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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
AMENDMENT NO. 1
ANNUAL REPORT
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-28330
TALK VISUAL CORPORATION
(Exact name of registrant as specified in its charter)
LEGACY SOFTWARE, INC.
(Former name of registrant as specified in its charter)
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<S> <C>
Delaware 95-4561156
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
One Canal Park - 3rd Floor 02142
Cambridge, Massachusetts (Zip Code)
(Address of principal executive offices)
5757 W. Century Boulevard, Suite 700 90045
Los Angeles, California (Zip Code)
(Former address of principal executive offices)
</TABLE>
Registrant's telephone number, including area code: (617) 679-0300
Registrant's former telephone number, including area code: (310) 348-7266
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class Name of exchange on
Common Stock, $.001 par value Which registered
None
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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 [ ]
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Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.[ ]
As of March 23, 1999, there were 3,714,435 shares of the registrant's
Common Stock outstanding. The aggregate market value (based on the average bid
and asked prices of the Common Stock) of the voting stock held by non-affiliates
of the registrant on March 23, 1999 was $11,816,924.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Certain biographical information concerning the Directors and executive
officers of the Company as of March 31, 1999 is set forth below. Such
information was furnished by them to the Company.
DAVID B. HURWITZ
David B. Hurwitz - Age 35, has been a Director of the Company since
November 6, 1998. Mr. Hurwitz is the Executive Vice President & General Manager
of US WATS, Inc., in charge of the day-to-day operation of that company. A
senior executive and business development professional, Mr. Hurwitz has proven
ability to build entrepreneurial-based businesses through strategic alliances,
teaming relationships, creating cohesive organizational structures, and the
professional development of their human resources. Mr. Hurwitz has over 12
years experience in the telecommunications industry, encompassing business
development, general management, and strategic sales and marketing initiatives.
Prior to joining Commonwealth Long Distance/RCN as Vice President of Sales &
Marketing, where Mr. Hurwitz led a sales force of greater than 140
representatives and was a key element in the development and management of
corporate sales and marketing strategies, Mr. Hurwitz was involved in several
successful entrepreneurial start-up ventures, funded by Petrocelli Industries of
NYC. As Executive Vice President & Chief Operating Officer of Internet
Communications Services, Inc., Mr. Hurwitz was responsible for the development
and operation of a prepaid "debit" long distance calling card service and
validation processing service bureau, and as General Manager of FiberNet, Mr.
Hurwitz was responsible for overseeing the sale and marketing of services
associated with FiberNet's Upstate, and New York Metropolitan Area Networks.
Mr. Hurwitz spearheaded the development of business relationships with the
country's largest long distance carriers, and was responsible for product and
service development, rate structures and operating policies and procedures.
Prior to developing the business plan and negotiating funding for InterNet, Mr.
Hurwitz participated in the due diligence and sale of FiberNet's Upstate, and
Metropolitan New York Area markets to MFS. Mr. Hurwitz graduated with a BA in
English and History from Hobart College in 1985. He completed Master's level
course work in Telecommunications Management in 1988 and 1989 at the State
University of Albany. While affiliated with Rochester Tel. Telecommunications
Group, a division of Rochester Telephone (now Frontier) from 1985 until February
of 1992, Mr. Hurwitz held numerous positions including: Account Executive,
Regional Sales Manager and Director of the Mid-Atlantic and Central Regions.
MICHAEL J. ZWEBNER
Michael Zwebner - Age 46, is the founder and has served as Chairman of
Videocall International Corporation since February 1998. From 1974 to 1986, Mr.
Zwebner founded and ran a travel and tourism company as well as a charter
airline, specializing in the areas of air charter travel, wholesale ticketing
and general business and tourist travel. From 1986 to 1990, Mr. Zwebner owned
and operated several real estate companies as well as managed a chain of
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five family restaurants and related catering services in England. From 1991 to
1997 Mr. Zwebner founded and served as Vice-President of Cardcall International
Holdings Inc. (USA) and Operating Manager of Cardcall (UK) Ltd. for which he
designed and developed telecommunications and marketing concepts and organized
the extensive prepaid phone card operations (Cardcall having been the largest
such operation in both the UK and Canada). Mr. Zwebner also coordinated
corporate finance activities for Cardcall. Mr. Zwebner has served as Chairman of
the Board and a Director of the Company since September 1998.
