<PAGE>
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 and
Exchange Act of 1934
For the quarterly period ended March 31, 1996 or
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934
For the transition period from ___________ to ___________.
Commission file number 0-27168
METATOOLS, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-4102687
(State of incorporation) (I.R.S. Employer Identification Number)
6303 Carpinteria Ave, Carpinteria, CA 93013
(Address of principal executive offices)
(805) 566-6200
(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 reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
As of May 9, 1996, there were outstanding 11,773,626 shares of the
registrant's Common Stock, $0.001 par value, which is the only outstanding
class of common or voting stock of the registrant.
1
<PAGE>
METATOOLS, INC.
FORM 10-Q
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)............................... 3
Balance sheets - March 31, 1996 and December 31, 1995
Statements of operations - Three months ended March 31,
1996 and 1995
Statements of cash flows - Three months ended March 31,
1996 and 1995
Notes to financial statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................. 14
SIGNATURES ............................................................. 16
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
METATOOLS, INC.
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
----------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................... $46,533,000 $46,885,000
Accounts receivable, net....................... 3,728,000 2,775,000
Inventories.................................... 839,000 912,000
Prepaid expenses............................... 925,000 890,000
--------------------------
Total current assets....................... 52,025,000 51,462,000
Property and equipment, net.................... 1,756,000 1,577,000
Other assets................................... 536,000 496,000
---------------------------
Total assets............................... $54,317,000 $53,535,000
===========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................. $ 1,597,000 $ 1,795,000
Accrued expenses................................. 808,000 964,000
Income taxes payable............................. 272,000 -
Royalties payable................................ 482,000 588,000
---------------------------
Total current liabilities.................. 3,159,000 3,347,000
Stockholders' equity:
Preferred stock, $.001 par value, 5,000,000
shares authorized - no shares issued and
outstanding at March 31, 1996 and December
31, 1995, respectively......................... - -
Common stock, $.001 par value; 30,000,000 shares
authorized - 11,716,960 and 11,597,908
shares issued and outstanding at March 31,
1996 and December 31, 1995, respectively....... 12,000 12,000
Paid-in capital.................................. 54,675,000 54,429,000
Accumulated deficit.............................. (3,529,000) (4,253,000)
---------------------------
Total stockholders' equity................. 51,158,000 50,188,000
---------------------------
Total liabilities and stockholders' equity. $54,317,000 $53,535,000
===========================
</TABLE>
The accompanying notes are an integral part of these Financial Statements.
3
<PAGE>
METATOOLS, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1995
----------------------------
<S> <C> <C>
Net revenues...................................... $ 5,503,000 $3,420,000
Cost of revenues.................................. 1,103,000 1,355,000
--------------------------
Gross profit...................................... 4,400,000 2,065,000
Operating expenses:
Sales and marketing............................. 2,625,000 1,786,000
General and administrative...................... 602,000 408,000
Research and development........................ 738,000 309,000
-------------------------
Total operating expenses.......................... 3,965,000 2,503,000
-------------------------
Income (loss) from operations..................... 435,000 (438,000)
Other income (expense):
Interest and investment income, net............. 611,000 15,000
Other income (expense), net..................... 3,000 (7,000)
-------------------------
Income (loss) before provision for income taxes... 1,049,000 (430,000)
Provision for income taxes........................ 325,000 -
--------------------------
Net income (loss)................................. $ 724,000 $ (430,000)
==========================
Net income (loss)................................. $ 724,000 $ (430,000)
Amortization of costs related to the
issuance of mandatory redeemable
Series B convertible preferred stock............. - (30,000)
Preferred stock dividend requirement.............. - (42,000)
--------------------------
Net income (loss) applicable to
common stockholders............................. $ 724,000 $ (502,000)
==========================
Net income (loss) per common share................ $ .06 $ (.09)
==========================
Weighted average number of shares outstanding..... 13,054,000 5,606,000
==========================
</TABLE>
The accompanying notes are an integral part of these Financial Statements.
