SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period June 30, 1996;
-------------
or
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------- ---------
Commission file #0-15797
--------
XIOX CORPORATION
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 95-3824750
- ------------------------------- --------------------------------
(State or other jurisdiction of (IRS Employer Identification No)
incorporation or organization)
577 Airport Blvd, Suite 700,
Burlingame, California 94010
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (415) 375-8188
- --------------------------------------------------------------------------------
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
--- ---
(2) Has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
Issuer's number of common shares
outstanding at June 30, 1996 2,372,384 shares
- -------------------------------------------------------------------------------
PAGE 1 of 12
<PAGE>
XIOX CORPORATION AND SUBSIDIARIES
INDEX
Page No
-------
PART I Financial Information
Item 1.
Condensed Consolidated Balance Sheets -
June 30, 1996 and December 31, 1995 3
Condensed Consolidated Statements of Operations
Three Months ended June 30, 1996 and June 30, 1995 4
Condensed Consolidated Statements of Operations
Six Months ended June 30, 1996 and June 30, 1995 5
Condensed Consolidated Statements of Cash Flows -
Six Months ended June 30, 1996 and June 30, 1995 6
Notes to Condensed Consolidated Financial Statements 7-8
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-11
PART II Other Information
Item 6.
Exhibits and Reports on Form 8-K 11
Exhibit 27.
Financial Data Schedule - June 30, 1996
(separate electronic document attached)
Signatures 12
PAGE 2
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
XIOX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30, 1996 December 31,1995
(unaudited) ***
----------- -----------------
<S> <C> <C>
ASSETS:
CURRENT ASSETS
CASH & CASH EQUIVALENTS $ 503,953 344,165
ACCOUNTS RECEIVABLE, NET 900,480 949,779
OTHER RECEIVABLES (2,824) 29,005
INVENTORIES 336,087 348,230
PREPAID EXPENSES AND OTHER ASSETS 122,780 74,175
----------- -----------
TOTAL CURRENT ASSETS 1,860,476 1,745,354
PURCHASED SOFTWARE, NET 78,520 95,606
PROPERTY & EQUIPMENT, NET 392,830 476,381
NOTES RECEIVABLE 131,138 131,138
DEPOSITS & OTHER ASSETS 20,698 21,952
----------- -----------
$ 2,483,662 2,470,431
=========== ===========
LIABILITIES/STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES
BANK LINE OF CREDIT $ 0 100,000
ACCOUNTS PAYABLE 150,631 146,139
ACCRUED EXPENSES 82,198 81,915
ACCRUED COMPENSATION 112,613 60,280
PURCHASE DEPOSITS 361,226 231,266
DEFERRED REVENUE 688,305 687,314
----------- -----------
TOTAL CURRENT LIABILITIES 1,394,973 1,306,914
COMMITMENTS & CONTINGENCIES
STOCKHOLDERS' EQUITY:
COMMON STOCK, $.01 par, 10,000,000 Authorized, 23,724 23,578
2,372,384 and 2,357,784 issued and outstanding ----------- -----------
in 1996 and 1995 respectively
PAID-IN CAPITAL 5,465,157 5,465,140
ACCUMULATED DEFICIT (4,400,192) (4,325,201)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 1,088,689 1,163,517
----------- -----------
$ 2,483,662 2,470,431
=========== ===========
<FN>
*** Condensed from audited financial statements.
The accompanying notes are an integral part of these condensed
financial statements.
</FN>
</TABLE>
PAGE 3
<PAGE>
PART I - FINANCIAL INFORMATION
XIOX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three months Three months
ended ended
June 30, 1996 June 30, 1995
(unaudited) (unaudited)
------------- --------------
REVENUES $ 1,387,949 1,872,603
PRODUCT COSTS 637,922 941,873
RESEARCH AND DEVELOPMENT 176,923 302,004
MARKETING, SALES, AND ADMINISTRATIVE 554,924 889,733
----------- -----------
1,369,769 2,133,610
----------- -----------
LOSS FROM OPERATIONS 18,180 (261,007)
INTEREST INCOME, NET 3,994 (10,947)
----------- -----------
LOSS BEFORE INCOME TAXES 22,174 (271,954)
INCOME TAX PROVISION (1,130) (2,308)
-----------
NET INCOME / (-LOSS) $ 21,044 (274,262)
=========== ===========
PER SHARE INFORMATION:
NET INCOME / (-LOSS) PER SHARE $ 0.01 (0.15)
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING DURING THE QUARTER 2,372,384 1,771,544
=========== ===========
The accompanying notes are an integral part of these condensed
financial statements.
