<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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FORM 10-Q
(Mark one)
/X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended MARCH 31, 1995 or
/ / Transition report pursuant to Section or 15(d) of the Securities Exchange
Act of 1934 for the transition period from to .
---------- ----------
Commission file number 0-13218
COMPRESSION LABS, INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 94-2390960
- --------------------------------- ------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
(NOTE: Previously I.R.S. EIN
77-0159558)
2860 JUNCTION AVENUE, SAN JOSE, CALIFORNIA 95134
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (408) 435-3000
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 latest practicable date.
Class Shares outstanding at April 24, 1995
- ----- ------------------------------------
Common Stock 14,717,721
Page 1 of Pages
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Exhibit Index at Page
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COMPRESSION LABS, INCORPORATED
INDEX
<TABLE>
<CAPTION>
Page
Number
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Operations --
For the Three Months Ended March 31, 1995 and 1994.................... 1
Condensed Consolidated Balance Sheets --
March 31, 1995 and December 31, 1994.................................. 2
Condensed Consolidated Statements of Cash Flows --
For the Three Months Ended March 31, 1995 and 1994.................... 3
Notes to Condensed Consolidated Financial Statements --
March 31, 1995........................................................ 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................... 6
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.............................................................. 8
Item 6. Exhibits and Reports on Form 8-K............................................... 9
SIGNATURES..................................................................... 10
</TABLE>
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<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
COMPRESSION LABS, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
------------------------------
1995 1994
------------ ------------
<S> <C> <C>
REVENUES
Net product sales $ 34,098 $32,787
Research and development contracts 5,948 5,004
-------- -------
Total Revenues 40,046 37,791
COST OF REVENUES
Net product sales 22,730 19,928
Research and development contracts 4,196 4,968
-------- -------
Total Cost of Revenues 26,926 24,896
GROSS MARGIN
Net product sales 11,368 12,859
Research and development contracts 1,752 36
-------- -------
Total Gross Margin 13,120 12,895
OPERATING EXPENSES
Selling, general and administrative 10,636 9,755
Research and development 3,470 2,991
Settlement of litigation 897 --
-------- -------
Total Costs and Expenses 15,003 12,746
-------- -------
OPERATING INCOME (LOSS) (1,883) 149
Interest income 6 93
Interest expense (215) (214)
-------- -------
NET INCOME (LOSS) $ (2,092) $ 28
======== =======
NET INCOME (LOSS) PER SHARE $ (0.14) $ 0.00
======== =======
WEIGHTED AVERAGE COMMON SHARES AND COMMON
SHARE EQUIVALENTS OUTSTANDING 14,667 15,392
======== =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE> 4
COMPRESSION LABS, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
(Unaudited) (Audited)
--------------- ----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 8,712 $ 11,319
Accounts receivable, less allowance for doubtful accounts
of $1,020 ($1,397 in 1994) 57,815 54,470
Inventories 28,786 29,511
Prepaid expenses and other current assets 2,502 2,715
-------- --------
Total Current Assets 97,815 98,015
-------- --------
PROPERTY AND EQUIPMENT 42,283 40,133
Less: Accumulated depreciation and amortization (21,035) (19,251)
-------- --------
Net Property and Equipment 21,248 20,882
CAPITALIZED SOFTWARE, NET 13,289 11,868
OTHER ASSETS 1,010 886
-------- --------
Total Assets $133,362 $131,651
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt $ 12,452 $ 9,803
Current portion of long-term debt and capital
lease obligations 1,253 750
Accounts payable 18,832 20,040
Accrued liabilities 6,502 6,362
Deferred revenue 7,378 7,240
-------- --------
Total Current Liabilities 46,417 44,195
-------- --------
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS 1,851 494
STOCKHOLDERS' EQUITY
Preferred Stock -
Undesignated Preferred Stock, $.001 par value;
4,000,000 shares authorized, none issued and
outstanding -- --
Common Stock -
$.001 par value; 25,153,658 shares authorized,
shares issued and outstanding: 14,666,753
(14,655,745 in 1994) 15 15
Additional paid-in capital 114,626 114,402
Accumulated deficit (29,547) (27,455)
-------- --------
Total Stockholders' Equity 85,094 86,962
-------- --------
Total Liabilities and Stockholders' $133,362 $131,651
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE> 5
