<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
------------------------
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________ .
COMMISSION FILE NUMBER: 0-26156
------------------------
NOVADIGM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 22-3160347
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
</TABLE>
<TABLE>
<S> <C>
ONE INTERNATIONAL BLVD, SUITE 200, MAHWAH, NJ 07495
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
(201) 512-1000
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 [ ]
On September 30, 1999 there were 18,119,948 shares of the Registrant's
Common Stock outstanding.
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<PAGE> 2
NOVADIGM, INC.
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of September 30,
1999 and March 31, 1999..................................... 3
Condensed Consolidated Statements of Income for the
three-month and six-month periods ended September 30, 1999
and September 30, 1998...................................... 4
Condensed Consolidated Statements of Cash Flows for the
six-month periods ended September 30, 1999 and September 30,
1998........................................................ 5
Notes to Condensed Consolidated Financial Statements........ 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 7
Item 3. Quantitative and Qualitative Disclosures about Market
Risk........................................................ 17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................... 18
Item 2. Changes in Securities....................................... 18
Item 3. Defaults upon Senior Securities............................. 18
Item 4. Submission of Matters to a Vote of Security Holders......... 19
Item 5. Other Information........................................... 19
Item 6. Exhibits and Reports on Form 8-K............................ 19
SIGNATURES............................................................ 20
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOVADIGM, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1999 1999
--------------------- --------------
(UNAUDITED)
<S> <C> <C>
Cash and cash equivalents.................................. $ 6,930 $ 8,124
Short-term marketable securities........................... 16,507 13,412
Accounts receivable, net................................... 8,921 8,586
Prepaid expenses and other current assets.................. 1,579 985
------- -------
Total current assets............................. 33,937 31,107
Property and equipment, net................................ 1,821 1,396
Other assets............................................... 1,156 873
------- -------
$36,914 $33,376
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities................... $ 6,168 $ 6,240
Deferred revenue........................................... 4,495 3,873
------- -------
Total current liabilities........................ 10,663 10,113
Stockholders' equity:
Common stock: 30,000 shares authorized; 18,163 and 17,838
issued as of September 30, 1999 and March 31, 1999,
respectively.......................................... 11 11
Additional paid-in capital............................... 66,573 65,476
Accumulated deficit...................................... (40,187) (41,791)
Treasury stock........................................... 0 (265)
Accumulated comprehensive loss........................... (146) (168)
------- -------
Total stockholders' equity....................... 26,251 23,263
------- -------
$36,914 $33,376
======= =======
</TABLE>
See accompanying notes.
3
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NOVADIGM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ------------------
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
REVENUES:
Licenses.......................................... $ 6,991 $ 5,759 $11,166 $ 9,635
Maintenance and services.......................... 4,336 2,130 8,217 4,812
------- ------- ------- -------
Total revenues............................ 11,327 7,889 19,383 14,447
OPERATING EXPENSES:
Cost of maintenance and services.................. 1,250 821 2,411 1,851
Sales and marketing............................... 5,276 4,245 9,295 7,940
Research and development.......................... 1,696 1,233 2,885 2,456
General and administrative........................ 1,909 1,243 3,497 2,479
------- ------- ------- -------
Total operating expenses.................. 10,131 7,542 18,088 14,726
------- ------- ------- -------
Operating income (loss)............................. 1,196 347 1,295 (279)
Interest income, net................................ 195 174 432 283
------- ------- ------- -------
Income before provision for income taxes............ 1,391 521 1,727 4
Provision for income taxes.......................... 80 0 123 2
------- ------- ------- -------
Net income.......................................... $ 1,311 $ 521 $ 1,604 $ 2
======= ======= ======= =======
Earnings per share -- basic......................... $ 0.07 $ 0.03 $ 0.09 $ 0.00
======= ======= ======= =======
Weighted average common shares
outstanding -- basic.............................. 18,039 17,502 17,972 17,486
======= ======= ======= =======
Earnings per share -- diluted....................... $ 0.07 $ 0.03 $ 0.08 $ 0.00
======= ======= ======= =======
Weighted average common and common equivalent shares
outstanding -- diluted............................ 19,998 17,562 19,828 17,516
======= ======= ======= =======
</TABLE>
See accompanying notes.
4
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NOVADIGM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
SEPTEMBER 30,
------------------------
1999 1998
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................. $ 1,604 $ 2
Adjustments to reconcile net income to net cash provided
by (used in) operating activities --
Depreciation and amortization.......................... 414 399
Increase in accounts receivable, net................... (335) (3,857)
Increase in prepaid expenses and other current
assets................................................ (594) (71)
Decrease (increase) in other assets.................... (283) 80
Decrease in accounts payable and accrued liabilities... (72) (687)
Increase (decrease) in deferred revenue................ 622 (358)
-------- --------
Net cash provided by (used in) operating
activities...................................... 1,356 (4,492)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment....................... (839) (293)
Purchases of held-to-maturity securities.................. (19,193) (13,934)
Proceeds from redemptions of held-to-maturity
securities............................................. 16,098 18,936
-------- --------
Net cash provided by (used in) investing
activities...................................... (3,934) 4,709
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from the exercise of stock options........... 1,362 131
-------- --------
Net cash provided by financing activities......... 1,362 131
-------- --------
Effect of exchange rate changes on cash..................... 22 89
-------- --------
Net increase (decrease) in cash and cash equivalents........ (1,194) 437
Cash and cash equivalents at the beginning of the period.... 8,124 4,431
-------- --------
Cash and cash equivalents at the end of the period.......... $ 6,930 $ 4,868
======== ========
</TABLE>
See accompanying notes.
5
<PAGE> 6
NOVADIGM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements have been
prepared by Novadigm, Inc. (the "Company"), without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission (the "Commission").
