UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From ___ to ___
Commission file number 33-42633
ViaGrafix Corporation
---------------------
(Exact name of registrant as specified in its charter)
Oklahoma 73-1354168
- -------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
One American Way, Pryor, Oklahoma 74361
---------------------------------------
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code:
(918) 825-6700
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 issuer's $.01 par value
common stock as of November 4, 1998 was 5,956,668.
<PAGE 2>
ViaGrafix Corporation
FORM 10-Q
For the Quarter Ended September 30, 1998
INDEX
Part 1. Financial Information
Item 1. Consolidated Financial Statements Page
(a) Consolidated Statements of Income
for the Three and Nine Months
ended September 30, 1998 and 1997 3
(b) Consolidated Balance Sheets
as of September 30, 1998 and
December 31, 1997 4
(c) Consolidated Statements of Cash Flows
for the Nine Months Ended
September 30, 1998 and 1997 5
(d) Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Part 2. Other Information
Item 1. Legal Proceedings 12
Item 2. Changes in Securities and Use of Proceeds 12
Item 6. Exhibits and Reports on Form 8-K 12
Signature 12
<PAGE 3>
<TABLE>
Part 1. Financial Information
Item 1. Consolidated Financial Statements
ViaGrafix Corporation
Consolidated Statements of Income
(Unaudited, except Nine Months Ended
September 30, 1997) Three Months Nine Months
Ended Ended
(In thousands, except per share) September 30, September 30,
1998 1997 1998 1997
<CAPTION>
<S> <C> <C> <C> <C>
Net sales $ 4,017 $ 3,657 $12,281 $ 9,803
Cost of sales 1,677 1,200 5,137 3,659
------- ------- ------- -------
Gross profit 2,340 2,457 7,144 $ 6,144
Selling, general and administrative 1,662 858 4,230 2,434
Research & development 423 311 1,180 836
Acquired research & development 37 - 37 -
Depreciation & amortization 203 87 408 236
------- ------- ------- -------
Operating profit 15 1,201 1,289 2,638
Net interest income (expense) 156 (69) 319 (218)
------- ------- ------- -------
Income before income taxes 171 1,132 1,608 2,420
Provision for income taxes 14 443 412 938
------- ------- ------- -------
Net income $ 157 $ 689 $ 1,196 $ 1,482
Computation of net income applicable
to common shares:
Net income $ 157 $ 689 $ 1,196 $ 1,482
Preferred stock dividends - - - (57)
------- ------- ------- -------
Net income applicable to common stock $ 157 $ 689 $ 1,196 $ 1,425
Basic earnings per share $0.03 $0.18 $0.22 $0.37
Weighted average common shares used
in computing basic earnings
per share 6,089 3,862 5,544 3,859
Diluted earnings per share $0.03 $0.15 $0.21 $0.33
Weighted average common shares used
in computing diluted earnings
per share 6,181 4,500 5,784 4,497
Dividends per common share - - - $0.12
Total common stock dividends declared - - - $ 449
</TABLE>
<PAGE 4>
<TABLE>
ViaGrafix Corporation
Consolidated Balance Sheets
(In thousands, except share amounts) (Unaudited)
September 30, December 31,
1998 1997
---- ----
<CAPTION>
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 14,082 $ 217
Accounts receivable 3,670 2,456
Income taxes receivable 187 -
Inventories 1,983 1,411
Prepaid expenses 241 319
-------- --------
Total current assets 20,163 4,403
Property, plant and equipment 4,259 3,263
Accumulated depreciation 1,251 959
-------- --------
3,008 2,304
Goodwill net of amortization 91 101
Capitalized customer lists net of amortization 295 -
Capitalized software net of amortization 204 -
Prepaid royalties & licenses 620 -
Note receivable-officer 188 -
Deferred income taxes 442 611
-------- --------
Total assets $ 25,011 $ 7,419
Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable $ 1,412 $ 848
Accrued liabilities 247 233
Income taxes payable - 209
Current portion of long-term debt - 789
-------- --------
Total current liabilities 1,659 2,079
Long-term debt - 2,827
Stockholders' equity:
Common stock, $.01 par value, authorized
40,000,000 shares; issued and outstanding
5,962,868 and 3,861,881 shares in 1998
and 1997, respectively 59 39
Convertible preferred stock, $.01
par value; authorized 10,000,000 shares;
issued and outstanding 855,000 shares in 1997 - 9
Additional paid-in capital 21,084 1,487
Unearned Compensation (115) (149)
Retained earnings 2,324 1,127
-------- --------
Total stockholders' equity 23,352 2,513
-------- --------
Total liabilities and stockholders' equity $ 25,011 $ 7,419
</TABLE>
<PAGE 5>
<TABLE>
ViaGrafix Corporation
