<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934
FOR THE QUARTER ENDED APRIL 30, 1997
0-22369
COMMISSION FILE NUMBER
BEA SYSTEMS, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 77-0394711
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
385 MOFFETT PARK DRIVE, SUNNYVALE, CALIFORNIA 90489
(Address of Principal Executive Office)
(408) 743-4000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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_____ No__X___
The number of shares outstanding of each of the issuer's classes of common
equity, as of June 1, 1997 was: Common Stock, 25,077,239 shares; Class B Common
Stock, 30,475,881 shares.
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BEA SYSTEMS, INC.
FORM 10-QSB
QUARTER ENDED APRIL 30, 1997
CONTENTS
PART I-FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of April 30, 1997
and January 31, 1997 3
Condensed Consolidated Statements of Operations for
the Three Months Ended April 30, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended April 30, 1997 and 1996 5
Notes to Condensed Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9-13
PART II-OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
2
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BEA SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
April 30, January 31,
1997 1997
(Unaudited)
ASSETS
Current assets
Cash and cash equivalents $6,541 $3,283
Accounts receivable, net of allowance
for doubtful accounts of $1,200 at
April 30, and $1,095 at January 31, 1997 30,675 24,778
Other current assets 8,085 3,083
-------- --------
Total current assets 45,301 31,144
Property and equipment, net 6,900 6,648
Acquired intangible assets, net 18,715 17,226
Other assets 2,444 2,955
-------- --------
Total assets $73,360 $57,973
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Borrowings under line of credit $4,455 $9,050
Accounts payable 3,838 3,488
Accrued payroll and related liabilities 7,210 6,597
Accrued sales tax 2,277 1,573
Other accrued liabilities 8,382 6,357
Other current liability 7,986 -
Deferred revenue 8,315 8,697
Current portion of long-term debt
& capital lease obligations 25,462 28,180
-------- --------
Total current liabilities 67,925 63,942
Long-term debt and capital lease obligations 50,012 49,540
Commitments - -
Series B redeemable convertible preferred stock, - 20,780
Stockholders' deficit:
Series A preferred stock - 17
Common stock 25 11
Class B common stock 30 -
Additional paid-in capital 84,461 32,335
Notes receivable from stockholders (544) (544)
Deferred compensation (784) (845)
Cumulative translation adjustment 211 74
Accumulated deficit (127,976) (107,337)
-------- --------
Stockholders' deficit (44,577) (76,289)
-------- --------
Total liabilities and stockholders' deficit $ 73,360 $ 57,973
======== ========
See accompanying notes
3
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BEA SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for per share data)
(Unaudited)
Three months ended
April 30,
1997 1996
Revenues
License $24,478 $5,484
Service 5,911 1,367
-------- --------
Total revenues 30,389 6,851
-------- --------
Cost of revenues
License 3,181 2,036
Service 3,854 458
-------- --------
Total cost of revenues 7,035 2,494
-------- --------
Gross margin 23,354 4,357
Operating expenses
Research and development 5,143 3,097
Sales and marketing 15,917 3,912
General and administrative 3,611 2,579
Write-off of in-process research
and development 16,000 60,948
-------- --------
Total operating expenses 40,671 70,536
-------- --------
Loss from operations (17,317) (66,179)
Other income (expense) (517) (117)
Interest expense (1,965) (1,117)
-------- --------
Loss before provision for income taxes (19,799) (67,413)
Provision for income taxes 572 38
-------- --------
Net loss $(20,371) $(67,451)
======== ========
Pro forma net loss per share
Net loss per share $(0.40) $(1.35)
======== ========
Shares used in computing pro forma
net loss per share 50,710 50,013
======== ========
See accompanying notes
4
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BEA SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three months ended
April 30,
1997 1996
OPERATING ACTIVITIES
Net Loss $(20,371) $(67,451)
Adjustments to reconcile net loss to cash
used in operating activities:
Depreciation 583 829
Amortization of deferred compensation 61 -
Loss on sale of assets 255 -
Amortization of intangible assets
acquired and write-off of in process
research and development 18,660 62,871
Changes in assets and liabilities:
Accounts receivable (5,897) (1,154)
Prepaid expenses and other current assets 748 (408)
Other assets 511 (250)
Accounts payable 350 97
Accrued payroll and related liabilities 613 635
Other accrued liabilities 1,569 22
Sales & use taxes payable 704 184
Other current liabilities (2,849) -
Deferred revenue (382) 837
------- -------
