<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 28, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-23204
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VISTA 2000, INC.
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(Exact name of Registrant as specified in its charter)
DELAWARE 58-1972066
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
736 Johnson Ferry Road, Building C-275, Marietta, Georgia 30068
- --------------------------------------------------------- (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (770) 971-4344
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock $.01 Par Value
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Series A Warrants
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ ] No [X]
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, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by nonaffiliates computed
by reference to the price at which the stock was sold was $2,051,098 as of
August 15 1997. This represents 32,817,564 shares at $.0625 per share.
There were 43,510,964 shares of the Registrant's common stock and 2,300,000
Series A Warrants and 611,127 other warrants outstanding as of August 15,
1997.
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PART I
Item 1. Business
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Vista 2000, Inc., the registrant, together with its subsidiaries, is
referred to herein as the "Company". The Company's executive offices are
located at 736 Johnson Ferry Road, Building C-275, Marietta, Georgia 30068,
and its telephone number is (770) 971-4344.
All statements, other than statements of historical fact, included in
this Annual Report, including, without limitation, the statements under
"Current Developments", "General Business" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" are, or may be
deemed to be, forward-looking statements within the meaning of Section 21E of
the Securities Exchange Act of 1934. Important factors that could cause
actual results to differ materially from those discussed in such
forward-looking statements ("Cautionary Statements") include: the general
strength or weakness of the consumer products industry, and the pricing
policies of competitors. All subsequent written and oral forward-looking
statements attributable to the Company or persons acting on behalf of the
Company are expressly qualified in their entirety by such Cautionary
Statements.
Current Developments
As previously disclosed, in 1995 the Company elected to change its fiscal
year from September 30 to December 30. The Company engaged Grant Thornton
LLP ("Grant Thornton") to audit its financial statements for the period
ending December 30, 1995. In March, 1996, Grant Thornton advised the Company
that contrary to prior projections and previously filed financial reports,
the Company had incurred a substantial loss for the year-end and for prior
quarters for fiscal year 1995. In March 1996, the Audit Committee of the
Board of Directors (consisting of the Company's two outside (i.e.
non-employee) directors) initiated an investigation of the integrity of the
Company's financial reporting procedures as well as the integrity of
management.
Richard P. Smyth ("Smyth") Chairman of the Board of Directors and Chief
Executive Officer, was placed on leave of absence pending the Audit
Committee's review. On April 16, 1996, the Company announced Smyth's
resignation as Chairman of the Board of Directors and Chief Executive Officer
of the Company and the Company filed a lawsuit against Mr. Smyth, alleging,
among other things, breach of fiduciary duty. This litigation is currently
pending.
As a result of the Audit Committee's investigation, the Company reported
a restatement of its results for the fiscal year ending September 30, 1994.
The Company had previously reported a loss for the period of $329,000. The
restated loss for this period is $2.1 million. Further, the Company reported
a loss for the three (3) month stub period ended December 31, 1994 of
approximately $1 million. The Company had reported a loss from its
consolidated operations for the fiscal year ended December 30, 1995 of $12.9
million or $2.04 per share based on approximately 6.3 million weighted
average shares outstanding during the period. This loss has been restated to
$14.7 million or $2.33 per share as presented in the Company's Form 10-K for
the year ended December 30, 1995.
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Beginning in mid-April 1996, 17 class action lawsuits were filed against
the Company and certain other entities and individuals relating to activities
of the Company while under control of previous management and the previous
Board of Directors. All of the lawsuits were eventually consolidated. The
lawsuits were filed in the United States District Court for the Northern
District of Georgia, and on March 14, 1997, the litigation was settled by a
Final Judgment and Order of Dismissal by the Court. Further, the Company is
being investigated by the Securities and Exchange Commission ("SEC"). (See
Item 3 - Legal Proceedings.)
