##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2010
 o
    
    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: 0-17995
 ZIX CORPORATION
 (Exact Name of Registrant as Specified in its Charter)
 Texas
(State of Incorporation)
    
    75-2216818
(I.R.S. Employer Identification Number)
 2711 North Haskell Avenue
Suite 2200, LB 36
Dallas, Texas 75204-2960
(Address of Principal Executive Offices)
 (214) 370-2000
(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 þ No o
 Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes o No o
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
(Check one):
 Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes o No þ
 Indicate the number of shares outstanding of each of the issuers classes of common stock, as of
the latest practicable date.
 Class
    
    Outstanding at May 4, 2010Common Stock, par value $0.01 per share
    
    63,980,061




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##### 



INDEX
 PageNumberPART I  FINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited)Condensed Consolidated Balance Sheets at March 31, 2010 (unaudited) and December 31, 2009
    
    
    3Condensed Consolidated Statements of Operations for the three months ended March 31, 2010 and 2009
    
    
    4Condensed Consolidated Statement of Stockholders Deficit for the three months ended March 31, 2010
    
    
    5Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2010 and 2009
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    11Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    17Item 4. Controls and Procedures
    
    
    17PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    17Item 1A. Risk Factors
    
    
    17Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    18Item 3. Defaults Upon Senior Securities
    
    
    18Item 4. (Removed and Reserved)
    
    
    18Item 5. Other Information
    
    
    18Item 6. Exhibits
    
    
    19EX-31.1EX-31.2EX-32.1
  2




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ZIX CORPORATION
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 March 31,
    
    
    December 31,2010
    
    
    2009(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    15,741,000
    
    
    $
    13,287,000Marketable securities
    
    
    25,000
    
    
    
    25,000Receivables, net
    
    
    656,000
    
    
    
    760,000Prepaid and other current assets
    
    
    981,000
    
    
    
    1,142,000Total current assets
    
    
    17,403,000
    
    
    
    15,214,000Property and equipment, net
    
    
    2,174,000
    
    
    
    2,137,000Goodwill
    
    
    2,161,000
    
    
    
    2,161,000Other assets
    
    
    199,000
    
    
    
    236,000Total assets
    
    $
    21,937,000
    
    
    $
    19,748,000LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities:Accounts payable
    
    $
    698,000
    
    
    $
    769,000Accrued expenses
    
    
    2,309,000
    
    
    
    3,124,000Deferred revenue
    
    
    16,860,000
    
    
    
    14,478,000License subscription note payable
    
    
    129,000
    
    
    
    126,000Total current liabilities
    
    
    19,996,000
    
    
    
    18,497,000Long-term liabilities:Deferred revenue
    
    
    2,092,000
    
    
    
    2,821,000License subscription note payable
    
    
    152,000
    
    
    
    186,000Deferred rent
    
    
    216,000
    
    
    
    233,000Total long-term liabilities
    
    
    2,460,000
    
    
    
    3,240,000Total liabilities
    
    
    22,456,000
    
    
    
    21,737,000Commitments and contingencies (see Note 8)Stockholders deficit:Preferred stock, $1 par value, 10,000,000 shares authorized; none issued and outstanding
    
    
    
    
    
    
    Common stock, $0.01 par value, 175,000,000 shares authorized; 66,223,408 issued and
63,896,227 outstanding in 2010 and 66,053,772 issued and 63,726,951 outstanding in 2009
    
    
    662,000
    
    
    
    661,000Additional paid-in capital
    
    
    338,109,000
    
    
    
    337,352,000Treasury stock, at cost; 2,327,181 common shares in 2010 and 2009
    
    
    (11,507,000
    )
    
    
    (11,507,000
    )Accumulated deficit
    
    
    (327,783,000
    )
    
    
    (328,495,000
    )Total stockholders deficit
    
    
    (519,000
    )
    
    
    (1,989,000
    )Total liabilities and stockholders deficit
    
    $
    21,937,000
    
    
    $
    19,748,000
  3




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ZIX CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months Ended March 31,2010
    
    
    2009Revenues
    
    $
    8,416,000
    
    
    $
    7,256,000Cost of revenues
    
    
    1,856,000
    
    
    
