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 Three Months ended March 31, 2000 Commission file No. 0-21450
EQUINOX SYSTEMS INC.
(Exact name of registrant as specified in its charter)
State of incorporation: Florida I.R.S. Employer Identification No. 59-2268442
Address of principal executive offices: One Equinox Way - Sunrise, Florida 33351
Telephone: (954) 746-9000
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock (par value $.01 per share)
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]
The number of shares of Common Stock outstanding as of May 12, 2000 was
5,447,239.
<PAGE>
INDEX TO ITEMS
<TABLE>
<CAPTION>
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<S> <C>
Condensed Consolidated Balance Sheets (Unaudited) - March 31, 2000 and December 31, 1999.............................. 3
Condensed Consolidated Statements of Operations (Unaudited) - Three months ended March 31, 2000 and 1999.............. 4
Condensed Consolidated Statements of Cash Flows (Unaudited) - Three months ended March 31, 2000 and 1999.............. 5
Notes to Condensed Consolidated Financial Statements (Unaudited)...................................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 8
PART II - OTHER INFORMATION
Item 5 Other Information......................................................................................... 11
Item 6. Exhibits and Reports on Form 8-K ......................................................................... 12
Signature Page........................................................................................................ 13
</TABLE>
2
<PAGE>
EQUINOX SYSTEMS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
-------- --------
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 6,820 $ 8,233
Marketable securities 14,982 15,044
Accounts receivable 1,731 3,667
Inventories 6,478 6,031
Deferred income taxes 1,444 1,432
Prepaid expenses and other current assets 1,004 584
-------- --------
Total current assets 32,459 34,991
-------- --------
PROPERTY AND EQUIPMENT, at cost 6,187 6,213
Less - accumulated depreciation and amortization (3,006) (2,937)
-------- --------
3,181 3,276
-------- --------
$ 35,640 $ 38,267
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 914 $ 1,865
Accrued expenses 949 2,148
-------- --------
Total current liabilities 1,863 4,013
-------- --------
SHAREHOLDERS' EQUITY:
Common stock 54 54
Additional paid-in capital 12,115 11,852
Retained earnings 21,699 22,414
Unrealized loss on marketable securities, net of tax (91) (66)
-------- --------
Total shareholders' equity 33,777 34,254
-------- --------
$ 35,640 $ 38,267
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
EQUINOX SYSTEMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
2000 1999
------- -------
<S> <C> <C>
NET SALES $ 2,720 $ 8,284
COST OF SALES 1,496 3,975
------- -------
Gross margin 1,224 4,309
------- -------
OPERATING EXPENSES:
Research and development 956 872
Selling, general and administrative 1,605 1,751
------- -------
Total operating expenses 2,561 2,623
------- -------
Income (loss) from operations (1,337) 1,686
------- -------
OTHER INCOME, NET:
Interest income 302 217
Loss on sale of marketable securities (69) --
Other income (expense), net 13 (22)
------- -------
Total other income, net 246 195
------- -------
Income (loss) before income taxes (1,091) 1,881
BENEFIT (PROVISION) FOR INCOME TAXES 376 (639)
------- -------
Net income (loss) $ (715) $ 1,242
======= =======
EARNINGS (LOSS) PER SHARE:
Basic $ (0.13) $ 0.23
======= =======
Diluted $ (0.13) $ 0.22
======= =======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
EQUINOX SYSTEMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
2000 1999
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (715) $ 1,242
-------- --------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 137 105
Provision for doubtful accounts and anticipated sales returns 138 211
Provision for warranty costs -- 43
Recognition of deferred service contract revenue (46) (118)
Loss on sale of marketable securities 69 --
Changes in operating assets and liabilities:
Accounts receivable 1,798 (558)
Inventories (447) (45)
Prepaid expenses and other current assets (331) (238)
Accounts payable (951) 34
Accrued expenses (1,109) (68)
-------- --------
Total adjustments (742) (634)
-------- --------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (1,457) 608
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturities (purchases) of marketable securities, net (133) (200)
Purchases of property and equipment (42) (113)
-------- --------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (175) (313)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Stock options exercised 219 87
Repurchases of common stock -- (840)
-------- --------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES 219 (753)
-------- --------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (1,413) (458)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 8,233 12,382
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 6,820 $ 11,924
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS:
Income taxes paid $ 100 $ 565
======== ========
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:
During 2000 and 1999, the Company realized income tax benefits of $44 and $33,
respectively, in connection with the exercise of stock options by certain
current and former employees and directors. Such amounts represent deductible
compensation expense not required to be recognized for financial statement
purposes.
