<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 September 30, 1997.
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 0-24030
THE PANDA PROJECT, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 65-0323354
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
901 YAMATO ROAD
BOCA RATON, FLORIDA 33431
(Address of principal executive offices)
(561) 994-2300
(Registrant's telephone number)
(Former name, former address and former fiscal year,
if changed since last report.)
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 .
----- -----
Applicable Only to Issuers Involved In Bankruptcy
Proceedings During The Preceding Five Years
Indicate by check mark whether the registrant filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court. Yes No .
---- ----
Applicable Only to Corporate Issuers
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock, $.01 Par Value 12,194,332 shares as of October 31, 1997
<PAGE>
Page 2
THE PANDA PROJECT, INC.
Index
Page
Part I - Financial Information
Item 1 - Financial Statements (unaudited)
Condensed Balance Sheets - September 30, 1997 and
March 31, 1997 3
Condensed Statements of Operations - Three and six months
ended September 30, 1997 and September 30, 1996 4
Condensed Statements of Cash Flows - Six months ended
September 30, 1997 and September 30, 1996 5
Notes to Condensed Financial Statements - September 30, 1997 6-7
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-11
Part II - Other Information
Item 1 - Legal Proceedings 12
Item 2 - Changes in Securities 12
Item 3 - Defaults Upon Senior Securities 12
Item 4 - Submission of Matters to Vote of Security Holders 12
Item 5 - Other Information 13
Item 6 - Exhibits and Reports on Form 8-K 14
<PAGE>
Page 3
The Panda Project, Inc.
Condensed Balance Sheets
September 30, March 31,
1997 1997
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $2,178,214 $ 3,243,505
Accounts receivable-trade (net of allowance
of $161,742 at September 30, 1997 and
$110,962 at March 31, 1997) 458,145 165,093
Inventory 968,820 822,309
Other receivables 404,288 18,905
Prepaid expenses and other current assets 307,729 98,963
------------ ------------
Total current assets 4,317,196 4,348,775
------------ ------------
Property and equipment, net 2,723,661 2,823,798
Restricted cash 260,000 150,000
Other assets 9,969 14,747
------------ ------------
Total assets $ 7,310,826 $ 7,337,320
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 1,679,798 $ 852,388
Accrued compensation and employee benefits 88,049 60,934
Accrued expenses and other current liabilities 1,323,013 1,611,123
------------ ------------
Total current liabilities 3,090,860 2,524,445
Stockholders' Equity:
Common Stock, $.01 par value, 50,000,000
shares authorized 12,179,701 shares at
September 30, 1997 and 10,124,643 shares
at March 31, 1997 issued and outstanding 121,798 101,247
Additional paid-in capital 63,338,544 58,627,529
Accumulated deficit (59,240,376) (53,915,901)
------------ ------------
Total stockholders' equity 4,219,966 4,812,875
------------ ------------
Total liabilities and stockholders' equity $ 7,310,826 $ 7,337,320
============ ============
The Balance Sheet at March 31, 1997 has been derived from the audited
financial statements of the Company at that date.
See Notes to Condensed Financial Statements.
<PAGE>
Page 4
<TABLE>
The Panda Project, Inc.
Condensed Statements of Operations (Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues:
Product sales $ 392,485 $ 837,359 $ 701,015 $ 1,433,929
Licensing fees 250,000 250,000 -
Contract research and
development revenues 441,470 835,724 -
Less returns and
allowances - (19,746) - (183,204)
------------ ------------ ------------ ------------
Net revenues $ 1,083,955 $ 817,613 $ 1,786,739 $ 1,250,725
Costs and expenses:
Cost of sales 435,138 1,398,674 778,960 2,188,780
Research and
development 1,050,581 1,923,880 2,202,821 3,460,948
Selling, general and
administrative 2,308,715 3,690,933 4,255,089 8,243,769
Costs associated with
asset impairments - - - 1,471,026
------------ ------------ ------------ ------------
Total costs and expenses 3,794,434 7,013,487 7,236,870 15,364,523
------------ ------------ ------------ ------------
Operating loss (2,710,479) (6,195,874) (5,450,131) (14,113,798)
Interest income 49,021 140,452 125,957 267,858
Other income (580) 5,402 (301) 7,807
------------ ------------ ------------ ------------
Net loss $ (2,662,038)$ (6,050,020)$ (5,324,475)$(13,838,133)
============ ============ ============ ============
Net loss per common
share $ (.22)$ (0.61)$ (.47)$ (1.48)
============ ============ ============ ============
Weighted average number
of shares of common
stock and common stock
equivalents outstanding 12,076,161 9,898,465 11,212,390 9,364,640
============ ============ ============ ============
See Notes to Condensed Financial Statements.
