Attached files
file | filename |
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EX-31.2 - PEERLESS SYSTEMS CORP | v205587_ex31-2.htm |
EX-32.2 - PEERLESS SYSTEMS CORP | v205587_ex32-2.htm |
EX-10.1 - PEERLESS SYSTEMS CORP | v205587_ex10-1.htm |
EX-32.1 - PEERLESS SYSTEMS CORP | v205587_ex32-1.htm |
EX-31.1 - PEERLESS SYSTEMS CORP | v205587_ex31-1.htm |
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark
One)
|
þ
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the quarterly period
ended October 31,
2010
or
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
transition period from to
Commission File Number:
000-21287
PEERLESS SYSTEMS
CORPORATION
(Exact name of Registrant as
Specified in its Charter)
Delaware
|
95-3732595
|
|
(State
or Other Jurisdiction
|
(I.R.S.
Employer
|
|
of
Incorporation or Organization)
|
Identification
No.)
|
|
2361
Rosecrans Avenue Suite 440, El Segundo, CA
|
90245
|
|
(Address
of Principal Executive Offices)
|
(Zip
Code)
|
(310) 536-0908
(Registrant’s Telephone
Number, Including Area Code)
Indicate by check mark
whether the registrant (1) has filed all reports required by
Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. þ
Yes ¨ No
Indicate by check mark
whether the registrant has submitted electronically and posted on its corporate
Web site, if any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files). ¨ Yes ¨ No
Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of “large
accelerated filer,” “accelerated filer” and “smaller reporting company” in
Rule 12b-2 of the Exchange Act. (Check
one):
Large
accelerated
filer
¨
|
Accelerated
filer
¨
|
Non-accelerated
filer¨
(Do
not check if a smaller reporting
company)
|
Smaller
reporting companyþ
|
Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). ¨ Yes þ
No
The number of shares of
common stock outstanding as of December 7, 2010 was 3,357,519.
PEERLESS SYSTEMS
CORPORATION
INDEX
Page
No
|
||
PART
I — FINANCIAL INFORMATION
|
||
Forward-looking
Statements
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3
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Item
1. Financial Statements
|
||
Unaudited
Condensed Consolidated Balance Sheets at October 31, 2010 and January 31,
2010
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4
|
|
Unaudited
Condensed Consolidated Statements of Operations for the Three and Nine
Month Periods Ended October 31, 2010 and 2009
|
5
|
|
Unaudited
Condensed Consolidated Statements of Cash Flows for the Nine Month Periods
Ended October 31, 2010 and 2009
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6
|
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Notes
to Unaudited Condensed Consolidated Financial Statements
|
7
|
|
Item
2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
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12
|
|
Item
3. Quantitative and Qualitative Disclosures About Market
Risk
|
17
|
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Item
4. Controls and Procedures
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17
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PART
II — OTHER INFORMATION
|
||
Item
1. Legal Proceedings
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18
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Item
1A. Risk Factors
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18
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Item
6. Exhibits
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19
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Signatures
|
2
FORWARD—LOOKING
STATEMENTS
Statements made by us in this
report and in other reports and statements released by us that are not
historical facts
may constitute “forward-looking statements” within the meaning of
Section 27A of the Securities Act of 1933, as amended (the “Securities
Act”) and Section 21 of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”). These forward-looking
statements are necessarily estimates reflecting the judgment of our senior
management based on our current estimates, expectations, forecasts and
projections and include comments that express our current opinions about trends
and factors that may impact future operating results. Disclosures that use words
such as “believe,” “anticipate,” “estimate,” “intend,” “could,” “plan,”
“expect,” “project” or the negative of these, as well as similar expressions,
are intended to identify forward-looking statements. These statements are not
guarantees of future performance, rely on a number of assumptions concerning
future events, many of which are outside of our control, and involve known and
unknown risks and uncertainties that could cause our actual results, performance
or achievement, or industry results, to differ materially from any future
results, performance or achievements, expressed or implied by such
forward-looking statements. We discuss such risks,
uncertainties and other factors which could cause results to differ materially
from management’s expectations throughout this report. Additional information
regarding factors that could cause results to differ materially from
management's expectations is found in the section entitled "Risk Factors" in our
2010 Annual Report on Form 10-K and in Item 1A of Part II
hereof. Any such forward-looking
statements, whether made in this report or elsewhere, should be considered in
the context of the various disclosures made by us about our businesses
including, without limitation, the risk factors discussed
below.
We intend that the
forward-looking statements included herein be subject to the above-mentioned
statutory safe harbor. Investors are cautioned not
to rely on forward-looking statements. Except as required under the
federal securities laws and the rules and regulations of the U.S. Securities and
Exchange Commission (the “SEC”), we do not have any intention or obligation to
update publicly any forward-looking statements, whether as a result of new
information, future events, changes in assumptions, or
otherwise.
3
Item 1 — Financial
Statements.
UNAUDITED CONDENSED
CONSOLIDATED BALANCE SHEETS
(In
thousands)
October
31,
|
January
31,
|
|||||||
2010
|
2010
|
|||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 54,990 | $ | 36,684 | ||||
Marketable
securities
|
- | 17,924 | ||||||
Trade
accounts receivable, net
|
2,650 | 1,135 | ||||||
Income
tax receivable
|
- | 234 | ||||||
Deferred
tax asset
|
779 | - | ||||||
Prepaid
expenses and other current assets
|
105 | 380 | ||||||
Total
current assets
|
58,524 | 56,357 | ||||||
Property
and equipment, net
|
21 | 24 | ||||||
Other
assets
|
6 | 7 | ||||||
Total
assets
|
$ | 58,551 | $ | 56,388 | ||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ | - | $ | 4 | ||||
Accrued
wages and compensated absenses
|
66 | 143 | ||||||
Accrued
product licensing costs
|
999 | 269 | ||||||
Other
current liabilities
|
360 | 286 | ||||||
Income
taxes payable
|
1,215 | - | ||||||
Deferred
tax liability
|
- | 2,114 | ||||||
Deferred
revenue
|
- | 372 | ||||||
Total
current liabilities
|
2,640 | 3,188 | ||||||
Other
liabilities
|
||||||||
Tax
liabilities
|
1,572 | 645 | ||||||
Total
liabilities
|
4,212 | 3,833 | ||||||
Stockholders’
equity:
|
||||||||
Common
stock
|
19 | 19 | ||||||
Additional
paid-in capital
|
56,518 | 55,874 | ||||||
Retained
earnings (deficit)
|
3,309 | (635 | ) | |||||
Accumulated
other comprehensive income
|
43 | 2,847 | ||||||
Treasury
stock, 2,937 shares at October 31, 2010 and January 31,
2010
|
(5,550 | ) | (5,550 | ) | ||||
Total
stockholders’ equity
|
54,339 | 52,555 | ||||||
Total
liabilities and stockholders’ equity
|
$ | 58,551 | $ | 56,388 |
The accompanying notes are an
integral part of these condensed consolidated financial
statements.
