<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended: May 31, 1998
------------
[ ] 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: 0-14779
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MEDIA 100 INC.
-------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 04-2532613
- ---------------------------------- ---------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification Number)
of organization or incorporation)
290 DONALD LYNCH BOULEVARD
MARLBOROUGH, MASSACHUSETTS
---------------------------------------------------------------------
(Address of principal executive offices)
01752-4748
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(Zip code)
(508) 460-1600
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(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
---- ----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, par value $.01 per share 8,274,115 shares
- -------------------------------------- ---------------------------------
Class Outstanding at June 30, 1998
<PAGE>
MEDIA 100 INC. AND SUBSIDIARIES
INDEX
-------
PAGE
PART I - FINANCIAL INFORMATION NUMBER
------
ITEM 1 Consolidated Financial Statements:
Consolidated Balance Sheets as of
May 31, 1998 and November 30, 1997 3
Consolidated Statements of Operations for the three
and six months ended May 31, 1998 and May 31, 1997 4
Consolidated Statements of Cash Flows for the six
months ended May 31, 1998 and May 31, 1997 5
Notes to Consolidated Financial Statements 6 - 8
ITEM 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 9 - 11
PART II - OTHER INFORMATION
ITEM 1 Legal Proceedings 12
ITEM 4 Submission of Matters to a Vote of Security Holders 12
ITEM 6 Exhibits and Reports on Form 8-K 12
SIGNATURES 13
EXHIBIT INDEX 14
2
<PAGE>
PART I - FINANCIAL INFORMATION
MEDIA 100 INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
May 31, November 30,
1998 1997
(in thousands) -------------- ---------------
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,984 $ 4,042
Marketable securities 30,918 28,892
Accounts receivable, net of reserves of
$397 in 1998 and $411 in 1997 5,847 7,689
Inventories 661 696
Prepaid expenses 655 743
-------------- ----------------
Total current assets 41,065 42,062
Property and equipment, net 8,694 8,104
Other assets, net 593 593
-------------- ----------------
Total assets $ 50,352 $ 50,759
-------------- ----------------
-------------- ----------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,659 $ 1,953
Accrued expenses 9,334 6,958
Deferred revenue 5,265 4,005
-------------- ----------------
Total current liabilities 16,258 12,916
Commitments and contingencies (Note 6) - -
Stockholders' equity:
Preferred stock - -
Common stock 83 82
Capital in excess of par value 40,744 40,477
Retained deficit (6,649) (2,547)
Cumulative translation adjustment (128) (87)
Unrealized holding gain (loss) on
available for sale securities, net 44 (82)
-------------- ----------------
Total stockholders' equity 34,094 37,843
-------------- ----------------
Total liabilities and stockholders' equity $ 50,352 $ 50,759
-------------- ----------------
-------------- ----------------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE>
MEDIA 100 INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended May 31, Six Months Ended May 31,
(in thousands, except per share data) 1998 1997 1998 1997
---------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net sales $ 9,637 $ 12,102 $ 20,158 $ 23,626
Cost of sales 3,759 4,730 7,852 9,091
---------- --------------- --------------- --------------
Gross profit 5,878 7,372 12,306 14,535
---------- --------------- --------------- --------------
Operating expenses:
Research and development 4,774 2,161 7,765 4,156
Selling and marketing 3,740 4,134 7,402 8,363
General and administrative 968 1,014 1,966 1,947
---------- --------------- --------------- --------------
Total operating expenses 9,482 7,309 17,133 14,466
---------- -------------- --------------- --------------
Income (loss) from (3,604) 63 (4,827) 69
operations
Interest income 416 432 841 894
Other expense, net (162) (76) (104) (324)
---------- --------------- --------------- --------------
Income (loss) before tax
provision (3,350) 419 (4,090) 639
Tax provision 0 83 12 138
---------- --------------- --------------- --------------
Net income (loss) $ (3,350) $ 336 $ (4,102) $ 501
---------- --------------- --------------- --------------
---------- --------------- --------------- --------------
Earnings (loss) per share:
Basic $ (.41) $ $ (.50) $ 0.06
0.04
---------- --------------- --------------- --------------
---------- --------------- --------------- --------------
Diluted $ (.41) $ 0.04 $ (.50) $ 0.06
---------- --------------- --------------- --------------
---------- --------------- --------------- --------------
Weighted average common shares
outstanding
Basic 8,258 8,127 8,245 8,119
---------- --------------- --------------- --------------
---------- --------------- --------------- --------------
Diluted 8,258 8,209 8,245 8,246
---------- --------------- --------------- --------------
---------- --------------- --------------- --------------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE>
MEDIA 100 INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended May 31,
(in thousands) 1998 1997
--------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (4,102) $ 501
Adjustments to reconcile net income to net cash
provided by (used in) operating activities
Depreciation and amortization 1,333 681
(Gain) loss on sale of marketable securities (11) 2
Changes in assets and liabilities
Accounts receivable 1,842 3,417
Inventories 35 735
Prepaid expenses 88 (6)
Accounts payable (294) (1,305)
Accrued expenses 2,376 (80)
Deferred revenue 1,260 1,026
--------------- ----------------
Net cash provided by operating activities $ 2,527 $ 4,971
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment (1,923) (4,774)
Increase in other assets - 24
Purchases of marketable securities (60,319) (20,583)
Proceeds from sales of marketable securities 58,430 20,043
--------------- ----------------
Net cash used in investing activities $ (3,812) $ (5,290)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock plans 268 233
--------------- ----------------
Net cash provided by financing activities $ 268 $ 233
--------------- ---------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (41) (45)
--------------- ----------------
NET DECREASE IN CASH AND CASH EQUIVALENTS $ (1,058) $ (131)
CASH AND CASH EQUIVALENTS, beginning of period 4,042 2,733
--------------- ----------------
CASH AND CASH EQUIVALENTS, end of period $ 2,984 $ 2,602
--------------- ----------------
--------------- ----------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes $ 62 $ 90
--------------- ----------------
--------------- ----------------
OTHER TRANSACTIONS NOT PROVIDING (USING) CASH:
Acquisition of equipment under capital lease obligations $ - $ (221)
--------------- ----------------
--------------- ----------------
Increase in value of marketable securities $ 126 $ 172
--------------- ----------------
--------------- ----------------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
5
<PAGE>
MEDIA 100 INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, EXCEPT FOR NOVEMBER 30, 1997 AMOUNTS)
1. Basis of Presentation
The accompanying consolidated financial statements include the accounts of Media
100 Inc. ("the Company") and its wholly-owned subsidiaries. The interim
financial statements are unaudited. However, in the opinion of management, the
consolidated financial statements and disclosures reflect all adjustments
necessary for fair presentation. Interim results are not necessarily indicative
of results expected for a full year or for any other interim period. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the Securities and
Exchange Commission. These consolidated condensed financial statements should be
read in conjunction with the consolidated financial statements and the notes
thereto included in the Company's latest audited financial statements, which are
incorporated by reference in the Company's Annual Report on Form 10-K for the
fiscal year ended November 30, 1997, filed with the Securities and Exchange
Commission.