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE>
EQUINOX SYSTEMS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(Unaudited)
(1) BASIS OF PRESENTATION
The condensed consolidated balance sheet as of December 31, 1999, which has been
derived from the annual audited financial statements, and the unaudited interim
condensed consolidated financial statements included herein, have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and note disclosures normally included in annual financial
statements prepared in accordance with accounting principles generally accepted
in the United States have been condensed or omitted pursuant to those rules and
regulations. These financial statements should be read in conjunction with the
financial statements and the notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1999.
In the opinion of the Company, the accompanying condensed consolidated financial
statements contain all material adjustments, consisting of only normal recurring
accruals, necessary to present fairly the Company's financial position, results
of operations and cash flows. Results of operations for the three months ended
March 31, 2000 are not necessarily indicative of the results to be expected for
the year ending December 31, 2000.
The accounting policies followed for quarterly financial reporting purposes are
the same as those disclosed in the Company's audited financial statements for
the year ended December 31, 1999, included in the Company's Form 10-K.
(2) FISCAL PERIOD
The fiscal periods of the Company end on the first Saturday following the last
calendar day of each month. All references to March 31, 2000 and March 31, 1999
represent the 13-week fiscal periods ended April 1, 2000 and April 3, 1999,
respectively.
(3) EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share is calculated by dividing net income (loss) by
the weighted average number of common shares outstanding during the period. On a
diluted basis, shares outstanding are adjusted to assume the exercise of options
under the treasury stock method, unless the effect is antidilutive, which it is
then excluded. Shares used in the computations for the three months ended March
31, 2000 and 1999 are as follows (in thousands):
2000 1999
----- -----
Weighted average shares used in basic
computation 5,424 5,398
Common stock equivalents - options 0 339
----- -----
Weighted average shares used in diluted
computation 5,424 5,737
===== =====
As the Company recorded a net loss for the three months ended March 31, 2000,
all options (1,526,936 shares) are antidilutive and have been excluded from the
computation of diluted shares. Options not included in the computation above,
because the exercise of which would be antidilutive, for the three months ended
March 31, 1999, were 18,750.
(4) INVENTORIES
Inventories consist of the following as of March 31, 2000 and December 31, 1999
(in thousands):
2000 1999
------ ------
Raw materials $1,671 $1,409
Work-in-process 299 240
Finished goods 4,508 4,382
------ ------
$6,478 $6,031
====== ======
6
<PAGE>
(5) COMPREHENSIVE INCOME
During 1998, the Company adopted SFAS No. 130 "Reporting Comprehensive Income."
Comprehensive income is the total of net income and all other changes in net
assets arising from non-owner sources. The Company's comprehensive income for
the three months ended March 31, 2000 is as follows (in thousands):
<TABLE>
<CAPTION>
Before-Tax Income After-Tax
Amount Tax Amount
------- ------- -------
<S> <C> <C> <C>
Net income (loss) for the three months ended March 31, 2000 $(1,091) $ (376) $ (715)
Unrealized holding losses on marketable securities arising during the period (36) (12) (24)
------- ------- -------
Comprehensive income for the three months ended March 31, 2000 $(1,127) $ (388) $ (739)
</TABLE>
Comprehensive income equaled net income for the three months ended March 31,
1999.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion contains forward-looking statements that reflect the
current views of the Company with respect to future events that could have an
effect on its future financial performance. These statements may include such
words as "expects," "believes," "estimates," and similar expressions. These
forward-looking statements are subject to various risks and uncertainties,
including those referred to under "Factors That May Affect Future Results" in
Item 5, and elsewhere herein, that could cause actual results to differ
materially from historical results or those currently anticipated. Readers are
cautioned not to place undue reliance on these forward-looking statements.