</TABLE>
<PAGE>
Page 5
The Panda Project, Inc.
Condensed Statements of Cash Flows (Unaudited)
Six Months Ended
September 30,
1997 1996
Net cash used by operating activities $ (5,308,659) $(12,698,354)
Cash flows from investing activities:
Additions to property and equipment (609,978) (571,056)
------------ ------------
Net cash used by investing activities (609,978) (571,056)
Cash flows from financing activities:
Payment of stock issuance costs - (596,784)
Proceeds from issuance of debentures 4,800,000 -
Proceeds from issuance of stock 53,346 11,123,245
------------ ------------
Net cash provided by financing activities 4,853,346 10,526,461
------------ ------------
Net decrease in cash and cash
equivalents (1,065,291) (2,742,949)
Cash and cash equivalents at beginning,
of period 3,243,505 10,731,540
------------ ------------
Cash and cash equivalents at end of period $ 2,178,214 $ 7,988,591
============ ============
During the six months ended September 30, 1997, $4,800,000 of the Company's
4% subordinated convertible debentures were converted into 1,996,825 shares
of the Company's common stock.
See Notes to Condensed Financial Statements.
<PAGE>
Page 6
The Panda Project, Inc.
Notes to Condensed Financial Statements (Unaudited)
September 30, 1997
1. Basis of Presentation
The accompanying condensed financial statements of The Panda Project, Inc.
("the Company") have been prepared in accordance with generally accepted
accounting principles on a basis consistent in all material respects with
those applied in the Annual Report on Form 10-K for the year ended March
31, 1997. The interim financial information is unaudited, but reflects all
normal and recurring adjustments which are, in the opinion of management,
necessary to provide a fair statement of results of operations for the
interim periods presented. The interim financial statements should be read
in connection with the financial statements in the Company's Annual Report
on Form 10-K for the year ended March 31, 1997.
2. Inventory
September 30, 1997 March 31, 1997
---------------------------------------
Raw materials $ 907,880 $ 434,569
Work in process - 43,341
Finished goods 60,940 344,399
---------------------------------------
$ 968,820 $ 822,309
=======================================
Inventory is valued at net realizable value, which is net of obsolescence
reserves of approximately $450,000 at September 30, 1997 and $250,000 at
March 31, 1997.
3. Subordinated Convertible Debentures
During April 1997, the Company completed a private placement of $4.8
million of 4% subordinated convertible debentures. The debentures were due
two years from the date of issuance and were convertible into shares of
common stock at the lower of $5.625 per share or 82% of the average closing
bid price of the Company's common stock for the five consecutive trading
days immediately preceding the date of conversion. During June and July
1997, all of such debentures were converted into an aggregate of 1,996,825
shares of the Company's common stock.
4. Commitments and Contingent Matters
During the quarter ended September 30, 1997, the Company issued purchase
orders to two suppliers to provide materials for the production of the
Company's VSPA semiconductor package. The aggregate commitment under these
purchase orders is approximately $400,000. During October 1997, the
<PAGE>
Page 7
Company issued additional purchase orders to one of these suppliers in the
aggregate amount of approximately $480,000.
During November 1997, the Company and William J. Sarubbi, the Company s
former Vice President of Sales, agreed to dismiss the lawsuit filed against
the Company by William Sarubbi in April 1996 with no obligation owed by the
Company.
There are various legal proceedings and claims pending against the Company,
including disputes with a former director of the Company. While it is not
possible to determine the ultimate outcome of these matters, it is the
opinion of management, based on advice from counsel, that the resolution of
such matters will not have a material adverse effect on the Company's
financial position.
5. Equity
During the annual meeting of shareholders held on August 12, 1997, an
amendment to the Company s Articles of Incorporation was approved which
allows the Company to issue up to 2,000,000 shares of preferred stock.
