<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 1997
[ ] 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: 0-26198
UNISON SOFTWARE, INC.
-----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 94-2696878
------------------------- -----------------------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
5101 PATRICK HENRY DRIVE
SANTA CLARA, CALIFORNIA 95054
(Address of principal executive offices, including zip code)
(408) 988-2800
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
The number of shares of Common Stock outstanding as of March 31, 1997 was
11,923,933.
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UNISON SOFTWARE, INC.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Page
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of May 31, 1996 and 3
February 28, 1997
Consolidated Statements of Operations for the three months 4
and nine months ended February 29, 1996 and February 28, 1997
Consolidated Statements of Cash Flows for the nine months 5
ended February 29, 1996 and February 28, 1997
Notes to the Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 7
AND RESULTS OF OPERATIONS
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 13
SIGNATURE 14
INDEX TO EXHIBITS 15
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ITEM 1
UNISON SOFTWARE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(unaudited)
<TABLE>
<CAPTION>
ASSETS MAY 31, 1996 FEB. 28, 1997
------------ -------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 4,558 $ 5,210
Marketable securities 15,890 20,200
Accounts receivable, net of allowance for doubtful accounts 11,214 9,738
of $176 and $187 at May 31, 1996 and Feb. 28, 1997,
respectively
Prepaid expenses and other current assets 116 710
Deferred income taxes 214 214
------------- ------------
Total Current Assets 31,992 36,072
Property and equipment, net 1,715 2,313
Deferred income taxes 237 227
Other assets, net 277 194
------------- ------------
Total Assets $34,221 $38,806
------------- ------------
------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 308 $ 81
Accounts payable 454 349
Current and deferred income taxes payable 403 1,081
Accrued expenses 3,154 2,453
Deferred revenue 6,003 7,451
------------- ------------
Total Current Liabilities 10,322 11,415
Long-term debt, net of current portion 688 64
Other long-term liabilities 184 4
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Total Liabilities 11,194 11,483
Preferred stock, $0.001 par value; -- --
Authorized: 5,000 shares;
Issued and outstanding: -0-
Common stock, $0.001 par value; 12 12
Authorized: 40,000 shares;
Issued and outstanding: 11,525 and
12,123 shares at May 31, 1996
and Feb. 28, 1997, respectively.
Additional paid-in capital 16,087 16,951
Unrealized holding losses on marketable securities, net (19) (24)
Retained earnings Notes receivable for common stock 7,002 10,520
Retained Earnings (135)
Cumulative foreign currency translation adjustments (55) (1)
------------- ------------
Total Stockholders' Equity 23,027 27,323
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Total Liabilities and
Stockholders' Equity $34,221 $38,806
------------- ------------
------------- ------------
See accompanying notes.
</TABLE>
3
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UNISON SOFTWARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------------- -------------------------------
FEB. 29, 1996 FEB. 28, 1997 FEB. 29, 1996 FEB. 28 1997
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Net revenues:
License fees $5,801 $6,507 $13,656 $18,549
Services 2,387 3,127 6,458 9,026
------------- ------------- ------------- ------------
Total net revenues 8,188 9,634 20,114 27,575
------------- ------------- ------------- ------------
Costs and expenses:
Cost of license fees 159 265 467 789
Cost of services 600 843 1,301 2,399
Sales and marketing 3,465 4,287 9,442 12,549
Research and development 1,065 1,358 2,824 3,689
General and administrative 636 1,118 1,909 3,118
------------- ------------- ------------- ------------
Total costs and expenses 5,925 7,871 15,943 22,544
------------- ------------- ------------- ------------
Income from operations 2,263 1,763 4,171 5,031
Interest and other income 196 253 524 688
(expense), net
------------- ------------- ------------- ------------
Income before income taxes 2,459 2,016 4,695 5,719
Provision for income taxes 934 776 1,783 2,202
------------- ------------- ------------- ------------
Net income $ 1,525 $ 1,240 $ 2,912 $ 3,517
------------- ------------- ------------- ------------
------------- ------------- ------------- ------------
Net income per share $ 0.13 $ 0.10 $ 0.25 $ 0.29
------------- ------------- ------------- ------------
------------- ------------- ------------- ------------
Shares used in per share 12,068 12,218 11,664 12,123
calculation
------------- ------------- ------------- ------------
------------- ------------- ------------- ------------
</TABLE>
See accompanying notes
4
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UNISON SOFTWARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------------------------
FEB. 29, 1996 FEB. 28, 1997
--------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . $2,912 $3,517
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization. . . . . . . . . 318 447
Other. . . . . . . . . . . . . . . . . . . . . (4) 50
Changes in assets and liabilities:
Accounts receivable. . . . . . . . . . . . (2,830) 1,476
Prepaid expenses and other current
