<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, 1999
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, 1999:
25,743,489 SHARES.
Page 1 of 18
<PAGE>
TRANSWITCH CORPORATION
FORM 10-Q
June 30, 1999
TABLE OF CONTENTS
- -----------------
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as of June 30, 1999
and December 31, 1998 3
Consolidated Statements of Operations for the Three and
Six Months Ended June 30, 1999 and 1998 4
Consolidated Statements of Cash Flows for the Three and
Six Months Ended June 30, 1999 and 1998 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 18
Page 2 of 18
<PAGE>
Part I FINANCIAL INFORMATION
Item 1. Financial Statements
TranSwitch Corporation
Consolidated Balance Sheets
(in thousands, except share data)
<TABLE>
<CAPTION>
June 30, December 31,
Assets 1999 1998
------ ---- ----
<S> <C> <C>
Current assets: (unaudited)
Cash and cash equivalents $ 39,654 $ 24,243
Short term investments 63,924 2,953
Accounts receivable, net 8,772 7,624
Inventories, net 4,255 5,476
Prepaid expenses and other current assets 1,759 917
--------- ---------
Total current assets 118,364 41,213
Property and equipment, net 6,388 5,143
Product licenses, net 933 1,142
Other assets 535 311
--------- ---------
Total Assets $ 126,220 $ 47,809
============ ========= =========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable $ 2,420 $ 2,858
Accrued expenses and other liabilities 4,325 4,294
Product license fee payable, current portion -- 303
--------- ---------
Total current liabilities 6,745 7,455
Stockholders' equity:
Common Stock, $.001 par value; authorized 100,000,000 shares;
issued and outstanding: 25,592,382 shares at June 30, 1999;
22,017,797 shares at December 31, 1998* 25 22
Additional paid in capital 135,643 64,290
Accumulated deficit (16,193) (23,958)
--------- ---------
Total stockholders' equity 119,475 40,354
--------- ---------
Total Liabilities and Stockholders' Equity $ 126,220 $ 47,809
=========================================== ========= =========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
* Adjusted to reflect a three-for-two stock split effective June 3, 1999.
Page 3 of 18
<PAGE>
TranSwitch Corporation
Consolidated Statements of Operations
(Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
For the three and six month periods ended
June 30, June 30,
---------------------- ------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $16,119 $ 9,607 $30,580 $18,213
Cost of Revenues 5,633 3,728 10,855 7,082
------- ------- ------- -------
Gross Profit 10,486 5,879 19,725 11,131
Operating Expenses:
Research and development 3,203 2,537 6,334 5,080
Marketing and sales 2,826 1,925 5,463 3,743
General and administrative 800 589 1,519 1,153
------- ------- ------- -------
Total Operating Expenses 6,829 5,051 13,316 9,976
------- ------- ------- -------
Operating Income 3,657 828 6,409 1,155
Interest Income, net 1,221 264 1,753 498
------- ------- ------- -------
Income before income taxes 4,878 1,092 8,162 1,653
Provision for income taxes 237 72 397 72
Net Income $ 4,641 $ 1,020 $ 7,765 $ 1,581
======= ======= ======= =======
Basic Earnings per Common Share $ 0.18 $ 0.05 $ 0.31 $ 0.08
Weighted Average Number of
Common Shares Outstanding 25,495 20,351 24,799 20,127
======= ======= ======= =======
Diluted Earnings per Common Share $ 0.17 $ 0.05 $ 0.29 $ 0.07
Weighted Average Number of
Common Shares and Equivalents Outstanding 27,587 22,211 26,929 21,987
======= ======= ======= =======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
Page 4 of 18
<PAGE>
TranSwitch Corporation
Consolidated Statements of Cash Flows
( Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 7,765 $ 1,581
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,351 1,100
Stock compensation expense 86 250
Changes in assets and liabilities:
(Increase) in accounts receivable (1,148) (913)
Decrease (increase) in inventories 1,221 (669)
(Increase) in prepaids and other current assets (1,066) (196)
(Decrease) increase in accounts payable (438) 537
Increase (decrease) in accrued liabilities 31 (678)
-------- --------
Total adjustments 37 (569)
-------- --------
Net cash provided by operating activities 7,802 1,012
Cash flows from investing activities:
Capital expenditures and cost of product licenses (2,387) (1,242)
Purchase of short term investments (73,345) (985)
Proceeds from maturities of short term investments 12,374 1,110
-------- --------
Net cash (used in) investing activities (63,358) (1,117)
Cash flows from financing activities:
Proceeds from the exercise of stock options and warrants 3,089 900
Proceeds from the issuance of common stock, net of issuance cost 68,181 --
Payment of issuance costs for convertible preferred stock -- (75)
Payments on product license obligations (303) (431)
-------- --------
Net cash provided by financing activities 70,967 394
-------- --------
Increase in cash and cash equivalents 15,411 289
Cash and cash equivalents at beginning of period 24,243 20,508
-------- --------
Cash and cash equivalents at end of period $ 39,654 $ 20,797
======== ========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 23 $ 68
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
Page 5 of 18
<PAGE>
TRANSWITCH CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
For the quarter ended June 30, 1999
Note 1. Interim Financial Statements
- -------------------------------------
The accompanying unaudited consolidated 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, 1998 filed
with the Securities and Exchange Commission on March 26, 1999.
