<PAGE>
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, 1996
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
_______
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-25832
______________________________________________________
MAXIS, INC.
(Exact name of registrant as specified in its charter)
______________________________________________________
DELAWARE 94-3128369
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2121 NORTH CALIFORNIA BLVD., SUITE 600
WALNUT CREEK, CA 94596-3572
(Address of principal executive offices)
TELEPHONE NUMBER (510) 933-5630
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 there were 11,231,815 shares of the
Registrant's Common Stock, $.0001 par value, outstanding.
____________
Page 1
<PAGE>
MAXIS, INC.
TABLE OF CONTENTS
PART I. Financial Information Page
----
Item 1. Condensed Consolidated Financial Statements (unaudited)
Condensed Consolidated Balance Sheets
At September 30, 1996 and March 31, 1996...................... 3
Condensed Consolidated Statements of Operations
Three and six months ended September 30, 1996 and 1995....... 4
Condensed Consolidated Statements of Cash Flows
Six months ended September 30, 1996 and 1995................. 5
Notes to Condensed Consolidated Financial Statements............... 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................. 8
PART II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders................13
Item 6. Exhibits and Reports on Form 8-K...................................14
Signature...................................................................15
Page 2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MAXIS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
ASSETS September 30, 1996 March 31, 1996
- ------ ------------------- --------------
Current assets:
Cash and cash equivalents $16,437 $20,102
Marketable securities 17,186 22,788
Accounts receivable, less allowance
for returns and doubtful accounts
of $6,078 and $5,607 5,482 6,991
Inventories 1,854 1,543
Income taxes refundable 4,349 227
Deferred income taxes 2,808 2,808
Other current assets 826 872
------- -------
Total current assets 48,942 55,331
Furniture and equipment, net 3,983 3,243
Deferred income taxes 2,023 2,023
Long-term marketable securities 7,692 6,119
Other assets 688 584
------- -------
$63,328 $67,300
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $1,264 $ 1,607
Payable to affiliate partners 474 631
Royalties payable 876 1,373
Accrued compensation 1,923 1,685
Accrued advertising 1,336 1,538
Other accrued liabilities 1,524 2,585
Accrued rent 580 647
------- -------
Total current liabilities 7,977 10,066
------- -------
Commitments
Stockholders' equity:
Common stock, $.0001 par value; authorized
shares, 40,000,000; issued and
outstanding, 11,231,552 and 10,989,906 52,462 50,514
Notes receivable from stockholders (261) (269)
Retained earnings 3,216 7,128
Deferred compensation (66) (139)
------- -------
Total stockholders' equity 55,351 57,234
------- -------
$63,328 $67,300
======= =======
See accompanying notes.
Page 3
<PAGE>
MAXIS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
September 30 September 30
------------------ ----------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues $ 8,004 $11,779 $16,112 $23,111
Cost of revenues 3,563 3,243 6,543 6,833
------- ------- ------- -------
Gross profit 4,441 8,536 9,569 16,278
------- ------- ------- -------
Operating expenses:
Research and development 3,091 2,159 5,876 3,956
Sales and marketing 3,586 2,866 7,207 5,770
General and administrative 2,197 1,168 3,657 2,608
------- ------- ------- -------
Total operating expenses 8,874 6,193 16,740 12,334
------- ------- ------- -------
Income (loss) from operations (4,433) 2,343 (7,171) 3,944
Interest income 374 435 808 630
------- ------- ------- -------
Income (loss) from operations before taxes (4,059) 2,778 (6,363) 4,574
Provision (benefit) for income taxes (1,563) 1,056 (2,451) 1,720
------- ------- ------- -------
Net income (loss) $(2,496) $ 1,722 $(3,912) $ 2,854
======= ======= ======= =======
Net income (loss) per share $ (.22) $ .15 $ (.35) $ .27
======= ======= ======= =======
Shares used in per share calculations 11,209 11,453 11,126 10,628
======= ======= ======= =======
</TABLE>
See accompanying notes.
