<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
---
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
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 0-16096
Inprise Corporation
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 94-2895440
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
100 ENTERPRISE WAY, SCOTTS VALLEY, CALIFORNIA 95066-3249
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (831) 431-1000
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
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
----- -----
The number of shares of common stock outstanding as of April 30, 2000,
latest practicable date prior to the filing of this report, was 61,197,820.
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INPRISE CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
at March 31, 2000 and December 31, 1999 ................................... 3
Condensed Consolidated Statements of Operations for the
three months ended March 31, 2000 and 1999 ................................ 4
Condensed Consolidated Statements of Comprehensive Income for
for the three months ended March 31, 2000 and 1999 ........................ 5
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 2000 and 1999 ................................ 6
Notes to Condensed Consolidated Financial Statements ...................... 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations ......................... 10
Item 3. Quantitative and Qualitative Disclosure
About Market Risk ........................................................ 27
PART II OTHER INFORMATION
Item 1. Legal Proceedings ........................................................ 29
Item 2. Changes in Securities and Use of Proceeds................................. 29
Item 5. Other Information......................................................... 29
Item 6. Exhibits and Reports on Form 8-K ......................................... 30
Signatures ............................................................... 30
</TABLE>
Page 2 of 29
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
INPRISE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PAR VALUE AND SHARE AMOUNTS)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 233,954 $ 192,013
Short-term investments 5,709 5,680
Accounts receivable, net 28,776 27,303
Other current assets 11,536 8,139
--------- ---------
Total current assets 276,975 233,135
Property and equipment, net 23,419 75,002
Other non-current assets 7,802 4,879
--------- ---------
Total assets $ 311,196 $ 313,016
========= =========
LIABILITIES, MANDATORILY REDEEMABLE CONVERTIBLE
PREFERRED STOCK AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 43,052 $ 41,733
Income taxes payable 4,019 5,808
Deferred revenue 15,041 12,273
Other 11,821 18,083
--------- ---------
Total current liabilities 73,933 77,897
Long-term debt and other 18,996 19,462
Stockholders' equity:
Preferred stock: Series A, $.01 par value;
1,000,000 shares authorized; no shares
issued or outstanding -- --
Preferred stock: Series C convertible, $.01 par
value; 625 shares authorized; 625 shares
issued and outstanding -- --
Common stock: $.01 par value; 100,000,000
shares authorized; 61,193,137 and 60,672,547
shares issued and outstanding 612 607
Additional paid-in capital 468,410 464,527
Accumulated deficit (230,718) (229,572)
Cumulative comprehensive income 5,168 5,300
--------- ---------
243,472 240,862
Common stock in treasury, at cost - 4,473,800
shares (25,205) (25,205)
------------ ---------
Total liabilities and stockholders' equity $ 311,196 $ 313,016
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Page 3 of 29
<PAGE>
INPRISE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS; UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
2000 1999
--------- ---------
<S> <C> <C>
Licenses and other revenue $39,774 $ 37,920
Service revenue 6,726 5,495
------- --------
Net revenue 46,500 43,415
------- --------
Cost of licenses and other revenue 4,063 5,750
Cost of service revenue 4,936 5,426
------- --------
Cost of revenue 8,999 11,176
------- --------
Gross profit 37,501 32,239
------- --------
Research and development 11,053 10,906
Selling, general and administrative 27,221 32,977
Restructuring and merger related charges -- 6,959
Other non-recurring charges -- 8,193
Merger - related expenses 1,542 --
------- --------
Total operating expenses 39,816 59,035
------- --------
Operating loss (2,315) (26,796)
Interest income, net and other 2,215 2,235
------- --------
Loss before income taxes (100) (24,561)
Income tax provision 1,046 1,028
------- --------
Net loss $(1,146) $(25,589)
======= ========
Net loss per share:
Basic $(0.02) $(0.54)
Diluted $(0.02) $(0.54)
Weighted average shares - basic 61,080 47,753
Weighted average shares - diluted 61,080 47,753
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Page 4 of 29
<PAGE>
INPRISE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS; UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
------- --------
<S> <C> <C>
Net loss $(1,146) $(25,589)
Other comprehensive loss:
Foreign currency translation adjustments (132) (1,965)
------- --------
Comprehensive loss $(1,278) $(27,554)
======= ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Page 5 of 29
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INPRISE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS; UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
2000 1999
---------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,146) $(25,589)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 3,066 3,662
Gain on sale of long-term investment -- (1,263)
(Gain)Loss on sale of fixed asset 500 (18)
Change in assets and liabilities:
Accounts receivable (2,134) 3,552
Other assets 278 (800)
Accounts payable and accrued expenses 1,608 4,119
Income taxes payable (2,964) (156)
Other (primarily deferred revenue
and restructuring) 2,093 3,309
-------- --------
Cash provided by (used in)operating activities 1,301 (13,184)
-------- --------
Cash flows from investing activities:
Purchase of property and equipment (377) (3,043)
Proceeds from sale of property 39,651 18
Net change in short-term investments (29) 2,767
Long-term investment, net (2,500) 529
-------- --------
Cash provided by investing activities 36,745 271
-------- --------
Cash flows from financing activities:
Proceeds from issuance of Common Stock, net 3,887 36
Repurchase of Common Stock -- (4,871)
Repayment of capital lease
obligations and other debt activity (43) (26)
-------- --------
Cash provided by (used in) financing activities 3,844 (4,861)
Effect of exchange rates on cash 51 (1,529)
-------- --------
Net change in cash and cash equivalents 41,941 (19,303)
Cash and cash equivalents at beginning of period 192,013 81,137
-------- --------
Cash and cash equivalents at end of period $233,954 $ 61,834
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Page 6 of 29
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INPRISE CORPORATION
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 1. PLAN TO MERGE WITH COREL CORPORATION
On February 6, 2000, Inprise entered into a merger agreement with Corel
Corporation and a wholly owned subsidiary of Corel. Pursuant to the merger
agreement, upon completion of the merger, Inprise will become a wholly-owned
subsidiary of Corel. Corel is one of the world's largest developers of business
productivity, graphics and operation solutions. Under the terms of the merger
agreement, Inprise stockholders will receive 0.747 of a share of Corel common
stock for each share of Inprise common stock held by such stockholders upon
closing of the transaction; on a fully diluted basis, Inprise stockholders will
own approximately 44% and Corel stockholders will own approximately 56% of the
combined entity. The board of directors of both companies have approved the
transaction. The merger is contingent upon the approval of both companies'
stockholders.
Dr. Michael C.J. Cowpland, Corel's Chairman of the Board, President and Chief
Executive Officer, will remain as President, Chief Executive Officer and a
director of the combined company. Dale Fuller, Inprise's Interim President and
Chief Executive Officer, will be Chairman of the Board of Directors of the
combined company. The Corel board will also be comprised of Robert Kohn, who
became a director of Inprise on May 7, 2000 and has been designated by Inprise
(with Corel's approval) to serve as a director of the combined company, and
three individuals who are current members of the Corel board. Corel has agreed
that it will recommend and support the election of Mr. Fuller and the other
Inprise designee to the Corel board at Corel's 2001 and 2002 annual meetings of
shareholders. Corel's obligation to cause Mr. Fuller to be appointed as chairman
of the Corel board continues until Corel's 2003 annual meeting of the
shareholders or for such longer time as may be agreed to by Mr. Fuller and the
Corel board. The operations of the combined company will be headquartered in
Ottawa, Ontario, Canada, with Inprise's operations remaining in its current
Silicon Valley locations. For additional information regarding the potential
merger, please read this document in conjunction with the Form S-4 filed with
the SEC by Corel Corporation on April 4, 2000.
NOTE 2. SALE OF THE CORPORATE FACILITIES
On March 17, 2000, Inprise completed the sale of its corporate facilities at 100
Enterprise Way, Scotts Valley, California, to Enterprise Way Associates, LLC as
assignee of ScalanKemperBard Companies. We received approximately $44.1 million
in consideration for the facility. Consideration in the transaction was net of
$2.5 million held in escrow to cover potential costs to improve the building and
$0.4 million in other disposal costs. We recorded a write-down of the corporate
facility of $29.7 million during the quarter ended December 31, 1999. In
conjunction with the sale of the facility, we entered into a long-term lease
arrangement to use approximately 44% of the building for corporate purposes.
NOTE 3. THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying condensed consolidated financial statements as of March 31,
2000 and the three months ended March 31, 2000 and 1999 are unaudited. The
unaudited interim condensed consolidated financial statements have been prepared
on the same basis as the annual consolidated financial statements and, in the
opinion of management, reflect all adjustments, which include only normal
recurring adjustments, necessary to present fairly Inprise's financial position,
results of operations and cash flows as of March 31, 2000 and for the three
months ended March 31, 2000 and 1999. The preparation of consolidated 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 reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These condensed consolidated
financial statements and notes should be read in conjunction with our audited
financial statements included in our Annual Report on Form 10-K for the fiscal
year ended December 31, 1999 as filed with the SEC on April 4, 2000.
