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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-KSB/A
AMENDMENT NO. 1
TO
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _______________ to _______________.
COMMISSION FILE NUMBER 0-28472
DIGITAL VIDEO SYSTEMS, INC.
(Name of small business issuer in its charter)
DELAWARE 77-0333728
(State of incorporation) (I.R.S. Employer
Identification No.)
160 Knowles Drive, Los Gatos, CA 95032
(Address of principal executive offices) (zip code)
Issuer's telephone number: (408) 874-2100
Securities to be registered pursuant
to Section 12(b) of the Act: NONE
Securities to be registered pursuant
to Section 12(g) of the Act: COMMON STOCK
CLASS A WARRANTS
CLASS B WARRANTS
UNITS, EACH CONSISTING OF ONE SHARE OF COMMON
STOCK, ONE CLASS A WARRANT AND ONE CLASS B
WARRANT
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to filing requirements for the past 90 days.
YES X NO
----- -----
Check mark indicates that disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not 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. [ ]
The aggregate market value of the voting stock held by non-affiliates of
registrant as of June 12, 1998 was approximately $13,678,000.
There were 20,993,230 shares of registrant's common stock outstanding as of
June 12, 1998.
The following documents are incorporated by reference into this report: None
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<PAGE>
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
MANAGEMENT OF THE COMPANY
Set forth below is certain information with respect to the directors
and executive officers of the Company as of the date of the filing of
this report.
<TABLE>
<CAPTION>
Director
Name Age Position Since
- - - - ------------------------ ------ -------------------------------------- --------
<S> <C> <C> <C>
Edward M. Miller (1) 46 Chief Executive Officer and --
President of U.S. Operations
Edmund Y. Sun (1) 52 Chairman of the Board and 1992
Chief Technology Officer
Sung Hee Lee (1) 43 President of Asian Operations --
John Smuda (1) 42 Chief Financial Officer --
Tom R.Parkinson (2) 51 Director 1997
Sanford C. Sigoloff 67 Director 1996
Philip B. Smith 63 Director 1995
Joseph F. Troy 59 Director 1996
Young Sam Cho 45 Director 1998
Robert Werbicki 46 Vice President of Computer Products --
</TABLE>
(1) Effective June 23, 1998, Dr. Sun resigned as Chief Executive
Officer, Mr. Parkinson resigned as President and Chief Operating
Officer, Mr. Miller was appointed Chief Executive Officer and
President of U.S. Operations, Mr. Lee was appointed President and
Chief Operating Officer of Asian Operations and Mr. Smuda was
appointed Chief Financial Officer.
EDMUND Y. SUN has served as the Company's Chairman of the Board
since its inception in October 1992 and is the founder of the Company.
Dr. Sun served as Chief Executive Officer from October 1992 to June
1998 and served as President from October 1992 to May 1996. Dr. Sun
founded C-Cube Microsystems Inc. ("C-Cube"), a public company involved
in the development of full-color still and motion picture compression
technology, and was its Chief Executive Officer from March 1989 to
September 1991, and Chairman of the Board from August 1988 until April
1993. Dr. Sun was also a founder, Vice President, and Chief Technical
Officer of Weiteck Corporation, a public company involved in high-speed
three-dimensional shaded applications. Dr. Sun is a director of CSS
Laboratories, Inc., a privately-held company involved in computer
hardware. Dr. Sun has a PH.D. in Applied Physics, and an M.S. in
Electrical Engineering from the California Institute of Technology, and
a B.S. in Electrophysics from the National Chiao-Tung University in
Taiwan.
EDWARD M. MILLER was appointed the Company's Chief Executive Officer
and President of U.S. Operations in June 1998. Mr. Miller was the
Chief Financial Officer of the Company from January 1998 to June 1998.
Prior to joining DVS, Mr. Miller served as Vice President of Finance
for SteriGenics International, Inc., ("SteriGenics") a leading provider
of microorganism reduction services for the Healthcare Industry. Mr.
Miller previously worked for Quality Technologies Corporation, ("QTC")
a spin-off of General Instrument and a leading Optoelectronics
manufacturing company, where he had served as Vice President of
Finance. Mr. Miller worked for General Instrument Corporation ("GI")
during the 1980's holding several positions in the areas including
finance, strategic planning and operations. During his tenure with GI,
Mr. Miller served as Assistant to the CFO, Financial Controller for
GI's UK operations, and Manager of Financial Analysis-Europe. Earlier
in his career at General Instrument, Mr. Miller served as Corporate
Credit Manager for 16 divisional and subsidiary operations with in GI's
Components Product Group. Mr. Miller received his BA in Business
Administration from Ohio University.
SUNG HEE LEE was appointed President and Chief Operating Officer of
Asian Operations of the Company in June 1998. Mr. Lee has been a
director of the Company from March 1994 to June 1998. Prior to joining
DVS, Mr. Lee was the Director and founder of the Multimedia Business
Division of Hyundai Electronics Industries Co., Inc. since 1993. From
1991 to 1993, Mr. Lee served as a Senior Marketing Manager of Hyundai's
Information Systems Business Sector and from 1989 to 1991, he was a
Senior Manager of Hyundai's Computer Export Department. Mr. Lee is a
member of the Board of Directors of Wanyan Electronics Co. Ltd. in
China. He received his M.S. in Industrial Engineering from the Korea
Advanced Institute of Science & Technology.
ROBERT WERBICKI has served as the Company's Executive Vice President
of Computer Products since August 1997. In 1995 he founded and was the
President of Synchrome Technology Inc., a development and marketing
company that integrates CD-ROM drives into finished peripheral add-on
personal computer products, and develops and markets multimedia audio
software. In 1993, Mr. Werbicki served as General Manager and
consultant to Mountain Network Solutions and Nakamichi Peripherals
Corporation. From 1990 to 1993 he served in various executive
positions at Rexon Inc., including President of Rexon/Tacmar Inc.;
President of Sytron, the Rexon, software development and marketing
subsidiary; and General Manager of the Wangtek DAT Division. From 1985
to 1990 Mr. Werbicki held Engineering positions at Mountain Network
Solutions Inc. From 1980 to 1984 he held design-engineering positions
at Ampex Corporation and DRS/Precision Echo. Mr. Werbicki received his
B.S.E.E. degree from the University of the Pacific and the Bachelor of
Commerce degree from the University of Toronto.