On April 26, 1996, the Company received a letter from the NASDAQ Stock
Market, Inc. ("NASDAQ") notifying the Company that its securities were
scheduled to be delisted from NASDAQ effective May 10, 1996. The Company
requested a formal hearing on the matter which was held on May 22, 1996. On
May 30, 1996, the Company was advised by NASDAQ that the Company's securities
were delisted effective May 31, 1996. The Company will not be eligible to
trade its securities on either the Electronic Bulletin Board Market or the
"pink sheets" market until (i) an application is made on behalf of the
Company by a NASD member firm as a market maker for the Company's securities
and (ii) the application is accepted by NASDAQ. The Company has not been and
continues not to be in a position to file its required periodic reports on a
timely basis (Forms 10-K and 10-Q) and consequently, has not filed an
application for listing. No assurance can be given as to if and when the
Company will be in a position to file its required periodic reports on a
timely basis and submit the aforementioned application to NASDAQ or, if the
Company does file such an application, whether NASDAQ will accept it. (See
Item 5 - Market for Registrant's Common Equity and Related Stockholder
Matters.)
On June 7, 1996, the Company entered into an agreement with Ginarra
Holdings, Inc. ("Ginarra") to add six (6) additional outside directors to the
Board of Directors which, at that time, consisted of three (3) members.
Pursuant to the terms of the agreement, the directors amended the Company's
bylaws to increase the size of the Board of Directors from five (5) to nine
(9) and voted to add six (6) Ginarra nominees as directors of the Company.
The nominees assumed office immediately following the issuance of a Form 8-K
filed with the SEC on June 6, 1996 for the year ended December 30, 1995 in
lieu of a Form 10-K (the "June 1996 Form 8-K"). Since that time, the three
original directors and one of the newly-elected directors have resigned,
currently leaving the Board with five (5) members. (See Item 10 - Directors
and Executive Officers of the Registrant.)
As previously disclosed in the June 1996 Form 8-K, Grant Thornton had
disclaimed an opinion on the Company's consolidated financial statements for
the year ended December 30, 1995 because evidence supporting the results of
operations of the Company's subsidiaries, Family Safety Products, Inc.
("FSPI"), Promotional Marketing, Inc. ("PMI") and Intelock Technologies, Inc.
("Intelock") was not available. However, Grant Thornton advised that it could
express, and the Company did receive, an unqualified opinion on the financial
statements of the Company's subsidiary, American Consumer Products, Inc.
("ACPI"), presented on an historical basis for twelve (12) months ended
December 30, 1995. Without an opinion on the Company's consolidated
financial statements, the Company was not able to comply with the applicable
rules and regulations of the Securities and Exchange Commission (the "SEC")
regarding reports and The NASDAQ Stock Market, Inc. ("NASDAQ") regarding the
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listing of the Company's securities. This resulted in, among other things,
the delisting of the Company's securities from the NASDAQ National Market
described above.
Following the issuance of the June 1996 Form 8-K, Grant Thornton was able
to perform additional audit procedures with respect to the fiscal year ended
December 30, 1995. After performing these procedures, Management identified
certain corrections that have been made to the financial statements for the
year-ended December 30, 1995. As a result of these corrections, on March 12,
1997, Grant Thornton re-issued its Auditors' Report on the Company's 1995
consolidated financial statements. This re-issued Report of Independent
Certified Public Accounts, which now contains an unqualified opinion of Grant
Thornton, was filed on May 1, 1997 with the Company's Form 10-K for the year
ended December 30, 1995.
General
The Company, successor by merger to Firearm Safety Products, Inc.
("Firearm"), was organized to design, develop, manufacture and market
consumer products. Firearm was organized on December 19, 1991 as
Triggerguard, Inc., a Georgia corporation. Effective August 10, 1992,
Triggerguard's name was changed to Firearm Safety Products, Inc. Pursuant to
a Plan and Agreement of Merger entered into October 20, 1993, Firearm was
merged into the Company, a newly formed Delaware corporation. In conjunction
with the plan of merger, FSPI, a Georgia corporation, was formed as a
wholly-owned subsidiary of the Company, and the assets and operations of
Firearm were transferred to FSPI. FSPI manufactured and marketed a broad
range of personal safety and home security devices, alarms and security
systems. On October 24, 1994, the Company completed an initial public
offering of its common stock and warrants.
Acquisitions and Dispositions
Effective May, 1995, the Company acquired all of the outstanding stock of
PMI for a total of $610,000 exclusive of acquisition costs. PMI provided
direct marketing services to a variety of customers. The acquisition was
accounted for as a purchase using the equity method of accounting. Effective
November 30, 1995, PMI sold substantially all of its assets to a company
owned by the former principals of PMI. Effective September 15, 1996, the
Company sold the remaining assets of PMI.
