<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 JUNE 30, 1998
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 0-25996
TRANSWITCH CORPORATION
(Exact name of Registrant as Specified in its Charter)
DELAWARE 06-1236189
(State of Incorporation) (I.R.S. Employer
Identification Number)
3 ENTERPRISE DRIVE
SHELTON, CONNECTICUT 06484
(Address of Principal Executive Offices)
Telephone (203) 929-8810
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 [ ]
COMMON STOCK, PAR VALUE $.001 PER SHARE, OUTSTANDING AT JULY 31, 1998:
14,204,882 SHARES.
Page 1 of 14
<PAGE>
TRANSWITCH CORPORATION
INDEX
For the quarter ended June 30, 1998
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1998
and December 31, 1997 3
Consolidated Statements of Operations for the Three and
Six Months Ended June 30, 1998 and 1997 4
Consolidated Statements of Cash Flows for the Three and
Six Months Ended June 30, 1998 and 1997 5
Notes to Unaudited 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 12
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
Page 2 of 14
<PAGE>
Part I FINANCIAL INFORMATION
Item 1. Financial Statements
TRANSWITCH CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(in thousands, except share data) June 30, December 31,
ASSETS 1998 1997
------ ----------- -----------
CURRENT ASSETS: (unaudited)
<S> <C> <C>
Cash and cash equivalents $ 20,797 $ 20,508
Short term investments 985 1,110
Accounts receivable, net 5,441 4,528
Inventories, net 5,481 4,812
Prepaid expenses and other current assets 1,011 815
Total current assets 33,715 31,773
PROPERTY AND EQUIPMENT, NET 3,875 3,816
PRODUCT LICENSES, NET 1,082 1,000
-------- --------
TOTAL ASSETS $ 38,672 $ 36,589
============ ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
====================================
CURRENT LIABILITIES:
Accounts payable $ 1,887 $ 1,350
Accrued liabilities 3,030 3,708
Product license fee payable, current portion 938 1,067
-------- --------
Total current liabilities 5,855 6,125
PRODUCT LICENSE FEE PAYABLE, LESS CURRENT PORTION - 303
STOCKHOLDERS' EQUITY:
Convertible Preferred Stock, $.01 par value; authorized 15,000,000 5,500 14,357
shares; issued and outstanding; 14,500,000 shares at December 31, 1997,
and 5,500,000 shares at June 30, 1998
Common Stock, $.001 par value; authorized 25,000,000 shares;
issued and outstanding; 12,318,271 shares at December 31, 1997,
13,671,342 shares at June 30, 1998 14 12
Additional paid in capital 55,683 45,753
Accumulated deficit (28,380) (29,961)
-------- --------
Total stockholders' equity 32,817 30,161
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 38,672 $ 36,589
========================================== ======== ========
</TABLE>
Page 3 of 14
<PAGE>
TRANSWITCH CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
-------------------------- ------------------------
1998 1997 1998 1997
----- ---- ---- ----
<S> <C> <C> <C>
REVENUES $ 9,607 $ 6,256 $18,213 $11,312
COST OF REVENUES 3,728 2,803 7,082 5,177
------- ------- ------- -------
GROSS PROFIT 5,879 3,453 11,131 6,135
OPERATING EXPENSES:
Research and development 2,537 2,216 5,080 4,614
Marketing and sales 1,925 1,673 3,743 3,174
General and administrative 589 567 1,153 1,085
------- ------- ------- -------
TOTAL OPERATING EXPENSES 5,051 4,456 9,976 8,873
------- ------- ------- -------
OPERATING INCOME (LOSS) 828 (1,003) 1,155 (2,738)
INTEREST INCOME, NET 264 111 498 254
------- ------- ------- -------
NET INCOME (LOSS) BEFORE TAX 1,092 (892) 1,653 (2,484)
INCOME TAXES 72 - 72 -
NET INCOME (LOSS) $ 1,020 $ (892) $ 1,581 $(2,484)
======= ======= ======= =======
BASIC EARNINGS (LOSS) PER COMMON SHARE $ 0.08 $ (0.07) $ 0.12 $ (0.21)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 13,567 12,093 13,418 12,063
======= ======= ======= =======
