-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KNzj6OK8WbOR4x+sLXiAzJD6m4ERSe71V9ckVbP1rzBo/2ZQewtFix7gMYyDZ4IU UYqhtNwP8g4yXrXOYR2Nzg== 0000950008-99-000147.txt : 19990518 0000950008-99-000147.hdr.sgml : 19990518 ACCESSION NUMBER: 0000950008-99-000147 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990517 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SCANSOFT INC CENTRAL INDEX KEY: 0001002517 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 943156479 STATE OF INCORPORATION: DE FISCAL YEAR END: 0103 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-27038 FILM NUMBER: 99626180 BUSINESS ADDRESS: STREET 1: 9 CENTENNIAL DRIVE CITY: PEABODY STATE: MA ZIP: 01960 BUSINESS PHONE: 9789772000 MAIL ADDRESS: STREET 1: 2560 W BAYSHORE RD CITY: PALO ALTO STATE: CA ZIP: 94303 FORMER COMPANY: FORMER CONFORMED NAME: VISIONEER INC DATE OF NAME CHANGE: 19951020 10-Q 1 SCANSOFT FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE PERIOD ENDED MARCH 31, 1999 OR [ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________ COMMISSION FILE NUMBER 0-27038 SCANSOFT, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 94-3156479 (STATE OR OTHER JURISDICTION OF (IRS EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER) 9 CENTENNIAL DRIVE PEABODY, MA 01970 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (978) 977-2000 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) 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 [ ] 26,364,235 shares of the registrant's Common Stock, $0.001 par value, were outstanding as of April 30, 1999 ================================================================================ SCANSOFT, INC. FORM 10-Q THREE MONTHS ENDED MARCH 31, 1999 INDEX PAGE ---- PART I: FINANCIAL INFORMATION Item 1. Financial Statements a) Condensed Balance Sheets at March 31, 1999 and December 31, 1998......................................... b) Condensed Statements of Operations for the three month periods ended March 31, 1999 and March 31, 1998........... c) Condensed Statements of Cash Flows for the three month periods ended March 31, 1999 and March 31, 1998........... d) Notes to Condensed Financial Statements................... Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...................................... Item 3. Quantitative and Qualitative Disclosures about Market Risk..... PART II: OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders............ Item 6. Exhibits and Reports on Form 8-K............................... Signatures.............................................................. -i- PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS SCANSOFT, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) UNAUDITED
ASSETS March 31, December 31, 1999 1998 ------------- --------------- Current Assets: Cash and cash equivalents......................................... $ 6,544 $ 7,659 Short-term investments............................................ 290 202 Restricted cash................................................... -- 262 Accounts receivable, less allowances of $2,357 and $4,171......... 3,789 13,512 Inventory, net.................................................... 550 4,777 Prepaid insurance................................................. 236 45 Prepaid royalties................................................. 120 201 Prepaid expenses and other current assets......................... 561 683 ------------- --------------- Total current assets........................................... 12,090 27,341 Property and equipment, net....................................... 869 1,039 Acquired intangible assets, net................................... 10,938 -- Other assets...................................................... 240 65 ------------- --------------- TOTAL ASSETS $ 24,137 $ 28,445 ============= =============== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Short term bank borrowings........................................ $ -- $ 6,000 Accounts payable.................................................. 709 11,053 Accrued wages..................................................... 607 216 Accrued sales and marketing expenses.............................. 866 1,165 Accrued royalties................................................. 290 457 Deferred revenue.................................................. 114 843 Other accrued liabilities......................................... 1,127 1,038 ------------- --------------- Total current liabilities...................................... 3,713 20,772 ------------- --------------- Long term liabilities.................................................. -- 91 ------------- --------------- Stockholders' equity: Non-voting Preferred stock, $0.001 par value; 3,562,238 shares authorized, issued and outstanding............................. 4 -- Common stock, $0.001 par value; 50,000,000 shares authorized; 26,344,380 and 19,852,952 shares issued and outstanding, respectively................................................... 26 20 Treasury stock, 331,740 shares.................................... (684) -- Additional paid in capital, Common................................ 100,857 87,995 Additional paid in capital, Preferred............................. 4,628 -- Deferred compensation relating to stock options................... -- (50) Accumulated deficit............................................... (84,407) (80,383) ------------- --------------- Total stockholders' equity..................................... 20,424 7,582 ------------- --------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............................. $ 24,137 $ 28,445 ============= ===============
The accompanying notes are an integral part of these financial statements. -1- SCANSOFT, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) UNAUDITED
Three months ended March 31, --------------------------------------- 1999 1998 ----------------- ----------------- Revenue................................................................ $ 4,508 $ 19,965 Costs and expenses: Cost of revenue................................................... 1,125 14,169 Research and development.......................................... 1,255 1,132 Selling, general and administrative............................... 2,603 4,566 Restructuring charges............................................. 346 -- Gain on sale of hardware business, net............................ (882) -- Amortization of intangible assets................................. 158 -- Acquired in-process research and development...................... 3,944 -- ----------------- ----------------- Total costs and expenses............................................... 8,549 19,867 Income (loss) from operations.......................................... (4,041) 98 Other income, net...................................................... 16 237 ----------------- ----------------- Income (loss) before income taxes...................................... (4,025) 335 Provision for income taxes............................................. -- -- ----------------- ----------------- Net income (loss)...................................................... $ (4,025) $ 335 ================= ================= Net income (loss) per share: basic..................................... $ (0.18) $ 0.02 ================= ================= Net income (loss) per share: diluted................................... $ (0.18) $ 0.02 ================= ================= Weighted average common shares: basic.................................. 22,220 19,600 ================= ================= Weighted average common and common equivalent shares: diluted.......... 22,220 21,845 ================= =================
