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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended JUNE 30, 1997
Commission file number 0-020992
MATHSOFT, INC.
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(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2842217
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(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification)
101 MAIN STREET, CAMBRIDGE, MASSACHUSETTS 02142
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (617) 577-1017
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE
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(Title of class)
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.____
The aggregate market value of the voting stock held by non-affiliates of
the registrant was approximately $20,493,478 as of September 3, 1997 (computed
by reference to the closing price of such stock on the Nasdaq Small Cap
Market). The number of shares of common stock, $.01 par value, outstanding as
of September 3, 1997 was 9,019,745.
DOCUMENTS INCORPORATED BY REFERENCE
Specified portions of the 1997 Annual Report to Stockholders for the
fiscal year ended June 30, 1997 are incorporated by reference into Parts II and
IV hereof.
The information required in response to Part III hereof is incorporated
by reference to the specified portions of the registrant's Proxy Statement for
the 1997 Annual Meeting of Stockholders to be held on December 12, 1997.
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ITEM 1. BUSINESS.
General
MathSoft, Inc. ("MathSoft" or the "Company") develops, markets and
supports software productivity tools for the technical calculation and
data analysis markets comprised of professionals, researchers, students
and educators.
Mathcad(R), the Company's principal technical calculation product, was
first released in fiscal 1987 and can be used by desktop and laptop
computer users to perform calculations from the simple to the elaborate,
and then document the results. Mathcad offers technical professionals,
educators, and students an interactive, intuitive, easy-to-modify
alternative to their traditional calculation methods such as pencil and
paper, scratchpads and calculators.
The market for technical calculation software includes technical
professionals, such as electrical, mechanical and civil engineers,
scientists, mathematicians, researchers, technicians and analysts, as
well as educators and students who regularly are required to perform
technical calculations. These users often refer to a wide range of
published materials containing formulas or data which can be used in
solving technical problems.
In 1992, the Company expanded its technical calculation software product
line by introducing Electronic Books as add-on products to Mathcad. These
books deliver extensive off-the-shelf technical information, such as
formulas and data, which is critical to technical problem solving.
Through the use of MathSoft's proprietary "live document interface(TM)"
these books provide the Mathcad user with on-screen access to interactive
technical information. This enables a Mathcad user to either perform
calculations in the book itself or transfer formulas, data and results to
Mathcad for instant calculation and analysis. The Company is delivering
electronic versions of industry-leading reference works from nationally
and internationally recognized publishers, in addition to internally
authored works. In addition, the Company licenses its Mathcad and
Electronic Book authoring technology to third party publishers for use in
creating interactive Electronic Books which are marketed and distributed
by such third party publishers as stand-alone products.
In May 1993, the Company opened an International office located in the
United Kingdom to broaden distribution of its products. In fiscal 1997,
international sales of all technical calculation and data analysis
software products and services represented 34.0% of total revenues.
In June 1993, the Company introduced a new product line through its
wholly-owned subsidiary, Statistical Sciences, Inc., now referred to as
MathSoft's Data Analysis Products Division ("DAPD"). DAPD develops and
markets advanced data analysis software products and services based on
"S", a computer language designed for statistics applications. DAPD's
principal product is S-PLUS(R), an interactive computing environment
which provides both a full-featured graphical data analysis system and an
object-oriented language. The Company acquired this business on June 30,
1993, through the acquisition of substantially all of the assets and
business of Statistical Sciences, Inc., a Washington corporation. In
fiscal 1997, worldwide sales of data analysis products and services
represented 30.9% of total revenues.
The market for data analysis software consists principally of
professional and academic scientists, engineers, statisticians and
business analysts. Data analysis products are used in such fields as
biomedical technology, quantitative financial analysis and risk
assessment, environmental science and engineering, industrial and market
research, and process control.
In November 1995, the Company acquired 100% of the outstanding stock of
TriMetrix(R), Inc. ("TriMetrix"), a Washington corporation, in a business
combination accounted for as a pooling of interests. As a result of the
business combination, TriMetrix became a wholly owned subsidiary of the
Company. MathSoft complemented its technical calculation product line
with the addition of Axum(R), a Windows-based technical charting and data
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analysis product acquired with TriMetrix, which transforms, manipulates
and sorts data sets to perform both simple and advanced analysis. Axum
has been redesigned to link seamlessly with Mathcad and is the
technological foundation for the most recent release of S-PLUS, S-PLUS
4.0, announced in June 1997.
In June 1996, the Company released StudyWorks!(TM) for Math and
StudyWorks!(TM) for Science targeted specifically toward high school and
non-engineering college students and educators. Both StudyWorks products
offer an interactive learning environment and assist students in both
mastering math and science concepts and creating professional looking
homework and lab reports in addition to allowing both educators and
students the ability to collaborate on projects. In September 1996, the
Company announced the release of StudyWorks!(TM) Schools, an
instructional edition of the StudyWorks for Math and StudyWorks for
Science software, which offers teachers a tools-based, interactive
teaching and learning environment.
In November 1996, the Company acquired 100% of the outstanding stock of
acroScience Corporation ("acroScience"), a Washington corporation, in a
business combination accounted for as a pooling of interests. As a result
of the business combination, acroScience became a wholly owned subsidiary
of the Company. MathSoft integrated visual modeling and programming
technology acquired with acroScience into its technical calculation
product line's latest release of Mathcad, Mathcad 7 for Windows, released
in June 1997.
In April 1997, the Company expanded its data analysis product line by
introducing MathSoft StatServer(TM), a warehouse-independent platform for
distributing statistical analysis and graphics to business professionals
and analysts over company Intranets. StatServer uses the S-PLUS
technology to create deployable intelligent analytics for an organization
and integrates with existing data storage and desktop applications.
The Company's goals are to continue to meet the expanding calculation and
data analysis needs of technical professionals, to provide students and
educators with software tools that can be used for learning and for
solving real-world problems and to develop new products for the growing
needs of businesses. The Company will continue to broaden the appeal for
all of its products to existing and new markets through technological
innovation, in such areas as ease-of-use, mathematical power, graphics
and deployability, and to continue to expand its distribution as new
products for new markets are introduced.
