As filed with the Securities and Exchange Commission on December 11, 1998
Registration No. 333-48023
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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)
---------------------------
THINH Q. TRAN
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
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. [_]
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<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
===================================================================================================================================
Title of Each Class Amount Proposed Maximum Proposed Maximum Amount of
of Securities to to be Offering Price Aggregate Offering Registration
be Registered Registered Per Share(2) Price(2) Fee
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<S> <C> <C> <C> <C>
Common Stock, no par value........... 900,000 shares $2.88 $2,592,000 $720.58
===================================================================================================================================
<FN>
(1) Includes shares of Common Stock which may be offered pursuant to this
Registration Statement consisting of 900,000 shares issuable upon
conversion of 15,000 shares of Series A Convertible Preferred Stock of
the Company and issuable upon exercise of warrants issued in connection
with the issuance of the Series A 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 A 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 December 7,
1998, in accordance with Rule 457(c) under the Securities Act of 1933.
A registration fee of $817 was paid by the Company in connection with
the initial filing of Registration Statement No. 333-48023 on March 16,
1998.
</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.
================================================================================
<PAGE>
PROSPECTUS
900,000 SHARES
SIGMA DESIGNS, INC.
COMMON STOCK
This Prospectus may be used only in connection with the resale, from
time to time, of up to 900,000 shares of Common Stock of Sigma Designs, Inc.
("Sigma" or the "Company"), by KA Investments LDC. All of the shares covered by
this Prospectus are to be sold by KA Investments LDC. KA Investments LDC will
receive the shares upon conversion of our Series A Preferred Stock and exercise
of warrants. KA Investments LDC purchased the shares of Series A Preferred Stock
and Warrants from an entity who originally purchased such shares and warrants
directly from us 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 KA Investments LDC, 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 privately-negotiated
transactions, broker-dealer transactions, exchange transactions, short sales, or
other methods. Sales may be made at market prices or negotiated prices. KA
Investments LDC will pay for any commission expenses and brokerage fees.
Our Common Stock is traded on the Nasdaq Stock Market under the symbol
"SIGM." On December 7, 1998, the last sale price for our Common Stock as
reported on the Nasdaq Stock Market was $2.88 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 December 11, 1998
<PAGE>
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.
<PAGE>
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.
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, 1998 and during
1999 and had substantial negative cash flow in fiscal 1995, 1996, 1997, 1998 and
during 1999. 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
<PAGE>
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 a
Silicon Valley Bank. Under this Agreement and the Notes, we are subject to a
certain profitability covenant. Since July, 1997, we have, on occasion, been in
violation of the profitability covenant and have obtained waivers releasing us
from our obligation to meet this covenant. We were granted such a waiver for the
quarter ended 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 this covenant, and if we do not obtain
another waiver, the loans may be in default. If we are in default, then the
lender could accelerate payments on the Notes and we 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.
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.
<PAGE>
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 affect 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 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
<PAGE>
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 six months ended July 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 occur when expected, our inventory levels could
be disproportionately high. This could require significant working capital, and
negatively affect our operating results.
<PAGE>
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.
Limited Intellectual Property Protection; Patents and Pending Patent
Applications; Litigious Sector
<PAGE>
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.
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;
<PAGE>
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 from Conversion of Series B Preferred Stock
Series B Preferred Stock. As of December 7, 1998, 2,250 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 December 7, 1998, the Conversion Price would
have been $2.06.
Based on this formula, if the remaining outstanding Series B Preferred
Stock was converted on December 7, 1998, it would have been convertible into
approximately 1,092,233 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 December 7, 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.
As of December 7, 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
<PAGE>
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.
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 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.
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.
<PAGE>
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.
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.
<PAGE>
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.
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
<PAGE>
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 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.
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.
<PAGE>
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 November 30, 1998, the Company had a staff of 31 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 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.
<PAGE>
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.
As of November 30, 1998, the Company had 71 full-time employees,
including 31 in research and development, 15 in marketing, sales and support, 10
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.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of shares
hereunder by KA Investments LDC.
<PAGE>
SELLING SHAREHOLDER
On March 11, 1998, the Company, Banque Edouard Constant SA ("BEC"), and
KA Investments LDC entered into an Assignment and Assumption Agreement under
which KA Investments LDC purchased from BEC 15,000 shares of Series A Preferred
Stock convertible into shares of Common Stock and a Warrant exercisable for
21,428 shares of Common Stock (the "Warrant"). The Company and BEC had
previously entered into a Series A Preferred Stock Private Securities
Subscription Agreement dated as of June 25, 1997, under which BEC purchased a
warrant exercisable for 57,142 shares of Common Stock beginning April 30, 1998,
and 40,000 shares of Series A Preferred Stock. The Series A Preferred Stock and
Warrant now held by KA Investments LDC is subject to the terms of the June 25,
1997 Series A Preferred Stock Private Securities Subscription Agreement, a
Certificate of Determination of Preferences filed in connection with the initial
issuance of the Series A Preferred Stock, and a Registration Rights Agreement.
