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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
(Mark One)
X Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
--- Act of 1934
For the quarterly period ended March 31, 2001
Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange
--- Act of 1934.
For the transition period from to .
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Commission file number 0-25936
USDATA Corporation
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 75-2405152
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2435 N. Central Expressway, Richardson, TX 75080
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(Address of Principal Executive Offices)
(Zip Code)
Registrant's Telephone Number, Including Area Code: (972) 680-9700
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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 requirements
for the past 90 days.
Yes X No
--- ---
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of May 7, 2001
Number of Shares
Class Outstanding
Common Stock, Par Value $.01 Per Share 14,075,055 shares
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USDATA CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2001
TABLE OF CONTENTS
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
as of March 31, 2001 and December 31,
2000 3
Condensed Consolidated Statements of
Operations and Comprehensive Loss for the
Three Months Ended March 31, 2001 and 2000 4
Condensed Consolidated Statements of Cash
Flows for the Three Months Ended March 31,
2001 and 2000 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 9
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
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USDATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
MARCH 31, DECEMBER 31,
2001 2000
--------- ------------
ASSETS (unaudited) (audited)
Current assets:
Cash and cash equivalents $ 1,365 $ 673
Accounts receivable, net of allowance for doubtful
accounts of $241 and $224, respectively 2,774 4,073
Other current assets 626 678
-------- --------
Total current assets 4,765 5,424
-------- --------
Property and equipment, net 1,860 2,216
Computer software development costs, net 7,404 7,848
Software held for resale, net 724 824
Other assets 19 42
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Total assets $ 14,772 $ 16,354
======== ========
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED
STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 1,318 $ 1,711
Deferred revenue 1,236 1,218
Accrued compensation and benefits 438 808
Current portion of long-term debt 1,370 1,165
Other accrued liabilities 1,791 2,555
Net liabilities of discontinued operation 1,245 2,413
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Total current liabilities 7,398 9,870
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Long-term debt, less current portion 529 554
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Total liabilities 7,927 10,424
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Commitments and contingencies
Redeemable convertible preferred stock, Series A-1 and Series A-2, $.01 par
value, with a redemption and liquidation value of $2.56 per share in 2000;
16,000,000 shares authorized for Series A-1 and 16,000,000 shares for Series
A-2; 5,300,000 shares issued and outstanding for each series of preferred
stock -- 27,142
Stockholders' equity (deficit):
Series A cumulative convertible preferred stock, $.01 par value;
liquidation preference $100; 100,000 shares authorized;
50,000 shares issued and outstanding in 2001 and 2000 5,668 5,568
Series B cumulative convertible preferred stock; $.01 par value;
liquidation preference $100; 800,000 shares authorized;
265,000 shares issued and outstanding in 2001 27,672 --
Series C-1 cumulative convertible preferred stock; $.01 par value;
liquidation preference $80; 125,000 shares authorized;
37,500 shares issued and outstanding in 2001 3,000 --
Series C-2 preferred stock warrant 6,000 --
Common stock, $.01 par value, 40,000,000 shares
authorized; 16,324,189 issued in 2001 and 2000 163 163
Additional paid-in capital 15,492 23,892
Accumulated deficit (42,449) (41,910)
Treasury stock at cost, 2,249,134 shares in 2001
and 2,317,008 shares in 2000 (7,724) (7,961)
Accumulated other comprehensive loss (977) (964)
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Total stockholders' equity (deficit) 6,845 (21,212)
-------- --------
Total liabilities, redeemable convertible preferred
stock and stockholders' equity (deficit) $ 14,772 $ 16,354
======== ========
See accompanying notes to condensed consolidated financial statements.