Certain information or footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. In the
opinion of the Company's management, the statements include all adjustments
(which are of a normal and recurring nature) necessary for the fair presentation
of the financial information set forth therein. These financial statements
should be read in conjunction with the Company's audited consolidated financial
statements included within the Company's Form 10-K filed with the Commission on
June 29, 1999 (Reg. No. 0-26156). The interim results presented herein are not
necessarily indicative of the results of operations that may be expected for the
full fiscal year ending March 31, 2000, or any other future period.
2. EARNINGS PER SHARE
The Company has implemented Statement of Financial Accounting Standards No.
128, "Earnings Per Share" ("SFAS 128"). SFAS 128 requires the presentation of
basic earnings per share ("Basic EPS") and diluted earnings per share ("Diluted
EPS"). Basic EPS is calculated by dividing income available to common
shareholders by the weighted average number of shares of common stock
outstanding during the period. Diluted EPS is calculated by dividing income
available to common shareholders by the weighted average number of common shares
outstanding for the period adjusted to reflect potentially dilutive securities.
In accordance with SFAS 128, the following table reconciles net income and
share amounts used to calculate basic earnings per share and diluted earnings
per share.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ------------------
1999 1998 1999 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA) ------- ------- ------- -------
<S> <C> <C> <C> <C>
Numerator:
Net income.......................................... $ 1,311 $ 521 $ 1,604 $ 2
======= ======= ======= =======
Denominator:
Weighted average number of common shares
outstanding -- basic........................... 18,039 17,502 17,972 17,486
Incremental shares from assumed conversion of
stock options.................................. 1,959 60 1,856 30
------- ------- ------- -------
Weighted average common and common equivalent
shares outstanding -- diluted.................. 19,998 17,562 19,828 17,516
======= ======= ======= =======
Earnings per share -- basic......................... $ 0.07 $ 0.03 $ 0.09 $ 0.00
======= ======= ======= =======
Earnings per share -- diluted....................... $ 0.07 $ 0.03 $ 0.08 $ 0.00
======= ======= ======= =======
</TABLE>
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These forward-looking statements are subject to certain
risks and uncertainties that could cause actual results to differ materially
from historical results or anticipated results. These risks include a history of
operating losses. The Company's quarterly operating results have fluctuated
significantly in the past, and may fluctuate in the future, due to a number of
factors, including the number, size and timing of customer orders, the timing
and market acceptance of the Company's new products, the dependence on
resellers, the level and pricing of international sales, changes in the level of
operating expenses, technological advances and new product introductions by the
Company's competitors, competitive conditions in the industry and foreign
currency exchange rates. In addition, the sales cycle for the Company's products
is lengthy and unpredictable depending upon the interest of the prospective
customer in the Company's products, the size of the order, the decision-making
and acceptance procedures within the customer's organization, the complexity of
implementation and other factors. The Company's operating results may also vary
significantly due to seasonal trends, as a result of efforts by the Company's
direct sales personnel to meet annual quotas, lower international revenues in
the summer months when many European businesses experience lower sales, the
establishment of calendar year capital budgets by prospective customers, as well
as other factors. There can be no assurance that the Company will be able to
achieve or maintain profitability on a quarterly or annual basis in the future.
See "Business Risks" below.
This report should be read in conjunction with the Company's annual report
on Form 10-K for the fiscal year ended March 31, 1999, as filed with the
Securities and Exchange Commission.
OVERVIEW
The Company designs, markets and supports technology solutions that
efficiently and reliably deliver, update and maintain software and content
across the extended enterprise. The Company's principal customers include medium
to large organizations with widely deployed and heterogeneous
business-to-employee ("B2E"), business-to-business ("B2B") and
business-to-customer ("B2C") networks. The Company was incorporated in February
1992. Through September 1993, the Company's primary efforts were devoted to
product development. In October 1993, Version 1.0 of Enterprise Desktop Manager
("EDM(TM)") was released for general availability. Since its first release, the
Company has continued to develop EDM by adding new features, applications and
platforms. Version 2.0 of EDM was released in February 1994, Version 3.0 in June
1995, and Version 4.0 was released in October 1997. In November 1997, the
Company released Radia(R) Software Manager, an Internet-based software and
content management solution and in November 1998, the Company announced the
general availability of Radia Software Manager Version 2.0 as well as the Radia
Application Manager. In October 1999, the Company announced Radia E-wrap(TM) for
ASPs to address the requirements for providing software to application service
providers (ASPs), independent software vendors (ISVs) and enterprise information
technology (IT) providers as subscription services.
The Company generates license revenues from licensing the rights to use its
software products to end users and sublicense fees from resellers. The Company
also generates maintenance and service revenues from providing renewable support
and software update rights services (maintenance) and from consulting and
training activities performed for license customers.
Revenues from perpetual software license agreements are recognized as
revenue upon shipment of the software if there are no significant post-delivery
obligations, payment is due within one year and collectibility is probable. If
an acceptance period is required, revenues are recognized upon the earlier of
customer acceptance or the expiration of the acceptance period. The Company
enters into reseller arrangements that typically provide for sublicense fees
payable to the Company based on a percent of the Company's list price. Reseller
arrangements may include non-refundable payments in the form of guaranteed
sublicense fees. Guaranteed sublicense fees from resellers are recognized as
revenue upon shipment of the master copy of all software to which the guaranteed
sublicense fees relate if there are no significant post-delivery obligations,
the reseller is creditworthy and if the terms of the agreement are such that the
payment obligation is not subject to price adjustment, is non-cancelable and
non-refundable and due within 90 days. These guaranteed sublicense
7
<PAGE> 8
fees are applied against sublicense fees reported by the reseller in relicensing
the Company's products to end-users.
Revenues for maintenance are recognized ratably over the term of the
support period. If maintenance is included in a license agreement, such services
are unbundled from the license fee at their fair market value based on the value
established by independent sale of such maintenance to customers. Consulting
revenues are primarily related to implementation services performed under
separate service arrangements related to the installation of the Company's
software products. Such services generally do not include customization or
modification of the underlying software code. If included in a license
agreement, such services are unbundled at their fair market value based on the
value established by the independent sale of such services to customers.
Revenues from consulting and training services are recognized as services are
performed.
