<PAGE> 1
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 QUARTER ENDED SEPTEMBER 30, 1996
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 0-23132
PARCPLACE-DIGITALK, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 77-0143293
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
999 EAST ARQUES AVENUE, SUNNYVALE, CALIFORNIA 94086
(Address of principal executive offices)
(408) 481-9090
(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
--- ---
As of October 31, 1996, the registrant had outstanding 11,810,416
shares of Common Stock.
<PAGE> 2
PARCPLACE-DIGITALK, INC.
FORM 10-Q
FOR THE PERIOD ENDED SEPTEMBER 30, 1996
TABLE OF CONTENTS
Page
----
PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Consolidated Financial Statements (unaudited)
Condensed Consolidated Balance Sheets
as of September 30, 1996 and March 31, 1996
Condensed Consolidated Statements of Operations
for the three and six months ended September 30, 1996 and 1995
Condensed Consolidated Statements of Cash Flows
for the six months ended September 30, 1996 and 1995
Notes to Condensed Consolidated Financial Statements
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders
ITEM 6. Exhibits and Reports on Form 8-K
SIGNATURES
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
PARCPLACE-DIGITALK, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, March 31,
1996 1996
--------------- ---------------
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 5,172 $ 14,367
Marketable securities 10,987 13,358
Accounts receivable, net of allowance of $2,859 at
September 30 and $1,467 at March 31 8,590 12,205
Inventories 983 825
Other current assets 979 744
-------- --------
Total current assets 26,711 41,499
Marketable securities 5,105 506
Property and equipment:
Property and equipment 13,265 11,846
Less accumulated depreciation 9,701 8,255
-------- --------
Net property and equipment 3,564 3,591
Other assets 1,509 1,706
-------- --------
Total assets $ 36,889 $ 47,302
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,341 $ 2,441
Accrued compensation 2,063 3,093
Other accrued liabilities 3,042 2,888
Deferred revenue 5,235 5,376
-------- --------
Total current liabilities 12,681 13,798
Commitments and contingencies
Stockholders' equity:
Common stock, $0.001 par value:
Authorized shares - 30,000
Issued and outstanding shares - 11,809 at
September 30 and 11,532 at March 31 12 12
Additional paid-in capital 49,687 48,392
Accumulated deficit (25,413) (14,871)
Cumulative translation adjustment (78) (29)
-------- --------
Total stockholders' equity 24,208 33,504
======== ========
Total liabilities and stockholders' equity $ 36,889 $ 47,302
======== ========
</TABLE>
(See accompanying notes.)
3
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PARCPLACE-DIGITALK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(Unaudited)
<TABLE>
<CAPTION>
For the three months For the six months
ended September 30, ended September 30,
------------------------- -------------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net revenues:
License $ 5,870 $ 5,499 $ 12,916 $ 11,387
Service 4,557 4,847 9,059 9,905
-------- -------- -------- --------
Total net revenues 10,427 10,346 21,975 21,292
Cost of net revenues:
License 2,076 1,148 3,720 2,484
Service 2,826 3,005 5,518 6,124
-------- -------- -------- --------
Total cost of net revenues 4,902 4,153 9,238 8,608
-------- -------- -------- --------
Gross profit 5,525 6,193 12,737 12,684
Operating expenses:
Sales and marketing 5,627 4,941 11,790 10,199
Research and development 2,548 2,805 5,029 5,459
Acquired research and development 2,867 -- 2,867 --
General and administrative 2,367 1,604 4,257 3,342
Merger related expenses -- 5,092 -- 5,092
-------- -------- -------- --------
Total operating expenses 13,409 14,442 23,943 24,092
-------- -------- -------- --------
Loss from operations (7,884) (8,249) (11,206) (11,408)
Interest income and other, net 310 383 603 692
-------- -------- -------- --------
Loss before provision for income taxes (7,574) (7,866) (10,603) (10,716)
Provision for income taxes 25 750 46 52
======== ======== ======== ========
Net loss $ (7,599) $ (8,616) $(10,649) $(10,768)
======== ======== ======== ========
Net loss per share $ (0.65) $ (0.84) $ (0.91) $ (1.08)
======== ======== ======== ========
Shares used in computing
net loss per share 11,775 10,350 11,700 10,100
======== ======== ======== ========
</TABLE>
(See accompanying notes)
4
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PARCPLACE-DIGITALK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
For the six months
ended September 30,
-------------------------
1996 1995
-------- --------
<S> <C> <C>
Operating Activities
Net loss $(10,649) $(10,768)
Adjustments to reconcile net loss to net cash
used in operating activities:
Research and development expensed on acquisition 2,867 --
Depreciation and amortization 2,191 1,455