The Company's preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. Cash Equivalents and Marketable Securities
Cash equivalents are carried at cost, which approximates market value, and have
original maturities of less than three months. Cash equivalents include money
market accounts.
The Company accounts for marketable securities in accordance with Statement of
Financial Accounting Standards (SFAS) No. 115, Accounting for Certain
Investments in Debt and Equity Securities. Under this standard, the Company is
required to classify all investments in debt and equity securities into one or
more of the following three categories: held-to-maturity, available-for-sale or
trading. Available-for-sale securities are recorded at fair market value with
unrealized gains and losses excluded from earnings and reported to stockholders'
equity. All of the Company's marketable securities are classified as
available-for-sale.
Marketable securities held as of May 31, 1998, consist of the following (in
thousands):
<TABLE>
<CAPTION>
Investments available for sale: Maturity Market Value
-------- ------------
<S> <C> <C>
U.S. Treasury Notes less than 1 year $ 1,013
U.S. Treasury Notes 1 - 5 years 6,624
----------------
Total U.S. Treasury Notes 7,637
Municipal Bonds less than 1 year 3,337
Municipal Bonds 1 - 3 years 1,563
----------------
Total Municipal Bonds 4,900
U.S. Agency Bonds less than 1 year 2,031
U.S. Agency Bonds more than 1 year 4,556
----------------
Total U.S. Agency Bonds 6,587
Money Market Instruments none 6,543
</TABLE>
6
<PAGE>
2. Cash Equivalents and Marketable Securities (continued)
<TABLE>
<CAPTION>
Investments available for sale: Maturity Market Value
---------------- ---------------------
<S> <C> <C>
Corporate Obligations less than 1 year 1,388
Corporate Obligations 1 - 3 years 3,863
------------------
Total Corporate Obligations 5,251
------------------
Total investments available for sale $ 30,918
------------------
------------------
</TABLE>
Marketable securities had a cost of $30,874 and $28,974 at May 31, 1998 and
November 30, 1997, respectively, and a market value of $30,918 and $28,892,
respectively. To adjust the carrying amount of the May 31, 1998 and November 30,
1997 marketable securities portfolio to market value, a valuation allowance has
been reflected as a separate component of stockholders' equity pursuant to the
provisions of SFAS No. 115.
3. Inventories
Inventories are stated at the lower of first-in, first-out (FIFO) cost or market
and consist of the following (in thousands):
<TABLE>
<CAPTION>
May 31, November 30,
1998 1997
-------------- ----------------
<S> <C> <C>
Raw materials $ 364 $ 305
Work-in-process 195 252
Finished goods 102 139
-------------- ----------------
$ 661 $ 696
-------------- ----------------
-------------- ----------------
</TABLE>
Work-in-process and finished goods inventories include material, labor and
manufacturing overhead. Management performs periodic reviews of inventory and
disposes of items not required by their manufacturing plan.
4. Property and equipment, net
Property and equipment, net is stated at cost, less accumulated depreciation and
amortization, and consists of the following (in thousands):
<TABLE>
<CAPTION>
May 31, November 30,
1998 1997
---------------- -----------------
<S> <C> <C>
Machinery and equipment $ 10,994 $ 10,428
Furniture and fixtures 1,307 1,288
Vehicles 11 12
--------------- -----------------
$ 12,312 $ 11,728
Less accumulated depreciation and amortization 3,618 3,624
--------------- -----------------
$ 8,694 $ 8,104
--------------- -----------------
--------------- -----------------
</TABLE>
5. Net Income (Loss) Per Common Share
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, EARNINGS PER SHARE (SFAS No. 128). The
new standard simplifies the computation of earnings per share and increases
comparability to international standards. Under SFAS No. 128, primary earnings
per share is replaced by "Basic" earnings per share, which excludes potentially
dilutive equity instruments and is computed by dividing income available to
common stockholders by the weighted average number of common shares outstanding
for the period. "Diluted" earnings per share, which is computed similarly to
fully diluted earnings per share, reflects the potential dilution that could
occur if securities or other contracts to issue common stock were exercised or
converted into common stock.
7
<PAGE>
6. Contingencies
(i) On June 7, 1995, a lawsuit was filed against the Company by Avid Technology,
Inc. ("Avid"), in the United States District Court for the District of
Massachusetts. The complaint generally alleges patent infringement by the
Company arising from the manufacture, sale, and use of the Company's Media 100
products. The complaint includes requests for injunctive relief, treble damages,
interest, costs and fees. In July, 1995 the Company filed an Answer and
Counterclaim denying any infringement and asserting that the Avid patent in
question is invalid. The Company intends to vigorously defend the lawsuit. In
addition, Avid is seeking reissue of the patent, including claims that it
asserts are broader than in the existing patent, and these reissue proceedings
remain pending before the U.S. Patent and Trademark Office. On January 16, 1998,
the court dismissed the lawsuit without prejudice to either party moving to
restore it to the docket upon completion of all matters pending before the U.S.
Patent and Trademark Office. There can be no assurance that the Company will
prevail in the lawsuit asserted by Avid or that the expense or other effects of
the lawsuit, whether or not the Company prevails, will not have a material
adverse effect on the Company's business, operating results and financial
condition.
(ii) From time to time the Company is involved in other disputes and/or
litigation encountered in its normal course of business. The Company does not
believe that the ultimate impact of the resolution of such other outstanding
matters will have a material effect on the Company's business, operating results
or financial condition.
7. Capitalized Software Development Costs
The Company capitalizes certain computer software development costs.
Capitalization of costs commences upon establishing technological feasibility.
Capitalized costs, net of accumulated amortization, were approximately $89,000
as of May 31, 1998 and November 30, 1997, and are included in other assets.
These costs are amortized on a straight-line basis over two years, which
approximates the economic life of the product. Amortization expense, included in
cost of sales in the accompanying consolidated statements of operations, was
approximately $30,000 and $80,000 for the six months ended May 31, 1998 and
twelve months ended November 30, 1997, respectively.
