SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

                 ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                   For the Fiscal Year ended December 31, 1999
                       Commission file number 333-05112-C

                                 XOX CORPORATION
           (Name of small business issuer as specified in its charter)


                  Delaware                                        93-0898539
(State or jurisdiction of incorporation or organization)      (I.R.S. Employer
                                                             Identification No.)


               7640 West 78th Street, Bloomington, Minnesota 55439
                                 (612) 946-1191
          (Address and telephone number of principal executive offices
                        and principal place of business)

Securities registered pursuant to Section 12(g) of the Act:
(1) Units, each unit consisting of one share of Common Stock, $.025 par value,
and one Redeemable Common Stock Purchase Warrant.

(2) Common Stock, $.025 par value.

(3) Redeemable Common Stock purchase warrants.

Check whether the Issuer (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 Issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes _X_ No ___

Check if disclosure of delinquent filers in response to item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of Issuer's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. ____

The Issuer's revenues for its most recent fiscal year were $2,621,085.

As of February 18, 1999, the Issuer had 3,078,068 shares of common stock, $.025
par value, outstanding. The aggregate market value of such common stock,
excluding outstanding shares beneficially owned by affiliates, as of February
18, 1999, (based on the average closing bid and asked prices as of February 18,
1999 as reported by the OTC Bulletin Board), was approximately $5,023,903.

DOCUMENTS INCORPORATED BY REFERENCE: None

Transitional Small Business Disclosure Format (check one): Yes ___ ; No _X_

<PAGE>


                                     PART I

     This Form 10-KSB contains certain forward-looking statements. For this
purpose, any statements contained in this Form 10-KSB that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, words such as "may," "will," "expect," "believe," "anticipate,"
or "continue" or the negative or other variation thereof or comparable
terminology are intended to identify forward-looking statements. These
statements by their nature involve substantial risks and uncertainties, and
actual results may differ materially depending on a variety of factors, not
limited to, but including the risk factors set forth in the "Risk Factors"
section of the Company's Registration Statement on Form SB-2 (File No.
333-05112-C).

ITEM 1. DESCRIPTION OF BUSINESS

(a) BUSINESS DEVELOPMENT

     XOX Corporation (the "Company" or "XOX" [pronounced zocks]) designs,
develops and markets proprietary computer software for creating virtual mock-ups
or models that capture the complete geometry of objects or spatial areas of
interest. This model can then be used for visual analysis or to simulate
physical phenomena in a diverse set of disciplines including geosciences and
medical applications.

     Uses of geometric computing software include, but are not limited to,
Geophysical software (such as oil-field modeling), computer aided design
("CAD"), computer aided engineering ("CAE"), geographical information systems
("GIS"), medical image processing, industrial and graphics arts design,
animation as well as scientific visualization and analysis.

     The Company was incorporated under the laws of the state of Delaware on
September 16, 1985.

     For the past several years, the Company has focused a significant portion
of its development and marketing resources in the area of Geosciences and the
creation of a PC based product. The Company believes that this market offers
good opportunities for customer revenues in the next two years and beyond,
especially as the industry converts more to PC's for greater flexibility, more
profitability and greater ease of operations.

     Over the last year, the Company introduced its first end user product in
the geoscience market, SHAPES PROSPECTOR(TM). SHAPES PROSPECTOR is a Windows
Based PC application designed to be easy to use and affordably priced. The
Company also continued to service its contract with Schlumberger GeoQuest
("Schlumberger") for support, development and maintenance services. Over the
course of the upcoming year, the Company intends to actively pursue additional
new end user products.


(b) BUSINESS OF THE COMPANY

PRODUCTS

The Company receives its revenues from the marketing of three products:
(1)  ShapesProspector(TM), an end user product for geologists.
(2)  SHAPES(R), a core geometric modeling technology which is applicable to
     diverse industries.
(3)  Consulting and support services targeted at current and potential users of
     SHAPES functionality.

                                       2
<PAGE>


These three products are briefly described below

     SHAPESPROSPECTOR

     In September of 1999, the Company released its first end user product
ShapesProspector(TM). This was developed for geologists to create 3D earth
models from well-log and seismic interpretations using 2D and 3D modeling
techniques. With ShapesProspector, users can easily create complex structural
models for analysis and presentation purposes.

     SHAPES

     The Company's principal technology, the SHAPES(R) Geometric Computing
System ("SHAPES"), is licensed to software applications developers in the
geosciences, medical, and other industries. Such licensees imbed SHAPES within
their application software as a sub-module that handles geometric modeling needs
required by the application.

     SHAPES and associated modules perform most of the work related to modeling
and analyzing the geometry of areas or objects of interest in the computer.
Since its inception, SHAPES has been distinguished from other competing
technologies in that it is able to handle much more complex modeling
requirements when compared to the surface- or solids-modeling systems that exist
in the CAD and other industries. In the CAD industry, for example, vendors have
used technologies developed in the late 1970's and early 1980's and a subset of
geometric shapes (called B-splines or NURBs) for the purpose of designing
manufactured solid objects, like automobile parts, airplane parts, etc. These
technologies are less useful for modeling objects in the geosciences or medical
domains. Similarly, technologies in medical or geosciences domains have used
ad-hoc techniques for creating and working with geometry that do not allow
sophisticated analysis of the relations between the geometric objects
(topology). SHAPES, on the other hand, has since its inception been based on a
more general model for geometry and topology that allows it to function
efficiently as enabling technology for a variety of areas ranging from CAD/CAM
and geosciences to medical modeling.

     Based on feedback received from its customers, the Company maintains that
these modelers are limited in four important areas where the Company believes
its product excels in contrast to competing products:

(1) Retention of material properties: SHAPES models can retain properties like
the porosity and density of the parts of the human body for medical
applications, or similar measurements for the elements of an earth model, such
as distinguishing oil, water, gas, shale and rock.

(2) Precise and robust intersections. SHAPES has excelled in modeling complex
intersections like those that occur with earth layers intersecting faults and
salt domes.

(3) N-dimensional and mixed-dimensional modeling. This is a unique capability of
SHAPES used, for example, to intersect one-dimensional struts to a
three-dimensional platform for the CAD-like design of an offshore oilrig. This
capability is extended to the modeling of boreholes inserted into a 3D-earth
model or a surgical instrument intrusion into the 3D model of the human body.

(4) The ability to model ill-formed data. CT scans in the medical field and
seismic data in geosciences create fuzzy data. Using industry supplied methods
for identifying points of interest, the Company's product converts this data
into more robust and complete models, that allow the users to look at and feel
areas of interest in great detail, and to simulate the impact of change.

The Company realizes revenues from licensing of the SHAPES development system to
the licensees as well as royalties when SHAPES based applications are shipped to
end-users by such licensees.

                                       3
<PAGE>


Geoscience Modules

     Over the past year, the company has started to move beyond its
"core-technology" focus and started to develop products and modules that more
directly address some of the modeling needs of end-users in the GeoScience
industry. The first of these products, ShapesProspector(TM), leverages the
Company's SHAPES core technology by pre-packaging much of the SHAPES
functionality that GeoScience application developers would desire. Such
functionality includes built in notions of faults, horizons and unconformities,
and standard ways of constructing these within the workflow most often used by
geologists.

     The Company expects to realize revenue from such modules in two ways:
          (1)  Direct sales to end users through its own sales force.
          (2)  Licensing fees and/or ongoing royalties for resold imbedded
               copies.

Support and Consulting Services

     XOX provides geometry consulting and custom development services to clients
in various industry segments. Such services relate to incorporating relevant
parts of the company's SHAPES product or its GeoScience specific modules into
its clients' products. These services can range in scope from telephone hot-line
support to custom development of a complete application on contract from the
client. Such services have the added benefit of expediting the deployment of
SHAPES based applications through partners and the flow of royalty revenues to
XOX therefrom.

     Support and consulting services from the company are available not only to
customers in the geosciences, but other industries such as medical and
GIS/remote-sensing as well.

Markets and Applications

     Until the early 90's, the company focused its marketing efforts principally
on software developers in the CAD market, achieving modest acceptance. In the
recent years, the Company has explored market areas other than CAD, including
Oil and Gas Exploration and Production (E&P), Geographical Information Systems
and Remote sensing, Medical Imaging, Scientific Visualization and Analysis
software.

     Of the above areas, the Company believes its strongest market is currently
represented by the Oil and Gas E&P. This is because the scope of the Company's
offerings in this area have matured over the recent years to cover a vast
majority of earth modeling requirements. In addition, this industry is currently
actively pursuing a move to 3D modeling of the type provided by the Company's
products. For these reasons, the company is currently pursuing technology
licensing as well as direct end-user product marketing opportunities in the oil
and gas E&P industry.

     The Company's other marketing efforts are currently geared towards the
medical and GIS/Remote-sensing markets. In both of these areas, the company is
exploring opportunities where it can leverage its proprietary modeling
technology to deliver end-user products in partnership with companies that have
identified strong product opportunities in their respective domains.

Geosciences - Oil and Gas E&P

     The Geosciences industry represents the largest number of active developers
of SHAPES-based products, including Shell Oil, Schlumberger GeoQuest and Seismic
Micro Technologies. In addition, the Company's ShapesProspector product is being
directly marketed to users within oil-companies.

     The end-users of these products, principally oil exploration and oil
producing companies, invest heavily in computer technology for its aid in
locating new oil fields and in enhancing the production and extraction of
petroleum from existing oil fields. The recent years have seen a shift in this
industry towards greater acceptance and accelerated incorporation of 3D
technology into production use. Key standards committees and consortiums such as
POSC and OpenSpirit have initiated efforts towards definition and propagation of
interoperability specifications that include 3D geometry.

                                       4
<PAGE>


     The company sees a need for its robust earth modeling technology and
expertise not only with larger software vendors such as Schlumberger but also
some of the smaller applications vendors who need to upgrade their offerings to
include 3D facilities. Smaller vendors are also more likely to use XOX
consulting to aid in the development of their SHAPES based product.

