<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended December 31, 1994
-----------------
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period ____________ to ____________ .
Commission file number 0-17111
-------
PHOENIX TECHNOLOGIES LTD.
---------------------------
(Exact name of Registrant as specified in its charter)
Delaware 04-2685985
- - - - - - --------------------------------------- ------------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
2770 De La Cruz Boulevard, Santa Clara, California 95050
--------------------------------------------------------
(Address of principal executive offices, including zip code)
408/ 654-9000
-------------
(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 $.001 13,442,994
----------------------------- -------------------------------
Class Number of shares Outstanding at
December 31, 1994
Exhibit Index is on Page 14
Page 1 of 16 pages
<PAGE>
PHOENIX TECHNOLOGIES LTD.
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
December 31, 1994 and September 30, 1994 . . . . . . . . . 3
Consolidated Statements of Operations
Three Months Ended December 31, 1994 and 1993. . . . . . . 4
Consolidated Statements of Cash Flows
Three Months Ended December 31, 1994 and 1993 . . . . . . .5
Notes to Consolidated Financial Statements. . . . . . . . .6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . .8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . 14
Page 2 of 16 pages
<PAGE>
PART I. FINANCIAL INFORMATION
Item I. Financial Statements
PHOENIX TECHNOLOGIES LTD.
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
December 31, September 30,
1994 1994
(unaudited)
------------ ------------
<S> <C> <C>
Assets
Current assets:
Cash and short-term investments (see note 2) $ 29,735 $ 33,889
Accounts receivable, net of allowances of $736,000 at
December 31, 1994 and $657,000 at September 30, 1994 13,476 12,316
Receivable from related party -- 3,768
Inventory (See note 3) 1,074 849
Other current assets 2,137 1,452
-------- --------
Total current assets 46,422 52,274
Property and equipment, net 2,455 2,307
Computer software costs, net 3,432 3,392
Other assets 5,420 5,262
-------- --------
Total assets $ 57,729 $ 63,235
-------- --------
-------- --------
Liabilities
Current liabilities:
Short-term borrowings $ 1,231 $ 1,241
Accounts payable 2,554 3,443
Salaries, commissions, and related items payable 2,349 2,462
Relocation accrual (see note 4) 1,389 1,923
Accrued license fees and royalties 424 1,214
Income taxes payable 2,559 3,993
Other accrued liabilities 3,455 4,209
Net current liabilities of discontinued operations 3,062 5,203
-------- --------
Total current liabilities 17,023 23,688
Long-term liabilities 101 101
-------- --------
Total liabilities 17,124 23,789
-------- --------
Stockholders' equity:
Preferred stock, $.10 par value, 500,000 shares
authorized, none issued and outstanding -- --
Common stock, $.001 par value, 20,000,000 shares authorized;
13,592,907 issued at December 31, 1994 and 13,435,077 at
September 30, 1994 14 13
Additional paid-in capital 50,261 49,839
Retained earnings (accumulated deficit) (8,274) (9,843)
Less: treasury stock at cost, 149,913 shares (1,396) (563)
-------- --------
Total stockholders' equity 40,605 39,446
-------- --------
Total liabilities and stockholders' equity $ 57,729 $ 63,235
-------- --------
-------- --------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
Page 3 of 16 pages
<PAGE>
PHOENIX TECHNOLOGIES LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
----------------------------
1994 1993
---- -----
<S> <C> <C>
Revenue $ 11,119 $ 20,115
Costs of revenue 765 8,912
-------- --------
Gross margin 10,354 11,203
Operating expenses
Selling, marketing and support 3,431 4,249
General and administrative 1,331 2,166
Research and development 3,862 2,465
-------- --------
Total operating expenses 8,624 8,880
-------- --------
Operating income 1,730 2,323
Other income 512 15
-------- --------
Income before income taxes 2,242 2,338
Provision for income taxes 673 790
-------- --------
Income from continuing operations 1,569 1,548
Discontinued operations:
Loss from discontinued operations (after tax benefit of $218,000) -- (328)
-------- --------
Net income $ 1,569 $ 1,220
-------- --------
-------- --------
Income per common share:
Income per common share from continuing operations $ 0.11 $ 0.11
Loss per common share from discontinued operations 0.00 ( 0.02)
-------- --------
Net income per common share $ 0.11 $ 0.09
-------- --------
-------- --------
Weighted average number of common and
common equivalent shares outstanding 14,775 13,743
-------- --------
-------- --------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
Page 4 of 16 pages
<PAGE>
PHOENIX TECHNOLOGIES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
-----------------------------
1994 1993
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $1,569 $1,220
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Depreciation and amortization 653 1,410
Equity interest in subsidiary (200) --
Change in operating assets and liabilities
Increase in accounts receivable (1,160) (1,850)
(Increase) decrease in inventory, other current assets and
other assets 2,803 (600)
Increase (decrease) in accounts payable and accrued liabilities (2,969) 4,648
Decrease in net liabilities of discontinued operations (2,141) --
Decrease in accrued salaries, commissions and
related items payable (113) (1,002)
Increase (decrease) in income taxes payable (1,434) 287
---------- ----------
Total adjustments (4,561) 2,893
---------- ----------
Net cash provided by (used in) operating activities (2,992) 4,113
Cash flows from investing activities:
Purchase of property and equipment (464) (314)
Additions to computer software costs (280) (846)
Maturity of short-term investments 3,579 1,000
Purchase of short-term investments (14,431) (1,000)
---------- ----------
Net cash used in investing activities (11,596) (1,160)
Cash flows from financing activities:
Proceeds from exercise of common stock options and
issuance of stock under employee stock purchase plan 425 263
Purchase of treasury stock (833) --
Repayment of loans and notes payable (10) (37)
---------- ----------
Net cash (used in) provided by financing activities (418) 226
---------- ----------
Net increase (decrease) in cash and cash equivalents (15,006) 3,179
Cash and cash equivalents at beginning of period 29,519 7,122
---------- ----------
Cash and cash equivalents at end of period (See note 2) $14,513 $10,301
---------- ----------
---------- ----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
Page 5 of 16 pages
<PAGE>
PHOENIX TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying financial statements, except for those dated as of
September 30, 1994, are unaudited and have been prepared by the Company in
accordance with generally accepted accounting principles. The year-end balance
sheet at September 30, 1994 was derived from audited financial statements, but
does not include all disclosures required by generally accepted accounting
principles. In the opinion of the Company, the accompanying unaudited
consolidated financial statements contain all adjustments, including normal
recurring accruals, necessary for a fair presentation for the interim periods.
