<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1999
-------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF
1934
Commission File Number 0-22101
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IAT MULTIMEDIA, INC.
--------------------
(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) 223-5078
------------------------
(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 August 13, 1999
- --------------------------- ------------------------------
Common Stock, $.01 par value 9,863,363 shares
<PAGE>
IAT MULTIMEDIA, INC. AND SUBSIDIARIES
FORM 10-Q INDEX
FOR QUARTERLY PERIOD ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at June 30, 1999 3
(unaudited) and December 31, 1998
Consolidated Statements of Operations for Three Months 4
ended June 30, 1999 and 1998 (unaudited)
Consolidated Statements of Operations for Six Months 5
ended June 30, 1999 and 1998 (unaudited)
Consolidated Statements of Cash Flows for Six Months 6
ended June 30, 1999 and 1998 (unaudited)
Notes to Consolidated Financial Statements 7-10
Item 2. Management's Discussion and Analysis of 11-18
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures 18
About Market Risk
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 2. Changes in Securities and Use of Proceeds 19
Item 3. Default upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 20-21
SIGNATURE PAGE 22
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
IAT MULTIMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
(unaudited)
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,556,430 $ 5,614,182
Marketable securities 750,000 750,000
Accounts receivable, less allowance for doubtful accounts of
$135,160 in 1999 and $166,159 in 1998 1,594,524 1,564,945
Inventories 1,350,502 2,359,896
Other current assets 750,550 396,924
------------- -------------
Total current assets 9,002,006 10,685,947
Equipment and improvements, net 438,555 578,939
Other assets:
Other receivables 578,963 580,385
Notes receivable from affiliates 0 562,286
Excess of cost over net assets acquired, net 3,490,740 4,155,972
Other assets 417,810 300,541
------------- -------------
$ 13,928,074 $ 16,864,070
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable, banks $ 270,883 $ -
Accounts payable 1,423,947 2,696,911
Other current liabilities 1,056,079 1,104,774
------------- -------------
Total current liabilities 2,750,909 3,801,685
------------- -------------
Convertible debenture 2,973,000 3,000,000
------------- -------------
Minority interest 26,596 72,079
------------- -------------
Stockholders' equity:
Preferred stock, $.01 par value, authorized 10,000,000 shares,
issued 2,000 shares in 1999 and nil shares in 1998 20 -
Common stock, $.01 par value, authorized 50,000,000 shares,
issued 10,064,019 in 1999 and 10,048,826 in 1998 100,640 100,488
Capital in excess of par value 32,464,010 30,416,979
Accumulated deficit (22,017,517) (20,982,472)
Cumulative translation adjustment (165,307) 661,571
Treasury stock (248,255 shares in 1999 and 50,000
shares in 1998) (2,204,277) (206,260)
------------- -------------
Total stockholders' equity 8,177,569 9,990,306
------------- -------------
$ 13,928,074 $ 16,864,070
============= =============
</TABLE>
See Notes to Consolidated Financial Statements
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<PAGE>
IAT MULTIMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
-------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Net sales $ 8,589,766 $ 6,689,183
Cost of sales 7,825,065 6,178,541
------------ ------------
Gross margin 764,701 510,642
------------ ------------
Operating expenses:
Selling expenses 647,505 484,864
General and administrative expenses 155,104 230,928
------------ ------------
802,609 715,792
------------ ------------
Operating loss before corporate overhead
depreciation and amortization (37,908) (205,150)
Corporate overhead 365,184 315,546
Depreciation and amortization 176,003 162,064
------------ ------------
Operating loss (579,095) (682,760)
Other income (expense):
Interest expense (49,672) (31,725)
Interest income 60,692 65,058
Discount on convertible debenture (448,277)
Other income (expense) (43,161) 2,736
Minority interest in net loss of subsidiary 62,735 55,506
------------ ------------
Loss before income taxes (benefit) (548,501) (1,039,462)
Income taxes (benefit) 8,650 (131,106)
------------ ------------
Net loss $ (557,151) $ (908,356)
============ ============
Net loss per share - basic and diluted $ (0.06) $ (0.10)
============ ============
Weighted average number of common shares
outstanding 9,316,021 9,227,629
============ ============
</TABLE>
See Notes to Consolidated Financial Statements
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<PAGE>
IAT MULTIMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------------------
1999 1998
-------------- -------------
<S> <C> <C>
Net sales $ 21,554,197 $ 15,451,246
Cost of sales 20,085,251 14,008,135
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Gross margin 1,468,946 1,443,111
-------------- -------------
Operating expenses:
Selling expenses 1,289,099 1,042,118
General and administrative expenses 323,051 359,221
-------------- -------------
1,612,150 1,401,339
-------------- -------------
Operating income (loss) before corporate overhead
depreciation and amortization (143,204) 41,772
Corporate overhead 648,492 489,757
Depreciation and amortization 364,218 298,430
-------------- -------------
Operating loss (1,155,914) (746,415)
Other income (expense):
Interest expense (99,729) (55,119)
Interest income 126,805 153,512
Discount on convertible debenture 0 (448,277)
Other income (expense) (6,570) 6,925
Minority interest in net loss of subsidiary 105,220 15,090
-------------- -------------
Loss before income taxes (benefit) (1,030,188) (1,074,284)
Income taxes (benefit) 4,857 (131,106)
-------------- -------------
Net loss $ (1,035,045) $ (943,178)
============== =============
Net loss per share - basic and diluted $ (0.11) $ (0.10)
============== =============
Weighted average number of common shares
outstanding 9,322,849 9,215,713
============== =============
</TABLE>
See Notes to Consolidated Financial Statements
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<PAGE>
IAT MULTIMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,035,045) $ (943,178)
Adjustments to reconcile net loss to net cash used
