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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 quarterly period ended June 30, 2000
Commission File Number 0-21041
EXCELON CORPORATION
-------------------
(Exact name of registrant as specified in its charter)
Delaware 02-0424252
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
25 Mall Road, Burlington, MA 01803
---------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (781) 674-5000
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 outstanding of the registrant's common stock as of
July 31, 2000 was 29,402,865.
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<PAGE>
EXCELON CORPORATION
INDEX TO FORM 10-Q
<TABLE>
<S> <C>
PART I - FINANCIAL INFORMATION Page
----
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 2000 and December 31, 1999 3
Consolidated Statements of Operations for the three and six
months ended June 30, 2000 and June 30, 1999 4
Consolidated Statements of Cash Flows for the six months
ended June 30, 2000 and June 30, 1999 5
Notes to the Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosures About Market Risk 11
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
</TABLE>
2
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
eXcelon Corporation
Consolidated Balance Sheets
(in thousands, except share data)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
-------- --------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 9,506 $ 13,847
Marketable securities 11,625 5,327
Accounts receivable, net of allowance for doubtful 18,148 13,902
accounts of $1,198 and $1,232 at June 30, 2000 and
December 30, 1999
Prepaid expenses and other current assets 1,316 946
-------- --------
Total current assets 40,595 34,022
Property and equipment, net 5,398 5,169
Marketable securities 989 4,589
Capitalized software, net 2,252 2,503
Other assets 1,134 1,122
-------- --------
Total assets $ 50,368 $ 47,405
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of capital lease obligations $ - $ 17
Accounts payable 4,629 3,404
Accrued expenses 4,402 3,898
Accrued compensation 2,926 2,876
Deferred revenue 8,944 7,697
-------- --------
Total current liabilities 20,901 17,892
Stockholders' equity:
Preferred stock, $.01 par value; authorized 5,000,000
shares; no shares issued or outstanding - -
Common stock, $.001 par value; authorized 200,000,000
shares; 29,400,737 and 28,920,730 shares issued and
outstanding 29 29
Additional paid-in capital 70,270 66,731
Accumulated deficit (36,835) (35,054)
Accumulated other comprehensive loss (3,424) (1,620)
Advances to stockholders (573) (573)
--------- ---------
Total stockholders' equity 29,467 29,513
-------- --------
Total liabilities and stockholders' equity $ 50,368 $ 47,405
======== ========
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
3
<PAGE>
eXcelon Corporation
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Software $ 11,878 $ 8,407 $ 21,952 $ 16,611
Services 7,191 6,240 14,121 11,144
-------- -------- -------- --------
Total revenues 19,069 14,647 36,073 27,755
Cost of revenues:
Cost of software 581 468 1,214 886
Cost of services 4,653 3,112 8,413 6,096
-------- -------- -------- --------
Total cost of revenues 5,234 3,580 9,627 6,982
Gross profit 13,835 11,067 26,446 20,773
-------- -------- -------- --------
Operating expenses:
Selling and marketing 10,163 9,046 19,268 17,026
Research and development 3,294 2,524 6,314 4,995
General and administrative 1,805 1,451 3,342 2,980
-------- -------- -------- --------
Total operating expenses 15,262 13,021 28,924 25,001
Operating loss (1,427) (1,954) (2,478) (4,228)
Other income, net 357 326 697 591
Loss before income taxes (1,070) (1,628) (1,781) (3,637)
Provision for income taxes - 43 - 43
-------- -------- -------- --------
Net loss $(1,070) $(1,671) $(1,781) $(3,680)
======== ======== ======== ========
Loss per share:
Basic $ (0.04) $ (0.06) $ (0.06) $ (0.13)
Diluted $ (0.04) $ (0.06) $ (0.06) $ (0.13)
Weighted average shares outstanding:
Basic 29,366 28,232 29,225 28,160
Diluted 29,366 28,232 29,225 28,160
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
4
<PAGE>
eXcelon Corporation.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
2000 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss (1,781) $(3,680)
Adjustments to reconcile net income to net
cash provided by (used for) operating activities:
Depreciation and amortization 1,938 1,348
Amortization of deferred compensation 216 -
Bad debt expense 160 462
Other 23 (3)
Changes in operating assets and liabilities:
Accounts receivable (4,673) 2,721
Prepaid expenses and other current assets (429) (402)
Other assets (111) (70)
Accounts payable and accrued expenses 1,039 (753)
Deferred revenue 1,399 740
-------- --------
Net cash (used for) provided by operating activities (2,219) 363
-------- --------
Cash flows from investing activities:
Capital expenditures (1,442) (1,030)
Purchased software (325) (100)
Purchases of marketable securities (19,991) (9,663)
Proceeds from maturities and sales of marketable securities 17,292 8,136
-------- --------
