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






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                      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