Table
of Contents
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
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
transition period from
to
Commission
File Number 000-28540
VERSANT
CORPORATION
(Exact name of
Registrant as specified in its charter)
California
|
|
94-3079392
|
(State or
other jurisdiction
of incorporation or organization)
|
|
(I.R.S.
Employer
Identification No.)
|
255 Shoreline Drive, Suite 450, Redwood City, California 94065
|
(Address
of principal executive offices) (Zip code)
|
|
(650) 232-2400
|
(Registrants
telephone number, including area code)
|
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. Yes
x
No
o
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
o
No
o
Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See definitions of large accelerated filer.
accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
Large
Accelerated Filer
o
|
|
Accelerated
Filer
o
|
|
|
|
Non-Accelerated
Filer
o
|
|
Smaller
reporting company
x
|
(Do not check if
a smaller reporting company)
|
|
|
Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
o
Yes
x
No
As of June 7, 2010,
there were outstanding 3,283,932 shares of the Registrants common stock, no
par value.
Table of Contents
VERSANT
CORPORATION
QUARTERLY
REPORT ON FORM 10-Q
For the
Quarterly Period Ended April 30, 2010
Table of Contents
2
Table of Contents
PART I. FINANCIAL INFORMATION
ITEM
1. FINANCIAL STATEMENTS
VERSANT
CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands,
except for share amounts)
(unaudited)
|
|
April 30,
|
|
October 31,
|
|
|
|
2010
|
|
2009
|
|
ASSETS
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
27,902
|
|
|
$
|
27,812
|
|
|
Trade
accounts receivable, net of allowance for doubtful accounts of $5 and $36 at
April 30, 2010 and October 31, 2009, respectively
|
|
1,991
|
|
|
2,251
|
|
|
Deferred
income taxes
|
|
839
|
|
|
939
|
|
|
Other
current assets
|
|
508
|
|
|
633
|
|
|
Total
current assets
|
|
31,240
|
|
|
31,635
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
540
|
|
|
488
|
|
|
Goodwill
|
|
8,499
|
|
|
8,410
|
|
|
Intangible
assets, net
|
|
648
|
|
|
802
|
|
|
Other
assets
|
|
38
|
|
|
38
|
|
|
Total
assets
|
|
$
|
40,965
|
|
|
$
|
41,373
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
279
|
|
|
$
|
154
|
|
|
Accrued
liabilities
|
|
871
|
|
|
1,215
|
|
|
Deferred
revenues
|
|
3,675
|
|
|
3,475
|
|
|
Total
current liabilities
|
|
4,825
|
|
|
4,844
|
|
|
|
|
|
|
|
|
|
|
Deferred
revenues
|
|
120
|
|
|
177
|
|
|
Other
long-term liabilities
|
|
103
|
|
|
95
|
|
|
Total
liabilities
|
|
5,048
|
|
|
5,116
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
Common
stock, no par value, 7,500,000 shares authorized, 3,487,401 shares issued and
outstanding at April 30, 2010, and 3,552,946 shares issued and
outstanding at October 31, 2009
|
|
95,284
|
|
|
95,730
|
|
|
Accumulated
other comprehensive income (loss), net
|
|
(63
|
)
|
|
434
|
|
|
Accumulated
deficit
|
|
(59,304
|
)
|
|
(59,907
|
)
|
|
Total
stockholders equity
|
|
35,917
|
|
|
36,257
|
|
|
Total
liabilities and stockholders equity
|
|
$
|
40,965
|
|
|
$
|
41,373
|
|
|
See accompanying
notes to condensed consolidated financial statements
3
Table of Contents
VERSANT
CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME
(in thousands,
except for per share amounts)
(unaudited)
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
April 30,
|
|
April 30,
|
|
April 30,
|
|
April 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
License
|
|
$
|
1,694
|
|
|
$
|
1,931
|
|
$
|
4,154
|
|
$
|
5,173
|
|
Maintenance
|
|
1,793
|
|
|
1,957
|
|
3,777
|
|
4,272
|
|
Professional
services
|
|
28
|
|
|
71
|
|
40
|
|
133
|
|
Total
revenues
|
|
3,515
|
|
|
3,959
|
|
7,971
|
|
9,578
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues:
|
|
|
|
|
|
|
|
|
|
|
License
|
|
75
|
|
|
57
|
|
156
|
|
122
|
|
Amortization
of intangible assets
|
|
77
|
|
|
108
|
|
154
|
|
201
|
|
Maintenance
|
|
366
|
|
|
333
|
|
756
|
|
716
|
|
Professional
services
|
|
21
|
|
|
34
|
|
31
|
|
70
|
|
Total
cost of revenues
|
|
539
|
|
|
532
|
|
1,097
|
|
1,109
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
2,976
|
|
|
3,427
|
|
6,874
|
|
8,469
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
Sales
and marketing
|
|
1,135
|
|
|
811
|
|
2,321
|
|
1,997
|
|
Research
and development
|
|
944
|
|
|
980
|
|
1,988
|
|
1,974
|
|
General
and administrative
|
|
751
|
|
|
818
|
|
1,675
|
|
2,004
|
|
Restructuring
|
|
(4
|
)
|
|
|
|
39
|
|
|
|
Total
operating expenses
|
|
2,826
|
|
|
2,609
|
|
6,023
|
|
5,975
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from operations
|
|
150
|
|
|
818
|
|
851
|
|
2,494
|
|
Interest
and other income, net
|
|
82
|
|
|
102
|
|
92
|
|
256
|
|
Income
before provision for income taxes
|
|
232
|
|
|
920
|
|
943
|
|
2,750
|
|
Provision
for income taxes
|
|
134
|
|
|
144
|
|
340
|
|
412
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
98
|
|
|
$
|
776
|
|
$
|
603
|
|
$
|
2,338
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.03
|
|
|
$
|
0.21
|
|
$
|
0.17
|
|
$
|
0.63
|
|
Diluted
|
|
$
|
0.03
|
|
|
$
|
0.21
|
|
$
|
0.17
|
|
$
|
0.63
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in per share calculation:
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
3,493
|
|
|
3,645
|
|
3,515
|
|
3,684
|
|
Diluted
|
|
3,535
|
|
|
3,681
|
|
3,555
|
|
3,720
|
|
See accompanying
notes to condensed consolidated financial statements
4
Table of Contents
VERSANT
CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(in thousands)
(unaudited)
|
|
Six Months Ended
|
|
|
|
April 30,
|
|
April 30,
|
|
|
|
2010
|
|
2009
|
|
Cash flows from operating activities:
|
|
|
|
|
|
Net
income
|
|
$
|
603
|
|
|
$
|
2,338
|
|
|
|
|
|
|
|
|
|
|
Adjustments
to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
174
|
|
|
173
|
|
|
Amortization
of intangible assets
|
|
154
|
|
|
201
|
|
|
Share
based compensation expense
|
|
574
|
|
|
470
|
|
|
Recovery
of bad debt allowance
|
|
(30
|
)
|
|
(10
|
)
|
|
Reduction
of restructuring charges
|
|
(19
|
)
|
|
|
|
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
Trade
accounts receivable
|
|
137
|
|
|
710
|
|
|
Other
assets
|
|
107
|
|
|
49
|
|
|
Accounts
payable
|
|
80
|
|
|
(188
|
)
|
|
Accrued
liabilities and other long-term liabilities
|
|
(207
|
)
|
|
(362
|
)
|
|
Deferred
revenues
|
|
365
|
|
|
765
|
|
|
Net
cash provided by operating activities
|
|
1,938
|
|
|
4,146
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
Acquisition
of business
|
|
(90
|
)
|
|
(2,282
|
)
|
|
Purchases
of property and equipment
|
|
(276
|
)
|
|
(104
|
)
|
|
Proceeds
from the sale of property and equipment
|
|
15
|
|
|
|
|
|
Net
cash used in investing activities
|
|
(351
|
)
|
|
(2,386
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
Proceeds
from issuance of common stock
|
|
112
|
|
|
143
|
|
|
Repurchases
of common stock
|
|
(1,131
|
)
|
|
(2,277
|
)
|
|
Principal
payments under capital lease obligations
|
|
|
|
|
(3
|
)
|
|
Net
cash used in financing activities
|
|
(1,019
|
)
|
|
(2,137
|
)
|
|
|
|
|
|
|
|
|
|
Effect
of foreign exchange rate changes on cash and cash equivalents
|
|
(478
|
)
|
|
(55
|
)
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
90
|
|
|
(432
|
)
|
|
Cash
and cash equivalents at beginning of period
|
|
27,812
|
|
|
27,234
|
|
|
Cash
and cash equivalents at end of period
|
|
$
|
27,902
|
|
|
$
|
26,802
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flows information:
|
|
|
|
|
|
|
|
Cash
paid for:
|
|
|
|
|
|
|
|
Interest
|
|
$
|
1
|
|
|
$
|
|
|
|
Income
taxes
|
|
$
|
317
|
|
|
$
|
398
|
|
|
See accompanying
notes to condensed consolidated financial statements
5
Table of Contents
VERSANT
CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
NOTE 1. GENERAL AND BASIS
OF PRESENTATION
The unaudited condensed
consolidated financial statements contained in this report on Form 10-Q
include all of the assets, liabilities, revenues, expenses and cash flows of
Versant and all entities in which Versant has a controlling interest
(subsidiaries) required to be consolidated in accordance with
U.S. generally accepted accounting principles. Inter-company accounts and
transactions between consolidated companies have been eliminated in
consolidation.
The financial statements
included herein reflect all adjustments which, in the opinion of the Company,
are necessary for a fair presentation of the results for the interim periods
presented. All such adjustments are normal recurring adjustments. These
financial statements have been prepared in accordance with generally accepted
accounting principles related to interim financial statements and the
applicable rules of the Securities and Exchange Commission (SEC).
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for annual financial statements.
The financial statements
and related disclosures have been prepared with the presumption that users of
the interim financial information have read or have access to the audited
financial statements for the Companys preceding fiscal year ended October 31,
200
9
.
Accordingly, these financial statements should be read in conjunction with
those audited financial statements and the related notes thereto contained in
the Companys Annual Report on Form 10-K for the fiscal year ended October 31,
2009, filed on January 29, 2010 (File/Film No. 000-28540/10558485).
The Companys operating results for the three and six months ended April 30,
2010 are not necessarily indicative of the results that may be expected for any
other interim period or for the full fiscal year ending October 31, 2010,
or for any future periods. Further, the preparation of condensed consolidated
financial statements requires management to make estimates and assumptions that
affect the recorded amounts reported therein. A change in facts or
circumstances relating to the estimates could result in a change to the
estimates and could impact future operating results.
NOTE
2
. FAIR VALUE MEASUREMENTS
ASC 820,
Fair Value Measurements and Disclosures
, defines fair value
as the price that would be received from selling an asset or paid to transfer a
liability in an orderly transaction between market participants at the
measurement date. When determining the fair value measurements for assets and
liabilities required to be recorded at fair value, the Company considers the
principal or most advantageous market for the transaction and considers
assumptions that market participants would use when pricing the asset or
liability, such as inherent risk, transfer restrictions, and risk of
nonperformance.
The Financial Accounting
Standards Board (FASB) guidance also establishes a fair value hierarchy that
requires an entity to maximize the use of observable inputs and minimize the
use of unobservable inputs when measuring fair value. A financial instruments
categorization within the fair value hierarchy is based upon the lowest level
of input that is significant to the fair value measurement. The three levels of
inputs that may be used to measure fair value are as follows:
·
Level 1: quoted prices in active
markets for identical assets or liabilities;
·
Level 2: inputs other than
Level 1 that are observable, either directly or indirectly, such as quoted
prices in active markets for similar assets or liabilities, quoted prices for
identical or similar assets or liabilities in markets that are not active, or
other inputs that are observable or can be corroborated by observable market
data for substantially the full term of the assets or liabilities; or
·
Level 3: unobservable inputs that are
supported by little or no market activity and that are significant to the fair
value of the assets or liabilities.
Financial
Assets Measured at Fair Value on a Recurring Basis
Our significant financial
assets measured at fair value on a recurring basis consisted of the following
types of instruments as of April 30, 2010 (Level 1, 2 and 3 inputs
are defined above):
6
Table
of Contents
|
|
Fair Value Measurements Using Input Type
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
|
|
(in thousands)
|
|
Assets:
|
|
|
|
|
|
|
|
Money
market funds
|
|
$
|
21,385
|
|
$
|
|
|
$
|
|
|
Total
|
|
$
|
21,385
|
|
$
|
|
|
$
|
|
|
The fair value of money
market funds reflect quoted market prices in an active market.
NOTE 3. ACQUISITIONS,
GOODWILL AND INTANGIBLE ASSETS
db4o
On
December 1, 2008, the Company acquired the assets of the database software
business of privately-held Servo Software, Inc. or Servo (formerly known
as db4objects, Inc.) pursuant to an asset purchase agreement between
Versant and Servo dated December 1, 2008 (the db4o Purchase Agreement).
Versant uses the db4o assets to provide an open source object database software
solution targeting the embedded device market. Our results of operations
include db4o transactions from the acquisition date of December 1, 2008.
The
total purchase price of $2.5 million for the db4o assets as of April 30,
2010 consisted of the following:
a)
Initial cash payment of $2.1
million made in December 2008;
b)
Direct transaction costs of
$182,000;
c)
Contingent deferred payment
of $100,000 due June 1, 2009; and
d)
Contingent deferred payment
of $90,000 due December 1, 2009.
