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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 000 - 19462
ARTISOFT, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 86-0446453
- ------------------------------- ----------------------
(State or other jurisdiction of (IRS employer
incorporation) identification number)
5 CAMBRIDGE CENTER, CAMBRIDGE, MA 02142
(617) 354-0600
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(Address, including zip code, and telephone number,
including area code, of registrant's
principal executive offices)
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 the
filing requirements for at least the past 90 days.
Yes [x] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date (November 12, 1999).
Common stock, $.01 par value: 14,893,269 shares
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ARTISOFT INC. AND SUBSIDIARIES
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets-
September 30, 1999 and June 30, 1999 3
Consolidated Statements of Operations-
Three Months Ended
September 30, 1999 and 1998 4
Consolidated Statements of Cash Flows-
Three Months Ended September 30, 1999
and 1998 5
Notes to Condensed Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-20
Item 2(a) Quantitative and Qualitative Disclosures about Market Risk 20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 2. Changes in Securities 21
Item 3. Defaults Upon Senior Securities 21
Item 4. Submission of Matters to a Vote by Security Holders 21
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 21
SIGNATURES 22
EXHIBITS
11 Computation of Net Income Per Share 23
27 Financial Data Schedule 24
2
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ARTISOFT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
September 30, June 30,
ASSETS 1999 1999
-------- --------
(unaudited)
Current assets:
Cash and cash equivalents $ 15,451 $ 16,148
Receivables:
Trade accounts, net 2,027 2,267
Other receivables 95 66
Inventories 1,019 1,214
Prepaid expenses 538 335
-------- --------
Total current assets 19,130 20,030
-------- --------
Property and equipment 6,464 6,349
Less accumulated depreciation and amortization (5,212) (4,984)
-------- --------
Net property and equipment 1,252 1,365
-------- --------
Other assets 999 1,163
-------- --------
$ 21,381 $ 22,558
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 879 $ 1,229
Accrued liabilities 2,193 2,466
Current portion of capital lease obligations 175 289
-------- --------
Total current liabilities 3,247 3,984
-------- --------
Commitments and contingencies -- --
Shareholders' equity:
Preferred stock, $1.00 par value. Authorized
11,433,600 shares; none issued -- --
Common stock, $.01 par value. Authorized
50,000,000 shares; issued 28,162,971 shares
at September 30, 1999 and 28,144,477 at
June 30, 1999 281 281
Additional paid-in capital 96,911 96,869
Accumulated deficit (9,274) (8,792)
Less treasury stock, at cost, 13,320,500 shares
at September 30, 1999 and June 30, 1999 (69,784) (69,784)
-------- --------
Total shareholders' equity 18,134 18,574
-------- --------
$ 21,381 $ 22,558
======== ========
See accompanying notes to consolidated financial statements
3
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ARTISOFT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three Months Ended
September 30,
------------------------
1999 1998
-------- --------
(unaudited)
Net sales $ 6,401 $ 5,094
Cost of sales 2,222 1,356
-------- --------
Gross profit 4,179 3,738
-------- --------
Operating expenses:
Sales and marketing 2,355 2,130
Product development 1,468 1,242
General and administrative 1,025 879
-------- --------
Total operating expenses 4,848 4,251
-------- --------
Loss from operations (669) (513)
Other income, net 187 181
-------- --------
Net loss $ (482) $ (332)
======== ========
Net loss per common share-basic and diluted $ (.03) $ (.02)
======== ========
Weighted average common shares outstanding 14,834 14,660
-------- --------
See accompanying notes to consolidated financial statements
4
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ARTISOFT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Three Months Ended
September 30,
----------------------
1999 1998
-------- --------
(unaudited)
Cash flows from operating activities:
Net loss $ (482) $ (332)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 392 342
Gain from disposition of property, net 3 --
Change in accounts receivable and
inventory allowances (29) (203)
Changes in assets and liabilities:
Receivables:
Trade accounts 303 872
Other receivables (29) 139
Inventories 161 81
Prepaid expenses (203) 13
Accounts payable and accrued liabilities (623) (519)
Accrued restructuring costs -- (926)
Other assets -- (43)
-------- --------
Net cash used in operating activities (507) (576)
-------- --------
Cash flows from investing activities:
Proceeds from sale of property and equipment -- 3
Purchases of property and equipment (118) (222)
-------- --------
Net cash used in investing activities (118) (219)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock 42 --
Principal payments on capital lease obligations (114) (161)
-------- --------
Net cash used in financing activities (72) (161)
-------- --------
Net decrease in cash and cash equivalents (697) (956)
Cash and cash equivalents at beginning of period 16,148 18,514
-------- --------
Cash and cash equivalents at end of period $ 15,451 $ 17,558
======== ========
See accompanying notes to consolidated financial statements.
5
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ARTISOFT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except percentages, shares and per share amounts)
(1) BASIS OF PRESENTATION
The condensed consolidated financial statements include the accounts of
Artisoft, Inc. and its three wholly-owned subsidiaries: Triton Technologies,
Inc., Artisoft "FSC", Ltd. (which has elected to be treated as a foreign sales
corporation), and NodeRunner, Inc. All significant intercompany balances and
transactions have been eliminated in consolidation.
The accompanying unaudited condensed consolidated financial statements have
been prepared by the Company in accordance with generally accepted accounting
principles, pursuant to the rules and regulations of the Securities and Exchange
Commission. In the opinion of management, the accompanying financial statements
include all adjustments (of a normal recurring nature) which are necessary for a
fair presentation of the financial results for the interim periods presented.
Certain information and footnote disclosures normally included in financial
statements have been condensed or omitted pursuant to such rules and
regulations. Although the Company believes that the disclosures are adequate to
make the information presented not misleading, it is suggested that these
financial statements be read in conjunction with the consolidated financial
statements and the notes thereto included in the Company's 1999 Annual Report on
Form 10-K. The results of operations for the three months ended September 30,
1999 are not necessarily indicative of the results to be expected for the full
year.