in operating activities:
Discount on convertible debenture 0 448,277
Depreciation of equipment 136,174 123,087
Amortization of goodwill 228,044 175,343
Minority interest in loss (105,220) (15,090)
Deferred taxes payable (18,833) (136,738)
Increase (decrease) in cash attributable to
changes in assets and liabilities:
Accounts receivable (203,372) (161,196)
Inventories 778,936 322,079
Other current assets (24,156) 122,665
Other assets 69,581 (119,173)
Accounts payable and other current liabilities (987,864) (1,865,383)
------------ ------------
Net cash used in operating activites (1,161,755) (2,049,307)
------------ ------------
Cash flows from investing activities:
Loans to and investments in, affiliated companies - (921,198)
Repayment of loans receivable, affiliates 167,477 -
Purchases of equipment and improvements (189,354) (173,733)
Sale of investments - 978,340
------------ ------------
Net cash used in investing activities (21,877) (116,591)
------------ ------------
Cash flows from financing activities:
Repayment of loans payable, stockholders - (1,322,960)
Proceeds from (repayment of) convertible debenture (27,000) 3,000,000
Proceeds from issuance of common stock, net proceeds 28,130 1,652,500
Capital contribution, stockholders - 464,003
Proceeds from (repayments of) short-term bank loan 279,497 (332,524)
------------ ------------
Net cash provided by financing activities 280,627 3,461,019
------------ ------------
Effect of exchange rate changes on cash (154,747) 3,298
------------ ------------
Net increase (decrease) in cash (1,057,752) 1,298,419
Cash and cash equivalents, beginning of period 5,614,182 5,472,928
------------ ------------
Cash and cash equivalents, end of period $ 4,556,430 $ 6,771,347
============ ============
Supplemental disclosures of cash flow information,
Cash paid during the period for interest $ 7,779 $ 65,391
============ ============
Cash paid during the period for income related taxes $ 34,567 $ 73,336
============ ============
Cash received during the period for income related taxes $ 96,798 $ 0
============ ============
Spinoff of assets and liabilities held for disposition $ - $ 1,077,920
============ ============
Supplemental schedule of non-cash financing activities,
Common stock issued for repayment of convertible
debentures $ 28,130 $ 0
============ ============
</TABLE>
See Notes to Consolidated Financial Statements
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<PAGE>
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.
(hereinafter the "Company" or "IAT"), necessary to present fairly the
consolidated financial position of the Company as of June 30, 1999, 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 included in the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission for the year ended December 31,
1998.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
include the accounts of IAT, its wholly-owned subsidiaries IAT AG, Switzerland
("IAT AG"), IAT Deutschland GmbH Interactive Medien Systeme Bremen ("IAT GmbH"),
and the General Partner of FSE Computer-Handel GmbH & Co. KG, and 80% of the
limited partnership interest of FSE (collectively "FSE"), and 100% of both the
General Partner of and the limited partnership interests in
Columbus-Computer-Handels und Vertriebs GmbH & Co. KG ("Columbus") (collectively
the "Company"). All intercompany accounts and transactions have been eliminated.
EXCESS OF COST OVER NET ASSETS ACQUIRED - Goodwill represents the
excess of cost over the fair market value of net assets of acquired businesses
and is amortized over a period of 10 years from the acquisition date. The
Company monitors the cash flows of the acquired operations to assess whether any
impairment of recorded goodwill has occurred. Amortization for the six month
periods ended June 30, 1999 and 1998 was approximately $228,000 and $175,000,
respectively.
FOREIGN CURRENCY TRANSLATION - The Company has determined that the
local currency of its Switzerland subsidiary, Swiss Francs, is the functional
currency for IAT AG and IAT GmbH and the Deutsch Mark is the functional currency
for FSE and Columbus. The financial statements of the subsidiaries have been
translated into U.S. dollars in accordance with Statement of Financial
Accounting Standards No. 52 (SFAS 52), "Foreign Currency Translation". SFAS 52
provides that all balance sheet accounts are translated at period-end rates of
exchange (1.55 and 1.37 Swiss Francs and 1.88 and 1.67 Deutsch Marks for each
U.S. dollar at June 30, 1999 and December 31, 1998, respectively), except for
equity accounts which are translated at historical rates. Income and expense
accounts and cash flows are translated at the average of the exchange rates in
effect during the year. The resulting translation adjustments are included as a
separate component of other comprehensive income in the statements of
stockholders' equity and consolidated statement of comprehensive loss, whereas
gains or losses arising from foreign currency transactions are included in
results of operations.
LOSS PER COMMON SHARE - Basic earnings per share excludes dilution and
is computed by dividing loss applicable to common stockholders by the weighted
average number of common shares outstanding for the period. The weighted average
number of common shares includes shares issued within one year of the Company's
initial public offering ("IPO") with an issue price less than the IPO price, and
excludes shares of the Company's common stock (the "Common Stock") placed in
escrow upon the completion of the IPO. Diluted earnings per share reflects the
potential dilution that could occur if securities or other contracts to issue
Common Stock were exercised or converted into Common Stock or
-7-
<PAGE>
resulted in the issuance of Common Stock that then shared in the earnings of the
entity. Diluted loss per common share is the same as basic loss per common share
for the periods ended June 30, 1999 and 1998. The Company has unexercised
options and warrants in addition to shares issuable upon conversion of its
convertible debentures which are not included in the computation of diluted loss
per share because their effect would have been antidilutive as a result of the
Company's losses.
COMPREHENSIVE LOSS - Effective January 1, 1998 the Company adopted SFAS
130, "Reporting Comprehensive Income".
