<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q/A
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
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 0-13244
ZYCAD CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 41-1404495
(State of incorporation) (I.R.S. Employer Identification No.)
47100 BAYSIDE PARKWAY, FREMONT, CALIFORNIA 94538
(Address of principal executive offices) ( Zip Code)
Registrant's telephone number, including area code: (510) 623-4400
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.
Title of Each Class Outstanding at June 30, 1996
------------------- ----------------------------
Common stock, par value $0.10 per share 20,361,190
1
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PART 1 - FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
ZYCAD CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
June 30, December 31,
1996 1995
-------- ------------
ASSETS
Current assets
Cash and cash equivalents $ 7,091 $ 3,722
Short-term investments 221 224
Accounts receivable, net 10,223 12,123
Inventories 2,583 1,788
Other current assets 1,204 765
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Total current assets 21,322 18,622
Property and equipment, net 5,291 5,598
Purchased technology 3,454 1,129
Other assets 4,568 3,631
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Total assets $ 34,635 $ 28,980
--------- ----------
--------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term obligations $ 1,217 $ 1,028
Accounts payable 4,214 3,968
Accrued expenses 4,744 3,955
Deferred revenues 3,506 2,930
--------- ----------
Total current liabilities 13,681 11,881
Subordinated convertible debenture notes 10,417 -
Long-term obligations 1,019 1,207
Other long-term liabilities 163 213
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Total liabilities 25,280 13,301
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Stockholders' equity
Common stock, par value $0.10 2,036 1,975
Additional paid-in capital 50,562 47,837
Accumulated translation adjustments (173) (19)
Accumulated deficit (43,070) (34,114)
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Total stockholders' equity 9,355 15,679
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Total liabilities and stockholders' equity $ 34,635 $ 28,980
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SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
2
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ZYCAD CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for per-share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------ ----------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues
Product $5,727 $7,412 $ 8,811 $ 14,745
Service 3,823 5,236 7,717 10,467
-------- -------- -------- --------
Total revenues 9,550 12,648 16,528 25,212
-------- -------- -------- --------
Cost of revenues
Product 1,695 1,661 2,930 3,469
Service 2,183 2,655 4,477 5,253
-------- -------- -------- --------
Total cost of revenues 3,878 4,316 7,407 8,722
-------- -------- -------- --------
Gross profit 5,672 8,332 9,121 16,490
-------- -------- -------- --------
Operating expenses
Sales and marketing 4,121 4,205 7,419 7,986
Research and development 4,099 2,585 8,429 5,306
General and administrative 891 705 1,711 1,424
-------- -------- -------- --------
Total operating expenses 9,111 7,495 17,559 14,716
-------- -------- -------- --------
Operating income (loss) (3,439) 837 (8,438) 1,774
-------- -------- -------- --------
Other income (expense)
Interest expense, net (533) (65) (593) (198)
Other income (expense), net 33 (31) 75 (155)
-------- -------- -------- --------
Other income (expense), net (500) (96) (518) (353)
-------- -------- -------- --------
Net income (loss) ($3,939) $741 ($8,956) $1,421
-------- -------- -------- --------
-------- -------- -------- --------
Net income (loss) per share ($0.20) $0.04 ($0.45) $0.07
-------- -------- -------- --------
-------- -------- -------- --------
Weighted average common shares
and common share equivalents
outstanding 20,026 20,318 19,914 20,392
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
3
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ZYCAD CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30, December 31,
1996 1995
-------- ------------
<S> <C> <C>
Cash flows from operating activities
Net Income (loss) $(8,956) $1,421
Adjustments to reconcile net income (loss) to net cash
generated by (used in) operating activities
Depreciation and amortization 2,038 2,314
Subordinated convertible debenture interest capitalized 417 -
Sales under capital leases, net (1,006) (904)
Changes in certain assets and liabilities
Accounts receivable 2,638 2,095
Inventories (795) 108
Other assets (533) 512
Accounts payable and accrued expenses 1,070 (1,708)
Deferred revenues 636 355
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Net cash generated by (used in) operations (4,491) 4,193
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Cash flows from investing activities
Property and equipment purchases (1,538) (541)
Increase in capitalized software (1,280) (400)
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Net cash used in investing activities (2,818) (941)
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Cash flows from financing activities
Net proceeds from issuance of convertible
debenture notes 10,000 -
Net proceeds from issuance of common stock 316 450
Decrease (increase) in debt obligation 287 (590)
Repayment of bank debt - (2,000)
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Net cash generated by (used in) financing activities 10,603 (2,140)
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Effect of exchange rate changes on cash
and cash equivalents 75 70
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Net increase in cash and cash equivalents 3,369 1,182
Cash and cash equivalents at beginning of period 3,722 2,861
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Cash and cash equivalents at end of period $7,091 $4,043
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Supplemental Disclosure of Noncash Activities
Common stock issued in connection with the acquisition
of all the outstanding shares of Attest Software, Inc. $2,400 $-
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
4
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ZYCAD CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. FINANCIAL STATEMENTS
The unaudited condensed consolidated financial statements of Zycad
Corporation for the three-month and six-month periods ended June 30, 1996
and 1995 reflect, in the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to fairly state the
results of operations for the interim period. The results of operations
for any interim period are not necessarily indicative of results for the
full year. The unaudited condensed consolidated interim financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto contained in the Company's December 31, 1995
Annual Report on Form 10-K.
