TRADEMARK COUNTRIES STATUS
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DHT and DIGITAL HOME U.S.A., Europe, Japan, Korea,
THEATER Taiwan, India, China, Canada Mexico,
Brazil, Chile, Peru and Argentina Pending
COMPUTER THEATER U.S.A Pending
KANGAROO U.S.A. Pending
CHT U.S.A., and Taiwan Pending
COMPUTER HOME THEATER U.S.A., and Taiwan Pending
Generally, pending trademark applications significantly inhibit the
ability of a third party to obtain registration for identical or similar marks
to those of the Company's during the pendency of application. However, the
specific trademark laws in each of the countries vary.
The Company also registered the trademark PROJECTAVISION in Japan on
October 31, 1995. Intent-to-Use applications for this mark have also been filed
in European Countries, Korea, Taiwan, India, China, Canada, Mexico, Chile, Peru,
Argentina and Brazil. In addition to the trademark PROJECTAVISION, the Company
has applied for registration of several Intend-to-Use trademark applications
various countries.
On April 7, 1995, Eugene Dolgoff, a founder of the Company and its former
Chief Scientist, filed suit against the Company alleging, among other things,
certain ownership rights with respect to the Company's technologies. See Item 3
"Legal Proceedings."
9
Competition
Projectavision's DHT is currently the only product that addresses simultaneously
the front projection, rear projection television, and computer monitor markets.
As a result, there are no direct competitors to the DHT. However, the Company
faces competition from a variety of companies in each of the distinct markets
targeted by the DHT. The following table summarizes the position of the Company
vis-a-vis its competitors in the industry.
Table 1
Competitive Product Platform
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Rear Rear Front Front Front
Projection Projection Projection Projection Projection
VIDEO VIDEO/DATA VIDEO DATA VIDEO/DATA
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Projectavision X X X X X
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Vidikron X X X
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Sony X X X X
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RCA X
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Zenith X X
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Mitsubishi X X
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Sharp X X
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JVC X X
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Nview X
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InFocus X
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Proxima X
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Electrohome X X
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Runco X X
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Davis X X
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Barco X X
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Source: Projectavision, Inc.
Front Projection
The front projection market is dominated by LCD-based products. Over the last
few years, the number of LCD projector companies has risen dramatically. Many
large electronics firms with LCD manufacturing experience and large consumer
electronics and office products divisions decided that the LCD projector market
offered attractive opportunities. Sharp Corporation was the leader in LCD
projection, introducing LCD-based front projectors in 1989. Toshiba Corp.
entered the U.S. market in 1996. In addition, companies such as Sony Corporation
("Sony"), Panasonic Broadcast and Television Systems Co. and Philips Consumer
Electronic Company ("Philips") have revamped their small LCD projector product
lines and sales efforts to become major players. The total number of companies
offering LCD front projectors under their own brand name increased from 10 in
1992 to 34 in 1996.
Table 2
LCD Front Projection Market
1996 U.S. Market Share
(Based on Unit Sales)
Rank Company Share
---- ----------------------- ---------
1 Sharp Corporation 15% - 25%
2 In Focus Systems 15% - 25%
3 Proxima Corp. 10% - 20%
4 Epson America 4% - 8%
5 nView Corp. 4% - 8%
6 Sanyo Electric Co., Ltd. 4% - 8%
7 NEC Corporation 4% - 8%
8 Polaroid Corp. 4% - 8%
9 Eiki International, Inc. 2% - 4%
10 3M Visual Systems Division 2% - 4%
All others less than 2% each
Source: Stanford Resources, Inc., Projection Displays, 1996.
10
Major suppliers of CRT-based front video projectors include Sony, Zenith
Electronics Corporation, Runco International ("Runco") and Barco, Inc.
("Barco"). Sony, NEC and Barco are the leaders in the data category, and
Vidikron, Electrohome, Ltd., Sony, Barco and NEC are strongly positioned in the
high-resolution front CRT projector market.
Projection Television (Rear Projection)
CRT-based products dominate the rear projection television market. Chip-based
systems, like Projectavision's DHT, were introduced in 1997.
Table 3
Rear Projection Television Market
1996 U.S. Market Share
(Based on Unit Sales)
Rank Brand Name Share
---- -------------- -----
1 RCA-Pro Scan 14%
2 Mitsubishi 13%
3 Magnavox 11%
4 Hitachi 11%
5 Sony 10%
6 Pioneer 10%
7 Zenith 8%
8 Toshiba 6%
9 Sears LXI 3%
10 GE 2%
All others 12%
Source: Stanford Resources, Inc., Projection Displays, 1996.
