<PAGE> 1
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, 1997
OR
[ ] 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 0-19682
------------------------------
CAYENNE SOFTWARE, INC.
---------------------
(Exact name of registrant as specified in its charter)
Massachusetts 04-2784044
------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8 New England Executive Park, Burlington,
- -----------------------------------------
Massachusetts 01803
------------- -----
(Address of principal executive offices) (Zip Code)
(617) 273-9003
--------------
(Registrant's telephone number, including area code)
Not Applicable
--------------
(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 .
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Shares outstanding
Title of Class at May 12, 1997
-------------- ---------------
Common Stock, $.01 par value 17,818,005
<PAGE> 2
CAYENNE SOFTWARE, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets-
as of March 31, 1997 and December 31, 1996................. 3
Consolidated Statements of Operations
For the Three Months Ended March 31, 1997 and 1996......... 4
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 1997 and 1996......... 5
Notes to Consolidated Financial Statements................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................ 8
Part II. Other Information
Item 1. Legal Proceedings........................................... 15
Item 4. Submission of Matters to a Vote of Security Holders......... 15
Item 6. Exhibits and Reports on Form 8-K............................ 15
Signatures........................................................... 18
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CAYENNE SOFTWARE, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
----------- -----------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents............................................................ $ 6,405 $ 4,150
Trade accounts receivable, less allowance for sales returns and doubtful accounts of
$796 and $820 at March 31, 1997 and December 31, 1996, respectively............... 12,870 13,320
Prepaid expenses and other current assets............................................ 1,447 1,375
------- -------
Total current assets........................................................... 20,722 18,845
Property and equipment, less accumulated depreciation and amortization.................. 2,256 2,256
Capitalized software costs, less accumulated amortization of
$306 and $266 at March 31, 1997 and December 31, 1996, respectively.................. 494 534
Other assets............................................................................ 665 601
------- -------
Total assets............................................................................ $24,137 $22,236
======= =======
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<S> <C> <C>
Current liabilities:
Short term debt...................................................................... $ 2,820 $ 2,820
Accounts payable..................................................................... 2,104 2,363
Accrued expenses..................................................................... 1,074 1,422
Accrued compensation and benefits.................................................... 3,436 3,415
Accrued restructuring costs.......................................................... 898 1,703
Income and other taxes payable....................................................... 531 909
Obligations under capital lease...................................................... 451 561
Deferred revenue..................................................................... 10,048 9,592
--------- ---------
Total current liabilities...................................................... 21,362 22,785
Obligations under capital lease......................................................... 186 106
Stockholders' equity (deficit):
Series B Convertible Preferred Stock, $1.00 par value per share, 150
shares authorized, 150 and 0 issued and outstanding at March 31, 1997
and December 31, 1996, respectively ................................................ 150 --
Common stock $.01 par value per share; 52,400 shares authorized; 17,775 and
17,695 shares issued and outstanding at March 31, 1997 and December 31,
1996, respectively ................................................................. 178 177
Additional paid-in capital........................................................... 106,077 102,935
Accumulated deficit.................................................................. (103,644) (103,706)
Accumulated translation adjustments.................................................. (172) (61)
--------- ---------
Stockholders' equity (deficit)....................................................... 2,589 (655)
--------- ---------
Total liabilities and stockholders' equity (deficit).................................... $ 24,137 $ 22,236
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 4
CAYENNE SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1997 1996
---- ----
<S> <C> <C>
Revenues:
Software license ............................................................. $ 5,071 $ 5,300
Consulting and education services ............................................ 2,503 3,346
Maintenance .................................................................. 5,823 6,186
-------- --------
Total revenues ......................................................... 13,397 14,832
Costs and expenses:
Cost of revenues
Cost of software licenses ................................................. 578 1,089
Cost of consulting and education services and maintenance.................. 2,119 2,942
Sales and marketing .......................................................... 6,322 8,009
Research and development ..................................................... 2,817 3,271
General and administrative ................................................... 1,461 2,252
Restructuring and other costs ................................................ (375) --
-------- --------
Total costs and expenses ........................................................ 12,922 17,563
Income (loss) from operations ................................................... 475 (2,731)
Interest expense, net ........................................................... 262 375
-------- --------
Income (loss) before provision for income taxes ................................. 213 (3,106)
Provision for income taxes ...................................................... 113 25
-------- --------
Net income (loss) ............................................................... 100 (3,131)
Dividends on Series B Preferred Stock ........................................... 38 --
-------- --------
Income (loss) applicable to common shares ....................................... $ 62 $ (3,131)
======== ========
Income (loss) per common share:
Net income (loss) ......................................................... $ 0.00 $ (0.19)
Weighted average number of common and common equivalent shares outstanding ...... 18,805 16,544
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 5
CAYENNE SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ........................................................ $ 100 $(3,131)
Adjustments to reconcile net income (loss) to net cash from operating
activities:
Depreciation and amortization ............................................ 470 847
Changes in operating assets and liabilities
Trade accounts receivable ............................................. 450 574
Prepaid expenses and other assets ..................................... 59 218
Accrued expenses ...................................................... (386) (235)
Accrued restructuring costs ........................................... (805) (623)
Accounts payable ...................................................... (259) (540)
Accrued compensation and benefits ..................................... 21 1,001
Income and other taxes payable ........................................ (378) (595)
Deferred revenue ...................................................... 456 2,351
------ -------
Net cash used in operating activities ......................................... (272) (133)
Cash flows from investing activities:
Purchases of property and equipment ...................................... (415) (225)
Proceeds from sale of property and equipment ............................. -- 56
------ -------
Net cash used in investing activities ......................................... (415) (169)
Cash flows from financing activities:
Proceeds from issuance of Preferred Stock and warrants, net .............. 2,965 --
Proceeds from issuance of common stock, net .............................. 118 345
Proceeds from factoring agreement ........................................ -- 9,195
Payments under factoring agreement ....................................... -- (5,381)
Payments under line of credit facility ................................... -- (2,480)
Payments under capital lease obligations ................................. (214) (14)
------ -------
Net cash provided by financing activities ..................................... 2,869 1,665
Effect of foreign exchange rates on cash and cash equivalents ................. 73 30
------ -------
Net increase in cash and cash equivalents ..................................... 2,255 1,393
Cash and cash equivalents at beginning of period .............................. 4,150 12,889
------ -------
Cash and cash equivalents at end of period .................................... $6,405 $14,282
====== =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries, and have been prepared by the
Company without audit in accordance with the Company's accounting policies, as
described in its latest annual report filed with the Securities and Exchange
Commission on Form 10-K. In the opinion of management, the accompanying
consolidated financial statements contain all adjustments, consisting only of
those of a normal recurring nature, necessary for a fair presentation of the
Company's financial position, results of operations and cash flows at the dates
and for the periods indicated. While the Company believes that the disclosures
presented are adequate to make the information not misleading, these financial
statements should be read in conjunction with the financial statements and
related notes included in the Company's Annual Report on Form 10-K for the
transition period ended December 31, 1996.
