-----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, ScKxWjAocGM+TThXDDKu0kLTp1coDjqYkZ7rrsAHYL98uYQE0FI+YWOotAMeonbw T28jqvSeppM/hY9zuDnAOQ== 0000950149-98-000300.txt : 19980218 0000950149-98-000300.hdr.sgml : 19980218 ACCESSION NUMBER: 0000950149-98-000300 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980217 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERNATIONAL MICROCOMPUTER SOFTWARE INC /CA/ CENTRAL INDEX KEY: 0000814929 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 942862863 STATE OF INCORPORATION: CA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-15949 FILM NUMBER: 98542930 BUSINESS ADDRESS: STREET 1: 1895 E FRANCISCO BLVD CITY: SAN RAFAEL STATE: CA ZIP: 94901 BUSINESS PHONE: 4154543000 MAIL ADDRESS: STREET 1: 1895 EAST FRANCISCO BLVD CITY: SAN RAFAEL STATE: CA ZIP: 94901 10-Q 1 QUARTERLY REPORT FOR THE PERIOD ENDED 12/31/97 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended DECEMBER 31, 1997 ----------------- [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to _____________ Commission File No 0-15949 INTERNATIONAL MICROCOMPUTER SOFTWARE, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) CALIFORNIA 94-2862863 - ------------------------------- ---------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) identification No.) 1895 EAST FRANCISCO BLVD., SAN RAFAEL, CA 94901 - ------------------------------------------ ---------- (Address of principal executive offices) (Zip code) (415) 257-3000 --------------------------------------------------- (Registrant's telephone number including area code) Indicate by check mark whether 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, and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] As of February 11, 1998, 5,630,184 shares of Registrant's Common Stock, no par value, were outstanding. 2 INTERNATIONAL MICROCOMPUTER SOFTWARE, INC. AND SUBSIDIARIES INDEX
Page ---- PART I - FINANCIAL INFORMATION Item 1. Interim Consolidated Financial Statements Consolidated Balance Sheets at December 31, 1997 and June 30, 1997 3 Consolidated Statements of Operations for the three and six months ended December 31, 1997 and 1996 4 Consolidated Statements of Cash Flows for the six months ended December 31, 1997 and 1996 5 Notes to Consolidated Financial Statements 6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-11 PART II - OTHER INFORMATION Item 1. Legal Proceedings 12 Item 6. Exhibits and Reports on Form 8-K 12 SIGNATURES 13
2 3 INTERNATIONAL MICROCOMPUTER SOFTWARE, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited)
DECEMBER 31, 1997 JUNE 30, 1997 ----------------- ------------- ASSETS Current assets: Cash and cash equivalents $ 976,000 $ 1,126,000 Receivables, less allowances for doubtful accounts and returns of $3,686,000 and $2,943,000 10,643,000 7,535,000 Inventories, net 5,680,000 3,472,000 Prepaid royalties and licenses, net 1,777,000 1,285,000 Deferred tax assets, net 1,170,000 1,473,000 Other current assets 672,000 478,000 ------------ ------------ Total current assets 20,918,000 15,369,000 ------------ ------------ Furniture and equipment, net 2,473,000 1,694,000 Deferred tax assets, net 2,858,000 265,000 Capitalized software development costs, net 1,574,000 92,000 Other assets, net 184,000 153,000 ------------ ------------ Total assets $ 28,007,000 $ 17,573,000 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Credit line payable $ 4,315,000 $ -- Short term debt and other obligations 487,000 402,000 Trade accounts payable 5,844,000 4,501,000 Current portion of notes payable 1,987,000 558,000 Wages, benefits and sales tax payable 703,000 515,000 Contracts payable 1,607,000 1,318,000 Income taxes payable 216,000 742,000 ------------ ------------ Total current liabilities 15,159,000 8,036,000 Long term debt and other obligations 1,770,000 2,042,000 ------------ ------------ Total liabilities 16,929,000 10,078,000 Shareholders' equity: Common stock, no par value; 300,000,000 authorized; issued and outstanding 5,594,341 and 5,128,759 shares 11,870,000 6,453,000 Retained earnings (accumulated deficit) (521,000) 1,373,000 Cumulative translation adjustment 14,000 (46,000) Notes receivable from shareholders (285,000) (285,000) ------------ ------------ Total shareholders' equity 11,078,000 7,495,000 ------------ ------------ Total liabilities and shareholders' equity $ 28,007,000 $ 17,573,000 ============ ============
