<PAGE>
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FORM 8-K/A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 17, 1996
DIGITAL VIDEO SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
0-28472 77-0333728
(Commission File Number) (I.R.S. Employer Identification No.)
2710 Walsh Avenue
Santa Clara, California 95051 95051
(Address of principal executive offices) (Zip Code)
(408) 748-2100
Registrant's telephone number, including area code
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<PAGE>
Item 2. Acquisition or Disposition of Assets
------------------------------------
On October 17, 1996, Digital Video Systems, Inc., a Delaware corporation
(the "Registrant") completed the acquisition (the "Acquisition") of ViComp
Technology, Inc., a Delaware corporation ("ViComp").
ViComp was founded in August 1995 and is engaged in the design and
development of integrated circuits (or "chips") to decode MPEG-I signals. The
Registrant anticipates that the MPEG-I chip under development by ViComp (the
"ViComp MPEG-I chip"), which the Registrant plans to incorporate into its Video
CD products and which the Registrant may market to other manufacturers of Video
CD products, will be available for production in commercial quantities by the
second half of calendar year 1997. However, there can be no assurance that the
design and development of the ViComp MPEG-I chip will be successfully completed
within the foregoing time schedule (which could be delayed due to unexpected
design problems, loss of key ViComp personnel or other factors), or at all.
Further, if the costs to commercially produce the ViComp MPEG-I chip in
commercial quantities is higher than currently anticipated, such product may be
noncompetitive based on the selling prices of other functionally equivalent
chips that may then be available. In addition, the Registrant intends to use
ViComp's integrated circuit design and development capabilities to create other
chips, such as an MPEG-II decoder chip for use in products currently under
consideration by the Registrant.
The Acquisition was effected pursuant to an Agreement and Plan of Merger
dated as of October 17, 1996 (the "Merger Agreement"), by and among the
Registrant, Digital Video Acquisition Co., a Delaware corporation and wholly
owned subsidiary of the Registrant ("Digital Sub"), ViComp and the shareholders
of ViComp (the "ViComp Shareholders"), with Registrant acquiring all of the
outstanding capital stock of ViComp in exchange for shares of the Registrant's
common stock ("Registrant Common Stock") in a transaction intended to qualify as
a reorganization within the meaning of Section 368(a)(1)(A) of the Internal
Revenue Code of 1986, as amended (the "Acquisition"). Pursuant to the terms of
the Merger Agreement, the Registrant issued to the ViComp Shareholders (i)
209,733 shares of Registrant Common Stock in exchange for 2,235,000 shares of
common stock of ViComp and (ii) 281,520 shares of Registrant Common Stock in
exchange for 3,000,000 shares of ViComp Series A Preferred Stock.
ViComp owns no material plant, personal property or real property. The
assets of ViComp acquired through the Acquisition consisted of approximately
$218,000 of computer hardware and software. The Registrant intends to continue
to use these ViComp assets in connection with the development of the ViComp
MPEG-I chip.
Dr. Edmund Y. Sun ("Dr. Sun"), the Registrant's Chairman of the Board and
Chief Executive Officer, was a co-founder of ViComp and owned 57.3% of the
outstanding capital stock of ViComp (for which he had paid a total of
$1,000,000) at the time of the Acquisition. Immediately prior to the
consummation of the Acquisition, Dr. Sun beneficially owned 7,540,898 shares of
the Registrant's Common Stock (approximately 44.3% of the Registrant's
outstanding Common Stock). Dr. Sun received 281,520 shares of Registrant Common
Stock in connection with the Acquisition and beneficially owned upon
consummation of the Acquisition 7,822,418 shares of Registrant's Common Stock
(approximately 44.4% of the Registrant's outstanding Common Stock).
2
<PAGE>
The other ViComp Shareholders acquiring Registrant Common Stock held no
shares of the Registrant's Common Stock immediately prior to the Acquisition and
were issued a total of 209,733 such shares in connection with the Acquisition
(with each such shareholder owning less than 1% of the Registrant's outstanding
Common Stock).
One-half of the 281,520 shares of Registrant Common Stock acquired by Dr.
