-----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, Vk83nJLWTDjH7Kk2GUK/Y1jZck+cIPPk8EvNTohHF+KCvSwwHOyCf2s3KyK3GsGs U60ydDZIvGyyRha38T+n/w== 0000936392-97-001338.txt : 19971021 0000936392-97-001338.hdr.sgml : 19971021 ACCESSION NUMBER: 0000936392-97-001338 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19971020 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HNC SOFTWARE INC/DE CENTRAL INDEX KEY: 0000945093 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 330248788 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 000-26146 FILM NUMBER: 97697991 BUSINESS ADDRESS: STREET 1: 5930 CORNERSTONE CT WEST CITY: SAN DIEGO STATE: CA ZIP: 92121-3728 BUSINESS PHONE: 6195468877 MAIL ADDRESS: STREET 1: 5930 CORNERSTONE CT WEST CITY: SAN DIEGO STATE: CA ZIP: 92121-3728 10-Q/A 1 FORM 10-Q/A 3-31-97 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A - AMENDMENT NO. 1 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997 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 0-26146 - -------------------------------------------------------------------------------- HNC SOFTWARE INC. (Exact name of registrant as specified in its charter) - -------------------------------------------------------------------------------- DELAWARE 33-0248788 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 5930 CORNERSTONE COURT WEST SAN DIEGO, CA 92121 (Address of principal executive offices, including zip code) (619) 546-8877 (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 APRIL 30, 1997 THERE WERE 19,282,520 SHARES OF COMMON STOCK, $0.001 PAR VALUE, OUTSTANDING. ================================================================================ 2 The Registrant hereby amends Items 1 and 2 of its quarterly report on Form 10-Q for the quarterly period ended March 31, 1997. INDEX LISTING - --------------------------------------------------------------------------------
Page Number ------ PART I FINANCIAL INFORMATION Item 1: FINANCIAL STATEMENTS Consolidated Balance Sheet at March 31, 1997 (unaudited) and December 31, 1996. 3 Consolidated Statement of Operations (unaudited) for the three month periods ended March 31, 1997 and 1996 4 Consolidated Statement of Cash Flows (unaudited) for the three month periods ended March 31, 1997 and 1996 5 Notes To Consolidated Financial Statements (unaudited) 6 Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8
2 3 PART I - FINANCIAL INFORMATION - -------------------------------------------------------------------------------- Item 1: FINANCIAL STATEMENTS HNC SOFTWARE INC. CONSOLIDATED BALANCE SHEET (in thousands, except per share data) ASSETS
March 31, December 31, 1997 1996 --------- ------------ (unaudited) Current assets: Cash and cash equivalents $ 6,379 $ 7,517 Short-term investments 10,075 7,353 Accounts receivable, net 18,830 18,832 Current portion of deferred income taxes 6,668 6,400 Other current assets 2,299 2,505 -------- -------- Total current assets 44,251 42,607 Property and equipment, net 6,744 5,966 Deferred income taxes, less current portion 21,848 22,966 Other assets 3,236 3,305 Long-term investments 21,392 19,375 -------- -------- 97,471 94,219 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,932 $ 3,270 Accrued liabilities 3,408 4,058 Deferred revenue 4,527 3,377 Other current liabilities 340 418 -------- -------- Total current liabilities 11,207 11,123 -------- -------- Other non-current liabilities 593 683 -------- -------- Common stock, $0.001 par value - 50,000 shares authorized: 19,262 and 19,126 shares issued and outstanding, respectively 19 19 Paid-in capital 84,711 83,554 Foreign currency translation adjustment (25) 54 Unrealized loss on investments (62) (59) Retained earnings (accumulated deficit) 1,028 (1,155) -------- -------- Total stockholders' equity 85,671 82,413 -------- -------- $ 97,471 $ 94,219 ======== ========
See accompanying notes to consolidated financial statements. 3 4 HNC SOFTWARE INC. CONSOLIDATED STATEMENT OF OPERATIONS (in thousands, except per share data) (unaudited)
Three Months Ended ------------------------------ March 31, 1997 March 31, 1996 -------------- -------------- Revenues: License and maintenance $13,809 $ 5,720 Installation and implementation 1,946 1,200 Contracts and other 2,726 2,979 ------- -------- Total revenues 18,481 9,899 ------- -------- Operating expenses: License and maintenance 2,390 1,981 Installation and implementation 801 589 Contracts and other 1,850 2,071 Research and development 4,277 2,336 Sales and marketing 4,232 2,207 General and administrative 1,870 1,342 ------- -------- Total operating expenses 15,420 10,526 ------- -------- Operating income (loss) 3,061 (627) Other income, net 404 437 ------- -------- Income (loss) before income tax provision 3,465 (190) Income tax provision 1,282 537 ------- -------- Net income (loss) $ 2,183 $ (727) ======= ======== Net income (loss) per share $ 0.11 $ (0.04) ======= ======== Shares used in computing net income (loss) per share 20,397 18,198 ======= ========
