<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
Form 10-Q
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 1998
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 001-11807
-------------------------------
UNIFY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 94-2710559
- ------------------------------- -------------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) NUMBER)
100 CENTURY CENTER COURT, SUITE 302
SAN JOSE, CALIFORNIA 95112
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
TELEPHONE: (408) 451-2000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
8,469,336 shares of Common Stock, $0.001 par value, as of November 30, 1998
<PAGE>
UNIFY CORPORATION
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
October 31, 1998 and April 30, 1998. . . . . . . . . . . . . 3
Condensed Consolidated Statements of Operations for
the three and six months ended October 31, 1998
and 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows
for the six months ended October 31, 1998 and 1997 . . . . . 5
Notes to Condensed Consolidated Financial Statements . . . . . . 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . . . . . 8
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . 14
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . . . . 14
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . 15
SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNIFY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
October 31, April 30,
1998 1998
----------- ---------
<S> <C> <C>
ASSETS (unaudited) (audited)
Current assets:
Cash and cash equivalents $ 6,049 $ 5,279
Short-term investments 4,300 5,460
Accounts receivable, net 5,679 5,568
Prepaid expenses and other current assets 759 779
-------- --------
Total current assets 16,787 17,086
Property and equipment, net 1,723 1,925
Other assets 78 88
-------- --------
Total assets $ 18,588 $ 19,099
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ - $ 18
Accounts payable 1,268 1,041
Amounts due to minority interest stockholders 615 756
Accrued compensation and related expenses 1,682 1,889
Other accrued liabilities 2,750 3,076
Deferred revenue 2,542 3,745
-------- --------
Total current liabilities 8,857 10,525
Long-term debt, net of current portion - 4
Minority interest 248 275
Stockholders' equity:
Common stock 8 8
Additional paid-in capital 53,594 53,474
Notes receivable from stockholders (221) (216)
Cumulative translation adjustments (562) (521)
Accumulated deficit (43,336) (44,450)
-------- --------
Total stockholders' equity 9,483 8,295
-------- --------
Total liabilities and stockholders' equity $ 18,588 $ 19,099
-------- --------
-------- --------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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UNIFY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
October 31, October 31,
---------------------- ----------------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues:
Software licenses $ 4,726 $ 3,994 $ 8,968 $ 6,863
Services 2,474 2,270 4,892 4,535
------- ------- ------- -------
Total revenues 7,200 6,264 13,860 11,398
------- ------- ------- -------
Cost of revenues:
Software licenses 236 130 462 363
Services 1,074 1,143 2,127 2,224
------- ------- ------- -------
Total cost of revenues 1,310 1,273 2,589 2,587
------- ------- ------- -------
Gross margin 5,890 4,991 11,271 8,811
------- ------- ------- -------
Operating expenses:
Product development 1,484 1,526 2,933 2,974
Selling, general and administrative 3,606 4,296 7,259 8,856
------- ------- ------- -------
Total operating expenses 5,090 5,822 10,192 11,830
------- ------- ------- -------
Income (loss) from operations 800 (831) 1,079 (3,019)
Other income, net 100 141 123 201
------- ------- ------- -------
Income (loss) before income taxes 900 (690) 1,202 (2,818)
Provision for income taxes (44) (43) (88) (90)
------- ------- ------- -------
Net income (loss) $ 856 $ (733) $ 1,114 $(2,908)
------- ------- ------- -------
------- ------- ------- -------
Net income (loss) per share,
basic and diluted $ 0.10 $ (0.09) $ 0.13 $ (0.35)
------- ------- ------- -------
------- ------- ------- -------
Shares used in computing net
income (loss) per share:
Basic 8,435 8,252 8,414 8,201
------- ------- ------- -------
------- ------- ------- -------
Diluted 8,547 8,252 8,538 8,201
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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UNIFY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended October 31,
----------------------------
1998 1997
---------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,114 $(2,908)
Reconciliation of net income (loss) to net cash used
in operating activities:
Depreciation 554 530
Provision for losses on accounts receivable 181 80
Minority interest (27) (37)
Liquidation of Benelux subsidiary - 136
Changes in operating assets and liabilities:
Accounts receivable (84) 388
Prepaid expenses and other current assets 32 117
Accounts payable 188 (457)
Amounts due to minority interest stockholders (198) (19)
Accrued compensation and related expenses (239) (34)
Other accrued liabilities (359) (790)
Deferred revenue (1,288) (293)
---------- -------
Net cash used in operating activities (126) (3,287)
---------- -------
Cash flows from investing activities:
Net sales of available-for-sale securities 1,160 1,689
Purchases of property and equipment (344) (430)
Other assets 12 168
---------- -------
Net cash provided by investing activities 828 1,427
---------- -------
Cash flows from financing activities:
Principal payments under debt obligations (22) (2,298)
Proceeds from issuance of common stock, net 211 331
Repurchase of common stock (91) -
Accrual of interest on notes receivable from stockholders (5) (5)
---------- -------
Net cash provided by (used in) financing activities 93 (1,972)
---------- -------
Effect of exchange rate changes on cash (25) (62)
---------- -------
Net increase (decrease) in cash and cash equivalents 770 (3,894)
Cash and cash equivalents, beginning of period 5,279 9,513
---------- -------
Cash and cash equivalents, end of period $6,049 $5,619
---------- -------
---------- -------
Supplemental schedule of noncash investing and financing
activities:
Cash paid during the period for:
Interest $ 81 $ 274
---------- -------
---------- -------
Income taxes $ 54 $ 80
---------- -------
---------- -------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
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UNIFY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The condensed consolidated financial statements have been prepared by Unify
Corporation (the "Company") pursuant to the rules and regulations of the
Securities and Exchange Commission ("SEC"). While the interim financial
information contained in this filing is unaudited, such financial statements
reflect all adjustments (consisting only of normal recurring adjustments) which
the Company considers necessary for a fair presentation. The results for
interim periods are not necessarily indicative of the results to be expected for
the entire fiscal year. These financial statements should be read in
conjunction with the Consolidated Financial Statements and Notes thereto,
together with Management's Discussion and Analysis of Financial Condition and
Results of Operations, which are included in the Company's Annual Report on Form
10-K for the year ended April 30, 1998 as filed with the SEC.
