<PAGE>
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 MARCH 31, 2000
OR,
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FROM THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-27012
INSIGNIA SOLUTIONS PLC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
ENGLAND AND WALES NOT APPLICABLE
(State or other jurisdiction of (I.R.S. employer identification
incorporation or organization) number)
----------------------
41300 CHRISTY STREET THE MERCURY CENTRE, WYCOMBE LANE
FREMONT WOOBURN GREEN
CALIFORNIA 94538 HIGH WYCOMBE, BUCKS HP10 0HH
UNITED STATES OF AMERICA UNITED KINGDOM
(510) 360-3700 (44) 1628-539500
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES AND
PRINCIPAL PLACES OF BUSINESS)
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 May 8, 2000, there were 14,206,576 Ordinary shares of L0.20 each
nominal value, outstanding.
<PAGE>
INSIGNIA SOLUTIONS PLC
PART 1 - FINANCIAL INFORMATION
<TABLE>
<S> <C> <C>
ITEM 1. FINANCIAL STATEMENTS:
Condensed Consolidated Balance Sheet at March 31, 2000
and December 31, 1999.............................................................................3
Condensed Consolidated Statement of Operations for the three months
ended March 31, 2000 and 1999.....................................................................4
Condensed Consolidated Statement of Cash Flows for the three months
ended March 31, 2000 and 1999.....................................................................5
Notes to Unaudited Condensed Consolidated Financial Statements....................................6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS........................................................................14
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.......................................23
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS................................................................................24
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.................................................................24
SIGNATURES .................................................................................................26
</TABLE>
Page 2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INSIGNIA SOLUTIONS PLC
CONDENSED CONSOLIDATED BALANCE SHEET
(AMOUNTS IN THOUSANDS, UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 2000 1999
------------------- -------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,975 $ 4,677
Restricted cash 120 120
Cash and cash equivalents held in escrow - 1,000
Accounts receivable, net of allowances
of $88 and $91, respectively 2,002 189
Prepaid and other current assets 1,121 1,038
------------------- -------------------
Total current assets 5,218 7,024
Property and equipment, net 560 625
Cash and cash equivalents held in escrow 5,130 5,060
Restricted cash 250 250
Other noncurrent assets 325 325
------------------- -------------------
$11,483 $13,284
=================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 820 $ 707
Accrued liabilities 1,846 1,661
Accrued royalties 2,430 2,327
Income taxes payable 184 188
Deferred revenue 1,787 1,349
Convertible debt 1,034 1,013
------------------- -------------------
Total current liabilities 8,101 7,245
------------------- -------------------
Contingencies (Note 6)
Mandatorily redeemable capital - 2,619
Mandatorily redeemable warrants 1,440 1,440
------------------- -------------------
Total mandatorily redeemable 1,440 4,059
------------------- -------------------
Shareholders' equity:
Preferred shares - -
Ordinary shares 4,681 4,304
Additional paid-in capital 37,849 35,106
Accumulated deficit (40,127) (36,969)
Cumulative currency translation adjustment (461) (461)
------------------- -------------------
Total shareholders' equity 1,942 1,980
------------------- -------------------
$11,483 $13,284
=================== ===================
</TABLE>
See accompanying notes
Page 3
<PAGE>
INSIGNIA SOLUTIONS PLC
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS, UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
March 31,
---------------------------------------
2000 1999
---------------- ---------------
<S> <C> <C>
Net revenues:
License $ 1,243 $ 2,180
Service 268 128
---------------- ---------------
Total net revenues 1,511 2,308
---------------- ---------------
Cost of net revenues:
License 570 1,093
Service 191 178
---------------- ---------------
Total cost of net revenues 761 1,271
---------------- ---------------
Gross margin 750 1,037
---------------- ---------------
Operating expenses:
Sales and marketing 1,292 1,628
Research and development 1,454 1,615
General and administrative 945 978
---------------- ---------------
Total operating expenses 3,691 4,221
---------------- ---------------
Operating loss (2,941) (3,184)
Interest income (expense), net (220) 155
Other income (expense), net 8 (47)
---------------- ---------------
Loss before income taxes (3,153) (3,076)
Provision for income taxes 5 40
---------------- ---------------
Net loss $ (3,158) $ (3,116)
================ ===============
Net loss per share:
Basic $ (0.22) $ (0.25)
================ ===============
Diluted $ (0.22) $ (0.25)
================ ===============
Weighted average equivalent shares:
Basic 14,089 12,690
================ ===============
Diluted 14,089 12,690
================ ===============
</TABLE>
See accompanying notes
Page 4
<PAGE>
INSIGNIA SOLUTIONS PLC
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(AMOUNTS IN THOUSANDS, UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
March 31,
------------------------------
2000 1999
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(3,158) $(3,116)
Adjustments to reconcile net income (loss) to net cash used
in operating activities:
Depreciation 117 176
Other (50) -
Net changes in assets and liabilities:
Accounts receivable, net (1,813) 689
Prepaid and other current assets (83) 92
Other noncurrent assets - 57
Accounts payable 113 (761)
Accrued liabilities 185 (39)
Accrued royalties 103 (2,712)
Income taxes (4) (34)
Deferred revenue 438 (34)
Convertible debt 21 -
------------- -------------
Net cash used in operating activities (4,131) (5,682)
------------- -------------
Cash flows from investing activities:
Purchases of property and equipment (55) (50)
Proceeds from sale of product line - 20
Product line sale proceeds held in escrow 70 (100)
Product line sale proceeds released from escrow 1,000 2,500
------------- -------------
Net cash provided by investing activities 1,015 2,370
------------- -------------
Cash flows from financing activities:
Payments made under capital leases - (14)
Proceeds from issuance of shares, net 414 105
------------- -------------
Net cash provided by financing activities 414 91
------------- -------------
Net decrease in cash and cash equivalents (2,702) (3,221)
Cash and cash equivalents at beginning of the period 4,677 6,798
------------- -------------
Cash and cash equivalents at end of the period $ 1,975 $ 3,577
============= =============
</TABLE>
See accompanying notes
Page 5
<PAGE>
INSIGNIA SOLUTIONS PLC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The condensed consolidated financial statements are unaudited. However, in
the opinion of management, all adjustments (consisting only of normal
recurring adjustments) which are necessary for a fair presentation of the
financial position and results for the interim period have been included.