The accompanying notes are an integral part of these financial statements. -2- SCANSOFT, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three months ended March 31, --------------------------------------- 1999 1998 ---------------- ----------------- (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss)...................................................... $ (4,025) $ 335 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization................................... 94 514 Accounts receivable allowances.................................. 767 (220) Amortization of intangible asset................................ 158 -- Net gain on sale of hardware business........................... (882) -- Write off of acquired in-process research and development....... 3,944 -- Other........................................................... -- 36 Changes in assets and liabilities, net of effects from acquisition of ScanSoft and sale of hardware assets: Accounts receivable........................................... (2,034) (1,784) Inventory..................................................... (18) (1,180) Prepaid expenses and other current assets..................... (145) 426 Other assets.................................................. -- 148 Accounts payable.............................................. (54) (957) Other accrued liabilities..................................... (416) (925) ---------------- ----------------- Net cash provided by (used in) operating activities.................... (2,611) (3,607) ---------------- ------------------ CASH FLOWS FROM INVESTING ACTIVITIES: Net sales of short-term investments............................... 174 355 Proceeds from sale of hardware business........................... 6,782 -- Cash associated with ScanSoft acquisition, net.................... 1,233 -- Capital expenditures for property and equipment................... (9) (46) ---------------- ----------------- Net cash provided by investing activities.............................. 8,180 309 ---------------- ----------------- CASH FLOWS FROM FINANCING ACTIVITIES: Short term bank borrowings, net................................... (6,000) 3,649 Buy back of Treasury Stock........................................ (684) 148 ----------------- ----------------- Net cash provided by (used in) financing activities.................... (6,684) 3,797 ---------------- ----------------- Net increase (decrease) in cash and cash equivalents................... (1,116) 499 Cash and cash equivalents at beginning of period....................... 7,659 11,423 ---------------- ----------------- Cash and cash equivalents at end of period............................. $ 6,544 $ 11,922 ================ =================
The accompanying notes are an integral part of these financial statements. -3- SCANSOFT, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1. BASIS OF PRESENTATION: The accompanying unaudited condensed consolidated financial statements of ScanSoft, Inc. (the "Company" or "ScanSoft") have been prepared in accordance with generally accepted accounting principles. In the opinion of management, these interim condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments necessary to present fairly the financial position, results of operations, and cash flows at March 31, 1999, and for other periods presented. Although the Company believes that the disclosures in these financial statements are adequate to make the information presented not misleading, certain information normally included in financial statements and related footnotes prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The accompanying financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended January 3, 1999. The results for the quarter ended March 31, 1999 are not necessarily indicative of the results that may be expected for the year ending December 31, 1999, or any future period. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities on the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Effective in the first quarter of 1999, the Company changed its year and quarter ends. The Company's fiscal year now ends on December 31. The Company reports quarterly results on the last day of the calendar quarter. The Company previously used the Sunday closest to the calendar month end. NOTE 2. BALANCE SHEET COMPONENTS: The following table summarizes key balance sheet components:
March 31, December 1999 1998 ---------------- -------------- Inventory: Raw Materials............................ $ 390 $ 429 Work-in-process.......................... 1 2,261 Finish goods............................. 159 2,087 ---------------- -------------- $ 550 $ 4,777 ================ ============== Accrued liabilities: Restructuring accrual.................... $ 134 $ - Accrued taxes payable.................... 183 158 Warranty accrual......................... 200 200 Other accrued liabilities................ 610 620 ---------------- -------------- $ 1,127 $ 978 ================ ==============
-4- NOTE 3. ACQUISITION OF SCANSOFT: The Company acquired ScanSoft, a company that develops, markets, distributes and supports systems and software that capture, communicate and print documents at the desktop, effective March 2, 1999 for approximately 6.8 million shares of Common Stock of the Company, 3.6 million shares of non-voting Preferred Stock of the Company and exchange of 1.7 million employee stock options to purchase Common Stock of the Company in exchange for outstanding employee stock options of ScanSoft. Additionally, in conjunction with the acquisition, the Company incurred approximately $1.1 million of acquisition related costs. The purchase price of ScanSoft, including acquisition costs, was $18.6 million, and was allocated to the assets acquired and liabilities assumed based on the fair value of ScanSoft's current assets, property and equipment, and liabilities. The excess of the purchase price over the fair value of tangible assets acquired has been allocated to intangible assets (IPRD, core technology, trade mark and trade name, and assembled workforce) acquired based on an independent appraisal. This acquisition has been accounted for under the purchase method of accounting and the results of operations of ScanSoft have been included in the consolidated statements of operations of the Company from the date of acquisition. The Company recorded a one time write-off of approximately $3.9 million in the quarter ended March 31, 1999 relating to the value of in-process research and development acquired as part of the purchase. The allocation of the purchase price was as follows (in thousands): Property and equipment......................... $ 909 Current and other assets....................... 4,813 Liabilities assumed............................ (2,166) Identified intangible assets................... 11,096 Acquired in-process research and development... 