-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EtLi5bzVSjwm93I6PDkMnFH5S7tzatCaYyfwgjddUvmkRdudJDLhntyLD8th9zmU NbkEz9T3yzkJ4rWwpgIx/w== 0000877937-98-000043.txt : 19980514 0000877937-98-000043.hdr.sgml : 19980514 ACCESSION NUMBER: 0000877937-98-000043 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980513 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: XEROGRAPHIC LASER IMAGES CORP /DE/ CENTRAL INDEX KEY: 0000877937 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 510319174 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 001-11236 FILM NUMBER: 98618452 BUSINESS ADDRESS: STREET 1: 101 BILLERICA AVENUE STREET 2: 5 BILERICA PARK CITY: NORTH BILLERICA STATE: MA ZIP: 01801 BUSINESS PHONE: 5086705999 MAIL ADDRESS: STREET 1: 101 BILLERICA AVENUE STREET 2: 5 BILLERICA PARK CITY: NORTH BILLERICA STATE: MA ZIP: 01801 10QSB 1 FORM 10-QSB 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, 1998. -------------- ( ) 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 of (I.R.S. Employer Identification No.) incorporation or organization) 101 Billerica Avenue, 5 Billerica Park, North Billerica, MA 01862 - ------------------------------------------------------------ ---------- (Address of principal executive offices) (Zip Code) (978) 670-5999 -------------------------------------------------- (Registrant's telephone number, including area code) 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 May 6, 1998 ------- -------------------------- Common Stock, $.01 par value per share 3,574,941 * Series A Convertible Preferred Stock, $.01 par value per share 315,238 *Common stock assuming conversion of the outstanding Series A convertible preferred shares equals 4,359,370 shares. Transitional Small Business Disclosure Format: Yes No X ----- ----- XEROGRAPHIC LASER IMAGES CORPORATION INDEX PAGES PART I FINANCIAL INFORMATION Item 1 Financial Statements Balance Sheets as of March 31, 1998 (unaudited) and December 31, 1997 4 Statements of Operations for the three month period ended March 31, 1998 and 1997 (unaudited) 5 Statements of Cash Flows for the three month period ended March 31, 1998 and 1997 (unaudited) 6 Notes to Financial Statements (unaudited) 7 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 8-10 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 Signature 12 Xerographic Laser Images Corporation Balance Sheets
March 31 December 31 1998 1997 ---------- ----------- ASSETS - ------ Current assets: Cash $39,832 $112,401 Accounts receivable 21,627 3,667 ---------- --------- Total current assets 61,459 116,069 ---------- --------- Property and equipment, net 15,465 16,478 Other assets 3,432 3,432 ---------- --------- Total assets 80,356 135,979 ========== ========= LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) - ---------------------------------------------- Current liabilities: Notes payable $110,000 $ - Accounts payable 363,019 237,873 Deferred revenue - 10,000 Accrued expenses 276,914 286,216 Accrued payroll 85,133 101,705 Current portion of capital leases 11,731 11,731 ---------- --------- Total current liabilities 846,798 647,525 ---------- --------- Capital lease obligations 1,049 5,176 Subordinated notes payable 283,688 283,688 ---------- --------- Total liabilities 1,131,535 936,390 Stockholder's equity (deficit) Series A Preferred stock, $.01 par value; authorized 1,000,000 shares; 315,238 issued and outstanding at March 31, 1998 and December 31, 1997 3,152 3,152 Common stock, $.01 par value; 30,000,000 shares authorized: 3,574,941 issued and outstanding at March 31, 1998 and 2,039,310 outstanding at December 31, 1997. 35,749 20,393 Additional paid-in capital 8,484,033 8,438,278 Accumulated deficit (9,574,114) (9,262,234) ---------- ---------- Total stockholders' equity (deficit) (1,051,180) (800,411) ---------- ---------- Total liabilities and stockholders' equity $80,356 $135,979 ========== ========== The accompanying notes are an integral part of the financial statements.