2. Income (loss) Per Common Share
Income (loss) per common share is computed based on the weighted average
number of common shares and dilutive common share equivalents outstanding during
each period except in loss periods. Dilutive common equivalent shares consist of
warrants and stock options (calculated using the Treasury Stock Method) for all
periods presented and also include convertible preferred stock for the quarter
ended March 31, 1997. For the quarter ended March 31, 1996 common equivalent
shares are excluded from the primary earnings per share calculation as they are
antidilutive. Fully diluted and primary earnings per share are the same amounts
for the quarters ended March 31, 1997 and 1996, respectively. During the
quarter ended March 31, 1997, the weighted average number of common and common
equivalent shares used in calculating earnings per share were 17,714,000 and
18,805,000 respectively.
3. Business Combinations
On March 27, 1997, the Company acquired certain of the assets and
liabilities of Multiquest Corporation ("Multiquest") in a transaction accounted
for as a purchase. The Company acquired such assets and liabilities in exchange
for 50,000 shares of the Company's common stock. The purchase price for
Multiquest was approximately $209,000 based upon a stock price of $4.1875 per
share (which approximated the fair market value of a share of the Company's
common stock at the closing of the acquisition). The net tangible assets and
liabilities of Multiquest acquired by the Company were insignificant. The
purchase price was allocated to the fair value of the technology acquired and
customer lists, and is being amortized over three years. The March 31, 1997
results reflect the allocation of the purchase price in accordance with
generally accepted accounting principles and the results of operations reflect
the impact of the acquisition since the date of closing. The pro-forma results
of Multiquest prior to the acquisition would be immaterial to the Company's
reported results and are therefore not presented.
4. Line of Credit
On November 6, 1996, the Company amended and restated its revolving credit
agreement with a bank to borrow up to $5.0 million to extend its term through
October 4, 1997 and to amend certain of the financial and operating covenants
and other provisions thereunder. In connection with the amendment, the Company
issued to the bank a three-year warrant to purchase 25,000 shares of the
Company's common stock at an exercise price of $4.25. The loan is contingent
upon meeting certain financial and operating covenants at the time of any
borrowing and over the life of the loan. The loan is secured by all of the
assets of the Company and any borrowing amounts are tied to a percentage of
qualified accounts receivable outstanding at the time of any borrowing. The
financial covenants, which were further amended on April 1, 1997, include the
attainment of certain specified levels of
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
consolidated net income (loss) at the end of each quarter including
profitability of $250,000 for the quarter ending June 30, 1997 and liquidity
(generally defined as cash and cash equivalents plus eligible domestic accounts
receivable and eligible international accounts receivable less any indebtedness
to the bank) at the end of each month. The Company was in compliance with all
covenants, as amended, at March 31, 1997. At March 31, 1997, the borrowing base
under the revolving credit agreement was approximately $4.2 million. The Company
had approximately $2.8 million outstanding against the line of credit at March
31, 1997.
5. Capital Stock
On January 2, 1997, the Company raised approximately $3.0 million through
the private placement of 150,000 shares of Series B Convertible Preferred
Stock, designated from its "blank check" preferred stock. Each share of Series
B Convertible Preferred Stock is entitled to earn dividends at a rate of 5% per
annum, payable upon conversion, in cash or stock, at the option of the Company.
Each share of Series B Convertible Preferred Stock is convertible into shares
of Common Stock at a rate determined by the lower of the average quoted market
price of the common stock for either (i) the ten trading days preceding the
date of issuance or (ii) any five trading days during any period of thirty days
before the conversion. In conjunction with the closing of the private
placement, the Company issued warrants to purchase 350,000 shares of the
Company's Common Stock at exercise prices ranging from 120% to 150% of the
price set forth in clause (i) above and having varying expiration dates from
three to five years. The shares of Common Stock underlying the Series B
convertible Preferred stock and Warrants were registered pursuant to the terms
of the registration rights agreement dated January 3, 1997.
6. Recently Issued Accounting Standards
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128 "Earnings Per Share", which will require adoption during the year ended
December 31, 1997. This statement specifies the computation, presentation and
disclosure requirements of earnings per share. The Company is in the process of
determining the effect of adoption of this statement on its consolidated
financial statements and related disclosures.
7. Forward Looking Statements
This Quarterly Report on Form 10-Q may contain forward-looking statements.
For this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, the words "believes," "anticipates," "plans," "expects," and
similar expressions are intended to identify forward-looking statements. There
are a number of important factors that could cause the Company's actual results
to differ materially from those indicated by such forward-looking statements.
These factors include, without limitation, those set forth in "Management's
Discussion and Analysis of Final Condition and Results of Operations" under the
caption "Factors That May Affect Future Results."
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
Cayenne Software, Inc. is one of the largest global suppliers of analysis
and design solutions for commercial and technical application and database
development. Cayenne offers development teams a scaleable,
workgroup-to-enterprise product family for object-oriented, data driven and
structured application development approaches.
