Attached files
file | filename |
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EXCEL - IDEA: XBRL DOCUMENT - PAGEFLEX INC. | Financial_Report.xls |
EX-32.1 - EX-32.1 - PAGEFLEX INC. | d398925dex321.htm |
EX-31.1 - EX-31.1 - PAGEFLEX INC. | d398925dex311.htm |
EX-31.2 - EX-31.2 - PAGEFLEX INC. | d398925dex312.htm |
Table of Contents
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, 2012
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: 000-54620
Marlborough Software Development Holdings Inc.
(Exact name of registrant as specified in its charter)
Delaware | 45-3751691 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
500 Nickerson Road, Marlborough, MA 01752-4695
(Address of principal executive offices)
Registrants telephone number, including area code: (617) 520-8400
(Registrants telephone number, including area code)
Indicate by checkmark 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 (the Exchange Act) 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 checkmark whether the registrant has submitted electronically and posted on its 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 definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ¨ | Accelerated filer | ¨ | |||
Non-accelerated filer | ¨ | 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
On November 8, 2012, there were 10,801,609 shares of Common Stock, par value $0.01 per share issued and outstanding.
Table of Contents
PAGE NUMBERS |
||||||
PART I. FINANCIAL INFORMATION | ||||||
ITEM 1. |
FINANCIAL STATEMENTS | 2 | ||||
CONDENSED CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2012 (UNAUDITED) AND DECEMBER 31, 2011 |
2 | |||||
3 | ||||||
4 | ||||||
5 | ||||||
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
6 | |||||
ITEM 2. |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
14 | ||||
ITEM 3. |
21 | |||||
ITEM 4. |
22 | |||||
PART II. OTHER INFORMATION | ||||||
ITEM 1. |
23 | |||||
ITEM 1A. |
23 | |||||
ITEM 2. |
23 | |||||
ITEM 3. |
23 | |||||
ITEM 4. |
23 | |||||
ITEM 5. |
24 | |||||
ITEM 6. |
24 | |||||
25 |
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PART I FINANCIAL INFORMATION
MARLBOROUGH SOFTWARE DEVELOPMENT HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
September 30, | December 31, | |||||||
2012 | 2011 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current assets: |
||||||||
Cash |
$ | 621 | $ | 551 | ||||
Accounts receivable, net of allowance of $33 and $24 at September 30, 2012 and December 31, 2011, respectively |
388 | 628 | ||||||
Prepaid expenses and other current assets |
497 | 394 | ||||||
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|
|
|
|||||
Total current assets |
1,506 | 1,573 | ||||||
Property and equipment, net |
1,819 | 1,355 | ||||||
Other |
528 | 238 | ||||||
Goodwill |
3,297 | 3,297 | ||||||
Intangible assets, net |
2,769 | 3,070 | ||||||
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Total assets |
$ | 9,919 | $ | 9,533 | ||||
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LIABILITIES AND STOCKHOLDERS EQUITY | ||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 375 | $ | 169 | ||||
Accrued payroll and other compensation |
709 | 775 | ||||||
Other accrued expenses |
663 | 388 | ||||||
Short-term deferred revenue |
1,993 | 2,200 | ||||||
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Total current liabilities |
3,740 | 3,532 | ||||||
Long-term deferred revenue |
580 | 526 | ||||||
Long-term deferred rent |
480 | 506 | ||||||
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Total liabilities |
4,800 | 4,564 | ||||||
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Commitments and contingencies |
||||||||
Stockholders equity: |
||||||||
Preferred stock, $0.01 par value: 10,000 shares authorized; no shares issued or outstanding |
| | ||||||
Common stock, $0.01 par value: 30,500 shares authorized; 10,802 and no shares issued and outstanding as of September 30, 2012 and December 31, 2011, respectively |
108 | | ||||||
Additional paid-in capital |
12,968 | 1,305 | ||||||
Accumulated deficit |
(7,957 | ) | (44,880 | ) | ||||
Owners net investment, prior to separation |
| 48,544 | ||||||
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|
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Total stockholders equity |
5,119 | 4,969 | ||||||
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Total liabilities and stockholders equity |
$ | 9,919 | $ | 9,533 | ||||
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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MARLBOROUGH SOFTWARE DEVELOPMENT HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
(Unaudited)
Three Months
Ended September 30, |
Nine Months
Ended September 30, |
|||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
Revenue: |
||||||||||||||||
Software licenses |
$ | 347 | $ | 711 | $ | 1,391 | $ | 2,078 | ||||||||
Services |
1,288 | 1,402 | 3,977 | 4,379 | ||||||||||||
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|||||||||
Total revenue |
1,635 | 2,113 | 5,368 | 6,457 | ||||||||||||
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Cost of revenue: |
||||||||||||||||
Software licenses |
237 | 278 | 700 | 859 | ||||||||||||
Services |
629 | 539 | 1,841 | 1,519 | ||||||||||||
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Total cost of revenue |
866 | 817 | 2,541 | 2,378 | ||||||||||||
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Gross profit |
769 | 1,296 | 2,827 | 4,079 | ||||||||||||
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Operating expenses: |
||||||||||||||||
Marketing and selling |
872 | 954 | 3,108 | 2,652 | ||||||||||||
Research and development |
1,343 | 1,703 | 4,714 | 5,154 | ||||||||||||
General and administrative |
773 | 665 | 2,790 | 2,453 | ||||||||||||
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|||||||||
Total operating expenses |
2,988 | 3,322 | 10,612 | 10,259 | ||||||||||||
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|||||||||
Operating loss |
(2,219 | ) | (2,026 | ) | (7,785 | ) | (6,180 | ) | ||||||||
Interest and other (expense) income, net |
17 | (25 | ) | (26 | ) | 7 | ||||||||||
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Loss before provision for income taxes |
(2,202 | ) | (2,051 | ) | (7,811 | ) | (6,173 | ) | ||||||||
Provision for income taxes |
35 | 41 | 146 | 132 | ||||||||||||
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|||||||||
Net loss |
$ | (2,237 | ) | $ | (2,092 | ) | $ | (7,957 | ) | $ | (6,305 | ) | ||||
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Basic and diluted net loss per share |
$ | (0.21 | ) | $ | (0.19 | ) | $ | (0.74 | ) | $ | (0.59 | ) | ||||
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Basic and diluted weighted average shares outstanding |
10,763 | 10,752 | 10,755 | 10,752 | ||||||||||||
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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MARLBOROUGH SOFTWARE DEVELOPMENT HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(IN THOUSANDS)
Common stock | Additional paid-in capital |
Accumulated deficit |
Owners net investment, prior to separation |
Total stockholders equity |
||||||||||||||||||||
Number of shares |
$ Amount | |||||||||||||||||||||||
December 31, 2011, balance |
| $ | | $ | 1,305 | $ | (44,880 | ) | $ | 48,544 | $ | 4,969 | ||||||||||||
Capital contributions from former Parent |
| | | | 9,005 | 9,005 | ||||||||||||||||||
Separation-related adjustments |
| | (1,305 | ) | (3,043 | ) | 3,428 | (920 | ) | |||||||||||||||
Reclassification of owners net investment to common stock and additional paid-in capital in connection with the Separation |
10,752 | 108 | 12,946 | 47,923 | (60,977 | ) | | |||||||||||||||||
Net loss |
| | | (7,957 | ) | | (7,957 | ) | ||||||||||||||||
Stock-based compensation expense |
| | 2 | | | 2 | ||||||||||||||||||
Issuance of stock award |
50 | | 20 | | | 20 | ||||||||||||||||||
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September 30, 2012, balance (Unaudited) |
10,802 | $ | 108 | $ | 12,968 | $ | (7,957 | ) | $ | | $ | 5,119 | ||||||||||||
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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MARLBOROUGH SOFTWARE DEVELOPMENT HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(IN THOUSANDS)
(Unaudited)
Nine Months
Ended September 30, |
||||||||
2012 | 2011 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
Net loss |
$ | (7,957 | ) | $ | (6,305 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
Stock-based compensation |
22 | 185 | ||||||
Depreciation and amortization |
246 | 165 | ||||||
Net loss on disposal of property and equipment |
2 | 2 | ||||||
Amortization of intangible assets |
302 | 306 | ||||||
Changes in operating assets and liabilities, net of effects of acquisition: |
||||||||
Accounts receivable |
228 | 285 | ||||||
Prepaid expenses and other assets (long and short-term) |
13 | (130 | ) | |||||
Accounts payable |
(339 | ) | 62 | |||||
Accrued payroll and other compensation |
(213 | ) | 218 | |||||
Other accrued expenses |
(185 | ) | 206 | |||||
Deferred revenue (long and short-term) |
(153 | ) | 444 | |||||
Deferred rent (long and short-term) |
(26 | ) | (17 | ) | ||||
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Net cash used in operating activities |
(8,060 | ) | (4,579 | ) | ||||
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CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
Purchases of property and equipment, including costs capitalized for development of internal-use software |
(805 | ) | (717 | ) | ||||
Increase in restricted cash |
(70 | ) | (54 | ) | ||||
Additions to intangible assets |
| (15 | ) | |||||
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|
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Net cash used in investing activities |
(875 | ) | (786 | ) | ||||
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CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
Capital contributions from former Parent |
9,005 | 5,434 | ||||||
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|
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Net cash provided by financing activities |
9,005 | 5,434 | ||||||
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Net increase in cash |
70 | 69 | ||||||
Cash, beginning of period |
551 | 601 | ||||||
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Cash, end of period |
$ | 621 | $ | 670 | ||||
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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MARLBOROUGH SOFTWARE DEVELOPMENT HOLDINGS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per-share amounts)
All references to MSDH, we, us, our, or Company refer to Marlborough Software Development Holdings Inc., a Delaware corporation. All references to Bitstream or Parent refer to Bitstream Inc., our former parent. Except as otherwise noted, all reported dollar and share amounts are in thousands.
