-----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, IC7hbAo5W9S3aCFpTPAUW9xW0kXNkszPZHf1E8jgBFGLp9NYlDA9rtY++1XLMqAr YYfl6gYYM9TSD0sFGkcPlQ== 0001012870-96-000661.txt : 19961118 0001012870-96-000661.hdr.sgml : 19961118 ACCESSION NUMBER: 0001012870-96-000661 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: COOPER & CHYAN TECHNOLOGY INC CENTRAL INDEX KEY: 0000849585 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 770409778 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-26750 FILM NUMBER: 96664063 BUSINESS ADDRESS: STREET 1: 1601 SARATOGA SUNNYVALE RD CITY: CUPERTINO STATE: CA ZIP: 95014 BUSINESS PHONE: 4083666966 MAIL ADDRESS: STREET 1: 1601 SOUTH DE ANZA BOULEVARD CITY: CUPERTINO STATE: CA ZIP: 95014 10-Q 1 FORM 10-Q REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 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 SEPTEMBER 30, 1996 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: 0-26750 COOPER & CHYAN TECHNOLOGY, INC. (Exact Name of Registrant as Specified in Its Charter) DELAWARE 77-0409778 (State or Other Jurisdiction (I.R.S. Employer of Incorporation or Organization) Identification No.) 1601 SOUTH DE ANZA BOULEVARD CUPERTINO, CALIFORNIA 95014 (Address of Principal Executive Offices) (Zip Code) (408) 366-6966 (Registrant's 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 ----- ----- As of November 7, 1996, Registrant had outstanding 13,035,725 shares of Common Stock. See Exhibit Index on page 20 Page 1 COOPER & CHYAN TECHNOLOGY, INC. QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996 TABLE OF CONTENTS
FORM 10-Q NAME OF ITEM PAGE ITEM NO. ------------ ---- --------- PART I Item 1. Financial Statements Consolidated Balance Sheets as of September 30, 1996 and December 31, 1995..................... 3 Consolidated Statements of Income for the quarter ended September 30, 1996 and 1995 and the nine months ended September 30, 1996 and 1995.......................................... 4 Consolidated Statements of Cash Flows for the nine months ended September 30, 1996 and 1995.... 5 Notes to Consolidated Financial Statements..................................................... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............. 8 PART II Item 1 Legal Proceedings................................................................................. 18 Item 2 Changes In Securities............................................................................. 18 Item 6 Exhibits and Reports on Form 8-K.................................................................. 18 Signatures........................................................................................ 19
______________________ ShapeBased, UniCAD, SyntheSolve, DASU, UniRule and IC Craftsman in combination with "Inspector," "Apprentice," "Journeyman" or "Master" and SPECCTRA, in combination with "AutoRoute," "EditRoute" and "AutoPlace," are trademarks of the Company. SPECCTRA, IC Craftsman, UniBuild and UniSolve are registered trademarks of the Company. Page 2 PART I ITEM 1. FINANCIAL STATEMENTS COOPER & CHYAN TECHNOLOGY, INC. CONSOLIDATED BALANCE SHEETS (Unaudited)
SEPTEMBER 30 DECEMBER 31 ------------ ----------- 1996 1995 ---- ---- ASSETS Current Assets Cash and cash equivalents $ 4,690,200 $ 3,586,998 Short term investments 26,737,015 23,402,236 Accounts receivable, net 6,525,685 5,599,419 Deferred income taxes 373,525 373,525 Prepaid expenses and other current assets 1,932,325 1,133,917 ----------- ----------- Total current assets 40,258,750 34,096,095 Property, equipment net 3,346,863 3,008,270 Other assets 250,788 385,174 ----------- ----------- $43,856,401 $37,489,539 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Trade accounts payable 573,132 882,074 Accrued salary and employee benefits 2,251,297 1,178,947 Other accrued liabilities 2,014,441 2,180,027 Income taxes payable 294,937 242,566 Deferred revenue 2,632,724 3,033,293 ----------- ----------- Total current liabilities 7,766,531 7,516,907 Deferred income taxes 238,851 238,851 Other long term liabilities 92,534 319,459 Stockholders' equity Common stock 129,584 123,228 Additional paid-in capital 28,828,228 25,732,747 Notes receivable from stockholders - (39,010) Deferred compensation (333,222) (404,626) Retained earnings 7,133,895 4,001,983 ----------- ----------- Total stockholders' equity 35,758,485 29,414,322 ----------- ----------- $43,856,401 $37,489,539 =========== =========== See accompanying notes
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COOPER & CHYAN TECHNOLOGY, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited) QUARTER ENDED NINE MONTHS ENDED ------------- ----------------- SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30 ------------ ------------ ------------ ------------ 1996 1995 1996 1995 ---- ---- ---- ---- Revenue License $ 6,903,763 $ 4,361,704 $18,138,210 $10,735,585 Service 2,532,858 1,799,924 7,542,007 5,284,006 ----------- ----------- ----------- ----------- Total revenue 9,436,621 6,161,628 25,680,217 16,019,591 ----------- ----------- ----------- ----------- Costs and expenses Cost of license revenue 437,188 240,193 1,226,884 885,160 Cost of service revenue 229,088 186,679 662,056 465,001 Research and development 2,000,643 1,599,125 5,557,199 4,262,731 Sales and marketing 3,448,571 2,874,966 10,066,474 6,987,522 General and administrative 1,820,367 785,514 4,006,103 2,167,110 ----------- ----------- ----------- ----------- Total costs and expenses 7,935,857 5,686,477 21,518,716 14,767,524 ----------- ----------- ----------- ----------- Income from operations 1,500,764 475,151 4,161,501 1,252,067 Other income, net 251,690 24,224 788,138 44,929 ----------- ----------- ----------- ----------- Income before provision for income taxes 1,752,454 499,375 4,949,639 1,296,996 Provision for income taxes 573,136 188,000 1,686,597 463,393 ----------- ----------- ----------- ----------- Net income $ 1,179,318 $ 311,375 $ 3,263,042 $ 833,603 =========== =========== =========== =========== Net income per share $0.08 $0.03 $0.23 $0.07 =========== =========== =========== =========== Shares used in computing per share amounts 14,698,099 1,990,510 14,418,872 11,917,611 =========== =========== =========== =========== See accompanying notes