4
PEERLESS SYSTEMS
CORPORATION
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except share
and per share amounts)
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
October 31,
|
October 31,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Revenues:
|
||||||||||||||||
Product
licensing
|
$ | 2,827 | $ | 682 | $ | 4,381 | $ | 3,359 | ||||||||
Engineering
services and maintenance
|
- | 273 | 122 | 613 | ||||||||||||
Total
revenues
|
2,827 | 955 | 4,503 | 3,972 | ||||||||||||
Cost
of revenues:
|
||||||||||||||||
Product
licensing
|
826 | 248 | 1,134 | (1,437 | ) | |||||||||||
Engineering
services and maintenance
|
59 | 54 | 202 | 199 | ||||||||||||
Total
cost of revenues
|
885 | 302 | 1,336 | (1,238 | ) | |||||||||||
Gross
margin
|
1,942 | 653 | 3,167 | 5,210 | ||||||||||||
Sales
and marketing
|
49 | 143 | 377 | 512 | ||||||||||||
General
and administrative
|
749 | 851 | 2,252 | 2,286 | ||||||||||||
Gain
on sale of operating assets
|
- | - | - | (3,759 | ) | |||||||||||
798 | 994 | 2,629 | (961 | ) | ||||||||||||
Income
(loss) from operations
|
1,144 | (341 | ) | 538 | 6,171 | |||||||||||
Other
income, net
|
74 | 4,813 | 6,023 | 5,029 | ||||||||||||
Income before
income taxes
|
1,218 | 4,472 | 6,561 | 11,200 | ||||||||||||
Provision
for income taxes
|
492 | 929 | 2,617 | 4,145 | ||||||||||||
Net
income
|
$ | 726 | $ | 3,543 | $ | 3,944 | $ | 7,055 | ||||||||
Basic
earnings per share
|
$ | 0.04 | $ | 0.21 | $ | 0.25 | $ | 0.42 | ||||||||
Diluted
earnings per share
|
$ | 0.04 | $ | 0.21 | $ | 0.24 | $ | 0.42 | ||||||||
Weighted
average common shares - outstanding — basic
|
16,174 | 16,505 | 16,047 | 16,888 | ||||||||||||
Weighted
average common shares - outstanding — diluted
|
16,459 | 16,699 | 16,328 | 16,835 |
The accompanying notes are an
integral part of these condensed consolidated financial
statements.
5
PEERLESS SYSTEMS
CORPORATION
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In
thousands)
Nine Months Ended
|
||||||||
October 31,
|
||||||||
2010
|
2009
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
income
|
$ | 3,944 | $ | 7,055 | ||||
Adjustments
to reconcile net income to net cash provided by (used in) operating
activities
|
||||||||
Depreciation
and amortization
|
27 | 56 | ||||||
Share-based
compensation
|
174 | 347 | ||||||
Income
tax receivable
|
234 | 2,991 | ||||||
Tax
liabilities
|
927 | (867 | ) | |||||
Deferred
tax asset and liability
|
(982 | ) | 1,868 | |||||
Realized
gain on investment
|
(2,804 | ) | - | |||||
Gain
on sale of operating assets
|
- | (3,759 | ) | |||||
Changes
in operating assets and liabilities:
|
||||||||
Trade
accounts receivables
|
(1,515 | ) | (922 | ) | ||||
Prepaid
expenses and other assets
|
252 | (185 | ) | |||||
Accounts
payable
|
(4 | ) | (70 | ) | ||||
Accrued
product licensing costs
|
730 | (3,861 | ) | |||||
Deferred
revenue
|
(372 | ) | (247 | ) | ||||
Income
taxes payable
|
1,215 | - | ||||||
Other
liabilities
|
(3 | ) | (195 | ) | ||||
Net
cash provided by operating activities
|
1,823 | 2,211 | ||||||
Cash
flows from investing activities:
|
||||||||
Purchases
of marketable securities
|
(3,224 | ) | (12,506 | ) | ||||
Proceeds
from sale of securities
|
19,237 | 3,759 | ||||||
Purchases
of software licenses
|
- | (13 | ) | |||||
Net
cash provided by (used in) investing activities
|
16,013 | (8,760 | ) | |||||
Cash
flows from financing activities:
|
||||||||
Purchase
of treasury stock
|
- | (1,279 | ) | |||||
Purchase
of employee stock option
|
- | (30 | ) | |||||
Proceeds
from exercise of common stock options
|
470 | 37 | ||||||
Net
cash provided (used) by financing activities
|
470 | (1,272 | ) | |||||
Net
increase (decrease) in cash and cash equivalents
|
18,306 | (7,821 | ) | |||||
Cash
and cash equivalents, beginning of period
|
36,684 | 44,689 | ||||||
Cash
and cash equivalents, end of period
|
$ | 54,990 | $ | 36,868 |
The accompanying notes are an
integral part of these condensed consolidated financial statements.
6
PEERLESS SYSTEMS
CORPORATION
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of
Presentation
The accompanying unaudited
condensed consolidated financial statements of Peerless Systems Corporation (the
“Company” or “Peerless”) have been prepared pursuant to the rules of the SEC for
Quarterly Reports on Form 10-Q and do not include all of the information and
note disclosures required by generally accepted accounting
principles. The financial statements and
notes herein are unaudited, but in the opinion of management, include all the
adjustments (consisting only of normal, recurring adjustments) necessary to
present fairly the financial position, results of operations and cash flows of
the Company. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ
from those estimates.