GEOGRAPHIC SEGMENT INFORMATION
The Company has adopted the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 131, ("SFAS 131"), disclosures
about segments of an enterprise and related information, effective for fiscal
years beginning after December 31, 1997. SFAS 131 supersedes Statement of
Financial Accounting Standards No. 14, ("SFAS 14"), Financial Reporting for
Segments of a Business Enterprise. SFAS 131 changes current practice under SFAS
14 by establishing new standards to report information about operating segments
in annual and interim financial statements based on the approach that management
utilized to organize the segments within the Company for management reporting
and decision making.
The Company markets its products and related services to customers in North
America, Europe, the Pacific Rim, Africa and South America. The Company's
international revenue represents products shipped from the United States
directly to end-users outside the United States. The Company does not sell
products directly to its international subsidiaries.
The following table presents revenue information by geographic area for the
three and six-month periods ended September 30, 1999.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- ------------------
1999 1998 1999 1998
(IN THOUSANDS) -------- ------- ------- -------
<S> <C> <C> <C> <C>
North America and all other.................. $ 6,897 $3,039 $12,202 $ 6,636
Europe and Africa............................ 4,430 4,850 7,181 7,811
------- ------ ------- -------
Total.............................. $11,327 $7,889 $19,383 $14,447
======= ====== ======= =======
</TABLE>
The following table presents long-lived-asset information by geographic
area at September 30, 1999 and 1998.
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------
1999 1998
(IN THOUSANDS) ----- -----
<S> <C> <C>
North America and all other................................. $834 $106
Europe and Africa........................................... 5 187
---- ----
Total............................................. $839 $293
==== ====
</TABLE>
8
<PAGE> 9
RESULTS OF OPERATIONS
For the periods indicated, the following table sets forth the percentage of
total revenue represented by the respective line items in the Company's
condensed consolidated statements of operations (unaudited):
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------- --------------
1999 1998 1999 1998
----- ----- ----- -----
<S> <C> <C> <C> <C>
REVENUES:
Licenses.................................................. 61.7% 73.0% 57.6% 66.7%
Maintenance and services.................................. 38.3 27.0 42.4 33.3
----- ----- ----- -----
Total revenues.................................... 100.0 100.0 100.0 100.0
OPERATING EXPENSES:
Cost of maintenance and services.......................... 11.0 10.4 12.4 12.9
Sales and marketing....................................... 46.6 53.8 48.0 55.0
Research and development.................................. 15.0 15.6 14.9 17.0
General and administrative................................ 16.8 15.8 18.0 17.2
----- ----- ----- -----
Total operating expenses.......................... 89.4 95.6 93.3 102.1
----- ----- ----- -----
Operating income (loss)..................................... 10.6 4.4 6.7 (1.9)
Interest income, net........................................ 1.7 2.2 2.2 2.0
----- ----- ----- -----
Income before provision for income taxes.................... 12.3 6.6 8.9 0.1
Provision for income taxes.................................. 0.7 -- 0.6 --
----- ----- ----- -----
Net income.................................................. 11.6% 6.6% 8.3% 0.1%
===== ===== ===== =====
</TABLE>
Total revenues for the Company's second fiscal quarter ended September 30,
1999 were $11.3 million compared to $7.9 million for the same quarter of the
previous year, an increase of $3.4 million or 43%. Revenues attributable to the
direct sales channel in the quarter ended September 30, 1999 were 53% of total
revenues compared to 33% of total revenues for the same quarter last year.
Revenues from North America customers in the quarter ended September 30, 1999
represented 61% of total revenues compared to 39% of total revenues for the same
quarter last year. Total revenues for the six-month period ended September 30,
1999 were $19.4 million compared to $14.4 million for the same period of the
previous year, an increase of $4.9 million or 34%. Revenues attributable to the
direct sales channel in the six-month period ended September 30, 1999 were 58%
of total revenues compared to 45% of total revenues for the same period last
year. Revenues from North America customers in the six-month period ended
September 30, 1999 represented 63% of total revenues compared to 46% of total
revenues for the same period last year. The increase in total revenues in the
current year quarter and six-month period over the same quarter and six-month
period last year, respectively, is due to increased licensing of the Company's
products resulting in higher license and maintenance and services revenues.
License revenues were $7.0 million or 61.7% of total revenues for the
quarter ended September 30, 1999 compared to $5.8 million or 73% of total
revenues for the same quarter last year. License revenues for the six month
period ended September 30, 1999 were $11.2 million or 57.6% of total revenues
compared to $9.6 million or 66.7% of total revenues for the same period last
year. The increases in license revenues for the quarter and six-month periods
ended September 30, 1999 were primarily attributable to closing a greater number
of contracts. Also, there continues to be increased demand for the Company's
products by both new customers and existing customers, more effective corporate
marketing programs, and the expansion of the Company's sales force in North
America and Europe. From time to time, the Company accepts guaranteed sublicense
fees from distributors. Distributors pay guaranteed sublicense fees in order to
have the right to sublicense the Company's products to its customers and to
receive training and support services from the Company. At September 30, 1999,
approximately 66% of all guaranteed sublicense fees received by the Company had
been relicensed by the Company's distributors to end-users.
9
<PAGE> 10
Maintenance and service revenues for the quarter ended September 30, 1999
exceeded maintenance and service revenues for the same quarter of the prior year
by 104%. Maintenance and service revenues were $4.3 million or 38.3% of total
revenues for the quarter ended September 30, 1999 compared to $2.1 million or
27.0% of total revenues for the comparable quarter last year. Maintenance and
service revenues for the six-month period ended September 30, 1999 exceeded
maintenance and service revenues for the same six-month period of the prior year
by 71%. Maintenance and service revenues for the six-month period ended
September 30, 1999 were $8.2 million or 42.4% of total revenues compared to $4.8
million or 33.3% of total revenues for the comparable period last year. The
higher maintenance and service revenues for the quarter and six-month periods is
due primarily to the increase in the Company's customer base and the high rate
of renewal of maintenance contracts by customers, an increase in September 1998
of the Company's maintenance prices, as well as the increased demand for the
Company's consulting and training services associated with the higher licensing
activity from new customers.
