<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10 - K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended December 31, 1997
OR
[ ] TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 1-8987
INOVISION CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
06-1043736
(I.R.S. Employer Identification Number)
c/o Proskauer Rose LLP,
1585 Broadway, New York, NY 10036
(Address of principal executive offices)(Zip Code)
(212) 969-3000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12 (b) of the Act: None
Securities Registered Pursuant to Section 12 (g) of the Act: Common Stock,
par value $.01 per share
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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_______
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (229.405 of this chapter) is not contained herein, and will
not be contained, to the best of the Registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this Form
10-K or any amendment of this Form 10-K. [ ]
<PAGE> 2
Number of shares outstanding of the Registrant's Common Stock, as of the latest
practicable date:
37,462,569 shares of Common Stock, par value $.01 per share, were outstanding as
of November 9, 1994 on which date the registrant closed its transfer book for
purposes of making liquidating distributions.
DOCUMENTS INCORPORATED BY REFERENCE: None.
2
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PART I
ITEM 1. BUSINESS
Inovision Corporation (formerly Vestron Inc.) (the "Company") conducted no
business operations during 1997. Historically, the revenues of the Company were
derived principally from the worldwide distribution, in home video and in other
media and markets, of feature films acquired from third parties. In July, 1991,
the Company sold substantially all of its operating assets and liabilities to
Vestron Acquisition Corporation ("VAC"), an indirect, wholly-owned subsidiary of
LIVE Entertainment Inc. and changed its name from Vestron Inc. to Inovision
Corporation. Immediately after the closing of the sale to VAC, the Company's
assets consisted principally of: (1) rights under litigations and settlement
agreements not acquired by VAC, including a claim against Security Pacific
National Bank (the "Security Pacific Litigation") and the Settlement Rights
described below; and (2) miscellaneous other assets. In May, 1993, the Company
received $100,000,000 (before legal fees and other costs) in full settlement of
its claims against Security Pacific. After 1991 the Company had no paid
employees but retained consultants who supplied services on an as needed basis.
Effective November 9, 1994 (the "Record Date"), the Company adopted a Plan of
Complete Liquidation and Dissolution (the "Plan" or "Plan of Liquidation").
Substantially all assets of the Company other than the Contingency Reserve and
the Settlement Rights described below were distributed to holders of the
Company's Common Stock on November 9, 1994 ("Record Date Holders") in a
liquidating distribution (the "Record Date Distribution") in the amount of $2.50
per share. Through December 31, 1997, assets aggregating $92,819,000 of the
Record Date Distribution were distributed to Record Date Holders, and the
remaining $837,000 of the Record Date Distribution, payable to Record Date
Holders who had not surrendered their share certificates as of December 31,
1997, is recorded as a liability on the Company's December 31, 1997 statement of
net assets in liquidation.
In addition to the Contingency Reserve and the Settlement Rights, the Company
may be entitled to the payment of an Overage Amount by Frogtown Holdings, Inc.,
the Company's majority stockholder (the "Majority Stockholder"), as described in
"Item 13. Certain Relationships and Related Transactions". The Company, prior to
September 30, 1998, will either liquidate its remaining assets and make a final
distribution of the aggregate amount of cash held by the Company (after payment
or provision for payment of the Company's indebtedness and other obligations),
if any, pro rata per share to each Record Date Holder or, in lieu of making such
distributions, in the discretion of the Board, the Company may transfer all of
its assets to a liquidating trust. In such event, the Company would distribute
beneficial interests in such liquidating trust pro rata per share to the Record
Date Holders, in complete liquidation. No distribution shall be
3
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made by the Company or a liquidating trust, if any, to any Record Date Holder if
the aggregate amount of the final distribution to the Record Date Holder would
be less than $1.00.
Pursuant to the Plan, a contingency reserve (the "Contingency Reserve") had been
established to prosecute a litigation relating to the production of an animated
motion picture featuring music by the Beatles. The litigation was settled in
1995 and the remaining portion of the Contingency Reserve was reversed. Pursuant
to the settlement (the "ITC Settlement") the Company has rights to future
payments of (i) $33,333 received in January 1998, and (ii) depending upon an
amount in respect to taxes which may be payable, between $282,500 and $332,500
payable in January 2000. If principal photography on this motion picture
commences, the foregoing payment will be accelerated to the date on which such
principal photography commences. The Company also is a party to a settlement and
escrow agreement (the "Benji Settlement") with the producers of the theatrical
motion picture, "Benji, the Hunted," pursuant to which the Company shares in the
royalties periodically generated by the film. Pursuant to the Benji Settlement,
the Company has received $1,551,000 prior to 1997 and an additional $24,220 in
1997. The Company will receive 30% of all future royalties, until the total
royalties received by the Company under the settlement reaches $3,000,000. At
that point, the -Company will not be entitled to share in any future royalties.
The Benji Settlement and the ITC Settlement are referred to herein as the
"Settlement Rights."
ITEM 2. DESCRIPTION OF PROPERTIES
The Company does not own or lease any real property.
