<PAGE>
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
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)
<TABLE>
<S> <C>
WASHINGTON 91-1448389
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
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:
<TABLE>
<CAPTION>
Class Shares outstanding as of April 30, 1997
- ---------------------------- ------------------------------------------
<S> <C>
Common Stock ($.01 par value) 13,954,162
</TABLE>
===============================================================================
<PAGE>
VISIO CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1997
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
----
Item 1. Financial Statements
<S> <C>
Balance Sheets as of March 31, 1997 and September 30, 1996........................ 2
Statements of Income for the three and six months ended March 31, 1997 and 1996... 3
Statements of Cash Flows for the six months ended March 31, 1997 and 1996......... 4
Notes to Financial Statements..................................................... 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................................... 6
</TABLE>
Part II. Other Information
<TABLE>
<CAPTION>
<S> <C>
Item 4. Submissions of Matters to a Vote of Security Holders.......................... 14
Item 6. Exhibits and Reports on Form 8-K.............................................. 14
Signatures............................................................................. 15
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
VISIO CORPORATION
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1997 1996
----------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and short-term investments $ 65,676 $ 61,107
Accounts receivable 6,386 2,242
Inventories 700 604
Prepaid expenses 2,674 2,431
Deferred income taxes 5,333 1,779
---------- ----------
Total current assets 80,769 68,163
Equipment and leasehold improvements, 4,280 3,445
---------- ----------
Total assets $ 85,049 $ 71,608
========== ==========
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 4,566 $ 3,525
Accrued compensation and benefits 2,552 2,002
Other accrued liabilities 11,909 8,798
Income taxes payable 2,926 1,584
Current portion of long-term obligations 214 326
---------- ----------
Total current liabilities 22,167 16,235
Long-term obligations 89 148
Shareholders' equity:
Common stock 48,439 45,688
Retained earnings 14,354 9,537
---------- ----------
Total shareholders' equity 62,793 55,225
---------- ----------
Total liabilities and shareholders' equity $ 85,049 $ 71,608
========== ==========
</TABLE>
See accompanying notes.
2
<PAGE>
VISIO CORPORATION
STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
---------------------- ---------------------
1997 1996 1997 1996
---------- ------- ---------- -------
<S> <C> <C> <C> <C>
Revenues $23,536 $14,527 $42,546 $27,944
Cost of revenues 2,391 2,384 4,368 4,729
---------- ------- ---------- -------
Gross profit 21,145 12,143 38,178 23,215
Operating expenses:
Research and development 3,459 2,720 6,164 4,384
Sales and marketing 9,313 5,231 16,803 10,778
General and administrative 1,816 1,080 3,182 2,119
Acquired technology 6,697 -- 6,697 --
---------- ------- ---------- -------
Total operating expenses 21,285 9,031 32,846 17,281
---------- ------- ---------- -------
Operating income (loss) (140) 3,112 5,332 5,934
Interest and other income, net 790 352 1,242 633
---------- ------- ---------- -------
Income before income taxes 650 3,464 6,574 6,567
Provision for income taxes 169 1,143 1,709 2,167
---------- ------- ---------- -------
Net Income $ 481 $ 2,321 $ 4,865 $ 4,400
========== ======= ========== =======
Earnings per share $ 0.03 $ 0.16 $ 0.32 $ 0.31
========== ======= ========== =======
Shares used in computation of earnings
per share 15,063 14,849 15,065 14,198
========== ======= ========== =======
</TABLE>
See accompanying notes.
3
<PAGE>
VISIO CORPORATION
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31,
--------------------
1997 1996
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATIONS:
Net income $ 4,865 $ 4,400
Adjustments to reconcile net income to net cash from
operations:
Depreciation and amortization 866 541
Deferred income taxes (3,554) 400
Changes:
Accounts receivable (4,073) 772
Inventories (98) 428
Prepaid expenses (263) 182
Other assets (5) 179
Accounts payable 1,028 (162)
Accrued compensation and benefits 549 605
Other accrued expenses 3,152 2,492
Income taxes payable 1,343 (863)
-------- -------
Net cash from operations 3,810 8,974
-------- -------
CASH FLOWS USED FOR INVESTMENTS:
Purchases of short-term investments (11,018) (9,155)
Proceeds from maturities of short-term investments 8,500 -
Purchases of equipment and leasehold improvements (1,666) (832)
-------- -------
Net cash used for investments (4,184) (9,987)
-------- -------
CASH FLOWS FROM FINANCING:
Proceeds from initial public offering - 35,680
Issuance of common stock 2,751 358
Payments on long-term obligations (170) (168)
-------- -------
Net cash from financing 2,581 35,870
-------- -------
Net increase in cash and cash equivalents 2,207 34,857
Effect of exchange rate changes on cash (145) (8)
Cash and cash equivalents, beginning 42,506 7,063
-------- -------
Cash and cash equivalents, end 44,568 41,912
Short-term investments 21,108 9,155
-------- -------
Cash and short-term investments $65,676 $51,067
======== =======
</TABLE>
See accompanying notes.
4
<PAGE>
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 March 31, 1997 and for the three-and six-month periods ended March
31, 1997 and 1996 are unaudited and reflect all adjustments, consisting of only
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, 1996 included in Visio's Annual Report on Form
10-K. The results of operations for the three- and six- months ended March 31,
1997 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 March 31, 1997, September 30, 1996 and March 31,
1996 reflect amounts as of and for the periods ended March 28, 1997, September
27, 1996 and March 29, 1996, respectively.