Sun pursuant to the Acquisition are subject to an escrow (the "Sun Performance
Escrow") pursuant to an escrow agreement dated as of October 17, 1996 by and
between Dr. Sun and the Registrant. All 140,760 shares of Registrant Common
Stock subject to the Sun Performance Escrow will be forfeited and cancelled in
the event the ViComp MPEG-I chip does not meet all of the following performance
conditions (the "Performance Conditions"): (i) the ViComp MPEG-I chip is capable
of being manufactured in commercial quantities by no later than July 1, 1997;
(ii) the Registrant's cost to purchase fully manufactured ViComp MPEG-I chips in
commercial quantities from qualified third party manufacturers does not exceed
$10 per chip; and (iii) the cost per ViComp MPEG-I chip is at least $3 per chip
less than the Registrant's cost to purchase the lowest-price chips that are
functionally substantially equivalent to the ViComp MPEG-I chip from other
manufacturers at the time the ViComp MPEG-I chip is ready for commercial
manufacture. All shares subject to the Sun Performance Escrow will be
distributed to Dr. Sun immediately following a conclusive determination that the
Performance Conditions have been met.
The remaining 140,760 shares of Registrant Common Stock acquired by Dr. Sun
pursuant to the Acquisition are subject to an escrow (the "Sun IPO Escrow," and
together with the Sun Performance Escrow, the "Sun Escrows") pursuant to an
escrow agreement by and among Dr. Sun, the Registrant and American Stock
Transfer and Trust Company. The Sun IPO Escrow provides that: (i) 50% of the
shares of Registrant Common Stock subject to the Sun IPO Escrow will be released
to Dr. Sun in the event that 50% of the securities previously escrowed by
certain of the Registrant's securityholders in connection with the Registrant's
initial public offering (the "IPO Escrow") are released to such securityholders
pursuant to the terms of the IPO Escrow; and (ii) the remaining 50% of the
shares of Registrant Common Stock subject to the Sun IPO Escrow will be released
to Dr. Sun in the event that the remaining 50% of the securities escrowed
pursuant to the IPO Escrow are released to the securityholders pursuant to the
terms of the IPO Escrow.
If the conditions described in clauses (i) or (ii) above are not met in
accordance with the terms and conditions of the Sun IPO Escrow, all shares of
Registrant Common Stock subject to the respective conditions of the Sun IPO
Escrow will be forfeited and cancelled.
In addition to the shares of Registrant Common Stock subject to the Sun
Escrows, 10% of the 209,733 shares of Registrant Common Stock acquired by the
ViComp Shareholders other than Dr. Sun are subject to an escrow (the
"Shareholder Escrow") pursuant to an escrow agreement dated as of October 17,
1996 by and between such ViComp Shareholders, the Registrant and American Stock
Transfer & Trust Company (the "Shareholder Escrow Agreement"). Shares subject
to the Shareholder Escrow Agreement are subject to forfeiture and cancellation
in the event of a breach of certain representations or warranties made to the
Registrant by the ViComp Shareholders (other than Dr. Sun) in the Merger
Agreement.
The shares of Registrant Common Stock were issued to the ViComp
Shareholders in a private transaction in reliance upon Section 4(2) of the
Securities Act of 1933, as amended. All of the shares of Registrant Common Stock
acquired by the ViComp Shareholders (including Dr. Sun) in the Acquisition
3
<PAGE>
are subject to a Registration Rights Agreement, which provides the ViComp
Shareholders with certain demand and piggyback registration rights with respect
to those shares. In connection with the Acquisition,the three ViComp
Shareholders who were employed by ViComp before and continue to be employed by
ViComp after the Acquisition were granted options to purchase a total of 189,557
shares of the Registrant's Common Stock for a ten-year period at a price of
$8.375 per share under the Registrant's 1996 Stock Option plan, which plan is
subject to approval by the shareholders of the Registrant. These options will
vest over a five-year period commencing one year from the date of grant.
The amount of consideration paid by the Registrant to acquire ViComp was
based on the Registrant's evaluation of the value of the technology being
developed by ViComp and the design and development capabilities of ViComp's
personnel, and the Registrant was advised by an independent investment banking
firm that the Acquisition is fair from a financial point of view to the
Company's shareholders (other than Dr. Sun).
4
<PAGE>
Item 7. Financial Statements and Exhibits
---------------------------------
(a) Financial statements of business acquired.
-----------------------------------------
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
ViComp Technology, Inc.
