EXHIBIT 99.1
        Other Considerations
 
        Documents and press releases prepared by the Company, including
this report on Form 10-KSB may from time to time contain forward looking
statements.  The Company, its assets, operations, and financial condition
and such forward  looking statements made by the Company are subject to
various risks and uncertainties, including without limitation, the
following:
 
        ABILITY TO CONTINUE AS A GOING CONCERN.  As a result of the
Company's net losses and negative cash flow from operating activities in
recent periods, the Company's independent auditors have included in
their report on the Company's March 31, 1998 financial statements an
explanatory paragraph regarding the ability of the Company to continue
as a going concern.  The Company is seeking additional debt and equity
funds, in one or more private placements transactions, in order to
obtain the funds necessary to meet its immediate working capital needs.
 There can be no assurance that the Company will be able to successfully
complete the private placements or loan transactions or otherwise obtain
the necessary funds to continue the Company's operations.
 
        LIQUIDITY.  The Company's continuing operating losses and capital
commitments in connection with its acquisition of DVD-ROM manufacturing
capabilities and license of related DVD-ROM technology from Hyundai have
created a liquidity problem for the Company.  As of March 31, 1998, the
Company had working capital of $10.4 million, as compared to working
capital of $32.7 million as of March 31, 1997, and the Company's working
capital has further declined since March 31, 1998.  In June 1998, the
Company entered into an agreement with Dr. Edmund Y. Sun, the Company's
Chairman and Chief Technology Officer, pursuant to which Dr. Sun agreed to
purchase from the Company $1,000,000 of the Common Stock in July 1998.
Payment for these shares will be made by cancellation of $1,000,000 of
working capital loans made to the Company by Dr. Sun in June 1998.
Notwithstanding the private placement to Dr. Sun, the Company will need
to generate additional liquidity to meet its current obligations and
maintain its current level of operations or to finance any significant
future increase in revenues and is actively seeking additional financing
to meet those needs.  The Company is currently negotiating equity
investments with several potential investors.  However, there can be no
assurance that any such financings will ever be consummated, that such
financings if so consummated will be on terms favorable to the Company or
that such financings will be sufficient to meet the Company's immediate
needs.  If adequate funds are not available to satisfy its capital
requirements, the Company may be required to curtail its operations
significantly or to obtain funds through arrangements with strategic
partners or others that may require the Company to relinquish material
rights to certain of its technologies or potential markets.
 
        The Company has incurred operating losses since fiscal year 1994.
Even if the Company successfully completes the equity financings it is
currently attempting to consummate, if the Company continues to
experience operating losses in the future that result in a significant
utilization of its liquid resources, the Company's liquidity and its
ability over the long-term to sustain operations at current levels could
be materially adversely affected.
 
        The Company may seek additional public or private financing to meet
its longer term capital needs if market conditions are favorable.  If
additional funds are raised through the issuance of equity securities, it
is likely that the Company will be required to sell such securities at a
substantial discount to the current market price for the Company's Common
Stock, the percentage ownership of the then current shareholders of the
Company will be reduced, and such equity securities may have rights,
preferences or privileges senior to those of the holders of the Common
Stock.  No assurance can be given that additional financing will be
available or that, if available, they will be available on terms
favorable to the Company or its shareholders.  Any increase in the
outstanding number of shares of Common Stock or options and warrants to
acquire Common Stock may have an adverse effect on the market price of
the Common Stock and may hinder efforts to arrange future financing.
 
        HISTORY OF LOSSES AND ACCUMULATED DEFICIT; EXPECTATION OF FUTURE
LOSSES.  To date, the Company has incurred significant losses.  At March
31, 1998 the Company had an accumulated deficit of approximately
$46,015,000.  The Company incurred operating losses of approximately
$12,206,000 and $26,807,000 for the fiscal years ended March 31, 1997 and
March 31, 1998.  Such losses resulted principally from limited revenues
from operations, price competition for the Company's products, including
pricing strategies implemented in order to penetrate certain markets and
significant costs associated with the development of the Company's
technologies.  The Company expects to incur losses in the first half of
the fiscal year ending March 31, 1999 and until such future time, if
ever, as there is a substantial increase in product sales.  There can be
no assurance that sales of the Company's products will ever generate
significant revenue, or that the Company will generate positive cash flow
from its operations or attain or thereafter sustain profitability in any
future period.
 
        UNCERTAINTY OF MARKET ACCEPTANCE OF PRODUCTS; LACK OF ESTABLISHED
MARKET FOR CERTAIN PRODUCTS.  The Company's business is dependent on
market acceptance of its digital video technology and the successful
commercialization of products utilizing this technology.  In March 1997,
the next-generation CD product, known as DVD, was launched in its
home-video format by several large consumer electronics manufacturers in
the United States.  A product for computer applications, known as the
DVD-ROM has recently entered the market as well.  The Company believes a
number of factors should contribute to the long-term success of the DVD
player, including the movie industry's endorsement; the computer
industry's demand; and the general movement towards digital technology.
However, there can be no assurance that the DVD market will become a
significant one in the near term or at all.
 