These financial statements should be read in conjunction with the financial
statements and related notes included in the Company's Form 10-K for the year
ended September 30, 1994. Certain amounts in the prior year's financial
statements also have been reclassified to conform to the fiscal 1995
presentation. The prior years consolidated statements of operations and related
notes have been restated to reflect the Printer Software Division as a
discontinued operation. The interim results are not necessarily indicative of
the results to be expected for the entire year.
2. CASH AND SHORT-TERM INVESTMENTS
Cash and short-term investments consist of the following:
<TABLE>
<CAPTION>
December 31, September 30,
1994 1994
---- ----
<S> <C> <C>
Cash and cash equivalents $ 14,513,000 $ 29,519,000
Short-term investments 15,222,000 4,370,000
------------ ------------
$ 29,735,000 $ 33,889,000
------------ ------------
------------ ------------
</TABLE>
At December 31, 1994, the Company adopted Statement of Financial Accounting
Standard No 115 (SFAS 115), "Accounting for Certain Investments in Debt and
Equity Securities". All short-term investments at December 31, 1994 were deemed
by management to be held-to-maturity securities and therefore are reported at
amortized cost. The adoption of SFAS 115 was not material to the financial
statements. Realized gains and losses are recorded based on specific
identification.
The Company's short-term investments were stated at cost which approximates
market value at December 31, 1994, and consisted of U.S. treasury notes and
discount notes maturing between January 1995 and August 1995.
Page 6 of 16 pages
<PAGE>
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31, September 30,
1994 1994
---- ----
<S> <C> <C>
Raw materials $ 19,000 --
Finished goods 1,055,000 $ 849,000
------------ ------------
$ 1,074,000 $ 849,000
------------ ------------
------------ ------------
</TABLE>
4. RELOCATION ACCRUAL
During the quarter ended December 31, 1994, the Company paid approximately
$472,000 relating primarily to relocation and employee separation costs. The
Company has not changed the estimated amount of accrual related to relocation
costs.
5. EARNINGS PER SHARE
Earnings per share is calculated by dividing net income by the weighted
average common shares and common share equivalents outstanding during the
period.
Page 7 of 16 pages
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
INTRODUCTION
On September 30, 1993, the Company sold 80% of its Publishing Division to
Softbank Corporation of Japan ("Softbank"). Also on that date, Softbank and the
Company contributed their equity interests in the Publishing Division to a newly
formed entity (Phoenix Publishing Systems, Inc.) for 80% and 20%, respectively,
of that entity. The prior year's quarter as reported includes the results of
operation for the Publishing Division. The following is a pro forma
Consolidated Statement of Operations showing what the Company's results for the
quarter ending December 31, 1993 would have been without the Publishing
Division.
<TABLE>
<CAPTION>
Three Months Ended
December 31, 1993
-------------------------------------------------------
ACTUAL RESULTS LESS ACTUAL PRO FORMA
FROM RESULTS OF AND RESULTS FROM
CONTINUING PRO FORMA CONTINUING
OPERATIONS ADJUSTMENTS FOR OPERATIONS
THE PUBLISHING EXCLUDING
DIVISION PUBLISHING
Division
<S> <C> <C> <C>
Revenue $ 20,115 $ 10,759 $ 9,356
Costs of revenue 8,912 7,994 918
---------- ---------- ----------
Gross margin 11,203 2,765 8,438
Operating expenses
Selling, marketing and support 4,249 1,259 2,990
General and administrative 2,166 546 1,620
Research and development 2,465 -- 2,465
---------- ---------- ----------
Total operating expenses 8,880 1,805 7,075
---------- ---------- ----------
Operating income 2,323 960 1,363
Other income 15 (422) 437
---------- ---------- ----------
Income before income taxes 2,338 538 1,800
Provision for income taxes 790 214 576
---------- ---------- ----------
Income from continuing operations $ 1,548 $ 324 $ 1,224
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
Page 8 of 16 pages
<PAGE>
RESULTS OF OPERATIONS
As an aid to understanding the Company's results, the following table sets
forth, for the periods indicated, each line item of the Company's statement of
income as a percentage of revenue.
