SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED MARCH 31, 1997
COMMISSION FILE NUMBER 0-20777
XIONICS DOCUMENT TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 04-3186685
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
70 BLANCHARD ROAD, BURLINGTON, MA 01803
(Address of principal executive offices) (Zip Code)
(617) 229-7000
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former
fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 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 .
At May 7, 1997, there were 11,454,526 shares of the Company's $.01 par
value common stock issued, with 11,230,463 shares outstanding.
XIONICS DOCUMENT TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX
PAGE
NUMBER
PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Consolidated Financial Statements
Balance Sheets--March 31, 1997 and June 30, 1996.......... 3
Statements of Operations--Nine Months Ended March 31,
1997 and 1996 and Three Months Ended March 31, 1997
and 1996................................................. 5
Statements of Cash Flows--Nine Months Ended March 31,
1997 and 1996............................................ 6
Notes to Condensed Consolidated Financial Statements........ 7
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 11
PART II OTHER INFORMATION
ITEM 2. Changes in Securities....................................... 15
ITEM 5. Other Information........................................... 15
ITEM 6. Exhibits and Reports on Form 8K............................. 15
Signatures.................................................. 16
PART I--FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
XIONICS DOCUMENT TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, June 30,
1997 1996
---------- ----------
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $21,455,132 $2,115,859
Short-term investments --- 644,613
Accounts receivable, less reserves of approximately $121,000 and 4,592,511 2,398,033
$140,000 at March 31, 1997 and June 30, 1996, respectively
Contract and other receivables 7,056,439 ---
Inventories 1,237,104 1,020,035
Other current assets 764,400 398,264
---------- ---------
Total Current Assets 35,105,586 6,576,804
Property and Equipment, net 2,764,198 2,169,091
Acquired intangibles, net of accumulated amortization of approximately $750,000 451,667 194,167
and $659,000 at March 31, 1997 and June 30, 1996, respectively
Deferred offering costs --- 926,439
Other assets 1,322,467 38,000
---------- ---------
$39,643,918 $9,904,501
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable $1,691,856 $1,988,470
Term loans, current portion --- 322,667
Equipment line of credit 140,037 ---
Deferred revenue 1,689,517 1,368,833
Accrued expenses 4,485,839 1,904,909
---------- ----------
Total Current Liabilities 8,007,249 5,584,879
Term loans, net of current portion --- 564,166
Secured promissory notes payable to a stockholder --- 2,094,000
Redeemable preferred stock:
Class C Redeemable Convertible Preferred Stock, $.01 par value--
Authorized--2,779,615 shares
Issued and outstanding--2,698,938 shares, stated at liquidation value,
at June 30, 1996 and none at March 31, 1997 --- 8,231,410
Stockholders' equity (deficit):
Preferred Stock, $.01 par value--
Authorized--10,000,000 shares
Issued and outstanding--none --- ---
Class A Convertible Preferred Stock, $.01 par value--
Authorized--3,603,305 shares
Issued and outstanding--3,125,051 at June 30, 1996 and none at --- 3,606,658
March 31, 1997
Common Stock, Class A, $.01 par value--
Authorized--20,000,000 shares
Issued--1,386,066 shares at June 30, 1996
Outstanding--1,161,755 at June 30, 1996 and none at March 31, 1997 --- 13,861
Common Stock, Class B, $.01 par value--
Authorized--10,000,000 shares
Issued and outstanding--558,931 shares at June 30, 1996 and none at
March 31, 1997 --- 5,589
Common Stock
Authorized--40,000,000 shares
Issued--10,896,749 shares at March 31, 1997 and none at June 30, 1996
Outstanding--10,672,686 shares at March 31, 1997 and none at June 30, 1996 108,968 ---
Additional paid-in capital 43,808,524 1,312,381
Treasury stock, at cost--224,063 shares and 224,311 shares at March 31, 1997
and June 30, 1997, respectively (151,246) (151,413)
Accumulated deficit (12,129,577) (11,357,030)
------------ ------------
Total stockholders' equity (deficit) 31,636,669 (6,569,954)
------------ ------------
$39,643,918 $9,904,501
============ ===========
The accompanying notes are an integral part of these consolidated financial statements.
