SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
F O R M 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, 1997;
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
-----------------------------------------------------------------
(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
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (650) 375-8188
- --------------------------------------------------------------------------------
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, 1997 2,932,934 shares
- --------------------------------------------------------------------------------
PAGE 1 of 14
X I O X C O R P O R A T I O N
INDEX
Page No.
--------
PART I Financial Information
Item 1.
Condensed Consolidated Balance Sheets -
September 30, 1997 and December 31, 1996 3
Condensed Consolidated Statements of Operations
Three Months ended September 30, 1997 and September 30, 1996 4
Condensed Consolidated Statements of Operations
Nine Months ended September 30, 1997 and September 30, 1996 5
Condensed Consolidated Statements of Cash Flows -
Nine Months ended September 30, 1997 and September 30, 1996 6-7
Notes to Condensed Consolidated Financial Statements 8-9
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-12
PART II Other Information
Item 6.
Exhibits and Reports on Form 8-K 13
Exhibit 27.
Financial Data Schedule - September 30, 1997
(separate electronic document attached)
Signatures 14
PAGE 2
PART I - FINANCIAL INFORMATION
X I O X C O R P O R A T I O N
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 1997 December 31, 1996
ASSETS: (unaudited) ***
CURRENT ASSETS
CASH & CASH EQUIVALENTS $ 3,130,079 291,488
ACCOUNTS RECEIVABLE, NET 709,265 1,062,045
OTHER RECEIVABLES 10,541 66,412
INVENTORIES 353,506 433,769
PREPAID EXPENSES AND OTHER ASSETS 175,750 69,470
----------- ---------
TOTAL CURRENT ASSETS 4,379,141 1,923,184
PROPERTY & EQUIPMENT, NET 377,621 358,118
PURCHASED SOFTWARE, NET 32,010 52,930
NOTES RECEIVABLE 100,000 131,138
DEPOSITS & OTHER ASSETS 383,013 20,319
----------- ---------
$ 5,271,785 2,485,689
=========== =========
LIABILITIES/STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
BANK LINE OF CREDIT - 0 - - 0 -
ACCOUNTS PAYABLE 132,634 140,627
ACCRUED EXPENSES 148,244 212,081
ACCRUED COMPENSATION 122,805 114,380
PURCHASE DEPOSITS 39,147 41,025
DEFERRED REVENUE 707,222 721,586
----------- ---------
TOTAL CURRENT LIABILITIES $ 1,150,052 1,229,699
MINORITY INTEREST 129,906
STOCKHOLDERS' EQUITY
COMMON STOCK, $.01 Par, 10,000,000 Authorized,
2,932,934 and 2,372,384 issued and outstanding in 29,329 23,724
1997 and 1996 respectively
PAID-IN CAPITAL 8,274,845 5,492,345
NOTE RECEIVABLE FROM SHAREHOLDER (27,188) (27,188)
FOREIGN CURRENCY TRANSLATION GAIN/(LOSS) (3,224)
----------- ---------
ACCUMULATED DEFICIT (4,281,935) (4,232,891)
----------- ---------
TOTAL STOCKHOLDERS' EQUITY 3,991,827 1,255,990
----------- ---------
5,271,785 2,485,689
=========== =========
<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
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended Three months ended
September 30, 1997 September 30, 1996
(unaudited) (unaudited)
REVENUES $ 1,265,527 1,350,673
----------- ---------
PRODUCT COSTS 519,112 612,132
RESEARCH AND DEVELOPMENT 198,509 175,844
MARKETING, SALES AND ADMINISTRATIVE 632,949 498,392
----------- ---------
1,350,570 1,286,368
----------- ---------
INCOME FROM OPERATIONS (85,043) 64,305
OTHER (LOSS) INCOME, NET 8,432 4,217
----------- ---------
INCOME BEFORE INCOME TAXES (76,611) 68,522
INCOME TAX PROVISION (3,632) (410)
----------- ---------
NET INCOME $ (80,243) 68,112
=========== =========
PER SHARE INFORMATION:
NET INCOME PER SHARE $ (.03) 0.03
=========== =========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING DURING THE QUARTER 2,932,934 2,372,384
=========== =========
<FN>
The accompanying notes are an integral part of these condensed financial statements.