DILUTED EARNINGS (LOSS) PER COMMON SHARE $ 0.07 $ (0.07) $ 0.11 $ (0.21)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES AND EQUIVALENTS OUTSTANDING 14,807 12,093 14,658 12,063
======= ======= ======= =======
</TABLE>
Page 4 of 14
<PAGE>
TRANSWITCH CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------
1998 1997
-------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 1,581 $ (2,484)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation and amortization 1,100 766
Stock compensation expense 250 166
Changes in assets and liabilities:
(Increase) in accounts receivable (913) (1,333)
(Increase) in prepaids and other current assets (196) (230)
(Increase) decrease in inventories (669) 89
Increase (decrease) in accounts payable 537 (260)
(Decrease) increase in accrued liabilities (678) 1,353
-------- -------
Total adjustments (569) 551
-------- -------
Net cash provided by (used) in operating activities 1,012 (1,933)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures and cost of product licenses (1,242) (960)
Purchase of short term investments (985) (4,506)
Proceeds from sale of short term investments 1,110 12,292
-------- -------
Net cash (used in) provided by investing activities (1,117) 6,826
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the exercise of stock options and warrants 900 190
Payment of issuance costs for convertible preferred stock (75) -
Payments on product license obligations (431) (460)
-------- -------
Net cash provided by (used in) financing activities 394 (270)
INCREASE IN CASH AND CASH EQUIVALENTS 289 4,623
-------- -------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 20,508 3,911
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 20,797 $ 8,534
======== =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 68 $ 90
</TABLE>
Page 5 of 14
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
For the second quarter ended June 30, 1998
Note 1. Interim Financial Statements
- -------------------------------------
The accompanying unaudited interim financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission
for reporting on Form 10-Q. Accordingly, certain information and footnotes
required by generally accepted accounting principles for complete financial
statements are not included herein. The financial statements are prepared on a
consistent basis with and should be read in conjunction with the statements and
notes thereto contained in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997 filed with the Securities and Exchange
Commission on March 31, 1998.
In the opinion of management, these statements include all adjustments,
consisting of normal, recurring adjustments, which are necessary for a fair
presentation for such periods. The results of operations for any interim period
are not necessarily indicative of the results which may be achieved for the
entire fiscal year ending December 31, 1998.
Note 2. Inventories
- --------------------
Inventories are carried at the lower of cost (on a first in, first out
basis) or estimated net realizable value. Inventories are summarized as follows
(in thousands):
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
------------- -----------------
<S> <C> <C>
Raw Materials $ 831 $1,086
Work in Process 818 1,654
Finished Goods 3,832 2,072
------ ------
Total Inventories $5,481 $4,812
====== ======
</TABLE>
Note 3. Comprehensive Income
- ----------------------------
Effective January 1, 1998, the Company adopted the Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income." This Statement
requires that companies disclose comprehensive income, which includes net
income, foreign currency translation adjustments, minimum pension liability
adjustments and unrealized gains and losses on marketable securities classified
as available for sale. For the Company, comprehensive income is the same as the
net income (loss).