XIONICS DOCUMENT TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
--------------------- ----------------------
March 31, March 31, March 31, March 31,
1997 1996 1997 1996
--------- --------- --------- ---------
Net revenue $9,829,322 $6,662,817 $27,774,829 $15,535,616
Cost of revenue 2,039,152 1,636,534 5,625,357 4,280,734
---------- ---------- ----------- -----------
Gross profit 7,790,170 5,026,283 22,149,472 11,254,882
Operating expenses:
Research and development 3,873,718 2,253,349 11,157,965 6,347,205
Selling, general and administrative 2,355,648 2,403,132 6,926,814 7,031,658
Charge for purchased R&D 5,400,000 --- 5,400,000 ---
---------- ---------- ----------- -----------
Income (loss) from operations (3,839,196) 369,802 (1,335,307) (2,123,981)
Other income:
Interest expense (1,067) (64,896) (85,993) (226,337)
Interest income 307,806 19,467 659,380 52,867
Other income 18,812 26,528 27,563 21,604
---------- ---------- ----------- -----------
Income (loss) before provision for income taxes (3,513,645) 350,901 (734,357) (2,275,847)
Provision (benefit) for income taxes (514,667) --- 38,190 ---
---------- ---------- ----------- -----------
Net income (loss) $(2,998,978) $350,901 $(772,547) $(2,275,847)
========== ========== =========== ===========
Net income (loss) per common and common equivalent $(0.28) $0.03 $(0.08) ($0.27)
share ========== ========== =========== ===========
Weighted average number of common and 10,630,541 10,406,952 9,542,882 8,316,543
common equivalent shares outstanding ========== ========== =========== ===========
The accompanying notes are an integral part of these consolidated financial statements.
XIONICS DOCUMENT TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
-------------------------
March 31, March 31,
1997 1996
----------- ----------
Cash flows from operating activities:
Net Loss $(772,547) $(2,275,847)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 823,045 555,440
Noncash charge --- 182,000
Changes in assets and liabilities--
Accounts receivable (2,194,478) (99,162)
Contract receivable (7,056,439) ---
Inventories (217,069) (109,966)
Prepaid expenses and other current assets (366,136) 3,358
Accounts payable (296,614) (226,348)
Deferred revenue 320,684 3,965,000
Accrued expenses 2,580,930 (21,836)
----------- -----------
Net cash (used in) provided by
operating activities (7,178,624) 1,972,639
----------- -----------
Cash flows from investing activities:
Acquisition of property and equipment (1,278,115) (678,055)
Increase in other assets (1,541,967) ---
Decrease in short-term investments 644,613 ---
----------- -----------
Net cash used in investing activities (2,175,469) (678,055)
----------- -----------
Cash flows from financing activities:
Repayment of term loans (886,833) ---
Repayment of note payable to stockholder (2,094,000) ---
Repayment of equipment line of credit --- (41,000)
Proceeds from exercise of stock options 62,710 32,278
Issuance of Class D Preferred Stock --- 4,500,000
Issuance of Class C Redeemable Convertible
Preferred Stock, net of issuance costs --- 3,274,349
Reissuance (purchase) of treasury stock 50 (230,000)
Sale of Common Stock, net of issuance costs 30,685,000 ---
Reclassification of deferred offering costs 926,439 ---
----------- -----------
Net cash provided by financing 28,693,366 7,535,627
activities ----------- -----------
Net increase in cash and cash equivalents 19,339,273 8,830,211
Cash and cash equivalents, beginning of period 2,115,859 1,226,364
----------- -----------
Cash and cash equivalents, end of period $21,455,132 $10,056,575
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid for interest $135,631 $171,617
=========== ===========
Cash paid for income taxes $150,142 ---
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
XIONICS DOCUMENT TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The condensed consolidated financial statements of Xionics Document
Technologies, Inc. and subsidiaries (the Company) presented herein have been
prepared pursuant to the rules of the Securities and Exchange Commission for
quarterly reports on Form 10-Q and do not include all of the information and
note disclosures required by generally accepted accounting principles. These
statements should be read in conjunction with the audited consolidated
financial statements and notes thereto for the year ended June 30, 1996,
included in the Company's Registration Statement on Form S-1 (333-4613),
declared effective by the Securities and Exchange Commission on September 26,
1996.