The Company was incorporated in Massachusetts in October, 1984 under the
name Engineering Specific Products Corp. and changed its name to
MathSoft, Inc. in January 1986. The Company's principal executive offices
are located at 101 Main Street, Cambridge, Massachusetts 02142, and its
telephone number is (617) 577-1017.
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Products
Technical Calculation Software Products
MathSoft publishes a range of technical calculation and software products
which allow users to perform calculations and create publication-quality
documents on personal computers. Its principal product in this category,
Mathcad, is to technical professionals what spreadsheets have proven to
be for business professionals. Mathcad can be used by desktop computer
users to perform technical calculations, from the simple to the
elaborate. An innovative feature of Mathcad is its ability to allow the
user to electronically access and manipulate formulas and data available
in the Company's Electronic Books and Function Packs. Electronic Books
provide on-screen libraries of industry-leading reference works, user
guides, solution templates, and educational materials while Function
Packs provide additional functionality for advanced users. StudyWorks,
the most recent addition to the Mathcad product line, was designed as an
integrated learning tool combining math, text, graphs and graphics for
the high school and college market. StudyWorks helps students master math
and science concepts, get better grades and create professional-looking
homework and lab reports.
Mathcad
Mathcad's broad appeal lies in its use of MathSoft's proprietary "live
document interface" technology. This permits users to calculate on a
computer in much the same way that they would on a scratchpad where
equations can be written anywhere, using real math notation, and erased,
changed and moved. A scratchpad can show a variety of expressions such as
formulas, words, graphs, data, equations and pictures. Mathcad works in a
similar free-form manner by literally turning a computer screen into a
live worksheet and therefore provides a very intuitive interface to
perform a wide range of numeric or symbolic calculations, but Mathcad has
one distinct advantage over a real scratchpad -- it calculates.
When using Mathcad, the computer screen initially appears blank like a
scratchpad. Using the keyboard and the mouse, the user begins by placing
the cursor anywhere on the screen and starts typing. To create a formula,
the user types keystrokes (+, /, *, etc.) or uses a mouse to click on a
symbol palette. As the user types, Mathcad automatically formats the
formulas in standard mathematical notation and instantly calculates the
results. To create a graph, the user selects the graph symbol from the
palette and defines the parameters of the graph. As with an electronic
spreadsheet, Mathcad instantly updates results as changes to variables or
formulas are made. Text may be added anywhere. Multi-page presentation
quality documents can be printed, complete with text, graphics, tables
and equations. It's free-form interactive environment makes Mathcad ideal
for formulating ideas, setting up problems and evolving solutions and
sharing both the process and the results through printed documents,
e-mail, and the World Wide Web.
Mathcad is used as a calculator for simple formulas, as a more elaborate
solver for equations formally linked within a "live document", as a
technical report generator, as a live charting facility, and as a
mathematical teaching environment. Mathcad also provides an interface to
on-line technical reference works. Mathcad performs numeric and symbolic
calculations in the real and complex domain, solves systems of linear and
non-linear equations, and performs iterative calculations.
Electronic Books
An extension of the Mathcad product line, Electronic Books deliver
information and solutions in an interactive form to Mathcad users.
Electronic Books provide the user with on-screen libraries of technical
data combined with Mathcad's capacity to utilize and manipulate the raw
data through its "live document interface". This enables the user to
search the book for material, use hyperlinks to jump to related sections
within the work, and calculate problems and manipulate data using
formulas and data contained in the work. A key feature of MathSoft's
Electronic Books is that the material is live and interactive, enabling a
Mathcad user to apply the formulas or data
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from the book either by performing calculations in the book itself or by
transferring the formulas or data, or results, to Mathcad for calculation
and analysis. Without the Electronic Book, the user must manually key in
entire formulas from published sources before using the software to solve
equations. The book may contain reference information (e.g., the
properties of various materials and standard formulas), solutions for
standard engineering problems, tutorials on selected topics, or
educational courseware. Additionally, Mathcad's "live document interface"
supports the inclusion of sound and video components.
In addition to internally authored works, the Company delivers electronic
versions of industry-leading reference works from nationally and
internationally recognized publishers. The agreements by which the
Company licenses content for Electronic Books from publishers typically
provide for a non-exclusive license at an agreed upon royalty rate, and
continue for a term of five to seven years unless extended by mutual
agreement.
The Company also licenses its Mathcad and Electronic Book authoring
technology to third party publishers for use in creating interactive
Electronic Books which are marketed and distributed by such third party
publishers as stand-alone products. Users are not required to use Mathcad
to access these interactive Electronic Books.
Function Packs
Function Packs provide additional functionality to Mathcad in the areas
of signal processing, data analysis, statistics and graphics. Once
installed, the functions are seamlessly integrated with the Mathcad
function set allowing the user to see results immediately and explore the
effects of changing parameters in mathematical routines.
Axum
In November 1995, the Company acquired 100% of the outstanding stock of
TriMetrix, Inc., a software company located in Seattle, Washington and
the developer of Axum software. Axum is a Windows-based advanced
technical graphing and data analysis software which offers scientists and
engineers in the technical professional market, including Mathcad users,
the advanced charting tools needed for creating compelling, highly visual
presentations and publication-quality documents. Users can transform,
manipulate and sort data sets to perform both simple and advanced
analysis. Axum has also been redesigned to link seamlessly with Mathcad.
StudyWorks
StudyWorks!(TM) for Math and StudyWorks!(TM) for Science, productivity
software for high school and college students and their teachers, was
designed as a rich learning environment that helps students understand
math and science problems, complete and check a variety of solutions, and
print out great looking lab reports and homework papers. It also contains
a section to help users prepare for the SAT II tests. Each product is a
three-in-one combination of an application, rich interactive content and
a unique two-way internet access. StudyWorks is based on a powerful
graphical calculation and document preparation tool and includes rich
multimedia encyclopedias of math and science formulas and key concepts in
algebra, geometry, earth science, chemistry, pre-calculus, physics,
calculus and statistics. Users also receive built-in links to the
Company's StudyWorks home page which allows high school students, college
students and teachers to participate in virtual study groups and
discussion forums, pick up Homework Hints and link to related sites on
the World Wide Web.
