<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL QUARTER ENDED MARCH 30, 1997 COMMISSION FILE NUMBER 0-27038
VISIONEER, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 94-3156479
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
</TABLE>
34800 CAMPUS DRIVE
FREMONT, CA 94555
(510) 608-0300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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 [ ].
The number of shares of the registrant's Common Stock, $0.001 par value,
outstanding as of April 30, 1997 was 19,382,337.
================================================================================
<PAGE> 2
VISIONEER, INC.
FORM 10-Q
THREE MONTHS ENDED MARCH 31, 1997
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
a) Condensed Balance Sheets at March 31, 1997 and December 31, 1996........... 2
b) Condensed Statements of Operations for the three month periods ended March
31, 1997 and March 31, 1996................................................... 3
c) Condensed Statements of Cash Flows for the three month periods ended March
31, 1997 and March 31, 1996................................................... 4
d) Notes to Condensed Financial Statements.................................... 5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations.................................................................... 7
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............................................................. 15
Item 6. Exhibits and Reports on Form 8-K.............................................. 15
Signatures.............................................................................. 16
</TABLE>
1
<PAGE> 3
PART 1
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VISIONEER, INC.
BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
MARCH
31, DECEMBER 31,
1997 1996
-------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents.......................................... $ 23,639 $ 22,391
Short-term investments............................................. 1,473 8,747
Restricted cash.................................................... 62 62
Accounts receivable, less allowances of $5,156 and $3,931.......... 4,946 10,780
Inventory.......................................................... 2,563 4,508
Prepaid expenses and other current assets.......................... 1,855 911
--------- ---------
Total current assets............................................ 34,538 47,399
Property and equipment, net.......................................... 3,392 4,158
Other assets......................................................... 228 228
--------- ---------
$ 38,158 $ 51,785
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................... $ 10,455 $ 11,449
Deferred revenue................................................... 763 334
Accrued sales and marketing incentives............................. 1,870 2,474
Accrued payable to sub-contractors................................. 5,055 1,100
Accrued liabilities................................................ 3,488 3,235
--------- ---------
Total current liabilities....................................... 21,631 18,592
--------- ---------
Stockholders' equity:
Common stock, $0.001 par value; 50,000,000 shares authorized at
March 31, 1997 and December 31, 1996; 19,380,160 and 19,202,609
shares issued and outstanding at March 31, 1997 and December 31,
1996, respectively.............................................. 19 19
Additional paid-in-capital......................................... 87,393 86,951
Deferred compensation relating to stock options.................... (225) (250)
Notes receivable from stockholders................................. (329) (329)
Accumulated deficit................................................ (70,331) (53,198)
--------- ---------
Total stockholders' equity...................................... 16,527 33,193
--------- ---------
$ 38,158 $ 51,785
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 4
VISIONEER, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1997 1996
-------- -------
<S> <C> <C>
Revenues:
Product revenues...................................................... $ 8,560 $13,200
Royalty revenues...................................................... 1,488 5,006
-------- -------
Total net revenues............................................ 10,048 18,206
-------- -------
Cost of revenues:
Cost of product revenues.............................................. 17,510 10,536
Cost of royalty revenues.............................................. 85 711
-------- -------
Total cost of revenues........................................ 17,595 11,247
-------- -------
Gross profit (loss)..................................................... (7,547) 6,959
-------- -------
Operating expenses:
Research and development.............................................. 3,030 2,372
Selling, general and administrative................................... 6,889 5,133
-------- -------
Total operating expenses...................................... 9,919 7,505
-------- -------
Operating loss.......................................................... (17,466) (546)
Interest income......................................................... 341 612
Interest expense........................................................ (8) (9)
-------- -------
Net income (loss)....................................................... $(17,133) $ 57
======== =======
Net income (loss) per share............................................. $ (0.89) $ 0.00
======== =======
Weighted average common shares and equivalents.......................... 19,282 20,462
======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 5
VISIONEER, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
1997 1996
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)...................................................... $(17,133) $ 57
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation and amortization..................................... 633 407
Accounts receivable allowances.................................... 1,225 (261)
Other............................................................. 25 25
Changes in assets and liabilities:
Accounts receivable............................................. 4,609 (5,048)
Inventory....................................................... 1,945 (1,068)
Prepaid expenses and other current assets....................... (944) 350
Other assets.................................................... -- 3
Accounts payable................................................ (994) (2,161)
Deferred revenue................................................ 429 (962)
Accrued sales and marketing incentives.......................... (604) 904
Accrued payable to sub-contractors.............................. 3,955 125
Other accrued liabilities....................................... 253 1,429
--------- ---------
Net cash used in operating activities.................................. (6,601) (6,200)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net sales (purchases) of short-term investments...................... 7,274 (4,971)
Capital expenditures for property and equipment...................... 133 (558)
--------- ---------
Net cash provided by (used in) investing activities.................... 7,407 (5,529)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net.......................... 442 6,580
Payments on capitalized lease obligations............................ -- (58)
--------- ---------
Net cash provided by financing activities.............................. 442 6,522
--------- ---------
Net increase (decrease) in cash and cash equivalents................... 1,248 (5,207)
Cash and cash equivalents at beginning of period....................... 22,391 39,909
--------- ---------
Cash and cash equivalents at end of period............................. $ 23,639 $ 34,702
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 6
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION:
The accompanying unaudited condensed financial statements of Visioneer,
Inc. (the "Company" or "Visioneer") have been prepared in accordance with
generally accepted accounting principles for interim financial information. In
the opinion of management, these interim condensed financial statements reflect
all adjustments, consisting of normal recurring adjustments necessary to present
fairly the financial position, results of operations, and cash flows at March
31, 1997, and for other periods presented. Although the Company believes that
the disclosures in these financial statements are adequate to make the
information presented not misleading, certain information normally included in
financial statements and related footnotes prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to the
rules and regulations of the Securities and Exchange Commission. The
accompanying financial statements should be read in conjunction with the audited
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K for the year ended December 31, 1996.
The results for the quarter ended March 31, 1997 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1997, or any future period.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities on the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
The Company's fiscal year ends on the Sunday closest to December 31.
Accordingly, fiscal 1997 will end December 28, 1997 and will contain 52 weeks,
fiscal 1996 ended December 29, 1996 and contained 52 weeks. The Company reports
quarterly results on thirteen-week quarterly periods, each ending on the Sunday
closest to month-end. For purposes of presentation, the Company has indicated
its accounting year as ending December 31 or its interim quarterly periods as
ending on the respective calendar month-end.
