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 DECEMBER 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)
(781) 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 February 11, 1998, there were 12,077,516 shares of the Company's $.01
par value common stock issued, with 11,853,453 shares outstanding.
XIONICS DOCUMENT TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX
PAGE
NUMBER
PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Consolidated Financial Statements
Balance Sheets--December 31, 1997 and June 30, 1997........... 3
Statements of Operations--Six Months Ended December 31, 1997
and 1996 and Three Months Ended December 31, 1997 and 1996... 5
Statements of Cash Flows--Six Months Ended December 31, 1997
and 1996.................................................... 5
Notes to Condensed Consolidated Financial Statements............. 6
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................... 9
PART II OTHER INFORMATION
ITEM 2. Changes in Securities and Use of Proceeds........................ 12
ITEM 4. Submission of Matters to a Vote of Security Holders.............. 12
ITEM 6. Exhibits and Reports on Form 8K.................................. 12
Signatures....................................................... 13
PART I--FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
XIONICS DOCUMENT TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, June 30,
1997 1997
------------ -----------
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $15,004,816 $20,843,911
Accounts receivable, less reserves of approximately $263,000 and
$119,000 at December 31, 1997 and June 30, 1997, respectively 5,882,082 5,445,913
Contract receivable 8,669,352 7,411,288
Other receivables 678,623 -
Inventories 1,408,086 1,026,980
Prepaid expenses and other current assets 914,989 1,370,908
----------- ------------
Total Current Assets 32,557,948 36,099,000
Property and Equipment, net 3,177,498 2,836,669
Deferred tax asset 1,030,000 930,000
Acquired intangibles, net of accumulated amortization of approximately $813,000
and $782,000 at December 31, 1997 and June 30, 1997 respectively 619,148 420,833
Other assets 778,218 2,312,611
----------- ------------
$38,162,812 $42,599,113
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $907,000 $1,965,055
Accrued payroll 418,452 694,354
Accrued expenses 2,652,226 3,356,819
Note payable, current portion 579,750 -
Deferred revenue 1,474,641 1,305,033
----------- ------------
Total Current Liabilities 6,032,069 7,321,261
Note payable, net of current portion 575,000 -
Stockholders' equity:
Preferred Stock, $.01 par value--
Authorized--10,000,000 shares
Issued and outstanding--none - -
Common Stock
Authorized--40,000,000 shares
Issued--12,045,531 and 11,831,762 shares at December 31, 1997 and
June 30, 1997, respectively
Outstanding--11,821,468 and 11,607,699 shares at December 31, 120,456 118,317
1997 and June 30, 1997, respectively
Additional paid-in capital 46,110,259 45,815,462
Treasury stock, at cost--224,063 shares of Common Stock at
December 31, 1997 and June 30, 1997, respectively (151,246) (151,246)
Accumulated deficit (14,523,726) (10,504,681)
----------- ------------
Total stockholders' equity 31,555,743 35,277,852
----------- ------------
$38,162,812 $42,599,113
============ ============
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 Six Months Ended
-------------------------- ---------------------------
December 31, December 31, December 31, December 31,
1997 1996 1997 1996
------------ ------------ ------------ ------------
Net revenue $8,702,553 $9,504,581 $18,154,046 $17,945,507
Cost of revenue 2,610,533 2,027,139 5,006,924 3,586,205
------------ ------------ ------------ ------------
Gross profit 6,092,020 7,477,442 13,147,122 14,359,302
Operating expenses:
Research and development 3,697,403 3,765,921 7,008,844 7,284,247
Selling, general and administrative 2,348,622 2,311,322 4,555,285 4,571,166
Charge for purchased research and development - - 2,000,000 -
Non-recurring charge 3,944,312 - 3,944,312 -
------------ ------------ ------------ ------------
(Loss) income from operations (3,898,317) 1,400,199 (4,361,319) 2,503,889
Other income (expense):
