<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1999
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 0-18511
---------------------
MOSAIX, INC.
(Exact name of registrant as specified in its charter)
WASHINGTON 91-1273645
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or
organization)
6464 185TH AVE. N.E.
REDMOND, WASHINGTON 98052
(Address of principal executive offices) (Zip Code)
(425) 881-7544
(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 [ ]
Common stock, par value $0.01 per share: 10,542,797 shares outstanding as of
April 30, 1999.
Page 1 of 15 sequentially numbered pages.
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<PAGE> 2
MOSAIX, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
TABLE OF CONTENTS
---------------------
<TABLE>
<CAPTION>
PART I: FINANCIAL INFORMATION PAGE NO.
<S> <C> <C>
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis
of Results of Operations and Financial Condition 9
Item 3. Quantitative and Qualitative Disclosure about Market Risk 13
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 14
Signature 15
</TABLE>
<PAGE> 3
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MOSAIX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(IN THOUSANDS) MARCH 31, DEC. 31,
1999 1998
------- -------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash, cash equivalents and short-term investments $28,229 $28,554
Trade accounts receivable, net 29,503 30,837
Inventories 866 591
Other current assets 6,412 5,665
------- -------
Total current assets 65,010 65,647
Furniture, equipment and leasehold improvements, net 7,740 7,672
Other assets 575 739
------- -------
Total assets $73,325 $74,058
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,446 $ 5,301
Accrued compensation 6,516 7,617
Other accrued expenses 7,716 6,940
Customer deposits and unearned revenue 7,258 6,332
------- -------
Total current liabilities 26,936 26,190
Shareholders' equity 46,389 47,868
------- -------
Total liabilities and shareholders' equity $73,325 $74,058
======= =======
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
Page 3
<PAGE> 4
MOSAIX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA) THREE MONTHS ENDED MARCH 31,
- ------------------------------------- ----------------------------
1999 1998
-------- --------
(UNAUDITED)
<S> <C> <C>
Revenues:
Systems sales $ 13,189 $ 11,658
Software licenses 3,804 7,375
Services and other 10,169 11,321
-------- --------
Total revenue 27,162 30,354
-------- --------
Cost of revenues:
Systems sales 4,368 4,645
Software licenses 468 548
Services and other 5,651 6,777
-------- --------
Total cost of revenue 10,487 11,970
-------- --------
Gross profit 16,675 18,384
-------- --------
Operating expenses:
Selling, general and administrative 11,305 12,197
Research and development 3,545 3,779
-------- --------
Total operating expenses 14,850 15,976
-------- --------
Operating income 1,825 2,408
Interest and other income, net 329 586
-------- --------
Income before income taxes 2,154 2,994
Income tax expense 431 898
-------- --------
Net income $ 1,723 $ 2,096
======== ========
Net income per share:
Basic $ 0.16 $ 0.17
Diluted $ 0.16 $ 0.17
Weighted average common shares outstanding:
Basic 10,650 12,200
Diluted 10,889 12,482
Comprehensive income:
Net income $ 1,723 $ 2,096
Foreign currency translation gain (loss) (246) 45
-------- --------
Comprehensive income $ 1,477 $ 2,141
======== ========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
Page 4
<PAGE> 5
MOSAIX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(IN THOUSANDS) THREE MONTHS ENDED MARCH 31,
-------------- ----------------------------
1999 1998
-------- --------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,723 $ 2,096
Depreciation and amortization 1,160 1,469
Trade and other receivables 1,334 (4,001)
Other assets (856) 948
Accounts payable and accrued liabilities (201) 365
Customer deposits and unearned revenue 926 4,099
-------- --------
Net cash provided by operating activities 4,086 4,976
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investments -- (8,010)
Proceeds from maturities of short-term investments 3,000 7,400
Purchases of furniture, equipment and leasehold improvements (961) (1,778)
Other (220) 216
-------- --------
Net cash provided by (used in) investing activities 1,819 (2,172)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term obligations -- (205)
Common stock repurchased (2,967) (2,407)
Proceeds from issuance of common stock 42 442
-------- --------
Net cash used in financing activities (2,925) (2,170)
-------- --------
Effect of exchange rate changes on cash (246) 45
-------- --------
Increase in cash and cash equivalents 2,734 679
Cash and cash equivalents, beginning of period 5,423 5,532
-------- --------
Cash and cash equivalents, end of period 8,157 6,211
Short-term investments 20,072 31,159
-------- --------
Cash, cash equivalents and short-term investments $ 28,229 $ 37,370
======== ========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
Page 5
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MOSAIX, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements include
the accounts of Mosaix, Inc. and its wholly owned subsidiaries,
collectively referred to as the "Company". The unaudited interim
condensed consolidated financial statements and related notes thereto
have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, certain information
and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles
have been omitted pursuant to such rules and regulations. The
accompanying interim condensed consolidated financial statements and
related notes thereto should be read in conjunction with the audited
consolidated financial statements and notes thereto included in the
Company's annual report on Form 10-K for the year ended December 31,
1998.
