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 AND EXCHANGE ACT OF 1934
For the quarterly period ended December 29, 2001
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _______
COMMISSION FILE NUMBER 0-22632
------------------------------
ASANTE TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 77-0200286
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
821 Fox Lane
San Jose, California 95131
(Address of principal executive offices)
Registrant's telephone number, including area code: (408) 435-8388
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 as the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past ninety days. YES X NO __
As of December 29, 2001, the Registrant had 10,003,181 shares of Common Stock
outstanding.
ASANTE TECHNOLOGIES, INC.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
PAGE NO.
Item 1. Financial Statements:
Unaudited Condensed Balance Sheets
December 29, 2001 and September 29, 2001 3
Unaudited Condensed Statements of Operations
Three months ended December 29, 2001 and December 30, 2000 4
Unaudited Condensed Statements of Cash Flows
Three months ended December 29, 2001 and December 30, 2000 5
Notes to Unaudited Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 14
II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 6. Exhibits and Reports on Form 8-K 16
Signature 17
2
Asante Technologies, Inc.
Condensed Balance Sheets
(in thousands)
(unaudited)
December 29, September 29,
2001 2001
------------ -------------
Assets
Current assets:
Cash and cash equivalents $5,190 $5,065
Accounts receivable, net 933 1,764
Inventory 2,092 1,848
Prepaid expenses and other current assets 388 400
------------ -------------
Total current assets 8,603 9,077
Property and equipment, net 96 117
Other assets 174 172
------------ -------------
Total assets $8,873 $9,366
============ =============
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $2,679 $2,469
Accrued expenses 4,167 4,117
Payable to stockholder 11 8
------------ -------------
Total current liabilities 6,857 6,594
------------ -------------
Stockholders' equity:
Common stock 28,412 28,412
Accumulated deficit 26,396) 25,640)
------------ -------------
Total stockholders' equity 2,016 2,772
------------ -------------
Total liabilities and stockholders' equity $8,873 $9,366
============ =============
3
Asante Technologies, Inc.
Condensed Statements of Operations
(in thousands, except per share data)
(unaudited)
Three months ended,
December 29, December 30,
2001 2000
------------ ------------
Net sales $3,859 $6,952
Cost of sales 2,549 4,422
------------ ------------
Gross profit 1,310 2,530
------------ ------------
Operating expenses:
Sales and marketing 1,041 1,244
Research and development 690 696
General and administrative 363 376
------------ ------------
Total operating expenses 2,094 2,316
------------ ------------
Income (loss) from operations (784) 214
Interest and other income, net 28 18
------------ ------------
Income (loss) before income taxes (756) 232
Provision for income taxes - -
------------ ------------
Net income (loss) ($756) $232
============ ============
Basic and diluted net income (loss) per share ($0.08) $0.02
============ ============
Shares used in per share calculation:
Basic 10,003 9,914
============ ============
Diluted 10,003 9,919
============ ============
4
ASANTE TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended
December 29, December 30,
2001 2000
------------ ------------
Cash flows from operating activities:
Net income (loss) $ (756) $ 232
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 26 66
Provision for doubtful accounts receivable 4 24
Loss due to write-off of idle assets
Changes in operating assets and liabilities:
Accounts receivable 831 565
Inventory (244) (555)
Prepaid expenses and other current assets 12 (237)
Accounts payable 210 198
Accrued expenses and other 53 (60)
Net cash provided by operating activities 132 233
------------ ------------
Cash flows from investing activities:
Purchases of property and equipment (5) (13)
Other (2) (8)
------------ ------------
Net cash used in investing activities (7) (21)
------------ ------------
Cash flows from financing activities:
Issuance of common stock - 2
Repurchase of common stock -
------------ ------------
Net cash provided by financing activities - 2
------------ ------------
Net increase in cash and cash equivalents 125 214
Cash and cash equivalents at beginning of quarter 5,065 6,433
------------ ------------
Cash and cash equivalents at end of quarter $ 5,190 $ 6,647
============ ============
The accompanying notes are an integral part of these financial statements
5
ASANTE TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 1. Interim Condensed Financial Statements
The unaudited condensed financial statements have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange Commission
("SEC"). Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted pursuant
to such rules and regulations. In the opinion of management, the financial
statements reflect all adjustments, consisting only of normal recurring
adjustments, necessary for the fair statement of the financial position,
operating results and cash flows for those periods presented. These unaudited
condensed financial statements should be read in conjunction with financial
statements and notes thereto for the year ended September 29, 2001, included in
the Company's 2001 Annual Report on Form 10-K. Certain prior period balances
have been reclassified to conform to the current period presentation.
