<PAGE> 1
United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
[ x ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the 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 0-20981
DOCUMENT SCIENCES CORPORATION
Delaware 33-0485994
- -------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or of organization) Identification No.)
6333 Greenwich Drive, Suite 200
San Diego, CA 92122
- ------------------------------- ------------
(Address of principal executive (Zip Code)
offices)
(619) 625-2000
--------------
(Registrant's telephone number, including area code)
Not applicable
--------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
periods that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes(X) No
The number of shares of the issuer's Common Stock outstanding as of April 30,
1997 was 10,762,363
<PAGE> 2
Index
DOCUMENT SCIENCES CORPORATION
<TABLE>
<CAPTION>
PAGE
NO.
---
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets---March 31, 1997 and December 31, 1996 .......... 3
Condensed consolidated statements of income---Three months ended March 31, 1997 and
1996 .................................................................................. 4
Condensed consolidated statements of cash flows---Three months ended March 31, 1997 and
1996 .................................................................................. 5
Notes to condensed consolidated financial statements .................................. 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations ............................................................................ 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ............................................. 12
Signatures ............................................................................ 13
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1-Financial Statements (Unaudited)
DOCUMENT SCIENCES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
----------- -----------
(UNAUDITED) (NOTE)
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 629,668 $ 2,465,694
Short-term investments 24,393,126 23,142,885
Accounts receivable, net 2,690,798 2,257,025
Due from affiliates 1,576,597 2,377,364
Other current assets 531,606 403,004
----------- -----------
Total current assets 29,821,795 30,645,972
Property and equipment, net 1,255,823 998,203
Other assets 352,078 377,342
----------- -----------
Total assets $31,429,696 $32,021,517
=========== ===========
LIABILITIES
Current liabilities:
Accounts payable $ 759,195 $ 698,711
Accrued liabilities 814,615 1,289,033
Deferred revenues 2,293,032 2,477,723
Current portion of obligations under capital leases 61,913 62,439
Current income tax expense payable to affiliate 311,000 311,000
----------- -----------
Total current liabilities 4,239,755 4,838,906
Obligations under capital leases 100,183 115,740
Deferred income taxes 156,500 156,500
STOCKHOLDERS' EQUITY
Common stock, $.001 par value;
Authorized---30,000,000 shares
Issued and outstanding shares --10,733,545 at March 31,
1997 and 10,722,168 at December 31, 1996 10,734 10,722
Additional paid-in-capital 25,385,084 25,382,203
Deferred compensation (323,972) (351,473)
Unrealized gain (loss) on short term investments (92,303) 13,222
Retained earnings 1,953,715 1,855,697
----------- -----------
Total stockholders' equity 26,933,258 26,910,371
----------- -----------
Total liabilities & stockholders' equity $31,429,696 $32,021,517
=========== ===========
</TABLE>
Note: The balance sheet at December 31, 1996 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. See notes to condensed consolidated financial statements.