(2) COMPUTATION OF NET LOSS PER SHARE
Basic loss per share is computed by dividing loss attributable to common
shareholders by the weighted average number of common shares outstanding for the
period. Diluted loss per share reflects the potential dilution that could occur
if securities or other contracts to issue common stock were exercised or
converted into common stock that then shared in the earnings (loss) of the
Company. In calculating net loss per common share for the three month periods
ended September 30, 1999 and 1998, 666,724 and 4,132 shares, respectively, of
anti-dilutive common stock equivalent shares consisting of stock options have
been excluded because their inclusion would have been anti-dilutive.
(3) SEGMENTATION OF FINANCIAL RESULTS
The financial results for the three months ended September 30, 1999 and
1998 are summarized below by product group:
Three Months Ended
September 30,
-----------------------
1999 1998
------- -------
Computer Telephony Group:
Net sales $ 2,721 $ 1,357
Gross profit $ 1,453 $ 837
Gross profit margin 53% 62%
Operating loss $(1,656) $(1,561)
Capital expenditures $ 83 $ 217
Depreciation and
amortization $ 157 $ 83
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Communications Software Group
Net sales $ 3,680 $ 3,737
Gross profit $ 2,726 $ 2,901
Gross profit margin 74% 78%
Operating income $ 987 $ 1,048
Capital expenditures $ 35 $ 5
Depreciation and
amortization $ 235 $ 259
The Company's Computer Telephony Group principally includes revenues from
the TeleVantage and Visual Voice product lines. The Company's Communications
Software Group principally includes revenues from the LANtastic NOS, CoSession
Remote, i.Share, ModemShare, WinBeep and BizFax product lines.
(4) INVENTORIES
Inventories at September 30, 1999 and June 30, 1999 consist of the
following:
September 30, June 30,
1999 1999
------- -------
Raw materials $ 674 $ 1,177
Work-in-process 4 7
Finished goods 518 173
------- -------
1,196 1,357
Inventory allowances (177) (143)
------- -------
$ 1,019 $ 1,214
======= =======
(5) PROPERTY AND EQUIPMENT
Property and equipment at September 30, 1999 and June 30, 1999 consist of
the following:
September 30, June 30,
1999 1999
------- -------
Furniture and fixtures $ 36 $ 36
Computers and other equipment 6,160 6,046
Leasehold improvements 268 267
------- -------
6,464 6,349
Accumulated depreciation and
amortization (5,212) (4,984)
------- -------
$ 1,252 $ 1,365
======= =======
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(6) OTHER ASSETS
Other assets at September 30, 1999 and June 30, 1999 consist of the
following:
September 30, June 30,
1999 1999
------ ------
Trademarks and patents, net of
accumulated amortization of $101 and $95 $ 23 $ 29
Purchased technology, net of
accumulated amortization of $1,880 and $1,451 851 1,009
Recoverable deposits and other 125 125
------ ------
$ 999 $1,163
====== ======
(7) ACCRUED LIABILITIES
Accrued liabilities at September 30, 1999 and June 30, 1999 consist of the
following:
September 30, June 30,
1999 1999
------ ------
Compensation and benefits $1,024 $1,183
Payroll, sales and property taxes 208 258
Marketing 487 427
Royalties 80 216
Other 394 382
------ ------
$2,193 $2,466
====== ======
8
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ARTISOFT, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
NET SALES. Net sales for the Company's Computer Telephony Product Group
increased 101% to $2.7 million for the quarter ended September 30, 1999 from
$1.3 million for the quarter ended September 30, 1998. The increase in net sales
was principally due to increased sales of the Computer Telephony Product Group's
TeleVantage product.
Net sales for the Company's Communications Software Product Group were
substantially unchanged at $3.7 million for the quarter ended September 30,
1999. A continued decline in the sales volume of the Communications Software
Group's LANtastic NOS products was offset by increased sales of the
Communications Software Group's CoSession Remote software and the addition of
sales of the Company's recently acquired WinBeep paging products.
The Company's overall net sales increased 26% to $6.4 million for the
quarter ended September 30, 1999 from $5.1 million for the quarter ended
September 30, 1998 principally due to substantially higher sales of the
Company's Computer Telephony product TeleVantage.
The Company distributes its products internationally and tracks sales by
major geographic area. Non-U.S. sales represented 16% and 18% of total net sales
for the quarters ended September 30, 1999 and 1998, respectively. The percentage
decrease in international sales is due to the increase in the Company's
non-European net sales in the quarter ended September 30, 1999 compared to the
quarter ended September 30, 1998. International sales increased 12% to $1.0
million for the quarter ended September 30, 1999 from $.9 million for the
quarter ended September 30, 1998. A majority of the Company's international
sales during the quarter ended September 30, 1999 were comprised of LANtastic
and other communications software products. Management believes that the reasons
for the increase in international net sales in the quarter ended September 30,
1999 compared to the quarter ended September 30, 1998 is due to increased
international sales of the Company's Computer Telephony products (especially
TeleVantage).
GROSS PROFIT. The Company's gross profit was $4.2 million for the quarter
ended September 30, 1999 and $3.7 million for the quarter ended September 30,
1998 or 65% and 73% of net sales, respectively. The decrease in gross profit
percentage for fiscal 1999 was due to a shift in product mix. Specifically,
sales of the Company's lower margin Visual Voice hardware products, and sales of
the Company's lower margin TeleVantage Not For Resale kits (NFR's) associated
with the Company's development on its TeleVantage reseller channel, increased as
a percentage of total net sales. Also contributing to the decline in gross
profit percentage was increases in royalty expenses on ConfigSafe Support
Edition sales. The increase in gross profit dollars was the result of higher net
sales of the Company's Computer Telephony products. Gross profit may fluctuate
on a quarterly basis because of product mix, pricing actions and changes in
sales and inventory allowances.
SALES AND MARKETING. Sales and marketing expenses were $2.4 million for the
quarter ended September 30, 1999 and $2.1 million for the quarter ended
September 30, 1998, representing 37% and 42% of net sales, respectively. The
increase in sales and marketing expenses in aggregate dollars for the quarter
ended September 30, 1999 compared to the same period in fiscal 1999 was due
principally to increased expenditures on the sales and marketing infrastructure
in the Company's Computer Telephony Products Group. The decrease in sales and
marketing expenses as a percentage of sales for the quarter ended September 30,
1999 compared to the same period in fiscal 1999 is due to the overall increase
in net sales for the quarter ended September 30, 1999.
