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FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from______________to________________
Commission file number: 0-26302
VIDEOLAN TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 33-93086
(State of incorporation) (I.R.S. Employer Identification No.)
100 Mallard Creek Road, Suite 250, Louisville, Kentucky 40207
(Address of principal executive offices) (Zip Code)
502-895-4858
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
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 June 30, 1996
- ---------------------- --------------------------------------
Common stock, $.01 par value per share 13,935,498
This document contains 15 pages.
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INDEX
Page
PART I. Financial Information
ITEM 1. Financial Statements
Unaudited Condensed Balance Sheet as of June 30, 1996 3
Unaudited Condensed Statements of Operations for the
three months ended June 30, 1995 and 1996, the six months
ended June 30, 1995 and 1996, and for the period from May
11, 1994(Inception) to June 30, 1996. 4
Unaudited Condensed Statement of Stockholders' Equity for
the Six Months ended June 30, 1996. 5
Unaudited Condensed Statements of Cash Flows for the
three months ended June 30, 1995 and 1996, the six months
ended June 30, 1995 and 1996, and for the period from May
11, 1994(Inception) to June 30, 1996. 6
Notes to Unaudited Condensed Financial Statements 7
ITEM 2. Management's Discussion and Analysis or Plan of Operations 11
PART II. Other Information 13
ITEM 1. Legal Proceedings
ITEM 2. Changes in Securities
ITEM 3. Defaults Upon Senior Securities
ITEM 4. Submission of Matters to a Vote of Security Holders
ITEM 5. Other Information 14
ITEM 6. Exhibits and Reports
SIGNATURES 15
2 of 15
VideoLan Technologies, Inc.
(a development stage enterprise)
CONDENSED BALANCE SHEET
June 30, 1996
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 2,532,417
Accounts receivable 24,588
Inventories 1,437,610
Prepaid expenses and other current assets 197,975
------------
Total Current Assets $ 4,192,590
Property and equipment, net 519,975
Other assets:
Patents pending or issued 88,715
Notes receivable 33,800
Other assets 27,749
Security deposits 122,759
------------
273,023
------------
$ 4,985,588
============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 399,508
Capital lease obligations-current 143,588
------------
Total Current Liabilities $ 543,096
Long term liabilties:
Capital lease obligations-non current 31,853
Commitments and Contingencies
Stockholders' equity:
Preferred stock, $.01 par value 5,000,000
shares authorized, none issued
Common stock, $.01 par value; 20,000,000
shares authorized; 13,935,498 shares issued
and outstanding 139,355
Additional paid-in-capital 16,566,060
Deficit accumulated during the development stage (12,294,776)
------------
Total Stockholders' Equity 4,410,639
------------
$ 4,985,588
============
3 of 15
VideoLan Technologies, Inc.
(a development stage enterprise)
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Period from
May 11, 1994
Three Months Ended Six Months Ended (Inception)
June 30, June 30, through
1995 1996 1995 1996 June 30, 1996
------------ ------------ ------------ ---------- -----------
Net sales $ -- $ -- $ -- $ -- $ 50,053
Cost of sales
-- -- -- -- 37,372
------------ ------------ ------------ ---------- -----------
Gross profit
-- -- -- -- 12,681
Selling, general and administrative expenses:
Salaries 93,433 491,288 201,821 980,273 1,744,944
Compensation expense 1,125,000 3,254,875
Payroll taxes 17,155 16,446 44,712 89,912 234,626
Consulting fees 135,866 281,422 1,152,535
Marketing cost 37,084 87,949 80,415 141,305 340,095
Professional fees 48,478 115,576 81,430 164,095 604,306
Travel and entertainment 103,540 150,118 167,884 225,020 693,934
Research and development 244,968 399,532 490,521 854,664 3,368,654
Equipment expense 26,759 174,554 49,903 222,977 378,921
Rent 14,401 38,896 28,455 72,826 191,744
Insurance 27,891 42,507 32,268 88,426 133,367
Office 83,427 50,483 112,939 90,191 265,160
Depreciation and amortization 6,239 26,237 8,310 44,182 77,571
Stock Administration Charges 27,837 37,898 37,898
Other 9,790 25,806 15,590 45,686 72,897
------------ ------------ ------------ ----------- -------------
Total expenses 713,165 1,783,095 2,439,248 3,338,877 12,551,527
Other income (expense)
Interest income 2,500 56,333 12,257 124,818 260,062
Interest expense (7,444) (9,800) (18,298)
Other Income 88 2,306 2,306
------------ ------------ ------------ ----------- -------------
2,500 48,977 12,257 117,324 244,070
Net loss $ (710,665) $ (1,734,118) $ (2,426,991) $(3,221,553) $ (12,294,776)
============ ============ ============ =========== =============
Loss per share $ (0.06) $ (0.12) $ (0.22) $ (0.23) $ (1.01)
============ ============ ============ =========== =============
Weighted average common
shares outstanding $ 10,968,498 $ 13,898,883 $ 10,968,498 $13,877,124 $ 12,172,717
============ ============ ============ =========== =============
4 of 15
VideoLan Technologies, Inc.
