<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/x/ Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Dimensional Visions Group, LTD.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
DIMENSIONAL VISIONS GROUP, LTD.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 17, 1996
Dear Stockholder:
An Annual Meeting of Stockholders of Dimensional Visions
Group, Ltd. (the "Company") will be held at the offices of Clark, Ladner,
Fortenbaugh & Young, One Commerce Square, 2005 Market Street, Philadelphia,
Pennsylvania 19103 on January 17, 1996, at 9:00 a.m. (local time) for the
following purposes:
1. to elect five directors;
2. to ratify the appointment of Gitomer & Berenholz,
P.C. as the Company's independent auditors for the
current fiscal year;
3. to consider and vote upon a proposal to amend the
Company's Certificate of Incorporation to authorize
additional shares of common and preferred stock of
the Company needed to accommodate the exercise of
stock warrants and conversion of preferred stock of
the Company; and
4. to consider and vote upon a proposal to amend the
Company's Certificate of Incorporation to change the
name of the Company to "Dimensional Group, Inc."; and
5. to transact such other business that may properly
come before the meeting.
A copy of the Annual Report for the fiscal year ended June 30,
1995, is enclosed for your information.
The Board of Directors has fixed the close of business on
December 4, 1995, as the record date for the Annual Meeting. Only stockholders
of record at that time are entitled to notice of and to vote at the Annual
Meeting, and any adjournment or postponement thereof.
All stockholders are cordially invited to attend the Annual
Meeting. The enclosed proxy is solicited by the Board of Directors of the
Company. Reference is made to the attached proxy statement for further
information with respect to the business to be transacted at the Annual
Meeting. The Board of Directors urges you to date, sign and return promptly
the enclosed proxy, even if you plan to attend the Annual Meeting. The return
of the proxy
<PAGE> 3
will not affect your right to vote in person if you do attend the Annual
Meeting. Executed proxies which contain no direction on the proposals
presented will be voted FOR the election of the five nominees to the Board of
Directors, FOR the ratification of Gitomer & Berenholz, P.C. as the Company's
independent auditors, FOR the authorization of additional shares of common
stock and preferred stock of the Company, and FOR the proposal to change the
Company's name.
By Order of the Board of Directors,
/s/ Steven M. Peck
------------------------------
Steven M. Peck,
Chief Executive Officer
Dated: December __, 1995
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<PAGE> 4
PRELIMINARY PROXY STATEMENT
DIMENSIONAL VISIONS GROUP, LTD.
718 ARCH STREET
SUITE 202N
PHILADELPHIA, PENNSYLVANIA 19106
PROXY STATEMENT
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Dimensional Visions Group,
Ltd., (the "Company") for use at the Annual Meeting of the Company's
Stockholders to be held at the offices of Clark, Ladner, Fortenbaugh & Young,
One Commerce Square, 2005 Market Street, Philadelphia, Pennsylvania 19103 on
January, 17, 1996 at 9:00 a.m. (local time), and at any adjournment or
adjournments of said meeting (the "Meeting"). Proxies are revocable at any time
before they are voted by delivering written notice of revocation to the
Secretary of the Company prior to or at the Meeting, by filing a duly executed
proxy bearing a later date or by voting in person at the Meeting. Unless so
revoked, the shares represented by proxies will be voted at the Meeting.
The Company intends to mail this Proxy Statement to the
Company's Stockholders on or about December __, 1996.
The cost of soliciting proxies will be borne by the Company.
Solicitations may be made by mail, personal interview, telephone, and facsimile
by officers and regular employees of the Company who will receive no additional
compensation therefor. The Company will reimburse banks, brokers and other
nominees for their reasonable expenses in forwarding proxy material to the
beneficial owners for whom they own shares.
The holders of record of the Company's shares of stock at the
close business on December 4, 1995, as listed below, are entitled to receive
notice of, and to vote at, the Meeting and any adjournment thereof:
1. On December 4, 1995, there were 17,601,098 shares of
common stock issued and outstanding. Each share of common stock is entitled to
one (1) vote for each matter considered;
2. On December 4, 1995, there were 57,250 shares of
First Series A Convertible 5% Preferred Stock issued and outstanding. Each
share of First Series A Convertible Preferred Stock is entitled to forty (40)
votes for each matter considered;
-3-
<PAGE> 5
3. On December 4, 1995, there were 175,700 shares of
Second Series B Convertible 8% Preferred Stock issued and outstanding. Each
share of Second Series B Convertible Preferred Stock is entitled to one hundred
(100) votes for each matter considered;
4. On December 4, 1995, there were 22,876 shares of
Series C Convertible Preferred Stock issued or to be issued and outstanding.
Each share of Series C Convertible Preferred Stock is entitled to ten (10)
votes for each matter considered;
5. On December 4, 1995, there were 32,150 shares of
Third Series S Convertible Participating Preferred Stock issued and
outstanding. Each share of the Third Series S Convertible Participating
Preferred Stock is entitled to one hundred (100) votes for each matter
considered; and
6. On December 4, 1995, there were 552,181 shares of
Fourth Series P Convertible Participating Preferred Stock issued and
outstanding. Each share of the Fourth Series P Convertible Participating
Preferred Stock is entitled to ten (10) votes for each matter considered.
The total number of shares of the Company's securities
entitled to vote at the Meeting is 46,426,668.
The shares of the Company's stock represented by each properly
executed proxy will be voted at the Meeting in the manner specified in such
proxy, or, if not specified, will be voted FOR the election of the five
nominees to the Board of Directors, FOR the ratification of Gitomer &
Berenholz, P.C. as the Company's independent auditors, FOR the authorization of
additional shares of common stock and preferred stock of the Company, and FOR
the proposal to change the Company's name, and in the discretion of the persons
named in the proxy, if granted, on all other matters properly presented to the
Meeting.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning stock
ownership of all persons known by the Company to own beneficially 5% or more of
the outstanding shares of the Company's Common Stock, each director, and all
executive officers and directors of the Company as a group, as of December 4,
1995, and their percentage ownership of Common Stock and their percentage
voting power.
-4-
<PAGE> 6
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Amount and
Nature of
Name and Address of Beneficial Percent
Beneficial Owners Ownership(1) Ownership
- ----------------------------------------------------------------------------------
<S> <C> <C>
George S. Smith(2) 6,279,840 26.3%
3130 Alexis Drive
Palo Alto, California 94304
- ----------------------------------------------------------------------------------
H. Thomas Ferstl(3) 4,165,920 19.1%
8761 State Street
P.O. Box 284
Millington, MI 48746
- ----------------------------------------------------------------------------------
Avonwood Capital Corporation(4) 2,200,800 11.1%
3 Radnor Corporation Center
Suite 400
Radnor, PA 19087
- ----------------------------------------------------------------------------------
Sean F. Lee(5) 1,822,010 9.4%
- ----------------------------------------------------------------------------------
John Arrillaga(6) 1,770,680 9.1%
1950 Cowper Street
Palo Alto, CA 93401
- ----------------------------------------------------------------------------------
Richard Peery(7) 1,770,680 9.1%
2200 Cowper Street
Palo Alto, CA 94301
- ----------------------------------------------------------------------------------
James B. Salmon(8) 1,696,160 9.0%
1525 Lakesite Drive
Birmingham, AL 35235
- ----------------------------------------------------------------------------------
Palmex Investment Company, Ltd.(9) 1,531,120 8.0%
Gibraltar
c/o International Company Services
(Gibraltar), Ltd.
