NEON Systems Announces Fourth Quarter and Fiscal 2004 Financial Results; Announces Promotion of Mark Cresswell to CEO.SUGAR LAND, Texas -- NEON Systems, Inc. (Nasdaq:NEON) today announced financial results for its fourth quarter and fiscal year ended March 31, 2004. Net income for the fourth quarter of fiscal year 2004 was $18,000, or $0.00 per share on a diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. basis, compared to a net loss of $5.6 million, or $0.64 per share, for the corresponding period in the prior year. Operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. for the fourth quarter of fiscal 2004 was $56,000, compared to a loss of $5.0 million for the corresponding period in the prior year, which included $3.9 million in charges related to restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). , impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. and additional depreciation due to a change in estimate. Total revenue for the fourth quarter of fiscal 2004 was $4.0 million compared to $4.6 million in the fourth quarter of the prior year. During the fourth quarter of fiscal 2004, NEON entered into a multi-million dollar agreement with one of its largest customers. The agreement contained multiple standard software products as well as a multi-year maintenance and support contract. Certain products were delivered during the fourth quarter of fiscal 2004 and the remaining products are scheduled to be delivered during fiscal 2005. Under GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). , NEON did not recognize any license revenue associated with this sale during the fourth quarter of fiscal 2004. All license revenue should be recognized once all software products have been delivered to the customer. At March 31, 2004, NEON had $8.5 million in deferred revenue, which represents an increase of $3.2 million from the previous quarter, primarily as a result of this transaction. On March 31, 2004, NEON had cash and cash equivalents of $20.9 million, which represents an increase of almost $700,000 from the previous quarter and $1.1 million during fiscal 2004. Net loss for the year ended March 31, 2004 was $98,000, or $0.01 per share, compared to a net loss of $18.9 million, or $2.17 per share, in the prior year. Operating loss for fiscal 2004 was $511,000, compared to an operating loss of $10.8 million in the prior year, which included $4.7 million in charges related to restructuring, impairment and additional depreciation due to a change in estimate. Total revenue for the twelve months ended March 31, 2004 was $15.4 million compared to total revenue of $17.3 million in the prior year. During fiscal 2003, NEON reported approximately $900,000 in revenue related to the Enterprise Sub-Systems Management product line which was eliminated in August 2002. "Looking at our accomplishments in fourth quarter and the past year, I can say with confidence that NEON is making progress," said Mark Cresswell Cresswell is a surname, and may refer to
adj. 1. Capable of being demonstrated or proved: demonstrable truths. 2. Obvious or apparent: demonstrable lies. loyalty to the Shadow brand. During this last fiscal year we have concentrated on providing exceptional customer service, developing industry-leading market-driven products, and improving our financial discipline." INNERACCESS TECHNOLOGIES ACQUISITION NEON announced on June June: see month. 1, 2004, that it has entered into a definitive agreement to acquire InnerAccess Technologies Inc., a privately held mainframe integration software vendor based in Toronto. The proposed acquisition will add a state-of-the-art mainframe Web Services (1) Loosely, any online service delivered over the Web. Such usage appears in articles from non-technical sources, but not in IT-oriented publications, because definition #2 below describes the correct use of the term. interface to NEON's Shadow product set; extend its mainframe connectivity options to include the widely utilized legacy CA -IDMS market; enrich NEON with a highly skilled development and marketing team; as well as add 80 high-quality customers in 14 countries, expanding NEON's opportunity to cross-sell existing and planned Shadow products. SALE OF SCALABLE SOFTWARE PROMISSORY NOTES promissory note, unconditional written promise to pay a certain sum of money at a definite time to bearer or to a specified person on his order. Promissory notes are generally used as evidence of debt. NEON announced on June 18, 2004, the closing of a previously announced sale of two promissory notes issued to NEON by Scalable Software, Inc. -- a $3.5 million guaranteed promissory note and the $6.0 million secured promissory note -- to JMI JMI Java Metadata Interface (Sun Microsystems) JMI Japan Market Intelligence JMI James Madison Institute JMI Jim Moran Institute for Global Entrepreneurship (Florida State University) Services, Inc., Scalable Software's largest shareholder. NEON received a cash purchase price of $4.75 million from JMI Services, Inc. NEON's aggregate carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. of the