StudyWorks!(TM) for Schools, released in September 1996, was designed as
the instructional edition complement to the Company's StudyWorks for Math
and StudyWorks for Science software products. StudyWorks for Schools
allows teachers to integrate software and distance learning approaches
into their current math and science curriculum and provide students with
an "active-learning", content-rich learning tool. StudyWorks for Schools
integrates seamlessly with existing curricula, works with graphing
calculators, includes a content-rich math and science reference library,
and comes with a Teachers Resource Guide featuring sample lesson plans,
classroom presentations, lab and homework exercises and tips for
maximizing the use of the technology. It also connects
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teachers and students to each other via the Web-based Collaboratory(TM)
for a variety of distance learning applications, including virtual study
groups, on-line tutoring, and the dissemination of class or lab notes,
problem sets, exams and solutions.
Data Analysis Software Products
S-PLUS
On June 30, 1993, the Company acquired substantially all of the assets of
Statistical Sciences, Inc., a software company located in Seattle,
Washington. The Company's principal product in this category, S-PLUS, is
an advanced, exploratory data analysis and statistical data mining
solution for technical and business professionals who need sophisticated
analysis and visualization capabilities. Based on the object-oriented "S"
programming language licensed from Lucent Technologies Inc., S-PLUS
enables users to perform exploratory data analysis, graphics, statistics,
visualization and mathematical computing in the Windows and UNIX
environments. The primary advantage of S-PLUS lies within the "S"
Language. The "S" language is the only modern object-oriented language
created specifically for data visualization and exploration, statistical
modeling and programming with data. This interactive language environment
gives users immediate feedback at every stage of their analysis.
Modules
To complement S-PLUS, the Company offers add-on modules that work with
S-PLUS and provide additional "S" language functions for specialized data
analysis purposes.
StatServer
In April 1997, the Company expanded its data analysis product line by
introducing MathSoft StatServer(TM). StatServer enables corporations to
leverage existing client/server and Internet/Intranet technologies and
deploy statistical expertise throughout an organization. StatServer is
data warehouse-independent and integrates seamlessly with all standard
database and data warehouse formats. The robust database support provides
the tools for advanced analysis and data visualization of the most
popular relational databases. With StatServer, basic statistical models
and data visualization capabilities are built and stored in a central
server for access by non-technical users, who can apply these analytical
techniques from a single and familiar client to understand or interpret
key data sets. Using StatServer, professionals in diverse fields such as
finance, biomedicine and manufacturing can use familiar tools such as
Excel, Netscape or Powerbuilder to access corporate data resources and
perform data analysis without becoming experts in statistics or users of
statistical tools. StatServer moves beyond the capabilities of report
writers, spreadsheet applications and stand-alone data analysis software,
representing a significant advancement in decision support and data
mining technology.
Marketing and Sales
Technical Calculation Software Products
The Company's market for technical calculation software products consists
of two significant groups of end users: technical professionals and
educators and students. End users within the technical professionals
group span numerous fields and include electrical, mechanical and civil
engineers, scientists, mathematicians, researchers, technicians and
analysts. The education market consists of secondary, undergraduate and
graduate educators and students in many technical disciplines. The
Company's products are currently used as tools for diverse purposes from
back-of-the envelope calculations to bridge design and genetic
engineering.
MathSoft reaches domestic customers of Mathcad primarily through a
network of educational and commercial third party resellers and
distributors. To complement this network, the Company has a domestic
telesales organization focused on sales to the registered installed base
as well as lead generation, prospect qualification and
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sales of site license agreements and network licenses. In addition,
Mathcad upgrades are primarily marketed to the Company's registered
installed base via direct mail. In fiscal 1997, domestic sales through
distributor and reseller channels accounted for 57.9% of total domestic
sales of technical calculation software products, with the balance of
such sales through either installed base direct mail or the Company's
telesales operations.
Internationally, all technical calculation software products are marketed
primarily through a network of resellers and distributors. Mathcad
upgrades are marketed through distributors as well as to the registered
installed base via direct mail. In fiscal 1997, international sales
through resellers and distributors accounted for 99.3% of total
international sales of technical calculation software products.
Data Analysis Software Products
The Company's market for data analysis products consists principally of
professional and academic scientists, engineers and statisticians. The
product is used in such fields as biomedical technology, quantitative
financial analysis and risk assessment, environmental science and
engineering, industrial and market research, and process control.
The Company reaches domestic customers of its data analysis products both
through its domestic telesales organization and a new outside sales team.
Leads are generated from advertising, vertical market list rentals and
tradeshows, which are then pursued by the telesales organization.
Internationally, the Company reaches customers of its data analysis
products entirely through a network of resellers and distributors.
Customer Technical Support
Technical Calculation Software Products
MathSoft subcontracts customer technical support to its domestic
customers by phone, fax and mail through a third party vendor located in
Greely, Colorado. A technical support staff of engineers located in
Cambridge is available to support the vendor in Colorado as well as to
resolve the most difficult technical support issues. The Company provides
this support free of charge to individual end-users. For corporate and
academic network users, the Company provides this support free of charge
for 30 days beginning with the first customer placed technical support
request. Subsequent to this free support period, the Company offers a
Premium Support Plan. The Company currently provides technical support
for its StudyWorks products free of charge and additionally supports this
product via the Company's home page on the World Wide Web.
International customers who purchase product from distributors receive
first line technical support from their respective local distributor. A
technical support staff of engineers, located in the Company's United
Kingdom sales and marketing office, is available to support the
distributors.
Data Analysis Software Products
Technical support for the S-PLUS product line is provided to domestic
customers by a staff of engineers located in Seattle. Support is only
available to customers who purchase an annual maintenance and technical
support plan.
International customers who purchase products from distributors receive
first line technical support from their respective local distributor. A
technical support staff of engineers, located in the Company's United
Kingdom sales and marketing office, is available to support the
distributors.
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Manufacturing and Distribution
The Company utilizes several third party vendors to manufacture and
distribute its products. This permits the Company to manage peak volumes
customary in the software industry and to avoid having to maintain high
fixed costs while experiencing daily fluctuations in order and customer
contacts.
The Company's practice is to ship its products promptly upon receipt of
orders from its customers and, as a result, product backlog is not
significant.
Technical Calculation Software Products
The Company subcontracts with a single independent third party vendor,
located in Plymouth, Massachusetts, to manufacture all of its technical
calculation software products and fulfill all of its domestic orders.