NOTE 2. BALANCE SHEET COMPONENTS:
Inventory consists of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
--------- ------------
<S> <C> <C>
Raw materials...................................... $ 431 $1,433
Work-in-process.................................... 1,577 1,453
Finished goods..................................... 555 1,622
------ ------
$ 2,563 $4,508
====== ======
</TABLE>
During the quarter ended March 31, 1997, the Company recorded inventory
reserves and write-offs of $3.8 million. Also, included in other current
liabilities is an additional $5.0 million of reserves, which the Company
recorded in the quarter ended March 31, 1997, in connection with the
cancellation of certain purchase commitments.
5
<PAGE> 7
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
Property, plant and equipment, net consist of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
--------- ------------
<S> <C> <C>
Machinery and equipment............................ $ 3,809 $5,129
Software........................................... 990 1,259
Leasehold improvements............................. 281 368
Furniture and fixtures............................. 626 607
------ ------
5,706 7,363
Accumulated depreciation and amortization.......... (2,314) (3,205)
------ ------
$ 3,392 $4,158
====== ======
</TABLE>
NOTE 3. NET INCOME PER SHARE AND NET LOSS PER SHARE:
Net income per share and net loss per share data are based upon the
weighted average number of outstanding shares of common stock plus dilutive
common stock equivalents. Common stock equivalents include stock options and
warrants (using the treasury stock method).
NOTE 4. RECENT ACCOUNTING PRONOUNCEMENTS:
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share." This statement
is effective for the Company's fiscal year ending December 31, 1997. The
Statement redefines earnings per share under generally accepted accounting
principles. Under the new standard, primary earnings per share is replaced by
basic earnings per share and fully diluted earnings per share is replaced by
diluted earnings per share. If the Company had adopted this Statement on January
1, 1996 it would not have had a material impact on the reported earnings (loss)
per share for the three months ended March 31, 1997 and 1996.
NOTE 5. LITIGATION AND PATENT INFRINGEMENT CLAIMS:
On November 1, 1996, Millennium, L.P. ("Millennium"), a Cayman Island
limited partnership, filed an infringement action against Compaq alleging that
Compaq's scanner keyboard system, which utilizes certain technology that is
licensed from the Company, and used in its products, infringes certain patent
claims. The Company has acknowledged that it will indemnify Compaq with respect
to the claims that Millennium has asserted against Compaq to the extent required
by the Company's OEM agreement with Compaq. The Company intends to defend
against these claims vigorously. However, the outcome of the lawsuit cannot be
accurately predicted and if the Company is unsuccessful in this matter, it could
have a significant material adverse effect on the Company's business, operating
results and financial condition.
6
<PAGE> 8
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the unaudited
financial statements and notes thereto included in Part I -- Item 1 of this
Quarterly Report and the audited financial statements and notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for the year ended December 31, 1996 contained in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996.
Except for the historical information contained herein, the matters
discussed in this document are forward-looking statements that involve certain
risks and uncertainties that could cause actual results to differ materially
from those in the forward-looking statements. Potential risks and uncertainties
include, without limitation, those mentioned in this report and, in particular,
the factors described under "Additional Factors That May Affect Future Results,"
and those mentioned in the Company's Annual Report on Form 10-K for the year
ended December 31, 1996 under "Business" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
OVERVIEW
Visioneer designs, develops and markets intelligent paper input systems and
image management software. The Company has a limited operating history upon
which an evaluation of the Company and its prospects can be based. The success
of the Company will depend on its ability to adopt certain product cost
reduction measures, thereby improving its gross margins, and implement certain
expense reduction measures while generating sales of PaperPort products
significantly in excess of sales during the past several quarters. This in turn
will depend in part on the ability of the Company to convince end users to adopt
paper management systems for the desktop and to educate end users about the
benefits of the Company's products. There can be no assurance that the Company
will be successful in reducing its costs and expenses, nor is there any
assurance that the market for paper input systems will develop or that the
Company will achieve broad market acceptance of its products. The Company has
incurred annual net losses since inception. There can be no assurance that the
Company will be able to attain profitability during any particular period or in
the near future. As of March 31, 1997, the Company had an accumulated deficit of
$70.3 million. Although the Company had experienced revenue growth during
several quarters, the growth rates have neither been consistent nor sustainable
and are not indicative of future operating results.
7
<PAGE> 9
RESULTS OF OPERATIONS
The following table presents, as a percentage of total net revenues,
certain selected financial data for the three month periods ended March 31, 1997
and March 31, 1996.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1997 1996
------- ------
<S> <C> <C>
Revenues:
Product revenues....................................... 85.2% 72.5%
Royalty revenues....................................... 14.8% 27.5%
------- ------
Total net revenues............................. 100.0% 100.0%
------- ------
Cost of revenues:
Cost of product revenues............................... 174.3% 57.9%
Cost of royalty revenues............................... 0.8% 3.9%
------- ------
Total cost of revenues......................... 175.1% 61.8%
------- ------
Gross profit (loss)...................................... (75.1%) 38.2%
------- ------
Operating expenses:
Research and development............................... 30.2% 13.0%
Selling, general and administrative.................... 68.6% 28.2%
------- ------
Total operating expenses....................... 98.7% 41.2%
------- ------
Operating loss........................................... (173.8%) (3.0%)
Interest income.......................................... 3.4% 3.4%
Interest expense......................................... (0.1%) (0.0%)
------- ------
Net income (loss)........................................ (170.5%) 0.3%
======= ======
</TABLE>
TOTAL NET REVENUES
Total net revenues decreased 45% to $10.0 million for the first quarter
ended March 31, 1997 from $18.2 million for the comparable quarter in 1996. The
decrease was attributable to several factors. First, retail scanner unit
shipments were down in the first quarter of 1997 over the first quarter of 1996.
The sheet-fed scanner market is transitioning from black and white to color much
more rapidly than the Company had anticipated and the corporate market is not
developing as quickly as the Company had expected. Second, the revenues for the
quarter ended March 31, 1997 were also adversely impacted by an average 20%
reduction in scanner prices made by the Company effective February 1, 1997.
Third, the royalties from the Company's OEM partners declined significantly
during the first quarter of 1997 as compared to the first quarter of 1996 as
Hewlett-Packard stopped purchasing the Company's product in the second quarter
of 1996 and royalties from Compaq have been significantly below the Company's
expectations. As a result of the slower than anticipated sales of the Compaq
scanner keyboard product, the Company and Compaq have mutually agreed to
terminate the OEM licensing agreement. There will be no further revenues
associated with this agreement. Finally, as a result of anticipated future
pricing actions and the planned introduction of new products, the Company
recorded price protection reserves of $2.5 million during the quarter ended
March 31, 1997.
During the quarter ended March 31, 1997, the Company recorded revenues from
sales of its first standalone software product, PaperPort Deluxe. Net revenues
from PaperPort Deluxe accounted for approximately 17% of total net revenues for
the quarter ended March 31, 1997. PaperPort Deluxe software offers many new
paper management features and is compatible with the Windows 95 and Windows NT
operating systems. It communicates with most TWAIN-compliant input devices.