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 that may be achieved for the
entire fiscal year ending December 31, 1999.
Note 2. Inventories, net
- -------------------------
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, 1999 December 31, 1998
------------- -----------------
<S> <C> <C>
Raw Materials $ 902 $ 947
Work in Process 642 809
Finished Goods 2,711 3,720
------ ------
Total Inventories, net $4,255 $5,476
====== ======
</TABLE>
Note 3. Stock Split
- --------------------
On April 14, 1999, the Board of Directors announced a three for two stock split
of the Company's common stock. The effective date of the stock split was June
3, 1999 for shareholders of record as of April 26, 1999. Shareholders' equity
has been restated to give retroactive recognition to the stock split in prior
periods by reclassifying from additional paid-in capital to common stock the par
value of the additional shares arising from the split. In addition, all
references in the financial statements to number of shares and per share amounts
have been restated.
Page 6 of 18
<PAGE>
Note 4. Consolidated Statement of Stockholders' Equity
- -------------------------------------------------------
(in thousands, except share data)
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit Total
------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1998 22,017,797 $22 $64,290 $(23,958) $ 40,354
Shares of common stock issued upon exercise of stock options 294,294 - 922 922
Common stock issued in follow on public offering 2,932,500 3 68,178 - 68,181
Compensation related to issuance of stock options
- - 33 33
Net income - - - 3,124 3,124
---------- --- -------- -------- --------
Balance at March 31, 1999 25,244,591 $25 $133,423 $(20,834) $112,614
========================= ========== === ======== ======== ========
Shares of common stock issued upon exercise of stock options 347,791 - 2,167 2,167
Compensation related to issuance of stock options - - 53 53
Net income - - - 4,641 4,641
---------- --- -------- -------- --------
BALANCE AT JUNE 30, 1999 25,592,382 $25 $135,643 $(16,193) $119,475
======================== ========== === ======== ======== ========
</TABLE>
Page 7 of 18
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
GENERAL
TranSwitch Corporation, a Delaware corporation established in April 1988
("TranSwitch" or the "Company"), designs, develops, markets and supports highly
integrated digital and mixed-signal (analog and digital) semiconductor solutions
for the telecommunications and data communications markets. The Company's
customers are original equipment manufacturers (OEMs) who serve three
communications market segments: worldwide public network infrastructure that
supports voice and data communications, internet infrastructure and corporate
wide area networks (WAN).
The Company's products are Very Large Scale Integrated (VLSI) semiconductor
devices that provide core functionality for communications network equipment.
The Company's VLSI solutions are programmable to provide high levels of
functionality for high-speed broadband communication networks. These products
are incorporated into OEMs' networking equipment. TranSwitch's VLSI devices are
compliant with SONET/SDH (Synchronous Optical Network/Synchronous Digital
Hierarchy), asynchronous and ATM (Asynchronous Transfer Mode) standards. The
Company's mixed-signal and digital design capability, together with its
telecommunications systems expertise, enables it to determine and implement
optimal combinations of design elements for enhanced functionality. The Company
believes that this approach allows its customers to achieve faster time to
market and to introduce systems that offer greater functionality, improved
performance, lower power dissipation, reduced system size and cost and greater
reliability relative to discreet solutions.
