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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1996
COMMISSION FILE NUMBER 0-14713
[LOGO]
INTERLEAF, INC.
(exact name of registrant as specified in its charter)
Massachusetts 04-2729042
(State or other jurisdiction (I.R.S. employer identification number)
of incorporation or organization)
62 Fourth Avenue, Waltham, MA 02154
(Address of principal executive offices) (Zip Code)
(617) 290-0710
(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
------- -------
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares outstanding of the issuer's Common Stock, $.01 par value,
as of February 4, 1997 was 17,459,219.
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Interleaf, Inc.
TABLE OF CONTENTS
Page
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated balance sheets at December 31, 1996 and March 31, 1996 ........ 3
Consolidated statements of operations for the three and nine months
ended December 31, 1996 and 1995 ........................................... 4
Consolidated statements of cash flows for the nine months ended
December 31, 1996 and 1995 ................................................. 5
Notes to consolidated financial statements ................................. 6
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations .................................................. 9
PART II - OTHER INFORMATION
Item 5 - Other Information ................................................ 13
Item 6 - Exhibits and Reports on Form 8-K ................................. 13
SIGNATURE ................................................................. 13
2
Interleaf, Inc.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
December 31, 1996 March 31, 1996
In thousands, except for share and per share amounts (unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 13,738 $ 12,725
Accounts receivable, net 17,772 19,771
Prepaid expenses and other current assets 1,702 2,112
--------- ---------
Total current assets 33,212 34,608
Property and equipment, net 6,679 7,800
Intangible assets 4,684 6,164
Other assets 545 344
--------- ---------
Total assets $ 45,120 $ 48,916
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 2,104 $ 2,908
Accrued expenses 16,187 13,252
Unearned revenue 14,734 15,986
Other current liabilities 6,723 1,348
--------- ---------
Total current liabilities 39,748 33,494
Other liabilities 188 3
--------- ---------
Total liabilities 39,936 33,497
--------- ---------
Shareholders' Equity
Preferred stock, par value $.10 per share, authorized 5,000,000 shares:
Series A Junior Participating, none issued and outstanding
Senior Series B Convertible, issued and outstanding 861,911
at December 31, 1996 and 923,304 at March 31, 1996 87 92
Series C Convertible Preferred Stock, issued and outstanding
1,004,904 at December 31, 1996 and -0- at March 31, 1996 100 -
Common stock, par value $.01 per share, authorized
30,000,000 shares, issued and outstanding 17,459,219 at December 31,
1996 and 16,697,988 at March 31, 1996 174 167
Additional paid-in capital 85,505 72,348
Retained earnings (deficit) (80,594) (56,958)
Cumulative translation adjustment (88) (230)
--------- ---------
Total shareholders' equity 5,184 15,419
--------- ---------
Total liabilities and shareholders' equity $ 45,120 $ 48,916
--------- ---------
--------- ---------
See notes to consolidated financial statements
3
Interleaf, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended December 31 Nine months ended December 31
1996 1995 1996 1995
In thousands, except for per share amounts (unaudited) (unaudited) (unaudited) (unaudited)
Revenues:
Products $ 4,296 $ 7,915 $ 15,955 $ 26,625
Maintenance 6,903 7,932 21,785 24,123
Services 4,149 5,408 13,247 16,945
------- ------- -------- --------
Total Revenues 15,348 21,255 50,987 67,693
------- ------- -------- --------
Costs of revenues:
Products 1,416 1,598 4,569 4,822
Maintenance 1,159 1,300 3,758 3,983
Service 3,931 4,474 12,493 14,050
------- ------- -------- --------
Total costs of revenues 6,506 7,372 20,820 22,855
------- ------- -------- --------
Gross Margin 8,842 13,883 30,167 44,838
------- ------- -------- --------
Operating Expenses:
Selling, general and administrative 8,964 9,545 30,868 31,398
Research and development 3,227 3,992 11,802 11,849
Write-down of intangible assets 2,288 - 2,288 -
Restructuring expense 3,700 - 8,500 -
------- ------- -------- --------
Total operating expenses 18,179 13,537 53,458 43,247
------- ------- -------- --------
