SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
____________________
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 2003
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to __________
_________________
Commission file number: 000-26952
Delaware |
| 33-0676350 |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. EmployerIdentification No.) |
12 Morgan, Irvine, California | 92618 |
(Address of principal executive office) | (Zip Code) |
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes No X
The Registrant’s revenues for its recent fiscal year were $13,630,900.
The aggregate market value of voting stock based upon the closing sale price held by non-affiliates of the Registrant on July 31, 2003 was $2,354,621.
(Indicate the number of shares of each of the registrant’s classes of common stock, as of the latest practicable date.)
Title | Date | Outstanding |
Common Stock, $.001 Par Value | August 12, 2003 | 13,900,720 |
Item 1. Financial Statements | |||||||
ENTRADA NETWORKS, INC. | |||||||
AND SUBSIDIARIES | |||||||
CONSOLIDATEDBALANCESHEET | |||||||
(In Thousands) | |||||||
July 31, |
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| January 31, |
| |||
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| 2003 |
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| 2003 | ||
(unaudited | ) | (audited | ) | ||||
ASSETS | |||||||
CURRENT ASSETS | |||||||
Cash and equivalents | $ | 850 | $ | 808 | |||
Short-term Investments | 52 | 45 | |||||
Accounts receivable, net of allowance for doubtful | |||||||
accounts of $84 and $212, respectively | 708 | 1,329 | |||||
Inventory, net of reserves of $3,799 and $3,809, respectively | 3,581 | 3,576 | |||||
Prepaid expenses and other current assets | 533 | 509 | |||||
TOTAL CURRENT ASSETS | 5,724 | 6,267 | |||||
PROPERTY AND EQUIPMENT, NET | 777 | 1,073 | |||||
OTHER ASSETS | |||||||
Deposits | 31 | 31 | |||||
Restricted cash | 0 | 300 | |||||
TOTAL OTHER ASSETS | 31 | 331 | |||||
TOTAL ASSETS | $ | 6,532 | $ | 7,671 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
CURRENT LIABILITIES | |||||||
Accounts payable | 597 | 810 | |||||
Other current and accrued liabilities | 1,053 | 1,409 | |||||
Short-term debt | 398 | 474 | |||||
Capital lease obligations | 16 | 68 | |||||
TOTAL LIABILITIES | $ | 2,064 | $ | 2,761 | |||
STOCKHOLDERS' EQUITY | |||||||
Preferred stock, $.001 par value, 2,000 shares authorized, no shares outstanding | - | - | |||||
Common stock, $.001 par value; 50,000 shares authorized; 13,901 shares | |||||||
issued and outstanding at July 31, 2003; 12,937 shares issued | |||||||
and outstanding at January 31, 2003 | 13 | 13 | |||||
Additional paid-in capital | 52,001 | 52,001 | |||||
Accumulated other comprehensive income (loss) | (2 | ) | - | ||||
Accumulated deficit | (47,417 | ) | (47,104 | ) | |||
Treasury Stock (402,616 shares at cost) | (127 | ) | - | ||||
TOTAL STOCKHOLDERS' EQUITY | 4,468 | 4,910 | |||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 6,532 | $ | 7,671 | |||
See accompanying notes to consolidated financial statements. |
Page 2 | ||
ENTRADA NETWORKS, INC. | |||||||||||||
AND SUBSIDIARIES | |||||||||||||