Effective June 30, 1995, the Company acquired 94% of the outstanding
shares of Intelock, a California manufacturer of digital lock mechanisms with
distribution through major homecenter and hardware retailers nationwide. The
balance of the shares were retained by a former officer and a former employee
of Intelock. The Company exchanged 69,200 shares of its Common Stock,
138,400 warrants and $5,000 cash for the common stock of Intelock and
exchanged an additional 150,000 shares of the Company's Common Stock for
molds integral to the manufacturing process which were held by a company
affiliated to the previous owner. Intelock's results from operations
subsequent to June 30, 1995 are included in the Company's consolidated
financial statements.
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Effective July 31, 1995, the Company acquired all of the stock of
Alabaster Industries, Inc. ("Alabaster"). Alabaster is an Alabama company
specializing in the manufacture of injection molded plastics products for the
housewares industry with a distribution network of national retailers. The
Company's total purchase consideration was 400,000 shares of the Company's
Common Stock. The sum of $4.8 million was paid in cash to satisfy certain
debt instruments of Alabaster held by a regional bank. The Company issued
and sold shares of Class D Convertible Preferred Stock pursuant to an
exemption from registration pursuant to Regulation "S" of the Securities Act
of 1933 (the "Act") to fund the cash portions of the acquisition. Liabilities
of Alabaster assumed by the Company were $4.1 million. Alabaster's results
from operations subsequent to July 31, 1995 are included in the Company's
consolidated financial statements.
Effective September 30, 1995, the Company acquired the outstanding common
stock of ACPI through a cash tender offer. On that date, employment
agreements were executed with principals who controlled 51% of ACPI's
outstanding shares, and agreements to purchase certain real estate occupied
by ACPI were obtained. The Company's total purchase consideration was $14.2
million in cash. The Company entered into an agreement with related parties
of ACPI to acquire facilities occupied by ACPI and its operating subsidiary,
Boss Manufacturing, Inc. ("Boss Manufacturing"), for approximately $7.0
million, consisting of a cash payment of approximately $2.7 million and
assumptions of liabilities of approximately $4.3 million to be made on or
before June 28, 1996. ACPI manufactures and distributes consumer hardware
products, including key blanks, key related accessories, knives, letters,
numbers and signs, driveway markers, snow shovels and pet products, as well
as gloves and other items through its Boss Manufacturing subsidiary, which
are sold by ACPI's national field sales force to hardware, mass merchandise,
and Do-It-Yourself retailers across the United States. The Company issued and
sold shares of Class C and D Convertible Preferred Stock pursuant to an
exemption from registration pursuant to Regulation "S" of the Act to fund the
cash portion of the purchase price for the stock of ACPI. ACPI's results from
operations subsequent to September 30, 1995 are included in the Company's
consolidated financial statements.
In May 1996, ACPI sold the inventory, tooling and other supplies of a
product line for $1.1 million in cash. The sale resulted in a gain of
$472,000.
On August 23, 1996, the Company sold substantially all of the assets of
its subsidiary, FSPI. The consideration for the sale consisted of $1.8
million in cash a $100,000 note and assumption by the purchaser of $2.7
million in trade accounts payable. The Company applied the cash portion of
the consideration toward its working capital requirements. The sale resulted
in a loss of approximately $9 million by the Company.
In September, 1996, the Company closed operations of its Intelock
subsidiary due to its continued unprofitability and a lack of working
capital. The resulting charge to earnings was approximately $660,000
representing a write down of assets to net realizable value. In April 1997,
the Company sold all of its stock in Intelock. (See Part II, Item 7
"Significant Subsequent Events")
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Marketing
The Company markets its product lines directly through its own sales
force to major retail stores and through distributors and manufacturer
representatives. Products are primarily purchased from the Company by
businesses located in the United States, including mass merchandising stores,
supermarkets, hardware stores, drug and variety stores, and other retail
outlets and by wholesalers who resell to such retailers. The Company's
products are also marketed outside the United States in Canada.
Product Development
Through its wholly-owned subsidiary, ACPI, the Company maintains an
engineering and development department to conduct research activities
relating to the improvement of existing products and the development of new
products.
