<PAGE> 1
Preliminary Copy--Confidential, For the Information of the Securities and
Exchange Commission Only
As Filed with the Securities and Exchange Commission on November ___, 1995
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF
1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/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 Section 240.14a-11(c) or Section 240.14a-12
Dimensional Visions Group, Ltd.
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 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:
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 FEBRUARY 28, 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 February 28, 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 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
January 11, 1996, 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 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
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auditors, and FOR the authorization of additional shares of common stock and
preferred stock of the Company.
By Order of the Board of Directors,
/s/ Steven M. Peck
-------------------------
Steven M. Peck,
Chief Executive Officer
Dated: February 6, 1996
2
<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
February 28, 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 February 7, 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 January 11, 1996, as listed below, are entitled to receive
notice of, and to vote at, the Meeting and any adjournment thereof:
1. On January 11, 1996, there were 17,701,098 shares of
common stock issued and outstanding. Each share of common stock is entitled to
one (1) vote for each matter considered;
2. On January 11, 1996, 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. On January 11, 1996, 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;
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4. On January 11, 1996, 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 January 11, 1996, 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 January 11, 1996, there were 548,879 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 46,493,648.
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, and FOR the
authorization of additional shares of common stock and preferred stock of the
Company, and in the discretion of the persons named in the proxy, if granted,
on all other matters properly presented to the Meeting.
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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 January 11,
1996, and their percentage ownership of Common Stock and their percentage
voting power.
<TABLE>
<CAPTION>
==============================================================================================================
Name and Address of Amount and Nature of Percent
Beneficial Owners Beneficial 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
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) 1,678,410 8.7%
InfoPak, Inc.
8855 N. Black Canyon Highway, Suite 2000
Phoenix, AZ 85021
- --------------------------------------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------------------------------------
Hans J. Kaemmlein(9) 1,731,120 9.0%
80 Orville Drive
Bohemia, NY 11716
- --------------------------------------------------------------------------------------------------------------
Marton & Kjellaug M. Klepp(10) 1,350,750 7.1%
12 Day Road
Armon, NY 10504
- --------------------------------------------------------------------------------------------------------------
John L. Miller(11) 1,250,000 6.6%
Dimensional Visions Group, Ltd.
45 E. Main Street, Suite B
Los Gatos, CA 95030
- --------------------------------------------------------------------------------------------------------------
Alejandro & Lida Zaffaroni(12) 1,244,190 6.6%
4005 Miranda Ave., Suite 180
Palo Alto, CA 94304
- --------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 7
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Peter L. Jensen(13) 1,111,270 5.7%
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%
Dimensional Visions Group, Ltd.
718 Arch Street, 202N
Philadelphia, PA 19106
- --------------------------------------------------------------------------------------------------------------
James W. Porter, Jr. (16)
- --------------------------------------------------------------------------------------------------------------
William A. Knegendorf (16)
- --------------------------------------------------------------------------------------------------------------
All executive officers and directors as a group (5 persons)(17) 4,732,810 21.2%
==============================================================================================================
</TABLE>
(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 152,841 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, 145,841 shares is owned by the Lee
Family Partnership of
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<PAGE> 8
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.
(9) Mr. Kaemmlein owns common stock purchase warrants to purchase 200,000
shares of the Company's Common Stock. Also included are the following,
which are held in the name of Software Marketing Corporation, which is
solely owned by Mr. Kaemmlein: (a) 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 (b) 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, an officer of the Company, 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 are common stock purchase
warrants to purchase 2,000,000 shares of the Company's Common Stock,
which are being held by the Company in escrow, subject to Mr. Miller
meeting certain job performance goals.
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<PAGE> 9
(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. Also included in the amount are common stock
purchase warrants to purchase 25,000 shares of the Company's 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.
(17) Does not include common stock purchase warrants to purchase in the
aggregate 5,569,840 shares of the Company's Common Stock, and
warrants to purchase 15,000 shares of 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
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
FISCAL YEARS 1994 AND 1995
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1995, the Company had a working capital deficiency of
$138,013, compared with a working capital deficiency of $85,149 in 1994.
During the period ended June 30, 1995, the Company raised $757,000 through the
sale of its promissory notes in private placements and approximately $39,000
through the exercise of warrants. The Company's selling and marketing efforts
had been limited until adequate funding was obtained. During the period the
Company was taking selected orders based upon availability of inventory used in
the production process.
On April 25, 1995, substantially all of the long term note holders (see
Note 5 of Notes to Consolidated Financial Statements) agreed to defer all
interest payments on the notes until the notes mature beginning in fiscal 1997,
or upon the consummation of long term financing and/or strategic partner
relationship, to convert the notes and accrued interest into 8% Series B
Convertible Preferred stock through the exercise of the Series B Redeemable
Warrants. As of September 18, 1995, there was approximately $1,942,000
principle amount of long-term notes issued. Management believes that the
InfoPak acquisition and the raising of $750,000 through the sale of Common
Stock meets the conditions by which conversion of the long-term notes will
occur. However, no assurance can be given as to how many of the long-term
notes will be converted into Series B Redeemable Warrants.
