UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934 FOR THE QUARTER ENDED MARCH 31, 2000
Commission file number 0-28610
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.)
7640 West 78th Street, Bloomington, Minnesota 55439
(952) 946-1191
(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 - 2,977,346 shares outstanding as of May 2, 2000.
Transitional Small Business Disclosure Format (check one): Yes ___ No _X_
1
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PART I
FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
XOX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31,
2000 December 31,
unaudited 1999
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,189,898 $ 1,390,415
Accounts receivable 251,407 191,175
Prepaid expenses 51,425 --
Other 29,448 16,735
------------ ------------
Total current assets 1,522,178 1,598,325
PROPERTY AND EQUIPMENT
Furniture and fixtures 74,022 74,022
Computer equipment 98,311 98,311
------------ ------------
172,333 172,333
Less accumulated depreciation 118,893 113,506
------------ ------------
53,440 58,827
------------ ------------
Total assets $ 1,575,618 $ 1,657,152
============ ============
CURRENT LIABILITIES
Accounts payable $ 3,273 $ 10,155
Accrued payroll taxes 29,526 48,782
Other accrued expenses 5,397 26,385
Deferred revenue 6,469 96,399
------------ ------------
Total current liabilities 44,665 181,721
STOCKHOLDERS' EQUITY
Common stock 74,432 77,408
Additional paid-in capital 12,627,784 12,770,098
Accumulated deficit (11,171,263) (11,372,075)
------------ ------------
Total stockholders' equity 1,530,953 1,475,431
------------ ------------
Total liabilities and stockholders' equity $ 1,575,618 $ 1,657,152
============ ============
</TABLE>
See notes to consolidated financial statements
2
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
XOX CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the three months ended March 31,
------------------------------------
2000 1999
unaudited unaudited
----------- -----------
Net revenues
License and product sales $ 422,300 $ 377,250
Customer support and consulting 218,930 181,595
Royalties 42,600 --
----------- -----------
683,830 558,845
Operating expenses
Research and development 267,510 222,296
Selling, general and administrative 227,879 189,363
----------- -----------
495,389 411,659
Income from operations 188,441 147,186
Interest income 14,783 13,236
Interest expense (458) (7,790)
Miscellaneous (1,954) (2,020)
----------- -----------
Net income $ 200,812 $ 150,612
=========== ===========
Net income per share
Basic $ 0.07 $ 0.05
Diluted 0.06 0.05
----------- -----------
Weighted average shares outstanding
Basic 3,008,619 3,072,901
Diluted 3,258,965 3,072,901
See notes to consolidated financial statements
3
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
XOX CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the three months ended March 31,
------------------------------------
2000 1999
unaudited unaudited
----------- -----------
<S> <C> <C>
Operating activities
Net income $ 200,812 $ 150,612
Adjustments to reconcile net loss to net cash used in operating
activities
Depreciation 5,387 5,938
Amortization
Share of joint venture net income
Gain on extinguishment of debt
Changes in other operating assets and liabilities
Accounts receivable (60,232) 90,125
Prepaid expenses (64,138) (87,021)
Accounts payable (6,882) (15,441)
Accrued interest -- 7,790
Accrued liabilities (40,244) (70,838)
Deferred revenue (89,930) 93,405
----------- -----------
Net cash provided by (used in) operating activities (55,227) 174,570
Financing activities
Net proceeds from issuance of common stock 6,000
Common stock repurchase (151,290)
-----------
Net cash used in financing activities (145,290)
Net increase (decrease) in cash and cash
equivalents (200,517) 174,570
Cash and cash equivalents at beginning of period 1,390,415 1,194,397
----------- -----------
Cash and cash equivalents at end of period $ 1,189,898 $ 1,368,967
=========== ===========
</TABLE>
See notes to consolidated financial statements
4
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
XOX CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 1 - BASIS OF PRESENTATION
XOX Corporation (the "Company" or "XOX" {pronounced zocks}) designs, develops
and markets proprietary software for creating virtual mock-ups or models
within the computer that capture the complete geometry of objects or spatial
areas of interest. This model can then be used for visual analysis or
simulate physical phenomena in a diverse set of disciplines ranging from
geosciences to medical applications.