3
<PAGE> 4
DOCUMENT SCIENCES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31,
1997 1996
---------- ----------
<S> <C> <C>
Revenue:
Initial license fees $1,783,079 $1,563,768
Annual renewal license and support fees 799,941 545,154
Services and other 1,398,915 578,932
---------- ----------
Total revenues 3,981,935 2,687,854
Cost of revenues:
Initial license fees 195,939 86,065
Annual renewal license and support fees 110,364 134,225
Services and other 407,727 138,819
---------- ----------
Total cost of revenues 714,030 359,109
---------- ----------
Gross profit 3,267,905 2,328,745
Operating expenses:
Research and development 692,686 506,063
Selling, marketing and customer support 2,141,703 1,462,507
General and administrative 648,776 340,650
---------- ----------
Total operating expenses 3,483,165 2,309,220
---------- ----------
Income (loss) from operations (215,260) 19,525
Interest income, net 286,876 5,337
---------- ----------
Income before income taxes 71,616 24,862
Provision for (benefit of) income taxes (26,400) 9,200
---------- ----------
Net income $ 98,016 $ 15,662
========== ==========
Net income per share $ 0.01 $ ---
========== ==========
Shares used in per share calculations 11,043,665 8,858,292
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
DOCUMENT SCIENCES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1997 1996
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 98,016 $ 15,662
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 80,159 53,351
Amortization of computer software costs 25,264 27,580
Amortization of deferred compensation 27,501 8,125
Provision for doubtful accounts (108,816) (1,307)
Changes in operating assets and liabilities:
Accounts receivable 475,810 1,551,921
Other current assets (128,602) (10,447)
Accounts payable 60,484 (176,741)
Accrued liabilities (474,416) (220,351)
Deferred revenue (184,691) (112,967)
----------- -----------
Net cash provided by (used for) operating activities (129,291) 1,134,826
INVESTING ACTIVITIES
Purchases of short-term investments (1,355,766) --
Purchases of property and equipment (337,779) (187,626)
Additions to computer software costs -- (88,223)
----------- -----------
Net cash used for investing activities (1,693,545) (275,849)
FINANCING ACTIVITIES
Principal payments under capital lease obligations (16,083) (14,184)
Issuance of common stock 2,893 3,527
----------- -----------
Net cash used for financing activities (13,190) (10,657)
----------- -----------
Increase (decrease) in cash and cash equivalents (1,836,026) 848,320
Cash and cash equivalents at beginning of period 2,465,694 1,271,120
----------- -----------
Cash and cash equivalents at end of period $ 629,668 $ 2,119,440
=========== ===========
Supplemental disclosure of cash flow information:
Interest paid $ 5,093 $ 4,366
=========== ===========
Capital lease obligations entered into for property and
equipment $ -- $ 97,860
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements
5
<PAGE> 6
DOCUMENT SCIENCES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 31, 1997
Note A---Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. The condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto, together with management's discussion and
analysis of financial condition and results of operations, contained in the
Annual Report to Stockholders incorporated by reference in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996. Operating
results for the three month period ended March 31, 1997 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1997.
Note B---Transactions with Affiliates
The Company has a strategic marketing alliance with Xerox Corporation (Xerox)
under which the parties have agreed to pay each other fees on referrals that
lead to the successful sale or licensing of each other's products. Included in
services and other revenue in the accompanying condensed consolidated
statements of income are commissions earned from Xerox totaling $183,600 and
$179,000 for the three months ended March 31, 1996 and 1997, respectively.
Commissions related to referrals from Xerox are included in selling and
marketing expense in the accompanying condensed consolidated statements of
income and totaled $30,100 and $39,500 for the three months ended March 31,
1996 and 1997, respectively.
The Company has distribution agreements with affiliates which provide the
affiliates with the non-exclusive right to sub-license the Company's software
in Australia, New Zealand and Canada. The terms of the distributor agreements
provide that the affiliates receive a discount from the list price of the
Company's products licensed, including maintenance and support. Revenues from
the affiliates under these agreements, net of discounts, were $69,900 and
$232,900 for the three months ended March 31, 1996 and 1997, respectively.
Included in accounts receivable are $31,300 and $227,800 from these revenues at
March 31, 1996 and 1997, respectively.
The Company has distribution agreements with affiliates which provide the
affiliates the non-exclusive right to sub-license the Company's software in
Europe. Revenues under these agreements totaled $211,400 and $479,400 for the
three months ended March 31, 1996 and 1997, respectively. Related accounts
receivable are $144,400 and $413,900 at March 31, 1996 and 1997, respectively.
Note C---Earnings per Share under FASB No. 128
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share, which is required to be adopted on December 31, 1997.
At that time, the Company will be required to change the method currently used
to compute earnings per share and to restate all prior periods. Under the new
requirements for calculating primary earnings per share, the dilutive effect of
6
<PAGE> 7
stock options will be excluded. The impact of Statement 128 on the calculation
of fully diluted earnings per share for these quarters is not expected to be
material.