8. Income Taxes
Due to the net loss for the three and six months ended May 31, 1998 and the
Company's current expectation that it will not be profitable for the full year
ended November 30, 1998, the Company anticipates its tax liabilities for fiscal
1998 will not be significant.
9. Accrued Expenses
Accrued expenses at May 31, 1998 and November 30, 1997 consist of the
following (in thousands):
<TABLE>
<CAPTION>
May 31, November 30,
1998 1997
------- ------------
<S> <C> <C>
Accrued commissions $ 203 $ 213
Payroll and related taxes 2,136 1,552
Accrued marketing, legal and other expense 6,491 4,689
Accrued taxes 504 504
------- ------------
$ 9,334 $ 6,958
------- ------------
------- ------------
</TABLE>
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
Except for the historical information contained herein, the matters discussed in
this Quarterly Report on Form 10-Q are forward-looking statements based on
current expectations, and involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Company, or industry results, to be materially different from those
expressed in such forward-looking statements. The risks and uncertainties
associated with such statements have been described under the heading "Certain
Factors That May Affect Future Results" in the Company's Annual Report on Form
10-K for the fiscal year ended November 30, 1997.
Media 100 Inc. is a technology and market leader in the market for personal
computer-based digital video systems. The Media 100 family of products are
analog and digital conversion systems that enable users to capture video and
audio into a personal computer, perform random-access ("nonlinear") video
editing and audio mixing, and directly produce a finished program with
broadcast-quality picture and compact disc-quality sound, all without the use of
traditional video tape equipment.
Results of Operations
The following table shows certain consolidated statements of operations data as
a percentage of net sales.
<TABLE>
<CAPTION>
Three Months Ended May 31, Six Months Ended May 31,
1998 1997 1998 1997
-------------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales 39.0 39.1 38.9 38.5
-------------- ----------- ----------- ------------
Gross profit 61.0 60.9 61.1 61.5
Operating expenses:
Research and development 49.5 17.9 38.5 17.6
Selling and marketing 38.8 34.1 36.7 35.4
General and administrative 10.1 8.4 9.8 8.2
-------------- ----------- ----------- ------------
Total operating expenses 98.4 60.4 85.0 61.2
Income (loss) from operations (37.4) .5 (23.9) .3
Interest income and other, net 2.6 3.0 3.6 2.4
-------------- ----------- ----------- ------------
Income (loss) before tax provision (34.8) 3.5 (20.3) 2.7
Tax provision - .7 - .6
-------------- ----------- ----------- ------------
Net income (loss) (34.8) % 2.8 % (20.3) % 2.1 %
-------------- ----------- ----------- ------------
-------------- ----------- ----------- ------------
</TABLE>
Comparison of Second Fiscal Quarter of 1998 to Second Fiscal Quarter of 1997
Net sales for the fiscal quarter ended May 31, 1998 were $9,637,000, a decrease
of $2,465,000, or 20.4%, from the same period a year ago. Net sales decreased
for the quarter ended May 31, 1998 primarily due to a decrease in overall units
sold and lower average selling prices for the Company's Media 100 products. The
Company's product line includes hardware and software products priced from
$1,995 to $19,995, hardware and software upgrades for these products and
technical support services for all of the Company's products. The decline in net
sales and lower average selling prices was partially offset by higher net sales
of hardware and software upgrades and technical support services.
Gross profit for the fiscal quarter ended May 31, 1998 was 61.0%, compared to
60.9% in the comparable quarter a year ago. Reductions in the cost of key
component parts used in the manufacture of the Media 100 hardware offset the
lower average selling prices allowing the Company's gross profit to remain
consistent with the year ago level.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Comparison of Second Fiscal Quarter of 1998 to Second Fiscal Quarter of 1997
(continued)
The Company sustained an operating loss for the second fiscal quarter of 1998 of
$3,604,000 compared to income from operations of $63,000 for the same period a
year ago. Operating income was lower in the quarter ended May 31, 1998 due to
lower net sales and higher operating expenses. Operating expenses for the second
fiscal quarter of 1998 were $9,482,000, an increase of $2,173,000, or 29.7%,
from the same period a year ago. In the first quarter of fiscal 1998, the
Company announced its intentions to significantly increase research and
development expenditures in fiscal 1998 over fiscal 1997 to support the
development of products running on the Windows NT platform. Research and
development expenses for the second quarter of fiscal 1998 were $4,774,000, an
increase of $ 2,613,000, or 120.9%, from the same period a year ago. Selling and
marketing expenses for the second fiscal quarter of 1998 were $3,740,000, a
decrease of $394,000, or 9.5%, from the same period a year ago. The Company
expects that selling and marketing expenses will increase from their current
levels in connection with introduction of new products based on the Windows NT
platform; the Company expects to begin such shipments in the latter half of
fiscal 1998. General and administrative expenses for the second fiscal quarter
of 1998 were $968,000, a decrease of $46,000, or 4.5%, from the same period a
year ago.
Interest income for the fiscal quarter ended May 31, 1998 was $416,000, or 4.3%
of net sales, compared to $432,000, or 3.6% of net sales, in the comparable
quarter a year ago. Other expense, net of other income, for the second fiscal
quarter of 1998 was $162,000 an increase of $86,000 over the same period a year
ago, reflecting the impact of foreign currency translations arising out of the
Company's subsidiaries.
The Company currently estimates its tax liabilities for the full year of 1998
will not be material due to an anticipated loss for fiscal 1998 and therefore
the Company has not provided for income taxes. This compares to a tax provision
of $83,000 for the fiscal quarter ended May 31, 1997.
The net loss for the second fiscal quarter ended May 31, 1998 was $ 3,350,000 or
$0.41 per share, compared to net income of $336,000, or $0.04 per share, for the
same period a year ago.
Comparison of First Six Months of 1998 to the First Six Months of 1997
Net sales for the first six months of 1998 were $20,158,000, a decrease of
$3,468,000, or 14.7%, from the same period a year ago. The decrease in net sales
for the six months ended May 31, 1998 is primarily attributable to lower unit
sales and lower average selling prices for the Company's Media 100 products. The
Company's product line includes hardware and software products priced from
$1,995 to $19,995, hardware and software upgrades for these products and
technical support services for all of the Company's products. The decline in net
sales and lower average selling prices was partially offset by higher net sales
of hardware and software upgrades and technical support services.
Gross margin for the first six months of 1998 was 61.1%, compared to 61.5% in
the comparable period a year ago. This decrease in gross profit was primarily
the result of lower average selling prices partially offset by reductions in the
cost of key component parts used in the manufacture of the Media 100 hardware.