In February of 1997, Mr. Zwebner negotiated and secured the sale/merger of
the Cardcall Group to DCI Telecommunications Inc., a publicly-held entity based
in Connecticut, USA, and was subsequently instrumental in the multi-million
dollar sale of the UK distribution contract to SmarTalk Teleservices Inc. In
addition, in February of 1988, Mr. Zwebner negotiated the creation of a multi-
million dollar joint venture between Cardcaller Canada Inc. with Datawave
Systems Inc. of Vancouver, Canada. Mr. Zwebner resigned from his positions with
the Cardcall Group in February 1998 to actively and exclusively pursue the
Videocall project.
EUGENE A. ROSOV
Eugene Rosov - Age 50, has served as Director, President and Chief
Executive Officer of Videocall International Corporation since June 1998. In
1967, Mr. Rosov started a national music educational and touring company, and in
1978 started the international chamber music association, Chamber Music America.
Mr. Rosov served as acting Director of Marketing for the nation's largest public
radio station, WNYC, from 1979 to 1980. In 1980 he was founder, president and
CEO of Water Test Corporation, a national drinking water testing laboratory
acquired by Household International in 1987. From 1988 to 1995 he was founder,
president, CEO and Chairman of Innovative Telecom Corporation, the Nashua, New
Hampshire telecommunications systems integrator and provider to five (of six)
Regional Bell operating companies of prepaid telephone card technologies and
customer service operations. From 1995-1998 Mr. Rosov acted as a consultant to
various telecom companies. Mr. Rosov graduated from Harvard College in 1971
with a BA in General Studies. Mr. Rosov has served as Chief Executive Officer
and a Director of the Company since November 1998 and September 1998,
respectively.
MICHAEL CUZNER-CHARLES
Michael Cuzner-Charles - Age 52, serves as a director of Regal Brook Ltd.
in Berkshire (UK), since 1995. He was finance director of Kingston Coatings,
Courtaulds Plc from 1976 to 1979, and became a Director of the CJ Phoenix Group
(Jewellers in Paris, London and Birmingham) in 1979 until 1982. For the
international management consulting firm of Grant Thornton, Mr. Cuzner-Charles
was senior manager from 1982 to 1984, and became senior manager of Corporate
Finance for Touche Ross from 1984-1992. From 1992-1995 Mr. Cuzner-Charles
served as a director of MBS Plc, a computer distribution company, and was Chief
Executive Officer of Trade Intermediary Group Plc. He is a Fellow of the
Institute of Chartered Accountants in England and Wales. Mr. Cuzner-Charles has
served as a Director of the Company since September 1998.
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ALEXANDER H. WALKER, JR.
Mr. Walker - Age 72, has served as Director and General Counsel to
Videocall International Corporation since July 1998. Since 1968 Mr. Walker has
served as Chairman of the Board of the Nevada Agency and Trust Company in Reno,
Nevada, a licensed and registered Trust Company and Transfer Agent in business
since 1903. From 1944 to 1946 Mr. Walker served in the United States Army,
rising to the rank of Captain, Infantry in the United States Army Reserve. He
received his B.A. from Waynesburg College (1950) and his J.D. from the
University of Pittsburgh School of Law in 1952. Since 1956, Mr. Walker has been
a practicing attorney, with his practice including all phases of trial work,
with a particular emphasis on corporate securities matters. From 1954 to 1955 he
served first as Attorney Advisory, and then 1955-1956 as Attorney in Charge of
the Salt Lake (UT) Branch for the United States Securities and Exchange
Commission (SEC). From 1956 to date, he has maintained a private practice as an
Attorney. Mr. Walker has served as a Director of the Company since September
1998.