Insignia Solutions plc's ("Insignia") condensed consolidated financial
statements have been presented on a going concern basis, which contemplates
the realization of assets and the satisfaction of liabilities in the normal
course of operations. During the prior eight quarters, Insignia has incurred
an aggregate loss from operations totaling $24.9 million. At March 31, 2000,
Insignia's working capital deficit totaled $2.9 million, compared to working
capital of $0.2 million at March 31, 1999.
Insignia continues to face significant risks associated with the successful
execution of its new product strategy. These risks include, but are not
limited to continued technology and product development, introduction and
market acceptance of new products, changes in the marketplace, liquidity,
competition from existing and new competitors which may enter the marketplace
and retention of key personnel. Due to the generally longer sales cycles
associated with the Jeode platform, Insignia does not currently have accurate
visibility of future order rates and demand for its products generally. There
can be no assurance that Jeode platform products will achieve market
acceptance.
Insignia believes that with the $5.0 million line of credit, entered into on
March 20, 2000 and expected cash flow from operations, Insignia will have
sufficient funds to meet Insignia's operating and capital requirements
through the end of fiscal year 2000. However, if additional funds are needed
there can be no assurance that Insignia will be able to obtain additional
funding on acceptable terms or at all. The failure to raise additional funds,
if needed, on a timely basis and on sufficiently favorable terms could have a
material adverse effect on Insignia's business, operating results and
financial condition. Insignia's liquidity may also be adversely affected in
the future by factors such as higher interest rates, inability to borrow
without collateral, availability of capital financing and continued operating
losses. Moreover, Insignia's expense levels are based in part on expectations
of future sales levels, and a shortfall in expected sales could thererfore
result in a disproportionate decrease in results of operations. In addition,
Insignia, which is listed on the Nasdaq National Markets, was not in
compliance with Nasdaq's continued listing requirements on net tangible
assets at March 31, 2000.
The results of operations for the three months ended March 31, 2000 are not
necessarily indicative of the results to be expected for the entire fiscal
year, which ends on December 31, 2000.
Page 6
<PAGE>
These unaudited condensed consolidated financial statements should be read in
conjunction with the financial statements and notes thereto for the year
ended December 31, 1999, included in Insignia Solutions plc's ("Insignia")
1999 Form 10-K.
NOTE 2. INCOME TAXES
Insignia's provision for income taxes for the three months ended March 31,
2000, primarily represents certain U.S. taxes. Insignia accounts for income
taxes under an asset and liability approach that requires the recognition of
deferred tax assets and liabilities for the expected future tax consequences
of events that have been recognized in Insignia's financial statements or tax
returns. In estimating future tax consequences, Insignia generally considers
all expected future events other than enactments of changes in the tax law or
rates.
NOTE 3. NET INCOME (LOSS) PER SHARE
Basic net income (loss) per share is computed using the weighted average
number of ordinary shares outstanding during the period. Diluted net income
(loss) per share is computed using the weighted average number of ordinary
shares and ordinary share equivalents outstanding during the period. Ordinary
equivalent shares consist of warrants and stock options (using the treasury
stock method). Ordinary equivalent shares are excluded from the computation,
if their effect is antidilutive.
NOTE 4. NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 133 "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). SFAS 133 establishes accounting and
reporting standards for derivative instruments and for hedging activities.
This statement becomes effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. In June 1999, the FASB issued Statement of
Financial Accounting Standard No. 137 "Accounting for Derivative Instruments
- - Deferral of the Effect Date of SFAS Statement No. 133" ("SFAS 137"). SFAS
137 defers the effective date of SFAS 133 until June 15, 2000. Insignia will
adopt SFAS 133 in 2001. Insignia expects the adoption of SFAS 133 will not
affect results of operations.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements." SAB 101 provides guidance for revenue recognition under certain
circumstances. Insignia does not believe SAB 101 will have a material impact
on the financial statements.
In March 2000, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 44 "Accounting for Certain Transactions Involving Stock
Compensation - an interpretation of APB Opinion No. 25". This interpretation
has provisions that are effective on staggered dates, some of which began
after December 15, 1998 and others that become effective after June 30, 2000.
The adoption of this interpretation did and will not have a material impact
on the financial statements.
Page 7
<PAGE>
NOTE 5. CONTINGENCIES
On February 5, 1998 Insignia completed the disposal of its NTRIGUE technology
to Citrix Systems Inc. ("Citrix") for $17.7 million. As part of the disposal,
Insignia transferred 45 employees to Citrix, of which 43 were development
engineers.
Under the terms of the disposal agreement $9.0 million was paid to Insignia
in cash on February 5, 1998, and the remainder was being held in escrow for
the sole purpose of satisfying any obligations to Citrix arising from or in
connection with an event against which Insignia would be required to
indemnify Citrix. Of this amount, $2.5 million, $0.9 million and $1.0 million
were released to Insignia in February 1999, August 1999 and February 2000,
respectively.
On January 29, 1999, Insignia received an indemnity claim from Citrix
Systems, Inc. ("Citrix") for an amount estimated by Citrix to not exceed
$6.25 million. The claim was made in relation to the Asset Purchase Agreement
between Insignia and Citrix under which Citrix purchased Insignia's NTRIGUE
product line in February 1998.
Citrix's indemnity claim is based on assertions made by GraphOn Corporation
("GraphOn") in January of 1998 and declaratory relief action that Citrix
filed against GraphOn in November 1998 in the United States District Court,
Southern District of Florida. Citrix's action against GraphOn seeks a
declaratory judgment that Citrix does not infringe any GraphOn proprietary
rights and that Citrix has not misappropriated any trade secrets or breached
an agreement to which GraphOn is a party. Citrix filed the action in response
to and to resolve assertions first made by GraphOn, and disclosed to Citrix
in January 1998, that Insignia may have used GraphOn's confidential
information to develop certain of Insignia's products, possibly including
products Insignia sold to Citrix in February 1998. The Court dismissed the
complaint, but Citrix has subsequently filed an appeal. Insignia believes
that any misappropriation or similar assertions by GraphOn are without merit
or basis. Accordingly, Insignia contests Citrix's indemnity claim.
