-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PI/3FGgsgBbIcGEbEBOL9gEF6KKbePG1b8qJtf/fXFcwIg2H2UCr6cF1xLd+TVOR dc5QmnhkWiQV7M1yfVpWUQ== 0000927356-98-000743.txt : 19980629 0000927356-98-000743.hdr.sgml : 19980629 ACCESSION NUMBER: 0000927356-98-000743 CONFORMED SUBMISSION TYPE: 10KSB/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980508 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ONLINE SYSTEM SERVICES INC CENTRAL INDEX KEY: 0001011901 STANDARD INDUSTRIAL CLASSIFICATION: 7373 IRS NUMBER: 841293864 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB/A SEC ACT: SEC FILE NUMBER: 000-28462 FILM NUMBER: 98614508 BUSINESS ADDRESS: STREET 1: 1800 GLENARM PLACE STREET 2: STE 800 CITY: DENVER STATE: CO ZIP: 80202 BUSINESS PHONE: 3032969200 MAIL ADDRESS: STREET 1: 1800 GLENARM PL STREET 2: SUITE 800 CITY: DENVER STATE: CO ZIP: 80202 10KSB/A 1 FORM 10-KSB/A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB/A ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended Commission file number DECEMBER 31, 1997 0-28462 ONLINE SYSTEM SERVICES, INC. (Exact name of registrant as specified in its charter) COLORADO 84-1293864 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1800 GLENARM PLACE, DENVER, CO 80202 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (303) 296-9200 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: None SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: Units, consisting of one share of Common Stock, no par value and one Warrant Common Stock, no par value Warrants for the purchase of Common Stock, no par value Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 herein, 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 [_]. Registrant's revenues for fiscal year ended December 31, 1997: $2,791,556 Aggregate market value of voting stock held by non-affiliates of registrant as of February 28, 1998: Approximately $22,598,163. Number of shares outstanding as of February 28, 1998: 3,333,577 shares of Common Stock, no par value, and 1,359,250 common stock purchase warrants. Documents incorporated by reference: None PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT. DIRECTORS AND OFFICERS The directors and officers of Online System Services, Inc. ("OSS" or the "Company") as of April 28, 1998 are as follows:
Name Age Director Position - - ---- --- -------- -------- Since ----- R. Steven Adams............... 45 1994 Chairman of the Board, President and Chief Executive Officer and a Director William R. Cullen............. 56 1998 Chief Operating Officer and a Director Thomas S. Plunkett............ 45 ---- Chief Financial Officer Robert M. Geller.............. 45 1995 Secretary and a Director Keith M. Bennett.............. 49 ---- Senior Vice President-Sales and Tactical Marketing Gwenael S. Hagan.............. 37 ---- Vice President-Strategic Development Edward C. Robinson............ 38 ---- Vice President-Business Development Paul H. Spieker............... 54 1995 Vice President-Technical Operations and a Director Vincent D. Bradshaw........... 57 ---- Vice President-Sales Michael S. Murphy............. 46 ---- Vice President-Operations Donald L. Smith III........... 48 ---- Vice President-Product Development Robert J. Lewis............... 67 1995 Director H. Robert Gill................ 61 1996 Director Richard C. Jennewine.......... 59 1996 Director Charles P. Spickert........... 44 1997 Director
R. STEVEN ADAMS, founder of the Company, has served as President, Chief Executive Officer and a director since the Company's incorporation in March 1994. From 1985 to 1994, Mr. Adams was President-Sheridan Hotel Management, a full service hotel management company. Mr. Adams was the creator and founder of HotelNet, which was an online information system for the hospitality industry. Mr. Adams' experience includes software development, personal computer manufacturing and management of online information systems. WILLIAM R. CULLEN, has served as Chief Operating Officer and a director since March 1998. From May 1997 to March 1998, Mr. Cullen worked as a consultant to the businesses in the cable industry. From April 1994 to May 1997, Mr. Cullen was Chairman and CEO of Access Television Network, Inc., a privately held company specializing in providing paid programming to local cable systems. From January 1992 to March 1994, Mr. Cullen was President and CEO of California News Channel, a programming project of Cox Cable Communications. From July 1984 to December 1991, Mr. Cullen was employed by United Artist Cable Corporation (and its predecessor United Cable Television Corp.) as Vice President of Operations and President of its subsidiary United Cable of Los Angeles, Inc., and as its Senior Vice President of the Southwest Division. Prior