9
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PRODUCT DEVELOPMENT. Product development expenses were $1.5 million for the
quarter ended September 30, 1999 and $1.2 million for the quarter ended
September 30, 1998, representing 23% and 24% of net sales, respectively. The
increase in aggregate product development expenses for the quarter ended
September 30, 1999 compared to the same period in fiscal 1999 is principally
attributable to the addition of product development resources in the Company's
Computer Telephony Group. The addition of new development personnel to the
Computer Telephony Group during the quarter ended September 30, 1999 was
required to meet planned future product introduction timetables. Specifically,
the Company has added development personnel in advance of the expected future
release of TeleVantage 3.0, its flagship product. The Company believes the
introduction of new products to the market in a timely manner is critical to its
future success.
GENERAL AND ADMINISTRATIVE. General and administrative expenses were $1.0
million for the quarter ended September 30, 1999 and $ .9 million for the
quarter ended September 30, 1998, representing 16% and 17% of net sales,
respectively. The increase in aggregate general and administrative expenses for
the quarter ended September 30, 1999 compared to the same period in fiscal 1999
is principally the result of additional occupancy costs incurred subsequent to
the expansion of the Company's Cambridge, Massachusetts-based headquarters, the
addition of certain executive administrative personnel and increased
depreciation expense on the Company's fixed assets in its Cambridge,
Massachusetts headquarters. The decrease in general and administrative costs as
a percentage of net sales for the quarter ended September 30, 1999 compared to
the same period in fiscal 1999 is due to the overall increase in net sales
between the two periods.
OTHER INCOME, NET. For the quarter ended September 30, 1999, other income,
net, increased to $187,000, from $181,000 in the corresponding quarter of fiscal
1999. The increase for the quarter ended September 30, 1999 resulted principally
from the receipt of increased interest income on the Company's cash and
investment balances and to a lesser extent by reduced interest expense on
certain of the Company's capital lease arrangements.
YEAR 2000
The Company recognizes the potential business impacts related to the Year
2000 computer system issue and has implemented a plan to assess and improve the
Company's state of readiness with respect to such issues. The Year 2000 issue is
one where computer systems may recognize the designation "00" as 1900 when it
means 2000, resulting in system failure or miscalculations.
Commencing in 1997, the Company initiated a comprehensive review of its
core information technology systems, non-information technology systems,
computer hardware and software products sold by the Company and computer
hardware and software products and components and other equipment supplied to
the Company by third parties which the Company is dependent upon for the conduct
of day to day business operations, in order to determine the adequacy of those
systems in light of future business requirements. This review included testing
and analysis of Company products and inquiries of third parties supplying
information technology and non-information technology systems, computer hardware
and software products and components and other equipment to the Company.
The Company divided its Year 2000 review into three phases. The first
addressed the Company's core information technology systems and products
currently sold by the Company. The second phase addressed non-core information
technology systems and non-information technology systems. In addition, the
Company implemented required Year 2000 upgrades and replacements during the
second phase. The third phase addresses third party suppliers of products,
supplies and services necessary to the Company's ongoing operations. In the
third phase, the Company also developed Year 2000 contingency plans. The Company
completed the first phase of its review in September 1998. The Company completed
the second phase of its review during the quarter ended September 30, 1999. The
Company completed substantially all of the third phase of its review during the
quarter ended September 30, 1999. The Company anticipates that all of its Year
2000 remediation efforts will be completed by November 30, 1999.
10
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In the first phase of its Year 2000 review, the Company tested software
products currently manufactured and shipped by the Company and determined that
most products are Year 2000 compliant. Certain of the Company's products that
were discontinued prior to fiscal 1998 are not Year 2000 compliant. In cases
where such non-Y2K compliant products are still sold on a replacement basis
only, the Company requires the customer to sign a release of liability for all
damages potentially caused by such non-Y2K compliant products. The Company
maintains a section on its web site that identifies all products the Company
sells and ships and lists their Y2K status. The Company also responds via direct
mail, e-mail or telephone, as appropriate, to customer and supplier requests for
information on Y2K compliance of its products. The Company has notified its
distributors, resellers and end users of cases of non-compliance where possible
and has authorized returns and replacement of these products where possible. The
Company believes the cost of these returns or product replacements to be
immaterial and that the Company's reserves are adequate to cover such returns
and replacements. The Company also has made inquiries of third parties supplying
the Company with computer hardware and software products and components
currently sold by the Company and is in the process of receiving responses to
these inquires. The Company has not received notice of any material problems.
The Company has followed up with third party suppliers and vendors who did not
respond to the Company's initial inquiries via telephone, mail or e-mail as
appropriate. The Company will review supplier/vendor replacement options as
necessary. With respect to core information technology, the Company has made
inquires of third parties supplying computer hardware and software operating
systems to the Company and has received assurances that, except as discussed
below, such hardware and software systems are or will be Year 2000 compliant.
As a result of its review, the Company determined that certain of its
internal financial software systems were inadequate for the Company's future
business needs and needed to be replaced because of various considerations,
including Year 2000 non-compliance. In certain cases the timing of replacement
systems was accelerated because of Year 2000 issues, although the Company
believes replacement would have been necessary in the near future regardless of
such issues. The Company successfully completed its migration to a new internal
financial software package in May 1999. The Company has spent less than $300,000
to implement and migrate to this new software package. These costs will be
capitalized over the life of the purchased software package. The Company does
not expect the amounts to be expensed over the life of the software package to
have a material effect on its financial position or results of operations. In
addition to the aforementioned software implementation and migration costs, the
Company has assigned certain employees to handle Year 2000 remediation efforts.
The total cost to the Company for all Year 2000 remediation efforts as of
September 30, 1999 was approximately $.5 million. The Company anticipates that
its total Year 2000 remediation costs will not exceed $.6 million.
The Company has also identified certain other internal sales, marketing and
support management software packages that were not fully Year 2000 compliant.
The Company has completed the evaluation of these internal systems and has
completed the necessary programming to ensure Year 2000 compliancy.