</FN>
PAGE 4
PART I - FINANCIAL INFORMATION
XIOX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Nine months ended Nine months ended
September 30, 1997 September 30, 1996
(unaudited) (unaudited)
REVENUES $ 3,788,088 4,078,147
----------- ---------
PRODUCT COSTS 1,502,479 1,850,847
RESEARCH AND DEVELOPMENT 573,903 542,520
MARKETING, SALES AND ADMINISTRATIVE 1,751,304 1,696,630
----------- ---------
3,827,686 4,089,997
----------- ---------
INCOME (LOSS) FROM OPERATIONS (39,598) (11,850)
OTHER (LOSS) INCOME, NET (2,541) 9,327
----------- ---------
INCOME (LOSS) BEFORE INCOME TAXES (42,139) (2,523)
INCOME TAX PROVISION (6,907) (4,356)
----------- ---------
NET INCOME (LOSS) $ (49,046) (6,879)
=========== =========
PER SHARE INFORMATION:
NET INCOME (LOSS) PER SHARE $ (.02) (0.00)
=========== =========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING DURING THE PERIOD 2,556,671 2,369,240
=========== =========
<FN>
The accompanying notes are an integral part of these condensed financial statements.
</FN>
PAGE 5
XIOX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended Nine months ended
September 30, 1997 September 30, 1996
(unaudited) (unaudited)
CASH FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $ (49,046) (6,879)
RECONCILING ADJUSTMENTS FROM OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 170,211 171,787
DECREASE (INCREASE) IN:
ACCOUNTS RECEIVABLE, NET 352,780 144,691
OTHER RECEIVABLES 55,871 0
PROMISSORY NOTE 31,138 0
INVENTORIES 80,263 (76,960)
PREPAID EXPENSES, DEPOSITS AND OTHER ASSETS (468,974) (52,929)
INCREASE (DECREASE) IN:
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (63,404) 77,959
INCOME TAXES PAYABLE (1,800)
PURCHASE DEPOSITS (1,878) (87,910)
DEFERRED REVENUE (14,363) (55,279)
----------- -------
NET CASH PROVIDED BY (USED IN) OPERATIONS 92,598 112,680
----------- -------
CASH FROM INVESTING ACTIVITIES:
ACQUISITION OF PROPERTY AND EQUIPMENT (150,285) (32,413)
ACQUISITION OF SOFTWARE (18,509) (9,048)
----------- -------
NET CASH (USED IN) INVESTING ACTIVITIES (168,794) (41,461)
----------- -------
CASH FROM FINANCING ACTIVITIES:
BANK LINE OF CREDIT REPAYMENTS -- (100,000)
BORROWINGS FROM BANK LINE -- --
PROCEEDS FROM SALE OF COMMON STOCK 2,914,787 163
----------- -------
NET CASH USED IN FINANCING ACTIVITIES 2,914,787 (99,837)
----------- -------
NET INCREASE/(DECREASE) IN
CASH & CASH EQUIVALENTS 2,838,592 (28,618)
BEGINNING CASH AND CASH EQUIVALENTS 291,488 344,165
----------- -------
ENDING CASH AND CASH EQUIVALENTS $ 3,130,080 315,547
=========== =======
PAGE 6
XIOX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (cont.)
Nine months ended Nine months ended
September 30, 1997 September 30, 1996
(unaudited) (unaudited)
SUPPLEMENTAL CASH FLOW INFORMATION:
INTEREST PAID DURING THE PERIOD $ 0 1,536
INCOME TAXES PAID DURING THE PERIOD 11,352 4,356
NONCASH FINANCING ACTIVITIES
COMMON STOCK ISSUED UPON EXERCISE OF STOCK OPTIONS
IN EXCHANGE FOR NOTE RECEIVABLE FROM SHAREHOLDER
$27,188
=======
PAGE 7
X I O X C O R P O R A T I O N
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 : BASIS OF PRESENTATION
The financial information included herein relating to December 31, 1996 is
audited, and the financial information relating to the three and nine month
periods ended September 30, 1997 and September 30, 1996 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, 1997 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 10K-SB for the year ended December 31,1996.
