SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period March 31, 1996;
or
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________to _________
Commission file #0-15797
XIOX CORPORATION
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(Exact name of small business issuer as specified in its charter)
Delaware 95-3824750
- ------------------------------- --------------------------------
(State or other jurisdiction of (IRS Employer Identification No)
incorporation or organization)
577 Airport Blvd, Suite 700,
Burlingame, California 94010
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (415) 375-8188
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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). Yes X No
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(2) Has been subject to such filing requirements for the past 90 days.
Yes X No
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Issuer's number of common shares
outstanding at March 31, 1996 2,372,384 shares
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PAGE 1 of 10
X I O X C O R P O R A T I O N A N D S U B S I D I A R I E S
INDEX
Page No
PART I Financial Information
Item 1.
Condensed Consolidated Balance Sheets -
March 31, 1996 and December 31, 1995 3
Condensed Consolidated Statements of Operations
Three Months ended March 31, 1996 and March 31, 1995 4
Condensed Consolidated Statements of Cash Flows -
Three Months ended March 31, 1996 and March 31, 1995 5
Notes to Condensed Consolidated Financial Statements 6-7
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-9
PART II Other Information
Item 6.
Exhibits and Reports on Form 8-K 9
Exhibit 27.
Financial Data Schedule - March 31, 1996
(separate electronic document attached)
Signatures 10
PAGE 2
PART I - FINANCIAL INFORMATION
X I O X C O R P O R A T I O N A N D S U B S I D I A R I E S
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 1996 December 31,1995
(unaudited) ***
-------------- ----------------
ASSETS:
CURRENT ASSETS
CASH & CASH EQUIVALENTS $ 235,201 344,165
ACCOUNTS RECEIVABLE, NET 978,523 949,779
OTHER RECEIVABLES 18,937 29,005
INVENTORIES 252,286 348,230
PREPAID EXPENSES AND OTHER ASSETS 224,382 74,175
----------- -----------
TOTAL CURRENT ASSETS 1,709,329 1,745,354
PURCHASED SOFTWARE, NET 87,810 95,606
PROPERTY & EQUIPMENT, NET 431,235 476,381
NOTES RECEIVABLE 131,138 131,138
DEPOSITS & OTHER ASSETS 21,598 21,952
----------- -----------
$ 2,381,110 2,470,431
=========== ===========
LIABILITIES/STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES
BANK LINE OF CREDIT $ 0 100,000
ACCOUNTS PAYABLE 78,283 146,139
ACCRUED EXPENSES 89,977 81,915
ACCRUED COMPENSATION 68,200 60,280
PURCHASE DEPOSITS 351,747 231,266
DEFERRED REVENUE 725,257 687,314
----------- -----------
TOTAL CURRENT LIABILITIES 1,313,464 1,306,914
COMMITMENTS & CONTINGENCIES
STOCKHOLDERS' EQUITY:
COMMON STOCK, $.01 par, 10,000,000 Authorized, 23,724 23,578
2,372,384 and 2,357,784 issued and ----------- -----------
outstanding in 1996 and 1995 respectively
PAID-IN CAPITAL 5,465,157 5,465,140
ACCUMULATED DEFICIT (4,421,235) (4,325,201)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 1,067,646 1,163,517
----------- -----------
$ 2,381,110 2,470,431
=========== ===========
*** Condensed from audited financial statements.
The accompanying notes are an integral part of these condensed
financial statements.
PAGE 3
PART I - FINANCIAL INFORMATION
X I O X C O R P O R A T I O N A N D S U B S I D I A R I E S
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended Three months ended
March 31, 1996 March 31, 1995
(unaudited) (unaudited)
----------- -----------
REVENUES $ 1,339,525 1,775,508
PRODUCT COSTS 600,792 913,994
RESEARCH AND DEVELOPMENT 189,754 324,906
MARKETING, SALES, AND ADMINISTRATIVE 643,314 796,058
----------- -----------
1,433,860 2,034,958
----------- -----------
LOSS FROM OPERATIONS (94,335) (259,450)
INTEREST INCOME, NET 1,116 (8,436)
----------- -----------
LOSS BEFORE INCOME TAXES (93,219) (267,886)
INCOME TAX PROVISION (2,815) (550)
----------- -----------
NET LOSS $ (96,034) (268,436)
=========== ===========
PER SHARE INFORMATION:
NET LOSS PER SHARE $ (0.04) (0.15)
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING DURING THE QUARTER 2,362,918 1,758,429
=========== ===========
The accompanying notes are an integral part of these
condensed financial statements.
