<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended March 31, 1998 Commission File Number 0-23599
MERCURY COMPUTER SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2741391
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
199 RIVERNECK ROAD 01824
CHELMSFORD, MA (Zip Code)
(Address of principal executive offices)
978-256-1300
(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
----- ------
Number of shares outstanding of the issuer's classes of common stock as of
April 30, 1998:
Class Number of Shares Outstanding
----- ----------------------------
Common Stock, par value $.01 per share 9,934,506
Total number of pages 14
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MERCURY COMPUTER SYSTEMS, INC.
INDEX
PAGE NUMBER
-----------
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of March 31, 1998 and
June 30, 1997 3
Consolidated Statements of Operations for the Three
and Nine Months Ended March 31, 1998 and 1997 4
Consolidated Statements of Cash Flows for the Nine
Months Ended March 31, 1998 and 1997 5
Notes to Consolidated Financial Statements 6-7
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-10
PART II. OTHER INFORMATION
Item 2. Recent Sales of Unregistered Securities;
Uses of Proceeds from Registered Securities 11-12
Item 6. Exhibits and Reports Filed on Form 8-K 12
SIGNATURE 13
EXHIBIT INDEX 14
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PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
MERCURY COMPUTER SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1998 1997
--------- --------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $17,188 $15,193
Short term investments 4,616 --
Trade accounts receivable, net of allowances of $218 and
$119 at March 31, 1998 and June 30, 1997, respectively 17,371 12,816
Contracts in progress --- 1,096
Inventory 9,840 8,314
Deferred income taxes, net 1,152 926
Prepaids and other current assets 1,278 728
------- -------
Total current assets 51,445 39,073
Long term investments 11,242 ---
Property and equipment, net 7,058 4,984
Capitalized software costs, net 184 483
Deferred income taxes, net 144 39
Other assets 320 269
------- -------
Total assets $70,393 $44,848
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,871 $ 2,801
Accrued expenses 3,407 1,903
Accrued compensation 3,377 2,316
Billings in excess of revenues and customer advances 1,517 2,877
Income taxes payable 1,005 1,629
------- -------
Total current liabilities 12,177 11,526
Commitments and contingencies (Note D)
Stockholders' equity:
Preferred stock, $.01 par value; 1,000,000 shares and 2,000,000
shares authorized, none and 1,000,000 shares designated as
Series A convertible Preferred Stock, none and 852,264 shares
Issued and outstanding at March 31, 1998 and June 30, 1997,
respectively, (liquidation preference of none and $1,200,000) -- 1,200
Common stock, $.01 par value: 25,000,000 shares authorized;
9,921,046 and 5,202,231 shares issued and outstanding at
March 31, 1998 and June 30, 1997, respectively 99 52
Additional paid-in capital 25,797 5,703
Retained earnings 32,771 26,752
Cumulative translation adjustment (126) (60)
Subscriptions and related parties notes receivable (325) (325)
------- -------
Total stockholders' equity 58,216 33,322
------- -------
Total liabilities and stockholders' equity $70,393 $44,848
======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
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MERCURY COMPUTER SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31 MARCH 31,
1998 1997 1998 1997
-------------------------- --------------------------
<S> <C> <C> <C> <C>
Net revenue $22,364 $17,154 $62,027 $45,298
Cost of revenue 7,832 5,356 21,776 15,022
------- ------- ------- -------
Gross profit 14,532 11,798 40,251 30,276
Operating expenses:
Selling, general and administrative 7,104 5,737 20,595 16,040
Research and development 3,749 3,759 10,535 9,584
------- ------- ------- -------
Total operating expenses 10,853 9,496 31,130 25,624
------- ------- ------- -------
Income from operations 3,679 2,302 9,121 4,652
Interest income, net 263 148 713 426
Other income (expenses), net (7) (125) (50) (146)
------- ------- ------- -------
Income before income taxes 3,935 2,325 9,784 4,932
Provision for income taxes 1,495 904 3,765 1,917
------- ------- ------- -------
Net income $ 2,440 $ 1,421 $ 6,019 $ 3,015
======= ======= ======= =======