as sets. . . . . . . . . . . . . . . . . (87) (594)
Accounts payable and other
accrued expenses . . . . . . . . . . . . 404 (127)
Deferred revenue . . . . . . . . . . . . . 1,206 1,448
---------- ---------
Net cash provided by operating activities. . . . . . . . 1,919 6,217
---------- ---------
Cash flows from investing activities:
Purchase of property and equipment. . . . . . . . . (808) (1,045)
Decrease/(increase) in other long-term assets . . . (186) 93
Change in other long-term liabilities . . . . . . . (181)
Purchases of marketable securities. . . . . . . . . (12,411) (7,177)
Sales of marketable securities. . . . . . . . . . . 204 2,867
---------- ---------
Net cash used in investing activities. . . . . . . . . . (13,201) (5,443)
---------- ---------
Cash flows from financing activities:
Issuance of common stock and warrants. . . . . . . . 13,873 729
Payments on capital lease obligations
and notes payable . . . . . . . . . . . . . . . . (925) (851)
---------- ---------
Net cash provided by financing activities. . . . . . . . 12,948 (122)
---------- ---------
Net increase in cash and cash equivalents. . . . . . . . 1,666 652
Cash and cash equivalents at beginning of period . . . . 3,955 4,558
---------- ---------
Cash and cash equivalents at end of period . . . . . . . $5,621 $5,210
---------- ---------
---------- ---------
See accompanying notes.
</TABLE>
5
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UNISON SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - INTERIM CONSOLIDATED FINANCIAL STATEMENTS
These interim consolidated financial statements are unaudited, but have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation of financial position,
results of operations and cash flows at the dates and for the periods
presented have been included. The interim financial information herein is
not necessarily indicative of results for any future period. The interim
consolidated financial statements should be read in conjunction with the
audited consolidated financial statements and the notes thereto for the
fiscal year ended May 31, 1996 included in the Company's Form 10-K.
NOTE 2 - COMPUTATION OF EARNINGS PER SHARE
Net income per share is computed using the weighted average number of
shares of common and dilutive common equivalent shares outstanding during the
period. Dilutive common equivalent shares consist of options and warrants
(using the treasury stock method for all periods presented). The number of
shares used in the per share calculation have been adjusted retroactively to
give effect to a three-for-two stock split which was effective on January 31,
1997.
6
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the attached
consolidated financial statements and notes thereto, and with the audited
consolidated financial statements and notes thereto of the Company for the
fiscal year ended May 31, 1996 included in the Company's Form 10-K.
OVERVIEW
Unison Software, Inc. develops, markets, and supports networked systems
management software for distributed, heterogeneous computing environments.
The Company's workload management, storage management, and output management
tools support the deployment of business critical applications in
client/server environments. Unison was incorporated in California in 1980
and reincorporated in Delaware in July 1995.
The Company's revenues are derived from license fees for software
products and fees for a range of services complementing such products,
including software maintenance and support, training and system
implementation consulting. Software licenses typically are granted on a
perpetual, per-CPU basis, although the Company may grant site or
enterprise-wide licenses for larger installations. License fee revenues are
recognized upon product shipment if no significant vendor obligations remain
and collection of the resulting receivable is deemed probable. Allowances
are established for potential product returns and credit losses, which have
not been substantial to date. Fees for services are charged separately from
fees for software licenses. Service revenues from customer maintenance
services, which include on-going product support and periodic product
updates, are recognized ratably over the term of each contract, which is
typically twelve months. Payments for customer maintenance fees are
generally made in advance and are non-refundable. Service revenues from
training and consulting services are recognized when the services are
performed.
License fee revenues have been derived principally from direct sales of
software products to end users through the Company's direct field sales and
telesales force and national account sales group. Although the Company
believes that such direct sales will continue to account for a significant
portion of license fee revenues, the Company expects that revenues from
sales through OEMs, VARs, ISVs and other indirect channels will increase as a
percentage of license fee revenues. The Company's expansion of its field
sales force has caused, and is expected to continue to cause, sales and
marketing expenses to increase. The Company is also increasingly attempting
to direct customers to larger, enterprise-wide implementations of the
Company's products, which may increase the complexity and length of the sales
cycle. In connection with such larger sales, the Company may choose to grant
greater pricing and other concessions than for single department or local
network sales.