6. Licensing Fees
In July, 1997, the Company entered into a licensing agreement with LG Cable
& Machinery Ltd. ("LG") whereby LG was granted a license, for a term that
continues until the expiration of the last to expire of the patents covered
by the agreement, with respect to a semiconductor package product owned by
the Company. The license granted to LG is non-exclusive except for certain
limited exclusive manufacturing rights with respect to specified Asian
countries. In connection with this agreement, the Company is entitled to a
non-refundable license fee of $250,000 which was received and recognized as
revenue during the quarter ended September 30, 1997. In addition, the
Company is entitled to receive royalties on sales of the semiconductor
package products by LG or its affiliates.
<PAGE>
Page 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
The Company was incorporated in April 1992 to design, develop, and
manufacture products incorporating the Company's proprietary semiconductor
packaging and interconnect technology (the "Technology Products") and to
develop, manufacture and market a line of powerful, modular computers (the
"Archistrat Computers"). The Company's fiscal year previously ended on
March 31. However, the Company has changed its fiscal year from April 1
through March 31 to January 1 through December 31, effective December 31,
1997. The Company will file an annual report on Form 10-K with the
Securities and Exchange Commission with audited financial statements for
the transition period (April 1, 1997 through December 31, 1997).
This Report on Form 10-Q contains forward-looking statements. For this
purpose any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without
limiting the foregoing, the words "believes", "anticipates", "plans",
"expects" and similar expressions are intended to identify forward-looking
statements. There are a number of important factors that could cause the
Company's actual results to differ materially from those indicated by such
forward-looking statements. These factors, include, without limitation,
delays in product development, potential claims and possible litigation
relating to the ownership of intellectual property, competitive pressures,
manufacturing risks, general economic conditions and the risk factors
detailed from time to time in the Company's periodic reports and
registration statements filed with the Securities and Exchange Commission.
Results of Operations - Quarter and Six Months Ended September 30, 1997 and
1996
Total net revenues increased approximately $266,000 or 33% to $1,083,955
for the quarter ended September 30, 1997 compared to the same period of the
preceding year. For the six months ended September 30, 1997, net revenues
increased approximately $536,000 or 43% compared to the six months ended
September 30, 1996.
For the quarter and six months ended September 30, 1997, the Company
recognized revenue related to its agreement with the Defense Advanced
Research Projects Agency, which commenced in October 1996, of $441,470 and
$835,724, respectively. The Company recognizes revenue and is entitled to
receive payments based on the achievement of specific milestones set forth
in the agreement.
Net revenues from the sale of Archistrat Computers amounted to $392,485 and
$701,015 during the quarter and six months ended September 30, 1997,
<PAGE>
Page 9
respectively, compared to net revenues of $817,613 and $1,250,725 during
the same periods of the prior year, respectively. Revenues of
approximately $326,000 and $874,000 were recognized during the three and
six months ended September 30, 1996 in connection with a barter transaction
with a software developer. The Company will continue to actively market
and sell the workstation configuration of the Archistrat computer,
primarily through its own sales force, for animation, video, and high
performance CAD/CAM applications. In addition, in October 1997, the
Company introduced a new lower cost version workstation using the Company's
proprietary architecture and technology in a basic chassis.
Cost of sales related to the sale of Archistrat Computers decreased to
$435,138 from $1,398,674 during the quarter ended September 30, 1997
compared to the same period of the previous year, and decreased to $778,960
from $2,188,780 during the six months ended September 30, 1997 compared to
the same period of the previous year. The decreases relate to the lower
amount of product sales and a significant reduction in the amount of
charges recognized related to inventory write downs, scrap and rework
during theprior year.
Research and development (R&D) expenses decreased approximately 45% during
the quarter ended September 30, 1997 as compared to the quarter ended
September 30, 1996 and decreased 36% during the six months ended September
30, 1997 compared to the prior year. The reduction in R&D spending is
reflective of the Company's progress in moving from a development stage
enterprise to one seeking to commercialize its core technologies. The
Company believes that its level of R&D spending is appropriate to support
current operations and to continue to maintain efforts to enhance
development of VSPA, Compass Connectors, Compass PGA, and the Archistrat
Computers and related technologies. During the quarter and six months
ended September 30, 1997, research and development activities primarily
included continued testing and qualification of VSPA as well as the design
and development of high-speed manufacturing equipment for VSPA.
