SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997.
( ) 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 1-11236
XEROGRAPHIC LASER IMAGES CORPORATION
------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 51-0319174
-------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
101 Billerica Avenue, 5 Billerica Park,
North Billerica, MA 01862
------------------- -----
(Address of principal executive offices) (Zip Code)
(508) 670-5999
--------------
(Registrant's telephone number, including area code)
Transitional Small Business Disclosure Format:
Yes No X
--- ---
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 requirement for the past 90 days. YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of Stock, as of the latest practicable date.
Class Outstanding at April 18, 1997
----- -----------------------------
Common Stock, $.01 par value
per share 1,778,646
Series A Convertible Preferred
Stock, $.01 par value
per share 315,238
2
XEROGRAPHIC LASER IMAGES CORPORATION
INDEX
PAGES
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Balance Sheets as of March 31, 1997
(unaudited) and December 31, 1996 4
Statements of Operations for the three
month period ended March 31, 1997 and
1996 (unaudited) 5
Statements of Cash Flows for the three month
period ended March 31, 1997 and 1996
(unaudited) 6
Notes to Financial Statements
(unaudited) 7
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8-9
PART II OTHER INFORMATION
Item 1 Legal Proceedings
Item 2 Changes in Securities
Item 3 Defaults Upon Senior Securities
Item 4 Submission of Matters to a Vote of Security-Holders
Item 5 Other Information
Item 6 Exhibits and Reports on Form 8-K 10
Signatures 11
3
Xerographic Laser Images Corporation
Balance Sheets
<TABLE>
<CAPTION>
March 31 December 31
1997 1996
--------------- ----------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash $21,248 $219,723
Accounts receivable, less allowance
for doubtful accounts of $2,000 in
1997 and $5,000 in 1996 6,571 20,314
--------------- ----------------
Total current assets 27,819 240,037
--------------- ----------------
Property and equipment, net 30,513 35,191
Other assets 4,432 4,432
--------------- ----------------
Total assets 62,764 279,660
--------------- ----------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $349,204 $352,346
Deferred revenue 59,333 101,000
Accrued expenses 85,014 179,943
Accrued severance costs 46,560 68,704
Current portion of capital leases 8,798 11,731
--------------- ----------------
Total current liabilities 548,909 713,724
--------------- ----------------
Capital lease obligations 16,908 16,908
Subordinated notes payable 283,688 283,688
--------------- ----------------
Total liabilities 849,505 1,014,320
--------------- ----------------
Stockholder's equity (deficit)
Series A Preferred stock, $.01 par value;
authorized 1,000,000 shares; 315,238
issued and outstanding at March 31, 1997
and December 31, 1996. 3,152 3,152
Common stock, $.01 par value; 30,000,000
shares authorized: 1,778,646 issued and
outstanding at March 31, 1997 and
December 31, 1996. 17,786 17,786
Additional paid-in capital 8,434,353 8,434,353
Accumulated deficit (9,242,032) (9,189,951)
--------------- ----------------
Total stockholders' equity (deficit) (786,741) (734,660)
--------------- ----------------
Total liabilities and stockholders' equity $62,764 $279,660
=============== ================
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
Xerographic Laser Images Corporation
Statements of Operations
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31 March 31
1997 1996
-------------------- ---------------------
(unaudited) (unaudited)
<S> <C> <C>
Product revenues $20,054 $59,711
Contract and license revenues 241,667 25,000
-------------------- ---------------------
Total revenues 261,721 84,711
-------------------- ---------------------
Cost and expenses:
Cost of product revenues 10,795 37,761
Cost of contract and license revenues 40,932 -
Research and development 112,491 70,483
Sales and marketing 7,330 12,790
General and administrative 145,268 101,416
-------------------- ---------------------
Total cost and expenses 316,816 222,450
-------------------- ---------------------
-------------------- ---------------------
Loss from operations (55,095) (137,739)
-------------------- ---------------------
Other income 4,739 -
Net interest expense 1,725 5,828
==================== =====================
Net loss ($52,081) ($143,567)
==================== =====================
Net loss per common share ($0.03) ($0.11)
Weighted average common and common
