SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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|X| Soliciting Material Under Rule 14a-12
DSET Corporation
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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[Graphic Omitted] PRESS RELEASE
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DSET Reports Third Quarter Financial Results
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Shrewsbury, NJ - November 13, 2002 - (Nasdaq: DSET) - DSET Corporation (the
Company) today reported third quarter 2002 financial results.
For the quarter ended September 30, 2002, DSET reported total revenues of $1.4
million, as compared with $2.0 million in the third quarter of 2001.
Gross margins on revenues for the third quarter of 2002 were 28.8 percent versus
39.7 percent for the same quarter in 2001. The difference is attributable to
lower revenues and approximately $200,000 of amortization of acquired technology
in the merger with ISPsoft Inc in 2002. Gross margins for the current quarter,
with this amortization expense excluded, were 43.1 percent
The net loss for the quarter was $1.6 million, or a loss of $0.30 per share on a
basic and diluted basis, as compared with a net loss of $7.6 million, or $2.61
per share on a basic and diluted basis, for the quarter ended September 30,
2001. The weighted average number of basic and diluted common shares outstanding
for the third quarter of 2002 was 5.1 million and the number of basic and
diluted common shares for the third quarter of 2001 was 2.9 million. The primary
difference in the number of shares between the third quarters of 2002 and 2001
is due to the 2.3 million shares issued in connection with the merger with
ISPsoft on January 31, 2002.
The net loss for the third quarter of 2001 also included restructuring and other
charges of $4.3 million, related to certain severance expenses and expenses
related to the abandonment of leasehold improvements, excess computer and office
equipment and excess furniture related to the reduction of staff and the closing
of additional office space. The prior year quarter also included a charge for
the impairment of goodwill of $311,000 related to certain of DSET's electronic
bonding gateway business. There were no charges of this nature in the third
quarter of 2002.
Revenues for the nine months ended September 30, 2002 were $4.1 million as
compared to $8.0 million for the same period of 2001. The net loss for the nine
months ended September 30, 2002 was $18.1 million, or a loss of $3.74 per share,
on a basic and diluted basis as compared to a net loss of $31.6 million, or a
loss of $10.90 per share, for the same period of 2001.
During the nine months ended September 30, 2002, the Company recorded a charge
for the impairment of goodwill of $11.4 million relating to DSET's merger with
ISPsoft in January 2002. The amount of impairment reflects both the further
decline in the Company's stock price and resulting market valuation in recent
months and a
reassessment of the market outlook for capital equipment and software purchases
in the telecommunications industry. Under FAS 142, "Goodwill and Other
Intangible Assets", goodwill impairment is deemed to exist if the net book value
of a reporting unit exceeds its estimated fair value. The fair value was
determined based on the common stock price and resultant market value of the
Company. This charge is non-recurring and does not affect the Company's cash
position. This compares to a charge of $730,000 for the impairment of goodwill
related to DSET's electronic bonding gateway business in the nine months ended
September 30, 2001.
The net loss for the nine months ended September 30, 2002 also included
restructuring and other charges of $2.3 million, related to certain severance
expenses and expenses related to the abandonment of leasehold improvements,
excess computer and office equipment and excess furniture related to the
reduction of staff and the closing of additional office space. This compares to
$14.1 million of restructuring and other charges in the nine months ended
September 30, 2001. The 2002 nine month period also includes a credit of
$307,000 to bad debt expense, due to the collection of some previously reserved
accounts and an improved outlook for collection of other accounts. During the
same nine month period of 2001, the Company recognized a charge to bad debt
expense of $987,000.
The weighted average number of basic and diluted common shares outstanding for
the first nine months of 2002 and 2001 was 4.8 million and 2.9 million,
respectively. The primary difference in the number of shares between the nine
months' of 2002 and 2001 is due to the 2.3 million shares issued in connection
with the merger with ISPsoft on January 31, 2002.
The Company ended the third quarter with $1.6 million in cash and cash
equivalents. This compares to $13.0 million in cash and cash equivalents as of
December 31, 2001. The cash utilized in the first nine months included
approximately $3.6 million of payments made in conjunction with the ISPsoft
merger. In addition, the Company collected $1.4 million for the U.S. income tax
refund due to the new tax carry-back provisions of the Job Creation and Worker
Assistance Act signed into law on March 9, 2002. The Company also recorded a
current receivable in the second quarter of 2002 for additional U.S. income tax
refund claims of $449,000 related to those noted above. The Company expects to
collect this refund in the fourth quarter of 2002.
Merger Announcement
On November 8, 2002, DSET announced that it had agreed to merge with NE
Technologies, Inc. (www.netechinc.com). Under the terms of the merger agreement,
all outstanding shares of DSET will be acquired by a newly formed subsidiary of
NE Technologies, Inc. for $0.30 per share in cash. This represented an 87.5%
premium over the closing price of the Company's Common Stock on November 7, 2002
of $0.16. Certain significant shareholders of DSET have agreed to vote in favor
of the transaction.