On October 4, 1999, Insignia filed a suit against Citrix and GraphOn in the
Superior Court of the State of California, County of Santa Clara, relating to
the misappropriation assertions of GraphOn's and Citrix's refusal to release
funds still remaining in escrow and breach of a Cooperation Agreement between
the parties. Subsequent to the filing of the lawsuit, Citrix agreed to
release $1.0 million from the escrow, leaving a balance of $5.1 million.
GraphOn answered the complaint, and claimed it had not made any claims of
misappropriation against Insignia or Citrix. The case is pending.
On March 15, 2000, GraphOn announced it had filed a suit against Citrix and
the Company in the Superior Court of the State of California, County of Santa
Clara, alleging trade secret misappropriation and breach of contract arising
out of the same facts and circumstances set forth in Insignia's action
against GraphOn. GraphOn has not yet served its complaint. Insignia believes
GraphOn's claims are without merit. The case is pending.
Page 8
<PAGE>
NOTE 6. SEGMENT INFORMATION
Insignia adopted Statement of Financial Accounting Standards 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS
131"), which provides for segment reporting based upon the "management"
approach. The management approach designates the internal organization that
is used by management for making operating decisions and assessing
performance as the source of Insignia's reportable segments. SFAS 131 also
requires disclosures about products and services, geographic areas, and major
customers
Insignia operates in a single industry segment providing virtual machine
technology which enables software applications and operating systems to be
run on various computer platforms. In the first quarter of 2000, Index
Systems Inc., a subsidiary of Gemstar International Group Limited
("Gemstar"), Compaq Computer Corporation ("Compaq"), and Quantum Corporation
("Quantum") accounted for 53%, 15% and 13% of total revenues, respectively.
In the first quarter of 1999, Ingram Micro U.S., Software House
International, and Mitsubishi accounted for 10%, 23% and 16% of total
revenues, respectively. No other customer accounted for 10% or more of
Insignia's total revenues during the first quarter of 2000 and 1999.
Page 9
<PAGE>
GEOGRAPHIC INFORMATION
Financial information by geographical region is summarized below (in
thousands):
<TABLE>
<CAPTION>
Three months ended
March 31,
----------------------------
2000 1999
------------- --------------
<S> <C> <C>
Revenues from unaffiliated customers:
United States........................... $ 1,511 $ 2,081
International........................... - 227
------------- --------------
Consolidated................................. $ 1,511 $ 2,308
============= ==============
Intercompany revenues:
United States........................... $ - $ 169
International........................... 513 111
------------- --------------
Consolidated................................. $ 513 $ 280
============= ==============
Operating loss:
United States........................... $ (888) $ (1,083)
International........................... (2,053) (2,101)
------------- --------------
Consolidated................................. $ (2,941) $ (3,184)
============= ==============
Identifiable assets:
United States........................... $ 3,633 $ 3,603
International........................... 22,964 24,193
Intercompany items and eliminations..... (15,114) (13,390)
------------- --------------
Consolidated................................. $ 11,483 $ 14,406
============= ==============
Long-lived assets:
United States........................... $ 422 $ 635
International........................... 20,957 14,258
Intercompany items and eliminations..... (15,114) (13,390)
------------- --------------
Consolidated................................. $ 6,265 $ 1,503
============= ==============
</TABLE>
All of the international revenues and substantially all of the international
identifiable assets relate to Insignia's operations in the United Kingdom.
Intercompany sales are accounted for at prices intended to approximate those
that would be charged to unaffiliated customers.
Revenues from United States operations included export sales of $103,000, and
$385,000 in the first quarter 2000 and 1999, respectively, which were primarily
to customers in Asia.
Page 10
<PAGE>
Revenue by geographic area for the quarter ended March 31, 2000 is as follows
(in thousands):
<TABLE>
<CAPTION>
U.S. U.S. EXPORTS EUROPE TOTAL
-------------- ---------------- ------------- --------------
<S> <C> <C> <C> <C>
OEM $1,363 $ - $ - $1,363
Distributor 7 43 - 50
End User 38 60 - 98
Other - - - -
-------------- ---------------- ------------- --------------
Total $1,408 $103 $ - $1,511
============== ================ ============= ==============
Percentage of total
revenue 93% 7% -% 100%
============== ================ ============= ==============
</TABLE>
Revenue by geographic area for the quarter ended March 31, 1999 is as follows
(in thousands):
<TABLE>
<CAPTION>
U.S. U.S. EXPORTS EUROPE TOTAL
-------------- ---------------- ------------- --------------
<S> <C> <C> <C> <C>
Distributor $ 1,608 $ 379 $ 211 $ 2,198
End user 64 6 12 82
Other 24 - 4 28
-------------- ---------------- ------------- --------------
Total $ 1,696 $ 385 $ 227 $ 2,308
============== ================ ============= ==============
Percentage of total
revenue 73% 17% 10% 100%
============== ================ ============= ==============
</TABLE>
There were no European countries that accounted for more than 10% of total
revenue.
NOTE 8. PRIVATE PLACEMENT AND WARRANTS
In December 1999, Insignia issued 1,063,515 Ordinary Shares in ADS form at a
price of $4.23 per share through a private placement. Insignia received $4.5
million less offering expenses totaling $0.4 million. Along with ADSs, Insignia
also issued to the purchasing shareholders warrants that entitle the purchasing
shareholders to purchase a total of 319,054 ADSs at an exercise price of $5.29
per ADS. As described below, the exercise price and the number of ADSs issuable
under the warrants are subject to various adjustments. In addition, Insignia may
issue additional warrants that entitle the purchasing shareholders to purchase
ADSs at par value on designated adjustment dates in the future.
The purchasing shareholders received warrants to purchase three ADSs for every
10 ADSs they purchased. The exercise price of the warrants was set at 125% of
the original per ADS purchase price i.e. $5.29.
Page 11
<PAGE>
The warrants contain anti-dilution provisions designed to protect the
purchasing shareholder if Insignia sells or is deemed to sell any shares at
below market price during the term of the warrants, which ends on December 9,
2004.
