SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] Quarterly Report Pursuant To Section 13 Or 15(d) Of The Securities
Exchange Act Of 1934 For the quarterly period ended January 25, 1997
OR
[ ] Transition Report Pursuant To Section 13 or 15(d) Of The Securities
Exchange Act Of 1934 For the transition period from ___ to ___
Commission file number 1-7636
DATAPOINT CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 74-1605174
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4 rue d'Aguesseau 75008, Paris, France
8410 Datapoint Drive
San Antonio, Texas 78229-8500
(Address of principal executive offices and zip code)
(33-1) 40 07 37 37
(210) 593-7000
(Registrant's telephone number, including area code)
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___.
As of January 25, 1997, 17,658,358 shares of Datapoint Corporation Common
Stock were outstanding, exclusive of 3,332,859 shares held in Treasury.
<PAGE>
DATAPOINT CORPORATION AND SUBSIDIARIES
INDEX
Page
Number
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets --
January 25, 1997 and July 27, 1996 3
Consolidated Statements of Operations --
Quarter and Six Months Ended January 25, 1997 and January 27, 1996 4
Consolidated Statements of Cash Flows --
Six Months Ended January 25, 1997 and January 27, 1996 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Part II. Other Information
Item 1. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Signature 13
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
Datapoint Corporation and Subsidiaries
<TABLE>
<CAPTION>
(In thousands, except share data)
- -------------------------------------------------------------------------------------------------------
(Unaudited)
Jan. 25, 1997 July 27, 1996
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 12,238 $ 23,184
Restricted cash and cash equivalents 313 864
Accounts receivable, net of allowance for doubtful
accounts of $2,759 and $2,791, respectively 32,650 38,735
Inventories 4,764 3,726
Prepaid expenses and other current assets 3,012 3,486
----- -----
Total current assets 52,977 69,995
Fixed assets, net 13,371 14,625
Other assets, net 9,136 9,198
----- -----
$ 75,484 $ 93,818
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Payable to banks $ 10,113 $ 9,831
Current maturities of long-term debt 1,313 3,114
Accounts payable 16,473 20,280
Accrued expenses 23,434 29,256
Deferred revenue 12,525 11,642
Income taxes payable 1,704 2,842
----- -----
Total current liabilities 65,562 76,965
Long-term debt, exclusive of current maturities 61,623 63,945
Other liabilities 7,511 8,110
Commitments and contingencies
Stockholders' deficit:
Preferred stock of $1.00 par value. Shares authorized 10,000,000;
shares issued and outstanding of 722,126 in 1997 and 1,868,071
in 1996 (aggregate liquidation preference, including
dividend in arrears, $16,248 in 1997 and $41,061 in 1996) 722 1,868
Common stock of $.25 par value. Shares authorized 40,000,000;
shares issued 20,991,217 including treasury shares of
3,332,859 in 1997 and 7,043,593 in 1996 5,248 5,248
Other capital 212,655 212,655
Foreign currency translation adjustment 8,884 11,567
Retained deficit (279,020) (248,226)
Treasury stock, at cost (7,701) (38,314)
------ -------
Total stockholders' deficit (59,212) (55,202)
------- -------
$ 75,484 $ 93,818
========= =========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
Datapoint Corporation and Subsidiaries
(Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
(In thousands, except share data)
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Quarter Ended Six Months Ended
- -------------------------------------------------------------------------------------------------------
Jan. 25, 1997 Jan. 27, 1996 Jan. 25, 1997 Jan. 27, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenue:
Sales $18,524 $22,398 $35,550 $46,884
Service and other 15,757 20,890 31,711 41,987
------ ------ ------ ------
Total revenue 34,281 43,288 67,261 88,871
Operating costs and expenses:
Cost of sales 12,936 15,884 25,708 33,791
Cost of service and other 11,270 13,071 22,098 25,901
Research and development 465 650 954 1,416
Selling, general and administrative 8,353 11,973 18,345 24,441
Reorganization/restructuring costs 1,549 77 2,358 125
----- -- ----- ---
Total operating costs and expenses 34,573 41,655 69,463 85,674
------ ------ ------ ------
Operating income (loss) (292) 1,633 (2,202) 3,197
Non-operating income (expense):
Interest expense (1,681) (2,060) (3,329) (4,344)
Other, net 2,154 1,102 3,346 757
----- ----- ----- ---
Income (loss) before income taxes and
extraordinary credit 181 675 (2,185) (390)
Income tax expense (benefit) (33) 612 20 751