PAGE 4
PART I - FINANCIAL INFORMATION
X I O X C O R P O R A T I O N A N D S U B S I D I A R I E S
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended Three months ended
March 31, 1996 March 31, 1995
(unaudited) (unaudited)
----------- --------------
CASH USED IN OPERATING ACTIVITIES:
NET LOSS $ (96,034) (268,436)
RECONCILING ADJUSTMENTS FROM OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 57,335 58,206
DECREASE (INCREASE) IN:
ACCOUNTS / OTHER RECEIVABLES, NET (18,676) 462,406
INVENTORIES 95,944 (137,773)
PREPAID EXPENSES, DEPOSITS AND OTHER ASSETS (149,853) (172,832)
INCREASE (DECREASE) IN:
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (49,174) (287,748)
INCOME TAXES PAYABLE (2,700) (550)
PURCHASE DEPOSITS 120,481 28,504
DEFERRED REVENUE 37,943 7,121
--------- ---------
NET CASH USED IN OPERATIONS (4,734) (311,102)
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES:
ACQUISITION OF PROPERTY AND EQUIPMENT, NET 62 (19,543)
ACQUISITION OF SOFTWARE RIGHTS, NET (4,455) (11,159)
--------- ---------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (4,393) (30,702)
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES:
BORROWINGS FROM BANK LINE 0 270,000
BANK LINE REPAYMENTS (100,000) 0
SALES OF COMMON STOCK 163 26,357
--------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (99,837) 296,357
--------- ---------
NET INCREASE/(DECREASE) IN
CASH & CASH EQUIVALENTS (108,964) (45,447)
BEGINNING CASH AND CASH EQUIVALENTS 344,165 52,556
--------- ---------
ENDING CASH AND CASH EQUIVALENTS $ 235,201 7,109
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
INTEREST PAID DURING THE QUARTER $ 1,536 12,336
INCOME TAXES PAID DURING THE QUARTER 2,815 550
<FN>
The accompanying notes are an integral part of these
condensed financial statements.
</FN>
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PART I - FINANCIAL INFORMATION
X I O X C O R P O R A T I O N A N D S U B S I D I A R I E S
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 : BASIS OF PRESENTATION
The financial information included herein relating to December 31, 1995
is audited and the financial information relating to the three month periods
ended March 31, 1996 and March 31, 1995 is unaudited, and as such reflects all
adjustments (consisting solely of normal recurring adjustments which are, in the
opinion of management, necessary for a fair statement of results for the interim
periods). Certain information and footnote disclosures normally included in
accordance with generally accepted accounting principles have been condensed
pursuant to Securities and Exchange Commission Rules.
The results of operations for the three month period ended March 31,
1996 are not necessarily indicative of the results to be expected for the full
year. It is suggested that these interim statements be read in conjunction with
the financial statements and notes included in the Company's Annual Financial
Report filed on Form 10KSB for the year ended December 31,1995.
NOTE 2 : INVENTORIES
Inventories at March 31, 1996 have been stated at the lower of cost
(first-in, first-out basis) or market. Inventories consist solely of purchased
hardware and software products (finished goods).
NOTE 3 : PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
March 31, 1996 December 31, 1995
--------------- -----------------
Office Equipment $ 1,020,487 1,019,919
Furniture and Fixtures 303,754 304,384
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1,324,241 1,324,303
less Accumulated
Depreciation/Amortization (893,006) (847,922)
----------- -----------
431,235 476,381
=========== ===========
Software Acquisition $ 193,402 188,947
less Accumulated Depreciation (105,592) (93,341)
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87,810 95,606
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PAGE 6
PART I - FINANCIAL INFORMATION
X I O X C O R P O R A T I O N A N D S U B S I D I A R I E S
NOTES TO CONDENSED FINANCIAL STATEMENTS
(continued)
NOTE 4 : BANK LINE OF CREDIT
The Company maintains a $750,000 line of credit collateralized by
eligible accounts receivable. The line bears interest at prime plus 1.75%,
increased to prime plus 2.00% effective December 28, 1995, and is renewable in
June, 1996. At March 31, 1996 the Company had $0 outstanding against this line.
NOTE 5: STOCK-BASED COMPENSATION
In October, 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard (SFAS) No. 123, "Accounting for
Stock-Based Compensation." SFAS No. 123 will be effective for fiscal years
beginning after December 15, 1995, and will require that the Company either
recognize in its consolidated financial statements costs related to its employee
stock-based compensation plans, such as stock option and stock purchase plans,
or make pro forma disclosures of such costs in a footnote to the consolidated
financial statements. SFAS No. 123 is not expected to have a material effect on
the Company's consolidated results of operations or financial position.