ACPI's technical, marketing, and manufacturing staff are responsible for
the development of a computerized key duplication machine. The machine is
designed to minimize operator training and common mistakes that lead to
mis-cut keys. The machine uses a digital CCD camera to scan the original key
to determine the appropriate blank to use and also digitizes the combination
cut into the key. The machine instructs the operator to select the
appropriate key blank and insert it into the machine. The machine then
aligns, grips, and cuts the key automatically. This machine is intended to
be deployed in stores where a high volume of keys are sold and minimizing
operator training is an issue. Development of the machine continued
throughout 1996, and is expected to continue through July 1997.
Raw Material
The Company expects to have multiple sources of supply for substantially
all of its material requirements. The raw materials and various purchased
components required for its products have generally been available in
sufficient quantities.
Patents
The Company holds a number of patents on various inventions and has
several patents pending, but the overall business is not dependent upon any
single patent or group of patents.
Competition
The Company competes with a number of well-established domestic and
foreign manufacturers that serve the markets for its products. Many of the
Company's products also compete against a number of substitute products.
Although the available information does not permit the Company to form a
reliable opinion as to its precise competitive position within these markets,
the Company believes it has a significant share in many of the markets for
some of its products.
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Regulation
The Company is subject to federal, state and local regulations concerning
the environment, occupational safety and health, and consumer products
safety. The Company has not experienced significant difficulty in complying
with such regulations and compliance has not had a material adverse effect on
the Company's business. All of the Company's electric-powered products are
listed by Underwriters Laboratories, Inc., which is an independent,
not-for-profit corporation engaged in the testing of products for compliance
with certain public safety standards.
Employees
The Company has approximately 1,375 full-time associates including 190
salaried personnel. Hourly associates are represented by a labor
organizations under collective bargaining agreements at the Company's ACPI,
Boss Manufacturing, and Alabaster facilities.
Executive Officers of the Registrant
The following is a list of the names and ages of all the executive
officers of the registrant and principal subsidiaries as of December 28, 1996
indicating all positions and offices with the registrant held by each such
person, and each such persons' principal occupations or employment during the
past five years.
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THE REGISTRANT
<TABLE>
<CAPTION>
POSITIONS AND OFFICES HELD AND
PRINCIPAL OCCUPATIONS OR EMPLOYMENT DURING
NAME AGE PAST 5 YEARS
- --------------------------------------------- ------------------- ---------------------------------------------
<S> <C> <C>
G. Louis Graziadio III 47 Chairman of the Board and Chief Executive
Officer since June 1996.He is also the
Chairman and CEO of Ginarra Holdings, Inc., a
holding company with investments through
various corporations, and a director of
Imperial Credit Industries, Inc., Imperial
Bancorp, Imperial Trust, Imperial Financial
Group and Lynx Golf, Inc. (1)
SUBSIDIARIES
Stephan Cole 49 Chief Executive Officer, ACPI Subsidiary (2)
Richard Bern 49 President, ACPI Subsidiary (2)
Daniel Norris 39 President, Alabaster Subsidiary
</TABLE>
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(1) On June 6, 1996, the duties of Chairman of the Board and Chief Executive
Officer were assumed by G. Louis Graziadio, III, who, as of the date of
this Report, is the only executive officer of the Company.
(2) Messrs. Bern and Cole terminated their employment agreements and resigned
their positions effective May 7, 1997. Under their severance agreements,
they will continue with ACPI in consulting capacities through the end of
1997. Mr. Ken Fristad, the current President of ACPI's subsidiary, Boss
Manufacturing, Inc., assumed their duties effective May 7, 1997.
ITEM 2. PROPERTIES
The following table shows the location, general character, square
footage, annual rent and lease expiration date of the principal operating
facilities owned or leased by the Company as of December 28, 1996. The
executive offices are located in Marietta, Georgia, which is a leased
facility occupying approximately 4,800 square feet. The Company considers its
properties to be in generally good condition and well-maintained, and are
generally suitable and adequate to carry on the Company's business.
