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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File Number: 000-21319
LIGHTBRIDGE, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 04-3065140
(State or other jurisdiction of (I.R.S employer identification number)
incorporation or jurisdiction)
</TABLE>
67 South Bedford Street
Burlington, MA 01803
(Address of principal executive offices, including Zip Code)
(617) 359-4000
(Registrant's telephone number, including area code)
281 Winter Street
Waltham, MA 02154
(Former address)
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
--- ---
As of July 31, 1997, there were 14,675,010 shares of the registrant's common
stock, $.01 par value, outstanding.
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LIGHTBRIDGE, INC.
Form 10-Q for the Quarter Ended June 30, 1997
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<CAPTION>
Table of Contents
PART I. FINANCIAL INFORMATION Page No.
--------
<S> <C> <C>
Item 1. Unaudited Condensed Consolidated Financial Statements:
Balance Sheets as of June 30, 1997 and December 31, 1996...... 3
Income Statements for the Three Months Ended June 30,
1997 and June 30, 1996....................................... 4
Income Statements for the Six Months Ended June 30, 1997
and June 30, 1996............................................ 5
Statements of Cash Flow for the Six Months Ended June 30,
1997 and June 30, 1996....................................... 6
Notes to Condensed Consolidated Financial Statements.......... 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................... 8
Item 4. Submission of Matters to a Vote of Security Holders............ 14
PART II. OTHER INFORMATION Page No.
--------
Item 6. Exhibits and Reports on Form 8-K.............................. 14
Signature..................................................... 15
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2
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PART I. FINANCIAL INFORMATION
ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
LIGHTBRIDGE, INC. AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
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<CAPTION>
June 30, 1997 December 31, 1996
--------------- -----------------
ASSETS
------
<S> <C> <C>
Current assets:
Cash and cash equivalents $23,298,904 $27,900,802
Short-term investments 1,038,190 --
Accounts receivable - net 8,676,897 7,530,809
Other current assets 1,457,391 970,735
--------------- -----------------
Total current assets 34,471,382 36,402,346
Property and equipment - net 6,006,817 4,271,880
Deferred tax asset 863,406 --
Other assets 903,167 1,091,429
--------------- -----------------
Total assets $42,244,772 $41,765,655
=============== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable and accrued liabilities $ 2,221,997 $ 3,254,421
Short-term borrowings and current portion
of subordinated notes payable 805,205 567,705
Current portion of obligations under
capital leases 648,955 1,533,899
Deferred revenues 506,403 422,875
Dividends payable on redeemable convertible
preferred stock 166,876 166,876
--------------- -----------------
Total current liabilities 4,349,436 5,945,776
Obligations under capital leases 32,399 100,301
Notes payable 305,371 457,808
Subordinated notes payable 1,335,115 1,663,127
--------------- -----------------
Total liabilities 6,022,321 8,167,012
--------------- -----------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value; 500,000 shares
authorized; no shares issued or outstanding
at June 30, 1997 and December 31, 1996,
respectively -- --
Common stock, $.01 par value; 60,000,000 shares
authorized; 15,468,752 and 15,369,697 shares
issued; 14,641,460 and 14,568,549 shares
outstanding at June 30, 1997 and December 31,
1996, respectively 154,697 153,698
Additional paid-in capital 36,342,717 36,296,969
Warrants 605,125 605,125
Retained earnings (deficit) 744,875 (1,921,075)
--------------- -----------------
Total 37,847,414 35,134,717
Less treasury stock, at cost (1,624,963) (1,536,074)
--------------- -----------------
Total stockholders' equity 36,222,451 33,598,643
--------------- -----------------
Total liabilities and stockholders' equity $42,244,772 $41,765,655
=============== =================
</TABLE>
See notes to unaudited condensed consolidated financial statements
3
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LIGHTBRIDGE, INC. AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENTS
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<CAPTION>
Three Months Ended June 30,
---------------------------
1997 1996
------------- ------------
<S> <C> <C>
Revenues $ 9,007,849 $ 6,948,721
Cost of revenues 4,151,534 3,996,396
------------- ------------
Gross profit 4,856,315 2,952,325
------------- ------------
Operating expenses:
Development 1,350,474 1,017,678
Sales and marketing 1,348,837 901,949
General and administrative 976,991 623,080
------------- ------------
Total operating expenses 3,676,302 2,542,707
------------- ------------
Income from operations 1,180,013 409,618
Other income (expense):
Interest income 327,425 38,404
Interest expense (83,687) (159,657)
