<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSISTION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 333-606
ISOCOR(R)
(Exact name of Registrant as specified in its charter)
California 95-4310259
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3420 Ocean Park Blvd., Santa Monica, CA 90405
(Address of principal executive offices) (Zip code)
Registrant's telephone number including area code: (310) 581-8100
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 of 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 No X(1)
--- ---
8,763,782 Shares of Common Stock of the Registrant were outstanding as of
June 30, 1996
(1)ISOCOR has been subject to such reporting requirements since the effective
date of its Registration Statement on Form S-1 (March 13, 1996) and has filed
all such reports since such effective date.
<PAGE> 2
ISOCOR
INDEX TO FORM 10-Q
THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Part I Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets at June 30, 1996
and December 31, 1995.................................................. 3
Consolidated Statements of Operations for the three and six months
ended June 30, 1996 and 1995........................................... 4
Consolidated Statements of Cash Flows for the six
months ended June 30, 1996 and 1995.................................... 5
Notes to Consolidated Financial Statements............................. 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.............................................. 9
Part II. Other Information
Item 2. Changes in Securities.......................................... 13
Item 5. Other Information.............................................. 13
Item 6. Exhibits and Reports on Form 8-K............................... 13
Signature....................................................................... 14
</TABLE>
2
<PAGE> 3
Part I - Financial Information
Item 1. Financial Statements
ISOCOR
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
-------------- -----------------
(unaudited)
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents $ 13,511 $ 5,849
Marketable securities 12,518
Trade accounts receivable
Customer, net 7,497 7,336
Related party 428 344
Other current assets 1,877 1,033
-------- --------
Total current assets 35,831 14,562
Investments, net -- 638
Property and equipment, net 2,374 1,945
Other assets 329 368
-------- --------
Total assets $ 38,534 $ 17,513
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 521 $ 571
Other accrued expenses 2,914 2,254
Deferred revenues 1,927 1,440
Product development obligation 561 510
Other current liabilities 45 45
-------- --------
Total current liabilities 5,968 4,820
Product development obligation 157 315
Other long term liabilities 143 191
-------- --------
Total liabilities 6,268 5,326
Commitments
Shareholders' equity
Redeemable convertible preferred stock, series A, (liquidation preference
$4,688) authorized, issued and
outstanding, 1,875,000 shares at December 31, 1995 -- 4,846
Redeemable convertible preferred stock, series B,
(liquidation preference $7,388) authorized 2,066,673 shares,
issued and outstanding, 2,066,655 shares at December 31, 1995 -- 8,341
Redeemable convertible preferred stock, series C,
(liquidation preference $3,750) authorized 2,060,000 shares,
issued and outstanding, 857,142 shares at December 31, 1995 -- 4,450
Redeemable convertible preferred stock, series D,
(liquidation preference $3,000) authorized 300,000 shares,
issued and outstanding, 150,000 shares at December 31, 1995 -- 653
Common stock, authorized 10,000,000 shares,
issued and outstanding 8,763,782 and 1,186,967
shares at June 30, 1996 and December 31, 1995 38,940 533
Notes receivable (26) (45)
Accumulated deficit (6,437) (6,388)
Deferred compensation (242) (280)
Foreign currency translation adjustment 31 77
-------- --------
Total shareholders' equity 32,266 12,187
-------- --------
Total liabilities and shareholders' equity $ 38,534 $ 17,513
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
3
<PAGE> 4
ISOCOR
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
-------------------------------- ------------------------------
1996 1995 1996 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues:
Products:
Customer $ 4,076 $ 3,323 8,086 5,676
Related parties 45 0 430 11
Services:
Customer 881 508 1,788 910
Related parties 23 12 50 22
-------- -------- -------- --------
Total revenues 5,025 3,843 10,354 6,619
Cost of revenues:
Products 380 440 827 714
Services 433 278 923 502
