-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RltK68N6nuDVNWQI9B+g21DgDq0is4HDudVVWTQUSyFzLp/Ajb7Wed6k/TWKET/e l7+7e+qSo/YFQSlT7zc9Iw== 0000912057-99-006028.txt : 19991117 0000912057-99-006028.hdr.sgml : 19991117 ACCESSION NUMBER: 0000912057-99-006028 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INSIGNIA SOLUTIONS PLC CENTRAL INDEX KEY: 0001002390 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-27012 FILM NUMBER: 99754622 BUSINESS ADDRESS: STREET 1: 41300 CHRISTY ST CITY: FREMONT STATE: CA ZIP: 94538-3115 BUSINESS PHONE: 5103603700 MAIL ADDRESS: STREET 1: 41300 CHRISTY ST CITY: FREMONT STATE: CA ZIP: 94538-3115 10-Q 1 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999 OR, [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FROM THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER 0-27012 INSIGNIA SOLUTIONS PLC (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) ENGLAND AND WALES NOT APPLICABLE (State or other jurisdiction of (I.R.S. employer identification incorporation or organization) number) ---------------------- 41300 CHRISTY STREET THE MERCURY CENTRE, WYCOMBE LANE FREMONT WOOBURN GREEN CALIFORNIA 94538 HIGH WYCOMBE, BUCKS HP10 0HH UNITED STATES OF AMERICA UNITED KINGDOM (510) 360-3700 (44) 1628-539500 (ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES AND PRINCIPAL PLACES OF BUSINESS) 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 [ ] As of November 11, 1999, there were 12,944,313 Ordinary shares of L0.20 each nominal value, outstanding. INSIGNIA SOLUTIONS PLC PART 1 - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS: Condensed Consolidated Balance Sheet at September 30, 1999 and December 31, 1998 (Unaudited).............................3 Condensed Consolidated Statement of Operations for the three months and nine months ended September 30, 1999 and 1998 (Unaudited)...............................................4 Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 1999 and 1998 (Unaudited)..........5 Notes to Unaudited Condensed Consolidated Financial Statements...............................................6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...............................10 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK........21 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K..................................22 SIGNATURES ..................................................................23
Page 2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS INSIGNIA SOLUTIONS PLC CONDENSED CONSOLIDATED BALANCE SHEET (AMOUNTS IN THOUSANDS, UNAUDITED)
September 30, December 31, 1999 1998 -------------------- ------------------- ASSETS Current assets: Cash and cash equivalents $ 2,116 $ 6,798 Restricted cash 120 186 Cash and cash equivalents held in escrow 5,990 9,100 Accounts receivable, net of allowances of $131 and $1,449, respectively 314 1,706 Prepaid and other current assets 1,227 1,515 -------------------- ------------------- Total current assets 9,767 19,305 Property and equipment, net 716 1,074 Restricted cash 250 250 Other noncurrent assets 325 382 -------------------- ------------------- $ 11,058 $ 21,011 -------------------- ------------------- -------------------- ------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 582 $ 1,608 Accrued liabilities 1,529 2,265 Accrued royalties 2,040 4,309 Income taxes payable 478 994 Deferred revenue 2,284 262 Customer deposits 137 104 Capital lease obligations - 51 -------------------- ------------------- Total current liabilities 7,050 9,593 -------------------- ------------------- Contingencies (Note 6) Shareholders' equity: Preferred shares - - Ordinary shares 4,287 4,164 Additional paid-in capital 35,049 34,725 Accumulated deficit (34,867) (27,010) Cumulative currency translation adjustment (461) (461) -------------------- ------------------- Total shareholders' equity 4,008 11,418 -------------------- ------------------- $ 11,058 $ 21,011 -------------------- ------------------- -------------------- -------------------
See accompanying notes. Page 3 INSIGNIA SOLUTIONS PLC CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS, UNAUDITED)
Three months ended Nine months ended September 30, September 30, -------------------------------- ---------------------------------- 1999 1998 1999 1998 ---------------- --------------- ---------------- ---------------- Net revenues: License $ 1,672 $ 3,325 $ 5,270 $ 10,123 Service 82 295 299 813 ---------------- --------------- ---------------- ---------------- Total net revenues 1,754 3,620 5,569 10,936 ---------------- --------------- ---------------- ---------------- Cost of net revenues: License 658 2,154 2,573 6,308 Service 116 170 424 859 ---------------- --------------- ---------------- ---------------- Total cost of net revenues 774 2,324 2,997 7,167 ---------------- --------------- ---------------- ---------------- Gross profit 980 1,296 2,572 3,769 ---------------- --------------- ---------------- ---------------- Operating expenses: Sales and marketing 1,292 1,743 4,352 6,344 Research and development 1,459 1,407 4,477 4,593 General and administrative 822 794 2,325 3,229 ---------------- --------------- ---------------- ---------------- Total operating expenses 3,573 3,944 11,154 14,166 ---------------- --------------- ---------------- ---------------- Operating loss (2,593) (2,648) (8,582) (10,397) Interest income, net 101 263 357 772 Other income (expense), net (3) 6 (53) 14,837 ---------------- --------------- ---------------- ---------------- Income (loss) before income taxes (2,495) (2,379) (8,278) 5,212 Provision (benefit) for income taxes (465) (1,712) (421) 1,924 ---------------- --------------- ---------------- ---------------- Net income (loss) $ (2,030) $ (667) $ (7,857) $ 3,288 ---------------- --------------- ---------------- ---------------- ---------------- --------------- ---------------- ---------------- Net income (loss) per share: Basic $ (0.16) $ (0.05) $ (0.62) $ 0.27 ---------------- --------------- ---------------- ---------------- ---------------- --------------- ---------------- ---------------- Diluted $ (0.16) $ (0.05) $ (0.62) $ 0.27 ---------------- --------------- ---------------- ---------------- ---------------- --------------- ---------------- ---------------- Weighted average equivalent shares: Basic 12,853 12,164 12,775 12,118 ---------------- --------------- ---------------- ---------------- ---------------- --------------- ---------------- ---------------- Diluted 12,853 12,164 12,775 12,352 ---------------- --------------- ---------------- ---------------- ---------------- --------------- ---------------- ----------------