NET SALES
The Company sells its products primarily through two sales channels,
distribution and original equipment manufacturers ("OEMs"). In addition, the
Company has a small amount of direct sales to end-users. Distributors and OEMs
resell substantially all the Company's products to a variety of end-users.
Because the Company has little control over the timing or volume of the
"sell-through" of its products, the Company has difficulty predicting its
revenues. The Company's distribution channel, which primarily serves the needs
of a large number of value-added resellers ("VARs") and System Integrators,
reports "sell-through" and inventory levels to the Company. As a result,
distribution sales are somewhat more predicable than OEM sales. Sales to OEM
customers are very difficult to predict because the Company has limited
knowledge of the OEM's inventory levels and sell-through.
Net sales decreased 67% to $2.7 million for the three months ended March 31,
2000 compared to $8.3 million for the first quarter of 1999. The Company
believes this significant decrease in sales was caused primarily by the residual
effect of the Y2K lockdown that began in the fourth quarter of 1999 (the Company
also experienced a significant decline in fourth quarter sales). End-users,
concerned with the potential threat of the Year 2000 software bug, halted
installation of new systems and limited equipment installations until after
January 1, 2000. Although the Company believes that many of these projects were
restarted in the first quarter, the Company's sales were not positively impacted
as both distribution and OEM customers drew down existing inventories to fill
the slowly increasing demand of end-users.
a. Distribution sales decreased 56% to $2.2 million from $5.0 million for
the first quarter of 1999. The Company recognizes revenues when the
product is shipped to the distributor less reserves for returns and
stock rotations. The Company believes domestic distributor inventories
fell about $0.8 million in the three months ended March 31, 2000.
b. OEM sales decreased 87% to $0.4 million from $3.1 million for the first
quarter of 1999. The Company recognizes revenues when the product is
shipped to the OEM. OEM accounts generally do not have a right to
rotate stock and do not report inventory levels or sell-through to the
Company, therefore, as noted above, sales to OEM customers are
difficult to predict.
c. Direct sales decreased 29% to $0.2 million from $0.3 million for the
first quarter of 1999.
The chart below summarizes the above information and, additionally, shows the
percentage of sales by channel.
($000) First Quarter First Quarter
2000 1999
---------------- ----------------
Distribution $2,164 80% $4,956 60%
OEM 363 13% 3,058 37%
Direct 193 7% 270 3%
------ ------ ------ ------
Total Sales $2,720 100% $8,284 100%
====== ====== ====== ======
The Company's products are installed directly into the server ("bus attached")
or are attached to the local area network ("LAN attached"). The chart below
summarizes sales information by how the Company's products are deployed and
their percentage of total sales. Because of the Y2K problem discussed above, the
Company does not believe this limited data can be used to draw the conclusion
that either bus attached products are becoming less important or LAN attached
products are gaining market share.
($000) First Quarter First Quarter
2000 1999
---------------- ----------------
Bus attached $1,872 69% $6,652 80%
LAN attached and other 848 31% 1,632 20%
------ ------ ------ ------
Total sales $2,720 100% $8,284 100%
====== ====== ====== ======
8
<PAGE>
GROSS MARGIN
Gross margin for the three months ended March 31, 2000 was 45% as compared to
52% for the first quarter of 1999. The Company's gross margin is dependent on
product costs, product mix, channel mix, and overhead expense, all of which
fluctuate from period to period. For example, an increase in future sales to OEM
customers may result in a lower gross margin because OEM sales are typically
priced lower than distribution sales.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses for the three months ended March 31, 2000 were
approximately $1.0 million, or 10% more than the $0.9 million for the first
quarter of 1999. The increase was due to increased new product development
efforts, redesign of existing products for more efficient, less costly
manufacturing, and continuing compliance testing. As a percentage of net sales,
research and development expenses were 35% for the three months ended March 31,
2000, compared to 11% for the first quarter of 1999. This increase in research
and development expenses as a precentage of net sales was due to the significant
decrease in sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative (SG&A) expenses were $1.6 million for the
three months ended March 31, 2000, or 8% less than the $1.8 million for the
first quarter of 1999. The decrease was primarily due to lower compensation
expenses. As a percentage of net sales, selling general and administrative
expenses were 59% for the three months ended March 31, 2000 compared to 21% for
the first quarter of 1999. This increase was due to the significant decrease in
sales for the first quarter of 2000.