PaperPort Deluxe turns many scanners, multi-function-peripherals and digital
cameras into a versatile solution for sending, filing, copying and finding paper
and photographs.
Total net revenues from international sales were approximately 13% of total
net revenues for the first quarter ended March 31, 1997 compared to 10% for the
comparable period in 1996. Although international revenues, as a percentage of
total net revenues, increased from year to year, absolute international revenues
8
<PAGE> 10
decreased by 21%. As part of an effort to reduce costs and maximize return on
investment, the Company reevaluated its international sales and marketing
strategy. In April 1997, the Company terminated its local sales operations for
Europe and the Asia-Pacific regions and will focus on distribution partners who
have established sales outlets and local country expertise. As a consequence, in
the near term, it is unlikely that the Company will be able to sustain the same
level of revenues from international sales as it has experienced in the pervious
several quarters.
The introduction of major new products and enhancements of existing
products, are expected to have a significant impact on the Company's quarterly
and annual revenues. As is characteristic of the initial stages of personal
computer product life cycles, the Company expects that sales volumes of any new
product may increase in the first few months following introduction due to the
purchase of initial inventory by the Company's distribution channels.
Thereafter, revenues may decline or stabilize until the end of a product life
cycle, at which time revenues are likely to decline significantly. Many
competitors have entered the market in the last 24 months and although they
helped to establish market demand for paper input products, they also have
applied significant pricing pressures to which the Company has had to respond.
Due to the inherent uncertainties of product development and new product
introductions, the Company cannot accurately predict the exact quarter in which
a new product or version will be ready to ship. Any delay in the scheduled
release of major new products would have a material adverse impact on the
Company's total net revenues and operating results.
The Company has experienced and may continue to experience significant
fluctuations in revenues and operating results from quarter to quarter and from
year to year due to a combination of factors, many of which are outside of the
Company's direct control. These factors include development of the paper input
systems market, demand for the Company's products, the Company's success in
developing, introducing and shipping new products and product enhancements, the
market acceptance of such products, the Company's ability to respond to new
product introductions and price reductions by its competitors, the timing,
cancellation or rescheduling of significant orders, the purchasing patterns and
potential product returns from the Company's distribution channels, the
Company's relationships with its OEM partners and distributors, the performance
of the Company's contract manufacturers and component suppliers, the
availability of key components and changes in the cost of materials for the
Company's products, the Company's ability to attract, retain and motivate
qualified personnel, the timing and amount of research and development and
selling, general and administrative expenditures, and general economic
conditions.
TOTAL COST OF REVENUES
Total cost of revenues as a percentage of total net revenues was 175% in
the first quarter ended March 31, 1997 compared to 62% for the comparable period
in 1996. The total cost of revenues increased to $17.6 million in the first
quarter of 1997 as compared to $11.2 million in the first quarter of 1996. The
increase was a result of charges taken for write-offs and increased reserves
relating to excess and obsolete inventory and cancellation of certain purchase
commitments. A substantial portion of the total manufacturing cost of the
PaperPort is represented by various components, particularly PCBAs, a contact
image sensor array and the Company's proprietary ASIC. Prices and availability
of these components can fluctuate significantly. Because the market for paper
input systems and, in particular, the Company's products, is new and rapidly
evolving, the Company's ability to forecast its demand for finished goods and
key components was and still is limited and involves a substantial amount of
risk. The Company believes that the market is transitioning to color scanners
much faster than originally anticipated and the corporate market is not
developing as quickly as originally expected. Based on these factors, the
Company recorded charges of approximately $9.5 million to cover estimated
cancellation charges and to increase inventory related reserves in the quarter
ended March 31, 1997. Due to variations in product mix, planned and unplanned
pricing actions, and manufacturing related costs associated with future product
transitions, the Company anticipates quarterly fluctuations and continued
pressure on its cost of revenues and gross margins for the balance of 1997,
which will have a material adverse effect on the financial condition and results
of operations of the Company.
9
<PAGE> 11
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses increased 28% in absolute dollars to $3.0
million in the quarter ended March 31, 1997 from $2.4 million in the comparable
quarter in 1996, while increasing as a percentage of total net revenues to 30%
from 13%. The increase in spending was primarily due to increased spending
associated with the development and prototyping of new products. At March 31,
1997, the Company employed 51 employees and 17 consultants in research and
development compared to 52 employees and 7 consultants at March 31, 1996. The
Company believes that the development of new products and the enhancement of
existing products is essential to its success, and will continue to invest in
activities which it believes are essential to the success of the Company. To
date, the Company has not capitalized any development costs and does not
anticipate capitalizing any such costs in the foreseeable future.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased 34% in absolute
dollars to $6.9 million in the quarter ended March 31, 1997 from $5.1 million in
the comparable quarter in 1996. As a percentage of total net revenues, selling,
general and administrative expense increased to 69% from 28%. The increase in
spending was primarily attributed to three factors. First, to expand overall
market demand and build the Company's brand name and product awareness, the
Company made substantial investments in sales and marketing. In this regard,
sales and marketing expenses increased by $1.2 million, or 37%, in the first
quarter in 1997 as compared to the first quarter of 1996. The Company employed
34 employees and 5 contractors in sales and marketing in the quarter ended March
31, 1997 compared to 14 employees and 3 contractors for the same period in 1996.
Second, customer support costs increased primarily as a result of the
introduction of PaperPort Deluxe software. Finally, general administration
expenses, including expenses associated with increased numbers of employees,
were increased in order to support the Company's operations. Over the next
several months, the Company will consider a number of options which will lower
overall research and development, and sales, general and administrative
spending. Selling, general and administrative expenses may fluctuate from
quarter to quarter, in absolute terms, depending on a variety of factors,
including the timing of the introduction of any new products, expansion of the
Company's distribution channels, general advertising not related to product
introductions and a new international sales and marketing strategy.
OTHER INCOME, NET
Other income, net, consists primarily of interest earned on cash
equivalents and short-term investments. Other income, net, was $333,000 for the
quarter ended March 31, 1997, compared to $603,000 for the quarter ended March
31, 1996. The overall decrease was the result of a decrease in interest income
from decreased cash equivalents and short-term investments, as a consequence of
the Company's operational losses over the last several quarters.
TAXATION
The Company had no tax provision during the quarters ended March 31, 1997
and 1996 due to the net loss incurred. The Company did not record a tax benefit
of operating losses in 1995 and 1996, nor for the first three months of 1997 due
to the uncertainty of their realization.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash, cash equivalents and short-term investments totaled
$25.2 million at March 31, 1997 as compared to $31.2 million at December 31,
1996. The $6.0 million decrease was primarily used to fund a $6.6 million use of
cash for operating activities for the first three months of 1997. The negative
cash flows from operating activities was attributed to net loss of $17.1
million, offset by non-cash charges and changes in working capital.
