<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities and
Exchange Act of 1934
For the quarterly period ended September 30, 1997
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from ________________ to
________________
Commission File Number 000-19828
SpatiaLight, Inc.
-----------------
(Exact name of small business issuer as specified in its charter)
New York 16-1363082
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
8-C Commercial Blvd., Novato, CA 94949-6125
--------------------------------------------
(Address of principal executive offices)
(415) 883-1693
--------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 [X ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 9,201,191 shares of
common stock as of November 14, 1997.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X ]
<PAGE>
SPATIALIGHT, INC. AND SUBSIDIARIES
Quarterly Report on Form 10-QSB
For the Quarter Ended September 30, 1997
Table of Contents
<TABLE>
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (unaudited)
Consolidated Balance Sheets dated
September 30, 1997 and December 31, 1996......................3
Consolidated Statements of Operations
for the Three and Nine Months Ended
September 30, 1997 and 1996...................................4
Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 1997
and 1996......................................................5
Notes to Condensed Consolidated Financial Statements..........6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations..............8
PART II. OTHER INFORMATION
Item 2. (c ) Recent Sales of Unregistered Securities.....................13
Item 6. (A) Exhibits and Reports on Form 8-K............................14
</TABLE>
2
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PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
SPATIALIGHT, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
----------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $343,781 $1,324,398
Accounts receivable 102,000 40,021
Inventories 15,000 75,401
Prepaid expenses and other 117,664 11,911
----------- ----------
Total current assets 578,445 1,451,731
Property and equipment, net 191,909 68,817
Other assets 22,940 12,877
----------- ----------
Total assets $793,294 $1,533,425
----------- ----------
----------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued expenses and other current liabilities $100,363 $108,581
Accounts payable 491,752 94,554
Short term note payable 300,000 --
----------- ----------
Total current liabilities 892,115 $203,135
Long term capital lease obligations 41,466 --
----------- ----------
Total liabilities 933,581 203,135
Stockholders' equity:
Common stock, $.01 par value
20,000,000 shares authorized: 8,547,191 and 79,972 79,832
8,533,191 shares issued and outstanding at
September 30, 1997 and December 31, 1996
Additional paid-in capital 9,026,248 8,714,539
Accumulated deficit (9,246,507) (7,464,081)
----------- ----------
Total stockholders' equity (140,287) 1,330,290
----------- ----------
Total liabilities and stockholders' equity $793,294 $1,533,425
----------- ----------
----------- ----------
</TABLE>
See accompanying notes to condensed consolidated financial statements
3
<PAGE>
SPATIALIGHT, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1997 1996 1997 1996
----------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Sales $0 $32,000 $0 $108,100
Contract revenues 325,000 0 325,000 0
---------- --------- --------- ---------
Total revenues 325,000 32,000 325,000 108,000
Cost of sales 0 38,285 0 56,825
---------- --------- --------- ---------
Gross profit 325,000 (6285) 325,000 51,815
Selling, general and administrative expenses 257,619 213,300 1,209,116 539,080
Research and development expenses 364,525 65,410 910,875 195,835
Write down of note receivable -- 121,702 -- 121,702
---------- --------- --------- ---------
Total operating expenses 622,144 400,412 2,119,991 856,607
Operating loss (297,144) (406,697) (1,794,991) (804,802)
Other income (expense):
Interest income 121 21,091 12,505 39,657
Other income (expense), net (5,883) (7,976) 2,920 (11,370)
---------- --------- --------- ---------
Total other income (expense) (5,762) 13,115 15,425 28,287
---------- --------- --------- ---------
Loss before income taxes (302,906) (393,582) (1,779,566) (776,515)
Income tax expense (463) 953 2,860 4,839
Net loss (302,443) (394,535) (1,782,426) (781,354)
Net loss per common share: (.04) (.05) (.21) (.11)
Weighted average shares used in computing
net loss per common share 8,547,191 7,810,908 8,539,310 6,854,097
---------- --------- --------- ---------
</TABLE>
See accompanying notes to condensed consolidated financial statements
4
<PAGE>
SPATIALIGHT, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,782,426) $(781,354)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 46,697 13,579
Write down of note receivable 121,702
Non cash litigation settlement 300,000 --
Non cash compensation 21,251
Changes in assets and liabilities:
Trade and other receivables, net (61,979) --
Inventories 60,401 (98,058)
Prepaid expenses (105,753) (18,726)
Accounts payable 397,198 --
Accrued expenses and other liabilities (8,218) 140,375
Other assets (10,063) (7,343)
----------- ----------
Net cash used in operating activities (1,142,893) (629,825)
Cash flows from investing activities:
Capital expenditures (128,323) (16,382)
Collection on notes receivable -- 50,000
Purchase of short term investments available for sale -- (1,172,899)
----------- ----------
Net cash used in investing activities (128,323) (1,139,281)
Cash flows from financing activities:
Draw on bank line of credit 250,000 --
Issuance of notes payable 50,000 --
Issuance costs related to common stock issued (9,402) 1,577,499
----------- ----------
Net cash provided by financing activities 290,598 1,577,499
Net decrease in cash and cash equivalents (980,618) (191,607)
Cash at beginning of period 1,324,398 678,300
----------- ----------
Cash at end of period $ 343,781 $ 486,693
----------- ----------
----------- ----------
</TABLE>
See accompanying notes to condensed consolidated financial statements
5
<PAGE>
SPATIALIGHT, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(1) Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with the instructions to
Form 10-QSB but do not include all information and footnotes
necessary for a fair presentation of financial condition, results of
operations and cash flows in conformity with generally accepted
accounting principles. In the opinion of management of Spatialight,
Inc. ("Spatialight" or "the Company"), the interim condensed
consolidated financial statements included herewith contain all
adjustments (consisting of normal recurring accruals and adjustments)
necessary for a fair presentation of the Company's financial
condition as of September 30, 1997 and the results of its operations
for the three months and nine months ended September 30, 1997 and
1996 respectively. The unaudited interim condensed consolidated
financial statements should be read in conjunction with the Company's
Annual Report on Form 10-KSB/A, which contains the audited financial
statements and notes thereto, together with Management's Discussion
and Analysis as of and for the years ended December 31, 1996 and
1995.
(2) Going Concern Uncertainty
The Company incurred significant operating losses in each of the last
five fiscal years, incurred a net loss in fiscal 1996 of $1,178,738
and incurred a net loss of $1,782,426 in the first nine months of
1997. At September 30, 1997, the Company's accumulated deficit
totaled $9,246,507.
In an effort to improve operating performance, the Company has been
and will be implementing certain programs and strategies in 1997.
These strategies include:
- Raising of additional capital
- Construction of engineering models to demonstrate proof of
technology for OEM's
- Outsourcing of all manufacturing activities, which will be
monitored by Company's manufacturing/quality control
engineering staff
- Developing strategic arrangements with potential customers
to share development costs and/or licensing of the Company's
technology
The successful completion of the Company's development program and,
ultimately, the attainment of profitable operations is dependent on
future events, including obtaining adequate financing to fulfill its
development activities, successful launching of the commercial
production and distribution of its products and achieving a level of
sales adequate to support the Company's cost structure. There can be
no assurance that the Company will ever be able to achieve revenues
in excess of expenses. The
6
<PAGE>
Company expects to incur substantial losses and substantial negative
cash flows from operating activities in the foreseeable future.
The Company believes that its existing cash and cash equivalents will
be insufficient to sustain the Company's current level of operations
and meet its financial obligations through the end of 1997. The
Company has engaged the services of an investment banking firm to
raise additional capital.
The accompanying unaudited condensed consolidated financial
statements have been prepared on a going concern basis, which
contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The matters discussed
above, among others, indicate that the Company may be unable to
continue as a going concern for a reasonable period of time.
The condensed consolidated financial statements do not include any
adjustments relating to the recoverability and classification of
recorded asset amounts or the amounts and classification of
liabilities that might be necessary should the Company be unable to
continue as a going concern.
(3) Earnings per share
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per
Share" (SFAS 128). The Company is required to adopt SFAS 128 in the
fourth quarter of fiscal 1997 and will restate at that time earnings
per share (EPS) data for prior periods to conform with SFAS 128.