Note D---Subsequent Event- Acquisition of Certain Assets
On May 9, 1997 the Company purchased substantially all of the assets of Data
Retrieval Corporation of America from the West Group. Included in the purchase
were exclusive ownership of the TextComply, Text DBMS, TextGen, TextMigrate and
Textbook software products and the installed base of commercial accounts. The
Company will retain employees responsible for the development, product support
and customer service of the software products. In addition, the Company will
continue to provide training and consulting support for existing and future
customers.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion contains certain trend analysis and other
forward-looking statements which involve risks and uncertainties. The Company's
actual results could differ materially from those anticipated in the
forward-looking statements as a result of factors, including those set forth in
this discussion under "Factors That May Affect Future Results" and other risks
detailed from time to time in the Company's SEC reports. In addition, the
discussion of the Company's results of operations should be read in conjunction
with the sections entitled "Certain Additional Business Risks" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996.
OVERVIEW
Document Sciences develops, markets and supports a family of document
automation software and services used in high volume electronic publishing
applications. The Company was incorporated in Delaware in October 1991 as a
wholly-owned subsidiary of Xerox Corporation ("Xerox"), and following the
Company's initial public offering of stock in September 1996, Xerox ownership
was reduced to approximately 63%.
RESULTS OF OPERATIONS
The following table sets forth the percentage of total revenues for certain
items in the Company's consolidated statements of income for the periods
indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1997 1996
---- ----
Revenues:
<S> <C> <C>
Initial license fees 45% 58%
Annual renewal license and support fees 20 20
Services and other 35 22
--- ---
Total revenues 100% 100%
=== ===
</TABLE>
7
<PAGE> 8
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1997 1996
------ ------
<S> <C> <C>
Cost of revenues:
Initial license fees 5% 3%
Annual renewal license and support fees 3 5
Services and other 10 5
----- -----
Total cost of revenues 18% 13%
----- -----
Gross profit 82% 87%
Operating expenses
Research and development 17 19
Selling, marketing and customer support 54 54
General and administrative 16 13
----- -----
Total operating expenses 87% 86%
----- -----
Income (loss) from operations (5) 1
Interest income, net 7 --
----- -----
Income before provision for taxes 2 1
----- -----
Provision for income taxes -- --
----- -----
Net income 2% 1%
===== =====
</TABLE>
REVENUES
The Company's revenues are divided into three categories: initial license fees,
annual renewal license and support fees, and services and other revenues.
Initial license fees are comprised principally of license fees for the first
year of use of the Company's products by end user customers. Annual renewal
license and support fees are comprised principally of mandatory fees paid by
customers annually for continued use and support of the licensed products.
Services and other revenues are comprised principally of fees for consulting,
application development and training services performed by the Company as well
as fees received from Xerox in connection with the sale of certain Xerox
printer products. The Company recognizes revenue in accordance with AICPA
Statement of Position on Software Revenue Recognition No. 91-1. Initial license
revenue is recognized upon shipment of the product to customers if no
significant Company obligations remain and collection of the receivable is
deemed probable. The portion of the initial license revenue which represents
the software support for the first year is deferred and recognized ratably over
the contract period. Revenues from commissions paid by Xerox in connection with
the sale of Xerox printer products are recognized upon installation of the
printer products. Revenues generated from consulting and training services are
recognized as the related services are performed.
Total revenues increased by 48.1% from $2.7 million for the three months ended
March 31, 1996 to $4.0 million for the three months ended March 31, 1997. This
growth was due primarily to the increases in revenues from increased consulting
services which are included in services and other.
The Company sells its products principally through a direct sales force
domestically, and internationally principally through distributors and value
added resellers ("VARS") and, to a lesser extent, through its direct sales
force. Revenues from export sales and sales through the Company's foreign
subsidiary
8
<PAGE> 9
increased 91.4% from $728,400 for the three months ended March 31, 1996 to $1.4
million for the three months ended March 31, 1997. This growth was principally
due to a more established and experienced VAR channel in Europe. Revenues from
export sales were 27% and 35% of total revenues for the three months ended
March 31, 1996 and 1997, respectively.
