As filed with the Securities and Exchange Commission on September 8, 1998
Registration No. 333-56767
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------------
Amendment No. 2 to
FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
-------------------------------------
VIDEOLABS, INC.
(Exact name of registrant as specified in its charter)
Delaware 41-1726281
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5960 Golden Hills Drive
Minneapolis, Minnesota 55416
(612) 542-0061
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
Copies to:
Jill R. Larson Robert R. Ribeiro, Esq.
Vice President, Administration Hinshaw & Culbertson
VIDEOLABS, Inc. 3100 Piper Jaffray Tower
5960 Golden Hills Drive 222 South Ninth Street
Minneapolis, Minnesota 55416 Minneapolis, Minnesota 55402
(612) 542-0061 (612) 334-8025
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Approximate date of commencement of proposed sale to the public: From
time to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
============================================================================================
Proposed Proposed
Title of Each Amount Maximum Maximum Amount of
Class of Securities to be Offering Price Aggregate Registration
to be Registered Registered Per Share* Offering Price* Fee(1)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock
($.01 par value) 2,338,146 $1.00 $2,338,146 $870.00
============================================================================================
</TABLE>
* Estimated solely for purposes of computing the registration fee and
based upon the average of the high and low sales prices for such Common
Stock on September 2, 1998, as reported on the Nasdaq market system.
(1) Previously paid.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
Subject to Completion: dated September 8, 1998
PROSPECTUS
VIDEOLABS, INC.
---------------------
2,338,146 SHARES
OF
COMMON STOCK
($.01 PAR VALUE)
---------------------
This Prospectus relates to an aggregate of 2,338,146 shares (the
"Shares") of Common Stock, par value $.01 per share (the "Common Stock"), of
VideoLabs, Inc., a Delaware corporation ("Videolabs" or the "Company"), that may
be sold from time to time by the shareholders named herein (the "Selling
Shareholders"). See "Selling Shareholders." The Shares are being registered for
resale purposes only and the Company will not receive any proceeds from the sale
of the Shares. The Company has agreed to pay the expenses of registration of the
Shares, including certain legal and accounting fees. Of the total 2,338,146
shares offered hereby, 1,067,038 shares were issued by the Company upon exercise
of warrants, 201,478 shares were issued pursuant to the acquisition of Video
Dynamics in April, 1998, and 1,069,630 shares may be issued by the Company upon
exercise of outstanding warrants and nonemployee options.
Any or all of the Shares may be offered from time to time in
transactions on the over-the-counter market, in brokerage transactions at
prevailing market prices or in transactions at negotiated prices. See "Plan of
Distribution."
The Shares offered hereby have not been registered under the blue sky
or securities laws of any jurisdiction, and any broker or dealer should assure
the existence of an exemption from registration or effectuate such registration
in connection with the offer and sale of the Shares.
The Common Stock is traded in the over-the-counter market and is quoted
on the Nasdaq SmallCap Market System under the symbol "VLAB." On August 10,
1998, the last reported sale price of the Common Stock as reported on the Nasdaq
SmallCap Market System was $1.078 per share.
---------------------
FOR INFORMATION CONCERNING CERTAIN RISKS RELATED TO THIS
OFFERING, SEE "RISK FACTORS" BEGINNING ON PAGE 3 OF
THIS PROSPECTUS.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus in connection with
the offer contained herein, and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Company. This Prospectus does not constitute an offer to sell, or a solicitation
of an offer to buy, any securities offered hereby in any jurisdiction in which
it is not lawful or to any person to whom it is not lawful to make any such
offer or solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that
information herein is correct as of any time subsequent to the date hereof.
