<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
|X| Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended April 2, 1999
|_| Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from _________ to ____________
Commission File Number: 000-21415
WHITE PINE SOFTWARE, INC.
(Name of Small Business Issuer as Specified in Its Charter)
Delaware 04-3151064
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
542 Amherst Street, Nashua, New Hampshire 03063
(Address of Principal Executive Offices)
(603) 886-9050
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 |_|
The number of shares outstanding of the Registrant's common stock as of May 12,
1999 was 10,597,569.
Transitional Small Business Disclosure Format (check one):
Yes |_| No |X|
<PAGE>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
<TABLE>
<S> <C>
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets as of April 2, 1999 and
December 31, 1998......................................................... 3
Condensed Consolidated Statements of Income for the three months
ended April 2, 1999 and April 3, 1998..................................... 4
Condensed Consolidated Statements of Cash Flows for the three
months ended April 2, 1999 and April 3, 1998.............................. 5
Notes to Condensed Consolidated Financial Statements...................... 6
Item 2. Management's Discussion and Analysis or Plan of Operation............... 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings....................................................... 12
Item 6. Exhibits and Reports on Form 8-K........................................ 13
Signatures...................................................................... 14
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
APRIL 2, DECEMBER 31,
1999 1998
-------------------- --------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,574 $ 6,421
Accounts receivable, net 2,652 2,122
Inventories 78 65
Prepaid expenses and other current assets 363 437
-------------------- --------------------
Total current assets 7,667 9,045
Property and equipment, net 1,332 1,354
Third party licenses, net 826 934
Purchased software 3,066 3,142
Trademark 931 951
Goodwill, net 378 437
Other long term assets 103 133
-------------------- --------------------
Total assets $ 14,303 $ 15,996
-------------------- --------------------
-------------------- --------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 1,565 $ 2,046
Deferred revenue 338 346
Current portion of long-term debt 25 11
-------------------- --------------------
Total current liabilities 1,928 2,403
Long term debt, net of current portion 5 23
Other long term liabilities 1,155 1,155
Total stockholders' equity 11,215 12,415
-------------------- --------------------
Total liabilities and stockholders' equity $ 14,303 $ 15,996
-------------------- --------------------
-------------------- --------------------
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE>
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------
APRIL 2, 1999 APRIL 3,1998
-------------------- -----------------
<S> <C> <C>
Revenue:
Software license fees $ 2,186 $ 1,794
Services and other 273 211
-------------------- -----------------
Total revenue 2,459 2,005
Cost of revenue 514 412
-------------------- -----------------
Gross profit 1,945 1,593
Operating expenses:
Sales and marketing 1,598 1,823
Research and development 1,177 1,284
General and administrative 515 571
-------------------- -----------------
Total operating expenses 3,290 3,678
-------------------- -----------------
Loss from operations (1,345) (2,085)
Other income (expense), net 41 180
Net loss before provision for income taxes (1,304) (1,905)
Provision for income taxes - 5
-------------------- -----------------
Net loss $ (1,304) $ (1,910)
-------------------- -----------------
-------------------- -----------------
Net loss per share: Basic: (0.12) (0.21)
-------------------- -----------------
-------------------- -----------------
Diluted: (0.12) (0.21)
-------------------- -----------------
-------------------- -----------------
Weighted average number of common and common
equivalent shares outstanding 10,480,093 9,306,710
-------------------- -----------------
-------------------- -----------------
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------
APRIL 2, APRIL 3,
1999 1998
--------------- -----------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (1,304) $ (1,910)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation 206 131
Amortization of goodwill and third-party licenses 167 125
Changes in operating assets and liabilities:
Accounts receivable (528) 567
Inventories (12) 14
Prepaid expenses 29 234
Other assets 71 (58)
Accounts payable (59) (92)
Accrued expenses and other accrued liabilities (401) (523)
Deferred revenue (7) 38
--------------- -----------------
Net cash used in operating activities (1,838) (1,474)
INVESTING ACTIVITIES
Purchase of property and equipment, net (98) (153)
--------------- -----------------
Net cash used in investing activities (98) (153)
FINANCING ACTIVITIES
Principal payments on long-term debt and third-party licenses (2) (3)
Proceeds from common stock issued upon exercise of stock options
25 4
--------------- -----------------
Net cash provided by financing activities 23 1
Currency translation effect on cash and cash equivalents 66 (9)
--------------- -----------------
Net decrease in cash and cash equivalents (1,847) (1,635)
Cash and cash equivalents at beginning of period 6,421 14,704
--------------- ---------------
---------------
Cash and cash equivalents at end of period $ 4,574 $ 13,069
--------------- -----------------
--------------- -----------------
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE>
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
APRIL 2, 1999
1. ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
White Pine develops, markets and supports multiplatform desktop multimedia
software that facilitates worldwide video and audio communication and data
collaboration across the Internet, intranets, extranets and other networks using
the Internet protocol.