The transaction must be approved by the Company's shareholders. Completion of
the merger is also subject to certain customary closing conditions. It is
expected that the shareholders of DSET will be asked to vote on the proposed
merger at a meeting to be held within the next 60 days.
Third Quarter Activities
Trials of our IPSource(TM) 2.2.1 product continue with certain major
communications service providers. Results so far have been encouraging and we
believe we will get favorable consideration in more than one buying decision in
the near future. At this point though, it is difficult to predict with any
certainty when we may get our first order for this product. We still expect to
announce general availability of Release 2 of IPSource(TM) 2.2, which includes
further enhancements to our current support of IPSec and other exciting new
features, by the end of the year.
Our electronic bonding gateway business continues to make positive contributions
to the Company. We continue to find strong interest from both surviving
competitive service providers and new entrants to the industry for the value
provided by automating this key element of provisioning new telecommunications
services.
In order to provide additional value to our gateway customers, we recently
announced ezConnector, a new gateway product enabling competitive local exchange
providers (CLEC) to streamline the processing of orders with trading partners
and improve customer satisfaction. ezConnector integrates DSET's ezPreOrder and
ezLocal electronic bonding gateway products in the standalone graphical user
interface (GUI) to automate the process of obtaining pre-order information from
the Customer Service Record (CSR) and to post that information directly on to
the local service request (LSR) order. This eliminates the time-consuming manual
steps of retrieving and re-entering data thereby helping to reduce overhead
expenses and minimize errors that can delay transactions and lower customer
satisfaction. We also introduced ezSupport, a new web-based customer support
system that accelerates the delivery of support services to customers.
As we previously announced, in September we were notified by Nasdaq that we were
subject to delisting from the Nasdaq SmallCap Market because the Company had not
regained compliance with the $1.00 minimum bid price per share requirement set
forth in Marketplace Rule 4310(c)(8)(D). We appealed this ruling to the Nasdaq
Listing Qualifications Panel and were granted a hearing in late October. To date
we have not been informed of the results of this hearing. In the event that we
are not able to maintain our listing on the Nasdaq SmallCap market, trading may
continue on the Over-the-Counter (OTC) Bulletin Board or other electronic
quotation services.
Looking Forward
We will continue to pursue new opportunities to sell our unique IP solutions as
we seek to close our first major contract for this product in the near future.
We anticipate that our recently announced merger with NE Technologies will
demonstrate to our potential customers that we have the stability and staying
power to meet their needs far into the future. We expect that the merger will
also give our current gateway customers the security of knowing that they will
have continuity of support for their critical operations support system products
supplied by DSET.
About DSET
DSET Corporation (WWW.DSET.COM) is one of the leading providers of innovative
OSS software solutions designed to minimize operational costs and maximize the
value of service offerings for telecommunications providers around the world.
Since 1989, DSET's field-proven products have been used to build critical global
network applications that generate immediate return on investment. DSET's
portfolio of industry-leading products include: IPSource(TM), an advanced IP
provisioning, activation and configuration platform enabling providers to
deploy, modify and manage services quickly, reliably and profitably; and
electronic-bonding gateways that allow competitive service providers to exchange
information electronically with other telecommunications providers which
significantly reduce the time required to provision services and resolve service
outages for their customers.
IMPORTANT ADDITIONAL INFORMATION WILL BE FILED WITH THE SEC
DSET Corporation plans to file with the SEC and mail to its shareholders a Proxy
Statement in connection with the transaction. The Proxy Statement will contain
important information about NE Technologies, Inc., NE Technologies Acquisition
Corporation, DSET Corporation, the transaction and related matters. Investors
and security holders are urged to read the Proxy Statement carefully when it is
available.
Investors and security holders will be able to obtain free copies of the Proxy
Statement and other documents filed with the SEC by DSET Corporation and by NE
Technologies, Inc. through the web site maintained by the SEC at WWW.SEC.GOV.
In addition, investors and security holders will be able to obtain free copies
of the Proxy Statement, when available, from DSET by contacting Mr. Bruce M.
Crowell, c/o DSET Corporation, 661 Shrewsbury Avenue, Shrewsbury, New Jersey
07702.
NE Technologies and its subsidiary may be deemed to be participants in the
solicitation of proxies in respect of the transactions contemplated by the
merger agreement. DSET Corporation and its directors and executive officers may
be deemed to be participants in the solicitation of proxies in respect of the
transactions contemplated by the merger agreement. Information regarding DSET's
directors and executive officers is contained in DSET's Form 10-K for the year
ended December 31, 2001, as amended, and its proxy statement dated January 3,
2002, which are filed with the SEC. As of October 31, 2002, DSET's directors and
executive officers beneficially owned approximately 1,167,979 shares, or 21.1%,
of DSET's common stock. In addition, certain additional information regarding
the directors and executive officers of DSET is set forth in the Company's
Current Report on Form 8-K, filed with the SEC on November 1, 2002. A more
complete description will be available in the Proxy Statement.