4
<PAGE>
METATOOLS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1995
----------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)................................................ $ 724,000 $ (430,000)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization................................. 161,000 50,000
Provision for losses on receivables and returns............... 357,000 237,000
Provision for losses on inventory............................. 36,000 398,000
Changes in operating assets and liabilities:
Accounts receivable........................................... (1,310,000) (606,000)
Inventories................................................... 37,000 (776,000)
Prepaid expenses and other assets............................. (47,000) (113,000)
Accounts payable and accrued expenses......................... (354,000) 292,000
Income taxes payable.......................................... 325,000 -
Royalties payable............................................. (106,000) 229,000
----------------------------
Net cash used in operating activities....................... (177,000) (719,000)
Cash flows from investing activities:
Purchase of property and equipment............................... (313,000) (232,000)
Purchase of software technology and product rights............... (55,000) -
----------------------------
Net cash used in investing activities....................... (368,000) (232,000)
Cash flows from financing activities:
Increase in notes receivable from stockholders................... - (49,000)
Proceeds from issuance of note payable to stockholder............ - 8,000
Proceeds from exercise of stock warrants and options............. 193,000 -
----------------------------
Net cash provided by (used in) financing activities......... 193,000 (41,000)
----------------------------
Net increase in cash and cash equivalents......................... (352,000) (992,000)
Cash and cash equivalents at beginning of period.................. 46,885,000 3,017,000
----------------------------
Cash and cash equivalents at end of period........................ $ 46,533,000 $2,025,000
============================
</TABLE>
The accompanying notes are an integral part of these Financial Statements.
5
<PAGE>
METATOOLS, INC.
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, the accompanying balance sheets and related interim statements of
operations and cash flows include all adjustments (consisting only of normal
recurring items) considered necessary for their fair presentation. 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, liabilities, revenues and expenses.
Actual results could differ from those estimates. The results of operations for
the period ended March 31, 1996 are not necessarily indicative of results to be
expected for the year ended December 31, 1996. The information included in this
Form 10-Q should be read in conjunction with Management's Discussion and
Analysis and the Company's audited financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1995.
Net Income (Loss) Per Common Share
Net income (loss) per common share is computed using the weighted average number
of shares of common stock and common equivalent shares outstanding. Common
equivalent shares related to stock options, warrants and preferred stock are
excluded from the computation when their effect is antidilutive, except that,
pursuant to the Securities and Exchange Commission Staff Accounting Bulletins,
common and common equivalent shares, issued at prices below the public offering
price during the twelve months immediately preceding the initial filing date of
the Company's initial public offering have been included in the calculation as
if they were outstanding for all periods presented, using the treasury stock
method and the initial public offering price.
2. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1995
----------------------------
<S> <C> <C>
Finished goods.......................... $ 473,000 $ 488,000
Materials and supplies.................. 366,000 424,000
--------------------------
$ 839,000 $ 912,000
==========================
</TABLE>
6
<PAGE>
METATOOLS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1995
----------------------------
<S> <C> <C>
Federal......................................... $ 224,000 $ -
State........................................... 101,000 -
-------------------------
$ 325,000 $ -
=========================
</TABLE>
The provision for income taxes for the three months ended March 31, 1996 is
based on the Company's estimated annualized effective tax rate for 1996 which
considers utilization of net operating loss and tax credit carryforwards. As a
result of net operating losses, the Company did not record any provision for
income taxes for the three months ended March 31, 1995.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the condensed
financial statements and notes thereto.
The discussion and analysis below contains trend analysis and other forward-
looking statements within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934. The Company's
actual results could differ materially from those projected in the forward-
looking statements. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in the section entitled
"Factors That May Affect Future Operating Results," as well as those discussed
elsewhere in the Company's SEC reports, including without limitation, its Annual
Report on Form 10-K for the year ended December 31, 1995.
