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 June 30, 1997;
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
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(Exact name of small business issuer as specified in its charter)
Delaware 95-3824750
-------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No)
577 Airport Blvd, Suite 700,
Burlingame, California 94010
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (650) 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, 1997 2,358,534 shares
- --------------------------------------------------------------------------------
PAGE 1 of 13
<PAGE>
XIOX CORPORATION
INDEX
Page No.
--------
PART I Financial Information
Item 1.
Condensed Consolidated Balance Sheets -
June 30, 1997 and December 31, 1996 3
Condensed Consolidated Statements of Operations
Three Months ended June 30, 1997 and June 30, 1996 4
Condensed Consolidated Statements of Operations
Six Months ended June 30, 1997 and June 30, 1996 5
Condensed Consolidated Statements of Cash Flows -
Six Months ended June 30, 1997 and June 30, 1996 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 12
Exhibit 27.
Financial Data Schedule - June 30, 1997
(separate electronic document attached)
Signatures 13
PAGE 2
<PAGE>
PART I - FINANCIAL INFORMATION
XIOX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31,
June 30, 1997 1996
ASSETS: (unaudited) ***
CURRENT ASSETS
CASH & CASH EQUIVALENTS $ 540,368 291,488
ACCOUNTS RECEIVABLE, NET 716,688 1,062,045
OTHER RECEIVABLES 63 66,412
INVENTORIES 368,359 433,769
PREPAID EXPENSES AND OTHER ASSETS 122,299 69,470
----------- -----------
TOTAL CURRENT ASSETS 1,747,777 1,923,184
PROPERTY & EQUIPMENT, NET 326,722 358,118
PURCHASED SOFTWARE, NET 30,632 52,930
NOTES RECEIVABLE 100,000 131,138
DEPOSITS & OTHER ASSETS 19,585 20,319
----------- -----------
$ 2,224,716 2,485,689
=========== ===========
LIABILITIES/STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
BANK LINE OF CREDIT $ -- --
ACCOUNTS PAYABLE 68,320 140,627
ACCRUED EXPENSES 86,685 212,081
ACCRUED COMPENSATION 119,533 114,380
PURCHASE DEPOSITS 41,614 41,025
DEFERRED REVENUE 665,194 721,586
----------- -----------
TOTAL CURRENT LIABILITIES $ 981,346 1,229,699
COMMITMENTS & CONTINGENCIES
STOCKHOLDERS' EQUITY
COMMON STOCK, $.01 Par, 10,000,000 Authorized, 23,585 23,724
2,358,534 and 2,372,384 issued and outstanding in
1997 and 1996 respectively
PAID-IN CAPITAL 5,448,665 5,492,345
NOTE RECEIVABLE FROM SHAREHOLDER (27,188) (27,188)
ACCUMULATED DEFICIT (4,201,692) (4,232,891)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 1,243,370 1,255,990
----------- -----------
2,224,716 2,485,689
=========== ===========
*** Condensed from audited financial statements.
The accompanying notes are an integral part of these condensed financial
statements.
PAGE 3
<PAGE>
PART I - FINANCIAL INFORMATION
XIOX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended Three months ended
June 30, 1997 June 30, 1996
(unaudited) (unaudited)
REVENUES $ 1,249,627 1,387,949
----------- -----------
PRODUCT COSTS 502,630 637,922
RESEARCH AND DEVELOPMENT 174,024 176,923
MARKETING, SALES AND ADMINISTRATIVE 567,346 554,924
----------- -----------
1,244,000 1,369,769
----------- -----------
INCOME FROM OPERATIONS 5,627 18,180
OTHER (LOSS) INCOME, NET (3,232) 3,994
----------- -----------
INCOME BEFORE INCOME TAXES 2,395 22,174
INCOME TAX PROVISION (450) (1,130)
----------- -----------
NET INCOME $ 1,945 21,044
=========== ===========
PER SHARE INFORMATION:
NET INCOME PER SHARE $ 0.00 0.01
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING DURING THE QUARTER 2,427,438 2,372,384
=========== ===========
The accompanying notes are an integral part of these condensed financial
statements.