3,944 ------------- $ 18,596 ============= NOTE 4. IN-PROCESS RESEARCH AND DEVELOPMENT: Management estimates that $3.9 million of the purchase price of ScanSoft represents acquired in-process technology that has not yet reached technological feasibility and has no alternative future use. Accordingly, this amount was immediately charged to expense in the consolidated statements of operations upon consummation of the acquisition. The value assigned to acquired in-process technology was determined by identifying research projects in areas for which technological feasibility has not been established. These include projects (primarily major version upgrades) in each of ScanSoft's major products, including ScanWorks, Pagis, TextBridge and API. The value was determined by estimating the revenue contribution of each of these products and the amount of the revenues attributable to the core/developed technology, the in-process - completed, the in-process - to be completed and the future yet-to-be-defined elements. The net cash flows for the in-process - completed were then discounted utilizing a weighted average cost of capital of 25%. This discount rate takes into consideration the inherent uncertainties surrounding the successful development of the in-process research and development, the profitability levels of such technology and the uncertainty of technological advances which could potentially impact the estimates described above. The split between the in-process - completed and the in-process - to be completed amounts were estimated based on the time and related costs incurred in development before the close of the acquisition and estimated to be incurred after the close of the acquisition. The average percentage of completion of the projects ranged from 73% to 95% at the date of the acquisition. Revenues are projected to be generated in fiscal 1999 for each of the product -5- versions in development at the acquisition date. If these projects are not successfully developed, future revenue and profitability of ScanSoft may be adversely affected. Additionally, the value of other intangible assets acquired may become impaired. NOTE 5. RESTRUCTURING: Restructuring costs of $346,000 in the first quarter of 1999 include $188,000 related to a workforce reduction. The workforce reduction costs primarily include severance costs related to the involuntary termination of employment for approximately 10 employees from research and development in California. The terminations were necessary in order to consolidate the Company's research and development efforts to the new corporate headquarters in Massachusetts. Also included was approximately $46,000 in fixed assets and $82,000 in non-refundable commitments associated with the California operation which were no longer required once the headquarters were moved to Massachusetts, and $30,000 in other exit costs. Severance costs and other exit costs were determined in accordance with EITF No. 94-13, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity." The restructuring actions are intended to be executed to completion by March 31, 2000, one year from the date the reserve was taken. NOTE 6. SALE OF HARDWARE BUSINESS: On December 3, 1998, the Company entered into an agreement to sell its hardware assets, liabilities and intellectual property to Primax Electronics, LTD ("Primax") for approximately $6.8 million in cash. The terms of the agreement also granted to Primax a software license agreement that allows them to "bundle," market and sell the Company's PaperPort software with Primax hardware products. The agreement requires the payment of certain royalties by Primax to the Company. On January 6, 1999 the agreement with Primax was completed. Accordingly, in the quarter ended March 31, 1999, the Company reported a non-operating gain of approximately $882,000 related to the sale of the hardware business. The most significant assets and liabilities at January 3, 1999, of the hardware business were receivables, inventories and accounts payable in the approximate amounts of $12.7 million, $4.6 million and $10.7 million, respectively. In addition, Primax assumed the lease of the Company's corporate facilities in California. The Company entered into an agreement with Primax to pay Primax rent for the Company's use of this facility until the move of the corporate offices to Peabody, Massachusetts after the acquisition of ScanSoft on March 2, 1999. As a result of the sale of the hardware business on January 6, 1999, the Company derived no revenues and incurred no material operating expenses related to the hardware business during the quarter ended March 31, 1999. NOTE 7. COMPREHENSIVE INCOME (LOSS): Under the provision of Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income," the Company is required to report comprehensive income (loss). Comprehensive income (loss) includes foreign currency translation gains and losses and other unrealized gains and losses that have been previously excluded from net income (loss) and reflected instead in equity. The Company's foreign subsidiary uses the dollar as its functional currency and therefore the Company reports gains or losses due to foreign currency fluctuations in the period that they occur. The Company also has no other elements of comprehensive income (loss) and the net loss reported for the quarter ended March 31, 1999 is the same as its comprehensive loss. -6- NOTE 8. NET INCOME (LOSS) PER SHARE: Net income (loss) per share is calculated in accordance with the provisions of Statement of Financial Accounting Standards No. 128 - "Earnings per Share" (SFAS No. 128). The following details the computation for basic and diluted income (loss) per share:
March 31, March 31, 1999 1998 --------------- --------------- Net income (loss)................................................ $ (4,025) $ 335 =============== =============== Weighted average common shares outstanding (basic)............... 22,220 19,600 Effect of dilutive options and warrants.......................... -- 2,245 --------------- --------------- Weighted average common and common equivalent shares outstanding (diluted)..................................................... 22,220 21,845 Income (loss) per share: basic.................................. $ (0.18) $ 0.02 =============== =============== Income (loss) per share: diluted................................ $ (0.18) $ 0.02 =============== ===============
NOTE 9. BANK LINE OF CREDIT: At December 31, 1998, the Company had bank borrowings of $6.0 million under a line of credit with a bank. In connection with the sale of the hardware business on January 6, 1999, the outstanding borrowings were paid and the line of credit was terminated. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE UNAUDITED FINANCIAL STATEMENTS. CERTAIN STATEMENTS CONTAINED IN THIS QUARTERLY REPORT ON FORM 10-Q, INCLUDING, BUT NOT LIMITED TO, STATEMENTS CONTAINING THE WORDS "EXPECTS", "INTENDS", "BELIEVES", "ANTICIPATES", "ESTIMATES", AND SIMILAR EXPRESSIONS, CONSTITUTE "FORWARD-LOOKING" STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. THESE FORWARD-LOOKING STATEMENTS INVOLVE CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. POTENTIAL RISKS AND UNCERTAINTIES INCLUDE, WITHOUT LIMITATION, THOSE MENTIONED IN THIS REPORT AND, IN PARTICULAR, THE FACTORS DESCRIBED UNDER "ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS," AND THOSE MENTIONED IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED JANUARY 3, 1999 UNDER "BUSINESS" AND "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS." OVERVIEW During 1997 we implemented a strategy to focus our research and development efforts on software development rather than hardware development and to leverage the engineering resources of our manufacturing partners to design future hardware products. In furtherance of this strategy, on January 6, -7- 1999, we sold our hardware business and the Visioneer brand name to Primax, and acquired Xerox Corporation's ScanSoft subsidiary on March 2, 1999. Following the sale to Primax and the acquisition of ScanSoft, our business now focuses on software products that capture, communicate, and print documents including the PaperPort, TextBridge and Pagis product lines. Our success in the future will depend on our ability to maintain software gross margins and increase sales of our software products. This will depend in part on our ability and the ability of our distributors, resellers and OEM partners to convince end-users to adopt paper and image input systems for the desktop and to educate end-users about the benefits of our products. There can be no assurance that the market for our products will develop or that we will achieve market acceptance of our products. We have incurred annual net losses since inception. There can be no assurance that we will be able to reach quarterly profitability or attain annual profitability in the near future. As of March 31, 1999, we had an accumulated deficit of $84.4 million. As a result of the sale of our hardware business in January, our revenues declined significantly in the first quarter of 1999. This decline was partially offset by the inclusion of sales of ScanSoft products subsequent to the acquisition of ScanSoft on March 2, 1999. We expect our revenues to start improving gradually from the first quarter 1999 levels, as revenues from ScanSoft start impacting our operating results. -8- RESULTS OF OPERATIONS The following table presents, as a percentage of net revenue, certain selected financial data for the quarters ended March 31, 1999 and March 31, 1998. SCANSOFT, INC. (UNAUDITED)
Three months ended March 31, --------------------------------- 1999 1998 ---------------- ------------- Revenue.......................................................... 100.0% 100.0% Costs and expenses: Cost of revenue............................................... 25.0% 71.0% Research and development...................................... 27.8% 5.7% Selling, general and administrative........................... 57.7% 22.9% Restructuring charges......................................... 7.7% 0.0% Gain on sale of hardware business, net........................ (19.6%) 0.0% Amortization of intangible assets............................. 3.5% 0.0% Acquired in-process research and development.................. 87.5% 0.0% ---------------- ------------- Total costs and expenses......................................... 189.6% 99.5% ---------------- ------------- Income (loss) from operations.................................... (89.6%) 0.5% Other income, net................................................ 0.3% 1.2% ---------------- ------------- Income (loss) before income taxes................................ (89.3%) 1.7% Provision for income taxes....................................... 0.0% 0.0% ---------------- ------------- Net income (loss)................................................ (89.3%) 1.7% ---------------- -------------
NET REVENUE Net revenue of $4.5 million in the first quarter of 1999 is decreased $15.5 million, or 77% from the first quarter of 1998. This decrease is due to the sale of the hardware business on January 6, 1999, which contributed $15.8 million of net revenue in the first quarter of 1998. Excluding the loss of hardware revenue, total net revenue has increased due to the acquisition of ScanSoft on March 2, 1999. Net revenue in the first quarter includes three months of activity for the PaperPort product line and only one month of the acquired TextBridge and Pagis product lines. Net revenue on a pro forma basis would have been approximately $7.4 million and $8.8 million in the first quarters of 1999 and 1998, respectively. Contributing to the decline in net revenue is the lack of Hewlett Packard royalties in the first quarter of 1999, compared to $516,000 recognized in the first quarter of 1998. Another contributor is the timing of new product introductions, in particular TextBridge Pro 98, which commenced shipping in the fourth quarter of 1997, driving increased retail sell through and re-orders in the first quarter of 1998. The current release of TextBridge, TextBridge Pro 9.0, commenced shipping in April 1999. -9- New products shipped in the first quarter include PaperPort Deluxe 6.0 and PaperPort ScannerSuite 2.0, both of which shipped in the latter half of the quarter. The breakdown of recorded net revenue by channel in the first quarter of 1999 is 43% retail, 17% direct and web, and 40% OEM. COST OF REVENUE Cost of revenue consists primarily of material costs, third party royalties, fulfillment, and salaries for product support personnel. Cost of revenue in the first quarter of 1999 was $1.1 million or 25% of total revenue, compared to $14.1 million or 71% in the first quarter of 1998. The variance in absolute dollars and percentage of revenue is primarily attributable to the sale of the hardware business which contributed $13.0 million in cost of revenues or 65% of total revenues in the first quarter of 1998. On a pro forma basis, cost of revenue would have been approximately $1.9 million and 25% of net revenue in the first quarter 1999, compared to $2.5 million and 28% of net revenue in the first quarter 1998. RESEARCH AND DEVELOPMENT EXPENSES Research and development expenses consist primarily of salary and benefit costs of engineers. Research and development costs were $1.3 million or 28% of revenue in the first quarter of 1999, an increase of $123,000 for the corresponding period in 1998. The costs for the first quarter 1999 represent three months of research and development effort from the former Visioneer team in California and one month from the ScanSoft team, and also include approximately $187,000 in costs associated with the consolidation to the East Coast. The benefit of the research and development consolidation to the East Coast will not be fully realized until the third quarter of 1999. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling expenses include salaries, commissions, advertising, direct mail, public relations, trade shows, travel and other related sales and marketing expenses. General and administrative expenses include personnel costs for administration, finance, human resources, information systems, and general management in addition to legal and accounting expenses and other professional services. Selling, general and administrative expenses in the first quarter of 1999 were $2.6 million or 58% of revenue compared to $4.6 million or 23% of revenue in the first quarter 1998. Included in the first quarter 1999 results are approximately $375,000 relating to non-recurring charges in connection with the acquisition and relocation of the Company's headquarters to the East Coast. The decline in absolute dollars is due in part to the sale of the hardware business, which contributed $3.6 million in first quarter 1998 costs. RESTRUCTURING CHARGES Restructuring charges of $346,000 in the first quarter of 1999 relate to the acquisition of ScanSoft and the subsequent consolidation of research and development operations and the