Earlier adoption is not permitted.
SFAS 128 replaces current EPS reporting requirements and requires a
dual presentation of basic and diluted EPS. Basic EPS excludes
dilution and is computed by dividing net income (loss) by the
weighted average of common shares outstanding for the period.
Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or
converted into common stock.
If SFAS 128 had been in effect during the current and prior year,
basic EPS and diluted EPS would not have been significantly different
than primary and fully diluted EPS currently reported for the
periods.
(4) Short term notes payable
As of September 30, 1997, the Company had a credit agreement with a
bank under which it can borrow up to an amount equal to the
Certificate of Deposit, up to a maximum of $750,000. The purpose of
the line of credit is to facilitate working capital. Under the terms
of the credit agreement, interest is accrued at the greater of Prime
or the certificate of deposit interest rate plus 2 percent. The line
of credit expires on March 8, 1998. As of September 30, 1997,
$250,000 was outstanding under this credit agreement and no
additional borrowings were available.
In September 1997 the Company borrowed $50,000 under a promissory
note. The note is payable on February 28, 1998 and accrues interest
at 12%. In addition, the lender received a warrant to purchase 6,500
shares of the Company's common stock.
7
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(5) New accounting standards
In June 1997, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards No. 130 (REPORTING
COMPREHENSIVE INCOME), which requires that an enterprise report, by
major components and as a single total, the change in its net assets
during the period from nonowner sources; and No. 131 (DISCLOSURES
ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION), which
establishes annual and interim reporting standards for an
enterprise's operating segments and related disclosures about its
products, services, geographic areas, and major customers. Adoption
of these statements will not impact the Company's consolidated
financial position, results of operations or cash flows, and any
effect will be limited to the form and content of its disclosures.
Both statements are effective for fiscal years beginning after
December 15, 1997, with earlier application permitted.
(6) Subsequent event
On October 31, 1997, the Company acquired the 20% of Spatialight of
California that it did not previously own, in exchange for 629,000
shares of the Company's common stock. The Company has not yet
determined the allocation of the purchase price.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The statements in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" that relate to future plans,
events or performance are forward-looking statements that involve
risks and uncertainties. Actual results, events or performance may
differ materially from those anticipated in these forward-looking
statements as a result of a variety of factors. Readers are cautioned
not to place undue reliance on these forward-looking statements,
which speak only as of the date hereof. The Company undertakes no
obligation to publicly release the result of any revisions to these
forward-looking statements that may be needed to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Overview
Spatialight is in the business of designing, producing, and
commercializing a miniature, proprietary, high resolution active
matrix liquid crystal display ("AMLCD"). The AMLCD, when mounted on
a semiconductor chip, is known as a Spatial Light Modulator ("SLM").
The Company's SLM is designed to be the essential component in both
small and large sized, high resolution, electronic display systems
which may be produced at lower costs than current or anticipated
display systems. The Company has produced prototype SLM's in small
volume which have been made available to potential customers who are
involved in the development of applications of this technology,
including manufacturers of computer monitors, headset displays,
optical computing equipment, holographic data storage and other
display applications. The Company has made only limited sales of
prototype units to date, and there can be no assurance that the
Company will ever be able to commercialize its technology.
8
<PAGE>
Results of Operations
The Company reported revenues of $325,000 for the quarter ended
September 30, 1997 under a non-recurring engineering contract. The
Company was contracted by a customer to provide a set of
specifications and development plans for a product using the
Company's technology. The Company is continuing to develop its
technological capabilities and its production capacity and believes
that significant sales of its SLM will be required in order for the
company to continue to meet its financial obligations and operating
plans. Any lack of significant sales would have a material adverse
affect upon the financial condition of the Company, and could cause
the Company to cease operations.
Selling, general and administrative expenses increased by $670,035
for the nine months ended September 30, 1997 as compared to the nine
months ended September 30, 1996, and by $44,319 for the three months
ended September 30, 1997 compared to the three months ended September
30, 1996. The increases were due primarily to an increase in
staffing and infrastructure support costs, and a $300,000 litigation
settlement expense in the quarter ended June 30, 1997.