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COOPER & CHYAN TECHNOLOGY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (Unaudited) NINE MONTHS ENDED NINE MONTHS ENDED ----------------- ----------------- SEPTEMBER 30 SEPTEMBER 30 ----------------- ------------------ 1996 1995 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES Net Income Adjustments to reconcile net income to net cash provided by (used in) operating activities: $ 3,263,042 $ 833,603 Depreciation and amortization 933,123 597,570 Deferred income taxes - 8,784 Amortization of deferred stock compensation 71,404 42,395 Changes in assets and liabilities: Accounts receivable (926,266) (1,874,380) Income taxes receivable - (166,915) Prepaid expenses and other current assets (798,408) (760,260) Other assets 134,386 (81,056) Trade accounts payable (308,942) 519,206 Accrued salary and employee benefits 1,072,350 (40,664) Other accrued liabilities (165,586) 562,700 Income taxes payable 52,371 170,000 Deferred revenue (400,569) 7,964 Other long term liabilities (226,925) (83,189) Total adjustments (563,062) (1,097,845) ------------ ----------- Net cash provided by operating activities 2,699,980 (264,242) ------------ ----------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (1,271,716) (1,366,687) Purchase of available-for-sale securities (29,778,494) (76,197) Proceeds from sale of available-for-sale securities 26,427,862 430,880 ------------ ----------- Net cash used in investing activities (4,622,348) (1,012,004) ------------ ----------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds on notes payable to stockholders 39,010 - Repayment of bank credit facility - (500,000) Proceeds from issuance of convertible preferred stock - 2,499,981 Proceeds from issuance of common stock 3,101,837 67,523 ------------ ----------- Net cash provided by financing activities 3,140,847 2,067,504 ------------ ----------- Net increase in cash and cash equivalents 1,218,479 791,258 Effect of exchange rates on foreign currency cash balances (101,238) 2,181 UniCAD activity for the three months ended December 31, 1995 (14,039) - Cash and cash equivalents at beginning of period 3,586,998 2,117,092 ------------ ----------- Cash and cash equivalents at end of period $ 4,690,200 $ 2,910,531 ============ =========== Supplemental disclosure of cash flow information Cash paid during the period for income taxes $ 1,490,444 $ 439,709 ============ ===========
Page 5 COOPER & CHYAN TECHNOLOGY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) BASIS OF PRESENTATION The unaudited, condensed, consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information or footnote disclosure 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 statements reflect all adjustments of a normal and recurring nature which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. These financial statements should be read in conjunction with the Company's Annual Report on Form 10-K for the fiscal year 1995 as filed with the Commission on March 30, 1996. The interim results presented herein are not necessarily indicative of the results of operations that may be expected for the full fiscal year ending December 31, 1996 or any other future periods. NET INCOME PER SHARE Net income per share is based on the weighted average number of common and dilutive common equivalent shares outstanding during the periods. Common equivalent shares include common stock issuable upon exercise of stock options using the treasury stock method. PURCHASE OF UNICAD, INC. On August 28, 1996, the Company acquired all of the outstanding stock of UniCAD, Inc. ("UniCAD"), a privately held company engaged in the development, marketing and support of electrical integrity, analysis and optimization software tools for PCB design. Under the terms of the agreement, the Company issued 389,462 shares of its common stock to the stockholders of UniCAD. Additionally, the Company assumed all outstanding options under the UniCAD stock option plan which will result in the issuance of 71,273 additional shares of the Company's common stock as the options are vested and exercised. The transaction was structured to be a tax-free reorganization and was accounted for as a pooling of interests. Due to the differing year-ends of the Company and UniCAD, financial information for dissimilar periods has been combined. UniCAD's results of operations for the nine month period ended June 30, 1995, has been combined with the Company's results of operations for the nine month period ended September 30, 1995. Balance sheet information as of December 31, 1995 includes the financial position of UniCAD as of September 30, 1995. Accordingly, the Company's statement of cash flows includes an adjustment to reflect the movement in retained earnings for UniCAD for the period of three months ended December 31, 1995.
NINE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, 1996 SEPTEMBER 30, 1995 ------------------ ------------------ Revenue Cooper & Chyan Technology 16,297,210 11,721,009 UniCAD 3,852,367 4,298,582 Combined, subsequent to merger 5,530,640 - ----------- ----------- $25,680,217 $16,019,591 =========== =========== Net income/(loss) Cooper and Chyan Technology 1,762,885 333,534 UniCAD (196,321) 500,069 Combined, subsequent to merger 1,696,478 - ----------- ----------- $ 3,263,042 $ 833,603 =========== ===========
LITIGATION WITH CADENCE On July 29, 1996, the Company was sued by Cadence Design Systems, Inc. ("Cadence") in the Superior Court of Santa Clara County (Case No. CV759629) in California. The complaint sought to enjoin the Company from selling a translator that was created by a third party that allows the Company's integrated circuit routing software (IC Craftsman) to connect to Cadence's software. The complaint alleged that the product was not authorized by Cadence's license agreements with the third party or the Company. The Company has sold the translator with a limited number of IC Craftsman products over the last 11 months. The complaint also sought unspecified damages from the Company. On September 12, 1996, the Company and Cadence settled the lawsuit filed against the Company by Cadence. The Company's legal costs related to the lawsuit are approximately $350,000 and are reflected in the financial statements for the quarter ended September 30, 1996. The lawsuit and settlement are not expected to have a material adverse impact on the Company's future results of operations or financial condition. AGREEMENT TO MERGE WITH CADENCE On October 28, 1996, the Company entered into a definitive agreement to be acquired by Cadence, a leading supplier of business solutions for the design of electronic components and systems. Under the terms of the agreement, each share of CCT common stock issued and outstanding immediately prior to the effective time of the acquisition will be exchanged for 0.85 shares of Cadence common stock (with cash being payable for any fractional shares), and each option to purchase shares of CCT common stock will be assumed by Cadence and will be converted into an option to purchase that number of shares of Cadence common stock determined by multiplying the number of shares of CCT common stock subject to such option immediately prior to the effective time of the acquisition by 0.85. Based on the number of outstanding shares of CCT common stock and CCT options on October 28, 1996, it is anticipated that Cadence will issue approximately 11.0 million shares of Cadence common stock and assume employee stock options to purchase approximately 1.9 million shares of Cadence common stock. The acquisition was structured to be a tax-free reorganization and will be accounted for as a pooling of interests. Consummation of the acquisition is subject to review by the United States Department of Justice under the Hart- Scott- Page 6 