<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, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 0-21287
PEERLESS SYSTEMS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 95-3732595
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2381 Rosecrans Avenue, El Segundo, CA 90245
(Address of principal executive offices, including zip code)
(310) 536-0908
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
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 [ ] No [X]
The number of shares of Common Stock outstanding as of December 3, 1996 was
10,455,988.
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PEERLESS SYSTEMS CORPORATION
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
PART I - Financial Information
Item 1. Financial Statements
Balance Sheets
October 31, 1996 and January 31, 1996........................ 3
Statements of Operations
Three Months Ended October 31, 1996 and September 30, 1995, and
Nine Months Ended October 31, 1996 and September 30, 1995.... 4
Statements of Cash Flows
Nine Months Ended October 31, 1996 and September 30, 1995.... 5
Notes to Financial Statements.................................. 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................ 8
PART II - Other Information
Item 1. Legal Proceedings.............................................. 13
Item 2. Changes in Securities.......................................... 13
Item 3. Defaults Upon Senior Securities................................ 13
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............................... 14
Signatures ............................................................... 15
</TABLE>
2
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PART I FINANCIAL INFORMATION
Item 1 FINANCIAL STATEMENTS
PEERLESS SYSTEMS CORPORATION
BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
October 31, January 31,
1996 1996
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
- ------
Current Assets:
Cash and cash equivalents $ 25,047 $ 722
Trade accounts receivable 4,738 2,013
Unbilled receivables 972 245
Prepaid expenses and other current assets 235 102
-------- --------
Total current assets 30,992 3,082
Property and equipment, net 1,573 532
Other assets 466 427
-------- --------
Total assets $ 33,031 $ 4,041
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
- ----------------------------------------------
Current Liabilities:
Accounts payable $ 1,261 $ 431
Accrued wages, benefits and related taxes 1,033 1,044
Other current liabilities 564 98
Obligations under capital leases, current portion 154
Deferred rent, current portion 76 76
Deferred revenue, current portion 4,931 3,887
-------- --------
Total current liabilities 7,865 5,690
Convertible notes payable 3,070
Obligations under capital leases 141
Deferred rent 235 291
Deferred revenue 600 784
-------- --------
8,700 9,976
-------- --------
Series A convertible, redeemable Preferred Stock 2,482
--------
Series B convertible, redeemable Preferred Stock 3,450
--------
Stockholders' equity (deficit):
Common Stock 10 3
Additional paid-in capital 37,316 1,394
Deferred compensation (376)
Accumulated deficit (12,619) (13,264)
-------- --------
Total stockholders' equity (deficit) 24,331 (11,867)
-------- --------
Total liabilities and stockholders' equity (deficit) $ 33,031 $ 4,041
======== ========
</TABLE>
See accompanying notes to financial statements.
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PEERLESS SYSTEMS CORPORATION
STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
----------------------------- ----------------------------
October 31, September 30, October 31, September 30,
1996 1995 1996 1995
------------ -------------- ----------- --------------
<S> <C> <C> <C> <C>
Revenues:
- ---------
Product licensing $2,363 $ 804 $ 4,801 $ 3,224
Engineering services and maintenance 2,014 1,489 6,664 3,801
------ ------ ------- -------
Total revenues 4,377 2,293 11,465 7,025
------ ------ ------- -------
Cost of revenues:
Product licensing 64 29 129 103
Engineering services and maintenance 1,576 1,341 4,872 3,699
------ ------ ------- -------
Total cost of revenues 1,640 1,370 5,001 3,802
------ ------ ------- -------
Gross margin 2,737 923 6,464 3,223
------ ------ ------- -------
Operating expenses:
Research and development 674 601 1,712 1,678
Sales and marketing 845 516 2,009 1,596
General and administrative 673 331 1,759 944
------ ------ ------- -------
Total operating expenses 2,192 1,448 5,480 4,218
------ ------ ------- -------
Income (loss) from operations 545 (525) 984 (995)
Interest (income) expense, net (42) 47 125 112
------ ------ ------- -------
Income (loss) before provision
for income taxes 587 (572) 859 (1,107)
Provision for income taxes 156 21 206 83
------ ------ ------- -------
Net income (loss) $ 431 $ (593) $ 653 $(1,190)
====== ====== ======= =======
Net income per share:
Primary $ 0.05 $ 0.10
====== =======
Fully diluted $ 0.04 $ 0.07
====== =======
Weighted average number of common
and common equivalent shares
outstanding:
Primary 8,044 6,832
====== =======
Fully diluted 9,809 9,185
====== =======
</TABLE>
See accompanying notes to financial statements.