(1) Background and Nature of Operations
MSDH was formed on July 18, 2011 in conjunction with our former Parents planned merger (the Bitstream Merger) with and acquisition by Monotype Imaging Holdings Inc., a Delaware corporation (Monotype), pursuant to an agreement and plan of merger (the Bitstream Merger Agreement) entered into by and between Bitstream and Monotype on November 10, 2011. On January 1, 2012, Bitstream transferred and assigned to MSDH all of the assets and liabilities relating to, arising from, or in connection with Bitstreams Pageflex and BOLT product lines (the Separation) pursuant to the terms and conditions of a Contribution Agreement dated November 10, 2011 by and between Bitstream and MSDH (the Contribution Agreement). On March 14, 2012, Bitstream distributed all of the shares of MSDH common stock to the stockholders of Bitstream on a pro rata basis (the Distribution) pursuant to the terms and conditions of the Distribution Agreement dated November 10, 2011 between Bitstream and MSDH (the Distribution Agreement). On March 19, 2012, Bitstream completed the Bitstream Merger with Monotype. MSDH and Bitstream have entered into certain ancillary agreements in connection with the Separation and Distribution that provide for indemnification of Bitstream with respect to certain liabilities of the Pageflex and BOLT products contributed to MSDH.
MSDH is a software development company focused on bringing innovative and proprietary software products to a wide variety of markets. Our core software products include mobile browsing technologies and variable data publishing, Web-to-print, and multi-channel communications technologies.
MSDH is subject to risks common to technology-based companies, including dependence on key personnel, rapid technological change, competition from alternative product offerings and larger companies, and challenges to the development and marketing of commercial products and services. MSDH has also experienced net losses and negative operating cash flows in the past and in the current year, and as of September 30, 2012 has an accumulated deficit of approximately $7,957. MSDHs historical carved out financial statements included an accumulated deficit of $47,923 at December 31, 2011, which was reset as of the Separation.
The unaudited condensed consolidated financial statements have been prepared on a basis that contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. MSDHs long-term viability is dependent on its ability to generate sufficient product revenue, net income and cash flows from operations to support its business as well as its ability to obtain additional financing. Managements plans also include reducing operating costs and delaying certain expenditures, if necessary, to maintain the Companys liquidity. The Separation from Bitstream Inc. has disrupted and may continue to disrupt our business and management, negatively affecting our business, operating results or financial condition and may cause other risks to the Company. MSDH has suffered recurring losses from operations both before and after the Separation. For its liquidity, prior to Separation, the Company relied on contributions from Bitstream. As of March 19, 2012, MSDH had accumulated contributions of approximately $60,977 from its former Parent. After Separation, the Company has sought third party investors to reduce the Companys liquidity risks.
MSDH received an equity commitment from two investors on October 10, 2012, scheduled to occur in two tranches. The first in the aggregate amount of $2,000 in exchange for 597 shares of 6.5% redeemable preferred stock and 2,985 common stock warrants closed on October 11, 2012. A second tranche of $1,500 of the same securities shall occur in 2013 if certain performance criteria specified in the investment documents are achieved. In addition, the Company received commitments from certain customers with terms including the prepayment of software licenses in the aggregate amount of $850 payable over the course of the next three fiscal quarters, subject in each case to the Company continuing to provide service and support to these customers. Additionally, MSDH announced on August 27, 2012 that it had restructured its global workforce eliminating 28 positions, including 7 contractors, a reduction in our workforce of approximately 26%.
MSDH had a cash balance of $621 as of September 30, 2012. Management believes that with its current operating plan, cash will be sufficient to meet the Companys working capital and capital expenditure requirements through at least the next twelve months.
(2) Basis of Presentation and Allocation Methodologies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of MSDH and its wholly-owned Israeli subsidiary. All material intercompany transactions and balances have been eliminated in consolidation. The financial statements prior to January 1, 2012 represent the assets, liabilities and operations relating to the two product lines of Bitstream that
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were contributed to MSDH. Our unaudited condensed consolidated financial statements presented herein have been prepared pursuant to the rules of the Securities and Exchange Commission (the SEC) for quarterly reports on Form 10-Q and do not include all of the information and footnote disclosures required by generally accepted accounting principles in the United States of America (GAAP). The balance sheet information as of December 31, 2011 has been derived from our audited consolidated financial statements but does not include all disclosures required by GAAP. These statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2011 included in our Annual Report on Form 10-K, which was filed with the SEC on March 30, 2012. The condensed consolidated balance sheet as of September 30, 2012, the condensed consolidated statements of operations for the three and nine months ended September 30, 2012 and 2011, the condensed consolidated statements of stockholders equity for the nine months ended September 30, 2012, and the condensed consolidated statements of cash flows for the nine months ended September 30, 2012 and 2011, and the notes to each are unaudited, but in the opinion of management include all adjustments necessary for a fair presentation of the condensed consolidated financial position, results of operations, and cash flows of the Company as of and for these interim periods. The results of operations for the three and nine months ended September 30, 2012 may not necessarily be indicative of the results to be expected for other interim periods and the year ending December 31, 2012. The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates in these financial statements include MSDH allocation methodologies, revenue recognition, the valuation of acquired intangible assets and goodwill, share-based compensation, income taxes and the valuation of deferred tax assets, and the allowance for doubtful accounts receivable. Actual results could differ from those estimates.
The Company evaluated subsequent events through November 14, 2012 to determine whether or not any such events required disclosure in this Form 10-Q, and determined that there was one such event which is disclosed in Footnote 10 to these condensed consolidated financial statements.
On March 14, 2012, as a wholly-owned subsidiary of the Parent, the Company completed its Separation from the Parent whereby each owner of Bitstream Class A Common Stock received a distribution of one share of MSDH Common Stock for each share of Bitstream Class A Common Stock that they owned as of the close of trading on March 8, 2012. On January 1, 2012, MSDH recorded a contribution adjustment of $(920) for the contribution of non-cash accounts comprised of various asset classifications of $231, various liability classifications of $(1,222) and equity related accounts of $71. The Company also recorded a cash contribution adjustment of $6,346 on January 1, 2012. Total capital contributions from the Parent during the first quarter of 2012 totaled $9,005, inclusive of the contribution adjustment of $6,346. There were no capital contributions from the Parent since the Separation and Merger were completed during the first quarter of 2012.
Retained Earnings as of the Distribution
During the quarter ended June 30, 2012, management determined that retained earnings as of the Distribution date should have been reset to $0. The Company decreased accumulated deficit and additional paid-in capital by approximately $48 million to correct the presentation on the condensed consolidated balance sheet as of and subsequent to June 30, 2012, and in the statement of changes in stockholders equity for the periods then ended. Beginning with the Companys quarterly report on Form 10-Q for the quarter ended June 30, 2012, the Company has revised its balance sheet and statement of changes in stockholders equity for the three months ended March 31, 2012, which is reflected in all subsequent filings that contain such condensed consolidated financial statements. The adjustment eliminates the previously reported accumulated deficit and decreases the previously reported additional paid in capital for the three months ended March 31, 2012 by approximately $48 million. The adjustment does not affect total stockholders equity. Management does not consider this correction to be qualitatively material to the Companys prior period condensed consolidated financial statements.
