<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996 COMMISSION FILE NUMBER 0-26778
APPLIED MICROSYSTEMS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
WASHINGTON 91-1074996
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
5020 148TH AVENUE N.E. 98052
REDMOND, WASHINGTON (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(206) 882-2000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.01 Per Share
(TITLE OF CLASS)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
---
The number of shares of the registrant's Common Stock outstanding as of
August 2, 1996, was 6,524,721.
This report including exhibits consists of 17 pages. The exhibit index
appears on page 15.
<PAGE> 2
APPLIED MICROSYSTEMS CORPORATION
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Statements of Income for the quarter and six months ended June 30, 1996
and 1995.................................................................................... 3
Consolidated Balance Sheets as of June 30, 1996 and December 31, 1995....................... 4
Consolidated Statements of Cash Flows for the six months ended June 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....... 7
Part II OTHER INFORMATION
Item 4. Submission of matters to a vote of Security Holders......................................... 12
Item 6. Exhibits and Reports on Form 8-K............................................................ 13
Signatures.................................................................................. 14
Exhibit Index............................................................................... 15
Exhibit 10.1................................................................................ 16
Exhibit 11.................................................................................. 17
</TABLE>
2
<PAGE> 3
APPLIED MICROSYSTEMS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30 SIX MONTHS ENDED JUNE 30
-------------------------- --------------------------
1996 1995 1996 1995
-------- -------- -------- --------
(IN THOUSANDS , EXCEPT PER SHARE AMOUNT)
(UNAUDITED)
<S> <C> <C> <C> <C>
Net Sales ............................. $ 9,750 $ 7,670 $ 18,454 $ 14,897
Cost of sales ......................... 2,806 2,364 5,363 4,633
-------- -------- -------- --------
Gross Profit .......................... 6,944 5,306 13,091 10,264
Operating expenses:
Sales, general and administrative .. 3,716 3,307 7,163 6,534
Research and development ........... 2,000 1,561 3,807 3,034
-------- -------- -------- --------
Total operating expenses .............. 5,716 4,868 10,970 9,568
-------- -------- -------- --------
Income from operations ................ 1,228 438 2,121 696
Interest income and other ............. 139 (27) 292 (23)
Interest expense ...................... (12) (55) (26) (156)
-------- -------- -------- --------
Income before income taxes ............ 1,355 356 2,387 517
Income taxes .......................... 359 50 689 125
-------- -------- -------- --------
Net Income ............................ $ 996 $ 306 $ 1,698 $ 392
======== ======== ======== ========
Net Income per share .................. $ 0.14 $ 0.06 $ 0.24 $ 0.07
Shares used in per share calculation .. 7,106 5,471 7,093 5,464
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE> 4
APPLIED MICROSYSTEMS CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
----------- ------------
(UNAUDITED)
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents ............................. $ 6,706 $ 12,771
Short Term Investments ................................ 5,918 --
Accounts receivable ................................... 8,735 7,510
Inventories ........................................... 3,115 3,145
Prepaid and other current assets ...................... 1,117 454
-------- --------
Total current assets .............................. 25,591 23,880
Property and equipment, net ................................ 2,255 2,212
Other assets ............................................... 660 754
-------- --------
Total assets ...................................... $ 28,506 $ 26,846
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ...................................... $ 3,092 $ 3,442
Accrued payroll ....................................... 1,606 1,698
Other accrued expenses ................................ 1,277 1,083
Deferred revenue ...................................... 2,170 1,834
Current portion of long-term obligations .............. 57 67
-------- --------
Total current liabilities ......................... 8,202 8,124
Long-term obligations, less current portion ................ 38 68
Shareholders' equity:
Preferred stock, par value $.01
Authorized - 5,000,000 shares
Common stock, par value $.01
Authorized - 25,000,000 shares
Issued - 6900500993,517,000 and 6,468,000 shares in