See accompanying notes to consolidated financial statements. 4 5 HNC SOFTWARE INC. CONSOLIDATED STATEMENT OF CASH FLOWS (in thousands, except per share data) (unaudited)
Three Months Ended -------------------------------- March 31, 1997 March 31, 1996 -------------- -------------- Cash flows from operating activities: Net income (loss) $ 2,183 $ (727) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,063 679 Changes in assets and liabilities: Accounts receivable, net 2 989 Other assets 30 (1,404) Deferred income taxes -- 520 Accounts payable (338) 339 Accrued liabilities (650) (115) Deferred revenue 1,150 1,640 Other liabilities (44) (300) ------- -------- Net cash provided by operating activities 3,396 1,621 ------- -------- Cash flows from investing activities: Purchases of investments (9,723) (18,443) Maturities of investments 1,904 4,382 Proceeds from sale of investments 3,001 -- Acquisitions of property and equipment (1,520) (898) ------- -------- Net cash used in investing activities (6,338) (14,959) ------- -------- Cash flows from financing activities: Net proceeds from issuance of common stock 725 521 Tax benefit from stock options 1,282 -- Proceeds under bank line of credit -- 764 Repayments under bank line of credit -- (435) Repayment of debt from asset purchases -- (328) Repayment of capital lease obligations (124) (127) ------- -------- Net cash provided by financing activities 1,883 395 ------- -------- Effect of exchange rate changes on cash (79) -- ------- -------- Net decrease in cash and cash equivalents (1,138) (12,943) Cash and cash equivalents at the beginning of the period 7,517 20,583 ------- -------- Cash and cash equivalents at the end of the period $ 6,379 $ 7,640 ======= ========
See accompanying notes to consolidated financial statements. 5 6 HNC SOFTWARE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- Note I GENERAL In management's opinion, the accompanying unaudited consolidated financial statements for HNC Software Inc. (the "Company") for the three months ended March 31, 1997 and 1996 have been prepared in accordance with generally accepted accounting principles for interim financial statements and include all adjustments (consisting only of normal recurring accruals) that the Company considers necessary for a fair presentation of its financial position, results of operations, and cash flows for such periods. However, the accompanying financial statements do not contain all of the information and footnotes required by generally accepted accounting principles for complete financial statements. All such financial statements are unaudited except the December 31, 1996 balance sheet. This report and the accompanying unaudited and audited financial statements should be read in conjunction with the Company's audited financial statements and notes thereto presented in its 1996 Annual Report for the fiscal year ended December 31, 1996. Footnotes which would substantially duplicate the disclosures in the Company's audited financial statements for the fiscal year ended December 31, 1996 contained in the 1996 Annual Report have been omitted. The interim financial information contained herein is not necessarily indicative of the results to be expected for any other interim period or the full fiscal year ending December 31, 1997. Note 2 NET INCOME (LOSS) PER SHARE In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 128 ("FAS128"), "Earnings Per Share," which the Company will adopt as required for all periods ending after December 15, 1997. Pursuant to this Statement, companies will replace the reporting of "primary" earnings per share ("EPS") with "basic" EPS. Basic EPS is calculated by dividing the income available to common stockholders by the weighted average number of common shares outstanding for the period, without consideration for common stock equivalents. "Fully diluted" EPS will be replaced by "diluted" EPS. Diluted EPS is computed similarly to fully diluted EPS under the provisions of APB Opinion No. 15. The pro forma effect of the adoption of FAS128 is as follows:
3/31/97 3/31/96 ------- ------- Basic earnings (loss) per share $0.11 $(0.04) Diluted earnings (loss) per share $0.11 $(0.04)
