-----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, F5yBqbgP3D7i2rpqra8jZmKJNf9KQxi12Qoz4nHISRgGGubPHGX28couzzf31Obz +ApFxYJNbwo0JB5ZR4rm8w== 0000950109-96-007608.txt : 19961118 0000950109-96-007608.hdr.sgml : 19961118 ACCESSION NUMBER: 0000950109-96-007608 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NETRIX CORP CENTRAL INDEX KEY: 0000889237 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER COMMUNICATIONS EQUIPMENT [3576] IRS NUMBER: 541345159 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-20512 FILM NUMBER: 96665194 BUSINESS ADDRESS: STREET 1: 13595 DULLES TECHNOLOGY DR CITY: HERNDON STATE: VA ZIP: 22071 BUSINESS PHONE: 7037426000 MAIL ADDRESS: STREET 2: 13595 DULLES TECHNOLOGY DRIVE CITY: HERNDON STATE: VA ZIP: 22071 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to _______________ Commission File Number 0-50464 NETRIX CORPORATION ------------------ (Exact name of registrant as specified in charter) Delaware 54-1345159 ---------------------- ---------------------------------- (State of Incorporation) (I.R.S. Employer Identification No.) 13595 Dulles Technology Drive, Herndon, Virginia 22071 - ----------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (703) 742-6000 -------------- (Registrant's telephone number, including area code) Indicate by check number 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 ------ ------ At October 31, 1996 there were 9,497,282 shares of the registrant's Common Stock, $.05 par value per share, outstanding. NETRIX CORPORATION ------------------ FORM 10-Q --------- SEPTEMBER 30, 1996 ------------------ INDEX -----
Page No. PART I -- FINANCIAL INFORMATION ITEM 1 -- FINANCIAL STATEMENTS Condensed Consolidated Statements of Operations for the nine months and three months ended September 30, 1996 and September 30, 1995 3 Condensed Consolidated Balance Sheets 4 Condensed Consolidated Statements of Cash Flows 6 Notes to Condensed Consolidated Financial Statements 7 ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10 PART II -- OTHER INFORMATION ITEM 1 -- LEGAL PROCEEDINGS 13 ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K 13 SIGNATURE 14
2 PART I -- FINANCIAL INFORMATION Item 1. Financial Statements NETRIX CORPORATION ------------------ CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share amounts)
Nine Months Ended Three Months Ended September 30, September 30, ----------------------- ------------------------ 1996 1995 1996 1995 ---- ---- ---- ---- Revenues: Product......................................... $23,966 $31,259 $ 7,604 $ 8,189 Service......................................... 8,283 7,598 2,910 2,697 ------- ------- -------- ------- Total revenues............................ 32,249 38,857 10,514 10,886 Cost of revenues: Product......................................... 10,644 12,916 3,751 3,659 Service......................................... 5,245 5,406 1,789 1,956 ------- ------- -------- ------- Total cost of revenues.................... 15,889 18,322 5,540 5,615 ------- ------- -------- ------- Gross profit....................... 16,360 20,535 4,974 5,271 Operating expenses: Sales and marketing............................. 8,763 10,825 2,719 3,518 Research and development........................ 8,294 8,132 2,706 2,735 General and administrative..................... 3,165 3,666 1,005 1,159 Restructuring reserve .......................... 900 -- -- -- ------- ------- -------- ------- Loss from operations................. (4,762) (2,088) (1,456) (2,141) Interest income, net................................. 350 551 87 207 Foreign exchange gain (loss)........................ (56) 133 (10) (55) ------- ------- -------- ------- Loss before income taxes............. (4,468) (1,404) (1,379) (1,989) Provision for income taxes........................... 69 72 33 18 ------- -------- -------- ------- Net loss............................................. $(4,537) $(1,476) $(1,412) $(2,007) ======= ======= ======== ======= Loss per share....................................... $ (0.48) $ (0.16) $ (0.15) $ (0.21) ======= ======= ======== ======= Weighted average number of shares outstanding........ 9,458 9,357 9,491 9,411 ======= ======= ======== =======
See notes to unaudited condensed consolidated financial statements. 3 NETRIX CORPORATION ------------------ CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS (in thousands)
September 30, December 31, 1996 1995 ------------ ------------ (Unaudited) Current assets: Cash and cash equivalents..................................... $ 1,254 $ 4,370 Short-term investments........................................ 7,257 7,357 Accounts receivable, net of allowance for doubtful accounts of $1,468 at September 30, 1996 and $1,530 at December 31, 1995................................. 10,297 11,052 Inventories, net.............................................. 8,492 9,016 Other current assets.......................................... 865 962 ---------- ---------- Total current assets........................... 28,165 32,757 Property and equipment, net of accumulated depreciation of $14,806 at September 30, 1996 and $12,131 at December 31, 1995............................ 5,781 7,130 Goodwill, net.......................................................... 1,511 1,816 Deposits and other assets.............................................. 251 282 ---------- ---------- $ 35,708 $ 41,985 ========== ==========
See notes to unaudited condensed consolidated financial statements. 4 NETRIX CORPORATION ------------------ CONDENSED CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY (In thousands, except share amounts)