Net cash used for investing activities (4,466) (2,657)
-------- --------
Cash flows from financing activities:
Proceeds from exercise of stock options 1,566 426
Purchase of treasury stock - (251)
Payments received from shareholder advances - -
Repayments of capital lease obligations (17) 11
--------- --------
Net cash provided by financing activities 1,549 186
-------- --------
Effect of exchange rate changes on cash 795 (145)
-------- ---------
Net change in cash and cash equivalents (4,341) (2,253)
Cash and cash equivalents, beginning of period 13,847 14,846
-------- --------
Cash and cash equivalents, end of period $ 9,506 $ 12,593
======== ========
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Basis of Presentation
The consolidated financial statements include the accounts of eXcelon
Corporation and its wholly owned subsidiaries. All significant intercompany
transactions and balances have been eliminated. In the opinion of management,
the accompanying unaudited consolidated financial statements contain all
adjustments, consisting only of those of a normal recurring nature, necessary
for a fair presentation of our financial position, results of operations, and
cash flows at the dates and for the periods indicated. While we believe that the
disclosures presented are adequate to make the information not misleading, these
financial statements should be read in conjunction with the consolidated
financial statements and related notes included in our Annual Report on Form
10-K for the year ended December 31, 1999. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to Securities and Exchange Commission rules and regulations. Certain
reclassifications have been made for consistent presentation. We operate in a
single industry segment: computer software and related services.
The results for the three and six months ended June 30, 2000 are not necessarily
indicative of the results to be expected for the entire fiscal year ending
December 31, 2000.
B. Net Loss Per Share
Basic earnings per share is computed by dividing net income by the
weighted-average number of common shares outstanding for the period. Diluted
earnings per share is computed by dividing net income by the sum of the
weighted-average number of common shares outstanding for the period plus the
number of common shares issuable upon the assumed exercise of all dilutive
securities, such as stock options. The following is a calculation of earnings
per share ("EPS") for the three and six months ended June 30, 2000 and 1999:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
(in thousands, except per share amounts) 2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net loss $ (1,070) $ (1,671) $ (1,781) $ (3,680)
========= ========= ========= =========
Weighted average shares outstanding: 29,366 28,232 29,225 28,160
Stock options (dilutive) - - - -
--------- --------- --------- ---------
Diluted shares 29,366 28,232 29,225 28,160
========= ========= ========= =========
Basic EPS $ (0.04) $ (0.06) $ (0.06) $ (0.13)
Diluted EPS $ (0.04) $ (0.06) $ (0.06) $ (0.13)
</TABLE>
Options to purchase 6,446,985 and 1,355,254 shares of common stock outstanding
with weighted average exercise prices of $4.36 and $1.71 as of the three month
periods ended June 30, 2000 and 1999, respectively, and 7,317,476 and 3,026,893
shares of common stock outstanding with weighted average exercise prices of
$5.14 and $3.01 as of the six month periods ended June 2000 and 1999,
respectively, were excluded from the calculation of diluted net loss per share
as the effect of their inclusion would have been anti-dilutive.
6
<PAGE>
C. Comprehensive Loss
The table below sets forth comprehensive loss as defined by Statement of
Financial Accounting Standards No. 130 "Reporting Comprehensive Income" for the
three month and six month periods ended June 30, 2000 and 1999 (in thousands):
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Loss $ (1,070) $(1,671) $ (1,781) $ (3,680)
Other comprehensive income, net of tax:
Foreign currency translation adjustments (115) (129) (250) (470)
Unrealized holding gain (loss) on securities 8 (48) 6 (53)
--------- --------- --------- ---------
Total other comprehensive loss (107) (177) (244) (523)
--------- --------- --------- ---------
Comprehensive loss $ (1,177) $ (1,848) $ (2,025) $ (4,203)
========= ========= ========= =========
</TABLE>
D. New Accounting Standards
In March 2000, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 44, Accounting for Certain Transactions involving Stock
Compensation, an interpretation of APB Opinion No. 25 (FIN No. 44). This
interpretation, which is generally effective July 1, 2000, clarifies, among
other issues, the definition of employee for the purposes of applying the
provisions of APB Opinion No. 25, the criteria for determining whether a plan
qualifies as a noncompensatory plan, and the accounting consequence of various
modifications to the terms of a previously fixed stock option or award. The
adoption of FIN No. 44 is not expected to have a material effect on the
Company's financial position or results of operations.