COMPRESSION LABS, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS CASH FLOWS
(Unaudited, in thousands)
<TABLE>
<CAPTION>
Three months ended March 31,
------------------------------
1995 1994
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Cash used in operations:
Net income (loss) $(2,092) $ 28
Non-cash expenses included in net income (loss) -
Depreciation and amortization 2,599 3,085
Changes in certain assets and liabilities -
Accounts receivable (3,345) (2,595)
Inventories 725 (756)
Prepaid expenses 213 274
Accounts payable (1,208) (843)
Accrued liabilities 140 (444)
Deferred revenue 138 1,016
------- -------
Net cash used in operating activities (2,830) (235)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Property and equipment additions (2,150) (2,889)
Increase in capitalized software (2,236) (1,519)
Increase in other assets (124) (59)
------- -------
Net cash used in investing activities (4,510) (4,467)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Sales of Common Stock, net of issuance costs 224 1,098
Payments of capital lease obligations (191) (67)
Collateralized borrowings 2,051 --
Borrowings under line of credit agreements 2,649 --
------- -------
Net cash generated by financing activities 4,733 1,031
------- -------
NET DECREASE IN CASH AND CASH EQUIVALENTS (2,607) (3,671)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 11,319 20,513
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 8,712 $16,842
======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE> 6
COMPRESSION LABS, INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MARCH 31, 1995
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
contain all adjustments of a normal recurring nature that in the
opinion of management are necessary to present fairly the financial
position and results of operations of Compression Labs, Incorporated
(the Company). Interim results of operations are not necessarily
indicative of the results to be expected for the full year.
The Company's interim fiscal quarters end on the Friday of the
thirteenth week following the end of the previous quarter. The fiscal
year end will remain as December 31. Accordingly, the actual dates of
the end of the first quarters of 1995 and 1994 were March 31 and April
1, respectively. The comparability of the financial statements between
years is not materially affected by this presentation.
The condensed consolidated financial statements should be read in
conjunction with the financial statements and the notes thereto for the
year ended December 31, 1994, included in the Company's 1994 Annual
Report.
2. NET INCOME (LOSS) PER SHARE
Net income per share is computed using the weighted average number of
common shares outstanding during each period including dilutive common
share equivalents (Common Stock options and warrants).
Net loss per share is computed using the weighted average number of
common shares outstanding. Common share equivalents have not been
included in the net loss per share calculation because the effect would
be anti-dilutive.
3. RESEARCH AND DEVELOPMENT CONTRACT REVENUE
In April 1992, the Company entered into a research and development
contract with Thomson Consumer Electronics, Inc. (Thomson) to develop
and manufacture a digital compressed video encoding system for the GM
Hughes Electronics' DIRECTV Direct Broadcast Satellite (DBS) system.
The agreement called for up to $5,000,000 in development funding and
encoding system purchases through 1993. In 1993, 1994 and 1995, this
agreement was amended to provide for additional funding of an aggregate
of $17,639,000 for additional system purchases as well as for
additional development work consistent with the terms of the original
contract. In June 1992, the Company entered into a research and
development contract with North American Philips Corporation (Philips)
to develop and manufacture digital compressed video encoders and
decoders for cable satellite uplink and head-end applications. The
agreement with Philips calls for up to $1,500,000 in development
funding and additionally outlines purchase terms for the products. In
1993, this agreement was amended to provide for additional funding of
$488,000 to complete additional research and development according to
the terms of the original contract. Research and development contract
revenues for these two programs totaled $5,584,000 of the $5,948,000 in
the first quarter of 1995 and $4,576,000 of the $5,004,000 in the first
quarter of 1994.
4. UNBILLED RESEARCH AND DEVELOPMENT CONTRACT RECEIVABLES AND ADVANCES
As of March 31, 1995, the Company had net unbilled receivables of
$10,806,000, primarily relating to research and development contracts
entered into with Thomson and Philips. See Note 3 of Notes to
Condensed Consolidated Financial Statements. These receivables are
generally billable based upon specified contractual milestones.
