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Palo
Alto, CA., August 18, 2003
Digital
Video Systems, Inc. (Nasdaq: DVID), a leading manufacturer of DVD
loaders and other DVD-based products, today reported its operating
results for the second quarter ended June 30, 2003.
Digital Video Systems, Inc. posted consolidated net revenues of
$23,244,000 for the quarter ended June 30, 2003 compared to $42,559,000
for the quarter ended June 30, 2002.
Consolidated net loss for the quarter ended June 30, 2003 was $909,000
or $0.13 basic and diluted net loss per share, compared to consolidated
net income of $715,000 or $0.12 basic and diluted net income per
share for the quarter ended June 30, 2002.
For the six months ended June 30, 2003, the Company posted consolidated
net revenues of $50,926,000 compared to $65,426,000 for the six
months ended June 30, 2002. The consolidated net loss for the six
months ended June 30, 2003 was $2,898,000 or $0.43 basic and diluted
net loss per share, compared to consolidated net losses of $2,798,000
or $0.48 basic and diluted net loss per share for the six months
ended June 30, 2002.
Although the Company is engaged in development of potential WiFi
products and has recently initiated business activities in India,
the Companyís reported financial results are primarily influenced
by the operations of its 51% owned subsidiary, DVS Korea. Management
of DVS Korea believes that the results for the quarter reflect a
migration of its product offerings from low-margin loader products
to a product mix that currently offers higher margins, but lower
revenues. Several of the Companyís long-term customers who
traditionally sourced lower-margin commodity items from DVS have
transitioned to now procuring higher-margin key proprietary mechanisms
and/or electronic components from the Company, resulting in more
favorable margin rates. Management of DVS Korea also believes that
new market segments are also being penetrated, such as Home Theater
System providers, where proprietary loader technologies offer operational
advantages with resulting higher margins.
As disclosed in more detail in the Form 10Q, the Companyís
consolidated expenditure on R&D for the six months ended June
30th, 2003, was $2, 669, 000, reflecting an increase of approximately
$1 million over the $1,687,000 expended on R&D during the same
period in 2002. The Company will seek to sustain its commitment
to R&D, as the Company and its subsidiaries focus their resources
on new product opportunities. With its partners, the Company is
working towards the development of products such as Wi-Fi based
terminals, PDA software and smart phone applications, which will
implement H.264, a new video compression standard.
The Company believes that the adoption of MPEG 4 AVC Part 10 (a
companion video compression standard) in the marketplace will also
create opportunities for DVS Korea and DVS India in the DVD player
and loader business.
Concurrent with these developments, management of the Company is
committed to monitoring its overhead structure and reducing it where
possible, as reflected by the relocation during the Quarter to lower
cost office space. The Company would also like to increase its oversight
of the management of DVS Korea, as feasible, consistent with its
participation on the Board of Directors of DVS Korea. Based on statements
made by management of DVS Korea, the Company believes that a return
to profitability is possible in the fourth quarter of this year
following the anticipated introduction of new products by DVS Korea
in October.
Shortly
following the end of the Quarter, the Company announced that it
is initiating business activities in India. The Company does not
anticipate that DVS India will materially impact the overall results
of the Company until the last Quarter of 2003 or later. The Companyís
Management is excited about the opportunities presented by the expansion
into India and believes that it is a logical extension of the existing
operations in Korea and China. The Company would like to maintain
sole control over its Indian subsidiary and does not anticipate
reducing ownership to below 80%, if at all.
About DVS
Established in 1992, DVS is a publicly held company specializing
in the development and application of digital video technologies
enabling the convergence of data, digital audio, digital video and
high-end graphics. DVS is headquartered in Palo Alto, California,
with subsidiaries and branch offices in South Korea and China. DVS
is a world leader in the manufacture of DVD loaders, the key component
in todayís DVD players. The company's present strategy is
to remain a leading solutions provider at the forefront of the DVD
industry. DVS is currently committed to an aggressive R&D product
diversification program to develop a variety of higher margin DVD
products including DVD loaders for the automotive market and DVD+R/RW
recordables.
Safe
Harbor Statement under the Private Securities Litigation Reform
Act of 1995
Any statements made in this release that are not historical facts
contain forward-looking information that involves risks and uncertainties.
These forward-looking statements include, but are not limited to,
statements regarding future profitability, gross margin rates, the
development of DVD players for the automotive market and rewriteable
DVD drives for the computing and audio markets, the timing of the
introduction of new products, business activities proposed for India
and development of potential new products such as those based WiFi
technology. Important factors that may cause actual results to differ
include, but are not limited to, the timely availability of components,
sufficiency of working capital, the impact of competitive products
and services, the Companyís ability to manage growth and
acquisitions of technology or business, the effect of economic and
business conditions, and other risks detailed from time to time
in the companyís filings with the Securities and Exchange
Commission. Digital Video Systems, Inc. assumes no obligation to
update these forward-looking statements, and does not intend to
do so.