2. EARNINGS PER SHARE
The following is a reconciliation of the numerators and denominators of the
basic and diluted earnings per share computations for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
October 31, October 31,
---------------------------------------------------
1998 1997 1998 1997
------ ------- ------ -------
<S> <C> <C> <C> <C>
NET INCOME (LOSS) (NUMERATOR):
Net income (loss), basic and diluted $ 856 $ (733) $1,114 $(2,908)
------ ------- ------ -------
------ ------- ------ -------
SHARES (DENOMINATOR):
Weighted average shares of common
stock outstanding, basic 8,435 8,252 8,414 8,201
Weighted average common equivalent
shares outstanding 112 - 124 -
------ ------- ------ -------
Weighted average shares of common
stock outstanding, diluted 8,547 8,252 8,538 8,201
------ ------- ------ -------
------ ------- ------ -------
PER SHARE AMOUNT:
Net income (loss) per share,
basic and diluted $ 0.10 $ (0.09) $ 0.13 $ (0.35)
------ ------- ------ -------
------ ------- ------ -------
ANTIDILUTIVE SHARES: 528 544 533 694
------ ------- ------ -------
------ ------- ------ -------
</TABLE>
6
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UNIFY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3. COMPREHENSIVE INCOME
Effective May 1, 1998, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income."
This statement requires that all items recognized under accounting standards
as components of comprehensive income be reported in an annual financial
statement that is displayed with the same prominence as other annual
financial statements. This statement also requires that an entity classify
items of other comprehensive income by their nature in an annual financial
statement. For example, other comprehensive income includes foreign currency
translation adjustments. Annual financial statements for prior periods will
be reclassified, as required. The Company's total comprehensive income
(loss) was as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
October 31, October 31,
------------------- ---------------------
1998 1997 1998 1997
---- ----- ------ -------
<S> <C> <C> <C> <C>
Net income (loss) $856 $(733) $1,114 $(2,908)
Other comprehensive income (loss),
net of tax (75) (8) (41) 63
---- ----- ------ -------
Total comprehensive income (loss) $781 $(741) $1,073 $(2,845)
---- ----- ------ -------
---- ----- ------ -------
</TABLE>
4. STOCK REPURCHASE PROGRAM
In September 1998, the Company announced that its Board of Directors had
authorized the repurchase of up to 500,000 of its outstanding common shares.
During the second quarter of fiscal 1999, 32,500 common shares were reacquired
under this program at an average price of $2.80.
5. NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This statement
establishes accounting and reporting standards for derivative instruments and
hedging activities. This statement is effective for all fiscal quarters of
fiscal years beginning after June 15, 1999. The Company has not yet determined
the impact of SFAS No. 133 on the Company's financial statements.
7
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UNIFY CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THE DISCUSSION IN THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS
FORWARD-LOOKING STATEMENTS THAT HAVE BEEN MADE PURSUANT TO THE PROVISIONS OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SUCH FORWARD-LOOKING
STATEMENTS ARE BASED ON CURRENT EXPECTATIONS, ESTIMATES AND PROJECTIONS ABOUT
THE SOFTWARE INDUSTRY AND CERTAIN ASSUMPTIONS MADE BY THE COMPANY'S
MANAGEMENT. WORDS SUCH AS "ANTICIPATES", "EXPECTS", "INTENDS", "PLANS",
"BELIEVES", "SEEKS", "ESTIMATES", VARIATIONS OF SUCH WORDS AND SIMILAR
EXPRESSIONS ARE INTENDED TO IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. THESE
STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND ARE SUBJECT TO
CERTAIN RISKS, UNCERTAINTIES AND ASSUMPTIONS THAT ARE DIFFICULT TO PREDICT;
THEREFORE, ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE EXPRESSED OR
FORECASTED IN ANY SUCH FORWARD-LOOKING STATEMENTS. SUCH RISKS AND
UNCERTAINTIES INCLUDE, BUT ARE NOT LIMITED TO, THOSE SET FORTH HEREIN UNDER
"VOLATILITY OF STOCK PRICE AND GENERAL RISK FACTORS AFFECTING QUARTERLY
RESULTS" AND IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K UNDER "BUSINESS -
RISK FACTORS." UNLESS REQUIRED BY LAW, THE COMPANY UNDERTAKES NO OBLIGATION
TO UPDATE PUBLICLY ANY FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW
INFORMATION, FUTURE EVENTS OR OTHERWISE. HOWEVER, READERS SHOULD CAREFULLY
REVIEW THE RISK FACTORS SET FORTH IN OTHER REPORTS OR DOCUMENTS THE COMPANY
FILES FROM TIME TO TIME WITH THE SEC, PARTICULARLY THE COMPANY'S ANNUAL
REPORTS ON FORM 10-K, QUARTERLY REPORTS ON FORM 10-Q AND ANY CURRENT REPORTS
ON FORM 8-K.