2nd Floor, Mansion House
143 Main Street, Gibraltar
- ----------------------------------------------------------------------------------
Marton & Kjellaug M. Klepp(10) 1,401,150 7.4%
12 Day Road
Armon, NY 10504
- ----------------------------------------------------------------------------------
John L. Miller(11) 1,250,000 6.6%
- ----------------------------------------------------------------------------------
Alejandro & Lida Zaffaroni(12) 1,244,190 6.6%
4005 Miranda Ave., Suite 180
Palo Alto, CA 94304
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Peter L. Jensen(13) 1,086,270 5.8%
2158 Balboa Avenue
Del Mar, CA 93014
- ----------------------------------------------------------------------------------
Robert & Jacqueline Stibor(14) 1,045,380 5.7%
9016 Thornberry Lane
Las Vegas, NV 89134
- ----------------------------------------------------------------------------------
Steven M. Peck(15) 1,000,000 5.4%
- ----------------------------------------------------------------------------------
James W. Porter, Jr. (16)
- ----------------------------------------------------------------------------------
William A. Knegendorf (16)
- ----------------------------------------------------------------------------------
All executive officers and 4,732,810 21.2%
directors as a group (7 persons)(17)
- ----------------------------------------------------------------------------------
</TABLE>
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<PAGE> 7
(1) Except as otherwise indicated, all of the shares are owned
beneficially and of record. Beneficial ownership has been
determined in accordance with Rule 13d-3 promulgated under the
Securities Exchange Act of 1934, as amended.
(2) Mr. Smith, the Chairman of the Company's Board of Directors,
owns 10,000 shares of the Company's Common Stock and 21,000
shares of the Company's Third Series S Convertible Participating
Stock which is convertible into 2,100,000 shares of the
Company's Common Stock. Also included in the amount are common
stock purchase warrants to purchase 2,669,840 shares of the
Company's Common Stock and preferred stock purchase warrants to
purchase 15,000 shares of the Company's Second Series B
Convertible Preferred 8% Stock which is the equivalent of
1,500,000 shares of the Company's Common Stock.
(3) Mr. Ferstl owns 3,000 shares of the Company's First Series A
Convertible 5% Preferred Stock which is convertible into 120,000
shares of Common Stock, 30,000 shares of the Company's Second
Series B Convertible 8% Preferred Stock which is convertible
into 3,000,000 shares of Common Stock and 3,592 shares of Series
C Convertible Stock which is convertible into 35,920 shares of
Common Stock. Also included in the amount are common stock
purchase warrants to purchase 1,010,000 shares of the Company's
Common Stock.
(4) Avonwood Capital Corporation owns 3,000 Series S Participating
Convertible Preferred Stock convertible into 300,000 shares of
Common Stock and 15,080 Fourth Series P Convertible Preferred
Stock convertible into 150,800 of Common Stock. Also included
in the amount are common stock purchase warrants to purchase
1,750,000 shares of the Company's Common Stock.
(5) Mr. Lee, a Director of the Company and Chief Executive Officer
of InfoPak, Inc. owns 167,201 shares of Fourth Series P
Convertible Participating Preferred Stock convertible into ten
shares of Common Stock for every one share of Fourth Series P
Convertible Participating Preferred Stock. Of this amount,
160,201 shares is owned by the Lee Family Partnership of which
Mr. Lee is the general partner. Also includes common stock
purchase warrants to purchase 150,000 shares of the Company's
common stock.
(6) Mr. Arrillaga owns 5,000 shares of the Company's First Series A
Convertible 5% Preferred Stock which is convertible into 200,000
shares of Common Stock, 15,000 shares of the Company's Second
Series B Convertible 8% Preferred Stock which is convertible
into 1,500,000 shares of Common Stock and 2,068 shares of Series
C Convertible Stock which is convertible into 20,680 shares of
Common Stock. Also included in the amount are common stock
purchase warrants to purchase 50,000 shares of the Company's
Common Stock.
(7) Mr. Peery owns 5,000 shares of the Company's First Series A
Convertible 5% Preferred Stock which is convertible into 200,000
shares of Common Stock, 15,000 shares of the Company's Second
Series B Convertible 8% Preferred Stock which is convertible
into 1,500,000 shares of Common Stock and 2,068 shares of Series
C Convertible Stock which is convertible into 20,680 shares of
Common Stock. Also included in the amount are common stock
purchase warrants to purchase 50,000 shares of the Company's
Common Stock.
(8) Mr. Salmon owns 490,000 shares of the Company's Common Stock and
11,500 shares of the Company's Second Series B Convertible 8%
Preferred Stock which is convertible into 1,150,000 shares of
Common Stock and 616 shares of Series C Convertible Stock which
is convertible into 6,160 shares of Common Stock. Also included
in the amount are common stock purchase warrants to purchase
50,000 shares of the Company's Common Stock.
-6-
<PAGE> 8
(9) Palmex Investment Company, Ltd. owns 15,000 shares of the
Company's Second Series B Convertible 8% Preferred Stock which
is convertible into 1,500,000 shares of Common Stock and 3,112
shares of Series C Convertible Stock which is convertible into
31,120 shares of Common Stock.
(10) Mr. and Mrs. Klepp jointly own 57,500 shares of the Company's
Common Stock and 12,500 shares of the Company's Second Series B
Convertible 8% Preferred Stock which is convertible into
1,250,000 shares of Common Stock and 1,825 shares of Series C
Convertible Stock which is convertible into 18,250 shares of
Common Stock. Also included in the amount are common stock
purchase warrants to purchase 75,400 shares of the Company's
Common Stock.
(11) Mr. Miller is an Executive Vice President of the Company, and
served on the Board of Directors from August 1993 to September
1995. Mr. Miller owns 50,000 shares of the Company's Common
Stock, and 3,000 shares of the Company's Third Series S
Convertible Participating Preferred Stock which is convertible
into 300,000 shares of the Company's Common Stock. Also
included in the amount are common stock purchase warrants to
purchase 900,000 shares of the Company's Common Stock. Not
included in the above are Common Stock Purchase Warrants to
purchase 2,200,000 shares of the Company's Common Stock, which
are being held in escrow, subject to Mr. Miller meeting certain
job performance goals.