DMD/DLP Licensees
A number of companies, in addition to Projectavision, have licensed Texas
Instruments' DLP technology. Projection companies marketing DLP-based desktop
projectors include nView Corp., In Focus Systems, Inc., Proxima Corp., ASK AS,
Davis A/S and Liesegang. Companies addressing the home theater market include
Runco and Vidikron Industries, however, only Projectavision currently has a
chip-based rear projection television on the market. Digital Projection Ltd. (a
Rank Brimar division), Electrohome Ltd. and Sony have all introduced
high-brightness models and a number of other companies, including Philips, are
evaluating the technology for a variety of products.
Government Regulations
The Food and Drug Administration ("FDA") of the U.S. Department of Health
and Human Services regulates television radiation emissions. State and local
governments also may regulate television radiation emissions. Compliance with
these regulations, or exemptions therefrom, will be necessary prior to
commencement of marketing of the Projector and the Digital Home Theater. The
Company believes that the Projector and the Digital Home Theater will comply
with applicable regulations. Current FDA regulations do not require FDA review
or approval prior to the manufacturing or marketing of the Projector or the
Digital Home Theater. If the Company's technology is used in the medical imaging
market, it may have to comply with FDA requirements pertaining to medical
devices, including possible extensive premarketing approval requirements. If the
Company is required to obtain premarketing approval from the FDA, use of the
technology in the medical imaging market could be significantly delayed and the
cost of obtaining such approval could be substantial.
The Company has obtained a UL listing for the Digital Home Theater
Projector.
The Company is unable to predict the extent of any governmental regulation
which might arise from future United States or foreign legislative or
administrative action.
11
Personnel
As of March 15, 1998, the Company employed fourteen (14) persons, all of
whom provide management and administrative services on a full-time basis. The
Company also has consulting arrangements with a number of engineers who assist
the Company in research and development. The Company also employs its Chief
Financial Officer pursuant to a consulting agreement. See "Employment
Agreements."
The Company believes that its employee relations are satisfactory,
notwithstanding a charge of discrimination that was filed against the Company
and settled and which was related solely to the actions of Mr. Dolgoff. See Item
3, "Legal Proceedings."
Item 2. PROPERTIES
The Company presently leases approximately 12,000 square feet of office
space for executive and research facilities at Two Penn Plaza, Suite 640, New
York, NY 10121. These facilities were originally subleased from an unaffiliated
party at a rate of approximately $17,000 per month. The sublease expired on
January 30, 1996, at which time, the Company entered into a direct lease with
the landlord for the same premises until December 31, 1998 at a rent of
approximately $23,500 per month.
Item 3. LEGAL PROCEEDINGS
In June of 1995 and August of 1995, two class action lawsuits were filed
against the Company as well as certain of its officers and directors by
stockholders of the Company. In October of 1995 the plaintiffs in the second
action joined as plaintiffs in the first action, and the second action was
dismissed without prejudice. In July 1996, the class action suit was dismissed
without prejudice, and the plaintiffs were given an opportunity to replead. Upon
repleading, the class action suit alleged numerous violations of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), including, but not
limited to, violations of Section 10(b) of the Exchange Act. The suit also
alleged claims for negligent misrepresentation and for common law fraud and
deceit. In response, the Company and the individual defendants submitted motions
to dismiss the action. In July 1997 these motions were granted, and the class
action suit was dismissed with prejudice by the U.S. District Court in New York.
Plaintiffs have filed a notice of appeal with the Second Circuit Appellate
Court, and the appeal is in the midst of the briefing process..
In April 1995 a legal action was brought against the Company, certain
members of the Board of Directors, and an employee of the Company by Eugene
Dolgoff, a founder and former officer of the Company. The complaint alleges,
among other actions, breach of employment and patent assignment agreements. Mr.
Dolgoff is seeking damages, punitive damages, and equitable relief totaling in
excess of $ 100 million. In April 1996, the New York State Supreme Court issued
an order and opinion which disqualified the Company's litigation counsel,
Anderson Kill, & Olick, P.C. ("Anderson, Kill") on the basis that Anderson, Kill
had a conflict of interest vis-a-vis Mr. Dolgoff, substantially denied the
Company's motion to dismiss Mr. Dolgoff's entire complaint, and denied Mr.
Dolgoff's motion to have a receiver appointed.