Page 7 of 29
<PAGE>
NOTE 4. NET INCOME PER SHARE
We compute net income (loss) per share in accordance with SFAS No. 128 "Earnings
per Share." Under the provisions of SFAS No. 128, basic net income (loss) per
share is computed by dividing the net income (loss) attributable to common
stockholders for the period by the weighted average number of common shares
outstanding during the period. Diluted net income (loss) per share is computed
by dividing the net income (loss) for the period by the weighted average number
of common and common equivalent shares outstanding during the period. Common
equivalent shares, which consist of incremental shares issuable upon exercise of
stock options and warrants and upon conversion of the Series C Convertible
Preferred Stock, are included in diluted net income (loss) per share to the
extent such shares are dilutive.
The following table sets forth the computation of basic and diluted net income
(loss) per share for the periods indicated (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31,
2000 1999
------- --------
<S> <C> <C>
Numerator:
Net loss before accretion charges $(1,146) $(25,589)
Accretion charges to preferred stock 219 26
------- --------
Loss available to common
stockholders for basic and
diluted earnings per share $(1,365) $(25,615)
------- --------
Denominator:
Denominator for basic and diluted loss
per share - weighted average shares 61,080 47,753
------- --------
Net loss per share - basic $ (0.02) $ (0.54)
======= ========
Net loss per share - diluted $ (0.02) $ (0.54)
======= ========
</TABLE>
NOTE 5. RESTRUCTURING
The following table summarizes our restructuring activity for the three months
ended March 31, 2000:
<TABLE>
<CAPTION>
Severance Other
and Asset
Benefits Facilities Charges Other Total
--------- ---------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
Accrual at December 31, 1999 $3,003 $ 997 $ 4,764 $1,204 $ 9,968
Cash payments (515) (124) -- (152) (791)
Non-cash costs -- -- (4,139) (459) (4,598)
----------------------------------------------------
Accrual at March 31, 2000 $2,488 $ 873 $ 625 593 $ 4,579
====================================================
</TABLE>
Subsequent to December 31, 1999, there have not been any changes to our estimate
of the total costs of prior restructuring provisions.
NOTE 6. INCOME TAXES
We have significant net operating loss and tax credit carryforwards in the U.S.
and a number of non-U.S. jurisdictions in which we conduct business. These
losses and credit carryforwards are used to offset our tax liability. In
addition, we incur
Page 8 of 29
<PAGE>
withholding taxes in a number of non-U.S. jurisdictions that is imposed
regardless of the profitability of Inprise in that jurisdiction. We anticipate
our tax provision for 2000 to be comprised principally of non-U.S. income taxes
and non U.S. withholding taxes. In 1999, our tax provision was comprised of U.S.
taxes, federal and state, and non-U.S. income and withholding taxes. The
principal difference between the 2000 and 1999 tax provisions is the U.S. tax
provision related to the income from the one-time patent cross-license agreement
with Microsoft.
NOTE 7. INVESTMENT
On March 17, 2000, Inprise entered into a Share Purchase Agreement with Troll
Tech AS ("Troll Tech"). Troll Tech, which is headquartered in Oslo, Norway, is a
leading provider of software used for the development of graphical user
interfaces in software applications. Under the terms of the agreement, Inprise
purchased a minority interest in Troll Tech. This investment is recorded at
cost.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
FORWARD-LOOKING STATEMENTS
The matters discussed throughout this Quarterly Report that are not historical
facts are forward-looking statements and accordingly, involve estimates,
projections, goals, forecasts, assumptions and uncertainties that could cause
actual results or outcomes to differ materially from those expressed in the
forward-looking statements.
These forward-looking statements may relate to, but are not limited to, future
capital expenditures, acquisitions, future revenues, earnings, margins, costs,
product release dates, demand for our products, market trends in the software
industry, interest rates and inflation and various economic and business trends.
You can identify forward-looking statements by the use of words such as
"expect," "estimate," "project," "budget," "forecast," "anticipate," "plan" and
similar expressions. Forward-looking statements include all statements regarding
expected financial position, results of operations, cash flows, dividends,
financing plans, business strategies, operating efficiencies or synergies,
budgets, capital and other expenditures, competitive positions, markets and
growth opportunities for existing or proposed products or services, plans and
objectives of management, and markets for stock of Inprise and conditions or
trends in the securities markets where shares of Inprise stock are traded.
Forward-looking statements also include all statements regarding the pending
merger with Corel Corporation.
Examples of factors that you should consider with respect to any forward-
looking statements made throughout this Quarterly Report include, but are not
limited to, the following:
. general industry trends and the effects of competition in the computer
software industry;
. changes in the economies of geographic areas served by the Company;
. catastrophic natural disasters;
. unanticipated changes in operating expenses and capital expenditures;
. customer business conditions;
. financial or regulatory accounting principles or policies imposed by the
Financial Accounting Standards Board, the Securities and Exchange Commission
and similar agencies with regulatory oversight;
. employee workforce factors, including loss or retirement of key executives;
. technological developments resulting in competitive disadvantages and
creating the potential for impairment of existing assets;
. if the merger is consummated unexpected costs or difficulties related to the
integration of the businesses of Inprise with Corel;
. other risks and uncertainties relating to the closing of the merger with
Corel;
. general economic factors including inflation and capital market conditions;
Page 9 of 29
<PAGE>
. other risks and uncertainties described in Inprise's public announcements and
public filings;
. changes in tax requirements, including tax rate changes, new tax laws and
revised interpretation of tax laws; and
. adverse changes, trends and conditions in the securities markets.
These factors are difficult to predict. They also involve uncertainties that
may materially affect actual results, and may be beyond the control of Inprise.
New factors may emerge from time to time and it is not possible for us to
predict new factors, nor can we assess the potential effect of any new factors
on Inprise.
These forward-looking statements are found at various places throughout this
Quarterly Report. We caution you not to place undue reliance on these forward-
looking statements, which unless otherwise indicated, speak only as of the date
they were made. Inprise does not undertake any obligation to release publicly
any revisions to these forward-looking statements to reflect events or
circumstances after the date of this Quarterly Report or to reflect the
occurrence of events that we do not currently anticipate.
You may read and copy any reports, statements or other information filed by
Inprise at SEC Public Reference Rooms at 450 Fifth Street, N.W., Washington,
D.C. 20549 or at any of the SEC's other public reference rooms in New York,
Chicago, and Illinois. Please call SEC at 1-800-SEC-0330 for further information
on public reference rooms. Inprise's filings with the SEC are also available to
the public from commercial document-retrieval services and at the Internet web
site maintained by SEC at www.sec.gov. In addition, any reports, statements or
-----------
other information filed by Inprise with the SEC may also be obtained for free
from Inprise by directing such request to: Inprise Corporation, 100 Enterprise
Way, Scotts Valley, California 95066-3249, Attention: Investor Relations,
telephone: (831) 431-1000, e-mail: [email protected].
--------------------
OVERVIEW
Inprise is a leading provider of Internet-enabling software and services
designed to reduce the complexity of application development for corporations
and individual programmers. We develop and provide integrated, scalable and
secure solutions, distinguished for their ease of use, performance and
productivity. Committed to most major computing platforms as well as the open
standards of the Internet, we provide service and support for software
developers worldwide through our online developer community and E-commerce site
- - community.borland.com - offering a range of technical information, value-added
services and third-party products. Our product lines and services are designed
to assist software developers and business enterprises in their development and
deployment of software in the desktop, client/server, distributed objects and
Internet and corporate intranet environments.
We market and distribute our products worldwide primarily through independent
distributors, dealers, value-added resellers ("VARs") and independent software
vendors ("ISVs"). We also market and sell to corporations, governments,
educational institutions and other end-user customers through direct sales and
through the Internet.
Page 10 of 29
<PAGE>
RESULTS OF OPERATIONS
Revenue. Our revenue is derived from software licenses, customer support,
training and consulting services.
Licenses and Other Revenue. License revenue represents amounts earned from
granting customers licenses to use our software products. Licenses and other
revenue totaled $39.8 million for the quarter ended March 31, 2000; an increase
of 5% from the same quarter of 1999. Revenue during the three months ended
March 31, 2000 was favorably affected by the release of JBuilder 3.5 during the
quarter. With this product release, JBuilder revenue more than doubled over the
same quarter a year ago. We released JBuilder 3.0 in the quarter ended June 30,
1999. The increase in JBuilder revenues was offset by a 44% decline in revenues
from the non-strategic enterprise and desktop products. Revenues from non-
strategic products represented 8% and 15% of Inprise's overall revenue for the
quarters ended March 31, 2000 and 1999, respectively.
Service Revenue. Service revenue represents amounts earned from customer
support, training, consulting and education services related to our software
products. Service revenue increased to $6.7 million for the quarter ended March
31, 2000 compared to $5.5 million for the quarter ended March 31, 1999. This
increase is primarily related to increased technical support revenue as the
Company focuses on support offerings for its enterprise products.
International Revenue. International revenue represented 63% of our total net
revenue for the quarter ended March 31, 2000 compared to 55% for the quarter
ended March 31, 1999. We expect that our international operations will continue
to provide a significant portion of our total revenue.