NOTE 2. INVENTORIES:
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------- -----------
<S> <C> <C>
Work in process............................... $ 17,605 $ 70,659
Purchased finished goods...................... 1,332,897 2,289,237
----------- -----------
$ 1,350,502 $ 2,359,896
=========== ===========
</TABLE>
NOTE 3. SPINOFFS:
On March 6, 1998, the Company transferred the business and
substantially all of the assets and the liabilities of its majority-owned
subsidiary, IAT GmbH, to a newly-formed German company, ALGO Vision Systems (the
"German Spinoff"). ALGO Vision Systems is substantially owned by an entity
controlled by the former co-chairman of the Board of Directors and a current
director of the Company. The Company owns 15% of the outstanding common stock of
ALGO Vision Systems. The German Spinoff was effective on January 1, 1998 and
required the Company to infuse approximately $650,000 of capital. In connection
with the German Spinoff, IAT AG purchased the remaining 25.1% interest in IAT
GmbH from the minority stockholder for a purchase price of approximately
$100,000. In addition, the Company provided ALGO Vision Systems with a loan of
approximately $300,000 for working capital requirements through March 6, 1998.
This loan bears interest at a rate of 5% per annum. The loan was repaid in two
installments 1998 and 1999 (See Note 5 - Subsequent Events).
On March 24, 1998, the Company transferred the business and certain of
the assets and liabilities of its wholly-owned subsidiary IAT AG to a
newly-formed Swiss company, ALGO Vision Schweiz (the "Swiss Spinoff") ALGO
Vision Schweiz is substantially owned by an entity controlled by the former
co-chairman of the Board of Directors and a current director of the Company. The
Company owns 15% of the outstanding common stock of ALGO Vision Schweiz. The
Swiss Spinoff was effective January 1, 1998. At closing, the Company received a
note ("Purchase Note"), due March 24, 2001, for approximately $325,000
representing the value of the assets in excess of the liabilities that were
transferred on March 24, 1998. In addition, the Company loaned ALGO Vision
Schweiz $250,000 ("The Note") for operating cash flow. The Note is due the
earlier of the date that ALGO Vision Schweiz raises either debt or equity
financing in excess of SF 1,000,000 or March 24, 2001. Both notes provide for
the payment of interest semi-annually beginning September 1, 1998 at a rate of
3% per annum. The balance of the notes at June 30, 1999 is approximately
$519,000. The notes will be repaid prior to August 22, 1999 (see Note 5
Subsequent Events).
-8-
<PAGE>
NOTE 4. CONVERTIBLE DEBENTURES:
The Company entered into a securities purchase agreement (the "Purchase
Agreement"), dated as of June 19, 1998, with two purchasers (the "Investors").
The transaction consisted of the issuance of 198,255 shares of the Company's
Common Stock and $3 million aggregate principal amount of the Company's 5%
Convertible Debentures due 2001 ("Debentures") for $5 million. The Debentures
are convertible into shares of common stock at the option of either the Company
(subject to certain limitations) or the Investors. Sales of the shares of common
stock issuable upon conversion by the Investors are subject to certain volume
limitations. Any portion of the Debentures remaining unconverted on October 27,
2000 shall convert automatically into shares of common stock. The number of
shares of common stock issuable upon conversion of the Debentures is the lesser
of (i) 120% of the average of the closing bid prices from the five trading days
immediately preceding the Original Issue Date (as defined in the Purchase
Agreement) and (ii) 87% of the average of the five lowest closing bid prices
during the 15 trading days immediately preceding the conversion date. The
Company recorded a discount on the Debentures due to the conversion features of
approximately $450,000 which is included in interest expense in the six month
period ended June 30, 1998.
In January 1999, the Company exchanged the 198,255 shares of common
stock issued in June 1998 for 2,000 shares of Series B Convertible Preferred
Stock ("Series B Stock"). Each share of Series B Stock shall be convertible into
shares of common stock, and at the option of the holder, at any time from the
issue date at $10.88 per share. The Series B Stock shall be convertible into
shares of common stock, at the option of the Company, at any time on or after
December 30, 1999, if certain conditions are met, or prior to such time if the
common stock reaches certain thresholds. All shares of Series B Stock not
previously converted into shares of common stock shall automatically convert in
January 2002.
In April 1999, the holder of the Debentures converted $27,000 of the
Debenture, plus accrued interest on the principal amount converted, and received
6,632 shares of the Company's common stock.
In August 1999, the holder of the Debentures converted $100,000 of the
Debenture, plus accrued interest on the principal amount converted, and received
47,599 shares of the Company's common stock.
NOTE 5. SUBSEQUENT EVENTS:
In connection with the spin off of our research and development
activities in March 1998, the Company granted Algo Vision Schweiz AG, one of the
entities formed in connection with the spin-off, an option to purchase a 50%
co-ownership interest in the Company's visual communications intellectual
property. In July 1999, as part of the reorganization of the Algo Vision
entities, Algo Vision Schweiz and Algo Vision Systems Gmbh, the other entity
formed in connection with the spin-off, became wholly-owned subsidiaries of Algo
Vision plc, an English company whose shares began trading on the European
Association of Securities Dealers Automated Quotation System on July 23, 1999.
Under the terms of a series of agreements between the Company, Algo Vision plc
and Algo Vision Schweiz (i) Algo Vision Schweiz transferred its option to
purchase the Company's intellectual property rights to Algo Vision plc, (ii)
Algo Vision plc agreed to purchase the Company's visual communications
intellectual property rights ( other than the IAT name or mark) and (iii) the
Company agreed to exchange its 15% equity interest in each of Algo
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<PAGE>
Vision Systems and Algo Vision Schweiz, for shares of capital stock of Algo
Vision plc. Dr. Vogt, one of the Company's directors, owns approximately 26.2%
of the outstanding shares of Algo Vision plc.
Under the terms of the agreements, Algo Vision plc purchased a 50%
interest in the Company's visual communications intellectual property rights for
$1,000,000 in July 1999 and purchased the remaining 50% interest for an
additional $2,500,000 in August 1999. Algo Vision plc also agreed to pay the
Company royalties (ranging from 5% to 10%) on the sale of certain products
utilizing the visual communications technology until August 2001. In connection
with the transaction, Algo Vision Schweiz has agreed to repay, prior to
August 22, 1999, outstanding loans, aggregating approximately $500,000, made by
the Company to Algo Vision Schweiz as part of the spin-off.