equivalent shares outstanding 1,778,646 1,338,646
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
Xerographic Laser Images Corporation
Statements of Cash Flows
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31 March 31
1997 1996
-------------------- ---------------------
(unaudited) (unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss ($52,081) ($143,567)
Adjustments to reconcile net loss to net cash
Used in operating activities:
Depreciation and amortization 4,678 6,672
(Increase) decrease:
Accounts receivable 13,743 106,329
Inventory - (16,137)
Other assets - 750
Increase (decrease):
Accounts payable (3,142) 46,801
Deferred revenues (41,667) (24,563)
Accrued expenses (94,929) -
Accrued severance costs (22,144) (22,301)
-------------------- ---------------------
Net cash used in operating activities (195,542) (46,016)
-------------------- ---------------------
Cash flows from financing activities:
Cash overdraft - (1,432)
Payments of notes payable - 55,000
Payments under capital lease obligations (2,933) (3,578)
-------------------- ---------------------
Net cash provided (used) in investing activities (2,933) 49,990
-------------------- ---------------------
Net increase (decrease) in cash (198,475) 3,974
Cash at beginning of period 219,723 -
-------------------- ---------------------
Cash at end of period $21,248 $3,974
==================== =====================
Supplemental disclosure of cash flow information:
Cash paid for interest $1,725 $1,756
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
XEROGRAPHIC LASER IMAGES CORPORATION
Notes to Financial Statements
March 31, 1997
1. Nature of Business and Basis of Presentation
In 1996, and the first three months of 1997, Xerographic Laser Images
Corporation (the "Company" or "XLI") continued to make cost reductions to bring
expenses more in line with near term expected revenues and transition away from
a provider of board products to focus on higher margin, mass-market offerings.
XLI continued its move to technology that will provide a flow of products for
primarily large OEM's in the printer market. These products consist of ASICs
(application specific integrated circuits), VHDL (virtual hardware description
language) and software products. In line with the transition, the Company has
entered into technology licensing agreements with Samsung Electronics, Pipeline
Associates, Xionics Document Imaging, and a Japanese printer OEM. A VHDL version
of the Company technology has been delivered to these customers in the latter
half of 1996 and the first quarter of this year for these customers to design
their own ASICs with XLI enhancement technology. XLI is also in the process of a
co-development arrangement for its own "Superchip" to enable the Company to
directly provide an ASIC to the printer market. XLI expects to bring this ASIC
to market in the third quarter of 1997.
The Company hopes to increase revenue through additional corporate alliances and
additional licensing of the Superchip technology. The Company also plans to add
additional engineering resources in 1997 in order to meet the demands from
existing and anticipated OEM agreements. The addition of such resources will
result in increased research and development costs and may negatively affect
cash flow. For the first quarter of 1997, the Company had negative cash flow
from operations of $195,542.
Despite the progress made in maintaining current expense levels and the
potential revenue which may be generated pursuant to the anticipated
co-development agreements with OEMs, significant risk remains concerning the
Company's ability to continue as an independent going concern. The financial
statements do not include any adjustments relating to the recovery and
classification of recorded asset amounts or the amounts and classifications of
liabilities that might be necessary should the Company be unable to continue as
a going concern.
The information furnished has been prepared from the Company's accounts without
audit. In the opinion of management, all adjustments and accruals (consisting
only of normal recurring adjustments), which are necessary for a fair
presentation of operating results, are reflected in the accompanying financial
7
statements. Certain information and footnote disclosures normally included in
the Company's annual financial statements have been condensed or omitted. These
interim financial statements should be read in conjunction with the audited
financial statements for the year ended December 31, 1996, which are contained
in the Company's 1996 Form 10-KSB filed with the Securities and Exchange
Commission.