Net cash used in operating activities (5,442) (3,788)
------- -------
INVESTING ACTIVITIES
Acquisition of property and equipment (79) (791)
------- -------
Net cash used in investing activities (79) (791)
------- -------
FINANCING ACTIVITIES
Net payments on line of credit (4,595) -
Proceeds from long term debt 3,500 845
Payments on long term debt and capital
lease obligations (16,014) -
Proceeds from issuances of stock 25,754 5,001
------- -------
Net cash provided by financing activities 8,645 5,846
------- -------
Net increase in cash and cash equivalents 3,121 1,267
Cumulative translation adjustment 137 -
Cash and cash equivalents at the beginning
of the period 3,283 4,549
------- -------
Cash and cash equivalents at end of period $ 6,541 $ 5,816
======= =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 1,762 $ -
======= =======
Cash paid for income taxes $ 76 $ -
======= =======
Notes issued to acquire businesses $13,985 $77,301
======= =======
Line of credit converted to common stock $ 4,561 $ -
======= =======
Incurrence of capital lease obligations
related to acquisition of equipment $ 580 $ -
======= =======
5
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BEA SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The accompanying unaudited consolidated financial statements of BEA Systems,
Inc. (the "Company"), include all adjustments (consisting only of normal
recurring items) which, in the opinion of management, are necessary for a fair
presentation of financial position, results of operations and cash flows. These
financial statements should be read in conjunction with the Management's
Discussion and Analysis of Financial Condition and Results of Operations and the
audited financial statements for the fiscal year ended January 31, 1997 included
in the Company's Registration Statement on Form SB-2 (Registration Statement
File No. 333-20791) and related prospectus for the Company's initial public
offering of its Common Stock, which was completed in April, 1997.
The results of operations for interim periods are not necessarily indicative of
results to be expected for a full year.
Note 2. Net Loss Per Share
Except as noted below, net loss per share is computed using the weighted
average number of shares of common stock outstanding during the period.
Common stock equivalents relating to stock options, the convertible preferred
stock and the convertible line of credit are excluded from the computation as
their effect is antidilutive. However, for the quarter ended April 30,1996,
the calculation includes those common equivalent shares required by the
Securities and Exchange Commission's staff accounting bulletins and
guidelines. Per share information calculated on the above noted basis is as
follows:
Three months ended
April 30,
1997 1996
Net loss per share $(1.02) $(2.44)
======= =======
Shares used in calculating net loss per share (in thousands) 20,323 27,822
======= =======
For the quarter ended April 30, 1996, the pro forma net loss per share has
been computed as described above and also gives effect, pursuant to SEC
policy, to common equivalent shares from convertible preferred stock issued
more than twelve months prior to the initial public offering and converted
upon completion of the offering.
For the quarter ended April 30, 1997, the pro forma net loss per share gives
effect to common equivalent shares from the convertible preferred stock and
the convertible line of credit.
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share" (EPS). The Statement is effective for both
interim and annual financial statements for periods ending after December 15,
1997. Under the Statement, primary EPS computed in accordance with Accounting
Principle Board Opinion No. 25 will be replaced with a new simpler
calculation called "basic EPS" and the Company will be required to restate
comparative EPS amounts for all prior periods. Under the new requirements,
basic loss per share for the three months ended April 30, 1997 would be
unchanged from the loss per share of $1.02 presented above. For the quarter
ended April 30, 1996, the basic loss per share under the new requirements
would be $8.15 based on weighted average shares outstanding of 8,289,000.
6
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BEA SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 3. Transaction with Digital Equipment Corporation ("DEC")
On March 26, 1997, the Company completed an agreement with DEC to acquire
exclusive worldwide rights to MessageQ, ObjectBroker and other related
products from DEC. The purchase price (including direct acquisition costs)
was approximately $19.8 million. Of the aggregate consideration for the
products, $5 million is payable in cash ($2 million was paid during the
quarter ended April 30, 1997, and $3 million is due on June 20, 1997), and
aggregate payments of $17 million pursuant to a convertible promissory note.