Other non-operating income - net 24,803 1,286
------------- ------------
Income before provision for income taxes 1,448,554 289,651
Provision for income taxes 550,430 10,042
------------- ------------
Net income $ 898,124 $ 279,609
============= ============
Net income per common share $0.06
=============
Weighted average number of common and
common equivalent shares outstanding 16,304,975
=============
Pro forma net income per common share $0.02
============
Pro forma weighted average number of
common and common equivalent shares
outstanding 13,708,446
============
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See notes to unaudited condensed consolidated financial statements
4
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LIGHTBRIDGE, INC. AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENTS
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<CAPTION>
Six Months Ended June 30,
----------------------------
1997 1996
---- ----
<S> <C> <C>
Revenues (includes sales to related
party of $0 and $3,125, respectively) $17,830,688 $13,263,057
Cost of revenues 8,320,091 7,762,426
------------- -------------
Gross profit 9,510,597 5,500,631
------------- -------------
Operating expenses:
Development 2,682,213 1,970,735
Sales and marketing 2,604,549 1,665,797
General and administrative 2,122,617 1,172,095
------------- -------------
Total operating expenses 7,409,379 4,808,627
------------- -------------
Income from operations 2,101,218 692,004
Other income (expense):
Interest income 647,241 44,253
Interest expense (191,542) (415,543)
Other non-operating income - net 15,524 1,286
------------- -------------
Income before provision for income taxes 2,572,441 322,000
Provision for (benefit from) income taxes (93,509) 19,500
------------- -------------
Net income $ 2,665,950 $ 302,500
============= =============
Net income per common share $0.16
=============
Weighted average number of common and
common equivalent shares outstanding 16,341,201
=============
Pro forma net income per common share $0.02
=============
Pro forma weighted average number of
common and common equivalent shares
outstanding 13,793,911
=============
</TABLE>
See notes to unaudited condensed consolidated financial statements
5
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LIGHTBRIDGE, INC. AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
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<CAPTION>
Six Months Ended June 30,
---------------------------
1997 1996
------------- ------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 2,665,950 $ 302,500
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,696,167 1,665,679
Amortization of discount on notes 9,484 35,534
Deferred tax asset (863,406) --
Changes in assets and liabilities:
Accounts receivable and other
current assets (1,632,744) (649,755)
Accounts payable and accrued liabilities (1,032,424) (888,580)
Deferred revenues 83,528 733,981
Other assets 93,006 (388,860)
------------- ------------
Net cash provided by operating activities 1,019,561 810,499
------------- ------------
Cash Flows Used in Investing Activities:
Purchases of property and equipment (3,494,550) (463,646)
Purchase of investments (2,069,323) --
Redemption of investments 1,031,133 --
------------- ------------
Net cash used in investing activities (4,532,740) (463,646)
------------- ------------
Cash Flows From (Used In) Financing Activities:
Payments on notes payable (152,437) --
Payments on subordinated notes payable (100,000) (1,151,000)
Principal payments under capital lease
obligations (883,029) (1,077,348)
Proceeds from issuance of common stock 46,747 136,158
Payments toward the purchase of treasury
stock -- (478,833)
Expenses paid on behalf of stockholder -- (260,000)
Proceeds from issuance of mandatory
redeemable convertible preferred
stock, net -- 5,958,400
------------- ------------
Net cash provided by (used in) financing
activities (1,088,719) 3,127,377
------------- ------------
Net increase (decrease) in cash and cash
equivalents (4,601,898) 3,474,230
Cash and cash equivalents, beginning of period 27,900,802 58,064
------------- ------------
Cash and cash equivalents, end of period $23,298,904 $ 3,532,294
============= ============
</TABLE>
See notes to unaudited condensed consolidated financial statements
6
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LIGHTBRIDGE, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation:
The consolidated financial statements included herein have been prepared by
Lightbridge, Inc. (the "Company"), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Although certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, the Company
believes that the disclosures are adequate to make the information presented not
misleading and reflect all adjustments (consisting only of normal recurring
adjustments) which are necessary for a fair presentation of results of
operations for such periods. Results of interim periods may not be indicative of
results for the full year. It is suggested that these financial statements be
read in conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1996.
