As filed with the Securities and Exchange Commission on November 25, 1998
Registration No. 333-47835
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
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SIGMA DESIGNS, INC.
(Exact name of Registrant as specified in its charter)
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CALIFORNIA 7372 94-2848099
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classification Identification Number)
organization) Code Number)
46501 Landing Parkway
Fremont, California 94538
(510) 770-0100
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
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Thinh Q. Tran
President
Sigma Designs, Inc.
46501 Landing Parkway
Fremont, California 94538
(510) 770-0100
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
David J. Segre, Esq.
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
(650) 493-9300
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If the only securities being delivered pursuant to this Form are being
offered pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
==================================================================================================================
Proposed Proposed
Maximum Maximum
Title of Each Class Amount Offering Aggregate Amount of
of Securities to to be Price Offering Registration
be Registered Registered(1) Per Share (2) Price Fee (2)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock no par value.............. 3,000,000 $3.56 $10,680,000 $2,969.04
==================================================================================================================
<FN>
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(1) Includes shares of Common Stock which may be offered pursuant to this
Registration Statement consisting of 3,000,000 shares issuable upon conversion
of 5,000 shares of Series B Convertible Preferred Stock of the Company and
issuable upon exercise of the Warrants issued in connection with
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the issuance of the Series B Preferred Stock. In addition to the shares set
forth in the table, pursuant to Rule 416 under the Securities Act of 1933, as
amended, this Registration Statement also covers an indeterminate number of
additional shares of Common Stock as may become issuable upon conversion of or
in respect of the Company's Series B Preferred Stock and Warrants, as such
number may be adjusted as a result of stock splits, stock dividends and
antidilution provisions (including floating rate conversion prices).
(2) Estimated solely for the purpose of computing the amount of the registration
fee based on the average of the high and low prices for the Common Stock as
reported on the Nasdaq Stock Market on November 23, 1998, in accordance with
Rule 457(c) under the Securities Act of 1933. A registration fee of $3,074 was
paid by the Company in connection with the initial filing of Registration
Statement No. 333-47835 on March 12, 1998, registering 3,405,000 shares of the
Company's Common Stock at a proposed maximum offering price per share of $3.06.
The Registrant is not required to pay a registration fee in connection with this
filing as the total registration fee of $2,969.04 does not exceed the $3,074
filing fee paid by the Registrant in connection with the initial filing of
Registration Statement No. 333-47835.
</FN>
</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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PROSPECTUS
3,000,000 Shares
Sigma Designs, Inc.
Common Stock
This Prospectus may be used only in connection with the resale, from
time to time, of up to 3,000,000 shares of Common Stock of Sigma Designs, Inc.
("Sigma" or the "Company"), by RGC International Investors LDC and Tsunami
Capital, Inc. All of the shares covered by this Prospectus are to be sold by
these shareholders. RGC International Investors LDC will receive the shares upon
conversion of our Series B Preferred Stock and exercise of Warrants. RGC
International Investors LDC purchased the Series B Preferred Stock and Warrants
directly from us in a transaction not subject to registration with the
Securities Exchange Commission. Tsunami Captial, Inc. received Common Stock from
us through a grant in a transaction not subject to registration with the
Securities and Exchange Commission. We will not receive any of the proceeds from
the sale of the shares. We will, however, pay the expenses incurred in
registering the shares, including legal and accounting fees.
The shares offered by this Prospectus may be offered and sold, from
time to time, by RGC International Investors LDC and Tsunami Capital, Inc., or
others who receive the shares pursuant to a valid transfer. Such offers and
sales can take place in transactions (including block transactions) on the
Nasdaq Stock Market (or any other exchange on which our Common Stock may then be
listed), in the over-the-counter market, in privately-negotiated transactions,
through the writing of options on the shares, short sales or otherwise. Sales
will be effected at the prices and for the consideration that may be obtainable
from time to time. RGC International Investors LDC and Tsunami Capital, Inc., as
appropriate, will pay for any commission expenses and brokerage fees.
Our Common Stock is traded on the Nasdaq Stock Market under the symbol
"SIGM." On November 23, 1998, the last sale price for our Common Stock as
reported on the Nasdaq Stock Market was $3.56 per share.
---------------------------
SEE "RISK FACTORS" ON PAGE 5 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES OFFERED BY THIS
PROSPECTUS.
---------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------------
The Date of this Prospectus Is November 25, 1998
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AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Accordingly, we file
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). These reports, proxy and information statements
and other information may be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the following Regional Offices of the Commission: New York
Regional Office, Seven World Trade Center, New York, New York 10048, and Chicago
Regional Office, 500 West Madison Street, Chicago, Illinois 60661. Copies of
these materials can be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549 upon payment of the
prescribed fees. Our Common Stock is quoted on the Nasdaq Stock Market. Reports,
proxy and information statements and other information concerning the Company
may be inspected at the National Association of Securities Dealers, Inc. at 1735
K Street, N.W., Washington, D.C. 20006. The Public may obtain information on the
operation of the Public Reference Room by calling the Securities Exchange
Commission at 1-800-SEC-0330. The Commission maintains a World Wide Web site
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. The address
of the site is http://www.sec.gov. We maintain a World Wide Web Site at
http://www.sigmadesigns.com.
This Prospectus constitutes a part of a Registration Statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") filed by the Company with the Commission under the
Securities Act of 1933, as amended (the "Securities Act"). This Prospectus does
not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information with respect to the Company and the
shares covered by this Prospectus, reference is made to the Registration
Statement. Statements contained in this Prospectus concerning the provisions of
any document are not necessarily complete, and each such statement is qualified
in its entirety by reference to the copy of such document filed with the
Commission.
Incorporation of Certain Documents by Reference
The following documents filed by the Company with the Commission are
hereby incorporated by reference in this Prospectus: (i) the Company's Annual
Report on Form 10-K for the fiscal year ended January 31, 1998; (ii) the
Company's Quarterly Report on Form 10-Q for the quarters ending April 30, 1998
and July 31, 1998; (iii) the Company's Proxy Statement relating to the Company's
Annual Meeting of Shareholders held on June 12, 1998; and (iv) the description
of the Company's Common Stock contained in its Registration Statement on Form
8-A filed with the Commission on November 3, 1986, as amended on September 22,
1989.
All reports and other documents subsequently filed by the Company
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date
of this Prospectus and prior to the termination of this offering shall be deemed
to be incorporated by reference herein and to be a part hereof from the date of
filing of such reports and documents. Any statement incorporated herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of the Registration Statement or this Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, upon written or oral request of such person, a copy of any or all of
the foregoing documents incorporated herein by reference (other than exhibits to
such documents, unless such exhibits are specifically incorporated by reference
into such documents). Requests for such documents should be submitted in writing
to Carol Kaplan, Director of Investor Relations, at the Company's principal
executive offices at 46501 Landing Parkway, Fremont, California 94538, or by
telephone at (510) 770-0100.