Page 6 of 14
<PAGE>
Note 4. Consolidated Statement of Stockholders' Equity
- -------------------------------------------------------
(in thousands, except share data)
<TABLE>
<CAPTION>
Convertible Additional
Common Stock Preferred Paid-in Accumulated
Shares Amount Stock Capital Deficit Total
---------- ------ ------ -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1997 12,318,271 $12 $14,357 $45,753 $(29,961) $ 30,161
Shares of common stock issued upon
exercise of stock options 133,355 - 294 - 294
Deemed dividend on convertible
preferred stock - - 143 (143) - -
Issuance cost of convertible preferred
stock - (55) - (55)
Shares of common stock issued upon
conversion of preferred stock 846,267 1 (6,750) 6,749 - -
Compensation related to issuance of
stock options - - 181 - 181
Net income - - - - 561 561
---------- --- ------- ------- -------- --------
BALANCE AT MARCH 31, 1998 13,297,893 $13 $ 7,750 $52,779 $(29,400) $ 31,142
Shares of common stock issued upon
exercise of stock options 160,785 - 606 - 606
Issuance cost of convertible
preferred stock - (20) - (20)
Shares of common stock issued upon
conversion of preferred stock 212,664 1 (2,250) 2,249 - -
Compensation related to issuance of
stock options - - - 69 - 69
Net income - - - - 1,020 1,020
---------- --- ------- ------- -------- --------
Balance at June 30, 1998 13,671,342 $14 $ 5,500 $55,683 $(28,380) $ 32,817
========== === ======= ======= ======== ========
</TABLE>
Page 7 of 14
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
GENERAL
TranSwitch Corporation, a Delaware corporation ("TranSwitch" or the
"Company") was organized and commenced operations in April 1988. Since its
incorporation, the Company has designed, sourced and marketed highly integrated
digital and mixed-signal semiconductor solutions for the telecommunications and
data communications markets. The Company's customers are the original equipment
manufacturers (OEM's) who serve four communications market segments: worldwide
public network infrastructure, including cable television (CATV); internet
infrastructure; corporate wide area networks (WAN) and local area networks
(LAN). The Company's products are generally incorporated into OEM's products at
the design stage, which often requires significant expenditures by the Company
well in advance of substantial orders from the customer.
The Company believes that period-to-period comparisons of its financial
results are not necessarily meaningful and should not be relied upon as an
indication of future performance. In addition, the Company's results of
operations may fluctuate from period to period in the future.
THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1998 AND 1997
REVENUE
The Company derives its revenues from product sales. Total revenues for the
quarter ended June 30, 1998 were $9.6 million, representing a 54% increase over
the $6.3 million recorded in the prior year comparable period. Total revenues
for the six months ended June 30, 1998 were $18.2 million, an increase of 61%
over the $11.3 million for the six months ended June 30, 1997. The increase in
revenue in the quarter and for six months is primarily attributable to the
increase in the revenue of the SONET/SDH product line.
GROSS PROFIT
Gross profit was $5.9 million for the quarter ended June 30, 1998 compared
to $3.5 million in the corresponding period of the prior year. Gross profit for
six months ended June 30, 1998 was $11.1 million compared to $6.1 million for
the same period in 1997. Gross margin was 61.2% for the quarter ended June 30,
1998 as compared to 55.2% for the quarter ended June 30, 1997; gross margin for
the six months ended June 30, 1998 was 61.1% compared to 54.2% for the same
period a year ago. The increase in gross profit and margin is principally the
results of improved costs from the Company's vendors achieved as higher volumes
of products were purchased by the Company.
Page 8 of 14
<PAGE>
RESEARCH AND DEVELOPMENT
Research and development expenses were 26.4% of total revenues for the
quarter ended June 30, 1998 compared to 35.4% of total revenues for the quarter
ended June 30, 1997; total spending increased 14.4% to $2.5 million for the
quarter ended June 30, 1998 as compared to $2.2 million for the quarter ended
June 30, 1997. In the six month period ended June 30, 1998, research and
development expenses were 27.9% of revenues as compared to 40.8% for the same
period a year ago; spending in the six months ended June 30, 1998 was $5.1
million, representing a 10.1% increase over the $4.6 million for the comparable
period a year ago. The increases in period-over-period expense were the result
of the Company's continued investment in research and development activities.
The decreases as a percentage of total revenues in the quarter and year-to-date
were attributable to the growth in revenues from the comparable periods in the
prior year.
MARKETING AND SALES
Marketing and sales expenses were 20.0% of total revenues for the quarter
ended June 30, 1998 compared to 26.7% for the quarter ended June 30, 1997. The
marketing and sales expenses increased 15.1% to $1.9 million for the quarter
ended June 30, 1998 compared to $1.7 million for the quarter ended June 30,
1997. In the six month period ended June 30, 1998, marketing and sales expenses
were 20.9% of total revenues compared to 28.1% for the same period in 1997.