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USDATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
----------------------
2001 2000
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Revenues:
Product license $ 2,982 $ 2,862
Services 486 683
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Total revenues 3,468 3,545
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Operating expenses:
Selling and product materials 2,284 3,568
Product development 490 1,392
General and administrative 1,172 1,185
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Total operating expenses 3,946 6,145
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Loss from operations (478) (2,600)
Interest expense (61) (58)
Other income, net -- 32
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Loss from continuing operations (539) (2,626)
Discontinued operations:
Loss from discontinued operations -- (4,438)
-------- --------
Net loss (539) (7,064)
Dividends on preferred stock, preferred stock warrants
and beneficial conversion (8,130) (108)
-------- --------
Net loss applicable to common stockholders $ (8,669) $ (7,172)
======== ========
Net loss per common share:
Basic and Diluted
Loss from continuing operations $ (0.62) $ (0.21)
Loss from discontinued operations -- (0.35)
-------- --------
Net loss per common share $ (0.62) $ (0.56)
======== ========
Comprehensive loss:
Net loss $ (539) $ (7,064)
Foreign currency translation adjustment (13) (69)
-------- --------
Comprehensive loss $ (552) $ (7,133)
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Weighted average shares outstanding:
Basic and diluted 14,070 12,789
======== ========
See accompanying notes to condensed consolidated financial statements.
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USDATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
--------------------
2001 2000
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Cash flows from operating activities:
Net loss $ (539) $(7,064)
Adjustments to reconcile net loss to net cash
used in operating activities:
Loss from discontinued operations -- 4,438
Depreciation and amortization 898 279
Changes in operating assets and liabilities:
Accounts receivable, net 1,299 3,373
Other assets, net 78 (459)
Accounts payable and other accrued liabilities (937) 104
Accrued compensation and benefits (370) (868)
Deferred revenue 18 152
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Net cash provided by (used in) continuing operations 447 (45)
Net cash used in discontinued operations (1,168) (3,015)
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Net cash used in operating activities (721) (3,060)
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Cash flows from investing activities:
Capital expenditures (60) (366)
Capitalized software development costs (151) (1,420)
Refund of leasehold improvement costs 209 --
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Net cash used in continuing operations (2) (1,786)
Net cash used in discontinued operations -- (1,526)
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Net cash used in investing activities (2) (3,312)
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Cash flows from financing activities:
Proceeds from stock option exercises -- 283
Proceeds from issuance of common stock 33 270
Proceeds from issuance of preferred stock, net 1,434 --
Borrowing of revolver debt 842 --
Other borrowings 114 --
Proceeds from note payable -- 5,000
Payments on long-term debt (1,008) (15)
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Net cash provided by financing activities 1,415 5,538
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Net increase (decrease) in cash and cash equivalents 692 (834)
Cash and cash equivalents, beginning of period 673 2,962
------- -------
Cash and cash equivalents, end of period $ 1,365 $ 2,128
======= =======
See accompanying notes to condensed consolidated financial statements.
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USDATA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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1. SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements of USDATA
Corporation and its subsidiaries (the "Company") for the three-month periods
ended March 31, 2001 and 2000 have been prepared in accordance with generally
accepted accounting principles. Significant accounting policies followed by the
Company were disclosed in the notes to the consolidated financial statements
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2000. In the opinion of the Company's management, the accompanying
consolidated financial statements contain the adjustments, consisting of normal
recurring adjustments, necessary to present fairly the consolidated financial
position of the Company at March 31, 2001 and the consolidated results of its
operations and comprehensive loss, and cash flows for the periods ended March
31, 2001 and 2000. Operating results for the three months ended March 31, 2001
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2001.
2. CONVERTIBLE PREFERRED STOCK AND PREFERRED STOCK WARRANT
On March 30, 2001, the Company secured an equity infusion of $1.5
million from SCP Private Equity Partners, L.P. ("SCP") through the issuance of
37,500 shares of Series C-1 Preferred Stock of the Company and a warrant to
purchase up to 75,000 shares of Series C-2 Preferred Stock. In addition, SCP has
committed to purchase an additional 37,500 shares of Series C-1 Preferred
("Option Stock") at the purchase price of $40 per share or $1.5 million. The
Company may exercise its right to sell the Option Stock on or before the
expiration of nine months after March 30, 2001 ("Closing Date"), but not before
two months after the Closing Date, and the Company must be in compliance with
specified monthly targets as defined in the Series C Preferred Stock Agreement.