PAGE 4
<PAGE>
PART I - FINANCIAL INFORMATION
XIOX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Six months ended Six months ended
June 30, 1996 June 30, 1995
(unaudited) (unaudited)
---------------- ----------------
REVENUES $ 2,727,474 3,648,111
PRODUCT COSTS 1,238,715 1,855,867
RESEARCH AND DEVELOPMENT 366,677 626,909
MARKETING, SALES, AND ADMINISTRATIVE 1,198,238 1,685,792
----------- -----------
2,803,630 4,168,568
----------- -----------
LOSS FROM OPERATIONS (76,156) (520,457)
INTEREST INCOME, NET 5,110 (19,383)
----------- -----------
LOSS BEFORE INCOME TAXES (71,046) (539,840)
INCOME TAX PROVISION (3,945) (2,858)
-----------
NET INCOME / (-LOSS) $ (74,991) (542,698)
=========== ===========
PER SHARE INFORMATION:
NET INCOME / (-LOSS) PER SHARE $ (0.03) (0.31)
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 2,367,651 1,765,040
=========== ===========
The accompanying notes are an integral part of these condensed
financial statements.
PAGE 5
<PAGE>
PART I - FINANCIAL INFORMATION
XIOX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months Six months
ended ended
June 30, 1996 June 30, 1995
(unaudited) (unaudited)
-------------- -------------
CASH USED IN OPERATING ACTIVITIES:
NET INCOME / (-LOSS) $ (74,991) (542,698)
RECONCILING ADJUSTMENTS FROM OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 114,183 117,715
DECREASE (INCREASE) IN:
ACCOUNTS / OTHER RECEIVABLES, NET 81,128 220,891
INVENTORIES 12,143 (207,288)
PREPAID EXPENSES, DEPOSITS AND OTHER ASSETS (47,351) (164,643)
INCREASE (DECREASE) IN:
ACCOUNTS PAYABLE AND ACCRUED EXPENSES 59,358 (185,475)
INCOME TAXES PAYABLE (2,250) (5,281)
PURCHASE DEPOSITS 129,960 231,877
DEFERRED REVENUE 991 49,534
--------- ---------
NET CASH PROVIDED BY / (-USED) IN OPERATIONS 273,171 (485,368)
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES:
ACQUISITION OF PROPERTY AND EQUIPMENT, NET (4,958) (64,728)
ACQUISITION OF SOFTWARE RIGHTS, NET (8,588) (11,160)
--------- ---------
NET CASH PROVIDED BY/(USED IN) INVESTING ACTIVITIES (13,546) (75,888)
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES:
BORROWINGS FROM BANK LINE 0 270,000
BANK LINE REPAYMENTS (100,000) 0
SALES OF COMMON STOCK 163 246,912
--------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (99,837) 516,912
--------- ---------
NET INCREASE/(DECREASE) IN
CASH & CASH EQUIVALENTS 159,788 (44,344)
BEGINNING CASH AND CASH EQUIVALENTS 344,165 52,556
--------- ---------
ENDING CASH AND CASH EQUIVALENTS $ 503,953 8,212
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
INTEREST PAID $ 1,536 26,504
INCOME TAXES PAID 3,945 2,858
The accompanying notes are an integral part of these condensed
financial statements.
PAGE 6
<PAGE>
PART I - FINANCIAL INFORMATION
XIOX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 : BASIS OF PRESENTATION
The financial information included herein relating to December 31, 1995
is audited and the financial information relating to the three and six month
periods ended June 30, 1996 and June 30, 1995 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 disclosures 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 six month periods ended
June 30, 1996 are 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 31,1995.