(12) Mr. and Mrs. Zaffaroni jointly own 12,200 shares of the
Company's Second Series B Convertible 8% Preferred Stock which
is convertible into 1,220,000 shares of Common Stock and 2,419
shares of Series C Convertible Stock which is convertible into
24,190 shares of Common Stock.
(13) Mr. Jensen owns 20,000 shares of the Company's Common Stock and
10,500 shares of the Company's Second Series B Convertible 8%
Preferred Stock which is convertible into 1,050,000 shares of
Common Stock and 1,627 shares of Series C Convertible Stock
which is convertible into 16,270 shares of Common Stock.
(14) Mr. and Mrs. Stibor own directly or jointly 250,000 shares of
the Company's Common Stock, 5,000 shares of the Company's First
Series A Convertible 5% Preferred Stock which is convertible
into 200,000 shares of Common Stock, 5,000 of the Company's
Second Series B Convertible 8% Preferred Stock which is
convertible into 500,000 shares of Common Stock and 38 shares of
Series Convertible Stock which is convertible into 380 shares of
Common Stock. Also included in the amount are common stock
purchase warrants to purchase 95,000 shares of the Company's
Common Stock.
(15) Mr. Peck, the Company's President and Chief Executive Officer
owns common stock purchase warrants to purchase 1,000,000 shares
of the Company's Common Stock.
(16) Owned directly by Avonwood Capital Corporation of which Mr.
Porter, a Director, is the President, the principal shareholder
and sole voting shareholder and of which Mr. Knegendorf, a
Director, is a Managing Director, and a shareholder. Includes
3,000 shares of the Company's Third Series S Convertible
Participating Preferred Stock which are convertible into 300,000
shares of the Company's Common Stock. Includes 15,080 shares of
the Company's Fourth Series P Convertible Participating
Preferred Stock convertible into 150,800 shares of Common Stock.
Also includes common stock purchase warrants to purchase
1,750,000 shares of the Company's Common Stock.
-7-
<PAGE> 9
(17) Does not include common stock purchase warrants to purchase in
the aggregate 6,569,840 shares of the Company's Common Stock,
and 150,000 warrants to purchase the Company's Series B
Convertible Preferred 8% Stock which would be convertible into
1,500,000 shares of the Company's Common Stock.
-8-
<PAGE> 10
PROPOSAL 1
ELECTION OF DIRECTORS
At the Meeting, five (5) Directors will be elected to serve
until the next Annual Meeting of Stockholders and until their respective
successors have been duly elected and qualified. Nominees receiving a
plurality of the votes cast will be elected as directors. Unless contrary
instructions are indicated, the shares represented by a properly executed proxy
will be voted "FOR" the election of the nominees named below, each of whom
presently serves on the Board of Directors of the Company. The Company is not
aware of any reason why any of the nominees, if elected, would be unable to
serve as directors. Should any nominee become unavailable to serve as a
director, the persons named in the enclosed proxy will vote the shares which
they represent for the election of such other nominee as recommended by the
Board of Directors.
<TABLE>
<CAPTION>
Director
--------
Name Age Since Position
- ---- --- ----- --------
<S> <C> <C> <C>
George S. Smith (1)(2) 61 1992 Director, Chairman
of the Board of
Directors
Steven M. Peck (2) 38 1995 Chief Executive
Officer, President,
Chief Financial
Officer of Company
and Director
Sean F. Lee (2) 55 1995 Chief Executive
Officer, of InfoPak,
Inc., and Director
James W. Porter, Jr.(1)(2) 46 1995 Director
William A. Knegendorf (1) 50 1995 Director
</TABLE>
- -----------------
1. Member of the Audit Committee
2. Member of the Compensation Committee
Mr. Smith was appointed Chairman of the Board in April 1992.
From April 1992 until September 12, 1995, Mr. Smith served as the Chief
Executive Officer of DVG. From 1980 to 1988, Mr. Smith was a Senior
Vice-President at Drexel Burnham Lambert. From 1988 to 1990 he was a Senior
Vice President at Shearson Leahman Brothers. From September 1990 until April
1992, Mr. Smith was on sabbatical for corrective back surgery. Mr. Smith is an
honors graduate in economics with a minor in engineering from San Jose State
University.
-9-
<PAGE> 11
Mr. Peck was appointed to his position in September 1995. Prior
to his joining the Company, Mr. Peck had been a private investor since March,
1995. From 1986 to March, 1995, Mr. Peck was with the Bachman Company, a snack
food manufacturer, as their Director of Marketing. From 1982-1986, Mr. Peck
was Director of Marketing at Fleer Corporation, a manufacturer of
confectionery, sports/entertainment trading cards and other licensed products.
Mr. Peck graduated from the University of North Carolina with a Bachelor of
Arts Degree.
Mr. Lee was appointed a Director in September 1995. Mr. Lee has
served as InfoPak's Chief Executive Officer since January 1992. In April 1994,
Mr. Lee co-founded and became Chairman of the Board of Directors of Auto X-ray,
Inc., a privately held company (diagnostic system for American automobiles).
From September 1988 until December 1991, Mr. Lee served as a director, Chief
Executive officer and President of Builder's Express, a publicly held company
based in San Antonio, Texas which filed for bankruptcy under Chapter 7 of the
U.S. Bankruptcy Code in 1991.
Mr. Porter was appointed to the Board of Directors in August
1995. Mr. Porter is the President and the principal shareholder of Avonwood
Capital Corporation, a venture capital and management consulting firm which Mr.
Porter co-founded in January 1995. From April 1990 to August 1994, Mr. Porter
was the Chief Executive Officer of OESI Power Corporation, a geothermal energy
firm.
Mr. Knegendorf was appointed to the Board of Directors in
September 1995. Since January 1995, Mr. Knegendorf has served as a Managing
Director and Chief Financial Officer of Avonwood Capital Corporation. From
November 1992 to November 1994, Mr. Knegendorf was the owner and principal of
in Key Value Systems, a business consulting firm. From 1988 to November 1992,
Mr. Knegendorf was the Chief Financial Officer of Clark Capital Management, a
registered investment adviser.
Directors serve until the next annual meeting or until their
successors are qualified and elected. Officers serve at the discretion of the
Board of Directors.
The Delaware General Corporation Law permits a corporation
through its Certificate of Incorporation to eliminate or limit its directors'
personal liability to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, with certain exceptions. The
exceptions include a breach of the director's duty of loyalty, acts or
omissions not in good faith or which involve intentional misconduct or knowing
violation of law, improper declarations of dividend, and transactions from
which the directors derived an improper personal benefit. The Company's
Certificate of Incorporation limits its directors' liability to the extent
permitted by this statutory provision. The limitation of liability provision
does not eliminate a stockholder's right to seek non-monetary, equitable
remedies such as injunction or rescission to redress an action taken by
directors. However, as a practical matter, equitable remedies may not be
available in all situations and there may be instances in which no effective
remedy is available.
