-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, V4mXkORcigyqVnlhJTIBmYqIfCIo3IbHoNoB1UCCMnkOHgFRsi+G2GFq1hvz4GIE ZyIcAjdbMwqe+c8/dkdTAQ== 0000892020-96-000001.txt : 19960819 0000892020-96-000001.hdr.sgml : 19960819 ACCESSION NUMBER: 0000892020-96-000001 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960816 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: VIDEOLABS INC CENTRAL INDEX KEY: 0000892020 STANDARD INDUSTRIAL CLASSIFICATION: PHOTOGRAPHIC EQUIPMENT & SUPPLIES [3861] IRS NUMBER: 411726281 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-23858 FILM NUMBER: 96616669 BUSINESS ADDRESS: STREET 1: 10925 BREN RD E STREET 2: STE 120 CITY: MINNEAPOLIS STATE: MN ZIP: 55343 BUSINESS PHONE: 6129880055 10QSB 1 FORM 10QSB 1 U.S. Securities and Exchange Commission Washington, D.C. 20549 Form 10QSB (Mark One) /X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996. / / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from ______________________ to ______________________ Commission file number 34-0-23-858 VIDEOLABS, INC. (Exact name of small business issuer as specified in its charter) Delaware 47-1726281 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 10925 Bren Road East Minnetonka, MN 55343 (Address of principal executive offices) (612) 988-0055 (Issuer's telephone number) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No ___X___ APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of August 10, 1996: 3,134,948 Transitional Small Business Disclosure Format (check one): Yes X No ______ 2 PART 1 -- FINANCIAL INFORMATION Item 1. Financial Statements VIDEOLABS, INC. INTERIM CONDENSED BALANCE SHEET
June 30, December 31, 1996 1995 Unaudited Audited ---------- ------------ ASSETS Current assets Cash and cash equivalents................ $ 482,227 $ 687,508 Certificate of deposit (Note 5) ......... 500,000 576,900 Marketable Securities (Note 4) .......... 62,873 353,963 Interest Receivable ..................... 7,886 9,251 Accounts Receivable, less allowance for doubtful accounts of $37,383 on June 30, 1996 and $25,400 on December 31, 1995 ..................... 1,050,118 1,266,109 Inventories ............................. 2,806,170 2,399,947 Deferred tax asset ...................... 0 30,000 Prepaid expenses ........................ 117,295 106,802 ---------- ------------ Total Current assets ................ 5,026,569 5,430,480 ---------- ------------ Property and Equipment Office and computer equipment ........... 370,052 324,067 Machinery and equipment ................. 307,775 312,723 European real estate .................... 137,578 137,579 Vehicles ................................ 0 31,623 Leasehold improvements .................. 21,250 21,250 ---------- ------------ Total equipment ........................... 836,655 827,242 Less accumulated depreciation ........... 371,748 265,107 ---------- ------------ Net equipment ........................... 464,907 562,135 ---------- ------------ Total assets ............................ $5,491,476 $5,992,615 ========== ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable ........................ $ 755,269 $ 770,356 Customer deposits and other liabilities.. 48,796 21,125 Accrued compensation .................... 33,223 64,612 Accrued Expenses ........................ 34,526 48,000 ---------- ------------ Total current liabilities ............. 871,814 904,093 ---------- ------------ Stock holders' Equity Common stock, $.01 par value; Authorized 20,000,000 shares issued and outstanding, 3,134,948 shares at June 30, 1996 and 3,133,948 shares at December 31, 1995 ... 31,349 31,339 Additional paid in capital .............. 5,514,293 5,511,653 Deferred Profit from RSI Inc common stock (Note 4) ................................ 0 219,215 Accumulated deficit ....................... (925,980) (673,685) ---------- ------------ Total stockholders' equity .............. 4,619,662 5,088,522 ---------- ------------ Total liabilities and stockholders' equity ............................... $5,491,476 $5,992,615 ========== ============
3 INTERIM CONDENSED STATEMENT OF OPERATIONS
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 1996 1995 1996 1995 ----------- ----------- ----------- ----------- Sales ................... $ 1,815,484 $ 1,379,648 $ 3,266,289 $ 2,981,730 Cost of goods sold ...... 1,126,595 846,932 2,098,805 1,779,592 ----------- ----------- ----------- ----------- Gross profit ............ 688,889 532,716 1,167,484 1,202,138 Selling, general and administrative expenses . 955,129 681,396 1,650,133 1,463,863 ----------- ----------- ----------- ----------- Operating Loss .......... (266,240) (148,680) (482,649) (261,725) Other income (expense) Interest income ......... 12,168 26,681 28,177 61,412 Gain (loss) on sale of assets ................. 231,581 0 232,177 0 Recovery of income taxes (30,000) 0 (30,000) 0 ----------- ----------- ----------- ----------- Total other income (expense) ............... 213,749 26,681 230,354 61,412 Net Income (loss) ....... $ (52,491) $ (121,999) $ (252,295) $ (200,313) =========== ============ =========== =========== Income (loss) per common share (Note 3) .......... $ (0.02) $ (0.03) $ (0.08) $ (0.06)
