<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[ X ] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarterly Period Ended March 31, 1999
Commission File Number 0-23282
Natural MicroSystems Corporation
______________________________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 04-2814586
______________________________________________________________________________
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
100 Crossing Boulevard, Framingham, Massachusetts 01702
______________________________________________________________________________
(Address of principal executive offices) (Zip Code)
(508) 620-9300
______________________________________________________________________________
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [ X ] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 11,052,976 shares of Common
Stock, $.01 par value, outstanding at April 30, 1999.
The Index to Exhibits appears on Page 15 Total Number of Pages with Exhibits: 1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION
Page
-------
<S> <C>
Item 1. Financial Statements and Notes
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Operations 4
Condensed Consolidated Statements of Cash Flow 5
Notes to Consolidated Financial Statements 6 - 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9 - 13
PART II OTHER INFORMATION
Item 4. Submission of Matters of Vote of Security Holders 13 - 14
Item 6. Exhibits and Reports on Form 8-K 14
</TABLE>
2
<PAGE>
Natural MicroSystems Corporation
Condensed Consolidated Balance Sheets
(In $000s)
<TABLE>
<CAPTION>
(Unaudited)
December 31, March 31,
ASSETS 1998 1999
- ----------- --------------- -------------
<S> <C> <C>
Current assets:
Cash and marketable securities $17,922 $16,071
Accounts receivable, net of allowance for uncollectable
accounts of $779 and $1,214, respectively 17,224 14,169
Inventories 9,773 9,112
Prepaid expenses and other current assets 6,599 7,812
--------------- -------------
Total current assets 51,518 47,164
Property and equipment, net of accumulated 13,981 14,165
depreciation of $8,376 and $9,505, respectively
Other long-term assets 9,214 9,091
Goodwill, net 3,925 4,195
--------------- -------------
$78,638 $74,615
=============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
- -----------
Current liabilities:
Accounts payable 5,662 5,011
Accrued expenses and others liabilities 7,592 7,943
Current portion of long-term obligations 73 67
--------------- -------------
Total current liabilities 13,327 13,021
Long-term obligations, less current portion 158 48
Stockholders' equity 65,153 61,546
--------------- -------------
$78,638 $74,615
=============== =============
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements
3
<PAGE>
Natural MicroSystems Corporation
Condensed Consolidated Statements of Operations
(Unaudited)
(In $000s except per share data)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
1998 1999
--------------------- ---------------------
<S> <C> <C>
Revenues $ 20,007 $ 16,621
Cost of revenues 6,066 6,625
--------------------- ---------------------
Gross profit 13,941 9,996
Operating expenses:
Selling, general and administrative 6,305 9,590
Research and development 4,583 5,554
Provision for uncollectable receivable 2,500
--------------------- ---------------------
Total operating expenses 13,388 15,144
--------------------- ---------------------
Operating income (loss) 553 (5,148)
Other income (expense), net 223 (161)
--------------------- ---------------------
Income (loss) before income taxes 776 (5,309)
--------------------- ---------------------
Income tax expense (benefit) 272 (1,858)
--------------------- ---------------------
Net income (loss) $ 504 $ (3,451)
===================== =====================
Basic net income (loss) per common share $ 0.05 $ (0.31)
===================== =====================
Weighted average shares outstanding 10,827 11,024
===================== =====================
Diluted net income (loss) per common share $ 0.04 $ (0.31)
===================== =====================
Weighted average shares outstanding 11,493 11,024
===================== =====================
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements
4
<PAGE>
Natural MicroSystems Corporation
Condensed Consolidated Statements of Cash Flow
(Unaudited)