With the exception of Mathcad upgrade orders generated by direct mail,
the Company processes all domestic orders from its leased facilities
located in Cambridge, Massachusetts. MathSoft subcontracts the processing
of all Mathcad upgrade direct mail orders with an independent service
company located in Chicago, Illinois.
All international orders are processed by a third party vendor located in
the United Kingdom that also provides warehousing and fulfillment
services.
Data Analysis Software Products
The Company subcontracts with a third party vendor, located in Monroe,
Washington, to manufacture all of its S-PLUS product line products. The
Company warehouses inventory and processes and fulfills domestic orders
internally out of its Seattle office. All international orders are
processed and fulfilled by third party vendors located in the United
Kingdom that also provide warehousing and fulfillment services.
Product Development
MathSoft's research and development organization, divided between the
Company's Cambridge, Massachusetts and Seattle, Washington locations, is
responsible for software development, product documentation, and quality
assurance. Its priorities are to continue technical innovation for power
and performance and to respond to market feedback by continuing to design
products for ease-of-use.
MathSoft's development team consists of experts in software engineering,
quality assurance, mathematics, statistics, engineering and
documentation. In software engineering, MathSoft's professional staff has
expertise in computer graphics, compiler design, user interface design
and advanced Windows and Internet technologies.
During the fiscal years ended June 30, 1997, 1996 and 1995, research and
development costs charged to operations were $5,143,000, $3,659,000, and
$3,059,000, respectively. The Company does not capitalize internal
software development costs.
Competition
The markets for technical calculation and data analysis software products
are highly competitive. In the technical calculation software market,
MathSoft considers its principal competition to include technical
calculation software from companies providing specialized tools, such as
The MathWorks, Waterloo Maple Software and Wolfram Research. In the data
analysis market, the Company considers its principal competition to
include statistical software products from such companies as SAS, SPSS
and Visual Numerics. In both markets, the Company faces competition from
companies providing competing software solutions, such as spreadsheets.
The Company may also face new competition from potential entrants into
the technical calculation and data analysis software markets and more
focused competition from companies in related markets, such as providers
of spreadsheet programs, which could add to or improve the technical
calculation and data analysis functionality of their existing products.
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Some of these companies may have significant name recognition, as well as
substantially greater capital resources, marketing experience, research
and development staffs and production facilities than the Company.
Although the Company believes it has a technological advantage over
existing competitors in the technical calculation and the data analysis
software markets, maintaining that advantage will require continued
investment by the Company in research and development. There can be no
assurance that the Company will have sufficient resources to make such
investment or that the Company will be able to make the technological
advances necessary to maintain such competitive advantage.
Intellectual Property Rights and Licenses
MathSoft's software is proprietary and the Company attempts to protect it
with copyrights, trade secret laws and internal nondisclosure safeguards,
as well as restrictions on copying, disclosure and transferability that
are incorporated into its software license agreements. Generally, the
Company's products are not physically copy-protected. In order to retain
exclusive ownership rights to all software developed by MathSoft, the
Company licenses all software and provides it in executable code only,
with contractual restrictions on copying, disclosure and transferability.
As is customary in the industry, MathSoft licenses its products to end
users by use of a `shrink-wrap' license. The source code for all of the
Company's products is protected as a trade secret and as unpublished
copyrighted work. In addition, the Company has entered into nondisclosure
and inventions agreements with each of its key employees. The Company has
been granted two patents and is aggressively pursuing patent protection.
However, in those areas where the Company has no patent protection,
judicial enforcement of copyright laws may be uncertain.
Prior to fiscal 1994, the Company licensed, on a worldwide basis, MAPLE V
Symbolic Algebra Software jointly from the University of Waterloo,
Waterloo Maple Software, Inc. and two authors in exchange for ongoing
royalty payments. In fiscal 1994, the Company was granted a non-exclusive
worldwide perpetual license for this technology for inclusion in Mathcad
and other products in exchange for a fixed royalty payment.
The Company is the exclusive, worldwide licensee (subject to certain
prior license grants) until February 18, 2002 of Lucent Technologies Inc.
for the "S" programming language. Under the license, the Company has the
exclusive right to use, sublicense and support the "S" programming
language from Lucent Technologies in exchange for royalties. Any
modifications, enhancements, adaptations or derivations of the "S"
programming language are the property of the Company. After February 18,
2002, the Company, at its election, may extend this exclusive license for
five year terms in perpetuity, provided that the Company continues to
comply with its obligations under the license. Although termination of
this license could have a material adverse effect on the Company's
operations as Lucent Technologies is the sole licensor of the "S"
programming language, the Company is not presently aware of any
circumstances which would prevent it from fulfilling its obligations
under the license.
Due to the rapid pace of technological change in the software industry,
the Company believes that patent, trade secret and copyright protection
are less significant to its competitive position than factors such as the
knowledge, ability and experience of the Company's personnel, new product
development, frequent product enhancements, name recognition, and ongoing
reliable product maintenance and support.
The Company believes that its products and other proprietary rights do
not infringe the proprietary rights of third parties. There can be no
assurance, however, that third parties will not assert infringement
claims in the future.
Employees
As of June 30, 1997, the Company employed approximately 160 regular
full-time and part-time employees, of which 15 were outside the United
States. As necessary, the Company supplements its regular employees with
temporary and contract personnel. As of June 30, 1997, the Company
employed 8 temporary and contract personnel, of which 1 was outside the
United States. None of the Company's regular employees are represented by
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a labor union or are subject to a collective bargaining agreement. The
Company has never experienced a work stoppage and believes that its
employee relations are good.
Cautionary Statements
In addition to the other information in this report, the following
cautionary statements should be considered carefully in evaluating the
Company and its business. Information provided by the Company from time
to time may contain certain "forward-looking" information, as that term
is defined by (i) the Private Securities Litigation Reform Act of 1995
(the "Act") and (ii) in releases made by the Securities and Exchange
Commission (the "SEC"). These cautionary statements are being made
pursuant to the provisions of the Act and with the intention of obtaining
the benefits of the "safe harbor" provisions of the Act.
