þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Texas
(State of Incorporation) |
75-2216818
(I.R.S. Employer Identification Number) |
Large accelerated filer o | Accelerated filer þ |
Non-accelerated filer
o
(Do not check if a smaller reporting company) |
Smaller reporting company o |
Class | Outstanding at August 2, 2010 | |
Common Stock, par value $0.01 per share | 64,071,326 |
Page | ||||||||
Number | ||||||||
PART I FINANCIAL INFORMATION
|
||||||||
Item 1. Financial Statements (Unaudited)
|
||||||||
3 | ||||||||
4 | ||||||||
5 | ||||||||
6 | ||||||||
7 | ||||||||
12 | ||||||||
19 | ||||||||
19 | ||||||||
19 | ||||||||
19 | ||||||||
19 | ||||||||
19 | ||||||||
19 | ||||||||
19 | ||||||||
20 | ||||||||
EX-10.1 | ||||||||
EX-10.2 | ||||||||
EX-31.1 | ||||||||
EX-31.2 | ||||||||
EX-32.1 |
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
June 30,
December 31,
2010
2009
(unaudited)
$
17,477,000
$
13,287,000
25,000
564,000
760,000
854,000
1,142,000
18,895,000
15,214,000
2,240,000
2,137,000
2,161,000
2,161,000
164,000
236,000
$
23,460,000
$
19,748,000
$
672,000
$
769,000
2,393,000
3,124,000
16,454,000
14,478,000
131,000
126,000
19,650,000
18,497,000
1,803,000
2,821,000
119,000
186,000
198,000
233,000
2,120,000
3,240,000
21,770,000
21,737,000
664,000
661,000
338,815,000
337,352,000
(11,507,000
)
(11,507,000
)
(326,282,000
)
(328,495,000
)
1,690,000
(1,989,000
)
$
23,460,000
$
19,748,000
Table of Contents
Three Months Ended June 30,
Six Months Ended June 30,
2010
2009
2010
2009
$
8,915,000
$
7,371,000
$
17,331,000
$
14,627,000
1,970,000
2,368,000
3,826,000
4,839,000
6,945,000
5,003,000
13,505,000
9,788,000
1,307,000
1,747,000
2,755,000
3,478,000
4,062,000
5,228,000
8,443,000
9,872,000
5,369,000
6,975,000
11,198,000
13,350,000
1,576,000
(1,972,000
)
2,307,000
(3,562,000
)
15,000
73,000
44,000
141,000
1,591,000
(1,899,000
)
2,351,000
(3,421,000
)
(90,000
)
(26,000
)
(138,000
)
(46,000
)
$
1,501,000
$
(1,925,000
)
$
2,213,000
$
(3,467,000
)
$
0.02
$
(0.03
)
$
0.03
$
(0.05
)
$
0.02
$
(0.03
)
$
0.03
$
(0.05
)
63,976,551
63,319,482
63,883,974
63,319,482
66,368,548
63,319,482
65,977,451
63,319,482
Table of Contents
Stockholders Equity
Additional
Total
Common Stock
Paid-In
Treasury
Accumulated
Stockholders
Shares
Amount
Capital
Stock
Deficit
Equity (Deficit)
66,053,772
$
661,000
$
337,352,000
$
(11,507,000
)
$
(328,495,000
)
$
(1,989,000
)
309,096
3,000
466,000
469,000
976,000
976,000
21,000
21,000
2,213,000
2,213,000
66,362,868
$
664,000
$
338,815,000
$
(11,507,000
)
$
(326,282,000
)
$
1,690,000
Table of Contents
Six Months Ended June 30,
2010
2009
$
2,213,000
$
(3,467,000
)
685,000
648,000
976,000
1,353,000
21,000
16,000
7,000
7,000
196,000
(152,000
)
353,000
374,000
(222,000
)
409,000
958,000
(19,000
)
(766,000
)
592,000
4,421,000
(239,000
)
(663,000
)
(515,000
)
25,000
3,000
(638,000
)
(512,000
)
469,000
(62,000
)
407,000
4,190,000
(751,000
)
13,287,000
13,245,000
$
17,477,000
$
12,494,000
Table of Contents
Three Months Ended June 30, 2010
Email Encryption
e-Prescribing
Corporate