Page 4
<PAGE>
MAXIS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
September 30
---------------------
1996 1995
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $(3,912) $ 2,854
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Provision for returns and doubtful accounts 471 1,445
Depreciation 696 384
Deferred income taxes -- (696)
Amortization of deferred compensation 73 223
Changes in operating assets and liabilities (5,542) (2,105)
--------- -------
Net cash (used in) provided by operating activities (8,214) 2,105
INVESTING ACTIVITIES
Purchases of held-to-maturity securities (11,356) (7,038)
Maturities of held-to-maturity securities 15,250 2,039
Sales of available-for-sale securities -- 1,943
Additions to fixed assets, net (1,436) (1,279)
Other 135 75
--------- -------
Net cash (used in) provided by investing activities 2,593 (4,260)
FINANCING ACTIVITIES
Proceeds from exercise of stock options 201 --
Proceeds from issuance of ESPP stock 341 --
Net proceeds from issuance of common stock -- 35,493
Tax benefit from exercise of stock options 1,421 --
Repayment of notes receivable from stockholders -- 18
Repurchase of common stock (7) (3)
Other -- 14
--------- -------
Net cash provided by financing activities 1,956 35,522
--------- -------
Net (decrease) increase in cash and cash equivalents (3,665) 33,367
Cash and cash equivalents at beginning of period 20,102 2,610
--------- -------
Cash and cash equivalents at end of period $16,437 $35,977
========= =======
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:
Accretion of preferred stock $ -- $ 87
========= =======
Conversion of preferred stock to common stock $ -- $11,450
========= =======
Forgiveness of note receivable from stockholder $ (8) $ --
========= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Income tax payments $ 250 $ 1,851
========= =======
</TABLE>
See accompanying notes.
Page 5
<PAGE>
MAXIS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
---------------------
The condensed consolidated financial statements for the three months
and six months ended September 30, 1996 and 1995 are unaudited and reflect all
adjustments, consisting only of normal recurring adjustments, which are, in the
opinion of management, necessary for a fair presentation of the results for the
interim periods. These condensed consolidated financial statements should be
read in conjunction with the financial statements and notes thereto in Maxis'
Annual Report on Form 10-K for the year ended March 31, 1996. The results of
operations for the three- and six-month periods ended September 30, 1996 are not
necessarily indicative of the results for the entire year.
Per share data
--------------
Per share data is based on the weighted average number of common
shares and dilutive common stock equivalents outstanding for the period. Common
shares outstanding includes weighted average common equivalent shares as if all
shares of preferred stock were converted into common stock on their respective
dates of issuance. Pursuant to Securities and Exchange Commission Staff
Accounting Bulletin No. 83, options to purchase common stock (using the treasury
stock method) granted by the Company during the 12 months immediately preceding
the initial public offering date have been included in the calculation of
weighted average number of common shares outstanding as if the underlying shares
were outstanding for all periods presented.
2. Issuance of Common Stock
------------------------
On June 1, 1995, the Company consummated an initial public offering of
3,450,000 shares of common stock which raised approximately $35.5 million, net
of expenses. Of the 3,450,000 shares of common stock, 2,450,000 shares were
sold by the Company and 1,000,000 shares were sold by selling stockholders.
Immediately prior to the offering, all outstanding shares of preferred stock
were converted into 2,094,000 shares of common stock.