June 30, 1996 and December 31, 1995,
respectively ...................................... 25,674 25,655
Cumulative translation adjustment ..................... (261) (156)
Accumulated deficit ................................... (5,147) (6,845)
-------- --------
Total shareholders' equity ........................ 20,266 18,654
-------- --------
Total liabilities and shareholders' equity ........ $ 28,506 $ 26,846
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE> 5
APPLIED MICROSYSTEMS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1996 1995
-------- --------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................................ $ 1,698 $ 392
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization ........................ 567 598
Changes in operating assets and liabilities:
Accounts receivable .................................. (1,225) (88)
Inventories .......................................... 30 9
Prepaid expenses ..................................... (663) 78
Other assets ......................................... 62 58
Deferred revenue ..................................... 336 130
Accounts payable and accrued expenses ................ (248) 92
-------- --------
Net cash provided by operating activities ........ 557 1,269
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investments ................... (5,918) --
Property and equipment additions ..................... (578) (426)
-------- --------
Net cash used in investing activities ............ (6,496) (426)
CASH FLOWS FROM FINANCING ACTIVITIES:
Stock options exercised .............................. 19 29
Proceeds from long-term obligations .................. -- 462
Repayment of long-term obligations ................... (40) (256)
Proceeds from notes payable to banks ................. -- 9,300
Repayment of notes payable to banks .................. -- (10,524)
-------- --------
Net cash used in financing activities ............ (21) (989)
Effects of foreign exchange rate changes on cash .......... (105) 250
-------- --------
(Decrease) increase in cash and cash equivalents ......... (6,065) 104
Cash and cash equivalents at beginning of period .......... 12,771 2,072
-------- --------
Cash and cash equivalents at end of period ................ $ 6,706 $ 2,176
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
5
<PAGE> 6
APPLIED MICROSYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements for the six month period ended
June 30, 1996 and the related footnote information are unaudited and have been
prepared on a basis substantially consistent with the 1995 audited consolidated
financial statements, and in the opinion of management include all adjustments
(consisting of only normal recurring adjustments) necessary for fair
presentation of the results of this interim period. These statements should be
read in conjunction with the consolidated financial statements and related notes
included in the Company's 1995 Annual Report to Shareholders. The results of
operations for the six month period ended June 30, 1996 are not necessarily
indicative of the results to be expected for the entire year.
Certain prior year amounts have been reclassified to conform to the
current year presentation. Such reclassifications have no effect on previously
reported results of operations.
2. COMPUTATION OF EARNINGS PER SHARE
Net income per share is based on the weighted average number of common
and common equivalent shares outstanding during each period. Common equivalent
shares include the effect of all outstanding convertible preferred stock and
outstanding stock options and warrants. Common equivalent shares are not
included in the per share calculations where the effect of their inclusion would
be antidilutive, except that, in accordance with Securities and Exchange
Commission requirements, common and common equivalent shares issued during the
12-month period prior to its filing of the initial public offering have been
included in the calculation as if they were outstanding for all periods through
November 1995 (the closing of its initial public offering), using the treasury
stock method and the initial public offering price.
3. INVENTORIES
Inventories consist of:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
-------- ------------
(IN THOUSANDS)
<S> <C> <C>
Finished goods $1,196 $1,275
Work in process 91 155
Purchased parts 1,828 1,715
------ ------
$3,115 $3,145
====== ======
</TABLE>
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion and Analysis of Financial Conditions and Results of
Operations should be read in conjunction with the accompanying financial
statements for the periods specified and the associated notes. Further reference
should be made to the Company's 1995 Annual Report to Shareholders.