We have audited the accompanying balance sheet of ViComp Technology, Inc. (a
development stage company) as of August 31, 1996, and the related statements
of operations, shareholders' equity, and cash flows for the period from
inception (August 21, 1995) to August 31, 1996. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of ViComp Technology, Inc. (a
development stage company) at August 31, 1996, and the results of its
operations and its cash flows for the period from inception (August 21, 1995)
to August 31, 1996, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Walnut Creek, California
October 18, 1996
5
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VICOMP TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
<TABLE>
<CAPTION>
AUGUST 31,
1996
----------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................................... $ 159,943
Property and equipment, net........................................ 217,988
----------
$ 377,931
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................... $ 93,958
Accrued payroll and related........................................ 27,686
----------
Total current liabilities........................................ 121,644
Shareholders' equity:
Convertible preferred stock, issuable in series: $0.001 par value,
4,000,000 shares authorized, 3,000,000 shares issued and
outstanding; aggregate liquidation preference of $1,000,000....... 3,000
Common stock, $0.001 par value, 16,000,000 shares authorized,
3,000,000 shares issued and outstanding........................... 3,000
Additional paid-in capital......................................... 1,072,000
Deficit accumulated during the development stage................... (773,713)
Deferred compensation.............................................. (48,000)
----------
Total shareholders' equity....................................... 256,287
----------
$ 377,931
==========
</TABLE>
See accompanying notes.
6
<PAGE>
VICOMP TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
PERIOD FROM INCEPTION (AUGUST 21, 1995) TO AUGUST 31, 1996
<TABLE>
<S> <C>
Operating costs and expenses:
Research and development........................................... $ 772,565
General and administration......................................... 16,205
---------
Total operating costs and expenses............................... 788,770
---------
Loss from operations................................................. (788,770)
Interest income...................................................... 15,057
---------
Net loss......................................................... $(773,713)
=========
</TABLE>
See accompanying notes.
7
<PAGE>
VICOMP TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY
PERIOD FROM INCEPTION (AUGUST 21, 1995) TO AUGUST 31, 1996
<TABLE>
<CAPTION>
SERIES A DEFICIT
CONVERTIBLE NOTES ACCUMULATED
PREFERRED STOCK COMMON STOCK ADDITIONAL RECEIVABLE DURING THE TOTAL
---------------- ---------------- PAID-IN FROM DEVELOPMENT DEFERRED SHAREHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL SHAREHOLDERS STAGE COMPENSATION EQUITY
--------- ------ --------- ------ ---------- ------------ ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of common
stock at $0.01 per
share in August 1995
for cash............. -- $ -- 3,000,000 $3,000 $ 27,000 $ -- $ -- $ -- $ 30,000
Issuance of Series A
convertible preferred
stock at $0.33 1/3
per share in
September 1995 for
cash and shareholder
notes receivable..... 3,000,000 3,000 -- -- 997,000 (500,000) -- -- 500,000
Repayment of notes
receivable from
shareholders......... -- -- -- -- -- 500,000 -- -- 500,000
Unearned compensation
related to stock
options.............. -- -- -- -- 48,000 -- -- (48,000) --
Net loss from
inception (August 21,
1995) to August 31,
1996................. -- -- -- -- -- -- (773,713) -- (773,713)
--------- ------ --------- ------ ---------- --------- --------- -------- ---------
Balances at August 31,
1996................. 3,000,000 $3,000 3,000,000 $3,000 $1,072,000 $ -- $(773,713) $(48,000) $ 256,287
========= ====== ========= ====== ========== ========= ========= ======== =========
</TABLE>
See accompanying notes.
8
<PAGE>
VICOMP TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
PERIOD FROM INCEPTION (AUGUST 21, 1995) TO AUGUST 31, 1996
<TABLE>
<S> <C>
CASH FLOWS USED IN OPERATING ACTIVITIES
Net loss.......................................................... $ (773,713)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization................................... 63,194
Increase in accounts payable.................................... 93,958
Increase in accrued liabilities................................. 27,686
----------
Net cash used in operating activities............................. (588,875)
----------
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchase of property and equipment................................ (281,182)
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
Proceeds from issuance of preferred stock......................... 500,000
Proceeds from issuances of common stock........................... 30,000
Repayments of notes receivable from shareholders.................. 500,000
----------
Net cash provided by financing activities......................... 1,030,000
----------
Net increase in cash and cash equivalents......................... 159,943
Cash and cash equivalents at beginning of period.................. --
----------
Cash and cash equivalents at end of period........................ $ 159,943
==========
</TABLE>
See accompanying notes.
