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ePresence Files Second Quarter 10-Q, First Quarter 10-Q/A And Amended Statements for Fiscal Year 2001.

Business Editors

WESTBORO Westboro can refer to: Places
  • Westboro, Ottawa, a neighbourhood in Ottawa, Canada
  • Westboro, Topeka, a neighbourhood in Topeka, Kansas
  • Westborough, Massachusetts, United States, sometimes spelled as Westboro
  • Westboro, Missouri, United States
, Mass.--(BUSINESS WIRE)--Sept. 25, 2002

ePresence Will Host Joint Conference Call with Switchboard

Incorporated at 10:00 a.m. ET on September 26

ePresence, Inc. (NASDAQ NASDAQ
 in full National Association of Securities Dealers Automated Quotations

U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on
: EPREE) announced it has filed its Form 10-Q Form 10-Q

See 10-Q.
 for the quarter ended June 30, 2002 with the Securities and Exchange Commission ("SEC").

The Company also filed an amended a·mend  
v. a·mend·ed, a·mend·ing, a·mends
1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive.

 10-Q for the first quarter of 2002 and recently filed amended consolidated financial statements Consolidated Financial Statements

The combined financial statements of a parent company and its subsidiaries.

Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge
 for the year ended December 31, 2001. The amended filings were primarily due to restatements made by ePresence's majority-owned subsidiary majority-owned subsidiary

A firm in which more than 50% of outstanding voting stock is owned by the parent company.
, Switchboard Incorporated (NASDAQ: SWBDE), for the fiscal period ended December 31, 2001 and for the first quarter of 2002 financial statements. ePresence's filings can be accessed in the "Investors" section of the Company's web site,

"Our 10-Q filing and our amended filings bring closure to a thorough and comprehensive re-audit of the Company's financial statements and should return us to compliance with SEC requirements and the NASDAQ National Market continued listing standards," said Bill Ferry, chairman and chief executive officer of ePresence. "These filings have had no impact on our capital resources or the Company's business strategy."

ePresence Restatement Restatement

A revision in a company's earlier financial statements.

The need for restating financial figures can result from fraud, misrepresentation, or a simple clerical error.
 of Fiscal Year 2001 Results

The Company's previously issued consolidated financial statements for the year ended December 31, 2001 and its consolidated financial statements for the quarters ended March 31, 2001, June 30, 2001, September 30, 2001 and December 31, 2001 have been restated. The restatements are described in detail below.

In the first quarter of 2001, Switchboard sold banner advertising Banner Advertising

A common form of advertising on the internet. The banner is an advertisement of 460x68 pixels, usually placed at the top of the page

For an example, just look at the top of a page on almost any popular web site.
 to a single customer that resulted in $2.7 million of revenue recognized in 2001. While seeking to collect payment, additional information about the customer and its relationship with one of Switchboard's vendors was evaluated by Switchboard and its recently engaged independent auditors Independent Auditor

An external auditor with a certified public accounting designation that qualifies him or her to provide an auditor's report.

These auditors aren't affiliated with the company being audited.
, Ernst & Young LLP LLP - Lower Layer Protocol . This information led Switchboard to conclude that it would have been more appropriate to record the 2001 banner advertising revenue as a reduction of expense. Accordingly, as part of this restatement, Switchboard reduced 2001 annual revenue by $2.7 million, reduced 2001 annual sales and marketing expenses by $1.5 million and reduced the 2001 special charges by $1.2 million. There was no effect on Switchboard's or the Company's net loss for the year ended December 31, 2001 related to this issue.

