<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission file number
DECEMBER 31, 1997 0-28462
ONLINE SYSTEM SERVICES, INC.
(Exact name of registrant as specified in its charter)
COLORADO 84-1293864
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1800 GLENARM PLACE, DENVER, CO 80202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(303) 296-9200
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Units, consisting of one share of Common Stock, no par value and one Warrant
Common Stock, no par value
Warrants for the purchase of Common Stock, no par value
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 such filing requirements for the past 90
days. Yes X No
--- ---
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B contained herein, and no disclosure will be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB [_].
Registrant's revenues for fiscal year ended December 31, 1997: $2,791,556
Aggregate market value of voting stock held by non-affiliates of registrant
as of February 28, 1998: Approximately $22,598,163.
Number of shares outstanding as of February 28, 1998: 3,333,577 shares of
Common Stock, no par value, and 1,359,250 common stock purchase warrants.
Documents incorporated by reference: None
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
DIRECTORS AND OFFICERS
The directors and officers of Online System Services, Inc. ("OSS" or
the "Company") as of April 28, 1998 are as follows:
<TABLE>
<CAPTION>
Name Age Director Position
- - ---- --- -------- --------
Since
-----
<S> <C> <C> <C>
R. Steven Adams............... 45 1994 Chairman of the Board, President and Chief Executive Officer
and a Director
William R. Cullen............. 56 1998 Chief Operating Officer and a Director
Thomas S. Plunkett............ 45 ---- Chief Financial Officer
Robert M. Geller.............. 45 1995 Secretary and a Director
Keith M. Bennett.............. 49 ---- Senior Vice President-Sales and Tactical Marketing
Gwenael S. Hagan.............. 37 ---- Vice President-Strategic Development
Edward C. Robinson............ 38 ---- Vice President-Business Development
Paul H. Spieker............... 54 1995 Vice President-Technical Operations and a Director
Vincent D. Bradshaw........... 57 ---- Vice President-Sales
Michael S. Murphy............. 46 ---- Vice President-Operations
Donald L. Smith III........... 48 ---- Vice President-Product Development
Robert J. Lewis............... 67 1995 Director
H. Robert Gill................ 61 1996 Director
Richard C. Jennewine.......... 59 1996 Director
Charles P. Spickert........... 44 1997 Director
</TABLE>
R. STEVEN ADAMS, founder of the Company, has served as President,
Chief Executive Officer and a director since the Company's incorporation in
March 1994. From 1985 to 1994, Mr. Adams was President-Sheridan Hotel
Management, a full service hotel management company. Mr. Adams was the creator
and founder of HotelNet, which was an online information system for the
hospitality industry. Mr. Adams' experience includes software development,
personal computer manufacturing and management of online information systems.
WILLIAM R. CULLEN, has served as Chief Operating Officer and a
director since March 1998. From May 1997 to March 1998, Mr. Cullen worked as a
consultant to the businesses in the cable industry. From April 1994 to May
1997, Mr. Cullen was Chairman and CEO of Access Television Network, Inc., a
privately held company specializing in providing paid programming to local cable
systems. From January 1992 to March 1994, Mr. Cullen was President and CEO of
California News Channel, a programming project of Cox Cable Communications.
From July 1984 to December 1991, Mr. Cullen was employed by United Artist Cable
Corporation (and its predecessor United Cable Television Corp.) as Vice
President of Operations and President of its subsidiary United Cable of Los
Angeles, Inc., and as its Senior Vice President of the Southwest Division.
Prior to joining United Artist Cable Corporation, Mr. Cullen was President of
Tribune Company Cable of California, Inc. and CEO of its United-Tribune Cable of
Sacramento joint venture, served as a top financial officer of three companies,
and worked in banking.