9
<PAGE>
VICOMP TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1996
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
ViComp Technology, Inc. ("ViComp") was incorporated on August 21, 1995 and
develops integrated circuits for use in video CD players. The operations of
the Company from inception to August 31, 1995 were not significant and are not
separately disclosed.
On October 17, 1996, ViComp signed an Agreement and Plan of Reorganization
to effectively merge ViComp with Digital Video Systems, Inc. ("DVS"), a
related party. The holder of all of ViComp's outstanding Series A preferred
stock is a significant shareholder, Chairman and Chief Executive Officer of
DVS. All outstanding equity interests in ViComp will be exchanged for
approximately 491,253 common shares of DVS.
Cash and Cash Equivalents
ViComp maintains its cash and cash equivalents in depository and money
market accounts with one financial institution.
Income Taxes
ViComp follows Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("Statement 109"). Under Statement 109, the
liability method is used to account for income taxes. Under this method,
deferred tax assets and liabilities are measured using the enacted tax rates
and laws that will be in effect when the differences are expected to
reverse.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Stock Based Compensation
ViComp accounts for its stock option plan in accordance with the provisions
of the Accounting Principles Board's Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB 25"). In 1995, the Financial Accounting Standards
Board released the Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"). SFAS 123 provides an
alternative method of accounting for stock-based compensation to APB 25 and is
effective for fiscal years beginning after December 15, 1995. ViComp expects
to continue to account for its stock-based compensation in accordance with the
provisions of APB 25. Accordingly, SFAS 123 is not expected to have any
material impact on ViComp's financial position or results of operations.
10
<PAGE>
VICOMP TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 2 -- PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the lesser of the estimated useful lives of the
respective assets, generally three years. Property and equipment consists of
the following at August 31, 1996:
<TABLE>
<S> <C>
Equipment........................................................ $ 25,738
Software......................................................... 255,444
--------
281,182
Less accumulated depreciation and amortization................... (63,194)
--------
$217,988
========
</TABLE>
In 1995, the Financial Accounting Standards Board released Statement of
Financial Accounting Standards No. 121 "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed of" ("FAS 121"). FAS 121
requires recognition of impairment of long-lived assets in the event the net
book value of such assets exceeds the future undiscounted cash flows
attributable to such assets. FAS 121 is effective for fiscal years beginning
after December 15, 1995. Adoption of FAS 121 is not expected to have a
material impact on ViComp's financial position or results of operations.
NOTE 3 -- COMMITMENTS
Throughout fiscal 1996, ViComp occupied a facility under an operating lease.
Prior to August 31, 1996, ViComp terminated this lease. Rent expense totaled
$10,532 for the period from inception through August 31, 1996.
NOTE 4 -- SHAREHOLDERS' EQUITY
Convertible Preferred Stock and Shareholder Note Receivable
In September 1995, ViComp issued 3,000,000 shares of Series A preferred
stock at $0.33 1/3 per share in exchange for cash of $500,000 and a $500,000
note receivable from shareholder. The shareholder note receivable accrued
interest at 7% per year and was repaid in January 1996.
Authorized and outstanding convertible preferred stock and its principal
terms are as follows at August 31, 1996.
<TABLE>
<CAPTION>
LIQUIDATION
DIVIDEND PREFERENCE
DESIGNATED OUTSTANDING PER SHARE PER SHARE
---------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Series A...................... 3,000,000 3,000,000 $0.023 $0.33 1/3
Undesignated.................. 1,000,000 -- -- --
---------
4,000,000
=========
</TABLE>
Dividends on the convertible preferred stock are payable when and if
declared by the board of directors. The dividend requirements of the preferred
stock must be satisfied prior to payment of any dividends or distributions
with respect to ViComp's common stock. No dividends have been declared.
ViComp's board of directors has three members: holders of Series A preferred
stock and holders of common stock, each voting separately as a class, are each
entitled to elect one director. The third director shall
11
<PAGE>
VICOMP TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4 -- SHAREHOLDERS' EQUITY--(CONTINUED)
be elected by the affirmative vote of the holders of both common and Series A
preferred shareholders. Preferred shareholders are entitled to voting rights
equivalent to the number of common shares into which their shares are
convertible. Subject to certain antidilution provisions, each share of Series
A preferred stock is convertible at any time into one common share. All
preferred shares convert automatically to common stock (3,000,000 shares if
converted at August 31, 1996) in the event of a public offering of the
Company's common stock with aggregate proceeds to ViComp of at least
$10,000,000 and a price per share of not less than $2.00 (as adjusted for any
stock dividends, stock splits or recapitalization).