The Company believes that due to the relatively long manufacturing lead
times and inventory pipelines associated with the Company's products, as the
Company introduces and ramps up production of its new products in subsequent
quarters, its investment in inventory will continue to represent a significant
portion of
10
<PAGE> 12
working capital. As a result of such investments in inventories, the Company may
be subject to an increased risk of excess inventory and inventory obsolescence,
which could materially adversely affect the Company's operating results and
financial condition.
Cash provided by financing activities for the three months ended March 31,
1997 was $442,000. The majority of the cash resulted from the issuance of new
Common Stock in connection with the Company's employee stock purchase plan.
The Company believes that its existing sources of liquidity are likely to
be sufficient to provide adequate cash to fund its operations for the next
twelve months. In addition, the Company is negotiating a line of credit to
provide an additional source of liquidity. There is no guarantee that this
negotiation will be successful, and without additional working capital
facilities, the Company's liquidity could come under pressure if its operating
results continue to be negatively impacted.
ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company intends to take advantage of the "Safe Harbor" provisions of
the Private Securities Litigation Reform Act of 1995. Specifically, the Company
wishes to alert readers that the following important factors, as well as other
factors, could in the future affect, and in the past have affected, the
Company's actual results and could cause the Company's results for future
quarters to differ materially from those expressed in any forward-looking
statements made by or on behalf of the Company in this report.
Dependence on Developing Market; Product Concentration
The market for paper input systems and, in particular, for the Company's
PaperPort products, is new and rapidly evolving. The Company currently derives
substantially all of its revenues from its PaperPort products and expects that
revenues from these products will continue to account for a substantial portion
of all of its revenues for the foreseeable future. Broad market acceptance of
PaperPort products is critical to the Company's future success. This success
will depend in part on the ability of the Company, its distributors and other
suppliers of paper input scanners to convince end users to adopt paper input
systems for the desktop, and the Company's ability to educate end users about
the benefits of its products. This success will also depend in part on the
Company's ability to offer competitive hardware and software features in its
PaperPort products in a limited period of time.
Difficulties and Risks Associated with New Product Introduction and
Development
The market for the Company's products is characterized by rapidly changing
technology and frequent new product introductions. The Company's success will
depend to a substantial degree upon its ability to develop and introduce in a
timely fashion new products and enhancements to its existing products that meet
changing customer requirements and emerging industry standards. The development
of new, technologically-advanced products and product enhancements is a complex
and uncertain process requiring high levels of innovation, as well as the
accurate anticipation of technological and market trends. There can be no
assurance that the Company will be able to identify, develop, manufacture,
market or support new products and product enhancements successfully, that any
new products or product enhancements will gain market acceptance, or that the
Company will be able to respond effectively to technological changes, emerging
industry standards or product announcements by competitors. New product
announcements by the Company could cause customers to defer purchasing existing
products or cause the Company to lower prices of its older products, resulting
in distributors claiming price protection credits or returning such products to
the Company. Any of these events could have a material adverse effect on the
Company's business, operating results and financial condition.
The introduction of major new products and enhancements of existing
products, such as PaperPort mx and PaperPort Deluxe, introduced in the first
quarter of 1997, has had and will continue to have a significant impact on the
Company's quarterly and annual revenues. As is characteristic of the initial
stages of personal computer product life cycles, the Company expects that sales
volumes of any new product may increase in the first few months following
introduction due to the purchase of initial inventory by the Company's
distributors. Thereafter, revenues may decline or stabilize until the end of a
product life cycle, at which time revenues are
11
<PAGE> 13
likely to decline significantly. To this extent, the Company feels that the
level of sales of PaperPort Deluxe and PaperPort mx through the balance of 1997
will not match those of the first quarter of 1997.
The Company must successfully manage the transition to new products and new
versions of existing products. At the end of a product life cycle the Company
may experience higher rates of return of its older products and may have to
lower the prices of such products, which would result in increased price
protection charges and could have a material adverse impact on the Company's net
revenues and operating results. The Company experienced higher than normal rates
of return of its black and white scanner products in the first quarter of 1997
and expects to incur significant price protection charges in connection with the
Company's planned release of new products later in 1997. Due to the inherent
uncertainties of product development and new product introductions, the Company
cannot accurately predict the exact timing in which a new product or version
will be ready to ship. Any delay in the scheduled release of major new products
would have a material adverse impact on the Company's net revenues and operating
results.
Fluctuations in Operating Results
The Company has experienced and may continue to experience significant
fluctuations in revenues and operating results from quarter to quarter and from
year to year due to a combination of factors, many of which are outside of the
Company's direct control. These factors include development of the paper
management systems market, demand for the Company's products, the Company's
success in developing, introducing and shipping new products and product
enhancements, the market acceptance of such products, the Company's ability to
respond to new product introductions and price reductions by its competitors,
the timing, cancellation or rescheduling of significant orders, the purchasing
patterns and potential product returns from the Company's distribution channels,
the Company's relationships with its OEM partners and distributors, the
performance of the Company's contract manufacturers and component suppliers, the
availability of key components and changes in the cost of materials for the
Company's products, the Company's ability to attract, retain and motivate
qualified personnel, the timing and amount of research and development and
selling, general and administrative expenditures, and general economic
conditions.
Revenues and operating results in any quarter depend on the volume, timing
and ability to fulfill customer orders, the receipt of which is difficult to
forecast. A significant portion of the Company's operating expenses is
relatively fixed in advance, based in large part on the Company's forecasts of
future sales. If sales are below expectations in any given period, the adverse
effect of a shortfall in sales on the Company's operating results may be
magnified by the Company's inability to adjust operating expenses to compensate
for such shortfall. Accordingly, any significant shortfall in revenues relative
to the Company's expectations would have an immediate material adverse impact on
the Company's business, operating results and financial condition. The Company
may also be required to reduce prices in response to competition or increase
spending to pursue new product or market opportunities. In the event of
significant additional price competition in the market for the Company's
products, which is expected, the Company will be required to decrease costs at
least proportionately and will be at a significant disadvantage compared to
competitors with substantially greater resources, which could more readily
withstand an extended period of downward pricing pressure. The Company realizes
substantially more revenue from the sale of its branded products than from its
royalty arrangements. However, the effect on gross profit and net income from
any shifts in product mix is uncertain and depends on the Company's ability to
control its costs.