The Company's operating results have fluctuated, and may continue to
fluctuate, on an annual and quarterly basis as a result of a number of
factors, many of which are outside of the Company's control. These factors
include the timing of significant orders, the length of sales cycles, the
ability of the Company to recruit and deploy effective field sales personnel,
customer budget changes, the timing of new product introductions, changes in
pricing policies by the Company or its competitors, product mix, the market
acceptance of new and enhanced versions of the Company's products, and
conditions and events in the computer industry and the general economy. The
Company does not maintain a significant backlog, and therefore revenues for
each quarter depend to a large extent on orders booked and shipped in that
quarter. Additionally, the Company typically realizes a significant portion
of license fee revenues in the last month of a quarter, frequently in the
last weeks or even days of a quarter. As a result, license fee revenues for
any quarter can be subject to significant variation. The Company establishes
its expenditure levels for sales, marketing, product development and other
operating expenses based, in large part, on its expected future revenues. If
revenues fall below expectations in a particular quarter, operating results
and net income are likely to be
7
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materially adversely affected. A significant portion of the Company's
operating expenses are fixed, and planned expenditures are based primarily on
sales forecasts. Any inability of the Company to adjust spending quickly
enough to compensate for any failure to meet sales forecasts or to receive
anticipated revenues, or any unexpected increase in product returns or other
costs, could magnify the adverse impact of such events on the Company's
operating results. Further, the purchase of the Company's products may
involve a significant commitment of capital by the customer, with the
attendant delays frequently associated with large capital expenditures and
acceptance procedures within an organization. For these and other reasons,
the sales cycle associated with the purchase of client/server networked
systems management software is typically lengthy and subject to a number of
significant risks over which the Company has little or no control, including
customers' budgetary constraints and internal acceptance reviews.
Furthermore, the Company's business has experienced and is expected to
continue to experience significant seasonality, due, among other things, to
customer capital spending patterns, the general summer slowdown in the
computer industry and the fact that the Company's first fiscal quarter
coincides with such summer slowdown. Based upon the foregoing and other
factors, the Company believes that its quarterly revenues, expenses and
operating results could vary significantly in the future, that
period-to-period comparisons of its results of operations are not necessarily
meaningful, and that, in any event, such comparisons should not be relied
upon as indications of future performance.
8
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RESULTS OF OPERATIONS
The following table sets forth certain consolidated statement of operations
data as a percentage of total net revenues:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------------------- ---------------------------------
FEB. 29, 1996 FEB. 28, 1997 FEB. 29, 1996 FEB. 28 1997
--------------- ----------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Net revenues:
License fees 70.8% 67.5% 67.9% 67.3%
Services 29.2% 32.5% 32.1% 32.7%
----------- ----------- ------------ -----------
Total net revenues 100.0% 100.0% 100.0% 100.0%
----------- ----------- ------------ -----------
Costs and expenses:
Cost of license fees 1.9% 2.8% 2.3% 2.9%
Cost of services 7.3% 8.8% 6.5% 8.7%
Sales and marketing 42.3% 44.5% 46.9% 45.5%
Research and development 13.0% 14.1% 14.0% 13.4%
General and administrative 7.8% 11.6% 9.5% 11.3%
----------- ----------- ------------ -----------
Total costs and expenses 72.3% 81.8% 79.2% 81.8%
----------- ----------- ------------ -----------
Income from operations 27.7% 18.2% 20.8% 18.2%
Interest and other income (expense), net 2.4% 2.6% 2.6% 2.5%
----------- ----------- ------------ -----------
Income before income taxes 30.1% 20.8% 23.4% 20.7%
Provision for income taxes 11.4% 8.1% 8.9% 8.0%
----------- ----------- ------------ -----------
Net income 18.7% 12.7% 14.5% 12.7%
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
</TABLE>
NET REVENUES
Net revenues increased 17.7% from $8.2 million for the three months
ended February 29, 1996 to $9.6 million for the three months ended February
28, 1997. Net revenues increased 37.1% from $20.1 million for the nine months
ended February 29, 1996 to $27.6 million for the nine months ended February
28, 1997. The increase was primarily the result of growth in open systems
license fees attributable to increased market acceptance of the Company's
UNIX and Microsoft Windows NT products, and increased revenues from indirect
channels, offset by a decline in revenues from HP3000 products. License fee
revenue for the quarter increased 12.2% for the quarter compared to the same
quarter last year and 35.8% for the nine month period. The rate of
expected increase in license fee revenue for the quarter ended February 28,
1997 resulted from lower than expected international revenues, delays in
concluding several large domestic transactions, and difficulties in
recruiting adequate numbers of qualified sales personnel. Service revenues
increased 31.0% for the quarter and 39.8% for the nine month period,
reflecting the increase in the installed base of the Company's products and
additional revenue generated as a result of the expansion of the Company's
consulting services group.
License fees accounted for 70.8% and 67.9% of net revenues for the three
and nine months ended February 29, 1996, respectively, compared to 67.5% and
67.3% of net revenues for the three and nine months ended February 28, 1997,
respectively. Conversely, service revenues accounted for 29.2% and 32.1% of
net revenues for the three and nine months ended February 29, 1996,
respectively, compared to 32.5% and 32.7% of net revenues for the three and
nine months ended February 28, 1997, respectively.