Contemporaneous con·tem·po·ra·ne·ous  
Originating, existing, or happening during the same period of time: the contemporaneous reigns of two monarchs. See Synonyms at contemporary.
 with Switchboard's decision to restate re·state  
tr.v. re·stat·ed, re·stat·ing, re·states
To state again or in a new form. See Synonyms at repeat.

 its 2001 financial statements for the banner advertising arrangement, Arthur Andersen For the U.S. Supreme Court case commonly known as Arthur Andersen, see .
Arthur Andersen LLP, based in Chicago, was once one of the "Big Five" accounting firms (the other four are PricewaterhouseCoopers, Deloitte Touche Tohmatsu, Ernst & Young and KPMG), performing
 LLP, independent auditor for ePresence and Switchboard in fiscal year 2001, advised both companies that its Boston office had ceased operations and would be unable to render a report on restated 2001 financial statements. Therefore, Ernst & Young commenced a re-audit of 2001 financial statements in August 2002.

As a result of the re-audit, it was determined that the previously reported 2001 financial statements should also be restated and reclassified as follows:
-- A reduction in Switchboard's operating expenses of $1.1 million related to the elimination of excess accrued liabilities.

-- A reduction in 2001 annual amortization expense related to Switchboard's directory and local advertising platform agreement entered into with America Online, Inc. ("AOL") in December 2000 ("AOL Directory Agreement") of $3.3 million resulting from a change in the amortization rate used to amortize the assets related to the AOL Directory Agreement as presented on the Company's balance sheet.

-- An impairment charge in Switchboard relating to the AOL Directory Agreement of $11.7 million determined pursuant to SFAS No. 121 "Accounting for the Impairment of Long Lived Assets and for Long Lived Assets to be Disposed Of," based on revised revenue projections under the AOL Directory Agreement.

-- A reclassification of $27.9 million and $10.4 million in Switchboard's marketable securities at December 31, 2001 and 2000, respectively, from long-term to short-term, to reflect all marketable securities with less than one year to maturity as short-term. This reclassification had no effect on the Company's total assets for the period.

-- A $0.6 million reduction in operating expenses for ePresence's services business related to the elimination of excess accrued liabilities and a reduction of amortization related to unearned compensation.

Additionally, on January 1, 2001, ePresence adopted SFAS SFAS Statement of Financial Accounting Standards
SFAS Special Forces Assessment and Selection
SFAS Student Financial Aid Services
SFAS Sport Fishing Association of Singapore
SFAS Safety Features Actuation System
SFAS Statewide Fixed Assets System
 No. 133, as amended, which, among other things, required derivatives derivatives

In finance, contracts whose value is derived from another asset, which can include stocks, bonds, currencies, interest rates, commodities, and related indexes. Purchasers of derivatives are essentially wagering on the future performance of that asset.
 to be measured at fair value and recognized as either assets or liabilities in the financial statements, as discussed in Note 2 to the Company's Consolidated Financial Statements. As a result, ePresence recorded a $3.4 million cumulative effect in accounting change, net of taxes, offset by a decrease in the reported gain on the sale of Openwave as well as a decrease in the provision for income taxes. The adoption of SFAS 133 had no effect on ePresence's consolidated net income for the period ended December 31, 2001.

Because the above-described restatements reflect the timing of certain revenues and expenses and non-cash transactions, the Company's consolidated balance sheet consolidated balance sheet

A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm.
 was correspondingly adjusted in various categories, including the asset related to the Directory Agreement, other assets other assets

Assets of relatively small value. For financial reporting purposes, firms frequently combine small assets into a single category rather than listing each item separately.
 and accrued expenses Accrued Expense

An accounting expense recognized in the books before it is paid for. It is a liability, usually current. These expenses are typically periodic and documented upon a company's balance sheet due to the high probability of collection.
. In addition, the accumulated ac·cu·mu·late  
v. ac·cu·mu·lat·ed, ac·cu·mu·lat·ing, ac·cu·mu·lates
To gather or pile up; amass. See Synonyms at gather.

To mount up; increase.
 deficit at December 31, 2001 was increased by $3.5 million to reflect the cumulative effect of these adjustments. ePresence's capital resources were not impacted by any of these restatements and reclassifications.