    2,471,000Gross profit
    
    
    6,560,000
    
    
    
    4,785,000Operating expenses:Research and development
    
    
    1,448,000
    
    
    
    1,731,000Selling, general and administrative
    
    
    4,381,000
    
    
    
    4,644,000Total operating expenses
    
    
    5,829,000
    
    
    
    6,375,000Operating income (loss)
    
    
    731,000
    
    
    
    (1,590,000
    )Other income, net
    
    
    29,000
    
    
    
    68,000Income (loss) before income taxes
    
    
    760,000
    
    
    
    (1,522,000
    )Provision for income taxes
    
    
    (48,000
    )
    
    
    (20,000
    )Net income (loss)
    
    $
    712,000
    
    
    $
    (1,542,000
    )Basic income (loss) per common share
    
    $
    0.01
    
    
    $
    (0.02
    )Diluted income (loss) per common share
    
    $
    0.01
    
    
    $
    (0.02
    )Basic weighted average common shares outstanding
    
    
    63,790,368
    
    
    
    63,319,482Diluted weighted average common shares outstanding
    
    
    65,517,908
    
    
    
    63,319,482
  4




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ZIX CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS DEFICIT
 Stockholders DeficitAdditional
    
    
    
    
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Paid-In
    
    
    Treasury
    
    
    Accumulated
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Stock
    
    
    Deficit
    
    
    DeficitBalance, December 31, 2009
    
    
    66,053,772
    
    
    $
    661,000
    
    
    $
    337,352,000
    
    
    $
    (11,507,000
    )
    
    $
    (328,495,000
    )
    
    $
    (1,989,000
    )Issuance of common stock
upon exercise of stock
options
    
    
    169,636
    
    
    
    1,000
    
    
    
    248,000
    
    
    
    
    
    
    
    
    
    
    
    249,000Employee stock-based
compensation costs
    
    
    
    
    
    
    
    
    
    
    499,000
    
    
    
    
    
    
    
    
    
    
    
    499,000Non-employee stock-based
compensation costs
    
    
    
    
    
    
    
    
    
    
    10,000
    
    
    
    
    
    
    
    
    
    
    
    10,000Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    712,000
    
    
    
    712,000Balance, March 31, 2010
    
    
    66,223,408
    
    
    $
    662,000
    
    
    $
    338,109,000
    
    
    $
    (11,507,000
    )
    
    $
    (327,783,000
    )
    
    $
    (519,000
    )
  5




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ZIX CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Three Months Ended March 31,2010
    
    
    2009Operating activities:Net income (loss)
    
    $
    712,000
    
    
    $
    (1,542,000
    )Non-cash items in net income (loss):Depreciation and amortization
    
    
    344,000
    
    
    
    319,000Employee stock-based compensation costs
    
    
    499,000
    
    
    
    830,000Non-employee stock-based compensation costs
    
    
    10,000
    
    
    
    6,000Changes in deferred taxes
    
    
    5,000
    
    
    
    8,000Changes in operating assets and liabilities:Receivables
    
    
    104,000
    
    
    
    (230,000
    )Prepaid and other current assets
    
    
    193,000
    
    
    
    (91,000
    )Accounts payable
    
    
    (73,000
    )
    
    
    426,000Deferred revenue
    
    
    1,653,000
    
    
    
    (479,000
    )Accrued and other liabilities
    
    
    (832,000
    )
    
    
    (123,000
    )Net cash provided by (used in) operating activities
    
    
    2,615,000
    
    
    
    (876,000
    )Investing activities:Purchases of property and equipment
    
    
    (379,000
    )
    
    
    (144,000
    )Restricted cash and marketable securities, net
    
    
    
    
    
    
    3,000Net cash used in investing activities
    
    
    (379,000
    )
    
    
    (141,000
    )Financing activities:Proceeds from exercise of stock options
    
    
    249,000
    
    
    
    Payment of license subscription note payable
    
    
    (31,000
    )
    
    
    Net cash provided by financing activities
    
    
    218,000
    
    
    
    Increase (decrease) in cash and cash equivalents
    
    
    2,454,000
    
    
    
    (1,017,000
    )Cash and cash equivalents, beginning of period
    
    
    13,287,000
    
    
    
