-----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, LiPO1X4sQVjnFNN+BLVgEe5e/zwO6h9G6nekQFgcktNZDWBSUcS3YqBvtWzuAEZ+ Be9+cVmGMW+Ht/OEf6DWAA== 0000891618-97-000379.txt : 19970221 0000891618-97-000379.hdr.sgml : 19970221 ACCESSION NUMBER: 0000891618-97-000379 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970210 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: GEOWORKS /CA/ CENTRAL INDEX KEY: 0000922285 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 942920371 STATE OF INCORPORATION: CA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-23926 FILM NUMBER: 97522510 BUSINESS ADDRESS: STREET 1: 960 ATLANTIC AVE CITY: ALAMEDIA STATE: CA ZIP: 94501 BUSINESS PHONE: 5108141660 10-Q 1 FORM 10-Q FOR THE PERIOD ENDED DECEMBER 31, 1996 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 quarterly period ended DECEMBER 31, 1996 [ ] 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 0-23926 GEOWORKS (Exact name of registrant as specified in its charter) CALIFORNIA 94-2920371 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 960 ATLANTIC AVENUE, ALAMEDA, CALIFORNIA 94501 (Address of principal executive offices) (Zip code) 510-814-1660 (Registrant's telephone number, including area code) NOT APPLICABLE (Former name, former address and former fiscal year, if changed since last report) 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. [ X ] Yes [ ] No Applicable Only to Issuers Involved in Bankruptcy Proceedings During the Preceding Five Years Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by the court. [ ] Yes [ ] No Applicable Only to Corporate Issuers Indicate the number of shares outstanding of each of the issuer's classes of stock, as of the latest practicable date. COMMON STOCK, NO PAR VALUE: 14,094,972 SHARES AS OF DECEMBER 31, 1996 2 GEOWORKS INDEX
Page ---- Part I. Financial Information Item 1. Financial Statements (Unaudited) Condensed consolidated balance sheets: December 31, 1996 and March 31, 1996 2 Condensed consolidated statements of operations: Three and nine months ended December 31, 1996 and December 31, 1995 3 Condensed consolidated statements of cash flows: Nine months ended December 31, 1996 and December 31, 1995 4 Notes to condensed consolidated financial statements: December 31, 1996 5 Item 2. Management's discussion and analysis of financial condition and results of operations 6-11 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K 12 Signature 13
1 3 PART 1-FINANCIAL INFORMATION ITEM 1-FINANCIAL STATEMENTS GEOWORKS CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (in thousands)
Dec. 31, March 31, 1996 1996 ----------- ----------- ASSETS Current assets Cash and cash equivalents $ 4,727 $10,765 Marketable securities 34,794 39,625 Prepaid expenses and other current assets 459 216 ------- ------- Total current assets 39,980 50,606 Furniture and equipment, net 3,055 2,132 Other assets 160 160 ------- ------- $43,195 $52,898 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable and accrued liabilities $ 1,621 $ 1,240 Deferred revenue 1,366 5,529 Other current liabilities 1,025 707 ------- ------- Total current liabilities 4,012 7,476 Other liabilities 658 965 ------- ------- Total liabilities 4,670 8,441 Shareholders' equity 38,525 44,457 ------- ------- $43,195 $52,898 ======= =======
See accompanying notes 2 4 GEOWORKS CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (in thousands, except per share data)
Three Months Ended Nine Months Ended -------------------------- ------------------------- Dec. 31, Dec. 31, Dec. 31, Dec. 31, 1996 1995 1996 1995 -------- -------- -------- -------- Net revenues: License revenue and product sales $ 2,733 $ 2,842 $ 6,160 $ 4,002 Research and development fees 371 25 1,304 200 Service revenue 100 -- 200 -- -------- -------- -------- -------- Total net revenues 3,204 2,867 7,664 4,202 Operating expenses: Cost of license revenue and product sales 210 65 309 105 Sales and marketing 1,723 1,070 4,773 2,962 Research and development 3,084 1,945 8,716 5,664 General and administrative 738 781 2,394 1,859 -------- -------- -------- -------- Total operating expenses 5,755 3,861 16,192 10,590 -------- -------- -------- -------- Operating loss (2,551) (994) (8,528) (6,388) Other income (expense): Interest income 488 397 1,778 663 Interest expense (38) (49) (119) (132) -------- -------- -------- -------- Loss before income taxes (2,101) (646) (6,869) (5,857) Provision for income taxes 55 -- 55 -- -------- -------- -------- -------- Net loss $ (2,156) $ (646) $ (6,924) $ (5,857) ======== ======== ======== ======== Net loss per share $ (0.15) $ (0.05) $ (0.49) $ (0.49) ======== ======== ======== ======== Shares used in per share computation 14,077 12,939 14,028 11,881 ======== ======== ======== ========
See accompanying notes 3 5 GEOWORKS CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (in thousands)