-------- -------- -------- --------
Total cost of revenues 813 718 1,750 1,216
-------- -------- -------- --------
Gross profit 4,212 3,125 8,604 5,403
-------- -------- -------- --------
Operating expenses:
Engineering 2,085 1,494 3,951 2,817
Sales and marketing 2,123 1,324 4,006 2,592
Administration 530 335 1,025 663
IDA grants (86) (157) (194) (443)
-------- -------- -------- --------
Total operating expenses 4,652 2,996 8,788 5,629
-------- -------- -------- --------
Operating income (loss) (440) 129 (184) (226)
(Income) loss from currency fluctuations 52 -- 70 (134)
Interest expense (income) (299) (35) (367) (75)
-------- -------- -------- --------
Income (loss) before income taxes and minority interest (193) 164 113 (17)
Provision for income taxes
30 281 136 281
-------- -------- -------- --------
Income (loss) before minority interest (223) (117) (23) (298)
-------- -------- -------- --------
Minority interest 26 -- 26 --
-------- -------- -------- --------
Net Income (loss) ($249) ($117) ($49) ($298)
======== ======== ======== ========
Net income (loss) per share $ (0.03) $ (0.05) $ (0.01) $ (0.14)
======== ======== ======== ========
Shares used in per share calculation 8,747 2,175 5,705 2,175
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
4
<PAGE> 5
ISOCOR
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
Six months ended June 30,
-------------------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss ($49) ($298)
Adjustments to reconcile net loss to net
cash provided (used) by operating activities:
Depreciation and amortization 509 333
Amortization of deferred compensation 37 --
Deferred rent (11) 43
Minority Interest 26 --
(Increase) / decrease in:
Accounts receivable (290) (865)
Other current assets (753) (204)
Other assets (20) (65)
Increase / (decrease) in:
Accounts payable (43) 47
Other accrued expenses 689 92
Deferred revenues 484 336
Product development obligation (106) --
Long term liabilities (61) (7)
-------- --------
Net cash provided (used) by operating activities 412 (588)
-------- --------
Cash flows from investing activities:
Purchase of property and equipment (916) (722)
Purchase of marketable securities (12,518) --
Investments, at cost 547 --
-------- --------
Net cash provided (used) by investing activities (12,887) (722)
-------- --------
Cash flows from financing activities:
Proceeds from the sale of stock, net 20,121 12
-------- --------
Net cash provided by financing activities 20,121 12
-------- --------
Effect of exchange rate changes on cash 16 (183)
-------- --------
Net increase (decrease) in cash 7,662 (1,481)
Cash and cash equivalents, beginning of year 5,849 5,297
-------- --------
Cash and cash equivalents, end of year $ 13,511 $ 3,816
======== ========
Supplemental schedule of non-cash financing activities:
Common stock issued to shareholders in exchange
for notes receivable, net -- $ 11
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
5
<PAGE> 6
ISOCOR
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
by ISOCOR (the "Company"), pursuant to the regulations of the U.S. Securities
and Exchange Commission. In the opinion of management, the unaudited financial
statements include all adjustments (consisting only of normal recurring
adjustments) necessary to fairly present the consolidated financial position at
June 30, 1996 and the consolidated statements of operations and cash flows for
the three and six month periods ended June 30, 1996 and June 30, 1995. The year
end balance sheet data was derived from audited financial statements, but does
not include all disclosures required by generally accepted accounting
principles.
The statements of operations and cash flows for the 1996 interim period are not
necessarily indicative of results to be expected for the full year.
These consolidated financial statements should be read in conjunction with the
financial statements included in the Company's Registration Statement No.
333-606 on Form S-1, as of December 31, 1995, as filed with the Securities and
Exchange Commission on March 13, 1996. Unless otherwise indicated, all
information herein has been restated to reflect the Company's 1 for 2.5 reverse
stock split, which was effected on January 26, 1996.
Concentration of credit risk
At June 30, 1996 the Company had balances held in U.S. banks of approximately
$11,773,000 which exceeded federally insured limits.
Marketable Securities
The Company invests excess cash in a diversified portfolio consisting of a
variety of securities including commercial paper, corporate notes and U.S.