9
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UNIX and Windows NT license fees accounted for 65.9% and 60.7% of total
license fees for the three and nine months ended February 29, 1996,
respectively, compared to 77.8% and 72.9% of total license fees for the three
and nine months ended February 28, 1997, respectively. The increases in UNIX
and Windows NT license fee revenues both in absolute dollars and as a
percentage of total license fees resulted from the expansion of the Company's
product offerings and its increased efforts to address the open distributed
systems market. The Company's future growth, if any, will depend on
continued growth in UNIX and Windows NT license fees. License fees from
HP3000 products have been, and are expected to continue to be, a significant
though declining portion of the Company's net revenues. However, there can
be no assurance as to how long the HP3000 will continue to be a viable
product or be used in ways which benefit from use of the Company's networked
systems management tools. The Company anticipates that HP3000 license fees
may decline in the future, as the Company continues to focus on the open
distributed systems market.
Sales to customers outside of the United States, including sales
generated by the Company's United Kingdom subsidiary, represented 27.1% and
25.2% of net revenues for the three and nine months ended February 29, 1996,
respectively, as compared to 19.6% and 21.5% of net revenues for the three
and nine months ended February 28, 1997, respectively. For the quarter ended
February 28, 1997, sales to customers outside the United States declined in
absolute dollars due to a general weakness in the European market, and
turnover in the Company's international sales management. Such factors may
continue to affect the Company's operating results through the remainder of
fiscal 1997 and into fiscal 1998.
COST OF LICENSE FEES
Cost of license fees consists primarily of product packaging, shipping,
delivery media, documentation and third-party royalties payable in connection
with sales of certain of the Company's products. Cost of license fees
increased from $159,000, or 2.7% of license fees, in the three months ended
February 29, 1996 to $265,000, or 4.1% of license fees, in the three months
ended February 28, 1997. Cost of license fees increased from $467,000, or
3.4% of license fees, in the nine months ended February 29, 1996 to $789,000,
or 4.3% of license fees, in the nine months ended February 28, 1997. The
increase in cost of license fees in both absolute dollars and as a percentage
of license fees was primarily a result of increased revenues from the
Company's products that are subject to royalty obligations.
COST OF SERVICES
Cost of services consists primarily of the direct and indirect costs of
providing software maintenance and support, training and consulting services
to the Company's customers. Cost of services increased from $600,000, or
25.1% of service revenues, in the three months ended February 29, 1996 to
$843,000, or 27.0% of service revenues, in the three months ended February
28, 1997. Cost of services increased from $1.3 million, or 20.2% of service
revenues, in the nine months ended February 29, 1996 to $2.4 million, or
26.6% of service revenues, in the nine months ended February 28, 1997. The
increases were due to increases in support personnel in anticipation of
increased demand for customer support services relating to the Company's UNIX
and Windows NT products and additional training and consulting personnel to
assist customers in deploying these products.
SALES AND MARKETING
Sales and marketing expenses consist principally of salaries, commissions,
travel and advertising and promotion costs. Sales and marketing expenses
increased from $3.5 million, or 42.3% of net revenues, in the three months ended
February 29, 1996 to $4.3 million, or 44.5% of net revenues, in the three months
ended February 28, 1997. Sales and marketing expenses increased from $9.4
million, or 46.9% of net revenues, in the nine months ended February 29, 1996 to
$12.5 million, or 45.5% of net revenues, in the nine months ended February 28,
1997. The increase in absolute dollars was primarily the result of the expansion
of the Company's field sales organization and increased sales compensation
resulting from increased revenues. Such expenses
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increased as a percentage of net revenues for the quarter in part as a result
of lower than expected license fee revenue for the quarter. The Company
anticipates that as it continues to expand its sales and marketing efforts in
the open systems market, such expenses will continue to increase in absolute
dollars during fiscal 1997.
RESEARCH AND DEVELOPMENT
Research and development expenses consist primarily of personnel related
costs. Research and development expenses increased from $1.1 million, or
13.0% of net revenues, in the three months ended February 29, 1996 to $1.4
million, or 14.1% of net revenues, in the three months ended February 28,
1997. Research and development expenses increased from $2.8 million, or 14.0%
of net revenues, in the nine months ended February 29, 1996 to $3.7 million,
or 13.4% of net revenues, in the nine months ended February 28, 1997.
Research and development expenses increased in absolute dollars over these
periods, and are expected to continue to increase, as a result of the
Company's efforts to enhance and expand its product offerings.