In addition, as part of the reorganization of the Algo Vision entities,
the Company exchanged its 15% interest in each of Algo Vision Systems and Vision
Schweiz, for 500,000 shares of Algo Vision plc (valued at $5,000,000 at EASDAQ
admission). These shares are subject to a lock-up agreement for a period of six
months, subject to certain exceptions. In August 1999, the Company purchased an
additional 250,000 shares of Algo Vision plc for a purchase price of $2,500,000,
of which 200,000 shares are subject to a lock-up agreement for a period of three
months, subject to certain exceptions.
NOTE 6. CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ --------------------------
1999 1998 1999 1998
---------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
Net Loss $ (557,151) $ (908,356) $ (1,035,045) $ (943,178)
Other comprehensive income
(loss) net of tax- Foreign
currency translation
adjustments (247,559) 50,310 (826,878) 3,298
---------- ---------- ------------ ----------
$ (804,710) $ (858,046) $ (1,861,923) $ (939,880)
========== ========== ============ ==========
</TABLE>
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<PAGE>
IAT MULTIMEDIA, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Unless the context otherwise requires, "we" or "us" refers to IAT
Multimedia, Inc., the Delaware corporation, and its subsidiaries. The
subsidiaries are:
o FSE Computer-Handel GmbH & Co. KG, a German limited partnership of
which we own 80% of the partnership interest, and FSE
Computer-Handel Verwaltungs GmbH, a German corporation of which we
own 100% of the stock ; and
o the following subsidiaries of which we own 100% of the equity:
o Columbus Computer Handels- und Vertriebs GmbH & Co. KG, a
German limited partnership, and Columbus Computer Handels-
und Vertriebs- Verwaltungs GmbH, a German corporation;
o IAT AG, a Swiss corporation, and
o IAT Deutschland GmbH Interaktive Medien Systeme, a German
corporation
This Form 10-Q contains forward-looking statements within the meaning of the
"safe Harbor" provision under Section 21E of the Securities Exchange Act of 1934
and the Private Securities Litigation Reform Act of 1995. We use forward-looking
in our description of our plans and objectives for future operations and
assumptions underlying these plans and objectives. Forward-looking terminology
includes the words "may", "expects", "believes", "anticipates", "intends",
"projects", or similar terms, variations of such terms or the negative of such
terms. These forward-looking statements are based on management's current
expectations and are subject to factors and uncertainties which could cause
actual results to differ materially from those described in such forward-looking
statements. We expressly disclaim any obligation or undertaking to release
publicly any updates or revisions to any forward-looking statements contained in
this Form 10-Q to reflect any change in our expectations or any changes in
events, conditions or circumstances on which any forward-looking statement is
based. Factors which could cause such results to differ materially from those
described in the forward-looking statements include those set forth under "Risk
Factors" and elsewhere in, or incorporated by reference from time to time into
our filings with the Securities and Exchange Commission. These factors include
the following: we have experienced significant operating losses, changed our
principal business and we cannot predict whether we will become profitable; our
operating results will be adversely affected by charges from acquisitions; our
strategy of acquiring other companies for growth may not succeed; we need
additional funds for future acquisitions; our substantial debt reduces cash
available for our business, may adversely affect our ability to obtain
additional funds and increase our vulnerability to economic or business
downturns; we face intense competition in the German PC industry; risks relating
to foreign operations and other risks.
-11-
<PAGE>
OVERVIEW
We were formed in September 1996 as a holding company for the existing
business of IAT AG and IAT Germany, which were engaged in developing products
for the visual communications industry. In November 1997, we acquired 100% of
the shares of capital stock of the general partner of FSE and 80% of the
outstanding limited partnership interests of FSE. Effective October 31, 1998, we
acquired 100% of the shares of capital stock of the general partner of Columbus
and all of the outstanding limited partnership interests of Columbus.
Through FSE and Columbus, we market in Germany high-performance PCs
assembled according to customer specifications and sold under the trade name
"Trinology," as well as components, software and peripherals for PCs. Our
product line includes high-performance IBM-compatible desktop PCs as well as
components, such as motherboards, hard disks, graphic cards and plug-in cards,
peripherals, such as printers, monitors and cabinets, and software. Our clients
are corporate customers, including industrial, pharmaceutical, service and trade
companies, the military and value added resellers. We market our products
directly through our internal sales force to dealers and end-users and also
maintain two retail showrooms and a mail-order department. We work directly with
a wide range of suppliers to evaluate the latest developments in PC-related
technology and engage in extensive testing to optimize the compatibility and
speed of the components which are sold and integrated into Trinology PCs.
In connection with the Columbus acquisition we consolidated a portion
of our existing peripherals business into that of Columbus. FSE will concentrate
primarily on the marketing of its high-performance built-to-order PCs and
Columbus will focus primarily on the distribution of components and peripherals.
In July 1999, we sold a 50% interest in our visual communications
intellectual property rights to Algo Vision plc. In August 1999, Algo Vision plc
purchased the remaining 50% interest in our visual communications intellectual
property and agreed to pay us royalties (ranging from 5% to 10%) on the sale of
certain products utilizing the visual communications technology until August
2001. In connection with the transaction, Algo Vision Schweiz, a wholly owned
subsidiary of Algo Vision plc, agreed to repay, prior to August 22, 1999,
outstanding loans, aggregating approximately $500,000, made by us to Algo Vision
Schweiz as a part of the spin-off in March 1998 (See "Note 5 - Subsequent
Events" and "Item 5 -Other Information").
In addition, as a part of the reorganization of the Algo Vision
entities, we exchanged our 15% interest in each of Algo Vision Systems and Algo
Vision Schweiz, for 500,000 shares of Algo Vision plc. These shares are subject
to a lock-up agreement for a period of six months, subject to certain
exceptions. In August 1999, we purchased an additional 250,000 shares of Algo
Vision plc, of which 200,000 shares are subject to a lock-up agreement for a
period of three months, subject to certain exceptions (See "Note 5 - Subsequent
Events" and "Item 5 - Other Information").