Cost of maintenance and services includes the direct costs of customer
support and update rights, and the direct and indirect costs of providing
training, maintenance and technical support and consulting services to the
Company's customers. Cost of maintenance and services consist primarily of
payroll, related benefits, and travel for field engineers and support personnel,
other related overhead and third-party consulting fees. Cost of maintenance and
services were $1.3 million or 29% of maintenance and service revenues for the
quarter ended September 30, 1999 compared to $0.8 million or 38% of maintenance
and service revenues for the quarter ended September 30, 1998. Cost of
maintenance and services for the six-month period ended September 30, 1999 was
$2.4 million or 29% of maintenance and service revenues compared to $1.9 million
or 39% of maintenance and service revenues for the same period last year. The
higher cost of maintenance and services in the quarter and six-month periods
ended September 30, 1999, as compared to the same periods of the prior year, was
primarily due to an increase in personnel to handle the 104% and 71% increase in
the maintenance and service revenue in the quarter and six-month periods ended
September 30, 1999 compared to the same quarter and six-month periods of the
prior year, respectively. The Company expects the cost of maintenance and
services to increase in future quarters to support the growing demand for the
Company's maintenance, consulting and training services.
Sales and marketing expenses consist primarily of salaries, related
benefits, commissions, travel, consultant fees, and other costs associated with
the Company's sales and marketing efforts. Sales and marketing expenses for the
quarter ended September 30, 1999 were $5.3 million or 46.6% of total revenues as
compared to $4.2 million or 53.8% of total revenues for the same period last
year. Sales and marketing expenses for the six-month period ended September 30,
1999 were $9.3 million or 48.0% of total revenues as compared to $7.9 million or
55% of total revenues for the same period last year. The increase in the quarter
and the six-month periods this year as compared to the same periods last year
was primarily due to increased staffing levels as well as higher compensation
costs resulting from higher reported revenues in the quarter and six-month
periods. The Company expects sales and marketing expenses to increase in future
periods in support of its growth plans.
Research and development expenses consist primarily of salaries, related
benefits, consultant fees and other costs associated with the Company's research
and development efforts. Research and development expenses were $1.7 million or
15.0% of total revenues for the quarter ended September 30, 1999 compared to
$1.2 million or 15.6% of total revenues for the same period last year. Research
and development expenses for the six-month periods ended September 30, 1999 and
September 30, 1998 were $2.9 million or 14.9% of total revenues and $2.5 million
or 17.0% of total revenues, respectively. The higher costs in the quarter and
six-month periods were due to the further development of the Company's products
to operate on additional platforms and the development of products to address
the requirements of application service providers (ASPs), independent software
vendors (ISVs) and enterprise information technology (IT) providers for
providing software applications to customers as subscription services. Though
the Company anticipates that it will continue to invest resources to further
enhance and develop its products the Company does not anticipate significant
growth in research and development expense in the remainder of the fiscal year.
General and administrative expenses consist primarily of salaries, related
benefits, travel and fees for professional services such as legal, consulting
and accounting. General and administrative expenses were
10
<PAGE> 11
$1.9 million or 16.8% of total revenues for the quarter ended September 30, 1999
compared to $1.2 million or 15.8% of total revenues for the same period last
year. General and administrative expenses for the six-month period ended
September 30, 1999 were $3.5 million or 18% of total revenues compared to $2.5
million or 17.2% of total revenues for the same period of last year. The
increase in general and administrative expenses in the current year quarter over
the same quarter last year is primarily due to higher legal fees associated with
a patent infringement litigation initiated by the Company and related litigation
(See Part II, Item 1. Legal Proceedings herein and Part I, Item 3. Legal
Proceedings in the Company's Form 10-K for the fiscal year ended March 31,
1999). In addition, there has been increased growth of the European sales and
support operations. The Company expects general and administrative expenses to
increase in future quarters.
Interest income, net is comprised primarily of interest income earned on
the Company's cash, cash equivalents and marketable securities adjusted for
interest expense, net foreign exchange gain (loss) and other financing expenses.
Net interest income was $195,000 and $432,000 for the quarter and six-month
periods ended September 30, 1999, respectively, compared to $174,000 and
$283,000 for the same periods of last year, respectively. Interest income
increased for the quarter and six-month period ended September 30, 1999 due
primarily to higher average balances of cash, cash equivalents and marketable
securities.
Provision for income taxes is primarily for federal, state and foreign
income taxes. For the quarter ended September 30, 1999 the provision is
approximately $80,000 compared to $0 in the same quarter last year. For the
six-month period ended September 30, 1999, the provision was approximately
$123,000 compared to $2,000 for the same six-month period of last year. The
increases are primarily due to reporting higher income in the current year
quarter and six-month period compared to the same periods of last year.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operations for the six-month period ended September 30,
1999 was $1.4 million compared to cash used in operations of $4.5 million for
the same period last year. The increase in cash provided by operations for the
six-month period ended September 30, 1999 was primarily due to a smaller
increase in accounts receivable in the six-month period ended September 30, 1999
compared to the same period last year and due to reporting a higher net income
in the current year six-month period compared to the same period last year.
As of September 30, 1999, the Company had working capital of $23.3 million
including $23.4 million of cash, cash equivalents and short-term marketable
securities. The Company has a revolving line of credit that permits unsecured
borrowings up to $1.0 million through September 2000. As of September 30, 1999,
there were no outstanding loans under the line of credit and the Company was in
compliance with the terms of the agreement.
Property and equipment expenditures were $624,000 and $839,000 for the
quarter and six-month period ended September 30, 1999, respectively. The Company
had no material commitments to purchase property and equipment at September 30,
1999 and expects to purchase property and equipment throughout the remainder of
the fiscal year at a rate consistent with the prior fiscal year.