RESULTS OF OPERATION
During the fiscal year ended June 30, 1995, the Company began limited
production. The net loss for the period was $1,192,332 compared with a net
loss of $1,069,642 for the fiscal year ended June 30, 1994. For the period the
Company paid consulting fees and expenses of approximately $235,000 which were
not related to research and development, and consulting fees of approximately
$137,720 relating to research and development. Salaries totaled approximately
$243,000 during the period. Other expenses during the period included outside
production costs consisting of plastic, printing and separating of
approximately $117,000, travel and related expenses of approximately $62,000
and approximately $72,000 for office rent and utilities expenses. Professional
fees for the period were approximately $46,000. Interest expense for the
period totaled approximately $208,700 which includes $141,200 of accrued
interest and $67,500 of additional interest relating to the issuance of
warrants.
Revenues for the period were approximately $135,000. Operational
funding needed to fully commence operations, i.e., purchase additional
inventory and equipment, offer a variety of DV3D(TM) products, hire additional
personnel and maintain good working relationships with third party vendors was
not obtained until after the period.
The Company's independent auditors report contains an explanatory
paragraph regarding the ability of the Company to continue as a going concern.
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<PAGE> 11
EVENTS SUBSEQUENT TO JUNE 30, 1995
The Company has been funding its operations by selling its securities
in private placements, short-term borrowing, equipment sales, and accruing
compensation to certain employees and consultants.
Subsequent to June 30, 1995, the Company raised a total of $895,000,
through the private placement of its secured notes and Common Stock, which has
allowed DVG to commence full operations. The $145,000 secured 10% notes
(including (i) warrants to purchase 14,500 shares of Series B Convertible
Preferred, each share of which is convertible into 100 shares of the Company's
Common Stock, and (ii) warrants to purchase 105,000 shares of the Company's
Common Stock) were sold for $145,000. The Company sold 3,000,000 shares of its
Common Stock through a Regulation S stock offering for $750,000. At the time
the Company initially entered into negotiations for the Regulation S offering,
the market price of its common stock ranged between $.40 and $.75 per share.
When negotiations were concluded, the market price approximated $1.89 per
share, however, the purchasers were unwilling to increase their offered
purchase price. As the Company had been attempting to raise funds for a period
of time with limited success, the Board of Directors determined that the above
offering was still in the best interest of the Company in order to contintue
its financial viability. Also, at the time of the offering, the Company
anticipated a second funding through the same placement agent at a smaller
discount from the market price for an amount considerably more than the above
offering. However, the second placement did not occur.
In September 1995, the Company acquired all of the outstanding capital
stock of InfoPak for 500,000 shares of its Series P Convertible Preferred
Stock, each share of which is convertible into 10 shares of the Company's
Common Stock. For the fiscal year ended December 31, 1994, InfoPak had revenue
from sales of $2,199,089, a net loss of $191,617 and a retained earnings
deficit at the end of the year of $327,487.
The Company believes it has sufficient funds to maintain its DVG
operations for the balance of the current fiscal year whether or not it
generates sales. InfoPak is currently in discussions with a major distributor
regarding renegotiation of a distribution agreement. It is possible that
InfoPak and the distributor may not reach an agreement. InfoPak has developed
an alternative marketing program, which may have the effect of slower sales
until the marketing program is developed and fully operational. The Company
can give no assurances that it will not need additional funds for InfoPak's
operations. The Company intends to seek additional funding to expand both DVG
and InfoPak's business to include new products and increased research and
development activity. No assurance can be given that the Company will be able
to obtain funds sufficient to meeting its capital needs. The Company's outside
auditors have qualified their report as to the ability of the Company to
continue as a going concern.
THREE MONTHS ENDED SEPTEMBER 30, 1994 AND 1995
RESULTS OF OPERATIONS
During the three months ended September 30, 1995 the net loss was $371,166
compared to a net loss of $281,252 for the three months ended September 30,
1994. During the three month period ended September 30, 1995, the Company had
revenues of $213,036 and gross profit of $53,620, compared to revenues of
$14,124 and a gross loss of ($3,475) for the comparable period.
InfoPak, from September 12, the date of acquisition, to September 30, 1995,
accounted for $198,376 of the Company's revenues and $85,401 of the gross
profit for the period ended September 30, 1995. InfoPak was not included with
the Company's results for the quarter ended September 30, 1994.
In the third quarter of fiscal year 1995, the Company delivered to a major
producer of graphic arts consumer products, a variety of DV3D(TM) print
products for test marketing. The tests were completed in the first quarter of
fiscal year 1996, and the Company has subsequently received through its major
distributor two commercial orders for these DV3D(TM) print products. The first
orders totaling $14,660 were delivered in September 1995, and accounted for all
of DV3D(TM) sales
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<PAGE> 12
in the three months ended September 30, 1995. The second order of
approximately $225,000 was delivered in November 1995. The Company anticipates
further orders from this customer.
During October 1995, the Company successfully completed production of its new
lenticular print material, which the Company believes enhances the quality of
DV3D(TM) print product.
During fiscal year 1995, the Company had under development a new master lens
which is designed to improve the quality of its DV3D(TM) master transparency.
Management believes this new master lens, which is currently in the prototype
stage, will be available for use in commercial production during the third
quarter of fiscal year 1996.
Operating expenses were $356,696 for the three months ended September 30, 1995
compared to $250,525 for the three months ended September 30, 1994. InfoPak's
operating expense was $40,230 for the September 30, 1995 period. Engineering
and development, marketing and general administrative costs were $59,538,
$54,707, and $242,451, respectively for the quarter ended September 30, 1995,
compared to $107,725, $34,021, and $108,779 for the quarter ended September 30,
1994. The $48,187 decline (45%) in engineering and development is primarily a
result of the Company having substantially completed the engineering of its
DV3D(TM) print product. Marketing costs increased $9,370 (27.5%) as a result
of the Company's increased efforts supporting its DV3D(TM) print product.