See accompanying notes. Page 4 INSIGNIA SOLUTIONS PLC CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (AMOUNTS IN THOUSANDS, UNAUDITED)
Nine months ended September 30, --------------------------------- 1999 1998 --------------- --------------- Cash flows from operating activities: Net income (loss) $ (7,857) $ 3,288 Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation 463 533 Other (63) (14,731) Net changes in assets and liabilities: Restricted cash 66 - Accounts receivable, net 1,392 4,168 Prepaid and other current assets 288 (81) Prepaid income taxes - 864 Other noncurrent assets 57 (416) Accounts payable (1,026) (519) Accrued liabilities (736) (144) Customer deposits 33 (498) Accrued royalties (2,269) (4,319) Deferred revenue 2,022 (559) Income taxes (516) 1,253 Noncurrent liabilities - 78 --------------- --------------- Net cash used in operating activities (8,146) (11,083) --------------- --------------- Cash flows from investing activities: Proceeds from sale of property and equipment 137 86 Purchases of property and equipment (179) (645) Purchases of short-term investments, net - 1,320 Proceeds from sale of product line - 15,862 Product line sale proceeds held in escrow (250) (9,000) Product line sale proceeds released from escrow 3,360 - --------------- --------------- Net cash provided by investing activities 3,068 7,623 --------------- --------------- Cash flows from financing activities: Payments made under capital leases (51) (80) Proceeds from issuance of shares, net 447 219 --------------- --------------- Net cash provided by financing activities 396 139 --------------- --------------- Net decrease in cash and cash equivalents (4,682) (3,321) Cash and cash equivalents at beginning of the period 6,798 10,641 --------------- --------------- Cash and cash equivalents at end of the period $ 2,116 $ 7,320 --------------- --------------- --------------- ---------------
See accompanying notes. Page 5 INSIGNIA SOLUTIONS PLC NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. BASIS OF PRESENTATION The condensed consolidated financial statements are unaudited. However, in the opinion of management, all adjustments (consisting only of normal recurring adjustments) which are necessary for a fair presentation of the financial position and results for the interim period have been included. The results of operations for the nine months ended September 30, 1999 are not necessarily indicative of the results to be expected for the entire fiscal year, which ends on December 31, 1999. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 1998 included in Insignia Solutions plc's ("Insignia") 1998 Annual Report and Form 10-K. NOTE 2. INCOME TAX PROVISION (BENEFIT) Insignia's benefit for income taxes for the three months and nine months ended September 30, 1999, primarily represents certain non-U.S. taxes offset against taxable profit, net of operating losses, arising upon the disposal of the Company's NTRIGUE product line in the prior year. Insignia accounts for income taxes under an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in Insignia's financial statements or tax returns. In estimating future tax consequences, Insignia generally considers all expected future events other than enactments of changes in the tax law or rates. NOTE 3. NET INCOME (LOSS) PER SHARE Net income (loss) per share is presented on a Basic and Diluted basis, and is based upon the weighted average number of ordinary and ordinary equivalent shares outstanding during the period. Ordinary equivalent shares consist of warrants and stock options (using the modified treasury stock method). Under the Basic method of calculating net income (loss) per share, ordinary equivalent shares are excluded from the computation. Under the Diluted method of calculating net income (loss) per share, ordinary share equivalents are excluded from the computation if their effect is anti-dilutive. NOTE 4. RECENT ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 133 "Accounting for Derivative Instruments and Hedging Activities" ("FAS 133"). FAS 133 establishes accounting and reporting standards for derivative instruments and for hedging activities. This statement becomes effective for all fiscal quarters of fiscal years beginning after June 15, 1999. In June 1999, the FASB issued Statement of Financial Accounting Standard No. 137 "Accounting for Derivative Instruments - Deferral of the Effect Page 6 Date of FAS Statement No. 133" ("FAS 137"). FAS 137 defers the effective date of FAS 133 until June 15, 2000. Insignia will adopt FAS 133 in 2001. Insignia expects the adoption of FAS 133 will not affect results of operations. In March 1998, the AICPA issued Statement of Position No. 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1 provides guidance on accounting for the costs of computer software developed or obtained for internal use and is effective for financial statements for fiscal years beginning after December 15, 1998. Insignia has adopted SOP 98-1 in 1999. The adoption of SOP 98-1 did not have a material impact on the results of operations. NOTE 5. COMPREHENSIVE INCOME (LOSS) In 1998, Insignia adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("FAS 130"). FAS 130 requires that all items recognized under accounting standards as components of comprehensive earnings be reported in an annual statement that is displayed with the same prominence as other annual financial statements. FAS 130 also requires that an entity classify items of other comprehensive earnings by their nature in an annual financial statement. The accumulated other comprehensive loss at December 31, 1998 related to cumulative currency translation adjustments. Total comprehensive loss was not different from the net loss reported for the nine months ended September 30, 1999. NOTE 6. CONTINGENCIES CITRIX In February 1998, Insignia disposed of its NTRIGUE technology for $17.687 million. A substantial portion of the total purchase price paid by the Buyer ("Citrix") was placed in escrow to secure Insignia's agreement to indemnify Citrix with respect to certain matters. On January 29, 1999, Insignia received an indemnity claim from Citrix for an amount estimated by Citrix to not exceed $6.25 million. The claim was made pursuant to the Asset