The information furnished reflects, in the opinion of management, all
adjustments, consisting of only normal recurring items, necessary for a
fair presentation of the results for the interim periods presented.
Interim results are not necessarily indicative of results for a full
year.
2. NET INCOME PER SHARE
Basic net income per share is computed using the weighted average
number of common shares outstanding. Diluted net income per share is
computed using the weighted average number of common shares plus
dilutive common share equivalents outstanding during the period using
the treasury stock method. Common share equivalents consist of employee
stock options.
The following table reconciles the numerator and the denominator of the
basic and diluted per share computations for net income per share:
<TABLE>
<CAPTION>
Weighted
Net Income Average Shares Net Income
(In thousands, except per share data) (Numerator) (Denominator) Per Share
- ------------------------------------- ----------- ------------- ---------
<S> <C> <C> <C>
Three months ended March 31, 1999:
Basic earnings per share $1,723 10,650 $ 0.16
Effect of dilutive stock options -- 239
------ ------
Diluted earnings per share $1,723 10,889 $ 0.16
====== ======
Three months ended March 31, 1998:
Basic earnings per share $2,096 12,200 $ 0.17
Effect of dilutive stock options -- 282
------ ------
Diluted earnings per share $2,096 12,482 $ 0.17
====== ======
</TABLE>
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<PAGE> 7
Options to purchase shares of common stock where the exercise price
exceeded the average market price were excluded from the computations
because they would be anti-dilutive. The related shares of stock
excluded from the computations are as follows:
<TABLE>
<CAPTION>
Shares
Excluded Exercise
(in 000's) Price
----------------- ---------------
<S> <C> <C>
Three months ended March 31, 1999 1,237 $ 8.38 - $19.75
Three months ended March 31, 1998 652 $10.25 - $19.75
</TABLE>
3. BUSINESS SEGMENT INFORMATION
The operating business segments reported below are the segments of the
Company for which separate financial information is available and for
which operating profit and loss amounts are evaluated and used by the
chief operating decision maker for making operating decisions,
assessing performance and deciding on how to effectively allocate
resources. Mosaix has two principal businesses and, therefore, two
reportable business segments: Call Management Systems (CMS) and
Customer Relationship Management (CRM) applications. Included in
"Reconciling Items" are all operating costs associated with the
Company's international sales force and European subsidiary, as well as
general corporate expenses and non-recurring charges. These costs are
generally not allocated to either segment, as the chief operating
decision maker does not consider these costs in the evaluation of the
performance of the individual reportable segments. The operating
segment information for 1999 and 1998 has been reported in accordance
with the provisions of SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information."
<TABLE>
<CAPTION>
Reconciling
(In thousands) CMS CRM Items Consolidated
-------------- ------- ------ ------------ ------------
<S> <C> <C> <C> <C>
Three months ended March 31, 1999
Net revenue $20,715 $ 6,447 $ - $27,162
Depreciation and amortization 850 250 60 1,160
Operating income (loss) 6,438 (190) (4,423) 1,825
Capital expenditures 817 96 48 961
Identifiable assets 6,082 706 66,537 73,325
Three months ended March 31, 1998
Net revenue $18,066 $12,288 $ - $30,354
Depreciation and amortization 1,174 233 62 1,469
Operating income (loss) 4,698 2,740 (5,030) 2,408
Capital expenditures 1,571 151 56 1,778
Identifiable assets 6,035 841 82,104 88,980
</TABLE>
Page 7
<PAGE> 8
4. NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities."
SFAS 133 establishes accounting and reporting standards for derivative
instruments embedded in other contracts, and for hedging activities.