In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (SAB
101), which among other guidance, clarifies certain conditions to be met in
order to recognize revenue. In June 2000, the SEC issued Staff Accounting
Bulletin No. 101B which delayed the implementation of SAB 101 until the fourth
quarter of fiscal years beginning after December 15, 1999. The implementation of
SAB 101 is not expected to have a material effect on the Company's financial
position or results or operations.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 133, "Accounting for Derivative Instruments
and Hedging Activities." This statement was originally effective for all fiscal
year ends beginning after June 15, 1999. In June 1999, the FASB issued Statement
137, which delayed the effective date of Statement 133 by one year. Statement
133 will be effective for the Company's fiscal year beginning January 1, 2001.
SFAS 133 requires that all derivative instruments be recorded on the balance
sheet at their fair value. Changes in the fair value of derivatives are recorded
each period in current earnings or other comprehensive income, depending on
whether a derivative is designated as part of a hedge transaction and, if it is,
the type of hedge transaction. The Company is currently evaluating the effects
of this change but anticipates that the adoption of SFAS 133 will not have a
significant effect on the Company's financial position or results of operations
in the near term.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This Report contains forward-looking statements, which reflect the current views
of management with respect to future events that will have an effect on our
future financial performance, including without limitation statements regarding
future revenue and expense levels, the impact of various legal claims and
changes in accounting standards and adequate liquidity to meet our capital and
operating requirements for the next twelve months. These statements include the
words "expect," "believe," "anticipate," "estimate," and similar expressions.
Such statements are not guarantees of future performance, and involve
substantial risks, uncertainties and assumptions that could cause our future
results to differ materially from those expressed in any forward-looking
statements. We disclaim any intent or obligation to update publicly any
forward-looking statements whether in response to new information, future events
or otherwise. Information about the basis for those assumptions and important
factors that could cause our actual results to differ materially from these
forward-looking statements is contained in "Certain Factors That May Affect
Future Results" included in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained in our 1999 Annual Report on Form
10-K, which section is incorporated herein by reference.
7
<PAGE>
RESULTS OF OPERATIONS
The following table shows certain consolidated financial data as a percentage of
our total revenue for the three and six months ended June 30, 2000 and 1999:
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
Total revenues: 100% 100% 100% 100%
Cost of revenues:
Software 3 3 4 3
Services 24 21 23 22
------ ------ ------ ------
Total cost of revenues 27 24 27 25
Gross profit 73 76 73 75
------ ------ ------ ------
Operating expenses:
Selling and marketing 53 62 53 61
Research and development 17 17 18 18
General and administrative 10 10 9 11
------ ------ ------ ------
Total operating expenses 80 89 80 90
Operating loss (7) (13) (7) (15)
Other income, net 2 2 2 2
Loss before income taxes (5) (11) (5) (13)
Provision for income taxes - - - -
------ ------ ------ ------
Net loss (5) (11) (5) (13)
====== ====== ====== ======
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS:
TOTAL REVENUES. Our total revenues increased to $19.1 million for the three
months ended June 30, 2000 from $14.6 million for the three-month period ended
June 30, 1999. Total revenues for the six months ended June 30, 2000 increased
30.0% to $36.1 million from $27.8 million for the six-month period ended June
30, 1999. These increases were primarily due to increased demand for our
recently expanded line of business-to-business ("B2B") products and services.