As previously announced, the SEC has advised Switchboard that it will be delivering a document request in connection with an investigation by the SEC of the restatements of Switchboard's financial statements. Switchboard intends to cooperate fully with the SEC regarding this investigation.

Restatement of First-Quarter 2002 Financial Results

Switchboard, in conjunction with its newly appointed independent auditors, Ernst & Young, re-evaluated the adoption of Emerging Issues Task Force Issue 01-9 "Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller An organization that sells hardware and software to the general public. Resellers purchase products from software publishers and hardware manufacturers.  of the Vendor's Products)" ("EITF EITF Emerging Issues Task Force
EITF Edinburgh International Television Festival
EITF Europe International Taekwon-Do Federation
 01-9"), which became effective for fiscal years beginning after December 15, 2001, and concluded that EITF 01-9 is applicable to the accounting for the AOL (A division of Time Warner, Inc., New York, NY, The world's largest online information service with access to the Internet, e-mail, chat rooms and a variety of databases and services.  Directory Agreement. The 2001 quarterly results, presented for comparative purposes, have been reclassified to conform to Verb 1. conform to - satisfy a condition or restriction; "Does this paper meet the requirements for the degree?"
fit, meet

coordinate - be co-ordinated; "These activities coordinate well"
 the presentation required by EITF 01-9. Accordingly, Switchboard reduced both revenue and operating expenses Operating expenses

The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted.
 by $1.1 million and $1.0 million in the fiscal quarters ended March 31, 2002 and 2001, respectively, which represented the restated amortization expense related to the AOL Directory Agreement assets described below. The adoption of EITF 01-9 had no effect on net income or cash for either Switchboard or ePresence.

ePresence's March 31, 2002 consolidated financial statements have been restated to reflect a net decrease in Switchboard amortization of approximately $0.7 million. This adjustment reflects the reversal of $1.0 million of Switchboard amortization expense previously recorded on AOL related prepaid pre·pay  
tr.v. pre·paid, pre·pay·ing, pre·pays
To pay or pay for beforehand.

pre·payment n.
 assets which were determined to be impaired as of December 31, 2001, offset by the amortization resulting from the $13.0 million AOL related asset recorded on January 2, 2002. The restated Switchboard amortization for the quarter ended March 31, 2002 is reflected as a reduction of Switchboard gross revenues in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[]

As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh.
 with EITF 01-9.

As a result of the above-described restatements, ePresence's accumulated deficit at March 31, 2002 was decreased by $0.4 million to reflect the cumulative effect of these 2002 adjustments. ePresence's capital resources were not impacted by any of these restatements.

Complete financial information for the fiscal quarter ended March 31, 2002 is available in ePresence's Amendment No. 1 to Quarterly Report on Form 10-Q, filed with the SEC today.

ePresence Revised Second-Quarter 2002 Consolidated Financial


As a result of Switchboard's revision to previously announced second-quarter results, ePresence's consolidated revenues for the second quarter of 2002 were $11.0 million. This compares with consolidated revenues of $15.9 million for the second quarter of 2001. For the second quarter of 2002, the consolidated net loss was $(2.7) million, or $(0.12) per share. This compares with a consolidated net loss of $(5.6) million, or $(0.24) per share, in the second quarter of 2001. There were no revisions to previously announced results for ePresence's services business.

As of June 30, 2002, ePresence reported $111.7 million in cash, marketable securities Marketable Securities

Very liquid securities that can be converted into cash quickly at a reasonable price.

Marketable securities are very liquid as they tend to have maturities less than one year, and the rate at which these securities can be bought or sold has
, and restricted cash on a consolidated basis, consisting of $57.0 million held by ePresence and $54.7 million held by Switchboard.