CONSOLIDATED STATEMENT OF OPERATIONS | |||||||||||||
(In Thousands, except per share amounts) | |||||||||||||
Three months ended | Six months ended | ||||||||||||
July 31, | July 31, | ||||||||||||
2003 |
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| 2002 |
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| 2003 |
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| 2002 | ||||
NET REVENUES | |||||||||||||
PRODUCT | $ | 1,847 | $ | 3,059 | $ | 4,233 | $ | 5,799 | |||||
SERVICES | 206 | 307 | 528 | 790 | |||||||||
TOTAL NET REVENUES | 2,053 | 3,366 | 4,761 | 6,589 | |||||||||
COST OF REVENUE | |||||||||||||
PRODUCT | 1,219 | 1,847 | 2,619 | 3,602 | |||||||||
SERVICES | 73 | (21 | ) | 169 | 129 | ||||||||
TOTAL COST OF REVENUE | 1,292 | 1,826 | 2,788 | 3,731 | |||||||||
GROSS PROFIT | 761 | 1,540 | 1,973 | 2,858 | |||||||||
OPERATING EXPENSES | |||||||||||||
Selling and marketing | 148 | 219 | 310 | 426 | |||||||||
Engineering, research and development | 362 | 283 | 681 | 568 | |||||||||
General and administrative | 509 | 518 | 962 | 1,019 | |||||||||
Other operating expenses | 281 | 120 | 341 | 240 | |||||||||
TOTAL OPERATING EXPENSES | 1,300 | 1,140 | 2,294 | 2,253 | |||||||||
INCOME (LOSS) FROM OPERATIONS | (539 | ) | 400 | (321 | ) | 605 | |||||||
OTHER CHARGES | |||||||||||||
Interest expense, net | (7 | ) | (52 | ) | (7 | ) | (103 | ) | |||||
Other expense | - | - | 15 | - | |||||||||
TOTAL OTHER CHARGES | (7 | ) | (52 | ) | 8 | (103 | ) | ||||||
NET INCOME (LOSS) | $ | (546 | ) | $ | 348 | $ | (313 | ) | $ | 502 | |||
INCOME (LOSS) PER COMMON SHARE: | |||||||||||||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | |||||||||||||
BASIC | 13,318 | 12,813 | 13,149 | 12,644 | |||||||||
DILUTED | 13,318 | 13,045 | 13,149 | 12,747 | |||||||||
BASIC AND DILUTED NET INCOME (LOSS) PER COMMON SHARE | |||||||||||||
BASIC | $ | (0.04 | ) | $ | 0.03 | $ | (0.02 | ) | $ | 0.04 | |||
DILUTED | $ | (0.04 | ) | $ | 0.03 | $ | (0.02 | ) | $ | 0.04 | |||
See accompanying notes to consolidated financial statements. |
Page 3 | ||
ENTRADA NETWORKS, INC. | |||||||
AND SUBSIDIARIES | |||||||
CONSOLIDATEDSTATEMENTS OFCASHFLOWS | |||||||
(In Thousands) | Six Months Ended July 31, | ||||||
2003 | 2002 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||
Net income (loss) | $ | (313 | ) | $ | 502 | ||
Adjustments to reconcile net income (loss) to net cash provided by | |||||||
operating activities: | |||||||
Depreciation and amortization | 300 | 342 | |||||
Accounts receivable and inventory reserve changes | (139 | ) | (53 | ) | |||
Sale of property and equipment | - | 20 | |||||
Non-cash change in short-term investment | (8 | ) | - | ||||
Issuance of common stock in payment of liabilities | - | 32 | |||||
Changes in assets and liabilities net of effects of business entity | |||||||
acquisition: | |||||||
(Increase) decrease in accounts receivable | 749 | 1,003 | |||||
(Increase) decrease in inventories | 5 | (325 | ) | ||||
(Increase) decrease in prepaid and other current assets | 276 | (55 | ) | ||||
Increase (decrease) in accounts payable | (214 | ) | (588 | ) | |||
Increase (decrease) in accrued expenses | (195 | ) | (991 | ) | |||