Income (loss) from operations (9,337) 346 (23,291) 1,591
Other income (expense) (172) 113 (345) 262
------- ------- -------- --------
Income (loss) before income taxes (9,509) 459 (23,636) 1,853
Provision for income taxes - 30 - 30
------- ------- -------- --------
Net income (loss) $(9,509) $ 429 $(23,636) $ 1,823
------- ------- -------- --------
------- ------- -------- --------
Net income (loss) per share $ (0.54) $ 0.02 $ (1.37) $ 0.10
------- ------- -------- --------
------- ------- -------- --------
Shares used in computing net
income (loss) per share 17,459 18,874 17,306 18,382
------- ------- -------- --------
------- ------- -------- --------
See notes to consolidated financial statements
4
Interleaf, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended
December 31
1996 1995
In thousands (unaudited)
Cash Flows from Operating Activities
Net income (loss) $(23,636) $ 1,823
Adjustments to reconcile net income (loss)
to net cash provided by
(used in) operating activities:
Restructuring expense 8,500 -
Write-down of intangible assets 2,288 -
Gain from settlement of legal dispute - (1,230)
Depreciation and amortization expense 5,880 5,833
Changes in assets and liabilities:
Decrease in accounts receivable, net 2,356 2,399
Decrease in other assets 740 448
Increase (decrease) in accounts payable
and accrued expenses 1,335 (189)
Decrease in unearned revenue (1,294) (1,465)
Decrease in other liabilities (3,099) (2,220)
Other, net 70 (4)
-------- -------
Net cash provided by (used in) operating activities (6,860) 5,395
-------- -------
Cash Flows from Investing Activities
Capital expenditures (1,796) (811)
Capitalized software development costs (887) (3,452)
-------- -------
Net cash used in investing activities (2,683) (4,263)
-------- -------
Cash Flows from Financing Activities
Net proceeds from issuance of common stock 1,250 2,655
Net proceeds from issuance of convertible
preferred stock 9,382 -
Repayment of long-term debt and capital leases (8) (1,680)
-------- -------
Net cash provided by financing activities 10,624 975
-------- -------
Effect of exchange-rate changes on cash (68) (114)
-------- -------
Net increase (decrease) in cash and cash equivalents 1,013 1,993
Cash and cash equivalents at beginning of period 12,725 10,441
-------- -------
Cash and cash equivalents at end of period $ 13,738 $12,434
-------- -------
-------- -------
See notes to consolidated financial statements
5
Interleaf, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The consolidated financial statements include the accounts of Interleaf,
Inc. and its subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation. Interleaf, Inc. and
its subsidiaries are collectively referred to as the "Company." Certain
1995 amounts have been reclassified to conform to the 1996 method of
presentation.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all
financial information and disclosures required by generally accepted
accounting principles for complete financial statements. In the opinion
of management, these financial statements include all adjustments
(consisting only of normal recurring accruals) necessary for a fair
presentation of the results of operations for the interim periods
reported and of the financial condition of the Company as of the date of
the interim balance sheet. The results of operations for interim periods
are not necessarily indicative of the results to be expected for the
full year.
These financial statements should be read in conjunction with the
Company's audited consolidated financial statements and related notes
included in the Company's Annual Report on Form 10-K for the year ended
March 31, 1996.
2. Net Income (Loss) Per Share
Per share amounts are calculated using the weighted average number of
common shares and common share equivalents outstanding during periods of
net income. Common share equivalents are attributable to stock options,
common stock warrants and convertible preferred stock. Per share amounts
are calculated using only the weighted average number of common shares
outstanding during periods of net loss. Fully diluted earnings per share
is not materially different from reported primary earnings per share.
3. The Learning Alliance
On May 1, 1996, the Company purchased all of the outstanding equity
securities of The Learning Alliance, Inc. ("TLA") for 341,500 shares of
common stock valued at $2,690,000. TLA provides sales training services
and develops and markets related software for the sales force automation
and integration marketplace.