Inventories
Inventories are stated at the lower of cost or market and consist of the
following:
<TABLE>
<CAPTION>
March 31, September 30,
1997 1996
----------- -------------
(in thousands)
<S> <C> <C>
Raw Materials $316 $189
Finished Goods 384 415
----- -----
$700 $604
===== =====
</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>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Visio, which commenced operations in September 1990, is a leading supplier
of 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(R) brand. The Company's primary products are Visio, Visio Technical
and Visio Professional. The Company's first product Visio, initially shipped in
November 1992, enables business and technical users to create drawings and
diagrams using a "drag and drop" approach. The Company shipped its second
significant product, Visio Technical, for technical drawing in December
1994. The Company shipped its third significant product Visio Professional,
which provides functionality specifically for information systems and business
process design, in the second quarter of fiscal 1997.
Visio classifies its revenues in four channels: "Distribution," "Direct,"
"Volume Licensing," and "OEM." Distribution revenues represent sales of packaged
products through national distributors and corporate, retail and mail order
resellers. Direct revenues represent sales of packaged products directly by the
Company, including upgrades, generally to end users responding to advertising or
other marketing promotions. 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 characteristically have higher gross
profit as a percentage of revenues, but lower operating profit 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.
The distribution channel commonly stocks and displays packaged products to
achieve in-store visibility and timely delivery to customers. 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
phenomena called "channel dry" and "channel fill." Channel dry occurs prior to
the release of an upgrade version of an existing product as the distribution
channel reduces the inventory levels to minimize product returns. 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 its worldwide
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>
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 change in licensing and marketing methods and changes
in general economic conditions. Additional information concerning these and
other risks is described in the "Certain Risk Factors that may Impact Future
Results of Operations" section of the Company's Form 10-K for the fiscal year
ended September 30, 1996, and, from time to time, in the Company's Securities
and Exchange Commission reports. 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>
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 SIX MONTHS ENDED
MARCH 31, MARCH 31,
------------------ -----------------
1997 1996 1997 1996
------- ------- ------- ------
<S> <C> <C> <C> <C>
Revenues........................ 100.0% 100.0% 100.0% 100.0%
Cost of revenues................ 10.2 16.4 10.3 16.9
----- ----- ----- -----
Gross profit.................... 89.8 83.6 89.7 83.1
Operating expenses:
Research and development...... 14.7 18.7 14.5 15.7
Sales and marketing........... 39.6 36.0 39.5 38.6
General and administrative.... 7.7 7.5 7.5 7.6
Acquired technology........... 28.4 -- 15.7 --
----- ----- ----- -----
Total operating expenses........ 90.4 62.2 77.2 61.9
----- ----- ----- -----
Operating income (loss)......... (0.6) 21.4 12.5 21.2
Interest and other income, net.. 3.4 2.4 2.9 2.3
----- ----- ----- -----
Income before income taxes...... 2.8 23.8 15.4 23.5
Provision for income taxes...... 0.7 7.8 4.0 7.7
----- ----- ----- -----
Net income...................... 2.1% 16.0% 11.4% 15.8%
===== ===== ===== =====
</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 MARCH 31,
------------------------------------------------
1997 1996 CHANGE
---------------- ----------------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues:
Business diagramming..... $10,790 45.8% $10,892 75.0% (0.9)%
Technical drawing........ 7,239 30.8 3,463 23.8 109.0 %
Business engineering..... 5,443 23.1 -- -- --
Other.................... 64 0.3 172 1.2 (62.8)%
------- ----- ------- -----
Total revenues...... $23,536 100.0% $14,527 100.0% 62.0 %
======= ===== ======= =====
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH 31,
------------------------------------------------
1997 1996 CHANGE
---------------- ----------------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues:
Business diagramming..... $22,470 52.8% $20,661 73.9% 8.8 %
Technical drawing........ 14,527 34.1 6,756 24.2 115.0 %
Business engineering..... 5,443 12.8 -- -- --
Other.................... 106 0.3 527 1.9 (79.9)%
------- ----- ------- -----
Total revenues...... $42,546 100.0% $15,880 100.0% 52.3 %
======= ===== ======= =====
</TABLE>
8
<PAGE>
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 second quarter of fiscal 1997 increased 62% over the same
quarter in the prior year. Revenues for the six months ended March 31, 1997
increased 52% over the comparable prior year period. The increase in revenues
for both the three- and six-month periods was due primarily to sales volume
growth and secondarily to price increases. The introduction of Visio
Professional in the March 1997 quarter contributed significantly to this revenue
growth.
The introduction of Visio Professional in the March 1997 quarter impacted
the revenue mix within the product groups. Visio Professional, the Company's
first product in the business engineering product group, contributed 23% of
total revenues for the March 1997 quarter. For existing product groups, revenue
growth in the technical drawing product group, was 109% and 115%, respectively,
for the three- and six-month periods ended March 31, 1997 compared to the same
periods in fiscal 1996. The business diagramming product group revenues declined
1% for the quarter ended March 31, 1997 as compared to the March 31, 1996
quarter, due to the strength of the Visio 4.0 upgrade in the fiscal 1996
quarter. New license units for the business diagramming product group increased
55% in the March 31, 1997 quarter over the comparable prior year quarter, while
new license revenues increased 10% for the same period. The percentage increase
in new license revenues was lower than the percentage increase in new license
units because a larger portion of revenues in the period came from the Volume
Licensing channel which has a lower average unit selling price than the other
channels. 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 March 31, 1997 was 75%, 7%, 17% and 1%,
respectively, compared to 77%, 12%, 8% and 3%, 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 74%, 7%, 18% and 1%, respectively,
for the six months ended March 31, 1997 compared to 75%, 14%, 8% and 3%,
respectively, for the same period in the prior year. Percentage growth was most
significant for the Volume Licensing channel, which grew 236% and 229% for the
three- and six-month periods ended March 31, 1997, over the comparable periods
in fiscal 1996, respectively. This growth represents continued investment in the
volume licensing program. The percentage decrease in the Direct channel for both
the three- and six-month periods was due primarily to a greater percentage of
upgrade revenues coming from the Distribution channel in the fiscal 1997 periods
as compared to the fiscal 1996 periods.