White Pine's group conferencing software products, CU-SeeMe and
MeetingPoint, create a client-server solution that allows users to participate
in real-time, multipoint, multimedia conferences from the users' desktop
computers, using existing Internet, intranet and extranet connections. By
developing multimedia conferencing products that require no proprietary
hardware, White Pine is able to offer multimedia conferencing at a substantially
lower price than vendors of traditional hardware-based systems and thereby
encourage businesses and others to adopt multimedia conferencing as a mass
communication medium.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly owned foreign subsidiary, White Pine Software, Europe. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash on hand and investments in high
grade commercial paper having maturities of three months or less when purchased.
Commercial paper qualifying as cash equivalents totaled $3,201,000 and
$5,432,000 at April 2, 1999 and December 31, 1998, respectively. These
investments have been categorized as held to maturity under the provisions of
Statement of Financial Accounting Standards No. 115, Accounting for Certain
Investments in Debt and Equity Securities. Accordingly, the balances are stated
at amortized cost, which approximates fair value, because of the short maturity
of these instruments.
REVENUE RECOGNITION
White Pine's revenue is derived from software license fees and fees for
services related to its software products, primarily software maintenance fees.
During fiscal 1997, White Pine recognized revenue in accordance with the
American Institute of Certified Public Accountants Statement of Position No.
91-1, "Software Revenue Recognition." Beginning in fiscal 1998, White Pine
recognized revenue in accordance with AICPA Statement of Position 97-2, SOFTWARE
REVENUE RECOGNITION.
- Software license revenue is recognized upon execution of a contract
or purchase order and shipment of the software, net of allowances
for estimated future returns, provided that no significant
obligations on the part of White Pine remain outstanding and
collection of the related receivable is deemed probable by
management. An allowance for product returns is recorded by White
Pine at the time of sale and is measured periodically to adjust to
changing circumstances, including changes in retail sales.
- Software maintenance fees, which are generally payable in advance
and are non-refundable, are recognized ratably over the period of
the maintenance contract, typically twelve months.
- Revenue from training and consulting services is recognized as
services are provided.
- Software license fees, consulting fees and training fees that have
been prepaid or invoiced but that do not yet qualify for recognition
as revenue under White Pine's policy, and prepaid maintenance fees
not yet recognized as revenue, are reflected as deferred revenue.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
THIS FORM 10-QSB CONTAINS "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934. ANY STATEMENTS CONTAINED HEREIN THAT ARE NOT STATEMENTS OF
HISTORICAL FACT MAY BE DEEMED TO BE FORWARD-LOOKING STATEMENTS. WITHOUT LIMITING
THE FOREGOING, THE WORDS "BELIEVES," "ANTICIPATES," "PLANS," "EXPECTS" AND
SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THE
FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND
OTHER FACTORS, INCLUDING THE FACTORS SET FORTH IN "ITEM 1A. RISK FACTORS" IN THE
COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31, 1998,
THAT MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE AND ACHIEVEMENTS OF WHITE PINE TO
DIFFER MATERIALLY FROM THOSE INDICATED BY THE FORWARD-LOOKING STATEMENTS.
INFORMATION SET FORTH UNDER THE HEADING "ITEM 1A. RISK FACTORS" IN SUCH FORM
10-KSB IS INCORPORATED AS AN EXHIBIT TO THIS FORM 10-QSB.
RESULTS OF OPERATIONS
The following table sets forth line items from the Company's statement of
operations as percentages of total revenue for the three months ended April 2,
1999 and April 3, 1998.
WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------
APRIL 2, 1999 APRIL 3, 1998
------------- -------------
<S> <C> <C>
PERCENTAGE OF TOTAL REVENUES
Revenue:
Software license fees 88.9% 89.5%
Services and other 11.1% 10.5%
-------- ---------
Total revenue 100.0% 100.0%
Cost of revenue 20.9% 20.6%
-------- ---------
Gross profit 79.1% 79.4%
Operating expenses:
Sales and marketing 65.0% 90.9%
Research and development 47.9% 64.0%
General and administrative 20.9% 28.5%
-------- ---------
Total operating expenses 133.8% 183.4%
-------- ---------
Loss from operations (54.7%) (104.0%)
Other income (expense), net 1.7% 9.0%
-------- ---------
Net loss before provision for income taxes (53.0%) (95.0%)
Provision for income taxes 0.0% 0.3%
-------- ---------
-------- ---------
Net loss (53.0%) (95.3%)
-------- ---------
-------- ---------
</TABLE>
7
<PAGE>
REVENUE. Total revenue increased by 23% to $2,459,000 in the quarter ended
April 2, 1999 from $2,005,000 in the quarter ended April 3, 1998. The
year-over-year increase in revenue was attributable to a 49% increase in
conferencing revenues, offset in part by a 26% decline in legacy connectivity
revenues in the same period. The server portion of conferencing revenue grew 82%
year-over-year. Conferencing revenue comprised 78% of total revenue at April 2,
1999 in contrast to 64% at April 3, 1998.
The Company's revenue from CU-SeeMe, its conferencing client software,
increased by 26% to $954,000 in the quarter ended April 2, 1999 from $757,000 in
the quarter ended April 3, 1998. This growth was primarily due to the
introduction of the Company's latest conferencing client offering, CU-SeeMe Pro,
which began shipping in late March 1999. Conferencing client revenue represented
39% of total revenue in the quarter ended April 2, 1999 compared to 38% in the
comparable quarter of prior year.
Conferencing server revenue increased by 82% to $954,000 in the quarter
ended April 2, 1999 from $523,000 in the quarter ended April 3, 1998. Server
growth was largely attributable to shipment of MeetingPoint 3.5.1, which
began shipping in February 1999. Conferencing server revenue represented 39%
of total revenue in the quarter ended April 2, 1999, compared with 26% in the
comparable quarter of the prior year. The Company anticipates that server
revenues will continue to grow, particularly in light of the product
enhancements expected to ship late in the second fiscal quarter. These
enhancements, which were announced in the first quarter, include the
integration of streaming media with multipoint group conferencing and
MeetingPoint for the Intel TeamStation. The Company will also begin shipping
its own T.120 whiteboarding technology as part of the same release.
The rate of server revenue growth continues to be determined in part by
product performance and customer acceptance and adoption. The Company is
experiencing relatively lengthy, two-step sales cycles for its MeetingPoint and
ClassPoint server products. The first step typically extends from one to three
months and results in sales of small quantities of the server products for pilot
programs. The second step extends considerably longer, from six months to over a
year, as customers decide whether to move beyond the pilot programs to
deployment of MeetingPoint on a company-wide basis or deployment of ClassPoint
as an operational long-distance learning program.
The Company's legacy connectivity product revenue continued to decline as
the Company continued to focus fewer resources on these older product lines.
Legacy connectivity revenue declined by 26% to $535,000 in the quarter ended
April 2, 1999 from $725,000 in the quarter ended April 3, 1998. The percentage
of total revenue represented by revenue from legacy connectivity products
decreased to 22% in the quarter ended April 2, 1999 from 36% in the quarter
ended April 3, 1998.
The Company believes that continued but minimal additional investment in
the legacy connectivity products in future quarters will slow the decline in
connectivity revenue in the short term, providing the Company with an additional
period to build the sales base for its server products. There can be no
assurance, however, that the Company will continue to be successful in
generating server revenue in an amount sufficient to offset declines in revenue
from its conferencing client and legacy connectivity products, or at all. The
actual amount of revenue generated by the Company's server products may vary
significantly depending on a number of factors, including the unproven market
status and acceptability of the products, significant and increasing competition
for those products and other factors described under "Item 1A. Risk Factors" in
the Company's Form 10-KSB for the year ended December 31, 1998, a copy of which
Item is filed as an exhibit hereto and incorporated by reference herein.