INTERIM CONDENSED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30 1996 1995 ---------- ------------ Cash Flows From Operations: Net cash provided by operations ................. $(579,470) $(672,173) Cash Flows From Investing: Capital expenditures ............................ (9,413) (94,203) Purchase/Sale of certificate of deposit ....... 76,900 100,000 Purchase/Sales of U.S. Treasury securities .... 2,505,109 Sale of RSI, Inc. Common Stock ............... 304,052 ---------- ---------- Net cash from investing .................... 371,539 2,510,906 Cash Flows From Financing: Net proceeds from sale of common stock .......... 2,650 0 Payment of Bridge Notes ......................... 0 0 Stock offering costs ............................ 0 0 Net proceeds from sale of bridge notes .......... 0 0 ---------- ---------- Net cash from financing .................... 2,650 0 ---------- ---------- Net increase (decrease) in cash and cash equivalents (205,281) 1,838,733 Cash and cash equivalents at beginning of period .. 687,508 237,392 ---------- ---------- Cash and cash equivalents at end of period ........ $ 482,227 $2,076,125 ========== ==========
4 FOOTNOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS NOTE 1. BASIS OF PRESENTATION The results of operations for the interim periods shown in this report are not necessarily indicative of results to be expected for the fiscal year. In the opinion of management, the information contained herein reflects all adjustments (consisting only of normally recurring adjustments) necessary to make the results of operations for the interim periods a fair statement of such operations. NOTE 2. INITIAL PUBLIC OFFERING On May 17, 1994, the Company closed the public offering and sale of 1,500,000 shares of the Company's common stock at a public offering price of $3.50 per share. After deducting an underwriting discount of $.35 per share, this public offering resulted in net proceeds to the Company of $4,275,000. Bridge notes totaling $750,000, plus accrued interest, were paid at the time of closing along with a three percent (3%) non-accountable expense allowance of $157,500 (less $15,000 that was prepaid to the underwr NOTE 3. INCOME (LOSS) PER COMMON SHARE Loss per common share amounts were computed using the weighted average number of shares outstanding during each period as the effect of including the common stock equivalents would be anti-dilutive. The number of average shares outstanding for the quarter ending June 30, 1996 was 3,134,948, and for the quarter ending June 30, 1995 was 3,133,948. Stock options and warrants for the purchase of Common Stock were considered to be anti-dilutive and have not been included in the computations. NOTE 4. DEFERRED PROFIT ON RSI, INC. COMMON STOCK The carrying value on the Company books at December 31, 1994, of RSI, Inc. Common stock was $5,000 consisting of the net between the amount of the note receivable and deferred income on that date. The value for reporting purposes of the 63,888 shares of RSI, Inc. common stock held by the Company at March 31, 1995, was calculated at $4.50 per share plus the basis of the shares on the Company books. The market value of RSI, Inc. Common stock on March 31, 1995, was approximately $8.00 per share. The RSI, Inc. common stock held by the Company is restricted from sale until November 15, 1996 unless prior consent of the underwriter of RSI, Inc. was obtained. The stock was sold at a discount during May, 1996, at a book profit of $230,354. NOTE 5. BANK LINE OF CREDIT On July 26, 1995, the Company entered into a loan agreement with a bank for $500,000. On September 20, 1995, the Company entered into a second loan agreement with the same bank for an additional $500,000. On April 10, 1996 a new loan agreement was entered into for $1,500,000 which expires on April 10, 1997. The line of Credit bears interest at 1% over the First Bank National Association Reference Rate. The notes are secured by all corporate assets and require cash collateral of $500,000. At June 30, 1996 the line of credit was being used to secure letters of credit to suppliers amounting to $800,000. A $500,000 certificate of deposit is on deposit with the bank as cash collateral required by the loan terms and conditions 5 ITEM 2: MANAGEMENT DISCSSION AND ANALYSIS Net revenues for the quarter ended June 30, 1996 were $1,815,484 compared to $1,379,648 for the second quarter of 1995, an increase of 32 percent. Net revenues for the six months ended June 30, 1996 were $3,266,289 compared to $2,981,730 