Revenues in the U.S. and Canada increased 63% to $14.8 million in the
second quarter of fiscal 1997 from $9.1 million in the prior year period.
Revenues for the six months ended March 31, 1997 increased 43% to $25.8 million
from $18.1 million in the fiscal 1996 comparable period. The increase in
revenues for both the three- and six-month periods reflect the release of Visio
Professional and the growth of Visio Technical revenues. International revenues
increased 61% to $8.7 million in the second quarter of fiscal 1997 from $5.4
million in the prior year period. The release of Visio Professional in the
quarter contributed to this growth. Revenues for the six months ended March 31,
1997 increased 69% to $16.7 million from $9.9 million in the comparable period
in the prior fiscal year. For the three- and six-month periods, international
revenues represented 37% and 39% of total revenues, respectively, as compared to
37% and 35%, respectively, for the comparable periods in the prior year.
The Company intends to introduce upgraded versions of Visio, Visio
Technical and Visio Professional during fiscal 1997, and, as a result, expects
its revenues to increase. 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 new products and international markets.
9
<PAGE>
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>
MARCH 31,
-----------------------------------------
1997 1996 CHANGE
--------------- --------------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Three months ended $2,391 10.2% $2,384 16.4% 0.3%
Six months ended $4,368 10.3% $4,729 16.9% (7.6)%
</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 decrease in cost of revenues as a percentage of revenues for the three-
and six-month periods of fiscal 1997 over the comparable periods of fiscal 1996
resulted from the increased use of lower cost CD-ROM media, increased Volume
Licensing revenues which have little or no standard costs, an increase in the
percentage of revenue from Visio Technical and Visio Professional which have
lower standard cost as a percentage of revenue than Visio and reduced inventory
write-offs. These decreases were partially offset by increased royalty costs
for licensed technology including Visual Basic for Applications (VBA) from
Microsoft Corporation.
10
<PAGE>
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>
MARCH 31,
-----------------------------------------
1997 1996 CHANGE
--------------- --------------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Three months ended $3,459 14.7% $2,720 18.7% 27.2%
Six months ended $6,164 14.5% $4,384 15.7% 40.6%
</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 in absolute terms for the
three- and six-month periods ended March 31, 1997 over the corresponding
periods of fiscal 1996 resulted primarily from planned additions to the
Company's development organization. The decrease in research and development as
a percentage of revenues for the three- and six-month periods ended March 31,
1997 over the corresponding periods of fiscal 1996 resulted primarily from the
acquisition of source code and other intellectual property from Arcland, Inc. in
March 1996.
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>
MARCH 31,
-----------------------------------------
1997 1996 CHANGE
--------------- --------------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Three months ended $ 9,313 39.6% $ 5,231 36.0% 78.0%
Six months ended $16,803 39.5% $10,778 38.6% 55.9%
</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 was due primarily to the continued development of the
domestic and international sales infrastructure. As a percentage of revenues,
sales and marketing expenses increased in both the three- and six-month
periods ending March 31, 1997 compared to the prior year periods, primarily
due to reduced spending in the fiscal 1996 periods in marketing prior
to the introduction of the Company's new marketing campaign of Visio as a
solutions strategy and graphics platform.
The Company believes substantial spending on marketing brand awareness
activities and Volume Licensing sales staffing is essential to achieve revenue
growth and to maintain and enhance the Company's competitive position. Visio
expects continued investment in marketing and sales of its products to further
develop market opportunities. Accordingly, the Company expects sales and
marketing expenses to increase in absolute terms over time. In addition,
competitive pressures faced by the Company may have an adverse effect on its
business, financial condition and results of operations.
11
<PAGE>
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>
MARCH 31,
-----------------------------------------
1997 1996 CHANGE
--------------- --------------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Three months ended $1,816 7.7% $1,080 7.5% 68.2%
Six months ended $3,182 7.5% $2,119 7.6% 50.2%
</TABLE>
General and administrative expenses increased in absolute terms in both the
second quarter and first six months of fiscal 1997 over the corresponding
periods of fiscal 1996 primarily due to the cost of supporting the Company's
expanded operations. The Company expects to show increased general and
administrative expenses in absolute terms in future periods for infrastructure
to support revenue growth.
ACQUIRED TECHNOLOGY
In the March 31, 1997 quarter, the Company acquired certain assets of
Boomerang Technology Inc., a privately held developer of Autodesk AutoCAD-
compatible software, located in San Diego, CA. Under the terms of the agreement,
the Company acquired source code and certain other assets for cash payments
totaling $6.7 million. The transaction was accounted for as a purchase with the
acquisition price expensed primarily as in-process acquired technology in the
March 31, 1997 quarter. The Company expects this technology will be incorporated
into a future product offering.
INTEREST AND OTHER INCOME, NET
Interest and other income includes interest income net of interest expense,
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. Interest and other income for the second quarter of
fiscal 1997 of $0.8 million increased 124% over the second quarter of
fiscal 1996. Interest and other income for the six months ended March 31, 1997
of $1.2 million increased 96% over the comparable period of fiscal 1996.
The increase for both the three- and six-month periods was primarily due to
increased interest income earned on cash and short-term investments. This
increase was partially offset by foreign exchange losses incurred in the fiscal
1997 periods. Visio did not engage in hedging activities in the periods
presented.
