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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A-1
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended June 30, 1995
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OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-10196
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Dimensional Visions Group, Ltd.
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(Exact name of registrant as specified in its charter)
Delaware 23-2517953
- ---------------------------- -----------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
718 Arch Street, Suite 202 N, Philadelphia 19106
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 440-7791
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Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
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(Title of Class)
Redeemable Class B Warrants
---------------------------
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter periods that
the Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
X YES NO
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained
herein, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB.
As of September 18, 1995, the number of shares of Common Stock
outstanding was 17,521,098. The aggregate market value of the Company's Common
Stock held by non-affiliates of the registrant as of September 18, 1995 was
approximately $27,298,590 (based upon 17,471,098 shares at $1.5625 per share).
DOCUMENTS INCORPORATED BY REFERENCE: NONE
Certain exhibits are incorporated by reference to the Company's
Registration Statement on Form S-1, Form 10-KSB and Form 8-K as listed in
response to Item 13(a)(3) of Part III.
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PART I
ITEM 1. BUSINESS
THE COMPANY
Dimensional Visions Group, Ltd. ("DVG") was organized in 1988. DVG
produces and markets lithographically printed stereoscopic prints commonly
referred to as three-dimensional prints. The prints may be viewed without the
use of special glasses or other viewing apparatus. DVG has applied for a
trademark for its three-dimensional products as the DV3D(TM) image. DVG's
product lines are determined by the technical specifications of the polymer
based lenticular material on which the DV3D(TM) image is printed. The DV3D(TM)
print product may be produced in varying sizes for specified customer
applications. The current DV3D(TM) print product is designed for hand-held
viewing.
On September 12, 1995, DVG, through a wholly-owned subsidiary,
acquired all the outstanding capital stock of InfoPak, Inc. ("InfoPak").
InfoPak, located in Phoenix, Arizona, manufactures and markets hardware and
software information and method products and programs. References herein to
the "Company" includes DVG and its wholly-owned subsidiaries.
InfoPak was founded in 1992. InfoPak has developed a system that
allows those that use large and cumbersome printed dated material an electronic
alternative which is easier to use. The InfoPak Information System (the
"System") was designed to manage voluminous databases that change often and to
distribute information to remote locations where the System utilizes standard
telephone lines and personal computers (PC's) to distribute the information.
Information is stored on an InfoCard(TM) and displayed by a hand-held
InfoReader(TM). The System has been designed to provide the owners and
publishers of the information many levels of security to ensure that piracy and
unauthorized use does not occur. In essence, InfoPak distributes data
electronically then repackages directories onto InfoCards(TM) to be used in
InfoReaders(TM). In many cases, InfoPak provides key business information to
the end user in just a few seconds when, historically, that process took days
or even weeks.
InfoPak currently produces and markets the System to the residential
real estate agent marketplace as the InfoPak Portable MLS. InfoPak is selling
the Portable MLS to realtors as an option to the printed Multiple Listing
Service Directory. The InfoCard(TM) stores the real estate listings and the
operating program for portable access through the InfoReader(TM).
Since its inception, the Company has been dependent upon the proceeds
of the sale of its securities, loans and sale of surplus equipment to conduct
its business. There can be no assurance that the Company will generate
sufficient revenues from the sale of its products necessary to maintain its
cost structure or achieve profitability.
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MARKETING
Since its inception, DVG has been attempting to develop a commercially
acceptable product. Management believes that during the first half of fiscal
1994, DVG was able to complete the development of its technologies necessary to
begin a sales and marketing effort.
DVG initiated a sales and marketing program in January 1994 and
shipped its first commercial order in July 1994 and received additional orders
which have resulted in a limited amount of sales to date. However, until
recently, the Company continued to lack adequate financial resources to begin
full operations which include a manufacturing/production executive, a creative
design employee and an adequate inventory of lenticular print material to fill
large volume orders.
DVG is marketing commercial and promotional applications of its
DV3D(TM) print products to all users of graphic arts. Some of the applications
of DV3D(TM) print products are packaging, book and magazine covers and inserts,
CD covers, trading cards, games, and greeting cards. Other proposed markets
include point-of-sale materials and displays, direct mail, specialty
advertising, premium incentives, trade show exhibits, and special events
promotion.
DVG uses its own employees and independent sales agents in marketing
its products. The independent sales agents are paid on a commission basis for
orders shipped, accepted and for which payment has been received. DVG also
sells its products to independent marketing organizations. During the first six
months of fiscal 1995, DVG entered into a number of exclusive sales and
marketing agreements with independent sales and marketing organizations. The
remaining two agreements relate to the sales and marketing of the DVG's
products for certain enumerated potential users, including, but not limited to,
comic books, greeting cards, magazines, and sports organizations. The
agreements have specific performance goals to be met in order to retain
exclusive distribution rights for identified target accounts.
To date, InfoPak has grown its business primarily through the use of
outside distributors. The objective was to develop a wide-spread distribution
network in order to establish broad based customer acceptance in the real
estate marketplace. Using this method of marketing, operations have been
established in over thirty cities in the United States and Canada. Expansion
has been steady and is expected to continue during the foreseeable future.
Presently, each distributor under contract with InfoPak receives an
exclusive marketing territory that may cover anywhere from one city to many
cities. Territories are granted based upon the distributor's financial
strength, real estate industry experience, performance goals, and initial
purchase commitments. The distributor maintains exclusivity as long as it
meets the
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performance benchmarks outlined in its distribution agreement with InfoPak.
Although these benchmarks vary from one distributor to another, they all
encompass inventory purchase requirements which is one of InfoPak's sources of
revenue.
InfoPak's revenues are primarily generated in two ways: 1) through
the sale of new Portable MLS InfoReaders(TM) to the distributor and 2) through
ongoing licensing revenue collected from the distributor for each InfoPak
Portable MLS InfoReader(TM) in operation. The licensing fee is assessed for
ongoing MLS data delivery, system support, and system maintenance, and normally
begins the thirteenth month following activation of an InfoReader(TM).
Distributors, in turn, either lease or sell the InfoReaders(TM) to the end
customer (normally realtors), collecting monthly licensing fees for ongoing
support in all cases. A portion of this licensing fee is what is returned to
InfoPak as described above.
To further enhance market penetration in addition to expansion through
outside distributors, InfoPak is pursuing market growth through direct Company
sales and marketing whereby it will contract with Real Estate Boards and
Associations directly to establish sales and marketing activities at those
sites without the assistance of outside distributors. Initially, InfoPak's
direct Company marketing campaign is targeting small to medium size Real Estate
Boards and Associations which are interested in using the InfoPak system,
without the aid of outside distributors.
PRODUCTION
DVG controls or supervises all phases of the production of the
DV3D(TM) print product from the stereoscopic photography and proprietary image
compositing through the color separation and printing.
There are four basic phases of the manufacturing process, the multiple
image stereoscopic photography, the multiple image compositing of the DV3D(TM)
image to create a master transparency, the color separation of the master
transparency and the printing of the separated image on polymer based
lenticular material. Lenticular material is a plastic optical material that
allows the three-dimensional image to be viewed without the use of any viewing
apparatus such as glasses, hoods, etc. The process involves, in part, the
taking and then compositing of numerous photographs of a subject in order to
create a single stereoscopic master image. The technology involves a computer
controlled camera mounted on a micro-positioning mechanism and imaging system
taking numerous photographs of a subject. The camera is mobile and takes
photographs from various positions and angles. The photos are then composited
in a clean room/photo laboratory to create a single stereoscopic master
transparency. The present stereoscopic photographic system used by the Company
can only produce an image of stationary objects. The DV3D(TM) image is then
sent to a commercial separator and printer where the master image, with the use
of the Company's proprietary methods and knowledge, is separated and, through
the lithographic process, printed on a
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polymer based lenticular material which focuses the multi-dimensional images.
The Company produces the multi-image, stereoscopic photography and compositing
of the DV3D(TM) image for the master transparency at its facilities in
Philadelphia, Pennsylvania. Proprietary color separation and printing are done
under the supervision of the Company with third-party vendors.
The polymer based lenticular material on which the DV3D(TM) image is
printed is supplied by producers in the petrochemical and plastic fabricating
industries. The DV3D(TM) image is printed on the polymer based lenticular
material by commercial lithographic printing processes. In the printer's
pre-press preparation stage, state-of-the-art computerized photo-equipment is
necessary because production specifications for the DV3D(TM) image require
ultra-accurate tolerances. The Company has established working arrangements
with third-party separators and a printer on a per order basis.
InfoPak's product is manufactured by a third party pursuant to a
Turnkey Agreement with Elamex, S.A. de C.V. The Turnkey Agreement provides for
the manufacture of the portable MLS InfoReader(TM) whereby creditworthy
purchase orders are placed directly through InfoPak with Elamex. Receivables
are assigned to a lockbox and upon receipt are distributed in accordance with
the costs of goods as agreed upon between InfoPak and Elamex.
PATENTS, TRADEMARKS AND PROPRIETARY PROTECTION
In November 1988 concurrent with the initial public offering of its
securities, the Company was assigned the rights to a patent, "Method and
Apparatus For Stereoscopic Photography." However, because applications were
not filed on a timely basis in other countries, except Canada, prior to the
patent being issued and before the Company's acquisition of the patent rights,
patent applications cannot be filed in any other country. The patent covers a
method and apparatus for taking three-dimensional pictures of an object in
which a plurality of cameras are used, or a single camera is operated
sequentially, on a side by side basis to take a plurality of separate pictures
of the same object. In September of 1990, the Company was issued an additional
patent, "Electronic (digitalized) Method and Apparatus For Stereoscopic
Photography", which can be used on the Company's photographic process.
In February 1993, certain officers of InfoPak sold and assigned
technology as set forth in a patent application "System and Method for Printing
Data and Program Code to a Card for Use by a Realtor" to InfoPak. In August
1993, certain officers of InfoPak sold and assigned certain technology as set
forth in a patent application "System and Method for Credit Card Verification
System" to InfoPak. InfoPak also has a patent application "Electronic
Telephone Directory with Interchangeable Listings". All patent applications
are pending before the Patent and Trademark Office. The Company enters into
confidentiality agreements with all persons and entities who or which may have
access to its technology. However, no assurance can be given that such
agreements, the patents or any additional patents which may be issued to the
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Company will prevent third parties from developing similar or competitive
technology. There can be no assurance that the patents will provide the Company
with any significant competitive advantages, or that challenges will not be
instituted against the validity or enforceability of its patents, or if
instituted that any such challenges will not be successful. The cost of
litigation to uphold the validity and prevent infringement can be substantial.
In addition, no assurance can be given that the Company will have sufficient
resources to either institute or defend any action, suit or other proceeding by
or against the Company with respect to any claimed infringement of patent or
other proprietary rights. In the event that the Company should lose, in the
near future, the protection afforded by the patents and any future patents,
such event could have a material adverse effect on the Company's operations.
Furthermore, there can be no assurance that the Company's technologies will not
infringe patents or other rights owned by others, licenses to which may not be
available to the Company.
The Company has applied to register the DV3D(TM) mark with the Patent
and Trademark office.
COMPETITION
Other processes currently are available which allow a viewer to
perceive an image in three-dimension, including those which employ
stereoglasses and viewing hoods and other processes, such as holograms and
other three-dimensional image systems, which do not require the use of viewing
apparatus. The Company is aware of at least three companies which manufacture
equipment capable of producing traditional three-dimensional images for
commercial or consumer use, all of which have substantially greater financial
and other resources than the Company. Various systems exist for taking
traditional three-dimensional photographs, including a system providing for the
taking of two pictures from different angles using filters, requiring glasses
for viewing and the use of a plurality of cameras spaced side by side or in an
arc around the subject. Holographic and other stereoscopic techniques, when
perfected, may result in three-dimensional images which will be directly
competitive with the Company's products. Further, the Company's products are
substantially more expensive than conventional, high quality, two-dimensional
prints and for this reason, high quality, conventional processes and methods
may be favored for many, if not most, illustration and advertising contexts.
Certain of the Company's competitors, who may have substantially greater
financial and organizational resources than the Company have developed
three-dimensional processes, such as Optigraphics, Inc., which compete with the
Company's products.
Management of InfoPak believe that no other product competes directly
with the InfoPak Portable MLS because of the single application function that
it provides its subscribers. However, many companies with far greater
resources than InfoPak offer palm-top and lap-top computers for use with
Multiple Listing Service Systems. No assurance can be given that such other
companies may not redesign their products specifically for the real estate
niche market that InfoPak sells its Portable MLS.