The following table presents our total revenue by geographic area:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------
2000 1999
------- -------
<S> <C> <C>
United States $17,205 $19,530
Europe 15,899 15,459
Japan 7,722 4,698
Other 5,674 3,728
------- -------
Net revenues $46,500 $43,415
======= =======
</TABLE>
Cost of Revenue
Cost of Licenses and Other Revenue. Cost of licenses revenue consists primarily
of production costs, product packaging, and royalties paid to third-party
vendors. Cost of licenses and other revenue was $4.1 million and $5.8 million
for the quarters ended March 31, 2000 and 1999, respectively. The decrease in
cost of licenses revenue during the quarter was due to the decreased volume of
units sold compared to the quarter a year ago. In addition, the Company lowered
the cost of inventory due to better inventory management. Cost of licenses
revenue may vary in future periods due to changes in royalty obligations to
third-party technology providers, certain manufacturing costs as well as the
number of new products and product upgrades introduced in any respective
quarter.
Cost of Service Revenue. Cost of service revenue consists primarily of salaries
and benefits, third-party contractor costs, and related expenses incurred in
providing customer support, training and education. Cost of service revenue was
$4.9 million and $5.4 million for the quarters ended March 31, 2000 and 1999,
respectively. This decrease in costs was primarily due to lower employee related
expenses, as the Company reduced the headcount within its professional service
group during the fourth quarter of 1999. Cost of service revenue as a percentage
of service revenue may also vary between periods due to the combination of
services that we provide to customers and the extent to which employees or
contractors are used to provide those services.
Operating Expenses
Research and Development. Research and development expenses consist primarily of
salaries and other personnel-related expenses, facilities costs and fees and
expenses of third-party consultants. Research and development expenses were 24%
Page 11 of 29
<PAGE>
and 25% of net revenues for the quarters ended March 31, 2000 and 1999,
respectively. Research and development expenses, in absolute dollars, for the
quarter ended March 31, 2000 remained consistent with the quarter ended March
31, 1999.
Sales, General and Administrative. Sales, general and administrative (SG&A)
expenses consist primarily of salaries, benefits, sales commissions, the cost of
product marketing programs, and facility and information system costs. SG&A
expenses decreased by 18% this quarter compared to the same quarter of last year
and represented 59% and 76% of net revenue for the quarters ended March 31,
2000, and 1999, respectively. This decrease was principally due to decreased
employee costs and a reduction in depreciation costs, as Inprise disposed of
its Scotts Valley facility and certain information systems capital assets during
the quarter ended March 31, 2000.
Restructuring and Merger-Related Charges. In January 1999, we announced the
restructuring of our corporate operations. We recorded a restructuring charge of
$7.0 million primarily related to severance costs.
During December 1999, we recorded a restructuring charge of $34.8 million. The
restructuring charge consists primarily of a write-down for the sale of our
Scotts Valley facility of $29.7 million; a $3.1 million charge for
discontinuation of our European information system implementation; severance
costs associated with organizational changes of $3.0 million and other
miscellaneous restructuring related costs of $3.1 million. These charges were
offset, in part, by the reversal of prior restructuring charges totaling $4.1
million.
During the quarter ended March 31, 2000, Inprise paid approximately $0.8 million
for severance, facility and other costs as part of the December 1999 restructure
charge. In connection with the pending merger transaction with Corel previously
described, Inprise has incurred approximately $1.5 million in costs through
March 31, 2000.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2000, total cash, cash equivalents and short-term investments
totaled $239.7 million up from $197.7 million at December 31, 1999. Working
capital increased to $203.0 million, up from $155.2 million at December 31,
1999, primarily due to the $39.6 million in cash received from the sale of the
Scotts Valley facility. We expect that our current working capital will be
sufficient to finance our working capital requirements at least through the next
twelve months.
LEGAL PROCEEDINGS
Inprise and certain of its former officers and directors were named
defendants in two lawsuits, Kaplan, et al vs. Kahn, et al, and Crook, et al vs.
Kahn, et al, originally filed in the United States District Court for the
Northern District of California in 1993 and 1995, respectively. The lawsuits
alleged certain securities law violations during the periods between 1991 and
1994. In 1996, the parties entered into an agreement to settle both lawsuits.
The agreement was submitted to the Court for approval and monies were deposited
in escrow to fund the settlement. At the time, we recorded an expense for the
amount of our contribution to the settlement. On September 3, 1999, the Court
approved the settlement agreements in both lawsuits, together with a revised
plan of allocation of the settlement proceeds. On March 20, 2000, the Court
entered a final order certifying the settlement class and a final order
certifying the settlement class and dismissing both lawsuits. This order became
final on April 19, 2000.
On April 14, 2000, a complaint was filed by Management Insights, Inc., a
stockholder of Inprise and a company controlled by C. Robert Coates, a former
director of Inprise, and members of his family, against Inprise, each of
the members of the Inprise board, Corel and Corel's merger subsidiary in the
Court of Chancery of the State of Delaware, in a lawsuit captioned, Management
Insights, Inc. v. Inprise Corporation, Dale Fuller, William F. Miller, William
Hooper, David Heller, Corel Corporation and Carleton Acquisition Co. In its
complaint, plaintiff seeks, among other things, a preliminary and permanent
injunction against consummation of the merger of Inprise and Corel, rescission
or other equitable relief in event that the merger is consummated and other
unspecified damages. The complaint alleges, among other things, that (i) the
Inprise board breached its fiduciary duties in entering into the merger
agreement with Corel and, later, by not terminating the merger agreement and
abandoning the merger, (ii) the representations and warranties made by Corel to
induce Inprise to enter into the merger agreement were not correct when made
and/or are no longer correct, and (iii) the preliminary version of this Form S-4
registration statement filed by Corel on April 4, 2000 did not accurately and
completely describe material facts concerning the proposed merger. The plaintiff
claims that the preliminary version of the Form S-4 registration statement was
allegedly false and misleading for failing to disclose, among other things,
that:
. Mr. Coates had resigned as an Inprise director on February 6, 2000
over the proposed merger;
. the value of the Corel common shares that is to be merger
consideration has substantially declined since the announcement of the
merger;
. Corel's financial results for the first quarter of fiscal year 2000,
ended February 29, 2000, were substantially below expectations and
Corel expects similar results for at least the next two quarters;
. Broadview's analysis in connection with its February 6, 2000 fairness
opinion relied on expected and projected financial results provided by
Corel that were and/or have proven to be inaccurate; and
. Corel's had disappointing Linux revenues in the first quarter of
fiscal year 2000 and the expectation that Corel will not achieve the
Linux revenues it forecast for fiscal year 2000.
On May 2, 2000, the plaintiff amended its complaint to add the following
additional allegations, among others that:
. Inprise has failed to correct the public record created by Corel's
filing with the SEC on April 14, 2000 of the text of a March 8, 2000
press conference at which Dale Fuller, Inprise's interim president and
chief executive officer, stated that Mr. Coates had resigned from the
Inprise board without giving any reason;
. given Corel's current stock price, Corel will, if the merger proceeds,
acquire Inprise at a discount rather that buying Inprise at a modest
premium;
. Inprise has grounds to withdraw from the merger agreement since
Corel's cash position constitutes a change, event or development that
is having or could reasonably be expected to have a material adverse
effect on Corel;
. Corel's cash position raises questions concerning the accuracy of
Corel's filings with the SEC and its financial statements and
financial projections; and
. given the alleged adverse developments at Corel it would be a breach
of fiduciary duty for the Inprise board to proceed with the merger.
Inprise and its Directors are currently reviewing this complaint and intend
to defend themselves against the claims contained in the complaint. As of the
date of this report, neither of Inprise, nor any of its Directors has filed an
answer to the complaint.
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On April 19, 2000, a complaint was filed by a purported stockholder, on his
own behalf and purportedly on behalf of the other stockholders of Inprise,
against Inprise and its directors in the Court of Chancery of the State of
Delaware, in a lawsuit captioned, Paul Berger v. Dale Fuller, William F. Miller,
William Hooper, David Heller and Inprise Corporation. The complaint alleges,
among other things, breaches of fiduciary duties by the directors of Inprise in
connection with their approval of the merger agreement. In his complaint, the
plaintiff seeks, among other things, a preliminary and permanent injunction
against consummation of the merger of Inprise and Corel, rescission or other
equitable relief in the event that the merger is consummated and other
unspecified damages. Inprise and the other defendants are currently reviewing
this complaint and intend to defend themselves against the claims contained in
the complaint. On May 12, 2000, Inprise filed a motion with the Court of
Chancery to dismiss this complaint.
We are also involved in various other legal actions arising in the normal
course of our business. We believe that it is unlikely that any of these actions
will have a material adverse impact on our operating results. However, because
of the
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inherent uncertainties of litigation, the outcome of any of these actions could
be unfavorable and could have a material adverse effect on our financial
condition or results of operations.
Factors That May Affect Future Results and Market Price of Stock
Inprise operates in a rapidly changing environment that involves many risks,
some of which are beyond our control. The following is a discussion that
highlights some of these risks.