As an additional condition to this equity financing, SCP and Safeguard 2000
Capital, L.P. both agreed to not exercise their right to convert any eMake
Corporation Series A-1 and A-2 Preferred Stock, respectively into USDATA
Corporation Series B convertible Preferred Stock acquired through the exercise
of the warrants issued by eMake Corporation in September 2000. SCP and
Safeguard 2000 Capital, L.P. hold warrants exercisable for 5,300,000 and
5,300,000 shares, respectively, of eMake Corporation Series A-1 and A-2
Preferred Stock which would be convertible into a total of 265,000 shares of
USDATA Corporation Series B convertible Preferred Stock.
In conjunction with the Series C-1 and C-2 Preferred Stock purchase,
the Company executed a Certificate of Designation for Series C-1 Preferred Stock
and Series C-2 Preferred Stock which designated 125,000 shares of authorized
preferred stock as Series C-1 Preferred Stock and designated 125,000 shares of
authorized but unissued preferred stock as Series C-2 Preferred Stock. As of
March 31, 2001, 37,500 shares of Series C-1 Preferred stock are issued and
outstanding.
SERIES C-1 CONVERTIBLE PREFERRED STOCK
The Series C-1 Preferred Stock has a par value of $.01 per share and a
liquidation preference of $80 per share plus cumulative dividends and interest.
The preferred stock is convertible into the Company's common stock at a
conversion rate of 100 shares of common stock for each share of preferred stock
and the cumulative dividends are payable at $4.00 per share per annum in the
form of additional shares of Series C-1 Preferred. The Series C-1 Preferred
Stock ranks senior to all other classes and series of the Company's capital
stock with respect to dividend rights, rights on liquidation, dissolution and
winding up. The excess of the liquidation preference over the purchase price of
the preferred stock has been reflected as a $1.5 million dividend on preferred
stock, increasing the loss applicable to common stockholders for the first
quarter of 2001 and decreasing additional paid-in capital.
WARRANT TO PURCHASE SERIES C-2 PREFERRED STOCK
The Series C-2 Preferred Stock warrant issued to SCP by the Company
grants SCP the right to purchase up to 75,000 shares of the Company's Series C-2
Preferred Stock at a purchase price of $40 per share. The Series C-2 Preferred
Stock has a par value of $.01 per share and a liquidation preference of $120 per
share plus cumulative dividends and interest and is convertible into the
Company's common stock
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USDATA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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at a conversion rate of 100 shares of common stock for each share of preferred
stock. The right to purchase the shares of Series C-2 Preferred Stock under the
warrant are exercisable on any business day on or before March 30, 2011, with
the exception of 50,500 shares, which may not be exercisable until the earlier
of stockholder approval of the transactions under the warrant or May 31, 2001.
On exercise, the warrant provides the holder a liquidation preference of three
times the exercise price per share. The excess of the warrant liquidation
preference over the exercise price of $6.0 million has been reflected as
additional return to the Series C-1 preferred stockholder, increasing loss
applicable to common stockholders for the first quarter 2001 and decreasing
additional paid-in capital.
SERIES B CONVERTIBLE PREFERRED STOCK
On January 31, 2001, SCP elected to exercise its right to acquire
132,500 shares of Series B Convertible Preferred Stock of the Company in
exchange for 5,300,000 shares of Series A-1 Redeemable Convertible Preferred
Stock of eMake Corporation. In addition, a subsidiary of Safeguard Scientifics,
Inc. elected to exercise its right to acquire 132,500 shares of Series B
Convertible Preferred Stock of the Company in exchange for 5,300,000 shares of
Series A-2 Redeemable Convertible Preferred Stock of eMake Corporation.