In addition, under the terms of the warrants, if at least $4.75 million of
the $6.1 million in funds held in escrow by Citrix Systems, Inc. on December
9, 1999 is not released to Insignia by July 10, 2000, the exercise price of
the warrants will be adjusted to the market price on that date, if that
market price is lower than $5.29 per share. In February, 2000, $1.0 million
was released from escrow to Insignia. As part of the warrant agreement, the
holders of the warrants may be entitled to cash payments upon the occurrence
of certain Major Transactions, as defined, including change of control
provisions. Cash payments are determined in a methodology described in the
agreement. Such methodology is impacted by market prices.
The additional warrants entitle the purchasing shareholders to purchase ADSs
at par value if the average of the closing bid price of the ADSs over ten
days before an adjustment date is less than $4.23. The adjustment dates are:
the effective date of a registration statement for the shares issued in this
private placement which was March 28, 2000, 4 months after the effective date
of the registration statement, and 8 months after the effective date of the
registration statement.
If Insignia completes an underwritten public offering with net proceeds of at
least $25 million and a per ADS price of at least $7.02 before either 4
months or 8 months after the effective date of the registration statement,
then the right to the related adjustment date terminates. In addition, if at
least $4.75 million of funds held in escrow by Citrix Systems, Inc. is not
released to Insignia by March 10, 2000, the purchasing shareholders will have
an adjustment date on that date and each month after that, until the earlier
of the date the funds are released from the escrow or December 10, 2000. In
February 2000, $1.0 million was released from escrow to Insignia.
Up to the date of this 10-Q, there have been four adjustment dates. However,
as calculated, the average share price of the Company on those adjustment
dates has exceeded the adjustment price of $4.23 per share and consequently
no adjustment has occurred.
On any adjustment date the purchasing shareholders will be entitled to
purchase additional ADSs at par value. The number of ADSs issuable to the
purchasing shareholders following an adjustment date is determined under a
formula. The following table illustrates the number of ADSs issuable upon
exercise of the additional warrants and the percentage ownership that each
represents, assuming: the average bid price is 100%, 75%, 50%, 29.1358% and
25% of the $4.23 price determined when the warrants were issued; the number
of Ordinary shares outstanding is the number outstanding on April 30, 2000,
which is 14,206,576; there was no adjustment of
Page 12
<PAGE>
the number of ADSs issuable upon exercise of the warrants; and the exchange
rate remains at $1.60 per UK pound sterling.
<TABLE>
<CAPTION>
PERCENT OF BID PRICE ADSS ISSUABLE ADSS ISSUED AS A PERCENTAGE OF
TOTAL ORDINARY SHARES IN ISSUE
AFTER ISSUANCE
-------------------- ------------- ------------------------------
<S> <C> <C>
100% ($4.23) 0 0%
75% ($3.1725) 394,274 2.70%
50% ($2.1115) 1,253,111 8.11%
29.1358% ($1.225) 3,529,467 19.90%
25% ($1.0575) 4,574,917 24.36%
</TABLE>
Insignia obtained a third-party valuation to allocate fair value to amounts
received from the private placement between the Ordinary Shares and the
warrants. The amount allocated to mandatorily redeemable warrants totaled
$1.440 million, of which $0.590 million was allocated to the warrant, and
$0.850 million was allocated to the additional warrant. Of the remaining net
proceeds received, $2.619 million was allocated to mandatorily redeemable
capital, of which $0.340 million was reclassified as Ordinary Shares and
$2.279 million was reclassified as additional paid-in capital upon the
registration statement becoming effective on March 28, 2000.
Amounts classified as warrants will remain outside of shareholders' equity
for the life of the warrant or until they are exercised, whichever occurs
first. This classification reflects certain potential cash payments that may
occur to the purchasing shareholders, should Insignia complete a major
transaction, such as a takeover, during the life of the warrants.
NOTE 9. CONVERTIBLE PROMISSORY NOTE
On October 20, 1999, Insignia signed a convertible promissory note in favor
of Quantum Corporation ("Quantum") for $1.0 million. The note is convertible
at Quantum's option to Insignia's shares any time during the lifetime of the
note. The initial conversion price is $4.28 per share with adjustment clauses
for stock splits, reverse stock splits and certain offerings. All unpaid
principal with any unpaid interest, accrued at 8% per annum, compounded
quarterly, is due and payable on December 31, 2000. Insignia has the option
to prepay the note in whole or in part upon 30 days written notice to Quantum.
NOTE 10. LINE OF CREDIT
On March 20, 2000, Insignia entered into an agreement with a director whereby
he would provide the Company a $5.0 million line of credit with a commitment
fee of four points based upon the total amount of the line and
drawdown/termination fee of two points for the first drawdown or termination.
The interest rate on amounts drawn down is at prime plus 2% until June 30,
2000 and thereafter at prime plus 4% per annum simple interest, payable in
cash at the repayment date. Full repayment of any outstanding loan is due on
March 20, 2001. As of March 31, 2000, there have been no draws against the
line of credit.
Page 13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
unaudited condensed consolidated financial statements and notes thereto
included in Part I - Item 1 of this Form 10-Q and the "Management's
Discussion and Analysis of Financial Condition and Results of Operations" set
forth in Insignia's Form 10-K for the year ended December 31, 1999 (the "Form
10-K").
FUTURE OPERATING RESULTS
This Form 10-Q contains forward looking statements. These forward looking
statements concern matters which include, but are not limited to, the revenue
model and market for the Jeode product line, the features, benefits and
advantages of the Jeode platform, international sales, gross margins, the
availability of licenses to third-party proprietary rights, business and
sales strategies, matters relating to proprietary rights, competition,
exchange rate fluctuations and Insignia's liquidity and capital needs and
other statements regarding matters that are not historical are
forward-looking statements. These matters involve risks and uncertainties
that could cause actual results to differ materially from those in the
forward looking statements. In addition to the factors discussed above, among
other factors that could cause actual results to differ materially are the
following: the demand for the Jeode platform; the performance and
functionality of Jeode; Insignia's ability to deliver products on time, and
market acceptance of new products or upgrades of existing products; the
timing of, or delay in, large customer orders; continued availability of
technology and intellectual property license rights; product life cycles;
quality control of products sold; competitive conditions in the industry;
economic conditions generally or in various geographic areas; and the risks
listed from time to time in the reports that Insignia files with the U.S.
Securities and Exchange Commission. There can be no assurance that Insignia
will experience growth in revenues and net income in any particular period
when compared to prior periods. Any quarterly or annual shortfall in net
revenues and/or net income from the levels expected by securities analysts
and shareholders would result in a substantial decline in the trading price
of Insignia's shares.