General administration expense increased 123% due primarily to professional
fees including (I) approximately $39,000 to Avonwood, (ii) approximately
$35,000 for legal and audit fees, (iii) approximately $28,500 in increased
administrative salaries and expenses, and (iv) approximately $7,500 of
increased accounting costs incurred during the period.
Interest expense increased due to the $145,000 of additional outstanding 10%
Secured Notes, while interest income increased with the short-term investments
of the proceeds of the $675,000 sale of common stock. Amortization of the
goodwill incurred in the acquisition of InfoPak was $21,987 for the quarter
ended September 30, 1995.
InfoPak, which was acquired by the Company on September 12, 1995, was founded
in 1992. InfoPak has developed a system that allows those who use large and
cumbersome printed data material an electronic alternative which is easier to
use and instantly updateable. The InfoPak(TM) Information System ("InfoPak
System"(TM)) was designed to manage voluminous databases that change often and
to distribute information to remote locations.
InfoPak currently produces and markets the InfoPak System(TM) to the
residential real estate agent marketplace as the InfoPak Portable MLS(TM). The
Portable MLS(TM) is currently the only product being sold. The Portable
MLS(TM) product is being marketed through four distributors. The MLS product
has not generated revenues as expected by InfoPak, nor does InfoPak have any
back orders for its product at this time. InfoPak has been unable to
successfully renegotiate its present distribution/marketing agreement with its
major distributor, and has provided notice to the major distributor of
termination of their Distribution Agreements for failure to comply with its
terms. The distributor has brought a legal action seeking a preliminary
injunction against InfoPak. InfoPak's revenues for the nine months ended
September 30, 1995 was approximately $775,000, of which approximately $577,000
was to that distributor. A third party has acquired one of the less
significant distributors which should lead to
11
<PAGE> 13
increased sales for InfoPak. These sales are anticipated to offset,
substantially, the loss of sales to the major distributor. However, no
assurances can be given that the above negotiations will be successfully
completed, nor that the anticipated revenues will be achieved.
InfoPak has under development a number of other products. During November
1995, research and development was completed for Small Talk(TM), a computer
chip that allows for the recording of voice, as well as a voice chip player,
both of which would be produced by a yet to be identified third party. The
viability and marketability of the product have not yet been determined.
In October 1995, InfoPak entered into a Letter of Intent with a division of
Spectrum Media, Inc. to form a joint venture for a number of newly developed
products, including replacement systems for printed directories and delivery
systems. The proposed joint venture is subject to due diligence by both
companies, the negotiation of a definitive agreement and provisions for the
initial funding. No assurance can be given that the transaction will be
consummated.
LIQUIDITY AND CAPITAL RESOURCES
On September 30, 1995, the Company had working capital of $78,045, compared to
a working capital deficiency of $138,013 on June 30, 1995. During the three
month period ended September 30, 1995, the Company raised $675,000 in net
proceeds through the sale of common stock to foreign investors, $145,000
through the sale of its promissory notes in a private placement and $800 from
the exercise of warrants to purchase common stock. Operating revenues for the
three months ended September 30, 1995, totaled $213,036, compared to $14,124
for the three months ended September 30, 1994.
On October 1, 1995, the Company converted $1,757,000 of its secured debt and
$228,760 of related accrued interest into unsecured convertible preferred
stock.
The Company's current financial position continues to be precarious even though
the Company was successful in the recent raising of $675,000. The Company will
need additional funding in order to maintain operations and in order to extend
the product line and increase the production capacity for its print products.
The Company has been funding its operations by selling its securities in
private placements, short-term borrowing, sales, and accruing compensation to
certain employees and consultants. The Company is currently in discussion with
third parties on raising additional funds. The amount of third party funding
will depend to some extent on the Company's revenues and cash flow from
operations. No assurance can be given that the Company will be able to obtain
the additional funds necessary to maintain its existing operations. In the
event the Company is not able to secure sufficient funds on a timely basis
necessary to maintain its current operations, it may cease all or part of its
existing operations or may seek protection under the federal bankruptcy laws.
12
<PAGE> 14
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.
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
13
<PAGE> 15
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 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.
14
<PAGE> 16
MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors held eight (8) meetings during the last
fiscal year and eight (8) 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 one (1) meeting. 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. Ferstl was required to file a Form 3 within 10 days of
when his beneficial ownership of the Company's Common Stock exceeds 10%. This
occurred on December 17, 1992 when he acquired 1,000,000 of his warrants to
purchase the Company's Common Stock. As of this date, the Company has no
record of his filing a Form 3.
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.
On May 12, 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
15
<PAGE> 17
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 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, (i) the Agreement was extended for an
additional year, (ii) the Company paid Avonwood $25,000 of their accrued
consulting fee and (iii) issued Avonwood 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 13, 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 (i) a sum equal to 5% of the incremental gross revenues generated by
any relationship which Avonwood introduces to InfoPak, (ii) 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, (iii) 5% success fee on all negotiations
resulting in a cash payment to InfoPak in which Avonwood is involved and (iv)
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 (ii) and (iii) have an infinite life. The term
of the agreement is automatically renewable on an annual basis unless canceled
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. James W. Porter, Jr., a Director, is the President,
principal and sole voting shareholder of Avonwood Capital Corporation, of which
Mr. William A. Knegendorf, a Director, is a Managing Director and a
shareholder.