These statements should be
read in conjunction with the audited financial statements and notes thereto
included in the Company’s Annual Report on Form 10-K for the fiscal year ended
January 31, 2010, filed with the SEC on May 1, 2010. The results of operations for
the interim periods shown herein are not necessarily indicative of the results
to be expected for any future interim period or for the entire
year.
2. Recent Accounting
Pronouncements
In October 2009, the
Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update
(“ASU”) No. 2009, “Certain
Revenue Arrangements That Include Software Elements—a consensus of the FASB
Emerging Issues Task Force” (ASU
No. 2009-14). It amends Accounting
Standards Codification (“ASC”) 985-605 and ASC 985-605-15-3 (Issue 03-5) to
exclude from their scope all tangible products containing both software and
non-software components that function together to deliver the product’s
essential functionality. The ASU includes factors that
entities should consider when determining whether the software and non-software
components function together to deliver the product’s essential functionality
and are thus outside the revised scope of ASC 985-605. ASU 2009-14 will be effective
for the first annual reporting period beginning on or after June 15, 2010,
with early adoption permitted provided that the revised guidance is
retroactively applied to the beginning of the year of adoption. We do not expect the adoption
of this accounting standard to have a material effect on our results of
operations and financial condition.
3. Cash, and Cash
Equivalents
On February 1, 2008, the
Company adopted the provisions of FASB ASC Topic 820, Fair
Value Measurements and Disclosures (formerly known as FAS 157
Fair Value Measurements), which clarifies that fair value is an exit price,
representing the amount that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market
participants. As such, fair value is a
market-based measurement that should be determined based on assumptions that
market participants would use in pricing an asset or liability. As a basis for considering
such assumptions, Topic 820 establishes a three-tier value hierarchy, which
prioritizes the inputs used in measuring fair value as follows: (Level I)
observable inputs such as quoted prices in active markets; (Level II) inputs
other than the quoted prices in active markets that are observable either
directly or indirectly; and (Level III) unobservable inputs in which there is
little or no market data, which requires the Company to develop its own
assumptions. This hierarchy requires the
Company to use observable market data, when available, and to minimize the use
of unobservable inputs when determining fair value. On a recurring basis, the
Company measures its investments, cash equivalents or marketable securities at
fair value. Cash, cash equivalents and
marketable securities are classified within Level I of the fair value hierarchy
because they are valued using quoted market prices in an active
market.
As of October 31, 2010, cash and cash
equivalents included the following (in thousands):
Cost
|
Unrealized
Gains
|
Unrealized Losses
Less Than
12 Months
|
Unrealized Losses
12 Months or
Longer
|
Estimated Fair
Value
|
||||||||||||||||
Cash
and cash equivalents
|
$ | 54,990 | $ | - | $ | - | $ | - | $ | 54,990 | ||||||||||
Total
|
$ | 54,990 | $ | - | $ | - | $ | - | $ | 54,990 |
Cash equivalents are
comprised of money market funds traded in an active market with no
restrictions.
7
PEERLESS SYSTEMS
CORPORATION
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
4. Comprehensive
Income
Comprehensive income is
defined as the change in equity of a business enterprise during a period from
certain defined
transactions and
other events. The Company’s comprehensive
income consists of its reported net income and the net unrealized gains or
losses on marketable securities and foreign currency translation
adjustments. Comprehensive income for each
of the periods presented is comprised as follows:
Three Months Ended
October 31,
|
Nine Months Ended
October 31,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Net
income
|
$ | 726 | $ | 3,543 | $ | 3,944 | $ | 7,055 | ||||||||
Changes
in unrealized gains/losses in available for sale securities, net of
taxes
|
- | (2,231 | ) | - | (162 | ) | ||||||||||
Foreign
currency translation adjustment, net of taxes
|
- | 13 | - | 44 | ||||||||||||
Total
comprehensive income, net of taxes
|
$ | 726 | $ | 1,325 | $ | 3,944 | $ | 6,937 |
5. Earnings Per
Share
Earnings per share (EPS) for
the three and nine months ended October 31, 2010 and 2009
are calculated as follows (in
thousands, except for per share amounts):
2010
|
2009
|
|||||||||||||||||||||||
Net
Income
(Loss)
|
Shares
|
Per
Share
Amount
|
Net Income
|
Shares
|
Per
Share
Amount
|
|||||||||||||||||||
Basic
EPS for three months ended October 31,
|
||||||||||||||||||||||||
Earnings
available to common stockholders
|
$ | 726 | 16,174 | $ | 0.04 | $ | 3,543 | 16,505 | $ | 0.21 | ||||||||||||||
Effect
of Dilutive Securities
|
||||||||||||||||||||||||
Options
|
- | 285 | - | - | 194 | - | ||||||||||||||||||
Diluted
EPS
|
||||||||||||||||||||||||
Earnings
available to common stockholders with assumed conversions
|
$ | 726 | 16,459 | $ | 0.04 | $ | 3,543 | 16,699 | $ | 0.21 | ||||||||||||||
2010
|
2009
|
|||||||||||||||||||||||
Net
Income
|
Shares
|
Per
Share
Amount
|
Net
Income
|
Shares
|
Per
Share
Amount
|
|||||||||||||||||||
Basic
EPS for nine months ended October 31,
|
||||||||||||||||||||||||
Earnings
available to common stockholders
|
$ | 3,944 | 16,047 | $ | 0.25 | $ | 7,055 | 16,888 | $ | 0.42 | ||||||||||||||
Effect
of Dilutive Securities
|
||||||||||||||||||||||||
Options
|
- | 281 | - | - | 147 | - | ||||||||||||||||||
Diluted
EPS
|
||||||||||||||||||||||||
Earnings
available to common stockholders with assumed conversions
|
$ | 3,944 | 16,328 | $ | 0.24 | $ | 7,055 | 16,835 | $ | 0.42 |
Potentially dilutive options
in the aggregate of approximately 163,000 and 320,000 for the three months
ended October 31, 2010 and 2009,
respectively, and 159,000 and 528,000 for the nine months ended October 31, 2010 and 2009,
respectively, have been excluded from the calculation of the diluted income per
share, because their effect would have been
anti-dilutive.
