-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, MfP1LGVmODpU7TT/r18CaB/BJ7KcNl0+bZQhApUZJoGT54y8PV3KG9Zj5ULptOXb Y1rpf7kFcksXfcgpOci3eA== 0000950005-95-000140.txt : 199507170000950005-95-000140.hdr.sgml : 19950717 ACCESSION NUMBER: 0000950005-95-000140 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950531 FILED AS OF DATE: 19950714 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTEGRATED SYSTEMS INC CENTRAL INDEX KEY: 0000775163 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 942658153 STATE OF INCORPORATION: CA FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18268 FILM NUMBER: 95553935 BUSINESS ADDRESS: STREET 1: 3260 JAY ST CITY: SANTA CLARA STATE: CA ZIP: 95054-3309 BUSINESS PHONE: 4089801500 MAIL ADDRESS: STREET 1: 3260 JAY STREET CITY: SANTA CLARA STATE: CA ZIP: 95054-3309 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------- FORM 10-Q (Mark One) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended May 31, 1995 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to -------------- ------------- Commission file number: 0-18268 ------------------------------ INTEGRATED SYSTEMS, INC. (Exact name of Registrant as specified in its charter) California 94-2658153 (State or other jurisdiction (I.R.S. employer of incorporation or organization) identification no.) ------------------------------ 3260 Jay Street Santa Clara, California 95054-3309 (408) 980-1500 (Address, including zip code, of Registrant's principal executive offices and telephone number, including area code) ------------------------------ 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 period 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 outstanding of the Registrant's Common Stock on June 30, 1995 was 9,598,616 shares. The Exhibit Index is located on page 11. Page 1 of 15 pages. INTEGRATED SYSTEMS, INC. INDEX Page PART I - FINANCIAL INFORMATION Item 1. Financial Statements 3 Condensed Consolidated Balance Sheets at May 31, 1995 and February 28, 1995 4 Condensed Consolidated Statements of Income for the Three Months Ended May 31, 1995 and 1994 5 Condensed Consolidated Statements of Cash Flows for the Three Months Ended May 31, 1995 and 1994 6 Notes to Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II - OTHER INFORMATION Item 1. Legal Proceedings 11 Item 5. Other Information 11 Item 6. Exhibits and Reports on Form 8-K 11 SIGNATURES 13 -2- PART I - FINANCIAL INFORMATION Item 1. Financial Statements The condensed consolidated interim financial statements included herein have been prepared by Integrated Systems, Inc. (the "Company"), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Although certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, the Company believes that the disclosures made are adequate to make the information presented not misleading. It is suggested that the condensed consolidated interim financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended February 28, 1995. The February 28, 1995 condensed consolidated balance sheet data was derived from the audited financial statements, but does not include all disclosures required by generally accepted accounting principles. The accompanying condensed consolidated interim financial statements have been prepared in all material respects in conformity with the standards of accounting measurements set forth in Accounting Principles Board Opinion No. 28 and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, necessary to summarize fairly the financial position, results of operations, and cash flows for the periods indicated. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year. Prior to fiscal 1996, the Company's fiscal year was reported on a 52/53-week period ending on the last Saturday in February of each year. Accordingly, quarterly periods did not necessarily end on the last day of a calendar month. Beginning in fiscal 1996, the Company's fiscal year end is the last day in February and quarterly periods will end on the last day of a calendar month. The effect of this change was not material to the Company's financial statements for the first quarter of fiscal 1996. For clarity of presentation herein, all fiscal periods are described as ending on a calendar month-end. -3- INTEGRATED SYSTEMS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) May 31, February 28, 1995 1995 -------- -------- (unaudited) ASSETS Current assets: Cash and cash equivalents ...................... $ 9,201 $ 7,144 Marketable securities, current ................. 9,714 6,472 Accounts receivable, net ....................... 11,570 14,156 Deferred income taxes .......................... 967 1,153 Other current assets ........................... 2,574 2,757 -------- -------- Total current assets ...................... 34,026 31,682 Marketable securities, noncurrent ................... 20,672 22,299 Property and equipment, net ......................... 2,921 2,584 Other assets ........................................ 