Variability of Quarterly Operating Results. The Company's quarterly
operating results may vary significantly from quarter to quarter,
depending upon factors such as the introduction and market acceptance of
new products and new versions of existing products, the ability to reduce
expenses, and the activities of competitors. Because a high percentage of
the Company's expenses are relatively fixed in the near term, minor
variations in the timing of orders and shipments can cause significant
variations in quarterly operating results. The Company operates with
little or no backlog and has no long-term contracts, and substantially
all of its product revenues in each quarter result from software licenses
issued in that quarter, and the Company's ability to accurately forecast
future revenues and income for any period is necessarily limited. Any
forward-looking information provided from time to time by the Company
represents only management's then-best current estimate of future results
or trends, and actual results may differ materially from those contained
in the Company's estimates.
Potential Volatility of Stock Price. There has been significant
volatility in the market price of securities of technology companies. The
Company believes factors such as announcements of new products by the
Company or its competitors, quarterly fluctuations in the Company's
financial results or other software companies' financial results,
shortfalls in the Company's actual financial results compared to results
previously forecasted by stock market analysts, and general conditions in
the software industry and conditions in the financial markets could cause
the market price of the Common Stock to fluctuate substantially. These
market fluctuations may adversely affect the price of the Company's
Common Stock.
Risks Associated with Acquisitions. The Company has made a number of
acquisitions and will continue to review future acquisition
opportunities. No assurances can be given that acquisition candidates
will continue to be available on terms and conditions acceptable to the
Company. Acquisitions involve numerous risks, including, among other
things, possible dilution to existing shareholders, difficulties and
expenses incurred in connection with the acquisitions and the subsequent
assimilation of the operations and services or products of the acquired
companies, the difficulty of operating new (albeit related) businesses,
the diversion of management's attention from other business concerns and
the potential loss of key employees of the acquired company. In the event
that the operations of an acquired business do not live up to
expectations, the Company may be required to restructure the acquired
business or write-off the value of some or all of the assets of the
acquired business. There can be no assurance that any acquisition will be
successfully integrated into the Company's operations.
Risks Associated with Divestitures. The Company's product offerings
presently may be divided between two principal product families - those
related to its Mathcad line addressing the calculation needs of the
technical, professional and education markets, and its S-PLUS offerings,
marketed primarily to professionals needing statistical data analysis
tools.
In setting strategic goals to maximize shareholder value, the Company
from time to time considers the options of divesting itself of one
product family or the other, or product lines within a given family,
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to concentrate its focus on the business opportunity associated with the
remaining product family or product lines.
At the present time, the Company is not party to any agreement relating
to the sale of either of its product families or product lines within
such families, but it may elect to pursue such options at any time. If
the Company were to consummate such a sale, there can be no assurance
that it would receive returns from such sale that investors in the
Company would consider attractive.
Risks Associated with Distribution Channels. The Company markets and
distributes its S-PLUS products in the U.S. through the Company's
telesales and outside sales force and internationally through third party
resellers and distributors. Mathcad products are currently marketed and
distributed in the U.S. through third party resellers and distributors,
telesales and direct mail (for upgrades to the Company's installed base).
Internationally, the Company's Mathcad products are marketed and
distributed through third party resellers and distributors. There can be
no assurance that the Company will be able to retain its current
resellers and distributors, or expand its distribution channels by
entering into arrangements with new resellers and distributors in the
Company's current markets or in new markets.
Risks Associated with International Operations. Sales outside North
America accounted for approximately 36.1% of the Company's total revenues
in fiscal 1995, approximately 32.5% of the Company's total revenues in
fiscal 1996 and approximately 34.0% of the Company's total revenues in
fiscal 1997, and may continue to represent a significant portion of the
Company's product revenues. Any decrease in sales outside North America
may have a materially adverse effect on the Company's operating results.
The Company's international business and financial performance may be
affected by fluctuations in exchange rates and by trade regulations.
Reliance on Third Party Licensors. Maple V, a software product licensed
as a part of the most recent version of Mathcad, contains certain
copyrighted texts licensed from third party publishers incorporated in
the Company's Electronic Books, and the S programming language, the
language on which all of StatSci's products are based, are currently
licensed from a single source or limited source suppliers. If such
licenses are discontinued, there can be no assurance that the Company
will be able to independently develop substitutes or to obtain
alternative sources or, if able to be developed or obtained as needed in
the future, that such efforts would not result in delays or reductions in
product shipments or cost increases that could have a material adverse
effect on the Company's consolidated business operations.
Rapid Technological Change; Competition. The technical calculation
software market is subject to rapid and substantial technological change,
similar to that affecting the software industry generally. The Company,
to remain successful, must be responsive to new developments in hardware
and chip technology, operating systems, programming technology, Internet
technology and multimedia capabilities. In addition, the Company competes
against numerous other companies, some of which have significant name
recognition, as well as substantially greater capital resources,
marketing experience, research and development staffs and production
facilities than the Company. The Company's financial results may be
negatively impacted by the failure of new or existing products to be
favorably received by retailers and consumers due to price, availability,
features, other product choices or the necessity of promotions to
increase sales of the Company's products.
Uncertainties Regarding Protection of Proprietary Technology;
Uncertainties Regarding Patents. The Company believes that while the
mathematical calculations performed by the Company's software are not
proprietary, the speed and quality of displaying the computation and the
ease of use are unique to MathSoft's products. The Company's success will
depend, in part, on its ability to protect the proprietary aspects of its
products. The Company seeks to protect these proprietary aspects of its
products principally through a combination of contract provisions and
copyright, patent, trademark and trade secret laws. There can be no
assurance that the steps taken by the Company to protect its proprietary
rights will be adequate to prevent misappropriation of its technology.
Although the Company believes that its products and technology do not
infringe any existing proprietary rights of others, the use of patents to
protect software has increased and there may be pending or issued patents
of which the Company is not aware that the Company may need to license or
challenge at significant expense. There can be no
11
12
assurance that any such license would be available on acceptable terms,
if at all, or that the Company would prevail in any such challenge.
Reliance on Attracting and Retaining Key Employees. The Company's
continued success will depend in large part on its ability to attract and
retain highly-qualified technical, managerial, sales and marketing and
other personnel. Competition for such personnel is intense. None of the
senior management of the Company is subject to an employment contract,
although the Company does have non-competition agreements with its key
management and technical personnel. There can be no assurance that the
Company will be able to continue to attract or retain such personnel.
ITEM 2. PROPERTIES.