3. Marketable Securities
---------------------
At September 30, 1996, the Company's held-to-maturity and available-
for-sale debt securities consist of the following (in thousands):
<TABLE>
<CAPTION>
Held-to-maturity securities
----------------------------------------------
Gross Gross Estimated
unrealized unrealized fair
Cost gains losses value
---- ---------- --------- -------
<S> <C> <C> <C> <C>
Municipal bonds................... $20,876 $ 83 $ -- $20,959
Municipal notes................... 2,003 45 -- 2,048
------- ---- ------ -------
$22,879 $128 $ -- $23,007
======= ==== ====== =======
</TABLE>
<TABLE>
<CAPTION>
Available-for-sale securities
----------------------------------------------
Gross Gross Estimated
unrealized unrealized fair
Cost gains losses value
---- ---------- --------- -------
<S> <C> <C> <C> <C>
U.S. corporate securities.......... $12,600 $ 18 $ -- $12,618
Money market funds................. 3,119 -- -- 3,119
------- ---- --------- -------
$15,719 $ 18 $ -- $15,737
======= ==== ========= =======
Total........................... $38,598 $146 $ -- $38,744
======= ==== ========= =======
</TABLE>
Page 6
<PAGE>
MAXIS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
3. Marketable Securities - (continued)
-----------------------------------
Such debt and equity securities have been recorded as cash and cash
equivalents ($13,720,000), short-term marketable securities ($17,186,000), and
long-term marketable securities ($7,692,000). The contractual maturities of
held-to-maturity and available-for-sale debt securities at September 30, 1996
are all two years or less. Realized gains and losses on sales of available-for-
sale securities have not been material.
4. Inventories
-----------
Inventories consist primarily of software media, manuals and related
packaging materials as follows (in thousands):
September 30 March 31
1996 1996
------------ --------
Raw materials and work in process $ 700 $ 356
Finished goods 1,154 1,187
------ ------
$1,854 $1,543
====== ======
Page 7
<PAGE>
MAXIS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following information should be read in conjunction with the
consolidated financial statements and the notes thereto and in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations in the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1996. The operating results for any quarter are not necessarily
indicative of results for any future period.
Overview
--------
Maxis was founded in 1987 to develop software for the consumer
entertainment market. In North America, Maxis currently sells its software
products, including affiliate partner products, through software distributors,
major computer and software retailing organizations, consumer electronics
stores, discount warehouse stores and mail order companies. Internationally, the
Company sells its products through a combination of distribution, direct retail
and licensing arrangements. Maxis' products are available for multiple
platforms, including Windows, Windows 95, DOS and Macintosh. The Company also
has adapted certain of its products for new game console platforms, including
the Sega Saturn and the Sony PlayStation.
The following table sets forth, as a percentage of net revenues,
consolidated statement of operations data for the periods indicated:
<TABLE>
<CAPTION>
Three months ended Six months ended
September 30 September 30
------------------------ ---------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues 100.0% 100.0% 100.0% 100.0%
Cost of revenues 44.5 27.5 40.6 29.6
Gross profit 55.5 72.5 59.4 70.4
----- ---- ---- ----
Operating expenses:
Research and development 38.6 18.3 36.5 17.1
Sales and marketing 44.8 24.3 44.7 25.0
General and administrative 27.5 10.0 22.7 11.3
----- ---- ---- ----
Total operating expenses 110.9 52.6 103.9 53.4
----- ---- ---- ----
Income (loss) from operations (55.4) 19.9 (44.5) 17.0
Interest income 4.7 3.7 5.0 2.7
----- ---- ---- ----
Income (loss) from operations before taxes (50.7) 23.6 (39.5) 19.7
Provision (benefit) for income taxes (19.5) 9.0 (15.2) 7.4
----- ---- ---- ----
Income (loss) from continuing operations (31.2)% 14.6% (24.3)% 12.3%
===== ==== ===== ====
</TABLE>
Page 8
<PAGE>
MAXIS, INC.
Net Revenues
- ------------
The Company's net revenues decreased 32% from $11,779,000 in the
second quarter of fiscal 1996 to $8,004,000 in the second quarter of fiscal
1997. Net revenues decreased 30.3% from $23,111,000 in the first half of fiscal
1996 to $16,112,000 in the first half of fiscal 1997. Although SimCity 2000 for
------------
personal computers remained the Company's best-selling group of products, the
Company experienced lower revenues from these products during the three- and
six-month periods ended September 30, 1996. The lower sales of SimCity 2000 for
------------
PCs were partially, but not completely, offset by sales of SimCity 2000 for game
------------
consoles, specifically the Sony Playstation and the Sega Saturn. SimCity 2000
------------
was released initially for the DOS format in October 1993. During the first
half of fiscal 1997, the Company's best-selling products included SimCity 2000
------------
for PCs, SimCity 2000 for the Sony Playstation, and SimTown. Also, the Company
------------ -------
released SimTower for Windows in April 1995 and SimCity 2000 for Windows 95 in
-------- ------------
August 1995. Both of these products contributed to higher net revenues during
the first half of fiscal 1996 as compared to the first half of fiscal 1997.