The acquisition was accounted for using the purchase method of
accounting, whereby the purchase price was allocated to the assets
acquired and liabilities assumed based on their respective estimated
fair market values. The acquisition resulted in goodwill of approximately
$2.6 million.
In December 1996, in order to allow the Company's management to focus on
development of its core businesses, the Company decided to divest itself
of TLA. TLA was sold in January 1997 for future royalty considerations
and foregone severance payments. As a result of this decision, in
December 1996 the Company recorded a write-down of approximately
$2.3 million of goodwill which had been recorded in connection with the
acquisition.
The operating results of TLA have been included in the consolidated
financial statements since the date of the acquisition. Pro forma
presentations have not been included as the acquisition was not material
to the results of operations of the Company.
6
Interleaf, Inc.
4. Noncash Financing Activities
Senior Series B Convertible Preferred Stock holders converted 61,393 and
805,269 shares of preferred stock into 82,496 and 1,082,081 shares of
the Company's common stock during the nine months ended December 31,
1996 and 1995, respectively. The Company issued 366,113 shares of common
stock, during the nine months ended December 31, 1995, in connection
with the exercise of a warrant. The Company received no proceeds upon
the conversion of the warrant into common stock.
5. Credit Agreement
The Company has a revolving line of credit of up to $10 million from a
major commercial lender. The credit agreement also provides for the
issuance of letters of credit of up to $2 million. Borrowings from the
line of credit bear interest at the higher of 9% or the prime rate plus 2%
and are secured by substantially all tangible and intangible domestic
assets of the Company. Outstanding letters of credit bear interest at 2%.
The credit agreement expires in May 1997. The agreement contains certain
financial covenants relating to the Company's current ratio, tangible net
worth, and working capital, as well as restrictions on certain additional
indebtedness, acquisitions, capital expenditures, and dividend payments. At
December 31, 1996, there were no loans outstanding under this line of
credit. Borrowings under the credit agreement are based on the level of
eligible North American accounts receivable, modified by cash collections
during the previous 90 days. As of December 31, 1996, approximately $0.8
million of standby letters of credit were outstanding to secure the leasing
of computer equipment, and the amount available for additional borrowings
was approximately $1.9 million. In January 1997, the Company received
notification that the lender does not plan to extend the line of credit
beyond May 1997. If the Company is unable to extend this financing
facility, the commercial lender will call the letter of credit. The Company
will then have to pay $800,000 to the lessor of the computer equipment.
6. Restructuring
In July 1996, the Company announced a restructuring plan and recorded a
charge of $4.8 million to reduce employment by approximately 75 people,
to close or reduce space in seven sales offices, and to implement the
second and final stage of relocating corporate headquarters to smaller
and less expensive space. The employee terminations affected all groups
throughout the organization. Cash outlays are anticipated to be
approximately $4.1 million of the total $4.8 million restructuring
charge and will require lease payments through December 2000.
Approximately $1.3 million of the restructuring charge was for employee
termination benefits and $3.5 million for other exit costs, primarily
related to facility leases.
In October 1996, the Company announced a restructuring plan and recorded
a charge of $3.7 million to further reduce employment by approximately
100 people and to close or reduce space in six sales offices. The
employee terminations affected all groups throughout the organization.
During the nine months ended December 31, 1996, the Company paid
approximately $2.2 million for employee termination benefits and
approximately $1.0 million, net of sublease receipts, for other exit
costs related to the 1996 and 1995 restructurings.
7
Interleaf, Inc.
7. Shareholders' Equity
On October 15, 1996, the Company issued 1,004,904 shares of newly
authorized Series C Convertible Preferred Stock ("Series C") at a price
of $9.9512 per share. The Company received net proceeds of approximately
$9.4 million which is being used for working capital and general
corporate purposes. Each Series C share is initially convertible into 4
shares of common stock, which rate is adjustable upon certain issuances
of common stock by the Company. Dividends of $0.24878 per share are
payable on April 15, 1998 and October 15, 1998, and $0.49756 per share
on each April 15 and October 15 thereafter. Holders of outstanding
shares of Series C Preferred Stock are entitled to the number of votes
equal to one-half the number of shares of common stock into which the
Series C shares are convertible. Series C shareholders are entitled to
receive upon liquidation an amount equal to $9.9512 per share plus any
declared or accrued but unpaid dividends, which amount is payable prior
to any payments to holders of the Series B Preferred Stock and common
stock. Series C shareholders must convert their shares into common stock
upon the consolidation, merger or sale of substantially all assets of
the Company or, subject to certain conditions, if the Company's common
stock trades for twenty consecutive days above $3.7317. The Company may,
at its option, redeem the Series C shares on or after October 16, 1999.
