<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM 10-Q/A
(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, 1998
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)
DELAWARE 04-3065140
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
67 SOUTH BEDFORD STREET
BURLINGTON, MASSACHUSETTS 01803
(Address of principal executive offices, including Zip Code)
(781) 359-4000
(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 such reports), and (2) has been subject to such
filing requirements for the past 90 days: Yes /X/ No / /
As of August 6, 1998, there were 15,871,347 shares of the registrant's
common stock, $.01 par value, outstanding.
On February 24, 1999, the registrant announced that it had restated its
financial statements for the year ended December 31, 1997 and the quarters ended
March 31, June 30, and September 30, 1998 to correct the accounting relating to
the acquisition of Coral Systems in November 1997. This amended Quarterly Report
on Form 10-Q contains restated financial information and disclosures for the
quarter ended June 30, 1998 reflecting the restatement and certain other
matters. (See Note 3 to the unaudited condensed consolidated financial
statements).
Unless otherwise stated, information in the originally filed Form 10-Q for
the quarter ended June 30, 1998 is presented as of the original filing date, and
has not been updated in this amended filing.
Financial statement information and related disclosures included in this
amended filing reflect, where appropriate, changes as a result of the
restatement.
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<PAGE>
LIGHTBRIDGE, INC.
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
-------------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheets as of December 31, 1997 and June 30, 1998 (Restated)....... 3
Statements of Operations for the three months ended June 30, 1997 and June
30, 1998 (Restated)..................................................... 4
Statements of Operations for the six months ended June 30, 1997 and June
30, 1998 (Restated)..................................................... 5
Statements of Cash Flows for the six months ended June 30, 1997 and June
30, 1998 (Restated)..................................................... 6
Notes to Unaudited Condensed Consolidated Financial Statements............ 7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS............................. 9
PART II. OTHER INFORMATION
SIGNATURE................................................................. 20
</TABLE>
INTRODUCTORY NOTE
This Amendment on Form 10-Q/A amends the Registrant's Quarterly Report on
Form 10-Q for the period ended June 30, 1998, as filed by the Registrant on
August 14, 1998, and is being filed to reflect the restatement of the
Registrant's condensed consolidated financial statements (the "Restatement").
The Restatement reflects the revaluation of acquired in-process research and
development in connection with the acquisition of Coral Systems in November
1997.
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
LIGHTBRIDGE, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------- -------------
<S> <C> <C>
(RESTATED,
SEE NOTE 3)
ASSETS
Current assets:
Cash and cash equivalents........................................................ $ 15,715,726 $ 13,381,604
Accounts receivable--net......................................................... 13,213,052 14,733,672
Other current assets............................................................. 2,885,583 2,950,379
------------- -------------
Total current assets......................................................... 31,814,361 31,065,655
Property and equipment--net........................................................ 11,763,013 11,459,062
Goodwill--net...................................................................... 10,383,581 9,311,665
Acquired intangible assets--net.................................................... 7,716,545 6,228,378
Other assets--net.................................................................. 1,887,676 2,529,416
------------- -------------
Total assets................................................................. $ 63,565,176 $ 60,594,176
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities......................................... $ 8,164,817 $ 5,743,441
Short-term borrowings and current portion of notes payable....................... 805,205 805,205
Deferred revenues................................................................ 1,658,406 1,948,811
------------- -------------
Total current liabilities.................................................... 10,628,428 8,497,457
Other long-term liabilities........................................................ 823,346 1,057,367
Notes payable...................................................................... 1,397,614 888,823
------------- -------------
Total liabilities............................................................ 12,849,388 10,443,647
------------- -------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value; 5,000,000 shares authorized; no shares issued or
outstanding at December 31, 1997 and June 30, 1998, respectively............... -- --
Common stock, $.01 par value; 60,000,000 shares authorized; 16,492,954 and
16,665,166 shares issued and 15,665,662 and 15,837,874 shares outstanding at
December 31, 1997 and June 30, 1998, respectively.............................. 164,929 166,651
Additional paid-in capital....................................................... 53,660,991 53,975,646
Warrants......................................................................... 598,875 598,875
Accumulated deficit.............................................................. (2,084,044) (2,965,680)
------------- -------------
Total........................................................................ 52,340,751 51,775,492
Less: treasury stock, at cost...................................................... (1,624,963) (1,624,963)
------------- -------------
Total stockholders' equity................................................... 50,715,788 50,150,529
------------- -------------
Total liabilities and stockholders' equity................................... $ 63,565,176 $ 60,594,176
------------- -------------
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</TABLE>
See notes to unaudited condensed consolidated financial statements.
3
<PAGE>
LIGHTBRIDGE, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
---------------------------
<S> <C> <C>
1997 1998
------------ -------------
<CAPTION>
(RESTATED,
SEE NOTE 3)
<S> <C> <C>
Revenues:
Transaction services............................................................... $ 5,972,765 $ 9,125,612
Software licensing................................................................. 975,916 3,410,130
Consulting services................................................................ 2,059,168 2,609,740
------------ -------------
Total revenues................................................................... 9,007,849 15,145,482
------------ -------------
Cost of revenues:
Transaction services............................................................... 3,434,131 5,122,507
Software licensing................................................................. 295,257 1,143,057
Consulting services................................................................ 422,146 1,684,528
------------ -------------
Total cost of revenues........................................................... 4,151,534 7,950,092
------------ -------------
Gross profit......................................................................... 4,856,315 7,195,390
------------ -------------
Operating expenses:
Development........................................................................ 1,350,474 2,429,574
Sales and marketing................................................................ 1,348,837 1,715,305
General and administrative......................................................... 976,991 3,158,656
------------ -------------
Total operating expenses......................................................... 3,676,302 7,303,535
------------ -------------
Income (loss) from operations........................................................ 1,180,013 (108,145)
Other income (expense):
Interest income.................................................................... 327,425 170,214
Interest expense................................................................... (83,687) (33,772)
Other non-operating income......................................................... 24,803 84,311
------------ -------------
Income before provision for income taxes............................................. 1,448,554 112,608
Provision for income taxes........................................................... 550,430 272,100
------------ -------------
Net income (loss).................................................................... $ 898,124 $ (159,492)
------------ -------------
------------ -------------
Basic and diluted earnings (loss) per common share................................... $ 0.06 $ (0.01)
------------ -------------
------------ -------------
</TABLE>
See notes to unaudited condensed consolidated financial statements.