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<PAGE> 7
5. INVENTORIES
Inventories are summarized as follows (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Raw materials $ 6,608 $ 7,521
Work-in-process 5,507 4,293
Finished products
- Products on hand 11,582 13,151
- Products under rental and loan agreements 5,089 4,546
------------------------------------------
$28,786 $29,511
==========================================
</TABLE>
6. CAPITALIZED SOFTWARE
The Company capitalized $2,155,000 of internal software development
costs and $81,000 of purchased software during the quarter ended March
31, 1995. Amortization of capitalized software development costs and
purchased software was $815,000 for the quarter ended March 31, 1995.
As of March 31, 1995, capitalized software net of accumulated
amortization was $13,289,000 (including $244,000 of purchased
software).
7. BANK LINES OF CREDIT
The Company has an aggregate of $15,000,000 in revolving credit
facilities with banks that bear interest at the banks' prime rate
(currently 9.00%) plus zero to one percent, which expire on June 30,
1995. The Company believes it can replace these lines upon their
expiration. The line of credit agreements are secured by substantially
all of the Company's assets. Of the total $15,000,000 in credit
facilities, $5,000,000 can only be accessed using qualified
non-domestic accounts receivable as collateral, as defined in the
agreement. Under the agreement, the Company is required to maintain
quarterly profitability, a certain minimum amount of working capital,
net worth and certain financial ratios, and may not declare or make any
cash or stock dividends. The Company was in compliance with these
requirements, or had obtained a waiver for non-compliance from the
bank, as of March 31, 1995. As of March 31, 1995, the balance
outstanding under these lines of credit was $12,452,000.
8. INCOME TAXES
Substantially all of the Company's federal income taxes to date have
been offset by utilization of net operating loss carryforwards. When
all such carryforwards are utilized, the Company anticipates a future
provision for federal income taxes that will more closely approximate
the statutory rates.
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<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
REVENUES
Total revenues in the first quarter of 1995 increased 6% to $40.0 million
compared to $37.8 million in the first quarter of 1994. The growth in total
revenues is primarily the result of an increase in videoconferencing product
revenues and research and development contract revenues, partially offset by a
decline in sales of broadcast products. The increase in videoconferencing
product revenue reflects increases in sales of the Company's Radiance and
eclipse product lines partially offset by a reduction in sales of the Company's
older generation product lines. The decline in sales of broadcast products was
primarily the result of decreased shipments of encoder and decoder units.
Because the broadcast market is evolving on multiple fronts - including the
highly regulated telephone segment - and because of the transition to products
based on the newly defined Moving Picture Experts Group (MPEG) standards, the
Company expects to experience uneven revenue growth in this market in the near
future. Codec shipments were 613 units in the first quarter of 1995 compared to
640 units in the first quarter of 1994.
Research and development contract revenues increased in the first quarter of
1995 to $5.9 million from $5.0 million in the first quarter of 1994. Research
and development contract revenue increased to 15% of total revenues in the first
three months of 1995, as compared to 13% of total revenues in the first three
months of 1994, primarily as a result of work on the contract with Thomson
Consumer Electronics, Inc. to develop and deliver digital compressed video
encoders and decoders using the MPEG standard. See Note 3 of Notes to Condensed
Consolidated Financial Statements.
International revenues decreased to $5.4 million, or 14% of total revenues, in
the first quarter of 1995, compared to $5.6 million, or 15% of total revenues,
in the first quarter of 1994. There were no international revenues attributable
to research and development contracts.
GROSS MARGIN
Gross margin as a percentage of net product sales decreased to 33% for the first
quarter of 1995 from 39% for the first quarter of 1994. The decrease in gross
margin was due to increased sales of lower margin decoders and decreased sales
of higher margin encoder products in the broadcast market, and lower prices in
the videoconferencing market associated with large individual customer orders
and shipments via indirect sales channels.
The Company continues to seek improvement in gross margin through introduction
of new products with higher margins, as well as through cost reductions of
existing products. However, the Company anticipates that product gross margin
will continue to be subject to fluctuations caused by the introduction of new
products, changes in product mix and variations in manufacturing costs.
