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 September 30, 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
-- --
(2) Has been subject to such filing requirements for the past 90 days.
Yes X No
-- --
Issuer's number of common shares
outstanding at September 30, 1996 2,372,384 shares
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PAGE 1 of 12
XIOX CORPORATION AND SUBSIDIARIES
INDEX
PART I Financial Information Page No
-------
Item 1.
Condensed Consolidated Balance Sheets -
September 30, 1996 and December 31, 1995 3
Condensed Consolidated Statements of Operations
Three Months ended September 30, 1996 and September 30, 1995 4
Condensed Consolidated Statements of Operations
Nine Months ended September 30, 1996 and September 30, 1995 5
Condensed Consolidated Statements of Cash Flows -
Nine Months ended September 30, 1996 and September 30, 1995 6
Notes to Condensed Consolidated Financial Statements 7-8
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-11
PART II Other Information
Item 6.
Exhibits and Reports on Form 8-K 11
Exhibit 27.
Financial Data Schedule - September 30, 1996
(separate electronic document attached)
Signatures 12
PAGE 2
PART I - FINANCIAL INFORMATION
XIOX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 1996 December 31,1995
(unaudited ) ***
------------------ ----------------
ASSETS:
CURRENT ASSETS
CASH & CASH EQUIVALENTS $ 315,547 344,165
ACCOUNTS RECEIVABLE, NET 830,238 949,779
OTHER RECEIVABLES 3,855 29,005
INVENTORIES 425,190 348,230
PREPAID EXPENSES AND OTHER ASSETS 129,621 74,175
--------- ---------
TOTAL CURRENT ASSETS 1,704,451 1,745,354
PURCHASED SOFTWARE, NET 64,955 95,606
PROPERTY & EQUIPMENT, NET 376,706 476,381
NOTES RECEIVABLE 131,138 131,138
DEPOSITS & OTHER ASSETS 19,435 21,952
--------- ---------
$ 2,296,685 2,470,431
========= =========
LIABILITIES/STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES
BANK LINE OF CREDIT $ 0 100,000
ACCOUNTS PAYABLE 134,040 146,139
ACCRUED EXPENSES 115,105 81,915
ACCRUED COMPENSATION 115,348 60,280
PURCHASE DEPOSITS 143,356 231,266
DEFERRED REVENUE 632,035 687,314
--------- ---------
TOTAL CURRENT LIABILITIES 1,139,884 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 (4,332,080) (4,325,201)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 1,156,801 1,163,517
--------- ---------
$ 2,296,685 2,470,431
========= =========
<FN>
*** Condensed from audited financial statements.
The accompanying notes are an integral part of these condensed
financial statements.
</FN>
PAGE 3
PART I - FINANCIAL INFORMATION
XIOX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended Three months ended
September 30, 1996 September 30, 1995
(unaudited) (unaudited)
------------------ -------------------
REVENUES $ 1,350,673 1,604,385
PRODUCT COSTS 612,132 848,117
RESEARCH AND DEVELOPMENT 175,844 286,630
MARKETING, SALES, AND ADMINISTRATIVE 498,392 892,255
--------- ---------
1,286,368 2,027,002
--------- ---------
INCOME (LOSS) FROM OPERATIONS 64,305 (422,617)
INTEREST INCOME, NET 4,217 (17,606)
--------- ---------
INCOME (LOSS) BEFORE INCOME TAXES 68,522 (440,223)
INCOME TAX PROVISION (410) (20,545)
--------- ---------
NET INCOME / (LOSS) $ 68,112 (460,768)
========= =========
PER SHARE INFORMATION:
NET INCOME / (LOSS) PER SHARE $ 0.03 (0.24)
========= =========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING DURING THE QUARTER 2,372,384 1,958,459
========= =========
<FN>
The accompanying notes are an integral part of these
condensed financial statements.