--- --- -- ---
Income (loss) before extraordinary credit 214 63 (2,205) (1,141)
--- -- ------ ------
Extraordinary credit -- debt extinguishment 81 -- 903 --
-- ---
Net income (loss) $295 $63 $(1,302) $(1,141)
==== === ======= =======
Net income (loss) applicable to common shareholders:
Net income (loss) $295 $63 $(1,302) $(1,141)
Preferred stock dividends accumulated (181) (477) (648) (947)
Gain on exchange and retirement of preferred stock 3,810 -- 3,810 --
----- -----
Net income (loss) applicable to common shareholders: $3,924 $(414) $1,860 $(2,088)
====== ===== ====== =======
Net income (loss) per common share:
Before extraordinary credit $.25 $(.03) $.07 $(.16)
Extraordinary credit -- debt extinguishment -- -- .06 --
---
Net income (loss) $.25 (.03) $.13 $(.16)
Average common shares 15,522,825 13,391,107 14,656,735 13,302,714
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Datapoint Corporation and Subsidiaries
(Unaudited)
<TABLE>
<CAPTION>
(In Thousands)
- -------------------------------------------------------------------------------------------------------
Six Months Ended
- -------------------------------------------------------------------------------------------------------
Jan. 25, 1997 Jan. 27, 1996
<S> <C> <C>
Cash flow from operating activities:
Net loss $ (1,302) $ (1,141)
Adjustments to reconcile net loss to net cash provided
from (used in) operating activities:
Depreciation and amortization 3,151 3,589
Provision for losses (recoveries) on accounts receivable 134 (207)
Gain on debt extinguishment (903) --
Changes in assets and liabilities:
Decrease in receivables 2,052 3,890
(Increase) decrease in inventory (1,317) 1,604
Decrease in accounts payable and accrued expenses (7,660) (2,958)
Increase in other liabilities and deferred credits 199 76
Other, net (293) (1,287)
---- ------
Net cash provided from (used in) operating activities (5,939) 3,566
Cash flow from investing activities:
Payments for fixed assets (2,054) (1,569)
Proceeds from disposition of fixed assets -- 50
Other, net (213) 60
---- --
Net cash used in investing activities (2,267) (1,459)
Cash flow from financing activities:
Proceeds from borrowings 5,959 13,976
Payments on borrowings (8,131) (18,169)
Restricted cash for letters of credit 551 614
--- ---
Net cash used in financing activities (1,621) (3,579)
Effect of foreign currency translation on cash (1,119) (583)
------ ----
Net decrease in cash and cash equivalents (10,946) (2,055)
Cash and cash equivalents at beginning of year 23,184 8,493
------ -----
Cash and cash equivalents at end of period $ 12,238 $ 6,438
======== ========
Cash payments for:
Interest $ 3,351 $ 4,082
Income taxes, net $ 386 $ 254
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
DATAPOINT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except share data)
(Unaudited)
1. Preparation of Financial Statements
The accompanying unaudited consolidated financial statements have been prepared
by Datapoint Corporation (the "Company"), in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, the information furnished reflects all adjustments that are
necessary for a fair statement of the results of the interim periods presented.
All adjustments made in the interim statements are of a normal recurring nature.
It is recommended that these statements be read in conjunction with the
financial statements and notes thereto included in the Company's Annual Report
and Form 10-K for the year ended July 27, 1996.
The results of operations for the quarter-ended January 25, 1997, are not
necessarily indicative of the results to be expected for the full year.
2. Inventories
Inventories consist of:
Jan. 25, 1997 July 27, 1996
------------- -------------
Raw materials $501 $731
Work in process 289 389
Finished goods 3,974 2,606
----- -----
$4,764 $3,726
3. Commitments and Contingencies
The Company is a defendant in various lawsuits generally incidental to its
business. Currently, there is no such suit that if decided adversely to the
Company, would result in a material liability.
4. Fixed Assets
In March 1995, the Financial Accounting Standards Board issued Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of", which requires impairment losses to be recognized for
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows are not sufficient to recover the assets
carrying amount. The impairment loss is measured by comparing the fair value of
the asset to its carrying amount. The Company adopted Statement No. 121 in the
first quarter of 1997. The adoption of the new impairment rules did not have a
material impact on the Company's financial statements.