During the quarter ended March 31, 1997, the Company's results reflect a
continued product mix shift from its mature mainframe and structured analysis
and design products to client/server and object-oriented solutions. As a result
of the product mix shift, reduced sales of third party products and
expense management during the quarter, gross margins rose to 80%. Since the
Company derives a significant portion of its business overseas, the Company's
results were also impacted by the rapid rise of the dollar against many foreign
currencies including the Italian Lira and German Mark. The Company continues to
invest heavily in its object-oriented and client/server based products which
culminated with the release of certain enhancements to those product offerings
in the quarter. Also, in an effort to promote distribution through alternate
channels, the Company is actively engaged in building alternate channels such
as value-added resellers ("VARs") and systems integrators worldwide which can
leverage its expanded product offerings.
On March 27, 1997, the Company acquired certain assets and liabilities of
Multiquest Corporation ("Multiquest") in a transaction accounted for as a
purchase. The Company acquired those assets and liabilities from Multiquest in
exchange for 50,000 shares of the Company's common stock. The purchase price
for Multiquest was approximately $209,000 based upon a stock price of $4.1875
(which approximated the fair market value of a share of the Company's common
stock at the closing of the acquisition). The product acquired by the Company
from Multiquest, Pepperseed (formerly named S-Case) provides users with a low
priced, entry level object-oriented solution that is fully scaleable to its
Object-Team product. The Company intends to market Pepperseed through its
direct sales force, VARs, channel partners and on the world wide web.
On March 29, 1997, the Company sold certain of the assets and liabilities
of its French subsidiary, Cayenne Software S.A.R.L., to Case Associates France
S.A. ("Case"). Under the terms of the acquisition Case assumed Cayenne
S.A.R.L.'s then remaining maintenance obligations to customers and certain
other liabilities, acquired its customer list and certain personal property and
entered into a distribution agreement with the Company to distribute its
products in France. In connection with the transaction, the Company issued a
warrant to purchase up to 20,000 shares of the Company's common stock at an
exercise price of $4.32 per share to an affiliate of Case. The costs related to
the transaction were immaterial to the results of the quarter ended March 31,
1997.
As the Company continues its migration toward providing customers a more
open and flexible set of solutions aimed at the growing client/server and
object-oriented market, it faces many challenges. The Company has addressed
some of these challenges through the acquisition (the "Merger") of Cadre
Technologies Inc. ("Cadre") which provides the Company with broader product
offerings and a larger customer base from which to solicit new and additional
business. Also, the Company has introduced additional products during the past
three years through both internal development and acquisitons targeted at the
client/server and object-oriented markets. The Company plans to continue to
enhance its product offerings through development efforts, strategic alliances
and acquisitions to improve its competitive position. The actions necessary to
execute this transition have had an adverse effect on the Company's operating
results during the first quarter of 1997, and may continue to effect operating
results throughout the remainder of 1997.
REVENUES
- --------
The Company's revenues are currently derived from three sources: (i) fees
for the perpetual license of the Company's proprietary software products, (ii)
fees from sales of consulting and education services, and (iii) maintenance fees
for maintaining, supporting and providing periodic upgrades of the Company's
software products.
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
The following table sets forth the amount of revenue derived by the
Company, by geographic segment and source, for each period indicated ($000s):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------
1997 1996
------------------------------
<S> <C> <C>
SOFTWARE LICENSE
United States $ 2,820 $ 2,269
Italy 707 1,149
United Kingdom 233 454
Rest of World 1,311 1,428
------- -------
5,071 5,300
CONSULTING AND EDUCATION
United States 706 1,260
Italy 1,399 1,690
United Kingdom 172 659
Rest of World 226 (263)
------- -------
2,503 3,346
MAINTENANCE
United States 3,086 3,523
Italy 675 375
United Kingdom 897 943
Rest of World 1,165 1,345
------- -------
5,823 6,186
TOTAL $13,397 $14,832
======= =======
</TABLE>
SOFTWARE LICENSES. Software license revenue for the three months ended
March 31, 1997 amounted to $5.1 million compared to $5.3 million for the
comparable period of 1996. The $0.2 million or 4% decrease in license revenues
during the quarter resulted primarily from migration by the Company's customers
from structured analysis and design and mainframe solutions toward
object-oriented and client/server solutions. This migration has resulted in a
reduction of revenues from the Company's Analyst and Teamwork products.
Additionally, contraction of federal defense programs has led to industry
consolidation, contributing to a reduction in the Company's technical embedded
customer base and specifically reduced revenues from the Company's Teamwork and
related products. As a result, the Company's worldwide license revenue
decreased from the comparable quarter of the prior year.
Client/server and object-oriented products accounted for 62% of new license
revenue for the three months ended March 31, 1997 compared to 30% for the
comparable period of the prior year. The Company expects this trend to continue
during 1997 as client/server and object-oriented solutions continue to gain
global acceptance and installed customers elect to follow market trends and
migrate from mainframe and structured analysis and design tools to client/server
and object-oriented solutions. License revenues in the United States increased
by 24% due to several large orders received during the quarter. License revenue
in Italy and the United Kingdom declined 38% and 49%, respectively, due to
lower demand for mature products and longer sales cycles.
CONSULTING AND EDUCATION SERVICES. Consulting and education revenue for the
three months ended March 31, 1997 amounted to $2.5 million compared to $3.3
million for the comparable period of the
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
prior year. Consulting and education revenue in United States decreased by $0.6
million or 44% primarily due to lower demand and reduced staffing in this area.
The $0.3 million or 17% and $0.5 million or 74% decreases in Italy and United
Kingdom, respectively are primarily due to the expiration of several long term
consulting contracts in the comparable quarter of 1996. Additionally, reduced
software license revenue in the current quarter contributed to the decline, as
consulting and education revenues tend to follow the trend of software license
revenue.
MAINTENANCE. Maintenance revenue for annual maintenance contracts is
deferred and recognized ratably over the term of the agreement. Maintenance
revenue for the three months ended March 31, 1997 amounted to $5.8 million
compared to $6.2 million for the comparable period of the prior year.
Maintenance revenue in Italy increased by $0.3 million or 80% primarily due to
increased penetration of international markets in the prior year combined with
an increased portion of the customer base that renewed maintenance contracts.