The condensed consolidated financial statements and notes herein are
unaudited, but in the opinion of management, include all the adjustments
(consisting of normal, recurring adjustments) necessary to present fairly the
consolidated financial position, results of operations and cash flows of the
Company and its subsidiaries.
The results of operations for the interim periods shown herein are not
necessarily indicative of the results to be expected for any future interim
period or for the entire year.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying condensed consolidated financial statements reflect the
application of certain accounting policies described in this and other notes to
these condensed consolidated financial statements.
(a) Principles of Consolidation
The accompanying condensed consolidated financial statements reflect the
accounts of the Company and its wholly owned subsidiaries. All material
intercompany accounts and transactions have been eliminated in consolidation.
(b) Contract Receivable
The Company has an outstanding contract receivable of $6,782,256 at March
31, 1997 from a significant customer. The contract receivable represents the
amount of revenue recognized in excess of cash received under an agreement
entered into by the Company and the customer whereby the Company licensed
certain of its page description technology, including its version of the
PostScript page description language, to the customer. There was no outstanding
contract receivable due to the Company as of June 30, 1996.
(c) Inventories
Inventories, which include material, labor and manufacturing overhead,
are stated at the lower of cost (first-in, first- out) or market and consist of
the following:
MARCH 31, 1997 JUNE 30, 1996
Raw materials $748,586 $493,660
Finished Goods 488,518 526,375
------------ ------------
$1,237,104 $1,020,035
XIONICS DOCUMENT TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
(d) Property and Equipment
The Company records property and equipment at cost and provides for
depreciation and amortization on a straight-line basis over the estimated
useful lives of the assets, as follows:
ESTIMATED
USEFUL LIFE MARCH 31 ,1997 JUNE 30, 1996
Asset Classification
Computer equipment 3-5 Years $3,419,356 $2,525,394
Furniture and fixtures 3-7 Years 1,031,059 564,865
Machinery and equipment 3-5 Years 133,608 75,612
---------- ----------
4,584,023 3,165,871
Accumulated depreciation and 1,819,825 996,780
amortization $2,764,198 $ 2,169,091
(e) Deferred Offering Costs
As of June 30, 1996, the Company had capitalized approximately $926,000
in costs related to the Company's initial public offering. These costs were
capitalized as deferred offering costs on the June 30, 1996 balance sheet and
reclassified to stockholders' equity upon completion of the offering.
(f) Noncash Investing and Financing Activities
MARCH 31, 1997 MARCH 31, 1996
Supplemental disclosure of noncash
transactions
Accretion of Preferred Stock Dividends --- $ 395,632
=========== ===========
Conversion of Class A Convertible
Preferred Stock to Class B Common Stock --- $1,229,113
=========== ==========
Forgiveness of secured promissory
note payable to a stockholder --- $ 565,000
=========== ==========
Acquisition of property and equipment
under capital lease $ 140,037 $ 482,000
=========== ==========
Conversion of Class C Redeemable Convertible
Preferred Stock to Common Stock $8,231,410 ---
=========== ==========
Conversion of Class A Convertible Preferred
Stock to Common Stock $3,606,658 ---
=========== ==========
XIONICS DOCUMENT TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
(f) Noncash Investing and Financing Activities (cont.)
Conversion of Class A Common Stock
to Common Stock $ 13,861 ---
Conversion of Class B Common Stock
to Common Stock $ 5,589 ---
========== =========
Acquisition of Property and Equipment
under Term Loans --- $ 329,500
========== =========
Converted to Class C Redeemable Convertible Preferred Stock---
Class B Redeemable Preferred Stock --- $2,310,596
Secured promissory notes payable to a stockholder --- $1,900,000
Senior subordinated promissory notes payable to --- $ 228,355
stockholders
3. ACQUISITION OF GCA Gesellschaft Fur Computer-Anwendung mbH
On February 21, 1997, the Company acquired GCA Gesellschaft fur
Computer-Anwendung mbH (GCA). The Company paid $5,000,000 in cash related to
the acquisition. The acquisition has been accounted for as a purchase in
accordance with APB Opinion No. 16, and accordingly, GCA's operating results
from February 21, 1997 are included in the accompanying financial statements.