     The flexibility of the SHAPES system in creating 3D earth models allows its
users to build models easily from a variety of data-sources and through a
variety of different tools and procedures. The resulting 3D model provides
unprecedented completeness of information and thus constitutes a very key piece
of the core information needed to drive all phases of work in the oil and gas
industry starting from exploration to planning and recovery.

     One of XOX's key customers, Schlumberger, is using SHAPES to create 3D
earth models starting from processed seismic data, and then creating a complete
earth model including property descriptions at each point in the model. The
resulting model is expected to be used to drive procedures for locating
reservoirs and simulating oil flow during production. This product called
Property 3D was released in early March 1999 by Schlumberger.


Medical Imaging and Analysis

     Similar to the Geosciences industry, the Medical Imaging and Analysis
industry is moving towards computer visualization and simulation to aid all
stages of the process starting from diagnosis through to surgical or other
clinical treatments. Many of the data-gathering techniques are similar in nature
to those in the geosciences. For example, CAT scans or MRI images essentially
use similar underlying technologies and produce similar results as seismic data
gathering techniques in geosciences. Further, a variety of factors are moving
the industry to find minimally invasive techniques for diagnosis and treatment.
This requires as complete as possible, information of the 3D description of
specific patient anatomies, sometimes with clearly segmented information for the
individual parts of treatment being studied.

     The Company believes its technology could have broad application within
this market, including the use of CT (Computed Tomography) and MRI (Magnetic
Resonance Imaging) scans to develop sophisticated models of portions of the
human body for radiation therapy planning, orthopedic fittings, development of
surgical strategies, and assistance in robotic surgery. The ability to look at
parts of the human body under different stress conditions has significance in
the medical industry. As an example, using SHAPES-based products from two of the
Company's customers, researchers at Stanford University created computer models
of a series of real blood vessels and arteries. They then simulated the effect
of moderate exercise on a clinically observed plaque deposit within an artery.
They were able to conclude that the flow through the artery was clearly less
impeded with the accelerated flow resulting from moderate exercise. Although the
Company's efforts in this industry are currently only exploratory in nature, the
Company hopes to be able to market its enabling technology to medical
application developers because of the unique capabilities of SHAPES.

Other Potential Markets

     There are several other industries where the Company believes its
technology has future potential - for example, remote sensing for GIS. The
Company intends to target those industries where the need is the most immediate,
the returns are likely to be the greatest, and where it will have the
opportunity to deliver potentially dominant technology.

STRATEGY

        The Company is focusing on the two-pronged strategy of (1) exploiting
niche opportunities to provide products directly to end-users through direct
sales, and (2) seeking joint venture partners for collaboration in delivering
state-of-the-art products based on its advanced SHAPES technology for a variety
of areas.

                                       5
<PAGE>


In addition, the Company is providing products directly to the end-user markets
where it locates opportunities. This has the benefit of creating name
recognition, creating a market-pull for partnerships and partnered products and
helping the Company better guide its technology through direct interaction with
end-users.


     The joint-venturing or partnering approach differs from its original OEM
approach in that as a partner in a joint venture, the Company partakes more
heavily in defining, scheduling and developing the SHAPES based end product.
This expedites deployment of SHAPES based products and provides XOX with higher
revenues on a more predictable schedule.


CUSTOMERS

     Over 20 software development entities have licensed the SHAPES core
technology for incorporation into larger software applications. These include
OEMs such as Schlumberger GeoQuest, partners such as Seismic Micro Technologies,
Evans and Sutherland and universities such as Stanford and RPI.

     For the fiscal year ended December 31, 1999, revenues from Schlumberger
Corporation ("Schlumberger") were $2,324,716. Shell International Exploration &
Production B.V ("Shell Oil") contributed another $229,500. This represents
approximately 97% of 1999 revenues. The Company currently anticipates that the
same companies could account for a significant portion of its annual revenue in
2000.

     In January 2000 the Company announced that its first end-user
product-SHAPES PROSPECTOR(TM) had exceeded internal sales projections and that
the industry response has been very favorable. The Company reported sales of
more than 10 PC-based geometric earth modeling tool kits to various oil and gas
exploration companies based throughout the US and Canada.

MARKETING AND SALES

     The Company has been marketing its products in North America, Europe and
Asia mainly through sales effort from its corporate offices. The Company has
opened a sales office in Houston, Texas in 1999. Further, the Company hired Mr.
Tim Ryan as Vice President of Sales. Mr. Ryan has over fifteen years of
experience in geology and software sales and recently worked for Paradigm
Geophysical. Currently the sales effort is being led by the Company's Vice
President of Sales with assistance and support by the President and COO working
in conjunction with a team of sales account representatives. The sales support
staff is responsible for aiding potential customers in technical evaluation of
SHAPES as a possible core technology for the customer's software. As the Company
moves from selling to technical leaders within OEM/partner organizations to
selling directly to end-users, it is the responsibility of this group to execute
sales demonstrations to user groups at client sites and to provide pre- and
post-sales support.

LICENSE AND DISTRIBUTOR AGREEMENTS

     The Company enters into license agreements with its customers. If and when
the ShapesProspector end-user product gains momentum and acceptance in the
industry, it is hoped that revenue from ShapesProspector sales will augment the
revenue from the current Schlumberger licensing agreement. As further
partnerships and strategic alliances are formed at this point to jointly develop
end-user products, the Company believes a growing share of its overall revenue
will be contributed from such sources. License agreements provide that each
customer is entitled to utilize the Company's proprietary technology as an
end-user application or in the development of the customer's product.

                                       6
<PAGE>


COMPETITION

     For ShapesProspector, the known competition includes Petrel, Paradigm
Geophysical, Dynamic Graphics, A2D Inc., and Geographix. These competitors all
provide similar features to ShapesProspector and have an established market
share. The Company believes that ShapesProspector, as a PC based product, will
be able to provide similar functionality at a fraction of the cost of the
products being offered by the competition.


     In the geophysical market, The GoCad Research Program is the Company's
primary competitor. GoCad is a consortium based at the University of Nancy in
France, which includes several large petroleum companies and a large French
geophysical software company. The consortium's GoCad software product is
designed specifically for geophysical modeling and has significant technical
strengths in the area of surface or boundary representations, which are required
in geophysical modeling. In addition, internal development is a strong
alternative for application vendors who the Company is trying to convert into
partners.

     While many of the Company's known competitors have more experience, greater
specialization and greater financial and other resources than the Company, the
Company believes that technical abilities, functionality and design make its
product superior to those of its competitors.

RESEARCH AND DEVELOPMENT

     The Company plans to continue research and development of products, which
will allow it to more fully, exploit its technology in the Geophysical software,
Remote Sensing, which is a sub-application of Geographical Information Systems
and Medical Imaging markets. In 1998 the Company invested approximately 10
man-years in the research and development of enhancements to its geometry
modeling technology. These enhancements were in part to fulfill custom software
development commitments to Schlumberger. Efforts were also directed toward the
production of utilities and tools, which were used to stimulate potential
business partnerships. In 1999 the Company devoted approximately 13 man years
toward continued research and development of its geometry technology as well as
the development and deployment of the Company's first end user product, SHAPES
Prospector. Currently the Company is working on development of: (1) a GeoScience
well planning product for the PC environment; (2) a GeoScience property modeling
product for the PC; (3) speed and performance improvements for handling large
models; (4) a grant proposal in conjunction with Stanford University in the area
of blood flow analysis, and (5) general enhancements to the Shapes core modeling
engine.


PATENTS AND PROPRIETARY TECHNOLOGY

     The Company relies on patents, patent applications, trademark, copyright
and trade secret laws, employee and third party non-disclosure agreements and
other methods to protect its proprietary rights. The Company currently holds two
United States patents relating to intersection algorithms and one patent
approved for issuance relating to the microtopology module. There can be no
assurance any future patent applications will be granted or that any current or
future patent, regardless of whether the Company is an owner or a licensee of
such patent, will not be challenged, invalidated or circumvented or that the
rights granted thereunder or under licensing agreements will provide competitive
advantages to the Company. Management of the Company believes that the Company's
technology is further protected by the knowledge, experience, and creativity of
the Company's research and development staff, which will enable the Company to
develop new technologies in an industry characterized by rapid technological
change. However, there can be no assurance that competitors may not successfully
duplicate the Company's proprietary software by their own research efforts or
that the Company will be able to retain (or replace) personnel important to its
research and development efforts.

     The Company's success is dependent on protecting its proprietary software
and intellectual property rights, especially the computer algorithms that allow
the Company's products to process geometric data with the generality, speed,
reliability, and efficiency required in the computer marketplace, and believes
such rights are of critical importance to the Company. Thus, it is the Company's
policy, whenever possible, to file for patents, copyrights, and trademarks and
to aggressively pursue perceived infringements of its technology.

                                       7
<PAGE>


OTHER

     The Company is not a manufacturer, and as such, there are no raw materials
or principal suppliers to be concerned with. The use of magnetic media, tapes,
diskettes, "chips" or transmitting the software via telecommunications is common
with all software companies. There are currently no domestic government
approvals or regulations, which affect the marketing of the company's existing
or future software products. However, in the event of any international sale of
its products, the Company would likely be subject to various domestic and
foreign laws aimed at regulating such export and export-related activities.
There are no current environmental laws believed to be germane to the Company's
business.

EMPLOYEES

     As of the date of this Form 10-KSB, the company employs 16 full time
people. No employee of the Company is represented by a labor union and the
Company is not subject to a collective bargaining agreement. All key employees
of the Company are covered by agreements containing confidentiality and
non-compete provisions.

ITEM 2. DESCRIPTION OF PROPERTY

     The Company currently leases approximately 4,332 square feet of commercial
office space at 7640 West 78th Street, Bloomington, Minnesota 55439. The lease
has a term through the year 2000. The annual rental payment on these premises is
approximately $29,680 plus a sharing of expenses for the term of the lease. The
Company currently does not maintain any investment in real estates or related
industries.

ITEM 3. LEGAL PROCEEDINGS

     To the best of its knowledge, the Company is not involved in any pending or
threatened litigation.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None.