The date of this Prospectus is ___________, 1998.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's regional offices at 7
World Trade Center, Suite 1300, New York, New York 10048 and CitiCorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
materials can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission maintains a web site that contains reports, proxy and information
statements and other information regarding issuers that file electronically with
the Commission. The address of the web site is http://www.sec.gov. In addition,
the Common Stock of the Company is quoted on the Nasdaq SmallCap Market System,
and reports, proxy statements and other information concerning the Company can
also be inspected at the offices of the National Association of Securities
Dealers, 1735 K. Street N.W., Washington, D.C. 20006. This Prospectus does not
contain all the information set forth in the Registration Statement and exhibits
thereto which the Company has filed with the Commission under the Securities Act
of 1933, as amended (the "Securities Act"), and to which reference is hereby
made.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents of the Company which have been filed with the
Commission are hereby incorporated by reference in this Prospectus:
(a) the Annual Report on Form 10-KSB for the year ended
December 31, 1997;
(b) the Quarterly Report on Form 10-QSB for the quarter ended
March 31, 1998;
(c) the Quarterly Report on Form 10-QSB for the quarter ended
June 30, 1998;
(d) the description of the Company's Common Stock contained in the
Company's Registration Statement filed pursuant to Section 12
of the Exchange Act and any amendment or report filed for the
purpose of updating any such description.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the Common Stock shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
respective dates of filing of such documents. Any statement contained herein or
in a document all or part of which is incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
subsequently filed
2
<PAGE>
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to any person to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the foregoing documents incorporated herein by reference (other
than certain exhibits to such documents). Requests for such copies should be
directed to Ms. Jill Larson, VideoLabs, Inc., 5960 Golden Hills Drive,
Minneapolis, Minnesota 55416, telephone number (612) 542-0061.
RISK FACTORS
The following risk factors should be considered carefully in addition
to the other information contained in or incorporated by reference into this
Prospectus before purchasing the Common Stock offered hereby. This Prospectus,
including the information incorporated herein by reference, contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-
looking statements represent the Company's expectations or beliefs concerning
future events, including the following: any statements regarding future sales
and gross profit percentages, any statements regarding the continuation of
historical trends, any statements regarding the sufficiency of the Company's
cash balances and cash generated from operating and financing activities for the
Company's future liquidity and capital resource needs. The Company cautions that
these statements are further qualified by important factors that could cause
actual results to differ materially from those projected in the forward-looking
statements as a result, in part, of the risk factors set forth below. In
connection with the forward-looking statements which appear in this Prospectus,
including the information incorporated herein by reference, prospective
purchasers of VideoLabs Common Stock offered hereby should carefully review the
factors set forth below.
LIMITED HISTORY OF PROFITABILITY
The Company achieved its first year of four consecutive profitable
quarters, and its second profitable year, during the fiscal year ended December
31, 1997. There can be no assurance that profitable operations can be maintained
in the future. As of December 31, 1997, the Company had an accumulated deficit
of $2.3 million.
EFFECT OF LOSS OF QUOTATION BY NASDAQ
The Company's Common Stock is currently traded in the national
over-the-counter market and quoted on the National Association of Securities
Dealers Automated Quotation System ("Nasdaq") SmallCap Market System. Nasdaq
rules require that companies quoted on the Nasdaq SmallCap Market System have
total assets of at least $2,000,000 and capital and surplus of at least
$1,000,000. As of June 30, 1998, the Company had total assets of $4,784,784 and
capital and surplus of $3,988,784. If the Company's Common Stock is not quoted
by Nasdaq in the
3
<PAGE>
future, it will be quoted in the local over-the-counter "pink sheets" and may
also be reported on the Nasdaq OTC Bulletin Board. However, in such event, the
public trading market for the Company's Common Stock could be adversely
affected. Consequently, holders of the Company's common stock might have
difficulty selling their shares or obtaining accurate price quotations. The
trading price of the common stock would also likely be materially adversely
affected. There can be no assurance that the Company will be able to meet the
applicable requirements for maintaining its Nasdaq SmallCap Market quotation in
the future.
INTENSE COMPETITION
The electronic camera market is highly competitive. The Company
competes with a number of companies ranging from very small businesses to large
companies, some of which have substantially greater financial, manufacturing,
marketing and product development resources than the Company. Some of these
other companies manufacture and sell electronic cameras as well as video-capture
equipment, and some are distributors for these products. The Company believes
that it competes most directly with Sony, Toshiba, Panasonic, Ken A Vision,
Sharp Electronics and Elmo.
Because the Company manufactures its product lines through the assembly
of component parts which are readily available in the world marketplace, there
are few barriers which would prevent others from designing and assembling
products similar to those sold by the Company.
The Company competes for electronic camera sales primarily on the basis
of image quality, design, focus, costs, flexibility, delivery time, reputation,
reliability, the effectiveness of its sales and distribution channels and its
customer service. The Company believes that its products compete favorably on
these factors, although there can be no assurance that this will continue to be
true in the future. The Company also competes with regard to pricing. The
Company establishes a pricing model based upon several factors including
achieving established corporate margins. The pricing model reflects list price,
dealer and distributor pricing. The factors that determine the model are the
cost of the components, direct labor, manufacturing overhead and selling costs.
