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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO .
COMMISSION FILE NUMBER 0-27168
VIEWPOINT CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-4102687
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
498 SEVENTH AVE., SUITE 1810, NEW YORK, NY 10018
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(212) 201-0800
(REGISTRANT'S 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 reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
As of May 2, 2001, there were outstanding 38,120,621 shares of the
registrant's Common Stock, $0.001 par value per share, which is the only
outstanding class of common or voting stock of the registrant.
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VIEWPOINT CORPORATION
FORM 10-Q
TABLE OF CONTENTS
PAGE
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements........................................ 3
Consolidated Balance Sheets -- March 31, 2001 (unaudited)
and December 31, 2000
Consolidated Statements of Operations -- Three months ended
March 31, 2001 and 2000 (unaudited)
Consolidated Statements of Cash Flows -- Three months ended
March 31, 2001 and 2000 (unaudited)
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 8
Item 3. Quantitative and Qualitative Disclosures About Market
Risk........................................................ 13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................ 14
SIGNATURES............................................................ 15
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VIEWPOINT CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
MARCH 31, DECEMBER 31,
2001 2000
------------ ------------
(UNAUDITED) (AUDITED)
ASSETS
Current assets:
Cash and cash equivalents................................. $ 8,174 $ 13,320
Marketable securities..................................... 20,216 15,713
Accounts receivable, net.................................. 2,486 2,101
Notes receivable from related parties, net................ 750 1,620
Prepaid expenses and other current assets................. 2,174 1,957
Current assets related to discontinued operations......... 162 5,662
--------- ---------
Total current assets.............................. 33,962 40,373
Property and equipment, net................................. 5,607 5,622
Goodwill and other intangibles.............................. 51,771 56,111
Other assets................................................ 154 179
Non-current assets related to discontinued operations....... 114 114
--------- ---------
Total assets...................................... $ 91,608 $ 102,399
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 2,644 $ 3,402
Accrued expenses.......................................... 1,098 861
Deferred revenues......................................... 754 636
Accrued incentive compensation............................ 545 546
Current liabilities related to discontinued operations.... 828 615
--------- ---------
Total current liabilities......................... 5,869 6,060
Stockholders' equity:
Preferred stock, $.001 par value; 5,000 shares
authorized-none issued and outstanding at March 31, 2001
and December 31, 2000..................................... -- --
Common stock, $.001 par value; 75,000 shares
authorized -- 38,028 and 37,964 shares issued and
outstanding at March 31, 2001 and December 31, 2000,
respectively.............................................. 38 38
Paid-in capital............................................. 264,968 264,698
Deferred compensation....................................... (20,411) (22,595)
Treasury stock at cost; 160 shares at March 31, 2001........ (1,015) --
Accumulated other comprehensive income...................... 22 12
Accumulated deficit......................................... (157,863) (145,814)
--------- ---------
Total stockholders' equity........................ 85,739 96,339
--------- ---------
Total liabilities and stockholders' equity........ $ 91,608 $ 102,399
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
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VIEWPOINT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
-------------------
2001 2000
-------- -------
Revenues:
Licenses.................................................. $ 1,908 $ 25
Services.................................................. 883 137
-------- -------
Total revenues.................................... 2,791 162
Cost of revenues............................................ 906 --
-------- -------
Gross profit...................................... 1,885 162
-------- -------
Operating expenses:
Sales and marketing (excluding non-cash stock-based
compensation charges totaling $596 in 2001 and $2,554
in 2000)............................................... 4,579 1,104
Research and development (excluding non-cash stock-based
compensation charges totaling $740 in 2001 and $979 in
2000).................................................. 1,319 677
General and administrative (excluding non-cash stock-based
compensation charges totaling $407 in 2001 and $323 in
2000).................................................. 2,165 1,488
Non-cash stock-based compensation charges................. 1,743 3,856
Amortization of goodwill and other intangibles............ 4,137 38
Depreciation.............................................. 415 92
-------- -------
Total operating expenses.......................... 14,358 7,255
-------- -------
Loss from operations........................................ (12,473) (7,093)
Other income................................................ 424 521
-------- -------
Loss before minority interest in loss of subsidiary......... (12,049) (6,572)
Minority interest in loss of subsidiary..................... -- 685
-------- -------
Net loss from continuing operations......................... (12,049) (5,887)
Income on disposal of discontinued operations............... -- 1,265
-------- -------
Net loss.................................................... $(12,049) $(4,622)
======== =======
Basic and diluted net loss per share:
Net loss per common share from continuing operations...... $ (0.32) $ (0.22)
Net income per common share from discontinued
operations............................................. -- 0.05
-------- -------
Net loss per common share......................... $ (0.32) $ (0.17)
======== =======
Weighted average number of shares outstanding -- basic and
diluted................................................... 37,985 26,804
======== =======
The accompanying notes are an integral part of these consolidated financial
statements.