Stock Option Plan
Under ViComp's 1995 stock option plan (the "Plan"), incentive and non-
qualified stock options may be granted to qualified employees, directors and
consultants to purchase a maximum of 2,400,000 common shares. The exercise
price of the option is determined by the administrator of the Plan on the date
of grant and must be at least equal to 85% in the case of a non-qualified
stock option or 100% in the case of an incentive stock option of the fair
market value of the shares on the grant date. Vesting periods are determined
by the board of directors. Options expire 10 years from the date of grant or 3
months from the date of the optionee's termination from ViComp. As of August
31, 1996, options for the purchase of 2,400,000 shares were granted and
outstanding under this plan and 550,000 of the options were exercisable.
NOTE 5 -- INCOME TAXES
At August 31, 1996, ViComp had net operating loss carryforwards for federal
and state tax purposes of approximately $780,000. The federal net operating
loss carryforwards expire in 2010 and 2011 and the state net operating loss
carryforward expires in 2023. Due to the "change of ownership" provisions and
other restrictions of the Internal Revenue Code, utilization of the net
operating loss carryforward may be limited.
As of August 31, 1996, ViComp had deferred tax assets of approximately
$330,000 relating primarily to the future tax benefits of net operating loss
carryforwards. Due to ViComp's lack of earnings history, the deferred tax
assets have been fully offset by a valuation allowance.
12
<PAGE>
(b) Pro forma financial information.
-------------------------------
PRO FORMA FINANCIAL INFORMATION
The Registrant will, in the event of the release of the Registrant Common
Stock received by Dr. Sun in the Acquisition and escrowed pursuant to the Sun
IPO Escrow, recognize, during the period that the conditions for such release
are met, a substantial non-cash charge to earnings that would increase the
Registrant's loss or reduce or eliminate earnings, if any, at such time. In the
event of release of the Registrant Common Stock received by Dr. Sun in the
Acquisition and escrowed pursuant to the Sun Performance Escrow, the Registrant
will recognize such a charge to earnings either during the period that the
conditions for such release are met or will recognize such charge to earnings
over future periods. The purchase method of accounting has been used to account
for the Acquisition.
The unaudited pro forma combined condensed balance sheet and statement of
operations reflects the following: (i) the combination of the financial
statements of the Registrant and ViComp; and (ii) the issuance of the Registrant
Common Stock (other than Dr. Sun's shares) in the Acquisition. The unaudited pro
forma combined condensed balance sheet was prepared as if the Acquisition had
occurred at September 30, 1996, and the unaudited pro forma combined condensed
statements of operations combine the Registrant's statements of operations for
the year ended December 31, 1995 and the nine-month period ended September 30,
1996 with ViComp's statement of operations for the period from inception (August
21, 1995) through August 31, 1996 and reflects the Acquisition as if it had
occurred as of the beginning of the periods presented.
The historical balance sheet and statements of operations of ViComp are
presented to coincide with the nine-month period ended September 30, 1996 and
the twelve-month period ended December 31, 1995 of the Registrant and the fiscal
year of ViComp, respectively.
In the opinion of the Registrant's management, all adjustments necessary to
present fairly such pro forma combined condensed financial statements have been
made in the terms and structure of the Acquisition.
The unaudited pro forma combined condensed balance sheet and statements of
operations are not necessarily indicative of the actual results had the
Acquisition occurred as of September 30, 1996, January 1, 1996 or January 1,
1995, as the case may be, nor do they purport to indicate the results of future
operations of the Registrant.
13
<PAGE>
DIGITAL VIDEO SYSTEMS, INC. AND
VICOMP TECHNOLOGY, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------------- ----------------------------
DIGITAL VIDEO VICOMP
SYSTEMS, INC. TECHNOLOGY, INC.