Allocation Methodologies
The financial statements of MSDH have been partially derived from the financial statements of Bitstream Inc. utilizing the following methodologies:
The December 31, 2011 MSDH balance sheet reflects the financial position of MSDH as if it had been a separate entity. Only those assets and liabilities, which were specifically identifiable to the MSDH business or those assets and liabilities that were used primarily by the MSDH business, such as our leased facilities in the United States, have been attributed and included in the balance sheet of MSDH. The September 30, 2012 MSDH condensed consolidated balance sheet reflects the actual assets, liabilities, and equity of MSDH after the completion of the Separation and Distribution.
The historical MSDH statements of operations for the three and nine months ended September 30, 2011 reflect revenue directly attributed to the MSDH business. Cost of revenue, research and development, and sales and marketing departments have historically been product specific and thus have been primarily attributed to MSDH based on product line information. Certain general and administrative (G&A) items that could be specifically identified and allocated, including amortization of intangibles, were allocated.
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Other general expenses that could not be specifically identified to a product line were allocated based on the most relevant measure, such as headcount and product revenue. Bitstream charged MSDH a fee for assets used by both companies, approximating fair value based upon relative usage of these assets, for the three and nine months ended September 30, 2011. The fee is netted with the expenses of MSDH in the consolidated statements of operations and was not material for the period prior to the Distribution.
Effective with the Separation on January 1, 2012, a management fee agreement between MSDH and Bitstream was executed, providing for the chargeback of certain costs incurred from January 1, 2012 through March 19, 2012, the effective date of the Bitstream Merger. These costs included all Separation, Distribution, and Merger costs directly associated with the transactions which amounted to $2,254, as well as a percentage ranging from 30% to 50% of general and administrative and manufacturing costs. The costs invoiced to Bitstream per this agreement are consistent with the allocation methodologies utilized for the 2011 consolidated financial statements.
The following table presents the allocable expense amounts allocated to the Companys former Parent:
Three months ended September 30, |
Nine months ended September 30, |
|||||||||||||||
Category |
2012 | 2011 | 2012 | 2011 | ||||||||||||
Cost of revenue |
$ | | $ | 14 | $ | 11 | $ | 70 | ||||||||
Marketing and selling |
| 13 | | 41 | ||||||||||||
General and administrative |
| 1,091 | 807 | 2,605 | ||||||||||||
Interest and other (income) expense, net |
| 37 | | (136 | ) | |||||||||||
Income taxes |
| 36 | | 76 | ||||||||||||
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|
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|
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Total |
$ | | $ | 1,191 | $ | 818 | $ | 2,656 | ||||||||
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There is significant judgment in determining the allocation of income, expense, and attribution of assets and liabilities. Management believes that the methodologies used in the allocation are reasonable.
(3) Relationship with our Former Parent
In connection with the Separation, we entered into a series of agreements, in addition to the Contribution and Distribution Agreements, with our former Parent. These agreements include a tax indemnification agreement and intellectual property assignment and license agreements with our former Parent, as well as a transition services agreement with Monotype. The net expense to MSDH related to these agreements was not material for the three and nine months ended September 30, 2012.
(4) Off-Balance Sheet Risk and Concentration of Credit Risk
Financial instruments that potentially expose us to concentrations of credit risk consist primarily of cash and trade accounts receivable. We place a majority of our cash investments in one highly-rated financial institution. We have not experienced significant losses related to receivables from any individual customers or groups of customers in any specific industry or by geographic area. Due to these factors, no additional credit risk beyond amounts provided for collection losses is believed by us to be inherent in our accounts receivable. As of September 30, 2012 and December 31, 2011, we did not have any off-balance sheet arrangements or unconsolidated special-purpose entities within the meaning of Item 303(a)(4) of Regulation S-K and therefore did not have any off-balance sheet risks as of such dates. At September 30, 2012, three customers accounted for 11%, 13%, and 13% of our accounts receivable, respectively. At December 31, 2011, two customers accounted for 23% and 19% of our accounts receivable, respectively. For the three and nine months ended September 30, 2012, one customer accounted for 11% and 15% of our revenue, respectively. For the three and nine month periods ended September 30, 2011, one customer accounted for 19% and 23% of our revenue, respectively.
(5) Recently Issued Accounting Standards
There has been one new accounting pronouncements during the nine months ended September 30, 2012, as compared to the recent accounting pronouncements described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011, that is of significance, or potential significance, to us.
In July 2012, the FASB issued ASU No. 2012-02, Intangibles Goodwill and Other (Topic 350) Testing Indefinite-Lived Intangible Assets for Impairment (ASU 2012-02). This update amends existing guidance by giving an entity testing an indefinite-lived intangible asset for impairment the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount. The more-likely-than-not threshold is defined as
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having a likelihood of more than 50 percent. If an entity determines that it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount, then the performance of the quantitative impairment test, as currently prescribed by ASC Topic 350, is required. ASU 2012-02 is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted. The adoption of this update did not have a significant effect on the Companys condensed consolidated financial statements and related disclosures.
(6) Property and Equipment
Property and equipment are stated at historical cost, less accumulated depreciation and amortization. Property and equipment consist of the following:
September 30, 2012 |
December 31, 2011 |
|||||||
Computer equipment |
$ | 1,688 | $ | 1,878 | ||||
Software |
1,671 | 1,110 | ||||||
Furniture and fixtures |
459 | 560 | ||||||
Leasehold improvements |
156 | 161 | ||||||
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|
|||||
3,974 | 3,709 | |||||||
Less Accumulated depreciation and amortization |
2,155 | 2,354 | ||||||
|
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|
|||||
Property and equipment, net |
$ | 1,819 | $ | 1,355 | ||||
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Depreciation and amortization are provided on a straight-line basis over the estimated useful lives of the related assets as follows:
Asset Classification |
Estimated Useful Life | |
Computer equipment |
3 Years | |
Software |
3 Years | |
Furniture and fixtures |
5 Years | |
Leasehold improvements |
Estimated useful life, or the lease term, whichever is shorter |
Depreciation expense for the three months ended September 30, 2012 and 2011 was $76 and $57, respectively. Depreciation expense for the nine months ended September 30, 2012 and 2011 was $224 and $165, respectively.
There were no disposals of property and equipment during the three month periods ended September 30, 2012 and 2011. During the nine months ended September 30, 2012 and 2011, we disposed of $551 and $26, respectively, of property and equipment with accumulated depreciation of $549 and $24, respectively, resulting in a loss on disposal of $2 for each period. In all cases, the assets were no longer in service.
During the three and nine months ended September 30, 2012, we capitalized software of $208 and $615, respectively (included in Software above). During each of the three and nine months ended September 30, 2011, we capitalized software of $554. The software became available for general release during the quarter ended September 30, 2012. Amortization expense related to capitalized software for the three and nine months ended September 30, 2012 was $22. There was no amortization expense during each of the three and nine months ended September 30, 2011 as the developed software was not yet ready for its intended use. The net book value of internally developed software at September 30, 2012 and December 31, 2011 was $1,281 and $688, respectively.
(7) Loss Per Share
MSDH had five authorized shares of common stock, par value $0.01 per share, at the date of incorporation. On November 10, 2011, the Company amended its authorized shares to be 30,500 shares of common stock, par value of $0.01 per share and 10,000 shares of preferred stock, par value of $0.01 per share. On March 14, 2012, MSDH issued 10,752 shares of MSDH stock in a pro rata dividend distribution by Bitstream to its stockholders on a one for one basis.
The computation of basic loss per share for all periods through December 31, 2011, is calculated using the number of shares of MSDH common stock outstanding on March 14, 2012, the Distribution date. No measure of diluted loss per common share is presented for those periods since there were no actual shares outstanding prior to Distribution.
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Basic net loss per share is determined by dividing the net loss by the weighted average number of shares of common stock outstanding during the periods. Basic loss per common share for all periods through the Distribution date is calculated using the number of shares of MSDH common stock outstanding on March 14, 2012, following the Distribution. Diluted earnings per share do not include the effect of common stock equivalents as MSDH has incurred a net loss for the periods presented, and therefore common stock equivalents are considered antidilutive. As a result, there is no difference between MSDHs basic and diluted loss per share for the three and nine months ended September 30, 2012 and 2011.
If MSDH had reported a profit for the periods, the potential common shares would have increased the weighted average shares outstanding by 20 and 0 for the three months ended September 30, 2012 and 2011, respectively, and 45 and 0 for the nine months ended September 30, 2012 and 2011, respectively, based on the weighted average number of common stock equivalents outstanding. Additionally, there were unvested restricted share awards and options outstanding to purchase 1,494 and 0 shares for the three months ended September 30, 2012 and 2011, respectively, and 1,462 and 0 shares for the nine months ended September 30, 2012 and 2011, respectively, that were not included in the potential common share computations because their exercise prices were greater than the average market price of MSDHs common stock. These common stock equivalents would be antidilutive even if a profit was reported.