Net income per share:
Basic $ 0.29 $ 0.28 $ 0.95 $ 0.59
======= ======= ======= =======
Diluted $ 0.24 $ 0.18 $ 0.69 $ 0.38
======= ======= ======= =======
Weighted average shares outstanding:
Basic 8,476 5,151 6,333 5,123
======= ======= ======= =======
Diluted 9,991 7,874 8,778 7,893
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
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MERCURY COMPUTER SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
1998 1997
-------------------------------
<S> <C> <C>
Cash flows provided from operating activities:
Net income $ 6,019 $ 3,395
Adjustments to reconcile net income to net cash
Provided by (used in) operating activities:
Depreciation and amortization 2,438 2,446
Deferred income taxes (332) -
Changes in assets and liabilities:
Trade accounts receivable (4,686) (2,826)
Contracts in progress 1,096 -
Inventory (1,671) (840)
Prepaid expenses and other current assets (586) (144)
Other assets (31) (373)
Accounts payable 72 366
Accrued expenses and compensation 2,580 962
Billings in excess of revenues and customer advances (1,349) 72
Income taxes payable (610) 934
-------- -------
Net cash provided by operating activities 2,940 3,992
-------- -------
Cash flows from investing activities:
Purchase of marketable securities (15,858) -
Purchases of property and equipment (4,172) (2,152)
Capitalized software development costs (65) (550)
-------- -------
Net cash used in investing activities (20,095) (2,702)
-------- -------
Cash flows from financing activities:
Net proceeds from issuance of common stock in connection
with initial public offering 18,578 -
Proceeds from exercise of stock options and warrants 363 210
-------- -------
Net cash provided by financing activities 18,941 210
-------- -------
Effect of exchange rate change on cash and cash equivalents 209 (73)
-------- -------
Net change in cash and cash equivalents 1,995 1,427
Cash and cash equivalents at beginning of period 15,193 9,704
-------- -------
Cash and cash equivalents at end of period $ 17,188 $11,131
======== =======
Cash paid during the year for:
Interest $ - $ -
Income taxes 4,720 995
Supplemental disclosure of non-cash financing transactions:
Conversion of preferred stock into common stock $ 1,200 $ -
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
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MERCURY COMPUTER SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. BASIS OF PRESENTATION
These consolidated financial statements should be read in conjunction with the
Company's financial statements and footnotes included in the Company's Form S-1
registration statement (File No. 333-41139) which was declared effective by the
Securities and Exchange Commission on January 29, 1998. In the opinion of
management, the accompanying unaudited financial statements include all
adjustments, consisting of normal recurring adjustments, necessary to present
fairly the consolidated financial position, results of operations and cash flows
of Mercury Computer Systems, Inc. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the Securities and
Exchange Commission rules and regulations.
B. INVENTORY
MARCH 31, 1998 JUNE 30, 1997
(IN THOUSANDS) (IN THOUSANDS)
-------------- --------------
Raw materials $4,447 $2,925
Work in process 3,448 3,084
Finished goods 1,945 2,305
------ ------
Total $9,840 $8,314
====== ======
C. NET INCOME PER COMMON SHARE
The Company has adopted Statement of Financial Accounting Standard ("SFAS") No.
128, "Earnings Per Share," which specifies the computation, presentation and
disclosure requirements for net income per common share. Basic net income per
common share is computed based on the weighted average number of common shares
outstanding during the period. Diluted net income per common share gives effect
to all diluted potential common shares outstanding during the period. Under SFAS
No. 128, the computation of diluted earnings per share does not assume the
issuance of common shares that have an antidilutive effect on net income per
common share.
Prior to the adoption of this statement, all common and common equivalent shares
issued during the twelve month period prior to the filing of the initial public
offering ("cheap stock") were included in the calculation of basic and diluted
earnings per share as if they were outstanding for all periods presented.