GENERAL AND ADMINISTRATIVE
General and administrative expenses increased from $636,000, or 7.8% of
net revenues, in the three months ended February 29, 1996 to $1.1 million, or
11.6% of net revenues, in the three months ended February 28, 1997. General
and administrative expenses increased from $1.9 million, or 9.5% of net
revenues, in the nine months ended February 29, 1996 to $3.1 million, or
11.3% of net revenues, in the nine months ended February 28, 1997. Such
expenses increased as a percentage of net revenues for the quarter in part as
a result of lower than expected license fee revenue for the quarter. The
Company expects that its general and administrative expenses will continue to
increase in absolute dollars in the future as the Company expands its
staffing to support expanded operations.
INTEREST AND OTHER INCOME (EXPENSE), NET
Interest and other income (expense), net is comprised primarily of
interest and dividend income, gains on foreign currency translations and
gains on sales of assets, net of interest expense and any losses on the
foregoing. Interest income is comprised primarily of interest on proceeds
from the Company's initial public offering completed in July 1995. Interest
expense has historically been comprised primarily of interest on debt
incurred in connection with a past acquisition and the Company's guarantee of
certain indebtedness of its Employee Stock Ownership Plan. During the
quarter ended November 30, 1995, the ESOP retired its indebtedness with a
portion of the proceeds from the ESOP's sale of shares in the initial public
offering.
PROVISIONS FOR INCOME TAXES
The Company recognizes deferred tax liabilities and assets for the
expected future tax consequences of events that have been included in the
financial statements or tax returns. The Company's effective tax rates were
38.0% and 38.5% for the nine months ended February 29, 1996 and February 28,
1997, respectively. Such rates approximately represented the combined
federal and state statutory rate and certain taxes due in the United Kingdom.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically funded its operations and capital
expenditures primarily with cash flow from operations. Net cash provided by
operating activities in the nine months ended February 28, 1997 was $6.2
million, resulting primarily from net income, decreases in accounts
receivable, increases in deferred revenue and slightly offset by a decrease
in prepaid expenses and a decrease in accounts payable. This compares to
net cash provided by operating activities of $1.9 million for the same period
of fiscal 1996.
Net cash used in investing activities was $13.2 million and $5.4 million
in the nine months ended February 29, 1996 and February 28, 1997,
respectively. The latter amount consisted primarily of purchases of
11
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marketable securities and equipment, offset in part by sales of marketable
securities.
Financing activities provided net cash of $12.9 million in the nine
months ended February 29, 1996, principally as a result of the Company's
initial public offering completed in July 1995. The Company sold 1.7 million
shares of Common Stock at a price to the public of $9.00 per share, resulting
in net proceeds to the Company (after deducting underwriting discounts and
commissions and offering expenses) of approximately $13.4 million. Cash used
in financing activities was $122,000 in the nine months ended February 28,
1997, primarily as a result of repayment of capital lease obligations and
notes payable, offset in part by issuance of common stock.
12
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Promissory note of Dominic Gattuso Jr. dated February 7, 1997
11.1 Statement Regarding Computation of Net Income Per Share
27.1 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the period for which
this report is filed.
<PAGE>
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 thereunto duly authorized.
UNISON SOFTWARE, INC.
(Registrant)
Date: April __, 1997 By: /s/ Richard J. Armitage
------------------------------
Richard J. Armitage
Chief Financial Officer
(Principal Financial and
Principal Accounting Officer)
14
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INDEX TO EXHIBITS
EXHIBIT PAGE
10.1 Promissory note of Dominic Gattuso Jr. dated February 7, 1997
11.1 Statement Regarding Computation of Net Income Per Share 16
27.1 Financial Data Schedule --
<PAGE>
PROMISSORY NOTE
$135,000 Santa Clara, California
February 7, 1997
FOR VALUE RECEIVED, Dominic Gattuso, Jr. ("Executive") promises to pay to
Unison Software, Inc., a Delaware corporation (the "Company"), or order, the
principal sum of One Hundred Thirty-Five Thousand Dollars ($135,000) together
with interest on the unpaid principal hereof, from the date hereof at the rate
set forth in paragraph 1 below. Proceeds delivered pursuant to this Note shall
be referred to herein as the "Loan."
1. PAYMENTS
(a) LOAN TERM; INTEREST RATE. The term of the Loan (the "Loan
Term") will commence on the date hereof and end February 6, 2001 (the
"Repayment Date"). Except as set forth herein, interest on the unpaid
principal balance of the Loan (the "Outstanding Balance") will accrue at a
rate per annum, compounded quarterly, equal to the Prime Rate (as defined
below) as in effect on the date of this Note and as adjusted March 1, June 1,
September 1 and December 1, to the Prime Rate in effect on each such date.
"Prime Rate" shall mean the "Prime Rate" published in the WALL STREET JOURNAL
on the date in question or, if such date is not a business day, the next
business day thereafter. The Outstanding Balance and any unpaid and
unforgiven accrued interest shall be repaid in full on the Repayment Date.