Selected items affected by the restatement of fiscal year 2001 and first quarter 2002, as well as revision of second quarter 2002 financial results are listed in the table below. Full financial information can be found in the Company's filings on Form 10-K/A for the year ended December 31, 2001 filed with the SEC on September 20, 2002, Form 10-Q for the quarter ended June 30, 2002 filed with the SEC on September 24, 2002 and Form 10-Q/A for the quarter ended March 31, 2002 filed with the SEC today.


                       ePresence, Incorporated
                 Condensed Results of Operations Data
                (in thousands, except per share amounts)
                 Year ended           Three months ended
              December 31, 2001        March 31, 2002
              As Restated    As       As              As
              and         Previously  Restated       Previously
             Reclassified  Reported                  Reported
Services      $51,711      $51,711     $10,293        $10,293

Switchboard    13,326       16,026       2,920          4,023
              -------       ------      ------         -------
Total Revenue  65,037       67,737      13,213         14,316

 (loss)      (105,743)     (99,032)     (8,583)         (9,304)

Net (loss)   $(40,331)    $(36,841)    $(6,934)        $(7,318)

Basic and
 diluted net
 (loss) per
 share         $(1.76)      $(1.60)     $(0.31)         $(0.33)

Shares used
 to compute
 basic and
 net (loss)
 per share      22,976       22,976      22,332          22,332

                                 Three months ended
                                     June 30, 2002
                                 As               As
                                 Reported         Previously
Services                         $8,952           $8,952

Switchboard                       2,068            3,014
                                 ------           ------
Total Revenue                    11,020           11,966

Operating (loss)                 (4,639)          (5,091)

Net (loss)                      $(2,722)         $(2,963)

Basic and diluted net
 (loss) per share                $(0.12)          $(0.13)

Shares used to compute
 basic and diluted
 net (loss) per
 share                            22,231          22,231

                               ePresence Incorporated
                            Condensed Balance Sheet Data
                                  (in thousands)

                  As of December 31, 2001       As of March 31, 2002
                  As Restated    As            As           As
                     and         Previously    Restated     Previously
                  Reclassified   Reported                   Reported
Total assets       162,951         171,491      161,708        156,525

Total liabilities   53,765          58,713       60,919         52,556

 equity           $109,186        $112,778     $100,789       $103,969

                                  As of June 30, 2002
                                  As               As
                                  Reported       Previously
Total assets                       154,561        149,928

Total liabilities                   57,035         49,470

Shareholder equity                 $97,526        $100,458

ePresence Third-Quarter Business Update

ePresence also announced today that it expects services revenues to be approximately $7.5 million for the third-quarter of 2002. Including one-time fees of $0.3 million incurred in connection with the re-audit, ePresence anticipates a cash loss from its services business of $(0.09) to $(0.11) per share for the third quarter of 2002. Cash earnings (loss) excludes depreciation, amortization and non-cash compensation.

NASDAQ Listing Status

ePresence's hearing at NASDAQ, with respect to the Company's failure to file its Quarterly Report on Form 10-Q for the quarter ended June 30, 2002 in a timely manner, was held on September 19, 2002. The Company yesterday filed its delinquent delinquent 1) adj. not paid in full amount or on time. 2) n. short for an underage violator of the law as in juvenile delinquent.

DELINQUENT, civil law. He who has been guilty of some crime, offence or failure of duty.
 Quarterly Report on Form 10-Q and believes that it is once again in compliance with the NASDAQ National Market continued listing requirements Listing requirements

Requirements, including minimum shares outstanding, market value, and income, that are laid down by an exchange for any stock to be listed for trading.
. The NASDAQ Hearing Panel will issue its determination regarding the Company's continued listing status in the upcoming weeks.

Conference Call

ePresence and Switchboard will host a joint conference call for investors at 10:00 a.m. ET on September 26 to discuss this announcement. The call will be broadcast live over the Internet Internet

Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the
. Investors interested in listening to the webcast should log onto the "Investors" section of ePresence's web site, located at, at least 15 minutes prior to the broadcast. To participate in the live teleconference call, please dial (719) 457-2657 and use confirmation code 310170. A replay will be available from 1:00 p.m. ET, September 26 through 8:00 p.m. ET, September 30, 2002 at 719-457-0820. The confirmation code for the replay is 310170.