Selling, general and administrative (SG&A) expenses for the quarter and six
months ended September 30, 1997 decreased 37% and 48%, respectively, as
compared to the same periods of the prior year. The net decrease in SG&A
expenses for the quarterly periods is due principally to a reduction in
work force. The average number of full-time employees decreased from 121
for the quarter ended September 30, 1996 to 62 for the quarter ended
September 30, 1997. Employee compensation and benefit costs also
substantially contributed to the overall reduction in SG&A expenses for the
six months ended September 30, 1997 compared to the same period of the
prior year. The average number of full-time employees decreased from 133
to 60 for the six months ended September 30, 1996 and 1997, respectively.
In addition, selling and marketing expenses decreased during this period as
a result of focusing on specific niche markets for the Company s Archistrat
Computers as well as utilizing independent manufacturing sales
<PAGE>
Page 10
representatives to supplement the Company s sales force regarding the sale
of the Company s technology products.
During the quarter ended June 30, 1996, the Company determined that, due to
various events and changes in circumstances (including efforts to
streamline operations and to increase the use of strategic alliances to
manufacture and market the Company's products), certain long-lived assets
were impaired. As a result, in the quarter ended June 30, 1996, the
Company recorded a charge of approximately $1.5 million.
The Company anticipates that it will be dependent on third parties for the
manufacture and/or assembly of printed circuit boards, frame, exterior,
base fabrication and other subassemblies, as well as for the supply of
various of the components, incorporated into the Archistrat Computers, and
for performing the final assembly configuration, certain quality control
testing and delivery of such computers. Although the Company has an
arrangement with a contract manufacturer to manufacturer certain
subassemblies and has identified an alternative manufacturer for such
components, there can be no assurance that such manufacturers will dedicate
sufficient production capacity to satisfy the Company's requirements within
scheduled delivery times or at all.
Liquidity and Capital Resources
During April 1997, the Company completed a private placement of $4.8
million of 4% subordinated convertible debentures and received net proceeds
of approximately $4.5 million. The debentures were convertible into shares
of common stock at the lower of $5.625 per share or 82% of the average
closing bid price of the Company's common stock for the five consecutive
trading days immediately preceding the date of conversion. During June and
July 1997, all of the debentures were converted into an aggregate of
1,996,825 shares of the Company's common stock.
The Company's capital requirements in connection with its operations and
development activities have been and may continue to be significant.
During the remainder of the current year, the Company expects to continue
its development efforts related to certain of its Technology Products,
complete the construction of several high-speed production machines for its
VSPA product which are expected to be utilized within the Company to
manufacture product for direct sales and/or to be sold to licensees of
VSPA, and continue to transition its current modular workstations and
server products into higher volume production.
In October 1997, the Company announced that it had completed construction
of the first automated machine for the production of the VSPA product. In
addition, the Company also announced that it had received a prototype order
from a manufacturer of data communications circuits based in Taiwan. The
Company anticipates, based on its discussions with certain customers, that
<PAGE>
Page 11
it will commence the production and shipment of modest quantities of VSPA
semiconductor packages during the quarter ending December 31, 1997. The
Company anticipates that it will also realize royalty revenue during such
quarter related to its Technology Products from the arrangements announced
during the past year, including, but not limited to, license agreements
with LG Cable & Machinery. The Company also expects to continue to earn
revenues related to the cooperative development agreement entered into with
the U.S. Government during the prior year. However, there can be no
assurance that revenues from any or all of these sources will in fact be
realized on the timetable anticipated by the Company or that the Company
will become profitable in the foreseeable future.
The Company has been dependent upon the proceeds of sales of its securities
to fund its activities since inception. The Company expects that sales of
VSPA, licensing and royalty revenue related to its Technology Products,
increased shipments of Archistrat Computers and the related revenue, and
revenue associated with the cooperative development agreement, noted above
will provide additional resources to at least partially fund its activities
during the remainder of the current year.
Primarily through its cost reduction efforts, the Company has been able to
significantly decrease the amount of average monthly cash consumption.
Cash flows used by operating activities decreased $7.4 million from $12.7
million during the six months ended September 30, 1996 to $5.3 million
during six months ended September 30, 1997.
The Company is dependent upon the success of the efforts discussed above to
expand its marketing activities in order to obtain additional orders for
its Technology Products and Archistrat Computers, to continue efforts that
may lead to the commercialization of additional products and technologies
and to finance other working capital requirements. The Company may need to
seek additional sources of funding during the current year in order to
achieve its goals.