6 7 Note 3 RECLASSIFICATIONS Certain prior period balances have been reclassified to conform to the current period presentation. 7 8 HNC SOFTWARE INC. - -------------------------------------------------------------------------------- Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD LOOKING STATEMENTS: NO ASSURANCES INTENDED This Item 2 contains certain forward-looking statements regarding the Company, its business, prospects and results of operations that are subject to certain risks and uncertainties posed by many factors and events that could cause the Company's actual business, prospects and results of operations to differ materially from those that may be anticipated by such forward-looking statements. Factors that may affect such forward-looking statements include, without limitation: the Company's ability to successfully develop new products for new markets; customer acceptance of new products; the Company's loss of a large customer or key personnel; the Company's acquisition of other businesses; the Company's ability to manage growth and to successfully integrate acquired businesses; the impact of competition on the Company's revenues, market share or ability to maintain its premium usage-based pricing terms and to generate recurring revenue from certain products; the availability to the Company, at reasonable cost, of data required to operate or update its intelligent decision software products; changes in law or regulatory requirements that adversely affect or preclude customers from using the Company's products for certain applications; the Company's inability to secure new government contracts for technology development; delays in the Company's introduction of new products; and failure by the Company to keep pace with emerging technologies. Accordingly, no assurances can be given that events or results mentioned in any such forward-looking statements will in fact occur. When used in this discussion, words such as "believes", "anticipates", "expects", "intends" and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. The Company undertakes no obligation to revise any forward-looking statements in order to reflect events or circumstances that may subsequently arise. Readers are urged to carefully review and consider the various disclosures made by the Company in this report and in the Company's reports filed with the Securities and Exchange Commission. 8 9 THREE MONTHS ENDED MARCH 31, 1997 AND 1996 REVENUES. Revenues for the three months ended March 31, 1997 were $18.5 million, an increase of 87% over revenues of $9.9 million for the same period in the prior year. This increase was primarily due to greater license and maintenance revenues, which were $13.8 million for the quarter ended March 31, 1997, an increase of 141% from $5.7 million for the comparable quarter in 1996. The Company's license and maintenance revenues are derived from periodic license fees, perpetual license fees and maintenance fees. This increase in license and maintenance revenues was due primarily to the growth of license fee revenues from products of recently acquired companies, including the Retek Merchandising System, which provides management solutions for retailers, CompCompare, which permits insurers to compare historical costs of workers' compensation insurance claims, and MIRA, the worker's compensation loss reserves prediction product. Also contributing to the increase in license and maintenance revenues was growth in revenue from Falcon license fees and, to a lesser extent, revenue from ProviderCompare, which enables insurers to compare the relative costs of health care providers' treatment of workers' compensation injuries. Installation and implementation revenues increased to $1.9 million during the first quarter of 1997 from $1.2 million during the first quarter of 1996. This increase is primarily attributable to increases in the installation of both SkuPlan and Colleague. Contracts and other revenues for the three months ended March 31, 1997 were $2.7 million, a decrease of 8% as compared to $3.0 million for the same period in the prior year. Contracts and other revenues are derived primarily from development and consulting contracts with commercial customers and research and development contracts with the United States Government. All revenues for new product pilots (i.e., the first production installation of a product) are also reported as contract and other revenues. The Company had a greater number of new product pilot installations in process during the first quarter of fiscal 1996 than during the quarter ended March 31, 1997, which accounted in part for the decrease in contracts and other revenues during that quarter. Revenues from contract services are generally recognized as the services are performed using the percentage of completion method based on costs incurred to date compared to total estimated costs at completion. During 1996, the Company had a significant number of new product development projects in process consisting of new product pilot installations, most of which the Company expects to begin shipping in production versions in 1997. Any significant delay in the completion of these or other new products, or the failure of such products, if and when installed, to achieve any significant market acceptance, would have a material adverse effect upon the Company's business. 