UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended April 30, 2010
or
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number: 0-30121
ULTICOM, INC.
(Exact name of registrant as specified in its charter)
New Jersey | 22-2050748 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
1020 Briggs Rd. Mt. Laurel, NJ | 08054 | |
(Address of principal executive offices) | (Zip Code) |
(856) 787-2700
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
x | Yes | ¨ | No |
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
¨ | Yes | ¨ | No |
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
¨ | Yes | x | No |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
¨ | Yes | x | No |
The number of shares of Common Stock, no par value, outstanding as of June 2, 2010 was 11,125,821.
TABLE OF CONTENTS | ||||
Page | ||||
Forward Looking Statements | ii | |||
PART I - Financial Information | ||||
ITEM 1. | Condensed Consolidated Financial Statements (Unaudited). | |||
Condensed Consolidated Balance Sheets as of January 31, 2010 and April 30, 2010 | 1 | |||
Condensed Consolidated Statements of Operations for the Three Months ended April 30, 2009 and 2010 | 2 | |||
Condensed Consolidated Statements of Cash Flows for the Three Months ended April 30, 2009 and 2010 | 3 | |||
Notes to Condensed Consolidated Financial Statements | 4 | |||
ITEM 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations. | 9 | ||
ITEM 3. | Quantitative and Qualitative Disclosures about Market Risk. | 17 | ||
ITEM 4. | Controls and Procedures. | 18 | ||
PART II - Other Information | ||||
ITEM 1. | Legal Proceedings. | 19 | ||
ITEM 1A. | Risk Factors. | 19 | ||
ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds. | 19 | ||
ITEM 3. | Defaults Upon Senior Securities. | 19 | ||
ITEM 4. | Removed and Reserved. | 19 | ||
ITEM 5. | Other Information. | 19 | ||
ITEM 6. | Exhibits. | 20 | ||
SIGNATURES | 20 | |||
EX-31.1 | (CERTIFICATION OF CHIEF EXECUTIVE OFFICER) | |||
EX-31.2 | (CERTIFICATION OF CHIEF FINANCIAL OFFICER) | |||
EX-32.1 | (CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER) |
FORWARD-LOOKING STATEMENTS
Certain statements by Ulticom, Inc. (referred to herein as “Ulticom,” the “Company,” “we,” “our” or “us”) appearing in Item 2 (Management’s Discussion and Analysis of Financial Condition and Results of Operations) and elsewhere in this Quarterly Report on Form 10-Q constitute “forward-looking statements” for purposes of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include financial projections, statements of plans and objectives for future operations, statements of future economic performance, and statements of assumptions relating thereto. In some cases, forward-looking statements can be identified by the use of future or conditional words such as “may,” “will,” “expects,” “plans,” “anticipates,” “estimates,” “intends,” “seeks,” “projected,” “believes,” “potential,” “continue” or the negative thereof or other comparable terminology.
There can be no assurances that forward-looking statements will be achieved. By their very nature, forward-looking statements involve known and unknown risks, uncertainties, and other important factors that could cause our actual results or performance to differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties may also give rise to future claims and increase our exposure to contingent liabilities. These risks and uncertainties arise from (among other factors):
· | our incurring substantial expenses for litigation and governmental enforcement actions and our potential exposure to contingent liabilities because of historical improper accounting practices which required restatement adjustments to be made in our consolidated financial statements as disclosed in the Annual Report on Form 10-K for the fiscal year ended January 31, 2009 (the “2008 Form 10-K”) and resulted in our inability to file required periodic reports with the SEC during the period from December 2005 to September 30, 2009; |
· | a Final Judgment that was entered in connection with our settlement of an SEC enforcement proceeding that permanently enjoins us from violating Section 17(a) of the Securities Act of 1933, Sections 13(a), 13(b)(2)(A) and (B) and 14(a) of the Securities Exchange Act of 1934 and SEC Rules 13a-1, 13a-11, 13a-13 and 14a-9; |
· | our directors and officers liability insurance is unlikely to cover potential expenses or liabilities relating to our historical improper option-related accounting practices, and could result in significant indemnification liabilities being uninsured, which could have a material adverse effect on our business, financial position, results of operations or cash flows; |
· | changes in our capital structure, including, but not limited to changes relating to our payment of a special dividend in April 2009; |
· | inaccuracies in our historical periodic reports filed with the SEC prior to the September 30, 2009 filing of the 2008 Form 10-K, and, as indicated in our Current Report on Form 8-K dated April 16, 2006, such reports cannot be relied upon; |
· | our majority shareholder, Comverse Technology, Inc., controls the outcome of all matters submitted for shareholder action, including the composition of our Board of Directors and the approval of significant corporate transactions and the interests of our majority shareholder may not be aligned with the interests of our other shareholders; |
· | our dependence on sales of our Signalware products and the possibility of such products becoming outdated because of new technology; |
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· | our ability to (i) identify and respond to emerging technological trends in our target markets; (ii) develop and maintain competitive solutions that meet customers’ changing needs; and (iii) enhance existing products by adding features and functionality that differentiate our products from those of our competitors; |
· | our investment in sales and marketing and research and development are a significant percentage of our revenues, and the failure for a market to emerge for these new products or customers to accept them could adversely affect our business and the investments may be lost; |
· | our dependence on a limited number of telecommunication industry customers for a significant percentage of our revenues, which customers may experience difficulties due to the current market environment and reductions in capital spending by telecommunication service providers on projects that incorporate our products; |
· | aggressive competition which may force us to reduce prices; |
· | our holding a large proportion of our assets in investments in marketable debt securities; |
· | our products being dependent upon their ability to operate on and support new hardware and operating systems, signaling systems and protocols of other companies and we are subject to risks associated with the integration of our products with those of equipment manufacturers and application developers and our ability to establish and maintain channel and marketing relationships with leading equipment manufacturers and application developers; |
· | our products having long sales cycles and our ability to forecast the timing and amount of product sales is limited; |
· | our reliance on a limited number of independent manufacturers to manufacture boards for our products and on a limited number of suppliers for board components; |
· | our becoming subject to, defending and resolving allegations or claims of infringement of intellectual property rights; risks associated with others infringing on our intellectual property rights and the inappropriate use by others of our proprietary technology; |
· | the impact changes in general economic conditions may have on our business; |
· | our ability to maintain the listing of our common stock on a national securities exchange; |
· | our dependence on customers outside of the United States for a significant portion of our total revenues and our exposure to particular risks associated with international transactions, including political decisions affecting tariffs and trade conditions, rapid and unforeseen changes in economic conditions in individual countries, turbulence in foreign currency and credit markets, and increased costs resulting from lack of proximity to the customer; and |
· | our ability to recruit and retain qualified personnel. |
These risks and uncertainties, as well as other factors, are discussed in greater detail in Item 1A (Risk Factors) in our Annual Report on Form 10-K for the fiscal year ended January 31, 2010. We make no commitment to revise or update any forward-looking statements in order to reflect events or circumstances after the date any such statement is made, except where otherwise required by law.