Purchase Agreement between Insignia and Citrix under which Citrix purchased Insignia's NTRIGUE product line in February 1998. Citrix' indemnity claim is based on a declaratory relief action that Citrix filed against GraphOn Corporation ("GraphOn") in November 1998 in the United States District Court, Southern District of Florida. Citrix' action against GraphOn seeks a declaratory judgement that Citrix does not infringe any GraphOn proprietary rights and that Citrix has not misappropriated any trade secrets or breached an agreement to which GraphOn is a party. Citrix filed the action in response to and to resolve assertions first made by GraphOn, and disclosed to Citrix in January 1998, that Insignia used GraphOn's confidential information to develop certain of Insignia's products, possibly including products Insignia sold to Citrix in February 1998. The Court dismissed the complaint, but Citrix has subsequently filed an appeal. GraphOn has not filed an action against either Insignia or Citrix relating to its assertions and Insignia believes such assertions by GraphOn are without merit or basis. Accordingly, Insignia contests Citrix' indemnity claim. Page 7 On October 4, 1999, Insignia filed a suit against Citrix and GraphOn in the Superior Court of the State of California, County of Santa Clara. MICROSOFT Insignia had a non-exclusive, worldwide license from Microsoft ("Microsoft Distribution Agreement") to reproduce, adapt and distribute the currently available versions of Windows and MS-DOS that were included as a component of Insignia's SoftWindows products. Insignia paid Microsoft a per unit royalty for copies of Insignia's products sold that included a version of Windows and MS-DOS. The Microsoft Distribution Agreement expired on October 31, 1999. Insignia did not renew the Agreement. In January 1999, pursuant to this agreement, Microsoft began an audit of the royalties paid in 1997 and 1998. The audit was completed and in November, 1999, Insignia settled all open issues with Microsoft. NOTE 7. SEGMENT INFORMATION In 1998, Insignia adopted Statement of Financial Accounting Standards 131, "Disclosures about Segments of an Enterprise and Related Information" ("FAS 131"). FAS 131 supersedes FAS 14, "Financial Reporting for Segments of a Business Enterprise", replacing the "industry segment" approach with the "management" approach. The management approach designates the internal organization that is used by management for making operating decisions and assessing performance as the source of Insignia's reportable segments. FAS 131 also requires disclosures about products and services, geographic areas, and major customers. The adoption of FAS 131 did not affect results of operations but did affect the disclosure of segment information. Insignia operates in a single industry segment providing virtual machine technology which enables software applications and operating systems to be run on various computer platforms. In the third quarter of 1999, Quantum Corporation and Silicon Graphics Inc. accounted for 43% and 28% of total revenues, respectively. In the third quarter of 1998, Sun Microsystems, Inc. and Mitsubishi Corporation accounted for 31% and 26% of total revenues, respectively. No other customer accounted for 10% or more of Insignia's total revenues during the third quarter of 1999 and 1998. Page 8 GEOGRAPHIC INFORMATION Financial information by geographical region is summarized below (in thousands):
Three months ended Nine months ended September 30, September 30, ---------------------------- ---------------------------- 1999 1998 1999 1998 ------------- ------------ ------------ ------------- Revenues from unaffiliated customers: United States $ 1,598 $ 3,308 $ 4,952 $ 9,282 International 156 312 617 1,654 ------------- ------------ ------------ ------------- Consolidated $ 1,754 $ 3,620 $ 5,569 $ 10,936 ------------- ------------ ------------ ------------- ------------- ------------ ------------ ------------- Intercompany revenues: United States $ 76 $ 94 $ 411 $ 645 International 61 (2,455) 224 (1,465) ------------- ------------ ------------ ------------- Consolidated $ 137 $ (2,361) $ 635 $ (820) ------------- ------------ ------------ ------------- ------------- ------------ ------------ ------------- Operating loss: United States $ (377) $ 1,762 $ (2,171) $ (1,438) International (2,216) (4,410) (6,411) (8,959) ------------- ------------ ------------ ------------- Consolidated $ (2,593) $ (2,648) $ (8,582) $ (10,397) ------------- ------------ ------------ ------------- ------------- ------------ ------------ ------------- Identifiable assets: United States $ 2,526 $ 6,673 International 20,043 26,580 Intercompany items and eliminations (11,511) (9,171) ------------ ------------- Consolidated $ 11,058 $ 24,082 ------------ ------------- ------------ -------------
All of the international revenues and substantially all of the international identifiable assets relate to Insignia's operations in the United Kingdom. Intercompany sales are accounted for at prices intended to approximate those that would be charged to unaffiliated customers. Page 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included in Part I - Item 1 of this Form 10-Q and the "Management's Discussion and Analysis of Financial Condition and Results of Operations" set forth in Insignia's Form 10-K for the year ended December 31, 1998 (the "Form 10-K"). FUTURE OPERATING RESULTS This Form 10-Q contains forward looking statements. These forward looking statements concern matters which include the revenue model and market for Jeode, international sales, gross margins, operating expenses, the availability of licenses to third-party proprietary rights, Year 2000 compliance, exchange rate fluctuations and Insignia's liquidity and capital needs and other statements regarding matters that are not historical. These matters involve risks and uncertainties that could cause actual results to differ materially from those in the forward looking statements. In addition to the factors discussed above, among the other factors that could cause actual results to differ materially are the following: the demand for Jeode; the performance and functionality of Jeode; Insignia's ability to deliver on time, and market acceptance of new products or upgrades of existing products; the timing of, or delay in, large customer orders; continued availability of technology and intellectual property license rights; product