Research and development expenses increased by $715,040 for the nine
months ended September 30, 1997 as compared to the nine months ended
September 30, 1996 and by $299,115 for the three months ended
September 30, 1997 compared to the three months ended September 30,
1996. Research and development expenses represent costs incurred,
primarily personnel related, for the design and development of new
products and the redesign of existing prototype products. The
Company believes that the development of new products will be
required to allow it to compete effectively and to achieve future
revenues. The Company currently has 10 full time employees whose
duties involve research and development. The Company intends to
continue its product enhancement and development programs, focusing
on increasing the display size and finalizing field sequential color
capabilities and liquid crystal filling manufacturing processes. The
Company believes that such enhancements and new products will be
required to exploit future markets for large screen monitors, high
definition television and head mount displays.
Net Loss
As a result of the above factors the Company recorded a net loss of
$1,782,426 or $.21 per share for the nine months ended September 30,
1997 and a net loss of $302,444 representing $.04 per share for the
three months ended September 30, 1997. While the Company is taking
steps to improve its performance, there can be no assurance that the
attempts by management at product development will be successful.
Any delay in effecting operational performance improvement by the
Company or in the further development of the SLM by the Company may
have a material adverse impact on the financial condition of the
Company.
Financial Condition, Liquidity and Capital Resources
Net cash used by operating activities totaled $1,142,893 for the nine
months ended September 30, 1997 primarily as a result of net losses
incurred of $1,782,426, which consisted of selling, general, and
administrative expenses, and research and development expenses
incurred during the period.
9
<PAGE>
As of September 30, 1997 the Company had $343,781 in cash and cash
equivalents. Net working capital was ($313,670).
The Company has secured a line of credit for up to a maximum of
$750,000, based on the amount in the Certificate of Deposit. As of
September 30, 1997, the Company has borrowed $250,000 under the line
of credit and no additional borrowings were available. The line of
credit accrues interest at the greater of Prime or the Certificate of
Deposit interest rate plus 2% and expires in March 1998.
The Company is experiencing negative cash flows from operations and
believes that its existing cash and cash equivalents will be
insufficient to sustain the Company's current level of operation and
meet its financial obligations through the end of 1997. As a result,
the Company will need to fund ongoing operations from financing
activities. The future existence and profitability of the Company is
dependent upon its ability to obtain additional funds to finance
operations and expand operations in an effort to achieve
profitability from operations. No assurance can be given that the
Company's business will ultimately generate sufficient revenue to
fund the Company's operations on a continuing basis. The matters
discussed above, among others, indicate that the Company may be
unable to continue as a going concern for a reasonable period of
time.
Business Risks
Most of the Company's revenue to date has been derived from research
and development contracts and limited sales of its SLM devices.
Although the Company has demonstrated SLM devices based on its core
technology, the Company has not yet produced any prototype SLM
products with quality and resolution sufficient to satisfy commercial
end-use applications. The Company recently entered into a contract
to produce an engineering prototype of a consumer product for mass
production. However, further development and testing will be
necessary before this product or the Company's other proposed
products will be available for commercial end-use applications.
Delays in development may result in the Company's introduction of its
products later than anticipated, which may have an adverse effect on
both the Company's financial and competitive position. Moreover,
there can be no assurance that the Company will ever be successful in
developing or manufacturing a commercially viable SLM device or any
of its proposed display products. In addition, there is no assurance
that an SLM device or any of the Company's display products will be
technically or commercially successful or that the Company will be
able to manufacture adequate quantities of its SLM devices or any of
its display products at commercially acceptable cost levels or on a
timely basis.
LACK OF SALES, MARKETING AND DISTRIBUTION EXPERIENCE. The Company
currently employs no full time sales or marketing specialists. The
Company intends to form alliances with corporate partners for the
marketing and distribution of certain of its anticipated display
products. There can be no assurance that the Company will be
successful in forming and maintaining such alliances or that the
Company's partners will devote adequate resources to successfully
market and distribute these anticipated products. There can be no
assurance that the Company will be able to attract and retain
qualified marketing and sales personnel, that the Company will be
able to enter into satisfactory agreements with marketing partners or
that the Company or its marketing partners will be successful in
gaining market acceptance for its anticipated products.