(a development stage enterprise)
STATEMENT OF STOCKHOLDERS' EQUITY
For the Six Months Ended June 30, 1996
(Unaudited)
Deficit
Accumulated
Common Stock Additional During Total
Preferred ---------------------------- Paid-In Development Stockholders'
Stock Shares Amount Capital Stage Equity
------------ ------------- ------------ ------------- ------------ -------------
Balance at January 1, 1996 $ 13,843,498 $ 138,435 $ 16,424,980 $ (9,073,223) $ 7,490,192
Warrants converted to Common Stock 5,000 50 34,950 35,000
Employee stock options exercised 87,000 870 106,130 107,000
Net loss (3,221,553) (3,221,553)
------------ ------------ ------------ ------------ ------------ ------------
Balances at June 30, 1996 $ 13,935,498 $ 139,355 $ 16,566,060 $(12,294,776) $ 4,410,639
============ ============ ============ ============ ============ ============
5 of 15
VideoLan Technologies, Inc.
(a development stage enterprise)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Period from
May 11, 1994
Three Months Ended Six Months Ended (Inception)
June 30, June 30, through
1995 1996 1995 1996 June 30, 1996
-------------- -------------- -------------- -------------- --------------
Cash flows from operating and development
stage activities:
Net loss $ (710,665) $ (1,734,118) $ (2,426,991) $ (3,221,553) $ (12,294,776)
Adjustments to net loss:
Issuances of common stock for services rendered 1,125,000 1,146,875
Issuances of common stock for consulting
services rendered 665,000
Issuances of common stock for purchased
research and development 709,125
Issuances of stock options to consultants 2,108,000
Depreciation and amortization 6,239 26,237 8,310 44,182 77,571
Gain on sale of assets (88) (88) (88)
(Increase)decrease in accounts receivable 77 77 (24,587)
Increase in interest receivable (2,500) (2,500)
Increase in inventories (163,816) (183,893) (387,043) (617,241) (1,437,610)
(Increase)decrease in prepaid expenses and
other current assets 2,352 16,478 (12,820) (39,494) (197,975)
Increase in security deposits (8,540) (93,540) (8,540) (97,098) (122,759)
Increase(decrease) in accounts payable and
accrued liabilities 230,155 (207,003) 220,433 54,665 399,508
-------------- -------------- -------------- -------------- --------------
Net cash used in operating and development
stage activities (646,775) (2,175,850) (1,484,151) (3,876,550) (8,971,717)
-------------- -------------- -------------- -------------- --------------
Cash flow from investing activities:
Acquisition of property and equipment (131,530) (73,429) (146,097) (116,133) (356,899)
Proceeds from sale of assets 500 500 500
Patent application costs (13,400) (4,452) (53,500) (88,715)
-------------- -------------- -------------- -------------- --------------
Net cash used in investing activities: (131,530) (86,329) (150,549) (169,133) (445,114)
-------------- -------------- -------------- -------------- --------------
Cash flows from financing activities:
Proceeds from issuance of common stock
in private placement 2,202,747 2,655,647
Offering costs (211,158) (499,861) (326,263)
Proceeds from the exercise of stock
options by employees 71,000 107,000 107,000
Proceeds from initial public offering 11,500,000
Underwriter's commissions and expense allowances (1,449,000)
Offering costs (27,749) (27,749) (473,719)
Proceeds from exercise of common stock warrants 35,000 35,000
Proceeds from notes payable 331,000
Repayment of notes payable (6,000) (331,000) (331,000)
Repayment of capital lease obligations (4,525) (34,436) (8,824) (45,148) (65,617)
Proceeds from bridge loans 450,000 900,000 900,000
Repayment of bridge loans (450,000) (900,000)
Loans to employees, net 35,311 (33,800)
Cash overdraft (31,003)
-------------- -------------- -------------- -------------- --------------
Net cash provided by financing activities: 228,317 8,815 1,817,370 69,103 11,949,248
-------------- -------------- -------------- -------------- --------------
Increase(decrease) in cash and cash
equivalents: (549,988) (2,253,364) 182,670 (3,976,580) 2,532,417
Cash and cash equivalents at beginning of
period 732,658 4,785,781 - 6,508,997 -
-------------- -------------- -------------- -------------- --------------
Cash and cash equivalents at end of period $ 182,670 $ 2,532,417 $ 182,670 $ 2,532,417 $ 2,532,417
============== ============== ============== ============== ==============
Supplemental disclosure of cash flow information: Capital lease obligations of
$130,398 were incurred when the Company entered into new leases for computer
equipment. Interest expense paid in cash was $2,356.
