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Previous: SALIX PHARMACEUTICALS LTD, SC 13G/A, 2000-02-15 |
Next: FIDELITY HOLDINGS INC, SC 13G/A, 2000-02-15 |
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________to _________
Commission file number 0-28472
DIGITAL VIDEO SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
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280 Hope Street
Mountain View, CA 94041
(Address of principal executive offices, including zip code)
(650) 625-8200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ]
The number of shares of Common Stock outstanding as of December 31, 1999, was 5,626,869
Digital Video Systems, Inc.
FORM 10-Q
Index
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheet- December 31, 1999
Condensed Consolidated Statements of Operations- Three months and six ended December 31, 1999 and 1998
Condensed Consolidated Statements of Cash Flows- Six months ended December 31, 1999 and 1998
Notes to Condensed Consolidated Financial Statements- December 31, 1999
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Part II. Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of the Proceeds
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
Signatures
PART I -- FINANCIAL INFORMATION
Item I. Financial Statements
Digital Video Systems, Inc.
Condensed Consolidated Balance Sheet
(in thousands)
(Unaudited)
December 31,
1999
------------
Assets:
Current assets:
Cash and cash equivalents......................... $4,169
Accounts receivable, net.......................... 1,337
Inventories....................................... 7,754
Prepaid expenses and other current assets......... 1,829
------------
Total current assets 15,089
Property and equipment, net.......................... 2,139
Investment in Shanghai............................... 204
Notes receivable - Non current....................... 1,782
Intangible assets.................................... 1,905
Other assets......................................... 824
------------
$21,943
============
Liabilities and Stockholders' Equity:
Current liabilities:
Accounts payable.................................. $6,942
Other payable..................................... 1,012
Notes payable..................................... 4,877
Accrued liabilities............................... 1,945
------------
Total current liabilities...................... 14,776
Stockholders' equity:
Preferred Stock................................... --
Common stock...................................... 3
Additional paid-in capital........................ 70,477
Accumulated deficit............................... (65,328)
Cumulative translation adjustments................ 2,015
------------
Total stockholders' equity 7,167
------------
Total Liabilities and Stockholders' equity:.......... $21,943
============
See accompanying notes to condensed consolidated financial statements.
Digital Video Systems, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
December 31, December 31,
------------------- -------------------
1999 1998 1999 1998
--------- --------- --------- ---------
Revenue:
Product revenue....................... $23,292 $4,927 $45,218 $10,324
Development and services revenue...... 187 66 244 401
Component revenue..................... 2 189 105 322
--------- --------- --------- ---------
Total revenue....................... 23,481 5,182 45,567 11,047
Cost of product revenue................. 19,703 4,468 39,693 8,972
Cost of development and
services revenue....................... 116 -- 120 20
Cost of component revenue............... 13 122 58 265
--------- --------- --------- ---------
Gross margin............................ 3,649 592 5,696 1,790
Operating expenses:
Research and development.............. 572 1,378 1,705 5,069
Sales and marketing................... 633 650 1,652 2,319
General and administrative............ 1,676 1,525 2,864 5,978
Acquired in-process research
and development...................... -- -- 125 500
--------- --------- --------- ---------
Total operating expenses........... 2,881 3,553 6,346 13,866
--------- --------- --------- ---------
Income (loss) from operation....... 768 (2,961) (650) (12,076)
Other income (expense), net............. 165 (744) 3,269 (710)
--------- --------- --------- ---------
Net income (loss)....................... $933 ($3,705) $2,619 ($12,786)
========= ========= ========= =========
Basic and Diluted net loss per share.... $0.21 ($1.54) $0.20 ($0.84)
========= ========= ========= =========
Shares used in the calculation of Basic
and Diluted net loss per share ........ 4,468 2,410 13,371 15,196
========= ========= ========= =========
See accompanying notes to condensed consolidated financial statements.
Digital Video Systems, Inc.