to joining United Artist Cable Corporation, Mr. Cullen was President of Tribune Company Cable of California, Inc. and CEO of its United-Tribune Cable of Sacramento joint venture, served as a top financial officer of three companies, and worked in banking. THOMAS S. PLUNKETT, has served as Vice President-Chief Financial Officer of the Company since October 1996. From 1995 to 1996 Mr. Plunkett was the Vice President of Business Management at Maxtor Corporation, a manufacturer of disk drives. From 1994 to 1995 Mr. Plunkett was the Vice President of Operations for Hi-Tech Manufacturing, an electronic manufacturing services company. From 1992 to 1994 he was a Controller at Conner Peripherals, a manufacturer of disk drives. From 1989 to 1992, Mr. Plunkett served as Vice President and C.F.O. of Discovery Technologies, a manufacturer of high resolution medical image transmission equipment. Prior to joining Discovery Technologies, Mr. Plunkett held various senior operations and financial management positions with Miniscribe Corporation from 1982 to 1989. ROBERT M. GELLER, has been a director and corporate secretary of the Company since May 1995. He also served as Vice President-Chief Financial Officer of the Company on a one-half time basis from May 1995 to October 1996. Mr. Geller currently provides consulting services to the Company on a one-half time basis. From 1986 to the present, Mr. Geller has been President of The Growth Strategies Group, a consulting company specializing in board and executive services for emerging growth companies. Mr. Geller is a director of Renaissance Entertainment Corporation, a publicly held owner and operator of renaissance fairs; and Armanino Foods of Distinction, Inc., a publicly held producer of Italian foods. KEITH M. BENNETT, joined the Company in April 1998 as Senior Vice President-Sales and Tactical Marketing. From December 1997 to April 1998 and from April 1996 to February 1997, Mr. Bennett worked as a consultant to new and emerging companies in the telecommunications industry to assist them in establishing their products and services in the marketplace. From February 1997 to December 1997, Mr. Bennett was Vice President of North American Sales for Intergram International, a global provider of digital messaging products and services, responsible for developing and implementing all sales and marketing strategies. From May 1993 to April 1996, Mr. Bennett was Director of Sales and Customer Service with U S WEST, MRG and was responsible for new product market launches with an emphasis on sales, customer service, and marketing. GWENAEL S. HAGAN, joined the Company in January 1998 as Vice President of Strategic Development. From June 1996 to January 1998. Mr. Hagan served as Vice President of New Business Development with International Channel, a cable television network, where he was responsible for new revenue opportunities, both domestically and internationally, and developing and implementing strategies to increase revenue and position International Channel for growth via evolving digital cable and satellite platforms. From December 1994 to June 1996, Mr. Hagan served as the Internet Marketing Manager for Microsoft's western region. His work with Microsoft encompassed competitive strategy development, sales resource allocation, presentations and public relations. From March 1994 to December 1994, Mr. Hagan worked with Missing Link Communications, Inc. , a developer of television programs to assist computers in buying personal computers. At Missing Link, Mr. Hagan was responsible for programming concepts and establishing alliances. Prior to that time, Mr. Hagan spent 11 years with Jones International, Ltd., a cable television operator and television network development company. EDWARD C. ROBINSON, joined the Company in May 1997 and is responsible for business development for the Company's broadband business to consumer products and services. From 1992 to 1994, Mr. Robinson was Director of Marketing and Sales, New Media for U S WEST Marketing Resources, responsible for preparing the $1.0 Billion division of U S WEST for entrance into the interactive services/Internet content businesses. From 1994 to 1996, Mr. Robinson was the Director of Business Development for U S WEST Interactive Services, responsible for negotiating and finalizing content and distribution agreements worldwide for U S WEST in it's broadband ventures. From 1996 to 1997 Mr. Robinson was the Director of Business Development for Broadvision, an Internet software company in Los Altos, CA. PAUL H. SPIEKER, has been Vice President-Technical Operations and a director of the Company since February 1995. From 1992 to 1994 Mr. Spieker was President of Business Regulatory Coalition-Colorado, a