-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Rs6QxdNRraymFqxUBliDrj0PR63EpbWJ8zg40stIKhyhRzE4TmaW3vXx+MoE0kET fNiYYew2WXt8gUtTjsPbAg== 0000950148-97-001468.txt : 19970520 0000950148-97-001468.hdr.sgml : 19970520 ACCESSION NUMBER: 0000950148-97-001468 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: QUARTERDECK CORP CENTRAL INDEX KEY: 0000707668 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 954320650 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19207 FILM NUMBER: 97609254 BUSINESS ADDRESS: STREET 1: 13160 MINDANAO WAY CITY: MARINA DEL REY STATE: CA ZIP: 90292 BUSINESS PHONE: 3103093700 MAIL ADDRESS: STREET 1: 13160 MINDANAO WAY CITY: MARINA DEL RAY STATE: CA ZIP: 90292 FORMER COMPANY: FORMER CONFORMED NAME: QUARTERDECK OFFICE SYSTEMS INC DATE OF NAME CHANGE: 19940510 10-Q 1 10-Q 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------- FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ---------- FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997 COMMISSION FILE NUMBER 0-19207 QUARTERDECK CORPORATION (Exact name of Registrant as specified in its charter) DELAWARE 95-4320650 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 13160 MINDANAO WAY, MARINA DEL REY, CALIFORNIA 90292 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (310) 309-3700 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ---- ----- The number of shares of the Registrant's common stock, $.001 par value, outstanding as of April 30, 1997 was 38,154,381. ================================================================================ 2 QUARTERDECK CORPORATION AND SUBSIDIARIES FORM 10-Q MARCH 31, 1997 INDEX
PAGE NO. -------- PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Consolidated Condensed Balance Sheets as of March 31, 1997 (unaudited) and September 30, 1996 3 Consolidated Unaudited Condensed Statements of Operations for the three and six months ended March 31, 1997 and 1996 4 Consolidated Unaudited Condensed Statements of Cash Flows for the six months ended March 31, 1997 and 1996 5 Notes to Consolidated Unaudited Condensed Financial Statements 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 11 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS 19 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 19 SIGNATURES 20
PAGE 2 3 PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS QUARTERDECK CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (AMOUNTS IN THOUSANDS) ASSETS
MARCH 31, SEPTEMBER 30, 1997 1996 -------- ------------- (UNAUDITED) Current assets: Cash and cash equivalents $ 10,235 $ 25,554 Trade accounts receivable, net 12,998 9,265 Inventories 1,610 2,151 Other current assets 4,687 5,594 -------- -------- Total current assets 29,530 42,564 Property, plant and equipment, net 21,984 21,252 Capitalized software costs, net 2,544 3,448 Other assets 5,118 9,517 -------- -------- $ 59,176 $ 76,781 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Trade accounts payable $ 5,702 $ 10,685 Notes payable to banks 6,997 8,280 Accrued liabilities 14,194 17,232 Accrued acquisition, restructuring and other charges 3,445 10,940 Current portion of long-term obligations 17 111 -------- -------- Total current liabilities 30,355 47,248 Convertible notes 25,000 25,000 Long-term obligations, less current portion 140 108 -------- -------- Total liabilities 55,495 72,356 Litigation (Note 7) Stockholders' equity: Series B preferred stock (authorized: 2,000 shares; issued and outstanding; 200 shares, liquidation preference $20,000) 20,000 20,000 Common stock (authorized: 70,000 shares; issued and outstanding: 38,150 and 37,666 shares) 38 38 Treasury stock (559) (559) Additional paid-in-capital 65,469 64,819 Retained earnings (accumulated deficit) (80,579) (79,766) Foreign currency translation adjustment (505) (468) Note receivable from directors for sale of stock (18) (18) Net unrealized gain (loss) on marketable securities (165) 379 -------- -------- Total stockholders' equity 3,681 4,425 -------- -------- $ 59,176 $ 76,781 ======== ========
The accompanying notes are an integral part of these consolidated unaudited condensed financial statements. PAGE 3 4 QUARTERDECK CORPORATION AND SUBSIDIARIES CONSOLIDATED UNAUDITED CONDENSED STATEMENTS OF OPERATIONS (Amounts in thousands, except per share data)
THREE MONTHS ENDED SIX MONTHS ENDED MARCH 31, MARCH 31, 1997 1996 1997 1996 -------- -------- -------- -------- Net revenues $ 23,097 $ 49,078 $ 47,482 $ 93,753 Cost of revenues 5,304 13,726 12,352 25,812 -------- -------- -------- -------- Gross margin 17,793 35,352 35,130 67,941 Operating expenses: Research and development 3,601 5,736 7,720 10,540 Sales and marketing 8,065 17,547 15,846 33,504 General and administrative 4,792 6,989 9,714 13,103 Acquisition and restructuring -- 4,919 -- 7,471 -------- -------- -------- -------- Total operating expenses 16,458 35,191 33,280 64,618 -------- -------- -------- -------- Operating income 1,335 161 1,850 3,323 Interest income (expense), net (501) 66 (993) 458 Other income (expense) (1,666) -- (1,666) -- -------- -------- -------- -------- Income (loss) before income taxes (832) 227 (809) 3,781 Provision (benefit) for income taxes -- (139) 3 614 -------- -------- -------- -------- Net income (loss) $ (832) $ 366 $ (812) $ 3,167 ======== ======== ======== ======== Net income (loss) per share $ (0.02) $ 0.01 $ (0.02) $ 0.08 ======== ======== ======== ======== Shares used to compute net income (loss) per share 38,062 37,924 37,902 38,424 ======== ======== ======== ======== Additional pro forma data: Income (loss) before income taxes $ (832) $ 227 $ (809) $ 3,781 Pro forma income taxes -- 2,999 3 4,003 -------- -------- -------- -------- Pro forma net income (loss) $ (832) $ (2,772) $ (812) $ (222) ======== ======== ======== ======== Pro forma net income (loss) per share $ (0.02) $ (0.07) $ (0.02) $ (0.01) ======== ======== ======== ======== Shares used to compute pro forma net income (loss) per share 38,062 37,924 37,902 38,424 ======== ======== ======== ========
The accompanying notes are an integral part of these consolidated unaudited condensed financial statements PAGE 4 5 QUARTERDECK CORPORATION AND SUBSIDIARIES CONSOLIDATED UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS (AMOUNTS IN THOUSANDS)
