<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT OF 1934
Commission File Number 0-22101
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IAT MULTIMEDIA, INC.
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(exact name of registrant as specified in its charter)
Delaware 13-3920210
- -------- ----------
(State or other jurisdiction of (I.R.S Employer
Incorporation or organization) Identification No.)
Geschaftshaus Wasserschloss
Aarestrasse 17
CH-5300 Vogelsang-Turgi, Switzerland
(Address of principal executive offices)
(011) (41) (56) 223-5022
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the latest practicable date.
Class Outstanding at October 31, 1997
- ---------------------------- -------------------------------
Common Stock, $.01 par value 9,555,000 shares
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IAT MULTIMEDIA, INC. AND SUBSIDIARIES
FORM 10-Q INDEX
FOR QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
Page No.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at September 30, 1997 3
(unaudited) and December 31, 1996
Consolidated Statements of Operations for Three Months 4
ended September 30, 1997 and 1996 (unaudited)
Consolidated Statements of Operations for Nine Months 5
ended September 30, 1997 and 1996 (unaudited)
Consolidated Statements of Cash Flows for Nine Months 6
ended September 30, 1997 and 1996 (unaudited)
Notes to Consolidated Financial Statements 7-9
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition 10-15
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 15
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURE PAGE 17
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
IAT MULTIMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, Year ended
1997 December 31,
(unaudited) 1996
------------ ------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 7,938,344 $ 264,661
Marketable securities 3,177,570
Accounts receivable, less allowance for doubtful
accounts of $46,520 in 1997 and $20,000 in 1996 127,305 309,133
Inventories 348,566 437,128
Prepaid expenses and other current assets 319,875 192,996
------------ ------------
Total current assets 11,911,660 1,203,918
Equipment and improvements, less accumulated
depreciation and amortization 655,644 638,955
Other assets:
Other assets 438,030 96,667
Deferred registration costs - 276,525
------------ ------------
$ 13,005,334 $ 2,216,065
============ ============
Liabilities and Stockholders' Equity(Deficit)
Current liabilities:
Notes payable, banks $ 1,460,726 $ 1,811,837
Accounts payable and other current liabilities 751,347 1,013,400
Loans payable, stockholders 448,276 1,107,407
------------ ------------
Total current liabilities 2,660,349 3,932,644
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Loans payable, stockholders, net of current portion 425,690 963,704
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Series A Convertible Preferred Stock, $.01 par value,
redeemable, 1,875,000 shares authorized, 1,875,000
shares issued and outstanding at December 31, 1996
and 0 shares issued and outstanding at
September 30, 1997 - 1,400,000
------------ ------------
Stockholders' equity(deficit):
Preferred stock, $.01 par value, authorized
500,000 shares, none issued
Common stock, $.01 par value, 20,000,000 shares
authorized, 9,605,000 shares issued and
9,555,000 shares outstanding at
September 30, 1997 and 4,375,000 shares issued
and outstanding at December 31, 1996 96,050 43,750
Capital in excess of par value 26,194,723 8,002,884
Accumulated deficit (16,647,906) (12,293,447)
Treasury stock at cost, 50,000 shares (206,260) -
Cumulative translation adjustments 482,688 166,530
------------ ------------
Total stockholders' equity(deficit) 9,919,295 (4,080,283)
------------ ------------
$ 13,005,334 $ 2,216,065
============ ============
See Notes to Consolidated Financial Statements
</TABLE>
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IAT MULTIMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
--------------------------------
1997 1996
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<S> <C> <C>
Net Sales $ 122,310 $ 178,775
Cost of Sales 82,867 157,293
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Gross margin 39,443 21,482
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Operating expenses:
Research and development costs:
Expenses incurred 540,045 663,223
Less participations received 5,389 45,726
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Research and development costs, net 534,656 617,497
Selling expenses 515,996 344,206
General and administrative expenses 547,760 367,827
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1,598,412 1,329,530
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Operating loss (1,558,969) (1,308,048)
Other income (expense):
Interest expense (45,671) (52,854)
Interest income 171,874 -
Other income(expense) 1,351 447
------------ -------------
Net loss $ (1,431,415) $ (1,360,455)
============ =============
Loss per share of common stock $ (0.16) $ (0.24)
============ =============
Weighted average number of
common shares outstanding 9,059,324 5,751,715
============ =============
See Notes to Consolidated Financial Statements
</TABLE>
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IAT MULTIMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------------------
1997 1996
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<S> <C> <C>
Net Sales $ 537,561 $ 961,257
Cost of Sales 328,613 689,952
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Gross margin 208,948 271,305
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Operating expenses:
Research and development costs:
Expenses incurred 1,967,604 1,952,079
Less participations received 94,070 272,071
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Research and development costs, net 1,873,534 1,680,008
Selling expenses 1,474,334 1,156,324
General and administrative expenses 1,374,210 1,041,894
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4,722,078 3,878,226
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Operating loss (4,513,130) (3,606,921)
Other income (expense):
Interest expense (169,454) (138,922)
Interest income 362,322 -
Other income 17,428 12,862
------------ -------------
Net loss $ (4,302,834) $ (3,732,981)
============ =============
Loss per share of common stock $ (0.54) $ (0.65)
============ =============
Weighted average number of
common shares outstanding 7,970,762 5,751,715
============ =============
See Notes to Consolidated Financial Statements
</TABLE>
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IAT MULTIMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------------------
1997 1996
------------ -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (4,302,834) $ (3,732,981)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 212,410 166,659
Common stock issued for services 22,500 -
Increase (decrease) in cash attributable to
changes in assets and liabilities:
Accounts receivable 189,068 491,199
Inventories 58,415 (279,871)
Other current assets (168,748) (15,859)
Other assets (341,363) -
Accounts payable and other current liabilities (192,852) 118,475
------------ -------------
Net cash used in operating activites (4,523,404) (3,252,378)
------------ -------------
Cash flows from investing activites
Purchases of equipments and improvements (295,765) (168,855)
Purchase of marketable securities (3,177,570) -
------------ -------------
Net cash used in investing activites (3,473,335) (168,855)
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Cash flows from financing activites
Proceeds from (repayments of) loans payable,
stockholders (1,054,310) 1,117,708
Proceeds from issuance of common stock 17,098,164 1,539,583
Deferred registration costs - (160,000)
Payment of preferred stock dividend (51,625) -
Payment for treasury stock (206,260) -
Proceeds from (repayments of) short-term
bank loan (226,158) 682,485
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Net cash provided by financing activites 15,559,811 3,179,776
------------ -------------
Effect of exchange rate changes on cash 110,611 55,962
------------ -------------
Net increase(decrease) in cash and cash
equivalents 7,673,683 (185,495)
Cash, beginning of period 264,661 198,879
------------ -------------
Cash and cash equivalents, end of period $ 7,938,344 $ 13,384
============ =============
Supplemental disclosures of cash flow
information, cash paid during the
period for interest $ 181,028 $ 128,281
============ =============
Supplemental schedule of non-cash
operating activities, Common stock issued
for services $ 22,500 $ 0
============ =============
Supplemental schedule of non-cash financing
activities, deferred registration costs
paid included in other assets and in
proceeds from issuance of common stock $ 276,525 $ 0
============ =============
See Notes to Consolidated Financial Statements
</TABLE>
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IAT MULTIMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
INTERIM FINANCIAL INFORMATION - The unaudited interim consolidated
financial statements contain all adjustments consisting of normal recurring
adjustments, which are, in the opinion of the management of IAT Multimedia,
Inc. (the "Company"), necessary to present fairly the consolidated financial
position of the Company as of September 30, 1997, and the consolidated results
of operations and cash flows of the Company for the periods presented. Results
of operations for the periods presented are not necessarily indicative of the
results for the full fiscal year. These financial statements should be read in
conjunction with the audited consolidated financial statements and notes
thereto, including the Independent Auditors' Report, filed with the Securities
and Exchange Commission as part of the Company's Registration Statement on
Form S-1.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
include the accounts of IAT Multimedia, Inc., its wholly owned subsidiary IAT
AG, Switzerland, ("IAT Switzerland") and a 74.9% owned subsidiary, IAT
Deutschland GmbH Interaktive Medien Systeme ("IAT GmbH"), Bremen. All
intercompany accounts and transactions have been eliminated.
