<PAGE> 1
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 June 30, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-26772
VISIO CORPORATION
(Exact name of registrant as specified in its charter)
WASHINGTON 91-1448389
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
520 PIKE STREET, SUITE 1800, SEATTLE, WASHINGTON 98101-4001
(Address of principal executive offices) (Zip code)
(206) 521-4500
(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 _____
-----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Class Shares outstanding as of July 31, 1996
- ----------------------------- ---------------------------------------
Common Stock ($.01 par value) 13,612,468
<PAGE> 2
VISIO CORPORATION
FORM 10-Q
For the Quarter Ended June 30, 1996
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Balance Sheets as of June 30, 1996 and September 30, 1995 ...................... 2
Statements of Income for the three and nine months ended June 30, 1996 and 1995 3
Statements of Cash Flows for the nine months ended June 30, 1996 and 1995 ...... 4
Notes to Financial Statements .................................................. 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ........................................ 6
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K .............................................. 14
SIGNATURES .............................................................................. 15
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
VISIO CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1996 1995
----------- -------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ...................................... $ 56,520 $ 7,063
Trade accounts receivable, net ................................. 2,149 4,462
Inventories .................................................... 698 1,431
Prepaid expenses ............................................... 1,682 1,662
Deferred income taxes .......................................... 1,795 2,136
-------- --------
Total current assets .............................................. 62,844 16,754
Equipment and leasehold improvements, net ......................... 2,840 2,308
Other assets ...................................................... 6 185
-------- --------
Total assets ...................................................... $ 65,690 $ 19,247
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable ............................................... $ 2,905 $ 4,176
Accrued compensation and benefits .............................. 1,815 1,025
Other accrued liabilities ...................................... 8,360 5,041
Income taxes payable ........................................... 1,106 2,653
Current portion of long-term obligations ....................... 359 394
-------- --------
Total current liabilities ......................................... 14,545 13,289
Long-term obligations ............................................. 247 453
Convertible and redeemable preferred stock ........................ -- 6,545
Shareholders' equity (deficit):
Common stock ................................................... 136 56
Additional paid-in capital ..................................... 45,080 487
Translation adjustments ........................................ (54) (74)
Retained earnings (accumulated deficit) ........................ 5,736 (1,509)
-------- --------
Total shareholders' equity (deficit) .............................. 50,898 (1,040)
-------- --------
Total liabilities and shareholders' equity (deficit) .............. $ 65,690 $ 19,247
======== ========
</TABLE>
The accompanying Notes to Financial Statements
are an integral part of these financial statements
2
<PAGE> 4
VISIO CORPORATION
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- ---------------------
1996 1995 1996 1995
------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues $15,231 $ 8,059 $43,175 $23,939
Cost of revenues 2,125 1,257 6,854 3,972
------- ------- ------- -------
Gross margin 13,106 6,802 36,321 19,967
Operating expenses:
Research and development 2,138 1,346 6,522 3,613
Sales and marketing 5,929 3,910 16,707 12,802
General and administrative 1,181 651 3,300 1,796
------- ------- ------- -------
Total operating expenses 9,248 5,907 26,529 18,211
------- ------- ------- -------
Income from operations 3,858 895 9,792 1,756
Other income, net 388 176 1,021 396
------- ------- ------- -------
Income before income taxes 4,246 1,071 10,813 2,152
Provision for income taxes 1,401 375 3,568 754
------- ------- ------- -------
Net income $ 2,845 $ 696 $ 7,245 $ 1,398
======= ======= ======= =======
Net income per share $ 0.19 $ 0.06 $ 0.50 $ 0.12
======= ======= ======= =======
Shares used in computing net income per
share 14,944 12,051 14,447 11,713
======= ======= ======= =======
</TABLE>
The accompanying Notes to Financial Statements
are an integral part of these financial statements
3
<PAGE> 5
VISIO CORPORATION
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JUNE 30,
-----------------------
1996 1995
-------- -------
(IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 7,245 $ 1,398
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 885 667
Deferred income taxes 341 --
Changes in:
Trade accounts receivable, net 2,311 706
Inventories 732 (51)
Prepaid expenses (23) 14
Other assets 179 13
Accounts payable (1,267) (435)
Accrued compensation & benefits 793 132
Other accrued expenses 3,343 55
Income taxes payable (1,547) (3)
-------- -------
Net cash provided by operating activities 12,992 2,496
INVESTING ACTIVITY - Purchases of equipment and leasehold
improvements (1,421) (843)
FINANCING ACTIVITIES
Proceeds from initial public offering 35,680 --
Issuance of convertible and redeemable preferred stock -- 1,490
Issuance of common stock 2,448 120
Proceeds from long-term obligations -- 260
Payments on long-term obligations (241) (268)
-------- -------
Net cash provided by financing activities 37,887 1,602
-------- -------
Net increase in cash and cash equivalents 49,458 3,255
Effect of exchange rate changes on cash (1) (68)
Cash and cash equivalents, beginning of period 7,063 3,669
-------- -------
Cash and cash equivalents, end of period $ 56,520 $ 6,856
======== =======
</TABLE>
The accompanying Notes to Financial Statements
are an integral part of these financial statements
4
<PAGE> 6
VISIO CORPORATION
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements of Visio Corporation ("Visio"
or the "Company") at June 30, 1996 and for the three- and nine-month periods
ended June 30, 1996 and 1995 are unaudited and reflect all adjustments,
consisting only of normal recurring items, which are, in the opinion of
management, necessary for a fair presentation of the financial position and
results of operations for the interim periods. The consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto for the fiscal year ended September 30, 1995
included in Visio's Registration Statement on Form S-1, Registration No. 33-
96986, as amended. The results of operations for the three and nine months ended
June 30, 1996 are not necessarily indicative of the results to be expected for
the full fiscal year.
Visio's fiscal year is a 52/53-week period. Accordingly, all
references as of and for the periods ended June 30, 1996, September 30, 1995 and
June 30, 1995 reflect amounts as of and for the periods ended June 28, 1996,
September 29, 1995 and June 30, 1995, respectively.
Inventories
Inventories are stated at the lower of cost or market and consist of
the following:
<TABLE>
<CAPTION>
June 30, September 30,
1996 1995
-------- -------------
(in thousands)
<S> <C> <C>
Raw Materials $ 242 $ 356
Finished Goods 456 1,075
------ ------
$ 698 $1,431
====== ======
</TABLE>
Initial Public Offering
On November 15, 1995, the Company completed its initial public
offering of 2,840,500 shares of common stock, par value $.01 per share (the
"Common Stock"), at $16 per share. Of these shares, 370,000 were sold by selling
shareholders. Proceeds to the Company were $35,679,879 net of $1,081,161 of
related expenses. The Company's 5,205,089 shares of convertible redeemable
preferred stock were automatically converted into 5,205,089 shares of Common
Stock on the closing date of the offering.