    13,245,000Cash and cash equivalents, end of period
    
    $
    15,741,000
    
    
    $
    12,228,000
  6




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ZIX CORPORATION
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 1. Basis of Presentation
  2. Recent Accounting Standards and Pronouncements
 To be adopted in 2010 or beyond:
  International Financial Reporting Standards
 3. Segment Information
    7




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Three Months Ended March 31, 2010
    
    Email Encryption
    
    
    e-Prescribing
    
    
    Corporate
    
    
    TotalRevenues
    
    $
    7,479,000
    
    
    $
    937,000
    
    
    $
    
    
    
    $
    8,416,000Cost of revenues
    
    
    1,502,000
    
    
    
    354,000
    
    
    
    
    
    
    
    1,856,000Gross profit
    
    
    5,977,000
    
    
    
    583,000
    
    
    
    
    
    
    
    6,560,000Direct expenses
    
    
    3,777,000
    
    
    
    293,000
    
    
    
    
    
    
    
    4,070,000Segment contribution
    
    
    2,200,000
    
    
    
    290,000
    
    
    
    
    
    
    
    2,490,000Unallocated (expense) incomeGeneral and administrative expense
    
    
    
    
    
    
    
    
    
    
    (1,759,000
    )
    
    
    (1,759,000
    )Other income, net
    
    
    
    
    
    
    
    
    
    
    29,000
    
    
    
    29,000Total unallocated (expense) income
    
    
    
    
    
    
    
    
    
    
    (1,730,000
    )
    
    
    (1,730,000
    )Income (loss) before provision for income
taxes
    
    $
    2,200,000
    
    
    $
    290,000
    
    
    $
    (1,730,000
    )
    
    $
    760,000
 Three Months Ended March 31, 2009
    
    Email Encryption
    
    
    e-Prescribing
    
    
    Corporate
    
    
    TotalRevenues
    
    $
    6,242,000
    
    
    $
    1,014,000
    
    
    $
    
    
    
    $
    7,256,000Cost of revenues
    
    
    1,013,000
    
    
    
    1,458,000
    
    
    
    
    
    
    
    2,471,000Gross profit
    
    
    5,229,000
    
    
    
    (444,000
    )
    
    
    
    
    
    
    4,785,000Direct expenses
    
    
    2,756,000
    
    
    
    1,845,000
    
    
    
    
    
    
    
    4,601,000Segment contribution (loss)
    
    
    2,473,000
    
    
    
    (2,289,000
    )
    
    
    
    
    
    
    184,000Unallocated (expense) incomeGeneral and administrative expense
    
    
    
    
    
    
    
    
    
    
    (1,774,000
    )
    
    
    (1,774,000
    )Other income
    
    
    
    
    
    
    
    
    
    
    68,000
    
    
    
    68,000Total unallocated (expense) income
    
    
    
    
    
    
    
    
    
    
    (1,706,000
    )
    
    
    (1,706,000
    )Income (loss) before provision for income
taxes
    
    $
    2,473,000
    
    
    $
    (2,289,000
    )
    
    $
    (1,706,000
    )
    
    $
    (1,522,000
    )
 Depreciation and amortization expense:
  Three Months Ended March 31,2010
    
    
    2009Email Encryption
    
    $
    265,000
    
    
    $
    192,000e-Prescribing
    
    
    36,000
    
    
    
    87,000Unallocated
    
    
    43,000
    
    
    
    40,000Total depreciation expense
    
    $
    344,000
    
    
    $
    319,000
 Allocated costs:
    Other segment information:
   8




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March 31, 2010
    
    
    December 31, 2009Total assets:Email Encryption
    
    $
    3,587,000
    
    
    $
    3,781,000e-Prescribing
    
    
    495,000
    
    
    
    416,000Corporate
    
    
    17,855,000
    
    
    
    15,551,000Total assets
    
    $
    21,937,000
    
    
    $
    19,748,000
 4. Stock Options and Stock-based Employee Compensation
  Three Months Ended March 31,2010
    
    
    2009Cost of revenues
    
    $
    47,000
    
    
    $
    126,000Research and development
    
    
    47,000
    
    
    