FOREIGN CURRENCY TRANSLATION - The Company has determined that the
Swiss Franc, the local currency of IAT Switzerland, is the functional
currency. The financial statements of the subsidiaries have been translated
into U.S. dollars in accordance with Statement of Financial Accounting
Standards No. 52 (SFAS No. 52), "Foreign Currency Translation", SFAS No. 52
provides that all balance sheet accounts are translated at period end rates of
exchange (1.45 and 1.35 Swiss Francs for each U.S. Dollar at September 30,
1997 and December 31, 1996, respectively), except for equity accounts which
are translated at historical rates. Income and expense accounts are translated
at the average of the exchange rates in effect during the period. The
resulting translation adjustments are included as a separate component of
stockholders' equity (deficit), whereas gains or losses arising from foreign
currency transactions are included in results of operations.
LOSS PER COMMON SHARE - Loss per share of common stock is based upon
the weighted average number of shares outstanding, including common stock
equivalents. The weighted average includes shares and common stock equivalents
issued within one year of the completion of the Company's initial public
offering (the "IPO") on April 1, 1997 with an issue price less than the
anticipated IPO price. Shares of common stock placed in escrow upon completion
of the IPO have been excluded from the calculation of loss per share.
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IAT MULTIMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2. INVENTORIES
September 30, December 31,
1997 1996
------------ ------------
Raw Materials..............................$ 272,635 $ 406,202
Finished Goods............................. 75,931 30,926
------------ ------------
$ 348,566 $ 437,128
============ ============
NOTE 3. IPO PROCEEDS
On April 1, 1997 the Company received the proceeds from its
IPO of the sale of 3,350,000 shares of its common stock at $6.00 per share,
which generated net proceeds of approximately $16,822,000 after Underwriters`
commission and offering expenses of approximately $3,278,000.
NOTE 4. SUBSEQUENT EVENT
On November 13, 1997, the Company and Dr. Alfred Simmet, the only
limited partner of FSE Computer-Handel GmbH & Co. KG ("FSE") and the only
general shareholder of FSE Computer-Handel Verwaltungs GmbH ("FSE GmbH"),
which is the only general partner of FSE, entered into a purchase agreement
(the "Purchase Agreement"), pursuant to which the Company has agreed to
purchase 80% of Dr. Simmet's shares in FSE and 100% of his shares in FSE GmbH
for an aggregate purchase price of DM 6.4 million, payable in cash and Common
Stock. The Purchase Agreement provides for the payment of the purchase price
in two installments. The first installment was payable to Dr. Simmet in an
amount of DM 3.2 million in cash and 146,949 shares of Common Stock, which
were payable on the date of the Purchase Agreement. The Purchase Agreement
further provides that the shares of Common Stock issued to Dr. Simmet shall
not be sold or transferred by him prior to November 13, 1998. The second
installment of DM 1.6 million is payable in cash to Dr. Simmet on March 13,
1998. As collateral for the payment of the second installment of the purchase
price, the Company has issued to Dr. Simmet a bank guaranty for DM 1.6
million. This guaranty has been secured by the Company through the
establishment of a letter of credit facility with The Citibank Private Bank.
The Purchase Agreement also grants the Company the right to acquire
an additional 10% of the shares of the limited partnership for a purchase
price of DM 1 million. The Company has the right to exercise this option at
any time upon presentment of a written statement of its intent to do so
subject to a right of first refusal of Dr. Simmet's son. Additionally, Dr.
Simmet has the right, under certain conditions, to sell the remaining 10% of
his shares in FSE to the Company, with the purchase price thereof to be
determined from a formula agreed upon by the parties. Until the time that
these respective options are exercised, however, both the Company and Dr.
Simmet have agreed, in their capacity as shareholders of FSE, to grant FSE's
executives the ability to purchase shares in FSE. In connection therewith,
-8-
<PAGE>
IAT MULTIMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Dr. Simmet has agreed to transfer to the participating executives, at the
request of the Company, a limited partner share in FSE for 10% of FSE.
Pursuant to this management option, the participating managers may purchase up
to 10% of the shares of FSE for an aggregate price of DM 800,000.
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<PAGE>
IAT MULTIMEDIA, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
INTRODUCTION
The following management's discussion and analysis of results of
operations and financial condition include forward-looking statements with
respect to the Company's future financial performance. These forward-looking
statements are subject to various risks and uncertainties which could cause
actual results to differ materially from historical results of those currently
anticipated.
The Company is a developer, manufacturer and marketer of
customizable, high-quality visual communications technology for use in
personal computer systems ("PCs").
The Company's visual communications technology currently has three
applications: the Vision and Live multifunctional communications system
("Vision and Live"), computer boards utilizing the Company's visual
communication system technology (the "Wonderboard") and proprietary wavelet
data compression technology for high-performance, high-quality still image
transfer.