The Company sustained an operating loss for the first six months of 1998 of
$4,827,000 compared to income from operations of $69,000 for the same period a
year ago. Operating income was lower for the six month period ended May 31, 1998
due to a decrease in sales and an expected increase in operating expenses.
Operating expenses for the first six months of 1998 were $17,133,000, an
increase of $2,667,000, or 18.4%, from the same period a year ago. In the first
quarter of fiscal 1998, the Company announced its intentions to significantly
increase research and development expenditures in fiscal 1998 over fiscal 1997
to support the development of products running on the Windows NT platform.
Research and development expenses for the first six months of fiscal 1998 were
$7,765000, an increase of $ 3,609,000, or 86.8%, from the same period a year
ago. Selling and marketing expenses for the first six months of fiscal 1998 were
$7,402,000, a decrease of $961,000, or 11.5%, from the same period a year
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Comparison of First Six Months of 1998 to the First Six Months of 1997
(continued)
ago. The decrease in selling and marketing expenses reflects primarily
reductions in headcount and advertising expenses related to the Company's
existing products. However, the Company expects that selling and marketing
expenses will increase from their current levels in connection with introduction
of new products based on the Windows NT platform; the Company expects to begin
such shipments in the latter half of fiscal 1998. General and administrative
expenses for the first six months of fiscal 1998 were $1,966,000, an increase of
$19,000, or .1%, from the same period a year ago.
Interest income for the first six months of 1998 was $841,000, or 4.2% of net
sales, compared to $894,000, or 3.8% of net sales, in the comparable period a
year ago. Other expense, net of other income, for the six month period ended May
31, 1998 was $104,000, a decrease of $220,00 over the same period a year ago,
reflecting the impact of foreign currency translations arising out of the
Company's subsidiaries.
The Company currently estimates its tax liabilities for the full year of 1998
will not be material due to an anticipated loss for fiscal 1998 and therefore a
$12,000 tax provision has been established. This compares to a tax provision of
$138,000 for the first six months of fiscal 1997.
The net loss for the six month period ended May 31, 1998 was $4,102,000 or $0.50
per share, compared to net income of $501,000, or $0.06 per share, for the same
period a year ago.
Liquidity and Capital Resources
The Company has funded its operations to date primarily from public offerings of
equity securities and cash flows from operations. As of May 31, 1998 the
Company's principal sources of liquidity included cash and cash equivalents and
marketable securities totaling approximately $33,902,000.
In the first six months of 1998, cash provided by operating activities was
approximately $2,527,000 compared to approximately $4,971,000 for the same
period a year ago. Cash was generated during the six months ended May 31, 1998
from an increase in accrued expenses of $2,376,000 and deferred revenue of
$1,260,000 and a reduction in accounts receivable of $1,842,000. This increase
in cash was partially offset by a reduction in accounts payable of $294,000. Net
cash used in investing activities was approximately $3,812,000 during the first
six months of 1998 compared to approximately $5,290,000 for the same period a
year ago. Cash used in investing activities during the six month period ended
May 31, 1998 was primarily for purchases of equipment of approximately
$1,923,000 and net purchases of marketable securities of approximately
$1,889,000. Cash provided by financing activities during the first six months of
1998 was approximately $268,000 compared to $233,000 for the same period a year
ago. All of the cash provided by financing activities in the first six months of
1998 came from proceeds from the Company's stock plans.
The Company believes its existing cash balance, including cash equivalents and
marketable securities, will be sufficient to meet the Company's cash
requirements for at least the next twelve months.
11
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
i) On June 7, 1995, a lawsuit was filed against the Company by Avid Technology,
Inc. ("Avid"), in the United States District Court for the District of
Massachusetts. The complaint generally alleges patent infringement by the
Company arising from the manufacture, sale, and use of the Company's Media 100
product. The complaint includes requests for injunctive relief, treble damages,
interest, costs and fees. In July, 1995 the Company filed an Answer and
Counterclaim denying any infringement and asserting that the Avid patent in
question is invalid. The Company intends to vigorously defend the lawsuit. In
addition, Avid is seeking reissue of the patent, including claims that it
asserts are broader than in the existing patent, and these reissue proceedings
remain pending before the U.S. Patent and Trademark Office. On January 16, 1998,
the court dismissed the lawsuit without prejudice to either party moving to
restore it to the docket upon completion of all matters pending before the U.S.
Patent and Trademark Office. There can be no assurance that the Company will
prevail in the lawsuit asserted by Avid or that the expense or other effects of
the lawsuit, whether or not the Company prevails, will not have a material
adverse effect on the Company's business, operating results and financial
condition.
Item 4. Submission of Matters to a Vote of Security Holders
The Company held an annual meeting of stockholders on April 15, 1998, at which
the stockholders approved the following proposals by the number of shares of
Common Stock voted as noted below:
Proposal
<TABLE>
<CAPTION>
(1) Election of Directors Number of Shares
----------------
Voted For Withheld
--------- --------
<S> <C> <C>
John A. Molinari 7,107,324 201,846
Roger Redmond 7,119,824 189,346
Maurice L. Castonguay 7,119,274 189,896
Bruce I. Sachs 7,118,774 190,396
Paul J. Severino 7,118,290 190,880
</TABLE>
(2)
<TABLE>
<CAPTION>
Number of Shares
Voted For Voted Against Abstained
--------- ---------------- ---------
<S> <C> <C> <C>
Increase by 200,000 the number of shares of the Company's
common stock, $.01 par value per share available for
issuance under the 1986 Employee Stock Purchase Plan for a
total of 800,000 shares available under such plan: 7,028,030 268,666 12,474
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Exhibits required as part of this Quarterly Report on Form 10-Q are listed in
the exhibit index on page 14.
b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter for which this report
is filed.
12
<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.
Media 100 Inc.
Date: July 14, 1998 By: /s/ Steven D. Shea
--------------------------
Steven D. Shea
Corporate Controller
(Principal Financial Officer
and Principal Accounting Officer)
13
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Number Description
------ -----------
<S> <C>
3.2 By-laws of Media 100, Inc., as amended
27 Financial Data Schedule
</TABLE>
14
<PAGE>
BY-LAWS
OF
MEDIA 100 INC.
(as amended through June 17, 1998)
Section 1. LAW, CERTIFICATE OF INCORPORATION AND BY-LAWS
1.1. These by-laws are subject to the certificate of incorporation of
the corporation. In these by-laws, references to law, the certificate of
incorporation and by-laws mean the law, the provisions of the certificate of
incorporation and the by-laws as from time to time in effect.