<TABLE>
<CAPTION>
Three Months Ended
December 31,
--------------------------------------
1994 1993 1993
------ ------ -----
Actual Actual Pro forma
------ ------ ---------
<S> <C> <C> <C>
Revenue 100.0% 100.0% 100.0%
Costs of revenue 6.9 44.3 9.8
------- ------- ------
Gross margin 93.1 55.7 90.2
Operating expenses
Selling, marketing and support 30.8 21.1 32.0
General and administrative 12.0 10.8 17.3
Research and development 34.7 12.3 26.3
------- ------- ------
Total operating expenses 77.5 44.2 75.6
------- ------- ------
Operating income 15.6 11.5 14.6
Other income 4.6 .1 4.7
------- ------- ------
Income before income taxes 20.2 11.6 19.3
Provision for income taxes 6.1 3.9 6.2
------- ------- ------
Income from continuing operations 14.1 7.7 13.1
Discontinued Operations:
Loss from discontinued operations -- (1.6) --
------- ------- ------
Net income 14.1% 6.1% 13.1%
------- ------- ------
------- ------- ------
</TABLE>
REVENUE
The Company's revenue for the three months ended December 31, 1994
decreased by 45% to $11,119,000 from $20,115,000 for the three months ended
December 31, 1993. This decrease is due to the inclusion of revenue from the
Publishing Division for the three month period ended December 31, 1993. On a
pro forma basis, revenues increased 18.8% over the prior year period. The
increase in revenue was primarily the result of a 35.6% growth in sales of
Company's OEM software products. This increase was partially offset by lower
revenues from the retail software products.
Page 9 of 16 pages
<PAGE>
GROSS MARGIN
Gross margin decreased by approximately $849,000 to $10,354,000 from
$11,203,000 for the quarters ended December 31, 1994 and 1993, respectively.
Excluding the Publishing Division revenues for the quarter ended December 31,
1993, gross margin increased 22.7% over the prior year period. The increased
gross margin which was realized as a result of the growth in revenues and lower
cost of sales resulting from the elimination of commissions paid to certain
United Kingdom companies which were acquired by the Company in June 1994.
Consequently, on a pro forma basis, total gross margin increased from 90.2% to
93.1% of revenue, respectively, for the first quarter in fiscal 1995 over the
same period in fiscal 1994.
SELLING, MARKETING AND SUPPORT EXPENSES
Costs related to selling, marketing and support decreased to $3,431,000 for
the three months ended December 31, 1994 from $4,249,000 for the same three-
month period last year. On a pro forma basis, selling, marketing, and support
costs increased 14.7% or $441,000 over the prior year period. The increase is
attributable to additional commissions paid on the increased revenue and to the
cost of expanding into the European market. The increase was partially offset
by a reduction in advertising costs by the PC Applications Software Division.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses of $1,331,000 for the first quarter of
fiscal 1995 decreased by 38.6% from $2,166,000 for the first quarter of fiscal
1994. On a pro forma basis, general and administrative expenses decreased by
17.8%. This decrease is attributable to decreased facilities costs, net of
reserves, as a result of the relocation from Massachusetts to California.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses before the capitalization of internally
developed software costs were 37.3% of revenue for the three months ended
December 31, 1994 and 14.5% for the same period in 1993. The Company
capitalized approximately $280,000 and $442,000 of internally developed software
costs during those periods, respectively. On an actual dollar basis, research
and development costs, before the capitalization of internally developed
software costs, increased to $4,142,000 for the quarter ended December 31, 1994
from $2,907,000 for the same quarter in the prior year. The increased research
and development cost is primarily due to increased staffing and related
expenses, and the additional costs of the European operations established in
June 1994.
INCOME TAXES
The Company recorded income tax provisions of $673,000 and $790,000 for the
quarters ended December 31, 1994 and 1993, respectively, resulting in effective
tax rates of 30% and 32%, respectively. The slightly lower effective tax rate
reflects primarily results from the recognition of deferred tax assets for which
a valuation allowance was provided at September 30, 1994
Page 10 of 16 pages
<PAGE>
FINANCIAL CONDITION
CHANGES IN FINANCIAL CONDITION
Current assets decreased $5,852,000 during the three months ended December 31,
1994. The decrease was primarily attributable to the collection of a $3,768,000
related party receivable and several large cash payments made by the Company
during the quarter including (i) approximately $2.5 million in accrued employee
compensation and other costs associated with the closing of the sale of the
Printer Software Business, (ii) the final $1,000,000 installment to IBM under
the terminated SurePath distribution agreement, (iii) federal and state income
tax payments totaling approximately $1,670,000 and (iv) the repurchase for
$833,000 of 119,900 shares of Company common stock.
Current liabilities decreased by $6,665,000 during the three months ended
December 31, 1994 to $17,023,000 from $23,688,000. The decrease is principally
attributable to the cash payments described above.
LIQUIDITY AND CAPITAL RESOURCES
During the three months ended December 31, 1993, the Company's cash and
short-term investments decreased by $4,154,000 to $29,735,000. The decrease is
attributable to the cash payments discussed above. The Company expects funding
requirements for fiscal 1995 to be met from its current cash position and future
operations. In August 1994, the Company announced that it's Board had
authorized repurchase of up to 1,000,000 shares of its common stock for use
in the Company's stock option plans and for general purposes. As of
December 31, 1994 the company had repurchased 119,900 shares.