notes was $3.5 million and anticipates it will record a gain of approximately $1.2 million on the sale of the notes in its fiscal quarter ending June 30, 2004. In addition, NEON agreed to not exercise its option to acquire Scalable Software without the prior written consent of JMI Services, Inc. NEON has indicated that it does not have any current intent to exercise such option to acquire Scalable Software, which option expires on June 26, 2004. FINANCIAL YEAR HIGHLIGHTS: --NEON introduced Shadow Event Publisher, the industry's first mainframe business event management solution to enable organizations to capture, enrich, transform (XML XML in full Extensible Markup Language. Markup language developed to be a simplified and more structural version of SGML. It incorporates features of HTML (e.g., hypertext linking), but is designed to overcome some of HTML's limitations. ) and publish business critical mainframe events from within multiple mainframe data environments with support for multiple messaging protocols The rules, formats and functions for exchanging messages between the components of a messaging system. The most widely used messaging protocol is the Internet's Simple Mail Transfer Protocol (SMTP). -- a key enabling technology for application development utilizing Event-Driven Architectures Event-driven architecture (EDA) is a software architecture pattern promoting the production, detection, consumption of, and reaction to events. An event can be defined as "a significant change in state"[1]. . --With the successful introduction of the Shadow Event Publisher, NEON was recognized by Gartner, a leading research firm, as one of the innovative vendors in Business Event Management. --NEON has received positive customer response for the technology and to date, has recorded two new customers -- a multi-billion dollar electronic retailer and a Fortune 100 global manufacturer of health care products. --NEON expanded its healthcare customer base in the fourth quarter, adding one of the nation's leading healthcare management and information services See Information Systems. as a new customer for its Shadow J2CA J2CA J2EE Connection Architecture J2CA J2ee Connector Architecture connectivity to CICS (Customer Information Control System) A TP monitor from IBM that was originally developed to provide transaction processing for IBM mainframes. It controls the interaction between applications and users and lets programmers develop screen displays without . --NEON continued to increase its strength in the financial services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. sector, adding significant follow-on business for its Shadow mainframe integration technology. --NEON delivered comprehensive support for IBM's DB2 Universal Database for z/OS Version 8. According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. industry research, DB2 accounts for one-third of the database market. --NEON announced an expanded partnership with Selesta, a leading integrator (1) In electronics, a device that combines an input with a variable, such as time, and provides an analog output; for example, a watt-hour meter. (2) See systems integrator. and distributor in the Italian IT market, to provide legacy integration solutions across southern Europe Southern Europe or sometimes Mediterranean Europe is a region of the European continent. There is no clear definition of the term which can vary depending on whether geographic, cultural, linguistic or historical factors are taken into account. . --NEON announced updated J2EE (Java 2 Platform, Enterprise Edition) A platform from Sun for building distributed enterprise applications. J2EE services are performed in the middle tier between the user's machine and the enterprise's databases and legacy information systems. (TM) adapter A device that allows one system to connect to and work with another. An adapter is often a simple circuit that converts one set of signals to another; however, the term often refers to devices which are more accurately called "controllers. support for WebLogic Platform 8.1 and WebSphere Application Server 5.0 --NEON completed validation See validate. validation - The stage in the software life-cycle at the end of the development process where software is evaluated to ensure that it complies with the requirements. for BEA WebLogic A software suite from BEA Systems, Inc., San Jose, CA (www.beasys.com) that is used to deploy Web and SOA applications. The core product is BEA WebLogic Server, a J2EE application server. Platform becoming first validated val·i·date tr.v. val·i·dat·ed, val·i·dat·ing, val·i·dates 1. To declare or make legally valid. 2. To mark with an indication of official sanction. 