2. Significant Accounting Policies:
Net Income Per Common Share
Net income per common and per common equivalent share are computed using
the weighted average number of common and dilutive common equivalent shares
outstanding during the period, using the provisions of Accounting Principles
Board Opinion No. 15, "Earnings per Share." Dilutive common equivalent shares
represent shares issuable upon exercise of stock options and warrants,
calculated using the treasury stock method. Primary and fully diluted earnings
per share were the same for the three and six month periods ended June 30, 1997.
Pro forma income per common share for the three month and six month periods
ended June 30, 1996 is based on the weighted average number of common and
dilutive common equivalent shares (common stock options and warrants)
outstanding and assumes that all series of redeemable convertible preferred
stock had been converted to common stock as of January 1, 1996. Common
equivalent shares are not included in the per share calculations where the
effect of their inclusion would be anti-dilutive, except in accordance with the
requirements of Securities and Exchange Commission Staff Accounting Bulletin No.
83. That Bulletin requires all common shares issued and options or warrants to
purchase common stock granted by the Company during the twelve-month period
prior to the filing of a proposed initial public offering be included in the
calculation as if they were outstanding for all periods. For purposes of
applying the Bulletin, the Company has used the initial public offering price of
$10 per share from the Company's offering in October 1996.
In February 1997, the Financial Accounting Standards Board released
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share," which the Company will adopt in the fourth quarter of 1997. Had SFAS No.
128 been effective for the three months and six months ended June 30, 1997 and
1996, reported earnings per share would have been as follows:
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Three Months Ended Six Months Ended
June 30, June 30,
------------------- ----------------
1997 1996 1997 1996
-------- -------- ------ ------
<S> <C> <C> <C> <C>
Basic...................... $0.06 $0.02 $0.18 $0.02
Diluted.................... 0.06 0.02 0.16 0.02
</TABLE>
Income Taxes
In October 1993, the Company adopted SFAS No. 109. "Accounting for Income
Taxes." In connection with the adoption, the Company recorded a deferred tax
asset relating to the tax benefit of operating losses, and differences between
the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. At that time the Company provided
a full valuation allowance equal to the entire deferred tax asset as the
7
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Company believed it was more likely than not that the deferred tax asset would
not be realized.
During the first quarter of 1997, the Company determined that the valuation
allowance was no longer necessary for the existing deferred tax assets and
deferred tax assets arising during the quarter, and recorded an income tax
benefit of approximately $644,000.
Reclassifications
Certain reclassifications have been made to the 1996 financial statements
to conform with the 1997 presentation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THE DISCUSSION IN THIS FORM 10-Q 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. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THE RESULTS CONTEMPLATED IN THE FORWARD-LOOKING STATEMENTS AS A
RESULT OF A NUMBER OF FACTORS, INCLUDING RISK FACTORS SET FORTH UNDER "ITEM 1A.
Risk Factors" IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1996 AND INCORPORATED BY REFERENCE AS AN EXHIBIT TO THIS FORM 10-Q.
PROFILE and SAMSPEN are registered trademarks of the Company, and ALLEGRO,
CAS_COMM, CHANNEL WIZARD, CHURN PROPHET, CREDIT DECISION SYSTEM, CUSTOMER
ACQUISITION SYSTEM, 800-FOR-CREDIT, FRAUD SENTINEL, INSIGHT, IRIS, LIGHTBRIDGE,
POPS, POSTALPRO, SAMS, TELESTO, TELECOMMUNICATIONS INTELLIGENCE and WIRELESS
INTELLIGENCE are trademarks of the Company. Other trademarks or trade names
referred to in this Form 10-Q are the property of their respective owners.
Results of Operations
Overview
- --------
Lightbridge, Inc. ("Lightbridge" or the "Company") develops, markets and
supports a suite of integrated products and services that enable
telecommunications carriers to improve their customer acquisition and retention
processes.
The Company's revenues consist of transaction revenues and software and
consulting revenues. Historically, transaction revenues have accounted for
substantially all of the Company's revenues, although software and consulting
revenues have increased during recent periods primarily as a result of the
licensing of certain software products and the demand for the Company's Business
Integration consulting services.