COST OF REVENUE. Cost of revenue consists principally of royalties and
associated amortization of paid license fees relating to third-party software
included in the Company's products, and costs of product media, manuals,
packaging materials, product localization for international markets, duplication
and shipping. Cost of revenue as a percentage of total revenue remained flat at
21% for the quarters ended April 2, 1999 and April 3, 1998. Margins may decline
slightly as higher-margin legacy connectivity revenues decline, and as the
Company ships higher volumes of product bundled with cameras.
SALES AND MARKETING. Sales and marketing expense consists primarily of
costs associated with sales and marketing personnel, sales commissions, trade
shows, advertising and promotional materials. Sales and marketing expense
decreased by 12% to $1,598,000 in the quarter ended April 2, 1999 from
$1,823,000 in the respective period in the prior year. The decrease is
predominantly due to reduction in travel expense
8
<PAGE>
and marketing program expenses. The Company expects sales and marketing expense
to increase in the second fiscal quarter, driven primarily by heavy trade show
activity in the months of April and May.
RESEARCH AND DEVELOPMENT. Research and development expense consists
primarily of costs of personnel and equipment. Research and development expense
decreased by 8% to $1,177,000 in the quarter ended April 2, 1999, from
$1,284,000 in the comparable period in the previous year. The decrease was
principally attributable to reduced headcount and related expenses, offset in
part by fees for contracting help.
GENERAL AND ADMINISTRATIVE. General and administrative expense consists of
administrative, financial and general management activities, including legal,
accounting and other professional fees. General and administrative expense
decreased by 10% to $515,000 for the quarter ended April 2, 1999 from $571,000
in the corresponding period in the prior year. The year-over-year decrease was
primarily due to reduced telecommunications, supplies, and fees expenditures in
the most recent quarter.
PROVISION FOR INCOME TAXES. The Company's provision for income taxes
consists of federal alternative minimum taxes and state and foreign income
taxes. The Company made no provision for income taxes for the three months ended
April 2, 1999 and $5,000 for the three months ended April 3, 1998 as the result
of the Company's net losses incurred during those periods and the Company's
expectation that it will incur a net loss for the fiscal year ending December
31, 1999. The Company expects that its effective tax rate for the foreseeable
future will be lower than the combined federal and state statutory rate
primarily as a result of the realization of net operating loss carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
The Company used cash of $1,847,000 in the three months ended April 2,
1999, as compared with $1,635,000 cash used in the three months ended April 3,
1998. Cash used in the three months ended April 2, 1999 was comprised largely of
the net loss of $1,304,000, a final cash outlay of $133,000 related to the
Company's acquisition of assets from Labtam Communications Pty Ltd. In July
1998, a $100,000 payment as part of an agreement with Radvision for a snapshot
of the H.323 stack source code, $100,000 in property and equipment purchases,
and approximately $150,000 in royalty expense.
On March 31, 1999, the Company terminated its commercial loan agreement
with Fleet Bank-NH, which had provided for a $1,000,000 revolving line of credit
and a separate term loan in the initial principal amount of $53,000. The Company
expects to initiate a new line of credit with a new lending bank during the
second half of fiscal 1999.
At April 2, 1999, the Company had cash and cash equivalents of $4,574,000
and working capital of $5,739,000. The Company believes that its current cash
and cash equivalents and funds generated from operations (if any) will be
sufficient to fund the Company's operations and capital expenditures through
fiscal 1999. Thereafter, the Company's liquidity will be materially dependent
upon its internally generated funds and its ability to obtain funds from
additional equity or debt financings from external sources.
The Company expects that it will need to raise capital in fiscal 1999,
either through a private or public offering of debt or equity or as part of a
strategic partnership or joint venture. The Company continues to experience a
significant negative cash flow each month. No assurance can be given that
financing will be available on acceptable terms or at all. If the Company is
unable to raise funds, it may be unable to support its projected operations and
may be required to defer, for a period of time or indefinitely, its research and
development activities or its continued roll-out of new products and product
versions. The Company has effected two focused personnel reductions during the
past two fiscal years in order to control costs, and it may be required to
effect further reductions if it is unsuccessful in raising additional capital
during fiscal 1999. The Company's capital requirements may vary materially from
those it now anticipates depending on a number of factors, including:
- - the level of its research and development activities;
- - the rate of market acceptance of its software offerings; and
- - the success of its sales, marketing and distribution strategy.