8
PEERLESS SYSTEMS
CORPORATION
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
6. Stock-Based Compensation
Plans
The Company has certain plans
which provide for the grant of incentive stock options to employees and non-
statutory stock options, restricted stock purchase awards and stock bonuses to
employees, directors and consultants. The terms of stock options
granted under these plans generally may not exceed 10 years. Options granted under the
incentive plans vest at the rate specified in each optionee’s agreement,
generally over three or four years. An aggregate of
6.2 million shares of common stock have been authorized for issuance under
the various option plans.
Compensation expense for
share-based awards granted on or after February 1, 2006 is recognized using
a straight-line, or single-option method. The Company recognizes these
compensation costs over the service period of the award, which is generally the
option vesting term of three or four years. In determining the fair value
of options granted the Company primarily used the Black-Scholes model and
assumed no dividends per year. During fiscal year 2011, the
Company used a weighted average expected life of 3.25 years, expected
volatility of 56%, and weighted average risk
free interest rate of 1.99%.
For the three months ended
October 31, 2010, the Company
recorded a total of $121,000 in share based compensation related to stock
options and restricted stock. Share-based compensation
expense was allocated as follows for the three months ending October 31, 2010: (1) $4,500 in
sales and marketing expense; and (2) $116,500 in general and
administrative expense.
For the nine months ended October 31, 2010, the Company
recorded a total of $174,000 in share based
compensation related to stock options and restricted stock. Share-based compensation
expense was allocated as follows for the nine months ending October 31, 2010: (1)
$13,500 in sales and marketing expense; and (2) $160,500 in general and
administrative expense.
The Company granted
its
directors a
total of 110,000 options to purchase common
stock, issued
50,000 shares of
restricted
stock
upon the
reelection of the five directors and issued 200,000 shares of
restricted stock to the Chief Executive Officer in the nine months ended October 31,
2010.
The following represents
option activity under the 1996 Equity Incentive Plan and 2005 Incentive Award
Plan, as amended and restated, for the nine months ended October 31,
2010:
Shares
|
Weighted Average
Exercise Price
|
Weighted Average Remaining
Contractual Term (Years)
|
Aggregate
Intrinsic Value
|
|||||||||
(In thousands, except per share amounts)
|
||||||||||||
Outstanding
at January 31, 2010
|
1,038 | $ | 1.93 | |||||||||
Granted
|
- | - | ||||||||||
Exercised
|
- | - | ||||||||||
Canceled
or expired
|
(10 | ) | 10.95 | |||||||||
Outstanding
at April 30, 2010
|
1,028 | $ | 1.83 | |||||||||
Granted
|
110 | 2.77 | ||||||||||
Exercised
|
(1 | ) | 1.33 | |||||||||
Canceled
or expired
|
- | - | ||||||||||
Outstanding
at July 31, 2010
|
1,137 | $ | 1.93 | |||||||||
Granted
|
- | - | ||||||||||
Exercised
|
(376 | ) | 1.73 | |||||||||
Canceled
or expired
|
- | - | ||||||||||
Outstanding
at October 31, 2010
|
761 | $ | 1.99 | |||||||||
Stock
options exercisable at quarter-end
|
475 | $ | 1.80 |
3.96
|
$
|
721
|
The weighted-average grant
date fair value of the options granted during the nine months ended October 31, 2010 was $1.17. As of October 31, 2010, there was
$269,000 of total unrecognized
compensation cost related to unvested share-based compensation arrangements
granted under the 1996 and 2005 plans, and certain employee options issued
outside these plans. That cost is expected to be
recognized over a weighted-average period of 2.5 years.
The total fair value of stock
awards vested during the nine months ended October 31, 2010 was $43,000. A summary of the Company’s
non-vested stock awards as of October 31, 2010 is as
follows:
9
PEERLESS SYSTEMS
CORPORATION
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Number of
Shares
|
Weighted
Average
Grant
Date Fair
Value
|
|||||||
Non-vested
stock awards as of January 31, 2010
|
44,481 | 1.95 | ||||||
Granted
|
250,000 | 3.85 | ||||||
Vested
|
(22,240 | ) | 1.95 | |||||
Forfeited
|
- | - | ||||||
Non-vested
stock awards as of October 31, 2010
|
272,241 | 3.70 |
The
Company used a Monte Carlo simulation model valuation technique to determine the
fair value of the 200,000 restricted shares(CEO grant) that vest based upon
achievement of market price targets or a “market condition” issued during the
fiscal quarter ended October 31, 2010. The Monte Carlo simulation
model utilizes multiple input variables that determine the probability of
satisfying the market condition stipulated in the award and calculates the fair
value of each share of the restricted stock. The Company used the
following assumptions in determining the fair value of the awards granted on
August 26, 2010:
Daily expected
stock price
volatility
|
Daily expected
mean return
on equity
|
Daily
Expected
dividend yield
|
Avg. daily risk free
interest rate
|
|||||||||||
2.683 | % | 0.046 | % | 0.000 | % | 0.003 | % |
The daily
expected stock price volatility is based on three-year historical volatility of
the Company’s common stock. The daily expected dividend yield is based on annual
expected dividend payments and the closing price of the Company’s common stock
on the Nasdaq Capital Market on the date of the grant. The average daily
risk-free interest rate is based on the three-year treasury yield as of the
grant date. Each of the four tranches of the restricted stock grant is
calculated to have its own fair value and requisite service
period. The fair value of each tranche is amortized over the lesser
of the requisite or derived service period which is up to three
years. These shares had a grant date fair value of
$423,000. As of October 31, 2010, no shares were vested under the CEO
grant. Stock compensation expense of approximately $74,000 was
recorded during the quarter.
7. Concentration of
Revenues
During the third quarter of fiscal year 2011,
two customers, Konica Minolta and Novell Inc. (“Novell”),
totaled approximately 88% of the revenues of the
Company. During the third quarter of fiscal year 2010,
three customers
Seiko Epson Corporation, Oki Data and Novell, totaled
approximately 70% of the revenues of the
Company.
During the nine months ended October 31, 2010, two customers, Konica Minolta and Novell, totaled
approximately 76% of the revenues of the
Company. During the nine months ended October 31, 2009, three customers, Konica Minolta, Novell and TallyGenicom, totaled approximately
73% of the revenues of the
Company.
