<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
---------
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
- ----- Exchange Act of 1934
For the quarterly period ended 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: 0-27774
PRISM SOLUTIONS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 77-0282704
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 HAMLIN COURT
SUNNYVALE, CA 94089
(Address of principal executive offices, including zip code)
TELEPHONE NUMBER (408) 752-1888
(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 May 9, 1997, there were 13,377,548 shares of the Registrant's Common Stock
outstanding.
================================================================================
<PAGE> 2
PRISM SOLUTIONS, INC.
FORM 10-Q
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets
December 31, 1996 and March 31, 1997 . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Operations
Three months ended March 31, 1996 and 1997 . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows
Three months ended March 31, 1996 and 1997 . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . . . . . . 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. . . . . . . . . . . .11
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. . . . . . . . . . . . . . . . . . . . . . . . .12
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
INDEX TO EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
PRISM SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
-------- --------
<S> <C> <C>
ASSETS (UNAUDITED)
Current assets:
Cash and cash equivalents $ 14,844 $ 5,163
Short-term investments 20,052 27,895
Accounts receivable, net 8,392 10,413
Other receivables 151 243
Prepaid expenses and other current assets 836 536
-------- --------
Total current assets 44,275 44,250
Property and equipment, net 1,861 1,987
Deposits 163 1,238
-------- --------
Total assets $ 46,299 $ 47,475
======== ========
LIABILITIES
Current liabilities:
Accounts payable $ 1,298 $ 1,801
Accounts payable to related party 28 31
Accrued payroll and related 2,429 2,046
Deferred revenue 4,752 4,828
Other accrued liabilities 1,270 1,579
-------- --------
Total current liabilities 9,777 10,285
Other liabilities 14 13
-------- --------
Total liabilities 9,791 10,298
-------- --------
STOCKHOLDERS' EQUITY
Common stock 14 14
Additional paid-in capital 49,876 50,397
Receivables from stockholders (104) (99)
Accumulated deficit (13,278) (13,135)
-------- --------
Total stockholders' equity 36,508 37,177
-------- --------
Total liabilities and stockholders' equity $ 46,299 $ 47,475
======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF
THESE CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE> 4
PRISM SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------------
1996 1997
------------ ------------
(UNAUDITED)
<S> <C> <C>
Revenues:
License $ 4,397 $ 6,614
Services and other 3,010 3,582
------------ ------------
Total revenues 7,407 10,196
------------ ------------
Cost of revenues:
License 133 377
Services and other 1,624 2,031
------------ ------------
Total costs of revenues 1,757 2,408
------------ ------------
Gross margin 5,650 7,788
------------ ------------
Costs and expenses:
Sales and marketing 4,221 5,343
Research and development 1,049 1,499
General and administrative 638 1,208
------------ ------------
Total operating expenses 5,908 8,050
------------ ------------
Loss from operations (258) (262)
Interest income, net 61 494
Other expense, net (15) (54)
------------ ------------
Income (loss) before income taxes (212) 178
Provision for income taxes 6 35
------------ ------------
Net income (loss) $ (218) $ 143
============ ============
Net income (loss) per share $ (0.04) $ 0.01
============ ============
Shares used in per share calculation 5,126,525 14,019,928
============ ============
Pro forma net income (loss) per share $ (0.02) $ 0.01
============ ============
Pro forma shares used in per share calculation 11,712,364 14,019,928
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF
THESE CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE> 5
PRISM SOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
1996 1997
-------- --------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net cash used in operating activities $ (66) $ (1,869)
-------- --------
Cash flows from investing activities:
Purchases of property and equipment (270) (495)
Purchases of short-term investments (2,994) (7,843)
-------- --------
Net cash used in investing activities (3,264) (8,338)
-------- --------
Cash flows from financing activities:
Proceeds from stock sold through employee purchase plan -- 485
Proceeds from exercise of stock options -- 46
Proceeds from initial public offering 35,634
Repayment on long-term debt (703)
Repurchase of common stock -- (10)
Proceeds from receivable due from stockholder -- 5
Other 19 --
-------- --------
Net cash provided by financing activities 34,950 526
-------- --------
Net increase (decrease) in cash and cash equivalents 31,620 (9,681)
Cash and cash equivalents at beginning of quarter 1,861 14,844
-------- --------
Cash and cash equivalents at end of quarter $ 33,481 $ 5,163
======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF
THESE CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE> 6
PRISM SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The consolidated financial statements at March 31, 1997 are unaudited and
reflect all adjustments (consisting only of normal recurring adjustments) which
are, in the opinion of management, necessary for a fair presentation of the
financial position and operating results for the interim period. The
consolidated financial statements should be read in conjunction with the notes
thereto, together with management's discussion and analysis of financial
condition and results of operations for the fiscal year ended December 31, 1996.