The Company has a $10,000,000 secured line of credit agreement with a
domestic commercial bank. Due to the sale of the Publishing and Printer
Software Divisions, the bank released its security interest in the assets of
these divisions. Until a new credit agreement is negotiated, borrowings under
this line of credit must be fully secured by compensating balances at the bank.
As of December 31, 1994, the Company had approximately $1.2 million outstanding
against this credit line. The Company is currently negotiating a new credit
line agreement with the bank.
Page 11 of 16 pages
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) EXHIBITS. See exhibit index beginning on page 14 hereof.
(b) REPORTS ON FORM 8-K
A Form 8-K was filed on October 14, 1994 and later amended with
Form 8-K/A-1 on November 10, 1994. The 8-K was to report the
sale of 80% of the Company's Publishing Division to Softbank
Corporation. Included in the 8-K form was a pro forma Balance
Sheet as of September 30, 1994 and a Pro Forma Consolidated
Statement of Operations for the year ended September 30, 1994.
A Form 8-K was filed on November 18, 1994 to report the sale of
the Page Division to Xionics International Holdings, Inc. The
8-K filed included a Pro Forma Consolidated Balance Sheet as of
September 30, 1994 and a Pro Forma Consolidated Statement of
Operations for the year ended September 30, 1994.
Page 12 of 16 pages
<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.
PHOENIX TECHNOLOGIES LTD.
By:/s/ Ronald D. Fisher
------------------------
Ronald D. Fisher
Chairman, Chief
Executive Officer
and Acting Principal
Financial Officer
Date: February 8, 1995
Page 13 of 16 pages
<PAGE>
EXHIBIT INDEX
EXHIBIT PAGE
4.1 Series A Convertible Preferred Stock and Warrant Purchase
Agreement dated March 18, 1988 among the Registrant, Neil J.
Colvin, Lance E. Hansche, Sigma Partners and Sigma
Associates, and the form of warrants issued thereunder -
filed as Exhibit 4.1 to the S-1 and incorporated herein
by this reference.
4.2 Registration Agreement dated March 18, 1988, among the
Registrant, Neil J. Colvin, Lance E. Hansche, Sigma Partners
and Sigma Associates, as amended - filed as Exhibit 4.2 to the
S-1 and incorporated herein by this reference.
4.3 Rights Agreement dated as of October 31, 1989 between the
Company and The First National Bank of Boston - filed as
Exhibit 4.1 to the October 31, 1989 Form 8-K, and
incorporated herein by this reference.
10.1 1986 Incentive Stock Option Plan, as amended - filed as
Exhibit 4.1 to the Company's Registration Statement on Form
S-8, Registration No. 33-30940, and incorporated herein by
this reference.
10.2 Senior Management Stock Option Plan, as amended - filed as
Exhibit 4.2 to the Company's Registration Statement on Form
S-8, Registration No. 33-26996 (the "February 1989 Form S-
8"), and incorporated herein by this reference.
10.3 Senior Management Nonqualified Stock Option Plan, as amended
- filed as Exhibit 4.3 to the February 1989 Form S-8 and
incorporated herein by this reference.
10.4 Lease dated June 29, 1989 between the Registrant and The
Prudential Insurance Company of America - filed as Exhibit
10.8 to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1989 (the "1989 Form 1O-K")
and incorporated herein by this reference.
10.5 Employment Agreement dated October 21, 1994 between the
Company and Judith L. Sundue - filed as Exhibit 10.5 to the
Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1994 (the "1994 Form 10-K") and
incorporated herein by this reference.
10.6 Letter Agreement dated December 19, 1994 between the Company
and Steve Kalman - filed as Exhibit 10.6 to the 1994 Form
10-K and incorporated herein by this reference.
10.7 Employment Agreement dated December 28, 1988, between the
Registrant and Steve Kalman - filed as Exhibit 10.25 to the
Company's 1990 Form 10-K and incorporated herein by this
reference.
10.8 Employment Agreement dated January 6, 1995 between the
Company and Ronald D. Fisher.
<PAGE>
10.9 Employment agreement dated June 9, 1994 between the
Registrant and Jack Kay - filed as Exhibit 10.9 to the
Company's Quarterly Report on Form 10-Q filed on August 15,
1994 and incorporated herein by this reference.
10.10 Employment Agreement dated August 15, 1994, between the
Registrant and Robert R. Langer - filed as Exhibit 10.10 to
the 1994 Form 10-K and incorporated herein by this
reference.
10.11 Line of Credit Agreement dated November 25, 1991 between the
Registrant and Silicon Valley Bank -- filed as Exhibit 10.17
to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1991 (the "1991 Form 10K")
and incorporated herein by this reference.
10.12 1991 Employee Stock Purchase Plan - filed as Exhibit 28.1 to
the Company's Registration Statement on Form S-8,
Registration No. 33-44211 filed on November 26, 1991 (the
"1991 Employee Stock Purchase Plan") and incorporated herein
by this reference.
10.13 1992 Equity Incentive Plan - filed with the Company's
preliminary proxy materials filed on December 17, 1992 (the
"1992 Equity Incentive Plan") and incorporated herein by
this reference.
10.14 Amendment dated April 15, 1993 to the Line of Credit
Agreement dated November 25, 1991 between the Registrant and
Silicon Valley Bank filed as exhibit 10.23 to the Company's
Form 1O-Q filed on August 16, 1993 and incorporated herein
by this reference.