Although it is difficult for the Company to predict future liquidity
requirements with certainty, the Company believes that its existing cash and
marketable securities balances, together with cash from operations and amounts
available under the Company's revolving line of credit, will be adequate to
finance its operations for at least the next twelve months. Although operating
activities may provide cash in certain periods, to the extent the Company
experiences growth in the future, the Company anticipates that its operating and
investing activities may use cash. Consequently, any such future growth may
require the Company to obtain additional equity or debt financing, which may not
be available on commercially reasonable terms or which may be dilutive.
YEAR 2000 COMPLIANCE
The Year 2000 computer issue creates risks for the Company. If internal
systems do not correctly recognize and process data information beyond the Year
1999, there could be an adverse impact on the
11
<PAGE> 12
Company's operations. There are two other related issues which could also lead
to incorrect calculations or failures: (1) some systems' programming assigns
special meaning to certain dates, such as 9/9/99, and (2) the Year 2000 is a
leap year. As used in this section, "Year 2000 capable" means that when used
properly and in conformity with the product information provided by the Company,
and when used with Year 2000 capable computer systems, the product will
accurately store, display, process, provide, and/or receive data from, into, and
between the twentieth and twenty-first centuries, including leap year
calculations, provided that all other technology used in combination with the
Company's product properly exchanges the data with the Company's product.
Internal Systems. To address these Year 2000 issues with its internal
systems, the Company initiated a program to deal with the Company's internal
management information systems and its embedded systems (e.g. phones, and
security systems). The program includes both assessment and remediation
proceeding in parallel and the Company has completed and tested changes to those
management and critical systems as of the third calendar quarter of 1999. These
activities encompassed all major categories of systems used by the Company,
including sales and financial systems and embedded systems.
Products. The Company has determined that the most recent versions of its
products do not have any date dependencies that could give rise to Year 2000
capability problems. The Company plans to evaluate new products as they are
developed. Because its products have no date dependencies that could give rise
to Year 2000 capability problems, the Company does not believe it is legally
responsible for cost incurred by customers related to ensuring their Year 2000
capability.
Suppliers. The Company is also working with key suppliers of products and
services to determine whether their operations and products are Year 2000
capable and to monitor their progress toward Year 2000 capability. The Company
identified four vendors that could materially impact the Company's business if
they experienced significant Year 2000 problems. These include the Company's
electric power, local telephone, long distance and Internet service providers.
The Company has obtained verbal assurances from each of these suppliers of
services that they comply with industry standards for Year 2000 readiness.
Costs. The Company is incurring various costs to provide customer support
and customer satisfaction services regarding Year 2000 issues and it is
anticipated that these expenditures will continue through 1999 and thereafter.
The costs incurred to date related to the Company's Year 2000 assessment and
remediation programs have not been material. The cost which will be incurred by
the Company regarding the implementation of Year 2000 compliant internal
information systems, answering and responding to customer requests related to
Year 2000 issues, including both incremental spending and redeployed resources,
is currently not expected to exceed $150,000. The total cost estimate does not
include potential costs related to any customer or other claims or the cost of
internal software and hardware replaced in the normal course of business. In
some instances, the installation schedule of new software and hardware in the
normal course of business is being accelerated to also afford a solution to Year
2000 capability issues. The total cost estimate is based on the current
assessment of the projects and is subject to change as the project progresses.
Based on currently available information, management does not believe that the
Year 2000 matters discussed above related to internal information technology or
embedded systems of key suppliers' systems or products sold to customers will
have material impact on the Company's financial condition or overall trends in
results of operations. However, the Company cannot guarantee that the Year 2000
situation will not negatively impact the Company. In addition, the failure to
ensure Year 2000 capability by a supplier or another third party could have a
material adverse effect on the Company. The Company's Year 2000 compliance
programs have been conducted internally, without the use of independent
verification or validation processes. These assessment and compliance programs
have not caused the deferral by the Company of other information technology
projects.
The Company's most reasonably likely worst case Year 2000 scenario is that
the Company experiences key service interruptions due to Year 2000 problems.
The Company has addressed potential problem areas with internal systems and
with suppliers and other third parties. It is expected that assessment,
remediation and contingency planning activities will be ongoing throughout 1999
with the goal of appropriately resolving all material internal systems and
third-party issues.
12
<PAGE> 13
BUSINESS RISKS
History of Operating Losses. The Company has a history of reporting
operating losses. There can be no assurance that the Company will be able to
sustain profitability on a quarterly or annual basis in the future.
Retention of Executives and Key Employees. The Company's future success
depends upon the contributions of its executives and key employees. The
inability to retain executives and certain key employees in research and
development and sales and marketing could have a significant adverse effect on
the Company's ability to develop new products and versions of its products and
market and sell its products in the marketplace. The loss of the services of one
or more of the Company's executives or key employees could have a material
adverse effect on the Company's operating results. The Company also believes its
future success will depend in large part upon its ability to attract and retain
additional highly skilled personnel.
Fluctuations in Quarterly Results; Seasonality. The Company's quarterly
operating results have fluctuated in the past and are expected to fluctuate
significantly in the future due to a number of factors, including, among others,
the size and timing of customer orders, the timing and market acceptance of new
products by the Company, the level and pricing of international sales, foreign
currency exchange rates, changes in the level of operating expenses,
technological advances and new product introductions by the Company's
competitors and competitive conditions in the industry. Revenues received from
individual customers of the Company vary significantly based on the size of the
product installation. Customer orders for the Company's products have ranged
from $25,000 to over $4 million, and have averaged several hundred thousand
dollars. As a result, the Company's quarterly operating results are likely to be
significantly affected by the number and size of customer orders the Company is
able to obtain in any particular quarter. In addition, the sales cycle for the
Company's products is lengthy and unpredictable, and may range from a few months
to over a year, depending upon the interest of the prospective customer in the
Company's products, the size of the order (which may involve a significant
commitment of capital by the customer), the decision-making and acceptance
procedures within the customer's organization, the complexity of implementation
and other factors.