Under
the terms of the db4o Purchase Agreement, in consideration of its
acquisition of the assets of the db4o business, Versant paid Servo the
above-mentioned closing payment of $2.1 million in cash, agreed to pay up to a
maximum of an additional $300,000 payable in three contingent deferred payments
of up to $100,000 each during the 18-month period immediately following the December 1,
2008 acquisition date and assumed certain liabilities of Servo under certain
contracts included among the db4o assets. The three contingent deferred
payments of up to $100,000 each are payable on the dates that are six months,
twelve months and eighteen months, respectively, following the December 1,
2008 acquisition date. The Company made the first contingent deferred payment
of $100,000 to Servo on May 29, 2009, the second payment of $90,000 on November 30,
2009 and, following the close of the quarter ended April 30, 2010, made
the third payment of $90,000 on May 28, 2010.
The
total purchase price for the db4o assets was allocated to db4os net tangible
and identifiable intangible assets based on their estimated fair values as of
the acquisition date, with the excess of the purchase price over these
aggregate fair values recorded as goodwill. The fair value assigned to
identifiable intangible assets acquired is determined using the income
approach, which values each intangible asset based upon the estimated impact on
the Companys expected future after-tax cash flows and discounts the net
changes in the Companys expected future after-tax cash flows to present value.
The discount was based on an analysis of the weighted-average cost of capital
for the industry.
The
Companys allocation of the purchase price for the db4o assets and liabilities
is summarized below (in thousands):
Tangible
net assets acquired
|
|
$
|
83
|
|
Customer
relationships
|
|
210
|
|
Developed
technology
|
|
300
|
|
Trade
name
|
|
100
|
|
Goodwill
|
|
1,779
|
|
|
|
$
|
2,472
|
|
Purchased identifiable
intangible assets are amortized on a straight-line basis over their useful
lives. The estimated useful economic lives of the acquired customer
relationships, developed technology and trade name are nine, five and five
years,
7
Table
of Contents
respectively. The weighted
average amortization period of the db4o intangible assets is 6.4 years. Changes
to the allocation of the purchase price for the acquisition may occur as
additional information (such as contingent payments) becomes available.
db4os results of operations for periods prior to this acquisition were
not material to the Companys condensed consolidated statements of income and,
accordingly, pro forma financial information has not been presented.
Goodwill
The following table
presents goodwill balances and acquisitions of, and adjustments to, goodwill
during the six months ended April 30, 2010 (in thousands):
|
|
Net Carrying
Amount As of
October 31, 2009
|
|
Goodwill
Acquired
|
|
Adjustments
to Goodwill
|
|
Net Carrying
Amount As of
April 30, 2010
|
|
Goodwill:
|
|
|
|
|
|
|
|
|
|
Versant
Europe
|
|
$
|
241
|
|
$
|
|
|
$
|
|
|
|
$
|
241
|
|
Poet
Holdings, Inc.
|
|
5,752
|
|
|
|
|
|
|
5,752
|
|
FastObjects, Inc.
|
|
677
|
|
|
|
|
|
|
677
|
|
JDO
Genie (PTY), LTD
|
|
50
|
|
|
|
|
|
|
50
|
|
db4o
|
|
1,690
|
|
90
|
|
(1
|
)
|
|
1,779
|
|
Total
|
|
$
|
8,410
|
|
$
|
90
|
|
$
|
(1
|
)
|
|
$
|
8,499
|
|
Goodwill is subject to at
least an annual assessment for impairment, applying a fair-value based test.
Versant conducted its annual impairment test in October 2009 and
determined there was no impairment.
The goodwill acquired in
the db4o acquisition will be deductible for tax purposes based upon a 15 year
tax life.
Intangible
Assets
The
Companys intangible asset balances as of April 30, 2010 and October 31,
2009 are as follows (in thousands):
|
|
As of April 30, 2010
|
|
As of October 31, 2009
|
|
|
|
Gross
|
|
|
|
Net
|
|
Gross
|
|
|
|
Net
|
|
|
|
Carrying
|
|
Accumulated
|
|
Carrying
|
|
Carrying
|
|
Accumulated
|
|
Carrying
|
|
|
|
Amount
|
|
Amortization
|
|
Amount
|
|
Amount
|
|
Amortization
|
|
Amount
|
|
Intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Poet
Holdings, Inc.- Developed Technology & Customer Relationships
(Amortized over 7 years)
|
|
$
|
1,919
|
|
$
|
1,738
|
|
$
|
181
|
|
$
|
1,919
|
|
$
|
1,643
|
|
$
|
276
|
|
db4o-Developed
Technology
(Amortized over 5 years)
|
|
300
|
|
85
|
|
215
|
|
300
|
|
55
|
|
245
|
|
db4o-Customer
Relationships
(Amortized over 9 years)
|
|
210
|
|
32
|
|
178
|
|
210
|
|
21
|
|
189
|
|
FastObjects, Inc.-
Customer Relationships
(Amortized over 6 years)
|
|
148
|
|
145
|
|
3
|
|
148
|
|
137
|
|
11
|
|
db4o-Trade
Name
(Amortized over 5 years)
|
|
100
|
|
29
|
|
71
|
|
100
|
|
19
|
|
81
|
|
Total
|
|
$
|
2,677
|
|
$
|
2,029
|
|
$
|
648
|
|
$
|
2,677
|
|
$
|
1,875
|
|
$
|
802
|
|
Aggregate amortization
expense for intangible assets was $77,000 and $154,000, respectively, for the
three and six months ended April 30, 2010, and $108,000 and $201,000,
respectively, for
the
three and six months ended April 30, 2009.
The
projected amortization of the Companys existing intangible assets as of April 30,
2010 is as follows (in thousands):
8
Table
of Contents
|
|
Amortization
|
|
Six
months ending October 31, 2010
|
|
$
|
149
|
|
Fiscal
year ending October 31,
|
|
|
|
2011
|
|
190
|
|
2012
|
|
104
|
|
2013
|
|
103
|
|
2014
|
|
30
|
|
Thereafter
|
|
72
|
|
Total
|
|
$
|
648
|
|
NOTE 4. LEASE COMMITMENTS
Versants principal
commitments as of April 30, 2010 consist of obligations under operating
leases for facilities and equipment.
Versant leases office space for its U.S. headquarters
in Redwood City, California and its offices in Hamburg, Germany under
multi-year operating lease agreements.
On July 17, 2009, the Company entered into an office
building lease, pursuant to which the Company has leased approximately 10,200
square feet in an office facility located in Hamburg, Germany. The lease has a
term of sixty months, which commenced in December 2009. The total
rent payable over the full sixty month lease term will be approximately $775,000.
On September 3, 2009, the Company entered into the
First Amendment (the Amendment) of an Office Building Lease executed on March 23,
2007. The Amendment extends the term of the Companys lease of
approximately 6,800 square feet in an office facility located in Redwood City,
California for an additional term of three years to May 31, 2013.
The total rent payable over the thirty-six month extended lease term will be
approximately $553,000.
Our minimum commitments
under non-cancelable operating leases not recorded on our condensed
consolidated balance sheet as of April 30, 2010 are as follows (in
thousands):
|
|
Facilities
|
|
Equipment
|
|
|
|
|
|
Leases
|
|
Leases
|
|
Total
|
|
|
|
|
|
|
|
|
|
Six
months ending October 31, 2010
|
|
$
|
132
|
|
$
|
2
|
|
$
|
134
|
|
Fiscal
year ending October 31,
|
|
|
|
|
|
|
|
2011
|
|
364
|
|
5
|
|
369
|
|
2012
|
|
372
|
|
5
|
|
377
|
|
2013
|
|
291
|
|
3
|
|
294
|
|
2014
|
|
172
|
|
|
|
172
|
|
Thereafter
|
|
14
|
|
|
|
14
|
|
Total
|
|
$
|
1,345
|
|
$
|
15
|
|
$
|
1,360
|
|
NOTE 5. STOCK REPURCHASE
PROGRAM
Fiscal 2010 Stock Repurchase Program
. On November 30, 2009 Versants Board of
Directors approved a new stock repurchase program pursuant to which Versant is
authorized to repurchase up to $5.0 million of its common stock in fiscal year
2010 on the open market, in block trades or otherwise. This stock repurchase
program is currently scheduled to expire upon the earlier of October 31,
2010, or such time as Versant has expended $5.0 million to repurchase
outstanding common shares under the program; however the program may be
suspended, discontinued or extended at any earlier time by the Company.
From the date of
announcement of this stock repurchase program through April 30, 2010,
Versant acquired under this program a total of 76,059 common shares on the open
market for approximately $1.1 million at an average purchase price of $14.83
per share, leaving approximately $3.9 million in authorized funds available for
future repurchases of stock under this program. Thereafter, during the period
beginning May 1, 2010 and ending June 7, 2010, Versant has acquired
an additional 209,235
9
Table
of Contents
common shares on the open
market and in block trades for approximately $2.4 million at an average purchase
price of $11.28 per share, leaving approximately $1.5 million in authorized
funds available for future repurchases of stock under this program at June 7,
2010.
Fiscal 2009 Stock Repurchase Program.
On December 1, 2008, Versants Board of
Directors approved a stock repurchase program authorizing Versant to repurchase
up to $5.0 million worth of its outstanding common shares from time to time on
the open market, in block trades or otherwise. This stock repurchase program
expired by its terms on October 31, 2009. Versant acquired a total of
222,688 common shares on the open market and in block trades for approximately
$3.2 million at an average purchase price of $14.52 per share under this stock
repurchase program.
NOTE 6. NET INCOME PER SHARE
Basic
and diluted net income per common share has been computed using the weighted
average number of shares of common stock outstanding during the period, less
shares subject to repurchase. The following table presents the calculation of
basic and diluted net income per share (in thousands, except per share
amounts):
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
April 30,
|
|
April 30,
|
|
April 30,
|
|
April 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
98
|
|
$
|
776
|
|
$
|
603
|
|
$
|
2,338
|
|
|
|
|
|
|
|
|
|
|
|
Calculation
of basic net income per share:
|
|
|
|
|
|
|
|
|
|
Weighted
average - common shares outstanding
|
|
3,493
|
|
3,645
|
|
3,515
|
|
3,684
|
|
|
|
|
|
|
|
|
|
|
|
Net
income per share, basic
|
|
$
|
0.03
|
|
$
|
0.21
|
|
$
|
0.17
|
|
$
|
0.63
|
|
|
|
|
|
|
|
|
|
|
|
Calculation
of diluted net income per share:
|
|
|
|
|
|
|
|
|
|
Weighted
average - common shares outstanding
|
|
3,493
|
|
3,645
|
|
3,515
|
|
3,684
|
|
Dilutive
effect of employee and director stock options
|
|
42
|
|
36
|
|
40
|
|
36
|
|
Weighted
average - common shares outstanding and potentially dilutive common shares
|
|
3,535
|
|
3,681
|
|
3,555
|
|
3,720
|
|
|
|
|
|
|
|
|
|
|
|
Net
income per share, diluted
|
|
$
|
0.03
|
|
$
|
0.21
|
|
$
|
0.17
|
|
$
|
0.63
|
|
The computation of diluted net income per share does not
include shares that are anti-dilutive under the treasury stock method. For the
three months ended April 30, 2010 and 2009, 339,000 and 193,000
potentially dilutive shares, respectively, were excluded from the computation
of diluted net income per share. For the
six months ended April 30, 2010 and 2009, 311,000 and 199,000 potentially
dilutive shares, respectively, were excluded from the computation of diluted
net income per share.
NOTE 7. SHARE BASED
COMPENSATION
Under the fair value recognition guidance of ASC 718
Compensation - Stock Compensation
, share based compensation
cost is estimated at the grant date based on the fair value of the award and is
recognized as expense over the requisite service period of the award.
The fair value of
each option granted
is estimated on the date of grant and the
fair value of each share issued under Versants Employee Stock Purchase Plan
(or ESPP) is estimated at the beginning
of the purchase period, using the Black-Scholes Option Pricing Model, based on the following weighted average
assumptions:
10
Table
of Contents
|
|
Stock Options
|
|
ESPP
|
|
|
|
Six Months Ended April 30,
|
|
Six Months Ended April 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Assumptions:
|
|
|
|
|
|
|
|
|
|
Volatility
|
|
54% - 56%
|
|
60% - 61%
|
|
42%-59%
|
|
48%-65%
|
|
Expected
life
|
|
3.3 - 3.4 years
|
|
2.4 - 2.5 years
|
|
6 months
|
|
6 months
|
|
Weighted
average risk-free interest rate
|
|
1.52% - 1.87%
|
|
0.93% - 1.39%
|
|
0.15%-0.29%
|
|
0.45%-2.01%
|
|
Dividend
yield
|
|
|
|
|
|
|
|
|
|
Share based compensation
expense recognized in the condensed consolidated statements of income related
to the Companys stock option plans and the ESPP was as follows (in thousands):
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
April 30,
|
|
April 30,
|
|
April 30,
|
|
April 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Share based compensation expense:
|
|
|
|
|
|
|
|
|
|
Stock
options
|
|
$
|
240
|
|
$
|
216
|
|
$
|
538
|
|
$
|
464
|
|
ESPP
|
|
18
|
|
21
|
|
36
|
|
6
|
|
Total
|
|
$
|
258
|
|
$
|
237
|
|
$
|
574
|
|
$
|
470
|
|
Share based compensation
recognized in the condensed consolidated statements of income by category of
award was as follows (in thousands):
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
April 30,
|
|
April 30,
|
|
April 30,
|
|
April 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Share based compensation expense:
|
|
|
|
|
|
|
|
|
|
Cost
of revenues
|
|
$
|
23
|
|
$
|
17
|
|
$
|
45
|
|
$
|
27
|
|
Sales
and marketing
|
|
46
|
|
18
|
|
121
|
|
58
|
|
Research
and development
|
|
56
|
|
56
|
|
124
|
|
100
|
|
General
and administrative
|
|
133
|
|
146
|
|
284
|
|
285
|
|
Total
|
|
$
|
258
|
|
$
|
237
|
|
$
|
574
|
|
$
|
470
|
|
The following table
summarizes stock option activities under the Companys equity-based
compensation plan
s
during the six months ended April 30,
2010 and 2009:
|
|
Six Months Ended April 30,
|
|
|
|
2010
|
|
2009
|
|
|
|
Shares in
thousands
|
|
Weighted
average
exercise
price
|
|
Shares in
thousands
|
|
Weighted
average
exercise
price
|
|
Stock option activity:
|
|
|
|
|
|
|
|
|
|
Outstanding
at the beginning of the period
|
|
386
|
|
|
$
|
18.45
|
|
303
|
|
|
$
|
20.40
|
|
Granted
|
|
143
|
|
|
18.38
|
|
120
|
|
|
13.16
|
|
Exercised
|
|
(2
|
)
|
|
11.33
|
|
(9
|
)
|
|
8.55
|
|
Forfeited
and expired
|
|
(18
|
)
|
|
49.78
|
|
(49
|
)
|
|
16.43
|
|
Outstanding
at the end of the period
|
|
509
|
|
|
17.37
|
|
365
|
|
|
18.86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
exercisable at the end of the period
|
|
296
|
|
|
$
|
17.42
|
|
200
|
|
|
$
|
21.47
|
|
11
Table
of Contents
NOTE 8. RESTRUCTURING
In the fourth quarter of fiscal year 2009, the Company committed to the
implementation of a restructuring plan pursuant to which it has closed its
research and development facility in Pune, India. The restructuring plan was
undertaken to consolidate the Companys research and development efforts into
one location in Germany in order to streamline operations, create management
efficiencies and increase productivity. Since the plan was undertaken, Versant
has incurred restructuring costs of $179,000 as of April 30, 2010. The
restructuring was substantially completed during the second fiscal quarter
ended April 30, 2010.