10.15 Amendment dated June 28, 1993 to the Line of Credit
Agreement dated November 25, 1991 between the Registrant and
Silicon Valley Bank filed as exhibit 10.24 to the Company's
Form 1O-Q filed on August 16, 1993 and incorporated herein
by this reference.
10.16 Replication Agreement dated March 15, 1993 between the
Company and Microsoft Corporation and Amendments One, Two,
Three and Four thereto, filed as exhibit 10.16 to the
Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1993 and incorporated herein by this
reference.
10.17 Letter Amendment dated as of December 30, 1993 to Line of
Credit Agreement dated November 25, 1991 between the
Registrant and Silicon Valley Bank filed as exhibit 10.17 to
the Company's Form 10-Q filed on February 14, 1994 and
incorporated herein by this reference.
10.18 Purchase Agreement dated March 15, 1994 between the Company
and Softbank Corporation filed as exhibit 10.18 to the
Company's Form 1O-Q filed May 16, 1994 and incorporated
herein by this reference.
<PAGE>
10.19 Amendment Number 1 to the 1992 Equity Incentive Plan filed
as exhibit 10.19 to the Company's Form 10-Q filed May 16,
1994 and incorporated herein by this reference.
10.20 Amendment Number 1 to the 1991 Employee Stock Purchase Plan
filed as exhibit 10.20 to the Company's Form 10-Q filed May
16, 1994 and incorporated herein by this reference.
10.21 Amendment No. 1 to Purchase Agreement by and between the
Registrant and Softbank Corporation dated as of March 15,
1994 - filed as Exhibit 2.02 to the Company's Current Report
on Form 8-K dated September 30, 1994 and incorporated herein
by this reference.
10.22 Asset Purchase Agreement made as of September 30, 1994 by
and between the Registrant and Xionics International
Holdings, Inc. - filed as Exhibit 2.01 to the Company's
Current Report on Form 8-K dated November 8, 1994 and
incorporated herein by this reference.
10.23 1994 Equity Incentive Plan, as amended through December 12,
1994 - filed as Exhibit 10.23 to the 1994 Form 10-K and
incorporated herein by this reference.
10.24 Lease dated as of May 3, 1994 between the Company and the
Equitable life Assurance Society of the United States -
filed as Exhibit 10.24 to the Company's Annual Report on
Form 10-K for the fiscal year ended September 30, 1994 (the
"1994 Form 10-K) and incorporated herein by this reference.
11.1 Statement re computation of earnings per share (primary
earnings per share).
11.2 Statement re computation of earnings per share (fully
diluted earnings per share).
<PAGE>
EXHIBIT 10.8
CONFIDENTIAL MEMORANDUM
To: Ron Fisher January 6, 1995
From:Tony Morris
Subject: Change in Employment Agreement
On behalf of the Compensation Committee of the Board of Directors of Phoenix
Technologies Ltd. ("Phoenix" or the "Company") I would like to confirm the
following employment agreement changes that we have agreed to, in conjunction
with the current restructuring of the Company:
I: Change in Title
You will assume the title of Chairman of the Board and Chief Executive Officer
for Phoenix, at the time that Jack Kay assumes the role of President and Chief
Operating Officer.
II: New Option Grant
You will be granted a new option to purchase 75,000 shares of the Company's
common stock at a price of $5.00 per share under the Company's 1994 Equity
Incentive Plan. This option will be governed by the terms and conditions of
that stock option plan and the related agreement covering the grant. In the
event that insufficient shares are available under the stock option plan, the
grant will be subject to stockholder approval of the addition of shares
sufficient to cover the grant. Phoenix will pursue all reasonable measures to
obtain such stockholder approval, if required. This option will vest as follows:
the first 50,000 shares will become vested on September 30, 1995, and the
remaining 25,000 shares will become vested on March 31, 1996.
III: Termination
1. Should your employment be terminated by the Company for reasons other than
"cause" as defined below, the following provisions shall apply:
(a). The Company will give you at least 18 months notice of termination.
During this notice period, you will remain an employee of Phoenix for all
purposes and your compensation shall be as set forth in this section III.1.
Your primary duties will be to secure other employment and to advise the Company
on matters related to the transition of your responsibilities to others and
matters with which you were involved while employed at Phoenix. This advice
will be given primarily during non-business hours, via telephone (but meetings
at Phoenix's facilities may be required) and may not exceed ten hours per month.
You will continue to receive your then current base salary (which base salary
shall not be less than at the rate of $225,000 per year) for a period of one
year from the date you receive the termination notice. In addition, should you
be unable to find employment after that one year period, or if you find
employment at a base salary less than your then current base salary, you will
continue to receive, for an additional six months, the lesser of (i) a base
salary at the rate of your then current base salary and (ii) the difference
between your new base salary and your then current base salary. Regardless of
whether you obtain other employment during any portion of this 18 month notice
period, you will remain an employee of Phoenix and obligated to provide advice
to Phoenix as set forth above.
Page 1 of 7 pages
<PAGE>
(b). If, during this 18 month notice period, you are unable to obtain other
employment because you are employed by the Company, you may resign from the
employ of the Company in which event your employment will terminate and (i) you
will continue to receive the cash compensation as set forth in this paragraph,
(ii) you will no longer be required to provide services to the Company, and
(iii) the time period during which you may exercise your stock options will be
as set forth in the applicable stock option agreement with the effective date of
your resignation being the effective date of the termination of your employment.
