1
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 DECEMBER 31, 1996
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 0-28660
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TRITEAL CORPORATION
(Exact name of registrant as specified in its charter)
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DELAWARE 33-0548924
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2011 PALOMAR AIRPORT ROAD
CARLSBAD, CA 92009-1431
(Address of principal executive offices)
(619) 930-2077
(Registrant's phone number, including area code)
----------------------------
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED REPORTS REQUIRED TO
BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS) AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS:
YES [X] NO [ ]
As of February 10, 1997 there were 9,280,878 shares of $.001 par value common
stock outstanding.
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TRITEAL CORPORATION
FORM 10-Q
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets.................................. 3
Consolidated Statements of Operations........................ 4
Consolidated Statements of Cash Flows........................ 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 6. Exhibits and Reports on Form 8-K............................. 14
SIGNATURES............................................................... 14
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TRITEAL CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
DECEMBER 31, MARCH 31,
1996 1996
------------ ------------
(Unaudited) (Note)
Current assets:
Cash and cash equivalents .......................................... $ 4,229,876 $ 301,251
Short-term investments ............................................. 17,708,938 -
Accounts receivable, net ........................................... 5,657,207 4,872,054
Prepaid expenses and other current assets .......................... 1,141,229 378,485
------------ ------------
Total current assets .......................................... 28,737,250 5,551,790
Property and equipment, net ............................................ 1,226,959 1,024,040
Other assets, net ...................................................... 191,872 60,140
============ ============
Total assets ................................................. $ 30,156,081 $ 6,635,970
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit ................................................... $ - $ 113,542
Accounts payable ................................................. 445,234 784,575
Accrued liabilities .............................................. 4,214,157 3,181,761
Deferred revenues ................................................ 1,136,980 922,732
Current portion of long-term debt ............................... - 121,388
------------ ------------
Total current liabilities .................................... 5,796,371 5,123,998
Long-term debt ......................................................... - 242,776
Stockholders' equity:
Preferred Stock, $.001 par value
Authorized shares -- 5,000,000
Issued and outstanding -- no shares and
1,527,247 shares at December 31, 1996
and March 31, 1996, respectively ............................... - 1,527
Common Stock, $.001 par value
Authorized shares -- 30,000,000
Issued and outstanding -- 9,209,852 shares and
4,186,902 shares at December 31,
1996 and March 31, 1996, respectively .......................... 9,210 4,187
Additional paid-in capital ....................................... 30,195,296 5,869,825
Preferred stock subscriptions .................................... - 363,129
Notes receivable from stockholders ............................... (101,667) (167,250)
Deferred compensation ............................................ (113,200) (151,900)
Accumulated deficit .............................................. (5,629,929) (4,650,322)
------------ ------------
Total stockholders' equity .................................... 24,359,710 1,269,196
============ ============
Total liabilities and stockholders' equity .................... $ 30,156,081 $ 6,635,970
============ ============
Note: The balance sheet at March 31, 1996 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See accompanying notes.
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TRITEAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
---------------------------- ----------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
Revenues:
License fees ...................... $ 4,253,714 $ 1,599,672 $ 9,657,074 $ 3,227,808
Maintenance and services .......... 452,501 225,476 1,455,396 1,173,897
------------ ------------ ------------ ------------
Total revenues ............... 4,706,215 1,825,148 11,112,470 4,401,705
Cost of revenues:
Cost of license fees .............. 846,712 317,524 1,886,775 902,720
Cost of maintenance and services .. 181,675 81,804 448,066 324,794
------------ ------------ ------------ ------------
Total cost of revenues ....... 1,028,387 399,328 2,334,841 1,227,514
------------ ------------ ------------ ------------
Gross profit ................. 3,677,828 1,425,820 8,777,629 3,174,191
Operating expenses:
Research and development .......... 643,368 1,058,195 1,678,703 1,753,142
Selling, general and administrative 3,106,256 2,140,676 8,572,788 5,684,486
------------ ------------ ------------ ------------
Total operating expenses ..... 3,749,624 3,198,871 10,251,491 7,437,628
------------ ------------ ------------ ------------
Operating loss ...................... (71,796) (1,773,051) (1,473,862) (4,263,437)
Interest income (expense), net ...... 339,538 (3,500) 494,255 (16,535)
------------ ------------ ------------ ------------
Income (loss) before provision for
(benefit from) income taxes ....... 267,742 (1,776,551) (979,607) (4,279,972)
Provision for (benefit from) income
taxes ............................. - (34,000) - (83,000)
============ ============ ============ ============
Net income (loss) ................... $ 267,742 $ (1,742,551) $ (979,607) $ (4,196,972)
============ ============ ============ ============
Net income (loss) per share ......... $ 0 .03 $ (0.26) $ (0.12) $ (0.63)
============ ============ ============ ============
Shares used in computing net income
(loss) per share ................. 10,590,707 6,712,321 7,966,133 6,712,321
============ ============ ============ ============
See accompanying notes.