In accordance with APB Opinion No. 16, the Company has allocated the
purchase price based on the fair value of assets acquired and liabilities
assumed. A significant portion of the purchase price, as described below, has
been identified in an independent appraisal as intangible assets using proven
valuation procedures and techniques, including approximately $5,400,000 of
in-process research and development ("in-process R&D"). Acquired intangibles
include the assembled workforce and goodwill of GCA. The intangible assets are
being amortized over their estimated useful lives of 5 GCA years.
The purchase price of $5,750,000, including direct acquisition costs, was
allocated as follows:
Current assets $ 444,313
Property and equipment 91,762
Acquired intangibles 150,000
In-process R&D 5,400,000
Other assets 9,098
Goodwill 200,000
Liabilities assumed (545,173)
----------
$5,750,000
----------
XIONICS DOCUMENT TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. ACQUISITION OF GCA Gesellschaft Fur Computer-Anwendung mbH (CONT.)
Unaudited pro forma operating results for the Company, assuming the
acquisition of GCA occurred on July 1, 1995 are as follows:
Year Ended
June 30, 1996
Net Sales $25,738,717
Net Loss $(1,606,262)
Net Loss per share $ (0.19)
Six Months Ended
December 31,1996
Net Sales $18,818,283
Net Income $ 2,187,382
Net Income per share $ 0.19
For purposes of these pro forma operating results, the in-process R&D was
assumed to have been written off prior to July 1, 1995, so that the operating
results presented include only recurring costs.
4. NEW ACCOUNTING STANDARD
In March 1997, the Financial Accounting Standards Board issued SFAS No.
128, Earnings Per Share. SFAS No. 128 establishes standards for computing and
presenting earnings per share and applies to entities with publicly held common
stock. This statement is effective for fiscal years ending after December 15,
1997 and early adoption is not permitted. When adopted, the statement will
require restatement of prior years' earnings per share. The Company will adopt
this statement for its fiscal year ended June 30, 1998. In addition, the
Company believes that the adoption of SFAS No. 128 will not have a material
effect on its financial statements.
XIONICS DOCUMENT TECHNOLOGIES, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Except for the historical information contained herein, this quarterly
Report on Form 10-Q may contain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Investors are cautioned that forward-looking statements
are inherently uncertain. Actual performance and results of operations may
differ materially from those projected or suggested in the forward-looking
statements due to certain risks and uncertainties, including, without
limitation, (i) the Company's relationship with Hewlett-Packard Company, from
whom the Company derives a significant portion of revenue from the supply of
software and related technology and support, (ii) the Company's dependence for
revenue upon the ability of its customers to develop and sell their own
products, which incorporate the Company's technology, to end users, and (iii)
the timely introduction of new products, such as the Company's embedded
technology for multifunction peripheral devices, and the market acceptance of
those products, in an extremely competitive and rapidly changing market where
the market success of entities providing embedded software products for paper
handling devices has historically been largely determined by their success in
becoming one of the industry standards. The market price of the Company's
common shares could be subject to significant fluctuations in response to
quarter-to-quarter variations in the Company's operating results, announcements
of technological innovations or new products by the Company or its competitors
and other events or factors. In addition, the stock market in recent years has
experienced extreme price and volume fluctuations that have particularly
affected the market prices of many technology companies. These fluctuations, as
well as general economic and market conditions, may materially and adversely
affect the market price of the Company's common shares. Because of these and
other factors, past financial performance should not be considered an indicator
of future performance. Additional information concerning certain risks and
uncertainties that would cause actual results to differ materially from those
projected or suggested in the forward-looking statements is contained in the
Company's filings with the Securities and Exchange Commission, including those
risks and uncertainties discussed in the Company's Final Prospectus, dated
September 26, 1996, in the section entitled "Risk Factors." The forward-looking
statements contained herein represent the Company's judgment as of the date of
this quarterly report on Form 10-Q, and the Company cautions readers not to
place undue reliance on such statements.
OVERVIEW
Xionics Document Technologies, Inc. (the Company) designs, develops and
markets advanced embedded systems technology for use in mainstream office
devices such as printers, copiers, scanners and multifunction devices. The
Company derives its revenue primarily from sales of its printer software
products, which include revenue from software licenses, royalties,
engineering services and maintenance, and from sales of its image
acceleration products. Software license revenue consists of the Company's
charges for licensed source code, which generally includes initial
non-refundable fees which are recognized as revenue upon the shipment of the
source code, provided there are no significant vendor obligations. Royalty
revenue is generally earned as a percentage of net revenue from unit sales by
licensees of products that incorporate the Company's software, and is
generally recognized as earned in the Company's financial statements in the
quarter in which amounts due to the Company have been determined using
estimates based upon historical payments. Engineering services revenue is
reorganized as the services are perfomed and consists of fees paid for
porting of the Company's software to
customer-specific device controllers. Payments under maintenance contracts are
due at the beginning of the contract; however, revenue is recognized ratably
over the term of the contract which is typically twelve months.