The Vision and Live systems permit users of PCs to hold multi-point
video conferences at multiple sites, as well as provide additional video,
audio and data transfer features not available in traditional video
conferencing systems. The technology utilized in the Vision and Live systems
can produce substantially higher quality image and video transmissions,
including reduced noise and artifacts, truer color representation and higher
frame rates, than software-only products and low cost hardwired systems, while
using less of the computing power of the host PC, which permits other
applications to continue to operate without interruption. These systems, which
include both proprietary and third-party software and hardware, are
inter-operable with products from certain other vendors and comply with all
relevant international standards, including H.320. While the Company's Vision
and Live technology has applications in many industrial and professional
fields, the Company has decided to initially focus its efforts on telemedicine
and teleservice.
The Company is currently developing a third generation of its video
communications technology utilizing a programmable digital signal processor
(the "C8x chip"), which was developed by the Company together with several
other companies, including Texas Instruments ("TI"). The C8x chip will allow
for easier upgrades and customization than systems using hardwired chips. The
Company will use the C8x chip in its Wonderboard, which the Company
anticipates marketing and selling to original equipment manufacturers
("OEMs"), VARs and end users for integration into high-performance PCs. The
Company also intends to customize this technology for a variety of industrial
and professional applications. In addition, the Company, together with the
Technical University of Berlin, has developed wavelet data compression and
decompression technology which enhances the quality and speed of still images
transmitted by visual communications systems. The company intends to integrate
this technology into high-performance PCs and continues to evaluate other uses
for the wavelet data compression and decompression software, including
potential Internet applications and sales to OEMs, VARs and end users.
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<PAGE>
The Company's strategy focuses on developing its visual
communications technology as well as selling its existing products. It intends
to continue developing new technologies aimed at the high quality professional
visual communications market. In addition, it intends to expand the fields in
which its current products are utilized gradually and, in certain
circumstances, in partnership with established market leaders such as Olympus.
An integral part of the Company's business strategy is growth through
acquisitions. The Company expects to make additional acquisitions in the
future in the technology or distribution fields.
The Company's revenues have quarterly fluctuations in which the
fourth quarter has historically reflected the highest quarterly revenues, as a
result of the perceived desire by its customers to deplete allocated budgets
for the Company's products prior to the end of the calendar year. There can be
no assurance that this trend will continue. Quarterly fluctuations depend in
part on the timing of introduction of new products by the Company and its
competitors.
RESULTS OF OPERATIONS
THREE MONTH PERIOD ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTH PERIOD
ENDED SEPTEMBER 30, 1996
The average exchange rate for the U.S. Dollar increased by approximately 23.1%
as compared to the Swiss Franc resulting in a decrease in all revenue and
expense accounts in the third quarter 1997 by this same percentage. The
average Swiss Franc to U.S. Dollar exchange rate was SF 1.49 = $1.00 in the
third quarter 1997 as compared to SF 1.21 = $1.00 in the third quarter 1996.
REVENUES. The Company's revenues for the third quarter 1997 decreased
by 31.6% to $122,000 from $179,000 in the comparable period of the prior year.
The decrease is primarily a result of the strengthening of the U.S. Dollar
against the Swiss Franc.
COST OF SALES. Cost of sales for the third quarter 1997 decreased to
$83,000 from $157,000 in the third quarter 1996. The cost of sales as a
percentage of sales decreased to 67.8% from 88.0%. This decrease is primarily
a result of a more competitive pricing structure on the Company's system
sales.
RESEARCH AND DEVELOPMENT COSTS. Research and development costs
incurred decreased by 18.6% to $540,000 in the third quarter 1997 from
$663,000 in the third quarter 1996. This decrease is primarily a result of the
strengthening of the US Dollar against the Swiss Franc. Research
participations decreased by 88.2% to $5,000 for the third quarter 1997 from
$46,000 for the third quarter 1996. This decrease is primarily a result of the
completion of all of the joint development projects with Deutsche Telekom in
1997.
SELLING EXPENSES. Selling expenses increased by 49.9% to $516,000 in
the third quarter 1997 from $344,000 in the third quarter 1996. This increase
is primarily a result of expenses incurred in connection with the production
of market and product communication brochures, an increase of the sales and
marketing personnel and costs related to the marketing agreement entered into
between the Company and General Capital on October 24, 1996, as amended (the
"Marketing Agreement").
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GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses increased by 48.9% to $548,000 in the third quarter 1997 from
$368,000 in the third quarter 1996. The increase is primarily a result of the
Company being a public company since April 1, 1997 the attendant D&O liability
and life insurance premiums, investor relations services not incurred in the
prior year comparable period and in an increase of board member fees, legal
and auditing expenses and other corporate overhead.
INTEREST. Interest expense decreased by 13.6% to $46,000 in the third
quarter 1997 from $53,000 in the third quarter 1996 as a result of a reduction
in outstanding bank loans. Interest income increased to $172,000 in the third
quarter 1997 from zero in the third quarter 1996 as a result of the investment
of the IPO proceeds in short and medium-term investments bearing interest in
the average of approximately 5.5%.
NET LOSS. Net loss for the three months ended September 30, 1997
increased by 5.2% to $1,431,000 from $1,360,000 for the comparable prior year
period. The loss primarily increased as a result of higher operating expenses
partially offset by higher interest income.
NINE MONTH PERIOD ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTH PERIOD ENDED
SEPTEMBER 30, 1996
The average exchange rate for the U.S. Dollar increased by approximately 20.8%
as compared to the Swiss Franc resulting in a decrease in all revenue and
expense accounts in the nine months ended September 30, 1997 by this same
percentage. The average Swiss Franc to U.S. Dollar exchange rate was SF 1.45 =
$1.00 in the nine months ended September 30, 1997 as compared to SF 1.20 =
$1.00 in the nine months ended September 30, 1996.
REVENUES. The Company's revenues for the nine months ended September
30, 1997 decreased by 44.1% to $538,000 from $961,000 in the comparable period
of the prior year. Sales in the nine months ended September 30, 1996 reached a
peak as a result of the introduction of the Company's second generation
systems. The volume of sales has dropped in the nine months ended September
30, 1997 as the customers await the release of the Company's third generation
systems.
COST OF SALES. Cost of sales for the nine months ended September 30,
1997 decreased to $329,000 from $690,000 in the nine months ended September
30, 1996. The cost of sales as a percentage of sales decreased to 61.1% from
71.8%. The decrease is primarily a result of proportionately higher royalty
income from various customers generating high profit margins partially offset
by sales of second generation systems generating lower gross margins at the
end of their life-cycle.