The following discussion should be read in conjunction with the
unaudited Condensed Consolidated Financial Statements and Notes thereto in
Part I, Item 1 of this Quarterly Report on Form 10-Q and with the audited
Consolidated Financial Statements and Notes thereto, together with
Management's Discussion and Analysis of Financial Condition and Results of
Operations, which are included in the Company's Annual Report on Form 10-K
for the year ended April 30, 1998 as filed with the SEC.
RESULTS OF OPERATIONS
REVENUES
The Company's strategy focuses on the marketing and enhancement of its
graphical product, Unify VISION. The Company continues to support its installed
base of character products, which the Company believes represents a significant
source of potential customers for Unify VISION. The Company also generates a
significant portion of its revenues from services, including customer
maintenance, consulting and training. The following table sets forth revenues
from licenses of its graphical and character products and from services for the
periods indicated:
8
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UNIFY CORPORATION
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
October 31, October 31,
--------------------- ----------------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
License revenues:
Graphical $2,719 $2,008 $ 4,869 $ 3,265
Character 2,007 1,986 4,099 3,598
------- ------- ------- -------
Total license revenues 4,726 3,994 8,968 6,863
Services revenues 2,474 2,270 4,892 4,535
------- ------- ------- -------
Total revenues $7,200 $6,264 $13,860 $11,398
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
Total revenues for the three and six months ended October 31, 1998
increased 15% and 22%, respectively, over the same periods of the prior year.
License revenues from graphical products for the three and six months ended
October 31, 1998 were 35% and 49% higher, respectively, than for the same
periods of the prior year, reflecting increased customer acceptance of those
products. Because of factors such as those described in "Volatility of Stock
Price and General Risk Factors Affecting Quarterly Results," there can be no
assurance that the Company will be able to maintain the same level of
graphical product license revenues as recorded for the quarter ended October
31, 1998. License revenues from character products were comparable at $2
million in each of the quarters ended October 31, 1998 and 1997. Character
license revenues for the six months ended October 31, 1998 increased 14% over
the same period of the prior year due to the timing of certain larger orders.
Service revenues for the three and six months ended October 31, 1998
increased 9% and 8%, respectively, over the same periods of the prior year
due to an increase in customer maintenance contracts associated with higher
license revenues in the fiscal 1999 periods.
International revenues increased to 56% and 54% of total revenues in the
three and six months ended October 31, 1998 from 47% and 49% of total
revenues in the three and six months ended October 31, 1997. European
revenues were unusually strong during the fiscal 1999 periods, primarily due
to improved penetration of Unify VISION into VAR accounts as a result of a
renewed focus on those accounts which began in the fourth quarter of fiscal
1998.
COST OF REVENUES
Cost of software licenses represented 5% of software license revenues
for the three and six months ended October 31, 1998 and were comparable to
cost of software licenses in the same periods of the prior year.
Cost of services for the three and six months ended October 31, 1998
decreased 6% and 4% compared to the same periods of the prior year, primarily
due to temporarily lower headcount in the U.S. customer maintenance
organization during the first half of fiscal 1999. Cost of services for the
three and six months ended October 31, 1998 decreased as a percentage of
service revenues to 43% from approximately 50% in the same periods of the
prior year primarily due to higher service revenues and lower service costs
in the fiscal 1999 periods. Within total services, the mix of customer
maintenance and consulting and training revenues and expenses were relatively
stable in the second quarter and first six months of fiscal 1999 as compared
with the same periods of the prior year.
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UNIFY CORPORATION
PRODUCT DEVELOPMENT
Product development expenses for the quarters ended October 31, 1998 and
1997 were comparable at $1.5 million and represented 21% and 24% of total
revenues for those periods. Product development expenses for the six months
ended October 31, 1998 and 1997 were also stable at approximately $3.0
million and represented 21% and 26% of total revenues for those periods. The
decreases in product development expenses as a percentage of total revenues
were due to the growth in license revenues during the fiscal 1999 periods as
compared to the same periods of the prior year. The Company believes that
substantial investment in product development is critical to maintaining
technological leadership and therefore intends to continue to devote
significant resources to product development.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative ("SG&A") expenses for the quarter
ended October 31, 1998 decreased to $3.6 million, or 50% of total revenues,
as compared to $4.3 million, or 69% of total revenues, for the same quarter
of the prior year. SG&A expenses for the six months ended October 31, 1998
decreased to $7.3 million, or 52% of total revenues, as compared to $8.9
million, or 78% of total revenues, for the same period of the prior year.
Fiscal 1999 SG&A expenses decreased in absolute dollars compared to the same
periods of the prior year primarily due to a cost control program which began
in the second quarter of fiscal 1998 and included lower headcount and a
flattening of the management structure in sales, marketing and finance. The
decreases in SG&A expenses as a percentage of total revenues were
attributable to the decreases in absolute dollars as well as to the increase
in fiscal 1999 license revenues as compared to the same periods of the prior
year. The Company expects that total SG&A expenses will fluctuate from
quarter to quarter primarily because of variability in marketing program
spending and sales commission expense.
PROVISION FOR INCOME TAXES
The Company recorded tax provisions for the three and six months ended
October 31, 1998 and 1997 which related primarily to foreign income tax
withholding on software license royalties paid to the Company by certain
foreign licensees. For the same periods, the Company recorded no federal or
state income tax provisions as the Company had substantial net operating loss
carryforwards.
YEAR 2000 COMPLIANCE
INTRODUCTION
Many of the world's computer systems currently record years in a
two-digit format. Such computer systems will be unable to properly interpret
dates beyond the year 1999, which could lead to business disruption (the
"Year 2000" issue).