The Company leases 34,562 square feet of office space at 101 Main Street,
Cambridge, Massachusetts of which 23,350 square feet is occupied by the
Company and 11,212 square feet is sublet to a third party. The terms of
both the lease and sublease for office space are scheduled to terminate
in October, 1999. A third party vendor provides warehousing services to
meet the Company's needs. The Company also leases 13,848 square feet of
office space and subleases 4,423 square feet of office space at 1700
Westlake Avenue North, Seattle, Washington. This lease expires in
September, 1999 and the sublease expires in March, 2000. In connection
with the acquisition of acroScience, the Company assumed a lease on 1,740
square feet of office space in Boulder, Colorado which is scheduled to
terminate in January 2000. The Company currently sublets this space to a
third party, the term of which is scheduled to terminate in May 1998. The
Company also leases 2,931 square feet of office space in the United
Kingdom. The term of the lease for this office space is scheduled to
expire in March, 2000.
The Company believes that its facilities are adequate for its needs. The
Company does not consider the specific location of its offices to be
material to its business.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not involved in any legal proceedings which could have a
material adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
Not applicable.
12
13
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The information set forth under the caption "Market Price of Common
Stock" appearing in the Company's 1997 Annual Report to Stockholders,
which appears as Exhibit 13.01, is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
The information set forth under the caption "Five Year Summary of
Selected Consolidated Financial Data" appearing in the Company's 1997
Annual Report to Stockholders, which appears as Exhibit 13.01, is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information set forth under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" appearing in
the Company's 1997 Annual Report to Stockholders, which appears as
Exhibit 13.01, is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements for the Company appearing in the
Company's 1997 Annual Report to Stockholders, which appears as
Exhibit 13.01, are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
13
14
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information set forth under the captions "Occupations of Directors
and Executive Officers" and "Section 16(a) Beneficial Ownership
Reporting Compliance" appearing in the Company's Proxy Statement for the
1997 Annual Meeting of Stockholders is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information set forth under the caption "Compensation and Other
Information Concerning Directors and Officers" appearing in the Company's
Proxy Statement for the 1997 Annual Meeting of Stockholders is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information set forth under the caption "Management and Principal
Holders of Voting Securities" appearing in the Company's Proxy Statement
for the 1997 Annual Meeting of Stockholders is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information set forth under the caption "Certain Relationships and
Related Transactions" appearing in the Company's Proxy Statement for the
1997 Annual Meeting of Stockholders is incorporated herein by reference.
14
15
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this report:
1. FINANCIAL STATEMENTS. The following consolidated financial
statements of the Company and Independent Auditors Report are
incorporated in Item 8 of this report by reference to the
Company's 1997 Annual Report to Stockholders.
Report of Independent Public Accountants.
Consolidated Balance Sheets as of June 30, 1997 and 1996.
Consolidated Statements of Operations for the Years Ended June 30,
1997, 1996 and 1995.
Consolidated Statements of Stockholders' Equity for the Years
Ended June 30, 1997, 1996 and 1995.
Consolidated Statements of Cash Flows for the Years Ended June 30,
1997, 1996 and 1995.
Notes to Consolidated Financial Statements.
2. FINANCIAL STATEMENT SCHEDULES. The following financial
statement schedule is filed as part of this report and should be
read in conjunction with the consolidated financial statements of
the Company.
Schedule II Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable or
the required information is shown in the consolidated financial
statements or notes thereto.
3. EXHIBITS.
2.1 Asset Purchase Agreement, dated as of June 30, 1993 among
the Registrant, Statistical Sciences, Inc., a Washington
corporation, and the Stockholders listed on Schedule I
thereto (filed as Exhibit 2.1 to the Registrant's Current
Report on Form 8-K dated June 30, 1993 and incorporated
herein by reference).
3.1 Third Restated Articles of Organization of the Company
(filed as Exhibit 3.2 to Registration Statement number
33-55658 on Form S-1 and incorporated herein by reference).
3.2 Amended and Restated By-laws of the Company (filed as
Exhibit 3.2 to Annual Report on Form 10-K for the fiscal
year ended June 30, 1994, file number 0-020992, and
incorporated herein by reference).
4.1 Specimen certificate representing the Common Stock (filed
as Exhibit 4.1 to Registration Statement number 33-55658 on
Form S-1 and incorporated herein by reference).
4.2 Please refer to Article VI of Exhibit 3.1.
10.1 Amended and Restated 1992 Stock Plan (filed as Exhibit 10.1
to Registration Statement number 33-55658 on Form S-1 and
incorporated herein by reference).
10.2 1987 Combination Stock Plan, as amended (filed as Exhibit
10.2 to Registration Statement number 33-55658 on Form S-1
and incorporated herein by reference).
10.3 Form of Key Officer Stock Option Agreement (filed as
Exhibit 10.3 to Registration Statement number 33-55658 on
Form S-1 and incorporated herein by reference).
15
16
10.4 1992 Employee Stock Purchase Plan (filed as Exhibit 10.4 to
Registration Statement number 33-55658 on Form S-1 and
incorporated herein by reference).
10.5 1992 Non-Employee Director Stock Option Plan (filed as
Exhibit 10.5 to Registration Statement number 33-55658 on
Form S-1 and incorporated herein by reference).
10.6 Lease dated August 12, 1988, as amended to date, between
Registrant and Jonathan G. Davis, Trustee of the
Broadway/Hampshire Development Trust (filed as Exhibit 10.6
to Registration Statement number 33-55658 on Form S-1 and
incorporated herein by reference).
10.7 Third Party Software Distribution Agreement, dated January
30, 1989, as amended, between the Company, University of
Waterloo, Waterloo Maple Software, Inc. et al. (filed as
Exhibit 10.7 to Registration Statement number 33-55658 on
Form S-1 and incorporated herein by reference).
10.8 Commitment Letter, dated August 28, 1992, between the
Company and Silicon Valley Bank (filed as Exhibit 10.8 to
Registration Statement number 33-55658 on Form S-1 and
incorporated herein by reference).
10.9 Third Schedule to the Series C Preferred Stock Purchase
Agreement, dated as of June 29, 1989, among the Company and
the Investors named in the First Schedule Annexed Thereto,
regarding certain registration rights and related matters
(filed as Exhibit 10.9 to Registration Statement number
33-55658 on Form S-1 and incorporated herein by reference).