3. vendor to support both Services and Events for integration with the IBM mainframe IBM mainframes, though perceived as synonymous with mainframe computers in general due to their marketshare, are now technically and specifically IBM's line of business computers that can all trace their design evolution to the IBM System/360. platform. EXECUTIVE MANAGEMENT PROMOTIONS Effective, June 15, 2004, NEON's board of directors promoted Mark J. Cresswell to chief executive officer of the company. Cresswell, 39, has been serving as president and chief operating officer Chief Operating Officer (COO) The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. for NEON Systems since March 7, 2003. NEON also promoted Andrew Gutteridge to an executive officer position as its vice president of EMEA (Europe, Middle East, Africa) Refers to that region of the world. For example, one might see products packaged differently for the UK, EMEA and Asia Pacific markets. Operations. Gutteridge, 43, joined NEON in 1996 and has been primarily focused on sales, business/partner development and European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. channel sales. Gutteridge has been serving as director of NEON's sales operations in Europe since July 2003. NEON's management team will host a conference call at 4 p.m. (EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT ) on Wednesday, June 23, 2004 to discuss its fiscal year and fourth quarter financial results, recent agreement to acquire InnerAccess Technologies and the sale of the Scalable Software promissory notes. Domestic participants may reach the conference call by calling (866-238-1641), passcode (497766). International participants should dial (703-639-1162) passcode (497766). All participants may also listen through a link on the Investor Relations Investor relations The process by which the corporation communicates with its investors. page on the NEON Systems Web site at http://www.neonsys.com/about_us/investor_relations.asp. Please go to the Web site at least fifteen minutes prior to the call to register, download To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. and install any necessary audio software. The conference call will be available until June 30, 2004 for replay on NEON Systems' Web site at http://www.neonsys.com/about_us/investor_relations.asp or by calling (888-266-2081) passcode (493195). About NEON Systems NEON Systems, Inc. (Nasdaq:NEON) is a leading provider of enterprise-class mainframe integration solutions, delivering a unified mainframe integration platform to support the entire range of requirements for modern Service-Oriented Architectures See SOA. (SOA (1) (Start Of Authority) The first record in a DNS zone file. See DNS records. (2) (Service Oriented Architecture) The modularization of business functions for greater flexibility and reusability. ) and emerging Event-Driven Architectures (EDA (1) (Electronic Design Automation) Using the computer to design, lay out, verify and simulate the performance of electronic circuits on a chip or printed circuit board. ). NEON's Shadow technology is designed to reduce the complexity of mainframe integration allowing large organizations with significant commitment to mainframe systems to streamline incumbent technologies and lower total cost of ownership. With decades of mainframe expertise, NEON is uniquely qualified to reduce the risk organizations face when supporting new business initiatives that integrate with mainframe systems. For more information on the future of mainframe integration, see our Web site at www.neonsys.com. This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of Section 27A of the Securities Act of 1933, as amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. (the "Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which are intended to be covered by the safe harbors Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. created thereby and the Safe Harbor Provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Such statements regarding, among other things, additional revenue opportunities and improvement of overall productivity of operations, are based on the current expectations and beliefs of management, and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The following factors, among others, could cause actual results to differ materially from those described in the forward-looking statements: development by competitors of new or competitive products or services, the entry into the market by new competitors, the ability to recruit and retain qualified personnel, the ability to retain customers or attract customers from other businesses, the uncertainties of whether new software products and product strategies will be successful, the sufficiency of NEON Systems' working capital and market and general economic conditions. Please refer to the risk factors described in NEON Systems' filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. filed on June 30, 2003 for a detailed description of these risks and others that could cause actual results to differ materially from the forward-looking statements. The NEON logo, Shadow, Shadow Direct and Shadow Web Server are registered trademarks, and Shadow Connect, Shadow Event Publisher, Shadow Event Connect and Shadow Console are trademarks of NEON Systems, Inc. in the USA and in other select countries. All other trademarks, service marks and product or service names are the property of their respective owners.