<PAGE>
Page 12
Part II - Other Information
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
At the Annual Meeting of Shareholders held on August 12, 1997,
an amendment to the Company s Articles of Incorporation was
approved which allows the Company to issue up to 2,000,000 shares
of Preferred Stock. The Board of Directors may, without action by
the shareholders, designate and issue such Preferred Stock in one
or more series, and may designate the dividend rate, voting rights
and other rights, preferences and restrictions of each series, all
or any of which may be greater than the rights of holders of
Common Stock of the Company.
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to Vote of Security Holders
(a) The annual meeting of shareholders was held on August 12,
1997.
(b) The following directors were elected at the meeting to serve
the term noted:
Stanford W. Crane, Jr. Three year term
James T.A. Wooder Three year term
Claud L. Gingrich One year term
Rao R. Tummala Two year term
(c) The matters voted upon at the meeting and results of the
voting with respect to those matters were as follows:
1) Election of Directors: For Against
Stanford W. Crane, Jr. 7,681,119 87,442
James T.A. Wooder 7,726,344 42,217
Claud L. Gingrich 7,725,544 43,017
Rao R. Tummala 7,726,544 42,017
2) Amend the Company s
Amended and Restated
Articles of Incorpor-
ation to establish
a class of Preferred
Stock consisting of
2,000,000 shares:
Broker Held
For Against Abstained Non-Voted
4,623,314 156,055 34,022 2,955,170
<PAGE>
Page 13
3) Amend the Company's
Amended and Restated
Articles of Incorpor-
ation and By-Laws
to establish a class-
ified Board of Directors
consisting of three
classes serving staggered
terms, and to provide
for amended procedures
for changing the number
of directors, removing
directors, filling
vacancies on the Board
and other related matters:
Broker Held
For Against Abstained Non-Voted
4,607,578 171,074 34,739 2,955,170
4) Amend the Company s
Nonemployee Directors
Stock Option Plan:
For Against Abstained
7,626,490 111,147 30,924
5) Ratification of Price
Waterhouse LLP as the
Company s independent
auditors for 1998:
For Against Abstained
7,558,248 19,141 12,057
The foregoing matters are described in detail in the Registrant s
definitive proxy statement dated August 12, 1997, for the Annual Meeting of
Shareholders held on August 12, 1997.
Item 5. Other Information
In September 1997, the Company announced it had reached agreement
with Grand Traverse Stamping, a division of Alcoa Fujikura,
Ltd.(a joint venture between Alcoa and Fujikura) under which
Grand Traverse Stamping will supply interconnect pins for the
Company's VSPA semiconductor package. The Company also announced
it had entered into an agreement with Confederate Plastics, Inc.
under which Confederate Plastics will supply the molded frame
made of liquid crystal polymer for the VSPA semiconductor
package.
In October 1997, the Company announced it had completed
construction of the first automated machine for the production of
the VSPA product. The Company also announced that it had
received a prototype order from Tamarack Microelectronics, Inc.,
a privately owned-manufacturer of data communications circuits
based in Taiwan.
In September 1997, William E.Ahearn, formerly Vice President of
Technology of the Company, was named Vice President and Chief
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Page 14
Scientist of the Company. In July 1997, Babar Hamirani resigned
as Senior Vice President of Systems Operations of the Company.
In November 1997, Robert Toda resigned as Vice President of Sales
and Marketing. The Company does not expect to fill that position
at this time.
In August 1997, the Company hired Melissa Crane, wife of Stanford
W. Crane, Jr., as Director of Strategic Business at an
annual salary of $100,000 per year. In September 1997, Ms. Crane
was granted an option to purchase 50,000 shares of Common Stock
of the Company at an exercise price of $6.13 per share. Such
options expire on September 19, 2007. Options to purchase 10,000
of these shares of Common Stock are exercisable six months from
the date of grant and the remainder become exercisable in equal
annual installments on the first, second, third and fourth
anniversaries of grant. In October 1997, the Board of
Directors approved the payment of a bonus of $25,000 to Ms. Crane
in connection with the achievement of certain marketing
objectives. In November 1997, the Board of Directors elected Ms.
Crane Vice President of Strategic Business and authorized an
increase in her salary to $125,000 per year.
Item 6. Exhibits and Reports on Form 8-K.