10.10 Distribution Agreement, dated as of June 18, 1987, between
the Company and Micro D, Inc., a predecessor to Ingram
Micro, Inc. (filed as Exhibit 10.10 to Registration
Statement number 33-55658 on Form S-1 and incorporated
herein by reference).
10.11 Lease Between Riverfront Office Park Joint Venture and
MathSoft, Inc., dated as of August 17, 1993 (filed as
Exhibit 10.11 to Annual Report on Form 10-K for the fiscal
year ended June 30, 1993, file number 0-020992, and
incorporated herein by reference).
10.12 Lease Agreement with the Bartell Drug Co. (Landlord), dated
as of June 22, 1990, together with Addendum Nos. A, B, C &
D of even date and as amended by Addendum No. E dated
December 9, 1992 (filed as Exhibit 10.12 to Annual Report
on Form 10-K for the fiscal year ended June 30, 1993, file
number 0-020992, and incorporated herein by reference).
10.13 Software License Agreement with American Telephone &
Telegraph Company, effective as of April 1, 1991, as
amended February 18, 1993 (filed as Exhibit 10.13 to Annual
Report on Form 10-K for the fiscal year ended June 30,
1993, file number 0-020992, and incorporated herein by
reference).*
10.14 Distributor Agreement with Mathematical Systems Institute,
Inc., dated August 24, 1990 (filed as Exhibit 10.14 to
Annual Report of Form 10-K for the fiscal year ended June
30, 1993, file number 0-020992, and incorporated herein by
reference).
10.15 Distributorship Agreement dated as of March 1, 1994 between
the Company and 766884 Ontario Inc., carrying on business
as Waterloo Maple Software (filed as Exhibit 10.15 to
Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1994, file number 0-020992, and incorporated
herein by reference).*
10.16 Perpetual Technology License dated as of March 1, 1994, as
amended by Addendum No. 1 thereto dated as of March 25,
1994, between the Company and 766884 Ontario Inc., carrying
on business as Waterloo Maple Software (filed as Exhibit
10.16 to Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1994, file number 0-020992, and
incorporated herein by reference).*
10.17 Line of Credit Agreement, dated January 11, 1996, between
the Company and Fleet Bank of Massachusetts (filed as
Exhibit 10.1 to Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 1996, file number 0-020992,
and incorporated herein by reference).
10.18 Consulting Agreement dated March 26, 1996 between the
Company and Allen M. Razdow (filed as Exhibit 10.18 to
Annual Report on Form 10-K for the fiscal year ended June
30, 1996, file number 0-020992, and incorporated herein by
reference).
16
17
10.19 Software License Agreement, dated February 18, 1996,
between the Company and Lucent Technologies Inc. (filed as
Exhibit 10.1 to Quarterly Report on Form 10-Q for the
fiscal quarter ended December 31, 1996, file number
0-020992, and incorporated herein by reference).*
10.20 Amendment to Software License Agreement, dated September 25,
1997, between the Company and Lucent Technologies Inc.+
11.1 Statement Regarding Computation of Per Share Earnings.
13.01 1997 Annual Report to Stockholders.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP.
27.1 Financial Data Schedule.
* Confidential treatment as to portions of the filed exhibit was
previously granted.
+ Confidential treatment requested as to certain portions.
(b) Reports on Form 8-K.
The Company filed a Current Report on Form 8-K dated April 24,
1997 reporting fiscal 1997 third quarter results.
17
18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
MATHSOFT, INC.
September 29, 1997 By: /S/ CHARLES J. DIGATE
------------------------------------------------
Charles J. Digate
Chairman, President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
September 29, 1997 /S/ RICHARD A. D'AMORE
------------------------------------------
Richard A. D'Amore
Director
September 29, 1997 /S/ CHARLES H. FEDERMAN
-----------------------------------------
Charles H. Federman
Director
September 29, 1997 /S/ ROBERT P. ORLANDO
------------------------------------------
Robert P. Orlando
Vice President Finance and Administration,
Chief Financial Officer, Treasurer
and Clerk
September 29, 1997 /S/ JUNE L. ROKOFF
------------------------------------------
June L. Rokoff
Director
September 29, 1997 /S/ STEVEN R. VANA-PAXHIA
---------------------------------------
Steven R. Vana-Paxhia
Director
18
19
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
2.1 Asset Purchase Agreement, dated as of June 30, 1993
among the Registrant, Statistical Sciences, Inc., a
Washington corporation, and the Stockholders listed on
Schedule I thereto (filed as Exhibit 2.1 to the
Registrant's Current Report on Form 8-K dated June 30,
1993 and incorporated herein by reference).
3.1 Third Restated Articles of Organization of the Company
(filed as Exhibit 3.2 to Registration Statement number
33-55658 on Form S-1 and incorporated herein by
reference).
3.2 Amended and Restated By-laws of the Company (filed as
Exhibit 3.2 to Annual Report on Form 10-K for the fiscal
year ended June 30, 1994, file number 0-020992, and
incorporated herein by reference).
4.1 Specimen certificate representing the Common Stock
(filed as Exhibit 4.1 to Registration Statement number
33-55658 on Form S-1 and incorporated herein by
reference).
4.2 Please refer to Article VI of Exhibit 3.1.
10.1 Amended and Restated 1992 Stock Plan (filed as Exhibit
10.1 to Registration Statement number 33-55658 on Form
S-1 and incorporated herein by reference).
10.2 1987 Combination Stock Plan, as amended (filed as
Exhibit 10.2 to Registration Statement number 33-55658
on Form S-1 and incorporated herein by reference).
10.3 Form of Key Officer Stock Option Agreement (filed as
Exhibit 10.3 to Registration Statement number 33-55658
on Form S-1 and incorporated herein by reference).
10.4 1992 Employee Stock Purchase Plan (filed as Exhibit 10.4
to Registration Statement number 33-55658 on Form S-1
and incorporated herein by reference).
10.5 1992 Non-Employee Director Stock Option Plan (filed as
Exhibit 10.5 to Registration Statement number 33-55658
on Form S-1 and incorporated herein by reference).
10.6 Lease dated August 12, 1988, as amended to date, between
Registrant and Jonathan G. Davis, Trustee of the
Broadway/Hampshire Development Trust (filed as Exhibit
10.6 to Registration Statement number 33-55658 on Form
S-1 and incorporated herein by reference).