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, 1999 AND 1998
REVENUES
The Company derives its revenues from product sales. Total revenues for
the quarter ended June 30, 1999 were $16.1 million, representing a 68% increase
over the $9.6 million recorded in the prior year comparable period. Total
revenues for the six months ended June 30, 1999 were $30.6 million, an increase
of 68% over the $18.2 million for the six months ended June 30, 1998. The
increase in revenue in the quarter is attributable to the increase in the
revenue across all three of its product lines, SONET/SDH, Asynchronous and ATM.
Page 8 of 18
<PAGE>
GROSS PROFIT
Gross profit was $10.5 million for the quarter ended June 30, 1999 compared
to $5.9 million in the corresponding period of the prior year. Gross Profit for
the six months ended June 30, 1999 was $19.7 million compared to $11.1 million
for the same period in 1998. Gross margin was 65.1% for the quarter ended June
30, 1999, compared to 61.1% for the quarter ended June 30, 1998; gross margin
for the six months ended June 30, 1999 was 64.5% compared to 61.1% for the same
period a year ago. The increase in gross profit and margin is principally the
result of lower costs resulting from improved pricing from the Company's vendors
achieved as higher volumes of products were purchased by the Company.
RESEARCH AND DEVELOPMENT
Research and development expenses were 19.9% of total revenues for the
quarter ended June 30, 1999, compared to 26.4% of total revenues for the quarter
ended June 30, 1998; total spending increased 26.3% to $3.2 million for the
quarter ended June 30, 1999, compared to $2.5 million for the quarter ended June
30, 1998. In the six month period ended June 30, 1999, research and development
expenses were 20.7% of revenues as compared to 27.9% for the same 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
decrease as a percentage of total revenues in the quarter was attributable to
the growth in revenues from the comparable period in the prior year.
MARKETING AND SALES
Marketing and sales expenses were 17.5% of total revenues for the quarter
ended June 30, 1999 compared to 20.0% for the quarter ended June 30, 1998.
Marketing and sales expenses increased 46.8% to $2.8 million for the quarter
ended June 30, 1999, compared to $1.9 million for the quarter ended June 30,
1998. In the six month period ended June 30, 1999, marketing and sales were
17.9% of total revenues compared to 20.6% for the same period in 1998. Total
spending increased 46.0% to $5.5 million for the six month period ended June 30,
1999 as compared to $3.7 million in the comparable period in 1998. The
increases in spending were primarily the result of the increase in marketing and
sales personnel, expansion of the Company's distribution network as part of the
Company's continued investment in its marketing and sales infrastructure and
increased commissions paid to manufacturer's representatives attributed to the
higher sales volumes. The decrease as a percentage of total revenues in the
quarter was attributable to the growth in revenues from the comparable period in
the prior year.
GENERAL AND ADMINISTRATIVE
General and administrative expenses for the quarter ended June 30, 1999
increased to $800 thousand from $589 thousand for the same quarter in the prior
year, and as a percentage of total revenues decreased to 5.0% for the quarter
ended June 30, 1999, compared to 6.1% for the quarter
Page 9 of 18
<PAGE>
ended June 30, 1998. The total spending for the six month period ended June 30,
1999 increased 31.7% to $1.5 million from $1.2 million for the comparable period
in 1998 and as a percentage of revenue decreased to 5.0% for the six months
ended June 30, 1999 as compared to the 6.3% 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
decrease as a percentage of total revenues in the quarter was attributable to
the growth in revenues from the comparable period in the prior year.
INTEREST INCOME, NET
Interest income, net of interest expense, was $1.2 million in the quarter
ended June 30, 1999, compared to $264 thousand in the corresponding period in
1998; for six months ended June 30, 1999, interest income net, was $1.8 million
compared to $498 thousand in the same period in 1998. The increase in interest
income, net of interest expense, was primarily the result of the increase in
cash balances between the two periods, due to the follow on public offering of
the Company's common stock that was completed in February and March 1999 and
cash generated from operations.
INCOME TAXES
The Company has existing net operating loss carry-forwards that offset
federal taxes and accordingly, the Company's effective tax rate of 4.9 percent
for the six month period of 1999 reflects estimated federal alternative minimum
tax and state taxes.