        In late 1996 the Company began the development of a DVD player and
related products for the home entertainment, business and computer
markets.  In June 1998, the Company acquired a perpetual royalty-free
license to certain DVD-ROM technology from Hyundai and acquired certain
related manufacturing capabilities.  The Company expects to commence
manufacturing DVD player, DVD Intelligent Loader, DVD Video Engine and
DVD-ROM products within the current calendar year.  It is anticipated
that these products will be marketed to original equipment manufacturers
on a proprietary basis and will be available in both consumer and
commercial products.  However, there can be no assurance that the Company
will be able to compete effectively in the market for products using the
new format or any different format.  The Company's ability to
successfully market its DVD-ROM, DVD Intelligent Loader, DVD Video Engine
and/or DVD player products will depend in part on the willingness of
potential customers to incur the costs involved in purchasing products
and systems which contain a DVD-ROM, DVD Intelligent Loader, DVD Video
Engine and DVD players, which in turn will depend on the Company and
others convincing potential customers of the benefits of digital video.
 
        The competition for DVD consumer players and DVD-ROM computer
devices is expected to be intense.  Among the factors which may limit
widespread adoption of the current DVD player are a competing technology
player (DIVX) (short for "digital video express"), the inability of
current models to record, the limited number of software titles currently
available, the relatively high current retail price, and remaining
unresolved technical issues, including certain issues with respect to
copyright protection.  Potential customers for the Company's products
utilizing the DVD format may be deterred from purchasing such products
due to the possibility that such products may become obsolete (as was the
case with beta video cassettes).  Failure of the Company's products in
general (and its DVD-ROM, DVD Intelligent Loader, DVD Video Engine and
DVD player products in particular) to attain significant market
acceptance would have a material adverse effect on the Company's
business, financial condition and results of operations.
 
        RISK OF PLANNED EXPANSION OF CETAIN OPEATIONS.  The Company plans
to significantly expand its DVD player, DVD Intelligent Loader, DVD Video
Engine and DVD-ROM operations, which could place a significant strain on
its limited personnel, financial and other resources.  The Company's
ability to manage this growth may require significant expansion of
certain of its product development, marketing and sales capabilities and
personnel.  The contemplated sale and distribution of products to
licensees and subcontractors who will manufacture products incorporating
the Company's products in diverse markets and the requirements of such
manufacturers for design support will also place substantial demands on
the Company's product development, quality control and sales functions.
The failure of the Company's management to effectively expand or manage
these functions consistent with any growth which may occur could have a
materially adverse effect on the Company's business, financial condition
and results of operations.
 
        DEPENDENCE ON LIMITED NUMBERS OF SUPPLIERS.  The Company
anticipates that its DVD products will incorporate optical components
produced by a leading manufacturer.  The Company has no contractual right
to obtain any specified number of optical components from the
manufactureand there can be no assurance that the Company will be able to
meet all of its future needs for such components through the
manufacturer.  Should the Company's ability to obtain the requisite
number of such components be limited for any lengthy period of time or if
the cost of such manufacturer components increases, or if such components
are only available to the Company at prices substantially higher than
those paid by the Company's competitors for these optical components or
other functionally equivalent optical components, the Company's ability
to supply products to its customers on a competitive basis or at all
could be materially and adversely affected.  The Company is currently
evaluating alternative sources of supply and anticipates that it will
begin the process of qualifying optical components made by other
suppliers to work with the Company's DVD products.  However, the
qualification process may take from six to twelve months to complete.
There can be no assurance that the Company could successfully or
economically convert its video engines to a DVD format.  The Company's
inability to obtain a sufficient quantity of optical components for its
DVD products or chips for its Video CD products at a competitive cost
would have a material adverse effect on the Company's business, financial
condition and results of operations.
 
        RISKS ASSOCIATED WITH THE PANYU JOINT VENTURE.  The Company entered
into the Panyu Joint Venture in August 1997 to manufacture Video CD
players and related products.  Prior to that time the Company had no
experience doing business in China (other than marketing products there).
 The Video CD market is highly competitive in China, with approximately
400 enterprises manufacturing and selling Video CD players there.  The
Company believes that the five largest of these companies control
approximately 70% of the total Video CD player market share in China,
with the remaining companies, including the Company, competing for
approximately 30% of the market.  This intense competition results in
ever-increasing downward pressure on the Company's gross margins on Video
CD players which are currently approaching approximately 5%, and the
Company believes that such downward pressure will continue.
 
        Since its inception in August 1997, the Panyu Joint Venture has
incurred losses of approximately $5,100,000.  In addition the Panyu Joint
Venture has ongoing liabilities which include an approximately $2,500,000
payable to a supplier of component parts, employee salaries and lease
payments on the joint venture's facilities.  The Company has not been
able to achieve a breakeven level of Video CD player production at the
Panyu Joint Venture, and because of decreasing margins due to intense
competition, the Company does not expect this to continue production of
the Video CD player for the Chinese consumer market.
 