Notwithstanding the foregoing, the Outstanding Balance and all unpaid and
unforgiven accrued interest thereon shall become due and payable 180 days
following the termination of Executive's employment with the Company.
(b) PAYMENT OF INTEREST. The interest accrued on the Outstanding
Balance during a particular fiscal quarter of the Company shall be forgiven,
and the Executive shall have no further obligation to repay that interest, if
the Company's operating profit for such fiscal quarter equals or exceeds 100%
of the budgeted operating profit for such fiscal quarter contained in the
Company's Budget (as defined below). If the Company's operating profit for
such fiscal quarter does not meet the foregoing test, the Company shall
provide written notice to the Executive, and the Executive shall pay all
interest accrued for such fiscal quarter within fifteen (15) days of such
notice.
(c) "BUDGET" DEFINED. For purposes of this Agreement, the term
"Budget" shall mean (A) for fiscal 1997, the Company's budget for fiscal 1997
dated as of May 21, 1996, or (B) for subsequent fiscal years, the Company's
budget for that particular fiscal year as determined in good faith by the
Company's Board of Directors in consultation with the Executive. If the
Company does not have a Budget in place during any given fiscal quarter, then
the interest accrued on the Outstanding Balance during such fiscal quarter
shall be forgiven during such quarter until such time as the Company prepares
a budget for the applicable fiscal year.
(d) TAX CONSEQUENCES OF FORGIVEN INTEREST. The Executive
acknowledges that the amount of any interest forgiven under Section 2(b) will
be compensation income to the Executive.
<PAGE>
(e) ACCELERATION OF REPAYMENT UPON AN EVENT OF DEFAULT. Upon the
occurrence of an Event of Default (as defined below), the Company shall have
the right at any time thereafter to accelerate repayment of the Outstanding
Balance and all unpaid and unforgiven accrued interest. In such event, the
Outstanding Balance and all unpaid and unforgiven interest accrued thereon
shall be due and payable immediately. After an Event of Default, the Company
shall have no obligation to forgive any interest pursuant to Section 1(b) or
Section 1(c) not already forgiven except for interest to be forgiven with
respect to a fiscal quarter that ended prior to the occurrence of the Event
of Default pursuant to such Sections, whether such interest accrued prior or
subsequent to such Event of Default or acceleration.
(f) "EVENT OF DEFAULT" DEFINED. For purposes of this Agreement,
the term "Event of Default" shall mean the occurrence of any of the following
events: (i) the Executive's failure to repay the Outstanding Balance and any
unpaid and unforgiven interest on the Repayment Date; (ii) the institution of
bankruptcy or insolvency proceedings by or against the Executive, the
appointment of a receiver for the property of the Executive, or the making of
an assignment by the Executive for the benefit of creditors; or (iii) the
Executive's material breach of any other covenants hereunder or under the
Security Agreement (as defined below) for a period of ten days after written
notice thereof from the Company.
2. SECURITY AGREEMENT. This Note is secured by a pledge of the shares
of the Company's Common Stock purchased with the proceeds of the Loan under
the terms of a Security Agreement dated February 7, 1997 (the "Security
Agreement"), and is subject to all the provisions thereof. Executive agrees
to deliver certificates representing such shares to the Company within ten
(10) days after purchase. If there is a Event by Default, the holder of this
Note shall have full recourse against the undersigned, and shall not be
required to proceed against the collateral securing this Note.
3. INSIDE INFORMATION AND COMPANY BLACKOUT PERIODS. The Executive
acknowledges that all purchases or sales of the Company's Common Stock in the
open market are subject to applicable law and the Company's standard insider
trading policies. The Executive further acknowledges that adherence to these
policies, including observance of any Company blackout periods, may affect
the Executive's ability to sell or otherwise dispose of such Common Stock
during a particular time period.
4. RIGHT TO ADVICE OF COUNSEL. The Executive acknowledges that he has
had the opportunity to consult with counsel and is fully aware of his rights
and obligations hereunder and under the Security Agreement.
5. WAIVER. Failure or delay on the part of either party hereto to
enforce any right, power, or privilege hereunder shall not be deemed to
constitute a waiver thereof. Additionally, a waiver by either party or a
breach of any promise hereof by the other party shall not operate as or be
construed to constitute a waiver of any subsequent waiver by such other party.
6. GOVERNING LAW. This Note shall be governed by and construed in
accordance with the laws of the State of California.
-2-
<PAGE>
7. PREPAYMENT. The undersigned may at any time prepay all or any
portion of the principal or interest owing hereunder without penalty.