3. LOSS PER SHARE
Net loss per share of common stock is presented in accordance with the
provisions of SFAS No. 128, Earnings Per Share. Under SFAS No. 128, basic income
(loss) per share excludes dilution for potentially dilutive securities and is
computed by dividing income or loss applicable to common stockholders by the
weighted average number of common shares outstanding during the period. Diluted
income (loss) 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. Potentially dilutive securities are excluded from the
computation of diluted income (loss) per share when their inclusion would be
antidilutive. Options to acquire a total of 1,307,282 common shares and options
and warrants to acquire 2,459,000 common shares have been excluded from the
computation of diluted loss per share for the three months ended March 31, 2001
and 2000, respectively, as their inclusion would be antidilutive.
4. AMENDMENT TO REVOLVING CREDIT FACILITY
At March 31, 2001, the Company was not in compliance with one of its
debt covenants under its revolving credit facility and subsequently received a
waiver from the lending bank for this covenant. As of May 3, 2001, the credit
facility has been amended to increase this covenant for the quarter ended March
31, 2001 and for the remainder of the agreement ending January 31, 2002.
5. SEVERANCE AND OTHER RESTRUCTURING ACCRUALS
The following table summarizes by category the accrued liability
balances at March 31, 2001 related to the Company's 2000 restructuring plans.
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USDATA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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Amount Amount
Accrued at Cash Accrued at
(in thousands) 12/31/00 Payments 3/31/01
--------- -------- ---------
Employee severance and other employee-related costs $ 410 $ (284) $ 126
Early lease termination and facility shutdown costs 141 (99) 42
Lease costs associated with vacated office space 988 (333) 655
Legal and other related costs 68 (17) 51
------- ------- -------
$ 1,607 $ (733) $ 874
======= ======= =======
The severance and restructuring accrued liabilities are included in
accrued compensation and benefits and other accrued liabilities in the
accompanying condensed consolidated balance sheets. Additionally, in connection
with the 2000 restructuring plans related to eMake Corporation, the Company paid
$454 thousand for severance and other employee-related costs, $58 thousand in
early lease termination and facility shutdown costs and $56 thousand in lease
costs associated with vacated office space. The accrued liability balance at
March 31, 2001 totals $365 thousand and is included in net liabilities of
discontinued operation.
6. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board released
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133"), as amended by SFAS No. 138, which is effective for the
Company beginning January 1, 2000. SFAS 133 establishes accounting and reporting
standards for derivative instruments. The Statement requires that an entity
recognize all derivatives as either assets or liabilities in the financial
statements and measure those instruments at fair value, and it defines the
accounting for changes in the fair value of the derivatives depending on the
intended use of the derivative. The Company adopted the provisions of SFAS 133
effective January 1, 2001, and the adoption did not have any impact on the
Company's consolidated results of operations, financial position or cash flows
as the Company does not have any derivative instruments.
7. SUBSEQUENT EVENT
In December 2000, the Company engaged an exclusive agent to assist the
Company in the subleasing of approximately 40,000 rentable square feet of excess
office space associated with the restructuring reported in the fourth quarter of
2000 in exchange for a broker fee of 5.65% on that portion of the lease
obligation from which the Company is released. On April 17, 2001, the Company
entered into a sublease agreement to sublease approximately 14,802 square feet
of excess office space. The sublease commences on May 10, 2001 and expires on
August 31, 2010. The base rental and other operating costs were negotiated at
the same rate the Company is obligated to pay under its Master Lease Agreement.
The Company shall receive monthly rental payments of approximately $27 thousand
through August 31, 2010. The broker fee associated with this sublease is
approximately $161 thousand and is due in two separate installments in June 2001
and September 2001.
