-----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, WWzNVCR6e/AnmVD2cEpxQpRK4Jxg1fCNwRy9vmOZq8YnbcSvtP70qbILY8Or1QKS tt+noZBOJtbgGT47NiHoRQ== 0000840824-98-000003.txt : 19980812 0000840824-98-000003.hdr.sgml : 19980812 ACCESSION NUMBER: 0000840824-98-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980811 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NETEGRITY INC CENTRAL INDEX KEY: 0000840824 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-COMPUTER & PERIPHERAL EQUIPMENT & SOFTWARE [5045] IRS NUMBER: 042911320 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10139 FILM NUMBER: 98682027 BUSINESS ADDRESS: STREET 1: 245 WINTER ST CITY: WALTHAM STATE: MA ZIP: 02154 BUSINESS PHONE: 6178901700 MAIL ADDRESS: STREET 1: 245 WINTER STREET STREET 2: 0 CITY: WALTHAM STATE: MA ZIP: 02184 FORMER COMPANY: FORMER CONFORMED NAME: SOFTWARE DEVELOPERS CO INC/DE/ DATE OF NAME CHANGE: 19920703 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------- FORM 10-Q ------------------- XX Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, For the quarterly period ended June 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 1-10139 ------------------------------ NETEGRITY, INC. (Exact name of registrant as specified in its charter) DELAWARE 04-2911320 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 245 Winter Street Waltham, MA 02154-8799 (Address of principal executive offices) (Zip Code) (781)890-1700 (Registrant's Telephone Number) ----------------------------- Securities registered pursuant to Section 12(g) of the Act: NONE 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 other 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 XX Yes No As of August 7, 1998 there were 9,397,526 shares of Common Stock outstanding. FORM 10-Q QUARTERLY REPORT ---------------- TABLE OF CONTENTS Facing Sheet. . . . . . . . . . . . . . . . . . . . . . . . 1 Table of Contents . . . . . . . . . . . . . . . . . . . . . 2 PART I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements Consolidated Balance Sheets. . . . . . . . . . . . 3 Consolidated Statements of Operations. . . . . . . 5 Consolidated Statements of Cash Flows. . . . . . . 7 Notes to Consolidated Financial Statements . . . . 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. . . . . . . .11 PART II. OTHER INFORMATION Item 1. Legal Proceedings. . . . . . . . . . . . . . . . .15 Item 2. Changes in Securities. . . . . . . . . . . . . . .15 Item 3. Defaults Upon Senior Securities. . . . . . . . . .15 Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . .15 Item 5. Other Information. . . . . . . . . . . . . . . . .16 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . .16 SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . .17 Exhibit 11 - Computation of earnings per share. . . . . . .18 PART I. - FINANCIAL INFORMATION NETEGRITY, INC. CONSOLIDATED BALANCE SHEETS ASSETS June 30, 1998 December 31, (unaudited) 1997 ------------------------ CURRENT ASSETS: Cash and cash equivalents $4,012,062 $2,133,586 Escrow receivable 600,000 600,000 Accounts receivable-trade, net of allowance for doubtful accounts of $58,470 and $64,460 at June 30, 1998 and December 31, 1997, respectively 854,623 791,369 Other current assets 307,757 312,971 --------- --------- TOTAL CURRENT ASSETS 5,774,442 3,837,926 EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET 638,888 585,055 CAPITALIZED SOFTWARE COSTS 282,233 309,891 OTHER ASSETS: Investment in Encotone, Inc. --- 78,199 Other 46,556 37,438 TOTAL OTHER ASSETS 46,556 115,637 --------- --------- TOTAL ASSETS $6,742,119 $4,848,509 The accompanying notes are an integral part of the financial statements. NETEGRITY, INC. CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY June 30, 1998 December 31, (unaudited) 1997 ------------------------ CURRENT LIABILITIES: Accounts payable-trade $ 954,773 $ 1,507,071 Other accrued expenses 2,129,429 2,022,949 Accrued compensation 310,474 279,722 Current portion of capitalized lease obligations --- 19,068 TOTAL CURRENT LIABILITIES 3,394,676 3,828,810 Long-term capital lease obligations --- 3,653 COMMITMENTS AND CONTINGENCIES --- --- --------- --------- TOTAL LIABILITIES 3,394,676 3,832,463 STOCKHOLDERS' EQUITY: Series D Preferred Stock, $.01 par value 3,333,333 shares authorized and outstanding as of June 30, 1998 33,333 --- Common stock, voting, $.01 par value, authorized 25,000,000 shares: 9,397,526 shares issued and 9,372,425 shares outstanding at June 30, 1998; 9,279,346 shares issued and 9,254,245 shares outstanding at December 31, 1997 93,975 92,793 Additional paid-in capital 15,688,020 10,578,330 Cumulative translation adjustment 28,028 28,028 