CD-ROM (vs. floppy disk) products accounted for 73% of the Company's
net revenues in each of the second quarters of fiscal 1996 and fiscal 1997.
During the first half of fiscal 1997 CD-ROM products accounted for 74% of net
revenues as compared to 72% of net revenues in the first half of fiscal 1996.
Cost of Revenues
- ----------------
Cost of revenues includes all costs of media, manuals, duplication,
packaging materials, assembly and freight. In addition, royalties are included
in cost of revenues. Gross profit as a percentage of net revenues was 55.5% in
the second quarter of fiscal 1997, a decrease from 72.5% in the second quarter
of fiscal 1996. The gross profit percentage for the first half of fiscal 1997
decreased to 59.4% from 70.4% in the same period of fiscal 1996. The decrease
in gross profit in fiscal 1997 was due to several factors. The Company derived
a higher percentage of net revenues from affiliate partner products during the
first half of fiscal 1997. Sales of affiliate products represented 16% and 9%
of net revenues in the first and second quarters of fiscal 1997 as compared to
5% in each of the first two quarters of fiscal 1996. Gross profit for affiliate
products is lower than gross profit for Maxis-published products because the
Company's services for its affiliate partners generally are limited to sales and
distribution and, in some cases, a manufacturing function. The Company also
derived a higher percentage of net revenues from game console products, due
primarily to sales of SimCity 2000 for the Sony Playstation during the first
------------
half of fiscal 1997. The percentage of revenues from game consoles was 15%
during the first half of fiscal 1997 and there were no revenues from products
for game consoles in the same period last fiscal year. Cost of goods sold
generally is higher for game console products than for PC-based Maxis products.
In addition, the Company experienced lower average selling prices because of an
increase in the percentage of revenues from sales of the Company's lower-priced
Collector's Series products and lower average selling prices for some of its
- ------------------
older products. The Company expects that the gross profit percentage will
continue to fluctuate on a quarterly basis.
Research and Development
- ------------------------
Research and development expenses consist primarily of personnel and
equipment costs required to conduct the Company's development efforts and to
fund third-party software development costs. Third-party software development
costs may include advance product development payments, which are expensed as
paid. The Company increased research and development expenses 43.2% from
$2,159,000 in the second quarter of fiscal 1996 to $3,091,000 in the second
quarter of fiscal 1997. As a percentage of net revenues, research and
development increased from 18.3% for the second quarter of fiscal 1996 to 38.6%
for the second quarter of fiscal 1997. Research and development expenses for
the first half of fiscal 1997 increased to $5,876,000, representing 36.5% of net
revenues from $3,956,000, representing 17.1% of net revenues. The increase in
research and development expenses was due primarily to hiring
Page 9
<PAGE>
MAXIS, INC.
Research and Development (Cont.)
- --------------------------------
additional employees and the associated salaries, benefits and facilities costs.
In addition, ongoing development costs related to Cinematronics were included in
the Company's results of operations for the entire first half of fiscal 1997.
There were no such costs in the same period last year because the Company
acquired Cinematronics in March 1996. The Company believes that significant
investment in research and development is required to remain competitive, and
the Company intends to continue to increase its investment in this area.
Therefore, the Company expects research and development expenses to increase in
absolute dollars.