NOTE 2 : INVENTORIES
Inventories at June 30, 1996 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
<TABLE>
Property and equipment consisted of the following:
<CAPTION>
June 30, 1996 December 31, 1995
-------------- -----------------
<S> <C> <C>
Office Equipment $ 1,025,507 1,019,919
Furniture and Fixtures 303,754 304,384
------------- ----------
1,329,261 1,324,303
less Accumulated Depreciation/Amortization (936,431) (847,922)
------------- ----------
392,830 476,381
============= ==========
Software Acquisition $ 197,535 188,947
less Accumulated Depreciation (119,015) (93,341)
------------- ----------
78,520 95,606
============= ==========
</TABLE>
PAGE 7
<PAGE>
PART I - FINANCIAL INFORMATION
XIOX CORPORATION AND SUBSIDIARIES
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, which was increased from $750,000 when renewed May
30, 1996. The line bears interest at prime plus 1.75%, decreased from prime plus
2.00% effective May 30, 1996, and is renewable in May, 1997. At June 30, 1996
the Company had $0 outstanding against this line.
NOTE 5: STOCK-BASED COMPENSATION
In October, 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard (SFAS) No. 123, "Accounting for
Stock-Based Compensation." SFAS No. 123 will be effective for fiscal years
beginning after December 15, 1995, and will require that the Company either
recognize in its consolidated financial statements costs related to its employee
stock-based compensation plans, such as stock option and stock purchase plans,
or make pro forma disclosures of such costs in a footnote to the consolidated
financial statements. SFAS No. 123 is not expected to have a material effect on
the Company's consolidated results of operations or financial position.
PAGE 8
<PAGE>
PART I - FINANCIAL INFORMATION
XIOX CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This section and the financial information provided herein contain
forward looking statements that involve risks and uncertainties. The Company's
actual results may differ materially from management's expectations and the
results discussed in the forward looking statements. Significant factors which
could affect performance include, but are not limited to, those discussed in the
subsection entitled "Factors Affecting Operating Results and Market Price of
Stock" commencing on page (11) below.
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.
Second Quarter, 1996 vs 1995
- ----------------------------
REVENUES / Revenues for the three months ended June 30, 1996 were
NET INCOME $1,387,949, a decrease of 26% versus the $1,872,603 recorded
during the three months ended June 30, 1995. A portion of the $484,654 decrease
in revenues is attributable to the sale of the Company's Gemini Telemanagement
Systems ("GTS") business in the fourth quarter of 1995.
Total expenses during the three months ended June 30, 1996
were $ 1,369,769, a decrease of 36% versus the $2,133,610 of expenses incurred
during the three months ended June 30, 1995. The variable portion of product
costs increased slightly to 23% of total revenue in second quarter 1996 from 19%
in 1995 due to variations in product mix. Total product costs as a percentage of
revenues decreased to 46% in 1996 from 50% in 1995, primarily due to the
Company's efforts to centralize key functions of its operations. Efforts to
manage expenses were realized during the second quarter of 1996 and are
reflected in an overall decrease in other operating expenses of 39%, or
$459,890, versus the comparable quarter of 1995.
Interest income from lease investments and short-term securities
generated interest income of $3,994 versus the year earlier interest income of
$3,221. Interest expense during the quarter decreased 100%, from $14,168 in 1995
to $0 in the second quarter of 1996, primarily due to a decrease in bank credit
line borrowings.
The Company generated income of $18,180 from operations during the
second quarter of 1996 and net income after taxes of $21,044 versus a loss of
$261,007 from operations and a net loss after taxes of $274,262 in the second
quarter of 1995. On a comparative basis, this represents a 108% increase in
profitability. The Company attributed this to its management of expenses and
efforts to streamline operations.
PAGE 9
<PAGE>
PART I - FINANCIAL INFORMATION
XIOX CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(continued)
First Half, 1996 vs 1995
- ------------------------
REVENUES / Revenues for the six months ended June 30, 1996 were
NET INCOME $2,727,474, a decrease of 25% versus the $3,648,111 recorded
during the six months ended June 30, 1995. A portion of the $920,637 decrease in
revenues is attributable to the sale of the Company's Gemini Telemanagement
Systems ("GTS") business in the fourth quarter of 1995.