ITEM 3. LEGAL PROCEEDINGS
While the Company is not a party to any legal proceedings which the Company
deems material, a former subsidiary of the Company which has been dissolved is a
defendant in Kling vs. United Feature Syndicate, Inc., et al, pending in the
United States District Court, Central District of California, Index No. 97-6293,
commenced August 21, 1997. In this action, plaintiff seeks damages from numerous
defendants, as well as an accounting and injunctive relief, in connection with
the alleged unauthorized distribution of certain animated television episodes.
The Company is seeking the withdrawal or dismissal of the action against the
dissolved subsidiary and has given notice to third parties which licensed the
subsidiary with respect to the episodes of the Company's claim for
indemnification.
Former executives of the Company have been subpoenaed in connection with an
action brought against LIVE Entertainment, Inc., among others, involving claims
for royalties. While no claim has been asserted against the Company, the royalty
claims relate in part to periods prior to the Company's sale of its operating
assets and liabilities in July 1991.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
5
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
MARKET INFORMATION
The Company closed its transfer books on the Record Date and at such time the
Company's transfer agent ceased recording stock transfers and issuing stock
certificates. Accordingly, trading in the shares ceased on that date. Future
distributions, if any, under the Plan (including distributions by the
liquidating trust, if any) will be made to Record Date Holders according to
their stockholdings as of the Record Date. Interests in any liquidating trust
will not be transferable except by bequest or inheritance, in the case of an
individual, or by operation of law. Each Record Date Holder is required to
surrender certificates representing his, her or its shares of Common Stock in
order to receive any liquidating distribution. Accordingly, most stockholders
have forwarded their stock certificates, together with the letter of transmittal
properly executed and completed, to the Company's transfer agent. All
distributions otherwise payable by the Company, if any, under the Plan to Record
Date Holders who have not surrendered their stock certificates will be held for
such stockholders, without interest, until the surrender of their certificates
(subject to escheat pursuant to applicable laws relating to unclaimed property).
There are 2,089 Record Date Holders.
DIVIDENDS
Except for the Record Date Distribution and any future distributions that may
occur under the Plan, the Company has not paid, and will not pay, any dividends.
6
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ITEM 6. SELECTED FINANCIAL DATA
Statement of Operations Data (5)
<TABLE>
<CAPTION>
(in thousands except for per share information) Period Period
Year Year Year 11/9/94 1/1/94
Ended Ended Ended to to
12/31/97 12/31/96 12/31/95 12/31/94 11/8/94
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Continuing Operations:
Litigation (expense) settlement N/A N/A N/A N/A (129)
Unrealized (loss) on marketable securities N/A N/A N/A N/A (3,226)
Realized loss on marketable securities N/A N/A N/A N/A (531)
Interest income N/A N/A N/A N/A 3,034
General and administrative expenses, net of
miscellaneous income N/A N/A N/A N/A (328)
--------- --------- --------- --------- ---------
Income (loss) before reorganization expense
and income tax benefit N/A N/A N/A N/A (1,180)
Reorganization expenses N/A N/A N/A N/A --
--------- --------- --------- --------- ---------
Income (loss) before income tax benefit N/A N/A N/A N/A (1,180)
Income tax benefit N/A N/A N/A N/A --
--------- --------- --------- --------- ---------
Income (loss) from continuing operations N/A N/A N/A N/A (1,180)
Discontinued Operations:
Loss from discontinued operations N/A N/A N/A N/A --
Gain (loss) on disposal of discontinued N/A N/A N/A N/A --
operations
--------- --------- --------- --------- ---------
Income (loss) from discontinued operations N/A N/A N/A N/A --
--------- --------- --------- --------- ---------
Net income (loss) before cumulative effect
of change in accounting principle N/A N/A N/A N/A (1,180)
Cumulative effect of change in accounting principle(2) N/A N/A N/A N/A 1,413
Net income (loss) $N/A N/A N/A $N/A $ 233
========= ========= ========= ========= =========
Basic net income (loss) per share:
Continuing operations $N/A N/A N/A $N/A $ (0.03)
Discontinued operations N/A N/A N/A N/A --
Cumulative effect of change in accounting N/A N/A N/A N/A 0.04
principle per share
--------- --------- --------- --------- ---------
Total basic income (loss) per share (3) $N/A $N/A $N/A $N/A $ 0.01
========= ========= ========= ========= =========
Weighted average number of common shares outstanding N/A N/A N/A N/A 37,463
========= ========= ========= ========= =========
Balance Sheet Data
Assets of discontinued operations N/A N/A N/A N/A N/A
Total assets N/A N/A N/A N/A N/A
Stockholders' equity (deficit)(4) N/A N/A N/A N/A N/A
Net assets in liquidation (1) 1,922 1,798 1,636 1,135 N/A
Net assets in liquidation per share 0.05 0.05 0.04 0.03 N/A
</TABLE>
<TABLE>