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PART I - FINANCIAL INFORMATION
X I O X C O R P O R A T I O N A N D S U B S I D I A R I E S
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This section and the financial information provided herein contain
forward looking statements that involve risks and uncertainties. The Company's
actual results may differ materially from management's expectations and the
results discussed in the forward looking statements. Significant factors which
could affect performance include, but are not limited to, those discussed in the
subsection entitled "Factors Affecting Operating Results and Market Price of
Stock" commencing on page (9) below.
The following is management's discussion and analysis of certain
significant factors which have affected Xiox's financial position and operating
results during the periods included in the accompanying condensed financial
statements.
First Quarter, 1996 vs 1995
REVENUES / Revenues for the three months ended March 31, 1996 were $1,339,525,
NET INCOME a decrease of 25% versus the $1,775,508 recorded during the three
months ended March 31, 1995. A portion of the $435,983 decrease in revenues is
attributable to the sale of the Company's Gemini Telemanagement Systems ("GTS")
business in the fourth quarter of 1995.
Total expenses during the three months ended March 31, 1996
were $ 1,433,860, a decrease of 30% versus the $2,034,958 of expenses incurred
during the three months ended March 31, 1995. The variable portion of product
costs declined slightly to 20% of total revenue in first quarter 1996 from 22%
in 1995 due to variations in product mix. Total product costs as a percentage of
revenues decreased to 45% in 1996 from 51% in 1995, primarily due to the
Company's efforts to centralize key functions of its operations. Efforts to
manage expenses were realized during the first quarter of 1996 and are reflected
in an overall decrease in other operating expenses of 26% or $287,896 versus the
comparable quarter of 1995.
Interest income from lease investments and short-term securities
generated interest income of $2,652 versus the year earlier interest income of
$3,900. Interest expense during the quarter decreased 88%, from $12,336 in 1995
to $1,536 in the first quarter of 1996, primarily due to a decrease in bank
credit line borrowings.
The Company lost $94,335 from operations during the first quarter of
1996 and incurred a net loss after taxes of $96,034 versus a loss of $259,450
from operations and a net loss after taxes of $268,436 in the comparable quarter
of 1995. On a comparative basis, this represents a 64% increase in
profitability, or a decrease in net loss of $163,416, at a lower revenue level.
The Company attributed this to its management of expenses and efforts to
streamline operations.
PAGE 8
PART I - FINANCIAL INFORMATION
X I O X C O R P O R A T I O N A N D S U B S I D I A R I E S
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(continued)
Liquidity and Capital Resources at March 31, 1996
At March 31, 1996, Xiox held cash and cash equivalents totaling
$235,201 and had working capital of $ 1,121,122 versus cash equivalents of
$334,165 and working capital of $1,125,754 at December 31, 1995. The Company
anticipates investing a total of $100,000 in capital equipment during 1996,
consisting primarily of computer hardware and software and office equipment.
Since December 31, 1995, capital equipment procurements have totaled $4,393.
In December, 1995, the Company decreased its bank line of credit from
$1,000,000 to $750,000. The bank line, when utilized, is collateralized by
certain current assets and property and equipment. The line carries a variable
interest rate based upon prime plus 1.75%, increased to prime plus 2.00%
effective December 28, 1995. At March 31, 1996, the Company had $0 outstanding
against this line.
Factors Affecting Market Price of Stock at March 31, 1996
Xiox operates in a rapidly changing environment that involves a number
of risks and uncertainties, some of which are beyond the Company's control and
any of which may have an adverse effect on the Company's business, financial
condition, and results of operations. These uncertainties include, but are not
limited to, the Company's reliance on the sale of few products; the Company's
dependence on the ability of its distribution channels to market the Company's
products; the fluctuations in the Company's quarterly results and the effect of
these results on the Company's ability to maintain its listed status on the
Nasdaq Small Cap Market; the ability of the Company's product developers to
design products and software that do not contain defects and "bugs" which render
the products or software inoperable, or susceptible to breakdown, software
viruses, or "hacking"; and the outcome of the litigation in which the Company is
involved.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter ended March
31, 1996.
PAGE 9
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X I O X C O R P O R A T I O N
SIGNATURES
In accordance with 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 duly authorized officers of the registrant.
XIOX CORPORATION
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(Registrant)
Date: May 15, 1996 William H. Welling
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(William H. Welling, Chairman)
(Duly Authorized Officer)
Date: May 15, 1996 Melanie D. Reid
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(Melanie D. Reid, VP of Finance/CFO)
(Duly Authorized Officer)
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