NOTE 2 : INVENTORIES
Inventories at September 30, 1997 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, 1997 December 31, 1996
Office equipment $ 1,241,392 1,075,298
Furniture and fixtures 289,828 305,638
----------- ---------
1,531,220 1,380,936
Less accumulated depreciation (1,153,599) (1,022,818)
----------- ---------
377,621 358,118
=========== =========
Purchased Software $ 218,546 200,037
Less accumulated depreciation (186,646) (147,107)
----------- ---------
32,010 52,930
=========== =========
PAGE 8
PART I - FINANCIAL INFORMATION
X I O X C O R P O R A T I O N
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 : BANK LINE OF CREDIT
The Company maintains a $1,000,000 line of credit collateralized by eligible
accounts receivable. The line bears interest at prime plus 1.25% and is
renewable in May 1998. At September 30, 1997 the Company had $0 outstanding
against this line.
NOTE 5: RECENT ACCOUNT PRONOUNCEMENTS
The Financial Accounting Standards Board recently issued Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings Per Share." SFAS No. 128 requires
the presentation of basic earnings per share ("EPS") and, for companies with
complex capital structures, diluted EPS. SFAS No. 128 is effective for annual
and interim periods ending after December 31, 1997. Adoption of SFAS No. 128 is
not expected to have a material impact on net income (loss) per common share as
presented in the accompanying consolidated statements of operations.
NOTE 6: FORMATION OF JOINTLY OWNED COMPANY
The Company formed a subsidiary in Belgium, XIOX Flanders N.V., in which the
Company holds a 94.9 % interest and a shareholder of the Company holds a 5.1%
interest.
PAGE 9
PART I - FINANCIAL INFORMATION
X I O X C O R P O R A T I O N
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The forward-looking statements included in this Quarterly Report filed on Form
10-QSB, which reflect management's best judgment based on factors known, involve
risks and uncertainties. In addition, the Company may from time to time make
oral forward-looking statements. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of a number of factors, including but not limited to those discussed
under "Certain Risk Factors Which May Impact Future Operating Results and Market
Price of Stock on page 12 below. Forward-looking information provided by Xiox
should be evaluated in the context of these factors.
The following is management's discussion and analysis of certain significant
factors which have effected Xiox's financial position and operating results
during the periods included in the accompanying condensed financial statements.
Results of Operations
Third Quarter, 1997 vs. 1996
Revenue for the three months ended September 30, 1997 was $1,265,527, a decrease
of 6% versus the $1,350,673 recorded during the three months ended September 30,
1996. The $85,146 decrease in revenue is primarily attributable to lower sales
of the Company's call accounting products.
Total operating expenses for the three months ended September 30, 1997 were $
1,350,570, an increase of 5% or $64,202 versus the $1,286,368 of operating
expenses incurred during the three months ended September 30, 1996. Total
product costs as a percentage of revenue decreased to 41% in the third quarter
of 1997 from 45% in the third quarter in 1996, primarily due to variations in
product mix.
Research and development expenses increased by 13% or $22,665 to $198,509 in the
third quarter of 1997 compared to $175,844 in the third quarter of 1996.
Research and development as a percentage of revenue increased to 16% in the
third quarter of 1997 from 13.0% in the third quarter of 1996 due to costs
associated with new product development.
Marketing, Sales and General and Administrative expenses in the third quarter of
1997 increased by 27% or $ 134,557 compared to the third quarter of 1996 due to
increased sales and marketing efforts including plans for new products.
Other income increased by $4,215 primarily due to an increase in interest income
earned from short-term securities. No debt was outstanding during the third
quarters of 1997 and 1996.