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PEERLESS SYSTEMS CORPORATION
STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
----------------------------
October 31, September 30,
1996 1995
------------ -------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 653 $(1,190)
Adjustments to reconcile net income(loss) to net cash
used in operating activities:
Depreciation and amortization 341 112
Amortization of deferred compensation 76
Changes in operating assets and liabilities:
Trade accounts receivable (2,725) 857
Unbilled receivables (727) 9
Prepaid expenses and other current assets (172) (211)
Accounts payable 830 (106)
Accrued wages, benefits & related taxes (11) (79)
Other current liabilities 466 29
Deferred rent (56) (135)
Deferred revenue 860 292
------- -------
Net cash used in operating activities (465) (422)
------- -------
Cash flows from investing activities:
Purchases of property and equipment (1,022) (30)
------- -------
Net cash used in investing activities (1,022) (30)
Cash flows from financing activities:
Net borrowing on line of credit 189
Payments on obligations under capital leases (655)
Proceeds from exercise of common stock options 110 38
Net proceeds from issuance of common stock 26,357
------- -------
Net cash provided by financing activities 25,812 227
------- -------
Net change in cash and cash equivalents 24,325 (225)
Cash and cash equivalents at beginning of period 722 393
------- -------
Cash and cash equivalents at end of period $25,047 $ 168
======= =======
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Income taxes $ 161 $ 64
======= =======
Interest $ 250 $ 95
======= =======
Supplemental schedule of non cash
investing and financing activities:
Increase in redemption value of
Series A and Series B Preferred stock $ 8 $ 131
======= =======
Conversion of convertible notes to shares of common stock $ 3,070
=======
Conversion of Series A and Series B Preferred
stock to shares of common stock $ 5,940
=======
Deferred compensation related to grant of stock options $ 452
=======
Property and equipment acquired under capital lease obligations $ 360
=======
</TABLE>
See accompanying notes to financial statements.
5
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PEERLESS SYSTEMS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Presentation:
The accompanying unaudited financial statements of Peerless Systems
Corporation (the "Company") have been prepared pursuant to the rules of the
Securities and Exchange Commission for quarterly reports on Form 10-Q and do not
include all of the information and note disclosures required by generally
accepted accounting principles. The financial statements and notes herein are
unaudited, but in the opinion of management, include all the adjustments
(consisting only of normal, recurring adjustments) necessary to present fairly
the financial position, results of operations and cash flows of the Company.
These statements should be read in conjunction with the audited financial
statements and notes thereto for the years ended December 31, 1993, 1994, and
1995, and for the period ended January 31, 1996, included in the Company's
Registration Statement on Form S-1 (Reg. No. 333-09357) filed August 26, 1996,
as amended. The results of operations for the interim periods shown herein are
not necessarily indicative of the results to be expected for any future interim
period or for the entire year.
On September 30, and October 18, 1996, the Company completed an initial
public offering of its common stock, selling an aggregate of 4,312,500 shares
(including 1,614,816 shares sold by selling stockholders) at $11.00 per share.
Net proceeds to the Company were approximately $26.4 million after deducting
related issuance costs.
2. Stock Split:
On July 25, 1996, the Board of Directors approved a 2-for-3 reverse split
of all outstanding common stock, Series A and Series B Preferred Stock, stock
options and warrants. All share and per share amounts have been adjusted to
give retroactive effect to this reverse split for all periods presented.