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USDATA CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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OVERVIEW
USDATA Corporation (the "Company") is a global supplier of real-time
component-based application software tools for automation and application
software products for manufacturing. These products and services are designed to
help customers manage their business in real time, reduce operating costs,
shorten cycle times and improve quality in their manufacturing operations. The
Company has a strong global presence with more than 45,000 installs located in
more than 60 countries throughout the world, channel support locations worldwide
and a global network of distribution and support partners.
The Company's software enables manufacturers to access more accurate
and timely information - whether they are on the plant floor, in the office, or
around the globe. The Company's solutions span a wide range of manufacturing
processes, from monitoring equipment to tracking product flow, and are designed
to integrate with customers' existing manufacturing and business software. This
combination of product breadth and ease of integration is intended to provide a
total plant solution intended to improve manufacturing performance and give
customers a competitive advantage.
Revenues have been generated primarily from licenses of the Company's
FactoryLink and Xfactory software and secondarily from technical support and
service agreements, training classes and product related services. The support
and service agreements are generally one-year, renewable contracts entitling a
customer to certain software upgrades and technical support. Revenue from
services represented approximately 14% and 19% of revenues during the three
months ended March 31, 2001 and 2000, respectively.
FactoryLink, is a process and control solution used to develop custom
supervisory control and data acquisition ("SCADA") and human machine interfaces
("HMI") for the supervision and control of a broad range of automated processes.
FactoryLink is a horizontal application tool set used by system integrators and
end customers to build automation and control applications for a wide variety of
industrial markets such as electronics assembly, semiconductor, automotive,
building automation, food and beverage, pharmaceuticals, metals, mining, cement,
oil and gas, electricity generation, transmission and distribution, and water
and waste water transport. It allows customers to collect and monitor data from
disparate process control systems and acts as hub for real-time information that
may be used by various decision makers interested in the real-time status of the
production process. In 2000, the Company released its latest version,
FactoryLink 7, which is designed to have a lower total cost of ownership than
other SCADA/HMI products on the market.
Xfactory is a manufacturing production execution software product that
enables customers to leverage their existing business and planning systems with
enterprise-wide, open systems solutions for production management. In mid-2000,
the Company introduced the Xfactory Production Suite software enabling
production, execution and tracking for eManufacturing integration with business
and supply chain systems.
The Xfactory Production Suite consists of four modules: 1) Connector
for information exchange with business systems; 2) Tracker for production
tracking of customer orders and products; 3) Analyzer for performance
monitoring, genealogy, and data analysis; and 4) FactoryLink for data
acquisition and process management.
The Company focuses its sales efforts through selected distributors
capable of providing the level of support and expertise required in the
real-time manufacturing and process control application market. The division
currently has channel support locations in the United States and Europe. The
Company's
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distributors have sales locations throughout North and South America, Europe,
the Far East and the Middle East.
RESULTS OF OPERATIONS
The following table presents selected financial information relating to
the financial condition and results of operations of the Company and should be
read in conjunction with the consolidated financial statements and notes
included herein. The table sets forth, for the periods indicated, the Company's
statement of operations as a percentage of revenues.
MARCH 31,
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2001 2000
---- ----
Revenues:
Product license 86% 81%
Services 14% 19%
---- ----
Total revenues 100% 100%
---- ----
Operating expenses:
Selling and product materials 66% 101%
Product development 14% 39%
General and administrative 34% 33%
---- ----
Total operating expenses 114% 173%
---- ----
Loss from operations (14)% (73)%
Interest expense (2)% (2)%
Other income, net 0% 1%
---- ----
Loss from continuing operations (16)% (74)%
Discontinued operation:
Loss from discontinued operations 0% (125)%
---- ----
Net loss (16)% (199)%
Dividends on preferred stock, preferred stock warrant
and beneficial conversion (234)% (3)%
---- ----
Net loss applicable to common stockholders (250)% (202)%
==== ====
Total revenues for the quarter ended March 31, 2001 were $3.5 million
compared to $3.5 million for the same period in 2000. Product licensing revenue
increased $0.1 million offset by a decrease in services revenue. The increase in
product licensing revenue was primarily related to Factorylink 7, which was
released on June 30, 2000. While the Company anticipates an improvement in
revenues going forward, continued economic uncertainty could affect buying
decisions making revenues and operating results more difficult to forecast.