    101,000Selling, general and administrative
    
    
    405,000
    
    
    
    603,000Stock-based compensation expense
    
    $
    499,000
    
    
    $
    830,000
  Stock Option Activity
  Weighted AverageWeighted
    
    
    Remaining
    
    
    AggregateAverage
    
    
    Contractual Term
    
    
    IntrinsicShares
    
    
    Exercise Price
    
    
    (Yrs)
    
    
    ValueOutstanding at December 31, 2009
    
    
    9,571,112
    
    
    $
    4.40Granted at market price
    
    
    659,072
    
    
    $
    1.94Cancelled or expired
    
    
    (94,870
    )
    
    $
    17.54Exercised
    
    
    (169,636
    )
    
    $
    1.47Outstanding at March 31, 2010
    
    
    9,965,678
    
    
    $
    4.17
    
    
    
    5.85
    
    
    $
    2,319,000Options exercisable at March 31, 2010
    
    
    8,568,230
    
    
    $
    4.44
    
    
    
    5.35
    
    
    $
    1,729,000
  5. Supplemental Cash Flow Information
  Three Months Ended March 31,2010
    
    
    2009Cash paid for interest
    
    $
    6,000
    
    
    
    Cash income tax payments
    
    $
    64,000
    
    
    $
    110,000Non-cash investing and financing activities:Payables related to purchases of fixed assets
    
    $
    2,000
    
    
    $
    301,000
 9




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6. Receivables, net
 March 31,
    
    
    December 31,2010
    
    
    2009Receivables
    
    $
    683,000
    
    
    $
    786,000Allowance for returns and doubtful accounts
    
    
    (27,000
    )
    
    
    (26,000
    )Note receivable
    
    
    484,000
    
    
    
    484,000Allowance for note receivable
    
    
    (484,000
    )
    
    
    (484,000
    )Receivables, net
    
    $
    656,000
    
    
    $
    760,000
   7. Earnings Per Share and Potential Dilution
  March 31,2010
    
    
    2009Net income (loss)
    
    $
    712,000
    
    
    $
    (1,542,000
    )Basic weighted average shares
    
    
    63,790,368
    
    
    
    63,319,482Effect of dilutive securities:Employee and director stock options
    
    
    630,034
    
    
    
    Warrants
    
    
    1,097,506
    
    
    
    Potential dilutive common shares
    
    
    65,517,908
    
    
    
    63,319,482Net earnings per shareBasic
    
    $
    0.01
    
    
    $
    (0.02
    )Diluted
    
    $
    0.01
    
    
    $
    (0.02
    )
  8. Commitments and contingencies
  Payments Due by PeriodTotal
    
    
    1 Year
    
    
    Years 2 & 3
    
    
    Beyond 3 YearsOperating leases
    
    $
    4,633,000
    
    
    $
    1,266,000
    
    
    $
    2,036,000
    
    
    $
    1,331,000License subscription note payable
    
    
    281,000
    
    
    
    129,000
    
    
    
    152,000
    
    
    
    Total cash obligations
    
    
    4,914,000
    
    
    
    1,395,000
    
    
    
    2,188,000
    
    
    
    1,331,000Interest on obligations
    
    
    27,000
    
    
    
    19,000
    
    
    
    8,000
    
    
    
    Total
    
    $
    4,941,000
    
    
    $
    1,414,000
    
    
    $
    2,196,000
    
    
    $
    1,331,000
  10




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##### Table of Contents



Claims and Proceedings
  9. Fair Value Measurements
  
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 NOTE ON FORWARD-LOOKING STATEMENTS AND RISK FACTORS
  Overview
 SM
 SM
 Critical Accounting Policies and Estimates
  11




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Summary of Significant Accounting
Policies Critical Accounting Policies and
Estimates
 Results of Operations
 First Quarter 2010 Summary of Operations
 Financial
 
    
    Revenue for the quarter ended March 31, 2010, was $8,416,000 compared with $7,256,000 for
the same period in 2009, representing a 16% increase.
    