The following table reflects the type and amount of these restructuring
charges included in operating expenses for the three and six months ended April 30,
2010 (in thousands):
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
April 30,
|
|
April 30,
|
|
April 30,
|
|
April 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Restructuring:
|
|
|
|
|
|
|
|
|
|
Severance,
retention and related charges
|
|
$
|
|
|
|
$
|
|
|
$
|
38
|
|
|
$
|
|
|
Impairment
of fixed assets (non-cash charges)
|
|
2
|
|
|
|
|
2
|
|
|
|
|
Impairment
to other assets (non-cash charges)
|
|
(29
|
)
|
|
|
|
(29
|
)
|
|
|
|
Contract
termination costs
|
|
8
|
|
|
|
|
8
|
|
|
|
|
Other
direct costs of closure
|
|
15
|
|
|
|
|
20
|
|
|
|
|
|
|
$
|
(4
|
)
|
|
$
|
|
|
$
|
39
|
|
|
$
|
|
|
There were no restructuring charges included in accrued liabilities in
the condensed consolidated balance sheets as of April 30, 2010 and October 31,
2009.
NOTE
9
.
OTHER COMPREHENSIVE INCOME
Accumulated other
comprehensive income presented in the accompanying condensed consolidated
balance sheets consist of cumulative foreign currency translation adjustments.
Comprehensive income for
the three and six month periods ended April 30, 2010 and April 30,
2009 is as follows (in thousands):
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
April 30,
|
|
April 30,
|
|
April 30,
|
|
April 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
Net
income, as reported
|
|
$
|
98
|
|
|
$
|
776
|
|
|
$
|
603
|
|
|
$
|
2,338
|
|
|
Foreign
currency translation adjustment
|
|
(213
|
)
|
|
(2
|
)
|
|
(498
|
)
|
|
(68
|
)
|
|
Comprehensive
income (loss)
|
|
$
|
(115
|
)
|
|
$
|
774
|
|
|
$
|
105
|
|
|
$
|
2,270
|
|
|
NOTE 10. INCOME TAXES
The Company accounts for
income taxes pursuant to the provisions of ASC 740
, Income
Taxes
, which requires an asset and liability approach to accounting
for income taxes. Deferred tax assets and liabilities are determined based on
the difference between the financial statement carrying amounts and the tax
basis of assets and liabilities and are measured using the enacted statutory
tax rates in effect at the balance sheet date.
The Company records a valuation allowance to reduce its deferred tax
assets when uncertainty regarding realizability exists. The Company had net
deferred tax assets of $839,000 and $939,000 as of April 30, 2010 and October 31,
2009, respectively.
The Company has
significant deferred tax assets arising primarily from net operating loss carry
forwards in the U.S., California and in Germany. Ultimately, the realization of
the deferred tax assets is dependent upon the Companys generation of
sufficient future taxable income to enable it to use net operating loss and tax
credit carry forwards during those periods in which such carry forwards can be
utilized by the Company. In evaluating Versants ability to utilize its
deferred tax assets, management of the
12
Table
of Contents
Company considers all
available positive and negative evidence, including past operating results in
the most recent fiscal years and an assessment of expected future results of
operations on a jurisdiction by jurisdiction basis.
The Company has
experienced substantial past tax losses in its U.S. operations, including in
fiscal 2009, and expects to experience a loss for tax purposes in fiscal 2010.
Due to the lack of forecasted future taxable income and the relative size of
the Companys Federal and California net operating loss carry forwards,
considerable uncertainty exists that the Company will realize these deferred
tax assets. Based on this objective evidence, a full valuation allowance has
been recorded against the Companys deferred tax assets related to its U.S.
operations.
The Company has also
experienced substantial past tax losses in its European operations. In the most recent fiscal years, the Company
has generated taxable income and begun to utilize its deferred tax assets
related to its German net operating loss carry forwards. Management of the
Company has forecasted taxable income for its European operations in fiscal
2010. The recent global economic downturn has negatively impacted the Companys
operating results in all regions. The
Company has experienced declining revenues as economic conditions have remained
difficult. Given the uncertainty of the macroeconomic environment, future
revenues and operating results are difficult to forecast. Therefore, management
has concluded it is more likely than not that the Company will realize the
benefit of its deferred tax assets related to its German net operating loss
carry forwards only to the extent of its expected taxable income in fiscal
2010.
Significant management judgment is required to
determine when, in the future, it will become more likely than not that
additional net deferred tax assets will be realized. Management will continue
to assess the realizability of the tax benefit available based on actual and
forecasted operating results. Management does not anticipate significant
changes to its uncertain tax positions through October 31, 2010.
The
provision for income taxes was $134,000 and $144,000 for the three months ended
April 30, 2010 and 2009, respectively and $340,000 and $412,000 for the
six months ended April 30, 2010 and 2009, respectively. The Companys fiscal 2010 effective tax rate
differs from the combined federal and state statutory rate primarily due to
foreign income taxed at other than U.S. rates, foreign withholding taxes,
changes in its U.S. valuation allowance, state taxes and share based
compensation expense.
The Company is subject to
U.S. federal income taxes and to income taxes in various states in the U.S. as
well as in foreign jurisdictions. Tax regulations within each jurisdiction are
subject to the interpretation of the related tax laws and regulations and
require significant judgment to apply. With few exceptions, the Company is no
longer subject to U.S. federal, state and local, or foreign tax examinations by
tax authorities for tax years before 2004.
The Company recognizes interest and penalties accrued related to unrecognized tax benefits in the provision for income taxes for all periods presented, which were not significant.
NOTE 11. SEGMENT AND
GEOGRAPHIC INFORMATION
ASC 280,
Segment Reporting
establishes standards for the manner in
which public companies report information about operating segments in annual
and interim financial statements, which require the reporting of segment
information using the management approach. Under this approach, operating
segments are identified in substantially the same manner as they are reported
internally and used by the Companys chief operating decision maker (CODM)
for purposes of evaluating performance and allocating resources. Based on this
approach, the Company has determined that it operates in a single operating
segment, Data Management.
In aggregate, the
revenues generated by all projects in all locations of one significant
telecommunications customer accounted for approximately 17% of total revenues
in the three months ended April 30, 2010 and 8% of total revenues in the
six months ended April 30, 2010.
The related
accounts receivable balance for this customer was approximately $415,000 as of April 30,
2010.
Another
telecommunications
customer accounted for approximately 12% of total revenues in the three and six
months ended April 30, 2010. The related accounts receivable balance for
this customer was approximately $287,000 as of April 30, 2010.
The
Company operates in North America, Europe and Asia. In general, revenues are
attributed to the region in which the contract originates.
The following table
reflects revenues for the three and six months ended April 30, 2010 and April 30,
2009 by each geographic region (in thousands)
13
Table
of Contents
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
April 30,
|
|
April 30,
|
|
April 30,
|
|
April 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
Revenues by Region:
|
|
|
|
|
|
|
|
|
|
North
America
|
|
$
|
1,606
|
|
$
|
1,563
|
|
$
|
3,005
|
|
$
|
3,659
|
|
Europe
|
|
1,780
|
|
2,147
|
|
4,448
|
|
5,530
|
|
Asia
|
|
129
|
|
249
|
|
518
|
|
389
|
|
|
|
$
|
3,515
|
|
$
|
3,959
|
|
$
|
7,971
|
|
$
|
9,578
|
|
The following table
reflects long-lived assets as of April 30, 2010 and October 31, 2009
in each geographic region (in thousands):
|
|
April 30,
|
|
October 31,
|
|
|
|
2010
|
|
2009
|
|
Total long-lived assets by region:
|
|
|
|
|
|
North
America
|
|
$
|
133
|
|
$
|
164
|
|
Europe
|
|
403
|
|
287
|
|
Asia
|
|
42
|
|
75
|
|
|
|
$
|
578
|
|
$
|
526
|
|
NOTE
12. RECENT ACCOUNTING PRONOUNCEMENTS
Recently Adopted Accounting Pronouncement
s
Subsequent Events
In February 2010, the FASB issued amended guidance on
subsequent events. Under this amended guidance, Securities and Exchange
Commission (SEC) filers are no longer required to disclose the date through
which subsequent events have been evaluated in originally issued and revised
financial statements. This guidance was effective immediately and the Company
adopted this new guidance in the quarter ended April 30, 2010. The
adoption of this amendment has not had a significant impact on the Companys
financial position, results of operations or cash flows.
Intangibles Goodwill
and Other
In April 2008, the
FASB issued authoritative guidance used to determine the useful life of
intangible assets. This guidance amends the factors that should be considered
in developing renewal or extension assumptions used to determine the useful
life of a recognized intangible asset. This change is intended to improve the
consistency between the useful life of a recognized intangible asset and the
period of expected cash flows used to measure the fair value of the asset. The
requirement for determining useful lives must be applied prospectively to
intangible assets acquired after the effective date and the disclosure
requirements must be applied prospectively to all intangible assets recognized
as of, and subsequent to, the effective date.
The guidance
is effective for fiscal years beginning after December 15, 2008 (November 1,
2009 for the Company) and interim periods within those years, with earlier
adoption prohibited. The
adoption of this guidance has not had a material impact on the Companys
financial position, results of operations, or cash flows.
Business Combinations
In December 2007, new guidance was issued providing
greater consistency in the accounting and financial reporting of business
combinations. It requires the acquiring entity in a business combination to
recognize all assets acquired and liabilities assumed in the transaction,
establishes the acquisition-date fair value as the measurement objective for
all assets acquired and liabilities assumed, and requires the acquirer to
disclose the nature and financial effect of the business combination. The
guidance is effective for fiscal years beginning after December 15, 2008 (November 1,
2009 for the Company) and interim periods within those years, with earlier
adoption prohibited. The adoption of this new guidance had no material impact
on
the Companys
financial position, results of operations, or cash flows.
14
Table of Contents
In April 2009, additional guidance was issued which
requires that assets acquired and liabilities assumed in a business combination
that arise from contingencies be recognized at fair value, if fair value can be
determined during the measurement period. This new rule specifies that an
asset or liability should be recognized at time of acquisition if the amount of
the asset or liability can be reasonably estimated and that it is probable that
an asset existed or that a liability had been incurred at the acquisition date.
This new rule is effective for all fiscal years beginning after December 15,
2008 (November 1, 2009 for the Company). The adoption of this new guidance
had no material impact on
the Companys financial position, results of operations, or cash flow.
Fair Value Measurements
In August 2009, the FASB issued additional guidance
regarding fair value measurements. This guidance provides clarification for circumstances
in which a quoted price in an active market for the identical liability is not
available. In these circumstances, a reporting entity is required to measure
fair value using one or more of the following methods: (1) a valuation
technique that uses a) the quoted price of the identical liability when traded
as an asset or b) quoted prices for similar liabilities or similar liabilities
when traded as assets and/or (2) a valuation technique that is consistent
with U.S. GAAP (e.g. an income approach or market approach). This guidance also
clarifies that when estimating the fair value of a liability, a reporting
entity is not required to include inputs relating to the existence of transfer
restrictions on that liability. This guidance is effective for fiscal years and
fiscal quarters beginning after August 26, 2009 (November 1, 2009 for
the Company). The adoption of this standard
had no material effect on the Companys financial
statements.
Fair Value Measurement Disclosure
In January 2010, the FASB amended the disclosure
requirements for the fair value measurements for recurring and nonrecurring
non-financial assets and liabilities. The guidance requires new disclosures
about transfers into and out of Levels 1 and 2 and separate disclosures about
purchases, sales, issuances, and settlements relating to Level 3 measurements.
It also clarifies existing fair value disclosures about the level of
disaggregation and about inputs and valuation techniques used to measure fair
value. The new disclosures and clarifications of existing disclosures are
effective for the Companys second quarter of fiscal year 2010, except for the
disclosures about purchases, sales, issuances, and settlements relating to
Level 3 measurements, which are effective for the Companys first quarter of
fiscal year 2012. The adoption of this guidance has not had a material impact
on the Companys consolidated financial statements.