THOMAS S. PLUNKETT, has served as Vice President-Chief Financial
Officer of the Company since October 1996. From 1995 to 1996 Mr. Plunkett was
the Vice President of Business Management at Maxtor Corporation, a manufacturer
of disk drives. From 1994 to 1995 Mr. Plunkett was the Vice President of
Operations for Hi-Tech Manufacturing, an electronic manufacturing services
company. From 1992 to 1994 he was a Controller at Conner Peripherals, a
manufacturer of disk drives. From 1989 to 1992, Mr. Plunkett served as Vice
President and C.F.O. of Discovery Technologies, a manufacturer of high
resolution medical image transmission equipment. Prior to joining Discovery
Technologies, Mr. Plunkett held various senior operations and financial
management positions with Miniscribe Corporation from 1982 to 1989.
<PAGE>
ROBERT M. GELLER, has been a director and corporate secretary of the
Company since May 1995. He also served as Vice President-Chief Financial
Officer of the Company on a one-half time basis from May 1995 to October 1996.
Mr. Geller currently provides consulting services to the Company on a one-half
time basis. From 1986 to the present, Mr. Geller has been President of The
Growth Strategies Group, a consulting company specializing in board and
executive services for emerging growth companies. Mr. Geller is a director of
Renaissance Entertainment Corporation, a publicly held owner and operator of
renaissance fairs; and Armanino Foods of Distinction, Inc., a publicly held
producer of Italian foods.
KEITH M. BENNETT, joined the Company in April 1998 as Senior Vice
President-Sales and Tactical Marketing. From December 1997 to April 1998 and
from April 1996 to February 1997, Mr. Bennett worked as a consultant to new and
emerging companies in the telecommunications industry to assist them in
establishing their products and services in the marketplace. From February 1997
to December 1997, Mr. Bennett was Vice President of North American Sales for
Intergram International, a global provider of digital messaging products and
services, responsible for developing and implementing all sales and marketing
strategies. From May 1993 to April 1996, Mr. Bennett was Director of Sales and
Customer Service with U S WEST, MRG and was responsible for new product market
launches with an emphasis on sales, customer service, and marketing.
GWENAEL S. HAGAN, joined the Company in January 1998 as Vice President
of Strategic Development. From June 1996 to January 1998. Mr. Hagan served as
Vice President of New Business Development with International Channel, a cable
television network, where he was responsible for new revenue opportunities, both
domestically and internationally, and developing and implementing strategies to
increase revenue and position International Channel for growth via evolving
digital cable and satellite platforms. From December 1994 to June 1996, Mr.
Hagan served as the Internet Marketing Manager for Microsoft's western region.
His work with Microsoft encompassed competitive strategy development, sales
resource allocation, presentations and public relations. From March 1994 to
December 1994, Mr. Hagan worked with Missing Link Communications, Inc. , a
developer of television programs to assist computers in buying personal
computers. At Missing Link, Mr. Hagan was responsible for programming concepts
and establishing alliances. Prior to that time, Mr. Hagan spent 11 years with
Jones International, Ltd., a cable television operator and television network
development company.
EDWARD C. ROBINSON, joined the Company in May 1997 and is responsible
for business development for the Company's broadband business to consumer
products and services. From 1992 to 1994, Mr. Robinson was Director of
Marketing and Sales, New Media for U S WEST Marketing Resources, responsible for
preparing the $1.0 Billion division of U S WEST for entrance into the
interactive services/Internet content businesses. From 1994 to 1996, Mr.
Robinson was the Director of Business Development for U S WEST Interactive
Services, responsible for negotiating and finalizing content and distribution
agreements worldwide for U S WEST in it's broadband ventures. From 1996 to 1997
Mr. Robinson was the Director of Business Development for Broadvision, an
Internet software company in Los Altos, CA.