Government Obligations all with maturities of one year or less. All of the
Company's marketable securities have been classified as "available-for-sale"
securities and are reported at fair value based on quoted market prices as
required by Statement of Financial Accounting Standards No. 115 "Accounting for
Certain Investments in Debt and Equity Securities."
Intangibles
In accordance with Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to
be Disposed," it is the Company's policy to review and evaluate periodically
whether there has been a permanent impairment in the value of intangibles and
other long-lived assets. Factors considered in the valuation include current
operating results, trends and anticipated undiscounted cash flows. The $355,000
intangible asset related to the 1995 acquisition of a sales and distribution
company located in Europe is being amortized using the straight line method over
an estimated useful life of five years and is included in "Other assets" in the
accompanying consolidated financial statements as of June 30, 1996, net of
accumulated amortization of $45,000.
2. INITIAL PUBLIC OFFERING
On March 19, 1996 and March 25, 1996 the Company completed the public offering
and sale of 2,000,000 and 300,000 shares respectively of its common stock at $9
per share resulting in net proceeds to the Company after offering costs,
underwriting discounts and commissions of approximately $18,379,000. The
Company's shares are traded on the Nasdaq National Market System under the
symbol "ICOR."
6
<PAGE> 7
ISOCOR
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996
(unaudited)
3. MARKETABLE SECURITIES
Marketable securities at book value, which is equal to fair value, as of June
30, 1996 and December 31, 1995 were (dollars in thousands):
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
<S> <C> <C>
Commercial paper................................... $1,119 -
Corporate notes.................................... 7,405 -
U.S. Government obligations........................ 3,994 -
------------- -----------------
$12,518 -
============= =================
</TABLE>
4. ACCOUNTS RECEIVABLE
Customer trade accounts receivable, net of allowances as of June 30, 1996 and
December 31, 1995 were (dollars in thousands):
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
<S> <C> <C>
Accounts receivable................................ $8,590 $7,900
Less: Allowance for doubtful accounts, returns and
price protection................................... (1,093) (564)
------------- ---------------
$7,497 $7,336
============= ===============
</TABLE>
5. OTHER ACCRUED EXPENSES
Other accrued expenses include (dollars in thousands):
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
<S> <C> <C>
Salaries and related expenses...................... $679 $698
Royalties.......................................... 495 336
Commissions........................................ 284 455
Travel............................................. 312 83
Other.............................................. 1,144 682
-------------- ----------------
$2,914 $2,254
============== ================
</TABLE>
7
<PAGE> 8
ISOCOR
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996
(unaudited)
6. INCOME TAXES
The source of income (loss) before income taxes for the three and six months
ended June 30, 1996 and 1995 is as follows (dollars in thousands):
<TABLE>
<CAPTION>
Three months Three months Six months Six months
ended ended ended ended
June 30, 1996 June 30, 1995 June 30, 1996 June 30, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
United States........... $(477) $(226) $ (968) $(620)
Foreign................. 284 390 1,081 603
----- ----- ------ -----
Income (loss) before
income taxes and
minority interest $(193) $ 164 $ 113 $ (17)
===== ===== ====== =====
</TABLE>
On an interim basis, the Company provides for income taxes using its estimated
effective tax rate for the year for foreign and domestic source income. As of
June 30, 1996, no net operating loss carryforwards remain in foreign
jurisdictions. The taxes provided relate primarily to foreign source income.
7. PER SHARE INFORMATION
Net income (loss) per common share is computed using the weighted average number
of shares of Common Stock and common equivalent shares outstanding. Common
equivalent shares related to stock options, warrants and Preferred Stock are
excluded from the computation when their effect is antidilutive, except that,
pursuant to the Securities and Exchange Commission Staff Accounting Bulletins,
common and common equivalent shares, issued at prices below the anticipated
public offering price during the 12 months immediately preceding the initial
filing date have been included in the calculations as if they were outstanding
for the 1995 periods presented, using the treasury stock method.
