FORM 10-Q FOR THE PERIOD 6/30/1999
UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549FORM 10-Q(Mark One)
x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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DELAWARE | 94-3221585 | |||||||||||
(State or other jurisdiction of | (I.R.S. Employer | |||||||||||
incorporation or organization) | Identification No.) |
1350 CHARLESTON ROAD, MOUNTAIN VIEW, CA | 94043-1331 | |||||||||||
(Address of principal executive offices) | (Zip Code) |
Class
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Shares
Outstanding
July 31, 1999 |
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Common stock, $.001 par value | 50,638,071 |
Page
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PART I
FINANCIAL INFORMATION
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Item 1. | 3
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Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations | 9
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Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 21
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PART II
OTHER INFORMATION
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Item 2. | Changes in Securities and Use of Proceeds | 22
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Item 4. | Submission of Matters to a Vote of Security Holders | 22
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Item 6. | Exhibits and Reports on Form 8-K | 23
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Signatures | 24
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Summary of Trademarks | 25
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EXHIBIT
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Exhibit 27.01 | Financial Data Schedule (available in EDGAR format only) |
Financial
Statement Description
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Sequentially
Numbered Page |
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---|---|---|---|---|---|---|---|---|---|---|---|---|
Consolidated
Balance Sheets
As of June 30, 1999 and December 31, 1998 |
4 | |||||||||||
Consolidated
Statements of Operations
For the Three and Six Months Ended June 30, 1999 and 1998 |
5 | |||||||||||
Consolidated
Statements of Cash Flows
For the Six Months Ended June 30, 1999 and 1998 |
6 | |||||||||||
Notes to Consolidated Financial Statements | 7 |
June 30,
1999 |
December 31,
1998 |
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---|---|---|---|---|---|---|---|---|---|---|---|---|
Assets | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $92,206 | $22,786 | ||||||||||
Short-term investments | 62,454 | 18,959 | ||||||||||
Accounts receivable, net | 16,460 | 9,769 | ||||||||||
Prepaid expenses and other current assets | 4,801 | 2,174 | ||||||||||
Total current assets | 175,921 | 53,688 | ||||||||||
Property and equipment, net | 9,860 | 9,234 | ||||||||||
Other assets, net | 10,974 | 1,373 | ||||||||||
$196,755 | $64,295 | |||||||||||
Liabilities and Stockholders Equity | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable | $ 7,406 | $ 5,472 | ||||||||||
Accrued liabilities | 4,433 | 4,035 | ||||||||||
Deferred revenue | 20,225 | 13,096 | ||||||||||
Total current liabilities | 32,064 | 22,603 | ||||||||||
Minority interest in subsidiary | 536 | 964 | ||||||||||
Commitments | ||||||||||||
Stockholders equity: | ||||||||||||
Preferred stock, $.001 par value; 5,000,000 shares authorized; none issued | | | ||||||||||
Common stock, $.001 par
value;
Authorized: 200,000,000 shares; Issued and outstanding: 50,421,756 shares in 1999 and 46,173,384 shares in 1998 |
50 | 46 | ||||||||||
Additional paid-in capital | 217,881 | 92,774 | ||||||||||
Notes receivable from stockholders | | (409 | ) | |||||||||
Deferred compensation | (224 | ) | (276 | ) | ||||||||
Accumulated deficit | (53,552 | ) | (51,407 | ) | ||||||||
Total stockholders equity | 164,155 | 40,728 | ||||||||||
$196,755 | $64,295 | |||||||||||
Three Months
Ended
June 30, |
Six
Months Ended
June 30, |
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1999
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1998
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1999
|
1998
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Revenues | $18,736 | $8,552 | $34,318 | $15,214 | ||||||||
Costs and expenses: | ||||||||||||
Cost of revenues | 7,373 | 4,257 | 13,974 | 8,277 | ||||||||
Sales and marketing | 8,148 | 5,612 | 15,663 | 10,332 | ||||||||
Research and development | 3,085 | 2,019 | 6,073 | 3,690 | ||||||||
General and administrative | 2,073 | 2,434 | 3,980 | 4,169 | ||||||||
Total costs and expenses | 20,679 | 14,322 | 39,690 | 26,468 | ||||||||
Operating loss | (1,943 | ) | (5,770 | ) | (5,372 | ) | (11,254 | ) | ||||
Other income | 1,613 | 657 | 2,799 | 1,049 | ||||||||
Loss before minority interest | (330 | ) | (5,113 | ) | (2,573 | ) | (10,205 | ) | ||||
Minority interest in net loss of subsidiary | 178 | 324 | 428 | 713 | ||||||||