The results of operations for the three months ended March 31, 1997 are not
necessarily indicative of the results for the entire year ending December 31,
1997. The previous year end's balance sheet data was derived from audited
financial statements but does not include all disclosures required by generally
accepted accounting principles.
2. NET INCOME (LOSS) PER SHARE AND PRO FORMA NET INCOME (LOSS) PER SHARE
The net income (loss) per share, on a historical basis, is computed using the
weighted average number of common and dilutive common equivalent shares
outstanding during the period. Common equivalent shares are excluded from the
computation if their effect is antidilutive, except that, pursuant to the
Securities and Exchange Commission Staff Accounting Bulletins, common and common
equivalent shares issued at prices below the public offering price during the 12
months immediately preceding the initial filing date have been included in the
calculation up to the effective date of the Company's registration statement as
if they were outstanding for all periods presented (using the treasury stock
method and the initial public offering price). Pro forma net income (loss) per
share for the three months ended March 31, 1996 assumes the common shares issued
upon conversion of the outstanding convertible preferred stock had been
outstanding during such period.
3. CONTINGENCIES
On March 5, 1997, a complaint styled Adler et al., v. Prism Solutions, Inc. et
al., Case No. CV764547, was filed by the law firm of Milberg Weiss Bershad Hynes
& Lerach LLP in Superior Court of the State of California, County of Santa
Clara, against the Company and several of its current and former officers and
directors and the underwriters of its initial public offering. The complaint, a
putative class action, was filed on behalf of those persons who purchased or
otherwise acquired the common stock of the Company from March 14 through October
14, 1996, and alleges that the defendants artificially inflated the demand for
the common stock prior to and after the initial public offering. The complaint
seeks damages in an unspecified amount. The Company believes the complaint has
no merit and intends to vigorously defend the action.
4. RECENT PRONOUNCEMENTS
During February 1997, the Financial Accounting Standards Board issued Statement
No. 128 ("FAS 128"), "Earnings per Share," which specifies the computation,
presentation and disclosure requirements for earnings per share. FAS 128 will
become effective for the Company's year ending December 31, 1997. The impact of
adopting FAS 128 on the Company's financial statements has not yet been
determined.
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
In addition to historical information contained herein, Management's Discussion
and Analysis contains forward-looking statements. The forward-looking statements
contained herein are subject to certain risks and uncertainties including those
discussed below that could cause actual results to differ materially from those
reflected herein, or those in the Company's Form 10-K dated December 31, 1996.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which reflect management's analysis only as of the date hereof. The
Company undertakes no obligation to publicly revise any forward-looking
statements in order to reflect events or circumstances after the date hereof.
OVERVIEW
Prism designs, develops, markets and supports data warehouse management
software that assists customers in developing, managing and maintaining data
warehouses. The Company was incorporated in California in March 1991 and
reincorporated in Delaware in February 1996. Through the end of 1992, the
Company was in the development stage and was engaged primarily in research and
development and the establishment of a sales and marketing infrastructure. The
Company began shipping its principal products, Prism Warehouse Manager and Prism
Directory Manager, in December 1992 and April 1995, respectively. In December
1996, Prism Warehouse Manager and Prism Directory Manager were replaced with
Prism Warehouse Executive and Prism Warehouse Directory, respectively, as the
Company's next generation software. In the fourth quarter of 1996, Prism also
completed the first transactions for Iterations, its consulting methodology. The
majority of the Company's total revenues to date have been derived from software
license revenues, which accounted for 61% of total revenues in 1996 and 65% of
total revenues in the first quarter of 1997. Services and other revenues
accounted for the remaining revenues in 1996 and the first quarter of 1997. The
Company expects that license revenues will continue to account for a majority of
the Company's total revenues for the foreseeable future.