The Company generally ships orders as received and as a result typically
has little or no backlog. Quarterly revenues and operating results therefore
depend upon the volume and timing of orders received during the quarter, which
are difficult to forecast. Historically, the Company has recognized the
substantial majority of its quarterly license revenues in the last weeks or week
of each quarter. In addition, because the Company's expenditure levels for
product development and other operating expenses are based in large part on
anticipated revenues, a substantial portion of which are not typically generated
until the end of each quarter, the timing and amount of revenues associated with
orders have caused, and may continue to cause, significant variations in
operating results from quarter to quarter.
The Company's operating results are also expected to vary significantly due
to seasonal trends. Historically, the Company has realized a greater percentage
of its annual revenues in its fourth quarter, and a lower percentage in the
first and second quarters. The Company believes that this seasonality is in part
a result of efforts of the Company's direct sales personnel to meet annual sales
quotas, and in part a result of lower international revenues in the summer
months when many businesses in Europe experience lower sales. In addition,
capital budgets of the Company's customers, which tend to concentrate spending
activity at calendar year-end, have had, and may continue to have, a seasonal
influence in the Company's quarterly operating results. The Company expects that
its operating results will continue to fluctuate in the future as a result of
these and other factors, and that seasonality may increase if the Company's
efforts to expand its international sales are successful.
Rapid Technological Change and Introduction of New Products. The market for
software and content management (Electronic Software Distribution ("ESD"),
Internet Services Management ("ISM"), etc.) products is characterized by rapid
technological advances, changes in customer requirements and frequent new
product introductions and enhancements. The Company's future success will depend
in large part on the Company's ability to enhance its current products and to
develop and introduce new products that keep pace with technological
developments, achieve market acceptance and respond to customer requirements
that are constantly evolving. Responding to rapid technological change and the
need to develop and introduce new products to meet customers' expanding needs
will require the Company to make substantial investments in
13
<PAGE> 14
research and product development. During fiscal 1999 and six months of fiscal
2000, among other research and development expenditures, the Company allocated
research and development funding to the development of its most recent release
of Radia Software Manager, version 2.0, Radia Application Manager, Radia
E-wrap(TM) for ASPs, an integrated LDAP adapter, support for IBM 4690 and SCO
Unix devices, as well as enhancements to EDM. The Company intends to continue to
allocate funding to these development projects throughout the remainder of
fiscal 2000. Any failure by the Company to anticipate or respond adequately to
technological developments and customer requirements, and in particular advances
in enterprise hardware platforms, Internet applications and platforms, operating
systems and systems management applications, or any significant delays in
product development or introduction, could result in a loss of competitiveness
or could materially and adversely affect the Company's operating results. There
can be no assurance that any product enhancements or new products developed by
the Company will gain market acceptance.
The failure to develop on a timely basis new products or product
enhancements could cause customers to delay or refrain from purchasing the
Company's existing products and thereby adversely affect the Company's operating
results. If future releases of new products and enhancements do not achieve
market acceptance, the Company's business, financial condition and results of
operations will be materially and adversely affected.
Software products as complex as those offered by the Company may contain
undetected errors or failures that, despite significant testing by the Company,
are discovered only after a product has been installed and used by customers.
Although the Company's business has not been materially and adversely affected
by any such errors to date, there can be no assurance that errors will not be
found in the Company's products in the future. Such errors could cause delays in
product introductions and shipments, require design modifications, result in
loss of or delay in market acceptance of the Company's products, or loss of
existing customers, any of which could adversely affect the Company's business,
financial condition and results of operations.
Competition. Competition in the software and content management market is
diverse and rapidly changing. While a variety of vendors have offered some form
of ESD, Internet Services Management or similar solutions with their offerings,
the current and prospective closest competitors of the Company today fall into
four categories:
- Network/Systems Management Framework Vendors. These competitors include
International Business Machines Corporation ("IBM")/Tivoli Systems Inc.
and Computer Associates International Inc. who offer conventional ESD
tools as part of their enterprise frameworks.
- LAN/Desktop Management Suite Vendors. These competitors include vendors
such as Microsoft Corporation, Intel Corporation and Network Associates,
Inc. who offer workgroup-based conventional ESD tools as part of a LAN
administration package.
- Internet ESD Vendors. These competitors (also known as ISM providers)
include companies such as Marimba, Inc., and BackWeb Technologies Ltd.
originally "push" technology companies that have redefined themselves to
take advantage of the Internet services market.
- Mobile Management Suite Vendors. These competitors include Sterling
Commerce, Inc.
Novadigm believes that it competes effectively with all of these vendors in
its target market on the basis of its E-wrap(TM) technology, broader product
line for software and content management, patented fractional differencing
technology, desired-state technological innovation, unique adaptive
configuration functionality, higher product implementation success rates, and
extensive customer support. Novadigm differentiates its products in the market
based on results that have proven its products are capable of distributing and
managing software and content faster, across larger and more diverse
environments, with higher reliability and greater adaptability.
Many of the Company's competitors have longer operating histories than the
Company, and many may have significantly greater financial, technical, sales,
marketing and other resources, as well as greater name recognition and larger
installed customer bases. The Company's current and future competitors could
introduce products with more features, greater functionality and lower prices
than the Company's products. These competitors could also bundle existing or new
products with other, more established products in order to
14
<PAGE> 15
compete with the Company. The Company's focus on software and content management
products may be a disadvantage in competing with vendors that offer a broader
range of products. Moreover, as the software and content management market
develops, a number of companies with significantly greater resources than those
of the Company could attempt to increase their presence in this market by
acquiring or forming strategic alliances with competitors or business partners
of the Company. There can be no assurance that the Company will be able to
compete successfully or that competition will not have a material adverse effect
on the Company's business, operating results or financial condition.
Volatility. The market for the Company's common stock is highly volatile.