Net loss | $(152 | ) | $(4,789 | ) | $(2,145 | ) | $(9,492 | ) | ||||
Basic and diluted net loss per share | $(.00 | ) | $(.11 | ) | $(.04 | ) | $(.24 | ) | ||||
Shares used in per share computations | 49,559 | 43,546 | 49,093 | 39,063 | ||||||||
Six Months
Ended June 30,
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1999
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1998
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Cash flows from operating activities: | ||||||||||
Net loss | $(2,145 | ) | $(9,492 | ) | ||||||
Adjustments to reconcile
net loss to net cash provided by (used in) operating
activities: |
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Depreciation and amortization | 2,362 | 1,785 | ||||||||
Minority interest in net loss of subsidiary | (428 | ) | (713 | ) | ||||||
Stock-based compensation | 52 | 216 | ||||||||
Loss on disposal of property and equipment | 337 | | ||||||||
Changes in operating assets and liabilities: | ||||||||||
Accounts receivable | (6,691 | ) | (2,934 | ) | ||||||
Prepaid expenses and other current assets | (2,627 | ) | (398 | ) | ||||||
Accounts payable | 1,934 | 24 | ||||||||
Accrued liabilities | 398 | 1,888 | ||||||||
Deferred revenue | 7,129 | 3,043 | ||||||||
Net cash provided by (used in) operating activities | 321 | (6,581 | ) | |||||||
Cash flows from investing activities: | ||||||||||
Purchases of short-term investments | (79,592 | ) | (33,722 | ) | ||||||
Maturities and sales of short-term investments | 36,097 | 18,679 | ||||||||
Purchase of long-term investment | (7,521 | ) | | |||||||
Purchases of property and equipment | (3,049 | ) | (2,481 | ) | ||||||
Other assets | (2,356 | ) | (14 | ) | ||||||
Net cash used in investing activities | (56,421 | ) | (17,538 | ) | ||||||
Cash flows from financing activities: | ||||||||||
Collections on notes receivable from stockholders | 409 | 61 | ||||||||
Subchapter S distributions by SecureIT, Inc. | | (199 | ) | |||||||
Net proceeds from issuance of common stock | 125,111 | 44,047 | ||||||||
Net cash provided by financing activities | 125,520 | 43,909 | ||||||||
Net change in cash and cash equivalents | 69,420 | 19,790 | ||||||||
Cash and cash equivalents at beginning of period | 22,786 | 4,942 | ||||||||
Cash and cash equivalents at end of period | $92,206 | $24,732 | ||||||||
1999
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1998
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Change
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(Dollars in thousands) | ||||||||||
Three-month period: | ||||||||||
Revenues | $18,736 | $8,552 | 119 | % | ||||||
Six-month period: | ||||||||||
Revenues | $34,318 | $15,214 | 126 | % |
1999
|
1998
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Change
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(Dollars in thousands) | ||||||||||
Three-month period: | ||||||||||
Cost of revenues | $7,373 | $4,257 | 73 | % | ||||||
Percentage of revenues | 39 | % | 50 | % | ||||||
Six-month period: | ||||||||||
Cost of revenues | $13,974 | $8,277 | 69 | % | ||||||
Percentage of revenues | 41 | % | 54 | % |
1999
|
1998
|
Change
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(Dollars in thousands) | ||||||||||
Three-month period: | ||||||||||
Sales and marketing | $8,148 | $5,612 | 45 | % | ||||||
Percentage of revenues | 43 | % | 66 | % | ||||||
Six-month period: | ||||||||||
Sales and marketing | $15,663 | $10,332 | 52 | % | ||||||
Percentage of revenues | 46 | % | 68 | % |
1999
|
1998
|
Change
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(Dollars in thousands) | ||||||||||
Three-month period: | ||||||||||
Research and development | $3,085 | $2,019 | 53 | % | ||||||
Percentage of revenues | 16 | % | 24 | % | ||||||
Six-month period: | ||||||||||
Research and development | $6,073 | $3,690 | 65 | % | ||||||
Percentage of revenues | 18 | % | 24 | % |
1999
|
1998
|
Change
|
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(Dollars in thousands) | ||||||||||
Three-month period: | ||||||||||
General and administrative | $2,073 | $2,434 | (15 | )% | ||||||
Percentage of revenues | 11 | % | 28 | % | ||||||
Six-month period: | ||||||||||
General and administrative | $3,980 | $4,169 | (5 | )% | ||||||
Percentage of revenues | 12 | % | 27 | % |
1999
|
1998
|
Change
|
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(Dollars in thousands) | ||||||||||
Three-month period: | ||||||||||
Other income | $1,613 | $657 | 146 | % | ||||||
Percentage of revenues | 9 | % | 8 | % | ||||||
Six-month period: | ||||||||||
Other income | $2,799 | $1,049 | 167 | % | ||||||
Percentage of revenues | 8 | % | 7 | % |
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the
rate and timing of the growth and use of IP networks for
electronic commerce and communications;
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the
extent to which digital certificates are used for electronic
commerce and communications;
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the
continued evolution of electronic commerce as a viable means of