9
<PAGE>
If the Company does not meet its goals with respect to revenue or if its
costs are higher than anticipated, substantial additional funds may be required.
YEAR 2000 COMPLIANCE
White Pine has formed a Year 2000 readiness team to evaluate all of its
systems, including its information technology systems. White Pine's internal
team is currently accumulating a list of all computer applications and
infrastructure to determine Year 2000 compliance. White Pine has tested its two
mission-critical software programs and has determined those systems to be Year
2000 compliant. These software programs run the companies accounting,
manufacturing, support, customer service and sales systems. White Pine has
received Year 2000 readiness statements from a majority of its vendors. These
vendors will be required to address compliance issues and to ensure these issues
are resolved in a timely manner. In the event that White Pine's vendors are not
fully year 2000 compliant prior to December 31, 1999, White Pine could
experience disruption and delays that could have a material adverse impact on
operations. White Pine is developing contingency plans to help alleviate
potential problems resulting from vendor Year 2000 readiness issues. These plans
are scheduled to be completed by the end of 1999.
In addition, White Pine has tested its multimedia conferencing and legacy
connectivity products for Year 2000 compliance. It has determined that its
conferencing products and most of its connectivity products are Year 2000
compliant. A few older connectivity products are not Year 2000 compliant. White
Pine has no plans to update the code on these older connectivity products and
will not market these products in 2000. White Pine has offered to sell the code
for these older products to customers in the installed base, in order to allow
the customers to choose to fix the code or to migrate to a new software package.
The revenue amount related to selling these older non-compliant connectivity
products is not material.
To date, White Pine has not engaged any outside support to assist in the
Year 2000 compliance process. Its out-of-pocket expenses for this process have
totaled less than $25,000 to date and relate principally to the purchase of
testing equipment and software. White Pine expects that it will continue to
resolve any compliance issues utilizing internal resources and that future
out-of-pocket expenses will not exceed an additional $25,000.
INFLATION
Although certain of the Company's expenses increase with general inflation
in the economy, inflation has not had a material impact on the Company's
financial condition or results of operations to date.
RECENT ACCOUNTING PRONOUNCEMENTS
White Pine adopted Statement of Financial Accounting Standards No. 131,
DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION ("SFAS
131"), in fiscal 1998. SFAS 131 establishes standards for reporting information
regarding operating segments in annual financial statements and requires
selected information for those segments to be presented in interim financial
reports issued to stockholders. SFAS 131 also establishes standards for related
disclosures about products and services and geographic areas. Operating segments
are identified as components of an enterprise about which separate discrete
financial information is available for evaluation by the chief operating
decision maker, or decision making group, in making decisions how to allocate
resources and assess performance. White Pine's chief decision maker, as defined
under SFAS 131, is Killko Caballero, White Pine's Chief Executive Officer and
President. To date, White Pine has viewed its operations as principally one
segment, software sales and associated services. As a result, the financial
information disclosed in White Pine's consolidated financial statements
materially represents all of the financial information related to White Pine's
principal operating segment.
Statement of Financial Accounting Standards No. 133, ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES ("SFAS 133"), requires companies
to record derivatives on the balance sheet as assets or liabilities, measured at
fair value. Gains or losses resulting from changes in the values of those
derivatives would be accounted for depending on the use of the derivative and
whether it qualifies for
10
<PAGE>
hedge accounting. SFAS 133 is effective beginning in 2000. The adoption of
SFAS 133 is not expected to have a material impact on the financial position
or results of operations of White Pine.
Statement of Position 98-1, ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE
DEVELOPED OR OBTAINED FOR INTERNAL USE, requires companies to capitalize
qualifying computer software costs that are incurred during the application
development stage and amortize them over the estimated useful life of the
software. Statement of Position 98-1 is effective for White Pine as of January
1, 1999. The adoption of Statement of Position 98-1 did not have a material
impact on the financial position or results of operations of White Pine.
Statement of Position 98-9, MODIFICATION OF SOP 97-2, SOFTWARE REVENUE
RECOGNITION, WITH RESPECT TO CERTAIN TRANSACTIONS, modifies certain provisions
of Statement of Position 97-2. White Pine's accounting policy on software
revenue recognition currently is in compliance with Statement of Position 97-2,
as amended by Statement of Position 98-9, and adoption of this Statement of
Position, as currently issued, did not have a material impact on the financial
position or results of operations of White Pine.