8. Sale of operating assets
to Kyocera-Mita Corporation (“KMC”)
In the first quarter of
fiscal 2010, the Company entered into an agreement with KMC providing for the
early release of certain escrow funds. The Company received approximately
$3.8 million which was recognized as a gain and $0.2 million was paid to KMC as
a discount for the early release of the $4.0 million held in
escrow.
9. Product License Revenues
and Costs
In the first quarter of
fiscal 2010, the Company amended a third party technology license agreement
which resulted in a $2.6 million change in estimate and resulting reduction in
certain licensing costs. The Company recorded the gain as a reduction
in the cost of revenues.
10.
|
Employment
Agreement with Timothy E. Brog
|
The
Company entered into an Employment Agreement (the “Employment Agreement”), dated
August 26, 2010, with Timothy E. Brog pursuant to which Mr. Brog was appointed
the Chief Executive Officer of the Company.
10
PEERLESS SYSTEMS
CORPORATION
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The
Employment Agreement provides that Mr. Brog will receive a base salary of
$340,000 and will be eligible for a cash bonus and stock options
semi-annually. The Employment Agreement will renew on each of August
26, 2011 and August 26, 2012, unless either party provides 120 days’ prior
notice to the other party. Thereafter, it may be terminated by either
party with 90 days’ prior notice to the other party.
Mr. Brog
received a grant of 200,000 shares of restricted common stock. The
shares of restricted stock received by Mr. Brog pursuant
to the Employment Agreement, dated August 26, 2010, vest if the
average closing price of the Company’s common stock on the Nasdaq Capital Market
is greater than or equal to the target prices of $3.75, $4.00, $4.25 and $4.50,
respectively, for 15 consecutive trading days. Any shares that do not vest
before August 26, 2010 will be forfeited.
If Mr.
Brog’s employment is terminated without Cause (as defined in the Employment
Agreement), he will receive unpaid salary and benefits, plus a severance payment
equal to six months’ salary. Additionally, if Mr. Brog is terminated
without Cause prior to August 26, 2013, 100,000 shares of his restricted stock
will vest (or 50,000 shares, if the remaining shares have already
vested).
11.
|
Tender
Offer
|
On August
26, 2010, the Board of Directors (the “Board”) approved a tender offer by the
Company to purchase up to 13,846,153 shares of its common stock at a cash price
of $3.25 per share (the “Offer”) in an amount up to $45 million.
The
Company entered into an Amended and Restated Nomination Agreement (the “Amended
Nomination Agreement”), dated August 26, 2010, with Bandera Partners LLC
and its affiliates (“Bandera”), which amended and restated the Nomination
Agreement, dated May 14, 2009, entered into between the Company and such
persons. The Amended Nomination Agreement provided that
Bandera would tender all of its shares of common stock in the Offer and that its
representatives on the Board, Gregory Bylinsky and Jefferson Gramm, would resign
immediately following the closing of the Offer if Bandera owned less than
360,000 shares of Common Stock.
The
Company also received a letter agreement from Edward Ramsden, a director of the
Company and representative of Caburn Management, LP, stating that Caburn would
tender its 323,672 shares of Common Stock in the Offer and that Mr. Ramsden
would resign from the Board immediately following the closing of the
Offer.
The
Company commenced the Offer on October 5, 2010, but did not complete the Offer
or purchase any shares pursuant thereto until the fourth fiscal
quarter.
12.
|
Subsequent
Events
|
The Offer
expired on November 4, 2010. Giving effect to shares properly
tendered pursuant to a notice of guaranteed delivery, a total of 13,214,401
shares were properly tendered and not withdrawn in the Offer at a total purchase
price of approximately $42.9 million. The Company completed the
purchase of shares on November 10, 2010. The Offer was
undersubscribed and all properly tendered shares were purchased by the
Company. The Company had 3,357,519 shares outstanding as of November
11, 2010. Total costs in connection with the Offer were approximately
$0.1 million.
On
November 11, 2010, pursuant to the Amended Nomination Agreement, Gregory
Bylinsky and Jefferson Gramm, Bandera’s representatives on the Board, resigned
from the Board and Edward Ramsden, representative of Caburn Management LP, also
resigned from the Board. Additionally, the Board resolved to fix the
size of the Board to six directors and Robert Frankfurt and Eric Kuby were
appointed as directors of the Company.
11
PEERLESS
SYSTEMS CORPORATION
Item 2 — Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
Highlights
Consolidated revenues for the
nine months ended October 31, 2010 was $4.5 million, a 13% increase from the nine months ended October 31, 2009. Engineering services and
maintenance revenues decreased 80% , which was primarily attributable to
declines in the demand for technologies we offer to OEMs and the requirement for
traditional engineering services which we have decided not to offer. One new perpetual license was
executed during each of the first nine months of fiscal year 2011 and
2010
On August 26, 2010, we
entered into an Employment Agreement with Timothy E. Brog, whereby he became the
Chief Executive Officer of the Company.
On August 26,
2010,
our Board of
Directors
approved a tender offer to acquire its common stock at a cash price of $3.25 per
share in an
amount up to $45 million. The tender offer was commenced on October
5, 2010 and expired on November 4, 2010. Giving effect to
shares properly tendered pursuant to a notice of guaranteed delivery, a total of
13,214,401 shares were properly tendered and not withdrawn in the Offer at a
total purchase price of $42,946,803. We completed the purchase of
shares on November 10, 2010. The offer was undersubscribed and we
purchased all properly tendered shares. As of November 11, 2010, the
Company had 3,357,519 shares outstanding.
On
November 11, 2010, pursuant to the Amended Nomination Agreement, Gregory
Bylinsky and Jefferson Gramm, Bandera’s representatives on the Board, resigned
from the Board and Edward Ramsden, representative of Caburn Management LP, also
resigned from the Board. Additionally, the Board resolved to fix the
size of the Board to six directors and Robert Frankfurt and Eric Kuby were
appointed as directors of the Company.
General
We continue to generate
revenue from our OEMs through the licensing of imaging solutions. Our product licensing
revenues are comprised of recurring per unit and block licensing
revenues, perpetual licenses,
and development
licensing fees for source code or software development kits
(“SDKs”). Licensing revenues are
derived from per unit fees paid periodically by our OEM customers upon
manufacturing and subsequent commercial shipment of products incorporating the
technology which we license. Licensing revenues are also
derived from arrangements in which we enable third party technology, such as
solutions from Adobe Systems Inc. (“Adobe”) or Novell, to be used with our OEM
partners’ products.