PAGE 4
<PAGE>
PART I - FINANCIAL INFORMATION
XIOX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Six months ended Six months ended
June 30, 1997 June 30, 1996
(unaudited) (unaudited)
REVENUES $ 2,522,561 2,727,474
----------- -----------
PRODUCT COSTS 983,367 1,238,715
RESEARCH AND DEVELOPMENT 375,394 366,677
MARKETING, SALES AND ADMINISTRATIVE 1,118,354 1,198,238
----------- -----------
2,477,115 2,803,630
----------- -----------
INCOME (LOSS) FROM OPERATIONS 45,446 (76,156)
OTHER (LOSS) INCOME, NET (10,973) 5,110
----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES 34,473 (71,046)
INCOME TAX PROVISION (3,275) (3,945)
----------- -----------
NET INCOME (LOSS) $ 31,198 (74,991)
=========== ===========
PER SHARE INFORMATION:
NET INCOME (LOSS) PER SHARE $ 0.01 (0.03)
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING DURING THE PERIOD 2,425,421 2,367,651
=========== ===========
The accompanying notes are an integral part of these condensed financial
statements.
PAGE 5
<PAGE>
PART I - FINANCIAL INFORMATION
XIOX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended Six months ended
June 30, 1997 June 30, 1996
(unaudited) (unaudited)
CASH FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $ 31,198 (74,991)
RECONCILING ADJUSTMENTS FROM OPERATING
ACTIVITIES:
DEPRECIATION AND AMORTIZATION 114,944 114,183
DECREASE (INCREASE) IN:
ACCOUNTS RECEIVABLE, NET 345,356 81,128
OTHER RECEIVABLES 66,350 0
PROMISSORY NOTE 31,138 0
INVENTORIES 65,409 12,143
PREPAID EXPENSES, DEPOSITS AND
OTHER ASSETS (52,095) (47,351)
INCREASE (DECREASE) IN:
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (192,548) 57,108
PURCHASE DEPOSITS 589 129,960
DEFERRED REVENUE (56,392) 991
--------- ---------
NET CASH PROVIDED BY (USED IN) OPERATIONS 353,949 273,171
--------- ---------
CASH FROM INVESTING ACTIVITIES:
ACQUISITION OF PROPERTY AND EQUIPMENT (56,237) (4,958)
ACQUISITION OF SOFTWARE (5,013) (8,588)
--------- ---------
NET CASH (USED IN) INVESTING ACTIVITIES (61,250) (13,546)
--------- ---------
CASH FROM FINANCING ACTIVITIES:
BANK LINE OF CREDIT REPAYMENTS -- (100,000)
BORROWINGS FROM BANK LINE -- --
PROCEEDS FROM SALE OF COMMON STOCK (43,819) 163
--------- ---------
NET CASH USED IN FINANCING ACTIVITIES (43,819) (99,837)
--------- ---------
NET INCREASE/(DECREASE) IN 248,880
CASH & CASH EQUIVALENTS 159,788
BEGINNING CASH AND CASH EQUIVALENTS 291,488 344,165
--------- ---------
ENDING CASH AND CASH EQUIVALENTS $ 540,368 503,953
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
INTEREST PAID DURING THE PERIOD $ 0 1,536
INCOME TAXES PAID DURING THE PERIOD 3,650 3,945
NONCASH FINANCING ACTIVITIES
COMMON STOCK ISSUED UPON EXERCISE OF
STOCK OPTIONS IN EXCHANGE FOR
NOTE RECEIVABLE FROM SHAREHOLDER $ 27,188 27,188
========= =========
PAGE 6
<PAGE>
PART I - FINANCIAL INFORMATION
XIOX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
The financial information included herein relating to December 31, 1996 is
audited, and the financial information relating to the three and six month
periods ended June 30, 1997 and June 30, 1996 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,
1997 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 10K-SB for the year ended December 31,1996.