16
<PAGE> 18
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. 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
13,702 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. John L. Miller, an officer of the Company, has an
agreement with the Company whereby he has been granted 2,000,000 warrants in
July 1993 to purchase the Company's common stock at $.15 per share for a five
year period and will vest upon the completion of certain technical and
production benchmarks. Mr. Miller was also issued 100,000 warrants to purchase
the Company's Common Stock in July of 1993 at $.15 per share exercisable over a
five year period. Additionally, Mr. Miller owns 50,000 shares of the
Company's Common Stock, valued at $.10 per share, which were granted in January
of 1995 as a bonus. In August 1995, Mr. Miller converted 300,000 shares of the
Company's Common Stock (which were granted in January 1994 in lieu of $30,000
of accrued compensation) into the Company's Series S Participating Convertible
Preferred Stock. Mr. Miller's current compensation is $6,000 per month, of
which $1,000 is being deferred until the Company has a positive cash flow.
Mr. Steven M. Peck was issued warrants to purchase 1,000,000
shares of the Company's Common Stock in September 1995 at an exercise price of
$.25 per warrant with a term of five years as a condition of his employment.
In December 1995, the Company and Mr. Peck entered into an employment
agreement. The agreement which is effective January 1, 1996, is for a three
year term, with a base salary of $125,000 per year. Such base salary shall be
subject to increases by the Board of Directors upon annual review.
17
<PAGE> 19
INDEPENDENT PUBLIC ACCOUNTANTS
On February 17, 1995, the Company notified its independent auditors, Rudolph
Palitz, that they were dismissed. Also, on February 17, 1995, the Company
engaged Gitomer & Berenholz, P.C. as its independent auditors.
Rudolph Palitz performed no auditing work for the Company. There was no
disagreement on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure which disagreements, if not
resolved to the satisfaction of the former accountant, would have caused it to
make reference to the subject matter of such disagreement.
The Company has authorized Rudolph Palitz to respond fully to any inquiries of
the Company's successor accountant.
The determination to change accountants was unanimously approved by the
Company's Board of Directors.
18
<PAGE> 20
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the total compensation earned by or
paid to the named executive officer by the Company for the fiscal year ended
June 30, 1995.
<TABLE>
<CAPTION>
====================================================================================================================
LONG TERM COMPENSATION
---- --------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
========================================================================================================
OTHER RESTRICTED SECURITIES ALL OTHER
ANNUAL STOCK UNDERLYING LTIP COMPENSATION
YEAR SALARY ($) BONUS ($) COMPENSATION AWARDS ($) OPTIONS/SARs PAYOUTS ($)
($) (#) ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<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 $36,000 of consulting
fees accrued in fiscal year 1995.
19
<PAGE> 21
<TABLE>
<CAPTION>
====================================================================================================================
OPTIONS/SAR GRANTS IN THE FISCAL YEAR 1995
- --------------------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS
- --------------------------------------------------------------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARs EXERCISE
UNDERLYING GRANTED TO OR
OPTION/SARs EMPLOYEES IN BASE PRICE EXPIRATION
NAME YEAR GRANTED(#) FISCAL YEAR ($/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.
20
<PAGE> 22
<TABLE>
<CAPTION>
===================================================================================================================================
AGGREGATED OPTIONS/SAR EXERCISES IN THE FISCAL YEAR 1995 AND FY- END OPTION/SAR VALUES
===================================================================================================================================
Value of
Shares Number of Securities Unexercised
Acquired Underlying Unexercised Options/SARs at In-the-Money Options/SARs
on FY-End (#) at FY-End($)
Name Year 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.
21
<PAGE> 23
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.
22
<PAGE> 24
PROPOSAL 3
AUTHORIZATION OF ADDITIONAL SHARES OF COMMON STOCK
AND PREFERRED STOCK
BACKGROUND
As of the date of this Proxy Statement, the Company has
2,033,902 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-two thousand two hundred and fifty (52,250)
shares of First Series A Convertible 5% Preferred Stock, at $.001 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 $.001
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 $.001 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 forty-eight thousand eight hundred
seventy-nine (548,879) shares of Fourth Series P Convertible Participating
Preferred Stock at $.001 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.
6. Thirty-two thousand one hundred and fifty (32,150)
shares of Third Series S Convertible Participating Preferred Stock, at $.001
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;
23
<PAGE> 25
7. Seventeen million nine hundred sixty six thousand
ninty eight (17,966,098) 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 66,597,212.
The Company's 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 expired on December 8, 1995.
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 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
24
<PAGE> 26
(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).
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, 17,701,098
shares were issued and outstanding at January 11, 1996. 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, 836,855 shares
were issued and outstanding at January 11, 1996. 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.
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
25
<PAGE> 27
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 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 acquirer seeking
to obtain control in order to break up and auction off the Company's component
parts or otherwise act in non-beneficial 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.
26
<PAGE> 28
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.
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.
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.
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.
The Company's audited financial statements for 1994 and 1995
are incorporated by reference from the Company's 1995 Annual Report.
+
27
<PAGE> 29
APPENDIX I
A. InfoPak, Inc.'s audited financial statements for 1994 and 1993.
B. InfoPak, Inc.'s unaudited financial statements for the six months
ended June 30, 1995.