Risks Associated with Plan to Merge with Corel
We entered into a merger agreement with Corel on February 6, 2000. The merger
is contingent, among other things, on the approval by Corel stockholders and our
stockholders. There can be no assurance that the merger will be approved by the
requisite vote of either our stockholders or Corel's stockholders. In addition,
if the merger agreement is terminated under certain circumstances, including,
among others, where another party has made an alternative acquisition proposal
to acquire Inprise, or if the Inprise board withdraws or changes in a manner
adverse to Corel its approval or recommendation of the merger agreement or the
merger, Inprise may be required to pay Corel a termination fee of $29.5 million.
Under such circumstances, Corel would also be able to exercise its option to
purchase up to 12 million shares of Inprise common stock (approximately 19.7% of
Inprise's common shares) at an exercise price of $14.94 per share, subject to
adjustment, provided that the maximum profit that Corel can obtain pursuant to
the option is aggregated with the termination fee that would be payable to Corel
and the aggregate amount is limited to $30 million.
If the merger is approved and completed, there are business risks related to
it. Such risks include the failure to successfully integrate and manage acquired
technology, operations and personnel, the loss of key employees of Inprise and
Corel and diversion of our management's attention from other ongoing business
concerns; and the risk of significant charges for in-process research and
development or other matters. Any of these factors could have a material adverse
effect on our operating results.
There are risks to our business if the merger is not consummated resulting
from the distraction of our management team, the loss of key personnel, the
delay in the implementation of product strategies, the postponement of our
customers' decision to purchase products and the loss of customers as a result
of the uncertainties created. Any of these factors could have a material adverse
effect on our business and operating results.
We Depend on Key Personnel
We believe that our future success will depend, in large part, on our ability
to recruit and retain qualified employees, particularly highly skilled software
engineers and management personnel. Competition for such personnel is intense,
particularly in Northern California where our operations are based, and we may
not be successful in retaining or recruiting such personnel.
Our Interim President and Chief Executive Officer entered into an employment
agreement dated April 9, 1999, the term of which expired on October 9, 1999.
There is no assurance that he will continue in his position or that we would be
able to find a replacement should he leave our employment.
We have experienced the loss of a significant number of management personnel
and other key employees. As a result, we have instituted retention programs to
retain key employees. We have increased compensation, bonuses, stock options and
other fringe benefits in order to attract and retain management and other key
personnel. We may be required to further increase such compensation and
benefits. We are not certain that these efforts will succeed in retaining our
key employees, and failure to attract and retain key personnel could
significantly harm our business.
Unpredictability of Future Revenues: Potential Fluctuations in Quarterly
Operating Results and Seasonality
Our quarterly operating results have varied significantly in the past. We
expect that our operating results will continue to vary significantly from time
to time. We believe that these variations may result from many factors already
described and may include, but may not be limited to, any of the following
factors:
. introduction of new products;
. the overall level of demand for our products;
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. the size and timing of significant orders and their fulfillment;
. the number, timing and significance of product enhancements and new product
announcements by us and our competitors;
. changes in pricing policies by us or our competitors;
. customer order deferrals in anticipation of enhancements or new products
offered by us or our competitors;
. deferral of customer orders based on their uncertainty about our short-term
and long-term prospects;
. product release cycles of existing products;
. product defects and other product quality problems;
. seasonal trends; and
. general domestic and international economic and political conditions.
An additional risk factor is the lengthening of our sales cycle. We expect
that a significant percentage of our future revenue will be from large orders.
These large sales typically contain multiple elements, including licenses for
development and deployment products, technical support, maintenance, consulting
and training services. The revenue from a large order is typically recognized
over time, instead of all at the time that order is placed. For example, when
the contract is signed, the license and deployment fees may be recognized as
revenue. However, revenue related to further services, such as technical support
and consulting services, must be deferred until the services are rendered. The
timing of recognition of revenue associated with larger sales may have a
material adverse effect on our business, operating results and financial
position.
Furthermore, many customers place orders toward the end of a given quarter.
Therefore revenues can be difficult to predict. Costs are based on projected
revenues and are relatively fixed in the short term. Therefore, if revenue
levels fall below projections, net income may be significantly reduced or we may
experience a loss.
We cannot be certain that we will be able to maintain profitability on a
quarterly or annual basis. It is likely that in some future quarters, our
operating results will be below our expectations as well as those of public
market analysts and investors. In such case, the price of our common stock may
be materially and adversely affected.
Risks in Transition to Direct Sales, Lengthy Sales Cycles and Systems
Implementation Selling
Selling enterprise software products directly to our customers entails sales
cycles that are substantially more lengthy and more uncertain than those
associated with our traditional business of selling desktop software through
retail channels. Customers for enterprise products are predominately larger
companies, institutions and governmental entities. These customers generally
commit significant time and resources to evaluating enterprise software, and
they require us to expend substantial time, effort and money educating them
about our software products and solutions. As a result, sales to these types of
customers generally require an extensive sales effort throughout the customer's
organization, and they often require final approval by an executive officer or
senior level employee. All of these factors substantially extend the sales cycle
and increase the uncertainty of whether a sale will be made. We have experienced
and expect to continue to experience delays and uncertainty in the sales cycle
as well as increased expenses for these sales.
We need to extensively train and effectively manage our sales personnel,
invest additional resources in the sales effort, and educate our authorized
resellers in international markets. Because we recently began making enterprise
sales in non-U.S. markets, there can be no assurance that we will successfully
complete our transition to the direct sales model outside of the U.S. Our
failure to do so could significantly harm our business.
We have added trained technical personnel to assist our customers in
implementing our enterprise software products. Personnel with sufficient
expertise and experience for these positions are in great demand, and we may not
be able to attract or retain a sufficient number of qualified personnel. Our
failure to do so could significantly harm our business.
We have made changes to our sales compensation programs in recent years in an
effort to increase sales. There can be no assurance, however, that they will be
successful in achieving this result in the long-term, and such changes could
significantly harm our revenues and sales-related expenses.
Risks Related to New Product Introductions; Rapid Technological and Market
Changes
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The market for our products is highly competitive and is characterized by
continuous technological advancement, evolving industry standards and changing
customer requirements. Our future ability to generate revenue will depend
substantially on our ability to successfully design and market new products and
upgrades of our current products for existing and new computer platforms and
operating environments that anticipate the requirements of this market.
We face a number of inherent risks in the current market environment,
including, but not limited to, the following:
. we may introduce products later than we expect or later than competitors'
introductions;
. competitors may introduce competing products at lower prices;
. product upgrades, which enable users to upgrade from earlier versions of our
products or competitors' products, have lower prices and margins than new
products; and/or
. the acceptance of our new products is highly dependent, in part, on the
continued adoption of the Internet as a new computing paradigm, the increased
use of the Java programming language; and the adoption of the Linux operating
system.
From time to time, we announce when we expect to begin shipping a new product.
In the past, some of our products have shipped later, and sometimes
substantially later, than when we originally expected. The loss of key employees
may increase the risk of these delays. Some of our products are based on
technology licensed from third parties. We have limited control over when and
whether these technologies are upgraded. The failure or delay in enhancements of
technology licensed from third parties could have a material adverse effect on
our ability to develop and enhance our products. Due to these uncertainties
inherent in software development, it is likely that these risks will materialize
from time to time in the future. We could lose customers as a result of
substantial delays in the shipment of new products or product upgrades.
Substantial delays could also render our products technologically obsolete and
significantly harm our business.
Risks of Entering a New Business Area
Our strategy is to focus on enterprise customers, software developers, and the
Internet and corporate Intranet markets. Our sales are dependent on these
enterprise customers' adopting distributed object technology for information
processing and the Internet and corporate Intranets for commerce and
communications. Concerns about the Internet and corporate intranets, including
security, reliability, cost, ease of use and access and quality of service, may
inhibit the adoption of this technology by potential customers, thereby harming
our business.
Our distributed object software products are based on several standards,
including the Common Object Request Broker Architecture, or CORBA, and Extended
Markup Language, or XML. These standards guide the development and management of
applications created in object oriented programming languages such as C++ and
Java. These new standards are just beginning to gain widespread acceptance, and
they compete with proprietary solutions such as Microsoft's ActiveX and DCOM.
The distributed object software market is relatively young, and there are few
proven products. Some of our VisiBroker products are designed specifically for
use in applications for the Internet and corporate Intranets. If CORBA is not
adopted, or is adopted more slowly than anticipated, or if our potential
customers select products based on other standards, our business would be
harmed.
We are investing time and resources in developing products for the Linux
operating system. Linux is a new operating system and has yet to be adopted on a
widespread basis. At this time, there are few commercially viable products that
operate on the Linux operating system. If Linux is not adopted, or is adopted
more slowly than anticipated, our investments in Linux technology may not
generate the anticipated return, and as a result our business could be
materially adversely affected.
As a newcomer to these markets, we face a number of risks including:
. the new and evolving nature of the markets themselves;
. our need to make choices regarding the operating systems, database management
systems and server software on which to focus;
. the ongoing transition and investment of our resources for this segment;
. our limited experience in this area; and
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. the presence of several very large and well-established businesses, as well
as a number of smaller successful companies, which are already competing in
this market.
There can be no assurance that we will be successful in these new markets.