10
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UNIFY CORPORATION
STATE OF READINESS
The Company believes that its current products are fully Year 2000
compliant. All current Unify products use four digit years for all internal
manipulations and representations. The Company has informed its customers
that it will be phasing out support for certain older versions of Unify
products that are not Year 2000 compliant by December 15, 1999. However,
there can be no assurance that the Company's products will function properly
with other potentially non-compliant products, including third party software
and hardware. Additionally, there can be no assurance that the Company's
products contain or will contain all features and functionality considered
necessary by customers, distributors, resellers and system integrators to be
Year 2000 compliant. If Unify's products cannot manage and manipulate data
related to the Year 2000, the result could be a material adverse effect on
the Company's business.
The Company sought to identify all significant internal applications and
business processes that would require modification to ensure Year 2000
compliance during fiscal 1996 and believes that, with the exception of its
accounting systems and certain older equipment and software, all appropriate
modification and testing of those applications and processes were completed
by the end of fiscal 1997. With regard to its accounting systems, the
reprogramming necessary for Year 2000 compliance has been identified and is
underway; the Company expects that reprogramming and testing of these systems
will be complete by the end of fiscal 1999. With regard to the older
equipment and software, primarily personal computers and related software,
upgrades and replacements have been identified and are in the process of
being ordered and installed. The Company expects that installation and
testing of new equipment and software will be complete by the end of fiscal
1999. However, no assurance can be given that the Company will not
experience unanticipated material costs caused by undetected errors or
defects in its internal systems.
An assessment of the readiness of significant suppliers and service
providers with which the Company electronically interacts is ongoing. To
date, the Company is not aware of any significant supplier or service
provider with a Year 2000 issue that would materially impact the Company's
business, operating results or financial condition. However, the Company has
no means of ensuring that suppliers and service providers will be Year 2000
compliant. The inability of suppliers and service providers to complete
their Year 2000 resolution process in a timely fashion could materially and
adversely impact the Company.
COSTS
The costs incurred in addressing the Year 2000 issue are being expensed
as incurred in compliance with generally accepted accounting principles. The
total cost to date of these Year 2000 compliance activities is approximately
$400,000 and the cost of future Year 2000 compliance activities is estimated
to be $500,000. Funding of these costs will come from existing cash
resources and future operating cash flows.
RISKS
The Company believes that the purchasing patterns of customers and
potential customers may be affected by the Year 2000 issue in a variety of
ways. Many companies are expending
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UNIFY CORPORATION
significant resources to correct their current software systems for Year 2000
compliance. These expenditures may result in reduced funds available to
purchase enterprise application software products such as those offered by
the Company. The impact of the foregoing on the Company's business,
operating results and financial condition is not determinable.
CONTINGENCY PLANS
The Company currently expects that the Year 2000 issue will not pose
significant internal operational problems. However, a delay in implementing
new information systems, or a failure to fully identify all Year 2000
dependencies in Unify's internal systems or in the systems of the Company's
suppliers and service providers could have material adverse consequences,
including delays in the delivery of products. Therefore, the Company is
developing contingency plans for continuing operations should these types of
problems arise. The Company believes that its contingency plans will be
complete and tested by the end of fiscal 1999.
VOLATILITY OF STOCK PRICE AND GENERAL RISK FACTORS AFFECTING QUARTERLY RESULTS
The Company's common stock price has been and is likely to continue to
be subject to significant volatility. A variety of factors could cause the
price of the Company's common stock to fluctuate, perhaps substantially,
including: announcements of developments related to the Company's business;
fluctuations in the Company's quarterly operating results and order levels;
general conditions in the computer industry or the worldwide economy;
announcements of technological innovations; new products or product
enhancements by the Company or its competitors; changes in financial
estimates by securities analysts; developments in patent, copyright or other
intellectual property rights; and developments in the Company's relationships
with its customers, distributors and suppliers. In addition, in recent years
the stock market in general, and the market for shares of equity securities
of many high technology companies in particular, has experienced extreme
price fluctuations which have often been unrelated to the operating
performance of those companies. Such fluctuations may adversely affect the
market price of the Company's common stock.
The Company's quarterly operating results have varied significantly in
the past, and the Company expects that its operating results are likely to
vary significantly from time to time in the future. Such variations result
from, among other factors, the following: the size and timing of significant
orders and their fulfillment; demand for the Company's products; the number,
timing and significance of product enhancements and new product announcements
by the Company and its competitors; ability of the Company to attract and
retain key employees; seasonality; changes in pricing policies by the Company
or its competitors; realignments of the Company's organizational structure;
changes in the level of the Company's operating expenses; changes in the
Company's sales incentive plans; budgeting cycles of the Company's customers;
customer order deferrals in anticipation of enhancements or new products
offered by the Company or its competitors; product life cycles; product
defects and other product quality problems; the results of international
expansion; currency fluctuations; and general domestic and international
economic and political conditions. Because a significant portion of the
Company's
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UNIFY CORPORATION
revenues have been, and the Company believes will continue to be, derived
from orders ranging in size from several hundred thousand dollars to
approximately $1 million, the timing of such orders and their fulfillment has
caused and is expected to continue to cause material fluctuations in the
Company's operating results, particularly on a quarterly basis.
Due to the foregoing factors, quarterly revenues and operating results
are difficult to forecast. Revenues are also difficult to forecast because
the market for client/server and Internet application development software is
rapidly evolving, and the Company's sales cycle, from initial evaluation to
purchase and the provision of maintenance services, is lengthy and varies
substantially from customer to customer. In particular, with the fiscal 1997
release of Unify VISION 3.0 and VISION/Web as well as the May 1998 release of
VISION 4.0, the Company has experienced new opportunities to compete for
larger, enterprise-level sales transactions. These transactions have even
longer sales cycles than the Company has experienced in the past. Because
the Company normally ships products within a short time after it receives an
order, it typically does not have any material backlog. As a result, to
achieve its quarterly revenue objectives, the Company is dependent upon
obtaining orders in any given quarter for shipment in that quarter.