C. Dimensional Visions Group, Ltd. Pro Forma Consolidated Statement of
Operation.
28
<PAGE> 30
INFOPAK, INC.
FINANCIAL STATEMENTS
WITH
INDEPENDENT AUDITORS' REPORT
YEARS ENDED DECEMBER 31, 1994 AND 1993
BILLER, FRITH-SMITH & ARCHIBALD Certified Public Accountants
<PAGE> 31
CONTENTS
<TABLE>
<CAPTION>
Page
------
<S> <C>
Independent auditors' report 1
Financial statements
Balance sheet 2
Statements of operations and deficit 3
Statements of cash flows 4
Notes to financial statements 5-8
</TABLE>
BILLER, FRITH-SMITH & ARCHIBALD Certified Public Accountants
<PAGE> 32
[BILLER, FRITH-SMITH & ARCHIBALD LETTERHEAD]
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 operations and deficit, and cash flows
for the two years 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 two
years then ended in conformity with generally accepted accounting principles.
Biller, Frith-Smith & Archibald
Tarzana, California
May 4, 1995
<PAGE> 33
2
INFOPAK, INC.
BALANCE SHEET
DECEMBER 31, 1994
ASSETS
------
<TABLE>
<S> <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
---------
Deposits 1,140
---------
$ 640,615
=========
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
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 (464,277)
---------
Total stockholders' deficit (413,566)
---------
$ 640,615
=========
</TABLE>
See accompanying accountants' audit report and notes to financial statements
<PAGE> 34
3
INFOPAK, INC.
STATEMENTS OF OPERATIONS AND DEFICIT
YEARS ENDED DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
Revenue from sales $ 2,199,089 $ 3,493,402
Cost of goods sold 1,457,054 2,300,138
------------ ------------
Gross profit 742,035 1,193,264
------------ ------------
Selling and marketing expenses 631,908 803,871
General and administrative 243,437 286,177
------------ ------------
875,345 1,090,048
------------ ------------
(Loss) income before taxes and other expenses (133,310) 103,216
Interest expense 33,436 15,399
------------ ------------
(Loss) income before income taxes (166,746) 87,817
Provision for income taxes - -
------------ ------------
Net (loss) income (166,746) 87,817
Deficit, beginning of year (297,531) (385,348)
------------ ------------
Deficit, end of year $ (464,277) $ (297,531)
============ ============
</TABLE>
See accompanying accountants' audit report
and notes to financial statements
<PAGE> 35
4
INFOPAK, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (166,746) $ 87,817
Adjustments to reconcile net (loss) income
to net cash used in operating activities:
Depreciation and amortization 48,069 43,000
Changes in assets and liabilities:
Notes and other receivables 355,243 (499,355)
Supplies and samples 1,119 (1,119)
Inventory (259,982) -
Prepaid expenses - 1,746
Deposits - 390
Accounts payable 26,220 (21,767)
Accrued expenses 26,483 267,114
----------- ------------
Net cash provided by operating activities 30,406 (122,174)
----------- ------------
Cash flows from investing activities:
Cash purchases of property and equipment (11,235) (22,038)
----------- ------------
Net cash used in investing activities (11,235) (22,038)
----------- ------------
Cash flows from financing activities:
Proceeds from employee loans - 64,074
Proceeds from notes payable 28,655 107,136
Repurchase of common stock (5,155) -
Issuance of common stock - 5,866
----------- ------------
Net cash provided by financing activities 23,500 177,076
----------- ------------
Net increase in cash 42,671 32,864
Cash, beginning of year 31,422 (1,442)
----------- ------------
Cash, end of year $ $ 31,422
=========== ============
Supplemental disclosure of cash flows informatio
Cash paid during the period for:
Interest $ 21,802 $ -
=========== ============
Income taxes $ - $ -
=========== ============
</TABLE>
See accompanying accountants' audit report and notes to financial statements
<PAGE> 36
5
INFOPAK, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994 AND 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Line of busines
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.
Income taxe
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.
2. NOTES AND OTHER RECEIVABLES
During the year ended December 31, 1994, the Company did not advance
any additional funds to employees/shareholders. The amounts are
recorded as notes receivable from the employees/shareholders with
interest calculated annually at 6% and not to exceed specified
amounts. Repayment is to begin when certain conditions are met.
<PAGE> 37
6
INFOPAK, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994 AND 1993
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>
Depreciation expense for the years ended December 31, 1994 and 1993
were $48,069 and $43,000, respectively.
5. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<S> <C>
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>
<PAGE> 38
7
INFOPAK, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994 AND 1993
5. LONG-TERM DEBT (continued)
Future maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
Year Ending December 31,
------------------------
<S> <C>
1995 $175,000
Thereafter 527,894
-----------
$702,894
===========
</TABLE>
6. 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.
7. INCOME TAXES
The Company has a tax liability to the state of Arizona for the
minimum state income tax of $50 for each of the years ended December
31, 1994 and 1993. 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.
8. 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 and 1993.
<PAGE> 39
8
INFOPAK, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994 AND 1993
8. COMMITMENTS AND CONTINGENCIES (continued)
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 taxe
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 deb
In 1994 the notes payable were renegotiated to begin payments after
the Company becomes profitable on a tax basis. (See note 6)
9. SUBSEQUENT EVENTS
Long term deb
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 5)
<PAGE> 40
INFOPAK, INC.