Our sales are made to customers principally in Switzerland and Germany
with revenues created in Deutsche Marks and Swiss Francs. The functional
currency of IAT Switzerland and IAT Germany is the Swiss Franc. The functional
currency of Columbus and FSE is the Deutsche Mark. We currently engage in
limited hedging transactions, which are
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<PAGE>
not material to our operations, to offset the risk of currency fluctuations. We
may increase or discontinue these hedging activities in the future.
In the following discussions, most percentages and dollar amounts have
been rounded to aid presentation. As a result, all such figures are
approximations.
RESULTS OF OPERATIONS
THREE MONTH PERIOD ENDED JUNE 30, 1999 COMPARED TO THREE MONTH PERIOD ENDED
JUNE 30, 1998
The average exchange rate for the U.S. Dollar increased as compared to the Swiss
Franc and the Deutsch Mark by approximately 1.3% and 3.4% respectively. The
average Swiss Franc to U.S. Dollar exchange rate was SF1.51 = $1.00 in the
second quarter of 1999 as compared to SF 1.49 = $1.00 in the second quarter of
1998. The average Deutsch Mark to U.S. Dollar exchange rate was DM 1.85 = $1.00
in the second quarter of 1999 as compared to DM 1.79 = $1.00 in the second
quarter of 1998.
We acquired FSE in November 1997 and Columbus effective as of October
31, 1998 and transferred the assets and liabilities and the businesses of one of
our German subsidiaries and our Swiss subsidiary in March 1998, effective
January 1998. These transactions cause a lack of quarter to quarter
comparability because our results of operations for the three months ended June
30, 1999 include the operations of FSE and Columbus, while our results of
operations for the three months ended June 30, 1998 include only the operations
of FSE.
REVENUES. Revenues for the second quarter 1999 increased by 28.4% to
$8,590,000 from $6,690,000 in the second quarter 1998. This increase is
primarily a result of Columbus's PC peripheral sales, partially offset by a
reduction of FSE's sales primarily due to the closing of one of the FSE's retail
stores and our focus on the sale of peripherals and components which produce
lower revenues but higher profit margins rather than bulk sales which produce
high revenues but low profit margins.
COST OF SALES. Cost of sales increased by 26.6% to $7,825,000 in the
second quarter 1999 from $6,179,000 in the second quarter 1998. The cost of
sales as a percentage of sales decreased to 91.1% in the second quarter 1999
from 92.4% in the second quarter 1998 primarily as a result of our strategy to
focus on the sale of peripherals and components which produce lower revenues but
higher profit margins rather than bulk sales which produce high revenues but low
profit margins.
SELLING EXPENSES. Selling expenses increased by 33.6% to $648,000 in
the second quarter 1999 from $485,000 in the second quarter 1998. This increase
is due primarily to selling expenses incurred by Columbus which are not included
in the second quarter 1998, and is partially offset by a reduction of selling
expenses incurred by FSE due to the restructuring of FSE.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses decreased by 32.9% to $155,000 in the second quarter 1999 from $231,000
in the second quarter 1998, primarily due to a reduction of expenses incurred by
FSE as a result of our restructuring of FSE, partially offset by administrative
expenses incurred by Columbus which are not included in the second quarter 1998.
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<PAGE>
CORPORATE OVERHEAD. Corporate overhead increased by 15.5% to $365,000
in the second quarter 1999 from $316,000 in the second quarter 1998, primarily
due to a new corporate structure resulting from the Columbus and FSE
acquisitions.
INTEREST. Interest expense increased by 56.3% to $50,000 in the second
quarter 1999 from $32,000 in the second quarter 1998. This increase is primarily
a result of interest accrued on our 5% convertible debentures.
Interest income decreased by 6.2% to $61,000 in the second quarter 1999
from $65,000 in the second quarter 1998, primarily as a result of a reduction of
our interest bearing time deposits and marketable securities.
NET LOSS. The net loss for the second quarter 1999 decreased by 38.7%
to $557,000 from $908,000 for the second quarter 1998. This decrease is
primarily due to the operating results of Columbus during the second quarter
1999 and a reduction of discount on our convertible debentures which was a
one-time charge to operations recorded in the second quarter 1998.
OPERATING LOSS BEFORE CORPORATE OVERHEAD, INTEREST, INCOME TAXES,
DEPRECIATION AND AMORTIZATION. Operating loss before corporate overhead,
interest, income taxes, depreciation and amortization in the second quarter 1999
decreased to $38,000 from $205,000 in the second quarter 1998. This decrease is
primarily due to the operating results of Columbus during the second quarter
1999 which resulted in an EBITDA of $188,000 in the second quarter 1999.
Operating loss before corporate overhead; interest, income taxes,
depreciation and amortization should not be considered an alternative to
operating income, net income, cash flows or any other measure of performance as
determined in accordance with generally accepted accounting principles, as an
indicator of operating performance or as a measure of liquidity.
SIX MONTH PERIOD ENDED JUNE 30, 1999 COMPARED TO SIX MONTH PERIOD ENDED JUNE 30,
1998
The Average Swiss Franc to U.S.Dollar exchange rate was SF 1.47 = $1.00
in the six months ended June 30, 1999 as compared to SF 1.48 = $1.00 in the six
months ended June 30, 1998. The average Deutsch Mark to U.S. Dollar exchange
rate was DM 1.80 =$1.00 in the six months ended June 30, 1999 and DM 1.80 =
$1.00 in the six months ended June 30, 1998.