(8) Income Taxes
Presentation
The Company accounts for income taxes in accordance with GAAP, which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of the temporary differences between the book and tax basis of recorded assets and liabilities. The Company makes estimates and judgments with regard to the calculation of certain income tax assets and liabilities. This FASB guidance requires that deferred tax assets be reduced by valuation allowances if, based on the consideration of all available evidence, it is more likely than not that some portion of the deferred tax asset will not be realized. Significant weight is given to evidence that can be objectively verified.
For purposes of the Companys historical financial statements prior to the completion of the Separation, income tax expense and deferred income tax balances were recorded as if the Company had filed tax returns on a separate return basis (hypothetical carve-out basis) from the former Parent. Post Bitstream Merger income tax expense and deferred income tax balances are recorded in accordance with the Companys stand-alone income tax positions.
MSDHs operating results have been included in Bitstreams consolidated U.S. federal and state income tax returns, as well as included in Bitstreams tax filings for non-U.S. jurisdictions. The Companys non-U.S. operations have primarily been conducted within Bitstreams non-U.S. subsidiaries which shared operations with Bitstreams other businesses. For purposes of the Companys unaudited condensed consolidated financial statements, income tax expense and deferred tax balances have been recorded as if the Company had filed tax returns on a separate return basis from Bitstream. The Companys contribution to Bitstreams tax losses and tax credits on a separate return basis has been included in these condensed consolidated financial statements. The Companys separate return basis tax loss will not reflect the tax positions taken or to be taken by Bitstream. In many cases tax losses and tax credits generated by the Company have been available for use by Bitstream and remained with Bitstream at the date of the Separation.
As the Company continues to incur cumulative taxable losses in the United States, the Company recorded a full valuation allowance against the Companys U.S. deferred tax assets, net of reversing taxable temporary differences.
Components of earnings (loss) before income taxes are as follows:
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
Foreign income |
$ | 63 | $ | 68 | $ | 246 | $ | 287 | ||||||||
Domestic loss |
(2,265 | ) | (2,119 | ) | (8,057 | ) | (6,460 | ) | ||||||||
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Loss before provision for income taxes |
$ | (2,202 | ) | $ | (2,051 | ) | $ | (7,811 | ) | $ | (6,173 | ) | ||||
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We have made an indefinite reinvestment of earnings in our foreign Israeli subsidiary and, therefore, we do not provide for U.S. income taxes applicable to its undistributed earnings.
We have recorded a deferred tax liability and related income tax expense for the naked credit resulting from the amortization of goodwill for tax purposes. The total deferred liability at September 30, 2012 and December 31, 2011 was $174 and $115, respectively.
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(9) Stock-based Compensation Plans and Stock-based Compensation Expense
(a) General
On January 25, 2012, the Board of Directors of MSDH, and the Board of Directors of Bitstream acting in its capacity as sole stockholder of MSDH, adopted the MSDH Incentive Compensation Plan (the Plan) under which 1,724 shares of MSDH common stock were authorized for issuance under the Plan. The Plan provides for the grant of awards in the form of options (which may be incentive stock options or non-qualified options), stock appreciation rights, restricted stock and restricted stock units, stock granted as a bonus or in lieu of another award, other stock-based awards, performance awards or annual incentive awards. Each stock option granted will have an exercise price of no less than 100% of the fair market value of the common stock on the date of grant. The awards will generally have a contractual life of ten years and will generally vest over four to ten years. The maximum number of shares of stock with respect to which awards can be granted will be 1,073 shares, plus the number of shares subject to the New MSDH Options, subject to adjustment as provided in the Plan to reflect the effect of mergers, recapitalizations, stock splits and reverse splits, extraordinary dividends, and similar transactions. On March 8, 2012, in connection with the Bitstream Merger Agreement, all outstanding former Parent stock option awards for the Companys employees were replaced with awards in the Company using a formula designed to preserve the intrinsic value and fair value of the award immediately prior to Separation. There was no incremental compensation expense to the Company related to the replacement of the former Parent stock-based compensation awards. The vesting of all outstanding options was accelerated and restrictions from restricted stock awards were removed as part of the Separation and Merger of the former Parent and thus no unrecognized compensation expense existed for the replaced awards. Accordingly, on March 8, 2012, 651 fully vested new MSDH options with a weighted average exercise price of $1.493 were granted to holders of the Bitstream options. On September 10, 2012, the Company granted a total of 1,199 options to purchase the Companys Common Stock at an exercise price of $0.67 per share and a total of 50 shares that vested immediately to employees, consultants and non-employee directors under the Companys incentive plan. Each stock option granted had an exercise price in excess of the $0.40 fair market value of the common stock on the date of grant. The stock option awards have a contractual life of ten years and vest over four years.
We account for stock-based compensation in accordance with authoritative guidance. Under the fair value recognition provisions of this guidance, stock-based compensation expense is measured at the grant date based on the fair value of the award, net of an estimated forfeiture rate, and is recognized as expense on a straight-line basis over the requisite service period, which is the vesting period.
(b) Stock-based Compensation Expense
We currently estimate the fair value of MSDH stock options using the Black-Scholes valuation model. Key input assumptions to be used to estimate the fair value of stock options will include the exercise price of the award, the expected option term, the expected volatility of our stock over the options expected term, the risk-free interest rate over the options expected term, and our expected annual dividend yield, which will all be based on the historical information of Bitstream. The expected term of options granted will be estimated by calculating the average term from our historical stock option exercise experience. Estimated volatility of our common stock will be based on Bitstreams historical volatility. The risk-free interest rate used in the option pricing model will be based on zero-coupon yields implied from U.S. Treasury issues with remaining terms similar to the expected term of the options. We are required to estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates. Historical data for Bitstream will be used to estimate pre-vesting option forfeitures and record stock-based compensation expense only for those awards that are expected to vest. We believe that the valuation technique and the approach utilized to develop the underlying assumptions are appropriate in calculating the fair values of our stock options. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by persons who receive equity awards. These amounts, and the amounts applicable to future quarters, are also subject to future quarterly adjustments based upon a variety of factors, which include but are not limited to, the issuance of new options.
The following table summarizes the weighted average assumptions we utilized for grants of share-based awards during the three and nine months ended September 30, 2012:
Three and nine months ended September 30, 2012 |
||||
Risk-free interest rates |
0.88 | % | ||
Expected dividend yield |
None | |||
Expected term |
6.0 Years | |||
Expected volatility |
48.1 | % |
No stock options were granted during the three and nine months ended September 30, 2011.
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During both the three and nine months periods ended September 30, 2012, we granted stock awards of 50 shares. Stock awards are valued at the fair market value at the grant date.
The stock-based compensation expense of $1,420 for the period of January 1, 2012 through March 14, 2012 was recorded through an intercompany transaction with our former Parent and is included as Bitstreams stockholders equity, as it relates exclusively to Bitstream stock. Therefore, this stock-based compensation is not included in the Companys condensed consolidated statements of stockholders equity for 2012. A portion of the adjustments for the Separation from the Parent was directly related to the $1,420 of stock-based compensation and the amount was therefore netted against stock-based compensation for presentation purposes on the condensed consolidated statements of cash flow for the three months ended March 31, 2012 resulting in no stock-based compensation reflected for the period. Stock-based compensation expense for MSDH stock is derived from the awards granted on September 10, 2012, discussed above.
Our results for the three months ended September 30, 2012 and 2011 include $22 and $82, respectively, and for the nine months ended September 30, 2012 and 2011 included $1,442 and $303, respectively, of stock-based compensation within the applicable expense classification where we report the option holders compensation cost. The expense includes stock option expense associated with the MSDH awards on September 10, 2012 and for the Bitstream options granted to those employees specifically assigned to MSDH as well as an allocation of the stock option expense for options granted to executives and other general shared personnel.