September 30, December 31, 1996 1995 ---------------- ------------ (Unaudited) Current liabilities: Line of credit................................................ $ 754 $ 750 Accrued liabilities........................................... 4,510 4,712 Accounts payable.............................................. 3,276 4,944 Current portion of long-term debt............................. 241 241 ------- -------- Total current liabilities...................... 8,781 10,647 Long-term debt, net of current portion................................. 300 320 Deferred rent, net of current portion.................................. 438 622 ---------- ---------- 9,519 11,589 --------- -------- Stockholders' equity: Preferred stock, $0.05 par value; 1,000,000 shares authorized; none issued and outstanding.................. -- -- Common stock, $0.05 par value; 15,000,000 shares authorized; 9,493,448 and 9,435,268 shares issued and outstanding at September 30, 1996 and December 31, 1995, respectively................ 475 472 Additional paid-in capital.................................... 55,510 55,105 Unrealized holding gain (loss)................................ (10) 42 Cumulative translation adjustment............................. (38) (11) Accumulated deficit........................................... (29,748) (25,212) ---------- ---------- Total stockholders' equity.................................... 26,189 30,396 ---------- ---------- $ 35,708 $ 41,985 ========= =========
See notes to unaudited condensed consolidated financial statements. 5 NETRIX CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands)
Nine Months Ended September 30, ------------------------------------------------ 1996 1995 ------------------ ----------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss.......................................................... $ (4,537) $ (1,476) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization................................. 2,979 2,650 Non-cash compensation expense................................. 129 -- Decrease in deferred rent..................................... (161) (140) Changes in assets and liabilities - Accounts receivable...................................... 756 4,498 Inventories.............................................. 20 (550) Other current assets..................................... 97 293 Deposits and other assets................................ 31 216 Accounts payable......................................... (1,668) (1,202) Accrued liabilities...................................... (226) (1,086) ---------- ---------- Net cash (used in) provided by operating activities...... (2,580) 3,203 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of short-term investments........................... (5,330) (14,363) Sales of short-term investments............................... 5,378 12,319 Purchases of property and equipment........................... (822) (1,642) Cash acquired from IDS acquisition............................ -- 35 ---------- ---------- Net cash provided by (used in) investing activities...... (774) (3,651) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from exercise of stock options....................... 205 200 Proceeds from employee stock purchase plan.................... 75 137 Proceeds from line of credit.................................. 4 480 Repayments of long-term debt.................................. (20) -- Payments under capital lease obligations...................... -- (25) ---------- ---------- Net cash provided by financing activities................. 264 792 ---------- ---------- Effect of foreign currency exchange rate changes on cash and cash equivalents.................................................. (26) (9) ---------- ---------- Net (decrease) increase in cash and cash equivalents................... (3,116) 335 Cash and cash equivalents, beginning of period......................... 4,370 6,000 ---------- ---------- Cash and cash equivalents, end of period............................... $ 1,254 $ 6,335 ========== ========== Supplemental disclosure of cash flow information: Cash paid during the period for interest...................... 108 37 Cash paid during the period for income taxes.................. -- -- Capitalization of inventories into manufacturing and test equipment........................................... 504 223
See notes to unaudited condensed financial statements. 6 NETRIX CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1996 1. Basis of Presentation: Netrix Corporation (the "Company") was formed in 1985 to develop, manufacture, market and support a family of high performance, integrated network switching and network management products for use in enterprise-wide communications networks. During 1989, the Company formed a wholly-owned subsidiary, Netrix International Corporation (a Delaware corporation). On January 1, 1995, the Company's wholly-owned subsidiary, Netrix Telcom Systems Corporation, was merged with and into the Company. Also on January 1, 1995, the Company acquired the equipment, inventory, and contract rights of InterData Systems GmbH ("IDS"), relating to its corporate network business. All significant intercompany transactions have been eliminated. The unaudited condensed financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission and include, in the opinion of management, all adjustments, consisting of normal, recurring adjustments, necessary for a fair presentation of interim period results. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The Company believes, however, that its disclosures are adequate to make the information presented not misleading. The results for such interim periods are not necessarily indicative of results to be expected for the full year. Certain reclassifications have been made to the prior year financial statements to conform with current year presentation. 2. Acquisitions: ------------ IDS On January 1, 1995, the Company acquired the equipment, inventory, and contract rights of IDS, relating to its corporate network business. Prior to this acquisition, IDS was a distributor of the Company and provided sales and service of the Company's products in Germany. The purchase price for the assets acquired in this transaction was $545,000. All of the assets acquired were transferred to Netrix GmbH, a wholly-owned subsidiary of the Company, which was established coincidentally with the acquisition of the assets of IDS. 3. Cash Equivalents: ----------------- Cash equivalents are primarily bank deposits, commercial paper, and US government agency securities, with original maturities of three months or less. These investments are carried at cost, which approximates market value. 