6 of 15
VideoLan Technologies, Inc.
(a development stage enterprise)
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 1996
(Unaudited)
NOTE A-DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
VideoLan Technologies, Inc. (the "Company"), is a development stage
enterprise established to acquire certain technology and the rights to a pending
U.S. Patent application for an analog video distribution communications system
designed to provide real-time, interactive video, to and from a desktop personal
computer over local and wide area networks ("VideoLan Technology"). Since
inception the Company has primarily been engaged in research and development.
In the course of its development stage activities, the Company has incurred
significant losses which have been funded with resources from the Chairman,
bridge loan financing, proceeds from a private placement, and proceeds from an
initial pubic offering.
Unless income from sales of the VideoLan System is obtained, the timing,
sufficiency and receipt of which the Company cannot predict, future development
and commercialization of the Company's technology will depend upon arrangements
with third parties to finance research and development projects, or the
Company's ability to obtain other additional financing on terms satisfactory to
the Company. The Company presently has no formal binding commitments for
external financing. The Company's inability to obtain such financing could have
a material adverse effect on the Company`s operations.
NOTE B-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Research and Development Costs
Research and development costs are expensed as incurred.
2. Net Loss Per Share of Common Stock
The computation of loss per common share is based on the weighted average
number of outstanding shares. Stock options and warrants have not been included
in the calculation as their inclusion would be antidilutive.
3. Cash and Cash Equivalents
Cash equivalents consist of short-term government obligations. These
securities have original maturity dates not exceeding three months. Such
investments are carried at cost which approximates market, and are considered
cash equivalents for purposes of reporting cash flows.
4. Interim Financial Statements
The unaudited balance sheet as of June 30, 1996 and the unaudited
statements of operations and cash flows for the three months and the six months
ended June 30, 1996 and 1995 as well as the period May 11, 1994 (inception)
through June 30, 1996 and the statement of stockholders' equity for the six
months ended June 30, 1996 contain all adjustments (consisting only of normal
recurring adjustments) which are, in the opinion of the Company's management,
necessary to present the financial position of the Company as of June 30, 1996
and results of operations and the cash flows for the three months, and the six
months ended June 30, 1996 and 1995, and the period May 11, 1994 (inception)
through June 30, 1996.
7 of 15
VideoLan Technologies, Inc.
(a development stage enterprise)
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 1996
(Unaudited)
5. Patents Pending or Issued
Patent pending applications consist of filing fees and certain legal costs
relating to the filing of domestic and international patent applications for the
VideoLan technology.
NOTE C-COMMITMENTS AND CONTINGENCIES
Employee Compensation
On January 17, 1996, Mr. John Haines' employment as CEO of the Company
ceased. As a result of his termination and release agreement with the Company,
Mr. Haines is to receive $15,625 per calendar month, prorated for partial
months, through September 24, 1996. The termination and release agreement allows
Mr. Haines to retain vested options to purchase 150,000 shares of common stock
at $3 per share granted to him under his consulting agreement. The termination
and release agreement also required the Company to register 50,000 of the
150,000 shares on June 20, 1996 and provides Mr. Haines certain piggyback
registration rights for the remaining 100,000 options. Upon entering the
termination and release agreement, Mr. Haines resigned as a director of the
Company.
Effective February 15, 1996, Richard Dean Jackson resigned as Executive
Vice President of the Company. As part of his severance and release agreement
with the Company, Mr. Jackson received $125,000 paid over a four month period,
commencing March 1996. Mr. Jackson concurrently signed a marketing
representative agreement to serve as a commissioned marketing representative of
the Company. Additionally, he was issued options to purchase 150,000 shares of
the Company's common stock at $12 per share.