conducting business;
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the
demand for our Internet trust services;
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competition levels;
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the
perceived security of electronic commerce and communications over
IP networks;
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the
perceived security of our services, technology, infrastructure and
practices; and
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our
continued ability to maintain our current, and enter into
additional, strategic relationships.
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successfully market our Internet trust services and our digital
certificates to new and existing customers;
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attract, integrate, train, retain and motivate qualified personnel;
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respond to competitive developments;
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successfully introduce new Internet trust services; and
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successfully introduce enhancements to our existing Internet trust
services to address new technologies and standards.
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potentially inadequate development of network infrastructure;
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security concerns including the potential for merchant or user
impersonation and fraud or theft of stored data and information
communicated over IP networks;
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inconsistent quality of service;
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lack
of availability of cost-effective, high-speed service;
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limited numbers of local access points for corporate users;
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inability to integrate business applications on IP networks;
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the
need to operate with multiple and frequently incompatible products;
and
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a
lack of tools to simplify access to and use of IP networks.
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market acceptance of products and services based upon
authentication technologies other than those we use;
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public perception of the security of digital certificates and IP
networks;
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the
ability of the Internet infrastructure to accommodate increased
levels of usage; and
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government regulations affecting electronic commerce and
communications over IP networks.
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regulatory requirements;
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legal
uncertainty regarding liability;
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export and import restrictions on cryptographic technology and
products incorporating that technology;
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tariffs and other trade barriers;
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difficulties in staffing and managing foreign operations;
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longer sales and payment cycles;
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problems in collecting accounts receivable;
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difficulties in authenticating customer information;
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political instability;
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seasonal reductions in business activity; and
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potentially adverse tax consequences.
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the
difficulty of assimilating the operations and personnel of the
acquired businesses;
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the
potential disruption of our business;
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our
inability to integrate, train, retain and motivate key personnel
of the acquired businesses;
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the
diversion of our management from our day-to-day operations;
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our
inability to incorporate acquired technologies successfully into
our Internet trust services;
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the
additional expenses associated with completing acquisitions and
amortizing any acquired intangible assets;
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the
potential impairment of relationships with our employees,
customers and strategic partners; and
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the
inability to maintain uniform standards, controls, procedures and
policies.