BALANCE SHEET
JUNE 30, 1995
(Unaudited)
ASSETS
---------
<TABLE>
<S> <C>
Current assets
Cash $ 357,961
Accounts receivable, trade net of allowance
for doubtful accounts $15,000 68,820
Inventory 116,896
----------
Total current assets 543,677
----------
Property and equipment, net of
accumulated depreciation of $135,172 96,547
----------
Deposits 1,140
----------
$ 641,364
==========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities
Current portion of long-term debt $ 175,000
Accounts payable, accrued expenses and other
liabilities 133,058
Royalties payable 201,132
----------
509,190
----------
Long term debt, net of current portion 467,201
----------
Stockholders' deficiency
Common stock, $.01 par value, 40,000,000 shares
authorized, 5,206,131 shares issued and outstanding 52,061
Additional paid-in capital 248,650
Deficit (635,738)
----------
(335,027)
----------
Total liabilities and stockholders' deficiency $ 642,364
==========
</TABLE>
See notes to financial statements.
1
<PAGE> 41
INFOPAK, INC.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1995
(Unaudited)
<TABLE>
<S> <C>
Operating revenue $ 558,590
Cost of goods sold 325,693
-----------
Gross profit 232,897
-----------
Operating expenses
Engineering and development 124,574
Marketing 70,588
General and administration 199,473
-----------
Total operating expenses 394,635
-----------
Loss before interest expense (161,738)
Interest expense, net 9,723
-----------
Net loss $ (121,461)
==========
</TABLE>
See notes to financial statements.
2
<PAGE> 42
INFOPAK, INC.
STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1995
(Unaudited)
<TABLE>
<S> <C>
Cash flow from operating activities
Net loss $ (171,461)
Adjustments to reconcile net loss to net cash used in
operating activities
Depreciation and amortization 23,612
Changes in assets and liabilities
Accounts receivable, trade 60,792
Inventory 143,086
Accounts payable, accrued expenses and
other liabilities (39,201)
Royalties payable 22,104
----------
Net cash provided by operations 38,932
----------
Cash flow from investing activities
Purchase of equipment (1,321)
----------
Net cash used in investing activities (1,321)
----------
Cash flow from financing activities
Reduction of long-term debt (3,743)
Sale of common stock 250,000
----------
Net cash provided by financing activities 246,257
----------
Net increase in cash 283,868
Cash, beginning of period $ 74,093
----------
Cash, end of period $ 357,961
==========
Supplemental disclosure of cash flows information
Cash paid during the period for
Interest $ -
=================
Income taxes $ -
=================
</TABLE>
See notes to financial statements.
3
<PAGE> 43
INFOPAK, INC.
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1995
(Unaudited)
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation of interim financial statements
In the opinion of management, the interim financials statements
reflect all adjustments of a normal recurring nature necessary for a
fair statement of the results for the six months ended June 30, 1995.
The current period results of operations are not necessarily
indicative of results which ultimately will be reported for year
ending December 31, 1995.
Line of busines
The Company is in the business of manufacturing and marketing hardware
and software information and recordable microchip and audio playback
systems and method products and programs.
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.
Income taxe
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.
Effective June 1, 1995, the Company, as a result of a sale of common
stock to a foreign shareholder was no longer eligible to be taxed as a
S-corporation, accordingly, from that date, the Company will be taxed
as a C-corporation.
4
<PAGE> 44
INFOPAK, INC.
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1995
(Unaudited)
Note 2. INVENTORY
Inventory consists of finished goods.
Note 3. PROPERTY, EQUIPMENT AND DEVELOPMENT COSTS
Property, equipment and development costs consist of the following:
<TABLE>
<S> <C> <C> <C>
Machinery $ 22,804 $13,320 $ 9,484
Furniture and fixtures 1,994 1,894 100
Software development 8,913 5,079 3,833
Hardware development 198,009 114,879 83,130
-------- ------- ------
$231,719 $135,172 $96,547
======== ======== =======
</TABLE>
Depreciation expense for the six months ended June 340, 1995 was
$23,612.
Note 4. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<S> <C>
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. 185,767
--------
642,201
Current maturities 175,000
--------
</TABLE>
Future maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
Year Ending June 30,
--------------------
<S> <C>
1995 $175,000
Thereafter 467,201
--------
$642,201
========
</TABLE>
5
<PAGE> 45
INFOPAK, INC.
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1995
(Unaudited)
Note 5. COMMON STOCK
On June 1, 1995, the Company sold 135,000 shares for $250,000 to a
foreign investor.
Note 6. COMMITMENTS AND CONTINGENCIES
Lease
The Company has a month-to-month, non-capitalized 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 1995.
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
June 30, 1995, there have been no bonuses paid.
Note 7. SUBSEQUENT EVENTS
On September 12, 1995, the shareholders of the Company exchanged all
of their outstanding stock for shares in Dimensional Visions Group,
Ltd. Certain liabilities were excluded from the merger transaction
and were canceled by the Company as follows:
<TABLE>
<S> <C>
Commissions payable $ 31,924
Royalties payable 210,132
Loans payable, employees 151,884
--------
$384,940
========
</TABLE>
In addition, notes payable of $281,434 and accrued interest of $65,379
due to certain shareholders of InfoPak, Inc. were canceled and
Dimensional Visions Group, Ltd. Issued 31,379 shares of its stock in
exchange for the cancellation of the obligations.