4
<PAGE>
LIGHTBRIDGE, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
----------------------------
<S> <C> <C>
1997 1998
------------- -------------
<CAPTION>
(RESTATED,
SEE
NOTE 3)
<S> <C> <C>
Revenues:
Transaction services............................................................. $ 12,001,921 $ 16,985,333
Software licensing............................................................... 1,745,265 7,521,062
Consulting services.............................................................. 4,083,502 3,941,903
------------- -------------
Total revenues............................................................... 17,830,688 28,448,298
------------- -------------
Cost of revenues:
Transaction services............................................................. 6,920,862 10,119,916
Software licensing............................................................... 425,935 2,503,813
Consulting services.............................................................. 973,294 2,450,422
------------- -------------
Total cost of revenues....................................................... 8,320,091 15,074,151
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Gross profit....................................................................... 9,510,597 13,374,147
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Operating expenses:
Development...................................................................... 2,682,213 4,721,671
Sales and marketing.............................................................. 2,604,549 3,671,242
General and administrative....................................................... 2,122,617 5,956,772
------------- -------------
Total operating expenses..................................................... 7,409,379 14,349,685
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Income (loss) from operations...................................................... 2,101,218 (975,538)
Other income (expense):
Interest income.................................................................. 647,241 399,181
Interest expense................................................................. (191,542) (99,612)
Other non-operating income....................................................... 15,524 123,333
------------- -------------
Income (loss) before provision for (benefit from) income taxes..................... 2,572,441 (552,636)
Provision for (benefit from) income taxes.......................................... (93,509) 329,000
------------- -------------
Net income (loss).................................................................. $ 2,665,950 $ (881,636)
------------- -------------
------------- -------------
Basic earnings (loss) per common share............................................. $ 0.18 $ (0.06)
------------- -------------
------------- -------------
Diluted earnings (loss) per common share........................................... $ (0.16) $ (0.06)
------------- -------------
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</TABLE>
See notes to unaudited condensed consolidated financial statements.
5
<PAGE>
LIGHTBRIDGE, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
----------------------------
<S> <C> <C>
1997 1998
------------- -------------
<CAPTION>
(RESTATED,
SEE NOTE 3)
<S> <C> <C>
Cash Flows From Operating Activities:
Net income (loss)................................................................ $ 2,665,950 $ (881,636)
Adjustments to reconcile net income (loss) to net cash (used in) provided by
operating activities:
Depreciation and amortization.................................................. 1,696,167 5,204,577
Amortization of discount on notes.............................................. 9,484 18,812
Deferred taxes................................................................. (863,406) --
Changes in assets and liabilities:
Accounts receivable and other current assets................................. (1,632,744) (1,605,417)
Other assets................................................................. 93,006 (1,048,621)
Accounts payable and accrued liabilities..................................... (1,032,424) (2,421,376)
Deferred revenues............................................................ 83,528 290,405
Other liabilities............................................................ -- 408,436
------------- -------------
Net cash provided by (used in) operating activities............................ 1,019,561 (34,820)
------------- -------------
Cash Flows From Investing Activities:
Principal payment received for note from officer............................... -- 20,000
Purchases of property and equipment............................................ (3,494,550) (1,933,661)
Purchase of investments........................................................ (2,069,323) --
Redemption of investments...................................................... 1,031,133 --
------------- -------------
Net cash used in investing activities.............................................. (4,532,740) (1,913,661)
------------- -------------
Cash Flows From Financing Activities:
Payments on notes payable...................................................... (252,437) (527,603)
Principal payments under capital lease obligations............................. (883,029) (174,415)
Proceeds from issuance of common stock......................................... 46,747 316,377
------------- -------------
Net cash used in financing activities............................................ (1,088,719) (385,641)
------------- -------------
Net decrease in cash and cash equivalents.......................................... (4,601,898) (2,334,122)
Cash and cash equivalents, beginning of period..................................... 27,900,802 15,715,726
------------- -------------
Cash and cash equivalents, end of period........................................... $ 23,298,904 $ 13,381,604
------------- -------------
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</TABLE>
See notes to unaudited condensed consolidated financial statements.
6
<PAGE>
LIGHTBRIDGE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
The accompanying unaudited condensed consolidated financial statements
include the accounts of Lightbridge, Inc. and its subsidiaries (the "Company").
The Company believes that the unaudited condensed consolidated financial
statements reflect all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the Company's financial
position, results of operations and cash flows at the dates and for the periods
indicated. Although certain information and disclosures normally included in the
Company's annual financial statements have been omitted, the Company believes
that the disclosures are adequate to make the information presented not
misleading. Results of interim periods may not be indicative of results for the
full year or any future periods. These financial statements should be read in
conjunction with the consolidated financial statements and related notes
included in the Company's Annual Report on Form 10-K/A for the year ended
December 31, 1997.
2. SIGNIFICANT ACCOUNTING POLICIES
SOFTWARE REVENUE RECOGNITION
Effective January 1, 1998, the Company adopted the provisions of Statement
of Position 97-2, "Software Revenue Recognition"("SOP 97-2"), which provides
guidance on recognizing revenue on software transactions. The Company's revenue
recognition practices were substantially in compliance with SOP 97-2 at the time
of adoption.
