UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [Fee Required] For the fiscal year ended
December 31, 1996.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from ________________to_______________
Commission file number: 0-27704
DIGITAL DATA NETWORKS, INC.
(Name of small business issuer in its charter)
Washington 91-1426372
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
3102 Maple Avenue, Suite 230
Dallas, Texas 75201
(Address of principal executive offices) (Zip Code)
(214) 969-7200
(Registrant's telephone number, including area code)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, no par value Common Stock Purchase Warrants
(Title of class) (Title of class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [ X ] No [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ X ]
The issuer's revenues for its most recent fiscal year were $683,000.
The aggregate market value of the voting stock held by non-affiliates of the
issuer on April 30, 1997 was $10,170,072.
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of April 30, 1997, 2,339,597
shares of Common Stock and 1,840,000 Common Stock Purchase Warrants were
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: None.
<PAGE>
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act.
Following is a brief summary of the business background and experience
of the Company's directors:
Donald B. Scott, Jr. has been President and a director of the Company
since March 1993. In July 1996, Mr. Scott was also elected as the Company's
Chairman of the Board. Mr. Scott served as the Company's Acting President from
December 1992 through March 1993. Mr. Scott was previously a principal of
Rutkowski, Erickson, Scott ("RES"), a consulting firm, from 1991 to July 1995.
Prior to his association with RES, Mr. Scott was with Paine Webber in New York
from 1987 to 1991. He has worked on Wall Street in various capacities since
starting at E. F. Hutton in 1979. He has a B.A. degree in communications and
economics from the University of Denver.
James F. Biagi, Jr. has been Secretary and a director of the Company
since its inception in 1988. He is a practicing attorney in Seattle, Washington,
and has been a principal of the law firm Monahan & Biagi since March 1996. Prior
to Monahan & Biagi, Mr. Biagi practiced law at the firm Monahan & Robinson since
1989, where he has specialized in tax, corporate and securities matters. Mr.
Biagi received his B.A. from Boston College, his J.D. from Gonzaga University
and his LL.M. in Taxation from the University of Denver.
Richard F. Rutkowski has been a director and Treasurer of the Company
since January 1995. Since December 1994, Mr. Rutkowski has been the Chief
Executive Officer of Microvision, Inc., a developer of virtual reality
technology, including the virtual retinal display. From October 1994 to December
1994, Mr. Rutkowski served as Microvision's Chief Operating Officer. Between
November 1992 and May 1994, Mr. Rutkowski served as Executive Vice President of
Medialink Technologies Corporation (formerly Lone Wolf Corporation), a developer
of high speed digital networking technology for multimedia applications in
audio-video computing, consumer electronics and telecommunications. Between
February 1990 and April 1995, Mr. Rutkowski was principal of RES.
Stephen R. Willey has been a director of the Company since August 1996.
Mr. Willey has served as Executive Vice President of Microvision, Inc., a
developer of virtual reality technology, since October 1995 and as a director
for Microvision since June 1995. Between January 1994 and April 1996, Mr. Willey
served as an outside consultant to Microvision through DGI, The Development
Group, Inc., a business and technology consulting firm that Mr. Willey founded
in 1982, and CSI Connection Systems, Inc., also a business and technology
consulting firm founded by Mr. Willey. Mr. Willey also co-founded Pro.Net
Communications, Inc., an Internet services company acquired by the Company in
June 1996, and has served as a director of Pro.Net since 1994.
Information regarding the executive officers of the Company is as
follows:
Name Age Position with the Company
- ---- --- -------------------------
Donald B. Scott, Jr. 42 President and Chairman of the Board
James F. Biagi, Jr. 40 Secretary and Director
Richard F. Rutkowski 41 Treasurer and Director
Steven R. Willey 43 Director
Richard J. Boeglin 39 Vice President, Finance and Operations
Chief Financial Officer
Susan E. Hassel 50 Vice President, Sales
<PAGE>
Donald B. Scott, Jr. has been President and a Director of the Company since
March 1993, and was elected Chairman of the Board in July 1996. For additional
information see business background and experience for directors above.
James F. Biagi, Jr. has been Secretary and a Director of the Company since its
inception in 1988. For additional information see business background and
experience for directors above.
Richard F. Rutkowski has been Treasurer and a Director of the Company since
January 1995. For additional information see business background and experience
for directors above.
Steven R. Willey has been a Director of the Company since August 1996. For
additional information see business background and experience for directors
above.
Richard J. Boeglin has been Vice President of Finance and Operations and the
Chief Financial Officer since April 1995. He has been with the Company since
1991. He has eleven years of management experience, including direct management
of transit system design, development and installation. From 1987 to 1991, Mr.
Boeglin worked in the outdoor advertising industry. He has a BS from Indiana
University, where he received a degree in Marketing and Management.
Susan E. Hassel has been Vice President of Sales since she started with the
Company in April 1992. She has fifteen years of sales and marketing experience.
From 1985 until 1991, Ms. Hassel was the Director of Sales and Marketing for The
Relocation Center, a relocation counseling company in Dallas, Texas. Ms. Hassel
has a BS in Education from the University of Cincinnati.