6
<PAGE> 46
INFOPAK, INC.
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1995
(Unaudited)
The pro forma consolidated balance sheet is presented to show the financial
position of Dimensional Visions Group, Ltd. (Company) as if the acquisition of
InfoPak, Inc. had occurred on June 30, 1995, and the pro forma consolidated
statement of operations as if the acquisition of InfoPak, Inc. had occurred on
July 1, 1994, using the assumptions and adjustments described in the
accompanying notes.
These pro forma consolidated financial statements have been prepared for
comparative purposes only, and do not purport to indicate what necessarily
would have occurred had the acquisition been completed since inception, or what
results may be in the future. The pro forma consolidated financial statements
should be read in conjunction with the historical financial statements and
notes, as presented in the 1995 Annual Form 10-KSB/A for the year ended June
30, 1995.
On September 12, 1995, the Company acquired all of the outstanding capital
stock of InfoPak, Inc., pursuant to a merger agreement dated September 6, 1995.
The Company issued 500,000 shares of Series P Convertible Preferred Stock
valued at $1,250,000 and the issuance of an additional 31,379 shares of Series
P Convertible Preferred Stock relating to the cancellation of Notes and accrued
interest of InfoPak, Inc. and 17,500 shares of Series P Convertible Preferred
Stock relating to certain employees and a consultant of InfoPak, Inc.
1
<PAGE> 47
DIMENSIONAL VISIONS GROUP, LTD. AND
SUBSIDIARIES PRO FORMA
CONSOLIDATED BALANCE SHEET
JUNE 30, 1995
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
Current assets
Cash and cash equivalents $ 227,972 $ 275,632(1) $ 503,604
Receivables
Trade 18,690 8,867(1) 27,557
Employee - 44,078(1) 44,078
Inventory 26,453 114,383(1) 140,836
Prepaid suppliers and expenses 43,361 - 43,361
--------- ---------- ----------
Total current assets 316,476 442,960 759,436
--------- ---------- ----------
Equipment and leasehold improvements, net 81,363 42,748(1) 124,111
--------- ---------- ----------
Other assets
Patent rights and other assets 53,398 43,750(2)
1,140(1) 98,288
Goodwill 910,791(1)
78,477(3)
36,866(4) 1,026,134
--------- ---------- ----------
53,398 1,071,024 1,124,422
--------- ---------- ----------
Total assets $ 451,237 $1,556,732 $2,007,969
========= ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities
Notes payable
Employees $ - $ 73,729(1) $ 73,729
Other 50,000 - 50,000
Accounts payable, accrued expenses and
other liabilities 404,489 36,866(4)
------------ ---------- ------------
73,939(1) 515,294
Total current liabilities 454,489 184,534 639,023
------------ ---------- ------------
Long term debt
Secured notes 1,837,000 - 1,837,000
Accrued interest payable 210,741 - 210,741
------------ ---------- ------------
2,047,741 - 2,047,741
------------ ---------- ------------
Stockholders' equity (deficiency)
Preferred stock 77 549(1) 626
Additional paid-in capital 772,423 1,371,649(1) 2,144,072
------------ ---------- ------------
772,500 1,372,198 2,144,698
Common stock 16,936 - 16,936
Additional paid-in capital 11,881,927 - 11,881,927
Deficit (14,722,356) - (14,722,356)
------------ ---------- ------------
Total stockholders' equity (deficiency) (2,050,993) 1,372,198 (678,795)
------------ ---------- ------------
Total liabilities and stockholders' equity (deficiency) $ 451,237 $1,556,732 $ 2,007,969
============ ========== ============
</TABLE>
The accompanying notes to pro forma consolidated financial statements
are an integral part of this statement.
2
<PAGE> 48
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
Results of
Operations of Pro Forma
Historical InfoPak, Inc. Adjustments Pro Forma
---------- -------------- ----------- ---------
<S> <C> <C> <C> <C>
Operating revenue $134,028 $2,199,997 $ - $2,334,025
-------- ---------- --------- ----------
Operating expenses
Cost of sales 241,240 1,395,276 (81,682)(5) 1,554,834
Marketing expenses 120,359 184,494 2,917 (6) 307,770
General and administrative expenses 460,680 401,595 6,664 (6)
205,227 (7) 1,074,166
-------- ---------- --------- ----------
Total operating expenses 1,121,546 2,219,743 139,790 3,481,079
-------- ---------- --------- ----------
Loss before other income (expenses) (987,518) (19,746) (139,790) (1,147,054)
-------- ---------- --------- ----------
Other income (expense)
Interest expenses (208,717) (27,625) 12,021 (5) (224,321)
Interest income 1,318 2,491 - 3,809
Gain on sale of equipment 2,585 - - 2,585
-------- ---------- --------- ----------
(204,814) (25,134) 12,021 (217,927)
-------- ---------- --------- ----------
Net loss ($1,192,332) ($44,880) ($127,769) ($1,364,981)
=========== ========== ========== ===========
Loss per share
===========
($.08)
===========
Weighted average number of shares 16,476,769
===========
outstanding
</TABLE>
The accompanying notes to pro forma consolidated financial statements
are an integral part of this statement.