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RISK FACTORS
You should carefully consider the risks described below before making
an investment decision. The risks and uncertainties described below are not the
only ones facing our company. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial may also impair our business
operations.
If any of the following risks actually occur, our business, financial
condition or results of operations could be materially adversely effected. In
such case, the trading price of our Common Stock could decline, and you may lose
all or part of your investment.
This Prospectus also contains forward-looking statements that involve
risks and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including the risks faced by us described below and elsewhere in this
Prospectus.
History of Operating Losses; Recent Significant Losses; Liquidity
We incurred significant losses in fiscal 1995, 1996 and 1998 and had
substantial negative cash flow in fiscal 1995, 1996, 1997 and 1998. Since our
introduction of the REALmagic Moving Picture Experts Group ("MPEG") product line
in November 1993, we have made significant investments in marketing and
technological innovation for our REALmagic products. As a result of our
investments, we experienced significant losses through fiscal 1996. Fiscal 1995,
1996 and 1998 also included significant losses associated with products other
than those related to our REALmagic technology. Since our inception through July
31, 1998, our total accumulated deficit is $39,205,000. We cannot assure you
that we will continue to sell our new REALmagic products in substantial
quantities or generate significant revenues from those sales. We cannot assure
you that we will return to profitable operations in any future fiscal quarter or
fiscal year. If profitable operations are achieved, we cannot assure you that
they will be sustained.
We have an Amended and Restated Business Loan Agreement with Silicon
Valley Bank, dated October 26, 1998. Under the Agreement we gave two secured
Promissory Notes in total principal amounts of $12 million and $6 million to
Silicon Valley Bank. Under this Agreement and the Notes, we are subject to
certain covenants relating to profitability and financial ratios. Since July,
1997, we have, on occasion, obtained waivers releasing us from our obligation to
meet these covenants. We have a waiver for the quarter ending October 31, 1998.
We expect to need another waiver for the quarter ending January 31, 1999. We
cannot assure you that Silicon Valley Bank will grant that waiver. If we do not
meet these covenants, and if we do not obtain another waiver, the loans may be
in default. If we are in default, then we the lender could accelerate payments
on the Notes and could suffer serious harm to our business, financial condition
and prospects.
Marketing Risks; Volatility of OEM Customer Sales; Volatility of Resale
Distribution
Our ability to increase sales, achieve profitability and maintain
REALmagic as a personal computer ("PC") industry multimedia standard depends
substantially on our ability to achieve a sustained high level of sales to new
Original Equipment Manufacture ("OEM") customers. We have not executed volume
purchase agreements with any of our customers. Our customers are not under any
obligation to purchase any minimum quantity of our products. We have not
achieved bundling agreements with many OEM customers to ensure the success of
our REALmagic product line. Also, even if we achieve new design wins, we cannot
assure you that PC manufacturers will purchase our products in substantial
volumes. Sales to any particular OEM customer are subject to significant
variability from quarter to quarter and to severe price pressures by
competitors. Based on our experience in the PC industry, we expect that our
actual sales to OEM customers will experience significant fluctuations. Also,
estimates of future sales to any particular customer or groups of customers are
inherently uncertain.
Our ability to achieve sustained profitability also depends on a
substantial increase in the sales of REALmagic products through domestic and
international distributors for resale through corporate markets. Sales to such
distributors are typically subject to contractual rights of inventory rotation
or price protection. The failure of distributors to achieve sustained
sell-through of REALmagic products could result in product returns or collection
problems. This could contribute to fluctuations in our results of operations. We
cannot assure you that we will be successful in maintaining a significant market
for our REALmagic products.
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<PAGE>
Technological Change; Uncertainty of Achievement of Technological Leadership
The market for multimedia PC products is characterized by the
following: rapidly changing technology and user preferences, evolving formats
for compression of video and audio data, and frequent new product introductions.
Even though REALmagic products and related software titles have gained initial
market acceptance, our success depends, among other things, on our ability to
achieve and maintain technological leadership and to remain competitive in terms
of price and product performance.
To have technological leadership, we must continue to make
technological advancements and research and development investments in the area
of MPEG video and audio decoding. These advancements include the following:
o compatibility with emerging standards and multiple platforms;
o improvements to the REALmagic architecture; and
o enhancements to the REALmagic application programming interface.
We cannot assure you that we will be able to make these advancements to
our REALmagic technology. If we do make these advances, we cannot assure you
that we will be able to achieve and maintain technological leadership. Any
material failure by us or OEMs and software developers to develop or incorporate
any required improvement could adversely effect the continued acceptance of our
technology and the introduction and sale of future products based on our
technology. We cannot assure you that products or technologies developed by
others will not render obsolete our technology, and the products based on our
technology.
To be competitive, we must anticipate the needs of the market and
successfully develop and introduce innovative new products in a timely fashion.
We cannot assure you that we will be able to successfully complete the design of
our new products, have these products manufactured at acceptable manufacturing
yields, or obtain significant purchase orders for these products. The
introduction of new products may adversely affect sales of existing products and
contribute to fluctuations in operating results from quarter to quarter. Our
introduction of new products also requires that we carefully manage our
inventory to avoid inventory obsolescence. In addition, new products, as opposed
to more mature products, typically have higher initial component costs. This
higher cost could result in downward pressures on our gross margins.
Competition
The market for multimedia PC products is highly competitive, and is
driven by faster processors provided by Intel Corporation and other companies.
Intel processors have, in recent years, included increased graphics
functionality. Other companies with more experience and financial resources may
develop a competitive product that could inhibit future growth of our REALmagic
technology. Increased competition may be generated from several major computer
product manufacturers that have developed products and technologies that could
compete directly with REALmagic products on the PC platform. These competitors
include:
o SGS Thompson Microelectronics;
o C-Cube Microsystems;
o IBM Corporation;
o Zoran Corporation; and
o LSI Logic.
In addition, Intel processors are becoming more powerful, so that video
decoding could eventually be done in software. Intel processors have, in recent
years, included increased graphics functionality. Most of our
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<PAGE>
competitors have substantial experience and expertise in audio, video and
multimedia technology and in producing and selling consumer products through
retail distribution. These companies also have substantially greater
engineering, marketing and financial resources than we have. Our competitors
could form cooperative relationships that could present formidable competition
to us. We cannot assure you that our REALmagic technology will achieve
commercial success or that it will compete effectively against other interactive
multimedia products, services and technologies that currently exist, are under
development, or may be announced by competitors.