5
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Visio, which commenced operations in September 1990, develops
drawing and diagramming software for the general business personal computer
user. All of the Company's products have been developed for the Microsoft
Windows 3.1, Windows 95 and Windows NT operating systems and are marketed under
the Visio brand. The Company's primary products are Visio(R) and Visio
Technical. Beginning with the initial shipment of Visio in November 1992, the
Company has focused on creating a new market for business drawing and
diagramming software. The Company shipped upgraded versions of Visio in October
1993, August 1994 and August 1995. The Company first shipped its second
significant product line, Visio Technical, for the technical drawing market in
December 1994, and shipped upgraded versions of Visio Technical in September
1995 and May 1996. The Company does not plan to upgrade its core products
annually in the future.
Visio currently classifies its revenues in four categories:
"Distribution," "Volume Licensing," "OEM" and "Direct." Distribution revenues
represent sales of packaged products through national distributors and
corporate, retail and mail order resellers. Volume Licensing revenues are
derived from volume licenses, which are generally administered through corporate
resellers after the Company's sales staff has negotiated the sale. The typical
sales cycle for a volume license is six to eighteen months. Volume Licensing
revenues usually do not include any significant amount of packaged goods, but do
include maintenance and support revenues, which are priced separately and
recognized over the lives of the contracts. Volume Licensing revenues are
characterized by higher gross margin as a percentage of revenues, but lower
operating margin as a percentage of revenues, due to costs of supporting the
related sales staff. OEM revenues include licenses of Visio products to hardware
and software manufacturers for bundling arrangements. OEM revenues include
packaged product sales, as well as royalty payments with no associated product
costs. Direct revenues represent sales of packaged products directly by the
Company, including upgrades, generally to end users responding to advertising or
other marketing promotions.
The distribution channel commonly stocks and displays packaged
products to achieve in-store visibility and timely delivery to customers, and
fluctuations in distributor inventory levels can affect the Company's revenues.
Distributor inventory levels may fluctuate for a variety of reasons, including
the inability of distributors to sell a product at the levels purchased, as well
as the phenomenon called "channel fill." Channel fill occurs following the
introduction of a new product or new version of a product, in anticipation of
price increases, in response to planned end-user promotions and in connection
with purchases of additional display space. The Company defers the recognition
of revenues from distributor inventory that it estimates to be in excess of
levels appropriate for the channel. Nonetheless, the effects of channel fill
could add substantial volatility to the Company's revenues.
The Company has invested heavily in the development of its core
graphics technology, new product introductions, Visio brand awareness and
domestic and international infrastructure. These investments are part of the
Company's strategy for growth and are consistent with its mission to become the
single standard for creating, storing and exchanging drawings and diagrams in
business. Although the Company believes that these investments have established
a foundation for the worldwide expansion of its business, they have also
significantly affected the Company's historical profitability. There can be no
assurance that the Company's revenue growth will be sufficient in future periods
to maintain its recent profitability as the Company continues to make such
investments.
- -----------
VISIO is a registered trademark of Visio Corporation.
6
<PAGE> 8
When used in this discussion, the words "expects," "believes,"
"anticipates" and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from those projected. Factors
which could affect the Company's financial results and cause such results to
differ materially from quarter to quarter include but are not limited to
fluctuations in quarterly performance, dependence on other products, including
Microsoft Windows, competition in the business drawing and diagramming software
market, timing and customer acceptance of new products, the Company's ability to
manage growth, potential changes in licensing and marketing methods and changes
in general economic conditions. Additional information concerning these and
other risks is described in the "Risk Factors" section of the Company's
Prospectus dated November 9, 1995, and, from time to time, in the Company's
Securities and Exchange Commission reports, which include the reports on Form
10-Q for the quarters ended December 31, 1995 and March 31, 1996. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date hereof. The Company undertakes no obligation to
publicly release the result of any revisions to these forward-looking statements
that may be made to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
7
<PAGE> 9
RESULTS OF OPERATIONS
The following table sets forth statement of income data as a
percentage of revenues for the fiscal periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ------------------
1996 1995 1996 1995
----- ----- ----- -----
<S> <C> <C> <C> <C>
Revenues ....................... 100.0% 100.0% 100.0% 100.0%
Cost of revenues ............... 14.0 15.6 15.9 16.6
----- ----- ----- -----
Gross margin ................... 86.0 84.4 84.1 83.4
Operating expenses:
Research and development ..... 14.0 16.7 15.1 15.1
Sales and marketing .......... 38.9 48.5 38.7 53.5
General and administrative.... 7.8 8.1 7.6 7.5
----- ----- ----- -----
Total operating expenses ....... 60.7 73.3 61.4 76.1
----- ----- ----- -----
Income from operations ......... 25.3 11.1 22.7 7.3
Other income, net .............. 2.6 2.2 2.4 1.7
----- ----- ----- -----
Income before income taxes ..... 27.9 13.3 25.1 9.0
Provision for income taxes ..... 9.2 4.7 8.3 3.2
----- ----- ----- -----
Net income ..................... 18.7% 8.6% 16.8% 5.8%
===== ===== ===== =====
</TABLE>
REVENUES
The following tables set forth revenues by product group with the
corresponding percentage of total revenues and the year-to-year percentage
change for the fiscal periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
-----------------------------------------------------------
1996 1995 Change
--------------------- -------------------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues:
Business drawing and diagramming $10,360 68.0% $6,404 79.5% 61.8 %
Technical drawing .............. 4,754 31.2 1,176 14.6 304.3 %
Other .......................... 117 0.8 479 5.9 (75.6)%
------- ----- ------ -----
Total revenues ........ $15,231 100.0% $8,059 100.0% 89.0 %
======= ===== ====== =====
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED JUNE 30,
------------------------------------------------------------
1996 1995 Change
--------------------- --------------------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues:
Business drawing and diagramming $31,021 71.8% $20,435 85.4% 51.8 %
Technical drawing .............. 11,510 26.7 2,476 10.3 364.9 %
Other .......................... 644 1.5 1,028 4.3 (37.4)%
------- ----- ------- -----
Total revenues ........ $43,175 100.0% $23,939 100.0% 80.4 %
======= ===== ======= =====
</TABLE>
8
<PAGE> 10
Revenues include sales of software products, maintenance and support
contracts and licenses, net of reserves for estimated future returns and
allowances. Revenues from the sale of maintenance and support contracts have not
been material to date. License revenues are derived from volume licenses,
international royalties and certain OEM arrangements.