The Company is reporting a loss of $85,043 from operations during the third
quarter of 1997 and a net loss after taxes of $80,243 versus reported earnings
of $ 64,305 from operations and net income after taxes of $68,112 in the
comparable quarter of 1996. The Company attributed this to a planned increase in
spending in the development of new products.
PAGE 10
PART I - FINANCIAL INFORMATION
X I O X C O R P O R A T I O N
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Nine Months, 1997 vs. 1996
Revenue for the nine months ended September 30, 1997 was $3,788,088, a decrease
of 7% versus the $4,078,147 recorded during the nine months ended September 30,
1996. The $290,059 decrease in revenue is primarily attributable to lower sales
of the Company's call accounting products.
Total operating expenses for the nine months ended September 30, 1997 were
$3,827,686, a decrease of 6% or $262,311 versus the $4,089,997 of operating
expenses incurred during the nine months ended September 30, 1996. Total product
costs as a percentage of revenue decreased to 40% in the nine months of 1997
from 45% in the nine months in 1996, primarily due to variations in product mix.
Research and development expenses increased by 6% or $31,383 to $573,903 in the
first nine months of 1997 compared to $573,903 in the first nine months of 1996
due to an increased investment in new product development.
Marketing, Sales and General and Administrative expenses in the first nine
months of 1997 increased by 3% or $54,674 compared to the first nine months of
1996 due to increased spending in new products.
Other income decreased by $11,868 from the first nine months of 1996 primarily
due to a $17,208 profit sharing distribution in during first nine months of
1997. Interest income from short-term securities in the first nine months of
1997 increased to $14,668 versus $10,863 in the first nine months of 1996. No
interest expense was incurred in 1997 versus $1,536 in the first nine months of
1996.
The Company reported a loss of $39,598 from operations and a net loss after
taxes of $49,046 during the first nine months of 1997 versus a loss of $11,850
from operations and a net loss after taxes of $6,879 in the comparable period of
1996. The Company attributed the change to a rise in spending in the development
of new products, utilizing a recent injection of investment funds into the
Company. This planned increase in spending is offset by two earlier quarters of
profitability in the first nine months of 1997 versus the same period in 1996.
PAGE 11
PART I - FINANCIAL INFORMATION
X I O X C O R P O R A T I O N
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital
At September 30, 1997, Xiox held cash and cash equivalents totaling $3,130,080
and had net working capital of $3,229,089 versus cash equivalents of $291,488
and net working capital of $693,485 at December 31, 1996. The Company
anticipates investing approximately $200,000 in capital equipment during 1997,
consisting primarily of computer hardware and software and office equipment.
Since December 31, 1996, the Company expended $168,794 for capital equipment and
software.
In May, 1997, the Company renewed its bank line of credit of $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 1.25. At September 30, 1997, the Company had $0 outstanding against
this line.
Certain Risk Factors Which May Impact Future Operating Results and Market Price
of Stock
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 any litigation the Company may be involved in. In addition,
the Company typically experiences weaker sales in the first quarter of each
calendar year compared to sales for the last quarter of the previous year.
PAGE 12
PART II - OTHER INFORMATION
XIOX CORPORATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
On July 22, 1997 the Company filed an 8-K reporting the initial sale on July 7,
1997 of 40,000 shares of its Common Stock to Flanders Language Valley for an
aggregate purchase price of $200,000 pursuant to a June 30, 1997 agreement
subject to future adjustments.
On October 8, 1997 the Company filed an 8KA reporting the subsequent sale on
September 24, 1997 of 534,400 shares of its Common Stock to Flanders Language
Valley for an aggregate purchase price of $2,672,000 pursuant to a June 30, 1997
agreement subject to future adjustments.
PAGE 13
********************************************************************************
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
Registrant
Date: November 14, 1997
/s/ William H. Welling
---------------------------------
(Duly Authorized Officer)
Date: November 14, 1997
/s/ Melanie D. Reid
---------------------------------
Melanie D. Reid, VP Finance/CFO/Secretary
(Duly Authorized Officer)
PAGE 14