Lightbridge's transaction revenues are derived primarily from the processing of
applications of subscribers for wireless telecommunications services and the
activation of service for those subscribers. The Company has expanded its
offerings from credit evaluation services to include screening for subscriber
fraud, evaluating carriers' existing accounts, interfacing with carrier and
third-party systems and providing teleservices call center services. These
services are provided pursuant to contracts with carriers which specify the
services to be utilized and the markets to be served. The Company's clients are
charged on a per transaction basis. Pricing varies depending primarily on the
volume of transactions, the type and number of other products and services
selected for integration with the services and the term of the contract under
which services are provided. The volume of processed transactions varies
depending on seasonal and retail trends, the success of the carriers utilizing
the Company's services in attracting subscribers and the markets served by the
Company for its clients. Revenues are recognized in the period when the services
are performed.
8
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The Company's software and consulting revenues have been derived primarily from
developing customized software and providing Business Integration consulting
services. The Company also began licensing its Channel Solutions software with
the introduction of its POPS and Iris products in fiscal 1995, its SAMS software
in 1996 and its Retail Management Systems software in 1997. Lightbridge's
Channel Solutions products and services are designed to assist customers in
interfacing with the Company's systems and are being marketed primarily to
wireless telecommunications carriers that utilize the Company's transaction
processing services. The Company's Telecommunications Intelligence, formally
known as Wireless Intelligence, products are being designed to help carriers
analyze their marketplace to improve their business operations. While its
Channel Solutions and its Telecommunications Intelligence products are licensed
as packaged software products, each of these products requires customization and
integration with other products and systems to varying degrees. Revenues derived
from consulting and other projects are recognized throughout the performance
period of the contracts. Revenues from licensing software are recognized at the
later of delivery of the licensed product or satisfaction of acceptance
criteria. Lightbridge's software and consulting revenues depend substantially on
the continuing need for integration of disparate systems and acceptance of the
Company's software products by the Company's existing and new clients.
<TABLE>
<CAPTION>
Results of Operations Data:
- ---------------------------
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Transaction......................... 66.3% 77.3% 67.3% 80.3%
Software and consulting............. 33.7 22.7 32.7 19.7
-------- ------- ------- -------
100.0 100.0 100.0 100.0
Cost of revenues...................... 46.1 57.5 46.7 58.5
-------- ------- ------- -------
Gross profit.......................... 53.9 42.5 53.3 41.5
-------- ------- ------- -------
Operating expenses:
Development......................... 15.0 14.6 15.0 14.9
Sales and marketing................. 15.0 13.0 14.6 12.6
General and administrative.......... 10.8 9.0 11.9 8.8
-------- ------- ------- -------
Total operating expenses......... 40.8 36.6 41.5 36.3
-------- ------- ------- -------
Income from operations................ 13.1 5.9 11.8 5.2
Other income (expense), net........... 3.0 (1.8) 2.6 (2.8)
-------- ------- ------- -------
Income before income taxes............ 16.1 4.1 14.4 2.4
Provision for (benefit from) income
taxes............................... 6.1 0.1 (0.6) (0.1)
-------- ------- ------- -------
Net income............................ 10.0% 4.0% 15.0% 2.3%
======== ======= ======= =======
</TABLE>
Three Months Ended June 30, 1997 and 1996
- -----------------------------------------
Revenues. Revenues increased by 29.6% to $9.0 million in the three months ended
- --------
June 30, 1997 from $6.9 million in the three months ended June 30, 1996.
Transaction revenues increased by 11.2% to $6.0 million in the three months
ended June 30, 1997 from $5.4 million in the three months ended June 30, 1996.
The increase in transaction revenues for the three month period ended June 30,
1997 was primarily due to increased volume of wireless customer qualification
and activation transactions processed for existing carrier clients and
additional new carrier clients.
Software and consulting revenues increased by 92.4% to $3.0 million in the three
months ended June 30, 1997 from $1.6 million in the three months ended June 30,
1996. The increase in software and consulting revenues for the three month
period ended June 30, 1997 was a result of the increase in revenues attributable
to both customized software integration services and licensed software.
9
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Cost of Revenues. Cost of revenues consists primarily of personnel costs, costs
- ----------------
of maintaining systems and networks used in processing subscriber qualification
and activation transactions (including depreciation and amortization of those
systems and networks), and amortization of capitalized software. Cost of
revenues may vary as a percentage of total revenues in the future as a result of
a number of factors, including changes in the mix of transaction revenues
between revenues from on-line transaction processing and revenues from
processing transactions through the Company's Teleservices Group and changes in
the mix of total revenues between transaction revenues and software and
consulting revenues.
