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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): DECEMBER 3, 1998
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MICROMUSE INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
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<S> <C> <C>
California 000-23783 94-3288385
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
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<S> <C>
139 Townsend Street, San Francisco, California 94107
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(Address of Principal Executive Offices) (Zip Code)
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Registrant's telephone number, including area code (415) 538-9090
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Same
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(Former name or Former Address, if Changed Since Last Report.)
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ITEM 5. OTHER EVENTS--YEAR 2000 READINESS DISCLOSURE.
(a) The following disclosure statements contained in the Registrant's
Quarterly Reports on Form 10-Q for the three-month periods ended March 31, 1998
and June 30, 1998 pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934, as amended, regarding the Registrant's Year 2000 readiness each
constitute "Year 2000 Readiness Disclosure" for purposes of the Year 2000
Information and Readiness Disclosure Act of 1998 (Public Law 105-271, 112 Stat.
2386, a U.S. statute). These disclosure statements were true and correct when
made but do not necessarily reflect the Registrant's current state of Year 2000
readiness. Complete copies of such reports can be obtained from the Registrant
upon request.
Year 2000 Readiness Disclosure contained in Quarterly Report on Form
10-Q for the three-month period ended March 31, 1998, filed with the Securities
and Exchange Commission on May 14, 1998:
"YEAR 2000 COMPLIANCE. Many currently installed computer systems and
software products are coded to accept only two digit entries in the date code
field. These date code fields will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. As a result, computer
systems and/or software used by many companies may need to be upgraded to
comply with such "Year 2000" requirements. The Company is currently in the
process of conducting a review of its internal information systems to identify
systems that could be affected by such Year 2000 requirements. Further, to
accommodate its recent growth, the Company will be required to continue to
implement and improve a variety of operational, financial and management
information systems, procedures and controls on a timely basis. In particular,
the Company will be required to improve its accounting and financial reporting
systems, which currently require substantial management effort and will be
required to implement a U.S.-based financial and accounting system. The Company
expects to incur internal staff costs as well as consulting and other expenses
related to these requirements, including Year 2000 requirements. The Company
cannot estimate the amount of costs that will be associated with implementing
these improvements and changes. While the Company currently expects that such
improvements and changes will not pose significant operational problems, delays
in the implementation or modification of the Company's information systems could
have a material adverse effect on the Company's business, results of operations
and financial condition."
"YEAR 2000 COMPLIANCE. Many currently installed computer systems and
software products are coded to accept only two digit entries in the date code
field. These date code fields will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. As a result, in less
than two years, computer systems and/or software used by many companies may need
to be upgraded to comply with such "Year 2000" requirements. Significant
uncertainty exists in the software industry concerning the potential effects
associated with such compliance. In the Company's standard license agreements,
the Company warrants to licensees that its software routines and programs are
Year 2000 compliant (i.e. that they accurately process date-related data within
any century and between two or more centuries). Although the Company believes
its software products are Year 2000 compliant, there can be no assurance that
the Company's software products contain all necessary software routines and
programs necessary for the accurate calculation, display, storage and
manipulation of data
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involving dates. If any of the Company's licensees experience Year 2000
problems, such licensee could assert claims for damages against the Company. Any
such litigation could result in substantial costs and diversion of the Company's
resources even if ultimately decided in favor of the Company. In addition, many
companies are expending significant resources to correct or patch their current
software systems for Year 2000 compliance. These expenditures may result in
reduced funds available to purchase software products such as those offered by
the Company. The occurrence of any of the foregoing could have a material
adverse effect on the Company's business, operating results or financial
condition."
Year 2000 Readiness Disclosure contained in Quarterly Report on Form
10-Q for the three-month period ended June 30, 1998, filed with the Securities
and Exchange Commission on August 14, 1998:
"YEAR 2000 COMPLIANCE AND EURO CONVERSION. Many currently installed
computer systems and software products are coded to accept only two digit
entries in the date code field. These date code fields will need to accept four
digit entries to distinguish 21st century dates from 20th century dates. As a
result, computer systems and/or software used by many companies may need to be
upgraded to comply with such "Year 2000" requirements. Further, various European
states have planned the introduction of a single currency (known as the Euro) in
January 1999. The introduction of the Euro may result in complex conversion
calculations. The Company is currently in the process of conducting a review of
its internal information systems to identify systems that could be affected by
such Year 2000 and Euro conversion requirements. Further, to accommodate its
recent growth, the Company will be required to continue to implement and improve
a variety of operational, financial and management information systems,
procedures and controls on a timely basis. In particular, the Company will be
required to improve its accounting and financial reporting systems, which
currently require substantial management effort and will be required to
implement a U.S.-based financial and accounting system. The Company expects to
incur internal staff costs as well as consulting and other expenses related to
these requirements, including Year 2000 and Euro conversion requirements. The
Company cannot estimate the amount of costs that will be associated with
implementing these improvements and changes. While the Company currently expects
that such improvements and changes will not pose significant operational
problems, delays in the implementation or modification of the Company's
information systems could have a material adverse effect on the Company's
business, results of operations and financial condition."