NOTE 2: INVENTORIES
Inventories at June 30, 1997 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:
June 30, 1997 December 31, 1996
------------- -----------------
Office equipment $ 1,127,213 1,075,298
Furniture and fixtures 309,959 305,638
----------- -----------
1,437,172 1,380,936
Less accumulated depreciation (1,110,450) (1,022,818)
----------- -----------
326,722 358,118
=========== ===========
Purchased Software $ 205,050 200,037
Less accumulated depreciation (174,418) (147,107)
----------- -----------
30,632 52,930
=========== ===========
PAGE 7
<PAGE>
PART I - FINANCIAL INFORMATION
XIOX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 1.25% and is
renewable in May 1998. At June 30, 1997 the Company had $0 outstanding against
this line.
NOTE 5: RECENT ACCOUNT PRONOUNCEMENTS
The Financial Accounting Standards Board recently issued Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings Per Share." SFAS No. 128 requires
the presentation of basic earnings per share ("EPS") and, for companies with
complex capital structures, diluted EPS. SFAS No. 128 is effective for annual
and interim periods ending after December 31, 1997. Adoption of SFAS No. 128 is
not expected to have a material impact on net income (loss) per common share as
presented in the accompanying consolidated statements of operations.
NOTE 6: SUBSEQUENT EVENT
The Company entered into an agreement to sell 574,400 shares of its Common Stock
to Flanders Language Valley ("Flanders") for an aggregate purchase price of
$2,872,000 subject to future adjustments. The investment is expected to be
completed in August subject to certain conditions of closing. Pursuant to the
agreement a subsidiary will be formed in Belgium, Xiox Flanders N.V., of which
Xiox will own 94.9% and Flanders will own 5.1%.
PAGE 8
<PAGE>
PART I - FINANCIAL INFORMATION
XIOX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The forward-looking statements included in this Quarterly Report filed on Form
10-QSB, which reflect management's best judgment based on factors known, involve
risks and uncertainties. In addition, the Company may from time to time make
oral forward-looking statements. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of a number of factors, including but not limited to those discussed
under "Certain Risk Factors Which May Impact Future Operating Results and Market
Price of Stock on page 11 below. Forward-looking information provided by Xiox
should be evaluated in the context of these factors.
The following is management's discussion and analysis of certain significant
factors which have effected Xiox's financial position and operating results
during the periods included in the accompanying condensed financial statements.
Results of Operations
Second Quarter, 1997 vs. 1996
Revenue for the three months ended June 30, 1997 was $1,249,627, a decrease of
10% versus the $1,387,949 recorded during the three months ended June 30, 1996.
The $138,322 decrease in revenue is attributable to lower than expected sales of
the Company's call accounting products.
Total operating expenses for the three months ended June 30, 1997 were
$1,244,000, a decrease of 9% or $125,769 versus the $1,369,769 of operating
expenses incurred during the three months ended June 30, 1996. Total product
costs as a percentage of revenue decreased to 40% in the second quarter of 1997
from 46% in the second quarter in 1996, primarily due to variations in product
mix and inventory variance.
Research and development expenses decreased slightly by 2% or $2,899 to $174,024
in the second quarter of 1997 compared to $176,923 in the second quarter of
1996. Research and development as a percentage of revenue increased to 13.9% in
the second quarter of 1997 from 12.7% in the second quarter of 1996 due to an
increased investment in new product development.
Marketing, Sales and General and Administrative expenses in the second quarter
of 1997 increased by 2% or $ 12,422 compared to the second quarter of 1996 due
to increased spending in new products.
Other income decreased by $7,226 from the second quarter of 1996 primarily due
to a $6,182 profit sharing distribution in the second quarter of 1997. The
remaining decrease was due to a moderate decline in interest income from
short-term securities in the second three months of 1997 to $2,950 versus $3,994
in the second three months of 1996. No debt was outstanding in the second
quarters of 1997 and 1996.
The Company earned $5,627 from operations during the second quarter of 1997 and
reported a net income after taxes of $1,945 versus reported earnings of $ 18,180
from operations and net income after taxes of $21,044 in the comparable quarter
of 1996. The Company attributed this to lower revenues.