INCOME TAXES
The Company's effective income tax rate was 26% and 33% for the first half
of fiscal 1997 and 1996, respectively. The lower effective tax rate for fiscal
1997 was primarily due to a greater percentage of income taxed in other
jurisdictions at rates lower than the U.S. rate.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, the Company had cash and short-term investments totaling
$65.7 million, an increase of $4.6 million from September 30, 1996. The
increase in cash and short-term investments was due primarily to cash generated
from operations, the exercise of employee stock options and the income tax
benefits associated with those exercises. This increase was partially off-set by
a $6.7 million payment related to the acquisition of technology from Boomerang
Technology, Inc. Since its inception, the Company has financed its operations
primarily through cash generated by its operations, as well as through sales of
its Common Stock and Preferred
12
<PAGE>
Stock and bank financing. The Company has a $1.0 million unsecured bank line of
credit, which matures on February 28, 1998. There were no borrowings under this
line at March 31, 1997.
At March 31, 1997, the Company's principal commitments consisted primarily
of leases on its headquarters facilities. The Company's capital expenditures
totaled $1.7 million in the first six months of fiscal 1997. At March 31, 1997,
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. On
April 30, 1997, the Company purchased certain assets of Sysdraw Software Co. for
$6.5 million.
RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings per Share, which is required to be adopted in the quarter
ended December 31, 1997. At that time, the Company will be required to change
the method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per share,
the dilutive effect of stock options will be excluded. The impact is expected
to result in an increase in primary earnings per share for the quarters ended
March 31, 1997 and March 31, 1996 of $0.00 and $0.02 per share, respectively,
and for the six months ended March 31, 1997 and March 31, 1996 of $0.03 and
$0.08 per share, respectively. The impact of Statement 128 on the calculation
of fully diluted earnings per share for these quarters is not expected to be
material.
13
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
An Annual Meeting of Shareholders of Visio Corporation was held on February 26,
1997. Matters voted on at the meeting and votes cast on each were as follows:
1. To elect seven directors of the Company to serve for the ensuing year
until the Company's 1998 annual meeting of shareholders and until their
successors are elected and qualified.
<TABLE>
<CAPTION>
For Withheld
--- --------
<S> <C> <C>
J. Jaech 13,255,019 5,675
T. Johnson 13,255,019 5,675
T. Alberg 13,255,019 5,675
T. Byers 13,255,019 5,675
J. Johnston 13,255,019 5,675
D. Mackenzie 13,255,019 5,675
S. Oki 13,255,019 5,675
</TABLE>
2. To approve the Company's 1995 Long-Term Incentive Compensation Plan, as
amended and restated.
<TABLE>
<S> <C>
For 9,002,223
Against 2,601,298
Abstain 3,260
</TABLE>
3. To ratify the selection of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending September 30, 1997.
<TABLE>
<S> <C>
For 13,258,215
Against 1,272
Abstain 1,207
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-K:
10.10 (b) Amendment to the Loan and Security agreement between
Silicon Valley Bank and Visio Corporation dated
February 28, 1997 .
10.19 Asset Purchase Agreement between Visio Corporation
and Boomerang Technology, Inc. dated February 21,
1997.
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.
Items 1, 2, 3 and 5 are not applicable and have been omitted.
14
<PAGE>
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: May 12, 1997 VISIO CORPORATION
By: /s/ STEVE GORDON
----------------------------
Steve Gordon
------------
Vice President, Finance and Operations;
Chief Financial Officer
(Principal Financial and Accounting Officer and Duly
Authorized Officer)
15
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ----
<S> <C> <C>
10.10 (b) Amendment to the Loan and Security agreement between Silicon Valley
Bank and Visio Corporation dated February 28, 1997.
10.19 Asset Purchase Agreement between Visio Corporation and Boomerang
Technology, Inc. dated February 21, 1997.
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.
</TABLE>
16
<PAGE>
Exhibit 10.10(B)
AMENDED AND RESTATED SCHEDULE TO LOAN AND SECURITY AGREEMENT
------------------------------------------------------------
Borrower: VISIO CORPORATION
Address: 520 Pike Street, Suite 1800
Seattle, Washington 98101-4001
Date: February 28, 1997
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) $2,000, which is due and payable at closing. (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, 1998, 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, 1998, without the prior written consent of
Silicon.
Page 1 - AMENDED AND RESTATED SCHEDULE TO LOAN AND SECURITY AGREEMENT
<PAGE>
FOREIGN EXCHANGE
SUBLIMIT: Borrower may utilize up to the Credit Limit for spot and future
foreign exchange contracts (the "Exchange Contracts"). All
Exchange Contracts must provide for delivery of settlement on
or before the Maturity Date. The limit available at any time
shall be reduced by the following amounts (the "Foreign
Exchange Reserve") on each day (the "Determination Date"): (i)
on all outstanding Exchange Contracts on which delivery is to
be effected or settlement allowed more than two business days
from the Determination Date, 20% of the gross amount of the
Exchange Contracts; plus (ii) on all outstanding Exchange
Contracts on which delivery is to be effected or settlement
allowed within two business days after the Determination Date,
100% of the gross amount of the Exchange Contract, the Borrower
may request that Silicon debit the Borrower's bank account with
Silicon for such amount, provided Borrower has immediately
available funds in such amounts in its bank account.
Whenever Borrower desires to enter into an Exchange Contract,
Borrower will notify Silicon by facsimile transmission or by
telephone not later than 11:00 a.m. California time, two
business days before effectiveness of the contract. Silicon
shall be entitled to rely on any such telephone notice given by
any person who Silicon reasonably believes to be an officer of
Borrower, and Borrower shall indemnify and hold Silicon
harmless for any damages or loss suffered by Silicon as a
result of such reliance.
