FORM 10-Q
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
________________________________________
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 1998
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ___________ to _____________
Commission File Number: 0-18280
PULSEPOINT COMMUNICATIONS
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(Exact name of Registrant as specified in its charter)
California 95-3222624
- --------------------------------- ---------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6307 Carpinteria Avenue, Carpinteria, California 93013
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(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code (805) 566-2000
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Not Applicable
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(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether 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 twelve 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 outstanding of Registrant's common stock as of October
28, 1998 was 5,213,927.
PULSEPOINT COMMUNICATIONS
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TABLE OF CONTENTS
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Page Number
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of September 30, 1998 3
and December 31, 1997
Consolidated Statements of Operations for the 4
Three months and Nine months ended
September 30, 1998 and September 30, 1997
Consolidated Statements of Cash Flows for the 5
Nine months ended September 30, 1998
and September 30, 1997
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of 9
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal proceedings 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
2
PART I - FINANCIAL INFORMATION
PULSEPOINT COMMUNICATIONS
-------------------------
CONSOLIDATED BALANCE SHEET
--------------------------
(In thousands, except share data)
September 30, December 31,
1998 1997
-------------- -------------
Unaudited
ASSETS
Current assets:
Cash and cash equivalents $ 13,764 $ 20,973
Accounts receivable, less allowance for doubtful accounts of $717
and $527 at September 30, 1998 and December 31, 1997, respectively 6,058 4,111
Inventories, net 5,993 3,876
Other current assets 268 169
-------- --------
Total current assets 26,083 29,129
Property and equipment:
Computers and other equipment 10,142 9,504
Furniture and fixtures 1,006 999
Leasehold improvements 1,469 1,357
-------- --------
Total property and equipment 12,617 11,860
Less accumulated depreciation and amortization (8,387) (6,776)
-------- --------
Net property and equipment 4,230 5,084
Other assets:
Investment securities 1,086 1,030
Other assets 1,432 2,198
-------- --------
Total other assets 2,518 3,228
-------- --------
Total assets $ 32,831 $ 37,441
======== ========
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Short term debt $ 4,149 $ 1,581
Shareholder notes payable -- 6,613
Accounts payable 4,302 3,532
Accrued payroll and related 3,017 3,102
Other accrued liabilities 2,462 2,170
-------- --------
Total current liabilities 13,930 16,998
Other liabilities 1,052 --
Shareholders' equity:
Preferred stock, 15,000,000 shares authorized:
Series B, no par value, 3,333,334 and 2,451,667 shares issued and
outstanding at September 30, 1998 and December 31, 1997,
respectively 24,723 18,110
Common stock, no par value - 50,000,000 shares authorized,
5,213,927 and 5,140,398 shares issued and outstanding
at September 30, 1998 and December 31, 1997, respectively 69,489 69,205
Accumulated deficit (76,363) (66,872)
-------- --------
Total shareholders' equity 17,849 20,443
-------- --------
Total liabilities & shareholders' equity $ 32,831 $ 37,441
======== ========
See accompanying notes
3
PULSEPOINT COMMUNICATIONS
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CONSOLIDATED STATEMENT OF OPERATIONS
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(In thousands, except per share data)
Three Months Ended Nine Months Ended
------------------ -----------------
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
-------------- -------------- -------------- --------------
(Unaudited)
Net sales $ 7,195 $ 5,890 $ 18,238 $ 14,317
Cost of sales 3,388 3,241 9,142 7,281
--------- --------- --------- ----------
Gross margin 3,807 2,649 9,096 7,036
Selling, general and administrative 3,799 4,481 11,085 12,304
Engineering and development 2,861 3,261 8,039 8,379
--------- --------- --------- ----------
6,660 7,742 19,124 20,683
--------- --------- --------- ----------
Income (loss) from operations (2,853) (5,093) (10,028) (13,647)
Interest and other income 143 4 537 244
--------- --------- --------- ----------
Income (loss) before provision for income taxes (2,710) (5,089) (9,491) (13,403)
Provision for income taxes: -- -- -- --
--------- --------- --------- ----------
Net income (loss) $ (2,710) $ (5,089) $ (9,491) $ (13,403)
========= ========= ========= ==========
Net income (loss) per common and common
equivalent share $ (.52) $ (1.00) $ (1.83) $ (2.64)
Weighted average common and common
equivalent shares outstanding 5,214 5,097 5,176 5,079
========== ========= ========= ==========
See accompanying notes
4
PULSEPOINT COMMUNICATIONS