4. Short-Term Investments: ----------------------- Short-term investments consist primarily of commercial paper with maturities of more than three months and less than twelve months and longer-term investments which are primarily US government obligations with maturities between twelve and eighteen months. Longer-term investments are bought and held principally for the purpose of selling them in the near term. Short-term investments are reported at fair value. 7 Under SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," debt securities that are classified as available-for-sale are reported at fair value, with unrealized gains and losses reported as a separate component of stockholders' equity. At September 30, 1996 and December 31, 1995, the unrealized holding gain/loss on short-term investments was a loss of approximately $10,000 and gain of approximately $42,000, respectively, and is reported as a separate component of stockholders' equity. 5. Inventories: ----------- Inventories consisted of the following (in thousands):
September 30, 1996 December 31, 1995 ------------------ ----------------- Raw materials........................................ $ 390 $ 335 Work in process...................................... 1,207 798 Finished goods....................................... 6,895 7,883 ---------- --------- Total inventories.................................... $ 8,492 $ 9,016 ========== =========
6. Debt: Line of Credit In January 1996, the Company renegotiated its existing line of credit agreement with a lending institution to provide for a $2.0 million line of credit for working capital at an interest rate per annum equal to the lender's prime rate plus 3/4% (9.0% at September 30, 1996), which includes covenants that require the Company to maintain certain levels of liquidity and tangible net worth. The working capital line of credit matures with unpaid principal amounts due and payable on January 3, 1997. At September 30, 1996 and December 31, 1995, the Company had approximately $754,000 and $750,000, respectively, outstanding under the working capital line of credit. Long-term Debt The Company utilized approximately $561,000 of available draws under an equipment line of credit with a lending institution, which was capped at this amount in January 1996 and began to amortize as a term loan over a 28-month period in accordance with the credit agreement. The term loan is payable in monthly installments of approximately $20,000 from September 3, 1996 through January 3, 1999. The equipment note payable bears interest at a rate per annum equal to the lender's prime rate plus 3/4% (9.0% at September 30, 1996) and is secured by certain machinery and equipment. At September 30, 1996 and December 31, 1995, the Company had approximately $541,000 and $561,000, respectively, outstanding under the equipment note payable. 8 7. Product Revenues: The Company's product revenues for the nine months and three months ended September 30, 1996 and 1995 were generated in the following geographic regions:
Nine Months Ended Three Months Ended September 30, September 30, ------------------ -------------------- 1996 1995 1996 1995 ---- ---- ---- ---- Domestic....................... $ 8,642 $17,207 $ 2,765 $ 4,431 Europe......................... 7,262 7,394 1,524 2,364 Pacific Rim and other.......... 8,062 6,658 3,315 1,394 --------- --------- --------- --------- Total.......................... $23,966 $31,259 $ 7,604 $8,189 ======= ======= ======== ======
All of the Company's products are manufactured and shipped out of its facilities in Herndon, Virginia and Charlotte, North Carolina. Sales are primarily denominated in U.S. dollars. 8. Restructuring Charge: In March 1996, the Company recorded a restructuring charge of $900,000 before income taxes. The charge includes anticipated costs associated with the consolidation and relocation of facilities and the reduction of personnel levels as part of management's restructuring plan for the Company. Of this amount, approximately $487,000 remained unused at September 30, 1996. 9. Foreign Exchange Gain (Loss): Generally, assets and liabilities denominated in foreign currencies are translated into U.S. dollars at current exchange rates. Operating results are translated into U.S. dollars using the average rates of exchange prevailing during the period. Gains or losses resulting from translation of assets and liabilities are included in the cumulative translation adjustment account in stockholders' equity, except for the translation effect of intercompany balances that are anticipated to be settled in the foreseeable future. Included in foreign exchange income for the nine and three months ended September 30, 1996, is approximately $56,000 and $10,000 in translation losses, respectively, and for the nine and three months ended September 30, 1995, is approximately $133,000 in translation gains, and $55,000 in translation losses, respectively. 10. Loss Per Share: Loss per share amounts have been computed using the weighted average number of common shares and common equivalent shares having a dilutive effect during the periods. The Company had a loss per share for the nine months and three months ended September 30, 1996, of $0.48 and $0.15, respectively, compared to a loss per share of $0.16 and $0.21, respectively, for the nine and three months ended September 30, 1995. 