Maintenance revenue in the United States declined $0.4 million or 12% due to
industry consolidation in the technical embedded market place, the
aforementioned market place migration to client/server and object oriented tools
and fewer customers renewing their maintenance contracts on mainframe and
structured analysis and design tools. Maintenance revenue in the United Kingdom
remained relatively unchanged compared to the prior year.
COSTS AND EXPENSES
- ------------------
The following table sets forth the amount of expense by category for the
periods indicated ($000s):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------
1997 1996
---- ----
<S> <C> <C>
Cost of revenues
Cost of software licenses $ 578 $ 1,089
Cost of consulting, education
and maintenance 2,119 2,942
------- -------
Total cost of revenues 2,697 4,031
Sales and marketing 6,322 8,009
Research and development 2,817 3,271
General and administrative 1,461 2,252
Restructuring and other costs (375) --
------- -------
Total costs and expenses $12,922 $17,563
======= =======
</TABLE>
COST OF REVENUE. The Company's cost of software licenses includes product
packaging, documentation, media and royalties to third parties, as well as the
amortization of capitalized software development costs. Costs of consulting and
education services and maintenance includes personnel, travel and occupancy
costs connected with providing such services.
Cost of software licenses were $0.6 million or 4% of revenue for the three
months ended March 31, 1997 compared with $1.1 million or 7% of revenue in the
comparable period of 1996. The $0.5 million decrease in 1997 expenses reflects
reduced sales of third party products for which the Company pays a royalty to
resell as well as reduced manufacturing costs consistent with reduced revenues.
Additionally, amortization related to WindTunnel was $0 in the first quarter of
1997 as compared to $0.1 million in the comparable period of the prior year.
This reduction is directly related to the Company's determination in June 1996
that the WindTunnel product was no longer consistent with the Company's
objectives.
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Cost of consulting, education and maintenance was $2.1 million or 16% of
revenue in the three months ended March 31,1997 compared with $2.9 million or
20% of revenue in the comparable period of 1996. The $0.8 million or 28%
decrease in 1997 expenses is primarily attributable to reduced staffing levels
as a result of company efforts to better align staffing with demand, attrition
and the merger.
SALES AND MARKETING. Sales and marketing expenses were $6.3 million or 47%
of revenue in the three months ended March 31, 1997 compared with $8.0 million
or 54% of revenue in the comparable period of 1996. The $1.7 million or 21%
decrease in 1997 expenses primarily reflects reduced staffing in North America
and international subsidiary operations as a result of attrition and the merger.
RESEARCH AND DEVELOPMENT. Research and development expenses were $2.8
million or 21% of revenue in the three months ended March 31, 1997 compared with
$3.3 million or 22% of revenue in the comparable period of 1996. The $0.5
million or 14% decrease in 1997 expenses primarily reflects reduced staffing as
a result of attrition and the merger. Additionally, during June of 1996, the
Company reviewed its product strategy and determined that several products
including WindTunnel were no longer consistent with the Company's objectives.
These efforts shifted resources toward developing and or refining core
client/server and object oriented products consistent with the Company's
objectives.
GENERAL AND ADMINISTRATIVE. General and administrative expenses were $1.5
million or 11% of revenue in the three months ended March 31, 1997 compared with
$2.3 million or 15% of revenue in the comparable period of 1996. The $0.8
million or 35% decrease in 1997 expenses primarily reflects lower levels of
staffing which were the result of the merger and the elimination of redundant
positions.
RESTRUCTURING AND OTHER COSTS. During the quarter ended March 31, 1997,
the Company evaluated its restructuring reserve and determined that certain
amounts provided for in previous restructuring actions were no longer required.
As a result, the Company recorded a benefit of approximately $0.4 million.
EFFECT OF INTERNATIONAL OPERATIONS ON INCOME (LOSS) FROM OPERATIONS
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
1997 1996
---- ----
<S> <C> <C>
Income (loss) from operations
United States $ 2,748 $(1,461)
Italy 67 156
United Kingdom (615) (347)
Rest of World (1,725) (1,079)
------- -------
$ 475 $(2,731)
</TABLE>
In addition to factors listed above, the operations of the Company's
international subsidiaries significantly affected results of operations in the
three months ended March 31, 1997 and 1996.
The income from operations -- United States and Rest of World -- increased
to $1.0 million during the quarter ended March 31, 1997 from a loss of $2.5
million in the corresponding quarter of the prior year. The improved results are
primarily attributable to actions taken by the Company in previous quarters to
better align expenses with revenues and improved efficiencies gained in the
merger with Cadre.
The Company's Italian subsidiary reported income from operations of $0.1
million for the three months ended March 31, 1997 compared to $0.2 million in
the corresponding period in the prior year principally due to lower than
expected revenues from mature products.
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
The loss from operations in the Company's United Kingdom subsidiary
increased 77% for the three months ended March 31, 1997 to $0.6 million
compared to the corresponding period in the prior year principally due to lower
license revenues associated with the aforementioned marketplace migration to
client/server and object-oriented tools and consolidation of the Company's and
Cadre's United Kingdom operations in connection with the merger.
INTEREST EXPENSE, NET. Interest expense for the quarter ended March 31,
1997 decreased by $0.1 million compared to the same period of the prior fiscal
year primarily due to lower interest rates on outstanding balances.
PROVISION FOR INCOME TAXES. Due to the Company's recent history of
operating losses and the existence of significant net operating loss
carryforwards, the tax provision for the quarter ended March 31, 1997 is
composed of foreign income and withholding taxes. The tax provision in the
comparable quarter of the prior year is composed of foreign withholding taxes.
RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128 "Earnings Per Share", which will require adoption during the year ended
December 31, 1997. This statement specifies the computation, presentation and
disclosure requirements of earnings per share. The Company is in the process of
determining the effect of adoption of this statement on its consolidated
financial statements and related disclosures.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1997, the Company's principal source of liquidity included
cash and cash equivalents aggregating $6.4 million and a secured bank line of
credit in the amount of $5.0 million discussed below. Cash and cash equivalents
increased by $2.3 million compared to December 31, 1996. For the quarter ended
March 31, 1997, cash flows were principally affected by the private placement
of Series B Preferred Stock, discussed below. The Company's principal
long-term cash commitments are for office space and operating leases.