    Gross profit for the quarter ended March 31, 2010, was $6,560,000 or 78% of revenues
compared with $4,785,000 or 66% of revenues for the comparable period in 2009.Email Encryption gross profit was $5,977,000 or 80% of revenues compared with $5,229,000 or
84% of revenues for the comparable period in 2009.e-Prescribing gross profit was $583,000 or 62% of revenues compared with gross loss of
$444,000 or 44% of revenues for the comparable period in 2009.
    
    Net income for the quarter ended March 31, 2010, was $712,000 compared with a net loss of
$1,542,000 in 2009.
    
    Ending cash and cash equivalents were $15,741,000 on March 31, 2010, compared with
$13,287,000 on December 31, 2009.
 Operations
 
    
    For the Email Encryption service, new first year orders (NFYOs) for the quarter ended
March 31, 2010, were $2,210,000. For the same period, backlog was $44,416,000.
    
    On December 8, 2009, we announced our intention to exit from the e-Prescribing business.
We plan to exit this business on December 31, 2010, while fulfilling its existing
obligations to customers and partners. As disclosed in our January 6, 2010, press release,
we expect this business to be breakeven to slightly profitable in 2010.
 Revenues
  Three Months Ended
    
    
    3-month VarianceMarch 31,
    
    
    2010 vs. 20092010
    
    
    2009
    
    
    $
    
    
    %Email Encryption
    
    $
    7,479,000
    
    
    $
    6,242,000
    
    
    
    1,237,000
    
    
    
    20
    %e-Prescribing
    
    
    937,000
    
    
    
    1,014,000
    
    
    
    (77,000
    )
    
    
    (8
    %)Total revenues
    
    $
    8,416,000
    
    
    $
    7,256,000
    
    
    
    1,160,000
    
    
    
    16
    %
  Revenue Indicators  Backlog, Orders and Deployments
 Company-wide backlog 
 12




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Email Encryption Orders 
 e-Prescribing 
 Cost of Revenues
  Three Months Ended
    
    
    3-month VarianceMarch 31,
    
    
    2010 vs. 20092010
    
    
    2009
    
    
    $
    
    
    %Email Encryption
    
    $
    1,502,000
    
    
    $
    1,013,000
    
    
    $
    489,000
    
    
    
    48
    %e-Prescribing
    
    
    354,000
    
    
    
    1,458,000
    
    
    
    (1,104,000
    )
    
    
    (76
    %)Total cost of revenues
    
    $
    1,856,000
    
    
    $
    2,471,000
    
    
    $
    (615,000
    )
    
    
    (25
    %)
  Email Encryption 
 e-Prescribing 
 13




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Research and Development Expenses
  Three Months Ended
    
    
    3-month VarianceMarch 31,
    
    
    2010 vs. 20092010
    
    
    2009
    
    
    $
    
    
    %Email Encryption
    
    $
    1,309,000
    
    
    $
    804,000
    
    
    $
    505,000
    
    
    
    63
    %e-Prescribing
    
    
    139,000
    
    
    
    927,000
    
    
    
    (788,000
    )
    
    
    (85
    %)Total Research and development
    
    $
    1,448,000
    
    
    $
    1,731,000
    
    
    $
    (283,000
    )
    
    
    (16
    %)
  SM ®
 Selling, General and Administrative Expenses
  Three Months Ended
    
    
    3-month VarianceMarch 31,
    
    
    2010 vs. 20092010
    
    
    2009
    
    
    $
    
    
    %Email Encryption Selling and marketing expenses
    
    $
    2,241,000
    
    
    $
    1,805,000
    
    
    $
    436,000
    
    
    
    24
    %e-Prescribing Selling and marketing expenses
    
    
    124,000
    
    
    
    893,000
    
    
    
    (769,000
    )
    
    
    (86
    %)Corporate Selling, general and administrative expenses
    
    
    2,016,000
    
    
    
    1,946,000
    
    
    
    70,000
    
    
    
    4
    %Total Selling, general and administrative
    
    $
    4,381,000
    
    
    $
    4,644,000
    
    
    $
    (263,000
    )
    
    
    (6
    %)
    Other Income, net
  14




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##### Table of Contents



Provision for Income Taxes
      Net Income
  Liquidity and Capital Resources
 Overview
    15