life cycles; quality control of products sold; competitive conditions in the industry; economic conditions generally or in various geographic areas; and the risks listed from time to time in the reports that Insignia files with the U.S. Securities and Exchange Commission. Insignia's future performance depends upon sales of products within Insignia's Jeode product line, which is a new product. Jeode became available for sale in March 1999. Jeode may not achieve or sustain market acceptance or provide the desired revenue levels. The failure of the Jeode product to provide an adequate level of performance and functionality, or the lack of market acceptance of this product for any reason, would harm Insignia's business, financial condition and results of operations. If the Jeode product is successful and developed on a timely basis, Insignia will be required to further develop direct sales channels in the embedded systems market and to hire and train more direct sales personnel. Competition for qualified sales personnel is intense and Insignia may not be able to attract the personnel needed to market and sell products in the embedded systems market. Insignia anticipates increased operating expenses as it develops the organization to market, sell and support the product, before any revenue is recognized from sales of the product. Insignia may not experience growth in revenues in any particular period when compared to prior periods. Any quarterly or annual shortfall in net revenues in relation to expectations would harm Insignia's operating results and financial condition. Insignia may not be able to achieve or sustain profitability. If Insignia's revenues grow more slowly than anticipated, or if Insignia's operating expenses exceed expectations and cannot be adjusted, Insignia's operating losses would continue or increase. In future periods, Insignia's operating results may fall below the levels expected by securities analysts and shareholders, which would result in a substantial decline in the trading price of Insignia's shares and could have an adverse effect on the liquidity of Insignia's shares. Insignia's Annual Report on Form 10-K for 1998 includes an analysis of certain risks of Insignia's business, including risks which are inherent to software development, as well as Page 10 specific risks relating to the competitive environment in which Insignia operates. Although Insignia has sought to identify the most significant risks to its business, Insignia cannot predict whether, or to what extent any such risks may be realized. Also, Insignia may not have identified all possible issues which Insignia might face. Potential risks and uncertainties include, without limitation, those mentioned in Insignia's Form 10-K; and in particular the continued acceptance by the marketplace of Insignia's products and Insignia's ability to successfully develop new products in the future. Investors should carefully read Insignia's filings with the Securities and Exchange Commission, together with this Form 10-Q, and consider all trends and uncertainties concerning Insignia's business before making an investment decision with respect to Insignia's stock. The following table sets forth the unaudited condensed consolidated results of operations as a percentage of total revenues for the three and nine month periods ended September 30, 1999 and 1998.
Three months ended Nine months ended September 30, September 30, ------------------------------------- ------------------------------------ 1999 1998 1999 1998 ----------------- ----------------- ---------------- ----------------- Net revenues: License 95.3% 91.9% 94.6% 92.6% Service 4.7% 8.1% 5.4% 7.4% ----------------- ----------------- ---------------- ----------------- Total net revenues 100.0% 100.0% 100.0% 100.0% ----------------- ----------------- ---------------- ----------------- Cost of net revenues: License 37.5% 59.5% 46.2% 57.7% Service 6.6% 4.7% 7.6% 7.9% ----------------- ----------------- ---------------- ----------------- Total cost of net revenues 44.1% 64.2% 53.8% 65.6% ----------------- ----------------- ---------------- ----------------- Gross profit 55.9% 35.8% 46.2% 34.4% ----------------- ----------------- ---------------- ----------------- Operating expenses: Sales and marketing 73.6% 48.1% 78.2% 58.0% Research and development 83.2% 38.9% 80.4% 42.0% General and administrative 46.9% 21.9% 41.7% 29.5% ----------------- ----------------- ---------------- ----------------- Total operating expenses 203.7% 108.9% 200.3% 129.5% ----------------- ----------------- ---------------- ----------------- Operating loss (147.8%) (73.1%) (154.1%) (95.1)% Interest income, net 5.8% 7.3% 6.4% 7.1% Other income (expense), net (0.2%) 0.2% (0.9%) 135.7% ----------------- ----------------- ---------------- ----------------- Income (loss) before income taxes (142.2%) (65.6%) (148.6%) 47.7% Provision (benefit) for income taxes (26.5%) (47.3%) (7.5%) 17.6% ----------------- ----------------- ---------------- ----------------- Net income (loss) (115.7%) (18.3%) (141.1%) 30.1% ----------------- ----------------- ---------------- ----------------- ----------------- ----------------- ---------------- -----------------
Page 11 OVERVIEW Insignia, which commenced operations in 1986, develops, markets and supports virtual machine technology which enables software applications and operating systems to be run on various computer platforms. In late 1997, Insignia began a strategic review of its business and explored new markets that would leverage Insignia's 10 years of emulation software development experience. In January 1998, Insignia announced its intention to launch a new product line. This product line, called Jeode-TM-, is based on Insignia's Embedded Virtual Machine ("EVM"-TM-) technology. Jeode is Insignia's implementation of Sun Microsystems, Inc.'s ("Sun") Java-Registered Trademark- technology developed specifically for embedded systems. The Jeode platform is enabled by Insignia's EVM and is designed to enable software developers to create reliable, efficient and predictable embedded products. The product became available for sale in March 1999 and generated 43% of the total revenues for the three months ending September 30, 1999. The Jeode product is now the principal product line in the foreseeable future. The Jeode product line revenue model is based on original equipment manufacturer's ("OEMs") customer transactions. Insignia expects that