The initial redemption premium is 25%, which decreases 5% annually until
October 16, 2004.
On September 12, 1996, the Board of Directors authorized a repricing
program which allows employees to elect to reprice all or some of their
outstanding options, ranging in exercise price from $2.75 to $10.75 per
share, to the September 12, 1996 closing price of $2.5625. Any options
repriced may not be exercised until March 12, 1997. Options for
approximately 2.3 million shares are eligible to be repriced.
8. Contingencies
Interleaf's German subsidiary, Interleaf GmbH, has been notified that it
is liable for certain German withholding taxes related to payments
remitted to the United States from Germany. The Company is appealing
this assessment, however, approximately $1.1 million of the cash and
cash equivalents balance at December 31, 1996 is restricted for
potential payment of the German withholding taxes. The Company believes
the final outcome will not have a material adverse effect on results of
operations of the Company.
8
Interleaf, Inc.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Overview
The Company recorded a net loss of approximately $9.5 million, on total
revenues of $15.3 million, for the third quarter and a net loss of
approximately $23.6 million, on total revenues of $51.0 million, for the nine
months ended December 31, 1996. This compares with net income of
approximately $0.4 million, on total revenues of $21.3 million, for the third
quarter and net income of approximately $1.8 million, on total revenues of
$67.7 million, for the nine months ended December 31, 1995. As a result of
the significant decline in revenues, the Company initiated two restructuring
plans, in July 1996 and October 1996, to reduce worldwide employment and
facility costs. A $4.8 million restructuring charge was recorded in July 1996
and a restructuring charge of $3.7 million was recorded during the third
quarter of fiscal 1997. Combined, these restructurings reduced employment by
approximately 175 people, approximately one-third of the Company's worldwide
workforce prior to the July restructuring. The Company has also closed or
reduced space in 12 sales offices and is implementing the final stage of
relocating its corporate offices to smaller and less expensive space. (See,
Note 6 to the Consolidated Financial Statements).
In addition, during the end of the third quarter and beginning of the fourth
quarter, a new senior management team has been installed, including a new
President and Chief Financial Officer. The new team will continue to review
and assess the Company's global operation, which may result in further
consolidation. In connection therewith, in the third quarter the Company
decided to divest itself of The Learning Alliance which was sold in January
1997.
Revenues
Total revenues decreased approximately $5.9 million (28%) and $16.7 million
(25%) for the third quarter and nine months ended December 31, 1996, when
compared with the same periods a year ago. Revenue has declined in all
geographic regions. Product revenue declined significantly during these
periods as sales of the Company's stand-alone products continue to decrease.
The Company is refocusing its business strategy on providing document
management applications targeted toward specific vertical markets. While the
Company has built well-accepted integrated document management ("IDM") based
solutions for individual customers, it has not yet demonstrated the ability
to develop, market and sell IDM applications. There is no assurance that the
Company will be successful in implementing its strategy, and therefore the
Company is unable to predict if or when product revenues will stabilize or
grow. Additionally, since the Company's services and maintenance revenue is
largely dependent on new product licenses, these revenue components have also
experienced downward pressure. This trend will continue unless product
revenue stabilizes.
Maintenance revenue, resulting from contracts to provide telephone support
and upgrades to the Company's software products, declined approximately 13%
and 10% during the third quarter and nine months ended December 31, 1996,
respectively, when compared with the same periods a year ago. Services
revenue, consisting of consulting and customer training revenue, decreased
approximately 23% and 22% for the third quarter and nine months ended
December 31, 1996, respectively, when compared with the same periods a year
ago. The Company leverages software product licensing with services to
provide IDM solutions to its customers. In fiscal 1996, the Company had
several large consulting projects, which were completed during early fiscal
1996, that have not been replaced with similar sized projects. This was
primarily attributable to the decline in product licensing over the past few
quarters.