Interest was imputed at 8% which results in the recorded liability of
approximately $14 million. The promissory note provides for payments of $2
million, $4 million and $11 million payable on or before February 1, 1998,
1999 and 2000, respectively. Each installment may be converted into shares
of the Company's Common Stock, at the option of DEC, at a conversion price of
$9.00, $10.80 and $15.00 per share, respectively. Of the final installment
of $11 million, only $5 million is convertible. In addition, the Company has
granted DEC a warrant to purchase 500,000 shares of Common Stock at a price
of $6.00 per share, exerciseable for a one year period, commencing in
October, 1997.
Note 4. Initial Public Offering
During the quarter ended April 30, 1997, the Company successfully completed
its initial public offering (the "Offering"). The Offering generated net
proceeds of approximately $25.6 million from the sale of 5,000,000 shares of
Common Stock. Subsequent to the end of the quarter, the Company's
underwriters exercised a portion of the over-allotment option, generating net
proceeds of approximately $2.1 million from the sale of 372,633 shares of
Common Stock. The proceeds from the Offering have been used to fund
scheduled payments on the Novell note payable, reduce the balance of the
revolving credit arrangement, and fund operating activities.
Concurrent with the closing of the Offering, the holders of all of the Series
A and Series B Preferred Stock converted their shares into the Company's
Common Stock and Class B Common Stock. The conversion of the Series A and
Series B Preferred Stock and the convertible line of credit resulted in the
issuance of 7,870,000 shares of Common Stock and 30,475,881 shares of Class B
Common Stock.
7
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BEA SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 5. Notes Payable and Capital Lease Obligations
Notes Payable and capital lease obligations consist of the following:
April 30, January 31,
1997 1997
Subordinated notes payable to founders of an acquired
company. The notes were due upon the completion of
the initial public offering, and were paid on May 1,
Accrued interest of $524 and $430 was included
at April 30, 1997 and January 31, 1997, respectively. $ 4,683 $ 4,589
Note payable to Novell 54,505 69,900
Note payable to DEC (See Note 3). The balance at April
30, 1997 includes accrued interest of $109. 14,094 -
Credit arrangement from the Company's majority stock-
holder. During the quarter ended April 30, 1997, an
additional $3.5 million was borrowed. Upon the
completion of the public offering, the aggregate
principal balance of $4.5 million plus the accrued
interest of approximately $61,000 was converted into
817,334 shares of Common Stock. - 1,000
Note payable to the former shareholders of Bay
Technologies Pty., Ltd. 820 928
Other notes payable 38 79
Capital lease obligations 1,334 1,004
------- -------
75,474 77,720
Less amounts due within one year (25,462) (28,180)
------- -------
Long-term debt and capital lease obligations $50,012 $49,540
======= =======
8
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF THE COMPANY SHOULD BE READ IN CONJUNCTION WITH THE MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS AND
THE CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES THERETO INCLUDED IN THE
COMPANY'S REGISTRATION STATEMENT ON FORM SB-2(REGISTRATION STATEMENT FILE NO.
333-20791) AND RELATED PROSPECTUS FOR THE COMPANY'S INITIAL PUBLIC OFFERING
OF ITS COMMON STOCK, WHICH WAS COMPLETED IN APRIL, 1997. THIS DISCUSSION
CONTAINS FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE
SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED. FORWARD LOOKING STATEMENTS INCLUDE, BUT ARE
NOT LIMITED TO, STATEMENTS REGARDING THE SUFFICIENCY OF THE COMPANY'S CURRENT
CASH BALANCES, BORROWINGS AVAILABLE UNDER ITS LINES OF CREDIT, CASH FLOW FROM
OPERATIONS TO MEET ITS WORKING CAPITAL REQUIREMENTS AND FUTURE AMORTIZATION
AND OTHER EXPENSE LEVELS. THESE STATEMENTS INVOLVE RISKS AND UNCERTAINTIES
AND ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED IN THE
FORWARD LOOKING STATEMENTS. FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY INCLUDE RISKS AND UNCERTAINTIES SUCH AS DIFFICULTY IN INTEGRATING
NEW OR RECENTLY ACQUIRED BUSINESSES OR PRODUCTS, LACK OF MARKET ACCEPTANCE OF
COMMERCIAL MIDDLEWARE TECHNOLOGY AND SOLUTIONS, DELAYS IN CUSTOMER ORDERS,
COMPETITION FROM NEW OR EXISTING COMMERCIAL MIDDLEWARE PROVIDERS OR IN-HOUSE
SOLUTIONS, EXPENSES AND NON-CASH CHARGES IN CONNECTION WITH ACQUISITIONS,
FAILURE TO EFFECTIVELY MANAGE ANTICIPATED GROWTH, FAILURE TO RAISE CASH
SUFFICIENT TO SATISFY FUTURE PAYMENT OBLIGATIONS AND CAPITAL NEEDS AND
IMPAIRMENT OF THE VALUE OF CAPITALIZED INTANGIBLE ASSETS. READERS SHOULD ALSO
REFER TO THE RISK DISCLOSURES OUTLINED IN BEA'S REGISTRATION STATEMENT (NO.