public affairs company responsible for policy formulation and activities primarily dealing with regulatory matters representing companies before the Colorado Public Utilities Commission. From 1991 to 1994, he was a private consultant primarily for businesses in voice and data communications. From 1990 to 1991, Mr. Spieker was President of Developers Cable Construction, a startup company providing contract construction services for residential developers and local telephone and cable companies. From 1987 to 1990, Mr. Spieker was employed by Volt Information Sciences, Inc., a New York based telecommunications company. Mr. Spieker was employed by U S WEST Communications, Inc. and its predecessor from 1966 to 1987 and served in several senior management capacities, including the head of the strategic business unit which served large telephone customers in a seven state territory. VINCENT D. BRADSHAW, joined the Company as Director-Sales in June 1996 and was promoted to Vice President-Sales in September 1996. From May 1993 to May 1996, he was Director of Business Development for Source One Management, Inc., a privately held Denver based company in the business of providing technical operations, management and engineering services. From 1987 to 1996, Mr. Bradshaw was an independent, Denver based marketing and business consultant, doing business as Foresight Business Services. As a consultant, he provided marketing and business operations advice to a number of private and public companies. From May 1981 to December 1986, Mr. Bradshaw was employed by Mountain Bell and its parent company in different sales positions leading to his being named Vice President-Federal Services from 1985 to 1986. From August 1960 to April 1981, he held progressive technical operations, engineering and sales/marketing positions with AT&T Company in several eastern states. Mr. Bradshaw is currently a business advisor with the Boulder Technology Incubator, a not-for-profit corporation that assists inventors and firms in marketing their technologies. MICHAEL S. MURPHY, joined the Company in April 1997 as Vice President - - - Operations. From November 1996 to April 1997, he was an independent management consultant. From May 1994 to November 1996, Mr. Murphy was co- founder and Vice President of Operations of Requisite Technology, Inc., a developer of software and electronic catalog publishing. From January 1993 to May 1994, Mr. Murphy was Director of Strategic Business Development for Ball Aerospace and Telecommunications Corporation and from July 1987 to January 1993, Manager, San Diego Operations of Ball System Engineering Division. DONALD L. SMITH III, joined the Company in November, 1997 and is responsible for product development. He has worked the past eleven years in the software development area in a variety of industries. His most recent experience included establishing and growing the development organization at Jones Cyber Solutions from a single resource to one hundred persons working on the development and customization of subscriber management and customer care software being sold to the cable and telephony marketplaces. His previous position included developing performance measurement and project management applications for multi-billion dollar Martin Marietta defense contracts. ROBERT J. LEWIS, has been a director of the Company since February 1995. Mr. Lewis retired in October 1995 after having spent 37 years in the cable television industry as an owner and developer of cable systems and senior executive with several cable television companies. From 1987 until his retirement, Mr. Lewis was employed by TCI Telecommunications, Inc. ("TCI"), one of the largest cable television companies in the United States. Mr. Lewis served as a Senior Vice President of TCI from 1991 to 1993 and as a Senior Advisor to TCI from 1993 until his retirement. H. ROBERT GILL, has been a director of the Company since August 1996. From April 1996 to the present, Mr. Gill has been the President of The Topaz Group, a consulting company offering board of director services to high technology, emerging growth, public and private corporations. From March 1995 to March 1996, Mr. Gill was the Senior Vice President and President, Enhanced Products Group for Frontier Corporation, a telecommunications company. From January 1989 to March 1995 he was President, Chief Executive Officer and a director or Confer-Tech International, Inc. Mr. Gill is a director of TOPRO, Inc., a systems integration company offering equipment and services to a variety of growth manufacturing industries; QualMark Corporation, a provider of accelerated life testing equipment and services; MOSAIX, Inc., a marketer of inbound and outbound call center systems