Reliance on a Single Line of Products; Source of Net Sales; Market Demand for
Multimedia Products
Our business strategy is, and has been, to focus on REALmagic products
by investing heavily in PC-based MPEG technology. In the fiscal year ended
January 31, 1998 and the nine months ended October 31, 1998, sales of multimedia
products accounted for virtually all of our net sales. A decline in market
demand for multimedia products will materially adversely affect our operating
results. Our present reliance on REALmagic products is further affected by the
fact that multimedia product sales are concentrated in the PC industry. A
decline in demand for PCs could have a material adverse effect on our operating
results and financial condition.
Variability of Operating Results; Seasonal Variations in Demand; DVD Technology
Our operating results have fluctuated in the past and may continue to
fluctuate in the future. This fluctuation is due to a number of factors,
including the following and others:
o our new product introductions and our competitors;
o market acceptance of our products by OEMs, software developers
and end users;
o the success of our promotional programs;
o gains or losses of our significant customers;
o reductions in selling prices;
o inventory obsolescence;
o an interrupted or inadequate supply of semiconductor chips;
o our ability to protect our intellectual property; and
o loss of our key personnel.
In addition, sales to OEM customers are subject to significant
variability from quarter to quarter. This variability depends on OEMs' timing
and release of products that incorporate our REALmagic technology, experience
with sales of these products and inventory levels.
The market for consumer electronics products is characterized by
significant seasonal swings in demand. Demand typically peaks in the fourth
calendar quarter of each year. We expect to derive a substantial portion of our
revenues from the sales of REALmagic products in the future. The demand for our
products will depend in part on the success of digital video technology. In
light of this, our revenues may vary with the availability of and demand for DVD
titles. This demand may increase or decrease as a result of a number of factors
that cannot be predicted, such as consumer preferences and product announcements
by competitors.
Announcements of directly competing products will likely have a
negative effect on our operating results. Based on our experience, we believe
that a substantial portion of our shipments will occur in the third month of a
quarter, with significant shipments completed in the latter part of the third
month. This shipment pattern may cause our operating results to be difficult to
predict. Currently, we place noncancellable orders to purchase semiconductor
products from our foundries with a long lead time. Consequently, if, as a result
of inaccurate forecasts or cancelled purchase orders, our anticipated sales and
shipments in any quarter do not
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occur when expected, our inventory levels could be disproportionately high. This
could require significant working capital, and negatively affect our operating
results.
Manufacturing Risks; Reliance on Independent Suppliers; Forecasting Risks;
Production Delay Risks
Our REALmagic products and components are presently manufactured by
outside suppliers or foundries. We do not have long-term contracts with these
suppliers. We conduct business with our suppliers on a written purchase order
basis. Our reliance on independent suppliers subjects us to several risks. These
risks include:
o the absence of adequate capacity;
o the unavailability of, or interruptions in access to, certain
process technologies; and
o reduced control over delivery schedules, manufacturing yields
and costs.
We obtain some of our components from a single source. Delays or
interruptions have not occurred to date, but any delay or interruption in the
supply of any of the components required for the production of our REALmagic
multimedia card currently obtained from a single source could have a material
adverse impact on our sales of REALmagic products, and on our business.
We must provide our suppliers with sufficient lead time to meet our
forecasted manufacturing objectives. Any failure to properly forecast such
quantities could materially adversely affect our ability to produce REALmagic
products in sufficient quantities. We cannot assure you that our forecasts
regarding new product demand will be accurate, particularly because we sell our
REALmagic products on a purchase order basis. Manufacturing the REALmagic
chipsets is a complex process, and we may experience short-term difficulties in
obtaining timely deliveries. This could affect our ability to meet customer
demand for our products. Any such delay in delivering products in the future
could materially and adversely affect our operating results. Also, should any of
our major suppliers become unable or unwilling to continue to manufacture our
key components in required volumes, we will have to identify and qualify
acceptable additional suppliers. This qualification process could take up to
three months or longer and additional sources of supply may not be in a position
to satisfy our requirements on a timely basis.
In the past, we have experienced production delays and other
difficulties, and we could experience similar problems in the future. In
addition, product defects may occur and they may escape identification at the
factory. This could result in unanticipated costs, cancellations, deferrals of
purchase orders, or costly recall of products from customer sites.
Dependence on Key Personnel
Our future success depends in large part on the continued service of
our key technical, marketing, sales and management personnel. Given the
complexity of REALmagic technology, we are dependent on our ability to retain
and motivate highly skilled engineers involved in the ongoing hardware and
software development of REALmagic products. These engineers are required to
refine the existing hardware system and application programming interface and to
introduce enhancements in future applications. The multimedia PC industry is
characterized by high level employee mobility and aggressive recruiting of
skilled personnel. Despite incentives we provide to them, our current employees
may not continue to work for us, and if additional personnel were required for
our operations, we may not able to obtain the services of additional personnel
necessary for our growth. We do not have "keyperson" life insurance policies on
any of our employees.
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Limited Intellectual Property Protection; Patents and Pending Patent
Applications; Litigious Sector
Our ability to compete may be affected by our ability to protect our
proprietary information. We currently hold ten patents covering the technology
underlying the REALmagic products. We have filed certain patent applications and
are in the process of preparing others. We cannot assure that any additional
patents for which we have applied will be issued or that any issued patents will
provide meaningful protection of our product innovations. Like other emerging
multimedia companies, we rely primarily on trade secrets and technological
know-how in the conduct of our business. We also rely, in part, on copyright law
to protect our proprietary rights with respect to REALmagic technology. We use
measures such as confidentiality agreements to protect our intellectual
property. These methods of protecting our intellectual property may not be
sufficient.
The electronics industry is characterized by frequent litigation
regarding patent and intellectual property rights. Any such litigation could
result in significant expense to us and divert the efforts of our technical and
management personnel. In the event of an adverse result in any such litigation,
we could be required to expend significant resources to develop noninfringing
technology or to obtain licenses to the technology that is the subject of the
litigation, and we may not be successful in such development or in obtaining
such licenses on acceptable terms, if at all. In addition, patent disputes in
the electronics industry have often been settled through cross-licensing
arrangements. Because we do not yet have a large portfolio of issued patents, we
may not be able to settle an alleged patent infringement claim through a
cross-licensing arrangement.
Risks of International Operations; Substantial Percentage of Net Sales Derived
From the Asia Pacific Region
During the fiscal years ended January 31, 1998, 1997 and 1996, sales to
international customers accounted for approximately 64%, 72% and 63% of our net
sales, respectively. We anticipate that sales to international customers,
including sales of REALmagic products, will continue to account for a
substantial percentage of our net sales. Also, some of the foundries that
manufacture our products and components are located in Asia. Overseas sales and
purchases to date have been denominated in U.S. dollars.
Due to the concentration of international sales and the manufacturing
capacity in Asia, we are subject to the risks of conducting business
internationally. These risks include unexpected changes in regulatory
requirements and fluctuations in the U.S. dollar that could increase the sales
price in local currencies of our products in international markets, or make it
difficult for the Company to obtain price reductions from its foundries. We do
not currently engage in any hedging activities to reduce our exposure to
exchange rate risks. If and when we engage in transactions in foreign
currencies, our results of operations could be adversely affected by exchange
rate fluctuations.