Nine Months Ended ---------------------------- Dec. 31, Dec. 31, 1996 1995 -------- -------- Operating activities: Net loss $ (6,924) $ (5,857) Adjustments to reconcile net loss to net cash used in operating activities Depreciation and amortization 955 793 Changes in operating assets and liabilities (3,797) (2,505) -------- -------- Net cash used in operating activities (9,766) (7,569) -------- -------- Investing activities: Purchases of furniture and equipment (1,768) (728) Sales (purchases) of marketable securities 4,832 (33,499) Other -- 115 -------- -------- Net cash provided by (used in) investing activities 3,064 (34,112) -------- -------- Financing activities: Proceeds from sale/leaseback of equipment -- 288 Payments of obligations under capital leases (207) (161) Net proceeds from issuance of common stock 871 44,895 -------- -------- Net cash provided by financing activities 664 45,022 -------- -------- Net increase in cash and cash equivalents (6,038) 3,341 Cash and cash equivalents at beginning of period 10,765 1,788 -------- -------- Cash and cash equivalents at end of period $ 4,727 $ 5,129 ======== ========
See accompanying notes 4 6 GEOWORKS NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. The condensed consolidated financial statements for the three months and nine months ended December 31, 1996 and 1995 are unaudited but reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the consolidated financial position and operating results for the interim periods. The condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto, together with management's discussion and analysis of financial condition and results of operations, contained in the Company's Annual Report to Shareholders for the fiscal year ended March 31, 1996. The results of operations for the three months and nine months ended December 31, 1996 are not necessarily indicative of the results to be expected for the entire fiscal year. 2. Net loss per share is computed using the weighted average number of shares of common stock outstanding. Common equivalent shares from stock options are not included in the computation as they are antidilutive. 3. In October 1995, the Financial Accounting Standards Board issued Statement No. 123 (SFAS No. 123), "Accounting for Stock-Based Compensation," which is effective for fiscal years beginning after December 15, 1995. SFAS No. 123 allows a company to adopt a new fair value-based method or continue to measure compensation cost for its stock-based compensation plans using the intrinsic value-based method of accounting prescribed by Accounting Principles Board Opinion No. 25 (APB No. 25). The Company will continue to follow APB No. 25 but will be required to make pro forma disclosures of net income or loss and earnings per share as if the fair value-based method had been applied. 5 7 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS Results of Operations Net Revenues Net revenues for the nine months ended December 31, 1996 increased $3,462,000, or 82%, compared to the nine months ended December 31, 1995. License revenue and product sales increased between the two periods by $2,158,000, or 54%, due primarily to the termination or restructuring of four OEM license agreements in the current fiscal year for which there were non-refundable, prepaid royalty balances. The prepaid balances related to these agreements had been recorded as deferred revenue, and had not yet been fully amortized at the time the agreements were terminated or restructured. Revenue recognized upon the termination or restructuring of these four agreements was included in license revenue and product sales, and accounted for $3,336,000, or 54%, of the Company's license revenue and product sales during the nine months ended December 31, 1996. For the corresponding period of the previous fiscal year, revenue resulting from the termination or restructuring of OEM license agreements amounted to $3,175,000. In addition to revenue recognized upon the termination or restructuring of license agreements, license revenue and product sales for the nine months ended December 31, 1996 included $1,071,000 of source code license fees paid by an OEM customer. Revenues associated with source code license fees and with the termination or restructuring of OEM license agreements are non-recurring. As a result of these and other non-recurring revenues, revenues for the nine months ended December 31, 1996 are not indicative of revenues to be recognized in future periods. The remainder of license revenue and product sales during the nine months ended December 31, 1996 consisted primarily of royalties on units sold by OEM licensees. Revenue related to research and development fees for the nine months ended December 31, 1996 increased $1,104,000, or 552%, compared