C. HAROLD SNYDER
C. Harold Snyder, CPA - Age 43, has held the position of Chief Financial
Officer since November 6, 1998. From 1985 to 1990 he served as Executive Officer
for Finance and Administration with North American Beauty Services, Inc., a
wholesale and retail distributor of beauty products. From 1990 to 1992, he
served as VP of Finance for Innovative Telecom Company, Inc., a
telecommunications provider. From 1992 to 1998, he served as a business
consultant, financial and tax strategist for companies throughout the New
England area. Mr. Snyder currently serves as Chief Financial Officer for
Videocall International Corporation.
Section 16(a) Beneficial Ownership Reporting Compliance
(The following people are directors, officers, beneficial owners of 10% or
more of the common stock, or any other person subject to Section 16 of the
Exchange Act that failed to file on a timely basis Forms 3, 4 and/or 5 as
required under Section 16(a) of the Exchange Act)
Michael Zwebner, Eugene Rosov, David Hurwitz, Alexander Walker, Jr.,
Michael Cuzner-Charles and C. Harold Snyder have reportable events in 1998 which
require the filing of Forms 3 and 5, and all contemplate that such Forms will be
filed subsequent to the filing of this Report.
ITEM 10. EXECUTIVE COMPENSATION
Compensation of Directors
The Company has no standard arrangements pursuant to which directors of the
Company are compensated for any services provided as a director except for the
Automatic Option Grant Program component of the 1995 Stock Option/Stock Issuance
Plan (the "1995 Plan"). Directors who are not current employees of the Company
("non-employee directors") are eligible for the Automatic Option Grant Program
component of the 1995 Plan under which option grants will automatically be made
at periodic intervals to eligible non-employee Board members to purchase shares
of Common Stock at an exercise price equal to 100% of their fair market value on
the grant date.
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Under the Automatic Option Grant Program, each individual who is first
elected or appointed as a non-employee Board member will receive a 3,333 share
option grant on the date of such election or appointment, provided such
individual has not been in the prior employ of the Company. In addition, at
each Annual Meeting, beginning with the 1997 Annual Meeting, each individual who
is to continue to serve as a non-employee Board member after the meeting will
receive an additional option grant to purchase 833 shares of Common Stock
whether or not such individual has been in the prior employ of the Company.
Each automatic grant will have a term of ten (10) years, subject to the
earlier termination following the optionee's cessation of Board service. Each
automatic option will be immediately exercisable; however, any shares purchased
upon exercise of the option will be subject to repurchase should the optionee's
service as a non-employee Board member cease prior to vesting in the shares.
The initial 3,333 share grant will vest in four equal and successive annual
installments over the optionee's period of Board service. Each additional 833
share grant will vest upon the optionee's completion of one year of Board
service measured from the grant date. However, each outstanding option will
immediately vest upon (1) certain changes in the ownership or control of the
Company or (2) the death or disability of the optionee while serving as a Board
member.
Compensation of Executive Officers
The following table sets forth certain summary information concerning
compensation paid or accrued by the Company on behalf of (i) the Chief Executive
Officer and (ii) the other most highly compensated executive officer of the
Company whose total annual salary and bonus for fiscal year 1998 exceeded
$100,000 (the "Named Executive Officers"), with respect to services rendered by
such persons to the Company and its subsidiaries for each of the fiscal years
ended December 31, 1996, 1997 and 1998:
SUMMARY COMPENSATION TABLE
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Long-Term Compensation
Awards
OTHER ANNUAL --------------------------
Salary COMPENSATION Securities
NAME AND PRINCIPAL POSITION Year ($) ($) UNDERLYING OPTIONS (#)
- ------------------------------------ -------- --------------- ------------------ --------------------------
<S> <C> <C> <C> <C>
Ariella J. Lehrer, Ph.D.(1)......... 1998 $ 85,000 $-0- 33,333
Chief Executive Officer, 1997 $105,115 $-0- -0-
President, Chairwoman of 1996 $117,500 $-0- 33,333
the Board of Directors
Eugene A. Rosov (2)(3).............. 1998 $ -0- $-0- -0-
Chief Executive Officer
William E. Sliney (4)............... 1998 $120,000 $-0- 100,000
Vice President of Finance, 1997 $117,581 $-0- -0-
Chief Financial Officer 1996 $112,500 $-0- 16,666
And Secretary
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- ---------------------
(1) Ms. Lehrer ceased to be Chief Executive Officer, President and Chairwoman of
the Board of Directors on September 14, 1998.