Recent Accounting Pronouncements Not Yet Adopted
Amendments to Variable Interest Entity Guidance
In June 2009, new guidance was issued which requires an
enterprise to determine whether its variable interest or interests give it a
controlling financial interest in a variable interest entity. The primary
beneficiary of a variable interest entity is the enterprise that has both (1) the
power to direct the activities of a variable interest entity that most
significantly impact the entitys economic performance, and (2) the
obligation to absorb losses of the entity that could potentially be significant
to the variable interest entity or the right to receive benefits from the
entity that could potentially be significant to the variable interest entity.
The guidance also requires ongoing reassessments of whether an enterprise is
the primary beneficiary of a variable interest entity. The guidance is
effective at the start of a Companys first fiscal year beginning after November 15,
2009 (November 1, 2010 for the Company). We do not expect that the
adoption of this new guidance will have an impact on our historical consolidated
financial position, cash flows and results of operations.
Multiple-Deliverable
Revenue Arrangements
In October 2009, new
guidance was issued by FASB related to the revenue recognition of multiple
element arrangements. The new guidance states that if vendor specific objective
evidence, or third party evidence, of fair value for deliverables in an
arrangement cannot be determined, companies will be required to develop a best
estimate of the selling price for separate deliverables and allocate arrangement
consideration using the relative selling price method. The new guidance is
effective for Versant for revenue arrangements entered into or materially
modified beginning on November 1, 2010. Early adoption is permitted and we
are currently evaluating the impact this guidance may have on our results of
operations, financial position and cash flows.
Revenue Recognition for Certain Arrangements that Include
Software Elements
In October 2009, new guidance was issued by FASB
related to certain revenue arrangements that include software elements.
Previously, companies that sold tangible products with more than incidental
software were required to apply software revenue recognition guidance. This
guidance often delayed revenue recognition for the delivery of the tangible
product. Under the new guidance, tangible products that have software
components that are essential to the functionality of the tangible product
will be excluded from the software revenue recognition guidance. The new
guidance will include factors to help companies determine what is essential to
the functionality. Software-enabled products will now be subject to other
revenue guidance and will likely follow the guidance for multiple deliverable
arrangements issued by the FASB in October 2009. The new guidance is
effective for Versant for revenue arrangements entered into or materially
modified beginning on November 1, 2010. Early adoption is permitted and we
are currently evaluating the impact this guidance may have on our results of
operations, financial position and cash flows.
15
Table
of Contents
Revenue Recognition Milestone Method
In April 2010, the FASB issued guidance on the criteria
that should be met for determining whether the milestone method of revenue
recognition is appropriate for research and development
arrangements. A vendor can recognize consideration that is
contingent upon achievement of a milestone in its entirety as revenue in the
period in which the milestone is achieved only if the milestone meets all
criteria to be considered substantive. The guidance is effective for
Versant for milestones achieved in fiscal years, and interim periods within
those years, beginning in the Companys third quarter of fiscal
2010. Early adoption is permitted and we are currently evaluating
the impact this guidance may have on our results of operations, financial
position and cash flows.
ITEM
2. MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion and analysis
should be read in conjunction with the Companys financial statements and
accompanying notes included in this report and the audited financial statements
and notes thereto included in the Companys Annual Report on Form 10-K for
the fiscal year ended October 31, 2009 filed with the SEC on January 29,
2010. Our historic operating results are not necessarily indicative of results
that may occur in future periods.
The following discussion and
analysis contains forward-looking statements within the meaning of Section 21E
of the Securities Exchange Act of 1934 and Section 27A of the Securities
Act of 1933. These forward-looking statements include, among other things,
statements regarding the Companys expected future financial performance,
assets, liquidity and trends anticipated for the Companys business. These
statements are based on the Companys current expectations, assumptions,
estimates and projections about the Companys business and the Companys
industry, which in turn are based on information that is reasonably available
to the Company as of the date of this report. Forward-looking statements may
include words such as believes, anticipates, expects, intends, plans,
will, may, should, estimates, predicts, forecasts, guidance, potential,
continue or the negative of such terms or other similar expressions. We
caution readers that these forward-looking statements are not assurances of our
future performance or financial condition and are subject to, and involve,
significant known and unknown risks, uncertainties and other factors that may
cause the Companys actual operating results, financial condition, levels of
activity, performance or achievement to be materially different from any future
operating results, financial condition, levels of activity, performance or
achievements that are expressed, forecasted, projected, implied in, anticipated
or contemplated by the forward-looking statements. These known and unknown risks, uncertainties
and other factors include, but are not limited to, those risks, uncertainties
and factors discussed elsewhere in this report, in the Companys other SEC
filings and in Part I, Item 1A (Risk Factors) and in Part II, Item
7 (Managements Discussion and Analysis of Financial Condition and Results of
Operations) of the Companys report on Form 10-K for the fiscal year
ended October 31, 2009. Versant undertakes no obligation to revise or
update any forward-looking statement in order to reflect events or
circumstances that may arise or occur after the date of this report.
Background and Overview
We
are a leading provider of object-oriented data management software that forms a
critical component of the infrastructure of enterprise computing. We
design, develop, market and support high performance, object-oriented database
management solutions and provide related maintenance and professional services.
Our products and services address the complex data management needs of
enterprises and providers of products requiring data management
functions. Our products and services collectively comprise our single
operating segment, which we call Data Management.
Our
end-user customers typically use our products to manage data for business
systems and to enable these systems to access and integrate data necessary for
the customers data management applications. Our data management products and
services offer customers the ability to manage real-time, XML and other types
of hierarchical and navigational data. We believe that by using our data
management solutions, customers cut their hardware costs, accelerate and
simplify their development efforts, significantly reduce administration costs
and deliver products and services with a significant competitive edge.
Our Data Management business is currently comprised
of the following key products:
16
Table
of Contents
·
Versant
Object Database or VOD,
previously known as VDS, an
eighth generation object-oriented database management system that is used in
high-performance, large-scale, real-time commercial applications in distributed
computing environments. We also offer several optional ancillary products for
use with Versant Object Database to extend its capabilities, provide
compatibility and additional protection of stored data.
·
FastObjects
, an
object-oriented database management system that can be embedded as a high
performance component into customers applications and systems.
·
db4o,
an open source
object-oriented database software solution targeting the embedded device
market.
Our
Versant Object Database product and ancillary offerings are used primarily by
larger organizations, such as technology providers, telecommunications
carriers, government defense agencies, defense contractors, healthcare
companies and companies in the financial services and transportation
industries, each of which have significant large-scale data management
requirements. Our FastObjects solution addresses the data management needs of
smaller business systems and with our recent acquisition of the db4o assets in December 2008,
we further expanded the scope of our solutions in the embedded market.
Our
customers data management needs can involve many business functions, ranging
from management of the use and sharing of a companys internal enterprise data
to the processing of externally originated information such as customer
enrollment, billing and payment transaction data. Our solutions have also been
used to solve complex data management issues such as fraud detection, risk
analysis and yield management and can be adapted for use with many different
applications.
In
addition to our product offerings, we provide maintenance and technical support
services to assist users in using our products. We also offer a variety of
consulting and training services to assist users in developing and deploying
applications based on our Versant Object Database, FastObjects and db4o
solutions.
We
license our products and sell associated maintenance, training and consulting
services to end-users through our direct sales force and through value-added
resellers, systems integrators and distributors.
In
addition to these products and services, we resell related software developed
by third parties. To date, substantially all of our revenues have been derived
from the following data management products and related services:
·
Sales of licenses for Versant Object
Database and FastObjects;
·
Maintenance and technical support
services for our products, including db4o;
·
Consulting and training services;
·
Nonrecurring engineering fees received
in connection with providing services associated with Versant Object Database;
·
The resale of licenses, and maintenance,
training and consulting services for third-party products that complement
Versant Object Database;
·
Reimbursements received for out-of-pocket
expenses, which we incurred and are recorded as revenues in our statements of
income.
Continued
Adverse Global Economic Conditions Are Negatively Impacting Our Business
The national and global
economies and financial markets have continued to experience a severe downturn
stemming from a multitude of factors, including adverse credit conditions,
slower economic activity, more recent crises relating to concerns about the
debt and financial stability of certain European countries, concerns about
failures or the instability of major financial institutions and other
businesses, inflation and deflation, high rates of unemployment, reduced
corporate profits and capital spending, adverse business conditions, liquidity
concerns and other factors. As a result of these conditions, the United States
and global economies are in a significant recession, which may continue for a
significant length of time. The severity of these economic and financial market
conditions and the length of time they may persist are unknown.
17
Table
of Contents
Our business has been
negatively affected by these ongoing worldwide economic conditions. It is
unclear when or to what extent the macroeconomic environment may improve.
During the first six months of fiscal 2010, our selling environment remained
very challenging, causing customers to delay or reduce technology purchases or
to make smaller investments in our solutions. We are seeing continuing
pressures on our customers budgets, and while they are facing uncertainty and
cost pressures in their own businesses, some of our customers are deferring
purchases of our products. The difficult and uncertain economic conditions are
causing some of our customers to face financial challenges and they may
continue to face such challenges for the foreseeable future. The current economic downturn in our
customers industries has contributed to the substantial reduction in our
revenues, particularly our license revenue, and could continue to harm our
business, operating results and financial condition.
Critical Accounting Policies and
Estimates
The preparation of our
consolidated financial statements requires us to make estimates and judgments
that affect the reported amount of our assets and liabilities at the date of
our financial statements and of our revenues and expenses during the reporting
period covered by our financial statements. We base these estimates and judgments
on information reasonably available to us, such as our historical experience
and industry trends, economic and seasonal fluctuations and on our own internal
projections that we derive from that information. Although we believe our
estimates to be reasonable under the circumstances, there can be no assurances
that such estimates will be accurate given that the application of these
accounting policies necessarily involves the exercise of subjective judgment
and the making of assumptions regarding many future variables and
uncertainties. We consider critical those accounting policies that require
our most difficult, subjective or complex judgments, and that are the most
important to the portrayal of our financial condition and results of
operations. These critical accounting policies relate to revenue recognition,
goodwill and acquired intangible assets, and income taxes.
During the first six
months of fiscal 2010, there were no significant changes in our critical
accounting policies and estimates. Please refer to Managements Discussion and
Analysis of Financial Condition and Results of Operations contained in Part II,
Item 7 of our Annual Report on Form 10-K for our fiscal year ended October 31,
2009, filed with the SEC on January 29, 2010 (File/Film No. 000-28540/10558485)
for a more complete discussion of our critical accounting policies and
estimates.
Results of Operations
The following table sets
forth, for the periods indicated, the percentage relationship of certain items
from our condensed consolidated statement of income to total revenues:
18
Table
of Contents
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
April 30,
|
|
April 30,
|
|
April 30,
|
|
April 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
License
|
|
48
|
%
|
|
49
|
%
|
|
52
|
%
|
|
54
|
%
|
|
Maintenance
|
|
51
|
|
|
49
|
|
|
47
|
|
|
45
|
|
|
Professional
services
|
|
1
|
|
|
2
|
|
|
1
|
|
|
1
|
|
|
Total
revenues
|
|
100
|
|
|
100
|
|
|
100
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
License
|
|
2
|
|
|
1
|
|
|
2
|
|
|
1
|
|
|
Amortization
of intangible assets
|
|
2
|
|
|
3
|
|
|
1
|
|
|
2
|
|
|
Maintenance
|
|
10
|
|
|
8
|
|
|
9
|
|
|
8
|
|
|
Professional
services
|
|
1
|
|
|
1
|
|
|
|
|
|
1
|
|
|
Total
cost of revenues
|
|
15
|
|
|
13
|
|
|
12
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
85
|
|
|
87
|
|
|
88
|
|
|
88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
and marketing
|
|
32
|
|
|
20
|
|
|
29
|
|
|
21
|
|
|
Research
and development
|
|
27
|
|
|
25
|
|
|
25
|
|
|
20
|
|
|
General
and administrative
|
|
21
|
|
|
21
|
|
|
21
|
|
|
21
|
|
|
Restructuring
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
|
80
|
|
|
66
|
|
|
75
|
|
|
62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from operations
|
|
5
|
|
|
21
|
|
|
13
|
|
|
26
|
|
|
Interest
and other income, net
|
|
2
|
|
|
2
|
|
|
1
|
|
|
2
|
|
|
Income
before provision for income taxes
|
|
7
|
|
|
23
|
|
|
14
|
|
|
28
|
|
|
Provision
for income taxes
|
|
4
|
|
|
3
|
|
|
4
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
3
|
%
|
|
20
|
%
|
|
10
|
%
|
|
24
|
%
|
|
Revenues
The following table
summarizes license, maintenance and professional services revenues for the
three and six months ended April 30, 2010 and April 30, 2009 (in
thousands, except percentages):
19
Table
of Contents
|
|
Three Months Ended
|
|
|
|
April 30,
|
|
April 30,
|
|
Change
|
|
|
|
2010
|
|
2009
|
|
Amount
|
|
Percentage
|
|
|
|
(unaudited)
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
License
revenues
|
|
$
|
1,694
|
|
$
|
1,931
|
|
$
|
(237
|
)
|
|
(12
|
)%
|
|
Maintenance
revenues
|
|
1,793
|
|
1,957
|
|
(164
|
)
|
|
(8
|
)
|
|
Professional
services revenues
|
|
28
|
|
71
|
|
(43
|
)
|
|
(61
|
)
|
|
Total
|
|
$
|
3,515
|
|
$
|
3,959
|
|
$
|
(444
|
)
|
|
(11
|
)%
|
|
|
|
Six Months Ended
|
|
|
|
April 30,
|
|
April 30,
|
|
Change
|
|
|
|
2010
|
|
2009
|
|
Amount
|
|
Percentage
|
|
|
|
(unaudited)
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
License
revenues
|
|
$
|
4,154
|
|
$
|
5,173
|
|
$
|
(1,019
|
)
|
|
(20
|
)%
|
|
Maintenance
revenues
|
|
3,777
|
|
4,272
|
|
(495
|
)
|
|
(12
|
)
|
|
Professional
services revenues
|
|
40
|
|
133
|
|
(93
|
)
|
|
(70
|
)
|
|
Total
|
|
$
|
7,971
|
|
$
|
9,578
|
|
$
|
(1,607
|
)
|
|
(17
|
)%
|
|
Total Revenues
. Total revenues are comprised of license
fees and fees for maintenance, training, consulting, technical and other
support services. Fluctuations in our total revenues can be attributed to
changes in economic and industry conditions, product and customer mix, the
timing of license and support transactions, general trends in information
technology spending, changes in geographic mix, and the corresponding impact of
changes in foreign currency exchange rates. Further, product life cycles impact
revenues periodically as old contracts expire and new products are released. In
2010, our revenues have been negatively impacted by the weakened global
economy.