<CAPTION>
(in thousands except for per share information) Year Ended
December 31,
-------------------------
1993 1992
--------- ---------
<S> <C> <C>
Continuing Operations:
Litigation (expense) settlement 94,251 (1,283)
Unrealized (loss) on marketable securities -- --
Realized loss on marketable securities -- --
Interest income 2,038 --
General and administrative expenses, net of
miscellaneous income (375) (254)
--------- ---------
Income (loss) before reorganization expense
and income tax benefit 95,914 (1,537)
Reorganization expenses -- --
--------- ---------
Income (loss) before income tax benefit 95,914 (1,537)
Income tax benefit -- --
--------- ---------
Income (loss) from continuing operations 95,914 (1,537)
Discontinued Operations:
Loss from discontinued operations -- --
Gain (loss) on disposal of discontinued -- --
operations
--------- ---------
Income (loss) from discontinued operations -- --
--------- ---------
Net income (loss) before cumulative effect
of change in accounting principle 95,914 (1,537)
Cumulative effect of change in accounting principle(2) -- --
(2)
Net income (loss) $95,914 $(1,537)
========= =========
Basic net income (loss) per share:
Continuing operations $2.56 $(0.04)
Discontinued operations -- --
Cumulative effect of change in accounting -- --
principle per share
--------- ---------
Total basic income (loss) per share (3) $ 2.56 $ (0.04)
========= =========
Weighted average number of common shares outstanding 37,463 37,463
========= =========
Balance Sheet Data
Assets of discontinued operations -- --
Total assets ERR 102
Stockholders' equity (deficit)(4) ERR (2,077)
Net assets in liquidation (1) N/A N/A
Net assets in liquidation per share N/A N/A
</TABLE>
(1) The Company adopted a the Plan of liquidation effective November 9,
1994. The financial statements have been presented on a going concern
basis for the periods on and before November 8, 1994, and on a
liquidation basis effective on and after November 9, 1994.
(2) The Company adopted Statement of Financial Accounting Standards No. 115
"Accounting for Certain Investments in Debt and Equity Securities",
effective January 1, 1994.
(3) The Company adopted Statement of Financial Accounting Standards No.
128, "Earnings per Share." The effect of the diluted earnings per share
calculation is either anti-dilutive or inapplicable for all other years
presented.
(4) The Company has not paid any cash dividends.
7
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company conducted no business operations after 1991.
On November 9, 1994, the Plan of Liquidation became effective and for periods
thereafter the Company's financial statements are presented on a liquidation
basis. Under the liquidation basis of accounting, assets are stated at their
anticipated net realizable value. The adjustments to reflect the change to
liquidation basis of accounting was an increase in net assets in liquidation of
$698,000. Pursuant to the Plan of Liquidation, assets aggregating $92,819,000 of
the Record Date Distribution were distributed to Record Date Holders through
December 31, 1997. The remaining $837,000 of the Record Date Distribution,
payable to Record Date Holders who had not surrendered their share certificates
as of December 31, 1997, is recorded as a liability on the Company's December
31, 1997 Statement of Net Assets in Liquidation. The Company's Statement of Net
Assets in Liquidation as of December 31, 1997 includes cash equivalents,
marketable securities and the Settlement Rights. The Company also may be
entitled to the Overage Amount, if any. See "Item 13. Certain Relationships and
Related Transactions."
8
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ITEM 8. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page:
<S> <C>
INDEPENDENT AUDITORS'
REPORT 10
FINANCIAL STATEMENTS:
Statement of Net Assets in
Liquidation 11
as of December 31, 1996 and 1997
(Liquidation Basis)
Statement of Changes in Net Assets in
Liquidation 12
Years Ended December 31, 1995, 1996 and 1997
(Liquidation Basis)
Notes to Financial Statements 13
</TABLE>
9
<PAGE> 10
PEAT MARWICK LLP
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Inovision Corporation:
We have audited the statement of net assets in liquidation of Inovision
Corporation as of December 31, 1997 and 1996, and the related statement of
changes in net assets in liquidation for each of the years in the three year
period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatements. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
As described in Note 1 to the financial statements, the stockholders of
Inovision Corporation approved a plan of liquidation effective November 9,
1994, and the Company commenced liquidation shortly thereafter. As a result,
the Company has changed its basis of accounting for periods subsequent to
November 8, 1994 from the going concern basis to a liquidation basis.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets in liquidation as of December 31, 1997
and 1996, and the changes in its net assets in liquidation for each of the
years in the three year period ended December 31, 1997, in conformity with
generally accepted accounting principles applied on the bases described in the
preceding paragraph.