revenue from the Jeode product line will generally be derived from four main sources: the sale of a development license, the sale of annual maintenance and support, a commercial use royalty based on shipments of products that include Jeode technology, and customer-funded engineering activities. Insignia's principal product line in recent years has been SoftWindows-TM-. This product enables Microsoft Windows ("Windows"-Registered Trademark-) applications to be run on most Apple Computer Inc. ("Apple"-Registered Trademark-) Macintosh computers and many UNIX workstations. Revenues from this product line have been declining since 1995. On October 18, 1999, Insignia signed an exclusive licensing arrangement of its SoftWindows and RealPC product lines to FWB Software. This allows Insignia to focus exclusively on its Jeode platform business strategy. The proceeds Insignia will receive from the license arrangement are based on an earn-out of FWB's future revenues from the product line and will be paid to Insignia as those revenues are achieved. Upon achieving a certain revenue threshold, FWB will purchase the SoftWindows and RealPC product line at no additional consideration. Between December 1995 and May 1998, Insignia shipped NTRIGUE-TM-, a Windows compatibility client/server product that supported multiple X-terminals, workstation clients, Macintosh computers, PCs, network computers and Net PCs from a Windows NT-based server. Insignia disposed of its NTRIGUE technology in February 1998 for $17.687 million. REVENUES
Three months ended Nine months ended September 30, September 30, -------------------------------- ---------------------------- 1999 1998 1999 1998 -------------- --------------- ------------- ------------ (in thousands) License revenue $ 1,672 $ 3,325 $ 5,270 $ 10,123 Service revenue 82 295 299 813 -------------- --------------- ------------- ------------ Total net revenue $ 1,754 $ 3,620 $ 5,569 $ 10,936 -------------- --------------- ------------- ------------ -------------- --------------- ------------- ------------
Page 12 Insignia derives its Jeode revenue from the sale of development licenses and annual maintenance contracts. Insignia derives its SoftWindows revenues from the sale of packaged software products and annual maintenance contracts. Revenues from the sale of development licenses, packaged products and royalties received from OEMs are classified as license revenue, while revenues from customer-funded engineering activities, training, and annual maintenance contracts are classified as service revenue. In the third quarter of 1999, total revenues declined by 52% compared to total revenues for the third quarter of 1998. In the nine months ended September 30, 1999, total revenues declined by 49% compared to revenues for the first nine months of 1998. The decline is primarily due to reduced demand for SoftWindows. License revenues in the three months ended September 30, 1999 were 95% of total revenues. License revenues in the three months ended September 30, 1998 were 92% of total revenues. In the nine months ended September 30, 1999 license revenues were 95% of total revenues. In the nine months ended September 30, 1998, license revenues were 93% of total revenues. In the third quarter of 1999, license revenues declined 50% compared to license revenues in the third quarter of 1998. For the nine months ended September 30, 1999, license revenue declined 48% compared to the same period in 1998. The decline is primarily due to the reduced demand for SoftWindows. Service revenue in the third quarter of 1999 was 72% lower than service revenue in the third quarter of 1998. Service revenue for the nine months ended September 30, 1999 was 63% lower than service revenue for the same period in 1998, primarily as a result of a decreased number of UNIX support contracts resulting from lower sales of SoftWindows products for UNIX. Jeode license revenue accounted for 43% of total revenues for the three months ended September 30, 1999, and 14% of total revenues in the nine months ended September 30, 1999. Jeode became available for sale in March 1999, and accounted for less than 1% of total revenues in the second quarter of 1999. Sales of Macintosh-based products in the third quarter of 1999 decreased by 87% compared to sales in the third quarter of 1998. For the nine months ended September 30, 1999, sales of Macintosh-based products decreased 53% compared to the same period in 1998. Revenue from the sale of Insignia's products for Macintosh computers accounted for 14% of total revenues in the three months ended September 30, 1999 and 54% of total revenues in the three months ended September 30, 1998. Revenue from the sale of Insignia's products for Macintosh computers accounted for 46% of total revenues in the nine months ended September 30, 1999 and 50% of total revenues in the nine months ended September 30, 1998. Revenues from the sale of Insignia's SoftWindows products for UNIX computers accounted for 43% of total revenues in the three months ended September 30, 1999 and September 30, 1998. Revenues from the sale of Insignia's products for UNIX computers accounted for 40% of total revenues in the nine months ended September 30, 1999 and 42% of total revenues in the nine months ended September 30, 1998. In the third quarter of 1999, sales of UNIX-based products decreased by 52% compared to sales in the third quarter of 1998. For the nine months ended September 30, 1999, UNIX sales decreased by 52% compared to the same period in 1998. Page 13 In the three months ended September 30, 1998, revenue from the sale of NTRIGUE products accounted for 4% of total revenues. In the nine months ended September 30, 1998, revenue from the sale of NTRIGUE products accounted for 8% of total revenues. There was no NTRIGUE revenue in 1999 as Insignia's NTRIGUE product line was sold in early 1998. Insignia distributes its packaged products within the United States and internationally through multiple distributors and resellers. Insignia offers certain return privileges to its customers including product exchange privileges and price protection. Insignia recognizes revenues from packaged products upon shipment with provisions for estimated future returns, exchanges and price protection being recorded as a reduction of total revenues. Sales to distributors and OEM's representing more than 10% of total revenue in each period accounted for the following percentages of total revenue.