SOFTWARE REVENUES. Software revenues increased 41.3% to $11.9 million for the
three months ended June 30, 2000 from $8.4 million for the three-month period
ended June 30, 1999. For the six-month period ended June 30, 2000 software
revenues increased 32.2% to $36.1 million from $16.6 million for the six-month
period ended June 30, 1999. This increase was primarily due to increased sales
of B2B software, including our new B2B Integration Server, which was released in
March 2000. We expect software license revenues from our B2B business to
increase in future periods. As we continue to place greater focus on our B2B
product line, our Data Server software license revenues may stabilize or decline
in future periods. The timing of closing large-sized software deals could result
in fluctuations of future software license revenues in any given quarter.
SERVICES REVENUES. Service revenues increased 15.2% to $7.2 million for the
three-month period ended June 30, 2000 from $6.2 million for the three-month
period ended June 30, 1999. For the six months ended June 30, 2000 service
revenues increased 26.7% to $14.1 million from $11.1 million for the six-month
period ended June 30, 1999. The increase is due to higher demand for our
consulting services related to customer deployments of our software and to
higher maintenance revenues, reflecting continued growth in our installed base.
We expect to hire additional consulting personnel during 2000 to accommodate
projected additional growth for our consulting services driven by our
expectation of growing B2B software revenues in future periods.
REVENUES FROM INTERNATIONAL OPERATIONS. Revenues from operations of our
international subsidiaries as a percentage of our total revenues increased to
42.0% for the three months ended June 30, 2000 compared with 37.4% for the
three-month period ended June 30, 1999. Revenues from international operations
as a percentage of total revenues for the six-month periods ended June 30, 2000
and 1999 were 45.1% and 40.3% respectively. The increase in international
revenues as a percent of total revenues was primarily due to growth in both the
Asia Pacific and European regions.
COST OF SOFTWARE. Cost of software increased 24.1% to $581,000 for the
three-month period ended June 30, 2000 from $468,000 for the three-month period
ended June 30, 1999 and decreased as a percent of software revenues to 4.9% from
5.6% for the three-month periods ended June 30, 2000 and June 30, 1999,
respectively. For the six months ended June 30, 2000, cost of software increased
37.1%, to $1,215,000 from $886,000 for the six-month period ended June 30, 1999,
and increased as a percent of software revenues to 5.5% from 5.3% for the
six-month periods ended June 30, 2000 and June 30, 1999, respectively. The
increase is primarily due to higher amortization expense associated with
additional purchases of technology from third parties in 1999 and 2000 for
inclusion in our recently expanded B2B product line.
COST OF SERVICES. Cost of services increased 49.5% to $4.7 million for the three
months ended June 30, 2000 from $3.1 million for the three-month period ended
June 30, 1999 and increased as a percent of service revenues to 64.7% to 49.9%
for the three-month periods ended June 30, 2000 and June 30, 1999, respectively.
For the six months ended June 30, 2000, cost of services increased 38.0% to $8.4
million from $6.1 million for the six month period ended June 30, 1999 and
increased as a percent of service revenues to 59.6% from 54.7% for the six-month
periods ended June 30, 2000 and June 30, 1999, respectively. The increase in
cost of services in absolute dollar terms and as a percent of service revenues
reflects expenses related to the growth in staffing necessary to generate and
support increased worldwide service revenues and to provide customer support to
our installed base. We expect to hire additional service personnel during 2000
to accommodate projected additional growth driven by our expectation of growing
B2B software revenues in future periods.
9
<PAGE>
SELLING AND MARKETING. Selling and marketing expenses increased 12.3% to $10.2
million for the three months ended June 30, 2000 from $9.0 million for the three
months ended June 30, 1999 and decreased as a percentage of revenues to 53.3%
from 61.8% for the three-month periods ended June 30, 2000 and June 19, 1999,
respectively. Selling and marketing expenses increased 13.2% to $19.3 million
for the six months ended June 30, 2000 from $17.0 million for the six months
ended June 30, 1999 and decreased to 53.4% from 61.3% of total revenues for the
six-month periods ended June 30, 2000 and June 30, 1999, respectively. The
increase in dollar amount primarily reflects the cost of hiring additional sales
and marketing personnel, the development of expanded sales distribution
channels, and an increase in promotional activities and marketing programs,
primarily relating to our B2B products and services. We expect selling and
marketing expenses to continue to increase in absolute dollars in future
periods, but to decline as a percentage of revenues over the upcoming quarters.