Insignia continues to face significant risks associated with the successful
execution of its new product strategy. These risks include, but are not
limited to continued technology and product development, introduction and
market acceptance of new products, changes in the marketplace, liquidity,
competition from existing and new competitors which may enter the marketplace
and retention of key personnel. Due to the generally longer sales cycles
associated with the Jeode platform, Insignia does not currently have accurate
visibility of future order rates and demand for its products generally. There
can be no assurance that Jeode platform products will achieve market
acceptance.
Insignia has experienced operating losses in each quarter since the second
quarter of 1996. To achieve profitability, Insignia will have to increase its
revenue significantly. Insignia's ability to increase revenues depends upon
the success of our Jeode product line. Jeode is a relatively new product and
it may not achieve market acceptance. If Insignia is unable to generate
revenues
Page 14
<PAGE>
from Jeode in the form of development license fees, maintenance and support
fees, commercial use royalties and customer-funded engineering services,
Insignia's current revenue will be insufficient to sustain its business.
The following table sets forth the unaudited condensed consolidated results
of operations as a percentage of total revenues for the three month periods
ended March 31, 2000 and 1999.
<TABLE>
<CAPTION>
Three months ended
March 31,
--------------------------------
2000 1999
-------------- --------------
<S> <C> <C>
Net revenues:
License 82.3% 94.5%
Service 17.7% 5.5%
-------------- --------------
Total net revenues 100.0% 100.0%
-------------- --------------
Cost of net revenues:
License 37.7% 47.4%
Service 12.7% 7.7%
-------------- --------------
Total cost of net revenues 50.4% 55.1%
-------------- --------------
Gross margin 49.6% 44.9%
-------------- --------------
Operating expenses:
Sales and marketing 85.5% 70.5%
Research and development 96.2% 70.0%
General and administrative 62.5% 42.4%
-------------- --------------
Total operating expenses 244.2% 182.9%
-------------- --------------
Operating loss (194.6%) (138.0%)
Interest income, net (14.6%) 6.7%
Other income (expense), net 0.5% (2.0%)
-------------- --------------
Loss before income taxes (208.7%) (133.3%)
Provision for income taxes 0.3% 1.7%
-------------- --------------
Net loss (209.0%) (135.0%)
============== ==============
</TABLE>
OVERVIEW
Insignia, which commenced operations in 1986, develops, markets and supports
virtual machine technology which enables software applications to be run on
various computer platforms.
Page 15
<PAGE>
In January 1998, after a strategic review of the Company and based upon 12
years of emulation software development experience, in January 1998 Insignia
announced its intention to launch a new product line called the Jeode-TM-
platform, based on Insignia's Embedded Virtual Machine ("EVM"-TM-)
technology. The Jeode platform is Insignia's implementation of Sun
Microsystems, Inc.'s ("Sun") Java-Registered Trademark- technology tailored
for Internet appliances and embedded devices. The Jeode platform is enabled
by Insignia's EVM and is designed to enable software developers to create
reliable, efficient and predictable Internet appliances and embedded devices.
The product became available for sale in March 1999. The Jeode platform is
now the principal product line of Insignia and will be for the foreseeable
future. The Jeode product line revenue model is based on original equipment
manufacturer's ("OEMs") customer transactions. Revenues from the Jeode
product line are generally derived from four main sources: the sale of a
development license, the sale of annual maintenance and support, a commercial
use royalty based on shipments of products that include Jeode technology, and
customer-funded engineering activities.
Insignia's principal product line in recent years has been SoftWindows-TM-.
This product enabled Microsoft Windows ("Windows"-Registered Trademark-)
applications to be run on most Apple Computer Inc. ("Apple"-Registered
Trademark-) Macintosh computers and many UNIX workstations. Revenues from
this product line grew until 1995, but declined significantly after that
date, along with margins. This was due to a declining demand for Apple
Macintosh products and increased competition. Insignia also shipped RealPC, a
low cost software product that allowed consumers to play games and other
applications designed for Intel-based PCs on their Power Macintosh computers.
In early 1999 Management took steps to discontinue these product lines, and
on October 18, 1999, Insignia signed an exclusive licensing arrangement with
FWB Software, LLC ("FWB"). Under the arrangement FWB will pay Insignia a
royalty based on an earn-out of FWB's future revenues from the product lines
and Insignia will be paid as those revenues are achieved. Upon achieving a
certain revenue threshold, Insignia will transfer the SoftWindows and RealPC
product lines to FWB at no additional consideration. This arrangement allows
Insignia to focus exclusively on its Jeode platform business strategy.
REVENUES
<TABLE>
<CAPTION>
Three months ended
March 31,
--------------------------------------
2000 1999
----------------- ---------------
(in thousands)
<S> <C> <C>
License revenue $ 1,243 $ 2,180
Service revenue 268 128
================= ===============
Total net revenue $ 1,511 $ 2,308
================= ===============
</TABLE>
The Jeode product line was the primary business of Insignia for the first
quarter of 2000. In 1999, Insignia shipped two principal product lines: the
Jeode platform and SoftWindows.
Revenue from the Jeode product line is derived from four main sources: the
sale of a development license, the sale of annual maintenance and support, a
commercial use royalty based on shipments of products that include Jeode
technology, and customer-funded engineering
Page 16
<PAGE>
activities. Insignia derived its SoftWindows revenues from the sale of
packaged software products and annual maintenance contracts, along with
royalties received from bundling agreements with OEMs and customer-funded
engineering activities under OEM contracts. Revenues from the sale of
development licenses, packaged products and royalties received from OEMs are
classified as license revenue, while revenues from customer-funded
engineering activities, training, and annual maintenance contracts are
classified as service revenue.
In the first quarter of 2000, total revenues and license revenues declined by
35% and 43%, respectively, compared to the first quarter of 1999. The decline
is primarily due to discontinuing the SoftWindows product line. The Jeode
platform became available for sale in March 1999 and generated no revenue in
the first quarter of 1999. The Jeode platform is now the principal product of
Insignia and will be the principal source of revenues for the foreseeable
future.
License and service revenues accounted for 82% and 18%, respectively, of
total revenues in the first quarter of 2000. In the first quarter of 1999,
license and service revenues accounted for 95% and 5%, respectively.