In accordance with the Assignment and Assumption Agreement, KA
Investments LDC obtained certain registration rights relating to the shares of
Series A Preferred Stock and the Warrant under the Registration Rights
Agreement. This Registration Statement has been filed by the Company with the
Securities and Exchange Commission pursuant to the terms of the Assignment and
Assumption Agreement.
<TABLE>
The following table sets forth certain information with respect to
beneficial ownership of the Company's Common Stock as of December 7, 1998 by KA
Investments LDC as follows: (i) the name of the Selling Shareholder; (ii) the
number of the Company's outstanding shares of Common Stock beneficially owned by
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 such Selling Shareholder after completion of the sale of
Common Stock. Except as indicated in the footnotes to this table, the person
named in the table has sole voting and investment power with respect to all
shares of Common Stock shown as beneficially owned by it, subject to community
property laws where applicable. The Selling Shareholder has 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>
Number of Shares of Common Stock
----------------------------------------------------------------------------
Beneficially
Owned After Offering(1)
Beneficially Being Offered -----------------------------
Name and Address Owned Prior to Offering(1) hereby Number Percent
- ------------------------------------- ----------------------------- ----------------------------------------------
<S> <C> <C> <C> <C>
KA Investments LDC 402,254 (2) 100,000 0(3)(4) 0(3)(4)
c/o Tarmachan Capital Management
1712 Hopkins Crossroads
Minnetonka, Minnesota 55305
<PAGE>
<FN>
- ---------------------------
(1) The number and percentage of shares beneficially owned is determined under
rules of the Securities and Exchange Commission, and the information is not
necessarily indicative of beneficial ownership for any other purpose. Under
such rules, beneficial ownership includes any shares as to which the
individual has sole or shared voting power or investment power and also any
shares which the individual has the potential right to acquire within sixty
(60) days of the Offering through the conversion of the shares of Series A
Preferred Stock or the exercise of warrants.
(2) Includes the number of shares of Common Stock (i) issued upon conversion of
shares of Series A Preferred Stock and (ii) issuable upon exercise of the
Warrant to purchase 21,428 shares of Common Stock. Also includes an
indeterminate number of shares of Common Stock that may become issuable to
prevent dilution resulting from stock splits, stock dividends and
Conversion Price or exercise price adjustments, which are included pursuant
to Rule 416 under the Securities Act of 1933, as amended.
(3) Assumes sale of all shares of Common Stock offered hereby.
(4) Includes shares of Common Stock to be sold outside of this Prospectus.
</FN>
</TABLE>
<PAGE>
PLAN OF DISTRIBUTION
KA Investments LDC may, from time to time, sell all or a portion of the
shares on the Nasdaq Stock Market in privately negotiated transactions or
otherwise, at fixed prices that may be changed, at market prices prevailing at
the time of sale, at prices related to such market prices or at negotiated
prices. The shares may be sold by KA Investments LDC by one or more of the
following methods, without limitation:
(a) block trades in which the broker or dealer so engaged will attempt to sell
the shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction, (b) purchases by a broker or dealer as
principal and resale by such broker or dealer for its account pursuant to this
Prospectus, (c) an exchange distribution in accordance with the rules of such
exchange, (d) ordinary brokerage transactions and transactions in which the
broker solicits purchasers, (e) privately negotiated transactions, (f) short
sales, and (g) a combination of any such methods of sale. In effecting sales,
brokers and dealers engaged by KA Investments LDC may arrange for other brokers
or dealers to participate. Brokers or dealers may receive commissions or
discounts from KA Investments LDC (or, if any such broker-dealer acts as agent
for the purchaser of such shares, from such purchaser) in amounts to be
negotiated which are not expected to exceed those customary in the types of
transactions involved. Broker-dealers may agree with the KA Investments LDC to
sell a specified number of such shares at a stipulated price per share, and, to
the extent such broker-dealer is unable to do so acting as agent for a KA
Investments LDC, to purchase as principal any unsold shares at the price
required to fulfill the broker-dealer commitment to KA Investments LDC.