2. Net Loss per Common Share
Net loss per share is computed based upon the weighted average number of common
shares outstanding. Common equivalent shares are not included in the per share
calculations as the effect of their inclusion would be nondilutive.
3. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
The Company continues to transform itself from a supplier of printers, printer
servers and printer controller boards to a supplier of ASICs, software, ASIC
cores and engineering services.
The Company's strategy is to develop core ideas derived from XLI's current
technology, then design products incorporating such ideas for production in
collaboration with strategic partners.
Revenues for the first quarter of 1997, which ended March 31, 1997 were
$261,721, an increase of approximately 209% from 1996's first quarter revenues
of $84,711.
The Company recorded a net loss of $52,081 for the first quarter of 1997, as
compared to a net loss of $143,567 for the same period in 1996. The reduction is
attributable primarily to the increase in contract and license revenues of
$216,667.
The Company's gross margin on product sales was 46% for the first quarter of
fiscal year 1997 compared to 37% for the same period in 1996. This increase in
gross margin was the result of the write-off of obsolete board inventory during
the same period in 1996.
Research and development costs for the three month period ended March 31, 1997
were $112,491 or approximately 43% of revenues as compared to $70,483 or
approximately 83% of revenues for the three month period ended March 31, 1996.
The increase in research and development costs was attributable to the Company's
development of ASICs incorporating the Company's proprietary high resolution
technology for the OEM market.
Selling and marketing expenses for the three month period ended March 31, 1997
were $7,330 or approximately 3% of revenues as
8
compared to $12,790 or approximately 15% of revenues for the three month period
ended March 31, 1996. The decrease of $5,460 is attributable to a reduction in
advertising costs associated with the promotion of the Company's printers and
board products. The Company intends to promote its board products primarily
through telemarketing and its ASIC technology through third party partnerships.
General and administrative expenses for the three month period ended March 31,
1997 were $145,268 or approximately 56% of revenues as compared to $101,416 or
approximately 120% of revenues for the three month period ended March 31, 1996.
The increase of $43,852 is attributable to royalty expense and the increased use
of consultants.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997 the Company had current assets of $27,819, current liabilities
of $548,909 and cash of $21,248.
On April 15, 1997 the Company received from Samsung Electronics Co., Ltd.
$62,446, which represents a refund from the Korean Tax Authority for taxes
withheld on a development contract in 1996.
The Company has no current plans to undertake a debt or equity financing in
1997. Funds for development efforts will come from current or anticipated
licensing and royalty fees. If the Company is unable to fund its operations
through cash flow, the Company's development efforts and operations will be
materially adversely effected.
9
PART II OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not currently involved in any material legal
proceedings.
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security-Holders
No matters were submitted to a vote of security-holders During the
period covered by this report.
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) There are no exhibits required to be filed herewith.
(b) There were no reports on Form 8-K filed by the Company during the
period reported on in this Report on Form 10-QSB.
10
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Xerographic Laser Images Corporation
------------------------------------
(Company)
Date: April 24, 1997 By: /s/ James L. Salerno
--------------------------------
James L. Salerno, Chief Financial Officer
(Principal Financial and Accounting
Officer)
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 21,248
<SECURITIES> 0
<RECEIVABLES> 8,571
<ALLOWANCES> 2,000
<INVENTORY> 0
<CURRENT-ASSETS> 27,819
<PP&E> 490,704
<DEPRECIATION> 460,191
<TOTAL-ASSETS> 62,764
<CURRENT-LIABILITIES> 548,909
<BONDS> 0
0
3,152
<COMMON> 17,786
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 62,764
<SALES> 20,054
<TOTAL-REVENUES> 261,721
<CGS> 10,795
<TOTAL-COSTS> 51,727
<OTHER-EXPENSES> 265,089
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,725
<INCOME-PRETAX> (55,095)
<INCOME-TAX> 0
<INCOME-CONTINUING> (55,095)
<DISCONTINUED> 0
<EXTRAORDINARY> 4,739
<CHANGES> 0
<NET-INCOME> (52,081)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