Total
$
8,194,000
$
721,000
$
$
8,915,000
1,570,000
400,000
1,970,000
6,624,000
321,000
6,945,000
3,632,000
133,000
3,765,000
2,992,000
188,000
3,180,000
(1,604,000
)
(1,604,000
)
15,000
15,000
(1,589,000
)
(1,589,000
)
$
2,992,000
$
188,000
$
(1,589,000
)
$
1,591,000
Table of Contents
Six Months Ended June 30,
2010
2009
$
535,000
$
386,000
73,000
179,000
77,000
83,000
$
685,000
$
648,000
Table of Contents
June 30, 2010
December 31, 2009
$
3,672,000
$
3,781,000
250,000
416,000
19,538,000
15,551,000
$
23,460,000
$
19,748,000
Three Months
Six Months
Ended June 30,
Ended June 30,
2010
2010
$
54,000
$
101,000
51,000
98,000
372,000
777,000
$
477,000
$
976,000
Table of Contents
Weighted Average
Weighted
Remaining
Aggregate
Average
Contractual Term
Intrinsic
Shares
Exercise Price
(Yrs)
Value
9,965,678
$
4.17
63,000
$
2.41
(240,289
)
$
3.49
(139,460
)
$
1.57
9,648,929
$
4.21
5.61
$
1,999,000
8,546,137
$
4.45
5.20
$
1,589,000
Six Months Ended June 30,
2010
2009
$
12,000
$
$
149,000
$
142,000
$
$
2,000
$
125,000
$
153,000
$
$
390,000
$
$
19,000
June 30,
December 31,
2010
2009
$
602,000
$
786,000
(38,000
)
(26,000
)
484,000
484,000
(484,000
)
(484,000
)
$
564,000
$
760,000
Table of Contents
Three Months ended June 30,
Six Months ended June 30,
2010
2009
2010
2009
$
1,501,000
$
(1,925,000
)
$
2,213,000
$
(3,467,000
)
63,976,551
63,319,482
63,883,974
63,319,482
845,705
748,190
1,546,292
1,345,287
66,368,548
63,319,482
65,977,451
63,319,482
$
0.02
$
(0.03
)
$
0.03
$
(0.05
)
$
0.02
$
(0.03
)
$
0.03
$
(0.05
)
Payments Due by Period
Total
1 Year
Years 2 & 3
Beyond 3 Years
$
4,287,000
$
1,219,000
$
1,959,000
$
1,109,000
250,000
131,000
119,000
4,537,000
1,350,000
2,078,000
1,109,000
21,000
16,000
5,000
$
4,558,000
$
1,366,000
$
2,083,000
$
1,109,000
Table of Contents
Table of Contents
Revenue for the quarter ended June 30, 2010, was $8,915,000 compared with $7,371,000 for
the same period in 2009 representing a 21% increase.
Gross profit for the quarter ended June 30, 2010, was $6,945,000 or 78% of revenues
compared with $5,003,000 or 68% of revenues for the comparable period in 2009.
Net income for the quarter ended June 30, 2010, was $1,501,000 compared with a net loss
of $1,925,000 in 2009. Included in net income for the quarter ended June 30, 2010, was
approximately $169,000 of non recurring severance costs related to the wind down of our
e-Prescribing business.
Ending cash and cash equivalents were $17,477,000 on June 30, 2010, compared with
$13,287,000 on December 31, 2009.
For the Email Encryption service, new first year orders (NFYOs) for the quarter ended
June 30, 2010, were $2,108,000. June 30, 2010, Email Encryption backlog was $45,593,000.
The wind down of our e-Prescribing business is progressing well. We have worked out
appropriate resolutions with all of our major customers in this business and have protected
our brand in the important healthcare vertical market. As disclosed in our July 27, 2010,
press release, we expect this business to generate a small amount of profit for 2010.