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EMPLOYEES
The Company has fourteen employees. DVG employs six persons, three of
whom are executive officers. InfoPak employs eight persons, four of whom are
executive officers.
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CONSOLIDATED SELECTED FINANCIAL DATA
Set forth below is selected financial data derived from the Company's
consolidated financial statements, some of which appear elsewhere in this
report. This data should be read in conjunction with the consolidated
financial statements, some of which are included elsewhere in this report.
<TABLE>
<CAPTION>
=========================================================================================================================
Year Ended Year Ended Year Ended Year Ended Year Ended
June 30, 1995 June 30, 1994 June 30, 1993 June 30, 1992 June 30, 1991
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operation revenue $134,028 $ -0- $ -0- $ 166,385 $ -0-
- -------------------------------------------------------------------------------------------------------------------------
Net Loss ($1,192,332) ($1,069,642) ($1,327,258) ($4,033,997) ($3,911,359)
- -------------------------------------------------------------------------------------------------------------------------
Net loss per share of ($.07) ($.07) ($.10) ($.39) ($.44)
common stock
- -------------------------------------------------------------------------------------------------------------------------
Balance Sheet Data:
- -------------------------------------------------------------------------------------------------------------------------
Working capital
(deficit) ($138,013) ($85,149) ($305,014) ($297,463) ($704,527)
- -------------------------------------------------------------------------------------------------------------------------
Total assets $451,237 $449,725 $636,133 $2,870,149 $4,675,768
- -------------------------------------------------------------------------------------------------------------------------
Total Liabilities $2,502,230 $1,464,861 $692,027 $2,273,631 $2,521,633
- -------------------------------------------------------------------------------------------------------------------------
Stockholders' equity
(deficiency) ($2,050,993) ($1,015,136) ($55,894) $596,518 $2,154,135
=========================================================================================================================
</TABLE>
ITEM 2. DESCRIPTION OF PROPERTY
DVG leases approximately 5,485 rentable square feet, for its
administration and technical operations. The term of the lease is five years,
expiring on February 28, 1999. The annual fixed rent of $23,595 for the first
year, $58,963 in year two, $60,335 in year three, $61,706 in year four and
$63,077 in the fifth year.
DVG leases approximately 770 square feet of office space in Los Gatos,
California. DVG leases the space for the use by its Executive Vice President,
Director of Research and Product Development, and its Chairman of the Board of
Directors, who reside in California. The monthly rent is $1,042, subject to
normal adjustments, on a month to month basis.
InfoPak leases approximately 1,800 square feet of office space in
Phoenix, Arizona. The monthly rent is $1,227 on a month to month basis.
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ITEM 3. LEGAL PROCEEDINGS. None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None
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PART II
ITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The principal market for the Company's Common Stock is the National
Association of Securities Dealers, Inc. over-the-counter market, on the
Electronic Bulletin Board. The trading symbol for the Common Stock is
"DVGL.U". The Company does not believe that any trading market exists for its
Series "B" Redeemable Common Stock Purchase Warrants.
On August 25, 1992, the Company's securities were delisted from the
NASDAQ trading system. Since that time the Company's Common Stock has been
listed on the Electronic Bulletin Board.
Public trading in the Company's Common Stock commenced in November
1988. Set forth below are the high and low bid prices for the Company's Common
Stock by the Company's fiscal quarters beginning July 1, 1994, as quoted by the
National Quotation Bureau. The prices represent prices between dealers, do not
include retail mark-ups, mark-downs or commissions and may not represent actual
transactions.
<TABLE>
<CAPTION>
-------------------------------------------------
Fiscal 1994 High Low
----------- ---- ---
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<S> <C> <C>
First Quarter $.44 $.09
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Second Quarter $.81 $.16
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Third Quarter $.41 $.16
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Fourth Quarter $.28 $.13
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<CAPTION>
Fiscal 1995
-----------
-------------------------------------------------
<S> <C> <C>
First Quarter $.41 $.19
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Second Quarter $.47 $.22
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Third Quarter $.44 $.19
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Fourth Quarter $.75 $.19
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<CAPTION>
Fiscal 1996
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<S> <C> <C>
First Quarter (through $2.76 $.75
September 18, 1995)
=================================================
</TABLE>
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HOLDERS
As of September 18, 1995, the number of stockholders of record was
369, not including beneficial owners whose shares are held by banks, brokers
and other nominees. The Company estimates that it has approximately 1,500
stockholders in total.
DIVIDENDS
The company has paid no dividends since its inception and does not
anticipate or contemplate paying cash dividends in the foreseeable future.
Pursuant to the terms of the Company's Series A Convertible Preferred
Stock, a 5% annual dividend is due and owing. The dividend is currently being
accrued. As of June 30, 1995, the unpaid cumulative dividends totaled
approximately $151,750. See Note 6 of Notes to Consolidated Financial
Statements.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FISCAL YEARS 1993 AND 1994
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1994, the Company had a working capital deficiency of
$85,149, compared with a working capital deficiency of $305,014 in 1993.
During the period ended June 30, 1994, the Company raised approximately
$880,000 through the sales of its promissory notes in a private placement.
RESULTS OF OPERATIONS
During the fiscal year ended June 30, 1994, the Company remained a
development stage company. The net loss for the period was $1,069,642,
compared with a net loss of $1,327,258 for the fiscal year ended June 30, 1993.
The decrease in the net loss reflects management's continued efforts to control
costs. During the fiscal year ended June 30, 1994, the Company paid consulting
fees and expenses of approximately $190,000 which included fees and expenses
paid to the Company's Chief Executive Officer and the Company's Director of
Sales and Marketing which were not related to research and development. The
Company paid consulting fees of approximately $59,000 relating to research and
development. Salaries totaled approximately $170,000 during the period. Other
expenses during the period included plastic and materials and printing expenses
of approximately $51,000, travel and related expenses of approximately $40,000
and approximately $99,000 for office rent and utilities expenses. Interest
expense for the period was approximately $73,000 which was accrued.
During the period, the Company continued to refine its technologies
which included seeking printers and separators capable of translating the
DV3D(TM) image into a high resolution lithographically printed product. The
Company spent approximately six months with one printer before deciding that it
was not capable of producing the desired results. In January of 1994, the
Company began working with a printer that has produced what the Company
believes is an acceptable product. The Company has also established
relationships with two separators.
In September 1993, the Company engaged the services of a full-time
Director of Sales and Marketing to design and implement a plan for bringing the
Company's DV3D(TM) product to the marketplace. The Company also retained the
services of independent marketing agents to market its DV3D(TM) product
throughout the country. Problems encountered with the Company's then current
printer resulted in the curtailing of marketing activities until the third
quarter of fiscal 1994, although the Company continued to make contact with
potential customers through referrals, direct mail and telephone.
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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.
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The Company's independent auditors report contains an explanatory
paragraph regarding the ability of the Company to continue as a going concern.
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 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. 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 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.
ITEM 7. FINANCIAL STATEMENTS
The consolidated financial statements required to be filed pursuant to
this Item 7 begins on page F-1 of this report. Such consolidated financial
statements are hereby incorporated by reference into this Item 7.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE. Non applicable.
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The directors and executive officers of the Company as of September
18, 1995 are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
George S. Smith (1)(2) 60 Director, Chairman of the Board of Directors
Steven M. Peck (2) 38 Chief Executive Officer, President, Chief Financial Officer of DVG and Director
Sean F. Lee (2) 55 Chief Executive Officer of InfoPak, Inc. and Director
James W. Porter, Jr. (1)(2) 45 Director
William A. Knegendorf (1) 50 Director
</TABLE>
- ---------------------
(1) Members of the Audit Committee
(2) Members 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 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
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<PAGE> 17
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.
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
17
<PAGE> 18
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.
18
<PAGE> 19
ITEM 10. 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 COMPEN
YEAR SALARY ($) BONUS ($) COMPENSATION AWARDS ($) OPTIONS/SARs PAYOUTS SATION
($) (#) ($) ($)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
George S. Smith 1995 $0 $5,000 $107,138(2) $0 -0- $0 $0
(Former Chief Executive
Officer)(1)
===================================================================================================================================
</TABLE>
(1) Mr. George S. Smith resigned as Chief Executive Officer in September
1995.
(2) Represents $31,099 of travel expenses, $16,039 of living expenses and
consulting fees of $60,000. Does not include $36,000 of consulting
fees accrued in fiscal year 1995.
19
<PAGE> 20
<TABLE>
<CAPTION>
===================================================================================================================================
OPTIONS/SAR GRANTS IN THE FISCAL YEAR 1995
- -----------------------------------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS
- -----------------------------------------------------------------------------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARs EXERCISE
UNDERLYING GRANTED TO OR
OPTION/SARs EMPLOYEES IN BASE PRICE EXPIRATION
NAME YEAR GRANTED(#) FISCAL YEAR ($/Share) DATE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
George S. Smith,
(Former Chief Executive 1995 -0- -0- -0- -0-
Officer)(1)
- -----------------------------------------------------------------------------------------------------------------------------------
===================================================================================================================================
</TABLE>
(1) Mr. Smith resigned as Chief Executive Officer in September 1995.
20
<PAGE> 21
<TABLE>
<CAPTION>
===================================================================================================================================
AGGREGATED OPTIONS/SAR EXERCISES IN THE FISCAL YEAR 1995 AND
FY-END OPTION/SAR VALUES
===================================================================================================================================
Number of Securities Value of
Shares Underlying Unexercised Unexercised
Acquired 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> 22
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning stock
ownership of all persons known by the Company to own beneficially 5% or more of
the outstanding shares of the Company's Common Stock, each director, and all
executive officers and directors of the Company as a group, as of September 18,
1995, 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) 6,319,840 26.6%
3130 Alexis Drive
Palo Alto, CA 94304
- --------------------------------------------------------------------------------------------------------
H. Thomas Ferstl(3) 3,730,000 17.6%
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) 1,528,410 8.0%
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) 1,690,000 9.0%
1525 Lakesite Drive
Birmingham, AL 35235
- --------------------------------------------------------------------------------------------------------
Hans J. Kaemmlein(9) 1,700,000 8.8%
80 Orville Drive
Bohemia, NY 11716
- --------------------------------------------------------------------------------------------------------
Marton & Kjellaug M. Klepp(10) 1,382,900 7.3%
12 Day Road
Armon, NY 10504
- --------------------------------------------------------------------------------------------------------
John L. Miller(11) 1,250,000 6.7%
Dimensional Visions Group, Ltd.
45 E. Main Street, Suite B
Los Gatos, CA 95030
- --------------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE> 23
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
Alejandro & Lida Zaffaroni(12) 1,469,999 7.8%
4005 Miranda Ave., Suite 180
Palo Alto, CA 94304
- --------------------------------------------------------------------------------------------------------
Peter L. Jensen(13) 1,095,000 5.8%
2158 Balboa Avenue
Del Mar, CA 93014
- --------------------------------------------------------------------------------------------------------
Robert & Jacqueline Stibor(14) 1,045,000 5.7%
9016 Thornberry Lane
Las Vegas, NV 89134
- --------------------------------------------------------------------------------------------------------
Steven M. Peck(15) 1,000,000 5.4%
718 Arch Street, 202N
Philadelphia, PA 19106
- --------------------------------------------------------------------------------------------------------
James W. Porter, Jr. (16)
- --------------------------------------------------------------------------------------------------------
William A. Knegendorf (16)
- --------------------------------------------------------------------------------------------------------
All executive officers and directors as a group 4,272,810 19.7%
(5 persons)(17)
========================================================================================================
</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
50,000 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 convertible into
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. Also included in the amount are common stock purchase
warrants to purchase 1,010,000 shares of the Company's Common Stock and
preferred stock purchase warrants to purchase 26,000 shares of the
Company's Second Series B Convertible Preferred 8% Stock which is the
convertible into 2,600,000 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
23
<PAGE> 24
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 which
Mr. Lee is the general partner.
(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. Also included in the amount are common stock purchase
warrants to purchase 50,000 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
convertible into 1,500,000 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. Also included in the amount are common stock purchase warrants
to purchase 50,000 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 convertible
into 1,500,000 shares of the Company's Common Stock.
(8) Mr. Salmon owns 490,000 shares of the Company's Common Stock. Also
included in the amount are common stock purchase warrants to purchase
50,000 shares of the Company's Common Stock and preferred stock
purchase warrants to purchase 11,500 shares of the Company's Second
Series B Convertible Preferred 8% Stock which is the convertible into
1,150,000 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 in the amount are
preferred stock purchase warrants, held in the name of Software
Marketing Company of which Mr. Kaemmlein is sole owner, to purchase
15,000 shares of the Company's Second Series B Convertible Preferred 8%
Stock, which is convertible into 1,500,000 shares of the Company Common
Stock.