JOHN SMUDA was appointed Chief Financial Officer of the Company in
June 1998. Mr. Smuda served as consultant to the Company since 1995
and became Vice President of Business Development in November 1997.
Prior to joining the Company, Mr. Smuda served as the Vice President of
Spencer Trask Securities, Inc. and The Private Equity Partnership. He
was responsible for strategically planning the financial applications
for the developmental stage of technology companies. Mr. Smuda's
background also includes fundamental analysis of high-technology
companies and evaluating market opportunity, competition and
management. Mr. Smuda received his MBA in Finance and Management from
Columbia University and earned his Ph.D. in Biochemistry from
Georgetown University.
THOMAS R. PARKINSON served as the President and Chief Operating
Officer of the Company from April 1997 to June 1998, and also served as
a director of the Company since September 1997. In 1993, Mr. Parkinson
served as a consultant for Shape, Inc., a manufacturer of home video
entertainment and computer related companies and, from 1994 to April
1997 served as that company's President and Chief Executive Officer.
In 1992, Mr. Parkinson founded Technology Vision, Inc., a provider of
management services.
SANFORD C. SIGOLOFF has served as a director of the Company since
June 1996. Mr. Sigoloff has been Chairman of the Board, President and
Chief Executive Officer of Sigoloff & Associates, Inc. (a management
consulting company) since 1989. He served as Chief Executive Officer
of L.J. Hooker Corporation (a retail conglomerate) from August 1989 to
June 1992. From March 1982 until 1988, Mr. Sigoloff served as Chairman
of the Board, President and Chief Executive Officer of Wickes
Companies, Inc. (a furniture retail chain). Mr. Sigoloff is a director
of Sun America, Inc., Kaufman and Broad Home Corporation and Movie
Gallery, Inc. which are public companies. Mr. Sigoloff is an adjunct
full professor at the John E. Anderson Graduate School of Management at
the University of California at Los Angeles.
PHILIP B. SMITH has served as a director of the Company since
November 1995. Mr. Smith has been a Vice Chairman of the Board of
Spencer Trask Securities Incorporated since 1991. He was formerly a
Managing Director of Prudential Securities in their merchant banking
division from 1985 to 1991. Mr. Smith is a founding General Partner of
Lawrence Venture Associates, a venture capital limited partnership
headquartered in New York City and was the General Partner from 1984 to
1985. From 1981 to 1984, he served as Executive Vice President and
Group Executive of the international banking and worldwide corporations
group at Irving Trust Company. Prior to joining Irving Trust Company,
he was at Citibank for 15 years, where he founded Citicorp Venture
Capital and was its President and Chief Executive Officer. Since 1988,
Mr.Smith has also been the managing general partner of Private Equity
Partnership, L.P. Mr. Smith is a director of Movie Gallery, Inc.,
DenAmerica Corp. and KLS Enviro Resources, Inc., all publicly-held
companies. Mr. Smith is an adjunct professor at Columbia University
Graduate School of Business. He holds a B.S.E. from Princeton
University and an M.B.A. from Harvard University.
JOSEPH F. TROY has served as a director of the Company since May
1996. Mr. Troy is the founder and has been a member of the law firm of
Troy & Gould Professional Corporation since May 1970. He is a director
of Movie Gallery, Inc., a publicly-held company. Mr. Troy holds a B.A.
from Yale University and an LL.B. from Harvard University.
Directors serve until the next annual meeting or until their
successors are elected or appointed. Officers are elected by and serve
at the discretion of the Board of Directors. There are no family
relationships among the officers or directors of the Company.
Pursuant to the underwriting agreement entered into by the Company
in connection with the initial public offering of the Company's
securities in May 1996 (the "IPO"), the Company agreed for a period of
five years commencing on May 9, 1996, if requested by the underwriter,
D.H. Blair Investment Banking Corp. (the "Underwriter"), to nominate a
designee of the Underwriter who is reasonably acceptable to the Company
to the Company's Board of Directors. To date, the Underwriter has not
designated a director.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's directors and certain of its
officers, and persons who own more than 10% of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission (the "Commission").
Officers, directors and greater than 10"% stockholders are required by
the Commission's regulations to furnish the Company with copies of all
Section 16(a) forms they file. Based solely upon a review of the copies
of the forms furnished to the Company and the representations made by the
reporting persons to the Company, the Company believes that during the
fiscal year ended March 31, 1998, its directors, officers and 10%
stockholders complied with all filing requirements under Section 16(a) of
the Exchange Act, with the following exceptions: Dr. Sun filed a late
Form 5 to report the cancellation of 140,760 shares of Common Stock
pursuant to the terms of an escrow agreement entered into in connection
with the Company's purchase of ViComp Technology, Inc.; Mr. Smith filed a
late Form 4 to report the acquisition of 18,738 shares of Common Stock
upon the exercise of stock options; Mr. Parkinson filed a late Form 3
reporting his appointment to the office of President and the receipt of
900,000 stock options; Mr. Franza filed a late Form 3 reporting his
appointment to the office of Executive Vice President of Business
Development for the Company and Chief Operating Officer of the Company's
Atlanta, Georgia operations and the receipt of 125,000 stock options; Mr.
Werbicki filed a late Form 3 to report his appointment to the office of
Vice President of Computer Products and the receipt of 100,000 stock
options.