Xerographic Laser Images Corporation Statements of Operations
Three Months Ended Three Months Ended March 31 March 31 1998 1997 (unaudited) (unaudited) ----------------- ------------------ Product revenues $2,739 $20,054 Contract and license revenues 141,603 241,667 ---------- ---------- Total revenues 144,341 261,721 Cost and expenses: Cost of product revenues 2,052 10,795 Cost of contract and license revenues 34,923 40,932 Research and development 158,401 112,491 Sales and marketing 41,707 7,330 General and administrative 211,342 145,268 ---------- ---------- Total cost and expenses 448,426 316,816 Loss from operations (304,085) (55,095) Other income 100 4,739 Net interest expense 7,810 1,725 Provision for Taxes 85 - ---------- ---------- Net loss ($311,880) ($52,081) ========== ========== Net loss per common share - basic ($0.11) ($0.03) Weighted average common and common equivalent shares outstanding-basic 2,807,125 1,778,646 The accompanying notes are an integral part of the financial statements.
Xerographic Laser Images Corporation Statements of Cash Flows
Three Months Ended Three Months Ended March 31 March 31 1998 1997 (unaudited) (unaudited) ------------------ ----------------- Cash flows from operating activities: Net loss ($311,880) ($52,081) Adjustments to reconcile net loss to net cash Used in operating activities: Depreciation and amortization 1,013 4,678 (Increase) decrease: Accounts receivable (17,960) 13,743 Increase (decrease): Accounts payable 125,147 (3,142) Deferred revenues (10,000) (41,667) Accrued expenses (9,302) (94,929) Accrued payroll (16,571) - Accrued severance costs - (22,144) ---------- ---------- Net cash used in operating activities (239,553) (195,542) ---------- ---------- Cash flows from financing activities: Issuance of common stock 61,111 - Payments under capital lease obligations (4,127) (2,933) Issuance of Note Payable 110,000 - ---------- ---------- Net cash provided (used) in investing activities 166,984 (2,933) ---------- ---------- Net increase (decrease) in cas (72,569) (198,475) Cash at beginning of period 112,401 219,723 ---------- ---------- Cash at end of period $39,832 $21,248 ========== ========== Supplemental disclosure of cash flow information: Cash paid for interest $7,810 $1,725 The accompanying notes are an integral part of the financial statements.
XEROGRAPHIC LASER IMAGES CORPORATION Notes to Financial Statements March 31, 1998 1. Nature of Business and Basis of Presentation --------------------------------------------- In the first quarter of 1998, the Company continued to focus on the design and development of ASIC and VHDL (Virtual Hardware Description Language) enhancement product offerings for the OEM printer and printer controller market. During 1997 the Company delivered VHDL modules to OEMs and introduced the XLI- 2050 ImageChip ASIC (Application Specific Integrated Circuit) that incorporates all of the Company's current enhancement technology into one chip design. The Company hopes to increase revenue through additional licensing of the ImageChip technology and through sales of its ImageChip ASICs to OEMs. The Company's strategy is to become the primary distributor of its ImageChip ASICs rather than solely a licensor of the ImageChip technology. The Company believes that its revenues and gross margins will ultimately be greater from chip sales than from royalties earned pursuant to technology licenses. Production quantities of the ImageChip are planned for the second half of 1998. The Company also plans to add additional engineering resources in 1998 in order to meet the demands from existing and anticipated OEM agreements. This will result in increased research and development costs that may negatively affect cash flow. On January 29, 1998 the Company entered into a Plan of Reorganization and Agreement of Merger by and among Oak Technology, Inc., Pixel Magic, Inc., and OTI Acquisition Corporation ("OTI") pursuant to which OTI will be merged with and into the Company and the Company will become a wholly-owned subsidiary of Pixel Magic, Inc., which is a wholly-owned subsidiary of Oak Technology, Inc. The ASIC products of Pixel Magic and XLI are complementary to each other and are targeted to the same printer/digital copier market. The Company believes that the merger should enhance XLI's ability to bring its products to the OEM market. The merger is subject to the approval of the Company's shareholders. During the first quarter or 1998, the Company continued working with a licensee on the design and development for a scaling/enhancement ASIC for flat-panel displays. Although this technology is an extension of the Company's Technology outside the printer market, there are no current plans to market such a product and, if done so, there is no assurance that this product would have market acceptance. In February 1998, the Company entered into a license agreement with QMS, Inc., (a provider of printing products to end users and printer controllers to OEMs) for the purchase of ImageChips. Including the agreement with QMS, the Company has entered into seven license agreements for its ImageChip Technology to date. 