(In $000s)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
1998 1999
-------------------------- ------------------------
Cash flow from operating activities:
<S> <C> <C>
Net income (loss) $ 504 $ (3,451)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,074 1,727
Provision for bad debts 75 435
Gain (loss) on sale of marketable securities (1) 14
Changes in assets and liabilities:
Accounts receivable 4,745 2,279
Inventories (283) 463
Prepaid expenses and other assets (639) (1,384)
Accounts payable (582) (579)
Accrued expenses and other liabilities (3,246) 520
-------------------------- ------------------------
Cash provided by operating activities 1,647 24
-------------------------- ------------------------
Cash flow from investing activities:
Additions to property and equipment (1,544) (1,531)
Additions to goodwill (515)
Additions to license agreements (1,984) (10)
Purchases of marketable securities (3,456) (1,008)
Proceeds from the maturity of marketable securities 5,564 2,637
Other investing activities (6)
-------------------------- ------------------------
Cash used in investing activities (1,420) (433)
-------------------------- ------------------------
Cash flow from financing activities:
Payments of refundable advances (104)
Proceeds from issuance of common stock, net of
Issuance costs 641 33
-------------------------- ------------------------
Cash provided by (used in) financing activities 641 ( 71)
-------------------------- ------------------------
Effect of exchange rate changes on cash 44 277
Net increase (decrease) in cash and cash equivalents 912 (203)
Cash and cash equivalents, beginning of period 6,318 12,024
-------------------------- ------------------------
Cash and cash equivalents, end of period $ 7,230 $ $11,821
========================== ========================
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements
5
<PAGE>
Natural MicroSystems Corporation
Notes to Condensed Consolidated Financial Statements
A. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated balance sheet as of March 31, 1999 and the condensed
consolidated statements of income, operations and cash flow for the three month
periods ending March 31, 1999 and 1998 include the accounts of Natural
MicroSystems Corporation and its wholly owned subsidiaries (the "Company").
In the opinion of management, all adjustments, which are of a normal recurring
nature, necessary to present fairly the financial position, results of
operations and cash flows for all periods presented have been made. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the dates of the financial statements and
the reported amounts of revenues and expenses during the reported periods.
Actual results could differ from those estimates. The operating results for the
three month period ended March 31, 1999 are not necessarily indicative of the
operating results to be expected for the full fiscal year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. The financial statements should be read in
conjunction with the consolidated financial statements of the Company as of and
for the year ended December 31, 1998.
B. STOCKHOLDERS' EQUITY: (in 000s)
<TABLE>
<CAPTION>
Accumulated
Common Stock Additional Other
----------------------- Paid-In Accumulated Comprehensive
Shares Amount Capital Deficit Income (loss) Total
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at 11,018 $110 $67,585 $(2,494) $ (48) $65,153
December 31, 1998
Exercise of common 6 33 33
stock options
Net loss (3,451) (3,451)
Foreign currency (189) (189)
Translation adjustment
-------------------------------------------------------------------------------------------
Balance at March 31, 1999 11,024 $110 $67,618 $(5,945) $(237) $61,546
============================================================================================
</TABLE>
6
<PAGE>
C. INDEBTEDNESS
The Company established a new $7.5 million bank line of credit for working
capital purposes effective May 14, 1999. Borrowings under the line of credit
bear interest at the bank's floating rate of prime plus one percent. The Company
is subject to covenants requiring maintenance of certain profitability, equity
and liquidity ratios. As of May 14, 1999 the Company is currently compliant with
all covenants under the line, and there are no amounts currently outstanding.