Three months ended Nine months ended September 30, September 30, ------------------------------ ------------------------------- 1999 1998 1999 1998 ------------- ------------- ------------- -------------- Distributors: Sun Microsystems * 31% * 26% Mitsubishi * 26% * 10% Ingram Micro * * * 17% All Distributors: 6% 83% 46% 73% OEM's: Quantum Corporation 43% * 13% * Silicon Graphics 28% * * *
* Less than 10% Sales to customers outside the United States, derived mainly from customers in Europe and Asia, represented approximately 9% of total revenues in the three months ended September 30, 1999 and 35% of total revenues in the three months ended September 30, 1998, and 18% of total revenues in the nine months ended September 30, 1999 and 26% of total revenues in the nine months ended September 30, 1998. Movements in currency exchange rates did not have a material impact on total revenues in the three or nine months ended September 30, 1999. However, movements in currency exchange rates could affect Insignia's future revenues and results of operations. Page 14 COST OF REVENUES AND GROSS MARGIN
Three months ended Nine months ended September 30, September 30, ------------------------------ ------------------------------- 1999 1998 1999 1998 ------------- ------------- ------------- -------------- (in thousands, except percentages) Cost of license revenue $ 658 $ 2,154 $ 2,573 $ 6,308 Gross margin: license revenue 61% 35% 51% 38% Cost of service revenue 116 170 424 859 Gross margin: service revenue (41%) 42% (42%) (6%) Total cost of revenues $ 774 $ 2,324 $ 2,997 $ 7,167 Gross margins: total revenues 56% 36% 46% 34%
Cost of license revenue comprises mostly royalties to third parties, along with the costs of documentation, duplication and packaging. Cost of service revenue includes costs associated with customer-funded engineering activities and end-user support under maintenance contracts. Insignia believes that the significant factors affecting the Jeode gross margin will include pricing of the development license, pricing of the unit usage and royalties to third parties such as Sun Microsystems. In early 1999, Insignia signed a five-year agreement with Sun Microsystems under which Sun established Insignia as an authorized Virtual Machine provider. Under this agreement Insignia will pay Sun a per unit royalty on each Jeode-enabled embedded product shipped by Insignia's customers, plus a royalty on all development licenses put in place between Insignia and its customers. Insignia's gross margin for license revenue is significantly affected by many factors, including pricing of Insignia's products, royalties paid to third parties, the mix of products licensed, the channels through which Insignia's products are distributed and product maturity. Insignia's gross margin for license revenue can also be affected in particular periods by pricing strategies and return privileges employed in connection with new product introductions and upgrades. License revenue gross margins in the quarter ended September 30, 1999 were 61%, compared to 35% for the same period in 1998. The prior year quarterly gross margin was low due to increased returns on the NTRIGUE product line. For the nine months ended September 30, 1999, license revenue gross margins were 51% compared to 38% for the same period in 1998. Gross margin for service revenue decreased in the third quarter of 1999 to (41%) from 42% in the same period of 1998, and decreased for the nine months ending September 30, 1999 to (42%) from (6%) in the same period of 1998. The decline is a result of the decreased UNIX service revenue. In the event that Jeode license increase in future periods, service revenue gross margins are expected to increase due to the required maintenance and upgrade contracts for each Jeode product sale. Page 15 OPERATING EXPENSES
Three months ended Nine months ended September 30, September 30, ------------------------------ ------------------------------- 1999 1998 1999 1998 ------------- ------------- ------------- -------------- (in thousands, except percentages) Sales and marketing $ 1,292 $ 1,743 $ 4,352 $ 6,344 Percentage of total revenues 74% 48% 78% 58% Research and development $ 1,459 $ 1,407 $ 4,477 $ 4,593 Percentage of total revenues 83% 39% 80% 42% General and administrative $ 822 $ 794 $ 2,325 $ 3,229 Percentage of total revenues 47% 22% 42% 30%
Sales and marketing expenses include advertising and promotional expenses, trade shows, personnel and related overhead costs, and salesperson commissions. Sales and marketing expenses decreased by 26% in the quarter ended September 30, 1999 from the quarter ended September 30, 1998, and by 31% for the nine months ended September 30, 1999 from the same period of 1998. The decrease is due to reduced spending on SoftWindows advertising programs and staffing. Insignia anticipates sales and marketing expenses to increase in the last quarter of 1999 as Insignia continues to increase its marketing and direct sales organization for its Jeode product line. Insignia has established a direct sales force in the United States, Europe and Japan. Research and development expenses consist primarily of personnel costs, overhead costs relating to occupancy and equipment depreciation. Research and development expenses increased by 4% in the three months ended September 30, 1999 over the same period in 1998. Research and development expenses decreased by 3% in the nine months ended September 30, 1999 over the nine months ended September 30, 1998. In accordance with Statement of Financial Accounting Standards No. 86, software development costs are expensed as incurred until technological feasibility is established, after which any additional costs are capitalized. In 1999 and 1998, no development expenditures were capitalized. General and administrative expenses consist primarily of personnel and related overhead costs for finance, information systems, human resources and general management. General and administrative expenses increased by 4% in the three months ended September 30, 1999 over the same period of 1998. General and administrative expenses decreased by 28% in the nine months ended September 30, 1999 over the same period of 1998. The decline is due to reduced headcount, reduced legal fees and a reduction in bad debt provisions. Page 16 INTEREST INCOME, NET
Three months ended Nine months ended September 30, September 30, ------------------------------ ------------------------------- 1999 1998 1999 1998 ------------- ------------- ------------- -------------- (in thousands, except percentages) Interest income, net $ 101 $ 263 $ 357 $ 772 Percentage of total revenues 6% 7% 6% 7%
Interest income, net decreased from $263,000 in the three months ended September 30, 1998 to $101,000 in the three months ended June 30, 1999 due primarily to decreased interest income earned on Insignia's cash and cash equivalents. For the nine months ended September 30, 1999, interest income, net decreased from $772,000 to $357,000. OTHER INCOME (EXPENSE), NET
Three months ended Nine months ended September 30, September 30, ------------------------------ ------------------------------- 1999 1998 1999 1998 ------------- ------------- ------------- -------------- (in thousands, except percentages) Other income (expense), net $ (3) $ 6 $ (53) $ 14,837 Percentage of total revenues -% -% (1%) 136%
