N.A., as Rights Agent, to the Amended and Restated Rights Agreement dated January 2, 2009, as amended, between the Company and the Rights Agent (previously filed in the Company’s report on Form 8-K filed on December 28, 2011).
|
||
|
10.1
|
Employment Letter Agreement dated as of October 25, 2011 by and between the Company and Jason Stern (previously filed in the Company’s report on Form 8-K filed on October 28, 2011).
|
||
|
10.2
|
Amended and Restated Severance Agreement dated as of October 25, 2011 by and between the Company and Jason Stern (previously filed in the Company’s report on Form 8-K filed on October 28, 2011).
|
||
|
10.3
|
Employment Letter Agreement dated as of October 25, 2011 by and between the Company and Todd Spartz (previously filed in the Company’s report on Form 8-K filed on October 28, 2011).
|
||
|
10.4
|
Amended and Restated Severance Agreement dated as of October 25, 2011 by and between the Company and Todd Spartz (previously filed in the Company’s report on Form 8-K filed on October 28, 2011).
|
||
|
31.1
|
|
Certification of President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
32.1
|
|
Certification of President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
32.2
|
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
101
|
Interactive data files pursuant to Rule 405 of Regulation S-T: (i) Condensed Consolidated Balance Sheets as of December 31, 2011 and March 31, 2011; (ii) Condensed Consolidated Statements of Operations for the three and nine months ended December 31, 2011 and 2010; (iii) Condensed Consolidated Statements of Cash Flows for the nine months ended December 31, 2011 and 2010; and (iv) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text. Such exhibit will not be deemed to be incorporated by reference into any filing under the Securities Act or Securities Exchange Act, except to the extent that the Company specifically incorporates it by reference.
|
||
21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
Date: February 10, 2012
|
By:
|
/s/ TODD SPARTZ
|
|
|
Todd Spartz
|
|||
|
Chief Financial Officer
|
22
EXHIBIT INDEX
|
Exhibit
No.
|
|
Description
|
|
|
4.1
|
Amendment 3 dated December 28, 2011 between the Company and Wells Fargo Bank, N.A., as Rights Agent, to the Amended and Restated Rights Agreement dated January 2, 2009, as amended, between the Company and the Rights Agent (previously filed in the Company’s report on Form 8-K filed on December 28, 2011).
|
||
|
10.1
|
Employment Letter Agreement dated as of October 25, 2011 by and between the Company and Jason Stern (previously filed in the Company’s report on Form 8-K filed on October 28, 2011).
|
||
|
10.2
|
Amended and Restated Severance Agreement dated as of October 25, 2011 by and between the Company and Jason Stern (previously filed in the Company’s report on Form 8-K filed on October 28, 2011).
|
||
|
10.3
|
Employment Letter Agreement dated as of October 25, 2011 by and between the Company and Todd Spartz (previously filed in the Company’s report on Form 8-K filed on October 28, 2011).
|
||
|
10.4
|
Amended and Restated Severance Agreement dated as of October 25, 2011 by and between the Company and Todd Spartz (previously filed in the Company’s report on Form 8-K filed on October 28, 2011).
|
||
|
31.1
|
|
Certification of President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
32.1
|
|
Certification of President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
32.2
|
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
101
|
Interactive data files pursuant to Rule 405 of Regulation S-T: (i) Condensed Consolidated Balance Sheets as of December 31, 2011 and March 31, 2011; (ii) Condensed Consolidated Statements of Operations for the three and nine months ended December 31, 2011 and 2010; (iii) Condensed Consolidated Statements of Cash Flows for the nine months ended December 31, 2011 and 2010; and (iv) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text. Such exhibit will not be deemed to be incorporated by reference into any filing under the Securities Act or Securities Exchange Act, except to the extent that the Company specifically incorporates it by reference.
|
||