Furthermore, because many customers place orders toward the end of a fiscal
quarter, the Company generally recognizes a substantial portion of its
revenues at the end of a quarter. As the Company's expense levels are based
in significant part on the Company's expectations as to future revenues and
are therefore relatively fixed in the short term, if revenue levels fall
below expectations operating results are likely to be disproportionately
adversely affected.
The Company also expects that its operating results will be affected by
seasonal trends. The Company believes that, in general, it is likely it will
experience relatively higher revenues in fiscal quarters ending April 30 and
relatively lower revenues in fiscal quarters ending July 31 as a result of
efforts by its direct sales force to meet fiscal year-end sales quotas. The
Company also anticipates that it may experience relatively weaker demand in
fiscal quarters ending July 31 and October 31 as a result of reduced business
activity in Europe during the summer months.
In particular, due to the foregoing factors and due to longer sales
cycles associated with Unify VISION 4.0, the operating results of the Company
for the quarter ending January 31, 1999 are subject to significant
uncertainty. The Company has incurred net losses in four of the last eight
fiscal quarters and in each of the last five fiscal years. Although the
Company recorded small operating profits in each of the four quarters ended
October 31, 1998, there can be no assurance regarding the Company's continued
profitability.
LIQUIDITY AND CAPITAL RESOURCES
At October 31, 1998, the Company had cash, cash equivalents and
short-term investments of $10.3 million, compared to $10.7 million at April
30, 1998. Working capital increased to $7.9 million at October 31, 1998 from
$6.6 million at April 30, 1998.
The Company's operating activities used cash of $0.1 million during the
six months ended October 31, 1998. Investing activities during the period
generated cash of $0.8 million, consisting principally of net sales of short
term investments of $1.2 million offset by equipment
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UNIFY CORPORATION
purchases of $0.3 million. Cash provided by financing activities during the
period was $0.1 million, representing primarily proceeds of $0.2 million from
the issuance of common stock offset by the acquisition of $0.1 million in common
stock under the Company's stock repurchase program.
The Company believes that current cash, cash equivalents and short-term
investments will be sufficient to meet its cash requirements during the next
12 months. Thereafter, depending on its operating results, the Company may
require additional equity or debt financing to meet its working capital or
capital equipment requirements. There can be no assurance that additional
financing will be available when required or, if available, that it will be
on terms satisfactory to the Company.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual meeting of the Company's stockholders held on October 2,
1998, the following matters were voted upon:
1. The election of each of the nominees for director were approved
with the following votes:
In Favor Withheld
--------- --------
Reza Mikailli 7,255,192 16,110
Arthur C. Patterson 7,252,516 16,786
Roel Pieper 7,256,009 15,293
Steven D. Whiteman 7,256,009 15,293
2. The appointment of Deloitte & Touche LLP as the Company's
independent accountants for the fiscal year ending April 30,
1999. Of the total shares voting on the foregoing resolution,
7,262,021 voted in favor, 2,100 voted against, and 7,181
abstained.
ITEM 5. OTHER INFORMATION
Gary Pado, Corporate Controller, was named Vice President, Finance,
and Chief Financial Officer effective November 16, 1998.
14
<PAGE>
UNIFY CORPORATION
Jeremy Jackson, Managing Director, Europe and International Sales,
was named Vice President, Europe and International Operations
effective November 16, 1998.
Roel Pieper, Director, resigned his position effective November 17,
1998 due to a change in employment which resulted in his
relocation to Europe.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 10.1 Employment Agreement by and between
Reza Mikailli and the Registrant dated
May 1, 1998
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the quarter
ended October 31, 1998.
15
<PAGE>
UNIFY CORPORATION
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Date: December 15, 1998 Unify Corporation
(REGISTRANT)
By:
Gary Pado
-------------------------------------------
Gary Pado
Vice President, Finance, and Chief Financial
Officer (Principal Financial and Accounting
Officer)
16
<PAGE>
UNIFY CORPORATION
181 METRO DRIVE, 3RD FLOOR
SAN JOSE, CA 95110
Reza Mikailli
c/o Unify Corporation
181 Metro Drive, 3rd Floor
San Jose, CA 95110
Re: EMPLOYMENT ARRANGEMENTS
Dear Reza:
This letter restates the terms and conditions of your employment with
the Company. Effective as of May 1, 1998, this letter supersedes that
certain Employment Letter between you and the Company dated March 31, 1995.
1. POSITION/TITLE. You will continue to be employed as President and
Chief Executive Officer. In such position, you shall report directly to the
Board of Directors. You shall devote your efforts and attention on a full
time basis solely to the business of the Company. You will not engage in any
other business activity, whether or not such business activity is pursued for
gain, profit or other pecuniary advantage without prior written approval of
the Board of Directors of the Company.
2. SALARY. You will be paid a fixed salary in bi-weekly or semi-
monthly installments at the rate of $22,917 per month in accordance with
Company policies from time to time in effect.
3. BONUS. You shall be eligible to participate in the executive bonus
plan approved from time to time by the Board. In general terms, consideration
of bonuses will be based upon the Company's achievement of its business plan.
You shall be eligible for a bonus of up to $160,000 per year. Subject to the
terms of any bonus plan which may be adopted from time to time by the Board,
the terms and conditions of such plans, the criteria for granting bonuses, as
well as the amount of bonuses, if any, will be at all times in the sole
discretion of the Board of Directors.