8. RELATED PARTY TRANSACTIONS
Included in revenues for the three months ended June 30, 1996 and 1995 was
approximately $6,000 and $5,000 respectively relating to software maintenance
agreements with an affiliate of a shareholder. Revenues from this same affiliate
for the six months ended June 30, 1996 and 1995 was approximately $266,000 and
$26,000 respectively. Included in Accounts Receivable as of June 30, 1996 was
$428,000 relating to this affiliate.
Included in revenues for the three months ended June 30, 1996 and 1995 was
approximately $62,000 and $7,000 respectively, relating to software license and
maintenance agreements with a shareholder. Revenues from this shareholder for
the six months ended June 30, 1996 and 1995 was approximately $214,000 and
$7,000 respectively.
8
<PAGE> 9
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion contains forward-looking statements. The
Company wishes to alert readers that the factors set forth in the section
entitled "Risk Factors" in the Company's Prospectus dated March 14, 1996, which
was filed with the U.S. Securities and Exchange Commission in connection with
its Registration Statement on Form S-1 (No. 333-606) on March 13, 1996 could in
the future affect, and in the past have affected, the Company's results. The
Company's results for future quarters could differ materially from those
expressed in any forward looking statements made by or on behalf of the Company.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995
Revenues. Total revenues were $5,025,000 and $3,843,000 for the three
months ended June 30, 1996 and 1995, respectively, representing an increase in
1996 of 31% over the same period one year ago. Revenues from international
sources accounted for approximately 73% and 89% of total revenues in the three
months ended June 30, 1996 and 1995, respectively. This decrease in the
percentage of international revenues is due to increased growth in the domestic
marketplace in the 1996 period as a result of the Company's focus in that
marketplace, and the impact of a single sale in Asia in excess of $1.3 million
during the three months ended June 30, 1995. The Company's European revenues
accounted for 85% and 52% of the Company's international revenues in the three
months ended June 30, 1996, and 1995 respectively. This decrease was primarily
due to the previously mentioned single sale in Asia during 1995.
Product revenues were $4,121,000 and $3,323,000 for the three months
ended June 30, 1996 and 1995, respectively. The 24% increase from 1995 to 1996
was mainly due to increased volumes of the Company's products sold.
Service revenues were $904,000 and $520,000 for the three months ended
June 30, 1996 and 1995, respectively. The 74% increase from 1995 to 1996
resulted primarily from increased volumes of custom engineering and training,
and increased software support and update service fees relating to the Company's
increased product sales.
Cost of Revenues. Cost of product revenues consists primarily of third
party royalties relating to licensed technology, costs of media duplication,
manuals and packaging materials. The decrease in cost of product revenues as a
percent of product revenues between the three months ended June 30, 1996 and the
same period of 1995, was primarily the result of the continuing shift in sales
toward products with higher margins due to decreasing reliance upon technology
owned by third parties and thus, lower royalties paid to third parties.
Cost of service revenues consists primarily of personnel-related costs
of providing software support and update, training and installation, and custom
engineering services. The slight decrease in cost of service revenues as a
percentage of service revenues between the three months ended June 30, 1996 and
the same period of 1995, resulted from faster growth in the level of support and
update services occurring in the Company's European facilities where labor costs
are lower, than in the same services occurring in the Company's United States
facilities.
Gross Profit Gross profit was $4,212,000 and $3,125,000 for the three
months ended June 30 1996 and 1995, respectively, representing 83.8% and 81.3%
of revenues for those same periods, respectively.
Gross profit from product sales was $3,741,000 and $2,883,000 for the
three months ended June 30 1996 and 1995, respectively, representing 90.8% and
86.8% of product sales for those same periods, respectively.
9
<PAGE> 10
Gross profit from services was $471,000 and $242,000 the three months
ended June 30 1996 and 1995, representing 52.1% and 46.5% of services revenues
for those same periods, respectively.
Engineering Engineering expenses were $2,085,000 and $1,494,000 for the
three months ended June 30, 1996 and 1995, respectively, representing 41.5% and
38.9% of revenues for those same periods, respectively. The increases in
engineering expenses resulted principally from increased levels of engineering
personnel from 91 at June 30, 1995 to 126 at June 30, 1996.