(c). During the entire 18 month period or up until the time that you
commence other full-time employment, whichever is sooner, you will continue to
receive those health benefits provided to all full time employees of the Company
on the terms and conditions generally applicable to all full time employees.
You shall not accrue any vacation time after your receipt of the notice of
termination of your employment. You shall immediately notify Phoenix in writing
when you obtain other employment.
2. Should your responsibilities substantially change from that which you
exercise as Chairman of the Board and Chief Executive Officer as on the date of
this letter for reasons other than cause, independent of your specific title,
you may consider yourself, at your sole option, to have received notice of
termination from employment by the Company, and invoke the provisions of
Section III.1, above. Such election must be made by you, if at all, in writing
within 60 days of such change in responsibility.
3. Should you be removed from the title and/or position of Chairman of the
Board and Chief Executive Officer for any reason other than cause, you may
consider yourself, at your sole option, to have received notice of termination
from employment by the Company, and invoke the provisions of Section III.1,
above. Such election must be made by you, if at all, in writing within 60 days
of such change in position or title.
4. Should the change in the Company's activities require that the CEO function
be located outside of the Boston, MA. area, you may consider yourself, at your
sole option, to have received notice of termination from employment by the
Company, and invoke the provisions of Section III.1, above. Such election must
be made by you, if at all, in writing within 60 days of such change in location.
5. Upon your receipt of notice of your termination from employment under any of
the provisions of this Section III, the stock option granted to you under
Section II, above, will immediately cease to vest. Also, upon the termination
of your employment for any reason, you will have the right to exercise any and
all of your vested options under any and all of your stock option agreements at
any time within the applicable time period specified in the applicable stock
option agreement after giving effect to the actual date of termination of your
employment at Phoenix.
The provisions of this section III apply only in the event of the termination of
your employment at Phoenix for reasons other than cause.
IV: Change of Company Ownership
In the event of a "change in control of the Company", as defined below, and if
the Company (or the successor company) then issues notice of termination of your
employment for reasons other than cause, in addition to your rights under
section III above, the stock options granted to you under Section II above will
become fully vested at the time of your receipt of notice of termination. In
the event of a change in control of the Company, and if your employment with the
Company (or the successor company) continues, all of your stock options will
continue to vest according to the schedule set forth in the applicable stock
option agreement.
Page 2 of 7 pages
<PAGE>
V. Miscellaneous
1. If you voluntarily resign your employment at Phoenix (termination pursuant
to section III 2, III 3 or III 4 above shall not be considered resignation)
prior to receipt of notice from the Company of termination of your employment,
or upon the termination of your employment for cause, Phoenix shall have no
further obligation to you under this letter. In any event, Phoenix shall have
no obligation to you under any circumstances after 18 months after your receipt
of notice of termination of your employment.
2. For purposes of this letter, "cause" shall mean (a) commission of an act
which is not believed by you, in good faith, to be in the best interest of the
Company and that causes significant economic damage to the Company or any
subsidiary, affiliate or parent company of the Company or significant damage to
the business reputation of the Company or any subsidiary, affiliate or parent
company of the Company; or (b) commission of an act of fraud or deceit in the
performance of duties on behalf of the Company or any subsidiary, affiliate or
parent company of the Company; or (c) the continuing failure to perform assigned
duties (other than failure due to mental or physical incapacity) after written
notice thereof.
3. For purposes of this letter, "change in control of the Company" shall mean
the acquisition by a single legal entity (or group of legal entities controlled
by a single legal entity) of beneficial ownership of more than 50% of the issued
and outstanding voting securities of the Company after the date of this letter.
4. This letter supersedes, replaces and cancels any and all other written or
oral understandings, arrangements and agreements, other than your stock option
agreements and the employee agreement referenced in section V.5 below, between
Phoenix and you that determine the period of your employment by Phoenix and/or
the compensation or benefits to be provided by Phoenix to you on the termination
of your employment by Phoenix.
5. You shall sign the employee agreement attached to this letter and that
agreement shall be retroactive to your first day of employment at Phoenix. The
provisions of that employee agreement which by their terms survive the
termination of your employment shall so survive.
6. From the date of this letter until one (1) year after the date on which
you are neither an employee of Phoenix nor receiving compensation or benefits
under this letter from the Company, you shall not directly or indirectly (1)
solicit for hire, as an employee, consultant, contractor or otherwise, any then
current employee of Phoenix; or (2) hire, as an employee, consultant, contractor
or otherwise, any person who is, or who has been, an employee of Phoenix, unless
(a) such person has not been an employee of Phoenix for more than six (6) months
prior to the date of hire (directly or indirectly), or (b) such person's
employment was terminated by Phoenix and not by such person.
7. During any period in which you are either an employee of the Company or
receiving compensation or benefits under this letter from the Company, you shall
not directly or indirectly provide services of any kind to any entity which
provides, or is planning to provide, products or services which compete or are
intended to compete with the products or services provided by the Company, or
which the Company plans to provide (as documented in the written product plans
of the Company), during your employment, or on the date of your receipt of
notice of termination of your employment if such notice is issued.
8. No modification, termination, amendment or waiver of any provision of this
letter shall be effective unless set forth in a writing signed by both you and
Phoenix.
9. This letter shall be construed in accordance with, and governed by, the laws
of the Commonwealth of Massachusetts, excluding its conflict of law rules. If
any provision of this letter is declared invalid by
Page 3 of 7 pages
<PAGE>
any tribunal, such provision shall be deemed automatically adjusted to conform
to the requirements for validity as declared at such time and, as so adjusted,
shall be deemed a provision of this letter as though originally included herein.