Silicon may, in its discretion, terminate the Exchange
Contracts at any time (a) that an Event of Default occurs or
(b) that there is no sufficient availability under the Credit
Limit and Borrower does not have available funds in its bank
account to satisfy the Foreign Exchange Reserve. If Silicon
terminates the Exchange Contracts, and without limitation of
the FX Indemnity Provisions (as referred to below), Borrower
agrees to reimburse Silicon for any and all fees, costs and
expenses relating thereto or arising in connection therewith.
Borrower shall not permit the total gross amount of all
Exchange Contracts on which delivery is to be effected and
settlement allowed in any two business day period to be more
than the Credit Limit, nor shall Borrower permit the total
gross amount of all Exchange Contracts to which Borrower is a
party, outstanding at any one time, to exceed the Credit Limit.
The Borrower shall execute all standard form applications and
agreements of Silicon in connection with the Exchange
Contracts, and without limiting any of the terms of such
applications and agreements the Borrower will pay all standard
fees and charges of Silicon in connection with the Exchange
Contracts.
Without limiting any of the other terms of this Agreement or
any such standard form applications and agreement of Silicon,
Borrower agrees to indemnify Silicon and hold it harmless, from
and against any and all claims, debts, liabilities, demands,
obligations, actions, costs and expenses (including, without
limitation, attorneys fees of counsel of Silicon's choice), of
every nature and description which it may sustain or incur,
based upon, arising out of, or in any way relating to any of
the Exchange Contracts or any transactions relating thereto or
contemplated
Page 2 - AMENDED AND RESTATED SCHEDULE TO LOAN AND SECURITY AGREEMENT
<PAGE>
thereby (collectively referred to as the "FX Indemnity
Provisions").
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 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. This fee was paid at closing.
SECOND TERM LOAN
PAGE 3 - AMENDED AND RESTATED SCHEDULE TO LOAN AND SECURITY AGREEMENT
<PAGE>
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.
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. This fee was paid at closing.
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
Page 4 - AMENDED AND RESTATED SCHEDULE TO LOAN AND SECURITY AGREEMENT
<PAGE>
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.
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,
Page 5 - AMENDED AND RESTATED SCHEDULE TO LOAN AND SECURITY AGREEMENT
<PAGE>
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. This fee was paid at closing.
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)
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 $28,275,000, 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.
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
Page 6 - AMENDED AND RESTATED SCHEDULE TO LOAN AND SECURITY AGREEMENT
<PAGE>
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 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:
Page 7 - AMENDED AND RESTATED SCHEDULE TO LOAN AND SECURITY AGREEMENT
<PAGE>
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
SILICON: SILICON VALLEY BANK
By: /S/ Jo Surbrugg
Title: Senior Vice President
PAGE 8 - AMENDED AND RESTATED SCHEDULE TO LOAN AND SECURITY AGREEMENT
<PAGE>
LOAN MODIFICATION AGREEMENT
BETWEEN: Visio Corporation, a Washington corporation ("Borrower"), whose
address is 520 Pike Street, Suite 1800, Seattle, Washington 98101-4001
AND: Silicon Valley Bank ("Silicon"), whose address is 3003 Tasman Drive,
Santa Clara, California 95054
DATE: February 28, 1997
This Loan Modification Agreement is entered into on the above date by
Borrower and Silicon.
I. Background. Borrower entered into a Loan and Security
----------
Agreement with Silicon in (as amended from time to time, the "Loan Agreement").
Capitalized terms used in this Loan Modification Agreement shall, unless
otherwise defined in this Agreement, have the meaning given to such terms in the
Loan Agreement.
Silicon and Borrower are entering into this Agreement to state the
terms and conditions of certain modifications to the Loan Agreement and the
Schedule, as amended prior to the date of this Agreement.
2. Modifications to Loan Agreement and Schedule.
--------------------------------------------
2.1 The Schedule to the Loan Agreement is hereby deleted and
replaced by the Amended and Restated Schedule to Loan and Security Agreement
attached to this Agreement.
2.2 Section 4.6(viii) of the Loan Agreement is deleted in its
entirety.
2.3 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, are secured by all liens and security
interests granted by Borrower to Silicon in the Loan Agreement.
3. Conditions Precedent. This Loan Modification Agreement shall not
--------------------
take effect until Borrower delivers to Silicon a Certified Resolution of
Borrower and such other documents as Silicon shall reasonably require to give
effect to the terms of this Loan Modification Agreement.
4. No Other Modifications. Except as expressly modified by this Loan
----------------------
Modification Agreement, the terms of the Loan Agreement, as amended prior to the
date of this Loan Modification 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.
Page 1 - LOAN MODIFICATION AGREEMENT
<PAGE>
5. Representations and Warranties.
------------------------------
5.1 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 articles of incorporation, bylaws or of any
undertaking to which the Borrower is a party or by which it is bound.
5.2 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 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/ Jo Surbrugg
Title: Senior Vice President
Page 2 - LOAN MODIFICATION AGREEMENT
<PAGE>
EXHIBIT 10.19
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement"), dated February 21, 1997
(the "Effective Date"), is made between Visio Corporation, a Washington
corporation ("Purchaser"), and Boomerang Technology, Inc., a California
corporation ("Seller"). The parties agree as follows:
SECTION 1. PURCHASE AND SALE OF ASSETS
1.1 PURCHASE OF ASSETS
Subject to the terms and conditions of this Agreement, Seller hereby sells,
assigns, transfers, conveys and delivers to Purchaser, and Purchaser hereby
purchases, acquires and accepts from Seller, free and clear of all liens, claims
and encumbrances, the assets set forth on Exhibit A (the "Assets").