9 10 The Company's success depends upon its ability to successfully enter new markets by developing new products for those markets on a timely and cost-effective basis. The Company's products often require customer data for decision model development and system installation. As a result, completion of new products may be delayed while the Company extracts sufficient amounts of statistically relevant data and develops the statistical models that form a product's core. During this development process, the Company relies on its potential customers in the new market to provide relevant industry data and to help train Company personnel in the use, relevance and meaning of the data in the specific industry. These relationships also assist the Company in establishing presence and credibility in the new market. There can be no assurance the Company will succeed in developing products that satisfy customers in new markets or that potential customers and other companies, most of which have significantly greater financial and marketing resources than the Company, will not compete with the Company in the future or will not otherwise discontinue their relationships with or support of the Company, either during development of the Company's products or thereafter. The Company's success will depend upon its ability to maintain competitive technologies, enhance its current products and develop new products for varied markets in a timely and cost-effective manner that meets changing market conditions, including evolving customer needs, new competitive product offerings, emerging industry standards and changing technology. The sales cycle associated with the purchase of the Company's products is typically lengthy and subject to a number of significant risks, including customers' budgetary constraints and internal acceptance reviews, over which the Company has little or no control. LICENSE AND MAINTENANCE EXPENSES. License and maintenance expenses primarily consist of the Company's expenses for personnel engaged in customer support, costs of travel to customer sites and the costs of documentation materials. License and maintenance expenses for the first quarter of 1997 were $2.4 million and constituted 17% of license and maintenance revenues for the quarter, whereas such expenses were $2.0 million and represented 35% of license and maintenance revenues in the first quarter of 1996. The primary reason for the increase in these expenses was increased staffing and associated costs in client services to support the increased volume of business. License and maintenance expenses represented a lower percentage of license and maintenance revenues in the quarter ended March 31, 1997 than in the comparable quarter in the prior year. This increase in gross margins was due to increased shipments of new products, including the Retek Merchandising System, CompCompare and MIRA, outpacing growths in costs. INSTALLATION AND IMPLEMENTATION EXPENSES. Installation and implementation expenses were $801,000 or 41% of installation and implementation revenues during the 10 11 first quarter of 1997 and $589,000 or 49% of installation and implementation revenues during the first quarter of 1996. The primary reason for the increase in these expenses was increased staffing and associated costs in client services to support the increased volume of business. This increase in gross margins was due in part to the fact that fewer pilot product installations (particularly for insurance and retail products) were in progress during the quarter ended March 31, 1997 than in the same quarter in 1996. Pilot product installations typically yield lower margins due to price discounts given to early adopter customers of new pilot products. When a pilot product is later sold to other non-pilot customers, the Company normally transitions to full pricing, and hence higher margins, for that product. A larger percentage of the revenue for the quarter ended March 31, 1997 was derived from full priced transactions. The Company also had a higher volume of full priced transactions for the quarter ended March 31, 1997 as compared to the same period of the prior year. Consequently, the Company's margins may vary from quarter to quarter depending upon, among other things, the relative mix of pilot product versus full priced product revenues for the quarter. CONTRACTS AND OTHER EXPENSES. Contracts and other expenses consist primarily of personnel-related expenses associated with the Company's performance of such contracts. Contracts and other expenses in the first quarter of 1997 were $1.9 million or 68% of contracts and other revenues as compared to $2.1 million or 70% of such revenues in the first quarter of 1996. The slight reduction in these expenses as a percent of revenues is due to higher pricing on commercial new product pilot contracts. RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses in the first quarter of 1997 were $4.3 million or 23% of