Total expenses during the six months ended June 30, 1996 were
$ 2,803,630, a decrease of 33% versus the $4,168,568 of expenses incurred during
the six months ended June 30, 1995. The variable portion of product costs
increased slightly to 22% of total revenue in the first half of 1996 from 19% in
1995 due to variations in product mix. Total product costs as a percentage of
revenues decreased to 45% in 1996 from 51% in 1995, primarily due to the
Company's efforts to centralize key functions of its operations. Efforts to
manage expenses were realized during the first half of 1996 and are reflected in
an overall decrease in other operating expenses of 32%, or $747,786, compared
with the prior year first half.
Interest income from lease investments and short-term securities
generated interest income of $6,646 versus the year earlier interest income of
$7,122. Interest expense during the first half decreased 94%, from $26,504 in
1995 to $1,536 in 1996, primarily due to a decrease in bank credit line
borrowings.
The Company lost $76,156 from operations during the first half of 1996
and incurred a net loss after taxes of $74,991 versus a loss of $520,457 from
operations and a net loss after taxes of $542,698 in the first half of 1995. On
a comparative basis, this represents an 86% increase in profitability, or a
decrease in net loss after taxes of $467,707. The Company attributed this to its
management of expenses and efforts to streamline operations.
Liquidity and Capital Resources at June 30, 1996
- ------------------------------------------------
At June 30, 1996, Xiox held cash and cash equivalents totaling $503,953
and had working capital of $1,153,808 versus cash equivalents of $334,165 and
working capital of $1,125,754 at December 31, 1995. The Company anticipates
investing a total of $100,000 in capital equipment during 1996, consisting
primarily of computer hardware and software and office equipment. Since December
31, 1995, capital equipment procurements have totaled $13,546.
In May, 1996, the Company increased its bank line of credit from
$750,000 to $1,000,000. 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 1.75%, decreased from prime plus 2.00%
effective May 30, 1996. At June 30, 1996, the Company had $0 outstanding against
this line.
PAGE 10
<PAGE>
PART I - FINANCIAL INFORMATION
XIOX CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(continued)
Factors Affecting Market Price of Stock at June 30, 1996
- --------------------------------------------------------
Xiox operates in a rapidly changing environment that involves a number
of risks and uncertainties, some of which are beyond the Company's control and
any of which may have an adverse effect on the Company's business, financial
condition, and results of operations. These uncertainties include, but are not
limited to, the Company's reliance on the sale of few products; the Company's
dependence on the ability of its distribution channels to market the Company's
products; the fluctuations in the Company's quarterly results and the effect of
these results on the Company's ability to maintain its listed status on the
Nasdaq Small Cap Market; the ability of the Company's product developers to
design products and software that do not contain defects and "bugs" which render
the products or software inoperable, or susceptible to breakdown, software
viruses, or "hacking"; and the outcome of the litigation in which the Company is
involved.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter ended June
30, 1996.
PAGE 11
<PAGE>
********************************************************************************
XIOX CORPORATION
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
--------------------------
(Registrant)
Date: August 1, 1996 William H. Welling
------------------
(William H. Welling, Chairman)
(Duly Authorized Officer)
Date: August 1, 1996 Melanie D. Reid
---------------
(Melanie D. Reid, VP of Finance/CFO)
(Duly Authorized Officer)
PAGE 12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 503,953
<SECURITIES> 0
<RECEIVABLES> 897,656
<ALLOWANCES> 0
<INVENTORY> 336,087
<CURRENT-ASSETS> 1,860,476
<PP&E> 471,350
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,483,662
<CURRENT-LIABILITIES> 1,394,973
<BONDS> 0
<COMMON> 23,724
0
0
<OTHER-SE> 1,064,965
<TOTAL-LIABILITY-AND-EQUITY> 2,483,662
<SALES> 2,727,474
<TOTAL-REVENUES> 2,727,474
<CGS> 1,238,715
<TOTAL-COSTS> 2,803,630
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,536)
<INCOME-PRETAX> (71,046)
<INCOME-TAX> (3,945)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (74,991)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> 0.00
</TABLE>