Condensed Consolidated Statements Of Cash Flows
(in thousands)
(Unaudited)
Nine Months Ended
December 31,
----------------------
1999 1998
---------- ----------
Cash flows from operating activities:
Net Income (loss)..................................... $2,619 ($12,786)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization..................... 629 859
Purchased in-process research and development..... 125 500
(Gain)Loss on disposal of fixed assets............ -- (1,104)
Changes in operating assets and liabilities:
(Increase)decrease in restricted cash............. -- (751)
Accounts receivable............................... (576) 198
Inventories....................................... 31 (1,096)
Prepaid expenses and other current assets......... (605) (761)
Accounts payable.................................. 1,502 3,848
Accrued liabilities............................... (1,451) 1,247
Cumulative translation............................ 416 --
---------- ----------
Net cash provided by (used in) operating activities... 2,690 (9,846)
---------- ----------
Investing activities:
Acquisition of property and equipment................. (695) (460)
Sale of short-term cash investments................... -- 1,033
Investment in Shanghai................................ (204) --
Other investing activities............................ -- 405
---------- ----------
Net cash (used in) provided by investing activities... (899) 978
---------- ----------
Financing activities:
Issuance of preferred stock........................... (1) 2,000
Issuance of common stock.............................. -- 1,403
Proceeds from intangible assets....................... 9 --
Proceeds from short-term loan ........................ 2,757 2,500
Repayment of short-term loan ......................... -- (1,000)
Issuance of notes receivable.......................... (1,662) --
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Net cash (used in) provided in financing activities... 1,103 4,903
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Net increase (decrease) in cash and cash equivalents.. 2,894 (3,965)
Cash and cash equivalents at beginning of period...... 1,276 5,915
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Cash and cash equivalents at end of period............ $4,170 $1,950
========== ==========
Supplemental disclosure of non cash transaction:
Interest paid....................................... $253 $ --
Issurance of stock to Hyundai for acquisition
of DVD-ROM asset................................... $ -- $3,500
See accompanying notes to condensed consolidated financial statements.
Digital Video Systems, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 - Basis of Presentation
Digital Video Systems, Inc. (the "Company") is a technology company specializing in Digital Versatile Disc (DVD) and other digital video technologies. The Company is currently focused on developing, manufacturing, and marketing DVD-based products (such as DVD-ROM Drives and DVD Loaders) for the computer and consumer product markets. Previously developed products from which the Company currently derives small revenue include its Video CD Player, Video Engine (Kiosk), and Video-on-Demand video servers for commercial applications.
The accompanying unaudited condensed consolidated financial statements have been prepared by the Company in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements and should be read in conjunction with the audited financial statements included in the Company's Annual Report and Form 10-KSB for the fiscal year ended March 31, 1999.
In the opinion of management, the accompanying unaudited condensed consolidated financial statements have been prepared on the same basis as the audited financial statements and include all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the interim periods presented. Operating results for the three-month period ended December 31, 1999 are not necessarily indicative of the results that may be expected for any other interim period or the full fiscal year ending March 31, 2000.
All significant inter-company balances and transactions have been eliminated.
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. Significant estimates include impairment write-downs of fixed assets and intangibles and the level of accounts receivable and inventory reserves. Actual results could differ from those estimates.
Note 2 - Net Income (Loss) Per Share
In 1997 the Financial Accounting Standards Board issued Statement No. 128, Earnings Per Share
("FAS 128"). FAS 128 replaced the calculation of primary and fully diluted net income (loss) per share with basic and diluted net income (loss) per share. Unlike primary net income (loss) per share, basic net income (loss) per share excludes any dilutive effects of options, warrants and convertible securities.
Diluted net income (loss) per share is very similar to the previously reported net loss per share. Net loss per share amounts for all periods have been presented and, where appropriate, restated to conform to the FAS 128 requirements.
Basic net loss per share is computed using the weighted average number of common shares outstanding during the periods. Diluted net loss per share is computed using the weighted average number of common and potentially dilutive common shares during the periods, except those that are anti-dilutive. Basic and diluted net loss per share is calculated as follows (in thousands):
Three Months Ended
December 31,
-------------------
1999 1998
--------- ---------
Net income (loss).................... $933 ($3,705)
========= =========
Weighted average common shares
outstanding(1)(2).................. 4,468 2,410
--------- ---------
Shares used in computing Basic
and Diluted net income (loss) per
share.............................. 4,468 2,410
========= =========
Basic and Diluted net income (loss)
per share. $0.21 ($1.54)
========= =========
(1) Does not include 1,158,535 and 1,183,979 shares of escrow common stock for the three months ended December 31, 1999 and 1998, respectively.