and services; and Spatial Technologies, Inc., a developer and marketer of three dimensional modeling software for CAD applications. RICHARD C. JENNEWINE, has been a director of the Company since November 1996. From September 1995 to the present, Mr. Jennewine has been President-International Operations and Regional Manager-Western Operations for Computer Aid, Inc. a leader in strategic outsourcing and information services consulting. From December 1991 to February 1995, Mr. Jennewine served as the Senior Vice President of the CONCORD Group, a privately held entrepreneurial group of 40 international enterprises. From January 1994 to February 1995, he served as the President of the Concord Trading Corporation, a company focusing on trading and business ventures in Asia, Russia, the Middle East and South America. Prior to these positions, Mr. Jennewine spent 26 years with IBM Corporation, including startup operations in mainland China. Mr. Jennewine is a director of Easter Seals of Colorado and is a member of the Corporate Management Committee of Computer Aid, Inc. CHARLES P. SPICKERT, has been a director since April 1997. Mr. Spickert founded Medical Education Collaborative ("MEC"), a non-profit medical education organization, in March 1988 and currently serves as MEC's President and Chief Executive Officer. From June 1990 to July 1992 Mr. Spickert also served as the President and Chief Operating Officer of HealthWatch, Inc., a developer and manufacturer of medical supplies and devices. Prior to these positions, Mr. Spickert held marketing and sales management positions with Allertech, a provider of allergy products and services; International Medical Corporation, a manufacturer of cardiovascular devices and supplies; and Becton Dickinson, a provider of microbiology equipment and supplies. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934 requires the Company's directors and executive officers, and persons who own more than ten percent of a registered class of the Company's equity securities, to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Officers, directors and greater than ten-percent shareholders are also required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. To the Company's knowledge, based solely on review of the copies of such reports furnished to the Company and written representations that no other reports were required, during the fiscal year ended December 31, 1997, all Section 16(a) filing requirements applicable to its officers, directors and greater than ten-percent beneficial owners were timely complied with except for the following:
Name of Individual Form Number of Late Reports Transactions Not Timely Reported ------------------ ---- ---------------------- -------------------------------- Charles P. Spickert 3 1 1 Greg Bicket 3 1 1 Michael S. Murphy 3 1 1 Vincent D. Bradshaw 3 1 1 R. Steven Adams 4 1 1 Richard C. Jennewine 4 1 1
ITEM 10. EXECUTIVE COMPENSATION. The following table summarizes the annual compensation paid by the Company during fiscal years ended December 31, 1995, 1996, and 1997 to R. Steven Adams, the Chief Executive Officer of the Company as of December 31, 1997 and the executive officers of the Company, other than Mr. Adams, whose total annual salary and bonus exceeded $100,000 for the year ended December 31, 1997.
SUMMARY COMPENSATION TABLE Annual Compensation Long-Term Composition ------------------------------------------------------------------------- Salary Bonus Other Securities Name and Principal Position Year $ $ $ Underlying Options - - --------------------------- ---- ------ ----- ----- ------------------ R. Steven Adams 1997 $120,217 -- -- -- President, Chief Executive 1996 $110,217 -- -- -- Officerand Director 1995 $ 69,000 -- (1) -- Thomas S. Plunkett (2) 1997 $103,642 -- -- 90,000 (3) Chief Financial Officer 1996 $ 17,641 -- -- 60,000 1995 -- -- -- --
_______________ (1) On January 1, 1995, the Company issued 480,000 shares of Common Stock issued to Mr. Adams, as the founder and promoter of the Company, for a nominal value ($100). Mr. Adams has also purchased other Common Stock from the Company at fair market value as determined by the Board of Directors. (2) Mr. Plunkett was hired as Chief Financial Officer in October 1996. (3) Includes options for the purchase of 60,000 shares and 15,000 shares, respectively, of Common Stock initially granted to Mr. Plunkett on October 4, 1996 and January 9, 1997, respectively, but repriced by the Company's Board of Directors on May 20, 1997. STOCK OPTIONS The following tables summarize the stock option grants and exercises during fiscal 1997 to or by the named executive officers and the value of all options held by the named executive officers as of December 31, 1997.