Adoption of this statement, and the related guidance set out in Securities and
Exchange Commission Staff Accounting Bulletin No. 98, has eliminated the
inclusion of cheap stock from the calculation of basic and diluted earnings per
share prior to issuance of the securities. Accordingly, basic and diluted
earnings per share for the three month and nine month periods ended March 31,
1997 have been restated from $.17 and $.36, respectively.
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED MARCH 31, ENDED MARCH 31,
1998 1997 1998 1997
(IN THOUSANDS) (IN THOUSANDS) (IN THOUSANDS) (IN THOUSANDS)
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net income $2,440 $1,421 $6,019 $3,015
Shares used in computation:
Weighted average common shares outstanding used in
computation of basic net income per share 8,476 5,151 6,333 5,123
Dilutive effect of convertible preferred stock 852 2,557 1,989 2,557
Dilutive effect of stock options 663 166 456 213
------ ------ ------ ------
Shares used in computation of diluted net income per share 9,991 7,874 8,778 7,893
====== ====== ====== ======
Basic net income per share $ 0.29 $ 0.28 $ 0.95 $ 0.59
====== ====== ====== ======
Dilutive net income per share $ 0.24 $ 0.18 $ 0.69 $ 0.38
====== ====== ====== ======
</TABLE>
Options to purchase 0 and 34,600 shares of common stock were outstanding during
the three months ended March 31, 1998 and March 31, 1997, respectively, but were
not included in the calculation of diluted net income per common share because
the option price was greater than the average market price of the common shares
during the period.
Options to purchase 5,980 and 34,970 shares of common stock were outstanding
during the nine months ended March 31, 1998 and
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March 31, 1997, respectively, but were not included in the calculation of
diluted net income per common share because the option price was greater than
the average market price of the common shares during the period.
D. INTERNAL REVENUE SERVICE AUDIT
On December 12, 1997, the Internal Revenue Service ("IRS") concluded an audit of
the Company's tax returns for the years ended June 30, 1992 through June 30,
1995, and issued a formal report reflecting proposed adjustments with respect to
the years under audit. The proposed IRS adjustments primarily relate to the
disallowance of research and development tax credits claimed by the Company, as
well as treatment of certain other items. The Company is in the process of
appealing the proposed adjustments to the Appeals Division of the IRS. While the
Company does not believe that the final outcome of the IRS audit will have a
material adverse effect on the Company's financial condition or results of
operations, no assurance can be given as to the final outcome of the audit, the
amount of any final adjustments or the potential impact of such adjustments on
the Company's financial condition or results of operations.
E. INITIAL PUBLIC OFFERING
On January 29, 1998, 3,500,000 shares of the Company's common stock were sold in
the Company's initial public offering ("IPO"), of which 2,000,000 shares were
sold by the Company and 1,500,000 shares were sold by certain stockholders of
the Company. The Company received $18,578,000 in net proceeds from the IPO after
deducting underwriting discounts and commissions of $1,470,000 and approximately
$952,000 in offering expenses.
F. NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board (the "FASB") issued SFAS
No. 130, "Reporting Comprehensive Income." This statement requires that changes
in comprehensive income be shown in a financial statement that is displayed with
the same prominence as other financial statements. The statement will be
effective for annual periods beginning after December 15, 1997 and the Company
will adopt its provisions in fiscal 1999. Reclassification for earlier periods
is required for comparative purposes. The Company is currently evaluating the
impact this statement will have on its financial statements; however, the
Company does not expect the statement to have a material impact on its financial
position or results of operations because the statement requires only additional
disclosure.
In June of 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." This statement supercedes SFAS No. 14,
"Financial Reporting for Segments of a Business Enterprise." This statement
includes requirements to report selected segment information quarterly and
entity-wide disclosures about products and services, major customers, and the
material countries in which the entity holds assets and reports revenues. The
statement will be effective for annual periods beginning after December 15, 1997
and the Company will adopt its provisions in fiscal 1999. Reclassification for
earlier periods is required, unless impracticable, for comparative purposes. The
Company is currently evaluating the impact this statement will have on its
financial statements; however, the Company does not expect the statement to have
a material impact on its financial position or results of operations because the
statement requires only additional disclosure.