RESEARCH AND DEVELOPMENT COSTS. Research and development costs
incurred increased by 0.8% to $1,968,000 in the nine months ended September
30, 1997 from $1,952,000 in the comparable period of the prior year. The
Company has increased during the first six months of 1997 as compared to the
first six months 1996 the number of employees involved in product development
to complete its third generation of products and has incurred additional
development costs by third parties in connection with the development of the
wavelet compression technology performed by the Technical University of Berlin
and of software and product licenses acquired in connection with the
development of the third generation products. This increase in the six months
period ended June 30, 1997 was partially offset by a decrease in the three
months period ended September 30, 1997. Research participations have
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<PAGE>
decreased by 65.4% to $94,000 for the nine months ended September 30, 1997
from $272,000 for the nine months ended September 30, 1996. This decrease is
primarily a result of the completion of all of the joint development projects
with Deutsche Telekom. In the nine months ended September 30, 1997 $81,000
were received in research participations through a government subsidy granted
by the state government of Berlin. The subsidy is granted for approximately
35%-40% of the actual expenditures incurred in Berlin in connection with the
development of the Wavelet Compression Technology by the Technical University
of Berlin.
SELLING EXPENSES. Selling expenses increased by 27.5% to $1,474,000
in the nine months ended September 30, 1997 from $1,156,000 in the nine months
ended September 30, 1996. This increase is a result of expenses incurred in
connection with the production of market and product communication brochures,
an increase in trade fair expenses, an enhancement of the sales and marketing
personnel and costs related to the Marketing Agreement concluded with General
Capital.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses increased by 31.9% to $1,374,000 in the nine months ended September
30, 1997 from $1,042,000 in nine months ended September 30, 1996. The increase
is primarily a result of the Company being a public company since April 1,
1997, the attendant D&O liability and life insurance premiums, investor
relations services not incurred in the prior year comparable period and in an
increase of board member fees, legal and auditing expenses and other corporate
overhead.
INTEREST. Interest expense increased by 22.0% to $169,000 in the nine
months ended September 30, 1997 from $139,000 in the nine months ended
September 30, 1996. This increase is principally due to the increase in
stockholders' loans in the first quarter 1997 which were repaid in April 1997,
partially offset by a reduction of outstanding bank loans in the second and
third quarter 1997. Interest income increased to $362,000 in the nine months
ended September 30, 1997 from zero in the nine months ended September 30, 1996
as a result of the investment of the IPO proceeds in short and medium-term
investments bearing interest in the average of approximately 5.5%.
NET LOSS. Net loss for the nine months ended September 30, 1997
increased by 15.3% to $4,303,000 from $3,733,000 for the comparable prior year
period. The loss primarily increased as a result of the Company's increase in
operating expenses, a decrease in research participations partially offset by
an increase of interest income.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased by $7,674,000 during the nine
months ended September 30, 1997 as compared to a decrease of $185,000 during
the nine months ended September 30, 1996. The increase is the result of the
IPO proceeds received on April 1, 1997
Net cash used in operating activities totaled $4,523,000 during the
nine months ended September 30, 1997 compared to $3,252,000 during the nine
months ended September 30, 1996. The increase is primarily due to prepaid
insurance premiums and marketing agreement expenses and an increase of the net
loss for the nine months ended September 30, 1997.
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<PAGE>
Net cash used in investing activities totaled $3,473,000 during nine
months ended September 30, 1997 compared to $169,000 during the nine months
ended September 30, 1996. The increase is primarily a result of the investment
of part of the IPO proceeds in marketable securities.
Net cash provided by financing activities totaled $15,560,000 during
the nine months ended September 30, 1997 as compared to $3,180,000 during the
nine months ended September 30, 1996. During the nine months ended September
30, 1997 cash was provided by net proceeds from issuance of common stock of
$17,098,000 partially offset by repayments of loans to stockholders and of
short-term bank loans, the payment of a preferred stock dividend and a
repurchase by the Company of its common stock pursuant to a stock repurchase
plan. In the nine months ended September 30, 1996 cash was provided by loans
from stockholders ($1,118,000), an increase of short term bank loans
($682,000) and net proceeds from issuance of common stock ($1,540,000).
The Company has credit lines and loans with a Swiss and a German bank
in the aggregate of approximately $1,500,000. The credit lines and loans are
due on demand. The Swiss bank line of credit currently has outstanding
approximately $900,000 and will be repaid in monthly installments of
approximately $140,000 starting on October 31, 1997.
The Company's expenditures are currently exceeding its revenues by
approximately $480,000 per month, principally as a result of continued
research and development related to new products which are expected to
generate additional revenue for the Company. In the third quarter of 1997,
certain of the Company's product development projects were completed resulting
in a decrease in product development expenditures. In addition, the Company is
restructuring its workforce to eliminate future duplication of cost, in
particular in the sales and marketing organization in light of potential
acquisitions. The Company has reduced marketing expenses in its German
subsidiary including the termination effective as of September 30, 1997 of
approximately 15 of 45 employees. While these terminations may require certain
severance payments under German Labor Law resulting in short-term increases in
expenses, the Company believes that the long-term effect will be a reduction
in expenses for the Company and a better competitive position. The Company
continues to evaluate the acquisition of potential strategic partners of
additional applications and broader marketing of its technology. The Company's
ability to become profitable is dependent on the completion of the development
of its third generation of products, a timely release of the products and
market penetration.
Cash and cash equivalents at September 30, 1997 amount to $7,938,000.
Investments in marketable securities at September 30, 1997 amount to
$3,178,000. The Company believes that its funds should be sufficient to
finance its research and development, capital and debt service requirements
and its working capital requirements for approximately the 12 months period
following September 30, 1997. However, the Company's requirements are subject
to numerous contingencies associated with the early stage of the Company's
third generation products.
SUBSEQUENT EVENT
On November 13, 1997, the Company and Dr. Alfred Simmet, the only
limited partner of FSE Computer-Handel GmbH & Co. KG ("FSE") and the only
general shareholder of FSE Computer-Handel Verwaltungs GmbH ("FSE GmbH"),
which is the only general partner of
-14-
<PAGE>
FSE, entered into a purchase agreement (the "Purchase Agreement"), pursuant to
which the Company has agreed to purchase 80% of Dr. Simmet's shares in FSE and
100% of his shares in FSE GmbH for an aggregate purchase price of DM 6.4
million, payable in cash and Common Stock. The Purchase Agreement provides for
the payment of the purchase price in two installments. The first installment
was payable to Dr. Simmet in an amount of DM 3.2 million in cash and 146,949
shares of Common Stock, which were payable on the date of the Purchase
Agreement. The Purchase Agreement further provides that the shares of Common
Stock issued to Dr. Simmet shall not be sold or transferred by him prior to
November 13, 1998. The second installment of DM 1.6 million is payable in cash
to Dr. Simmet on March 13, 1998. As collateral for the payment of the second
installment of the purchase price, the Company has issued to Dr. Simmet a bank
guaranty for DM 1.6 million. This guaranty has been secured by the Company
through the establishment of a letter of credit facility with The Citibank
Private Bank.