KPMG Peat Marwick LLP
Stamford, Connecticut
March 12, 1998
<PAGE> 11
INOVISION CORPORATION
STATEMENT OF NET ASSETS IN LIQUIDATION
AS OF DECEMBER 31, 1996
AND DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(LIQUIDATION BASIS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Cash and cash equivalents (note 1) $ 1,364 $ 724
Marketable Securities (note 1) 1,907 2,459
Settlement rights (note 5) 230 253
----------- -----------
$ 3,501 $ 3,436
----------- -----------
LIABILITIES
Accrued expenses and other liabilities
including liquidation costs (note 3) $ 742 $ 796
Liquidation distribution payable (note 4) 837 842
----------- -----------
1,579 1,638
----------- -----------
Net assets in liquidation (note 1) $ 1,922 $ 1,798
=========== ===========
Number of common shares as of Record Date (note 1) 37,462,569 37,462,569
----------- -----------
Net assets in liquidation per share $ 0.05 $ 0.05
----------- -----------
</TABLE>
See accompanying notes to financial statements.
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INOVISION CORPORATION
STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
FOR THE YEAR ENDED DECEMBER 31, 1995, 1996 and 1997
(IN THOUSANDS)
(LIQUIDATION BASIS)
<TABLE>
<S> <C>
NET ASSETS IN LIQUIDATION AT DECEMBER 31, 1994 $ 1,135
-------
Interest income 144
Reduction in remaining unapplied ITC Settlement contingency reserve 343
Unrealized Gain in Marketable Securities 5
Other Income 9
-------
NET ASSETS IN LIQUIDATION AT DECEMBER 31, 1995 $ 1,636
-------
Interest income 155
Adjustment to Settlement Rights 38
Unrealized (Loss) in Marketable Securities (28)
Realized (Loss) in Marketable Securities (3)
-------
NET ASSETS IN LIQUIDATION AT December 31, 1996 $ 1,798
-------
Interest income 158
Realized (Loss) in Marketable Securities (34)
-------
NET ASSETS IN LIQUIDATION AT DECEMBER 31, 1997 $ 1,922
=======
</TABLE>
See accompanying notes to financial statements.
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INOVISION CORPORATION
Notes to Financial Statements
December 31, 1997, 1996 and 1995
LIQUIDATION BASIS STATEMENTS - NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
On June 16, 1994, the Board of Directors authorized and adopted the Company's
Plan of Complete Liquidation and Dissolution (the "Plan"), Pursuant to the Plan,
a contingency reserve (the "Contingency Reserve") was established to prosecute
the litigation with ITC. The remaining ITC Contingency Reserve was eliminated in
1995 after receipt of settlement funds (see note 5).
The Company, prior to September 30, 1998, will either liquidate its remaining
assets and make a final distribution of the aggregate amount of cash held by the
Company (after payment or provision for payment of the Company's indebtedness
and other obligations), if any, pro rata per share to each Record Date Holder
or, in lieu of making such distributions, in the discretion of the Board, the
Company may transfer all of its assets to a liquidating trust. In such event,
the Company would distribute beneficial interests in such liquidating trust pro
rata per share to the Record Date Holders, in complete liquidation.
As a result, the Company has adopted the liquidation basis of accounting for all
periods subsequent of November 8, 1994. Under the liquidation basis of
accounting, assets are stated at their estimated net realizable value and
liabilities are stated at their estimated amounts.
The valuation of assets and liabilities necessarily requires many estimates and
assumptions, and there are substantial uncertainties in carrying out the
provisions of the Plan. The actual value of any additional liquidating
distributions will depend upon a variety of factors not presently determinable.
The valuations presented in the accompanying Statement of Net Assets in
Liquidation represent estimates, based on present facts and circumstances, of
the estimated realizable values of assets, estimated liabilities and estimated
costs associated with carrying out the provisions of the Plan. The actual values
and costs could be higher or lower than the amounts recorded.
CASH AND CASH EQUIVALENTS
Cash equivalents consist of cash and tax-exempt municipal debt instruments
having maturities of 90 days or less. The carrying amount is a reasonable
estimate of fair value.
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INOVISION CORPORATION
Notes to Financial Statements
MARKETABLE SECURITIES
Marketable securities consists of tax-exempt municipal obligations with 1998
maturities. Interest income is accrued as earned and is reflected in the asset
value of the marketable securities. Marketable Securities are valued at
approximate market price.
(2) LIQUIDATION RELATED PARTY TRANSACTIONS
Pursuant to the Company's Plan of Liquidation, certain In Kind Assets with no
book value consisting of remaining development and sequel rights, insurance
claims, incidental tangible assets, and tradenames were treated as part of the
liquidating distribution to the Company's Majority Stockholder at an ascribed
value of $120,000. The Company believes its ascribed values of the In Kind
Assets were reasonable estimates as of the Record Date. To the extent that the
In Kind Assets generate net proceeds to the Majority Stockholder substantially
in excess of the values ascribed, the Company will receive additional proceeds
to distribute to minority stockholders.