D. EARNINGS PER SHARE
The following is a reconciliation of basic to the diluted earning per share
(EPS) computations for net income (loss). The shares outstanding calculation for
the three months ended March 31, 1999 do not include 2,666,189 anti-dilutive
shares:
<TABLE>
<CAPTION>
Three months ended March 31, 1999
----------------------------------------------------------
Income (loss) Shares Per Share
(In 000s except per share data) (Numerator) (Denominator) Amount
- ---------------------------------------------------------- ----------------------------------------------------------
<S> <C> <C> <C>
Basic EPS (income available to all shareholders) $(3,451) 11,024 $(0.31)
Effect of dilutive securities (stock options)
- ---------------------------------------------------------- ----------------------------------------------------------
Diluted EPS (income available to common
stockholders + assumed conversions) $(3,451) 11,024 $(0.31)
==========================================================
</TABLE>
<TABLE>
<CAPTION>
Three months ended March 31, 1998
-----------------------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
- ---------------------------------------------------------- -----------------------------------------------------------
<S> <C> <C> <C>
Basic EPS (income available to all shareholders) $504 10,827 $0.05
Effect of dilutive securities (stock options) 666
- ---------------------------------------------------------- -----------------------------------------------------------
Diluted EPS (income available to common
stockholders + assumed conversions) $504 11,493 $0.04
===========================================================
</TABLE>
E. INVENTORIES
Inventories are stated at the lower of cost (principally first-in, first-out) or
market. Inventories, as of December 31, 1998 and March 31, 1999 were comprised
of the following:
<TABLE>
<CAPTION>
December 31, March 31,
(In $000s) 1998 1999
-------------------------- --------------------------
<S> <C> <C>
Raw materials $ 967 $ 1,695
Work In process 5,747 4,286
Finished goods 3,059 3,131
-------------------------- --------------------------
$ 9,773 $ 9,112
========================== ==========================
</TABLE>
7
<PAGE>
F. SEGMENT INFORMATION
The following table presents the Company's revenues and operating income by
geographic segment:
<TABLE>
<CAPTION>
Three Months ended
March 31
1998 1999
<S> <C> <C>
Revenues
North America $15,150 $11,537
Europe 2,281 3,427
Other 2,576 1,657
-------------------------- -------------------------
Total revenues $20,007 $16,621
========================== ==========================
Operating income (loss)
North America $ (495) $(4,738)
Europe (398) (445)
Other 1,446 35
-------------------------- --------------------------
Total operating income (loss) $ 553 $(5,148)
========================== ==========================
</TABLE>
G. COMPREHENSIVE INCOME
The following table represents the Company's comprehensive income for the stated
periods.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1999
----------------------- -----------------------
<S> <C> <C>
Net income (loss) $ 504 $(3,451)
Other comprehensive income (loss) items:
Foreign currency translation adjustment (64) (189)
----------------------- -----------------------
Comprehensive income (loss) $ 440 $(3,640)
======================= =======================
</TABLE>
8
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Natural MicroSystems Corporation designs, manufactures and markets integrated
hardware and software products which enables its customers to develop and
implement high-value telecommunications applications and systems based on open,
standards-based, client/server architectures, collectively referred to as Open
Telecommunications(TM). Use of these state-of-the-art hardware and software
products, combined with the Company's consulting and support services, enable
customers to shorten time to market for computer telephony systems including
Internet/IP voice and fax systems, integrated voice response (IVR) systems, and
call centers integrated with web sites. Specific examples of these applications
include long distance least-cost routing and bypass, cellular and other wireless
switching services, telephone banking, medical alert and prescription services,
hotel and hospital information systems, transaction card authorization,
telemarketing, help desks, school bulletin boards, security monitoring, and
automated operator services.
Results of Operations
Revenues
Revenues of $16.6 million for the three months ended March 31, 1999 ("1999"),
decreased 16.9% percent from $20.0 million for the three months ended March 31,
1998 ("1998"). The decrease from 1998 to 1999 was primarily due to lower
revenue in North America, Asia and Latin America, partially offset by higher
revenue in Europe and higher service revenue.
Revenues from customers located outside of North America accounted for 30.6%
($5.1 million) and 24.3% ($4.9 million) of revenues for 1999 and 1998,
respectively. The dollar and percentage increase in revenues for 1999 over 1998
was due to significant increases of sales in Europe attributable to an enhanced
client base partially offset by decreases in Asia and Latin America.
Gross Profit
Gross profit for the three months ended March 31, decreased 28.3% to $10.0
million in 1999 versus $13.9 million for the same period in 1998 and were 60.1%
of revenues for 1999 versus 69.7% in 1998. The decrease in gross profit is
directly related to expenses incurred for investment in the services and
manufacturing departments and decreased sales volume.