Changes in operating assets and liabilities:
Accounts receivable 3,615 4,968
Inventories (158) 689
Prepaid expenses and other current assets (235) 163
Accounts payable and accrued liabilities (1,078) (2,312)
Accrued merger costs -- 3,456
Deferred revenue (141) (266)
-------- --------
Net cash used in operating activities (3,588) (2,615)
Investing activities
Purchased business combination (2,999) --
Purchases of property and equipment (1,419) (883)
Proceeds from maturities of marketable securities 13,339 13,633
Purchases of marketable securities (15,460) (24,679)
(Increase) decrease in deposits and other assets (146) 153
-------- --------
Net cash used in investing activities (6,685) (11,776)
Financing activities
Principal payments under capital lease obligations -- (147)
Proceeds from issuance of common stock, net of repurchases 1,127 661
-------- --------
Net cash provided by financing activities 1,127 514
-------- --------
Effect of exchange rate changes on cash
and cash equivalents (49) (40)
Net decrease in cash and cash equivalents (9,195) (13,917)
Cash and cash equivalents at beginning of period 14,367 25,059
======== ========
Cash and cash equivalents at end of period $ 5,172 $ 11,142
======== ========
</TABLE>
(See accompanying notes.)
5
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PARCPLACE-DIGITALK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared by ParcPlace-Digitalk, Inc. (ParcPlace or the Company)
pursuant to the rules and regulations of the Securities and Exchange
Commission regarding interim financial reporting. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements and should be read
in conjunction with the audited financial statements included in the
Company's Annual Report and Form 10-K for the fiscal year ended March 31,
1996.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for fair presentation have been
included. The operating results for the three and six months ended
September 30, 1996 are not necessarily indicative of the results expected
for the full fiscal year ending March 31, 1997.
2. Income Taxes
The Company provides for income taxes at the end of each interim period
based on the estimated effective tax rate for the full fiscal year.
3. Net Loss per Share
Net loss per share is computed using the weighted average number of shares
of common stock outstanding. Common equivalent shares have not been
included as their effect would be anti-dilutive.
4. Cash Equivalents and Marketable Securities
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
Short-term marketable securities consist principally of debt instruments
with maturities between three and twelve months. Long-term marketable
securities consist of debt instruments with maturities exceeding twelve
months.
At September 30, 1996, all of the Company's debt securities were classified
as available-for-sale and are carried at fair market value with unrealized
gains and losses recorded in stockholders' equity. The cost of the
securities is based upon the specific identification method.
6
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5. Litigation
The Company and certain of its officers and directors have been named as
defendants in a securities class action lawsuit filed on October 11, 1995,
in the U.S. District Court for the Northern District of California,
asserting claims under the Securities Exchange Act of 1934. The litigation
is in pre-trial discovery and no trial date has been set. The Company
believes that the claims are without merit. There can be no assurance,
however, that the lawsuit will not cause management distraction from the
operations of the Company or that the lawsuit will be resolved in a timely
or satisfactory manner without significant costs to the Company.
6. Acquisition
On July 31, 1996 ParcPlace acquired Objectshare Systems, Inc. (OSI), a
privately held corporation in the Smalltalk tools add-on products business.
The acquisition was accounted for as a purchase. In exchange for all the
outstanding stock and options of OSI, ParcPlace paid $3.0 million in cash
and assumed options for the purchase of 104,086 shares of ParcPlace's
Common Stock. In connection with the acquisition, ParcPlace has taken a
one-time write-off of $2.9 million for acquired research and development in
the quarter ended September 30, 1996. The operating results of OSI have
been included in the Company's consolidated results of operations from the
date of acquisition.
7. Subsequent Events
On October 1, 1996 ParcPlace acquired Polymorphic Software, Inc. (PSI), a
privately held corporation in the Smalltalk tools and consulting business.
This acquisition will be accounted for as a purchase. The Company agreed to
pay approximately $1.0 million in cash in exchange for all outstanding
shares of PSI common stock. The operating results of PSI will be included
in the Company's consolidated results of operations from the date of
acquisition.