5. Divestiture
On May 28, 1996, the Company entered into an agreement with Kalamazoo Computer
Group, plc ("Kalamazoo") providing for the sale by the Company to Kalamazoo of
its European-based Automotive Dealer Management Systems ("EADS") business, other
than its United Kingdom operations, for a purchase price of $33.0 million.
<PAGE>
As part of the agreement in connection with the sale of the EADS business, the
Company agreed to continue to sell hardware and software to Kalamazoo at various
discounts from its normal hardware prices and to continue to provide hardware
service maintenance to Kalamazoo at a 15% discount from the Company's normal
hardware service maintenance prices. The Company transferred to Kalamazoo all of
its employees who were dedicated to the EADS business. The consolidated
statement of operations for the three month period ended January 27, 1996,
includes revenues of $4.8 million and costs and expenses of $3.6 million and for
the six months ended January 27, 1996, includes revenues of $8.7 million and
costs and expenses of $6.5 million, that represent the operations of EADS sold
to Kalamazoo plus the effect of discounts on the continuing EADS business which
are included in the accompanying statements of operations. Because the Company's
accounting records do not completely segregate the EADS business' historical
performance, certain allocations were required based upon employee effort
analyses of EADS and other appropriate measures.
6. Preferred Stock Exchange
During the second quarter of 1997, the Company accepted 1,145,945 shares of its
$1.00 Exchangeable Preferred Stock, liquidation preference $20 per share ("the
$1.00 Preferred Stock"), tendered in its exchange offer described in the proxy
statement/prospectus delivered to the holders of the Company's common stock, par
value $.25 per share (the "Common Stock"), and to the holders of $1.00 Preferred
Stock. Under the terms of the exchange offer, each share of $1.00 Preferred
Stock tendered was exchanged for 3.25 shares of Common Stock. The exchange offer
expired December 10, 1996, at 9:00 a.m., New York City time. The tendered shares
approximate 61.34% of the total outstanding shares of $1.00 Preferred Stock
immediately prior to the expiration of the exchange offer. For purposes of
calculating net income applicable to common shareholders and related per share
amounts, a gain on exchange and retirement of preferred stock has been added to
net income or loss. This gain includes the excess of the carrying value of
preferred stock accepted in the exchange over the fair value of the common stock
issued. In addition, the gain includes accumulated dividends on the retired
preferred stock. The effect of this gain on income before extraordinary items
per common share was approximately $.24 and $.26 for the three month and six
month periods, respectively, ending January 25, 1997.
Also, the Company's proposal to its stockholders to adopt an amendment to the
Company's certificate of incorporation whereby all outstanding shares of its
$1.00 Preferred Stock would be automatically converted into the right to receive
3.25 shares of Common Stock, did not receive the requisite vote required of the
approval of holders of at least two-thirds of the outstanding shares of $1.00
Preferred Stock and a majority of the outstanding shares of Common Stock, and
thus was not adopted.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Years Referred to are Fiscal Years)
Overview
For 1997, the Company's main objectives to preserve and improve the Company's
cash liquidity and financial position and to allow the Company to meet its
future operating requirements are as follows:
1. Product marketing to maintain stabilized revenue levels,
2. Continued review and reduction of operating costs,
3. One time cash infusions to meet longer term operating requirements; and
4. The vigorous pursuit of patent royalties due from the licensing and
enforcement of its video conferencing and multi-speed networking patents.
During the second quarter of 1997, the Company had net income of $295 thousand
compared with net income of $63 thousand for the same period a year ago. For the
first six months of 1997, the Company experienced a net loss of $1.3 million
compared with a net loss of $1.1 million for the same period a year ago.
<PAGE>
Revenue during the second quarter of 1997 declined $9.0 million to $34.3 million
when compared to the same period a year ago. The decrease is primarily
attributable to the loss of business (mostly service) caused by the sale of EADS
to Kalamazoo and longer than anticipated sales cycles in two of the Company's
European subsidiaries. Revenue declined $21.6 million during the first six
months of 1997 to $67.3 million when compared to the same period a year ago. The
decrease is primarily attributable to the loss of business (mostly service)
caused by the sale of EADS to Kalamazoo, longer than anticipated sales cycles in
two of the Company's European subsidiaries, and the fact that the sales revenue
level for the first quarter of 1996 was unusually high compared with the
Company's historical sales performance for the first quarter of each fiscal
year.