See Notes to Consolidated Financial Statements 3 4 INTERNATIONAL MICROCOMPUTER SOFTWARE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED DECEMBER 31, --------------------------------------------------------- 1997 1996 ----------------------- ----------------------- Net revenues $16,380,000 100.0% $11,791,000 100.0% Product costs 5,932,000 36.2% 5,124,000 43.5% ----------- ----- ----------- ----- Gross margin 10,448,000 63.8% 6,667,000 56.5% Costs and expenses: Sales and marketing 4,640,000 28.3% 3,234,000 27.4% General and administrative 1,278,000 7.8% 1,216,000 10.3% Research and development 2,390,000 14.6% 1,122,000 9.5% Write off of purchased research and dev. 6,367,000 22.0% ----------- ----- ----------- ----- Total operating expenses 8,308,000 50.7% 5,572,000 47.2% ----------- ----- ----------- ----- Operating income (loss) 2,140,000 13.1% 1,095,000 9.3% Other income (expense) (234,000) (1.4)% 53,000 0.4% ----------- ----- ----------- ----- Income (loss) before taxes 1,906,000 11.7% 1,148,000 9.7% Provision (benefit) for income taxes 686,000 4.3% 442,000 3.7% ----------- ----- ----------- ----- Net income (loss) $ 1,220,000 7.4% $ 706,000 6.0% =========== ===== =========== ===== Basic earnings (loss) per share: $ 0.22 $ 0.14 =========== =========== Diluted earnings (loss) per share: $ 0.19 $ 0.12 =========== =========== Shares used in computing basic earnings (loss) per share: 5,570,000 4,924,000 =========== =========== Shares used in computing diluted earnings (loss) per share: 6,572,000 5,690,000 =========== ===========
SIX MONTHS ENDED DECEMBER 31, --------------------------------------------------------- 1997 1996 ----------------------- ------------------------ Net revenues 28,891,000 100.0% 19,903,000 100.0% Product costs 10,463,000 36.2% 8,120,000 40.8% ----------- ----- ------------ ------ Gross margin 18,428,000 63.8% 11,783,000 59.2% Costs and expenses: Sales and marketing 8,294,000 28.8% 5,710,000 28.7% General and administrative 2,270,000 7.9% 2,070,000 10.4% Research and development 4,025,000 13.9% 2,167,000 10.9% Write off of purchased research and dev. 6,367,000 22.0% 0.0% ----------- ----- ------------ ------ Total operating expenses 20,956,000 72.6% 9,947,000 50.0% ----------- ----- ------------ ------ Operating income (loss) (2,528,000) (8.8)% 1,836,000 9.2% Other income (expense) (431,000) (1.5)% (24,000) (0.1)% ----------- ----- ------------ ------ Income (loss) before taxes (2,959,000) (10.3)% 1,812,000 9.1% Provision (benefit) for income taxes (1,065,000) (3.7)% 696,000 3.5% ----------- ----- ------------ ------ Net income (loss) $(1,894,000) (6.6)% $ 1,116,000 5.6% =========== ===== ============ ====== Basic earnings (loss) per share: $ (0.35) $ 0.23 =========== ============ Diluted earnings (loss) per share: $ (0.30) $ 0.20 =========== ============ Shares used in computing basic earnings (loss) per share: 5,377,000 4,906,000 =========== ============ Shares used in computing diluted earnings (loss) per share: 6,272,000 5,585,000 =========== ============
See Notes to Consolidated Financial Statements 4 5 INTERNATIONAL MICROCOMPUTER SOFTWARE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
SIX MONTHS ENDED DECEMBER 31, ------------------------------- 1997 1996 ----------- ----------- Cash flows from operating activities: Net income (loss) $(1,894,000) $ 1,116,000 Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities Depreciation and amortization 954,000 468,000 Deferred taxes (2,290,000) -- Write-off of purchased in-process research and development 6,367,000 -- Changes in operating assets and liabilities: Receivables, net (2,923,000) (2,627,000) Inventories (2,208,000) (1,136,000) Prepaid royalties and licenses (617,000) (278,000) Other current assets (194,000) 190,000 Trade accounts payable 1,334,000 1,758,000 Wages, benefits, and sales tax payable 95,000 53,000 Contracts payable 262,000 651,000 Income taxes payable (525,000) (10,000) Foreign currency translation 60,000 (20,000) ----------- ----------- Net cash provided (used) by operating activities (1,579,000) 165,000 ----------- ----------- Cash flows from investing activities: Purchase of equipment (1,086,000) (242,000) Capitalized software development costs -- 25,000 Acquisition of technology and assets (1,556,000) -- Other (16,000) -- ----------- ----------- Net cash used by investing activities (2,658,000) (217,000) ----------- ----------- Cash flows from financing activities: Credit line borrowings 6,170,000 1,435,000 Credit line repayments (1,855,000) (750,000) Term loan repayments (772,000) -- Capital lease and other obligations additions 608,000 (344,000) Capital lease and other obligations repayment (242,000) -- Proceeds from issuance of common stock 178,000 281,000 ----------- ----------- Net cash provided by financing activities 4,087,000 622,000 ----------- ----------- Net increase (decrease) in cash and cash equivalents (150,000) 572,000 Cash and cash equivalents at beginning of period 1,126,000 387,000 ----------- ----------- Cash and cash equivalents at end of the period $ 976,000 $ 957,000 =========== =========== SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING AND INVESTING INFORMATION: Purchase of technology and assets in exchange for long-term debt $ 300,000 Purchase of technology and assets in exchange for trade payables $ 383,000 Purchase of technology and assets in exchange for notes payable $ 1,034,000 Purchase of technology and assets in exchange for common stock $ 5,240,000 --