The Company and Xerox maintain a strategic marketing alliance agreement under
which the parties have agreed to pay each other fees on referrals that lead to
the successful licensing or sales of each other's products. The Company's
revenues from the strategic marketing alliance, principally commissions from
sales of Xerox printers, were $183,600 and $179,000 for the three months ended
March 31, 1996 and 1997, respectively. The fees received by the Company from
sales of Xerox printers under the strategic marketing alliance have little
associated costs, have had a high degree of inconsistency from quarter to
quarter and are difficult to project. Failure to continue to receive such fees
could have a material adverse effect on the Company's business, operating
results and financial condition.
The Company has entered into distributorship agreements with various Xerox
foreign affiliates to remarket the Company's products internationally. The
Company's revenues from such distributorship agreements related to the
licensing, maintenance and support of the Company's products increased 153.3%
from $281,300 for the three months ended March 31, 1996 to $712,300 for the
three months ended March 31, 1997. This increase is due principally to
substantially increased European revenues from Xerox affiliates, and to a
lesser extent, to increased sales through Xerox Canada Ltd. and Fuji Xerox
Australia.
Initial license fees. Initial license fee revenues increased 14.0% from $1.6
million for the three months ended March 31, 1996 to $1.8 million for the three
months ended March 31, 1997. The increase was due principally to sales to new
customers, expansion of the direct sales force and expansion of the Company's
indirect distribution channel, especially the VAR channel in Europe. Initial
license fees have declined as a percentage of total revenue due to customers
increasing demand for consulting services.
Annual renewal license and support fees. Revenues from annual renewal license
and support fees increased 46.7% from $545,200 for the three months ended March
31, 1996 to $799,900 for the three months ended March 31, 1997. The increase
was principally due to the larger installed base of users of the Company's
software products. As a percentage of total revenues, annual renewal license
and support fees were 20.3% and 20.1% for the three months ended March 31,
1996 and 1997, respectively.
Services and other. Revenues from services and other increased 141.6% from
$578,900 for the three months ended March 31, 1996 to $1.4 million for the
three months ended March 31, 1997. Consulting services, which is included in
services and other, represented a larger component of new customer orders in
relation to similar sales made during the first quarter of 1996.
Cost of Revenues
Total cost of revenues was 13.4% and 17.9% of total revenues for the three
months ended March 31, 1996 and 1997, respectively. The increase in cost of
revenues as a percentage of total revenues resulted primarily from increased
personnel costs associated with providing additional professional consulting
services to customers.
Cost of initial license fees. Cost of initial licenses of software includes
documentation, reproduction costs, product packaging, packaging design, product
media, employment costs for training, installation and distribution personnel
and the cost of third party software. The cost of initial licenses increased
127.7% from $86,100 for the three months ended March 31, 1996 to $195,900 for
the three months
9
<PAGE> 10
ended March 31, 1997. This increase was primarily the result of increased
payments for third party software integrated into the Company's Document
Library software products. As a percent of initial license fee revenues, the
cost of initial license fees was 5.5% and 11.0% for the three months ended
March 31, 1996 and 1997, respectively. The cost of initial license fees also
included the amortization of capitalized software development costs of $27,600
and $25,300 for the three months ended March 31, 1996 and 1997, respectively.
Cost of annual renewal license and support fees. Cost of annual renewal license
and support fees consists primarily of employment-related costs for the
Company's technical support staff, which performs technical software support
services. These costs decreased $23,800 from $134,200 for the three months
ended March 31, 1996 to $110,400 for the three months ended March 31, 1997. As
a percentage of annual renewal license and support fee revenues, these costs
were 24.6% and 13.8% for the three months ended March 31, 1996 and 1997,
respectively. This decrease is attributed to a more experienced and efficient
technical support staff.
Cost of services and other. Cost of services and other consists principally of
the employment-related costs for the Company's staff of product consultants and
trainers. There are little or no costs related to commissions from the sale of
Xerox printers under the strategic marketing alliance. Cost of services and
other revenue increased 193.7% from $138,800 for the three months ended March
31, 1996 to $407,700 for the three months ended March 31, 1997. The costs of
services and other represented 24.0% and 29.1% of the related revenues for the
three months ended March 31, 1996 and 1997, respectively. The increase in cost
of services and other revenues resulted principally from the additional costs
related to the Company providing increased professional consulting services.