New Facility
In May 1996, the Company leased a 9,778 square foot facility in Jeffersontown,
KY. The Company relocated the Product Engineering and the Research and
Development Departments from the Corporate Office to this new facility. The
minimum annual lease payments under this five year lease are as follows:
1996 $ 30,564
1997 61,128
1998 73,128
1999 77,128
2000 85,128
Thereafter 28,376
=========
$ 355,452
=========
8 OF 15
VideoLan Technologies, Inc.
(a development stage enterprise)
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 1996
(Unaudited)
Patents Pending or Issued
The claims under VideoLan's U.S. Patent application for "bi-directional
transport of video bandwidth signals have been approved by the U.S. Patent and
Trademark Office. The U.S. Patent (No. 5537142) was issued July 16, 1996.
The Company's remaining pending international patent applications claim an
efficient network for the real time, simultaneous, bi-directional transmission
of voice, video, and data among a plurality of users connected to a plurality of
hubs.
Patents and patent applications involve complex legal and factual issues. A
number of companies have filed applications for, or have been issued, patents
relating to products or technology that is similar to some of the products or
technology being developed or used by the Company. There can be no assurance
that the Company's patent will afford protection against the development of
similar or related technology by competitors.
Although the Company believes that its VideoLan System and technology do
not and will not infringe on patents or proprietary rights of others, it is
possible that such infringement or violation has occurred or may occur or that
others may infringe on the Company's patents.
In the event that the Company's products or technologies infringe on
patents or other proprietary rights of others, the Company could be required to
discontinue the sale of its products, including the VideoLan System, and
redesign its product or obtain licenses. There can be no assurance that the
Company would be able to do so in a timely manner, upon acceptable terms and
conditions, or at all, or that the failure to do any of the foregoing would not
have a material adverse effect on the Company. If any of the Company's products
or technologies are deemed to infringe on patents or other proprietary rights of
others, the Company could, under certain circumstances, become liable for
damages, which could also have a material adverse effect on the Company.
In June 1996, Datapoint Corporation ("Datapoint") filed a lawsuit against
the Company in the United State District Court for the District of New Jersey
claiming patent infringement, contributory infringement and inducing
infringement. No claims are made in the lawsuit regarding the validity of the
Company's patent. Datapoint, which is currently experiencing financial
difficulties, has made similar claims in lawsuits filed against other
videoconferencing companies. However, to the Company's knowledge, Datapoint has
not obtained a final verdict of infringement against any of these companies. The
Company's independent outside patent counsel has reviewed Datapoints's claims
and determined that they are without merit. Accordingly, management does not
believe the lawsuit will have a material adverse effect on the Company's
results of operations or financial condition.
NOTE D-CAPITAL STOCK
At the Annual Meeting of Stockholders in June 1996, the Company's
stockholders approved a proposal to increase the Company's authorized shares of
common stock from 20,000,000 to 80,000,000. The proposal permitted the Company's
management to defer the effectiveness of the increase. Since the Company
presently has sufficient authorized shares for its currently planned needs, it
has no present intention to make the increase effective. Additionally, the
stockholders approved a proposal to increase the number of shares available
under the Company's 1995 Stock Option Plan from 1,000,000 to 2,000,000.
9 OF 15
VideoLan Technologies, Inc.
(a development stage enterprise)
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 1996
(Unaudited)
NOTE E-SUBSEQUENT EVENTS
Sales Agency Agreement
In July of 1996, the Company entered into a Sales Agency Agreement with
Quest Enterprises, Inc. ("QEI") QEI was appointed a nonexclusive authorized
sales agent of the Company to sell to approved accounts in the United States.
The Company will pay a sales commission equal to five percent of net sales to
QEI on these approved accounts. The Company also granted to QEI an option to
purchase 75,000 shares of common stock at an exercise price of $16 per share.
The option to purchase 25,000 of these shares is irrevocable and is exercisable
at any time prior to its expiration and is not be affected by the termination of
the Sales Agency Agreement. The option to purchase any or all of the remaining
shares will not be exercisable until and unless prior to the termination of the
Sales Agency Agreement (i) the Company has received net sales from approved
accounts of at least $5,000,000 or (ii) the Company obtains equity financing of
at least $5,000,000 through QEI on terms that are acceptable to the Company.
Software Development Consulting Agreement
In July of 1996 the Company signed a one year consulting agreement with
Video Network Service, Inc. ("VNS") to provide full time software supervision
and development. The consulting agreement calls for VNS to be paid $280,000 over
the term of the one year contract. Additionally, 40,000 stock options were
granted to VNS in specific increments once mutually agreed upon milestones are
met.