Broker-dealers who acquire shares as principal may thereafter resell such shares
from time to time in transactions (which may involve block transactions and
sales to and through other broker-dealers, including transactions of the nature
described above) in the over-the-counter market or otherwise at prices and on
terms then prevailing at the time of sale, at prices then related to the
then-current market price or in negotiated transactions and, in connection with
such resales, may pay to or receive from the purchasers of such shares
commissions as described above. KA Investments LDC may also sell the shares in
accordance with Rule 144 under the Securities Act, rather than pursuant to this
Prospectus.
KA Investments LDC and any broker-dealers or agents that participate
with KA Investments LDC in sales of the shares may be deemed to be
"underwriters" withing the meaning of the Securities Act in connection with such
sales. In such event, any commissions received by such broker-dealers or agents
and any profit on the resale of the shares purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
From time to time KA Investments LDC may engage in short sales, short
sales against the box, puts and calls and other transactions in securities of
the Company or derivatives thereof, and may sell and deliver the shares in
connection therewith or in settlement of securities loans. If KA Investments LDC
engages in such transaction, the Conversion Price may be affected. From time to
time KA Investments LDC may pledge its shares pursuant to the margin provisions
of its customer agreements with its brokers. Upon a default by KA Investments
LDC, the broker may offer and sell the pledged shares from time to time.
The Company is required to pay all fees and expenses incident to the
registration of the shares, including one half of any fees and disbursements
(which half is not to exceed an aggregate of $5,000) of counsel to KA
Investments LDC. The Company has agreed to indemnify KA Investments LDC against
certain losses, claims, damages and liabilities, including liabilities under the
Securities Act.
<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.
<PAGE>
TABLE OF CONTENTS
Page
Available Information..........................................................2
Incorporation of Certain Documents by Reference................................3
Risk Factors...................................................................3
The Company...................................................................10
Use of Proceeds...............................................................15
Selling Shareholder...........................................................16
Plan of Distribution..........................................................18
Legal Matters.................................................................19
Experts.......................................................................19
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.
<PAGE>
900,000 Shares
SIGMA DESIGNS, INC.
Common Stock
------------
PROSPECTUS
------------
December 11, 1998
<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......................$ 817
Nasdaq National 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 Fees........................................ 5,000
Miscellaneous............................................................ 1,500
Total...........................................................$97,317
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)
<PAGE>
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 o 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 Subscription Agreement by and between the
Company and the initial purchasers of the Series A
Preferred Stock and warrants.
4.2* Form of Registration Rights Agreement by and between
the Company and the initial purchasers of the Series A
Preferred Stock and warrants.
4.3** Assignment and Assumption Agreement by and among the
Company, BEC and KA Investments LDC.
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.
* Incorporated by reference to Registration Statement No. 333-33147 (filed
August 7, 1997).
** Previously filed.
- ---------------------------
Schedules not listed above have been omitted because they are not
applicable or are not required or the information required to be set forth
therein is included in the consolidated financial statements or notes thereto.
II-2
<PAGE>
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 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 ability 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-3
<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 11th day of December 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>
/s/ Thinh Q. Tran Chairman of the Board, President and Chief December 11, 1998
- -------------------------------------- Executive Officer (Principal Executive Officer)
Thinh Q. Tran
Kit Tsui* Director of Finance, Chief Financial Officer, December 11, 1998
- -------------------------------------- Secretary (Chief Financial and Accounting Officer)
Kit Tsui
William J. Almon* Director December 11, 1998
- --------------------------------------
William J. Almon
William Wang* Director December 11, 1998
- --------------------------------------
William Wang
*By: /s/ Thinh Q. Tran December 11, 1998
- --------------------------------------
Attorney-in-Fact
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
EXHIBIT NUMBER
- --------------
4.1* Form of Subscription Agreement by and between the Company
and the initial purchasers of the Series A Preferred
Stock and warrants.
4.2* Form of Registration Rights Agreement by and between the
Company and the initial purchasers of the Series A
Preferred Stock and warrants.
4.3** Assignment and Assumption Agreement by and among the
Company, BEC and KA Investments LDC.
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).
* Incorporated by reference to Registration Statement No. 333-33147 (filed
August 7, 1997).
** Previously filed.
II-5
Exhibit 5.1
December 10, 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 December 10, 1998 (the "Registration Statement"), in connection
with the registration under the Securities Act of 1933, as amended, of 900,000
shares of your Common Stock, no par value (the "Shares"), all of which are
authorized and will be issued to the selling shareholder identified in the
Registration Statement (the "Selling Shareholder"). The Shares are to be offered
by the Selling Shareholder 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,
/s/ Wilson Sonsini Goodrich & Rosati
------------------------------------
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-Effective
Amendment No. 1 to Registration Statement 333-48023 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
December 9, 1998