        The Company believes that it may be possible for the Panyu Joint
Venture's manufacturing facility to produce the level and quality of
output required to compete effectively in the DVD player market.
However, this will require, among other things, upgrading certain parts
of the manufacturing facility's production capacity and process,
providing additional training to the work force, and instituting more
rigorous quality control measures.  However, there can be no assurance
that the Panyu Joint Venture will be able to achieve quality and output
objectives in order to compete effectively in the DVD player market. In
addition, the actions necessary to increase the Panyu Joint Venture's
manufacturing capacity and to improve quality control at the Panyu Joint
Venture's manufacturing facility may require substantial expenditures
that may need to be funded by the Company in excess of its current
financial commitment to the Panyu Joint Venture.
 
        In addition to intense competition, the Company has experienced
increasingly severe problems with its local Chinese partner (the "JV
Partner") in the Panyu Joint Venture.  Based upon a recently completed
investigative audit of the Panyu Joint Venture, the Company believes that
the JV Partner diverted substantially all of the revenues generated by
the Panyu Joint Venture (approximately $2.1 million) in fiscal 1998.  In
addition, the Company believes that the JV Partner removed substantial
amounts of inventory from the Panyu Joint Venture's premises without
authorization or payment.  The Company has retained Chinese counsel to
provide advice on how to recover such losses and is currently
investigating available legal remedies.  There can be no assurance,
however, that the Panyu Joint Venture will be able to recoup any of the
losses resulting from the improper conduct of the JV Partner.
 
        If the Panyu Joint Venture does not achieve its cash flow
objectives within a reasonable period of time, the Company may be
compelled to choose between contributing additional resources to the
Panyu Joint Venture or risking the loss of its entire investment.
Transfer of an interest in a Chinese equity joint venture, such as the
Panyu Joint Venture, requires government approval and unanimous agreement
among the parties.  In addition, the parties in an equity joint venture
may not reduce the amount of their registered capital until the
expiration of the term of the joint venture or its dissolution in
accordance with Chinese law.  The term of the Panyu Joint Venture is 25
years.
 
        RAPID TECHNOLOGICAL CHANGE AND OBSOLESCENCE; RISKS ASSOCIATED WITH
PRODUCT DEVELOPMENT, INTRODUCTIONS AND ANNOUNCEMENTS.  The markets served
by the Company are characterized by rapid technological advances,
downward price pressure in the marketplace as technologies mature,
changes in customer requirements, frequent new product introductions and
enhancements, and price erosion.  The Company's business requires
substantial ongoing research and development efforts and expenditures,
and its future success will depend on its ability to enhance its current
products, reduce product costs and develop and introduce new products
that both keep pace with technological developments in response to
evolving customer requirements and that also achieve market acceptance.
There can be no assurance that one or more of the Company's products will
not be rendered noncompetitive or obsolete by technological advances or
changing customer preferences.  In addition, from time to time, the
Company or others may announce products, features or technologies that
have the potential to shorten the life cycle of or replace the Company's
then existing products, including the Company's products that only use
the MPEG-1 format.  Such announcements could cause customers to defer the
decision to buy or determine not to buy the Company's products or cause
the Company's distributors to seek to return products to the Company, any
of which could cause the Company to write down some or all of its
inventory.  Any such writedown could have a material adverse effect on
the Company's business, financial condition and results of operations.
 
        The Company has from time to time experienced delays in introducing
new products and product enhancements, and there can be no assurance that
the Company will not experience difficulties that could delay or prevent
the successful development, introduction and marketing of new products or
product enhancements in the future.  In 1996, the Company acquired all of
the outstanding capital stock of ViComp Technology, Inc.  At that time
ViComp was engaged in the design and development of integrated circuits
to decode MPEG-1 signals.  However, to date ViComp has been unable to
complete planned development of the ViComp MPEG-1 Chip for use in the
Company's Video CD players and since approximately December 1997 all such
development efforts at ViComp have been suspended.  In order stay current
in a market of rapidly changing technologies, the Company will be
required to continue to invest in research and development to attempt to
maintain and enhance its existing technologies, and there can be no
assurance that it will have the funds available at such time as it will
be necessary to do so.
 
        In addition to the difficulty of completing product development on
certain products, some of the products offered by the Company may contain
defects when they are first introduced or as new or enhanced versions are
released.  The Company has in the past discovered defects in certain of
its new products, such as the karaoke jukebox, and in certain of its
product enhancements.  These defects have required correction by the
Company, thereby resulting in delays in the marketing of such products or
product enhancements.  There can be no assurance that, despite
significant quality control testing by the Company, defects will not be
found in new products and product enhancements after commencement of
commercial shipments, resulting in delays in or loss of market
acceptance.
 
        The Company has identified and increased its product development
and sales efforts in certain market segments, including the DVD-ROM, DVD
Intelligent Loader, DVD Video Engine and DVD player segments, in which
the Company believes the demand for its products will increase in the
future.  There can be no assurance that the Company's efforts in such
market segments will result in increased revenues or profitability in the
future.   Moreover, there can be no assurance that the Company's
competitors will not introduce functionally similar products that could
render the Company's products obsolete.  If the Company is unable to
develop new, or improve its current, products and technology in response
to changes in customer demand, the Company's operating results and
financial condition could be materially, adversely affected.
 