Rodino Antitrust Improvements Act of 1976, as amended, approval by the stockholders of the Company, and certain other closing conditions set forth in the definitive agreement. Upon completion of the acquisition, the Company will become a wholly-owned subsidiary of Cadence. Page 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Except for the historical information contained herein, the matters discussed in this Form 10-Q are forward-looking statements that involve risks and uncertainties, including the timely availability and acceptance of new products, the impact of competitive products and pricing, the management of growth and the other risks detailed herein. The actual results that the Company achieves may differ materially from any forward-looking statements due to such risks and uncertainties. The Company develops, markets and supports software tools that help designers route the physical wiring interconnections within high performance printed circuit boards ("PCBs") and integrated circuits ("ICs"). The Company was founded in 1989 and licensed its first product, SPECCTRA, for the PCB market in December 1989. The Company has subsequently developed and released several new versions of the product. As of September 30, 1996, SPECCTRA products were available on a broad number of operating system platforms with several available option packages. Until 1995, the Company derived substantially all of its revenue from its SPECCTRA line of products and from the service activities performed by UniCAD, its subsidiary. The IC Craftsman product line, introduced in early 1995, has accounted for approximately 15% of the Company's total revenue in 1995 and 29% of the Company's total revenue in the first nine months of 1996. Revenue consists primarily of fees for licenses of the Company's software products and for maintenance and customer support. The Company recognizes revenue from software licenses after shipment of the products and fulfillment of acceptance terms, if any, and when no significant contractual obligations remain outstanding and collection of monies owed is probable. After delivering the software, the Company determines the significance of remaining contractual obligations, if any, based on an estimate of the costs and difficulty to fulfill the obligations in comparison to the overall contract. When the Company receives payment prior to shipment and fulfillment of significant vendor obligations, such payments are recorded as deferred revenue and are recognized as revenue upon shipment and fulfillment of significant vendor obligations. The Company also derives service revenue primarily from maintenance agreements that provide customers access to product enhancements and customer support. In particular, a significant proportion of the Company's service revenue is earned by UniCAD, its subsidiary. Most of the Company's customers have purchased annual maintenance contracts on initial licenses and have renewed such contracts upon their expiration. Maintenance revenue is deferred and recognized ratably over the term of the maintenance agreement, which is typically one year. Revenue from customer training, support and other services is recognized as the service is performed. Recently, the Company has significantly increased its research and development and sales and marketing personnel. The increase in research and development personnel was primarily to support the development of the IC Craftsman product line. The increase in sales and marketing personnel was begun in anticipation of the introduction of the IC Craftsman product line and was continued in order to expand worldwide distribution, principally in Europe and Japan. While the Company anticipates an increase in revenues as the IC Craftsman product line gains further commercial acceptance and international sales increase, there can be no assurance that the Company will achieve revenue levels that justify the increased expenses. The Company's revenues and results of operations are affected by seasonal trends that may include higher revenues in the Company's second and fourth fiscal quarters and lower revenues in its first and third fiscal quarters as a result of many customers' purchasing and budgetary practices, and lower revenues in the summer months (particularly in Europe) when many businesses make fewer purchases. The Company's expense levels are based, in part, on its expectations as to future revenue. If revenue levels are below expectations due to delays associated with customers' acceptance and evaluation procedures or for any other reason, operating results are likely to be materially adversely affected. Net income, if any, may be disproportionately affected by a reduction in revenue because only a small portion of the Company's expenses varies with its revenue. Although the Company has recently experienced significant revenue growth, such growth should not be considered to be indicative of future revenue growth, if any, or of future operating results. The Company's recent revenue growth is a result of increased unit volume and new product introductions. There can be no assurance that the Company's revenue will grow or be sustained in future periods or that the Company will remain profitable in any future period. In addition, the rapid growth and expansion the Company has experienced, including the acquisition of UniCAD, has placed and continues to place a significant strain upon its management, and operational and Page 8 financial resources. The Company has grown from 115 permanent full time employees at December 31, 1994 to 166 permanent full time employees at September 30, 1996, and currently plans to continue to expand its staff. To accommodate this recent growth, the Company is currently enhancing a variety of new and upgraded operational and financial systems, procedures and controls, including the improvement of its general ledger accounting and other internal management systems, its customer database and its transaction processing systems. There can be no assurance that the Company will be able to continue to enhance these systems, procedures and controls successfully. The failure of the Company to respond to and manage its growth and changing business conditions, or to adapt its operational, management and financial control systems to accommodate its growth, could have a material adverse effect on the Company's business, financial condition and results of operations. The increase in the number of the Company's employees and the Company's market diversification and product development activities have resulted in increased responsibilities for the Company's management. The Company's ability to operate successfully will require such personnel to work together effectively. Failure to do so could have a material adverse effect upon the Company's business, financial condition and results of operations. Page 9 RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, certain unaudited statement of operations data of the Company expressed as a percentage of total revenue.