-10-
<PAGE> 12
Meetings of the Board of Directors
The Board of Directors held eight (8) meetings during the last
fiscal year and seven (7) meetings since the last fiscal year. The Company
established an Audit Committee in September 1995 consisting of George S. Smith,
James W. Porter, Jr. and William Knegendorf (Chairman), which has held one (1)
meeting. The Company established a Compensation Committee in September 1995,
consisting of George S. Smith, Steven M. Peck, Sean F. Lee, and James W.
Porter, Jr. (Chairman) which has held no meetings. The Board of Directors does
not have a nominating committee.
DIRECTORS' FEES
Outside members of the Board of Directors are not paid a fee, but
are reimbursed for expenses, for each meeting of the Board of Directors or
Committee thereof attended.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires directors and certain officers of the Company, as well as persons who
own more than 10% of a registered class of the Company's equity securities
("Reporting Persons") to file reports of ownership and changes in ownership of
Forms 3, 4 and 5 with the Securities and Exchange Commission. The Company
believes that other than as set forth below, all Reporting Persons have
complied on a timely basis with all filing requirements applicable to them.
Mr. Porter inadvertently filed a Form 3 late in connection with
his appointment to the Board of Directors in August 1995.
Certain Relationships and Related Transactions
In July of 1993 Mr. George Smith was granted warrants to purchase
1,000,000 shares of the Company's Common Stock for a five year period at an
exercise price of $.15 per share. Also in July 1993 600,000 warrants to
purchase the Company's Common Stock for five years at $.15 per share were
issued to Mr. Smith and 687,495 warrants were canceled by the Company at prices
ranging between $.4375 and $1.00 per share. Mr. Smith is a consultant to the
Company at a current fee of $5,000 per month.
In May 1995, Avonwood Capital Corporation ("Avonwood") entered
into a Letter of Intent and a Management and Consulting Agreement (collectively
the "Agreement"). The Agreement requires Avonwood to assist the Company with
financial restructuring, corporate finance negotiations, strategic alliance
development, corporate consulting and advisory and arranging of capital as
required. For their management and consulting services, the Agreement is
renewable annually by mutual agreement except in the event that $1,000,000 of
capital is raised then there is an automatic 12 month renewable period,
Avonwood receives a fee of $100,000 per year accruing quarterly in arrears and
payable when the Company has a pre-tax
-11-
<PAGE> 13
operating profit for any such quarter, provided that the amount to be paid does
not exceed the pre-tax operating profit. As a result of Avonwood's assistance
in securing capital for the Company and for its assistance in the acquisition
of InfoPak, Inc. ("InfoPak") in September, 1995 the Agreement was extended for
an additional year, the Company paid Avonwood $25,000 of their accrued
consulting fee and issued 500,000 warrants to purchase common stock. As
additional compensation for each dollar of capital raised, Avonwood will
receive warrants to purchase common stock to a maximum of 1,600,000 of which
1,000,000 warrants have been issued and 250,000 were exercised. The warrants
are for a five year term with an exercise price of $.15 per share. Avonwood
will also be entitled to a maximum of 5% of any capital raised, net of, fees to
third parties.
Pursuant to the terms of the Agreement, Avonwood, in May 1995,
loaned the Company $50,000 and was issued a 9% unsecured promissory note due in
November 1998. In connection with the loan, the Company issued warrants to
purchase 500,000 shares of Common Stock at $.10 per share exercisable within
three and one-half years from issuance and warrants to purchase 50,000 shares
of Common Stock at $.01 per share which have been exercised. In September
1995, the Company repaid the loan.
The Agreement provides that at Avonwood's expense, the Company
would register up to 1,000,000 shares of Common Stock upon the exercise of any
of the warrants. In May 1995, Avonwood exercised warrants to purchase 300,000
shares of Common Stock for $38,000. In August 1995, Avonwood converted these
shares of Common Stock into the Company's Series S Convertible Preferred Stock.
Avonwood also has a consulting agreement with InfoPak dated May
1995. Under the terms of the consulting agreement Avonwood, is paid $2,500 per
month and is paid a success fee for sales and marketing performances. Pursuant
to the terms of the consulting agreement Avonwood will be paid (1) a sum equal
to 5% of the incremental gross revenues generated by any relationship which
Avonwood introduces to InfoPak, (2) 5% of the incremental gross revenue
generated by the successful negotiations between an existing or potential
client of InfoPak where Avonwood has been authorized by InfoPak to so become
involved, (3) 5% success fee on all negotiations resulting in a cash payment to
InfoPak in which Avonwood is involved and (4) 5% of the incremental gross
revenue generated by InfoPak benchmarked to the date of the consulting
agreement, net of existing relationships but including those existing
relationships that InfoPak has given written permission for Avonwood to
negotiate. Items (2) and (3) have an infinite life. The term of the agreement
is automatically renewable on an annual basis unless cancelled by either party
in writing at least 60 days prior to the renewal date in May 1996. The
consulting agreement also provided that Avonwood received 3% of InfoPak's fully
diluted outstanding stock.
Mr. Sean F. Lee has an employment agreement with InfoPak, a
wholly owned subsidiary of the Company. The term of the agreement is three
years ending in September 1998. Mr. Lee's base compensation is $100,000 per
year. Mr. Lee is also entitled to participate in InfoPak's Bonus Plan. The
Bonus Plan is set at 10% of InfoPak's pre-tax profits.
-12-
<PAGE> 14
Fifty percent of the Bonus Plan is set aside for target management
compensation. Mr. Lee's target compensation is $300,000 per year and his
percentage of the 50% is 62%. The other 50% of the Bonus Plan is set aside for
all InfoPak employees, including management. Pursuant to the Agreement, Mr.
Lee was appointed to the Company's Board of Directors and the Company is
required to nominate Mr. Lee to continue to serve on the Board of Directors
during the term of the Agreement. Mr. Lee also received 7,000 shares of the
Company's Series P Convertible Preferred Stock as a signing bonus. Each
share of the Series P Convertible Preferred Stock is convertible into 10 shares
of the Company's Common Stock.
In September 1995, Mr. Lee and his spouse as a creditor of
InfoPak cancelled a promissory note in the amount of $170,039 in exchange for
17,004 shares of the Company's Series P Convertible Preferred Stock. In
October 1995, Mr. Lee was granted common stock purchase warrants to purchase
150,000 shares of the Company's common stock. The warrants are for a five year
period with an exercise price of $.15 per share.
Mr. Lee is a party to an Asset Purchase Agreement dated September
6, 1995, between InfoPak, Mr. Lee and two other executive officers of InfoPak.
Pursuant to the terms of the Agreement Mr. Lee and the other InfoPak executives
sold certain digital sound device technology to InfoPak in return for a royalty
of 3% (1% to each seller) of the net revenue per quarter from any sales of the
device. Net revenue is defined in the Agreement to be gross revenues from the
sale or license of the technology less returns. The term of the Agreements is
the earlier of seventeen years or for the term of any patent that may be issued
on the technology.