                                    PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

A. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Since September 11, 1996 (the date of the Company's initial public offering of
its Units, each Unit consisting of one share of Common Stock, $.025 par value,
and one Redeemable Common Stock Purchase Warrant) and for the period which
followed, the Company's Units have traded in the over-the-counter market and
have been quoted on the NASDAQ SmallCap Market under the symbol XOXCU. On or
about March 11, 1997, the Common Stock and Redeemable Warrants became separately
tradable and were approved for listing on the NASDAQ SmallCap Market under the
symbols XOXC and XOXCW, respectively. The following table sets forth, for the
fiscal year 1998 and 1999 calendar quarters indicated, the high and low bid
prices for the Company's Common Stock as reported by NASDAQ. Such quotations
represent interdealer prices, without retail markup, markdown or commission, and
do not necessarily represent actual transactions.

                                       8
<PAGE>


                                                 HIGH                  LOW

1998
First Quarter                                   $2.187                $1.250


Pending satisfaction of certain listing conditions of NASDAQ Listing
Qualifications Panel, effective February 12,1998, the Company's securities were
identified with a fifth character "C" ("conditional") appended to its symbol. On
March 31,1998, the Company informed the NASDAQ SmallCap Market Inc. that it
would be unable to satisfy the conditions for continued listing on the NASDAQ
SmallCap Market imposed by the NASDAQ Listing Qualifications Panel. As a result,
the Company's securities were delisted from trading on the NASDAQ SmallCap
Market and are now quoted on the OTC Bulletin Board. The following table sets
forth periods indicated, for the high and low bid prices for the Company's
Common Stock as reported by OTC Bulletin Board. Such quotations represent
interdealer prices, without retail markup, markdown or commission, and do not
necessarily represent actual transactions.

                                                 HIGH                  LOW
1998
Second Quarter                                  $1.750                $1.187
Third Quarter                                   $3.500                $1.500
Fourth Quarter                                  $1.875                $1.000

1999
First Quarter                                   $1.250                $0.875
Second Quarter                                  $1.310                $0.875
Third Quarter                                   $2.870                $1.310
Fourth Quarter                                  $2.500                $1.870

2000
First Quarter (as of February 18, 2000)         $2.625                $2.375

     On November 25, 1997, the Company's Board of Directors approved the private
placement of up to 100,000 shares of the Company's unregistered common stock to
members of the Company's Board of Directors at a price of $1.50 per share (the
"Private Placement"). Each member of the Board of Directors was offered the
ability to purchase his proportional share of the Private Placement. Messrs.
Steven Liefschultz and Bernard Reeck each agreed to participate in the Private
Placement, with each purchasing 50,000 shares of such common stock. The total
offering price for the Private Placement was $150,000, and the securities were
sold pursuant to exemptions under Sections 4(2) and 4(6) of the Securities Act
of 1933, as amended, as well as pursuant to Rules 504 and 506 of Regulation D.

     As of February 18, 2000, there were (a) 2,975,346 shares of common stock
outstanding, held of record by approximately 182 registered shareholders, (b)
outstanding options to purchase an aggregate of 858,404 shares of Common Stock,
and (c) outstanding warrants to purchase an aggregate of 161,022 shares of
Common Stock. The Company has not declared or paid any cash dividends on its
Common Stock since its inception and does not intend to pay any dividends for
the foreseeable future.

                                       9
<PAGE>


ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

RESULTS OF OPERATIONS

FISCAL YEAR 1999 COMPARED TO FISCAL YEAR 1998

     Net revenues for fiscal year 1999 increased approximately 17% to $2,621,085
from net revenues of $2,241,389 realized in fiscal year 1998. The primary reason
for the increase in net revenues is attributable to revenues earned from certain
agreements the Company entered into with GeoQuest, a division of Schlumberger
Technology Corporation (The "Schlumberger Agreements"). The Schlumberger
Agreements provide for payments of approximately $5.75 million to XOX
Corporation over three years, with additional sums possible based upon potential
software sales. There is no restriction on the number of years in which XOX will
receive royalties based on the number of such software sales made by
Schlumberger. Additionally, net revenues increased due to the introduction,
during the latter part of the fourth quarter of 1999, of the Company's new end
user product, SHAPES PROSPECTOR(TM).

     The Company anticipates that geosciences will continue in fiscal year 2000
to represent the strongest niche market for providing revenues to XOX.

     1999 operating expenses increased $130,773 to $ 1,905,626 for 1999
representing a 7% increase from 1998. This was primarily due to scheduled
personnel increases and performance bonuses as well as the opening of offices in
Houston, Texas and Bangalore, India.

     Research and development expenses increased approximately 25% to $1,029,038
in 1999 representing approximately 54% of operating expenses as compared to 46%
of operating expenses in 1998. This was primarily due to the increased
development effort going into the creation of the Company's first end-user
product. (ShapesProspector)

     Selling, general and administrative expenses decreased approximately 8%
from 1998 to $876,588 in 1999 representing approximately 46% of operating
expenses as compared to 54% of operating expense in 1998. This was primarily due
to ongoing efforts to reduce administrative and non-software related operating
expenses.

     Net income was $927,955 for 1999 compared to a net income of $377,520
reported for 1998. The net income per share for 1999 before extraordinary items
was $.27 per share compared to $.12 in 1998. Net income per share for 1999
including extraordinary items was $.30 per share.

     Other income in 1999 of $130,099 consists primarily of the investment of
the surplus cash realized from the Company's 1999 earnings in money market
accounts and short-term commercial paper.

     Interest expense of $12,848 in 1999 is $22,586 less than in 1998 due to
reduction of long-term debt. The Company prepaid all outstanding long-term debt
during 1999. Long-term obligations consisted of various notes to directors,
officers, stockholders and employees of the Company with interest at prime plus
2%. During 1999, pursuant to an initiative by the Company's board of directors,
the entire remaining principal balance was repaid for $386,004 resulting in an
extraordinary gain of $110,245.

     For the year 2000, the Company believes that operating results could vary
substantially from quarter to quarter. At its current stage of operations, the
Company's quarterly revenues and results of operations may be materially
affected by the timing of the development, introduction and market acceptance of
the Company's products and its licensees' products.

LIQUIDITY AND CAPITAL RESOURCES

     Cash and cash equivalents were $1,390,415 at December 31, 1999 compared to
$1,194,397 at December 31, 1998. The Company's working capital was $1,416,604 at
December 31, 1999 compared to working capital of $963,080 at December 31, 1998.

                                       10
<PAGE>


     The Company has no remaining long-term debt, as of December 31, 1999. All
long-term debt was prepaid in the first half of 1999, as compared to long-term
debt as of December 31, 1998 of $496,249.

     The Company estimates that it will make capital expenditures in 2000 of
approximately $34,000 for computer equipment, office furniture and leasehold
improvements related to its operations in India, Houston, Texas as well as
operation at its headquarters in Bloomington, Minnesota.

     The Company estimates that its current cash balance and the cash to be
generated from customer revenues will be sufficient to fund its operations and
capital needs through second quarter 2001. At its current stage of business
development, the Company's quarterly revenues and results of operations may be
materially affected by, among other factors, development and introduction of
products, time to market, market acceptance, demand for the Company's products,
reviews in the press concerning the products of the Company or its competitors
and general economic conditions. Many of these factors are not within the
control of the Company. As a result, there can be no assurance that the Company
will be sufficiently funded through the second quarter of 2001.

     For the year 2000, in the area of Product Research and Development, the
Company's focus will remain centered on enhancements to the ShapesProspector
product. The Company also plans to continue to develop geometry kernel
improvements for the GeoScience industry. Additionally, an effort toward
developing a potential medical industry application is planned.

     For the year 2000, the Company does not anticipate any significant changes
in the number of its employees.


YEAR 2000

     In addressing the Year 2000 issue, the Company performed an internal
analysis of its primary software product (SHAPES), and assessed the readiness of
the Company's other products including its internal computer systems and third
party equipment and software for handling Year 2000 issues. The Company
confirmed that the SHAPES product is Year 2000 compliant. The Company, its
software engineers and its technical support staff also performed an extended
analysis on vendor supplied modules. While the Company cannot give any
assurances that these vendor modules will continue to be Year 2000 compliant,
the Company expects to be able to successfully address and implement any
necessary changes for continuance of Year 2000 compliance.

     The Company also addressed administrative dependence on software packages.
Management sent correspondence to its outside vendors and third party suppliers
to inquire about the Year 2000 readiness of their respective products and
services. To the extent that such vendors and suppliers could ensure Year 2000
compliance, the Company anticipates the continued use and dependence on such
third parties. However, there can be no assurance that these outside vendors and
third party suppliers will remain Year 2000 compliant, which could have an
adverse effect on the Company.

     XOX is Year 2000 compliant and realizes the impact to our customers if the
Company is unable to continue developing, maintaining, and supplying SHAPES
software. The Company has developed contingency plans in areas that could be
impacted by Year 2000 related computer failure, but has not had to execute such
plans.

     The Company has not incurred any significant expenditures associated with
becoming Year 2000 compliant. The Company did allocate internal resources to
assess and rectify the Company's internal and external dependence upon Year 2000
issues, but no other significant expenditures were required to become Year 2000
compliant. However, as management continues to monitor the Company's Year 2000
compliance, the Company may find it necessary to incur additional costs to
remain Year 2000 compliant.

                                       11
<PAGE>


ITEM 7. FINANCIAL STATEMENTS

      The following Financial Statements and Independent Auditor's Report
thereon are included herein (page numbers refer to pages in this Report on Form
10-KSB):

<TABLE>
<CAPTION>
                                                                                          Page
<S>                                                                                         <C>
Report of Independent Certified Public Accountants - Grant Thornton LLP...............    F-1

Independent Auditors' Report - Ernst & Young LLP......................................    F-2

Consolidated Balance Sheets as of December 31, 1999 and 1998..........................    F-3

Consolidated Statements of Earnings for the years ended December 31, 1999 and 1998 ...    F-5

Consolidated Statement of Stockholders' Equity for the years ended
  December 31, 1999 and 1998..........................................................    F-6

Consolidated Statements of Cash Flows for the years ended December 31, 1999 and 1998..    F-7

Notes to the Consolidated Financial Statements........................................    F-8
</TABLE>


ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

     XOX Corporation on May 18, 1999, dismissed Ernst & Young LLP at its
independent accountant. The XOX Board of Directors recommended the decision.
There were no disagreements with Ernst & Young LLP on any matter of accounting
principles or practices, financial statement disclosures, or auditing scope or
procedures.