The Company believes that it has tax net operating loss carryforwards which, due
to the Company's liquidation, it may not utilize. The NOLs are generally
available to offset future income of the Company or other members of its
consolidated group. Furst Holdings, Inc., a company owned by Austin O. Furst,
Jr., the Company's chairman, and members of his family, and Frogtown Holdings,
Inc., a wholly-owned subsidiary of Furst Holdings, Inc., are the parent of the
consolidated group of which the Company is a member and the Company's immediate
parent company, respectively, and accordingly, under applicable tax law, may
utilize the NOLs. As Furst Holdings or Frogtown Holdings utilizes all or any
portion of the NOLs to offset future income, the portion of the NOLs so utilized
will not inure to the benefit of the Company's other stockholders. If all of
such NOLs had been utilized by the Company prior to liquidation, such
utilization would have resulted in a maximum tax benefit to the Company in an
amount not exceeding approximately 15 cents per share. Frogtown Holdings and
Furst Holdings have entered into a Tax Assumption and Acknowledgment Agreement
dated as of October 11, 1994 ("Tax Agreement").
Under the Tax Agreement, Furst Holdings and Frogtown Holdings have acknowledged
that as a matter of law they are liable for any unpaid federal income tax
liability of the Company in excess of the assets of the Company available for
the payment thereof; have agreed to be liable for any unpaid state and local
income tax liability of the Company in excess of the assets of the Company
available for the payment thereof; have agreed to indemnify the Company's other
stockholders in respect of any such federal,
14
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INOVISION CORPORATION
Notes to Financial Statements
state and local income tax liability; and have waived any rights they may have
to seek contribution from such stockholders in respect of the payment of these
taxes or any other liabilities on behalf of the Company, although Furst Holdings
and Frogtown Holdings have retained any rights they may have in respect thereof
against the Company or any liquidating trust established by the Company.
(3) ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses at December 31, 1997, 1996 and 1995 include estimates of costs
to be incurred in carrying out the Plan. These costs include a reserve for legal
fees and other estimated liabilities. The actual costs could vary significantly
from the related provisions due to uncertainty related to complexities and
contingencies which may arise.
(4) LIQUIDATING DISTRIBUTIONS
Pursuant to the Plan, substantially all assets of the Company other than the
Contingency Reserve and the Settlement Rights (see note 5) were distributed to
holders of the Company's Common Stock on November 9, 1994 ("Record Date
Holders") in a liquidating distribution (the "Record Date Distribution") in the
amount of $2.50 per share. Through December 31, 1997, assets aggregating
$92,819,000 of the Record Date Distribution were distributed to Record Date
Holders, and the remaining $837,000 of the Record Date Distribution, payable to
Record Date Holders who had not surrendered their share certificates as of
December 31, 1997, is recorded as a liability on the Company's December 31, 1997
Statement of Net Assets in Liquidation.
(5) SETTLEMENT RIGHTS
The Company is a party to a settlement agreement (the "ITC Settlement") relating
to the production of an animated motion picture featuring music by the Beatles.
In January 1989, the Company brought an action against ITC Productions, Inc.
("ITC"), Computer Graphics Laboratories, Inc. and GCL Studios, Inc. The Company
agreed to settle the litigation on April 19, 1994. Pursuant to the Company's
Plan of Liquidation a $500,000 contingency reserve was recorded on the
liquidation basis accounting records to provide for liabilities, if necessary,
to be incurred to prosecute the litigation pending the closing of the
settlement. During 1995 this $500,000 Contingency Reserve was applied against
$157,000 of professional fees and expenses, and the remaining balance of
$343,000 was reversed. Pursuant to the ITC Settlement, the Company received
$908,333 in January 1995, $33,333 in January 1996, $33,333 in January 1998, and
has rights to a future payment of between $282,500 and $332,500 payable in
January 2000 depending upon an amount in respect to taxes which may be payable.
If principal photography on this motion picture commences, the foregoing payment
will be accelerated to the date on which such principal photography commences.
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<PAGE> 16
The Company also is a party to a settlement and escrow agreement (the "Benji
Settlement") with the producers of the theatrical motion picture, "Benji, the
Hunted," pursuant to which the Company shares in the royalties periodically
generated by the film. Pursuant to the Benji Settlement, the Company has
received $1,551,000 prior to 1997 and an additional $24,220 in 1997. The Company
will receive 30% of all future royalties, until the total royalties received by
the Company under the settlement reaches $3.0 million. At that point, the
Company will not be entitled to share in any future royalties.
16
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT
See Item 12.
ITEM 11. EXECUTIVE COMPENSATION
During the fiscal years ended December 31, 1997, 1996 and 1995, the Company had
no executive officers other than Austin O. Furst, Jr., Chairman of the Board and
Chief Executive Officer. Mr. Furst received no compensation from the Company
during the three year period.
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ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the following Record
Date Holders by: (i) each director of the Company and (ii) all directors and
officers as a group.
<TABLE>
<CAPTION>
Number and Percentage of
Shares of Common Stock
Principal Occupation Director Owned Beneficially as of
Name and Age or Employment Since November 9, 1994 (a)
- ------------------------- ------------------------ -------- ------------------------------
<S> <C> <C> <C> <C>
Austin O. Furst, Jr., 54* Chairman of the Board 1981 30,767,400 (b) 82.13%
Natural World, Inc.