On March 31, 1997, the Company had no material commitments for capital
expenditures.
On January 2, 1997, the Company raised approximately $3.0 million through
the private placement of 150,000 shares of Series B Convertible Preferred Stock,
designated from its "blank check" preferred stock. Each share of Series B
Convertible Preferred Stock is entitled to earn dividends at a rate of 5% per
annum, payable upon conversion, in cash or stock, at the option of the Company.
Each share of Series B Convertible Preferred Stock is convertible into shares of
Common Stock at a rate determined by the lower of the average quoted market
price of the common stock for either (i) the ten trading days preceding the date
of issuance or (ii) any five trading days during any period of thirty days
before the conversion. In conjunction with the closing of the private placement,
the Company issued warrants to purchase 350,000 shares of the Company's Common
Stock at exercise prices ranging from 120% to 150% of the price set forth in
clause (i) above and having varying expiration dates from three to five years.
The shares of Common Stock underlying the Series B convertible Preferred stock
and Warrants were registered pursuant to the terms of the registration rights
agreement dated January 3, 1997.
On November 6, 1996, the Company amended and restated its revolving credit
agreement with a bank to borrow up to $5.0 million, to extend its term through
October 4, 1997 and to amend certain of the financial and operating covenants
and other provisions thereunder. In connection with the amendment, the Company
issued to the bank a three year warrant to purchase 25,000 shares of the
Company's common stock at an exercise price of $4.25 per share. The loan is
contingent upon meeting certain financial and operating covenants at the time
of any borrowing and over the life of the loan. The loan is secured by all of
the assets of the Company and any borrowing amounts are tied to a percentage of
qualified accounts receivable outstanding at the time of any borrowing. The
financial covenants, which were further amended on April 1, 1997, include the
attainment of certain specified levels of consolidated net income (loss) at the
end of each quarter, tangible net worth (generally defined as the excess of
tangible net assets of the Company over total liabilities (excluding any
outstanding redeemable preferred stock)) at the end of each quarter and month,
and liquidity (generally defined as cash and cash equivalents plus eligible
domestic accounts receivable and eligible
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
international accounts receivable less any indebtedness to the bank) at the end
of each month. The Company was in compliance with all covenants as amended at
March 31, 1997. At March 31, 1997, the borrowing base under the revolving credit
agreement was approximately $4.2 million. The Company had approximately $2.8
million outstanding against the line of credit at March 31, 1997.
On July 18, 1996, the Company completed its merger with Cadre of
Providence, Rhode Island. In connection with the merger, the Company issued
4,716,442 shares of Cayenne common stock for all of the outstanding capital
stock of Cadre. The transaction was accounted for as a pooling-of-interests for
accounting purposes beginning in the transition period. The Company incurred a
$6.3 million charge to operations during the transition period to reflect costs
associated with combining the operations of the two companies, transaction
fees, and other costs incident to the merger.
Cash expenditures for restructuring activities were approximately $0.4
million during the quarter ended March 31, 1997. The Company currently estimates
that cash expenditures for restructuring actions for the remainder of 1997 will
be approximately $0.6 million. The Company believes that it has adequately
provided for all restructuring actions taken to date.
The Company anticipates that existing cash balances and funds generated
from operations will provide sufficient cash resources to finance its current
operations and projected capital expenditures through 1997. Thereafter, the
Company's cash requirements will depend upon the results of future operations,
including the impact of the Cadre acquisition, which cannot be foreseen. There
can be no assurance that the Company will be able to meet its loan covenants,
achieve its operating plan and sustain profitability, and failure to do so may
have a material adverse impact on the Company's business and operations.
FACTORS THAT MAY AFFECT FUTURE RESULTS
From time to time, information provided by the Company or statements made
by its employees may contain "forward-looking" information, as that term is
defined in the Private Securities Litigation Reform Act of 1995 (the "Act"). The
Company cautions investors that there can be no assurance that actual results or
business conditions will not differ materially from those projected or suggested
in such forward-looking statements as a result of various factors including but
not limited to the following:
The Company's future operating results are dependent on its ability to
develop, produce, and market new and innovative products and services internally
or through acquisitions including, without limitation, achieving product market
acceptance of its client/server and object oriented products and services and
maintaining relationships with software and hardware vendors and consultants.
There are numerous risks inherent in this complex process, including rapid
technological change the requirements that the Company bring to market in a
timely fashion new products and services which meet customers' changing needs
and the successful integration of products and services as a result of
acquisitions.
Historically the Company has generated a disproportionate amount of its
operating revenues toward the end of each quarter, making precise prediction of
revenues and earnings particularly difficult and resulting in risk of variance
of actual results from those forecast an any time. In addition, the company's
operating results historically have varied from fiscal period to fiscal period;
accordingly, the
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Company's financial results in any particular fiscal period are not necessarily
indicative of results for future periods.
The Company operates in a highly competitive environment and in a highly
competitive industry, which include significant pricing pressures and intense
competition for skilled employees. From time to time, the Company may experience
unanticipated intense competitive pressure, possibly causing operating results
to vary from those expected.
The Company offers its products and services directly and through indirect
distribution channels. Changes in the financial condition of, or the Company's
relationship with, distributors and other indirect channel partners could cause
actual operating results to vary from those expected.
The Company does business worldwide. Global and/or regional economic
factors and potential changes in laws and regulations affecting the Company's
business, including without limitation, currency fluctuation, changes in
monetary policy and tariffs, and federal, state and international laws could
impact the Company's financial condition or future results of operations.
The market price of the Company's securities could be subject to
fluctuation in response to quarter to quarter variations in operating results,
changes in analysts' earnings estimates, market conditions in the information
technology industry, as well as general economic conditions and other factors
external to the Company.
<PAGE> 15
PART II. OTHER INFORMATION (CONTINUED)
Item 1. Legal Proceedings
The Company is not aware of any material litigation or claim pending or
threatened against the Company or any of its subsidiaries.