(10) Mr. and Mrs. Klepp jointly own 57,500 shares of the Company's Common
Stock. Also included in the amount are common stock purchase warrants
to purchase 75,400 shares of the Company's Common Stock and preferred
stock purchase warrants to purchase 12,500 shares of the Company's
Second Series B Convertible Preferred 8% Stock which is the convertible
into 1,250,000 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
24
<PAGE> 25
job performance goals.
(12) Mr. and Mrs. Zaffaroni jointly own 249,999 shared of the Company's
Common Stock. Also included in the amount are preferred stock purchase
warrants to purchase 12,200 shares of the Company's Second Series B
Convertible Preferred 8% Stock which is the convertible into 1,220,000
shares of the Company's Common Stock.
(13) Mr. Jensen owns 20,000 shares of the Company's Common Stock. Also,
owns preferred stock purchase warrants to purchase 10,500 shares of the
Company's Second Series B Convertible Preferred 8% Stock which is the
convertible into 1,050,000 shares of the Company's 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. Also included in the amount are common stock purchase
warrants to purchase 95,000 shares of the Company's Common Stock and
preferred stock purchase warrants to purchase 5,000 shares of the
Company's Second Series B Convertible Preferred 8% Stock which is the
convertible into 500,000 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 5,419,840 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.
STOCK OPTION PLAN
The Company has adopted a stock option plan (the "Plan") covering
500,000 shares of the Company's Common Stock, $.001 par value, pursuant to
which officers, directors, key employees and consultants of the Company are
eligible to receive incentive as well as non-qualified stock options and Stock
Appreciation Rights ("SAR'S"). The Plan, which expires in September 1998, is
administered by the Board of Directors. Incentive stock options granted under
the Plan are exercisable for a period of up to 10 years from the date of grant
and at an
25
<PAGE> 26
exercise price which is not less than the fair market value of the Common Stock
on the date of the grant, except that the term of an incentive stock option
granted under the Plan to a stockholder owning more than 10% of the outstanding
Common Stock may not exceed five years and the exercise price of an incentive
stock option granted to such a stockholder may not be less than 110% of the
fair market value of the Common Stock on the date of the grant. Non-qualified
stock options may be granted on terms determined by the Board of Directors.
SAR's which give the holder the privilege of surrendering such rights for the
appreciation in the Company's Common Stock between the time of grant and the
surrender, may be granted on any terms determined by the Board of Directors. No
SAR's have been granted.
To date, 20,000, options are currently in effect. The exercise price of
the options granted under the Plan to date is $.48 per share.
ITEM 12. 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
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, (a) the Agreement was extended for an
additional year, (b) the Company paid Avonwood $25,000 of their accrued
consulting fee, and (c) 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
26
<PAGE> 27
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 (1) a
sum equal to 5% of the incremental gross revenues generated by any relationship
which Avonwood introduces to InfoPak, (2) 5% of the incremental gross revenue
generated by the successful negotiations between an existing or potential
client of InfoPak where Avonwood has been authorized by InfoPak to so become
involved, (3) 5% success fee on all negotiations resulting in a cash payment to
InfoPak in which Avonwood is involved and (4) 5% of the incremental gross
revenue generated by InfoPak benchmarked to the date of the consulting
agreement, net of existing relationships but including those existing
relationships that InfoPak has given written permission for Avonwood to
negotiate. Items (2) and (3) have an infinite life. The term of the agreement
is automatically renewable on an annual basis unless 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.
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 canceled 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
27
<PAGE> 28
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 as a condition of his employment. The term of the warrants is
five years. 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.
ITEM 13. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
A. The following documents are filed as part of this report:
1. The consolidated financial statements filed as part
of this report are listed under the caption "Index to
Financial Statements and Schedules", appearing
elsewhere in this report.
2. The consolidated financial schedules of the Company
are filed as part of this report:
Schedule V - Property and Equipment
28
<PAGE> 29
Schedule VI - Accumulated Depreciation and
Amortization of Property and Equipment
3. The following Exhibits are filed herein:
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
3.1(a) Certificate of Incorporation and By Laws
3.2(b) Form of Certificate of Designation - Series A Convertible
Preferred Stock
3.4(b) Form of Certificate of Designation - Series B Convertible
Preferred Stock
3.4a(c) Form of Certificate of Designation - Series P Convertible Preferred Stock
3.4b(d) Form of Certificate of Designation - Series S Convertible Preferred Stock
3.4c(d) Form of Certificate of Designation - Series C Convertible Preferred Stock
4.1(a) Warrant Agreement (including form of warrant)
10.1(b) Agreement of lease between 718 Arch Street Associates, Ltd. and registrant made as of
March 1, 1994
10.2(b) Lease between Alden Johnson and Carolyn Johnson and registrant made as of June 1, 1994
10.3(c) Agreement and Plan of Merger By and Among InfoPak, Inc. Certain Shareholders of InfoPak,
Inc. InfoPak Acquisition Co. and registrant dated September 6, 1995.
10.4 Letter of Intent dated May 12, 1995, and Management and Consulting Agreement, dated May
24, 1995, between Avonwood Capital Corporation and the registrant.
10.5 Consulting Agreement between Avonwood Capital Corporation and InfoPak, Inc, dated May 13,
1995.
</TABLE>
29
<PAGE> 30
<TABLE>
<S> <C>
10.6 Employment Agreement between Steven M. Peck and the registrant, dated as of January 1,
1996.
21.0(d) Subsidiaries of the registrant
27.0(d) Financial Data Schedule
</TABLE>
B. Reports on Form 8-K filed: September 27, 1995 and as amended
November 21, 1995.
To report an event under Item 2 regarding the registrants'
acquisition of all of the issued and outstanding capital stock
of InfoPak, Inc.
- --------------------------
(a) Incorporated by reference from the registrants registration statement
on Form S-1 (No. 33-24554)
(b) Incorporated by reference from the registrants' Annual Report on Form
10-KSB for the fiscal years ended June 30, 1992, 1993 and 1994.
(c) Incorporated by reference from registrants' Current Report on Form 8-K
dated September 27, 1995.
(d) Previously filed.
30
<PAGE> 31
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
duly authorized.
<TABLE>
<S> <C>
DIMENSIONAL VISIONS GROUP, LTD.
DATED: February 6, 1996 BY: /s/ George S. Smith
----------------------------------------------
George S. Smith
Chief Executive Officer
(for the period ending September 12, 1995)
BY: /s/ Steven M. Peck
-----------------------------------------------
Steven M. Peck
Chief Executive Officer
(from September 13, 1995)
</TABLE>
In accordance with Section 13 or 15(d) of the Exchange Act, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ George S. Smith Chief Executive Officer (Principle February 6, 1996
- ------------------------------ Executive Officer and Principal
George S. Smith Financial Officer for the period
Ending September 12, 1995) and Director
/s/ Steven M. Peck Chief Executive Officer, Chief February 6, 1996
- ------------------------------ Financial Officer (Principle Executive
Steven M. Peck Officer, Principle Financial Officer
and Principle Accounting Officer)
And Director from September 13, 1995
/s/ Sean F. Lee Director February 6, 1996
- --------------------------------
Sean F. Lee
/s/ James W. Porter, Jr. Director February 6, 1996
- ----------------------------
James W. Porter, Jr.
/s/ William A. Knegendorf Director February 6, 1996
- -------------------------
William A. Knegendorf
</TABLE>
31
<PAGE> 32
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
YEARS ENDED JUNE 30, 1995 AND 1994
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditor's Report F-2
Consolidated Financial Statements
Balance Sheet F-4
Statements of Operations F-5
Statements of Stockholders' Equity F-6
Statements of Cash Flows F-10
Notes to Consolidated Financial Statements F-11
Schedules
Independent Auditor's Report F-19
Schedule V - Property and Equipment F-20
Schedule VI- Accumulated Depreciation and Amortization of Property and Equipment F-21
</TABLE>
F-1
<PAGE> 33
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1995 AND 1994
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Dimensional Visions Group, Ltd.
Philadelphia, Pennsylvania
We have audited the accompanying consolidated balance sheet of Dimensional
Visions Group, Ltd. and its subsidiaries (the "Company") as of June 30, 1995,
and the related consolidated statements of operations, stockholders'
deficiency, and cash flows for each of the two years in the period ended June
30, 1995. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Dimensional Visions Group, Ltd.
and its subsidiaries at June 30, 1995 and the results of their operations and
their cash flows for each of the two years in the period ended June 30, 1995 in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As described in Note 1 to
the consolidated financial statements, the Company has suffered recurring
losses from operations and has a deficiency in working capital, which raises
substantial doubt about the Company's ability to continue as a going
F-2
<PAGE> 34
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1995 AND 1994
concern. The Company has been funding its operations by selling its securities
in private placements, loans, sale of surplus equipment and by certain
employees and consultants deferring their compensation. The future of the
Company as an operating business will depend on (1) its ability to successfully
market its products, (2) obtain sufficient capital contributions or financing
as may be required to sustain it's current operations and fulfill its sales and
marketing activities, (3) achieving a level of sales adequate to support the
Company's cost structure, and (4) to ultimately achieve a level of
profitability. Management's plan concerning these matters are also described in
Note 1. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ GITOMER & BERENHOLZ, P.C.
-----------------------------
Gitomer & Berenholz, P.C.
Jenkintown, Pennsylvania
September 18, 1995
F-3
<PAGE> 35
DIMENSIONAL VISIONS GROUP, LTD.