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<TABLE>
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GENERAL SQUARE ANNUAL LEASE
LOCATION CITY CHARACTER FEET RENT EXPIRATION
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<S> <C> <C> <C> <C> <C>
Alabama Alabaster Manufacturing and 162,300 n/a owned
Administrative Office
Alabama Greenville Manufacturing 86,000 n/a owned
Alabama Monroeville Manufacturing 5,000 $ 3,600 month-to-month
Arizona Phoenix Manufacturing 68,600 $179,172 05/14/98
Br.Columbia, Vancouver Manufacturing 6,000 $ 14,400 unknown
Canada
Florida Hollywood Manufacturing 15,000 $ 90,000 12/31/98
Georgia Marietta Administrative Office 4,800 $ 28,800 month-to-month
Illinois Kewanee Manufacturing and 50,400 n/a owned
Administrative Office
Illinois Springfield Manufacturing 80,000 $159,500 06/30/99
Mexico Juarez Manufacturing 35,400 n/a owned
Minnesota Burnsville Manufacturing 9,070 $ 38,448 09/30/98
Ohio Solon Manufacturing 202,000 n/a owned
Ontario, Concord Manufacturing 18,400 $ 62,560 month-to-month
Canada
Texas El Paso Manufacturing 1,770 $ 11,664 02/28/96
Washington Kent Warehouse 25,000 $ 66,000 month-to-month
</TABLE>
ITEM 3. LEGAL PROCEEDINGS.
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The Corporation is involved in various lawsuits in the ordinary course of
business. These lawsuits primarily involve claims for damages arising out of
commercial disputes.
During the period from April 1, 1996 through June 30, 1996, the Company,
together with certain former officers, former directors and third parties,
was named as a defendant in seventeen (17) class action lawsuits filed by
persons and entities who purchased the common stock and warrants of the
Company during the period of November 11, 1994 through and including April
15, 1996, in the United States District Court for the Northern District of
Georgia. On July 9, 1996, the District Court ordered that the Complaints be
consolidated for all purposes. On July 23, 1996, plaintiffs filed a
consolidated class action complaint ("Complaint") alleging violations of
Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5
promulgated thereunder, and an
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additional claim under Georgia common law for alleged negligent
misrepresentations. The Complaint named as defendants the Company: Richard P.
Smyth ("Smyth"), the former Chairman of the Board and Chief Executive Officer
of the Company; Arnold E. Johns ("Johns"), formerly President and a director
of the Company; Roemmich & Seymour, PC ("R&S"), the Company's former outside
auditor; and the principals of R&S, Roger Roemmich ("Roemmich") and J. Allen
Seymour ("Seymour").
The Complaint alleged that throughout the period from November 11, 1994
through April 15, 1996, the Company issued materially false and misleading
financial statements that caused the market price of the Company's securities
to trade at artificially inflated prices.
On August 29, 1996, the District Court certified plaintiffs as
representatives of a class of all persons who purchased the Company's common
stock and/or warrants during the period from October 24, 1994 through June 8,
1996 (the "Class") except the defendants, all former officers and former
directors and employees of the Company, all underwriters of the Company's
initial public offering, members of the immediate families of each of the
foregoing and any person, firm, trust, corporation, officer, director or
other individual or entity in which any of the defendants has a controlling
interest or which is related to or affiliated with any of the defendants, and
the legal representatives, heirs, successors-in-interest or assigns of the
Class as well as all individuals or entities who acquired Vista common stock
and/or warrants through Vista's employee profit sharing, retirement, benefit
or incentive program. Current officers and directors are not excluded from
the Class, so long as they meet the requirements for participation.
On March 14, 1997, a settlement was confirmed by the entry of a Final
Judgment and Order of Dismissal with Prejudice. The settlement provides,
among other things, that the Company will issue shares of its common stock
(and provide certain anti-dilution protection) to the plaintiffs and the
Class in order to convey ownership of 40% of the Company's common stock. In
addition, the settlement provides that additional common shares will be
issued to the Class to maintain its 40% ownership interest in the Company if
the Company's outstanding convertible preferred stock is converted to common
stock at less than $1.35 per common share for the Series C preferred or $1.19
per common share for the Series A and D preferred. Furthermore, additional
shares will also be issued, if the Company's management is issued common
stock through the Company's stock option plan, resulting in management
acquiring more than 20% of the common stock of the Company. The number of
shares to be issued under the terms of this settlement is approximately
14,226,000 The Company's insurance carrier also contributed $300,000 to the
settlement. The settlement is in satisfaction of all claims of the Class.
The SEC notified the Company in April 1996 that it had commenced an
informal investigation of the Company. The status of the investigation was
changed to a formal private investigation in January, 1997. The Company has
responded to the SEC's request for information and will continue to cooperate
with the SEC in this matter. Independently, the Company through its Audit
Committee has conducted an internal investigation of the facts and
circumstances surrounding the investigation. (See Item 1 - "Business--
Current Developments".)