The Purchase Agreement also grants the Company the right to acquire
an additional 10% of the shares of the limited partnership for a purchase
price of DM 1 million. The Company has the right to exercise this option at
any time upon presentment of a written statement of its intent to do so
subject to a right of first refusal of Dr. Simmet's son. Additionally, Dr.
Simmet has the right, under certain conditions, to sell the remaining 10% of
his shares in FSE to the Company, with the purchase price thereof to be
determined from a formula agreed upon by the parties. Until the time that
these respective options are exercised, however, both the Company and Dr.
Simmet have agreed, in their capacity as shareholders of FSE, to grant FSE's
executives the ability to purchase shares in FSE. In connection therewith, Dr.
Simmet has agreed to transfer to the participating executives, at the request
of the Company, a limited partner share in FSE for 10% of FSE. Pursuant to
this management option, the participating managers may purchase up to 10% of
the shares of FSE for an aggregate price of DM 800,000.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
-15-
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The Company completed an initial public offering of Common Stock
in the United States (the "Offering"). The registration statement for the
Offering (file no. 333-18529) became effective on March 26, 1997. The
Offering began on March 26, 1997. Of the 3,350,000 shares of Common Stock
registered (at a proposed maximum aggregate offering price of $20,100,000,
3,350,000 were sold (at an aggregate sales price of $20,100,000), and the
over-allotment option granted to the underwriters to purchase an additional
502,500 shares of Common Stock expired unexercised and the shares were
deregistered. The managing underwriter for the Offering was Royce Investment
Group, Inc.
During the period from March 26, 1997 through June 26, 1997,
the Company paid a total of $2,840,276 in expenses in connection with
the Offering, including $1,608,000 in underwriters's commissions and
discounts, $452,500 for underwriters' expenses, and $779,776 in other
expenses. None of these expenses were paid, directly or indirectly, to
directors, officers, 10% shareholders or affiliates of the Company or their
associates.
The net proceeds received by the Company from the Offering, after
deducting the payments referred to above, were $17,259,724. During the
period from March 26, 1997 through September 30, 1997, the Company
utilized $6,259,637 of the proceeds from the Offering. Of this amount,
approximately $1,821,000 were utilized for repayment of shareholders' loans,
approximately $417,000 for repayment of bank loans, approximately $400,000
for prepayment of marketing agreement expenses, approximately $230,000
for the purchase of machinery and equipment, approximately $1,260,000 for
research and development and approximately $2,132,000 went for working
capital and general corporate purposes including approximately $206,000 for
repurchase of 50,000 shares of the Company's Common Stock. On the Company's
Form S-R, filed on June 26, 1997, the Company reported that $12,423,150 of
the proceeds from the Offering remain unused. As of September 30, 1997,
$11,000,087 of the proceeds from the Offering remain unused.
In July 1997, the Company issued 5,000 shares of Common Stock to
Ballin & Partners, as compensation for services rendered to the Company. This
issuance of Common Stock was in a private transaction not involving a public
offering and, thus, exempt from the registration provisions of the Securities
Act of 1933, as amended, pursuant to Section 4(2) thereof.
ITEM 5. OTHER INFORMATION
In July, 1997, the Company repurchased 50,000 shares of its Common
Stock pursuant to its July, 1997 stock repurchase plan. The purchase was made
in an open-market transaction at the then-prevailing market price.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 10.1 - Amendment No. 1 to the Joint Development
and Cross License Agreement, dated June 2, 1997,
between Texas Instruments Incorporated and IAT AG.
Exhibit 10.2 - License Agreement, dated June 2, 1997,
between Texas Instruments Incorporated and IAT AG.
Exhibit 11 - Statement re computation of per share earnings
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
Form 8-K filed with the Securities and Exchange Commission
on September 5, 1997 under Item 5, reporting the appointment
of Reiner Hallauer as the Managing Director of IAT
Deutschland GmbH and the restructuring of its workforce.
-16-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IAT MULTIMEDIA, INC.
/s/ Dr. Viktor Vogt
--------------------------------
Dr. Viktor Vogt
Co-Chairman of the Board of
Directors and Chief Executive
Officer and President
/s/ Klaus Grissemann
--------------------------------
Klaus Grissemann
Chief Financial Officer
Date: November 13, 1997
-17-
<PAGE>
TI/IAT
Agreement #MSCI10850
Page 1 of 2
05/21/97
AMENDMENT NO. 1
BETWEEN
TEXAS INSTRUMENTS INCORPORATED
AND
IAT AG
WHEREAS, TEXAS INSTRUMENTS INCORPORATED with its offices located at 8505
Forest Lane, Dallas, Texas 75243 ("TI" herein) and IAT AG with offices
located at Geschaeftschaus Wasserschloss Aarestrasse 17, 5300
Vogelsang-Turgi, Switzerland ("IAT" herein) have previously entered into July
18, 1996 Agreement #MSC10850 (the "Agreement" herein) related to licensing of
TI Products and IAT Products as well as the development of Joint Products
exchanged between IAT and TI;
NOW THEREFORE, the parties hereby agree to amend the above referenced
Agreement by adding the following new language:
1. Modify Secton 3.1 in its entirety to read:
"3.1 With the exception of the VC Development Software, Reference Design
Transfer, Intermode Message Manager, Direct Draw Client Driver-WIN95,
and B Channel Network Driver and subject to IAT completing its
obligations and granting of licenses to TI as elsewhere provided herein,
TI grants to IAT a worldwide, non-transferable, non-assignable,
non-exclusive license under TI's copyrights and associated trade secrets
solely to use, modify, compile, or otherwise develop as applicable
software programs which may be original or derivative with respect to
the counterpart TI products, and to make, have made, use, and sublicense
use of object code versions of such software programs solely for
operation on TI DSP's. TI DSP's are defined to be any TMS320CXX
Microprocessor manufactured by Texas Instruments. Except with respect to
the Databeam software, which shall be royalty bearing as provided in
Section 4 herein, all licenses hereunder shall be fully paid. All the
terms and conditions of this license shall be applicable to any
modifications of the Licensed Products made pursuant to this Agreement.