RESULTS OF OPERATIONS
Net revenue for the three months ended March 31, 1997 increased 48% to
$9.8 million compared to $6.7 million for the three months ended March 31,
1996. Net revenue for the nine months ended March 31, 1997, increased 79% to
$27.8 million compared to $15.5 million for the nine months ended March 31,
1996. The increases in both the three and nine month periods resulted primarily
from growth in sales of the Company's printer software products, including
approximately $3.8 million and $11.8 million, respectively, of revenue
recognized under an amendment to its preexisting agreement with Hewlett-
Packard Company ("HP") which was entered into in March 1996 (the "HP
Agreement").
Gross profit for the three months ended March 31, 1997 increased 55% to
$7.8 million from $5.0 million for the three months ended March 31, 1996. Gross
margin increased to 79% for the three months ended March 31, 1997 compared to
75% for the three months ended March 31, 1996. Gross profit for the nine months
ended March 31, 1997 increased 97% to $22.1 million from $11.3 million for the
nine months ended March 31, 1996. Gross margin increased to 80% for the nine
months ended March 31, 1997 compared to 72% for the nine months ended March 31,
1996. The increases in both the three and nine month periods were attributable
primarily to increased sales of higher margin Intelligent Peripheral System
("IPS") products and related engineering services, primarily related to the HP
Agreement, partially offset by a reduction in gross margin attributable to the
Company's image acceleration products.
Research and development expenses increased by 72% to $3.9 million for
the three months ended March 31, 1997 from $2.3 million for the three months
ended March 31, 1996. Research and development expenses increased by 76% to
$11.2 million for the nine months ended March 31, 1997 from $6.3 million for
the nine months ended March 31, 1996. For both the three and nine month periods
the higher expense level resulted primarily from increased expenditures
relating to the Company's multifunction peripheral technology, which is
currently in development. As a percentage of revenue, research and development
expenses increased to 39% for the three months ended March 31, 1997 compared to
34% for the three months ended March 31, 1996 and decreased to 40% for the nine
months ended March 31, 1997 compared to 41% for the nine months ended March 31,
1996. The declines in research and development expenses as a percentage of
revenue were principally the result of higher revenue.
Selling, general and administrative expenses remained relatively constant
at $2.4 million for both the three months ended March 31, 1997 and March 31,
1996. Selling, general and administrative expenses decreased by 1% to $6.9
million for the nine months ended March 31, 1997 from $7.0 million for the nine
months ended March 31, 1996. The decrease in selling, general and
administrative expenses during the nine month comparative periods is primarily
due to decreases in advertising, trade show and travel expenses relating to the
Company's image acceleration products. As a percentage of revenue, selling,
general and administrative expenses decreased to 24% and 25%, respectively, for
the three and nine month periods ended March 31, 1997, compared to 36% and 45%
for the three and nine month periods ended March 31, 1996. In addition to lower
levels of expense for the comparable nine month periods, the decline in
selling, general and administrative expenses as a percentage of revenue was
also principally the result of higher revenue.
During the three month period ended March 31, 1997, the Company completed
the acquisition of GCA Gesellschaft fur Computer-Anwendung mbH (GCA), Freiberg,
Germany, a developer of printer drivers for the worldwide
multifunction/printer peripheral market. The Company acquired all of the
outstanding shares of GCA for $5.0 million cash through its wholly-owned
subsidiary Xionics Document Technologies GmbH, Dortmund, Germany. The
purchase price of $5.7 million included $700,000 of direct costs including
the accrual of amounts for terminating certain leases and the relocation of
employees. The acquisition resulted in one-time charges of $5.4 million for
in-process research and development costs.
During the three and nine month periods ended March 31, 1997, net
interest expense decreased by $64,000 and $140,000, respectively, or 98% and
62%, compared to the three and nine month periods ended March 31, 1996. This
decrease resulted primarily from the reduction in bank lines of credit and note
payable to a shareholder, which were completely paid down by December 31, 1996.