</FN>
PAGE 4
PART I - FINANCIAL INFORMATION
XIOX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Nine months ended Nine months ended
September 30, 1996 September 30, 1995
(unaudited) (unaudited)
------------------ ------------------
REVENUES $ 4,078,147 5,252,496
PRODUCT COSTS 1,850,847 2,703,984
RESEARCH AND DEVELOPMENT 542,520 913,539
MARKETING, SALES, AND ADMINISTRATIVE 1,696,630 2,578,047
--------- ---------
4,089,997 6,195,570
--------- ---------
NET INCOME (LOSS) FROM OPERATIONS (11,850) (943,074)
INTEREST INCOME, NET 9,327 ( 36,989)
--------- ---------
NET INCOME (LOSS) BEFORE INCOME TAXES (2,523) (980,063)
INCOME TAX PROVISION (4,356) (23,403)
--------- ---------
NET INCOME / (LOSS) $ (6,879) (1,003,466)
========= =========
PER SHARE INFORMATION:
NET INCOME / (LOSS) PER SHARE $ (0.00) (0.55)
========= =========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 2,369,240 1,830,222
========= =========
<FN>
The accompanying notes are an integral part of these condensed
financial statements.
</FN>
PAGE 5
PART I - FINANCIAL INFORMATION
XIOX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended Nine months ended
September 30, 1996 September 30, 1995
(unaudited) (unaudited)
------------------ ------------------
CASH USED IN OPERATING ACTIVITIES:
NET INCOME / (LOSS) $ (6,879) (1,003,466)
RECONCILING ADJUSTMENTS FROM OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 171,787 164,640
DECREASE (INCREASE) IN:
ACCOUNTS / OTHER RECEIVABLES, NET 144,691 339,645
INVENTORIES (76,960) (163,999)
PREPAID EXPENSES, DEPOSITS AND OTHER ASSETS (52,929) (42,062)
INCREASE (DECREASE) IN:
ACCOUNTS PAYABLE AND ACCRUED EXPENSES 77,959 (326,772)
INCOME TAXES PAYABLE (1,800) (5,031)
PURCHASE DEPOSITS (87,910) 245,288
DEFERRED REVENUE (55,279) (15,406)
---------- ----------
NET CASH PROVIDED BY / (-USED) IN OPERATIONS 112,680 (807,163)
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES:
ACQUISITION OF PROPERTY AND EQUIPMENT, NET (32,413) (79,369)
ACQUISITION OF SOFTWARE RIGHTS, NET (9,048) (11,160)
---------- ----------
NET CASH PROVIDED BY / (USED IN) INVESTING ACTIVITIES (41,461) (90,529)
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES:
BORROWINGS FROM BANK LINE 0 270,000
BANK LINE REPAYMENTS (100,000) 0
SALES OF COMMON STOCK 163 968,699
---------- ----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (99,837) 1,238,699
---------- ----------
NET INCREASE / (DECREASE) IN
CASH & CASH EQUIVALENTS (28,618) 341,007
BEGINNING CASH AND CASH EQUIVALENTS 344,165 52,556
---------- ----------
ENDING CASH AND CASH EQUIVALENTS $ 315,547 393,563
========= ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
INTEREST PAID $ 1,536 47,208
INCOME TAXES PAID 4,356 23,403
<FN>
The accompanying notes are an integral part of these
condensed financial statements.
</FN>
PAGE 6
PART I - FINANCIAL INFORMATION
XIOX CORPORATION AND SUBSIDIARIES
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 and nine month
periods ended September 30, 1996 and September 30, 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 and nine month periods ended
September 30, 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 September 30, 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:
September 30, 1996 December 31, 1995
------------------ -----------------
Office Equipment $ 1,052,962 1,019,919
Furniture and Fixtures 303,754 304,384
--------- ---------
1,356,716 1,324,303
less Accumulated Depreciation/Amortization (980,010) (847,922)
--------- ---------
376,706 476,381
========= =========
Software Acquisition $ 197,995 188,947
less Accumulated Depreciation (133,040) (93,341)
--------- ---------
64,955 95,606
========= =========
PAGE 7
PART I - FINANCIAL INFORMATION
XIOX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
(continued)
NOTE 4: BANK LINE OF CREDIT
The Company maintains a $1,000,000 line of credit collateralized by
eligible accounts receivable, which was increased from $750,000 when renewed May
30, 1996. The line bears interest at prime plus 1.75%, decreased from prime plus
2.00% effective May 30, 1996, and is renewable in May, 1997. At September 30,
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.
