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Netopia Reports Fourth Quarter Fiscal Year 2004 and Full Fiscal Year 2004 Results; Restatements of Financial Results for Fiscal Years 2003 and 2002 CompletedEMERYVILLE, Calif. --(Business Wire)-- Feb. 1, 2005 -- Netopia, Inc. (Pink Sheets:NTPA), a market leader in broadband gateways and service delivery software, today announced results for the fourth fiscal quarter of fiscal year 2004 and the full fiscal year ended September 30, 2004. Revenues for the fourth fiscal quarter ended September 30, 2004 were $25.8 million, a 3.7% increase from $24.9 million for the same period in the prior fiscal year. Revenues for the fiscal year ended September 30, 2004 were $101.3 million, a 19.3% increase from $84.9 million for the prior fiscal year ended September 30, 2003. Net loss on a GAAP basis for the fourth fiscal quarter was ($6.1) million or ($0.25) per share, compared to a net income of $51,000 or $0.00 per share for the same period in the prior fiscal year. The net loss on a GAAP basis for the fiscal year ended September 30, 2004 was ($8.8) million or ($0.37) per share, compared to a net loss of ($8.9) million or ($0.45) per share for the fiscal year ended September 30, 2003. As discussed below, the results for the fourth fiscal quarter and fiscal year ended September 30, 2003 have been restated from the previously reported results. Netopia also announced the completion of the previously announced review by Netopia's audit committee of Netopia's accounting and reporting practices, including the appropriateness and/or timing of revenue recognition of software license fees in two transactions with a single software reseller customer. As a result of the review, Netopia is restating its previously announced financial results for the fiscal years ended September 30, 2003 and 2002, and the fiscal quarters ended March 31, 2004 and December 31, 2003. A description of the restatements, including reconciliation with the previously announced results of the quarterly and fiscal year results for the periods being restated is attached to this release. Netopia expects to file on February 1, 2005 with the United States Securities and Exchange Commission both its Annual Report on Form 10-K for the fiscal year ended September 30, 2004, and the quarterly report on Form 10-Q for the third fiscal quarter ended June 30, 2004. This Annual Report on Form 10-K will incorporate the restatements for all periods being restated, and include the audit opinion for the fiscal years ended September 30, 2004, 2003 and 2002 of Burr, Pilger & Mayer LLP, Netopia's registered independent accountant. "We are pleased to be releasing our financial results for the last fiscal year. With today's SEC filings, Netopia believes that we again will be in compliance with the SEC's periodic filing requirements. We intend to remain compliant and to file an application as soon as possible to seek to list our common stock for trading on the Nasdaq stock market," said Alan Lefkof, Netopia's president and CEO. "We look forward to releasing on February 9, 2005 our financial results for the first fiscal quarter of fiscal year 2005 ended December 30, 2004." Note: Netopia will host a conference call to discuss its results for the fourth fiscal quarter and fiscal year ended September 30, 2004, and the restatements of previously announced financial results. The conference call will take place on Tuesday, February 1, 2005 at 8:30 a.m. Eastern time (5:30 a.m. Pacific time). The conference call will be broadcast live on the Internet and can be accessed by visiting Netopia's web site at www.netopia.com. To join the telephone conference, dial (913) 981-4911 and enter the pass code 374037. An archived recording of the conference call will be available on Netopia's web site for one year, and by telephone from February 1 - February 8, 2005. To listen to the archived recording, dial (719) 457-0820 and enter the pass code 374037, or go to Netopia's web site. About Netopia Netopia, Inc. is a market leader in broadband and wireless products and services that simplify and enhance broadband delivery to residential and business-class customers. Netopia's offerings enable carriers and broadband service providers to improve their profitability with feature-rich DSL smart modems, routers, and gateways, software that simplifies installation and reduces ongoing support needs, and value-added services to enhance revenue generation. Netopia's Wi-Fi CERTIFIED(TM) gateways include 3-D Reach(TM) technology delivering enhanced wireless range, security, and performance. Netopia's DSL smart modems, routers, and gateways come with a suite of installation wizards and support utilities that offer a comprehensive approach to installation, deployment, service provisioning, application setup, self-diagnostics, and troubleshooting. Netopia provides value-added services with its broadband software platform, including the Netopia Broadband Server suite of gateway and PC management and customer support software solutions, a server-based Parental Controls subscription service, and the Web eCommerce server software. netOctopus Desktop Support and eCare software enable broadband service providers and enterprises to support customers and devices by remotely viewing and operating the desktop or other device. Netopia has established strategic distribution relationships with leading carriers and broadband service providers including Belgacom, BellSouth, Covad Communications, EarthLink, eircom, Hong Kong Telecom/PCCW, MegaPath Networks, Netifice, SBC Communications, Swisscom, and Verizon. Headquartered in Emeryville, Calif., Netopia's common stock trades on the pink sheets under the symbol "NTPA.PK." Further information about Netopia can be obtained via phone (510) 420-7400, fax (510) 420-7601, or on the Web at www.netopia.com. Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: Portions of this release that are not statements of historical fact may include forward-looking statements. Statements regarding Netopia, Inc.'s beliefs, plans, expectations or intentions regarding the future are forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements concerning Netopia's ability to list its common stock on the Nasdaq Stock Market. In addition, prior period-to-period comparisons of revenues are not necessarily indicative of period-to-period comparative revenues in future periods. Prospective and current investors are cautioned not to place undue reliance on any forward-looking statements. Further, Netopia expressly disclaims any obligation to revise or update any of the forward-looking statements contained herein to reflect future events or developments after the date hereof. Netopia does not undertake to update any oral or written forward looking-statement that may be made by or on behalf of Netopia. For more information concerning Netopia and risk factors that may affect Netopia's future results and may cause actual results to vary from results anticipated in forward-looking statements, including risk factors relating to Netopia's existing and potential securities litigation relating to the restatements described above and a formal investigation commenced by the Securities and Exchange Commission to determine whether any federal securities laws may have been violated, investors should review Netopia's public filings with the United States Securities and Exchange Commission, which are available by calling Netopia at 510-420-7516 or online at www.sec.gov. All company names, brand names and product names are trademarks of their respective holder(s). -0- *T GAAP Condensed Consolidated Statements of Operations for the Three Months And Fiscal Years Ended September 30 -------------------------------------------------------- Three Months Ended Fiscal Years Ended September 30, September 30, ------------------- -------------------- 2004 2003 2004 2003 Restated Restated ---------------------------------------------------------------------- (in thousands, except per share amounts) REVENUES: Broadband equipment $22,276 $20,622 $85,702 $67,393 Broadband software and services 3,559 4,294 15,633 17,527 ---------------------------------------------------------------------- Total revenues 25,835 24,916 101,335 84,920 ---------------------------------------------------------------------- COST OF REVENUES: Broadband equipment 17,471 14,330 63,251 49,001 Broadband software and services 286 224 992 1,314 Amortization of acquired technology 300 288 1,200 1,152 ---------------------------------------------------------------------- Total cost of revenues 18,057 14,842 65,443 51,467 ---------------------------------------------------------------------- GROSS PROFIT 7,778 10,074 35,892 33,453 OPERATING EXPENSES: Research and development 3,974 3,812 15,828 15,570 Research and development project cancellation costs -- -- -- 606 Selling and marketing 5,266 4,845 20,528 20,110 General and administrative 3,556 1,276 7,147 4,740 Amortization of intangible assets 86 87 345 345 Restructuring costs 999 (77) 999 395 ---------------------------------------------------------------------- Total operating expenses 13,881 9,943 44,847 41,766 ---------------------------------------------------------------------- OPERATING INCOME (LOSS) (6,103) 131 (8,955) (8,313) Other loss, net Loss on impaired securities -- -- -- (457) Other income (expense), net 31 (80) 224 (95) ---------------------------------------------------------------------- Other loss, net 31 (80) 224 (552) Provision for Income Taxes 13 -- 78 -- ---------------------------------------------------------------------- NET INCOME (LOSS) $(6,085) $51 $(8,809) $(8,865) ---------------------------------------------------------------------- Per share data, net income (loss): Basic and diluted net income (loss) per share $(0.25) $0.00 $(0.37) $(0.45) ---------------------------------------------------------------------- Shares used in the basic per share calculation 24,490 20,790 23,573 19,560 ---------------------------------------------------------------------- Shares used in the diluted per share calculation 24,490 22,646 23,573 19,560 ---------------------------------------------------------------------- Condensed Consolidated Balance Sheets Restated September 30, September 30, 2004(1) 2003(1) ---------------------------------------------------------------------- (in thousands) ASSETS Current assets Cash and short-term investments $23,973 $22,208 Trade receivables, net 17,812 16,062 Inventories, net 6,280 5,738 Prepaid expenses and other current assets 1,226 899 ---------------------------------------------------------------------- Total current assets 49,291 44,907 Furniture, fixtures and equipment, net 2,694 3,740 Intangible assets, net 5,684 6,235 Long-term investments 1,032 1,032 Deposits and other assets 886 1,105 ---------------------------------------------------------------------- TOTAL ASSETS $59,587 $57,019 ---------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities $18,051 $16,566 Long-term liabilities 406 630 ---------------------------------------------------------------------- Total liabilities 18,457 17,196 Stockholders' equity 41,130 39,823 ---------------------------------------------------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $59,587 $57,019 ---------------------------------------------------------------------- *T (1) Derived from the audited consolidated balance sheets dated September 30, 2004 and 2003 included in Netopia, Inc.'s 2004 Annual Report on Form 10-K. Internal Accounting Review Netopia announced on July 22, 2004, that the Audit Committee of its Board of Directors had initiated an Internal Accounting Review of its accounting and reporting practices, including the appropriateness and timing of the revenue recognition of software license and maintenance fees in two transactions with a single software reseller customer. On September 10, 2004, KPMG LLP, which had served as Netopia's independent registered accountant, resigned. At the time of its resignation, KPMG LLP advised Netopia that its audited financial statements for fiscal year ended September 30, 2003 should no longer be relied upon. On September 30, 2004, the Audit Committee engaged Burr, Pilger & Mayer LLP ("BPM") as Netopia's new independent registered public accounting firm to audit Netopia's consolidated financial statements for the fiscal years ended September 30, 2004, 2003 and 2002. The Internal Accounting Review determined that both software transactions referred to above were contingent sales. As a consequence, and, in accordance with the principles of Statement of Position (SOP) 97-2, Software Revenue Recognition, as amended, Netopia is restating revenue to reflect: First Transaction -- the elimination of $750,000 of software license revenue of the approximately $1.5 million originally recorded in the third fiscal quarter ended June 30, 2002 to reflect the proceeds not received during the quarter; -- the recognition of $632,000 of software license revenue in the fourth fiscal quarter ended September 30, 2002 to reflect the proceeds received during the quarter; and -- the recognition of $118,000 of maintenance revenue ratably over the four fiscal quarters commencing July 1, 2003 and ending June 30, 2004 during which periods the maintenance revenues were earned, the proceeds for which were received in the fourth fiscal quarter ended September 30, 2002; Second Transaction -- the elimination of $750,400 of software license, maintenance and deferred revenue in the fourth fiscal quarter ended September 30, 2003 because no proceeds were received during the quarter; -- the recognition of $273,000 of software license revenue in the fourth fiscal quarter ended September 30, 2004 to reflect the proceeds received during the quarter; and -- the recognition of $64,000 of maintenance revenue ratably over the five fiscal quarters commencing July 1, 2004 and ending September 30, 2005 during which periods the maintenance revenues will be earned, the proceeds for which were received in the fourth fiscal quarter ended September 30, 2004. -- In addition, Netopia will recognize $262,500 of software license revenue in the first fiscal quarter of fiscal year 2005 ended December 31, 2004, reflecting additional proceeds received during the first fiscal quarter of fiscal year 2005 with respect to the second transaction. As a result of the Internal Accounting Review, Netopia will be recognizing approximately $2.1 million of software license and maintenance revenue with respect to the two transactions, which is the total amount of proceeds that Netopia has received from the software reseller. This amount is $150,000 less than originally recorded because during the fourth fiscal quarter of fiscal year 2004, Netopia entered into an agreement with the software reseller to reduce the amount payable with respect to the second transaction by $150,000. This agreement confirms that Netopia has satisfied all of its outstanding obligations and that the reseller will make no additional payments with respect to this sale. Other Significant Transactions Requiring Restatement During the course of Netopia's review of the financial statements for fiscal years 2002, 2003 and the first and second fiscal quarters of 2004, Netopia determined that other transactions required adjustment in order for our financial statements to conform more properly to Generally Accepted Accounting Principles ("GAAP"). These adjustments are described below. Marketing Incentive Programs Netopia has participated with certain of its distributor and reseller customers in marketing incentive programs that have resulted in the provision of rebates, credits and discounts to these customers. These transactions were originally recorded as marketing expenses. Netopia has determined that these rebates, credits and discounts should be accounted for in accordance with Emerging Issues Task Force ("EITF") Issue No. 01-09, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor's Products), as a reduction to revenues and not as marketing expenses. As a result, for the fiscal years ended September 30, 2002 and 2003, Netopia is reducing revenues by $935,000 and $824,000, respectively, and making offsetting reductions to marketing expenses during the same periods. The adjustments to record these transactions properly are being made on a quarterly basis. For the three months ended December 31, 2003 and March 31, 2004, Netopia is reducing revenues by $289,000 and $174,000, respectively, and making offsetting reductions to marketing expenses during these periods. These adjustments do not change the previously reported net loss for any period. Rent Expense Netopia determined that it recorded expenses in error relating to a rental obligation for which the Company previously had accrued a charge in conjunction with an acquisition. Netopia is correcting this error by reversing (i) $109,000 of operating expenses for fiscal year ended September 30, 2002; (ii) $50,000 of operating expenses for the fiscal year ended September 30, 2003; and (iii) $10,000 and $12,000 of operating expenses for the three months ended December 31, 2003 and March 31, 2004, respectively. These adjustments will reduce the Company's previously reported net loss or increase the previously reported net income for these periods. These adjustments are being recorded on a quarterly basis. Income Tax Expense Netopia is reducing its income tax expense by $200,000 for the fiscal quarter ended June 30, 2002 to reflect the receipt of an income tax refund for which there is no associated liability. This adjustment will reduce the Company's net loss for the three months and fiscal year ended June 30, 2002 and September 30, 2002, respectively. Inventory Netopia determined that manufacturing overhead had not been properly applied to cost of sales and ending inventory for prior fiscal periods. As a result, inventory valuation was (i) understated by $242,000 at September 30, 2002; (ii) overstated by $320,000 at September 30, 2003; and (iii) and overstated by $16,000 for the first and second fiscal quarters of fiscal years 2004. Accordingly, cost of revenues increased/(decreased) by ($242,000), $320,000, and $16,000 for the fiscal years ended September 30, 2002 and 2003, and for the first and second fiscal quarters of fiscal year 2004, respectively, as a result of these adjustments. The adjustments to properly record manufacturing overhead are being recorded on a quarterly basis, and this summary describes the annual effect of these adjustments. Netopia determined that the Reserve for Excess and Obsolete Inventory for prior years was inadequate based on information that was known at the end of these periods. The effect of these adjustments was to decrease the net value of inventory by $385,000 and $155,000 at September 30, 2002 and 2003, respectively. Cost of Revenues increased/(decreased) by $385,000, ($230,000), and ($155,000) for the years ended September 30, 2002, 2003 and 2004, respectively, as a result of these adjustments. Amortization of Other Intangible Assets Netopia determined that the amortization of other intangible assets, with identifiable lives, related to the acquisitions of Cayman and JadeSail were included incorrectly in operating expenses. The Company has reclassified the expenses to cost of revenue for fiscal years 2002 and 2003 and for the first quarter of fiscal year 2004. Cost of revenues increased by $288,000 per quarter or $1.2 million for fiscal years ended September 30, 2002 and 2003. For the first quarter of fiscal year 2004, cost of revenues increased by $300,000. Although these adjustments do not impact previously reported net loss/income