4. OPTIONS. The Company has granted you an option for an additional
485,000 shares of Common Stock with an exercise price of $2.156 per share.
The new option will vest monthly over a four year period from the date of
grant. Notwithstanding the above, in the event of (i) the merger of the
Company with or into another corporation as a result of which the holders of
the Company's equity securities prior to such transaction control less than
50% of the equity securities of the surviving entity following such
transaction (a "Merger"), or (ii) a sale by the
<PAGE>
Company of all or substantially all of its assets (an "Asset Sale"), then you
shall, effective with the closing of such transaction, have the right to
exercise your stock options for the number of shares which have vested as of
such date plus one-half of the number of shares which have not yet vested.
The remaining unvested portion of the option will vest at a proportionately
lower rate over the remaining period of the original four year vesting term.
If your employment is terminated by the Company or your compensation and
benefits are materially reduced within twelve months following a Merger or an
Asset Sale, then you shall have the right to exercise your stock options for
all of the shares subject to the options.
If your full time employment is terminated by the Company at any other
time, your options shall be accelerated such that you shall have the benefit
of one additional year of vesting of the unvested portion of your options.
5. OTHER BENEFITS. You shall also be entitled to such other benefits
and to participate in such other plans as may be offered from time to time by
the Company to employees generally, in accordance with the terms and
conditions of such plans. Without limiting the generality of the foregoing,
you shall be provided a monthly automobile allowance of $500.
6. BENEFITS ON SALE OF THE COMPANY. It is understood and acknowledged
that the terms and conditions of that certain letter dated October 30, 1997
regarding special bonus arrangements upon any Sale of the Company (as defined
therein) have terminated as provided in such letter and are no longer in
force or effect.
7. LOAN. So long as you remain employed by the Company, at the end of
each quarter, commencing with the quarter ending July 31, 1998, the Company
will forgive $25,000 of the amounts owed by you pursuant to that certain
promissory note made by you in favor of the Company in the approximate amount
of $200,000. You shall be responsible for all taxes which arise in connection
with such forgiveness, including, to the extent required, payment of
withholding taxes.
8. SEVERANCE. If the Company terminates your employment you shall be
entitled to severance benefits including salary, bonus (based upon the actual
bonus for the prior year) plus medical and dental benefits in accordance with
the terms of this paragraph. An amount equal to six months salary and bonus
shall be payable upon any such termination. In addition, for a period ending
six months after termination or when you commence new employment, whichever
first occurs, you shall continue to receive your salary, bonus and benefits.
If your new employment involves only part-time work or a salary and bonus
rate below the salary and bonus paid to you by the Company, the Company shall
continue to pay you the difference in salary until the expiration of the six
month period. It is expressly understood that the loan forgiveness amounts
referred to in paragraph 7 hereof shall not be included for the purposes of
determining your salary and bonus.
<PAGE>
9. TERM AND TERMINATION. You acknowledge that your employment with
the Company is on a "AT WILL" basis and shall terminate upon the earlier of
(i) your resignation, death or permanent disability or (ii) the Company's
election to terminate your employment with or without cause or notice. In
the event of any such termination, you shall be entitled only to such
benefits as shall have accrued as of the date of termination as specified
herein, and no further compensation. You acknowledge that the terms
specified herein include substantial benefits to offset any risks of your
employment being terminated at any time, with or without cause. You further
acknowledge that this provision cannot be modified except by written
agreement approved by a majority of the disinterested members of the Board of
Directors.
Without limiting the generality of the foregoing, it shall be a
condition precedent to your receipt of, and the Company's obligation to pay
you, any of the benefits provided for in this agreement on your termination
(including all severance payments and acceleration of options) that you
execute a full release of the Company and its officers, directors, employees,
agents and affiliates of any claims relating to your employment, compensation
and the termination of your employment, such release to be substantially in
the form attached as Exhibit A hereto. Failure to execute such release shall
not affect the enforceability of Sections 9, 10, 11, 12 or 13 of this
agreement, but shall only affect the Company's obligation to provide you the
post-termination benefits described in Sections 4, 6 and 8 hereof.
10. OTHER AGREEMENTS. You represent and warrant that you are not
subject to or bound by any agreement which forbids employment by the Company
or limits in any way your ability to perform your duties and responsibilities
as President and Chief Executive Officer of the Company. You further agree
to execute and deliver all other agreements reasonably required by the
Company, including, but not limited to, the Company's standard employee
confidentiality agreement.
11. CONFIDENTIALITY AGREEMENTS. You represent, warrant and agree that
you will comply with all of the Company's confidentiality and proprietary
rights policies from time to time in effect during the term of your
employment.
12. ARBITRATION. You agree that in the event of any dispute regarding
your employment, including, but not limited to, any dispute regarding the
negotiation of the terms of employment, any termination or employment or the
interpretation or performance of the terms and conditions hereof, such
dispute shall be subject to binding arbitration in accordance with the rules
of the American Arbitration Association.
13. ENTIRE AGREEMENT. You recognize and agree that this letter sets
forth all of the material terms of the Company's agreement with you and that
you are not relying upon any oral or written representation with respect to
your employment except as specifically contained herein. To the extent of
any inconsistency between this letter and other documents, including but not
limited to, documents or agreements related to stock option exercises, prior
employment offer letters, company bonus plans, etc., the terms and conditions
of this letter shall prevail.
<PAGE>
13. SEVERABILITY. While the provisions contained in this letter are
considered by you and the Company reasonable in all circumstances, it is
recognized that certain of the provisions may fail for technical reasons.