Selling, General and Administrative
Selling, general and administrative expenses increased 52.1% to $9.6 million for
1999 from $6.3 million for 1998 and were 57.7% of total revenues for 1999 versus
31.5% in 1998. These increases were due to costs associated with increased
selling activities in Japan, China, Brazil, Spain and Italy, as well as
increased expenditures for international marketing, service administration
and marketing programs. The Company expects that its selling, general and
administrative expenditures will vary as a percentage of product revenues in
future periods.
Research and Development
Research and development expenditures increased 21.2% to $5.6 million for 1999
from $4.6 million for 1998, and were 33.4% of total revenues for 1999 versus
22.9% in 1998. The increases were due to increased personnel and development
project related cost related to IP Telephony functionality and software tools.
The Company expects that its research and development expenditures will continue
to increase, but may vary as a percentage of product revenues in future periods.
9
<PAGE>
Provision for Uncollectable Receivable
The Company recorded a provision against a trade receivable in 1998 from a
customer that ceased operations in April of that same year.
Restructuring Charges
During the last quarter of the Company's fiscal year, it incurred certain
restructuring charges in an effort to create efficiencies and manage its
business more effectively. The balance of accrued restructuring charges as of
the beginning of the quarter amounted to $3.0 million. The Company has paid
$672,000 during the current quarter, leaving approximately $2.3 million in
accrued charges outstanding. The Company experienced more favorable terms than
anticipated in the termination of existing lease commitments pertaining to its
new corporate office space. The expense of lease termination was less than
previous estimates. These savings, however, were offset by reduction in force of
certain executives in an effort to continue to reduce payroll and other related
expenditures. Any additional savings will be applied against the termination of
lease commitments at one of the Company's remote engineering facilities located
in Schaumburg, Illinois.
Operating and Net Income (Loss)
As a result of the foregoing, operating income (loss) was ($5.1) million and
$553,000 for 1999 and 1998, respectively. Net income (loss) was ($3.5) million
and $504,000 for the same periods, respectively.
Income Tax Expense (Benefit)
Income tax expense (benefit) of ($1,858,000) and $272,000 for 1999 and 1998,
respectively, was based on an effective tax rate which differed from the U. S.
Federal statutory rate primarily due to state and foreign income taxes and
income tax credits. The Company's current effective tax rate is 35.0%, on a
worldwide basis. For U.S. federal income tax purposes the Company has net
operating loss carryforwards available to reduce income of approximately $3.5
million at December 31, 1998. These carryforwards will begin to expire in 2004.
Utilization of net operating loss carryforwards are subject to an annual
limitation of approximately $1.0 million under Internal Revenue Code Section
382. In addition, ViaDSP, a wholly owned subsidiary, has net operating loss
carryforwards available to reduce future income of approximately $1.6 million at
December 31, 1998. These carryforwards are subject to annual limitations of
approximately $402,000 under Internal Revenue Code Section 382 and will be
available to reduce future taxable income of ViaDSP only. The Company
continuously re-evaluates the recoverability of its deferred tax assets. The
amount of the deferred tax asset considered realizable could be significantly
or completely reduced. Although realization is not assured, management believes
it is more likely than not the net deferred asset will be realized. The Company
will continue to assess the valuation of the deferred tax asset each quarter.
Other Income (Expense), Net
Other income (expense), net for 1999 and 1998 was ($161,000) and $223,000,
respectively. The decrease was due to a combination of both foreign exchange
losses and lower cash balances in the current period.
Liquidity And Capital Resources
Cash provided by operations for 1999 and 1998 was $24,000 and $1.6 million
respectively. Cash was provided by operations in 1999 due to reductions in
accounts receivable generated through better collection rates, increases in
accrued expenses and other liabilities offset by decreased net income and
accounts payable and an increase in prepaid expenses and other assets. Cash was
provided by operations in 1998 due to a reduction in accounts receivable
partially offset by decreased net income, accrued expenses and other
liabilities.