See Notes to Consolidated Financial Statements 5 6 INTERNATIONAL MICROCOMPUTER SOFTWARE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The accompanying interim consolidated financial statements have been prepared from the records of International Microcomputer Software, Inc. and Subsidiaries (the "Company") without audit. In the opinion of management, all adjustments, which consist only of normal recurring adjustments, necessary to present fairly the financial position, results of operations and cash flows as of and for the periods ended December 31, 1997, and for all periods presented, have been made. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1997. The results of operations for the three and six months ended December 31, 1997 and 1996 are not necessarily indicative of the results to be expected for the full year. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." 2. INVENTORIES Inventories are valued at the lower of cost or market, on a first-in, first-out basis, and consist of:
December 31, 1997 June 30, 1997 ----------------- ------------- Raw Materials $ 2,297,000 $ 1,379,000 Finished Goods 3,734,000 2,252,000 ----------- ----------- 6,031,000 3,631,000 Reserves for Obsolescence (351,000) (159,000) ----------- ----------- $ 5,680,000 $ 3,472,000 =========== ===========
3. ACQUISITIONS In the quarter ended September 30, 1997, the Company acquired the rights and related technologies to products in the CAD, diagramming and consumer categories from Corel Corporation, for stock and notes payable valued at $5,640,000. The total purchase price consisted of $5,000,000 in IMSI common stock (346,020 shares at $14.45 per share), and $640,000 in notes payable, which is due during fiscal year 1998. The Company allocated the purchase price as follows: $5,044,000 was expensed to in-process research and development during the September 30, 1997 quarter, $517,000 to capitalized software to be amortized over 18 months and $79,000 to goodwill to be amortized over 36 months. In the quarter ended September 30, 1997, the Company also acquired the technology and assets of MapLinx Corporation from Computer Concepts Corporation, the exclusive license of selected 6 7 graphics technology from Quarterdeck, Inc., and MediaPaq, Inc., valued at $2,250,000. The total purchase price consisted of $240,000 in IMSI common stock (20,000 shares at $12.00 per share), cash of $1,233,500, notes payable of $233,500, which is due during fiscal year 1998, and the balance in various assumed liabilities. The Company allocated the purchase price as follows: $1,323,000 was expensed to in-process research and development during the September 30, 1997 quarter, $914,000 to capitalized software to be amortized over 18 months and $13,000 to goodwill to be amortized over 36 months. 4. NEW ACCOUNTING STANDARDS In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128 "Earnings per Share" (SFAS 128). The Company adopted SFAS 128 in the December 31, 1997 quarter as required, and restated earnings per share (EPS) data for prior periods to conform with SFAS 128. Basic EPS excludes dilution and is computed by dividing net income by the weighted average of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. In June 1997, the Financial Accounting Standard Board issued Statements of Financial Accounting Standards No. 130 (Reporting Comprehensive Income), which requires that an enterprise report, by major components and as a single total, the change in its net assets during the period from non-owner sources; and No. 131 (Disclosures about Segments of an Enterprise and Related Information), which establishes annual and interim reporting standards for an enterprise's operating segments and related disclosures about its products, services, geographic areas, and major customers. Adoption of these statements will not impact the Company's consolidated financial position, results of operations or cash flows, and any effect will be limited to the form and content of its disclosures. Both statements are effective for fiscal years beginning after December 15, 1997, with earlier application permitted. 