EARNINGS PER SHARE
Basic earnings per share is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding for the
period. Diluted earnings per share reflects the potential dilution that could
occur if securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock.
A reconciliation of the denominators of the basic and diluted earnings per
share computations for income (loss) from continuing operations is shown below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
<S> <C> <C> <C> <C>
1997 1998 1997 1998
------------ ------------ ------------ ------------
Shares for basic earnings per share...................... 14,629,937 15,798,486 14,620,421 15,752,223
Effect of options and warrants........................... 1,675,038 -- 1,720,780 --
------------ ------------ ------------ ------------
Shares for diluted earnings per share.................... 16,304,975 15,798,486 16,341,201 15,752,223
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
Stock options and warrants convertible into common stock have been excluded
from the diluted computation for the three and six months ended June 30, 1998 as
they are anti-dilutive. Had such shares been included, shares for the dilutive
computation would have increased by approximately 1,800,000 and 2,000,000 shares
for the three and six months ended June 30, 1998, respectively.
No adjustments have been made to net income in computing diluted income per
share.
COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income." No
items, other than net income,
7
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are currently considered elements of comprehensive income, and accordingly net
income and comprehensive income are the same for all periods presented.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1997 financial statements to
conform with the 1998 presentation.
3. RESTATEMENT
The Company has restated its previously filed condensed consolidated
financial statements as of and for the three and six months ended June 30, 1998
to adjust the allocation of purchase price related to the acquisition of Coral
Systems, Inc. ("Coral") in November, 1997, and the resulting amortization of
goodwill and intangible assets.
The Securities and Exchange Commission ("SEC") issued new guidance in
September 1998 on its views regarding the valuation methodologies used to
determine the allocation of purchase price to acquired in-process research and
development ("IPRD") and intangible assets in a purchase business combination.
Generally accepted accounting principles require that amounts allocated to IPRD
be expenses upon consummation of an acquisition. Following discussions between
the Company and the staff of the SEC regarding the application of this guidance,
the Company has modified the methods used to value IPRD and other intangible
assets acquired in connection with the acquisition of Coral. The revised
valuation is based on management's best estimates at the date of acquisition of
the net cash flows expected to be generated by Coral on a going-forward basis
and gives explicit consideration to the SEC's views on IPRD as set forth in
guidance issued in its September 1998 letter to the American Institute of
Certified Public Accountants. As a result of this revised valuation, the amount
of purchase price allocated to IPRD at the date of acquisition decreased from
$16 million to $4 million, and the amount ascribed to goodwill and acquired
intangible assets increased by $4.0 million and $8.0 million, respectively.
The effects of this restatement on the Company's consolidated financial
statements are as follows:
CONSOLIDATED BALANCE SHEETS:
<TABLE>
<CAPTION>
JUNE 30, 1998
----------------------------
<S> <C> <C>
AS PREVIOUSLY
REPORTED AS RESTATED
------------- -------------
Goodwill--net.................................................. $ 5,179,557 $ 9,311,665
Acquired intangible assets--net................................ -- $ 6,228,378
Total assets................................................... 50,233,690 60,594,176
Total stockholders' equity..................................... 39,790,043 50,150,529
</TABLE>
CONSOLIDATED STATEMENT OF OPERATIONS:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1998 JUNE 30, 1998
-------------------------- ----------------------------
<S> <C> <C> <C> <C>
AS
PREVIOUSLY AS PREVIOUSLY
REPORTED AS RESTATED REPORTED AS RESTATED
------------ ------------ ------------- -------------
Cost of revenues...................................... $7,702,942 $ 7,950,092 $ 14,002,651 $ 15,074,151
Total operating expenses.............................. 7,112,930 7,303,535 14,168,476 14,349,685
Net income (loss)..................................... 278,263 (159,492) 371,073 (881,636)
Basic and diluted (loss) per common share............. $ 0.02 $ (0.01) $ 0.02 $ (0.06)
</TABLE>
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THE DISCUSSION IN THIS FORM 10-Q/A 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. ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM THE RESULTS CONTEMPLATED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF A
NUMBER OF FACTORS, INCLUDING (A) THE UNPREDICTABILITY OF FUTURE REVENUES AND
POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS, (B) CONTINUING RAPID
CHANGE IN THE TELECOMMUNICATIONS INDUSTRY THAT MAY AFFECT BOTH LIGHTBRIDGE, INC.
AND ITS CUSTOMERS, (C) CUSTOMER CONCENTRATION, (D) UNCERTAINTIES ASSOCIATED WITH
THE ABILITY OF LIGHTBRIDGE, INC. TO DEVELOP NEW PRODUCTS AND TECHNOLOGIES, (E)
MARKET ACCEPTANCE OF NEW PRODUCTS OF LIGHTBRIDGE, INC. AND CONTINUING DEMAND FOR
PRODUCTS OF LIGHTBRIDGE, INC. BY TELECOMMUNICATIONS COMPANIES, (F) THE IMPACT OF
COMPETITIVE PRODUCTS AND PRICING ON BOTH LIGHTBRIDGE, INC. AND ITS CUSTOMERS AND
(G) THE OTHER FACTORS SET FORTH UNDER "ITEM 1A. RISK FACTORS" IN THE ANNUAL
REPORT ON FORM 10-K/A OF LIGHTBRIDGE, INC. FOR THE YEAR ENDED DECEMBER 31, 1997.
Information set forth under the heading "Item 1A. Risk Factors" in the Annual
Report on Form 10-K/A of Lightbridge, Inc. for the year ended December 31, 1997
is incorporated as an exhibit to this Form 10-Q/A. Unless the context otherwise
requires, "Lightbridge" and the "Company" refer collectively to Lightbridge and
its subsidiaries.
CHURNALERT and FRAUDBUSTER are registered trademarks of the Company, and
CUSTOMER ACQUISITION SYSTEM, LIGHTBRIDGE and POPS are trademarks of the Company.