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 (all such shares had been converted into shares of Common Stock
as of September 30, 1998), the borrowings from a working capital line and
equipment financing from Silicon Valley Bank, public offerings of its common
stock and cash generated from its operations. In the first quarter of 1999, the
Company completed a follow-on public offering and raised $68.2 million, net of
commissions, and issued 2,932,500 shares of its common stock, adjusted for the
split on June 3, 1999.
The Company's principal sources of liquidity as of June 30, 1999 consisted
of $103.6 million in cash, cash equivalents and short-term investments and $10.0
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, 1999,
the Company had no outstanding balance 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 security interests in such assets.
In the first six months of 1999, the Company generated $7.8 million of cash
from its
Page 10 of 18
<PAGE>
operating activities, the result of net income of $7.8 million adjusted for
non-cash items of $1.4 million, offset by a net increase in working capital of
$1.4 million. Capital expenditures during this period totaled $2.4 million,
including purchases of computer equipment and software.
The Company believes that its existing cash resources and cash generated
from operations, will fund necessary purchases of capital equipment and provide
adequate working capital at least through the end of 1999. However, there can
be no assurance that events in the future will not require the Company to seek
additional capital in the future or, if so required, that such capital will be
available on terms favorable or acceptable to the Company, if at all.
YEAR 2000
Many currently installed computer systems and software products are
dependent upon internal calendars coded to accept only two digit entries in the
date code field. These date code fields will need to accept four digit entries
to distinguish 21st century dates from 20th century dates. As a result,
computer systems and software used by many companies may need to be upgraded to
comply with such "Year 2000" requirements.
None of TranSwitch's current products utilize internal calendars that are
dependent upon the input of a specific date. As a result, all of TranSwitch's
current products are inherently Year 2000 compliant.
In the fourth quarter of 1997, TranSwitch established a Year 2000 Committee
(the "Committee"), chaired by the Senior Vice President and Chief Financial
Officer, to assess the effects of the Year 2000 issue on operations and to
remediate such effects as necessary. The Committee focuses on the Year 2000
readiness of both internal systems and key outside suppliers, financial
institutions and other business partners.
To assess TranSwitch's internal readiness, the Committee has examined and
tested the Company's current hardware and software to identify systems with
inherent Year 2000 problems. No hardware performing critical functions have
been found to have such problems. Although isolated hardware performing non-
critical functions has been found to have Year 2000 problems, these problems
were not judged likely to have a material impact on operations. As a result,
such non-critical hardware will not be replaced.
Moreover, the Committee has obtained certificates from its software vendors
to the effect that all of TranSwitch's key software systems, including its MRP,
order entry and customer services systems, are free of Year 2000 problems. The
Committee has tested certain key software systems independently for Year 2000
functionality as well.
To assess the Year 2000 readiness of TranSwitch's key outside suppliers,
financial institutions and other business partners, the Committee has requested
certification from each that it
Page 11 of 18
<PAGE>
has resolved any Year 2000 issues that might have a material impact on
operations. To date, 100% of its semiconductor foundries and financial
institutions and over half of all other such parties have so certified.
We currently estimate that costs, exclusive of software and systems that
are being replaced or upgraded in the normal course of business, will be
approximately $75,000, plus staff time, of which approximately $20,000 was spent
in 1998 and $35,000 in the first half of 1999. We estimate that $20,000 will be
spent in the remainder of 1999. All expenditures will be expensed when they
occur and are not expected to have a material impact on results of operations.
The Committee does not believe that other information technology projects will
be delayed or otherwise materially affected by our Year 2000 efforts.
Based on the Committee's assessment to date, TranSwitch believes that it
will not experience any material disruption in its operations as a result of
Year 2000 issues. However, if certain critical vendors, service providers and
business partners, such as public utilities providing electricity, water or
telephone service, or financial institutions with which the Company maintains
accounts, or key suppliers of parts and materials to the Company, fail to
provide needed services to the Company or to its key outside suppliers or
customers, customer orders could decline or the Company's operations could shut
down for as long as the failure or failures persist. The Committee has
developed various contingency plans and will continue to develop plans for
contingencies as the needs are identified. Accordingly, the Company cannot be
certain the Year 2000 issues will not have a material adverse effect on
TranSwitch's business, results of operation or financial results.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
From time to time, information provided by the Company, statements made by
its employees, or information included in its filings with the Securities and
Exchange Commission (including this Form 10-Q) may contain statements which are
not historical facts, so-called "forward-looking statements," which involve
risks and uncertainties. Such forward-looking statements are made pursuant to
the safe harbor provisions of Section 21E of the Securities Exchange Act of
1934, as amended. The Company's actual future results may differ significantly
from those stated in any forward-looking statements. Factors that may cause
such differences include, but are not limited to, the factors discussed below.