OTHER INCOME, NET
Other income, net, which includes interest income, was $0.2 million for the
three months ended March 31, 2000 and 1999. As a percentage of net sales, other
income, net, was 9% for the three months ended March 31, 2000 compared to 2% in
1999.
The Company recognized a loss of approximately $69,000 on the sale of securities
during the three months ended March 31, 2000. These securities, four series of
preferred stock from three separate issuers, had been acquired for a cost of
$1.6 million in 1998 and were the only such securities in the Company's
portfolio. Preferred stocks are tax advantaged to corporate holders but have no
maturity date and trade inversely to long-term interest rates. The Company
determined that these preferred stocks did not fit into its portfolio and has
sold them all.
PROVISION FOR INCOME TAXES
Income taxes were a benefit of $0.4 million for the three months ended March 31,
2000 compared to a provision of $0.6 million in 1999. The Company's effective
tax rate increased to 34.5% in 2000 compared to 34% for the first quarter of
1999 based on expected tax rates for the current year.
NET INCOME (LOSS)
As a result of the factors discussed above, the Company recorded a net loss for
the three months ended March 31, 2000 of $0.7 million compared to net income of
$1.2 million for the first quarter of 1999. Diluted loss per share was $(0.13)
for the three months ended March 31, 2000 compared to diluted net income per
share of $0.22 for the quarter ended March 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital was $30.6 million at March 31, 2000, compared with
$31.0 million at December 31, 1999. Cash and cash equivalents and marketable
securities were $21.8 million at March 31, 2000, compared with $23.3 million at
December 31, 1999.
Net cash used in operating activities was $1.5 million for the three months
ended March 31, 2000, compared to cash provided by operating activities of $0.6
million for the three months ended March 31, 1999. The decrease was primarily
due to the first quarter net loss and decreases in accounts payable and accrued
expenses.
Net cash used in investing activities for the three months ended March 31, 2000
was $0.2 million compared to $0.3 million for the three months ended March 31,
1999, and was due to purchases of property and equipment offset by net sales of
marketable securities.
9
<PAGE>
Net cash provided by financing activities was $0.2 million for the three months
ended March 31, 2000 and represented funds received in connection with employee
stock option exercises. Net cash used in financing activities was $0.8 million
in 1999 and primarily represented repurchases of the Company's common stock.
In March 1997, the Board of Directors authorized the Company to repurchase up to
1,500,000 shares of the Company's issued and outstanding common stock. During
1997, the Company repurchased a total of 821,400 shares at a purchase price of
approximately $5,409,000 under this buyback plan. No repurchases were made
during 1998. During 1999, the Company repurchased an additional 87,300 shares of
its common stock in the open market for an aggregate purchase price of $840,000.
During 2000, and through the date of this filing, no repurchases were made. The
Company is still authorized to repurchase an additional 591,300 shares under
this plan. Repurchases may be made from time to time, subject to prevailing
conditions, in the open market or in privately negotiated transactions.
As of March 31, 2000, the Company had no material commitments for capital
expenditures. Management believes that cash and cash equivalents and marketable
securities on hand together will be adequate to meet the Company's working
capital and capital expenditure needs for at least the next 12 months.