NEON SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
MARCH 31, MARCH 31,
2004 2003
----------- -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $20,899 $19,791
Accounts receivable, net 6,150 3,443
Taxes receivable -- 1,311
Other current assets 1,232 655
----------- -----------
Total current assets 28,281 25,200
----------- -----------
Property and equipment, net 475 839
Notes receivable, net 7,760 7,760
Other assets 341 515
----------- -----------
Total assets $36,857 $34,314
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $298 $424
Accrued expenses 2,733 2,116
Deferred revenue 8,471 6,086
----------- -----------
Total current liabilities 11,502 8,626
----------- -----------
Accrued restructuring expenses - long term 898 1,297
----------- -----------
Total liabilities 12,400 9,923
----------- -----------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value. Authorized
10,000,000 shares; no shares issued and
outstanding -- --
Common stock, $.01 par value. Authorized
30,000,000 shares; 8,914,547 and 8,764,427
shares issued and outstanding at March
31, 2004 and 2003, respectively 98 97
Additional paid-in capital 51,696 51,585
Treasury stock, 913,400 shares at cost (2,649) (2,649)
Accumulative other comprehensive loss (421) (473)
Accumulated deficit (24,267) (24,169)
----------- -----------
Total stockholders' equity 24,457 24,391
----------- -----------
Commitments and contingencies
Total liabilities and stockholders'
equity $36,857 $34,314
=========== ===========
NEON SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED YEAR ENDED
MARCH 31, MARCH 31,
------------------- -------------------
2004 2003 2004 2003
--------- --------- --------- ---------
Revenues:
License $1,451 $1,991 $5,306 $7,573
Maintenance 2,555 2,577 10,074 9,690
--------- --------- --------- ---------
Total revenues 4,006 4,568 15,380 17,263
Cost of revenues:
Cost of licenses -- 29 84 299
Cost of maintenance 276 456 1,353 1,977
--------- --------- --------- ---------
Total cost of revenues 276 485 1,437 2,276
--------- --------- --------- ---------
Gross profit 3,730 4,083 13,943 14,987
--------- --------- --------- ---------
Operating expenses:
Sales and marketing 1,602 2,559 6,085 11,107
Research and development 1,118 1,181 4,509 4,550
General and administrative 1,041 2,421 3,623 6,331
Restructuring costs 25 2,785 237 2,918
Impairment of intangibles -- 151 -- 150
Loss on disposal -- -- -- 687
--------- --------- --------- ---------
Total operating expenses 3,786 9,097 14,454 25,743
--------- --------- --------- ---------
Operating income (loss) (56) (5,014) (511) (10,756)
--------- --------- --------- ---------
Interest and other income, net 44 98 275 432
Equity loss in affiliate -- (338) -- (3,525)
Valuation allowance of note
receivable -- -- -- (378)
--------- --------- --------- ---------
Income (loss) from continuing
operations before income taxes
and cumulative effect of
change in accounting
principle (12) (5,254) (236) (14,227)
--------- --------- --------- ---------
Provision for income taxes -- 194 -- 194
--------- --------- --------- ---------
Income (loss) from continuing
operations before
cumulative effect of change in
accounting principle (12) (5,448) (236) (14,421)
Loss from discontinued
operations -- (181) (244) (3,451)
Gain on disposal of
discontinued operations 30 -- 382 --
--------- --------- --------- ---------
Income (loss) before cumulative
effect of change
in accounting principle 18 (5,629) (98) (17,872)
Cumulative effect of change in
accounting principle -- -- -- (1,043)
--------- --------- --------- ---------
Net income (loss) $18 $(5,629) $(98) $(18,915)
========= ========= ========= =========
Income (loss) per common share
--Basic and Diluted:
Income (loss) from continuing
operations before
cumulative effect of change in
accounting principle $-- $(0.62) $(0.02) $(1.65)
--------- --------- --------- ---------
Loss from discontinued
operations -- (0.02) (0.03) (0.40)
Gain on disposal of
discontinued operations -- -- 0.04 --
--------- --------- --------- ---------
Income (loss) before cumulative
effect of change in
accounting principle -- (0.64) (0.01) (2.05)
Cumulative effect of change in
accounting principle -- -- -- (0.12)
--------- --------- --------- ---------
Net income (loss) $-- $(0.64) $(0.01) $(2.17)
========= ========= ========= =========
Weighted average shares
outstanding:
Basic 8,903 8,767 8,855 8,721
========= ========= ========= =========
Diluted 8,903 8,767 8,855 8,721
========= ========= ========= =========
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