The Company has developed certain Year 2000 contingency plans. In addition
to the review and remedial actions described above, the Company has taken the
following steps: First, the Company has set up a Year 2000 task force consisting
of programmers, Information Systems and Technology personnel and key developers
who will remain "on call" between December 25, 1999 and January 10, 2000 to
resolve any Year 2000 problems. Second, the Company has identified key
alternative suppliers in the event its primary suppliers experience Year 2000
problems which interrupt their ability to supply key raw materials or services
to the Company. The Company will contact each of these alternative suppliers in
advance and record all pertinent information to facilitate a smooth transition
should it be warranted. Finally, the Company will increase its inventories on
hand for certain key raw materials to insure against potential shortages caused
by third party Year 2000 problems. The Company maintains and deploys contingency
plans designed to address various other potential business interruptions. These
plans may also be applicable to address the interruption of support provided by
third parties resulting from their failure to be Year 2000 ready.
11
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If the Company or the third parties with which it has relationships were to
cease or not successfully complete its or their Year 2000 remediation efforts,
the Company could encounter disruptions to its business that could have a
material adverse effect on its business, financial position and results of
operations. The Company could also be materially and adversely impacted by
widespread economic or financial market disruption.
FUTURE RESULTS
The Company is currently and will continue to focus a substantial majority
of its business resources on its computer telephony products. Concurrent with
the expanded investment in computer telephony products, the Company has
substantially reduced its expenditures on its communications software products.
It is unlikely that, with the reduced sales, marketing and development
expenditures on its communications software products, revenue levels for
communications software products will continue at their current levels in the
future.
The Company intends to continue to increase its investments and
expenditures in sales, marketing and development of its flagship product,
TeleVantage. There can be no assurance that the Company will be able sell
TeleVantage successfully at particular levels or within particular time-frames.
Accordingly, the Company could experience a slower than anticipated increase in
TeleVantage revenues as it attempts to further expand its distribution and
reseller network that may build market awareness for its TeleVantage product. A
slow increase in the Company's TeleVantage revenues, particularly if combined
with increased expenditures on its TeleVantage product development and marketing
and declining communications software product revenues, could cause the Company
to experience substantially higher operating losses in the future.
The Company recently announced its intention to pursue the investigation of
alternatives for a possible division of its business units, which could involve
the sale or other disposition of all or a portion of one or both of the
Company's business units. The Company intends to pursue this investigation in an
effort to further focus its resources on its computer telephony products and
potentially maximize shareholder value. There can be no assurance that a
separation of the business units will be successful or even initiated upon the
conclusion of this investigation.
The Company's future results of operations involve a number of risks and
uncertainties. Among the factors that could cause future results to differ
materially from historical results are the following: business conditions and
the general economy; business and technological developments in the emerging and
rapidly changing software-based PBX market; competitive pressures, acceptance of
new products and price pressures; availability of third party compatible
products at reasonable prices; risk of nonpayment of accounts receivable; risk
of product line or inventory obsolescence due to shifts in technologies or
market demand; timing of software introductions; and litigation. These and other
risk factors are outlined below.
On October 22, 1999, the Company announced its intent to form a strategic
alliance with Toshiba American Information Systems (TAIS). Under the terms of a
letter of intent dated October 19, 1999, Artisoft and TAIS would enter into an
OEM relationship which would couple the marketing and development plans of the
two organizations. As a part of the OEM arrangement, TAIS would make an initial
volume purchase of licenses for the Company's TeleVantage products. In addition,
TAIS would be granted rights to purchase up to 1.5 million shares of the
Company's Common Stock through a possible combination of open market purchases,
purchases from the Company and warrants.
12
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FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents of $15.5 million at September 30,
1999 compared to $16.1 million at June 30, 1999 and working capital of $15.9
million at September 30, 1999 compared to $16.0 million at June 30, 1999. The
decrease in cash and cash equivalents of $.6 million was the result of the
following factors: increased development, sales force expansion and marketing
investments in the Company's Computer Telephony Products Group and increased
research and development personnel costs in the Company's Computer Telephony
Products Group. The decrease in the Company's working capital of $.1 million was
primarily the result of the Company's operating loss.
The Company funds its working capital requirements primarily through cash
flows from operations and existing cash balances. While the Company anticipates
that existing cash balances and cash flows from operations will be adequate to
meet the Company's current and expected cash requirements for at least the next
year, additional investments by the Company to acquire new technologies and
products or loss of revenues from disposed business segments could necessitate
that the Company seek additional debt or equity capital. In addition, the
Company may also from time to time seek debt financing or solicit equity
investments for various business reasons. There can be no assurance that any
such additional debt financing or equity capital will be available when needed
or, if available, will be on satisfactory terms. The issuance of additional
equity securities may result in substantial dilution.
In the event the Company and TAIS enter into the strategic alliance
discussed above under "Future Results," TAIS may acquire up to 1.5 million
shares of the Company's Common Stock, from the Company, pursuant to warrants
and/or on the open market. TAIS's acquisition of all or a portion of such shares
could result in dilution to existing holders of the Company's Common Stock. In
addition, such acquisition could affect the market price of the Company's Common
Stock.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
This Form 10-Q may contain forward-looking statements that involve risks
and uncertainties. There can be no assurances that the Company will achieve a
final agreement with TAIS on the terms described herein. Among the important
factors that could cause actual results to differ materially from forward
looking statements contained herein are the impact of competitive products and
pricing, product demand and market acceptance risks, the presence of competitors
with greater financial resources, product development and commercialization
risks, costs associated with the integration and administration of acquired
operations, capacity and supply constraints or difficulties, the results of
financing efforts, Year 2000 issues, and other risks detailed from time to time
in the Company's Securities and Exchange Commission filings. The Company filed
its 1999 Form 10-K on September 23, 1999.
RISK FACTORS
GENERAL
COMPETITION. The computer telephony and communications software industries
are highly competitive and are characterized by rapidly changing technology and
evolving industry standards. The Company competes with other software companies,
many of which have substantially greater financial, technological, production,
sales and marketing and other resources, as well as greater name recognition and
larger customer bases, than the Company. As a result, these competitors may be
able to respond more quickly and effectively to new or emerging technologies and
changes in customer requirements or to devote greater resources to the
development, promotion, sales and support of their products than the Company.