CONSOLIDATED BALANCE SHEET
JUNE 30, 1995
<TABLE>
<CAPTION>
ASSETS
<S> <C>
DEFICIENCY
Current Assets
Cash and cash equivalents $227,972
Accounts receivable, trade 18,690
Inventory 26,453
Prepaid supplies and expenses 43,361
---------
Total Current Assets 316,476
---------
Equipment and Leasehold Improvements
Equipment 1,628,028
Furniture and fixtures 134,938
Leasehold Improvements 109,446
---------
1,872,412
Less Accumulated Depreciation and Amortization 1,791,049
---------
81,363
---------
Other Assets
Patent rights and other assets 53,398
---------
Total Assets $ 451,237
=========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
<S> <C>
Current Liabilities
Note Payable $ 50,000
Accounts payable, accrued expenses and other liabilities 404,489
-----------
Total Current Liabilities 454,489
-----------
Long-Term Debt
Secured notes 1,837,000
Accrued interest payable 210,741
-----------
2,047,741
-----------
Commitments and contingencies -
Stockholders' Equity
Preferred stock - $.001 par value, authorized 2,000,000
shares; issued and outstanding 77,250 shares at June 30,
1995 77
Additional paid-in capital 772,423
-------
772,500
Common Stock - $.001 par value, authorized - 20,000,000
shares; Issued and outstanding - 16,936,098 16,936
Additional paid-in capital 11,881,927
Deficit (14,722,356)
-----------
Total stockholders' deficiency (2,050,993)
-----------
Total Liabilities and Stockholders Equity $ 451,237
===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-4
<PAGE> 36
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Operating revenue $ 134,028 $ -
------------ -----------
Operating expense
Cost of Sales 241,240 -
Research and development costs 299,267 561,076
Marketing expenses 120,359 103,758
General and administrative expenses 460,680 436,712
------------ -----------
Total operating expenses 1,121,546 1,101,546
------------ -----------
Loss before other income (expenses) (987,518) (1,101,546)
and extraordinary item ------------ -----------
Other income (expenses)
Interest expense (208,717) (73,498)
Interest income 1,318 3,317
Gain on sale of equipment 2,585 3,054
------------ -----------
(204,814) (67,127)
------------ -----------
Loss before extraordinary item (1,192,332) (1,168,673)
Extraordinary Item
Gain on reversal of liabilities relating to
unsecured creditors under dismissed Chapter 11
proceedings of DVG Plastics, Inc. - 99,031
------------ -----------
Net loss ($1,192,332) ($1,069,642)
============ ===========
Loss per share of common stock
Loss before extraordinary item $ .07 $ .07
============ ===========
Net loss $ .07 $ .07
============ ===========
Weighted average shares of common stock outstanding 16,476,769 15,872,879
============ ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-5
<PAGE> 37
DIMENSIONAL VISIONS GROUP, LTD.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
YEARS ENDED JUNE 30, 1995 AND 1994
<TABLE>
<CAPTION>
Preferred Stock Common Stock
--------------- ------------
(Series A ($.001 Par Value)
---------- -----------------
Convertible) Additional
------------ Paid-In
Shares Amount Shares Amount Capital Deficit Total
------ ------ ------ ------ ------------- --------------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, July 1, 1993 77,250 $772,500 15,461,098 $15,461 $11,616,527 ($12,460,382) ($55,894)
Issuance of 2,925,000 warrants to
outside directors, company executive
officers and employees to purchase
2,925,000 shares of the Company's
common stock @ $.15 per share,
exercisable over a five year period
commencing July 1993 - - - - - - -
Issuance of 3,900,000 warrants to
company executive officers and an
employee to purchase 3,900,000 shares
of the Company's common stock @ $.15
per share, such warrants to be held in
escrow, and when released to be
exercisable over a five year period
commencing December 1992
- - - - - - -
Issuance of 1,070,000 warrants to
outside consultants to purchase
1,070,000 shares of the Company's
common stock @ $.15 per share,
exercisable over a five year period
commencing July 1993 - - - - 15,400 - 15,400
Retirement of 1,712,495 warrants
issued to outside directors, a company
executive officer, a company employee
and an outside consultant to purchase
1,712,495 shares of the Company's
common stock at exercise prices
ranging from $.4375 to $3.94 per share
- - - - - - -
</TABLE>
F-6
<PAGE> 38
DIMENSIONAL VISIONS GROUP, LTD.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY (CONTINUED)
YEARS ENDED JUNE 30, 1995 AND 1994
<TABLE>
<CAPTION>
Preferred Stock Common Stock
--------------- ------------
(Series A ($.001 Par Value)
- -------- -----------------
Convertible) Additional
------------ Paid-In
Shares Amount Shares Amount Capital Deficit Total
------ ------ ------ ------ ------------- ------------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of 900,000 shares of the
Company's common stock in settlement
of amounts due officers, employees and
consultants for accrued payroll and
fees - - 900,000 900 94,100 - 95,000
Issuance of 300,000 warrants to a
company executive officer and an
outside consultant to purchase
300,000 shares of the Company's common
stock @ $.20 per share exercisable
over a five year period commencing
April 1994 - - - - - - -
Net loss - - - - - ( 1,069,642) ( 1,069,642)
----- -------- ----------- ------- ----------- ------------ -----------
-
Balance, June 30, 1994 77,250 $772,500 16,361,098 $16,361 $11,726,027 ($13,530,024) ($1,015,136)
====== ======== =========== ======= =========== ============ ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-7
<PAGE> 39
DIMENSIONAL VISIONS GROUP, LTD.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY (CONTINUED)
YEARS ENDED JUNE 30, 1995 AND 1994
<TABLE>
<CAPTION>
Preferred Stock Common Stock
--------------- ------------
(Series A ($.001 Par Value)
--------- -----------------
Convertible) Additional
------------ Paid-In
Shares Amount Shares Amount Capital Deficit Total
------ ------ ------ ------ ------------ --------------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, July 1, 1994 77,250 $772,500 16,361,098 $16,361 $11,726,027 ($13,530,024) ($1,015,136)
Issuance of 165,000 shares of
the Company's common stock in
bonuses to certain
officers/employees/directors
of the Company - - 165,000 165 16,335 - 16,500
Exercise of 110,000 warrants
to purchase 110,000 shares of
the Company's common stock @
$.01 per share - - 110,000 110 990 - 1,100
Issuance of 37,500 warrants to
purchase 37,500 shares of the
Company's common stock @ $.15
per share for a five year
period commencing April, 1995
for consulting services
rendered to the Company - - - - 3,375 - 3,375
Issuance of 500,000 warrants
to purchase 500,000 shares of
the Company's common stock @
$.10 per share for a three and
half year period commencing
May 1995 - - - - 60,000 - 60,000
</TABLE>
F-8
<PAGE> 40
DIMENSIONAL VISIONS GROUP, LTD.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY (CONTINUED)
YEARS ENDED JUNE 30, 1995 AND 1994
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of 50,000 warrants to
purchase 50,000 shares of the
Company's common stock @ $.01
per share for a one year
period commencing May 1995 - - - - 7,500 - 7,500
Issuance of 250,000 warrants
to purchase 250,000 shares of
the Company's common stock @
$.15 per share for a five year
period commencing May 1995 - - - - 30,000 - 30,000
Exercise of 300,000 warrants
to purchase 300,000 shares of
the Company's common stock @
$.15 per share (250,000
shares) and $.01 per share
(50,000 shares) - - 300,000 300 37,700 - 38,000
Net loss - - - - - ( 1,192,332) ( 1,192,332)
------- -------- ----------- ------- ----------- ------------ -----------
Balance, June 30, 1995 77,250 $772,500 16,936,098 $16,936 $11,881,927 ($14,722,356) ($2,050,993)
======= ======== =========== ======= =========== ============ ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-9
<PAGE> 41
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
(Reclassified)
<S> <C> <C>
Operating activities
Net loss
Adjustments to reconcile net loss to net
cash used in operating activities ($1,192,332) ($1,069,642)
Extraordinary item
Gain on reversal of liabilities relating to unsecured creditors
under dismissed Chapter 11 proceedings of DVG Plastics, Inc. - ( 99,031)
Compensation paid to officers/employees 16,500 -
Interest paid through issuance of warrants 67,500 -
Consulting service paid through issuance of warrants 4,625 15,400
Depreciation and amortization of property and equipment 150,491 341,697
Amortization of other assets 4,074 4,074
Gain on sale of equipment (2,584) (3,054)
Changes in assets and liabilities which provided (used) cash
Accounts Receivable, trade (18,690) -
Inventory 12,634 (39,087)
Prepaid expenses and deposit 3,118 (12,981)
Accounts payable, accrued expenses and other liabilities
(including accrued interest classified as long term) 281,769 (9,535)
Issuance of common stock in connection with settlement of certain
liabilities to employees and officers - 95,000
----------- -----------
Net cash used in operating activities (672,895) (777,159)
----------- -----------
Investing activities
Proceeds from sale of equipment 3,107 3,300
Purchase of equipment (16,374) (12,005)
Capitalized legal fees related to patent rights - 3,025
Deposits - 589
----------- -----------
Net cash used in investing activities (13,267) (5,091)
----------- -----------
Financing activities
Proceeds from
Issuance of common stock in connection with the exercise of warrants 39,100 -
Borrowings 757,000 880,000
----------- -----------
Net cash provided by financing activities 796,100 880,000
----------- -----------
Net increase in cash and cash equivalents 109,938 97,750
Cash and cash equivalents, beginning 118,034 20,284
----------- -----------
Cash and cash equivalents, ending $ 227,972 $ 118,034
=========== ===========
Supplemental disclosure of cash flow information
Cash paid during the year for interest $ - $ -
=========== ===========
Issuance of common stock in connection with settlement of certain liabilities
to employees and officers $ - $ 95,000
=========== ===========
Issuance of common stock in connection with officers/employees stock bonus $ 16,500 $ -
=========== ===========
Issuance of warrants in connection with
Consulting service $ 33,375
===========
Financing $ 67,500
===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-10
<PAGE> 42
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 1995 AND 1994
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business, Financing and Basis of Financial Statement
Presentation
Dimensional Visions Group, Ltd. (the "Company" or "DVGL") was
incorporated in Delaware on May 12, 1988. The Company, was a development
stage company through June 30, 1994 and had an accumulated deficit during
the development stage of $13,530,024. The Company produces and markets
lithographically printed stereoscopic prints commonly referred to as
three-dimensional prints. The prints may be viewed without the use of
special glasses or viewing apparatus.
The Company has financed its development through the sale of its
securities, loans and sale of surplus equipment and by certain employees
and consultants deferring their compensation. The Company has had
limited sales of its product during the year ended June 30, 1995. The
Company has completed the development of a photographic and compositing
system capable of producing stationary three-dimensional images used in
the manufacturing of the DV3D(TM) lithographic print products. The
Company has also completed the development of the printing and separation
process needed to produce the DV3D(TM) image for commercial use. The
process involves a highly sophisticated computer controlled camera
mounted on a micro-positioning mechanism and imaging system taking
numerous photographs of a subject. The camera is mobile and takes
photographs from various positions and angles. The photos are then
composited in the clean room/photo laboratory to create a single
stereoscopic master transparency, the product of which the company has
trademarked the "DV3D(TM)" image. The DV3D(TM) image is then sent to
commercial separator and printer where the master image, with the use of
the company's proprietary methods and knowledge, is separated and
lithographically printed on a polymer based lenticular material which
focuses the multi- dimensional images.
On September 5, 1995, the Company received $750,000 from the sale of the
Company's Common Stock as part of its long term financing plans (See Note
13).
The Company on September 12, 1995 completed the acquisition of InfoPak,
Inc. which manufactures and markets hardware and software information and
audio playback systems and method products and programs. (See Note 13).
Liquidity and Capital Resources
The Company has incurred losses since inception of $14,722,356, has a
working capital deficiency of $138,013 as of June 30, 1995. The future
of the Company as an operating business will depend on (1) its ability to
successfully market its products, (2) obtain sufficient capital
contributions or financing as may be required to sustain its current
operations and to fulfill its sales and marketing activities, (3)
achieving a level of sales adequate to support the Company's cost
structure, and (4) to ultimately achieve a level of profitability.
Management's plan to address these issues includes (a) substantially
increase sales and marketing efforts of the Company's products, (b)
exercise tight cost controls to conserve cash, (c) raise additional long
term financing, and (d) evaluate possible merger or acquisition
opportunities.
The consolidated financial statements have been prepared on the basis
that the Company is a going concern and do not reflect any adjustments
that might result from the outcome of the uncertainties described in
paragraph 1 above.
Consolidation Policy
The consolidated financial statements include the accounts of DVGL and
its wholly-owned subsidiaries, DVG Plastics, Inc., DVG Films, Inc.
(effective January 27, 1995 DVG Films, Inc. changed its name to Digital
Dimensions, Inc.) and DV3D Images, Inc. As of June 30, 1995 all of the
wholly-owned subsidiaries are inactive. All significant inter company
balances and transactions have been eliminated in consolidation.
F-11
<PAGE> 43
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 1995 AND 1994
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Inventory
Inventory is stated at the lower of cost or market. Cost is
determined by the first in first out method. Inventory consists of
raw materials amounting to $26,453.
Equipment and Leasehold Improvements and Depreciation and Amortization
Equipment and leasehold improvements are stated at cost. Depreciation
and amortization are provided by the use of the straight-line method over
the estimated useful lives of the assets as follows:
<TABLE>
<S> <C>
Equipment 5-7 years
Furniture and fixtures 5 years
Leasehold improvements Term of the initial operating lease (5 years)
</TABLE>
Patent Rights
Costs incurred to acquire patent rights and the related technology are
amortized over the shorter of the estimated useful life or the remaining
term of the patent rights. In the event that the costs of patent rights
and/or acquired technology are abandoned, the write-off will be charged
to expense in the period the determination is made to abandon them.
Research and Development Costs
The Company charges to Research and Development Costs all items of a
non-capital nature related to bringing a "significant" improvement to its
product. Such costs include salaries and expenses of employees and
consultants, the conceptual formulation, design, and testing of the
products and prototypes. All such costs of a capital nature are
capitalized.
Income Taxes
Effective July 1, 1993, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes."
This statement supersedes Accounting Principles Board Opinion No. 11,
"Accounting for Income Taxes." Deferred income taxes reflect the net tax
effect of (a) temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts
used for income tax purposes, and (b) operating loss carryforwards. (See
note 11 as to the Company's change in accounting for income taxes.)
Employer's Accounting for Postemployment Benefits
Employers Accounting for Post Employment Benefits Statement of Financial
Accounting Standards No. 112, Employers Accounting for Post Employment
Benefits (SFAS No. 112), establishes accounting standards for post
employment benefits and requires either the accrual of the obligation or
disclosure, depending upon the circumstances, for the cost of benefits
provided to former or inactive employees after employment or before
retirement. The Company adopted SFAS No. 112 during the first quarter of
1995. Such adoption will not have a material adverse effect on the
Company's operations or financial position, since the Company does not
have any post-retirement benefits.
Reclassifications
Certain reclassifications have been made to the June 30, 1994 financial
statements to conform to classifications used in the June 30, 1995
financial statement.