Mr. Steven M. Peck was issued warrants to purchase 1,000,000
shares of the Company's Common Stock in September 1995 as a condition of his
employment. The term of the warrants is five years. The exercise price is
$.25 per warrant. Mr. Peck's annual compensation is $96,000. The Company and
Mr. Peck are currently negotiating an employment agreement, however, no
assurance can be given that a definitive agreement will be reached.
-13-
<PAGE> 15
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the total compensation earned by or
paid to the named executive officer by the Company for the fiscal year ended
June 30, 1995.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
=====================================================================================================
OTHER RESTRICTED SECURITIES LTIP ALL OTHER
ANNUAL STOCK UNDERLYING PAYOUTS COMPEN
YEAR SALARY ($) BONUS ($) COMPENSATION AWARDS ($) OPTIONS/SARs ($) SATION
($) (#) ($)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
George S. Smith 1995 $0 $5,000 $107,138(2) $0 -0- $0 $0
(Former Chief Executive
Officer)(1)
====================================================================================================================================
</TABLE>
(1) Mr. George S. Smith resigned as Chief Executive Officer in September
1995.
(2) Represents $31,099 of travel expenses, 16,039 of living expenses and
consulting fees of $60,000. Does not include $36,000 of consulting
fees accrued in fiscal year 1995.
-15-
<PAGE> 16
<TABLE>
<CAPTION>
===================================================================================================================================
OPTIONS/SAR GRANTS IN THE FISCAL YEAR 1995
- -----------------------------------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS
- -----------------------------------------------------------------------------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARs EXERCISE
UNDERLYING GRANTED TO OR
OPTION/SARs EMPLOYEES IN BASE PRICE EXPIRATION
NAME YEAR GRANTED(#) FISCAL YEAR ($/Share) DATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
George S. Smith,
(Former Chief Executive Officer)(1) 1995 -0- -0- -0- -0-
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
</TABLE>
(1) Mr. Smith resigned as Chief Executive Officer in September 1995.
-16-
<PAGE> 17
<TABLE>
<CAPTION>
===================================================================================================================================
AGGREGATED OPTIONS/SAR EXERCISES IN THE FISCAL YEAR 1995 AND FY- END OPTION/SAR VALUES
===================================================================================================================================
Value of
Number of Securities Unexercised
Underlying Unexercised In-the-Money
Shares Options/SARs at Options/SARs
Acquired FY-End (#) at FY-End($)
Name Year on Exercise(#) Value Realized Exercisable/Unexercisable(1) Exercisable/Unexercisable(1)
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
George S. Smith 1995 $0 $0 2,669,840(E)/O(U) $693,135
(Former Chief Executive
Officer)(1)
===================================================================================================================================
</TABLE>
(1) Mr. Smith resigned as Chief Executive Officer in September 1995.
-17-
<PAGE> 18
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Subject to stockholder ratification, the Board of Directors, upon
recommendation of the Audit Committee, has reappointed the firm of Gitomer &
Berenholz, P.C. as the independent auditors to examine the Company's financial
statements for fiscal year 1996. The Board of Directors unanimously recommends
that the stockholders vote for such ratification.
Vote Required for Approval
The affirmative vote of holders of a majority of the outstanding
shares of the Company's voting stock is required in order to approve this
proposal. If the stockholders do not ratify this appointment, other
independent auditors will be considered by the Board of Directors upon
recommendation of the Audit Committee.
Representatives of Gitomer & Berenholz, P.C. are expected to attend
the meeting and will have the opportunity to make a statement if they so choose
and to respond to appropriate questions.
-18-
<PAGE> 19
PROPOSAL 3
AUTHORIZATION OF ADDITIONAL SHARES OF COMMON STOCK
AND PREFERRED STOCK
BACKGROUND
As of the date of this Proxy Statement, the Company has only
585,733 shares of authorized but unissued or not reserved shares of Common
Stock. However, as of the date of this Proxy Statement, the Company has,
issued and outstanding, the following warrants and convertible preferred stock,
which if exercised or converted, as the case may be, require the issuance of
Common Stock substantially in excess of the current authorized Common Stock of
the Company:
1. Fifty-seven thousand two hundred and fifty (57,250)
shares of First Series A Convertible 5% Preferred Stock, at $10 par value per
share, 100,000 shares authorized, convertible into common stock at the rate of
forty (40) shares of common stock for each share of the First Series A
Convertible Preferred Stock;
2. Twenty-two thousand five hundred (22,500) preferred
stock purchase warrants to purchase the Company's Second Series B Convertible
8% Preferred Stock. Each share of the Second Series B Convertible Preferred
Stock is convertible at the rate of one hundred (100) shares of common stock;
3. One hundred seventy-five thousand seven hundred
(175,700) shares of Second Series B Convertible 8% Preferred Stock, at $10 par
value per share, 200,000 shares authorized, convertible at the rate of one
hundred (100) shares of common stock for each share of Second Series B
Convertible Preferred Stock;
4. Twenty-two thousand eight hundred seventy-six
(22,876) shares of Series C Convertible Preferred Stock, at $10 par value per
share, 1,000,000 shares authorized, convertible at the rate of ten (10) shares
of common stock for each share of Series C Convertible Preferred Stock;
5. Five hundred fifty-two thousand one hundred
eighty-one (552,181) shares of Fourth Series P Convertible Participating
Preferred Stock at $10 par value per share, 600,000 authorized convertible at
the rate of ten (10) shares of common stock for each share of Series P
Convertible Participating Preferred Stock.
-19-
<PAGE> 20
6. Thirty-two thousand one hundred and fifty (32,150)
shares of Third Series S Convertible Participating Preferred Stock, at $10 par
value per share, 50,000 shares authorized, convertible at the rate of one
hundred (100) shares of common stock for each share of Third Series S
Convertible Participating Preferred Stock;
7. One million eight hundred and thirteen thousand one
hundred and sixty-nine (1,813,169) Class B Redeemable Common Stock Purchase
Warrants exercisable into three million eight hundred and seven thousand six
hundred and fifty-five (3,807,655) shares of the Company's Common Stock.
8. Eighteen million one hundred and five thousand five
hundred and twenty-three (18,105,523) fully paid and non-assessable common
stock purchase warrants.
The total number of shares of common stock which would be
outstanding assuming all of the warrants and convertible preferred stock were
to be exercised or converted is 70,589,846.
The Company's First Series A Convertible 5% Preferred Stock
and the Company's Second Series B Convertible 8% Preferred Stock were issued
through private placements for the purpose of increasing the capital of the
Company. The Series C Convertible Preferred Stock was issued to certain
holders of the Company's secured notes in lieu of accrued interest. The Third
Series S Convertible Participating Preferred Stock was issued to certain
stockholders consisting mainly of officers and directors of the Company in
exchange for such stockholders' shares of common stock. Such common stock was
then sold on September 5, 1995 for the purpose of raising additional capital.