576 427 Intangible assets, net .............................. 5,019 5,466 -------- -------- Total assets .............................. $ 63,214 $ 62,458 ======== ======== LIABILITIES Current liabilities: Accounts payable ............................... $ 2,052 $ 1,741 Accrued payroll and related expenses ........... 1,454 2,110 Other accrued liabilities ...................... 2,843 3,097 Income taxes payable ........................... 1,631 1,952 Deferred revenue ............................... 5,771 6,067 -------- -------- Total current liabilities ................. 13,751 14,967 Other liabilities ................................... 185 200 -------- -------- Total liabilities ......................... 13,936 15,167 -------- -------- SHAREHOLDERS' EQUITY Common Stock, no par value, 25,000 shares authorized: 9,565 and 9,494 shares issued and outstanding at May 31, 1995 and February 28, 1995, respectively ................................... 36,171 35,529 Unrealized holding gain (loss) on marketable securities, net ................................ 169 (109) Retained earnings ................................... 12,938 11,871 -------- -------- Total shareholders' equity ................ 49,278 47,291 -------- -------- Total liabilities and shareholders' equity .................................. $ 63,214 $ 62,458 ======== ======== The accompanying notes are an integral part of these condensed consolidated financial statements. -4- INTEGRATED SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data) (unaudited) Three Months Ended May 31, -------------------- 1995 1994 ------- ------- Revenue: Product licenses ................................. $ 9,519 $ 5,789 Maintenance and renewals ......................... 2,337 2,301 Engineering services ............................. 2,286 2,011 ------- ------- Total revenue ................................ 14,142 10,101 ------- ------- Costs and expenses: Cost of product licenses revenue ................. 1,761 653 Cost of maintenance and renewals revenue ......... 153 165 Cost of engineering services revenue ............. 1,721 1,449 Marketing and sales .............................. 5,697 4,179 Research and development ......................... 2,339 1,707 General and administrative ....................... 1,233 877 Amortization of intangible assets ................ 186 532 ------- ------- Total costs and expenses ..................... 13,090 9,562 ------- ------- Income from operations ................... 1,052 539 Interest and other income ............................ 517 391 ------- ------- Income before income taxes ............... 1,569 930 Provision for income taxes ........................... 502 298 ------- ------- Net income ............................... $ 1,067 $ 632 ======= ======= Earnings per share ................................... $ 0.11 $ 0.07 ======= ======= Shares used in per share calculations ................ 9,976 9,452 ======= ======= The accompanying notes are an integral part of these condensed consolidated financial statements. -5- INTEGRATED SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Three Months Ended May 31, ------------------ 1995 1994 ------- ------- Cash flows from operating activities: Net income ........................................... $ 1,067 $ 632 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization .................... 982 920 Changes in assets and liabilities: Accounts receivable ....................... 2,586 1,614 Other current assets ...................... 183 (627) Accounts payable, accrued payroll and other accrued liabilities ............ (599) (824) Income taxes payable ...................... (321) (607) Deferred revenue .......................... (296) (14) Other assets and liabilities .............. (164) (103) ------- ------- Net cash provided by operating activities ........ 3,438 991 ------- ------- Cash flows from investing activities: Purchases of marketable securities, net .............. (1,151) (55) Additions to property and equipment, net ............. (712) (480) Capitalized software development costs ............... (160) (300) ------- ------- Net cash used in investing activities ............ (2,023) (835) ------- ------- Cash flows from financing activities: Proceeds from exercise of common stock options and purchases under the employee stock purchase plan . 642 375 ------- ------- Net cash provided by financing activities ........ 642 375 ------- ------- Net increase in cash and cash equivalents ................ 2,057 531 Cash and cash equivalents at beginning of period ......... 