SIX MONTHS ENDED MARCH 31, 1997 1996 -------- -------- Cash flows from operating activities: Net income (loss) $ (812) $ 3,167 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization of equipment and leasehold improvements 2,570 1,747 Amortization of capitalized software costs 1,082 1,815 Write-off of property and equipment 176 -- Elimination of duplicate net income from acquired entities -- (717) Decrease in unrealized gain on marketable securities (544) (195) Changes in assets and liabilities: Trade accounts receivable (3,733) (15,704) Deferred tax asset -- (2,807) Inventories 540 (1,929) Other current assets 907 (1,577) Other assets 4,400 (5) Accounts payable (4,983) (8,957) Accrued liabilities (3,182) 3,243 Income taxes payable 177 271 Accrued acquisition, restructuring and other charges (7,416) 1,129 Foreign currency translation adjustment (36) (3) -------- -------- Net cash provided by (used in) operating activities (10,854) (20,522) -------- -------- Cash flows from investing activities: Sales of marketable securities -- 34,285 Loan to related party for Note receivable - Building -- (5,213) Capital expenditures (3,503) (4,907) Capitalized software costs (178) (1,554) Cash acquired in acquisitions -- 5,094 Payments for minority interest of other companies -- (4,858) -------- -------- Net cash provided by (used in) investing activities (3,681) 22,847 -------- -------- Cash flows from financing activities: Proceeds from issuance of Convertible Notes -- 25,000 Principal debt repayments (2,944) (243) Proceeds from bank borrowing 1,582 -- Dividends to shareholders of acquired entity -- (7,307) Net proceeds from issuance of preferred stock -- 50 Net proceeds from issuance of common stock 578 1,965 -------- -------- Net cash provided by (used in) financing activities (784) 19,465 -------- -------- Net increase (decrease) in cash and cash equivalents (15,319) 21,790 Cash and cash equivalents at beginning of period 25,554 5,384 -------- -------- Cash and cash equivalents at end of period $ 10,235 $ 27,174 ======== ======== Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 994 $ 197 Income taxes $ 50 $ 1,837 -------- -------- Non-cash transaction: Tax benefits arising from exercise of non-qualified stock options and warrants $ -- $ 1,100 -------- --------
The accompanying notes are an integral part of these consolidated unaudited condensed financial statements PAGE 5 6 QUARTERDECK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED UNAUDITED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The accompanying consolidated financial statements of Quarterdeck Corporation are unaudited (except for the Balance Sheet as of September 30, 1996) and have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements and should be read in conjunction with the consolidated financial statements and notes thereto included in Quarterdeck's Annual Report on Form 10-K for the fiscal year ended September 30, 1996. In the opinion of management, the accompanying consolidated unaudited financial statements include all adjustments which are necessary for a fair presentation. The results of operations for the three and six month periods ended March 31, 1997 are not necessarily indicative of results to be expected for the full fiscal year. 2. GENERAL Quarterdeck Corporation develops, markets, and supports software that enhances the performance, user productivity and cost-effectiveness of personal computing in standalone and networked environments. The company provides its software solutions to individual, business, and government/education users through retail distribution, resellers, direct marketing operations and Internet downloads. Its worldwide headquarters are in Marina del Rey, California, with Dublin, Ireland serving as its European headquarters. The Company was incorporated in California in 1982 as Quarterdeck Office Systems. In June 1991, the Company changed its state of incorporation from California to Delaware. In February 1995, the Company changed its name to Quarterdeck Corporation. The Company's principal offices are located at 13160 Mindanao Way, Marina del Rey, California, 90292; its telephone number is (310) 309-3700. Quarterdeck's Internet home page is located on the World Wide Web at http://www.quarterdeck.com/. Unless the context otherwise indicates, the "Company" and "Quarterdeck" refer to Quarterdeck Corporation, its predecessor and its subsidiaries. PAGE 6 7 3. BALANCE SHEET INFORMATION
MARCH 31, SEPTEMBER 30, 1997 1996 -------- ------------- (in thousands) Trade accounts receivable: Receivables ....................................... $ 25,684 $ 22,284 Less: allowance for doubtful accounts ............ (2,878) (2,032) Less: allowance for sales returns ................ (5,821) (7,213) Less: allowance for market development funds ..... (3,987) (3,774) -------- -------- $ 12,998 $ 9,265 ======== ======== Other current assets: Prepaid royalties ................................. $ 515 $ 901 Income tax receivable ............................. 1,537 2,825 Other prepaid expenses ............................ 1,014 1,150 Notes receivable .................................. 62 1 Advances to employees ............................. 19 26 Marketable securities ............................. 1,288 -- Other ............................................. 252 691 -------- -------- $ 4,687 $ 5,594 ======== ======== Equipment and leasehold improvements: Building (C.I.P.) ................................. $ 12,809 $ 11,069 Computer equipment ................................ 12,499 12,748 Office furniture and equipment .................... 11,073 9,910 Office furniture and equipment under capital leases 140 252 Leasehold improvements ............................ 1,561 1,586 -------- -------- 38,082 35,565 Less: accumulated depreciation and amortization .. (16,098) (14,313) -------- -------- $ 21,984 $ 21,252 ======== ======== Capitalized software costs: Capitalized software costs ........................ $ 5,697 $ 5,607 Less: accumulated amortization ................... (3,153) (2,159) -------- -------- $ 2,544 $ 3,448 ======== ======== Other assets: Marketable securities ............................. $ -- $ 968 Other investments ................................. 1,256 3,788 Notes receivable from employee .................... -- 13 Intangible assets acquired, net ................... 2,976 3,125 Other ............................................. 886 1,623 -------- -------- $ 5,118 $ 9,517 ======== ======== Accrued expenses: Accrued expenses, general ......................... $ 11,410 $ 12,599 Accrued payroll ................................... 1,208 2,052 Accrued vacation .................................. 1,510 1,460 Accrued advertising ............................... 66 1,121 -------- -------- $ 14,194 $ 17,232 ======== ======== Accrued acquisition, restructuring and other charges: Acquisition - pooling transactions ................. $ 1,883 $ 2,345 Acquisition - purchase transactions ................ 144 315 Restructuring ...................................... 1,418 8,280 -------- -------- $ 3,445 $ 10,940 ======== ========
PAGE 7 8
THREE MONTHS ENDED SIX MONTHS ENDED STATEMENT OF OPERATIONS MARCH 31, MARCH 31, SUPPLEMENTAL DATA 1997 1996 1997 1996 ------ ------ ------ ------ Acquisition, restructuring and other charges: Restructuring $ -- $ 42 $ -- $ 450 Acquisition -- 4,877 -- $7,021 In-process R&D -- -- -- -- ------ ------ ------ ------ $ -- $4,919 $ -- $7,471 ====== ====== ====== ======
4. CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments purchased with an original maturity to the Company of three months or less to be cash equivalents. Cash and cash equivalents at March 31, 1997 amounted to $10,235,000. 5. COMPUTATION OF NET INCOME PER SHARE The primary net income per common and common equivalent shares for the three and six month periods ended March 31, 1997 and 1996 have been computed using the weighted average number of common shares and also includes common stock equivalents unless their inclusion would result in higher earnings figures. The shares outstanding for each period are summarized below:
THREE MONTHS ENDED SIX MONTHS ENDED MARCH 31, MARCH 31, 1997 1996 1997 1996 ------ ------ ------ ------ Weighted average common stock outstanding during period 38,062 35,605 37,902 35,538 Common stock equivalents of stock options outstanding -- 2,319 -- 2,886 ------ ------ ------ ------ Shares used in primary net income per share calculation 38,062 37,924 37,902 38,424 ====== ====== ====== ======
Common stock equivalents consist of certain outstanding stock options and shares of common stock held in escrow. PAGE 8 9 6. RESTRUCTURING CHARGES During fiscal 1996, the Company implemented a comprehensive, corporate-wide restructuring plan. As a result of the plan, the Company recorded a restructuring charge and reduced its workforce by approximately 40%, eliminating nearly 500 positions. This restructuring focused the Company in the utilities and communications software categories. As part of the restructuring, the Company has centralized operations and eliminated many duplicate functions that resulted from a series of acquisitions during fiscal 1996 and 1995. The following is an analysis of the significant components of the fiscal 1996 restructuring and other charges and activity during the quarter ended March 31, 1997 (in thousands):
ACTIVITY ------------------------------------- Restructuring and Non-Cash Cash Paid Category Accrued as of Non-recurring Costs in Fiscal Reclass March 31, Costs Accrued at 1997 1997 December 31, 1996 ----------------- -------- ---------- --------- ------------- Discontinuance and $ 943 $ (137) $ (22) $ (185) $ 599 consolidation of offices Severance costs/other charges 1,236 (107) (1,449) 712 392 Write-off of property and 897 (85) 0 (527) 285 equipment ------ ------- ------- ----- ------ Total $ 3,076 $ (329) $(1,471) $ -- $1,276 ======= ======= ======= ===== =======
Quarterdeck expects the restructuring accrual to be utilized, primarily through cash disbursements, by the end of fiscal 1997. The Company anticipates the cash effect of such disbursements to be of declining significance throughout the remainder of fiscal 1997. Funding for these disbursements is expected to come from the Company's working capital and available borrowings. PAGE 9 10 7. LEGAL PROCEEDINGS Shareholder complaints were filed in November and December 1996 and January 1997 in the Superior Court of the State of California, County of Los Angeles, against the Company and one former and one current officer of the Company alleging, among other things, violations of certain provisions of California securities laws relating to statements made about the Company. The suits are purportedly brought on behalf of all persons who purchased the Company's common stock during the period January 26, 1996 through June 13, 1996 and seek damages in an unspecified amount and other relief. To date the Company has not filed a response to the complaints. Due to the early stage of the litigation and the inherent uncertainty, management is unable to estimate the impact on the Company's results of operations, financial condition, or liquidity, if any. Accordingly, no provision for any liability that may result from these suits has been made in the Company's consolidated financial statements (other than with respect to the $250,000 deductible under the Company's directors and officers insurance policy which has been utilized for costs relating to the defense). However, no assurances can be given that the ultimate disposition of these cases will not have a material adverse effect on the Company's results of operations and financial condition or liquidity. In March 1997, a purported class action lawsuit, Jack Abbott, et al. v. Quarterdeck Corporation, Case No. 00709198, was filed in the Superior Court of the State of California, County of San Diego. The complaint purports to allege claims against Quarterdeck on behalf of all licensees of MagnaRAM2 residing in the United States. The complaint alleges, among other things, that MagnaRAM2 fails to significantly increase Random Access Memory or otherwise help Windows 95 and Windows 3.x users. The plaintiffs seek compensatory damages and punitive damages in unspecified amounts, injunctive relief, and attorney fees and costs. Quarterdeck has not yet been served with this complaint. If it is so served, Quarterdeck intends to defend the case vigorously and to oppose any effort to certify the claims for class resolution. Quarterdeck is a defendant in various other pending claims and lawsuits. Management believes that the disposition of such matters will not have a material adverse impact on the results of operations or financial position of the Company. 8. SUBSEQUENT EVENT - LINE OF CREDIT During April, 1997, the Company established an asset based line of credit with Greyrock Business Credit, a division of NationsBank. The Company repaid and terminated the then existing line with Bank of America with proceeds from the new line. Maximum borrowings under the new line are $12,000,000. The Company may borrow 85% of eligible accounts receivable plus the value of inventory to a maximum of $2,000,000 up to the maximum borrowing amount. The line can be used for general corporate purposes, including investments and acquisitions, and bears interest at prime plus 2%. The line is secured by substantially all assets of Quarterdeck. The Company is obligated to pay a minimum interest charge of $10,000 per month and comply with certain other non-financial covenants and restrictions. At April 30, 1997 the Company had $1,500,000 outstanding under the line and the ability to borrow up to the maximum amount of $12,000,000. The current term of the agreement matures March 31, 1998 and contains renewal provisions. PAGE 10 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This discussion and analysis of financial condition and results of operations should be read in conjunction with the consolidated financial statements, the notes thereto and other information, including information set forth in the Company's 10-K for the fiscal year ended September 30, 1996 and all other recent filings the Company has made with the Securities and Exchange Commission before making an investment decision with respect to the Company's stock. In addition to an analysis of recent and historical financial results, this Form 10-Q includes a discussion of certain of the Company's business risks, including risks which are inherent to software development as well as specific trends and uncertainties relating to the competitive environment in which the Company operates. The Company has sought to identify and disclose the significant risks to its business. However, the Company cannot predict where or to what extent any of such risks may be realized nor can there be any assurance that the Company has identified all possible issues which the Company faces now or may face in the future. In particular, the Company has completed a number of acquisitions over the past two years and made investments in certain companies and is in the process of restructuring its operations in an attempt to maximize the benefit of such acquisitions (See trends and uncertainties for further discussion). There can be no guarantee that the restructuring or such acquisitions will ultimately be beneficial. This Form 10-Q contains forward-looking statements which are made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Within this Form 10-Q, words such as "believes", "anticipates", "plans", "expects", "intends", and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. These forward-looking statements involve a number of risks and uncertainties, including the timely development and market acceptance of products and technologies, sell-through of products in the sales channel, successful integration of acquisitions, the ability to secure additional sources of financing, the ability to reduce operating expenses and other factors described throughout this Form 10-Q and in the Company's other filings with the Securities and Exchange Commission. The actual results that the Company achieves may differ materially from any forward-looking statements due to such risks and uncertainties. The Company undertakes no obligation to revise or update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this report. RESULTS OF OPERATIONS Net Revenues: Net revenues for the three and six months ended March 31, 1997 decreased by $25,981,000 or 52.9% and $46,271,000 or 49.4% respectively, in relation to the comparative periods of the prior year. The decreases compared with the prior year periods resulted primarily from a steep decline in revenue from certain memory management products including QEMM and MagnaRAM and certain other communication, internet and utility products including Procomm, WebTalk and HiJaak. Version 3.0 of Procomm was released in the March 1996 quarter and had large initial shipments into the retail channel which have not continued at that level. Retailers such as Best Buy, Computer City, and Egghead recently have been closing stores and/or reducing the amount of software products purchased. As these retailers have historically represented approximately 25-30% of the Company's North American retail business, such changes may have a material adverse effect on the Company's future revenues. In an attempt to mitigate this potential negative effect, the Company has broadened its distribution through mass merchandisers, discount and club stores such as Walmart, Price-Costco and Sam's Club. There can be no assurance that the Company will be successful in replacing the lost revenues. During the March 1997 quarter, the Company achieved net revenue of $23,097,000 which was primarily the result of the continued marketplace success of core product lines, especially Cleansweep and Procomm. Also contributing to the March 1997 quarter revenues were the Company's new releases, including the Essential Utilities Suite, which bundles four existing products, and Iware 3.0, a new version of the Company's Internet connectivity product PAGE 11 12 for Novell networks. Internationally, Quarterdeck released French and German versions of Fix-It; U.K., French and German versions of Partition-It; and Japanese versions of Cleansweep 3.0, WebCompass 2.0, WinProbe 95 and MagnaRAM97. Net revenues from European and other international distributors, dealers and end-users outside of the United States amounted to $4,661,000 and $8,801,000, respectively, representing 20.2% and 18.5% of the Company's net revenues for the three and six month periods ended March 31, 1997. During the comparative periods of the prior year the company recorded non-US revenue of $9,336,000 and $16,537,000, respectively, or 19.0% and 17.6% of net revenue. The increased proportion of international revenues is largely due to the sales of Cleansweep. Due to the inherent uncertainties in software development and in the microcomputer software industry and the other factors discussed herein, the Company is unable to predict net revenue trends. Past performance is not necessarily indicative of future results. Cost of Revenues: The Company's cost of revenues includes product packaging, documentation and media, manufacturing expenses, amortization of capitalized software costs, technical support and production costs as well as translation costs and certain royalties paid to third parties. Overall cost of revenues decreased by $8,422,000 and $13,460,000 respectively for the three and six months ended March 1997, over the comparative periods of the prior year. Cost of revenues as a percentage of net revenues decreased to 23.0% and 26.0% for those periods as compared to 28.0% and 27.5% for the comparative periods. While the aggregate dollar reductions reflect the sales volume reduction, the reduced cost percentage is primarily due to an increased proportion of corporate licensing revenues, the ongoing shift toward lower-cost CD-ROM versus diskette versions of the Company's core products and the further consolidation and centralization of the production and purchasing functions which have enabled the Company to leverage volume pricing agreements and strengthen controls. Capitalized software development and purchased software costs are generally amortized over one to three year periods, commencing upon initial product release. Fluctuations in amortization expense between periods may arise depending on the amount of software costs incurred and capitalized for particular software products and their respective release dates. Amortization of capitalized software costs decreased from $685,000 for the three months and $1,826,000 for the six months ended March 31, 1996 to $421,000 and $1,082,000 for the comparative periods of the current fiscal year. The decrease in the first quarter was primarily due to a reduction in the amortization of ProComm and the decrease in the second quarter is due primarily to WebCompass having been fully amortized prior to the March 1997 quarter. Future cost of revenues as a percentage of net revenues will depend primarily on total sales, the mix of sales by product, domestic versus international, and by single unit versus multiple license packages and the proportion of revenues provided by corporate licensing. The microcomputer software industry has experienced increased price competition in recent years. The Company anticipates that increased price competition will continue in the future and may result in reduced average unit selling prices and corresponding reduced margins. In addition, the industry has been subject to rapid changes that can be expected to continue. The introduction of new or upgraded operating systems and future technology or market changes may cause certain products to become obsolete more quickly than expected and thus may result in capitalized software write-offs and an increase in required inventory reserves and, reduced gross margins and net income. PAGE 12 13 Research and Development: Research and development expenses consist primarily of salaries, benefits and consulting fees to support product development, including product testing and documentation. Research and development expense decreased by $2,135,000 and $2,820,000 respectively for the three and six months ended March 31, 1997 over the comparative periods of the prior year, while increasing as a percentage of net revenues from 11.7% and 11.2% for the respective fiscal 1996 periods to 15.6% and 16.3% for the current fiscal year periods. This decrease is primarily due to reduced research and development staffing levels on non-strategic products, a simplified management structure and certain benefits from acquisition integration. The Company capitalized $110,000 and $178,000 of purchased software development costs during the three and six months ended