Item 4 Submission of Matters to a Vote of Security Holders
None.
Item 6. Exhibits and Reports on Form 8-K
Documents listed below, except for documents identified by footnotes,
are being filed as exhibits herewith. Documents identified by asterisks
are not being filed herewith and, pursuant to Rule 12b-32 of the
General Rules and Regulations promulgated by the Commission under the
Securities Exchange Act of 1934 (the "Act") reference is made to such
documents as previously filed as exhibits with the Commission. The
Company's file number under the Act is 0-19682.
2.1(4) Asset Purchase Agreement among CSI Acquisition
Corporation, Cayenne and Cooperative Solutions,
Inc. dated November 16, 1993
2.2(5) Agreement and Plan of Merger by and among
Cayenne, BI Acquisition Corp. and WindTunnel
Software, Inc. dated April 27, 1993
2.3(11) Agreement and Plan of Merger among Cayenne, B.C.
Acquisition Corp. and Cadre Technologies Inc.
dated as of March 25, 1996
3.1(1)2 Amendment to Restated Articles of Organization
of Cayenne
3.2(2) Restated Articles of Organization of Cayenne
3.3(1) Amended and Restated By-Laws of Cayenne
3.4(14) Statement of Rights and Preferences of Series B
Convertible Preferred Stock
4.1(1) Specimen Certificate for Common Stock of Cayenne
4.2(8) Statement of Rights and Preferences of Series A
Convertible Preferred Stock
4.3(8) Form of Warrant Agreement dated as of November
21, 1994 by and among Cayenne and purchasers of
Series A Convertible Preferred Stock
4.4(7) Warrant Agreement dated as of October 28, 1994
by and between Cayenne and Silicon Valley Bank
4.5(14) Convertible Preferred Stock Purchase Agreement
dated as of January 2, 1997 between the Company
and Southbrook International Investments, Ltd.
4.6(14) Registration Rights Agreement dated as of
January 2, 1997
4.7(14) Form of Warrant Agreement dated as of January 2,
1997
4.8(14) Warrant Agreement dated as of December 20, 1996
between the Company and Silicon Valley Bank
<PAGE> 16
PART II. OTHER INFORMATION (CONTINUED)
10.1(1) General License and Maintenance Agreement dated
January 30, 1987 between Cayenne and American
Telephone & Telegraph Communications, Inc.
10.2(1) Lease with New England Mutual Life Insurance
Company
10.3(3) Lease dated August 12, 1992 between Cayenne and
Spaulding Investment Co.
10.4(2) Agreement for Partial Sale of Going Concern
dated as of October 25, 1992 between Pro Systems
and Cayenne France
10.5(2) Sale and Purchase Agreement relating to Cayenne
Information Systems Limited, dated November 16,
1991, among Abacus Trustees (Jersey) Limited,
Cayenne and others, as amended by Amendment
Consent dated February 18, 1992
10.6(2) Agreement dated as of November 1, 1991, between
Cayenne and Cayenne Italia S.r.1., as amended by
letter dated December 9, 1991 and as further
amended by amendment dated December 31, 1991
10.7(3) Fiscal Year 1993 Bonus Pool Plan
10.8(1) Amended and Restated 1986 Incentive and
Nonqualified Stock Option Plan of Cayenne 10.92
1992 Employee Stock Purchase Plan
10.10(1) Savings/Retirement Plan and Trust of Cayenne
10.11(6) Employment agreement dated as of January 1, 1994
by and between Cayenne and Charles W. Bachman
10.12(6) Employment Agreement dated as of August 4, 1993
by and between Cayenne and Peter J. Boni
10.13(6) 1994 Bonus Pool Plan of Cayenne, as amended
10.14(7) 1995 Bonus Pool Plan of Cayenne, as amended.
10.15(7) Revolving Credit Agreement and Warrant Agreement
dated as of October 28, 1994 by and between
Cayenne and Silicon Valley Bank
10.16(8) Series A Convertible Preferred Stock Purchase
Agreement dated as of November 21, 1994 by and
among Cayenne and purchasers of Series A
Convertible Preferred Stock
10.17(8) Registration Rights Agreement dated as of
November 21, 1994 by and among Cayenne and
purchasers of Series A Convertible Preferred
Stock
10.18(9) Form of Common Stock Purchase Agreement dated as
of September 15, 1995 by and among Cayenne and
certain purchasers of Common Stock
10.19(9) Form of Registration Rights Agreement dated as
of September 15, 1995 by and among Cayenne and
certain purchasers of Common Stock
10.20(10) 1996 Bonus Pool Plan of Cayenne
10.21(12) Amendment No. 1 to Employment Agreement dated as
of August 4, 1993 by and between Cayenne and
Peter J. Boni
10.22(12) Amended and Restated Revolving Credit Agreement
dated as of June 6, 1996 by and between Cayenne
and Silicon Valley Bank
10.23(14) 1997 Bonus Plan of Cayenne
<PAGE> 17
PART II. OTHER INFORMATION (CONTINUED)
10.24(13) Amended 1996 Incentive and Nonqualified Stock
Option Plan
10.25 Calendar Year 1997 Bonus Pool of Cayenne
27.1 Financial Data Schedules
- -------------
1) Incorporated by reference to the exhibits filed with
Cayenne's Registration Statement on Form S-1, File
No. 33-43401, as amended.
2) Incorporated by reference to the exhibits filed with
Cayenne's Registration Statement on Form S-1, File No.
33-45841, as amended.
3) Incorporated by reference to the exhibits filed with
Cayenne's Annual Report on Form 10-K for the year ended
June 30, 1992, File No. 0-19682.
4) Incorporated by reference to the exhibit filed with
Cayenne's Current Report on Form 8-K dated November 16,
1993, as amended.
5) Incorporated by reference to Cayenne's Registration
Statement on Form S-4, File No. 33-62650, as amended.
6) Incorporated by reference to the exhibits filed with
Cayenne's Quarterly Report on Form 10-Q dated May 13,
1994.
7) Incorporated by reference to the exhibits filed with
Cayenne's Quarterly Report on Form 10-Q dated November
11, 1994.
