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 June 30, 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 Identification No.)
of incorporation or
organization)
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 July 24, 1997
- ---------------------------- ----------------------------
Common Stock, $.01 par value
per share 2,039,310
Series A Convertible Preferred
Stock, $.01 par value
per share 315,238
Common stock including equivalents, options and warrants exercisable
at current market price or lower equal 3,383,770 shares.
XEROGRAPHIC LASER IMAGES CORPORATION
INDEX
PAGES
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Balance Sheets as of June 30, 1997
(unaudited) and December 31, 1996 4
Statements of Operations for the six and three
month periods ended June 30, 1997 and
1996 (unaudited) 5
Statements of Cash Flows for the six month
periods ended June 30, 1997 and 1996
(unaudited) 6
Notes to Financial Statements
(unaudited) 7-8
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9-10
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 11
Signatures 12
Xerographic Laser Images Corporation
Balance Sheets
June 30, December 31,
1997 1996
----------- -----------
(unaudited)
ASSETS
- ------
Current assets:
Cash $145,652 $219,723
Accounts receivable, less allowance
for doubtful accounts of $2,000 in
1997 and $5,000 in 1996 24,937 20,314
---------- ----------
Total current assets 170,589 240,037
---------- ----------
Property and equipment, net 25,835 35,191
Other assets 7,274 4,432
---------- ----------
Total assets $203,698 $279,660
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
- ----------------------------------------------
Current liabilities:
Accounts payable $318,416 $352,346
Deferred revenue 34,333 101,000
Accrued expenses 269,947 179,943
Accrued severance costs 28,022 68,704
Current portion of capital leases 11,731 11,731
---------- ----------
Total current liabilities 662,449 713,724
---------- ----------
Capital lease obligations 9,421 16,908
Subordinated notes payable 283,688 283,688
---------- ----------
Total liabilities 955,558 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 June 30, 1997
and December 31, 1996. 3,152 3,152
Common stock, $.01 par value; 30,000,000
shares authorized: 2,039,310 issued and
outstanding at June 30, 1997 and
1,778,646 outstanding at
December 31, 1996. 20,393 17,786
Additional paid-in capital 8,463,323 8,434,353
Accumulated deficit (9,238,728) (9,189,951)
----------- ------------
Total stockholders' equity (deficit) (751,860) (734,660)
----------- ------------
Total liabilities and stockholders' equity $203,698 $279,660
=========== ============
The accompanying notes are an integral part of the financial statements.
Xerographic Laser Images Corporation
Statements of Operations
Three Months Ended Six Months Ended
----------------------------------- -----------------------------------
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
------------- ------------- ------------- -------------
(unaudited) (unaudited) (unaudited) (unaudited)
Product revenues $ 48,649 $ 49,130 $ 68,703 $ 108,841
Contract and license revenues 449,051 - 690,718 25,000
------------- ------------- ------------- -------------
Total revenues 497,700 49,130 759,421 133,841
------------- ------------- ------------- -------------
Cost and expenses:
Cost of product revenues 11,957 34,315 22,752 72,076
Cost of contract and license revenues 161,023 - 201,955 -
Research and development 155,555 87,283 268,046 157,766
Sales and marketing 14,036 7,073 21,366 19,863
General and administrative 151,175 167,103 296,443 268,519
------------- ------------- ------------- -------------
Total cost and expenses 493,746 295,774 810,562 518,224
------------- ------------- ------------- -------------
Profit or (loss) from operations 3,954 (246,644) (51,141) (384,383)
------------- ------------- ------------- -------------
Other income 1,050 - 5,789 -
Net interest expense (1,700) (5,361) (3,425) (11,189)
------------- ------------- ------------- -------------
Net profit or (loss) $ 3,304 $ (252,005) $ (48,777) $ (395,572)
============= ============= ============= =============
Net loss per common share $ 0.00 $ (0.18) $ (0.03) $ (0.29)
Weighted average common and common
equivalent shares outstanding 1,908,978 1,396,146 1,843,812 1,367,396
The accompanying notes are an integral part of the financial statements.
Xerographic Laser Images Corporation
Statements of Cash Flows
Six Months Ended Six Months Ended
June 30, 1997 June 30, 1996
(unaudited) (unaudited)
Cash flows from operating activities:
Net loss $ (48,777) $ (395,572)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 9,356 14,537
Issuance of common stock for services rendered 31,577 3,450
(Increase) decrease:
Accounts receivable (4,623) 263,835
Inventory - (1,740)
Other assets (2,842) 2,891
Increase (decrease):
Accounts payable (33,930) 67,270
Deferred revenues (66,667) -
Accrued expenses 90,004 (95,738)
Accrued severance costs (40,682) (37,101)
--------------- ---------------
Net cash used by operating activities (66,584) (178,168)
--------------- ---------------
Cash flows from financing activities:
Cash overdraft - (1,432)
Proceeds from issuance of Subordinated Notes - 195,000
Payments of notes payable - (5,500)
Payments under capital lease obligations (7,487) (5,651)
--------------- ---------------
Net cash provided (used) by financing activities (7,487) 182,417
--------------- ---------------
Net increase (decrease) in cash (74,071) 4,249
Cash at beginning of period 219,723 -
--------------- ---------------
Cash at end of period $ 145,652 $ 4,249
=============== ===============
Supplemental disclosure of cash flow information:
Cash paid for interest $ 3,424 $ 17,281
The accompanying notes are an integral part of the financial statements.