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Digital
Video Systems, Inc.
Condensed Consolidated Statements of Operations *
(In Thousands, except Per Share Amounts)
(Unaudited) |
Three
Months Ended
June 30 |
Three
Months
Ended
June 30 |
|
| |
2003 |
2002 |
2003 |
2002 |
| Net
revenue |
$
23,244 |
$
42,559
|
$
50,926
|
$
65,426 |
| Cost
of revenue |
20,304
|
36,840
|
47,364 |
59,574 |
| Gross
margin |
2,940 |
5,719 |
3,562 |
5,852 |
| Operating
expenses: |
|
|
|
|
| Research
and development |
1,356
|
784
|
2,669 |
1,687 |
| Sales
and marketing |
762 |
489 |
1,562 |
1,122 |
| General
and administrative |
1,465 |
1,661 |
3,489 |
3,407 |
| Total
operating expenses |
3,583 |
2,934 |
7,720 |
6,216 |
| (Loss)
income from operations |
(643) |
2,785 |
(4,158) |
(364) |
| Interest
(expense) income, net |
(291) |
(288) |
(543) |
(764) |
| Other
(expense) income |
(312) |
(997) |
587 |
(1,526) |
| (Loss)
income before minority interest and income taxes |
(1,246)
|
1500 |
(4,114)
|
(2,654) |
| Income
tax benefit |
(2) |
(52) |
(2) |
(52) |
| Minority
interest |
339 |
(733) |
1218 |
(92) |
| Net
(loss) income |
$
(909)
|
$
715 |
$
(2,898) |
$
(2,798) |
| Net
(loss) income per share basic and diluted |
$
(0.13) |
$
0.12 |
$
(0.43) |
$
(0.48) |
| Weighted
average common shares and equivalent outstanding |
6,832 |
5,910 |
6,726 |
5,889 |
*
Selected quarterly financial information. The information contained
herein does not include the full unaudited quarterly financial information.
Please see the Company's report on Form 10Q for the quarter ended
June 30, 2003 for the unaudited financial information and notes
thereto.
Digital
Video Systems, Inc.
Condensed Consolidated Balance Sheet*
(In Thousands) |
| June
30, 2003 |
December
31, 2003 |
|
ASSETS:
Current assets: |
|
|
| Cash
and cash equivalents |
$ 12,007 |
$ 12,330 |
| Restricted
cash |
6,391 |
5,908 |
| Accounts
receivable, net |
7,622 |
10,749 |
| Inventories |
22,224 |
25,758 |
| Marketable
debt securities |
419 |
427 |
| Prepaid
expenses and other current assets |
3,231 |
3,402 |
| Notes
receivable related party |
884 |
884 |
| Total
current assets |
52,778 |
59,458 |
| Property
and equipment, net |
12,098 |
11,067 |
| Intangibles |
461 |
587 |
| Other
assets |
393 |
315 |
| Total
assets |
$ 65,730 |
$ 71,427 |
LIABILITIES
AND STOCKHOLDERS EQUITY:
Current Liabilities: |
| Line
of credit |
$ 26,533 |
$ 26,086 |
| Current
portion of long term debt |
191 |
192 |
| Notes
payable |
4,482 |
4,223 |
| Accounts
payable |
10,886 |
13,592 |
| Accounts
payable related party |
515 |
434 |
| Accrued
liabilities |
2,406 |
3,325 |
| Other
payable |
136 |
234 |
| Total
current liabilities |
45,149 |
48,086 |
| Long
term liabilities: |
| Long
term liabilities - long term debt |
ó
|
968 |
| Total
liabilities |
45,149 |
48,182 |
| Minority
interest |
12,261 |
13,434 |
Stockholders
equity:
Preferred stock |
0 |
0 |
| Common
stock |
1 |
1 |
| Additional
paid-in capital |
74,684 |
73,334 |
| Accumulated
other comprehensive loss |
1,505 |
1,457 |
| Deferred
compensation |
(11) |
(20) |
| Accumulated
deficit |
(67,859) |
(64,961) |
| Total
stockholders equity |
8,320 |
9,811 |
| Total
liabilities and stockholders equity |
$ 65,730 |
$ 71,427 |
*
Selected quarterly financial information. The information contained
herein does not include the full unaudited quarterly financial information.
Please see the Companyís report on Form 10Q for the quarter
ended June 30, 2003 for the unaudited financial information and
notes thereto.
For
additional information please contact:
Digital Video Systems, Inc.
430 Cambridge Ave., Suite 110,
Palo Alto, CA 94306
Tel: 650.322.8108
Fax:650.322.8109
CCG
Investor Relations
15300 Ventura Blvd. Suite 303,
Sherman Oaks, CA 91403
Tel: 818.789.0100
Fax: 818.789.1152
DVS
Contact:
Larissa Licea
Office: 650.322.8108 X106
Cell: 408-712-4165
E-Mail:
ir@dvsystems.com
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