12
The Company appealed the New York Supreme Court's decision regarding the
disqualification of Anderson, Kill and the denial of its motion to dismiss Mr.
Dolgoff's complaint. Mr. Dolgoff appealed the New York Supreme Court's denial of
his motion to have a receiver appointed. In January of 1997, the Supreme Court
of the State of New York Appellate Division First Department, affirmed the lower
court's disqualification of Anderson, Kill and the lower court's motion to
dismiss and ordered that a receiver be appointed to protect whatever interest,
if any, the former officer and employee of the Company may ultimately be able to
prove that he has in any inventions Mr. Dolgoff assigned to the Company. The
Supreme Court subsequently issued a decision restricting the scope of the
receivership sought by Mr. Dolgoff. However, the receivership order has not as
yet been entered. At this time, neither the Appellate Court, nor any other
court, has determined that Mr. Dolgoff has any proof to support his claims; the
Appellate Court has merely reaffirmed the lower court's decision that, at this
preliminary stage of the litigation, Mr. Dolgoff's complaint has satisfied
procedural pleading requirements. As a consequence of new facts having come to
the attention of the Company, the Company has amended its pleadings and filed
counterclaims against Mr. Dolgoff, his affiliated companies, Breakthrough
Enterprises, Inc. and Floating Images, Inc. for, among other things, fraud,
breach of fiduciary duty, misappropriation of trade secrets, conversion, breach
of contract, diversion of corporate assets and opportunities, unjust enrichment,
and tortious interference with contractual relations, in connection with which
the Company is seeking injunctive relief and a constructive trust, in addition
to monetary damages in excess of $ 100 million.
In 1996, a suit was filed by a individual investor against the Company and
Marvin Maslow, Chairman of the Board of Directors, alleging fraudulent
inducement in connection with the plaintiff's purchase of the Company's
securities. In March 1997 the case was dismissed by the U.S. District Court in
Florida on jurisdictional grounds.
In the remaining action outstanding with Mr. Dolgoff, the Company's management,
based upon discussions with counsel, believe that they have meritorious defenses
to Mr. Dolgoff's claims. The Company's management believes that the outcome of
these matters will not have a material adverse effect on its financial position
or results of operations.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock, Redeemable Warrants and Series B Preferred
Stock are quoted on NASDAQ under the following symbols:
Common Stock: PJTV
Redeemable Warrants: PJTVW
Series B Preferred Stock: PJTVP
The Common Stock and Redeemable Warrants were initially registered and
traded as Units and were not separately transferrable until August 24, 1991. The
Units commenced trading in the over-the-counter market on the closing of the
Company's initial public offering on August 1, 1990.
On February 27, 1992 the Company announced a two-for-one stock split,
effective March 2, 1992. Accordingly, all quoted prices for the Company's
securities commencing with the first quarter of 1992 are adjusted to reflect the
March 1992 two-for-one stock split.
The Series B Preferred Stock was initially registered on September 9, 1992
in connection with the Company's Redeemable Warrant incentive program (the
"Warrant Incentive Program"). Prior to that time, there was no public market for
the Series B Preferred Stock. Pursuant to the Warrant Incentive Program, holders
of the Company's Redeemable Warrants who exercised their Redeemable Warrants
within 65 days after September 9, 1992 received one (1) share of Series B
Preferred Stock for every three (3) Redeemable Warrants exercised. In connection
with the Warrant Incentive Program, the Company issued 246,452 shares of Series
B Preferred Stock.