7 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following information should be read in conjunction with the consolidated financial statements and the notes thereto and in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's Form 10-K for the year ended June 30, 1997. This quarterly report on Form 10-Q, and in particular Management's Discussion and Analysis of Financial Condition and Results of Operations, may contain forward- looking statements regarding future events or the future performance of the Company that involve certain risks and uncertainties including those discussed on Form 10-K, as filed with the Securities and Exchange Commission ("SEC"). Actual events or the actual future results of the Company may differ materially from any forward-looking statements due to such risks and uncertainties. The Company assumes no obligation to update these forward-looking statements to reflect actual results or changes in factors or assumptions affecting such forward-looking statements. This analysis is not intended to serve as a basis for projection of future events. RESULTS OF OPERATIONS SUMMARY The Company reported net income of $1,220,000 for the quarter ended December 31, 1997, compared to net income of $706,000 for the comparable quarter of 1996, representing an increase of $514,000 or 73%. The increase in net income was primarily a result of higher sales coupled with new product introductions. During the first quarter of fiscal 1998, the Company consummated four acquisitions in which approximately $6.4 million of in-process research and development costs were expensed. The Company reported operating income for the quarter ended December 31, 1997 of $2,140,000 or 13% of net revenues, compared to operating income of $1,095,000 or 9% of net revenues for the comparable quarter last year. NET REVENUES Net revenues for the three and six months ended December 31, 1997 were $16,380,000 and $28,891,000 respectively, compared to $11,791,000 and $19,903,000 for the comparable periods in the previous year. Increased net revenues for the six months ended December 31, 1997, were fueled by several important releases, upgrades and continued sales from products including MasterPublisher(TM) 97, which has a web-publishing suite and professional tools for business desktop publishing users, FormTool(R) 97, the best-selling forms design software, WinDelete(TM) 97, which includes Internet technology and system management features, NetAccelerator(TM), an Internet speedup utility, as well as TurboProject(TM) Professional, a corporate version of TurboProject with top-down project management features. During the quarter ended December 31, 1997, IMSI released VoiceDirect(TM), speech recognition software, Family Heritage(TM), the genealogy software product recently acquired from Corel Corporation, and Graphics File Converter(TM). Extending the Company's best-selling line of clip art, IMSI began shipping its new MasterClips(R) lineup this 8 9 quarter. Growth during the quarter was also a result of continued channel penetration both in the U.S. and internationally with localized versions on most product lines. Net revenues from channel and OEM sales were $15,164,000 or 93% and $26,148,000 or 91% of net revenues for the three and six months ended December 31, 1997 and $10,457,000 or 89% and $17,173,000 or 86% of net revenues for the comparable periods in the previous year. Channel and OEM sales increased $4,707,000 or 45% and $8,975,000 or 52% for the three and six months ended December 31, 1997 from the comparable periods in the previous year. Net revenues from direct mail sales were $1,216,000 or 7% and $2,743,000 or 9% of net revenues for the three and six months ended December 31, 1997, compared to $1,334,000 or 11% and $2,730,000 or 14% of net revenues for the comparable periods in the previous year. Direct mail sales decreased $118,000 or 9% for the three months ended December 31, 1997 from the comparable period in the previous year. Direct mail sales remained relatively constant at $ 2.7 million for the six months ended December 31, 1997, compared with the same period in the previous year. International net revenues were $7,480,000 or 46% and $11,707,000 or 41% of net revenues for the three and six months ended December 31, 1997, compared to $4,581,000 or 39% and $7,112,000 or 36% of net revenues for the comparable periods in the previous year. The increase in international sales of $2,899,000 or 63% and $4,595,000 or 65% of net