SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
F O R M 10-QSB
(Mark One)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period SEPTEMBER 30, 1995;
or
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file #0-15797
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XIOX CORPORATION
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(Exact name of small business issuer as specified in its charter)
Delaware 95-3824750
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State or other jurisdiction of (IRS Employer Identification No)
incorporation or organization)
577 Airport Blvd, Suite 700,
Burlingame, California, 94010
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (415) 375-8188
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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). Yes X No
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(2) Has been subject to such filing requirements for the past 90 days.
Yes X No
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Issuer's number of common shares
outstanding at September 30, 1995 2,085,450 shares
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PAGE 1 of 12
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X I O X C O R P O R A T I O N
INDEX
Page No
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PART I Financial Information
Item 1.
Condensed Consolidated Balance Sheets -
September 30, 1995 and December 31, 1994 3
Condensed Consolidated Statements of Income/-Loss -
Three Months ended September 30, 1995 4
Condensed Consolidated Statements of Income/-Loss -
Nine Months ended September 30, 1995 and September 30, 1994 5
Condensed Consolidated Statements of Cash Flows -
Nine Months ended September 30, 1995 and September 30, 1994 6
Notes to Condensed Consolidated Financial Statements 7-8
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-10
PART II Other Information 11
Item 6. Exhibits and Reports on Form 8-K
Signatures 12
PAGE 2
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PART I - FINANCIAL INFORMATION
X I O X C O R P O R A T I O N
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 1995 December 31,1994
(unaudited) ***
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ASSETS:
CURRENT ASSETS
CASH & CASH EQUIVALENTS $ 393,564 52,556
ACCOUNTS RECEIVABLE, NET 1,144,929 1,468,201
LEASE CONTRACT RECEIVABLE, CURRENT 0 16,234
INVENTORIES 534,051 370,052
PREPAID EXPENSES AND OTHER ASSETS 101,477 62,456
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TOTAL CURRENT ASSETS 2,174,021 1,969,499
PROPERTY & EQUIPMENT, NET 532,098 583,562
SOFTWARE ACQUISITION, NET 103,403 126,050
NOTES RECEIVABLE 131,138 131,138
DEPOSITS & OTHER ASSETS 102,892 99,851
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TOTAL ASSETS $3,043,552 2,910,100
=========== ===========
LIABILITIES/SHAREHOLDERS' EQUITY:
CURRENT LIABILITIES
BANK LINE OF CREDIT $ 540,000 270,000
ACCOUNTS PAYABLE 191,091 356,151
ACCRUED EXPENSES 80,528 48,782
ACCRUED COMPENSATION 75,532 274,022
PURCHASE DEPOSITS 312,465 67,177
DEFERRED REVENUE 813,150 828,555
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TOTAL CURRENT LIABILITIES 2,012,766 1,844,687
STOCKHOLDERS EQUITY
COMMON STOCK, $.01 par, 10,000,000 Authorized, 20,854 17,483
2,085,450 and 1,748,316 issued and ----------- -----------
outstanding in 1995 and 1994
PAID IN CAPITAL 5,039,003 4,073,675
ACCUMULATED DEFICIT (4,029,071) (3,025,745)
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STOCKHOLDERS' EQUITY 1,030,786 1,065,413
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TOTAL LIABILITIES/EQUITY $ 3,043,552 2,910,100
=========== ===========
*** Condensed from audited financial statements.
The accompanying notes are an integral part of these condensed
financial statements.
PAGE 3
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PART I - FINANCIAL INFORMATION
X I O X C O R P O R A T I O N
CONDENSED CONSOLIDATED STATEMENTS OF INCOME /(-LOSS)
Three months ended Three months ended
September 30, 1995 September 30, 1994
(unaudited) (unaudited)
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REVENUES $ 1,604,385 2,045,765
PRODUCT COSTS 848,117 846,730
RESEARCH AND DEVELOPMENT 286,630 232,965
SALES, MARKETING AND ADMINISTRATIVE 892,255 865,327
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TOTAL COSTS OF SALES & EXPENSES 2,027,002 1,945,022
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OPERATING PROFIT/(-LOSS) (422,617) 100,743
INTEREST INCOME, NET (17,606) 865
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INCOME/(-LOSS) BEFORE INCOME TAXES (440,223) 101,608
INCOME TAX PROVISION (20,545) (750)
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NET INCOME / (-LOSS) $ 460,768) 100,858
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PER SHARE INFORMATION:
NET INCOME (-LOSS) / PER COMMON SHARE $ (0.24) 0.06
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AVERAGE NUMBER OF SHARES OUTSTANDING 1,958,459 1,711,649
=========== ==========
The accompanying notes are an integral part of these
condensed financial statements.