Increase (decrease) in other current liabilities | (160 | ) | 159 | ||||
NET CASH PROVIDED BY OPERATING ACTIVITIES: | 301 | 46 | |||||
CASH FLOWS USED IN INVESTING ACTIVITIES: | |||||||
Purchase of treasury stock | (127 | ) | - | ||||
Investment in marketable securities | - | (51 | ) | ||||
Purchase of property and equipment | (4 | ) | - | ||||
NET CASH USED IN INVESTING ACTIVITIES | (131 | ) | (51 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Repayment of short-term debt | (76 | ) | (43 | ) | |||
Repayment of capital lease obligations | (52 | ) | (87 | ) | |||
NET CASH USED IN FINANCING ACTIVITIES | (128 | ) | (130 | ) | |||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 42 | (135 | ) | ||||
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD | 808 | 698 | |||||
CASH AND CASH EQUIVALENTS - END OF PERIOD | $ | 850 | $ | 563 | |||
See accompanying notes to consolidated financial statements. |
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ENTRADA NETWORKS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (In thousands, except per share amounts) |
Page 5 | ||
ENTRADA NETWORKS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)- Continued (In thousands, except per share amounts) |
Page 6 | ||
ENTRADA NETWORKS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)- Continued (In thousands, except per share amounts) |
Three Months Ended July 31, | Six Months Ended July 31, | ||||||||||||
2003 | 2002 | 2003 | 2002 | ||||||||||
Net income (loss): | |||||||||||||
As reported | $ | (546 | ) | $ | 348 | $ | (313 | ) | $ | 502 | |||
Add: Stock based employee compensation expense | - | - | - | - | |||||||||
Deduct: Total stock based employee compensation | |||||||||||||
expense determined under fair value method | (16 | ) | (254 | ) | (205 | ) | (600 | ) | |||||
Pro forma income (loss) per share: | (562 | ) | 94 | (518 | ) | (98 | ) | ||||||
Basic and diluted EPS as reported | $ | (0.04 | ) | $ | 0.03 | $ | (0.02 | ) | $ | 0.04 | |||
Pro forma basic and diluted EPS | $ | (0.04 | ) | $ | 0.01 | $ | (0.04 | ) | $ | (0.01 | ) | ||
July 31, 2003 | January 31, 2003 | ||||||
Raw material | $ | 3,493 | $ | 3,736 | |||
Work in process | 283 | 163 | |||||
Finished goods | 3,604 | 3,486 | |||||
7,380 | 7,385 | ||||||
Less: valuation reserve | (3,799 | ) | (3,809 | ) | |||
Net Inventories | $ | 3,581 | $ | 3,576 | |||
TREASURY STOCK
On May 27, 2003, we announced that our Board of Directors has authorized the repurchase of up to $500,000 of the Company’s common stock over the next twelve months at prevailing market prices. Stock repurchases may be made from time-to-time during the twelve-month period at management's discretion, either in the open market or through privately negotiated transactions.
During the three month period ended July 31, 2003, we repurchased 18,001 shares of our common stock from certain shareholders in the open market pursuant to a previously announced odd-lot repurchase program and 384,615 sharesat a fair market 10 dayaverage pricefrom our Chairman and CEO pursuant to a private agreement approved by our independent directors. The aggregate purchase price for the 402,616 shares of our common stock was $126,677.