3
<PAGE> 49
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
(Unaudited)
(1) Represents the acquisition of the net assets of InfoPak, Inc. on
September 12, 1995, by the issuance of 500,000 shares of Series P
Convertible Preferred Stock valued at $1,250,000 ($2.50 per share) and
the issuance of an additional 31,379 shares of Series P Preferred
Stock relating to the cancellation of Notes Payable and related
accrued interest of InfoPak, Inc. valued at $78,448. In connection
with the acquisition of InfoPak, Inc., the Company incurred legal fees
of $36,866. The net assets acquired are as follows:
<TABLE>
<S> <C>
Assets
Cash and cash equivalent $275,632
Receivables
Trade 8,867
Employees 44,078
Inventory 114,383
Equipment 42,804
Deposit 1,140
--------
486,904
--------
Liabilities
Notes payable, employees 73,729
Accounts payable, accrued expenses
and other liabilities 43,531
--------
117,260
--------
Net assets acquired $369,644
========
</TABLE>
As a result of the excess purchase price paid for InfoPak, Inc. and
costs incurred, the Company accordingly recorded Goodwill of
$1,026,134. The Series P Convertible Preferred Stock was valued at
$2.50 per share based upon the price at which the Company was able to
sell 3,000,000 shares of its Common Stock on September 5, 1995 through
a Regulation S Offering which was $.25 per share.
(2) Represents the issuance of 17,500 shares of Series P Convertible
Preferred Stock in connection with employment and consulting contract
signing bonuses to certain employees and a consultant to InfoPak, Inc.
(3) Represents the issuance of 31,379 shares of Series P Convertible
Preferred Stock in connection with the cancellation of debt and
related accrued interest due to certain shareholders of InfoPak, Inc.
(4) Represents legal fees in connection with the merger agreement dated
September 6, 1995.
4
<PAGE> 50
DIMENSIONAL VISIONS GROUP, LTD AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
JUNE 30, 1995
(Unaudited)
(5) Represents the elimination of royalty fees, and interest expense which
would not be incurred by the Company to operate InfoPak, Inc.
(6) Represents the amortization of the deferred compensation expense
(signing bonuses) over the three year term of the employment
contracts, and two year term of the consulting contract.
(7) Represents amortization of Goodwill over a period of five years.
(8) Represents the historical results of operations of InfoPak, Inc. for
12 monthly periods from July 1, 1994 through June 30, 1995.
5
<PAGE> 51
[FRONT SIDE OF PROXY CARD]
P
R DIMENSIONAL VISIONS GROUP, LTD.
O
X PROXY SOLICITED BY THE BOARD OF DIRECTORS
Y ANNUAL MEETING OF STOCKHOLDERS - FEBRUARY 28, 1996
The undersigned stockholder of Dimensional Visions Group, Ltd. (the
"Company"), revoking all previous proxies, hereby appoints Steven M.
Peck and George S. Smith and each of them acting individually, as the attorney
and proxy of the undersigned, with full power of substitution and
resubstitution, to vote all shares of the Company's voting stock which the
undersigned would be entitled to vote if personally present at the Annual
Meeting of Stockholders of the Company, to be held at 9:00 a.m., (local time),
at the offices of Clark, Ladner, Fortenbaugh & Young located at One Commerce
Square, 2005 Market Street, Philadelphia, Pennsylvania 19106 on February 28,
1996, and at any adjournment or postponement thereof. Said proxies are
authorized and directed to vote as indicated with respect to the following
matters:
1. Election of Directors, For all nominies listed below ----
(Except as marked to the contrary).
Withhold authority to vote for all nominies listed below. ----
George S. Smith, Steven M. Peck, Sean F. Lee, James W. Porter, Jr., and
William A. Knegendorf.
(Instructions: To withhold authority to vote for any individual nominee write
that nominee's name in the space provided.)
- ------------------------------------------------------------------------------
2. To ratify the appointment of Gitomer & Berenholz, P.C. as the - FOR
Company's independent auditors. - AGAINST
- ABSTAIN
<PAGE> 52
3. To consider and vote upon a proposal to amend the Company's - FOR
Certificate of Incorporation to authorize additional shares of - AGAINST
common stock and preferred stock of the Company. - ABSTAIN
4. To transact such other business as may properly come before this meeting.
<PAGE> 53
[BACK SIDE OF PROXY CARD]
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. Unless
otherwise specified, the shares will be voted FOR the elcection of the five
nominees to the Board of Directors, FOR the ratification of Gitomer &
Berenholz, P.C.as the Company's independent auditors, and FOR the authorization
of additional shares of common stock and preferred stock of the Company, in
each case as described in the accompanying Proxy Statement. This Proxy also
delegates discretionary authority to vote with respect to any other business
which may properly come before the meeting or any adjournment or postponement
thereof.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF THE ANNUAL
MEETING OF THE STOCKHOLDERS TO BE HELD FEBRUARY 28, 1996 AND A COPY OF THE 1995
ANNUAL REPORT OF DIMENSIONAL VISIONS GROUP, LTD.
Dated: , 1996
-----------------------------
---------------------------------------
Signature of Stockholder
---------------------------------------
Signature of Stockholder
NOTE: Please sign this Proxy exactly as name(s) appear
in address. When signing as attorney-in-fact,
executor, administrator, trustee or guardian, please
add your title as such. If stockholder is a
corporation, please sign with full corporate name by
duly authorized officer or officers and affix the
corporate seal. When stock is held in the name of two
or more persons, all such persons should sign.
PLEASE, SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