9 NETRIX CORPORATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations - --------------------- Background. The results for the nine and three months ended September 30, 1996, reflect a decrease in revenues over the comparable periods in 1995. The decline is primarily a result of decreased domestic and European sales offset by an increase in revenue from its Pacific Rim markets. In March 1996, the Company implemented a restructuring plan, reducing its workforce by approximately 15% and consolidating its manufacturing facilities from Herndon, Virginia, and Longmont, Colorado, to one location in Charlotte, North Carolina. In January 1995, the Company acquired the equipment, inventory, and contract rights of IDS, relating to its corporate network business. Prior to this acquisition, IDS was a distributor of the Company and provided sales and service of the Company's products in Germany. The purchase price for the assets acquired in this transaction was $545,000. See Notes 1 and 2 to the Unaudited Condensed Consolidated Financial Statements for further discussion. The reported results include the operations of IDS since the acquisition date of January 1, 1995. Revenues. Total revenues decreased by $6.6 million or 17.0%, in the nine months ended September 30, 1996 compared to the nine months ended September 30, 1995. Total revenues also decreased $0.4 million, or 3.4%, in the third quarter of 1996 compared to the third quarter of 1995. The decrease in revenues was due to decreased product sales offset in part by increased service revenue. Product revenues decreased $7.3 million, or 23.3% for the first nine months of 1996 compared to 1995. Product revenue to domestic customers decreased by 49.8%, sales to Europe remained flat, while sales to the Pacific Rim increased by 21.1% during this time period. Although revenue by territory can vary from quarter to quarter, the decline in domestic product revenue is partially due to the transition of the more established products to new products the company released for shipment in Q3 1996, combined with the decrease in the domestic sales force, resulting from the restructuring in March 1996. Service revenues increased by approximately $0.7 million, or 9.0%, for the nine months ended September 30, 1996 compared to nine months ended September 30, 1995. For the third quarter of 1996, there was an increase in service revenue of 7.9% from third quarter of 1995. The increase in service revenue is reflective of additions to the installed base during 1995 and early 1996. Gross Profit. Gross profit decreased by $4.2 million, or 20.3%, for the first nine months of 1996 compared to the first nine months of 1995, and decreased as a percentage of total revenues from 52.8% to 50.7%. For the third quarter of 1996 compared to the third quarter of 1995, gross profit decreased $0.3 million or 5.6%, and decreased as a percent of total revenues from 48.4% to 47.3%. Product gross margin decreased from 58.7% in the first nine months of 1995 to 55.6% in the first nine months of 1996. This decrease primarily resulted from a high volume of sales of the Company's lower margin products to distributors with higher discounts. As the product mix and channel mix change from quarter to quarter, product gross margins can vary within a wide range. Due to this mix, margins earned in the nine months ended September 30, 1996 are not necessarily indicative of margins that will be earned in the future. The gross margin for service revenue increased from 28.8% in the first nine months of 1995 to 36.7% in the first nine months of 1996. The higher gross margin is a result of increased service revenues as discussed above and lower service costs mainly in the areas of compensation and warranty expenses. Sales and Marketing. Sales and marketing expenses decreased by $2.1 million or 19.0% from the first nine months of 1995 to the first nine months of 1996. For the third quarter of 1996 as compared to the third quarter of 1995, the decrease was $0.8 million, or 22.7%. The decrease in expenses was principally due to a decrease in personnel and travel costs, and marketing programs which include trade shows and public relations. 10 Research and Development. Research and development expenses increased by $0.2 million or 2.0% from the first nine months of 1995 to the comparable period of 1996. Third quarter expenses did not change significantly from 1996 to 1995. The increase was due principally to increased expenses related to equipment parts and outside services. Currently, all of the Company's research and development costs are charged to operations as incurred. General and Administrative. General and administrative expenses decreased by $0.5 million or 13.6%, from the first nine months of 1995 as compared to the same period in 1996. For the third quarter of 1996 compared to the third quarter of 1995 there was a decrease of $0.2 million, or 13.3%. The decrease in these expenses was due principally to a reduction in personnel costs, outside services expenses which include consulting costs, and legal and accounting fees. Restructuring Charge. In March 1996, the Company recorded a restructuring charge of $900,000 before income taxes. The charge includes anticipated costs associated with the consolidation and relocation of facilities and the reduction of personnel levels as part of management's restructuring plan for the Company. Of this amount, approximately $497,000 remained unused at September 30, 1996. Approximately $265,000 of this reserve relates to future lease obligations. Interest and Other Income, Net. The Company generated net interest and other income of approximately $350,000 and $87,000, respectively, in the nine and three months ended September 30, 1996, compared to approximately $551,000 and $207,000, respectively, in the same periods in 1995. The decrease in net interest income is due primarily to lower investment levels maintained in short-term investments, combined with increased interest expense on the Company's borrowings under an equipment line of credit. Foreign Exchange Gain. Included in foreign exchange income for the nine and three months ended September 30, 1996, is approximately $56,000 and $10,000 in translation losses, respectively, and for the nine and three months ended September 30, 1995, is approximately $133,000 in translation gains and $55,000 in translation losses, respectively. Net Loss. For the first nine months of 1996, the Company generated a net loss of approximately $4.5 million compared to net loss of $1.5 million in the comparable period of 1995. The net loss for the third quarter of 1996 was approximately $1.4 million compared to net loss of $2.0 million in the third quarter of 1995. The decline in earnings for the year to date and the increase in earnings in the third quarter were due to the factors discussed