We derive a substantial portion of our revenues from sales to the Asia
Pacific region. This region of the world is subject to increased levels of
economic instability, and this instability could have a material adverse effect
on our results of operations.
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Volatility of Stock Price
The market of our Common Stock has been subject to significant
volatility. This volatility is expected to continue. The following factors,
among others, may have a significant impact on the market price of our Common
Stock:
o our announcement of the introduction of new products;
o our competitors' announcements of the introduction of new
products;
o market conditions in the technology, entertainment and emerging
growth company sectors; and
o short sales by shareholders and others.
The stock market has experienced, and is currently experiencing,
volatility that particularly affects the market prices of equity securities of
many high technology and development stage companies, such as those in the
electronics industry. This volatility is often unrelated or disproportionate to
the operating performance of such companies. These fluctuations, as well as
general economic and market conditions, could adversely affect the price of our
Common Stock.
Potential for Dilution of Series B Preferred Stock
Series B Preferred Stock. As of November 23, 1998, 3,500 shares of our
Series B Convertible Preferred Stock were issued and outstanding. The shares of
Series B Preferred Stock are convertible at the option of the holders into that
number of shares of Common Stock as is generally determined by the following
formula:
o Multiply the stated value ($1,000) by the number of outstanding
shares of Series B Preferred Stock (under certain circumstances,
this value may be increased by a premium based on the number of
days the Series B Preferred Stock is held), and divide the
product by the then current Conversion Price (set forth below).
o The Conversion Price is based on the average of the lowest six
trading prices of our Common Stock in the twenty trading days
ending one day prior to the date of conversion of the Series B
Preferred Stock. Thus, if the Series B Preferred Stock was
converted on November 23, 1998, the Conversion Price would have
been $1.95.
Based on this formula, if the remaining outstanding Series B Preferred
Stock was converted on November 23, 1998, it would have been convertible into
approximately 1,794,872 shares of Common Stock. This number can prove to be
significantly greater in the event of a decrease in the trading price of our
Common Stock. Purchasers of our Common Stock will experience substantial
dilution of their investment upon conversion of the Series B Preferred Stock.
However, in the event the price of our Common Stock falls below $3.26, subject
to applicable laws restricting our repurchase of stock, we have the option to
elect to pay cash (at a premium to the then current market price of our Common
Stock) to the holders of Series B Preferred Stock in lieu of converting the
shares of Series B Preferred Stock. In the event we elect to pay cash,
purchasers of our Common Stock will suffer less dilution. Our election to pay
cash, however, will come at the expense of diverting our available cash funds
from other potential uses. The shares of Series B Preferred Stock are not
registered and may be sold only if registered under the Securities Act or sold
in accordance with an applicable exemption from registration, such as Rule 144.
As of November 23, 1998, Warrants to purchase 50,000 shares of Common
Stock issued to the purchasers of the Series B Preferred Stock and exercisable
for a period of three years following May 1, 1998 at a price of $5.16 (as may be
adjusted from time to time under certain antidilution provisions) were
outstanding.
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As of November 13, 1998, 5,854,398 shares of Common Stock were reserved
for issuance upon exercise of our outstanding warrants and options (excluding
the Warrants issued to the purchasers of the Series B Preferred Stock) and an
additional 4,300,000 shares of Common Stock were reserved for issuance upon
conversion of the preferred stock and exercise of the Warrants issued to the
purchasers of the Series B Preferred Stock. At October 31, 1998, there were
13,514,735 shares of Common Stock outstanding. Of these outstanding shares,
13,492,952 were freely tradable without restriction under the Securities Act
unless held by affiliates who are subject to certain limitations under Rule 144
of the Securities Act of 1933, as amended.
Series A Preferred Stock. As of November 16, 1998, there were no
outstanding shares of Series A Preferred Stock. As of November 23, 1998,
warrants to purchase 57,142 shares of Common Stock issued to the purchasers of
the Series A Preferred Stock and exercisable beginning on December 27, 1998 for
a period of three years at a price of $3.98 (as may be adjusted from time to
time under certain antidilution provisions) were outstanding. The shares of
Common Stock issuable upon exercise of these warrants have been previously
registered pursuant to a separate Registration Statement.
Impact of the Year 2000 Issue
Year 2000 Compliance. We are aware of the issues associated with the
programming code in existing computer systems as the year 2000 approaches. The
"year 2000 problem" is pervasive and complex as virtually every computer
operation will be affected in some way by the rollover of the two-digit year
value to 00. The issue is whether computer systems will properly recognize date
sensitive information when the year changes to 2000. Systems that do not
properly recognize such information could generate erroneous data or cause a
system to fail.
We have tested our products and believe our products are year 2000
compliant. Our management has also conducted a review of our exposure to the
year 2000 problem, including working with computer systems and software vendors.
We currently believe that our internal systems are year 2000 compliant. We do
not expect to
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<PAGE>
further incur any significant operating expenses or invest in additional
computer systems to resolve issues relating to the year 2000 problem, with
respect to both our information technology and product and service functions.
However, significant uncertainty remains concerning the effects of the
year 2000 problem, including uncertainty regarding assurances made by vendors.
In addition, we have not investigated year 2000 compliance of other entities who
are not our vendors or who are vendors or purchasers of our product. For
example, we do not have control over the compliance of our distributors,
partners, banks, stock markets or systems in which our products are used.
We cannot assume that third parties will be year 2000 compliant, and if
they are not, we cannot assume that we will not be subject to actions,
liabilities or damages associated with these failures. We will develop
appropriate contingency plans in the event that a significant exposure arises
relative to any such third parties.
-12-
<PAGE>
THE COMPANY
Overview
The following sections regarding the Company contain forward-looking
statements that involve risks and uncertainties. The Company's actual results
could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, as discussed in this Registration
Statement.
We design, manufacture (using subcontractors) and market multimedia
products for use with personal computers. The emergence of multimedia technology
in the personal computer (PC) market has dramatically changed the way in which
users interact with computers. Multimedia integrates different elements, such as
sound and video, to enhance the computing experience and deliver a heightened
sense of realism. Through its REALmagic product line incorporating Moving
Picture Experts Group (MPEG) technology, Sigma Designs has become a leader in
this emerging market.
Prior to MPEG's introduction, video on personal computers suffered from
serious drawbacks. Motion pictures appeared jerky, and video was confined to
small window sizes. MPEG, a defined International Standards Organization (ISO)
standard for video compression, eliminated many of those problems and
revolutionized multimedia on the PC platform. For the first time, MPEG users
could play back full-screen, full-motion video combined with stereo audio, even
from a standard CD-ROM. A single CD-ROM using the MPEG compression technique can
store up to 74 minutes of full-motion video and audio.