PAGE 9
<PAGE>
PART I - FINANCIAL INFORMATION
XIOX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
First Half, 1997 vs. 1996
Revenue for the six months ended June 30, 1997 was $2,522,561, a decrease of 8%
versus the $2,727,474 recorded during the six months ended June 30, 1996. The
$204,913 decrease in revenue is attributable to lower than expected sales of the
Company's call accounting products.
Total operating expenses for the six months ended June 30, 1997 were $2,477,115,
a decrease of 12% or $326,515 versus the $2,803,630 of operating expenses
incurred during the six months ended June 30, 1996. Total product costs as a
percentage of revenue decreased to 39% in the first half of 1997 from 45% in the
first half in 1996, primarily due to variations in product mix and inventory
variance.
Research and development expenses increased by 2% or $8,717 to $375,394 in the
first half of 1997 compared to $366,677 in the first half of 1996 due to an
increased investment in new product development.
Marketing, Sales and General and Administrative expenses in the first half of
1997 decreased by 7% or $79,884 compared to the first half of 1996 due to
discretionary spending controls offset by increased spending in new products.
Other income decreased by $16,083 from the first half of 1996 primarily due to a
$17,065 profit sharing distribution in the first half of 1997. Interest income
from short-term securities in the first six months of 1997 decreased slightly to
$6,092 versus $6,647 in the first six months of 1996. No debt was outstanding in
the first half of 1997 explaining the decrease in interest expense to $0 versus
$1,536 in the first half of 1996.
The Company earned $45,446 from operations during the first six months of 1997
and reported a net income after taxes of $31,198 versus a loss of $76,156 from
operations and a net loss after taxes of $74,991 in the comparable quarter of
1996. The Company attributed this to its management of expenses, product mix and
efforts to streamline operations.
PAGE 10
<PAGE>
PART I - FINANCIAL INFORMATION
XIOX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital
At June 30, 1997, Xiox held cash and cash equivalents totaling $540,368 and had
net working capital of $766,431 versus cash equivalents of $291,488 and net
working capital of $693,485 at December 31, 1996. The Company anticipates
investing approximately $100,000 in capital equipment during 1997, consisting
primarily of computer hardware and software and office equipment. Since December
31, 1996, the Company expended $61,249 for capital equipment and software.
In May, 1997, the Company renewed its bank line of credit of $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 1.25. At June 30, 1997, the Company had $0 outstanding against this
line.
Certain Risk Factors Which May Impact Future Operating Results and Market Price
of Stock
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 any litigation the Company may be involved in. In addition,
the Company typically experiences weaker sales in the first quarter of each
calendar year compared to sales for the last quarter of the previous year.
PAGE 11
<PAGE>
PART II - OTHER INFORMATION
XIOX CORPORATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
No reports on Form 8-K have been filed during the quarter ended June
30, 1997.
PAGE 12
<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 14, 1997
/s/ William H. Welling
------------------
(Duly Authorized Officer)
Date: August 14, 1997
/s/ Melanie D. Reid
---------------
Melanie D. Reid, VP Finance/CFO/Secretary
(Duly Authorized Officer)
PAGE 13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM the
Company's Condensed Consolidated Balance Sheets and Statements of
Operations AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCES TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000782995
<NAME> Xiox Corporation
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 540,368
<SECURITIES> 0
<RECEIVABLES> 878,397
<ALLOWANCES> (161,709)
<INVENTORY> 368,359
<CURRENT-ASSETS> 1,747,777
<PP&E> 1,642,222
<DEPRECIATION> (1,284,868)
<TOTAL-ASSETS> 2,224,716
<CURRENT-LIABILITIES> 981,346
<BONDS> 0
0
0
<COMMON> 23,585
<OTHER-SE> 1,219,785
<TOTAL-LIABILITY-AND-EQUITY> 2,224,716
<SALES> 2,522,561
<TOTAL-REVENUES> 2,522,561
<CGS> 983,367
<TOTAL-COSTS> 2,477,115
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 34,473
<INCOME-TAX> (3,275)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,198
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.00
</TABLE>