Block licenses are per-unit
licenses in large volume quantities to an OEM for products either in or about to
enter into distribution into the marketplace. Perpetual licenses
allow OEMs to ship products using licensed technology without the further
payment of licensing fees. Payment schedules for
these licenses are negotiable and
payment terms are often dependent on the size and other terms and conditions of
the license being acquired. Typically, payments are made
in either one lump sum or over a period of four or fewer
quarters.
Revenue received for
block and
perpetual
licenses is recognized in accordance with provisions of ASC 985-605, Software –
Revenue
Recognition and ASC 605-25, Revenue Recognition – Multiple-Element
Arrangements,
which requires that revenue be recognized after the following conditions have
been met: (1) delivery has occurred; (2) fees have been determined and are
fixed; (3) collection of fees is probable; and (4) and evidence of an
arrangement exists. For block licenses that have
a significant portion of the payments due within twelve months, revenue is
generally recognized at the time the block license becomes effective assuming
all other revenue recognition criteria have been met.
Historically, a limited
number of customers have provided a substantial portion of our
revenues. Therefore, the availability
and successful closing of new contracts, or modifications and additions to
existing contracts with these customers may materially impact our financial
position and results of operations from quarter to
quarter.
The technology we license has
addressed the worldwide market for monochrome printers (21-69 pages per minute)
and multifunction printers (“MFP”) (21-110 pages per minute). This market has been
consolidating, and the demand for the technology offered by us has continued to
decline since fiscal year 2008. The document imaging industry
has changed. Lower cost of development and
production overseas as well as increasing complexity of imaging requirements
makes us unable to effectively compete in this environment. As a result, we sold our
imaging and networking
technologies and
certain other
assets to KMC in
April 2008. As part of the transaction we
retained the right, subject to certain restrictions, to continue licensing the
imaging technology that we had previously developed and continue to license
third party imaging technologies. We are currently pursuing
other potential investment opportunities. The strategy calls for
aligning our cost structure with our current and projected revenue streams,
maximizing the value of our licensed back technologies and expanding our
business through investment opportunities.
12
Our inability to implement
our strategy to
enhance stockholder value as well as the declining
sales trend of our existing licenses, downward price pressure on the
technologies we license, downward price pressure on original equipment
manufacturer (“OEM”) products and the anticipated consolidation of the number of
OEMs in the marketplace, may have a material adverse effect on our business and
financial results. See “Forward
Looking Statements” above.
Liquidity and Capital
Resources
Our total assets at
October 31, 2010 were $58.6 million, an increase of 3.8% from $56.4 million as
of January 31, 2010. Stockholders’ equity at
October 31, 2010 was $54.3 million, an increase of
3.4% from $52.6 million as of
January 31, 2010. Our ratio of current assets
to current liabilities was 22.2:1, which is an increase from
the 17.7:1 ratio as of January 31, 2010. Our operations provided
$1.8 million mainly because
of the operating
profits and timing of receipts and payments associated with those operations
during the
nine months ended October 31, 2010, compared to
$2.2 million in cash
provided by operations during the
nine months ended October 31,
2009.
During the nine months ended October 31, 2010, $16.0
million in cash was generated by our investing activities, mainly due to
the proceeds received from the sale of the Company’s investment in Highbury
Financial, Inc.
At October 31, 2010, our principal
source of liquidity, cash and cash equivalents was $55.0 million; an increase of
$18.3 million from
January 31, 2010. The increase is primarily due
to the marketable securities which were sold during the nine months ended October 31, 2010. We do not have a credit
facility and may require additional long-term capital to finance our strategy to
enhance value for stockholders.
On August 26, 2010, the
Company’s Board
of Directors
approved a tender offer by the Company to acquire its common stock at a cash
price of $3.25 per share in an amount up to $45 million. The Offer was commenced on
October 5, 2010 and expired on November 4, 2010. Giving effect
to shares properly tendered pursuant to a notice of guaranteed delivery, a total
of 13,214,401 shares were properly tendered and not withdrawn in the Offer at a
total purchase price of $42,946,803. The Company completed the
purchase of shares on November 10, 2010. As of November 11, 2020, the
Company had 3,357,519 shares outstanding.
Critical Accounting
Policies
We describe our significant
accounting policies in Item 7, Management’s Discussion and Analysis of
Financial Condition and Results of Operations, in our Annual Report on Form 10-K
for the year ended January 31, 2010. There has been no change in our
significant accounting policies since the end of fiscal
2010.
Use of
Estimates: The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
periods. Actual results could differ
from those estimates.
13
Results of
Operations
Comparison of Quarters Ended
October 31, 2010 and
2009
Percentage of
Total Revenues
Three Months
Ended
October 31,
|
Percentage
Change Three
Months Ended
October 31,
|
|||||||||||
2010
|
2009
|
2010 vs. 2009
|
||||||||||
Revenues:
|
||||||||||||
Product
licensing
|
100 | % | 71 | % | 315 | % | ||||||
Engineering
services and maintenance
|
- | 29 | (100 | ) | ||||||||
Total
revenues
|
100 | 100 | 196 | |||||||||
Cost
of revenues:
|
||||||||||||
Product
licensing
|
29 | 26 | 233 | |||||||||
Engineering
services and maintenance
|
2 | 6 | 9 | |||||||||
Total
cost of revenues
|
31 | 32 | 193 | |||||||||
Gross
margin
|
69 | 68 | 197 | |||||||||
Sales
and marketing
|
2 | 15 | (66 | ) | ||||||||
General
and administrative
|
26 | 89 | (12 | ) | ||||||||
28 | 104 | (20 | ) | |||||||||
Income
(loss) from operations
|
40 | (36 | ) | (435 | ) | |||||||
Other
income, net
|
3 | 504 | (98 | ) | ||||||||
Income before
income taxes
|
43 | 468 | (73 | ) | ||||||||
Provision for
income taxes
|
17 | 97 | (47 | ) | ||||||||
Net
income
|
26 | % | 371 | % | (80 | )% |
Net
Income
Our net income in the third quarter of fiscal year 2011
was $0.7 million, or
$0.04 per basic and diluted share, compared to a
net income of $3.5 million, or
$0.21 per basic share and diluted
share, in the third quarter of fiscal year
2010.