All other trademarks or trade names referred to in this Form 10-Q/A are the
property of their respective owners.
RESTATEMENT
The Company has restated its previously filed condensed consolidated
financial statements for the three and six months ended June 30, 1998 to adjust
the allocation of purchase price related to the acquisition of Coral Systems,
Inc. ("Coral") in November, 1997 and the resulting amortization of goodwill and
intangible assets.
The Securities and Exchange Commission ("SEC") issued new guidance in
September 1998 on its views regarding the valuation methodologies used to
determine the allocation of purchase price to acquired in-process research and
development ("IPRD") and intangible assets in a purchase business combination.
Generally accepted accounting principles require that amounts allocated to IPRD
be expensed upon consummation of an acquisition. Following discussions between
the Company and the staff of the SEC regarding the application of this guidance,
the Company has modified the methods used to value IPRD and other intangible
assets acquired in connection with the acquisition of Coral. The revised
valuation is based on management's best estimates at the date of acquisition of
the net cash flows expected to be generated by Coral on a going-forward basis
and gives explicit consideration to the SEC's views on IPRD as set forth in its
September 1998 letter to the American Institute of Certified Public Accountants.
As a result of this revised valuation, the amount of purchase price allocated to
IPRD at the date of acquisition decreased from $16 million to $4 million, and
the amount ascribed to goodwill and acquired intangible assets increased by $4.0
million and $8.0 million, respectively.
OVERVIEW
Lightbridge develops, markets and supports a network of integrated products
and services that enable telecommunications carriers to improve their customer
acquisition and retention processes.
In November 1997, the Company acquired all of the outstanding stock of Coral
pursuant to an Agreement and Plan of Reorganization dated as of September 9,
1997 (the "Reorganization Agreement"). The acquisition was effected through a
reverse triangular merger (the "Merger") in which a newly formed subsidiary of
Lightbridge was merged with and into Coral and the surviving corporation became
a wholly owned subsidiary of the Company. Pursuant to the Merger, each of the
9
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outstanding shares of Coral's stock was converted into a fraction of a share of
Lightbridge's common stock, determined as set forth in the Reorganization
Agreement. In addition, as a result of the Merger, all options and warrants to
purchase shares of Coral's stock became exercisable, when vested, to purchase
shares of Lightbridge's common stock. As a result of the Merger, Lightbridge
issued 892,073 shares of its common stock for all of the outstanding shares of
Coral's common stock and reserved 114,399 shares of its common stock for Coral's
options and warrants. The Merger has been accounted for using the purchase
method, which combines the results of Coral from the date of acquisition with
those of the Company. As a result, the Company's results of operations include
Coral's results for the three and six months ended June 30, 1998, but not for
the three and six months ended June 30, 1997. During the three months ended June
30, 1998, the Company incurred expenses in connection with moving Coral's
facilities from Longmont, Colorado to 320 Interlocken Parkway, Broomfield,
Colorado; the move is expected to be completed in August 1998.
The Company historically has reported its software licensing and consulting
services revenues as a single line item in its income statements. Because
software licensing and consulting services revenues have become more
significant, the Company is, commencing with this Form 10-Q, reporting revenues
and costs of revenues in three components: transaction services, software
licensing and consulting services. See "--Revenues and Costs of Revenues for
Three Months Ended September 30, 1997 and December 31, 1997" below for a table
of revenues and costs of revenues for the last two quarters of the year ended
December 31, 1997 presented on the basis of these three components.
Lightbridge's transaction services revenues are derived primarily from the
processing of applications for qualification of subscribers for wireless
telecommunications services and the activation of service for those subscribers.
Over time, 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 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.
The Company's software licensing revenues consist of revenues attributable
to the licensing of Company's Channel Solutions, Customer Management and Fraud
Management software. The Company began licensing its Channel Solutions software
with the introduction of its POPS product in fiscal 1995. Lightbridge's Channel
Solutions products are designed to assist customers in interfacing with the
Company's systems as well as to perform other point-of-sale and channel
functionality. The Company's Customer Management products are designed to help
carriers analyze their marketplace to improve their business operations. While
the Company's software products are licensed as packaged software products, each
of these products requires customization and integration with other products and
systems to varying degrees. When a product requires significant customization
and/or integration, the entire arrangement is accounted for in conformity with
Accounting Research Bulletin No. 45, using relevant guidance in SOP 97-2 and in
SOP 81-1, ACCOUNTING FOR PERFORMANCE OF CONSTRUCTION-TYPE AND CERTAIN
PRODUCTION-TYPE CONTRACTS. If no significant customization or integration exists
for a product, then revenues are recognized when delivery has occurred,
persuasive evidence of an arrangement exists, the fee is fixed or determinable
and collectibility is probable. In either event, revenue is not recognized until
the product is accepted by the client if the arrangement specifies acceptance.
Revenues from software maintenance contracts are recognized ratably over the
term of the maintenance agreement and are included in software licensing
revenue.
10
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The Company's consulting services revenues have been derived principally
from providing consulting for customer acquisition and retention. During the
three months ended June 30, 1998, the Company launched Lightbridge Consulting
Services, which provides business advisory, customization and integration,
deployment, and optimization services in the areas of customer acquisition and
retention, fraud prevention and distribution management. Revenues from
consulting services are generally recognized as the services are performed,
using the percentage-of-completion method, measured by labor hours.
During the second quarter of 1998, the Company continued its efforts to
complete development of in-process technology acquired from Coral. In June 1998,
the Company released FraudBuster 4.2.5, a new version of FraudBuster that
provides certain performance and functional enhancements. As of June 30, 1998,
the Company was continuing to develop two new versions of FraudBuster, one of
which is expected to contain additional performance and functional enhancements
and is currently scheduled to be released in the fourth quarter of 1998, and the
other of which is expected to contain substantial enhancements in performance,
scalability and functionality and is currently scheduled to be released in 1999.