                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16 (a) OF THE EXCHANGE ACT

(a) DIRECTORS, EXECUTIVE OFFICERS AND OTHER SIGNIFICANT EMPLOYEES


<TABLE>
<CAPTION>
                                                                                     Director
    Name                       Age      Position                                      Since
    ----                       ---      --------                                      -----
<S>                             <C>      <C>                                           <C>
Steven B. Liefschultz           51       Chairman of the Board and Director            1997
                                         (2)(3)

Bernard J. Reeck                71       Director(2)(3)                                1997

Craig Gagnon                    59       Director(1)(2)(3)(4)                          1998

Peter Dahl                      32       Director(1)                                   1998

Layton G. Kinney                66       Director                                      1999

Brian D. Zelickson              39       Director                                      2000

Mark O. Senn                    51       President and Chief Operating Officer          N/A
</TABLE>

                                       12
<PAGE>


(1) Member of the Audit Committee
(2) Member of the Compensation Committee
(3) Member of the Executive Committee
(4) Compliance Committee


STEVEN B. LIEFSCHULTZ is the Chairman of the Board and Director of the Company.
Mr. Liefschultz is also Chairman of the Remada Company, a real estate
development and management company in Minnesota. Prior to this, Mr. Liefschultz
practiced law for 12 years, specializing in commercial litigation, contract
negotiation and commercial real estate. He has extensive experience in the
development, ownership, financing and management of income real estate and other
areas of investment.

BERNARD J. REECK is a Director of the Company. Mr. Reeck is also the president
of Group Services Company, which has interests, among others, in the oil and gas
industry, and of the Cellars Wines & Spirits Inc., a chain of retail liquor
stores in Minnesota. He has also been involved in numerous real estate
transactions since 1975. Mr. Reeck has a law degree from the University of North
Dakota and is a retired managing editor of West Publishing Company.

CRAIG GAGNON is a Director of the Company. Mr. Gagnon is a partner with
Oppenheimer Wolff & Donnelly in Minneapolis, Minnesota. Mr. Gagnon's practice is
concentrated in litigation in the areas of securities fraud, accounting
malpractice and legal malpractice defense work. Mr. Gagnon chairs the Board of
Trustees for William Mitchell College of Law; is a Fellow in the American
College of Trial Lawyers; and is a past president of the Metropolitan Breakfast
Club. Mr. Gagnon also acts as a general partner in several commercial real
estate partnerships located in Minnesota. Mr. Gagnon received his Bachelor of
Arts degree from the University of Minnesota (1964) and his Juris Doctor degree
from William Mitchell College of Law (1968 - magna cum laude).

PETER DAHL is a Director of the Company. Mr. Dahl currently is the Executive
Vice President and Chief Operating Officer for BankWindsor. He oversees the
commercial and private lending functions of the bank as well as the overall
asset growth and performance of the loan portfolio. His areas of expertise
involve small business, mezzanine, and real estate finance, which enhance his
ability to cultivate relationships with entrepreneurs and their businesses. Mr.
Dahl works closely with younger companies to establish the credit facilities
they need to help them grow.

LAYTON G. KINNEY is a Director of the Company. Mr. Kinney has been an
independent business consultant since 1991. From 1985 through 1991 he was Vice
President of the Minnesota Cooperation Office, a private enterprise consulting
organization specializing in entrepreneurial start-up companies. From 1960 to
1985, he was with Control Data Corporation in various management positions
including Corporate VP, Division General Manager and Subsidiary President. Mr.
Kinney also serves on the Boards of several private corporations.

BRIAN D. ZELICKSON is a Director of the Company. Mr. Zelickson is currently,
Assistant Professor, Electron Microscopy Laboratory Director, Department of
Dermatology, University of Minnesota. From 1976 to 1982, he did his
undergraduate studies at the University of Colorado, with a Bachelor of Arts in
Molecular, Cellular and Development biology, with honors, Phi Beta Kappa. From
1982 to 1986 he attended the Mayo Medical School in Rochester, Minnesota and did
his residency from 1987 to 1990 for Dermatology at the Mayo Clinic Graduate
School of Medicine, Rochester, Minnesota.

MARK O. SENN was promoted from Executive Vice President and Chief Operating
Officer to President and Chief Operating Officer on June 1, 1999. Mr. Senn has
20 years of operations and management experience in both the private and public
sector. His experience includes VP and General Manager of Oxford Properties,
Inc. and President of Marcus Corporation.

     Thomas J. Lucas was a Director of the Company from 1995 until his
resignation on January 21, 2000. Steven Mercil was a Director of the Company
from August 1997 until his resignation on August 30, 1999. Mr. Mercil had
previously served on the Company's Board from 1993 to 1995. Paul Johnson was a
Director of the Company from November 11, 1998 until his resignation on April
30, 1999.

                                       13
<PAGE>


The Board currently has four Committees - an Executive Committee, an Audit
Committee, a Compliance Committee and a Compensation Committee. The recently
created Executive Committee takes an active role in the operation and strategic
direction of the Company. It is authorized and directed to take any and all
necessary and appropriate action of the Company including, but not limited to,
forming and appointing members to an advisory committee, determining the
compensation of any such advisory committee, conducting executive searches,
filling employment positions with the Company, hiring organizational
consultants, conducting directorial searches and recommending candidates to the
Board, and negotiating contracts with existing and potential customers of the
Company. The Executive Committee is composed of Messrs. Liefschultz, Reeck and
Gagnon. The Audit Committee reviews the results and scope of the audit and other
services provided by the Company's independent auditors, as well as the
Company's accounting principles and its system of internal controls, and reports
the results of its review to the Board. The Audit Committee is composed of
Messrs. Gagnon, Dahl and Kinney. The Compliance Committee is composed of Mr.
Gagnon. The Compensation Committee makes recommendations concerning executive
compensation and incentive compensation for employees of the Company, subject to
ratification by the Board. Currently the Executive Committee members serve as
the Compensation Committee. Currently, the entire Board of Directors proposes a
nominee for each elective Board position then vacant or to become vacant.

(b) SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers and all persons who beneficially
own more than 10% of the outstanding shares of the Company's Common Stock to
file with the Securities and Exchange Commission initial reports of ownership
and reports of changes in ownership of the Company's Common Stock. Directors,
executive officers and greater than 10% beneficial owners are also required to
furnish the Company with copies of all Section 16(a) forms that they file.

Mr. Steven Liefschultz, Chairman of the Board, on May 10, 1999 filed a Form 4 to
report grants of stock options for serving as Chairman of the Board, member of
the Executive Committee and as a Director.

Mr. Bernard Reeck, Director, on May 10, 1999 filed a Form 4 to report grants of
stock options for serving as a member of the Executive Committee and as a
Director.

Mr. Craig Gagnon, Director, on May 10, 1999 filed a Form 4 to report grants of
stock options for serving as a member of the Executive Committee and as a
Director.

Mr. Peter Dahl, Director, on May 19, 1999 filed a Form 4 to report a grant of
stock options for serving as a Director.

Mr. Bernard Reeck, Director, on September 8, 1999 filed a Form 4 to report a
transaction.

Mr. Bernard Reeck, Director, on November 19, 1999 filed a Form 4 to report a
transaction.

Mr. Mark Senn, President & COO, on February 16, 2000 filed a Form 5 to report
options granted as part of compensation.

Mr. Robert Kanne, Interim CFO, on February 15, 2000, filed a Form 5 to report
options granted for serving as Interim CFO.

To the Company's knowledge, based upon a review of the copies of such reports
furnished to the Company no other reports were required, during the year ended
December 31, 1999, none of the other Company's directors, executive officers or
beneficial owners of greater than 10% of the Company's Common Stock failed to
file on a timely basis the forms required by Section 16(a) of the Securities
Exchange Act of 1934.

                                       14
<PAGE>


ITEM 10. EXECUTIVE COMPENSATION

EXECUTIVE COMPENSATION

     The following table provides certain summary information for the years
indicated ended December 31, 1999 concerning executive compensation paid or
accrued by the Company to the Company's Chief Executive Officer whose salary and
bonus compensation for 1999 exceeded $100,000 (the "Named Executive Officer").



                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                      LONG TERM
                                  ANNUAL COMPENSATION                 COMPENSATION AWARDS
                                  -------------------                 -------------------

                                  FISCAL                    SECURITIES
NAME AND PRINCIPAL POSITION        YEAR     SALARY       BONUS        UNDERLYING OPTIONS
---------------------------        ----     ------       -----        ------------------

<S>                                <C>      <C>           <C>                  <C>
Pradeep Sinha (1)                  1999     40,600        None                 None
(Chief Executive Officer &         1998    112,000        None               60,000
  Chief Technical Officer)         1997     96,000        None               35,000

Mark O. Senn (2)                   1999     81,250      25,000               50,000
President & COO                    1998     29,900       2,400               50,000
</TABLE>

(1)  Dr. Sinha served as Interim Chief Executive Officer from August 1997 to
     October 1997 and then became Chief Executive Officer on June 4, 1998.
     Effective March 26, 1999, Dr. Sinha resigned.
(2)  Mr. Senn served as Executive Vice President and COO from May 1998 to May
     1999 and then became President & COO effective June 1, 1999 and continues
     to serve as President & COO.


STOCK OPTION GRANTS DURING FISCAL YEAR 1999

     The following table provides information regarding stock options granted
during fiscal year 1999 to the named executive officer in the Summary
Compensation Table.

                           % OF TOTAL OPTIONS
                           GRANTED TO EMPLOYEES    EXERCISE
                OPTIONS    FISCAL YEAR 1999        PRICE
NAME            GRANTED                            PER SHARE    EXPIRATION DATE
Mark O. Senn     50,000           25%                1.37       April 19, 2009
                   (1)

(1)  Mr. Senn may exercise the subject non-qualified stock options effective May
     31, 2000.