Cumulative deficit (12,212,256) (9,399,448) Loan to officer (200,000) (200,000) 3,431,100 1,099,703 Less - Treasury Stock, at cost: 25,101 shares (83,657) (83,657) --------- --------- TOTAL STOCKHOLDERS' EQUITY 3,347,443 1,016,046 --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,742,119 $ 4,848,509 The accompanying notes are an integral part of the financial statements. NETEGRITY, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) For the three months ended June 30, 1998 1997 -------------------------- Net revenues $1,054,434 $1,183,656 Cost of revenues 407,090 699,702 --------- --------- Gross profit 647,344 483,954 Selling, general and administrative expenses 1,571,311 1,272,195 Research and development costs 451,997 185,350 Loss from operations (1,375,964) (973,591) Interest income 36,686 62,656 Share of loss from investment in Encotone, Inc. --- (47,704) Write off of investment in Encotone, LTD. --- (1,000,000) --------- --------- Net loss $(1,339,278) $(1,958,639) Basic loss per share $(0.14) $(0.21) Weighted average shares outstanding (basic) 9,362,876 9,269,446 Diluted loss per share $(0.14) $(0.21) Weighted average shares outstanding (diluted) 9,362,876 9,269,446 The accompanying notes are an integral part of the financial statements. NETEGRITY, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) For the six months ended June 30, 1998 1997 ------------------------ Net revenues $1,864,255 $2,170,250 Cost of revenues 753,646 1,234,953 --------- --------- Gross profit 1,110,609 935,297 Selling, general and administrative expenses 3,119,221 2,293,717 Research and development costs 872,853 286,498 Loss from operations (2,881,465) (1,644,918) Interest income 68,657 141,718 Share of loss from investment in Encotone, Inc. --- (103,748) Write off of investment in Encotone, LTD. --- (1,000,000) --------- --------- Net loss $(2,812,808) $(2,606,948) Basic loss per share $(0.30) $(0.28) Weighted average shares outstanding (basic) 9,322,896 9,265,279 Diluted loss per share $(0.30) $(0.28) Weighted average shares outstanding (diluted) 9,322,896 9,265,279 The accompanying notes are an integral part of the financial statements. NETEGRITY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For the six months ended June 30, 1998 1997 ------------------------ OPERATING ACTIVITIES Net(loss) income from continuing operations $(2,812,808) $(2,606,948) Adjustments to reconcile (loss) income to net cash (used for) provided by operating activities: Share of loss from investment in Encotone, Inc. --- 103,748 Write off of investment in Encotone, LTD. --- 1,000,000 Depreciation and amortization 97,976 44,494 Provision for doubtful accounts receivable (5,990) 7,000 Change in operating assets and liabilities: Accounts receivable (57,264) 279,161 Other current assets 5,214 5,603 Other assets 69,081 (10,562) Accounts payable (552,298) (537,005) Other accrued expenses 137,232 48,542 Total adjustments (306,049) 940,981 Net cash (used for) provided by continuing operating activities (3,118,857) (1,665,967) Net cash (used for) provided by discontinued operating activities --- (41,455) --------- --------- Net cash (used for) provided by operating activities $(3,118,857) $(1,707,422) The accompanying notes are an integral part of the financial statements. NETEGRITY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Cont.) (Unaudited) For the six months ended June 30, 1998 1997 ----------------------- INVESTING ACTIVITIES: Capitalized software costs $ 27,658 $ (344,189) Capital expenditures for equipment and leasehold improvements (177,673) (226,294) Proceeds from sale of certain assets 25,863 --- Net cash (used for) provided by investing activities (124,152) (570,483) FINANCING ACTIVITIES: Net proceeds from issuance of preferred stock 4,950,001 --- Net proceeds from issuance of stock 194,205 109,450 Principal payments under capital leases (22,721) (2,316) Net cash provided by financing activities 5,121,485 107,134 NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS 1,878,476 (2,170,771) Cash and cash equivalents at beginning of period 2,133,586 6,791,057 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $4,012,062 $4,620,286 Supplemental Disclosures of Cash Flow Information: Interest paid $ 872 $ 424 Income taxes paid $ --- $ 63,557 Supplemental disclosure of non cash investing and financing activities: Write off of investment in Encotone, LTD. $ --- $1,000,000 Purchase of equipment under capital lease obligation $ --- $ 32,374 The accompanying notes are an integral part of the financial statements. NETEGRITY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - The unaudited financial information furnished