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VIEWPOINT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
--------------------
2001 2000
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................................... $(12,049) $ (4,622)
Adjustments to reconcile net loss to net cash used in
operating activities:
Net income on disposal of discontinued operations......... -- (1,265)
Amortization of deferred compensation..................... 1,743 3,856
Depreciation and amortization............................. 4,552 130
Reserve of notes receivable............................... (145) --
Minority interest in loss of subsidiary................... -- (685)
Changes in operating assets and liabilities:
Accounts receivable.................................... (182) 111
Prepaid expenses and other assets...................... (192) 711
Accounts payable....................................... (758) 389
Accrued expenses....................................... 237 (65)
Deferred revenues...................................... 272 (183)
Net cash provided by (used) in discontinued
operations............................................ 5,713 (5,241)
-------- --------
Net cash used in operating activities................ (809) (6,864)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment......................... (400) (1,250)
Purchases of marketable securities.......................... (17,328) (26,442)
Proceeds from maturities of marketable securities........... 12,850 30,100
Repayment of notes receivable from related party............ -- 1,000
Net cash used in discontinued operations.................... -- (84)
-------- --------
Net cash provided by (used in) investing
activities.......................................... (4,878) 3,324
CASH FLOWS FROM FINANCING ACTIVITIES
Collection of subscription receivable related to subsidiary
common stock.............................................. -- 1,000
Proceeds from exercise of stock options..................... 556 9,363
-------- --------
Net cash provided by financing activities............ 556 10,363
Effect of exchange rates on cash............................ (15) 8
-------- --------
Net increase (decrease) in cash and cash equivalents........ (5,146) 6,831
Cash and cash equivalents at beginning of period............ 13,320 4,480
-------- --------
Cash and cash equivalents at end of period.................. $ 8,174 $ 11,311
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
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VIEWPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
UNAUDITED INTERIM FINANCIAL INFORMATION
The accompanying unaudited consolidated financial statements include the
accounts of Viewpoint Corporation and its subsidiaries (collectively "Viewpoint"
or the "Company"). All significant intercompany accounts and transactions have
been eliminated in consolidation.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statement presentation. In the opinion of management, the accompanying
consolidated balance sheets and related interim consolidated statements of
operations and cash flows include all adjustments (consisting only of normal
recurring items) considered necessary for their fair presentation. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues and expenses.
Actual results could differ from those estimates. The consolidated results of
operations for the period ended March 31, 2001 are not necessarily indicative of
results to be expected for the year ending December 31, 2001. The information
included in this Form 10-Q should be read in conjunction with the Company's
audited consolidated financial statements and notes thereto as of December 31,
2000 and 1999, and for the three years in the period ended December 31, 2000, as
filed on Form 10-K.
Certain reclassifications have been made to the 2000 consolidated financial
statements to conform to the 2001 presentation.
REVENUE RECOGNITION
The Company recognizes revenue in accordance with Statement of Position
97-2, "Software Revenue Recognition," as amended. Accordingly, revenue from
software arrangements involving multiple elements (e.g., software products,
upgrades/enhancements, post contract customer support, etc.) is allocated to
each element based on the relative fair value of the elements. The determination
of fair value is based on objective evidence, which is specific to the Company.