March 31, 1997. Quarterdeck did not capitalize any internal software development costs, since the majority of development efforts incurred during the periods related to new products for which technological feasibility had not been established. Quarterdeck anticipates that spending for software development and purchased software will continue as a significant expense in the future. Because of the inherent uncertainties of software development projects and the software market in general, the Company's software development efforts and purchased software may not result in successful product introductions or increased sales. Without successful product development and introductions the Company's results of operations may be materially adversely affected. Sales and Marketing, and General and Administrative: Sales and marketing, and general and administrative expenses consist of salaries and commissions and related costs of administrative, sales and marketing, customer service and support personnel as well as advertising, trade show and promotional expenses and facilities costs. Sales and marketing expenses decreased by $9,482,000 and $17,658,000, respectively, for the three and six months ended March 31, 1997, while decreasing as a percentage of net revenues from 35.8% and 35.7% for the fiscal 1996 periods to 34.9% and 33.4% for the current fiscal year periods, including a reduction in advertising and market development fund expense between March 31, 1996 and the comparative period in the current fiscal year of $3,882,000 and $9,225,000 respectively for the three and six months then ended. Advertising and marketing development expenses as a percentage of net revenues decreased from 12.1% and 14.1% for the three and six months ended March 31, 1996 to 9.0% and 8.4% for the current fiscal year periods. This decline in expenses is a reflection of the 1996 restructuring and Quarterdeck's efforts to bring variable spending in line with the underlying sell-through of the Company's products. General and administrative expenses decreased by $2,197,000 and $3,389,000, respectively, between the three and six months ended March 31, 1996 and the comparative periods of the current fiscal year while increasing as a percentage of net revenues from 14.2% and 14.0% for the 1996 periods to 20.7% and 20.5% for the current fiscal year periods. The Company is exploring additional actions to reduce these expenses as a percentage of revenue, including further facilities consolidation. Acquisition and Other Charges: There were no acquisition and other charges incurred for the three and six months ended March 31, 1997. The Company incurred acquisition charges of $4,877,000 and $7,021,000 for the three and six months ended March 31, 1996 primarily for costs incurred in connection with the acquisitions of Inset Systems, Inc. and Datastorm Technologies, Inc. These expenses included fees for financial advisory, legal and accounting services, personnel severance and benefits, and other related expenses. Restructuring Charges: There were no restructuring expenses incurred for the three and six months ended March 31, 1997, as compared to restructuring charges of $42,000 and $450,000 for the comparative periods of the prior year. The Company is seeking to reduce certain ongoing obligations by pursuing subleases for office space which has been vacated as a result of the restructuring. See Note 6 of the Notes to the Consolidated Financial Statements for a table and a detailed explanation of the activity during the quarter and the balances remaining. Primarily as a result of restructuring and lower sales volume, Quarterdeck reduced operating expenses for the quarter ended March 31, 1997 by approximately $13,814,000 versus the comparative quarter of the prior year. The operating expense reduction for the six months totals $23,867,000. The Company is currently conducting a further review of its operations. Such review may result in further consolidation and integration of its business as well as additional restructuring charges. PAGE 13 14 Other expense: During the three months ended March 31, 1997 the Company wrote down the value of its investment in Infonautics, Inc. due to their current public market value having declined considerably below the Company's carrying value. The Company recorded a charge of $1,666,000 to the Statement of Operations and charged equity directly for another $324,000 representing the estimated temporary portion of the decline. Income Taxes: A valuation allowance was recorded to offset 100% of the Company's $25,900,000 net deferred tax asset as of March 31, 1997. The net deferred tax asset of $25,900,000 (before applying the valuation allowance) is comprised of the estimated tax effect of expected future temporary differences and tax net operating losses, relating in part to charges taken for book purposes that are not deductible for federal income tax purposes until the amounts are paid in the future. Management believes that due to the fiscal 1996 financial results it is appropriate to record a full valuation allowance until such time as it becomes more likely than not that the Company will realize some or all of the benefit of the net deferred tax asset. Net Income: The net loss for the three and six month periods ended March 31, 1997 was $832,000 and $812,000, respectively, or $0.02 per share. This represents a decrease to net income of approximately $1,198,000 and $3,979,000 for the three and six month periods of fiscal 1997 as compared to fiscal 1996. The decrease in the March 1997 quarter is due in part to the recognition of a previously discussed write-down in the value of the Company's investment in Infonautics, Inc. Trends and Uncertainties: The computer software industry is subject to rapid technological changes often evidenced by new competing products and improvements in existing products. Quarterdeck depends on the successful development or acquisition and resulting sales of new products, including upgrades of existing products, to replace revenues from products introduced in prior periods that may have begun to experience reduced revenues. If Quarterdeck's current leading products become outdated and lose market share faster than those revenues are replaced by new products, or if new products or existing product upgrades are not introduced when planned or do not achieve the revenues anticipated by the Company, Quarterdeck's operating results could be materially adversely affected. Even with normal development cycles, the market environment can change so quickly that features in products can become outdated soon after market introduction. These events may occur in the future and may have an adverse effect on future revenues and operating results. While Quarterdeck expects that memory management will continue to provide benefit to users of Windows 95 and legacy systems, the Company has over the past two years expanded its focus from a sole reliance on memory management to a broader base of desktop utilities. Fiscal 1996 acquisitions of Limbex, Vertisoft, Future Labs, Datastorm, Inset, as well as other acquisitions completed during fiscal 1995 have broadened the Company's product portfolio and sales distribution channels. There are significant business risks associated with