Cash was used in investing activities for 1999 and 1998 of $433,000 and $1.4
million, respectively. For both 1999 and 1998 cash of $1.5 million was used for
purchases of property and equipment. In 1998, the Company made a $2.0 million
investment in technology licensing agreements. In 1999 and 1998 the Company
realized net proceeds of $1.6 million and $2.1 million respectively from the
maturities of marketable securities.
Cash provided by (used in) financing activities in 1999 and 1998 was ($71,000)
and $641,000, respectively. In 1999, cash was used to pay down refundable
advances offset partially from
10
<PAGE>
proceeds primarily from the issuance of common stock upon the exercise of common
stock options. In 1998, cash proceeds were from the issuance of common stock
upon the exercise of common stock options.
Current assets at March 31, 1999, were $47.2 million, 8.5% less than current
assets of $51.5 million at December 31, 1998. Current liabilities at March 31,
1999 were $13.0 million, 2.3% less than current liabilities of $13.3 million at
December 31, 1998. Lower accounts payable and tax related accruals accounted for
the decrease in liabilities in 1999.
The Company established a new $7.5 million bank line of credit for working
capital purposes effective May 14,1999. Borrowings under the line of credit bear
interest at the bank's floating rate of prime plus one percent. The Company is
subject to covenants requiring maintenance of certain profitability, equity and
liquidity ratios. As of May 14,1999 the Company is currently compliant with all
covenants under the line, and there are no amounts currently outstanding.
Year 2000 Readiness Disclosure
The Year 2000 issue encompasses the inability of certain computer programs and
equipment that utilize embedded chips to perform accurately after the year 2000.
Concerns relating to the Year 2000 issue generally arise out of the potential
that this issue will affect business operations on an ongoing basis, as well as
the costs to correct possible system failures.
The Company has been implementing a Year 2000 compliance program to address the
Year 2000 issue. This program is designed to ensure that the Company's current
product offerings are Year 2000 compliant, that Year 2000 disruptions of vendors
and other third party relationships will not materially affect the Company's
operations, and that the Company's internal systems will continue to function
properly. As part of this implementation, since February 1998, the Company has
been publishing on its external web site Year 2000 information concerning the
Company's product offerings and other information relating to the Company's Year
2000 compliance program. Furthermore, an external consulting firm has completed
its report on the Company's Year 2000 readiness and has provided assistance for
the Company to comply with the Year 2000 requirements.
The Company is pursuing its Year 2000 compliance program in accordance with the
following five phases: (1) conduct an inventory to determine all potential Year
2000 problem areas having a material impact on the Company; (2) prioritize the
identified Year 2000 problem areas; (3) formally test or assess material items
for Year 2000 readiness; (4) repair or replace material items determined not to
be Year 2000 compliant; and (5) design and implement a contingency and business
continuation plan for items not to be repaired or replaced.
Phases 1 and 2 for all functions of the Company's program have been completed.
The Company is currently working on phase 3. During this phase the Company will
assess whether any Year 2000 non-compliant items can be remediated, replaced or
upgraded.
The Company has established testing criteria for all functions of the project.
Testing will involve an integration of both remediation and stress testing of
the Company's product offerings and internal systems. Final procedures were
established during the fourth quarter of 1998, and formal testing began
immediately thereafter.
The Company has tested 97% of the Company's major products and 73% of its legacy
products and (ii) by June 30, 1999, will have tested 100% of its major products
and 80% of current legacy products. As testing is in progress, it is believed
that all current major Company product offerings are already Year 2000
compliant. Certain older legacy products, which the Company no longer sells, may
not be Year 2000 compliant. The Company will address this issue by publishing
on the Company's external web site that these products may not be Year 2000
compliant, and that each customer who purchased these products should test,
repair and/or replace any of these products if they are still in use.