        RISKS OF INTERNATIONAL OPERATIONS.  Sales outside the United States
have accounted for approximately 79% of the Company's revenues from
inception through March 31, 1998 (with sales to Hong Kong, China and
Taiwan accounting for approximately 55%, 10% and 7%, respectively, of the
Company's revenues of $17,638,000 in fiscal 1998), and the Company
believes that foreign sales will continue to account for a significant
portion of its future revenues.  The Company's four largest customers in
fiscal 1998 were Carnival Honour Development Limited, Starnet, Wanyan
Electronic Systems, Inc., and Serial Semiconductor Co., Ltd., which
accounted for 30.6%, 8.6%, 7.7% and 7.7%, respectively, of the Company's
revenues for that fiscal year.  Moreover, the Company has been
manufacturing Video CD players and "Video Engine" (a commercial
application of its Video CD products) products utilizing subcontractors
in China and Taiwan to produce Video CD, Video Engine and
sub-assemblies.  The Company has completed the process of shifting
assembly of Video CD products to the Panyu Joint Venture in China to
reduce manufacturing costs.  The Company may establish manufacturing
operations in other countries to meet local demand for its products in
those markets when, if ever, such demand develops.
 
        The Company will be subject to all of the risks inherent in
international operations in connection with its foreign operations,
including work stoppages, transportation delays and interruptions,
political instability in, or conflict between, countries in which the
Company is doing business, such as South Korea, China and Taiwan, foreign
currency fluctuations, economic disruptions, expropriation, the
imposition of tariffs and import and export controls, the payment of
significant customs duties to deliver products into markets such as China
where the smuggling of competing products into such markets without the
payment of duties may be widespread, changes in governmental policies
(including United States trade policy toward certain countries such as
China and Japan) and other factors which could have a material adverse
effect on the Company's business, financial condition and results of
operations.  The recent currency and financial turmoil in a number of
Asian countries has adversely impacted consumer demand for various
products in certain of those countries.  A prolonged or deepening crisis
in these countries could have a material adverse effect on demand for the
Company's products in these countries.
 
        The Company will also be subject to the burdens of complying with a
wide variety of foreign laws and regulations.  These international trade
factors may, under certain circumstances, materially and adversely impact
demand for the Company's products or the Company's ability to deliver its
products in a timely manner, which in turn may have an adverse impact on
the Company's relationships with its customers.  In order to manufacture
or market its products in foreign countries such as China, the Company
may be required or deem it advisable to conduct these operations through
joint ventures with local partners, which could expose the Company to
various risks, including potentially reduced profitability of these
operations for the Company and the need to share management control with
such local partners.  The Company's success will depend in part upon its
ability to manage international marketing and sales operations and
manufacturing relationships, which are generally more complex than
domestic marketing and sales operations or manufacturing relationships.
 
        Should the Company substantially increase its product sales in
South Korea or China or other countries, the Company anticipates that it
will be required to significantly increase the amount of credit it
extends to purchasers in these markets.  The Company has had only limited
experience in extending credit to foreign customers and will encounter
increased risks in extending credit to new customers in these markets,
including the creditworthiness of such customers and the difficulty of
collecting accounts receivable in these countries.  While the Company
sells certain of its products in international markets and buys limited
quantities of certain items incorporated into its products in currencies
other than the U.S. dollar, the Company does not currently hedge its
exposure to foreign currency fluctuations.  As a result, currency
fluctuations could have a material adverse effect on the Company's
business and results of operations.  With respect to international sales
that are denominated in U.S. dollars, an increase in the value of the
U.S. dollar relative to foreign currencies could increase the effective
price of, and reduce demand for, the Company's products relative to
competitive products priced in the local currency.
 
        RISKS ASSOCIATED WITH MERGERS, ACQUISITIONS, DIVESTITURES AND JOINT
VENTURES.  An element of the Company's strategy is to pursue mergers,
acquisitions, divestitures and joint ventures that would complement its
existing range of products, augment its market coverage or enhance its
technological capabilities or that may otherwise offer growth
opportunities.  Acquisitions and joint ventures made to date have failed
to meet the Company's objectives for such operations and have contributed
to the Company's substantial operating losses, and there can be no
assurance that the Company's acquisition of DVD-ROM manufacturing
capabilities and related license of DVD-ROM technology from Hyundai will
meet the Company's business objectives.  Any future mergers, acquisitions
or joint ventures by the Company could result in potentially dilutive
issuances of equity securities, the incurrence of debt and contingent
liabilities, and the amortization of expenses related to goodwill and
other intangible assets, any of which could have a material adverse
effect on the Company's business, financial condition and results of
operations.   Mergers, acquisitions and joint ventures entail numerous
risks, including difficulties in the assimilation of acquired operations,
technologies and products, diversion of management's attention to other
business concerns, risks of entering markets in which the Company has no,
or limited, prior experience, the potential loss of key employees of
acquired organizations or joint ventures and the need to share managerial
control of joint ventures with one or more joint venture partners.  No
assurance can be given as to the ability of the Company to successfully
integrate any acquired business, product, technology or personnel with
the operations of the Company, and the failure of the Company to do so
could have a material adverse effect on the Company's business, financial
condition and results of operations.
 