3. Net Income Per Common Share:
Primary net income per share has been computed by dividing the net income
by the weighted average numbers of common and dilutive common equivalent shares
outstanding during the period. Common stock equivalents consist of stock
options using the treasury stock method.
Fully diluted net income per share also includes Series A and Series B
Convertible Redeemable Preferred Stock on an as-if converted basis in the
calculation of weighted average number of common and common equivalent shares
outstanding.
4. Stockholder's Equity:
On September 30, 1996, the Company converted all of the outstanding shares
of Class A Convertible Redeemable Preferred Stock, Class B Convertible
Redeemable Preferred Stock,
6
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Convertible Notes Payable and Warrants into new shares of Common Stock
simultaneously with the closing of the Company's initial public offering.
7
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PEERLESS SYSTEMS CORPORATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Except for the historical information contained herein, this quarterly
Report on Form 10-Q may contain forward-looking statements. Investors are
cautioned that forward-looking statements are inherently uncertain. Actual
performance and results of operations may differ materially from those projected
or suggested in the forward-looking statements due to certain risks and
uncertainties. Information concerning certain risks and uncertainties is
contained in the Company's Prospectus, dated September 25, 1996, and filed with
the Securities and Exchange Commission, in the section entitled "Risk Factors,"
and in "Certain Business Risks" below. The forward-looking statements contained
herein represent the Company's judgment as of the date of this release, and the
Company cautions readers not to place undue reliance on such statements.
OVERVIEW
The Company, founded in April 1982, provides software-based embedded
imaging systems to original equipment manufacturers ("OEMs") of digital document
products located primarily in the United States and Japan. The Peerless family
of products and engineering services provides advanced embedded imaging
technologies that enable the Company's OEM customers to develop digital
printers, copiers and multifunction products ("MFPs") quickly and cost
effectively. The Company's revenues are comprised of both recurring and one-
time product licensing fees as well as engineering services and maintenance fees
related to the Company's embedded imaging software and supporting electronics
technologies.
As of October 31, 1996, the Company had an accumulated deficit of
approximately $12.6 million. The Company changed its fiscal year-end from
December 31 to January 31, commencing February 1, 1996, in order to better align
the timing of the Company's financial reporting with the timing of receipt of
royalty information by the Company from its OEMs. Accordingly, information for
the three months and nine months ended October 31, 1996 is compared with
information for the three months and nine months ended September 30, 1995.
The Company's customers currently include, among others, Adobe and OEM
customers, Canon, IBM and Xerox. A significant portion of the Company's
revenues in recent years has been concentrated with a limited number of OEM
customers, and the Company anticipates that its revenues in the future may be
similarly concentrated. For the nine months ended October 31, 1996, and the
year ended December 31, 1995, the Company's top four OEM customers accounted for
approximately 57% and 74% of total revenues, respectively. See "Certain
Business Risks" below.
The Company's product licensing revenues are comprised of both recurring
licensing revenues and one-time licensing fees for source code. Recurring
licensing revenues are derived from per unit fees paid quarterly by the
Company's OEMs upon shipment or manufacture of products incorporating the
Company's technology. Recurring licensing revenues are derived to a lesser
extent from arrangements in which the Company enables its products to be used
with third-
8
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party technology such as certain arrangements with Adobe. The Company's one-time
licensing fees for source code are paid by OEMs for access to the Company's
software, which in turn generates recurring licensing revenues if the software
is incorporated into OEM products that are subsequently developed and shipped.
The Company's engineering services revenues are derived primarily from
adapting the Company's software and supporting electronics to specific OEM
requirements. The Company provides its engineering services to OEMs seeking an
embedded imaging solution for their digital document products. The Company's
maintenance revenues are derived from software maintenance agreements.
Maintenance revenues constitute a very small portion of engineering services and
maintenance revenues.