The following table presents stock-based compensation expense for the three and nine months ended September 30, 2012 and 2011 by category:
Three Months
Ended September 30, |
Nine Months
Ended September 30, |
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2012 | 2011 | 2012 | 2011 | |||||||||||||
Cost of revenuesoftware licenses |
$ | | $ | | $ | | $ | | ||||||||
Cost of revenueservices |
| | 2 | 10 | ||||||||||||
Marketing and selling |
| 7 | (5 | ) | 23 | |||||||||||
Research and development |
1 | 38 | 325 | 151 | ||||||||||||
General and administrative |
21 | 37 | 1,120 | 119 | ||||||||||||
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Stock-based compensation expense prior to Parent allocation |
$ | 22 | $ | 82 | $ | 1,442 | $ | 303 | ||||||||
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(10) Subsequent Events
(a) Equity Investment (dollar amounts not in thousands)
On October 11, 2012, MSDH announced that the Company received an equity investment from two investors scheduled to occur in two tranches. Pursuant to the purchase agreement for this equity investment, the Company agreed to issue and sell 597,014 shares of its 6.5% Series A Redeemable Preferred Stock (the Series A Preferred Stock) and warrants (the Warrants) to purchase up to 2,985,070 shares of the Companys common stock (the Warrant Shares). The Series A Preferred Stock accumulates a preferred dividend at a rate of 6.5% per annum, has a liquidation preference of $3.35 plus accrued and unpaid dividends, ranks senior to the Companys common stock, and is redeemable upon certain events but in no event later than the five year anniversary of the date of issuance. The two investors were Amos Kaminski, a member of the Companys board of directors, and The Altshuler Shaham Group, in its management capacity for certain provident and pension funds.
The securities were sold to the investors in units (the Units) at a price of $3.35 per Unit, with each Unit consisting of one (1) share of Series A Preferred Stock and a warrant to purchase five (5) shares of the Companys common stock, for an aggregate offering price of approximately $2 million. In addition, the investors will be required to purchase from the Company an additional 447,761 Units for additional purchase consideration of approximately $1.5 million upon the Companys achievement of certain revenue and earnings targets for the six months ending June 30, 2013. The Company also has agreed to file a registration statement with the Securities and Exchange Commission on or prior to March 31, 2013 covering the resale by the investors of the Warrant Shares issuable upon exercise of the Warrants.
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In connection with the equity investment, the Company has granted to the investors preemptive rights to participate in future securities offerings by the Company. These preemptive rights terminate five years from the date of issuance of the Series A Preferred Stock or upon the occurrence of certain specified events, including the earlier redemption of the Series A Preferred Stock or a listing of the Companys common stock on a U.S. national securities exchange with a market capitalization of $40 million.
The Warrants are exercisable for a term of ten (10) years and have an exercise price of $0.67 per share and may also be exercised pursuant to a cashless exercise. The Warrants contain customary provisions for anti-dilution adjustments in the event of recapitalization or reorganization events of the Company or in the event of a subsequent financing at less than $0.67 per share. The anti-dilution protections related to subsequent financings terminate five years from the date of issuance of the Warrants or upon the occurrence of certain specified events, including the earlier redemption of the Series A Preferred Stock or a listing of the Companys common stock on a U.S. national securities exchange with a market capitalization of $40 million.
(b) Financial Consulting Services Engagement
On October 31, 2012, the Company signed an engagement letter with a financial advisory firm to advise on strategic alternatives. One of the Companys board members is also the managing principal of the firm engaged to provide the consulting services. With the exception of a retainer of $10, compensation for services rendered pursuant to this agreement will be contingent upon specific transaction objectives.
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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
All statements, trend analysis and other information contained in the following discussion relative to markets for our products and trends in revenue, gross margin and anticipated expense levels, as well as other statements, including words such as may, anticipate, believe, plan, estimate, expect, and intend and other similar expressions constitute forward-looking statements. These forward-looking statements are subject to business and economic risks and uncertainties and our actual results of operations may differ materially from those contained in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed under Item 1A Risk Factors in our Annual Report on Form 10-K, as may be supplemented from time to time in our quarterly reports on Form 10-Q, as well as other risks and uncertainties referenced in this report.
EXECUTIVE OVERVIEW
Marlborough Software Development Holdings Inc. (MSDH or We or the Company) was formed on July 18, 2011 in conjunction with our former parent companys, Bitstream Inc. (Bitstream), planned merger (the Bitstream Merger) with and acquisition by Monotype Imaging Holdings Inc., a Delaware corporation (Monotype) pursuant to an agreement and plan of merger (the Bitstream Merger Agreement) entered into by and between Bitstream and Monotype on November 10, 2011 (the Separation Date). On the Separation Date, Bitstream transferred and assigned to MSDH all of the assets and liabilities relating to, arising from or in connection with Bitstreams Pageflex and BOLT product lines (the Separation) pursuant to the terms and conditions of a Contribution Agreement dated November 10, 2011 by and between Bitstream and MSDH (the Contribution Agreement). On March 14, 2012, Bitstream distributed all of the shares of MSDH common stock to the stockholders of Bitstream on a pro rata basis (the Distribution) pursuant to the terms and conditions of the Distribution Agreement dated November 10, 2011 between Bitstream and MSDH (the Distribution Agreement). On March 19, 2012, Bitstream completed the Bitstream Merger with Monotype.
MSDH is a software development company focused on bringing innovative and proprietary software products to a wide variety of markets. Our core software products include mobile browsing technologies and variable data publishing, Web-to-print, and multi-channel communications technologies.
Automated Marketing Communication and Print Production Variable Technologies. The Pageflex product line enables companies across the globe to communicate their marketing messages more easily and effectively. It is the advanced technology for brand management, web-to-print applications, and sophisticated personalized communications based on customer information. We pioneered flexible variable data software in 1997 and have been a technology innovator in the document customization arena ever since. The platform produces rich, creative, award-winning document designs that look like they were given the individual attention of a graphic designer but were, in reality, created on-the-fly with Pageflex variable publishing technology. Print service providers, marketing service providers, corporate marketers, and publishers use Pageflex products to ensure design integrity and brand control while empowering local users to customize and personalize print collateral, email campaigns, and 1-to-1 marketing Web sites. Pageflex Persona is desktop software that produces personalized print and email documents using data from a database. Pageflex Studio ID is a plug-in to Adobe InDesign for producing personalized print pieces. Pageflex Storefront is a turnkey solution for producing web portals for document customization and online purchasing of print documents. Pageflex Server provides an enterprise solution for high-volume document customization driven by a database or requests from a web site. Pageflex iWay provides business flow automation for printing companies. Pageflex Campaign Manager lets companies develop personal conversations with their customers in print, email, and online. And finally, Pageflex Chart works with these Pageflex products to add dynamic charts and graphs to print documents. Pageflex products enable companies worldwide to manage, streamline, and automate their document production processes, communicate more personally with their customers, and control their brand and market messaging while enabling their remote employees, franchises, and consumers to use a self-serve model to order customized communications. Pageflex products are purchased by both corporations and the printing companies that support them, who also use the software to control and track production processes in order to improve their business ROI.
We market our products and acquire our customers through a variety of sources including participation in industry trade shows, trade association sponsorships, online marketing, including search engines and advertising on online networks and other websites, and other marketing efforts, relationships with our partners, referrals from our growing customer base, general brand awareness and the inclusion of a link to our website in the footer of the emails sent by our customers. Our business strategy focuses on expanding both our direct sales effort as well as expanding our relationships with our OEM and reseller channels. We are also focused on improving our product offerings and expanding our market share.
Mobile Browsing Technologies. BOLT provides a consistent, full desktop-style browsing experience on almost any handset. The BOLT mobile browser offers faithful rendering of web pages and it is the only browser for mobile phones of all types to support streaming video from popular media sharing sites such as YouTube and MySpace. Compatible with most handsets that support the
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J2ME or BREW/BMP operating systems, BOLTs advanced features include W3C based widget support, direct Twitter integration, six levels of magnification, international localization, copy/paste, FOTA updates, and additional usability features such as auto-complete url, save page, secure browsing, patented split-screen minimap, password manager, rss subscriptions, automatic socket support, history and keypad shortcuts. BOLT is a WebKit based cloud computing mobile browser. We believe this cloud computing architecture is the key to BOLTs capabilities. Web pages are first loaded by the BOLT servers, then transcoded and sent to the BOLT mobile browser client on handsets. This client/server approach maintains the integrity of Web page layouts, reduces packet consumption on data networks, dramatically improves page load speeds, and enables advanced features such as video streaming. Currently, we are concentrating our resources and efforts on our automated marketing communications and print production variable technologies, and we do not expect sales of our mobile browsing products to contribute significant revenues in the short term.
Certain Financial and Operating Metrics
In connection with the ongoing operation of our business, our management regularly reviews key financial and operating metrics, such as revenue, gross margin, expenses, and capital expenditures, among others. Management considers these financial and operating metrics critical to understanding and improving our business, reviewing our historical performance, comparing our performance versus other companies and identifying current and future trends, and for planning purposes.