In the case of the VC Development Software, Internode Message Manager,
Direct Draw Client Driver-WIN95 and B Channel Network Driver, all
license rights above apply except that such licenses to IAT shall be
exclusive."
2. The license granted by IAT to TI in Section 3.6, 3.7 and 3.8 shall
terminate upon execution of this Amendment No. 1; provided that
termination of such license shall not effect the rights of TI's current
sublicensees.
3. Add to the end of Section 7 the following:
"7.4 TI represents and warrants that upon execution of this Amendment
No. 1, it will not continue to exercise its current right to license to
third parties the VisionPoint 80 printed circuit board design.
7.5 IAT represents and warrants that it will provide to TI upon TI's
request maintenance and support services for the H.320/H.324 library at
a level no less than IAT currently offers to its other customers, and
under terms and conditions no less favorable than IAT currently offers
to its other customers similarly situated."
Except as herein above amended, the provisions of the Agreement remain
unchanged and fully effective.
[continued on the next page]
<PAGE>
TI/IAT
Agreement #MSCI10850
Page 2 of 2
05/21/97
IN WITNESS WHEREOF, the parties have caused this Amendment No. 1 to be
executed by their duly authorized representatives as of the date of last
signature below.
<TABLE>
<CAPTION>
<S> <C>
TEXAS INSTRUMENTS INCORPORATED IAT
By: /s/ Michael J. Hames By: /s/ Dr. Victor Vogt
-------------------------------------------- -------------------------
Name: Michael J. Hames Name: Dr. Victor Vogt
Title: Vice President, Semiconductor Group Title: CEO
Date: 6/2/97 Date: 5/5/97
------------------------------------------ -----------------------
</TABLE>
<PAGE>
TI/IAT
Page 1 of 7
05/21/97
License Agreement #122317
EXHIBIT 10.2
LICENSE AGREEMENT
This Agreement ("Agreement") is entered into by and between the Semiconductor
Group of TEXAS INSTRUMENTS INCORPORATED, a Delaware Corporation with its
offices at 8505 Forest Lane, M/S 8670, Dallas, Texas 76243 ("TI" herein), and
IAT AG with principal offices at IAT AG, Geschaftshaus Wasserschloss,
Aarestrasse 17, CH5300 Votgelsang-Turgi, Switzerland ("LICENSEE" herein).
1. PURPOSE AND SCOPE
For the purpose of assisting LICENSEE in its development of products for
use with TI's TMS320C8X product family, TI agrees to deliver to LICENSEE the
software product(s) and related documentation described as Licensed Products
in Schedule 1 (collectively referred to as "Licensed Product"). LICENSEE
wishes to combine the Licensed Product with a video telephony platform that
will run with one or more of TI's 320C8x product family. The aforementioned
platform will be used and will be licensed to OEMs and/or sold to end user
customers. LICENSEE agrees that such Licensed Product shall be used solely in
conjunction with systems designed exclusively for one of TI's 320C8x product
family, and that such use shall be subject to the terms and conditions of
this Agreement.
2. TITLE
TI represents that it has the rights to grant the license to the Licensed
Product. Nothing contained in this Agreement shall be construed as
transferring any right, title, or interest in the Licensed Product to
LICENSEE except as expressly set forth herein.
3. LICENSE AND OBLIGATIONS
3.1 TI grants to LICENSEE, only under TI's copyrights and trade secrets, a
non-transferable, non-assignable, non-exclusive license solely to use,
modify, compile, or otherwise develop as applicable, a software program
("Modified Application Program"), which may be original or derivative with
respect to the Licensed Product, for use solely in conjunction with systems
designed exclusively for TI's 320C8X product family.
3.1.1 LICENSEE may make one copy of the Licensed Product for internal
back-up purposes. LICENSEE agrees that as a condition for obtaining its
rights hereunder, each copy of the Licensed Product, or any portion thereof
or documentation therefor, shall contain a valid copyright notice and any
other proprietary notices, including the copyright notices of TI and/or TI's
suppliers, which appear on or in the Licensed Product and documentation
delivered to LICENSEE hereunder or as TI may require from time to time, in
order to protect TI's copyright and other ownership interests. Presence of a
copyright notice does not constitute an acknowledgment of publication.
LICENSEE shall reproduce on the copy of the Licensed Product, and on all
copies of the Modified Application Program, all copyright notices and any
other proprietary notices exactly as and where they appear on the Licensed
Product delivered, or as closely as possible where a change in media
precludes exact reproduction.
3.1.2 LICENSEE shall maintain any source code of the Licensed Product as
confidential, and shall not disclose, distribute, or disseminate any such
source code to any third parties.
3.2 LICENSEE is expressly prohibited from reverse compiling, reverse
assembling, and reverse engineering any portion of the Licensed Product
provided in object format.
<PAGE>
TI/IAT
Page 2 of 7
05/21/97
License Agreement #122317
3.3 TI grants to LICENSEE under only TI's copyrights and trade secrets, a
non-transferable, non-assignable, non-exclusive license solely to copy and
distribute only object code versions of the Modified Application Program for
use solely in conjunction with systems designed exclusively for TI's 320C8X
product family.
3.3.1 LICENSEE shall ensure that all sublicensees must reproduce on every
copy made, all copyright notices and any other proprietary notices exactly as
and where they appear on the Licensed Product delivered, or as closely as
possible where a media change precludes reproduction.
3.3.2 LICENSEE shall ensure that all sublicensees are expressly prohibited
from reverse compiling, reverse assembling, and reverse engineering the
Licensed Product or the Modified Application Program.
3.3.3 LICENSEE shall ensure that all sublicensees restrict their end users
by written agreement from copying, modifying, distributing, reverse
engineering and reverse assembling or reverse compiling the Licensed Product
or the Modified Application Program, except that end users may make one (1)
copy for back-up purposes only.
3.4 LICENSEE shall ensure that all of its end users are restricted by
written notice from copying, modifying, distributing, reverse engineering and
reverse assembling or reverse compiling the Licensed Product or the Modified
Application Program.
3.6 LICENSEE agrees that it will not disclose any portion, or all of the
Licensed Product or the accompanying documentation in any form to any
employees, with the exception of employees (i) who require access thereto for
a purpose authorized by this Agreement and (ii) who have signed an
appropriate employee agreement committing them to abide by the obligations
and restrictions in this Agreement or who are otherwise required to maintain
confidentiality of information hereunder pursuant to an enforceable written
agreement that requires such employee to use the same degree of care, but no
less than a reasonable degree of care, as the LICENSEE uses to protect its
own similiar confidential information, and to prevent any use not authorized
herein, dissemination to any employee of LICENSEE without a need to know,
communication to any third party or publication of the confidential
information.