The Company recognizes its recurring product licensing revenues on a
royalty basis generally when the Company's OEM customers ship products that
incorporate the Company's technology. In certain cases, the non-refundable
portion of guaranteed royalties is reported as royalty revenues upon receipt by
the Company. Generally, the Company recognizes its one-time licensing revenues
for software licenses upon shipment by the Company's OEMs. The Company
recognizes engineering services revenues over the course of the development work
on a percentage-of-completion basis. Maintenance revenues are recognized
ratably over the term of the maintenance contract, which generally is twelve
months. Licensing revenues are recognized in accordance with Statement of
Position 91-1 "Software Revenue Recognition."
RESULTS OF OPERATIONS
Revenues for the quarter ended October 31, 1996, increased 91% to $4.4
million from the $2.3 million for the three months ended September 30, 1995. The
increase in revenue was primarily due to the 194% increase in product licensing
fee revenues in the third quarter compared to the comparable quarter in the
prior year that were generated by the increase in the shipments and number of
products incorporating Peerless imaging technology, as well as unusually high
one-time licensing fees for source code. Engineering services and maintenance
revenues for the three months ended October 31, 1996, increased 35% to $2.0
million from $1.5 million in the three months ended September 30, 1995. The
increase was due in part to design wins previously awarded to the Company that
specified the provision of turn-key development services.
Revenues for the nine months ended October 31, 1996, increased 63% to $11.5
million, from the $7.0 million recorded for the nine months ended September 30,
1995. This increase in revenue was attributable to the growth in product
license revenue generated by increased shipments of products that incorporate
Peerless imaging technology as well as a 75% increase in engineering services
and maintenance revenue, due to the increase in design wins.
Gross margin for the three months ended October 31, 1996 increased 197% to
$2.7 million from $923,000 for the three months ended September 30, 1995. Gross
margin as a percentage of total revenues increased to 63% for the three months
ended October 31, 1996, compared to 40% in the three months ended September 30,
1995. These increases are primarily attributable to the shift in revenue mix
towards licensing revenues, which have relatively low costs related to the
revenue being recognized. Licensing revenues increased from 35% of total
9
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revenues in the quarter ended September 30, 1995 to 54% of total revenue in the
quarter ended October 31, 1996. The gross margin on engineering services and
maintenance improved from 10% in the quarter ended September 30, 1995 to 22% in
the quarter ended October 31, 1996 as a result of enhanced operational
efficiencies and the ability of the Company to leverage its technology over more
product lines.
Gross margin for the nine months ended October 31, 1996, increased 101% to
$6.5 million from the $3.2 million recorded for the nine months ended September
30, 1995. Gross margin as a percentage of total revenues increased to 56% in
the nine months ended October 31, 1996 from the 45% recorded in the nine months
ended September 30, 1995. These improvements are attributable to the increase
in product licensing revenues, which have higher margins.
The Company's research and development expenses are comprised primarily of
employee salaries and benefits, an allocation of engineering management and
administrative staff expenses and an allocation of the corporate facilities
overhead. Research and development expenses in the three months ended October
31, 1996 increased 12% to $674,000 from $601,000 in the three months ended
September 30, 1995. These expenses remained constant at approximately $1.7
million for the nine months ended October 31, 1996 and September 30, 1996.
Research and development expenses for both the three and nine months ended
October 31, 1996 represented 15% of total revenues, compared to 26% and 24% for
the three and nine months ended September 30, 1995, respectively. These
expenses remained relatively constant during each of these periods as the
Company was unable to increase its engineering personnel as anticipated due in
part to competition for such personnel as well as constraints on cash
availability prior to the completion of the Company's public offering in
September 1996.