7,144 8,021 ------- ------- Cash and cash equivalents at end of period ............... $ 9,201 $ 8,552 ======= ======= Supplemental disclosure of noncash investing and financing activities: Unrealized gain (loss) on marketable securities ...... $ 464 $ (429) The accompanying notes are an integral part of these condensed consolidated financial statements. -6- INTEGRATED SYSTEMS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Information for the three months ended May 31, 1995 and 1994 is unaudited) 1. Summary of Significant Accounting Policies The condensed consolidated financial statements include the accounts of Integrated Systems, Inc. and its majority owned subsidiaries, after elimination of all significant intercompany accounts and transactions, and should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended February 28, 1995. These condensed consolidated financial statements do not include all disclosures normally required by generally accepted accounting principles. 2. Software Development Costs The Company incurs certain costs to develop computer software to be licensed or otherwise marketed to customers. Costs that are required to be capitalized under Statement of Financial Accounting Standards No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed" ("SFAS No. 86") were $160,000 in the first three months of fiscal 1996 compared to $300,000 in the same period of the previous year. Such costs are being amortized using the greater of the amount computed using the ratio that current gross revenues for a product bear to the total of current and anticipated future gross revenues for that product, or on a straight-line basis over three years. Amortization for the three months ended May 31, 1995 was $214,000 compared to $45,000 for the three months ended May 31, 1994. 3. Earnings Per Share Earnings per share is computed using the weighted average number of common and common equivalent shares outstanding during the period. Common equivalent shares result from the assumed exercise of outstanding stock options that have a dilutive effect when applying the treasury stock method. The following table sets forth the calculation of earnings per share for purposes of this report: Three Months Ended May 31, ------------------- (in thousands, except per share data) 1995 1994 ------ ------ (unaudited) Primary: Net income ........................................ $1,067 $ 632 ====== ====== Number of shares: Weighted average number of common shares outstanding ......................... 9,535 9,162 Dilutive effect of stock options, net ........ 441 290 ------ ------ 9,976 9,452 ====== ====== Earnings per share ..................................... $ 0.11 $ 0.07 ====== ====== Fully diluted: Net income ........................................ $1,067 $ 632 ====== ====== Number of shares: Weighted average number of common shares outstanding ......................... 9,535 9,162 Dilutive effect of stock options, net ........ 441 298 ------ ------ 9,976 9,460 ====== ====== Earnings per share ..................................... $ 0.11 $ 0.07 ====== ====== -7- 4. Contingency Settlement In November 1994, the Company and Microtec Research, Inc. (MRI), a development tools supplier, began arbitration proceedings related to a royalty payment dispute. In March 1995, the Company received notification that the judgment in the arbitration proceedings was principally in favor of MRI. In June 1995, the final award was determined to be $690,000 plus a portion of MRI's legal fees and costs. A majority of the award amount was accrued for in the prior fiscal year. The remainder of the award and the Company's legal costs, which were incurred in the first quarter of fiscal 1996, were charged to expense in the first quarter of fiscal 1996. 5. Change in Fiscal Year Prior to fiscal 1996, the Company's fiscal year was reported on a 52/53-week period ending on the last Saturday in February of each year. Accordingly, quarterly periods did not necessarily end on the last day of a calendar month. Beginning in fiscal 1996, the Company's fiscal year end is the last day in February and quarterly periods will end on the last day of a calendar month. The effect of this change was not material to the Company's financial statements for the first quarter of fiscal 1996. For clarity of presentation herein, all fiscal periods are described as ending on a calendar month-end. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following information should be read in conjunction with the condensed consolidated interim financial statements and the notes thereto included in Item 1 of this Quarterly Report and with Management's Discussion and Analysis of Financial Condition and Results of Operations contained in the Company's Annual Report on Form 10-K for the year ended February 28, 1995, as filed with the Securities and Exchange Commission on May 26, 1995. Results of Operations The following table sets forth for the periods indicated the percentage of total revenue represented by each line item in the Company's condensed consolidated statements of income and the percentage change from the comparative prior period in each line item:
