<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 000-23698
APPLIED DIGITAL ACCESS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 68-0132939
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
9855 SCRANTON ROAD, SAN DIEGO, CALIFORNIA 92121
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, ZIP CODE)
(619) 623-2200
(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 [ ]
There were 12,674,294 shares of the registrant's Common Stock, $0.001 par value,
outstanding on April 30, 1998.
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
APPLIED DIGITAL ACCESS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
--------- ------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,291 $ 4,400
Investments - current 9,320 8,779
Accounts receivable, net 9,132 12,981
Inventory, net 5,345 5,859
Deferred income taxes 130 130
Prepaid expenses and other current assets 3,611 3,775
--------- --------
Total current assets 30,829 35,924
Property and equipment, net 6,216 6,165
Deferred income taxes 1,372 1,372
Other, net 2,538 2,822
--------- --------
$40,955 $46,283
--------- --------
--------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,334 $ 3,478
Accrued expenses 1,281 2,864
Accrued warranty 1,318 1,323
Deferred revenue 1,695 1,471
--------- --------
Total current liabilities 8,628 9,136
Obligations under capital leases, net
of current portion 10 15
--------- --------
Total liabilities 8,638 9,151
Shareholders' equity:
Preferred stock, $0.001 par value, 7,500,000
shares authorized, no shares issued - -
Common stock, $0.001 par value,
30,000,000 shares authorized, 12,671,267
and 12,605,082 shares issued and outstanding
at March 31, 1998 and December 31, 1997,
respectively 51,894 51,610
Additional paid-in capital 2,519 2,492
Unrealized gain on investments 166 84
Accumulated deficit (22,262) (17,054)
--------- --------
Total shareholders' equity 32,317 37,132
--------- --------
$40,955 $46,283
--------- --------
--------- --------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
2
<PAGE>
APPLIED DIGITAL ACCESS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS
ENDED MARCH 31,
-----------------------------
1998 1997
------------ ------------
(AMOUNTS IN THOUSANDS EXCEPT
PER SHARE AMOUNT)
<TABLE>
<CAPTION>
<S> <C> <C>
Revenue $5,272 $6,388
Cost of revenue 3,664 3,211
--------- ---------
Gross profit 1,608 3,177
Operating expenses:
Research and development 3,544 2,001
Sales and marketing 2,280 1,458
General and administrative 1,119 1,355
--------- ---------
Total operating expenses 6,943 4,814
--------- ---------
Operating loss (5,335) (1,637)
Interest income 175 243
Other income (expense), net (11) (4)
--------- ---------
Loss before income taxes (5,171) (1,398)
Provision for income taxes 37 51
--------- ---------
Net loss ($5,208) ($1,449)
--------- ---------
Net loss per basic and diluted share ($0.41) ($0.12)
--------- ---------
--------- ---------
Number of shares used in per share
computations 12,624 12,310
Comprehensive Loss ($5,127) ($1,465)
--------- --------
--------- --------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
APPLIED DIGITAL ACCESS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE THREE MONTHS
ENDED MARCH 31,
-----------------------------
1998 1997
------------ ------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C> <C>
Cash flows from operating activities:
Net loss ($5,208) ($1,449)
Adjustments to reconcile net loss to net
cash provided (used) by operating
activities:
Depreciation and amortization 918 661
Other 17 51
Changes in assets and liabilities:
Accounts receivable 3,849 645
Inventory 514 240
Prepaid expenses and other current 164 80
assets
Accounts payable 856 145
Accrued expenses (1,584) (251)
Accrued warranty (5) (5)
Deferred revenue 224 (91)
-------- --------
Net cash provided (used) by operating
activities: (255) 26
-------- --------
Cash flows from investing activities:
Purchases of investments (3,413) (6,789)
Maturities of investments 2,935 6,944
Purchases of property and equipment (684) (249)
-------- --------
Net cash used by investing activities (1,162) (94)
Cash flows from financing activities:
Principal payments on capital leases (4) (3)
Proceeds from the issuance of common
stock under stock option plans 312 298
-------- --------
Net cash provided by financing activities 308 295
-------- --------
Net increase (decrease) in cash and (1,109) 227
cash equivalents
Cash and cash equivalents, beginning of 4,400 1,504
period
-------- --------
Cash and cash equivalents, end of period $3,291 $1,731
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE>
APPLIED DIGITAL ACCESS, INC.