10.7 Third Party Software Distribution Agreement, dated
January 30, 1989, as amended, between the Company,
University of Waterloo, Waterloo Maple Software, Inc. et
al. (filed as Exhibit 10.7 to Registration Statement
number 33-55658 on Form S-1 and incorporated herein by
reference).
10.8 Commitment Letter, dated August 28, 1992, between the
Company and Silicon Valley Bank (filed as Exhibit 10.8
to Registration Statement number 33-55658 on Form S-1
and incorporated herein by reference).
10.9 Third Schedule to the Series C Preferred Stock Purchase
Agreement, dated as of June 29, 1989, among the Company
and the Investors named in the First Schedule Annexed
Thereto, regarding certain registration rights and
related matters (filed as Exhibit 10.9 to Registration
Statement number 33-55658 on Form S-1 and incorporated
herein by reference).
10.10 Distribution Agreement, dated as of June 18, 1987,
between the Company and Micro D, Inc., a predecessor to
Ingram Micro, Inc. (filed as Exhibit 10.10 to
Registration Statement number 33-55658 on Form S-1 and
incorporated herein by reference).
19
20
EXHIBIT NO. DESCRIPTION
10.11 Lease Between Riverfront Office Park Joint Venture and
MathSoft, Inc., dated as of August 17, 1993 (filed as
Exhibit 10.11 to Annual Report on Form 10-K for the
fiscal year ended June 30, 1993, file number 0-020992,
and incorporated herein by reference).
10.12 Lease Agreement with the Bartell Drug Co. (Landlord),
dated as of June 22, 1990, together with Addendum Nos.
A, B, C & D of even date and as amended by Addendum No.
E dated December 9, 1992 (filed as Exhibit 10.12 to
Annual Report on Form 10-K for the fiscal year ended
June 30, 1993, file number 0-020992, and incorporated
herein by reference).
10.13 Software License Agreement with American Telephone &
Telegraph Company, effective as of April 1, 1991, as
amended February 18, 1993 (filed as Exhibit 10.13 to
Annual Report on Form 10-K for the fiscal year ended
June 30, 1993, file number 0-020992, and incorporated
herein by reference).*
10.14 Distributor Agreement with Mathematical Systems
Institute, Inc., dated August 24, 1990 (filed as Exhibit
10.14 to Annual Report on Form 10-K for the fiscal year
ended June 30, 1993, file number 0-020992, and
incorporated herein by reference).
10.15 Distributorship Agreement dated as of March 1, 1994
between the Company and 766884 Ontario Inc., carrying on
business as Waterloo Maple Software (filed as Exhibit
10.15 to Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1994, file number 0-020992, and
incorporated herein by reference).*
10.16 Perpetual Technology License dated as of March 1, 1994,
as amended by Addendum No. 1 thereto dated as of March
25, 1994, between the Company and 766884 Ontario Inc.,
carrying on business as Waterloo Maple Software (filed
as Exhibit 10.16 to Quarterly Report on Form 10-Q for
the fiscal quarter ended March 31, 1994, file number
0-020992, and incorporated herein by reference).*
10.17 Line of Credit Agreement, dated January 11, 1996,
between the Company and Fleet Bank of Massachusetts
(filed as Exhibit 10.1 to Quarterly Report on Form 10-Q
for the fiscal quarter ended March 31, 1996, file number
0-020992, and incorporated herein by reference).
10.18 Consulting Agreement dated March 26, 1996 between the
Company and Allen M. Razdow (filed as Exhibit 10.18 to
Annual Report on Form 10-K for the fiscal year ended
June 30, 1996, file number 0-020992, and incorporated
herein by reference).
10.19 Software License Agreement, dated February 18, 1996,
between the Company and Lucent Technologies Inc. (filed
as Exhibit 10.1 to Quarterly Report on Form 10-Q for the
fiscal quarter ended December 31, 1996, file number
0-020992, and incorporated herein by reference).*
10.20 Amendment to Software License Agreement, dated September 25, 1997,
between the Company and Lucent Technologies Inc.+
11.1 Statement Regarding Computation of Per Share Earnings.
13.01 1997 Annual Report to Stockholders.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP.
27.1 Financial Data Schedule.
* Confidential treatment as to portions of the filed exhibit was previously
granted.
+ Confidential treatment requested as to certain portions.
20
21
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To MathSoft, Inc.:
We have audited, in accordance with generally accepted auditing standards, the
financial statements included in MathSoft, Inc. and subsidiaries' annual report
to stockholders incorporated by reference in this Form 10-K, and have issued our
report thereon dated August 1, 1997. Our audit was made for the purpose of
forming an opinion on those statements taken as a whole. The schedule listed in
Item 14(a)(2) of the index is the responsibility of the Company's management and
is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states, in all
material respects, the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/S/ ARTHUR ANDERSEN LLP
Boston, Massachusetts
August 1, 1997
22
SCHEDULE II
MATHSOFT, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
BALANCE, CHARGED TO DEDUCTION BALANCE,
BEGINNING OF COSTS AND END OF
PERIOD EXPENSES PERIOD
YEAR ENDED JUNE 30 1995:
Allowance for doubtful accounts $ 892,781 $ 108,206 $490,665 $ 510,322
Allowance for sales returns 300,106 519,091 282,555 536,642
---------- ---------- -------- ----------
Total reserve for accounts receivable $1,192,887 $ 627,297 $773,220 $1,046,964
========== ========== ======== ==========
YEAR ENDED JUNE 30, 1996:
Allowance for doubtful accounts $ 510,322 $ 73,573 $207,161 $ 376,734
Allowance for sales returns 536,642 348,549 486,247 398,944
---------- ---------- -------- ----------
Total reserve for accounts receivable $1,046,964 $ 422,122 $693,408 $ 775,678
========== ========== ======== ==========
YEAR ENDED JUNE 30, 1997:
Allowance for doubtful accounts $ 376,734 $ 83,297 $ 49,206 $ 410,825
Allowance for sales returns 398,944 1,306,858 396,771 1,309,031
---------- ---------- -------- ----------
Total reserve for accounts receivable $ 775,678 $1,390,155 $445,977 $1,719,856
========== ========== ======== ==========