move of the Company's headquarters to Massachusetts, which resulted in the termination of 10 employees in California. The major components of these costs are approximately $188,000 in severance costs for the 10 employees and approximately $46,000 for disposed West Coast equipment. Also included is $82,000 in non-refundable commitments associated with the West Coast development team, as well as $30,000 in other exit costs. -10- GAIN ON SALE OF THE HARDWARE BUSINESS In the quarter ended March 31, 1999, the Company sold its hardware business to Primax Electronics, Ltd., for approximately $7 million and reported a non-operating gain of approximately $882,000. The most significant assets and liabilities at January 3, 1999, of the hardware business were receivables, inventories and accounts payable in the approximate amounts of $12.7 million, $4.6 million and $10.7 million, respectively. AMORTIZATION OF IDENTIFIED INTANGIBLE ASSETS The acquisition of ScanSoft included approximately $11.0 million in identified intangible assets. These assets consist of core developed technology, trade marks and trade names, and the assembled workforce, which will be amortized over six, seven and three years, respectively. IN-PROCESS RESEARCH AND DEVELOPMENT Management estimates that $3.9 million of the purchase price of ScanSoft represents acquired in-process technology that has not yet reached technological feasibility and has no alternative future use. Accordingly, this amount was immediately charged to expense in the consolidated statements of operations upon consummation of the acquisition. The value assigned to acquired in-process technology was determined by identifying research projects in areas for which technological feasibility has not been established. These include projects (primarily major version upgrades) in each of ScanSoft's major products, including ScanWorks, Pagis, TextBridge and API. The value was determined by estimating the revenue contribution of each of these products and the amount of the revenues attributable to the core/developed technology, the in-process - completed, the in-process - to be completed and the future yet-to-be-defined elements. The net cash flows for the in-process - completed were then discounted utilizing a weighted average cost of capital of 25%. This discount rate takes into consideration the inherent uncertainties surrounding the successful development of the in-process research and development, the profitability levels of such technology and the uncertainty of technological advances which could potentially impact the estimates described above. The split between the in-process - completed and the in-process - to be completed amounts were estimated based on the time and related costs incurred in development before the close of the acquisition and estimated to be incurred after the close of the acquisition. The average percentage of completion of the projects ranged from 73% to 95% at the date of the acquisition. Revenues are projected to be generated in fiscal 1999 for each of the product versions in development at the acquisition date. If these projects are not successfully developed, future revenue and profitability of ScanSoft may be adversely affected. Additionally, the value of other intangible assets acquired may become impaired. INTEREST AND OTHER INCOME, NET Interest and other income, net, consists primarily of interest earned on cash equivalents and short-term investments. Interest and other income, net was $16,000 for the three month period ended March 31, 1999 compared to $237,000 for the three month period ended March 31, 1998. The decrease was the result of a decrease in interest income from decreased cash equivalents and short-term investments in the respective periods. INCOME TAXES We had no tax provision during the three month periods ended March 31, 1999 and 1998, due to availability of loss carryforwards and tax credits. -11- LIQUIDITY AND CAPITAL RESOURCES As of March 31, 1999, we had cash, cash equivalents and short-term investments of $6.8, as compared to $14.6 million of cash, cash equivalents and short-term investments at March 31, 1998. We used $2.6 million in cash for operating activities in the quarter ended March 31, 1999. The cash was used to fund payment of salary and personnel costs, the prepayment of annual insurance policies, and other normal operating costs. Cash used in the quarter ended March 31, 1998 was $3.6 million. Cash provided by investing activities in the quarter ended March 31, 1999 and March 31, 1998 was $8.2 million and $309,000, respectively. Approximately $6.8 million was received in connection with the sale of the hardware business in the quarter ended March 1999. Cash used in financing activities for the quarter ended March 31, 1999 was $6.7 million. The cash was used to buy back common stock from existing stockholders in connection with the acquisition of ScanSoft and to pay off outstanding short term bank borrowings of approximately $6.0 million. We believe that our current cash and cash equivalents and cash generated from operations will satisfy our working capital and capital expenditures needs through fiscal 1999. YEAR 2000 COMPLIANCE We are aware of the potential business risks associated with the "Year 2000" millennium issue. Based upon this potential business risk, we have developed a strategy to examine the potential effect of this issue. The following strategy outlines the process by which we are trying to minimize the potential risk associated with the "Year 2000" millennium issue. We have assessed the potential effects of the "Year 2000" millennium change on our business systems and processes, including facilities, software and components used by our employees, as well as our outsourcing vendors and critical suppliers. Our Year 2000 project is proceeding on schedule. The project goal is to ensure that our business is not impacted by the date transitions associated with the Year 2000. Our Year 2000 project plan is coordinated by a team that reports to senior management. The project team is evaluating the Year 2000 compliance of our business systems and processes, including facilities, software and components used by our employees, as well as our outsourcing vendors and critical suppliers who provide services relating to our business. Our Year 2000 project is comprised of the following phases: o Phase 1 - Inventory all business systems and processes, including facilities, software and components used by our employees, in order to assign priorities to potentially impacted systems and services. This phase was completed by January 31, 1999 and a complete inventory was compiled. o Phase 2 - Assess the Year 2000 compliance of all inventoried business systems and processes, including facilities, software and components used by our employees, and determine whether to renovate or replace any non-Year 2000 compliant systems and services. This phase was completed by March 31, 1999. o Phase 3 - Complete remediation, if any is required, of any non-compliant business systems and processes, including facilities, software and components used by our -12- employees and outsourcing vendors. Conduct procurements to replace any other non-Year 2000 compliance business systems and processes, including facilities, software and components used by our employees and outsourcing vendors that won't be remediated. We expect to complete all remediation