to the corresponding period of the previous fiscal year. Research and development fees represent amounts received pursuant to contracts with OEM licensees under which the Company is reimbursed for a portion of its development costs related to specific products up to the amounts specified in the contracts. The Company is typically paid by the OEM licensee as certain project milestones are achieved. Revenue under these research and development arrangements is recognized under the percentage of completion method. The extent to which such revenue is reported can vary considerably among periods, depending upon the specific terms of the Company's contracts with OEM licensees and the relative level of development effort devoted towards projects on which research and development fees are charged. Service revenue increased $200,000 for the nine months ended December 31, 1996 compared to the corresponding period of the previous fiscal year. Service revenue represents amounts earned for the support and maintenance of software pursuant to contracts with OEM licensees. For the three months ended December 31, 1996, net revenues increased $337,000, or 12%, compared to the corresponding period of the previous fiscal year. License revenue and product sales declined $109,000, or 4%, principally due to lower revenues in the current quarter revenues from the termination or restructuring of OEM license agreements. Research and development fees increased $346,000 and service revenue increased $100,000 in the three 6 8 months ended December 31, 1996, compared to the corresponding period of the previous fiscal year. Operating Expenses Cost of Revenues. The Company's gross margin percentage was 96% for the nine months ended December 31, 1996 and 98% for the corresponding period of the previous fiscal year. Gross margin percentage was 93% for the three months ended December 31, 1996, and 98% for the corresponding three months of the previous fiscal year. Cost of revenues for all periods presented consisted principally of license payments to third parties for software that is incorporated into the Company's software. The Company anticipates that gross margin percentages would decline gradually in the event that OEM unit shipments increase and royalty revenues come to represent a greater share of total revenues. Sales and Marketing. Sales and marketing expense increased $1,811,000, or 61%, for the nine months ended December 31, 1996, and $653,000, or 61%, for the three months ended December 31, 1996, in comparison with the corresponding periods of the previous fiscal year. These increases resulted from the Company's expanded efforts in pursuit of opportunities in the market for mobile communications devices. As this market has evolved, the Company has dedicated additional resources towards the design and marketing of content and services for wireless devices, and has also broadened its services to VARs and other outside developers of software for the market. To support these activities, staffing and related costs for travel, benefits, and facilities increased in the three month and nine month periods ended December 31, 1996, as compared to the corresponding periods of the previous fiscal year. Research and Development. Research and development expense increased $3,052,000, or 54%, for the nine months ended December 31, 1996, and $1,139,000, or 59%, for the three months ended December 31, 1996, in comparison with the corresponding periods of the previous fiscal year. These increases were due primarily to the continuing expansion of the Company's engineering staff, which resulted in higher compensation costs and related increases in costs for employee benefits, travel, and facilities. The Company expects that research and development expense will continue to increase in future periods, as the Company expands its efforts to develop products for the emerging market for mobile communications devices. General and Administrative. General and administrative expense increased $535,000, or 29%, for the nine months ended December 31, 1996, in comparison with the corresponding period of the previous fiscal year. Higher costs for compensation, recruiting, and outside services were primarily responsible for this increase. General and administrative expense declined $43,000, or 6%, in the three months ended December 31, 1996, in comparison with the corresponding period of the previous fiscal year. Other Income (Expense) Interest income rose $1,115,000, or 168%, for the nine months ended December 31, 1996, and $91,000, or 23%, for the three months ended December 31, 1996, in comparison with the corresponding periods of the previous fiscal year. These increases were attributable to the significantly higher balances available to the Company for short-term investment as a direct result of the Company's secondary public offering of common stock and concurrent sale of common stock to a private investor in November 1995. These concurrent equity offerings raised over $40 million for the Company. 