Competition in the software industry is likely to intensify as current
competitors expand their product lines, more features are included in operating
systems (e.g., Windows NT 5.0), new applications are developed, and as new
companies enter the markets or segments in which the Company currently competes.
The software industry is also characterized by a high degree of consolidation
which favors companies with greater resources than those of the Company.
13
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Consequently, the Company expects its products to experience increased
competition which could result in significant price reductions, loss of market
share and lack of acceptance of new products, any of which could have a material
adverse effect on the Company's business, financial condition and results of
operations. The Company's new product introductions can be subject to severe
price and other competitive pressures. While the Company endeavors to introduce
its products to the marketplace in a timely manner there can be no assurances
that due to the greater financial resources of the Company's competitors that
these products will be successful or even accepted. There can be no assurance
that the Company's products will be able to compete successfully with other
products offered presently or in the future by other vendors.
NEW INDUSTRY DEVELOPMENT. The Company's principal product, TeleVantage,
competes in the newly emerging software based PBX market. Software based PBX
products operate in conjunction with and are affected by developments in other
related industries. These industries include highly developed product markets,
such as PCs, PC operating systems and servers, proprietary PBX and related
telephone hardware and software products, and telephone, data and cable
transmission systems, as well as new emerging products and industries, such as
internet communications and Internet Protocol ("IP") telephony. All of these
industries and product markets are currently undergoing rapid changes, market
evolution and consolidation. The manner in which these industries and products
evolve, including the engineering- and market-based decisions that are made
regarding the interconnection of the products and industries, will affect the
opportunities and prospects for the Company's computer telephony products,
including TeleVantage.
RETURNS AND PRICE PROTECTION. The Company is exposed to the risk of product
returns and rotations from its distributors and other volume purchasers, which
are estimated and recorded by the Company as a reduction in sales. Although the
Company attempts to monitor and adjust its channel inventories to be consistent
with current levels of sell through, localized overstocking may occur with
certain products due to rapidly evolving market conditions. In addition, the
risk of product returns and rotations may increase if the demand for its
existing products should rapidly decline due to regional economic troubles or
increased competition. Although the Company believes that it provides adequate
allowances for product returns and rotations, there can be no assurance that
actual product returns and rotations will not exceed the Company's allowances.
Any product returns and rotations in excess of recorded allowances could result
in a material adverse effect on net sales and operating results. As the Company
introduces more new products, the predictability and timing of sales to end
users and the management of returns to the Company of unsold products by
distributors and volume purchasers becomes more complex and could result in
material fluctuations in quarterly sales and operating results.
FACTORS AFFECTING PRICING. Substantially all of the Company's revenue in
each fiscal quarter results from orders booked in that quarter. A significant
percentage of the Company's bookings and sales to distributors and other volume
purchasers historically have occurred during the last month of the quarter and
are concentrated in the latter half of that month. Orders placed by major
customers are typically based upon customers' recent historical and forecasted
sales levels for Company products and inventory levels of Company products
desired to be maintained by those major customers at the time of the orders.
Moreover, orders may also be based upon financial practices by major customers
designed to increase the return on investment or yield on the sales of the
Company's products to value added resellers or end-users. Major distribution
customers occasionally receive market development funds from the Company for
purchasing Company products and from time to time extended terms, in accordance
with industry practice, depending upon competitive conditions. The Company
currently does not offer any cash rebates to its U.S. distribution partners.
Changes in purchasing patterns by one or more of the Company's major customers,
changes in customer policies pertaining to desired inventory levels of Company
products, negotiations of market development funds and changes in the Company's
ability to anticipate in advance the product mix of customer orders could result
in material fluctuations in quarterly operating results.
14
<PAGE>
PRODUCT CONCENTRATION. The Company has in the past derived, and may in the
future derive, a significant portion of its revenues from a relatively small
number of products. Declines in the revenues from these software products,
whether as a result of competition, technological change, price pressures or
other factors, could have a material adverse effect on the Company's business,
results of operations and financial condition. Further, life cycles of the
Company's products are difficult to estimate due in part to the recent emergence
of certain of the Company's products, the effect of new products or product
enhancements, technological changes in the software industry in which the
Company operates and future competition. There can be no assurance that the
Company will be successful in maintaining market acceptance of its current
products or any new products or product enhancements.
TECHNOLOGICAL CHANGE. The markets for computer software applications are
characterized by rapid technological change, changing customer needs, frequent
product introductions and evolving industry standards. The introduction of
products incorporating new technologies and the emergence of new industry
standards could render the Company's existing products obsolete and
unmarketable. The Company's future success will depend upon its ability to
develop and introduce new software products (including new releases and
enhancements) on a timely basis that keep pace with technological developments
and emerging industry standards and address the increasingly sophisticated needs
of its customers. There can be no assurance that the Company will be successful
in developing and marketing new products that respond to technological changes
or evolving industry standards, that the Company will not experience
difficulties that could delay or prevent the successful development,
introduction and marketing of these new products, or that its new products will
adequately meet the requirements of the marketplace and achieve market
acceptance. If the Company is unable, for technological or other reasons, to
develop and introduce new products in a timely manner in response to changing
market conditions or customer requirements, the Company's business, results of
operations and financial condition could be adversely affected.
POTENTIAL FOR UNDETECTED ERRORS. Software products as complex as those
offered by the Company may contain undetected errors. There can be no assurance
that, despite testing by the Company and by current and potential customers,
errors will not be found in new or existing products after commencement of
commercial shipments, resulting in loss of or delay in market acceptance or the
recall of such products, which could have a material adverse effect upon the
Company's business, results of operations and financial condition. The Company
provides customer support for most of its products. The Company will in the
future offer new products. If these products are flawed, or are more difficult
to use than traditional Company products, customer support costs could rise and
customer satisfaction levels could fall.
CD ROM AVAILABILITY. The Company primarily sells most of its software in a
form that includes a CD-ROM or CD-ROMs and a manual. Currently, the Company has
the capability to produce its products in-house only on 3 1/2 -inch diskettes.
However, with the expansion of the size of most software programs, CD-ROM has
surpassed diskettes as the most prominent medium. The Company does not currently
have the capability to produce CD-ROMs and the cost to develop such production
capability may be prohibitive. The Company currently contracts CD-ROM production
to specialized CD-ROM facilities. The Company expects continued rapidly
expanding growth in the CD-ROM usage medium, more of the Company's relationships
would involve CD-ROM production and the Company's business, results of
operations and financial condition could be adversely affected.