Gross margin as a percentage of research and development contract revenues was
29% and 1% for the first quarter of 1995 and 1994, respectively. The increase in
gross margin for the three-month period ended March 31, 1995 is due primarily to
work on higher margin products relating to the Company's primary contract.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased to 27% of total revenues
for the first quarter of 1995 compared to 26% for the first quarter of 1994. The
increase in expenses as a percentage of total revenues was primarily due to
increases in sales, marketing and service personnel and facilities to stimulate
and support revenue growth in future periods. The Company anticipates that
selling, general and administrative expenses will generally increase with
increases in the level of revenues, but may vary from quarter to quarter as a
percentage of total revenues.
RESEARCH AND DEVELOPMENT EXPENSE
Research and development expense was 9% and 8% of total revenues for the first
quarter of 1995 and 1994, respectively. The increase in research and development
expense as a percentage of total revenues is due to an increase in personnel
costs, depreciation and equipment-related expense related to the development of
new products in the videoconferencing and broadcast television markets,
partially offset by an increase in the amounts capitalized in conjunction with
the development of new software for more complex and feature-rich products,
including MPEG standard-based broadcast products. The Company expects that the
level of research and development spending will continue to increase in absolute
dollars in the future, but may fluctuate quarter to quarter as a percentage of
total
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<PAGE> 9
revenues, due to varying levels of research and development activities, external
funding and amounts capitalized in conjunction with software development
activities.
INTEREST INCOME/INTEREST EXPENSE
Interest income decreased to $6,000 in the first quarter of 1995 from $93,000 in
the first quarter of 1994. The decrease for the first three months of 1995 was
principally due to a reduction of interest income from equipment leases and
funds available for investment.
Interest expense increased to $215,000 in the first quarter of 1995 from
$214,000 in the first quarter of 1994. This increase is due to higher interest
rates during the first quarter of 1995 as compared to the first quarter of 1994.
See Note 7 of Notes to Condensed Consolidated Financial Statements.
NET INCOME (LOSS)
The Company reported a net loss of $2.1 million in the first quarter of 1995
compared to net income of $28,000 in the first quarter of 1994. The decrease in
operating results was primarily due to lower gross margins and higher operating
expenses. The net loss also included costs of $897,000, primarily relating to
legal expenses associated with the class action suit filed in 1992 against the
Company and settled during the quarter.
FACTORS AFFECTING FUTURE RESULTS
The Company continues to seek improvement in operating results through
introduction of new products that are expected to have higher margins, as well
as through cost reductions of existing products. However, there can be no
assurance that the Company will be successful in its efforts. In the future, the
Company's operating results may be impacted by a number of factors, including
cancellation or delays of customer orders, interruption or delays in the supply
of key components, changes in customer base or product mix, seasonal patterns of
capital spending by customers, new product announcements by the Company or its
competitors, pricing pressures and changes in general economic conditions.
Historically, a significant portion of the Company's shipments have been made in
the last month of each quarter. As a result, a shortfall in revenue compared to
expectation may not evidence itself until late in the quarter. Additionally, the
timing of expenditures for research and development activities and sales and
marketing programs, as well as the timing of orders by major customers, may
cause operating results to fluctuate between quarters and between years.
LIQUIDITY AND CAPITAL RESOURCES
The Company has used internally generated funds, public and private offerings of
Common Stock and Preferred Stock, sale and leaseback arrangements and bank
credit lines to finance its growth since 1983. Cash used in operations was $2.8
million for the first three months of 1995 compared to $0.2 million in 1994,
primarily due to decreased operating results and increases in accounts
receivable and a decrease in accounts payable, partially offset by a decrease in
inventories and an increase in deferred revenue. Capital additions were $2.1
million in the first quarter of 1995. While the Company expects the level of
capital expenditures in 1995 to be comparable to 1994 levels, there are no
material commitments to purchase capital equipment at the present time. Net cash
generated by financing activities was $4.7 million in the first quarter of 1995
primarily due to borrowings against the lines of credit and the establishment of
term loans using capital equipment as collateral. See Note 7 of Notes to
Condensed Consolidated Financial Statements.
As of March 31, 1995, the Company had cash and cash equivalents totaling $8.7
million. The Company had bank lines of credit as of March 31, 1995 in the amount
of $15.0 million of which $12.5 million was outstanding. See Note 7 of Notes to
Condensed Consolidated Financial Statements. Working capital decreased to $51.4
million as of March 31, 1995, compared to $53.8 million at December 31, 1994.