Jeode revenue accounted for 97% of total revenues for the three months ended
March 31, 2000. Jeode license revenue accounted for 82% of total revenues and
100% of license revenues for the three months ended March 31, 2000. There was
no Jeode platform revenue in the first quarter of 1999.
Revenue from Insignia's SoftWindows products accounted for 3% of total
revenue in the three months ended March 31, 2000 and 100% of total revenues
in the three months ended March 31, 1999. The decline is a result of
discontinuing the SoftWindows product line. The SoftWindows revenue in the
first quarter of 2000 is entirely from UNIX-based maintenance contracts that
Insignia is under contract to service through the third quarter of 2000.
Service revenue in the first quarter of 2000 was 109% higher than service
revenue in the first quarter of 1999, primarily as a result of Jeode
engineering and training fees and continuing SoftWindows UNIX maintenance
revenue. In the first quarter of 2000, Jeode service revenue accounted for
15% of total revenues and 85% of total service revenue. SoftWindows service
revenue accounted for 3% of total revenues and 15% of service revenue in the
first quarter of 2000.
Insignia distributed its SoftWindows packaged products within the United
States and internationally through multiple distributors and resellers.
Insignia offered certain return privileges to its customers including product
exchange privileges and price protection. Insignia recognized revenues from
packaged products upon shipment with provisions for estimated future returns,
exchanges and price protection being recorded as a reduction of total
revenues.
Page 17
<PAGE>
Sales to OEM's and distributors representing more than 10% of total revenue in
each period accounted for the following percentages of total revenues.
<TABLE>
<CAPTION>
Three months ended
March 31,
--------------------------------------
2000 1999
----------------- ---------------
<S> <C> <C>
OEM's:
Quantum 13% -%
Compaq 15% -%
Gemstar 53% -%
All OEM's 90% -%
Distributors:
Software House International -% 23%
Mitsubishi -% 16%
Ingram Micro -% 10%
All Distributors: 3% 66%
</TABLE>
Sales to customers outside the United States, derived mainly from customers in
Asia, represented approximately 7% of total revenues in the three months ended
March 31, 2000 and 27% of total revenues in the three months ended March 31,
1999. Insignia markets Jeode to Internet appliance and embedded device
manufacturers in the United States, Europe and Japan. Insignia distributes its
Jeode product line through direct sales, multiple distributors and strategic
partners. Fluctuations in currency exchange rates did not have a material impact
on total revenues in the three months ended March 31, 2000 or March 31, 1999.
However, fluctuations in currency exchange rates could affect Insignia's future
revenues and results of operations.
COST OF REVENUES AND GROSS MARGIN
<TABLE>
<CAPTION>
Three months ended
March 31,
--------------------------------------
2000 1999
----------------- ---------------
(in thousands, except percentages)
<S> <C> <C>
Cost of license revenue $ 570 $ 1,093
Gross margin: license revenue 54% 50%
Cost of service revenue 191 178
Gross margin: service revenue 29% (39%)
Total cost of revenues $ 761 $ 1,271
Gross margins: total revenues 50% 45%
</TABLE>
Page 18
<PAGE>
Cost of license revenue comprises mostly royalties to third parties, along
with the costs of documentation, duplication and packaging. Cost of service
revenue includes costs associated with customer-funded engineering activities
and end-user support under maintenance contracts.
Insignia believes that the significant factors affecting the Jeode gross
margin will continue to include pricing of the development license, pricing
of the unit usage and royalties to third parties such as Sun. In early 1999,
Insignia signed a five-year agreement with Sun under which Sun established
Insignia as an authorized Virtual Machine provider. Under this agreement
Insignia will pay Sun a per unit royalty on each Jeode-enabled embedded
product shipped by Insignia's customers, plus a royalty on all development
licenses put in place between Insignia and its customers. License revenue
gross margins in the quarter ended March 31, 2000 were 54%, compared to 50%
for the same period in 1999.
Gross margin for service revenue increased in the first quarter of 2000 to
29% from (39%) in the same period of 1999. The increase is a result of Jeode
engineering and training revenue and the wind down of the SoftWindows UNIX
maintenance contract. Service revenue gross margins are lower than license
revenue gross margins because many initial customers require non-recurring
engineering services, which generate lower gross margin than service revenues.
In the event that Jeode licenses increase in future periods, service revenue
gross margins are expected to improve as a result of the required maintenance
and upgrade contracts for each Jeode product sale.
OPERATING EXPENSES
<TABLE>
<CAPTION>
Three months ended
March 31,
--------------------------------------
2000 1999
----------------- ---------------
(in thousands, except percentages)
<S> <C> <C>
Sales and marketing $ 1,292 $ 1,628
Percentage of total revenues 86% 71%
Research and development $ 1,454 $ 1,615
Percentage of total revenues 96% 70%
General and administrative $ 945 $ 978
Percentage of total revenues 63% 42%
</TABLE>
Sales and marketing expenses include advertising and promotional expenses,
trade shows, personnel and related overhead costs, and salesperson
commissions. Sales and marketing expenses decreased by 21% in the quarter
ended March 31, 2000 from the quarter ended March 31, 1999. The decrease is
due to eliminating expenditures on SoftWindows advertising programs and
staffing. Insignia anticipates a small increase in sales and marketing
expenses in the second quarter of 2000 as Insignia continues to increase its
marketing and direct sales organization for its Jeode product line. Insignia
has established a direct sales force in the United States, Europe
Page 19
<PAGE>
and Japan. Insignia has also developed relationships with strategic partners
to leverage the Jeode technology.
Research and development expenses consist primarily of personnel costs,
overhead costs relating to occupancy and equipment depreciation. Research and
development expenses decreased by 10% in the three months ended March 31,
2000 over the same period in 1999 due to direct engineering expenses on
customer funded engineering projects being classified as part of cost of
sales. Excluding this reclass, the expense would be flat. In accordance with
Statement of Financial Accounting Standards No. 86, software development
costs are expensed as incurred until technological feasibility is
established, after which any additional costs are capitalized. In 2000 and
1999, no development expenditures were capitalized.
General and administrative expenses consist primarily of personnel and
related overhead costs for finance, information systems, human resources and
general management. General and administrative expenses decreased by 3% in
the three months ended March 31, 2000 over the same period in 1999. The
decline is due to reduced headcount and reduced legal fees.