RESULTS OF OPERATIONS
The following table sets forth for the period indicated the percentage of total
revenue represented by each line item in the Company's condensed consolidated
statements of income and the percentage change from comparative prior period in
each line item:
<TABLE>
<CAPTION>
Percent of Period-to-Period
Net Sales Percentage Change
--------------------- ---------------------
Three Months Ended Three Months Ended
June 30, June 30, 1996
1996 1995 Compared to 1995
------ ------ ---------------------
<S> <C> <C> <C>
Net Sales 100.0% 100.0% 27.1%
Cost of sales 28.8 30.8 18.7
------ ------
Gross Profit 71.2 69.2 30.9
Operating expenses:
Sales, general and administrative 38.1 43.1 12.4
Research and development 20.5 20.4 28.1
------ ------
Total operating expenses 58.6 63.5 17.4
------ ------
Income from operations 12.6 5.7 180.4
Interest income and other 1.4 (0.4) --
Interest expense (0.1) (0.7) (78.2)
------ ------
Income before income taxes 13.9 4.6 280.6
Income taxes 3.7 0.6 618.0
------ ------
Net Income 10.2% 4.0% 225.5%
====== ======
</TABLE>
7
<PAGE> 8
<TABLE>
<CAPTION>
Percent of Period-to-Period
Net Sales Percentage Change
--------------------- ---------------------
Six Months Ended Six Months Ended
June 30, June 30, 1996
1996 1995 Compared to 1995
------ ------ ---------------------
<S> <C> <C> <C>
Net Sales 100.0% 100.0% 23.9%
Cost of sales 29.1 31.1 15.8
------ ------
Gross Profit 70.9 68.9 27.5
Operating expenses:
Sales, general and administrative 38.8 43.8 9.6
Research and development 20.6 20.4 25.5
------ ------
Total operating expenses 59.4 64.2 14.7
------ ------
Income from operations 11.5 4.7 204.7
Interest income and other 1.5 (0.2) --
Interest expense (0.1) (1.0) (83.3)
------ ------
Income before income taxes 12.9 3.5 361.7
Income taxes 3.7 0.9 451.2
------ ------
Net Income 9.2% 2.6% 333.2%
====== ======
</TABLE>
NET SALES
Net sales increased by 27.1 % from $7.7 million for the quarter ended
June 30, 1995 to $9.8 million for the quarter ended June 30, 1996. For the first
six months of 1996, revenue increased by 23.9% to $18.5 million from $14.9
million for the same period on 1995. These increases were primarily attributable
to sales of CodeTEST(TM) and NetROM(TM) tools which were not available in the
prior year period , and to increased unit sales of CodeTAP(R). The increases
were partially offset by a decline in average selling prices due to an increased
proportion of sales represented by lower-priced tools and to a lesser extent was
unfavorably impacted by currency exchange rate fluctuations affecting
international sales. The Company's net sales are presently derived predominantly
from sales of software design, debugging and testing tools and to a lesser
extent include product support revenues. Product support revenues which
increased by 15.5% and 11.5% over the prior three month and six month period,
respectively, but declined as a percentage of sales from 8.4% and 7.7% of net
sales for the quarter ended June 30, 1995 and 1996, respectively and 8.6% and
7.7% of net sales for the six months ended June 30, 1995 and 1996. The Company
generally recognizes revenues from product sales upon shipment, and recognizes
product support revenues ratably over the life of each maintenance contract,
typically 12 months.
8
<PAGE> 9
International sales expressed in U.S. dollars increased by 21.5% for
the quarter ended June 30, 1996 over the comparable period of 1995, to 46.8% of
net sales as compared to 49.0% of net sales in the prior year. For the six
months ending June 30, 1996, international sales increased 21.5% over the same
period in 1995 representing 47.3% of total sales versus 48.2% in the prior
period. The growth rate in both periods for international sales as expressed in
U.S. dollars is attributable to increased unit sales which is due primarily to
increased sales and marketing efforts. The Company's sales through its foreign
subsidiaries are generally denominated in local currencies, and as a result,
fluctuations in currency exchange rates can have a significant effect on the
Company's reported net sales. Had the exchange rates remained the same from the
prior periods, especially in Japan, sales would have increased an additional
11.5 percentage points for the quarter ended June 30, 1996 and increased an
additional 8.0 percentage points for the six months ended June 30, 1996. The
Company is unable to predict currency exchange rate fluctuations and anticipates
that such fluctuations will continue to affect its net sales to varying degrees
in the future. In order to mitigate certain risks associated with exchange rate
fluctuations, the Company does hedge a portion of its foreign exchange risk in
Japan. Although the Company generally plans to continue to engage in exchange
rate hedging activities with respect to certain exchange rate risks, there can
be no assurance that it will do so or that any such activities will successfully
protect the Company against such risks. The Company expects international sales,
especially in Japan, to continue to account for a significant percentage of its
net sales.