With MPEG technology, producers can create (and users can enjoy) an
interactive, television-like experience on a desktop PC. The result is a
significant new visual impact, thereby opening possibilities for a wide range of
entertainment, education, training and business presentation applications. In
April 1997, the Company announced its entry into the Digital Video Disk ("DVD")
market. A key element of the DVD specification is the use of MPEG-2 for digital
video compression, a technology in which Sigma has established expertise.
Sigma's REALmagic EM8300, EM8220 and EM8800 PC-based DVD and SVCD solutions are
extensions of the Company's MPEG expertise and provide a highly-integrated
solution for the PC-DVD and PC-SVCD markets.
The REALmagic MPEG Standard
Since its first shipment in November 1993, REALmagic technology has
received support from PC industry leaders, software developers and OEM and
retail customers.
Partnership with PC Industry Leaders
Sigma has developed strategic partnerships to develop and market
network streaming video products with companies such as Hughes Network Systems,
IBM, Microsoft Corporation, Oracle Corporation, Silicon Graphics, Inc.,
Starlight Networks, Sun Microsystems, OptiVision and FVC.com.
Support from Software Developers
Support for Sigma's REALmagic MPEG standard has grown to over 1,200
software developers. To further expand the list of developers, Sigma has worked
directly with Microsoft on Microsoft's new streaming standard for MPEG-2 called
DirectShow. Sigma Designs is the first and currently the only company shipping
drivers with DirectShow support for streaming MPEG-2 video, making it the only
recommended decoder for use with Microsoft's NetShow Theater video server.
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<PAGE>
Using the DirectShow standard, software developers can create streaming
video applications with virtually any video server-without any C programming at
all. This enables universities and corporations to get live video and video on
demand applications online very rapidly, which shortens the sales process.
Support from OEMs
In the United States, Dell Computer Corporation, Compaq Computer
Corporation, IBM, Hughes Network Systems and OptiVision have purchased REALmagic
cards for installation inside their systems for streaming video. Additionally,
Philips, Sony, Panasonic Canada, Matsushita, Toshiba, VideoLogic and several
other companies market DVD kits that include REALmagic Hollywood Plus playback
cards, and several vendors base their DVD systems on REALmagic DVD playback
cards.
Acceptance by the Corporate Market
REALmagic is the most well-known and most recognized brand name for
MPEG video on PCs. Sigma Designs has developed this brand name through marketing
campaigns and by building a reputation for delivering and supporting inexpensive
MPEG decoders with robust, powerful and flexible software drivers. This has made
Sigma Designs' REALmagic the de facto standard for corporate market projects
such as corporate-wide rollouts at Merrill Lynch, Smith Barney and Wal-Mart.
REALmagic Business Strategy
Sigma's corporate objective is to continue to be a leading provider of
MPEG multimedia products that enable full-screen, full-motion, TV-like quality
video on the standard desktop and the notebook PC. To accomplish this goal the
Company intends to promote widespread acceptance of REALmagic technology. The
key parts of this strategy include:
Win More OEM Partnerships and Further Penetrate the Corporate Market
To establish REALmagic for MPEG-2 as a standard, the Company will
continue to seek design wins with major PC manufacturers worldwide, in which the
OEMs will factory-install REALmagic boards or chipsets inside their multimedia
PCs. On the retail side, the Company's systems integration sales team will
continue to work with its network of national distributors and special Value
Added Resellers (VARs) to distribute its high-end REALmagic playback card. In
Europe and Asia Pacific, the Company will continue to expand its relationship
with distributors as well as OEMs and VARs. In addition, the Company will seek
to sell chipsets to add-on card manufacturers that will, in turn, market to
owners of Pentium PCs.
Introduce New Generations of REALmagic, Offer REALmagic products at Competitive
Prices and Continually Reduce Product Costs
A significant aspect of the Company's product strategy is to increase
the sale of REALmagic chipsets while continuing to develop newer versions and
generations of REALmagic products, including chipsets for both desktop and
notebook PCs. The Company seeks to continue to offer consumers better-featured
and lower-priced products over time.
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<PAGE>
REALmagic Products
The Company currently offers a complete family of REALmagic products
including:
o REALmagic Hollywood Plus--In April 1997, the Company announced its
entry into the DVD market. The REALmagic Hollywood Plus MPEG-2 playback card
turns a PC into a full-featured DVD player that exploits many of the digital
video and digital surround sound capabilities of the DVD format and upcoming
MPEG-2 interactive titles. The REALmagic Hollywood Plus DVD/MPEG-2 playback card
displays flicker-free video at full-screen resolution, making video watching on
a PC a new experience. Movies can be simultaneously displayed on the PC monitor
and on a large-screen TV.
o REALmagic NetStream 2--In October 1997, the Company announced its
entry into the MPEG-2 networked video market. Products in the NetStream family
include specialized hardware and software developed specifically for delivering
video to corporate desktops and can be used for both video on demand and
broadcast video playback. NetStream 2 is an MPEG-2 playback card offering full
plug and play installation and compatibility with a broad range of third-party
applications, including video servers for video on demand, MPEG encoders for
stored or real-time playback, satellite delivery systems, streaming video
playback systems and scores of customizable interactive training titles.
o REALmagic EM8300--In March 1998, the Company announced the
introduction of the EM8300 REALmagic DVD/MPEG-2/MPEG-1 decoder Integrated
Circuit ("IC"). Integrating virtually all functions of a DVD decoder on one
chip, the EM8300 is designed to provide a highly integrated, cost effective
vehicle for high-quality DVD. The EM8300 feature set draws on Sigma's
industry-leading experience in the DVD/MPEG-2 market with earlier designs such
as the REALmagic Ventura and REALmagic Hollywood decoder cards. The result is a
blend of performance and affordability that can be key to gaining market share
in the rapidly growing DVD market.
o REALmagic EM8220 DVD/MPEG-2 VGA Add-On Card--In June 1998, the
Company announced the introduction of a daughter card to add to Intel i740-based
2D/3D Video Graphics Array ("VGA") graphics cards to quickly and effectively
deliver high-performance, video-ready multimedia systems.
o REALmagic DVD/MPEG-2 Notebook Module--Designed to connect directly to
the VGA controller through the ZV-bus and to the system bus through the module's
Peripheral Component Interconnect ("PCI") interface, the notebook module gives
notebook users all of the power and impact of DVD performance with their
go-anywhere systems.
o REALmagic EM8800--In October 1998, the Company announced the
REALmagic EM8800 decoder IC, the first single-chip PC solution for China's new
Super Video Compact Disk ("SVCD") standard. Integrating virtually all SVCD
decoding functions on one chip, the EM8800 can turn a PC into a full-featured
home theater video player that fully exploits the improved video quality
supported by the SVCD standard.