        EFFECT OF TRADE DISPUTES.  The United States has had disputes with
China relating to trade and human rights issues and has considered trade
sanctions against China and Japan.  If trade sanctions were imposed,
China or Japan could enact trade sanctions in response which, if imposed,
could have a material adverse effect on the Company's business, financial
condition and results of operations because of the proportion of the
Company's business in those countries.  Similarly, protectionist trade
legislation could have a material adverse effect on the Company's ability
to import and/or export products and to manufacture or to sell its
products in foreign markets.
 
        RISKS ASSOCIATED WITH CONDUCTING BUSINESS IN CHINA.  General
economic conditions in China could have a significant impact on the
business prospects of the Company.  The economy of China differs from the
economies of most countries belonging to the Organization for Economic
Co-operation and Development in such respects as structure, government
involvement, level of development, growth rate, capital reinvestment,
allocation of resources, self- sufficiency, rate of inflation and balance
of payments position, among others.  For over 40 years, the economy of
China has been primarily a planned economy characterized by state
ownership and control of productive assets and the management of such
assets through a series of economic and social development plans.
However, the adoption of economic reform policies since 1978 has resulted
in a gradual reduction in the role of state economic plans in the
allocation of resources, pricing and management of productive assets, an
increased emphasis on the utilization of market forces, and rapid growth
in the Chinese economy.  At times, the economic reform measures adopted
by the Chinese government may be inconsistent or ineffectual, and
therefore the Company may not be able to enjoy the potential benefits of
such reforms.
 
        The Company may also be adversely affected by changes in the
political and social conditions in China, and by changes in governmental
policies with respect to such matters as laws and regulations, methods to
address inflation (including austerity measures that could adversely
affect consumer demand for products such as DVD players and Video CD
players), currency conversion and rates and methods of taxation.
 
        To date, a substantial portion of the revenues generated by the
Company in China have been earned in Renminbi (the Chinese currency) and
the Company expects that this will continue to be the case.  Renminbi
earnings must be converted to pay dividends or make other payments to the
Company in U.S. dollars or other freely convertible currencies.  As of
December 1, 1996, the Renminbi became fully convertible for current
account items, including profit distributions, interest payments and
receipts and expenditures from trade.  Certain ministerial approvals are
needed to acquire foreign exchange for a current account transaction.
Strict foreign exchange controls continue for capital account
transactions (including repayment of loan principal and return of direct
capital investments and transactions in investments in negotiable
securities).  In the past, there have been shortages of U.S. dollars or
other foreign currency available for conversion of Renminbi, and it is
possible such shortages could recur, or that restrictions on conversion
could be reimposed, in the future at times when the Company is seeking to
convert Renminbi.  Prior to 1994, the Renminbi experienced a significant
net devaluation against most major currencies, and during certain
periods, significant volatility in the market-based exchange rate.  In
early 1994, the Renminbi experienced an approximately 35% devaluation
against most major currencies, and the Renminbi to U.S. dollar exchange
rate has largely stabilized since that time.  However, China's finance
minister has recently stated that a failure to attain China's target 8%
growth in 1998 could affect the stability of the Renminbi.  Given the
current Asian financial crisis, there can be no assurance that the
Renminbi to U.S. dollar exchange rate will remain stable or that the
Company will continue to be able to remit foreign currency abroad.
 
        China's current legal system is relatively new, and the government
is still in the process of developing a comprehensive system of laws.
While considerable progress has been made in the promulgation of laws and
regulations dealing with economic matters such as corporate organization
and governance, foreign investment, commerce, taxation and trade, foreign
investors may be adversely affected by new laws, changes to existing laws
(or interpretations thereof) and preemption of provincial or local
regulations by national laws or regulations.  Moreover, experience with
respect to the implementation, interpretation and enforcement of such
laws and regulations is limited.  Administrative and judicial
interpretation and implementation and the enforcement of commercial
claims and resolution of commercial disputes may be subject (as has
recently been asserted by a number of American corporations doing
business in China) to the exercise of considerable discretion by both
administrative and judicial organs and may be influenced by external
forces unrelated to the legal merits of a particular matter or dispute.
Even where adequate laws exist and contractual terms are clearly stated,
there can be no assurance that the Company will obtain swift and
equitable enforcement of its rights under Chinese law.
 
        EXPROPRIATION.  The Chinese government has, in the past, renounced
various debt obligations incurred by predecessor governments, which
obligations remain in default, and expropriated assets without
compensation.  There can be no assurance that Chinese government will not
in the future expropriate or nationalize assets which may relate to any
current or prospective business operations of the Company.
 
        RELIANCE ON STATISTICS.  Statistics relating to economic,
demographic, and general business data are not widely disseminated within
or outside of China.  Further, certain Chinese statistics may not be
compiled in accordance with, or may not be subject to, Western standards
of accuracy.  The resultant imperfect information naturally hinders the
performance of the Company's business planning or investment analysis and
introduces risks in conducting business in China.
 