F-12
<PAGE> 44
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 1995 AND 1994
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
NET LOSS PER SHARE OF COMMON STOCK
Net loss per share of common stock is based on the weighted average of
shares of common stock outstanding. Outstanding warrants or options are
not considered in the calculation of net loss per share of common stock,
as they would have an anti-dilutive effect.
NOTE 2 CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments, with an original
maturity of three months or less when purchased, to be cash equivalents.
Cash and cash equivalents are summarized as follows:
<TABLE>
<CAPTION>
June 30, 1995
-------------
<S> <C>
Cash in bank $ 82,334
Money Market Account 145,638
--------
$227,972
========
</TABLE>
The Company maintains its cash in banks located in Pennsylvania and
California. The total cash balances are insured by the FDIC up to
$100,000 per financial institution. As of June 30, 1995, the uninsured
cash balance totaled $70,736.
NOTE 3 PATENT RIGHTS AND OTHER ASSETS
<TABLE>
<CAPTION>
June 30, 1995
-------------
<S> <C>
Patent Rights $58,426
Organization Costs 2,000
Deposits 5,500
Trade Mark 225
-------
66,151
Less Accumulated Amortization 12,753
-------
Total $53,398
=======
</TABLE>
F-13
<PAGE> 45
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 1995 AND 1994
NOTE 4 ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER LIABILITIES
Accounts payable, accrued expenses and other liabilities consist of the
following:
<TABLE>
<CAPTION>
June 30, 1995
-------------
<S> <C>
Accounts payable $116,410
Accrued Expenses
Interest (1) 3,938
Salaries 29,241
Consulting fees 98,900
Customer Deposits(2) 156,000
--------
Total $404,489
========
</TABLE>
(1) Accrued interest of $210,741 is classified as long term as of
June 30, 1995. (See Note 5).
(2) $150,000 represents a deposit on two orders that were not
accepted by a customer during 1992.
NOTE 5 LONG-TERM DEBT
As of June 30, 1995 the outstanding Secured Notes are $1,837,000. The
Secured Notes are due beginning in fiscal 1996 and interest at 10%
will be paid semi-annually, with the first interest payment not due to
be paid until twelve months after the date of the Secured Notes. The
Company is permitted to prepay the Secured Notes after twelve months
from the date of the Secured Notes with no penalty. As collateral for
the Secured Notes, the Company has given a security interest in all of
the Company's assets, tangible and intangible, including all patents
and proprietary technology, which was evidenced by a Uniform
Commercial Code filing on March 24, 1994.
On April 25, 1995, substantially all of the long term Secured Note
Holders agreed to defer all interest payments until the Secured Notes
mature beginning in fiscal 1996 or, upon the consummation of long term
financing and/or a strategic partner relationship, to convert the
Secured Notes and accrued interest into 8% Series "B" Convertible
Preferred Stock through the exercise of the Series "B" Redeemable
warrants.
As of June 30, 1995, Secured Note Holders representing $95,000 of the
outstanding notes have not agree to convert their Notes or defer
interest. These notes are all long term obligations of the Company.
As of June 30, 1995, 183,700 warrants are outstanding to purchase
Series B Convertible Preferred Stock which can be converted to
18,370,000 shares of the Company's common stock at $.10 per share. In
addition, there are 450,000 warrants that have not been exercised to
purchase 450,00 shares of the Company's common stock at $.01 per share
to certain Note Holders who lent funds to the Company during the year
ended June 30, 1995.
On May 24, 1995 the Company borrowed $50,000 at 9% per annum. The
Promissory Note for $50,000 was due on November 24, 1998. On
September 11, 1995, the Promissory Note and related accrued interest
was paid in full. 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. The
warrants were valued at $67,500 ($.12 per warrant) at the time of
issue and was recorded as additional interest expense.
F-14
<PAGE> 46
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 1995 AND 1994
NOTE 5 LONG TERM DEBT (CONTINUED)
The annual maturity on long term debt is as follows:
<TABLE>
<CAPTION>
Year Ending June 30 Amount
------------------- ------
<S> <C>
1996 $50,000
1997 1,130,000
1998 707,000
----------
1,887,000
Less Current Portion 50,000
----------
Long Term Debt $1,837,000
==========
</TABLE>
NOTE 6 COMMITMENTS
The company leases its corporate office, studio and lab facilities in
Philadelphia, Pennsylvania under a five year operating lease through
February 28, 1999 at an annual rental of approximately $44,100 through
June 1995 and adjusted on March 1, of each year through 1998 by
approximately $2,314 in 1995 and $1,371 each year thereafter. In
addition, the Company is responsible for its proportionate share of
excess operating expenses and real estate taxes. The Company has a
conditional option to terminate the lease 30 days prior to ground
breaking date on the proposed new building site adjacent to where the
Company leases space.
<TABLE>
<CAPTION>
Year Ending June 30 Annual Rental Amount
------------------- --------------------
<S> <C>
1996 $ 59,400
1997 60,800
1998 62,200
1999 42,100
--------
$224,500
========
</TABLE>
Total rent expense on all operating leases amounted to approximately
$56,600 and $82,600, for the years ended June 30, 1995 and 1994,
respectively.
The Company has not declared dividends on Series A Convertible Preferred
Stock. The cumulative dividend in arrears through June 30, 1995 is
$151,750.
The Company has outstanding employment and consulting contracts that
expire through June 30, 1999 as follows:
<TABLE>
<CAPTION>
Year ending June 30
-------------------
<S> <C>
1996 $164,000
1997 244,000
1998 144,000
1999 144,000
--------
$696,000
========
</TABLE>
In connection with a consulting contract providing among other things,
assisting the Company with arranging for additional capital. For each
dollar of capital raised a maximum of 1,600,000 warrants will be issued
to purchase the Company's common stock at $.15 per share of which 250,000
warrants were issued during May 1995 and exercised during June 1995. The
warrants will be exercisable over a five year period at $.15 per share.
The warrants issued in May 1995 were valued at $30,000 ($.12 per warrant)
at the time issued and will be recognized as additional consulting fees
over the two-year term of the consulting contract. In addition, the
contract provides for a fee of 5% on capital raised.
F-15
<PAGE> 47
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 1995 AND 1994
NOTE 7 CONTINGENCIES
During 1992, two former officers of DVG Plastics, Inc. resigned their
positions. They filed claims amounting to $225,000 with the Bankruptcy
Court for certain compensation (salary, severance and bonus) under their
contracts. These claims have been dismissed by the Bankruptcy Court on
November 16, 1993, as a result of the entire bankruptcy matter being
dismissed and the Company is not aware of any legal action in connection
with this dispute. Management of the Company feels that this matter, if
pursued by the former officers of DVG Plastics, Inc., will be resolved
with no material adverse financial impact to the Company.
On November 16, 1993 the Bankruptcy Court dismissed the bankruptcy case
of DVG Plastics, Inc. In connection with the dismissed bankruptcy case of
DVG Plastics, Inc., the Company wrote off all liabilities relating to
unsecured creditors of approximately $99,000 as of June 1994. There have
been no claims by any of these creditors since the date of dismissal
(November 16, 1993.)
In connection with the various changes in management during 1991 and
1992, the Company believes that there are no outstanding obligations to
former officers of the Company. In the event a claim would arise, the
Company believes that no material adverse financial impact will occur.
There are no legal proceedings which the Company believes will have a
material adverse effect on its financial position.
NOTE 8 COMMON STOCK
As of June 30, 1995, the Company had issued non-public warrants to
purchase 15,380,522 shares of the Company's Common Stock at prices
ranging from $01 per share to $3.94 per share. Included in the
non-public warrants are 3,900,000 warrants that are being held in escrow
until officers and directors and a Company employee achieve certain bench
mark goals established by management. As of June 30, 1995 the Company
had issued 183,700 warrants to purchase Series B Convertible Preferred
stock, in connection with a private placement offering which converts to
18,370,000 shares of the Company's common stock. As of June 30, 1995,
the Company had 1,813,169 publicly-held warrants to purchase 1,813,169
shares of common stock.
The Company may not have available sufficient common stock for those who
elect to exercise their warrants or convert preferred stock to common
stock.
During January 1994 the Company issued 900,000 shares of the Company's
common stock in settlement of amounts due to officers and employees for
consulting fees and payroll valued at approximately $.11 per share.
During January 1995, the company issued 165,000 shares of the Company's
common stock as a bonus to certain officer/employees/directors of the
Company valued at $.10 per share.
During the period February 1995 through May 1995 the Company received
$39,100 from the exercise of 410,000 warrants to purchase 410,000 shares
of the Company's common stock.
The fair value of common stock and warrants issued in non cash
transactions were priced in relationship to the $.10 per share price at
which the Secured Note Holders could ultimately convert their holdings
to common stock (see Note 5). The warrants issued to Avonwood Capital
Corporation were based on a valuation provided by an independent third
party.
NOTE 9 STOCK OPTION PLAN
The Company has adopted a stock option plan (the "Plan") covering 500,000
shares of the Company's common stock, $.001 par value, pursuant to which
officers, directors, key employees and consultants of the Company are
eligible to receive incentive as well as non-qualified stock options and
Stock Appreciation Rights ("SAR's"). The Plan, which expires in
September 1998, will be administered by the Board of Directors or a
committee chosen therefrom. Incentive stock options granted under the
Plan are exercisable for a period of up to 10 years from the date of
grant at an exercise price which is not less than the fair market value
of the Common stock on the date of the grant, except that the terms of an
incentive stock option granted under the Plan to a stockholder owning
more than 10% of the outstanding common stock may not exceed five years
and the exercise price of an incentive stock option granted to such a
stockholder may not be less than 110% of the fair market value of the
common stock on the date of the grant. Non-qualified stock options maybe
granted on terms determined by the Board of Directors or a
F-16
<PAGE> 48
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 1995 AND 1994
NOTE 9 STOCK OPTION PLAN (CONTINUED)
committee designated by the Board of Directors. SAR's which give the
holder the privilege of surrendering such rights for the appreciation in
the Company's common stock between the time of grant and the surrender,
may be granted on any terms determined by the Board of Directors or
committee designated by the Board of Directors. No SAR's have been
granted.
A summary of transactions under this Plan is as follows:
<TABLE>
<CAPTION>
Option Price
Per Share, Total
Shares As Adjusted Option Price
------ ----------- ------------
<S> <C> <C> <C>
Options outstanding 161,000 $.48 $77,280
Canceled (141,000) .48 (67,680)
-------- -------
Options outstanding
June 30, 1995 and
1994 20,000 $9,600
======== =======
</TABLE>
NOTE 10 EXTRAORDINARY ITEM
On November 16, 1993 the Bankruptcy Court dismissed the bankruptcy case
of DVG Plastics, Inc. In connection with the dismissed bankruptcy case
of DVG Plastics, Inc., the Company wrote off all liabilities relating to
unsecured creditors as of June 30, 1994. As a result of the write off
the Company recognized a gain of $99,031 and has been classified as an
Extraordinary item.
NOTE 11 INCOME TAXES
The Company adopted Statement of Financial Standards ("SFAS") No. 109,
"Accounting for Income Taxes" effective July 1, 1993. There is no
cumulative effect of adopting SFAS 109 on the Company's financial
statements for the year ended June 30, 1994. Restatement of prior years
for the effect of SFAS No. 109 would not have materially changed
previously reported losses.
The Tax effects of significant items comprising the Company's net
deferred taxes as of June 30, 1995 were as follows:
<TABLE>
<CAPTION>
1995
------
<S> <C>
Deferred Tax Assets:
Property ($ 23,000)
Patents 7,000
Operating loss carry forwards 5,050,000
Valuation allowance (5,034,000)
----------
$
==========
</TABLE>
The change in valuation allowance for the year ended June 30, 1995 was
increased by approximately $431,000.
There was no provision for current income taxes for the years ended June
30, 1995 and 1994.
The federal net operating loss carryforwards of approximately $14,413,000
expire in varying amounts through 2010 and state net operating loss
carryforwards are available up to $500,000 per year commencing in fiscal
1995 and will be available up to three years from date of loss.
F-17
<PAGE> 49
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 1995 AND 1994
NOTE 11 INCOME TAXES (CONTINUED)
The Company has had numerous transactions in its common stock. Such
transactions may have resulted in a change in the Company's ownership, as
defined in the Internal Revenue Code Section 382. Such change may result
in an annual limitation on the amount of the Company's taxable income
which may be offset with its net operating loss carryforwards. The
Company has not evaluated the impact of Section 382, if any, on its
ability to utilize its net operating loss carryforwards in future years.