Percentage of Period-to-Period Total Revenue Percentage Change ------------------ --------------------- Three Months Ended Three Months Ended May 31, May 31, 1995 1994 1995 compared to 1994 ----- ----- --------------------- Revenue: Product licenses .................................................. 67% 57% 64% Maintenance and renewals .......................................... 17 23 2 Engineering services .............................................. 16 20 14 --- --- Total revenue ................................................ 100 100 40 --- --- Costs and expenses: Cost of product licenses revenue .................................. 13 7 170 Cost of maintenance and renewals revenue .......................... 1 2 (7) Cost of engineering services revenue .............................. 12 14 19 Marketing and sales ............................................... 40 41 36 Research and development .......................................... 17 17 37 General and administrative ........................................ 9 9 41 Amortization of intangible assets ................................. 1 5 (65) --- --- Total costs and expenses ..................................... 93 95 37 --- --- Income from operations .................................. 7 5 95 Interest and other income .............................................. 4 4 32 --- --- Income before income taxes .............................. 11 9 69 Provision for income taxes ............................................. 3 3 68 --- --- Net income .............................................. 8% 6% 69% --- ---
-8- Revenue The Company's revenue is primarily derived from the licensing of its products, related maintenance and license renewals, and engineering services. Total revenue in the first quarter of fiscal 1996 of $14,142,000 increased 40% compared to the first quarter of fiscal 1995 due to growth in all revenue categories. Total product licenses revenue increased by 64% in the first quarter of fiscal 1996 compared to the first quarter of fiscal 1995 due to growth in both the real-time and MATRIXx product lines. Total maintenance and renewals revenue increased by 2% over the prior year's first quarter. Engineering services revenue increased by 14% between the comparative periods due to increases in the number and size of contracts. The Company's real-time product licenses, maintenance and renewals revenue increased 71% in the first quarter of fiscal 1996 compared to the same quarter of the prior fiscal year as the embedded software market continues to grow. Contributing to revenue growth of the real-time product family was the introduction of pSOSystem for the PowerPC in the first quarter of fiscal 1996 and sales of the FlexOS product line, which was acquired in the third quarter of fiscal 1995. Real-time product licenses, maintenance and renewals revenue in the first quarter of fiscal 1996 increased in all geographic regions. MATRIXx product licenses, maintenance and renewals revenue increased 19% in the first quarter of fiscal 1996 compared to the first quarter of fiscal 1995 due to an increase in European sales and the introduction of new products, particularly MATRIXx for Windows NT and MATRIXx version 4.1. Domestic product licenses, maintenance and renewals revenue increased by 27% between the comparative quarterly periods, while international product licenses, maintenance and renewals revenue increased by 84%. The percentage of the Company's total revenue from customers located internationally increased to 36% in the first quarter of fiscal 1996, compared to 27% in the first quarter of fiscal 1995. Costs and Expenses The Company's cost of product licenses revenue as a percentage of total revenue increased to 13% in the first quarter of fiscal 1996 compared to 7% in the first quarter of fiscal 1995 due primarily to an increase in the amortization of capitalized research and development expenditures with the recent releases of new products and an increase in royalty payments related to third party software sales. In addition, a portion of the arbitration award costs related to a royalty payment dispute with a development tools supplier were charged to cost of revenue in the first quarter of fiscal 1996 (see Note 4 of Notes to Condensed Consolidated Financial Statements). The cost of maintenance and renewals revenue as a percentage of total revenue was not significant in the first quarter of fiscal 1996 and fiscal 1995. The cost of engineering services revenue increased as a percentage of engineering services revenue due primarily to changes in contract mix. Marketing and sales expenses increased 36% quarter over quarter but decreased from 41% to 40% of total revenue. The Company expects sales and marketing expenses as a percentage of revenue to be lower for the whole of fiscal 1996. Research and development expenses increased by 37% between the quarterly comparative periods. This increase was primarily the result of increased activity associated with bringing several significant products to market, including increased personnel and consulting expenses, and due to a decrease in software capitalization. Costs that