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PART I – FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
ULTICOM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share data)
January 31, | April 30, | |||||||
2010* | 2010 | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 13,190 | $ | 20,250 | ||||
Short-term investments | 65,087 | 55,184 | ||||||
Accounts receivable, net | 10,657 | 10,347 | ||||||
Inventories | 1,019 | 1,526 | ||||||
Prepaid expenses and other current assets | 7,444 | 9,060 | ||||||
Total current assets | 97,397 | 96,367 | ||||||
Property and equipment, net | 1,872 | 1,687 | ||||||
Other assets | 1,411 | 1,407 | ||||||
Deferred income taxes | 6,377 | 6,051 | ||||||
Total assets | $ | 107,057 | $ | 105,512 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current Liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 6,598 | $ | 4,715 | ||||
Deferred revenue | 2,945 | 4,516 | ||||||
Total current liabilities | 9,543 | 9,231 | ||||||
Long-term Liabilities: | ||||||||
Deferred revenue | 3,682 | 3,628 | ||||||
Unrecognized income tax benefits | 1,640 | 1,661 | ||||||
Other long-term liabilities | 35 | - | ||||||
Total liabilities | 14,900 | 14,520 | ||||||
Commitments and Contingencies | ||||||||
Shareholders’ Equity: | ||||||||
Common stock, no par value, 50,000,000 shares authorized, 11,044,685 and 11,122,146 shares issued and outstanding as of January 31, 2010 and April 30, 2010, respectively | - | - | ||||||
Additional paid-in capital | 96,691 | 96,810 | ||||||
Accumulated deficit | (3,582 | ) | (4,822 | ) | ||||
Accumulated other comprehensive loss | (952 | ) | (996 | ) | ||||
Total shareholders’ equity | 92,157 | 90,992 | ||||||
Total liabilities and shareholders’ equity | $ | 107,057 | $ | 105,512 | ||||
* The Condensed Consolidated Balance Sheet as of January 31, 2010 has been derived from the Company’s audited Consolidated Balance Sheet as of that date.
The accompanying notes are an integral part of these unaudited financial statements.
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ULTICOM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Three months ended | |||||||
April 30, | April 30, | ||||||
2009 | 2010 | ||||||
Revenues from: | |||||||
Products | $ | 8,304 | $ | 4,963 | |||
Services | 3,252 | 3,423 | |||||
Total revenues | 11,556 | 8,386 | |||||
Cost of revenues: | |||||||
Product costs | 1,807 | 1,376 | |||||
Service costs | 1,211 | 1,207 | |||||
Total cost of revenues | 3,018 | 2,583 | |||||
Gross profit | 8,538 | 5,803 | |||||
Operating expenses: | |||||||
Research and development | 3,490 | 3,046 | |||||
Selling, general and administrative | 7,345 | 5,900 | |||||
Loss from operations | (2,297 | ) | (3,143 | ) | |||
Interest and other income, net | 853 | 372 | |||||
Loss before income taxes | (1,444 | ) | (2,771 | ) | |||
Income tax benefit | (533 | ) | (1,531 | ) | |||
Net loss | $ | (911 | ) | $ | (1,240 | ) | |
Loss per share: | |||||||
Basic | $ | (0.08 | ) | $ | (0.11 | ) | |
Diluted | $ | (0.08 | ) | $ | (0.11 | ) | |
The accompanying notes are an integral part of these unaudited financial statements.
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ULTICOM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Three months ended | ||||||||
April 30, | April 30, | |||||||
2009 | 2010 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (911 | ) | $ | (1,240 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization | 427 | 315 | ||||||
Deferred income taxes | (587 | ) | 210 | |||||
Share-based payment expense | 152 | 129 | ||||||
Net realized loss (gain) on sales of investments | (124 | ) | 4 | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable, net | (1,149 | ) | 310 | |||||
Inventories | (310 | ) | (507 | ) | ||||
Prepaid expenses and other current assets | 951 | (1,665 | ) | |||||
Accounts payable and accrued expenses | 377 | (1,888 | ) | |||||
Deferred revenue | 1,065 | 1,518 | ||||||
Other, net | (386 | ) | 112 | |||||
Net cash used in operating activities | (495 | ) | (2,702 | ) | ||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | - | (203 | ) | |||||
Purchases of investments | (22,525 | ) | (20,000 | ) | ||||
Maturities and sales of investments | 55,800 | 30,000 | ||||||
Net cash provided by investing activities | 33,275 | 9,797 | ||||||
Cash flows from financing activities: | ||||||||
Proceeds from exercises of stock options | - | 74 | ||||||
Payment of special dividend | (199,643 | ) | - | |||||
Net cash provided by (used in) financing activities | (199,643 | ) | 74 | |||||
Effect of exchange rate changes on cash and cash equivalents | 6 | (109 | ) | |||||
Net increase (decrease) in cash and cash equivalents | (166,857 | ) | 7,060 | |||||
Cash and cash equivalents, beginning of period | 206,771 | 13,190 | ||||||
Cash and cash equivalents, end of period | $ | 39,914 | $ | 20,250 | ||||
The accompanying notes are an integral part of these unaudited financial statements.