During February 1997, the Financial Accounting Standards Board issued
Statement No. 128 ("FAS 128"), "Earnings per Share," which specifies the
computation, presentation and disclosure requirements for earnings per share.
FAS 128 will become effective for the Company's year ending December 31, 1997.
The impact of adopting FAS 128 on the Company's financial statements has not yet
been determined.
The following table sets forth operating results as a percentage of total
revenues for the three month periods ended March 31, 1996 and 1997:
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL REVENUES
----------------------------
THREE MONTHS ENDED
MARCH 31,
----------------
1996 1997
----- -----
<S> <C> <C>
Revenues:
License 59% 65%
Services and other 41 35
--- ---
Total revenues 100 100
--- ---
Cost of revenues:
License 2 4
Services and other 22 20
--- ---
Total cost of revenues 24 24
--- ---
Gross margin 76 76
--- ---
Costs and expenses:
Sales and marketing 57 52
Research and development 14 15
General and administrative 9 12
--- ---
</TABLE>
7
<PAGE> 8
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL REVENUES
----------------------------
THREE MONTHS ENDED
MARCH 31,
----------------
1996 1997
----- -----
<S> <C> <C>
Total operating expenses 80 79
--- ---
Loss from operations (4) (3)
Interest income, net 1 5
Other expense, net 0 (1)
--- ---
Income (loss) before income taxes (3) 1
Provision for income taxes 0 0
--- ---
Net income (loss) (3) 1
=== ===
</TABLE>
REVENUES
The Company's revenues are derived from license fees for its software
products and fees for services complementing its products, including software
maintenance and support, implementation, consulting and training.
License Revenues. The increase in license revenues from the first quarter
of 1996 to the same period of 1997 was primarily due to an increased number of
license transactions. However, the average transaction size declined somewhat
from the first quarter of 1996 to the same period in 1997, due mainly to the
smaller configuration of systems licensed to customers in the first quarter of
1997.
Services and Other Revenues. The growth from the first quarter of 1996 to
the same period of 1997 was the result primarily of an increase in the number
and scope of consulting engagements as the Company's consulting organization has
grown and, to a lesser extent, of increased licensing activity causing an
increase in the maintenance base as well as yearly maintenance renewals. The
majority of services and other revenues in both periods came from implementation
and consulting revenues.
COST OF REVENUES
Cost of License Revenues. Cost of license revenues consists primarily of
increases in certain reserves, costs of royalties paid to third-party vendors,
and expenses incurred for product media and duplication, shipping expenses,
printing of manuals and packaging materials.
The increase from the first quarter of 1996 to the same period of 1997 were
due primarily to an increase in certain reserves, increased distribution costs,
and media and duplication costs as well as royalty payments to marketing
partners for their assistance in consummating licensing transactions. The
Company expects that the cost of license revenues will increase in absolute
dollars as the Company licenses additional technology and products from third
parties for inclusion in its product line.
Cost of Services and Other Revenues. Cost of services and other revenues
consists primarily of personnel-related costs incurred in providing consulting
and implementation services, telephone support and training to customers.
The dollar amount of cost of services and other revenues increased from the
first quarter of 1996 to the same period of 1997 primarily because of increased
personnel-related costs as the Company continued to expand its consulting,
customer support and training organizations to support an increase in sales. The
percentage decrease from 1996 to 1997 in cost of services and other revenues
compared to total revenue was primarily due to economies of scale related to
maintenance and support services. The Company expects that the costs of services
and other revenues will increase in absolute dollars and as a percentage of
revenues.
8
<PAGE> 9
OPERATING EXPENSES
The growth in operating expenses occurred primarily as a result of
increases in salaries and benefits, resulting from higher staffing levels and
the expansion of facilities.