License Revenue is recognized over the term of the license in a time-based
broadcast license model and up-front in a perpetual broadcast license model.
Service revenue, which consists of fees for professional services, is
recognized as the services are performed or, if no pattern of performance is
discernible, on a straight-line basis over the period during which the services
are performed.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements," which gives additional guidance in applying generally accepted
accounting principles to revenue recognition in the financial statements. The
Company was in compliance with the provisions of SAB No. 101.
2. NET LOSS PER COMMON SHARE
Basic net loss per common share is computed using the weighted average
number of shares of common stock and diluted net loss per common share is
computed using the weighted average number of shares of common stock and common
equivalent shares outstanding. Common equivalent shares related to stock options
and warrants are excluded from the computation of diluted net loss per common
share because their effect was antidilutive.
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VIEWPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. DISCONTINUED OPERATIONS
In December 1999, the Board of Directors of the Company approved a plan to
focus exclusively on its digital marketing technologies and services and to
correspondingly divest itself of its prepackaged graphics software business.
Accordingly, these operations are reflected as discontinued operations for all
periods presented in the accompanying consolidated statements of operations.
The Company recorded an adjustment to net loss on disposal of discontinued
operations of $1,265,000 during the three months ended March 31, 2000 as a
result of better than expected net revenues during the quarter from the
discontinued business. The provision for loss on disposal of discontinued
operations is an estimate and subject to change. Changes in estimates will be
accounted for prospectively and included in income (loss) on disposal of
discontinued operations.
4. RELATED PARTY TRANSACTIONS
In connection with the acquisition of Real Time Geometry Corp. ("RTG") in
December 1996, the Company entered into a noncompetition agreement with one of
RTG's founders who was a former executive of the Company. In addition, the
Company loaned $2,000,000 to the former executive. The loan, which accrued
interest semi-annually at 5.67% and was payable on January 15, 2001, was
collateralized by shares of common stock of the Company owned by the former
executive. As of December 31, 2000, the Company recorded a reserve against the
loan in the amount of $1,442,000, which represented the unsecured portion of the
loan as of December 31, 2000. The former executive defaulted on the loan and the
Company took possession of the collateral on January 16, 2001. As a result, the
Company recorded treasury stock based on the closing price of the Company's
common stock on January 16, 2001.
5. SUBSEQUENT EVENTS
On April 19, 2001, the Company entered into an agreement with Computer
Associates International. Inc. ("Computer Associates") regarding, among other
things, the waiver of transfer restrictions applicable to shares received by
Computer Associates under the Exchange Agreement, dated as of August 10, 2000,
between the Company and Computer Associates (the "Exchange Agreement") to enable
Computer Associates to sell 1,000,000 shares of Viewpoint common stock to a
third party in a private transaction. The Company agreed to register the
1,000,000 shares under the Securities Act of 1933. Under the agreement entered
into on April 19, 2001, Computer Associates agreed to accept newly-issued shares
of Viewpoint common stock in partial repayment of a promissory note due June 8,
2001 and issued by the Company in connection with its acquisition of all of the
outstanding capital stock of Viewpoint Digital Inc.
On May 9, 2001, the Company and Computer Associates entered into a
subsequent agreement (the "Agreement") under which, among other things:
- The Company agreed to waive transfer restrictions applicable to an
additional 2,400,000 unregistered shares (the "Shares") of the Company's
common stock received by Computer Associates in accordance with the
Exchange Agreement to enable Computer Associates to transfer the Shares
to third parties in private transactions;
- The Company agreed to register the Shares under the Securities Act of
1933; and
- Computer Associates agreed to accept, at the Company's election, either
cash or newly-issued, unregistered shares of Viewpoint common stock in
repayment of (a) any additional amounts due under the promissory note due
June 8, 2001, (b) any amounts due under the agreement entered into on
April 19, 2001, and, (c) to the extent Computer Associates realizes
proceeds from the sale of the Shares as well as the shares sold by
Computer Associates under the agreement entered into on April 19, 2001 in
excess of the amounts due under clauses (a) and (b), in repayment of a
promissory note due April 30, 2002.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the unaudited
consolidated financial statements and notes thereto.