Other income (expense), net decreased from income of $6,000 in the three months ended September 30, 1998 to an expense of $3,000 in the three months ended September 30, 1999, and primarily comprised foreign exchange gains (losses) in both periods. In the nine months ended September 30, 1999, other income (expense), net decreased from income of $14.837 million, for the same period last year, to an expense of $53,000. The income in the first nine months of 1998 was a result of the gain on disposal of the NTRIGUE product line of $14.731 million in the first quarter of 1998. This gain comprised gross disposal proceeds of $17.687 million less $2.956 million of transaction expenses, employment terminations and costs and losses related to the property and equipment sold or written down in value. In the nine months ended September 30, 1999, Insignia realized a foreign exchange loss of $53,000 compared to a gain of $137,000 in the nine months ended September 30, 1998. Approximately 85% of Insignia's total revenues and over 40% of its operating expenses are denominated in United States dollars. Most of the remaining revenues and expenses of Insignia are pound sterling denominated and consequently Insignia is exposed to fluctuations in pound sterling exchange rates. To hedge against this currency exposure, Insignia enters into foreign currency options and forward exchange contracts for periods and amounts consistent with the amounts and timing of its anticipated pound sterling denominated operating cash flow requirements. Unrealized gains and losses on foreign currency option contracts are deferred and were not material at September 30, 1999 and December 31, 1998. However, currency fluctuations could harm Insignia's results of operations in the future. Page 17 Insignia has, at times, an investment portfolio of fixed income securities that are classified as "available for sale securities." These securities, like all fixed income instruments, are subject to interest rate risk and will fall in value if market interest rates increase. Insignia attempts to limit this exposure by investing primarily in short-term securities. PROVISION FOR INCOME TAXES
Three months ended Nine months ended September 30, September 30, ------------------------------ ------------------------------- 1999 1998 1999 1998 ------------- ------------- ------------- -------------- (in thousands) Provision (benefit) for income $ (465) $ (1,712) $ (421) $ 1,924 taxes Effective income tax rate - - - -
Insignia's benefit for income taxes for the three and nine months ended September 30, 1999 primarily represents certain non-U.S. taxes arising from sales to customers in Japan and the benefit of offsetting net operating losses against provisions arising from the disposal of the Company's NTRIGUE product line in 1998. Insignia's income tax benefit for the three months ended September 30, 1998 primarily represents a reduction in its income tax liability due to anticipated net operating losses. The provision for income taxes for the nine months ended September 30, 1998 primarily represents certain non-U.S. taxes arising upon the disposal of the Company's NTRIGUE product line, net of offsetting operating losses. Insignia has recorded a full valuation allowance against all deferred tax assets, primarily comprising net operating losses, on the basis that significant uncertainty exists with respect to realization. LIQUIDITY AND CAPITAL RESOURCES
September 30, December 31, 1999 1998 ------------------- ------------------ (in thousands) Cash, cash equivalents and investments $ 2,236 $ 6,984 Cash and cash equivalents held in escrow $ 5,990 $ 9,100 Working capital $ 2,717 $ 9,712 Net cash used in operating activities $ (8,146) $ (13,687)
Insignia is in the process of transitioning its product focus from compatibility products to its Jeode product line based on Insignia's EVM technology. This change in product focus has resulted in a redirection of available resources from Insignia's historical revenue base towards the development and marketing efforts associated with the Jeode platform, which was not released for general availability until March 1999. As a result of this change in product strategy and associated redirection of resources to new product development, Insignia's financial position weakened during the first nine months of 1999. Insignia's cash, cash equivalents and short-term investments, including cash and cash equivalents of $5.99 million held in escrow, were $8.2 million at September 30, 1999, a decrease of $7.9 million from $16.1 million at December 31, 1998, and an increase of $0.1 million from June 30, 1999. Working capital decreased to $2.7 million at September 30, 1999, from $9.7 million at Page 18 December 31, 1998. The principal source of cash funding came from receivable collections and NTRIGUE product line sales proceeds released from escrow. On October 20, 1999, Insignia signed a convertible promissory note to Quantum Corporation for $1,000,000. The note is convertible at Quantum's option to Insignia stock any time during the lifetime of the note. All unpaid principal with any unpaid interest, at 8% per annum, is due and payable on December 31, 2000. Insignia continues to face significant risks associated with the successful execution of its new product strategy. These risks include, but are not limited to continued technology and product development, introduction and market acceptance of new products, changes in the marketplace, liquidity, competition from existing and new competitors which may enter the marketplace and retention of key personnel. Due to the generally longer sales cycles expected to be associated with the Jeode platform, Insignia does not currently have accurate visibility of future order rates and demand for its products generally. Jeode platform products may never achieve market acceptance. Insignia believes that additional financing will be necessary, as its existing cash and cash equivalents are insufficient to meet Insignia's future operating and capital requirements. Insignia is currently considering various financing alternatives. Insignia may not be able to obtain adequate funding when needed, on acceptable terms or at all. The failure to raise additional funds on a timely basis and on sufficiently favorable terms would jeopardize Insignia's business. Insignia's liquidity may be reduced in the future by factors such as higher interest rates, inability to borrow without collateral, outcome of pending claims, availability of capital financing and continued operating losses. Further, significant fluctuations in quarterly operating results has had and, in the future, may continue to have a negative affect on Insignia's liquidity. Factors such as price reductions, the introduction and market acceptance of new products and product returns have contributed to this quarterly variability. Moreover, Insignia's expense levels are based in part on expectations of future sales levels, and a shortfall in expected sales could therefore result in a disproportionate decrease in results of operations. As such, the revenues or results of operations in some future period may be below the expectations of investors, which would likely result in a significant reduction in the market price of Insignia's shares. A decline in the market price of Insignia's shares would have a negative effect on Insignia's ability to raise needed capital on acceptable terms and conditions. YEAR 2000 COMPLIANCE It is generally anticipated that many organizations will experience operational difficulties at the beginning of the Year 2000 