above. Liquidity and Capital Resources - ------------------------------- At September 30, 1996, the Company had approximately $1.3 million of cash and cash equivalents on hand, short-term investments of $7.3 million, and net working capital of $19.4 million, a decrease of $3.1 million, $0.1 million, and $2.7 million, respectively, for the nine month period. For the nine months ended September 30, 1996, the Company used approximately $2.6 million in cash from operating activities. The cash used in operating activities was primarily due to the negative cash flow from operating results and a reduction in accounts payable during the nine months. For the same period in 1995, the cash provided by operating activities totaled $3.2 million and was attributable mainly to accounts receivable collections during the period. For the nine months ended September 30,1996, the Company used approximately $0.8 million in investing activities. This was the result of purchases of capital expenditures during the period of $0.8 million. For the period, purchases and sales of short-term investments generally offset each other with $5.3 million in purchases and $5.4 million in sales. For the same period in 1995, the Company used approximately $3.7 million in investing activities, which consisted primarily of net purchases of short- 11 term investments totaling $2.0 million and capital expenditures of $1.6 million. Capital expenditures in both periods were financed with cash on hand and funds generated from operations, and were primarily for additional research and development and test equipment required to support the expanded product base at the Company. Cash provided by financing activities in the first nine months of 1996 was approximately $0.3 million and consisted primarily of proceeds from the employee stock option and employee stock purchase plans. For the same period in 1995, cash provided by financing activities of approximately $0.8 million consisted primarily of proceeds from the equipment line of credit of $0.5 million. In January 1996, the Company renegotiated its existing line of credit with a lending institution to provide working capital. The agreement provides for a $2.0 million line of credit for working capital and includes covenants that require the Company to maintain certain levels of liquidity and tangible net worth. In addition, the Company utilized approximately $561,000 of available draws under an equipment line of credit with the same lending institution. This amount is payable in monthly installments of approximately $20,000 from September 3, 1996 through January 3, 1999. The working line of credit matures with unpaid principal amounts due and payable on January 3, 1997. Both instruments bear interest at a rate per annum equal to the lender's prime rate plus 3/4% (9.0% at September 30, 1996). At September 30, 1996 and December 31, 1995, the Company had approximately $754,000 and $750,000, respectively, outstanding under the working capital line of credit, and approximately $541,000 and $561,000, respectively outstanding under the equipment line of credit. The Company believes that existing cash resources, together with internally generated funds, will be sufficient to meet its cash requirements through fiscal 1996. 12 PART II -- OTHER INFORMATION Item 1. Legal Proceedings ----------------- Items 1 through 5 are not applicable. Item 6. Exhibits and Reports of Form 8-K -------------------------------- (a) Exhibits Exhibit No. Description ----------- ----------- 11 Computation of Earnings Per Share. 99 Agreement on Change in Control (b) Reports on Form 8-K No report on Form 8-K was filed by the Registrant during the quarter ended September 30, 1996. 13 SIGNATURE: --------- Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NETRIX CORPORATION Date: November 11, 1996 By: --------------------- -------------------------------- Robert W. Carroll Vice President, Finance (Principal Financial Officer) 14 EXHIBIT INDEX Exhibit No. Description Page - --------- ----------- ---- 11 Computation of Earnings Per Share 16 99 Change in Control Agreement 17 15 EX-11 2 EXHIBIT 11 Netrix Corporation Exhibit 11 EPS Calculation
Nine Months Ended Three Months Ended ---------------------------- ---------------------------- 9/30/96 9/30/95 9/30/96 9/30/95 ------------ ----------- ----------- ------------ Earnings per share and common stock equivalents - Primary: Net loss (4,537,000) (1,476,000) (1,412,000) (2,007,000) Weighted average common stock outstanding 9,457,884 9,357,028 9,491,112 9,410,551 Weighted average common stock equivalents: - - - - Other stock options - - - - ------------ ----------- ----------- ------------ Total weighted average common stock and common stock equivalents 9,457,884 9,357,028 9,491,112 9,410,551 Earnings per share (0.48) (0.16) (0.15) (0.21) ============ =========== =========== ============ Earnings per share and common stock equivalents - Fully Diluted: Net loss (4,537,000) (1,476,000) (1,412,000) (2,007,000) Weighted average common stock outstanding 9,457,884 9,357,028 9,491,112 9,410,551 Weighted average common stock equivalents: - - - - Other stock options - - - - ----------- ---------- ----------- ----------- Total weighted average common stock and common stock equivalents 9,457,884 9,357,028 9,491,112 9,410,551 Earnings per share (0.48) (0.16) (0.15) (0.21) =========== ========== =========== ============
16 EX-27 3 FDS - ARTICLE 5
5 1,000 9-MOS DEC-31-1995 JAN-01-1996 SEP-30-1996 1,254 7,257 10,297 1,468 8,492 28,165 5,781 14,806 35,708 8,781 0 0 0 475 25,714 35,708 23,966 32,249 10,644 15,889 21,122 0 108 (4,468) 69 0 0 0 0 (4,537) (0.48) 0