7 9 Provision for Income Taxes The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Income tax expense consists of foreign income tax withholding on foreign source royalties paid to the Company. The Company has a July 31 year end for income tax purposes. As of March 31, 1996, the Company had net operating loss carryforwards for federal income tax purposes of approximately $37,246,000 and for state income tax purposes of approximately $14,449,000. The Company also had research and development credit carryforwards for federal income tax purposes of approximately $1,255,000 and for state income tax purposes of approximately $561,000. Pursuant to the Tax Reform Act of 1986, annual utilization of the Company's net operating loss and tax credit carryforwards is partially limited. Liquidity and Capital Resources The Company's cash, cash equivalents, and marketable securities declined to $39.5 million at December 31, 1996 from $50.4 million at March 31, 1996. This decrease of $10.9 million resulted primarily from the use of cash during the period of $9.8 million for operating activities and $1.8 million for the purchase of furniture and equipment, offset by the net receipt of approximately $700,000 through equity and lease financing activities . The Company expects to incur additional substantial losses at least through its fiscal year ending March 31, 1997, but anticipates that its existing capital resources will be adequate to satisfy its operating and capital requirements at least through its fiscal year ending March 31, 1998. Prepaid expenses and other current assets increased $243,000 from March 31, 1996 to December 31, 1996 due to increases in the balance of prepaid insurance premiums in connection with the Company's directors and officers liability insurance coverage. Furniture and equipment, net of depreciation, increased $923,000 from March 31, 1996 to December 31, 1996, due to furniture and equipment purchases for new employees, leasehold improvements related to office expansions, and ongoing enhancements to the Company's computer equipment used for research and development. Accounts payable and accrued liabilities increased $381,000 at December 31, 1996 as compared to March 31, 1996, principally because of higher accrual balances in the current fiscal year for marketing events and for license payments due to third parties. Deferred revenue at December 31, 1996 fell $4,163,000 from March 31, 1996, as the Company recognized as revenue certain advance royalty payments collected in previous periods under contracts with OEM customers. The amount of such advance royalty payments recognized as revenue during the nine months ended December 31, 1996 exceeded the amount of any payments collected during the period, causing the balance in deferred revenue to decline significantly. The significant decrease in the Company's deferred revenue balance during the period was attributable primarily to the recognition as revenue of $3,336,000 in connection with the termination or restructuring of four OEM license agreements for which there had been non-refundable, prepaid royalty balances outstanding at the time of the termination or restructuring. Other current liabilities increased $318,000 from March 31, 1996 to December 31, 1996 as a result of higher accrual balances for certain incentive compensation and employee benefit programs. Lease obligations decreased $307,000 from March 31, 1996 to December 31, 1996, as monthly lease payments amortized outstanding principal balances. Future Operating Results Since its inception in 1983, the Company has realized limited revenues, incurred significant losses, and suffered substantial negative cash flow. At December 31, 1996, the 8 10 Company had an accumulated deficit of $48.5 million, and had incurred operating losses of approximately $9.9 million, $10.2 million, and $7.9 million in the fiscal years ended March 31, 1996, 1995 and 1994, respectively, and $6.9 million during the nine months ended December 31, 1996. The Company expects to continue to incur substantial annual operating losses at least through its fiscal year ending March 31, 1997, and it is unclear how soon thereafter, if ever, the Company will operate profitably. The Company's strategic plan to achieve profitability includes focusing in the near term on the "smart phone" segment of the market for mobile communications devices. The Company's objective is to establish its GEOS system software as a leading operating system for this market in the near term, and to leverage this position by developing and marketing an array of products and services to the installed