"YEAR 2000 COMPLIANCE. Many currently installed computer systems and
software products are coded to accept only two digit entries in the date code
field. These date code fields will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. As a result, in less
than two years, computer systems and/or software used by many companies many
need to be upgraded to comply with such "Year 2000" requirements. Significant
uncertainty exists in the software industry concerning the potential effects
associated with such compliance. In the Company's standard license agreements,
the Company warrants to licensees that its software routines and programs are
Year 2000 compliant (i.e. that they accurately process date-related data within
any century and between two or more centuries). Although the Company believes
its software products are Year 2000 compliant, there can be no assurance that
the Company's software products contain all necessary software routines and
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programs necessary for the accurate calculation, display, storage and
manipulation of data involving dates. If any of the Company's licensees
experience Year 2000 problems, such licensee could assert claims for damages
against the Company. Any such litigation could result in substantial costs and
diversion of the Company's resources even if ultimately decided in favor of the
Company. In addition, many companies are expending significant resources to
correct or patch their current software systems for Year 2000 compliance. These
expenditures may result in reduced funds available to purchase software products
such as those offered by the Company. The occurrence of any of the foregoing
could have a material adverse effect on the Company's business, operating
results or financial condition."
(b) The following Year 2000 Readiness Disclosure statement reflects the
Registrant's current state of readiness with respect to Year 2000 issues:
YEAR 2000. A significant amount of the demand the Company has
experienced in recent years for applications software may be generated by
customers in the process of replacing and upgrading applications in order to
accommodate the change in date to the Year 2000. Once such customers have
completed their preparations, the software industry and the Company may
experience a significant deceleration from the strong annual growth rates
recently experienced in the applications software marketplace. Although the
Company has designed and tested its products to be Year 2000 compliant, there
can be no assurances that the Company's current products do not contain
undetected errors or defects associated with Year 2000 date functions that may
result in material costs to the Company. In addition, certain components of the
Company's products process timestamp information from third party applications
or local operating systems. As a result, if such third party applications or
local operating systems are not Year 2000 compliant, the Company's products that
process such timestamp information may not be Year 2000 compliant. The Company
is currently evaluating the Year 2000-related risk and corrective actions in
connection with such third party applications and local operating systems. Some
commentators have stated that a significant amount of litigation will arise out
of Year 2000 compliance issues, and the Company is aware of a growing number of
lawsuits against other software vendors. Because of the unprecedented nature of
such litigation, it is uncertain to what extent the Company may be affected by
it. In addition, in the Company's standard license agreements, the Company
warrants to licensees that its software programs and routines are Year 2000
compliant. If any of the Company's licensees experiences Year 2000 problems,
such licensees could assert claims for damages against the Company. Any such
litigation could result in substantial costs and diversion of the Company's
resources even if ultimately decided in favor of the Company. With respect to
its internal information technology systems (including information
technology-based office facilities such as data and voice communications, and
building management and security systems), the Company is currently evaluating
the adoption of standard industry practices, as published by the British
Standards Institute, in preparing for the Year 2000 date change. The Company's
Year 2000 internal readiness program primarily covers: taking inventory of
hardware, software and embedded systems, assessing business and customer
satisfaction risks associated with such systems, creating action plans to
address known risks, executing and monitoring action plans, and contingency
planning. The Company currently is conducting (i) a review of its vendors and
service providers to evaluate Year 2000 readiness and (ii) ongoing risk
analysis. The Company expects to substantially complete Year 2000 readiness
preparations at the end of the first quarter of calendar 1999 with respect to
its core business and software systems and at the end of June 1999 with respect
to its hardware systems. In each case, the Company expects to continue extensive
testing through calendar 1999. Although the Company does not currently believe
that it will incur any material costs or experience material disruptions in its
business associated with preparing its internal systems for the Year 2000, there
can be no assurances that the Company will not experience serious unanticipated
negative consequences and/or material costs caused by undetected errors or
defects in the technology used in its internal systems, which are composed of
third party software, third party hardware that contains embedded software and
the Company's own software products. The most reasonably likely worst case
scenarios would include: (i) corruption of data contained in the Company's
internal information systems, (ii) hardware failure, and (iii) the failure of
infrastructure services provided by government
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agencies and other third parties (e.g., electricity, phone service, water
transport, internet services, etc.). The Company is in the process of conducting
its contingency planning for high risk areas at this time and is scheduled to
commence contingency planning for medium to low risk areas in January 1999. The
Company expects its contingency plans to include, among other things, manual
"work-arounds" for software and hardware failures, as well as substitution of
systems, if necessary.
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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 hereunto duly authorized.
MICROMUSE INC.
Date: December 3, 1998 By: /s/ STEPHEN A. ALLOTT
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President and Chief Financial Officer
(Principal Financial and Chief
Accounting Officer)