Total spending increased 17.9% to $3.7 million for the six month period ended
June 30, 1998 as compared to $3.2 million in the comparable period in 1997. The
increases in spending were primarily the result of the increase in marketing and
sales personnel and expansion of the Company's distribution network as part of
the Company's continued investment in its marketing and sales infrastructure.
The decreases as a percentage of total revenues in the quarter and year-to-date
were attributable to the growth from revenues in the comparable periods in the
prior year.
GENERAL AND ADMINISTRATIVE
General and administrative expenses for the quarter ended June 30, 1998
increased to $589 thousand from $567 thousand for the same quarter in the prior
year, and as a percentage of total revenues decreased to 6.1% for the quarter
ended June 30, 1998 compared to 9.1% for the quarter ended June 30, 1997. The
total spending for the six month period ended June 30, 1998 increased 6.2% to
$1.2 million as compared to $1.1 million for the comparable period in 1997, and
as a percentage of total revenues decreased to 6.3% for the six months ended
June 30, 1998 as compared to the 9.6% for the comparable period a year ago. The
increases in period-over-period expense were the result of the Company's
continued investment in the general and administrative area. The decreases as a
percentage of total revenues in the quarter and year-to-date were attributable
to the growth in revenues from the comparable periods in the prior year.
Page 9 of 14
<PAGE>
INTEREST INCOME, NET
Interest income, net of interest expense, was $264 thousand in the quarter
ended June 30, 1998 compared to $111 thousand in the corresponding period in
1997 and for the six month period was $498 thousand in 1998 as compared to $254
thousand in the same period in 1997. The increases in interest income, net were
primarily the result of the increase in cash between the two periods.
INCOME TAXES
The Company's effective tax rate was 4.4 percent in the first six months of
1998, which reflects the estimated federal alternative minimum taxes and states
taxes that will need to be paid.
In June, 1998 the Financial Accounting Standards Board issued Statement of
Financial Standards (SFAS) No. 144, "Accounting for Derivative Instruments and
Hedging Activities," SFAS No. 133 requires companies to recognize all
derivatives as assets or liabilities measured at their fair value. Gains or
losses resulting from changes in the values of those derivatives would be
accounted for depending on the use of the derivative and whether it qualifies
for hedge accounting. We do not expect this statement to have a material impact
on our financial position or results of operations. This Statement is effective
for fiscal years beginning after June 15, 1999. We will adopt this accounting
standard beginning January 1, 2000.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations and met its capital requirements
since it was incorporated in 1988 primarily through private placements of
preferred stock, borrowings from a working capital line and equipment financing
from Silicon Valley Bank, an initial public offering of its common stock in June
1995 and cash generated from its operations. In October 1997 the Company
received net cash proceeds of $13.7 million in connection with a private
placement of its Series A Convertible Preferred Stock.
In the first six months of 1998, the Company generated $1.0 million of cash
from its operating activities, the result of a net income of $1.6 million and
non-cash items of $1.3 million, offset by a net increase in working capital of
$1.9 million. Capital expenditures during this period totaled $1.2 million,
including purchases of computer equipment, tooling, software and product
licenses.