333-20791) FILED IN CONNECTION WITH ITS IPO. ALL FORWARD-LOOKING STATEMENTS
AND REASONS WHY RESULTS MIGHT DIFFER INCLUDED IN THIS FORM 10-QSB ARE MADE AS
OF THE DATE HEREOF, BASED ON INFORMATION AVAILABLE TO BEA AS OF THE DATE
HEREOF, AND BEA ASSUMES NO OBLIGATION TO UPDATE ANY SUCH FORWARD-LOOKING
STATEMENT OR REASON WHY RESULTS MIGHT DIFFER.
CONSOLIDATED RESULTS OF OPERATIONS FOR THE QUARTERS ENDED APRIL 30, 1997 AND
1996
The Company acquired TUXEDO from Novell during the quarter ended April 30,
1996. During the remainder of the year ended January 31, 1997, the Company
acquired additional technologies as well as acquired and further established
distribution channels for the Company's products and services. Therefore,
the Company's operations have experienced significant growth.
Revenues
The Company's revenues are derived primarily from fees for software licenses and
to a lesser extent from services. The Company's revenues were $30.4 million and
$6.9 million for the fiscal quarters ended April 30, 1997 and 1996,
respectively.
International revenues, which the Company defines as revenues from sales to
customers outside the United States, accounted for 51% and 15% of total revenues
in the fiscal quarters ended April 30, 1997 and 1996, respectively. The
increase was due primarily to the Company's opening of local subsidiaries
throughout Europe and Asia as well as its acquisition of USL France in May
1996.
License Revenues. License revenues were $24.5 million and $5.5 million for the
fiscal quarters ended April 30, 1997 and 1996, respectively, representing 81%
and 80% of total revenues in the respective periods. The increase in dollar
amount was primarily due to the impact of the acquisitions as well as additional
market acceptance of BEA TUXEDO and related products.
Service Revenues. Service revenues were $5.9 million and $1.4 million for
the fiscal quarters ended April 30, 1997 and 1996, respectively, representing
19% and 20% of total revenues in the respective periods. The increase in
dollar amount was primarily due to the increase in consulting, training and
maintenance fees associated with the increased sales of the Company's
software licenses.
9
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Cost Of Revenues
Cost of Licenses. Cost of licenses consists primarily of amortization of
certain intangible assets related to acquisitions as well as product media,
product duplication and shipping. Cost of licenses totaled $3.2 million and
$2.0 million for the fiscal quarters ended April 30, 1997 and 1996,
respectively, representing 13% and 37% of license revenues, respectively. The
increase in absolute dollars was due primarily to the Company's acquisitions
and the amortization of intangibles related to those acquisitions. The
decrease as a percentage of revenues was due primarily to the substantial
increase in license revenues during the period. Amortization of intangible
assets resulted from certain acquisitions during the fiscal years ended
January 31, 1997 and 1996; and the acquisition of certain software products
developed by Digital in the quarter ended April 30, 1997. Amortization of
certain intangible assets included in cost of licenses totaled $2.6 million
and $1.6 million in the fiscal quarters ended April 30, 1997 and 1996,
respectively. In the future, amortization of intangible assets acquired
through April 30, 1997 is expected to total $2.8 million per quarter for the
rest of the fiscal year ending January 31, 1998; $6.6 million for the fiscal
year ended January 31, 1999; and $2.4 million for the remaining balance of
intangible assets through the fiscal year ended January 31, 2002. To the
extent future events result in the impairment of any capitalized intangible
assets, these amortization expenses would be accelerated.