Our total revenues
decreased by $
444,000
(or
11
%) for the three months ended April 30,
2010 compared to the corresponding period in fiscal 2009. This decrease
resulted primarily from an approximate $237,000 (or 12%) decrease in license
revenues and an approximate $164,000 (or 8%) decrease in maintenance revenues.
Professional services revenues decreased $43,000 (or 61%) for the three months
ended April 30, 2010 over the corresponding period in fiscal 2009. Total
revenues for the three months ended April 30, 2010 also included
approximately $99,000 of favorable foreign currency exchange rate fluctuations.
Our total revenues
decreased by $
1.6 million
(or
17
%) for the six months ended April 30,
2010 compared to the corresponding period in fiscal 2009. This decrease
resulted primarily from an approximate $1.0 million (or 20%) decrease in
license revenues and an approximate $495,000 (or 12%) decrease in maintenance
revenues. Professional services revenues
decreased $93,000 (or 70%) for the six months ended April 30, 2010 over
the corresponding period in fiscal 2009. Total revenues for the six months
ended April 30, 2010 also included approximately $355,000 of favorable
foreign currency exchange rate fluctuations.
Two significant
telecommunications
customers
accounted for 29% of our total revenues for the three months ended April 30,
2010 and 21% of our total revenues for the six months ended April 30,
2010.
The inherently
unpredictable business cycle of an enterprise software company makes
discernment of continued and meaningful business trends difficult, particularly
in the current recessionary economic environment. In terms of license revenues,
we are still experiencing lengthy sales cycles and customers preference for
licensing our software on an as needed basis, versus the historical practice
of prepaying license fees in advance of usage, a factor which can adversely
affect the amount of our license revenues. In addition, the deterioration in
general economic conditions has further lengthened our sales cycle and created
increased pricing pressure as many customers strive to reduce their operating
costs. License revenues are a critical
factor in driving the amount of our services revenues, as new license customers
typically enter into support and maintenance agreements with us, from which our
maintenance revenues are derived over future fiscal periods. These economic circumstances have to date
adversely affected our license and maintenance revenues in fiscal 2010 and
accordingly, on May 6, 2010 we publicly revised our guidance for fiscal
2010 to reflect reduced expectations for total revenue and income from
operations for this fiscal year.
20
Table
of Contents
License.
License revenues primarily represent
perpetual license fees received and recognized from our End-Users and Value
Added Resellers.
License revenues were
$1.7 million for the three months ended April 30, 2010, a decrease of
$237,000 (or 12%) from $1.9 million reported for the comparable period in
fiscal 2009. The decrease in license revenues for the three months ended April 30,
2010 compared to the same three month period in 2009 resulted primarily from
fewer larger license transactions, and was partially offset by an approximate
$58,000 increase in license revenues resulting from favorable foreign currency
exchange rate fluctuations.
License revenues were
$4.2 million for the six months ended April 30, 2010, a decrease of $1.0
million (or 20%) from $5.2 million reported for the comparable period in fiscal
2009. The decrease in license revenues for the six months ended April 30,
2010 compared to the same six month period in 2009 resulted primarily from
fewer larger license transactions, and was partially offset by an approximate
$212,000 increase in license revenues resulting from favorable foreign currency
exchange rate fluctuations.
Maintenance
. Maintenance and technical support
revenues include revenues derived from maintenance agreements, under which we
provide customers with internet and telephone access to support personnel and
software upgrades, dedicated technical assistance and emergency response
support options.
Maintenance revenues were $1.8 million for the three
months ended April 30, 2010, a decrease of $164,000 from $2.0 million
reported for the comparable period in fiscal 2009. The decrease in maintenance
revenues for the quarter ended April 30, 2010 resulted primarily from an
approximate decrease of $123,000 attributable to certain
customers electing less expensive support and maintenance options and an
approximate decrease of $100,000 due to only partial renewal or
non-renewal of maintenance contracts by
certain customers. These decreases were
partially offset by an approximate increase of $37,000 in maintenance revenues
related to our db4o customers and an increase of approximately $41,000
resulting from favorable foreign currency exchange rate fluctuations during the
quarter ended April 30, 2010 compared to the corresponding period in
fiscal 2009.
Maintenance revenues were
$3.8 million for the six months ended April 30, 2010, a decrease of
$495,000 from $4.3 million reported for the comparable period in fiscal 2009.
The decrease in maintenance revenues for the six months ended April 30,
2010 resulted primarily from the absence in the six months ended April 30,
2010 of back maintenance revenue (compared to $300,000 of back maintenance
revenue we recognized from one European telecommunications customer in the same
period in fiscal 2009), an approximate decrease of $216,000 resulting from
certain
customers electing less expensive support and maintenance
options
and an
approximate decrease of $188,000 attributable to only partial renewal or
non-renewal of maintenance contracts by certain customers. These decreases were partially offset by an
increase of approximately $143,000 resulting from favorable foreign currency
exchange rate fluctuations during the six months ended April 30, 2010
compared to the corresponding period in fiscal 2009 and an increase in
maintenance revenues generated by db4o customers of approximately $85,000
during the six months ended April 30, 2010 compared to the corresponding
period in fiscal 2009.
Given recent lower levels
of license revenue and the current economic environment, we may in the future
obtain fewer new maintenance agreements and may experience lower rates of
renewal of our maintenance contracts or renewals at reduced service levels.
Professional Services
.
Professional
services revenues consist of revenues from consulting, training and technical
support as well as billable travel expenses incurred by our professional
services organization.
Professional services
revenues were $28,000 and $40,000, respectively, for the three and six months
ended April 30, 2010, a decrease of $43,000 (or 61%) from $71,000 reported
for the three months ended April 30, 2009 and a decrease of $93,000 (or
70%) from $133,000 reported for the six months ended April 30, 2009. These decreases were a result of reduced
consulting services performed in our European operations including $43,000 of
consulting revenue for one customer we recognized in the six months ended April 30,
2009 that was not repeated in fiscal 2010.
International Revenues
. The following table summarizes our
revenues by geographic area for the three and six months ended April 30,
2010 and April 30, 2009 (in thousands, except percentages):
21
Table
of Contents
|
|
Three Months Ended April 30,
|
|
|
|
|
|
Percentage
|
|
|
|
Percentage
|
|
Change
|
|
|
|
2010
|
|
of revenues
|
|
2009
|
|
of revenues
|
|
Amount
|
|
Percentage
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues by Region:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
America
|
|
$
|
1,606
|
|
46
|
%
|
|
$
|
1,563
|
|
40
|
%
|
|
$
|
43
|
|
|
3
|
%
|
|
Europe
|
|
1,780
|
|
50
|
|
|
2,147
|
|
54
|
|
|
(367
|
)
|
|
(17
|
)
|
|
Asia
|
|
129
|
|
4
|
|
|
249
|
|
6
|
|
|
(120
|
)
|
|
(48
|
)
|
|
|
|
$
|
3,515
|
|
100
|
%
|
|
$
|
3,959
|
|
100
|
%
|
|
$
|
(444
|
)
|
|
(11
|
)%
|
|
|
|
Six Months Ended April 30,
|
|
|
|
|
|
Percentage
|
|
|
|
Percentage
|
|
Change
|
|
|
|
2010
|
|
of revenues
|
|
2009
|
|
of revenues
|
|
Amount
|
|
Percentage
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues by Region:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
America
|
|
$
|
3,005
|
|
38
|
%
|
|
$
|
3,659
|
|
38
|
%
|
|
$
|
(654
|
)
|
|
(18
|
)%
|
|
Europe
|
|
4,448
|
|
56
|
|
|
5,530
|
|
58
|
|
|
(1,082
|
)
|
|
(20
|
)
|
|
Asia
|
|
518
|
|
6
|
|
|
389
|
|
4
|
|
|
129
|
|
|
33
|
|
|
|
|
$
|
7,971
|
|
100
|
%
|
|
$
|
9,578
|
|
100
|
%
|
|
$
|
(1,607
|
)
|
|
(17
|
)%
|
|
Total revenues decreased
$444,000 (or 11%) in the three months ended April 30, 2010 compared to the
comparable period of fiscal 2009. The decrease in revenues in absolute dollars
was due to revenue decreases of $367,000 in Europe and $120,000 in Asia and was
partially offset by an increase in revenues of $43,000 in North America. The
decrease in total revenues generally occurred across geographic regions as the
global economy remained weak, however, in North America, we recognized significant
license revenues with one telecommunications customer of approximately $527,000
in the three months ended April 30, 2010, which resulted in the small
increase in North American revenues. Total revenues for the three months ended April 30,
2010 also included approximately $99,000 of favorable foreign currency exchange
rate fluctuations.
Total revenues decreased
$1.6 million (or 17%) in the six months ended April 30, 2010 compared to
the comparable period of fiscal 2009. The decrease in total revenues also
generally occurred across geographic regions as the global economy remained
weak. The decrease in revenues in absolute dollars was due to revenue decreases
of $654,000 in North America and $1.1 million in Europe and included an
approximate increase of $355,000 in favorable foreign currency fluctuations.
These decreases were also partially offset by an increase in revenues of
$129,000 in Asia which was primarily a result of an increase in revenues from
Japan.
International revenues
(revenues from the European and Asian regions) represented approximately 54% of
our total revenues for the three months ended April 30, 2010, as compared
to 60% for the comparable period in fiscal 2009. The decrease in international
revenues as a percentage of total revenues in the quarter ended April 30,
2010 is due to decreases of $367,000 and $120,000 in revenues from Europe and
Asia, respectively, while North American revenues as a percentage of total
revenues increased slightly. International revenues (revenues from the European
and Asian regions) represented approximately 62% of our total revenues for the
six months ended April 30, 2010 and the six months ended April 30,
2009 remaining relatively stable as a percentage of total revenues.
Revenues from North America
: The $43,000 (or 3%) revenue increase
from North America was primarily due to significant license transactions with
one North American telecommunications customer totaling $527,000 in the three
months ended April 30, 2010, compared to $206,000 of license revenues from
the same customer in the three months ended April 30, 2009, partially
offset by generally smaller license transactions.
The $654,000 (or 18%) revenue decrease from North
America in the six months ended April 30, 2010 compared to the
corresponding period of 2009 was primarily due to fewer larger license
transactions.
Revenues from Europe
:
The $367,000
(or 17%) decrease in European revenues
for the three months ended April 30, 2010
over the comparable period in fiscal 2009 and the $1.1 million (or 20%)
decrease in European revenues for the six months ended April 30,
22
Table
of Contents
2010 over the comparable period in fiscal 2009 included
decreases in license, maintenance and consulting services revenues. These
decreases were
partially offset by an approximate $99,000 and $355,000 increase in revenues
resulting from favorable foreign currency exchange rate fluctuations in the three
and six months ended April 30, 2010, respectively.
Since the Companys
acquisition of Poet Holdings, Inc. in early 2004, we have generally
derived a higher percentage of international revenues due to stronger demand
for our products in Europe. We expect in the future to continue to experience a
somewhat stronger demand for our products in Europe as compared to our other
geographic markets.
Revenues from Asia:
We experienced a decrease of $120,000
(or 48%) in revenues from our Asia Pacific region during the three months ended
April 30, 2010, and an increase of $129,000 (or 33%) in revenues from our
Asia Pacific region during the six months ended April 30, 2010 compared to
the comparable periods in fiscal 2009. The $120,000 decrease in revenues from
Asia during the three months ended April 30, 2010 largely resulted from an
approximate $200,000 decrease related to revenues recognized from one
significant Korean telecommunications customer during the three months ended April 30,
2009 that was not repeated during the three months ended April 30, 2010.
However, revenues from this same customer remained relatively stable over the
six months ended April 30, 2010 when compared to the corresponding period
of 2009. The $129,000 increase in revenues from Asia during the six months
ended April 30, 2010 was primarily a result of an increase of $188,000 in
revenues from Japan which was partially offset by an approximate $49,000
decrease in revenues from Australia.
A variety of factors may
impact Versants future revenues, including the potential strengthening of the
U.S. dollar (which would have the effect of reducing portions of our revenue
resulting from favorable currency exchange fluctuations) and the generally more
difficult economic environment currently being experienced in the global
economy, which may negatively impact demand for our products and services.