The trading price of the Company's common stock has been and could in the future
be subject to wide fluctuations in response to quarterly variations in operating
and financial results, announcements of technological innovations or new
products by the Company or its competitors, changes in prices of the Company's
or its competitors' products and services, changes in product mix, change in the
Company's revenue and revenue growth rates for the Company as a whole or for
individual geographic areas, products or product categories, as well as other
events or factors. Statements or changes in opinions, ratings, or earnings
estimates made by brokerage firms or industry analysts relating to the market in
which the Company does business or relating to the Company specifically have
resulted, and could in the future result in, an immediate and adverse effect on
the market price of the Company's common stock. In addition, the stock market
has from time to time experienced extreme price and volume fluctuations which
have particularly affected the market price for the securities of many high
technology companies and which often have been unrelated to the operating
performance of these companies. These broad market fluctuations may adversely
affect the market price of the Company's common stock.
Risks Related to International Revenues. For the years ending March 31,
1998 and 1999, approximately 46% and 47% of the Company's net revenues,
respectively, were derived from its international operations. In the six-months
ended September 30, 1999, 37% of the Company's revenue was derived from
international operations. International revenues are a significant percentage of
the Company's revenues and the Company plans to continue to develop
international sales, primarily through its European operations. The Company's
operations and financial results could be significantly affected by factors
associated with international operations, such as changes in foreign currency
exchange rates, uncertainties relative to regional economic circumstances,
longer payment cycles, greater difficulty in accounts receivable collection,
changes in regulatory requirements and product localization requirements, as
well as by other factors associated with international activities.
Customer Concentration. In the fiscal year ended March 31, 1999, two
customers, Amdahl Corporation ("Amdahl") and Esoft, Ltd. ("Esoft") accounted for
approximately 17% and 12% of total revenues, respectively. In fiscal 1998, two
customers, Amdahl and Electronic Data Systems Corporation, accounted for
approximately 31% and 10% of total revenues, respectively. During fiscal 1997,
two customers, IBM and Amdahl, accounted for approximately 23% and 16% of total
revenues, respectively. In the six months ended September 30, 1999 no customer
accounted for more than 10% of total revenues. In June 1995, the Company entered
into a seven-year, non-exclusive OEM and distribution agreement with Amdahl.
Under the agreement Amdahl can sublicense EDM throughout the world as part of
their bundled solution and sublicense EDM stand-alone to a limited worldwide
market. Novadigm agreed to provide limited technical support and training. The
agreement required Amdahl to pay the Company $8 million in minimum royalties in
1996; and $4 million in minimum royalties in each of 1997 and 1998. The
agreement was amended in March 1997, instead requiring Amdahl to pay $2 million
in minimum royalties in each of 1997 and 1998; and minimum royalties of $3
million in each of 1999 and 2000. In the event of a change of control of the
Company, the amended agreement allows Amdahl the right to terminate the
agreement and recover unused guaranteed sublicense fees at the time of the
termination, to the extent they were also outstanding at March 31, 1997. Though
Amdahl renewed the agreement at the end of 1999, there can be no assurance that
Amdahl will extend this agreement in subsequent years. Although the Company
believes that its dependence on its relationship with Amdahl has become less
significant over time as the Company expands the number of companies
participating in its indirect marketing channels, the disruption of the
Company's relationship with Amdahl could materially and adversely affect the
Company's operating results and financial condition.
15
<PAGE> 16
Dependence on Proprietary Technology; Risks of Infringement. The success of
the Company will be, heavily dependent upon proprietary technology. The Company
relies primarily on a combination of copyright and trademark laws, trade
secrets, confidentiality procedures and contractual provisions to protect its
proprietary rights. The Company seeks to protect its software, documentation and
other written materials under trade secret and copyright laws, which provide
only limited protection. Despite precautions taken by the Company, it may be
possible for unauthorized third parties to copy aspects of its current or future
products or to obtain and use information that either regards as proprietary. In
particular, the Company may provide its respective licensees with access to its
proprietary information underlying its licensed applications. There can be no
assurance that such means of protecting their proprietary rights will be
adequate or that their competitors will not independently develop similar or
superior technology. Policing unauthorized use of software is difficult and,
while the Company is able to determine the extent to which piracy of its
software products exists, software piracy can be expected to be a persistent
problem. In addition, the laws of some foreign countries do not protect the
proprietary rights of the Company to the same extent as do the laws of the
United States. Litigation may be necessary in the future to enforce their
intellectual property rights, to protect trade secrets or to determine the
validity and scope of the proprietary rights of others. In March 1997, the
Company filed suit against Marimba, Inc. alleging that Marimba has infringed on
one of the Company's patents. Such litigation could result in substantial costs
and diversion of resources and could have a material adverse effect on the
business, results of operations, and financial condition of any or all of the
Company (See "Part II, Item 1 -- Legal Proceedings" hereof).
The Company does not believe that any of its software product offerings
infringes the proprietary rights of third parties. There can be no assurance,
however, that third parties will not claim infringement with respect to current
or future products of the Company. For instance, in July 1999, Marimba filed
suit against the Company alleging that certain of the Company's products
infringe Marimba's patents (See "Part II, Item 1 -- Legal Proceedings" hereof).
The Company expects that software product developers will increasingly be
subject to infringement claims as the number of products and competitors in
their industry segment grows and the functionality of products in different
industry segments overlaps. Any such claims, with or without merit, could be
time consuming, result in costly litigation, cause product shipment delays, or
require the Company to enter into royalty or licensing agreements. Such royalty
or licensing agreements, if required, may not be available on acceptable terms
or at all, which could have a material adverse effect on the business, results
of operations, and financial condition of the Company.
Product Liability. The license agreements, which the Company enters with
its customers typically, contain provisions designed to limit exposure to
potential product liability claims. It is possible, however, that the limitation
of liability provisions contained in such license agreements may not be
effective under the laws of certain jurisdictions. Although the Company has not
experienced any product liability claims to date, the sale and support of their
products may entail the risk of such claims, and there can be no assurance that
the Company will not be subject to such claims in the future. A product
liability claim brought against the Company could have a material adverse effect
on its respective businesses, results of operations, and financial condition.