Interest income and other income increased by $281,000 and $612,000,
respectively, or 610% and 822%, during the three and nine month periods ended
March 31, 1997, compared to the three and nine month periods ended March 31,
1996. Increases in interest income resulted primarily from increased cash
balances as a result of receiving net proceeds from the Company's September 26,
1996 initial public offering.
The Company recorded a $515,000 benefit for income taxes for the three
month period ended March 31, 1997, primarily resulting from the recognition of
a portion of the Company's deferred tax asset. The Company maintained a
$38,000 net provision for income taxes for the nine month period ended
March 31, 1997. In addition to the anticipated tax effect of the GCA
acquisition, the effective tax rate for the periods differs from the statutory
rate primarily as a result of the utilization of a portion of net operating
loss carry forwards. The Company did not provide for income taxes during the
three and nine month periods ended March 31, 1996 due to the loss for the
nine month period and the expected loss for fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, the Company had cash and cash equivalents of $21.5
million compared to $2.8 million at June 30, 1996. This increase is primarily
due to net proceeds resulting from the September 26, 1996 initial public
offering, partially offset by $5.0 million used in the February 21, 1997
acquisition of GCA.
At present, the Company has available a $4.0 million working capital
revolving line of credit and a $2.0 million term loan facility with a bank,
both of which are secured by substantially all assets of the Company. The
working capital line of credit terminates on December 1, 1997, and no term loan
will be made after June 30, 1997. Under the loan facilities, the Company is
required to comply with certain restrictive covenants, which the Company was in
compliance with as of March 31, 1997. The interest rate for the working capital
line of credit is the bank's prime rate; the interest for the term loan
facility is the bank's prime rate plus 0.5%. As of March 31, 1997, there were
no outstanding borrowings under the working capital line of credit and term
loan facility. Under the terms of the working capital and term loan facilities,
the Company is prohibited from declaring or paying dividends on its Common
Stock. While the Company may in the future use private or public placements of
its securities as a source of liquidity, it has no present intention to do so.
The Company believes that its existing cash and cash equivalent balances,
together with funds generated from operations and available borrowings under
its lines of credit will be sufficient to finance the Company's operations for
at least the next 12 months. In the event the Company acquires one or more
businesses or products, the Company's capital requirements could increase
substantially, and there can be no assurance that additional capital will be
available on terms acceptable to the Company, if at all.
PART II -- OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
During the quarter ended March 31, 1997, the Company issued 100,876
shares of unregistered common stock in reliance on exemptions available
under Securities and Exchange Commission Rule 701, pursuant to the
exercise of employee stock options granted under the Company's 1995 and
1996 Stock Option Plans (the "Plans") prior to the effectiveness of the
Company's Registration Statement on Form S-1, declared effective
September 26, 1996. The average exercise price for the shares issued
was $.2729 and the total consideration received by the Company was
$27,529 for the issuance of such shares.
ITEM 5. OTHER INFORMATION
On April 1, 1997, Peter J. Simone joined the Company as President and
Chief Operating Officer, reporting directly to Robert E. Gilkes,
Chairman and Chief Executive Officer.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 Statement re: Computation of Per Share Earnings
27 Financial Data Schedule
99 Xionics Document Technologies, Inc. press release dated April
1, 1997, announcing appointment of Peter J. Simone as
President and Chief Operating Officer
(b) Reports on Form 8-K
On March 7, 1997, the Company filed a report on Form 8-K reporting
its acquisition of GCA Gesellschaft fur Computer-Anwendung mbH
through its German subsidiary, Xionics Document Technologies GmbH,
on February 21, 1997. On May 6, 1997, the Company filed a further
report on Form 8-K providing financial statements and pro forma
financial statements of GCA and of the Company and GCA on a
consolidated basis.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THE REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
XIONICS DOCUMENT TECHNOLOGIES, INC.
NAME TITLE DATE
- ---- ----- ----
/S/ ROBERT E. GILKES Chairman of the Board of May 14, 1997
- ----------------------------- Directors and Chief Executive
ROBERT E. GILKES Officer
/S/ GERARD T . FEENEY
- -----------------------------
GERARD T. FEENEY Chief Financial Officer May 14, 1997