The Company's principal sources of liquidity as of June 30, 1998 consisted
of cash and cash equivalents and short term investments of approximately $21.8
million, as well as $8.0 million available under the Company's working capital
line of credit and equipment line of credit provided by Silicon Valley Bank. As
of June 30, 1998, the Company had no outstanding balances under these lines of
credit. Pursuant to the working capital and equipment financing agreements with
Silicon Valley Bank, the Company is restricted from further pledging its assets
or granting additional
Page 10 of 14
<PAGE>
security interests in such assets. The Company believes its existing cash, the
cash flow from operations, if any, and cash available under its lines of credit
will be sufficient to satisfy the Company's cash needs for at least the next 12
months. However, there can be no assurance that events in the future will not
require the Company to seek additional capital sooner, or if so required, that
such capital will be available on terms favorable or acceptable to the Company,
if at all.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company does not provide financial performance forecasts. The forward
looking statements in this Form 10-Q and presented elsewhere by management from
time to time are made under the safe harbor provisions of Section 21E of the
Securities Exchange Act of 1934, as amended. The Company's operating results and
financial condition have varied and may vary in the future significantly
depending on a number of factors and involve risks and uncertainties that could
materially adversely affect revenues and profitability, including: competitive
pressures on selling prices; the timing and cancellation of customers orders;
the timing and provision of pricing protections and returns from certain
distributors; availability of foundry capacity and raw materials; fluctuations
in yields; changes in product mix; the Company's ability to introduce new
products and technologies on a timely basis; introduction of products and
technologies by the Company's competitors; market acceptance of the Company's
and its competitors' products; the level of orders received which can be shipped
in a quarter; the amount and timing of recognition of non-recurring engineering
revenue; the timing of investments in research and development, including
tooling expenses associated with product development and pre-production; and
whether the Company's customers buy directly from the Company or a distributor.
Sudden shortages of raw materials or production capacity constraints can lead
producers to allocate available supplies or capacity to customers with resources
greater than those of the Company, which could interrupt the Company's ability
to meet its production obligations. Historically, average selling prices in the
semiconductor industry have decreased over the life of a product, and as a
result, the average selling prices of the Company's products may be subject to
significant pricing pressures in the future. The Company's business is
characterized by short-term orders and shipment schedules, and customer orders
typically can be canceled or rescheduled without significant penalty to the
customer. Due to the absence of a substantial noncancellable backlog, the
Company typically plans its production and inventory levels based on internal
forecasts of customer demand, which are highly unpredictable and can fluctuate
substantially. Because the Company is continuing to increase its operating
expenses for personnel and new product development and for inventory in
anticipation of future sales levels, operating results would be adversely
affected if increased sales are not achieved. In addition, the Company is
limited in its ability to reduce costs quickly in response to any revenue
shortfalls. From time to time, in response to anticipated long lead times to
obtain inventory and materials from its foundries, the Company may order in
advance of anticipated customer demand, which might result in excess inventory
levels if expected orders fail to materialize or other factors render the
customer's products less marketable. As a result of the foregoing and other
factors, the Company may experience material fluctuations in future operating
results on a quarterly or annual basis, which could materially and adversely
affect its business, financial condition, operating results and stock price.
Page 11 of 14
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
On May 27, 1998 the Company held its Annual Meeting of Stockholders, at which
the stockholders of the Company voted on the following matters:
1. The election of a Board of Director for the ensuing year. The number of votes
cast for the re- election of each of the directors listed below was as follows:
Nominee Number of Shares
------- ----------------
For Withhold Authority
--- ------------------
Santanu Das 11,410,022 550,374
Steward S. Flaschen 11,091,206 869,190
David D. French 11,405,397 554,999
Charles Lee 11,092,230 868,166
Ljubomir Micic 11,372,809 587,587
Albert E. Paladino 11,091,360 869,036
Erik H. Van Der Kaay 11,409,222 551,174
2. To approve and ratify the Corporation's Third Amended and Restated 1995 Stock
Plan, with a total of 3,500,000 shares of Common stock available of issuance
thereunder. The number of votes cast was as follows:
Number of Shares
----------------
For 4,961,116
Against 2,369,555
Abstain 238,768
Broker Non-Votes 4,390,957
3. To approve an amendment to the Corporation's 1995 Non-Employee Director Stock
Option Plan to (a) increase the number of shares of Common Stock available for
issuance thereunder by an additional 100,000 shares, to a total of 250,000
shares available for issuance thereunder, and (b) amend Section 4(b) of the 1995
Non-Employee Director Stock Option Plan to increase the annual option granted
thereunder to each non-employee director from an option to purchase 7,500 shares
of Common Stock on each one-year anniversary of the date that he or she is first
elected to the Board of Directors, to an option to purchase 9,600 shares of
Common Stock on each one-year anniversary of the date that he or she is first
elected to the Board of Directors. The number of votes cast was as follows:
Page 12 of 14
<PAGE>
Number of Shares
----------------
For 6,325,115
Against 1,080,153
Abstain 252,293
Broker Non-Votes 4,302,835
3. The selection of KPMG Peat Marwick LLP as auditors for the fiscal year ending
December 31, 1998 was ratified by the following vote:
For 11,881,820
Against 68,931
Abstain 9,645
Broker Non-Votes 0
Item 5. Other Information.