INTEREST INCOME (EXPENSE), NET
<TABLE>
<CAPTION>
Three months ended
March 31,
--------------------------------------
2000 1999
----------------- ---------------
(in thousands, except percentages)
<S> <C> <C>
Interest income (expense), net $ (220) $ 155
Percentage of total revenues (15%) 7%
</TABLE>
Interest income (expense), net decreased from income of $155,000 in the three
months ended March 31, 1999 to expense of $220,000 in the three months ended
March 31, 2000. The decrease is due primarily to decreased interest income
earned on Insignia's cash and cash equivalents, and a one time expense for a
$300,000 commitment fee for the $5 million of credit secured in the first
quarter of 2000.
OTHER INCOME (EXPENSE), NET
<TABLE>
<CAPTION>
Three months ended
March 31,
--------------------------------------
2000 1999
----------------- ---------------
(in thousands, except percentages)
<S> <C> <C>
Other income (expense), net $ 8 $ (47)
Percentage of total revenues 1% (2%)
</TABLE>
In the three months ended March 31, 2000, Insignia realized a foreign
exchange gain of $10,000 compared to a loss of $47,000 in the three months
ended March 31, 1999.
All of Insignia's revenues and approximately 35% of its operating expenses
are denominated in United States dollars. Most of the remaining revenues and
expenses of Insignia are pound
Page 20
<PAGE>
sterling denominated and consequently Insignia is exposed to fluctuations in
pound sterling exchange rates. To hedge against this currency exposure,
Insignia enters into foreign currency options and forward exchange contracts
for periods and amounts consistent with the amounts and timing of its
anticipated pound sterling denominated operating cash flow requirements.
Unrealized gains and losses on foreign currency option contracts are deferred
and were not material at March 31, 2000 and December 31, 1999. There can be
no assurance that such fluctuations will not have a material effect on
Insignia's results of operations in the future.
Insignia has, at times, an investment portfolio of fixed income securities
that are classified as "available-for-sale-securities." These securities,
like all fixed income instruments, are subject to interest rate risk and will
fall in value if market interest rates increase. Insignia attempts to limit
this exposure by investing primarily in short-term securities.
PROVISION FOR INCOME TAXES
<TABLE>
<CAPTION>
Three months ended
March 31,
--------------------------------------
2000 1999
----------------- ---------------
(in thousands)
<S> <C> <C>
Provision for income taxes $ 5 $ 40
Effective income tax rate - -
</TABLE>
Insignia's provision for income taxes for the three months ended March 31,
2000 primarily represents certain U.S. taxes. Insignia has recorded a full
valuation allowance against all deferred tax assets, primarily comprising net
operating losses, on the basis that significant uncertainty exists with
respect to realization.
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
March 31,
--------------------------------------
2000 1999
----------------- ---------------
(in thousands)
<S> <C> <C>
Cash, cash equivalents and investments $ 2,345 $ 4,013
Cash and cash equivalents held in escrow $ 5,130 $ 6,700
Working capital $ (2,883) $ 6,904
Net cash used in operating activities $ (4,102) $ (5,682)
Line of credit available $ 5,000 $ -
</TABLE>
Insignia has transitioned its product focus from compatibility products to
its Jeode product line based on Insignia's EVM technology. This change in
product focus has resulted in a redirection of available resources from
Insignia's historical revenue base towards the development and marketing
efforts associated with the Jeode platform, which was released for general
availability in March 1999. As a result of this change in product strategy
and associated redirection of resources to new product development,
Insignia's financial position weakened during the first quarter of 2000. Cash
used in operating activities in the first quarter of 2000 totaled $4.1
million compared to $5.7 million for the same period in 1999.
Page 21
<PAGE>
Insignia's cash, cash equivalents and short-term investments, including
restricted cash of $5.1 million held in escrow, were $7.5 million at March
31, 2000, a decrease of $3.2 million from $10.7 million at March 31, 1999.
Working capital decreased to $(2.9) million at March 31, 2000, from $6.9
million at March 31, 1999. The principal source of cash funding came from a
private placement funding, a convertible promissory note, receivable
collections and monies released from escrow.
On October 20, 1999, Insignia signed a convertible promissory note in favor
of Quantum Corporation ("Quantum") for $1.0 million. The note is convertible
at Quantum's option to Insignia's shares any time during the lifetime of the
note. All unpaid principal with any unpaid interest, at 8% per annum, is due
and payable on December 31, 2000.
On March 20, 2000, Insignia entered into an agreement with a director whereby
he would provide Insignia a $5.0 million line of credit. The interest rate on
amounts drawn down is at prime plus 2% until June 30, 2000 and thereafter at
prime plus 4% per annum simple interest, payable in cash at the repayment
date. Full repayment of any outstanding loan is due on March 20, 2001.
Insignia believes that with the $5.0 million line of credit, entered into on
March 20, 2000, and expected cash flow from operations Insignia will have
sufficient funds to meet Insignia's operating and capital requirements
through the end of fiscal year 2000. However, if additional funding is
required, there can be no assurance that Insignia will be able to obtain
additional funding on acceptable terms or at all.
Insignia's liquidity may be reduced in the future by factors such as higher
interest rates, inability to borrow without collateral, outcome of pending
claims, availability of capital financing and continued operating losses.
Further, significant fluctuations in quarterly operating results has had and,
in the future, may continue to have a negative affect on Insignia's
liquidity. Factors such as price reductions, the introduction and market
acceptance of new products and product returns have contributed to this
quarterly variability. Moreover, Insignia's expense levels are based in part
on expectations of future sales levels, and a shortfall in expected sales
could thererfore result in a disproportionate decrease in results of
operations. As such, the revenues and results of operations in some future
period may be below the expectations of investors, which would likely result
in a significant reduction in the market price of Insignia's shares. A
decline in the market price of Insignia's shares would have a negative effect
on Insignia's ability to raise needed capital on terms and conditions
acceptable to management.