Interest expense (1,382) (19,349) (1,501) (84,926)
Interest income 192,937 340,352 431,742 351,574
Other income 84,599 11,786 54,698 8,751
------------ ------------ ------------ ------------
(Loss) income before (benefit) provision for income taxes (3,622,163) 161,732,988 (3,876,380) 2,779,288
(Benefit) provision for income taxes (557,335) 343,597 142,665 552,857
------------ ------------ ------------ ------------
Net (loss) income $(3,064,828) $1,389,391 $(4,019,045) $2,226,431
============ ============ ============ ============
(Loss) income per common and common equivalent share (Note 3)
Basic net (loss) income per share $(0.26) $0.13 $(0.34) $0.25
============ ============ ============ ============
Diluted net (loss) income per share $(0.26) $0.11 $(0.34) $0.20
============ ============ ============ ============
Weighted average common and common equivalent shares outstanding 11,786,138 10,471,030 11,738,417 9,007,974
Basic
============ ============ ============ ============
Diluted 11,786,138 12,755,769 11,738,417 11,330,226
============ ============ ============ ============
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)
Six Months Ended
-----------------------------
December 31, December 31,
1997 1996
------------ --------------
Cash flows from operating activities:
Net (Loss) income $(4,019,045) $2,226,431
Adjustments to reconcile net
(loss) income to net
cash used in operating activities:
Non-recurring charge 3,944,312 -
Charge for purchased research 2,000,000 -
and development
Depreciation and amortization 628,878 533,249
Changes in assets and liabilities-- -
Accounts receivable (436,169) (1,455,350)
Contract receivable (1,258,064) (2,971,773)
Other receivables (678,623)
Inventories (381,106) (359,235)
Deferred tax asset (100,000)
Prepaid expenses and other current assets 455,919 (436,610)
Accounts payable (1,082,663) (89,648)
Accrued payroll (325,526)
Accrued expenses (1,608,319) (509,180)
Deferred revenue 169,608 2,175,262
----------- -------------
Net cash used in operating activities (2,690,798) (886,854)
----------- -------------
Cash flows from investing activities:
Purchases of property and equipment (969,707) (915,258)
Increase in other assets (1,405,048) (832,094)
Cash paid for Seaport, net of cash acquired (902,468) -
Decrease in short-term investments - 644,613
----------- -------------
Net cash used in investing activities (3,277,223) (1,102,739)
----------- -------------
Cash flows from financing activities:
Repayment of term loans - (886,833)
Repayment of note payable to stockholder - (2,094,000)
Proceeds from exercise of stock options 73,674 35,181
Proceeds from employee stock purchase plan 55,252 -
Reissuance of treasury stock - 50
Sale of Common Stock, net of issuance costs - 30,685,000
Reclassification of deferred offering costs - 926,439
----------- -------------
Net cash provided by financing activities 128,926 28,665,837
----------- -------------
Net (decrease) increase in cash and cash equivalents (5,839,095) 26,676,244
Cash and cash equivalents, beginning of period 20,843,911 2,115,859
----------- -------------
Cash and cash equivalents, end of period $15,004,816 $28,792,103
----------- -------------
Supplemental disclosure of cash flow information:
Cash paid for interest $42, 338 $133,497
----------- -------------
Cash paid for income taxes $ - $97,000
----------- -------------
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, 1997,
included in the Company's annual report on Form 10-K.
The condensed consolidated financial statements and notes herein are
unaudited, but in the opinion of management, include all the adjustments
(consisting only 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 had an outstanding contract receivable of $8,669,352 and
$7,411,288 at December 31, 1997 and June 30, 1997, respectively, from a
significant customer. The contract receivable represents 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. This contract requires that the Company
perform customer support in configuring its technology to the customer
specifications. The Company follows contract accounting in recognizing revenue
on this contract using the percentage of completion method.