QUARTER ENDED NINE MONTHS ENDED -------------- ------------------ SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30 ------------ ------------ ------------ ------------ 1996 1995 1996 1995 ---- ---- ---- ---- Revenue License 73% 71% 71% 67% Service 27 29 29 33 ----- ----- ----- ----- Total revenue 100 100 100 100 ----- ----- ----- ----- Costs and expenses Cost of license revenue 5 4 5 5 Cost of service revenue 2 3 3 3 Research and development 21 26 22 27 Sales and marketing 37 46 39 44 General and administrative 19 13 15 13 ----- ----- ----- ----- Total costs and expenses 84 92 84 92 ----- ----- ----- ----- Income from operations 16 8 16 8 ----- ----- ----- ----- Interest/other income (net) 3 0 3 0 ----- ----- ----- ----- Income before provision for income taxes 19 8 19 8 ----- ----- ----- ----- Provision for income taxes 6 3 6 3 ----- ----- ----- ----- Net income 13% 5% 13% 5% ===== ===== ===== -----
Revenue Total revenue increased by 52% from $6.2 million in the third quarter of 1995 to $9.4 million in the third quarter of 1996. For the first nine months of 1996, total revenue was $25.7 million, an increase of 61% from total revenue of $16.0 million for the first nine months of 1995. License revenue increased by 57% from $4.4 million in the third quarter of 1995 to $6.9 million in the third quarter of 1996. For the first nine months of 1996, license revenue was $18.1 million, an increase of 69% from license revenue of $10.7 million for the first nine months of 1995. The increase in license revenue from both the third quarter and the first nine months of 1995 to the corresponding periods of 1996 was primarily attributable to increased licensing of both the Company's SPECCTRA products and the Company's IC Craftsman products. License revenue increased 21% from the second quarter of 1996 to the third quarter of 1996. This increase was attributable to an increase in IC Craftsman revenue partially offset by a decrease in SPECCTRA revenue. The decrease in SPECCTRA revenue was primarily attributable to a decrease in business with Mentor Graphics Corporation ("Mentor Graphics") and a decrease in the Company's revenue from the low- Page 10 end PCB design market generated by licensing SPECCTRA products with the PCB industry's IBM compatible CAD systems. Service revenue increased by 39% from $1.8 million in the third quarter of 1995 to $2.5 million in the third quarter of 1996. For the first nine months of 1996, service revenue was $7.5 million, an increase of 42% from service revenue of $5.3 million for the first nine months of 1995. The increase in service revenue in the period was primarily attributable to maintenance contracts in connection with the continued growth of the installed base of customers licensing the Company's products. The percentage of the Company's total revenue attributable to service revenue decreased from 29% and 33% in the third quarter and the first nine months of 1995, respectively, to 27% and 29% in the corresponding periods of 1996. The Company expects that service revenue in absolute dollars will continue to increase. However, service revenue as a percentage of total revenue may or may not increase depending upon a number of factors, including new maintenance sales rates, maintenance renewal rates and the level of consulting revenue. International license and service revenue accounted for $2.5 million in the third quarter of 1995, rising to $4.1 million in the third quarter of 1996. For the first nine months of 1996, international revenue was $10.6 million, versus $7.6 million for the first nine months of 1995. The increase in international revenue from quarter to quarter was principally due to an increase in sales in Japan. Because a majority of the Company's European revenue is denominated in U.S. dollars, the Company has not engaged in European currency hedging activities there. However, in Japan, where the Company's revenue is denominated in local currency, the Company has in the past, and may again in the future, entered into foreign exchange contracts to hedge certain of its foreign currency exposures. In the third quarter of 1996, the Company did not enter into any foreign exchange contracts. In the first nine months of 1996, transaction gains and losses from foreign exchange hedging activities were not significant. The Company expects that international license and service revenue will continue to account for a significant portion of its revenue in the short term, and as a result, foreign currency exposure may increase. The Company's international revenue involves a number of risks, including the impact of possible recessionary environments in economies outside the United States, longer receivables collection periods and greater difficulty in accounts receivable collection, unexpected changes in regulatory requirements, reduced protection for intellectual property rights in some countries, tariffs and other trade barriers, foreign currency exchange rate fluctuations, difficulties in staffing and managing foreign operations, the burdens of complying with a variety of foreign laws, potentially adverse tax consequences and political and economic instability. There can be no assurance that the foregoing factors will not have a material adverse effect on the Company's future international license and service revenue and, consequently, on the Company's business, financial condition and results of operations. In the third quarter of 1995, sales to Mentor Graphics accounted for 13% of the Company's total revenue. For the corresponding period of 1996, sales to Mentor Graphics represented 8% of the Company's total revenue. For the first nine months of 1995, Mentor Graphics accounted for 12% of the Company's revenue versus 10% for the first nine months of 1996. Additionally, the Company received a significant order from Texas Instruments Inc. ("TI"). The value of the order received was $4.8 million, of which $3.6 million was for product licenses and $1.2 million was for maintenance on such products. Sales to TI for the quarter ended September 30, 1996 amounted to $1.0 million or 11% of total revenue. The remaining product licenses are to be delivered at the request of TI between October 1, 1996 and December 31, 1997. The maintenance period extends from September 30, 1996 until December 31, 1999. No other customer accounted for more than 10% of revenue during either of these two periods. The proportion of revenue earned from distributors and OEMs was 13% and 18% during the third quarter and the first nine months of 1996, respectively. The Company is dependent upon the continued viability and financial stability of these distributors and OEMs. Since the Company's products are used by highly skilled professional engineers, an effective distributor or OEM representative must possess sufficient technical, marketing and sales resources and must devote these resources to a lengthy sales cycle, customer training and product service and support. In addition, the Company's distributors and OEMs generally offer products of several different companies, including, in some cases, products that are competitive with the Company's products. Although the Company is not aware of any financial difficulties being experienced by any of its significant OEMs or distributors, there can be no assurance that Mentor Graphics or any of the Company's distributors or other OEMs will be able to continue to market, service and support the Company's products effectively, that economic conditions or industry Page 11 demand will not adversely affect these distributors and OEMs, that Mentor Graphics or any distributor or other OEM that licenses the Company's products will choose to continue to license such products or that any of these distributors and OEMs will not devote greater resources to marketing and supporting products of other companies. The current OEM agreement with Mentor Graphics will expire on March 31, 1998. There can be no assurance that the Company will reach a subsequent agreement with Mentor Graphics. Should the Company fail to reach a subsequent agreement with Mentor Graphics, there can be no assurance that the Company would be successful in either securing alternative channels of distribution for its products or expanding its own direct sales to replace Mentor Graphics. The loss of, or a significant reduction