8) Incorporated by reference to the exhibits filed with
Cayenne's Quarterly Report on Form 10-Q dated February
13, 1995, as amended.
9) Incorporated by reference to the exhibits filed with
Cayenne's Annual Report on Form 10-K, as amended, for
the year ended June 30, 1995, File No. 0-19682.
10) Incorporated by reference to the exhibits filed with
Cayenne's Quarterly Report on Form 10-Q dated February
13, 1996.
11) Incorporated by reference to exhibits filed with
Cayenne's Registration Statement on Form S-4, File No.
333-6087, as amended.
12) Incorporated by reference to exhibits filed with
Cayenne's Annual Report on Form 10-K dated September 27,
1996.
13) Incorporated by reference to Cayenne's Proxy Statement
dated November 20, 1996.
14) Incorporated by reference to Cayenne's Annual Report on
Form 10-K dated March 29, 1997.
(a) REPORTS ON FORM 8-K:
None.
<PAGE> 18
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.
Cayenne Software, Inc.
Dated: May 15, 1997 By: /S/ Frederick H. Phillips
---------------------------
Frederick H. Phillips
Vice President, Finance and
Administration, Treasurer
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
<PAGE> 19
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------
EXHIBITS
TO
QUARTERLY REPORT ON FORM 10-Q
-------------------------------
CAYENNE SOFTWARE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
- --------------------------------------------------------------------------------
<PAGE> 20
Documents listed below, except for documents identified by footnotes, are being
filed as exhibits herewith. Documents identified by asterisks are not being
filed herewith and, pursuant to Rule 12b-32 of the General Rules and Regulations
promulgated by the Commission under the Securities Exchange Act of 1934 (the
"Act") reference is made to such documents as previously filed as exhibits with
the Commission. The Company's file number under the Act is 0-19682.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------ ----------- ----
<S> <C>
2.1(4) Asset Purchase Agreement among CSI Acquisition Corporation,
Cayenne and Cooperative Solutions, Inc. dated November 16,
1993
2.2(5) Agreement and Plan of Merger by and among Cayenne, BI
Acquisition Corp. and WindTunnel Software, Inc. dated April
27, 1993
2.3(11) Agreement and Plan of Merger among Cayenne, B.C. Acquisition
Corp. and Cadre Technologies Inc. dated as of March 25, 1996
3.1(1)2 Amendment to Restated Articles of Organization of Cayenne
3.2(2) Restated Articles of Organization of Cayenne
3.3(1) Amended and Restated By-Laws of Cayenne
3.4(14) Statement of Rights and Preferences of Series B Convertible
Preferred Stock
4.1(1) Specimen Certificate for Common Stock of Cayenne
4.2(8) Statement of Rights and Preferences of Series A Convertible
Preferred Stock
4.3(8) Form of Warrant Agreement dated as of November 21, 1994 by
and among Cayenne and purchasers of Series A Convertible
Preferred Stock
4.4(7) Warrant Agreement dated as of October 28, 1994 by and
between Cayenne and Silicon Valley Bank
4.5(14) Convertible Preferred Stock Purchase Agreement dated as of
January 2, 1997 between the Company and Southbrook
International Investments, Ltd.
4.6(14) Registration Rights Agreement dated as of January 2, 1997
4.7(14) Form of Warrant Agreement dated as of January 2, 1997
4.8(14) Warrant Agreement dated as of December 20, 1996 between the
Company and Silicon Valley Bank
10.1(1) General License and Maintenance Agreement dated January 30,
1987 between Cayenne and American Telephone & Telegraph
Communications, Inc.
10.2(1) Lease with New England Mutual Life Insurance Company
10.3(3) Lease dated August 12, 1992 between Cayenne and Spaulding
Investment Co.
10.4(2) Agreement for Partial Sale of Going Concern dated as of
October 25, 1992 between Pro Systems and Cayenne France
10.5(2) Sale and Purchase Agreement relating to Cayenne Information
</TABLE>
<PAGE> 21
<TABLE>
<S> <C>
Information Systems Limited, dated November 16, 1991, among
Abacus Trustees (Jersey) Limited, Cayenne and others, as
amended by Amendment Consent dated February 18, 1992
10.6(2) Agreement dated as of November 1, 1991, between Cayenne and
Cayenne Italia S.r.1., as amended by letter dated December
9, 1991 and as further amended by amendment dated December
31, 1991
10.7(3) Fiscal Year 1993 Bonus Pool Plan
10.8(1) Amended and Restated 1986 Incentive and Nonqualified Stock
Option Plan of Cayenne 10.92 1992 Employee Stock Purchase
Plan
10.10(1) Savings/Retirement Plan and Trust of Cayenne
10.11(6) Employment Agreement dated as of January 1, 1994 by and
between Cayenne and Charles W. Bachman
10.12(6) Employment Agreement dated as of August 4, 1993 by and
between Cayenne and Peter J. Boni
10.13(6) 1994 Bonus Pool Plan of Cayenne, as amended
10.14(7) 1995 Bonus Pool Plan of Cayenne, as amended.
10.15(7) Revolving Credit Agreement and Warrant Agreement dated as of
October 28, 1994 by and between Cayenne and Silicon Valley
Bank
10.16(8) Series A Convertible Preferred Stock Purchase Agreement
dated as of November 21, 1994 by and among Cayenne and
purchasers of Series A Convertible Preferred Stock
10.17(8) Registration Rights Agreement dated as of November 21, 1994
by and among Cayenne and purchasers of Series A Convertible
Preferred Stock
10.18(9) Form of Common Stock Purchase Agreement dated as of
September 15, 1995 by and among Cayenne and certain
purchasers of Common Stock
10.19(9) Form of Registration Rights Agreement dated as of September
15, 1995 by and among Cayenne and certain purchasers of
Common Stock
10.20(10) 1996 Bonus Pool Plan of Cayenne
10.21(12) Amendment No. 1 to Employment Agreement dated as of August
4, 1993 by and between Cayenne and Peter J. Boni
10.22(12) Amended and Restated Revolving Credit Agreement dated as of
June 6, 1996 by and between Cayenne and Silicon Valley Bank
10.23(14) 1997 Bonus Plan of Cayenne
10.24(13) Amended 1996 Incentive and Nonqualified Stock Option Plan
10.25 Calendar Year 1997 Bonus Pool of Cayenne
27.1 Financial Data Schedules
</TABLE>
- -------------
1) Incorporated by reference to the exhibits filed with
Cayenne's Registration Statement on Form S-1, File No.