SECTION 16 REQUIREMENTS
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires the Company's directors and officers, and persons who own more
than 10% of a registered class of the Company's equity securities, to file
initial reports of ownership and reports of changes in ownership with the
Securities and Exchange Commission (the "SEC"). Such persons are required by SEC
regulations promulgated pursuant to the Exchange Act to furnish the Company with
copies of all Section 16(a) report forms they file with the SEC.
The Company's registration statement under Section 12 of the Exchange
Act became effective February 13, 1996. Based solely on its review of the copies
of report forms received by it with respect to initial filings from reporting
persons, the Company believes that all filing requirements applicable to its
directors, officers and persons who own more than 10% of a registered class of
the Company's equity securities have been timely complied with in accordance
with Section 16(a) of the Exchange Act.
<PAGE>
Item 10. Executive Compensation.
The following table sets forth certain information regarding cash and non-cash
compensation paid by the Company during each of the Company's last three fiscal
years to the Company's Chief Executive Officer and the other most highly
compensated executive officers of the Company whose annual compensation exceeded
$100,000 (the "Named Persons").
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards
Name and ------------------- Securities
Principal Position Year Salary Bonus Underlying Options
- ------------------ ---- ------ ----- ------------------
<S> <C> <C> <C> <C>
Donald B. Scott, President 1996 $144,000 $74,872 60,000 (1)
1995 120,000 74,558 44,723
1994 17,000 -0- 4,920
Richard J. Boeglin, V.P. 1996 $96,000 $15,650 40,000 (1)
Finance and Operations 1995 66,086 -0- 559
1994 59,161 -0- 12,298
Susan E. Hassel, V.P. Sales 1996 $129,637 -0- 15,000 (2)
1995 114,790 -0- 559
1994 95,982 -0- 11,179
</TABLE>
- ----------------
(1) These options to vest on a pro-rata basis over a 24-month period commencing
July 1, 1996.
(2) These options to vest on a pro-rata basis over a 24-month
period commencing December 1, 1996.
The following table sets forth information with respect to options granted to
the Named Persons during the fiscal year ended December 31, 1996.
Option Grants in Last Fiscal Year
Individual Grants
<TABLE>
<CAPTION>
Number of % of Total Options
Securities Granted to
Underlying Employees in Exercise or Base
Name Options Granted Fiscal Year Price Per Share Expiration Date
---- --------------- ----------- --------------- ---------------
<S> <C> <C> <C> <C>
Donald B. Scott 60,000 44 $5.50 June 30, 2001
President
Richard J. Boeglin 40,000 30 $5.50 June 30, 2001
V.P. Finance and
Operations
Susan E. Hassel 15,000 11 $5.50 November 30, 2001
V.P. Sales
</TABLE>
<PAGE>
The following table sets forth information with respect to options
exercised by the Named Persons during 1996 and the value of unexercised options
held by the Named Persons at the end of fiscal 1996.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of
Securities
Underlying Value of
Unexercised Unexercised
Options at In-the-Money
Fiscal Options
Shares Acquired Value Year-End At Fiscal Year-End
Name on Exercise Realized Exercisable Exercisable (1)
---- ----------- -------- ----------- ---------------
<S> <C> <C> <C> <C>
Donald B. Scott 0 0 178,769 $ 283,765
President
Richard J. Boeglin 0 0 53,975 $ 0
V.P. Finance and
Operations
Susan E. Hassel 0 0 27,856 $ 0
V.P. Sales
</TABLE>
(1) The value of unexercised options is based on the market value of the
Company's Common Stock on April 30, 1997, of $4.50 per share.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of April 30, 1997, by (i)
each person or entity who beneficially owns 5% or more of the Common Stock, (ii)
each director, (iii) the Chief Executive Officer and the next four highest
compensated officers whose compensation exceeds $100,000, and (iv) all officers
and directors of the Company as a group. Unless otherwise noted, the persons and
entities named below have sole voting and investment power with respect to such
shares.
<TABLE>
<CAPTION>
Name of Total Beneficial Ownership Percent of Class Beneficially
Beneficial Owner (including options) Owned as of April 30, 1997
- ---------------- ------------------- --------------------------
<S> <C> <C>
Donald B. Scott, Jr., Chairman and
President 189,412 (1) 8.1%
James F. Biagi, Jr., Secretary 95,019 (2) 4.1%
Richard F. Rutkowski, Treasurer 53,797 (3) 2.3%
Stephen R. Willey, Director 78,500 (4) 3.4%
Richard J. Boeglin, V.P. Finance and 55,653 (5) 2.4%
Operations
Susan E. Hassel, V.P. Sales 28,975 (6) 1.2%
All Executive Officers and Directors 501,356 (7) 21.4%
as a group (6 persons)
</TABLE>
- -----------------------
(1) Includes options to purchase 178,769 shares.
(2) Includes options to purchase 79,133 shares.
(3) Includes options to purchase 42,042 shares.
(4) Includes options to purchase 40,000 shares.
(5) Includes options to purchase 53,975 shares.
(6) Includes options to purchase 27,856 shares.
(7) Includes options to purchase 421,775 shares.