ITEM 10. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following table sets forth the compensation for the fiscal year
ended March 31, 1998 and 1997 and twelve months ended March 31, 1996 paid by the
Company to its Chief Executive Officer and the other executive officer
of the Company who earned in excess of $100,000(collectively, the
"Named Executive Officers") based on salary and bonus for the fiscal
year ended March 31, 1998:
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation(1) Awards
------------------------------------- ------------
Other
Annual Securities
Name and Fiscal Year Compensa- Underlying
Principal Position Ended(2) Salary($) tion Options(#)
- - - - ----------------------------- ---------------- --------- ---------- ------------
<S> <C> <C> <C> <C>
Edward M. Miller (4) 1998 $41,409 $ -- 135,000
Chief Executive Offiver and 1997 -- -- --
President of U.S. Operations 1996 -- -- --
Dr. Edmund Y. Sun(3) 1998 165,157 -- $ --
Chairman of the Board 1997 159,751 -- --
and Chief Technology Officer 1996 131,709 -- --
Thomas Parkinson (5) 1998 393,166 -- 900,000(6)
President and Chief 1997 -- -- --
Operating Officer 1996 -- -- --
Robert Werbicki 1998 144,806 -- 100,000
Vice President of 1997 -- -- --
Computer Products 1996 -- -- --
Gary Franza 1998 138,439 89,861 (7) 125,000
Executive Vice President 1997 -- -- --
New Media Division 1996 -- -- --
David Keller (8) 1998 112,465 -- 80,000
General Manager and Vice 1997 -- -- --
President of the New 1996 -- -- --
Media Division
</TABLE>
(1) The compensation described in this table does not include medical
insurance, retirement benefits and other benefits received by the
foregoing executive officers which are available generally to all
employees of the Company and certain perquisites and other
personal benefits received by the foregoing executive officers of
the Company, the value of which did not exceed the lesser of
$50,000 or 10% of the executive officer's cash compensation in the
table.
(2) In June 1996, the Company changed its fiscal year end from
December 31 to March 31.
(3) Dr. Sun also served as President of the Company during the twelve
months ended March 31, 1996 and through May 1996 and as Chief
Executive Officer during the fiscal year ended March 31, 1996 and
through June 1998.
(4) Mr. Miller was appointed as Chief Executive Officer of the Company
and President of U.S. Operations effective June 23, 1998. Mr.
Miller served as Chief Financial Officer of the Company from
January 1998 to June 1998.
(5) Mr. Parkinson resigned as President and Chief Operating Officer of
the Company effective June 23, 1998. Mr. Parkinson continues to
serve as a director of the Company.
(6) Options to acquire 900,000 shares of Common Stock were granted to
Mr. Parkinson on March 28, 1997 in anticipation of his employment
with the Company on April 15, 1997. 702,083 shares of such options
were canceled as of July 3, 1998.
(7) Represents payments made to Mr. Franza as a consultant prior to
his employment by the Company as Executive Vice President of the
New Media Division in August 1997.
(8) Mr. Keller's employment as General Manager and Vice President of
the New Media Division was terminated as of May 19, 1998.
The following table provides information on stock options granted
in the fiscal year ended March 31, 1998:
OPTIONS GRANTED IN FISCAL YEAR ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
% of
Total
Options
Number of Granted
Securities to Exercise
Underlying Employees or Base Expir-
Options in Fiscal Price ation
Name Granted Year (Per Share) Date
- - - - ------------------------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Dr. Edmund Y. Sun -- -- --
Thomas Parkinson 702,803 (1) 33.9% $3.75 7/3/98
197,917 (2) 9.5% $3.75 3/28/07
Edward M. Miller 135,000 6.5% $1.44 3/17/08
Robert Werbicki 100,000 (3) 4.8% $4.69 9/17/07
Gary Franza 125,000 (4) 6.0% $4.69 9/17/07
David Keller 80,000 (5) 3.9% $4.69 11/11/98
</TABLE>
(1) All of such options were canceled effective as of July 3, 1998.
(2) Such options have been fully vested and are exercisable during the
term when Mr. Parkinson serves as a director of the Company.
(3) Pursuant to the Company's option repricing agreement(the
"Repricing Agreement"), employees were permitted to reprice their
options in exchange for agreeing to cancel options equal to 25% of
their outstanding non-escrowed options. 25,000 of such options
were canceled as a result of the option repricing agreement
effective January 1998. The balance of such options, which is
75,000, will expire March 17, 2007.
(4) Pursuant to the Repricing Agreement, 31,250 of such options were
canceled effective January 1998. The balance of such options,
which is 93,750, will expire March 17, 2007.
(5) Pursuant to the Repricing Agreement, 20,000 of such options were
canceled effective January 1998. 46,250 options will cancel upon
Mr. Keller's termination with the Company on August 13, 1998 and
13,750 options if not exercised will expire on November 11, 1998.
DIRECTOR COMPENSATION
Directors (other than directors who are employees of the Company)
receive $15,000 per year as compensation for serving on the Board of
Directors and are also entitled to participate in the Company's stock
option plans and from time to time to receive grants of options
thereunder to purchase shares of the Company's Common Stock. During
the fiscal year ended March 31, 1998, the following option grants were
made pursuant to the Company's 1996 Amended and Restated Stock Option
Plan (the "1996 Stock Option Plan"): Thomas Parkinson: options to
purchase 900,000 shares of Common Stock at $3.75 per share, pursuant to
Mr. Parkinson's Employment Agreement (of which 702,083 options were
subsequently cancelled). Subsequent to fiscal year ended March 31,
1998, in June 1998 all non-employee directors were granted 100,000
options pursuant to the Company's 1998 Stock Option Plan (the "1998
Stock Option Plan").
EMPLOYMENT AND CONSULTING AGREEMENTS
The Company entered into an employment agreement (the "Sun
Employment Agreement") with Dr. Sun, the Company's founder, Chairman of
the Board and Chief Executive Officer, in March 1996. The term of the
Sun Employment Agreement commenced in May 1996 and will expire on March
31, 2001; provided, however, that the Sun Employment Agreement can be
terminated by either party after March 31, 1999, if all of the Escrow
Securities (as defined herein) have been released.
The Sun Employment Agreement provides that in consideration for Dr.
Sun's services, he is to be paid a salary of $160,000 during the first
year of the agreement. In addition, he will receive increases in
salary and bonuses as deemed appropriate by the Board of Directors. In
June 1998, Dr. Sun resigned as Chief Executive Officer and was
appointed Chief Technology Officer. Dr. Sun's compensation package
remains the same.
The Company entered into a two-year employment agreement dated as of
March 28, 1997 with Thomas R. Parkinson, pursuant to which Mr.