revenues for the three and six months ended December 31, 1997 over the comparable periods in the previous year, was primarily the result of increased sales through the retail channel, particularly, in Germany and the United Kingdom, expansion into Latin American markets and new product introductions. PRODUCT COSTS Product costs, as a percentage of net revenues were $5,932,000 or 36% and $10,463,000 or 36% for the three and six months ended December 31, 1997, compared to $5,124,000 or 44% and $8,120,000 or 41% for the comparable periods in the previous year. The quarter over quarter percent decrease is primarily attributable to the continued improvement in gross margin over the last 12 to 15 months fueled in part by purchasing efficiencies and also stronger margins on certain sales. Amortization of capitalized software development costs and acquired software costs, and other amortization included in product costs were $387,000 and $647,000 for the three and six months ended December 31, 1997, compared to $260,000 and $117,000 for the comparable periods in the previous fiscal year. SALES AND MARKETING Sales and marketing expenses increased to $4,640,000 or 28% and $8,294,000 or 29% of net revenue for the three and six months ended December 31, 1997, compared to $3,234,000 or 27% and $5,710,000 or 29% for the comparable periods in the previous year. The quarter over previous year quarter increase of $1,406,000 or 43% is attributed to expenses associated with an increase in headcount. GENERAL AND ADMINISTRATIVE General and administrative expenses increased to $1,278,000 or 8% and $2,270,000 or 8% of net revenue for the three and six months ended December 31, 1997, compared to $1,216,000 or 10% and $2,070,000 or 10% of net revenue for the comparable periods in the previous year. The 9 10 quarter over quarter percent decrease is primarily attributable to a higher net revenue base, and the fixed nature of general and administrative expenses. RESEARCH AND DEVELOPMENT Excluding the write-off of in-process research and development, research and development expense increased to $2,390,000 or 15% and $4,025,000 or 14% of net revenue for the three and six months ended December 31, 1997, compared to $1,122,000 or 10% and $2,167,000 or 11% of net revenue for the comparable periods in the previous year. The increase can be attributed to an increase in domestic headcount, the utilization of additional contractors and other third party development costs relating to the development and expansion of the Company's product offerings. PROVISION FOR INCOME TAXES The Company's provision (benefit) for income taxes were $686,000 and $(1,065,000) for the three and six months ended December 31, 1997, compared to $442,000 and $696,000 for the comparable periods in the previous year. The Company's effective tax rate for these periods is 36% and 38%, respectively. The reduction in tax provision percentage is primarily attributed to international tax restructuring. LIQUIDITY AND CAPITAL RESOURCES The Company has financed its business primarily from operating revenues, short-term and long-term bank borrowings, capital leases and proceeds from the sale of stock. Working capital decreased to $5,759,000 at December 31, 1997, from $7,333,000 at June 30, 1997, resulting primarily from the increase in line of credit borrowing. The Company has used cash generated from its financing activities to fund its working capital requirements and to acquire software products and capital equipment. The Company's operating activities used cash of $1,579,000, which was due to inventory buildup and royalty prepayments in the six months ended December 31, 1997, and provided cash of $165,000 for the comparable period in the previous year. The Company's investing activities used cash of $2,658,000 and $217,000 in the six months ended December 31, 1997 and 1996, respectively. These capital expenditures were primarily for the acquisition and development of software, trademarks and the purchase of capital equipment. At December 31, 1997, the Company had no material commitments for capital expenditures. Cash provided by financing activities were $4,087,000 and $622,000 for the quarters ended December 31, 1997 and 1996, respectively. Cash inflows from financing activities, for the six months ended December 31, 1997, were primarily the result of net line of credit borrowings of $4,315,000. The Company had a credit agreement with a bank under which it can borrow the lesser of $6,000,000 or 25% of eligible inventory up to a cap of $500,000 and 80% of eligible accounts receivable, at the bank's index rate (8.5% at