About ePresence

ePresence, Inc. (NASDAQ: EPREE) is a market leader in delivering Secure Identity Management (SIM) solutions based on directory technology that help companies reduce cost, enhance security, improve customer service and increase revenues. Our highly focused solutions have enabled numerous Fortune 1000-class companies to efficiently and securely provide personalized per·son·al·ize  
tr.v. per·son·al·ized, per·son·al·iz·ing, per·son·al·iz·es
1. To take (a general remark or characterization) in a personal manner.

2. To attribute human or personal qualities to; personify.
 access to digital resources for their employees, business partners and customers, thus maximizing the ROI (Return On Investment) The monetary benefits derived from having spent money on developing or revising a system. In the IT world, there are more ways to compute ROI than Carter has liver pills (and for those of you who never heard of that expression, it means a lot).  of their IT-based initiatives. ePresence is headquartered in Westboro, Massachusetts Massachusetts (măsəch`sĭts), most populous of the New England states of the NE United States.  and can be reached at (800) 222-6926 or online at

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.

The Company noted that each of the above statements about the Company's business and financial outlook, future plans, operations and performance, including its statements regarding SEC and NASDAQ compliance issues, anticipated third-quarter financial results, as well as others using the terms "expect," "anticipate," "target," "plan," "believe," "will," and other similar terms and any other statements in this press release which are not historical facts are forward-looking statements, within the meaning 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. These statements are based on current expectations and are subject to differ materially from actual results based on various important factors, including, without limitation, the impact of the broad economic slowdown For articles with similar titles, see Slow Down (disambiguation).
A slowdown is an industrial action in which employees perform their duties but seek to reduce productivity or efficiency in their performance of these duties.
 and the uncertainty of current economic conditions, which has affected the demand for technology services, lengthened length·en  
tr. & intr.v. length·ened, length·en·ing, length·ens
To make or become longer.

lengthen·er n.
 the sales cycles and caused decreased technology spending for many of our customers and potential customers; the uncertainty of current global political conditions; the impact of the Company's strategic initiatives to grow its business while reducing costs; market acceptance of the ePresence name and the identification of the name with the Company's SIM business; the Company's ability to enter and manage strategic alliances; the impact of the Company's termination of international operations Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. ; increased competition; acceptance of the Company's solutions in the marketplace and success of the Company's sales and marketing efforts; the Company's ability to attract and retain qualified personnel; the impact of the Company's stock repurchase Stock repurchase

A firm's repurchase of outstanding shares of its common stock.
 program; the impact of Switchboard's financial results on the Company's consolidated results; the volatility of securities markets including fluctuations in the value of the Switchboard securities held by ePresence; the possible delisting Delisting

When the stock of a company is removed from a stock exchange.

Reasons for delisting include violating regulations and/or failure to meet financial specifications set out by the stock exchange.
 of the Company's securities by NASDAQ for noncompliance noncompliance

failure of the owner to follow instructions, particularly in administering medication as prescribed; a cause of a less than expected response to treatment.

 with listing requirements; and the results of the SEC investigation of Switchboard. For further information on these and other risks, uncertainties, and factors, please review the Company's filings on Form 10-K/A for the year ended December 31, 2001 filed with the SEC on September 20, 2002, Form 10-Q for the quarter ended June 30, 2002 filed with the SEC on September 24, 2002 and Form 10-Q/A for the quarter ended March 31, 2002 filed with the SEC on September 25, 2002. The forward-looking statements made in this press release relate only to events as of the date on which the statements are made and the Company undertakes no obligation to update these forward-looking statements.
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Publication:Business Wire
Geographic Code:1USA
Date:Sep 25, 2002
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