Marketing and Sales
Sigma Designs currently distributes its products through sales to
national and regional distributors, value-added resellers (VARs) and OEMs in the
U.S. and throughout the world. The Company's U.S. distributors include Ingram
Micro, Inc. and Tech Data, and its OEMs include Sony, Philips, Panasonic Canada,
IBM Canada, Matsushita, Toshiba, Kapok Computers, Sidus/TigerDirect, Inc., Royal
Computer, ASE Technologies, LungHwa Electronics Co., Ltd., Formosa Industrial
Computing, Labway Corporation and others. The Company's international
distributors are strategically located in many countries around the world.
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<PAGE>
The Company generally acquires and maintains products for distribution
through corporate markets based on forecasts rather than firm purchase orders.
Additionally, the Company generally acquires products for sale to its OEM
customers only after receiving purchase orders from such customers, which
purchase orders are typically cancellable without substantial penalty from such
OEM customers. The Company currently places noncancellable orders to purchase
semiconductor products from its suppliers on a twelve- to sixteen-week lead time
basis. Consequently, if, as a result of inaccurate forecasts or cancelled
purchase orders, anticipated sales and shipments in any quarter do not occur
when expected, expenses and inventory levels could be disproportionately high,
requiring significant working capital and resulting in severe pressure on the
Company's financial condition.
Sales to distributors are typically subject to contractual rights of
inventory rotation and price protection. Regardless of particular contractual
rights, the failure of one or more distributors or OEMs to achieve sustained
sell-through of REALmagic products could result in product returns or collection
problems, contributing to significant fluctuations in the Company's operating
results.
Research and Development
As of September 30, 1998, the Company had a staff of 29 research and
development personnel. The research and development personnel conduct all the
Company's product development. The Company is focusing its development efforts
primarily on MPEG multimedia products, including new and improved versions of
REALmagic MPEG chipsets and cost reduction processes.
To achieve and maintain technological leadership, the Company must
continue to make technological advancements in the areas of MPEG video and audio
compression and decompression. These advancements include maintaining
compatibility with emerging standards and multiple platforms, making
improvements to the REALmagic architecture, and developing enhancements to the
REALmagic Application Programming Interface (API).
There can be no assurance that the Company will be able to make any
such advancements in the REALmagic MPEG technology or, if they are made, that
the Company will be able to market such advancements to maintain profitability
and its technological leadership.
During fiscal 1998, fiscal 1997 and fiscal 1996, the Company's research
and development expenses were $4,948,000, $4,688,000 and $4,499,000,
respectively. The Company plans to continue to devote substantial resources to
research and development of future generations of MPEG and other multimedia
products.
Competition
The market for MPEG multimedia products is highly competitive;
companies such as C-Cube Microsystems have a high profile in the industry.
Although the Company does not believe that any products sold by a third party
are in direct competition with the REALmagic decoding card in terms of price and
performance, the possibility that other companies with more marketing and
financial resources may develop a competitive product may inhibit the wide
acceptance of REALmagic technology. The Company believes that many computer
product manufacturers are developing MPEG products that will compete directly
with REALmagic products in the near future.
The Company believes that the principal competitive factors in the
market for MPEG multimedia hardware products include time to market for new
product introductions, product performance, compatibility with industry
standards, price and marketing and distribution resources. The Company believes
that it
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<PAGE>
competes most favorably with respect to time to market, product performance and
price of its REALmagic products. Moreover, the Company believes that the
acceptance of the REALmagic API as an industry standard for software development
could provide a significant competitive advantage for the Company. However,
there can be no assurance that the REALmagic API will be established as an
industry standard or that the Company's lead time in product introduction will
be sustained.
Licenses, Patents and Trademarks
The Company is seeking patent protection for certain software and
hardware features in current and future versions of REALmagic. The Company
currently has fifteen pending patent applications for its REALmagic technology.
Ten patents have been issued to the Company. There can be no assurance that more
patents will be issued or that such patents, even if issued, will provide
adequate protection for the Company's competitive position. The Company also
attempts to protect its trade secrets and other proprietary information through
agreements with customers, suppliers and employees and other security measures.
Although the Company intends to protect its rights vigorously, there can be no
assurance that these measures will be successful.
Manufacturing
To reduce overhead expenses, along with capital and staffing
requirements, the Company currently uses third-party contract manufacturers to
fulfill all of its manufacturing needs, including chipset manufacture and
board-level assembly. All of the chips used by the Company to develop its
decoding products are manufactured by outside suppliers and foundries. Each of
these suppliers is a sole source of supply to the Company of the respective
chips produced by such supplier.
The Company's reliance on independent suppliers involves several risks,
including the absence of adequate capacity and reduced control over delivery
schedules, manufacturing yields and costs. Any delay or interruption in the
supply of any of the components required for the production of REALmagic
products could have a material adverse impact on the sales of the Company's
products and, thus, on the Company's operating results.
Backlog
Since the Company's customers typically expect quick deliveries, the
Company seeks to ship products within a few weeks of receipt of a purchase
order. However, the customer may reschedule delivery of products or cancel the
purchase order entirely without significant penalty. Historically, the Company's
backlog has not been reflective of future sales. The Company also expects that
in the near term, its backlog will continue to be not indicative of future
sales.
Employees
As of September 30, 1998, the Company had 69 full-time employees,
including 29 in research and development, 16 in marketing, sales and support, 9
in operations, and 15 in finance and administration.
The Company's future success will depend, in part, on its ability to
continue to attract, retain and motivate highly qualified technical, marketing,
engineering and management personnel, who are in great demand. The Company's
employees are not represented by any collective bargaining unit, and the Company
has never experienced a work stoppage. The Company believes that its employee
relations are satisfactory.
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<PAGE>
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Shares
hereunder by the Selling Shareholders.
<TABLE>
SELLING SHAREHOLDERS
The following table sets forth certain information with respect to
beneficial ownership of the Company's Common Stock as of November 16, 1998 by
RGC International Investors LDC and Tsunami Capital, Inc. (the "Selling
Shareholders") as follows: (i) the name of each Selling Shareholder; (ii) the
number of the Company's outstanding shares of Common Stock beneficially owned by
each Selling Shareholder (including shares obtainable under options exercisable
within sixty (60) days of such date) prior to the offering hereby; (iii) the
number of shares of Common Stock being offered hereby; and (iv) the number of
and percentage of the Company's outstanding shares of Common Stock to be
beneficially owned by each Selling Shareholder after completion of the sale of
Common Stock. Except as indicated in the footnotes to this table, the persons
named in the table have sole voting and investment power with respect to all
shares of Common Stock shown as beneficially owned by them, subject to community
property laws where applicable. The Selling Shareholders have not held any
position or office or had a material relationship with the Company or any of its
affiliates within the past three years.