RESEARCH AND DEVELOPMENT. Research and development expenses increased 30.5% to
$3.3 million for the three months ended June 30, 2000 from $2.5 million for the
three months ended June 30, 1999 and increased as a percentage of revenue to
17.3% from 17.2% for the three months ended June 30, 2000 and June 30, 1999,
respectively. Research and development expenses increased 26.4% to $6.3 million
for the six months ended June 30, 2000 from $5.0 million for the six months
ended June 30, 1999 and decreased to 17.5% from 18.0% of total revenues for the
six months ended June 30, 2000 and June 30, 1999, respectively. The increase in
dollar amount was primarily due to increased staffing associated with the
development of our B2B products and services.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased 24.4%
to $1.8 million for the three months ended June 30, 2000 from $1.5 million for
the three months ended June 30, 1999 and decreased as a percentage of revenue to
9.5% from 10.0% for the three months ended June 30, 2000 and June 30, 1999,
respectively. General and administrative expenses increased 12.1% to $3.3
million for the six months ended June 30, 2000 from $3.0 million for the six
months ended June 30, 1999 and decreased to 9.3% from 10.7% of total revenues
for the six months ended June 30, 2000 and June 30, 1999, respectively. The
increase is primarily due to the additional outside professional services
required to support the overall operations of the business. We expect general
and administrative expense to continue to increase in absolute dollars in future
periods, but to continue to decline as a percentage of revenues for the upcoming
quarters.
OTHER INCOME. Other income increased 9.5% to $357,000 for the three-month period
ended June 30, 2000 from $326,000 for the three-month period ended June 30,
1999. Other income increased 18.3% to $699,000 for the six-month period ended
June 30, 2000 from $591,000 for the six-month period ended June 30, 1999. The
increase was largely the result of increased cash balances and higher rates of
return on our cash and investments.
PROVISION FOR INCOME TAXES. No provision for income taxes were made in the
three- and six-month periods ending June 30, 2000, due to the net losses we
incurred in both periods.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2000, our principal sources of liquidity included $21.1 million of
cash and cash equivalents and short-term investments and a $2.0 million
revolving line of credit with Silicon Valley Bank. Availability under the line
of credit, expiring September 2000, is based on a formula of eligible accounts
receivable, subject to compliance with certain covenants. Borrowings are
collateralized by our assets, excluding intellectual property, and bear interest
at the bank's prime rate. At June 30, 2000, no borrowings were outstanding, and
we were in compliance with the bank's covenants. A letter of credit in the
amount of $325,000 under the line of credit was outstanding at that date.
Net cash used for operating activities was $2.2 million for the six months ended
June 30, 2000 compared to $0.4 million provided for the six months ended June
30, 1999. The net use of cash was due to an increase in the receivable balance
related to revenue growth, partially offset by a decrease in net loss, and an
increase in accounts payable and deferred revenue during the six months ended
June 30, 2000.
Our investing activities used $4.5 million of cash for the six months ended June
30, 2000, as compared to $2.7 million used by investing activities for the
six-month period ended June 30, 1999. The use from investment activities was
primarily attributable to a net purchase of marketable securities of $2.7
million for the six months ended June 30, 2000, as compared to the net purchase
of $1.6 million of investments for the six months ended June 30, 1999.
10
<PAGE>
Our financing activities provided net cash of $1.5 million for the six months
ended June 30, 2000, as compared to $186,000 of cash provided for financing
activities in the same period in 1999. The increase in cash provided was
primarily due to an additional $1.1 million in cash from stock option exercises
during the six months ended June 30, 2000 compared to the same period in 1999.
We believe that our current cash, cash equivalents, marketable securities, bank
facilities and funds generated from operations, if any, will provide adequate
liquidity to meet our capital and operating requirements for the next twelve
months.
EURO CONVERSION
On January 1, 1999, eleven of the fifteen member countries of the European Union
established fixed conversion rates between their existing sovereign currencies
and the Euro, making the Euro their common legal currency on that date. The
legacy currencies will remain legal tender in the participating countries as
denominations of the Euro between January 1, 1999 and January 1, 2002 (the
"transition period").
During the transition period, public and private parties may pay for goods and
services using either the Euro or the participating country's legacy currency on
a "no compulsion, no prohibition" basis. However, conversion rates no longer
will be computed directly from one legacy currency to another. Instead, a
triangular process will apply whereby an amount denominated in one legacy
currency will first be converted into the Euro. The resultant Euro-denominated
amount will then be converted into the second legacy currency.