Risks with New Business Practices, Processes and Information Systems
In order to remain competitive, we are continually seeking to improve our
business processes and information systems. During 1998 and 1999, we began a
company-wide implementation of new business processes and new information
systems in an effort to optimize usage of system capabilities, enhance user
skills surrounding system features, and reduce runtime errors. The complexity of
the new systems will require us to invest in substantial employee training.
There may also be delays or unexpected costs during the implementation. Delays
in training or implementation or unexpected costs associated with our new
systems could adversely affect our business.
Risks Related to Restructuring
In response to significant losses from operations, we implemented a
restructuring and realignment of operations in 1998 and 1999. These
restructurings resulted in significant reductions in workforce and other ongoing
costs. Given the extent of the restructuring that we have undertaken, we are
uncertain that the remaining resources are sufficient for us to return to
consistent revenue growth or profitability, nor can we be certain that we will
realize the cost savings which the restructurings were designed to produce.
Extremely Competitive Industry
The computer software industry is an intensely competitive industry. Rapid
change, new and emerging technologies and fierce competition characterize the
industry. The pace of change has accelerated due to the emergence of the
Internet and corporate Intranets, programming languages, such as Java, and
operating systems such as Linux.
Our development tools and distributed objects products compete with products
offered by a number of companies, including but not limited to Computer
Associates, Microsoft, Oracle, Sun Microsystems, Sybase, Symantec and IBM. In
the standards-based distributed object market, we compete primarily with BEA
Systems and Iona Technologies. These products also compete against existing or
proposed distributed object solutions from hardware vendors such as Hewlett-
Packard, IBM and Sun Microsystems.
In addition, we are dependent upon and in competition with operating systems
vendors. To the extent that we are unable to obtain information regarding
existing and future operating systems from the developer of such systems, the
release of our products for such systems may be delayed or may not be
competitive. For example, Microsoft, a significant competitor, is the developer
of the Windows operating environments. Microsoft has announced that it intends
to include certain middleware functionality in future versions of its Windows
2000 operating system. Microsoft has also introduced a product that includes
certain basic application server functionality. The bundling of competing
functionality in versions of Windows products requires us to compete with
Microsoft in the Windows marketplace where Microsoft has certain inherent
advantages due to its significantly greater financial, technical, marketing and
other resources, greater name recognition, substantial installed base and the
integration of its middleware functionality with Windows. We need to
differentiate our products from Microsoft's, based on scalability,
functionality, interoperability with non-Microsoft platforms, performance and
reliability as well as to establish that our products provide more effective
solutions to customers' needs. There can be no assurance that we will be able to
differentiate our products successfully from those offered by Microsoft, or that
Microsoft's entry into the middleware market will not harm this portion of our
business.
Some of our competitors have substantially greater financial, management,
marketing and technical resources than we have. Many of our competitors have
well-established relationships with our current and potential customers. They
also have extensive knowledge of the markets, extensive development, sales and
marketing resources, and they are capable of offering single vendor solutions.
In particular, operating system vendors such as Hewlett-Packard, IBM, Microsoft
and Sun Microsystems may offer similar products bundled with their own operating
systems. For example, Microsoft has introduced DCOM for Microsoft operating
systems. In the past, some of our competitors have utilized their greater
resources to provide substantial signing bonuses and other inducements to lure
away our management and other key personnel.
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Some of our products are targeted at the emerging market for standards-based
distributed object software products. These markets are intensely competitive.
We believe that our product quality, performance and price, vendor and product
reputation, product architecture and quality of support make us competitive in
these markets. However, because there are relatively low barriers to entry in
these markets, we expect additional competition from other established and
emerging companies. Increased competition could result in price reductions,
fewer customer orders, reduced gross margins and loss of market share. Any one
of these results could materially adversely affect our business, operating
results and financial condition.
It is possible that current and new competitors may form alliances to gain
significant market share. Some of our competitors have offered to license
software for free to gain competitive advantage. This kind of competition could
materially adversely affect our ability to sell additional licenses and
maintenance and support renewals on profitable terms. Competitive pressures
could require us to reduce the price of our products and related services. We
are not certain that we will be able to compete successfully against current and
future competition. The failure to compete successfully would have a material
adverse effect on our business, operating results and financial condition.
We need to differentiate our products from our competitors' products based on
functionality, interoperability, developer productivity, performance and
reliability. There can be no assurance that we will be able to successfully
differentiate our products from our competitors.
Commercial acceptance of our products and services is also dependent on the
perception of our Company. Successful marketing of our products and promotion of
our Company are important to our success. There can be no assurance that our
efforts will be successful. In addition, critical or negative statements made by
brokerage firms, industry and financial analysts, and industry periodicals about
our Company, our products, or our business could negatively impact customer
perception. Similarly, negative advertising or marketing efforts conducted by
our competitors could affect customer perception. If the customers' perception
of us becomes negative, this could have an adverse impact on our business,
operating results and financial condition.
We face intense competition in the development and marketing of Internet and
corporate Intranets, middleware and development software. We are not certain
that we will be able to compete effectively for Internet and corporate
Intranets, on-line services, electronic commerce business opportunities as they
arise.
Dependence on Third Party Licenses
We are dependent on licenses from third party suppliers for some elements of
our products. If any of these licenses were terminated or were not renewed, or
these third parties failed to develop new or updated products in a timely
manner, we might not be able to ship some of our products. We would then have to
develop an alternative to the third party's product. This could result in
delays, increased costs or reduced functionality of our products and could have
a material and adverse effect on our business, operating results and financial
condition.
Protecting Our Intellectual Property Rights
As a technology company, our intellectual property rights are among our most
valuable assets. We rely on a combination of patent, copyright, trademark, and
trade secret laws, contractual arrangements and other methods to protect our
proprietary technology. The protective steps we have taken may be inadequate to
deter misappropriate of our proprietary technology and, it may be possible for
an unauthorized third party to reverse engineer our products, or copy, obtain
and use our proprietary technology. We may be unable to detect the unauthorized
use of, or take appropriate steps to enforce, our intellectual property rights.
In addition, the intellectual property laws of some foreign countries are not as
protective as the laws of the United States. Accordingly, we cannot be certain
that we will be able to protect our proprietary technology against unauthorized
third party copying or use that could materially and adversely affect our
competitive position.
From time to time, we receive a notice claiming that we have infringed a third
party's patent or other intellectual property right. We expect that software
products in general will increasingly be subject to such claims as the number of
products and competitors increase and the functionality of products overlap.
Regardless of the merit of a claim, responding to any claim can be time
consuming and costly and divert our efforts of Inprise's technical and
management personnel from productive tasks and/or enter into royalty and
licensing agreements that might not be offered or available on acceptable terms.
In the event of a successful claim against us, Inprise may be required to pay
significant monetary damages, discontinue use and sale of the infringing
products, expend significant resources to develop non-infringing technology
and/or enter into royalty and licensing agreements that might not be offered or
available on acceptable terms. If
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a successful claim were made against us and we failed to commercially develop or
license a substitute technology, our business could be harmed.
We Have a History of Declining Revenue and Operating Losses
We recorded an operating loss of $2.3 million for the quarter ended March 31,
2000. This includes expenses of $1.5 million incurred in conjunction with the
pending merger with Corel. We have had operating losses in five of the past
six fiscal years.
Our ability to achieve revenue growth and profitability in the future is
dependent on our success in selling our products and services while, at the same
time, reducing our operating expenses. Our future profitability is dependent,
among other things, upon our ability to:
. introduce new products and services successfully;
. achieve market acceptance of our products and services;
. implement restructuring and cost control measures from time to time; and
. integrate the products and operations of acquired companies successfully.
If we are unable to accomplish these objectives, we will be unable to achieve
revenue growth and profitability in future periods.
Extreme Volatility of Stock Price
Like the publicly-traded securities of other high technology companies, the
market price of our common stock has experienced significant fluctuations and
may continue to be extremely volatile. During the period from January 1, 1999 to
March 15, 2000, the sales price of our common stock has ranged from a high of
$20.00 to a low of $2.69. The market price of our common stock may be
significantly affected by factors such as the following:
. announcements of new products or product enhancements by us or our
competitors;
. technological innovation by us or our competitors;
. quarterly variations in our results of operations or those of our
competitors;
. changes in the prices of our products or those of our competitors;
. changes in revenue and revenue growth rates for us as a whole or for specific
geographic areas, business units, products or product categories;
. changes in our earnings estimates by market analysts;
. speculation in the press or analyst community;
. actual or anticipated changes in interest rates; and
. general market conditions or market conditions specific to particular
industries.
In the past, following periods of volatility in the market price of a
company's securities, securities class action litigation has often been
institute against the company. The institution of similar litigation against us
could result in substantial costs and a diversion of our management's attention
and resources, which could materially adversely affect our business, results of
operations and financial condition.
Risks of Regulation of the Internet and Electronic Commerce
We intend to expand our business through e-commerce on the Internet. The
electronic commerce market is new and rapidly evolving. Currently, there are few
laws or regulations that directly apply to access or commerce on the Internet.