1.2 NO ASSUMED OBLIGATIONS
Purchaser does not assume and shall not be or become liable for, and Seller
shall, in accordance with Section 5.2, indemnify Purchaser against, any and all
debts, liabilities or obligations arising from or relating to (a) the use,
licensing, distribution or other dealings involving all or any portion of the
Assets prior to the Effective Date, (b) the Technology Transfer Agreement dated
February 21, 1997, between Seller and Softdesk, Inc. ("Softdesk"), except for
the amounts to be paid by Visio to Softdesk under Section 2.1(a), and (c) the
conduct of Seller's business.
SECTION 2. PURCHASE PRICE
2.1 PURCHASE PRICE
The purchase price for the Assets shall be Six Million Seven Hundred
Sixteen Thousand Four Hundred Thirty-Eight and 60/100 Dollars ($6,716,438.60)
(the "Purchase Price"), payable as follows:
(a) upon execution of this Agreement, the sum of One Million Dollars
($1,000,000) shall be paid to Softdesk by cashier's check as instructed by
Seller; and
(b) upon receipt by Purchaser of all the items described in Section
4.1, the sum of Five Million Seven Hundred Sixteen Thousand Four Hundred
Thirty-Eight and 60/100 Dollars ($5,716,438.60) shall be paid to Seller by
wire transfer or other immediately available funds.
2.2 TRANSFER TAXES
Except for any legal expenses of Seller payable by Purchaser under Section
2 of the Memorandum of Understanding dated February 21, 1997, between Seller and
Purchaser (the
<PAGE>
"MOU"), the Purchase Price shall be deemed to include any and all taxes, fees
and expenses to be remitted by Purchaser to Seller relating to Purchaser's
purchase of the Assets. All title, recording and transfer fees payable or
assessable in connection with the sale and transfers contemplated by this
Agreement, together with any and all sales taxes payable or assessable in
connection with the sale and transfers contemplated by this Agreement, shall be
borne by Seller.
2.3 FULL COMPENSATION
Payment of the amounts set forth in Section 2.1 shall constitute full
compensation to Seller for the Assets, the representations and warranties set
forth in Section 3 and full performance of Seller's obligations under this
Agreement.
SECTION 3. REPRESENTATIONS AND WARRANTIES
Seller represents and warrants to Purchaser, which representations and
warranties shall survive the execution and delivery of this Agreement to the
extent provided herein, as follows:
3.1 ORGANIZATION AND GOOD STANDING
Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of California. Seller has all requisite
corporate power and authority to own, operate and lease its properties and
assets and to carry on its business as now conducted.
3.2 POWER AND AUTHORITY; ENFORCEABILITY; NO VIOLATION
Seller has full power and authority to execute, deliver and perform its
obligations under this Agreement, and to consummate the transactions
contemplated hereby. All actions on the part of Seller and its officers,
directors and shareholders necessary for the authorization, execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby have been taken. This Agreement has been duly executed and
delivered by Seller and constitutes a legal, valid and binding obligation of
Seller, enforceable against Seller in accordance with its terms.
3.3 NO APPROVALS OR NOTICE REQUIRED; NO CONFLICTS WITH INSTRUMENTS
The execution, delivery and performance of this Agreement by Seller and the
consummation of the transactions contemplated hereby will not (a) constitute a
violation (with or without the giving of notice or lapse of time, or both) of
any provision of any law or any judgment, decree, order, regulation or rule of
any court, agency or other governmental authority applicable to Seller, (b)
require any consent, approval or authorization of any person, corporation,
partnership, governmental or regulatory authority or other organization or
entity (a "Person"), (c) result in a default (with or without the giving of
notice or lapse of time, or both) under, an acceleration or termination of, or
the creation in any party of the right to accelerate, terminate, modify or
cancel, any agreement, lease, note or other restriction, encumbrance, obligation
or liability to which Seller is a party or by which it is bound or to which the
Assets is subject, (d) result in the creation of any lien or encumbrance upon
the Assets, (e) conflict with or result in a breach of or constitute a default
under any provision of Seller's Articles of Incorporation or Bylaws, or (f)
invalidate or adversely affect any permit, license, authorization or status used
in Seller's conduct of Seller's business; where such
2
<PAGE>
violation, default, acceleration, termination, creation or imposition, or
consent, approval or authorization, if not obtained, would have a material
adverse effect on the Assets.
3.4 INTELLECTUAL PROPERTY
(a) Seller owns all right, title and interest in and to the Assets,
free and clear of any liens, encumbrances, security interests rights or claims
of any other Person (other than the license rights granted to Softdesk pursuant
to the Technology Transfer Agreement dated February 21, 1997, between Softdesk
and Seller). The execution and delivery of this Agreement will convey, transfer
and assign to Purchaser good and marketable title to the Assets free and clear
of all security interests, liens, encumbrances, rights and claims of any Person
(other than the license rights granted to Softdesk pursuant to the Technology
Transfer Agreement dated February 21, 1997, between Softdesk and Seller).
(b) Neither Seller nor any Person claiming by, through or under Seller
has a copy, or the right to acquire or discover a copy, of any of the source
code with respect to the Assets (except for copies which Seller will immediately
deliver to Purchaser or destroy). Seller has not delivered copies of source
code for the Assets to any Person, whether pursuant to an escrow arrangement or
otherwise. Copies of all licenses, sublicenses and other agreements, including
confidential disclosure agreements, as to which Seller is a party and pursuant
to which any other Person is authorized to use any the Assets have been
delivered by Seller to Purchaser. Seller is not, and as a result of the
execution and delivery of this Agreement or the performance of Seller's
obligations hereunder will not be, in violation of, or lose any rights pursuant
to any license, sublicense or agreement.
(c) The Assets do not infringe any patent, copyright, trade secret,
trademark or other intellectual property of any Person.