Stephen L. Einhorn, 55 President 1985 101,000 **
New Line Home Video
Klaus Eppler, 67 Partner 1985 (c) **
Proskauer Rose LLP
Attorneys-at-law
Donald Sting, 57 Private Investor 1988 - **
All directors and officers as a group 30,868,400 82.40%
(4 persons)
</TABLE>
* Chairman of the Board and sole executive officer of the Company.
** Less than 1%
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(a) The table lists all shares of Common Stock as to which the listed person
have or share the power to vote or direct disposition, as reported to the
Company on November 9, 1994, the date on which trading in Common Stock ceased.
Unless otherwise indicated, each person listed had the sole power to vote and
direct disposition of the shares shown as beneficially owned (under the
applicable rules of the Securities and Exchange Commission) by him.
(b) All shares of the Company listed were held indirectly by Furst Holdings,
Inc. ("Furst Holdings"). Mr. Furst is a director and owns 3,271 shares of the
voting common stock of Furst Holdings (which constitutes 59.15% of the
outstanding voting common stock and 32.71% of the outstanding capital stock of
Furst Holdings). For purposes other than Section 13(d) and 13(g) of the
Securities Exchange Act of 1934, Mr. Furst disclaims (A) beneficial ownership of
1,624,519 (5.28%) of the shares of the Company held indirectly by Furst Holdings
that represent the proportionate interest in such shares of Leslie F. Furst, Mr.
Furst's wife, arising from her (and a family trust formed by her) ownership of
528 shares of the voting common stock of Furst Holdings, (B) beneficial
ownership of 5,325,837 (17.31%) of such shares that represent the proportionate
interest in such shares of certain trusts (the "Trusts") for the benefit of Mr.
Furst's family and of which Mr. Eppler is trustee, arising from the Trusts'
ownership of 1,731 shares of the voting common stock of Furst Holdings and (C)
pecuniary interest in 13,753,027 (44.7%) of such shares that represent the
proportionate interest in such shares of the Trusts, arising from the Trusts'
ownership of 4,470 shares of non-voting common stock of Furst Holdings. Does not
include 479,000 shares of the Company's Common Stock held by the charitable
foundations referred to in footnote (c) below. Mr. Furst is one of the directors
of one such foundation and Mrs. Furst is one of the directors of the other such
foundation. Mr. Furst disclaims beneficial ownership of the shares held by such
foundations.
(c) Does not include any shares held by Furst Holdings. Mr. Eppler is a director
of Furst Holdings and acts as trustee of the Trusts, which own 31.3% of the
outstanding voting common stock and 100% of the outstanding non-voting common
stock of Furst Holdings, which together constitutes 62.01% of the outstanding
capital stock of Furst Holdings. Mr. Eppler disclaims beneficial ownership of
all the shares held indirectly by Furst Holdings for the purposes of Section 13
(d) and 13 (g) of the Securities Exchange Act of 1934 and disclaims beneficial
ownership of all but 19,078,864 (62.01%) of the shares held indirectly by Furst
Holdings (which corresponds to the aggregate percentage of the outstanding
capital stock of Furst Holdings held by Mr. Eppler as trustee for the benefit of
Mr. Furst's family) for all other purposes. Does not include 479,000 shares of
the Company's Common Stock owned by two charitable foundations of which Mr.
Eppler serves as director. One such foundation owns 239,000 shares of the
Company's Common Stock and the other foundation owns 240,000 shares of the
Company's Common Stock. Mr. Eppler shares voting power and power to direct
disposition of the shares held by these foundations and disclaims beneficial
ownership of shares held by them.
19
<PAGE> 20
Mr. Eppler serves as a director of Bed Bath & Beyond Inc. and The Dress Barn,
Inc.
The following table sets forth, as of November 9, 1994, the date on which
trading on the shares ceased, certain information with respect to the beneficial
ownership of the Company's Common Stock, within the meaning of the Rule 13d-3
under the Securities Exchange Act of 1934, by each person who is known by the
Company to own beneficially more than 5% of the Company's Common Stock as
furnished to the Company:
<TABLE>
<CAPTION>
Shares Beneficially % of Shares
Name (a) Owned Outstanding
<S> <C> <C>
Austin O. Furst, Jr.
Furst Holdings, Inc. 30,767,400(b) 82.13%
Frogtown Holdings, Inc.
</TABLE>
(a) The address of Austin O. Furst, Jr., Furst Holdings and Frogtown Holdings,
Inc. ("Frogtown Holdings") is P.O. Box 392, Lewes, Delaware. Mr. Furst, Furst
Holdings and Frogtown Holdings are controlling persons of the Company. All the
shares listed were owned by Frogtown Holdings, which is a wholly-owned
subsidiary of Furst Holdings. Mr. Furst, a director of Frogtown Holdings and
Furst Holdings, owns 59.15% of the outstanding voting common stock of Furst
Holdings. The other directors are Leslie F. Furst, Mr. Furst's wife, and Mr.
