Xscribe Corp., a La Jolla-based manufacturer of computer-aided transcription systems, has filed a registration statement with the Securities and Exchange Commission for an initial public offering of 2 million shares of common stock that will raise up to $24 million.
About $1.2 million of the anticipated net proceeds will be used to retire bank debt, and the balance will be used for "general corporate purposes," according to the company's prospectus.
Two years ago, Inc. magazine ranked the La Jolla-based company as the nation's 17th fastest-growing private company. For the fiscal year ended March 31, Xscribe reported a $1.4-million net profit and $29.8 million in revenue.
Merrill Lynch Capital Markets will manage the offering that is expected to be completed in late June. Shares will be $10 and $12. Of the offering's 2 million shares, about 750,000 will be sold by existing shareholders. After the offering, Xscribe will have 5.1 million outstanding shares.
The company controls about 40% of the computer-aided transcription (CAT) market, according to the offering's preliminary prospectus. Its major competitors are San Leandro-based Baron Data Systems and Stenograph Corp., a subsidiary of Quixote Corp. of Skokie, Ill.
About half of the nation's 25,000 to 35,000 court reporters now use CAT-equipped devices. In 1983, just 6,000 CAT machines were in use. The CAT devices automatically translate stenotypy "markings" into English. Operators can create computerized "dictionaries" to meet their own needs.
Court reporters are attracted to CAT machines because they reduce errors and can boost productivity by 30% to 50%, industry sources said. Lawyers and judges have welcomed CAT machines because they help speed up the processing of testimony.
The company was formed eight years ago by Bert Mawhinney, a former General Dynamics engineer, who hooked a computer to his wife's stenotypy machine. Mawhinney, now Xscribe's chairman, worked part-time on the project for a number of years.
Growth in the stenotypy market is limited, according to industry observers. Consequently, Xscribe and its competitors are developing "litigation support systems" that could help the nation's 700,000 lawyers quickly and accurately transform cumbersome paper documents into records that can easily be handled by computers.
Xscribe's past growth was funded through a combination of internally generated funds, a $2.2-million research and development partnership with E.F. Hutton & Associates, and $4 million in equity funding from two groups of investors.