OPTION EXERCISES DURING FISCAL YEAR 1999 AND FISCAL YEAR-END OPTION VALUES


<TABLE>
<CAPTION>
                 Number of                   Number of Unexercised           Value (1) of Unexercised
                 Shares                      Options at December 31, 1999    Options at December 31, 1999
                 Acquired       Value (1)        --------------------            --------------------
Name             on Exercise    Realized     Exercisable    Unexercisable    Exercisable    Unexercisable
----
<S>                   <C>           <C>      <C>                      <C>     <C>              <C>
Pradeep Sinha         0             0        15,000                   0       No value         No value
Mark O. Senn          0             0        50,000              50,000        53,500           53,500
</TABLE>

(1) Value is the difference between the exercise price of the option and the
closing price of the common stock on December 31, 1999 of $2.44.

                                       15
<PAGE>


EMPLOYMENT AGREEMENT
The Company has a written agreement with Mark O. Senn regarding his employment
as President and Chief Operating Officer. This written agreement is effective
from June 1, 1999 through May 31, 2000.


DIRECTOR COMPENSATION

     The Company has a standard arrangement outlining the compensation to be
given to its Board of Directors. Members of the Board (or the entities with
which such directors are affiliated) do not receive any cash compensation for
serving on the Board, except for reimbursement for expenses incurred in
attending meetings and instead receive a non-qualified stock option to purchase
7,500 shares of the Company's common stock for each year of service on the
Board. In addition, during fiscal year 1999, members of the Company's Executive
Committee received stock options to purchase 15,000 shares of Common Stock at
100% of the Fair Market Value of each share at the date of grant. Each option
granted to Directors on the Executive Committee vests one year from the date of
grant, provided that on such anniversary date the Optionee has served on such
Executive Committee for one year. In addition, in fiscal year 1997, Steven
Liefschultz was granted an option to purchase 100,000 shares of Common with an
exercise price of $1.70 per share which was not less then 85% of the Fair Market
Value of the Common Stock on date of grant. This grant was not made pursuant to
the Company's 1996 Omnibus Stock Plan, and was made in consideration of the
additional contemplated work to be performed by Mr. Liefschultz. 25% of the
shares subject to the Liefschultz option vested immediately upon grant. 50% of
the shares subject to the Liefschultz option vested in equal installments on
November 30, 1997, December 31, 1997 and January 31, 1998. The remaining 25% of
the shares subject to the Liefschultz option vest upon the occurrence of certain
contingencies related to either the amount of time Mr. Liefschultz works for the
Company or the occurrence of various business and financial transactions.

1996 OMNIBUS STOCK PLAN

     The Board of Directors of the Company adopted and the Company's
stockholders approved the Company's 1996 Omnibus Stock Plan effective June 14,
1996 (the "Plan"). The Plan supersedes both the 1987 Incentive Stock Option Plan
and the 1987 Non-Qualified Stock Option Plan of the Company. The purpose of the
Plan is to promote the interests of the Company and its stockholders by
providing personnel of the Company with an opportunity to acquire a proprietary
interest in the Company and thereby develop a stronger incentive to put forth
maximum effort for the continued success and growth of the Company and to aid
the Company in attracting and retaining personnel of outstanding ability. The
Company reserved a total of 500,000 shares of Common Stock for issuance under
the Plan. At the Annual Shareholder Meeting held on June 4, 1998, Stockholders
approved an amendment to the plan to add 500,000 shares of the Company's common
stock to be reserved for issuance under the Plan (so that a total of 1,000,000
shares of common stock will have been reserved for issuance under the Plan), and
to eliminate the formula provisions under the plan. At December 31, 1999, the
Company had 417,083 Shares of Common Stock available for issuance under the
Plan.

     The Plan is administered by a committee of three or more non-employee
directors of the Company (the "Committee") appointed by the Board. The Committee
has the responsibility to interpret the Plan and all determinations made by it
are final and conclusive, subject in all cases to the provisions of the Plan and
the applicable provisions of the Internal Revenue Code of 1986, as amended (the
"Code"). The Committee has complete discretion to select the participants and to
establish the terms and conditions of each award. Outside Directors are eligible
to receive only nonstatutory stock options under the Plan.

     Employees of the Company are eligible to receive incentive stock options
(as that term is defined in Section 422 of the Code); nonqualified stock
options, reload options, stock appreciation rights and restricted stock under
the Plan. Other key individuals, who are not employees, may also be granted
nonqualified options under the Plan. Common Stock of the Company granted to
recipients may be unrestricted or may contain such restrictions, including
provisions requiring forfeiture and imposing restrictions upon stock transfer.
Unless forfeited, the recipient of restricted Common Stock will have all other
rights of a stockholder, including without limitation, voting and dividend
rights. The value of a stock appreciation right granted to a recipient is
determined by the appreciation in Common Stock of the Company, subject to any
limitations upon the amount or percentage of total appreciation that the
Committee may determine at the time the right is granted. Concurrent with the
award of any options, the Committee also may authorize reload options to
purchase for cash or shares a number of shares of Common Stock.

     The Plan requires that the option price of incentive stock options granted
under the Plan shall be not less than 100% of the fair market value of the
Company's Common Stock as of the date the option is granted and that the term of
an incentive stock option may not exceed ten years. The Plan provides that
nonqualified stock options shall have an option price not less than 85% of the
fair market value of the Company's Common Stock on the date of grant.

                                       16
<PAGE>


The exercise price of any incentive stock option granted to an employee who owns
capital stock representing more than 10% of the voting rights of the Company's
outstanding capital stock on the date of grant must be equal to at least 110% of
the fair market value on the date of grant and shall expire five years from the
date of grant.

The Committee sets the term during which any nonqualified options may be
exercised and determines whether such options are exercisable immediately, in
stages, or otherwise. All options granted under the Plan are nontransferable and
are subject to various other conditions and restrictions. Shares of Common Stock
subject to canceled options are available for subsequently granted options under
the Plan.


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth as of February 18,2000. The number of shares
of the Company's Common Stock beneficially owned by (I) each director of the
Company; (ii) each of the Named Executive Officers; (iii) each person known by
the Company to beneficially own more than 5% of the outstanding shares of Common
Stock; and (iv) all executive officers and directors as a group.

                                Number of Shares of Common    Percentage of
Name                            Stock Beneficially Owned (1)  Outstanding Shares
----

Minnesota Investment Network Corporation    183,293(2)                 5%
111 Third Avenue South
Suite 420
Minneapolis, Minnesota 55401

Steven B. Liefschultz                       410,500(3)                 13%
7630 West 78th Street
Bloomington, Minnesota 55401

Bernard J. Reeck                             243,628(4)                8%
1232 Duluth Court
St. Paul, Minnesota 55109

Peter Dahl                                     7,500(5)                *
BankWindsor
740 Marquette Ave
IDS Center
Minneapolis, Minnesota 55402

Craig Gagnon                                 22,500(6)                 *
Oppenheimer Wolff & Donnelly
45 South 7th Street
Suite 3400
Minneapolis, Minnesota 55402

Layton Kinney
14458 Shady Beach Trail
Prior Lake, MN 55372                        None owned

Brian D. Zelickson
4100 West 50th Street
Edina, MN  55424                            None owned

Mark O. Senn
7640 West 78th Street
Bloomington, MN  55439                       50,000(7)                 1%

                                       17
<PAGE>


Robert J. Fink
1850 Arvin Drive
Mendota Heights, MN  55118                   198,185(8)                6.4%


Total Executive Officers and Directors       1,115,606(9)              36%
as a group (six persons & affiliates)

*       Less than 1%.


(1)  Shares of Common Stock subject to options, warrants, or convertible debt
     securities currently exercisable or Exercisable within 60 days after the
     date of this Form 10-KSB are deemed to be outstanding for purposes of
     computing the percentage of shares beneficially owned by the person holding
     such options, warrants, or convertible debt securities but are not deemed
     to be outstanding for purposes of computing such percentage for any other
     person. Except as indicated by footnote, each person or group identified
     has sole voting and investment powers with respect to all shares of Common
     Stock shown as beneficially owned by them.

(2)  Includes 28,500 options currently exercisable.

(3)  Includes 30,600 warrants issuable upon exercise of warrants and 172,500
     options currently exercisable.

(4)  Includes 28,000 warrants issuable upon exercise of warrants and 37,500
     options currently exercisable.

(5)  Includes 7,500 options currently exercisable.

(6)  Includes 22,500 options currently exercisable.

(7)  Includes 50,000 options currently exercisable.

(8)  Shares currently held.

(9)  Includes securities held by Minnesota Investment Network and Mark Senn who
     is the Company's President & COO.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     As noted in the chart following the descriptions below, each of the
following transactions involved parties related to the Company.

     In February 1993, the Company issued a series of variable repayment
debentures (the "VRDs") as part of an exchange of its then current debt. These
VRDs included collateralized VRDs in the aggregate principal amount of $150,352;
Directors VRDs in the aggregate principal amount of $27,766; Employee
Interest-Bearing Notes in the aggregate principal amount of $282,266; Employee
Non-Interest Bearing Notes in the aggregate principal amount of $276,866; and
the SAS IP VRD in the principal amount of $279,657. In connection with a
Subordination and Deferral Agreement, the holders of the VRDs held warrants to
purchase 15,302 shares of Common Stock at a purchase price of $1.50 per share.
Of these warrants, 603 were held by current and former officers and directors of
the Company.

     With the exception of the Employee Non-Interest Bearing Notes, which bear
no interest, the VRDs bear interest at a rate equal to the prime rate plus two
percent (2%). Interest was payable on a quarterly basis, and principal was
payable out of "adjusted after tax profits" as defined in the instruments
evidencing the debt. The Employee Non-Interest Bearing Notes were convertible
into Common Stock at a conversion rate of $2.50 per share at the option of the
note holder and were payable in eight (8) quarterly installments beginning 90
days after all of the VRDs had been repaid.

         During the second quarter 1999, pursuant to an initiative by the
Company's Board of Directors, all Company long-term debt was repaid. Debt
repayments in the second quarter 1999 reduced interest expense to $0 from
$12,794 for the comparable quarter in 1998.