total revenues compared to $2.3 million or 24% of total revenues in the first quarter of the prior year. The increase in these expenses was due primarily to increases in staffing and related costs to support increased product development activities, primarily related to enhancements to the Falcon product, Retek Merchandising 7.0, Capstone, Retek's ARI product and Retek Data Warehouse, and to a lesser extent, Falcon Sentry, Colleague, AREAS, CompCompare, and ProviderCompare. SALES AND MARKETING EXPENSES. Sales and marketing expenses were $4.2 million or 23% of total revenues in the first quarter of 1997 compared to $2.2 million and 22% of total revenues in the first quarter of 1996. The increase in sales and marketing expenses was due primarily to increased staffing related to the Company's expansion of its direct sales and marketing staff, including opening sales offices in the United Kingdom, Japan, South Africa and France, and increased expenses for trade shows, advertising and other marketing programs to support the roll-out of new products. GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses were $1.9 million and 10% of total revenues in the first quarter of 1997, compared to 11 12 $1.3 million and 14% of total revenues in the prior year. The increase in these costs was due to increased staffing and related expenses to support higher levels of sales and development activity of the Company resulting in part from the fiscal 1996 acquisitions of Risk Data Corporation and Retek Distribution Corporation. The decrease in general and administrative expenses as a percent of total revenues is due to relatively higher increases in revenues as compared to the increase in general and administrative expenses. OPERATING INCOME (LOSS). The above factors resulted in operating income of $3.1 million, constituting 17% of total revenues for the first quarter of 1997, compared to an operating loss of $627,000 or 6% of total revenues in the same quarter of the prior year. The Company's quarterly revenues and operating results have varied significantly in the past and may do so in the future. Although to date a significant portion of the Company's revenues has come from monthly usage fees under long-term contracts, there can be no assurance that the Company will continue to realize such recurring revenues or that customers under such contracts would not seek to cancel such contracts if the Company's products were not competitive or did not achieve effective results. A significant portion of the Company's business has been derived from substantial orders placed by large organizations, and the timing of such orders has caused material fluctuations in the Company's operating results. In addition, because the Company's Retek subsidiary generally provides its products to customers under perpetual licenses with no significant continuing obligations for which collection of the related receivable is probable, it recognizes the majority of its revenue upon the delivery of the software and acceptance by the customer. Thus, revenues derived by Retek may be more likely to be recognized in irregular patterns that may result in quarterly variations in the Company's revenues. The Company's expense levels are based in part on its expectations regarding future revenues and in the short term are fixed to a large extent. Therefore, the Company may be unable to adjust spending in a timely manner to compensate for any unexpected revenue shortfall. As a result, if anticipated revenues in any quarter do not occur or are delayed, the Company's operating results for the quarter would be disproportionately affected. The Company's operating results are also affected by seasonal trends. Such trends may include higher revenues in the third quarter and lower revenues in the fourth quarter as a result of fewer installations of the Falcon product scheduled during the fourth quarter when credit card activity is at peak levels. Operating results also may fluctuate due to factors such as the demand for the Company's products, product life cycles, the introduction and acceptance of new products and product enhancements by the Company or its competitors, changes in the mix of distribution channels through which the Company's products are offered, changes in the level of operating expenses, customer order deferrals in anticipation of new products, competitive conditions in the industry and economic conditions generally or in various industry segments. The Company expects quarterly fluctuations to continue for the foreseeable future. Accordingly, the Company believes that period-to-period comparisons of its 12 13 financial results should not be relied upon as an indication of the Company's future performance. No assurance can be given that the Company will be able to achieve or maintain profitability on a quarterly or annual basis in the future. Due to