for the same period in 1995, a 10 percent increase. The results for the second quarter met the expectations of management. Results for the six months were below expectations and were negatively affected by the product transition from the $595 to the $395 FlexCam product discussed in the 10qsb for the period ended March 31, 1996. Gross margins of the Company are determined by deducting from net revenues all materials, labor, packaging, manuals and related overhead costs which are directly attributable to the cost of manufacture and shipment of the Company's products. Royalty costs and commission costs related to the sales of products are not included in cost of goods, but are included in selling expenses. The Company's gross margin on sales during the second quarter of 1996 was $688,889 or 38% as compared to $532,716 or 39% for the second quarter of 1995. Gross margins for the six months ended June 30, 1996 were $1,167,484 or 36% as compared to $1,202,138 or 40% for the same period in 1995. The decrease in gross margin as a percentage of revenues reflects the results of the product transition from the higher priced to lower priced cameras during the first quarter of 1996. The Company has a goal to maintain gross margins in the 40% range. There is no assurance that it will be able to do so. Selling, general and administrative expenses include all costs of the Company except those related directly to the manufacture of products described above and other income and expense items below. These expenses increased from $681,396 in the second quarter of 1995 to $955,129 in the second quarter of 1996 and from 49% in 1995 to 52% of revenue in 1996. For the six months ended June 30 1996 these expenses were $1,650,133 or 50% of revenues versus $1,463,863 or 49% of revenues for the six months ended June 30, 1995. The major items affecting these costs were sales costs including advertising, trade show participation and sales representatives. The Company expects that it will continue to spend substantial sums on sales related expenses in an effort to expand the market for the Company's products. Major selling, general and administrative expense differences between the second quarter 1995, and 1996, are set forth in the table below. MAJOR SELLING GENERAL AND ADMINISTRATIVE EXPENSE DIFFERENCES
1996 1995 Expense ------------------------ ------------------------ Type Amount % of sales Amount % of sales ---- -------- ---------- -------- ---------- Salaries Wages & Comm. $262,360 14.5 $205,850 14.9 Royalties 42,370 2.3 51,066 3.7 Advertising 124,279 6.8 55,133 4.0 Trade shows 28,096 1.5 19,160 1.4 Promotional Materials 43,845 2.4 (9,882) (0.7) International selling costs 63,506 3.5 30,469 2.2 Bank Charges 19,510 1.1 3,433 0.2 Manufacturing consulting 0 0.0 23,140 1.7 R & D Consulting 91,160 5.0 12,003 0.8 Other expenses 280,003 15.4 291,024 21.0 -------- ---- -------- ---- Total SG&A Expenses $955,129 52.6 $681,396 48.8 ======== ==== ======== ====
6 Operating losses for the second quarter of 1996 were $266,240 compared to $148,680 for 1995 and $482,649 for the six months ended June 30, 1996 compared to $261,725 for the same period in 1995. Management believes that the loss from operations was primarily adversely impacted by the sales related costs and research and development expenses discussed above during the second quarter and the product transition to lower price point video cameras during the first quarter. For the balance of 1996, management a on the fact that unit volume of camera sales was up significantly in the most recent two months. The other income in the second quarter 1996 was primarily from the gain on the sale of RSI stock which the Company was holding and sold in May, 1996. This transaction generated a non-operating profit of $231,581. The remaining other income is almost exclusively from interest on the investment of the cash generated from the Company's public offering of its Common Stock. Such income is expected to diminish as the Company uses the funds for financing inventories and accounts receivable. During the second quarter of 1996 the Company wrote its deferred tax asset amounting to $30,000 off the books. Net loss for the second quarter 1996 was $52,491 compared to a loss of $121,999 for the second quarter of 1995 and $252,295 for the six months ended June 30, 1996 compared to $200,313 for the same period in 1995. The amount of the loss was affected by the sale of the RSI, Inc. Common stock in the second quarter of 1996. Primary and fully diluted earnings per share for the quarters ended June 30, 1996 and 1995 were computed based on weighted average number of shares actually outstanding. The weighted average number of shares outstanding for the quarter ended June 30, 1996 was 3,134,948 and June 30, 1995 was 3,133,948. Stock options and warrants for the purchase of Common Stock were anti-dilutive and have not been included in the computations. Working capital, which consists principally of cash, receivables and inventories, was $4,154,755 at June 30, 1996 and $4,526,387 at December 31, 1995. The ratio of current assets to current liabilities was 6:1 at June 30, 1996 and 6:1 at December 31, 1995. Working capital decreased approximately $371,000 during the six months ended June 30, 1996 primarily due to operating losses incurred during the six month period. 