in revenue from, Mentor Graphics or any of the Company's distributors or other OEMs would have a material adverse effect on the Company's business, financial condition and results of operations, at least to the extent such loss is not offset by a corresponding increase in the Company's direct sales. Cost of Revenue Cost of license revenue includes personnel and related operating costs associated with order processing, documentation and other production costs related to the licensing of the Company's products. Cost of license revenue increased by 78% from $240,000 in the third quarter of 1995 to $437,000 in the third quarter of 1996. The increases in cost of license revenue was primarily attributable to an increase in licenses of the Company's products. Cost of license revenue was 4% of total revenue for the third quarter of 1995 and 5% for the third quarter of 1996. The cost of license revenue increased by 36% from $885,000 for the first nine months of 1995 to $1.2 million in the first nine months of 1996. Cost of license revenue was 5% of total revenue for both the first nine months of 1995 and 1996. Cost of service revenue includes personnel and related costs allocated to maintenance and other customer support activities. Cost of service revenue increased by 22% from $187,000 in the third quarter of 1995 to $229,000 in the third quarter of 1996. The increase in cost of service revenue was primarily attributable to an increase in technical support personnel. Cost of service was 3% of total revenue for the third quarter of 1995 and 2% of total revenue for the third quarter of 1996. The cost of service revenue increased by 42% from $465,000 in the first nine months of 1995 to $662,000 in the first nine months of 1996. Cost of license revenue was 4% of total revenue for the first nine months of 1995 and 3% of total revenue for the first nine months of 1996. Research and Development Research and development expenses include all costs associated with the development of new products and enhancements to existing products. Research and development expenses increased by 25% from $1.6 million in the third quarter of 1995 to $2.0 million in the third quarter of 1996. These expenses were 26% and 21% of total revenue in the third quarter of 1995 and the third quarter of 1996, respectively. Research and development expenses increased by 30% from $4.3 million in the first nine months of 1995 to $5.6 million in the first nine months of 1996. The increase in expenses resulted principally from growth in the number of research and development personnel. To date, all software development costs have been expensed as incurred. The Company anticipates that it will continue to commit substantial resources to research and development in the future. At least for the short term, the Company expects research and development expenses to increase in absolute dollars but to stay flat or decrease slightly as a percentage of total revenue, to the extent revenue increases. However, there can be no assurance that there will be a corresponding increase in revenue to justify the increase in expenditure. Sales and Marketing Sales and marketing expenses consist of salaries, commissions paid to internal sales and marketing personnel and certain third parties, promotional costs and related operating expenses. Sales and marketing expenses increased by 17% from $2.9 million in the third quarter of 1995 to $3.4 million in the third quarter of 1996. These expenses were 46% and 37% of total revenue in the third quarter of 1995 and the third quarter of 1996, respectively. Sales and marketing expenses increased by 44% from $7.0 million in the first nine months of 1995 to $10.1 million in the first nine months of 1996. The increases in sales and marketing expenses in each period consist principally of the cost of additional sales and marketing personnel related to the expansion of the Company's direct sales Page 12 capability in the PCB market, to support the Company's entry into the IC market and to expand worldwide distribution, principally in Europe and Japan, and increases in variable sales compensation due to increased revenue. The number of sales and marketing personnel increased from 56 at the end of the third quarter of 1995 to 63 at the end of the third quarter of 1996. At least for the short term, the Company expects sales and marketing expenses to increase in absolute dollars, but to stay flat or decrease slightly as a percentage of total revenue, to the extent revenue increases. This is due to the continuing focus on direct sales. However, there can be no assurance that there will be a corresponding increase in revenue to justify the increase in expenditure. The increase in sales and marketing personnel was begun in anticipation of the introduction of the IC Craftsman product line and has been continued in order to expand worldwide distribution. While the Company anticipates an increase in revenues as the IC Craftsman product line gains commercial acceptance and international sales increase, there can be no assurance that the Company will continue to achieve revenue levels that justify the increased expenses. The Company has relatively little experience in direct sales in the IC market. There can be no assurance that expansion of the Company's direct sales efforts will succeed or that such expansion will result in increased sales. Although the success of this direct channel has reduced the Company's dependence on the OEM channel, there can be no assurance that the expansion of this channel will not have an adverse effect on the Company's relationship with Mentor graphics or other existing distributor and OEM relationships. The Company has expanded its international sales and support organization, which has resulted in an increase in sales and marketing expenses. The Company intends to further expand these organizations, resulting in additional increases in sales and marketing expenses. However, the Company expects the growth rate of such expenses to be lower than in the past. There can be no assurance that the Company will be able to sustain or increase revenue derived from international licensing and service. Any failure to expand sales in foreign markets would have a material adverse effect on the Company's business, financial condition and results of operations. General and Administrative General and administrative expenses increased 129% from $786,000 in the third quarter of 1995 to $1.8 million in the third quarter of 1996. These expenses were 13% and 19% of total revenue in the third quarter of 1995 and the third quarter of 1996, respectively. General and adminstrative expenses increased by 82% from $2.2 million in the first nine months of 1995 to $4.0 million in the first nine months of 1996. The increases in general and administrative expenses were primarily attributable to two non-recurring items. First, professional fees associated with the settling of the Cadence lawsuit amounted to approximately $350,000 in the quarter. Second, expenses associated with the acquisition of UniCAD amounted to approximately $400,000 in the quarter. Due to the impact of the non-recurring items, the Company expects the level of general and administrative expenses to decrease in the final quarter of 1996. Excluding the non-recurring items, the Company expects general and administrative expenses to increase in absolute dollars but to stay flat or decrease slightly as a percentage of total revenue, to the extent revenue increases. However, there can be no assurance that there will be a corresponding increase in revenue to justify the increase in expenditure. Income Taxes The provision for income taxes as a percentage of pre-tax income was 33% for 1995 and 34% for the first nine months of 1996. These percentages are less than the federal and state combined statutory rate of approximately 40% due primarily to the utilization of research and development credits in both periods. LIQUIDITY AND CAPITAL RESOURCES The Company has financed its operations to date with cash from operations and through private and public sales of equity securities. Private sales of equity securities have yielded approximately $4.7 million, including the sale of shares of Common Stock to Synopsys in May 1996, the proceeds of which were approximately $2.2 million. In addition, in October 