(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:
DECEMBER 31, 1997 JUNE 30, 1997
Raw materials $805,619 $523,295
Finished Goods 602,467 503,685
---------------- ------------
$1,408,086 $1,026,980
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 DECEMBER 31, 1997 JUNE 30, 1997
Asset Classification
Computer equipment 3-5 Years $4,134,127 $3,284,246
Furniture and fixtures 3-7 Years 1,114,741 1,057,440
Machinery and equipment 3-5 Years 369,506 306,983
----------- -----------
5,618,374 4,648,669
Less-Accumulated depreciation and amortization (2,440,876) (1,812,000)
----------- -----------
$3,177,498 $2,836,669
(e) Noncash Investing and Financing Activities
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- ------------------
Supplemental disclosure of noncash transactions
Issuance of note payable related to the Seaport
acquisition $ 1,155,000 $ ---
=========== ===========
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
=========== ===========
Conversion of Class A Common
Stock $ --- $ 13,861
=========== ===========
Conversion of Class B Common Stock to Common Stock $ --- $ 5,589
=========== ===========
3. (LOSS) INCOME PER SHARE
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings
Per Share", replaces the calculation of primary and fully diluted earnings per
share with basic and diluted earnings per share. Basic earnings per share is
calculated by dividing net income or loss by the weighted average number of
common shares outstanding for the period. Diluted earnings per share reflects
the potential dilution of stock options and warrants that could share in the
earnings of the Company. Diluted income per common share is computed using the
weighted average number of common and common equivalent shares outstanding
during each period. For those periods where a net loss is reported, stock
options and warrants are not considered; as their effect would be
anti-dilutive.
XIONICS DOCUMENT TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. (LOSS) INCOME PER SHARE (CONT.)
Basic and diluted (loss) income per share, as required by SFAS No. 128,
are as follows:
Three Months Ended Six Months Ended
--------------------------- -----------------------------
December 31, December 31, December 31, December 31,
1997 1996 1997 1996
----------- ------------- ------------ -------------
Net (loss) income $(3,064,828) $1,389,391 $(4,019,045) $2,226,431
=========== =========== =========== ===========
Basic weighted average shares outstanding 11,786,138 10,471,030 11,738,417 9,007,974
shares outstanding
Weighted average common equivalent shares - 2,284,739 - 2,232,252
common equivalent
shares
----------- ----------- ----------- -----------
Diluted weighted average shares outstanding 11,786,138 12,755,769 11,738,41 11,330,226
=========== =========== =========== ===========
Basic (loss) income per share $(0.26) $0.13 $(0.34) $0.25
=========== =========== =========== ===========
Diluted (loss) income per share $(0.26) $0.11 $(0.34) $0.20
=========== =========== =========== ===========
4. NON-RECURRING CHARGE
During the second quarter ended December 31, 1997, the Company recorded a
non-recurring charge of approximately $3.9 million as follows:
Write-down of intangible assets to net realizable value 3.0
Provision for lease costs of excess facilities .9
----
$3.9
====
As a result of the change in market conditions for certain products, in
accordance with Statement of Financial Accounting Standards No.121 (SFAS 121),
"Accounting for the Impairment of Long-lived Assets and for Long-lived Assets
to be Disposed of", the Company wrote off certain intangible assets that the
Company determined were impaired. The Company wrote off approximately $2.7
million of purchased technology and $0.3 million of prepaid royalties for which
there is no estimated future economic benefit to the Company. The lease loss
accrual of $.9 million consists of costs related to excess facilities at the
Company's current facility in Burlington, MA, and abandoned space at the
Company's office in the United Kingdom.