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ULTICOM, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Company Business and Background - Ulticom, Inc. (together with its subsidiaries, the “Company"), a New Jersey corporation and a majority-owned subsidiary of Comverse Technology, Inc., designs, develops, markets, licenses, and supports service enabling signaling software for fixed, mobile, and internet communications software and hardware for use in the communications industry.
Basis of Presentation - The accompanying financial information should be read in conjunction with the consolidated financial statements, including the notes thereto, contained in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2010. The condensed consolidated financial information included herein is unaudited; however, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for a fair statement of results for the interim periods. The results of operations for the three months ended April 30, 2009 and 2010 are not necessarily indicative of the results to be expected for the full year.
Recent Accounting Guidance Not Yet Adopted - In October 2009, the FASB issued an accounting standards update that provides authoritative guidance regarding revenue arrangements with multiple deliverables. The guidance in this update:
· | provides principles and application guidance on whether a revenue arrangement contains multiple deliverables, how the arrangement should be separated, and how the arrangement consideration should be allocated; |
· | requires an entity to allocate revenue in a multiple-deliverable arrangement using estimated selling prices of the deliverables if a vendor does not have vendor-specific objective evidence or third-party evidence of selling price; |
· | eliminates the use of the residual method and, instead, requires an entity to allocate revenue using the relative selling price method; and |
· | expands disclosure requirements with respect to multiple-deliverable revenue arrangements. |
Also, in October 2009, the FASB issued an accounting standards update that applies to multiple-deliverable revenue arrangements that contain both software and hardware elements. This update removes tangible products from the scope of the existing software revenue guidance and provides guidance on determining whether software deliverables in an arrangement that includes a tangible product are within the scope of the software revenue guidance. The guidance in both accounting standards updates should be applied on a prospective basis for applicable multiple-deliverable revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Alternatively, an entity can elect to adopt the provisions of the guidance on a retrospective basis. The Company is assessing the potential impact that the application of this guidance may have on its consolidated financial statements and disclosures.
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2. | SPECIAL DIVIDEND (FISCAL YEAR 2009) |
On April 20, 2009, the Company paid a special cash dividend to its shareholders of record as of the close of business on April 13, 2009. The total amount of the dividend was approximately $199.8 million. As of April 30, 2010, a portion of the special dividend, totaling approximately $0.1 million, was payable to holders of deferred stock units awarded under the Company’s equity incentive plan pending delivery of the shares of common stock subject to such awards. The Company’s retained earnings as of the date of the dividend was approximately $65.9 million. As the amount of the dividend exceeded the Company’s retained earnings as of the date of the dividend, the remaining portion of the dividend, approximately $133.9 million, reduced additional paid-in capital. The Company’s accumulated deficit as of January 31, 2010 represented the net loss of the Company from April 21, 2009 through January 31, 2010.
3. | SHORT-TERM INVESTMENTS AND CASH EQUIVALENTS |
As of January 31, 2010 and April 30, 2010, all of the Company’s short-term investments were marketable debt securities that were classified as available-for-sale and summarized in the following table:
(Amounts in thousands) | Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | Ranking of Market Price Observability | ||||||||||||
As of January 31, 2010 | |||||||||||||||||
U.S. governmental agency obligations | $ | 64,959 | $ | 285 | $ | (157 | ) | $ | 65,087 | Level 2 | |||||||
As of April 30, 2010 | |||||||||||||||||
U.S. governmental agency obligations | $ | 54,957 | $ | 234 | $ | (7 | ) | $ | 55,184 | Level 2 |
The Company’s measurements of the fair values of these financial instruments are performed on a recurring basis and, as of April 30, 2010, were based on non-binding market consensus prices that can be corroborated with observable market data. The valuation techniques used to determine these prices are primarily income-based approaches, the inputs to which generally consist of yield curves and other factors considering the risk attributes of the investment security. Accordingly, the inputs to the valuation techniques used to measure the fair values of these instruments were ranked, according to their market price observability, as Level 2 inputs.
As of January 31, 2010 and April 30, 2010, the Company’s cash equivalents primarily consisted of investments in institutional money market funds placed with high credit-quality financial institutions. Due to the short-term nature of the Company’s cash and cash equivalents, the carrying amounts are not generally subject to price risk that may result from fluctuations in interest rates.
4. INVENTORIES
As of January 31, 2010 and April 30, 2010, the Companies inventories principally consisted of finished goods, as the carrying amounts of raw material inventories were not significant.
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5. INTEREST AND OTHER INCOME, NET
Interest and other income, net consisted of the following:
(Amounts in thousands) | Three months ended | ||||||
April 30, | April 30, | ||||||
2009 | 2010 | ||||||
Interest income | $ | 737 | $ | 379 | |||
Realized gain (loss) on sales of investments, net | 124 | (4 | ) | ||||
Other | (8 | ) | (3 | ) | |||
$ | 853 | $ | 372 |
6. COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) consisted of the following:
(Amounts in thousands) | Three months ended | ||||||
April 30, | April 30, | ||||||
2009 | 2010 | ||||||
Net loss | $ | (911 | ) | $ | (1,240 | ) | |
Unrealized gains (losses) on investments, net of reclassification adjustments and income taxes | (130 | ) | 62 | ||||
Foreign currency translation adjustments | 52 | (106 | ) | ||||
Total comprehensive loss | $ | (989 | ) | $ | (1,284 | ) |
Upon the sale of an available-for-sale investment security, the cumulative unrealized gain or loss associated with the sold security that was previously recorded in accumulated other comprehensive income (loss) is reclassified into the condensed consolidated statement of operations as a realized gain (loss). For each of the three months ended April 30, 2009 and 2010, realized gains, net of applicable income taxes, reclassified into the condensed consolidated statements of operations were less than $0.1 million.
7. EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share is determined by using the weighted average number of shares of common stock outstanding during each period. Diluted earnings per share further assumes the issuance of common shares for all dilutive potential shares outstanding. The share amounts used in the computations of basic and diluted loss per share were as follows:
(Amounts in thousands) | Three months ended | ||||||
April 30, | April 30, | ||||||
2009 | 2010 | ||||||
Basic share amounts | 10,883 | 10,953 | |||||
Effect of dilutive potential shares: | |||||||
Options | - | - | |||||
Restricted stock and deferred stock units | - | - | |||||
Diluted share amounts | 10,883 | 10,953 |
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For purposes of computing basic earnings (loss) per share, any nonvested shares of restricted stock that have been issued by the Company and are contingently returnable to the Company are excluded from the weighted average number of shares of common stock outstanding. Incremental potential common shares from stock options and nonvested restricted stock and deferred stock units (“DSUs”) are included in the computation of diluted earnings per share except when the effect would be antidilutive. Accordingly, diluted earnings (loss) per share for the three months ended April 30, 2009 and 2010 excluded approximately 0.8 million and 0.7 million potential common shares associated with outstanding stock options and nonvested restricted stock and DSUs, as these potential common shares would have had an antidilutive effect.
8. RELATED PARTY TRANSACTIONS
The Company sells products and provides services to other subsidiaries of Comverse Technology, Inc. For each of the three months ended April 30, 2009 and 2010, the Company’s revenues included sales to subsidiaries of Comverse Technology, Inc. of approximately $0.4 million.
As of January 31, 2010 and April 30, 2010, the amount due from subsidiaries of Comverse Technology, Inc. was approximately $0.3 million and $0.4 million, respectively.
9. SHARE-BASED PAYMENT TRANSACTIONS
Equity Award Grants
In February 2010, the independent directors of the Company’s Board of Directors were awarded, in the aggregate, approximately 9,300 DSUs for their service during the fiscal year ending January 31, 2011. The DSUs vest 25% on April 30, 2010; 25% on July 31, 2010; 25% on October 31, 2010; and 25% on January 31, 2011. Shares of the Company’s common stock equal to the number of vested DSUs will be issued to these directors on or before January 2, 2012. Based on the fair market value of the Company’s common stock at the date of the grant, the total share-based payment cost of the DSU grants was approximately $0.1 million and is recognized in the condensed consolidated statement of operations on a pro rata basis in proportion to the number of vested DSUs at each vesting date.
In April 2010, executive officers of the Company were granted, in the aggregate, approximately 110,000 shares of restricted common stock, of which 40% of these shares vest over a three-year service period (“time-based awards”) while vesting of the remaining shares is contingent on the achievement of defined operating income targets during fiscal year 2010 (“performance-based awards”). Based on the fair market value of the Company’s common stock as of the grant date, the total share-based payment costs of the time-based awards and performance-based awards were approximately $0.4 million and $0.7 million, respectively. The cost of the time-based awards is recognized into expense in the consolidated statement of operations on a straight-line basis over the vesting period of each grant. No share-based payment expense was recognized for the performance-based awards during the three months ended April 30, 2010, as the Company determined that satisfaction of the award’s performance conditions, and therefore vesting of each award, was not a probable outcome. If, during the remainder of fiscal year 2010, circumstances change and it is determined that satisfaction of the performance conditions is a probable
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outcome, share-based payment expense will be recognized for each performance-based award over the award’s vesting period, which is three years commencing with the grant date.
10. INCOME TAXES
The Company and its subsidiaries are subject to U.S. federal income tax, as well as income tax of multiple foreign and state jurisdictions. For all periods presented in the condensed consolidated statements of operations, the Company’s income tax benefit reflects current and deferred income taxes associated with each of these taxing jurisdictions. For the three months ended April 30, 2010, the Company’s effective income tax rate was significantly higher than the statutory federal income tax rate of 34%, due to foreign income tax expense that was only partially offset by the deferred tax benefits associated with U.S. foreign tax credits.
During May 2010, the Company effectively settled income tax positions associated with benefits realized in tax returns previously filed with a foreign taxing jurisdiction. Prior to this settlement, the Company considered these positions to be uncertain as to their being sustained upon the foreign taxing authority’s examination of such positions. The benefit attributable to these positions that was included in the Company’s liability for unrecognized income tax benefits in the condensed consolidated balance sheet as of April 30, 2010, totaling approximately $1.0 million, will be recognized in the Company’s income tax provision in the second quarter of fiscal year 2010. Partially offsetting this benefit in the Company’s income tax provision will be the write-off of an income tax receivable that was originally established to account for the anticipated U.S. income tax benefits that would have been realized by the Company had the foreign taxing authority’s examination resulted in an unfavorable outcome. As of April 30, 2010, the income tax receivable totaled approximately $0.9 million and was included in other assets in the condensed consolidated balance sheet.