Cost of Services. Cost of services consists primarily of personnel-related
costs incurred in providing consulting services, training and maintenance to
customers. Cost of services were $3.9 million and $458,000 for the fiscal
quarters ended April 30, 1997 and 1996, respectively, representing 65% and 33%
of total service revenues for each period, respectively. The increase in
absolute dollars was due primarily to the Company's growing customer base and
increased operating activity resulting from such growth. The increase in costs
as a percentage of related service revenues for the fiscal quarter ended April
30, 1997 over the same period in 1996 is the result of the hiring of additional
consulting and support personnel in response to an anticipated increase in the
number of customers. The Company has also invested substantial resources in a
worldwide Customer Support organization to provide a high level of maintenance
service to the Company's customers.
Operating Expenses
Research and Development. Research and development expenses include engineering
personnel and related expenses, as well as consulting costs associated with new
product development and enhancement of existing products. Research and
development expenses were $5.1 million and $3.1 million for the fiscal quarters
ended April 30, 1997 and 1996, respectively, representing 17% and 45% of total
revenues in each period, respectively. The increase in dollar amount was due to
an increase in personnel and related expenses, including a significant increase
in such expenses resulting from the acquisition of TUXEDO. The decrease in
research and development expenses as a percentage of total revenues was
primarily due to the substantial increase in revenues. The Company expects that
the dollar amount of research and development expenses will continue to increase
as the Company continues to commit substantial resources to product development
and engineering in future periods.
10
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Sales and Marketing. Sales and marketing expenses include salaries,
commissions, advertising, direct mail, seminars, public relations, trade shows,
travel and other related selling and marketing expenses. Sales and marketing
expenses were $15.9 million and $3.9 million for the fiscal quarters ended April
30, 1997 and 1996, respectively, representing 52% and 57% of total revenues for
each period, respectively. The increase in absolute dollars was due primarily to
the expansion of the Company's direct sales force and an increase in marketing
personnel and activities. The Company believes that the dollar amount of sales
and marketing expenses will continue to increase as the Company expands its
sales and marketing organization.
General and Administrative. General and administrative expenses include
personnel costs for administration, finance, human resources, information
technology and general management, as well as amortization of goodwill related
to certain acquisitions. General and administrative expenses were $3.6 million
and $2.6 million for the fiscal quarters ended April 30, 1997 and 1996,
respectively, representing 12% and 38% of total revenues for each period,
respectively. The increase in dollar amount was attributed to the expansion of
the Company's general and administrative staff and associated expenses necessary
to manage and support the Company's growth. The decrease in general and
administrative expenses as a percentage of total revenues was primarily due to
the substantial increase in revenues. The Company expects that the dollar amount
of general and administrative expenses will continue to increase in the future
as the Company expands its staffing and incurs higher costs associated with
being a public company. Amortization of goodwill totaled $57,000 and $47,000 in
the quarters ended April 30, 1997 and 1996, respectively. Amortization of
goodwill is expected to total $77,300 per quarter for the rest of the fiscal
year ending January 31, 1998 and $1.0 million for the remaining balance of
intangible assets through the fiscal year ended January 31, 2003. To the extent
future events result in the impairment of goodwill, these amortization expenses
would be accelerated.
Write-Off of In-Process Research and Development. As a result of the
acquisitions of TUXEDO from Novell in the quarter ending April 30, 1996 and
MessageQ, ObjectBroker and other related products from Digital Equipment Corp.
in the quarter ending April 30, 1997, the Company has acquired a number of
projects and products that had not reached technological feasibility at the date
of purchase. Accordingly, such costs ($16.0 million in the current quarter and
$60.9 million in the quarter ended April 30, 1996) were included in research
and development expense in the period incurred. There can be no assurance that
the Company will be successful in completing the development of such in-process
research and development or that development efforts will result in viable
products.