OPTION GRANTS DURING FISCAL YEAR ENDED DECEMBER 31, 1997 Percent of Total Options Number of Securities Granted to Employees Exercise Underlying Options During Fiscal Year Ended Price Expiration Name Granted December 31, 1997 ($/Share) Date - - ---- -------------------- ------------------------ --------- ---------- R. Steven Adams 0 $ 0 -- -- Thomas S. Plunkett 75,000 (1) $1.63 5/20/04 15,000 (2) $1.63 5/20/02 ---------- 90,000 9.7% (3)
_______________ (1) Includes options for the purchase of 60,000 shares and 15,000 shares, respectively, that were initially granted to Mr. Plunkett on October 4, 1996 and January 9, 1997, respectively, at exercise prices of $3.88 and $3.38, respectively. These options were repriced by the Board of Directors of the Company on May 20, 1997. Each of these options was initially exercisable in one-third increments on the 12th, 24th, and 36th month after the date of grant. In connection with the repricing of these options, the vesting of the options was delayed for six months such that each of these options is now exercisable on the 18th, 30th, and 42nd months after the date of the original grant. (2) This option was exercisable in full immediately upon grant. (3) All options repriced by the Board of Directors during the fiscal year ended December 31, 1997 (but which were originally granted during a prior fiscal year) are deemed to have been granted during the fiscal year ended December 31, 1997 for the purpose of calculating such percentage. AGGREGATED OPTION EXERCISES DURING FISCAL YEAR ENDED DECEMBER 31, 1997 AND OPTION VALUES AT DECEMBER 31, 1997
Number of Securities Value of Unexercised Shares Underlying Options at In-The-Money Options at Acquired Value December 31, 1997 December 31, 1997 Name on Exercise Realized Exercisable / Unexercisable Exercisable / Unexercisable - - ---- ----------- -------- --------------------------- --------------------------- R. Steven Adams -- -- -- -- Thomas S. Plunkett 0 $ 0 15,000 / 75,000 $73,050 / $365,250 (1)
_______________ (1) The value of unexercised in-the-money options was determined by multiplying the number of shares subject to such options by the favorable difference between the exercise price per share and $6.50, the closing bid price per share on December 31, 1997. BOARD OF DIRECTOR COMPENSATION The Board of Directors of the Company do not receive cash compensation for their services as directors of the Company, but they are reimbursed for their reasonable expenses in attending meetings of the Board of Directors. During fiscal 1997, the Company compensated Robert M. Geller, Robert J. Lewis, H. Robert Gill, Richard C. Jennewine and Charles P. Spickert for their services as consultants. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Information as to the name, address and stock holdings of each person known by the Company to be a beneficial owner of more than 5% of its Common Stock or its 10% Cumulative, Convertible, Redeemable Preferred Stock ("10% Preferred Stock") and as to the name, address and stock holdings of each member of the Board of Directors and by all executive officers and directors, as a group, as of April 28, 1998 is set forth below. Except as indicated below, the Company believes that each such person has the sole (or joint with spouse) voting and investment powers with respect to such shares.
Common Stock 10% Preferred Stock ----------------------------------------- ------------------------------ Name/Address Amount Percent Amount Percent of Beneficially of Beneficially of Shareholder/Director Owned Class (1) Owned Class (1) - - ---------------------------------------- ------------ --------- ------------ --------- R. Steven Adams 497,000 (2) 14.8% None 1800 Glenarm Place, Suite 800 Denver, Colorado 80202 Robert M. Geller 184,667 (3) 5.4% None 1800 Glenarm Place, Suite 800 Denver, Colorado 80202 Paul H. Spieker 179,667 (4) 5.3% None 1800 Glenarm Place, Suite 800 Denver, Colorado 80202 Lee E. Schlessman 57,000 (5) 1.7% 120,000 (6) 44.9% 1301 Pennsylvania Street, Suite 800 Denver, Colorado 80203 Susan M. Duncan 13,500 (7) * 30,000 (8) 11.3% 2651 South Wadsworth Circle Lakewood, Colorado 80227 Robert J. Lewis 64,370 (9) 1.9% None 1800 Glenarm Place, Suite 800 Denver, Colorado 80202 Thomas S. Plunkett 37,000 (10) 1.1% None 1800 Glenarm Place, Suite 800 Denver, Colorado 80202 H. Robert Gill 20,000 (11) * None 1800 Glenarm Place, Suite 800 Denver, Colorado 80202 Richard C. Jennewine 20,000 (12) * None 1800 Glenarm Place, Suite 800 Denver, Colorado 80202 Charles P. Spickert 56,000 (13) 1.6% None 1800 Glenarm Place, Suite 800 Denver, Colorado 80202 William R. Cullen None (14) None 1800 Glenarm Place, Suite 800 Denver, Colorado 80202
Directors and Executive Officers as a 1,058,704 (15) 29.1% None Group (12 persons)