In October 1996, ParcPlace reduced its world-wide total headcount by
approximately 20%. The Company took this action in an effort to reduce its
ongoing operating expenses. The Company will take a restructuring charge
against third quarter results estimated to be less than $2.0 million to
cover severance packages, the closing of excess facilities, and the
write-off of certain computer equipment and office furniture.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
ParcPlace develops, markets, and supports object-oriented application
development tools for the client/server/web computing market. The company also
provides customer support, training, on-site assistance, and consulting. The
Company's primary products are VisualWorks, Visual Smalltalk Enterprise, and
VisualWave. These products comprise a family of object-oriented application
development environments based on the Smalltalk programming language. During the
second quarter of fiscal 1997, the Company introduced Parts for Java, a
Java-based component development environment.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated (i) the percentage of
net revenues represented by certain line items in the Company's Condensed
Consolidated Statements of Operations, (ii) the gross margins on license and
service revenues and (iii) the percentage changes from the preceding periods.
<TABLE>
<CAPTION>
Percentage of total net revenues for the
----------------------------------------
Percent change
Three months ended Six months ended of dollar amounts
September 30, September 30, 1996 compared to 1995
------------- ------------- ---------------------
Three Six
1996 1995 1996 1995 months months
---- ---- ---- ---- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net Revenues:
License 56 % 53 % 59 % 54 % 7 % 13 %
Service 44 % 47 % 41 % 46 % (6)% (9)%
--- --- --- ---
Total net revenues 100 % 100 % 100 % 100 % 1 % 3 %
Cost of net revenues:
License 20 % 11 % 17 % 11 % 81 % 50 %
Service 27 % 29 % 25 % 29 % (6)% (10)%
--- --- --- ---
Total cost of net revenues 47 % 40 % 42 % 40 % 18 % 7 %
--- --- --- ---
Gross Margin 53 % 60 % 58 % 60 % (11)% 0 %
Operating Expenses:
Sales and marketing 54 % 48 % 54 % 48 % 14 % 16 %
Research and development 24 % 27 % 23 % 26 % (9)% (8)%
Acquired research and development 28 % 0 % 13 % 0 % 100 % 100 %
General and administrative 23 % 16 % 19 % 16 % 48 % 27 %
Merger related expenses 0 % 49 % 0 % 24 % N/A N/A
--- --- --- ---
Total operating expenses 129 % 140 % 109 % 114 % (7)% (1)%
--- --- --- ---
Loss from operations (76)% (80)% (51)% (54)% (4)% (2)%
Interest and other income, net 3 % 4 % 3 % 3 % (19)% (13)%
--- --- --- ---
Loss before income taxes (73)% (76)% (48)% (51)% (4)% (1)%
Provision for income taxes 0 % 7 % 0 % 0 % (97)% (12)%
--- --- --- ---
Net loss (73)% (83)% (48)% (51)% (12)% (1)%
Gross margin:
License 65 % 79 % 71 % 78 % (13)% 3 %
Service 38 % 38 % 39 % 38 % (6)% (6)%
</TABLE>
8
<PAGE> 9
Net revenues
Net revenues for the second quarter and the first six months of fiscal 1997 were
$10.4 million and $22.0 million, respectively, an increase of 1% and 3%,
respectively, over the comparable periods of fiscal 1996.
License revenues for the second quarter and the first six months of fiscal 1997
increased 7% and 13%, respectively, over the comparable periods of fiscal 1996.
The increase in license revenues can be attributed to three new products:
VisualWave, a new product introduced in the third quarter of fiscal 1996; Parts
for Java, the Company's newest product offering, introduced in the second
quarter of fiscal 1997; and Distributed Smalltalk, which the Company acquired
from Hewlett-Packard in the fourth quarter of fiscal 1996. Shipments of Parts
for Java in the second quarter of fiscal 1997 totalled nearly $1.6 million but
the Company recorded less than $500,000 in net license revenues in the quarter
and established a reserve of approximately $1.1 million pending sell-through of
the product in the retail channel, with which the Company has no history. The
year-to-date increase in license revenues was partially offset by the
elimination, early in the first quarter of fiscal 1997, of Visualworks runtime
licenses, and by reduced sales of Visualworks.
Service revenues for the second quarter and the first six months of fiscal 1997
decreased 6% and 9%, respectively, over the comparable periods of fiscal 1996.
The decrease in service revenue is attributable to a reduction of domestic
consulting revenue, primarily due to a reduction in the number of consulting
personnel. This decrease was partially offset by an increase in international
training and consulting revenue, and an increase in support revenue.