Revenues for the third quarter of fiscal 1996 increased 89% over the
same quarter in the prior year. Revenues for the nine months ended June 30, 1996
increased 80% over the comparable prior-year period. The increase in revenues
for both the three- and nine-month periods was due primarily to sales volume
growth across product groups, distribution channels and geographic regions and
secondarily to price increases.
Percentage growth within the product groups was most significant for
the technical drawing product group, which grew 304% and 365% for the three- and
nine-month periods ended June 30, 1996 over the comparable periods in fiscal
1995, respectively. The growth in the business drawing and diagramming product
group was also strong, growing 62% and 52% for the three- and nine-month periods
ended June 30, 1996, over the comparable periods in fiscal 1995, respectively.
Other revenues consisted primarily of sales of Visio Home and related Visio
Shapes products, which represented a decreasing percentage of total revenues due
to the Company's focus on business personal computer users.
In the channels, the mix of Distribution, Direct, Volume Licensing
and OEM revenues for the quarter ended June 30, 1996 was 75%, 7%, 11% and 7%,
respectively, compared to 82%, 9%, 5% and 4%, respectively, for the same quarter
in the prior year. On a year-to-date basis, the mix of Distribution, Direct,
Volume Licensing and OEM revenues was 75%, 12%, 9% and 4%, respectively, for the
nine months ended June 30, 1996 compared to 76%, 13%, 5% and 6%, respectively,
for the same period in the prior year. Percentage growth was most significant
for the Volume Licensing channel, which grew 298% and 240% for the three- and
nine-month periods ended June 30, 1996, over the comparable periods in fiscal
1995, respectively. This growth is primarily the result of continued
infrastructure investment in the volume licensing program.
Revenues in the United States and Canada increased 72% to $9.2
million in the third quarter of fiscal 1996 from $5.4 million in the prior-year
period. Revenues in the United States and Canada for the nine months ended June
30, 1996 increased 63% to $27.2 million from $16.6 million in the fiscal 1995
comparable period. The increase in revenues for both the three- and nine-month
periods primarily reflects the contribution of Visio Technical and the release
of upgrade versions of Visio and Visio Technical. International revenues
increased 124% to $6.1 million in the third quarter of fiscal 1996 from $2.7
million in the prior-year period. The quarter ended June 30, 1996 was favorably
impacted by new language versions of Visio Technical 4.1 released within the
quarter and the new Japanese version of Visio 4.0 released in the March 31, 1996
quarter. International revenues for the nine months ended June 30, 1996
increased 118% to $15.9 million from $7.3 million in the comparable period in
the prior year. The increase in revenues for both the three- and nine-month
periods primarily reflects the release of upgrade localized versions of Visio
4.0 and the introduction of Visio Technical in Europe. For the three- and
nine-month periods ended June 30, 1996, international revenues represented 40%
and 37%, respectively, of total revenues, an increase from 34% and 30%,
respectively, for the comparable periods in the prior year. The Company intends
to introduce additional language versions of Visio 4.0 and Visio Technical 4.1
during fiscal 1996, and, as a result, expects its international revenues to
increase as a percentage of total revenues. There can be no assurance, however,
that this growth will occur or that any growth will be sufficient to offset the
Company's continuing investment in international markets.
9
<PAGE> 11
COST OF REVENUES
The following table sets forth cost of revenues with the
corresponding percentage of revenues and year-to-year percentage change for the
fiscal periods indicated.
<TABLE>
<CAPTION>
JUNE 30,
---------------------------------------------------------
1996 1995 Change
------------------- ------------------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Three months ended $2,125 14.0% $1,257 15.6% 69.1%
Nine months ended $6,854 15.9% $3,972 16.6% 72.6%
</TABLE>
Cost of revenues varies with the mix of Distribution, Direct, Volume
Licensing and OEM revenues, due to relative variations in the standard costs
associated with each revenue category, and with fluctuations in period costs.
Standard costs consist primarily of documentation, packaging, media duplication,
assembly and material management costs. Period costs consist primarily of
technical support, production management, freight and fulfillment, certain
royalties, standard material variances and inventory valuation adjustments.
Standard costs associated with each revenue category are primarily
determined by the amount of packaged product delivered in that revenue category.
Accordingly, most of the Company's standard costs are associated with
Distribution and Direct revenues, all of which are derived from sales of
packaged products. Volume Licensing revenues have the lowest standard cost
because they generally do not include any significant amount of packaged goods.
The increase in cost of revenues in absolute terms during the first
three quarters of fiscal 1996 resulted from increased standard costs primarily
due to higher Distribution revenues and, to a lesser extent, Direct revenues and
due to increased period costs resulting from increased volume. The decrease in
cost of revenues as a percentage of revenues for the three- and nine-month
periods of fiscal 1996 over the comparable periods of fiscal 1995 resulted
primarily from increased Volume Licensing revenues which have little or no
standard costs, from an increase in the percentage of revenue from Visio
Technical, which has a lower standard cost as a percentage of revenue than Visio
and from lower period costs due to reduced technical support and production
management costs. In both the three- and nine-month periods ended June 30, 1996,
this benefit was partially offset by inventory write-offs.
10
<PAGE> 12
RESEARCH AND DEVELOPMENT
The following table sets forth research and development expenses
with the corresponding percentage of revenues and year-to-year percentage change
for the fiscal periods indicated.
<TABLE>
<CAPTION>
JUNE 30,
---------------------------------------------------------
1996 1995 Change
------------------- ------------------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Three months ended $2,138 14.0% $1,346 16.7% 58.8%
Nine months ended $6,522 15.1% $3,613 15.1% 80.5%
</TABLE>
Research and development expenses consist primarily of personnel,
contract services, occupancy and equipment costs required to conduct the
Company's product development efforts. Product development includes product
engineering, documentation development, localization, usability testing, quality
assurance and advanced research and development costs. Contract localization
costs and lump sum payments for technology such as file converters are
capitalized and amortized to development over the lesser of the useful life or
12 months. Research and development expenses are charged to operations as
incurred. Generally accepted accounting principles requiring capitalization of
certain software development costs subsequent to the establishment of
technological feasibility are not applicable because these costs have been
immaterial.