are required to be capitalized under Statement of Financial Accounting Standards No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed" ("SFAS No. 86") were $160,000 in the first quarter of fiscal 1996 compared to $300,000 in the first quarter of fiscal 1995. The amount capitalized represents approximately 6% of total research and development expenditures for the first quarter of fiscal 1996 compared to 15% for the first quarter of fiscal 1995. The amount of research and development expenditures capitalized in a given time period depends upon the nature of the development performed and, accordingly, amounts capitalized may vary from period to period. Capitalized costs are being amortized using the greater of the amount computed using the ratio that current gross revenues for a product bear to the total of current and anticipated future gross revenues for that product, or on a straight-line basis over three years. Amortization for the three months ended May 31, 1995 was $214,000 compared to $45,000 for the three months ended May 31, 1994. General and administrative expenses increased 41% between the three-month comparative periods due primarily to legal expenses associated with arbitration proceedings between the Company and a development tools supplier (see Note 4 of Notes to Condensed Consolidated Financial Statements). Amortization of intangible assets in the first quarter of fiscal 1996 has decreased from the prior year quarter as certain assets and deferred compensation related to the acquisition of Software Components Group, Inc. in the second quarter of fiscal 1992 became fully amortized in fiscal 1995. -9- Other The Company's interest and other income increased by $126,000 between the three-month quarterly comparative periods due primarily to an increase in cash and marketable securities. Risk Factors That May Affect Future Results of Operations The Company believes that in the future, its results of operations could be impacted by factors such as delays in shipment of the Company's new products and major new versions of existing products, market acceptance of new products and upgrades, growth in the marketplace in which it operates, competitive product offerings and adverse changes in general economic conditions in any of the countries in which the Company does business. The Company's performance may also be adversely affected by the ability of its suppliers to provide competitive products. During the quarter, the Company's competitors have continued to make a variety of product announcements and offerings. The Company continues to release new versions of its product lines and the successful acceptance of these products will play a key role in future growth. The impact of any of these factors is difficult to predict or forecast. During any quarter, the Company receives a relatively small number of large orders. Delays in the receipt of one or more such orders would have a significant negative impact on quarterly revenue and a potentially more significant impact on earnings. Due to the risk factors noted above, the Company's future earnings and stock price may be subject to significant volatility, particularly on a quarterly basis. Any shortfall in revenue or earnings from levels expected by securities analysts could have an immediate and significant adverse effect on the trading price of the Company's common stock in any given period. Additionally, the Company often does not learn of such shortfalls until late in the fiscal quarter, or after the quarter is over, which could result in an even more immediate and adverse effect on the trading price of the Company's common stock. Finally, the Company participates in a highly dynamic industry, which often results in significant volatility of the Company's common stock price. Consequently, the purchase or holding of the Company's stock involves a high degree of risk. Liquidity and Capital Resources The Company has funded its operations to date principally through cash flows from operations. As of May 31, 1995, the Company had $39,587,000 of cash, cash equivalents and marketable securities. This represents an increase of $3,672,000 from February 28, 1995. During fiscal 1995, the Company announced that the Board of Directors authorized the Company to repurchase up to an additional 500,000 shares of common stock for cash, from time-to-time at market prices, pursuant to a repurchase program announced in September 1992. In fiscal 1995, under this program, the Company repurchased 125,000 shares of common stock for $1,094,000. The Company believes that cash flows from operations, together with existing cash balances and available borrowings, will be adequate to meet the Company's cash requirements for working capital, capital expenditures and stock repurchases for the next twelve months and the foreseeable future. Net cash provided by operating activities during the three months ended May 31, 1995 totaled $3,438,000 compared to $991,000 