INTELLECTUAL PROPERTY RIGHTS. The Company's success is dependent upon its
software code base, its programming methodologies and other intellectual
properties. To protect its proprietary technology, the Company relies primarily
on a combination of trade secret laws and nondisclosure, confidentiality, and
other agreements and procedures, as well as copyright and trademark laws. These
laws and actions may afford only limited protection. There can be no assurance
that the steps taken by the Company will be adequate to deter misappropriation
of its proprietary information, or to prevent the successful assertion of an
adverse claim to software utilized by the Company, or that the Company will be
able to detect unauthorized use and take effective steps to enforce its
intellectual property rights. The Company owns United States and foreign
trademark registrations for certain of its trademarks. In addition, the Company
has applied for trademark protection on a number of its recently introduced new
technologies. Certain of the Company's trademark applications are still pending
and no assurances can be made that the trademark applications will be accepted
15
<PAGE>
by the U.S. Trademark and Patent Office and relevant foreign authorities. A
rejection of one or more of these trademark applications could have a material
adverse affect on the Company's ability to successfully sell and market these
new products. In selling its products, the Company relies primarily on "shrink
wrap" licenses that are not signed by licensees and, therefore, may be
unenforceable under the laws of certain jurisdictions. In addition, the laws of
some foreign countries provide substantially less protection to the Company's
proprietary rights than do the laws of the United States. Trademark or patent
challenges in such foreign countries could, if successful, materially disrupt or
even terminate the Company's ability to sell its products in such markets. There
can be no assurance that the Company's means of protecting its proprietary
rights will be adequate or that the Company's competitors will not independently
develop similar technology. Although the Company believes that its services and
products do not infringe on the intellectual property rights of others, such
claims have been and in the future may be asserted against the Company. The
failure of the Company to protect its proprietary property, or the infringement
of the Company's proprietary property on the rights of others, could have a
material adverse effect on the Company's business, results of operations and
financial condition.
DEPENDENCE UPON KEY PERSONNEL. The Company's future performance depends in
significant part upon key technical and senior management personnel. The Company
is dependent on its ability to identify, hire, train, retain and motivate high
quality personnel, especially highly skilled engineers involved in the ongoing
research and development required to develop and enhance the Company's software
products and introduce enhanced future products. The industry is characterized
by a high level of employee mobility and aggressive recruiting of skilled
personnel. There can be no assurance that the Company's current employees will
continue to work for the Company. Loss of services of key employees could have a
material adverse effect on the Company's business, results of operations and
financial condition. The Company may need to grant additional options and
provide other forms of incentive compensation to attract and retain key
personnel. The Company has experienced and expects to continue to experience
difficulty in hiring key technical personnel in certain of its key development
offices. These difficulties could lead to higher compensation costs and may
adversely effect the Company's future results of operations.
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS. The Company's operating
results have in the past fluctuated, and may in the future fluctuate, from
quarter to quarter, as a result of a number of factors including, but not
limited to, changes in pricing policies or price reductions by the Company or
its competitors; variations in the Company's sales channels or the mix of
product sales; the timing of new product announcements and introductions by the
Company or its competitors; the availability and cost of supplies; the financial
stability of major customers; market acceptance of new products and product
enhancements; the Company's ability to develop, introduce and market new
products, applications and product enhancements; the Company's ability to
control costs; possible delays in the shipment of new products; the Company's
success in expanding its sales and marketing programs; deferrals of customer
orders in anticipation of new products, product enhancements or operating
systems; changes in Company strategy; personnel changes; and general economic
factors. The Company's software products are generally shipped as orders are
received and accordingly, the Company has historically operated with little
backlog. As a result, sales in any quarter are dependent primarily on orders
booked and shipped in that quarter and are not predictable with any degree of
certainty. In addition, the Company's expense levels are based, in part, on its
expectations as to future revenues. If revenue levels are below expectations,
operating results are likely to be adversely affected. The Company's net income
may be disproportionately affected by a reduction in revenues because of fixed
costs related to generating its revenues. Quarterly results in the future may be
influenced by these or other factors and, accordingly, there may be significant
variations in the Company's quarterly operating results. The Company's
historical operating results are not necessarily indicative of future
performance for any particular period. Due to all of the foregoing factors, it
is possible that in some future quarter the Company's operating results may be
below the expectations of public market analysts and investors. In such event,
the price of the Company's Common Stock could be adversely affected.
POSSIBLE VOLATILITY OF STOCK PRICE. The trading price of the Company's
Common Stock is likely to be subject to significant fluctuations in response to
variations in quarterly operating results, changes in management, announcements
of technological innovations or new products by the Company, its customers or
its competitors, legislative or regulatory changes, general trends in the
industry and other events or factors. The stock market has experienced extreme
16
<PAGE>
price and volume fluctuations which have particularly affected the market price
for many high technology companies similar to the Company and which have often
been unrelated to the operating performance of these companies. These broad
market fluctuations may adversely affect the market price of the Company's
Common Stock. Further, factors such as announcements of new contracts or product
offerings by the Company or its competitors and market conditions for stocks
similar to that of the Company could have significant impact on the market price
of the Common Stock.
POSSIBLE ACQUISITIONS OR DIVESTITURES. From time to time, the Company may
consider acquisitions of or alliances with other companies that could complement
the Company's existing business, including acquisitions of complementary product
lines. The Company may also consider the divestiture of certain of its product
segments and operating groups, should conditions warrant, particularly in light
of the Company's strategy of focusing its resources on its Computer Telephony
Group. Although the Company may periodically discuss such potential transactions
with a number of companies, there can be no assurance that suitable acquisition,
alliance or purchase candidates can be identified, or that, if identified,
acceptable terms can be agreed upon or adequate and acceptable financing sources
will be available to the Company or purchasers that would enable them to
consummate such transactions. Even if an acquisition or alliance is consummated,
there can be no assurance that the Company will be able to integrate
successfully such acquired companies or product lines into its existing
operations, which could increase the Company's operating expenses in the
short-term and materially and adversely affect the Company's results of
operations. Moreover, certain acquisitions by the Company could result in
potentially dilutive issuances of equity securities, the incurrence of
additional debt and amortization of expenses related to goodwill and intangible
assets, all of which could adversely affect the Company's profitability.