Certain Trends and Uncertainties
The following represents a summary of known trends and uncertainties which could have a significant impact on our financial condition and results of operations. This summary should be considered along with the factors discussed under the headings Risk Factors and Forward-Looking Statements elsewhere in our Form 10-K filed with the SEC on March 30, 2012.
| Effective January 1, 2012 we completed the Separation from Bitstream and on March 14, 2012 Bitstream completed the Distribution, thereby resulting in MSDH becoming a separate, stand-alone public company. On March 19, 2012, Bitstream completed the Bitstream Merger with Monotype. We continue to experience disruption in our business related to the Separation and the Bitstream Merger, including, but not limited to, attention and time spent on the Separation, Distribution and transition services pursuant to the Bitstream Merger and the assignment of material contracts to us for which some of the parties may not consent to the assignment. If we experience significant disruption as a result of these or any other factors related to the Separation, Distribution and Bitstream Merger, our financial results could be adversely impacted. |
| The Pageflex and Bolt product activities were conducted by Bitstream as a whole and integrated with the Fonts products activities. Our historical financial information may not be representative of our results as a separate company. |
| We continue to closely monitor current economic conditions, particularly as they impact our customers. We believe that our customers continue to experience some amount of economic hardship. If this economic hardship continues or worsens, our financial results could be adversely impacted. |
| We continue to develop new products and new versions of our existing product offerings. Failure to develop and launch new products and versions could negatively impact our financial results. |
CRITICAL ACCOUNTING POLICIES
Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America consistently applied. The preparation of these unaudited condensed consolidated financial statements requires us to make significant estimates and judgments that affect the amounts reported in our unaudited condensed consolidated financial statements and the accompanying notes. These items are regularly monitored and analyzed by management for changes in facts and circumstances, and material changes in these estimates could occur in the future. Changes in estimates are recorded in the period in which they become known. We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from our estimates.
While all of our accounting policies impact the unaudited condensed consolidated financial statements, certain policies are viewed to be critical. Critical accounting policies are those that are both most important to the portrayal of our financial condition and results of operations and that require managements most subjective or complex judgments and estimates. We consider the following accounting policies to be critical in fully understanding and evaluating our financial results:
| Allocation Methodologies |
| Revenue Recognition |
| Stock-based Compensation |
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| Impairment of Goodwill and Other Long-Lived Assets |
| Accounts Receivable |
| Software Development Costs |
| Income Taxes |
Please refer to the critical accounting policies set forth in our Annual Report on Form 10-K as of and for the fiscal year ended December 31, 2011, filed with the Securities and Exchange Commission, or the SEC, on March 30, 2012, for a description of all critical accounting policies.
The critical accounting policies included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011 have not materially changed.
OVERVIEW
RESULTS OF OPERATIONS (in thousands, except percentages and per share amounts)
Revenue and Gross Profit:
Three Months Ended September 30, | Change | |||||||||||||||||||||||
2012 | % of Revenue |
2011 | % of Revenue |
Dollars | Percent | |||||||||||||||||||
Revenue |
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Software licenses |
$ | 347 | 21.2 | % | $ | 711 | 33.6 | % | $ | (364 | ) | (51.2 | )% | |||||||||||
Services |
1,288 | 78.8 | 1,402 | 66.4 | (114 | ) | (8.1 | ) | ||||||||||||||||
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Total revenue |
1,635 | 100.0 | 2,113 | 100.0 | (478 | ) | (22.6 | ) | ||||||||||||||||
Cost of Revenue |
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Software licenses |
237 | 68.3 | 278 | 39.1 | (41 | ) | (14.7 | ) | ||||||||||||||||
Services |
629 | 48.8 | 539 | 38.4 | 90 | 16.7 | ||||||||||||||||||
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Total cost of revenue |
866 | 53.0 | 817 | 38.7 | 49 | 6.0 | ||||||||||||||||||
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Gross Profit |
$ | 769 | 47.0 | % | $ | 1,296 | 61.3 | % | $ | (527 | ) | (40.7 | )% | |||||||||||
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Nine Months Ended September 30, | Change | |||||||||||||||||||||||
2012 | % of Revenue |
2011 | % of Revenue |
Dollars | Percent | |||||||||||||||||||
Revenue |
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Software licenses |
$ | 1,391 | 25.9 | % | $ | 2,078 | 32.2 | % | $ | (687 | ) | (33.1 | )% | |||||||||||
Services |
3,977 | 74.1 | 4,379 | 67.8 | (402 | ) | (9.2 | ) | ||||||||||||||||
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Total revenue |
5,368 | 100.0 | 6,457 | 100.0 | (1,089 | ) | (16.9 | ) | ||||||||||||||||
Cost of Revenue |
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Software licenses |
700 | 50.3 | 859 | 41.3 | (159 | ) | (18.5 | ) | ||||||||||||||||
Services |
1,841 | 46.3 | 1,519 | 34.7 | 322 | 21.2 | ||||||||||||||||||
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Total cost of revenue |
2,541 | 47.3 | 2,378 | 36.8 | 163 | 6.9 | ||||||||||||||||||
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Gross Profit |
$ | 2,827 | 52.7 | % | $ | 4,079 | 63.2 | % | $ | (1,252 | ) | (30.7 | )% | |||||||||||
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License Revenue
We recognize license revenue from direct sales and licensing agreements of our products and products from third parties, licensing agreements with OEMs, and from the resale of our products through various resellers. We recognize reseller revenue on a sell-in basis and bear no obligation after the license has been delivered to the reseller.
The decrease in revenue from software licenses for the three and nine month periods ended September 30, 2012 as compared to the three and nine month periods ended September 30, 2011 was due to decreases across all our sales channels. During the first nine months of 2012, our sales continued to be affected by the global economic downturn. The decrease in OEM royalties is attributable primarily to reduced sales with certain of our OEMs and the delayed introductions of new versions of our solutions which were anticipated earlier in the year but which were not released until our third quarter of 2012.
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Additionally, the decrease in direct sales during the first quarter was affected by the Separation of MSDH from Bitstream and activities related to the merger of Bitstream with Monotype Imaging. These activities began in 2011 and were completed during the first quarter of 2012. We expect with the release of new versions of our products, the stabilization of the iWay product, the localization of the Pageflex Storefront product and our increase in sales and marketing resources, that our revenue will begin to show improvement during the fourth quarter of 2012 and will continue to increase in 2013 as compared to levels achieved in 2012, though there can be no assurance that such revenue levels can be achieved.
Service Revenue
Services revenue decreased for the three and nine month periods ended September 30, 2012 due primarily to a significant consulting agreement completed during the three months ended September 30, 2011. Services revenue also decreased for the nine month period ended September 30, 2012 primarily due to an end-of-life support contract which resulted in non-recurring support revenue for the nine month period ended September 30, 2011. These decreases were partially offset by the completion of a consulting engagement in the second quarter of 2012. Other product services revenue for customer support, consulting, custom design and training services were generally consistent period over period. We expect the revenue from support contracts to increase for the remainder of 2012, however there can be no assurance that this upward trend will be sustained. Consulting, design and training services vary with specific requirements of customers and may be affected more by economic concerns as customers may delay design changes, custom development and training.
Cost of Revenue
Cost of revenue includes hosting costs, royalties and fees paid to third parties for the license of rights to technology, costs incurred in the fulfillment of custom orders, costs incurred in providing customer support, maintenance and training, and costs associated with the duplication, packaging and shipping of products. Cost of revenue also includes amortization of acquired-technology from the acquisition of assets from Press-Sense Ltd. and the amortization of capitalized internally developed software related to the translation of our products into multiple languages.
Cost of License Revenue
The decrease in cost of license revenue for the three and nine month periods ended September 30, 2012 as compared to the same periods ended September 30, 2011 was primarily related to a decision to suspend the hosting of the BOLT browser free user base, partially offset by the first month of amortization of internally developed software related to the translation of Pageflex products into multiple languages. For the nine months ended September 30, 2012, these decreases were also partially offset by increased royalties related to increased sales of third party products during the second quarter.
Cost of Service Revenue
The increase in cost of services revenue for the three and nine months ended September 30, 2012, as compared to the same period in 2011 was primarily due to increases in salary and related expenses for additional resources, contractor costs, expendable equipment purchases, and increased facilities costs resulting from added resources. The increase in contractor costs for the three and nine months ended September 30, 2012 resulted from costs to transfer our support services to an alternate system, as well as costs related to the setup of a new hosted product offering. Our cost of services infrastructure increased during the first nine months of 2012 and we expect these costs to decrease during the fourth quarter of this year with the reduction in workforce that we announced in August 2012. We do not expect our variable costs to continue to increase for the remainder of 2012.