Each of these factors, and others, are discussed from time to time in the
Company's filings with the Securities and Exchange Commission.
Potential Fluctuations in Operating Results. The Company's quarterly and annual
operating revenues, expenses and operating results may fluctuate due to a number
of factors including:
-the timing and cancellation of customer orders;
-market acceptance of the Company's and customers' products;
Page 12 of 18
<PAGE>
-competitive pressures on selling prices; and
-general economic conditions.
Management of Growth and Dependence on Key Personnel. TranSwitch must attract
and retain highly qualified and well-trained personnel, including senior
managers. Competition for such employees is intense, and it may become
increasingly difficult for the Company to hire and retain such personnel.
TranSwitch Depends on a Few Outside Fabrication Facilities. The Company does
not own or operate a Very Large Scale Integrated (VLSI) circuit fabrication
facility, and depends upon four foundries for most of its semiconductor device
requirements. The Company cannot be certain that it will be able to renew or
maintain contracts with these foundries on terms as favorable as current
contract terms. There are other significant risks associated with reliance on a
few outside foundries, including:
-the lack of assured semiconductor wafer supply and control over delivery
schedules;
-the unavailability of, or delays in obtaining access to, key process
technologies; and
-limited control over quality assurance, manufacturing yields and
production costs.
Dependence on Telecommunications, Internet and Data Communications Markets. The
Company derives virtually all of its product revenues from sales of products for
the telecommunications, Internet and data communications markets, which are
characterized by intense competition, rapid technological change and short
product life cycles. Although the telecommunications, Internet and data
communications equipment markets have grown rapidly in the last few years, they
may not continue to grow, or a significant slowdown in these markets may occur.
Dependence on New Products; Risk of Product Development Delays. The development
of new VLSI devices is highly complex, and from time to time, the Company has
experienced delays in completing the development of new products.
Customer Concentration. Historically, a relatively small number of customers
have accounted for a significant portion of the Company's total revenues in any
particular period and probably will continue to do so.
TranSwitch's Success Depends on Intellectual Property. The Company's success
depends in part on its ability to obtain patents and licenses and to preserve
other intellectual property rights covering its products and development and
testing tools. The Company cannot ensure that:
-patents be will issued from currently pending or future applications;
Page 13 of 18
<PAGE>
-its existing patents or any new patents will be sufficient in scope or
strength to provide meaningful protection or any commercial advantage;
-foreign intellectual property laws will protect the Company's intellectual
property rights; or
-others will not independently develop similar products, duplicate the
Company's products or design around any patents issued to the Company.
In addition, the Company may be unknowingly infringing on the proprietary
rights of others and may be liable for that infringement, which could result in
significant liability.
Competition. The semiconductor industry is intensely competitive and is
characterized by factors likely to result in pricing pressures on the Company's
products.
Foreign Sales. TranSwitch expects foreign sales to continue to account for a
significant percentage of revenues. A significant portion of total revenues,
therefore, will be subject to risks associated with foreign sales. In
particular, sales to Pacific Rim countries may be impacted by the current
financial instability plaguing these nations.
The Semiconductor Industry. TranSwitch provides semiconductor devices to
telecommunications and data communications OEMs. The semiconductor industry is
highly cyclical and has been subject to significant economic downturns at
various times.
Page 14 of 18
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The Company held its Annual Meeting of Stockholders on May 27, 1999 and June
24,1999, at such meeting 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 14,732,460 401,131
Alfred R. Boschulte 14,732,160 401,431
Steward S. Flaschen 14,729,625 403,966
Ljubomir Micic 14,711,056 422,535
James M. Pagos 14,730,275 403,316
Albert E. Paladino 14,730,660 402,931
Erik H. Van Der Kaay 14,730,660 402,931
2. To amend the amended and restated Certificate of Incorporation to increase
the number of authorized shares of the Corporations's Common Stock by an
additional 75,000,000 shares.