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##### Table of Contents



Impact of Current Economic Environment
  Sources and Uses of Cash Summary
 Three Months Ended March 31,2010
    
    2009Net cash provided by (used in) operations
    
    $
    2,615,000
    
    
    $
    (876,000
    )Net cash used in investing activities
    
    $
    (379,000
    )
    
    $
    (141,000
    )Net cash provided by financing activities
    
    $
    218,000
    
    
    $
    
    Liquidity Summary
  Options and Warrants of ZixCorp Common Stock
  16




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##### Table of Contents



Summary of Outstanding Options and WarrantsVested SharesTotal Value of
    
    
    (included in
    
    
    Total Value ofExercise Price Range
    
    Outstanding Shares
    
    
    Outstanding Shares
    
    
    Outstanding shares)
    
    
    Vested Shares$1.11 - $1.99
    
    
    7,166,611
    
    
    $
    10,989,000
    
    
    
    6,508,779
    
    
    $
    9,960,000$2.00 - $3.49
    
    
    5,304,470
    
    
    
    15,510,000
    
    
    
    4,909,936
    
    
    
    14,691,000$3.50 - $4.99
    
    
    3,279,852
    
    
    
    14,587,000
    
    
    
    2,934,770
    
    
    
    12,959,000$5.00 - $5.99
    
    
    549,260
    
    
    
    2,792,000
    
    
    
    549,260
    
    
    
    2,792,000$6.00 - $8.99
    
    
    736,816
    
    
    
    4,757,000
    
    
    
    736,816
    
    
    
    4,757,000$9.00 - $19.99
    
    
    890,381
    
    
    
    9,727,000
    
    
    
    890,381
    
    
    
    9,727,000$20.00 - $57.60
    
    
    967,667
    
    
    
    54,002,000
    
    
    
    967,667
    
    
    
    54,002,000Total
    
    
    18,985,057
    
    
    $
    112,364,000
    
    
    
    17,497,609
    
    
    $
    108,888,000
 Off-Balance Sheet Arrangements
  Contractual Obligations, Contingent Liabilities and Commitments
  Payments Due by PeriodTotal
    
    
    1 Year
    
    
    Years 2 & 3
    
    
    Beyond 3 YearsOperating leases
    
    $
    4,633,000
    
    
    $
    1,266,000
    
    
    $
    2,036,000
    
    
    $
    1,331,000Debt (long-term and short-term)
    
    
    308,000
    
    
    
    148,000
    
    
    
    160,000
    
    
    
    Total
    
    $
    4,941,000
    
    
    $
    1,414,000
    
    
    $
    2,196,000
    
    
    $
    1,331,000
   
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
  Changes in Internal Controls over Financial Reporting
  
 PART II  OTHER INFORMATION
 
 ITEM 1. Legal Proceedings
  
 ITEM 1A. Risk Factors
  17




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##### Table of Contents



ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. (Removed and Reserved)
 
 ITEM 5. OTHER INFORMATION
  18




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##### Table of Contents



ITEM 6. EXHIBITS
 a. Exhibits
  Exhibit No.
    
    Description of Exhibits3.1
    
    Restated Articles of Incorporation of Zix Corporation, as
filed with the Texas Secretary of State on November 10,
2005. Filed as Exhibit 3.1 to Zix Corporations Annual
Report on Form 10-K for the year ended December 31, 2005,
and incorporated herein by reference.3.2
    
    Amended and Restated Bylaws of Zix Corporation, dated
February 4, 2009. Filed as Exhibit 3.1 to Zix
Corporations Current Report on Form 8-K, dated February
10, 2009, and incorporated herein by reference.31.1*
    
    Certification of Richard D. Spurr, President and Chief
Executive Officer of the Company, pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.31.2*
    
    Certification of Susan K. Conner, Chief Financial Officer
of the Company, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.1**
    
    Certification of Richard D. Spurr, President and Chief
Executive Officer of the Company, and Susan K. Conner,
Chief Financial Officer of the Company, pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Filed herewith.**
    
    Furnished herewith. 19




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##### Table of Contents



SIGNATURES
  ZIX CORPORATIONDate: May 7, 2010
    By:
    /s/ Susan K. ConnerSusan K. ConnerChief Financial Officer 20