The discussion and analysis below contains trend analysis and other
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. Words such as "anticipates," "expects,"
"intends," "plans," "believes," "seeks," "estimates," and variations of such
words and similar expressions are intended to identify such forward-looking
statements. These statements are not guarantees of future performance and are
subject to certain risks, uncertainties and assumptions that are difficult to
predict. Therefore, actual results could differ materially from those expressed
or forecasted in any such forward-looking statements as a result of certain
factors, including those set forth in "Factors That May Affect Future Operating
Results," as well as those discussed elsewhere in the Company's SEC reports,
including without limitation, the Company's audited consolidated financial
statements and notes thereto as of December 31, 2000 and 1999, and for the three
years in the period ended December 31, 2000, as filed on Form 10-K.
OVERVIEW
Viewpoint Corporation, a Delaware corporation ("Viewpoint" or the
"Company") is focused on providing digital marketing technologies and services
for creating and deploying virtual products centered on the Company's Viewpoint
Experience Technology for marketing and e-commerce on the Web environment.
Until December 1999, the Company was primarily engaged in the development,
marketing, and sales of prepackaged software graphics products. Its principal
products were computer graphics "painting" tools and photo imaging software
products. With its acquisition of Real Time Geometry Corporation in December
1996, however, the Company became involved, on a limited basis, in the
development of technologies designed to make practical the efficient display and
deployment of rich media on the Internet.
In June 1999, the Company increased its commitment to the development of
rich media internet technologies and formed Metastream.com Corporation
("Metastream") to operate a business exploiting these technologies. The Company
originally held an 80% equity interest in Metastream with Computer Associates
International, Inc. ("Computer Associates") holding the remaining 20% equity
interest. This 20% interest was acquired by the Company in November 2000.
In December 1999, the Board of Directors of the Company approved a plan to
focus exclusively on the internet technologies of its majority-owned subsidiary
and to correspondingly divest the Company of all its prepackaged software
business. By April 2000, the Company had sold substantially all of its
prepackaged software product lines.
In September 2000, the Company acquired Viewpoint Digital, Inc. ("Viewpoint
Digital"), a wholly-owned subsidiary of Computer Associates. Viewpoint Digital
publishes the world's largest library of 3D digital content and provides
creative 3D services to thousands of customers in entertainment, advertising,
visual simulation, computer-based training and corporate communications.
The Company's primary initiatives include:
- Licensing technology for specific marketing visualization solutions;
- Providing a full range of fee-based professional services for
implementing marketing visualization solutions;
- Forging technological alliances with leading interactive agencies and web
content providers; and
- Maximizing market penetration and name recognition.
Viewpoint believes that its success will depend largely on its ability to
extend its technology and market leadership in e-commerce visualization.
Accordingly, Viewpoint intends to invest heavily in research and
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development and sales and marketing. Revenues from continuing operations
primarily have been from the sale of technology licenses and fee based
professional services.
In light of its recent change in strategic focus, Viewpoint has a limited
operating history upon which an evaluation of the Company and its prospects can
be based. Viewpoint prospects must be considered in light of the risks and
difficulties frequently encountered by early stage technology companies. There
can be no assurance that Viewpoint will achieve or sustain profitability.
Viewpoint has had significant quarterly and annual operating losses since its
inception, and as of March 31, 2001, had an accumulated deficit of $157,863,000.
OPERATING RESULTS
REVENUES
THREE MONTHS ENDED MARCH 31,
-----------------------------
2001 % CHANGE 2000
------- --------- -----
(DOLLARS IN THOUSANDS)
Total revenues........................................... $2,791 1,623% $162
Total revenues of $2,791,000 for the three months ended March 31, 2001 were
comprised of $1,908,000 in license fees and $883,000 in fee-based professional
services. Total revenues of $162,000 for the three months ended March 31, 2000
were comprised of $25,000 in license fees and $137,000 in fee-based professional
services.