We have evaluated the business implications of conversion to the Euro, including
technical adaptation of information technology and other systems to accommodate
Euro-denominated transactions, long-term competitive implications of the
conversions and the effect on market risk with respect to financial instruments
and do not expect a material impact on our operations.
NEW ACCOUNTING STANDARDS
In March 2000, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 44, Accounting for Certain Transactions involving Stock
Compensation, an interpretation of APB Opinion No. 25 (FIN No. 44). This
interpretation, which is generally effective July 1, 2000, clarifies, among
other issues, the definition of employee for the purposes of applying the
provisions of APB Opinion No. 25, the criteria for determining whether a plan
qualifies as a noncompensatory plan, and the accounting consequence of various
modifications to the terms of a previously fixed stock option or award. The
adoption of FIN No. 44 is not expected to have a material effect on the
Company's financial position or results of operations.
In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (SAB
101), which among other guidance, clarifies certain conditions to be met in
order to recognize revenue. In June 2000, the SEC issued Staff Accounting
Bulletin No. 101B which delayed the implementation of SAB 101 until the fourth
quarter of fiscal years beginning after December 15, 1999. The implementation of
SAB 101 is not expected to have a material effect on the Company's financial
position or results or operations.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 133, "Accounting for Derivative Instruments
and Hedging Activities." This statement was originally effective for all fiscal
year ends beginning after June 15, 1999. In June 1999, the FASB issued Statement
137, which delayed the effective date of Statement 133 by one year. Statement
133 will be effective for the Company's fiscal year beginning January 1, 2001.
SFAS 133 requires that all derivative instruments be recorded on the balance
sheet at their fair value. Changes in the fair value of derivatives are recorded
each period in current earnings or other comprehensive income, depending on
whether a derivative is designated as part of a hedge transaction and, if it is,
the type of hedge transaction. The Company is currently evaluating the effects
of this change but anticipates that the adoption of SFAS 133 will not have a
significant effect on the Company's financial position or results of operations
in the near term.
11
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no significant changes in our market risk exposure as described
in Management's Discussion and Analysis of Financial Condition and Results of
Operations included in our 1999 Annual Report on Form 10-K which description is
incorporated herein by reference.
PART II: OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 24, 2000, the Annual Meeting of Stockholders was held in Burlington,
Massachusetts to act upon proposals to elect a Class I Director of the Company;
to amend the Company's 1996 Employee Stock Purchase Plan; and to amend the
Company's 1996 Incentive and Nonqualified Stock Option Plan. These matters were
voted upon and approved by the stockholders of the Company at the meeting as
follows:
1. A proposal to consider and vote upon the election of Gerald B. Bay as a Class
I Director of the Company.
TOTAL VOTE FOR TOTAL VOTE WITHHELD
24,049,331 97,085
2. A proposal to approve an amendment to the Company's 1996 Employee Stock
Purchase Plan to increase the number of shares of Common Stock available for
grant thereunder by 200,000.
FOR AGAINST ABSTAIN
23,549,122 558,499 38,795
3. A proposal to approve an amendment to the Company's 1996 Incentive and
Nonqualified Stock Option Plan to increase the number of shares of Common Stock
available for grant thereunder by 1,000,000.
FOR AGAINST ABSTAIN
19,339,395 4,757,758 49,263
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<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT NUMBER DESCRIPTION
*3.3 Amended and Restated Certificate of Incorporation
*3.5 Amended and Restated By-laws of the Company
27.1 Financial Data Schedule (filed herewith)
* This exhibit is incorporated by reference to the similarly numbered exhibit
filed as part of the Company's Registration Statement on Form S-1, Securities
and Exchange Commission File No. 333-05241.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended June 30, 2000.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, eXcelon
Corporation has duly caused this Quarterly Report on Form 10-Q to be signed on
its behalf by the undersigned, thereunto duly authorized.
EXCELON CORPORATION
(Registrant)
August 14, 2000 By: /s/ Robert N. Goldman
-------------------------------------
Robert N. Goldman
President and Chief Executive Officer
August 14, 2000 By: /s/ Lacey P. Brandt
-------------------------------------
Lacey P. Brandt
Chief Financial Officer
14