The Company's sales and marketing expenses are comprised primarily of
employee salaries and benefits, commissions and bonuses, advertising and
promotional expenses, the cost of operating the Japan sales office and an
allocation of the corporate facilities overhead. Sales and marketing expenses
in the three months ended October 31, 1996, increased 64% to $845,000 from the
$516,000 recorded in the comparable quarter last year. These expenses for the
nine months ended October 31, 1996, increased 26% to $2.0 million from $1.6
million in the nine months ended September 30, 1995. These increases are the
result of an increase in the number of sales and marketing personnel, as well as
additional emphasis on the two major industry trade shows which occurred in the
quarter ended October 31, 1996.
The Company's general and administrative expenses are comprised primarily
of salaries, benefits and bonuses paid to its executive and administrative
staff, fees paid to the Company's external auditors, counsel and other corporate
consultants, an allocation of the corporate facilities overhead, and expenses
required of a public company. General and administrative expenses in the three
months ended October 31, 1996 increased 103% to $673,000 from $331,000 in the
three months ended September 30, 1995. These expenses for the nine months ended
October 31, 1996 increased 86% to $1.8 million from $944,000 in the nine months
ended September 30, 1995. General and administrative expenses increased
primarily due to the addition of personnel to support the Company's operations
and certain non-recurring costs. The Company expects that its general and
administrative expenses may increase in order to support growth in operations,
and as a result of expenses as a public company.
10
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The provisions for income taxes for the three and nine month periods
presented are based on the estimated annual effective tax rate and include
current federal, state and foreign income taxes. The effective tax rates for
the periods differ from the federal statutory rate, primarily as a result of the
utilization of net operating loss carry forwards, offset by certain foreign
taxes. The higher tax rate in fiscal 1997 is primarily attributable to federal
minimum tax.
LIQUIDITY AND CAPITAL RESOURCES
At October 31, 1996, the Company had cash and cash equivalents of $25.0
million compared to $722,000 at January 31, 1996. This increase is due to net
proceeds resulting from the initial public offering in September 1996.
As of October 31, 1996, accounts receivable were $4.7 million, compared to
$2.0 million at January 31, 1996. This increase is the result of timing of
invoices related to contractual billings to certain major customers.
Property and equipment at October 31, 1996 was $1.6 million compared to
$532,000 at January 31, 1996. This increase is primarily the result of
acquiring the assets previously utilized by the Company under various capital
and operating leases, as well as purchases of equipment in the normal course of
business.
Accounts payable at October 31, 1996 were $1.3 million compared to $431,000
at January 31, 1996. The increase primarily relates to the timing of receipt of
invoices for professional services provided to the Company in relation to the
initial public offering.
At present, the Company has available a $1.5 million revolving line of
credit with a bank, which is collateralized by substantially all assets of the
Company. The line of credit, which terminates in May 1997, requires the Company
to maintain compliance with certain financial covenants.
The Company believes that the net proceeds from the recently completed
initial public offering, together with its existing cash balances, funds
generated from operations and available borrowings under its line of credit will
be sufficient to finance the Company's operations for at least the next twelve
months.
CERTAIN BUSINESS RISKS
The Company in the past has reported net losses and has only recently
reported net income. The Company has accumulated aggregate net losses from
inception through October 31, 1996, of approximately $12.6 million. Although
the Company has reported net income for the three and nine months ended October
31, 1996, there can be no assurance that the Company will maintain profitability
on a quarterly basis or achieve profitability on an annual basis in the future.
The success of the Company and its business strategy is dependent upon, among
other things, the ability and willingness of the Company's OEM customers to
timely develop and promote digital document products that incorporate the
Company's technology. For the three and nine months ended October 26, 1996, the
Company's top four OEM customers accounted for approximately 63% and 57% of
total revenues, and the Company believes that future revenues may be similarly
11
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concentrated with a limited number of OEM customers. Consequently, any
significant decrease in product sales or reduction in licensing or engineering
services with a large OEM customer would have a material adverse effect on the
Company's operating results.
The market for the Company's products is characterized by rapidly changing
technology, evolving industry standards and needs, frequent new product
introductions and diminishing time frames within which to develop new products.