Provision For Income Taxes
The Company has experienced operating losses to date. The Company has
incurred income tax expense of $572,000 and $38,000 for the fiscal quarters
ended April 30, 1997 and 1996, respectively. The income tax expense is
comprised primarily of foreign withholding tax and, to a lesser extent,
foreign income tax expense incurred as a result of local country profits.
11
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LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has financed its operations, and acquisitions of
subsidiaries and the distribution rights to TUXEDO, primarily through a
public sale of securities of approximately $26 million, the private sale of
equity securities of approximately $51 million, notes payable of
approximately $95 million, equipment financing under capital leases of
approximately $1.6 million, borrowings under a revolving credit arrangement,
and an unsecured credit arrangement of approximately $4.5 million with the
Company's majority stockholder.
During the quarter ended April 30, 1997, the Company successfully completed
its initial public offering of securities. The offering generated net
proceeds of approximately $25.6 million from the sale of 5,000,000 shares of
Common Stock. Subsequent to the end of the quarter, the underwriters
exercised a portion of their over-allotment option, generating additional net
proceeds of approximately $2.1 million from the sale of 372,633 shares of
Common Stock. The proceeds from the offering have been used to fund
scheduled payments on the Novell note payable, reduce the balance of the
revolving credit arrangement, and fund operating activities.
Under the terms of the revolving credit arrangement, the Company has the
ability to borrow up to $20 million and borrowing availability is based on a
percentage of certain accounts receivable. At April 30, 1997, the Company
had borrowed approximately $4.5 million and had an additional borrowing
capability of $3.9 million. The credit arrangement is collateralized by the
assets of the Company. The credit arrangement bears interest at the LIBOR
rate plus 5.125% (10.755% in aggregate at April 30, 1997) and is scheduled to
expire in April 1998.
Under the terms of the unsecured credit arrangement with the Company's
majority stockholder, the Company had the ability to borrow up to $10
million. At January 31, 1997, the Company had borrowed $1 million. During
the quarter ended April 30, 1997, the Company borrowed an additional $3.5
million. Upon the completion of the Company's initial public offering in
April 1997, the principal balance of $4.5 million plus the accrued interest
was converted into Common Stock.
As of April 30, 1997, the balance of the note payable to Novell was $54.5
million. Scheduled payments for the next twelve months are $23.0 million, in
aggregate.
At April 30, 1997, the note payable to Digital Equipment Corp. ("DEC") (see
Note 3 to the accompanying financial statements) had a balance of $14.1
million. The scheduled payment during the next twelve months is $2 million,
due in February 1998. The payment is convertible into Common Stock at DEC's
option. Additionally, $3 million not related to the note, is due on June 20,
1997.
12
<PAGE>
During the quarters ended April 30, 1997 and 1996, the Company used
approximately $79,000 and $791,000, respectively, of cash to purchase property
and equipment, primarily for leasehold improvements, computers, furniture and
other office equipment. The Company also acquired equipment with a cost of
approximately $580,000 under a capital lease line of credit during the quarter
ended April 30, 1997. The Company has a remaining credit limit of $420,000
under this lease line of credit. As of April 30, 1997, the Company had no
material commitments for capital expenditures.
Due to the relatively large dollar size of individual sales and the fact that a
substantial portion of the Company's accounts receivable from license revenues
have been generated within the last weeks of each quarter, the Company has
experienced significant fluctuations in its average days sales outstanding. The
Company believes that such fluctuations will continue in the future and will
continue to affect its liquidity, working capital and financial condition.
A significant portion of the Company's business is conducted in currencies other
than the U.S. dollar (the currency in which its financial statements are
stated), primarily the Japanese yen, the German mark, the French franc and the
British pound. As a result, appreciation in the value of these currencies
relative to the U.S. dollar could adversely affect operating results. Foreign
currency transaction gains and losses arising from normal business operations
are credited to or charged against operations in the period incurred. As a
result, fluctuations in the value of the currencies in which the Company
conducts its business relative to the U.S. dollar have caused and will continue
to cause currency transaction gains and losses. The Company is currently
establishing a program to reduce its foreign currency exposure. However, there
can be no assurance that the Company will not continue to experience currency
losses in the future, nor can the Company predict the effect of future exchange
rate fluctuations on future operating results.