Accordingly, it is hereby agreed that if any one or more provisions of
paragraph 9 of this letter which are restrictions or limitations on you
shall, either by itself or themselves or taken with others, be adjudged to be
invalid as exceeding what is reasonable, but would be valid if any such
particular restriction or provisions were deleted or, restricted or limited
in a particular manner, then the said provisions shall apply with such
deletion, restriction, limitation, reduction, curtailment, or modification as
may be necessary to make them valid and effective.
If the foregoing accurately reflects your understanding of our agreement,
kindly execute the enclosed copy of this letter in the space provided and
return it to me.
Very truly yours,
UNIFY CORPORATION
By
-------------------------------
Arthur Patterson, on behalf
of the Board of Directors
The foregoing is agreed and accepted.
------------------------------
Reza Mikailli Date
<PAGE>
Exhibit A
Form of Release
CONFIDENTIAL AGREEMENT
AND GENERAL RELEASE
This Confidential Agreement and General Release is entered into on this
___th day of __________, 19___, by and between ____________________ ("Employee")
and Unify Corporation, a California corporation (the "Company") and sets
forth the terms upon which Employee and the Company have agreed to terminate
the employment of Employee with the Company and each has agreed to release
the other from any liability arising from the employment relationship and the
termination of that relationship.
The parties agree as follows:
1. The parties have agreed that is mutually in their best interests to
terminate their full time employment relationship as of __________________
(the "Effective Date"). Upon the signing of this Agreement, Employee hereby
resigns from all positions as an officer, director, trustee, and other
offices he may hold or may have held with the Company and all subsidiaries
and affiliates of the Company (collectively the "Affiliates") with effect
from the date hereof and agrees that his employment with the Company shall
have ceased at the close of business on that date.
2. As compensation for entering into this Agreement, Employee shall
receive the benefits described in that certain Letter Agreement between the
Company and Employee dated as of March 31, 1995 as restated effective as of
May 1, 1998. The payment of such benefits shall be conditioned upon
Employee's not having revoked this Agreement within eight (8) days following
the date hereof.
3. Employee acknowledges that he has had access to proprietary
information, trade secrets, and confidential material of the Company,
including but not limited to customer lists, pricing and cost information,
and sales strategy, and he agrees, without limitation in time or until such
information shall become public other than by Employee's unauthorized
disclosure, to maintain the confidentiality of that information and refrain
from divulging, disclosing, or otherwise using said confidential information
to the detriment of the Company or for any other purpose.
4. Employee hereby fully and finally releases, acquits, and forever
discharges the Company, the Affiliates, and any and all officers, directors,
agents, employees, successors, or assigns of said persons or entities (the
"Released Parties") from any and all claims, demands, liabilities, damages,
causes of action, costs, expenses and compensation of any kind or nature
whatsoever, whether or not now known or unknown, suspected or claimed,
matured or unmatured, fixed or contingent, which Employee ever had, now has,
or may claim to have from the beginning of time, against the Released Parties
(whether directly or indirectly), or any of
<PAGE>
them, by reason of any act, event, or omission concerning any matter, cause
or thing, including those which arise out of, or result from, or occurred in
connection with Employee's employment with the Company and/or its Affiliates,
and the termination of that employment.
The Company hereby fully and finally releases, acquits, and forever
discharges Employee, and any and all agents, successors, or assigns of said
persons or entities (the "Employee Released Parties") from any and all
claims, demands, liabilities, damages, causes of action, costs, expenses and
compensation of any kind or nature whatsoever, whether or not now known or
unknown, suspected or claimed, matured or unmatured, fixed or contingent,
which the Company ever had, now has, or may claim to have from the beginning
of time, against the Employee Released Parties (whether directly or
indirectly), or any of them, by reason of any act, event, or omission
concerning any matter, cause or thing, including those which arise out of, or
result from, or occurred in connection with Employee's employment with the
Company and/or its Affiliates, and the termination of that employment.
5. It is expressly understood and agreed that there are no claims or
provisions or liabilities not expressed in this Agreement and that the
payment of the sums as hereinabove set forth is not, and shall not be
construed to be, an admission of liability of any person, firm, or
corporation; but that the parties are settling and compromising their
employer-employee relationship as to which all of the parties deny any
liability. With respect to the said settlement, each party covenants and
agrees that he shall forever refrain from initiating, prosecuting,
maintaining or pressing any action, suit or claim in any jurisdiction,
against the parties released herein, based on the termination of Employee's
employment or holding of any office with the Company and the Affiliates.
6. The parties hereto each acknowledge that they may hereafter
discover facts different from or in addition to those they now know or
believe to be true with respect to the claims, demands, causes of action,
obligations, damages, and liabilities of any nature, whatsoever, that are the
subject of the releases set forth in this Agreement, and they each expressly
agree to assume the risk of the possible discovery of additional or different
facts, and agree that this Agreement shall be and remain effective in all
respects regardless of such additional or different facts. The parties
further agree that this Agreement and all the terms and conditions hereof
shall be binding upon and inure to the benefit of their respective heirs,
legal representatives, successors, and assigns.
7. The parties acknowledge that there is a risk that, subsequent to
the execution of this Agreement, they may discover, incur or suffer from
claims which were unknown or unanticipated at the time this Agreement is
executed, including, without limitation, unknown or unanticipated claims
which arose from, are based upon, or are related to the termination of
Employee's employment with the Company and the Affiliates which, if known by
them on the date this Agreement is being executed, may have materially
affected their decision to execute this Agreement. Each party acknowledges
that it is assuming the risk of such unknown and unanticipated claims and
agrees that this Agreement applies thereto. Each party expressly
<PAGE>
waives the benefits of Section 1542 of the Civil Code of the State of
California, which reads as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR."