The Company compares the product in a competitive matrix against competing
products from various manufacturers to see if the established list price is
appropriate.
RAPID TECHNOLOGICAL CHANGE
The markets for the Company's products are characterized by rapid
technological change and evolving industry standards and, further, are highly
competitive with respect to timely product innovation, the introduction of
profits embodying new technology and the emergence of new industry standards
which can render existing products obsolete and non-marketable. The Company's
success depends on its ability to anticipate changes in technology and industry
standards and thereby to develop and successfully introduce new and enhanced
products on a timely basis. Charge coupled device (CCD) technology has
revolutionized camera design and continues to evolve rapidly, both increasing
quality and decreasing costs. If the Company is unable for technological or
other reasons to develop products in a timely manner in response to changes in
the marketplace or if products or product enhancements that the Company develops
do not achieve market acceptance, the Company's business will be materially and
adversely affected.
DEPENDENCE ON KEY PERSONNEL
The success of the Company is dependent upon the services of Mr. James
Hansen, the Chairman, Chief Executive Officer and Treasurer of VideoLabs. On
June 1, 1997, the Company entered into a three year employment agreement with
Mr. Hansen which contains provisions prohibiting competition with the Company
under certain conditions. The Company does not maintain key-man life insurance
on Mr. Hansen.
RISK OF INTERNATIONAL SALES
A significant percentage of the Company's sales are made
internationally. For the year ended December 31, 1997, sales in the United
States, Europe and Asia/Pacific region were 63%, 31% and 6%, respectively, of
total sales. Sales to Europe and the Asia/Pacific region declined slightly from
1996, when such sales were 32% and 8%, respectively, of total sales. Dependence
on international sales generally poses greater risks than domestic sales. These
risks include uncertainties regarding overseas economic conditions, political
turmoil, currency translation losses and conflicting regulatory requirements.
The decrease in the Company's sales to the Asian/Pacific region from 1996 to
1997 reflected primarily the Asian economic problems. There can be no assurance
that continued Asian economic problems or other risks of international sales,
will not have a material adverse effect on the Company in the future.
VOTING CONTROL BY OFFICERS AND DIRECTORS
The officers and directors of the Company, as a group, beneficially own
approximately 42% of the Company's outstanding common stock, (assuming exercise
of outstanding options and warrants held by such persons). Consequently, the
officers and directors of the Company have the ability to exercise a controlling
influence on matters to be voted upon by shareholders, including election of the
Company's Board of Directors.
RISK OF PRODUCT OBSOLESCENCE
The Company's products employ advanced technology. Such technology is
rapidly changing with a consequent risk of obsolescence of the Company's
products and inventories of components. In the fourth quarter of 1996, the
Company wrote down $1,575,000 to reflect the valuation of inventory that became
obsolete in the fourth quarter of 1996 related to the Company's Universal
Digital Camera product. That inventory write down comprised 21% of 1996 total
sales. There can be no assurance that current or future products of the Company
will not become obsolete resulting in further inventory write-offs.
RISK OF SOLE SOURCES OF SUPPLY
Certain components of the Company's products are available only from a
single source or a limited number of sources. All of the Company's products
utilize, and therefor all of its revenues are derived from, such components. The
Company does not have a long term contract with such suppliers but rather
obtains supplies on a purchase order basis. The Company attempts to keep a 3 to
4 month supply inventory of such components to minimize the impact of the loss
of a significant supplier. To date, there have been no significant interruptions
in the supply of key components to the Company. There can be no assurance,
however, that loss of a supplier would not result in a material adverse effect
on the Company's ability to meet its product shipment requirements.
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of the Company's common stock in the
public market in the future could adversely affect the prevailing market prices
for the common stock and hinder the ability of the Company to raise equity
capital in the future without substantial dilution of existing shareholders. Of
the 2,338,146 shares offered for resale hereunder, approximately 1,269,000
shares will be freely tradeable without restriction in the public market as of
the date of this Prospectus. An additional approximately 1,070,000 shares
offered for resale hereunder are subject to issuance upon exercise of
outstanding warrants or options and, upon such issuance, also will be freely
tradeable in the public market. The resale of the shares offered hereunder could
have a material adverse effect on the price of the Company's common stock.