The Statement requires that entities recognize all derivatives as
either assets or liabilities on the balance sheet and measure these
derivatives at fair value. SFAS 133 also specifies a new method of
accounting for hedging transactions, prescribes the type of items and
transactions that may be hedged, and specifies detailed criteria to be
met to qualify for hedge accounting. This Statement is effective for
financial statements for years beginning after June 15, 1999. The
Company does not expect the adoption of this Statement to have a
material impact on the consolidated financial statements.
5. MERGER WITH LUCENT TECHNOLOGIES INC.
On April 2, 1999, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") with Lucent Technologies Inc., a
Delaware corporation ("Lucent"). Pursuant to the Merger Agreement, at
the effective time of the Merger, each outstanding share of Mosaix,
Inc. common stock will be canceled and converted automatically into the
right to receive 0.19273 shares of Lucent common stock. The Merger is
expected to be accounted for as a pooling-of-interests and to qualify
as a tax-free reorganization.
The Merger is subject to the customary closing conditions, including
shareholder approval by Mosaix, to be considered at a special meeting
anticipated to occur on or before June 30, 1999 and legal and
regulatory approvals. The Merger will be effective promptly following
shareholder approval, assuming satisfaction of the other conditions of
the Merger.
Page 8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
Overview
For the first quarter of 1999, revenue was $27.2 million compared with
$30.4 million in the first quarter of 1998. The Company had first
quarter 1999 net income of $1.7 million, or $0.16 diluted earnings per
share, compared with $2.1 million, or $0.17 diluted earnings per share
in the first quarter of 1998.
Revenue
Revenue of $27.2 million for the first quarter of 1999 represents an
11% decrease from the first quarter of 1998. System sales increased
$1.5 million, or 13%, to $13.2 million from $11.7 million in 1998. The
increase in system sales was primarily due to increased sales of
domestic call center systems and system upgrades as compared to the
same period in the prior year. During the first quarter of 1999, the
Company released a higher capacity dialer platform that contributed to
the increase in system upgrade sales.
Software licenses revenue was $3.8 million in 1999 compared to $7.4
million in 1998. The decrease was due to reduced sales of the Company's
Customer Relationship Management ("CRM") software solution. In
addition, during the first quarter of 1998, the Company had two
significant CRM license sales.
Services and other revenue was $10.2 million in 1999 compared to $11.3
million in 1998. The decrease was primarily due to lower professional
services revenues, partially offset by increased customer service
revenues.
International revenue was 30% of total revenue in the first quarter of
1999 compared to 31% of total revenue in the comparable quarter for
1998. The decrease was primarily due to lower Canadian software license
revenues.
As discussed in the Company's 1998 Annual Report on Form 10-K, the
Company may from time to time experience quarterly fluctuations in
revenue due to the relatively few number of transactions in any single
quarter, no material backlog, changes in customer budgets and general
economic conditions.
Gross Margin
Total gross margin remained consistent with the comparable quarter of
1998 at approximately 61% of revenue. System sales gross margin
increased to 67% in the first quarter of 1999 compared to 60% in the
comparable period of the prior year. The increase was primarily the
result of the sales mix of a higher proportion of system upgrades,
which generally have higher margins than full call center systems. In
addition, the absence of capitalized software amortization costs, which
ended during the fourth quarter of 1998, contributed to improved
systems margins in the first quarter of 1999. Software licenses gross
margins, however, decreased to 88% from 93% a year ago, due to a higher
proportion of third party software product sales which generally have
lower margins than Mosaix internally developed products. Services and
other gross margin increased to 44% in the first quarter of 1999 from
40% in the comparable period of the prior year, due to not performing
non-billable consulting services for a certain customer, as was done in
1998, and a shift in the revenue mix to higher margin customer services
revenues.