XEROGRAPHIC LASER IMAGES CORPORATION
Notes to Financial Statements
June 30, 1997
1. Nature of Business and Basis of Presentation
--------------------------------------------
During the first half of 1997, Xerographic Laser Images Corporation, ("XLI"
or the "Company") has focused on the implementation and commercialization
of the XLI SuperChip Enhancement Technology ("SuperChip Technology") in ASIC
(Application Specific Integrated Circuit) and VHDL (Virtual Hardware
Description Language) product forms. These product are targeted for the
large printer and printer controller OEM's that provide products to mass-
markets. These SuperChip Technology products are expected to provide the
Company with a family of revenue producing product offerings for the next
several years. To date five (5) companies have licensed the SuperChip VHDL
product for the incorporation of the Company's SuperChip Technology into
their own ASIC products. In addition, in the second quarter of 1997, the
Company entered into a co-development and license agreement with a Colorado-
based designer and marketer of integrated circuits. Pursuant to this
agreement, a SuperChip ASIC will be designed and fabricated for sale directly
by XLI. XLI expects to have samples of this SuperChip ASIC available for
evaluation during the third quarter of 1997, with chips available for sale
to printer OEMs. Initial sales activity for this ASIC has been focused
primarily in Japan and the USA where the majority of laser printer and
printer controller manufacturers are located.
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 six months ending June 30, 1997,
the Company had negative cash flow from operations of $66,584.
Despite the favorable reception the Company has received for its SuperChip
Technology and the potential revenue that may be generated pursuant to
future co-development agreements with OEMs, significant risk remains due to
the Company's short range cash needs. 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 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's strategy is to design and develop products derived from XLI's
current technology in collaboration with strategic partners.
Revenues for the second quarter of 1997, which ended June 30, 1997 were
$497,700, an increase of $448,570 from 1996's second quarter revenues of
$49,130. Revenues for the six-month period ended June 30, 1997 were
$759,421, an increase of $625,577 from the $133,841 of revenue recorded for
the six months ended June 30, 1996. The Company recognized $449,051 in
contract and license revenues in connection with agreements with Samsung
Electronics Co., Ltd. and Xionics Document Technologies, Inc. in the
second quarter of 1997 and none in the second quarter of 1996.
The Company recorded a net profit of $3,304 for the second quarter of 1997,
as compared to a net loss of $252,005 for the same period in 1996. The
increase in profitability is attributable to the increase in contract and
license revenues in the second quarter of 1997.
The Company's gross margin on product sales was 75% for the second quarter
of fiscal year 1997 compared to 30% for the same period in 1996. The gross
margin for the six months ended June 30, 1997 was 67% compared to 34% for the
same period in 1996. This was mainly due to the board inventory being
written off in December 1996.
Research and development costs for the three month period ended June 30, 1997
were $155,555 or approximately 31% of revenues as compared to $87,283 or
approximately 178% of revenues for the second quarter of 1996. Research and
development costs for the six months ended June 30, 1997 were $268,046, as
compared to $157,766 for the same period in 1996. The increase in research
and development costs from June 30, 1996 to June 30, 1997 of $110,280 was
due to the hiring of additional engineering personnel and increased use of
independent engineering consultants. The Company's engineering emphasis
will continue to be on the 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 June 30, 1997
were $14,036 or approximately 3% of revenues as compared to $7,073 or
approximately 14% of revenues for the three month period ended June 30, 1996.
Selling and marketing expenses for the six months ended June 30, 1997 were
$21,366, as compared to $19,863 for the same period in 1996. The slight
increase of $1,503 is attributable to a change in the commissions structure
in connection with board sales as the Company attempts to sell off its
remaining board inventory. The Company will 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 June 30,
1997 were $151,175 or approximately 30% of revenues as compared to $167,103
or approximately 340% of revenues for the three month period ended June 30,
1996. The decrease is attributable to the refund of foreign income taxes
from the Korean Tax Authority in April 1997. General and administrative
expenses for the six months ended June 30, 1997 were $296,443 as compared to
$268,519 for the same period in 1996. This increase was primarily due to
professional fees (patent legal fees).
Liquidity and Capital Resources
At June 30, 1997 the Company had current assets of $170,589, current
liabilities of $662,449 and cash of $145,652.
The Company continues to fund its operations from its cash account and from
cash flow provided from contract development agreements and technology
licenses. Additionally, in April 1997 the Company received from Samsung
Electronics Co., Ltd. a $62,446 refund 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 operations and development efforts will come from the
Company's available cash and from current or anticipated licensing and
royalty fees. If the Company is unable to fund its operations from cash
flow, the Company's development efforts and operations will be materially
adversely effected.
The Company has no current commitments for any material capital
expenditures.
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) The following exhibits are filed herewith:
Exhibit Number Title
-------------- -----
10.43 Development and License Agreement
dated May 30, 1997, between the
Company and SIS Microelectronics, Inc.
10.44 License and Royalty Agreement dated
June 26, 1997, between the Company
and PCPI Technologies, Inc.
(b) There were no reports on Form 8-K filed by the Company during
the quarter ended June 30, 1997.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Xerographic Laser Images Corporation
------------------------------------------------
(Company)
Date: July 28, 1997 By: /s/ James L. Salerno
------------- --------------------------------------------
James L. Salerno, Chief Financial Officer
(Principal Financial and Accounting Officer)