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TRITEAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
DECEMBER 31,
----------------------------
1996 1995
------------ ------------
Cash flows from operating activities:
Net loss ................................................ $ (979,607) $ (4,196,972)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization ..................... 427,174 223,713
Amortization of deferred compensation ............. 38,700 20,400
Issuance of common stock for services ............. - 6,250
Changes in operating assets and liabilities:
Accounts receivable receivable ................ (785,153) (795,833)
Prepaid expenses and other current assets ..... (762,744) (356,049)
Accounts payable .............................. (339,341) 95,476
Accrued liabilities ........................... 1,032,396 1,252,605
Deferred revenue .............................. 214,248 80,735
------------ ------------
Net cash used in operating activities ................... (1,154,327) (3,699,675)
Cash flows from investing activities:
Short-term investments ............................ (17,708,938) -
Purchase of property and equipment ................ (630,093) (817,528)
Other assets ...................................... (131,732) (33,727)
------------ ------------
Net cash used in investing activities ................... (18,470,763) (851,255)
Cash flows from financing activities:
Net proceeds from (repayments of) line of credit .. (113,542) 113,542
Proceeds from long-term debt ...................... - 251,271
Repayments of long-term debt ...................... (364,164) (19,355)
Proceeds from repayments of notes receivable from
stockholders ................................... 65,583 -
Proceeds from issuance of common stock, net ....... 20,399,674 -
Proceeds from issuance of preferred stock, net .... 3,566,164 3,965,000
------------ ------------
Net cash provided by financing activities ............... 23,553,715 4,310,458
------------ ------------
Increase (decrease) in cash and cash equivalents ........ 3,928,625 (210,472)
Cash and cash equivalents at beginning of period ........ 301,251 1,224,636
------------ ------------
Cash and cash equivalents at end of period .............. $ 4,229,876 $ 1,014,164
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest .......................................... $ 28,155 $ 29,493
============ ============
Supplemental disclosure of noncash financing activities:
Issuance of common stock in exchange for notes
receivable ....................................... $ - $ 167,250
============ ============
See accompanying notes.
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TRITEAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
TriTeal Corporation (the "Company") develops, markets and supports open
systems-based, mission-critical desktop system software and integrated
applications that enable multi-platform deployment of client/server applications
throughout an enterprise. The Company recently introduced its Java-based SoftNC
technology, a thin-client, platform-independent solution designed to allow
simultaneous access to Java and legacy applications.
The Consolidated Financial Statements of the Company included in the
Company's Registration Statement on Form S-1 (Registration No. 333-20579),
including the related Prospectus dated January 31, 1997 (the "Registration
Statement"), contain additional information about the Company, its operations,
and its financial statements and accounting practices, and should be read in
conjunction with this Quarterly Report on Form 10-Q. These unaudited
consolidated financial statements have been prepared in accordance with the
instructions on Form 10-Q and, therefore, certain information and footnote
disclosures normally contained in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted.
The accompanying unaudited consolidated financial statements of the Company
reflect all adjustments of a normal recurring nature which are, in the opinion
of management, necessary for a fair presentation of the financial position,
results of operations and cash flows for all periods presented. The interim
financial information herein are not necessarily indicative of results for any
future interim periods or for the full fiscal year ending March 31, 1997.
NOTE 2 - STOCKHOLDERS' EQUITY
On August 6, 1996, the Company completed its initial public offering of
2,500,000 shares of its Common Stock. Net proceeds to the Company aggregated
approximately $17.6 million. As of the closing date of the offering, all of the
Preferred Stock outstanding was converted, on a one-for-one basis, into an
aggregate of 2,093,411 shares of Common Stock. A portion of the proceeds was
used to repay the Company's long-term debt.
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TRITEAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 - STOCKHOLDERS' EQUITY (CONTINUED)
On August 29, 1996, the underwriters of the offering exercised their
over-allotment option to purchase an additional 375,000 shares of Common Stock.