(2) Shares shown reflect the reverse split of 1:7 of August 1999.
For three months ended December 31, 1999 and 1998, respectively, 928,982 and 610,598 options and 18,450,000 and 18,450,000 of warrants (pre reverse split) were excluded from the calculation of diluted loss per share because their effect would have been anti-dilutive.
Note 3 - Comprehensive Income
The Company has adopted Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income," as of the first quarter of fiscal year ended March 31, 2000 ("Fiscal 2000"). SFAS No. 130 establishes new rules for the reporting and display of comprehensive income and its components, however is has no impact on the Company's net loss or stockholders' equity.
The components of comprehensive income, net of tax, are as follows (in thousands):
Three Months Ended
December 31,
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1999 1998
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Net Income (loss)....................... $933 ($3,705)
Cumulative foreign currency
translation adjustments............... 736 (66)
Deferred Compensation................... -- (65)
--------- ---------
Comprehensive income (loss)........... $1,669 ($3,836)
========= =========
Accumulated other comprehensive loss presented on the accompanying consolidated condensed balance sheets consists of the cumulative foreign currency translation adjustments and deferred compensation.
Note 4 - Inventories
Inventories consisted of the following
December 31,
1999
------------
Inventories:
Raw materials................ $187
Work in process.............. 1,264
Finished goods............... 6,303
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$7,754
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Note 5 - Other Related Party Transactions
On October 15, 1999 Dr. Edmund Sun, the Company's Co-Chairman, advanced The Company $530,000. The amount is to be repaid April 15, 2000 with interest at 6%.
Note 6 - Recent Accounting Pronouncements
The Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities. SFAS 133 will be effective for the Company at the beginning of the June 2000 quarter for both annual and interim reporting periods. The Company is evaluating the potential impact of this accounting pronouncement on required disclosures and accounting practice.
Note 7 - Change in useful life of intangible assets acquired from Hyundai in June 1998.
The intellectual property acquired has enabled the Company to gain rapid acceptance for the current product offerings. This acceptance is best evidenced by the rapid growth enjoyed (current annual rate in excess of $80 million). This digital technology portfolio acquired will provide many future product developments for the coming years and coupled with our market penetration to date we now estimate a 15 year useful life, as compared to the original estimate of three years made in June, 1998. The resulting effect of this change in this current and previous quarter is a reduction in amortization of approximately $173,000 per quarter from $200,001 in prior quarters to $ 26,511 in this and in future quarters.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
This document contains forward-looking statements within the meaning of the "safe-harbor" provisions of the Private Securities Litigation Act of 1995 that involve risks and uncertainties, including, without limitation, statements with respect to the Company's strategy, proposed sales of the Company's products, markets, and the development of the Company's products. The Company's actual results may differ materially from those described in these forward-looking statements due to a number of factors, including, but not limited to, the uncertainty of market acceptance of DVD-ROM drives, DVD loaders, DVD players, Video CD players and other Company products, planned growth of the Company's operations, dependence on a limited number of suppliers of certain components used in the Company's operations, risks associated with rapid technological change and obsolescence and product development, conducting business in foreign countries, such as China and South Korea, and the competitive market for the Company's products, and other factors described in Exhibit 99.1 to the Form 10- KSB, or in other documents the Company files from time to time with the Securities and Exchange Commission. A significant portion of the Company's revenue and net income is derived from international sales, particularly from customers based in Asia. Fluctuation of the U.S. dollar against foreign currencies, charges in local regulatory or economic condition could adversely effect operating results. The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto included herein the Company's Annual Report on Form 10-KSB for the fiscal year ended March 31, 1999 and the condensed consolidated financial statements and notes thereto included herein for the three months ended June 30, 1999.