We acquired FSE in November 1997 and Columbus effective as of October
31, 1998 and transferred the assets and liabilities and the businesses of one of
our German subsidiaries and our Swiss subsidiary in March 1998, effective
January 1998. These transactions cause a lack of comparability because our
results of operations for the six months ended June 30, 1999 include the
operations of FSE and Columbus, while our results of operations for the six
months ended June 30, 1998 include only the operations of FSE.
REVENUES. Revenues for the six month ended June 30, 1999 increased by
39.5% to $21,554,000 from $15,451,000 in the six month ended June 30, 1998. This
increase is a result of Columbus's PC peripheral sales, partially offset by a
reduction of FSE's sales due primarily to the closing of one of the FSE's retail
stores and our focus on the sale of peripherals and components in the second
quarter 1999 which produce lower revenues but higher profit margins rather than
bulk sales which produce high revenues and low profit margins.
-14-
<PAGE>
COST OF SALES. Cost of sales increased by 43.4% to $20,085,000 in the
six month ended June 30, 1999 from $14,008,000 in the six month ended June 30,
1998. The cost of sales as a percentage of sales increased to 93.2% in six month
ended June 30, 1999 from 90.7% in the six month ended June 30, 1998 primarily as
a result of an increase in sales of PC components, which generally produce lower
gross profit margins than fully assembled PCs. In addition, many of the
components purchased by us during the first quarter 1999 were purchased in
U.S.Dollars and we incurred higher costs for these components as a result of the
strengthening of the U.S.Dollar against the Deutsch Mark of approximately 8%
during the first quarter 1999. During the second quarter 1999 we focused our
sales on peripherals and components which produce higher gross profit margins
and as a result partially offset the increase in cost of sales encountered
in the first quarter 1999.
SELLING EXPENSES. Selling expenses increased by 23.7% to $1,289,000 in
the six month ended June 30, 1999 from $1,042,000 in the six month ended June
30, 1998. This increase is due to selling expenses incurred by Columbus which
are not included in the six month ended June 30, 1998, and is partially offset
by a reduction of selling expenses incurred by FSE due to the restructuring of
FSE.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses decreased by 10.0% to $323,000 in the six month ended June 30, 1999
from $359,000 in the six month ended June 30, 1998, primarily due a reduction of
expenses incurred by FSE as a result of our restructuring of FSE, partially
offset by administrative expenses incurred by Columbus which are not included in
the six month ended June 30, 1998.
CORPORATE OVERHEAD. Corporate Overhead increased by 32.2% to $648,000
in the six month ended June 30, 1999 from $490,000 in the six month ended June
30, 1998, primarily due to a new corporate structure resulting from the Columbus
and FSE acquisitions.
INTEREST. Interest expense increased by 81.8% to $100,000 in the six
month ended June 30, 1999 from $55,000 in the six month ended June 30, 1998.
This increase is primarily a result of interest accrued on our 5% convertible
debentures.
Interest income decreased by 17.5% to $127,000 in the six month ended
June 30, 1999 from $154,000 in the six month ended June 30, 1998, primarily as a
result of a reduction of our interest bearing time deposits and marketable
securities.
NET LOSS. The net loss for the six months ended June 30, 1999 increased
by 9.8% to $1,035,000 from $943,000 for the six months ended June 30, 1998. This
increase is primarily a result of increased costs for components purchased by us
during the first quarter 1999 in U.S.Dollars and for which we incurred higher
costs as a result of the strengthening of the U.S.Dollar against the Deutsch
Mark of approximately 8% during the first quarter 1999. Net loss also increased
as a result of an increase in operating expenses and an increase in goodwill
amortization related to the Columbus acquisition, partially offset by a
reduction of discount on our convertible debentures which was a one-time charge
to operations recorded in the second quarter 1998.
OPERATING LOSS BEFORE CORPORATE OVERHEAD, INTEREST, INCOME TAXES,
DEPRECIATION AND AMORTIZATION. Operating loss before corporate overhead,
interest, income taxes, depreciation and amortization in the six months ended
June 30, 1999 increased to $143,000 from an operating income of $42,000 in the
six months ended June 30, 1998. This increase is primarily a result of increased
costs for components purchased by us during the first quarter 1999 in
U.S.Dollars resulting in lower gross profit margins due to the strengthening of
the
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<PAGE>
U.S.Dollar against the Deutsch Mark. Operating loss before corporate overhead;
interest, income taxes, depreciation and amortization should not be considered
an alternative to operating income, net income, cash flows or any other measure
of performance as determined in accordance with generally accepted accounting
principles, as an indicator of operating performance or as a measure of
liquidity.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1999, the Company's cash and cash equivalents and
investments in corporate bonds decreased to $4,556,000 and $750,000,
respectively, as compared to $5,614,000 and $750,000, respectively, at December
31, 1998.
Net cash used in operating activities totaled $1,162,000 during the six
months ended June 30, 1999 compared to $2,049,000 during the six months ended
June 30, 1998. This decrease is primarily the result of a reduction of cash used
for the payment of accounts payable and other current liabilities and a
reduction of inventories.
Net cash used in investing activities totaled $22,000 during the six
months ended June 30, 1999 compared to $117,000 during the six months ended June
30, 1998. During the six months ended June 30, 1999 cash was primarily used for
the purchase of equipment and for the new accounting, procuring, order
management and invoicing system, partially offset by the repayment of certain
loans by Algo Vision during the six months ended June 30, 1999. During the six
months ended June 30, 1998 cash was used to pay for the acquisition of 25.1% of
the common stock of IAT Germany in the amount of $96,000, for 15% each of the
common stock of Algo Vision Systems and Algo Vision Schweiz in the aggregate
amount of $19,000 and for loans to these companies in the aggregate amount of
$805,000 and for the purchase of equipment. These payments were offset by the
sale of marketable securities.
Net cash provided by financing activities during the six month ended
June 30, 1999 amounted to $281,000 primarily due to an increase in short-term
bank loans as compared to $3,461,000 during the six months ended June 30, 1998.