herein reflects all adjustments which are of a normal recurring nature, which in the opinion of management are necessary to fairly state the Company's financial position, cash flows and the results of its operations for the periods presented. Certain information and footnote disclosure normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. This information should be read in conjunction with the Company's audited financial statements for the fiscal year ended December 31, 1997, included in Form 10-K. Certain amounts for 1997 have been reclassified to conform to the 1998 presentation. NOTE 2 - The results of operations for the three-month and six-month periods ended June 30, 1998 are not necessarily indicative of the results to be expected for the entire year ending December 31, 1998. NOTE 3 - The Company has adopted Statement of Financial Accounting Standards (SFAS) No. 128 "Earnings Per Share" and has retroactively restated the earnings per share (EPS) for the second quarter and year-to-date 1997. SFAS 128 requires presentation of basic and diluted EPS. Basic EPS is computed by dividing net income by the number of weighted average common shares outstanding. Diluted EPS reflects potential dilution from outstanding stock options and warrants, using the treasury stock method. For the periods that options are anti-dilutive, they are not included in the calculation of earnings per share. NOTE 4 - The Company follows Statement of Financial Accounting Standards ("SFAS") No. 109 "Accounting for Income Taxes." Under SFAS No. 109, deferred tax assets and liabilities are recognized for the unexpected future tax consequences of events that have been included in the financial statements or tax returns. The amount of deferred tax asset or liability is based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. NOTE 5 - The Company capitalizes certain internally generated software development costs after technological feasibility of the product has been established. Such costs are amortized over the estimated life of the product. The Company continually compares the unamortized costs of capitalized software to the expected future revenues for the products. If the unamortized costs exceed the expected future net realizable value, the excess amount is written off. NOTE 6 - On January 6, 1998, the Company, entered into a Preferred Stock and Warrant Purchase Agreement (the "Agreement") with Pequot Private Equity Fund, L.P., a Delaware limited partnership ("PPEF") and Pequot Offshore Private Equity Fund, Inc., a British Virgin Islands corporation (together with PPEF, the "Pequot Entities"). Pursuant to the terms of the Agreement, on January 7, 1998, the Company sold 1,666,667 shares of Series D Preferred Stock, at $1.50 per share, and 750,393 Warrants to the Pequot Entities for an aggregate purchase price of $2,500,000.50. The Series D Preferred Stock is automatically convertible into Common Stock on a one-for-one basis, subject to adjustment. In addition, the Series D Preferred Stock is subject to mandatory conversion into Common Stock upon certain circumstances. The Company entered into an amendment on June 5, 1998 to the Preferred Stock and Warrant Purchase Agreement with the Pequot Entities. Pursuant to the terms of the amended Agreement, on June 5, 1998, the Company sold 833,333 shares of Series D Preferred Stock, at $1.50 per share, and 375,197 Warrants to the Pequot Entities for an aggregate purchase price of $1,250,001. On June 30, 1998, the Company sold an additional 833,333 shares of Series D Preferred Stock, at $1.50 per share, and 375,197 Warrants to the Pequot Entities for an aggregate purchase price of $1,250,000. As part of the Agreement with the Pequot Entities, James McNiel joined the Board of Directors of the Company, as designee of the Pequot Entities, and has agreed to provide certain consulting services to the Company. In addition to consulting fees in connection with such service, the Company granted Mr. McNiel warrants for the purchase of 100,000 shares of Common Stock. NOTE 7 - The Company has adopted American Institute of Certified Public Accountants Statement of Position 97-2, "Software Revenue Recognition." Adoption of this pronouncement did not have a material effect on the revenue recognition practices of the Company. The Company has adopted SFAS No. 130, Reporting Comprehensive Income, in the quarter ended March 31, 1998. SFAS 130 requires that all items that are required to be recognized under accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. The statement requires that an enterprise classify items of other comprehensive income by their nature in a financial statement