Cost of revenues increased by 3.9% to $4.2 million in the three months ended
June 30, 1997 from $4.0 million in the three months ended June 30, 1996, while
decreasing as a percentage of total revenues to 46.1% from 57.5%. The dollar
increase in costs for the three month period ended June 30, 1997 resulted
principally from increases in transaction volume and costs attributable to
expansion of the Company's staff and systems capacity. The decrease in cost of
revenues as a percentage of total revenues for the three month period ended June
30, 1997 primarily resulted from a higher percentage of transaction revenues
from on-line processing, a higher percentage of revenues from customized
software integration services and licensed software and increased utilization of
the Company's operating and networking systems.
Development. Development expenses consist primarily of personnel and outside
- -----------
technical services costs related to developing new products and services,
enhancing existing products and services, and implementing and maintaining new
and existing products and services. Development expenses increased by 32.7% to
$1.4 million in the three months ended June 30, 1997 from $1.0 million in the
three months ended June 30, 1996, while increasing as a percentage of total
revenues to 15.0% from 14.6%. Both the dollar increase and the increase as a
percentage of total revenues for the three month period ended June 30, 1997
resulted primarily from the addition of engineering personnel necessary to
support the Company's development programs. The Company expects to continue to
increase its engineering and development efforts in order to continue enhancing
its existing products and services, including its Customer Acquisition System,
Telecommunications Intelligence, Business Integration and Channel Solutions
products, as well as to develop new products and services.
Sales and Marketing. Sales and marketing expenses consist primarily of
- -------------------
salaries, commissions and travel expenses of direct sales and marketing
personnel, as well as costs associated with advertising, trade shows and
conferences. Sales and marketing expenses increased by 49.5% to $1.3 million in
the three months ended June 30, 1997 from $0.9 million in the three months ended
June 30, 1996, and increased as a percentage of total revenues to 15% from
13.0%. Both the dollar increase and the increase as a percentage of total
revenues for the three month period ended June 30, 1997 were due to the addition
of direct sales and product marketing personnel, increased commissions resulting
from the higher level of revenues and increased use of marketing programs. The
Company continues to invest in sales and marketing efforts in order to increase
its penetration into existing accounts and to add new clients and markets.
General and Administrative. General and administrative expenses consist
- --------------------------
principally of salaries of administrative, executive, finance and human
resources personnel, as well as outside professional fees. General and
administrative expenses increased by 56.8% to $1.0 million in the three months
ended June 30, 1997 from $0.6 million in the three months ended June 30, 1996,
and increased as a percentage of total revenues to 10.8% from 9.0%. Both the
dollar increase and the increase as a percentage of total revenues for the three
month period ended June 30, 1997 resulted primarily from increased recruiting
fees associated with the hiring of company personnel and the addition of finance
and human resource personnel. The Company expects further increases in general
and administrative expenses through the end of 1997.
Other Income (Expense) Net. Other income (expense) in the three month period
- --------------------------
ended June 30, 1997 consisted predominantly of interest income and expense.
Interest expense consists of interest, commitment fees and other similar fees
payable with respect to the Company's bank lines of credit, subordinated notes
and capital leases. Interest expense decreased by 47.6% to $0.1 million in the
three months ended June 30, 1997 from $0.2 million in the three months ended
June 30, 1996. Interest income, which historically had not been significant,
increased to $0.3 million in the three month period ended June 30, 1997
10
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from $38,404 in the three months ended June 30, 1996 as a result of the
investment of the proceeds from the Company's initial public offering in October
1996.
Provision for Income Taxes. During the three months ended June 30, 1997 the
- --------------------------
Company experienced a net income tax provision of $0.6 million. No significant
provision for or benefit from income taxes was recorded in the three months
ended June 30, 1996. The effective tax rate for the three months ended June 30,
1997 and 1996 was approximately 38% and 4% respectively.
Six Months Ended June 30,1997 and 1996
- --------------------------------------
Revenues. Revenues increased by 34.4% to $17.8 million in the six months ended
- --------
June 30, 1997 from $13.3 million in the six months ended June 30, 1996.