RECENT ACCOUNTING PRONOUNCEMENTS
In April 1998, the AICPA issued Statement of Position 98-5, "Reporting on the
Costs of Start-Up Activities" ("SOP 98-5"). SOP 98-5 requires all costs
associated with pre-opening, pre-operating and organization activities to be
expensed as incurred. The Company adopted SOP 98-5 during the first quarter of
1999. Adoption had no impact on the Company's consolidated financial position or
results of operations.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). SFAS 133 establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded on the
balance sheet as either an asset or liability measured at its fair value. SFAS
133 requires that changes in the derivative's fair value be recognized currently
in earnings unless specific hedge accounting criteria are met. SFAS 133 cannot
be applied retroactively. The FASB issued SFAS 137 which defers the adoption of
SFAS 133 until January 1, 2001. Adoption of this statement is not expected to
have a material impact on the Company's consolidated financial position or
results of operations.
10
<PAGE>
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
FACTORS THAT MAY AFFECT FUTURE RESULTS
In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, the Company is providing the following cautionary
statements identifying important factors that could cause the Company's actual
results to differ materially from those projected in any forward-looking
statements made by, or on behalf of, the Company.
The Company wishes to caution readers that the following important factors,
among others, in some cases have affected, and in the future could affect, the
Company's actual results and could cause the Company's consolidated results
throughout the remainder of 2000 and beyond to differ materially from those
expressed in any forward-looking statements made by, or on behalf of, the
Company.
GENERAL BUSINESS AND ECONOMIC CONDITIONS
General business and economic conditions have an impact on the Company's
financial results. The Company's customer base, which is largely distributors,
may be impacted by weak economic conditions and, as a result, may reduce
inventory levels of products purchased from the Company. Although the Company
does not consider its business to be highly seasonal, the historical quarterly
trends reflected over the last three years may, in fact, be adversely affected
by general economic conditions both domestically and abroad and may or may not
continue.
The Company experienced a significant slowdown in demand for its products during
the fourth quarter of 1999 and the first quarter of 2000. The Company believes
that this slowdown was primarily a result of delays in large server
installations due to Y2K concerns. While these installations are expected to
resume during 2000, the Company is uncertain as to when and if the demand for
its products will return to historical levels.
COMPETITION
The markets for the Company's products are intensely competitive. The Company's
products compete both with other technologies as well as similar products
manufactured by other companies, some of which have more extensive research and
development, manufacturing, marketing and product support capabilities as well
as greater financial and technological resources. The Company believes that its
ability to compete depends on a number of factors, including product quality and
reliability, performance, price, product delivery, service and support and name
recognition. There can be no assurance the Company will be able to continue to
compete successfully with respect to these factors.
PRODUCT SHORTAGES
The competitiveness of the industry requires that the Company fulfill many of
its orders within a very short time period (typically within one week after
receipt of order). Should the Company be unable to fulfill orders on a timely
basis due to inaccurate forecasting by the Company or shortages at its
suppliers, orders could be canceled and placed with a competitor.
Additionally, certain important components used in the Company's products
presently are available from one or a limited number of sources. Also, most of
the Company's product lines currently are manufactured for the Company by one
contractor per product line. The inability to obtain sufficient quantities of
limited source components, as required, or to develop alternative sources of
supply for components or alternative sources to manufacture its finished
products, could result in delays or reductions in product shipments which could
have a material adverse effect on the Company's business.
EXPOSURE TO NATURAL DISASTERS
The Company's headquarters facility, as well as certain of its turnkey
manufacturers, are located in areas prone to natural disasters, specifically
hurricanes. In August 1992, Hurricane Andrew caused extensive damage to the
Company's former headquarters facility and the majority of the Company's assets.
While the Company recovered quickly from that disaster, the Company believes
that its operating results and financial condition could be adversely affected
should another natural disaster strike its current facility, any of its turnkey
manufacturers, or any of its major customers.