The Company's By-Laws establish an advance notice procedure with regard
to certain matters, including nominations of persons for election to
the Board of Directors and the proposal of business to be considered by
the stockholders entitled to vote at the next annual meeting of
stockholders. In general, notice must be received, in writing, at the
Company's principal executive offices not later than December 21, 1998
and not before November 21, 1998. Notice should be sent to the
attention of the Secretary of the Company and must contain specified
information concerning the matters to be brought before such meeting
and concerning the stockholder proposing such matters. In order to
curtail any controversy as to the date on which notice was received by
the Company, it is suggested that proponents submit their notice by
Certified Mail, Return Receipt Requested.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11, Statement re: computation of per share earnings.
Exhibit 27, Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the second quarter
ended June 30, 1998.
Page 13 of 14
<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.
TranSwitch Corporation
(Registrant)
Date: August 12, 1998 /s/ Dr. Santanu Das
------------------------------------
Dr. Santanu Das
Chairman of the Board,
President, Chief Executive Officer
(Principal Executive Officer)
/s/ Michael F. Stauff
------------------------------------
Michael F. Stauff
Senior Vice President and Chief
Financial Officer and Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Page 14 of 14
<PAGE>
Exhibit 11:
TRANSWITCH CORPORATION
COMPUTATION OF EARNINGS PER SHARE /1/
(Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic earnings (loss) per share:
Net income (loss) 1,020 (892) 1,581 (2,484)
====== ====== ====== ======
Weighted average number of common shares
outstanding during the period 13,567 12,093 13,418 12,063
------ ------ ------ ------
Basic earnings (loss) per share 0.08 (0.07) 0.12 (0.21)
====== ====== ====== ======
Diluted earnings (loss) per share:
NET INCOME (LOSS) 1,020 - 1,581 -
====== ====== ====== ======
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
outstanding during the period 13,567 - 13,418 -
Common stock issuable with respect to:
Stock options and warrants 719 - 720 -
Convertible preferred stock 520 - 520 -
Adjusted weighted average number of shares 14,806 - 14,658 -
outstanding during the period
Diluted earnings (loss) per share $0.07 - /2/ $0.11 - /2/
====== ====== ====== ======
</TABLE>
- ----------
/1/ This exhibit should be read in connection with "Consolidated Statement of
Stockholders' Equity" in Note 4 of the notes to the Consolidated Financial
Statements.
/2/ Diluted loss per share is the same as basic given the net loss position of
the Company.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-START> JAN-01-1998 JAN-01-1998
<PERIOD-END> JUN-30-1998 JUN-30-1998
<CASH> 20,797 20,797
<SECURITIES> 985 985
<RECEIVABLES> 5,652 5,652
<ALLOWANCES> 211 211
<INVENTORY> 5,481 5,481
<CURRENT-ASSETS> 33,715 33,715
<PP&E> 10,463 10,463
<DEPRECIATION> 6,588 6,588
<TOTAL-ASSETS> 38,672 38,672
<CURRENT-LIABILITIES> 5,855 5,855
<BONDS> 0 0
0 0
5,500 5,500
<COMMON> 14 14
<OTHER-SE> 27,303 27,303
<TOTAL-LIABILITY-AND-EQUITY> 38,672 38,672
<SALES> 9,607 18,213
<TOTAL-REVENUES> 9,607 18,213
<CGS> 3,728 7,082
<TOTAL-COSTS> 5,051 9,976
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 1,092 1,653
<INCOME-TAX> 72 72
<INCOME-CONTINUING> 1,020 1,581
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,020 1,581
<EPS-PRIMARY> $0.08 $0.12
<EPS-DILUTED> $0.07 $0.11
</TABLE>