4
<PAGE>
GOVERNMENT REGULATION
Products sold by the Company are subject to regulations of the U.S.
Government Federal Communication Commission and European product compliance
requirements. All products sold by the Company have met mandatory requirements
of both the FCC and CE regulations and has received the "CE" mark for sales in
Europe. The Company is in compliance with all applicable federal, state and
local regulations. The Company does not know of any pending regulations which
would adversely affect its operations or products.
LIMITED PROPRIETARY PROTECTION
The Company attempts to protect the proprietary rights to its products
by use of patents, copyrights, trade secret law and internal non-disclosure
safeguards. The source code for the software contained in the Company's products
is considered proprietary and is not furnished to customers. The Company has
also entered into confidentiality and non-compete agreements with certain key
employees as well as outside consultants. Despite these restrictions, it may be
possible for competitors or users to copy aspects of the Company's products or
to obtain information that the Company regards as proprietary.
The Company has received a patent for the FlexCam and several of its
healthcare products and intends to vigorously defend these patents in the
marketplace. The Company's patents were issued in 1990, 1993, 1995, 1996 and
1998, ranging from fourteen - seventeen year terms.
FlexCam was originally engineered by outside consultants at the
direction of the Company and was first sold in the second quarter of 1993. The
Company has a royalty agreement with the original design firm and pays two
percent (2%) of revenues resulting from the first 36,000 electronic camera sales
and one percent (1%) of the revenues from the subsequent 20,000 unit sales and
one-half percent (0.5%) of the next 20,000 unit sales. The Company has shipped
approximately 74,000 units under this agreement.
Because of the rapid pace of technological changes in the computer
industry, the Company believes that patent, trade secret and copyright
protection are less significant to its competitive position than are factors
such as the knowledge, ability and experience of the Company's personnel, the
Company's success at new product development and frequent product enhancements,
and the Company's name recognition and ongoing reliable product maintenance and
support.
NO CASH DIVIDENDS
The Company has never paid or declared any cash dividends on its Common
Stock and does not intend to pay dividends on its Common Stock in the
foreseeable future.
RISK OF UNCERTAIN MARKET ACCEPTANCE OF COMPANY PRODUCTS
Because the electronic camera market is highly competitive and is
dominated by large companies with substantial resources, the Company has
developed products to serve specialty and niche markets. Because the Company has
no direct experience with these markets prior to entering them and because it
conducts only limited market studies, there can be no assurance that market
segments targeted by the Company will accept its products. The failure by the
Company to continue to gain acceptance of its products in niche markets could
have a material adverse effect on the Company's business.
5
<PAGE>
LIMITATION OF DIRECTOR LIABILITY
The Company's Certificate of Incorporation and Bylaws provide for
indemnification of directors to the full extent permitted by the Delaware
Business Corporation Law and, to the extent permitted by such law, eliminate or
limit the personal liability of directors to the Company and its shareholders
for monetary damages for certain breaches of fiduciary duty. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers or persons controlling the Company pursuant to
the foregoing provisions, the Company has been informed that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
ANTI-TAKEOVER EFFECT OF DELAWARE GENERAL CORPORATION LAW
The Company is governed by the provisions of Section 203 of the General
Corporation Law of the State of Delaware, an anti-takeover provision adopted in
1988. As a result of Section 203, potential acquirors of the Company may be
discouraged from attempting to effect acquisition transactions with the Company,
thereby possibly depriving stockholders of certain opportunities to sell or
otherwise dispose of the Company's common stock at above-market prices pursuant
to such transactions.
VIDEOLABS, INC.
GENERAL
VideoLabs, Inc. (the "Company") is a Delaware corporation which was
incorporated in 1992. The Company designs and manufactures image capture,
transmission and manipulation devices for use as components of systems for
education, presentation, identification, medical, desktop computer video
applications, video-teleconferencing and computer-based and non-computer based
solutions. The Company's products range in list price from $395 to $995 for
educational products and $1,495 to $9,995 for health care products.
The Company believes that there are opportunities for growth in the
application of the core technologies of the Company in several market segments.