        RISKS ASSOCIATED WITH CONDUCTING BUSINESS IN SOUTH KOREA. As the
Company expands its DVD-ROM operations in South Korea, general economic
conditions in South Korea could have a significant impact on the business
prospects of the Company and its operations there.  South Korea has
experienced severe economic problems in the last 12 months, including a
slowing of GDP growth and export growth, currency devaluation and rising
unemployment.  In December 1997, the International Monetary Fund ("IMF")
outlined and began to implement a reform program designed to stabilize to
economy.  The IMF monetary reforms include limiting money growth during
1998 to a rate consistent with 5% percent inflation and maintaining a
flexible exchange rate policy.  IMF fiscal reforms include the
elimination of certain tax incentives and exemptions for corporations and
an increase in value added tax, excise tax and transportation taxes,
among others.  There can be no assurance that such reforms, or that any
future reforms, will not have a material adverse effect on the Company's
operations in South Korea, and thereby have a material adverse effect on
the Company's business, operations, prospects and financial results.
 
        The Company may also be adversely affected by changes in the
political and social conditions in South Korea, and by changes in
governmental policies with respect to such matters as laws and
regulations, methods to address inflation (including austerity measures
that could adversely affect consumer demand for products such as DVD
products), currency conversion and rates and methods of taxation.
 
        In early 1998, the South Korean currency, the Won, reached its
lowest exchange rate against the U.S. dollar in a decade.  Given the
current Asian financial crisis, there can be no assurance that the Won to
U.S. dollar exchange rate will not decline further.  Although the IMF
policy has stated that Korea will maintain a flexible exchange rate,
there can be no assurance that the Company will be able to obtain
sufficient dollars for conversion of Won, or that the IMF or the South
Korean government will not restrict the Company's ability to remit
foreign currency earnings to the United States.  It is possible shortages
of the Won could occur, or that restrictions on conversion could be
imposed in the future at times when the Company is seeking to convert
Won.  Any such restrictions could have a material adverse effect on the
Company's business, operations, prospects and financial results.
 
        DEPENDENCE ON KEY PERSONNEL AND NEED FOR ADDITIONAL MANAGEMENT
PERSONNEL.  The Company's operations to date have depended in large part
on the skills and efforts of Dr. Edmund Y. Sun, the Company's founder,
Chairman and former Chief Executive Officer and, to a lesser extent,
Thomas R. Parkinson, the Company's former President and Chief Executive
Officer.  The Company's operations also depend to a significant extent on
the performance and continued service of certain other key employees,
including Edward M. Miller, Jr., who was appointed the Company's Chief
Executive Officer in June 1998 after previously serving as the Company's
Chief Financial Officer, and Bob Werbicki, the Company's Vice President
of Engineering.  Competition for highly-skilled business, product
development, technical and other personnel is intense, and there can be
no assurance that the Company will be successful in recruiting new
personnel as needed or in retaining any of its existing personnel.  The
Company may experience increased costs in order to retain and attract
skilled employees.  The Company's failure to attract additional qualified
employees as needed or to retain the services of key personnel could have
a material adverse effect on the Company's business, financial condition
and results of operations.
 
        COMPETITION IN THE VIDEO CD PRODUCT AND DVD PRODUCT MARKETS.  The
Company's Video CD products currently compete with, and the Company's DVD
products, when introduced, will compete with, products marketed by other
manufacturers of Video CD players, subassemblies and components and DVD
products, respectively, as well as with alternative methods of displaying
audio and video such as video cassette players, laser discs, multimedia
computers and game machines, as well as with other companies' products
that use similar technologies.  The large video entertainment markets of
the United States and other industrial nations are currently served
primarily by VHS video cassettes and laser discs, and there can be no
assurance that DVD formats will be able to effectively compete for these
markets in the future.  A number of major electronics manufacturers have
entered the DVD consumer entertainment market and many other major
electronics manufacturers are expected to compete for this market should
it expand significantly.  In September 1997, a large U.S. consumer
electronics retailer announced plans to back DIVX an alternative
competing format called "DIVX," short for "digital video express." DIVX
disks are designed to be viewable only a limited number of times.  Unlike
rented video cassette tapes, DIVX disks need not be returned to the
retailer.  It is possible that these two competing, but similar,
technologies may create confusion in the minds of consumers that will
result in consumers being hesitant to invest in DVD players until a
dominant technology emerges.  Most of the Company's competitors and
potential competitors are substantially larger in size and have far
greater financial, technical, marketing, customer service and other
resources than the Company.  Certain of the Company's potential
competitors may have technological capabilities or other resources that
would allow them to develop alternative products which could compete with
the Company's products.
 