acquisitions, including the successful integration of the companies in an efficient and timely manner, the coordination of research and development and sales efforts, the retention of key personnel, diversion of management's attention away from day-to-day matters and the integration of the acquired products. Additionally, there may be an adverse impact on revenues of acquired companies due to the transition of products, sales and marketing, and research and development activities. The Company's future success will depend, in part, on its ability to further integrate the operations of acquired companies and effectively utilize the acquired intellectual property. Quarterdeck is focusing software product development efforts on products that are designed to operate on Windows 95 and Windows NT. Microsoft Corporation may incorporate advanced utilities or other features in Windows 95 or Windows NT that may decrease the demand for certain of the Company's products, including those under development. If Quarterdeck is not able to continue to develop and market products that function under Windows 95 and Windows NT, and offer value to Windows 95 and Windows NT users beyond that which is offered in the base operating systems, future revenues would be adversely affected. Future competitive product releases may cause disruptions in orders and lengthen sales cycles for the Company's products while users and the marketplace evaluate the competitive products. The extent of the disruption in orders and the impact on future orders of Quarterdeck's products will depend on various factors that are not fully known at this time. Among those factors are the level of functionality, performance and features included in the final release of competitive products and the market's evaluation of those products as compared to the then current functionality, performance and features of the Company's products. PAGE 14 15 Quarterdeck has also made investments in certain companies and technologies. The Company retained a portion of its investment in Lernout & Hauspie which is carried at $748,000 on the accompanying balance sheet in other current assets. The Company sold a portion of the investment in fiscal 1996 at a substantial gain and during April, 1997 the Company sold its remaining investment in Lernout & Hauspie. In the quarter ended March 31, 1997, the Company wrote-down its investment in Infonautics, Inc. The Company continues to monitor its investment in Infonautics, Inc., now carried at $540,000 and Intelligence at Large, carried at $1,250,000. The Company also owns a building in Columbia Missouri which has a net book value of $12,647,000 and is currently listed for sale. Additional write-downs of these assets, if necessitated by market conditions, could have a material adverse effect on the Company's financial results. Quarterdeck's distributor and reseller customers also carry the products of Microsoft Corporation and other of the Company's competitors, many of whom have substantially greater financial resources than the Company. The distributors and resellers have limited capital to invest in inventory and their decisions to purchase the Company's products and in the case of resellers, to give them critical shelf space, is partly a function of pricing, terms and special promotions offered by the Company's competitors, over which Quarterdeck has no control and which it cannot predict. There can be no assurance that the Company will negotiate successfully with resellers to obtain shelf space and other terms needed to sell the Company's products at the levels currently anticipated. Quarterdeck's pattern of revenues and earnings were affected during the third and fourth quarters of fiscal 1996, and may be affected in the future, by the phenomenon known as "channel fill." Channel fill occurs following the introduction of a new product or a new version of products as distributors buy significant quantities of the new product or version in anticipation of sales of such product or version. Following such purchases, the rate of distributors' purchases often declines, depending on the rates of purchases by end users or "sell-through." The phenomenon of "channel fill" may also occur in anticipation of price increases or in response to sales promotions or incentives, some of which may be designed to encourage customers to accelerate purchases that might otherwise occur in later periods. Channels may also become filled simply because the distributors are unable to, or do not, sell their inventories to retail distribution or end users as anticipated. If sell-through does not occur at a sufficient rate, distributors will delay purchases or cancel orders in later periods or return prior purchases in order to reduce their inventories. Consequently, there can be no assurance that existing channel inventories will not adversely impact the sales in future periods. In addition, between the date the Company announces a new version or new product and the date of release, distributors, dealers and end users often delay purchases, cancel orders or return products in anticipation of the availability of the new version or new product. Such order delays or cancellations may cause material fluctuations in revenues from one quarter to the next. Net revenues may be materially affected favorably or adversely by these effects. Quarterdeck operates with relatively little order backlog; therefore, if near-term demand for the Company's products weaken in a given quarter, there could be a material adverse effect on revenues and on the Company's operating results. Like other manufacturers of packaged software products, Quarterdeck is exposed to the risk of product returns from distributors, resellers and individual customers. There can be no assurance that actual returns in excess of recorded allowances will not result in a material adverse effect on business, operating results and financial condition. Quarterdeck's return policy generally allows its distributors, subject to certain limitations, to return purchased products in exchange for new products or for credit toward future purchases. However, competitive factors often require the Company to offer expanded rights of return for products that distributors or retailers are unable to sell. Product returns occur as a result of the introduction of upgrades and new versions of products or when distributors order excessive product. The Company estimates and maintains reserves for product returns. In addition to detailed historical return rates, the Company's estimate of return reserves takes into account future product upgrades and new releases, current market conditions and customer inventories, as well as any other known factors that could impact anticipated returns. However, there can be no assurance that future returns will not exceed the reserves established by the Company or that future returns will not have a material adverse effect on the operating results of the Company. PAGE 15 16 FACTORS AFFECTING QUARTERLY RESULTS AND STOCK PRICE Quarterdeck has in the past experienced wide fluctuations in its operating results and stock price, and the Company's future operating results and stock price could be subject to significant volatility, particularly on a quarterly basis. The