Operating expenses for the second quarter of 1997 were $8.8 million, compared
with $12.6 for the same period a year ago. For the first six months of fiscal
year 1997, operating expenses were $19.3 million, compared with $25.9 million
for the same period a year ago. The decreases were the result of the continued
cost cutting actions undertaken by the Company and the impact of the sale of
EADS mentioned above. Also, the Company recorded restructuring charges of $1.5
million in the second quarter of 1997 and $2.4 million for the first six months
of fiscal 1997 primarily related to the reorganizations resulting from the sale
of EADS. As the Company continues to pursue its objective to review and reduce
operating costs, it may incur additional restructuring charges.
In addition, during the second quarter of 1997 and for the first six months of
fiscal year 1997, the Company repurchased in the public market approximately
$170 thousand and $2.2 million, respectively, face value of its 8-7/8%
convertible subordinated debentures resulting in extraordinary gains of $81
thousand and $0.9 million, respectively.
During the second quarter of 1997, the Company accepted 1,145,945 shares of its
$1.00 Exchangeable Preferred Stock, liquidation preference $20 per share ("the
$1.00 Preferred Stock"), tendered in its exchange offer described in the proxy
statement/prospectus delivered to the holders of the Company's common stock, par
value $.25 per share (the "Common Stock"), and to the holders of $1.00 Preferred
Stock. Under the terms of the exchange offer, each share of $1.00 Preferred
Stock tendered was exchanged for 3.25 shares of Common Stock. The exchange offer
expired December 10, 1996, at 9:00 a.m., New York City time. The tendered shares
approximate 61.34% of the total outstanding shares of $1.00 Preferred Stock
immediately prior to the expiration of the exchange offer. For purposes of
calculating net income applicable to common shareholders and related per share
amounts, a gain on exchange and retirement of preferred stock has been added to
net income or loss. This gain includes the excess of the carrying value of
preferred stock accepted in the exchange over the fair value of the common stock
issued. In addition, the gain includes accumulated dividends on the retired
preferred stock. The effect of this gain on income before extraordinary items
per common share was approximately $.24 and $.26 for the three month and six
month periods, respectively, ending January 25, 1997.
Also, the Company's proposal to its stockholders to adopt an amendment to the
Company's certificate of incorporation whereby all outstanding shares of its
$1.00 Preferred Stock would be automatically converted into the right to receive
3.25 shares of Common Stock, did not receive the requisite vote required of the
approval of holders of at least two-thirds of the outstanding shares of $1.00
Preferred Stock and a majority of the outstanding shares of Common Stock, and
thus was not adopted.
During the current fiscal year, the Company is continuing to pursue actions that
will provide cash infusions, including the sale of surplus real estate, selected
assets and/or operations of the Company, and to improve its financial position.
The Company had previously announced that consideration was being given to the
potential sale of its telephony business. Subsequently, the Company decided not
to pursue further negotiations with interested parties for the sale of its
telephony business. The Company will continue to position itself as an
integrated system provider of both telephonic and data transmission services,
and as such, believes that its short term and long term prospects can be better
maximized by retaining the telephony business.
<PAGE>
Results of Operations
The Company had an operating loss of $292 thousand and net income of $295
thousand for the second quarter of 1997 and an operating loss of $2.2 million
and net loss of $1.3 million for the first six months of 1997. This compares
with operating income of $1.6 million and net income of $63 thousand for the
second fiscal quarter a year ago and operating income of $3.2 million and net
loss of $1.1 million for the first six months of fiscal 1996. The following is a
summary of the Company's sources of revenue:
Quarter Ended Six Months Ended
(In thousands) 01/25/97 01/27/96 01/25/97 01/27/96
Sales:
U.S. $963 $751 $2,097 $1,989
Foreign 17,561 21,647 33,453 44,895
------ ------ ------ ------
18,524 22,398 35,550 46,884
Service and other:
U.S. 341 232 632 499
Foreign 15,416 20,658 31,079 41,488
------ ------ ------ ------
15,757 20,890 31,711 41,987
------ ------ ------ ------
Total revenue $34,281 $43,288 $67,261 $88,871
======= ======= ======= =======
Total revenue during the second quarter of 1997 decreased $9.0 million, or
20.8%, compared with the same period of the prior year. The decrease is
primarily attributable to the loss of business (mostly service) caused by the
sale of EADS to Kalamazoo and longer than anticipated sales cycles in two of the
Company's European subsidiaries. For the first six months of 1997, total revenue
decreased $21.6 million or 24.3% when compared with the same period of the prior
year. The decrease is primarily attributable to the loss of business (mostly
service) caused by the sale of EADS to Kalamazoo, longer than anticipated sales
cycles in two of the Company's European subsidiaries , and the fact that the
sales revenue level for the first quarter of 1996 was unusually high compared
with the Company's historical sales performance for the first quarter of each
fiscal year.