base of GEOS-based devices. The duration and outcome of any of these efforts is uncertain, and the Company's future operating results will depend upon the growth rate of the smart phone market segment, the Company's ability to establish licensing relationships with leading smart phone hardware manufacturers, the introduction by those manufacturers of successful smart phone products, the emergence of wireless content and services for smart phones to spur demand and generate additional revenues, and the Company's ability to achieve and maintain a competitive advantage. Prior to the emergence of the smart phone market, the Company licensed its GEOS operating system software to manufacturers of non-communicating mobile devices, such as personal digital assistants and handheld electronic organizers. These non-communicating devices - in particular the Hewlett-Packard OmniGo and Casio Z-7000 -- as well as those introduced by competitors, such as the Apple Newton, Sony MagicLink and Motorola Envoy, have achieved only modest unit sales to date. As a result of the slow adoption rates in these device categories, the Company has failed to generate significant royalty revenues in connection with its licensing efforts to date, and its operating results have been affected adversely. The Casio Z-7000, a first-generation personal digital assistant based upon the Company's GEOS system software, has been discontinued. Sharp and Toshiba have each developed a non-communicating GEOS-based device and subsequently elected to cancel introduction of such devices in to the market. Other market participants have announced restructurings of their efforts relating to similar products. In addition, sales of low-cost, GEOS-based educational computer systems fell short of the Company's expectations, causing the Company to discontinue its development efforts in this segment and restructure its licensing agreement with IBM/Eduquest. During calendar year 1995, Brother released the Ensemble, a personal desktop publishing system, and Hewlett-Packard announced and shipped its OmniGo 100, a second generation electronic organizer. Both of these products are based on the GEOS system software. Royalty revenues earned on reported unit shipments of these products, however, have been modest to date, and it is unlikely that they will ever make a significant favorable contribution to the Company's operating results. Collectively, these third-party product discontinuances and disappointments have resulted in the Company recognizing lower-than-expected recurring license revenues in the current fiscal year and previous fiscal years. In August 1996, Nokia Mobile Phones released in selected geographic markets a smart phone which incorporates the Company's software. Although this device has been well received since its introduction, it is unclear what effect in the long term this new product will have on the Company's reported royalties or the adoption rate of smart phones. Many factors relating to the market introduction and promotion of smart phone and other products are not within the control of the Company, and there can be no assurance as to the timing of release or success of any such products, the impact they may have on adoption rates within their respective markets, or the effect they may have on the Company's operating results. The Company's efforts are currently concentrated on developing and marketing operating system software for use in mobile communicating devices. The Company's success depends both upon the development of a new market for these products and upon the adoption of the Company's GEOS system software as an accepted operating system standard for such devices. Although the market for cellular telephones is well-established and is currently growing 9 11 at an appreciable rate, the smart phone market is in the early stages of development, and to date no smart phone device has achieved broad market acceptance. The development of the smart phone market, like that of other computer and consumer electronics markets, is dependent upon the simultaneous development of a substantial infrastructure of related and supporting products and services, including hardware and software products, distribution channels and services, communications services and support and repair services. The Company has only limited influence over and, therefore, is substantially dependent upon, the activities of third parties for the development of this infrastructure. In addition, the Company's long-term results will depend upon its success in developing and marketing aftermarket wireless content products and services that operate on GEOS-based smart phones. There can be no assurance, however, that the wireless content and services market will develop as anticipated or that the Company will be able to execute its