COST OF REVENUES
THREE MONTHS ENDED MARCH 31,
------------------------------
2001 % CHANGE 2000
------- --------- ------
(DOLLARS IN THOUSANDS)
Cost of revenues......................................... $ 906 N/A $ --
As % of net revenues..................................... 32% --%
Cost of revenues consist primarily of salaries and consulting fees for
those who provide fee-based professional services.
SALES AND MARKETING (EXCLUDING NON-CASH STOCK- BASED COMPENSATION CHARGES
TOTALING $596 IN 2001 AND $2,554 IN 2000)
THREE MONTHS ENDED MARCH 31,
----------------------------
2001 % CHANGE 2000
------ -------- ------
(DOLLARS IN THOUSANDS)
Sales and marketing..................................... $4,579 315% $1,104
As % of net revenues.................................... 164% 682%
Sales and marketing expenses consist primarily of salaries and benefits,
consulting fees, travel expenses, advertising and tradeshow costs related to the
Company's sales and marketing efforts. The 315% increase in sales and marketing,
is primarily due to an increase in salaries and benefits, recruiting fees and
travel expenses related to an increase in personnel.
RESEARCH AND DEVELOPMENT (EXCLUDING NON-CASH STOCK-BASED COMPENSATION CHARGES
TOTALING $740 IN 2001 AND $979 IN 2000)
THREE MONTHS ENDED MARCH 31,
-----------------------------
2001 % CHANGE 2000
------- --------- -----
(DOLLARS IN THOUSANDS)
Research and development................................. $1,319 95% $677
As % of net revenues..................................... 47% 418%
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The 95% increase in research and development expenses is primarily due to
an increase in salaries and benefits related to increased internal development
personnel in connection with the further development of Viewpoint Experience
Technology. The Company expects research and development expenses to continue to
increase in future periods, but such expenses may vary as a percentage of net
revenues.
GENERAL AND ADMINISTRATIVE (EXCLUDING NON-CASH STOCK-BASED COMPENSATION CHARGES
TOTALING $407 IN 2001 AND $323 IN 2000)
THREE MONTHS ENDED MARCH 31,
----------------------------
2001 % CHANGE 2000
------ -------- ------
(DOLLARS IN THOUSANDS)
General and administrative.............................. $2,165 45% $1,488
As % of net revenues.................................... 78% 919%
General and administrative expenses primarily consist of corporate overhead
of the Company, which includes salaries and benefits costs related to finance
and administration personnel along with other administrative costs such as
legal, accounting, investor relations, and insurance expense. The 45% increase
in general and administrative expenses is primarily attributable to an increase
in salaries and benefits costs related to an increase in personnel.
NON-CASH STOCK-BASED COMPENSATION CHARGES
In connection with the grant of stock options in Metastream to certain
employees and non-employee directors during 1999 and 2000, the Company recorded
deferred compensation representing the difference between the fair value of
Metastream's common stock and the exercise price of the options at the date of
grant. Stock-based compensation expense is recognized over the vesting schedule
of the underlying options.
Stock based compensation decreased from $3,856,000 for the three months
ended March 31, 2000 to $1,743,000 for the three months ended March 31, 2001.
The decrease is primarily attributable to vesting on certain options granted
below fair value during the three months ended March 31, 2000 and the forfeiture
of employee stock options. The Company does not anticipate issuing additional
options below fair market value.
AMORTIZATION OF GOODWILL AND OTHER INTANGIBLES
Amortization of goodwill and other intangibles, which increased from
$38,000 during the three months ended March 31, 2000 to $4,137,000 during the
months ended March 31, 2001, is primarily attributable to the amortization of
intangibles recorded as part of the acquisition of Viewpoint Digital and the
acquisition of Computer Associates' minority interest in Metastream.
DEPRECIATION
Depreciation increased from $92,000 for the three months ended March 31,
2000 to $415,000 for the three months ended March 31, 2001. This increase is
primarily the result of property and equipment additions during 2000 and 2001.