PAGE 4
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PART I - FINANCIAL INFORMATION
X I O X C O R P O R A T I O N
CONDENSED CONSOLIDATED STATEMENTS OF INCOME /(-LOSS)
Nine months ended Nine months ended
September 30, 1995 September 30,1994
(unaudited) (unaudited)
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REVENUES $ 5,252,496 5,308,034
PRODUCT COSTS 2,703,984 2,335,562
RESEARCH AND DEVELOPMENT 913,539 664,051
SALES, MARKETING AND ADMINISTRATIVE 2,578,047 2,397,153
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TOTAL COSTS OF SALES & EXPENSES 6,195,570 5,396,766
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OPERATING PROFIT/(-LOSS) (943,074) (88,732)
INTEREST INCOME, NET (36,989) 18,219
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INCOME / (-LOSS) BEFORE INCOME TAXES (980,063) (70,513)
INCOME TAX PROVISION (23,403) (4,373)
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NET INCOME / (-LOSS) $(1,003,466) (74,886)
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PER SHARE INFORMATION:
NET INCOME (-LOSS) / PER SHARE $ (0.55) (0.04)
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AVERAGE NUMBER OF SHARES OUTSTANDING 1,830,222 1,709,840
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The accompanying notes are an integral part of these
condensed financial statements.
PAGE 5
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PART I - FINANCIAL INFORMATION
X I O X C O R P O R A T I O N
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months Nine months
ended ended
September 30, September 30,
1995 1994
(unaudited) (unaudited)
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CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES NET INCOME/(-LOSS)
FROM OPERATIONS $(1,003,466) (74,886)
RECONCILING ADJUSTMENTS FROM OPERATING
ACTIVITIES:
DECREASE (INCREASE) IN ASSETS:
DEPRECIATION AND AMORTIZATION 164,640 126,243
ACCOUNTS/LEASE CONTRACT RECEIVABLES, NET 339,645 (587,195)
INVENTORIES (163,999) 46,866
PREPAID EXPENSES, DEPOSITS AND OTHER ASSETS (42,062) 20,447
NOTES RECEIVABLES FROM EMPLOYEES (40,000)
INCREASE (DECREASE) IN LIABILITIES:
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (326,772) 87,601
INCOME TAXES PAYABLE (5,031) 2,250
PURCHASE DEPOSITS 245,288 479
DEFERRED REVENUE (15,406) 102,798
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NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (807,163) (315,397)
CASH USED IN INVESTING ACTIVITIES:
ACQUISITION OF PROPERTY AND EQUIPMENT (79,369) (204,175)
ACQUISITION OF SOFTWARE RIGHTS (11,160) (46,404)
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NET CASH USED IN INVESTING ACTIVITIES (90,529) (250,579)
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES:
BORROWINGS UNDER BANK CREDIT LINE 270,000 100,000
REPAYMENTS OF BANK CREDIT LINE
NOTES PAYABLE
SALES OF COMMON STOCK 968,699 89,125
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NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 1,238,699 189,125
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NET INCREASE/ (-DECREASE) IN
CASH AND CASH EQUIVALENTS 341,007 (376,851)
BEGINNING OF PERIOD CASH AND CASH EQUIVALENTS 52,556 501,915
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END OF PERIOD CASH AND CASH EQUIVALENTS $ 393,563 125,064
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
INTEREST PAID $ 47,208 22,928
INCOME TAXES PAID 23,403 850
The accompanying notes are an integral part of these
condensed financial statements.