<CAPTION>
Shares Beneficially
Number of Owned After Offering
Shares (1) (2)
Number of Shares Being Offered ---------------------
Beneficially Owned as of
Name Prior to Offering (2) Current Date Number Percent
- ----------------------------------- --------------------- -------------- ----------- ---------
<S> <C> <C> <C> <C>
RGC International Investors, LDC(1) 1,661,130 1,794,872 0 *
Tsunami Capital, Inc. 5,000 0 0 *
<FN>
- ---------------------------
* Represents less than 1%
(1) The number of shares set forth in the table represents an estimate of the
number of shares of Common Stock to be offered by the Selling Stockholders. The
actual number of shares of Common Stock issuable upon conversion of Series B
Preferred Stock and exercise of the Warrants issued to RGC International
Investors, LDC ("RGC") is indeterminate, is subject to adjustment and could be
materially less or more than such estimated number depending on factors which
cannot be predicted by the Company at this time, including, among other factors,
the future market price of the Common Stock. The actual number of shares of
Common Stock offered hereby, and included in the Registration Statement of which
this Prospectus is a part, includes such additional number of shares of Common
Stock as may be issued or issuable upon conversion of the Series B Preferred
Stock and exercise of the Warrants by reason of the floating rate conversion
price mechanism or other adjustment mechanisms described therein, or by reason
of any stock split, stock dividend or similar transaction involving the Common
Stock, in order to prevent dilution, in accordance with Rule 416 under the
Securities Act. Pursuant to the terms of the Series B Preferred Stock, if the
Series B Preferred Stock had been actually converted on March 10, 1998, the
conversion price would have been $3.01 (the average of the six lowest traded
prices of the Common Stock for the 20 trading days immediately preceding such
date) at which price the Series B Preferred Stock would have been converted into
approximately 1,661,130 shares of Common Stock. As of November 23, 1998 the
selling Shareholder had converted 1,500 shares of Series B Preferred Stock. If
the remaining Series B Preferred Stock had been actually converted on November
23, 1998, the conversion price would have been $1.95 (the average of the six
lowest traded prices of the Common Stock for the 20 days trading immediately
preceding such date) at which price the Series B Preferred Stock would have been
converted into approximately 1,794,872 shares of Common Stock. The Warrants are
exercisable into 50,000 shares of Common Stock at an exercise price of $5.16.
Pursuant to the terms of the Series B Preferred Stock and the Warrants, the
shares of Series B Preferred Stock are convertible and the Warrants are
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<PAGE>
exercisable by any holder only to the extent that the number of shares of Common
Stock thereby issuable, together with the number of shares of Common Stock owned
by such holder and its affiliates (but not including shares of Common Stock
underlying unconverted shares of Series B Preferred Stock or unexercised
portions of the Warrants) would not exceed 19.99% of the then outstanding Common
Stock as determined in accordance with Section 13(d) of the Exchange Act unless
approved by the stockholders of the Company or permission is granted pursuant to
Nasdaq Requirement 4460(i). In the event the holders of Series B Preferred Stock
and Warrants convert or exercise, as appropriate, more than 19.99% of the then
outstanding Common Stock and no such approval or permission is obtained by the
Company, the Company shall be required to redeem, out of funds legally available
therefor, all of the then outstanding shares of Series B Preferred Stock at a
premium. In addition, any such shares of Series B Preferred Stock or Warrants
are convertible or exercisable, as appropriate, only to the extent that the
number of shares of Common Stock thereby issuable, together with the number of
shares of Common Stock owned by such holder and its affiliates (but not
including shares of Common Stock underlying any such unconverted or unexercised
shares, as appropriate) would not exceed 4.9% of the then outstanding Common
Stock as determinded in accordance with Section 13(d) of the Exchange Act.
Accordingly, the number of shares of Common Stock set forth in the table for the
Selling Stockholders exceeds the number of shares of Common Stock that the
Selling Stockholders could own beneficially at any given time through its
ownership of the Series B Preferred Stock and the Warrants. In that regard,
beneficial ownership of the Selling Stockholders set forth in the table is not
determined in accordance with Rule 13d-3 under the Exchange Act.
(2) The persons named in the table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws where applicable and the information
contained in the footnotes to this table.
</FN>
</TABLE>
PLAN OF DISTRIBUTION
On February 10, 1998 the Company entered into a Securities Purchase
Agreement dated as of January 30, 1998 with RGC (the "Purchase Agreement"),
pursuant to which RGC purchased 5,000 shares of Series B Preferred Stock that
are convertible into Common Stock of the Company (the "Preferred Stock"). The
Preferred Stock can be converted by RGC into shares of the Company's Common
Stock starting 181 days after its issuance (or sooner under certain
circumstances) at the Conversion Prices described in the Purchase Agreement.
Concurrent with the purchase of the Preferred Stock, that Selling Shareholder
received Warrants to purchase additional Common Stock at an exercise price based
on a premium to the market price on April 30, 1998. This Registration Statement
has been filed by the Company pursuant to the exercise of certain registration
rights granted under the Purchase Agreement. In addition, the Company granted
5,000 shares of Common Stock to Tsunami Capital, Inc. in consideration for its
efforts in assisting with the sale of the Preferred Stock.
The shares of Common Stock may be sold from time to time by the Selling
Shareholders or by pledgees, donees, transferees or other successors in
interest. Such sales may be made in any one or more transactions (which may
involve block transactions) on the Nasdaq Stock Market, or any exchange on which
the Common Stock may then be listed, in the over-the-counter market, in
privately-negotiated transactions, through the writing of options on the shares,
short sales or a combination of such methods of sale, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. The shares of Series B Preferred Stock and
Common Stock may also be sold pursuant to Rule 144. The Selling Shareholders
shall have the sole discretion not to accept any purchase offer or make any sale
of shares if they know the purchase price to be unsatisfactory at any particular
time.
The Selling Shareholders or their respective pledgees, donees, transferees
or other successors in interest, may also sell the shares directly to market
makers acting as principal and/or broker-dealers acting as agents for themselves
or their customers. Brokers acting as agents for the Selling Shareholders will
receive usual and customary commissions for brokerage transactions, and market
makers and block purchasers purchasing the shares will do so for their own
account and at their own risk. It is possible that a Selling Shareholder will
attempt to sell shares of Common Stock in block transactions to market makers or
other purchasers at a price per share which may be below the then market price.
There can be no assurance that all or any of the shares offered hereby will be
issued to, or sold by, the Selling Shareholders. In connection with such sales,
the Selling Shareholders and any participating brokers or dealers may be deemed
to be "underwriters" as defined in the Securities Act. The Company has agreed to
indemnify the Selling Shareholders against certain liabilities, including
liabilities under the Securities Act.