(a) See the Exhibit Index included immediately preceding the Exhibits
to this report, which is incorporated herein by reference.
(b) Reports on Form 8-K:
A current report on Form 8-K dated September 30, 1997 was filed
on October 6, 1997, reporting a change in fiscal year, an event
reported under Item 8. In addition, the Company also reported
that it had issued shares of Common Stock to a third-party for
services rendered. Such shares were issued pursuant to an
exemption from registration under Regulation S under the
Securities Act of 1933; such issuance was made solely to non-U.S.
persons in an offshore transaction and resale of such securities
is restricted in the manner provided in Regulation S. This
transaction was an event reported under Item 9.
<PAGE>
Page 15
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.
THE PANDA PROJECT, INC.
Date: November 14, 1997
By: /s/ C. DARYL HOLLIS
---------------------------------------
C. Daryl Hollis, Chief Financial Officer
(On behalf of the Registrant and as
Principal Financial and Accounting
Officer)
<PAGE>
Page 16
EXHIBIT INDEX
Exhibit Description of Exhibit Page
- ------- ---------------------- -----
4.1 Amended and Restated Articles of
Incorporation of the Company,
as amended (filed as Exhibit 3.1
to the Company s Registration
Statement on Form S-3 filed with
the Securities and Exchange
Commission on November 3, 1997) *
3.2 Amended and Restated By-Laws of
the Company (filed as Exhibit 3.2
to the Company s Registration
Statement on Form S-3 filed with
the Securities and Exchange
Commission on November 3, 1997) *
27 Financial Data Schedule
99.1 Amended and Restated Nonemployee
Director Stock Option Plan
- -----------------
* Incorporated herein by refernce.
<TABLE> <S> <C>
<ARTICLE> 5
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> SEP-30-1997
<CASH> 2,178,214
<SECURITIES> 0
<RECEIVABLES> 619,887
<ALLOWANCES> (161,742)
<INVENTORY> 968,820
<CURRENT-ASSETS> 4,317,196
<PP&E> 5,573,735
<DEPRECIATION> (2,850,074)
<TOTAL-ASSETS> 7,310,826
<CURRENT-LIABILITIES> 3,090,860
<BONDS> 0
0
0
<COMMON> 121,798
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 7,310,826
<SALES> 1,786,739
<TOTAL-REVENUES> 1,786,739
<CGS> 778,960
<TOTAL-COSTS> 778,960
<OTHER-EXPENSES> 6,457,910
<LOSS-PROVISION> 50,826
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (5,324,475)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,324,475)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,324,475)
<EPS-PRIMARY> (.47)
<EPS-DILUTED> (.47)
</TABLE>
EXHIBIT 99.1
THE PANDA PROJECT, INC.
AMENDED AND RESTATED
NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
As amended and restated
as of November 13, 1996
Purpose of Plan: The purpose of The Panda Project, Inc.
Nonemployee Director Stock Option Plan (the "Plan") is to attract
and retain the services of experienced and knowledgeable
independent directors of The Panda Project, Inc., a Florida
corporation (the "Corporation"), and to provide additional
incentive for such directors to continue to work for the best
interests of the Corporation and its stockholders through an
investment interest in the future success of the Corporation.
Administration: The Plan shall be administered by the
Stock Option Committee of the Board of Directors of the
Corporation (the "Committee"). Subject to the provisions of the
Plan, the Committee shall grant stock options under the Plan and
is authorized to interpret the Plan, to promulgate, amend and
rescind rules and regulations relating to the Plan and to make
all other determinations necessary or advisable for its
administration. Interpretations and construction of any
provision of the Plan by the Committee shall be final and
conclusive.
Indemnification of Committee Members: In addition to
such other rights of indemnification as they may have, the
members of the Committee shall be indemnified by the Corporation
against the reasonable expenses, including attorneys' fees,
actually and necessarily incurred in connection with the defense
of any action, suit or proceeding, or in connection with any
appeal therein, to which they or any of them may be a party by
reason of any action taken or failure to act under or in
connection with the Plan or any option granted hereunder, and
against all amounts paid by them in settlement thereof (provided
such settlement is approved by independent legal counsel selected
by the Corporation) or paid by them in satisfaction of a judgment
in any such action, suit or proceeding, except in relation to
matters as to which it shall be adjudged in such action, suit or
proceeding that such Committee member has acted in bad faith;
provided, however, that within sixty (60) days after receipt of
notice of institution of any such action, suit or proceeding a
Committee member shall offer the Corporation in writing the
opportunity, at its own cost, to handle and defend the same.