Parkinson became the President and Chief Operating Officer of the
Company commencing on April 15, 1997. In connection with entering into
such agreement, Mr. Parkinson received five-year options to purchase
400,000 shares of Common Stock at $3.75 per share under the Company's
1993 Stock Option Plan, of which options to purchase 266,667 shares are
Escrow Securities. See "Security Ownership of Certain Beneficial
Owners and Management--Escrow Securities." One-fourth of such options
vested and became exercisable after Mr. Parkinson had served as the
President of the Company for one year. The balance of such option was
scheduled to vest at a monthly rate of 2.083% over the following 36
months, subject to acceleration of this vesting schedule or forfeiture
of these options under certain circumstances(see below). In addition,
Mr. Parkinson received five-year options to purchase 500,000 shares of
Common Stock at $3.75 per share under the Company's 1996 Stock Option
Plan. Such options vest at a monthly rate of 2.083% over a four-year
period commencing on April 30, 1997, subject to acceleration of this
vesting schedule or forfeiture of these options under certain
circumstances. Mr. Parkinson received an annual salary of $280,000 and
was eligible for an annual performance bonus ranging from $120,000 to
$200,000. Mr. Parkinson's salary and bonus would be mutually agreed to
by Mr. Parkinson and the Board after the first year. Mr. Parkinson's
employment as President and Chief Operating Officer was renewable at
the end of the initial two-year term by mutual agreement of the
parties. Mr. Parkinson terminated his employment as President in July
3, 1998, but continues to serve as a director of the Company. In
connection with his termination as President, Mr. Parkinson and the
Company agreed that his options to purchase 197,917 shares of Common
Stock would vest on July 3, 1998 and the balance of 702,083 options
were canceled on July 3, 1998. Mr. Parkinson will receive the same
director compensation as other directors of the Company.
The Company entered into a fifteen-months employment agreement In
December 1997 with Edward Miller, pursuant to which Mr. Miller became
the Chief Financial Officer of the Company in January 1998. Upon
entering into such agreement, Mr. Miller received five-year options to
purchase 135,000 shares of Common Stock at $1.44 per share under the
Company's 1996 Stock Option Plan. Such options vest at a monthly rate
of 2.083% over a four year period commencing on March 1, 1998, subject
to acceleration of this vesting schedule or forfeiture of these options
under certain circumstances. Mr. Miller receives an annual salary of
$135,000 and will be eligible for an annual performance bonus ranging
from $27,000 to $67,500. Mr. Miller's employment as Chief Financial
Officer was renewable at the end of the fifteen-month term by mutual
agreement of the parties. In June 1998, Mr. Miller was appointed Chief
Executive Officer of the Company and President of its U.S. Operations.
Mr. Miller was granted an additional 215,000 shares of Common Stock
under the Company's 1998 Stock Option Plan as a result of such
appointment.
In August 1997, the Company entered into a three year employment
agreement with Robert Werbicki, pursuant to which Mr. Werbicki became
the Vice President of Computer Products of the Company. Upon entering
into such agreement, Mr. Werbicki received five-year options to
purchase 100,000 shares of Common Stock at $4.69 per share under the
Company's 1996 Stock Option Plan. Such options vest at a monthly rate
of 2.083% over a four-year period commencing on September 1, 1997,
subject to acceleration of this vesting schedule or forfeiture of these
options under certain circumstances. Mr. Werbicki receives annual
salary of $150,000. Mr. Werbicki is also eligible for a quarterly
performance bonus equal to a certain percentage of the gross margin
from all hardware sales under the Computer Products Division, (the
"Gross Margin"). The first year's bonus is calculated based on 5% of
the Gross Margin, but no less than $75,000 per annum. The second year's
bonus is 5% of the Gross Margin with no minimum bonus and the third
year is between 2% to 5% of the Gross Margin which will be negotiated
and mutually agreed on by Mr. Werbicki and the President of the
Company. Mr. Werbicki's employment as Vice President of the Computer
Products is renewable at the end of the initial three-year term by
mutual agreement of the parties.
In August 1997 the Company entered into a two year employment
agreement with Gary Franza, pursuant to which Mr. Franza became the
Executive Vice President of Business Development for the Company and
Chief Operating Officer of the Company's Atlanta, Georgia operations.
Upon entering into such agreement, Mr. Franza received five-year
options to purchase 125,000 shares of Common Stock at $4.69 per share
under the Company's 1996 Stock Option Plan. Such options vest at a
monthly rate of 2.083% over a four-year period commencing on September
1, 1997, subject to acceleration of this vesting schedule or forfeiture
of these options under certain circumstances. Mr. Franza receives
annual salary of $180,000 and will be eligible for an annual
performance bonus ranging from $40,000 to $80,000. Mr. Franza's
employment is renewable at the end of the initial two-year term by
mutual agreement of the parties.
In August 1997 the Company entered into a two-year employment
agreement with David Keller, pursuant to which Mr. Keller became the
Vice President and General Manager of the Company's Atlanta, Georgia
operations. Upon entering into such agreement, Mr. Keller received
five-year options to purchase 80,000 shares of Common Stock at $4.69
per share under the Company's 1996 Stock Option Plan. Such options
vest at a monthly rate of 2.083% over a four year period commencing on
September 1, 1997, subject to acceleration of this vesting schedule or
forfeiture of these options under certain circumstances. Mr. Keller
received annual salary of $170,000 and was eligible for an annual
performance bonus of up to $51,000. Mr. Keller's employment was
renewable at the end of the initial two-year term by mutual agreement
of the parties. In May 1998, Mr. Keller's employment with the Company
was terminated. Pursuant to the termination agreement, the Company
paid $42,500 of separation payment to Mr. Keller and all 46,250 shares
of Common Stock not vested as of August 13, 1998 were canceled.
STOCK OPTION PLANS
In October 1993, the Board of Directors approved the Company's 1993
Stock Option Plan, which plan was subsequently approved by the
Company's stockholders in March 1994. In April 1996, the Board of
Directors and the stockholders of the Company approved the 1993 Amended
and Restated Stock Option Plan, which effected certain amendments to
the 1993 Stock Option Plan. The 1993 Stock Option Plan provides for
the grant of options to officers, directors, other key employees and
consultants of the Company to purchase up to an aggregate of 3,762,532
shares of Common Stock. The 1993 Stock Option Plan is administered by
the Board of Directors or a committee of the Board and is currently
administered by the Board of Directors, which has complete discretion
to select the optionees and to establish the terms and conditions of
each option, subject to the provisions of the 1993 Stock Option Plan.