* Less than one percent of shares outstanding. (1) In calculating percentage ownership, all shares of Common Stock which a named shareholder has the right to acquire within 60 days from the date of this Proxy Statement upon exercise of options or warrants are deemed to be outstanding for the purpose of computing the percentage of Common Stock owned by that shareholder, but are not deemed to be outstanding for the purpose of computing the percentage of Common Stock owned by any other shareholders. No options or warrants to acquire 10% Preferred Stock are outstanding. (2) Excludes options for the purchase of 100,000 shares of Common Stock that are not exercisable during the next 60 days. (3) Includes options for the purchase of 36,667 shares of Common Stock, but excludes options for the purchase of 38,333 shares of Common Stock that are not exercisable during the next 60 days. (4) Includes options for the purchase of 36,667 shares of Common Stock, but excludes options for the purchase of 23,333 shares of Common Stock that are not exercisable during the next 60 days. (5) Includes warrants for the purchase of 16,000 shares of Common Stock. Also includes (i) 2,500 shares of Common Stock owned by The Schlessman Family Foundation, (ii) warrants for the purchase of 2,000 shares of Common Stock owned by The Schlessman Family Foundation, (iii) 7,500 shares of Common Stock owned by persons who have granted Mr. Schlessman a power of attorney with respect to such shares, and (iv) warrants for the purchase of 6,000 shares of Common Stock owned by persons who have granted Mr. Schlessman a power of attorney with respect to such warrants. (6) Includes 10,000 shares of 10% Preferred Stock owned by The Schlessman Family Foundation. Also includes 30,000 shares of 10% Preferred Stock owned by persons who have granted Mr. Schlessman a power of attorney with respect to such shares. (7) Includes warrants for the purchase of 2,000 shares of Common Stock. Also includes 5,000 shares of Common Stock owned by the Susan M. Duncan Irrevocable Gift Trust and warrants for the purchase of 4,000 shares of Common Stock owned by the Susan M. Duncan Irrevocable Gift Trust. (8) Includes 20,000 shares of 10% Preferred Stock owned by the Susan M. Duncan Irrevocable Gift Trust. (9) Includes options and warrants for the purchase of 35,000 and 2,700 shares of Common Stock, respectively. (10) Includes options for the purchase of 35,000 shares of Common Stock, but excludes options for the purchase of 80,000 shares of Common Stock that are not exercisable during the next 60 days. (11) Includes options for the purchase of 20,000 shares of Common Stock, but excludes options for the purchase of 20,000 shares of Common Stock that are not exercisable during the next 60 days. (12) Includes options for the purchase of 20,000 shares of Common Stock, but excludes options for the purchase of 20,000 shares of Common Stock that are not exercisable during the next 60 days. (13) Includes options for the purchase of 50,000 shares of Common Stock, but excludes options for the purchase of 15,000 shares of Common Stock that are not exercisable during the next 60 days. (14) Excludes options for the purchase of 130,000 shares of Common Stock that are not exercisable during the next 60 days. (15) Includes options for the purchase of 236,034 shares of Common Stock, but excludes options for the purchase of 516,666 shares of Common Stock that are not exercisable during the next 60 days. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Since inception, the Company has issued the following shares of common stock to certain current or former officers and directors:
Number of Shares Number of Shares Number of Recipient Issued to Founder(1) Issued for Services(2) Shares Purchased(3) - - --------- -------------------- ---------------------- ------------------- R. Steven Adams 480,000 -- 20,000 Robert M. Geller -- 100,000 55,000 Paul H. Spieker -- 50,000 100,000 Mitchell B. Campbell -- -- 160,000 D. Kent McBride -- 50,000 5,000 William Eager -- 50,000 10,000 Mark D. Rothschild -- 20,000 30,000 Robert J. Lewis -- -- 26,667
_____________ (1) On January 1, 1995, the Company issued 480,000 shares of common stock to Mr. Adams, as the founder and promoter of the Company, for a nominal value ($100). (2) In March and May 1995, the Company issued an aggregate of 270,000 shares of common stock to the then respective officers and directors identified in the table for services valued at $0.10 per share, which was determined by the Board of Directors to be the fair market value of the common stock at the time of issuance. (3) From June through December 1995, the then officers and directors identified in the table purchased an aggregate of 315,000 shares of common stock for cash at a price of $0.50 per share, which was determined by the Board of Directors to be the fair market value of the common stock at the time of purchase. During fiscal 1996, 65,000 shares were purchased at a price of $.50 per share pursuant to the exercise of stock options and 26,667 shares were purchased at a price of $2.25 per share in a private placement. During 1995, the Company leased $50,000 