Divestitures of product lines or operating groups could adversely affect the
Company's profitability by reducing the Company's revenues without a
corresponding reduction in expenses. Acquisitions, alliances and divestitures
involve numerous risks, such as the diversion of the attention of the Company's
management from other business concerns, the entrance of the Company into
markets in which it has had no or only limited experience, unforeseen
consequences of exiting from product markets and the potential loss of key
employees of the acquired company, all of which could have a material adverse
effect on the Company's business, financial condition and results of operations.
COMPUTER TELEPHONY
COMPUTER TELEPHONY PRODUCT MARKET. The market for open, standards-based
computer telephony tools, applications and system-level products is relatively
new and is characterized by the rapid evolution of computer telephony hardware
and software standards, emerging technologies and changing customer
requirements. These characteristics may render the Company's computer telephony
products unmarketable or may make the expansion, timing and direction of product
development unpredictable. As a result of these factors, there can be no
assurance that computer telephony markets will continue to expand, or that the
Company's products will achieve market acceptance.
The Company believes that the principal competitive factors affecting the
computer telephony markets it serves include vendor and product reputation,
product architecture, functionality and features, scalability, ease of use,
quality of product and support, performance, price, brand name recognition and
effectiveness of sales and marketing efforts. There can be no assurance that the
Company can maintain and grow its market position against current and potential
competitors, especially those with significantly greater financial, marketing,
service, support, technical and other competitive resources. Any failure by the
Company to maintain and grow its competitive position could have a material
adverse effect upon the Company's revenues from its computer telephony product
line.
TeleVantage is a telephone system designed for small and medium sized
businesses and branch offices. The Company believes TeleVantage offers
functionality superior to that of a traditional standalone PBX. However, due to
the complexity of this software and the mission critical systems it is designed
to operate, there can be no assurances that the software will be successfully
sold in high volume. Additionally, there can be no assurances that competitors
with substantially greater financial resources than that of the Company will not
develop their own software based PBX solutions and subsequently adversely affect
the Company's ability to market or sell its software based PBX solution,
TeleVantage.
17
<PAGE>
TeleVantage could also face direct competition from companies with
significantly greater financial, marketing, service, support and technical
resources. In addition to the possibility that these companies may release a
software based PBX solution, they have signaled their intentions to develop "IP"
(Internet Protocol) based applications. Several of the Company's potential
competitors with substantially greater financial resources have recently
announced partnerships designed to develop, market and sell IP based and
software based telephony solutions. These developments could put the Company at
a competitive disadvantage and adversely affect the Company's ability to sell
and market its own software based PBX solution, TeleVantage. The Company
anticipates certain competitors with greater financial resources will continue
to make substantial new investments in developing IP based and software based
telephony solutions and may form further partnerships that will put the Company
at a competitive disadvantage. Thus there can be no assurance that the Company
will be able to successfully market or sell its own competing IP based or
software based telephony solutions.
COMPUTER TELEPHONY HARDWARE SUPPLIER DEPENDENCIES. The Company's software
based PBX product, TeleVantage, is designed to operate in conjunction with voice
processing boards manufactured by Dialogic Corporation. Additionally, Dialogic
is currently the Company's only supplier of the voice processing boards that are
necessary for the operation of TeleVantage. If Dialogic becomes unable to
continue to manufacture and supply these boards in the volume, price and
technical specifications the Company requires, then the Company would have to
adapt its products to a substitute supplier. Introducing a new supplier of voice
processing boards could result in unforseen additional product development or
customization costs and could introduce hardware and software operating or
compatibility problems. These problems could affect product shipments, be costly
to correct or damage the Company's reputation in the markets in which it
operates, and could have a material adverse affect on its business, financial
condition or results of operations.
Additionally, Dialogic hardware failures could adversely affect the
Company's ability to ship and sell its own software products, damage its
reputation in the markets in which it operates, and could have a material
adverse affect on its business, financial condition or results of operations.
COMPUTER TELEPHONY CUSTOMERS AND MARKET ACCEPTANCE. The Company is
currently and will continue to invest significant resources in the development,
marketing and sales of TeleVantage, a software based PBX. There can be no
assurance that the Company will achieve market acceptance of these products
whose PBX and related telephone needs have traditionally been served through
proprietary PBX and key system distributors and interconnects. Additionally, the
Company's software based PBX products are principally targeted at small to
medium sized businesses. The Company's potential customer base for its
TeleVantage product, small and medium sized businesses, have well established
histories of buying existing telecommunications products, including proprietary
PBXs and related products, and have found such products to be generally
reliable. Moreover, large companies such as Lucent, Nortel and Toshiba, have
invested substantial resources in the development and marketing of existing
proprietary PBXs and related products and maintain well developed distribution
channels. Accordingly, the Company will face substantial market barriers and
competitive pressures in achieving market acceptance of its new software based
PBX products. There can be no assurance that the Company will be successful in
establishing a critical mass of qualified computer telephony resellers or that
such resellers will be able to successfully market TeleVantage. The Company's
success in selling these products will likely be influenced by its ability to
attract and inform qualified VARs and distributors and interconnects on the
features and functionality of these emerging technologies.
The Company's computer telephony products compete in a relatively immature
industry with as yet unproven technologies. The Company believes that there will
be a gradual evolution toward open server-based telephony enabled applications
18
<PAGE>
from the traditional proprietary PBX environment and that, in such a new
environment, software based PBX systems will be widely accepted. The Company
also believes that there may be an eventual gravitation toward Internet Protocol
architectures and/or voice over wire applications. However, there can be no
assurance that the current technological innovations in the computer telephony
industry will be widely adopted by small to medium sized businesses or that
telephony standards will evolve in a manner that is advantageous to or
anticipated by the Company.