The accompanying unaudited condensed financial statements have been prepared
by the Company, pursuant to the rules and regulations of the Securities and
Exchange Commission. The information furnished in the financial statements
includes normal recurring adjustments and reflects 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 accompanying notes included in the
Company's annual report to the Securities and Exchange Commission on Form
10-KSB for the fiscal year ended December 31, 1999.
In preparation of the Company's consolidated financial statements, management
is required to make estimates and assumptions that effect reported amounts of
assets and liabilities and related revenues and expenses. Actual results
could differ from the estimates used by management.
5
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NOTE 2 - NET INCOME PER SHARE
The Company's basic net income per share amounts have been computed by
dividing net income by the weighted average number of outstanding common
shares. The Company's diluted net income per share is computed by dividing
net income by the weighted average number of outstanding common shares and
common share equivalents relating to stock options and warrants when
dilutive. Options to purchase 210,403 shares of common stock with a weighted
average exercise purchase price of $4.67 and warrants to purchase 161,022
shares of common stock with a weighted average purchase price of $7.89 were
outstanding during the first quarter of 2000 but were excluded from the
computation of common share equivalents because they were antidilutive.
During the quarter ending March 31, 2000 the effect of all outstanding
options and warrants were antidilutive.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This report, other than historical financial information, contains
forward-looking statements that involve risks and uncertainties. These
forward-looking statements will likely be impacted by factors outside the
Company's control and may differ materially from actual future events or
results. There are a number of important factors that could cause actual
results to differ materially from those anticipated by any forward-looking
information. A description of risks and uncertainties relating to the Company
and its industry and other factors that could affect the Company's financial
results are included in the Company's Securities and Exchange Commission
filings.
RESULTS OF OPERATIONS
FISCAL YEAR 2000 QUARTER ENDING MARCH 31, 2000 COMPARED TO QUARTER ENDING
MARCH 31, 1999
Net revenues for the quarter ended March 31, 2000 increased approximately 20%
to $683,830, as anticipated, from $558,845 reported for the same quarter
ending March 31 1999. The primary reason for the increase is attributable to
ShapesProspector sales and ongoing licensing fees.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS - CONTINUED
To increase the Company's revenues in 2000, the Board and management continue
to broaden the scope of business opportunities beyond the sales of licenses,
maintenance and royalties relating to those licenses. This is accomplished
primarily through the development and introduction of the Company's first end
user product ShapesProspector(TM). Version 2.0 of ShapesProspector was
released in May 2000. ShapesProspector(TM) is a PC Windows Compatible 3D
modeling tool that performs high-speed calculations and enables the end user
to input well data and build complex models. ShapesProspector(TM) also allows
for integrated 2D and 3D models, surface models, detailed mapping, fault
modeling and solid models. In quarter two, XOX plans to add multiple Z value
modeling capabilities to ShapesProspector(TM). This will allow for
construction and manipulation of complex models such as salt diapirs,
overturned folds and reverse faults.
Research and development expenses increased approximately 20% to $267,510 for
the quarter ended March 31, 2000, from $222,296 reported for same quarter of
1999. The research and development expenses for the quarter ended March 31,
2000 represented approximately 54% of the Company's total operating expenses.
This was primarily due to the increased development effort going into the
creation of Version 2.0 of ShapesProspector(TM), which was released in May
2000.
Selling, general and administrative expenses for the quarter ended March 31,
2000 increased approximately 20% to $227,879 from $189,363 reported for the
same quarter in 1999 and represented approximately 46% of the Company's total
operating expenses.
The increase in revenues outpaced the increases in the operating expenses and
resulted in a net income of $200,812 for the quarter ended March 31, 2000.