PAUL H. SPIEKER, has been Vice President-Technical Operations and a
director of the Company since February 1995. From 1992 to 1994 Mr. Spieker was
President of Business Regulatory Coalition-Colorado, a public affairs company
responsible for policy formulation and activities primarily dealing with
regulatory matters representing companies before the Colorado Public Utilities
Commission. From 1991 to 1994, he was a private consultant primarily for
businesses in voice and data communications. From 1990 to 1991, Mr. Spieker was
President of Developers Cable Construction, a startup company providing contract
construction services for residential developers and local telephone and cable
companies. From 1987 to 1990, Mr. Spieker was employed by Volt Information
Sciences, Inc., a New York based telecommunications company. Mr. Spieker was
employed by U S WEST Communications, Inc. and its predecessor from 1966 to 1987
and served in several senior management capacities, including the head of the
strategic business unit which served large telephone customers in a seven state
territory.
VINCENT D. BRADSHAW, joined the Company as Director-Sales in June 1996
and was promoted to Vice President-Sales in September 1996. From May 1993 to
May 1996, he was Director of Business Development for Source One Management,
Inc., a privately held Denver based company in the business of providing
technical operations, management and engineering services. From 1987 to 1996,
Mr. Bradshaw was an independent, Denver based marketing and business consultant,
doing business as Foresight Business Services. As a consultant, he
<PAGE>
provided marketing and business operations advice to a number of private and
public companies. From May 1981 to December 1986, Mr. Bradshaw was employed by
Mountain Bell and its parent company in different sales positions leading to his
being named Vice President-Federal Services from 1985 to 1986. From August 1960
to April 1981, he held progressive technical operations, engineering and
sales/marketing positions with AT&T Company in several eastern states. Mr.
Bradshaw is currently a business advisor with the Boulder Technology Incubator,
a not-for-profit corporation that assists inventors and firms in marketing their
technologies.
MICHAEL S. MURPHY, joined the Company in April 1997 as Vice President
- - - Operations. From November 1996 to April 1997, he was an independent
management consultant. From May 1994 to November 1996, Mr. Murphy was co-
founder and Vice President of Operations of Requisite Technology, Inc., a
developer of software and electronic catalog publishing. From January 1993 to
May 1994, Mr. Murphy was Director of Strategic Business Development for Ball
Aerospace and Telecommunications Corporation and from July 1987 to January 1993,
Manager, San Diego Operations of Ball System Engineering Division.
DONALD L. SMITH III, joined the Company in November, 1997 and is
responsible for product development. He has worked the past eleven years in the
software development area in a variety of industries. His most recent experience
included establishing and growing the development organization at Jones Cyber
Solutions from a single resource to one hundred persons working on the
development and customization of subscriber management and customer care
software being sold to the cable and telephony marketplaces. His previous
position included developing performance measurement and project management
applications for multi-billion dollar Martin Marietta defense contracts.
ROBERT J. LEWIS, has been a director of the Company since February
1995. Mr. Lewis retired in October 1995 after having spent 37 years in the
cable television industry as an owner and developer of cable systems and senior
executive with several cable television companies. From 1987 until his
retirement, Mr. Lewis was employed by TCI Telecommunications, Inc. ("TCI"), one
of the largest cable television companies in the United States. Mr. Lewis
served as a Senior Vice President of TCI from 1991 to 1993 and as a Senior
Advisor to TCI from 1993 until his retirement.
H. ROBERT GILL, has been a director of the Company since August 1996.
From April 1996 to the present, Mr. Gill has been the President of The Topaz
Group, a consulting company offering board of director services to high
technology, emerging growth, public and private corporations. From March 1995
to March 1996, Mr. Gill was the Senior Vice President and President, Enhanced
Products Group for Frontier Corporation, a telecommunications company. From
January 1989 to March 1995 he was President, Chief Executive Officer and a
director or Confer-Tech International, Inc. Mr. Gill is a director of TOPRO,
Inc., a systems integration company offering equipment and services to a variety
of growth manufacturing industries; QualMark Corporation, a provider of
accelerated life testing equipment and services; MOSAIX, Inc., a marketer of
inbound and outbound call center systems and services; and Spatial Technologies,
Inc., a developer and marketer of three dimensional modeling software for CAD
applications.