At April 30, 1997, the Company had $6.5 million in cash and cash equivalents
and a working capital deficit of $22.6 million. Management believes the
Company will need to obtain additional equity or debt financing to service
the Company's short-term financing needs. The Company is currently in
negotiation to secure additional lines of credit. The Company believes that
the current cash balance plus the cash available under its existing and
expected lines of credit will be sufficient to meet its working capital
requirements through January 31, 1998. Although operating activities may
provide cash in certain periods, to the extent that the Company experiences
growth in the future, the Company anticipates that its operating and
investing activities may use cash. There can be no assurance that additional
financing will be available or, if available, that it will be on terms
satisfactory to the Company.
13
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BEA SYSTEMS, INC.
APRIL 30, 1997 FORM 10-QSB
PART II-OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
Concurrent with the closing of the Company's initial public offering, the
holders of all of the Series A and Series B Preferred Stock converted their
shares into the Company's Common Stock and Class B Common Stock. The conversion
of the Series A and Series B Preferred Stock and the convertible line of credit
resulted in the issuance of 7,870,000 shares of Common Stock and 30,475,881
shares of Class B Common Stock.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
The following exhibits are filed by attachment to this Form 10-QSB:
Exhibit
Number Description of Exhibit
- ------- ----------------------
11 Statement re: computation of earnings per share
27 Financial Data Schedule
14
<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.
Dated: June 12, 1997
BEA Systems, Inc.
- -------------------------
(Registrant)
By: /s/ Steve L. Brown
----------------------
Steve L. Brown
Executive Vice President and Chief Financial Officer
(Duly Authorized Officer and Principal Financial Officer)
15
<PAGE>
EXHIBIT 11
BEA SYSTEMS, INC.
APRIL 30, 1997 FORM 10-QSB
COMPUTATION OF NET LOSS PER SHARE
(in thousands, except for per share amounts)
<TABLE>
<CAPTION>
Three months ended
April 30,
1997 1996
<S> <C> <C>
Net Loss Per Share:
Weighted average common shares outstanding for the period 20,323 8,289
Common equivalent shares pursuant to Staff Accounting Bulletin
Nos. 64 and 83 - 19,533
-------- --------
Shares used in historical per share computation 20,323 27,822
======== ========
Net loss $(20,371) $(67,451)
Cumulative dividends on Series B redeemable convertible
preferred stock (268) (119)
-------- --------
Net loss applicable to common stockholders $(20,639) $(67,750)
======== ========
Net loss per share $ (1.02) $ (2.44)
======== ========
Pro Forma Net Loss Per Share:
Shares used in historical per share computation 20,323 27,822
Common equivalent shares assuming conversion of preferred stock 29,969 22,200
Common equivalent shares assuming conversion of convertible
line of credit 418 -
-------- --------
Shares used in per share computation 50,710 50,013
======== ========
Net loss $(20,371) $(67,451)
======== ========
Pro forma net loss per share $ (0.40) $ (1.35)
======== ========
</TABLE>
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE FINANCIAL STATEMENTS INCLUDED IN THIS FORM 10-QSB 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> JAN-31-1998
<PERIOD-START> FEB-01-1997
<PERIOD-END> APR-30-1997
<CASH> 6,541
<SECURITIES> 0
<RECEIVABLES> 31,875
<ALLOWANCES> 1,200
<INVENTORY> 0
<CURRENT-ASSETS> 45,301
<PP&E> 8,765
<DEPRECIATION> 1,865
<TOTAL-ASSETS> 73,360
<CURRENT-LIABILITIES> 67,925
<BONDS> 50,012
0
0
<COMMON> 55
<OTHER-SE> (44,632)
<TOTAL-LIABILITY-AND-EQUITY> 73,360
<SALES> 24,478
<TOTAL-REVENUES> 30,389
<CGS> 3,181
<TOTAL-COSTS> 7,035
<OTHER-EXPENSES> 21,143
<LOSS-PROVISION> 165
<INTEREST-EXPENSE> 1,965
<INCOME-PRETAX> (19,799)
<INCOME-TAX> 572
<INCOME-CONTINUING> (20,371)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (20,371)
<EPS-PRIMARY> (0.40)
<EPS-DILUTED> 0
</TABLE>