of equipment (the "Equipment Lease") from a partnership whose partners include Robert M. Geller, an officer and director of the Company. The three year capital lease has an effective annual interest rate of 14.9%. The Company granted Mr. Geller a five-year warrant to purchase 5,000 shares of Common Stock at an exercise price of $0.50 per share in connection with the Equipment Lease. During November 1997, the Company licensed its MD Gateway Web site and related equipment and software to Medical Education Collaborative, a nonprofit company formed by Charles P. Spickert, a director of the Company. The Company licensed MD Gateway to MEC in connection with the Company's strategic decision to focus its activities on non-healthcare related activities. The license agreement provides that MEC will pay OSS a license fee of 35% of revenues in excess of certain MEC expenses related to MD Gateway services. The Company's principal offices are located in a building managed by Sheridan Management Company and owned by one of its affiliates. R. Steven Adams' spouse is a vice president of Sheridan Management Company. The current base monthly rental is $18,209. The Company believes that the transactions summarized above are on terms no less favorable than could be obtained from unaffiliated third parties. The Board of Directors has determined that any transactions with officers, directors or principal shareholders will be approved by the disinterested directors and will be on terms no less favorable than could be obtained from an unaffiliated third party. The Board of Directors will obtain independent counsel or other independent advice to assist in that determination. SIGNATURES In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ONLINE SYSTEM SERVICES, INC. Date: May 7, 1998 By /s/ Thomas S. Plunkett ------------------------------------------- Thomas S. Plunkett, Chief Financial Officer ONLINE SYSTEM SERVICES, INC. INDEX TO EXHIBITS FORM 10-KSB/A (For Fiscal Year Ended December 31, 1997) (a) Listing of Exhibits: 3.1 Articles of Incorporation, as amended, of the Company (4) 3.2 Bylaws of the Company(1) 4.1 Specimen form of the Company's Common Stock certificate(2) 4.2 Form of Warrant Agreement dated May 23, 1996 between Corporate Stock Transfer and the Company, including form of Warrant(2) 4.3 Stock Option Plan of 1995(1) 4.4 Form of Incentive Stock Option Agreement for Stock Option Plan of 1995(1) 4.5 Form of Nonstatutory Stock Option Agreement for Stock Option Plan of 1995(1) 4.6 Nonstatutory Stock Option Agreement for options issued to Creative Business Strategies, Inc.(2) 4.7 Form of Warrant issued in connection with Sale-Leaseback of Equipment(1) 4.8 Form of Warrant issued in 1996 to private investors(1) 4.11 Specimen of Warrant Certificate--See Exhibit A filed with Exhibit 4.2 4.12 Form of Warrant Agreement issued in 1997 and 1998 to private investors. (4) 10.1 Equipment Lease Agreement dated December 15, 1995 between the Company and OSS Equipment Leasing General Partnership(1) 10.2 Financial Advisory Agreement dated February 23, 1996 between the Company and Cohig and Associates(1) 10.3 Form of Nondisclosure and Nonsolicitation Agreement between the Company and its employees(2) 10.4 Office Lease for the Company's principal offices(2) 10.5 Long-Term Equipment Sale and Software License Agreement dated October 7, 1997 between the Company and FiberTel TCI2 S.A. (4) 10.6 Agreement and Plan of Merger dated March 19, 1998 among the Company, Durand Acquisition Corporation and Durand Communications, Inc. (4) 10.7 Agreement dated October 7, 1997 between the Company and Medical Education Collaborative, Inc. (4) 13 The registrant intends to deliver to its shareholders a copy of 1997 Annual Report on form 10-KSB (without exhibits), in lieu of a separate Annual Report to Shareholders 16 Letter on change in certifying accountant(3) 23.1 Consent of Arthur Andersen LLP(4) 27.1 Financial Data Schedule (4) 27.2 Restated Financial Data Schedule* - - ------------------ * Filed herewith. (1) Filed with the initial Registration Statement on Form SB-2, filed April 5, 1996, Commission File No. 333-3282-D. (2) Filed with Amendment No. 1 to the Registration Statement on Form SB-2, filed May 3,1996, Commission File No. 333-3282-D. (3) Filed with the Form 8-K Report, dated October 7, 1996, Commission File No. 0-28462. (4) Filed with the Form 10-KSB Report, dated April 2, 1998, Commission File No. 0-28462. EX-27.2 2 RESTATED FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM ONLINE SYSTEM SERVICES, INC. FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0001011901 ONLINE SYSTEM SERVICES, INC. YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 1,645,163 3,855,343 294,201 64,851 195,941 6,209,693 672,296 185,952 6,860,653 611,405 32,647 0 0 7,953,665 (1,637,064) 6,860,653 319,425 1,445,042 232,511 949,920 0 0 0 (1,420,432) 0 (1,420,432) 0 0 0 (1,420,432) (.55) (.55)
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