in the three months ended May 31, 1994. The increase in net cash provided by operating activities was primarily due to increased net income and from changes in accounts receivable and other current assets. Net cash used in investing activities totaled $2,023,000 in the first three months of fiscal 1996 compared to $835,000 in the first three months of fiscal 1995. The increase in net cash used in investing activities was due primarily to net purchases of marketable securities and increased expenditures on property and equipment. Net cash provided by financing activities during the three months ended May 31, 1995 totaled $642,000 compared to $375,000 for the three months ended May 31, 1994. This increase was due to an increase in proceeds from the exercise of common stock options and purchases under the Employee Stock Purchase Plan. The Company expects that it will be able to sustain its level of expenditures on property and equipment and fund operational needs for the next twelve months and the foreseeable future, from cash flow from operations. -10- PART II - OTHER INFORMATION Item 1. Legal Proceedings The information required by this item is incorporated by reference to Note 4 of Notes to Condensed Consolidated Financial Statements on page 8 of this report. Item 5. Other Information Not applicable. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. The following exhibits are filed herewith: Exhibit Page Number Title Number ------- ----- ------ 10.13 Form of Stock Option Exercise Form used in 14 connection with Registrant's 1988 Stock Option Plan, as amended to date. 27.00 Financial Data Schedule 15 The following exhibits are incorporated herein by reference: Exhibit Number Title ------- ------ 2.01 Agreement and Plan of Reorganization by and among Registrant, Software Components Group, Inc. a California corporation ("SCG"), and Alfred Chao dated as of August 9, 1991 (incorporated by reference to Exhibit Number 2.01 to Registrant's Form 8-K filed with the Securities and Exchange Commission on September 3, 1991 (the "September 3, 1991 Form 8-K")). 2.02 Agreement of a Merger by and between Registrant and SCG dated as of August 20, 1991 (incorporated by reference to Exhibit Number 2.02 to the September 3, 1991 Form 8-K). 3.01(i) Registrant's Articles of Incorporation, as amended to date (incorporated by reference to Exhibit Number 3.04 to the Registrant's Form 10-K for the fiscal year ended February 28, 1993). 3.01(ii) Registrant's Bylaws, as amended July 14, 1993 (incorporated by reference to Exhibit Number 3.03 to Registrant's Form 10-Q for the quarter ended August 31, 1993). 10.01 * Registrant's 401(k) Plan (incorporated by reference to Exhibit Number 10.01 to Registrant's Registration Statement on Form S-1 under the Securities Act of 1933, as amended, filed January 26, 1990, Registration No. 33-33219 (the "S-1 Registration Statement")). 10.02 * Registrant's 1983 Incentive Stock Option Plan, as amended to date, and related documents (incorporated by reference to Exhibit Number 10.02 to the S-1 Registration Statement). 10.03 * Registrant's 1988 Stock Option Plan, as amended to date (incorporated by reference to Exhibit Number 4.01 to the Registrant's Form S-8 filed with the Securities and Exchange Commission on June 16, 1992). - -------------------- * Represents a management contract or compensatory plan or arrangement. -11- Exhibit Number Title ------- ----- 10.04 * Registrant's 1990 Stock Purchase Plan, as amended to date (incorporated by reference to Exhibit Number 4.03 to the Registrant's Form S-8 filed with the Securities and Exchange Commission on October 18, 1993). 10.05 * Form of Indemnity Agreement with Directors (incorporated by reference to Exhibit Number 10.06 to the S-1 Registration Statement). 10.06 Lease Agreement by and between Registrant and Boyd C. Smith, Trustee of the Richard T. Peery 1976 Children Trusts, and Louis B. Sullivan, Trustee of the John Arrillaga 1976 Children Trusts, dba A&P Family Investments dated as of December 13, 1990 (for 3260 Jay Street, Santa Clara, CA 95054) (incorporated by reference to Exhibit Number 10.09 to the Registrant's Form 10-K for the fiscal year ended February 28, 1991). 10.07 * Form of Stock Option Grant used in connection with Registrant's 1988 Stock Option Plan, as amended to date (incorporated by reference to Exhibit Number 19.01 to Registrant's Form 10-Q for the quarter ended August 31, 1990). 10.08 * Form of Option Modification Agreement (incorporated by reference to Exhibit Number 19.01 to the Registrant's Form 10-Q for the quarter ended August 31, 1991). 10.09 Registrant's 1994 Directors Stock Option Plan (incorporated by reference to Exhibit Number 10.10 to the Registrant's Form 10-K for the fiscal year ended February 28, 1994 (the "FY94 Form 10-K")). 10.10 * Form of Stock Option Grant and Stock Option Exercise Form used in connection with Registrant's 1994 Directors Stock Option Plan (incorporated by reference to Exhibit Number 10.11 to the Registrant's FY94 Form 10-K). 