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Impacted Systems
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Status
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Targeted
Implementation |
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Internet trust services sold to
customers |
Digital certificates tested and
available for
customer trial |
Completed | ||||||||
Non-information technology systems
and services |
Systems upgraded or replaced as
appropriate,
testing and implementation completed |
Completed | ||||||||
Hardware and software systems used
to
deliver services |
Systems upgraded or replaced as
appropriate,
testing and implementation completed |
Completed | ||||||||
Communication networks used to
provide services |
Systems upgraded or replaced as
appropriate,
testing and implementation completed |
Completed | ||||||||
Operability with internal systems
of
customers and suppliers |
Systems upgraded or replaced as
appropriate,
testing and implementation completed |
Completed | ||||||||
Hardware and software systems used
to
manage VeriSigns business |
Systems upgraded or replaced as
appropriate,
testing and implementation completed |
Completed |
June 30,
1999 |
December
31,
1998 |
Change
|
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---|---|---|---|---|---|---|---|---|---|---|
(Dollars in thousands) | ||||||||||
Cash, cash equivalents and short-term investments | $154,660 | $41,745 | 270 | % | ||||||
Working capital | $143,857 | $31,085 | 363 | % | ||||||
Stockholders equity | $164,155 | $40,728 | 303 | % |
Maturing In
|
||||||||||
---|---|---|---|---|---|---|---|---|---|---|
One Year
or Less |
Over One
Year |
Total
|
Fair
Value |
|||||||
Included in cash and cash equivalents | $73,286 | None | $73,286 | $73,286 | ||||||
Weighted-average interest rate | 5.08 | % | ||||||||
Included in short-term investments | $22,455 | $39,999 | $62,454 | $62,454 | ||||||
Weighted-average interest rates | 5.20 | % | 5.52 | % |
For
|
Withheld
|
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
Stratton D. Sclavos | 21,729,766 | 32,498 | ||||||||
Timothy Tomlinson | 21,733,625 | 28,639 |
For: | 12,205,817 | |||||||||
Against: | 5,884,818 | |||||||||
Abstain: | 12,962 |
For: | 17,897,991 | |||||||||
Against: | 192,207 | |||||||||
Abstain: | 13,399 |
For: | 21,433,135 | |||||||||
Against: | 274,079 | |||||||||
Abstain: | 55,050 |
For: | 21,747,722 | |||||||||
Against: | 3,853 | |||||||||
Abstain: | 10,689 |
Exhibit
Number |
Exhibit
Description
|
Incorporated by
Reference
|
Filed
Herewith |
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Form
|
Date
|
Number
|
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4.01 | Amendment to Third
Amended and Restated Certificate
of Incorporation of the Registrant |
S-8 | 7/15/99 | 4.03 | ||||||
10.01 | Registrants 1998 Equity Incentive Plan | S-8 | 7/15/99 | 4.04 | ||||||
10.02 | Registrants 1998 Employee Stock Purchase Plan | S-8 | 7/15/99 | 4.05 | ||||||
10.03 | Form of Non-Plan Stock Option for
options granted to
certain non-executive officer employees |
S-8 | 7/15/99 | 4.06 | ||||||
27.01 | Financial Data Schedule (available
in EDGAR format
only) |
X |
VERISIGN , INC. | |
Da
te:
August 10, 1999
|
By:
/s/
STRATTON
D. SCLAVOS
|
Stratton D. Sclavos
President and Chief Executive Officer (Principal Executive Officer) |
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Date: August 10, 1999
|
By:
/s/
DANA
L. EVAN
|
Dana L. Evan
Executive Vice President of Finance and Administration and Chief Financial Officer (Principal Financial and Accounting Officer) |
SecureIT
|
VeriSign Logo
|
VeriSign is a
registered trademark exclusively licensed to VeriSign, Inc.
|
Digital ID
SM
|
Digital ID Center
SM
|
Go Secure!
SM
|
NetSure
SM
Protection Plan
|
VeriSign OnSite
SM
|
VeriSign Trust
Network
SM
|
VeriSign V-Commerce
SM
|
WebPass
SM
ID
|
WorldTrust
SM
|
|