10 of 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
Introduction
VideoLan Technologies, Inc. ("the Company"), is a development stage enterprise
incorporated in Delaware. The Company is engaged in the continuing development
of communications products which utilize the Company's proprietary technology to
transmit and receive real time, interactive video, voice and data signals over
unshielded twisted pair copper wire ("UTP"), as well as coaxial cable and fiber,
to and from desktop personal computers over local and wide area networks. On
July 16, 1996 the US Patent and Trademark office issued the Company a patent
(No. 5537142) for a bi-directional transmission of video banded signals,
including a switching matrix. There are several international patents still
pending.
During the second half of 1996, the Company plans to introduce and market a
stand-alone video, voice and data communications network solution (the "VideoLan
System"), its first product, through the establishment of distribution channels
and direct sales in certain niche markets. The Company will also continue to
develop its technology to enable local telephone exchange carriers, regional
bell operating companies ("RBOC's") and cable companies to provide immediate
access in the home to programming selected by customers from a remote library
("Video Services").
In August 1995, the Company concluded its initial public offering ("IPO") of
2,875,000 units, each unit consisting of one share of common stock and one
redeemable common stock purchase warrant exercisable for one share of common
stock at a price of $7.00 subject to certain adjustments based upon
anti-dilution provisions, at any time until August 10, 2000. The net proceeds of
the offering to the Company, after payment of underwriters discounts and
commissions, and other expenses of the offering were approximately $9,600,000.
The Company anticipates that the remaining proceeds from the offering should be
sufficient to fund operations through the end of 1996.
Management believes that approximately $750,000 of the proceeds of the offering
was originally budgeted to accomplish the Company's marketing strategy for the
VideoLan System through December 31, 1996 ($236,144 used as of June 30, 1996),
reflecting the Company's plan to rely in part on the marketing organizations of
the original equipment manufacturers ("OEM's"), value added resellers
("VARS's"), systems integrators and distributors through which it intends to
sell the VideoLan System. The Company plans to minimize operating expenses by
subcontracting manufacturing, installation and field maintenance services.
Additionally, approximately $3,000,000 of the proceeds of the offering was
allocated to the purchase of inventory through December 31, 1996 ($993,884 used
as of June 30, 1996), and approximately $1,500,000 will be used during the next
twelve months to was allocated to enhancements of the VideoLan System and
development of the Company's technology for Video Services ($1,781,934 used as
of June 30, 1996). Thereafter, the Company anticipated that cash flow from the
sales of the VideoLan System and/or development contracts with RBOC's, cable
companies or other third parties would be required to finance the integration of
the Company's technology into existing RBOC or cable company infrastructures for
video services. The balance of the IPO proceeds was allocated for general
corporate working capital.
Originally, the Company budgeted $1,500,000 for research and development to
enhance the VideoLan System and develop the Company's technology for Video on
Demand. The Company has exceeded the original budgeted amount by $281,934. The
company is currently achieving its original goals for the technology and has
expanded its expectations. The Company is therefore devoting more of its
resources to developing new applications for the technology as well as
additional features for the current applications.
11 of 15
There can be no assurance that the Company will establish satisfactory
distribution channels for the VideoLan System or that the VideoLan System will
be accepted in the marketplace. There can also be no assurance that the Company
will enter into satisfactory development contracts for Video Services and or
that it can complete development before other technologies are selected by Video
Services providers.
Results of Operations
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995
Revenues. The Company had no revenues for the six months ended June 30,
1996 or 1995. The Company has engaged in limited marketing of the VideoLan
System and is currently beginning to implement its marketing strategy.
Selling, General and Administrative Expenses. Total selling, general and
administrative expenses for the six months ended June 30, 1996 were $3,338,877
as compared with $2,439,248 in the comparable period of the prior year.
Salaries, consulting fees and related payroll taxes increased by $1,105,074 to
$1,351,607 in the first half of the fiscal 1996 compared to $246,533 in the
first half of fiscal 1995. Research and development expenses for the first half
of 1996 were $854,664 as compared with $490,521 for the same period in 1995, and
marketing costs were $141,305 in 1996 as compared with $80,415 for the same
period in 1995.
Net Loss. The net loss of the Company for the six months ended June 30,
1996 was $3,221,553 ($0.23) as compared with $2,426,991 ($0.22) for the six
months ended June 30, 1995. The Company expects to incur continuing losses until
significant quantities of the VideoLan System are sold.