(d) No claims with respect to the Assets have been asserted or, to the
knowledge of Seller, are threatened by any Person, and Seller does not know of
any claims (i) to the effect that the manufacture, sale or use of any product
related to the Assets as now used or offered by Seller infringes any copyright,
patent, trade secret or other intellectual property right, (ii) against the use
by Seller of any of the Assets, or (iii) challenging the ownership, validity or
effectiveness of any of the intellectual property rights associated with the
Assets.
(e) Any patents and registered trademarks, service marks and other
company, product or service identifiers and registered copyrights, associated
with the Assets are valid and subsisting.
(f) There has not been and there is not now any material unauthorized
use, infringement or misappropriation of any of the Assets by any third party,
including without limitation any employee or former employee of Seller. Seller
has not been sued or charged in writing as a defendant in any claim, suit,
action or proceeding which involves a claim of infringement of any patents,
trademarks, service marks, copyrights or other intellectual property rights and
which has not been finally terminated prior to the date of this Agreement.
There are no such charges or claims outstanding and, to the best knowledge of
Seller, Seller does not have any infringement liability with respect to any
patent, trademark, service mark, copyright or other intellectual property right
of another.
3
<PAGE>
3.5 CLAIMS AND LEGAL PROCEEDINGS
There are no claims, actions, suits, arbitrations, criminal or civil
investigations or proceedings pending or involving or, to Seller's knowledge,
threatened against Seller before or by any court or governmental or
nongovernmental department, commission, board, bureau, agency or
instrumentality, or any other Person which would, directly or indirectly have a
material adverse impact on the Assets. To Seller's knowledge, there is no valid
basis for any claim, action, suit, arbitration, investigation or proceeding.
There are no outstanding or unsatisfied judgments, orders, decrees or
stipulations to which Seller is a party that involve the transactions
contemplated herein or that could result in a lien, claim or encumbrance on any
of the Assets or result in the commencement of a claim, suit or other proceeding
against Purchaser which would, directly or indirectly have a material adverse
impact on the Assets.
3.6 GOVERNMENTAL AUTHORIZATIONS AND COMPLIANCE WITH LAWS
Seller has conducted its business in accordance with all applicable
foreign, federal, state and local laws, regulations, permits, licenses,
authorizations and other requirements of all governmental entities having
jurisdiction over Seller, the noncompliance with which, or the violation of, or
the failure to obtain or adhere to, could have a material adverse affect on the
condition or use of the Assets.
SECTION 4. COVENANTS AND AGREEMENTS OF SELLER
Seller agrees to perform and observe the following agreements:
4.1 DELIVERY
Seller shall deliver or cause to be delivered forthwith to Purchaser all
intangible and any tangible embodiments of the Assets (including, without
limitation, one complete copy of the source code for the Assets).
4.2 USE OF ASSETS
On the Effective Date, Seller shall cease all use, development, or other
exploitation of the Assets, except with the prior written consent of Purchaser.
Without limiting the generality of the foregoing, Seller shall treat all trade
secrets, technology, designs, know-how and methods related to the Assets as
confidential and proprietary information of Purchaser. Seller shall not
disclose such information to any other person unless and until the information
is in the public domain at the time of its disclosure through no fault of Seller
or Purchaser consents to the disclosure in writing.
SECTION 5. SURVIVAL; INDEMNITY
5.1 SURVIVAL
All provisions of this Agreement, including without limitation all
representations and warranties contained in this Agreement or in any instrument
delivered pursuant hereto, shall survive the consummation of the transactions
contemplated by this Agreement.
4
<PAGE>
5.2 INDEMNIFICATION
Seller shall indemnify and hold harmless Purchaser from and against any
claims, losses, liabilities, actions, damages, costs and expenses (including
reasonable attorneys' fees) incurred by Purchaser arising out of or in
connection with (a) any breach of the representations or warranties made by
Seller under this Agreement; (b) any claims by third parties arising out of the
ownership, use or distribution of the Assets on or before the Effective Date;
(c) any liabilities or obligations arising from or relating to the Technology
Transfer Agreement dated February 21, 1997, between Seller and Softdesk, except
for the amounts to be paid by Visio to Softdesk under Section 2.1(a), (d) any
claims by Seller's creditors (including, without limitation, any trade
creditors); and (e) any failure of the transactions contemplated by this
Agreement to comply with applicable creditor protection or similar laws;
provided, however, that Seller shall not be responsible to defend Purchaser or
pay Purchaser's attorney's fees or other costs of defense unless an adverse
------
final judgment as to an item in subsections (a) through (e) has been entered and
no further appeal therefrom is possible.
SECTION 6. MISCELLANEOUS
6.1 EXPENSES
Except as specifically provided for in this Agreement, and subject to
Section 2 of the MOU, each party shall bear its own expenses incident to the
negotiation, preparation, authorization and consummation of this Agreement and
the transactions contemplated hereby, including, without limitation, all fees
and expenses of its counsel and accountants, whether or not such transactions
are consummated.
6.2 NOTICES
All notices, claims and other communications hereunder shall be in writing
and shall be made by hand delivery, registered or certified mail (postage
prepaid, return receipt requested) or overnight air courier guaranteeing next-
day delivery:
(a) If to Purchaser, to: with a copy to:
Visio Corporation Perkins Coie
Suite 1800 411 - 108th Avenue NE, 18th Floor
520 Pike Street Bellevue, Washington 98004
Seattle, WA 98101-4001 Attention: Greg P. Mackay, Esq.
Attention: Chief Financial Officer
(b) If to Seller, to: with a copy to:
Boomerang Technology, Inc. Brobeck, Phleger & Harrison
241 Kalbaugh Street 550 West C Street
Ramona, CA 92065 Suite 1300
Attention: Michael C. Bailey San Diego, CA 92101
Attention: Hayden Trubitt, Esq.