Notwithstanding the foregoing, grants of options to named executive
officers may be made only by a committee of directors who qualify as
"outside directors" within the meaning of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"). Options
granted under the 1993 Stock Option Plan may be "incentive stock
options" as defined in Section 422 of the Code, or nonqualified
options, and will be designated as such.
The exercise price of incentive stock options may not be less than
100% of the fair market value of the Company's Common Stock as of the
date of grant(110% of the fair market value if the grant is to an
employee who owns more than 10% of the total combined voting power of
all classes of capital stock of the Company). The Code currently
limits to $100,000 the aggregate value of Common Stock that may be
acquired in any one year pursuant to incentive stock options under the
1993 Stock Option Plan or any other option plan adopted by the Company.
Nonqualified options may be granted under the 1993 Stock Option Plan at
an exercise price less than the fair market value of the Common Stock
on the date of grant. Nonqualified options also may be granted without
regard to any restriction on the amount of Common Stock that may be
acquired pursuant to such options in any one year.
In general, upon termination of employment of an optionee, all
options granted to such person which were not exercisable on the date
of such termination would immediately terminate, and any options that
are exercisable would terminate 90 days (six months in the case of
termination by reason of death or disability) following termination of
employment.
Options may not be exercised more than ten years after the grant
(five years after the grant if the grant is an incentive stock option
to an employee who owns more than 10% of the total combined voting
power of all classes of capital stock of the Company). Options granted
under the 1993 Stock Option Plan are not transferable and may be
exercised only by the respective grantees during their lifetime or by
their heirs, executors or administrators in the event of death. Under
the 1993 Stock Option Plan, shares subject to cancelled or terminated
options are reserved for subsequently granted options. The number of
options outstanding and the exercise price thereof are subject to
adjustment in the case of certain transactions such as mergers,
recapitalizations, stock splits or stock dividends. The 1993 Stock
Option Plan is effective for ten years, unless sooner terminated or
suspended.
During the fiscal year ended March 31, 1998, options to purchase
152,167 shares of Common Stock were granted under the 1993 Stock Option
Plan."
In September 1996, the Company's Board of Directors approved the
Company's 1996 Stock Option Plan, which was subsequently approved by
the Company's stockholder in September 1997. The purpose of the 1996
Stock Option Plan is to enable the Company to attract and retain top-
quality employees, officers, directors and consultants and to provide
such employees, officers, directors and consultants with an incentive
to enhance stockholder return. The 1996 Stock Option Plan became
effective on the first day immediately following the date on which the
1996 Stock Option Plan was approved by the stockholders.
The 1996 Stock Option Plan provides for the grant of options to
officers, directors, other key employees and consultants of the Company
to purchase up to an aggregate of 1,500,000 shares of Common Stock.
The 1996 Stock Option Plan is administered by the Board of Directors or
a committee of the Board, and is currently administered by the Board of
Directors, which has complete discretion to select the optionees and to
establish the terms and conditions of each option, subject to the
provisions of the 1996 Stock Option Plan. Notwithstanding the
foregoing, grants of options to executive officers may be made only by
a committee of directors who qualify as "outside directors" within the
meaning of Section 162(m) of the Code. Options granted under the 1996
Stock Option Plan may be "incentive stock options" as defined in
Section 422 of the Code, or nonqualified options, and will be
designated as such.
The exercise price of incentive stock options may not be less than
100% of the fair market value of the Company's Common Stock as of the
date of grant(110% of the fair market value if the grant is to an
employee who owns more than 10% of the total combined voting power of
all classes of capital stock of the Company). The Code currently
limits to $100,000 the aggregate value of Common Stock that may be
acquired in any one year pursuant to incentive stock options under the
1996 Stock Option Plan or any other option plan adopted by the Company.
Nonqualified options may be granted under the 1996 Stock Option Plan at
an exercise price less than the fair market value of the Common Stock
on the date of grant. Nonqualified options also may be granted without
regard to any restriction on the amount of Common Stock that may be
acquired pursuant to such options in any one year.
In general, upon termination of employment of an optionee, all
options granted to such person which were not exercisable on the date
of such termination would immediately terminate, and any options that
are exercisable would terminate 90 days (six months in the case of
termination by reason of death or disability) following termination of
employment.
Options may not be exercised more than ten years after the grant
(five years after the grant if the grant is an incentive stock option
to an employee who owns more than 10% of the total combined voting
power of all classes of capital stock of the Company). Options granted
under the 1996 Stock Option Plan are not transferable and may be
exercised only by the respective grantees during their lifetime or by
their heirs, executors or administrators in the event of death. Under
the 1996 Stock Option Plan, shares subject to cancelled or terminated
options are reserved for subsequently granted options. The number of
options outstanding and the exercise price thereof are subject to
adjustment in the case of certain transactions such as mergers,
recapitalizations, stock splits or stock dividends. The 1996 Stock
Option Plan is effective for ten years, unless sooner terminated or
suspended. The 1996 Stock Option Plan provides that options covering
no more than 500,000 shares of Common Stock may be granted to any one
employee in any twelve month period.
During the fiscal year ended March 31, 1997, options to purchase
752,490 shares of Common Stock were granted under the 1996 Stock Option
Plan(excluding 868,386 shares which were granted and then canceled
under the Company's option repricing agreement.
In May 1998, the Board of Directors adopted the Company's 1998 Stock
Option Plan (the "1998 Plan"). The 1998 Plan will be submitted to the
Company's shareholders for approval at the Company's next annual
meeting of shareholders. The 1998 Stock Option Plan provides for the
grant of options to officers, directors, other employees and
consultants of the Company to purchase up to an aggregate of 2,000,000
shares of Common Stock. The 1998 Stock Option Plan is administered by
the Board of Directors or a committee of the Board, and is currently
administered by the Compensation Committee of the Board of Directors,
which has complete discretion to select the optionees and to establish
the terms and conditions of each option, subject to the provisions of
the 1998 Stock Option Plan. Options granted under the 1998 Stock
Option Plan may be "incentive stock options" as defined in Section 422
of the Code, or nonqualified options, and will be designated as such.