The Company was also continuing to develop a product that is expected to be
complementary to FraudBuster and to contain new subscription fraud detection
tools. This product is currently scheduled to be available in the first quarter
of 1999. Finally, the Company continued its development efforts with respect to
two versions of ChurnAlert, which are currently scheduled to be released in the
third quarter of 1998 and in 1999. Although the completion dates for these
projects have been delayed, as of the date this report was originally filed, the
Company had not changed its original estimate of the total costs it expected to
incur to complete these projects because of changes in projected development
staffing levels. If the Company is unsuccessful in completing these projects,
the Company's business, financial condition, results of operations and cash
flows could be materially adversely affected.
During the three months ended June 30, 1998, Lightbridge hired a senior vice
president of worldwide sales and marketing, consolidated its consulting services
group and named a vice president to head the newly formed group, and hired a new
senior vice president and chief financial officer who has responsibility for
matters such as the Company's financial reporting systems, business measures and
analyses, and relationships with public market analysts and investors.
11
<PAGE>
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
1997 1998 1997 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
(1) (1)
Revenues:
Transaction services.......................................................... 66.3% 60.3% 67.3% 59.7%
Software licensing............................................................ 10.8 22.5 9.8 26.4
Consulting services........................................................... 22.9 17.2 22.9 13.9
--------- --------- --------- ---------
Total revenues................................................................ 100.0 100.0 100.0 100.0
--------- --------- --------- ---------
Cost of revenues:...............................................................
Transaction services.......................................................... 38.1 33.8 38.8 35.6
Software licensing............................................................ 3.3 7.5 2.4 8.8
Consulting services........................................................... 4.7 11.2 5.5 8.6
--------- --------- --------- ---------
Total cost of revenues........................................................ 46.1 52.5 46.7 53.0
--------- --------- --------- ---------
Gross profit.................................................................... 53.9 47.5 53.3 47.0
--------- --------- --------- ---------
Operating expenses:
Development................................................................... 15.0 16.0 15.0 16.6
Sales and marketing........................................................... 15.0 11.3 14.6 12.9
General and administrative.................................................... 10.8 20.9 11.9 20.9
--------- --------- --------- ---------
Total operating expenses...................................................... 40.8 48.2 41.5 50.4
--------- --------- --------- ---------
Income (loss) from operations................................................... 13.1 (0.7) 11.8 (3.4)
Other income, net............................................................... 3.0 1.4 2.6 1.5
--------- --------- --------- ---------
Income (loss) before provision for (benefit from) income taxes.................. 16.1 0.7 14.4 (1.9)
Provision for (benefit from) income taxes....................................... 6.1 1.8 (0.6) 1.2
--------- --------- --------- ---------
Net income (loss)............................................................... 10.0% (1.1)% 15.0% (3.1)%
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
- ------------------------
(1) As restated. See Note 3 of Notes to the Unaudited Condensed Consolidated
Financial Statements.
THREE MONTHS ENDED JUNE 30, 1998 COMPARED WITH THREE MONTHS ENDED JUNE 30,
1997
REVENUES. Revenues increased by 68.1% to $15.1 million in the three months
ended June 30, 1998 from $9.0 million in the three months ended June 30, 1997.
Transaction services revenues increased by 52.8% to $9.1 million in the
three months ended June 30, 1998 from $6.0 million in the three months ended
June 30, 1997, while decreasing as a percentage of total revenues to 60.3% from
66.3%. The dollar increase in transaction services revenues for the three months
ended June 30, 1998 was primarily due to increased volume of qualification and
activation transactions processed for carrier clients. The decrease in
transaction services revenues as a percentage of total revenues for the three
month period ended June 30, 1998 principally resulted from a greater increase in
software licensing revenues than transaction services revenues for the same
period.
Software licensing revenues increased by 249.4% to $3.4 million in the three
months ended June 30, 1998 from $1.0 million in the three months ended June 30,
1997, while increasing as a percentage of total revenues to 22.5% from 10.8%.
Both the dollar increase and the increase as a percentage of total revenues in
software licensing revenues for the three months ended June 30, 1998 was
principally a result of the increase in revenues attributable to the Company's
Channel Solutions
12
<PAGE>
and Fraud Management products and services. The Company's software licensing
revenues during the three months ended June 30, 1998 included revenues from its
Fraud Management software that was installed for a new international client but
had not been fully accepted by the client as of March 31, 1998 and therefore, as
described in Item 2 of the Company's Quarterly Report on Form 10-Q for the three
months ended March 31, 1998, was not recognizable during the three months ended
March 31, 1998.
The Company believes that software licensing revenues for the next several
fiscal quarters will be subject to fluctuation and more difficult to anticipate
than the Company's other types of revenues, principally due to the relatively
large dollar costs and relatively lengthy sales cycles of the software licenses.
The sales cycles for domestic software licenses generally extend from three to
six months and may extend as long as twelve months; sales cycles for software
licenses sold to international clients typically are longer. The predictability
of software licensing revenue is further impeded because the Company's licensed
software is a discretionary purchase for most customers. As a result of the
foregoing, a small number of licensing transactions may have a significant
effect on the Company's software licensing revenues for a fiscal quarter.
Consulting services revenues increased by 26.8% to $2.6 million in the three
months ended June 30, 1998 from $2.1 million in the three months ended June 30,
1997, while decreasing as a percentage of total revenues to 17.2% from 22.9%.
The dollar increase in consulting services revenues for the three months ended
June 30, 1998 was principally due to increased demand for the consulting
services offered by the Company. The decrease in consulting services revenue as
a percentage of total revenues for the three months ended June 30, 1998
principally resulted from a greater increase in software licensing revenues than
consulting services revenues for the same period.