1995, the company completed its initial public offering, raising approximately $22.4 million. Net cash provided by operating activities in the first nine months of 1996 was $2.7 million versus $264,000 cash used in the corresponding period of 1995. The cash generated in the first nine months of 1996 resulted primarily from net income and an increase in accrued salary and employee benefits, offset by increases in accounts receivable, prepaid expenses and other current assets, and decreases in trade accounts payable, income Page 13 taxes payable and deferred revenue. The increase in cash generated in the nine months of 1996 versus the corresponding period of 1995, is due principally to the higher level of net income in 1996 coupled with a lower rate of growth in receivables, versus the same period in 1995, when net income was much lower, and the growth in receivables was much more pronounced. Cash used in investing activities resulted primarily from additions to property and equipment and purchases of available-for-sale securities. Purchases of property and equipment, consisting primarily of computer equipment, were $1.3 million in the first nine months of 1996 versus $1.4 million in the corresponding period of 1995. Capital spending was particularly high during the first nine months of 1995 due to the significant increase in headcount during that period and the associated spending on equipment that was required to support it. As of September 30, 1996, the Company had working capital of $32.5 million, including cash, cash equivalents and short term investments of $31.4 million. As of September 30, 1996, the Company had no bank indebtedness and no significant long term commitments other than operating lease obligations. The Company believes that existing cash balances and funds generated from operations will provide the Company with sufficient funds to finance its operations in the near future. Thereafter, the Company may require additional funds to support its working capital requirements and for other purposes and may seek to raise such additional funds through public or private equity financings or from other sources. No assurance can be given that additional financing will be available or that, if available, such financing will be obtainable on terms favorable to the Company or its stockholders. OTHER FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS The Company expects that it will face increasing pricing pressures from its current competitors and new market entrants. There can be no assurance that the Company's competitors will not engage in pricing practices that are detrimental to the Company. In addition, the Company believes that the amount of design work done by the users of the Company's products on Windows-based personal computers is increasing relative to UNIX-based workstations. This trend has led to a decrease in the average selling prices of the Company's products. If this trend continues, it may continue to negatively impact the Company's average selling prices. There can be no assurance that such decreases in average selling price will be offset by an increase in the volume of sales. Many of the Company's current and potential competitors have longer operating histories, significantly greater financial, technical, product development and marketing resources, greater name recognition and larger customer bases than the Company. There can be no assurance that the Company's competition will not be able to develop products comparable or superior to those developed by the Company, adapt more quickly to new technologies, evolving industry trends or customer requirements than the Company, or devote greater resources to the development, promotion and sale of their products than the Company. In addition, current competitors of the Company have established and may establish cooperative relationships among themselves or with third parties to increase the ability of their products to address the needs of the Company's existing and prospective customers. Such alliances among competitors could present increased competition to the Company. Moreover, the EDA industry has become increasingly concentrated in recent years as the result of numerous mergers and acquisitions. The Company expects that competition may increase as a result of this increased concentration. There can be no assurance that the Company will be able to compete successfully against current and future competitors or that competitive pressures faced by the Company will not have a material adverse effect on its business, financial condition and results of operations. In addition, the introduction or announcement by the Company or one or more of its competitors of products embodying new technologies or features could render the Company's existing products obsolete or unmarketable. There can be no assurance that the introduction or announcement of new product offerings by the Company or one or more of its competitors will not cause customers to defer purchases of existing Company products. Such deferral of purchases could have a material adverse effect on the Company's business, financial condition and results of operations. The Company's success is heavily dependent upon its proprietary software technology. The Company does not currently have any patents and relies principally on trade secret, copyright and trademark laws, nondisclosure and other contractual agreements and technical measures to protect its technology, including its ShapeBased technology. The Company generally enters into confidentiality and/or license agreements with its employees, distributors, OEMs and customers, and limits access to and distribution of its software, documentation and other Page 14 proprietary information. The Company's software is shipped with a software security lock which limits software access to authorized users. In addition, the Company generally does not license or release its source code, except in connection with source code escrow arrangements. However, effective copyright and trade secret protection may be unavailable or limited in certain foreign countries. There also can be no assurance that the steps taken by the Company will prevent misappropriation of its technology. Any failure by or inability of the Company to protect its proprietary technology could have a material adverse effect on the Company's business, financial condition and results of operations. Furthermore, such protections do not preclude competitors from developing products with functionality or features similar to the Company's products, and there can be no assurance that third parties will not independently develop competing technologies that are substantially equivalent or superior to the Company's technologies. However, the Company believes that, due to the rapid pace of innovation within the EDA industry, factors such as the technological and creative skills of its personnel, new product developments, frequent product enhancements, name recognition and reliable product maintenance are more important to establishing and maintaining a technology leadership position than are the various legal protections of its technology. The Company does not believe its products infringe the proprietary rights of any third parties. However, there can be no assurance that infringement claims will not be asserted against the Company or its customers. Furthermore, the Company may initiate claims or litigation against third parties for infringement of the Company's proprietary rights or to establish the validity of the Company's proprietary rights. Litigation, either as plaintiff or defendant, would cause the Company to incur substantial costs and divert management resources from productive tasks, whether or not such litigation is resolved in the Company's favor, which could have a material adverse effect on the Company's business, financial condition and results of operations. Parties making claims against the Company could secure substantial damages, as well as injunctive or other equitable relief, which could effectively block the Company's ability to license its products in the United States or abroad. Such a judgment could have a material adverse effect on the Company's business, financial condition and results of operations. If it appears necessary or desirable, the Company may seek licenses