Note 2. Basic and Diluted Net Income (Loss) Per Share
Basic net income (loss) per share is computed by dividing net income (loss)
available to common stockholders (numerator) by the weighted-average number of
common shares outstanding (denominator) during the period. Diluted net income
(loss) per share gives effect to all dilutive potential common shares
outstanding during the period including stock options, using the treasury stock
method. In computing diluted net income (loss) per share, the average stock
price for the period is used in determining the number of shares assumed to be
purchased from the exercise of stock options.
The following is a reconciliation of the numerators and denominators of the
basic and diluted net income (loss) per share computations for the periods
presented below (in thousands, except per share data):
6
Three Months Ended
December 29, December 30,
2001 2000
----------- -----------
Net income (loss) $ (756) $ 232
=========== ===========
Weighted average common stock outstanding (basic) 10,003 9,914
Effect of dilutive warrants and options -- 5
----------- -----------
Weighted average common stock outstanding (diluted) 10,003 9,919
=========== ===========
Net income (loss) per share:
Basic $ (0.08) $ 0.02
=========== ===========
Diluted $ (0.08) $ 0.02
=========== ===========
At December 29, 2001, and December 30, 2000, options and warrants outstanding of
1,585,551 and 1,426,817, respectively, were excluded since their effect was
antidilutive.
Note 3. Comprehensive Income (loss)
The Company had no items of other comprehensive income (loss) during any of the
periods presented, and, accordingly, net income (loss) was equal to
comprehensive income for all periods presented.
Note 4. Inventory
Inventory is stated at the lower of standard cost, which approximates actual
cost (on a first-in, first-out basis), or market. Appropriate adjustments of the
inventory values are provided for slow moving and discontinued products based
upon future expected sales and committed inventory purchases. Inventories
consisted of the following (in thousands):
December 29, September 29,
2001 2001
------------ -------------
Raw materials and component parts 155 154
Work-in-process 69 130
Finished goods 1,868 1,564
------------ -------------
$ 2,092 $ 1,848
============ =============
Note 5. Bank Borrowings
In December 2001, the Company renewed its bank line of credit that provides for
maximum borrowings of $3.0 million, primarily limited to a certain percentage of
eligible accounts
7
receivable and eligible inventory. No borrowings have been made under the
line-of-credit agreement. As of December 29, 2001, the Company was in compliance
with the covenant's under its line of credit agreement.
Note 6. Income Taxes
The Company has recorded no provision for federal and state income taxes for the
periods ended December 29, 2001 and December 30, 2000, due primarily to a
valuation allowance on deferred tax assets established, net operating loss
carryforwards and research and development credits. The Company has recorded a
full valuation allowance on its deferred tax assets as the Company believes that
sufficient uncertainty exists regarding their recoverability.
Note 7. Litigation
From time to time the Company is subject to legal proceedings and claims in the
ordinary course of business, including claims of alleged infringement of
trademarks and other intellectual property rights.
On September 13, 1996, a complaint was filed by Datapoint Corporation against
the Company and six other companies individually and as purported
representatives of a defendant class of all manufacturers, vendors and users of
Fast Ethernet-compliant, dual protocol local-area network products, for alleged
infringement of United States letters Patent Nos. 5,077,732 and 5,008,879. The
complaint sought unspecified damages in excess of $75,000 and permanent
injunctive relief. The Company filed a response to the complaint denying
liability. The case was consolidated, for purposes of claim interpretation, with
similar cases filed against several other defendants, which include, among
others, Intel Corporation, IBM Corporation, Cisco Systems, Bay Networks, and Sun
Microsystems. On April 16,1998, a Special Master appointed by the court issued a
report agreeing in most material respects with the defendants' interpretation of
the alleged patent claims. Subsequently, by order dated November 23, 1998, the
District Court adopted without modification the findings of the Special Master
and the recommendations of the Magistrate Judge regarding claim interpretation
of the patents-in-suit. The Court ordered dismissal of the case, and entered
judgment in favor of all defendants. Plaintiff has filed an appeal of the
judgment to the Federal Circuit Court of Appeals, which is now pending. Oral
arguments on the appeal were heard December 3, 2001, and a decision is expected
in late February or March.
In September 1999, certain inventory having a cost of approximately $400,000 was
seized by the United States Customs for the alleged improper use of
certification marks owned by Underwriters Laboratories Inc. ("UL"). It is the
Company's position that the alleged improper use was simply a mistake or error.