efforts, if any are required, by June 30, 1999. o Phase 4 - Test and validate remediated and replacement systems, if any such remediation or replacement is required, to ensure inter-system compliance and mission critical system functionality. We expect to complete testing and validation efforts, if any are required, by July 31, 1999. o Phase 5 - Deploy and implement remediated and replacement systems, if any deployment or implementation is required, after the completion of successful testing and validation. We expect to complete the deployment and implementation of the remediated or replacement systems, if any is required, by September 30, 1999. o Phase 6 - Design contingency plan and business continuation plans in the event of the failure of business systems and processes, facilities, data networking infrastructure, software and components used by our employees due to the Year 2000 millennium change. We expect that the initial contingency and business continuation plan will be in place by November 30, 1999. Based on our inventory and assessment to date, we believe that our internal mission critical systems are Year 2000 compliant and that our facilities can be Year 2000 compliant. In addition, we are seeking assurances from our facilities' landlords and equipment vendors and data circuit providers regarding the Year 2000 compliance of their facilities and equipment. At this time, we believe that our incremental remediation costs, if any, needed to make our current business systems and processes, including facilities, software and components used by our employees and outsourcing vendors, are not material. While we are incurring some incremental costs, our incurred costs through March 31, 1999 were less than $60,000. Our expected total costs, including remediation and replacement costs, if any, are estimated to be between $100,000 and $200,000 over the life of the Year 2000 project. We are contacting our hardware and software vendors, other significant suppliers, manufacturers, outsourcing service providers and other contracting parties to determine the extent to which we are vulnerable to any one of their failures to achieve Year 2000 compliance for their own systems. At the present time, we do not expect Year 2000 issues of any such third parties to materially affect our business. Should we fail to solve a Year 2000 compliance problem to our critical business systems and processes, the result could be a failure or interruption to normal business operations. Despite the assurances of our third-party suppliers, hardware and software vendors, and outsourcing service providers regarding Year 2000 compliance of their products and services, the potential exists that a Year 2000 problem relating to such third-party suppliers, vendors and outsourcing service providers products and services could have a material impact on our business. We are conducting monthly discussions with our critical outsourcing service providers to determine the progress of their Year 2000 compliance programs. Despite extensive preparation and effort to ensure Year 2000 compliance, implementation of our business continuation contingency plan for a very short time may be required while we remediate the Year 2000 problem. -13- Despite our belief that our mission critical computer software applications and systems are Year 2000 compliant and our expectation that our enhancement effort will result in Year 2000 compliant systems, we are currently developing a business continuation contingency plan. We expect to finalize our initial contingency plan to complete the testing of all existing systems by November 30, 1999. The information in this section is a "Year 2000 Readiness Disclosure" as defined in the Year 2000 Information Readiness and Disclosure Act of 1998 enacted on October 19,1998. The foregoing Year 2000 discussion contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements, including without limitation, anticipated costs and the dates by which certain actions are expected to be completed, are based on management's best current estimates, which were derived utilizing numerous assumptions about future events, including the continued availability of certain resources, representations received from third parties and other factors. However, there can be no guarantee that these estimates will be achieved, and actual results could differ materially from those anticipated. Specific factors that might cause such material differences include, but are not limited to, the ability to identify and remediate all relevant systems, results of Year 2000 testing, adequate resolution of Year 2000 issues by governmental agencies, businesses and other third parties who are outsourcing service providers suppliers and vendors, unanticipated system costs, the adequacy of and ability to implement contingency plans and similar uncertainties. The "forward-looking statements" made in the foregoing Year 2000 discussion speak only as of the date on which such statements are made, and management does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. FACTORS AFFECTING RESULTS DIFFICULTIES OF INTEGRATING TWO COMPANIES. The anticipated benefits merging with ScanSoft will depend in part on whether we can integrate our operations and products in an efficient and effective manner. We cannot guarantee that this will occur. Successful integration will require integration of each company's products and coordination of each company's operating procedures, financial controls, development efforts and sales and marketing efforts. This integration may be difficult to accomplish smoothly or successfully, and may take longer than we expect. If serious difficulties are encountered during integration, management will have to divert its attention from normal business operations to address these issues, which could have an adverse effect on the surviving corporation's business. In addition, the merger may cause potential customers to cancel or delay orders as the result of uncertainty over the successful integration of the two companies. Furthermore, there could be an adverse effect on employee morale and on the ability of the surviving corporation to retain key personnel. Failure to effectively accomplish the integration of the two companies' operations could have a material adverse effect on the surviving corporation's business, operating results and financial condition. FAILURE TO ACHIEVE SYNERGIES COULD LEAD TO DECLINE IN STOCK PRICE. The market price of our common stock may decline significantly if: o the integration of the combined companies is not successful; o we do not experience business synergies as quickly or to the extent expected by financial analysts; or o the effect of the merger on earnings per share and operating results is not in line with the expectations of financial analysts. -14- DEPENDENCE ON DEVELOPING MARKET; RAPID TECHNOLOGICAL CHANGE. The market for digital imaging software and, in particular, for our products, is new and rapidly evolving. It is dependent on market demand for color sheetfed and flatbed scanners, as well as for other paper input systems. It is characterized by transforming technology and frequent new product introductions. Developing new products and product enhancements is a complex and uncertain process requiring high levels of innovation, as well as the accurate anticipation of technological and market trends. Our PaperPort, Pagis and