Company's revenues and quarterly operating results may experience significant fluctuations and be unpredictable as the result of a number of factors including, among others, the factors noted above, including the introduction of new or enhanced products by the Company or its competitors, rapid technological changes in the Company's markets, seasonality of revenues, changes in operating expenses and general economic and market conditions. Any shortfalls in revenues or quarterly results could have an immediate and significant adverse effect on the trading price of the Company's common stock in any given period. Net income per share is calculated using the treasury stock method (see Note 5 of Notes to Consolidated Financial Statements). Increases in the price of Quarterdeck's stock can have an adverse impact on the calculation of net income per share in that period as more outstanding instruments are included as common shares outstanding. As a result of the foregoing factors and other factors that may arise in the future, the market price of the Company's common stock may be subject to significant fluctuations over a short period of time. These fluctuations may be due to factors specific to the Company, to changes in analysts' earnings estimates, or to factors affecting the computer industry or the securities markets in general. LIQUIDITY AND CAPITAL RESOURCES At March 31, 1997, cash and cash equivalents totaled $10,235,000 as compared to $25,554,000 at September 30, 1996. Working capital at March 31, 1997 amounted to a deficit of $825,000, an improvement of $3,859,000 as compared to the deficit of $4,684,000 at September 30, 1996. The improvement in working capital and the decrease in cash and cash equivalents of $15,319,000 during the six month period is primarily the result of the payment of accrued acquisition and restructuring costs, a significant paydown of accounts payable and accrued liabilities, an increase in accounts receivable, and approximately $3,500,000 paid for capital additions associated primarily with the construction of the Datastorm building in Columbia Missouri. The Company borrowed approximately $1,600,000 during the March 1997 quarter under the construction loan to finance, in part, the final stages of construction. Operating Activities: At March 31, 1997, trade accounts receivable totaled $12,998,000, compared to $9,265,000 at September 30, 1996. Trade accounts receivable balances at March 31, 1997 primarily reflect stronger sales in the current quarter of $23,097,000 as compared to $19,740,000 for the quarter ended September 30, 1996. Accounts receivable days sales outstanding (DSO) were approximately 51 and 43 days at March 31, 1997 and September 30, 1996, respectively. The increase in days sales outstanding is primarily due to a $3,400,000 increase in gross accounts receivable as a result of stronger sales and a $2,400,000 decrease in the allowance for sales returns between September 30, 1996 and March 31, 1997 due to the receipt and processing of returns that had previously been reserved. Inventories decreased to $1,610,000 from $2,151,000 primarily as a result of improved inventory control and management of the purchasing process. Other current assets decreased by $907,000 primarily due to a $1,200,000 federal income tax refund which was received during the December 1996 quarter and other decreases which were partially offset by a reclassification to this account from Other non current assets of $1,288,000 relating to the Company's investments in Lernout & Hauspie, Inc. and Infonautics, Inc. Other assets decreased by $4,399,000 primarily due to a reclassification of certain investments to Other current assets. The write-down of the value of the Infonautics investment also reduced the aggregate amount of these assets. The Company reduced its trade accounts payable by $4,983,000 from $10,685,000 at September 30, 1996 to $5,702,000 at March 31, 1997. This reduction is primarily due to the utilization of available cash to pay the Company's trade vendors. PAGE 16 17 Investing Activities: The Company purchased capital assets composed of property, plant and equipment, and capitalized software in the amounts of $3,503,000 and $178,000 respectively during the six months ended March 31, 1997. The capital expenditures were primarily incurred for construction of the Columbia, Missouri building and related furniture and fixtures, in addition to the purchase of a predictive dialing system for the Clearwater, Florida direct sales division. On August 6, 1996, the Company's Datastorm subsidiary secured construction financing for a new facility from a bank for up to $5,000,000 with an interest rate equal to the bank's commercial base rate, currently prime plus 2%, secured by the newly constructed Columbia, Missouri building. The principal amount outstanding as of March 31, 1997 was $4,300,000. The principal amount plus any unpaid interest was originally due February 7, 1997, and has been extended until June 7, 1997 with the maximum borrowings reduced to $4,500,000. During the third quarter of fiscal 1997 the Company plans to borrow the remaining $200,000 available under this loan as well as pay an additional $220,000 of the Company's own cash for the completion of the building. Management is pursuing the sale and/or lease of the facility and other long-term take-out financing options. There can be no assurance that the Company will be successful in achieving a sale on favorable terms or in obtaining such long-term financing with acceptable terms and conditions. In April 1996, the Company's Datastorm subsidiary borrowed $2,000,000 from a bank to partially finance the completion of the building in Columbia, Missouri. The loan was secured by Datastorm's equipment and initially had an interest rate of 4.5% per annum. The rate was subsidized, in part by the State of Missouri in exchange for the Company achieving certain local employment targets. As part of the Company's restructuring the Company revised downward the personnel complement at this location. As a result, it has written off a significant portion of the equipment and collateral at this location, and the interest rate was raised to 8.5%. The Company repaid $1,750,000 of the loan during the current quarter. The outstanding loan balance as of March 31, 1997 was $250,000 which was paid in April, 1997. The Company had a revolving credit facility with Bank of America secured by accounts receivable and inventory which was replaced with a new credit facility in April, 1997. The outstanding balance under this facility was $2,450,000 as of March 31, 1997. This revolving credit facility was repaid, with borrowings from the Company's new line of credit, and closed in April 1997. During April 1997, the Company established an asset based line of credit with Greyrock Business Credit, a division of NationsBank. The Company repaid and terminated the then existing line with Bank of America with proceeds from the new line. Maximum borrowings under the new line are $12,000,000. The Company may borrow 85% of eligible accounts receivable plus the value of inventory to a maximum of $2,000,000 up to the maximum borrowing amount. The line can be used for general corporate purposes, including investments and acquisitions, and bears