The Fourth Series P Convertible Participating Preferred Stock was issued to
InfoPak, shareholders in exchange for all of the outstanding capital stock of
InfoPak, on September 12, 1995. Certain financial information with regard to
the acquisition of InfoPak is set forth in Appendix I.
To accommodate the future exercise of the warrants and/or
conversion of the convertible preferred stock described above, at the Meeting,
the stockholders will vote on a proposal to amend the Company's Certificate of
Incorporation to authorize in the aggregate 100,000,000 shares of common stock
and 10,000,000 shares of preferred stock.
The Company has not entered into any agreement regarding the
issuance of a significant number of additional shares other than as described
above and does not have any other present intention to issue any of the
additional shares of common stock or
-20-
<PAGE> 21
preferred stock to be authorized. However, the Company intends to seek
additional funding and/or other business ventures which would require the
issuance of the Company's securities.
DESCRIPTION OF PROPOSED AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION
To effect the proposed amendment to the Company's Certificate
of Incorporation to authorize in the aggregate 100,000,000 shares of common
stock and 10,000,000 shares of preferred stock, Article FOURTH of the
Certificate of Incorporation would be amended to provide as follows:
The total number of shares of stock which the
corporation shall have authority to issue is One
Hundred and Ten Million (110,000,000), consisting of
Ten Million (10,000,000) shares of Preferred Stock,
all of the par value of ($.001), and One Hundred
Million (100,000,000) shares of Common Stock, all of
a par value of ($.001).
-21-
<PAGE> 22
INCREASE IN AUTHORIZED SHARES OF COMMON STOCK
General. The Company is presently authorized to issue 20,000,000
shares of common stock, par value $.001 per share. Of such number, 17,601,098
shares were issued and outstanding at December 4, 1995. The proposed amendment
to the Certificate of Incorporation would increase the number of authorized
shares of common stock from 20,000,000 to 100,000,000. Such additional
authorized shares of common stock will have no preemptive rights. No further
vote of the stockholders will be required to issue such additional shares of
authorized common stock.
INCREASE IN AUTHORIZED SHARES OF PREFERRED STOCK
General. The Company is authorized to issue 2,000,000 shares of
preferred stock, par value $ .001 per share. Of such number, 840,159 shares
were issued and outstanding at December 4, 1995. The proposed amendment to the
Certificate of Incorporation would increase the number of authorized shares of
preferred stock from 2,000,000 to 10,000,000. No further vote of the
stockholders will be required to issue such additional shares of authorized
preferred stock.
Under Delaware law and under the terms of the Certificate of
Incorporation, the Company's preferred stock may be issued in series
established from time to time by the Board of Directors. In this connection,
the Board of Directors has broad discretion to set the terms of the preferred
stock, and, if it decided to, may fix for each series, without further
stockholder approval, (1) the rate of the dividend, (2) the price at which and
the terms and conditions on which shares may be redeemed, (3) the amount
payable upon shares in the event of voluntary or involuntary liquidation, (4)
sinking fund provisions, if any, for the redemption of the Company or purchase
of shares, (5) the terms and conditions on which shares may be converted, if
the shares of any series are issued with the privilege of conversion, and (6)
voting rights, if any.
The Board of Directors may fix the number of votes to which each share
of preferred stock is entitled, or deny voting rights to the shares of any
series, except to the extent voting rights are expressly granted by applicable
law. Depending upon the terms or voting rights granted to any series of
preferred stock, issuance thereof could result in a reduction in the voting
power of the holders of common stock or other preferred stock.
-22-
<PAGE> 23
It is not possible to state the actual effect of the authorization of
the preferred stock or other classes of stock upon the rights of holders of
common stock until the Board of Directors determines the respective rights of
the holders of one or more series of the preferred stock. However, such
effects might include without limitation: (a) restrictions on dividends on
common stock if preferred stock is issued with a preferential (and possibly
cumulative) dividend right and dividends on the preferred stock are in arrears;
(b) substantial dilution of the voting power of the common stock to the extent
that the preferred stock has voting rights or to the extent that any preferred
stock is given conversion rights into common stock; and (c) the holders of
common stock not being entitled to share in the Company's assets upon
liquidation or dissolution until satisfaction of any liquidation preference
granted to the preferred stock, which the Board of Directors can set at its
discretion. The Board of Directors could also authorize holders of the
preferred stock to vote, either separately as a class or with the holders of
common stock, on any merger, sale or exchange of assets by the Company or other
extraordinary corporate transaction. Shares of preferred stock could also be
privately placed with purchasers who might ally themselves with the Board in
opposing a hostile takeover bid, diluting the stock ownership or voting power
of persons seeking to obtain control of the Company.
In addition, the Company may be affected to the extent that preferred
stock is issued which is, by its terms, redeemable, either at the option of the
Company or the holder of preferred stock, in accordance with such terms and
conditions as may be designated by the Board of Directors in creating such
series. The amount payable by the Company upon redemption of the preferred
stock will be the redemption price fixed for the shares of each series by the
Board of Directors and may also include payment of all accumulated and unpaid
dividends. There are many other potential effects not mentioned here.
POTENTIAL ANTI-TAKEOVER EFFECTS OF INCREASE IN AUTHORIZED CAPITAL STOCK
The Board of Directors is not aware of any attempts to takeover or
effect a change in control of the Company. As such, the proposed amendment to
the Certificate of Incorporation increasing the authorized capital stock of the
Company is not the result of a specific effort by the Board of Directors to
thwart any known takeover attempts. Nonetheless, the increase in the
authorized shares could be used to impede a takeover attempt since
-23-
<PAGE> 24
new shares could be issued to dilute the stock ownership of a person attempting
to acquire control of the Company.
Any provision which discourages the acquisition of Company stock by a
person seeking control could be beneficial to the stockholders generally to the
extent that it (i) provides for greater stability and continuity of management,
(ii) protects stockholders against unfair or inequitable mergers or tender
offers, and (iii) helps discourage or prevent a takeover by an acquiror seeking
to obtain control in order to break up and auction off the Company's component
parts or otherwise act in nonbeneficial ways with respect to the Company or its
assets. However, such provisions could also have the effect of discouraging,
making costlier or more difficult, or preventing a merger or a tender offer
which would be beneficial to the Company's stockholders. Moreover, the adoption
of the proposed amendments to the Certificate of Incorporation may have the
effect of assisting the Company's management in retaining its position, even if
removal would be beneficial to the stockholders generally. Consequently,
management would be in a better position to resist changes that might benefit
stockholders generally, but that might be disadvantageous to management.