2. NET INCOME (LOSS) PER SHARE
Net income per share is computed using the weighted average number of
common shares outstanding during each period including dilutive common
share equivalents (Common Stock options and warrants).
Net loss per share is computed using the weighted average number of common
shares outstanding. Common share equivalents have not been included in the
net loss per share calculation because the effect would be anti-dilutive.
3. INVENTORIES
Inventories consisted of (in thousand's):
June 30, 1996 December 31, 1995
------------- -----------------
Finished goods $ 745 $ 753
Raw materials and
work in process 1,838 1,035
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$2,583 $1,788
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4. SUBORDINATED CONVERTIBLE DEBENTURE NOTES
In May 1996, the Company sold a total of $10,000,000 of subordinated
convertible debenture notes (the Notes) to institutional investors as part
of a private placement. The Notes accrue interest at an annual rate of 6%,
beginning on the date of issue, with the principal due and payable three
years from the date of issue if and to the extent that the Notes are not
previously converted. The Notes are convertible at the option of the
holder into Common Stock at a price equal to 80% to 85% of the average
closing bid price for the Common Stock on the Nasdaq National Market for
the five trading days prior to the date of conversion. In addition, the
noteholders received warrants to purchase up to 100,000 additional shares
of the Company's stock at $10.00 per share, subject to certain conditions.
5. PURCHASED TECHNOLOGY
During the second quarter of 1996, the Company issued approximately 387,000
shares of the Company's common stock valued at approximately $2,400,000,
for the acquisition of all the outstanding shares of Attest Software, Inc.,
a software-based fault simulation and automatic test generation (ATG) tools
vendor.
5
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in the
Company's Form 10-K for the year ended December 31, 1995 under the caption
"Business."
RESULTS OF OPERATIONS
The 1995 second quarter and year-to-date results include revenue and costs
related to the Company's DOORS requirements management solution sales as
summarized below. In January 1996 the Company formed a joint venture with the
U.K. based owner of the DOORS technology to market and distribute the technology
in North America. Accordingly, the results of the joint venture will now be
reported on an equity basis rather than on the operating basis that had been the
reporting method in 1995. For the three-month and six-month periods ended June
30, 1996 the Company's 40% equity share of the joint venture profits was not
material. ($ in millions):
($'S IN MILLIONS) Three Month Six Month
Period Ended Period Ended
June 30, 1995 June 30, 1995
Service revenue $1.1 $2.2
Cost of service revenue 0.4 0.8
--------------- ---------------
Gross profit 0.7 1.4
Sales and marketing expense 0.5 0.9
--------------- ---------------
Operating income $0.2 $0.5
--------------- ---------------
--------------- ---------------
Effective June 1, 1996 the Company acquired Attest Software Inc. (Attest). The
revenues and expenses related to Attest which were included in the Company's
results of operations for the three-month and six-month periods ended June 30,
1996 were $0.3 million and $0.1 million, respectively.
REVENUES
Revenues for the quarter ended June 30, 1996 were $9.6 million, a decrease of
$3.1 million compared to the comparable period in 1995. Product revenues
decreased $1.7 million as two separate $1.0 million customer purchases in the
1995 quarter were not duplicated in 1996. Additionally, the Company is
transitioning from its current generation accelerator products for logic
simulation to its next generation, faster LightSpeed accelerator product. The
LightSpeed product will be available for shipment in quantity in September 1996.
As a result of this transition, some customers are waiting for the availability
of LightSpeed before purchasing accelerators for their engineering projects.
This $1.7 million decline in product revenues was partially offset by $0.3
million of revenues from new software products, which resulted from the
acquisition of Attest.
The $5.9 million decline in product revenues for the six-month period ended June
30, 1996, compared to June 1995, was also due to large purchases in 1995 not
being repeated in 1996 and to the product transition from PXP to LightSpeed as
previously described.