11
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
White Pine is a defendant in two lawsuits pending in New York federal court
(the "RSI Suits") in which the plaintiffs claim to suffer from carpal tunnel
syndrome, or "repetitive stress injuries," as a result of having used computer
keyboards that are alleged to have been defectively designed. The keyboards were
supplied, and possibly designed and manufactured, by Ontel. The assets of Ontel
were purchased in 1982 by Visual Technology, a predecessor of White Pine. The
RSI Suits, which seek money damages, were brought by employees of New York
Telephone, which purchased the keyboards from Lockheed Electronics. One or more
of Visual Technology, Ontel, Lockheed Electronics and Key Tronics, a
subcontractor for certain of the keyboards, are named as co-defendants in a
number of suits, including the RSI Suits. Neither of the RSI Suits has reached
trial.
White Pine has established a reserve for legal fees and losses that could
arise from the RSI Suits and a number of similar actions against White Pine. The
amount of this reserve is based upon White Pine's belief that (1) the RSI Suits
may be covered by product liability insurance, (2) White Pine is contractually
indemnified by Lockheed Electronics and Key Tronics against all or a portion of
the damages to which White Pine may be subject and (3) White Pine has defenses
to substantially all of the claims under the RSI Suits. White Pine reduced this
reserve from $291,000 to $51,000 as of December 31, 1998, in recognition of the
fact that four similar lawsuits had been resolved at no expense to White Pine.
Although White Pine believes that its reserve for the RSI Suits is adequate,
there can be no assurance that White Pine's liabilities under the RSI Suits will
not substantially exceed the reserve.
From time to time, White Pine has received and may receive in the future
notice of claims of infringement of other parties' proprietary rights. Although
White Pine believes that its products and technology do not infringe the
proprietary rights of others, there can be no assurance that additional third
parties will not assert infringement and other claims against White Pine or that
any infringement claims will not be successful.
12
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit Description
11.1 Statement re computation of per share earnings
27.1 Financial Data Schedule for fiscal quarter ended April 2,
1999
99.1 Disclosure set forth under "Item 1A. Risk Factors" in the
Registrant's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1998 (incorporated by reference).
(b) Reports on Form 8-K
None.
13
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized, as of May 17, 1999.
WHITE PINE SOFTWARE, INC.
By: /s/ KILLKO A. CABALLERO
-----------------------------
Killko A. Caballero
Chief Executive Officer and
President
By: /s/ CHRISTINE J. COX
-----------------------------
Christine J. Cox
Chief Financial Officer and
Vice President - Finance
(Principal Financial and
Accounting Officer)
14
<PAGE>
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
EXHIBIT 11.1
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------------
April 2, 1999 April 3, 1998
------------------- ---------------
<S> <C> <C>
Weighted average shares outstanding 10,480,093 9,306,710
------------------- ---------------
Total shares 10,480,093 9,306,710
------------------- ---------------
Net Loss $ (1,303,856) $ (1,910,238)
------------------- ---------------
------------------- ---------------
Net Loss per share: Basic $ (0.12) $ (0.21)
------------------- ---------------
------------------- ---------------
Diluted $ (0.12) $ (0.21)
------------------- ---------------
------------------- ---------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0001006591
<NAME> WHITE PINE SOFTWARE, INC.
<MULTIPLIER> 1
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> APR-02-1999
<EXCHANGE-RATE> 1
<CASH> 4,574,180
<SECURITIES> 0
<RECEIVABLES> 2,786,482
<ALLOWANCES> 134,343
<INVENTORY> 77,533
<CURRENT-ASSETS> 362,914
<PP&E> 2,399,811
<DEPRECIATION> (1,067,777)
<TOTAL-ASSETS> 14,302,954
<CURRENT-LIABILITIES> 1,927,816
<BONDS> 0
104,914
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 14,302,954
<SALES> 0
<TOTAL-REVENUES> 2,458,909
<CGS> 0
<TOTAL-COSTS> 514,184
<OTHER-EXPENSES> 3,290,096
<LOSS-PROVISION> (10,635)
<INTEREST-EXPENSE> 1,063
<INCOME-PRETAX> (1,303,856)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,303,856)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> (0.12)
</TABLE>