Transaction revenues increased by 12.7% to $12.0 million in the six months ended
June 30, 1997 from $10.7 million in the six months ended June 30, 1996. The
increase in transaction revenues for the six month period ended June 30, 1997
was primarily due to increased volume of wireless customer qualification and
activation transactions processed for existing carrier clients and additional
new carrier clients.
Software and consulting revenues increased by 123.3% to $5.8 million in the six
months ended June 30, 1997 from $2.6 million in the six months ended June 30,
1996. The increase in software and consulting revenues for the six month period
ended June 30, 1997 was principally a result of the increase in revenues
attributable to customized software integration services.
Cost of Revenues. Cost of revenues increased by 7.2% to $8.3 million in the six
- ----------------
months ended June 30, 1997 from $7.8 million in the six months ended June 30,
1996, while decreasing as a percentage of total revenues to 46.7% from 58.5%.
The dollar increase in costs for the six month period ended June 30, 1997
resulted principally from increases in transaction volume and costs attributable
to expansion of the Company's staff and systems capacity. The decrease in cost
of revenues as a percentage of total revenues for the six month period ended
June 30, 1997 primarily resulted from a higher percentage of transaction
revenues from on-line processing, a higher percentage of revenues from
customized software integration services and licensed software and increased
utilization of the Company's operating and networking systems.
Development. Development expenses increased by 36.1% to $2.7 million in the six
- -----------
months ended June 30, 1997 from $2.0 million in the six months ended June 30,
1996, increasing as a percentage of total revenues to 15.0% from 14.9%. Both the
dollar increase and the increase as a percentage of total revenues for the six
month period ended June 30, 1997 resulted primarily from the addition of
engineering personnel necessary to support the Company's development programs.
Sales and Marketing. Sales and marketing expenses increased by 56.4% to $2.6
- -------------------
million in the six months ended June 30, 1997 from $1.7 million in the six
months ended June 30, 1996, and increased as a percentage of total revenues to
14.6% from 12.6%. Both the dollar increase and the increase as a percentage of
total revenues for the six month period ended June 30, 1997 were due to the
addition of direct sales and product marketing personnel, increased commissions
resulting from the higher level of revenues and increased use of marketing
programs.
General and Administrative. General and administrative expenses increased by
- --------------------------
81.1% to $2.1 million in the six months ended June 30, 1997 from $1.2 million in
the six months ended June 30, 1996, and increased as a percentage of total
revenues to 11.9% from 8.8%. Both the dollar increase and the increase as a
percentage of total revenues for the six month period ended June 30, 1997
resulted primarily from increased recruiting fees associated with the hiring of
company personnel and the addition of finance and human resource personnel.
Other Income (Expense) Net. Other income
- --------------------------
11
<PAGE>
(expense) in the six month period ended June 30, 1997 consisted predominantly of
interest income and expense. Interest expense decreased by 53.9% to $0.2 million
in the six months ended June 30, 1997 from $0.4 million in the six months ended
June 30, 1996. Interest income, which historically had not been significant,
increased to $0.6 million in the six month period ended June 30, 1997 as a
result of the investment of the proceeds from the Company's initial public
offering in October 1996.
Provision for (Benefit from) Income Taxes. During the six months ended June 30,
- -----------------------------------------
1997, the Company's net income tax benefit of $93,509 was derived from the
reversal of the Company's deferred tax asset valuation allowance of $0.7
million, the utilization of the tax credits, which aggregated $0.4 million,
offset by a provision of $1.0 million. No significant provision for or benefit
from income taxes was recorded in the six months ended June 30, 1996.
Liquidity and Capital Resources
Prior to its initial public offering, the Company funded its operations
primarily through private placements of equity and debt securities, cash
generated from operations, bank borrowings and equipment financings.
In October 1996, the Company consummated an initial public offering in
which 4,370,000 shares of the Company's Common Stock ($.01 par value) were sold
at an initial public offering price of $10.00 per share. The total shares
consisted of 3,021,868 shares sold by the Company and 1,348,132 shares sold by
selling shareholders. Proceeds to the Company, net of underwriters' discount and
associated costs, were approximately $27.1 million. These proceeds were used to
repay certain debt obligations of the Company, to repurchase certain shares of
the common stock of the Company and to fund working capital and other general
corporate purposes.