Selling and product materials expenses decreased $1.3 million from $3.6
million for the quarter ended March 31, 2000 to $2.3 million for the same period
in 2001. The decrease was a result of decreased sales, marketing and technical
support services totaling $1.9 million attributed to the Company's own cost
reduction efforts, offset by a $0.6 million increase in capitalized software
amortization due to the release of Factorylink 7. Selling and product materials
expenses as a percentage of revenues decreased to 66% for the quarter ended
March 31, 2001 from 101% for the same period in 2000.
Product development expenses, which consisted primarily of labor costs,
decreased $0.9 million from $1.4 million for the quarter ended March 31, 2000 to
$0.5 million for the same period in 2001, net of amounts capitalizable. The
decrease in 2001 is primarily related to decreased engineering development
activities related to the FactoryLink and Xfactory product lines in addition to
the Company's own cost reduction efforts. The Company capitalized $0.1 million
and $1.4 million of development costs in the quarters ended March 31, 2001 and
March 31, 2000, respectively, primarily related to the next major version of the
FactoryLink product line.
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General and administrative expenses of $1.2 million for the quarter
ended March 31, 2001 are comparable to general and administrative expenses of
$1.2 million for the same period in 2000. General and administrative expenses as
a percentage of revenues increased slightly to 34% for the quarter ended March
31, 2001 from 33% for the same period in 2000.
As a result of the factors discussed above, the Company recorded a net
loss from continuing operations of $0.5 million for the quarter ended March 31,
2001, compared to a loss from continuing operations of $2.6 million for the same
period in 2000.
In February 2001, management of the Company determined that the market
adoption rate of the technology around the Company's subsidiary eMake
Corporation ("eMake") was not progressing in a manner to support the necessary
resources needed to continue eMake's newly developed operating plan. As a
result, the Company's Board of Directors approved a plan to terminate the
operations of eMake as part of a strategy to commit the Company's resources to
its core business. For the quarter ended March 31, 2000, the condensed
consolidated financial statements have been restated to present eMake as a
discontinued operation. The Company's loss from discontinued operations for the
quarter ended March 31, 2000 was $4.4 million.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating activities used $0.7 million of cash for the
quarter ended March 31, 2001 compared to $3.1 million for the same period in
2000. The net cash used in operating activities for the first quarter of 2001 is
primarily due to a loss from operations of $0.5 million and a decrease in
accounts payable, partially offset by collections on accounts receivable in
2001.
Cash used in investing activities for the quarter ended March 31, 2001
resulted from software development costs of $0.15 million, offset by other
investing activities of $0.2 million and capital expenditures of $0.06 million.
Cash provided by financing activities of $1.4 million is due to $1.4
million in proceeds from the issuance of the Company's Series C-1 Preferred
Stock, net of issuance costs (discussed below), borrowings from the Company's
revolving line of credit and other borrowings of $1.0 million, offset by
payments on long-term debt of $1.0 million, including repayments on the
revolving line of credit.
On March 30, 2001, the Company secured an equity infusion of $1.5
million from SCP Private Equity Partners, L.P. ("SCP") through the issuance of
37,500 shares of Series C-1 Preferred Stock of the Company and a warrant to
purchase up to 75,000 shares of Series C-2 Preferred Stock. In addition, SCP has
committed to purchase an additional 37,500 shares of Series C-1 Preferred
("Option Stock") at the purchase price of $40 per share or $1.5 million. The
Company may exercise its right to sell the Option Stock on or before the
expiration of nine months after March 30, 2001 ("Closing Date"), but not before
two months after the Closing Date, and the Company must be in compliance with
specified monthly targets as defined in the Series C Preferred Stock Agreement.