Page 7 | ||
ENTRADA NETWORKS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)- Continued (In thousands, except per share amounts) |
Three Months Ended July 31, | Six Months Ended July 31, | ||||||||||||
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| 2003 |
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| 2002 |
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| 2003 |
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| 2002 |
| |
Net income (loss) available to common | |||||||||||||
stockholders used in basic and diluted EPS | $ | (546 | ) | $ | 348 | $ | (313 | ) | $ | 502 | |||
Weighted average number of common shares | |||||||||||||
used in basic EPS | 13,317,972 | 12,812,801 | 13,149,222 | 12,643,928 | |||||||||
Three Months Ended July 31, | Six Months Ended July 31, | ||||||||||||
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| 2003 |
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| 2002 |
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| 2003 |
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| 2002 |
| |
Net income available to common | |||||||||||||
stockholders used in basic EPS | $ | (546 | ) | $ | 348 | $ | (313 | ) | $ | 502 | |||
Weighted average number of common shares | |||||||||||||
used in basic EPS | 13,317,972 | 12,812,801 | 13,149,222 | 12,643,928 | |||||||||
Effect of dilutive securities: | |||||||||||||
Stock benefit plans | - | 231,990 | - | 102,633 | |||||||||
Weighted average number of common shares | |||||||||||||
and dilutive potential common stock | |||||||||||||
used in diluted EPS | 13,317,972 | 13,044,791 | 13,149,222 | 12,746,561 | |||||||||
Page 8 | ||
ENTRADA NETWORKS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)- Continued (In thousands, except per share amounts) |
July 31, |
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| July 31, |
| |||
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| 2003 |
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| 2002 | ||
Cisco | 46.9 | % | 56.1 | % | |||
Computer Overseas Corp | 10.6 | % | - | ||||
Celestica | 10.3 | % | - |
Page 9 | ||
ENTRADA NETWORKS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)- Continued (In thousands, except per share amounts) |
Three months ended July 31, | Six months ended July 31, |
| |||||||||||
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| 2003 |
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| 2002 |
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| 2003 |
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| 2002 | ||
Net Revenues: | |||||||||||||
United States | $ | 1,971 | $ | 3,066 | $ | 4,557 | $ | 6,067 | |||||
Europe | 82 | 300 | 204 | 522 | |||||||||
Other | -- | -- | -- | -- | |||||||||
Total net revenues | $ | 2,053 | $ | 3,366 | 4,761 | 6,589 | |||||||
Three months ended July 31, | Six months ended July 31, | ||||||||||||
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| 2003 |
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| 2002 |
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| 2003 |
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| 2002 | ||
Net Revenues: | |||||||||||||
Network adapter cards | $ | 1,695 | $ | 2,918 | $ | 3,957 | $ | 5,547 | |||||
Frame relay network products | 152 | 141 | 276 | 252 | |||||||||
Service and support | 206 | 307 | 528 | 790 | |||||||||
Total net revenue | $ | 2,053 | $ | 3,366 | $ | 4,761 | $ | 6,589 | |||||
Page 10 | ||
ENTRADA NETWORKS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)- Continued (In thousands, except per share amounts) |
| Rixon Networks |
|
| Sync Research |
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| Torrey Pines Networks |
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| Total |
| ||
| Quarter ended July 31, 2003 | ||||||||||||
Total Revenues | $ | 1,695 | $ | 358 | $ | - | 2,053 | ||||||
Net Income (loss) | (530 | ) | 90 | (106 | ) | (546 | ) | ||||||
Depreciation and amortization expense | 95 | 14 | 41 | 150 | |||||||||
Inventory reserve additions | (36 | ) | - | - | (36 | ) | |||||||
Capital asset additions | 4 | - | - | 4 | |||||||||
Total Assets | $ | 4,356 | $ | 1,455 | $ | 721 | $ | 6,532 |
Rixon Networks |
|
| Sync Research |
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| Torrey Pines Networks |
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| Total |
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| Six months ended July 31, 2003 | ||||||||||||
Total Revenues | 3,957 | 804 | - | 4,761 | |||||||||
Net Income (loss) | (329 | ) | 203 | (187 | ) | (313 | ) | ||||||
Depreciation and amortization expense | 185 | 32 | 83 | 300 | |||||||||
Inventory reserve additions | (10 | ) | - | - | (10 | ) | |||||||