The exercise price of incentive stock options may not be less than the
fair market value of the Company's Common Stock as of the date of grant
(110% of the fair market value if the grant is to an employee who owns
more than 10% of the total combined voting power of all classes of
capital stock of the Company). The Code currently limits to $100,000 the
aggregate value of Common Stock that may become exercisable for the first
time in any one year pursuant to incentive stock options under the 1998
Stock Option Plan or any other option plan adopted by the Company.
Nonqualified options may be granted under the 1998 Stock Option Plan at
an exercise price less than the fair market value of the Common Stock on
the date of grant. Nonqualified options also may be granted without
regard to any restriction on the amount of Common Stock that may become
exercisable pursuant to such options in any one year.
In general, upon termination of employment of an optionee, all options
granted to such person which were not exercisable on the date of such
termination would immediately terminate, and any options that are
exercisable would terminate 90 days (six months in the case of
termination by reason of death or disability)following termination of
employment.
Options may not be exercised more than ten years after the grant (five
years after the grant if the grant is an incentive stock option to an
employee who owns more than 10% of the total combined voting power of all
classes of capital stock of the Company). Options granted under the 1998
Stock Option Plan are not transferable and may be exercised only by the
respective grantees during their lifetime or by their heirs, executors or
administrators in the event of death. Under the 1998 Stock Option Plan,
shares subject to cancelled or terminated options are available for
subsequently granted options. The number of options outstanding and the
exercise price thereof are subject to adjustment in the case of certain
transactions such as recapitalizations, stock splits or stock dividends.
The 1998 Stock Option Plan is effective for ten years, unless sooner
terminated or suspended. The 1998 Stock Option Plan provides that
options covering no more than 200,000 shares of Common Stock may be
granted to any one employee in any twelve month period.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of July 28, 1998,
by (i) each person who is known by the Company to own beneficially more
than 5% of the Company's outstanding Common Stock; (ii) each of the
Company's directors; (iii) each of the Named Executive Officers; and
(iv) all officers and directors of the Company as a group.
<TABLE>
<CAPTION>
Amount and Percent
Nature of of
Beneficial Owner-
Name and Address(1) Ownership(2) ship
- - - - ---------------------------------------------- ---------------- ---------
<S> <C> <C>
Edmund Y. Sun................................. 7,681,683 (3) 33.4%
Thomas R. Parkinson........................... 197,917 (4) *
Edward M. Miller.............................. 16,875 (5) *
Sung Hee Lee.................................. -- (6) *
Philip B. Smith............................... 71,010 (7) *
Sanford Sigoloff.............................. 76,842 (8) *
Joseph F. Troy................................ 79,688 (9) *
Young Sam Cho................................. --(10) *
Robert Werbicki............................... 18,749 (11) *
Gary Franza................................... 23,437 (12) *
David Keller.................................. 13,750 (13) *
Hyundai Electronics Industries Company, Ltd... 5,896,999 (14) 25.6%
10th Floor, Boram Building
705-19, Yeeksam-dong
Kongnam-Ku, Seoul, Korea
All executives officers, directors and director
nominess as a group (11 persons)............... 8,179,951 35.6%
_________________
* Less than one percent.
</TABLE>
(1) Except as otherwise indicated, the address of each principal
stockholder is c/o the Company at 160 Knowles Drive, Los Gatos,
California 95032.
(2) Includes the Escrow Securities of such individual or entity. See
"-- Escrow Securities." Nature of beneficial ownership of
securities is direct and arises from sole voting power and sole
investment power, subject to community property laws where
applicable. Shares underlying options to purchase Common Stock
exercisable within 60 days are deemed to be outstanding for
purposes of calculating the number of shares owned by the holders
of such options.
(3) Includes 140,760 shares of Common Stock acquired by Dr. Sun in the
ViComp Acquisition, all of which have been deposited in escrow and
are subject to cancellation in certain circumstances. Also
includes 280,334 shares owned by Dr. Sun's sons and 21,564 shares
owned by Dr. Sun's sister.
(4) Represents options to purchase 197,917 shares of Common Stock.
(5) Represents options to purchase 16,875 shares of Common Stock.
Excludes options to purchase 118,125 shares of Common Stock which
are not exercisable within 60 days.
(6) Although Mr. Lee served as Hyundai's representative on the
Company's Board of Directors, he did not have any right to vote or
dispose of the shares owned by Hyundai. Mr. Lee resigned as
director of the Company and became President of Asia Operations in
July 1998.
(7) Represents options to purchase 71,010 shares of Common Stock.
Excludes options to purchase 36,998 shares of Common Stock which
are not exercisable within 60 days.
(8) Represents options to purchase 76,842 shares of Common Stock.
Excludes options to purchase 59,766 shares of Common Stock which
are not exercisable within 60 days.
(9) Represents options to purchase 79,688 shares of Common Stock.
Excludes options to purchase 56,920 shares of Common Stock which
are not exercisable within 60 days.
(10) Although Mr. Cho serves as Hyundai's representative on the
Company's Board of Directors, he does not have any right to vote
or dispose of any shares owned by Hyundai.
(11) Represents options to purchase 18,749 shares of Common Stock.
Excludes options to purchase 56,251 shares of Common Stock which
are not exercisable within 60 days.
(12) Represents options to purchase 23,437 shares of Common Stock.
Excludes options to purchase 70,313 shares of Common Stock which
are not exercisable within 60 days.
(13) Represents options to purchase 13,750 shares of Common Stock.
(14) Mong Hun Chung is the Chairman and largest individual shareholder
of Hyundai and may be considered a beneficial owner of such
shares.
ESCROW SECURITIES
In connection with the IPO and through March 31, 1997, the holders
of the Company's Common Stock and options to purchase Common Stock
placed 8,086,321 shares (the "Escrow Shares") and options to purchase
1,985,656 shares (the "Escrow Options") and the Company has placed
through March 31, 1997 options issuable under the 1993 Stock Option
Plan to purchase 28,023 shares of Common Stock (together with the
Escrow Options and the Escrow Shares, the "Escrow Securities") into
escrow pursuant to an escrow agreement (the "Escrow Agreement") with
American Stock Transfer & Trust Company, as escrow agent. The Escrow
Securities are not assignable or transferable; however, the Escrow
Shares may be voted. Holders of any options in escrow may exercise
their options prior to their release from escrow; however, the shares
issuable upon any such exercise will continue to be held in escrow as
Escrow Shares pursuant to the Escrow Agreement.