3-month Variance
6-month Variance
Three Months Ended June 30,
2010 vs. 2009
Six Months Ended June 30,
2010 vs. 2009
2010
2009
$
%
2010
2009
$
%
$
8,194,000
$
6,379,000
$
1,815,000
28
%
$
15,673,000
$
12,621,000
$
3,052,000
24
%
721,000
992,000
(271,000
)
(27
%)
1,658,000
2,006,000
(348,000
)
(17
%)
$
8,915,000
$
7,371,000
$
1,544,000
21
%
$
17,331,000
$
14,627,000
$
2,704,000
18
%
Table of Contents
3-month Variance
6-month Variance
Three Months Ended June 30,
2010 vs. 2009
Six Months Ended June 30,
2010 vs. 2009
2010
2009
$
%
2010
2009
$
%
$
1,570,000
$
1,088,000
$
482,000
44
%
$
3,072,000
$
2,101,000
$
971,000
46
%
400,000
1,280,000
(880,000
)
(69
%)
754,000
2,738,000
(1,984,000
)
(72
%)
$
1,970,000
$
2,368,000
$
(398,000
)
(17
%)
$
3,826,000
$
4,839,000
$
(1,013,000
)
(21
%)
Table of Contents
3-month Variance
6-month Variance
Three Months Ended June 30,
2010 vs. 2009
Six Months Ended June 30,
2010 vs. 2009
2010
2009
$
%
2010
2009
$
%
$
1,248,000
$
821,000
$
427,000
52
%
$
2,557,000
$
1,624,000
$
933,000
57
%
59,000
926,000
(867,000
)
(94
%)
198,000
1,854,000
(1,656,000
)
(89
%)
$
1,307,000
$
1,747,000
$
(440,000
)
(25
%)
$
2,755,000
$
3,478,000
$
(723,000
)
(21
%)
3-month Variance
6-month Variance
Three Months Ended June 30,
2010 vs. 2009
Six Months Ended June 30,
2010 vs. 2009
2010
2009
$
%
2010
2009
$
%
$
2,140,000
$
1,986,000
$
154,000
8
%
$
4,381,000
$
3,791,000
$
590,000
16
%
52,000
796,000
(744,000
)
(93
%)
176,000
1,689,000
(1,513,000
)
(90
%)
1,870,000
2,446,000
(576,000
)
(24
%)
3,886,000
4,392,000
(506,000
)
(12
%)
$
4,062,000
$
5,228,000
$
(1,166,000
)
(22
)%
$
8,443,000
$
9,872,000
$
(1,429,000
)
(14
%)
Table of Contents
Table of Contents
Six Months Ended June 30,
2010
2009
$
4,421,000
$
(239,000
)
$
(638,000
)
$
(512,000
)
$
407,000
$
Table of Contents
Summary of Outstanding Options and Warrants
Vested
Total Value
(included in
Total Value of
Exercise Price Range
Outstanding
Outstanding
Outstanding)
Vested
6,931,619
$
10,616,000
6,449,559
$
9,867,000
5,287,527
15,430,000
4,878,652
14,565,000
3,218,888
14,319,000
3,013,181
13,342,000
549,260
2,792,000
549,260
2,792,000
734,316
4,741,000
734,316
4,741,000
890,381
9,727,000
890,381
9,727,000
43,500
1,028,000
43,500
1,028,000
17,655,491
$
58,653,000
16,558,849
$
56,062,000
Payments Due by Period
Total
1 Year
Years 2 & 3
Beyond 3 Years
$
4,287,000
$
1,219,000
$
1,959,000
$
1,109,000
271,000
147,000
124,000
$
4,558,000
$
1,366,000
$
2,083,000
$
1,109,000
Table of Contents
Table of Contents
Exhibit No.
Description of Exhibits
Restated Articles of Incorporation of Zix Corporation, as filed
with the Texas Secretary of State on November 10, 2005. Filed
as Exhibit 3.1 to Zix Corporations Annual Report on Form 10-K
for the year ended December 31, 2005, and incorporated herein
by reference.