Cost
of Revenues
The following table
summarizes total cost of revenues for the three and six months ended April 30,
2010 and April 30, 2009 (in thousands, except percentages):
|
|
Three Months Ended
|
|
|
|
April 30,
|
|
April 30,
|
|
Change
|
|
|
|
2010
|
|
2009
|
|
Amount
|
|
Percentage
|
|
|
|
(unaudited)
|
|
|
|
|
|
Cost of revenues:
|
|
|
|
|
|
|
|
|
|
Cost
of license
|
|
$
|
75
|
|
$
|
57
|
|
$
|
18
|
|
|
32
|
%
|
|
Amortization
of intangible assets
|
|
77
|
|
108
|
|
(31
|
)
|
|
(29
|
)
|
|
Cost
of maintenance
|
|
366
|
|
333
|
|
33
|
|
|
10
|
|
|
Cost
of professional services
|
|
21
|
|
34
|
|
(13
|
)
|
|
(38
|
)
|
|
Total
|
|
$
|
539
|
|
$
|
532
|
|
$
|
7
|
|
|
1
|
%
|
|
|
|
Six Months Ended
|
|
|
|
April 30,
|
|
April 30,
|
|
Change
|
|
|
|
2010
|
|
2009
|
|
Amount
|
|
Percentage
|
|
|
|
(unaudited)
|
|
|
|
|
|
Cost of revenues:
|
|
|
|
|
|
|
|
|
|
Cost
of license
|
|
$
|
156
|
|
$
|
122
|
|
$
|
34
|
|
|
28
|
%
|
|
Amortization
of intangible assets
|
|
154
|
|
201
|
|
(47
|
)
|
|
(23
|
)
|
|
Cost
of maintenance
|
|
756
|
|
716
|
|
40
|
|
|
6
|
|
|
Cost
of professional services
|
|
31
|
|
70
|
|
(39
|
)
|
|
(56
|
)
|
|
Total
|
|
$
|
1,097
|
|
$
|
1,109
|
|
$
|
(12
|
)
|
|
(1
|
)%
|
|
Total Cost of Revenues.
Total cost of revenues was $539,000 (or 15% of
revenues) and $1.1 million (or 12% of revenues) for the three and six months
ended April 30, 2010, respectively, remaining at a relatively consistent
level in absolute dollars and slightly
23
Table
of Contents
higher as a percentage of
revenues compared to $532,000 (or 13% of revenues) and $1.1 million (or 12% of
revenues) for the comparable periods in fiscal 2009.
License.
Cost of license revenues consists
primarily of royalties, the cost of third party products which we resell to our
customers, as well as product media, shipping and packaging costs.
Cost of license revenues
was $75,000 (or 4% of license revenues) for the three months ended April 30,
2010, an increase of $18,000 (or 32%) from $57,000 (or 3% of license revenues)
reported for the comparable period in fiscal 2009. This increase was primarily related to a
major release (Version 8) of the Versant Object Database in February 2010,
which generated additional printing and other production costs in the three
months ended April 30, 2010.
Cost of license revenues
was $156,000 (or 4% of license revenues) for the six months ended April 30,
2010, an increase of $34,000 (or 28%) from $122,000 (or 2% of license revenues)
reported for the comparable period in fiscal 2009. This increase was primarily related to a
major release (Version 8) of the Versant Object Database in February 2010,
which generated additional printing and other production costs in the six
months ended April 30, 2010.
Amortization of Intangible
Assets.
Amortization of intangible assets consists of amortization of the intangible
assets acquired in our fiscal 2009 acquisition of db4o and our fiscal 2004
acquisitions of Poet Holdings, Inc. and FastObjects, Inc.
Amortization of
intangible assets was $77,000 for the three months ended April 30, 2010, a
decrease of $31,000 (or 29%) from $108,000 reported for the three months ended April 30,
2009. Intangible assets related to JDO Genie Technology were fully amortized in
the third quarter of fiscal 2009, causing a decrease of $28,000 in amortization
of intangible assets in the three months ended April 30, 2010 compared to
the three months ended April 30, 2009.
Amortization of
intangible assets was $154,000 for the six months ended April 30, 2010,
representing a decrease of $47,000 (or 23%) from $201,000 reported for the six
months ended April 30, 2009. This decrease included a $56,000 decrease due
to intangible assets related to JDO Genie Technology being fully amortized in
the third quarter of fiscal 2009, and was partially offset by a $9,000 increase
in amortization of intangible assets recorded from our acquisition of the db4o
business in the first quarter of fiscal 2009.
We expect to incur
amortization charges of approximately $76,000 for the third quarter of fiscal
2010.
Maintenance.
Cost of maintenance revenues consists
primarily of salaries, bonuses and consulting fees for customer support
personnel and related expenses, including payroll, employee benefits and
allocated overhead.
Cost of maintenance
revenues was $366,000 (or 20% of maintenance revenues) for the three months
ended April 30, 2010, a slight increase in both absolute dollars and as a
percentage of maintenance revenues, compared to $333,000 (or 17% of maintenance
revenues) reported for the comparable period in fiscal 2009. The increase is
primarily related to an adjustment related to the acquisition of db4o of
$30,000 made in the second fiscal quarter of 2009 that was not repeated in
fiscal 2010.
Cost of maintenance
revenues was $756,000 (or 20% of maintenance revenues) for the six months ended
April 30, 2010, a slight increase in both absolute dollars and as a
percentage of maintenance revenues compared to $716,000 (or 17% of maintenance
revenues) reported for the comparable period in fiscal 2009. This increase is
primarily related to an approximate increase of $23,000 due to hiring one
additional customer support representative in our European operations in the
second quarter of fiscal 2009 and an approximate increase of $24,000 due to
unfavorable foreign currency exchange fluctuations in the six months ended April 30,
2010.
Professional Services.
Cost of professional services consists
of salaries, bonuses, third party consulting fees and other costs associated
with supporting our professional services organization.
Cost of professional
services revenues decreased $13,000 to $21,000 (or 76% of professional services
revenues) for the three months ended April 30, 2010 compared to $34,000
(or 48% of professional services revenues) reported for the comparable period
in fiscal 2009.
24
Table of Contents
Cost of professional
services revenues decreased $39,000 to $31,000 (or 77% of professional services
revenues) for the six months ended April 30, 2010 compared to $70,000 (or
53% of professional services revenues) reported for the comparable period in
fiscal 2009.
Operating
Expenses
The following table
summarizes our operating expenses for the three and six months ended April 30,
2010 and April 30, 2009 (in thousands, except percentages):
|
|
Three Months Ended
|
|
|
|
April 30,
|
|
April 30,
|
|
Change
|
|
|
|
2010
|
|
2009
|
|
Amount
|
|
Percentage
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
and marketing
|
|
$
|
1,135
|
|
|
$
|
811
|
|
$
|
324
|
|
|
40
|
%
|
|
Research
and development
|
|
944
|
|
|
980
|
|
(36
|
)
|
|
(4
|
)
|
|
General
and administrative
|
|
751
|
|
|
818
|
|
(67
|
)
|
|
(8
|
)
|
|
Restructuring
|
|
(4
|
)
|
|
|
|
(4
|
)
|
|
100
|
|
|
Total
|
|
$
|
2,826
|
|
|
$
|
2,609
|
|
$
|
217
|
|
|
8
|
%
|
|
|
|
Six Months Ended
|
|
|
|
April 30,
|
|
April 30,
|
|
Change
|
|
|
|
2010
|
|
2009
|
|
Amount
|
|
Percentage
|
|
|
|
(unaudited)
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Sales
and marketing
|
|
$
|
2,321
|
|
$
|
1,997
|
|
$
|
324
|
|
|
16
|
%
|
|
Research
and development
|
|
1,988
|
|
1,974
|
|
14
|
|
|
1
|
|
|
General
and administrative
|
|
1,675
|
|
2,004
|
|
(329
|
)
|
|
(16
|
)
|
|
Restructuring
|
|
39
|
|
|
|
39
|
|
|
100
|
|
|
Total
|
|
$
|
6,023
|
|
$
|
5,975
|
|
$
|
48
|
|
|
1
|
%
|
|
Total Operating Expenses.
Total operating expenses were $2.8
million (or 80% of revenues) for the three months ended April 30, 2010 and
$2.6 million (or 66% of revenues) for the comparable period in fiscal 2009. The
$217,000 (or 8%) absolute dollar increase in total operating expenses for the
three months ended April 30, 2010 resulted primarily from an approximate
increase of $312,000 related to a planned expansion of our sales force and
marketing programs in both the United States and in our European operations and
an approximate increase of $63,000 due to unfavorable foreign currency exchange
rate fluctuations, partially offset by a decrease of approximately $33,000 in
our research and development costs related to the consolidation of engineering
activities into one location and a decrease of $84,000 in our general and
administrative expenses related to a reduction in outside services and
reductions in bonus and profit-sharing costs.
Total operating expenses
were $6.0 million (or 75% of revenues) for the six months ended April 30,
2010 and $6.0 million (or 62% of revenues) for the comparable period in fiscal
2009. The $48,000 (or 1%) absolute dollar increase in total operating expenses
for the six months ended April 30, 2010 resulted primarily from an
approximate increase of $569,000 related to the planned expansion of our sales
force and marketing programs in the United States and in our European
operations and an approximate increase of $212,000 due to unfavorable foreign
currency exchange rate fluctuations, partially offset by a decrease of
approximately $339,000 related to the termination of our former Executive VP of
Field Operations in December 2009, a decrease of approximately $92,000 in
our research and development costs due to the consolidation of engineering
activities into one location and a decrease of
$252,000 in our general and administrative expenses largely related to a
reduction in outside services and bonus and profit-sharing costs.
Sales and Marketing.
Sales and marketing expenses consist
primarily of personnel and personnel related expenses, commissions earned by
sales personnel, and expenses associated with trade shows, travel and other
marketing communication costs, such as advertising and other marketing
programs.
25
Table
of Contents
Sales and marketing
expenses were $1.1 million (or 32% of revenues) for the three months ended April 30,
2010 and $811,000 (or 20% of revenues) for the comparable period in fiscal
2009. The $324,000 increase (or 40%) in sales and marketing costs for the three
months ended April 30, 2010 related primarily to an approximate increase
of $166,000 due to the expansion of our U.S. sales operations, including
increased salary and related costs, facilities and travel costs associated with
the addition of two new salespeople and a VP of Sales North America, an
approximate $73,000 increase in domestic marketing programs including the
addition of a new VP Marketing and Strategic Product Development, and an
approximate $73,000 in new marketing programs in our European operations
including a new strategic partnership and new marketing collateral.
Sales and marketing
expenses were $2.3 million (or 29% of revenues) for the six months ended April 30,
2010 and $2.0 million (or 21% of revenues) for the comparable period in fiscal
2009. The $324,000 increase (or 16%) in sales and marketing costs related
primarily to an approximate increase of $399,000 in connection with the
expansion of our U.S. sales operations, including increased salary and related
costs, facilities and travel costs associated with the addition of two new
salespeople and a VP of Sales North America, an approximate $170,000 increase
in global marketing programs including the addition of a new VP Marketing and
Strategic Product Development, and an approximate increase of $59,000 due to
unfavorable foreign currency exchange rate fluctuations, with these increases
partially offset by an approximate decrease of $339,000 related to expenses
associated with the termination of our
former Executive VP of Field Operations in December 2009 which were not
repeated in the six months ended April 30, 2010.
For the remainder of fiscal
2010, we expect our quarterly sales and marketing expenses to continue to
increase at a somewhat reduced rate as we invest in efforts to expand our
customer base. We expect these expenses to continue to represent a considerable
percentage of our total operating expenditures in the foreseeable future.
Research and Development.
Research and development expenses consist
primarily of personnel and related expenses, including payroll and employee
benefits, expenses for facilities and payments made to outside software
development contractors.
Research and development
expenses were $944,000 (or 27% of revenues) for the three months ended April 30,
2010 and $980,000 (or 25% of revenues) for the comparable period in fiscal
2009. The $36,000 decrease (or 4%) in absolute
dollars for the three months ended April 30, 2010 included an approximate
decrease of $120,000 related to the wind-down of our Indian operations, offset
by an increase of $87,000 in salary and related costs for six personnel
additions in our European engineering operations.
Research and development
expenses were $2.0 million (or 25% of revenues) for the six months ended April 30,
2010 and $2.0 million (or 20% of revenues) for the comparable period in fiscal
2009. The $14,000 increase (or 1%) in absolute
dollars for the six months ended April 30, 2010 included an approximate
increase of $138,000 in salary and related costs for personnel additions in our
European operations and an approximate increase of $122,000 due to unfavorable
foreign currency exchange fluctuations, partially offset by a decrease of
$186,000 related to the wind-down of our Indian operations and a decrease of
$44,000 in reduced outside consulting services.
We anticipate that we
will continue to invest significant resources in research and development
activities to develop new products, advance the technology of our existing
products and develop new business opportunities. We expect research and
development expenditures to generally remain at current levels for the
remainder of fiscal 2010.
General and Administrative.
General and administrative expenses
consist primarily of personnel and related expenses and general operating
expenses.
General and
administrative expenses were $751,000 (or 21% of revenues) for the three months
ended April 30, 2010 and $818,000 (or 21% of revenues) for the comparable
period in fiscal 2009. The $67,000 (or 8%) decrease in general and
administrative expense for the three months ended April 30, 2010 when
compared to the three months ended April 30, 2009 was due to an
approximate $51,000 decrease in Sarbanes-Oxley Act SOX compliance costs and
other professional services costs, a $33,000 decrease in executive bonus and
profit sharing costs and a decrease of $35,000 in facilities and travel costs,
partially offset by a $51,000 increase in bad debt expense connected with the
collection of past due receivables in the second quarter of fiscal 2009 not
repeated in fiscal 2010.
General and
administrative expenses were $1.7 million (or 21% of revenues) for the six
months ended April 30, 2010 and $2.0 million (or 21% of revenues) for the
comparable period in fiscal 2009. The $329,000 (or 16%) decrease in general and
administrative expense for the six months ended April 30, 2010 was due to
an approximate $213,000 decrease in SOX compliance
26
Table
of Contents
costs and other
professional services costs, a $39,000 decrease in executive bonus, profit
sharing and share based compensation costs, a decrease of $39,000 in allocated
facilities costs and a $15,000 decrease in bad debt expense, partially offset
by an approximate increase of $28,000 due to unfavorable foreign currency
exchange fluctuations.