GENERAL EFFECT OF APPROVAL OF ADDITIONAL COMMON STOCK AND PREFERRED STOCK
Dilution of Voting Power. The approval of additional common stock and
preferred stock will have the effect of diluting the voting power of the
stockholders entitled to vote only to the extent the warrants described in the
Background Section above are exercised. The conversion of existing preferred
stock into the additional shares of common stock of the Company have no effect
on the voting power of the stockholders of the Company because the preferred
stockholders are currently entitled to vote in the same ratio that such
preferred stockholders' shares would be converted into common shares of the
Company.
Dilution of Dividend Rights. To the extent that the warrants
described in the Background Section are exercised, the Second Series B
Convertible Preferred Stock shareholders right to dividends will be diluted in
proportion to any increase in the number of issued Second Series B Convertible
Preferred Stock resulting from the exercise of such warrants.
The Board of Directors unanimously recommends that stockholders vote
FOR this proposal at the Meeting.
-24-
<PAGE> 25
VOTE REQUIRED FOR APPROVAL
The affirmative vote of the holders of a majority of the outstanding
shares of the Company's voting stock is required for the adoption of the
proposed amendment to the Certificate of Incorporation authorizing additional
shares of common stock and preferred stock.
-25-
<PAGE> 26
PROPOSAL 4
CHANGE OF COMPANY NAME
At the Meeting, the stockholders will vote on a proposal to amend the
Certificate of Incorporation of the Company to change the name of the Company
from "Dimensional Visions Group, Ltd.," to "Dimensional Group, Inc."
The Company has proposed the change of name to more accurately reflect
the nature of the Company's current and future operations.
The Board of Directors unanimously recommends that the stockholders
vote FOR this proposal at the Meeting.
DESCRIPTION OF PROPOSED AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION
Article FIRST of the Company's Certificate Incorporation would be
amended to read as follows:
The name of the corporation (hereinafter called the
"corporation") is DIMENSIONAL GROUP, INC.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of holders of a majority of the outstanding
shares of the Company's voting stock is required in order to approve this
proposal. If approved, this change of name will be effective upon filing with
the Secretary of the State of Delaware of a Certificate of Amendment to the
Certificate of Incorporation of the Company, which is expected to follow
shortly after the Meeting.
ADDITIONAL INFORMATION
OTHER MATTERS
The Board of Directors does not know of any matters to be
presented at the Meeting other than those set forth in the Notice of Annual
Meeting of Stockholders. However, it is intended that proxies solicited will
be voted on any matters that may properly come before the Meeting in the
discretion of the persons named in the proxy.
-26-
<PAGE> 27
1996 STOCKHOLDER PROPOSALS
In order for stockholder proposals for the 1996 Annual Meeting
of Stockholders to be eligible for inclusion in the Company's proxy statement,
they must be received by the Company at its executive offices, located at 718
Arch Street, Suite 202N, Philadelphia, Pennsylvania 19106, on or before July 1,
1996.
-27-
<PAGE> 28
INFOPAK, INC.
FINANCIAL STATEMENTS
WITH
INDEPENDENT ACCOUNTANTS' REPORT
DECEMBER 31, 1994
BILLER, FRITH-SMITH & ARCHIBALD Certified Public Accountants
<PAGE> 29
CONTENTS
<TABLE>
<CAPTION>
Page
------
<S> <C>
Independent auditors' report 1
Financial statements
Balance sheet 2
Statement of income and deficit 3
Statement of cash flows 4
Notes to financial statements 5-8
Independent accountants' report on additional information 9
Supporting schedule of selling and marketing,
and general and administrative expenses 10
</TABLE>
BILLER, FRITH-SMITH & ARCHIBALD Certified Public Accountants
<PAGE> 30
To the Board of Directors
Infopak, Inc.
Phoenix, Arizona
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying balance sheet of
Infopak, Inc., as of December 31, 1994, and the related
statements of income and deficit, and cash flows for
the year then ended. These financial statements are
the responsibility of the Company's management. Our
responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit 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 misstatement. 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 audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the
financial position of Infopak, Inc. as of December 31,
1994, and the results of its operations and its cash
flows for the year then ended in conformity with
generally accepted accounting principles.
Tarzana, California
May 4, 1995
<PAGE> 31
2
INFOPAK, INC.
BALANCE SHEET
DECEMBER 31, 1994
ASSETS
<TABLE>
<S> <C> <C>
Current assets
Cash $ 74,093
Accounts receivable, net of
allowance for doubtful
accounts of $15,000 129,612
Notes and other receivables 56,950
Inventory 259,982
-----------
Total current assets 520,637
Property, equipment and development costs
net of accumulated depreciation 118,838
Other assets
Start-up costs, net of amortization 136,790
Deposits 1,140
-----------
Total other assets 137,930
-----------
$ 777,405
===========
</TABLE>
LIABILITIES AND STOCKHOLDERS' DEFICIT
<TABLE>
<S> <C> <C>
Current liabilities
Accounts payable $ 42,409
Accrued payroll 26,476
Accrued payroll taxes 24,025
Accrued interest 47,425
Commissions payable 31,924
Royalties payable 179,028
Current portion of long-term debt 175,000
-----------
Total current liabilities 526,287
Long-term liabilities 527,894
Stockholders' deficit
Common stock, $.01 par value,
40,000,000 shares authorized,
5,071,131 shares issued and
outstanding 50,711
Deficit ( 327,487)
-----------
Total stockholders' deficit ( 276,776)
-----------
$ 777,405
===========
</TABLE>
See accompanying accountants' audit report and notes to financial statements
<PAGE> 32
3
INFOPAK, INC.
STATEMENT OF INCOME AND DEFICIT
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<S> <C> <C>
Revenue from sales $ 2,199,089 100.0 %
Cost of goods sold 1,457,054 66.3
------------ ------
Gross profit 742,035 33.7
------------ ------
Selling and marketing expenses 631,908 28.7
General and administrative 268,308 12.2
------------ ------
900,216 41.0
------------ ------
Loss before taxes and other expenses ( 158,181) ( 7.2)
Interest expense 33,436 1.5
------------ ------
Loss before income taxes ( 191,617) ( 8.7)
Provision for income taxes - 0 - -
------------ ------
Net loss ( 191,617) ( 8.7)%
======
Deficit, beginning of year ( 135,870)
------------
Deficit, end of year $( 327,487)
============
</TABLE>
See accompanying accountants' audit report and notes to financial statements
<PAGE> 33
4
INFOPAK, INC.
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss $( 191,617)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 72,940
Changes in assets and liabilities:
Notes and other receivables 355,243
Supplies and samples 1,119
Inventory ( 259,982)
Accounts payable 26,220
Accrued expenses 26,483
-----------
Net cash provided by operating activities 30,406
-----------
Cash flows from investing activities:
Cash purchases of property and equipment ( 11,235)
-----------
Net cash used in investing activities ( 11,235)
-----------
Cash flows from financing activities:
Proceeds from notes payable 28,655
Repurchase of common stock ( 5,155)
-----------
Net cash provided by financing activities 23,500
-----------
Net increase in cash 42,671
Cash, beginning of year 31,422
-----------
Cash, end of year $ 74,093
===========
Supplemental disclosure of cash flows information:
Cash paid during the period for:
Interest $ 21,802
===========
Income taxes $ - 0 -
===========
</TABLE>
See accompanying accountants' audit report and notes to financial statements
<PAGE> 34
5
INFOPAK, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Line of business
The Company designs and manufactures products in the hand held
personal computer industry.