The Company may obtain the return of the inventory through settlement
negotiations with either the United States Customs or United States Attorney's
Office, obtaining permission from UL to use the certification marks, or being
successful in trial proceedings. To contest the seizure, the Company determined
to seek a review with the United States Attorney's Office and filed a claim for
the inventory. It is now incumbent upon the
8
United States Attorney's Office to file in court seeking forfeiture of the
inventory and allow the Company, as claimant, to challenge such proceeding. The
Company also expects that the United States Customs may issue a penalty separate
from the seizure under 19 U.S.C. section 1526(f), which provides for a penalty
ranging in amount from the retail value of the seized inventory had the
inventory been UL approved, to twice the retail value. The Company asserts this
is a first time offense. For a first time offense, the United States Customs may
mitigate the penalties when challenged administratively, with such mitigation
being as low as 10% of the value of the inventory. The Company intends to
contest any penalty action through administrative and/or judicial procedures. On
April 28, 2000, the Company submitted a settlement proposal to the United States
Attorney's Office offering settlement of the case. The Company has not yet
received a reply to its settlement proposal. Despite a recent federal case which
upheld the US. Customs authority to seize and penalize for improper use of the
UL certification mark, the U.S. Attorney has stated that he would still consider
settlement of the Company's case in the near future due to factual differences.
Note 8. Recently Issued Accounting Pronouncements
In June 2001, the FASB Emerging Issues Task Force ("EITF") issued EITF Issue No.
00-25 ("EITF 00-25"), "Vendor Income Statement Characterization of Consideration
Paid to a Reseller of the Vendor's Products." EITF 00-25 establishes the
treatment in the income statement of vendor consideration to resellers of a
vendor's products. EITF 00-25 is effective for the interim and year-end periods
beginning after December 15, 2001. The Company has not yet determined the impact
that adoption of this issue will have on the Company's consolidated financial
position, results of operations and cash flows.
In October 2001, the FASB issued Statement of Financial Accounting Standards No.
144 ("SFAS 144"), "Accounting for the Impairment or Disposal of Long-Lived
Assets," which is effective for fiscal years beginning after December 15, 2001
and interim periods within those fiscal periods. SFAS 144 supersedes FASB
Statement No. 121 and APB Opinion No. 30, however, it retains the requirement of
Opinion No. 30 to report discontinued operations separately from continuing
operations and extends that reporting to a component of an entity that either
has been disposed of (by sale, by abandonment, or in a distribution to owners)
or is classified as held for sale. SFAS 144 addresses financial accounting and
reporting for the impairment of certain long-lived assets and for long-lived
assets to be disposed of. The Company believes that SFAS 144 will not have a
material impact on the financial position or results of operations of the
Company.
Note 9. Segment Information
The Company determined that it does not have separately reportable operating
segments.
Sales as a percent of total sales by geographic region for the first three
months of each fiscal year are as follows:
2002 2001
---- ----
United States 78% 73%
Europe 14% 15%
Other 8% 12%
Substantially all of the Company's assets are located in the United States.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This discussion, other than the historical financial information, may consist of
forward-looking statements that involve risks and uncertainties, including
quarterly fluctuations in results, the timely availability of new products, the
impact of competitive products and pricing, and the other risks detailed from
time to time in the Company's SEC reports, including this report on Form 10-Q
for the quarter ended December 29, 2001, and the Company's Annual Report on Form
10-K for the fiscal year ended September 29, 2001. These forward-looking
statements speak only as of the date thereof and should not be given undue
reliance. Actual results may vary materially from those projected.
The Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events, or otherwise.
Results of Operations
Net sales of $3.9 million for the first quarter of fiscal 2002 was approximately
$3.1 million, or 44.5%, below net sales of $7.0 million for the first quarter of
fiscal 2001.
Over the last year, the world economy has been negatively impacted across most
segments, and especially the high technology industry including internet
companies, communications and networking, and service providers. The current
economic slow-down has particularly impacted communications products including
those of the Company and its competitors, with the effect of reducing corporate
and consumer year-end spending. The Company believes this was compounded by
reduced demand caused by the events surrounding the September 11th terrorist
attacks.