and to display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of a statement of financial position. The Company believes that the adoption of SFAS 130 will have no material impact on its financial statements as there are no material differences between net income and comprehensive income. NOTE 8 - The Company is currently a defendant in one legal proceeding. The case involves a suit and countersuit between the Company and Programmer's Paradise, Inc. ("PPI") of Shrewsbury, New Jersey. The proceedings are intended to resolve a valuation dispute of approximately $1,100,000 related to the Net Assets Transferred to PPI during the 1996 divestiture of The Software Developer's Company, Inc. The Company's management does not believe that this case will have a material adverse effect on the Company's results of operations. At this time, the Company cannot predict the outcome of this case. NETEGRITY, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The Private Securities Litigation Reform Act of 1995 contains certain safe harbors regarding forward-looking statements. In that context, the discussion in this Item contains forward-looking statements which involve certain degrees of risk and uncertainties, including statements relating to liquidity and capital resources. Except for the historical information contained herein, the matters discussed in this section are such forward-looking statements that involve risks and uncertainties, including the impact of competitive pricing within the software industry, the effect any reaction to such competitive pressures has on the need for and effect of any business restructuring, the presence of competitors with greater financial resources, capacity and supply constraints or difficulties, and the Company's continuing need for improved profitability and liquidity. The Company's revenues were generated by the sale of network security products, integration and support services to companies doing business on the Internet and internal networks. The Company plans to develop and introduce new products to address the changing needs of the evolving network security market. There can be no assurance that the Company will be able to develop new products or that such products will achieve market acceptance, or, if market acceptance is achieved, that the Company will be able to maintain such acceptance for a significant period of time. RESULTS OF OPERATIONS The following information should be read in conjunction with the consolidated financial statements and notes thereto: Period to Period % Increase/(Decrease) % to Net Revenue Three Months Ended For the three months June 30, ended June 30, 1998 1997 1998 vs. 1997 ----------------- ------------- Net Revenues: Product sales 100% 100% (11%) Gross Margins: Product sales 61% 41% 34% Selling, general and administrative expenses 149% 107% 24% Research and development costs 43% 16% 144% (Loss) from operations (130%) (82%) 41% REVENUES: Total net revenues for the second quarter ended June 30, 1998 decreased by $129,222, or 11%, to $1,054,434 from $1,183,656 in the second quarter ended June 30, 1997. This decrease is due to a decline in the Company's firewall reseller business as a result of the Company's continued de-emphasis on this portion of its business. This was partially offset by revenue achieved from the Company's SiteMinder product and related services in the second quarter ended June 30, 1998. GROSS PROFIT: Total gross profit dollars for the second quarter ended June 30, 1998 increased by $163,390, or 34%, to $647,344 compared with $483,954 in the second quarter ended June 30, 1997. This increase can be attributed to higher gross margins relating to sales of the Company's SiteMinder product and services during the quarter. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling, General and Administrative (SG&A) expenses increased by $299,116, or 24% to $1,571,311 for the second quarter ended June 30, 1998 from $1,272,195 in the quarter ended June 30, 1997. This increase was a result of the Company continuing to build its sales, marketing and technical support infrastructure to support the growth in sales of the Company's SiteMinder product and services. RESEARCH AND DEVELOPMENT COSTS: Research and Development expenditures for the second quarter ended June 30, 1998 increased by $266,647, or 144% to $451,997 as compared to $185,350 for the quarter ended June 30, 1997. The Company continues to develop and enhance its product line to address the changing needs of the evolving web access control market. Certain research and development expenditures are incurred substantially in advance of the related revenue, and in some