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
Statements in this press release regarding the proposed transaction between NE
Technologies, Inc. and DSET Corporation, the expected timetable for completing
the transaction, future financial and operating results, benefits and synergies
of the transaction, future opportunities for the combined company and any other
statements about NE Technologies, Inc. or DSET Corporation, managements' future
expectations, beliefs, goals, plans or prospects constitute forward-looking
statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Any statements
that are not statements of historical fact (including statements containing the
words "believes," "plans," "anticipates," "expects," estimates and similar
expressions) should also be considered to be forward-looking statements. There
are a number of important factors that could cause actual results or events to
differ materially from those indicated by such forward-looking statements,
including the ability to consummate the transaction. NE Technologies, Inc. and
DSET Corporation disclaim any intention or obligation to update any
forward-looking statements as a result of developments occurring after the date
of this press release.
x x x
DSET Contacts:
Financial: Bruce Crowell, Chief Financial Officer, 732-945-6000, ext.111
e-mail: bcrowell@dset.com
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Media Relations: Patricia Beninati, director of marketing, DSET , 732-945-6000,
ext. 240 email: pbeninati@dset.com
Lorretta Gasper, Wind Rose Communications, 404-459-8878
email: lgasper@mindspring.com
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DSET and the DSET logo are registered trademarks of DSET Corporation. IPSource
is a trademark of DSET Corporation.
All other trademarks are the property of their respective owners.
DSET Corporation
Consolidated Balance Sheets
(In $000)
September 30, 2002 December 31, 2001
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Assets (unaudited)
Current assets:
Cash and cash equivalents.................................. $ 1,555 $ 12,958
Accounts receivable, net................................... 560 824
Income taxes receivable.................................... 461 8
Prepaid licenses........................................... 920 935
Prepaid expenses and other current assets, net............. 387 330
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Total current assets..................................... 3,883 15,055
Acquired technology, net...................................... 3,467 -
Fixed assets, net............................................. 1,550 2,173
Goodwill, net................................................. - 19
Loans to ISPsoft Inc.......................................... - 3,850
Merger and acquisition costs.................................. - 1,043
Other assets, net............................................. 172 418
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Total assets............................................. $ 9,072 $ 22,558
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Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued expenses...................... $ 1,556 $ 2,460
Deferred revenues.......................................... 1,398 2,293
Accrued restructuring expenses............................. 1,499 1,177
Current portion of notes payable........................... 819 494
Current portion of capital lease obligation................ 162 138
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Total current liabilities................................ 5,434 6,562
Long term accrued restructuring expenses...................... 460 1,021
Deferred rent................................................. 101 550
Capital lease obligation...................................... 145 283
Other liabilities............................................. - 21
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Total liabilities........................................ 6,140 8,437
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Commitments
Shareholders' equity:
Common stock............................................... 56,946 50,138
Accumulated deficit........................................ (53,948) (35,837)
Accumulated other comprehensive loss.............................. (22) (22)
Treasury stock, at cost.................................... (44) (158)
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Total shareholders' equity............................... 2,932 14,121
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Total liabilities and shareholders' equity............... $ 9,072 $ 22,558
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DSET Corporation
Consolidated Statements of Net Loss
(In $000 except per share data)
Quarter Ended Nine Months Ended
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September 30,
September 30,
2002 2001* 2002 2001*
Unaudited Unaudited Unaudited Unaudited
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Revenues:
License revenues................................ $ 154 $ 230 $ 530 $ 2,337
Service revenues................................ 1,244 1,785 3,570 5,710
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Total revenues................................ 1,398 2,015 4,100 8,047
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Cost of revenues:
License revenues................................ 200 131 536 1,157
Service revenues................................ 796 1,083 2,710 4,639
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Total cost of revenues........................ 996 1,214 3,246 5,796
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Gross profit.................................. 402 801 854 2,251
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Operating expenses:
Sales and marketing............................. 309 1,303 1,539 5,952
Research and product development................ 755 1,692 2,833 8,595
General and administrative...................... 703 1,115 2,835 4,384
Bad debt expense (benefit) and other charges.... - 1 (307) 987
Amortization of goodwill and other intangibles..
------------ 70 - 273
-
Restructuring and other charges................. - 4,269 2,250 14,059
Impairments of goodwill......................... - 311 11,444 730
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Total operating expenses...................... 1,767 8,761 20,594 34,980
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Operating loss................................ (1,365) (7,960) (19,740) (32,729)
Interest expense and other income (expense)........ (212) 51 (289) (26)
Interest income.................................... 17 469 83 1,363
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Loss before taxes.................................. (1,560) (7,440) (19,946) (31,392)
Provision (benefit) for income taxes............... - 125 (1,835) 252
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Net loss........................................... $ (1,560) $ (7,565) $ (18,111) $ (31,644)
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Net loss per common share-basic and diluted........
$ (0.30) $ (2.61) $ (3.74) $ (10.90)
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Weighted average number of common shares
outstanding and common equivalent shares
outstanding..................................... 5,147 2,895 4,845 2,903
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* Certain amounts have been reclassified for comparative purposes