Sales and Marketing. Sales and marketing expenses were $2,123,000 and
$1,324,000 for the three months ended June 30, 1996 and 1995, respectively,
representing 42.2% and 34.4% of revenues for those same periods, respectively.
The increase resulted primarily from growth in the Company's sales and support
organizations where headcount increased from 41 to 60.
Administration. Administration expenses were $530,000 and $335,000 for
the three months ended June 30, 1996 and 1995, respectively, representing 10.5%
and 8.7% of revenues for those same periods, respectively. The increase resulted
from the hiring of additional personnel in connection with continued growth in
the Company's business, and the costs associated with being a public company.
Agency Grants. Agency grants are received from the Industrial
Development Authority of Ireland under an incentive program designed to induce
organizations to locate and conduct business in Ireland, and are based
predominately upon the number of new jobs created by the Company in Ireland. The
Company expects that this number will fluctuate on a quarterly basis. The amount
of grants in any given period will therefore vary based upon the number of jobs
created and the timing of receipt of grant aid payments.
(Income) loss from currency fluctuations. Loss from currency
fluctuations was $52,000 and virtually zero for the three months ending June 30,
1996 and 1995, respectively. The fluctuation during these periods primarily
result from changes in foreign currency exchange rates.
Income Tax Provision. The income tax provision was $30,000 on a pre-tax
loss of $193,000 for the three months ended June 30, 1996, which resulted from
taxes on the Company's profitable foreign operations. For the three months ended
June 30, 1995, income tax of $281,000 related to taxes withheld by a foreign
government in connection with a single large sale in Asia made from the United
States.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
Revenues. Total revenues were $10,354,000 and $6,619,000 for the six
months ended June 30, 1996 and 1995, respectively, representing an increase in
1996 of 56.4% over the same period one year ago. Revenues from international
sources accounted for approximately 73% and 83% of total revenues in the six
months ended June 30, 1996 and 1995, respectively. This decrease in the
percentage of international revenues is primarily due to increased growth in the
domestic marketplace as a result of the Company's focus in that marketplace, and
the impact of a single sale in Asia in excess of $1.3 million during the six
months ended June 30, 1995. The Company's European revenues accounted for 84.5%
and 57.9% of the Company's international revenues in the six months ended June
30, 1996, and 1995 respectively. This decrease was primarily due to the
previously mentioned single sale in Asia during 1995.
Product revenues were $8,516,000 and $5,687,000 for the six months
ended June 30, 1996 and 1995, respectively. The 49.7% increase from 1995 to 1996
was mainly due to increased volumes of the Company's products sold.
10
<PAGE> 11
Service revenues were $1,838,000 and $932,000 for the six months ended
June 30, 1996 and 1995, respectively. The 97.2% increase from 1995 to 1996
resulted primarily from increased volumes of custom engineering, and increased
software support and update service fees relating to the Company's increased
product sales.
Cost of Revenues. Cost of product revenues consists primarily of third
party royalties relating to licensed technology, costs of media duplication,
manuals and packaging materials and cost of warranty. The decrease in cost of
product revenues as a percent of product revenues between the six months ended
June 30, 1996 and the same period of 1995, was primarily the result of the
continuing shift in sales toward products with higher margins due to decreasing
reliance upon technology owned by third parties and thus, lower royalties paid
to third parties, partially offset by an increase in the cost of providing
warranty on product sales, due mainly to the larger volume of high-end ADMD
product sales which carry a longer warranty.
Cost of service revenues consists primarily of personnel-related costs
of providing software support and update, training and installation, and custom
engineering services. The slight decrease in cost of service revenues, as a
percent of service revenues between the six months ended June 30, 1996 and the
same period of 1995, resulted from faster growth in the level of support and
update services occurring in the Company's European facilities where labor costs
are lower, than in the same services occurring in the Company's United States
facilities.