13
The Common Stock and Series B Preferred Stock of the Company are quoted on
the NASDAQ Small Cap Market. There is no public trading market for the Company's
Redeemable Warrants (which were delisted from the Nasdaq Small Cap Market in
December 1997), the Series A Preferred Stock (of which there is only one (1)
holder), the Series D Preferred Stock (of which there are only two (2) holders),
the Series E Preferred Stock (of which there is only one holder), or the Series
F Preferred Stock that was issued in February 1998 (of which there is only one
holder). The high and low bid quotations for the Common Stock, Redeemable
Warrants and Series B Preferred Stock for each full quarterly period for the
fiscal years ending December 31, 1996 and December 31, 1997 and for the Common
Stock and Series B Preferred Stock for the first quarter of 1998 through March
24, 1998 are listed below:
COMMON STOCK WARRANTS PREFERRED STOCK
1996 Calendar Quarter Quoted Bid Price Quoted Bid Price Quoted Bid Price
--------------------- ---------------- ---------------- ----------------
High Low High Low High Low
First Quarter 4.56 4.00 5.25 5.00 6.00 5.00
Second Quarter 3.56 2.19 4.00 3.25 4.00 3.00
Third Quarter 4.00 2.81 6.13 4.25 4.50 4.00
Fourth Quarter 3.69 2.56 6.50 5.50 3.50 2.75
COMMON STOCK WARRANTS PREFERRED STOCK
1997 Calendar Quarter Quoted Bid Price Quoted Bid Price Quoted Bid Price
--------------------- ---------------- ---------------- ----------------
High Low High Low High Low
First Quarter 3.47 2.00 5.50 2.00 3.75 2.25
Second Quarter 2.68 1.63 6.50 3.00 3.00 2.00
Third Quarter 2.19 1.50 6.50 3.00 2.75 2.00
Fourth Quarter 2.06 .75 6.50 3.00 2.00 1.06
COMMON STOCK PREFERRED STOCK
1998 Calendar Quarter Quoted Bid Price Quoted Bid Price
--------------------- ---------------- ----------------
High Low High Low
First Quarter (through
March 24, 1998) 1.50 0.625 1.50 0.938
On March 24, 1998 the closing bid and asked prices of Common Stock
as reported on the NASDAQ system were $ 1.06 and $1.03 per share, respectively.
On December 3, 1997, the closing bid and asked prices of Warrants as reported on
the NASDAQ system were $3.00 and $3.00 per Warrant, respectively. The warrants
have since been delisted. On March 6, 1998, the last day prices were quoted for
the Series B Preferred Stock, the closing bid and asked prices of Series B
Preferred Stock on the NASDAQ system were $0.94 and $0.94, respectively.
On March 24, 1998 there were 411 holders of record of Common Stock
and 21,279,935 shares of Common Stock issued and outstanding, and there were 6
holders of record of Series B Preferred Stock and 351,258 shares of Series B
Preferred Stock issued and outstanding.
No cash dividends have been paid by the Company and management does
not anticipate paying cash dividends in the foreseeable future.
14
Item 6. SELECTED FINANCIAL DATA
The selected financial information set forth below is derived from the
financial statements and notes thereto. The financial statements as of December
31, 1996 and December 31, 1997 and for the three years in the period ended
December 31, 1997 are included elsewhere in this Annual Report on Form 10-K.
This information should be read in conjunction with the financial statements and
related notes and Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Statements of Operations Data
For the Years Ended December 31,
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1993 1994 1995 1996 1997
---- ---- ---- ---- ----
Revenues $ 105,000 $ -0- $ 200,000 $ 150,000 $ 1,017,645
Research and Development $ 276,215 $ 827,660 $ 608,651 $ 2,389,329 $ 1,240,578
Net Loss $ (2,730,242) $ (5,632,283) $ (6,471,638) $(10,880,893) $ (8,289,920)
Basic and Diluted Net Loss per Share
Attributable to Common Shareholders $ (.26) $ (.47) $ (.51) $ (.99) $ (.64)
Average Number of Common Shares
Outstanding 10,449,499 11,895,648 12,606, 678 13,586,705 17,968,876
Balance Sheet Data
December 31,
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1993 1994 1995 1996 1997
---- ---- ---- ---- ----
Working capital $ 5,181,003 $ 6,659,132 $ 3,341,425 $ 3,421,387 $ 1,016,223
Total assets $ 8,300,501 $ 9,850,523 $ 4,168,415 $ 10,132,488 $ 10,412,357
Total liabilities $ 390,580 $ 236,473 $ 485,710 $ 3,690,443 $ 4,725,394
Accumulated deficit $ (8,216.949) $(14,015,013) $(20,641,044) $(34,157,268) $(45,604,454)
Stockholders' equity $ 7,909,921 $ 9,614,050 $ 3,682,705 $ 6,442,045 $ 5,686,963
Computation of Per Share Loss
For the Years Ended December 31,
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1993 1994 1995 1996 1997
---- ---- ---- ---- ----
Average Number of Common Shares
Outstanding 10,449,499 11,895,648 12,606,678 13,586,705 17,968,876
Net Loss $ (2,730,242) $ (5,632,283) $ (6,471,638) $(10,880,893) $ (8,289,920)
Dividends on Preferred Stock -- -- -- (2,635,331) (3,157,266)
Basic and Diluted Net Loss per Share
Attributable to Common Shareholders $ (.26) $ (.47) $ (.51) $ (.99) $ (.64)
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