Amended and Restated Bylaws of Zix Corporation, dated February
4, 2009. Filed as Exhibit 3.1 to Zix Corporations Current
Report on Form 8-K, dated February 10, 2009, and incorporated
herein by reference.
Form of Zix Corporation Outside Director Stock Option Agreement.
Form of Zix Corporation Employee Stock Option Agreement.
Certification of Richard D. Spurr, President and Chief
Executive Officer of the Company, pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
Certification of Susan K. Conner, Chief Financial Officer of
the Company, pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
Certification of Richard D. Spurr, President and Chief
Executive Officer of the Company, and Susan K. Conner, Chief
Financial Officer of the Company, pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
*
Filed herewith.
**
Furnished herewith.
Table of Contents
ZIX CORPORATION
Date: August 9, 2010
By:
/s/ Susan K. Conner
Susan K. Conner
Chief Financial Officer
1
2
3
a) | Company is not obligated to issue fractional Shares. | ||
b) | Optionee cannot exercise this Option in order to purchase less than 100 Option Shares unless the number of then Vested Shares is less than 100. | ||
c) | Optionee cannot exercise this Option if exercise or the delivery of Shares would violate any applicable law or any rule of any securities exchange on which the Shares are then listed. | ||
d) | Optionee cannot exercise this Option if exercise or the delivery of shares would in the Companys sole discretion constitute a violation of any Company rule or policy, including but not limited to block trades, windows and black-out periods. |
4
5
(i) | The Company is merged, consolidated or reorganized into or with another corporation or other legal person and as a result of such merger, consolidation or reorganization, the Company or its shareholders or Affiliates immediately before |
6
such transaction beneficially own, immediately after or as a result of such transaction, equity securities of the surviving or acquiring corporation or such corporations parent corporation possessing less than fifty-one percent (51%) of the voting power of the surviving or acquiring person or such persons parent corporation; or |
(ii) | The Company sells all or substantially all of its assets to any other corporation or other legal person and as a result of such sale, the Company or its shareholders or Affiliates immediately before such transaction beneficially own, immediately after or as a result of such transaction, equity securities of the surviving or acquiring corporation or such corporations parent corporation possessing less than fifty-one percent (51%) of the voting power of the surviving or acquiring person or such persons parent corporation (provided that this provision does not apply to a registered public offering of securities of a subsidiary of the Company, which offering is not part of a transaction otherwise a part of or related to a Change in Control); or | ||
(iii) | Any Acquiring Person has become the beneficial owner (as the term beneficial owner is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of securities which, when added to any securities already owned by such person, would represent in the aggregate 35% or more of the then outstanding securities of the Company which are entitled to vote to elect any class of directors; or | ||
(iv) | If, at any time, the Continuing Directors then serving on the Board of Directors of the Company cease for any reason to constitute at least a majority thereof; or | ||
(v) | Any occurrence that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A or any successor rule or regulation promulgated under the Exchange Act. |
7
8
ZIX CORPORATION |
||||
Date: __________________ | By: | |||
Susan K. Conner | ||||
Chief Financial Officer | ||||
9
1
2
3
4
5
6
7
8
ZIX CORPORATION
|
||||
Date: | By: | |||
Susan K. Conner | ||||
Chief Financial Officer | ||||
9
1. | I have reviewed this Quarterly Report on Form 10-Q of Zix Corporation; | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: August 9, 2010 | /s/ RICHARD D. SPURR | |||
Richard D. Spurr | ||||
President and Chief Executive Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of Zix Corporation; | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: August 9, 2010 | /s/ SUSAN K. CONNER | |||
Susan K. Conner | ||||
Chief Financial Officer |
1. | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and | |
2. | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Zix Corporation. |
/s/ RICHARD D. SPURR | ||||
Name: | Richard D. Spurr | |||
Title: | President and Chief Executive Officer |
/s/ SUSAN K. CONNER | ||||
Name: | Susan K. Conner | |||
Title: | Chief Financial Officer | |||