Revenues during the quarter were also impacted by a significant reduction of
inventory in the distributor channel. We believe that the distributor channel
underestimated inventory levels, which impacted sales of certain products to
several new large customer accounts. Additionally, revenues were partially
impacted during the quarter by a move in production facilities by one of the
Company's suppliers from Taiwan to China, which affected the availability of
products. The Company continues to see a decline in sales of Apple related
legacy adapter products due to Apple's continued incorporation of Ethernet onto
the motherboard of most of its new computers and price competition continues to
reduce average selling prices for its products. Sales of Apple related adapter
and print router products were $0.8 million in the first quarter, compared to
$2.6 million for the same quarter in fiscal 2001, and sales of the Company's
shared hub products were $0.3 million in the first quarter of fiscal 2002, from
$0.9 million in the same period of fiscal 2001 due primarily to significant
price erosion and a transition to switch products. The Company has experience
several sequential quarters which have been lower than that of the prior year,
however, the Company hopes to increase future sales by moving its focus to
market's demanding more sophisticated products with specialized features such as
the Multi-Tenant Unit/Multi-Dwelling Unit (MTU/MDU) market and increasing its
focus on its education base.
10
These are markets the Company believes it can succeed and offer more
sophisticated products at a good value.
Management anticipates that sales of the Company's older adapter card and shared
systems products will continue to decrease as a percentage of total sales,
although its Universal Serial Bus (USB), internet access, and gigabit products
and wireless will increase as a percentage of total sales in the second quarter.
International sales, primarily to customers in Europe, Canada and Asia Pacific,
accounted for approximately 22% of net sales for the first quarter of fiscal
2002, compared to 27% for the first quarter of fiscal 2001, with Canada being
the primary area of the sales reduction in terms of percent of net sales.
The Company's gross profit as a percentage of net sales decreased to 33.9% for
the first quarter of fiscal 2002 as compared to 36.4% for the same period in
fiscal 2001. The decrease was due primarily to competitive pricing pressures in
the market and to the Company's slightly higher fixed overhead costs as a
percentage of sales due to the lower revenue level compared to the first quarter
of fiscal 2001.
Sales and marketing expenses decreased by 16.3% to $1.0 million for the first
quarter of fiscal 2002 (27.0% of net sales) compared to $1.2 million for the
same period in fiscal 2001 (17.9% of net sales). The decrease in sales and
marketing expenses as compared to the first quarter of fiscal 2001 was due
primarily to decreased bad debt related costs, reduced spending activities
related to advertising related activities, personnel related costs, including
travel, advertising and product collateral related costs. . The increase as a
percentage of sales was due to the reduction in sales in the quarter. The
Company expects that its sales and marketing expenses in absolute dollars will
remain flat in fiscal 2002 in comparison to fiscal 2001.
Research and development expenses remained relatively flat at $0.7 million for
the first quarter of fiscal 2002, compared to the first quarter of fiscal 2001.
As a percentage of net sales, these expenses were 17.9% for the first quarter of
fiscal 2002 and 10.0% for the first quarter of fiscal 2001. . The increase as a
percentage of sales was due to the reduction in sales in the quarter. The
Company expects that spending on research and development for the remainder of
fiscal 2002 will increase slightly in comparison to fiscal 2001.
General and administrative expenses remained relatively flat at $0.4 million for
both the first quarter of fiscal 2002, and fiscal 2001. As a percentage of net
sales, general and administrative expenses were 9.4% for the first quarter of
fiscal year 2002, and 5.4% for the first quarter of fiscal 2001, respectively.
The increase as a percentage of sales was due to the reduction in sales in the
quarter. The Company expects that general and administrative expenses in
absolute dollars will remain flat or decrease marginally for the remainder of
fiscal 2002.
Income Taxes
The Company has recorded no provision for federal and state income taxes for the
periods ended December 29, 2001 and December 30, 2000, due primarily to a
valuation allowance on deferred tax assets being recorded and the Company's net
operating loss carry forwards, which together
11
were sufficient to offset any significant tax liability. The Company has
recorded a full valuation allowance on its deferred tax assets as sufficient
uncertainty exists regarding its recoverability.
Liquidity and Capital Resources
Net cash provided by operating activities was $132,000 for the quarter ended
December 29, 2001, compared to cash provided of $233,000 for the quarter ended
December 30, 2000. During the first quarter of fiscal 2002, the net cash
provided by operating activities resulted primarily from reduced receivables of
$0.8 million and an increase in payables of $0.2 million. Cash was also provided
by decreases in prepaid and other assets and an increase in accrued expenses of
$0.1 million. These increases in cash were primarily offset by the Company's net
loss of $0.8 million, and to the increase in inventories of $0.2 million.