Section 2. STOCKHOLDERS
2.1. Annual Meeting. The annual meeting of stockholders shall be held
at 10:00 a.m. on the third Wednesday in April in each year (or if that day is a
legal holiday at the place where the meeting is to be held, then at the same
hour on the next succeeding day that is not a legal holiday), or at such other
date and time as shall be designated from time to time by the board of directors
and stated in the notice of the meeting, at which they shall elect a board of
directors and transact such other business as may be required by law or these
by-laws or as may properly come before the meeting. At an annual meeting of the
stockholders, only such business shall be conducted as shall have been properly
brought before the meeting as (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the board of directors, (b)
otherwise properly brought before the meeting by or at the direction of the
board of directors, or (c) otherwise properly brought before the meeting by a
stockholder by the stockholder's giving timely notice thereof in writing to the
secretary of the corporation. To be timely, a stockholder's notice must be
received at the principal executive offices of the corporation: (1) not less
than 60 days in advance of such meeting if such meeting is to be held on a day
which is within 30 days preceding the anniversary of the previous year's annual
meeting or 90 days in advance of such meeting if such meeting is to be held on
or after the anniversary of the previous year's annual meeting; and (2) with
respect to any other annual meeting of stockholders, on or before the close of
business on the 15th day following the earliest date of public disclosure of the
date of such meeting. For purposes of this section, the date of public
disclosure of a meeting shall include, but not be limited to, the date on which
disclosure of the date of the meeting is made in a press release reported by the
Dow Jones News Services, Associated Press or a comparable national news service,
or in a document publicly filed by the corporation with the Securities and
Exchange Commission pursuant to Sections 13, 14 or 15(d) (or the rules and
regulations thereunder) of the Securities Exchange Act of 1934, as amended. A
stockholder's notice to the secretary shall set forth as to each matter the
stockholder proposes to bring before the annual meeting (a) a brief description
of the business desired to be brought before the
<PAGE>
annual meeting and the reasons for conducting such business at the annual
meeting, (b) the name, age and business and residential address, as they appear
on the corporation's records, of the stockholder proposing such business, (c)
the class and number of shares of the corporation which are beneficially owned
by the stockholder, and (d) any material interest of the stockholder in such
business. Notwithstanding anything in the by-laws to the contrary, no business
shall be conducted at an annual meeting except in accordance with the procedures
set forth herein. The chairman of the annual meeting shall, if the facts
warrant, determine and declare to the meeting that business was not properly
brought before the meeting and in accordance with the provisions hereof and if
the chairman should so determine, the chairman shall so declare to the meeting
and any such business not properly brought before the meeting shall not be
transacted.
2.2. Special Meetings. All meetings of the stockholders may be called
at any time by the chief executive officer or the board of directors. A special
meeting of the stockholders shall be called by the secretary, or, in the case of
the death, absence, incapacity or refusal of the secretary, by an assistant
secretary, or some other officer, upon application of a majority of the
directors. Any such application shall state the purpose or purposes of the
proposed meeting. Any such call shall state the place, date, hour, and purposes
of the meeting.
2.3. Place of Meetings. All meetings of the stockholders for the
election of directors or for any other purpose shall be held at such place
within or without the State of Delaware as may be determined from time to time
by the chief executive officer or the board of directors. Any adjourned session
of any meeting of the stockholders shall be held at the place designated in the
vote of adjournment.
2.2. Notice of Meetings. Except as otherwise provided by law, a written
notice of each meeting of stockholders stating the place, day and hour thereof
and, in the case of a special meeting, the purposes for which the meeting is
called, shall be given not less than ten nor more than sixty days before the
meeting, to each stockholder entitled to vote thereat, and to each stockholder
who, by law, by the certificate of incorporation or by these by-laws, is
entitled to notice, by leaving such notice with him or at his residence or usual
place of business, or by depositing it in the United States mail, postage
prepaid, and addressed to such stockholder at his address as it appears in the
records of the corporation. Such notice shall be given by the secretary, or by
an officer or person designated by the board of directors, or in the case of a
special meeting by the officer calling the meeting. As to any adjourned session
of any meeting of stockholders, notice of the adjourned meeting need not be
given if the time and place thereof are announced at the meeting at which the
adjournment was taken except that if the adjournment is for more than thirty
days or if after the adjournment a new record date is set for the adjourned
session, notice of any such adjourned session of the meeting shall be given in
the manner heretofore described. No notice of any meeting of stockholders or any
adjourned session thereof need be given to a stockholder if a written waiver of
notice, executed before or after the meeting or such adjourned session by such
stockholder, is filed with the records of the meeting or if the stockholder
attends such meeting without objecting at the
2
<PAGE>
beginning of the meeting to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any meeting of the stockholders or any adjourned session
thereof need be specified in any written waiver of notice.
2.3. Quorum of Stockholders. At any meeting of the stockholders a
quorum as to any matter shall consist of a majority of the votes entitled to be
cast on the matter, except where a larger quorum is required by law, by the
certificate of incorporation or by these by-laws. Any meeting may be adjourned
from time to time by a majority of the votes properly cast upon the question,
whether or not a quorum is present. If a quorum is present at an original
meeting, a quorum need not be present at an adjourned session of that meeting.
Shares of its own stock belonging to the corporation or to another corporation,
if a majority of the shares entitled to vote in the election of directors of
such other corporation is held, directly or indirectly, by the corporation,
shall neither be entitled to vote nor be counted for quorum purposes; provided,
however, that the foregoing shall not limit the right of any corporation to vote
stock, including but not limited to its own stock, held by it in a fiduciary
capacity.
2.4. Action by Vote. When a quorum is present at any meeting, a
plurality of the votes properly cast for election to any office shall elect to
such office and a majority of the votes properly cast upon any question other
than an election to an office shall decide the question, except when a larger
vote is required by law, by the certificate of incorporation or by these
by-laws. No ballot shall be required for any election unless requested by a
stockholder present or represented at the meeting and entitled to vote in the
election.
2.5. Proxy Representation. Every stockholder may authorize another
person or persons to act for him by proxy in all matters in which a stockholder
is entitled to participate, whether by waiving notice of any meeting, objecting
to or voting or participating at a meeting, or expressing consent or dissent
without a meeting. Every proxy must be signed by the stockholder or by his
attorney-in-fact. No proxy shall be voted or acted upon after three years from
its date unless such proxy provides for a longer period. A duly executed proxy
shall be irrevocable if it states that it is irrevocable and if, and only as
long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the corporation generally. The authorization of a proxy may but need
not be limited to specified action, provided, however, that, if a proxy limits
its authorization to a meeting or meetings of stockholders, unless otherwise
specifically provided such proxy shall entitle the holder thereof to vote at any
adjourned session but shall not be valid after the final adjournment thereof.