        Potential competitors may begin operations or expand their existing
operations into the Company's proposed markets before the Company is able
to successfully market its products.  The Company's ability to
effectively compete may be adversely affected by the ability of these
competitors to offer their products at lower prices than the price of the
Company's products and to devote greater resources to the sales and
marketing of their products than are available to the Company.
Competition in the Video CD market generally occurs on the basis of price
and features.  To date, the Company has been unable to offer its
customers products that are as competitively priced or as feature rich as
its larger competitors and there can be no assurance that the Company
will be able to do so in the future.  Moreover, manufacturers of Video CD
player sub-assemblies and components have substantially reduced the
selling prices of these items and further reductions in those prices can
be expected, which will require the Company to reduce its production
costs in order to remain competitive in the Video CD player, sub-assembly
and component markets.  Although the Company has been reducing its costs
of production for these products and is now focusing its efforts in the
commercial Video CD business rather than the more competitive consumer
Video CD business, there can be no assurance that it will be able to
remain competitive or that its operations will not be materially
adversely affected should competitors substantially reduce their prices
in the future.  There can be no assurance that future technological
advances will not result in improved products or services that could
adversely affect the Company's business.  Competition in the electronics
industry also extends to attracting and retaining qualified technical and
marketing personnel, and there can be no assurance that the Company will
be successful in attracting and retaining such qualified personnel.
 
        COMPETITION IN DIGITAL AD INSERTION MARKET.  Since August 1997, the
Company, through its New Media Division, has competed against other
suppliers of digital advertisement insertion systems, which provide cable
television operators with the ability to selectively insert local and
regional advertising into cable channel video streams.  The digital ad
insertion market is highly competitive and is currently dominated by two
suppliers, SeaChange International Inc. and SkyConnect, Inc.  Based on
its experience to date, and the substantial cash drain created by the New
Media Division, the Company does not believes that it can compete
effectively in the digital ad insertion market.  Thus, the Company has
decided to exit the digital ad insertion business.  The Company is
currently exploring various options to ensure an orderly liquidation of
assets remaining in the New Media Division.
 
        DEPENDENCE ON NONAFFILIATED AND FOREIGN MANUFACTURERS.  To date,
the Company has primarily relied on subcontractors and licensees, most of
whom have been located in China or Taiwan, to manufacture its products or
products incorporating the Company's products.  None of these
manufacturers are contractually obligated to meet the long-term
production requirements of the Company.  There can be no assurance that
the Company will be successful in entering into any such future
manufacturing arrangements with third parties on terms acceptable to the
Company, or at all.  As the Company begins to manufacture DVD products in
South Korea, the Company may rely on subcontractors and/or licensees.
The Company's arrangements with manufacturers in South Korea or elsewhere
may not prevent these manufacturers from entering into similar
arrangements with competitors of the Company or competing directly with
the Company.  The Company's reliance on third parties for manufacturing
components of its products reduces the Company's control over the
manufacture of its products and makes the Company substantially dependent
upon such third parties to deliver its products in a timely manner, with
satisfactory quality controls and on a competitive basis.  On several
occasions, the Company has had a number of its products manufactured in
Taiwan returned to it by customers due to quality control problems.
There can be no assurance that the Company will not experience quality
control problems or require product recalls in the future in its foreign
manufacturing operations that could have a material adverse effect on the
Company's business, financial condition and results of operations.
Further, foreign manufacturing is subject to a number of risks inherent
in foreign operations, including risks associated with the availability
of and time required for the transportation of products from such foreign
countries and increased risks of theft by personnel of source codes and
other proprietary product information in countries where intellectual
property is not well protected by law.  Although the Company has
experienced certain quality control problems in connection with the Panyu
Joint Venture's initial production of Video CD players, the Company
believes that manufacturing Video CD players and other products through
the Panyu Joint Venture ultimately will enable the Company to exercise
greater control over the quality of such products and the manufacturing
capacity required to make such products.
 
        LIMITED SALES AND MARKETING EXPERIENCE.  The Company's operating
results will depend to a large extent on its ability to successfully sell
and market its Video CD products, DVD products and network video
products.  The Company currently has limited marketing capabilities.
There can be no assurance that the Company will be able to recruit, train
or retain qualified personnel to market and sell its products or that it
will develop a successful sales and marketing strategy.  The Company also
has very limited marketing experience.  There can be no assurance that
any marketing efforts undertaken by the Company will be successful or
will result in any significant sales of its products.
 
        RISKS OF LIMITED PROTECTION FOR COMPANY'S INTELLECTUAL PROPERTY AND
PROPRIETARY RIGHTS AND INFRINGEMENT OF THIRD PARTIES' RIGHTS.  The
Company regards its products as proprietary and relies primarily on a
combination of patent, trademark, copyright and trade secret laws and
employee and third-party nondisclosure agreements to protect its
proprietary rights.  The Company possesses certain patent rights which
may limit competition against it in certain areas of the digital ad
insertion market, and has applied for patent protection in the United
States and certain other countries covering certain of the technologies
that relate to its digital ad insertion systems and network video
systems.  There are few barriers to entry into the market for many of the
Company's products, and there can be no assurance that any patents
applied for by the Company will be granted for any of these technologies
or that the scope of any patent claims allowed will be sufficiently broad
to protect against the use of similar technologies by the Company's
competitors.  There can be no assurance, therefore, that any of the
Company's competitors, many of whom have far greater resources than the
Company, will not independently develop technologies that are
substantially equivalent or superior to the Company's technology.
Further, the Company distributes certain of its products in countries
where intellectual property laws are not well developed or are poorly
enforced.  Legal protection of the Company's rights may be ineffective in
such countries, and software developed in such countries may not be
protectable in jurisdictions where protection is ordinarily available.
Software piracy and ineffective legal protection of the Company's
software in foreign jurisdictions may cause substantial losses of sales
by the Company, which could have a material adverse effect on the
Company's business, financial condition and results of operations.
 