TeleVantage currently runs only on Microsoft Windows NT servers. In
addition, the Company's products use other Microsoft Corporation technologies,
including Microsoft Exchange Server and Microsoft SQL Server. A decline in
market acceptance for Microsoft technologies or the increased acceptance of
other server technologies could cause the Company to incur significant
development costs and could have a material adverse effect on our ability to
market our current products. Although, the Company believes Microsoft
technologies will continue to be widely used by businesses, there nonetheless
can be no assurance that businesses will adopt these technologies as anticipated
or will not migrate to other competing technologies that the Company's telephony
products do not currently support.
Additionally, since the operation of the Company's software based PBX
solution is dependent upon certain Microsoft technologies, there can be no
assurances that in the event of a price increase by Microsoft on its SQL Server
licenses or other technologies that the Company will be able to continue to
successfully sell and market its software based PBX.
COMMUNICATIONS AND NETWORKING SOFTWARE
NETWORKING AND COMMUNICATIONS SOFTWARE CUSTOMERS. The Company relies on a
network of distributors and VARs for a significant portion of both its domestic
and international networking and communications software product revenues. A
majority of the sales of CoSession Remote, the Company's remote communications
software product, are to PC original equipment manufacturers. Generally, there
are no minimum purchase requirements for the Company's distributors, VARs or
OEMs and many of the Company's distributors and VARs sell competitive products.
There can be no assurance that these customers will give priority to the
marketing of the Company's products compared to competing products or
alternative solutions or that such customers will continue to offer the
Company's products. In the event of the termination of the Company's
relationship with one or more major distributors, the Company would have to find
suitable alternative channels of distribution. The absence of such alternatives
could have an adverse affect on the Company's business, financial condition and
results of operation. Certain of the Company's OEM relationships require the
scheduled delivery of product revisions and new products. Some of the Company's
OEM product offerings involve the bundling of licensed technologies with its own
technologies. The failure of the Company and/or one of its licensors to adhere
to agreed-upon product delivery schedules could result in the termination of key
relationships with major PC manufacturers, which could have an adverse impact on
current and future revenues in the OEM channel. The Company's OEM revenue
streams are dependent upon the maintenance of one or more key OEM relationships.
The termination of any one of these relationships may have an adverse affect on
the Company's current and future revenues.
NETWORKING AND COMMUNICATIONS SOFTWARE COMPETITORS. The Company's major
competitors in the small business networking market are Microsoft, the
industry's principal operating system provider, and Novell, the industry's
leading network operating system provider. Both of these companies have
substantially greater financial, technological, production and sales and
marketing resources than those of the Company.
Management believes that the inclusion of networking capabilities (printer,
file and application sharing) in Microsoft's Windows 95/98 operating system
(released in August 1995 and June 1998, respectively) has had and will continue
to have a significant detrimental impact on sales of the Company's LANtastic NOS
products. Windows 95/98 is pre-loaded on virtually all Pentium processor-based
personal computers currently sold worldwide. In April 1999, Microsoft released
Windows 2000 Beta 3.0. Management believes that Microsoft will release Windows
NT 5.0 (Windows 2000) in mid 1999. Windows NT 5.0 (Windows 2000) will likely
combine the enhanced security features of Windows NT 4.0 with the functionality
of Windows 98. This release may further erode the market share of the Company's
19
<PAGE>
LANtastic NOS product line. The Company believes that Windows NT 5.0 (Windows
2000) server will include both modem sharing and internet sharing capabilities.
The inclusion of modem sharing and internet sharing capabilities in Windows NT
could result in substantially increased competition for the Company's ModemShare
and i.Share products, which could have a significant impact on the Company's
sales and operating results.
ITEM 2(a). QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
MARKET RISK. During the normal course of business Artisoft is routinely
subjected to a variety of market risks, examples of which include, but are not
limited to, interest rate movements and collectibility of accounts receivable.
Artisoft currently assesses these risks and has established policies and
practices to protect against the adverse effects of these and other potential
exposures. Although Artisoft does not anticipate any material losses in these
risk areas, no assurances can be made that material losses will not be incurred
in these areas in the future.
INTEREST RATE RISK. Artisoft may be exposed to interest rate risk on
certain of its cash equivalents. The value of certain of the Company's cash
equivalents may be impacted in a rising interest rate investment environment.
Although Artisoft does not anticipate any material losses from such a movement
in interest rates, no assurances can be made that material losses will not be
incurred in the future.
20
<PAGE>
ARTISOFT, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is subject to lawsuits and other claims arising in the ordinary
course of its operations. In the opinion of management, based on consultation
with legal counsel, the effects of such matters will not have a materially
adverse effect on the Company's financial position.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE BY SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
No. 11 - Computation of Net Loss Per Share
No. 27 - Financial Data Schedule for Form 10-Q dated November 12, 1999
(c) Reports on Form 8-K
None
21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ARTISOFT, INC.
Date: November 12, 1999 By /s/ T. Paul Thomas
-------------------------------------
T. Paul Thomas
President and Chief Executive Officer
By /s/ Kirk D. Mayes
-------------------------------------
Kirk D. Mayes
Controller and Acting Chief Financial
Officer
22
EXHIBIT 11
STATEMENT REGARDING COMPUTATION OF
NET LOSS PER SHARE
(In thousands, except per share data)
Three Months Ended
September 30,
------------------------
1999 1998
-------- --------
Net loss $ (482) $ (332)
======== ========
Weighted average common shares outstanding 14,834 14,660
======== ========
Basic net loss per share (1) $ (.03) $ (.02)
======== ========
(1) Basic and diluted net loss per share is the same.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 15,451
<SECURITIES> 0
<RECEIVABLES> 2,027
<ALLOWANCES> 0
<INVENTORY> 1,252
<CURRENT-ASSETS> 19,130
<PP&E> 6,464
<DEPRECIATION> (5,212)
<TOTAL-ASSETS> 21,381
<CURRENT-LIABILITIES> 3,247
<BONDS> 0
0
0
<COMMON> 281
<OTHER-SE> 17,853
<TOTAL-LIABILITY-AND-EQUITY> 18,134
<SALES> 6,401
<TOTAL-REVENUES> 6,401
<CGS> 2,222
<TOTAL-COSTS> 2,222
<OTHER-EXPENSES> 4,848
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (482)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (482)
<EPS-BASIC> (.03)
<EPS-DILUTED> (.03)
</TABLE>