RICHARD C. JENNEWINE, has been a director of the Company since
November 1996. From September 1995 to the present, Mr. Jennewine has been
President-International Operations and Regional Manager-Western Operations for
Computer Aid, Inc. a leader in strategic outsourcing and information services
consulting. From December 1991 to February 1995, Mr. Jennewine served as the
Senior Vice President of the CONCORD Group, a privately held entrepreneurial
group of 40 international enterprises. From January 1994 to February 1995, he
served as the President of the Concord Trading Corporation, a company focusing
on trading and business ventures in Asia, Russia, the Middle East and South
America. Prior to these positions, Mr. Jennewine spent 26 years with IBM
Corporation, including startup operations in mainland China. Mr. Jennewine is a
director of Easter Seals of Colorado and is a member of the Corporate Management
Committee of Computer Aid, Inc.
CHARLES P. SPICKERT, has been a director since April 1997. Mr.
Spickert founded Medical Education Collaborative ("MEC"), a non-profit medical
education organization, in March 1988 and currently serves as MEC's President
and Chief Executive Officer. From June 1990 to July 1992 Mr. Spickert also
served as the President and Chief Operating Officer of HealthWatch, Inc., a
developer and manufacturer of medical supplies and devices. Prior to these
positions, Mr. Spickert held marketing and sales management positions with
Allertech, a provider of allergy
<PAGE>
products and services; International Medical Corporation, a manufacturer of
cardiovascular devices and supplies; and Becton Dickinson, a provider of
microbiology equipment and supplies.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file with
the Securities and Exchange Commission initial reports of ownership and reports
of changes in ownership of Common Stock and other equity securities of the
Company. Officers, directors and greater than ten-percent shareholders are also
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1997, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten-percent beneficial owners were timely complied with except for
the following:
<TABLE>
<CAPTION>
Name of Individual Form Number of Late Reports Transactions Not Timely Reported
------------------ ---- ---------------------- --------------------------------
<S> <C> <C> <C>
Charles P. Spickert 3 1 1
Greg Bicket 3 1 1
Michael S. Murphy 3 1 1
Vincent D. Bradshaw 3 1 1
R. Steven Adams 4 1 1
Richard C. Jennewine 4 1 1
</TABLE>
ITEM 10. EXECUTIVE COMPENSATION.
The following table summarizes the annual compensation paid by the
Company during fiscal years ended December 31, 1995, 1996, and 1997 to R. Steven
Adams, the Chief Executive Officer of the Company as of December 31, 1997 and
the executive officers of the Company, other than Mr. Adams, whose total annual
salary and bonus exceeded $100,000 for the year ended December 31, 1997.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Composition
-------------------------------------------------------------------------
Salary Bonus Other Securities
Name and Principal Position Year $ $ $ Underlying Options
- - --------------------------- ---- ------ ----- ----- ------------------
<S> <C> <C> <C> <C> <C>
R. Steven Adams 1997 $120,217 -- -- --
President, Chief Executive 1996 $110,217 -- -- --
Officerand Director 1995 $ 69,000 -- (1) --
Thomas S. Plunkett (2) 1997 $103,642 -- -- 90,000 (3)
Chief Financial Officer 1996 $ 17,641 -- -- 60,000
1995 -- -- -- --
</TABLE>
_______________
(1) On January 1, 1995, the Company issued 480,000 shares of Common Stock
issued to Mr. Adams, as the founder and promoter of the Company, for a
nominal value ($100). Mr. Adams has also purchased other Common Stock from
the Company at fair market value as determined by the Board of Directors.
(2) Mr. Plunkett was hired as Chief Financial Officer in October 1996.
(3) Includes options for the purchase of 60,000 shares and 15,000 shares,
respectively, of Common Stock initially granted to Mr. Plunkett on October
4, 1996 and January 9, 1997, respectively, but repriced by the Company's
Board of Directors on May 20, 1997.