In October 1997, the American Institute of Certified Public Accountants
("AICPA") issued the statement of position ("SOP") 97-2 "Software Revenue
Recognition," which will supersede SOP 91-1, SOP 97-2 has not changed the basic
rules of revenue recognition but does provide more guidance particularly with
respect to multiple deliverables and "when and if available" products. SOP 97-2
is effective for transactions entered into for fiscal periods beginning after
December 15, 1997. The Company will adopt SOP 97-2 in fiscal 1999 and has not
yet determined its impact.
In February 1998, the FASB issued SFAS No. 132, "Employees' Disclosures about
Pensions and Other Postretirement Benefits." The new requirements require
increased disclosures for public entities. SFAS No. 132 only effects disclosure
issues and does not change any existing measurement or recognition provisions
previously required. The statement is effective for fiscal years beginning after
December 15, 1997. Reclassification for earlier periods is required for
comparative purposes. Management does not expect the statement to have a
material impact on its financial position or results of operations.
In March 1998, the American Institute of Certified Public Accountants issues SOP
98-1, "Internal Use Software," which provides guidance on the accounting for the
costs of software developed or obtained for internal use. SOP 98-1 is effective
for fiscal years beginning after December 15, 1998. Management does not expect
the statement to have a material impact on its financial position or results of
operations.
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ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
From time to time, information provided by the Company, statements made by its
employees or information included in its filings with the Securities and
Exchange Commission may contain statements which are not historical facts but
which are "forward-looking statements" which involve risks and uncertainties.
The words "may," "will," "expect," "anticipate," "continue", "estimate",
"project," "intend" and similar expressions are intended to identify
forward-looking statements regarding events, conditions and financial trends
that may affect the Company's future plans of operations, business strategy,
result of operations and financial position. These statements are based on the
Company's current expectations and estimates as to prospective events and
circumstances about which there can be no firm assurance given. Further, any
forward-looking statement speaks only as of the date on which such statement is
made, and the Company undertakes no obligation to update any forward-looking
statement to reflect events or circumstances after the date on which such
statement is made. As it is not possible to predict every new factor that may
emerge, forward-looking statements should not be relied upon as a prediction of
actual future financial condition or results. Important factors that may cause
the Company's actual results to differ from forward-looking statements are
referenced in the Company's registration statement on Form S-1 (File No.
333-41139) and in the Company's prospectus dated January 29, 1998 included as
part of such registration statement including the section thereof entitled "Risk
Factors".
RESULTS OF OPERATIONS
REVENUES
The Company's total revenues increased 30% from $17.2 million during the three
months ended March 31, 1997 to $22.4 million during the three months ended March
31, 1998. The Company's total revenues increased 37% from $45.3 million during
the nine month period ended March 31, 1997 to $62.0 million during the nine
month period ended March 31, 1998. These increases in revenues reflect volume
increases in all lines of businesses.
Defense electronics revenues increased 25% from $14.1 million or 82% of total
revenues during the three months ended March 31, 1997 to $17.6 million or 79% of
total revenues during the three months ended March 31, 1998. Defense electronics
revenues increased 36% from $35.7 million or 79% of total revenues during the
nine months ended March 31, 1997 to $48.4 million or 78% of total revenues
during the nine months ended March 31, 1998. The increase in revenues was due
primarily to increased unit demand for defense electronics products.
Medical imaging revenues increased 24% from $2.1 million or 12% of total
revenues during the three months ended March 31, 1997 to $2.6 million or 12% of
total revenues during the three months ended March 31, 1998. Medical imaging
revenues increased 40% from $5.5 million or 12% of total revenues during the
nine months ended March 31, 1997 to $7.7 million or 12% of total revenues during
the nine months ended March 31, 1998. The increase in revenues was due both to
increased unit demand for medical imaging products and increased average selling
prices due to demand for higher computing power.