TextBridge software products account for most of our revenues. We expect that these products will continue to account for most of our revenues for the foreseeable future. Broad market acceptance of these products is therefore critical to our future success and will depend in part on the following: o Our ability and that of our distributors and other industry suppliers to convince end users to adopt paper input systems and digital imaging software for the desktop. o Our ability to educate end users about the benefits of digital imaging products generally and the specific benefits of our products. o Our ability to adapt to emerging industry standards and respond to our competitors' product announcements. o Our ability to develop, introduce, upgrade and support competitive, new products and product enhancements that meet changing customer requirements and emerging industry standards. o Our ability to maintain current market share for our products and increase brand-name recognition. If we are not successful in meeting the goals listed above, we may not be able to gain broad market acceptance for our products. Further, a decline in demand for digital imaging products generally, or for PaperPort, Pagis or TextBridge products, in particular, could occur as a result of competitive technological change or other factors and would have a material adverse effect on our business, operating results and financial condition. DIFFICULTIES ASSOCIATED WITH TIMING OF NEW PRODUCT INTRODUCTION. The digital imaging software market is characterized by rapid technological change, evolving customer needs, frequent new product introductions and evolving industry standards. Rapid product advancements could erode the market position of our products or render those products obsolete. Our success depends on how well we are able to manage the transition to new products and new versions of existing products. The life cycles of our products are difficult to estimate. Further, it is not unusual in personal computer software life cycles for the sales volume of new products to increase in the first few months after their introduction because distributors and resellers purchase initial inventory during that time. As a product reaches the end of its life cycle, however, demand for that product tends to fall in anticipation of new replacement products. Consequently, announcements about new products at the end of a product life cycle may cause our customers to defer purchasing existing products, and we may be forced to lower the prices of older products in anticipation of new releases. This may result in distributors claiming price protection credits or returning older products to us, and as a result, our revenues may decline. We cannot accurately predict the exact timing in which a new product or version will be ready to ship. Moreover, in order to maintain competitiveness, we must make substantial investments in product development and testing. We cannot guarantee that we will have sufficient resources to make the necessary investments or that we will be able to develop new products or new product features quickly enough to meet market demand. Any delay in the scheduled release of new products or features, or lack of market acceptance for such new products or features, may have a material adverse impact on our business, results of operations and financial condition. -15- COMPETITION. The digital imaging market is highly competitive and subject to rapid change, with frequent new product introductions and enhancements, and constant pressure to reduce prices. We believe that the principal competitive factors in the digital imaging software market include: o OCR accuracy; o ease of understanding and use, o product reliability; o tolerance for poor media; o product features and functions; o price/performance characteristics; o brand recognition; and o quality of product support. Our current competitors include developers of digital image processing software (including photo-editing software), personal document management software and scanning software suites and manufacturers of scanners and multi-function peripheral devices. We also face competition in the market for packaged OCR application programs and bundled OCR products, both in the retail channel and in the OEM market. We experience significant price competition in both the retail channel and the OEM market and expect this to continue. In addition, our "bundled" OCR products themselves compete with our fully featured shrink-wrap products. In addition to our current competitors, Microsoft Corporation and MGI Software offer photo-editing products and could offer products in this market segment in the future. Increased competition may force us to lower our prices, experience decreased gross margins or lose market acceptance. We face the following challenges from our competitors: o Certain of our competitors offer products comparable to ours at retail prices that are lower than ours. o Many of our current and potential competitors have longer operating histories and significantly greater financial, technical, support, sales, marketing, recruiting and other resources. o Certain of our competitors have greater name recognition and larger customer bases than we do. o Certain of our competitors may be better able to withstand significant price decreases or devote greater resources to the development, promotion, sale and support of their products than we can. o Certain of our competitors may be able to develop digital image processing software with superior OCR accuracy, ease of understanding and use, product reliability, tolerance for poor media, product features and functions and price/performance characteristics. We may not be able to compete successfully against current and future competitors, especially those with greater financial, technical, support, sales, marketing, recruiting and other resources. If we are -16- not successful in meeting the challenges listed above, we may not be able to gain broad market acceptance for our products and our business, financial condition and operating results may suffer. Competitive pressures may materially affect our business, operating results, and financial condition. Further, we expect that some consolidation in the digital imaging software industry will occur over the next few years through strategic acquisitions or alliances. We expect increased competition from new entrants, including the possibility that Microsoft will add digital imaging components to the Windows operating system. In addition, according to PC Data, Inc., the average retail price of scanners dropped by 47% for the nine months ending September 30, 1998, as compared to the same period in 1997. Based on this historical trend, we expect that scanner prices will continue to decline in the future. We believe that the downward price trend of scanners may reduce prices for digital imaging software products. These changes in the market could result in price erosion, reduced gross margins or loss of market share, any of which could have a material adverse effect on our business, operating results and financial condition. PRESSURE ON GROSS MARGIN. We may suffer adverse operating results if our gross margin fluctuates. Retail prices on software products drop quickly. In addition, our competitors will attempt to offer products which meet or exceed our products' performance and capabilities. We