11. COMMITMENTS AND CONTINGENCIES
Subject to certain limitations, the Company has agreed to indemnify its current and former directors, officers and employees in connection with any regulatory or litigation matter relating to the improper stock option granting practices described in the Company’s Fiscal Year 2008 Form 10-K. Such obligations may arise under the terms of the Company’s articles of incorporation, as amended, the Company’s amended and restated bylaws, applicable agreements and New Jersey law. An obligation to indemnify generally means that the Company is required to pay or reimburse the individual’s reasonable legal expenses and possibly damages and other liabilities that may be incurred. The Company’s insurance policies for periods prior to June 29, 2007 are unlikely to provide adequate coverage for expenses resulting from the historical stock option granting practices and any such coverage may have to be shared with related parties. Factors that may affect such coverage are minimum retention requirements and exceptions for certain non-qualifying expenses. Additionally, the Company’s current director and officer liability insurance does not provide coverage with respect to its historical stock option granting practices.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The following management’s discussion and analysis should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2010 and the condensed consolidated financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q. The discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from the results contemplated in these forward-looking statements as a result of factors including, but not limited to, those described under “Item 1A – Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2010.
OVERVIEW OF THE COMPANY’S OPERATIONS
The Company designs, develops, markets, licenses and supports network signaling solutions. Its products are sold primarily through direct sales to network equipment manufacturers, application developers, and service providers that include the Company’s products within their systems or services. Product revenues consist primarily of sales of software licenses and interface boards. Service revenues consist primarily of software maintenance fees related to previously deployed licenses of the Company’s products and fees for support services. Service revenues are expected to show less volatility than product revenues. The key drivers of the Company’s financial results are:
· | product price and volume; |
· | cost to support new and existing customer deployments of its products; |
· | investments in product enhancements and expansion into new markets; and |
· | interest income earned on its cash equivalents and short-term investments. |
During fiscal years 2008 and 2009, the Company’s financial results were adversely affected by the ongoing slowdown of infrastructure spending by communication service providers and by declines in technology expenditures, resulting in a significant decline in quarterly revenues. In response to these circumstances, the Company took measures during these years to lower its costs to operate more effectively at these lower sales levels. Such actions principally consisted of reductions in the numbers of personnel in substantially all areas of its operations, the largest of which occurred in September 2009.
As compared to the same period in fiscal year 2009, revenues for the three months ended April 30, 2010 declined 27%, primarily resulting from a lower sales volume of boards and licenses of approximately 40%. Delays in the timing of anticipated orders for the Company’s products and continued weakness in infrastructure spending by communication service providers were the primary causes of the decline in product revenues. Though the timing of the ultimate receipt of these orders is uncertain, the Company expects that the majority of these orders will be received in subsequent quarters of fiscal year 2010.
The Company continues to focus on the key elements of its strategy to expand its role as a premium provider of signaling solutions to the telecommunications industry. These elements include the Company leveraging its strengths to maintain and expand its market share in the
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wireless broadband services and communication infrastructure markets. Specifically, the Company is currently focusing on further developing the following strengths of its business:
· | comprehensive product portfolio – signaling component and system solutions; |
· | high-value customer base – established and emerging equipment manufacturers and service providers; and |
· | increasing operational efficiency – continuous process innovation and talent management. |
RESULTS OF OPERATIONS
Three Months Ended April 30, 2010 Compared to Three Months Ended April 30, 2009
Revenues.
Three Months Ended | |||||||||
(in thousands) | April 30, | April 30, | |||||||
2009 | 2010 | Change | |||||||
Product revenues | $ | 8,304 | $ | 4,963 | $ | (3,341 | ) | ||
Service revenues | 3,252 | 3,423 | 171 | ||||||
Total revenues | $ | 11,556 | $ | 8,386 | $ | (3,170 | ) |
The decrease in product revenues was due to lower sales of boards and licenses of approximately $1.7 million and $1.6 million, respectively. As compared to the three months ended April 30, 2009, the sales volume of boards and licenses was lower by approximately 40% and product revenues from the Company’s three largest customers decreased by approximately $3.6 million. Delays in the timing of anticipated orders for the Company’s products and continued weakness in infrastructure spending by communication service providers were the primary causes of the decline in product revenues. Though the timing of the ultimate receipt of these orders is uncertain, the Company expects that the majority of these orders will be received in subsequent quarters of fiscal year 2010.
Cost of Revenues.
Three Months Ended | |||||||||
(dollar amounts in thousands) | April 30, | April 30, | |||||||
2009 | 2010 | Change | |||||||
Product costs | $ | 1,807 | $ | 1,376 | $ | (431 | ) | ||
Service costs | 1,211 | 1,207 | (4 | ) | |||||
Total cost of revenues | $ | 3,018 | $ | 2,583 | $ | (435 | ) | ||
Gross margin (as a percentage of revenues) | 74% | 69% |
Lower materials and production costs from the lower volume of board and license sales resulted in an approximate $0.4 million decrease in cost of product revenues. As the change in labor and overhead costs charged to cost of revenues was minimal, the reduction in gross margin was primarily attributable to the significant decrease in sales volume.
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Research and Development Expenses.
Three Months Ended | |||||||||
(dollar amounts in thousands) | April 30, | April 30, | |||||||
2009 | 2010 | Change | |||||||
Research and development expenses | $ | 3,490 | $ | 3,046 | $ | (444 | ) | ||
As a percentage of revenues | 30% | 36% |
Reductions in the number of research and development personnel, mostly resulting from the reduction in force occurring in September 2009, lowered research and development expenses by approximately $0.4 million.
Selling, General and Administrative Expenses.