Prior to its initial public offering, the Company financed its operations
in part with the proceeds of four offerings of convertible preferred stock and
two offerings of subordinated debt. The Company sold shares of its Series A
Redeemable Convertible Preferred Stock in February 1991 for an aggregate
purchase price of $1.0 million, shares of its Series B Redeemable Convertible
Preferred Stock in December 1991 for an aggregate purchase price of $1.1 million
and shares of its Series C Redeemable Convertible Preferred Stock in June, July
and August of 1993 for an aggregate purchase price of $0.6 million. In August
1994, the Company sold $2.1 million in principal amount of its 8% subordinated
notes, together with warrants exercisable to purchase up to 525,000 shares of
Common Stock. In August 1995, the Company sold $1.2 million in principal amount
of its 16% subordinated notes, together with warrants exercisable to purchase up
to 287,750 shares of Common Stock. The Company sold shares of its Series D
Preferred Stock in April 1996 for an aggregate purchase price of $6.0 million. A
portion of the proceeds of the Series D Preferred Stock was applied to repay the
16% subordinated notes.
As of June 30, 1997, the Company had cash and cash equivalents of $23.3
million, short-term investments of $1.0 million and working capital of $30.1
million. The Company believes that the current cash balances and funds available
under existing lines of credit will be sufficient to finance the Company's
operations and capital expenditures for at least the next twelve months.
The Company's capital expenditures in the three and six month periods ended
June 30, 1997 and 1996 aggregated $2.3 million, $3.5 million, $0.2 million and
$0.5 million, respectively. The capital expenditures consisted of purchases of
fixed assets, principally for the Company's services delivery infrastructure,
leasehold improvements related to the relocation of the Company's corporate
headquarters and computer equipment for development activities. The Company
expects capital expenditures for the remainder of 1997 to approximate $1.0
million including capital expenditures related to the move of its corporate
headquarters in August 1997. The Company leases its facilities and certain
equipment under non-cancelable capital and operating lease agreements that
expire at various dates through December 2004.
The Company has a $4.0 million working capital line of credit and a $2.0
million equipment line of credit with Silicon Valley Bank (the ''Bank''). The
working capital line of credit is secured by a pledge of the Company's accounts
receivable, equipment and intangible assets, and borrowing availability, which
was approximately $3.3 million at June 30, 1997, is based on the amount of
qualifying accounts receivable. At June 30, 1997, there were no borrowings
outstanding under the working capital
12
<PAGE>
line of credit and borrowings of $610,577 million were outstanding under the
equipment line of credit. The agreements contain covenants that, among other
things, prohibit the declaration or payment of dividends and require the Company
to maintain certain financial ratios which the Company believes are not
restrictive to its business operations. The working capital line of credit was
renewed in June 1997 and will expire in June 1998. The equipment line of credit
expires in June 1999.
In March 1997 the Company entered into a seven year lease for approximately
46,000 square feet in Burlington, Massachusetts. In August 1997 the Company
relocated its headquarters to the Burlington facility and subleased a portion of
the 39,000 square foot facility in Waltham.
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 results to date.
Recent Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board released
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS
128), which is effective for fiscal 1997. SFAS 128 will require the Company to
restate amounts previously reported as earnings per share to comply with the
requirements of SFAS 128. The Company will adopt SFAS 128 in the fourth quarter
of 1997. See Note 2 to the Unaudited Condensed Consolidated Financial Statements
included elsewhere herein.
In June 1997, the Financial Accounting Standards Board released Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
(SFAS 130), which is effective for fiscal years beginning after December 15,
1997. SFAS 130 establishes standards for reporting and display of comprehensive
income and its components (revenues, expenses, gains, and losses) in a full set
of general-purpose financial statements.
In June 1997, the Financial Accounting Standards Board released Statement
of Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS 131), which is effective for periods
beginning after December 15, 1997. SFAS 131 establishes standards for the way
that public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports issued to
shareholders.
13
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Company held its Annual Meeting of Stockholders on May 22, 1997.
(b) At such Annual Meeting the nominee for Class I director was elected as
indicated by the following schedule of votes cast for and withheld from
that director:
Total Votes Total Votes
Nominee for Director Withheld from Director
------- ------------ ----------------------
Douglas A. Kingsley 10,424,094 143,850
There were no abstentions or broker non-votes with respect to the election
of the Class I director nominee.