XIONICS DOCUMENT TECHNOLOGIES, INC. AND SUBSIDIARIES
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains 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, including without limitation statements
regarding the anticipated shipment date of products containing the Company's
XipChip 1.5 ASIC and the development of and demand for the Company's future
products. 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 various risks and uncertainties, including, without limitation: (i) the
possibility of termination of the Company's relationship with Hewlett-Packard
Company, from which the Company derives a significant portion of its revenue
from the supply of software and related technology and support; (ii) the
Company's dependence for its revenue upon the success of its customers in
developing and selling their own products, which incorporate the Company's
technology, to end users; (iii) the phasing out of the Company's royalty
payments from Lexmark International Group, Inc.; (iv) the Company's dependence
on its relationships with a relatively small number of significant customers;
(v) the difficulties and risks associated with the development and timely
introduction of new products, such as the Company's embedded technology for
multifunction peripheral devices, and the market acceptance of those products;
(vi) the difficulties and risks associated with competing in a market
characterized by rapidly changing technology, evolving industry standards and
frequent new product introductions, and in which the market success of entities
providing embedded software products for office devices has historically been
largely determined by their success in becoming one of the industry's
standards; (vii) the Company's dependence for the success of its MFP-oriented
products upon broad market acceptance of devices of this type, and upon its OEM
customers' ability to develop and market MFPs that meet market demands for
functionality, performance, speed, and network connectivity; (viii) the
pressures of intense competition from the Company's competitors, including
Adobe Systems Incorporated and others with significantly greater resources and
name recognition than the Company; (ix) the possibility of increased
competition from Adobe, in particular; and (x) the difficulties and risks
associated with effective management of the Company's growth. In addition, the
market price of the Company's common stock 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. Further, the
stock market in recent years has experienced extreme price and volume
fluctuations that have particularly affected the market price of the stock 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 stock. Because of these and other factors, past financial
performance should not be considered an indicator of future performance. Any
and all 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. 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 annual report on form 10-K, dated September 29, 1997
and its 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. 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 may include 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 derived from 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
FOR THE QUARTERS AND SIX MONTHS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996
Net revenue for the three months ended December 31, 1997 decreased 8% to
$8.7 million compared to $9.5 million for the three months ended December 31,
1996. Net revenue for the six months ended December 31, 1997, increased 1% to
$18.2 million compared to $17.9 million for the six months ended December 31,
1996. The decrease in the three month period resulted primarily from the effect
of changes in the competitive market conditions which resulted in reduced
license fees and the timing of certain software license agreements.
Gross profit for the three months ended December 31, 1997 decreased 19%
to $6.1 million from $7.5 million for the three months ended December 31, 1996.
Gross margin decreased to 70% for the three months ended December 31, 1997
compared to 79% for the three months ended December 31, 1996. Gross profit for
the six months ended December 31, 1997 decreased 8% to $13.1 million from $14.4
million for the six months ended December 31, 1996. Gross margin decreased to
72% for the six months ended December 31, 1997 compared to 80% for the six
months ended December 31, 1996. The decreases in both the three and six month
periods were attributable primarily to a changes in the revenue mix. This
included a higher proportion of revenue generated from non-recurring
engineering fees which are at a lower gross margin combined with a lower
proportion of software license fees and royalties which are at a higher gross
margin.
Research and development expenses decreased by 2% to $3.7 million for the
three months ended December 31, 1997 from $3.8 million for the three months
ended December 31, 1996. Research and development expenses decreased by 4% to
$7.0 million for the six months ended December 31, 1997 from $7.3 million for
the six months ended December 31, 1996. Principally as a result of lower
revenue, research and development expenses increased to 42% of revenue for the
three months ended December 31, 1997 compared to 40% for the three months ended
December 31, 1996. Research and development expenses decreased to 39% for the
six months ended December 31, 1997 compared to 41% for the six months ended
December 31, 1996.
Selling, general and administrative expenses remained relatively constant
at $2.3 million for both of the three month periods ended December 31, 1997 and
December 31, 1996 and at $4.6 million for both of the six month periods ended
December 31, 1997 and December 31, 1996. Principally as the result of lower
revenue, selling, general and administrative expenses increased to 27% of
revenue for the three months ended December 31, 1997 compared to 24% for the
three months ended December 31, 1996. Selling, general and administrative
expenses were 25% of revenue for both of the six month periods ended December
31, 1997 and December 31, 1996.
Charge for Purchased Research and Development. On August 13, 1997, the
Company completed the acquisition of Seaport Imaging (Seaport), San Jose, CA a
leading developer of image processing software and hardware for production
scanning and the document imaging market (the Seaport acquisition). The Company
acquired all the outstanding shares of Seaport in a $2.46 million transaction.
The Company paid $1.1 million in cash at closing and the balance is evidenced
by a promissory note. The Seaport acquisition resulted in a charge of $2
million for purchased in-process research and development cost. This amount
represents the value of acquired in-process research and development projects
as determined by an independent appraisal. The development of these projects
had not yet reached technological feasibility and the technology had no
alternative future use. The technology acquired in the Seaport acquisition has
required substantial additional development.
Non-recurring charge. During the second quarter ended December 31, 1997,
the Company recorded a non-recurring charge of approximately $3.9 million.