Revenues
Consolidated revenues were
$2.8 million for the
third quarter of fiscal year 2011,
compared to $1.0 million for the
third quarter of fiscal year
2010. We experienced an increase in licensing revenues
because of
a non-recurring
increase in product licensing during the current quarter
versus the third quarter of fiscal year
2010. Engineering services and
maintenance revenues were $0 and $0.3 million, for the
third quarter of fiscal year 2011
and 2010, respectively. The decrease was due to the
expiration of service and maintenance contracts with customers which we decided
not to renew.
Cost of
Revenues
Total cost of revenues
was $0.9 million in the third quarter of fiscal year 2011,
compared to
$0.3 million in the
third quarter of fiscal year
2010. Product licensing costs
increased $0.6 million in the third quarter of fiscal year
2011 primarily
due
to license fees
incurred in
connection with
new product licensing. Engineering services and
maintenance costs in the third quarter of fiscal year 2011
were
comparable to
the third quarter of fiscal year
2010.
Gross
Margin
Our gross margins were
69% and 68% for the third quarters of fiscal years 2011 and 2010.
Operating
Expenses
Total operating expenses
decreased 20% to $0.8 million in the third quarter of
fiscal year 2011, compared with
$1.0 million in the third
quarter of fiscal year 2010.
|
•
|
Sales and marketing expenses
decreased 66% to $49,000 in the third quarter of
fiscal year 2011 from $143,000 in the comparable quarter of fiscal year
2010. The decrease was mainly due to
reduction in compensation expenses and commissionable sales following the
resignation of the Company’s President and Vice President of
Sales.
|
14
|
•
|
General and administrative
expenses decreased 12% to $0.7 million in the third
quarter of fiscal year 2011, which included expenses
associated with the tender offer of approximately $0.1
million, from
$0.9 million in the comparable quarter of fiscal year
2010. The decrease was due to lower
staffing levels and a lower level of professional
fees.
|
Income
Taxes
Our $0.5 million tax provision for the third quarter of
fiscal 2011 was the result of a pretax operating income. Our $0.9
million tax provision for the third quarter of fiscal year 2010 was primarily
due to the gain associated with an amended third party license
agreement and the Highbury dividend.
Comparison of Nine Months
Ended October 31, 2010 and 2009
Percentage of
Total Revenues
Nine Months
Ended
October 31,
|
Percentage
Change Nine
Months Ended
October 31,
|
|||||||||||
2010
|
2009
|
2010 vs. 2009
|
||||||||||
Revenues:
|
||||||||||||
Product
licensing
|
97 | % | 85 | % | 30 | % | ||||||
Engineering
services and maintenance
|
3 | 15 | (80 | ) | ||||||||
Total
revenues
|
100 | 100 | 13 | |||||||||
Cost
of revenues:
|
||||||||||||
Product
licensing
|
25 | (36 | ) | (179 | ) | |||||||
Engineering
services and maintenance
|
4 | 5 | 2 | |||||||||
Total
cost of revenues
|
30 | (31 | ) | (208 | ) | |||||||
Gross
margin
|
70 | 131 | (39 | ) | ||||||||
Sales
and marketing
|
8 | 13 | (26 | ) | ||||||||
General
and administrative
|
50 | 58 | (1 | ) | ||||||||
Gain
on sale of operating assets
|
- | (95 | ) | (100 | ) | |||||||
58 | (24 | ) | (374 | ) | ||||||||
Income from
operations
|
12 | 155 | (91 | ) | ||||||||
Other
income, net
|
134 | 127 | 20 | |||||||||
Income before
income taxes
|
146 | 282 | (41 | ) | ||||||||
Provision for
income taxes
|
58 | 104 | (37 | ) | ||||||||
Net
income
|
88 | % | 178 | % | (44 | )% |
Net
Income
Our net income in the first
nine months of fiscal year 2011 was $3.9 million, or
$0.25 per basic and $0.24 per diluted share, compared
to a net income of $7.1 million, or $0.42
per basic and
diluted share, in the first nine months of fiscal year
2010.
Revenues
Consolidated revenues were
$4.5 million for the first nine months of
fiscal year 2011, compared to
$4.0 million for the first nine months of
fiscal year 2010. Licensing revenues increased $1.0 million in the first
nine months of fiscal year 2011 primarily resulting from non-recurring new
product licensing during the third quarter of fiscal 2011 offset by a decline in
the demand for the other technologies we license. Engineering services and
maintenance revenues decreased $0.5 million, primarily as a result of the
expiration of service and maintenance contracts which we decided not to
renew.
Cost of
Revenues
Total cost of revenues was
$1.3 million in the first nine months of fiscal year 2011,
compared to a
gain of
$1.2 million in the first
nine months of fiscal year
2010. Product licensing costs
increased
$2.5 million in the first nine months of fiscal year 2011
primarily resulting from the reversal of accrued licensing cost of $2.6 million
during the first quarter of fiscal year 2010. Excluding this reversal, product
licensing costs were comparable fiscal year over year. Engineering services and
maintenance costs in the first nine months of fiscal year 2011
and 2010
were
$0.2
million.
Gross
Margin
Our gross margin decreased to
70% for the first nine months of fiscal year 2011
compared with 131% in the first nine months of fiscal year
2010, because
the reversal of the accrued licensing cost that occurred in fiscal year
2010. Excluding the reversal of
accrued licensing cost, our gross margin increased to 70% compared with 66%. The increase was primarily
the result of lower mix of products being sold for which
we pay license fees to a third party.
15
Operating
Expenses
Total operating expenses
increased by 374% to $2.6 million for the first
nine months of fiscal year 2011,
compared to a gain of $1.0 million for the first
nine months of fiscal year
2010. Excluding the gain
associated with the escrow payment in the first nine months of fiscal year 2010,
total operating expenses decreased
10%.
|
•
|
Sales and marketing expenses
decreased 26% to $377,000 in the first nine months of fiscal year 2011 from
$512,000 in the first nine months of fiscal year
2010. The decrease was due to the
reduction of staffing which was no longer required in the sale of current
product offerings.
|
|
•
|
General and administrative
expenses decreased
1% to $2.2 million in the first nine months of fiscal year 2011
from $2.3 million in
the first nine months of fiscal year 2010. The decrease was a
result of lower staffing levels and professional fees.
|
Other Income,
net
Total other income was
$6.0 million for the first
nine months of fiscal 2011,
compared to $5.0 million for the first
nine months of fiscal
2010.