The failure of the Company and its OEM customers to meet these needs on a timely
basis or to anticipate or respond to rapidly changing technology could result in
a loss of competitiveness or revenues, which would have a material adverse
effect on the Company's operating results.
The recurring product licensing revenues reported by the Company are
dependent on the timing and accuracy of product sales reports received from the
Company's OEM customers. These reports are provided only on a calendar quarter
basis and, in any event, are subject to delay and potential revision by the OEM.
Therefore, the Company is required to estimate all of its quarterly revenues
from an OEM when the report from such OEM is not received in a timely manner.
As a result, the Company may be unable to estimate such revenue accurately prior
to public announcement of the Company's quarterly results. In such event, the
Company subsequently may be required to restate its recognized revenues or
adjust revenues for subsequent periods, which could have a material adverse
effect on the Company's operating results.
Also inherent in the Company's business are additional risks, which include:
competition in the market of embedded imaging systems for digital document
products, including internal development by OEMs; the risk of delays in the
development of products, whether such delays are within the control of the
Company or not; risks associated in developing products for new and rapidly
developing markets, in which the Company has directed a substantial portion of
its recent development efforts; dependence on sole source providers;
uncertainties regarding protection of intellectual property rights, including
the potential for trademark and patent infringement litigation; dependence on
key personnel; and risks associated with the Company's international business
activities, which account for a substantial portion of its revenues.
12
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable.
Item 2. Changes in Securities
Since September 24, 1996, the effective date of the Company's Registration
Statement on Form S-1 filed in connection with the Company's initial public
offering of its Common Stock (the "IPO") and the date upon which the Company
became subject to the reporting requirements of the Securities Exchange Act of
1934, as amended, the Company issued the following unregistered securities:
1. On September 30, 1996, the Company issued to its preferred stockholders
an aggregate of 2,646,917 shares of its Common Stock pursuant to the
conversion of the Company's outstanding shares of preferred stock, which
shares converted to Common Stock at an approximately 1-to-1 ratio
automatically upon the closing of the IPO.
2. On September 30, 1996, the Company issued to the underwriters in the IPO
an aggregate of 983,146 shares of its Common Stock pursuant to the net
exercise of outstanding warrants based upon the initial public offering
price in the IPO of $11.00 per share, which warrants expired upon the
closing of the IPO.
3. On September 30, 1996, the Company issued to its holders of convertible
debentures an aggregate of 1,169,518 shares of its Common Stock pursuant
to the conversion of outstanding convertible debentures, which converted
to Common Stock automatically upon the closing of the IPO.
4. Simultaneous with the IPO, the Company issued an aggregate of 15,869
shares of its Common Stock pursuant to the exercise of stock options to
purchase Common Stock collectively held by an executive officer and a
former executive officer of the Registrant at a weighted average exercise
price of $0.53 per share.
The issuance of the securities described in paragraphs 1, 2, and 3 above
were deemed exempt from registration in reliance on Section 3(a)(9) of the
Securities Act of 1933, as amended (the "Securities Act"). The sale and issuance
of securities in the transactions described in paragraph 4 above were deemed to
be exempt from registration under the Securities Act by virtue of Rule 701
promulgated thereunder, in that they were issued either pursuant to written
compensatory benefit plans or pursuant to a written contract relating to
compensation, as provided in Rule 701, and/or Section 4(2) of the Securities
Act.