9
Interleaf, Inc.
Costs of Revenues
Cost of product were flat in the current period and year-to-date when
compared with prior year periods as increased amortization of capitalized
software development costs was offset by lower direct product costs
associated with the decrease in product license revenue. Because of the
decline in product revenues, however, cost of product revenues increased as a
percentage of product revenues to 33% and 29% for the third quarter and nine
months ended December 31, 1996, respectively, compared with approximately 20%
and 18% for the corresponding periods in the prior year. Cost of maintenance
revenues remained relatively stable in both amount and as a percentage of
maintenance revenues relative to the prior year. Cost of services revenue
decreased primarily as a result of a decline in services personnel. However,
cost of services revenue increased as a percentage of services revenue to
approximately 95% and 94% for the third quarter and nine months ended
December 31, 1996, respectively, compared with approximately 83% for both the
corresponding periods in the prior year, as the decline in services revenue
discussed above was only partially offset by the decline in services
personnel.
Operating Expenses
Selling, general and administrative ("SG&A") expenses decreased slightly from
the prior year primarily due to the restructurings discussed previously.
Because of the decrease in total revenues, SG&A expenses increased as a
percentage of total revenues to approximately 58% and 61% for the third
quarter and nine months ended December 31, 1996, respectively, compared with
approximately 45% and 46% for the corresponding periods in the prior year.
SG&A expenses are expected to decrease further as a result of the fiscal 1997
restructurings.
Research and development ("R&D") expenses decreased slightly from the prior
year primarily due to lower personnel expenses. For the third quarters ended
December 31, 1996 and 1995, R&D expenses were approximately 21% and 19%,
respectively, of total revenues. For the nine months ended December 31, 1996
and 1995, R&D expenses were approximately 23% and 18%, respectively, of total
revenues. The Company's product development plans are to focus on IDM-based
product offerings as well as enhancements to existing products. R&D spending
is expected to decline further as a result of the fiscal 1997 restructurings.
Liquidity and Capital Resources
The Company had approximately $13.7 million of cash and cash equivalents at
December 31, 1996, an increase of approximately $1.0 million from March 31,
1996. The increase was primarily attributable to the Company's sales of
convertible preferred stock (see below) which generated $9.4 million and
common stock which generated $1.2 million, offset by negative cash flow from
operations during the first nine months of fiscal 1997 and payments
associated with the July and October 1996 restructurings. In addition, a
large portion of the maintenance fees for calender 1997 were collected in
December 1996. Capital expenditures of approximately $1.8 million were
principally for improvements to the Company's information system
infrastructure. Interleaf's German subsidiary, Interleaf GmbH, has been
notified that it is liable for German withholding taxes related to payments
remitted to the United States from Germany in 1990. The Company is appealing
this assessment. At December 31, 1996, the Company had approximately $1.1
million of cash restricted for potential payment of German withholding taxes,
and approximately $0.3 million as collateral for various lease commitments.
As part of the Company's strategy to develop sales force automation and
integration applications, the Company acquired The Learning Alliance, Inc.
("TLA") in May 1996 for 341,500 shares of common stock valued at $2.7
million. In December 1996, in order to allow the Company's management to
focus on development of its core businesses, the Company decided to divest
itself of TLA. TLA was sold in January 1997 for future royalty considerations
and foregone severance obligations. As a result of this decision, in December
1996 the Company recorded a $2.3 million write-down of certain intangible
assets which had been recorded in connection with acquisition (See, Note 3 to
the Consolidated Financial Statements for further discussion).
10
Interleaf, Inc.
Total accrued restructuring charges associated with both the fiscal 1995 and
1996 restructurings were approximately $6.7 million at December 31, 1996. Cash
payments related to these restructurings are anticipated to continue until
December 2000.
The Company has a revolving line of credit from a major commercial lender.