OTHER INCOME
Other income, which decreased from $521,000 during the three months ended
March 31, 2000 to $424,000 during the three months ended March 31, 2001,
primarily consists of interest and investment income on cash and marketable
securities. As a result, other income fluctuates with changes in the Company's
cash and marketable securities balances and market interest rates.
MINORITY INTEREST IN LOSS OF SUBSIDIARY
Metastream, originally a joint initiative between the Company and Computer
Associates, was formed in June 1999. For financial reporting purposes, the
assets, liabilities and operations of Metastream were included in the Company's
consolidated financial statements. Computer Associates and another minority
shareholder's
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combined 20% interest in Metastream was recorded as minority interest in the
Company's consolidated balance sheets, and the losses attributed to their
combined 20% interest were reported as minority interest in the Company's
consolidated statements of operations. In November 2000, the Company acquired
the minority interest in Metastream by issuing approximately 5,578,000 shares of
Company common stock in exchange for 4,850,000 shares of Metastream common
stock.
DISCONTINUED OPERATIONS
In December 1999, the Board of Directors of the Company approved a plan to
focus exclusively on its digital marketing technologies and services and to
correspondingly divest itself of its prepackaged graphics software business.
Accordingly, these operations are reflected as discontinued operations for all
periods presented in the accompanying consolidated statements of operations.
The Company recorded an adjustment to net loss on disposal of discontinued
operations of $1,265,000 during the three months ended March 31, 2000 as a
result of better than expected net revenues during the quarter from the
discontinued business. The provision for loss on disposal of discontinued
operations is an estimate and subject to change. Changes in estimates will be
accounted for prospectively and included in income (loss) on disposal of
discontinued operations.
LIQUIDITY AND CAPITAL RESOURCES
Cash and investments totaled $28,390,000 at March 31, 2001, down from
$29,033,000 at December 31, 2000. Net cash used in operating activities of the
Company totaled $809,000 for the three months ended March 31, 2001, compared to
$6,864,000 for the three months ended March 31, 2000. Net cash used in operating
activities for the three months ended March 31, 2001 primarily resulted from a
$12,049,000 net loss from continuing operations, offset by $5,713,000 in net
cash provided by discontinued operations, $1,743,000 in non-cash stock-based
compensation charges and $4,552,000 in depreciation and amortization. Net cash
used in operating activities for the three months ended March 31, 2000 primarily
resulted from a $5,887,000 net loss from continuing operations and $5,241,000 in
net cash used in discontinued operations, offset by $3,856,000 in non-cash
stock-based compensation charges.
Net cash used in investing activities totaled $4,878,000 for the three
months ended March 31, 2001, compared to net cash provided by investing
activities of $3,324,000 for the three months ended March 31, 2000. Net cash
used in investing activities for the three months ended March 31, 2001 primarily
resulted from $4,478,000 in net purchases of marketable securities. Net cash
provided by investing activities for the three months ended March 31, 2000
primarily resulted from $3,658,000 in net proceeds from maturities of marketable
securities and $1,000,000 from the repayment of a note receivable from a related
party, net of $1,250,000 used in purchases of property and equipment.
Net cash provided by financing activities totaled $556,000 and $10,363,000
for the three months ended March 31, 2001 and 2000, respectively, primarily
resulting from proceeds received from the exercise of stock options by the
Company's employees during the respective periods. In addition, during the three
months ended March 31, 2000, the Company collected $1,000,000 of a subscription
receivable related to common stock of Metastream.
The Company believes that its current cash and marketable securities
balances and cash provided by future operations, if any, are sufficient to meet
its operating cash flow needs and anticipated capital expenditure requirements
through at least the next twelve months. In addition, the Company may pursue
additional debt or equity financing to augment their working capital position;
however, there can be no assurance that the Company can obtain financing at
terms acceptable to the Company.