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
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There were no matters submitted to a vote of security holders during the year
ended December 28, 1996, as neither an annual meeting was held nor a proxy
statement issued during 1996.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
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The Company's common stock (symbol: VISTE) was traded on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") until
May 31, 1996, when the Company's stock was delisted. (See Item
1--"Business-Current Developments") The following table sets forth the range
of high and low bid prices for the Company's Common Stock as quoted by
NASDAQ. These quotations represent prices between dealers in securities, do
not include retail mark-ups, mark-downs or commissions and do not necessarily
represent actual transactions.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FISCAL YEAR ENDED OCTOBER 25, 1994 THRU
DECEMBER 28, 1996(1) DECEMBER 30, 1995 DECEMBER 31, 1994
QUARTER HIGH BID LOW BID HIGH BID LOW BID HIGH BID LOW BID
- -------------------------------------- ----------- ----------- ----------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
First................................. 14-7/8 8-1/2 2-5/8 1-1/2 N/A
Second(2)............................. 10-1/8 1-7/16 6-9/32 1-15/16 N/A
Third................................. N/A 7-3/8 5-3/16 N/A
Fourth................................ N/A 10-1/2 4-5/8 3-15/16 2-1/2
</TABLE>
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(1) On December 28, 1996 there were in excess of 1000 record holders of the
Company's common stock. Holders of Common Stock are entitled to dividends
when, as, and if declared by the Board of Directors out of funds legally
available therefore. The Company has not paid any cash dividends on its
Common Stock and, for the immediate future, intends to retain earnings, if
any, to finance the development and expansion of its business.
(2) Represents market prices second quarter through May 31, 1996, the date the
stock was delisted.
ITEM 6. SELECTED FINANCIAL DATA.
The selected consolidated financial data of the Company shown below for
the four year and three month period ended December 28, 1996 are derived from
the consolidated financial statements of the Company. The information set
forth below is qualified in its entirety by the more detailed financial
statements and notes thereto included elsewhere herein together with the
reports issued by the independent certified public accounts. The following
table should be read in conjunction with Management's Discussion and Analysis
of Results of Operations and Financial Condition and the Company's audited
Consolidated Financial Statements and Notes thereto appearing elsewhere
herein.
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<TABLE>
<CAPTION>
CONSOLIDATED 3
BALANCE SHEET YEAR YEAR MONTHS YEAR YEAR
DATA (AS OF ENDED ENDED ENDED ENDED ENDED
PERIOD END) 12/28/96 12/30/95 12/31/94 9/30/94 9/30/93
- ------------------------------------------ ------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
(AMOUNTS IN THOUSANDS EXCEPT SHARES AND PER SHARE DATA)
-------------------------------------------------------------------------
Working capital (deficit)................. $ 30,587 $ 30,393 $ (212) $ (3,235) $ (566)
Total assets.............................. 61,771 65,311 1,597 1,430 1,583
Long-term debt, including current......... 24,302 23,636 695 1,036 761
Stockholders' equity (deficit)............ 24,161 21,125 (9) (3,178) (817)
Consolidated Statement of Operations Data
Net sales................................. $ 110,955 $ 32,422 $ 1 $ 137 $ 745
Cost of sales............................. 82,563 28,244 26 314 593
Gross profit (loss)....................... 28,392 4,178 (25) (177) 152
Operating expenses........................ 34,235 17,318 858 1,721 2,448
Loss from Asset........................... (10,787) -- -- -- --
Sales/Writedowns
Loss from disposed business............... -- (1,147) -- -- --
Operating loss............................ (16,630) (14,287) (883) (1,898) (2,296)
Interest expense.......................... (2,174) (649) (143) (266) (231)
Other income (expense).................... (351) 273 4 45 --
Net loss before Income Taxes.............. (19,155) (14,663) (1,022) (2,119) (2,527)
Income Tax Expense........................ (246) -- -- -- --
Net loss.................................. $ (19,401) $(14,663) $ (1,022) $ (2,119) $ (2,527)
Loss per share............................ $ (1.20) $ (2.33) $ (0.36) $ (0.99) $ (1.28)
Weighted average shares outstanding....... $ 16,133,508 6,294,361 2,813,293 2,131,226 1,970,706
</TABLE>
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Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
OVERVIEW
The Company reported a net loss of $19.4 million or a $1.20 loss per
share for the year ended December 28, 1996 compared to a net loss of $14.7
million or $2.33 loss per share for the year ended December 1995 compared to
net loss of $1.0 million or $.36 loss per share for the three month period
ended December 31, 1994 and net loss of $2.1 million or $.99 loss per share
for the year ended September 30, 1994.