The Company anticipates that existing cash and lines of credit, together with
sources of additional liquidity such as private or public offerings, sale and
leaseback arrangements, equipment lease lines and bank credit lines, will be
sufficient to meet cash requirements through 1995. Should additional funding be
required, however, there can be no assurance that such funding will be available
on acceptable terms as and when required by the Company.
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<PAGE> 10
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In July, August and December 1992, twelve complaints were filed in
United States District Court against the Company and certain of its officers and
directors. In the aggregate, the complaints alleged that the defendants
misrepresented or failed to disclose to investors material facts concerning the
Company's products, its accounting policies and its relationship with SkyPix,
Inc. and that certain of the defendants improperly sold shares of Company stock
at prices that were artificially inflated by these nondisclosures or
misrepresentations. No specific amount of damages was alleged. As amended and
consolidated into a single class action, the matter now consists of a complaint
of a single claim for violation of Section 10(b) of the Securities Exchange Act
of 1934. The matter is set for trial on July 24, 1995.
The defendants have reached a settlement with the plaintiffs, subject
to court approval, that provides that the plaintiffs will dismiss all claims
with prejudice in exchange for a cash payment in the amount of $4,800,000.
Pursuant to an agreement between the Company and its Directors and Officers
Liability insurance carrier, the settlement of the class action will be funded
in its entirety by the carrier. The carrier will receive from the Company a
warrant for the purchase of 195,000 shares of common stock of the Company,
exercisable for three years at a price above the market price on the date the
agreement was reached.
On August 24, 1993, the Company filed a complaint against Oklahoma
State University Education and Research Foundation, Inc. (OSUERF) in United
States District Court claiming that OSUERF breached an exclusive subcontract for
the Company to provide equipment to OSUERF under OSUERF's prime contract with
the United States Army, TRADOC Division. On November 18, 1993 the Company
amended the complaint to add Federal Leasing, Inc. (FLI) as a defendant. FLI is
a third-party leasing company that acquired the Company's right, title and
interest in equipment installed under the contract pursuant to a Federal
Government Financing Agreement (Financing Agreement) effective September 30,
1991 and leased the equipment to TRADOC. An assertion of entitlement to
indemnification has been received by the Company from FLI. The amended complaint
asserted a single cause of action for breach of contract against OSUERF and two
causes of action against FLI for (i) breach of contract and (ii) declaratory
judgment. By the amended complaint, the Company claimed general and
consequential damages in an unspecified amount against OSUERF and FLI, and
sought a judicial declaration on the question of whether the Company is
obligated to indemnify FLI for OSUERF's failure to continue making monthly
payments to FLI.
On April 19, 1995, the Court granted the Company's motion to amend its
complaint to state additional causes of action against OSUERF for (i) fraud,
(ii) interference with contractual relations and (iii) declaratory judgment that
OSUERF is obligated to indemnify the Company pursuant to an addendum to the
contract. The Company filed its second amended complaint on April 21, 1995.
On February 4, 1994, the CIT Group/Equipment Financing Inc. (CIT), as
an assignee of FLI's rights under the Financing Agreement, filed a complaint
against the Company in United States District Court claiming entitlement or
indemnification from the Company. The Company responded to the complaint by
denying the material charging allegations of the complaint and stating certain
affirmative defenses. In addition, the Company stated two counterclaims against
CIT for (i) breach of contract and (ii) declaratory judgment. Pursuant to court
order, the OSUERF and CIT actions have been consolidated.
On February 14, 1995, CIT filed a motion for summary judgment against
the Company on its claim of breach of contract and indemnity, seeking payment of
$2,100,000 (updated on April 11, 1995 by CIT's reply brief to $2,300,000). FLI
also filed a motion for summary judgment against the Company on February 17,
1995, revised and re-filed on March 14, 1995, asserting that CIT is the real
party in interest, that CIT is entitled to summary judgment and that FLI is
therefore entitled to judgment as a matter of law on the Company's claims
against it. The Court took the motions under submission without oral argument
and a decision is expected in early May 1995.