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<PAGE>
LEGAL MATTERS
Certain legal matters relating to validity of the shares of Common Stock
offered hereby will be passed upon for the Company by Wilson Sonsini Goodrich &
Rosati, Professional Corporation, Palo Alto, California.
EXPERTS
The consolidated financial statements and the related financial statement
schedule incorporated in this prospectus by reference from the Company's Annual
Report on Form 10-K for the fiscal year ended January 31, 1998 have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their report, which
is incorporated herein by reference, and have been so incorporated in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
TABLE OF CONTENTS
Page
----
Available Information.........................................................4
Incorporation of Certain Documents by Reference...............................4
Risk Factors..................................................................6
the Company..................................................................13
Use of Proceeds..............................................................18
Selling Shareholders.........................................................18
Plan of Distribution.........................................................19
Legal Matters................................................................20
Experts......................................................................20
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<PAGE>
You should rely on the information contained in this Prospectus. We
have not authorized anyone to provide you with information different from that
contained in this Prospectus. We are offering to sell and seeking offers to buy,
shares of Common Stock only in jurisdictions where offers and sales are
permitted. The information contained in this Prospectus is accurate only as of
the date of this Prospectus, regardless of the time of delivery of this
Prospectus or of any sale of the Common Stock.
In this Prospectus, the "Company," "Sigma," "we," "us," and "our" refer to
Sigma Designs, Inc.
SIGMA DESIGNS, INC.
3,000,000 Shares of
Common Stock
------------ PROSPECTUS ------------
November 25, 1998
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable in connection with the sale of
Common Stock being registered. All amounts are estimates except the Securities
and Exchange Commission registration fee and the Nasdaq Stock Market Listing
Fee.
Securities and Exchange Commission Registration Fee.................. $ 3,074
Nasdaq Stock Market Listing Fee...................................... 17,500
Legal fees and Expenses.............................................. 60,000
Accounting Fees and Expenses......................................... 10,000
Blue Sky Fees and Expenses........................................... 2,500
Transfer Agent and Registrar Fee..................................... 5,000
Miscellaneous........................................................ 1,500
Total.......................................................... 99,574
Item 15. Indemnification of Directors and Officers
Section 317 of the California Corporations Code authorizes a court to
award or a corporation's Board of Directors to grant indemnity to directors and
officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act. Article IV of the Registrant's
Second Restated Articles of Incorporation and Article VI of the Registrant's
Bylaws provide for indemnification of its directors, officers, employees and
other agents to the maximum extent permitted by the California Corporations
Code. In addition, the Registrant has entered into Indemnification Agreements
with its officers and directors.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling the
Registrant pursuant to the foregoing provisions, the Registrant has been
informed that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
Item 16. Exhibits and Financial Statement Schedules
(a) EXHIBITS
4.1 Form of Securities Purchase Agreement by and between Sigma and
the Buyers.*
4.2 Form of Registration Rights Agreement by and between Sigma and
the Initial Investors.*
4.3 Form of Certificate of Determination of Preferences of Series B
Convertible Preferred Stock.*
4.4 Form of Stock Purchase Warrant.*
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation, counsel for the Registrant.
23.1 Independent Auditors' Consent.
23.2 Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation, counsel for the Registrant (included in Exhibit
5.1).
24.1 Power of Attorney. (See page II-4.)*
* Previously filed.
Item 17. Undertakings
Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the
II-1
<PAGE>
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered hereunder, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to include any material
information with respect to the Plan of Distribution not previously disclosed in
the Registration Statement or any material change to such information in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Fremont, State of
California, on the 24th day of November 1998.
SIGMA DESIGNS, INC.
By: /s/ Thinh Q. Tran
----------------------------------------
Thinh Q. Tran Chairman of the Board,
President and Chief Executive Officer
<TABLE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATE INDICATED:
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
Thinh Q. Tran* Chairman of the Board, President and Chief
- ------------------------- Executive Officer (Principal Executive Officer)
Thinh Q. Tran
Kit Tsui* Director of Finance, Chief Financial Officer,
- ------------------------- Secretary (Chief Financial and Accounting Officer)
Kit Tsui
II-3
<PAGE>
William J. Almon* Director
- -------------------------
William J. Almon
William Wang* Director
- -------------------------
William Wang
*By: /s/ Thinh Q. Tran
- -------------------------
Attorney-in-Fact November 24, 1998
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
EXHIBIT NUMBER
- --------------
4.1 Form of Securities Purchase Agreement by and between Sigma and
the Buyers.*
4.2 Form of Registration Rights Agreement by and between Sigma and
the Initial Investors.*
4.3 Form of Certificate of Determination of Preferences of Series B
Convertible Preferred Stock.*
4.4 Form of Stock Purchase Warrant.*
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation, counsel for the Registrant.
23.1 Independent Auditors' Consent.
23.2 Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation, counsel for the Registrant (included in Exhibit
5.1).
24.1 Power of Attorney. (See page II-4.)*
* Previously filed.
II-5
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD JOHN ARNOT WILSON
PALO ALTO, CALIFORNIA 94304-1050 RETIRED
TELEPHONE 650-493-9300 FACSIMILE 650-493-6811
Exhibit 5.1
November 25, 1998
Sigma Designs, Inc.
46501 Landing Parkway
Fremont, CA 94538
RE: SIGMA DESIGNS, INC. REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
We have examined Post-Effective Amendment No. 1 to the Registration
Statement on Form S-3 to be filed by you with the Securities and Exchange
Commission on November 25, 1998 (the "Registration Statement"), in connection
with the registration under the Securities Act of 1933, as amended, of 3,000,000
shares of your Common Stock, no par value (the "Shares"), all of which are
authorized and will be issued to the selling shareholders identified in the
Registration Statement (the "Selling Shareholders"). The Shares are to be
offered by the Selling Shareholders for sale to the public as described in the
Registration Statement. As your counsel in connection with this transaction, we
have examined the proceedings taken and proposed to be taken in connection with
the sale of the Shares.
It is our opinion that, upon completion of the proceedings being taken
or contemplated to be taken prior to the registration of the Shares, including
such proceedings to be carried out in accordance with the securities laws of the
various states, where required, the Shares when sold in the manner referred to
in the Registration Statement, will be legally and validly issued, fully paid
and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement, and further to the use of our name wherever appearing in the
Registration Statement, including the Prospectus constituting a part thereof,
any amendment thereto.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
/s/ WILSON SONSINI GOODRICH & ROSATI
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this
Post-Effective Amendment No. 1 to Registration Statement No. 333-47835 of Sigma
Designs, Inc. on Form S-3 of our report dated February 26, 1998, appearing in
the Annual Report on Form 10-K of Sigma Designs, Inc. for the year ended January
31, 1998 and to the reference to us under the heading "Experts" in the
Prospectus, which is part of this Registration Statement.
DELOITTE & TOUCHE LLP
San Jose, California
November 23, 1998