Gross Profit Gross profit was $8,604,000 and $5,403,000 for the six
months ended June 30 1996 and 1995, respectively, representing 83.1% and 81.6%
of revenues for those same periods, respectively.
Gross profit from product sales was $7,689,000 and $4,973,000 for the
six months ended June 30 1996 and 1995, respectively, representing 90.3% and
87.4% of product sales for those same periods, respectively.
Gross profit from services was $915,000 and $430,000 the six months
ended June 30 1996 and 1995, representing 49.8% and 46.1% of services revenues
for those same periods, respectively.
Engineering Engineering expenses were $3,951,000 and $2,817,000 for the
six months ended June 30, 1996 and 1995, respectively, representing 38.2% and
42.6% of revenues for those same periods, respectively. The increase in
engineering expenses resulted principally from increased levels of engineering
personnel from an average of 84 for the six months ended June 30, 1995 to an
average of 115 for the six months ended June 30, 1996.
Sales and Marketing. Sales and marketing expenses were $4,006,000 and
$2,592,000 for the six months ended June 30, 1996 and 1995, respectively,
representing 38.7% and 39.2% of revenues of those same periods, respectively.
The increase resulted primarily from growth in the Company's sales and support
organizations where headcount increased from an average of 36 for the six months
ended June 30, 1995 to an average of 55 for the six months ended June 30, 1996
Administration. Administration expenses were $1,025,000 and $663,000
for the six months ended June 30, 1996 and 1995, respectively, representing
approximately 10% of revenues for each of those periods, respectively. The
increase resulted from the hiring of additional personnel in connection with
continued growth in the Company's business, and the costs associated with being
a public company.
Agency Grants. Agency grants are received from the Industrial
Development Authority of Ireland under an incentive program designed to induce
organizations to locate and conduct business in Ireland, and based predominately
upon the number of new jobs created by the Company in Ireland. The Company
expects that this number will fluctuate on a quarterly basis. The amount of
grants in any given period will therefore vary based upon the number of jobs
created and the timing of receipt of grant aid payments.
11
<PAGE> 12
(Income) loss from currency fluctuations. (Income) loss from currency
fluctuations was $70,000 and $(134,000) for the six months ended June 30, 1996
and 1995, respectively. The fluctuation during these periods primarily result
from changes in foreign currency exchange rates.
Income Tax Provision. The income tax provision was $136,000 on a
pre-tax profit of $113,000 for the six months ended June 30, 1996, which
resulted from taxes on the Company's profitable foreign operations. For the six
months ended June 30, 1995, income tax of $281,000 related to taxes withheld by
a foreign government in connection with a single large sale in Asia made from
the United States.
LIQUIDITY AND CAPITAL RESOURCES
During March, 1996 the Company completed a public offering and sale of
2,300,000 shares (including the over-allotment) of its Common Stock at $9 per
share, resulting in net proceeds to the Company after offering costs of
approximately $18,379,000. The Company received an additional $1,500,000 from
Intel and an additional $288,000 from Thomson-CSF Ventures as a result of the
issuance of 166,667 and 39,942 shares of common stock, respectively.
As of June 30, 1996, total accounts receivable, net were $7,925,000
versus $7,680,000 at December 31, 1995. The Company typically generates a large
percentage of its quarterly revenue during the last few weeks of the quarter,
which when coupled with payment terms in excess of 90 days on some of the larger
sales, has given rise to an increase in the accounts receivable balance at June
30, 1996. The Company expects that certain of the Company's larger sales will
continue to have longer payment terms, thus slowing the cash flow cycle. The
Company does not believe these longer payment terms are likely to have a
material adverse effect on the collectibility of the related receivables.
As of June 30, 1996, the Company had a balance of approximately
$13,511,000 in cash and cash equivalents, and a balance of $12,518,000 in
marketable securities. The Company believes that its existing capital resources
will be adequate to finance the Company's operations and capital expenditures
through at least the end of 1997.
12
<PAGE> 13
PART II Other Information
Item 2 - Changes in Securities
See Part II, Item 2 of Registrant's Report on Form 10-Q as filed with
the Securities and Exchange Commission on May 4, 1996.