Due to all of the foregoing factors, it is likely that at some point in the
future the Company's operating results will be below the expectations of public
market analysts and investors. In such event, the price of the Company's Common
Stock would likely be materially adversely affected. Accordingly, the Company's
prospects must be considered in light of the risks, expenses and difficulties
frequently encountered by companies participating in new and rapidly evolving
markets. There can be no assurance that the Company will be successful in
addressing such risks.
12
<PAGE> 14
Dependence on Contract Manufacturers
The Company has an independent contract manufacturing agreement with
Flextronics. Until the second quarter of 1996, Flextronics had accounted for
nearly all of the Company's material procurement, assembly, system integration,
testing and quality assurance. Commencing in the second quarter of 1996, the
Company began contracting the manufacture of the PaperPort ix, the scanner
keyboard, with NMB Technologies, Inc. (NMB) on a purchase order basis. (NMB)
will also be manufacturing new products for the Company. As of May 9, 1997,
there was no final manufacturing agreement between NMB and the Company. There
can be no assurance that a final agreement will be reached, which may result in
delayed, interrupted or ceased production of new products. Both manufacturing
partners are located in the Far East, and therefore, the Company is exposed to
the political and economic risks associated with doing business in this region,
which could have a material adverse effect on the Company's business, operating
results and financial condition. Furthermore, commencement of production of
products at new or existing facilities involves certain start-up risks, such as
those associated with the procurement of materials and training of production
personnel, which may result in delays and quality issues. The current purchase
order arrangement with NMB would allow NMB to terminate the arrangement by not
accepting the Company's purchase orders. The unanticipated loss of Flextronics
or NMB as manufacturing partners could cause delays in the Company's ability to
fulfill orders while the Company identifies a replacement manufacturer. Such an
event would have a material adverse effect on the Company's business, operation
results and financial condition.
The Company's manufacturing policies are designed to take advantage of
lower manufacturing costs overseas, which may, in certain instances, result in
excess or insufficient inventory, or inappropriate mix of component inventory,
if orders do not match forecasts. To date, the Company's inventory reflects
purchases made based on forecasted sales, however, there can be no assurance
that actual sales will match sales forecasts. To the extent the Company has
excess inventory, the Company may experience inventory write-downs or may have
to lower prices of its product which would result in substantial price
protection charges and a negative impact on gross margins. In this regard, the
Company did experience a significant excess inventory situation during the
quarter ended March 31, 1997, and did record significant inventory write-down
and price protection charges. Although the Company will be focusing its efforts
to reduce its inventory risk over the next several months, there can be no
assurance that the Company will not experience a similar adverse excess
inventory situation.
Dependence on Distributors
To date, the Company has derived a substantial portion of its revenues from
sales through its independent distributors. Although the Company has established
several strategic OEM partnerships, the Company expects that sales through its
independent distributors will continue to account for a substantial portion of
its revenues for the foreseeable future. Sales to the top four independent
distributors in the first three months of 1997 accounted for 46% of the
Company's net revenues compared to 61% for the comparable period of 1996. The
Company anticipates that its dependence on any one independent distributor will
continue to decrease in the future because of its efforts to expand its
distribution channels domestically and internationally. The Company's agreements
with its distributors are not exclusive, and each of the Company's distributors
can cease marketing the Company's products with limited notice and with little
or no penalty. There can be no assurance that the Company's independent
distributors will continue to offer the Company's products or that the Company
will be able to recruit additional or replacement distributors. The loss of one
or more of the Company's major distributors would have a material adverse effect
on the Company's business, operating results and financial condition. Many of
the Company's distributors offer competitive products manufactured by third
parties. There can be no assurance that the Company's distributors will f give
priority to the marketing of the Company's products as compared to competitors'
products. Any reduction or delay in sales of the Company's products by its
distributors would have a material adverse effect on the Company's business,
operating results and financial condition.
13
<PAGE> 15
Dependence on Component Suppliers
A substantial portion of the total manufacturing cost of the PaperPort is
represented by various components, particularly PCBAs, a contact image sensor
array and the Company's ASIC. Prices of these components can fluctuate
significantly depending primarily upon the availability of these components.
Because the market for paper management systems and, in particular, the
Company's products, is new and rapidly evolving, the Company's ability to
forecast its demand for key components is limited. Due to the long lead times
for procurement of certain materials and components ordered by the Company, and,
to the extent orders for the Company's products exceed its initial forecasts,
the Company may be required to incur expenses for expediting procurement of key
components.
Intensely Competitive Market
The computer and peripherals industry has been characterized by ongoing
rapid price erosion and resulting pressure on gross margins. For example, the
suggested retail price of PaperPort Vx, when it was introduced in November 1995,
was $369, the suggested retail price as of May 1, 1997 is $229. The Company
expects that, based on historical trends in the computer and peripherals
industry and, in particular, on the Company's recent observations and
experiences in the paper management systems market, prices will continue to
decline in the future and that competitors will offer products which meet or
exceed performance and capabilities of the Company's products. The Company
intends to introduce new hardware designs, software upgrades, accessory products
and new software features, in part, to respond to anticipated competitive price
pressures and new product introductions. If prices fall faster than expected by
the Company, or if the Company reduces its prices in order to become or remain
competitive or for any other reason, the Company may be unable to respond with
significant cost reductions and its gross margin could be materially adversely
affected. In addition, the Company's gross margin will depend in part on other
factors outside the Company's control, including the availability and prices of
key components, the success of the Company's product transition, competition,
the timing and amount of royalties received under its OEM arrangements and
general economic conditions. Fluctuations in gross margin could have a material
adverse effect on the Company's financial condition and operating results.
14
<PAGE> 16
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On November 1, 1996, Millennium, L.P. ("Millennium"), a Cayman Island
limited partnership, filed an infringement action against Compaq alleging that
Compaq's scanner keyboard system, which utilizes certain technology that is
licensed from the Company, and used in its products, infringes certain patent
claims. The Company has acknowledged that it will indemnify Compaq with respect
to the claims that Millennium has asserted against Compaq to the extent required
by the Company's OEM agreement with Compaq. The Company intends to defend
against these claims vigorously. However, the outcome of the lawsuit cannot be
accurately predicted and if the Company is unsuccessful in this matter, it could
have a significant material adverse effect on the Company's business, operating
results and financial condition.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS IN SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- --------------------------------------------------------------------------
<S> <C>
10.22** 1997 Employee Stock Option Plan
10.23** Director 1997 Compensation Plan
11.1 Statement of Computation of Net Income (Loss) per Common Shares and
Equivalents
27.1 Financial Data Schedule
</TABLE>
- ---------------
** Management compensatory plan or arrangement
(b) Reports on Form 8-K
None
15
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant
has duly caused this Report on Form 10-Q to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Fremont, State of
California, on May 14th, 1997.
VISIONEER, INC.