Research and development. Research and development expenses consist primarily of
the employment-related costs of personnel associated with developing new
products, enhancing existing products, testing software products and developing
product documentation. The Company expenses all costs for research and
development of new products until technological feasibility has been assured.
Thereafter, costs of production are capitalized until general release of the
product. The capitalized costs of software production are amortized using the
greater of the amount computed using the ratio of current product revenues to
estimated total product revenues or the straight-line method over the remaining
estimated economic lives of the products. The Company capitalized $88,200 of
software costs for the three month period ended March 31, 1996. The Company did
not capitalize any software costs for the three month period ended March 31,
1997. Research and development expenses increased 36.9% from $506,100 for the
three months ended March 31, 1996 to $692,700 for the three months ended March
31, 1997. The increase in these expenses resulted principally from the expansion
of the engineering staff and related costs.
Selling, marketing and customer support. Selling, marketing and customer support
expenses consist primarily of salaries, commissions, marketing programs and
related costs for pre- and post sales activity. These expenses increased 46.4%
from $1.5 million for the three months ended March 31, 1996 to $2.1 million for
the three months ended March 31, 1997. The growth of these expenses was due
principally to increased sales, sales support and marketing personnel and
related costs and commissions associated with increased revenues and increased
marketing programs.
General and administrative. General and administrative expenses consist
primarily of employment-related costs for finance, administration and human
resources, and general corporate management and services. These expenses
increased 90.5% from $340,700 for the three months ended March 31, 1996 to
$648,800 for the three months ended March 31, 1997. These expenses represented
12.7% and 16.3% of the total revenues for the three months ended March 31, 1996
and 1997, respectively. The increase in
10
<PAGE> 11
general and administrative expenses in absolute dollars was the result of
growth in the finance and administrative operations of the Company and
increased expenses associated with being a publicly traded company. The
Company expects general and administrative expenses to increase for the
remainder of the year in order to support the growth of the Company.
Interest and other income (expense), net. Interest and other income is primarily
composed of interest income from cash and cash equivalents and short term
investments offset by financing charges related to equipment leases and other
debt. Interest and other income increased from $5,300 for the three months ended
March 31, 1996 to $286,900 for the three months ended March 31, 1997. The
increase in dollar amount is primarily due to higher cash balances resulting
from the infusion of cash from the Company's initial public offering of common
stock completed in September 1996.
Provision for and (benefit of) income taxes. From its inception to September
20, 1996, the Company's taxes were included in the consolidated tax returns of
Xerox Corporation. For reporting purposes, the Company recognized income tax
expense on pretax income at the tax rates in effect as if the Company were
filing tax returns on a stand-alone basis. For the three months ended March
31, 1997, the Company has recognized a tax benefit as a result of non taxable
municipal bond interest received during the period.
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
The Company's total revenues and operating results have varied, sometimes
substantially, from quarter to quarter and are expected to vary significantly in
the future. The Company's revenues and operating results are difficult to
forecast. Future results will depend upon many factors, including the demand for
the Company's products, the level of product and price competition, the length
of the Company's sales cycle, the size and timing of individual license
transactions, the delay or deferral of customer implementations, the budget
cycles of the Company's customers, the Company's success in expanding its direct
sales force and indirect distribution channels, the timing of new product
introductions and product enhancements by the Company and its competitors, the
mix of products and services sold, levels of international sales, activities of
and acquisitions by competitors, the timing of new hires, changes in foreign
currency exchange rates, the ability of the Company to develop and market new
products and control costs, and general domestic and international economic
conditions. In addition, the Company's sales generally reflect a relatively high
amount of revenues per order, and the loss or delay of individual orders,
therefore, could have a significant impact on revenues and quarterly operating
results of the Company. In addition, a significant amount of the Company's
revenues occur predominantly in the third month of each fiscal quarter and tend
to be concentrated in the latter half of that third month.
The Company's software products generally are shipped as orders are received.