all of the foregoing factors, it is possible that in some future quarter the Company's operating results will be below the expectations of public market analysts and investors. In such event, the price of the Company's Common Stock would likely be materially adversely affected. OTHER INCOME, NET. Other income for the first quarter of 1997 was $404,000 compared to $437,000 in the first quarter of the prior year. The decrease was due to a reduction in interest income during the first quarter of 1997 as a result of lower cash and investment balances due to the repayment of the loans and notes payable of Risk Data Corporation and Retek Distribution Corporation. Lower interest rates also contributed to the reduction in interest income. INCOME (LOSS) BEFORE INCOME TAX PROVISION. The resulting income before income tax provision for the first quarter of 1997 was $3.5 million or 19% of total revenues, compared to a loss before tax provision of $190,000 or 2% of total revenues for the comparable quarter of 1996. INCOME TAX PROVISION. The income tax provisions of $1.3 million and $537,000 in the first quarters of 1997 and 1996, respectively, are based on management's estimates of the effective tax rates to be incurred by the Company during those respective full fiscal years. The loss before income tax provision of $190,000 for the first three months of 1996 includes losses incurred by Risk Data Corporation and Retek Distribution Corporation for which no tax benefit was available during that period. LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operating activities during the first quarter of 1997 of $3.4 million represented net income before depreciation and amortization of approximately $3.2 million, further increased by a net increase in deferred revenue of $1.2 million related to contract and license prepayments, and offset by decreases in accrued liabilities of $650,000 and accounts payable of $338,000. Net cash provided by operating activities during the first quarter of 1996 of $1.6 million represented a net loss before depreciation and amortization of approximately $48,000. This was increased by a net increase in deferred revenue of $1.6 million related to contract and license prepayments, and decreases in accounts receivable of $989,000 and deferred tax assets of $520,000 offset by a increase in other assets of $1.4 million. Net cash used in investing activities was $6.3 million during the first quarter of 1997, primarily due to net purchases of investments of $4.8 million. In addition, the 13 14 Company expended $1.5 million for property and equipment during the first quarter of 1997, including $1.3 million for computer equipment to support the increased staffing across the Company. Net cash used in investing activities was $15.0 million during the first quarter of 1996 as a result of net purchases of investments of $14.1 million. The Company also acquired approximately $898,000 of property and equipment (primarily computer equipment) during the first quarter of 1996. Net cash provided by financing activities was $1.9 million during the first quarter of 1997 primarily due to the tax benefit from stock option exercises of $1.3 million and the net proceeds from the issuance of common stock of $725,000, offset by capital lease repayments. Net cash provided by financing activities was $395,000 during the first quarter of 1996, primarily as a result of proceeds from Risk Data Corporation's bridge loan of $764,000 and the net proceeds from the issuance of common stock of $521,000, offset by repayments of the revolving line of credit, notes payable to stockholders and capital lease obligations totaling $890,000. At March 31, 1997, the Company had $37.8 million in cash, cash equivalents and investments. Management believes that the Company's cash and investments and cash generated from operations will be adequate for the Company's cash requirements for the next twelve months. Management intends to invest the Company's cash in excess of current operating requirements in short-term, interest-bearing, investment grade securities. A portion of the Company's cash could be used to acquire or invest in complementary businesses or products or to obtain the right to use complementary technologies or data. From time to time, in the ordinary course of business, the Company evaluates potential acquisitions of such businesses, products, technologies or data. 14 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report on Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized. HNC SOFTWARE INC. Date: October 20, 1997 By: /s/ Raymond V. Thomas ------------------------------------------ Raymond V. Thomas Vice President, Finance & Administration and Chief Financial Officer (for Registrant as duly authorized officer and as Principal Financial Officer and Principal Accounting Officer) 15 -----END PRIVACY-ENHANCED MESSAGE-----