By: /s/ GEOFFREY C. DARBY
------------------------------------
Geoffrey C. Darby
Vice President of Finance and
Administration and
Chief Financial Officer (Principal
Financial and Accounting Officer)
16
<PAGE> 18
EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
10.22** 1997 Employee Stock Option Plan
10.23** Director 1997 Compensation Plan
11.1 Statement of Computation of Net Income (Loss) per Common Shares
and Equivalents
27.1 Financial Data Schedule
- -------------
** Management compensatory plan or arrangement
<PAGE> 1
Exhibit 10.22
VISIONEER, INC.
1997 EMPLOYEE STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this 1997 Employee
Stock Option Plan are to attract and retain the best available personnel for
positions of substantial responsibility, to provide additional incentive to the
Employees and Consultants of the Company and to promote the success of the
Company's business. Options granted hereunder shall be Nonstatutory Stock
Options.
2. Definitions. As used herein, the following definitions shall
apply:
(a) "Administrator" shall mean the Board or any of its
Committees appointed pursuant to Section 4 of the Plan.
(b) "Board" shall mean the Board of Directors of the
Company.
(c) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(d) "Committee" shall mean the Committee appointed by the
Board of Directors in accordance with paragraph (a) of Section 4 of the Plan,
if one is appointed. The Committee members shall not be required to be Board
members.
(e) "Common Stock" shall mean the Common Stock of the
Company.
(f) "Company" shall mean Visioneer, Inc., a Delaware
corporation.
(g) "Consultant" shall mean any person who is engaged by
the Company or any Parent or Subsidiary to render consulting services and is
compensated for such consulting services, excluding any Officers, Named
Executives and Directors.
(h) "Continuous Status as an Employee or Consultant"
shall mean the absence of any interruption or termination of service as an
Employee or Consultant. Continuous Status as an Employee or Consultant shall
not be considered interrupted in the case of sick leave, military leave, or any
other leave of absence approved by the Board; provided that such leave is for a
period of not more than 90 days or reemployment upon the expiration of such
leave is guaranteed by contract or statute.
(i) "Director" shall mean a member of the Board.
(j) "Employee" shall mean any person who is employed by
the Company or any Parent or Subsidiary of the Company, excluding any Officers,
Named Executives and Directors. Notwithstanding the foregoing, an Officer who
was not previously employed by the Company and for whom an Option grant is an
inducement essential to the Officer's entering into an employment relationship
or contract with the Company, shall be treated as an Employee for purposes of
the Option grant made to the Officer in connection with commencement of the
Officer's employment with the Company.
(k) "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
(l) "Fair Market Value" shall mean, as of any date, the
value of Common Stock determined as follows:
<PAGE> 2
(i) If the Common Stock is listed on any
established stock exchange or a national market system including without
limitation the National Market of the National Association of Securities
Dealers, Inc. Automated Quotation ("Nasdaq") System, its Fair Market Value
shall be the closing sales price for such stock as quoted on such exchange on
system for the last market trading day prior to the date of determination (if
for a given day no sales were reported, the closing bid on that day shall be
used), as such price is reported in The Wall Street Journal or such other
source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the Nasdaq
System (but not on the National Market thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean between the bid and asked prices for the Common
Stock or;
(iii) In the absence of an established market for
the Common Stock, the Fair Market Value thereof shall be determined in good
faith by the Administrator.
(m) "Named Executive" shall mean any individual who, on
the last day of the Company's fiscal year, is the chief executive officer of
the Company (or is acting in such capacity) or among the four highest
compensated officers of the Company (other than the chief executive officer).
Such officer status shall be determined pursuant to the executive compensation
disclosure rules under the Exchange Act.
(n) "Nonstatutory Stock Option" shall mean an Option not
intended to qualify as an Incentive Stock Option, as designated in the
applicable option agreement. "Incentive Stock Option" shall mean an Option
intended to qualify as an incentive stock option within the meaning of Section
422 of the Code, as designated in the applicable option agreement.
(o) "Officer" shall mean a person who is an officer of
the Company within the meaning of Section 16 of the Exchange Act and the rules
and regulations promulgated thereunder.
(p) "Option" shall mean a stock option granted pursuant
to the Plan.
(q) "Optioned Stock" shall mean the Common Stock subject
to an Option.
(r) "Optionee" shall mean an Employee or Consultant who
receives an Option.
(s) "Parent" shall mean a "parent corporation," whether
now or hereafter existing, as defined in Section 424(e) of the Code.
(t) "Plan" shall mean this 1997 Employee Stock Option
Plan.
(u) "Rule 16b-3" shall mean Rule 16b-3 promulgated under
the Exchange Act as the same may be amended from time to time, or any successor
provision.
(v) "Share" shall mean a share of the Common Stock, as
adjusted in accordance with Section 11 of the Plan.
(w) "Subsidiary" shall mean a "subsidiary corporation,"
whether now or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of
Section 11 of the Plan, the maximum aggregate number of shares which may be
optioned and sold under the Plan is 1,300,000 shares of Common Stock. The
Shares may be authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were
subject thereto shall, unless the Plan shall have been terminated, become
<PAGE> 3
available for future grant under the Plan. Notwithstanding any other provision
of the Plan, shares issued under the Plan and later repurchased by the Company
shall not become available for future grant or sale under the Plan.
4. Administration of the Plan.
(a) Composition of Administrator. The Plan shall be
administered by (A) the Board or (B) a Committee designated by the Board, which
Committee shall be constituted in such a manner as to satisfy the legal
requirements relating to the administration of nonstatutory stock option plans,
if any, of applicable securities laws and the Code (collectively, the
"Applicable Laws"). If a Committee has been appointed pursuant to this Section
4(a), such Committee shall continue to serve in its designated capacity until
otherwise directed by the Board. From time to time the Board may increase the
size of any Committee and appoint additional members thereof, remove members
(with or without cause) and appoint new members in substitution therefor, fill
vacancies (however caused) and remove all members of a Committee and thereafter
directly administer the Plan, all to the extent permitted by the Applicable
Laws.
(b) Powers of the Administrator. Subject to the
provisions of the Plan, and in the case of a Committee, the specific duties
delegated by, or limitations of authority imposed by, the Board to or on such
Committee, the Administrator shall have the authority, in its discretion:
(i) to grant Options under the Plan;
(ii) to determine, upon review of relevant
information and in accordance with Section 2(l) of the Plan, the fair market
value of the Common Stock;
(iii) to determine the exercise price per share of
Options to be granted, which exercise price shall be determined in accordance
with Section 9(a) of the Plan;
(iv) to determine the Employees or Consultants to
whom, and the time or times at which, Options shall be granted and the number
of shares to be represented by each Option;
(v) to interpret the Plan;
(vi) to approve forms of agreement for use under
the Plan;
(vii) to determine the terms and provisions of each
Option granted (which need not be identical) and, with the consent of the
holder thereof, modify or amend each Option;
(viii) to accelerate or defer (with the consent of
the Optionee) the exercise date of any Option;
(ix) to authorize any person to execute on behalf
of the Company any instrument required to effectuate the grant of an Option
previously granted by the Administrator; and
(x) to make all other determinations deemed
necessary or advisable for the administration of the Plan.