NOTE 12 RELATED PARTY TRANSACTIONS
On July 19, 1993, 600,00 warrants to purchase the Company's Common Stock
for five years at $.15 per share were issued to Mr. Smith, the Chairman
of the Board and former Chief Executive Officer, and 687,495 warrants
were canceled by the Company at prices that range between $.4375 and
$1.00 per share.
During March and April of 1994 Mr. Smith lent the Company an additional
$50,000 in connection with the Company's Private Placement Secured Notes
and Preferred Stock Purchase Warrants offering.
As of June 30, 1995, Mr. Smith owns approximately 1,950,000 shares of the
common stock of the Company and has 2,669,840 warrants to purchase the
Company's Common Stock and 15,000 warrants to purchase 15,000 shares of
Series B Preferred Stock at $10 per share, which is convertible into the
equivalent of 1,500,000 shares of common stock. In addition, Mr. Smith
owns 5,000 shares of Series A preferred stock at $10 per share which is
convertible into the equivalent of 200,000 shares of common stock. On
August 22, 1995, the Series A preferred stock was converted into 200,000
shares of common stock.
NOTE 13 SUBSEQUENT EVENTS
In connection with a private placement of its 10% Promissory Notes and
preferred Stock Purchase Warrants (the "Notes"), the Company received
additional loans of $105,000 from subscribers of promissory notes since
June 30, 1995.
On September 5, 1995 the Company received $675,000 net of fees of $75,000
from the sale of 3,000,000 shares of the Company's common stock at $.25
per share. In order to issue the shares sold on September 5, 1995,
certain stockholders consisting mainly of officers and directors of the
Company surrendered 3,215,000 shares of the Company's common stock in
exchange for 32,150 shares of Series S Convertible Preferred Stock. The
Series S Convertible Preferred Stock is convertible to 3,215,000 shares
of common stock on the earlier of January 1, 1996 or such time as the
Company has sufficient authorized common stock to convert all of the
Series S Preferred stock.
On September 12, 1995, the Company acquired all the outstanding capital
stock of InfoPak, Inc. for 500,000 shares of its series P Convertible
Preferred Stock, each share of which is convertibles into 10 shares of
the Company's common stock.
The Series P Convertible Preferred Stock issued in connection with the
acquisition was valued at $2,750,000 ($.55 per share) by the Company and
will be accounted for as a purchase.
F-18
<PAGE> 50
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 1995 AND 1994
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Dimensional Visions Group, Ltd.
Philadelphia, Pennsylvania
We have audited in accordance with generally accepted auditing standards, the
financial statements of DIMENSIONAL VISIONS GROUP, LTD. included in this Annual
Report on Form 10-KSB and have issued our report thereon dated September 18,
1995. Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in the preceding
index are the responsibility of the Company's management and are presented for
purposes of complying with the Securities and Exchange Commission's rules and
are not part of the basic financial statements. These schedules have been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, fairly state in all material respects
the financial data required to be set forth in relation to the basic financial
statements taken as a whole.
/s/ GITOMER & BERENHOLZ, P.C.
-----------------------------
Gitomer & Berenholz, P.C.
Jenkintown, Pennsylvania
September 18, 1995
F-19
<PAGE> 51
SCHEDULE V
DIMENSIONAL VISIONS GROUP, LTD.
SCHEDULE V - PROPERTY AND EQUIPMENT (1)
<TABLE>
<CAPTION>
--------------- --------------- --------------- --------------- --------------- ---------------
Column A Column B Column C Column D Column E Column F
--------------- --------------- --------------- --------------- --------------- ---------------
Balance at Other
Beginning Additions at Changes - Balance at End
Classification of Period Cost Retirements Add (Deduct) of Period
--------------- --------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Year Ended June 30, 1995
------------------------
Equipment $1,621,408 $11,522 $5,228 $ 326 $1,628,028
Furniture and fixtures 130,412 4,852 - ( 326) 134,938
Leasehold improvements 109,446 - - - 109,446
---------- ------- ------ ------ ----------
$1,861,266 $16,374 $5,228 $ - $1,872,412
========== ======= ====== ====== ==========
Year Ended June 30, 1994
------------------------
Equipment $1,624,061 $ 6,197 $8,850 $ - $1,621,408
Furniture & Fixtures 124,604 5,808 - - 130,412
Leasehold Improvements 109,446 - - - 109,446
---------- ------- ------ ----- ----------
$1,858,111 $12,005 $8,850 $ - $1,861,266
========== ======= ====== ===== ==========
</TABLE>
(1) Depreciation and amortization is computed by the straight-line method over
the estimated useful lives of the related assets as follows:
<TABLE>
<S> <C>
Equipment 5-7 years
Furniture & Fixtures 5 years
Leasehold improvements Term of initial operating lease (5 years)
</TABLE>
F-20
<PAGE> 52
SCHEDULE VI
DIMENSIONAL VISIONS GROUP, LTD.
SCHEDULE VI - ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
--------------- --------------- --------------- --------------- --------------- ---------------
Column A Column B Column C Column D Column E Column F
--------------- --------------- --------------- --------------- --------------- ---------------
Balance at Other
Beginning Additions at Changes - Balance at End
Classification of Period Cost Retirements Add (Deduct) of Period
--------------- --------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Year Ended June 30, 1995
------------------------
Equipment $1,426,715 $137,720 $4,705 $ - $1,559,730
Furniture and fixtures 110,632 11,801 - 122,433
Leasehold improvements 107,916 970 - - 108,886
---------- -------- ------ ------ ----------
$1,645,263 $150,491 $4,705 $ - $1,791,049
========== ======== ====== ====== ==========
Year Ended June 30, 1994
------------------------
Equipment $1,134,545 $300,798 $8,604 ($24) $1,426,715
Furniture & Fixtures 88,051 22,557 - 24 110,632
Leasehold Improvements 90,574 18,342 - - 107,916
---------- -------- ------ ----- ----------
$1,312,170 $341,697 $8,604 $ - $1,645,263
========== ======== ====== ===== ==========
</TABLE>
F-21
<PAGE> 53
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Description Exhibit No.
- ----------- -----------
<S> <C> <C>
10.4 Letter of Intent, dated May 12, 1995 and 1
Management and Consulting Agreement,
dated may 24, 1995, between Avonwood
Capital Corporation and the registrant.
10.5 Consulting Agreement between Avonwood 2
Capital and InfoPak, Inc., dated May 13,
1995.
10.6 Employment Agreement between Steven M. 3
Peck and registrant, dated January 1, 1996.
</TABLE>
<PAGE> 1
Exhibit 1
AVONWOOD CAPITAL CORPORATION
532 Avonwood Road
Haverford, PA 19041
May 12, 1995
Board of Directors
Dimensional Visions Group, Ltd.
718 Arch Street, 202N
Philadelphia, PA 19106
Attention: George Smith, Chairman
The purpose of this binding letter of intent is to set forth, the
plans, the intentions, the terms and the conditions relating to a business
relationship to be undertaken between Dimensional Visions Group, Ltd. ("DVG")
and Avonwood Capital Corporation ("ACC"). Specifically, it is agreed as
follows:
1. As will be more fully described in the proposed Management and
Consulting Agreement, ACC will render services in areas needed by the DVG which
are consistent with the charter of ACC which are to include, but not be limited
to, financial restructuring, business strategy and tactical development,
contract and corporate finance negotiations, merger and acquisition
negotiations, distribution enhancement, sales expansion, strategic alliance
development, corporate consulting and advisory and arranging of capital.
2. ACC will loan DVG the sum of $50,000 in exchange for which DVG
will issue ACC its (a) 3 1/2 year unsecured Promissory Note in the amount of
%50,000, with interest thereon at nine percent (9%) per annum, (b) Warrants to
Purchase 500,000 Shares of DVG restricted Common Stock at $.10 per Common
Share, exercisable within 3 1/2 years from issuance, and (C) warrants to
purchase 50,000 shares of restricted Common Stock at $.01 per share exercisable
immediately.
3. DVG, at ACC's expense, agrees to immediately initiate the
filing and pursue, in good faith and with due diligence, approval of an SB-2
Registration with the Securities and Exchange Commission (SEC) for 300,000
shares of the voting common stock of DVG on behalf of ACC.
4. As additional consideration for the services to be rendered by
ACC, DVG agrees to retain ACC, effective as of the date of the note, pursuant
to a Management and Consulting Agreement on terms and conditions satisfactory
to the parties, to provide management and consulting services to DVG in
exchange for a fee of $100,000 per year accruing quarterly in arrears and
payable when DVG has a pre-tax operating profit for any such quarter, provided,
the portion of the fee to be paid at that time shall not exceed the pre-tax
operating profit. The Management and Consulting Agreement shall be for a term
of one (1) year and shall renew thereafter on a year-to-year basis unless and
until terminated by either party giving the other
<PAGE> 2
May 12, 1995
Page 2
sixty (60) days written notification prior to the end of the ten current term.
Upon the completion of $1 million dollars of capital raised (by equity, debt,
private placement or otherwise) for DVG, the Management and Consulting
Agreement shall be renewed for a twelve (12) month period.
5. Also, pursuant to the Management and Consulting Agreement, ACC
will be entitled to receive five percent (5%) of the amount of any capital
raised (by equity, debt, private placement or otherwise) for DVG by ACC or any
of its affiliates; provided, however, should Shipley Raidy Capital Partners LP
("SR"), or any other affiliate of ACC raise capital as aforesaid, for DVG, ACC
agrees that the ACC fee shall be adjusted so that the aggregate percentage fee
paid to SR, or any other affiliate of ACC, and ACC, does not exceed eight
percent (8%). For example, if the fee for SR, or any other affiliate of ACC,
to raise capital is six percent (6%), ACC's fee would be reduced from five
percent (5%) to two percent (2%), the aggregate fee being (8%).
6. ACC shall receive, for each dollar of capital raised by (I)
debt, (ii) equity, and/or by (iii) other value enhancing transaction (the "VET)
for DVG, or as otherwise stated herein, a Warrant(s), to a maximum of 1,600,000
Warrants to purchase restricted Voting Common Stock of DVG at fifteen cents
($0.15) per share exercisable at any time within five (5) years from the date
of the issuance of the warrant(s) pursuant to the terms of a Warrant Agreement
satisfactory to the both parties. If a VET is mutually agreed upon, in
writing, by ACC and DVG, and consummated, then all warrants, not previously
vested, as specified in paragraph 6 of this Letter of Intent, shall vest
immediately. ACC shall have the responsibility for compensating SR, or any
other affiliate of ACC, for any warrants earned as a result of their raising
capital for DVG. Upon the closing by DVG and ACC of the documents described in
this letter of intent, DVG shall issue to ACC the last 250,000 of the above
referenced warrants. In the event of the completion of a merger, consolidation
or reorganization involving at least twenty (20%) percent of the stock or
assets by or between DVG and a third party, the Management and Consulting
Agreement may be terminated immediately by either party following such
completion, and all the remaining warrants of those referenced above shall vest
to ACC.
7. Each party agrees to indemnify and hold the other party
harmless from and against any and all suits, judgments, causes of actions or
claims resulting from the negligence or willful misconduct of the other, its
agents or employees. Each party further agrees that the Management Agreement
will contain confidentiality provisions satisfactory to the parties and will
also contain provisions which will not permit DVG to do business with any
financing or other value enhancing sources introduced to DVG or contacted by
ACC, or any of its affiliates, under its Management and Consulting Agreement on
behalf of DVG, within one (1) year after expiration of the term of the
Management Agreement, without the prior written consent of ACC.
8. All expenses incurred by ACC incident to this Letter of Intent
(but excluding legal services in connection therewith) as well as expenses
incurred by ACC after the inception of the Management Contract, will be paid by
DVG within fourteen (14) days after submission by ACC provided, that all
expense types shall have been pre-approved by DVG.
<PAGE> 3
May 12, 1995
Page 3
9. As conditions precedent to the effectiveness of this Letter of
Intent the parties agree that the following must have occurred:
(a) DVG shall have executed a letter with Shipley Raidy
("SR") pursuant to which SR agrees to undertake to raise capital by and on
behalf of DVG on terms and conditions satisfactory to SR, DVG and ACC.
(b) ACC must be provided with verification satisfactory
to ACC that there is at least one (1) party interested in acquiring the
business of DVG, whether by stock or asset acquisition or otherwise.
It is the intent of the parties that the form of Promissory Note,
Warrants, Management and Consulting Agreement, and SR letter will be prepared,
reviewed and agreed to within ten (10) days after the execution of this binding
letter of intent. In addition, during this time DVG will take whatever steps
are required in order to provide to ACC with the verification required pursuant
to Paragraph 8(b) of this letter.