In the year ended December 31, 1997, one customer accounted for 29% of the
Company's total revenues. While Lightbridge believes that its relationship with
this customer is good, the Company currently expects that the percentage of the
Company's total revenues for the year ended December 31, 1998 will be
significantly less than for the preceding year, as a result of growth in the
Company's total revenues, the Company's efforts to diversify its customer base
and a decrease in the consulting services utilized by the customer.
COST OF REVENUES. Cost of revenues consists primarily of personnel costs,
costs of maintaining systems and networks used in processing qualification and
activation transactions (including depreciation and amortization of systems and
networks) and amortization of capitalized software and certain acquired
intangible assets. 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 services revenues between revenues from on-line transaction
processing and revenues from processing transactions services through the
Company's Teleservices Group and changes in the mix of total revenues between
transaction services revenues, software licensing revenues and consulting
services revenues.
Transaction services cost of revenues increased by 49.2% to $5.1 million in
the three months ended June 30, 1998 from $3.4 million in the three months ended
June 30, 1997, while decreasing as a percentage of total revenues to 33.8% from
38.1%. The increase in transaction services cost of revenues for the three
months ended June 30, 1998 resulted principally from increases in transaction
volume and costs attributable to expansion of the Company's staff and systems
capacity. The decrease in transaction services cost of revenues as a percentage
of total revenues for the three months ended June 30, 1998 principally resulted
from an increase in the number of transactions processed through on-line
processing as opposed to through the teleservices group.
Software licensing cost of revenues increased by 287.1% to $1.1 million in
the three months ended June 30, 1998 from $0.3 million in the three months ended
June 30, 1997, while increasing as a percentage of total revenues to 7.5% from
3.3%. Both the dollar increase and the increase as a percentage of total
revenues in software licensing cost of revenues for the three months ended June
30,
13
<PAGE>
1998 was primarily due to the increased cost of revenues for Fraud Management
products and amortization expense for certain acquired intangible assets.
Consulting services cost of revenues increased by 299.0% to $1.7 million in
the three months ended June 30, 1998 from $0.4 million in the three months ended
June 30, 1997, while increasing as a percentage of total revenues to 11.2% from
4.7%. Both the dollar increase and the increase as a percentage of total
revenues in consulting services cost of revenues was primarily due to the
increase in consulting staff due to the expansion of the consulting services
group, including both newly hired personnel and personnel reallocated from other
areas of the Company's operations, including sales and marketing, as part of the
establishment of Lightbridge Consulting Services. The Company expects to
continue hiring consulting staff during the three months ending September 30,
1998 and, to a lesser extent, the three months ending December 31, 1998.
The Company expects fluctuations in gross profit may occur primarily due to
fluctuations in revenue generated from the Company's three revenue components,
particularly revenues from software licensing which have historically generated
higher gross profit margins.
DEVELOPMENT. Development expenses include all internal software development
costs and 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 80.0% to $2.4 million in the three months
ended June 30, 1998 from $1.4 million in the three months ended June 30, 1997.
The increase in costs for the three months ended June 30, 1998 resulted
primarily from the addition of engineering personnel necessary to support the
Company's product development plans in connection with the development and
deployment of its fraud management software product, FraudBuster. The Company
expects to continue to increase its engineering and development efforts in order
to continue enhancing its existing products and services, including its Channel
Solutions, Churn and Fraud Management products and services, 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 27.1% to $1.7 million in
the three months ended June 30, 1998 from $1.3 million in the three months ended
June 30, 1997. The increase for the three months ended June 30, 1998 was 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. This increase was offset in part by the reallocation of
certain personnel to Lightbridge Consulting Services as well as the allocation
of certain related expenses to consulting services cost of revenues. The Company
expects to continue to invest in sales and marketing efforts in order to
increase its penetration of existing accounts and to add new clients and
markets. The Company currently estimates that sales and marketing expenses will
account for approximately 11% to 12% of the Company's total revenues during the
latter half of 1998, although the actual percentage may vary significantly as
the result of unanticipated fluctuations in the Company's revenues during the
period.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
principally of salaries of administrative, executive, finance and human
resources personnel, fees for outside professional services, and amortization of
goodwill incurred pursuant to the acquisition of Coral. General and
administrative expenses increased by 223.3% to $3.2 million in the three months
ended June 30, 1998 from $1.0 million in the three months ended June 30, 1997.
The increase reflected the amortization of $0.7 million of goodwill and certain
acquired intangible assets attributable to the Company's acquisition of Coral,
certain costs associated with the integration of Coral and the addition of
finance personnel.
14
<PAGE>
The increase also reflected a one-time write-off during the three months ended
June 30, 1998 of approximately $0.1 million relating to fixed assets, including
leasehold improvements and telephone systems, used at Coral's existing
facilities in Longmont, Colorado, that will not deployed at its new facilities
in Broomfield, Colorado, as well as approximately $0.3 million of accruals
relating to various matters, including sales taxes, the allowance for doubtful
accounts and costs attributable to the establishment of foreign subsidiaries in
Asia and the United Kingdom. The Company expects that its general and
administrative costs will decrease on a quarterly basis during the latter half
of 1998 due to the nonrecurring nature of certain of the expenses recorded by
the Company during the three months ended June 30, 1998.
OTHER INCOME, NET. Other income, net in the three months ended June 30,
1998 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 remained the same at $0.1 million in the three months
ended June 30, 1998 and 1997. Interest income decreased to $0.2 million in the
three months ended June 30, 1998 from $0.3 million in the three months ended
June 30, 1997 as a result of lower cash balances. The interest income for the
three months ended June 30, 1998 reflected an average rate of return of
approximately 5.6%.
