UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED JUNE 30, 1996
Commission file number 333-05112-C
XOX CORPORATION
(Name of small business issuer as specified in its charter)
Delaware 93-0898539
(State or jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
1450 Energy Park Drive, Suite 120, Saint Paul, Minnesota 55108
(612) 645-9000
(Address and telephone number of principal executive offices and
principal place of business)
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 periods 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____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date:
Common Stock, $.025 Par Value - 2,908,756 shares outstanding as of
October 24, 1996.
Transitional Small Business Disclosure Format (check one): Yes ____ No __X__
PART 1
FINANCIAL INFORMATION
Item 1. Financial Statements
XOX CORPORATION
Balance Sheets
U.S. Dollars June 30, 1996 December 31,1995
(unaudited)
------------- ----------------
Current assets:
Cash 12,292 29,918
Accounts receivable 37,449 38,108
Prepaid expenses 55,299 1,405
--------- ---------
Total current assets 105,040 69,431
Property and equipment:
Furniture and fixtures 45,705 46,890
Computer equipment 296,665 289,760
Leasehold improvements 64,300 64,300
--------- ---------
406,670 400,950
Less accumulated depreciation 323,573 311,514
Net property and equipment 83,097 89,436
--------- ---------
Total assets 188,137 158,867
========= =========
Current liabilities:
Accounts payable 213,053 81,714
Accrued expenses 7,098 14,733
Bridge financing 403,000 56,000
Notes payable 53,939 60,116
Accrued interest 4,872 126,079
Convertible debenture 0 1,482,880
--------- ---------
Total current liabilities 681,962 1,821,522
Deferred revenue 200,486 90,001
Long-term liabilities:
Long-term debt - related parties 1,063,821 1,086,755
Accrued interest - related parties 133,811 132,345
Accrued payroll taxes 34,977 34,163
Other accrued liabilities 82,349 58,765
Stockholders' deficit:
Series A convertible preferred stock 4,000 4,000
Common stock 49,512 33,141
Additional paid-in capital 7,248,430 5,437,484
Accumulated deficit -9,311,211 -8,539,309
Total stockholders' deficit -2,009,269 -3,064,684
Total liabilities and stockholders'
--------- ---------
deficit 188,137 158,867
========= =========
See Note to Financial Statements
PART 1
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1. Financial Statements
For the Three Months Ended For the Six Months Ended
XOX CORPORATION June 30, June 30,
Statements of Operations 1996 1995 1996 1995
U.S. Dollars Unaudited Unaudited Unaudited Unaudited
-------------------------- --------------------------
<S> <C> <C> <C> <C>
Net Revenue:
Customer support and consulting 43,267 35,300 169,524 127,481
Product revenue 31,595 8,145 78,655 73,438
Royalties 10,766 3,048 16,776 7,048
--------- --------- --------- ---------
85,628 46,493 264,955 207,967
Operating expenses:
Research and development 165,805 111,834 346,136 257,884
Selling, general and administrative 293,544 365,128 549,753 686,690
--------- --------- --------- ---------
459,349 476,962 895,889 944,574
Net loss from operations -373,721 -430,469 -630,934 -736,607
Interest income 81 3,717 549 4,763
Interest expense 78,980 33,288 141,517 88,615
Net loss -452,620 -460,040 -771,902 -820,459
========= ========= ========= =========
Net loss per share -0.20 -0.23 -0.34 -0.41
Weighted average number of shares
outstanding 2,313,000 2,004,633 2,250,308 2,004,633
See Note to Financial Statements
</TABLE>
PART 1
FINANCIAL INFORMATION
Item 1. Financial Statements
For the Six Months Ended
XOX CORPORATION June 30,
Statement of Cash Flows 1996 1995
U.S. Dollars Unaudited Unaudited
--------------------------
OPERATING ACTIVITIES
Net loss -771,902 -820,459
adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 12,059 20,005
Recognition of deferred revenue -22,016 -8,250
Noncash interest expense related to
warrants 30,745 13,740
Changes in other operating assets and
liabilities:
Accounts receivable 659 -34,250
Prepaid expenses -53,894 6,771
Accounts payable 131,339 -77,457
Accrued interest 64,517 12,000
Accrued liabilities 16,763 9,929
Deferred revenue 132,501 97,354
--------- ---------
Net cash used in operating activities -459,229 -780,617
INVESTING ACTIVITIES
Purchase of property and equipment -5,720 -22,469
--------- ---------
Net cash used in investing activities -5,720 -22,469
FINANCING ACTIVITIES
Net proceeds from issuance of common
stock 103,500 0
Proceeds from bridge loans 350,000 0
Payments of bridge loans 0 -291,500
Proceeds from convertible debentures 0 1,358,262
Payments on notes payable -6,177 0
--------- ---------
Net cash provided by financing activities 447,323 1,066,762
--------- ---------
Net (decrease) increase in cash -17,626 263,676
Cash at beginning of period 29,918 59,358
--------- ---------
Cash at end of period 12,292 323,034
========= =========
See Note to Financial Statements
PART 1
FINANCIAL INFORMATION
ITEM 1. Financial Statements (continued)
XOX Corporation
Note to Financial Statements
June 30, 1996
The financial statements have been prepared by XOX Corporation, without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
The information furnished in the financial statements include normal recurring
adjustments and reflect all adjustments which are, in the opinion of management,
necessary for a fair presentation of such financial statements. 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, although the
Company believes that the disclosures are adequate to make the information
presented not misleading. It is suggested that these condensed financial
statements be read in conjunction with the financial statements and the
accompanying notes included in the Company's final prospectus, dated September
11, 1996, for its recently completed initial public offering.