Three Months Ended | |||||||||
(dollar amounts in thousands) | April 30, | April 30, | |||||||
2009 | 2010 | Change | |||||||
Selling, general and administrative expenses | $ | 7,345 | $ | 5,900 | $ | (1,445 | ) | ||
As a percentage of revenues | 64% | 70% |
Included in selling, general and administrative expenses for the three months ended April 30, 2009 were various costs incurred to complete the restatement of the Company’s financial statements that were included in the 2008 Form 10-K, totaling approximately $1.2 million, and fees paid in connection the evaluation of the special dividend paid in April 2009 of approximately $0.3 million. Included in selling, general and administrative expenses for the three months ended April 30, 2010 were costs associated with restatement-related matters, totaling approximately $0.2 million, and certain severance and termination benefits, totaling approximately $0.5 million. Reductions in the number of sales, marketing and administrative personnel during fiscal year 2009, mostly resulting from the reduction in force occurring in September 2009, lowered selling, general and administrative expenses by approximately $0.5 million.
Interest and Other Income, net. Interest and other income, net was approximately $0.9 million and $0.4 million for the three months ended April 30, 2009 and 2010, respectively. The payment of the special dividend on April 20, 2009 lowered the Company’s total cash equivalents and short-term investments by approximately $200 million, resulting in lower interest income of approximately $0.4 million.
Income Tax Benefit. For the first fiscal quarters of 2009 and 2010, the Company recorded income tax benefits of approximately $0.5 million and $1.5 million, respectively. The Company’s overall effective tax rate was 37% and 55% for the three months ended April 30, 2009 and 2010, respectively. For the three months ended April 30, 2010, the Company’s effective income tax rate was significantly higher than the statutory federal income tax rate of 34%, due to foreign income tax expense that was only partially offset by the deferred tax benefits associated with U.S. foreign tax credits.
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LIQUIDITY AND CAPITAL RESOURCES
At January 31, 2010 and April 30, 2010, the Company’s cash and cash equivalents and short-term investments totaled approximately $78.3 million and $75.4 million, respectively. On April 20, 2009, the Company paid a special cash dividend to its shareholders, totaling approximately $200 million. The Company has no current plans to pay additional cash dividends on its equity securities. Any future determination as to the declaration and payment of dividends will be made by the Board of Directors in its discretion and will depend upon the Company’s earnings, financial condition, capital requirements, and other relevant factors.
The Company believes that its cash, cash equivalent and short-term investment balances will be sufficient to meet anticipated cash needs for working capital, capital expenditures, research and development and other activities for the foreseeable future. However, if current sources are not sufficient to meet the Company’s needs, it may seek additional debt or equity financing.
Although there are no present understandings, commitments, or agreements with respect to acquisitions of other businesses, products, or technologies, the Company may, in the future, consider such transactions, which may require debt or additional equity financing. The issuance of debt or equity securities may have a dilutive impact on the Company’s shareholders, and any acquired business may not contribute positive operating results commensurate with the associated investment.
Analysis of Cash Flows
Although the Company made significant reductions in the aggregate amount of cash used for personnel-related expenses and nonrecurring costs (e.g., restatement related expenses) during first quarter of fiscal year 2010, operations for the three months ended April 30, 2010 used cash of approximately $2.7 million, mostly due to an approximate $1.9 million reduction in accounts payable and accrued expenses that primarily resulted from payments of certain commission and other compensation-related expenses incurred during the fourth quarter of fiscal year 2009. The Company’s operating loss for the three months ended April 30, 2010 also contributed significantly to the use of cash.
Throughout fiscal year 2009 and the first quarter of fiscal year 2010, the Company’s cash provided by or used in investing activities primarily reflected the Company’s shifts between cash equivalents and short-term investments, as capital expenditures were not significant. For fiscal year 2010, the Company expects that its capital expenditures will be less than $1 million.
From April 17, 2006 through December 10, 2009, holders of options to purchase common stock under the Company’s equity incentive plans were prohibited from exercising their vested options until the time that the Company became current in its reporting obligations under applicable securities laws and had an effective registration statement on Form S-8 on file with the SEC, both of which occurred on December 10, 2009. The resumption of option exercises on December 11, 2009 has provided a source of cash from financing activities.
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CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company evaluates these estimates and judgments on an ongoing basis, and the estimates are based on experience, current and expected future conditions, third-party evaluations and various other assumptions that the Company believes are reasonable under the circumstances. The results of estimates form the basis for making judgments about the carrying amounts of assets and liabilities, as well as identifying and assessing the accounting treatment with respect to commitments and contingencies. Actual results could differ from those estimates.
Critical accounting policies are those that are both most important to the portrayal of a company’s financial position and results of operations and require management to make difficult, subjective, or complex judgments.
The Company’s accounting policies that require a significant amount of estimation or judgment in their application include:
· | revenue recognition; |
· | allowance for doubtful accounts receivable; |
· | reserve for obsolete or excess inventory; |
· | accounting for share-based payment transactions; and |
· | accounting for income taxes. |
Revenue Recognition
Product revenues, which include software license and hardware revenue, are generally recognized in the period in which persuasive evidence of a sale or service arrangement exists, the products are delivered and accepted by the customer, the fee is fixed and determinable, and collection is considered probable. When the Company has significant obligations subsequent to shipment, revenues are not recognized until the obligations are fulfilled. Revenues from arrangements that include significant acceptance terms are not recognized until acceptance has occurred. The Company provides its customers with post-contract support services, which generally consist of bug-fixing and telephone access to the Company’s technical personnel, but may also include the right to receive unspecified product updates, upgrades, and enhancements, when and if available. Revenue from these services is recognized ratably over the contract period. Post-contract support services included in the initial licensing fee are allocated from the total contract amount based on the relative fair value of vendor-specific objective evidence (“VSOE”). For multiple element software arrangements, the fair value of any undelivered element is determined using VSOE. The Company allocates revenue based on VSOE to the undelivered elements and the residual revenue to the delivered elements. Where VSOE of the undelivered element cannot be determined, the Company defers revenue for the delivered elements until the undelivered elements are delivered.