(2) Mr. Rosov became Chief Executive Officer on November 6, 1998.
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(3) C. Robert Kline, Ph.D., served as Chief Executive Officer from September
14, 1998 until October 6, 1998, and received $7,500 in compensation for his
services as such.
(4) Mr. Sliney ceased to be Vice President of Finance, Chief Financial Officer
and Secretary on October 6, 1998.
Compensation Committee Interlocks and Insider Participation
The Company's Compensation Committee was formed in January, 1996 to
establish salary, bonus and other forms of compensation for officers of the
Company, provide recommendations for the salaries and incentive compensation of
the employees and consultants of the Company and make recommendations to the
Board of Directors regarding such matters. The principal objectives of the
Company's executive compensation are to:
. support the achievement of the desired Company performance;
. align the executive officer's interests with the success of the Company and
with the interests of the Company's stockholders; and
. provide compensation that will attract and retain qualified management and
reward performance.
These objectives are principally achieved through compensation in the form of
annual base salaries, discretionary bonuses and equity investment opportunities,
such as stock option grants. Prior to January, 1996, the Board of Directors
performed the functions of the Compensation Committee. The Company has not
historically linked executive compensation directly to corporate performance.
During the 1998 fiscal year, the Compensation Committee was composed of Mr.
Hessler and Dr. Rosenberg until October 9, 1998 and Messrs. Hurwitz, Rosov and
Cuzner-Charles thereafter. No interlocking relationship exists between the
Company's Board of Directors or Compensation Committee and the board of
directors or compensation committee of any other company, nor has any such
interlocking relationship existed in the past.
Stock Options
The following table sets forth certain information with respect to options
granted to each of the Company's Named Executive Officers during fiscal year
1998. The Company did not grant any stock appreciation rights during fiscal
year 1998.
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OPTION GRANTS IN FISCAL 1998
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Individual Grants
-------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
Number of PERCENT OF VALUE AT ASSUMED
SECURITIES TOTAL OPTIONS RATES OF STOCK
UNDERLYING GRANTED TO APPRECIATION FOR
OPTIONS ELIGIBLE PERSONS Exercise or Option Term(1)
GRANTED IN FISCAL BASE PRICE Expiration -------------------------
Name (#) Year ($/Sh) Date 5% 10%
- ----------------------- ------------- ----------------- ----------------------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Ariella J. Lehrer, 16,666 11.8% $2.07 8/20/01 -0- -0-
Ph.D. 8,333 5.9 3.11 8/20/01 -0- -0-
8,333 5.9 4.14 8/20/01 -0- -0-
William E. Sliney 50,000 35.3 2.07 8/20/01 -0- -0-
25,000 17.6 3.11 8/20/01 -0- -0-
25,000 17.6 4.14 8/20/01 -0- -0-
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- ---------------
(1) The 5% and 10% assumed rates of appreciation are specified under the rules
of the Securities and Exchange Commission and do not represent the Company's
estimate or projection of the future Common Stock price. There can be no
assurance provided to any executive officer or any other holder of the
Company's securities that the actual stock price appreciation over the
three-year option term will be at the assumed 5% and 10% levels or at any
other defined level. Unless the market price of the Common Stock appreciates
over the option term, no value will be realized from the option grants made
to the executive officers.
AGGREGATED OPTION EXERCISES IN FISCAL 1998
AND VALUE OF OPTIONS AT END OF FISCAL 1998
The following table sets forth certain information with respect to the
Company's Named Executive Officers concerning unexercised stock options held as
of December 31, 1998. No stock options were exercised by such individuals during
fiscal year 1998. The Company did not grant any stock appreciation rights during
fiscal year 1998 and no such rights were outstanding as of the end of such
fiscal year.