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, 1997, which are contained in the Company's 1997 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 - --------------------- The Private Securities Litigation Reform Act of 1995 contains safe harbor provisions regarding forwarding-looking statements. Except for historical information contained herein, the matters discussed in this section contain potential risks and uncertainties, including, without limitation, risks related to the ability of XLI (hereinafter referred to in this section as the "Company") to successfully develop, test, product and market its proposed products, identify and attract partners to help market its proposed products, identify and attract partners to help commercialize the Company's products; attract and retain key employees; obtain meaningful patent protection to cover the Company's proprietary technology; raise capital for future operations and commercialization of its products; and successfully respond to technological changes in the marketplace. The Company will need to complete the pending merger to attract partners in order to exploit its products, and there can be no assurance that the Company will be successful in completing such transactions. Additional information regarding potential factors which could affect the Company's financial results are included in the Company's public filings with the Securities and Exchange Commission. Results of Operations 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 1998, which ended March 31, 1998 were $144,341, a decrease of approximately 45% from 1997's first quarter revenues of $261,721. Product revenues were $2,739 and contract and license revenues were $141,603 for the first quarter of 1998, as compared to product revenues of $20,054 and contract and license revenues of $241,667 for the same period in 1997. The Company recorded a net loss of $311,880 for the first quarter of 1998, as compared to a net loss of $52,081 for the same period in 1997. The increase is attributable primarily to the decrease in contract and license revenues of $100,064 and the increase in cost and expenses of $131,610. The Company's gross margin on total revenue was 75% for the first quarter of fiscal year 1998 compared to 81% for the same period in 1997. The decrease in gross margin was mostly due to the decrease in contract and license revenue of $100,064. Research and development costs for the three month period ended March 31, 1998 were $158,401 or approximately 110% of revenues as compared to $112,491 or approximately 43% of revenues for the three month period ended March 31, 1997. The increase in 1998 of $45,910 was primarily attributable to the hiring of additional personnel and to associated expenses to support the increase in ASIC and VHDL development activity. The Company's ongoing engineering emphasis continues to be on the development of image enhancement ASICs. Selling and marketing expenses for the three month period ended March 31, 1998 were $41,707 or approximately 29% of revenues as compared to $7,330 or approximately 3% of revenues for the three month period ended March 31, 1997. The increase of $34,377 is primarily attributable to the hiring of a vice president of marketing and sales in late 1997 and expenses associated with the introduction of the XLI-2050 ImageChip. General and administrative expenses for the three month period ended March 31, 1998 were $211,342 or approximately 147% of revenues as compared to $145,268 or approximately 50% of revenues for the three month period ended March 31, 1997. The increase of $66,074 is primarily attributable to costs incurred in connection with the proposed merger with OTI Acquisition Corporation. Liquidity and Capital Resources At March 31, 1998 the Company had current assets of $61,459, current liabilities of $846,798 and cash of $39,832, resulting in a working capital deficit of $785,339. For the quarter ended March 31, 1998, the Company had a negative cash flow from operations of $239,553. In connection with the Merger Agreement, XLI and Oak entered into a Promissory Note and Agreement on April 24, 1998 (the "Note and Agreement") pursuant to which Oak