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<PAGE> 10
Selling, General and Administrative
Selling, general and administrative expenses were $11.3 million in the
first quarter of 1999, compared to $12.2 million in the comparable
period of the prior year. The decrease, in absolute dollars, is due to
cost containment initiatives undertaken during the second half of 1998
and continued into 1999.
Research and Development
Research and development expense was $3.5 million or 13% of revenue in
the first quarter of 1999, compared to $3.8 million or 12% of revenue
in the comparable quarter of the prior year. These spending levels are
consistent with the Company's historical levels. The Company remains
committed to the ongoing development of new products and improvements
to existing products as a key source of future revenue.
Interest and Other Income, Net
Interest and other income, net was $0.3 million in the first quarter of
1999 compared with $0.6 million for the same period of 1998. The
decrease is primarily due to lower interest income on the Company's
investment portfolio, which has decreased due to stock repurchases, and
the absence of non-recurring other income items during the first
quarter of 1999.
Income Taxes
The effective tax rate for the first quarter of 1999 was 20% compared
to the statutory rate of 34%. The lower rate is due mainly to the
Company's use of net operating loss carryforwards to reduce taxable
income. The utilization of net operating loss carryforwards and excess
credit carryforwards are restricted by the Internal Revenue Code. The
Company therefore, is limited in the amount of net operating loss
carryforwards that may be utilized.
FINANCIAL CONDITION
Liquidity and Capital Resources
The Company's combined cash and cash equivalents and short-term
investments were $28.2 million at March 31, 1999 versus $28.6 million
at December 31, 1998. The short-term investment portfolio is invested
in commercial paper and corporate debt securities with maturities of
one year or less. The portfolio is diversified among security types and
issuers and does not include any derivative products. At March 31,
1999, the Company's working capital was $38.1 million compared to $39.5
million at December 31, 1998.
During the first quarter of 1999, the Company generated $4.1 million in
cash from operations compared to $5.0 million in the comparable quarter
of 1998. Customer deposits and unearned revenue were $7.3 million at
March 31, 1999 versus $6.3 million at December 31, 1998. The increase
is primarily due to annual customer service and maintenance fees being
renewed during the first quarter of 1999. These fees will be amortized
to services and other revenue over the remainder of the year.
In addition to its cash and short-term investment balances, the Company
has available a $10.0 million domestic line of credit to meet cash flow
needs. The line of credit expires on May 31, 1999, and management
intends to extend the line of credit through August 31, 1999.
Management believes that existing cash and short-term investments and
cash flow from operations, together with its available credit line,
will continue to be sufficient to meet ongoing operating requirements
as well as the Company's planned future investments in capital
additions and research and development activities
In July 1997, the Company's Board of Directors authorized, subject to
certain terms and conditions, the repurchase of up to 1,700,000 shares
of the Company's common stock. In February 1998, the
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<PAGE> 11
Board of Directors authorized the repurchase of an additional 1,000,000
shares of the Company's common stock. During the first quarter of 1999,
the Company repurchased 332,100 shares for approximately $3.0 million.
As of March 31, 1999, the Company had repurchased 3,561,600 shares at a
total cost of $31.7 million. In connection with the April 1999
announcement of the proposed merger with Lucent, the Company's
repurchase program was cancelled in order to satisfy certain conditions
of the pooling-of-interests accounting method.
The Company does not currently hedge against changes in foreign
currency exchange rates. The majority of the Company's sales are
denominated in US dollars with customers assuming foreign currency
exchange rate risks. The Company's United Kingdom subsidiary's sales
are generally denominated in British Pounds, which is the functional
currency of the UK subsidiary. As of March 31, 1999 outstanding
receivables at the UK subsidiary totaled $5.7 million or 19% of total
accounts receivable. Because the Company invoices certain of its
foreign sales in local currency and does not hedge these transactions,
fluctuations in exchange rates could adversely affect the Company's
revenues and costs and could create significant foreign currency
losses.