The potential for increases in use of image capture devices in audio visual,
education and computer markets is increasing as computer processing power, speed
and cost factors have all improved as has higher capacity transmission
utilities. The Company has also observed emerging applications in the use of
video image capture solutions in identification, medical and other market
segments that are primarily due to new, flexible, lower cost digital
applications that allow for unique solutions targeted at potential niche
markets.
The Company's short term strategy is to develop or acquire image
capture solutions for specific niche markets in education, audio visual,
identification and medical applications where it already has distribution
resources and can provide value-added solutions. The development of the FlexCam
Digital and ProfCam have been delayed because of limited engineering resources
to the fourth quarter of 1998. The ProfCam will list at $3,995. The list price
for FlexCam Digital is not yet determined. Shipments of both products are
expected to begin during the fourth quarter of 1998. The Company is currently
evaluating the market for industrial arts and health educator's packages.
THE COMPANY STRATEGY
The Company's business strategy is to utilize its core competencies in
analog and digital image capture development and distribution to provide
solutions for individual and organizational customers and to earn an acceptable
return on equity for the Company's shareholders.
FOCUS ON PROFITABLE GROWTH
The Company is focused on internal growth in profitable niches in
professional image capture solutions for audio visual, education, identification
and medical markets where it
6
<PAGE>
currently has distribution system capabilities. The Company intends to become a
multiple product supplier in these markets through internal product development
and through product acquisitions. With its capital resources, the Company is
positioned to respond to growth opportunities in the desktop video and computer
videoconferencing markets as profitable niches and such opportunities become
available.
The Company had instituted an ISO 9001 quality program to reduce cost
of goods sold and inventory levels while improving quality and customer response
times. The Company recently redirected its ISO goals to implementation of an ISO
9002 quality program. That program focuses on manufacturing and service quality
while ISO 9001 also addresses the design process. The company hopes to return to
a full ISO 9001 program in the future. The quality control manager that the
Company hired in the beginning of 1997 has resigned and the Company is seeking a
new quality control manager. to continue the implementation process. The Company
has designed the system and recently started internal audits. The Company
anticipates an external audit in the second quarter of 1999 to achieve ISO 9002
certification. Furthermore the Company has developed partnerships with its
suppliers and distributors to reduce cost of goods sold and selling expenses
while shortening cycle times and putting the Company closer to its customers in
the selling channel. By developing Business Partnerships with its dealers and
distributors, the Company receives annual purchase commitments. This allows the
Company to add efficiencies and cost reductions by ordering higher volumes of
inventory with monthly deliveries and also benefiting the Company's forecasting
and production management. This better accommodates the Company's customers with
improved response and delivery times. The Company also believes that acquisition
opportunities exist in markets with potential to leverage existing technology,
distribution systems or the administrative infrastructure.
RECENT DEVELOPMENTS
Between March - July of 1998, certain warrantholders exercised a total
of 955,703 warrants at an exercise price of $0.6875. The Company received a
total of $657,046 in proceeds from the exercise of these warrants into the
Company's common stock. These proceeds were used as working capital for the
Company. Currently the Company has approximately 655,000 warrants remaining that
have expiration dates extending over the period of July 31, 1998 to January 15,
1999 with potential proceeds of approximately $450,000 (assuming the exercising
of all outstanding warrants).
On April 6, 1998, the Company acquired substantially all of the
operating assets of Video Dynamics, Inc. a Florida corporation. In connection
with such purchase, the Company also assumed substantially all of Video
Dynamics' operating liabilities as of the date of closing. The purchase price
for the acquisition consisted of $200,000 in cash and 201,478 shares of common
stock of the Company ($300,000 at a per share value of $1.49, the average of the
closing price of the Common Stock over the 20 trading days preceding closing).
In addition to the foregoing, the Company issued a promissory note in the amount
of $10,000, payable without interest on or before September 30, 1998. The
Company funded from cash on hand the cash purchase price at Closing. The assets
acquired totaled $415,000 and included four patents relating to medical
instrument camera technology. These patents were granted in 1990, 1993, 1995 and
1998 and have fourteen to seventeen year terms.
Concurrent with the closing, the Company entered into employment
agreements with Richard Cane and Wayne Byard, the principals of Video Dynamics.
The employment agreements are for five (5) year terms from the date of closing.
Video Dynamics will operate as VideoLabs' Healthcare Products Division.
7
<PAGE>
SELLING SHAREHOLDERS
The following table sets forth certain information as to the maximum
number of Shares that may be sold by each of the Selling Shareholders pursuant
to this Prospectus.