December 31, 1997). The line of credit agreement requires the Company to maintain certain financial ratios including net worth and working capital. This line of credit expires on October 31, 1998. Under terms of the agreement, all assets not subject to liens of other financial institutions have been pledged as collateral against the line 10 11 of credit. As of December 31, 1997, the Company had $4,315,000 outstanding under this line of credit. The Company believes that cash flow from operations, together with existing sources of liquidity, will satisfy the Company's working capital and capital expenditure requirements for at least the next twelve months. The Company believes that these sources will also be sufficient to satisfy its working capital and capital expenditure requirements beyond the next 12 months at the Company's current level of operations. The Company's long term goal, however, is to grow substantially. Expansion of the Company's current business may involve significant financial risk and require significant capital investment. Significant expansion of the Company's operations, future acquisitions of products or companies, unexpected increases in expenses or other factors might lead the Company to seek additional debt or equity financing. While the Company believes it will be able to raise any necessary funds, there can be no assurances that the Company will be able to do so, and failure to obtain sufficient capital could have a material adverse effect on the Company or adversely affect the Company's ability to continue to grow. In order to finance future growth or for other reasons, the Company may consider an offering of its equity securities within the next year or thereafter. The decision to undertake such an offering, and the size of such an offering, would depend upon many factors, such as the market price of the Common Stock, the working capital and capital expenditure needs of the Company, the availability of alternative sources of capital, and general market conditions. QUARTERLY TRENDS The Company's consolidated results of operations to date have not been materially affected by seasonal trends. However, the Company believes that in the future its results may be impacted by such factors as order deferrals in anticipation of new product releases, delays in shipments of new products, a slower growth rate in the software markets in which the Company operates, or adverse general economic and industry conditions in any of the countries in which the Company does business. In addition, with significant portions of net revenues contributed by international operations, fluctuations of the U.S. dollar against foreign currencies and the seasonality of the European, Asia/Pacific, and other international markets could impact the Company's results of operations and financial position in a particular quarter. Rapid technological change and the Company's ability to develop, manufacture, and market products that successfully adapt to the change may also impact results of operations. Further, increased market competition from competitors either known or unknown to the Company could also negatively impact the Company's results of operations. Due to these factors, the Company's future earnings and stock price may by subject to significant volatility, particularly on a quarterly basis. Any shortfall in revenues or earnings from anticipated levels could have an immediate and adverse effect on the trading price of the Company's common stock. 11 12 PART II - OTHER INFORMATION ITEM 1. Legal Proceedings None. ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits 27.1 Financial Data Schedule (b) Form 8-K filing, September 30, 1997. Company acquired the rights to products in the CAD, diagramming and consumer categories from Corel Corporation. 12 13 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. DATE: February 13, 1998 INTERNATIONAL MICROCOMPUTER SOFTWARE, INC. By: /s/ MARTIN SACKS ---------------------------------------- Martin Sacks President & Chief Executive Officer (Principal Executive Officer) By: /s/ KENNETH R. FINEMAN ---------------------------------------- Kenneth R. Fineman V.P. Finance & Chief Financial Officer (Principal Financial Officer) 13 EX-27.1 2 FINANCIAL DATA SCHEDULE
5 1 US DOLLAR 6-MOS JUN-30-1998 JUL-01-1997 DEC-31-1997 1 976,000 0 14,329,000 3,686,000 5,680,000 20,918,000 4,264,000 1,791,000 28,007,000 15,159,000 0 0 0 11,870,000 (792,000) 28,007,000 28,891,000 28,891,000 10,463,000 10,463,000 20,956,000 743,000 431,000 (2,959,000) (1,065,000) (1,894,000) 0 0 0 (1,894,000) (.35) (.30)
-----END PRIVACY-ENHANCED MESSAGE-----