11
<PAGE>
TECHNOLOGICAL CHANGES
The market for the Company's products is characterized by continued and rapid
technological advances in both hardware and software development requiring
ongoing expenditures for research and development and the timely introduction of
new products. To remain competitive, the Company must respond effectively to
technological changes by continuing to enhance and improve its existing products
and by successfully developing and introducing new products. There can be no
assurance that the Company will be able to respond effectively to technological
changes or new product announcements or introductions by others.
PROPRIETARY RIGHTS
The Company relies primarily upon the technical expertise and creative skills of
its personnel, rather than patents and copyrights, to develop and maintain its
competitive position. However, there can be no assurance that competitors will
not develop products or technology that are equivalent or superior to those of
the Company or that the safeguards on which the Company relies will be adequate
to protect its interests. In addition, it is common in the computer industry for
companies to seek to assert claims for infringement of their patents or
proprietary RIGHTS. Although no such claims are pending against the Company,
there can be no assurance that these claims will not be made or that, if made,
any license that might be needed by the Company will be available on
commercially reasonable terms.
DISTRIBUTION AND OEM RISKS
The Company is dependent upon the continued viability and financial stability of
its distributors and OEM customers. (Two distributors and two OEM customers
collectively accounted for 30% of the Company's net sales during the first three
months of 2000. In all of these cases, the customers resold substantially all of
the Company's products to numerous unrelated third parties.) The loss or
ineffectiveness of these customers or other certain customers could have a
material adverse effect on the Company's operating results.
International distributor sales are denominated and transacted in U.S. dollars
and are subject to risks common to export activities, including governmental
regulation, trade barriers and fluctuating currency exchange rates (which
affects the competitiveness of U.S. products sold abroad). In addition, the
Company's international sales must be licensed by the Office of Export
Administration of the U.S. Department of Commerce. To date, the Company has not
experienced any difficulty in conducting export sales, including obtaining
necessary export licenses. There can be no assurance, however, that these or
other factors affecting international sales will not adversely affect the
Company's future operating results.
PRODUCT RETURNS, PRICE PROTECTION AND WARRANTIES
As is typical in the computer industry, the Company's distributors may be
entitled to return inventory to the Company for stock rotation purposes and
receive credit against other purchases on terms relating to price and volume
negotiated with the Company. In addition, if the Company reduces its prices, the
Company credits its distributors for the difference between the purchase price
of products remaining in their inventory and the Company's reduced price for
such products. The Company's 3-5 year limited warranty permits customers to
return any product for repair or replacement if the product does not perform as
warranted. There can be no assurance that product returns, price protection and
warranty claims will not have a material adverse effect on the Company's future
operating results. The Company seeks to continually introduce new and enhanced
products which could result in higher product returns and warranty claims due to
risks inherent in the introduction of such products.
DEPENDENCE ON KEY PERSONNEL
William A. Dambrackas, the Company's Founder, Chairman and Chief Executive
Officer, Robert F. Williamson, Jr., the Company's CFO and Vice President,
Finance and Administration, Robert F. Gintz, the Company's Vice President,
Development, Thomas E. Garrett, the Company's Vice President, Sales, and Robert
S. Sowell, the Company's Vice President, Technical Support, have been primarily
responsible for the development and expansion of the Company's business, and the
loss of the services of one or more of these individuals could adversely affect
the Company. In addition, the Company believes that its future success will be
dependent in part on its continued ability to recruit, motivate and retain
qualified personnel. There can be no assurance that the Company will be
successful in this regard.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 - Financial Data Schedule (EDGAR filing only)
(b) During the three months ended March 31, 2000, the Company did not file
any reports on Form 8-K.
12
<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.
EQUINOX SYSTEMS INC.
/S/ ROBERT F. WILLIAMSON, JR.
----------------------------------
ROBERT F. WILLIAMSON, JR.
Chief Financial Officer
(Principal Financial Officer)
DATE: May 11, 2000
13
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 6,820
<SECURITIES> 14,982
<RECEIVABLES> 2,584
<ALLOWANCES> 853
<INVENTORY> 6,478
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0
0
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</TABLE>