Changes in laws or regulations governing the Internet and electronic commerce
could have a material adverse effect on our business, operating results and
financial condition.
Risks Associated with Our Dependence on Java and Encryption Technology
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Some of our products are based on Java, an object-oriented software
programming language developed by Sun Microsystems. Java is a relatively new
language and was developed primarily for Internet and corporate Intranet
applications. It is still too early to determine whether Java will become a
widely adopted technology. At this time, there are a limited number of Java-
based products. Alternatives to Java have been announced by several companies,
including Microsoft. If Java is not adopted widely, or is adopted more slowly
than anticipated, there could be a material adverse effect on our business.
We will use encryption technology in some of our future products to provide
security for the exchange of confidential information. Encryption technologies
have been breached in the past. There can be no assurance that there will not be
a compromise or breach of our security technology. If any such breach were to
occur, it could have a material adverse effect on our business.
Risks of Using Retail Distribution Channels
A significant portion of our sales are made through retail distribution
channels. Demand in these channels fluctuate based on customer demand. Our
retail distributors also carry the products of competitors. Some of our retail
distributors have limited capital to invest in inventory. Their decision to
purchase our products is based on a combination of demand for our products, our
pricing, terms and special promotions we offer.
Our net revenues and earnings may be affected by a practice called "channel
fill." Channel fill occurs when a distributor purchases more products than it
expects to sell in anticipation of price changes, sales promotions or
incentives. After we announce a new version or new product and prior to the date
of product availability, distributors, dealers and end users often delay
purchases, cancel orders or return products in anticipation of the availability
of the new version or product. We try to mitigate the negative effect of this
pattern by deferring recognition of revenue associated with distributors' and
resellers' inventories that are in excess of appropriate levels. However,
channel fill may still affect our net revenues, particularly during periods
where we announce several new products at the same time.
When we introduce new versions of our products, our distributors return their
inventories of the older versions. Our return policy allows our distributors,
with some limitations, to return products in exchange for credit or toward new
products. Similarly, end users may return products through dealers and
distributors within a reasonable period from the date of purchase for a full
refund. Retailers may then return the older versions to us. We estimate and
maintain reserves for product returns. However, future product returns could
exceed our reserves, and this could have a material adverse effect on our
business.
Risks of Reliance on VARs & ISVs
A part of our strategy is to embed and bundle our technology in the products
offered by value-added-resellers, or VARs and independent software vendors, or
ISVs, such as Cisco, Hewlett-Packard, Hitachi, Microsoft, Netscape, Novell and
Oracle. In the past, a small number of VAR and ISV customers accounted for a
significant percentage of VisiBroker or enterprise product sales and revenue.
For these sales, the pricing and discount terms and conditions of our license
agreements are negotiated and vary among our customers. Most of our license
agreements with these customers are non-exclusive and do not require them to
recommend or offer our products exclusively. Many of our agreements do not
require our customers to make a minimum number of purchases. We have virtually
no control over the shipping dates or volumes of systems shipped by our
customers. Many of the markets for the VAR and ISV products are new and
evolving. Therefore, we cannot predict that these customers will purchase our
technology for their products in the future. If we are not successful with our
current customers or in continuing to secure license agreements with additional
VARs and ISVs on profitable terms, our business, financial condition and results
of operations could be materially adversely affected.
Risks Associated with International Operations and Sales
A substantial portion of our revenue is from international sales. There are
inherent risks in doing business internationally. Some of these risks include
the following:
. general economic conditions in each country;
. seasonal reductions in business activity during the summer months in Europe
and certain other parts of the world;
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. the difficulty of managing an organization spread over various countries;
. fluctuations in currency exchange rates;
. longer payment cycles in certain countries;
. export restrictions, tariffs and other trade barriers;
. changes in regulatory requirements;
. compliance with different laws and regulations;
. overlap of different tax structures; and
. political instability.
One or more of these risk factors could have a material adverse effect on our
future international operations and, consequently, on our business, operating
results and financial condition. In addition, our subsidiaries generally operate
in local currencies, and their results are translated monthly into U.S. dollars.
If the value of the U.S. dollar increases significantly relative to foreign
currencies, our business, operating results and financial condition could be
materially adversely affected.
Risks of Software Defects and Liability Claims
Software products occasionally contain errors or defects, especially when they
are first introduced or when new versions are released. We have not experienced
any substantial problems to date from potential defects and errors. We routinely
test our new products and new versions for defects and errors. We cannot be
certain, however, that our products are completely free of defects and errors.
The discovery of a defect or error in a new version or product may result in the
following:
. delayed shipping of the product;
. immediate loss of revenue;
. delay in market acceptance;
. diversion of development resources;
. damage to our reputation; and
. increased service and warranty costs.
These factors could materially and adversely affect our business, operating
results and financial condition.
Most of our license agreements contain provisions designed to limit our
liability for potential product liability claims. It is possible, however, that
these provisions may not protect us because of existing or future federal, state
or local laws or ordinances or judicial decisions. A successful product
liability claim for large damages brought against us could have a material
adverse effect on our business, operating results and financial condition.
Risks of Anti-takeover Provisions
In December 1991, we implemented a stockholder rights plan to protect the
stockholders in the event of a proposed takeover that has not been recommended
or approved by our Board of Directors. Our stockholder rights plan and certain
provisions of our Certificate of Incorporation may discourage or prevent an
actual or potential change in control of our Company even if such a change in
control would be beneficial to our stockholders. These limitations may limit the
stockholders' ability to approve transactions that they may deem to be in their
best interests. In addition, our Board of Directors has the authority to fix the
rights and preferences of, and issue shares of, preferred stock without action
by the stockholders. This may have the effect of delaying or preventing a change
in control of our Company.
Under the stockholder rights plan, each share of our outstanding common stock
carries one preferred share purchase right which governs our stockholder rights
plan. Each right entitles the holder; under certain circumstances, to purchase
common stock at a 50% discount from our then current market price. The rights
are redeemable at a nominal price and expire in 2001.
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Effective as of February 6, 2000, the stockholder rights plan was amended in
order to, among other things, prevent the transactions contemplated by the
merger agreement and the related option agreement providing for the grant by
Inprise to Corel of options to purchase up to 12 million shares of Inprise
common stock from causing the rights to become exercisable.
Potential Dilutive Effect of Conversion and Additional Issuance of Series C
Preferred Stock ("Series C Stock")
Each share of Series C Stock is convertible, at the option of the holder,
after a two year holding period, or, automatically, when the business
liquidates or in the event of a transaction such as the merger with Corel. The
shares are convertible, based on a fixed conversion ratio, into fully paid and
non-assessable shares of common stock. The conversion ratio is subject to
adjustments for stock splits or other capital reorganizations. As of March 31,
2000, 6,720,430 shares of our common stock were reserved for issuance upon the
conversion of the Series C Stock to shares of common stock. In the merger with
Corel, each share of the Series C Stock will be automatically converted into
8,032.2576 Corel common shares.
Risks Associated with Potential Business Combinations
As a part of our business strategy, we may make acquisitions of businesses,
products or technologies in the future. We will review potential acquisition
prospects with the following goals in mind:
. complement our existing product offerings;
. augment our market coverage;
. enhance our technological capabilities; or
. offer growth opportunities.
There may be substantial costs associated with acquisitions including the
potential dilution to our earnings per share, the incurrence or assumption of
debt, the assumption of contingent liabilities, and the amortization of expenses
related to goodwill and other intangible assets. Acquisitions entail numerous
risks, including difficulty in the assimilation of operations, technologies and
products. Acquisitions divert the attention of management from other business
concerns. An acquisition in a new area risks entering markets where we have no
or limited prior experience as well as potential loss of key employees of the
acquired organization. Any one of these risks if realized, could negatively
impact our operating results and/or the market price of our common stock. We
cannot be certain of our ability to successfully integrate any businesses,
products, technologies or personnel acquired. Failure to do so in an acquisition
could negatively affect our business, financial condition and operating results.
Impact of Year 2000 Date Transition
This section is a Year 2000 Readiness Disclosure pursuant to the Year 2000
Information and Readiness Disclosure Act of 1998.
We currently know of no significant year 2000-related failures occurring in
either our products or our internal systems as a result of the date change from
December 31, 1999 to January 1, 2000.
We have addressed a broad range of issues associated with the programming code
in existing computer systems. The "Year 2000" problem is complex, as some
computer systems have been affected in some way by the rollover of the two-digit
year value to "00." Systems that do not properly recognize such information
could generate erroneous data or cause a system to fail. The Year 2000 issue
creates risks for us from unforeseen problems in our products, our computer
systems, and from third parties on which we depend for financial and other
transactions worldwide. Failure of our, and or third parties' computer systems,
or Year 2000 issues in our products, could have a material adverse effect on our
ability to conduct business.
State of Readiness. We commenced a phased program to inventory, assess,
remediate, test, implement, and develop contingency plans for the following
three potential areas for impact:
1) software products offered to customers;
Page 22 of 29
<PAGE>
2) our internal hardware and software systems; and
3) third party readiness, i.e. the Year 2000 readiness of third parties with
whom we have significant business relationships.