Net cash used in investing activities in the first quarter of fiscal 2001 and
fiscal 2000 was insignificant.
The Company operates in a highly competitive market characterized by rapidly
changing technology, together with competitors and distributors that have
significantly greater financial resources than the Company. The Company intends
to incur significant expenses to develop and promote new products as well as to
support existing product sales. Failure to generate sufficient revenues from new
and existing products, raise additional capital or reduce discretionary
expenditures would have a material adverse effect on the Company's ability to
continue as a going concern and achieve its intended business objectives.
The Company believes that its current cash and cash equivalents, together with
cash expected to be generated by operations and existing credit facilities, will
be sufficient to fund its operations and meet capital requirements through the
next twelve months.
Factors Affecting Future Operating Results
The Company operates in a rapidly changing and growing industry, which is
characterized by vigorous competition from both established companies and
start-up companies. The market for the Company's products is extremely
competitive both as to price and capabilities. The Company's success depends in
part on its ability to enhance existing products and introduce new high
technology products. The Company must also bring its products to market at
competitive price levels. Unexpected changes in technological standards,
customer demand and pricing of competitive products could adversely affect the
Company's operating results if the Company is unable to respond effectively and
timely to such changes.
The industry is also dependent to a large extent on proprietary intellectual
property rights. From time to time the Company is subject to legal proceedings
and claims in the ordinary course of business, including claims of alleged
infringement of patents, trademarks and other intellectual property rights.
Consequently, from time to time, the Company will be required to prosecute or
defend against alleged infringements of such rights.
12
The Company's success also depends to a significant extent upon the
contributions of key sales, marketing, engineering, manufacturing, and
administrative employees, and on the Company's ability to attract and retain
highly qualified personnel, who are in great demand. None of the Company's key
employees are subject to a non-competition agreement with the Company. High
employee turnover in the high-tech industry is typical. Unless vacancies are
promptly filled, the loss of current key employees or the Company's inability to
attract and retain other qualified employees in the future could have a material
adverse effect on the Company's business, financial condition and results of
operations. The job market in the San Francisco Bay Area is characterized by
fierce competition, rapidly changing salary structures, and a shortage of the
workforce in general. These conditions could affect the Company's ability to
retain and recruit a sufficiently qualified workforce.
The Company's current manufacturing and sales structure is particularly subject
to various risks associated with international operations including currency
exchange rate fluctuations, changes in costs of labor and material, reliability
of sources of supply and general economic conditions in foreign countries.
Unexpected changes in foreign manufacturing or sources of supply, fluctuations
in monetary exchange rates and changes in the availability, capability or
pricing of foreign suppliers could adversely affect the Company's business,
financial condition and results of operations. The networking industry and
technology markets in general have been affected by a widespread reduction in
demand for products due to financial problems experienced by many Internet
Service Provider's (ISP's), and the failure of many Internet companies. The
duration, or long-term effect on the Company's operations is difficult to
measure, but the inability to alter its structure, or react properly to this
slowdown could have an adverse effect on the Company's financial position.
The 10/100 Mbps and 100 Mbps Ethernet technology (100BASE-T, or "Fast-Ethernet")
has become a standard networking topology in the networking and computer
industries. This standard has been adopted widely by end-user customers because
of its ability to increase the efficiency of LANs and because of its ease of
integration into existing 10BASE-T networks. Because of the importance of this
standard, the Company has focused its ongoing research and development
activities on introducing future products incorporating 100BASE-T technology.
The Company realizes the importance of bringing more 10/100BASE-T (10 Mbps)
switching and 100BASE-T switching to market in order to complement its existing
100BASE-T shared products. In addition, Gigabit (1000BASE-T, or 1000Mbps)
Ethernet technology is increasingly being adopted in the backbone of large
enterprises and educational institutions. In that regard, the Company's future
operating results may be dependent on the market acceptance and the rate of
adoption of these technologies, as well as timely product release. There can be
no assurance that the market will accept, adopt, or continue to use this new
technology or that the Company can meet market demand in a timely manner.
The Company's success will depend in part on its ability to accurately forecast
its future sales due to the lead time required to order components and assemble
products. If the Company's product sales forecasts are below actual product
demand, there may be delays in fulfilling product orders; consequently, the
Company could lose current and future sales to competitors. Alternatively, if
the Company's product sales forecasts are above actual product demand, this
13
may result in excess orders of components or assembled products and a build-up
of inventory that would adversely affect working capital.