All or a portion of the Escrow Securities may be released from
escrow based on the Company's Minimum Pretax Income amounts (as defined
and set forth below) or the trading price of the Company's Common
Stock. The Minimum Pretax Income amounts (i) shall be calculated
exclusively of any extraordinary earnings, including, but not limited
to, any charge to income resulting from the release of the Escrow
Securities; and (ii) shall be increased from the amounts established at
the time of the IPO proportionately, with certain limitations, in the
event additional shares of Common Stock or securities convertible into,
exchangeable for or exercisable into Common Stock are issued after the
IPO. The Minimum Pretax Income amounts as originally established at
the time of the IPO are described below.
Of the Escrow Securities, one-half (representing 5,050,000 shares of
issued or issuable shares of Common Stock) will be released from
escrow, on a pro rata basis, if, and only if, one or more of the
following conditions are met (none of such conditions having been met
to date):
(i) the Company's net income before provision for income taxes and
exclusive of any extraordinary earnings as audited and determined by
the Company's independent public accountants (the "Minimum Pretax
Income") amounts to at least $10.0 million for the fiscal year ended
March 31, 1997.
(ii) the Minimum Pretax Income amounts to at least $15.0 million for
the fiscal year ending March 31, 1998;
(iii) the Minimum Pretax Income amounts to at least $23.0 million
for the fiscal year ending March 31, 1999;
(iv) the Minimum Pretax Income amounts to at least $31.0 million for
the fiscal year ending March 31, 2000;
(v) the Minimum Pretax Income amounts to at least $39.0 million for
the fiscal year ending March 31, 2001;
(vi) commencing on May 9, 1996 and ending 18 months thereafter, the
bid price of the Company's Common Stock averages in excess of $24.00
per share (subject to adjustment in the event of any reverse stock
splits or other similar events) for 60 consecutive business days;
(vii) commencing November 9, 1997 and ending 36 months thereafter,
the bid price of the Company's Common Stock averages in excess of
$48.00 per share (subject to adjustment in the event of any reverse
stock splits or other similar events) for 90 consecutive business days;
or
(viii) during the periods specified in (vi) or (vii) above, the
Company is acquired by or merged into another entity in a transaction
in which the value of the per share consideration received by the
stockholders of the Company on the date of such transaction or at any
time during the applicable period set forth in (vi) or (vii),
respectively, equals or exceeds the applicable levels set forth in (vi)
or (vii), respectively.
The remaining Escrow Securities (representing 5,050,000 shares of
issued or issuable shares of Common Stock) will be released from
escrow, on a pro rata basis, if, and only if, one or more of the
following conditions is met (none of such conditions having been met to
date):
(i) the Minimum Pretax Income amounts to at least $15.0 million for
the fiscal year ended March 31, 1997;
(ii) the Minimum Pretax Income amounts to at least $21.0 million for
the fiscal year ending March 31, 1998;
(iii) the Minimum Pretax Income amounts to at least $32.0 million
for the fiscal year ending March 31, 1999;
(iv) the Minimum Pretax Income amounts to at least $42.0 million for
the fiscal year ending March 31, 2000;
(v) the Minimum Pretax Income amounts to at least $53.0 million for
the fiscal year ending March 31, 2001;
(vi) commencing on May 9, 1996 and ending 18 months thereafter, the
bid price of the Company's Common Stock averages in excess of $48.00
per share(subject to adjustment in the event of any reverse stock
splits or other similar events) for 60 consecutive business days;
(vii) commencing November 9, 1997 and ending 36 months thereafter,
the bid price of the Company's Common Stock averages in excess of
$96.00 per share (subject to adjustment in the event of any reverse
stock splits or other similar events) for 90 consecutive business days;
or
(viii) during the periods specified in (vi) or (vii) above, the
Company is acquired by or merged into another entity in a transaction
in which the value of the per share consideration received by the
stockholders of the Company on the date of such transaction or at any
time during the applicable period set forth in (vi) or (vii),
respectively, equals or exceeds the applicable levels set forth in (vi)
or (vii), respectively.
The bid price amounts set forth above are subject to adjustment in
the event of any stock splits, reverse stock splits or other similar
events.
Holders of Escrow Securities have agreed not to sell, transfer,
hypothecate, negotiate, pledge, assign, encumber or otherwise dispose
of any or all of the Escrow Securities unless and until (A) the Company
shall have given notice that the conditions for the release of the
Escrow Securities set forth in Paragraphs (a) and (b) above are met, or
(B) such disposition is (i) proposed in connection with an agreement by
which the Company is to be acquired by or merged into another entity in
which the consideration paid by the acquiror per share of the Company's
stock is no less than 80% of the minimum consideration required by
Paragraphs (a)(vi) and (vii)above as to a disposition of up to 50% of
the Escrow Securities or by Paragraphs(b)(vi) and (vii) above as to a
disposition of up to 100% of the Escrow Securities and (ii) approved by
at least 80% of the votes cast, in person or by proxy, by holders of
the Common Stock eligible to vote on such matter excluding the shares
held by the holders of the Escrow Securities, provided that the holders
of at least 50% of the Common Stock (excluding the shares held by the
holders of the Escrow Securities) actually vote on such matter, in
person or by proxy, or are present, in person or by proxy, at the
meeting at which the vote takes place. If the Company is acquired by
or merges into another company that thereafter owns all of the
outstanding stock of the Company except for the Escrow Securities, at
any time from and after the consummation of the merger or acquisition,
holders of Escrow Securities desiring to dispose of their Escrow
Securities will be permitted to do so if the acquiror gives notice as
to conditions being met in Paragraphs (a) and (b) above or consents in
writing to the disposition, but no vote or consent of the former
stockholders of the Company will be required.