cases, do not generate revenue. INTEREST INCOME: Net interest income (expense) for the first quarter ended June 30, 1998 decreased $25,970, or 41%, to $36,686 from $62,656 for the same period last year. This decrease is mainly attributable to a lower average cash and investment portfolio balance. Period to Period % Increase/(Decrease) Six Months Ended For the six months % to Net Revenue June 30, ended June 30, 1998 1997 1998 vs. 1997 ------------- ------------- Net Revenues: Product sales 100% 100% (14%) Gross Margins: Product sales 60% 43% 19% Selling, general and administrative expenses 167% 106% 36% Research and development costs 47% 13% 205% (Loss) from operations (151%) (120%) 75% REVENUES: Total net revenues for the six months ended June 30, 1998 decreased by $305,995, or 14%, to $1,864,255 from $2,170,250 in the six months ended June 30, 1997. This decrease is due to a decline in the Company's firewall reseller business as a result of the Company's continued de-emphasis on this portion of its business. This was significantly offset by revenue achieved from the Company's SiteMinder product and related services during the six months ended June 30, 1998. GROSS PROFIT: Total gross profit dollars for the six months ended June 30, 1998 increased by $175,312, or 19%, to $1,110,609 from $935,297 in the six months ended June 30, 1997. This increase can be attributed to higher gross margins relating to sales of the Company's SiteMinder product and services during the six months ended June 30, 1998. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling, General and Administrative (SG&A) expenses increased by $825,504, or 36%, to $3,119,221 for the six months ended June 30, 1998 from $2,293,717 in the six months ended June 30, 1997. This increase was a result of the Company continuing to build its sales, marketing and technical support infrastructure to support the growth in sales of the Company's SiteMinder product and services. RESEARCH AND DEVELOPMENT COSTS: Research and Development expenditures for the first six months ended June 30, 1998 increased by $586,355, or 205% to $872,853 as compared to $286,498 for the six months ended June 30, 1997. The Company continues to develop and enhance its product line to address the changing needs of the evolving web access control market. Certain research and development expenditures are incurred substantially in advance of the related revenue, and in some cases, do not generate revenue. INTEREST INCOME: Net interest income (expense) for the first quarter ended June 30, 1998 decreased $73,061, or 52%, to $68,657 from $141,718 for the same period last year. This decrease is mainly attributable to a lower average cash and investment portfolio balance. LIQUIDITY AND CAPITAL RESOURCES (in thousands, except ratios) June 30, December 31, Financial Condition as of 1998 1997 --------------------- Cash and cash equivalents $4,012 $2,134 Working capital 2,380 9 Current ratio 1.70 1.00 Cash Flow Activity Summary for June 30, June 30, the Six Months Ended 1998 1997 -------------------- Net cash (used for) provided by continuing operating activities $(3,119) (1,666) Net cash used for investing activities (124) (570) Net cash provided by (used for) financing activities 5,121 107 The Company's net cash balance increased by $1,878,476 to $4,012,062 at June 30, 1998 from $2,133,586 at December 31, 1997. This increase was attributable to proceeds from preferred stock offerings entered into with the Pequot Entities consummated through June 30, 1998 (see Note 6), offset by expenditures related to building its sales, marketing, and development infrastructure for its SiteMinder product business. Accounts receivable-trade (net of allowance for doubtful accounts) increased 8% to $854,623 at June 30, 1998 from $791,369 at December 31, 1997. This increase resulted primarily from the increased volume of SiteMinder related sales closed during the last month of the second quarter ended June 30, 1998. Working capital increased by $2,370,650 to $2,379,766 at June 30, 1998 from $9,116 at December 31, 1997. This increase was primarily attributable to proceeds from preferred stock offerings entered into with the Pequot Entities consummated through June 30, 1998 (see Note 6), offset by expenditures related to building its sales, marketing, and development infrastructure for its SiteMinder product business. The Company anticipates that its existing cash resources and anticipated cash flow from operations will be sufficient to fund its operations through the Company's current fiscal year ending December 31, 1998. PART II. - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS During the second quarter ended June 30, 1998, the Company reached a settlement with Lemma, Inc. with regard to the dispute arising from a 1996 consulting contract. ITEM 2. CHANGES IN SECURITIES During the quarter ended June 30, 1998, the Company issued 1,666,666 shares of Series D Preferred Stock, par value $.01 as described in Note 6. The securities were issued to institutional investors pursuant to the exemption afforded by Section 4(2) promulgated under the Securities Act of 1933 for transactions not involving a public offering. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On April 15, 1998, the Board of Directors caused to be distributed to stockholders of record as of April 8, 1998 a Notice of Special Meeting in Lieu of Annual Meeting of Stockholders, Proxy and a Proxy Statement for the Special Meeting on May 13, 1998. On that record date, the Company had outstanding 9,292,526 shares of Common Stock (excluding treasury shares) and 1,666,667 of Series D Preferred Stock, convertible into Common Stock on a one-for-one basis. The holders of shares of Series D Preferred Stock and Common Stock voted together as a single class. At the meeting, the stockholders acted upon the following proposals: (1) to elect a Board of Directors; (2) approve the 1997 Non-Employee Director Stock Option Plan which was adopted by the Board of Directors on September 10, 1997, which reserved for issuance 125,000 shares of the Company's Common Stock subject to adjustment for capital changes as provided in the Plan. Voting results were as follows: (1) Election of Directors: FOR WITHHELD Stephen L. Watson 9,534,750 15,800 Barry N. Bycoff 9,531,950 18,600 Milton J. Pappas 9,532,350 18,200 Ralph B. Wagner 9,532,750 17,800 Michael L. Mark 9,534,750 15,800 Eric R. Giler 9,532,750 17,800 James McNiel 9,534,750 15,800 (2) To approve the 1997 Non-Employee Director Stock Option Plan: FOR WITHHELD 9,391,139 122,961 ITEM 5. OTHER INFORMATION In accordance with the provisions of Rule 14a-4(c) promulgated under the Securities Exchange Act of 1934, if the Company does not receive notice of a shareholder proposal to be raised at its 1999 Annual Meeting on or before March 1, 1999, then in such event, the management proxies shall be allowed to use their discretionary voting authority when the proposal is raised at the 1999 Annual Meeting of Stockholders. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibit 11.00 - Computation of Earnings Per Share (b) Exhibit 27.00 - Financial Data Schedule (Edgar only) (c) The Company filed a Report on Form 8-K/A dated April 29,1998 amending the Form 8-K previously filed on January 15, 1998 for the Preferred Stock and Warrant Purchase Agreement with the Pequot Entities as described in Note 6. (d) The Company filed a Report on Form 8-K dated June 12, 1998 for the Preferred Stock and Warrant Purchase Agreement with the Pequot Entities as described in Note 6. 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. NETEGRITY, INC. Date: August 11, 1998 By: /s/ Barry N. Bycoff Barry N. Bycoff President and Chief Executive Officer (Principal Executive Officer) Date: August 11, 1998 By: /s/ James E. Hayden James E. Hayden Vice President, Finance and Administration, and Chief Financial Officer (Principal Financial and Chief Accounting Officer) EXHIBIT 11.00 NETEGRITY, INC. COMPUTATION OF EARNINGS PER SHARE (UNAUDITED) (In thousands, except per share data) Three months ended June 30, 1998 1997 ----------------- BASIC: Average Common shares outstanding 9,363 9,269 Net loss $(1,339) $(1,959) Per share amount $(0.14) $(0.21) DILUTED: Average Common shares outstanding 9,363 9,269 Net effect of dilutive stock options and warrants based on treasury stock method --- --- Total 9,363 9,269 ----- ----- Net loss $(1,339) $(1,959) Per share amount $(0.14) $(0.21) Six months ended June 30, 1998 1997 ----------------- BASIC: Average Common shares outstanding 9,323 9,265 Net loss $(2,813) $(2,607) Per share amount $(0.30) $(0.28) DILUTED: Average Common shares outstanding 9,323 9,265 Net effect of dilutive stock options and warrants based on treasury stock method --- --- Total 9,323 9,265 ----- ----- Net loss $(2,813) $(2,607) Per share amount $(0.30) $(0.28) EX-27 2
5 The attached Financial Data Schedule is for the three-months ended June 30, 1998 and should be read in conjunction with the Netegrity, Inc. Form 10-Q for the same period. 3-MOS DEC-31-1998 JUN-30-1998 4,012,062 0 913,093 58,470 0 5,774,442 638,888 265,279 6,742,119 3,394,676 0 0 33,333 93,975 3,220,135 6,742,119 1,054,434 1,054,434 407,090 2,430,398 0 0 872 (1,339,278) 0 (1,339,278) 0 0 0 (1,339,278) (0.14) (0.14)
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