Increases in research and development expenses for the quarter ended
June 30, 1996 over the corresponding period of fiscal 1995 resulted primarily
from planned additions to the Company's development organization. Research and
development expenses decreased as a percentage of revenues in the third fiscal
quarter of 1996 primarily because the comparable quarter in fiscal 1995 included
expenses associated with the development of Visio 4.0 which first shipped in
August 1995. The increases in research and development expenses for the nine
months ended June 30, 1996 over the corresponding period of fiscal 1995 resulted
primarily from the planned additions to the Company's development organization
and the acquisition of source code and other intellectual property from Arcland,
Inc.
SALES AND MARKETING
The following table sets forth sales and marketing expenses with the
corresponding percentage of revenues and year-to-year percentage change for the
fiscal periods indicated.
<TABLE>
<CAPTION>
JUNE 30,
-----------------------------------------------------------
1996 1995 Change
-------------------- -------------------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Three months ended $ 5,929 38.9% $ 3,910 48.5% 51.6%
Nine months ended $16,707 38.7% $12,802 53.5% 30.5%
</TABLE>
Sales and marketing expenses, which include customer service
expenses, have increased in absolute terms as the Company continues building its
worldwide sales, marketing and customer service infrastructure. The increase in
sales and marketing expenses in both the three- and nine-month periods ended
June 30, 1996 compared to the prior year's periods, was due primarily to
increased product marketing costs, continued development of the domestic and
international sales infrastructure and the initiation of an internal consulting
group to support customers and developers. As a percentage of revenues, sales
and marketing expenses decreased in both the three- and nine-month periods ended
June 30, 1996 compared to the prior year's periods, primarily due to increased
revenues in fiscal 1996 as well as the investment in sales and marketing in the
comparable fiscal 1995 periods. This investment consisted primarily of brand
awareness activities including an advertising campaign aimed at developing the
Visio brand and accelerating awareness levels.
11
<PAGE> 13
The Company believes substantial spending on marketing awareness and
Volume Licensing sales staffing is essential to achieve revenue growth and to
maintain and enhance the Company's competitive position. Accordingly, Visio
expects sales and marketing expenses to increase in absolute terms over time.
Historically, quarterly revenue growth has not been consistently sufficient to
maintain the percentage of revenues represented by sales and marketing
expenditures, and there can be no assurance that it will be sufficient in future
quarters. In addition, competitive pressures faced by the Company may have an
adverse effect on its business, financial condition and results of operations.
GENERAL AND ADMINISTRATIVE
The following table sets forth general and administrative expenses
with the corresponding percentage of revenues and year-to-year percentage change
for the fiscal periods indicated.
<TABLE>
<CAPTION>
JUNE 30,
-------------------------------------------------------
1996 1995 Change
------------------ ------------------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Three months ended $1,181 7.8% $ 651 8.1% 81.4%
Nine months ended $3,300 7.6% $1,796 7.5% 83.7%
</TABLE>
General and administrative expenses increased in absolute terms in
both the third quarter and first nine months of fiscal 1996 primarily due to the
cost of developing the infrastructure and personnel associated with becoming a
public company and with supporting the Company's increased operations. The
Company expects to show increased general and administrative expenses in
absolute terms in future periods for infrastructure to support revenue growth.
OTHER INCOME, NET
Other income for the third quarter of fiscal 1996 of $388,000
increased 120% over the third quarter of fiscal 1995. Other income for the nine
months ended June 30, 1996 of $1.0 million increased 158% over the comparable
period of fiscal 1995. The increase for both the three- and nine-month periods
was primarily due to interest earned on investment of proceeds from the
Company's initial public offering completed in November 1995, and was partially
offset by other nonoperating expenses. Other income includes interest income,
foreign currency transaction gains and losses and grant income from the
Industrial Development Agency of Ireland tied to employment levels in the
Company's Dublin operation. Visio does not currently engage in hedging
activities.
INCOME TAXES
The Company's effective income tax rate was 33% and 35% for the
first nine months of fiscal 1996 and 1995, respectively. The lower effective tax
rate for fiscal 1996 was primarily due to the benefit of the utilization of
foreign net operating loss carryforwards, tax-exempt interest and income taxed
in other jurisdictions at rates lower than the U.S. rate. The Company is
currently undergoing an audit by the Internal Revenue Service of its federal
income tax returns for fiscal 1993 and 1994, but does not anticipate that the
audit will result in adjustments that would materially adversely affect its
results of operations. However, there can be no assurance that such adjustments
would not adversely affect the Company's results of operations.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, the Company had cash and cash equivalents totaling
$56.5 million, an increase of $49.5 million from September 30, 1995. The
increase in cash and cash equivalents was due primarily to net proceeds of $35.7
million from the sale of Common Stock in the Company's initial public offering
completed in November 1995. The remainder of the increase was due primarily to
cash generated from operations, the exercise of employee stock options and
warrants and the income tax benefits associated with those exercises. Since its
inception, the Company has financed its operations primarily through cash
generated by its operations, as well as
12
<PAGE> 14
through sales of its Common Stock and Preferred Stock and bank financing. The
Company has a $1.0 million unsecured bank line of credit, which matures on
February 28, 1997.
At June 30, 1996, the Company's principal commitments consisted
primarily of leases on its headquarters facilities. The Company's capital
expenditures totaled $1.4 million in the first nine months of fiscal 1996. At
June 30, 1996, the Company had no material commitments for capital expenditures.
The Company believes that its current cash balances, funds available under its
line of credit and cash flow from operations will be sufficient to meet its
working capital and capital expenditure requirements for at least the next 12
months.
From time to time, the Company evaluates potential acquisitions of
businesses, products or technologies that complement the Company's business.
At June 30, 1996, the Company had no material agreements or commitments with
respect to any such transaction.
13
<PAGE> 15
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-K:
10.4(a) Amendment to the Office Lease between Visio Corporation
and Sixth & Pike Associates, L.P. dated June 13, 1996.
10.10(a) Amendment to the Loan and Security Agreement between
Silicon Valley Bank and Visio Corporation dated
April 3, 1996.
11.1 Computation of Earnings Per Share.
27.1 Financial Data Schedule which is submitted
electronically to the Securities and Exchange
Commission for information purposes only and not filed.
(b) Reports on Form 8-K:
None.
14
<PAGE> 16
SIGNATURES
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.
Date: August 12, 1996 VISIO CORPORATION
By: /s/ MARTY CHILBERG
---------------------------------------
Marty Chilberg
Vice President, Finance and Operations;
Chief Financial Officer
(Principal Financial and Accounting
Officer and Duly Authorized Officer)
15
<PAGE> 17
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ----
10.4(a) Amendment to the Office Lease between Visio Corporation
and Sixth & Pike Associates, L.P. dated June 13, 1996.