Sales and Marketing. Sales and marketing expenses consist primarily of
salaries, commissions and bonuses paid to sales and marketing personnel and
promotional expenses. The increase in dollar amount in sales and marketing
expenses from the first quarter of 1996 to the same period of 1997 were
primarily due to the expansion of the Company's sales operations and increased
marketing activities, including trade shows and promotional expenses. The
decrease in sales and marketing expenses as a percentage of total revenues for
the three month period resulted primarily from increases in productivity as
sales personnel and system engineers became more experienced, and due to the
economies of scale associated with the increase in total revenues. The Company
expects that sales and marketing expenses will continue to increase in absolute
dollars but slightly decrease as a percentage of total revenues if the Company's
total revenues continue to increase.
Research and Development. Research and development expenses consist
primarily of salaries paid to the engineering staff. The increases in research
and development expenses from the first quarter of 1996 to the same period of
1997 are primarily attributable to increased staffing and associated support for
software engineers required to expand and enhance the Company's product line.
Software development costs have been expensed in accordance with Statement of
Financial Accounting Standards No. 86, "Accounting for the Costs of Computer
Software to be Sold, Leased or Otherwise Marketed." To date, costs incurred
after establishment of technological feasibility have been immaterial and, as a
result, all research and development costs have been expensed as incurred. The
Company believes that a significant level of investment for research and
development is required to remain competitive and, accordingly, the Company
anticipates that research and development expenses will increase in absolute
dollars and remain fairly constant as a percentage of total revenues if the
Company's total revenues continue to increase.
General and Administrative. General and administrative expenses consist
primarily of salary expenses for administrative and executive staff. These
expenses increased in absolute dollars from the first quarter of 1996 to the
same period of 1997 as the Company increased its finance and information systems
department staffing. The increase in general and administrative expenses as a
percentage of total revenues for the three month period was principally caused
by costs related to management turnover, in particular recruiting and severance
costs. The Company expects that its general and administrative expenses will
increase in absolute dollars and remain fairly constant as a percentage of
revenues if the Company's total revenues continue to increase.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash, cash equivalents and short-term investments decreased
to $33,058,000 as of March 31, 1997 from $34,896,000 as of December 31, 1996,
due primarily to the payment of prepaid royalties to third-party vendors. As of
March 31, 1997, the Company had $5,163,000 in cash and cash equivalents and
$27,895,000 in short-term investments, which are classified as available for
sale.
The Company expects that its capital expenditures will remain constant or
increase in absolute dollars as the Company's employee base grows. As of March
31, 1997, the Company had no material commitments to make capital expenditures.
The Company's principal commitments consisted of non-cancelable operating leases
on its facilities.
To date, the Company has not invested in derivative securities or any other
financial instruments that involve a high level of complexity or risk.
Management expects that, in the future, cash in excess of current requirements
will be invested in short-term, interest-bearing, investment grade securities.
The Company believes its current cash balances and cash flow from
operations, if any, will be sufficient to meet its working capital and capital
expenditure requirements for at least the next 12
9
<PAGE> 10
months. Although operating activities may provide cash in certain periods, to
the extent the Company experiences growth in the future, the Company anticipates
that its operating and investing activities may use cash. Consequently, any such
future growth may require the Company to obtain additional equity or debt
financing, which may not be available or may be dilutive.
ADDITIONAL RISK FACTORS THAT MIGHT AFFECT FUTURE RESULTS
Limited Operating History; History of Losses
The Company's limited operating history makes the prediction of future
operating results difficult. Although the Company has experienced significant
growth in revenues in recent periods, the Company does not believe that this
growth rate is sustainable or indicative of future operating results. The
Company has never been profitable on an annual basis and currently believes that
it could continue to experience operating losses in 1997. Future operating
results will depend on many factors, including the growth of the data
warehousing market, the length of the sales cycle, the level of product and
price competition, demand for the Company's products, transaction size, the
Company's success in expanding its direct sales force and indirect distribution
channels, the ability of the Company to support and maintain existing products,
develop and market new products and control costs, the ability to recruit and
retain software engineers and other key personnel, general economic conditions
and other factors.