for these periods, they will reduce the gross margins reported for these periods. Summary On January 25, 2005, the Audit Committee met with the Company's Interim Senior Vice President and Chief Financial Officer and BPM to review the effect on the Company's previously issued financial statements of: (i) the findings of the Internal Accounting Review, (ii) the other significant transactions requiring adjustment, as described above, and (iii) and certain other adjustments, including other revenue and expense transactions that were overstated in certain periods and understated in other periods. While the amounts associated with these other adjustments are relatively small, the Company believes that it is appropriate to record them as part of these restatements so that our financial statements are as accurate as possible. The Audit Committee approved the adjustments and resulting restatements to previously issued financial statements. The net effect of all of the restatement adjustments is to: -- decrease the Company's net loss by approximately $23,000 during the fiscal quarter ended March 31, 2004; -- increase the Company's net income by approximately $34,000 during the fiscal quarter ended December 31, 2003; -- increase the Company's net loss by approximately $545,000 for the fiscal year ended September 30, 2003; and -- increase the Company's net loss by approximately $9,000 for the fiscal year ended September 30, 2002. -- As described above, as a result of the restatement adjustments, the Company also will recognize $262,500 of software license revenue in the first fiscal quarter of fiscal year 2005 ended December 31, 2004, reflecting additional proceeds received during the first fiscal quarter of fiscal year 2005. The following tables set forth unaudited quarterly results of operations data for the twelve quarters ended September 30, 2004, both as previously reported and as restated, and the restatement changes on the Company's financial results on a quarterly basis for the fiscal years ended September 30, 2003 and 2002, and the fiscal quarters ended March 31, 2004 and December 31, 2003: -0- *T Fiscal 2004 ------------------------------------------- Restated Restated Sep. 30, Jun. 30, Mar. 31, Dec. 31, Three months ended, 2004 2004 2004 2003 ---------------------------------------------------------------------- (in thousands; except per share amounts) REVENUES: Broadband equipment $22,276 $21,891 $17,878 $23,657 Broadband software and services 3,559 3,543 3,879 4,652 ------------------------------------------- Total revenues 25,835 25,434 21,757 28,309 ---------------------------------------------------------------------- COST OF REVENUES: Broadband equipment 17,471 16,757 12,573 16,450 Broadband software and services 286 267 231 208 Amortization of acquired technology 300 300 300 300 ---------------------------------------------------------------------- Total cost of revenues 18,057 17,324 13,104 16,958 ---------------------------------------------------------------------- GROSS PROFIT 7,778 8,110 8,653 11,351 OPERATING EXPENSES: Research and development 3,974 3,846 4,057 3,951 Research and development project cancellation costs - - - - Selling and marketing 5,266 5,199 5,037 5,026 General and administrative 3,556 1,184 1,172 1,235 Amortization of intangible assets 86 86 87 86 Restructuring costs 999 - - - Integration costs - - - - Acquired in-process research and development - - - - Impairment of goodwill and other intangible assets - - - - ---------------------------------------------------------------------- Total operating expenses 13,881 10,315 10,353 10,298 ---------------------------------------------------------------------- OPERATING INCOME (LOSS) (6,103) (2,205) (1,700) 1,053 Other income (loss), net Loss on impaired securities - - - - Other income (expense), net 31 (52) 77 168 ---------------------------------------------------------------------- Other income (loss), net 31 (52) 77 168 ---------------------------------------------------------------------- Provision for income taxes 13 19 (11) 57 NET INCOME (LOSS) $(6,085) $(2,276) $(1,612) $1,164 ---------------------------------------------------------------------- Per share data, net income (loss): Basic net income (loss) per share ($0.25) ($0.09) ($0.07) $0.05 ---------------------------------------------------------------------- Diluted net income (loss) per share ($0.25) ($0.09) ($0.07) $0.04 ---------------------------------------------------------------------- Shares used in the computation of net income (loss): Shares used in the basic per share calculations 24,490 24,033 23,536 22,236 ---------------------------------------------------------------------- Shares used in the diluted per share calculations 24,490 24,033 23,536 26,020 ---------------------------------------------------------------------- Fiscal 2003 ---------------------------------------- Restated Restated Restated Restated Sep. 30, Jun. 30, Mar. 31, Dec. 31, Three months ended, 2003 2003 2003 2002 ---------------------------------------------------------------------- (in thousands; except per share amounts) REVENUES: Broadband equipment $20,622 $17,718 $14,647 $14,406 Broadband software and services 4,294 4,114 4,214 4,905 ---------------------------------------- Total revenues 24,916 21,832 18,861 19,311 ---------------------------------------------------------------------- COST OF REVENUES: Broadband equipment 14,330 12,808 11,239 10,624 Broadband software and services 224 316 345 429 Amortization of acquired technology 288 288 288 288 ---------------------------------------------------------------------- Total cost of revenues 14,842 13,412 11,872 11,341 ---------------------------------------------------------------------- GROSS PROFIT 10,074 8,420 6,989 7,970 OPERATING EXPENSES: Research and development 3,812 3,764 4,011 3,983 Research and development project cancellation costs - - - 606 Selling and marketing 4,845 4,855 4,939 5,471 General and administrative 1,276 961 1,091 1,412 Amortization of intangible assets 87 86 86 86 Restructuring costs (77) 130 - 342 Integration costs - - - - Acquired in-process research and development - - - - Impairment of goodwill and other intangible assets - - - - ---------------------------------------------------------------------- Total operating expenses 9,943 9,796 10,127 11,900 ---------------------------------------------------------------------- OPERATING INCOME (LOSS) 131 (1,376) (3,138) (3,930) Other income (loss), net Loss on impaired securities - - (457) - Other income (expense), net (80) (3) (5) (7) ---------------------------------------------------------------------- Other income (loss), net (80) (3) (462) (7) ---------------------------------------------------------------------- Provision for income taxes - - - - NET INCOME (LOSS) $51 $(1,379) $(3,600) $(3,937) ---------------------------------------------------------------------- Per share data, net income (loss): Basic net income (loss) per share $0.00 ($0.07) ($0.19) ($0.21) ---------------------------------------------------------------------- Diluted net income (loss) per share $0.00 ($0.07) ($0.19) ($0.21) ---------------------------------------------------------------------- Shares used in the computation of net income (loss): Shares used in the basic per share calculations 20,790 19,370 19,163 18,906 ---------------------------------------------------------------------- Shares used in the diluted per share calculations 22,646 19,370 19,163 18,906 ---------------------------------------------------------------------- Fiscal 2002 ---------------------------------------- Restated Restated Restated Restated Sep. 30, Jun. 30, Mar. 31, Dec. 31, Three months ended, 2002 2002 2002 2001 ---------------------------------------------------------------------- (in thousands; except per share amounts) REVENUES: Broadband equipment $12,016 $9,880 $11,070 $11,638 Broadband software and services 5,053 4,898 4,319 4,049 ---------------------------------------- Total revenues 17,069 14,778 15,389 15,687 ---------------------------------------------------------------------- COST OF REVENUES: Broadband equipment 9,656 7,795 7,969 7,047 Broadband software and services 175 154 146 164 Amortization of acquired technology 288 288 288 288 ---------------------------------------------------------------------- Total cost of revenues 10,119 8,237 8,403 7,499 ---------------------------------------------------------------------- GROSS PROFIT 6,950 6,541 6,986 8,188 OPERATING EXPENSES: Research and development 4,337 4,632 4,295 4,150 Research and development project cancellation costs - - - - Selling and marketing 5,729 5,898 5,818 5,955 General and administrative 1,674 1,450 1,267 973 Amortization of intangible assets 86 86 86 86 Restructuring costs - - - 482 Integration costs - - - 309 Acquired in-process research and development - - 1,908 2,150 Impairment of goodwill and other intangible assets 9,146 - - - ---------------------------------------------------------------------- Total operating expenses 20,972 12,066 13,374 14,105 ---------------------------------------------------------------------- OPERATING INCOME (LOSS) (14,022) (5,525) (6,388) (5,917) Other income (loss), net Loss on impaired securities (1,543) - (1,400) - Other income (expense), net 29 54 80 156 ---------------------------------------------------------------------- Other income (loss), net (1,514) 54 (1,320) 156 ---------------------------------------------------------------------- Provision for income taxes - (200) - - NET INCOME (LOSS) $(15,536) $(5,271) $(7,708) $(5,761) ---------------------------------------------------------------------- Per share data, net income (loss): Basic net income (loss) per share ($0.83) ($0.28) ($0.42) ($0.32) ---------------------------------------------------------------------- Diluted net income (loss) per share ($0.83) ($0.28) ($0.42) ($0.32) ---------------------------------------------------------------------- Shares used in the computation of net income (loss): Shares used in the basic per share calculations 18,822 18,648 18,255 18,092 ---------------------------------------------------------------------- Shares used in the diluted per share calculations 18,822 18,648 18,255 18,092 ---------------------------------------------------------------------- Fiscal 2004 ---------------------------------------------------------------------- Previ- Previ- ously ously Restated Filed Restated Filed Three months Sep. 30, Jun. 30, Mar. 31, Mar. 31, Dec. 31, Dec. 31, ended, 2004 2004 2004 2004 2003 2003 ---------------------------------------------------------------------- (in thousands; except per share amounts) REVENUES: Broadband equipment $22,276 $21,891 $17,878 $18,052 $23,657 $23,946 Broadband software and services 3,559 3,543 3,879 3,844 4,652 4,653 ---------------------------------------------------------------------- Total revenues 25,835 25,434 21,757 21,896 28,309 28,599 ---------------------------------------------------------------------- COST OF REVENUES: Broadband equipment 17,471 16,757 12,573 12,533 16,450 16,459 Broadband software and services 286 267 231 231 208 208 Amortization of acquired technology 300 300 300 300 300 - ---------------------------------------------------------------------- Total cost of revenues 18,057 17,324 13,104 13,064 16,958 16,667 ---------------------------------------------------------------------- GROSS PROFIT 7,778 8,110 8,653 8,832 11,351 11,932 OPERATING EXPENSES: Research and development 3,974 3,846 4,057 4,069 3,951 3,961 Research and development project cancellation costs - - - - - - Selling and marketing 5,266 5,199 5,037 5,211 5,026 5,315 General and administrative 3,556 1,184 1,172 1,188 1,235 1,251 Amortization of intangible assets 86 86 87 87 86 386 Restructuring costs 999 - - - - - Integration costs - - - - - - Acquired in- process research and development - - - - - - Impairment of goodwill and other intangible assets - - - - - - ---------------------------------------------------------------------- Total operating expenses 13,881 10,315 10,353 10,555 10,298 10,913 ---------------------------------------------------------------------- OPERATING INCOME (LOSS) (6,103) (2,205) (1,700) (1,723) 1,053 1,019 Other income (loss), net Loss on impaired securities - - - - - - Other income (expense), net 31 (52) 77 77 168 168 ---------------------------------------------------------------------- Other income (loss), net 31 (52) 77 77 168 168 ---------------------------------------------------------------------- Provision for income taxes 13 19 (11) (11) 57 57 NET INCOME (LOSS) $(6,085) $(2,276) $(1,612) $(1,635) $1,164 $1,130 ---------------------------------------------------------------------- Per share data, net income (loss): Basic net income (loss) per share ($0.25) ($0.09) ($0.07) ($0.07) $0.05 $0.05 ---------------------------------------------------------------------- Diluted net income (loss) per share ($0.25) ($0.09) ($0.07) ($0.07) $0.04 $0.04 ---------------------------------------------------------------------- Shares used in the computation of net income (loss): Shares used in the basic per share calculations 24,490 24,033 23,536 23,536 22,236 22,236 ---------------------------------------------------------------------- Shares used in the diluted per share calculations 24,490 24,033 23,536 23,536 26,020 26,091 ---------------------------------------------------------------------- Fiscal 2003 ---------------------------------------------------------------------- Previously Previously Restated Filed Restated Filed Sep. 30, Sep. 30, Jun. 30, Jun. 30, Three months ended, 2003 2003 2003 2003 ---------------------------------------------------------------------- (in thousands; except per share amounts) REVENUES: Broadband equipment $20,622 $20,821 $17,718 $17,962 Broadband software and services 4,294 4,674 4,114 4,009 ---------------------------------------------------------------------- Total revenues 24,916 25,495 21,832 21,971 ---------------------------------------------------------------------- COST OF REVENUES: Broadband equipment 14,330 14,218 12,808 12,471 Broadband software and services 224 224 316 316 Amortization of acquired technology 288 288 288 288 ---------------------------------------------------------------------- Total cost of revenues 14,842 14,730 13,412 13,075 ---------------------------------------------------------------------- GROSS PROFIT 10,074 10,765 8,420 8,896 OPERATING EXPENSES: Research and development 3,812 3,821 3,764 3,791 Research and development project cancellation costs - - - - Selling and marketing 4,845 5,079 4,855 5,099 General and administrative 1,276 1,265 961 977 Amortization of intangible assets 87 375 86 374 Restructuring costs (77) (77) 130 130 Integration costs - - - - Acquired in-process research and development - - - - Impairment of goodwill and other intangible assets - - - - ---------------------------------------------------------------------- Total operating expenses 9,943 10,463 9,796 10,371 ---------------------------------------------------------------------- OPERATING INCOME (LOSS) 131 302 (1,376) (1,475) Other income (loss), net Loss on impaired securities - - - - Other income (expense), net (80) (80) (3) (3) ---------------------------------------------------------------------- Other income (loss), net (80) (80) (3) (3) ---------------------------------------------------------------------- Provision for income taxes - - - - NET INCOME (LOSS) $51 $222 $(1,379) $(1,478) ---------------------------------------------------------------------- Per share data, net income (loss): Basic net income (loss) per share $0.00 $0.01 ($0.07) ($0.08) ---------------------------------------------------------------------- Diluted net income (loss) per share $0.00 $0.01 ($0.07) ($0.08) ---------------------------------------------------------------------- Shares used in the computation of net income (loss): Shares used in the basic per share calculations 20,790 20,790 19,370 19,370 ---------------------------------------------------------------------- Shares used in the diluted per share calculations 22,646 22,646 19,370 19,370 ---------------------------------------------------------------------- Fiscal 2003 ---------------------------------------------------------------------- Previously Previously Restated Filed Restated Filed Mar. 31, Mar. 31, Dec. 31, Dec. 31, Three months ended, 2003 2003 2002 2002 ---------------------------------------------------------------------- (in thousands; except per share amounts) REVENUES: Broadband equipment $14,647 $14,838 $14,406 $14,596 Broadband software and services 4,214 4,400 4,905 5,007 ---------------------------------------------------------------------- Total revenues 18,861 19,238 19,311 19,603 ---------------------------------------------------------------------- COST OF REVENUES: Broadband equipment 11,239 10,632 10,624 10,423 Broadband software and services 345 345 429 429 Amortization of acquired technology 288 288 288 288 ---------------------------------------------------------------------- Total cost of revenues 11,872 11,265 11,341 11,140 ---------------------------------------------------------------------- GROSS PROFIT 6,989 7,973 7,970 8,463 OPERATING EXPENSES: Research and development 4,011 4,026 3,983 3,983 Research and development project cancellation costs - - 606 606 Selling and marketing 4,939 5,130 5,471 5,661 General and administrative 1,091 1,107 1,412 1,428 Amortization of intangible assets 86 374 86 374 Restructuring costs - - 342 342 Integration costs - - - - Acquired in-process research and development - - - - Impairment of goodwill and other intangible assets - - - - ---------------------------------------------------------------------- Total operating expenses 10,127 10,637 11,900 12,394 ---------------------------------------------------------------------- OPERATING INCOME (LOSS) (3,138) (2,664) (3,930) (3,931) Other income (loss), net Loss on impaired securities (457) (457) - - Other income (expense), net (5) (5) (7) (7) ---------------------------------------------------------------------- Other income (loss), net (462) (462) (7) (7) ---------------------------------------------------------------------- Provision for income taxes - - - - NET INCOME (LOSS) $(3,600) $(3,126) $(3,937) $(3,938) ---------------------------------------------------------------------- Per share data, net income (loss): Basic net income (loss) per share ($0.19) ($0.16) ($0.21) ($0.21) ---------------------------------------------------------------------- Diluted net income (loss) per share ($0.19) ($0.16) ($0.21) ($0.21) ---------------------------------------------------------------------- Shares used in the computation of net income (loss): Shares used in the basic per share calculations 19,163 19,163 18,906 18,906 ---------------------------------------------------------------------- Shares used in the diluted per share calculations 19,163 19,163 18,906 18,906 ---------------------------------------------------------------------- Fiscal 2002 ---------------------------------------------------------------------- Previously Previously Restated Filed Restated Filed Sep. 30, Sep. 30, Jun. 30, Jun. 30, Three months ended, 2002 2002 2002 2002 ---------------------------------------------------------------------- (in thousands; except per share amounts) REVENUES: Broadband equipment $12,016 $12,405 $9,880 $10,096 Broadband software and services 5,053 4,501 4,898 5,468 ---------------------------------------------------------------------- Total revenues 17,069 16,906 14,778 15,564 ---------------------------------------------------------------------- COST