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CONSOLIDATED STATEMENT OF CASH FLOWS
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(In thousands)
Nine Months Ended
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September 30, September 30,
1998 1997
---------- ----------
(Unaudited)
Cash flows from operating activities:
Net income $ (9,491) $ (13,403)
Adjustments to reconcile net income to
net cash provided (used) by operations:
Depreciation and amortization 2,427 1,327
Provision for loss on inventory 202 160
Provision for allowance for bad debt 225 80
Changes in operating assets and liabilities: --
Accounts receivable (1,608) 76
Inventories (2,318) (2,441)
Other current assets (74) 69
Investment securities (56) (1,775)
Other assets
Accounts payable 745 1,772
Accrued payroll and related (85) 883
Other accrued liabilities (272) 180
Other liabilities 1,052 --
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Net cash used by operating activities (9,253) (13,072)
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Cash flows from investing activities:
Additions to property and equipment (807) (2,327)
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Net cash used in investing activities (807) (2,327)
Cash flows from financing activities:
Net proceeds from line of credit 2,568 --
Net proceeds from issuance of common stock 283 107
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Net cash provided from financing activities 2,851 107
Net decrease in cash and cash equivalents (7,209) (15,292)
Cash and cash equivalents at beginning of period 20,973 18,187
--------- ----------
Cash and cash equivalents at end of period $ 13,764 $ 2,895
========= ==========
See accompanying notes
5
PULSEPOINT COMMUNICATIONS
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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SEPTEMBER 30, 1998
------------------
(Unaudited)
NOTE 1. General
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All interim financial data is unaudited, but in the opinion of PulsePoint
Communications (the "Company") such unaudited statements include all
adjustments, consisting of normal recurring accruals, necessary for a fair
presentation of the results for the interim periods. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission. Nevertheless, the Company believes that the disclosures in these
financial statements are adequate to make the information presented not
misleading.
The results of operations for the current interim period are not necessarily
indicative of results to be expected for the current year.
Revenue recognition. Generally sales are recognized when products are
shipped or when services are performed. Warranty costs are accrued at the time
of sale. Revenue from sales of extended warranties is accounted for as deferred
revenue and recognized into income over the warranty or maintenance period.
In October 1997, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) 97-2, "Software Revenue Recognition"
("SOP 97-2"). SOP 97-2 establishes standards relating to the recognition of all
aspects of software revenue. SOP 97-2 is effective for transactions entered
into in fiscal years beginning after December 15, 1997. The Company adopted the
provisions of SOP 97-2 as of March 31, 1998. The adoption had no effect on the
financial statements.
Principles of consolidation. In September 1998, the names of the
corporation's wholly-owned subsidiaries DGSD Malaysia and Digital Sound
International Corporation were changed, respectively, to PulsePoint
Communications Malaysia Corporation and PulsePoint Communications International
Corporation. The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries, as noted above. All significant
intercompany transactions and balances have been eliminated.
Short term investments. The Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" ("SFAS 115"). The Company adopted
the provisions of SFAS 115 for investments held as of December 31, 1995. The
adoption had no effect on the financial statements. Short term investments
(principally commercial paper and discount notes with maturity dates generally
within 90 days that are considered cash equivalents) are classified as "held to
maturity" based on the Company's positive intent and ability to hold the
securities until maturity. The securities are presented at amortized cost which
approximates fair value. Amortization and interest on securities classified as
"held to maturity" are included in investment income.
Cash and cash equivalents. The Company considers as cash equivalents only
those investments that are short-term, highly liquid, readily convertible to
cash, and so near their maturity that they present insignificant risk of changes
in value because of changes in interest rates. The Company classifies as cash
equivalents only those investments with maturities of three months or less.
Reclassification. Certain data in the 1997 financial statements have been
reclassified to conform to the 1998 presentation.
6
Reverse Stock Split. All share and per share information in the accompanying
consolidated financial statements and notes thereto has been retroactively
adjusted to reflect a one-for-four reverse stock split approved on April 10,
1998 by the Company's shareholders, effective April 20, 1998.