3.7 LICENSEE shall ensure that the same degree of care is used to prevent
the unauthorized use, dissemination, or publication of the Licensed Product
as Licensee uses to protect its own confidential information, but in no event
shall the safeguards for protecting such Licensed Product be less than a
reasonably prudent business would exercise. Such safeguards, shall include at
a minimum, storage of Licensed Product in a secure, locked area when not in
use, LICENSEE shall prevent unauthorized use or disclosure of Licensed
product by its employees, including those who have access to the Licensed
Product.
3.7.1 LICENSEE's employees who have access to the Licensed Product shall
be instructed to copy Licensed Product only as permitted under this Agreement
and to disclose Licensed Product only to other employees of LICENSEE that
LICENSEE has authorized to have access to the Licensed Product.
<PAGE>
TI/IAT
Page 3 of 7
05/21/97
License Agreement #122317
3.7.2 Source code of Licensed Product shall be handled, used, and stored
under appropriately controlled passwords and shall be used solely at the
LICENSEE's site(s) listed below Agreement, and only on the following
designated CPU: Serial Number:_____________, Make: Sun Spark Server, Model:
1000E. LICENSEE may change this designated CPU by providing written notice to
TI at the address below, within thirty (30) days of such change:
Texas Instruments Incorporated
P.O. Box 1443, M/S 730
Houston, TX 77251
3.8 LICENSEE recognizes and acknowledges all TI's claim(s) to techniques,
algorithms, and processes contained in the Licensed Product which have been
developed, acquired, or licensed by TI, or any modification or extraction
thereof, constitute trade secrets of TI and/or its suppliers, and will be
used by LICENSEE only in accordance with the terms of this Agreement.
LICENSEE will take all measures reasonably required to protect the
proprietary rights of TI and its suppliers in the Licensed Product and will
promptly notify TI of any lost or missing items and take all reasonable steps
to recover such items.
3.9 If LICENSEE engages in a Clone Product development or marketing of a
LICENSEE created product having capabilities that are similar to those
provided by the Licensed Product or TI's 320C8X product family ("Clone
Product" herein), during the term of this Agreement, LICENSEE shall ensure
that there is no sharing with the Clone Product development of (i) the
Licensed Product or (ii) any laboratory, office or research facilities
containing Licensed Product. LICENSEE shall not use any TI trademarks in
association with any Clone Product. The provisions of this Paragraph 3.10
shall survive the termination, cancellation or expiration of this Agreement
for a period of twelve (12) months after the Licensed Product is returned to
TI or destroyed.
3.10 LICENSEE shall maintain reasonable documentation sufficient to
identify all employees, Contractors, all employees of such Contractors, or
other third parties who are proposed to have access to the source code of
Licensed Product.
3.11 During the term of this Agreement and for a period of eighteen (18)
month thereafter, TI or its authorized representatives, upon advance written
notice, shall have access to such portion of LICENSEE's records as is
necessary to allow TI to determine whether LICENSEE is substantially in
compliance with this Agreement. In no event shall audits be made hereunder
more frequently than every six (6) months. Such access shall be (a) during
LICENSEE's regular business hours, (b) arranged so that, to the extent
possible, LICENSEE'S regular business activities are minimally disrupted and
(c) under the terms of an appropriate confidentiality agreement executed by
the individual(s) conducting such audit. If TI determines, after conducting
such audit, that LICENSEE is not substantially in compliance with this
agreement, LICENSEE shall pay the costs of such audit. Otherwise, TI shall
pay the costs of such audit. Such payment will not preclude TI from
exercising any right which it may have under this Agreement. LICENSEE shall
immediately correct any deficiencies discovered during the course of the
audit.
3.12 The obligations of this section 3 shall survive termination or
expiration of this Agreement.
<PAGE>
TI/IAT
Page 4 of 7
05/21/97
License Agreement #122317
4. LICENSE FEES
4.1 All applicable License fees and/or royalties payable hereunder shall
be as indicated in Section 2 of Schedule 1, (incorporated herein by this
reference), and shall be exclusive of all governmental taxes, fees or tariffs
which shall be paid by LICENSEE.
4.2 The License Fee will include an upfront payment in the amount
indicated in Section 2 of Schedule 1. The License Fee shall be payable within
thirty (30) days of delivery of the Licensed Products to LICENSEE.
4.3 Per copy royalty fees apply to items specified in Section 2 of
Schedule 1, and to Modified Applications Programs derived from the items
specified, and are charged for each copy made and distributed or placed into
service, except that no additional royalty will be charged or updates to
copies provided to end users for which the appropriate royalty has previously
been paid.
4.4 If royalties are payable hereunder, TI shall have the right once each
calendar year to inspect the books and records of LICENSEE and any authorized
sublicensees of LICENSEE in order to verify the royalty reports provided by
LICENSEE to TI. LICENSEE shall make available to TI the books and records of
LICENSEE and sublicensees at their respective places of business during
regular hours. TI will give reasonable notices of its intent to perform an
audit. LICENSEE shall promptly pay any understated sums disclosed by the
audit. In the event royalty reports prove to be understated by 10% or more,
LICENSEE shall pay all costs of TI conducting the audit. TI shall have the
right to conduct a final audit upon expiration or termination of this
License.
4.5 All payment notices and checks shall be sent by registered mail to:
ASP Controller
Texas Instruments Incorporated
Semiconductor Group
P.O. Box 1443, M/S 710
Houston, Texas 77251-1443
If not otherwise specified by this Agreement, any notice relating to this
Agreement shall be deemed given when sent by registered mail, with proof of
delivery to the carrier, to the other party at the address listed below:
TI:
Texas Instruments Incorporated
P.O. Box 660199
Dallas, Texas 76243
Dallas, Texas 75266-0199
Attention: Manager, Business Services
LICENSEE:
IAT AG, Geschaftshaus Wasserschloss
Aarestrasse 17, CH5300 Votgelsang-Turgi
Switzerland
4.6 Royalty Payments charged for each copy made of the Licensed Product or
the Modified Application Program shall be payable within thirty (30) days of
each calendar quarter, detailing the number of copies made by LICENSEE or
with LICENSEE'S authorization.
<PAGE>
TI/IAT
Page 5 of 7
05/21/97
License Agreement #122317
4.7 Royalty reports shall be made quarterly within thirty (30) days of
each calendar quarter, detailing the number of copies made by LICENSEE, or
with LICENSEE'S authorization, providing a list of the entities who made
copies, and stating the amount of royalties paid. Royalty reports shall be
maintained for a period of two (2) years from the date of each report. A
final report shall be made on expiration or termination of this License.