GROSS PROFIT
The Company's gross profit increased from $5.3 million, or 69.2% of net
sales, for the quarter ended June 30, 1995 to $6.9 million, or 71.2% of net
sales, for the quarter ended June 30, 1996. For the six months ending June 30,
1996, the company's gross profit increased from $10.3 million to $13.1 million
representing 68.9% and 70.9% of net sales respectively. The increases in gross
profit as a percentage of net sales was primarily attributable to an increase in
the percentage of net sales attributable to newer CodeICE(TM) and CodeTEST
products that have lower material and labor costs, and to a lesser extent,
increased leverage of fixed and semi-variable manufacturing costs, and favorable
cost reductions on certain hardware components. These savings were partially
offset by unfavorable currency exchange rate fluctuations.
9
<PAGE> 10
SALES, GENERAL AND ADMINISTRATIVE
Sales, general and administrative expenses were $3.3 million or 43.1%
of net sales, and $3.7 million, or 38.1% of net sales, for the quarter ended
June 30, 1995 and 1996, respectively. For the six month period ended June 30,
1995 and 1996, sales, general and administrative expenses were $6.5 million or
43.8% of net sales, and $7.2 million or 38.8% of net sales, respectively. The
dollar amount increase between comparable periods was primarily attributable
to increased compensation-related expenses resulting principally from increased
sales headcount. Sales, general and administrative expenses declined as a
percentage of net sales due to the Company's ability to leverage certain fixed
selling, general and administrative expenses over an increased sales base.
Sales, general and administrative expenses include salaries, bonuses,
commissions, benefits, depreciation, travel and entertainment, rent, telephone,
supplies and promotional costs. The Company expects its sales and marketing
expenditures to continue to increase in the future as it introduces and markets
new products, and continues to expand its sales, general and administrative
organization.
RESEARCH AND DEVELOPMENT
Research and development expenses were $1.6 million, or 20.4% of net
sales, and $2.0 million, or 20.5% of net sales, for the quarters ended June 30,
1995 and 1996, respectively. For the six month period ending June 30, 1996 and
June 30, 1995, research and development expenses were $3.0 million, or 20.4% of
net sales, and $3.8 million, or 20.6% of net sales, respectively. The 28.1% and
25.5% increase in the dollar amount of research and development expenses between
comparable periods was primarily attributable to increased compensation-related
expenses resulting principally from increased engineering headcount relating to
new product development. Aggregate amounts devoted to product development, prior
to offsetting such amounts with external development funding from semiconductor
manufacturers, increased from $1.6 million for the quarter ended June 30, 1995
to $2.1 million for the quarter ended June 30, 1996 and from $3.3 million for
the six months ended June 30, 1995 to $4.1 million for the six months ended June
30, 1996. Although external product development funding cannot be relied upon,
the Company intends to continue to make substantial investments in product
development, including development of software design, debugging and test tools
for additional embedded microprocessors as well as continued advanced
development in future directions. As a result, the Company anticipates that net
research and development expenses are likely to increase for the foreseeable
future.
OTHER
The Company's interest(net) and other income increased by $209,000 between the
comparable three month periods and $445,000 between the comparable six month
periods due primarily to an increase in cash and marketable securities from the
initial public offering in November 1995 and reduction in debt.
10
<PAGE> 11
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS
Statements in this report concerning sales, costs, expenses, adequacy of working
capital which are not historical facts, constitute forward-looking statements
which are subject to a number of risks and uncertainties which might cause
actual results to differ materially from stated expectations. Such risks and
uncertainties include delays in shipments of the Company's new products,
declining product prices and margins, market acceptance of new products, growth
in the marketplace in which the Company operates, competitive product offerings,
unfavorable foreign currency fluctuations and adverse changes in general
economic conditions in any of the countries in which the Company does business
and other risks set forth in the Company's filings with the Securities and
Exchange Commission. The Company's performance may also be adversely affected by
the ability of its suppliers to provide components and assemblies. During the
last twelve months, the Company's competitors have continued to make a variety
of product announcements and offerings. The Company continues to release new
versions of its product lines and the successful acceptance of these products
will play a key role in future growth. The impact of any of these factors is
difficult to predict or forecast.