OVERVIEW
The Company derives a substantial majority of its revenues from a limited number
of products. The Company's future revenues are substantially dependent upon the
continued market acceptance of Kai's Power Tools, Bryce, Convolver, Vector
Effects, KPT PowerPhotos and Final Effects. In this regard, revenue from the
sale of Kai's Power Tools was 35% and 29% of net revenues for the three month
periods ended March 31, 1996 and 1995, respectively. The Company also has a
number of new product development efforts under way, and a significant portion
of future revenues is dependent upon the success of these activities.
The Company develops its products either internally or through co-development
arrangements with third parties. These co-development arrangements generally
provide the Company with certain exclusive proprietary, copyright or marketing
rights for developed products in exchange for the payment of one-time and/or
ongoing royalties. The Company expects to continue fostering arrangements with
external developers as part of its strategy of expanding its product portfolio.
The Company includes such royalty expenses in cost of revenues as such royalties
are earned. The Company believes that co-development arrangements represent an
important component of the Company's research and development investment. There
can be no assurance, however, that the Company will be able to continue to
supplement its product development efforts in the future through such
relationships on favorable terms or at all. If the Company were unable to
maintain its existing co-development arrangements or to attract new co-
development partners, the Company would, at a minimum, have to increase its
research and development expenditures, which could have a material adverse
effect on the Company's business, operating results and financial condition.
The Company sells its products primarily to domestic and international
distributors, including mail order resellers and, to a lesser extent, retail
outlets. The Company also sells its products to OEMs for bundling with their
hardware or software products and directly to end users, generally through
telesales and direct mail campaigns. Fluctuations in distributor purchases can
cause significant volatility in the Company's revenues. Distributors generally
stock the Company's products at levels which may fluctuate significantly for a
variety of reasons, including the distributors' ability to finance the purchase
of products and to devote shelf space, catalog space or attention to the
products. Distributor purchases may also be affected by the Company's
introduction of a new product or new version of a product, the Company's end
user promotions
8
<PAGE>
programs, anticipated product price increases, the Company's purchases of
display space at retail outlets and other factors.
Since 1992, the Company has focused on building its product portfolio and
establishing brandname awareness of its products. These activities have
resulted in significant increases in all expense categories. In particular, the
Company's shift from direct sales to end users toward expanded indirect
distribution channels has required a substantial increase in the Company's sales
and marketing activities. The Company's recent product development efforts have
also entailed significant research and development expenditures. These higher
expense levels combined with fluctuations in net revenues have contributed to
the Company's annual losses and quarterly losses through June 30, 1995, as well
as fluctuations in its operating results. The Company intends to continue to
invest significant amounts both in expanding its product portfolio and in
maintaining and enhancing brand awareness of its products, and accordingly may
continue to experience losses and volatility of net revenues and operating
results in future periods.
OPERATING RESULTS
The following table sets forth certain selected financial information expressed
as a percentage of net revenues for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------
1996 1995
-----------------------------
<S> <C> <C>
Net revenues............................................ 100.0% 100.0%
Cost of revenues........................................ 20.0 39.6
-----------------------------
Gross margin......................................... 80.0 60.4
Operating expenses:
Sales and marketing.................................... 47.8 52.2
General and administrative............................. 10.9 12.0
Research and development............................... 13.4 9.0
-----------------------------
Total operating expenses............................. 72.1 73.2
-----------------------------
Income (loss) from operations........................... 7.9 (12.8)
Other income, net....................................... 11.2 .2
-----------------------------
Net income (loss) before provision for income taxes..... 19.1 (12.6)
Provision for income taxes.............................. 5.9 -
-----------------------------
Net income (loss)....................................... 13.2% (12.6)%
=============================
</TABLE>
Net Revenues
The Company recognizes revenue from the sale of its products upon shipment to
the customer and satisfaction of significant Company obligations, if any. Net
revenues increased 61% from $3.4 million for the three months ended March 31,
1995 to $5.5 million for the three months ended March 31, 1996. Net revenues
increased as a result of the Company's release of new products and new versions
of its existing products along with increased expansion of sales
9
<PAGE>
through its domestic distribution channels. In particular, since the first
quarter of 1995, the Company has released KPT PowerPhotos Series II, III and IV,
Vector Effects, Final Effects, Cool Effects, Kai's Power Tools 3 and Bryce 2.