FORWARD LOOKING STATEMENTS-RISK FACTORS REGARDING FUTURE PERFORMANCE
Certain statements in this Form 10-Q contain "forward-looking"
information (as defined in the Private Securities Litigation Reform Act
of 1995) that involve risks and uncertainties, which may cause the
actual results, performance or achievements of the Company or industry
to be significantly different from any future results, performance or
achievements expressed or implied by such forward-looking information
or otherwise expected or anticipated. These risks and uncertainties
include among other things: uncertainty arising from the prospective
merger with Lucent; uncertainty regarding market acceptance of the
Company's products, including market acceptance of underlying
technologies, such as the Internet and the Microsoft NT operating
system, and the nature of the emerging CRM market; market uncertainties
arising from Year 2000 issues, including particularly customer
decisions to delay or forgo purchasing or upgrading products; quarterly
fluctuations resulting from variations in product mix, the timing of
customer orders and the fact that relatively few, large orders can
affect performance in any one quarter; the Company's ability to develop
and effectively introduce new products on a timely basis, the Company's
ability to develop products on new technology platforms that may be
introduced or are now gaining acceptance in the marketplace; the
Company's ability to establish effective channels of distribution of
its products and related marketing relationships, including
uncertainties arising from international economic conditions;
introduction of products and technologies by the Company's competitors;
and competitive pricing pressures. As a result of the foregoing and
other factors, the Company may experience material fluctuations in
future operating results on a quarterly or annual basis, which could
materially and adversely affect the Company's business operations,
financial condition, operating results, and stock price. Reference is
made to the Company's Annual Report on Form 10-K for the year ended
December 31, 1998 filed with the SEC on March 12, 1999, and Form 8-K
filed on April 16, 1999 for a more detailed description of these risks
and uncertainties.
Year 2000
The Company is aware of the issues associated with the programming code
in existing computer systems as the millennium (year 2000) approaches.
The "year 2000" problem is pervasive and complex, and virtually every
computer operation will be affected in some way by the rollover of the
two digit year value to 00. The issue is whether computer systems will
properly recognize date sensitive information when the year changes to
2000. Systems that do not properly recognize such information could
generate erroneous data or cause system failures.
The Company has tested and believes all of the Company's currently
shipping products are year 2000 compliant. In addition, whenever
possible, the Company has made software and hardware upgrades available
to existing customers that will enable their systems to be year 2000
compliant. It is possible
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that the Company's current products contain undetected errors related
to year 2000 that may result in material additional costs or
liabilities, which could have a material adverse effect on the Company.
The Company does have some customers who have purchased call management
systems in the past for which hardware upgrades are not available to
allow the customer to become year 2000 compliant. The Company has and
will continue to encourage such customers to migrate to current product
versions. It is possible that the Company will incur additional
expenses in addressing these migration issues. In addition, a
significant number of existing customers, who are currently paying
maintenance fees, have not yet upgraded to the latest year 2000
compliant products. The demand for upgrade services by these customers
will be significant, and may exceed the Company's resources of skilled
technical personnel dedicated to providing year 2000 upgrade services,
thus resulting in customers with non-compliant systems at January 1,
2000. Because of these issues, the Company may be subject to litigation
seeking damages relating to non-year 2000 compliant products sold in
the past, and for business interruptions caused by the Company's
inability to upgrade all customers to a year 2000 compliant system. It
is also possible that support fee revenues may be adversely and
materially affected if customers choose not to upgrade or otherwise to
discontinue use of Mosaix products. The Company's international
distributors, who support their end user customers directly, may
encounter similar issues, which may, in turn, affect adversely their
demand for Mosaix products in the coming quarters.
Year 2000 issues may negatively affect the Company's revenues in future
quarters in ways beyond non-renewal of maintenance service or support
fees. Some customers or prospects may decline to purchase new systems
or products from the Company until all of their internal systems have
been upgraded to year 2000 compliant versions. The market for the
Company's products may be materially adversely affected by this
internal focus of resources and available budgets on resolving year
2000 problems. The potential for distraction from normal customer
purchasing cycles and activities will exist throughout fiscal year
1999, and possibly into the fiscal year 2000.