For the first time since October 1998, the Company is reporting a positive working capital position of $312,000 at December 31, 1999. With our operations now profitable and with credit lines of more than $20 million established with banks, the Company believes that it is financially able for its current operations. In anticipation of the rapid growth in the coming fiscal year, the Company has been active in securing additional credit lines and other sources of funds to meet its growth plans.
The Company continues to focus on high-volume products based upon its DVD intellectual property portfolio. Initial offering of DVD-ROM drives and DVD loaders have gained acceptance in the marketplace and are fueling the rapid growth of the Company and also establishing an entryway for future product offerings.
Sales have grown rapidly and revenues in this quarter, ending December 31, 1999, increased to $23.3 million as compared to the prior quarter ending September 30,1999 of $15.6 million and the quarter ending December 31,1998, a year ago, of"ongoing revenues" of $4.4 million. This is an increase of nearly 51% over our second quarter ending September 30,1999 and nearly six times our quarter ending December 31, a year ago.
Gross margins continue to improve (running at 16% in the third quarter ending December 31, 1999 versus 11% in the second quarter ending September 30, 1999) reflecting our increasing procurement volumes coupled with effective value engineering. Initial deliveries of our latest low cost DVD loader/drive designs, which will also be produced in China, are forecasted to begin in late March 2000.
Operating expenses, worldwide, continue under tight control with operating expenses in this quarter ending December 31, 1999 of $2.8 million and are about 75% of what they were a year ago ($3.6 million) in the quarter ending December 31, 1998.
Spending is up from the previous quarter by about $1.1 million reflecting the infrastructure required to support our annualized revenue of over $90 million and, as discussed later, to cover the one-time charges required to support the China initiative and to establish distribution of DVD products in Europe.
Three months ended
December 31,
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1999 1998 Change
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Revenue $23,481 $5,182 353.1%
Operating expense $2,881 $3,553 -18.9%
Percent of revenue 12.3% 68.6% --
In summary we are meeting our objectives as shared in previous reports:
- Revenues substantially up and with sustaining order input.
- Manufacturing costs being reduced
- China initiative moving forward
- Operating profits continue
The outlook for the fourth quarter ending March 31, 1999 is positive and continues to meet our expectations. Consistent with the seasonal pattern and given the factors of scaled-down production of DVD-ROM drive and more staff to ramp up the operations in China, we expect revenues to be at approximately $17 million with earnings at about $0.13 to 0.15 per share in the fourth quarter.
New management has been put into place at our Korean subsidiary, bringing us operational skills in high volume operations combined with the necessary planning and financial controls to take our subsidiary to the next higher level of volume and profitability. The new president of DVS Korea, Mr. Byung Hung Lee, has held senior executive positions with both Samsung and Hyundai Groups and is highly regarded in the Korean electronics industry.
RESULTS OF OPERATIONS FOR THREE MONTHS ENDED DECEMBER 31, 1999 COMPARED TO THE THREE MONTHS ENDED DECEMBER 31, 1998
The following table sets forth for the periods indicated certain income and expense items expressed as a percentage of the Company's total revenues for the three months ended December 31, 1999 compared to the three months ended December 31, 1998. See Consolidated Statements of Operations.
Percent of Revenue Percent of Revenue
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Three Months Ended Nine Months Ended
December 31, December 31,
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1999 1998 1999 1998
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Revenues 100.0% 100.0% 100.0% 100.0%
Gross margin 15.5% 11.4% 12.5% 16.2%
Research and development 2.4% 26.6% 3.7% 45.9%
Sales and marketing 2.7% 12.5% 3.6% 21.0%
General and administration 7.1% 29.4% 6.3% 54.1%
Acquired in process R & D 0.0% 0.0% 0.3% 4.5%
Operating income (loss) 3.3% -57.1% -1.4% -109.3%
Net income (loss) 4.0% -71.5% 5.7% -115.7%
Three months ended
December 31,
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1999 1998 Change
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Consolidated Revenue $23,481 $5,182 353.1%
"Ongoing" $23,481 $4,393 434.5%
Other $ -- $789 --
Total revenue increased by $18.3 million or 353% for the three months ended December 31, 1999 compared with the three months ended December 31, 1998. Current products ("Ongoing") were $23.5 million and $4.4 million, respectively and increased by 434% from the like quarter ending a year ago. Approximately 93% of the current quarter revenue was generated by the sale of DVD drives and loaders as compared to 60% of revenue in the like quarter a year ago.