Item 5. - Other Information
James F. Jordan, a member of the Board of Directors of the Company,
resigned his position as a director in April 1996, for personal business
reasons.
On June 5, 1996 the Company filed a Registration Statement on Form S-8
to register a total of 2,121,270 shares of Common Stock under the 1996
Director's Stock Option Plan, the 1996 Employee Stock Purchase Plan and the 1992
Stock Option Plan.
Item 6. - Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this Quarterly Report on
Form 10-Q:
4.1 - Amended and Restated Articles of Incorporation of the Company
dated March 14th, 1996 (previously filed as an exhibit to the
Company's Registration Statement No. 333-05275 on Form S-8 and
incorporated here by reference).
4.2 - Amended and Restated Bylaws of the Company dated January 19,
1996 (previously filed as an exhibit to the Company's
Registration Statement No. 333-05275 on Form S-8 and
incorporated here by reference).
4.3 - The Company's 1992 Stock Option Plan, as amended (previously
filed as an exhibit to the Company's Registration Statement No.
333-606 on Form S-1 and incorporated here by reference).
4.4 - The Company's 1996 Employee Stock Purchase Plan (previously
filed as an exhibit to the Company's Registration Statement No.
333-606 on Form S-1 and incorporated here by reference).
4.5 - The Company's 1996 Director's Stock Option Plan (previously
filed as an exhibit to the Company's Registration Statement No.
333-606 on Form S-1 and incorporated here by reference).
11.1- Statement of Computation Shares Used in Per Share Computation.
27.1- Financial Data Schedule.
(b) No reports on Form 8-K have been filed during the quarter for which
this report has been filed.
13
<PAGE> 14
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report on Form 10Q to be signed on its
behalf by Janine M. Bushman, thereunto duly authorized to sign on behalf of the
registrant and as the principal financial officer thereof.
ISOCOR
Date: August 8, 1996 By: /s/ Janine M. Bushman
-------------------------------
Janine M. Bushman, Vice President,
Finance and Administration, and Chief
Financial Officer
14
<PAGE> 15
INDEX TO EXHIBITS
Exhibit
Number Exhibits Page
11.1 Statement of Computation Shares Used in Per Share Computation......... 1
27.1 Financial Data Schedule............................................... 2
<PAGE> 1
EXHIBIT 11.1
ISOCOR
STATEMENT OF COMPUTATION OF SHARES USED IN PER SHARE COMPUTATION
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three months ended Six months ended
------------------------ -------------------------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Computation of shares used in net income (loss) per share:
Weighted average common shares outstanding............... 8,747 1,189 5,705 1,189
Common equivalent shares attributable to stock options...
(treasury stock method)................................ - 173 - 173
Common equivalent shares attributable to redeemable
preferred stock........................................ - 813 - 813
----- ----- ----- -----
Shares used in per share calculation.......................... 8,747 2,175 5,705 2,175
===== ===== ===== =====
</TABLE>
1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1996 AND THE RELATED CONSOLIDATED
STATEMENTS OF OPERATIONS FOR THE SIX MONTHS IN THE PERIOD ENDED JUNE 30, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 13511
<SECURITIES> 12518
<RECEIVABLES> 8590
<ALLOWANCES> 1093
<INVENTORY> 0
<CURRENT-ASSETS> 35831
<PP&E> 4361
<DEPRECIATION> 1987
<TOTAL-ASSETS> 38534
<CURRENT-LIABILITIES> 5968
<BONDS> 0
0
0
<COMMON> 38940
<OTHER-SE> (6674)
<TOTAL-LIABILITY-AND-EQUITY> 38534
<SALES> 10354
<TOTAL-REVENUES> 10354
<CGS> 827
<TOTAL-COSTS> 1750
<OTHER-EXPENSES> 8788
<LOSS-PROVISION> 142
<INTEREST-EXPENSE> (367)
<INCOME-PRETAX> 113
<INCOME-TAX> 136
<INCOME-CONTINUING> (49)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (49)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