Other revenues increased 120% from $1.0 million or 6% of total revenues during
the three months ended March 31, 1997 to $2.2 million or 10% of total revenues
during the three months ended March 31, 1998. Other revenues increased 44% from
$4.1 million or 9% of total revenues during the nine months ended March 31, 1997
to $5.9 million or 10% of total revenues during the nine months ended March 31,
1998. The increase in revenues was primarily due to increased unit demand by new
and existing commercial and shared storage customers.
COST OF REVENUES
Cost of revenues increased 46% from $5.4 million during the three months ended
March 31, 1997 to $7.8 million during the three months ended March 31, 1998.
Cost of revenues increased 45% from $15.0 million during the nine months ended
March 31, 1997 to $21.8 million during the nine months ended March 31, 1998. As
a percent of total revenues, cost of revenues increased from 31% for the three
months ended March 31, 1997 to 35% for the three months ended March 31, 1998.
Cost of revenues as a percent of total revenues increased from 33% for the nine
months ended March 31, 1997 to 35% for the nine months ended March 31, 1998.
This increase in cost of revenues as a percentage of total revenues was due
primarily to the shift in product mix to lower margin products, in particular a
domestic defense electronics development contract which yielded lower gross
margins than gross margins historically achieved by the Company as a whole.
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SELLING, GENERAL AND ADMINISTRATIVE
Selling, general, and administrative expenses increased 24% from $5.7 million
during the three months ended March 31, 1997 to $7.1 million during the three
months ended March 31, 1998. Selling, general, and administrative expenses
increased 28% from $16.0 million during the nine months ended March 31, 1997 to
$20.6 million during the nine months ended March 31, 1998. These increases
reflect the hiring of additional sales and administrative personnel, increased
commissions and costs related to the expansion of European operations.
RESEARCH AND DEVELOPMENT
Research and development expenses remained constant at approximately $3.7
million for the three months ended March 31, 1998 and 1997. Research and
development expenses increased 10% from $9.6 million during the nine months
ended March 31, 1997 to $10.5 million during the nine months ended March 31,
1998. The increase was due primarily to the hiring of additional software and
hardware engineers to develop and enhance the features and functionality of the
Company's products.
INCOME FROM OPERATIONS
Income from operations increased 60% from $2.3 million during the three months
ended March 31, 1997 to $3.7 million during the three months ended March 31,
1998. Included in income from operations during the three months ended March 31,
1998 were $300,000 in hardware and software revenues and $1,096,000 in direct
expenses related to the shared storage business. Included in income from
operations during the three months ended March 31, 1997 were no revenues and
$1.0 million in direct expenses related to the shared storage business. The
direct expenses include expenses from marketing and engineering activities,
primarily related to compensation, trade shows, and prototype development and
direct costs related to the sale of the product, including certain hardware
costs.
Income from operations increased 96% from $4.7 million during the nine months
ended March 31, 1997 to $9.1 million during the nine months ended March 31,
1998. Included in income from operations during the nine months ended March 31,
1998 were $385,000 in hardware and software revenues and $2.6 million in direct
expenses related to the shared storage business. Included in income from
operations during the nine months ended March 31, 1997 were $2.1 million in
hardware and software revenues and $3.1 million in direct expenses related to
the shared storage business.
INTEREST INCOME, NET
Interest income, net increased 78% from $148,000 during the three months ended
March 31, 1997 to $263,000 during the three months ended March 31, 1998.
Interest income, net increased 67% from $426,000 during the nine months ended
March 31, 1997 to $713,000 during the nine months ended March 31, 1998. This
increase reflects an increase in the Company's average cash balances primarily
as a result of cash received from the Company's initial public offering.
Offsetting the effect of higher average cash balances were lower yields achieved
on the Company's cash. These lower yields were the result of a shift during the
three month period ended March 31, 1998, in investment strategy from taxable
money market instruments to non-taxable securities.