                                       18
<PAGE>


The following table includes major stockholders, current and former directors
and officers of the Company who served in these capacities during 1999 and
participated in the foregoing transactions as follows:




                                                     Debt ($)
                                                     --------

                                              Employee    Employee
                    Collateralized            Interest    Non-Interest
                    VRD's                     Bearing     Bearing         1996
                                               Notes       Notes          Bridge

Thomas J. Lucas            --          --          --          --         25,000

Turhan F. Rahman           --                  11,605      11,383             --

Pradeep Sinha           2,001          --      16,367      16,054             --

Totals                  2,001                  27,972      27,437         25,000


                         Equity (Shares of Common Stock)
                         -------------------------------

Steven B. Liefschultz      50,000   PPM November 11, 1997
Bernard J. Reeck           50,000   PPM November 11, 1997

     On December 2, 1997 the Company entered into a lease agreement (the
"Lease") with the Braemar Business Center, LLC regarding the leasing of the
Company's office space. Prior to December 31, 1997 Mr. Steven Liefschultz,
Chairman of the Company's Board of Directors, had a significant ownership
interest in Braemar Center, LLC. Currently, Mr. Liefschultz has no financial
interest or ownership in the Braemer Center.

     The Company intends that all ongoing and future transactions between the
Company and its directors, officers, principal stockholders and affiliates of
any such persons will be on terms no less favorable to the Company than those
that are generally available from unaffiliated third parties, and will be
ratified by a majority of the independent outside members of the Company's Board
of Directors who do not have an interest in the transaction.


ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a) EXHIBITS. See Exhibit index.

(b) REPORTS ON FORM 8-K.

      NONE.

                                       19
<PAGE>


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


Board of Directors
XOX Corporation

         We have audited the accompanying consolidated balance sheet of XOX
Corporation and subsidiary as of December 31, 1999, and the related consolidated
statements of earnings, stockholders' equity, and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

         We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
our audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe our audit provides a reasonable basis for our
opinion.

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
XOX Corporation and subsidiary as of December 31, 1999, and the consolidated
results of their operations and their consolidated cash flows for the year then
ended, in conformity with accounting principles generally accepted in the United
States.


                                             GRANT THORNTON LLP


Minneapolis, Minnesota
February 4, 2000

                                       F-1
<PAGE>


                         REPORT OF INDEPENDENT AUDITORS


Board of Directors
XOX Corporation

We have audited the accompanying balance sheet of XOX Corporation as of December
31, 1998, and the related statements of earnings, stockholders' equity, and cash
flows for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of XOX Corporation at December 31,
1998, and the results of its operations and its cash flows for the year then
ended, in conformity with accounting principles generally accepted in the United
States.


                                             Ernst & Young LLP


Minneapolis, Minnesota
February 26, 1999

The accompanying notes are an integral part of these statements.


                                      F-2
<PAGE>


                                 XOX CORPORATION

                           CONSOLIDATED BALANCE SHEETS

                                  DECEMBER 31,



                ASSETS                        1999              1998
                                           ---------         ---------

CURRENT ASSETS
   Cash and cash equivalents              $1,390,415        $1,194,397
   Accounts receivable                       191,175           172,312
   Prepaid expenses                           16,735                --
                                           ---------         ---------

                Total current assets       1,598,325         1,366,709





PROPERTY AND EQUIPMENT
   Furniture and fixtures                     74,022            58,519
   Computer equipment                         98,311            95,348
                                           ---------         ---------
                                             172,333           153,867
   Less accumulated depreciation             113,506            90,736
                                           ---------         ---------
                                              58,827            63,131
                                           ---------         ---------

                                          $1,657,152        $1,429,840
                                           =========         =========

The accompanying notes are an integral part of these statements.

                                      F-3
<PAGE>


<TABLE>
<CAPTION>
                LIABILITIES AND                                     1999             1998
                   STOCKHOLDERS' EQUITY                            ------           ------
<S>                                                              <C>              <C>
CURRENT LIABILITIES
   Accounts payable                                           $    10,155      $    64,212
   Accrued payroll expenses                                        48,782           35,456
   Other accrued expenses                                          26,385           82,143
   Deferred revenue                                                96,399          221,818
                                                               ----------       ----------

                Total current liabilities                         181,721          403,629

LONG-TERM OBLIGATIONS                                                 --           496,249

ACCRUED PAYROLL TAXES                                                 --            17,701

COMMITMENTS AND CONTINGENCIES                                         --               --

STOCKHOLDERS' EQUITY
   Undesignated - 10,000,000 shares                                   --               --
   Common stock, $.025 par value; 20,000,000 shares
      authorized; 3,096,378 and 3,072,901 shares issued
      and outstanding at December 31, 1999 and 1998                77,408           76,821
   Additional paid-in capital                                  12,770,098       12,735,470
   Accumulated deficit                                        (11,372,075)     (12,300,030)
                                                               ----------       ----------
                                                                1,475,431          512,261
                                                               ----------       ----------

                                                              $ 1,657,152      $ 1,429,840
                                                               ==========       ==========
</TABLE>

                                      F-4
<PAGE>


                                 XOX CORPORATION

                       CONSOLIDATED STATEMENTS OF EARNINGS

                            YEARS ENDED DECEMBER 31,


                                                            1999          1998
                                                           ------        ------

Revenues
   License and product sales                           $1,666,700    $1,014,400
   Customer support and consulting                        896,835     1,129,153
   Royalties                                               57,550        97,836
                                                        ---------     ---------
                                                        2,621,085     2,241,389
Operating expenses
   Research and development                             1,029,038       823,473
   Selling, general and administrative                    876,588       951,380
                                                        ---------     ---------
                                                        1,905,626     1,774,853
                                                        ---------     ---------

                Operating profit                          715,459       466,536

Other income (expense)
   Equity in loss of joint venture                             --       (80,532)
   Interest expense                                       (12,848)      (35,434)
   Other income                                           130,099        36,950
                                                        ---------     ---------
                                                          117,251       (79,016)
                                                        ---------     ---------

                Earnings before income taxes              832,710       387,520

Income taxes                                               15,000        10,000
                                                        ---------     ---------

                Earnings before extraordinary item        817,710       377,520

Extraordinary item - gain on extinguishment of debt       110,245            --
                                                        ---------     ---------

                NET EARNINGS                           $  927,955    $  377,520
                                                        =========     =========

Earnings per share - basic
   Earnings before extraordinary item                  $     0.27    $     0.12
   Extraordinary item                                        0.03            --
                                                        ---------     ---------
   Net earnings                                              0.30          0.12
                                                        =========     =========

Earnings per share - diluted
   Earnings before extraordinary item                        0.26          0.12
   Extraordinary item                                        0.03            --
                                                        ---------     ---------
   Net earnings                                            $ 0.29        $ 0.12
                                                        =========     =========

Weighted average shares outstanding:
   Basic                                                3,077,433     3,067,661
                                                        =========     =========

   Diluted                                              3,149,127     3,067,661
                                                        =========     =========

The accompanying notes are an integral part of these statements.

                                      F-5
<PAGE>


                                 XOX CORPORATION

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                     YEARS ENDED DECEMBER 31, 1998 AND 1999



<TABLE>
<CAPTION>
                                                 Common stock         Additional                           Total
                                            ----------------------     paid-in        Accumulated       stockholders'
                                              Shares     Amount        capital          deficit            equity
                                              ------     ------        -------          -------            ------

<S>                                          <C>             <C>      <C>            <C>                  <C>
Balance at January 1, 1998                   3,051,931       $76,298  $12,677,471    $(12,677,550)        $ 76,219


   Conversion of long-term debt and
     accrued interest into common stock         20,970           523       51,901             --            52,424

   Fair value of stock options granted
     for services                                  --            --         6,098             --             6,098

   Net earnings                                    --            --            -          377,520          377,520
                                             ---------       -------  -----------    ------------      -----------

Balance at December 31, 1998                 3,072,901        76,821   12,735,470     (12,300,030)         512,261

   Exercise of stock warrants                   22,277           557       32,858             --            33,415

   Exercise of stock options                     1,200            30        1,770             --             1,800

   Net earnings                                    --            --           --          927,955          927,955
                                             ---------       -------  -----------    ------------      -----------

Balance at December 31, 1999                 3,096,378       $77,408  $12,770,098    $(11,372,075)     $ 1,475,431
                                             =========        ======   ==========     ===========       ==========
</TABLE>

The accompanying notes are an integral part of these statements.

                                      F-6
<PAGE>


                                 XOX CORPORATION

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                            YEARS ENDED DECEMBER 31,


<TABLE>
<CAPTION>
                                                                  1999          1998
                                                               ---------     ---------
<S>                                                            <C>           <C>
Cash flows from operating activities:
   Net earnings                                               $  927,955    $  377,520
   Adjustments to reconcile net earnings to net
     cash provided by operating activities:
       Depreciation and amortization                              22,770        98,056
       Loss on disposal of property and equipment                     --         2,325
       Equity in loss of joint venture                                --        80,532
       Fair value of stock options granted for service                --         6,098
       Gain on extinguishment of debt                           (110,245)           --
       Changes in other operating assets and liabilities:
         Accounts receivable                                     (18,863)      107,576
         Prepaid expenses                                        (16,735)       22,719
         Accounts payable                                        (54,057)     (119,793)
         Accrued liabilities                                     (60,133)      (87,696)
         Deferred revenue                                       (125,419)      103,353
                                                               ---------     ---------

                Net cash provided by operating activities        565,273       590,690

Cash flows from investing activities:
   Purchase of property and equipment                            (18,466)           --
                                                               ---------     ---------

                Net cash used in investing activities            (18,466)           --

Cash flows from financing activities:
   Proceeds from exercise of stock options and warrants           35,215            --
   Payments on long-term obligations                            (386,004)      (83,332)
                                                               ---------     ---------

                Net cash used in financing activities           (350,789)      (83,332)
                                                               ---------     ---------

                Net increase in cash and cash equivalents        196,018       507,358

Cash and cash equivalents at beginning of year                 1,194,397       687,039
                                                               ---------     ---------

Cash and cash equivalents at end of year                      $1,390,415    $1,194,397
                                                               =========     =========

Cash paid for:
   Interest                                                   $   21,220    $   27,062
   Income taxes                                                   10,364            --
                                                               =========     =========

Noncash financing activities:
   Conversion of accrued interest and long-term debt into
      common stock                                            $       --    $   52,424
                                                               =========     =========
</TABLE>

The accompanying notes are an integral part of these statements.