Item 3. Defaults Upon Senior Securities
Not Applicable
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Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
On September 24, 1996, the Securities and Exchange Commission
simultaneously declared effective the Company's Registration Statement on
Form S-1 filed under the Securities Act and its Registration Statement on
Form 8-A, filed under the Securities Exchange Act of 1934, as amended. The
Registration Statement on Form S-1 related to the initial public offering of
3,750,000 shares of the Company's Common Stock. On September 24, 1996, the
Company entered into an Underwriting Agreement with Hambrecht & Quist LLC,
Prudential Securities Incorporated and Wessels Arnold & Henderson LLC (the
"Underwriters"), pursuant to which the Underwriters agreed to purchase 2,500,000
shares of the Company's Common Stock from the Company and 1,250,000 shares of
the Company's Common Stock from certain selling shareholders, at the public
offering price of $11.00 per share, less underwriting discounts and commissions
of $.77 per share. On September 30, 1996, pursuant to the terms of Underwriting
Agreement, the initial public offering closed and the Company received from the
Underwriters the net proceeds of the initial public offering in the amount of
$25,575,000. In October, 1996, the Underwriters notified the Company of their
exercise of their option, granted under the terms of the Underwriting Agreement,
to purchase 562,500 additional shares, including 197,684 shares from the Company
and 364,816 shares from certain selling shareholders, solely to cover
overallotments, and on October 18, 1996, upon the closing of the sale of the
overallotment shares, the Company received additional net proceeds of $2,022,000
from the Underwriters.
Item 6. Exhibits And Reports on Form 8-K
(a) Exhibits
11.1 - Statement of Computation of Net Income Per Common Share
27 - Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the quarter
ended October 31, 1996.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized:
PEERLESS SYSTEMS CORPORATION
By: /s/Edward Gavaldon Date: December 13, 1996
----------------------------------------------
Edward Gavaldon
President and Chief Executive Officer
By: /s/Hoshi Printer Date: December 13, 1996
----------------------------------------------
Hoshi Printer
Chief Financial Officer
and Vice President, Finance and Administration
(Principal Financial and Accounting Officer)
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EXHIBIT 11.1
PEERLESS SYSTEMS CORPORATION
STATEMENT OF COMPUTATION OF NET INCOME PER SHARE
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three months ended Nine months ended
---------------------------- ----------------------------
October 31, September 30, October 31, September 30,
1996 1995 1996 1995
----------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
PRIMARY
- -------
Weighted average common shares
outstanding 3,750 2,671 3,126 2,665
Common stock options 656 656
Warrants 983 983
Series A convertible, redeemable
Preferred Stock 375 125
Series B convertible, redeemable
Preferred Stock 507 169
Staff Accounting Bulletin (SAB)
Topic 4-D equivalents 1,773 1,773 1,773 1,773
------ ------ ------ -------
Total 8,044 4,444 6,832 4,438
====== ====== ====== =======
FULLY DILUTED
- -------------
Weighted average common shares
outstanding 3,750 2,671 3,126 2,665
Common stock options 656 656
Warrants 983 983
Series A convertible, redeemable
Preferred Stock 1,126 1,126
Series B convertible, redeemable
Preferred Stock 1,521 1,521
Staff Accounting Bulletin (SAB)
Topic 4-D equivalents 1,773 1,773 1,773 1,773
------ ------ ------ -------
Total 9,809 4,444 9,185 4,438
====== ====== ====== =======
Net income (loss) $ 431 $ (593) $ 653 $(1,190)
====== ====== ====== =======
Net income per common share:
Primary $ 0.05 $ 0.10
====== ======
Fully diluted $ 0.04 $ 0.07
====== ======
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR PERIOD ENDED OCTOBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-START> FEB-01-1996
<PERIOD-END> OCT-31-1996
<CASH> 25,047
<SECURITIES> 0
<RECEIVABLES> 5,710
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 30,992
<PP&E> 2,725
<DEPRECIATION> 1,152
<TOTAL-ASSETS> 33,031
<CURRENT-LIABILITIES> 4,865
<BONDS> 0
0
0
<COMMON> 10
<OTHER-SE> 24,321
<TOTAL-LIABILITY-AND-EQUITY> 33,031
<SALES> 11,465
<TOTAL-REVENUES> 11,465
<CGS> 5,001
<TOTAL-COSTS> 5,001
<OTHER-EXPENSES> 5,480
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 125
<INCOME-PRETAX> 859
<INCOME-TAX> 206
<INCOME-CONTINUING> 653
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 653
<EPS-PRIMARY> .10
<EPS-DILUTED> .07
</TABLE>