During the six months ended June 30, 1998 cash was primarily provided from the
issuance of common stock and the issuance of convertible debentures in the
aggregate amount of $4,653,000. In addition, cash was provided by a capital
contribution by certain stockholders. These amounts were partially offset by the
repayment of stockholder loans, including the second installment of the FSE
purchase price and the repayment of short-term bank loans.
Cash, cash equivalents and investments in corporate bonds at June 30,
1999 amounted to $5,306,000. We believe that our funds should be sufficient to
finance our working capital requirements and our capital and debt service
requirements for approximately the 12 months period following June 30, 1999,
depending on acquisitions. We may require additional funds for acquisitions and
integration and management of acquired businesses. However, we have no
commitments or arrangements to obtain any additional funds and we cannot predict
whether additional funds will be available on terms favorable to us or at all.
If we cannot obtain funds when required, the growth of our business may be
adversely affected.
In June 1998, we sold $3,000,000 aggregate principal amount of our 5%
Convertible Debentures due 2001. In April 1999 and in August 1999, the holder of
the debentures converted $27,000 and $ 100,000, respectively, of such
debentures, plus accrued interest on the principal amount converted, and
received 6,632 and 47,599, respectively, shares of our
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<PAGE>
common stock. As a result, as of August 9, 1999, $2,873,000 aggregate principal
amount of such debenture, plus interest, remained outstanding. (See note 4).
In July 1999, we sold a 50% interest in our visual communications
intellectual property rights to Algo Vision plc for $1,000,000. In August 1999,
Algo Vision plc purchased the remaining 50% interest in our visual communication
intellectual property for an additional $2,500,000 and agreed to pay us
royalties (ranging from 5% to 10%) on the sale of certain products utilizing the
visual communications technology until August 2001. In connection with the
transaction, Algo Vision Schweiz, a wholly owned subsidiary of Algo Vision plc,
agreed to repay, prior to August 22, 1999, outstanding loans, aggregating
approximately $500,000, made by us to Algo Vision Schweiz as part of the
spin-off in March 1998.
In addition , as part of the reorganization of the Algo Vision
entities, we exchanged our 15% interest in each of Algo Vision Systems and Algo
Vision Schweiz, for 500,000 shares of Algo Vision plc (valued at $5,000,000 on
the date of Algo Vision plc's admission to EASDAQ). These shares are subject to
a lock-up agreement for a period of six months, subject to certain exceptions.
In August 1999, we purchased an additional 250,000 shares of Algo Vision plc for
a purchase price of $2,500,000, of which 200,000 shares are subject to a lock-up
agreement for a period of three months, subject to certain exceptions.
YEAR 2000 COMPLIANCE
The Year 2000 issue is the result of using only the last two digits to
indicate the year in computer hardware and software programs and embedded
technology such as micro-controllers. As a result, these programs do not
properly recognize a year that begins with "20" instead of the familiar "19." If
uncorrected, such programs will be unable to interpret dates beyond the year
1999, which could cause computer system failure or miscalculations and could
disrupt our operations and adversely affect its cash flows and results of
operations.
We recognize the importance of the Year 2000 issue and have established
a project team with the objective to ensure an uninterrupted transition to the
year 2000 by assessing, testing and modifying products and information
technology and non-IT systems so that such systems and software will perform as
intended and information and dates can be processed with expected results. The
scope of the Year 2000 compliance effort includes (i) IT such as software and
hardware; (ii) non-IT systems or embedded technology; and (iii) the readiness of
key third parties, including suppliers and customers, and the electronic date
interchange with those key third parties.
Independent of the Year 2000 issue, we have installed new financial
accounting, procurement, order management and invoicing systems. These systems
are fully operational. Testing of these systems for Year 2000 compliance has
been completed and we believe that such systems are Year 2000 compliant. In the
event such systems are not Year 2000 compliant, we have developed a contingency
plan which includes increasing normal inventories of critical supplies prior to
December 31, 1999 and ensuring that all critical staff are available or
scheduled to work prior to, during and immediately after December 31, 1999.
THIRD PARTIES. In addition to internal Year 2000 IT and non-IT remediation
activities, we are in contact with key suppliers and vendors to minimize
disruptions in the relationship
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<PAGE>
between us and these important third parties from the Year 2000 issue. We have
requested Year 2000 compliance certification from each of such vendors and
suppliers for their hardware and software products and for their internal
business applications and processes. While we cannot guarantee compliance by
third parties, we will consider alternate sources of supply, which we believe
are generally available in the event a key supplier cannot demonstrate its
systems or products are Year 2000 compliant.
OUR PRODUCTS. We believe that all hardware products included in Trinology PCs
shipped since the fourth quarter of 1997 are Year 2000 compliant and hardware
products included in Trinology PCs shipped prior to such time can be made Year
2000 compliant through upgrade of software patches. We have requested Year 2000
compliance certificates from each of our suppliers and vendors from parts and
components installed in our Trinology PCs.
The replacement of our existing financial accounting, procurement,
order management and invoicing systems is estimated at approximately $350,000,
however, only a portion of the cost of these systems is attributable to the Year
2000 issue. While we estimate that the Year 2000 effort will have a nominal cost
impact, there can be no assurance as to the ultimate cost of the Year 2000
effort or the total cost of information systems.
Our current estimates of the amount of time and costs necessary to
achieve Year 2000 compliance are based on the facts and circumstances existing
at this time. The estimates were made using assumptions of future events
including the continued availability of certain resources, Year 2000
modification plans, implementation success by key third-parties, and other
factors. New developments may occur that could affect our estimates of the
amount of time and costs needed to achieve Year 2000 compliance. These
developments include, but are not limited to: (i) the availability and cost of
personnel trained in this area; (ii) unanticipated failures in our IT and non-IT
systems; and (iii) the planning and Year 2000 compliance success that suppliers
and vendors attain.
We cannot determine the impact of these potential developments on the
current estimate of probable costs of achieving Year 2000 compliance.