as a result of the fact that many currently installed computer systems, embedded systems, and software products are coded to accept only two digit entries in the date code field. Significant uncertainty exists in the software and other industries concerning the scope and magnitude of problems associated with the century change. Insignia's assessment of the impact of this issue has encompassed 1) software held for resale; 2) internally utilized systems; 3) computerized information and software provided by third parties which might be integral to customer usage of Insignia's products; 4) compliance issues related entirely to the state of readiness by customers and vendors and 5) Year 2000 cost. Set forth below is the status of each review and the estimated impact, to the extent management can determine at this time. Page 19 SOFTWARE HELD FOR RESALE Based on Insignia's assessment to date, Insignia believes that all versions of Jeode, SoftWindows 98 products, SoftWindows95 products, RealPC and NTRIGUE are Year 2000 compliant. Earlier versions of SoftWindows and all versions of Soft PC are not Year 2000 compliant, but all such versions are upgradable to Year 2000 compliant products. However, all of Insignia's customers may not install the Year 2000 compliant version of Insignia's products in a timely manner, which could lead to failure of customer systems and product liability claims against Insignia. Even if Insignia's products are Year 2000 compliant, Insignia may in the future be subject to claims based on Year 2000 issues in the products of other companies, or issues arising from the integration of multiple products within a system. The costs of defending and resolving Year 2000 related disputes, and any liability of Insignia for Year 2000 damages, including consequential damages, could harm Insignia's financial condition and results of operations. INTERNAL SYSTEMS Insignia has carried out an assessment of its own internal systems and believes that they are all Year 2000 compliant. THIRD-PARTY SYSTEMS Insignia has reviewed its material third-party relationships such as key suppliers and distributors. Insignia believes all computerized information and software provided by third parties that might be integral to customer usage of Insignia's products is Year 2000 compliant. Although Insignia believes that its internal critical processes are Year 2000 ready, Insignia also recognizes that it is vulnerable, as are most organizations, to the inability of third-party external interface suppliers and utility organizations to achieve Year 2000 readiness. The most reasonable worst case scenario could include failure of power and water supplies, major transportation disruptions, and failures of communications and financial systems - - any one of which could have a major and material effect on Insignia's ability to produce its products and deliver services to its customers. While Insignia has contingency plans in place to address most issues under its control, a problem outside its control could result in a delay in product shipments depending on the nature and severity of the problems. CUSTOMERS AND VENDORS Insignia's products are generally used with systems and software involving complicated software products developed by other vendors, which may not be Year 2000 compliant. Failure of the information systems of Insignia's customers because of the failure of such noncompliant systems or software or for any other reason, could also affect the perceived performance of Insignia's products, which could have a negative effect on Insignia's competitive position. In addition, Insignia believes that the purchasing patterns of customers and potential customers may be affected by Year 2000 issues as companies expend significant resources to correct or patch their current software systems for Year 2000 compliance. These expenditures may result in reduced funds available to purchase software products such as those offered by Insignia, which could result in a material adverse effect on Insignia's business, financial condition and results of operations. Page 20 YEAR 2000 COST The total cost associated with preparation for the Year 2000 has not been, and is not expected to be, material to Insignia's business, financial condition or results of operations. Nevertheless, Insignia may not timely identify and remediate all significant Year 2000 problems and remedial efforts may involve significant time and expense. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Insignia enters into derivative financial instruments such as currency option contracts to hedge certain anticipated, but not yet committed, transactions expected to be denominated in foreign currencies. Insignia does not use derivative financial instruments for trading or speculative purposes. Insignia's downside risk with respect to currency option contracts (British pounds) is limited to the premium paid for the right to exercise the option. Premiums paid for options outstanding as of September 30, 1999 were not material. Pge 21 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits The following exhibits are filed as part of this Report: Exhibit 11.1 Statement Regarding Computation of Basic and Diluted Net Income (Loss) Per Share Exhibit 27.1 Financial Data Schedule (b) Reports on Form 8-K None Page 22 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. INSIGNIA SOLUTIONS PLC (Registrant) Date: November 15, 1999 s/STEPHEN M. AMBLER -------------------- STEPHEN M. AMBLER Chief Financial Officer Page 23 INDEX TO EXHIBITS
EXHIBIT NUMBER EXHIBIT TITLE - -------------------------------------------------------------------------------- Exhibit 11.1 Statement Regarding Computation of Basic and Diluted Net Income (Loss) Per Share Exhibit 27.1 Financial Data Schedule
Page 24 EX-11.1 2 EXHIBIT 11.1 EXHIBIT 11.1 INSIGNIA SOLUTIONS PLC STATEMENT REGARDING COMPUTATION OF BASIC AND DILUTED NET INCOME (LOSS) PER SHARE (IN THOUSANDS EXCEPT PER SHARE DATA, UNAUDITED)
Three months ended Nine months ended September 30, September 30, -------------------------------- -------------------------------- 1999 1998 1999 1998 --------------- --------------- --------------- --------------- Net income (loss) $ (2,030) $ (677) $ (7,857) $ 3,288 --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- CALCULATION OF BASIC NET INCOME (LOSS) PER SHARE: Weighted average number of ordinary shares outstanding used in computation 12,853 12,164 12,775 12,118 --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- Basic net income (loss) per share $ (0.16) $ (0.05) $ (0.62) $ 0.27 --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- CALCULATION OF DILUTED NET INCOME (LOSS) PER SHARE: Weighted average number of ordinary shares outstanding used in computation 12,853 12,164 12,775 12,118 Net effect of dilutive stock options outstanding - - - 234 --------------- --------------- --------------- --------------- 12,853 12,164 12,775 12,352 --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- Diluted net income (loss) per share $ (0.16) $ (0.05) $ (0.62) $ 0.27 --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
EX-27.1 3 EXHIBIT 27.1
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1999 AND THE CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 8,476 0 445 (131) 13 9,767 2,825 (2,109) 11,058 7,050 0 0 0 4,287 (279) 11,058 5,270 5,569 2,573 14,151 (304) 0 0 (8,278) (421) (7,857) 0 0 0 (7,857) (.62) (.62)
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