SEPTEMBER 30, AUGUST 31, PRO FORMA
1996 1996 ADJUSTMENTS COMBINED
------------- ---------------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents.......... $ 14,638,889 $ 159,943 $ -- $ 14,798,832
Accounts receivable,
net.................. 1,194,143 -- -- 1,194,143
Inventories........... 1,488,454 1,488,454
Prepaid expenses and
other current assets. 668,219 -- -- 668,219
------------ ---------- ----------- ------------
Total current
assets............. 17,989,705 159,943 -- 18,149,648
Property and
equipment, net....... 499,921 217,988 (56,172)(a) 661,737
Purchase research and
technology........... -- -- 1,758,399 (a)
-- -- (1,758,399)(b) --
Other assets.......... 116,873 -- -- 116,873
------------ ---------- ----------- ------------
Total assets........ $ 18,606,499 $ 377,931 $ (56,172) $ 18,928,258
============ ========== =========== ============
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...... $ 694,034 $ 93,958 $ -- $ 787,992
Accrued liabilities... 467,986 27,686 250,000 (a) 745,672
------------ ---------- ----------- ------------
Total current
liabilities........ 1,162,020 121,644 250,000 1,533,664
Stockholders' equity
Convertible preferred
stock................ -- 3,000 (3,000)(c) --
Common stock.......... 1,701 3,000 (3,000)(c)
49 (a) 1,750
Additional paid-in
capital.............. 29,800,775 1,072,000 (1,072,000)(c)
1,756,465 (a) 31,557,240
Accumulated deficit... (12,267,320) (773,713) 773,713 (c)
(1,758,399)(b) (14,025,719)
Foreign currency
translation
adjustments.......... (45,437) -- -- (45,437)
Deferred compensation. (45,240) (48,000) -- (93,240)
------------ ---------- ----------- ------------
Total stockholders'
equity............. 17,444,479 256,287 (306,172) 17,394,594
------------ ---------- ----------- ------------
Total liabilities
and stockholders
equity............. $ 18,606,499 $ 377,931 $ (56,172) $ 18,928,258
============ ========== =========== ============
</TABLE>
14
<PAGE>
DIGITAL VIDEO SYSTEMS, INC. AND
VICOMP TECHNOLOGY, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------------------- -------------------------
VICOMP
DIGITAL VIDEO TECHNOLOGY, INC.
SYSTEMS, INC. AUGUST 21, 1995
NINE MONTHS ENDED (INCEPTION) PRO FORMA
SEPTEMBER 30, 1996 TO AUGUST 31, 1996 ADJUSTMENTS COMBINED
------------------ ------------------ ----------- -----------
<S> <C> <C> <C> <C>
Total revenue........... $ 4,895,514 $ -- $ -- $ 4,895,514
Cost of revenue......... 5,566,010 -- -- 5,566,010
----------- --------- -------- -----------
Gross profit.......... (670,496) -- -- (670,496)
Operating expenses:
Research and
development.......... 1,048,324 772,565 -- 1,820,889
Sales and marketing... 784,900 -- -- 784,900
General and
administrative....... 2,011,494 16,205 -- 2,027,699
----------- --------- -------- -----------
Total operating
expenses........... 3,844,718 788,770 -- 4,633,488
----------- --------- -------- -----------
Loss from operations.... (4,515,214) (788,770) -- (5,303,984)
Other income (expenses),
net.................... (463,577) 15,057 -- (448,520)
----------- --------- -------- -----------
Net loss before
extraordinary items.... (4,978,791) (773,713) -- (5,752,504)
Extraordinary item--loss
on early extinguishment
of bridge notes........ (1,263,796) -- -- (1,263,796)
----------- --------- -------- -----------
Net loss................ $(6,242,587) $(773,713) $ -- $(7,016,300)
=========== ========= ======== ===========
Net loss per share...... $ (.81) $ (.89)
=========== ===========
Shares used in the
computation of net loss
per share.............. 7,675,792 209,733(d) 7,885,525
=========== ======== ===========
</TABLE>
15
<PAGE>
DIGITAL VIDEO SYSTEMS, INC. AND
VICOMP TECHNOLOGY, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------------------ -------------------------
VICOMP
DIGITAL VIDEO TECHNOLOGY, INC.