The gross profit margin for the second quarter of 1997 and the first six months
of 1997 was 29.4% and 28.9%, respectively, compared with 33.1% and 32.8%,
respectively, for the same periods of the prior year. The decrease was primarily
the result of competitive pricing pressures worldwide and the loss of higher
margin service business due to the sale of EADS.
Operating expenses (research and development plus selling, general and
administrative) during the second quarter of 1997 decreased $3.8 million, of
which $1.7 million is attributable to the sale of EADS, and for the first six
months of 1997 decreased $6.6 million, of which $3.1 million is attributable to
the sale of EADS, when compared with the same period of the prior year. The
remainder of the decreases are due primarily to the realization of the various
cost reduction and restructuring actions that the Company has implemented
throughout the last two fiscal years. Also, the Company recorded restructuring
charges of $1.5 million in the second quarter of 1997 and $2.4 million for the
first six months of fiscal 1997 primarily related to the reorganizations
resulting from the sale of EADS. As the Company continues to pursue its
objective to review and reduce operating costs, it may incur additional
restructuring charges. For the second quarter of 1996 and for the first six
months of fiscal 1996, the Company recorded restructuring charges of $77
thousand and $125 thousand, respectively.
Non-operating income and expenses for the quarter ended January 25, 1997,
includes interest expense of $1.7 million offset by $2.2 million of transaction
gains as a result of the strengthening U.S. dollar against foreign currencies
during the quarter. Non-operating income and expenses for the first six months
of 1997, includes interest expense of $3.3 million offset by $3.4 million of
transaction gains. Non-operating income and expenses for the three months ended
January 27, 1996, included interest expense of $2.1 million offset by $1.1
million of transaction gains as a result of the strengthening U.S. dollar
against foreign currencies during the quarter. Non-operating income and expenses
for the first six months of 1996, included interest expense of $4.3 million
offset by $1.1 million of transaction gains.
In addition, during the second quarter of 1997 and for the first six months of
fiscal year 1997, the Company repurchased in the public market approximately
$170 thousand and $2.2 million, respectively, face value of its 8-7/8%
convertible subordinated debentures resulting in extraordinary gains of $81
thousand and $0.9 million, respectively.
<PAGE>
Financial Condition
During the first six months of 1997, the Company's cash and cash equivalents
decreased $10.9 million primarily due to the usage of cash in operations. The
decrease in cash was chiefly a result of the revenue decline, payments of
long-standing vendor obligations, payments of other accrued liabilities
including executive contractual bonuses, and the semi-annual bond interest
payment, partially offset by continued strong collections of accounts
receivables. The Company used $1.3 million to repurchase 8-7/8% subordinated
debentures with a face value of $2.2 million during the first six months of
fiscal 1997.
The Company used $2.1 million for the purchase of fixed assets (primarily test
equipment, spares and internally used equipment and a subsidiary's building
renovations) during the first six months of 1997.
For the six-month period ended January 25, 1997, the Company used $1.6 million
in financing activities, primarily consisting of paydowns of Company debt
approximating $8.1 million offset by additional borrowings of $6.0 million.
As of January 25, 1997, the Company had cash and cash equivalents of $12.2
million and restricted cash and cash equivalents of $0.3 million (restricted
primarily to cover various lines of credits which are reflected as payables to
banks). The Company believes its available cash and cash equivalents and funds
generated from operations will be sufficient to provide its working capital and
cash requirements for 1997.