Consolidated Statements of Cash Flows
(In Thousands) Nine Months Ended
(Unaudited, except September 30, 1997) September 30,
1998 1997
---- ----
<CAPTION>
<S> <C> <C>
Operating Activities
Net Income $ 1,196 $ 1,482
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 408 236
Deferred income tax provision 173 118
Non-cash interest expense 45 -
Loss on disposal of assets 5 9
Bad debt expense 87 70
Write-off purchased research and development 37 -
Amortization of unearned compensation 24 32
Changes in operating assets and liabilities:
Increase in accounts receivable (1,286) (1,027)
Increase in inventories (572) (341)
Decrease in prepaid expenses 75 93
Increase in accounts payable 565 181
Increase in accrued liabilities 14 57
Increase in income taxes receivable (187) -
Decrease in income taxes payable (209) (59)
------- -------
Net cash provided by operating activities 375 851
Investing Activities
Purchase of property, plant & equipment (986) (579)
Purchase of assets of Make It So, Inc. (682) -
Prepaid royalties & licenses (620) -
Note receivable-officer (188) -
------- -------
Cash used in investing activities (2,476) (579)
Financing Activities
Initial public offering of common stock 20,491 -
Repurchase of common stock (917) -
Repayments of debt (3,661) (433)
Dividends paid to common and preferred shareholders - (506)
Purchase of treasury common stock - (2)
Exercise of stock options 53 29
------- -------
Net cash provided by (used in) financing activities 15,966 (912)
------- -------
Net increase (decrease) in cash and cash equivalents 13,865 (640)
Cash and cash equivalents at beginning of year 217 1,009
------- -------
Cash and cash equivalents at end of period $14,082 $ 369
</TABLE>
<PAGE 6>
ViaGrafix Corporation
Notes to Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
In the opinion of management of ViaGrafix Corporation
("ViaGrafix" or the "Company"), the accompanying balance sheets
and related interim statements of income and cash flows reflect
all adjustments (consisting only of normal recurring items)
necessary for their fair presentation in conformity with
generally accepted accounting principles. Preparing financial
statements requires management to make estimates and assumptions
that affect the reported amounts of assets, liabilities,
revenues, and expenses. Actual results may differ from these
estimates. Interim results are not necessarily indicative of
results for a full year. The information included in this Form 10-
Q should be read in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations and
financial statements and notes thereto included in the Company's
March 4, 1998 Prospectus ("Prospectus") which is included as a
part of Post-Effective Amendment No. 1 to the Company's
Registration Statement on Form S-1 as filed with the Securities
and Exchange Commission.
2. Inventories
Inventories consist of the following:
(Unaudited)
September 30, December 31,
1998 1997
---- ----
Finished goods .............. $1,141,113 $ 721,370
Raw materials ............... 841,960 689,887
---------- ----------
$1,983,073 $1,411,257
3. Earnings Per Share
Basic and diluted earnings per share are computed in conformity
with rules and standards established in Statement of Financial
Accounting Standards No. 128 "Earnings Per Share." Basic earnings
per share are based on the average number of common shares
outstanding during each period. Diluted earnings per share
assumes conversion of preferred stock to common stock and
exercise of stock options outstanding using the treasury stock
method.
4. Legal Contingencies
On May 22, 1998 a lawsuit was filed in the United States District
Court for the Northern District of Texas by Jonathan L. Gordon,
brought as a putative class action against the Company and
certain of its officers and directors claiming violations of the
Securities Act of 1933 for alleged misrepresentations and
omissions in the Company's Prospectus issued in connection with
its initial public offering made in March 1998. Mr. Gordon and
certain others have sought designation as lead plaintiffs in the
action. The Company believes the lawsuit is without merit. The
Company's response is not yet due.
<PAGE 7>
The Company is involved in various other claims and legal actions
arising in the ordinary course of business. Management does not
believe that the ultimate resolution of these matters will have a
material effect on the Company's financial position, results of
operations or cash flows.