Costs for our efforts to address Year 2000 readiness have not been substantial
and are largely absorbed within our existing engineering expenditures. To date,
these costs have not been reported separately and have not been material. Our
estimate of future costs is based on expectations of future events. The actual
costs could differ materially from our estimates. There can be no assurance that
our expectations will be accurate, and substantial increases in these costs
could have a material adverse effect on our business.
Product Readiness. We classified our products into the following categories of
Year 2000 readiness:
. ready,
. ready with issues,
. not ready, and
. will not be tested.
We generally believe that the most of our newly introduced products are Year
2000 ready. Some of our older products are not Year 2000 ready or will not be
tested. Where possible, we encouraged our customers to migrate to current
product versions. However, despite our analysis and review, it is possible that
our products may contain undetected errors or defects associated with Year 2000
date functions, that may result in material costs. Furthermore, use of our
products in connection with other products, that may or may not be Year 2000
ready, including hardware, software and firmware, may result in the inaccurate
exchange of date data resulting in performance issues and system failures. To
the extent that our products or third party products that include our products,
prove not to be Year 2000 ready or in the event of disputes with customers
regarding whether our products are ready, our business, results of operations
and financial condition could be materially adversely affected.
Year 2000 readiness issues may give rise to legal claims. In our license
agreements with customers, we routinely disclaim all express and implied
warranties for such defects and/or limit our liability for such problems. We are
aware of a number of lawsuits against software vendors. Because of the
unprecedented nature of this kind of litigation, we are not certain to what
extent we may be affected. Legal claims against us could have a materially
adverse impact on our business, financial condition or results of operations.
Internal System Readiness. Prior to January 1, 2000, we had completed our
assessment of our own internal systems for handling the Year 2000. This
assessment included our own internal software as well as software and hardware
supplied by third party vendors. In addition to application and information
technology systems, we assessed our non-information technology systems,
including embedded systems, facilities and other operations, such as our
financial, banking, security and utility systems. Based on our assessments and
experience since January 1, 2000, we do not believe that we will incur any
material costs or suffer any disruption as a result of Year 2000 issues.
Nonetheless, there can be no assurance that we will not experience significant
business disruptions or loss of business due to an inability to adequately
address the Year 2000 issue. As a result, our business, financial condition and
results of operations could be materially adversely affected.
Material Third-Party Readiness. We communicated with our key suppliers,
contract manufacturers, distributors, vendors and partners in order to determine
that their operations and the products and services that they provide to us are
Year 2000 ready. Where practicable, we attempted to mitigate our risks with
respect to the failure of third parties to be Year 2000 ready, including
developing contingency plans. However, such failures, including failures of any
contingency plan, remain a possibility and could have a material adverse effect
on our results of operations and financial condition.
Contingency Plans. Although we dedicated resources towards becoming Year 2000
ready, there is no assurance that we will be successful in our efforts to
identify and address all Year 2000 issues. Contingency plans were developed in
certain key areas to ensure that any potential business interruptions caused by
the Year 2000 issue were mitigated. Even though we have acted in a timely
manner, some Year 2000 issues may not have been identified or corrected in time
to prevent material adverse consequences to our business. We cannot guarantee
that the contingency plan has adequately
Page 23 of 29
<PAGE>
addressed all circumstances that may arise as a result of Year 2000 issues or
that such planning will prevent circumstances that may cause a material adverse
effect on the operating results or financial condition of the business.
Risk of Natural Disasters
Our corporate headquarters, including most of our research and development
operations, are located in Northern California, a region known for seismic
activity. Seismic activity, such as a major earthquake, could have a material
adverse effect on our business, financial condition and operating results.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Market risks relating to our operations result primarily from changes in
interest rates and foreign exchange rates, as well as credit risk
concentrations. To address the foreign exchange rate risk we enter into various
hedging transactions as described below. We do not use financial instruments
for trading purposes.
Foreign Currency Risk
We conduct business in a number of foreign countries, including Japan, Canada
and certain countries throughout Europe and Southeast Asia. We have established
a foreign currency program utilizing foreign currency forward exchange contracts
to minimize intercompany balances and other monetary assets denominated in
foreign currencies. A forward foreign exchange contract obligates us to exchange
predetermined amounts of specified foreign currencies at specified exchange
rates on specified dates or to make an equivalent U.S. Dollar payment equal to
the value of such exchange. We do not use foreign currency forward exchange
contracts for trading purposes. The goal of the program is to offset the
earnings impact of foreign denominated balances. At the end of a given month,
the foreign denominated balances and the forward exchange contracts are marked-
to-market, and unrealized gains and losses are included in current period net
income.
During the three months ended March 31, 2000, we recorded foreign exchange
losses on intercompany receivables due to the dollar strengthening against many
foreign currencies including the Australian Dollar, German Mark, the French
Franc, and the Dutch Guilder. To the extent that the Company has entered into a
hedging contract for the receivables denominated in these currencies, the losses
have been offset by our foreign exchange contracts. We cannot be certain that
these currency trends will continue. If the U.S. dollar continues to strengthen
against these or other foreign currencies, we may experience foreign exchange
losses to the extent that we have not limited our exposure with foreign currency
forward exchange contracts. Future foreign exchange losses could have a material
adverse effect on our operating results and cash flows.
The table below sets forth information about our derivative financial
instruments, that are comprised of foreign currency forward exchange contracts
outstanding as of March 31, 2000. The information is provided in U.S. Dollar
equivalent amounts, as presented in our financial statements. For foreign
currency forward exchange contracts, the table presents the notional amounts (at
the contract exchange rates) and the weighted average contractual foreign
currency exchange rates. All instruments mature within a period of twelve months
or less.
Page 24 of 29
<PAGE>
<TABLE>
<CAPTION>
March 31, 2000
-------------------------------------------
Notional Average Estimated
Amount Contract Rate Fair Value
----------- ------------- ---------------
<S> <C> <C> <C>
Foreign currency forward exchange contracts:
Australian Dollar $ 5,923,518 1.66 $ 52,314
Canadian Dollar 1,321,526 1.47 17,051
Italian Lira 955,917 2017.0 (4,950)
Hong Kong Dollar 5,875,775 7.79 5,643
Dutch Guilder -2,831,299 2.29 16,564
New Taiwan Dollar 2,183,555 30.89 29,372
British Pound 1,575,200 0.63 16,400
Others 2,434,316 (5,896)
----------- --------
Total $17,438,508 $126,498
=========== ========
</TABLE>
Interest Rate Risk
Our exposure to market risk for changes in interest rates relates primarily to
our investment portfolio. We do not use derivative financial instruments in our
investment portfolio. We place our cash equivalents and short-term investments
in a variety of financial instruments such as commercial paper. Our investment
policy limits the amount of our credit exposure to any one financial institution
or commercial issuer.
We mitigate default risks by investing in only investment grade credit quality
securities and by positioning our portfolio to respond appropriately to a
significant reduction in the credit rating of any investment issuer. Our
portfolio includes only marketable securities with active secondary and resale
markets to ensure portfolio liquidity.
We have no interest rate exposure from rate changes for our fixed rate long-term
debt obligations. We primarily enter into debt and capital lease obligations to
finance capital expenditures. Such debt and capital lease obligations have a
fixed rate of interest.
The table below presents principal (or notional) amounts and related weighted
average interest rates by year of maturity for our investment portfolio and debt
obligations.
<TABLE>
<CAPTION>
In thousands 2000 2001 2002 2003 2004 Thereafter Total
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash Equivalents $233,954 $233,954
Fixed rate 5.6% 5.6%
Short-term investments $ 5,709 $ 5,709
Fixed rate 1.0% 1.0%
LONG-TERM DEBT
Debt $ 121 $180 $200 $222 $247 $8,094 $ 9,064
Fixed Rate 10.75% 10.75%
</TABLE>
The short term investment balances include required compensating balance
accounts invested in Japanese securities.
Credit Risks
Our financial instruments that are exposed to concentrations of credit risk
consists primarily of cash, cash equivalents and trade receivables. We position
our cash equivalents in high quality securities placed with major banks and
financial
Page 25 of 29
<PAGE>
institutions. With respect to receivables, our risk is limited due to the large
number of customers and their dispersion across geographic areas. We perform
periodic credit evaluations of our customers' financial condition and generally
do not require collateral. Currently, our one customer located in the United
States accounts for approximately 13% of net account receivable. No other single
group or customer represents greater than 10% of net accounts receivable.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Information with respect to this item is incorporated by reference to "Part I -
Item 2 Management's Discussion and Analysis of Financial Condition and Results
of Operations-Legal Proceedings," of this Form 10-Q.
Item 2. Changes in Securities and Use of Proceeds
Amendment of Rights Agreement
Effective as of February 6, 2000, the Rights Agreement, dated as of
December 20, 1991, by and between Inprise Corporation and ChaseMellon
Shareholder Services, L.L.C., was amended in order to, among other things,
prevent the transactions contemplated by the merger agreement with Corel and the
related option agreement providing for the grant by Inprise to Corel of options
to purchase 12 million shares of Inprise common stock from causing the rights to
become exercisable. The amendment is filed as Exhibit 99 to Inprise's Form 8-
A/A which was filed with the SEC on February 11, 2000 and the foregoing
description of the amendment is qualified in its entirety by reference to such
Exhibit 99.