Reorganization/Restructuring
(In thousands)
A rollforward of the restructuring accrual from July 30, 1994, through January
25, 1997, is as follows:
TOTAL
Restructuring accrual as of July 30, 1994 $13,988
Fiscal 1995 additions 9,213
Fiscal 1995 asset write-offs (1,895)
Fiscal 1995 payments (17,138)
- ---------------------------------------------------------
Restructuring accrual as of July 29, 1995 4,168
Fiscal 1996 additions 263
Fiscal 1996 payments (3,776)
- ---------------------------------------------------------
Restructuring accrual as of July 27, 1996 655
Fiscal 1997 additions 2,358
Fiscal 1997 payments (1,139)
- ---------------------------------------------------------
Restructuring accrual as of January 25, 1997 $1,874
======
The projected payout of the restructuring accrual balance as of January 25,
1997, which related almost entirely to unpaid employee termination costs, is as
follows:
Third quarter 1997 $975
Fourth quarter 1997 720
First quarter 1998 82
Second quarter 1998 82
Beyond 15
- --------------------------------------------------------
Restructuring accrual as of January 25, 1997 $1,874
======
Restructuring charges are not recorded until specific employees are notified of
termination by management in accordance with its overall restructuring plan.
Employee termination payments are generally paid over a period of time rather
than as one lump sum. As the Company continues to pursue its objective to review
and reduce operating costs, it may incur additional restructuring charges.
However a reasonable estimate of the amount of future restructuring costs cannot
be made at this time.
<PAGE>
Cautionary Statement Regarding Risks and Uncertainties That May Affect
Future Results
This Quarterly Report on Form 10-Q contains forward-looking statements about the
business, financial condition and prospects of the Company. The actual results
of the Company could differ materially from those indicated by the
forward-looking statements because of various risks and uncertainties including
without limitation changes in product demand, the availability of products,
changes in competition, economic conditions, new product development, various
inventory risks due to changes in market conditions, changes in tax and other
governmental rules and regulations applicable to the Company, and other risks
indicated in the Company's filings with the Securities and Exchange Commission.
These risks and uncertainties are beyond the ability of the Company to control,
and in many cases, the Company cannot predict the risks and uncertainties that
could cause its actual results to differ materially from those indicated by the
forward-looking statements. When used in this Quarterly Report on Form 10-Q, the
words "believes," "estimates," "plans," "expects," and "anticipates" and similar
expressions as they relate to the Company or its management are intended to
identify forward-looking statements.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See Item 3 of Registrant's Report on Form 10-K for the fiscal year ended July
27, 1996, for a description of certain legal proceedings heretofore reported and
incorporated by reference herein.
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders held on December 10, 1996, the holders of
the Company's Common Stock elected six directors, ratified the appointment of
Ernst & Young LLP, certified public accountants, as the Company's independent
auditors for fiscal year 1997, and approved the Company's 1996 Director Stock
Option Plan and 1996 Employee Stock Option Plan, and the holders of the
Company's $1.00 Preferred Stock elected two directors. The proposal to amend the
certificate of incorporation of the Company (the "Preferred Stock Amendment") to
reclassify and convert each outstanding share of $1.00 Preferred Stock into 3.25
shares of Common Stock did not receive the requisite vote required of the
approval of at least two-thirds of the outstanding shares of $1.00 Preferred
Stock and a majority of the outstanding shares of Common Stock, and thus was not
adopted. The votes on the above proposals were cast as follows:
1. Election of Directors by holders of Common Stock:
FOR WITHHELD
Gerald N. Agranoff 6,521,734 539,575
Asher B. Edelman 6,519,048 542,261
Irving J. Garfinkel 6,522,021 539,288
Daniel R. Kail 6,522,124 539,185
Didier M. M. Ruffat 6,521,894 539,415
Blake D. Thomas 6,521,860 539,449
2. Election of Directors by holders of Preferred Stock:
FOR WITHHELD
Charles F. Robinson 1,645,811 122,727
Robert D. Summer 1,643,511 125,027
3. Ratification of Ernst & Young, LLP as independent auditors:
FOR AGAINST ABSTAIN
6,943,940 62,949 54,420
4. Adoption of the 1996 Director Stock Option Plan:
FOR AGAINST ABSTAIN NOTVOTED
3,036,310 861,706 183,566 2,979,727
5. Adoption of the 1996 Employee Stock Option Plan:
FOR AGAINST ABSTAIN NOTVOTED
3,186,551 811,867 83,164 2,979,727
6. Adoption of the Preferred Stock Amendment:
FOR AGAINST ABSTAIN NOTVOTED
Preferred Stock 1,126,255 211,339 46,013 384,931
Common Stock 3,715,511 201,390 164,681 2,979,727
<PAGE>
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.
DATAPOINT CORPORATION
(Registrant)
Date: March 7, 1997 /s/ Phillip P. Krumb
--------------------
Phillip P. Krumb
Chief Financial Officer
(Principal Accounting Officer)
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<NAME> DATAPOINT CORPORATION
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