If you are in agreement with the terms and conditions of this binding
letter of intent, please indicate your acceptance of same by executing the
enclosed four (4) copies where indicated and returning two (2) copies of this
letter to the undersigned.
Very truly yours,
AVONWOOD CAPITAL CORPORATION
By: /s/ James W. Porter, Jr.
--------------------------------
James W. Porter, Jr.
President
APPROVED AND AGREED To this 12th day of May, 1995.
DIMENSIONAL VISIONS GROUP, LTD.
By: /s/ George S. Smith
--------------------------------
CEO
-----------------------------
Title
<PAGE> 4
Exhibit 1
MANAGEMENT AND CONSULTING AGREEMENT
DIMENSIONAL VISIONS GROUP LTD.
May 24, 1995
On the basis of our recent discussions with Mr. George Smith, Chairman and CEO,
this memorandum presents our proposed Management and Consulting Agreement to
assist with financial restructuring, corporate finance negotiations, strategic
alliance development, corporate consulting and advisory, and arranging of
capital as required.
This proposal is organized into the following sections:
- Our Understanding of the Objectives
- Approach to the Project
- Proposed Methodology
- Philosophy of Engagement
- Estimated Time and Cost
- Benefits
1
<PAGE> 5
OUR UNDERSTANDING OF THE OBJECTIVES
Dimensional Visions Group, Ltd. (DVGL) wants to undertake a comprehensive
financial planning project to guide its growth over the next five years. This
study will be directed at growth opportunities in existing business, as well as
new markets and products. It will be concerned also with the emphasis that
should be given to internal financial as well as external capital and the
potential acquisition candidates. Finally, Avonwood will monitor the
implications of the agreed upon growth strategy for the financial,
organization, and management processes of the Company.
More specifically, as we understand the situation, the initial objectives of
the project will be to obtain answers and perspective with respect to the
following five key questions:
1. WHAT ARE THE OPPORTUNITIES FOR SIGNIFICANTLY IMPROVING THE
RELATIONSHIP WITH EXISTING FINANCING SOURCES?
2. WHAT ARE THE OPPORTUNITIES FOR ENTERING NEW INSTITUTIONAL
MARKETS?
3. WHAT IS LIKELY TO BE DVGL'S FINANCING REQUIREMENTS OVER THE
NEXT 3-5 YEARS FROM CONTINUATION OF ITS EXISTING PRODUCTS?
4. WHAT COULD BE THE LIKELY TIMING AND MAGNITUDE OF FUNDING
REQUIRED BY DVGL'S ENTRY INTO NEW AREAS?
5. WHAT SHOULD BE THE MAJOR FINANCIAL, ORGANIZATIONAL, AND
MANAGEMENT ELEMENT IN DVGL'S GROWTH STRATEGY OVER THE NEXT 3-5
YEARS AND WHAT WILL IT TAKE TO ENSURE SUCCESSFUL
IMPLEMENTATION?
APPROACH TO THE PROJECT
Our basic approach to achieving these objectives is to focus first on
establishing a deep understanding of DVGL's existing operation and the
strengths and weaknesses of the Company's current financial position and
outlook. Once this understanding has been firmly established and agreed upon,
Avonwood will have a solid foundation for evaluating alternative opportunities
to achieve sales and profit goals, capitalizing on financial opportunities, and
strengthening capital positioning as an on-going process. To this end, the
major end products of the project will be organized under the following five
topic headings:
I. BROAD OVERVIEW OF THE SIZE, TRENDS, AND LIKELY DEVELOPMENTS IN
THE SECTORS OF THE CAPITAL MARKETS MOST APPLICABLE TO DVGL AND
ITS FUTURE
2
<PAGE> 6
II. PROFILE OF DVGL'S TARGET FINANCING IN TERMS OF SIZE, GROWTH,
AND RELATIVE COST.
III. COMPETITIVE ENVIRONMENT AND STRUCTURE OF EACH KEY FINANCIAL
MARKET SEGMENT.
IV. CONTINGENCY PLANS FOR DVGL FINANCING OF NEW MARKETS AND
PRODUCTS
V. MAJOR ELEMENTS OF THE FINANCIAL STRATEGY TO BE FOLLOWED BY DVGL
The implications of the financial strategy for organization structure,
financial stability, management processes, and on-going planning will
be highlighted. Also, an action program and timetable detailing the
various elements of the strategy and implementation will be prepared.
PROPOSED METHODOLOGY
In order to complete the tasks outlined above, we will perform a series of
week-to-week steps which are summarized in this section. Broadly, we will take
the following steps:
1. Brief key DVGL executives on the objectives and proposed
approach to the project, introduce Avonwood, and establish
liaison for coordinating the work. Talk individually with all
members of the top management group.
2. Collect and analyze internal and external financial data on
each of your products and develop a profile of each market
segment in terms of size, growth rate, profitability, and
capital requirements.
3. Against the perspective resulting from steps 1 and 2, we
analyze the sales and profit projections of DVGL and validate
management's estimates of future cash flow for each of the
current businesses. In addition, a "gap analysis" will be
developed to illustrate the magnitude of the discrepancy (if
any) between the reported financial growth of your existing
business and the overall Corporate growth goal.
4. Based on the foregoing steps, we will present an oral progress
report for review with the CEO covering the findings and
conclusions to date, prepare a listing (and initial
quantification) of opportunities, those questions still
unanswered, and the required financing as currently defined.
This will enable us to educate financing sources about DVGL as
the company progresses.
5. Following this key checkpoint, we will carry out additional
fact-finding and analysis as required. We will prepare a
second oral progress report to reflect this
3
<PAGE> 7
additional work, as well as a revised growth-gap analysis
incorporating an assessment of the most probable financing
prospects for DVGL's expanding businesses. This would enable
the magnitude of the growth gap (if any) to be defined and
accordingly the emphasis that should be placed on financing of
new product development.
6. Through further top management discussions and analysis, we
will develop financial criteria for desirable new businesses
and screen likely candidates, including a brief profile of
each business and the financial reasons for its consideration.
This analysis will focus on synergy of operations, leverage of
corporate assets, and DVGL's ability to negotiate a position
for DVGL's benefit.
7. We will negotiate corporate finance availability and
restructuring as required.
PHILOSOPHY OF ENGAGEMENT
Our concept of professional service is particularly appropriate to this
project:
- Confidentiality is absolute and continuous.
- Client should be the CEO.
- No competitor may be a client during engagement.
- Each engagement commands the primary focus of assigned staff.
- Project must leverage experience and contacts.
- At the onset of the study, a solid grasp of the profit
economics of the Company is obtained.
- We focus on the decision making needs of management, and
increasing Company profits.
TIME, FEES, AND EXPENSES
The term of this agreement, the fees, other consideration, and expenses to be
paid to Avonwood Capital Corporation (ACC) for its services hereunder shall be
as provided in paragraph 4, 5, and 6 in the Letter of Intent dated May 10,
1995, between ACC and DVGL (the "LOI") attached hereto as exhibit "A", the
terms of which are incorporated herein by reference. DVGL has agreed to comply
with the term of paragraph 3 of the LOI, which is also incorporated herein by
reference.
DVGL agrees to take the steps necessary to increase the authorized common stock
of DVGL to an amount which, if all warrants were exercised, and securities
convertible were converted to
4
<PAGE> 8
common stock, would enable DVGL to issue the shares required in exchange for
the warrants and other convertible securities. Such increase in the authorized
common shall have occurred on or before December 31, 1995 (the "End Date").
If DVGL has not increased its authorized common shares to the amount as
described by the End Date, and provided that ACC has previously attempted to
exercise its vested warrants and there were insufficient shares available to
cover all or any portion of the amount requested to be exercised, ACC, at its
option, may elect to:
(a) return its vested warrants to DVGL in exchange for a herein
agreed upon payment to ACC by DVGL as liquidated damages. Such payment shall
be determined by taking fifty percent (50%) of the average of the bid price of
DVGL common stock for the last 20 trading days of 1995, minus the exercise
price for the warrant multiplied by the number of vested warrants being
returned; or
(b) retain the vested warrants.
All expenses incurred by Avonwood incident to this management consulting
agreement will be paid by DVGL within fourteen (14) days after submission by
Avonwood, provided that all expense types shall have been pre-approved.
INDEMNITY AND CONFIDENTIALITY
The parties agree to be bound by the provisions of paragraph 7 of the LOI, the
terms of which are incorporated herein by reference
BENEFITS
DVGL and Avonwood will submit a written financing plan to the CEO in addition
to previously described reporting as described in Proposed Methodology.
The addition of new capital, the avoidance of staff turnover, and identified
cost reductions will all result from the awareness, understanding, and tools
generated by this project. Direct identifiable economic benefits running two
to four times the professional fees are anticipated.
<TABLE>
<CAPTION>
Accepted by: Accepted by:
Avonwood Capital Corporation Dimensional Visions Group, Ltd.
<S> <C>
/s/ James W. Porter, Jr. /s/ George S. Smith
- -------------------------------------- ----------------------------------------
Name Name
President CEO
- --------------------------------------------- -----------------------------------------------
Title Title
May 24, 1995 May 24, 1995
- ----------------------------------------- -----------------------------------------
Date Date
</TABLE>
5
<PAGE> 1
Exhibit 2
AVONWOOD
Capital Corporation
532 Avonwood Road
Haverford, PA 19041
5/13/95
LETTER OF ENGAGEMENT AND AGREEMENT
It is with great pleasure that we present this letter of agreement in which
InfoPak, Inc. (the "Company") has agreed to engage the services of Avonwood
Capital Corporation (ACC). The terms of the agreement are outlined as follows:
Services It is agreed that "ACC" will render, on a best
efforts basis, those services needed by the "Company"
which are consistent with the charter of "ACC" which
are to include, but not be limited to, business
strategy and tactical development, contract and
corporate finance negotiations, distribution
enhancement, sales expansion, strategic alliance
development, corporate consulting/advisory and the
arranging of capital as required.
Compensation (1) It is agreed that "ACC" will be paid $2,500.00
per month by the "Company", for each month in
advance, with the first payment to be accrued until
the realization of capital infusion, which is
currently under negotiations or, in the event of an
incremental increase in the revenue of the Company,
which ever comes first. This annual agreement dated
as to this document, automatically renewable unless
canceled by either party in writing at least 60 days
prior to the renewal date.
(2) "ACC" will be paid a sum equal to 5% of the
incremental gross generated by any relationship which
ACC introduces to the Company.
(3) "ACC" will be paid 5% of the incremental gross
revenue generated by the successful negotiation
between an existing or potential client of the
Company where the Company has in writing, authorized
ACC's involvement to negotiate, to be consistent with
this agreement.
(4) It is also agreed that "ACC" will be paid a 5%
success fee on all negotiations resulting in a cash
payment to the "Company" in which "ACC" is involved.
(5) Items 2 and 3 of this document shall have a
infinite life.
<PAGE> 2
(6) All payments associated with 2 and 3 will be on
terms of 30 days in arrears.
(7) ACC will be paid 5% of the incremental gross
revenue generated by the Company, benchmarked to the
date of this agreement, net of existing relationships
as itemized in addendum A dated May 1, 1995, but
including those existing relationships that InfoPak
has given written permission for ACC to negotiate
with.
Equity Allocation "ACC" will be issued 3% of the fully diluted
outstanding stock of the "Company" which will have
the covenant of non-dilution. This can be issued in
the form of warrants, options or common shares as to
ACC's discretion. Benchmarks will be established
outlining the distribution of said warrants, options
and common shares.
T&E All expenses incurred by "ACC" associated with the
normal functions pertaining to this contract will be
paid by the "Company" 14 days after submission by
"ACC" all expenses will be pre-approved.
If these terms are agreeable to you please sign below and return to "ACC".
This will be followed by legal documentation which will cover each of these
items in more detail as needed.
We look forward to a successful partnership in achieving the goals and
expectations of InfoPak, Inc. and its shareholders.
Agreed to by:
<TABLE>
<S> <C> <C>
/s/ Thomas R. Smith /s/ Sean Lee /s/ Paul C. Damiani
- ---------------------------- ---------------------------------- --------------------------------
Thomas R. Smith Sean Lee Paul C. Damiani
Managing Director Chairman Secretary
Avonwood Capital Corporation InfoPak, Inc. InfoPak, Inc.