Net proceeds to the Company aggregated approximately $2.8 million.
NOTE 3 - COMPUTATION OF NET INCOME (LOSS) PER SHARE
Net income (loss) per share is computed using the weighted average number of
common shares and common stock equivalents outstanding. Common equivalent shares
from stock options and warrants are excluded from the computation when their
effect is antidilutive except that, pursuant to the Securities and Exchange
Commission Staff Accounting Bulletins, common shares and common equivalent
shares issued during the twelve months prior to the initial filing of the
Registration Statement with the Securities and Exchange Commission have been
included in the calculation as outstanding for all periods prior to the
Company's initial public offering (using the treasury stock method). The
calculation also gives effect to the conversion of all convertible preferred
shares (using the if-converted method), which automatically converted into
common shares upon completion of the Company's initial public offering.
NOTE 4 - LINE OF CREDIT FACILITY
On November 18, 1996, the Company entered into a $3 million revolving bank
credit facility (the "Facility") which expires on October 30, 1997. Borrowings
are secured by substantially all Company assets and bear interest at the bank's
prime rate (8.25% at December 31, 1996). At December 31, 1996, no amounts were
outstanding under the Facility.
NOTE 5 - RECENT ACCOUNTING PRONOUNCEMENTS
In June 1996, the American Institute of Certified Public Accountants issued
an Exposure Draft of a proposed Statement of Position (SOP), "Software Revenue
Recognition," that would supercede SOP 91-1 and would be effective for the
Company's fiscal 1998 financial statements. If adopted, the Exposure Draft is
not expected to have a significant impact on the financial position or the
results of operations of the Company.
NOTE 6 - SUBSEQUENT EVENT
On January 27, 1997, the Board of Directors approved the filing of, and the
Company subsequently filed, a Registration Statement on Form S-1 (Registration
No. 333-20579) including the related Prospectus dated January 31, 1997 (the
"Registration Statement"), covering 2,200,000 shares of the Company's Common
Stock to the public, of which 1,350,000 shares will be offered by the Company
and 850,000 shares will be offered by certain stockholders of the Company.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements that involve risks
and uncertainties. The Company's actual results may differ materially from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those risks and uncertainties
discussed below, as well as other risks set forth under the caption "Risk
Factors" in the Registration Statement and elsewhere in the related Prospectus.
The following discussion should be read in conjunction with the Consolidated
Financial Statements and the Notes thereto included in Item 1 of this Quarterly
Report on Form 10-Q and the Registration Statement.
OVERVIEW
TriTeal Corporation (the "Company") develops, markets and supports open
systems-based, mission-critical desktop system software and integrated
applications that enable multi-platform deployment of client/server applications
throughout an enterprise. The Company recently introduced its Java-based SoftNC
technology, a thin-client, platform-independent solution designed to allow
simultaneous access to Java and legacy applications. The Company was founded in
January 1993, commenced operations in April 1993 and released its first product
in May 1993. In August 1995, the Company introduced its current flagship
product, TED. The Company's current products are based on certain technologies
licensed from Hewlett-Packard, Spyglass, Inc., SPYRUS and other technology
vendors. The Company's revenues are derived principally from two sources: (i)
license fees for the use of the Company's software products, and (ii)
maintenance agreements and software development contract revenues. To date,
substantially all of the Company's revenues have been attributable to sales of
the TED family of products and related services. The Company has not introduced
for commercial sale any products based on, or recognized any revenues from
license fees of, its SoftNC technology. Revenues from software licenses are
generally recognized upon shipment of software. Revenues from maintenance
agreements are recognized over the term of each contract, which generally is one
year. Software development contract revenues are recognized using the
percentage-of-completion method.
THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
Revenues
TriTeal's revenues are derived principally from license fees, maintenance
agreements and software development contracts. The Company's total revenues
increased to $4.7 million for the three months ended December 31, 1996 from $1.8
million for the three months ended December 31, 1995. During the three months
ended December 31, 1996, two of the Company's customers/resellers, Sylvest
Management and IBM, accounted for 42% and 32% of revenues, respectively. License
fees increased to $4.3 million for the three months ended December 31, 1996 from
$1.6 million for the three months ended December 31, 1995. During the three
months ended December 31, 1996 and 1995, license fees aggregated 90% and 88% of
total revenues, respectively. This increase in license fees was due primarily to
increased market acceptance of
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the Company's existing products, introduction of enhanced and new products and
expansion of the Company's direct sales force. Maintenance and services
revenues, which also include revenues derived from software development
contracts, increased to $453,000 for the three months ended December 31, 1996
from $226,000 for the three months ended December 31, 1995. Maintenance, which
consists primarily of technical support, increased to $453,000 for the three
months ended December 31, 1996 from $200,000 for the three months ended December
31, 1995. The increase in maintenance revenues was due primarily to additional
maintenance agreements associated with a larger installed base of customers. The
Company does not anticipate receiving a significant amount of revenues from
software development contracts in the future; however, it may enter into such
contracts in special situations where the technology may allow the Company to
introduce new products, penetrate new markets or establish strategic
relationships.
Cost of Revenues
The Company's total cost of revenues increased to $1.0 million for the three
months ended December 31, 1996 from $399,000 for the three months ended December
31, 1995. As a percentage of revenues, gross profit was 78% for the three months
ended December 31, 1996 and 1995. There can be no assurance that gross margins
will remain at this level in the future. The cost of license fees, which
consists primarily of third-party royalties for licensed technology and media
and documentation, increased to $847,000 for the three months ended December 31,
1996 from $318,000 for the three months ended December 31, 1995. The increase in
the cost of license fees was due principally to a higher volume of sales of
licenses. The cost of maintenance and services, which consists primarily of
labor and services, increased to $182,000 for the three months ended December
31, 1996 from $82,000 for the three months ended December 31, 1995. The increase
in the cost of maintenance and services was due primarily to the increase in the
number of customer support and development personnel and related overhead costs
necessary to support a larger installed customer base, product upgrades and
development activities, offset in part by the decrease in revenue from software
development contracts.
Research and Development
Research and development expenses include expenses associated with the
development of new products, enhancements of existing products and quality
assurance activities. These expenses consist principally of personnel costs,
overhead costs relating to occupancy, equipment depreciation and supplies. In
accordance with Statement of Financial Accounting Standards No. 86, development
costs incurred in the research and development of new software products and
enhancements to existing software products are expensed as incurred until
technological feasibility in the form of a working model has been established.
To date, the Company's software development has been completed concurrent with
the establishment of technological feasibility and, accordingly, no costs have
been capitalized. Research and development expenses decreased to $643,000 for
the three months ended December 31, 1996 from $1.1 million for the three months
ended December 31, 1995. The decrease in research and development expenses was
primarily attributable to a $600,000 non-recurring charge in 1995 for in-process
technology, offset in large part by increased costs associated with both
additional headcount as well as expanded research and development efforts in the
current quarter. The Company believes that a significant level of
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investment for product development is required to remain competitive and,
accordingly, the Company anticipates that, for the foreseeable future, these
expenses will continue to increase in absolute dollars.
Selling, General and Administrative
Selling, general and administrative expenses consist primarily of
salaries, commissions and bonuses, promotional expenses and occupancy costs.
Selling, general and administrative expenses increased to $3.1 million for the
three months ended December 31, 1996 from $2.1 million for the three months
ended December 31, 1995. The increase in selling, general and administrative
expenses was due primarily to sales commissions and bonuses associated with
increased sales volume, additional promotional activities, the hiring of
additional sales and marketing personnel and, to a lesser degree, increased
administrative personnel and occupancy costs.
The Company believes that selling, general and administrative expenses
will increase in absolute dollar amounts as the Company expands its sales,
marketing and administrative staff, adds infrastructure and incurs additional
costs related to being a public company.
Interest Income (Expense), Net
Interest income (expense), net, represents interest earned on the
Company's cash, cash equivalents and short-term investments, offset in part by
interest expense on the Company's borrowings, principally its equipment loan.
Interest income was $340,000 for the three months ended December 31, 1996,
compared to interest expense of $3,500 for the three months ended December 31,
1995. This increase was attributable to earnings on the proceeds from the
Company's initial public offering.