We expect our general and
administrative expenses in fiscal 2010 to increase moderately from fiscal 2009
due to cost increases related to compliance with Section 404 of the
Sarbanes-Oxley Act as our small company exemption from the internal controls
attestation requirements of the Sarbanes-Oxley Act lapses in fiscal 2010.
Restructuring
:
On September 22, 2009, the Company committed to
the implementation of a restructuring pursuant to which it has closed its
research and development facility in Pune, India. The restructuring plan was
undertaken to consolidate our research and development efforts into one
location in Germany in order to streamline operations, create management
efficiencies and increase productivity. The restructuring plan has been substantially
completed in the fiscal quarter ended April 30, 2010.
A net reduction of
restructuring charges of $4,000 was reported for the three months ended April 30,
2010 which included a $29,000 decrease related to the collection of monies due
for certain current assets for which an allowance had previously been
established and was partially offset by an increase of $23,000 of contract
termination costs and other direct costs of closure. There were no
restructuring charges during the second quarter of fiscal 2009.
Restructuring charges
were $39,000 for the six months ended April 30, 2010, which included $38,000
of severance and retention costs and $28,000 of contract termination and other
direct costs of closure, partially offset by a $29,000 decrease related to the
collection of monies due for certain current assets for which an allowance had
previously been established. There were
no restructuring charges during the six months ended April 30, 2009.
Interest and Other Income, Net
The following table summarizes
our interest and other income, net for the three and six months ended April 30,
2010 and April 30, 2009 (in thousands, except percentages):
|
|
Three Months Ended
|
|
|
|
April 30,
|
|
April 30,
|
|
Change
|
|
|
|
2010
|
|
2009
|
|
Amount
|
|
Percentage
|
|
|
|
(unaudited)
|
|
|
|
|
|
Interest and other income, net:
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
$
|
13
|
|
$
|
58
|
|
$
|
(45
|
)
|
|
(78
|
)%
|
|
Foreign
exchange gain
|
|
69
|
|
44
|
|
25
|
|
|
57
|
|
|
Other
income
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
82
|
|
$
|
102
|
|
$
|
(20
|
)
|
|
(20
|
)%
|
|
|
|
Six Months Ended
|
|
|
|
April 30,
|
|
April 30,
|
|
Change
|
|
|
|
2010
|
|
2009
|
|
Amount
|
|
Percentage
|
|
|
|
(unaudited)
|
|
|
|
|
|
Interest and other income, net:
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
$
|
27
|
|
$
|
205
|
|
$
|
(178
|
)
|
|
(87
|
)%
|
|
Foreign
exchange gain
|
|
64
|
|
51
|
|
13
|
|
|
25
|
|
|
Other
income
|
|
1
|
|
|
|
1
|
|
|
100
|
|
|
Total
|
|
$
|
92
|
|
$
|
256
|
|
$
|
(164
|
)
|
|
(64
|
)%
|
|
Interest and other
income, net, consists of interest income earned on our cash and cash
equivalents, net of interest expense due to our financing activities,
miscellaneous refunds and foreign exchange rate gains as a result of settling
transactions denominated in currencies other than our functional currency.
27
Table
of Contents
Interest and other
income, net, was $82,000 (or 2% of total revenues) and $102,000 (or 2% of total
revenues) for the three months ended April 30, 2010 and 2009,
respectively. The decrease in absolute dollars of $20,000 (or 20%) was largely
due to a decrease in interest income of $45,000 as a result of the lower
general level of interest rates, partially offset by an increase of $25,000 of
foreign exchange gains resulting from settling transactions denominated in
currencies other than our functional currency.
Interest and other
income, net, was $92,000 (or 1% of total revenues) and $256,000 (or 2% of total
revenues) for the six months ended April 30, 2010 and 2009, respectively.
The decrease in absolute dollars of $164,000 (or 64%) was largely due to a
decrease in interest income of $178,000 as a result of the lower general level
of interest rates.
Provision for Income Taxes
The following table
reflects the Companys provision for income taxes for the three and six months
ended April 30, 2010 and April 30, 2009 (in thousands, except
percentages):
|
|
Three Months Ended
|
|
|
|
April 30,
|
|
April 30,
|
|
Change
|
|
|
|
2010
|
|
2009
|
|
Amount
|
|
Percentage
|
|
|
|
(unaudited)
|
|
|
|
|
|
Provision for income taxes:
|
|
|
|
|
|
|
|
|
|
Foreign
withholding taxes
|
|
$
|
20
|
|
$
|
34
|
|
$
|
(14
|
)
|
|
(41
|
)%
|
|
Provision
for income taxes - Europe
|
|
114
|
|
90
|
|
24
|
|
|
27
|
|
|
Provision
for income taxes - India
|
|
|
|
|
|
|
|
|
|
|
|
Federal,
state and franchise taxes
|
|
|
|
20
|
|
(20
|
)
|
|
(100
|
)
|
|
Total
|
|
$
|
134
|
|
$
|
144
|
|
$
|
(10
|
)
|
|
(7
|
)%
|
|
|
|
Six Months Ended
|
|
|
|
April 30,
|
|
April 30,
|
|
Change
|
|
|
|
2010
|
|
2009
|
|
Amount
|
|
Percentage
|
|
|
|
(unaudited)
|
|
|
|
|
|
Provision for income taxes:
|
|
|
|
|
|
|
|
|
|
Foreign
withholding taxes
|
|
$
|
54
|
|
$
|
47
|
|
$
|
7
|
|
|
15
|
%
|
|
Provision
for income taxes - Europe
|
|
286
|
|
305
|
|
(19
|
)
|
|
(6
|
)
|
|
Provision
for income taxes - India
|
|
|
|
1
|
|
(1
|
)
|
|
(100
|
)
|
|
Federal,
state and franchise taxes
|
|
|
|
59
|
|
(59
|
)
|
|
(100
|
)
|
|
Total
|
|
$
|
340
|
|
$
|
412
|
|
$
|
(72
|
)
|
|
(17
|
)%
|
|
Although we have not
exhausted our net operating tax loss carry forwards in Germany, the German tax
code provides for certain annual statutory limitations related to the use of
tax loss carry forward amounts. In
addition, as of April 30, 2010, the strengthening of the US dollar against
the euro created taxable gains from US denominated currencies held by our
German operations. Consequently, we accrued income taxes for our European
operations of approximately $114,000 and $286,000, for the three and six months
ended April 30, 2010, respectively, and approximately $90,000 and $305,000
for the three and six months ended April 30, 2009, respectively. The
Companys tax provisions were based upon our projected fiscal 2010 and fiscal
2009 effective tax rates. The $79,000
decrease in the provision for income taxes excluding foreign withholding taxes
for the six months ended April 30, 2010 over the comparable period in
fiscal 2009 was primarily attributable to decreased net income and was
partially offset by an approximate $21,000 increase due to unfavorable foreign
currency exchange fluctuations.
We incurred foreign
withholding taxes of approximately $20,000 and $34,000, respectively, for the
three months ended April 30, 2010 and 2009, and approximately $54,000 and
$47,000, respectively, for the six months ended April 30, 2010 and 2009,
which we have included in our income tax provision.
In evaluating our ability
to utilize our deferred tax assets, we consider all available positive and
negative evidence, including our past operating results in the most recent
fiscal years and our assessment of expected future results of operations on a
jurisdiction by jurisdiction basis. Significant management judgment is required
to determine when, in the future, the realization of our net
28
Table
of Contents
deferred tax assets will
become more likely than not. The Company will continue to assess the
realizability of the tax benefit available based on actual and forecasted
operating results. See Note 10 to the
Notes to Condensed Consolidated Financial Statements included in this report
for additional information regarding the treatment of taxes in our financial
statements.
LIQUIDITY AND
CAPITAL RESOURCES
The following table sets
forth certain consolidated balance sheets data as of April 30, 2010 and October 31,
2009 and certain consolidated statements of cash flows data for the six months
ended April 30, 2010 and 2009:
|
|
April 30,
|
|
October 31,
|
|
Percent
|
|
|
|
2010
|
|
2009
|
|
Change
|
|
|
|
(in thousands, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Working
Capital
|
|
$
|
26,415
|
|
$
|
26,791
|
|
(1
|
)%
|
|
Cash
and cash equivalents
|
|
$
|
27,902
|
|
$
|
27,812
|
|
|
%
|
|
|
|
Six Months Ended
|
|
|
|
|
|
April 30,
|
|
April 30,
|
|
Percent
|
|
|
|
2010
|
|
2009
|
|
Change
|
|
|
|
(in thousands, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by operating activities
|
|
$
|
1,938
|
|
|
$
|
4,146
|
|
|
(53
|
)%
|
|
Net
cash used in investing activities
|
|
(351
|
)
|
|
(2,386
|
)
|
|
(85
|
)
|
|
Net
cash used in financing activities
|
|
$
|
(1,019
|
)
|
|
$
|
(2,137
|
)
|
|
(52
|
)%
|
|
Cash
and Cash Equivalents
We funded our business
from cash generated by our operations during the six months ended April 30,
2010. As of April 30, 2010, we had cash and cash equivalents of
approximately $27.9 million, an increase of $90,000 from the $27.8 million of
cash and cash equivalents we held at October 31, 2009.
As of April 30,
2010, $6.3 million of our $27.9 million in cash and cash equivalents at that
date was held in foreign financial institutions, of which
$5.3 million
was held in foreign currencies.
The following table
summarizes our cash balances held in foreign currencies and their equivalent
U.S. dollar amounts for the periods indicated (in thousands):
|
|
As of April 30, 2010
|
|
As of October 31, 2009
|
|
|
|
Local Currency
|
|
U.S. Dollar
|
|
Local Currency
|
|
U.S. Dollar
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
Cash in foreign currency:
|
|
|
|
|
|
|
|
|
|
Euros
|
|
|
3,732
|
|
$
|
4,940
|
|
|
2,936
|
|
$
|
4,347
|
|
British
Pound
|
|
£
|
20
|
|
31
|
|
£
|
15
|
|
24
|
|
Indian
Rupee
|
|
Rs
|
14,055
|
|
315
|
|
Rs
|
18,069
|
|
383
|
|
Total
|
|
|
|
$
|
5,286
|
|
|
|
$
|
4,754
|
|
We transact business in
various foreign currencies and, accordingly, we are subject to exposure from adverse
movements in foreign currency exchange rates. Operating expenses incurred
by our foreign subsidiaries are denominated primarily in local
currencies. We currently do not use financial instruments to hedge these
operating expenses. While we intend to assess the need to utilize
financial instruments to hedge currency exposures on an ongoing basis, we do
not at this time anticipate establishing any hedging during fiscal 2010.
29
Table of Contents
The effect of changes in
foreign currency exchange rates on our net operating results in the second
quarter of fiscal 2010, as compared to the second quarter of fiscal 2009, was
comprised of approximately $99,000 of favorable foreign currency fluctuations
on our revenues, $9,000 of unfavorable foreign currency fluctuations on our
cost of revenues, and $63,000 of unfavorable foreign currency fluctuations on
our operating expenses, resulting in a net favorable effect of approximately
$27,000 on our operating income for the three months ended April 30, 2010.
The effect of changes in
foreign currency exchange rates on our net operating results for the six months
ended April 30, 2010, compared to the corresponding period in fiscal 2009,
was comprised of approximately $355,000 of favorable foreign currency
fluctuations on our revenues, $32,000 of unfavorable foreign currency
fluctuations on our cost of revenues, and $212,000 of unfavorable foreign currency
fluctuations on our operating expenses, resulting in a net favorable effect of
approximately $111,000 on our operating income.
Our exposure to foreign
exchange risk is primarily related to the magnitude of foreign net profits and
losses denominated in euros, as well as our net position of monetary assets and
monetary liabilities in the euro (though in the future the same could be true
of other foreign currencies depending on the source of our revenues). This
exposure has the potential to produce either gains or losses within our
consolidated results. However, in some instances our European operations act as
a natural hedge, since both operating expenses as well as revenues are
denominated in local currencies. In these instances, although an unfavorable
change in the exchange rate of the euro against the U.S. dollar will result in
lower revenues when translated into U.S. dollars, our European operating
expenditures will be lower as well.
Additionally, we held
approximately 81% of our total cash balances at April 30, 2010 in the form
of U.S. dollars to assist in minimizing the impact of foreign currency
fluctuations.
In relation to our cash
balances held overseas, there were no European Union foreign exchange
restrictions on repatriating our overseas-held cash to the United States.
However, we may be subject to income tax withholding in the source countries
and to U.S. federal and state income taxes in the future if the cash payment or
transfer from our subsidiaries to the U.S. parent were to be classified as a
dividend. Other payments made by our European overseas subsidiaries in the
ordinary course of business (e.g. payment of royalties or interest from the
subsidiaries to the U.S. parent) were generally not subject to income tax
withholding under existing tax treaties.
Our cash equivalents
primarily consist of money market accounts; accordingly, our interest rate risk
is not considered significant.
On November 30, 2009
our Board of Directors approved a new stock repurchase program pursuant to
which the Company is authorized to repurchase up to $5.0 million of its common
stock in fiscal year 2010. This stock repurchase program is currently scheduled
to expire upon the earlier of October 31, 2010, or such time as Versant
has expended $5.0 million to repurchase outstanding common shares under the
program; however the program may be suspended, discontinued, or extended at any
time by the Company. As of April 30, 2010, pursuant to this stock
repurchase program, Versant had acquired 76,059 common shares on the open
market for approximately $1.1 million at an average purchase price of $14.83
per share; and as of June 7, 2010, Versant had acquired a total of 285,294
common shares on the open market or in block trades for approximately $3.5
million at an average purchase price of $12.23 per share.
Taking into consideration
the contingent cash outflows related to potential common stock repurchases, we
believe that with our current cost structure and based on our current estimates
of revenues and collections in fiscal 2010, we expect to operate with a
moderate negative cash flow in fiscal 2010.