NO ASSURANCES OF SUCCESSFUL MANUFACTURING. The Company has no
experience manufacturing SLM devices or display products. The
Company's facility is designed principally for
10
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research and development and small scale assembly and inventory storage,
and the Company currently engages outside manufacturers to produce its
SLM devices. The Company is negotiating with several manufacturers for
establishment of full scale integrated manufacturing capacity for its
SLM devices and has reached an agreement with one manufacturer for
fabrication of silicon wafers. However, no decision has been made by
any such manufacturer to establish such a capability and there can be
no assurance that any of them will do so. In the event any such
manufacturer establishes a full scale integrated manufacturing
capability, the Company could become dependent on such manufacturer
for the manufacture of SLM devices. The termination or cancellation
of the Company's agreement with the manufacturer could adversely
affect the Company's ability to manufacture its products. In such
event, the Company could be required to establish an alternative
manufacturing relationship or establish its own manufacturing
capability. There can be no assurance that the Company would be able
to establish such a relationship on acceptable terms or develop its
own manufacturing capability; in any event the time required to
establish such a substitute relationship or capability could
substantially delay the commercialization of the Company's SLM
devices and display products, which, in turn, could have a
substantial adverse impact on the Company's results of operations and
financial condition.
PATENTS AND PROTECTION OF PROPRIETARY TECHNOLOGY. The Company's
ability to compete effectively with other companies will depend, in
part, on the ability of the Company to maintain the proprietary
nature of its technologies. Although the Company has been awarded or
has filed applications for several patents in the United States,
there can be no assurance as to the degree of protection offered by
these patents, or as to the likelihood that pending patents will be
issued. Furthermore, the Company has not yet applied for or obtained
any foreign patents. There can be no assurance that competitors, in
both the United States and foreign countries, many of which have
substantially greater resources and have made substantial investments
in competing technologies, will not seek to apply for and obtain
patents that will prevent, limit or interfere with the Company's
ability to make and sell its products or intentionally infringe the
Company's patents. The defense and prosecution of patent suits is
both costly and time consuming, even if the outcome is favorable to
the Company. This is particularly true in foreign countries. In
addition, there is an inherent unpredictability regarding obtaining
and enforcing patents in foreign countries. An adverse outcome in
the defense of a patent suit could subject the Company to significant
liabilities to third parties, require disputed rights to be licensed
from third parties, or require the Company to cease selling its
products. The Company also relies on unpatented proprietary
technology and there can be no assurance that others may not
independently develop the same or similar technology or otherwise
obtain access to the Company's proprietary technology. To protect
its rights in these areas, the Company requires all employees and
most consultants, advisors and collaborators to enter into
confidentiality agreements. There can be no assurance, however, that
these agreements will provide meaningful protection for the Company's
trade secrets, know how or other proprietary information in the event
of any unauthorized use, misappropriation or disclosure of such trade
secrets, know how or other proprietary information. To date, the
Company has no experience in enforcing its confidentiality
agreements.
RAPID TECHNOLOGICAL CHANGE; COMPETITION. The electronic imaging
display industry has undergone rapid and significant technological
change. The Company expects the technology to continue to develop
rapidly, and the Company's success will depend significantly on its
ability to maintain a competitive position. Rapid technological
development may result in actual and proposed products or processes
becoming obsolete before the Company recoups a significant portion of
related research and development, acquisition and commercialization
costs. If the Company is successful in the development of a
commercially viable SLM device and its proposed display and other
products, the
11
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Company's ability to compete will depend in part upon the consistency
of product quality and delivery, as well as pricing, technical
capability and servicing, in addition to factors within and outside
its control, including the success and timing of product introductions
by the Company and its competitors, product performance and price,
product distribution and customer support. There can be no assurance
that the Company's competitors will not succeed in developing
technologies and products that are equally or more effective than
any which are being developed by the Company or that will render the
Company's technology, SLM devices or display and other products
obsolete and non-competitive. In addition, numerous competitors have
substantially greater financial, technical and other resources than
the Company. The Company may face an aggressive, well financed
competitive response that may include misappropriation of the
Company's intellectual property or predatory pricing.