10.10(a) Amendment to the Loan and Security Agreement between
Silicon Valley Bank and Visio Corporation dated April 3,
1996.
11.1 Computation of Earnings Per Share.
27.1 Financial Data Schedule which is submitted electronically
to the Securities and Exchange Commission for information
purposes only and not filed.
16
<PAGE> 1
EXHIBIT 10.4(a)
AMENDMENT NO. 4 TO LEASE DATED OCTOBER 28, 1993
between
SIXTH & PIKE ASSOCIATES
and
VISIO CORPORATION
THIS AMENDMENT TO LEASE is made this 13th day of June, 1996 by and
between Sixth & Pike Associates ("Landlord") and Visio Corporation ("Tenant").
All capitalized terms used but not otherwise defined herein shall have the
meanings set forth in the Lease.
WHEREAS, Landlord and Tenant entered into a lease agreement dated
October 28, 1993 and amended in March, 1994, October 18, 1995 and again in
March, 1996 ("Lease") for certain premises located in 520 Pike Tower, Seattle,
Washington ("Premises"), as more fully described in the Lease; and
WHEREAS, Tenant wishes to exercise its final expansion option and also
wishes to lease additional space on Floor 16;
NOW, THEREFORE, in consideration of the covenants and agreements
contained herein, the parties hereby mutually agree to the following:
1. Tenant hereby exercises its option for Expansion Space 3 consisting of
approximately 3,084 rentable square feet according to the terms outlined in
Amendment No. 2 to Lease by and between Landlord and Tenant.
2. Tenant also agrees to lease approximately 1,911 rentable square feet (rsf)
as shown on Exhibit B attached hereto, commencing September 1, 1987. Base
Rent for this approximate 1,911 rentable square feet shall be Two thousand
six hundred twenty seven and 63/100 dollars ($2,627.63) per month. Landlord
agrees to provide nineteen thousand one hundred ten dollars (19,110) to
improve this expansion space. Landlord agrees to fund additional
improvements which will be paid by Tenant in additional rent by amortizing
the cost at twelve percent (12%) through the term of the Lease.
3. A summary of square footage leased, the period and Base Rent is outlined
below:
<TABLE>
<CAPTION>
Period Rentable Square Feet Base Rent
------ -------------------- ---------
<S> <C> <C>
July 1, 1996 - August 31, 1997 45,252 $58,450.50
September 1, 1987 - February 28, 2000 50,247 $65,078.13
</TABLE>
4. Tenant warrants that all necessary corporate actions have been duly taken
to permit Tenant to enter into this Amendment to Lease and that each
undersigned officer has been duly authorized and instructed to execute this
Amendment to Lease.
All other terms and conditions of the Lease shall remain in full force and
effect.
IN WITNESS HEREOF, this Amendment to Lease has been executed the day and
year set forth above.
<PAGE> 2
LANDLORD: TENANT:
SIXTH & PIKE ASSOCIATES, L.P. VISIO CORPORATION
a limited partnership
By: Oregon Property Investment Corporation, By: /s/ Marty Chilberg
an Oregon corporation
Its: General Partner Its: Vice President
By: LA SALLE ADVISORS LIMITED Date: June 13, 1996
Its: Advisor and duly Authorized Agent
By: /s/ Stephen T. Wong
Stephen T. Wong
Its: Vice President
Date: June 13, 1996
By: /s/ Diane R. McMahon
Diane R. McMahon
Its: Vice President
Date: June 13, 1996
<PAGE> 1
THIRD LOAN MODIFICATION AGREEMENT
BETWEEN: Visio Corporation ("Borrower"), formerly known as Shapeware
Corporation, whose address is 520 Pike Street, Suite 1800,
Seattle, WA 98101-4001;
AND: Silicon Valley Bank ("Silicon") whose address is 3003 Tasman
Drive, Santa Clara, California 95054;
DATE: April 3, 1996.
This Third Loan Modification Agreement ("Agreement") is entered into on
the above date by Borrower and Silicon.
I. Background. Borrower entered into a loan and security agreement with
Silicon dated as of January 26, 1994, which was amended on March 23, 1994,
September 1994 and March 31, 1995 (as amended, the "Loan Agreement").
Capitalized terms used in this Third Loan Modification Agreement shall, unless
otherwise defined in this Agreement, have the meaning given to such terms in the
Loan Agreement.
Borrower and Silicon are entering into this Loan Modification Agreement
to modify the terms of the Loan Agreement and the Schedule.
2. Modification to Schedule. The term "Schedule," as defined in Section
1.1 of the Loan Agreement, is hereby defined to mean the Schedule attached to
this Amendment.
3. Modifications to Loan Agreement. Notwithstanding any statements to
the contrary in the Loan Agreement, the Revolving Loan described in the Schedule
shall be unsecured.
Section 3.7 of the Loan Agreement is deleted in its entirety and
replaced with the following:
Financial Condition and Statements. All financial statements
now or in the future delivered to Silicon have been, and shall
be, prepared in conformity with generally accepted accounting
principles and now and in the future shall completely and
accurately reflect the financial condition of the Borrower, at
the times and for the periods therein stated. Since the last
date covered by any such statement, there has been no material
adverse change in the financial condition or business of the
Borrower. The Borrower is now and shall continue to be
solvent. The Borrower shall provide Silicon copies of its
filings with the Securities Exchange Commission as provided in
the Schedule. In addition, Borrower shall provide Silicon,
within 90 days following the end of the Borrower's fiscal
year, complete annual audited financial statements of
Borrower, such audit being conducted by independent certified
public accountants reasonably acceptable to Silicon."
4. Cross-Default. An Event of Default under the terms of the Revolving
Loan or any Term Loan shall constitute an Event of Default under all other loans
from Silicon to Borrower.
5. Expense Reimbursement. Borrower shall upon execution of this
Agreement pay Silicon an annual commitment fee for the Revolving Loan as stated
in the Schedule. In addition, Borrower shall reimburse Silicon for Silicon's
reasonable attorneys' fees and credit checking costs resulting from the
preparation of this Agreement.
6. Security Agreement. Borrower acknowledges and agrees that all
Obligations, including without limitation Borrower's obligation to repay amounts
advanced by Silicon to Borrower on the terms of the Loan Agreement and Schedule
as modified by this Loan Modification Agreement, and all obligations
<PAGE> 2
evidenced by promissory notes made by Borrower and held by Silicon, are secured
by all liens and security interests granted by Borrower to Silicon in the Loan
Agreement or by any other document or agreement, except that the Revolving Loan
shall be unsecured. Borrower shall not grant a security interest in, or lien on,
any of its assets in favor of any person other than Silicon.