International sales decreased from 28% of net revenues for the three months
ended March 31, 1995 to 18% of net revenues for the three months ended March 31,
1996. Growth in the European markets was offset by the Company's transition to a
new publisher and distributor, Marubeni Corporation in Japan, which required
repackaging and sales training, delaying shipments in the first quarter of 1996.
The Company offers two principal product types consisting of plug-in extensions
(including Kai's Power Tools, Convolver, Vector Effects and Final Effects) and
stand-alone applications and application platforms (principally consisting of
Bryce and KPT PowerPhotos). The following table reflects the net revenue
contribution by each product family for the fiscal periods presented:
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1995 1994
----------------------------
<S> <C> <C>
Plug-in extensions.................................... $2,653,000 $1,649,000
Stand-alone applications and application platforms.... 2,850,000 1,771,000
-------------------------
Total.............................................. $5,503,000 $3,420,000
=========================
</TABLE>
The Company provides an allowance for estimated returns at the time of product
shipments and adjusts this allowance as needed based on actual returns history.
Such reserves as a percentage of net revenues have varied significantly over
recent years, reflecting the Company's experience in product returns as it has
significantly expanded the proportion of its sales through third-party
distribution channels and increased its product portfolio. The Company expects
reserves will continue to vary in the future. The Company's agreements with its
distributors generally provide the distributors with limited rights to return
unsold inventories under a stock balancing program. The Company monitors the
activities of its distributors in an effort to minimize excessive returns and
establishes its reserves based on its estimates of expected returns. While
historically the Company's returns have been within expectations, the setting of
reserves requires judgments regarding such factors as future competitive
conditions and product life cycles, which can be difficult to predict. As a
result, there can be no assurance that established reserves will be adequate to
cover actual future returns.
Cost of Revenues
Cost of revenues includes the costs of goods sold, royalties paid to external
developers, inventory management costs, freight and handling costs and reserves
for inventory obsolescence. Cost of revenues decreased from $1.4 million, or
40% of net revenues, for the three months ended March 31, 1995 to $1.1 million,
or 20% of net revenues, for the three months ended March 31, 1996. Cost of
revenues as a percentage of net revenues decreased as a result of a changing mix
of product sales toward lower royalty products and improved management of
production and inventory levels. Royalties represented 4% and 14% of net
revenues for the three months ended March 31, 1996 and 1995, respectively.
10
<PAGE>
Sales and Marketing
Sales and marketing expenses include advertising, promotional materials, mail
campaigns, trade shows and the compensation costs of sales, marketing, customer
service and public relations personnel who promote the Company's products,
including related facilities costs. Sales and marketing expenses increased from
$1.8 million to $2.6 million, but decreased as a percentage of net sales from
52% to 48%, for the three months ended March 31, 1995 and 1996, respectively.
Such increase was a result of the continued efforts to expand sales and
marketing activities and distribution channels. The Company intends to continue
such expansion and anticipates that sales and marketing expenses will continue
to increase significantly in future periods as the Company's product offerings
expand, although they may vary as a percentage of net revenues.
General and Administrative
General and administrative expenses include compensation costs related to
executive management, finance and administration personnel of the Company along
with other administrative costs including legal and accounting fees, insurance,
and bad debt expenses. General and administrative expenses increased from
$408,000 to $602,000 million, but decreased as a percentage of net sales from
12% to 11%, for the three months ended March 31, 1995 and 1996, respectively.