Liquidity and Capital Resources
Through June 30, 1996, an aggregate of $8,971,717 has been expended in the
operating and development stage activities of the Company, principally for
research and development, salaries and professional fees. An additional $445,114
has been used to prepare the Company's patent applications and purchase certain
equipment. Additional funds will be necessary to pay for additional engineers,
technical personnel and increased marketing costs in connection with the sale of
the Company's products.
As of June 30, 1996, the Company has financed its operations primarily through
investments by its Chairman and individual investors, a private placement of the
Company's Common Stock completed in February of 1995, which raised net proceeds
of approximately $1,900,000, and from the IPO which was completed in August 1995
and generated net proceeds of $9,600,000. The Company expects that the IPO
proceeds will be sufficient to meet the Company's working capital, marketing,
research and development, engineering and inventory requirements for the balance
of 1996. Thereafter, the Company anticipates that sales of the VideoLan System
and/or from research and development contracts will be the primary source of
working capital.
The Company will need to obtain financing to fund its activities in 1997 until
such time as the Company generates sufficient sales of the VideoLan System. The
Company is currently in discussions to obtain such financing but presently has
no formal binding commitments from any financing source.
The Company believes that, during the past year, inflation has not had a
significant impact on the Company's operating results.
12 of 15
VideoLan Technologies, Inc.
(A Development Stage Enterprise)
Part II: Other Information
ITEM 1. Legal Proceedings
In June 1996, Datapoint Corporation ("Datapoint") filed a lawsuit
against the Company in the United State District Court for the
District of New Jersey claiming patent infringement, contributory
infringement and inducing infringement. No claims are made in the
lawsuit regarding the validity of the Company's patent. Datapoint,
which is currently experiencing financial difficulties, has made
similar claims in lawsuits filed against other videoconferencing
companies. However, to the Company's knowledge, Datapoint has not
obtained a final verdict of infringement against any of these
companies. The Company's independent outside patent counsel has
reviewed Datapoint's claims and determined that they are without
merit. Accordingly, management does not believe the lawsuit will
have a material adverse effect on the Company's results of
operations or financial condition.
ITEM 2. Changes in Securities
None
ITEM 3. Defaults Upon Senior Securities
None
ITEM 4. Submission of Matters to a Vote of Security Holders
(A) The annual meeting of Stockholders of VideoLan Technologies, Inc.
was held on June 20, 1996.
(B) All director nominees were elected.
(C) Certain matters voted upon at the meeting and the votes cast with
respect to such matters are as follows:
(1) ELECTION OF DIRECTORS For Withheld
---------------------------------- --------------- ---------------
Ted Ralston 8,526,742 1,548,615
Vernon L. Jackson 10,047,842 27,515
Steven B. Rothenberg 10,047,842 27,515
John R. Glankler 8,526,742 1,548,615
Jacques O. de Labry 10,047,842 27,515
13 of 15
VideoLan Technologies, Inc.
(A Development Stage Enterprise)
Part II: Other Information
Broker
For Against Abstain Non Votes
-------------------------------- --------- -------- ------- ---------
(2) Proposal for amendment
to the Company's certificate
of incorporation. 9,155,374 841,127 44,150 34,706
(3) Proposal for amendments to
and retatement of the Company's
1995 Stock Option Plan. 6,420,235 881,898 81,260 2,691,964
(4) Proposal to ratify the
appointment of Grant Thornton
LLP as independent accountants
for the Company for the year
ending December 31, 1996. 9,289,797 762,450 23,110 0
ITEM 5. Other Information
None
ITEM 6 Exhibits and Reports:
(a) Exhibits
10.1 Amended and Restated 1995 Stock Option Plan
10.2 Termination and Release Agreement between the Company and John
E. Haines
10.3 Option Agreement between the Company and John E. Haines
10.4 Registration Rights Agreement between the Company and John E.
Haines
10.5 Sales Agency Agreement between the Company and Quest
Enterprises, Inc.
10.6 Option Agreement between the Company and Quest Enterprises, Inc.
10.7 Consulting Agreement between the Company and Video Network
Services, Inc.
10.8 Option agreement between the Company and Video Network Services,
Inc.
27.0 Financial Data Schedule
(b) Reports
None
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In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
VideoLan Technologies, Inc.
Date: August 9, 1996 /s/ Ted Ralston
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Chairman of the Board
Date: August 9, 1996 /s/ Steven B. Rothenberg
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Chief Financial and Accounting Officer
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