7. No Other Modifications; No Defenses. Except as expressly modified by
this Loan Modification Agreement, the terms of the Loan Agreement shall remain
unchanged and in full force and effect. Silicon's agreement to modify the Loan
Agreement pursuant to this Loan Modification Agreement shall not obligate
Silicon to make any future modifications to the Loan Agreement or any other loan
document. Nothing in this Loan Modification Agreement shall constitute a
satisfaction of any indebtedness of any Borrower to Silicon. It is the intention
of Silicon and Borrower to retain as liable parties all makers and endorsers of
the Loan Agreement or any other loan document. No maker, endorser, or guarantor
shall be released by virtue of this Loan Modification Agreement. The terms of
this paragraph shall apply not only to this Loan Modification Agreement, but
also to all subsequent loan modification agreements. Borrower agrees that it has
no defenses against the obligations to pay any amounts of the Obligations.
8. Representations and Warranties.
8.1 The Borrower represents and warrants to Silicon that the
execution, delivery and performance of this Agreement are within the Borrower's
corporate powers, and have been duly authorized and are not in contravention of
law or the terms of the Borrower's charter, bylaws or other incorporation
papers, or of any undertaking to which the Borrower is a party or by which it is
bound.
8.2 The Borrower understands and agrees that in entering into
this Agreement, Silicon is relying upon the Borrower's representations,
warranties and agreements as set forth in
<PAGE> 3
the Loan Agreement and other loan documents. Borrower hereby reaffirms all
representations and warranties in the Loan Agreement, all of which are true as
of the date of this Agreement.
BORROWER: VISIO CORPORATION
By: /s/ Ed Leary
Title: Controller
SILICON: SILICON VALLEY BANK
By: /s/ Art Hiemstra
Title: Regional Vice President
<PAGE> 4
SILICON VALLEY BANK
SCHEDULE
(TO LOAN AND SECURITY AGREEMENT)
Borrower: VISIO CORPORATION
Address: 520 Pike Street, Suite 1800
Seattle, Washington 98101-4001
Date: April 3, 1996
REVOLVING LOAN.
CREDIT LIMIT;
SECURITY:
(Section 1.1) An amount not to exceed $1,000,000 at any one time
outstanding. The amount of all letters of credit
issued by Silicon at the request of the Borrower
shall reduce, dollar for dollar, the amount otherwise
available to be borrowed under the formula described
in this paragraph. This Revolving Loan shall be
unsecured. Borrower shall not grant a security
interest in, or lien on, any of its assets in favor
of any person other than Silicon.
INTEREST RATE:
(Section 1.2) A rate equal to the "Prime Rate" in effect from time
to time. Interest calculation shall be made on the
basis of a 360-day year and the actual number of days
elapsed. "Prime Rate" means the rate announced from
time to time by Silicon as its "prime rate"; it is a
base rate upon which other rates charged by Silicon
are based, and it is not necessarily the best rate
available at Silicon. The interest rate applicable to
the Obligations shall change on each date there is a
change in the Prime Rate.
LOAN ORIGINATION FEE:
(Section 1.3) One quarter of one percent per annum of the
$1,000,000 Credit Limit. (Any Commitment Fee
previously paid by the Borrower in connection with
this loan shall be credited against this Fee.)
MATURITY DATE:
(Section 5.1) February 28, 1997, at which time all unpaid principal
and accrued by unpaid interest shall be due and
payable.
MATURITIES OF
LETTERS OF CREDIT: Commercial or standby letters of credit issued by
Silicon shall have a maximum maturity of not later
than February 28, 1997, without the prior written
consent of Silicon.
REPAYMENT: The Borrower shall repay on demand any amount drawn
on a letter of credit issued by Silicon. Silicon may,
but is not obligated to, add to the principal amount
outstanding under the Revolving Loan any amount drawn
on a letter of credit issued by Silicon. Any such
amount shall be subject to the terms applicable to
the Revolving Loan.
ISSUANCE: The issuance of any letter of credit under this
Agreement is subject to Silicon's written approval
and must be in form and content satisfactory to
Silicon and in favor of a beneficiary reasonably
acceptable to Silicon. The Borrower shall
<PAGE> 5
execute Silicon's then-current application forms,
reimbursement agreement and related documents as a
condition to Silicon's issuance of any letter of
credit.
FEES: The Borrower shall pay Silicon the fees and costs
customarily charged by Silicon (at the time of
issuance of the letter of credit) with respect to the
issuance of letters of credit.
FIRST TERM LOAN.
AMOUNT: Not exceeding $250,000 in the aggregate.
PURPOSE: The Borrower shall use the proceeds of each
disbursement of the Term Loan solely for the purpose
of purchasing the new equipment identified in the
draw request for such disbursement.
INTEREST RATE: 9.5% per annum
AMORTIZATION: 36 equal monthly installments of principal commencing
on the first business day of August, 1994, and on the
first business day of each month thereafter through
and including the first business day of July, 1997,
each such installment shall be in the amount of 1/36
of the principal amount of the Term Loan outstanding
as of July 1, 1994.
DRAW
PROCEDURES: The Borrower shall submit to the Lender not less than
three business days prior to the date of any
requested disbursement of the Term Loan, a written
request for borrowing, together with such written
documentation as Lender may require identifying the
equipment to be purchased with such requested
disbursement. Unless such requirement is expressly
waived in writing by Silicon, no disbursement of the
Term Loan shall be made after July 1, 1994 and the
amount of each disbursement of the Term Loan shall
not exceed 80% of the invoice price of the equipment
to be financed by such purchase.
LOAN ORIGINATION FEE:
(Section 1.3) $1,000. (Any Commitment Fee previously paid by the
Borrower in connection with this loan shall be
credited against this Fee.)
SECOND TERM LOAN.
AMOUNT: Not exceeding $500,000 in the aggregate.
PURPOSE: The Borrower shall use the proceeds of each
disbursement of the Term Loan solely for the purpose
of purchasing the new equipment identified in the
draw request for such disbursement.
INTEREST RATE: A rate equal to the Prime Rate in effect from time to
time, plus 2.0% per annum.
AMORTIZATION: 36 equal monthly installments of principal commencing
on the first business day of October, 1994, and on
the first business day of each month thereafter
through and including the first business day of
October, 1997, each such installment shall be in the
amount of 1/36 of the principal amount of the Term
Loan outstanding as of October 1, 1994.