PROVISION FOR (BENEFIT FROM) INCOME TAXES. The Company's effective tax rate
was 27.2% and 38.0% for the three months ended June 30, 1998 and 1997,
respectively. The relatively high effective tax rate for 1998 results in part
from goodwill attributable to the Company's acquisition of Coral; the
amortization of this goodwill is recognized as an expense for accounting
purposes, but is not deductible for tax purposes. Since the goodwill
attributable to the Coral acquisition will continue to be amortized through the
three months ending December 31, 2001, the Company anticipates that its
effective tax rate will continue to be relatively high during that amortization
period and, in particular, estimates that its effective tax rate for the year
ending December 31, 1999 will be between 40% and 42%. The actual effective tax
rate for 1998 and 1999 may vary significantly from the Company's estimates as
the result of a number of factors, including any and all factors that cause the
Company's actual revenues for those years to vary from the Company's internal
estimates.
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
REVENUES. Revenues increased by 59.5% to $28.4 million in the six months
ended June 30, 1998 from $17.8 million in the six months ended June 30, 1997.
Transaction services revenues increased by 41.5% to $17.0 million in the six
months ended June 30, 1998 from $12.0 million in the six months ended June 30,
1997. The increase in transaction services revenues for the six months ended
June 30, 1998 was primarily due to increased volume of qualification and
activation transactions processed for carrier clients.
Software licensing revenues increased by 331.0% to $7.5 million in the six
months ended June 30, 1998 from $1.7 million in the six months ended June 30,
1997. The increase in software licensing revenues for the six months ended June
30, 1998 was principally a result of the increase in revenues attributable to
the Company's Channel Solutions and Fraud Management products and services.
Consulting services revenues decreased by 3.5% to $3.9 million in the six
months ended June 30, 1998 from $4.1 million in the six months ended June 30,
1997. The decrease in consulting services revenues for the six months ended June
30, 1998 was principally due to a decrease in the consulting services utilized
by the Company's largest client partially offset by an increased demand for the
consulting services provided to other clients of the Company.
15
<PAGE>
COST OF REVENUES. Transaction services cost of revenues increased by 46.2%
to $10.1 million in the six months ended June 30, 1998 from $6.9 million in the
six months ended June 30, 1997. The increase in transaction services cost of
revenues for the six months ended June 30, 1998 resulted principally from
increases in transaction volume and costs attributable to expansion of the
Company's staff and systems capacity.
Software licensing cost of revenues increased by 487.8% to $2.5 million in
the six months ended June 30, 1998 from $0.4 million in the six months ended
June 30, 1997. The increase in software licensing cost of revenues for the six
months ended June 30, 1998 was primarily due to the increased costs of revenues
for Fraud Management products and amortization expense for certain acquired
intangible assets.
Consulting services cost of revenues increased by 151.8% to $2.5 million in
the six months ended June 30, 1998 from $1.0 million in the six months ended
June 30, 1997. The increase in consulting services cost of revenues was
primarily due to the increase in consulting staff due to the expansion of the
consulting services group, including both newly hired personnel and personnel
reallocated from other areas of the Company's operations as part of the
establishment of Lightbridge Consulting Services.
DEVELOPMENT. Development expenses increased by 76.1% to $4.7 million in the
six months ended June 30, 1998 from $2.7 million in the six months ended June
30, 1997. The increase in costs for the six months ended June 30, 1998 resulted
primarily from the addition of engineering personnel necessary to support the
Company's product development plans.
SALES AND MARKETING. Sales and marketing expenses increased by 41.0% to
$3.7 million in the six months ended June 30, 1998 from $2.6 million in the six
months ended June 30, 1997. The increase for the six months ended June 30, 1998
was 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, including trade shows. This increase was offset in
part by the reallocation during the three months ended June 30, 1998 of certain
personnel to Lightbridge Consulting Services as well as the allocation of
certain related expenses for those three months to consulting services cost of
revenues.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
by 172.1% to $6.0 million in the six months ended June 30, 1998 from $2.1
million in the six months ended June 30, 1997. The increase reflected the
amortization of $1.5 million of goodwill and certain acquired intangible assets
attributable to the Company's acquisition of Coral, certain costs associated
with the integration of Coral and the addition of finance personnel. The
increase also reflected (i) a one-time write-off during the six months ended
June 30, 1998 of approximately $0.1 million relating to fixed assets, including
leasehold improvements and telephone systems, used at Coral's existing
facilities in Longmont, Colorado, that will not be deployed at its new
facilities in Broomfield, Colorado, (ii) write-offs of approximately $0.3
million for bad debts attributable principally to contracts of Coral that
predated the Company's acquisition of Coral and (iii) accruals of approximately
$0.3 million for various matters, including sales taxes, the Company's allowance
for doubtful accounts and costs attributable to the Company's establishment of
foreign subsidiaries in Asia and the United Kingdom.
OTHER INCOME, NET. Other income, net in the six months ended June 30, 1998
consisted predominantly of interest income and expense. Interest expense
decreased to $0.1 million in the six months ended June 30, 1998 from $0.2
million in the six months ended June 30, 1997. Interest income decreased to $0.4
million in the six months ended June 30, 1998 from $0.6 million in the six
months ended June 30, 1997 as a result of lower cash balances due to the
investment made in the service delivery infrastructure and computer equipment
for development activities of the business during 1997.
16
<PAGE>
PROVISION FOR (BENEFIT FROM) INCOME TAXES. During the six months ended June
30, 1998 and 1997, the Company's effective tax rate was 59.5% and (3.6)%,
respectively. The Company's effective tax rate in 1997 was affected by the
reversal of its deferred tax valuation allowance and the utilization of certain
tax credits in the quarter ended March 31, 1997.
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.
The Company has a $4.0 million working capital line of credit and a $3.0
million equipment line of credit with a 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 is based on the amount of
qualifying accounts receivable. Advances under the working capital line of
credit and equipment line of credit bear interest at the bank's prime rate (8.5%
at June 30, 1998). The working line of credit also provides for the issuance of
letters of credit, which reduce the amount that may be borrowed under the line
of credit and are limited to $1,250,000 in the aggregate. At June 30, 1998,
there were no borrowings outstanding under the working capital line of credit
and borrowings of $0.3 million were outstanding under the equipment line of
credit. The Company's agreements with the bank 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
expires in June 1999, and the equipment line of credit expires in June 2001.