business plan successfully. The Company's operating results have in the past been, and are expected in the future to be, subject to significant fluctuations on both a quarterly and annual basis. Specifically, the Company expects that its operating results will fluctuate as a result of the timing and success of the Company's efforts to establish and maintain relationships with significant smart phone market participants; the introduction and market acceptance of new GEOS-based smart phones by these participants; the introduction and distribution of new system and application software by the Company; actions by competitors of the Company; and actions by its partners. License revenue related to OEM customer products which contain the Company's software is contingent upon those OEM customers' success in meeting anticipated shipment dates, obtaining market acceptance for their products, and realizing significant sales volume of those products. The Company's results are also affected by the timing and extent of product development, engineering, and sales and marketing expenses. The Company presently intends to devote substantial resources towards product development, which may affect its investment and performance in other activities and in turn affect reported operating results in future periods. In addition, the Company's results may be affected by seasonal and other fluctuations in demand for smart phones and for related software products and services, as well as by the general state of the domestic and global economies. The Company expects the smart phone market could ultimately reflect significant seasonal swings in demand similar to those in the consumer electronics market, in which demand typically peaks in the fourth calendar quarter of each year. The Company's operating results may also vary as a result of the receipt of one-time technology license or engineering fees, and the recognition as revenue of paid but unamortized advance royalties under OEM agreements (currently recorded as deferred revenue) upon the restructuring or termination of such agreements or upon product discontinuation. Amounts recognized upon such restructuring or termination have accounted in the past, and could account in the future, for a material portion of the Company's revenue, with no corresponding cash flow benefit in the period in which the revenue is recognized. Shortfalls in the Company's revenues or results of operations in comparison with levels expected by securities analysts could have an immediate and significant adverse effect on the trading price of the Company's common stock. Moreover, the Company' stock price is subject to the volatility generally associated with technology stocks and may also be affected by broader market trends unrelated to the Company's specific performance. Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements include those referring to the Company's future plans, capital needs and operating results, the acceptance of the activities and products of the Company and its partners in the market for mobile communications devices, the extent of the Company's investment in research and development in future periods, and the development of the market for mobile communications devices in general. Actual events and results could differ materially from those projected in the forward-looking statements as a result of a variety of factors, including those risk factors set 10 12 forth in the preceding seven paragraphs and elsewhere in this report, especially those regarding the Company's operating results and future activities and those regarding the market for mobile communications devices. 11 13 ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits 10.38 Amendment Number One to Software License Agreement dated December 5, 1996 between Casio Computer Co., Ltd. and Geoworks 10.39 Amendment Number Four to Corporate Technology Agreement between the Company and Toshiba Corporation** 27.1 Financial Data Schedule ** Confidential treatment requested as to portions thereof. b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended December 31, 1996. 