Sales and Marketing
- -------------------
The Company increased its sales and marketing expenses, which include
customer support services, from $2,866,000 in the second quarter of fiscal 1996
to $3,586,000 in the second quarter of fiscal 1997. As a percentage of net
revenues, sales and marketing expenses increased from 24.3% in the second
quarter of fiscal 1996 to 44.8% in the second quarter of fiscal 1997. Sales and
marketing expenses increased from $5,770,000 in the first half of fiscal 1996 to
$7,207,000 in the first half of fiscal 1997. As a percentage of net revenues,
sales and marketing expenses increased from 25% in the first half of fiscal 1996
to 44.7% in the first half of fiscal 1997. The increase in sales and marketing
expenses was due primarily to expansion of the Company's domestic and European
sales and marketing organizations. Also, during the first quarter of fiscal
1997, the Company opened a sales, marketing and development office in Tokyo,
Japan. There were no comparable costs during the first half of fiscal 1996. In
addition, the Company increased expenditures for advertising, trade shows and
marketing programs with customers.
The Company believes that competition for retail shelf space has
increased significantly over the prior year, due in part to an overall increase
in the number of new products. The Company expects to continue aggressive
marketing and sales programs in order to continue to distinguish the Company and
its products in the marketplace. Therefore, the Company expects marketing and
sales expenses to continue to increase in absolute dollars.
General and Administrative
- --------------------------
General and administrative expenses increased from $1,168,000 in the
second quarter of fiscal 1996 to $2,197,000 in the second quarter of fiscal
1997. General and administrative expenses increased from $2,608,000 in the first
half of fiscal 1996 to $3,657,000 in the first half of fiscal 1997. The
increase in general and administrative expenses was due primarily to bad debt
expenses related to the bankruptcies of two of the Company's customers.
Interest income
- ---------------
Interest income decreased from $435,000 for the quarter ended
September 30, 1995 to $374,000 for the quarter ended September 30, 1996 due to
lower invested cash balances as compared to the quarter following the Company's
initial public offering in June 1995. Interest income increased from $630,000 in
the first half of fiscal 1996 to $808,000 in the first half of fiscal 1997
because the Company's initial public offering proceeds were invested for the
full six-month period in fiscal 1997 as opposed to only four months in fiscal
1996.
Liquidity and Capital Resources
- -------------------------------
As of September 30, 1996, the Company's principal sources of liquidity
included cash and short-term investments of approximately $33.6 million. The
Company also has longer-term investments totaling approximately $7.7 million.
The Company's cash and investments are available to meet seasonal working
Page 10
<PAGE>
MAXIS, INC.
Liquidity and Capital Resources (Cont.)
- ---------------------------------------
capital requirements. The Company uses its working capital to finance ongoing
operations, to fund the development and introduction of new products and to
acquire capital equipment. The Company's operating activities used cash of
$8,214,000 in the first half of fiscal 1997 and provided cash of $2,105,000 in
the first half of fiscal 1996.
From time to time, the Company evaluates acquisitions of businesses,
products or technologies that complement the business of Maxis. The Company has
no present understandings, commitments or agreements with respect to any
material acquisitions of other businesses, products or technologies. Any such
transactions, if consummated, may use a portion of the Company's working capital
or require the issuance of equity.
The Company believes that existing working capital and cash from
operations will satisfy the Company's liquidity and capital requirements for at
least the next year.
Risk Factors Affecting Future Earnings and Stock Price
- ------------------------------------------------------
Sections of this Report, particularly the third paragraph on page 9, the
first and third paragraphs on page 10 and the statements under Liquidity and
-------------
Capital Resources contain 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. Actual results could differ materially from those
projected in the forward-looking statements as a result of many factors,
including the risk factors set forth below and elsewhere in this Report.
The Company has experienced, and expects to continue to experience,
significant fluctuations in operating results due to a variety of factors,
including the size and rate of growth of the consumer software market, market
acceptance of the Company's products and those of its competitors, development
and promotional expenses relating to the introduction of new products or new
versions of existing products, seasonality, projected and actual changes in
computing platforms, the timing and success of product introductions, product
returns, changes in pricing policies by the Company or its competitors, the
accuracy of retailers' forecasts of consumer demand, the timing of orders from
major customers and order cancellations.