The Company's future earnings and stock price may be subject to significant
volatility, particularly on a quarterly basis, due to a variety of factors,
including factors noted above. Any shortfall in revenue or earnings from levels
expected by securities analysts could have an immediate and significant adverse
effect on the trading price of the Company's common stock in any given period.
Additionally, the Company often does not learn of such shortfalls until late in
the fiscal quarter, or even after the quarter is over, which could result in an
even more immediate and adverse effect on the trading price of the Company's
common stock. Finally, the Company participates in a highly dynamic industry,
which often results in significant volatility of the company's common stock
price. Consequently, purchasing or holding of the Company's stock involves a
high degree of risk.
LIQUIDITY AND CAPITAL RESOURCES
The Company requires capital principally for the financing of
inventory, capital equipment and accounts receivable, and for investment in
product development activities, new technologies and potential company or
product line acquisitions. The Company's net assets changed considerably as a
result of the initial public offering in November 1995 which resulted in net
proceeds to the Company of $13 million. Among other things, these proceeds were
used to purchase short-term investments and equipment, and pay off certain
debts. For the six months ended June 30, 1995 and 1996, the Company generated
$1,269,000 and $557,000, respectively, of cash from operations; utilized
$426,000 and $6.5 million, respectively, of cash for purchases of short-term
investments and equipment; and utilized $989,000 and $21,000, respectively, of
cash for net debt reduction. As of June 30, 1996, the Company had working
capital of $17.4 million, including $12.6 million of cash, cash equivalents and
short-term investments.
The Company believes that the net proceeds from the November, 1995
initial public offering, together with funds from operations and borrowings,
will provide the Company with sufficient funds to finance its operations for at
least the next 12 months. The Company's future capital requirements will,
however, depend on a number of factors, including costs associated with product
development efforts, the success of the commercial introduction of the Company's
new products and the acquisition of complementary businesses, products or
technologies. To the extent additional capital is required, the Company may sell
additional equity, debt or convertible securities, or obtain additional credit
facilities.
11
<PAGE> 12
PART II. - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Shareholders was held on May 22, 1996. The
following matters were voted upon by the shareholders with the results as
follows:
(1) The following persons were nominated by the Board of Directors and each
was elected to serve as a director until the next Annual Meeting of
Shareholders or until his earlier retirement, resignation or removal:
Robert L. Deinhammer, Anthony Miadich, Elwood D. Howse, Jr., Paul N.
Risinger and David E. Stitt.
The number of votes cast for or withheld for each director nominee was
as follows:
<TABLE>
<CAPTION>
Nominee For Withheld
------- --- --------
<S> <C> <C>
Robert L. Deinhammer 6,048,704 3,950
Anthony Miadich 6,048,704 3,950
Elwood D. Howse, Jr. 6,048,704 3,950
Paul N. Risinger 6,048,704 3,950
David E. Stitt 6,048,704 3,950
</TABLE>
(2) The shareholders voted 5,122,264 shares in the affirmative, 152,194
shares in the negative, 4,895 abstained and 773,301 broker non-votes to
amend the existing Applied Microsystems Corporation 1992 Performance
Stock Plan (the "1992 Plan"), as amended, to increase the number of
shares from 1,525,317 shares to 1,755,317 shares and limit the number
of shares subject to options that may be granted to any person in any
one calendar year.
(3) The shareholders voted 5,262,078 shares in the affirmative, 13,650
shares in the negative, 3,625 shares abstained and 773,301 broker
non-votes to approve the Applied Microsystems Corporation 1996 Employee
Stock Purchase Plan (the "Purchase Plan") and reserve of 250,000 shares
of Common Stock eligible for purchase under the Purchase Plan.
(4) The shareholders voted 6,048,679 shares in the affirmative, 3,550
shares in the negative and 425 shares abstained to ratify the
appointment of Ernst & Young LLP, as independent auditors for the
Company's year ending December 31, 1996.
12
<PAGE> 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) The following exhibits are filed as part of this report.