12 14 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 , 1997 GEOWORKS by: /s/ Daniel L. Sicotte ------------------------------ Daniel L. Sicotte Treasurer (Duly Authorized Officer and Principal Financial Officer) 13 15 GEOWORKS EXHIBITS TABLE OF CONTENTS Exhibit No. Description Sequential Page Number - ----------- ----------- ---------------------- 10.38 Amendment Number One to Software License Agreement dated December 5, 1996 between Casio Computer Co., Ltd. and Geoworks 10.39 Amendment Number Four to Corporate Technology Agreement between the Company and Toshiba Corporation ** 27.1 Financial Data Schedule ** Confidential treatment requested as to portions thereof 14 EX-10.38 2 AMENDMENT #1 TO SOFTWARE AGREEMENT DATED 12/5/96 1 EXHIBIT 10.38 December 5, 1996 Mr. Hidetaka Fujisawa General Manager Development Department Communication Technology Laboratory Hamura R & D Center Casio Computer Co., Ltd. 2-1 Sakaecho 3-chome Hamura-shi Tokyo 205 Japan Dear Fujisawa-san, As you know, Casio Computer Co., Ltd. a Japanese Corporation ("Casio") and Geoworks, a California corporation ("Geoworks") are parties to a Software License Agreement (the "Zoomer Agreement"), entered into as of May 22, 1992. Our records show that either party may now terminate the Zoomer Agreement. By this letter, Geoworks respectfully advises Casio that Geoworks hereby terminates the Zoomer Agreement as of the date of this letter. Although the Zoomer Agreement provides that all obligations cease upon termination, Geoworks will be pleased to continue providing support in the manner established by the Agreement, through December 31, 1997. We would appreciate your acknowledgment of this termination by signing this letter below and returning it to us. It has been our pleasure to work with Casio, and hope we may have an additional opportunity to work together again in the future. Sincerely, /s/ Leland J. Llevano Leland J. Llevano VP Strategic Partnerships ACKNOWLEDGED: Casio Computer Co., Ltd. hereby acknowledges the termination of the above-referenced Software License Agreement as of the date of this letter. Signed: /s/ Hidetaka Fujisawa EX-10.39 3 AMENDMENT #4 TO CORPORATE TECHNOLOGY AGREEMENT 1 EXHIBIT 10.39 CONFIDENTIAL TREATMENT REQUESTED --------------------------------------- ** This portion has been omitted and filed separately pursuant to a request of confidential treatment. --------------------------------------- ADDENDUM TO GEOWORKS - TOSHIBA CORPORATE TECHNOLOGY AGREEMENT This Addendum (the "Addendum") to the March 17, 1993 Corporate Technology Agreement between Geoworks and Toshiba is effective as of December 16, 1996. RECITALS A. Toshiba and Geoworks entered into a Corporate Technology License Agreement effective as of March 17, 1993 (the "Original Agreement"), as amended by Amendment Number One effective as of June 30, 1994 ("Amendment No. 1"), Amendment Number Two effective as of June 20, 1995 ( "Amendment No. 2"), Amendment Number Three effective as of September 29, 1995 ("Amendment No. 3"), the ** Project memorandum entered into in October 1995 (the "Project Outline), and the ** made by Geoworks in connection with Toshiba's equity investment in Geoworks (the **). Hereinafter the Original Agreement, Amendment No. 1, Amendment No. 2, Amendment No. 3, Project Outline and ** are collectively referred to as the "Agreement." B. Notwithstanding the Project Outline, the Parties agreed that Toshiba ** . Instead, the Parties wish to ** technology on which Geoworks has ** . C. The Parties wish to amend the Agreement to add a license from Geoworks to Toshiba of an ** for the ** operating system. AGREEMENT 1. ADDITION TO LICENSED TECHNOLOGY The list of technologies licensed by Geoworks to Toshiba for the ** is hereby amended to add an ** for the ** operating system. 2. LICENSE FEE In consideration for the addition of the ** technology, Toshiba shall pay to Geoworks the sum of ** U.S. upon signing this Addendum. Said sum shall Page 1 of 2 ADDENDUM 2 CONFIDENTIAL TREATMENT REQUESTED --------------------------------------- ** This portion has been omitted and filed separately pursuant to a request of confidential treatment. --------------------------------------- constitute a ** for the right to use the ** technology in accordance with the terms and conditions of the Agreement. ** of the ** technology are not **. A ** will be negotiated between the parties should Toshiba desire that **. Maintenance and support of the ** technology will be provided by Geoworks under the same terms and conditions of the Agreement. 3. CONTRACT AMENDMENT Both Parties agree to use their best efforts to formally amend the Agreement to incorporate the terms and conditions of this Addendum. IN WITNESS WHEREOF, the Parties have executed this Amendment as of the Amendment Effective Date. TOSHIBA GEOWORKS Signature: /s/ S. Yamashita Signature: /s/ Leland J. Llevano Print Name: S. Yamashita Printed Name: Leland J. Llevano Title: General Manager Title: Vice President Legal Affairs Division Date: Dec 27, 1996 Date: 12 Dec 1996 Page 2 of 2 ADDENDUM EX-27.1 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET OF GEOWORKS AS OF DECEMBER 31, 1996, AND THE CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS MAR-31-1997 APR-01-1996 DEC-31-1996 4,727,000 34,794,000 0 0 0 39,980,000 5,666,000 (2,611,000) 43,195,000 4,012,000 0 0 0 87,138,000 (48,613,000) 43,195,000 0 7,664,000 0 309,000 15,883,000 0 119,000 (6,869,000) 55,000 (6,924,000) 0 0 0 (6,924,000) (.49) (.49)
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