2.6. Inspectors. The directors or the person presiding at the meeting
may, and shall if required by applicable law, appoint one or more inspectors of
election and any substitute inspectors to act at the meeting or any adjournment
thereof. Each inspector,
3
<PAGE>
before entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector at such meeting with strict
impartiality and according to the best of his ability. The inspectors, if any,
shall determine the number of shares of stock outstanding and the voting power
of each, the shares of stock represented at the meeting, the existence of a
quorum, and the validity and effect of proxies, and shall receive votes, ballots
or consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all stockholders. On request of the person
presiding at the meeting, the inspectors shall make a report in writing of any
challenge, question or matter determined by them and execute a certificate of
any fact found by them.
2.7. List of Stockholders. The secretary shall prepare and make, at
least ten days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at such meeting, arranged in alphabetical order
and showing the address of each stockholder and the number of shares registered
in his name. The stock ledger shall be the only evidence as to who are
stockholders entitled to examine such list or to vote in person or by proxy at
such meeting.
Section 3. BOARD OF DIRECTORS
3.1. Number. The corporation shall have one or more directors, the
number of directors to be determined from time to time by vote of a majority of
the directors then in office. Except in connection with the election of
directors at the annual meeting of stockholders, the number of directors may be
decreased only to eliminate vacancies by reason of death, resignation or removal
of one or more directors. No director need be a stockholder.
3.2. Tenure. Each director shall hold office until the next annual
meeting and until his successor is elected and qualified, or until he sooner
dies, resigns, is removed or becomes disqualified.
3.3. Powers. The business and affairs of the corporation shall be
managed by or under the direction of the board of directors who shall have and
may exercise all the powers of the corporation and do all such lawful acts and
things as are not by law, the certificate of incorporation or these by-laws
directed or required to be exercised or done by the stockholders.
3.4. Vacancies. Vacancies and any newly created directorships resulting
from any increase in the number of directors may be filled by vote of the
holders of the particular class or series of stock entitled to elect such
director at a meeting called for the purpose, or by a majority of the directors
then in office, although less than a quorum, or by a sole remaining director, in
each case elected by the particular class or series of stock entitled to elect
such directors. When one or more directors shall resign from the board,
effective at a future date, a majority of the directors then in office,
including those who
4
<PAGE>
have resigned, who were elected by the particular class or series of stock
entitled to elect such resigning director or directors shall have power to fill
such vacancy or vacancies, the vote or action by writing thereon to take effect
when such resignation or resignations shall become effective. The directors
shall have and may exercise all their powers notwithstanding the existence of
one or more vacancies in their number, subject to any requirements of law or of
the certificate of incorporation or of these by-laws as to the number of
directors required for a quorum or for any vote or other actions.
3.5. Committees. The board of directors may, by vote of a majority of
the whole board, (a) designate, change the membership of or terminate the
existence of any committee or committees, each committee to consist of one or
more of the directors; (b) designate one or more directors as alternate members
of any such committee who may replace any absent or disqualified member at any
meeting of the committee; and (c) determine the extent to which each such
committee shall have and may exercise the powers of the board of directors in
the management of the business and affairs of the corporation, including the
power to authorize the seal of the corporation to be affixed to all papers which
require it and the power and authority to declare dividends or to authorize the
issuance of stock; excepting, however, such powers which by law, by the
certificate of incorporation or by these by-laws they are prohibited from so
delegating. In the absence or disqualification of any member of such committee
and his alternate, if any, the member or members thereof present at any meeting
and not disqualified from voting, whether or not constituting a quorum, may
unanimously appoint another member of the board of directors to act at the
meeting in the place of any such absent or disqualified member. Except as the
board of directors may otherwise determine, any committee may make rules for the
conduct of its business, but unless otherwise provided by the board or such
rules, its business shall be conducted as nearly as may be in the same manner as
is provided by these by-laws for the conduct of business by the board of
directors. Each committee shall keep regular minutes of its meetings and report
the same to the board of directors upon request.
3.6. Regular Meetings. Regular meetings of the board of directors may
be held without call or notice at such places within or without the State of
Delaware and at such times as the board may from time to time determine,
provided that notice of the first regular meeting following any such
determination shall be given to absent directors. A regular meeting of the
directors may be held without call or notice immediately after and at the same
place as the annual meeting of stockholders.
3.7. Special Meetings. Special meetings of the board of directors may
be held at any time and at any place within or without the State of Delaware
designated in the notice of the meeting, when called by the chief executive
officer, the president, or by one-third or more in number of the directors,
reasonable notice thereof being given to each director by the secretary, the
chief executive officer, the president or any one of the directors calling the
meeting.
5
<PAGE>
3.7. Notice. It shall be reasonable and sufficient notice to a director
to send notice by mail at least forty-eight hours or by telegram at least
twenty-four hours before the meeting addressed to him at his usual or last known
business or residence address or to give notice to him in person or by telephone
at least twenty-four hours before the meeting. Notice of a meeting need not be
given to any director if a written waiver of notice, executed by him before or
after the meeting, is filed with the records of the meeting, or to any director
who attends the meeting without protesting prior thereto or at its commencement
the lack of notice to him. Neither notice of a meeting nor a waiver of a notice
need specify the purposes of the meeting.
3.8. Quorum. Except as may be otherwise provided by law, by the
certificate of incorporation or by these by-laws, at any meeting of the
directors a majority of the directors then in office shall constitute a quorum;
a quorum shall not in any case be less than one-third of the total number of
directors constituting the whole board. Any meeting may be adjourned from time
to time by a majority of the votes cast upon the question, whether or not a
quorum is present, and the meeting may be held as adjourned without further
notice.
3.9. Action by Vote. Except as may be otherwise provided by law, by the
certificate of incorporation or by these by-laws, when a quorum is present at
any meeting the vote of a majority of the directors present shall be the act of
the board of directors.
3.10. Action Without a Meeting. Any action required or permitted to be
taken at any meeting of the board of directors or a committee thereof may be
taken without a meeting if all the members of the board or of such committee, as
the case may be, consent thereto in writing, and such writing or writings are
filed with the records of the meetings of the board or of such committee. Such
consent shall be treated for all purposes as the act of the board or of such
committee, as the case may be.