11
<PAGE>
The Company's enterprise-wide business system is the Company's primary internal
management information system. This system is warranted to be Year 2000
compliant by the vendor. The Company believes that its internal systems and
equipment will not pose a significant operational problem from a Year 2000
standpoint. Basic Input Output System ("BIOS") testing results on individual
workstations have yielded extremely favorable results. Furthermore, tools for
testing internal software packages have been developed and implemented.
The Company is verifying the readiness of its suppliers by issuing
questionnaires relating to Year 2000 issues. The Company is auditing the
responses of top tier suppliers and any other supplier who could have a material
impact on the Company's operations. Where the Company believes that a
particular supplier poses an unacceptable risk, the Company will identify an
alternative source. The mailing of questionnaires to suppliers has been
completed, and the Company is reviewing the responses as they are submitted.
Approximately 65% of suppliers have responded to date. Suppliers responding to
date have indicated that they are Year 2000 compliant. This process will be
ongoing as new vendors are added as suppliers to the Company's operations.
The Company is addressing the Year 2000 readiness of significant customers. On
an on-going basis, the Company is reviewing their publicly available published
information relating to their Year 2000 status. The Company has not encountered
any material concerns with its significant customers to date.
Costs incurred in the Company's Year 2000 effort will be expensed as incurred.
While the Company's final evaluation of total costs has not yet been determined,
it has been estimated based upon the Company's current Year 2000 program and
information to be approximately $1 million. Should these estimates prove to be
correct, it is believed that the expense will not have a material impact on its
business, operating results or ongoing operations resulting from Year 2000
issues.
The Company is addressing concerns relating to its products, internal facilities
and material relationships with third parties. At this time, the Company cannot
assure that there will not be any material effect on the Company's business,
results of operations or financial condition as a result of (i) products from
third parties that have not become Year 2000 compliant or (ii) currently unknown
information. However, the Company is reducing its risks relating to the Year
2000 issue by implementing its Year 2000 program, and will develop contingency
plans to any reasonably likely worst case scenario that it may become aware of.
Readers should be cautioned that forward-looking statements contained in the
Year 2000 update should be read in conjunction with the Company's disclosure
under the heading "Cautionary Statement" for the purposes of the safe harbor
provisions of the Private Securities Litigation Reform Act.
European Union Currency Conversion
On January 1, 1999, eleven member nations of European Economic and Monetary
Union began using a common currency, the Euro. For a three-year transition
period ending June 30, 2002, both the Euro and each of the currencies for such
member nations will remain in circulation. After June 30, 2002, the Euro will be
the sole legal tender for those countries. The adoption of the Euro will affect
many financial systems and business applications as the commerce of those
countries will be transacted in the Euro and the existing national currency
during the transition period. Of the eleven currently using the Euro, the
Company has subsidiary operations in France, Germany and Italy, and branch
operations in Spain. The Company has assessed the potential impact of the Euro
conversion in a number of areas, particularly including the potential impact
upon pricing and other marketing strategies, and upon product development.
Although the Company does not currently expect that the conversion, either
during or after the transition period, will adversely affect its operations of
financial condition, the conversion has only recently been implemented and there
can be no assurance that it will not have some unexpected adverse impact.
12
<PAGE>
A significant portion of the Company's revenues are subject to the risks
associated with international sales. Although most of the Company's product
prices are denominated in United States currency, customers in other geographic
regions generally evaluate purchases of products, such as those sold by the
Company, based on the purchase price expressed in the customer's currency.
Therefore, changes in foreign currency exchange rates may adversely affect the
demand for the Company's products.
The Company believes that its revenues and results of operations have not been
significantly impacted by inflation during the past three fiscal years.