5
<PAGE>
or at such other address as any party may from time to time furnish to the other
parties by a notice given in accordance with the provisions of this Section 6.2.
All such notices and communications shall be deemed to have been duly given at
the time delivered by hand, if personally delivered; upon receipt, if mailed;
and upon receipt, if sent by an overnight air courier service guaranteeing next-
day delivery.
6.3 ENTIRE AGREEMENT
This Agreement, together with Exhibit A hereto, constitutes the entire
agreement among the parties concerning the subject matter hereof, supersedes all
other agreements and understandings, whether oral or written (including without
limitation the Assignment and Bill of Sale dated February 21, 1997, from Seller
to Purchaser and, except with respect to Section 2 of the MOU, the MOU), and may
not be changed, modified, altered or terminated except by an agreement in
writing executed by the parties hereto. Any waiver by any party of any of its
rights under this Agreement or of any breach of this Agreement shall not
constitute a waiver of any other rights or of any other or future breach.
6.4 REMEDIES CUMULATIVE
Except as otherwise provided herein, each and all of the rights and
remedies provided in this Agreement, and each and all of the rights and remedies
allowed at law and in equity in like case, shall be cumulative, and the exercise
of one right or remedy shall not be exclusive of the right to exercise or resort
to any and all other rights or remedies provided in this Agreement or at law or
in equity.
6.5 GOVERNING LAW; JURISDICTION AND VENUE
This Agreement shall be governed by and construed and enforced in
accordance with and subject to the internal laws and decisions of the State of
Washington, regardless of its or any other jurisdiction's conflict of law
provisions.
6.6 COUNTERPARTS; SIGNATURE
This Agreement may be executed in counterparts, each of which shall be
deemed an original, and all of which together constitute one and the same
instrument. To expedite the process of entering into this Agreement, the
parties acknowledge that Transmitted Copies of the Agreement shall be equivalent
to original documents until such time as original documents are completely
executed and delivered. "Transmitted Copies" shall mean copies which are
reproduced or transmitted via photocopy, facsimile, or other process of complete
and accurate reproduction and transmission.
6.7 WAIVERS
No provision of this Agreement shall be deemed waived by course of conduct,
unless such waiver is in writing signed by the parties and stating that it was
intended to modify this Agreement.
6
<PAGE>
6.8 SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. Seller shall not
have the right to assign this Agreement or any of its rights or obligations
hereunder to any Person without Purchaser's prior written consent.
6.9 FURTHER ASSURANCES
Each party shall, at the request of any other party hereto from time to
time, execute and deliver such other assignments, transfers, conveyances and
other instruments and documents and do and perform such other acts and things as
may be reasonably necessary or desirable for effecting complete consummation of
this Agreement and the transactions contemplated hereby.
6.10 CONFIDENTIALITY
Seller shall not make any public announcement or other disclosure with
regard to the transactions contemplated hereby or the material terms hereof
(including, without limitation, the Purchase Price and form of consideration to
be paid pursuant to Section 2.1 hereof) without the prior consent Purchaser;
provided, however, that nothing herein shall restrict Seller from disclosing or
using for its own benefit or for any other purpose any such information which
enters the public domain and is readily available to the general public so long
as such information did not enter the public domain or become available to the
general public as a direct or indirect result of Seller's breach of this
Agreement and so long as such disclosure or use does not violate any
intellectual property right of Purchaser.
6.11 SEVERABILITY
In the event that any term or provision of this Agreement is determined to
be illegal, invalid or unenforceable, the remainder of this Agreement shall
continue in full force and effect, provided that such continuation would not
materially alter the terms hereof or materially diminish the benefits or
materially increase the burdens of this Agreement for any party.
VISIO CORPORATION BOOMERANG TECHNOLOGY, INC.
By /s/ Jeremy Jaech By /s/ Michael Bailey
-------------------------- -------------------------
Its President Its President
-------------------------- ------------------------
7
<PAGE>
EXHIBIT 11.1
VISIO CORPORATION
COMPUTATION OF EARNINGS PER SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
------------------ -----------------
1997 1996 1997 1996
------- ------ ------ ------
(IN THOUSANDS EXCEPT NET INCOME PER SHARE)
<S> <C> <C> <C> <C>
Weighted average common shares outstanding 13,850 13,249 13,797 11,322
Net effect of dilutive stock options calculated using the
treasury stock method and the average stock price 1,133 1,416 1,178 1,401
Net effect of dilutive stock warrants calculated using the
treasury stock method and the average stock price 80 184 90 174
Weighted average common shares giving effect to the
conversion of convertible and redeemable preferred stock n/a n/a n/a 1,301
into common stock
Total 15,063 14,849 15,065 14,198
======= ======= ======= =======
Net Income $ 481 $ 2,321 $ 4,865 $ 4,400
======= ======= ======= =======
Earnings per share $ 0.03 $ 0.16 $ 0.32 $ 0.31
======= ======= ======= =======
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 65,676
<SECURITIES> 0
<RECEIVABLES> 12,609
<ALLOWANCES> 6,223
<INVENTORY> 700
<CURRENT-ASSETS> 80,769
<PP&E> 8,082
<DEPRECIATION> 3,802
<TOTAL-ASSETS> 85,049
<CURRENT-LIABILITIES> 22,167
<BONDS> 0
0
0
<COMMON> 48,439
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 85,049
<SALES> 42,546
<TOTAL-REVENUES> 42,546
<CGS> 4,368
<TOTAL-COSTS> 4,368
<OTHER-EXPENSES> 32,846
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19
<INCOME-PRETAX> 6,574
<INCOME-TAX> 1,709
<INCOME-CONTINUING> 4,865
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,865
<EPS-PRIMARY> 0.32
<EPS-DILUTED> 0.32
</TABLE>