5. Acquisition
On July 31, 1998 the Company acquired certain assets of Make It
So, Inc., a privately held company based in San Mateo,
California, that provides e-mail list management services and
Internet marketing services, for approximately $682,000. The
transaction was financed with existing cash and was accounted for
as a purchase. The purchase price and related direct expenses
associated with the acquisition have been allocated based on the
fair value of the assets purchased. The results of operations for
this acquisition have been included in the Company's consolidated
results of operations since the acquisition date. Pro forma
operating results are not presented as they would not differ
materially from actual results for 1998 and 1997.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
This commentary should be read in conjunction with the Company's
Prospectus for a more complete understanding of the Company's
financial condition and results of operations. The following
discussion contains forward looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended and
Section 21E of the Securities Exchange Act of 1934, as amended.
Actual results could differ materially from those contemplated by
the forward looking statements as a result of certain factors,
including but not limited to those disclosed under "Risk Factors"
in the Company's Prospectus.
Results of Operations
ViaGrafix develops, produces and markets technology-based
information technology ("IT") training products and graphics
software products. The Company's IT training courses include
video tutorials and interactive multimedia training courses
delivered on CD-ROM, LANs, intranets and the Internet for a
variety of computer software. ViaGrafix has developed and markets
more than 850 training courses for most major personal computer
software packages. These products provide an audio-visual
environment that is designed to allow users to learn faster and
increase retention and productivity. The Company's principal
graphics software product, DesignCAD, is a computer-aided design
("CAD") package sold worldwide. ViaGrafix also produces several
other CAD-related software packages. The current primary
platforms for both the training and software products are Windows
3.1, Windows 95,Windows 98 and Windows NT. The Company believes
its training and graphics software products enable users to
increase productivity with their computers and thereby reduce
costs.
Net Sales. Net sales increased 10% to $4.0 million in the three
months ended September 30, 1998 from $3.7 million in the three
months ended September 30, 1997. On a year-to-date basis, net
sales were $12.3 million, 25% greater than net sales of $9.8
million in the comparable period for 1997. This increase, for the
quarter and year-to-date, reflects an increase in sales from
existing and new Information Technology (IT) training titles, and
was primarily attributable to increases in the volume of products
sold rather than increases in prices.
<PAGE 8>
The decrease in sales in the third quarter reflects reduced sales
to the Company's largest customer, Ingram Micro, Inc., a
distributor that supplies resellers. This decrease was partially
offset by increased sales to other customers, including direct
sales to end-users. Net sales to Ingram Micro in the third
quarter were approximately 9% of total net sales compared to 32%
of the total net sales for the first six months of 1998. The
majority of this decrease was due to decreased sales of Company
products by Ingram Micro to CompUSA and Computer City. CompUSA
reported that it acquired the Computer City chain from Tandy
Corporation on August 31, 1998 and in September closed 55 of the
101 former Computer City stores.
Cost of Sales. Cost of sales increased 40% to $1.7 million in the
three months ended September 30, 1998 from $1.2 million for the
three months ended September 30, 1997. Cost of sales as a
percentage of net sales increased to 41.7% for the quarter ended
September 30, 1998, from 32.8% for the same period in 1997. Most
of the increase in cost of sales as a percent of sales in the
third quarter of 1998 was attributable to advertising allowances
to retailers, which were approximately 13% of net sales in the
third quarter of 1998 compared to approximately 5% during the
same period in 1997. For the nine month period ended September
30, 1998 cost of sales increased 40% to $5.1 million from $3.7
million for the nine months ended September 30, 1997. Year-to-
date, cost of sales as a percentage of net sales increased to
41.8% as compared to 37.3% in the comparable period for 1997. The
increase in cost of sales year-to-date as a percent of net sales
was a result of increased advertising allowances to retailers,
which as a percent of net sales increased to approximately 11% in
1998 from approximately 5% in the first nine months of 1997.
Selling, General and Administrative Expenses. Selling, general
and administrative expenses increased 94% to approximately $1.7
million in the three months ended September 30, 1998 from
approximately $858,000 for the same period in 1997. Selling,
general and administrative expenses as a percentage of net sales
increased to 41.4% for the quarter ended September 30, 1998, from
23.5% during the same period in 1997.