OF REVENUES: Broadband equipment 9,656 8,984 7,795 7,452 Broadband software and services 175 175 154 154 Amortization of acquired technology 288 288 288 288 ---------------------------------------------------------------------- Total cost of revenues 10,119 9,447 8,237 7,894 ---------------------------------------------------------------------- GROSS PROFIT 6,950 7,459 6,541 7,670 OPERATING EXPENSES: Research and development 4,337 4,481 4,632 4,546 Research and development project cancellation costs - - - - Selling and marketing 5,729 6,028 5,898 6,204 General and administrative 1,674 1,690 1,450 1,466 Amortization of intangible assets 86 374 86 374 Restructuring costs - - - - Integration costs - - - - Acquired in-process research and development - - - - Impairment of goodwill and other intangible assets 9,146 9,146 - - ---------------------------------------------------------------------- Total operating expenses 20,972 21,719 12,066 12,590 ---------------------------------------------------------------------- OPERATING INCOME (LOSS) (14,022) (14,260) (5,525) (4,920) Other income (loss), net Loss on impaired securities (1,543) (1,543) - - Other income (expense), net 29 29 54 54 ---------------------------------------------------------------------- Other income (loss), net (1,514) (1,514) 54 54 ---------------------------------------------------------------------- Provision for income taxes - - (200) - NET INCOME (LOSS) $(15,536) $(15,774) $(5,271) $(4,866) ---------------------------------------------------------------------- Per share data, net income (loss): Basic net income (loss) per share $(0.83) $(0.84) $(0.28) $(0.26) ---------------------------------------------------------------------- Diluted net income (loss) per share $(0.83) $(0.84) $(0.28) $(0.26) ---------------------------------------------------------------------- Shares used in the computation of net income (loss): Shares used in the basic per share calculations 18,822 18,822 18,648 18,648 ---------------------------------------------------------------------- Shares used in the diluted per share calculations 18,822 18,822 18,648 18,648 ---------------------------------------------------------------------- Fiscal 2002 ---------------------------------------------------------------------- Previously Previously Restated Filed Restated Filed Mar. 31, Mar. 31, Dec. 31, Dec. 31, Three months ended, 2002 2002 2001 2001 ---------------------------------------------------------------------- (in thousands; except per share amounts) REVENUES: Broadband equipment $11,070 $11,239 $11,638 $11,811 Broadband software and services 4,319 4,470 4,049 4,074 ---------------------------------------------------------------------- Total revenues 15,389 15,709 15,687 15,885 ---------------------------------------------------------------------- COST OF REVENUES: Broadband equipment 7,969 7,640 7,047 7,095 Broadband software and services 146 146 164 164 Amortization of acquired technology 288 288 288 288 ---------------------------------------------------------------------- Total cost of revenues 8,403 8,074 7,499 7,547 ---------------------------------------------------------------------- GROSS PROFIT 6,986 7,635 8,188 8,338 OPERATING EXPENSES: Research and development 4,295 4,348 4,150 4,148 Research and development project cancellation costs - - - - Selling and marketing 5,818 5,975 5,955 6,128 General and administrative 1,267 1,267 973 973 Amortization of intangible assets 86 374 86 374 Restructuring costs - - 482 482 Integration costs - - 309 309 Acquired in-process research and development 1,908 1,908 2,150 2,150 Impairment of goodwill and other intangible assets - - - - ---------------------------------------------------------------------- Total operating expenses 13,374 13,872 14,105 14,564 ---------------------------------------------------------------------- OPERATING INCOME (LOSS) (6,388) (6,237) (5,917) (6,226) Other income (loss), net Loss on impaired securities (1,400) (1,400) - - Other income (expense), net 80 80 156 156 ---------------------------------------------------------------------- Other income (loss), net (1,320) (1,320) 156 156 ---------------------------------------------------------------------- Provision for income taxes - - - - NET INCOME (LOSS) $(7,708) $(7,557) $(5,761) $(6,070) ---------------------------------------------------------------------- Per share data, net income (loss): Basic net income (loss) per share $(0.42) $(0.41) $(0.32) $(0.34) ---------------------------------------------------------------------- Diluted net income (loss) per share $(0.42) $(0.41) $(0.32) $(0.34) ---------------------------------------------------------------------- Shares used in the computation of net income (loss): Shares used in the basic per share calculations 18,255 18,255 18,092 18,092 ---------------------------------------------------------------------- Shares used in the diluted per share calculations 18,255 18,255 18,092 18,092 ---------------------------------------------------------------------- Effects on Net Loss Resulting from the Restatement Entries -------------------------------------------------- Note that numbers in parentheses represent a decrease in revenue, expenses and net loss. Numbers with no parentheses represent an increase in revenue, expenses and net loss. Fiscal Year Three Months Ended Ended -------------------------------------- ----------- Dec. 31, Mar. 31, Jun. 30, Sep. 30, Sep. 30, 2003 2004 2004 2004 2004 -------------------------------------------------- (in thousands) REVENUES: Broadband equipment Marketing funds reclassification $(289) $(174) $- $- $(463) Broadband software and services Net changes in deferred revenue recognized (1) 35 - - 34 ---------------------------------------------------------------------- Subtotal (290) (139) - - (429) ---------------------------------------------------------------------- COST OF REVENUES: Broadband equipment Amortization expense reclassification 288 - - - 288 Inventory Valuation Adjustments (9) 25 - - 16 Correction of expenses - 15 - - 15 Broadband software and services Amortization expense reclassification 12 - - - 12 ---------------------------------------------------------------------- Subtotal 291 40 - - 331 ---------------------------------------------------------------------- Research and development Correction of lease accrual (10) (12) - - (22) Selling and marketing - - - - - General and administrative Correction of expenses (16) (16) - - (32) Marketing funds reclassification (289) (174) - - (463) Amortization of