4.8 LICENSEE shall ensure that a valid and enforceable sublicense
agreement is entered into with all sublicensees containing all of the
restrictions of the license grant set forth in this Section.
5. TERMS AND TERMINATION
5.1 the term of this Agreement shall be for a period of five (5) years
from the date of execution of this Agreement.
5.2 TI may, in its sole discretion, terminate this License in the event of
breach by LICENSEE, with forty-five (45) days prior written notice from TI,
and failure to cure by LICENSEE within that forty-five (45) day period.
5.3 Upon termination of this License, LICENSEE will return and/or certify
destruction of all copies of the Licensed Products in its possession.
LICENSEE may keep one copy of the object code of the Licensed Product for
archival purposes. LICENSEE may not keep any copies of Licensed Product
source code for any purposes, and must return and/or certify destruction of
all source code copies of the Licensed Product. Termination shall not affect
the royalty obligations of LICENSEE.
6. WARRANTY
6.1 Nothing contained herein shall constitute a warranty or
representation by TI to maintain production of the hardware with which the
Licensed Product is to be used.
6.2 The media on which the Licensed Product is supplied shall be warranted
against defects in material and workmanship under normal use for a period of
(90) days from the date shipped. TI will replace defective media returned to
TI within the ninety (90) day warranty period.
6.3 TI does not warrant that the functions contained in the Licensed
Product will be free from error or will meet LICENSEE'S specific
requirements. TI shall have no responsibility or liability for errors or
product malfunction resulting from LICENSEE'S use, modification, copying, or
distribution of the Licensed Product. LICENSEE assumes complete
responsibility for decisions made or actions taken based on information
obtained using the Licensed Product. Any statements concerning the utility of
the Licensed Products are not to be construed as expressed or impled
warranties.
6.4 THE FOREGOING WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR
IMPLIED INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
7. LIMITATION OF DAMAGES
IN NO EVENT WILL EITHER PARTY BE LIABLE FOR SPECIAL, COLLATERAL,
INCIDENTAL OR CONSEQUENTIAL DAMAGES IN CONNECTION WITH OR ARISING OUT OF THIS
AGREEMENT OR USE OF THE LICENSED PRODUCTS. THESE EXCLUDED DAMAGES INCLUDE,
BUT ARE NOT LIMITED TO, COST OF REMOVAL OR REINSTALLATION, OUTSIDE COMPUTER
TIME, LABOR
<PAGE>
TI/IAT
Page 6 of 7
05/21/97
License Agreement #122317
COSTS, LOSS OF GOODWILL, LOSS OF PROFITS, LOSS OF SAVINGS, OR LOSS OF USE OR
INTERRUPTION OF BUSINESS. THE SOLE AND EXCLUSIVE LIABILITY OF EITHER PARTY,
REGARDLESS OF THE FORM OF ACTION, WILL NOT EXCEED THE PAYMENTS MADE FOR THIS
LICENSE BY LICENSEE UNDER THIS AGREEMENT.
8. EXPORT
The re-export of United States original software is subject to United
States laws under Export Administration Act of 1969 as Amended. Any further
sale or distribution of the Licensed Product shall be done in compliance with
the United States Department of Commerce Administration Regulations.
Compliance with such regulations is the responsibility of LICENSEE and not
the responsibility of TI.
9. CONSTRUCTION
THE AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF TEXAS FOR CONTRACTS MADE TO BE PERFORMED IN THE STATE OF TEXAS.
10. INTEGRATION
This Agreement shall constitute the entire agreement between the parties,
and shall supersede all previous agreements, whether oral or written,
concerning Licensed Products. Any amendments to this Agreement shall be in
writing and executed by authorized representatives of both parties.
11. NO PUBLICITY
Neither party will publicly announce this Agreement or release any
information pertaining hereto publicly, without the prior written consent of
the other party.
IN WITNESS WHEREOF, this Agreement is hereby executed by the undersigned who
are respectively duly authorized representatives of TI and LICENSEE, and
shall become effective on the date of the last signature below.
TEXAS INSTRUMENTS INCORPORATED
Semiconductor Group
8505 Forest Lane, M/S 8670
Dallas, Texas 75243
By: /s/ Michael J. Hames
------------------------------------
Name: Michael J. Hames
Title: Vice President, Semiconductor Group
------------------------------------
Date: 6/2/97
------------------------------------
LICENSEE
IAT AG, Geschaftshaus Wasserschloss
Aarestrasse 17, CH5300 Votgelsang-Turgi
Switzerland
By: /s/ Dr. Vogt
------------------------------------
Name: Dr. Vogt
----------------------------------
Title: Chief Executive Officer
-----------------------------------
Date: 5/5/97
----------------------------------
<PAGE>
EXHIBIT 11 - STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
The computation of the weighted average number of shares for the
Company is comprised of the following:
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
Number --------------------------------------------------------
Date of Shares 1997 1996 1997 1996
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance carried 01-Jan-96 4,375,000 4,375,000 4,375,000 4,375,000 4,375,000
forward
Stock issued 01-Apr-97 3,350,000 2,233,333 3,350,000
22-Jul-97 5,000 1,282 3,804
Conversion of
Series A Preferred 1,875,000 1,875,000 1,875,000 1,875,000 1,875,000
Less Treasury stock 07-Jul-97 (50,000) (15,568) (46,195)
Less escrow shares (498,285) (498,285) (498,285) (498,285) (498,285)
--------------------------------------------------------
Total 7,970,762 5,751,715 9,059,324 5,751,715
========================================================
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 7,938,344
<SECURITIES> 3,177,570
<RECEIVABLES> 173,825
<ALLOWANCES> 46,520
<INVENTORY> 348,566
<CURRENT-ASSETS> 11,911,660
<PP&E> 655,644
<DEPRECIATION> 0
<TOTAL-ASSETS> 13,005,334
<CURRENT-LIABILITIES> 2,660,349
<BONDS> 0
0
0
<COMMON> 96,050
<OTHER-SE> 9,823,245
<TOTAL-LIABILITY-AND-EQUITY> 13,005,334
<SALES> 537,561
<TOTAL-REVENUES> 537,561
<CGS> 328,613
<TOTAL-COSTS> 328,613
<OTHER-EXPENSES> 4,722,078
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 169,454
<INCOME-PRETAX> (4,302,834)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,302,834)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,302,834)
<EPS-PRIMARY> (0.54)
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</TABLE>