These financial statements should be read in conjunction with the financial
statements and the notes thereto included in the Company's Form 10-K for the
fiscal year ended December 31, 1997, as filed with the Securities and Exchange
Commission.
NOTE 2. Inventories
- --------------------
Inventories are stated at the lower of standard cost (which approximates the
first-in, first-out method) or market:
September 30, December 31,
1998 1997
------------- -------------
(Unaudited)
Raw materials and purchased parts $ 2,198 $ 2,077
Work in process 2,843 1,521
Finished goods 952 278
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$ 5,993 $ 3,876
============= =============
NOTE 3: Debt
- -------------
The Company's Security and Loan Agreement (the "Credit Line") with Imperial
Bank was due to mature on June 30, 1998. In order to provide sufficient time to
negotiate and document a renewal of the Credit Line, the Company received
extensions of this maturity date to September 21, 1998. On September 19, 1998,
the Company renewed its Security and Loan Agreement to February 26, 1999.
On September 29, 1998, the Company received a commitment from Transamerica
Business Credit Corporation ("Transamerica") to provide the Company with a Term
Loan in the amount of $3.0 million secured by certain of the assets of the
Company (the "Term Loan"). Each funding under the Term Loan will be for a
period of 36 months with equal monthly repayments of approximately 3.4% of the
amount funded. As additional incentive to enter into the Term Loan, the Company
also provided warrants to purchase 92,308 shares of the Company's common stock
at a price of $3.25 per share, the closing price on the date of the commitment.
At September 30, 1998 there were no borrowings under the Term Loan.
In anticipation of closing the Term Loan, Imperial Bank agreed to provide
$2.0 million of additional availability under the limits and terms of the Credit
Line. As such, at September 30, 1998 the total amount drawn on the Credit Line
was $4.1 million, including the $2.0 million additional availability. On
October 16th, the $2.0 million additional availability was repaid to Imperial
Bank. On November 10, 1998, the Company signed the Term Loan agreement. The
Company expects to draw at least $2.0 million under the Term Loan by December
31, 1998.
7
NOTE 4: Equity
- ---------------
Common and Common Equivalent Stock.
-----------------------------------
At September 30, 1998, there were 5,213,927 shares of the Company's Common
Stock outstanding and 9,958,393 shares of common stock equivalents, as follows:
Number of Common and
Common Equivalent Shares
------------------------
(A) Common Stock Outstanding at 9/30/98 5,213,927
(B) Conversion of Series B Convertible Preferred Stock 8,333,336
(C) Options Granted - 1983 Stock Option Plan 1,463,657
(D) Options Granted - Directors' Stock Option Plan 61,400
(E) Warrants 100,000
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Additional shares issuable 9,958,393
----------
Total Potential Shares of Common Stock 15,172,320
==========
(A) Number of shares of Common Stock outstanding at September 30, 1998.
(B) Shares of Common Stock issuable upon conversion of the Company's Series B
Convertible Preferred Stock outstanding at September 30, 1998.
(C) Number of shares of Common Stock issuable pursuant to options granted under
the Company's 1983 Stock Option Plan (assuming full vesting).
(D) Number of shares of Common Stock issuable pursuant to options granted under
the Company's Directors' Option Plan (assuming full vesting).
(E) Warrants to purchase 100,000 shares of the Company's Common Stock issued to
Imperial Bank. Does not include warrants to purchase 92,308 shares of the
Company's common stock which the Company has agreed to issue to
Transamerica Business Credit Corporation nor warrants to purchase 29,000
shares of the Company's common stock issueable to NextLink Communications,
Inc.
Reverse Split of Common Stock
- -----------------------------
On April 10, 1998, the Company's Shareholders approved and on April 20, 1998,
the Company effected a 1 for 4 reverse split of the Company's Common Stock. In
accordance with SAB 83, the financial statements and footnote disclosure
reflects the reverse stock split for all reporting periods. In addition, the
calculation of earnings (loss) per share has given effect to the reverse stock
split.
NOTE 5. Per Share Information
- ------------------------------
Earnings (loss) per common and common equivalent share are computed based
upon the weighted average number of outstanding shares of common stock and
common stock equivalents. Antidilutive common stock equivalents were excluded
from this calculation for the periods in which a loss was incurred.