Borrowings from the line of credit are secured by substantially all tangible
and intangible domestic assets of the Company. At December 31, 1996, there
were no outstanding borrowings under this line of credit, but a letter of
credit in the amount of approximately $800,000 was issued and, therefore, the
amount available for borrowings was approximately $1.9 million (See, Note 5
to the Consolidated Financial Statements regarding borrowing limits and
restrictive covenants associated with the credit agreement). The Company has
received notification that the lender does not plan to extend the line of
credit beyond May 1997. If the Company is unable to extend this line of
credit, or secure other financing, the Company will be required to pay
approximately $800,000, the amount of the outstanding letter of credit.
In October 1996, the Company sold Series C Convertible Preferred Stock
("Series C") in a private placement resulting in net proceeds of
approximately $9.4 million (See, Note 7 to the Consolidated Financial
Statements for further discussion).
The objectives of the Company's two restructurings in the last six months and
the Series C private placement were to enable the Company to return to a
sustainable profitable condition. However, due to the uncertainty among the
Company's customers and employees created by the Company's restructurings,
along with the downward trend in the Company's revenue, the Company is unable
to predict its future revenue. The Company will continue to closely monitor
revenue and manage its expenses and cost structure accordingly. While the
Company believes its current cash position will meet the Company's liquidity
needs for the remainder of fiscal 1997, the Company can fund its longer term
ongoing business operations only by increasing revenues, combined with
tightly managed cost controls. If the Company's cash resources are
insufficient to fund its operations at any time, there can be no assurance
that the Company will be able to obtain additional capital or, if it does so,
that such capital can be obtained at commercially reasonable terms or without
incurring substantial dilution to existing shareholders.
The Company has retained the investment banking firm Hambrecht & Quist LLC to
assist it in exploring long-term strategic alternatives.
Risk Factors
From time to time, information provided by the Company or statements made by
its employees may contain forward-looking information. The Company's actual
future results may differ materially from those projections or suggestions
made in such forward-looking information as a result of various potential
risks and uncertainties including, but not limited to, the factors discussed
below.
The Company's future operating results are dependent on its ability to
develop and market integrated document management software products and
services that meet the changing needs of organizations with complex document
management requirements. There are numerous risks associated with this
process, including the uncertainty among customers and employees created by
the Company's recent financial difficulties, the appointment of new senior
management, rapid technological change in the information technology industry
and the requirement to bring to market IDM solutions that solve complex
business needs in a timely manner. In addition, the existing document
publishing, electronic distribution, and document management markets are
highly competitive. The Company competes against a number of companies for
sales of its software products on both an individual product basis and
integrated with services in large IDM solution sales.
Sales cycles associated with IDM solution sales are long as organizations
frequently require the Company to solve complex business problems which
typically involve reenginering of their business processes. In addition, a
high percentage of the Company's product license revenues are generally
realized in the last month of a fiscal quarter and are difficult to predict
until the end of a fiscal quarter. Accordingly, given the Company's
relatively fixed cost structure, a shortfall or increase in product license
revenue will have a significant impact on the Company's operating results and
liquidity.
11
Interleaf, Inc.
The Company markets its software products and services worldwide. Global
and/or regional economic factors, currency exchange rate fluctuations, and
potential changes in laws and regulations affecting the Company's business
could impact the Company's financial condition or future operating results.
The market price of the Company's common stock may be volatile at times in
response to fluctuations in the Company's quarterly operating results,
changes in analysts' earnings estimates, market conditions in the computer
software industry, as well as general economic conditions and other factors
external to the Company.
12
Interleaf, Inc.
PART II - OTHER INFORMATION
Item 5. Other Information
Effective November 15, 1996, the Company's Board of Directors ("Board")
accepted the resignation of Ed Koepfler as its President and Chief Executive
Officer and elected Rory J. Cowan as its President and Chief Executive
Officer on an interim basis. Effective January 24, 1997, the Board elected
Jaime W. Ellertson President and Chief Executive Officer and accepted Rory J.
Cowan's resignation.