Notes to Condensed Consolidated Financial Statements
March 31, 1998
(Unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
include the accounts of Applied Digital Access, Inc. (the "Company" or
"ADA") and its wholly owned subsidiary: Applied Digital Access - Canada,
Inc. All significant intercompany balances and transactions have been
eliminated in consolidation. These financial statements have been prepared
in accordance with the interim reporting requirements of Form 10-Q,
pursuant to the rules and regulations of the Securities and Exchange
Commission ("SEC"). Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements.
In the opinion of management, all adjustments (consisting of only normal
recurring adjustments) considered necessary for a fair presentation have
been included. Operating results for the three month period ended March 31,
1998 are not necessarily indicative of the results that may be expected for
the year ending December 31, 1998. These financial statements should be
read in conjunction with the Company's audited financial statements and
notes thereto, together with Management's Discussion and Analysis of
Financial Condition and Results of Operations, and Risks and Uncertainties,
contained in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997 filed with the SEC.
2. New Accounting Pronouncements
The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 130, "Reporting of Comprehensive Income," effective January
1, 1998. This statement requires the disclosure of comprehensive income
and its components in a full set of general-purpose financial statements.
Comprehensive income is defined as net income plus revenues, expenses,
gains and losses that, under generally accepted accounting principles, are
excluded from net income. The components of comprehensive income, which
are excluded from net income are foreign currency gains/losses and
unrealized gains/losses on securities and have been included in the
calculation of comprehensive income.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"), which supersedes
Statement of Financial Accounting Standards, "Financial Reporting of
Segments of a Business Enterprise" ("SFAS 14"). SFAS 131 changes current
practice under SFAS 14 by establishing a new framework on which to base
segment reporting and also requires interim reporting of segments
information. This statement is effective for fiscal years beginning after
December 15, 1997. This statement's interim reporting disclosures are not
required until the first quarter immediately subsequent to the fiscal year
in which SFAS 131 is effective.
3. Inventory
Inventory is valued at the lower of cost (determined using the first-in,
first-out method) or market. Inventory was as follows:
<TABLE>
<CAPTION>
MARCH 31, 1998 DECEMBER 31, 1997
-------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Raw materials $2,855 $3,419
Work-in-process 2,220 2,223
Finished goods 716 787
------- -------
5,791 6,429
Less inventory reserve (446) (570)
------- -------
$5,345 $5,859
------- -------
------- -------
</TABLE>
5
<PAGE>
4. Per Share Information
The Company has adopted the provisions of SFAS No. 128, EARNINGS PER SHARE,
effective December 31, 1997. SFAS No. 128 requires the presentation of
basic and diluted earnings per share. Basic EPS is computed by dividing
income available to common stockholders by the weighted average number of
common shares outstanding for the period. Diluted EPS is computed giving
effect to all dilutive potential common shares that were outstanding
during the period. Dilutive potential common shares consist of the
incremental common shares issuable upon the conversion of convertible
preferred stock (using the "if converted") method and exercise of stock
options and warrants for all periods. All prior period earnings per share
amounts have been restated to comply with SFAS No. 128.
In accordance with the disclosure requirements of SFAS No. 128, a
reconciliation of the numerator and denominator of basic and diluted EPS is
provided as follows (dollars in thousands, except per share amounts).
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1998 1997
-------- --------
<S> <C> <C>
Numerator - basic and diluted EPS:
Net loss $(5,208) $(1,449)
Denominator - basis and diluted EPS:
Weighted average common stock outstanding 12,624 12,310
Basic and diluted earnings per share $ (0.41) $ (0.12)
</TABLE>
6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this Amendment to the Company's report on Form
10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.
Applied Digital Access, Inc.
Date: June 4, 1998 /s/ PETER P. SAVAGE
----------------------------
Peter P. Savage
Director
President and Chief Executive Officer
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