Cost of net revenues
Cost of net revenues consists of cost of license revenues and cost of service
revenues. Cost of license revenues is substantially lower than cost of service
revenues, reflecting the relatively low materials, packaging, and other costs
associated with sales of the Company's software products compared with the
relatively high personnel costs incurred in providing services.
Cost of license revenues consists principally of royalties, materials, packaging
and freight, and amortization of capitalized software development and purchased
software costs. Cost of license revenues for the second quarter and the first
six months of fiscal 1997 increased 81% and 50%, respectively, over the
comparable periods of fiscal 1996. The increases were due primarily to a
one-time write-off of purchased capitalized software for a canceled product, an
increased royalty accrual on a third-party product sold by the Company, and a
reserve for obsolete inventory. Cost of license revenues as a percentage of
license revenue in the second quarter and first six months of fiscal 1997 was
35% and 29%, respectively, compared to 21% and 22%, respectively, in the
comparable periods of fiscal 1996.
Cost of service revenues consists principally of personnel costs for training,
consulting and customer support. Cost of service revenues varies based on the
mix of services provided. Cost of service revenues for the second quarter and
the first six months of fiscal 1997 decreased 6% and 10%, respectively, from the
comparable periods of fiscal 1996. This decrease in costs was due to a reduction
in the number of outside contractors used by the Company, reduced personnel
costs and lower overhead costs. This decrease was partially offset by an
increase in international training and consulting expenses as the Company
expanded its international capacity. These costs as a percentage of service
revenues in the second quarter and first six months of fiscal 1997 were 62% and
61%, respectively, compared to 62% in the comparable periods of fiscal 1996.
9
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Operating expenses
Sales and marketing expenses consist principally of salaries, commissions,
advertising, facility expenses, and travel-related expenses. These expenses for
the second quarter and first six months of fiscal 1997 were $5.6 million and
$11.8 million, respectively, representing increases of 14% and 16%,
respectively, over the comparable periods of fiscal 1996. This increase is
primarily due to a significant expansion in the Company's international sales
force, including the French distributor acquired in the fourth quarter of fiscal
1996; an increase in sales commissions; higher travel costs; and recruiting fees
for the domestic sales force. In addition, marketing expenses for advertising
and promotion material increased as a result of the promotion of several
products released during the last two quarters of fiscal 1996. As a percentage
of net revenues, sales and marketing expenses for the second quarter and first
six months of both fiscal 1997 and fiscal 1996 were 54% and 48%, respectively.
Acquired research and development expenses represent a one-time charge for
software that has not yet reached technological feasibility under FAS 86 in the
amount of $2.9 million taken in connection with the July 31, 1996 acquisition of
privately held Objectshare Systems, Inc.
Research and development expenses for the second quarter and first six months of
fiscal 1997 were $2.5 million and $5.0 million, respectively, a decrease of 9%
and 8%, respectively, from comparable periods of fiscal 1996. This decrease was
primarily due to a reduction in the size of the research and development
organization subsequent to the merger with Digitalk in the second quarter of
fiscal 1996. The decrease in research and development expenses was partially
offset by increases in overhead, expensed tools and project materials, and
third-party fees for product localization. No software development costs were
capitalized during the first six months of fiscal 1997. As a percentage of net
revenues, research and development expenses for the second quarter and first six
months of fiscal 1997 were 24% and 23%, respectively, compared to 27% and 26%,
respectively, in the comparable periods of fiscal 1996.
General and administrative expenses for the second quarter and first six months
of fiscal 1997 were $2.4 million and $4.3 million, respectively, an increase of
48% and 27%, respectively, over the comparable periods of fiscal 1996. The
increase resulted primarily from an increase in expenses associated with the
securities class action lawsuit, an increase in the Company's allowance for
doubtful accounts, and the acquisition of the French subsidiary near the end of
the fourth quarter of fiscal 1996. As a percentage of net revenues, general and
administrative expenses for the second quarter and first six months of fiscal
1997 were 23% and 19%, respectively, compared to 16% in the comparable periods
of fiscal 1996.
Merger related expenses, incurred by the Company in the second quarter of fiscal
1996, were $5.1 million. Costs associated with the merger of ParcPlace Systems,
Inc. and Digitalk, Inc., primarily transactions fees and costs, severance
costs, the closing of duplicated facilities, and the write-off of inventory
related to duplicate product lines incident to the merger, were charged against
operations in the second quarter of fiscal 1996, the quarter in which the merger
was consummated.