(c) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options granted under the
Plan.
5. Eligibility.
<PAGE> 4
(a) Options may be granted only to Employees and
Consultants. An Employee or Consultant who has been granted an Option may, if
Optionee is otherwise eligible, be granted an additional Option or Options.
(b) Each Option shall be designated in the written option
agreement as a Nonstatutory Stock Option.
(c) The Plan shall not confer upon any Optionee any right
with respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with Optionee's right or the
Company's right to terminate Optionee's employment or consulting relationship
at any time, with or without cause.
6. Term of Plan. The Plan shall become effective upon its
adoption by the Board of Directors. It shall continue in effect for a term of
ten (10) years unless sooner terminated under Section 14 of the Plan.
7. Term of Option. The term of each Nonstatutory Stock Option
shall be ten (10) years from the date of grant thereof or such shorter term as
may be provided in the Nonstatutory Stock Option Agreement.
8. Exercise Price and Consideration.
(a) The per Share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be such price as is determined
by the Administrator, but shall be no less than 85% of the fair market value
per Share on the date of grant.
(b) The consideration to be paid for the Shares to be
issued upon exercise of an Option, including the method of payment, shall be
determined by the Administrator and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares of Common Stock which (i) either
have been owned by the Optionee for more than six (6) months on the date of
surrender or were not acquired, directly or indirectly, from the Company, and
(ii) have a fair market value on the date of surrender equal to the aggregate
exercise price of the Shares as to which said Option shall be exercised, (5)
delivery of a properly executed exercise notice together with irrevocable
instructions to a broker to deliver promptly to the Company the amount of sale
or loan proceeds required to pay the exercise price, or (6) any combination of
such methods of payment. In making its determination as to the type of
consideration to accept, the Administrator shall consider if acceptance of such
consideration may be reasonably expected to benefit the Company.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any
Option granted hereunder shall be exercisable at such times and under such
conditions as determined by the Administrator, including performance criteria
with respect to the Company and/or the Optionee, and as shall be permissible
under the terms of the Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice
of such exercise has been given to the Company in accordance with the terms of
the Option by the person entitled to exercise the Option and full payment for
the Shares with respect to which the Option is exercised has been received by
the Company. Full payment may, as authorized by the Administrator, consist of
any consideration and method of payment allowable under Section 9(b) of the
Plan. Until the issuance (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company) of the
stock certificate evidencing such Shares, no right to vote or receive dividends
or any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Company shall issue (or
cause to be issued) such stock certificate promptly upon exercise of the
Option. No adjustment will be made for a dividend or other right for which the
record date is prior to the date the stock certificate is issued, except as
provided in Section 11 of the Plan.
<PAGE> 5
Exercise of an Option in any manner shall result in a decrease
in the number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Status as an Employee or Consultant.
In the event of termination of an Optionee's Continuous Status as an Employee
or Consultant, such Optionee may, but only within thirty (30) days (or such
other period of time, not exceeding six (6) months, as is determined by the
Administrator) after the date of such termination (but in no event later than
the date of expiration of the term of such Option as set forth in the Option
Agreement), exercise Optionee's Option to the extent that Optionee was entitled
to exercise it at the date of such termination. To the extent that Optionee
was not entitled to exercise the Option at the date of such termination, or if
Optionee does not exercise such Option (which Optionee was entitled to
exercise) within the time specified herein, the Option shall terminate.
(c) Disability of Optionee. Notwithstanding the
provisions of Section 10(b) above, in the event of termination of an Optionee's
Continuous Status as an Employee or Consultant as a result of Optionee's total
and permanent disability (as defined in Section 22(e)(3) of the Code), Optionee
may, but only within twelve (12) months (but in no event later than the date of
expiration of the term of such Option as set forth in the Option Agreement),
from the date of such termination (but in no event later than the date of
expiration of the term of such Option as set forth in the Option Agreement),
exercise Optionee's Option to the extent Optionee was entitled to exercise it
at the date of such termination. To the extent that Optionee was not entitled
to exercise the Option at the date of termination, or if Optionee does not
exercise such Option (which Optionee was entitled to exercise) within the time
specified herein, the Option shall terminate.
(d) Death of Optionee. In the event of termination of an
Optionee's Continuance Status as an Employee or Consultant as a result of the
death of an Optionee, the Option may be exercised, at any time within twelve
(12) months following the date of death (but in no event later than the date of
expiration of the term of such Option as set forth in the Option Agreement), by
the Optionee's estate or by a person who acquired the right to exercise the
Option by bequest or inheritance, but only to the extent of the right to
exercise the Option at the date of death. To the extent that Optionee was not
entitled to exercise the Option at the date of death, or if Optionee does not
exercise such Option to the extent so entitled within the time specified
herein, the Option shall terminate.
10. Non-Transferability of Options. The Option may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner
other than by will or by the laws of descent or distribution; provided, that
the Administrator may in its discretion grant transferable Nonstatutory Stock
Options pursuant to option agreements specifying (i) the manner in which such
Nonstatutory Stock Options are transferable and (ii) that any such transfer
shall be subject to the Applicable Laws. The designation of a beneficiary by
an Optionee will not constitute a transfer. An Option may be exercised, during
the lifetime of the Optionee, only by the Optionee or a transferee permitted by
this Section 11.
11. Adjustments Upon Changes in Capitalization or Merger.
(a) Adjustments. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, and the price per share of Common Stock covered by
each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the Administrator, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an Option.
<PAGE> 6
(b) Corporate Transactions. In the event of the proposed
dissolution or liquidation of the Company, the Option will terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Administrator. The Administrator may, in the exercise of its
sole discretion in such instances, declare that any Option shall terminate as
of a date fixed by the Administrator and give each Optionee the right to
exercise Optionee's Option as to all or any part of the Optioned Stock,
including Shares as to which the Option would not otherwise be exercisable. In
the event of a proposed sale of all or substantially all of the assets of the
Company, or the merger of the Company with or into another corporation, the
Option shall be assumed or an equivalent option shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation,
unless such successor corporation does not agree to assume the Option or to
substitute an equivalent option, in which case the Administrator shall, in lieu
of such assumption or substitution, provide for the Optionee to have the right
to exercise the Option as to all of the Optioned Stock, including Shares as to
which the Option would not otherwise be exercisable. If the Administrator
makes an Option fully exercisable in lieu of assumption or substitution in the
event of a merger or sale of assets, the Administrator shall notify the
Optionee that the Option shall be fully exercisable for a period of fifteen
(15) days from the date of such notice, and the Option will terminate upon the
expiration of such period.