<PAGE>
STOCK OPTIONS
The following tables summarize the stock option grants and exercises
during fiscal 1997 to or by the named executive officers and the value of all
options held by the named executive officers as of December 31, 1997.
<TABLE>
<CAPTION>
OPTION GRANTS DURING FISCAL YEAR ENDED DECEMBER 31, 1997
Percent of Total Options
Number of Securities Granted to Employees Exercise
Underlying Options During Fiscal Year Ended Price Expiration
Name Granted December 31, 1997 ($/Share) Date
- - ---- -------------------- ------------------------ --------- ----------
<S> <C> <C> <C> <C>
R. Steven Adams 0 $ 0 -- --
Thomas S. Plunkett 75,000 (1) $1.63 5/20/04
15,000 (2) $1.63 5/20/02
----------
90,000 9.7% (3)
</TABLE>
_______________
(1) Includes options for the purchase of 60,000 shares and 15,000 shares,
respectively, that were initially granted to Mr. Plunkett on October 4,
1996 and January 9, 1997, respectively, at exercise prices of $3.88 and
$3.38, respectively. These options were repriced by the Board of Directors
of the Company on May 20, 1997. Each of these options was initially
exercisable in one-third increments on the 12th, 24th, and 36th month after
the date of grant. In connection with the repricing of these options, the
vesting of the options was delayed for six months such that each of these
options is now exercisable on the 18th, 30th, and 42nd months after the
date of the original grant.
(2) This option was exercisable in full immediately upon grant.
(3) All options repriced by the Board of Directors during the fiscal year ended
December 31, 1997 (but which were originally granted during a prior fiscal
year) are deemed to have been granted during the fiscal year ended December
31, 1997 for the purpose of calculating such percentage.
AGGREGATED OPTION EXERCISES DURING FISCAL YEAR ENDED DECEMBER 31, 1997 AND
OPTION VALUES AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Underlying Options at In-The-Money Options at
Acquired Value December 31, 1997 December 31, 1997
Name on Exercise Realized Exercisable / Unexercisable Exercisable / Unexercisable
- - ---- ----------- -------- --------------------------- ---------------------------
<S> <C> <C> <C> <C>
R. Steven Adams -- -- -- --
Thomas S. Plunkett 0 $ 0 15,000 / 75,000 $73,050 / $365,250 (1)
</TABLE>
_______________
(1) The value of unexercised in-the-money options was determined by multiplying
the number of shares subject to such options by the favorable difference
between the exercise price per share and $6.50, the closing bid price per
share on December 31, 1997.
BOARD OF DIRECTOR COMPENSATION
The Board of Directors of the Company do not receive cash compensation
for their services as directors of the Company, but they are reimbursed for
their reasonable expenses in attending meetings of the Board of Directors.
During fiscal 1997, the Company compensated Robert M. Geller, Robert J. Lewis,
H. Robert Gill, Richard C. Jennewine and Charles P. Spickert for their services
as consultants.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information as to the name, address and stock holdings of each person
known by the Company to be a beneficial owner of more than 5% of its Common
Stock or its 10% Cumulative, Convertible, Redeemable Preferred
<PAGE>
Stock ("10% Preferred Stock") and as to the name, address and stock holdings of
each member of the Board of Directors and by all executive officers and
directors, as a group, as of April 28, 1998 is set forth below. Except as
indicated below, the Company believes that each such person has the sole (or
joint with spouse) voting and investment powers with respect to such shares.