Service revenues decreased $1.4 million and $2.8 million, respectively in the
three-month and six-month periods ended June 30, 1996. The primary reason for
the decreases is that revenues from the DOORS technology amounting to $1.1
million and $2.2 million in the respective 1995 reporting periods are no longer
included in 1996 (See Results of Operations). The remaining portion of the
decrease was due to reduced maintenance revenue related to the older generation
XP and PXP products.
GROSS PROFIT
Second quarter 1996 gross profit was $5.7 million, a decrease of $2.7 million
compared to the second quarter in 1995.
Gross profit from product revenues decreased $1.7 million related to the revenue
decline. The gross profit percentage was 70% in 1996 compared to 78% in 1995.
This decline was due to both product mix and to higher discounts in 1996 as the
PXP product technology is one year older and in the last stages of its product
life cycle for logic simulation.
Gross profit from service revenues decreased $0.9 million of which $0.7 million
related to the amount of gross profit contributed from the DOORS technology in
1995 that is not included in 1996. The remaining $0.2 million is principally
related to the decline in maintenance revenue. Excluding the impact of DOORS in
1995, service gross profit in 1996 was 42% compared to 44% in 1995.
6
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Year-to-date service gross profit was 42% in 1996 compared to 50% in 1995,
excluding the impact of DOORS in 1995. This decrease is due to lower product
maintenance revenues due to the PXP to LightSpeed product transition without a
commensurate decrease in costs.
OPERATING EXPENSES
SALES AND MARKETING
Sales and Marketing expenses in the 1996 second quarter decreased by $0.1
million compared to the 1995 second quarter. This decrease was principally
related to the impact of including $0.5 million DOORS expenses in 1995 and not
in 1996 and lower commission expense related to lower revenue levels partially
offset by higher marketing expenses related to the introduction of the
LightSpeed product.
Year-to-date sales and marketing expenses were $0.6 million lower in 1996 for
the same reasons used to explain the second quarter comparison.
RESEARCH AND DEVELOPMENT
Research and development expenses increased $1.5 million in the 1996 second
quarter over the comparable quarter in 1995 and increased $3.1 million for the
comparable six-month period ended June 30. These increases are due to
additional staffing levels and a much higher level of engineering project
activity associated with the introduction of both the LightSpeed product and the
high-density FPGA products, which became available in quantities during the 1996
second quarter.
GENERAL AND ADMINISTRATIVE
General and administrative expenses were $0.2 million higher in the 1996 second
quarter than in the 1995 second quarter and $0.3 million higher in the six-month
period ended June 30, 1996 compared to June 30, 1995. These increases are
principally related to higher legal and accounting costs associated with
completion of the $10.0 million subordinated convertible debenture note offering
during the second quarter of 1996 (see Note 4 of Notes to Condensed Consolidated
Financial Statements).
OTHER INCOME/EXPENSES, NET
Other expenses, net were $0.4 million higher in the second quarter 1996 compared
to 1995. Such expenses were $0.2 million higher for the comparable six-month
period ended June 30, 1996 vs. 1995 principally due to $0.4 million of
accelerated amortization of discount expense related to the Company's
subordinated convertible debenture notes (see Note 4 of Notes to Condensed
Consolidated Financial Statements), as well as fluctuations in foreign
currencies which favorably impacted 1996 results and adversely impacted 1995
results.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996 the Company's working capital was $7.6 million compared to $6.7
million at December 31, 1995. The $0.9 million increase results from the cash
proceeds from the $10.0 million subordinated convertible debenture note
offering, completed in May 1996, partially offset by the net loss from
operations for the six-month period ended June 30, 1996 and the changes in
current assets and current liabilities during that period.
The Company anticipates that by attaining revenue projections for 1997 and by
relying on the new credit line, together with sources of additional liquidity
such as private or public offerings and equipment lease lines the Company
expects to meet short-term liquidity needs. Should additional funding be
required, however, there can be no assurance that such funding will be available
on acceptable terms as and when required by the Company.
7
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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.
ZYCAD CORPORATION
BY /s/ Stephen A. Flory
--------------------
Stephen A. Flory
Chief Financial Officer and
Treasurer
April 14, 1997
8
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<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 7091
<SECURITIES> 221
<RECEIVABLES> 10223
<ALLOWANCES> 0
<INVENTORY> 2583
<CURRENT-ASSETS> 21322
<PP&E> 5291
<DEPRECIATION> 0
<TOTAL-ASSETS> 34635
<CURRENT-LIABILITIES> 13681
<BONDS> 0
0
0
<COMMON> 2036
<OTHER-SE> 50389
<TOTAL-LIABILITY-AND-EQUITY> 34635
<SALES> 8811
<TOTAL-REVENUES> 16528
<CGS> 2930
<TOTAL-COSTS> 7407
<OTHER-EXPENSES> 17559
<LOSS-PROVISION> 0
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