8. COSTS. Should any action be instituted for the collection of this
Note, the reasonable costs and attorneys' fees therein of the holder shall be
paid by the undersigned.
/s/ DOMINIC GATTUSO, JR.
------------------------------------
Dominic Gattuso, Jr.
-3-
<PAGE>
EXHIBIT A
SECURITY AGREEMENT
This Security Agreement is made as of February 7, 1997 by and among
Unison Software, Inc., a Delaware corporation ("Secured Party"), Dominic
Gattuso, Jr. ("Debtor"), and Michael Casteel, in his capacity as Secretary of
Secured Party ("Pledgeholder").
Secured Party has agreed to loan Debtor one hundred thirty-five thousand
dollars ($135,000) (the "Loan") pursuant to a Promissory Note dated February
7, 1997 (the "Note").
Debtor has granted a security interest in the purchased shares as
security for the Loan.
The parties agree as follows:
1. DEFINITIONS. As used in this Security Agreement, the following
terms shall have the following meanings:
"SHARES" means 5,000 shares of Secured Party's Common Stock
purchased by Debtor on December 23 and 24, 1996, having a value as of the
time of such purchase of $135,000, and all distributions related to and all
proceeds of such shares, including Stock Adjustments.
"STOCK ADJUSTMENTS" means all substitutions and exchanges for and
all distributions with respect to the Shares and rights related to the
Shares, including but not limited to dividends (other than dividends paid in
cash out of current profits of Secured Party), stock splits, adjustments,
reclassifications, options and warrants.
All capitalized terms not defined herein shall have the same meaning as
in the Note.
2. CREATION AND DESCRIPTION OF SECURITY INTEREST.
(a) GRANT OF SECURITY INTEREST. In consideration of the Secured
Party's delivery of the Loan, Debtor hereby grants the Secured Party a
security interest in the Shares (herein sometimes referred to as the
"Collateral") to secure Debtor's obligations under the Note, which Collateral
shall be held by the Pledgeholder for the benefit of Secured Party.
(b) TRANSFER OF THE COLLATERAL TO PLEDGEHOLDER. Concurrently with
the execution hereof, Debtor shall deliver the certificates representing the
Shares, duly endorsed in blank or with executed stock powers, to the
Pledgeholder, who shall hold such certificates subject to the terms and
conditions of this Security Agreement. The Shares shall be held by the
Pledgeholder for the benefit of Secured Party as security for the repayment
of the Note, and any extensions or renewals thereof, and the Pledgeholder
shall not encumber or dispose of such Shares except in accordance with the
provisions of this Security Agreement or as instructed by Secured Party.
<PAGE>
3. DEBTOR'S REPRESENTATIONS AND COVENANTS. To induce Secured Party to
enter into this Security Agreement, Debtor represents and covenants to
Secured Party, its successors and assigns, as follows:
(a) PAYMENT OF INDEBTEDNESS. Debtor will pay the principal sum of
the Note, together with interest thereon (to the extent not forgiven), at the
time and in the manner provided in the Note.
(b) ENCUMBRANCES. The Shares purchased will be free of all other
encumbrances, defenses and liens, and Debtor will not further encumber the
Shares without the prior written consent of Secured Party.
(c) MARGIN REGULATIONS. In the event that Secured Party's Common
Stock is now or later becomes margin-listed by the Federal Reserve Board and
Secured Party is classified as a "lender" within the meaning of the
regulations under Part 207 of Title 12 of the Code of Federal Regulations
("Regulation G"), Debtor agrees to cooperate with Secured Party in making any
amendments to the Note or providing any additional collateral or other
documentation as may be necessary to comply with such regulations.
4. VOTING RIGHTS. During the term of this pledge and so long as all
payments of principal and interest are made as they become due under the
terms of the Note, Debtor shall have the right to vote all of the Shares
pledged hereunder.
5. STOCK ADJUSTMENTS. In the event that during the term of the pledge
any Stock Adjustment occurs, all new, substituted and additional shares or
other securities issued by reason of such Stock Adjustment shall be
immediately delivered to and held by the Pledgeholder under the terms of this
Security Agreement in the same manner as the Shares originally pledged
hereunder. In the event of substitution of such securities, Debtor, Secured
Party and Pledgeholder shall cooperate and execute such documents as are
reasonable so as to provide for the substitution of such Collateral and, upon
such substitution, references to "Shares" in this Security Agreement shall
include the substituted shares of capital stock held by Debtor as a result
thereof.
6. OPTIONS AND RIGHTS. In the event that, during the term of this
pledge, subscription options or other rights or options shall be issued in
connection with the Shares, such rights and options shall be the property of
Debtor and, if exercised by Debtor, all new stock or other securities so
acquired by Debtor as it relates to the Shares then held by Pledgeholder
shall be immediately delivered to Pledgeholder, to be held under the terms of
this Security Agreement in the same manner as the Shares pledged.