10.11 Revolving Line of Credit Note by and between Registrant and Wells Fargo Bank, National Association, dated July 15, 1994 and related Letter Agreement (incorporated by reference to Exhibit Number 10.11 to the Registrant's Form 10-Q for the quarter ended August 31, 1994). 10.12 Amendment dated January 19, 1995, to Revolving Line of Credit Note by and between Registrant and Wells Fargo Bank, National Association, dated July 15, 1994 and related Letter Agreement (incorporated by reference to Exhibit Number 10.12 to the Registrant's Form 10-K for the fiscal year ended February 28, 1995 (the "FY95 Form 10-K")). (b) Reports on Form 8-K. No reports on Form 8-K were filed by Registrant during the three months ended May 31, 1995. - ------------------- * Represents a management contract or compensatory plan or arrangement. -12- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: July 14, 1995 INTEGRATED SYSTEMS, INC. (Registrant) ----------------------------- DAVID P. ST. CHARLES President and Chief Executive Officer ---------------------------- STEVEN SIPOWICZ Vice President Finance and Chief Financial Officer -13- EX-10.13 2 STOCK OPTION EXERCISE AGREEMENT INTEGRATED EXHIBIT 10.13 SYSTEMS LOGO 1988 Stock Option Plan Stock Option Exercise Agreement I hereby elect to exercise the number of shares of Common Stock, as set forth below: Optionee: __________________ Grant Number: ____________________ Social Security #:__________________ Date of Option Grant: ____________________ Address: ___________________________ Number of Shares to Exercise: _____________ ___________________________ Exercise Price per Share: _________________ Type of Option: [ ] Nonqualified Stock Option Total Exercise Price:____________ [ ] Incentive Stock Option The method I choose to exercise these shares is indicated below: [ ] Cash: Attached is a check in the amount of $_____________ payable to Integrated Systems, Inc. for the total exercise price of these shares. If I am exercising a nonqualified option, a second check in the amount of $___________ is attached to pay for the taxes due on the day of exercise (I understand these taxes will be calculated for me.) __________ Please instruct the transfer agent to issue the certificate in my name and mail it to me at my home address listed above. __________ Please instruct the transfer agent to issue the certificate in street name and mail it directly to the broker listed below: _______________________________________ (Broker Name) _______________________________________ (Company Name) _______________________________________ (Street Address) _______________________________________ (City, State, Zip Code) _______________________________________ (Phone Number) _______________________________________ (Fax Number) _______________________________________ (Account Number) [ ] Same-Day-Sale: I choose to pay for the exercise of this option and any taxes due on the day of exercise from the proceeds of a same-day-sale through Hambrecht & Quist, Inc. I further understand that I am guaranteed the bid side net price through this broker with no transaction or service fees. I have indicated below if I wish to sell at market price or if I choose to specify a selling price (a "good until canceled" order). _____ I choose to sell my shares at market price. _____ I choose to sell my shares at the specified price of $__________ per share. [ ] Payment from Margin Account: I choose to pay for the exercise of this option and any taxes due on the day of exercise from my margin account at Hambrecht & Quist, Inc. I have sufficient funds in my account to cover these costs. Tax Consequences. Optionee understands that optionee may suffer adverse tax consequences as a result of optionee's purchase or disposition of the shares. Optionee represents that optionee has consulted with any tax consultant(s) optionee deems advisable in connection with the purchase or disposition of the shares and that optionee is not relying on the company for any tax advice. Entire Agreement. The Plan and Grant are incorporated herein by reference. This Exercise Agreement, the Plan and the Grant constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and is governed by California law except for that body of law pertaining to conflict of laws. Date: ________________________ _________________________________ Signature of Optionee Approved: _________________ _________________________________ Printed Name -14- EX-27 3 FINANCIAL DATA SCHEDULE
5 The Schedule contains summary financial information extracted from Q1 FY96 Form 10Q Financial Statements and is qualified in its entirety by reference to such Financial Statements. 1,000 3-MOS FEB-28-1996 MAR-01-1995 MAY-31-1995 9,201 9,714 11,570 0 0 34,026 2,921 0 63,214 13,751 0 36,171 0 0 13,107 63,214 11,856 14,142 1,914 3,635 9,455 0 0 1,569 502 1,067 0 0 0 1,067 0.11 0.11
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