Wage expense increased 40% in the third quarter of 1998 to
approximately $992,000 from approximately $710,000 during the
third quarter of 1997. Increased wage expenses during 1998's
third quarter were primarily due to the previously planned
addition of personnel for sales, marketing, technical support and
customer service, including the addition of nine personnel in the
Company's new subsidiary, Make It So, Inc. The Company believes
these staff additions will provide support for increased future
sales. The Company is building an infrastructure to support its
corporate sales efforts, and in July hired a Director of
Corporate Sales to manage that key area of expected sales growth.
Advertising increased 110% to approximately $501,000 during the
third quarter of 1998, compared to approximately $239,000 for the
same period in 1997. The increase in advertising was due to
previously planned increased expenditures through the
distribution channel and increased direct advertising, including
expenditures related to the release of DesignCAD Pro 2000 during
the quarter. The Company plans to maintain advertising
expenditures in the fourth quarter at levels above those incurred
in the fourth quarter of 1997.
The balance of the increased selling, general and administrative
expenditures in the third quarter of 1998 versus the same period
in 1997 was approximately $260,000 and was composed of numerous
expense categories, mostly to service the planned increased
staffing and facilities.
For the first three quarters of 1998, selling, general and
administrative expenses increased 74% to approximately $4.2
million from approximately $2.4 million during the same period in
1997. Selling, general and administrative expenses as a
percentage of net sales increased to 34.4% for the first nine
months of 1998, from 24.8% during the first nine months of 1997.
Advertising and commissions paid to manufacturer sales reps
increased 142% to approximately $1.3 million and 162% to
approximately $412,000 respectively in the first nine months of
1998, compared to approximately $545,000 and $157,000
respectively during the same period of 1997. Wage expenses during
the first nine months of 1998 increased to approximately $2.5
million from approximately $1.8 million during the same period of
1997. Advertising and wage expenditures reflect the same emphasis
by the Company in the first nine months as discussed in the
paragraph above. The increase in commissions paid to manufacturer
sales reps was a result of significantly increased sales to
retailers through manufacturer sales reps during the first nine
months of 1998 compared to the same period in 1997.
<PAGE 9>
Research and Development Expenses. Research and development
expenses increased 36% to approximately $423,000 in the three
months ended September 30, 1998 compared to approximately
$311,000 during the third quarter of 1997. Research and
development expenses as a percentage of net sales increased to
10.5% during the quarter ended September 30, 1998, from 8.5%
during the same period in 1997. On a year-to-date basis, research
and development expenses increased 41% to $1.2 million or 9.6% of
net sales from approximately $836,000 or 8.5% of net sales during
the same period in 1997. This increase for the third quarter and
year-to-date reflects the Company's commitment to expand its
number of IT training courses offered. The Company released
DesignCAD Pro 2000, the latest version of its flagship CAD
software during the third quarter and will be releasing a new
graphics program, ViaDraw in November. The Company has continued
to increase its development staff during the fourth quarter of
1997 and for the first nine months of 1998.
Depreciation and Amortization. Depreciation and amortization
expenses were approximately $203,000 during the third quarter of
1998 representing 5.1% of net sales, compared to approximately
$87,000 representing 2.4% of net sales during the third quarter
of 1997. For the first nine months, depreciation and amortization
in 1998 was approximately $408,000 or 3.3% of net sales, compared
to approximately $236,000 or 2.4% during the same period in 1997.
For the quarter, and year-to-date, approximately $87,000 of
depreciation and amortization is attributable to the assets
purchased on July 31, 1998 from Make It So, Inc. The majority of
the assets purchased from Make It So, Inc. have depreciable lives
of 12 to 18 months.
Net Interest Income (Expense). Net interest income was
approximately $156,000 or 3.9% of net sales in the three months
ended September 30, 1998 compared to net interest expense of
approximately $69,000, or 1.9% of net sales, during the third
quarter of 1997. For the first nine months of 1998 net interest
income was approximately $319,000 or 2.6% of net sales compared
to net interest expense of approximately $218,000 or 2.2% of net
sales, during the same period in 1997. A portion of the net
proceeds from the initial public offering on March 4, 1998 was
used to retire all outstanding long-term debt, which lowered
interest expense to approximately $54,000 in the nine months
ended September 30, 1998 compared to approximately $231,000 in
the same period of 1997. A significant portion of the net
proceeds from the initial public offering was invested in highly
liquid investments with maturities of three months or less. These
investments generated interest income of approximately $373,000
in the first nine months of 1998 compared to interest income of
approximately $13,000 in the first nine months of 1997.