Through the remainder of 1997, the Company will continue to invest more in
customer services, marketing and research and development, and make personnel
additions to the Company's sales force worldwide. These additional expenses may
adversely affect the Company's operating margin if there are no offsetting
increases in revenues or reductions in other operating expenses.
Management of Growth
The Company is currently experiencing a period of rapid growth that has
placed and is expected to continue to place a strain on the Company's
administrative, financial and operational resources. Further significant
increases in the number of employees are anticipated during the remainder of
1997. The Company's ability to manage its staff and facilities growth
effectively will require it to continue to improve its operational, financial
and management controls, reporting systems and procedures, and to train,
motivate and manage its employees. If the Company's management is unable to
manage growth effectively and new employees are unable to achieve performance
levels, the Company's business, operating results and financial condition could
be adversely affected.
Lengthy Sales Cycle
The licensing of the Company's products by its customers typically involves
a significant technical evaluation and commitment of capital and other
resources, with the attendant delays frequently associated with customers'
internal procedures to approve large capital expenditures and to test and accept
new technologies that affect key operations. For these and other reasons, the
sales cycle associated with the licensing of the Company's products is typically
lengthy and subject to a number of significant risks, including customers'
budgetary constraints and internal acceptance reviews, that are beyond the
Company's control. During 1996, the Company began to experience longer sales
cycles, which have continued through the first quarter of 1997. The Company
believes the longer sales cycles are due to increased competition, especially in
the data mart segment. If the longer sales cycle persists or continues to
lengthen, the Company's future financial performance could be adversely
affected.
Competition
The data warehouse market is intensely competitive and subject to rapid
change. Competitors vary in size and in the scope of the products and services
they offer. The Company encounters competition from a number of sources,
including management information systems departments of customers and potential
customers. The most active competitors to the Company's Prism Scaleable
Enterprise and Prism Scaleable Warehouse packages are Evolutionary Technologies
International, Carleton Corporation, and PLATINUM Technology. The most active
competitor to the Company's Prism
10
<PAGE> 11
Scaleable Data Mart package is Informatica and several other small, private
companies. Notwithstanding the foregoing, all competitors compete in each market
segment. The Company expects to experience additional competition from other
established and emerging software companies, including some of the Company's
current marketing partners. Increased competition has resulted in the
lengthening of sales cycles and price reductions, and could result in reduced
transaction sizes, fewer customer orders, reduced gross margins and loss of
market share, any of which could have a material adverse effect on the Company's
business, operating results and financial condition.
Dependence on Key Personnel
The Company's future success will depend in large part upon its ability to
attract, retain and motivate highly skilled employees. There is significant
competition for employees with the skills required to perform the services
offered by the Company, particularly for software development engineers, and
there can be no assurance that the Company will be able to continue to attract
and retain sufficient numbers of highly skilled employees. The loss of a
significant number of the Company's senior management or other key research,
development, sales and marketing personnel, particularly if lost to competitors,
could have a material adverse effect on the Company's business, operating
results and financial condition, including its ability to attract employees.
Risks Associated with International Operations
The Company intends to continue to expand its operations in Europe and into
Asia and Latin America, which will require significant management attention and
financial resources. There can be no assurance that the Company's efforts to
develop international sales and support channels will be successful, and the
failure of such efforts could have a material adverse effect on the Company's
business, operating results and financial condition. International sales are
subject to a number of risks, including longer payment cycles, unexpected
changes in regulatory requirements, import and export restrictions and tariffs,
difficulties in staffing and managing foreign operations, the burden of
complying with a variety of foreign laws, greater difficulty in accounts
receivable collection, potentially adverse tax consequences, currency
fluctuations and political and economic instability.
Product Concentration
Substantially all of the Company's revenues to date have been attributable
to licenses for Prism Warehouse Manager (replaced by Prism Warehouse Executive),
Prism Directory Manager (replaced by Prism Warehouse Directory) and related
services. The Company currently expects that revenues attributable to Prism
Warehouse Executive and Prism Warehouse Directory, including maintenance and
consulting services, will continue to account for a majority of the Company's
total revenues. A decline in demand for or failure to achieve broad market
acceptance of these products as a result of competition, technological change or
otherwise, would have a material adverse effect on the business, operating
results and financial condition of the Company. A decline in license revenues
from these products would also have a material adverse effect on sales of other
Company products. The Company's future financial performance will depend in part
on the successful development, introduction and customer acceptance of new
releases of Prism Warehouse Executive and Prism Warehouse Directory, including
new versions incorporating a new code base which is currently being written.