EX-99 4 EXHIBIT 99 Exhibit 99 NETRIX CORPORATION 13595 DULLES TECHNOLOGY DRIVE HERNDON, VIRGINIA 22071 August 1, 1996 Dear : Netrix Corporation (the "Company") and its Board of Directors considers it essential to the best interests of its stockholders and employees to foster the continuous employment of key management personnel. In order to induce you to remain in its employ, the Company agrees that you shall receive the severance benefits set forth in this letter agreement (the "Agreement") in the event your employment with the Company is terminated under the circumstances described below subsequent to a "Change in Control" of the Company (as defined in Section 2). 1. Term of the Agreement. (a) The term of this Agreement (the "Term") shall commence on August 1, 1996 and shall continue in effect through December 31, 1999 unless extended as hereinafter provided. The Term shall be automatically extended for additional one-year periods thereafter, unless at least six months prior to the beginning of any calendar year, the Board of Directors of the Company (the "Board") shall have taken affirmative action so that the Term will not be further extended; provided that, if a Change in Control of the Company (as defined in Section 2) shall have occurred during the original or extended term of this Agreement, this Agreement shall continue in effect for a period of not less than 12 months beyond the month in which such Change in Control occurred. 2. Change in Control. (a) No benefits shall be payable under Section 4 of this Agreement unless there has been a Change in Control of the Company from and after the date of this Agreement and prior to expiration of the Term. (b) For purposes of this Agreement, a "Change in Control of the Company" shall occur or be deemed to have occurred only if (i) any "person," as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportion as their ownership of stock of the Company) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's then outstanding securities; 17 (ii) during any period of two consecutive years ending during the Term (not including any period prior to the Term), the following individuals (the "Disinterested Directors") shall cease for any reason to constitute a majority of the Board: (a) individuals who at the beginning of such period constituted the Board, and (b) any new director (other than a director designated by a person who has entered into an agreement with the Company to effect any transaction described in clause (i), (iii) or (iv) of this Section 2(b)) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the directors then still in office who were either directors at the beginning of the period or whose election or whose nomination for election was previously so approved; (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as hereinabove defined) acquires more than 50% of the combined voting power of the Company's then outstanding securities; or (iv) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets which, in either case, has not previously been approved by a majority of Disinterested Directors. 3. Employment Status; Termination Following Change in Control. (a) This Agreement does not prevent you from terminating your employment at any time. This Agreement does not constitute a contract of employment or impose on the Company any obligation to retain you as an employee. If your employment is terminated for any reason and subsequently a Change in Control shall have occurred, you shall not be entitled to any benefits hereunder. Any termination by the Company or by you following a Change in Control of the Company during the Term shall be communicated by written notice of termination ("Notice of Termination") to the other party hereto in accordance with Section 6. The "Date of Termination" shall mean the effective date of such termination as specified in the Notice of Termination. (b) Notwithstanding anything to the contrary herein, you shall be entitled to the benefits provided in Section 4 only if any of the events constituting a Change in Control of the Company shall have occurred during the Term and your employment with the Company is terminated within 12 months after such a Change in Control of the Company and such termination is not (A) because of your death, (B) by the Company for Disability (as defined in Section 3(b)(i)) or Cause (as defined in Section 3(b)(ii)), or (C) by you without Good Reason (as defined in Section 3(b)(iii)). 18 (i) Disability. "Disability" shall mean if, as a result of incapacity due to physical or mental illness, you shall have been absent from the full-time performance of your duties with the Company for six (6) consecutive months and, within thirty (30) days after written notice of termination is given to you, you shall not have returned to the full-time performance of your duties. Notwithstanding any other provision of this Agreement, you shall not be considered a terminated employee within the meaning of the Company's long term disability plan and your rights thereunder shall not be affected by this Agreement. (ii) Cause. Termination by the Company of your employment for "Cause" shall mean termination upon (A) your willful and continued failure to substantially perform your duties with the Company (other than any such failure resulting from your incapacity due to physical or mental illness or any such actual or anticipated failure after the issuance of a Notice of Termination by you for Good Reason as defined in Section 3(b)(iii)), after a written demand for substantial performance is delivered to you by the Company, which demand specifically identifies the manner in which the Company believes that you have not substantially performed your duties, or (B)(x) you shall have been guilty of any act or acts of dishonesty constituting a felony, or (y) you shall have violated any provision of any confidentiality, nondisclosure, assignment of invention, non-competition or similar agreement entered into by you in connection with your employment by the Company. For purposes of this subsection, no act or failure to act on your part shall be deemed "willful" unless done or omitted to be done by you not in good faith and without reasonable belief that your action or omission was in the best interest of the Company. (iii) Good Reason. You may terminate your employment upon 15 days prior written notice to the Company for any reason and with or without cause, but you shall be entitled to the benefits provided in Section 4(a) only if you do so for Good Reason. For purposes of this Agreement, "Good Reason" shall mean, without your consent, the occurrence after a