As an additional condition to this equity financing, SCP and Safeguard 2000
Capital, L.P. both agreed to not exercise their right to convert any eMake
Corporation Series A-1 and A-2 Preferred Stock, respectively, into USDATA
Corporation Series B convertible Preferred Stock acquired through the exercise
of the warrants issued by eMake Corporation in September 2000. SCP and Safeguard
2000 Capital, L.P. hold warrants exercisable for 5,300,000 and 5,300,000 shares,
respectively, of eMake Corporation Series A-1 and A-2 Preferred Stock which
would be convertible into a total of 265,000 shares of USDATA Corporation Series
B convertible Preferred Stock.
The Series C-2 Preferred Stock warrant issued to SCP by the Company
grants SCP the right to purchase up to 75,000 shares of the Company's Series C-2
Preferred Stock at a purchase price of $40 per share. The Series C-2 Preferred
Stock has a par value of $.01 per share and a liquidation preference of $120 per
share plus cumulative dividends and interest and is convertible into the
Company's common stock at a conversion rate of 100 shares of common stock for
each share of preferred stock. The right to purchase the shares of Series C-2
Preferred Stock under the warrant are exercisable on any business day on or
before March 30, 2011, with the exception of 50,500 shares, which may not be
exercisable until the earlier of stockholder approval of the transactions under
the warrant or May 31, 2001. On exercise, the warrant provides the holder a
liquidation preference of three times the exercise price per share. The excess
of the warrant liquidation preference over the exercise price of $6.0 million
has been reflected as additional return
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to the Series C-1 preferred stockholder, increasing loss applicable to common
stockholders for the first quarter 2001 and decreasing additional paid-in
capital.
The Company's working capital requirements are funded through
internally generated funds, its $3.0 million revolving credit facility through
January 15, 2002 and up to $3.0 million in equity financing from SCP (see
description above). The revolving credit facility bears interest at prime plus
1.5%, or 10% at March 31, 2001, and has a commitment fee of 1.5% per annum on
the total $3.0 million. At March 31, 2001, $783,000 was drawn under the credit
facility and approximately $850,000 was available. Availability under the credit
facility is subject to a borrowing base calculation, which varies each month
depending on billings and cash collections. In addition to the $1.5 million
equity infusion received on March 30, 2001, SCP has committed to purchase an
additional 37,500 shares of Series C-1 Preferred Stock at the purchase price of
$40 per share or $1.5 million, subject to certain financing conditions. The
Company currently anticipates that internally generated cash, the credit
facility and the equity financing will be sufficient to satisfy its operating
cash needs for the foreseeable future, however, based on the conditional
financing arrangements, there can be no assurance that the Company will be able
to obtain sufficient funding on terms acceptable to the Company, if at all.
FORWARD LOOKING STATEMENTS
This document contains "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995 regarding revenues,
margins, operating expenses, earnings, growth rates and certain business trends
that are subject to risks and uncertainties that could cause actual results to
differ materially from the results described herein. Specifically, the ability
to grow product and service revenues may not continue and the Company may not be
successful in developing new products, product enhancements or services on a
timely basis or in a manner that satisfies customers needs or achieves market
acceptance. Other factors that could cause actual results to differ materially
are: competitive pricing and supply, market acceptance and success for service
offerings, short-term interest rate fluctuations, general economic conditions,
employee turnover, possible future litigation and the related uncertainties on
future revenue and earnings as well as the risks and uncertainties set forth
from time to time in the Company's other public reports and filings and public
statements. Recipients of this document are cautioned to consider these risks
and uncertainties and to not place undue reliance on these forward-looking
statements. All subsequent written and oral forward-looking statements
attributable to the Company or persons acting on its behalf are expressly
qualified in their entirety by these cautionary statements.