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Operating Expenses:
Three Months Ended September 30, | Change | |||||||||||||||||||||||
% of | % of | |||||||||||||||||||||||
2012 | Revenue | 2011 | Revenue | Dollars | Percent | |||||||||||||||||||
Marketing and selling |
$ | 872 | 53.3 | % | $ | 954 | 45.1 | % | $ | (82 | ) | (8.6 | )% | |||||||||||
Research and development |
1,343 | 82.1 | 1,703 | 80.6 | (360 | ) | (21.1 | ) | ||||||||||||||||
General and administrative |
773 | 47.3 | 665 | 31.5 | 108 | 16.2 | ||||||||||||||||||
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Total operating expenses |
$ | 2,988 | 182.7 | % | $ | 3,322 | 157.2 | % | $ | (334 | ) | (10.1 | )% | |||||||||||
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Nine Months Ended September 30, | Change | |||||||||||||||||||||||
% of | % of | |||||||||||||||||||||||
2012 | Revenue | 2011 | Revenue | Dollars | Percent | |||||||||||||||||||
Marketing and selling |
$ | 3,108 | 57.9 | % | $ | 2,652 | 41.1 | % | $ | 456 | 17.2 | % | ||||||||||||
Research and development |
4,714 | 87.8 | 5,154 | 79.8 | (440 | ) | (8.5 | ) | ||||||||||||||||
General and administrative |
2,790 | 52.0 | 2,453 | 38.0 | 337 | 13.7 | ||||||||||||||||||
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Total operating expenses |
$ | 10,612 | 197.7 | % | $ | 10,259 | 158.9 | % | $ | 353 | 3.4 | % | ||||||||||||
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Marketing and Selling (M&S) Expense
Marketing and selling (M&S) expense consists primarily of salaries and benefits, commissions, travel expense and facilities costs related to sales and marketing personnel, as well as marketing program-related costs. The decrease in M&S for the three months ended September 30, 2012 as compared to the three months ended September 30, 2011 related primarily to decreases in salaries and benefits, as well as in tradeshow costs as a result of timing of the Graph Expo show which was held in the third quarter of 2011 but not until the fourth quarter of 2012. The increase in M&S for the nine months ended September 30, 2012 as compared to the nine months ended September 30, 2011 related primarily to increases in salary and benefit costs, employee travel, sales subcontractors including resources in Poland and Brazil, and facilities related expenses resulting from the increased resources. We expect that our M&S expense will increase in absolute dollars during the remainder of 2012, due to the timing of participation in marketing and tradeshow activities, as well as from increases in commissionable sales and as we invest in new sales and marketing resources.
Research and Development (R&D) Expense
Research and development (R&D) expense consists primarily of salary and benefit costs, contracted third-party development costs, and facility costs related to software developers and management. R&D expense decreased for the three months ended September 30, 2012, as compared to the three months ended September 30, 2011 primarily due to the reduction in R&D resources related to BOLT browser product development. The decrease reported for the nine months ended September 30, 2012 as compared to the nine months ended September 30, 2011 was primarily due to the reduction in R&D resources related to the BOLT browser product development, partially offset by an increase in stock compensation expense from the acceleration of Bitstream options and restricted stock awards caused by the merger of Bitstream on March 19, 2012. We expect our R&D costs to decrease during the fourth quarter of this year due to the reduction in workforce that we announced in August 2012.
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General and Administrative (G&A) Expense
G&A expense consists primarily of salaries, benefits, and other related costs including travel and facility expenses for finance, human resource, legal and executive personnel, legal and accounting professional services, provision for bad debts, directors fees and director and officer insurance. G&A expense increased for the three months ended September 30, 2012 as compared to the three months ended September 30, 2011, consisting primarily of costs associated with public financial reporting, reduced allocation of facilities costs, and severance costs resulting from a workforce reduction in the US during the third quarter 2012. These increases were partially offset by a decrease in professional services costs.
G&A expense increased for the nine months ended September 30, 2012 as compared to the nine months ended September 30, 2011 due to increases from the three months ended September 30, 2012 as compared to the three months ended September 30, 2011 as explained above, as well as from Bitstream stock compensation expense and G&A bonus and related tax expense, both related to the Bitstream merger with Monotype during the first quarter of 2012. These increases were partially offset by a management fee allocation to Bitstream in accordance with the management fee agreement between MSDH and Bitstream (see Note (2) Basis of Presentation and Allocation methodologies for details). In addition, the first quarter of 2012 included $2,250 of transaction costs related to the spinout of MSDH from Bitstream Inc. and the merger of Bitstream into Monotype Imaging Inc., which were fully allocated to Bitstream during the first quarter, resulting in a net effect of zero. We expect MSDH G&A expense to increase during the remainder of the year ended December 31, 2012 when compared to the carve-out expenses reported for 2011 as MSDH will bear the full costs of the previously shared expenditures and we expect the overall decrease in those costs to be less than the amount to be absorbed by MSDH.
Other Income, Net:
Other income consists primarily of foreign currency transactions gains or losses.
Provision for Income Taxes:
The provision for income taxes consists of foreign taxes in Israel and U.S. federal tax expense related to the deferred tax liability created by the taxable amortization of Goodwill. There was no significant change in the provision for taxes for the three months ended September 30, 2012 and 2011, and for the nine months ended September 30, 2012 and 2011.
The Company accounts for income taxes in accordance with GAAP, which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of the temporary differences between the book and tax basis of recorded assets and liabilities. The Company makes estimates and judgments with regard to the calculation of certain income tax assets and liabilities. GAAP requires that deferred tax assets be reduced by valuation allowances if, based on the consideration of all available evidence, it is more likely than not that some portion of the deferred tax asset will not be realized. Significant weight is given to evidence that can be objectively verified.
For purposes of the Companys historical financial statements prior to the Separation, income tax expense and deferred income tax balances were recorded as if the Company had filed tax returns on a separate return basis (hypothetical carve-out basis) from Bitstream. After the completion of the Separation, income tax expense and deferred income tax balances are recorded in accordance with the Companys stand-alone income tax positions.
MSDHs operating results have been included in Bitstreams consolidated U.S. federal and state income tax returns, as well as included in Bitstreams tax filings for non-U.S. jurisdictions. The Companys non-U.S. operations have primarily been conducted within Bitstreams non-U.S. subsidiaries which share operations with Bitstreams other businesses. For purposes of the Companys condensed consolidated financial statements, income tax expense and deferred tax balances have been recorded as if the Company had filed tax returns on a separate return basis from Bitstream. The Companys contribution to Bitstreams tax losses and tax credits on a separate return basis has been included in these condensed consolidated financial statements. The Companys separate return basis tax loss will not reflect the tax positions taken or to be taken by Bitstream. In many cases tax losses and tax credits generated by the Company have been available for use by Bitstream and will largely remain with Bitstream after the completion of the Separation.
As the Company continues to incur cumulative taxable losses in the United States, the Company recorded a full valuation allowance against the Companys U.S. deferred tax assets, net of reversing taxable temporary differences.
We have made an indefinite reinvestment of earnings in our Israeli subsidiary and, therefore, we do not provide for U.S. income taxes applicable to its undistributed earnings.
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We have recorded a deferred tax liability and related income tax expense for the naked credit resulting from the amortization of goodwill for tax purposes. The total deferred liability at September 30, 2012 and December 31, 2011 was $174 and $115, respectively.
LIQUIDITY AND CAPITAL RESOURCES (dollar amounts in thousands)
At September 30, 2012, our primary source of liquidity comes from our cash of $621. Our cash at September 30, 2012 of $621 includes $308 held by our Israeli subsidiary that is not available to fund domestic operations, unless the funds were repatriated. We do not intend to repatriate funds and if we do we will accrue and pay any applicable taxes on the repatriated funds, as required. The Pageflex and BOLT products historically have been funded directly through the conduct of our operations as a component of Bitstream. For the nine months ended September 30, 2012 and 2011, we incurred net losses of $7,957 and $6,305, respectively. Bitstream contributed capital of $9,005 and $5,434 for the nine months ended September 30, 2012 and 2011, respectively. As of September 30, 2012, we had a working capital deficit of $2,234.
Our operating activities used cash during the nine months ended September 30, 2012 and 2011 of $8,060 and $4,579, respectively. The increased usage of cash during the nine months ended September 30, 2012 as compared to the same period in the prior year resulted primarily from an increased net loss of $1,652, a decrease in contributions from working capital accounts of $1,743, and a decrease in the add-backs of non-cash expense items of $86. Cash used in operating activities has historically been affected by the amount of net loss, changes in working capital accounts and add-backs of non-cash expense items such as depreciation and amortization and the expense associated with stock-based awards.