to intellectual property that it is allegedly infringing. The Company is not currently seeking any such license. There can be no assurance, however, that licenses could be obtained on commercially reasonable terms, if at all, or that the terms of any offered license would be acceptable to the Company. The failure to obtain the necessary licenses or other rights could have a material adverse effect on the Company's business, financial condition and results of operations. As the number of software products in the industry increases and the functionality of these products further overlaps, the Company believes that software developers may become increasingly subject to infringement claims. Any such claims, with or without merit, can be time consuming and expensive to defend and could adversely affect the Company's business, financial condition and results of operations. The Company's future depends in large part on the continued service of its key technical personnel, in particular its founders, and its ability to continue to attract and retain such personnel, many of whom are highly skilled. The competition for such personnel in the software industry in general, and the EDA industry in particular, is intense, and there can be no assurance that the Company will retain its key technical personnel or continue to attract such personnel in the future. There are only a limited number of qualified EDA engineers, and competition for such individuals is especially intense. The Company has at times experienced and continues to experience difficulty in recruiting qualified technical personnel. Although such difficulties have not had a material impact on the Company's business to date, there can be no assurance that such difficulties will not do so in the future. Generally, the Company's employees are not bound by employment or noncompetition agreements or covered by key man life insurance policies. In addition, competitors may attempt to recruit the Company's key employees. The loss of any key technical, management or marketing personnel or the failure to recruit such personnel successfully in the future could have a material adverse effect on the Company's business, financial condition and results of operations. The EDA industry is characterized by extremely rapid technological change, frequent new product introductions and enhancements, evolving industry standards and rapidly changing customer requirements. Customers in the EDA industry require software products that allow them to minimize their time-to-market, differentiate their products, maximize their engineering productivity and reduce design time and costs. The Company's future success will depend upon its ability to continually enhance its current products and develop and introduce new products that keep pace with technological advancements and address the increasingly sophisticated needs of its customers. There can be no assurance that the Company will be successful in developing and marketing product enhancements or new products that respond to technological change, evolving industry standards and changing customer requirements, that the Company will not experience difficulties that could delay or prevent the successful development, introduction and marketing of these products or product enhancements or that its new products and product enhancements will adequately meet the requirements of the marketplace and achieve Page 15 any significant degree of market acceptance. Failure of the Company, for technological or other reasons, to develop and introduce new products and product enhancements in a timely and cost-effective manner would have a material adverse effect on the Company's business, financial condition and results of operations. Any failure by the Company to anticipate or to respond adequately to changing market conditions, or any significant delays in product development or introduction, could cause customers to delay or decide against purchases of the Company's products and would have a material adverse effect on the Company's business, financial condition and results of operations. Software products as complex as those offered by the Company may contain defects or failures when introduced or when new versions are released. The Company has in the past discovered software defects in certain of its products and may experience delays or lost revenue correcting such defects in the future. Although the Company has corrected known material defects and has not experienced material adverse effects resulting from any such defects to date, there can be no assurance that, despite testing by the Company, errors will not be found in new products or releases after commencement of commercial shipments. Any such occurrence could result in loss of market share or failure to achieve market acceptance and could have a material adverse effect upon the Company's business, financial condition and results of operations. The Company's future operating results are significantly dependent upon continued enhancement and market acceptance of its SPECCTRA product line and successful market acceptance of its IC Craftsman product line. There can be no assurance that the SPECCTRA product line will continue to be adequately enhanced to achieve continued market acceptance or that the Company will be successful in marketing the IC Craftsman product line or any other new or enhanced products. In particular, the Company believes that its future operating results are significantly dependent upon market acceptance in Japan of the Company's IC Craftsman products. The Company believes that a number of factors will be necessary for its IC Craftsman products to achieve, and its SPECCTRA products to continue to achieve, broad market acceptance. These factors include performance, price, interoperability with existing systems and the customer's assessment of the Company's technical, managerial, service and support expertise and capability. Failure to succeed with respect to any of these factors could result in the Company's failure to achieve market acceptance of its products, which would have a material adverse effect on the Company's business, financial condition and results of operations. A decline in demand for any of the Company's products as a result of competition, technological change or other factors would have a material adverse effect on the Company's business, financial condition and results of operations. In addition, factors adversely affecting the EDA market generally could have a material adverse effect on the Company's business, financial condition and results of operations. The sales cycle for the Company's products is relatively lengthy. In particular, orders for licenses of the Company's IC Craftsman products in a given quarter are typically made by relatively fewer customers and in larger amounts as compared to orders for licenses of the Company's SPECCTRA products. Accordingly, because IC Craftsman revenues have increased as a percentage of the Company's total revenues, such licenses ordered by a single customer can account for a significant portion of a quarter's revenues. Because the Company's expenses are relatively fixed in the short term, the loss or delay of such orders by a single customer or multiple customers could have a material adverse effect on the Company's business, financial condition and results of operations. In addition, the Company believes that its quarterly and annual operating results have in the past and may in the future vary significantly depending on factors such as variations in product development or operating expenditures, increased competition, the purchasing patterns of its customers, the timing of customer design and development projects, the timing of customer evaluation and acceptance, the timing of expenditures by the Company in anticipation of product releases or increased revenue, the timing of product enhancements and product introductions by the Company and its competitors, market acceptance of new and enhanced versions of the Company's products, the size, timing and structure of significant licenses, changes in pricing policies of the Company and its competitors, variations in the mix of products the Company licenses, delays in processing orders, the mix of direct and indirect sales, changes in Company strategy, personnel changes and