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Sales of development kits are deferred and recognized as revenue over the estimated period of future customer software deployments and related maintenance, which the Company considers to be the economic life of the development kit. Additional development license fees are deferred and recognized as revenue over the remaining estimated economic life of the development kit. The estimation of the economic life of the development kit requires significant management judgment and is based on the customer’s historical project experience. Any change in the estimated economic life of the development kit would affect the amount of revenue recognized in future periods.
Allowance for Doubtful Accounts Receivable
The collectability of the Company’s accounts receivable requires a considerable amount of judgment when assessing the realization of these receivables, including reviewing the current creditworthiness, current and historical collection history, and the related aging of past due balances of each customer. The Company evaluates specific accounts when it becomes aware of information indicating that a customer may not be able to meet its financial obligations due to deterioration of its financial condition, lower credit ratings, bankruptcy, or other factors affecting the ability to render payment. Reserve requirements are based on the facts available and are re-evaluated and adjusted each accounting period as additional information is received.
Reserve for Obsolete or Excess Inventory
Inventory reserves for excess and obsolete inventory are determined primarily by future demand forecasts and charges are recorded to cost of revenues. Demand forecasts are assessed on at least a quarterly basis. Charges are recorded to reduce inventory to its estimated net realizable value and there is no increase in its carrying value due to subsequent changes in demand forecasts.
Accounting for Share-based Payment Transactions
For all share-based payment transactions in which the Company acquires services from employees or directors by issuing shares of the Company’s common stock, options to purchase shares or other equity instruments, the Company recognizes the cost of awarded equity instruments that are ultimately expected to vest based on each instrument’s grant-date fair value over the period during which the employee or director is required to provide service in exchange for the award. For purposes of calculating each stock option’s fair value, the Company uses the Black-Scholes option pricing model, which involves the determination of assumptions that become inputs into the model. The primary inputs are expected volatility, expected term of the option, risk-free interest rate and dividend yield. Expected volatility is based on the historical performance of the Company’s common stock. Prior to the option award made in January 2010, the Company had not made an option award since December 2005 and all holders of options were prohibited from exercising their vested options from April 17, 2006 through December 10, 2009. Accordingly, sufficient recent data regarding exercise behavior did not exist in a form that could reasonably predict the term, or life, of an option. Therefore, for the options granted during January 2010, the Company estimated the expected term using the “simplified method.” Until such time that Company has sufficient data regarding exercise behavior, the Company expects to employ the simplified method to estimate expected term. The risk-free interest rate is the implied yield available as of the grant date on U.S. Treasury zero-coupon issues with a remaining term equal to the option’s expected term. Prior to the Company’s special cash
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dividend paid on April 20, 2009, the Company had not paid dividends and had not declared any intentions of doing so. Accordingly, the dividend yield is assumed to be zero.
The Black-Scholes model was developed for use in estimating the fair value of traded options and does not consider the non-traded nature of employee stock options, vesting and trading restrictions, lack of transferability or the possibility that employees may forfeit their options prior to expiration. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in subjective input assumptions can materially affect the fair value estimate, the Black-Scholes model may not necessarily provide a reliable single measure of the fair value of the options granted under the Company’s equity incentive plans.
The total cost to recognize as share-based payment expense over the requisite service period is based on the number of awards that are ultimately expected to vest. Accordingly, the Company develops expectations with respect to forfeitures of awards, based on historical experience regarding employee turnover or, in the case of awards that vest upon the satisfaction of predetermined performance conditions, on the probable outcome of the performance conditions. Upon vesting of awards, the Company’s share-based payment expense is adjusted to reflect the effects of actual forfeitures.
Accounting for Income Taxes
The Company accounts for income taxes using an asset and liability approach, which requires estimates of taxes payable or refunds for the current period and estimates of deferred income tax assets and liabilities for the future tax consequences attributable to differences between the carrying amounts of assets and liabilities for financial reporting purposes and the corresponding amounts used for income tax purposes. Current and deferred tax assets and liabilities are based on provisions of the enacted tax laws and are measured using the enacted tax rates and laws that are expected to be in effect when the future tax events are expected to reverse. The effects of future changes in tax laws or rates are not anticipated.
Significant judgment is required in evaluating the Company's income tax positions and measuring any related future benefit that may result from such positions. In its determination of income tax expense, the Company does not recognize any benefit from tax positions it considers to be uncertain. Only benefits that may result from tax positions that are more likely than not of being sustained on audit, based on the technical merits of the position, are recognized. Further, the effect on the Company’s income tax provision of these tax positions is measured at the largest amount of benefit that is greater than 50% likely of being realized upon the ultimate settlement. Differences between the amount of benefits taken or expected to be taken in the Company’s income tax returns and the amount of benefits recognized based on the evaluation and measurement of the related tax positions represent unrecognized income tax benefits, the total of which is reflected as a liability in the consolidated balance sheet.
The portion of any deferred tax asset for which it is more likely than not that a tax benefit will not be realized is offset by recording a valuation allowance. Future realization of the tax benefit of an existing deductible temporary difference or carryforward ultimately depends on the existence of sufficient taxable income of the appropriate character (for example, ordinary income or capital gain) within the carryforward period available under the tax law. The Company’s
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policy is to consider the following sources of taxable income, which may be available under the tax law to realize a tax benefit for deductible temporary differences and carryforwards:
· | future reversals of existing taxable temporary differences; |
· | future taxable income exclusive of reversing temporary differences and carryforwards; |
· | taxable income in prior carryback year(s) if carryback is permitted under the tax law; and |
· | tax planning strategies that would, if necessary, be implemented to: |
(1) accelerate taxable amounts to utilize expiring carryforwards;
(2) change the character of taxable or deductible amounts from ordinary income or loss to capital gain or loss; and
(3) switch from tax-exempt to taxable investments.