Effective January 2, 1997 the Board appointed Robert R. Langer as Vice
President of Finance and Administration, Treasurer, and Chief Financial
Officer and Principal Financial and Accounting Officer, and accepted the
resignation of Robert M. Stoddard from these positions.
On November 15, 1996, the Board accepted the resignation of Stan Douglas, as
the Company's Vice President of Engineering Operations, and on February 3,
1997 the Board accepted the resignation of Robert T. Maher, as Vice President
of Engineering.
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits listed in the accompanying Exhibit Index
are filed as part of this Quarterly Report on Form
10-Q.
(b) No reports were filed on Form 8-K by the Company
during the quarter ended December 31, 1996.
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.
INTERLEAF, INC.
February 13, 1997
/s/ Robert R. Langer
---------------------------------
Robert R. Langer
Vice President of Finance and Administration
and Chief Financial Officer
(Principal Financial and Accounting Officer)
13
INTERLEAF, INC.
EXHIBIT INDEX
Exhibit
Number Description Method of Filing
- -------- ----------- ----------------
3(a) Restated Articles of Organization of the Company,
as amended Included
3(b) By-Laws of the Company, as amended [v]
4(a) Specimen Certificate for Shares of the Company's
Common Stock [xiv]
4(b) Rights Agreement, dated July 15, 1988, between the
Company and the First National Bank of Boston [xv]
10(a) Company's 1983 Stock Option Plan, as amended [v]
10(a1) 1994 Employee Stock Option Plan, as amended [xiii]
10(a2) 1993 Incentive Stock Option Plan, as amended [viii]
10(b) Company's 1989 Director Stock Option Plan [i]
10(b2) Company's 1987 Employee Stock Purchase Plan, as amended [xiii]
10(c) Company's 1989 Officer and Employee Severance
Benefit Plans [i]
10(cc) Company's 1993 Director Stock Option Plan [v]
10(d) Agreements between PruTech Research and Development
Partnership III and the Company, dated October 21, 1988. [ii]
10(e) Exclusive Marketing and Licensing Agreement, between
Interleaf South America, Ltd. and the Company, and
related Option Agreement, dated March 31, 1989. [i]
10(f) Distribution and License Agreement between Interleaf
Italia, S.r.l. and the Company, and related Joint
Venture Agreement, dated October 31, 1988. [i]
10(g) Preferred Stock Purchase Agreements, for the issuance
of 2,142,857 shares of the Company's Senior Series B
Convertible Preferred Stock, dated September 29, 1989. [ii]
10(h) Notification to Preferred Shareholder of increase in
conversion ratio, dated May 18, 1992. [iii]
10(i) Lease of Prospect Place, Waltham, MA, between Prospect
Place Limited Partnership and Interleaf, Inc., and
related Agreements, dated March 30, 1990. [iv]
10(j) Employment and severance agreement between the Company
and Edward Koepfler, the Company's President, dated
October 3, 1994. [vii]
10(k) Loan and Security Agreement between the Company and
Foothill Capital Corporation, dated May 2, 1995. [ix]
10(l) Employment and severance agreement between the Company
and G. Gordon M. Large, the Company's Executive Vice
President and Chief Financial Officer, dated June 5, 1995. [ix]
10(m) Net Lease, dated August 14, 1995, between Principal
Mutual Insurance Company and the Company. [x]
10(n) Sublease, dated September 15, 1995, between Parametric
Technology Corporation and the Company. [x]
10(o) Employment and severance agreement between the Company
and Mark Cieplik, the Company's Vice President, Americas,
dated March 17, 1995. [xi]
10(p) Agreement between PruTech Research and Development
Partnership III and the Company, dated November 14, 1995. [xii]
10(q) Series C Preferred Stock Agreement between Interleaf,
Inc. and Lindner Investments, dated October 14, 1996. [xiii]
14
Exhibit
Number Description Method of Filing
- -------- ----------- ----------------
10(r) Letter Agreement between the Company and Robert M.
Stoddard, as the Company's then Vice President of
Finance and Administration, and Chief Financial
Officer, dated November 11, 1996. Included
10(s) Letter Agreement between the Company and Rory J.