Issuance of Stock Option
In connection with the execution of the merger agreement, on February 6,
2000, Inprise and Corel entered into a stock option agreement, pursuant to which
Inprise granted to Corel an irrevocable option to purchase up to 12 million
shares of Inprise common stock, representing approximately 19.7% of Inprise's
shares of common stock outstanding on February 6, 2000, at an exercise price of
$14.94 per share, subject to adjustment under specified circumstances. The
option exercise price for Corel to purchase shares of Inprise common stock is
equal to the closing price of a Corel common share on Nasdaq on February 4, 2000
multiplied by the merger exchange ratio of 0.747.
Corel can exercise the stock option in whole or in part at any time after
the occurrence of any event which could entitle Corel to receive a cash
termination fee from Inprise pursuant to the merger agreement. Notwithstanding
the foregoing, the stock option is not exercisable until a termination fee
becomes due and payable. As of the date of this report, the stock option is not
exercisable. The issuance of shares pursuant to the exercise of the stock
option is subject to the satisfaction of customary conditions. These include
receipt of applicable governmental approvals and absence of any court or
governmental order that restrains the exercise of the stock option.
The stock option agreement provides that the stock option will terminate
upon the earliest of (i) the closing of the merger, (ii) the termination of the
merger agreement, except where Inprise may be required to pay a termination fee,
or (iii) one year after termination of the merger agreement under circumstances
where a termination fee may be payable by Inprise.
Corel will have certain registration rights with respect to the shares
issued under the stock option. Corel will have the right to require Inprise to
have the shares of Inprise common stock issued to Corel under the stock option
granted to Corel approved for listing on Nasdaq.
At any time after the stock option is exercisable, upon request of Corel,
Inprise will repurchase the stock option and any shares purchased by Corel on
exercise of the stock option. Inprise must purchase the stock option at a
price equal to the greater of: (i) the average closing price of one share of
Inprise common stock on Nasdaq for the five trading days before the date Corel
gives notice, or the price per share that a third party offers to pay in a
tender offer or acquisition, minus the exercise price, multiplied by the number
of shares subject to the stock option. If Inprise is required to repurchase
shares that were acquired under the stock option, it must pay a price per share
equal to the exercise price of the stock option, as adjusted, plus the
difference between the highest price per share offered for the relevant shares
by a third party during the repurchase period and the exercise price, multiplied
by the number of option shares.
Page 26 of 29
<PAGE>
The maximum aggregate amount of profit which Corel may receive with respect
to any termination fee that would be payable to Corel pursuant to the Merger
agreement and the stock option is $30 million.
Inprise has relied on Section 4(2) of the Securities Act of 1933, as
amended, in connection with the execution of the stock option agreement. The
execution of the stock option agreement was privately negotiated, and Corel was
a sophisticated investor with access to all relevant information necessary to
evaluate the investment. No public offering or public solicitation was used by
Inprise in connection with the stock option agreement.
Item 5. Other Information.
Merger Agreement with Corel
On February 6, 2000, Inprise entered into a merger agreement with Corel,
pursuant to which Inprise, upon completion of the merger, will become a wholly-
owned subsidiary of Corel. Corel is one of the world's largest developers of
business productivity, graphics and operation solutions. Under the terms of the
merger agreement, Inprise stockholders will receive 0.747 of a share of Corel
common stock for each share of Inprise common stock held. Upon closing of the
transaction, on a fully diluted basis, Inprise stockholders will own
approximately 44% of the combined company and Corel stockholders will own about
56%. The boards of directors of both companies have approved the transaction.
The merger is contingent upon, among other things, the approval and adoption of
the merger agreement by Inprise's stockholders and the approval by Corel's
stockholders of the issuance of shares of Corel common stock in the merger and
the adoption of a transitional stock option plan.
Pursuant to the terms of the merger agreement, Dr. Michael C.J. Cowpland,
Corel's Chairman of the Board, President and Chief Executive Officer, will
remain as President, Chief Executive Officer and a director of the combined
company. Dale Fuller, Inprise's Interim President and Chief Executive Officer,
will be Chairman of the Board of Directors of the combined company. The Corel
board will also be comprised of Robert Kohn, who became a director of Inprise on
May 7, 2000 and has been designated by Inprise (with Corel's approval) to serve
as director of the combined company, and three individuals who are current
members of the Corel board. Corel has agreed that it will recommend and support
the election of Dale Fuller and the other Inprise designee to the Corel board at
Corel's 2001 and 2002 annual meetings of stockholders. In addition, without the
consent of Dale Fuller and the other Inprise designee, the Corel board will not
have more than six members prior to the election of directors at Corel's 2003
annual meeting of shareholders. Corel's obligation to cause Mr. Fuller to be
appointed as chairman of the Corel board continues until Corel's 2003 annual
meeting of the stockholders or for such longer time as may be agreed to by Mr.
Fuller and the Corel board. The operations of the combined company will be
headquartered in Ottawa, Ontario, Canada, with the Inprise operations remaining
in its current Silicon Valley locations.
Corel has filed a registration statement on Form S-4 with the SEC in
connection with the securities to be issued by Corel pursuant to the merger
agreement. The registration statement has not been declared effective. This
filing also includes the preliminary joint proxy statement/prospectus for the
special meeting of Inprise stockholders to be held for approval and adoption of
the merger agreement. Investors should read carefully this document and the
other documents filed with the SEC by Corel and Inprise with respect to the
merger. The registration statement and the preliminary joint proxy
statement/prospectus contain important information about Inprise, Corel, the
merger, the persons soliciting proxies relating to the merger, their interests
in the merger, and related matters. These documents may be obtained for free at
the SEC's Internet web site, www.sec.gov. The preliminary joint proxy
statement/prospectus and such other documents may also be obtained for free from
Inprise by directing such request to: Inprise Corporation, 100 Enterprise Way,
Scotts Valley, California 95066-3249, Attention: Investor Relations, telephone:
(831) 431-1000, e-mail: [email protected].
---------------------
Amendment of Agreement with Microsoft
Microsoft Corporation is the owner of 625 shares of Inprise Series C
Convertible Preferred Stock which, upon completion of the merger, will be
converted into and exchanged for 5,020,161 Corel common shares. These Corel
common shares will constitute approximately 4% of Corel's common shares after
completion of the merger. On April 7, 2000, Microsoft entered into an agreement
with the Antitrust Division of the United States Department of Justice under
which Microsoft deposited all of its shares of Inprise C Convertible Preferred
Stock with an escrow agent. Microsoft also agreed not to exercise its right of
beneficial ownership of the Corel common shares which it receives in the merger
and that the escrow agent will engage in an orderly sale of such Corel common
shares to an entity or entities not affiliated with Microsoft, with all such
shares to be sold no later than 90-days from the receipt by Microsoft of
certificates representing
Page 27 of 29
<PAGE>
Corel common shares. In order to enable Microsoft to enter into its agreement
with the Antitrust Division, Inprise agreed to waive certain provisions of the
Investor Rights Agreement, dated as of June 7, 1999, by and between Inprise and
Microsoft. The waived provisions relate principally to the transferability of
the Inprise Series C Convertible Preferred Stock held by Microsoft.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
<C> <S>
27.1 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
<TABLE>
<CAPTION>
<S> <C>
1. Inprise filed a report on Form 8-K on February 10, 2000. The purpose of the filing was to report that
Inprise had entered into a merger agreement with Corel and a wholly-owned subsidiary of Corel.
2. Inprise filed a report on Form 8-K on March 2, 2000. The purpose of the filing was to report that
Inprise had entered into an agreement to sell its corporate headquarters campus in Scotts Valley,
California to ScanlanKemperBard Companies for $47 million in cash.
</TABLE>
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.
INPRISE CORPORATION
-------------------
(Registrant)
Date: May 12, 2000
Page 28 of 29
<PAGE>
/s/ FREDERICK A. BALL
----------------------
Frederick A. Ball
Vice President - Finance and
Chief Financial Officer
(Duly Authorized Officer)
Page 29 of 29
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> DEC-31-2000
<CASH> 233,954
<SECURITIES> 5,709
<RECEIVABLES> 43,583
<ALLOWANCES> (14,807)
<INVENTORY> 382
<CURRENT-ASSETS> 276,975
<PP&E> 108,550
<DEPRECIATION> (85,130)
<TOTAL-ASSETS> 311,196
<CURRENT-LIABILITIES> 73,933
<BONDS> 0
0
0
<COMMON> 443,817
<OTHER-SE> (225,550)
<TOTAL-LIABILITY-AND-EQUITY> 311,196
<SALES> 39,774
<TOTAL-REVENUES> 46,500
<CGS> 4,063
<TOTAL-COSTS> 8,999
<OTHER-EXPENSES> 39,816
<LOSS-PROVISION> 63
<INTEREST-EXPENSE> 262
<INCOME-PRETAX> (100)
<INCOME-TAX> 1,046
<INCOME-CONTINUING> (1,146)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,146)
<EPS-BASIC> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