                                      F-7
<PAGE>


                                 XOX CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           DECEMBER 31, 1999 AND 1998



NOTE A  -  NATURE OF BUSINESS

   XOX Corporation ("the Company") designs, develops and markets proprietary
   software for creating virtual mock-ups or models that capture the complete
   geometry of objects or spatial areas of interest. During 1999, XOX
   Corporation incorporated a wholly-owned subsidiary, XOX Technologies India,
   PUT LTD located in Bangalore India to aid in research and maintenance of the
   Company's products.


NOTE B  -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   Principles of Consolidation

   The consolidated financial statements include the accounts of the Company and
   its wholly-owned subsidiary. All significant intercompany transactions have
   been eliminated in consolidation.

   Cash and Cash Equivalents

   The Company considers all highly liquid investments with an original maturity
   of three months or less to be cash equivalents.

   The Company maintains a significant portion of their cash and cash
   equivalents at one financial institution, located in Minneapolis, Minnesota.
   Accounts at the institution are insured by the Federal Deposit Insurance
   Corporation up to $100,000. Uninsured balances are approximately $1,048,000
   at December 31, 1999. The Company has not experienced any losses in such
   accounts and believes it is not exposed to any significant credit risk on
   cash and cash equivalents.

   Property and Equipment

   Property and equipment, including leasehold improvements, are stated at cost.
   Depreciation is generally provided on the straight-line method over five
   years, the estimated useful life of the assets. Leasehold improvements are
   amortized using the straight-line method over three to five years,
   representing the shorter of their estimated useful lives or the underlying
   lease term. Accelerated and straight-line methods are used for income tax
   purposes.

                                      F-8
<PAGE>


                                 XOX CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           DECEMBER 31, 1999 AND 1998



NOTE B  -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  -  Continued

   Revenue Recognition

   Revenues from software sales are recognized upon delivery of the software in
   instances where the Company has evidence of a contract, the fee is fixed and
   determinable and collection is probable. Revenues earned from customer
   support (i.e., long-term maintenance contracts) are recognized over the life
   of the contract on a straight-line method. Consulting revenues are recognized
   as worked is performed.

   The Company also earns royalty fees from the incorporation of its products
   into other vendors' software. Such revenue is recognized upon delivery of the
   end product.

   Research and Development

   Software development costs are capitalized subsequent to the establishment of
   technological feasibility. Based on the Company's product development
   process, technological feasibility is established upon completion of a
   working model. To date, costs incurred by the Company between completion of
   the working model and the point at which the product is ready for general
   release have been immaterial. Accordingly, all software development costs
   have been charged to research and development expense as incurred.

   Investment in Joint Venture

   The Company had a joint venture with another entity, which was subsequently
   dissolved in 1998. The Company was a 47.5% shareholder in the joint venture
   and accounted for its investment under the equity method of accounting.

                                      F-9
<PAGE>


                                 XOX CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           DECEMBER 31, 1999 AND 1998



NOTE B  -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  -  Continued

   Earnings Per Share

   Basic earnings per share is computed using the weighted average number of
   common shares outstanding. Diluted earnings per share is computed using the
   combination of dilutive common share equivalents and the weighted average
   number of common shares outstanding. Options to purchase 404,403 shares of
   common stock with a weighted average exercise purchase price of $3.56 and
   warrants to purchase 161,022 shares of common stock with a weighted average
   purchase price of $7.89 were outstanding during 1999 but were excluded from
   the computation of common share equivalents because they were antidilutive.
   During 1998, the effect of all outstanding options and warrants were
   antidilutive.

   Stock-Based Compensation

   The Company utilizes the intrinsic value method of accounting for employee
   stock based compensation. Pro forma information related to the fair value
   based method of accounting is contained in Note D.

   Use of Estimates

   The preparation of financial statements in conformity with accounting
   principles generally accepted in the United States requires management to
   make estimates and assumptions that affect the amounts reported in the
   financial statements and accompanying notes. Actual results could differ from
   those estimates.

   Reclassification

   Certain items from the 1998 financial statements have been reclassified to
   conform with the 1999 presentation. These reclassifications had no effect on
   net earnings or stockholders' equity as previously reported.

                                      F-10
<PAGE>


                                 XOX CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           DECEMBER 31, 1999 AND 1998



NOTE C  -  LONG-TERM OBLIGATIONS

   Long-term obligations consisted of various notes to directors, officers,
   stockholders, and employees of the Company with interest at prime plus 2%.
   During 1999, pursuant to an initiative by the Company's board of directors,
   the entire remaining principal balance was repaid for $386,004 resulting in
   an extraordinary gain of $110,245.


NOTE D  -  STOCKHOLDERS' EQUITY

   Stock Options

   The Company maintains the 1996 Omnibus Stock Plan (the Plan) under which
   1,000,000 shares were reserved for either incentive options or nonqualified
   options. The Plan requires that the option price of incentive stock options
   be not less than 100% of the fair market value of the Company's common stock
   on the date of grant and may remain outstanding up to ten years from the date
   of grant. Nonqualified options must be priced not less than 85% of the fair
   market value of the Company's common stock on the date of grant. At December
   31, 1999 the Company had 417,083 options available for grant under the Plan.

   A summary of the Company's stock option activity, including options
   outstanding from previous option plans, is as follows:

                                                      Weighted average
                                          Shares       exercise price
                                          ------       --------------

     Outstanding at January 1, 1998       903,705        $    3.92
       Granted                            193,917             1.60
       Canceled                          (317,285)            3.36
                                         --------         --------
     Outstanding at December 31, 1998     780,337             3.23
       Granted                            239,000             1.42
       Exercised                           (1,200)            1.50
       Canceled                          (265,233)            3.74
                                         --------         --------
     Outstanding at December 31, 1999     752,904        $    2.48
                                         ========         ========

                                      F-11
<PAGE>


                                 XOX CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           DECEMBER 31, 1999 AND 1998



NOTE D  -  STOCKHOLDERS' EQUITY  -  Continued

   Outside the Plan and previous plans, the Company has 105,500 options
   outstanding to purchase shares of common stock with a weighted average
   exercise price of $2.39 per share.

   The following table summarizes information about Plan options outstanding at
   December 31, 1999:
<TABLE>
<CAPTION>
                                                       Options outstanding                   Options exercisable
                                          -------------------------------------------     ------------------------
                                                            Weighted
                                                           average         Weighted                       Weighted
                                                           remaining       average                         average
                Range of                    Number        contractual     exercise          Number        exercise
            exercise prices               outstanding         life          price         exercisable       price
            ---------------               -----------     -----------     -----------     -----------   ---------
<S>          <C>                            <C>              <C>           <C>              <C>            <C>
             $1.50 - $2.50                  546,000          8 years       $  1.76          455,700        $  1.74
             $3.00 - $4.50                  135,866          5 years          3.41          127,695           3.35
             $4.75 - $6.50                   60,800          6 years          4.75           60,800           4.75
                 $15.00                      10,238          2 years         15.00           10,238          15.00
                                          -----------                                     -----------

                                            752,904                                         654,433
                                          ===========                                     ===========
</TABLE>

   The number of options exercisable as of December 31, 1999 and 1998 were
   654,433 and 582,971 at weighted average exercise prices of $2.54 and $3.23
   per share.

   Pro Forma Disclosures

   The fair value of options was estimated at the date of grant using a
   Black-Scholes option pricing model with the following weighted-average
   assumptions all years presented: risk free-interest rates in 1999 and 1998 of
   6% and 5.50%; no dividend yield; volatility factor of the expected market
   price of the Company's common stock in 1999 and 1998 of .8 and 1.01, and a
   weighted-average expected life of the option of 10 years and 8.5 years.

   The Company's pro forma information, assuming the fair value method had been
   used, is as follows:
                                                          1999          1998
                                                        --------      --------

     Pro forma net income (loss)                       $ 775,522     $(270,352)
     Pro forma net income (loss) per common share
       Basic                                               $0.25        $(0.09)
       Diluted                                             $0.24        $(0.09)

                                      F-12
<PAGE>


                                 XOX CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           DECEMBER 31, 1999 AND 1998



NOTE D  -  STOCKHOLDERS' EQUITY  -  Continued

   Warrants

   The Company has also issued warrants in connection with debt and equity
   offerings with summarized activity as follows:
                                            Warrants
                                           outstanding            Price
                                         and exercisable        per share
                                         ---------------      -------------

         Balance at January 1, 1998           1,456,214       $1.50 - $15.00

           Canceled                            (316,504)       5.68 - 15.00
                                         --------------

         Balance at December 31, 1998         1,139,710        1.50 - 15.00

           Exercised                            (22,277)           1.50

           Canceled                            (956,411)       1.50 - 8.00
                                         --------------

         Balance at December 31, 1999           161,022        3.00 - 15.00
                                         ==============

   Warrants outstanding at December 31, 1999 expire in 2000 and 2001.


NOTE E  -  INCOME TAXES

   At December 31, 1999, the Company has net operating loss (NOL) carryforwards
   of approximately $8,890,000 available to offset future taxable income through
   2012. These NOL's are subject to annual utilization limitations due to
   changes in the equity ownership of the Company. Income taxes in 1999 and 1998
   consists of federal and state alternative minimum tax.