Eppler. For all purposes other than Section 13(d) and 13(g) of the Securities
Exchange Act of 1934, Mr. Furst disclaims (A) beneficial ownership of 1,624,519
(5.28%) of the shares of the Company held indirectly by Furst Holdings that
represent the proportionate interest in such shares by Mrs. Furst, arising from
her, and her family trust's, ownership of 528 shares of the voting common stock
of Furst Holdings, (B) beneficial ownership of 5,325,837 (17.31%) of such shares
that represent the proportionate interest in such shares of the Trusts, arising
from the Trusts' ownership of 1731 shares of the voting common stock of Furst
Holdings, and (C) pecuniary interest in 13,753,027 (44.7%) of such shares that
represent the proportionate interest in such shares of the Trusts, arising from
the Trusts' ownership of 4,470 shares of the non-voting common stock of Furst
Holdings.
(b) Does not include 239,000 shares of the Company's Common Stock owned by a
charitable foundation of which Messrs. Furst and Eppler serve as directors and
240,000 shares of the Company's Common Stock owned by a second charitable
foundation of which Mrs. Furst and Mr. Eppler serve as directors.
20
<PAGE> 21
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
The Company believes that it has tax net operating loss carryforwards, which due
to the Company's liquidation, it may not utilize (see note 2 - "Liquidation
Related Party Transactions"). The NOLs are generally available to offset future
income of the Company or other members of its consolidated group. As a result of
its liquidation, the Company does not anticipate utilizing the NOLs. Furst
Holdings, Inc., a company owned by Austin O. Furst, Jr., the Company's chairman,
and members of his family, and Frogtown Holdings, Inc., a wholly-owned
subsidiary of Furst Holdings, Inc., are the parent of the consolidated group of
which the Company is a member and the Company's immediate parent company,
respectively, and accordingly, under applicable tax law, may utilize the NOLs.
As Furst Holdings or Frogtown Holdings utilizes all or any portion of the NOLs
to offset future income, the portion of the NOLs so utilized will not inure to
the benefit of the Company's other stockholders. If all of such NOLs had been
utilized by the Company prior to liquidation, such utilization would have
resulted in a maximum tax benefit to the Company in an amount not exceeding
approximately 15 cents per share. Frogtown Holdings and Furst Holdings have
entered into a Tax Assumption and Acknowledgment Agreement dated as of October
11, 1994 ("Tax Agreement"). Under the Tax Agreement, Furst Holdings and Frogtown
Holdings have acknowledged that as a matter of law they are liable for any
unpaid federal income tax liability of the Company in excess of the assets of
the Company available for the payment thereof; have agreed to be liable for any
unpaid state and local income tax liability of the Company in excess of the
assets of the Company available for the payment thereof; have agreed to
indemnify the Company's other stockholders in respect of any such federal, state
and local income tax liability; and have waived any rights they may have to seek
contribution from such stockholders in respect of the payment of these taxes or
any other liabilities on behalf of the Company, although Furst Holdings and
Frogtown Holdings have retained any rights they may have in respect thereof
against the Company or any liquidating trust established by the Company.
The Record Date Distribution was made solely in cash to all stockholders other
than the Majority Stockholder. The Majority Stockholder received its Record Date
Distribution by delivery of (A) certain assets of the Company with an ascribed
value of $120,000 (the "In Kind Assets") and (B) the remainder in cash, cash
equivalents and marketable tax-exempt municipal debt securities with an ascribed
value equal to the average of the quotes thereon by two independent valuation
sources on November 8, 1994.
The In Kind Assets, which constituted less than 0.2% of the Majority
Stockholder's Record Date Distribution, consisted of certain development and
sequel rights, an insurance claim, and certain incidental tangible assets and
tradenames, none of which had any book value. While no substantial effort was
made by the Company to market the development and sequel
21
<PAGE> 22
rights, the Company believed that there was no current market for any of the In
Kind Assets and that any sale thereof to a third party would result in little,
if any, consideration therefor received by the Company. Accordingly, the Company
believed that a transfer in kind of such assets to the Majority Stockholder in
partial payment of the Majority Stockholder's Record Date Distribution would
result in a benefit to the Company's minority stockholders by increasing the
Record Date Distribution they received in comparison to that which they would
have received had the In Kind Assets been disposed of prior to the Record Date.
While the Company believes its ascribed values of the In Kind Assets were
reasonable estimates as of the Record Date, these values were arbitrarily
ascribed rather than determined through appraisal, arms' length negotiation or
in any other manner. These prices may not have been as high as the price a third
party might have been willing to pay for the In Kind Assets, if such a purchaser
had been found.
Notwithstanding the foregoing, in connection with the Plan, the Majority
Stockholder executed and delivered to the Company an agreement to pay to the
Company between August 1, 1998 and August 31, 1998 an amount (the "Overage
Amount") equal to 17.95% of the difference between (i) the excess, if any, of
(A) all cash amounts theretofore received in respect of a sale, transfer,
license or other disposition of the In Kind Assets after the Record Date (net of
all costs and expenses incurred in connection with such sale, transfer, license
or other disposition) over (B) $250,000 (the "Minimum Value"); minus (ii) the
amount of any liabilities of the Company paid by the Majority Stockholder;
provided, however, that in no event will the Majority Stockholder be required to
make any payment to the Company if the Overage Amount is not, on the sixtieth
day prior to the third anniversary of the close of the Company's taxable year
during which the Record Date Distribution is made, in an amount equal to or
greater than $50,000 (the "Overage Minimum").