Cash used in investing activities during the nine months ended September 30, 2012 and 2011 was $875 and $786, respectively. Cash used in investing activities during the nine months ended September 30, 2012 and 2011 consisted of increases in restricted cash, the capitalization of internally developed software, and purchases of property and equipment.
Our financing activities for the nine months ended September 30, 2012 and 2011 provided cash of $9,005 and $5,434, respectively. Cash provided by financing activities consists entirely of contributions from Bitstream.
We are utilizing approximately 40% of the square footage of the Marlborough, Massachusetts headquarters after the decrease in personnel associated with the Bitstream Merger and a reduction in workforce during August 2012. Management anticipates a reduction in operating costs through the elimination of certain fixed costs, including, without limitation, the possible sub-letting or returning to the landlord of the unutilized space that currently exists. However, there can be no assurance that management will be successful in implementing these cost-cutting plans or that such plans will be successful or, if successful, how long they will take to implement.
The unaudited condensed consolidated financial statements have been prepared on a basis that contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. MSDHs long-term viability is dependent on its ability to generate sufficient product revenue, net income and cash flows from operations to support its business as well as its ability to obtain additional financing. Managements plans also include reducing operating costs and delaying certain expenditures, if necessary, to maintain the Companys liquidity. The Separation from Bitstream Inc. has disrupted and may continue to disrupt our business and management, negatively affecting our business, operating results or financial condition and may cause other risks to the Company. MSDH has suffered recurring losses from operations, both before and after the Separation. For its liquidity, prior to Separation, the Company relied on contributions from Bitstream. As of March 19, 2012, MSDH had accumulated contributions of approximately $60,977 from its former Parent. After Separation, the Company has sought third party investors to reduce the Companys liquidity risks.
MSDH received an equity commitment from two investors on October 10, 2012, scheduled to occur in two tranches. The first in the aggregate amount of $2,000 in exchange for 597 shares of 6.5% redeemable preferred stock and 2,985 common stock warrants closed on October 11, 2012. A second tranche of $1,500 of the same securities shall occur in 2013 if certain performance criteria specified in the investment documents are achieved by the end of the second quarter of 2013. In addition, the Company received commitments from certain customers with terms including the prepayment of software licenses in the aggregate amount of $850 payable over the course of the next three fiscal quarters, subject in each case to the Company continuing to provide service and support to these customers. Additionally, MSDH announced on August 27, 2012 that it had restructured its global workforce eliminating 28 positions, including 7 contractors, a reduction in our workforce of approximately 26%.
Management believes that with its current operating plan, the additional funds received by the Company from the October 10, 2012 equity investment, and anticipated cash flows in the next year, cash will be sufficient to meet the Companys working capital and capital expenditure requirements through at least the next twelve months. There can be no assurance, however, that MSDH will not require additional financing in the future if funds from future operations or estimated expenses differ materially from those amounts estimated by management. In October 2012, the Company engaged a financial advisory firm to assist the company with exploring its strategic alternatives. There can be no assurance that additional financing sources of capital would be available on terms favorable to us, if at all. In addition, MSDH and Bitstream have entered into certain ancillary agreements in connection with the Separation and Distribution that provide for indemnification of Bitstream with respect to certain liabilities of the Pageflex and BOLT products contributed to MSDH.
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Potential Indemnification Obligations
We enter into standard indemnification agreements in the ordinary course of business. Pursuant to these agreements, we indemnify, hold harmless, and agree to reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally business partners or customers, in connection with any U.S. patent, or any copyright or other intellectual property infringement claim by any third party with respect to our products. The term of these indemnification agreements is generally perpetual any time after execution of the agreement. The maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited. We have never incurred costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, we believe the estimated fair value of these agreements is minimal, but we can provide no assurance that payments will not be required under these agreements in the future.
In connection with the Separation of MSDH from Bitstream and the Merger of Bitstream with Monotype, the Company entered into certain indemnification agreements with Monotype. A detailed discussion of these agreements is included in our Form 10-K filed with the SEC on March 30, 2012.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements or unconsolidated special-purpose entities within the meaning of Item 303(a)(4) of Regulation S-K.
RECENT ACCOUNTING PRONOUNCEMENTS
Recent Accounting Pronouncements Not Yet Adopted
There has been one new accounting pronouncement during the three months ended September 30, 2012, as compared to the recent accounting pronouncements described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011, that is of significance, or potential significance, to us.
In July 2012, the FASB issued ASU No. 2012-02, Intangibles Goodwill and Other (Topic 350) Testing Indefinite-Lived Intangible Assets for Impairment (ASU 2012-02). This update amends existing guidance by giving an entity testing an indefinite-lived intangible asset for impairment the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. If an entity determines that it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount, then the performance of the quantitative impairment test, as currently prescribed by ASC Topic 350, is required. ASU 2012-02 is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted. The adoption of this update did not have a significant effect on the Companys condensed consolidated financial statements and related disclosures.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Primary Market Risk Exposures. Our primary market risk exposures are in the areas of interest rate risk and foreign currency exchange rate risk. Our investment portfolio of cash equivalent and short-term investments is subject to interest rate fluctuations, but we believe this risk is immaterial due to the short-term nature of these investments.
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Foreign Currency Exchange Risk. Our exposure to currency exchange rate fluctuations has been, and is expected to continue to be, modest due to the fact that the operations of our Israeli subsidiary are conducted partially in Israels local currency. Currently, we do not engage in foreign currency hedging activities.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of September 30, 2012. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of September 30, 2012, these disclosure controls and procedures were effective to provide reasonable assurance that material information required to be disclosed by us, including our consolidated subsidiaries, in reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the Commission rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Evaluation of Changes in Internal Control over Financial Reporting
No change in the Companys internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the quarter ended September 30, 2012 that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.
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From time to time we are subject to legal proceedings and claims in the ordinary course of business, including claims of infringement of third-party patents and other intellectual property rights, and claims involving commercial, employment and other matters. In accordance with generally accepted accounting principles, we make a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. This provision is reviewed at least quarterly. As of September 30, 2012, there are no material pending legal proceedings to which we are a party, and no liability was recorded. Litigation is inherently unpredictable and it is possible that our financial position, cash flows, or results of operations could be materially affected in any particular period by the resolution of any such contingencies or the costs involved in seeking the resolution of any such contingencies.
We incorporate herein by reference the risk factors contained in Part I, Item 1A of our Annual Report on Form 10-K as of and for the fiscal year ended December 31, 2011. There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(a) | None. |
(b) | Not applicable. |
(c) | None. |
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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(a) | None. |
(b) | None. |
PART IV
(a) | Exhibits. |
Certain of the exhibits listed hereunder have been previously filed with the SEC as exhibits to certain registration statements and periodic reports as indicated in the footnotes below and are incorporated herein by reference pursuant to Rule 411 promulgated under the Securities Act and Rule 24 of the SECs Rules of Practice. The location of each document so incorporated by reference is indicated in parentheses.
EXHIBIT NO. |
DESCRIPTION | |
3.1 | Certificate of Designation of 6.5% Series A Redeemable Preferred Stock (filed as Exhibit 3.1 to MSDHs Current Report on Form 8-K as filed with the SEC on October 11, 2012 and incorporated herein by reference). | |
10.1 | Securities Purchase Agreement, dated October 10, 2012, by and between the Company and the purchasers listed in Annex A thereto (filed as Exhibit 10.1 to MSDHs Current Report on Form 8-K as filed with the SEC on October 11, 2012 and incorporated herein by reference). | |
10.2 | Form of Common Stock Purchase Warrant dated as of October 10, 2012 (filed as Exhibit 10.2 to MSDHs Current Report on Form 8-K as filed with the SEC on October 11, 2012 and incorporated herein by reference) | |
31.1* | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2* | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1*** | Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101.INS** | XBRL Instance Document | |
101.SCH** | XBRL Taxonomy Extension Schema Document | |
101.CAL** | XBRL Calculation Linkbase Document | |
101.DEF** | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB** | XBRL Label Linkbase Document | |
101.PRE** | XBRL Taxonomy Presentation Linkbase Document |
* | Filed herewith. |
** | XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections. |
*** | Furnished herewith. |
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, in Marlborough, Commonwealth of Massachusetts on this 14th day of November, 2012.
SIGNATURE |
TITLE |
DATE | ||||||
/S/ PINHAS ROMIK Pinhas Romik |
President and Chief Executive Officer | November 14, 2012 | ||||||
/S/ JAMES P. DORE James P. Dore |
Executive Vice President and Chief Financial Officer | November 14, 2012 |
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