The other directors whose terms of office continued after the meeting are
indicated by the following schedule:
Directors with Terms Expiring in 1998 (Class II Directors):
Andrew I. Fillat
D. Quinn Mills
Directors with Terms Expiring in 1999 (Class III Directors):
Pamela D.A. Reeve
Torrence C. Harder
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11.1 Statement re: computation of per share earnings
27.1 Financial Data Schedule for the three months ended June 30, 1997
99.1 Information set forth under the heading "ITEM 1A. Risk Factors" in
the Company's Annual Report on Form 10-K for the year ended December
31, 1996 is incorporated herein by reference.
- ---------------
(b) Reports on Form 8-K
The Company did not file any Current Reports on Form 8-K during the quarter
ended June 30, 1997.
14
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LIGHTBRIDGE, INC.
Dated: August 13, 1997 By: /s/ William G. Brown
---------------------
William G. Brown
Chief Financial Officer, Vice President
of Finance and Administration and
Treasurer (Authorized Officer and
Principal Financial and Accounting
Officer)
<PAGE>
Exhibit 11 Computation of Earnings (Loss) per Common Share
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-----------------------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
PRO-FORMA:
Weighted average number of common and common equivalent
shares outstanding:
Common stock 6,210,482 6,422,537
Assumed conversion of preferred stock 5,247,324 5,247,324
Common equivalent shares resulting from stock options and warrants
(treasury stock method) 1,344,812 1,218,222
SAB 83 shares (treasury stock method) 905,828 905,828
------------ ------------
Total 13,708,446 13,793,911
============ ============
Net income applicable to common stock $279,609 $302,500
============ ============
Pro-forma income per common share $0.02 $0.02
============ ============
PRIMARY:
Weighted average number of common and common equivalent shares
outstanding:
Common stock 14,629,937 6,210,482 14,620,421 6,422,537
Common equivalent shares resulting from stock options and warrants
(treasury stock method) 1,675,038 1,344,812 1,720,780 1,218,222
SAB 83 shares (treasury stock method) -- 905,828 -- 905,828
------------ ------------ ------------ ------------
Total 16,304,975 8,461,122 16,341,201 8,546,587
============ ============ ============ ============
Net income $898,124 $279,609 $2,665,950 $302,500
Dividends accreted on preferred stock -- (45,635) -- (91,270)
----------- ----------- ----------- -----------
Net income applicable to common stock $898,124 $233,974 $2,665,950 $211,230
============ ============ ============ ============
Primary income per common share $0.06 $0.03 $0.16 $0.02
============ ============ ============ ============
FULLY DILUTED:
Weighted average number of common and common equivalent shares
outstanding:
Common stock 14,629,937 6,210,482 14,620,421 6,422,537
Assumed conversion of preferred stock -- 5,247,324 -- 4,213,924
Common equivalent shares resulting from stock options and warrants
(treasury stock method) 1,675,038 1,465,817 1,720,780 1,465,817
SAB 83 shares (treasury stock method) -- 905,828 -- 905,828
------------ ------------ ------------ ------------
Total 16,304,975 13,829,451 16,341,201 13,008,106
============ ============ ============ ============
Net income applicable to common stock $898,124 $279,609 $2,665,950 $302,500
============ ============ ============ ============
Fully diluted income per common share $0.06 $0.02 $0.16 $0.02
============ ============ ============ ============
</TABLE>
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 23,298,904
<SECURITIES> 1,038,190
<RECEIVABLES> 8,795,798
<ALLOWANCES> (188,901)
<INVENTORY> 0
<CURRENT-ASSETS> 34,471,382
<PP&E> 12,771,977
<DEPRECIATION> (6,765,160)
<TOTAL-ASSETS> 42,244,772
<CURRENT-LIABILITIES> 4,349,436
<BONDS> 0
0
0
<COMMON> 154,697
<OTHER-SE> 36,067,754
<TOTAL-LIABILITY-AND-EQUITY> 42,244,772
<SALES> 9,007,849
<TOTAL-REVENUES> 9,007,849
<CGS> 4,151,534
<TOTAL-COSTS> 3,676,302
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 83,687
<INCOME-PRETAX> 1,448,554
<INCOME-TAX> 550,430
<INCOME-CONTINUING> 898,124
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 898,124
<EPS-PRIMARY> 0.06
<EPS-DILUTED> 0.06
</TABLE>