Three months ended
December 31,
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1999 1998 Change
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Gross margin $3,649 $592 516.4%
as a percentage of revenue 15.5% 11.4%
Gross margin as a percentage of revenue showed significant improvement from our previous quarter ending September 30, 1999 at 11%, to the current quarter ending December 31, 1999 of 16%.
Three months ended
December 31,
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1999 1998 Change
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Research and Development $572 $1,378 -58.5%
as a percentage of revenue 2.4% 26.6%
Research and development expenses consist primarily of personnel and equipment prototype costs required for the Company's product development efforts in Korea. Research and development expenses decreased by $.8 million or 58% during the three months ended December 31, 1999 compared with the same period in the prior fiscal year. The Company expects that the research and development expenses will increase as the revenue grows, to allow more resources for developing next generation DVD products, as well as other technologies.
Three months ended
December 31,
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1999 1998 Change
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Sales and Marketing $633 $650 -2.6%
as a percentage of revenue 2.7% 12.5%
Sales and marketing expenses consist primarily of personnel and consulting costs involved in the selling process and in the marketing of the Company's products, sales commissions, and expenses of promotion activities. Sales and marketing expenses decreased slightly ($17,000) for the three month period ending December 31, 1999 compared with the same period in the previous fiscal year. For the near term, the Company intends to maintain approximately the same level of spending on sales and marketing in terms of the percentage of revenue. As the Company's expected growth continues, the sales and marketing expenses in dollar terms are expected to increase.
Three months ended
December 31,
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1999 1998 Change
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General and Administrative $1,676 $1,525 9.9%
as a percentage of revenue 7.1% 29.4%
General and administrative expenses consist of administrative salaries and benefits, insurance, facility, legal, accounting, investor relations and other business support costs. In addition, for the quarter ending December 31, 1999, we have incurred non recurring charges related to the final steps in bringing our DVD product designs, manufacturing aids, and marketing resources to bear in China while establishing in California an organization to sell DVD products in the U.S. and Europe. Additionally, our sales have increased nearly 300% in the last 6 months and has created the need for additional staffing and related expenses. We believe that the major portion of this activity is behind us and future periods will be in line with the activity level of the then current period under review. As the Company's expected growth continues, these expenses in dollar terms are expected to increase.
Three months ended
December 31,
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1999 1998
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Other income $165 ($744)
as a percentage of revenue 0.7% -14.4%
Other income for the period is primarily the result of favorable exchange rate gains of our Korean subsidiary.
Liquidity And Capital Resources
The amount of working capital at December 31, 1999 is $312,000 compared to a negative position at December 31, 1998 of $962,000. This is the first time since October 1998 that the Company's working capital has been positive. The Company believes that it has "turned the corner" to continuing profitability and coupled with established credit lines of more than $20 million, has sufficient funds available to support its current operations. The Company is also active in securing additional credit lines and other sources of funds to support its aggressive growth plan.
Net cash provided by operating activities was $2.7 million for the nine months ended December 31, 1999, compared to $9.8 million net cash used for the nine months ended December 31, 1998. Substantially all of the net cash provided by operating activities in the nine months ended December 31, 1999 represented the net income of $2.6 million adjusted for non-cash charges for depreciation and amortization of $0.6 million and acquired in-process research and development of $0.12 million and net cash provided by an increase in accounts payable of $1.5 million, and offset by net cash used to fund increase in accounts receivable of $0.6 million, decrease in prepaid and other current assets of $0.6 million, and accrued liabilities of $1.5 million. Substantially all of the net cash used in operating activities for the nine months ended December 31, 1998 represented the net loss of $12.8 million adjusted for non-cash charges for depreciation and amortization of $0.9 million and acquired in-process research and development of $0.5 million
Net cash used in investing activities was $0.9 million for the nine months ended December 31, 1999 compared to $1.0 million provided by investing activities for the nine months ended December 31, 1998. Substantially all of the cash used in investing activities for the nine months ended December 31, 1999 consisted of the acquisition of property and equipment of $0.7 million and investment in Shanghai of $0.2 million. Net cash provided by investing activities for the nine months ended December 31, 1998 included the sale of short-term investments of $1 million which was partially offset by the acquisition of property and equipment of $0.5 million.