The Company continued to expand its internal staffing to support its growth
during the first quarter of 1996. The Company expects that its general and
administrative expenses will continue to increase in the future as the Company
expands its staffing to support expanded operations and to comply with the
responsibilities of a public company, but may vary as a percentage of net
revenues.
Research and Development
Research and development expenses consist primarily of personnel costs,
consultant fees and required equipment and facilities costs related to the
Company's product development efforts. To date, the Company has not capitalized
any internal software development costs since costs qualifying for such
capitalization have not been significant.
Research and development expenses increased from $309,000, or 9% of net
revenues, for the three months ended March 31, 1995 to $738,000, or 13% of net
revenues, for the three months ended March 31, 1996 as a result of the Company's
focus on expanding its product portfolio, enhancing its products and migrating
its existing products to multiple operating systems, which required the hiring
of additional personnel. The Company expects research and development expenses
will continue to increase in future periods, but may vary as a percentage of net
revenues.
Provisions for Income Taxes
The Company records income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." The provision for
income taxes for the three months ended March 31, 1996 is based on the Company's
estimated annualized effective tax rate for 1996 which considers utilization of
net operating loss and tax credit carryforwards. As a result of net operating
losses, the Company did not record any provision for income taxes for the three
months ended March 31, 1995.
11
<PAGE>
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
Limited Operating History; History of Losses; Variability of Operating Results
The Company was incorporated in March 1987 and did not introduce its first
internally developed product until January 1993. The Company experienced losses
in each quarter of 1994 and the first two quarters of 1995, and the Company's
revenues and operating results have varied substantially from period to period.
There can be no assurance that the Company's future revenue and operating
results will not also vary substantially. The Company's revenues are relatively
difficult to forecast due to a number of variable factors, including the timing
of the introduction of new products by the Company and its competitors,
seasonality of customer purchases, other general economic conditions, and the
Company's ability to capture sufficient interest and commitment by distributors
to market the Company's products or product enhancements. The Company's
operating results also vary significantly depending on changes in pricing,
changes in customer budgets and the volume and timing of orders received and
shipments made during a quarter, which are difficult to forecast. Customers
generally order on an as-needed basis, and the Company's software generally is
shipped as orders are received. Consequently, the Company typically operates
with little or no backlog. The Company experiences some effect of seasonality
in its business, as demand for its products tends to increase during the fourth
calendar quarter as a result of the year-end holiday buying season. A
disproportionate percentage of the Company's quarterly revenues is typically
generated in the last month of the quarter principally due to customer buying
patterns. As a result of the foregoing and other factors, the Company
anticipates that it may experience material and adverse fluctuations in future
operating results on a quarterly or annual basis. Therefore, the Company
believes that period to period comparisons of its revenues and operating results
are not necessarily meaningful and that such comparisons cannot be relied upon
as indicators of future performance.
Evolving Markets for Computer Graphic Imaging and Internet/Online Design Tools;
Rapid Technological Change
Since the markets for computer graphic imaging and Internet/online design tools
are still emerging, there can be no assurance that the markets for the Company's
existing products will grow, that digital graphic and Internet/online content
developers will adopt the Company's products, that sufficient distribution
resources will be available to market the Company's products in a timely manner
or that such products will be successful in achieving market acceptance.
Additionally, since the computer graphic imaging and Internet/online design tool
markets, and the personal computer industry in general, are characterized by
rapidly changing technology, resulting in short product life cycles and price
declines, the Company must continuously update its existing products to keep
them current with changing technology and must develop new products to take
advantage of new technologies that could render the Company's existing products
obsolete. The Company's future prospects are highly dependent on its ability to
keep pace with its competitors' innovations, to adapt to new operating systems,
hardware platforms and emerging industry standards, and to provide additional
functionality to the Company's existing products.