The Company commits to expense levels, including manufacturing costs and
advertising and promotional programs, based in part on expectations of future
net sales levels. If future net sales levels in a particular quarter do not meet
the Company's expectations or the Company does not bring new products timely to
market, the Company may not be able to reduce or reallocate such expense levels
on a timely basis, which could adversely affect the Company's operating results.
There can be no assurance that the Company will be able to achieve profitability
on a quarterly or annual basis in the future.
The Company's target markets include end-users, value-added resellers, systems
integrators, retailers, education, MTU/MDU providers, and OEMs. Due to the
relative size of the customers in some of these markets, particularly the OEM
market, sales in any one market could fluctuate dramatically on a quarter to
quarter basis. Fluctuations in the OEM market could materially adversely affect
the Company's business, financial condition and results of operations.
In summary, the Company's net sales and operating results in any particular
quarter may fluctuate as a result of a number of factors, including competition
in the markets for the Company's products, delays in new product introductions
by the Company, market acceptance of new products incorporating 100BASE-T by the
Company or its competitors, changes in product pricing, material costs or
customer discounts, the size and timing of customer orders, distributor and
end-user purchasing cycles, fluctuations in channel inventory levels, variations
in the mix of product sales, manufacturing delays or disruptions in sources of
supply, the current economic recession and seasonal purchasing patterns specific
to the computer and networking industries as discussed above. The Company's
future operating results will depend, to a large extent, on its ability to
anticipate and successfully react to these and other factors. Failure to
anticipate and successfully react to these and other factors could adversely
affect the Company's business, financial condition and results of operations.
In addition to the above, the Company is also susceptible to other factors that
generally affect the market for stocks of high technology companies. These
factors could affect the price of the Company's stock and could cause such stock
prices to fluctuate over relatively short periods of time.
Recent Accounting Pronouncements
In June 2001, the FASB Emerging Issues Task Force ("EITF") issued EITF Issue No.
00-25 ("EITF 00-25"), "Vendor Income Statement Characterization of Consideration
Paid to a Reseller of the Vendor's Products." EITF 00-25 establishes the
treatment in the income statement of vendor consideration to resellers of a
vendor's products. EITF 00-25 is effective for the interim and year end periods
beginning after December 15, 2001. The Company has not yet determined the impact
that adoption of this issue will have on the Company's consolidated financial
position, results of operations and cash flows.
14
In October 2001, the FASB issued Statement of Financial Accounting Standards No.
144 ("SFAS 144"), "Accounting for the Impairment or Disposal of Long-Lived
Assets," which is effective for fiscal years beginning after December 15, 2001
and interim periods within those fiscal periods. SFAS 144 supersedes FASB
Statement No. 121 and APB Opinion No. 30, however, it retains the requirement of
Opinion No. 30 to report discontinued operations separately from continuing
operations and extends that reporting to a component of an entity that either
has been disposed of (by sale, by abandonment, or in a distribution to owners)
or is classified as held for sale. SFAS 144 addresses financial accounting and
reporting for the impairment of certain long-lived assets and for long-lived
assets to be disposed of. The Company believes that SFAS 144 will not have a
material impact on the financial position or results of operations of the
Company.
Item 3A. Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk. As of December 29, 2001, the Company's cash and investment
portfolio comprised primarily money market securities and did not include
fixed-income securities. Due to the short-term nature of the Company's
investment portfolio, an immediate 10% change in interest rates would not have a
material effect on the fair market value of the Company's portfolio. Since the
Company has the ability to liquidate this portfolio, it does not expect its
operating results or cash flows to be materially affected to any significant
degree by the effect of a sudden change in market interest rates on its
investment portfolio.
Foreign Currency Exchange Risk. All of the Company's sales and purchases are
denominated in U.S. dollars, and as a result the Company has little exposure to
foreign currency exchange risk. The effect of an immediate 10% change in
exchange rates would not have a material impact on the Company's future
operating results or cash flows.
15
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time the Company is subject to legal proceedings and claims in the
ordinary course of business, including claims of alleged infringement of
trademarks and other intellectual property rights.
Information regarding current litigation is set forth in Note 7 of the Notes to
Unaudited Condensed Financial Statements included in Part I, Item 1 of this
report.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a.) Exhibits:
None
(b.) Reports on Form 8-K: None
16
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: February 12, 2002 ASANTE TECHNOLOGIES, INC.
(Registrant)
By: /s/ ANTHONY CONTOS
-------------------------------
Anthony Contos
Vice President of Finance and
Administration, and Secretary
(Authorized Officer and
Principal Financial Officer)
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