        There can also be no assurance that third parties will not assert
infringement claims against the Company in the future with respect to
current or future products.  If infringement is alleged, the Company
could be required to discontinue the use of certain software codes or
processes, to cease the manufacture, use and sale of infringing products,
to incur significant litigation costs and expenses and to develop
non-infringing technology or to obtain licenses to the alleged infringing
technology.  There can be no assurance that the Company would be able to
develop alternative technologies or to obtain such licenses or, if a
license were obtainable, that the terms would be commercially acceptable
to the Company.
 
        The Company may be involved from time to time in litigation to
determine the enforceability, scope and validity of any proprietary
rights of the Company or of third parties asserting infringement claims
against the Company.  Any such litigation could result in substantial
costs to the Company and diversion of efforts by the Company's management
and technical personnel.
 
        CONTROL BY INSIDERS.  The Company's directors and officers,
together with Hyundai (a principal shareholder of the Company),
beneficially own shares of the Company's capital stock representing in
excess of 50% of the total voting power of the Company.  Accordingly, it
is likely that they will continue to be able to elect at least a majority
of the Company's directors and thereby direct the policies of the Company
for the foreseeable future.
 
        CHARGE TO INCOME IN THE EVENT OF RELEASE OF ESCROWED SECURITIES.
In the event that certain shares of Common Stock and certain options to
purchase Common Stock which were deposited into an escrow in connection
with the IPO ("Escrow Securities") owned by securityholders of the
Company who are officers, directors, consultants or employees of the
Company, or 140,760 shares received by Dr. Edmund Y. Sun in the ViComp
Acquisition that were escrowed in connection with the Company's follow-on
offering are released from escrow (the "Escrow Acquisition Shares"),
compensation expense will be recorded for financial reporting purposes.
Therefore, in the event the Company attains any of the earnings or stock
price thresholds required for the release of the Escrow Securities and
the foregoing Escrow Acquisition Shares owned by Dr. Sun, the release
will be treated, for financial reporting purposes, as expense of the
Company.  Accordingly, the Company will, in the event of the release of
the Escrow Securities or Dr. Sun's Escrow Acquisition Shares, recognize,
during the period that the conditions for such release are met, a
substantial non-cash charge to earnings that would increase the Company's
loss or reduce or eliminate earnings, if any, at such time.  The amount
of those charges will be equal to the aggregate market price of such
Escrow Securities or Escrow Acquisition Shares at the time of release
from escrow.  Although the amount of expense recognized by the Company
will not affect the Company's total shareholders' equity or cash flow, it
may depress the market price of the Company's securities.
 
        EFFECT OF OUTSTANDING OPTIONS AND WARRANTS.  The Company previously
has issued or granted warrants and stock options, some of which are
currently exercisable, for a substantial number of shares of the
Company's common stock.  Holders of such options and warrants may
exercise them at a time when the Company would otherwise be able to
obtain additional equity capital on terms more favorable to the Company.
 Moreover, while these options and warrants are outstanding, the
Company's ability to obtain financing on favorable terms may be adversely
affected.  If the trading price of the Company's common stock at the time
of exercise of any such options or warrants exceeds the exercise price,
as the Company anticipates it will, such exercise will have a dilutive
effect on the Company's shareholders.
 
        POSSIBLE ADVERSE EFFECTS OF AUTHORIZATION OF PREFERRED STOCK;
POTENTIAL ANTI-TAKEOVER PROVISIONS.  The Company's Amended and Restated
Certificate of Incorporation authorizes the issuance of a maximum of
5,000,000 shares of Preferred Stock on terms which may be fixed by the
Company's Board of Directors without further shareholder action.  The
terms of any series of preferred stock, which may include priority claims
to assets and dividends and special voting rights, could adversely affect
the rights of holders of the Common Stock and thereby reduce the value of
the Common Stock.  The issuance of preferred stock could make the
possible takeover of the Company or the removal of management of the
Company more difficult, discourage hostile bids for control of the
Company in which shareholders may receive premiums for their shares of
Common Stock or otherwise dilute the rights of holders of Common Stock.
In addition, the agreement governing the Escrow Securities contains
certain procedures that may make a possible takeover of the Company more
difficult.
 
        POSSIBLE VOLATILITY OF PRICE OF SECURITIES.  The Company believes
factors such as quarterly fluctuations in financial results and
announcements of new technology in the entertainment industry may cause
the market price of the Company's securities to fluctuate, perhaps
substantially.  These fluctuations, as well as general economic
conditions, such as recessions or high interest rates, may adversely
affect the market price of the securities.