The Company's operating results also may fluctuate significantly due to
changes in product plans or delays in completing and shipping products. For
example, in April 1996, the Company decided to reevaluate The Mindwarp, an
------------
action game it had planned to ship during fiscal 1997. In July 1996, the
Company completed its re-evaluation and decided to discontinue the development
of The Mindwarp. In connection with this decision, the Company decided to close
------------
its Utah development office. Such risks apply to all of the Company's products
under development.
Sales to a limited number of distributors and retailers have constituted
and are anticipated to continue to constitute a substantial majority of the
Company's net revenues. The loss of, or significant reduction in, sales
attributable to any of the Company's principal distributors or retailers could
materially adversely affect the Company's business, operating results and
financial condition. Distribution and retailing businesses in the computer
industry from time to time have experienced significant fluctuations in their
businesses and there have been a number of business failures among such
entities. For example, NeoStar, a retailer with over 650 retail stores, filed
for Chapter 11 bankruptcy in September 1996. In connection with this event, the
Company incurred an expense for bad debt during the quarter ended September 30,
1996. Although the Company performs periodic credit evaluations of its
customers, the insolvency or business failure of any significant distributor or
retailer of the Company's products could have a material adverse effect on the
Company's business, operating results and financial condition.
The consumer software business is highly seasonal. Net revenues typically
are significantly higher during the third fiscal quarter, due primarily to the
increased demand for consumer software during the calendar
Page 11
<PAGE>
MAXIS, INC.
Risk Factors Affecting Future Earnings and Stock Price (Cont.)
- --------------------------------------------------------------
year-end holiday buying season. Net revenues in other quarters generally are
lower and vary significantly as a result of new product introductions and other
factors. The Company expects its net revenues and operating results to continue
to reflect significant seasonality. There can be no assurance that the Company
will achieve consistent profitability on a quarterly or annual basis.
In response to competitive pressures, the Company may take certain
pricing and/or marketing actions that could materially adversely affect the
Company's business, operating results and financial condition. The Company may
be required to pay fees in advance or to guarantee royalties, which may be
substantial, to obtain licenses to intellectual properties from third parties
before products incorporating such properties have been introduced or have
achieved market acceptance.
Products generally are shipped as orders are received, and accordingly
the Company operates with little backlog. The Company's expense levels are
based, in part, on its expectations regarding future sales and, as a result,
operating results would be disproportionately adversely affected by a decrease
in sales or a failure to meet the Company's sales expectations. Defective
products may result in higher customer support costs and product returns.
The Company's gross profit is affected by the mix of sales among products
that are developed or licensed by the Company and products that are developed by
third party affiliate partners and distributed by the Company. Gross profit and
operating expenses are significantly lower on affiliate partner products because
the Company's services with respect to such products generally are limited to
sales, distribution and related functions. Effective April 1, 1996, the Company
changed the offered terms of its affiliate partner program, granting, among
other things, a greater share of affiliate sales receipts to affiliate partners.
There can be no assurance that the Company's current share of receipts on
affiliate sales for distribution services or the current mix of affiliate
partner sales will be sustained.
The market price of the Company's Common Stock could be subject to
significant fluctuations in response to variations in quarterly operating
results as well as other factors, such as announcements of new products by the
Company or its competitors and changes in financial estimates by securities
analysts or other events. The stock market and many technology companies
recently have been trading at or near historic highs and reflect price/earning
ratios above historic norms. Moreover, the stock market has experienced extreme
volatility that has particularly affected the market prices of equity securities
of many high technology companies and that often has been disproportionate to
the operating performance of such companies. Broad market fluctuations, as well
as economic conditions in general and in the software industry in particular,
may adversely affect the market price of the Company's Common Stock. There can
be no assurance that the Company's stock price will remain at or near its
current level.