Cowan, the Company's President and Chief Executive
Officer, dated November 15, 1996, concerning his
employment and compensation with the Company. Included
10(t) Letter Agreement between the Company and Mark H.
Cieplik, the Company's Vice President of Sales,
dated November 15, 1996, concerning his employment
and compensation with the Company. Included
10(u) Letter Agreement between the Company and Michael L.
Shanker, the Company's Vice President of Professional
Services, dated November 15, 1996, concerning his
employment and compensation with the Company. Included
10(v) Letter Agreement between the Company and Stephen J.
Hill, the Company's Vice President of Europe, dated
November 15, 1996, concerning his employment and
compensation with the Company. Included
10(w) Resignation Agreement and Release and Employment
Agreement between Ed Koepfler, the Company's former
President and Chief Executive Officer, and the Company,
dated November 15, 1996, concerning his employment and
severance with the Company. Included
10(w1) Resignation Agreement and Release and Employment
Agreement between G. Gordon M. Large, the Company's
former Executive Vice President of Finance and
Administration and Chief Financial Officer, and the
Company, dated November 12, 1996, concerning his
employment and severance with the Company. Included
10(x) Resignation Agreement and Release and Employment
Agreement between Stan Douglas, the Company's former
Vice President of Engineering Operations, and the
Company, dated November 15, 1996, concerning his
employment and severance with the Company. Included
10(y) Terms of Engagement between the Company and Robert
R. Langer, Vice President of Finance and Administration
and Chief Financial Officer, dated December 30, 1996,
concerning his employment with the Company. Included
10(z) Offer Letter and Acceptance between Jaime W.
Ellertson, the Company's President and Chief Executive
Officer, and the Company, dated January 9, 1997. Included
11 Computation of Earnings Per Share Included
27 Financial Data Schedule Included
_________________________
[i] Incorporated herein by reference is the applicable Exhibit to Company's
Annual Report on Form 10-K for the year ended March 31, 1989, File Number
0-14713.
[ii] Incorporated herein by reference is the applicable Exhibit to Company's
Annual Report on Form 10-K for the year ended March 31, 1990, File Number
0-14713.
[iii] Incorporated herein by reference is the applicable Exhibit to Company's
Annual Report on Form 10-K for the year ended March 31, 1992, File Number
0-14713.
[iv] Incorporated herein by reference is the applicable Exhibit to Company's
Report on Form 8-K filed April 13, 1990, File Number 0-14713.
15
INTERLEAF, INC.
[v] Incorporated herein by reference is the applicable Exhibit to Company's
Annual Report on Form 10-K for the year ended March 31, 1994, File Number
0-14713.
[vi] Incorporated herein by reference is the applicable Exhibit to Company's
Report on Form 10-Q for the quarter ended September 30, 1994, File Number
0-14713.
[vii] Incorporated herein by reference is the applicable Exhibit to Company's
Report on Form 10-Q for the quarter ended December 31, 1994, File Number
0-14713.
[viii] Incorporated herein by reference is the applicable Exhibit to
Company's Annual Report on Form 10-K for the year ended March 31, 1995, File
Number 0-14713.
[ix] Incorporated herein by reference is the applicable Exhibit to Company's
Report on Form 10-Q for the quarter ended June 30, 1995, File Number 0-14713.
[x] Incorporated herein by reference is the applicable Exhibit to Company's
Registration Statement on Form S-2, File Number 33-63785.
[xi] Incorporated herein by reference is the applicable Exhibit to Company's
Report on Form 10-Q for the quarter ended September 30, 1995, File Number
0-14713.
[xii] Incorporated herein by reference is the applicable Exhibit to Company's
Report on Form 10-Q for the quarter ended December 31, 1995, File Number
0-14713.
[xiii] Incorporated herein by reference is the applicable Exhibit to
Company's Report on Form 10-Q for the quarter ended September 30, 1996, File
Number 0-14713.
[xiv] Incorporated herein by reference is the applicable Exhibit to Company's
Registration Statement on Form S-1, File Number 33-5743.
[xv] Incorporated herein by reference is Exhibit 1 to Company's Registration
Statement on Form 8-A, filed July 27, 1988.
16