Maximum Number of Shares Subject to Plan: The maximum
number of shares with respect to which options may be granted
under the Plan shall be 50,000 shares in the aggregate of Common
Stock of the Corporation, which may consist in whole or in part
of the authorized and unissued or reacquired Common Stock of the
Corporation. If an option expires or terminates for any reason
without having been fully exercised, the number of shares with
respect to which the option was not exercised at the time of its
expiration or termination shall again become available for the
grant of options under the Plan.
The number of shares subject to each outstanding option,
the number of shares subject to each option to be granted under
the Plan, the option price with respect to outstanding options,
and the aggregate number of shares remaining available under the
Plan shall be subject to such adjustment as the Committee, in its
discretion, deems appropriate to reflect such events as stock
dividends, stock splits, recapitalizations, mergers,
consolidations or reorganizations of or by the Corporation.
Provided, however, that no fractional shares shall be issued
pursuant to the Plan, no options may be granted under the Plan
with respect to fractional shares, and any fractional shares
resulting from such adjustments shall be eliminated from any
outstanding option.
Eligibility for and Grant of Options: Each member of the
Board of Directors of the Corporation (the "Board") who otherwise
(i) is not presently an employee of the Corporation, (ii) is not
a former employee still receiving compensation for prior services
(other than benefits under a tax qualified pension plan), (iii)
was not an officer of the Corporation at any time, and (iv) is
not currently receiving remuneration from the Corporation in any
capacity other than as a director (a "Participant") shall be
eligible for the grant of stock options under the Plan. Each
Participant who was serving as a member of the Board on the date
the Plan was originally adopted by the Board shall automatically
be granted on such date an option to purchase 5,000 shares of
Common Stock of the Corporation (subject to adjustment as
provided in Paragraph 4). Provided that a sufficient number of
shares remain available under the Plan, each year on the date of
the annual meeting of the stockholders of the Corporation there
shall automatically be granted to each Participant who is serving
on or elected to the Board on such date an option to purchase
4,000 shares of the Common Stock of the Corporation (subject to
adjustment as provided in Paragraph 4). The options to be
granted under the Plan shall be nonqualified stock options (stock
options which do not constitute "incentive stock options" within
the meaning of Section 422A of the Internal Revenue Code of 1986,
as amended).
Written Agreement: Each option shall be evidenced by a
written agreement which shall contain such provisions as may be
approved by the Committee. Such agreements shall constitute
binding contracts between the Corporation and the Participant and
every Participant, upon acceptance of such agreement, shall be
bound by the terms and restrictions of the Plan and of the
agreement. The terms of each such agreement shall be in
accordance with the Plan, but the agreement may include such
additional provisions and restrictions determined by the
Committee, provided that such additional provisions and
restrictions are not inconsistent with the terms of the Plan.
Option Price: The price per share for which the shares
covered by an option may be purchased shall be 100% of the fair
market value of the shares on the date on which the option is
granted.
Payment of Option Price: At the time of the exercise in
whole or in part of any option granted hereunder, payment of the
option price in full in cash or in Common Stock of the
Corporation shall be made by the Participant for all shares so
purchased. No participant shall have any of the rights of a
shareholder of the Corporation under any option until the actual
issuance of shares to said Participant, and prior to such
issuance no adjustment shall be made for dividends, distributions
or other rights in respect of such shares, except as provided in
Paragraph 4.
Exercise and Term of Options: Each option granted
hereunder shall become exercisable with respect to 25% of the
shares covered by the option on each of the first four
anniversaries of the date of grant of the option; provided,
however, that if a Participant's service as a member of the Board
terminates by reason of death or disability, then an option
granted to such Participant shall become exercisable in full as
of the date of such termination. If not sooner terminated as
provided herein, each option granted hereunder shall expire 5
years from the date of the granting thereof.
A Participant may exercise an option, if then
exercisable, in whole or in part by delivery to the Corporation
of written notice of the exercise, in such form as the Committee
may prescribe, accompanied by full payment for the shares with
respect to which the option is exercised. Except as provided in
Paragraph 12, options granted to a Participant may be exercised
only while the Participant is serving as a member of the Board.