7 PART II--OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company has filed a suit against David E. Krekelberg, a former Vice President of Engineering and Director of the Company until the end of 1995 and a consultant since that time, alleging that he attempted to give plans and designs of an advanced digital camera module to a contract fabricator of the Company. Mr. Krekelberg has countersued alleging that the Company owes him royalties on certain Company products. The Company anticipates that the suits will be settled to the satisfaction of the parties. ITEM 2. CHANGES IN SECURITIES None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Annual Meeting of the Company's shareholders was held on May 2, 1996. At the meeting Ward C. Johnson, Richard F. Craven and John Collins were each elected to the Company's Board of Directors. There were no other Directors whose term of office as a Director continued after this meeting. The Company's shareholders also ratified the Company's appointment of Boulay, Heutmaker, Zibell & Co., as the independent auditors of the Company for its fiscal year ending December 31, 1996. The VideoLabs, Inc. Report of Election dated May 2, 1996 provides all of the information reference For, Against and abstentions of votes and is attached hereto and incorporated herein by reference. ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits required by Item 601. None (b) Reports on Form 8-K None 8 In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. VIDEOLABS, INC. Date: August 14, 1996 By: /s/ Ward Johnson ----------------- ---------------------------------- Ward C. Johnson President /s/ F. J. Broghammer ---------------------------------- F. Broghammer Chief Financial Officer EX-27 2 FDS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) BALANCE SHEET AND STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) 10QSB 0000892020 VIDEOLABS, INC. 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 982,227 62,873 1,050,118 0 2,806,170 5,026,569 836,655 371,748 5,491,476 871,814 0 0 0 31,349 4,588,313 5,491,476 3,266,289 3,266,289 2,098,805 1,650,133 0 0 0 (482,649) 30,000 (512,649) 0 260,354 0 (252,295) (0.08) (0.08)
EX-99 3 VIDEOLABS, INC. OATH OF INSPECTORS OF ELECTION STATE OF MINNESOTA ) )SS COUNTY OF HENNEPIN ) The undersigned do hereby swear to, faithfully and to the best of their ability, execute and perform the duties of Inspectors of Election with strict impartiality at the Annual Meeting of the Shareholders of VideoLabs, Inc. to be held at the UMAGA Gift Mart, 10301 Bren Road W., Minnetonka, Minnesota 55343 on Thursday, May 2, 1996, at 4:00 P.M., local time. /s/ Tammy Brusehaven ----------------------- /s/ Mary Theno ----------------------- Sworn to before me this 2nd day of May, 1996 /s/ Kimberly C Rathe - ------------------------- Notary Public EX-99 4 BALLOT FOR ANNUAL MEETING VIDEOLABS, INC. MAY 2, 1996 The undersigned hereby cast(s) the following votes: 1. FOR Election of directors 2,493,715 Ward C. Johnson -------------- 2,493,915 Richard F. Craven -------------- 2,493,615 John Collins -------------- 2. FOR 2,545,968 ------------- AGAINST 8,405 ----------- Proposal to ratify the appointment of Boulay, Heutmaker, Zibell & Co. as the independent auditors for the Company for the fiscal year ending December 31, 1996. /s/ Frank Broghammer -------------------------- Frank Broghammer /s/ Jill R. Larson -------------------------- Jill R. Larson EX-99 5 VIDEOLABS, INC. REPORT OF ELECTION The undersigned Inspectors of Election at the Annual Meeting of Shareholders of VideoLabs, Inc. report as follows: There were 3,133,948 shares of Common Stock entitled to vote at the meeting --------- and a total of 2,557,781 shares (81.62 percent) were represented at the --------- ----- meeting. 1. Election Directors: WITHHOLD FOR AUTHORITY Ward C. Johnson 2,493,715 64,066 --------- --------- Richard F. Craven 2,493,915 63,866 --------- --------- John Collins 2,493,615 64,166 --------- --------- 2. Proposal to ratify the appointment of Boulay, Heutmaker, Zibell & Co. as the independent auditors for the Company for the fiscal year ending December 31, 1996. FOR 2,545,968 AGAINST 8,405 ABSTAIN 3,408 BROKER NON-VOTE N/A --------- ----- ----- ----- /s/ Tammy Brusehaven ------------------------------- /s/ Mary Theno ------------------------------- Dated: May 2, 1996 -----END PRIVACY-ENHANCED MESSAGE-----