If the provision invalidated is of such a nature that it cannot be so adjusted,
the provision shall be deleted from this letter as though it had never been
included herein. In either case, the other provisions of this letter shall
remain in effect.
10. This letter shall be binding upon, and inure to the benefit of, the parties
hereto and their respective heirs, successors, administrators, executors,
personal representatives and assigns.
11. Provided that there is no significant incremental expense to Phoenix,
Phoenix shall maintain for you the voice mail services which you have on the
date of this letter until the termination of your employment or until you have
secured other employment, whichever is earlier.
12. If Phoenix fails to perform any obligation to you under this letter and
such failure continues for at least ten days from receipt by Phoenix of written
notice thereof and if you then retain the services of an attorney to enforce
your rights under this letter, then, if you are successful in so enforcing your
rights under this letter, Phoenix shall reimburse you for reasonable attorney
fees in addition to all other amounts due to you.
Please sign a copy of this letter indicating your agreement with its terms.
Sincerely, Accepted
/s/ Anthony P. Morris /s/ R. D. Fisher
Director fishere2.doc 10/4/94 Ron Fisher
Page 4 of 7 pages
<PAGE>
PHOENIX TECHNOLOGIES LTD.
EMPLOYEE INVENTION ASSIGNMENT AND
PROPRIETARY INFORMATION AGREEMENT
Ronald D. Fisher
("Employee")
Address: 99 Kirkstall Rd.
Newton, MA 02160
In consideration of my employment or continued employment by Phoenix
Technologies Ltd. ("Phoenix"), I hereby represent and agree as follows:
1. Employee understands that Phoenix is engaged in a continuous program of
research, development, production and marketing in connection with its business
and that, as an essential part of Employee's work with Phoenix, Employee is
expected to make new contributions to and create inventions of value for
Phoenix.
2. Employee agrees to promptly disclose in writing in confidence to
Phoenix all inventions, improvements, and other innovations of any kind, whether
or not patentable or copyrightable or protectable as trade secrets or mask
works, that are made or conceived or first reduced to practice or created by
Employee, either alone or jointly with others, during the period of Employee's
employment, whether or not in the course of such employment ("INNOVATIONS").
Examples of Innovations include but are not limited to original works of
authorship, computer programs, formulas, processes, databases, trade secrets,
mechanical and electronic hardware, computer languages, user interfaces,
documentation, marketing and new product plans, production processes, packaging
and marketing techniques, and improvements to anything.
3. Employee agrees that all Innovations that (a) are not developed
entirely on Employee's own time, (b) are developed using equipment, supplies,
facilities or trade secrets of Phoenix, (c) result from work performed by
Employee for Phoenix, or (d) relate at the time of conception or reduction to
practice to the business or the actual or demonstrably anticipated research or
development of Phoenix, will be the sole and exclusive property of Phoenix, and
Employee hereby assigns to Phoenix any rights that Employee may have in any such
Innovations and in any associated patents, patent applications, copyrights,
trade secret rights, mask work rights, rights of priority and other intellectual
property rights.
Accordingly, Employee may request a written waiver from his or her manager
which will act to formally acknowledge that Phoenix has no right, title or
interest in Employee's Innovations that (a) are developed entirely on Employee's
own time, (b) are developed using equipment, supplies, facilities or trade
secrets not belonging to Phoenix, (c) result from work not performed by Employee
for Phoenix, or (d) relate at the time of conception or reduction to practice to
no business or actual or demonstrably anticipated research or development of
Phoenix. Such written waiver must be signed by Employee's manager and Phoenix's
Corporate Counsel and will be placed in Employee's personnel file with an
original copy retained by Employee.
4. Employee agrees to assist Phoenix in every proper way to obtain for
Phoenix and enforce patents, copyrights, mask work rights and other legal
protections for Innovations belonging to Phoenix in any and all countries.
Employee will execute any documents that Phoenix may reasonably request for use
in obtaining or enforcing such patents, copyrights, mask work rights and other
legal protections. Employee's obligations under this Section will continue
beyond the termination of Employee's
Page 5 of 7 pages
<PAGE>
employment with Phoenix, provided that Phoenix will compensate Employee at a
reasonable rate after such termination for time actually spent by Employee at
Phoenix's request on such assistance.
5. Employee hereby irrevocably transfers and assigns to Phoenix, and
forever waives and agrees never to assert, any and all "Moral Rights" (as
defined below) that Employee may have in or with respect to any Innovation.
"MORAL RIGHTS" mean any right to claim authorship or be identified as the author
of any Innovation, to object to any modification of, or other action in relation
to, any Innovation, or any similar right, existing under judicial or statutory
law of any country in the world, or under any treaty, regardless of whether or
not such right is denominated or generally referred to as a "moral right."
6. Employee understands that Employee's employment with Phoenix creates a
relationship of confidence and trust with respect to any information of a
confidential or secret nature that may be disclosed to Employee by Phoenix or
that Employee may learn in the course of employment by Phoenix and that relates
to the business, products, supplier, customers, research or development of
Phoenix and its products ("PROPRIETARY INFORMATION"). Such Proprietary
Information includes but is not limited to Innovations, marketing plans, product
plans, business strategies, financial information, forecasts, personnel
information, customer lists and any other nonpublic technical or business
information that Employee knows or has reason to know Phoenix would like to
treat as confidential for any purpose, such as maintaining a competitive
advantage or avoiding undesirable publicity.