Capital asset additions | 4 | - | - | 4 | |||||||||
Total Assets | $ | 4,356 | $ | 1,455 | $ | 721 | $ | 6,532 |
Page 11 | ||
ENTRADA NETWORKS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)- Continued (In thousands, except per share amounts) |
| Rixon Networks |
|
| Sync Research |
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| Torrey Pines Networks |
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| Total |
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| Quarter ended July 31, 2002 | ||||||||||||
Revenue from External Customers | $ | 2,918 | $ | 448 | - | $ | 3,366 | ||||||
Inter-segment Revenues | - | - | - | - | |||||||||
Total Revenues | 2,918 | 448 | - | 3,366 | |||||||||
Net income (loss) | 336 | 55 | (43 | ) | 348 | ||||||||
Depreciation and amortization expense | 78 | 16 | 40 | 207 | |||||||||
Inventory reserve additions | (254 | ) | (45 | ) | - | (299 | ) | ||||||
Capital asset additions | - | - | - | - | |||||||||
Total Assets | $ | 7,559 | $ | 393 | $ | 528 | $ | 8,480 |
| Rixon Networks |
|
| Sync Research |
|
| Torrey Pines Networks |
|
| Total |
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| ||||||||
| Six Months ended July 31, 2002 | ||||||||||||
Revenue from External Customers | $ | 5,547 | $ | 1,042 | - | $ | 6,589 | ||||||
Inter-segment Revenues | - | - | - | - | |||||||||
Total Revenues | 5,547 | 1,042 | - | 6,589 | |||||||||
Net income (loss) | 451 | 135 | (84 | ) | 502 | ||||||||
Depreciation and amortization expense | 228 | 33 | 80 | 342 | |||||||||
Inventory reserve additions | (241 | ) | (27 | ) | - | (268 | ) | ||||||
Capital asset additions | - | - | - | - | |||||||||
Total Assets | $ | 7,559 | $ | 393 | $ | 528 | $ | 8,480 |
Page 12 | ||
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Page 14 | ||
On May 27, 2003, we announced that our Board of Directors has authorized the repurchase of up to $500,000 of the Company’s common stock over the next twelve months at prevailing market prices. Stock repurchases may be made from time-to-time during the twelve-month period at management's discretion, either in the open market or through privately negotiated transactions.
During the three month period ended July 31, 2003, we repurchased 18,001 shares of our common stock from certain shareholders in the open market pursuant to a previously announced odd-lot repurchase program and 384,615 sharesat a fair market 10 day average price from our Chairman and CEO pursuant to a private agreement approved by our independent directors. The aggregate purchase price for the 402,616 shares of our common stock was $126,677.
Page 15 | ||
While we anticipate an operating loss for the next quarter based on the loss of revenues from Cisco, we are working toward a breakeven cash flow with our personnel reductions and cost cutting measures. However, there can be no assurance that future revenue gains from our additional sales personnel or anticipated cost reductions will occur or be sufficient if there are further reductions in revenue from changes in the economy or our product marketing areas.
Payment Due by Period as of July 31, 2003 | ||||||||||||||||
Contractual Obligations | Less than | 1-3 | 4-5 | After 5 | ||||||||||||
(In thousands) | Total | 1Year | Years | Years | Years | |||||||||||
Short Term Debt | $ | 398 | $ | 398 | $ | - | $ | - | $ | - | ||||||
Capital Lease Obligations | 16 | 16 | - | - | - | |||||||||||
Total Contractual Cash Obligations | $ | 414 | $ | 414 | $ | - | $ | - | $ | - |
Page 16 | ||
Plan category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) |
| Weighted-Average Exercise price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column (a) | ||||||
Equity Compensation Plans Approved by Security Holders | 2,915,100 | $ | 1.13 | 1,407,914 | ||||||
Equity Compensation Plans Not Approved by Security Holders* | 75,757 | $ | 3.30 | - | ||||||
Total | 2,990,857 | $ | 1.18 | 1,407,914 |
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- Variations in our quarterly operating results, which variations could result from, among other things, changes in the needs of one or more of our customers;
- Changes in market valuations of similar companies and stock market price and volume fluctuations generally;
- Economic conditions specific to the industries in which we operate;
- Announcements by us or our competitors of new or enhanced products, technologies or services or significant contracts, acquisitions, strategic relationships, joint ventures or capital commitments;
- Regulatory developments;
- Additions or departures of key personnel; and
- Future sales of our common stock or other debt or equity securities.
Page 21 | ||
- Exhibits
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