<PAGE>
Item 12. Certain Relationships and Related Transactions.
In consideration of Donald B. Scott's loan of $44,000 to the Company in
1992, the Company granted Mr. Scott an option to purchase 4,920 shares of Common
Stock at $8.94 per share in 1994. During 1994, the Company canceled outstanding
options held by Mr. Scott and reissued to him new options to purchase 67,084
shares at $0.27 per share until December 12, 2002. See "Management - Executive
Compensation." During 1994, the Company advanced to Mr. Scott $59,000, which was
an unsecured non-interest bearing receivable. During 1995, the receivable was
repaid in consideration for compensation earned during 1995.
Paul Miller and Henry Appleton are principals of Sunrise Systems, the
Company's principal electronic equipment supplier and systems integrator.
Additionally, one of them may be nominated to serve on the Company's board of
directors pursuant to their agreement with the Company. They work closely with
the Company to obtain system components and manufacturing resources plus design
product enhancements. The Company licenses its software from, and has an
exclusive hardware purchase agreement with, Sunrise Systems. The Company granted
options to purchase shares of its Common Stock to Sunrise Systems in February
1993 in connection with the execution of the Hardware and Software Agreements.
Such options were subsequently modified in December 1993 and December 1994 as
partial consideration for extending the Hardware and Software Agreements. As a
result of the original grant and modifications, Sunrise Systems holds options
which expire in 2003, to purchase Common Stock of the Company as follows:
Shares Price/Share
------ -----------
18,448 $0.09
5,590 $0.89
36,388 $9.93
In December 1994, Bruce S. Glant, a former director of the Company
filed a lawsuit against the Company for payment of a demand note in the
principal amount of approximately $53,000 plus interest. Pursuant to a
Settlement Agreement dated as of April 21, 1995, the Company agreed to pay Mr.
Glant $5,000 upon execution of the Settlement Agreement and $2,000 per month
thereafter until the note was paid in full. The Company also granted to Mr.
Glant (i) the right to implement the digital information network technology in
the greater Seattle, Washington market, and (ii) warrants to purchase 11,181
shares at $8.94 per share for five years. Mr. Glant directed 1,118 of such
warrants to be issued to each of the two managers in the Company's Dallas
office. The Company paid the outstanding balance of $37,757 upon conclusion of
its public offering in February 1996.
In January 1995, James F. Biagi, Jr., Secretary and a director, Ronald
P. Erickson, a former director, and Richard F. Rutkowski, a director, exchanged
$119,829 of outstanding 5% promissory notes of the Company with accrued interest
for 8,933 shares of Common Stock at $13.42 per share. In November 1995, Mr.
Biagi exchanged $19,095 of a 5% demand note with accrued interest for 4,774
shares at $4.00 per share.
In June 1996, in consideration for acquiring all of the outstanding
capital stock of Pro.Net Communications, Inc., the Company issued 100,000 shares
of the Company's Common Stock to shareholders of Pro.Net Communications, Inc.,
including 28,500 shares to Stephen R. Willey, who was elected a director of the
Company in August, 1996 to fill the vacancy created by the resignation of Ronald
P. Erickson, former chairman of the board of directors. Mr. Willey received an
additional 10,000 shares of the Company's Common Stock in June 1996 for entering
into a two-year consulting agreement with the Company.
In June 1996, in consideration for acquiring all of the outstanding
capital stock of Cyber America Corporation, the Company issued 23,500 shares of
the Company's Common Stock to Simon D. Liebman and Joseph S. Rutkowski, and
2,500 shares of the Company's Common Stock to Richard S. Rutkowski, Cyber
America's three principal shareholders. Richard F. Rutkowski, the Company's
treasurer and a director, is the brother of Joseph S. Rutkowski and son of
Richard S. Rutkowski.
<PAGE>
The Company believes that the foregoing transactions with its officers
and directors were on terms no less favorable than could have been obtained from
independent third parties. All future transactions with such persons will also
be on terms no less favorable than could be obtained from independent third
parties and will be approved by a majority of the independent, disinterested
directors.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
DIGITAL DATA NETWORKS, INC.
(Registrant)
By: /s/ Donald B. Scott, Jr.
-------------------------
Donald B. Scott, Jr., Chairman of the Board
(Principal Executive Officer)
Date: May 21, 1997
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signatures Capacity Date
- ---------- -------- ----
<S> <C> <C>
/s/ Donald B. Scott, Jr. Chairman of the Board, President May 21, 1997
Donald B. Scott, Jr. Director, (Principal Executive
Officer)
/s/ James F. Biagi, Jr. Secretary and Director May 21, 1997
- ------------------------
James F. Biagi, Jr.
/s/ Richard F. Rutkowski Treasurer and Director May 21, 1997
- -------------------------
Richard F. Rutkowski
/s/ Stephen R. Willey Director May 21, 1997
- ----------------------
Stephen R. Willey
/s/ Richard J. Boeglin Vice President, May 21, 1997
- ----------------------- Finance and Operations
Richard J. Boeglin (Principal Financial and
Accounting Officer)
</TABLE>
<PAGE>