PAGE 8
PART I - FINANCIAL INFORMATION
XIOX CORPORATION AND SUBSIDIARIES
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 (11) 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.
Third Quarter, 1996 vs 1995
REVENUES/ Revenues for the three months ended September 30, 1996 were $1,350,673
NET INCOME a decrease of 16% versus the $1,604,385 recorded during the three
months ended September 30, 1995. A portion of the $253,712 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 September 30,
1996 were $ 1,286,368, a decrease of 37% versus the $2,027,002 of expenses
incurred during the three months ended September 30, 1995. The variable portion
of product costs decreased slightly to 21% of total revenue in third 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 53% in 1995, primarily due
to the Company's efforts to centralize key functions of its operations. Efforts
to manage expenses were realized during the third quarter of 1996 and are
reflected in an overall decrease in other operating expenses of 43%, or
$504,649, versus the comparable quarter of 1995.
Interest income from lease investments and short-term securities
generated interest income of $4,217 versus the year earlier interest income of
$3,098. Interest expense during the quarter decreased 100%, from $20,704 in 1995
to $0 in the third quarter of 1996, primarily due to a decrease in bank credit
line borrowings.
The Company generated income of $64,305 from operations during the
third quarter of 1996 and net income after taxes of $68,112 versus a loss of
$422,617 from operations and a net loss after taxes of $460,768 in the third
quarter of 1995. The Company attributed its return to profitability to its
management of expenses and efforts to streamline operations.
PAGE 9
PART I - FINANCIAL INFORMATION
XIOX CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(continued)
Nine Months, 1996 vs 1995
REVENUES/NET INCOME Revenues for the nine months ended September 30, 1996 were
$4,078,147, a decrease of 22% versus the $5,252,496 recorded during the nine
months ended September 30, 1995. A portion of the $1,174,349 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 nine months ended September 30, 1996 were
$4,089,997, a decrease of 34% versus the $6,195,570 of expenses incurred during
the nine months ended September 30, 1995. The variable portion of product costs
increased slightly to 21% of total revenue in the first three quarters of 1996
from 20% 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 three quarters of 1996 and are
reflected in an overall decrease in other operating expenses of 36%, or
$1,252,436, compared with the prior year.
Interest income from lease investments and short-term securities generated
interest income of $10,863 versus the year earlier interest income of $10,220.
Interest expense during the first three quarters decreased 97%, from $47,208 in
1995 to $1,536 in 1996, primarily due to a decrease in bank credit line
borrowings.
The Company lost $11,850 from operations during the first three
quarters of 1996 and incurred a net loss after taxes of $6,879 versus a loss of
$943,074 from operations and a net loss after taxes of $1,003,466 in the first
three quarters of 1995. On a comparative basis, this represents a decrease in
after tax net loss of $996,587, or 99%. The Company attributed this to its
management of expenses and efforts to streamline operations.
Liquidity and Capital Resources at September 30, 1996
At September 30, 1996, Xiox held cash and cash equivalents totaling
$315,547 and had working capital of $1,196,602 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 $41,461.
In May, 1996, the Company increased its bank line of credit from
$750,000 to $1,000,000. 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%, decreased from prime plus 2.00%
effective May 30, 1996. At September 30, 1996, the Company had $0 outstanding
against this line.
PAGE 10
PART I - FINANCIAL INFORMATION
XIOX CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(continued)
Factors Affecting Market Price of Stock at September 30, 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
September 30, 1996.
PAGE 11
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XIOX CORPORATION
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
------------------------
(Registrant)
Date: November 1, 1996 William H. Welling
------------------------
(William H. Welling, Chairman)
(Duly Authorized Officer)
Date: November 1, 1996 Melanie D. Reid
------------------------
(Melanie D. Reid, VP of Finance/CFO)
(Duly Authorized Officer)
PAGE 12