Change in Control of the Company of any of the following circumstances unless such circumstances are fully corrected prior to the Date of Termination (as defined in Section 3(a)) specified in the Notice of Termination (as defined in Section 3(a)) given in respect thereof: (A) any reduction in your annual compensation (including salary and bonuses and commissions based on agreed upon targets then in effect) as in effect on the date hereof or as the same may be increased during the Term; or (B) any requirement by the Company or of any person in control of the Company that the location at which you perform your principal duties for the Company be outside a radius of 50 miles from the location at which you performed such duties immediately prior to a Change in Control of the Company; 4. Compensation Upon Termination. (a) If (1) any of the events constituting a Change in Control of the Company shall have occurred during the Term and (2) your employment with the Company is terminated within 12 months after such Change in Control of the Company, you shall be entitled to the benefits set forth in this Section 4(a): (i) During any period that you fail to perform your full-time duties with the Company as a result of incapacity due to physical or mental illness, you shall continue to receive base salary and all other earned or accrued compensation at the rate in effect at the 19 commencement of any such period (offset by all compensation payable to you under the Company's disability plan or program or other similar plan during such period) until your employment is terminated pursuant to Section 3(b)(i) hereof. Thereafter, or in the event your employment is terminated by reason of death, your benefits shall be determined under the Company's long-term disability, retirement, insurance and other compensation programs then in effect in accordance with the terms of such programs. (ii) If your employment shall be terminated by the Company for Cause or by you other than for Good Reason, the Company shall pay you your full base salary and all other earned or accrued compensation through the Date of Termination at the rate in effect at the time the Notice of Termination is given, plus all other amounts to which you are entitled under any compensation plan of the Company at the time such payments are due, and the Company shall have no further obligations to you under this Agreement. (iii) If your employment by the Company should be terminated by the Company other than for Cause or Disability or if you should terminate your employment for Good Reason, then you shall be entitled to the benefits below: (A) the Company shall pay you your full base salary and all other earned or accrued compensation through the Date of Termination at the rate in effect at the time the Notice of Termination is given, plus all other amounts to which you are entitled under any compensation plan of the Company at the time such payments are due and, in lieu of further salary payments for periods subsequent to the Date of Termination, the Company will pay you a lump sum cash payment as severance pay (the "Severance Payment") in an amount equal to your total cash compensation (including salary, bonus and commissions) for the 12 month period immediately prior to the Date of Termination. (B) The payments provided for in subsection (A) above shall be made not later than the tenth day following the Date of Termination; provided, however, that, if the amounts of such payments cannot be finally determined on or before such day, the Company shall pay to you on such day an estimate, as determined in good faith by the Company, of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at the rate provided in Section 1274(b)(2)(B) of the Internal Revenue Code of 1986, as amended (the "Code")) as soon as the amount thereof can be determined but in no event later than the thirtieth day after the Date of Termination. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to you, payable on the fifth day after demand by the Company (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code). (C) For a 12-month period after the Date of Termination, the Company shall arrange to provide you with life, disability, accident and health insurance benefits substantially similar to those which you received immediately prior to the Date of Termination and at the same cost to you (if any) as in effect immediately prior to the Date of Termination. Notwithstanding the foregoing, the Company shall not provide any benefit otherwise receivable by you pursuant to this Section 4(a)(iii)(C) if an equivalent benefit is actually received by you from another employer during the 12-month period after the Date of Termination and any such benefit actually received by you shall be reported to the Company. 20 (D) You shall not be required to mitigate the amount of any payment provided for in this Section 4(a) by seeking other employment or otherwise, nor, except as provided in the second sentence of Section 4(a)(iii)(C) hereof, shall the amount of any payment or benefit provided for in this Section 4(a) be reduced by any compensation earned by you as a result of employment by another employer, by retirement benefits or by offset against any amount claimed to be owed by you to the Company or otherwise. (iv) The Severance Payment under this Section 4(a) shall be made without regard to whether the deductibility of such payments (or any other "parachute payments," as that term is defined in Section 280G of the Code, to or for your benefit) would be limited or precluded by Section 280G and without regard to whether such payments (or any other "parachute payments" as so defined) would subject you to the federal excise tax levied on certain "excess parachute payments" under Section 4999 of the Code; provided that if the total of all "parachute payments" to or for your benefit, after reduction for all federal taxes (including the tax described in Section 4999 of the Code, if applicable) with respect to such payments (the "Total After-Tax Payments"), would be increased by the limitation or elimination of any payment under this Section 4(a) or the limitation or elimination of any other "parachute payments", amounts payable under this Section 4(a) or the amounts of any other "parachute payments" shall be reduced to the extent, and only to the extent, necessary to maximize the Total After-Tax Payments. The determination as to whether and to what extent payments under this Section 4 or the amounts of any other "parachute payments" are required to be reduced in accordance with the preceding sentence shall be made at the Company's expense by Arthur Andersen & Co. or by such other certified public accounting firm as the Board may designate prior to a Change in Control of the Company. In the event of any underpayment or overpayment under this Section 4(a) or any underpayment or overpayment of any other "parachute payment" as determined by Arthur Andersen & Co.