Any money, securities, rights or property distributed in respect of
the Escrow Securities, including any property distributed as dividends
or pursuant to any stock split, merger, recapitalization, dissolution,
or total or partial liquidation of the Company, shall be held in escrow
until release of the Escrow Securities. If none of the applicable
Minimum Pretax Income or bid price levels set forth above have been met
by July 15, 2001, the Escrow Securities, as well as any dividends or
other distributions made with respect thereto, will be cancelled and
contributed to the capital of the Company. The Company expects that
the release of the Escrow Securities to officers, directors, employees
and consultants of the Company will be deemed compensatory and,
accordingly, will result in a substantial charge to reportable
earnings, which would equal the fair market value of such shares on the
date of release. Such charge could substantially increase the loss or
reduce or eliminate the Company's net income for financial reporting
purposes for the period or periods during which such shares are, or
become probable of being, released from escrow. Although the amount of
compensation expense recognized by the Company will not affect the
Company's total shareholders' equity, it may have a negative effect on
the market price of the Company's securities.
The Minimum Pretax Income and bid price levels set forth above were
determined by negotiation between the Company and the Underwriter of
the IPO prior to the IPO and should not be construed to imply or
predict any future earnings by the Company or any increase in the
market price of its securities.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In October 1996, the Company acquired all of the outstanding capital
stock of ViComp Technology, Inc. ("ViComp") for 491,253 shares (the
"Acquisition Shares") of the Company's Common Stock (the "ViComp
Acquisition"). Dr. Edmund Y. Sun, the Company's Chairman of the Board
and Chief Technology 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 in September 1995 and January 1996)at the time of
the ViComp Acquisition. The Company issued to Dr. Sun 281,520 shares
of the Company's Common Stock for his ViComp capital stock in the
ViComp Acquisition (57.3% of the total 491,253 shares of Common Stock
issued in the ViComp Acquisition).
140,760 of the Acquisition Shares issued to Dr. Sun were deposited
in escrow and are subject to forfeiture and cancellation under certain
circumstances and may not be publicly resold until released from
escrow. The remaining of 140,760 Acquisition Shares issued to Dr. Sun
were subject to performance escrow and were canceled under the escrow
as certain milestones were not reached by July 1997.
The ViComp Acquisition was unanimously approved by the disinterested
members of the Company's Board of Directors, and the Company's Board of
Directors was advised by Sutter Securities Incorporated that the ViComp
Acquisition is fair from a financial point of view to the Company's
stockholders other than Dr. Sun.
Upon the closing of the IPO in May 1996, Dr. Sun converted 1,335,949
shares of Series B Preferred shares into 1,335,949 shares of Common
Stock.
The Company borrowed $1,000,000 from Dr. Sun in June 1998. The loan
from Dr. Sun will be converted into shares of the Company's common
stock in July 1998 (at a price equal to 100% of the average closing
price of the Company's common stock over the five trading days
preceding the conversion) and with Dr. Sun to receive registration
rights to cover these shares.
Hyundai purchased 3,247,473 shares of the Company's Series A
Preferred Stock for approximately $5,000,000 and 649,526 shares of the
Company's Series B Preferred Stock for approximately $1,000,000 from
the Company in January 1994 and April 1995, respectively. In
connection with such purchases, Hyundai was given the right to
designate a director, a right of first refusal relating to sales of the
Company's securities and certain registration rights. Such right
of first refusal terminated in connection with the IPO and Hyundai
waived its registration rights for 13 months following the closing of
the IPO in May 1996. Hyundai's Series A Preferred Stock and the Series
B Preferred Stock were converted into 3,896,999 shares of Common Stock
upon the closing of the IPO in May 1996.
In June 1998, the Company acquired a perpetual, worldwide, royalty-
free license to DVD-ROM technology owned by Hyundai in exchange for
2,000,000 shares of the Company's Common Stock. In addition, the
Company, through a newly-formed, wholly-owned subsidiary, DVS-Korea,
completed the acquisition of DVD-ROM manufacturing capabilities, a
related research and development team and management from Hyundai for
$1,000,000 cash. The Company believes that the terms of this
acquisition are fair to the Company and that the consummation of this
transaction is in the best interests of the Company. The Company has
obtained a fairness opinion of Houlihan Lokey Howard & Zukin Financial
Advisors, Inc., a nationally recognized independent valuation firm,
with respect to the fairness of the financial terms of the transaction
to the Company.
In 1993, Hyundai and the Company entered into agreements relating to
the Company's development of a consumer karaoke player, a karaoke
jukebox, encoding machines and a karaoke network system. These
agreements were subsequently amended in 1994 in connection with the
Company and Hyundai agreeing to a manufacturing relationship for
karaoke jukebox players. The Company and Hyundai subsequently entered
into the 1995 Hyundai Technical Assistance and License Agreement (the
"Technical Agreement") which subsumed part of the agreements entered
into in 1993 and obligated the Company to develop MPEG-2 compressor
products. The Technical Agreement is still in force.
In March 1996, the Company entered into an employment agreement with
Dr. Sun. During the fiscal year ended March 31, 1998, the Company
entered into employment agreements with the following executive
officers: Thomas Parkinson, Edward Miller, Robert Werbicki, Gary
Franza and David Keller. See "Compensation of Directors and Executive
Officers-Employment and Consulting Agreements."
In October 1996, the Company removed Janis Gemignani as the
Company's Vice President, Secretary and Chief Financial Officer.
Pursuant to a Settlement Agreement and General Releases between Ms.
Gemignani and the Company, the Company agreed, in connection with the
settlement of certain actions brought by Ms. Gemignani in connection
with her removal, to retain Ms. Gemignani as a consultant for a period
of twelve months commencing February 4, 1997, at a fee of $15,000 per
month.
Mr. Troy is a member of Troy & Gould Professional Corporation, a law
firm which was retained by the Company during the fiscal year ended
March 31, 1998, and has been retained to provide services for the
current fiscal year.
Mr. Smith provided consulting services to the Company during the
fiscal year ended March 31, 1997, pursuant to which he received fees of
$6,000.
In August 1997 Mr. Werbicki sold substantially all of the assets of
Synchrome Technology, Inc. to the Company for cash of $753,000.
Pursuant to the purchase agreement, Mr. Werbicki received an additional
cash payment of $125,000 in February 1998 and the Company expects to
make another cash payment of $125,000 when certain conditions are met
further pursuant to the purchase agreement.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Amendment No. 1 to be signed on its behalf by
the undersigned, thereunto duly authorized.
DIGITAL VIDEO SYSTEMS, INC.
Date: July 29, 1998 By:/s/ Edward M. Miller
----------------------------
Edward M. Miller
Chief Executive Officer