7. DEFAULT. Debtor shall be deemed to be in default of the Note and
of this Security Agreement if an Event of Default shall occur under the Note.
In the case of an Event of Default, Secured Party shall have the right to
accelerate payment of the Note upon notice to Debtor, and
-2-
<PAGE>
Secured Party shall thereafter be entitled, but not obligated, to pursue its
remedies with respect to the Collateral under the California Commercial Code.
8. WITHDRAWAL OR SUBSTITUTION OF COLLATERAL. Debtor shall not sell,
withdraw, pledge, substitute or otherwise dispose of all or any part of the
Collateral without the prior written consent of Secured Party.
9. TERM. The security interest in the Shares provided for herein
shall continue until the payment of all indebtedness secured hereby, at which
time the Shares shall be promptly delivered to Debtor.
10. PLEDGEHOLDER LIABILITY. In the absence of willful misconduct or
gross negligence, Pledgeholder shall not be liable to any party for any of
his acts, or omissions to act, as Pledgeholder.
11. INVALIDITY OF PARTICULAR PROVISIONS. Debtor and Secured Party
agree that the enforceability or invalidity of any provision or provisions of
this Security Agreement shall not render any other provision or provisions
herein contained unenforceable or invalid.
12. SUCCESSORS OR ASSIGNS. Debtor, Secured Party and Pledgeholder
agree that all of the terms of this Security Agreement shall be binding on
their respective successors and assigns, and that the term "Debtor" and the
term "Secured Party" as used herein shall be deemed to include, for all
purposes, their respective designees, successors, assigns, heirs, executors
and administrators, and the term "Pledgeholder" shall be deemed to include
for all purposes each person who subsequently becomes Secretary of Secured
Party.
13. COSTS AND ATTORNEYS' FEES. Debtor will pay all costs and expenses
of enforcement or collection, including reasonable attorneys' fees.
14. GOVERNING LAW. This Security Agreement shall be governed by and
construed in accordance with the laws of the State of California applicable
to agreements made and performed entirely within such state.
15. COUNTERPARTS. This Agreement may be executed in counterparts,
which together will constitute one instrument.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
"DEBTOR" /s/ Dominic Gattuso, Jr.
-------------------------------------
Dominic Gattuso, Jr.
2826 Broderick St.
-------------------------------------
(ADDRESS)
San Francisco, CA 94123
-------------------------------------
"SECURED PARTY" UNISON SOFTWARE, INC.
a Delaware corporation
By: /s/ Don H. Lee
-------------------------------------
Title: Chief Executive Officer
----------------------------------
"PLEDGEHOLDER" /s/ Michael A. Casteel
-------------------------------------
Secretary of
Unison Software Inc.
-4-
<PAGE>
EXHIBIT 11.1
UNISON SOFTWARE, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE (1)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
FEB. 29, 1996 FEB. 28, 1997 FEB. 29, 1996 FEB. 28, 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Weighted average common shares
outstanding for the period...... 11,291 11,903 10,778 11,705
Common equivalent shares assuming
conversion of stock options
and warrants under the treasury
stock method..................... 777 315 886 418
-------- -------- -------- --------
Shares used in per share
calculation...................... 12,068 12,218 11,664 12,123
-------- -------- -------- --------
-------- -------- -------- --------
Net income......................... $1,525 $1,240 $2,912 $3,517
-------- -------- -------- --------
-------- -------- -------- --------
Net income per share............... $ 0.13 $ 0.10 $ 0.25 $ 0.29
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
(1) There is no difference between primary and fully diluted net income per
share for all periods presented.
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF UNISON SOFTWARE, INC. FOR THE NINE
MONTHS ENDED FEBRUARY 28, 1997 INCLUDED ELSEWHERE IN THIS REPORT AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> FEB-28-1997
<CASH> 5210
<SECURITIES> 20200
<RECEIVABLES> 9925
<ALLOWANCES> 187
<INVENTORY> 0
<CURRENT-ASSETS> 36072
<PP&E> 4145
<DEPRECIATION> 1832
<TOTAL-ASSETS> 38806
<CURRENT-LIABILITIES> 11415
<BONDS> 0
0
0
<COMMON> 12
<OTHER-SE> 27311
<TOTAL-LIABILITY-AND-EQUITY> 38806
<SALES> 0
<TOTAL-REVENUES> 27575
<CGS> 0
<TOTAL-COSTS> 3188
<OTHER-EXPENSES> 19356
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30
<INCOME-PRETAX> 5719
<INCOME-TAX> 2202
<INCOME-CONTINUING> 3517
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3517
<EPS-PRIMARY> .29
<EPS-DILUTED> .29
</TABLE>