Net cash used in financing activities for the nine months ended December 31, 1999 was $1.1 million compared to $4.9 million net cash provided by for the nine months ended December 31, 1998. The cash used in financing activities was the issuance of note receivables as part of the sale of assets to OPLI on September 30, 1999. The above activities resulted in an increase in cash and cash equivalents of $2.9 million for the nine months ended December 31, 1999 compared to a decrease in cash and cash equivalents of $4.0 million for the nine months ended December 31, 1998.
Year 2000
As of this date, The Company has not experienced any problems or difficulties as a result of the Year 2000 computer concerns.
The Company is taking appropriate steps to ensure that its computer systems will properly recognize date sensitive information when the year changes to 2000 or "00." Systems that do not properly recognize such information could generate erroneous data or cause a system to fail. The Company is in the process of evaluating its computer systems to identify those that could be affected by this issue.
Product Liability. While the Company believes that most of its currently developed and actively marketed products are Year 2000 compliant for significantly all functionality, these products could contain errors or defects related to the Year 2000. Versions of the Company's products which are not the most currently released or which are not currently being developed may not be Year 2000 compliant. The Company sells some of its older product lines, which are not being actively developed and updated, as such these products are not necessarily Year 2000 compliant.
Corporate Systems. The Company has begun an assessment of its computer systems and software and will modify or replace portions of its software so that its operating systems will function properly with respect to dates in the Year 2000 and thereafter. The Company will evaluate system interfaces with third- party systems, such as those of key suppliers, distributors and financial institutions, for Year 2000 functionality. The Company estimates that replacement of internal hardware and software systems could approach $100,000.
The Company believes that, with modifications to existing software and conversions to new software, the Year 2000 issue will not pose significant operational problems for its computer systems. However, if such modifications and conversions are not made, or not completed in a timely manner, the Year 2000 issue could have material adverse impact on the operations of the Company. Additionally, the systems of other companies with which the Company does business may not address any Year 2000 problems on a timely basis, which could have an adverse affect on the Company's systems or business transactions. As testing of Year 2000 functionality of the Company's systems must occur in a simulated environment, the Company will not be able to test full system Year 2000 interfaces and capabilities prior to Year 2000. The Company believes that its exposure on Year 2000 issues is not material to its business as a whole.
Part II. Other Information.
Except as listed below, all information required by items in Part II is omitted because the items are inapplicable or the answer is negative.
Item 1. Legal Proceedings
The Company is involved in a pending lawsuit. Ambient Capital Group has filed suit against the Company seeking to recover a "commission" arising out of a private placement investment secured by the Company. The Company has filed a cross-complaint against Ambient Capital. It is the opinion of management that this case will result in a favorable outcome. Management feels that there will be no material effect on the financial statement. The Company is also in litigation with its former corporate council regarding unpaid fees. The Company has filed a cross-complaint against the firm.
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27.1 - Financial Data Schedule
(b) Reports on Form 8-K
Form 8-K, dated June 30, 1999, changes in registrant's certifying accountant.
Form 8-K, dated July 1, 1999, changes in registrant's certifying accountant, amended.
Form 8-K, dated August 20, 1999, financial statements and exhibits, letter from Ernst & Young.
Form 8-K, dated August 24, 1999, changes in registrant's certifying accountant, amended.
Form 8-K, dated October 15, 1999, acquisition or disposition of assets.
SIGNATURES
Pursuant to the requirement of the Security Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
DIGITAL VIDEO SYSTEMS, INC.
(Registrant)
Date: December 31, 1999 By: /s/ Mali Kuo
Mali Kuo
Chief Executive Officer and
Co-Chairman
(Chief Executive Officer)
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