As a result, initial license revenues in any quarter are substantially
dependent on orders booked and shipped in that quarter. The timing of receipt
of initial license revenue is difficult to predict because of the length of the
Company's sales cycle, which is typically three to twelve months from the
initial contact. Because the Company's operating expenses are based on
anticipated revenue trends and because a high percentage of the Company's
expenses are relatively fixed, a delay in the recognition of revenue from a
limited number of initial license transactions could cause significant
variations in operating results from quarter to quarter and could result in
losses. To the extent such expenses precede, or are not subsequently followed
by, increased revenues, the Company's operating results would be materially
adversely affected.
Due to the foregoing factors, revenues and operating results for any quarter
are subject to significant variation, and the Company believes that
period-to-period comparisons of its results of operations are not necessarily
meaningful and should not be relied upon as indications of future performance.
11
<PAGE> 12
LIQUIDITY AND CAPITAL RESOURCES
In September 1996, the Company completed an initial public offering of its
common stock. In October 1996 the Underwriters of the offering exercised their
over allotment option. The net proceeds received by the Company from the
offering were approximately $23.3 million.
The Company's cash and cash equivalents and short-term investments totaled
$25.0 million at March 31, 1997, representing 79.6% of total assets. Net cash
used by operating activities for the three months ended March 31, 1997 was
$129,300 and was primarily the result of reductions in deferred revenue and
accrued liabilities. The Company intends to continue to invest in short-term,
interest-bearing, investment grade securities.
For the three months ended March 31, 1997, the Company's investing activities
used cash of $1.7 million primarily for purchases of short-term investments and
for computer equipment and fixed assets required to support the growth of the
Company.
The Company's current line of credit allows for borrowings up to $2.5 million
at the bank's prime rate and expires in July 1997. As of March 31, 1997, the
Company had no outstanding borrowings under its line of credit.
With the exception of plans to undertake capital spending to expand the
corporate facilities in the second quarter of 1997, the Company has no
significant capital spending or purchase commitments other than normal purchase
commitments and commitments under facilities and capital leases.
The Company believes that its existing cash balances, anticipated cash flows
from operations and its bank line of credit will be sufficient to meet its
anticipated cash needs for working capital and capital expenditures for at
least the next twelve months.
On May 9, 1997, the Company purchased substantially all of the assets of Data
Retrieval Corporation of America from the West Group. Included in the purchase
were exclusive ownership of the TextComply, TextDBMS, TextGen, TextMigrate and
TextBook software products along with the installed customer base and certain
fixed assets. In the future a portion of the Company's cash could be used to
acquire or invest in additional complementary businesses or products or obtain
the right to use complementary technologies. The Company is currently
evaluating, in its ordinary course of business, potential investments in and/or
strategic acquisitions of certain businesses, products or technologies.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K 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.
Document Sciences Corporation
-----------------------------
(Registrant)
Date: May 14, 1997 /S/ Barbara Amantea
- ------------------- --------------------------------
Barbara Amantea, Vice President,
Chief Financial Officer (Duly
Authorized and Principal
Financial Officer)
EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
27 Financial Data Schedule
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 629,668
<SECURITIES> 24,393,126
<RECEIVABLES> 4,385,689
<ALLOWANCES> (118,204)
<INVENTORY> 33,800
<CURRENT-ASSETS> 29,821,795
<PP&E> 1,836,362
<DEPRECIATION> (580,539)
<TOTAL-ASSETS> 31,429,696
<CURRENT-LIABILITIES> 4,239,755
<BONDS> 0
0
0
<COMMON> 10,734
<OTHER-SE> 26,922,524
<TOTAL-LIABILITY-AND-EQUITY> 31,429,696
<SALES> 2,583,020
<TOTAL-REVENUES> 3,981,935
<CGS> 306,303
<TOTAL-COSTS> 714,030
<OTHER-EXPENSES> 3,304,573
<LOSS-PROVISION> 178,592
<INTEREST-EXPENSE> 5,093
<INCOME-PRETAX> 71,616
<INCOME-TAX> 26,400
<INCOME-CONTINUING> 98,016
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 98,016
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