10.1 Amendment dated as of March 25, 1996, to Registrant's
1992 Performance Stock Plan, as amended.
10.2 1996 Employee Stock Purchase Plan (incorporated by reference
from Exhibit 10.8 to the Registrant's Form S-8 filed April
8, 1996, File No. 333-3396).
11 Computation of Earnings Per Share
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the City of
Redmond, State of Washington, on August 12, 1996.
APPLIED MICROSYSTEMS CORPORATION
(Registrant)
By /s/ A. James Beach
-------------------------------------
A. James Beach
Vice President, Chief Financial Officer,
Secretary and Treasurer
(Principal Financial and Accounting Officer)
14
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page No.
<C> <C> <C>
10.1 Amendment dated as of March 25, 1996, to Registrant's 1992 16
Performance Stock Plan, as amended.
10.2 1996 Employee Stock Purchase Plan (incorporated by reference from
Exhibit 10.8 to the Registrant's Form S-8 filed April 8, 1996, File
No. 333-3396).
11 Computation of Earnings Per Share. 17
</TABLE>
15
<PAGE> 1
Exhibit 10.1
SECOND AMENDMENT
TO
APPLIED MICROSYSTEMS CORPORATION
1992 PERFORMANCE STOCK PLAN
THIS SECOND AMENDMENT to the APPLIED MICROSYSTEMS CORPORATION 1992
PERFORMANCE STOCK PLAN is adopted as of March 25, 1996, by APPLIED MICROSYSTEMS
CORPORATION, a Washington corporation (the "Company"), subject to approval by
the shareholders of the Company.
The Company's 1992 Performance Stock Plan (the "1992 Plan") is hereby amended as
follows:
1. Section 2 of the 1992 Plan is amended by substituting "1,775,317
shares" in place of "1,525,317 shares."
2. Section 4(a) of the 1992 Plan is amended by adding the following
provision at the end of the first sentence of that paragraph:
The number of shares subject to any option or options granted to any
person in one calendar year shall not exceed 375,000.
3. Except as amended hereby, the 1992 Plan as previously amended shall
remain in full force and effect.
IN WITNESS WHEREOF, this Amendment has been executed as of the date and
year first above written.
APPLIED MICROSYSTEMS CORPORATION
By /s/ A. James Beach
-------------------------------------
A. James Beach
Vice President, Chief Financial Officer,
Secretary and Treasurer
(Principal Financial and Accounting Officer)
16
<PAGE> 1
Exhibit 11
APPLIED MICROSYSTEMS CORPORATION
Computation of Earnings Per Share
(in thousands, except per share amount)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
1996 1995
------ ------
<S> <C> <C>
Average shares outstanding 6,508 755
Net effect of dilutive stock warrants and options based on the
treasury stock method using average market price 598 249
Net effect of stock options issued during 12 months prior to the
initial public offering at less than the offering price based on the treasury
stock method using $10.00 per share, treated as
outstanding for all periods presented 478
Dilutive effect of Convertible Preferred Stock 3,989
------ ------
Total 7,106 5,471
====== ======
Net Income $ 996 $ 306
====== ======
Per share amount $ .14 $ .06
====== ======
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1996 1995
------ ------
<S> <C> <C>
Average shares outstanding 6,493 730
Net effect of dilutive stock warrants and options based on the
treasury stock method using average market price 600 269
Net effect of stock options issued during 12 months prior to the
initial public offering at less than the offering price based on the treasury
stock method using $10.00 per share, treated as
outstanding for all periods presented 560
Dilutive effect of Convertible Preferred Stock- 3,905
------ ------
Total 7,093 5,464
====== ======
Net Income $1,698 $ 392
====== ======
Per share amount $ .24 $ .07
====== ======
</TABLE>
17
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 6,706
<SECURITIES> 5,918
<RECEIVABLES> 8,735
<ALLOWANCES> 0
<INVENTORY> 3,715
<CURRENT-ASSETS> 25,591
<PP&E> 2,255
<DEPRECIATION> 0
<TOTAL-ASSETS> 28,506
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0
0
<COMMON> 25,674
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</TABLE>