Successive options may be granted to the same
Participant, whether or not the option(s) previously granted to
such Participant remain unexercised. A Participant may exercise
an option, if then exercisable, notwithstanding that options
previously granted to such Participant remain unexercised.
Non-transferability of Options: No option granted under
the Plan to a Participant shall be transferable by such
Participant otherwise than by will, or by the laws of descent and
distribution, and such option shall be exercisable, during the
lifetime of the Participant, only by the Participant.
Continuation of Service: The Committee may require, in
its discretion, that any Participant under the Plan to whom an
option shall be granted shall agree in writing as a condition of
the granting of such option to continue serving on the Board for
a designated minimum period from the date of the granting of such
option as shall be fixed by the Committee. Nothing contained in
the Plan or in any option granted pursuant to the Plan, nor any
action taken by the Committee hereunder, however, shall confer
upon any Participant any right with respect to continuation of
membership on the Board nor interfere in any way with the right
of the Corporation to terminate such person's membership on the
Board at any time.
Termination of Service: If the membership of a
Participant on the Board terminates by reason of death or
disability, an option granted to such Participant may be
exercised for a period of twelve months after such termination.
If the membership of a Participant on the Board terminates for
any reason other than death or disability, an option granted to
such Participant may be exercised for a period of sixty days
after such termination. In no event, however, shall an option be
exercisable subsequent to its expiration date and, furthermore,
an option may only be exercisable after termination of a
Participant's membership on the Board to the extent exercisable
on the date of such termination.
Investment Purposes: If the Committee in its discretion
determines that as a matter of law such procedure is or may be
desirable, it may require a Participant, upon any acquisition of
stock hereunder, to execute and deliver to the Corporation a
written statement, in form satisfactory to the Committee,
representing and warranting that the Participant's acquisition of
shares of stock shall be for such person's own account, for
investment and not with a view to the resale or distribution
thereof and that any subsequent offer for sale or sale of any
such shares shall be made either pursuant to (a) a Registration
Statement on an appropriate form under the Securities Act of
1933, as amended (the "Securities Act"), which Registration
Statement has become effective and is current with respect to the
shares being offered and sold, or (b) a specific exemption from
the registration requirements of the Securities Act, but in
claiming such exemption the Participant shall, prior to any offer
for sale or sale of such shares, obtain a favorable written
opinion from counsel for or approved by the Corporation as to the
availability of such exemption. The Corporation may endorse an
appropriate legend referring to the foregoing restriction upon
the certificate or certificates representing any shares issued or
transferred to the Participant.
Withholding Payments: If upon the exercise of an option
there shall be payable by the Corporation any amount for income
tax withholding, either the Corporation shall appropriately
reduce the amount of stock to be issued to the Participant or the
Participant shall pay such amount to the Corporation to reimburse
it for such income tax withholding.
Effectiveness of Plan: The Plan shall be effective on
the date the Board adopts the Plan, provided that the
shareholders of the Corporation approve the Plan within 12 months
of its adoption by the Board. Options granted prior to
shareholder approval of the Plan shall be subject to shareholder
approval of the Plan and no option may be exercised prior to such
shareholder approval.
Termination, Duration and Amendments of Plan: The Plan
may be abandoned or terminated at any time by the Board. Unless
sooner terminated, the Plan shall terminate on the date ten years
after its adoption by the Board, and no options may be granted
thereafter. The termination of the Plan shall not affect the
validity of any option outstanding on the date of termination.
For the purpose of conforming to any changes in
applicable law or governmental regulations, or for any other
lawful purpose, the Board shall have the right, with or without
approval of the shareholders of the Corporation, to amend or
revise the terms of the Plan at any time; provided, however, that
(a) no such amendment or revision shall (i) increase the maximum
number of shares in the aggregate which are subject to the Plan
or which may be granted to Participants (subject, however, to the
provisions of Paragraph 4), change the class of persons eligible
to be Participants under the Plan or materially increase the
benefits accruing to Participants under the Plan, without
approval or ratification of the shareholders of the Corporation
or (ii) alter or impair any option which shall have been
previously granted under the Plan without the consent of the
holder thereof, and (b) the Plan may not be amended more than
once every six months, unless such amendment is permitted by Rule
16b-3(c)(2)(ii)(B) under the Securities Exchange Act of 1934, as
amended, or its successor.