intend to introduce new software products, software upgrades and software features in response to anticipated competitive price pressures and new product introductions. If prices fall faster than we expect or if we must reduce our prices for any reason, we may experience pressure on our gross margin. In addition, our gross margin will depend in part on certain factors listed below: o Our success in introducing new products to the market and easing out old ones. o Our competitors prices, products and market share. o The amount of royalties we receive under our OEM arrangements. o General economic conditions. If we are not successful in meeting these challenges, our business, operating results and financial condition may suffer. HISTORY OF LOSSES; FLUCTUATIONS IN OPERATING RESULTS. ScanSoft had net losses for 1996, 1997 and 1998. Visioneer also had net losses for its fiscal 1996, 1997 and 1998, although a substantial portion of those losses were attributable to the hardware business that was sold to Primax. On a pro forma basis, the combined companies had a net loss for 1997 and 1998.. Our revenues frequently fluctuate from quarter to quarter due, to a large extent, on the following: o volume, timing and filling of customer orders; o reduction in prices in response to competition; o increased expenditures to pursue new product or market opportunities; o fluctuation in sales orders, juxtaposed with a significant portion of our operating expenses being fixed in advance, based in large part on forecasts of future sales; o inability to adjust operating expenses to compensate for shortfalls in sales orders against forecast; -17- o price protection charges in excess of recorded allowances; o demand for products; o seasonality; o customer deferrals in anticipation of new versions of products; o introduction of new products by us or our competitors; o timing of new product acquisitions; and o timing of significant marketing and sales promotions. Further, backlog early in a quarter is generally not large enough to assure than we will meet our revenue target for any particular quarter. A shortfall in shipments at the end of any quarter may cause operating results for that quarter to fall significantly short of anticipated levels. In addition, if we need to reduce our prices in response to price competition, we will therefore be at a significant disadvantage with respect to our competitors that have substantially greater resources. Such competitors may more readily withstand an extended period of downward pricing pressure. In such event, we may also incur price protection charges from our distributors and resellers. Any price protection charges in excess of recorded allowances would have a material adverse effect on our business, operating results and financial condition. Due to the foregoing factors, among others, our revenues are difficult to forecast. We intend to base our expense levels in significant part on our expectations of future revenue. As a result, we expect our expense levels to be relatively fixed in the short term. Our failure to meet revenue expectations would have a material adverse affect on our business, operating results and financial condition. Further, an unanticipated decline in revenue for a particular quarter may disproportionately affect our net income because a relatively small amount of our expenses are intended to vary with our revenue in the short term. As a result, we believe that period-to-period comparisons of our results of operations are not and will not necessarily be meaningful, and you should not rely upon them as an indication of future performance. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. -18- PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On February 23, 1999, the Company held a special meeting of Stockholders. At such meeting, the following actions were voted upon: a. Approval and adoption of the Agreement and Plan of Merger between ScanSoft, Inc., an indirect wholly-owned subsidiary of Xerox Corporation, and Visioneer, Inc. (the "Company"), the merger of the Company and the amendment to the Company's certificate of incorporation to increase the authorized common and preferred stock and to set forth the rights, preferences and privileges of the Series B preferred stock to be issued in the merger and to approve other transactions contemplated in the Agreement and Plan of Merger. VOTES FOR VOTES AGAINST ABSTAINED BROKER NON-VOTES --------- ------------- --------- ---------------- 11,413,061 82,920 28,608 0 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits The exhibits listed on the Exhibit Index hereto are filed or incorporated by reference (as stated therein) as part of this report on Form 10-Q. (b) Reports on Form 8-K January 21, 1999 Item 2. Reported sale of hardware business to Primax Electronics, Ltd. March 17, 1999 Item 2. Reported March acquisition of ScanSoft, Inc. -19- SIGNATURES Pursuant to the requirements of the Securities Act of 1934, the Registrant has duly caused this Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Peabody, State of Massachusetts, on May 15, 1999. SCANSOFT, INC. By: /S/ SHARON E PLANTE ------------------------------------ Sharon E. Plante Chief Accounting Officer Treasurer -20- EXHIBIT INDEX Exhibits (numbered in accordance with Item 601 of Regulation S-K) Exhibit No. Description of Exhibits --- ----------------------- 2.1(1) Agreement and Plan of Merger dated December 2, 1998, between Visioneer, Inc., a Delaware corporation, and ScanSoft, Inc., a Delaware corporation. 3.1(2) Bylaws of Registrant. 3.2(3) Amended and Restated Certificate of Incorporation of Registrant. 4.1(3) Specimen Common Stock Certificate. 4.2(4) Preferred Shares Rights Agreement, dated as of October 23, 1996, between the Registrant and U.S. Stock Transfer Corporation, including the Certificate of Designation of Rights, Preferences and Privileges of Series A Participating Preferred Stock, the form of Rights Certificate and Summary of Rights attached thereto as Exhibits A, B and C, respectively. 4.3(5) Voting Agreement dated March 2, 1999 between Xerox, Xerox Imaging Systems, Inc., Visioneer, Inc. and several holders of Visioneer common stock. 27.1 Financial Data Schedule. - -------------- (1) Incorporated by reference from the Registrant's Registration Statement on From S-4 (No. 333-70603) filed with the Commission on January 14, 1999. (2) Incorporated by reference from the Registrant's Registration Statement on Form S-1 (No. 333-98356) filed with the Commission on October 19, 1995. (3) Incorporated by reference from the Registrant's Registration Statement on Form S-8 (No. 333-74343) filed with the Commission on March 12, 1999. (4) Incorporated by reference from the Registrant's current Report on Form 8-K dated October 30, 1996. (5) Incorporated by reference from the Registrant's Annual Report on Form 10-K for the fiscal year ended January 3, 1999. EX-27.1 2 ART. 5 FDS FOR 1999
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET, STATEMENT OF OPERATIONS AND STATEMENT OF CASH FLOWS INCLUDED IN THE COMPANY'S FORM 10-Q FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND THE NOTES THERETO. 1000 3-MOS DEC-31-1999 JAN-1-1999 MAR-31-1999 6,544 290 6,146 2,357 550 12,090 2,846 1,977 24,137 3,713 0 0 4 26 20,394 24,137 4,508 4,508 1,125 1,125 7,424 0 0 (4,025) 0 (4,025) 0 0 0 (4,025) (0.18) (0.18)
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