<TABLE>
<CAPTION>
Percent of
Number of Number of Number of Common Stock
Shares Owned Shares Shares to be Owned After
Prior to the Offered Owned After Completion of
Name Offering Hereby the Offering (12) Offering
- ---- -------- ------ ----------------- --------
<S> <C> <C> <C> <C>
John Collins (1) 114,327 80,994(5) 33,333 *
Ward Johnson (2) 336,769 32,000(a) 304,769 7.8
Christian Johnson 20,000 20,000(a) 0 *
Margit Johnson 20,000 20,000(a) 0 *
Erik Johnson 20,000 20,000(a) 0 *
Andrew J. Porter Irrevocable
Trust U/A 7/25/90 81,816 81,816(6) 0 *
Kathleen Porter Irrevocable Trust
U/A 5/18/89 81,816 81,816(7) 0 *
Maria Porter Irrevocable
Trust U/A 7/25/87 81,816 81,816(8) 0 *
Michael Porter Irrevocable Trust
U/A 1/23/88 81,816 81,816(9) 0 *
James Hansen (3) 419,976 320,000(10) 99,976 2.6%
Timothy A. Gagner 72,722 72,722(a) 0 *
Richard F. Craven (4) 647,484 292,460(11) 355,024 9.1%
A. J. Porter 1,244 1,244(a) 0 *
Ann Johnson 29,091 29,091(a) 0 *
Ann Crowely 8,145 8,145(a) 0 *
William M. and Sandra K
Metcalf 58,183 58,183(a) 0 *
Kathleen Stroh 8,145 8,145(a) 0 *
Richard L. Robinson & F
Lee Robinson 40,727 40,727(a) 0 *
Marion & Louise Waters 8,145 8,145(a) 0 *
Howard V. O'Connell 34,618 34,618(a) 0 *
James F. Pederson 8,145 8,145(b) 0 *
First Trust National Assoc,
FBO James V. Vessey IRA 1,000 1,000(a) 0 *
Robert S Spong 34,618 34,618(b) 0 *
John G. Kinnard & Co. 101,818 101,818(b) 0 *
Binford & Assoc. Profit Sharing 4,073 4,073(b) 0 *
Bright M. Dornblaser 8,145 8,145(b) 0 *
Byron Shaffer 162,909 162,909(b) 0 *
Charles McMunn 16,291 16,291(b) 0 *
Dave Olson 30,545 30,545(b) 0 *
Dorothy Trisko 7,270 7,270(b) 0 *
Gary T. Alkire 20,364 20,364(b) 0 *
George O. Johnson 8,145 8,145(b) 0 *
Karen Struve 8,145 8,145(b) 0 *
8
<PAGE>
Mary S. Binford 2,036 2,036(b) 0 *
Michael S. McGray 4,073 4,073(b) 0 *
Norman and Kahthryn Craven 2,036 2,036(b) 0 *
Sheldon and Ruth Gustafson 4,073 4,073(b) 0 *
Timothy and Susan Thompson 2,097 2,097(b) 0 *
Dirk D. Draayer 815 815(b) 0 *
Don and Alice Craven 8,145 8,145(b) 0 *
Glen and Margret Thompson 8,145 8,145(b) 0 *
Gregory D. Craven 4,073 4,073(b) 0 *
Gretchen M. Craven 4,073 4,073(b) 0 *
James E. Kopriva 2,036 2,036(b) 0 *
Jan Gniffke 815 815(b) 0 *
Larry F. Gehl 2,851 2,851(b) 0 *
Lisa Wing 815 815(b) 0 *
Michael P. Craven 1,018 1,018(b) 0 *
Rick Lalonde 815 815(b) 0 *
Robert A. and Karen J. Craven 4,073 4,073(b) 0 *
Scott C. Dunlop 2,036 2,036(b) 0 *
Todd R. Craven 4,073 4,073(b) 0 *
A. J. Kamps 40,727 40,727(b) 0 *
Charles H. Colby 20,364 20,364(b) 0 *
Jay Jackson 7,273 7,273(b) 0 *
David Krekelberg 60,000 60,000(b) 0 *
Frank Broghammer 2,500 2,500(b) 0 *
Ted Davies 10,000 10,000(b) 0 *
Gary Campbell 2,500 2,500(b) 0 *
Video Dynamics, Inc. 201,478 201,478(a) 0 *
b. warrant holdings 2,480 2,480(b) 0 *
Wayne Mills 3,400 3,400(b) 0 *
Dennis Hanish 4,500 4,500(b) 0 *
John Ryden 4,500 4,500(b) 0 *
Edward Higgins 5,000 5,000(b) 0 *
Richard B. Heise 65,060 65,060(b) 0 *
John E. Feltl 65,060 65,060(b) 0 *
---------- ----------- ---
TOTAL 3,121,248 2,338,146 793,102 *
========== ========= =======
</TABLE>
===============================================================================
(a) Denotes Shares issued and outstanding.