PROVISION FOR INCOME TAX
The Company recorded a tax provision of $1.5 million during the three months
ended March 31, 1998 reflecting a 38% tax rate as compared to a $904,000 tax
provision during the three months ended March 31, 1997, reflecting a 39% tax
rate. During the nine months ended March 31, 1998, the Company recorded a tax
provision of $3.8 million, reflecting a 38% tax rate as compared to a $1.9
million tax provision recorded during the nine months ended March 31, 1997,
reflecting a 39% tax rate.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1998, the Company had cash and marketable investments of
approximately $33.0 million. During the nine months ended March 31, 1998, the
Company generated approximately $2.9 million in cash from operations compared to
$4.0 million generated during the nine months ended March 31, 1997. The decrease
in cash generated from operations was due to a number of factors, including the
investment of Company resources in a defense electronics development project and
increases in inventory which were partially offset by the Company's increased
profitability. Days sales outstanding increased from 67 days at March 31, 1997
to 70 days at March 31, 1998. Days sales outstanding increased primarily due to
one large account not settling until immediately after March 31, 1998.
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From June 30, 1997 to March 31, 1998, inventory increased due to anticipation of
new product introductions and an increase in customer orders.
The Company has a line of credit agreement with a commercial bank on which the
Company can borrow up to $6.0 million at an interest rate equal to the prime
rate or, at the election of the Company, two and one quarter percentage points
above the London InterBank Offered Rate. As of March 31, 1998, there was no
outstanding borrowing on this line of credit.
During the nine months ended March 31, 1998, the Company's investing activities
used cash of $20.1 million which consisted of the purchase of marketable
securities amounting to $15.9 million, $3.0 million for computers, furniture and
equipment, $1.2 million for the acquisition of a parcel of land and related
expenditures for development of additional office space, and $65,000 for
capitalized software. During the nine months ended March 31, 1997, the Company's
investing activities used cash of $2.7 million, consisting of $2.2 million for
computers, furniture and equipment and $550,000 for capitalized software.
During the nine months ended March 31, 1998, the Company's financing activities
provided approximately $18.9 million in cash, consisting of $18.6 million in net
proceeds received in connection with the initial public offering and $363,000
from the issuance of stock options and warrants. During the nine months ended
March 31, 1997, the Company's financing activities provided $210,000 in cash
from the issuance of stock options.
The Company believes that its available cash, cash generated from operations,
and the Company's line of credit, will be sufficient to provide for the
Company's working capital and capital expenditure requirements for the
foreseeable future and any final adjustments resulting from the IRS audit
described in the notes to the financial statements. If the Company acquires one
or more businesses or products, the Company's capital requirements could
increase substantially. In the event of such an acquisition or in the event that
any unanticipated circumstances arise which significantly increase the Company's
capital requirements, there can be no assurance that necessary additional
capital will be available on terms acceptable to the Company, if at all.
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MERCURY COMPUTER SYSTEMS, INC.
PART II. OTHER INFORMATION
ITEM 2. RECENT SALES OF UNREGISTERED SECURITIES; USES OF PROCEEDS FROM
REGISTERED SECURITIES
(c) Recent Sales of Unregistered Securities
During the three months of January, February, and March, 1998 the Company issued
the following securities, none of which has been registered under the Securities
Act of 1933:
In transactions exempt from registration pursuant to Rule 701 under the
Securities Act the Company has issued the following securities:
1. On March 30, 1998, the Company issued 1,000 shares of
Common Stock at a price of $2.00 per share upon exercise of
a stock option.
2. On March 24, 1998, the Company issued 3,000 shares of
Common Stock at a price of $1.50 per share upon exercise of
a stock option.
3. On March 19, 1998, the Company issued 720 shares of Common
Stock at a price of $4.00 per share and 3,000 shares of
Common Stock at a price of $1.50 per share upon exercise of
two stock options.
4. On March 18, 1998, the Company issued 390 shares of Common
Stock at a price of $4.00 per share and 5,000 shares of
Common Stock at a price of $2.00 per share upon exercise of
three stock options.
5. On March 4, 1998, the Company issued 500 shares of Common
Stock at a price of $4.00 per share upon the exercise of
two stock options.
6. On March 2, 1998, the Company issued 75 shares of Common
Stock at a price of $4.00 per share and 600 shares of
Common Stock at a price of $5.00 per share upon the
exercise of two stock options.