The Company's capital expenditures in the totalled $0.7 million and $1.9
million, respectively, for the three and six months ended June 30, 1998 and $2.3
million and $3.5 million, respectively, for the three and six months ended June
30, 1997. The capital expenditures during these periods consisted of purchases
of fixed assets, principally for the Company's services delivery infrastructure
and computer equipment for development activities. Capital expenditures during
the three months ended June 30, 1998 included leasehold improvements and other
costs attributable to the relocation of Coral's facilities to Broomfield,
Colorado. The Company expects capital expenditures for the remainder of 1998 to
total approximately $2.3 million, including additional capital expenditures
related to the relocation of Coral's Colorado facilities. The Company leases its
facilities and certain equipment under non-cancelable capital and operating
lease agreements that expire at various dates through December 2002.
During the three months ended June 30, 1998, the Company completed
development of version 1.19 of the Customer Acquisition System ("CAS"), the
Company's transaction processing system. Version 1.19 completed Year 2000
compliance for the core CAS and its front-end access points. The Company expects
that version 1.20 of CAS, which currently is scheduled for release during the
three months ending December 31, 1998, will include Year 2000 support for
third-party interfaces to CAS, such as interfaces with credit bureaus and
billing systems. The Company also continued its testing and modification efforts
relating to its other software products. The Company may be required to make
significant expenditures in connection with the on-going design and testing of
its software-based services and products and interfaces to third-party systems
for Year 2000 compatibility, and any related modifications or other development
work that may be required to cause those services and products to be Year 2000
compatible. The Company currently estimates that it will spend approximately
17
<PAGE>
$0.3 million on Year 2000 testing and compliance during the latter half of 1998,
although the actual amount of these expenditures may vary significantly,
depending upon the timing and results of testing and integration activities,
including those that require the involvement and cooperation of third parties.
The Company currently is unable to estimate accurately the amount of
expenditures for Year 2000 compliance that may be required in fiscal 1999 and
thereafter, although it currently believes the amount of these expenditures will
not be material.
As of June 30, 1998, the Company had cash and cash equivalents of $13.4
million and working capital of $22.6 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.
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
Effective January 1, 1998, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" and
AICPA Statement of Position No. 97-2, "Software Revenue Recognition." Adoption
of these pronouncements has not had a material effect on reported results of
operations or financial position. However, the future effects of AICPA Statement
of Position No. 97-2 on the Company's results of operations will depend on the
nature and terms of the individual software agreements entered into in future
periods.
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 No. 131"). SFAS No. 131 establishes
standards applicable to the manner in which the Company reports information
about operating segments in its annual financial statements commencing with the
Company's fiscal year ending December 31, 1998 and will require that the Company
report selected information about operating segments in subsequent interim
financial reports issued to stockholders.
REVENUES AND COSTS OF REVENUES FOR THREE MONTHS ENDED SEPTEMBER 30, 1997 AND
DECEMBER 31, 1997
As discussed under "--Overview" above, prior to the filing of this Form
10-Q, the Company has reported its software licensing and consulting services
revenues as a single line item in its income statements. The following table
presents the Company's revenues and costs of revenues for the last two quarters
of the year ended December 31, 1997 on the basis of three components--
transaction services,
18
<PAGE>
software licensing and consulting services--consistent with the presentation in
the income statements included in this Form 10-Q.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------
<S> <C> <C>
SEPTEMBER 30,
1997 DECEMBER 31, 1997
----------------- -----------------
Revenues:
Transaction services...................................................... $ 6,749,506 $ 8,130,089
Software licensing........................................................ 862,843 3,723,661
Consulting services....................................................... 1,844,933 1,407,602
----------------- -----------------
Total revenues........................................................ $ 9,457,282 $ 13,261,352
----------------- -----------------
----------------- -----------------
Cost of revenues:
Transaction services...................................................... $ 3,754,795 $ 4,859,486
Software licensing........................................................ 232,358 1,376,160
Consulting services....................................................... 397,949 486,796
----------------- -----------------
Total cost of revenues................................................ $ 4,385,102 $ 6,722,442
----------------- -----------------
----------------- -----------------
</TABLE>
19
<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.
<TABLE>
<S> <C>
LIGHTBRIDGE, INC.
Date: March 31, 1999 *BY: /S/ JOSEPH S. TIBBETTS, JR.
------------------------------------------------
Joseph S. Tibbetts, Jr.
SENIOR VICE PRESIDENT, FINANCE AND
ADMINISTRATION AND CHIEF FINANCIAL OFFICER
(AUTHORIZED OFFICER AND PRINCIPAL FINANCIAL
AND ACCOUNTING OFFICER)
</TABLE>
20
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 13,381,604
<SECURITIES> 0
<RECEIVABLES> 15,017,530
<ALLOWANCES> 283,858
<INVENTORY> 2,950,379
<CURRENT-ASSETS> 31,065,655
<PP&E> 23,508,381
<DEPRECIATION> 12,049,319
<TOTAL-ASSETS> 60,594,176
<CURRENT-LIABILITIES> 8,497,457
<BONDS> 0
0
0
<COMMON> 166,651
<OTHER-SE> 49,983,841
<TOTAL-LIABILITY-AND-EQUITY> 60,594,176
<SALES> 15,145,482
<TOTAL-REVENUES> 15,145,482
<CGS> 7,950,092
<TOTAL-COSTS> 7,303,535
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33,772
<INCOME-PRETAX> 112,608
<INCOME-TAX> 272,100
<INCOME-CONTINUING> (159,492)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (159,492)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