<TABLE>
<CAPTION>
Number of Unexercised VALUE OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
OPTIONS AT OPTIONS AT
Fiscal Year-End Fiscal Year-End($)(1)
-------------------------------------- ------------------------------
Name EXERCISABLE Unexercisable EXERCISABLE UNEXERCISABLE
---------------- -------------------- -------------- --------------
<S> <C> <C> <C> <C>
Ariella J. Lehrer, Ph.D.............. 66,666 -- $11,833 --
Eugene A. Rosov...................... --0-- -- -0- --
William E. Sliney.................... 116,667 -- $35,500 --
</TABLE>
- -------------------
(1) Calculated on the basis of the fair market value of the underlying
securities at December 31, 1998 ($2.78 per share) minus the exercise price.
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ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 1999, the number and
percentage of shares of Common Stock beneficially owned (as defined in Rule 13d-
3 adopted under the Exchange Act) by (a) all persons known to the Company to own
beneficially more than 5% of any class of voting security of the Company, (b)
each of the Company's directors, (c) the Company's officers named in the Summary
Compensation Table set forth herein and (d) all directors and executive officers
of the Company as a group.
COMMON STOCK
--------------------------------
NUMBER PERCENTAGE
OF SHARES OF SHARES
Name and BENEFICIALLY BENEFICIALLY
Address(1) OWNED(2)(3) OWNED(2)(3)
- ---------- -------------- ----------------
E.B.C. Trust Corporation (4)..... 219,465 5.91
10, rue Princesse Florestine
MC 98000 Monaco
All directors and executive 750,000 20.19
officers as a group
(3 persons)...................
____________________
* Less than one percent
(1) Unless otherwise indicated, the stockholder's address is the Company's
principal executive offices.
(2) Percentage ownership is based on 3,714,435 shares of Common Stock
outstanding as of March 31, 1999 plus any shares issuable pursuant to
options or warrants held by the person or class in question which may be
exercised within 60 days of March 31, 1999.
(3) Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, each stockholder named in this table has
sole voting and investment power with respect to the shares set forth
opposite such stockholder's name.
(4) The beneficial owners of E.B.C. Trust Corporation's capital stock are
Richard MacLellan and Michael Woolf.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1998, the Company made an advance of $70,000 to the Sacramento
Results, Inc. subsidiary of Talk Visual Corporation and, at December 31, 1998,
Talk Visual Corporation had advanced $4,000 to the Company.
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ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
3(i). Articles of Incorporation
3(ii). By-Laws
99. Additional exhibits - internal Balance Sheet at 2/28/99
(b) REPORTS ON FORM 8-K.
Disclosure under Item 5 of Agreement and Plan of Merger with Videocall
International Corporation - filed September 14, 1998. No financial
statements were included with this filing.
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SIGNATURES
In accordance with the requirements of Section 13 or 15(d) of the Exchange
Act, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
TALK VISUAL CORPORATION
By: /s/C. Harold Snyder
----------------------
Chief Financial Officer
Dated: April 30, 1999
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
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<CAPTION>
Signature Title Date
- ------------------------------------------ ----------------------------------- -------------------------
<S> <C> <C>
/s/ EUGENE ROSOV* President and Chief Executive April 30, 1999
- ------------------------------------------ Officer (Principal Executive
Eugene Rosov Officer) and Director`
/s/ C. HAROLD SNYDER Chief Financial Officer (Principal April 30, 1999
- ------------------------------------------ Financial and Accounting Officer)
C. Harold Snyder
/s/ MICHAEL ZWEBNER* Chairman of the Board and Director April 30, 1999
- ------------------------------------------
Michael Zwebner
/s/ DAVID B. HURWITZ* Director April 30, 1999
- ------------------------------------------
David B. Hurwitz
/s/ ALEXANDER WALKER, JR.* Director April 30, 1999
- ------------------------------------------
Alexander Walker, Jr.
/s/ MICHAEL CUZNER-CHARLES* Director April 30, 1999
- ------------------------------------------
Michael Cuzner-Charles
</TABLE>
*By: /s/ C. Harold Snyder
---------------------
C. Harold Snyder
Attorney-in-Fact
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