Other income for the first nine months of fiscal year 2011 was mainly due to dividends
received of $3.1 million, and a $3.7
million realized gain on the Company’s investment in Highbury Financial, Inc.
Other income for
the first nine months of fiscal year 2010 was mainly attributable to $4.8
million dividend received from Highbury Financial,
Inc.
Income
Taxes
Our effective income tax rate
was 39.9% for the nine months ended October 31, 2010 compared to 37.0% for the
nine months ended October 31, 2009. The increase in
tax rate is associated with the gain on our investment in
Highbury.
16
Item 3 — Quantitative
and Qualitative Disclosures About Market Risk.
We are exposed to a variety
of risks in investments, mainly a lowering of interest rates. The primary objective of our
investment activities is to preserve the principal of our investments, while at
the same time maximizing yields without significantly increasing
risk. To achieve this objective,
from time to time, we maintain our portfolio of cash equivalents, fixed rate
debt instruments of the U.S. Government and high-quality corporate issuers and
short-term investments in money market funds. Although we are subject to
interest rate risks, we believe an effective increase or decrease of 10% in
interest rate percentages would not have a material adverse effect on our
results from operations.
Currently all of our
contracts, including those involving foreign entities, are denominated in U.S.
dollars. We have experienced no
significant foreign exchange gains or losses to date. We have not engaged in
foreign currency hedging activities to date and have no intention of doing
so. Our international business
is subject to risks typical of an international business including, but not
limited to, differing economic conditions, changes in political climate,
differing tax structures, other regulations and restrictions, and to a lesser
extent foreign exchange rate volatility. Accordingly, our future
results could be materially and adversely affected by changes in these or other
factors.
(a) Evaluation of
disclosure controls and procedures
We maintain disclosure
controls and procedures that are designed to ensure that information required to
be disclosed in our Exchange Act reports is recorded, processed, summarized and
reported within the time periods specified in the SEC’s rules and forms, and
that such information is accumulated and communicated to our management,
comprised of our Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required
disclosure. In designing and evaluating
the disclosure controls and procedures, management recognized that any controls
and procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives, and management
necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.
For the period ending
October 31, 2010 (the “Evaluation
Date”), we carried out an evaluation, under the supervision and with the
participation of our management, including the Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon that evaluation,
the Chief Executive Officer and Chief Financial Officer concluded that, as of
October 31, 2010, our disclosure
controls and procedures were effective.
(b) Changes in internal
control over financial reporting
In the nine months ended October 31, 2010, there has been no
change in our internal control over financial reporting that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
17
Item 1 — Legal
Proceedings.
We are involved in various
legal proceedings incidental to the conduct of our business. In accordance with SFAS No.
5, “Accounting for Contingencies,” we record a provision for liability when
management believes that it is probable that a liability has been incurred and
we can reasonably estimate the amount of loss. We do not believe there is a
need for such a provision at this time. We review these provisions
to reflect the impact of negotiations, settlements, rulings, advice of legal
counsel and other information and events pertaining to a particular
proceeding.
Item 1A — Risk
Factors.
There have been no material
changes to the risk factors disclosed under Part I, Item 1A, “Risk Factors”
in our Annual Report on Form 10-K for the fiscal year ended
January 31, 2010 (the “Form 10-K”), except as set forth below. Please refer to that section
of the Form 10-K for disclosures regarding the risks and uncertainties
related to our business.
Since the closing of the
tender offer on November 10, 2010, the Company has fewer
resources to
pursue its
strategy to enhance stockholder value.
On August
26, 2010, the Company’s
Board of
Directors approved
a tender
offer by the
Company to acquire
its common stock at a cash price of $3.25 per share in an amount up to $45
million. The Offer
was commenced on October 5, 2010 and expired on November 4,
2010. Giving
effect to shares properly tendered pursuant to a notice of guaranteed delivery,
a total of 13,214,401 shares were properly tendered and not
withdrawn in the Offer at a total purchase price of $42,946,803. The Company
completed the purchase of shares on November 10, 2010.
The Company’s total costs in connection with the
Offer were approximately
$0.1 million. As of November 11, 2010, the Company had 3,357,519 shares
outstanding. Following
completion of the Offer, the Company
intends to continue to pursue its strategy to
enhance stockholder value. With a reduced cash balance, the Company has
fewer resources to explore opportunities that enhance value for
stockholders.
18
Item 6 —Exhibits.
EXHIBIT
10.1
|
Amended
and Restated 2005 Equity Incentive Plan, dated November 1,
2010.
|
EXHIBIT
31.1
|
Certification of Chief Executive
Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act and
Section302 of the Sarbanes-Oxley Act of
2002
|
EXHIBIT
31.2
|
Certification of Chief Financial
Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act and
Section302 of the Sarbanes-Oxley Act of
2002
|
EXHIBIT
32.1
|
Certification of Chief Executive
Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
EXHIBIT
32.2
|
Certification of Chief Financial
Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
19
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:
Peerless
Systems Corporation
|
|||
By:
|
/s/ Timothy E. Brog
|
||
Chief
Executive Officer
|
|||
/s/ William R. Neil
|
|||
Chief
Financial Officer
|
Date: December 15,
2010
20
Exhibit
Number
|
Description of Exhibit
|
|
EXHIBIT
10.1*
|
Amended
and Restated 2005 Equity Incentive Plan, dated November 1.
2010.
|
|
EXHIBIT
31.1*
|
Certification
of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities
Exchange Act and Section 302 of the Sarbanes-Oxley Act of
2002
|
|
EXHIBIT
31.2*
|
Certification
of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities
Exchange Act and Section 302 of the Sarbanes-Oxley Act of
2002
|
|
EXHIBIT
32.1*
|
Certification
of Chief Executive Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
|
EXHIBIT
32.2*
|
Certification
of Chief Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of
2002
|
*Filed
herewith.
21