Provision for Income Taxes. During the three months ended
September 30, 1998 the effective tax rate improved to 8.2%
compared to 39.1% for the same period in 1997. Approximately
$125,000 of the $156,000 in net interest income during the third
quarter of 1998 was derived from federal tax exempt investments.
In addition, tax credits discussed below favorably impacted the
effective tax rate for the third quarter of 1998.
<PAGE 10>
For the first nine months of 1998 the effective tax rate improved
to 25.6% compared to 38.8% for the same period in 1997. The
reduction in the effective tax rate was due to several factors,
including the realization of research and development tax credits
for 1995 through 1998. The amount of available credits for 1995
through 1997 was quantified and the benefit recorded in the first
quarter of 1998. In addition, the effective tax rate was impacted
favorably by increased tax credits during the first nine months
of 1998, and from employing enrolled members of Indian Tribes
within specified portions of the State of Oklahoma. These two tax
credits were not realized during the first nine months of 1997,
as noted above. The employment tax credit was not available until
August 1997 as a result of the passage of the Taxpayer Relief Act
of 1997. During the first nine months of 1998 approximately
$277,000 of the $373,000 in interest income was derived from
federal tax exempt investments.
Liquidity and Financial Condition
The Company's cash and cash equivalents totaled approximately
$14.1 million at September 30, 1998. Following the Company's
initial public offering on March 4, 1998, the Company realized
net proceeds from the offering of approximately $20.5 million.
Long-term debt of $3.7 million was retired after the Company
received the offering proceeds. The Company does not have any
long-term debt as of September 30, 1998. On July 31, 1998 the
Company utilized approximately $682,000 to purchase the assets of
Make It So, Inc. The Company announced on September 1, 1998 that
its board of directors had authorized the repurchase of up to $3
million of its common stock. During September 1998 the Company
repurchased approximately 181,600 shares of its common stock for
approximately $917,000.
The Company believes that its cash balance at September 30, 1998
and cash generated from future operations will satisfy its
anticipated working capital requirements for at least the next
two years. The Company, however, may need substantial additional
funds for potential acquisitions. In the normal course of
business, the Company evaluates acquisitions of businesses,
product lines and technologies that complement the Company's
business, like the Make It So, Inc. acquisition.
During the period ending September 30, 1998 operating activities
provided the Company with net cash of approximately $375,000.
Operating activities generated cash flows through approximately
$1.2 million in net income, increases in accounts payable and
accrued liabilities of approximately $579,000 and a decrease in
prepaid expenses of approximately $75,000. Depreciation and
amortization and non-cash items including interest expense, bad
debt expense and deferred income tax provision generated cash
flows of approximately $779,000. During the period, cash flow
used in operating activities included an increase of
approximately $1.3 million in accounts receivable, decreased
income taxes payable of approximately $209,000, increased income
taxes receivable of approximately $187,000, and increased
inventories of approximately $572,000.
The Company's capital expenditures during the first nine months
of 1998 were approximately $986,000. Capital expenditures were
primarily for expansion of facilities, production and duplication
equipment and computer hardware. On July 31, 1998 the Company
purchased the assets of Make It So, Inc. for approximately
$682,000, including approximately $665,000 in capital and
intangible assets. On September 30, 1998 the Company executed a
$620,000 Development and Licensing Agreement with Street
Technologies, Inc. The President and Chief Executive Officer of
Street Technologies, Inc. is a director of the Company. The
Company loaned approximately $188,000 to its Vice President and
Chief Marketing Officer, in July 1998 as a part of an employment
agreement. The loan is secured by a first mortgage on his
residence, is at a rate of 8% and is amortized over 30 months
with a balloon payment due at the end of two years.
<PAGE 11>
The Company does not currently have any other significant
commitments for capital expenditures, and anticipates that it
will continue to expand its facilities and purchase equipment as
needed to support its product research and development,
production of its products, sales and marketing, product support,
and administrative staff.
Year 2000 Disclosure ("Y2K")
Until recently, many software systems were not programmed to
correctly recognize dates beyond December 31, 1999 (the "Y2K
Problem"). The Company believes that Y2K Problems will not have a
material adverse effect on its results of operations or financial
position.
The Company uses up-to-date, PC-based software for its internal
accounting and other applications. The Company has completed
testing of its significant applications and found no Y2K Problem
defects. The Company's training products and graphics software
products do not suffer Y2K defects simply because they do not use
dates. The Company does not anticipate incurring material costs
in addressing Y2K issues.