7. At all times, both during and after Employee's employment, Employee
will keep all such Proprietary Information in confidence and trust, and will not
use or disclose any of such Proprietary Information without the written consent
of Phoenix, except as may be necessary to perform Employee's duties as an
employee of Phoenix and for Phoenix's benefit. Upon termination of Employee's
employment with Phoenix, Employee will promptly deliver to Phoenix all documents
and materials of any nature pertaining to Employee's work with Phoenix, and
Employee will not take with Employee any documents or materials or copies
thereof containing any Proprietary Information.
8. Employee represents that Employee's performance of this Agreement and
of Employee's duties as an employee with Phoenix will not breach any invention
assignment or proprietary information or similar agreement with any former
employer or other party. Employee represents that employee will not bring with
Employee to Phoenix or use in the performance of Employee's duties for Phoenix
any documents, materials or information of a former employer that are not
generally available to the public.
9. Employee hereby authorizes Phoenix to notify others, including but not
limited to customers of Phoenix and Employee's future employers, of the terms of
this Agreement and Employee's responsibilities hereunder.
10. In the event of any violation of this Agreement by Employee, and in
addition to any relief or remedies to which Phoenix may otherwise be entitled,
Employee agrees that Phoenix shall have the right to an immediate injunction,
and shall have the right to recover the reasonable attorneys' fees and court
costs expended in connection with any litigation instituted to enforce this
Agreement.
Page 6 of 7 pages
<PAGE>
11. Employee understands and agrees that this Agreement does not
constitute a contract of employment or obligate Phoenix to employ employee for
any stated period of time. Employee understands that Employee's employment with
Phoenix is at will, and may be terminated by Phoenix at any time and for any
reason, with or without cause.
This Agreement shall be effective as of the first day of Employee's
employment with Phoenix.
Signature of Employee:______/s/R. D. Fisher______________________
Accepted and acknowledged by Phoenix Technologies Ltd.:
Signature:____/s/ Anthony P. Morris________________________
Title:_______Director_________________________
(Please Print)
Page 7 of 7 pages
<PAGE>
EXHIBIT 11.1
PHOENIX TECHNOLOGIES LTD.
COMPUTATION OF EARNINGS PER SHARE
PRIMARY EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended December 31,
-------------------------------
1994 1993
------ ------
<S> <C> <C>
Income from continuing operations $1,569,000 $ 1,548,000
Loss from discontinued operations -- (328,000)
---------- ----------
Net income $1,569,000 $1,220,000
Weighted average number of common
shares outstanding 13,438,000 13,043,000
Weighted average number of common
equivalent shares (1) 1,337,000 700,000
---------- ----------
Weighted average number of common and
common equivalent shares outstanding 14,775,000 13,743,000
---------- ----------
---------- ----------
Primary earnings per share: (1)
Continuing operations $ 0.11 $ 0.11
Discontinued operations $ 0.00 (0.02)
---------- ----------
Net income $ 0.11 $ 0.09
---------- ----------
---------- ----------
<FN>
- - - - - - ---------------
(1) In a loss period, loss per share is computed using only the weighted
average number of common shares outstanding, as the effect of common
equivalent shares would be antidilutive.
</TABLE>
Page 1 of 1 page
<PAGE>
EXHIBIT 11.2
PHOENIX TECHNOLOGIES LTD.
COMPUTATION OF EARNINGS PER SHARE
FULLY DILUTED EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended December 31,
-------------------------------
1994 1993
------ ------
<S> <C> <C>
Income from continuing operations $1,569,000 $ 1,548,000
Loss from discontinued operations -- (328,000)
---------- ----------
Net income $1,569,000 $1,220,000
Weighted average number of common
shares outstanding 13,438,000 13,043,000
Weighted average number of common
equivalent shares (1) 1,516,000 700,000
---------- ----------
Weighted average number of common and
common equivalent shares outstanding 14,954,000 13,743,000
---------- ----------
---------- ----------
Primary earnings per share: (1)
Continuing operations $ 0.10 $ 0.11
Discontinued operations $ 0.00 (0.02)
---------- ----------
Net income $ 0.10 $ 0.09
---------- ----------
---------- ----------
<FN>
- - - - - - -----------------
(1) In a loss period, loss per share is computed using only the weighted
average number of common shares outstanding, as the effect of common
equivalent shares would be antidilutive.
</TABLE>
Page 1 of 1 page
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1994
<PERIOD-START> OCT-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 14,513
<SECURITIES> 15,222
<RECEIVABLES> 14,212
<ALLOWANCES> 736
<INVENTORY> 1,074
<CURRENT-ASSETS> 46,422
<PP&E> 11,951
<DEPRECIATION> 9,497
<TOTAL-ASSETS> 57,729
<CURRENT-LIABILITIES> 17,023
<BONDS> 0
<COMMON> 14
0
0
<OTHER-SE> 50,261
<TOTAL-LIABILITY-AND-EQUITY> 40,605
<SALES> 0
<TOTAL-REVENUES> 11,119
<CGS> 0
<TOTAL-COSTS> 765
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20
<INCOME-PRETAX> 2,242
<INCOME-TAX> 673
<INCOME-CONTINUING> 1,569
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,569
<EPS-PRIMARY> .11
<EPS-DILUTED> .10
</TABLE>