12. Time of Granting Options. The date of grant of an Option
shall, for all purposes, be the date on which the Administrator makes the
determination granting such Option. Notice of the determination shall be given
to each Employee or Consultant to whom an Option is so granted within a
reasonable time after the date of such grant.
13. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may amend or
terminate the Plan from time to time in such respects as the Board may deem
advisable
(b) Effect of Amendment or Termination. Any such
amendment or termination of the Plan shall not adversely affect Options already
granted (except to the extent contemplated by such Options) and such Options
shall remain in full force and effect, unless mutually agreed otherwise between
the Optionee and the Board (or other body then administering the Plan), which
agreement must be in writing and signed by the Optionee and the Company.
14. Conditions Upon Issuance of Shares. Shares shall not be
issued pursuant to the exercise of an Option unless the exercise of such Option
and the issuance and delivery of such Shares pursuant thereto shall comply with
all relevant provisions of law, including, without limitation, the Securities
Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the Shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
15. Reservation of Shares. The Company, during the term of this
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan. The inability of
the Company to obtain authority from any regulatory body having jurisdiction,
which authority is deemed by the Company's counsel to be necessary to the
lawful issuance and sale of any Shares hereunder, shall relieve the Company of
any liability in respect of the failure to issue or sell such Shares as to
which such requisite authority shall not have been obtained.
16. Option Agreement. Options shall be evidenced by written
option agreements in such form as the Administrator shall approve.
<PAGE> 7
17. Information to Optionees. The Company shall provide to each
Optionee upon request, during the period for which such Optionee has one or
more Options outstanding, copies of all annual reports and other information
which are provided to all shareholders of the Company.
18. Withholding Taxes. As a condition to the exercise of Options
granted hereunder, the Optionee shall make such arrangements as the
Administrator may require for the satisfaction of any federal, state, local or
foreign withholding tax obligations that may arise in connection with the
exercise, receipt or vesting of such Option. The Company shall not be required
to issue any Shares under the Plan until such obligations are satisfied.
19. Stock Withholding to Satisfy Withholding Tax Obligations. At
the discretion of the Administrator, Optionees may satisfy withholding
obligations as provided in this paragraph. When an Optionee incurs tax
liability in connection with an Option which tax liability is subject to tax
withholding under applicable tax laws, and the Optionee is obligated to pay the
Company an amount required to be withheld under applicable tax laws, the
Optionee may satisfy the withholding tax obligation by one or some combination
of the following methods: (a) by cash payment, or (b) out of Optionee's
current compensation, or (c) if permitted by the Administrator, in its
discretion, by surrendering to the Company Shares that (i) in the case of
Shares previously acquired from the Company, have been owned by the Optionee
for more than six months on the date of surrender, and (ii) have a fair market
value on the date of surrender equal to or less than Optionee's marginal tax
rate times the ordinary income recognized, or (d) by electing to have the
Company withhold from the Shares to be issued upon exercise of the Option that
number of Shares having a fair market value equal to the amount required to be
withheld. For this purpose, the fair market value of the Shares to be withheld
shall be determined on the date that the amount of tax to be withheld is to be
determined (the "Tax Date").
All elections by an Optionee to have Shares withheld to
satisfy tax withholding obligations shall be made in writing in a form
acceptable to the Administrator and shall be subject to the following
restrictions:
(a) the election must be made on or prior to the
applicable Tax Date;
(b) once made, the election shall be irrevocable as to
the particular Shares of the Option as to which the election is made; and
(c) all elections shall be subject to the consent or
disapproval of the Administrator.
In the event the election to have Shares withheld is made by
an Optionee and the Tax Date is deferred under Section 83 of the Code because
no election is filed under Section 83(b) of the Code, the Optionee shall
receive the full number of Shares with respect to which the Option is exercised
but such Optionee shall be unconditionally obligated to tender back to the
Company the proper number of Shares on the Tax Date.
<PAGE> 1
Exhibit 10.23
DIRECTOR 1997 COMPENSATION PLAN
Non-employee directors of Visioneer, Inc. will receive compensation of
$25,000 per year for their services commencing in the 1997 fiscal year, which
amount will be paid at the end of each fiscal year to directors who served
during the fiscal year and who remain directors at the end of the fiscal year.
<PAGE> 1
EXHIBIT 11.1
VISIONEER, INC.
COMPUTATION OF NET INCOME (LOSS) PER
COMMON SHARES AND EQUIVALENTS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
----------------------
1997 1996
------ ------
<S> <C> <C>
Weighted average common shares outstanding . . . . . 19,282 18,929
Weighted average common equivalent shares
from convertible preferred stock and
warrants, calculated using the if-converted
method . . . . . . . . . . . . . . . . . . . . . . - 64
Common equivalent shares from convertible
preferred stock and options issued between
October 1, 1994 to December 12, 1995,
included pursuant to Staff Accounting
Bulletin No. 83 . . . . . . . . . . . . . . . . . - 1,469
-------- -------
Weighted average common shares and equivalents . . . 19,282 20,462
======== =======
Net income (loss) . . . . . . . . . . . . . . . . . $(17,133) $ 57
======== =======
Net income (loss) per share . . . . . . . . . . . . $ (0.89) $ 0.00
======== =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED BALANCE SHEET, CONDENSED STATEMENT OF OPERATIONS AND CONDENSED
STATEMENT OF CASH FLOWS INCLUDED IN THE COMPANY'S FORM 10-Q FOR THE THREE MONTH
PERIOD ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS AND THE NOTES THERETO.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-START> DEC-30-1996
<PERIOD-END> MAR-30-1997
<CASH> 23,639
<SECURITIES> 1,535
<RECEIVABLES> 10,102
<ALLOWANCES> 5,156
<INVENTORY> 2,563
<CURRENT-ASSETS> 34,538
<PP&E> 5,706
<DEPRECIATION> 2,314
<TOTAL-ASSETS> 38,158
<CURRENT-LIABILITIES> 21,631
<BONDS> 0
0
0
<COMMON> 19
<OTHER-SE> 16,508
<TOTAL-LIABILITY-AND-EQUITY> 38,158
<SALES> 8,560
<TOTAL-REVENUES> 10,048
<CGS> 17,510
<TOTAL-COSTS> 17,595
<OTHER-EXPENSES> 9,919
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (333)
<INCOME-PRETAX> (17,133)
<INCOME-TAX> 0
<INCOME-CONTINUING> (17,133)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (17,133)
<EPS-PRIMARY> (.89)
<EPS-DILUTED> (.89)
</TABLE>