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
This Form 10-Q contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. Words
such as "anticipates," "expects," "intends," "plans," "believes," "seeks,"
"estimates," and variations of such words and similar expressions are intended
to identify
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such forward-looking statements. These statements are not guarantees of future
performance and are subject to certain risks, uncertainties and assumptions that
are difficult to predict. Therefore, actual results could differ materially from
those expressed or forecasted in any such forward-looking statements as a result
of certain factors, including those listed below.
Shares of the Company's common stock are speculative in nature and involve
a high degree of risk. The risks set forth below are described in more detail in
the Company's Annual Report on Form 10-K for the year ended December 31, 2000
and should be considered carefully. The risks described below are not the only
ones facing the Company. Many factors could cause our results to be different,
including the following risk factors and other risks described in this document.
If any of the following risks occur, our business would likely be adversely
affected and the trading price of the Company's common stock could decline. This
could result in a loss of all or part of your investment.
- We Have a Limited Operating History that Makes an Evaluation of Our
Business Difficult;
- We Have a History of Losses and Expect to Incur Losses in the Future;
- Our Future Revenues May Be Unpredictable and May Cause Our Quarterly
Results to Fluctuate;
- We May be Unable to Meet our Future Capital Requirements;
- Our Stock Price is Volatile and May Continue to Fluctuate in the Future;
- If the Internet Does Not Continue to Expand as a Widespread Commerce
Medium, Demand for Our Products and Technologies May Decline
Significantly;
- Our Market Is Characterized by Rapidly Changing Technology, and if We Do
Not Respond in a Timely Manner, Our Products and Technologies May Not
Succeed in the Marketplace;
- Potential Delays in Product Releases Could Harm Our Business;
- Undetected Errors in Our Products and Technologies Could Result in
Adverse Publicity, Reduced Market Acceptance or Lawsuits by Customers;
- In Order to Increase Market Awareness of Our Products and Generate
Increased Revenue We Need to Expand our Sales and Marketing Capabilities;
- We May Be Unable to Protect Our Intellectual Property Rights and We May
Be Liable For Infringing the Intellectual Property Rights of Others;
- Security Risks Could Limit the Growth of E-commerce and Expose Us to
Litigation or Liability;
- Increasing Government Regulation Could Increase Our Cost of Doing
Business or Increase Our Legal Exposure;
- We Recently Acquired Viewpoint Digital And May Need to Enter Into Other
Business Combinations and Strategic Alliances Which Could Be Difficult to
Integrate and May Disrupt Our Business;
- The Loss of Any of Our Key Personnel Would Harm Our Business;
- Our Revenues Could be Negatively Affected by the Loss of Strategic
Partners;
- Our Future Success Depends on Our Ability to Identify, Hire, Train and
Retain Highly Qualified Employees;
- Our Charter Documents Could Make it More Difficult for a Third Party to
Acquire us;
- Our Business is Subject to General Economic Conditions.
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RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which established accounting and reporting
standards for derivative instruments and hedging activities. SFAS No. 133 is
effective for fiscal years beginning after June 15, 2000. It requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. To
date, we have not engaged in derivative and hedging activities.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to concentration of credit risk and interest rate
risk related to cash equivalents and marketable securities. The Company does not
have any derivative financial instruments as of March 31, 2001. Credit risk is
managed by limiting the amount of securities placed with any one issuer,
investing in high-quality marketable securities and securities of the U.S.
government and limiting the average maturity of the overall portfolio. The
majority of the Company's portfolio, which is classified as available-for-sale,
is composed of fixed income securities that are subject to the risk of market
interest rate fluctuations, and all of the Company's securities are subject to
risks associated with the ability of the issuers to perform their obligations
under the instruments. The Company may suffer losses in principal if forced to
sell securities, which have declined in market value due to changes in interest
rates.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
10.1 Letter Agreement between the Registrant and Fred Brown dated
March 29, 2001.
(b) Reports on Form 8-K
None.
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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.
VIEWPOINT CORPORATION
(Registrant)
/s/ JEFFREY J. KAPLAN
--------------------------------------
Jeffrey J. Kaplan
Executive Vice President and
Chief Financial Officer
Date: May 15, 2001
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