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USDATA CORPORATION AND SUBSIDIARIES
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's exposure to market risk associated with changes in
interest rates relates to its variable rate bank note payable of $192,000 and
its revolving line of credit of $783,000. Interest rate risk is estimated as the
potential impact on the Company's results of operations or financial position
due to a hypothetical change of 50 basis points in quoted market prices. This
hypothetical change would not have a material effect on the Company's results of
operations and financial position.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits (filed as part of this report).
Number Description
4.1 Series C Preferred Stock Purchase Agreement, dated as
of March 30, 2001, by and among USDATA Corporation
and SCP Private Equity Partners, II, L.P.
4.2 Certificate of Designation for Series C-1 Preferred
Stock and Series C-2 Preferred Stock
4.3 Warrant, dated March 30, 2001, issued in the name of
SCP Private Equity Partners, II, L.P.
4.4 Second Amended and Restated Investors' Rights
Agreement, dated as of March 30, 2001, by and among
USDATA Corporation, the Investors listed on Schedule
A thereto and Safeguard Scientifics, Inc.
4.5 Warrant Agreement, dated as of March 30, 2001, by and
between USDATA Corporation, Safeguard 2000 Capital,
L.P. and SCP Private Equity Partners, II, L.P.
4.6 Waiver of Anti-Dilution Rights for Series A Preferred
Stock and Series B Preferred Stock, dated March 30,
2001, by and among USDATA Corporation, Safeguard
Delaware, Inc., Safeguard 2000 Capital, L.P. and SCP
Private Equity Partners, II, L.P.
4.7 Right of First Refusal Agreement, dated as of March
30, 2001, by and among the Investors listed on
Schedule A thereto, SCP Private Equity Partners, II,
L.P. and USDATA Corporation
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(b) Reports on Form 8-K
On January 10, 2001, the Company filed a Current Report on Form 8-K to
announce that the Company received a Nasdaq Stock Market Staff Determination
that the Company was not in compliance with certain minimum listing requirements
and as a result, the Company's securities were subject to delisting from the
Nasdaq National Market. Subsequently, on February 9, 2001, the Company received
a Nasdaq Stock Market Staff Determination that the Company has evidenced
compliance with all minimum listing requirements for continued listing of the
Company's stock.
On February 6, 2001, the Company filed a Current Report on Form 8-K to
announce that the Company's two major stockholders exercised their right to
acquire shares of the Company's Series B Convertible Preferred Stock in exchange
for Series A-1 and A-2 Redeemable Convertible Preferred Stock of eMake
Corporation.
On February 7, 2001, The Company filed an Amended Current Report on
Form 8-K to update the financial information filed in the Form 8-K on February
6, 2001.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
USDATA CORPORATION
Date: May 15, 2001 /s/ Robert A. Merry
----------------------------------
Robert A. Merry
President, Chief Executive Officer
and Director
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
4.1 Series C Preferred Stock Purchase Agreement, dated as of March 30,
2001, by and among USDATA Corporation and SCP Private Equity
Partners, II, L.P.
4.2 Certificate of Designation for Series C-1 Preferred Stock and Series
C-2 Preferred Stock
4.3 Warrant, dated March 30, 2001, issued in the name of SCP Private
Equity Partners, II, L.P.
4.4 Second Amended and Restated Investors' Rights Agreement, dated as of
March 30, 2001, by and among USDATA Corporation, the Investors listed
on Schedule A thereto and Safeguard Scientifics, Inc.
4.5 Warrant Agreement, dated as of March 30, 2001, by and between USDATA
Corporation, Safeguard 2000 Capital, L.P. and SCP Private Equity
Partners, II, L.P.
4.6 Waiver of Anti-Dilution Rights for Series A Preferred Stock and
Series B Preferred Stock, dated March 30, 2001, by and among USDATA
Corporation, Safeguard Delaware, Inc., Safeguard 2000 Capital, L.P.
and SCP Private Equity Partners, II, L.P.
4.7 Right of First Refusal Agreement, dated as of March 30, 2001, by and
among the Investors listed on Schedule A thereto, SCP Private Equity
Partners, II, L.P. and USDATA Corporation