<PAGE> 6
DRAW
PROCEDURES: The Borrower shall submit to the Lender not less than
three business days prior to the date of any
requested disbursement of the Term Loan, a written
request for borrowing, together with such written
documentation as Lender may require identifying the
equipment to be purchased with such requested
disbursement. Unless such requirement is expressly
waived in writing by Silicon, no disbursement of the
Term Loan shall be made after October 1, 1994 and the
amount of each disbursement of the Term Loan shall
not exceed 80% of the invoice price of the equipment
to be financed by such purchase.
LOAN ORIGINATION FEE:
(Section 1.3) $2,500. (Any Commitment Fee previously paid by the
Borrower in connection with this loan shall be
credited against this Fee.)
THIRD TERM LOAN.
AMOUNT: An amount not to exceed the lesser of: (i)
$750,000.00 at any one time outstanding; or (ii) the
amount of the "Equipment Borrowing Base", as defined
below. For purposes of this Schedule, the "Equipment
Borrowing Base" shall mean the sum of (a) 80% of the
invoice amount for equipment purchased by Borrower
after September 30, 1994. Silicon shall have no
obligation to advance against taxes, freight charges,
installation charges or other similar amounts
relating to Borrower's equipment, whether or not such
amounts are identified on the invoices submitted to
Silicon. Equipment to be included in the Equipment
Borrowing Base must be new equipment, at the time of
purchase by Borrower, owned by Borrower, in good
working order, must not be subject to any liens in
favor of any person or entity other than Silicon, and
must be subject to a first perfected security
interest in favor of Silicon. Silicon shall make
advances under this Third Term Loan from time to
time, based on invoices and other documentation as
shall be requested by Silicon to support such
advances, but Silicon shall have no obligation to
make any advance under this Term Loan after March 25,
1996.
Borrower shall submit to Silicon such invoices,
advance requests and other information, in form
acceptable to Silicon, as Silicon shall require from
time to time.
Once the total amount of the principal has been
advanced under this Third Term Loan, Borrower is no
longer entitled to further advances. Advances may be
requested in writing by Borrower or an authorized
person. Silicon may, but need not, require that all
oral requests be confirmed in writing. The unpaid
principal balance owing on this Term Loan at any time
may be evidenced by endorsements to this Schedule or
by Silicon's internal records, including daily
computer print-outs.
PURPOSE: The Borrower shall use the proceeds of each
disbursement of the Third Term Loan solely for the
purpose of purchasing the new equipment identified in
the draw request for such disbursement.
INTEREST RATE: The interest rate applicable to the Third Term Loan
shall be a rate equal to the "Prime Rate" in effect
from time to time, plus 1.75% per annum. Interest
calculations shall be made on the basis of a 360-day
year and the actual number of days elapsed. "Prime
Rate" means the rate announced from time to time by
Silicon as its "prime rate"; it is a base rate upon
which other rates charged by Silicon are based, and
it is not necessarily the best rate available at
Silicon. The interest rate shall change on each date
there is a change in the Prime Rate.
<PAGE> 7
MATURITY DATE:
(Section 5.1) March 25, 1999, at which time all unpaid principal
and accrued but unpaid interest shall be due and
payable.
AMORTIZATION: Borrower shall pay Silicon 12 monthly payments of
interest only commencing April 25, 1995. Commencing
on April 25, 1996, the Borrower shall pay Silicon 36
equal monthly payments of principal, in the amount
necessary to repay fully the outstanding principal of
the Third Term Loan in 36 payments, plus interest
calculated as provided in this Schedule. Subsequent
payments are due on the 25th day of each month
thereafter.
In the event that $500,000 has been disbursed under
the Third Term Loan, that amount shall be
automatically segregated, and Borrower shall on the
25th day of the next month commence paying Silicon 36
equal monthly payments of principal in the amount
necessary to repay fully the outstanding $500,000
principal in 36 payments, plus interest calculated as
provided in this Schedule. With regard to any amounts
disbursed in excess of $500,000, Borrower shall make
monthly payments of interest only until March 25,
1996; commencing April 25, 1996, Borrower shall make
36 equal monthly payments of principal in the amount
necessary to repay fully the outstanding balance 36
payments, plus interest calculated as provided in
this Schedule.
DRAW
PROCEDURES: The Borrower shall submit to the Lender not less than
three business days prior to the date of any
requested disbursement of the Third Term Loan, a
written request for borrowing, together with such
written documentation as Lender may require
identifying the equipment purchased or to be
purchased with such requested disbursement. Unless
such requirement is expressly waived in writing by
Silicon, no disbursement of the Third Term Loan shall
be made after March 25, 1996, and the amount of each
disbursement of the Third Term Loan shall not exceed
80% of the invoice price of the equipment to be
financed by such purchase.
LOAN ORIGINATION
FEE:
(Section 1.3) $1,000. (Any Commitment Fee previously paid by the
Borrower in connection with this loan shall be
credited against this Fee.)
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
PRIOR NAMES OF
BORROWER: Axon Corporation
(Section 3.2) Shapeware Corporation
TRADE NAMES OF
BORROWER: None
(Section 3.2)
OTHER LOCATIONS
AND ADDRESSES: Approximately $40,000 of inventory is located at
(Section 3.3) Prism Group, Inc., 15530 Woodinville-Redmond Road,
Woodinville, WA 98027
MATERIAL ADVERSE
LITIGATION: None
(Section 3.10)
<PAGE> 8
ADDITIONAL DUTIES OF THE BORROWER.
FINANCIAL
COVENANTS:
(Section 4.1) Borrower shall at all times comply with all of the
following covenants:
QUICK RATIO: Borrower shall maintain a ratio of Quick Assets
(defined below) to current liabilities less deferred
revenue of not less than 2.0:1.0 measured as of the
end of each fiscal quarter of Borrower.
MINIMUM TANGIBLE
NET WORTH: Borrower shall maintain a Minimum Tangible Net Worth
(as defined below) of not less than $1,500,000 plus
75% of the proceeds of Borrower's initial public
offering, measured quarterly.
DEBT TO TANGIBLE
NET WORTH RATIO: Borrower shall maintain a ratio of total liabilities
(excluding deferred revenues and Subordinated Debt)
to Tangible Net Worth (including deferred revenue)
of not more than .75:1.0, measured
quarterly.
PROFITABILITY: Borrower shall not incur a loss (defined below) in
excess of $500,000 for any fiscal quarter during the
term of this Agreement. For purposes of this
paragraph, "loss" means net income after taxes, as
reported on Borrower's financial statements.