general economic factors. Any unfavorable changes in these or other factors could have a material adverse effect on the Company's business, financial condition and results of operations. The anticipated benefits of the recently completed acquisition of UniCAD will not be achieved unless UniCAD and the Company are successfully combined in an efficient and timely manner. It is possible that the process of combining the two organizations, integrating their product offerings and coordinating their research and development, production, administrative and sales and marketing efforts, will cause an interruption of, or a loss of momentum in, the activities of either or both of the companies' businesses, which could have a material adverse effect on the Company's business, financial condition and results of operations, at least in the near term. The Page 16 difficulties of integration may be increased by the necessity of coordinating geographically separated organizations and integrating personnel with disparate business backgrounds. Furthermore, the process of combining the companies could have a material adverse effect on employee morale and on the ability of the Company to retain the key management, technical and sales and marketing personnel who are critical to the Company's future operations. In addition, the consummation of the acquisition could cause customers or potential customers to delay or cancel orders for products as a result of uncertainty over the integration and support of the Company's products. There can be no assurances that the Company's current management will be capable of managing the combined operations, or UniCAD's existing strategic relationships with its customers, effectively. In addition, it is possible that the business and management changes brought by the acquisition may cause key employees to leave UniCAD or cause the Company to terminate key employees of UniCAD. Any failure by UniCAD or the Company to retain and attract key employees could have a material adverse effect on the Company's business, financial condition and results of operations. The anticipated benefits of the recently announced agreement to be acquired by Cadence will not be achieved unless Cadence and the Company are successfully combined in an efficient and timely manner. The announcement of the proposed acquisition by Cadence could have a material adverse effect on employee morale and on the ability of the Company to retain the key personnel who are critical to the Company's future operations and could cause customers or potential customers to delay or cancel orders for products as a result of uncertainty over the integration and support of the Company's products, either of which could have a material adverse effect on the Company's business, financial condition and results of operations. Page 17 PART II ITEM 1. LEGAL PROCEEDINGS On July 29, 1996, the Company was sued by Cadence in the Superior Court of Santa Clara County (Case No. CV759629) in California. The complaint sought to enjoin the Company from selling a translator that was created by a third party that allows the Company's integrated circuit routing software (IC Craftsman) to connect to Cadence's software. The complaint alleged that the product was not authorized by Cadence's license agreements with the third party or the Company. The Company has sold the translator with a limited number of IC Craftsman products over the last 11 months. The complaint also sought damages from the Company. On September 12, 1996, the Company and Cadence settled the lawsuit filed against the Company by Cadence. The legal costs related to the lawsuit are approximately $350,000. Except for the payment of such legal costs, the lawsuit is not expected to have a material adverse impact on the Company's future results of operations or financial condition. As part of the settlement, Cadence has become a preferred services provider for the Company's IC and PCB design tools, giving Cadence's professional services organization access to the Company's tools to fulfill service agreements with mutual customers. In addition, the Company signed an expanded agreement allowing its products to interface with Cadence's IC and PCB design solutions. ITEM 2. CHANGES IN SECURITIES The Company has never declared or paid any cash dividends on its common stock. The Company currently anticipates that it will retain all future earnings for use in its business and does not anticipate paying any cash dividends in the forseeable future. On November 12, 1996, the Company filed a report on Form 8-K describing an Agreement and Plan of Merger and Reorganization entered into with Cadence on October 28, 1996 ("Reorganization Agreement"). The Company has agreed not to declare or pay dividends on its common stock without the consent of Cadence during the term of the Reorganization Agreement. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K The following exhibits are filed herewith or incorporated by reference: EXHIBIT NUMBER EXHIBIT TITLE - ------ ---------------- (a) See attached Exhibit Index. (b) Reports on Form 8-K. -------------------- The Company filed a report on Form 8-K on September 12, 1996 to report the Company's acquisition of UniCAD and filed an amendment to such report on Form 8-K on November 12, 1996 to include the required financial statements of UniCAD and the required pro-forma financial information. Subsequent to the end of the third quarter, the Company filed a report on Form 8-K on November 12, 1996 to report that the Company had signed a definitive agreement to be acquired by Cadence. Page 18 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: November 14, 1996 COOPER & CHYAN TECHNOLOGY, INC. By: /s/ Robert D. Selvi ------------------------------ Robert D. Selvi Chief Financial Officer (Duly Authorized Officer and Chief Accounting Officer) Page 19
EXHIBIT INDEX EXHIBIT PAGE - ------- ---- NUMBER EXHIBIT TITLE NUMBER - ------ ------------- ------ 10.01 CBDS License Agreement dated as of July 22, 1996 among Cooper & Chyan Technology, Inc., UniCAD, Inc., and Northern Telecom Limited.(1)** 11.01 Statement of Computation of Net Income Per Share.(2) 21 27.01 Financial Data Schedule, which is submitted electronically 22 to the Securities and Exchange Commission for information only and is not filed.(2)
(1) Incorporated by reference to Exhibit I of Exhibit 2.01 in the Company's Form 8-K/A filed with the Securities and Exchange Commission on November 12, 1996. (2) Filed herewith. ** Confidential treatment has been requested with respect to certain portions of this agreement. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission. Page 20 EX-11.01 2 COMPUTATION OF NET INCOME Exhibit 11.01
COOPER & CHYAN TECHNOLOGY, INC. COMPUTATION OF NET INCOME PER SHARE QUARTER ENDED QUARTER ENDED NINE MONTHS ENDED NINE MONTHS ENDED ----------------- ----------------- SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30 -------------- ------------- ----------------- ----------------- 1996 1995 1996 1995 -------------- ------------- ----------------- ----------------- Net Income $ 1,179,318 $311,375 $ 3,263,042 $833,603 Weighted average common shares outstanding 12,912,562 8,097,586 12,636,278 7,780,821 Weighted average common share equivalents 1,785,537 918,327 1,782,594 1,162,192 related to stock options (using the Treasury Stock method) Shares relating to SAB No 64 and 83 - 1,494,598 - 1,494,598 Convertible preferred stock - 1,480,000 - 1,480,000 ---------------------------------------------------------------------- Shares used in per share computation 14,698,099 11,990,511 14,418,872 11,917,611 ---------------------------------------------------------------------- Net income per share $ 0.08 $ 0.03 $ 0.23 $ 0.07 ======================================================================
Page 21 EX-27 3 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from financial statements for the quarter ended September 30, 1996 and is qualified in its entirety by reference to such financial statements. 3-MOS DEC-31-1996 SEP-30-1996 4,690,200 26,737,015 7,099,504 573,819 0 40,258,750 6,144,449 2,797,586 43,856,401 7,766,531 0 0 0 129,584 0 43,856,401 6,903,763 9,436,621 666,276 7,935,857 (28,413) 79,105 280,103 1,752,454 573,136 1,179,318 0 0 0 1,179,318 0.08 0.08
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