intangible assets Amortization expense reclassification (300) - - - (300) Restructuring costs - - - - - Integration costs - - - - - Acquired in-process research and development - - - - - Impairment of goodwill and other intangible assets - - - - - ---------------------------------------------------------------------- Subtotal (615) (202) - - (817) ---------------------------------------------------------------------- Total Expense (324) (162) - - (486) Other income (loss), net Loss on impaired securities - - - - - Other income (expense), net - - - - - ---------------------------------------------------------------------- Other income (loss), net - - - - - ---------------------------------------------------------------------- Provision for income taxes - Loss from continuing operations before cumulative effect from adoption of Staff Accounting Bulletin 101 (324) (162) - - (486) Cumulative effect from adoption of Staff Accounting Bulletin 101 - - - - Total effect on net loss $(34) $(23) $- $- $(57) ---------------------------------------------------------------------- Effects on Net Loss Resulting from the Restatement Entries --------------------------------------------------- Note that numbers in parentheses represent a decrease in revenue, expenses and net loss. Numbers with no parentheses represent an increase in revenue, expenses and net loss. Fiscal Year Three Months Ended Ended --------------------------------------- ----------- Dec. 31, Mar. 31, Jun. 30, Sep. 30, Sep. 30, 2002 2003 2003 2003 2003 --------------------------------------------------- (in thousands) REVENUES: Broadband equipment Marketing funds reclassification $(190) $(191) $(244) $(199) $(824) Broadband software and services Net changes in deferred revenue recognized (102) (186) 105 (380) (563) ---------------------------------------------------------------------- Subtotal (292) (377) (139) (579) (1,387) ---------------------------------------------------------------------- COST OF REVENUES: Broadband equipment Amortization expense reclassification 288 288 288 288 1,152 Inventory Valuation Adjustments (87) 303 49 54 319 Correction of expenses - 16 - (230) (214) Broadband software and services Amortization expense reclassification - - - - - ---------------------------------------------------------------------- Subtotal 201 607 337 112 1,257 ---------------------------------------------------------------------- Research and development Correction of lease accrual - (15) (27) (9) (51) Selling and marketing Correction of expenses - - - (35) (35) General and administrative Correction of expenses (16) (16) (16) 11 (37) Marketing funds reclassification (190) (191) (244) (199) (824) Amortization of intangible assets Amortization expense reclassification (288) (288) (288) (288) (1,152) Restructuring costs - - - - - Integration costs - - - - - Acquired in-process research and development - - - - - Impairment of goodwill and other intangible assets - - - - - ---------------------------------------------------------------------- Subtotal (494) (510) (575) (520) (2,099) ---------------------------------------------------------------------- Total Expense (293) 97 (238) (408) (842) Other income (loss), net Loss on impaired securities - - - - - Other income (expense), net - - - - - ---------------------------------------------------------------------- Other income (loss), net - - - - - ---------------------------------------------------------------------- Provision for income taxes - Loss from continuing operations before cumulative effect from adoption of Staff Accounting Bulletin 101 (293) 97 (238) (408) (842) Cumulative effect from adoption of Staff Accounting Bulletin 101 - - - - Total effect on net loss $(1) $474 $(99) $171 $545 ---------------------------------------------------------------------- Effects on Net Loss Resulting from the Restatement Entries --------------------------------------------------- Note that numbers in parentheses represent a decrease in revenue, expenses and net loss. Numbers with no parentheses represent an increase in revenue, expenses and net loss. Fiscal Year Three Months Ended Ended -------------------------------------- ------------ Dec. 31, Mar. 31, Jun. 30, Sep. 30, Sep. 30, 2001 2002 2002 2002 2002 --------------------------------------------------- (in thousands) REVENUES: Broadband equipment Marketing funds reclassification $(173) $(169) $(216) $(389) $(947) Broadband software and services Net changes in deferred revenue recognized (25) (151) (570) 552 (194) ---------------------------------------------------------------------- Subtotal (198) (320) (786) 163 (1,141) ---------------------------------------------------------------------- COST OF REVENUES: Broadband equipment Amortization expense reclassification 288 288 288 288 1,152 Inventory Valuation Adjustments (336) 44 52 - (240) Correction of expenses - (3) 3 384 384 Broadband software and services Amortization expense reclassification - - - - - ---------------------------------------------------------------------- Subtotal (48) 329 343 672 1,296 ---------------------------------------------------------------------- Research and development Correction of lease accrual 2 (53) 86 (144) (109) Selling and marketing Correction of expenses - - (90) 90 - General and administrative Correction of expenses - - (16) (16) (32) Marketing funds reclassification (173) (157) (216) (389) (935) Amortization of intangible assets Amortization expense reclassification (288) (288) (288) (288) (1,152) Restructuring costs - - - - - Integration costs - - - - - Acquired in-process research and development - - - - - Impairment of goodwill and other intangible assets - - - - - ---------------------------------------------------------------------- Subtotal (459) (498) (524) (747) (2,228) ---------------------------------------------------------------------- Total Expense (507) (169) (181) (75) (932) Other income (loss), net Loss on impaired securities - - - - - Other income (expense), net - - - - - ---------------------------------------------------------------------- Other income (loss), net - - - - - ---------------------------------------------------------------------- Provision for income taxes - - (200) - (200) Loss from continuing operations before cumulative effect from adoption of Staff Accounting Bulletin 101 (507) (169) (381) (75) (1,132) Cumulative effect from adoption of Staff Accounting Bulletin 101 - - - - - Total effect on net loss $(309) $151 $405 $(238) $9 ---------------------------------------------------------------------- *T |