The electronic imaging display industry has been characterized by
rapid and significant technological advances. There can be no
assurance that the Company's SLM devices and display products will be
reflective of such advances or that the Company will have sufficient
funds to invest in new technologies or products or processes. A
number of companies in the United States assemble workstation
monitors using LCDs and cathode ray tubes ("CRTs") purchased from
Japan. A number of Japanese companies build monitors around their
LCDs and CRTs. Korean companies are also entering the LCD and CRT
monitor market. Development of improved high definition LCDs and
CRTs continues to receive significant attention by these and other
companies. Although the Company believes that its SLM products have
the capability to improve LCD performance beyond that of commercially
available LCD and CRT based display products, there is no assurance
that manufacturers of LCDs or CRTs will not develop further
improvements of LCD or CRT technology that would eliminate or
diminish the Company's anticipated advantage.
PRODUCT LIABILITY. As a manufacturer and marketer of electronic
equipment and components, the Company may be subject to potential
product liability claims. There can be no assurance that the Company
will carry sufficient insurance to cover all possible liabilities.
In the event of a successful suit against the Company, such an
insufficiency of insurance coverage could have a material adverse
impact on the financial condition of the Company. In addition, the
cost of defending or settling a product liability action and the
negative publicity arising therefrom could have a material adverse
impact on the Company. The Company is not aware of any current
pending or threatened product liability claim against it.
DEPENDENCE ON KEY PERSONNEL. The Company is dependent upon its key
scientific and management personnel, including its Chief Executive
Officer, William Hollis, its President, L. John Loomis, and its Vice
President, Dean Irwin. The Company does not maintain key man life
insurance on Messrs. Hollis, Loomis or Irwin. In 1997, the Company
entered into a three year employment agreement with Mr. Irwin, a four
year employment agreement with Mr. Hollis, and a five year employment
agreement with Mr. Loomis. The loss of the services of one or more
key individuals may have a material adverse impact on the Company.
The Company's success will also depend on its ability to attract and
retain other highly qualified scientific, marketing, manufacturing
and other key management personnel. The Company faces competition
for such personnel and there can be no assurance that the Company
will be able to attract or retain such personnel.
DEPENDENCE ON THIRD PARTIES TO DEVELOP PRODUCTS INCORPORATING SLM.
The Company intends to develop its SLM devices to be a component for
incorporation into finished products to be developed, manufactured
and marketed by third parties. The Company does not plan, nor does it
have the financial resources, to develop or market any such end
products itself. Therefore, the Company
12
<PAGE>
will be completely dependent upon independent third parties for the
development, manufacturing and marketing of such products. No such
products exist today, and the Company does not have commitments from
any third party for such development, manufacturing or marketing.
There can be no assurance that any third party will develop or market a
product incorporating the Company's SLM's. If not, there will be no
market for the Company's SLM's.
DEPENDENCE ON FEW CUSTOMERS. There were no sales in the nine months
ended September 30, 1997 , only the contract revenues described
above. In 1996 all sales were to five customers. In 1996, only one
customer purchased more than one SLM unit from the Company. All of
the units sold have been prototypes. The Company continues to be
dependent on a few customers for its sales. There can be no
assurance that any of the Company's past customers will purchase
additional units in the future. Loss of any one customer could have a
material adverse impact on the Company.
PART II. OTHER INFORMATION
Item 2(c). Recent Sales of Unregistered Securities
In the quarter ended September 30, 1997 the Company issued a
warrant to purchase 6,500 shares of the Company's common
stock pursuant to a Note Purchase Agreement.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27- Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the nine months
ended September 30, 1997.
13
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date:
---------------------------------
Spatialight, Inc.
By:
-----------------------------------
William E. Hollis
Chairman of the Board, Chief
Executive Officer
and Chief Financial Officer
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 343,781
<SECURITIES> 0
<RECEIVABLES> 102,000
<ALLOWANCES> 0
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0
0
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</TABLE>