NINE MONTHS ENDED DECEMBER 31, 1996 AND 1995
Revenues
The Company's total revenues increased to $11.1 million for the nine
months ended December 31, 1996 from $4.4 million for the nine months ended
December 31, 1995. During the nine months ended December 31, 1996, two of the
Company's customers/resellers, IBM and Sylvest Management, accounted for 50% and
24% of revenues, respectively. License fees increased to $9.7 million for the
nine months ended December 31, 1996 from $3.2 million for the nine months ended
December 31, 1995. During the nine months ended December 31, 1996 and 1995,
license fees aggregated 87% and 73% of total revenues, respectively. This
increase in license fees was due primarily to increased market acceptance of the
Company's existing products, introduction of enhanced and new products and
expansion of the Company's direct sales force. Maintenance and services
revenues, which also include revenues derived from software development
contracts, increased to $1.5 million for the nine months ended December 31, 1996
from $1.2 million for the nine months ended December 31, 1995. Maintenance,
which consists primarily of technical support, increased to $1.2 million for the
nine months ended December 31, 1996 from $504,000 for the nine months ended
December 31, 1995. The increase in maintenance revenues was due primarily to
additional maintenance agreements associated with a larger installed base of
customers.
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Cost of Revenues
The Company's total cost of revenues increased to $2.3 million for the nine
months ended December 31, 1996 from $1.2 million for the nine months ended
December 31, 1995. As a percentage of revenues, gross profit increased to 79%
for the nine months ended December 31, 1996 from 72% for the nine months ended
December 31, 1995. The increase in gross margin was a result of the shift in
revenue mix to software license revenues, which typically have higher gross
margins, as well as lower average third-party royalty rates. The cost of license
fees increased to $1.9 million for the nine months ended December 31, 1996 from
$903,000 for the nine months ended December 31, 1995. The increase in the cost
of license fees was due principally to a higher volume of sales of licenses. The
cost of maintenance and services increased to $448,000 for the nine months ended
December 31, 1996 from $325,000 for the nine months ended December 31, 1995. The
increase in the cost of maintenance and services was due primarily to the
increase in the number of customer support and development personnel and related
overhead costs necessary to support a larger installed customer base, product
upgrades and development activities.
Research and Development
Research and development expenses decreased to $1.7 million for the nine
months ended December 31, 1996 from $1.8 million for the nine months ended
December 31, 1995. The decrease in research and development expenses was
primarily attributable to a $600,000 non-recurring charge in 1995 for in-process
technology, offset in large part by increased costs associated with both
additional headcount as well as expanded research and development efforts during
the nine months ended December 31, 1996.
Selling, General and Administrative
Selling, general and administrative expenses increased to $8.6 million for
the nine months ended December 31, 1996 from $5.7 million for the nine months
ended December 31, 1995. The increase in selling, general and administrative
expenses was due primarily to sales commissions and bonuses associated with
increased sales volume, additional promotional activities, the hiring of
additional sales and marketing personnel and, to a lesser degree, increased
administrative personnel and occupancy costs.
Interest Income (Expense), Net
Interest income (expense), net, represents interest earned on the Company's
cash, cash equivalents and short-term investments, offset in part by interest
expense on the Company's borrowings, principally its equipment loan. Interest
income was $494,000 for the nine months ended December 31, 1996, compared to
interest expense of $17,000 for the nine months ended December 31, 1995. This
increase was attributable to earnings on the proceeds from the Company's initial
public offering in August 1996.
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FACTORS AFFECTING OPERATING RESULTS
The Company has experienced significant fluctuations in its revenues and
operating results from quarter to quarter and anticipates that it will continue
to experience such quarterly fluctuations. The Company's revenues and operating
results have generally been higher in the fourth fiscal quarter than in any
preceding quarter of each fiscal year and lower in the first fiscal quarter, due
largely, the Company believes, to the effect of the Company's incentive sales
compensation plans. There can be no assurance, however, that such patterns of
operating results will be repeated in the future. In addition, the Company's
sales are made predominantly in the third month of each fiscal quarter and tend
to be concentrated in the latter half of that third month. Moreover, the
Company's sales generally reflect a relatively high average of revenues per
order. Accordingly, the Company's quarterly results of operations are difficult
to predict, and delays in product delivery or in closings of sales near the end
of a quarter, or the loss of individual orders, could cause quarterly revenues
to fall substantially short of anticipated levels and, to a greater degree,
adversely affect profitability. Factors that may contribute to such
fluctuations, in addition to incentive compensation plans, include seasonal
factors, such as the fiscal year ends of the government and other customers and
reduction in the European business during summer months; the number of new
orders and product shipments; the size and timing of individual orders; the
timing of introduction of products or product enhancements by the Company, the
Company's competitors or other providers of hardware, software and components
for the Company's market; competition and pricing in the software industry;
market acceptance of new products; reduction in demand for existing products and
shortening of product life cycles as a result of new product introductions by
competitors; product quality problems; customer order deferrals in anticipation
of new products; changes in customer budgets; changes in operating expenses;
changes in Company strategy; personnel changes; changes in foreign currency
exchange rates; changes in mix of products sold; and changes in general economic
conditions.