The Company could experience difficulty in attracting and
retaining qualified technical personnel as the national
population of qualified technical people is absorbed by others in
addressing their Y2K Problems, but to date the Company has been
able to meet its personnel requirements. Should there be
widespread defects affecting the financial/banking industry, the
Company could experience temporary problems in receiving payments
from customers.
The Company does not feel there is a need for any contingency
plans related to the Y2K Problem.
Item 3. Quantitative and Qualitative Disclosures About Market
Risk
Not applicable in 1998.
<PAGE 12>
Part II. Other Information
Item 1. Legal Proceedings
See Note 4 to Consolidated Financial Statements.
Item 2. Changes in Securities and Use of Proceeds
(a) Modifications in Instruments Defining the Rights of
Stockholders. As a consequence of the closing of the Company's
initial public offering on March 9, 1998, all outstanding shares
of Series A Convertible Preferred Stock were converted into an
aggregate of 488,571 shares of Common Stock.
(b) Limitations of Qualifications of Other Securities. None.
(c) Sales of Unregistered Securities. None.
(d) Use of Proceeds. On July 31, 1998 the Company acquired
certain assets of Make It So, Inc., a privately held company
based in San Mateo, California, that provides e-mail list
management services and Internet marketing services, for
approximately $682,000. During September the Company repurchased
181,600 shares of its common stock for approximately $917,000.
The Company utilized a portion of the proceeds from its March 4,
1998 initial public offering to fund the acquisition and the
stock repurchase.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11. Statement regarding computation of per share earnings
27. Financial data schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by ViaGrafix during the quarter
ended September 30, 1998
Items 3, 4 and 5 are not applicable and have been omitted.
Signature
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
ViaGrafix Corporation
Date: November 4, 1998 By: /s/ Robert C. Moore, Jr.
----------------------------
Robert C. Moore, Jr.,
Treasurer and Chief Financial Officer
(Principal Financial and Accounting
Officer and Duly Authorized Officer)
<PAGE 13>
<TABLE>
Exhibit 11.
ViaGrafix Corporation
Computation of Earnings Per Share
(Unaudited, except Nine Months Ended September 30, 1997)
(In thousands, except per share)
The following sets forth the computation of basic and diluted
earnings per share for the
Three Months Nine Months
Ended Ended
September 30, September 30,
1998 1997 1998 1997
---- ---- ---- ----
<CAPTION>
<S> <C> <C> <C> <C>
Numerator:
Net income $ 157 $ 689 $ 1,196 $ 1,482
Preferred stock dividend - - - 57
------- ------- ------- -------
Numerator for basic earnings per
share income - available to common
shareholders 157 689 1,196 1,425
Effect of dilutive securities -
preferred stock dividend - - - 57
------- ------- ------- -------
Numerator for diluted earnings
per share - income available to common
shareholders after assumed
conversions of preferred stock $ 157 $ 689 $ 1,196 $ 1,482
======= ======= ======= =======
Denominator:
Denominator for basic earnings
per share - weighted average shares 6,089 3,862 5,544 3,859
Effect of dilutive securities:
Employee stock options 92 149 114 149
Series A convertible preferred stock - 489 126 489
------- ------- ------- -------
Dilutive potential common shares 92 638 240 638
------- ------- ------- -------
Denominator for diluted earnings
per share - adjusted
weighted-average conversions 6,181 4,500 5,784 4,497
======= ======= ======= =======
1998 1997 1998 1997
---- ---- ---- ----
Basic earnings per share $0.03 $0.18 $0.22 $0.37
Diluted earnings per share $0.03 $0.15 $0.21 $0.33
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 14,082
<SECURITIES> 0
<RECEIVABLES> 3,819
<ALLOWANCES> 149
<INVENTORY> 1,983
<CURRENT-ASSETS> 20,163
<PP&E> 4,843
<DEPRECIATION> 1,336
<TOTAL-ASSETS> 25,011
<CURRENT-LIABILITIES> 1,659
<BONDS> 0
0
0
<COMMON> 59
<OTHER-SE> 23,293
<TOTAL-LIABILITY-AND-EQUITY> 25,011
<SALES> 12,281
<TOTAL-REVENUES> 12,654
<CGS> 5,137
<TOTAL-COSTS> 5,855
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
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</TABLE>