YEAR 2000 COMPLIANCE
Insignia believes that all of Insignia's most current product releases will
not cease to perform nor generate incorrect or ambiguous data or results
solely due to a change in date to or after January 1, 2000, and will
calculate any information dependent on these dates in the same manner, and
with the same functionality, data integrity and performance, as these
products did on or before December 31, 1999. However, all of Insignia's
customers may not implement the Year 2000 compliant release of Insignia's
products in a timely manner, which could lead to failure of customer systems
and product liability claims against Insignia. Even if Insignia's products
are
Page 22
<PAGE>
Year 2000 compliant, Insignia may, in the future, be subject to claims based
on Year 2000 issues in the products of other companies or issues arising from
the integration of multiple products within a system. The costs of defending
and resolving Year 2000-related disputes, and any liability for Year
2000-related damages, including consequential damages, could be significant.
In addition, Year 2000 failures could have a negative effect on Insignia's
competitive position. If any of Insignia's critical suppliers do not
successfully and timely achieve Year 2000 compliance, and Insignia is unable
to replace them with new or alternate suppliers, our business would be
disrupted.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Insignia enters into derivative financial instruments such as currency option
contracts to hedge certain anticipated, but not yet committed, transactions
expected to be denominated in foreign currencies. Insignia does not use
derivative financial instruments for trading or speculative purposes.
Insignia's downside risk with respect to currency option contracts (British
pound sterling) is limited to the premium paid for the right to exercise the
option. Premiums paid for options outstanding as of March 31, 2000 were not
material.
Page 23
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On January 29, 1999, Insignia received an indemnity claim from Citrix
Systems, Inc. ("Citrix") for an amount estimated by Citrix to not exceed
$6.25 million. The claim was made in relation to the Asset Purchase Agreement
between Insignia and Citrix under which Citrix purchased Insignia's NTRIGUE
product line in February 1998.
Citrix's indemnity claim is based on assertions made by GraphOn Corporation
("GraphOn") in January 1998 and declaratory relief action that Citrix filed
against GraphOn in November 1998 in the United States District Court,
Southern District of Florida. Citrix's action against GraphOn seeks a
declaratory judgment that Citrix does not infringe any GraphOn proprietary
rights and that Citrix has not misappropriated any trade secrets or breached
an agreement to which GraphOn is a party. Citrix filed the action in response
to and to resolve assertions first made by GraphOn, and disclosed to Citrix
in January 1998, that Insignia may have used GraphOn's confidential
information to develop certain of Insignia's products, possibly including
products Insignia sold to Citrix in February 1998. The Court dismissed the
complaint, but Citrix has subsequently filed an appeal. Insignia believes
that any misappropriation or similar assertions by GraphOn are without merit
or basis. Accordingly, Insignia contests Citrix's indemnity claim.
On October 4, 1999, Insignia filed a suit against Citrix and GraphOn in the
Superior Court of the State of California, County of Santa Clara, relating to
the misappropriation assertions of GraphOn's trade secrets and Citrix's
refusal to release funds still remaining in the escrow established in
connection with the Asset Purchase Agreement between Insignia and Citrix and
breach of a Cooperation Agreement between the parties. Subsequent to the
filing of the lawsuit, Citrix agreed to release $1.0 million from the escrow,
leaving a balance of $5.1 million. GraphOn answered the complaint, and
claimed it had not made any claims of misappropriation against Insignia or
Citrix. The case is pending.
On March 15, 2000, GraphOn announced it had filed a suit against Citrix and
Insignia in the Superior Court of the State of California, County of Santa
Clara, alleging trade secret misappropriation and breach of contract arising
out of the same facts and circumstances set forth in Insignia's action
against GraphOn. GraphOn has not yet served its complaint. Insignia believes
GraphOn's claims are without merit. The case is pending.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are filed as part of this Report:
Exhibit 11.1 Statement Regarding Computation of Earnings (Loss) Per
Share
Exhibit 27.1 Financial Data Schedule
Page 24
<PAGE>
(b) Reports on Form 8-K
During the quarter ended March 31, 2000 Insignia filed a Report on Form
8-K/A, amending Item 5, a private placement under a Securities Purchase
Agreement dated December 9, 1999.
Page 25
<PAGE>
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.
INSIGNIA SOLUTIONS PLC
(Registrant)
Date: May 15, 2000
/s/ Stephen M. Ambler
-----------------------
Stephen M. Ambler
Chief Financial Officer
Page 26
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ----------------------------------------------------------------------------------
<S> <C>
Exhibit 11.1 Statement Regarding Computation of Earnings (Loss) Per Share
Exhibit 27.1 Financial Data Schedule
</TABLE>
Page 27
<PAGE>
EXHIBIT 11.1
INSIGNIA SOLUTIONS PLC
STATEMENT REGARDING COMPUTATION OF EARNINGS (LOSS) PER SHARE
(IN THOUSANDS EXCEPT PER SHARE DATA, UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
March 31,
2000 1999
------------- -------------
<S> <C> <C>
Net loss $ (3,158) $ (3,116)
============= =============
CALCULATION OF BASIC LOSS PER SHARE:
Weighted average number of ordinary shares
outstanding used in computation 14,089 12,690
============= =============
Basic loss per share $ (0.22) $ (0.25)
============= =============
CALCULATION OF DILUTED LOSS PER SHARE:
Weighted average number of ordinary shares
outstanding used in computation 14,089 12,690
Net effect of dilutive stock options outstanding - -
------------- -------------
14,089 12,690
============= =============
Diluted loss per share $ (0.22) $ (0.25)
============= =============
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2000 AND THE CONSOLIDATED STATEMENT
OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2000, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 7,475
<SECURITIES> 0
<RECEIVABLES> 2,090
<ALLOWANCES> (88)
<INVENTORY> 4
<CURRENT-ASSETS> 5,218
<PP&E> 2,639
<DEPRECIATION> (2,079)
<TOTAL-ASSETS> 11,483
<CURRENT-LIABILITIES> 8,101
<BONDS> 0
0
0
<COMMON> 4,681
<OTHER-SE> (2,739)
<TOTAL-LIABILITY-AND-EQUITY> 11,483
<SALES> 1,243
<TOTAL-REVENUES> 1,511
<CGS> 570
<TOTAL-COSTS> 4,452
<OTHER-EXPENSES> 212
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,153)
<INCOME-TAX> 5
<INCOME-CONTINUING> (3,158)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,158)
<EPS-BASIC> (0.22)
<EPS-DILUTED> (0.22)
</TABLE>