                                      F-13
<PAGE>


                                 XOX CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           DECEMBER 31, 1999 AND 1998



NOTE E  -  INCOME TAXES  -  Continued

   The tax effects of temporary differences giving rise to deferred income taxes
   are as follows:

                                                 1999                  1998
                                              ---------             ---------
     Deferred tax assets:
       Net operating loss carryforwards     $ 3,556,000           $ 3,930,000
       Research and development credits         271,000               219,000
       Other                                     72,000               110,000
                                              ---------             ---------
                                              3,885,000             4,259,000
     Less valuation allowance                (3,885,000)           (4,259,000)
                                              ---------             ---------

                                             $       --            $       --
                                              =========             =========

   The Company's provision for income taxes differs from the statutory federal
   income tax as follows:

                                                 1999                   1998
                                                -------               -------

     Tax at federal statutory rate            $ 321,857             $ 131,778
     State income taxes                          56,788                23,255
     Alternative minimum tax                     15,000                10,000
     Net operating loss carryforward           (378,645)             (155,033)
                                                -------               -------

                                               $ 15,000              $ 10,000
                                                =======               =======


NOTE F  -  LEASES

   The Company leases office space and equipment under non-cancelable operating
   lease agreements. Future minimum lease commitments for all operating leases
   with initial or remaining terms of one year or more are as follows:

                 Year ending December 31:
                           2000                             $79,647
                           2001                              39,129
                           2002                              19,491

                                      F-14
<PAGE>


                                 XOX CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           DECEMBER 31, 1999 AND 1998



NOTE F  -  LEASES  -  Continued

   Rent expense on operating leases for the years ended December 31, 1999 and
   1998 was $63,792 and $43,740.


NOTE G  -  SIGNIFICANT CUSTOMERS

   During 1998, the Company entered into two contracts with Geoquest, a division
   of Schlumberger Technology Corporation for services through May 2001. The
   agreements provide for payment of approximately $5.75 million to the Company
   in exchange for software rights and licensing capabilities, certain
   maintenance and other support services. Revenues under the contract
   represented 85% and 63% of net revenues for the years ended December 31, 1999
   and 1998.

   In 1998, the Company also had foreign sales to one customer which represented
   21% of net revenues. In 1999, the sales to this customer were not
   significant.


NOTE H  -  SUBSEQUENT EVENT

   On January 26, 2000, the Company repurchased and retired 121,032 shares of
   common stock for approximately $150,000 in cash.

                                      F-15
<PAGE>


                                   SIGNATURES

     In accordance with the requirements of the Exchange Act, the Company caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

Dated:  March 29, 2000                      XOX Corporation

                                         By /s/ Mark O. Senn
                                            President & COO



     In accordance with the requirements of the Exchange Act, this Report has
been signed below by the following persons on behalf of the Company and in the
capacities indicated on March 29, 2000.

                                POWER OF ATTORNEY

     Each person whose signature appears below constitutes and appoints Mark O.
Senn as their true and lawful attorney-in-fact and agent, with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments to this Annual Report on Form 10-KSB
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all said attorney-in-fact and agent, or
his substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.


SIGNATURE                         POSITION
---------                         --------


/s/  Steven B. Liefschultz
Steve Liefschultz                 Chairman of the Board

/s/  Bernard J. Reeck
Bernard J. Reeck                  Director

/s/ Peter Dahl
Peter Dahl                        Director

/s/ Craig Gagnon
Craig Gagnon                      Director

/s/ Layton Kinney                 Director
Layton Kinney

/s/Brian Zellickson               Director
Brian Zellickson

<PAGE>


XOX CORPORATION
                                EXHIBIT INDEX TO
                FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31, 1999

<TABLE>
<CAPTION>
Item No.             Title of Document                                                           Method of Filing
--------             -----------------                                                           ----------------

<S>    <C>                                                                                              <C>
 3.1   Amended and Restated Certificate of Incorporation of small business issuer ...............       *

 3.2   Amended and Restated Bylaws of small business issuer......................................       *

 4.1   Specimen of Unit Certificate..............................................................       *

 4.2   Form of Warrant Agreement.................................................................       *

 4.3   Form of 1996 Promissory Note and Common Stock Purchase Warrant............................       *

 4.4   Security Agreement, $100,000 Promissory Note and Common Stock Purchase
       Warrant between Unitechnic and the Company dated March 8, 1996 ...........................       *

 4.5   Form of 1994 Bridge Loan Promissory Note and Security Agreement...........................       *

 4.6   Form of 1993 Convertible Variable Repayment Debenture.....................................       *

 4.7   Form of Director's Variable Repayment Debenture...........................................       *

 4.8   Form of 1993 Employee Debt-Related Promissory Note........................................       *

 4.9   Form of 1993 Secured Collateralized Variable Repayment Debenture .........................       *

 4.10  Form of 1993 Unsecured Collateralized Variable Repayment Debenture .......................       *

 4.11  Form of 1993 Employee Debt-Related Variable Repayment Debenture...........................       *

 4.12  $297,656.30 Variable Repayment Debenture dated February 1993,
       between Swanson Analysis Systems, Inc., as Payee, and the Company, as Payor ..............       *

 4.13  Form of 1993 Debt Exchange Subscription Agreement and Letter of Investment Intent ........       *

10.1#  License Agreement between ANSYS, Inc. (formerly Swanson
       Analysis Systems, Inc.) and the Company dated February 9, 1993 ...........................

10.2   Joint Venture Agreement between IIS Infotech Ltd., the Company
       and Dr. Indranil Chakravarty dated December 20, 1995 .....................................       *

10.3#  Software License Agreement between Landmark Graphics, Inc. and
       the Company dated January 1, 1995 ........................................................       *

10.4#  Software    License     Agreement    between Schlumberger Corporation
       and the Company dated October 14, 1994 ...................................................       *

10.5#  Software License Agreement between CogniSeis Development,
       Inc. and the Company dated July 10, 1995 .................................................       *

10.6   Sublease Agreement between the Company and St. Paul Software,
       Inc. dated July 25, 1995..................................................................       *

10.7   Employment Agreement between the Company and Lawrence W.
       McGraw dated December 20, 1994 ...........................................................       *

10.8   Employment Agreement between the Company and Dr. Pradeep
       Sinha dated December 20, 1994 ............................................................       *

10.9   Employment Agreement between the Company and Dr. T.K.
       Srikanth dated December 20, 1994 .........................................................       *

10.10  Employment Agreement between the Company and Dr. Indranil
       Chakravarty dated September 15, 1995......................................................       *

10.11  Employment Agreement between the Company and Turhan
       Rahman dated December 20, 1994 ...........................................................       *

10.12  XOX Corporation 1996 Omnibus Stock Plan...................................................       *

10.13  XOX Corporation 1987 Incentive Stock Option Plan and
       Agreement.................................................................................       *

10.14  XOX Corporation 1987 Non-Qualified Stock Option Plan and
       Agreement ................................................................................       *
</TABLE>

<PAGE>


<TABLE>
<S>    <C>                                                                                              <C>
10.15# Software License Agreement between CADKEY, Inc. and the
       Company dated September 27, 1990 .........................................................       *

10.16# Software License Agreement between Schlumberger/Geco-Prakl
       and the Company dated November 30, 1993 ..................................................       *

10.17# Software License Agreement between Shell Oil and the Company
       dated October 7, 1994 ....................................................................       *

10.18# Confidential Disclosure Agreement between Fairfield Imaging-
       VoluMetrix and the Company dated October 17, 1995 ........................................       *

10.19# Distribution License Agreement among the Company, TechSoft
       GmbH and SAPEX dated April 18, 1995 ......................................................       *

10.20# Marketing and Support Agreement between TechSoft GmbH and
       the Company dated October 1, 1994 ........................................................       *

10.21# Development and License Agreement between Visual Software,
       Inc. and the Company dated November 28, 1995 .............................................       *

10.22# International Distribution Agreement between Unitechnic SA and
       the Company dated June 1, 1996 ...........................................................       *

10.23  $100,000 Secured Promissory Note, Guaranty and Security
       Agreement among Robert S. Mars, Jr., as Guarantor, and First
       Bank National Association, as Bank, and the Company, as
       Borrower, dated July 10, 1996 ............................................................       *

10.24# Software License Agreement between Evans and Sutherland
       Corporation and the Company dated January 9, 1996 ........................................       *

10.25  Source Code Licensing Agreement between VoluMetrix and the
       Company dated October 31, 1996............................................................       *

10.26  Software, known as "MACADAMIA", purchase agreement between
       Jacques E. Gavois and the Company dated December 1, 1996..................................       *

10.27  Employment Agreement between Jacques E. Gavois and the
       Company dated December 1, 1996 ...........................................................       *

10.28# Reciprocal Joint Development and Marketing Agreement between
       IMETRIX Ltd. and the Company dated October 31, 1996 ......................................       *

10.29# Letter of understanding regarding a Convertible Bridge Loan
       Agreement between the Company and IMETRIX Ltd. dated
       February 26, 1997 ........................................................................       *

10.30# SURFER Software License Agreement between Shell Oil
       Company and the Company dated October 3, 1996.............................................       *

10.31# XOX Corporation and Shell International Exploration and
       Production B.V. Consultancy Agreement dated 12/19/97......................................       **

10.31# XOX Corporation and GeoQuest agreements dated 7/24/98.....................................       ***

16.1   Letter on change in certifying accountant.................................................       ****

21.1   Subsidiaries of the Registrant............................................................       File herewith electronically

23.1   Consent of Grant Thornton, LLP............................................................       File herewith electronically

23.2   Consent of Ernst & Young LLP..............................................................       File herewith electronically

24.1   Power of Attorney..............................................................Included in signature page of this Form 10-KSB

27.1   Financial Data Schedule for Year Ended December 31, 1999 .................................       File herewith electronically
</TABLE>


   * Incorporated by reference to the Company's registration statement on form
     SB2, SEC file number 333-05112-C.

  ** Incorporated herein by reference to the Company's filing of form 10KSB for
     year ended in December 31, 1997.

 *** Incorporated herein by reference to the Company's filing of form 10Q for
     quarter ending June 30, 1998 as exhibit 10.31#.

**** Incorporated herein by reference to the Company's filing of form 8K dated
     May 25, 1999.

# Confidential Treatment Requested pursuant to the Securities Exchange Act of
1934, as amended, Rule 24b-2; confidential portions of the exhibits have been
deleted and filed separately with the Securities and Exchange Commission.