Austin O. Furst, Jr., Chairman of the Board of the Company, is a director and
substantial stockholder of Furst Holdings and members of his immediate family or
trusts for their benefit (the "Trusts") own the balance of the stock in Furst
Holdings. Klaus Eppler, a Director of the Company, is a director of Furst
Holdings and acts as trustee of certain of the Trusts. The law firm in which Mr.
Eppler is a partner has served as general counsel to the Company since its
inception and represented the Company in connection with the Security Pacific
Litigation, the ITC Litigation and the Plan of Complete Liquidation and
Dissolution, and continues to represent the Company.
22
<PAGE> 23
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
Page:
<S> <C>
(A) (1) THE FOLLOWING FINANCIAL STATEMENTS
ARE INCLUDED IN PART II, ITEM 8:
Independent Auditors' Report 10
Statement of Net Assets in Liquidation 11
as of December 31, 1996 and 1997
(Liquidation Basis)
Statement of Changes in Net Assets in Liquidation 12
Years Ended December 31, 1995, 1996 and 1997
(Liquidation Basis)
</TABLE>
23
<PAGE> 24
(A) (3) EXHIBITS INCLUDED HEREIN:
Exhibit Number Exhibits Page
2 (a) Plan of Complete Liquidation and Dissolution
incorporated by reference from exhibit to Information
Statement dated October 11, 1994
3 (a) Certificate of Incorporation of the Registrant, as
amended.*
b) By-Laws of the Registrant.**
(c) Amendment to Certificate of Incorporation of the
Registrant, as amended, effecting the change of the
Registrant's name from Vestron Inc. to Inovision
Corporation.***
10 (a) Tax Assumption and Acknowledgment Agreement
dated as of October 11, 1994.****
(b) Letter from Frogtown Holdings, Inc.
dated as of October 11, 1994.****
(c) Indemnification Agreement dated as of October 30, 1990
by and among Vestron Acquisition Corp., Furst Holdings Inc.,
Frogtown Holdings, Inc., Austin O. Furst, Jr. and the
Registrant (Incorporated by reference to Exhibit 2 to the
Registrant's Current Report on Form 8-K dated October 30,
1990).
(d) Securities Indemnification Agreement dated as of October
30, 1990 by and among Vestron Acquisition Corp., Furst
Holdings Inc., Frogtown Holdings, Inc., Austin O. Furst, Jr.
and the Registrant (Incorporated by reference to Exhibit 3
to the Registrant's Current Report on Form 8-K dated October
30, 1990).
(e) Key Debenture holder Agreement dated as of October 31,
1990 among the Registrant, LIVE Entertainment, Inc., Vestron
Acquisition Corp., et al. (Incorporated by reference to
Exhibit 4 to the Registrant's Current Report on Form 8-K
dated October 30, 1990).
- --------------------------
* Incorporated by reference to the Company's Annual Report on Form 10-K for the
year ended December 31, 1987 (File No. 1-8987). The exhibit number of such
exhibits on said Form 10-K are the same as such number specified above.
** Incorporated by reference to the Company's Registration Statement on Form S-1
(No. 2-99947) which became effective on October 8, 1985. The exhibit numbers of
such exhibits on said Form S-1 are the same as such number specified above.
24
<PAGE> 25
*** Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1991 (File No. 1-8987). The exhibit number of such
exhibits on said Form 10-K are the same as such numbers specified above.
**** Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1994 (File No. 1-8987). The exhibit number of such
exhibits on said Form 10-K are the same as such number specified above.
25
<PAGE> 26
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
March 27, 1998 INOVISION CORPORATION
Registrant
By: /s/ Austin O. Furst, Jr.
-----------------------
Austin O. Furst, Jr.
Chairman of the Board
Principal Executive Officer,
Principal Financial
and Accounting Officer.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
March 27, 1998 /s/ Austin O. Furst, Jr.
--------------------------------
Austin O. Furst, Jr.
Chairman of the Board
and Chief Executive Officer
March 27, 1998 /s/ Stephen L. Einhorn
--------------------------------
Stephen L. Einhorn
Director
March 27, 1998 /s/ Klaus Eppler
--------------------------------
Klaus Eppler
Director
March 27, 1998 /s/ Donald Sting
--------------------------------
Donald Sting
Director
26
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000775526
<NAME> GEORGE VOGEN
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,364
<SECURITIES> 1,907
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,271
<PP&E> 230
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,501
<CURRENT-LIABILITIES> 1,579
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,922
<TOTAL-LIABILITY-AND-EQUITY> 3,501
<SALES> 0
<TOTAL-REVENUES> 124
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