Limited Product Lines; Risk of Product Delays
The Company's growth will be dependent upon the introduction of new products and
new versions of existing products. There can be no assurance that any such new
products or versions
12
<PAGE>
will achieve market acceptance. In addition, the Company has in the past
experienced delays in the development of new products and the enhancement of
existing products, and such delays may occur in the future.
Dependence on Third Parties
Certain of the Company's products operate as plug-in extensions and enhancements
for specific print, animation, video and multimedia application platforms.
Market acceptance of the Company's plug-in products is dependent upon market
acceptance of these third-party application platforms, as well as the
willingness of the manufacturers of such platforms to permit their platforms to
be extended and enhanced by plug-in products such as those of the Company.
Distribution Risks
The Company sells its products worldwide through multiple distribution channels,
including traditional software distributors, hardware and software OEMs,
international distributors, educational distributors, VARs, hardware
superstores, retail dealers, and direct marketers. Accordingly, the Company is
dependent on the continued viability and financial stability of these third
parties, including certain of the traditional software distributors who have
recently experienced significant margin pressure.
Competition
The Company faces competition from a number of sources, including other vendors
of personal computer graphic imaging and Internet/online design application
platforms and tools, other personal computer software industry participants and
companies that offer graphic and Internet/online design solutions that are not
personal computer based. If these or other competitors develop products,
technologies or solutions that offer significant performance, price or other
advantages over those of the Company, the Company's business, operating results
and financial condition would be materially affected.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company satisfied its cash requirements principally through
the private sale of its securities, borrowings from stockholders and bank
borrowings. In December 1995, the Company raised $45.2 million, net of offering
costs, in connection with an initial public offering of its common stock.
The Company has a $3.0 million revolving line of credit with a bank which
expires during December 1996 and is collateralized by substantially all of the
assets of the Company. Borrowings under the credit facility are limited to a
percentage of eligible accounts receivable, as defined in the credit agreement.
As of March 31, 1996, the Company had no outstanding borrowings under the line
of credit.
Historically, net cash used in operating activities and investing activities of
the Company has been significant due to operating losses and working capital
requirements resulting from the growth of the Company. Non-cash assets have
increased significantly, particularly accounts receivable, inventories and
property and equipment. Net cash used in operating activities and investing
activities of the Company totaled $545,000 and $951,000 for the three months
ended
13
<PAGE>
March 31, 1996 and 1995, respectively. The Company expects that its working
capital requirements will continue to increase to the extent the Company
continues to grow.
The Company believes that its current cash balances and any cash provided by
future operations will be sufficient to meet its cash requirements through at
least the next twelve months.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Exhibit Title
------- -------------
2.1 Form of Agreement and Plan of Merger by and between the
Registrant and MetaTools, Inc., a California corporation (1)
3.1 Amended and Restated Articles of Incorporation of California
predecessor of Registrant (1)
3.2 Certificate of Incorporation of Registrant (1)
3.3 Amended and Restated Certificate of Incorporation of
Registrant (3)
3.4 Restated Certificate of Incorporation of Registrant (3)
3.5 Bylaws of California predecessor of Registrant, as amended (1)
3.6 Bylaws of Registrant, as amended (3)
4.1 Specimen of Common Stock Certificate of Registrant (3)
10.1 Indemnification Agreement for Executive Officers and Directors (1)
10.2 Investors' Rights Agreement, as amended (1)
10.3 1992 Incentive Stock Plan (1)
10.4 1994 Incentive Stock Option, Non-Qualified Stock Option and
Restricted Stock Purchase Plan (1)
10.5 1995 Stock Plan (2)
10.6 1995 Employee Stock Purchase Plan (2)
10.7 1995 Director Option Plan (2)
10.8 Employment Agreement between the Registrant and John J. Wilczak
dated April 15, 1992, as amended (1)
10.9 Employment Agreement between the
Registrant and Kai Krause dated January 26, 1994 (1)