Property and equipment and depreciation
Property and equipment are stated at cost. Depreciation is computed
using the straight line method over the estimated useful lives of the
assets. The estimated useful lives are as follows:
<TABLE>
<S> <C>
Machinery and equipment 3 - 5 years
Furniture and fixtures 3 - 5 years
Development costs 5 years
</TABLE>
Expenditures for replacements and betterments are capitalized, while
repairs and maintenance are charged to expense as incurred.
Start-up costs amortization
Start-up costs are amortized on the straight line method over seven
years that commenced in 1993.
Income taxes
The Company elected in 1993, by unanimous consent of the shareholders,
to be taxed as an S-Corporation under the provisions of the Internal
Revenue Code. Under such provision, the Company does not pay federal
or state corporate income taxes on its taxable income. Therefore, no
provisions for federal or state income taxes have been made. Each
individual shareholder is to report his respective share of the
Company's taxable income, to the extent allowable, on his federal and
state income tax returns.
<PAGE> 35
6
INFOPAK, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
2. NOTES AND OTHER RECEIVABLES
During the year ended December 31, 1994, the Company did not advance
any additional funds to employee/shareholders. The amounts are
recorded as notes receivable from the employee/shareholders with
interest calculated annually at 6% and not to exceed specified
amounts. Repayment is to begin when certain conditions are met.
3. INVENTORY
Inventory consists of finished goods.
4. PROPERTY, EQUIPMENT AND DEVELOPMENT COSTS
Property, equipment and development costs consist of the following:
<TABLE>
<CAPTION>
Accumulated Net Book
Cost Depreciation Value
---------- ------------ -----------
<S> <C> <C> <C>
Machinery $ 21,926 $ 10,593 $ 11,333
Furniture and fixtures 1,994 1,701 293
Software development 8,469 4,188 4,281
Hardware development 198,009 95,078 102,931
---------- ------------ -----------
$ 230,398 $ 111,560 $ 118,838
========== ============ ===========
</TABLE>
<TABLE>
<S> <C> <C>
5. START-UP COSTS
Start-up costs consist of expenses incurred
for developing the Company's initial product
patents, copyrights and manufacturing processes. $ 174,096
Accumulated amortization 37,306
-----------
$ 136,790
===========
</TABLE>
<PAGE> 36
7
INFOPAK, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
<TABLE>
<S> <C> <C>
6. LONG-TERM DEBT
Long-term debt consists of the following:
Notes payable, unsecured, with monthly
payments including interest at 8%,
commencing when the Company becomes
profitable on a tax basis. $ 281,434
Loan payable, unsecured, due on demand,
non-interest bearing. 175,000
Loans payable, employees, unsecured, with
monthly payments including interest at 6%,
commencing when the Company becomes
profitable on a tax basis. No payments
were made during 1994. 246,460
-----------
702,894
Current maturities 175,000
-----------
$ 527,894
===========
</TABLE>
Future maturities of long-term debt are as follows:
<TABLE>
<S> <C>
Year Ending December 31,
------------------------
1995 $ 175,000
Thereafter 527,894
-----------
$ 702,894
===========
</TABLE>
7. COMMON STOCK
The Company repurchased 515,464 shares of common stock during 1994 for
a total of $6,008.97. The stock was retired and is available for
issuance at a latter date.
8. INCOME TAXES
The Company has a tax liability to the state of Arizona for the
minimum state income tax of $50. There is no federal income tax due
to the Company being a subchapter "S" corporation (Note 1). The
amount of the liability is immaterial and not accrued in the
financial statements.
<PAGE> 37
8
INFOPAK, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
9. COMMITMENTS AND CONTINGENCIES
Lease
The Company has a month to month, noncapitalized operating lease for
its premises.
Royalty agreement
The Company has a royalty agreement with certain officers of the
Company. This agreement is to pay a royalty for sales of
manufactured product. The royalty accrues and will be paid when the
Company becomes profitable on a tax basis. There were no royalties
paid during 1994.
Bonus plans
The Company entered into a bonus plan in 1993 to pay management and
employees a percentage of the net profit on a cash (tax) basis. As of
May 4, 1995 there have been no bonuses paid.
Income taxes
The Company has a net operating loss carryover which is available if
the Company reverts to a "C" corporation. The net operating loss
expires in 2008.
Long term debt
In 1994 the notes payable were renegotiated to begin payments after
the Company becomes profitable on a tax basis. (See note 6)
10. SUBSEQUENT EVENTS
Long term debt
Subsequent to the balance sheet date, a potential investor requested
the return of his initial deposit for the purchase of stock. Due to
this the stock purchase deposit has been reclassified as a loan
payable. (Note 6)
<PAGE> 38
9
Board of Directors and Stockholders
Infopak, Inc.
Phoenix, Arizona
INDEPENDENT ACCOUNTANTS' REPORT ON ADDITIONAL INFORMATION
Our report on our audit of the basic financial statements
of Infopak, Inc. for 1994 appears on page one. That
audit was made for the purpose of forming an opinion on
the basic financial statements taken as a whole. The
supporting schedule of selling and marketing and general
and administrative expenses is presented for purposes of
additional analysis and is not a required part of the
basic financial statements. Such information has been
subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, is
fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
Tarzana, California
May 4, 1995
<PAGE> 39
10
INFOPAK, INC.
SUPPORTING SCHEDULE OF SELLING AND MARKETING, AND
GENERAL AND ADMINISTRATIVE EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<S> <C> <C>
Selling and marketing
---------------------
Commissions $ 63,445 2.9
Health insurance 42,420 1.9
Insurance 10,527 0.5
Marketing 13,344 0.6
Moving expenses 4,307 0.2
Payroll taxes 34,907 1.6
Salaries 451,715 20.5
Sales expense 9,223 0.4
Travel and entertainment 2,020 0.1
----------- ----
Total $ 631,908 28.7 %
=========== ====
General and administrative
--------------------------
Accounting $ 2,000 0.1 %
Amortization and depreciation 72,940 3.3
Legal and professional 10,512 0.5
Miscellaneous 19,185 0.9
Office expense 107,306 4.9
Repairs and maintenance 966 -
Rent 14,725 0.7
Taxes and licenses 96 -
Telephone 13,165 0.6
Travel 27,413 1.2
----------- -----
Total $ 268,308 12.2 %
=========== =====
</TABLE>
See accountants' report