8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Results of Operations
- ---------------------
Three Months Ended September 30, 1998 Compared to Three Months Ended September
- ------------------------------------------------------------------------------
30, 1997
- --------
Net sales increased 22.0% from $5.9 million in 1997 to $7.2 million in 1998.
Consistent with the Company's focus on the Voice Information Services ("VIS")
market, sales to network service providers accounted for approximately 85% of
the total sales while sales into the Customer Premise Equipment ("CPE") market
represented the remaining 15% of the total sales as compared to 76% and 24% of
sales for VIS and CPE during the same period in 1997, respectively.
Gross margin as a percentage of net sales increased to 52.9% in the 1998
period as compared to 45.0% for the same period in 1997. The gross margin
improvement resulted from higher production volumes which allow for the wider
spreading of fixed costs, coupled with an increase in the number of larger
system sales.
Throughout 1998, the Company has effectively managed and controlled operating
expenses by instituting various cost efficiency measures. As a result, selling,
general and administrative expenses decreased from $4.5 million in 1997 to $3.8
million in 1998. Combining the impact of the cost efficiency measures with the
higher volume in net sales resulted in lower selling, general and
administrative expenses as a percentage of sales (52.8%) in 1998 as compared to
1997 (76.1%).
Similar cost management and control measures have been applied to engineering
and development expenses which decreased from $3.3 million in 1997 to $2.9
million in 1998. As a result of the decrease in spending for engineering
development in 1998 and the higher volume in net sales, engineering and
development expenses were lower as a percentage of sales in 1998 (39.8%) as
compared to 1997 (55.4%).
There was no provision for income taxes in the third quarter of 1998 due to
the loss from operations.
As a result of the above, the Company's net loss for the three months
improved by 46.7%, from a net loss of $5.1 million for the quarter ending at
September 30, 1997 to a $2.7 million net loss for the comparable period this
year.
Nine months ended September 30, 1998 Compared to Nine months ended September 30,
- --------------------------------------------------------------------------------
1997
- ----
Net sales increased 27.3% from $14.3 million in 1997 to $18.2 million for the
first nine months of 1998. Again, consistent with the Company's focus on the
VIS market, sales to network service providers accounted for approximately 83%
of the total sales while sales into the CPE market represented the remaining 17%
of the total sales as compared to 74% and 26% of sales for VIS and CPE during
the same period in 1997, respectively.
Gross margin as a percentage of net sales increased to 49.9% in the 1998
period as compared to 49.1% for the same period in 1997. The gross margin
improvement is attributed to higher production volumes which allow for the wider
spreading of fixed costs, coupled with an increase in the number of larger
system sales. During the second quarter of 1998, the Company established a
reserve to allow for certain of the Company's products sold to be potentially
traded-in for new products, when generally available. The allowance to
establish this reserve was recognized in Cost of Goods Sold and was the primary
cause of a lower overall gross margin. The reserve balance at September 30,
1998 was $1.1 million.
As noted earlier, throughout 1998 the Company has effectively managed and
controlled operating expenses by instituting various cost efficiency measures.
As a result, selling, general and administrative expenses decreased from $12.3
million in 1997 to $11.1 million in 1998 as the Company instituted cost control
measures company-wide. As a result of these cost efficiency measures and the
higher volume of net sales,
9
selling, general and administrative expenses were lower as a percentage of sales
(60.8%) in 1998 as compared to 1997 (85.9%).
Similarly, engineering and development expenses decreased from $8.4 million
in 1997 to $8.0 million in 1998. As a result of this decrease and higher volume
in net sales, engineering and development expenses were lower as a percentage of
sales in (44.1%) as compared to 1997 (58.5%).
There was no provision for income taxes for the nine months ended September
30, 1998 due to the loss from operations.
As a result of the above, the Company's net loss for the nine months improved
by 29.1% from a net loss of $13.4 million for the 9 months ending at September
30, 1997 to a $9.5 million net loss for the comparable period this year.
Factors That May Affect Future Results
- --------------------------------------
The Company operates in a rapidly changing environment that involves a number
of risks, some of which are beyond the Company's control. These risks are
discussed in the Company's 1997 Annual Report to Shareholders and incorporated
by reference to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997.