10.10 Employment Agreement between the Registrant and Terance A.
Kinninger dated June 27, 1995 (1)
10.11 Employment Agreement between the Registrant and James Mervis
dated April 3, 1995 (1)
10.13 Secured Promissory Note between the Registrant and Kai Krause
dated November 28, 1994 (1)
10.14 Secured Promissory Note between the Registrant and Kai Krause
dated November 28, 1994 (1)
10.15 Loan and Security Agreement between the Registrant and Silicon
Valley Bank dated September 25, 1994, as amended on December 15,
1995 (3)
10.16* Distribution Agreement between the Registrant and Ingram Micro
Inc. dated October 19, 1992, as amended (1)
14
<PAGE>
10.17* Distribution Agreement between the Registrant and Merisel
Distributing (formerly, Softsel Computer Products, Inc.) dated
March 12, 1990, as amended (1)
10.18 Sublease Agreement between Digital Sound Corporation and
Registrant dated as of June 8, 1994 (1)
10.19 Form of Employee Invention, Copyright, and Secrecy Agreement (1)
10.20 Employment Agreement between the Registrant and Fred Brown dated
November 13, 1995 (1)
10.21* Software Licensing Agreement between the Registrant and Marubeni
Corporation dated as of January 31, 1996 (3)
11.1 Statement Regarding Computations of Earnings per Share
27 Financial Data Schedule
______________
* Confidential treatment for this exhibit has been requested pursuant to Rule
24b-2 under the Securities Exchange Act of 1934, as amended
(1) Incorporated by reference to the Company's Registration Statement on Form
SB-2, filed December 11, 1995, as amended (File No. 33-98628LA).
(2) Incorporated by reference to the Company's Registration Statement on Form
S-8, filed on or about April 1, 1996.
(3) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K with the Securities and
Exchange Commission during the first quarter ended March 31, 1996.
15
<PAGE>
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.
METATOOLS, INC.
(Registrant)
Date: May 13, 1996 /s/TERANCE A. KINNINGER
-----------------------
Terance A. Kinninger
Vice President and
Chief Financial Officer
16
<PAGE>
EXHIBIT 11.1
METATOOLS, INC.
STATEMENT REGARDING COMPUTATION OF
NET INCOME (LOSS) PER SHARE
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1995
----------------------------
<S> <C> <C>
PRIMARY AND FULLY DILUTED (1)
Weighted average shares outstanding for the period.............. 11,634,000 3,129,000
Common equivalent shares, including items pursuant
to Staff Accounting Bulletin No. 83............................ 1,420,000 2,477,000
---------------------------
Shares used in per share calculation............................ 13,054,000 5,606,000
===========================
Net income before dividends and reversal of amortization........ $ 724,000 $ (430,000)
Preferred stock dividend requirements and amortization
of issuance costs.............................................. - (72,000)
---------------------------
Net income (loss) available for common stockholders............. $ 724,000 $ (502,000)
===========================
Net income (loss) per common share.............................. $ .06 $ (.09)
===========================
</TABLE>
(1) Primary and fully diluted calculations are substantially the same.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ACCOMPANYING FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 46,533,000
<SECURITIES> 0
<RECEIVABLES> 3,728,000
<ALLOWANCES> 0
<INVENTORY> 839,000
<CURRENT-ASSETS> 52,025,000
<PP&E> 2,324,000
<DEPRECIATION> 568,000
<TOTAL-ASSETS> 54,317,000
<CURRENT-LIABILITIES> 3,159,000
<BONDS> 0
0
0
<COMMON> 12,000
<OTHER-SE> 51,146,000
<TOTAL-LIABILITY-AND-EQUITY> 54,317,000
<SALES> 5,503,000
<TOTAL-REVENUES> 5,503,000
<CGS> 1,103,000
<TOTAL-COSTS> 1,103,000
<OTHER-EXPENSES> 3,965,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,049,000
<INCOME-TAX> 325,000
<INCOME-CONTINUING> 724,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 724,000
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