(b) Denotes Shares issuable upon exercise of outstanding warrants or options.
* Less than 1 percent.
(1) Mr. Collins is a director of the Company.
(2) Mr. Johnson is a director of the Company.
(3) Mr. Hansen is the Chairman, CEO and Treasurer of the Company. (4) Mr. Crave
is a director of the Company
(5) Reflects 60,994 issued and outstanding Shares and 20,000 Shares issuable
upon exercise of warrants or options.
(6) Reflects 52,900 issued and outstanding Shares and 28,916 Shares issuable
upon exercise of warrants or options.
(7) Reflects 52,900 issued and outstanding Shares and 28,916 Shares issuable
upon exercise of warrants or options.
(8) Reflects 52,900 issued and outstanding Shares and 28,916 Shares issuable
upon exercise of warrants or options.
(9) Reflects 52,900 issued and outstanding Shares and 28,916 Shares issuable
upon exercise of warrants or options.
(10) Reflects 170,000 issued and outstanding Shares and 150,000 Shares issuable
upon exercise of warrants or options.
(11) Reflects 270,424 issued and outstanding Shares and 22,036 Shares issuable
upon exercise of warrants or options.
(12) Assumes all shares being registered in this offering will be sold. However,
to the Company's knowledge, the holders of such securities have no
commitment to anyone to sell all or part of the securities being
registered.
9
<PAGE>
PLAN OF DISTRIBUTION
The Shares will be offered and sold by the Selling Shareholders for
their own accounts. The Company will not receive any proceeds from the sale of
the Shares pursuant to this Prospectus. The Company has agreed to pay the
expenses of registration of the Shares, including a certain amount of legal and
accounting fees.
The Selling Shareholders may offer and sell the Shares from time to
time in transactions on the over-the-counter market, in brokerage transactions
at prevailing market prices or in transactions at negotiated prices. Sales may
be made to or through brokers or dealers who may receive compensation in the
form of discounts, concessions or commissions from the Selling Shareholders or
the purchasers of Shares for whom such brokers or dealers may act as agent or to
whom they may sell as principal, or both. As of the date of this Prospectus, the
Company is not aware of any agreement, arrangement or understanding between any
broker or dealer and the Selling Shareholders.
The Selling Shareholders and any brokers or dealers acting in
connection with the sale of the Shares hereunder may be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act, and
any commissions received by them and any profit realized by them on the resale
of Shares as principals may be deemed underwriting compensation under the
Securities Act.
EXPERTS
The December 31, 1997 and 1996 financial statements incorporated by
reference in this Prospectus and elsewhere in the Registration Statement have
been audited by Boulay, Heutmaker, Zibell & Co. P.L.L.P., independent public
accountants, as indicated in their report with respect thereto, and incorporated
herein by reference in reliance upon the authority of such firm as experts in
accounting and auditing in giving said reports.
LEGAL MATTERS
The validity of the Shares offered hereby has been passed upon for the
Company by Hinshaw & Culbertson, 222 South Ninth Street, Minneapolis, Minnesota
55402.
10
<PAGE>
No dealer, salesperson or any other
person has been authorized to give any
information or to make any representations 2,338,146 Shares
other than those contained in this
Prospectus, and, if given or made, such
information or representations must not be
relied upon as having been authorized by the
Company, any Selling Shareholder or any
other person. This Prospectus does not
constitute an offer to sell or a VIDEOLABS, INC.
solicitation of any offer to buy to any
person in any jurisdiction in which such
offer or solicitation would be unlawful or
to any person to whom it is unlawful.
Neither the delivery of this Prospectus nor
any offer of sale made hereunder shall,
under any circumstances, create any
implication that there has been no change in
the affairs of the Company or that the
information contained herein is correct as
of any time subsequent to the date hereof.