TERM DEBT
COVERAGE: The sum of cash plus net line of credit availability
shall at all times exceed 2.5 times the outstanding
balance on the Term Loans, or the ratio of net
earnings plus interest, taxes and noncash expenses
divided by the sum of current maturities of long term
debt plus interest (measured quarterly on an
annualized basis) shall exceed 1.50:1.0.
DEFINITIONS: Except as otherwise provided in the Loan and Security
Agreement or in this Schedule, accounting terms not
specifically defined shall be construed, and all
accounting procedures shall be performed, in
accordance with generally accepted United States
accounting principles consistently applied.
Capitalized terms used in this Schedule and not
otherwise defined herein shall have the meanings
ascribed to those terms in the text of the Loan and
Security Agreement.
"Quick Assets" means cash on hand or on
deposit in banks, readily marketable
securities issued by the United States,
readily marketable commercial paper rated
"A-1" by Standard & Poor's Corporation (or a
similar rating by a similar rating
organization), certificates of deposit and
banker's acceptances, and accounts
receivable (net of allowance for doubtful
accounts).
"Subordinated Debt" means indebtedness for
borrowed money of Borrower which shall have
been subordinated to the Obligations of
Borrower under the Loan and Security
Agreement, on terms and conditions
acceptable to Silicon.
"Tangible Net Worth" means total assets
minus total liabilities, plus Subordinated
Debt, determined in accordance with
generally accepted accounting principles,
excluding however, all assets which would be
classified as intangible assets under
generally accepted accounting principles,
including without limitation goodwill,
licenses, patents, trademarks, trade names,
copyrights, franchises, capitalized software
costs
<PAGE> 9
and deferred organizational costs.
"Term Loans" means the First Term Loan, the
Second Term Loan and the Third Term Loan, as
defined above.
OTHER COVENANTS:
(Section 4.1) Borrower shall at all times comply with all of the
following additional covenants:
1. BANKING RELATIONSHIP. Borrower shall at
all times maintain its primary banking
relationship with Silicon.
2. SEC FILINGS. Borrower shall provide
Silicon with Borrower's 10-Q and 10-K
filings at the time Borrower files such
documents with the Securities Exchange
Commission.
CONDITIONS TO
CLOSING: Before requesting any such advance of any
Loan, Borrower shall satisfy each of the
following conditions:
1. LOAN DOCUMENTS:
Borrower shall have executed and delivered
to Silicon all loan documents required by
Silicon.
2. DOCUMENTS RELATING
TO AUTHORITY, ETC.:
Silicon shall have received each of the
following in form and substance satisfactory
to it:
(a) A certified copy of a Resolution adopted
by the Board of Directors of Borrower
authorizing the execution, delivery and
performance of all loan documents executed
by Borrower in connection with this
transaction; and
(b) Incumbency Certificates describing the
office and identifying the specimen
signatures of the individuals signing all
such loan documents on behalf of Borrower.
3. INSURANCE:
Silicon shall have received evidence
satisfactory to it that all insurance
required by this Agreement is in full force
and effect with all necessary loss payable
endorsements.
5. OTHER INFORMATION:
Silicon shall have received such other
statements, opinions, certificates,
documents and information with respect to
matters contemplated by this Agreement as it
may reasonably request.
BORROWER: VISIO CORPORATION
By: /s/ Ed Leary
Title: Controller
<PAGE> 10
SILICON: SILICON VALLEY BANK
By: /s/ Art Hiemstra
Title: Regional Vice President
<PAGE> 11
CERTIFIED RESOLUTION AND INCUMBENCY CERTIFICATE
BORROWER: Visio Corporation, formerly known as Shapeware
Corporation, a corporation organized under the laws
of the State of Washington
DATE: April 3, 1996
I, the undersigned, Secretary or Assistant Secretary of the above-named
Borrower, a corporation organized under the laws of the state set forth above
(the "Company"), do hereby certify that the following is a full, true and
correct copy of resolutions duly and regularly adopted by the Board of Directors
of said corporation as required by law, and by the bylaws of said corporation,
and that said resolutions are still in full force and effect and have not been
in any way modified, repealed, rescinded, amended or revoked:
RESOLVED, that the Chief Financial Officer of the Company (the
"Authorized Officer") is hereby authorized and directed to execute and
deliver to Silicon Valley Bank ("Silicon") the Third Loan Modification
Agreement in substantially the form presented to the Board of Directors
and to execute and deliver to Silicon the Schedule attached thereto and
such other agreements, documents, and instruments as Silicon may
require from time to time and as such Authorized Officer shall in his
or her judgment determine are necessary or appropriate for the proper
fiscal management of the Company, including but not limited to any
renewals, extensions and/or amendments of the foregoing documents.
I do also hereby certify that each of the following named individuals
holds the office of the Company set forth opposite his or her name, and do
further certify that the signature written opposite the name and title of such
individual is his or her true and correct signature.
Name Title Signature
- ---- ----- ---------
Chief Financial
Marty Chilberg Officer /s/ Marty Chilberg
Director of
Leslie Deitz Finance /s/ Leslie Deitz
Ed Leary Controller /s/ Ed Leary
IN WITNESS WHEREOF, I have hereunto set my hand as such Secretary or
Assistant Secretary on the date set forth above.
/s/ Theodore Johnson
Secretary or Assistant Secretary
<PAGE> 1
Exhibit 11.1
VISIO CORPORATION
COMPUTATION OF NET INCOME PER SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ------------------
1996 1995 1996 1995
------- ------- ------- -------
(IN THOUSANDS EXCEPT NET INCOME PER SHARE)
<S> <C> <C> <C> <C>
Weighted average common shares outstanding 13,487 5,528 12,043 5,321
Net effect of dilutive stock options calculated using the
treasury stock method and the average stock price 1,337 1,064 1,380 738
Net effect of dilutive stock warrants calculated using the
treasury stock method and the average stock price 120 11 156 3
Weighted average common shares giving effect to the
conversion of convertible and redeemable preferred stock
into common stock n/a 5,069 868 5,010
Net effect of preferred stock issued, stock options exercised
and stock options granted during the 12 months prior to
the Company's filing of it's initial public offering,
calculated using the treasury stock method at the offering
price of $16.00 per share
Preferred stock issued n/a 79 n/a 114
Stock options exercised n/a 4 n/a 110
Stock options granted n/a 296 n/a 417
------- ------- ------- -------
Total 14,944 12,051 14,447 11,713
======= ======= ======= =======
Net Income $ 2,845 $ 696 $ 7,245 $ 1,398
======= ======= ======= =======
Net income per share $ 0.19 $ 0.06 $ 0.50 $ 0.12
======= ======= ======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
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0
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