8. In accordance with the Older Workers Benefit Protection Act of
1990, Employee represents and acknowledges that he has been made aware of the
following:
(1) he has the right to consult with an attorney before signing this
Agreement;
(2) he has seven (7) days after signing this Agreement to revoke this
Agreement, and this Agreement shall not be effective until that revocation
period has expired.
9. Nothing in this Agreement shall be deemed to waive or affect the
parties' rights and obligations under California Labor Code Section 2802,
which reads in pertinent part:
"AN EMPLOYER SHALL INDEMNIFY HIS EMPLOYEE FOR ALL THAT THE EMPLOYEE
NECESSARILY EXPENDS OR LOSES IN DIRECT CONSEQUENCE OF THE DISCHARGE OF HIS
DUTIES, AS SUCH, OR OF HIS OBEDIENCE TO THE DIRECTIONS OF THE EMPLOYER,
EVEN THOUGH UNLAWFUL, UNLESS THE EMPLOYEE, AT THE TIME OF OBEYING SUCH
DIRECTIONS, BELIEVED THEM TO BE UNLAWFUL."
10. The Company and Employee each represent and warrant that there has
been no assignment or other transfer of any interest in any claim they may
have against any of the parties released herein, or any of them, and each
agrees to indemnify and hold harmless the released parties, and each of them,
from any liability, claims, demands, damages, costs, expenses, and attorneys'
fees incurred by the released parties, or any of them, as a result of any
such assignment or transfer.
11. Each of the parties hereto agrees that if he or it hereafter
commences, joins in, or in any manner seeks relief through any suit arising
out of, based upon, or relating to any of the claims released hereunder, or
in any manner asserts against the released parties, or any of them, any of
the claims released hereunder, then he shall pay to the released parties, and
each of them, in addition to any other damages caused to them thereby, all
attorneys' fees incurred by the released parties in defending or otherwise
responding to said suit or claim.
12. Each of the parties hereto represents that this Agreement has been
carefully read by him or it and that he or it knows and understands the
contents hereof. Each of the parties has received independent legal advice
from attorneys of his or its choice with respect to the
<PAGE>
preparation, review and advisability of executing this Agreement. Each of
the parties further represents and acknowledges that he or it has freely and
voluntarily executed this Agreement after independent investigation and
without fraud, duress, or undue influence.
13. While the provisions contained in this Agreement are considered by
the parties to be reasonable in all circumstances, it is recognized that
provisions of the nature in question may fail for technical reasons and
accordingly, it is hereby agreed and declared that if any one or more of such
provisions shall, either by itself or themselves or taken with others, be
adjudged to be invalid as exceeding what is reasonable in all circumstances
for the protection of the interests of the Company, but would be valid if any
particular restriction or provisions were deleted or, restricted or limited
in a particular manner or if the period or area thereof were reduced or
curtailed, then the said provisions shall apply with such deletion,
restriction, limitation, reduction, curtailment, or modification as may be
necessary to make them valid and effective.
14. This Agreement constitutes the entire agreement relating to the
matters set forth herein between the parties who have executed it and
supersedes any and all other agreements, understandings, negotiations, or
discussions, either oral or in writing, express or implied, between the
parties to this Agreement. The parties to this Agreement each acknowledge
that no representations, inducements, promises, agreements or warranties,
oral or otherwise, have been made by them, or anyone acting on their behalf,
which are not embodied in this Agreement, that they have not executed this
Agreement in reliance on any such representation, inducement, promise,
agreement or warranty, and that no representation, inducement, promise,
agreement or warranty not contained in this Agreement including, but not
limited to, any purported supplements, modifications, waivers or terminations
of this Agreement shall be valid or binding, unless executed in writing by
all of the parties to this Agreement.
15. Each of the parties covenants and agrees that neither he or it nor
his or its attorneys or representatives shall reveal to anyone, except
accountants for income tax purposes, any of the terms of this Agreement,
except as may be mutually agreed upon in writing or otherwise required by law
or court order.
16. The parties acknowledge that this Agreement was jointly prepared by
them, by and through their respective legal counsel, and any uncertainty or
ambiguity existing herein shall not be interpreted against any of the
parties, but otherwise according to the application of the rules on
interpretation of contracts.
IN WITNESS WHEREOF, the parties have set their hand as of the first date
written above.
UNIFY CORPORATION EMPLOYEE
By
-------------------------------- --------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONDENSED CONSOLIDATED BALANCE SHEET AS OF OCTOBER 31, 1998 AND
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED OCTOBER
31, 1998.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-START> MAY-01-1998
<PERIOD-END> OCT-31-1998
<CASH> 6,049
<SECURITIES> 4,300
<RECEIVABLES> 6,337
<ALLOWANCES> 658
<INVENTORY> 0
<CURRENT-ASSETS> 16,787
<PP&E> 6,528
<DEPRECIATION> 4,805
<TOTAL-ASSETS> 18,588
<CURRENT-LIABILITIES> 8,857
<BONDS> 0
0
0
<COMMON> 53,602
<OTHER-SE> (44,119)
<TOTAL-LIABILITY-AND-EQUITY> 18,588
<SALES> 13,860
<TOTAL-REVENUES> 13,860
<CGS> 2,589
<TOTAL-COSTS> 12,781
<OTHER-EXPENSES> (204)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 81
<INCOME-PRETAX> 1,202
<INCOME-TAX> (88)
<INCOME-CONTINUING> 1,114
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,114
<EPS-PRIMARY> 0.13
<EPS-DILUTED> 0.13
</TABLE>