This compares to a net income of $150,612 for the same period in 1999. Thus,
the Company's basic income per share for the quarter ended March 31, 2000 was
$0.07 compared to basic income per share of $0.05 for the quarter ended March
31, 1999.
Interest income in the quarter ended March 31, 2000 of $14,783 resulted from
the investment of the surplus cash in money market accounts and short-term
certificates.
During 2000, the Company believes that operating results could continue to
vary substantially from quarter to quarter. At its current stage of
operations, the Company's quarterly revenues and results of operations may be
materially affected by the timing of the development, introduction and market
acceptance of the Company and its end user products.
7
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $1,189,898 at March 31, 2000, compared to
$1,390,415 at December 31, 1999. The Company's working capital was $1,477,513
at March 31, 2000 compared to working capital of $1,416,605 at December 31,
1999. The Company's accounts receivables were $251,407 on March 31, 2000
compared to accounts receivables of $191,175 at December 31, 1999.
The Company currently estimates that it will make capital expenditures in
2000 of approximately $34,000 for computer equipment.
The Company estimates that its current cash balance and the cash to be
generated from customer revenues will be sufficient to fund its operations
and capital needs through at least 2001. At its current stage of business
development, the Company's quarterly revenues and results of operations may
be materially affected by, among other factors, development and introduction
of products, time to market products, market acceptance of the Company and
its products, demand for the Company's products, reviews in the press
concerning the products of the Company and its competitors and general
economic conditions. Many of these factors are not within the control of the
Company. As a result, there can be no assurance that the Company will be
sufficiently funded beyond 2001.
FORWARD LOOKING STATEMENTS
This Form 10-QSB contains certain forward-looking statements. For this
purpose, any statements contained in this Form 10-QSB that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, words such as "may," "will," "expect," "believe," "anticipate,"
or "continue" or the negative or other variation thereof or comparable
terminology are intended to identify forward-looking statements. These
statements by their nature involve substantial risks and uncertainties, and
actual results may differ materially depending on a variety of factors, not
limited to, but including the risk factors set forth in the "Risk Factors"
section of the Company's Registration Statement on Form SB-2 (File No.
333-05112-C).
8
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
Effective January 21, 2000 Thomas J. Lucas resigned as a member of
the Company's Board of Directors. Mr. Lucas resigned from the
Board because he was unable to fulfill the time requirements
associated with his position on the Board. Mr. Lucas had been on
the Company's Board of Directors since August, 1995. Effective
January 24, 2000, Dr. Brian Zelickson was appointed to the Board
of Directors.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(i) Those exhibits required to be furnished in response
to this item other than Exhibit 27, were furnished
in connection with the Company's Registration
Statement on Form SB2, File No. 333-05112-C, as
filed with the Securities and Exchange Commission
and as amended, and other reports filed under the
Securities Exchange Act of 1934, all of which are
incorporated herein by reference.
(ii) Exhibit 27.1 - Financial Data Schedule
(b) Reports on Form 8-K
(i) None
9
<PAGE>
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
May 15, 2000
By /s/ Mark O. Senn
Mark O. Senn
President and COO
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,189,898
<SECURITIES> 0
<RECEIVABLES> 251,407
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,522,178
<PP&E> 172,333
<DEPRECIATION> 118,893
<TOTAL-ASSETS> 1,575,618
<CURRENT-LIABILITIES> 44,665
<BONDS> 0
0
0
<COMMON> 74,432
<OTHER-SE> 1,456,521
<TOTAL-LIABILITY-AND-EQUITY> 1,575,618
<SALES> 0
<TOTAL-REVENUES> 683,830
<CGS> 0
<TOTAL-COSTS> 495,389
<OTHER-EXPENSES> 1,954
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,325
<INCOME-PRETAX> 200,812
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 200,812
<EPS-BASIC> 0.07
<EPS-DILUTED> 0.06
</TABLE>