Number of Shares
----------------
For 13,606,371
Against 8,093
Abstain 1,519,217
Broker Non-Votes 1,716,803
3. To amend and ratify the Corporation's Third Amended and Restated 1995 Stock
Plan, to increase the number of shares available for issuance thereunder by an
additional 1,700,000 shares of Common stock available of issuance thereunder.
The number of votes cast was as follows:
Number of Shares
----------------
For 6,970,527
Against 5,880,157
Abstain 17,238
Broker Non-Votes 3,982,472
4. To approve an amendment to the Corporation=s 1995 Non-Employee Director
Stock Option Plan
Page 15 of 18
<PAGE>
to (a) increase the number of shares of Common Stock available for issuance
thereunder by an additional 100,000 shares, and (b) amend Section 10(d) thereof
to appropriately increase or decrease the number of shares of Common Stock that
a Non-Employee Director receives options to purchase on the date he or she is
first elected to the Board of Directors and on each one year anniversary of the
date he or she is first elected to the Board of Directors to reflect stock
dividends, stock splits, reorganizations or any other changes in the corporate
structure of shares of the Corporation. The number of votes cast was as follows:
Number of Shares
----------------
For 10,333,541
Against 2,081,798
Abstain 452,583
Broker Non-Votes 3,982,472
5. The selection of KPMG Peat Marwick LLP as auditors for the fiscal year
ending December 31, 1999 was ratified by the following vote:
Number of Shares
----------------
For 15,102,325
Against 23,364
Abstain 7,902
Broker Non-Votes 1,716,803
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 for the annual meeting to be held in 2000, notice must be
received, in writing, at the Company's principal executive offices not
later than December 21, 1999 and not before November 21, 1999. 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.
Page 16 of 18
<PAGE>
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
On June 10, 1999 the Company filed a Current Report of Form 8-K
reporting a 3-for-2 stock split of its Common Stock, which was
paid in the form of a stock dividend.
Page 17 of 18
<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 11, 1999 /s/ Dr. Santanu Das
--------------------------------------
Dr. Santanu Das
Chairman of the Board,
President and 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 18 of 18
<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,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic earnings per share:
Net income 4,641 1,020 7,765 1,581
====== ====== ====== ======
Weighted average number of common shares
outstanding during the period 25,495 20,351 24,799 20,127
------ ------ ------ ------
Basic earnings per share 0.18 0.05 0.31 0.08
====== ====== ====== ======
Diluted earnings per share:
Net income 4,641 1,020 7,765 1,581
====== ====== ====== ======
Weighted average number of common shares
outstanding during the period 25,495 20,351 24,799 20,127
Common stock issuable with respect to:
Stock options and warrants 2,092 1,080 2,130 1,080
Convertible preferred stock -- 780 -- 780
Adjusted weighted average number of shares
outstanding during the period 27,587 22,211 26,929 21,987
Diluted earnings per share 0.17 0.05 0.29 0.07
====== ====== ====== ======
</TABLE>
(1) This exhibit should be read in connection with "Consolidated Statement of
Stockholders' Equity" in Note 3 of the notes to the Consolidated
Financial Statements.
(2) Diluted per share amount is the same as basic for the three months ended
June 30, 1998.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1999
<PERIOD-START> APR-01-1999 JAN-01-1999
<PERIOD-END> JUN-30-1999 JUN-30-1999
<CASH> 39,654 39,654
<SECURITIES> 63,924 63,924
<RECEIVABLES> 9,033 9,033
<ALLOWANCES> 261 261
<INVENTORY> 4,255 4,255
<CURRENT-ASSETS> 118,364 118,364
<PP&E> 15,138 15,138
<DEPRECIATION> 8,750 8,750
<TOTAL-ASSETS> 126,220 126,220
<CURRENT-LIABILITIES> 6,745 7,455
<BONDS> 0 0
0 0
0 0
<COMMON> 17 17
<OTHER-SE> 119,458 119,458
<TOTAL-LIABILITY-AND-EQUITY> 126,220 126,220
<SALES> 16,119 30,580
<TOTAL-REVENUES> 16,119 30,580
<CGS> 5,633 10,855
<TOTAL-COSTS> 6,829 13,316
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 4,878 8,162
<INCOME-TAX> 237 397
<INCOME-CONTINUING> 4,641 7,765
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 4,641 7,765
<EPS-BASIC> 0.18 0.31
<EPS-DILUTED> 0.17 0.29
</TABLE>