3.11. Participation in Meetings by Conference Telephone. Members of the
board of directors, or any committee designated by such board, may participate
in a meeting of such board or committee by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other or by any other means permitted by law. Such
participation shall constitute presence in person at such meeting.
3.12. Compensation. In the discretion of the board of directors, each
director may be paid such fees for his services as director and be reimbursed
for his reasonable expenses incurred in the performance of his duties as
director as the board of directors from time to time may determine. Nothing
contained in this section shall be construed to preclude any director from
serving the corporation in any other capacity and receiving reasonable
compensation therefor.
6
<PAGE>
3.13. Interested Directors and Officers.
(a) No contract or transaction between the corporation and one or more
of its directors or officers, or between the corporation and any other
corporation, partnership, association, or other organization in which one or
more of the corporation's directors or officers are directors or officers, or
have a financial interest, shall be void or voidable solely for this reason, or
solely because the director or officer is present at or participates in the
meeting of the board or committee thereof which authorizes the contract or
transaction, or solely because his or their votes are counted for such purpose,
if:
(1) The material facts as to his relationship or interest and
as to the contract or transaction are disclosed or are known to the board of
directors or the committee, and the board or committee in good faith authorizes
the contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or
(2) The material facts as to his relationship or interest and
as to the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the corporation
as of the time it is authorized, approved or ratified, by the board of
directors, a committee thereof, or the stockholders.
(b) Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the board of directors or of a committee
which authorizes the contract or transaction.
Section 4. OFFICERS AND AGENTS
4.1. Enumeration; Qualification. The officers of the corporation shall
be a chief executive officer, a president, a treasurer, a secretary and such
other officers, if any, as the board of directors from time to time may in its
discretion elect or appoint including without limitation a chairman of the board
(who must be a director), one or more vice presidents and a controller. The
corporation may also have such agents, if any, as the board of directors from
time to time may in its discretion choose. Any officer need not be a stockholder
of the corporation nor, except in the case of the chairman of the board, need
any such officer be a director of the corporation. Any two or more offices may
be held by the same person, unless otherwise prohibited by law, the certificate
of incorporation or these by-laws. Any officer may be required by the board of
directors to secure the faithful performance of his duties to the corporation by
giving bond in such amount and with sureties or otherwise as the board of
directors may determine.
7
<PAGE>
4.14. Powers. Subject to law, to the certificate of incorporation and
to the other provisions of these by-laws, each officer shall have, in addition
to the duties and powers herein set forth, such duties and powers as are
commonly incident to his office and such additional duties and powers as the
board of directors may from time to time designate.
4.15. Election. The officers may be elected by the board of directors
at their first meeting following the annual meeting of the stockholders or at
any other time. At any time or from time to time the directors may delegate to
any officer their power to elect or appoint any other officer or any agents.
4.16. Tenure. Each officer shall hold office until the first meeting of
the board of directors following the next annual meeting of the stockholders and
until his respective successor is chosen and qualified unless a shorter period
shall have been specified by the terms of his election or appointment, or in
each case until he sooner dies, resigns, is removed or becomes disqualified.
Each agent shall retain his authority at the pleasure of the directors, or the
officer by whom he was appointed or by the officer who then holds agent
appointive power.
4.5. Chairman of the Board of Directors, Chief Executive Officer,
President and Vice President. The chairman of the board, if any, shall preside
at all meetings of the directors and of the stockholders and shall have such
additional duties and powers as shall be designated from time to time by the
board of directors.
The chief executive officer, subject to the control of the directors,
shall have general charge and supervision of the business of the corporation. In
the absence or disability of the chairman of the board, or if there be none, the
chief executive officer shall preside at all meetings of the directors and of
the stockholders. In the absence or disability of the chief executive officer,
the president shall perform his duties and have his powers.
The president shall have full responsibility for the day-to-day
business operations of the corporation and shall have such additional duties and
powers as shall be designated from time to time by the board of directors.
Any vice presidents shall have such duties and powers as shall be set
forth in these by-laws or as shall be designated from time to time by the board
of directors or by the chief executive officer or the president.
4.6. Treasurer and Assistant Treasurers. Unless the board of directors
otherwise specifies, the treasurer shall be the chief financial officer of the
corporation and shall be in charge of its funds and valuable papers, and shall
have such other duties and powers as may be designated from time to time by the
board of directors or by the chief executive officer or the president. If no
controller is elected, the treasurer shall, unless the board of directors
otherwise specifies, also have the duties and powers of the controller.
8
<PAGE>
Any assistant treasurers shall have such duties and powers as shall be
designated from time to time by the board of directors, the chief executive
officer, the president or the treasurer.
4.7. Controller and Assistant Controllers. If a controller is elected,
he shall, unless the board of directors otherwise specifies, be the chief
accounting officer of the corporation and be in charge of its books of account
and accounting records, and of its accounting procedures. He shall have such
other duties and powers as may be designated from time to time by the board of
directors, the chief executive officer, the president or the treasurer.
Any assistant controller shall have such duties and powers as shall be
designated from time to time by the board of directors, the chief executive
officer, the president, the treasurer or the controller.
4.8. Secretary and Assistant Secretaries. The secretary shall record
all proceedings of the stockholders, of the board of directors and of committees
of the board of directors in a book or series of books to be kept therefor and
shall file therein all actions by written consent of stockholders or directors.
In the absence of the secretary from any meeting, an assistant secretary, or, if
there be none or he is absent, a temporary secretary chosen at the meeting,
shall record the proceedings thereof. Unless a transfer agent has been appointed
the secretary shall keep or cause to be kept the stock and transfer records of
the corporation, which shall contain the names and record addresses of all
stockholders and the number of shares registered in the name of each
stockholder. He shall have such other duties and powers as may from time to time
be designated by the board of directors or by the chief executive officer or the
president.
Any assistant secretaries shall have such duties and powers as shall be
designated from time to time by the board of directors, the chief executive
officer, the president or the secretary.
Section 5. RESIGNATIONS AND REMOVALS
5.1 Any director or officer may resign at any time by delivering his
resignation in writing to the chief executive officer, the president, or the
secretary or to a meeting of the board of directors. Such resignation shall be
effective upon receipt unless specified to be effective at some other time, and
without in either case the necessity of its being accepted unless the
resignation shall so state. A director (including persons elected by
stockholders or directors to fill vacancies in the board) may be removed from
office with or without cause by the vote of the holders of a majority of the
issued and outstanding shares of the particular class or series entitled to vote
in the election of such director. The board of directors may at any time remove
any officer either with or without cause. The board of directors may at any time
terminate or modify the authority of any agent.