33-43401, as amended.
<PAGE> 22
2) Incorporated by reference to the exhibits filed with
Cayenne's Registration Statement on Form S-1, File No.
33-45841, as amended.
3) Incorporated by reference to the exhibits filed with
Cayenne's Annual Report on Form 10-K for the year ended June
30, 1992, File No. 0-19682.
4) Incorporated by reference to the exhibit filed with
Cayenne's Current Report on Form 8-K dated November 16,
1993, as amended.
5) Incorporated by reference to Cayenne's Registration
Statement on Form S-4, File No. 33-62650, as amended.
6) Incorporated by reference to the exhibits filed with
Cayenne's Quarterly Report on Form 10-Q dated May 13, 1994.
7) Incorporated by reference to the exhibits filed with
Cayenne's Quarterly Report on Form 10-Q dated November 11,
1994.
8) Incorporated by reference to the exhibits filed with
Cayenne's Quarterly Report on Form 10-Q dated February 13,
1995, as amended.
9) Incorporated by reference to the exhibits filed with
Cayenne's Annual Report on Form 10-K, as amended, for the
year ended June 30, 1995, File No. 0-19682.
10) Incorporated by reference to the exhibits filed with
Cayenne's Quarterly Report on Form 10-Q dated February 13,
1996.
11) Incorporated by reference to exhibits filed with Cayenne's
Registration Statement on Form S-4, File No. 333-6087, as
amended.
12) Incorporated by reference to exhibits filed with Cayenne's
Annual Report on Form 10-K dated September 27, 1996.
13) Incorporated by reference to Cayenne's Proxy Statement dated
November 20, 1996.
14) Incorporated by reference to Cayenne's Annual Report on Form
10-K dated March 29, 1997.
<PAGE> 1
EXHIBIT 10.25
CAYENNE SOFTWARE, INC.
CY 97 BONUS PLAN
A portion or all of each executive officer's bonus will be based on the
achievement of net income ("Profit") before taxes by Cayenne Software, Inc.,
(the "Company"). The bonus will be paid as follows:
(A) For the Company's President: every one (1) full percentage
point of Profit Before Taxes up to 10% will result in a payment
of $25,000. Every one (1) full percentage point of Profit Before
Taxes above 10% will result in a payment of $50,000.
(B) For the Company's Senior Vice President of Product Operations:
(i) 33.3% of base salary for achievement versus plan of total
worldwide software license and maintenance revenue. (This
incentive will be computed and paid quarterly according to an
accelerated scale that will yield 50% of the incentive at
approximately 5% Profit Before Taxes and 100% of the incentive
at ten percent Profit Before Taxes, maximum quarterly payout is
the quarterly incentive target), and (ii) 33.3% of base salary
for year-end Profit Before Taxes as follows: every one (1) full
percentage point of Profit Before Taxes up to 10% will result in
a payment of $7,500; every one (1) full percentage point of
Profit Before Taxes above 10% will result in a payment of
$15,000.
(C) For the Company's Senior Vice President of Worldwide Field
Operations: (i) 35% of base salary for achievement of worldwide
revenue versus plan will be computed and paid monthly, (ii) 35%
of base salary for achievement of worldwide operations
contribution margin versus plan will be computed and paid
quarterly, and (iii) 30% of base salary for achievement of
year-end company Profit Before Taxes as follows: every one (1)
full percentage point of Profit Before Taxes up to 10% will
result in a payment of $4,500; every one (1) full percentage
point of Profit Before Taxes above 10% will result in a payment
of $9,000.
(D) For the Company's Vice President of North American Sales: (i)
40% of base salary for achievement of North American sales
revenue versus plan will be computed and paid monthly, (ii) 40%
of base salary for achievement of North American operations
contribution margin versus plan will be computed and paid
quarterly, and (iii) 35% of base salary for achievement of
year-end Company Profit Before Taxes as follows: every one (1)
full percentage point of Profit Before Taxes up to 10% will
result in a payment of $4,500; every one (1) full percentage
point of Profit Before Taxes above 10% will result in a payment
of $9,000.
(E) For the Company's Vice President/Chief Financial Officer and the
Vice President/General Counsel: every one (1) full percentage
point of Profit Before Taxes up to 10% will result in a payment
of $5,000; every one (1) full percentage point of Profit Before
Taxes above 10% will result in a payment of $10,000.
(F) For the Company's Vice President of Human Resources: every one
(1) full percentage point of Profit Before Taxes up to 10% will
result in a payment of $2,300; every one (1) full percentage
point of Profit Before Taxes above 10% will result in a payment
of $4,600.
Net income before taxes will be calculated excluding any restructuring charges
taken for CY 1997.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATIONS OF CAYENNE SOFTWARE,
INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORMS 10-K, 10-KA
AND 10-Q.
</LEGEND>
<CIK> 0000880229
<NAME> CAYENNE SOFTWARE, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 6,405
<SECURITIES> 0
<RECEIVABLES> 13,666
<ALLOWANCES> 796
<INVENTORY> 0
<CURRENT-ASSETS> 20,722
<PP&E> 16,978
<DEPRECIATION> 14,722
<TOTAL-ASSETS> 24,137
<CURRENT-LIABILITIES> 21,362
<BONDS> 0
0
150
<COMMON> 178
<OTHER-SE> 2,261
<TOTAL-LIABILITY-AND-EQUITY> 24,137
<SALES> 5,071
<TOTAL-REVENUES> 13,397
<CGS> 578
<TOTAL-COSTS> 2,697
<OTHER-EXPENSES> 10,225
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 262
<INCOME-PRETAX> 213
<INCOME-TAX> 113
<INCOME-CONTINUING> 100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 100
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