Cash
Flow provided by Operating Activities
The main source of our
operating cash flows is cash collections from customers who have purchased our
products and services. Our primary uses of cash in operating activities are for
personnel related expenditures and facility costs.
The timing of payments to
our vendors for accounts payable and collections from our customers for
accounts receivable will significantly impact cash flows in our operating
activities. We typically pay our vendors and service providers in accordance
with their invoice terms and conditions. Our standard payment terms for our
invoices are usually between 30 and 60 days net.
We measure the
effectiveness of our collection efforts by an analysis of our accounts
receivable and our days sales outstanding (DSO). We calculate DSO by taking the
ending accounts receivable balances (net of bad debt allowance) divided by the
average
30
Table of Contents
daily sales amount.
Average daily sales amount is calculated by dividing the total quarterly
revenue recognized net of changes in deferred revenues by 91.25 days. Our DSOs
were 61 days and 56 days for the three months ended April 30, 2010 and
2009, respectively
.
Collections
of accounts receivable and related DSO could fluctuate in future periods due to
the timing and amount of our revenues and the effectiveness of our collection
efforts.
Cash Flow used in Investing Activities
The change in cash flows
from investing activities primarily relates to purchases of property and
equipment of $276,000 for our new offices in Hamburg, Germany and a $90,000
contingent payment to Servo Software related to our acquisition of the db4o
assets.
For the six months ended April 30,
2010 and 2009, $90,000 and $2.3 million of cash was used for the acquisition of
the db4o, assets, respectively.
Cash Flow used in Financing Activities
On December 1, 2008 and November 30, 2009,
our Board of Directors approved stock repurchase programs. Under each program,
the Company was authorized to repurchase up to $5.0 million worth of its
outstanding common shares from time to time on the open market, in block trades
or otherwise. The stock repurchase
program that was approved on December 1, 2008 expired pursuant to its own
terms on October 31, 2009.
The primary source of
cash flows from financing activities is proceeds from the sale of common stock
under our Equity Incentive Plan, Directors Plan and Employee Stock Purchase
Plan.
For the six months ended April 30,
2010, $1.0 million of cash was used by financing activities, consisting of $1.1
million of cash used to repurchase our common stock offset by cash inflows of
$112,000 from the sale of common stock under our Equity Incentive and Employee
Stock Purchase Plans.
For the six months ended April 30,
2009, $2.1 million of cash was used by financing activities, consisting of $2.3
million of cash used to repurchase our common stock offset by cash inflows of
$143,000 from the sale of common stock under our Equity Incentive and Employee
Stock Purchase Plans.
Our future liquidity and
capital resources could be impacted by our stock repurchase program as
described above, and by the exercise of outstanding common stock options and
purchase of shares under the ESPP and the cash proceeds we receive upon
exercise and purchase of these securities. As of April 30, 2010, we had
approximately 180,288 shares available to issue under our current Equity
Incentive Plan and our Director Stock Option Plan and 509,483 shares in
outstanding grants under our current Equity Incentive Plan and our Director
Stock Option Plan. The timing of the issuance, the duration of vesting
provisions and the grant price will all impact the timing of any proceeds.
Accordingly, we cannot estimate the amount of such proceeds at this time.
Commitments and Contingencies
Our
principal commitments as of April 30, 2010 consist of obligations under
operating leases for facilities and equipment. In September 2009, the
Company entered into an amended lease agreement to extend the office facilities
lease for its U.S. headquarters and in July 2009, the Company entered into
a new lease agreement for its European headquarters.
On November 30, 2009
our Board of Directors approved a new stock repurchase program pursuant to
which the Company is authorized to repurchase up to $5.0 million of its common
stock in fiscal 2010. The stock repurchase program is currently scheduled to
expire upon the earlier of October 31, 2010, or such time as Versant has
expended $5.0 million to repurchase outstanding common shares under the
program; however the program may be earlier suspended, discontinued, or
extended at any time by the Company.
In December 2008, we
committed $2.6 million in cash to acquire the assets of the database software
business of privately-held Servo Software, Inc. (formerly db4objects, Inc.).
The final contingent payment of $90,000 was paid on May 28, 2010.
After taking into account
potential common stock repurchases under our current stock repurchase program,
we believe that our existing cash and cash equivalents and cash to be generated
from operations will be sufficient to finance our operations during the
31
Table of Contents
next twelve months.
However, if we fail to generate adequate cash flows from operations in the
future, due to an unexpected decline in our revenues, difficulties or delays in
collection of revenues or due to a sustained increase in cash expenditures in
excess of the revenues generated, then our cash balances may not be sufficient to
fund our continuing operations without obtaining additional debt or equity
financing. Additional cash may also be needed to acquire or invest in
complementary businesses or products or to obtain the right to use
complementary technologies, and we expect that, in the event of such an
acquisition or investment that is significant, it will be necessary for us to
seek additional debt or equity financing.
Recent
Accounting Pronouncements
For recent accounting
pronouncements see Note 12,
Recent Accounting Pronouncements
of Notes to Condensed Consolidated Financial Statements under Item 1
of Part I of this R
eport.
Risk
Factors
Our business faces many
risks and uncertainties. When evaluating our business and prospects you should,
in addition to other information contained in this report and our other filings
with the SEC, particularly consider the risk factors set forth in Part I,
Item 1A (Risk Factors) of the Companys Annual Report on Form 10-K for
the fiscal year ended October 31, 2009, filed with the SEC on January 29,
2009 (File/Film No. 000-28540/10558485).
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign
currency hedging instruments.
We transact business in various foreign currencies
and, accordingly, we are subject to exposure from adverse movements in foreign
currency exchange rates. Operating expenses incurred by our foreign
subsidiaries are denominated primarily in local currencies. We currently
do not use financial instruments to hedge these operating expenses. While
we intend to assess the need to utilize financial instruments to hedge currency
exposures on an ongoing basis, we do not at this time anticipate establishing
any hedging during fiscal 2010.
The effect of changes in
foreign currency exchange rates on our net operating results in the second
quarter of fiscal 2010, as compared to the second quarter of fiscal 2009, was
comprised of approximately $99,000 of favorable foreign currency fluctuations
on our revenues, $9,000 of unfavorable foreign currency fluctuations on our
cost of revenues, and $63,000 of unfavorable foreign currency fluctuations on
our operating expenses, resulting in a net favorable effect of approximately
$27,000 on our operating income for the three months ended April 30, 2010.
The effect of changes in
foreign currency exchange rates on our net operating results for the six months
ended April 30, 2010, compared to the corresponding period in fiscal 2009,
was comprised of approximately $355,000 of favorable foreign currency
fluctuations on our revenues, $32,000 of unfavorable foreign currency
fluctuations on our cost of revenues, and $212,000 of unfavorable foreign
currency fluctuations on our operating expenses, resulting in a net favorable
effect of approximately $111,000 on our operating income.
Our exposure to foreign
currency exchange rate risk is primarily related to the magnitude of foreign
net profits and losses denominated in euros, as well as our net position of
monetary assets and monetary liabilities in the euro (though in the future the
same could be true of other foreign currencies depending on the source of our
revenues). This exposure has the potential to produce either gains or losses
within our consolidated results. However, in some instances our European
operations act as a natural hedge, since both operating expenses as well as
revenues are denominated in local currencies. In these instances, although an
unfavorable change in the exchange rate of the euro against the U.S. dollar
will result in lower revenues when translated into U.S. dollars, our European
operating expenditures will be lower as well.
Additionally, we held
approximately 81% of our total cash balance at April 30, 2010 in the form
of U.S. dollars to assist in minimizing the impact of foreign currency
fluctuations.
We did not own any derivative financial instruments as of April 30,
2010.
Interest
rate risk.
Our cash
equivalents primarily consist of money market accounts; therefore, we do not
believe that our interest rate risk is significant at this time.
32
Table
of Contents
ITEM 4.
CONTROLS AND PROCEDURES
(a)
Evaluation of Disclosure Controls and Procedures
.
SEC rules define the
term disclosure controls and procedures to mean a companys controls and
other procedures that are designed to ensure that information required to be
disclosed by the company in the reports that it files or submits under the
Securities Exchange Act of 1934 is recorded, processed, summarized and
reported, within the time periods specified in the SECs rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by a
company in its reports that it files or submits under the Securities Exchange
Act of 1934 is accumulated and communicated to the companys management,
including its principal executive and principal financial officers, or persons
performing similar functions, as appropriate to allow timely decisions
regarding required disclosure.
Our
disclosure controls and procedures include components of our internal control
over financial reporting. Managements assessment of the effectiveness of our
internal control over financial reporting is expressed at the level of
reasonable assurance because a control system, no matter how well designed and
operated, can provide only reasonable, but not absolute, assurance that the
control systems objectives will be met.
Based on the evaluation
of the effectiveness of our disclosure controls and procedures by our
management, with the participation of our chief executive officer and chief
financial officer, as of the end of the period covered by this report, our
chief executive officer and chief financial officer have concluded that our
disclosure controls and procedures were effective to provide reasonable
assurance that (i) information required to be disclosed in the reports
that the Company files or submits under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported, within the time periods specified
in the Commissions rules and forms and (ii) is accumulated and
communicated to the Companys management, including its principal executive and
principal financial officers, as appropriate to allow timely decisions
regarding required disclosure.
(b)
Changes
in Internal Control over Financial Reporting
.
There was no change in
our internal control over financial reporting during the three and six months
ended April 30, 2010 that has materially affected, or is reasonably likely
to materially affect, our internal control over financial reporting.
SEC rules define the term internal control over financial
reporting as a process designed by, or under the supervision of, the Companys
principal executive and principal financial officers, or persons performing
similar functions, and effected by the Companys board of directors, management
and other personnel, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles and
includes those policies and procedures that:
·
Pertain to the maintenance of records
that in reasonable detail accurately and fairly reflect the transactions and
dispositions of the assets of the Company;
·
Provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and
that receipts and expenditures of the Company are being made only in accordance
with authorizations of management and directors of the Company; and
·
Provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition
of the Companys assets that could have a material effect on the financial
statements.
Our Chief Executive Officer and Chief Financial Officer have
concluded that there have not been any changes in our internal control over
financial reporting during the three and six months ended April 30, 2010
that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
33
Table of Contents
PART II. OTHER INFORMATION
ITEM
2. UNREGISTERED SALES OF EQUITY
SECURITIES AND USE OF PROCEEDS
(c) Purchases
of Equity Securities by the Issuer and Affiliated Purchasers.
On
November 30, 2009 our Board of Directors approved a new stock repurchase
program pursuant to which the Company is authorized to repurchase up to $5.0
million of its common stock in fiscal year 2010. The stock repurchase program
is currently scheduled to expire upon the earlier of October 31, 2010, or
such time as Versant has expended $5.0 million to repurchase outstanding common
shares under the program; however the program may be earlier suspended,
discontinued, or extended at any time by the Company.
The stock repurchase activity under this stock
repurchase program during the three and six months ended April 30, 2010 is
summarized as follows:
|
|
Total Number
of Shares
Purchased
|
|
Average Price
Paid Per
Share(1)
|
|
Total Number of
Shares
Purchased as
Part of Publicly
Announced
Program
|
|
Approximate
Dollar Value of
Shares that May
Yet Be Purchased
Under the
Program
|
|
Period:
|
|
|
|
|
|
|
|
|
|
February 1
- February 28, 2010
|
|
19,692
|
|
$
|
14.48
|
|
19,692
|
|
$
|
3,970,410
|
|
March 1
- March 31, 2010
|
|
6,825
|
|
$
|
14.41
|
|
6,825
|
|
$
|
3,872,086
|
|
April 1
- April 30, 2010
|
|
|
|
$
|
|
|
|
|
$
|
3,872,086
|
|
|
|
|
|
|
|
|
|
|
|
Three
months ended April 30, 2010
|
|
26,517
|
|
$
|
14.46
|
|
26,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 30,
2009 - January 31, 2010
|
|
49,542
|
|
$
|
15.03
|
|
49,542
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six
months ended April 30, 2010
|
|
76,059
|
|
$
|
14.83
|
|
76,059
|
|
|
|
(1) Average price paid per share is calculated on
a settlement basis and excludes commission.
ITEM 6. EXHIBITS
(a)
Exhibits
The
following exhibits are filed with this Quarterly Report on Form 10-Q:
Exhibit
|
|
|
|
Incorporated by Reference
|
|
Filed
with
this
|
Number
|
|
Exhibit Description
|
|
Form
|
|
File Number
|
|
Exhibit
|
|
File Date
|
|
10-Q
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.01
|
|
Certification of Chief
Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.02
|
|
Certification of Chief
Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.01*
|
|
Certification of Chief
Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.02*
|
|
Certification of Chief
Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
|
|
|
|
|
|
|
|
|
X
|
* This exhibit is being furnished rather than
filed, and shall not be deemed incorporated by reference into any filing, in
accordance with Item 601 of Regulation S-K.
34
Table
of Contents
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.
|
|
VERSANT CORPORATION
|
|
|
|
Dated: June 10,
2010
|
|
/s/ Jerry Wong
|
|
|
Jerry Wong
|
|
|
Vice President, Finance
|
|
|
Chief Financial Officer
|
|
|
(Duly Authorized
Officer, Principal
|
|
|
Financial and
Accounting Officer)
|
|
|
|
|
|
|
|
|
/s/Jochen Witte
|
|
|
Jochen Witte
|
|
|
President and Chief
Executive Officer
(Duly Authorized Officer and Principal Executive Officer)
|
35
Versant (NASDAQ:VSNT)
Historical Stock Chart
From Jun 2024 to Jul 2024
Versant (NASDAQ:VSNT)
Historical Stock Chart
From Jul 2023 to Jul 2024