Accordingly, we are not able to estimate our possible future costs beyond the
current estimate of costs. As new developments occur, these cost estimates may
be revised to reflect the impact of these developments on the costs to us of
making our products and IT and non-IT systems Year 2000 compliant. Such
revisions in costs could have a material adverse impact on our results of
operations in the quarterly period in which they are recorded. Although we
consider it unlikely, such revisions could also have a material adverse effect
on our business, financial condition or results of operations.
Like virtually every company, we are at risk for the failure of major
infrastructure providers to adequately address potential Year 2000 problems. We
are highly dependent on a variety of public and private infrastructure providers
to conduct our business in numerous jurisdictions throughout the country.
Failures of the banking system, basic utility providers, telecommunication
providers and other services, as a result of Year 2000 problems, could have a
material adverse effect on our ability to conduct our business. While we are
cognizant of these risks, a complete assessment of all such risks is beyond the
scope of our Year 2000 assessment or our ability to address. We have focused our
resources and attention on the most immediate and controllable Year 2000 risks.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
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<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
We did not issue any equity securities during the three months ended
June 30, 1999 which were not registered under the Securities Act of 1933, except
as follows:
In April 1999, we issued 6,632 shares of our common stock to the holder
of our 5% Convertible Debentures upon the conversion of $27,000 of the principal
amount of the debenture, plus accrued interest on the principal amount
converted.
In August 1999, we issued 47,599 shares of our common stock to the
holder of our 5% Convertible Debentures upon the conversion of $100,000 of the
principal amount of the debenture, plus accrued interest on the principal amount
converted.
The above transactions were private transactions not involving a public
offering and were exempt from the registration provisions of the Securities Act
of 1933 under Section 4(2) or Regulation D of the Securities Act. The sale of
such securities was without the use of an underwriter, and the certificates for
the shares contain a restrictive legend permitting the transfer of such
securities only upon registration of the shares or an exemption under the
Securities Act.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
ALGO VISION TRANSACTION
In connection with the spin off of our research and development
activities in March 1998, we granted Algo Vision Schweiz AG, one of the entities
formed in connection with the spin-off, an option to purchase a 50% co-ownership
interest in our visual communications intellectual property. In July 1999, as
part of the reorganization of the Algo Vision entities, Algo Vision Schweiz and
Algo Vision Systems Gmbh, the other entity formed in connection with the
spin-off, became wholly-owned subsidiaries of Algo Vision plc, an English
company whose shares began trading on the European Association of Securities
Dealers Automated Quotation System on July 23, 1999. Under the terms of a series
of agreements between us, Algo Vision plc and Algo Vision Schweiz (i) Algo
Vision Schweiz transferred its option to purchase our intellectual property
rights to Algo Vision plc, (ii) Algo Vision plc agreed to purchase our visual
communications intellectual property rights (other than the IAT name or mark)
and (iii) we agreed to exchange our 15% equity interest in each of Algo Vision
Systems
-19-
<PAGE>
and Algo Vision Schweiz, for shares of capital stock of Algo Vision plc.
Dr. Vogt, one of our directors, owns approximately 26.2% of the outstanding
shares of Algo Vision plc.
Under the terms of the agreements, Algo Vision plc purchased a 50%
interest in our visual communications intellectual property rights for
$1,000,000 in July 1999 and purchased the remaining 50% interest for an
additional $2,500,000 in August 1999. Algo Vision plc also agreed to pay us
royalties (ranging from 5% to 10%) on the sale of certain products utilizing the
visual communications technology until August 2001. In connection with the
transaction, Algo Vision Schweiz agreed to repay, prior to August 22, 1999,
outstanding loans, aggregating approximately $500,000, made by us to Algo
Vision Schweiz as part of the spin-off.
In addition, as part of the reorganization of the Algo Vision entities,
we exchanged our 15% interest in each of Algo Vision Systems and Vision Schweiz,
for 500,000 shares of Algo Vision plc (valued at $5,000,000 at EASDAQ
admission). These shares are subject to a lock-up agreement for a period of six
months, subject to certain exceptions. In August 1999, we purchased an
additional 250,000 shares of Algo Vision plc for a purchase price of
$2,500,000, of which 200,000 shares are subject to a lock-up agreement for a
period of three months, subject to certain exceptions.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.62 Agreement for the Acquisition of Intellectual Property
Rights dated July 22,1999 among the Registrant, IAT AG,
Algo Vision Schweiz AG and Algo Vision plc (i).
10.63 Intellectual Property Assignment dated July 22, 1999 among
the Registrant, IAT AG and Algo Vision plc (i).
10.64 Intellectual Property Assignment dated July 22, 1999 among
the Registrant, IAT AG and Algo Vision plc (i).
10.65 Share Exchange and Subscription Agreement dated July 22,
1999 between Algo Vision plc and IAT AG (i).
10.66 Second Subscription Agreement dated July 22, 1999 between
Algo Vision plc and IAT AG (i).
10.67 Lock-In Agreement dated July 22, 1999 among Algo Vision
plc, Beeson Gregory Limited and IAT AG (i).
27.1 Financial Data Schedule
--------------------
(i) Incorporated by reference to our Current Report on Form 8-K filed
on August 4, 1999.
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<PAGE>
(b) No reports on Form 8-K were filed during the quarter ended June 30,
1999.
On August 4, 1999, we filed a Current Report on Form 8-K reporting
information under Item 2.
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<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.
By: /s/ Jacob Agam
-----------------------------
Jacob Agam
Chairman of the Board of
Directors and Chief Executive
Officer
/s/ Klaus Grissemann
-----------------------------
Klaus Grissemann
Chief Financial Officer
Date: August 13, 1999
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1999
<CASH> 4,556,430
<SECURITIES> 750,000
<RECEIVABLES> 1,729,684
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<CURRENT-ASSETS> 9,002,006
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