SYSTEMS, INC. AUGUST 21, 1995
YEAR ENDED (INCEPTION) PRO FORMA
DECEMBER 31, 1995 TO AUGUST 31, 1996 ADJUSTMENTS COMBINED
----------------- ------------------ ----------- -----------
<S> <C> <C> <C> <C>
Total revenue........... $ 3,520,831 $ -- $ -- $ 3,520,831
Cost of revenue......... 3,354,920 -- -- 3,354,920
----------- --------- -------- -----------
Gross profit.......... 165,911 -- -- 165,911
Operating expenses:
Research and
development.......... 1,257,833 772,565 -- 2,030,398
Sales and marketing... 548,573 -- -- 548,573
General and
administration....... 1,513,636 16,205 -- 1,529,841
----------- --------- -------- -----------
Total operating
expenses........... 3,320,042 788,770 -- 4,108,812
----------- --------- -------- -----------
Loss from operations.... (3,154,131) (788,770) -- (3,942,901)
Other income (expense),
net.................... (80,312) 15,057 -- (65,255)
Loss on investment in
affiliate.............. (1,248,868) -- -- (1,248,868)
----------- --------- -------- -----------
Net loss................ $(4,483,311) $(773,713) $ -- $(5,257,024)
=========== ========= ======== ===========
Net loss per share...... $ (.84) $ (.95)
=========== ===========
Shares used in the
computation of net loss
per share.............. 5,337,668 209,733(d) 5,547,401
=========== ======== ===========
</TABLE>
16
<PAGE>
DIGITAL VIDEO SYSTEMS, INC. AND
VICOMP TECHNOLOGY, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED BALANCED SHEET AND STATEMENT
OF OPERATIONS
The following pro forma adjustments are required to allocate the purchase
price and acquisition cost to the assets acquired from ViComp Technology, Inc.
based on their fair value, as determined by an independent appraisal and to
reflect the write-off of purchased research and development identified in the
purchase price allocation.
(a) Reflects the allocation of the purchase price, based on fair market
values, to the historical balance sheet.
(b) Reflects the write-off of purchased research and development identified in
the purchase price allocation. The pro forma statements of operations
exclude the write-off of purchased research and development due to its
non-recurring nature.
(c) Reflects the elimination of ViComp equity accounts.
(d) Reflects an increase in common stock for the shares issued in connection
with the purchase price of ViComp for the net assets acquired. Does not
include 281,520 shares issued to a related party that are subject to
cancellation. Inclusion of these shares in the pro forma weighted average
common shares outstanding calculation would be anti-dilutive.
17
<PAGE>
(c) Exhibits
--------
The exhibits listed below are filed as part of this Current Report.
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ----------- ----------------------
<S> <C>
2.1 Agreement and Plan of Merger dated as of October 17, 1996 by and
among the Registrant, ViComp and the ViComp Shareholders.*
4.1 Escrow Agreement dated as of October 17, 1996 by and between Dr.
Sun and the Registrant.*
4.2 Escrow Agreement dated as of October 17, 1996 by and among the
Registrant, Dr. Sun and American Stock Transfer & Trust Company.*
4.3 Escrow Agreement dated as of October 17, 1996 by and among the
Registrant, the shareholders named in the signature pages thereto
and American Stock Transfer & Trust Company.*
4.4 Registration Rights Agreement dated as of October 17, 1996 by and
between the Registrant and the ViComp Shareholders.*
23.1 Consent of Ernst & Young.
</TABLE>
- ---------
* Previously filed on Form 8-K dated October 31, 1996.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DIGITAL VIDEO SYSTEMS, INC.
Date: November 22, 1996
By: /s/ Arvin S. Erickson
--------------------------
Arvin S. Erickson
Chief Financial Officer
19
<PAGE>
EXHIBIT INDEX
The exhibits listed below are filed as part of this Current Report.
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ----------- ----------------------
<S> <C>
2.1 Agreement and Plan of Merger dated as of October 17,
1996 by and among the Registrant, ViComp and the
ViComp Shareholders.*
4.1 Escrow Agreement dated as of October 17, 1996 by
and between Dr. Sun and the Registrant.*
4.2 Escrow Agreement dated as of October 17, 1996 by and
among the Registrant, Dr. Sun and American Stock Transfer
& Trust Company.*
4.3 Escrow Agreement dated as of October 17, 1996 by and
among the Registrant, the ViComp Shareholders named in
the signature pages thereto and American Stock Transfer &
Trust Company.*
4.4 Registration Rights Agreement dated as of October 17, 1996
by and between the Registrant and the ViComp Shareholders.*
23.1 Consent of Ernst & Young.
</TABLE>
- --------
* Previously filed on Form 8-K dated October 31, 1996.
20
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report dated October 18, 1996 of ViComp
Technology, Inc., which report is included in this Form 8-K/A.
/s/ Ernst & Young LLP
Walnut Creek, California
November 22, 1996