10
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Interest and other income, net
Interest and other income, net, decreased to $310,000 in the second quarter of
fiscal 1997 from $383,000 in the second quarter of the prior year. Interest and
other income decreased to $603,000 in the first half of fiscal 1997 from
$692,000 in the first half of fiscal 1996. These decreases are primarily the
result of reduced cash and marketable securities balances as a result of the use
of funds for acquisitions and working capital purposes.
Provision for income taxes
Although the Company had a loss for the second quarter and first six months of
fiscal 1997, it provided for foreign and local taxes of $25,000 and $46,000,
respectively.
LEGAL PROCEEDINGS
The Company and certain of its officers and directors have been named as
defendants in a securities class action lawsuit filed on October 11, 1995, in
the U.S. District Court for the Northern District of California, asserting
claims under the Securities Exchange Act of 1934. The litigation is in pre-trial
discovery and no trial date has been set. The Company believes that the claims
are without merit. There can be no assurance, however, that the lawsuit will not
cause management distraction from the operations of the Company or that the
lawsuit will be resolved in a timely or satisfactory manner without significant
costs to the Company.
FACTORS AFFECTING QUARTERLY RESULTS
The Company has experienced significant quarterly fluctuations in operating
results and anticipates such fluctuations in the future. Quarterly fluctuations
may be caused by numerous factors including but not limited to those discussed
above. The Company generally ships orders as received and, as a result,
typically has little or no backlog. Quarterly revenues and operating results
therefore depend on the volume and timing of orders received during the quarter,
which are difficult to forecast. Historically, the Company has received a
substantial portion of its product orders in the last month of the quarter, with
a concentration of such orders in the last week. Delays in the receipt of orders
can therefore cause significant variations in quarterly license revenues. In
addition, license revenues in quarters after a new product or upgrade release
may be affected by the amount of new product or upgrade revenue, which tends to
increase soon after the release and then decline rapidly. License revenues may
also be affected by seasonal trends. Service revenues tend to fluctuate as
consulting projects, which may continue over several quarters, are undertaken or
completed. Operating results may also fluctuate due to factors such as the
demand for the Company's products, the mix of products and services, the size
and timing of customer orders, the introduction of new products and product
enhancements by the Company or its competitors, changes in the proportion of
revenues attributable to licenses and to service fees, commencement or
conclusion of significant consulting projects, changes in the level of operating
expenses, and competitive conditions in the industry. Because the Company's
staffing and other operating expenses are based on anticipated revenues,
operating results will be adversely affected if the anticipated level of
revenues is not realized in the applicable budget period. The Company's results
in recent quarters are not necessarily indicative of future results and the
Company believes that period-to-period comparisons of its financial results
should not be relied upon as an indicator of future performance.
11
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The Company's future success will depend to a large extent on growth in market
acceptance of object-oriented technology in general and the Company's
Smalltalk-based products in particular, and will also depend on acceptance of
the Company's products for use in new applications and operating environments
such as the Internet. The market for the Company's products is characterized by
ongoing technological developments, evolving industry standards and rapid
changes in customer requirements. If the Company is unable to develop and
introduce new products or enhancements to existing products in a timely manner
in response to changing market conditions or customer requirements, or if errors
are found in products after commercial shipments, the Company's business and
results of operations will be adversely affected. In addition, competitive
pressures from existing and new competitors who offer lower prices, provide free
deployment licenses or introduce new products can result in delays in purchase
decisions by, or loss of sales to, potential customers or cause the Company to
institute price reductions, any of which will adversely affect the Company's
results of operations.
In October 1996, ParcPlace reduced its world-wide total headcount by
approximately 20%. The Company took this action in an effort to reduce its
ongoing operating expenses and to better align operating expenses with revenue.
The Company will take a restructuring charge against third quarter results
estimated to be less than $2.0 million to cover severance packages, the closing
of excess facilities, and the write-off of certain computer equipment and office
furniture. The Company's future operating results and financial condition could
be adversely affected by its ability to effectively manage the transition to the
new business model and cost structure. The restructuring may adversely affect
the Company's ability to retain and motivate employees.