8
<PAGE>
Section 6. VACANCIES
6.1 If the office of the chief executive officer or the president or
the treasurer or the secretary becomes vacant, the directors may elect a
successor by vote of a majority of the directors then in office. If the office
of any other officer becomes vacant, any person or body empowered to elect or
appoint that officer may choose a successor. Each such successor shall hold
office for the unexpired term, and in the case of the chief executive officer,
the president, the treasurer and the secretary until his successor is chosen and
qualified or in each case until he sooner dies, resigns, is removed or becomes
disqualified. Any vacancy of a directorship shall be filled as specified in
Section 3.4 of these by-laws.
Section 7. CAPITAL STOCK
7.1 Stock Certificates. Each stockholder shall be entitled to a
certificate stating the number and the class and the designation of the series,
if any, of the shares held by him, in such form as shall, in conformity to law,
the certificate of incorporation and the by-laws, be prescribed from time to
time by the board of directors. Such certificate shall be signed by the chairman
of the board or the president or a vice president and by the treasurer or an
assistant treasurer or by the secretary or an assistant secretary. Any of or all
the signatures on the certificate may be a facsimile. In case an officer,
transfer agent, or registrar who has signed or whose facsimile signature has
been placed on such certificate shall have ceased to be such officer, transfer
agent, or registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer, transfer agent, or
registrar at the time of its issue.
7.17. Loss of Certificates. In the case of the alleged theft, loss,
destruction or mutilation of a certificate of stock, a duplicate certificate may
be issued in place thereof, upon such terms, including receipt of a bond
sufficient to indemnify the corporation against any claim on account thereof, as
the board of directors may prescribe.
Section 8. TRANSFER OF SHARES OF STOCK
8.1. Transfer on Books. Subject to the restrictions, if any, stated or
noted on the stock certificate, shares of stock may be transferred on the books
of the corporation by the surrender to the corporation or its transfer agent of
the certificate therefor properly endorsed or accompanied by a written
assignment and power of attorney properly executed, with necessary transfer
stamps affixed, and with such proof of the authenticity of signature as the
board of directors or the transfer agent of the corporation may reasonably
require. Except as may be otherwise required by law, by the certificate of
incorporation or by these by-laws, the corporation shall be entitled to treat
the record holder of stock as shown on its books as the owner of such stock for
all purposes, including the payment of dividends and the right to receive notice
and to vote or to give any consent with respect thereto and to be held liable
for such calls and assessments, if any, as may lawfully be made thereon,
regardless of any transfer, pledge or other
10
<PAGE>
disposition of such stock until the shares have been properly transferred on the
books of the corporation.
It shall be the duty of each stockholder to notify the corporation of
his post office address.
8.2. Record Date. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, the board of directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the board of directors, and which record date shall
not be more than sixty nor less than ten days before the date of such meeting.
If no such record date is fixed by the board of directors, the record date for
determining the stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the board of directors may fix a new record date for the adjourned meeting.
In order that the corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the board of
directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the board of
directors, and which date shall not be more than ten days after the date upon
which the resolution fixing the record date is adopted by the board of
directors. If no such record date has been fixed by the board of directors, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the board of directors is
required by the General Corporation Law of the State of Delaware, shall be the
first date on which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the corporation by delivery to its
registered office in Delaware by hand or certified or registered mail, return
receipt requested, to its principal place of business or to an officer or agent
of the corporation having custody of the book in which proceedings of meetings
of stockholders are recorded. If no record date has been fixed by the board of
directors and prior action by the board of directors is required by the General
Corporation Law of the State of Delaware, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the board of
directors adopts the resolution taking such prior action.
In order that the corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights or to exercise any rights in respect of any change, conversion or
exchange of stock, or for the purpose of any other lawful action, the board of
directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted, and which record
date shall be not more than sixty days prior to such payment, exercise or
11
<PAGE>
other action. If no such record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the board of directors adopts the resolution relating thereto.
Section 9. CORPORATE SEAL
9.1. Subject to alteration by the directors, the seal of the
corporation shall consist of a flat-faced circular die with the word "Delaware"
and the name of the corporation cut or engraved thereon, together with such
other words, dates or images as may be approved from time to time by the
directors.
Section 10. EXECUTION OF PAPERS
10.1 Except as the board of directors may generally or in particular
cases authorize the execution thereof in some other manner, all deeds, leases,
transfers, contracts, bonds, notes, checks, drafts or other obligations made,
accepted or endorsed by the corporation shall be signed by the chief executive
officer, the president, a vice president, the treasurer or the controller.
Section 11. FISCAL YEAR
11.1. The fiscal year of the corporation shall end on November 30 of
each year.
Section 12. AMENDMENTS
12.1. These by-laws may be adopted, amended or repealed by vote of a
majority of the directors then in office or by vote of a majority of the voting
power of the stock outstanding and entitled to vote. Any by-law, whether
adopted, amended or repealed by the stockholders or directors, may be amended or
reinstated by the stockholders or the directors.
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET ON FORM 10Q FOR THE PERIOD ENDED MAY 31, 1998 AND THE
CONSOLIDATED STATEMENT OF OPERATIONS AS FILED ON FORM 10Q FOR THE THREE AND SIX
MONTHS ENDED MAY 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> NOV-30-1998 NOV-30-1998
<PERIOD-START> MAR-01-1998 DEC-01-1997
<PERIOD-END> MAY-31-1998 MAY-31-1998
<CASH> 2,984 2,984
<SECURITIES> 30,918 30,918
<RECEIVABLES> 6,244 6,244
<ALLOWANCES> 397 397
<INVENTORY> 661 661
<CURRENT-ASSETS> 41,065 41,065
<PP&E> 12,312 12,312
<DEPRECIATION> 3,618 3,618
<TOTAL-ASSETS> 50,352 50,352
<CURRENT-LIABILITIES> 16,258 16,258
<BONDS> 0 0
0 0
0 0
<COMMON> 83 83
<OTHER-SE> 34,011 34,011
<TOTAL-LIABILITY-AND-EQUITY> 50,352 50,352
<SALES> 9,637 20,158
<TOTAL-REVENUES> 9,637 20,158
<CGS> 3,759 7,852
<TOTAL-COSTS> 3,759 7,852
<OTHER-EXPENSES> 9,482 17,133
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (3,350) (4,102)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (3,350) (4,102)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (3,350) (4,102)
<EPS-PRIMARY> (.41) (.50)
<EPS-DILUTED> (.41) (.50)
</TABLE>