For the past several years, the Company has relied upon sales and services
related to its VoiceServer family of products. In February 1998, the Company
introduced its new product line, the PulsePoint Enhanced Application Platform
("EAP"). The EAP is a carrier-grade, internet-ready open-system enhanced
services solution based on Microsoft Windows NT Server. It is designed for the
messaging needs of small- to large-sized network service providers and
resellers. Its architecture supports a wide variety of port capacities from
tens to thousands of ports.
In July 1998, the Company announced the renewal of its multi-year contract
with GTE. As part of that renewal, GTE provided a $50 million minimum purchase
commitment, subject to the Company meeting certain delivery milestones. Also in
July 1998, the Company announced that one of those milestones had been missed
and as such, GTE now has the option of choosing to reduce, cancel, or maintain
the purchase commitment clause within the overall contract. Through November
12, 1998, no action has been taken to modify the purchase commitment clause.
The Company also announced in July 1998 that the EAP was in integration testing
and standardization at GTE with a goal of initial deployment beginning later
this year. The Company continues to maintain its goal of initial deployment with
GTE or other customers in late 1998, although there can be no assurance that
this goal will be achieved.
Though demand for the Company's VoiceServer product lines remains strong, the
Company's management believes that future sales will depend largely upon the
successful completion, standardization, and build-out of the EAP product line.
There can, however, be no assurance that this goal will be achieved.
The Company's strategy has been to develop new technology and to expand its
marketing capabilities, with the goal of creating successful new products and
marketing them effectively, thereby returning the Company to profitability. The
Company's ongoing investments in technology and marketing require funds and the
Company's financial resources are limited so that the Company's funds will be
exhausted if the Company is unsuccessful in creating, developing, and marketing
new products such as the EAP product line and is unable to raise additional
working capital.
Year 2000 Update
- ----------------
Certain computer programs and embedded computer chips are unable to
distinguish between the year 1900 and the year 2000 (the "Year 2000 Problem").
The Company has undertaken a comprehensive program to address the effects of the
Year 2000 Problem on its products and systems ("The Program"). The Program
addresses the Year 2000 Problem as it impacts the Company in three distinct
areas: (1) the Company's
10
products; (2) the Company's internal systems; and (3) third parties with which
the Company has material relationships.
The Company sold certain equipment prior to 1992 which may still be in
service but which the Company no longer has commitments to support and as such,
the Company does not believe it has any responsibility to remediate the Year
2000 Problem with regard to these particular systems. Though the Company does
not anticipate receiving any requests for such remediation, there can be no
assurance that these claims will not occur.
The Company believes that its current products are either Year 2000 compliant
or that Year 2000 compliant solutions are available for the products. Although
the Company has not received any customer complaints, there can be no assurance
that such complaints will not be received. The Company has also been developing
a new product line, and any new products the Company releases are being designed
to be Year 2000 compliant.
In 1997, the Company replaced its primary internal accounting, manufacturing,
and inventory systems with a new system which the vendor warrants is Year 2000
compliant. The Company is approximately 60% complete with its testing of other
internal systems and imbedded processors. These include, among many others, the
Company's payroll, internal networking, engineering development, and office
security systems. The Company plans to complete testing of the remaining 40% and
to have repaired or replaced any systems found to be non-Year 2000 compliant by
June 30, 1999.
The Program has identified third parties with which the Company has material
relationships. To date, approximately 30% of these third parties have responded
to the Company's queries regarding their Year 2000 compliance and, to date, none
of these third parties have disclosed any material risk to the Company. The
Company currently plans to have received responses from the remaining 70% by
June 30, 1999. In many cases, the Company is not in a position to confirm
independently the accuracy of the information reported by these third parties.
If any of these third parties remain non-Year 2000 compliant, it could have
material adverse effects upon the operations of the Company.
The Company expects the total cost of The Program to be approximately $0.8
million. To date, the Company has incurred approximately $0.5 million of these
costs. Should the Company encounter unexpected problems in any area of
compliancy with the Year 2000 Problem, this amount could be substantially
increased. The Company currently plans to have The Program completed not later
than June 30, 1999, which is prior to any anticipated impact on the Company's
operating systems. While the Company does not expect the Year 2000 Problem to
cause any significant operational problems, there can be no assurance that such
problems will not occur. As part of The Program, the Company is working to
develop the most reasonably likely worst case scenario after which the Company
will develop a contingency plan. The anticipated completion date for this is
June 30, 1999.