(or such other firm as may have been designated in accordance with the preceding sentence), the amount of such underpayment or overpayment shall forthwith be paid to you or refunded to the Company, as the case may be, with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code. (b) If any of the events constituting a change of control of the Company shall have occurred during the Term (i) the options granted to you on September 7, 1995 and evidenced by the Non-statutory Stock Option Agreement, dated as of September 7, 1995, shall fully vest and (ii) 50% of the unvested portion of the options granted to you on March 20, 1996 and evidenced by the Incentive Stock Option Agreement, dated as of March 20, 1996, shall fully vest. 5. Non-Compete. (a) For a period of one year after the termination of your employment with the Company, you will not directly or indirectly: (i) as an individual proprietor, partner, stockholder, officer, employee, director, joint venturer, investor, lender, or in any other capacity whatsoever (other than as the holder of not more than one percent (1%) of the total outstanding stock of a publicly held company), engage in the business of developing, producing, marketing or selling products of the kind or type developed or being developed, produced, marketed or sold 21 by the Company while you are employed by the Company for any enterprise listed on Exhibit A hereto; or (ii) recruit, solicit or induce, or attempt to induce, any employee or employees of the Company to terminate their employment with, or otherwise cease their relationship with, the Company; or (iii) solicit, divert or take away, or attempt to divert or to take away, the business or patronage of any of the clients, customers or accounts, or prospective clients, customers or accounts, of the Company which were contacted, solicited or served by you while employed by the Company. (b) If any restriction set forth in this Section 5 is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable. (c) The restrictions contained in this Section 5 are necessary for the protection of the business and goodwill of the Company and are considered by you to be reasonable for such purpose. You agree that any breach of this Section 5 will cause the Company substantial and irrevocable damage and therefore, in the event of any such breach, in addition to such other remedies which may be available, the Company shall have the right to seek specific performance and injunctive relief. 6. Successors; Binding Agreement. (a) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company expressly to assume and agree to perform this Agreement to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain an assumption of this Agreement prior to the effectiveness of any succession shall be a breach of this Agreement and shall entitle you to compensation from the Company in the same amount and on the same terms as you would be entitled hereunder if you had terminated your employment for Good Reason immediately after a Change in Control of the Company, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination As used in this Agreement, "Company" shall mean the Company as defined above and any successor to its business or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law or otherwise. (b) This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amount would still be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, to your estate. 7. Notice. For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be duly given when delivered or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed to the President of the Company and to you at the respective address shown above or below or to such other address as either the Company or you may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. 22 8. Miscellaneous. (a) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. (b) The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the Commonwealth of Virginia. (c) No waiver by you at any time of any breach of, or compliance with, any provision of this Agreement to be performed by the Company shall be deemed a waiver of that or any other provision at any subsequent time. (d) This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. (e) Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law. (f) This Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party hereto; and any prior agreement of the parties hereto in respect of the subject matter contained herein is hereby terminated and canceled. If this letter sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed copy of this letter, which will then constitute our agreement on this subject. Sincerely, NETRIX CORPORATION By:______________________________ Charles W. Stein President Agreed to as of the 1st day of August, 1996 ______________________________ (Signature of Employee) ______________________________ (print name) Address:______________________ ______________________________ 23 EXHIBIT A ACT Networks Inc. Network Equipment Technology Ascom Timplex Newbridge Networks Corp. Ascend Communications U.S. Robotics 24 The following list of Netrix Corporation officers have signed the above agreement: Charles W. Stein Lynn C. Chapman J. Gerard Cregan G. Brent Wilson John K. Mullaney Robert W. Carroll George R. Kushin 25 -----END PRIVACY-ENHANCED MESSAGE-----