interest at prime plus 2%. The line is secured by substantially all assets of Quarterdeck. The Company is obligated to pay a minimum interest charge of $10,000 per month and comply with certain other non-financial covenants and restrictions. At April 30, 1997 the Company had $1,500,000 outstanding under the line and the ability to borrow up to the maximum amount of $12,000,000. The current term of the agreement matures March 31, 1998 and contains renewal provisions. In conjunction with the Company's August, 1996 acquisition of Limbex Corporation, the Company has an obligation to pay an additional $3,600,000, or issue shares in lieu of cash, on the one year anniversary of the acquisition. It is the Company's intention to issue shares of common stock to satisfy this obligation. The shares will be valued at the time of issuance. Divestiture of Products: As part of its restructuring, the Company intends to dispose of certain non-core products, technologies and operations obtained as part of the acquisitions which do not fit into the Company's ongoing strategy. There can be no assurance that such divestitures will be successfully completed. PAGE 17 18 The Company conducts business in various foreign currencies and is therefore subject to the transaction exposures that arise from foreign exchange rate movements between the dates that foreign currency transactions are recorded and the date that they are consummated. The Company is also subject to certain exposures arising from translation of the foreign subsidiaries financial statements. There can be no assurance that actions taken to manage such exposures will continue to be successful or that future changes in currency exchange rates will not have a material impact on the Company's future operating results. The Company does not hedge either its translation risk or its economic risk. Liquidity: The Company believes existing cash and cash equivalents, borrowing capacity, plus funds provided by operations and the potential proceeds from the divestiture of non-core products and technologies, as well as anticipated proceeds from the sale of, or other take-out financing arrangements with respect to, the Columbia, Missouri facility should be sufficient to fund operations for the coming twelve months. Although the expense reductions resulting from the restructuring are anticipated to provide additional funds from operations in future quarters, there is no assurance that such anticipated savings will occur or that any such increase will result in adequate operating funds, or that sales will occur at anticipated levels or that potential proceeds from divestitures and/or the Columbia facility sale or take-out financing will occur, or that such additional financing will be available, or if available, will be available on acceptable terms. Should product orders or shipments be delayed or should the Company experience significant shortfalls in planned revenues or collections, or not achieve sufficient cost savings as a result of the restructuring, or experience unforeseen fixed expenses, the Company believes it has the ability to make additional reductions to variable expenses to extend its capital. The Company is actively exploring other financing alternatives, including additional sales of equity securities and/or the divestiture of non-core products and assets. Any decision or ability to obtain financing through equity investment will depend on various factors, including, among others, financial market conditions, strategic acquisition and investment opportunities, and developments in the Company's markets. The sale of additional equity securities or future conversion of any convertible security would result in additional dilution to the Company's stockholders. PAGE 18 19 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Shareholder complaints were filed in November and December 1996 and January 1997 in the Superior Court of the State of California, County of Los Angeles, against the Company and one former and one current officer of the Company alleging, among other things, violations of certain provisions of California securities laws relating to statements made about the Company. The suits are purportedly brought on behalf of all persons who purchased the Company's common stock during the period January 26, 1996 through June 13, 1996 and seek damages in an unspecified amount and other relief. To date the Company has not filed a response to the complaints. Due to the early stage of the litigation and the inherent uncertainty, management is unable to estimate the impact on the Company's results of operations, financial condition, or liquidity, if any. Accordingly, no provision for any liability that may result from these suits has been made in the Company's consolidated financial statements (other than with respect to the $250,000 deductible under the Company's directors and officers insurance policy which has been utilized for costs relating to the defense). However, no assurances can be given that the ultimate disposition of these cases will not have a material adverse effect on the Company's results of operations and financial condition, or liquidity. In March 1997, a purported class action lawsuit, Jack Abbott, et al. v. Quarterdeck Corporation, Case No. 00709198, was filed in the Superior Court of the State of California, County of San Diego. The complaint purports to allege claims against Quarterdeck on behalf of all licensees of MagnaRAM2 residing in the United States. The complaint alleges, among other things that MagnaRAM2 fails to significantly increase Random Access Memory or otherwise help Windows 95 and Windows 3.x users. The plaintiffs seek compensatory damages and punitive damages in unspecified amounts, injunctive relief, and attorney fees and costs. Quarterdeck has not yet been served with this complaint. If it is so served, Quarterdeck intends to defend the case vigorously and to oppose any effort to certify the claims for class resolution. Quarterdeck is a defendant in various other pending claims and lawsuits. Management believes that the disposition of such matters will not have a material adverse impact on the results of operations or financial position of the Company. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits None (b) Reports on Form 8-K A Form 8-K with respect to a press release issued January 14, 1997, which announced the appointment of a new chief executive officer was filed with the Securities and Exchange Commission on January 14, 1997. PAGE 19 20 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. QUARTERDECK CORPORATION (Registrant) Date: May 13, 1997 /s/ CURTIS A. HESSLER Curtis A. Hessler President and Chief Executive Officer Date: May 13, 1997 /s/ FRANK GREICO Frank Greico Sr. Vice President and Chief Financial Officer PAGE 20 EX-27 2 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS INCLUDED WITH THE QUARTERLY REPORT ON FORM 10Q DATED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND QUARTERLY REPORT. 1,000 3-MOS SEP-30-1997 JAN-01-1997 MAR-31-1997 10,235 0 25,684 12,686 1,610 29,530 38,082 16,098 59,176 30,355 25,000 0 20,000 38 (16,357) 59,176 23,097 23,097 5,304 16,458 1,666 0 501 (832) 0 (832) 0 0 0 (832) (0.02) (0.02)
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