Technology, Inc. ("Oak") agrees to advance to XLI such amounts as XLI may request for working capital purposes, up to $500,000. XLI promises to pay to Oak the principal sum of $500,000, or such lesser principal amount, as the case may be, at an interest rate equal to the Prime Rate plus one-half percent. All principal and accrued interest shall be due on August 31, 1998. If the Reorganization Agreement has not closed on or before August 31, 1998, then the principal and accrued interest shall at the option of the Lender either convert to a prepaid royalty under that Technology License and Supply Agreement entered into on October 15, 1997 by and between Pixel Magic, Inc., a Massachusetts corporation and wholly owned subsidiary of Lender, and Borrower or be immediately due and payable. Lender shall provide written notification to Borrower on August 31, 1998, indicating the form of repayment it has chosen. The Company plans to finance its operations from its available cash and through the working capital line provided by Oak. Capital Expenditures The Company does not have any material commitments for capital expenditures at this time. 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 exhibit is filed herewith: Exhibit Number Title -------------- ------- 10.47 Promissory Note and Agreement dated April 24, 1998 between Oak Technology, Inc. and XLI (b) Form 8-K filed by the Company on February 3, 1998 to announce the signing of the Plan of Reorganization and Agreement of Merger by and among Oak Technology, Inc., Pixel Magic, Inc., OTI Acquisition Corporation and Xerographic Laser Images Corporation. 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: May 13, 1997 By: /s/ James L. Salerno ------------ ----------------------------- James L. Salerno, Chief Financial Officer (Principal Financial and Accounting Officer) EX-10.47 2 PROMISSORY NOTE AND AGREEMENT Exhibit 10.47 PROMISSORY NOTE AND AGREEMENT ("Note and Agreement") $500,000.00 Sunnyvale, California April 24, 1998 FOR VALUE RECEIVED, Xerographic Laser Images, a Delaware Corporation ("Borrower"), hereby promises to pay to the order of Oak Technology, Inc., a Delaware corporation ("Lender"), the principal sum of FIVE HUNDRED THOUSAND DOLLARS ($500,000.00) or such lesser amount as shall equal the outstanding principal amount of all sums advanced to Borrower hereunder and to pay interest on the outstanding balance of said sum at a rate per annum equal to the Prime Rate (as defined below) plus one-half percent (0.50%), such rate of interest to change as the Prime Rate shall change. The "Prime Rate" shall be, for any day, the rate of interest in effect for such day as published by the Federal Reserve Board from time to time in its Statistical Release H.15 (519) under the heading "Bank prime loan". Any change in the Prime Rate shall take effect at the opening of business on the day specified in the publication of such change. All principal and accrued interest hereunder shall be due and payable on August 31, 1998. If the Reorganization Agreement (defined below) has closed on or before August 31, 1998, then the principal and accrued interest shall become an intercompany debt and be eliminated in the purchase accounting related to the Reorganization Agreement and this Note and Agreement shall terminate. If the Reorganization Agreement has not closed on or before August 31, 1998, then the principal and accrued interest shall at the option of the Lender either convert to a prepaid royalty under that Technology License and Supply Agreement entered into on October 15, 1997 by and between Pixel Magic, Inc. a Massachusetts corporation and wholly owned subsidiary of Lender, and Borrower or be immediately due and payable. Lender shall provide written notification to Borrower on August 31, 1998, indicating the form of repayment it has chosen. All computations of interest under this Note and Agreement shall be based on a year of 365 or 366 days, as applicable, for actual days elapsed. In the event that, contrary to the intent of Lender and Borrower, Borrower pays interest under this Note and Agreement and it is determined that such interest rate was in excess of the then legal maximum rate, then that portion be deemed a payment of principal and applied against the principal then due under this Note and Agreement. Reorganization Agreement: This Note and Agreement is being entered into in connection with the Plan of Reorganization and Agreement of Merger dated as of January 29, 1998 (as the same may be amended, restated, supplemented or otherwise modified pursuant to the terms thereof, the"Reorganization Agreement") by and between Borrower, Lender, OTI Acquisition Corporation and certain party stockholders of Borrower. Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Reorganization Agreement. Conditions to Advances, Use of Proceeds, Covenants: Amounts shall be advanced to Borrower under this Note and Agreement solely in accordance with the terms and conditions set forth in this Note and Agreement, including Schedule A attached hereto and incorporated herein by this reference. Borrower shall use the proceeds of any amount advanced under this Note and Agreement solely for its normal working capital in the ordinary course of business. Until the termination of this Note and Agreement or payment in full by Borrower of all amounts outstanding under this Note and Agreement, Borrower agrees that it shall comply with and duly perform all of its covenants, obligations and agreement set forth in the Reorganization Agreement, which are hereby incorporated herein by reference as if fully set forth herein. Borrower agrees to pay on demand: (i) all reasonable costs and expenses of Lender, and the reasonable fees and disbursements of counsel, in connection with the enforcement or attempted enforcement of, and preservation of any rights or interests under, this Note and Agreement, including in any out-of-court workout or other refinancing or restructuring or in any bankruptcy case. Any amounts payable to Lender pursuant to this paragraph if not paid upon demand shall bear interest from the date of such demand until paid in full, at the rate of interest set forth herein in respect of principal outstanding hereunder. If at any time any provision of this Note and Agreement is or become illegal, invalid or unenforceable in any respect, neither the legality, validity nor enforceability of the remaining provisions shall in any way be affected or impaired thereby. Any term, covenant, agreement or condition of this Note and Agreement may be amended or waived if such amendment or waiver is in writing and is signed by Borrower and Lender. No failure or delay by Lender in exercising any right or remedy hereunder shall operate as a waiver thereof or of any other right or remedy nor shall any single or partial exercise of any such right or remedy preclude any other further exercise thereof or of any other right or remedy. The acceptance at any time by Lender of any past due amount hereunder shall not be deemed to be a waiver of the right to require prompt payment when due of any other amounts then or thereafter due and payable. Unless otherwise specified in such waiver or consent, a waiver of consent given hereunder shall be effective only in the specific instance and for the specific purpose for which given. This Note and Agreement shall be binding upon and inure to the benefit of Borrower, Lender, and their respective successors and permitted assigns, except that Borrower may not assign or transfer any of its rights or obligations under this Note and Agreement without the prior written consent of Lender. Nothing expressed in or to be implied from this Note and Agreement is intended to give, or shall be construed to give, any person or entity, other than the parties hereto and their permitted successors and assigns hereunder, any benefit or legal or equitable right, remedy or claim under or by virtue of this Note and Agreement or under or by virtue of any provisions herein. The words "hereof", "herein", "hereunder" and similar words refer to this Note and Agreement as a whole (including the Schedules attached hereto) and not to any particular provision of this Note and Agreement. Borrower hereby waives presentment, demand, protest, notice of dishonor and all other notices, except as expressly provided herein, any release or discharge other than actual payment in full hereof. This Note and Agreement shall be construed in accordance with and governed by the laws of the State of California, excluding conflict of laws principles. All notices and other communications hereunder shall be given as provided in Section 12.9 of the Reorganization Agreement. IN WITNESS WHEREOF, the undersigned duly authorized officer of Borrower has executed this Note and Agreement as of the date set forth above. By: /s/ Anthony D. D'Amelio -------------------------- Name: Anthony D. D'Amelio Title: President & CEO, XLI By: /s/ William L. Siddall ------------------------- William L. Siddall Vice President, Operations Pixel Magic, Inc. EX-27 3 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1998 MAR-31-1998 39,832 0 21,627 0 0 61,459 490,704 475,239 80,356 846,798 0 0 3,152 35,749 0 80,356 2,739 144,341 2,052 36,975 411,450 0 7,810 (304,085) 0 (304,085) 0 100 0 (311,880) (.11) (.11)
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