<TABLE>
<CAPTION>
Common Stock 10% Preferred Stock
----------------------------------------- ------------------------------
Name/Address Amount Percent Amount Percent
of Beneficially of Beneficially of
Shareholder/Director Owned Class (1) Owned Class (1)
- - ---------------------------------------- ------------ --------- ------------ ---------
<S> <C> <C> <C> <C>
R. Steven Adams 497,000 (2) 14.8% None
1800 Glenarm Place, Suite 800
Denver, Colorado 80202
Robert M. Geller 184,667 (3) 5.4% None
1800 Glenarm Place, Suite 800
Denver, Colorado 80202
Paul H. Spieker 179,667 (4) 5.3% None
1800 Glenarm Place, Suite 800
Denver, Colorado 80202
Lee E. Schlessman 57,000 (5) 1.7% 120,000 (6) 44.9%
1301 Pennsylvania Street, Suite 800
Denver, Colorado 80203
Susan M. Duncan 13,500 (7) * 30,000 (8) 11.3%
2651 South Wadsworth Circle
Lakewood, Colorado 80227
Robert J. Lewis 64,370 (9) 1.9% None
1800 Glenarm Place, Suite 800
Denver, Colorado 80202
Thomas S. Plunkett 37,000 (10) 1.1% None
1800 Glenarm Place, Suite 800
Denver, Colorado 80202
H. Robert Gill 20,000 (11) * None
1800 Glenarm Place, Suite 800
Denver, Colorado 80202
Richard C. Jennewine 20,000 (12) * None
1800 Glenarm Place, Suite 800
Denver, Colorado 80202
Charles P. Spickert 56,000 (13) 1.6% None
1800 Glenarm Place, Suite 800
Denver, Colorado 80202
William R. Cullen None (14) None
1800 Glenarm Place, Suite 800
Denver, Colorado 80202
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Directors and Executive Officers as a 1,058,704 (15) 29.1% None
Group (12 persons)
</TABLE>
* Less than one percent of shares outstanding.
(1) In calculating percentage ownership, all shares of Common Stock which a
named shareholder has the right to acquire within 60 days from the date of
this Proxy Statement upon exercise of options or warrants are deemed to be
outstanding for the purpose of computing the percentage of Common Stock
owned by that shareholder, but are not deemed to be outstanding for the
purpose of computing the percentage of Common Stock owned by any other
shareholders. No options or warrants to acquire 10% Preferred Stock are
outstanding.
(2) Excludes options for the purchase of 100,000 shares of Common Stock that
are not exercisable during the next 60 days.
(3) Includes options for the purchase of 36,667 shares of Common Stock, but
excludes options for the purchase of 38,333 shares of Common Stock that are
not exercisable during the next 60 days.
(4) Includes options for the purchase of 36,667 shares of Common Stock, but
excludes options for the purchase of 23,333 shares of Common Stock that are
not exercisable during the next 60 days.
(5) Includes warrants for the purchase of 16,000 shares of Common Stock. Also
includes (i) 2,500 shares of Common Stock owned by The Schlessman Family
Foundation, (ii) warrants for the purchase of 2,000 shares of Common Stock
owned by The Schlessman Family Foundation, (iii) 7,500 shares of Common
Stock owned by persons who have granted Mr. Schlessman a power of attorney
with respect to such shares, and (iv) warrants for the purchase of 6,000
shares of Common Stock owned by persons who have granted Mr. Schlessman a
power of attorney with respect to such warrants.
(6) Includes 10,000 shares of 10% Preferred Stock owned by The Schlessman
Family Foundation. Also includes 30,000 shares of 10% Preferred Stock owned
by persons who have granted Mr. Schlessman a power of attorney with respect
to such shares.
(7) Includes warrants for the purchase of 2,000 shares of Common Stock. Also
includes 5,000 shares of Common Stock owned by the Susan M. Duncan
Irrevocable Gift Trust and warrants for the purchase of 4,000 shares of
Common Stock owned by the Susan M. Duncan Irrevocable Gift Trust.
(8) Includes 20,000 shares of 10% Preferred Stock owned by the Susan M. Duncan
Irrevocable Gift Trust.
(9) Includes options and warrants for the purchase of 35,000 and 2,700 shares
of Common Stock, respectively.
(10) Includes options for the purchase of 35,000 shares of Common Stock, but
excludes options for the purchase of 80,000 shares of Common Stock that are
not exercisable during the next 60 days.