The net proceeds to the Company for the recently completed initial public
offering are estimated to be approximately $4,913,000, after deduction of the
Underwriting discount, the Underwriter's nonaccountable expense allowance and
estimated expenses of the offering payable by the Company. In this regard, the
balance sheet as of June 30, 1996 includes offering expenses of $53,894 in the
"prepaid expenses" category of current assets.
ITEM 2. Management's Discussion and Analysis or Plan of Operation
LIQUIDITY AND CAPITAL RESOURCES
The enclosed financial statements have added the financial and business activity
of the Company's June 1996 and June 1995 operations to the five month stub that
appeared in the final prospectus of the Company's recently completed initial
public offering. As such, there is not a significant amount of new business
transactions included in this quarterly filing beyond the information contained
in the registration statement on Form SB-2.
As of June 30, 1996 the Company had a working capital deficit of $576,922. The
net proceeds estimated at $4,913,000 from the recently completed public offering
has improved the Company's liquidity and health of its balance sheet. The
Company will use those net proceeds, assuming no exercise of the Underwriter's
over-allotment option, in the following approximate amounts:
Repayment of Certain Liabilities $ 839,000
Capital Expenditures 150,000
Sales and Marketing 600,000
Research and Product Development 1,450,000
Investments and Joint Developments 750,000
Working Capital 1,124,000
Total $4,913,000
RESULTS OF OPERATIONS
The Company hired an additional engineer in June 1996 to increase the work
effort on the feasibility study and possible development of a hardware
accelerator for its software products. A hardware accelerator is either a
circuit board that is added to existing computers or, eventually, a custom
computer chip that is built as part of a personal computer or workstation. This
work is in the very early stages and prior to this effort, the Company has had
no experience in the hardware market. Both the potential benefits to customers
and business risks were explained in the sections on Risk Factors and Business
Description in the Company's final prospectus dated September 11, 1996.
During the quarter ended June 30, 1996, the Company continued its sales and
marketing efforts to the targeted markets, with the Geosciences and Advanced
Computer Aided Design and Analysis receiving special emphasis.
On June 21, 1996, the Company filed a registration statement on Form SB-2 with
the Securities and Exchange Commission at its Midwest Regional Office in
Chicago, Illinois. Preparation of this registration statement and the
intervening work that took place before a closing session was held on the
completed initial public offering on September 16, 1996, consumed much of the
time and energies of the Company's executive staff.
For the next several quarters the Company believes that it will be difficult to
accurately estimate future revenues, and as a result, operating results may vary
substantially from quarter to quarter.
PART II
OTHER INFORMATION
ITEM 1. Legal Proceedings
The Company is not involved in any pending or, to its knowledge, threatened
litigation.
ITEM 6. Exhibits and Reports on Form 8-K
(A) Exhibits
27 Financial Data Schedule (submitted only in electronic format).
(B) No report on Form 8-K has been filed during the last quarter of
the period covered by this report.
In accordance with the requirements of the Exchange Act, the Company caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
XOX Corporation
By
-------------------------------------
Lawrence W. McGraw
President and Chief Executive Officer
October 24, 1996 By
-------------------------------------
William J. Birmingham
Chief Financial Officer
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 12,292
<SECURITIES> 0
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<TOTAL-REVENUES> 264,955
<CGS> 0
<TOTAL-COSTS> 895,889
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<INTEREST-EXPENSE> 141,517
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