Evidence available about each of those possible sources of taxable income will vary between tax jurisdictions and, possibly, from year to year. To the extent evidence about one or more sources of taxable income is sufficient to support a conclusion that a valuation allowance is not necessary, the Company’s policy is that other sources need not be considered. Consideration of each source is required, however, to determine the amount of the valuation allowance that may be required to be recognized for deferred tax assets.
For any specific jurisdiction where a history of three years of cumulative losses has occurred or where there has been a substantial change in the business, the Company does not rely on projections of future taxable income as described above. Instead, the Company determines its need for a valuation allowance on deferred tax assets, if any, by determining an average steady-state normalized taxable income amount over the last three years. The Company will also consider the following positive evidence in the above scenarios, if present:
· | existing customer contracts that will produce more than enough taxable income to realize the deferred tax asset based on existing sales prices and cost structures; and |
· | an excess of appreciated asset value over the tax basis of the entity’s net assets in an amount sufficient to realize the deferred tax asset. |
RECENT ACCOUNTING GUIDANCE NOT YET ADOPTED
In October 2009, the FASB issued an accounting standards update that provides authoritative guidance regarding revenue arrangements with multiple deliverables. The guidance in this update:
· | provides principles and application guidance on whether a revenue arrangement contains multiple deliverables, how the arrangement should be separated, and how the arrangement consideration should be allocated; |
· | requires an entity to allocate revenue in a multiple-deliverable arrangement using estimated selling prices of the deliverables if a vendor does not have vendor-specific objective evidence or third-party evidence of selling price; |
· | eliminates the use of the residual method and, instead, requires an entity to allocate revenue using the relative selling price method; and |
· | expands disclosure requirements with respect to multiple-deliverable revenue arrangements. |
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Also, in October 2009, the FASB issued an accounting standards update that applies to multiple-deliverable revenue arrangements that contain both software and hardware elements. This update removes tangible products from the scope of the existing software revenue guidance and provides guidance on determining whether software deliverables in an arrangement that includes a tangible product are within the scope of the software revenue guidance. The guidance in both accounting standards updates should be applied on a prospective basis for applicable multiple-deliverable revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Alternatively, an entity can elect to adopt the provisions of the guidance on a retrospective basis. The Company is assessing the potential impact that the application of this guidance may have on its consolidated financial statements and disclosures.
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. |
The Company is exposed to financial market risks, primarily from changes in interest rates that may impact the fair values of the Company’s short-term investments in marketable debt securities. Derivative financial instruments have not been used to manage these risks.
As discussed in Note 3 to the Condensed Consolidated Financial Statements, short-term investments as of April 30, 2010 consisted of marketable debt securities, principally U.S. government agency obligations, which the Company deems available-for-sale. The Company’s investment policy provides guidelines relative to diversification and maturities designed to maintain reasonable levels of safety and liquidity. At any given time, the Company’s mix of investments held as cash and cash equivalents versus short-term investments is dependent upon the Company’s view of each prospective investment’s price risk relative to the attainment of potentially higher yields or returns on its invested cash. A 10% increase or decrease in the fair values of the Company’s short-term investments held at April 30, 2010 would have a material effect on the Company's consolidated financial position.
As of the end of each reporting period, the Company adjusts the carrying amount of each short-term investment to its fair value. For each of the Company’s marketable debt securities held as of April 30, 2010, the Company’s measurements of fair value were based on non-binding market consensus prices that can be corroborated with observable market data. As of each reporting date, the Company monitors the liquidity of each investment it holds by analyzing current trading activity, to the extent such activity exists and is verifiable. The Company obtains alternate fair value estimates for each of its investments from independent pricing services as a means of verifying the prices used to measure fair value.
As of April 30, 2010, cash and cash equivalents and short-term investments totaled approximately $75.4 million. If, during the fiscal year ending January 31, 2011, average short-term interest rates increase or decrease by 50 basis points relative to average rates realized during the year ended January 31, 2010, the Company’s projected interest income from cash and cash equivalents and short-term investments would increase or decrease by approximately $0.4 million, assuming a similar level of investments as held at April 30, 2010.
As of April 30, 2010, the Company’s cash equivalents primarily consisted of investments in institutional money market funds placed with high credit-quality financial institutions. Due to
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the short-term nature of the Company’s cash and cash equivalents, the carrying amounts are not generally subject to price risk that may result from fluctuations in interest rates.
ITEM 4. CONTROLS AND PROCEDURES.
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are controls and other procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified by the rules and forms promulgated by the Securities and Exchange Commission. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to management, including the chief executive officer and the chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
In connection with the preparation of this Quarterly Report on Form 10-Q, the Company completed an evaluation, as of April 30, 2010, under the supervision of and with the participation of the Company’s management, including the Chief Executive and Chief Financial Officers, as to the effectiveness of the Company’s disclosure controls and procedures. Based upon the evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of April 30, 2010, the Company’s disclosure controls and procedures were effective.
It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
From time to time, the Company is subject to claims in legal proceedings arising in the normal course of its business. The Company does not believe that it is currently party to any pending legal actions that could reasonably be expected to have a material adverse effect on its business, financial condition, results of operations or cash flows.
ITEM 1A. RISK FACTORS.
There were no additions to or material changes in the Company’s risk factors for the fiscal quarter ended April 30, 2010 from those disclosed in the Part I, Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2010.
ITEM | 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. |
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. REMOVED AND RESERVED.
ITEM 5. OTHER INFORMATION.
None.
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ITEM 6. EXHIBITS.
(a) Exhibit Index.
31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
ULTICOM, INC. | |||
Dated: | June 9, 2010 | /s/ Shawn K. Osborne | |
Shawn K. Osborne | |||
President and Chief Executive Officer | |||
Dated: | June 9, 2010 | /s/ Mark A. Kissman | |
Mark A. Kissman | |||
Senior Vice President and Chief Financial Officer |
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