(11) Includes options for the purchase of 20,000 shares of Common Stock, but
excludes options for the purchase of 20,000 shares of Common Stock that are
not exercisable during the next 60 days.
(12) Includes options for the purchase of 20,000 shares of Common Stock, but
excludes options for the purchase of 20,000 shares of Common Stock that are
not exercisable during the next 60 days.
(13) Includes options for the purchase of 50,000 shares of Common Stock, but
excludes options for the purchase of 15,000 shares of Common Stock that are
not exercisable during the next 60 days.
(14) Excludes options for the purchase of 130,000 shares of Common Stock that
are not exercisable during the next 60 days.
(15) Includes options for the purchase of 236,034 shares of Common Stock, but
excludes options for the purchase of 516,666 shares of Common Stock that
are not exercisable during the next 60 days.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Since inception, the Company has issued the following shares of common
stock to certain current or former officers and directors:
<TABLE>
<CAPTION>
Number of Shares Number of Shares Number of
Recipient Issued to Founder(1) Issued for Services(2) Shares Purchased(3)
- - --------- -------------------- ---------------------- -------------------
<S> <C> <C> <C>
R. Steven Adams 480,000 -- 20,000
Robert M. Geller -- 100,000 55,000
Paul H. Spieker -- 50,000 100,000
Mitchell B. Campbell -- -- 160,000
D. Kent McBride -- 50,000 5,000
William Eager -- 50,000 10,000
Mark D. Rothschild -- 20,000 30,000
Robert J. Lewis -- -- 26,667
</TABLE>
_____________
<PAGE>
(1) On January 1, 1995, the Company issued 480,000 shares of common stock to
Mr. Adams, as the founder and promoter of the Company, for a nominal value
($100).
(2) In March and May 1995, the Company issued an aggregate of 270,000 shares of
common stock to the then respective officers and directors identified in
the table for services valued at $0.10 per share, which was determined by
the Board of Directors to be the fair market value of the common stock at
the time of issuance.
(3) From June through December 1995, the then officers and directors identified
in the table purchased an aggregate of 315,000 shares of common stock for
cash at a price of $0.50 per share, which was determined by the Board of
Directors to be the fair market value of the common stock at the time of
purchase. During fiscal 1996, 65,000 shares were purchased at a price of
$.50 per share pursuant to the exercise of stock options and 26,667 shares
were purchased at a price of $2.25 per share in a private placement.
During 1995, the Company leased $50,000 of equipment (the "Equipment
Lease") from a partnership whose partners include Robert M. Geller, an officer
and director of the Company. The three year capital lease has an effective
annual interest rate of 14.9%. The Company granted Mr. Geller a five-year
warrant to purchase 5,000 shares of Common Stock at an exercise price of $0.50
per share in connection with the Equipment Lease.
During November 1997, the Company licensed its MD Gateway Web site and
related equipment and software to Medical Education Collaborative, a nonprofit
company formed by Charles P. Spickert, a director of the Company. The Company
licensed MD Gateway to MEC in connection with the Company's strategic decision
to focus its activities on non-healthcare related activities. The license
agreement provides that MEC will pay OSS a license fee of 35% of revenues in
excess of certain MEC expenses related to MD Gateway services.
The Company's principal offices are located in a building managed by
Sheridan Management Company and owned by one of its affiliates. R. Steven
Adams' spouse is a vice president of Sheridan Management Company. The current
base monthly rental is $18,209.
The Company believes that the transactions summarized above are on terms
no less favorable than could be obtained from unaffiliated third parties. The
Board of Directors has determined that any transactions with officers, directors
or principal shareholders will be approved by the disinterested directors and
will be on terms no less favorable than could be obtained from an unaffiliated
third party. The Board of Directors will obtain independent counsel or other
independent advice to assist in that determination.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ONLINE SYSTEM SERVICES, INC.