The Company's software products generally are shipped as orders are
received, and revenues are recognized upon shipment of the products, provided no
significant vendor obligations exist and collection of the related receivable is
deemed probable. The Company typically enters each fiscal quarter with a low
backlog and, as a result, software license revenues in any quarter are
substantially dependent on orders booked and shipped in that quarter. Because
the Company's operating expenses are based on anticipated revenue trends and
because a high percentage of the Company's expenses are relatively fixed, a
delay in the recognition of revenue from a limited number of license
transactions could cause significant variations in operating results from
quarter to quarter and could result in losses substantially in excess of
anticipated amounts. To the extent such expenses precede, or are not
subsequently followed by, increased revenues, the Company's operating results
would be materially and adversely affected. As a result of the foregoing
factors, among others, revenues for any quarter are subject to significant
variation, and the Company believes that period-to-period comparisons of its
results of operations should not be relied upon as indications of future
performance. Fluctuations in operating results may also result in volatility in
the price of the Company's Common Stock in the public market. Due to all of the
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foregoing factors, among others, it is likely that, from time to time in the
future, the Company's results of operations would be below the expectations of
public market analysts and investors.
The Company's business is subject to a number of other significant risks
including, but not limited to, its limited operating history and history of
operating losses (including an accumulated deficit of $5.6 million at December
31, 1996); its dependence on certain strategic relationships and third-party
technology licenses; the concentration of the Company's customers among
enterprises supporting UNIX operating systems; its dependence on the growth of
the desktop and client/server market and the continuation of heterogeneous
operating environments; the relatively small number of customers that have
historically accounted for a significant percentage of the Company's revenues;
the Company's dependence on indirect channel partners; the concentration of its
product line on the TED family of products and services; the risks associated
with rapidly changing technology and evolving standards, international
operations and sales to departments and agencies of the U.S. Government;
substantial competition in the Company's markets (including competitors and
potential competitors with significantly greater resources than the Company);
the Company's dependence on proprietary technology and other risks common to
emerging growth, high technology software companies as well as other factors
discussed herein.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, the Company had $21.9 million in cash, cash
equivalents and short-term investments, representing 73% of total assets. The
Company has a $3 million revolving bank credit facility which expires on October
30, 1997. Borrowings are secured by substantially all Company assets and bear
interest at the bank's prime rate (8.25% at December 31, 1996). At December 31,
1996, no amounts were outstanding borrowings under the facility.
As of December 31, 1996, the Company's principal commitments consisted of
obligations under operating leases, aggregating $728,000, and the Company had no
material commitments for capital expenditures.
The Company's operations to date have required substantial amounts of
capital. The Company expects to spend substantial funds to support the growth of
its products, to add enhancements and additional applications to its products
and to expand internationally. The Company's capital requirements will depend on
numerous factors, including the progress of the Company's research and
development programs, the commercial acceptance of its products, the resources
the Company devotes to advanced technologies and the demand for its products.
The Company believes that the its existing cash and investments, together with
its available credit facilities, will be sufficient to meet its anticipated cash
needs for working capital, capital expenditures and business expansion for at
least the next 12 months. The estimate of the period for which the Company
expects its available cash balances and credit facilities to be sufficient to
meet its capital requirements is a forward-looking statement that involves risks
and uncertainties as set forth herein and under the caption "Risk Factors" in
the Registration Statement.
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PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A) EXHIBITS:
10.1 Imperial Bank Revolving Line of Credit, dated
November 18, 1996
11.1 Statement Regarding Calculation of Net Income (Loss)
Per Share
27.1 Financial Data Schedule
B) REPORTS ON FORM 8-K:
No reports on Form 8-K were filed by the Company during the
three months ended December 31, 1996.
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.
TRITEAL CORPORATION
Date: February 12, 1997 /s/ Jeffrey D. Witous
---------------------- -------------------------------------------
Jeffrey D. Witous
President, Chief Executive Officer and
Chairman of the Board
Date: February 12 , 1997 /s/ Arthur S. Budman
---------------------- -----------------------------------------
Arthur S. Budman
Chief Financial Officer and Director
(Principal financial and accounting
officer)
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