Year 2000 Implications. Many currently installed computer systems and
software products are unable to distinguish 21st century dates from 20th century
dates. Beginning in the year 2000, these date code fields will need to
distinguish 21st century dates from 20th century dates, and, as a result, many
companies' software and computer systems may need to be upgraded or replaced in
order to comply with such "Year 2000" requirements. The Company has undertaken
assessment, testing and remediation as described above under "Management's
Discussion and Analysis of Financial Condition and Results of Operations -- Year
2000 Compliance." However, there can be no assurance that the Company's products
are Year 2000 compliant, or that the Company's products will not be integrated
with, or otherwise interact with, non-compliant software. The foregoing could
expose the Company to claims from its customers and result in the loss of or
delay in market acceptance of the Company's products, increased service and
warranty costs to the Company and payment by the Company of compensatory or
other damages, any of which events could have a material adverse effect on the
Company's business, operating results and financial condition. Although the
Company believes that the cost to replace or upgrade its internal systems to be
Year 2000 compliant will not have a
16
<PAGE> 17
material adverse effect on its business, the failure of any third-party systems
to operate properly with regard to the Year 2000 and thereafter could have a
material adverse effect on the Company's business, results of operations and
financial condition. Furthermore, the purchasing patterns of potential customers
may be affected by Year 2000 issues as companies expend significant resources to
correct their current systems for Year 2000 compliance.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
17
<PAGE> 18
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On March 3, 1997, Novadigm sued Marimba, Inc. for infringement of the
Company's U.S. Patent No. 5,581,764 (the "764 Patent") in the U.S. District
Court for the Northern District of California. Novadigm alleges that Marimba's
Castanet Software product infringes the "764 Patent." On May 2, 1997, Marimba
filed an answer to Novadigm's complaint and a counterclaim, denying the
Company's allegations and seeking a declaration that the "764 Patent" is
invalid, not infringed, and unenforceable. Discovery in the case is nearing
completion. Both parties filed summary judgement motions, which were heard by
the court in June 1999, but neither of which was granted. A jury trial is
presently scheduled for November 1999 with respect to certain of the claims. A
second trial to address the remaining items has not yet been scheduled.
On July 30, 1999, Marimba, Inc. ("Marimba") filed a complaint against the
Company in U.S. District Court, Northern District of California, San Jose
division alleging that the Company has infringed one of Marimba's patents. The
suit seeks monetary damages as well as an injunction to prevent the Company from
making, using or selling infringing software products. The suit seeks triple
damages under the United States Patent Act.
The Company intends to defend the new Marimba suit vigorously. However, the
Company may not prevail in the above-mentioned litigation. Such litigation could
result in substantial costs and diversion of resources and could have a material
adverse effect on the business, results of operations, and financial condition
of any or all of the Company. Furthermore, the Company expects to incur
substantial costs in defending against the litigation filed against it by
Marimba. Additionally, the Company anticipates that the costs of prosecuting its
patent infringement litigation against Marimba will increase significantly if
the dispute goes to trial as scheduled in November 1999. It is possible that the
costs of prosecuting and defending the Marimba litigation could substantially
exceed the Company's expectations. Moreover, as a result of such litigation, the
Company may be required to enter into royalty or licensing agreements, that may
not be available on acceptable terms or at all, which could have a material
adverse effect on the business, results of operations, and financial condition
of the Company.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
18
<PAGE> 19
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its 1999 Annual Meeting of Stockholders on September 17,
1999. The following matters were approved by the stockholders by the votes
indicated below:
<TABLE>
<CAPTION>
VOTES VOTES BROKER
FOR AGAINST ABSTAIN NON-VOTES
---------- ------- ------- ---------
<S> <C> <C> <C> <C> <C>
a. Election of four directors to serve for the
ensuing year as follows:
Albion J. Fitzgerald.......................... 13,443,576 -- 23,292 --
Robert B. Anderson............................ 13,443,826 -- 23,042 --
H. Kent Petzold............................... 13,404,476 -- 62,392 --
Deborah Doyle McWhinney....................... 13,443,796 -- 23,072 --
b. Proposal to amend the Company's 1992 Stock
Option Plan to provide for a maximum term of
all options granted thereunder of 10 years.... 13,078,251 227,011 13,380 148,226
c. Proposal to amend the Company's 1995 Stock
Option Plan for French Employees to provide
for a maximum term of all options granted
thereunder of 9 1/2 years..................... 13,232,523 222,065 12,280 --
d. Proposal to appointment of Arthur Andersen LLP
as independent auditors of the Company for the
fiscal year ending March 31, 2000............. 13,442,389 14,479 10,000 --
</TABLE>
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports
The Company did not file any reports on Form 8-K during the quarter ended
September 30, 1999.
19
<PAGE> 20
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.
NOVADIGM, INC.
By: /s/ WALLACE D. RUIZ
------------------------------------
Wallace D. Ruiz
Vice President & Chief Financial
Officer
(principal financial and chief
accounting officer)
Dated: November 15, 1999
20
<PAGE> 21
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
27.1 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 6,930
<SECURITIES> 16,507
<RECEIVABLES> 9,759
<ALLOWANCES> 838
<INVENTORY> 0
<CURRENT-ASSETS> 33,937
<PP&E> 6,042
<DEPRECIATION> 4,221
<TOTAL-ASSETS> 36,914
<CURRENT-LIABILITIES> 10,663
<BONDS> 0
0
0
<COMMON> 11
<OTHER-SE> 26,240
<TOTAL-LIABILITY-AND-EQUITY> 36,914
<SALES> 0
<TOTAL-REVENUES> 11,327
<CGS> 0
<TOTAL-COSTS> 1,250
<OTHER-EXPENSES> 8,881
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (195)
<INCOME-PRETAX> 1,391
<INCOME-TAX> 80
<INCOME-CONTINUING> 1,311
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,311
<EPS-BASIC> .07
<EPS-DILUTED> .07
</TABLE>