With regard to the Company's internal processing and operational
systems, the Company has substantially completed installation of an
enterprise-wide financial and operational system from a major vendor
that is year 2000 compliant. The Company anticipates that all critical
components of this system will be operational by mid-1999. Significant
portions of this system are currently operational. The Company has
capitalized the price of this system and third party consulting costs
incurred to date and will continue to do so as the system is completed.
With regard to other systems, the Company is identifying, reprogramming
and testing all systems for year 2000 compliance. Although the Company
is not aware of any additional material operational issues or costs
associated with preparing the internal systems for the year 2000, it is
possible the Company will experience material adverse effects from
undetected errors or the failure of such systems to be year 2000
compliant.
The Company has further attempted to ascertain the year 2000 readiness
status of its primary vendors of goods and services to assess and
minimize the risk of interruptions of delivery of such goods and
services. Although the Company is not currently aware of any material
vendor year 2000 performance issues, it is possible that unknown or
unforeseen vendor operational problems, stemming from year 2000
problems, will materially adversely impact the Company's financial
performance.
While the Company continues to develop and implement readiness and
contingency plans intended to minimize the impacts of foreseeable year
2000 problems (the Company currently does not have a contingency plan
to address areas of potential failure, but anticipates developing
contingency plans prior to December 31, 1999 with regard to specific
areas of risk where the Company has not been able to gain reasonable
assurance of year 2000 compliance), it is possible the full and
complete impact of the year 2000 on the future results of the Company
will be material and adverse. This risk is difficult to fully determine
at present, and should be considered in evaluating the financial
prospects and future growth of the Company. The Company does not
believe that the expenses incurred to date, or to be incurred in the
future, in connection with currently planned year 2000 remediation
efforts, has had, or will have, a material adverse effect on the
Company.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Mosaix does not use derivative financial instruments in its investment
portfolio. Its financial instruments consist of cash and cash
equivalents, short-term investments, trade accounts receivable,
accounts payable, and long-term obligations. All of Mosaix's cash
equivalents and short-term investments, principally commercial paper
and debt securities, are classified as held-to-maturity as of March 31,
1999. The Company's exposure to market risk for changes in interest
rates relates primarily to its short-term investments and short-term
obligations, thus, fluctuations in interest rates would not have a
material impact on the fair value of these securities.
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<PAGE> 14
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Mosaix is subject to various legal proceedings that arise in
the ordinary course of its business. While the outcome of
these proceedings cannot be predicted with certainty, the
Company believes that none of such proceedings, individually
or in the aggregate will have a material adverse effect on the
Company's business or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters have been submitted to a vote of Mosaix's
shareholders since the Company's last annual meeting of
shareholders in April 1998.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K
A Form 8-K dated April 2, 1999 was filed by the Company
reporting the Company has entered into an Agreement and Plan
of Merger with Lucent Technologies, Inc.
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<PAGE> 15
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.
MOSAIX, INC.
(Registrant)
DATE: May 10, 1999 BY: /s/John J Flavio
--------------------------------
John J. Flavio
Chief Financial Officer
(Principal Financial Officer)
Page 15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MOSAIX, INC.
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10K.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 8,157
<SECURITIES> 20,072
<RECEIVABLES> 31,124
<ALLOWANCES> 1,621
<INVENTORY> 866
<CURRENT-ASSETS> 65,010
<PP&E> 30,342
<DEPRECIATION> 22,602
<TOTAL-ASSETS> 73,325
<CURRENT-LIABILITIES> 26,936
<BONDS> 0
0
0
<COMMON> 108
<OTHER-SE> 46,281
<TOTAL-LIABILITY-AND-EQUITY> 73,325
<SALES> 16,993
<TOTAL-REVENUES> 27,162
<CGS> 4,836
<TOTAL-COSTS> 10,487
<OTHER-EXPENSES> 14,850
<LOSS-PROVISION> 72
<INTEREST-EXPENSE> 5
<INCOME-PRETAX> 2,154
<INCOME-TAX> 431
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,723
<EPS-PRIMARY> 0.16<F1>
<EPS-DILUTED> 0.16
<FN>
<F1>For purposes of this exhibit, Primary means Basic.
</FN>
</TABLE>