PAGE 6
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PART I I - FINANCIAL INFORMATION
X I O X C O R P O R A T I O N
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 : BASIS OF PRESENTATION
The financial information included herein relating to December 31, 1994
is audited and the financial information relating to the three and nine month
periods ended September 30, 1995 and September 30, 1994 is unaudited, and as
such reflects all adjustments (consisting solely of normal recurring adjustments
which are, in the opinion of management, necessary for a fair statement of
results for the interim periods). Certain information and footnote disclosure
normally included in accordance with generally accepted accounting principles
have been condensed pursuant to Securities and Exchange Commission Rules.
The results of operations for the three and nine month periods ended
September 30, 1995 is not necessarily indicative of the results to be expected
for the full year. It is suggested that these interim statements be read in
conjunction with the financial statements and notes included in the Company's
Annual Financial Report filed on Form 10KSB for the year ended December 31,1994.
NOTE 2 : INVENTORIES
Inventories at September 30, 1995 have been stated at the lower of cost
(first-in, first-out basis) or market. Inventories consist solely of purchased
hardware and software products (finished goods).
NOTE 3 : PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
September 30, 1995 December 31, 1994
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Office Equipment $ 1,065,485 986,116
Furniture and Fixtures 309,325 309,325
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1,374,810 1,295,441
less Accumulated
Depreciation/Amortization (842,712) (711,879)
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532,098 583,562
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Software Acquisition $ 193,206 187,047
less Accumulated Depreciation (89,804) (55,997)
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103,402 126,050
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PAGE 7
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PART I - FINANCIAL INFORMATION
X I O X C O R P O R A T I O N
NOTES TO CONDENSED FINANCIAL STATEMENTS
(continued)
NOTE 4 : BANK LINE OF CREDIT
The Company maintains a $1,000,000 line of credit collateralized by
eligible accounts receivable. The line bears interest at prime plus 1.00%,
increased to prime plus 1.75% effective September 19, 1995, and is renewable in
June, 1996. At September 30, 1995 the Company had $540,000 outstanding against
this line.
NOTE 5: INCOME TAX PROVISION
The income tax provision reflects a $21,000 adjustment for the prior
year's tax provision related to the potential loss utilization of a deferred tax
asset.
PAGE 8
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PART I - FINANCIAL INFORMATION
X I O X C O R P O R A T I O N
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain
significant factors which have affected Xiox's financial position and operating
results during the periods included in the accompanying condensed financial
statements.
Third Quarter, 1995 vs 1994
REVENUES / Revenues for the three months ended September 30, 1995 were
NET INCOME $1,604,385, a decrease of 22% versus the $2,045,765
recorded during the three months ended September 30, 1994.
The decrease of $441,380 resulted primarily from a slower rise in revenue in a
portion of our product line and a slowdown in the North American Numbering Plan
(NANP) upgrades.
Total expenses during the three months ended September 30, 1995 were $
2,027,002 an increase of 4% versus the $1,945,022 of expenses incurred during
the three months ended, September 30,1994. The variable portion of product costs
increased slightly to 22% in third quarter 1995 from 21% in 1994 due to an
increased proportion of hardware sales as percentage of total sales. Total
product costs increased to 53% in 1995 from 41% in 1994 due to an increase in
expanded customer service operations including on-site installations. Research
and development expense increased by 23% or $53,665 as the Company continued its
development of Windows-based and toll fraud products. Sales, Marketing and
General and administrative overhead expenses increased by 3% or $26,928 as the
Company expanded its sales and marketing efforts to focus on distribution
channels.
Interest income from lease investments and short-term securities
generated interest income of $3,098 versus the year earlier interest income of
$4,370. Interest expense during the quarter increased from $3,505 in 1994 to
$20,704 in the third quarter of 1995 primarily due to an increase in bank credit
line borrowings.
The Company lost $422,617 from operations during the third quarter of
1995 and a net loss after taxes of $460,768 versus a gain of $101,608 from
operations and a net gain after taxes of $100,858 in the comparable quarter of
1994. Both periods included the results of Gemini Telemanagement Systems, which
was acquired in August, 1994 and accounted for as a pooling of interests.
PAGE 9
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Nine months, 1995 vs 1994
REVENUES / Revenues for the nine months ended September 30, 1995 were
NET INCOME $5,252,496, a decrease of 1 % versus the $5,308,034 recorded
during the nine months ended September 30, 1994.