The Company believes that to respond to changes in the marketplace, including
technological changes and increased competition, it is necessary to continue to
invest in sales and marketing, and research and development. Accordingly the
Company expects that operating expenses in the next several quarters will
continue to be at a higher percentage of total net revenues than in years prior
to fiscal 1996. Competition for qualified personnel, however, is intense and may
intensify. Employee turnover, particularly in technical and sales positions, is
highly disruptive, and the loss of key personnel or inability to hire and retain
qualified personnel will adversely affect the Company's business.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1996, the Company had cash, cash equivalents and marketable
securities of $21.3 million and working capital of $14.0 million compared to
$28.2 million and $27.7 million, respectively, as of March 31, 1996. The Company
has a $5 million working capital line of credit which includes a $1 million
equipment line of credit sub-facility. The agreement expires on January 15,
1997, and there were no borrowings outstanding under this agreement on September
30, 1996.
The Company used cash for operations of $3.6 million in the first six months of
fiscal 1997, which included a net loss of $10.6 million (including a one-time
charge of $2.9 million for acquired research and development in the acquisition
of Objectshare Systems, Inc.) and a decrease in accounts payable and accrued
liabilities of $1.1 million offset by a decrease in accounts receivable of $3.6
million and amortization and depreciation of $2.2 million. Cash payments for the
purchase of property and equipment in the first six months of fiscal 1997 were
$1.4 million.
12
<PAGE> 13
The Company may acquire other products, technologies, or businesses in the
future. Costs and liabilities resulting from such acquisitions, or failure to
effectively integrate such acquisitions, could adversely affect the Company's
business and its results of operations and financial condition.
The Company believes that existing cash, cash equivalents and marketable
securities will be sufficient to satisfy its currently anticipated cash
requirements for the next twelve months.
13
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PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its 1996 Annual Meeting of Stockholders on August 23, 1996. The
stockholders voted as follows:
Proposal 1. The stockholders elected each of the five nominees for
director. The elected directors are: James C. Anderson (9,182,473 shares
for, 441,470 shares withheld), John B. Carrington (9,179,161 shares for,
444,782 shares withheld), Jos C. Henkens (9,182,473 shares for, 441,470
shares withheld), Phillip C. Kantz (9,182,473 shares for, 441,470 shares
withheld), William P. Lyons (9,168,386 shares for, 455,557 shares
withheld),
Proposal 2. The stockholders approved amendments to the 1993 Stock Plan,
including an increase in the number of shares authorized for issuance
thereunder (6,269,440 shares for, 3,225,652 shares against, 14,486 shares
abstaining, and 114,365 broker non-votes).
Proposal 3. The stockholders approved an amendment to the 1993 Employee
Stock Purchase Plan to increase in the number of shares authorized for
issuance thereunder (8,487,899 shares for, 1,006,867 shares against,
14,812 shares abstaining, and 114,365 broker non-votes).
Proposal 4. The stockholders confirmed the appointment of Ernst & Young as
independent auditors of the corporation for the fiscal year ending March
31, 1997 (9,588,119 shares for, 28,904 shares against, 6,920 shares
abstaining, and 0 broker non-votes).
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A) Exhibits:
27.1 Financial Data Schedule
B) Reports on Form 8-K:
No reports on Form 8-K were filed during the three months ended
September 30, 1996.
14
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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.
DATE: November 12, 1996 PARCPLACE-DIGITALK, INC.
By: /S/ CAROLYN V. AVER
__________________________________________
Carolyn V. Aver
Vice President and Chief Financial Officer
(on behalf of the Registrant and as
principal financial officer)
15
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EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
27.1 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from (a) the
financial statements contained in the Company's Form 10-Q for the period ending
September 30, 1996 and is qualified in its entirety by reference to such (b)
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 5,172
<SECURITIES> 16,092
<RECEIVABLES> 11,449
<ALLOWANCES> 2,859
<INVENTORY> 983
<CURRENT-ASSETS> 26,711
<PP&E> 13,265
<DEPRECIATION> 9,701
<TOTAL-ASSETS> 36,889
<CURRENT-LIABILITIES> 12,681
<BONDS> 0
0
0
<COMMON> 49,699
<OTHER-SE> (78)
<TOTAL-LIABILITY-AND-EQUITY> 36,889
<SALES> 12,916
<TOTAL-REVENUES> 21,975
<CGS> 3,720
<TOTAL-COSTS> 9,238
<OTHER-EXPENSES> 23,943
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (10,603)
<INCOME-TAX> 46
<INCOME-CONTINUING> (10,649)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,649)
<EPS-PRIMARY> (.91)
<EPS-DILUTED> (.91)
</TABLE>