-------------------- Common Stock
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION................... 2
--------------
INCORPORATION OF CERTAIN DOCUMENTS PROSPECTUS
BY REFERENCE............................ 2 --------------
RISK FACTORS............................ 3
VIDEOLABS, INC.......................... 6
SELLING SHAREHOLDERS.................... 8
PLAN OF DISTRIBUTION.................... 10
EXPERTS ............................... 10
LEGAL MATTERS........................... 10
________, 1998
=========================================== ==============================
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
SEC Registration Fee $ 870
Accounting Fees and Expenses 800
Legal Fees and Expenses 3,000
Miscellaneous 500
---------
Total $ 5,170
All fees and expenses other than the SEC registration fee are
estimated. The expenses listed above will be paid by the Company.
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Under Delaware law, the directors and officers of the Company are
entitled, under certain circumstances, to be indemnified by it against all
expenses and liabilities incurred by or imposed upon them as a result of suits
brought against them as such directors and officers, if they act in good faith
and in a manner they reasonably believe to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action or
proceeding, have no reasonable cause to believe their conduct was unlawful,
except that no indemnification shall be made against expenses in respect of any
claim, issue or matter as to which they shall have been adjudged to be liable
for negligence or misconduct in the performance of their duties to the Company,
unless and only to the extent that the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, they are fairly and
reasonably entitled to indemnity for such expenses which such court shall deem
proper. Any such indemnification may be made by the Company only as authorized
in each specific case upon a determination by the stockholders or disinterested
directors that indemnification is proper because the indemnitee has met the
applicable statutory standard of conduct. The Certificate of Incorporation and
Bylaws of VideoLabs provides that VideoLabs indemnify officers and directors to
the extent permitted by law as now enacted or hereafter amended.
VideoLabs also maintains an insurance policy or policies to assist in
funding indemnification of directors and officers for certain liabilities.
II-1
<PAGE>
ITEM 16. LIST OF EXHIBITS
5 Opinion of Hinshaw & Culbertson regarding legality.*
23.1 Consent of Boulay, Heutmaker, Zibell & Co. P.L.L.P.
23.2 Consent of Hinshaw & Culbertson (included in Exhibit 5 to this
Registration Statement).*
24 Power of Attorney.*
* Previously filed.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by
section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof which,
individually or in the aggregate, represent a fundamental
change to such information in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
under the Securities Act if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration
statement; and
(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in the registration statement or any material change in the
information set forth in the registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the registration statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the
registrant pursuant to section 13 or section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
registration statement.
II-2
<PAGE>
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
Insofar as indemnification for liabilities arising Under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has caused this Amendment No. 1 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Minneapolis, State of Minnesota, on September 4, 1998.
VIDEOLABS, INC.
By /s/ James Hansen
-------------------------------------
James Hansen
Chairman and Chief Executive Officer
II-3
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
By /s/ James Hansen
---------------------------------------- Dated: September 4, 1998
James Hansen
Chairman and Chief Executive Officer
(principal executive officer)
By /s/ James Hansen
---------------------------------------- Dated: September 4, 1998
James Hansen
Treasurer
(principal financial officer)
(principal accounting officer)
By * Dated: September 4, 1998
----------------------------------------
Ward Johnson
Director
By * Dated: September 4, 1998
----------------------------------------
Richard Craven
Director
By * Dated: September 4, 1998
----------------------------------------
John Collins
Director
*By /s/ James Hansen Dated: September 4, 1998
----------------------------------------
James Hansen
As Attorney-in-Fact
II-4
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page
5* Opinion of Hinshaw & Culbertson regarding legality..
23.1 Consent of Boulay, Heutmaker, Zibell & Co. P.L.L.P..
24* Power of Attorney...................................
* Previously filed
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
VideoLabs, Inc.:
We consent to the inclusion of our report dated February 13, 1998 on the
Financial Statements of VideoLabs, Inc., as of December 31, 1997 and 1996 and
for the years then ended, in the Amendment No. 2 to Form S-3 Registration
Statement dated September 8, 1998 and to the reference to our firm under the
caption "Experts" included therein.
Boulay, Heutmaker, Zibell & Co. P.L.L.P.
Minneapolis, Minnesota
September 8, 1998