Total expenses during the nine months ended September 30, 1995 were
$6,195,570, a 15% increase versus the $5,396,766 of expenses incurred during the
nine months ended September 30, 1994. The variable portion of product costs
remained at 20% in the first three quarters of 1995 and 1994. Total product
costs as a percentage of revenues increased to 51% in the 1995 period from 44%
in 1994 due to expanded customer service operations. Research and development
expenses increased by 38% compared with the prior year first three quarters,
primarily as a result of continued development of Windows-based and toll fraud
products. Other overhead expenses including Sales, Marketing and General and
Administrative overhead increased by 8% or $180,894 compared with the first
three quarters of 1994.
Interest income from lease investments and short-term securities
generated interest income of $10,220 versus the year earlier interest income of
$19,087. Interest expense during the first three quarters increased from $869 in
1994 to $47,208 in 1995 primarily due an increase in bank credit line
borrowings.
The Company lost $943,074 from operations during the first three
quarters of 1995 and a net loss after taxes of $1,003,466 versus a loss of
$88,732 from operations and a net loss after taxes of $74,886 in the comparable
quarter of 1994. Both periods included the results of Gemini Telemanagement
Systems, which was acquired in August, 1994 and accounted for as a pooling of
interests.
Liquidity and Capital Resources at September 30, 1995
At September 30, 1995, Xiox held cash and cash equivalents totaling
$393,564 and had working capital of $ 701,520 versus cash equivalents of $52,556
and working capital of $786,470 at December 31, 1994. The Company anticipates
investing a total of $125,000 in capital equipment during 1995, consisting
primarily of computer hardware and software and office equipment. Since December
31, 1994, capital equipment procurements have totaled $90,528.
In May, 1994, the Company increased its line of credit from $500,000 to
$1,000,000, collateralized by current and capital assets, with a bank. The bank
line, when utilized, is collateralized by certain current assets and property
and equipment. The line carries a variable interest rate based upon prime plus
1%, increased to prime plus 1.75% effective September 19, 1995. At September 30,
1995, the Company had $ 540,000 outstanding against this line. The Company
anticipates that it will have sufficient working capital generated through
operations and use of the bank line of credit to support its cash requirements
through mid 1996.
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Item 6. Exhibits and Reports on Form 8-K
A report on Form 8-K was filed on July 13, 1995 describing the raising
in a private placement of $380,700 through the sale of 126,900 shares of Xiox
common stock to primarily current shareholders, directors and officers of the
company. The proceeds were used to help satisfy the capital and surplus
requirements of the National Association of Securities Automated Quotation
System ("NASDAQ") as of the June 30, 1995 reporting period and provide
additional working capital.
On August 9, 1995 an additional $40,200 was raised in a private
placement through the sale of 13,400 shares of Xiox common stock to officers and
other shareholders. No report on Form 8-K was required to be filed describing
this transaction.
A report on Form 8-K was filed on September 29, 1995 describing the
raising of $300,000 through the sale of 100,000 shares of Xiox common stock to
existing shareholders. The proceeds were used to provide additional working
capital.
No other reports on Form 8-K have been filed during the quarter ended
September 30, 1995.
A report on Form 8-K was filed on October 27, 1995 describing the
October 14, 1995 sale of certain assets of the Company's Gemini Telemanagement
Systems ("GTS"). The sale of the business assets was made in exchange for a sum
of monies and assumption by Purchaser of the service warranty obligations of the
Company existing on October 1, 1995. The transaction will be accounted for in
October, 1995 as a sale of assets in exchange for payment of $52,254.95 and
release of deferred revenue liability resulting in a one-time extraordinary gain
of $109,236. The sale of GTS is a positive step in enabling the Company to focus
on distribution sales opportunities.
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X I O X C O R P O R A T I O N
SIGNATURES
In accordance with 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 duly authorized officers of the registrant.
XIOX CORPORATION
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(Registrant)
Date: November 14, 1994 William H. Welling
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(William H. Welling, Chairman)
(Duly Authorized Officer)
Date: November 14, 1994 Melanie D. Reid
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(Melanie D. Reid, VP of Finance/CFO)
(Duly Authorized Officer)
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