7. On February 5, 1998, the Company issued 20,000 shares of
Common Stock at a price of $2.00 per share, 188 shares of
Common Stock at a price of $4.00 per share, and 2,400
shares of Common Stock at a price of $5.00 per share upon
the exercise of four stock options.
8. On January 28, 1998, the Company issued 2,000 shares of
Common Stock at a price of $3.50 per share upon the
exercise of a stock option.
9. On January 23, 1998, the Company issued 3,000 shares of
Common Stock at a price of $2.00 per share upon the
exercise of a stock option.
10. On January 21, 1998, the Company issued 200 shares of
Common Stock at a price of $7.50 per share upon the
exercise of a stock option.
11. On January 14, 1998, the Company issued 4,000 shares of
Common Stock at a price of $2.00 per share upon the
exercise of a stock option.
12. On January 12, 1998, the Company issued 3,000 shares of
Common Stock at a price of $1.50 per share upon the
exercise of a stock option.
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(d) Use of Proceeds from Registered Securities.
The Company registered 3,500,000 shares of its Common Stock, par value $.01 per
share, on a Registration Statement on Form S-1 (File No. 333-41139), which was
declared effective by the Securities and Exchange Commission on January 29,
1998. Trading of the Company's registered Common Stock commenced on January 30,
1998 and closed on February 4, 1998. The managing underwriters were Prudential
Securities Incorporated and Cowen & Company. All 3,500,000 shares were sold, of
which 2,000,000 shares were sold by the Company and 1,500,000 shares were sold
by certain existing stockholders of the Company (the "Selling Stockholders").
The aggregate gross proceeds of the Company from the sale of the 2,000,000
shares sold by the Company were $21,000,000 and the aggregate gross proceeds to
the Selling Stockholders from the sale of the 1,500,000 shares sold by the
Selling Stockholders were $15,750,000. The net proceeds to the Company were
$18,578,000 after deducting $1,470,000 in underwriters' discounts and
commissions and approximately $952,000 in other expenses. None of the
underwriting discounts and commissions or expenses were paid directly or
indirectly to affiliates, directors, officers or persons owning 10 percent or
more of any class of the Company's equity securities. During the three months of
January, February, and March 1998, the Company used approximately $133,000 of
proceeds received from the sale of the 2,000,000 shares to begin construction of
an additional facility as discussed in the Company's S-1 Registration Statement.
ITEM 6. EXHIBITS AND REPORTS FILED ON FORM 8-K
(a) Exhibits. See as listed
Exhibit
Item #
-------
27.1 Financial Data Schedule
(b) Reports on Form 8-K. None.
12
<PAGE> 13
MERCURY COMPUTER SYSTEMS, INC.
SIGNATURE
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.
MERCURY COMPUTER SYSTEMS, INC.
Date: May 12, 1998 By: /s/ G. MEAD WYMAN
--------------------------------------------
G. Mead Wyman
Vice President, Chief Financial Officer
and Treasurer
(Principal Financial and Accounting Officer)
13
<PAGE> 14
MERCURY COMPUTER SYSTEMS, INC.
EXHIBIT INDEX
Exhibit
Item #
- -------
27.1 Financial Data Schedule
14
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<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> MAR-31-1998
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<CASH> 17,188
<SECURITIES> 15,858
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<ALLOWANCES> 218
<INVENTORY> 9,840
<CURRENT-ASSETS> 51,445
<PP&E> 18,466
<DEPRECIATION> 11,408
<TOTAL-ASSETS> 70,393
<CURRENT-LIABILITIES> 12,177
<BONDS> 0
0
0
<COMMON> 99
<OTHER-SE> 58,117
<TOTAL-LIABILITY-AND-EQUITY> 70,393
<SALES> 22,364
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<CGS> 7,832
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<OTHER-EXPENSES> 10,597
<LOSS-PROVISION> 50
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,935
<INCOME-TAX> 1,495
<INCOME-CONTINUING> 2,440
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 2,440
<EPS-PRIMARY> .29
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</TABLE>