There can be no assurance that the Company will continue to be successful in
these or any new or enhanced products.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
11
<PAGE> 12
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On March 5, 1997, a complaint styled Adler et al., v. Prism Solutions, Inc. et
al., Case No. CV764547, was filed by the law firm of Milberg Weiss Bershad Hynes
& Lerach LLP in Superior Court of the State of California, County of Santa
Clara, against the Company and several of its current and former officers and
directors and the underwriters of its initial public offering. The complaint, a
putative class action, was filed on behalf of those persons who purchased or
otherwise acquired the common stock of the Company from March 14 through October
14, 1996, and alleges that the defendants artificially inflated the demand for
the common stock prior to and after the initial public offering. The complaint
seeks damages in an unspecified amount. The Company believes the complaint has
no merit and intends to vigorously defend the action.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The following exhibits are filed as part of this Form 10-Q:
11.01 Computation of Net Income (Loss) per Share
27.01 Financial Data Schedule (EDGAR version only)
99.01 Report of Independent Accountants
(b) Reports on Form 8-K. No reports were filed during the quarter ended March
31, 1997.
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATED: May 9, 1997
PRISM SOLUTIONS, INC.
(Registrant)
By: /S/ WARREN M. WEISS
--------------------------------------------
Warren M. Weiss
President and Chief Executive Officer
By: /S/ EARL C. CHARLES
--------------------------------------------
Earl C. Charles
Vice President, Finance and Administration
Chief Financial Officer
13
<PAGE> 14
PRISM SOLUTIONS, INC.
INDEX TO EXHIBITS
EXHIBIT
-------
11.01 COMPUTATION OF NET INCOME (LOSS) PER SHARE
27.01 FINANCIAL DATA SCHEDULE (EDGAR VERSION ONLY)
99.01 REPORT OF INDEPENDENT ACCOUNTANTS
14
<PAGE> 1
EXHIBIT 11.01
PRISM SOLUTIONS, INC.
COMPUTATION OF NET INCOME (LOSS) PER SHARE
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------------
1996 1997
----------- -----------
(UNAUDITED)
<S> <C> <C>
Weighted average shares outstanding 4,113,069 13,943,749
Common equivalent shares pursuant to SAB No. 83 1,013,456 --
Net effect of dilutive stock options -- 76,179
----------- -----------
Average common and common stock equivalent
shares outstanding 5,126,525 14,019,928
=========== ===========
Net income (loss) $ (218) $ 143
=========== ===========
Net income (loss) per share $ (0.04) $ 0.01
=========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 5,163
<SECURITIES> 27,895
<RECEIVABLES> 10,413
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 44,250
<PP&E> 1,987
<DEPRECIATION> 0
<TOTAL-ASSETS> 47,475
<CURRENT-LIABILITIES> 10,285
<BONDS> 0
0
0
<COMMON> 14
<OTHER-SE> 37,163
<TOTAL-LIABILITY-AND-EQUITY> 47,475
<SALES> 10,196
<TOTAL-REVENUES> 10,196
<CGS> 2,408
<TOTAL-COSTS> 2,408
<OTHER-EXPENSES> 8,050
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (494)
<INCOME-PRETAX> 178
<INCOME-TAX> 35
<INCOME-CONTINUING> 143
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 143
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
<PAGE> 1
EXHIBIT 99.01
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Stockholders
Prism Solutions, Inc.
Sunnyvale, California
We have reviewed the accompanying consolidated balance sheet, statement
of operations and cash flows of Prism Solutions, Inc. and subsidiaries as of
March 31, 1997, and for the three-month period then ended. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the accompanying consolidated financial statements for
them to be in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
San Jose, California
April 14, 1997