Liquidity and Capital Resources
- -------------------------------
For the nine months ended September 30, 1998, net working capital increased
by $0.1 million to $12.2 million compared to $12.1 million at December 31, 1997.
The increase in net working capital resulted principally from an increase in
accounts receivable of $1.9 million, an increase in inventory of $2.1 million,
an increase in the amounts borrowed under the Company's credit line of $2.6
million, and an increase in accrued liabilities of $1.0 million offset by a
decrease in cash of $7.2 million. In April 1998, the $6.6 million of
shareholder notes were converted to 881,667 shares of the Company's Series B
Convertible Preferred Stock. (See note 9 to the Company's financial statements
included in the Company's 1997 Annual Report to Shareholders and in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1997.)
11
At September 30, 1998, the Company had cash and cash equivalents of
$13.8 million. Through September 30, 1998 capital expenditures were $0.8
million. The Company has never paid any cash dividends on its stock and
anticipates that, for the foreseeable future, it will continue to retain any
earnings for use in the operation of its business.
The Company's cash and cash equivalents balance has declined by
approximately $7.2 million during the first nine months of 1998. The Company's
level of sales during the three quarters of 1998 has been insufficient to
generate net cash from operations. If the Company's sales were to increase
substantially in response to heightened demand for the Company's new products,
the Company initially would be required to increase its outlays to meet such
demand. As a result, the Company expects its operations to continue to use net
cash, and the Company may be required to seek additional debt or equity
financings during the coming quarters. There can be no assurance that the
Company will be able to consummate debt or equity financings in a timely manner
on a basis favorable to the Company, or at all.
PART II - OTHER INFORMATION
---------------------------
PULSEPOINT COMMUNICATIONS
-------------------------
Item 1. Legal Proceedings
As reported in Note 11 to the Company's financial statements included
in the Company's 1997 Annual Report to Shareholders and incorporated by
reference in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, the Company is involved in patent litigation with Theis
Research, Inc. ("Theis"). This action was stayed pending resolution of Theis'
patent infringement action against Octel Communications Corporation (now a
division of Lucent Technologies) and Northern Telecom Inc. In 1997, the U.S.
Court of Appeals affirmed a district court's decision that the claims of the
five patents Theis asserted against both Octel and Northern Telecom were each
either invalid, not infringed or both. Theis' writ of certiorari to the U.S.
Supreme Court was denied on June 26, 1998, exhausting Theis' appeals. On
September 29, 1998, the district court has now entered a judgment that the
claims of a sixth patent asserted against Northern Telecom are invalid. Theis
filed a notice of appeal to the U.S. Court of Appeals for the Federal Circuit on
October 29, 1998. The action should remain stayed with respect to the Company at
least until this appeal is concluded.
Item 5. Other Information
New Securities and Exchange Commission ("SEC") rules regarding
shareholder proposals became effective on June 29, 1998. Pursuant to these new
rules, if the Company has not received notice on or before January 11, 1999 of
any matter a shareholder intends to propose for a vote at the 1999 Annual
Meeting of Shareholders, then a proxy solicited by the board of directors may be
voted on such matter in the discretion of the proxy holder, without a discussion
of the matter in the proxy statement soliciting such proxy and without such
matter appearing as a separate matter on the proxy card. As previously disclosed
in the Company's proxy statement for the annual meeting of shareholders held
earlier this year on April 10, 1998, a shareholder who wishes to include a
proposal and the shareholder's statement in support thereof in the Company's
proxy statement must send such material in accordance with SEC rules to the
Company at its principal executive offices for receipt no later than December
17, 1998.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a) Exhibits
10.2 Second Amendment to Security and Loan Agreement, Domestic
Credit and Addendum Thereto, between the Registrant and
Imperial Bank, dated as of September 11, 1998.
12
10.3 Second Amendment to Credit Terms and Conditions, between the
Registrant and Imperial Bank, dated as of September 11, 1998.
b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter for which
this report is filed.
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, on November 13, 1998.
PULSEPOINT COMMUNICATIONS
By: /s/ Mark C. Ozur
----------------------------------
Mark C. Ozur
President, Chief Executive Officer
By: /s/ B. Robert Suh
----------------------------------
B. Robert Suh
Vice President, Finance
and Chief Financial Officer
13