Page 12
<PAGE>
MAXIS, INC.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Stockholders on August 21, 1996. At the
meeting, the following votes were cast:
Proposal 1: Election of Directors
NOMINEE VOTES FOR VOTES WITHHELD
------- ----------- --------------
Jeffrey B. Braun 10,482,125 62,902
Samuel L. Poole 10,527,125 17,902
Charles H. Gaylord, Jr. 10,527,125 17,902
William H. Janeway 10,482,125 62,902
Dr. Henry Kressel 10,527,125 17,902
Avram C. Miller 10,527,125 17,902
William R. Wright 10,527,125 17,902
Eric C.W. Dunn 10,527,125 17,902
<TABLE>
<CAPTION>
VOTES VOTES BROKER
VOTES FOR AGAINST ABSTAINED NON-VOTES
--------- ------- --------- ---------
<S> <C> <C> <C> <C>
Proposal 2: Approval of amendments
to the 1995 Stock Plan to (i)
increase the number of shares of the
Company's Common Stock reserved for
issuance under such plan by
1,200,000 shares from a total of
575,000 shares to a total of
1,775,000 shares, and (ii) make
directors of the Company eligible to
participate in such plan. 7,612,604 1,029,801 9,638 1,892,984
Proposal 3: Approval of amendment to
the 1995 Employee Stock Purchase
Plan to increase the number of
shares of Common Stock reserved for
issuance under such plan by 100,000
shares to a total of 200,000 shares. 8,626,002 16,738 9,303 1,892,984
Proposal 4: Ratification of
appointment of Ernst & Young LLP as
independent auditors for the Company
for the fiscal year ended March 31,
1997. 10,533,433 3,336 8,258 0
</TABLE>
Page 13
<PAGE>
MAXIS, INC.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11.1 Statement of Computation of Earnings per Share
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter
ended September 30, 1996.
Page 14
<PAGE>
MAXIS, INC.
SIGNATURE
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.
MAXIS, INC.
(Registrant)
Date: November 13, 1996 By: /S/ Fred M. Gerson
------------------
Vice President,
Chief Financial Officer
Page 15
<PAGE>
MAXIS, INC.
INDEX TO EXHIBITS
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION OF EXHIBIT NUMBERED PAGE
- ------- ---------------------- -------------
11.1 Statement of Computation of Earnings per Share 17
27 Financial Data Schedule 18
Page 16
<PAGE>
EXHIBIT 11.1
MAXIS, INC.
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
------------------- ------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss) $(2,496) $ 1,722 $(3,912) $ 2,854
Computations of weighted average common and common
equivalent shares outstanding:
Weighted average common shares outstanding 11,209 10,407 11,126 7,497
Common equivalent shares from stock options issued
during the twelve-month period prior to the
Company's initial public -- 993 -- 993
Common equivalent shares attributable to:
Redeemable preferred stock (if-converted method) -- -- -- 2,094
Stock options (treasury stock method) -- 53 -- 44
------ ------- ------- -------
Shares used in computing net income (loss) per share 11,209 11,453 11,126 10,628
====== ======= ======= =======
Net income (loss) per share $ (.22) $ .15 $ (.35) $ .27
====== ======= ======= =======
</TABLE>
Page 17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
CONDENSED CONSOLIDATED FINANCIAL STATEMENT
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 16,437
<SECURITIES> 17,186
<RECEIVABLES> 11,560
<ALLOWANCES> 6,078
<INVENTORY> 1,854
<CURRENT-ASSETS> 48,942
<PP&E> 6,963
<DEPRECIATION> 2,980
<TOTAL-ASSETS> 63,328
<CURRENT-LIABILITIES> 7,977
<BONDS> 0
0
0
<COMMON> 52,462
<OTHER-SE> 2,889
<TOTAL-LIABILITY-AND-EQUITY> 63,328
<SALES> 6,928
<TOTAL-REVENUES> 8,004
<CGS> 3,176
<TOTAL-COSTS> 3,563
<OTHER-EXPENSES> 8,874
<LOSS-PROVISION> 2,250
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (4,059)
<INCOME-TAX> (1,563)
<INCOME-CONTINUING> (2,496)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,496)
<EPS-PRIMARY> (0.22)
<EPS-DILUTED> (0.22)
</TABLE>