Trial of this matter is set for September 18, 1995. The discovery
cut-off is set for July 14, 1995. Settlement has been considered, however, no
settlement has been reached. Thus, discovery is continuing, and depositions of
the Company's witnesses commenced on May 9, 1995. There can be no assurance that
the Company will defeat the motions or prevail ultimately or obtain indemnity
for any recovery from
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<PAGE> 11
OSUERF. If any of CIT's claims were to be decided adversely to the Company, the
Company would be liable to pay monetary damages to CIT. The Company believes
that the ultimate resolution of this matter will not have a material adverse
impact on the Company's financial position.
In a complaint filed December 20, 1993, in United States District
Court, Datapoint Corporation (Datapoint) alleged that the Company has infringed
two United States Patents owned by Datapoint and relating to video conferencing
networks. The complaint seeks a judgment of infringement, monetary damages,
injunctive relief and reasonable attorney's fees. The Company responded to the
complaint on February 16, 1994 by denying the material allegations of the
complaint and asserting affirmative defenses. Pursuant to court order, the
parties have participated in mediation before a court-appointed mediator.
Discovery in the case has commenced. The Company believes that it has
meritorious defenses to the allegations of the complaint, and is pursuing an
aggressive defense; however, there can be no assurance that the Company will
prevail. If any of the claims were to be decided adversely to the defendants,
the Company could be liable for monetary damages to the plaintiff and be subject
to injunctive relief. The Company believes that the ultimate resolution of this
matter will not have a material adverse impact on the Company's financial
position.
The Company and Voicecraft, Inc. (Voicecraft) are parties to a License
Agreement dated December 3, 1987 pursuant to which the Company licenses certain
technology from Voicecraft in exchange for the payments of royalties. At various
times since the inception of the license/royalty relationship, disputes have
arisen between the Company and Voicecraft relating to the scope of the license,
as well as the amount of royalties due. By letter dated May 6, 1994, Voicecraft
purported to terminate the Company's license as of July 5, 1994 for its alleged
failure to remit royalties as required by the License Agreement. Voicecraft has
further asserted that the Company is infringing certain patent rights belonging
to Voicecraft. The Company disputes Voicecraft's assertions. At present, the
Company and Voicecraft are in discussion to resolve the issues outstanding
between them so as to avoid litigation. The Company believes that the ultimate
resolution of this matter will not have a material adverse impact on the
Company's financial position.
In the normal course of business, the Company receives and makes
inquiries with regard to other possible patent infringement. Where deemed
advisable, the Company may seek or extend licenses or negotiate settlements.
Outcomes of such negotiations may not be determinable at any point in time;
however, management does not believe that such licenses or settlements will,
individually or in the aggregate, have a material adverse impact on the
Company's financial position or results of operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
NONE
(b) Reports on Form 8-K
NONE
No other applicable items.
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<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMPRESSION LABS, INCORPORATED
BY
--------------------------------------------
WILLIAM A. BERRY
Senior Vice President,
Chief Financial Officer (Principal Financial
and Accounting Officer, Authorized Officer)
DATE: May 11, 1995
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<PAGE> 13
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Page
Number Number
- ------- ------
<S> <C> <C>
27.1 Article 5 of Regulation S-X, Financial Data Schedules for Compression
Labs, Incorporated for the Quarter Ending March 31, 1995
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<CASH> 8,712
<SECURITIES> 0
<RECEIVABLES> 58,835
<ALLOWANCES> 1,020
<INVENTORY> 28,786
<CURRENT-ASSETS> 97,815
<PP&E> 42,283
<DEPRECIATION> 21,035
<TOTAL-ASSETS> 21,248
<CURRENT-LIABILITIES> 46,417
<BONDS> 0
<COMMON> 15
0
0
<OTHER-SE> 114,626
<TOTAL-LIABILITY-AND-EQUITY> 133,362
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<TOTAL-REVENUES> 40,046
<CGS> 22,730
<TOTAL-COSTS> 26,926
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<INTEREST-EXPENSE> 215
<INCOME-PRETAX> (1,903)
<INCOME-TAX> 189
<INCOME-CONTINUING> (2,092)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,092)
<EPS-PRIMARY> (0.14)
<EPS-DILUTED> (0.14)
</TABLE>