Included in the charge is a write-down of intangible assets to net realizable
value of $3.0 million and a $.9 million provision for lease costs of excess
facilities. The Company determined that, due to changes in market conditions
related to certain products, certain intangible assets were impaired. Included
in the charge is a lease loss accrual of $.9 million which consists of costs
related to excess facilities at the Company's current facility in Burlington,
MA, and abandoned space at the Company's office in the United Kingdom.
During the three and six month periods ended December 31, 1997, interest
expense decreased by $17,967 and $83,425, or 93% and 98%, respectively,
compared to the three and six month periods ended December 31, 1996. This
decrease resulted primarily from the reduction in bank lines of credit and a
note payable to a shareholder, which were completely paid down by December 31,
1996. During the three month period ended December 31, 1997, interest income
decreased by $147,415, or 43%, compared to the three month period ended
December 31, 1996, primarily as a result of decreased cash balances. For the
six month period ended December 31, 1997, interest income increased by $80,168,
or 23%, compared to the six month period ended December 31, 1996, primarily
from increased cash balances as a result of receiving net proceeds from the
Company's September 26, 1996 initial public offering.
The Company's effective income tax rate was 35% for the three and six
month periods ended December 31, 1997. 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 and other tax preference items.
The Company's effective income tax rate was 20% for the three and six month
periods ended December 31, 1996. 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.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1997, the Company had cash and cash equivalents of $15.0
million compared to $20.8 million at June 30, 1997. This decrease is primarily
due to uses of cash for operating activities, computer equipment purchases, and
for the August 1997 acquisition of Seaport Imaging.
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, 1998, and no term loan
will be made after December 1, 1998. Under the loan facilities, the Company is
required to comply with certain restrictive covenants, with which the Company
was in compliance as of December 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 December 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 placements or
public offerings 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 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 AND USE OF PROCEEDS
During the quarter ended December 31, 1997, the Company sold 46,727 shares of
unregistered common stock in reliance on the exemption 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-8 covering the Plans, filed November 4, 1996. The average
exercise price for the shares was $0.5961, and the total consideration received
by the Company for the sale of such stock was $27,854. Use of proceeds is as
disclosed in the Company's Annual Report on Form 10-K filed with the Commission
on September 29, 1997.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held an Annual Meeting of its Stockholders on December 8, 1997, at
which the following occurred:
Election of Directors: The stockholders elected Robert E. Gilkes,
Thomas A. St. Germain and Peter J. Simone as Class I Directors, to serve
until the Annual Meeting of Stockholders to be held in the year 2000.
The other persons continuing as directors are Richard A. D'Amore, Ronald
D. Fisher, Paul R. Low and David R. Skok.
The vote with respect to each nominee was as follows:
Mr. Gilkes received the votes of 10,769,784 shares in favor of his
election, 5,175 against, no abstentions and no broker non-votes. Mr.
St. Germain received the votes of 10,769,784 shares in favor of his
election, 5,175 against, no abstentions and no broker non-votes. Mr.
Simone received the votes of 10,770,084 shares in favor of his election,
4,875 against, no abstentions and no broker non-votes.
Amendment of 1996 Stock Option Plan: The stockholders approved the amendment of
the 1996 Stock Option Plan to increase the number of shares available for grant
under such Plan from 950,000 shares to 1,750,000 shares. The vote on the matter
was as follows:
For 6,736,278
Against 2,848,366
Abstain 8,356
Broker non-votes 1,290,105
Appointment of Independent Auditors: The stockholders ratified the appointment
of Arthur Andersen LLP as the Company's independent public accountants for the
fiscal year ending June 30, 1998. The vote on the matter was as follows:
For 10,733,248
Against 2,975
Abstain 38,736
Broker non-votes 0
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
On November 4, 1997, the Company filed a report on Form 8-K reporting the
resignation of Robert E. Gilkes as Chief Executive Officer and the appointment
of Peter J. Simone as Chief Executive Officer on October 21, 1997.
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/ PETER J. SIMONE President and Chief Executive February 13, 1998
PETER J. SIMONE Officer
/S/ GERARD T. FEENEY
GERARD T. FEENEY Chief Financial Officer February 13, 1998