Date: May 7, 1998 By /s/ Thomas S. Plunkett
-------------------------------------------
Thomas S. Plunkett, Chief Financial Officer
<PAGE>
ONLINE SYSTEM SERVICES, INC.
INDEX TO EXHIBITS
FORM 10-KSB/A (For Fiscal Year Ended December 31, 1997)
(a) Listing of Exhibits:
3.1 Articles of Incorporation, as amended, of the Company (4)
3.2 Bylaws of the Company(1)
4.1 Specimen form of the Company's Common Stock certificate(2)
4.2 Form of Warrant Agreement dated May 23, 1996 between Corporate Stock
Transfer and the Company, including form of Warrant(2)
4.3 Stock Option Plan of 1995(1)
4.4 Form of Incentive Stock Option Agreement for Stock Option Plan of
1995(1)
4.5 Form of Nonstatutory Stock Option Agreement for Stock Option Plan of
1995(1)
4.6 Nonstatutory Stock Option Agreement for options issued to Creative
Business Strategies, Inc.(2)
4.7 Form of Warrant issued in connection with Sale-Leaseback of
Equipment(1)
4.8 Form of Warrant issued in 1996 to private investors(1)
4.11 Specimen of Warrant Certificate--See Exhibit A filed with Exhibit 4.2
4.12 Form of Warrant Agreement issued in 1997 and 1998 to private
investors. (4)
10.1 Equipment Lease Agreement dated December 15, 1995 between the Company
and OSS Equipment Leasing General Partnership(1)
10.2 Financial Advisory Agreement dated February 23, 1996 between the
Company and Cohig and Associates(1)
10.3 Form of Nondisclosure and Nonsolicitation Agreement between the
Company and its employees(2)
10.4 Office Lease for the Company's principal offices(2)
10.5 Long-Term Equipment Sale and Software License Agreement dated October
7, 1997 between the Company and FiberTel TCI2 S.A. (4)
10.6 Agreement and Plan of Merger dated March 19, 1998 among the Company,
Durand Acquisition Corporation and Durand Communications, Inc. (4)
10.7 Agreement dated October 7, 1997 between the Company and Medical
Education Collaborative, Inc. (4)
13 The registrant intends to deliver to its shareholders a copy of 1997
Annual Report on form 10-KSB (without exhibits), in lieu of a separate
Annual Report to Shareholders
16 Letter on change in certifying accountant(3)
23.1 Consent of Arthur Andersen LLP(4)
27.1 Financial Data Schedule (4)
27.2 Restated Financial Data Schedule*
- - ------------------
* Filed herewith.
(1) Filed with the initial Registration Statement on Form SB-2, filed April
5, 1996, Commission File No. 333-3282-D.
(2) Filed with Amendment No. 1 to the Registration Statement on Form SB-2,
filed May 3,1996, Commission File No. 333-3282-D.
(3) Filed with the Form 8-K Report, dated October 7, 1996, Commission File
No. 0-28462.
(4) Filed with the Form 10-KSB Report, dated April 2, 1998, Commission File
No. 0-28462.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM ONLINE SYSTEM
SERVICES, INC. FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001011901
<NAME> ONLINE SYSTEM SERVICES, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,645,163
<SECURITIES> 3,855,343
<RECEIVABLES> 294,201
<ALLOWANCES> 64,851
<INVENTORY> 195,941
<CURRENT-ASSETS> 6,209,693
<PP&E> 672,296
<DEPRECIATION> 185,952
<TOTAL-ASSETS> 6,860,653
<CURRENT-LIABILITIES> 611,405
<BONDS> 32,647
0
0
<COMMON> 7,953,665
<OTHER-SE> (1,637,064)
<TOTAL-LIABILITY-AND-EQUITY> 6,860,653
<SALES> 319,425
<TOTAL-REVENUES> 1,445,042
<CGS> 232,511
<TOTAL-COSTS> 949,920
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,420,432)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,420,432)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,420,432)
<EPS-PRIMARY> (.55)
<EPS-DILUTED> (.55)
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