Cautionary Statement
When used anywhere in this Form 10-Q and in future filings by the Company with
the Securities and Exchange Commission, in the Company's press releases and in
oral statements made with the approval of an authorized executive officer of the
Company, the words or phrases "will likely result", "the company expects", "will
continue", "is anticipated", "estimated", "project", or "outlook" or similar
expressions (including confirmations by an authorized executive officer of the
Company of any such expressions made by a third party with respect to the
Company) are intended to identify "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. The Company
wishes to caution readers not to place undue reliance on any such forward-
looking statements, which speak only as of the date made. Such statements are
subject to certain risks and uncertainties that could cause actual results to
differ materially from historical earnings and those presently anticipated or
projected. Such risk factors are set forth in Part I of the Company's annual
report on Form 10-K for the year ended December 31, 1998. The Company
specifically declines any obligation to publicly release the result of any
revisions which may be made to any forward-looking statements to reflect
anticipated or unanticipated events or circumstances occurring after the date of
such statements.
PART II - OTHER INFORMATION
ITEMS 1-3 Not Applicable.
ITEM 4 Submission of matters to a vote of security holders
On April 30, 1999, the Company held its Annual Meeting of Stockholders. The
matters considered at the meeting consisted of the following:
1. Election of Zenas W. Hutcheson III as director for a three year term. The
results of the voting were as follows:
Withhold
For Against Authority
8,322,296 94,202
2. Approval of an amendment to the Company's 1993 Employee Stock Purchase Plan
to increase the number of shares available for issuance thereunder by
300,000, from 400,000 to 700,000 shares.
Withhold
For Against Authority
8,167,278 204,727 44,493
13
<PAGE>
3. Approval of an amendment to the Company's 1993 Non-Employee Directors' Stock
Option Plan to increase the number of shares available for issuance
thereunder by 120,000, from 120,000 to 240,000 shares.
Withhold
For Against Authority
6,911,777 1,497,871 6,850
4. Ratification of the selection of PricewaterhouseCoopers LLP as the Company's
independent certified public accountants.
Withhold
For Against Authority
8,396,420 11,910 8,168
ITEM 5. Not Applicable.
ITEM 6. Exhibits and Reports on Form 8-K.
A. Exhibits
No. 27.1 Financial Data Schedule
B. Reports on Form 8-K
A report on Form 8-K was filed on May 12, 1998 related to a news
release disclosing a charge taken by the Company pursuant to a provision
recorded against a trade receivable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Natural MicroSystems Corporation
Dated: May 14, 1999 By: /S/ Robert P. Schechter
------------------------------------
Robert P. Schechter
President and Chief Executive Officer
And Chairman of the Board of Directors
Dated: May 14, 1999 By: /S/ Robert E. Hult
--------------------------------------------
Vice President of Finance and Operations,
Chief Financial Officer and Treasurer
14
<PAGE>
Natural MicroSystems Corporation
Exhibit Index
Page
----
No. 27.1 Financial Data Schedule 16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM QUARTERLY
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> MAR-31-1999 MAR-31-1998
<CASH> 11,821 7,230
<SECURITIES> 4,250 24,870
<RECEIVABLES> 15,383 15,340
<ALLOWANCES> 1,214 717
<INVENTORY> 9,112 8,881
<CURRENT-ASSETS> 47,164 57,954
<PP&E> 23,671 15,621
<DEPRECIATION> 9,506 5,741
<TOTAL-ASSETS> 74,615 78,832
<CURRENT-LIABILITIES> 13,021 9,375
<BONDS> 0 0
0 0
0 0
<COMMON> 110 109
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 74,615 78,832
<SALES> 16,621 20,007
<TOTAL-REVENUES> 16,621 20,007
<CGS> 6,625 6,066
<TOTAL-COSTS> 6,625 6,066
<OTHER-EXPENSES> 15,144 13,388
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (5,039) 776
<INCOME-TAX> (1,858) 272
<INCOME-CONTINUING> (3,451) 504
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (3,451) 504
<EPS-PRIMARY> (0.31) 0.05
<EPS-DILUTED> (0.31) 0.04
</TABLE>