</TABLE>
<PAGE> 1
Exhibit 3
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 1st day of January, 1996, by and
between STEVEN M. PECK, an adult individual (hereinafter referred to as
"Employee"), and DIMENSIONAL VISIONS GROUP, LTD., a Delaware corporation, with
a principal place of business located at 718 Arch Street, Philadelphia,
Pennsylvania, 19106 (hereinafter referred to as "Company");
W I T N E S S E T H:
WHEREAS, Employee has been employed by the Company;
AND, WHEREAS, the Company and Employee now desire to enter
into an Agreement that sets forth the terms and conditions of Employee's
services to the Company;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto intending to be legally bound,
hereby agree as follows:
1. Employment Term, Duties and Acceptance.
A. Company hereby retains Employee as the
Company's President and Chief Executive Officer for a period of three (3) years
(the "Employment Period"), commencing on January 1, 1996 (the "Employment
Period"), subject to earlier terminations as hereinafter provided, to render
his full time services to the Company upon the terms and conditions herein
contained, in such capacity.
B. Employee hereby accepts the foregoing
employment and agrees to devote, on a full-time basis, his best efforts, energy
and skill to such employment.
C. During the term of this Agreement, Employee
shall not, except as may be permitted by the Board of Directors, be employed
by, work for, or be associated with, directly or indirectly, as an officer,
consultant, employee, or in any other capacity, any other business
1
<PAGE> 2
operation whether or not same is competitive with the business of the Company.
2. Compensation and Expense Reimbursement.
A. As base compensation for Employee duly
rendering his services pursuant to the terms of this Agreement, Company agrees
to pay and Employee agrees to accept a base salary of One Hundred Twenty-five
Thousand Dollars ($125,000) per annum payable in equal bi-weekly installments,
less such deductions or amounts as shall be required to be withheld by
applicable law or regulation, and paid in accordance with the Company's payroll
practices. Such base salary shall be subject to increase by the Board of
Directors upon annual review. Employee shall be eligible for bonus payments in
accordance with the Bonus Plan as approved by the Board of Directors.
B. Company shall pay or reimburse Employee for
travel and other expenses reasonably incurred by Employee in the performance of
his services under this Agreement during the Employment Period, upon
presentation of expense statements, vouchers or such other supporting
documentation as may reasonably be required.
3. Fringe Benefits. Employee shall be entitled
(subject to the terms and conditions of particular plans and programs), to all
fringe benefits afforded to other employees of the Company, including, but not
by way of limitation, the right to participate in any pension, stock option,
retirement, major medical, group health, disability, accident and life
insurance, relocation reimbursement, and other employee benefit programs made
generally available, from time to time, by the Company except to the extent
that Employee, pursuant to the terms of this Agreement is already receiving
such benefits from the Company. Notwithstanding the foregoing, Employee shall
be provided with life insurance protection in an amount at least equal to one
half of his then current annual base salary.
2
<PAGE> 3
4. Vacations. Employee shall be entitled, during
each employment year, to four (4) weeks vacation, per annum, non-cumulative, or
payment for vacation time not taken by Employee.
5. Termination by Company.
A. Notwithstanding the stated term of
employment, this Agreement and the term of employment may be sooner terminated
by the Company for cause or for any of the following reasons:
(i) In the event Employee, in the
reasonable opinion of the Company, as determined by the Board of Directors, is
unable by reason of physical or mental disability to continue the proper
performance of his duties hereunder for a period of three (3) consecutive
months, the Company may terminate Employee's employment on a date thirty (30)
days after the date on which the Company shall have mailed written notice of
such termination to Employee's last known address;
(ii) The Employee's death;
(iii) Employee has committed an act of
dishonesty, theft, substance abuse, intoxication, unethical business conduct, a
material breach of the Employment Agreement, or has been convicted of a felony;
all of the foregoing shall be separately and collectively, known as "cause" for
termination.
6. Notice of Termination. Any purported termination by
the Company shall be communicated by written Notice of Termination to the other
party hereto in accordance with Section 17 hereof (except if the event given
rise to termination is Employee's death). For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall indicate the specific
3
<PAGE> 4
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Employee's employment under the provision so indicated.
7. Compensation Upon Termination or During Disability.
A. During any period that the Employee fails to
perform his duties hereunder as a result of incapacity due to physical or
mental illness, the Employee shall continue to receive his full base salary at
the rate then in effect and all other compensation, until the Employee's
employment is terminated by the Company pursuant to Section 5 hereof, and for a
three month period thereafter (the three month period shall commence on the
date the Company notifies Employee of the Company's election to terminate
Employee's employment, pursuant to the provisions of Section 5 A. hereof).
B. If the Employee's employment shall be
terminated for cause, except as herein specifically provided to the contrary in
the event the cause for termination is death or disability, the Company shall
pay the Employee his full base salary through the date of termination at the
rate in effect at the time the Notice of Termination is given and the Company
shall have no further obligations to the Employee under this Agreement.
C. If the Employee's employment by the Company
shall be terminated without cause during the three year term of this Agreement,
Employee shall be entitled to the payment of his compensation at the then
current level for the remainder of the term. In the event of the sale,
transfer or reorganization of the Company, any agreement for such shall include
a commitment by the surviving entity to continue payment of such compensation
for the remainder of the said three year term. If Employee's employment shall
be terminated without cause following
4
<PAGE> 5
the expiration of his initial three year term of employment:
(i) The Company shall continue to pay
the Employee an amount equal to the Employee's base salary at the rate in
effect at the time Notice of Termination is given for a period of six months,
said payments to be made at the same time and in the same manner, as if
Employee had remained in the employ of the Company; plus
(ii) Any bonus to which the Employee
would otherwise be entitled, pro rated to the effective date of termination;
plus
(iii) All other amounts payable to the
Employee and all benefits payable to him under any other plan or agreement
relating to retirement benefits or to compensation previously earned and
deferred, in accordance with the respective terms of such plans or agreements,
pro rated to a date six (6) months following the date of termination.
8. Trade Secrets.
A. Employee acknowledges that his employment by
the Company, which is in the business of three-dimensional imaging, will enable
him to obtain confidential information concerning the Company, its subsidiaries
and affiliates, and information about the trade secrets the Company employs in
its business, including but not limited to the following: research,
experiments, inventions, discoveries and improvements conceived, developed or
worked on by the Company, whether or not related to Company's business as it
now exists; data and information about costs, profit, markets, sales, key
personnel, pricing policies; technical, scientific, patent and proprietary
information and/or processes; operational methods and other business affairs
and methods, including plans for future developments, now known or available to
Employee or the public (all of which is hereinafter collectively referred to as
the "Confidential Information"). Confidential Information
5
<PAGE> 6
shall also mean the same as trade secrets under the 2nd Restatement of Torts.
Employee and the Company further acknowledge that the services to be performed
under this Agreement are of a special, unique, unusual and extraordinary
character; the Company's products and services will be marketed and licensed
throughout the United States and abroad, and that the Company will be competing
with other organizations which are or could be located in any part of the
United States or abroad. Accordingly, Employee agrees that he shall not use
for himself or divulge any of the Confidential Information to anyone outside of
the Company's business and then only with the prior written consent of the
Company's Board of Directors. Employee further acknowledges that he is not now
and has not in the past been engaged in any business related to that of the
Company (three dimensional imaging). Accordingly, Employee agrees that upon
the termination of expiration of this Agreement, and for a period of two (2)
years thereafter, Employee will not, directly or indirectly, alone or as a
member or a partnership, or as an officer, employee, director, stockholder or
consultant, of or to any person, firm or corporation engage in any business,
directly or indirectly, the same as or similar to and/or competitive with that
of the Company as now constituted or as may hereafter be constituted during the
term of this Agreement (including its successors or assigns) and during the two
(2) year restrictive covenant period set fourth above.
B. As a condition to the employment of the
Employee, Employee further agrees to execute the Company's standard
Confidentiality and EDAC Agreements and such other Confidentiality Agreements
as may, during the term of Employee's employment, be required by the Company of
all employees in the Company's employ. It is specifically understood that the
consideration supportive of such latter execution by Employee will be the
continued employment of Employee, it being specifically understood that the
failure or refusal of Employee to execute such
6
<PAGE> 7
latter documents (provided same is required of all employees of the Company)
would constitute cause for termination by the Company of Employee's employment
hereunder.
C. The provisions of this Section 8 shall
survive the termination or expiration of this Agreement.
9. Injunctive Relief.
A. Employee acknowledges that his services to
the Company are unique and that the confidential information which will be
divulged to the Employee will be of such nature that the divulging of same by
Employee to any other person, firm or corporation or the utilization thereof by
Employee, in breach of his undertakings thereunder, could cause the Company
irreparable harm or damage for which the Company cannot be entirely compensated
by an award of money damages. It is therefore agreed that in addition to any
other relief or remedy which may be available to the Company in the event of
the breach by Employee of his confidential undertaking, the Company may seek as
against the Employee injunctive relief, and the Employee agrees that in the
event such an action is commenced by the Company against Employee which
alleges, in whole or in part, a breach or threatened breach by Employee of his
confidential undertaking, to consent, and he does hereby consent, to the
issuance by the Court to a preliminary injunction in favor of the Company
restraining the Employee from breaching his confidential undertaking as set
fourth herein pending a final determination of such judicial proceeding. The
provisions hereof shall survive the termination or expiration of this
Agreement.
10. Return of Confidential Information. Upon the
termination or expiration of this Agreement, Employee shall return to the
Company all material in Employee's possession or control which is of a
confidential matter relating to the Company's business. The provisions of this
7
<PAGE> 8
Section 10 shall survive the termination or expiration of this Agreement.
11. Employee shall be indemnified by the Company against
any liability incurred in connection with any proceeding in which Employee may
be involved by reason of his service as an officer, director or employee of the
Company except where such liability results from willful misconduct or
recklessness or where such indemnification is prohibited by applicable law.
12. Severability. The invalidity or unenforceability
of any term of this Agreement shall not affect the validity or enforceability
of this Agreement or any of its other terms; and this Agreement and such other
terms shall be construed as though the invalid or unenforceable term(s) were
not included herein, unless the effect would be to vitiate the parties'
fundamental purpose in entering into the Agreement.
13. Remedies Cumulative. Except as otherwise
expressly provided herein, each of the rights and remedies of the parties set
forth in this Agreement shall be cumulative with all other such rights and
remedies, as well as with all rights and remedies of the parties otherwise
available at law or in equity.
14. Waiver. The failure of either party at any time or
times to require performance of any provisions hereof shall in no manner effect
the right at a later time to enforce the same. To be effective, any waiver
must be contained in a written instrument signed by the party waiving
compliance by the other party of the term or covenant as specified. The waiver
by either party of the breach of any term or covenant contained herein, whether
by conduct or otherwise in any one or more instances, shall not be deemed to
be, or construed as, a further or continuing waiver of any such breach, or a
waiver of the breach of any other term or covenant contained in this Agreement.
8
<PAGE> 9
15. Governing Law. Employee agrees that this
Agreement shall be governed by the laws of the Commonwealth of Pennsylvania.
16. Captions. Captions of articles and paragraphs
of this Agreement are included for convenient reference only, shall not be
construed as part of this Agreement and shall not be used to define, limit,
extend or interpret the terms hereof.
17. Warranties. Employee represents, warrants,
covenants and agrees that he has a right to enter into this Agreement, that he
is not a party to any agreement or understanding whether or not written which
would prohibit or restrict his performance of his obligations under this
Agreement and that he will not use in the performance of his obligations
hereunder any proprietary information of any other party which he is legally
prohibited from using.
18. Notice. Any notice required to be given
pursuant to the provisions of this Agreement shall be in writing and sent by
registered mail, to the parties at the following addresses:
To the Employer: Dimensional Visions Group, Ltd.
718 Arch Street, Suite 202N
Philadelphia, PA 19106
To the Employee: Mr. Steven M. Peck
88 Bunker Hill Court
Wayne, PA 19087
19. Assignment. This Agreement shall inure to the
benefit of and be binding upon the Company, its successors and assigns, it
being specifically agreed and understood that in the event that the Company
engages in a so-called "bulk sale" of its assets, this Agreement may, at the
Company's option, for all purposes be deemed an asset of the Company.
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<PAGE> 10
20. Definition. For purposes of this Agreement, the
term "Company" shall mean the Company, its subsidiaries, its successors or
assignees.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
Attest: DIMENSIONAL VISIONS GROUP, LTD.
/s/ William R. Lewis By /s/ James W. Porter, Jr.
- -------------------------------- -------------------------------
Chairman, Compensation Committee
Board of Directors
WITNESS:
/s/ Anna Colasante /s/ Steven M. Peck
- -------------------------------- ----------------------------------
STEVEN M. PECK
10