The 1996 loss is primarily attributable to substantial losses on the sale
of the assets of FSPI and write-down of the assets of Alabaster and Intelock.
In addition, high general overhead costs were incurred in the operation of
the Company's corporate offices. The Company's substantial growth as
discussed below resulted from two significant acquisitions during 1995. The
loss for the year ended December 30, 1995 was primarily attributable to
acquisition and reorganization costs, inventory liquidations below normal
selling prices, production start-up costs, related material and manufacturing
costs, and high general overhead costs. The loss for the three month period
ended December 31, 1994 is primarily due to low levels of business
operations. The loss for the year ended September 30, 1994 is primarily due
to low levels of business operations during the time when Vista was actively
pursuing an initial public offering.
RESTATEMENT OF FINANCIAL STATEMENTS OF PRIOR PERIODS
Financial Statements for the Year ended September 30, 1994
The audited financial statements previously issued for the year ended
September 30, 1994 have been restated to reflect two prior period accounting
adjustments. First, previously recognized revenue from the sale of an
exclusive license agreement for one of the Company's products, consideration
for which was substantially in the form of a $1.2 million note receivable,
has been reversed as a result of a 1996 investigation initiated by the Audit
Committee of the Board of Directors. Second, $635,000 of previously
reported sales have been reversed also as a result of the Audit Committee
investigation referred to above. The effects of these two prior period
adjustments on operations results in a reduction of revenue, an increase in
net loss and an increase in accumulated deficit all in the amount of $1.8
million.
Quarterly Reports filed on Forms 10-Q
The unaudited interim financial statements filed on Forms 10-Q for the
quarters ended December 31, 1994, March 31, 1995, June 30, 1995 and September
30, 1995 have been amended. These amendments were necessary to properly
reflect certain year-end 1995 adjustments, correct accounting errors
determined as a result of the audit of the December 30, 1995 financial
statements,
13
<PAGE>
and record the prior period accounting adjustments referred to above related
to the September 30, 1994 financial statements. The individual quarterly
effects of the adjustments for the respective comparative quarters have been
reported in the Company's Forms 10-Q for the quarters ending March 30, 1996,
June 29, 1996 and September 28, 1996, which were filed on May 1, 1997.
Descriptions of the nature of these adjustments are as follows:
- The effective date of the acquisition of PMI by Vista was not
October 31, 1994 as previously reported but instead, May 1, 1995,
immediately prior to the closing date of the acquisition in May
of 1995.
- The effective date of the acquisition of Alabaster by Vista was not
May 1, 1995 as previously reported but instead, the closing date of
the acquisition was on July 31, 1995.
- The effective date of the acquisition of ACPI by Vista was not
August 31, 1995 as previously reported but instead, September 30, 1995,
subsequent to the initiation of the tender offer through which Vista
achieved majority ownership and control of ACPI.
- Inventory costing adjustments necessary to properly state year-end FSPI
inventories, in large part, related to the previously reported
quarterly results. During prior quarters cost of goods sold for FSPI
was artificially computed to be approximately 52% of net sales. Upon
examination of the actual costs of products sold by FSPI it was
determined that costs as a percentage of net sales was much higher
than the 52% factor used in computing the quarterly gross profit
amounts.
- Accruals for various stock-based compensation costs were not recorded
in the quarterly results.
RESULTS OF OPERATIONS
Consolidated
Net sales were $111.0 million for the year ended December 28, 1996
compared to $32.4 million for the year ended December 30, 1995. The increase
is primarily a result of the inclusion of a full year's operating results of
ACPI and Alabaster, both of which were acquired during 1995.
Gross profit was $28.4 million for the year ended December 28, 1996
compared to $4.2 million for the year ended December 30, 1995. The increase
is primarily a result of the acquisitions of ACPI and Alabaster during 1995.
Gross profit was 25.6% of net sales for the year ended December 20, 1996
compared to 12.9% of net sales for the year ended December 30, 1995. Gross
profit in 1996 improved as a result of having a full year's results for ACPI
versus three months in 1995, substantially mitigating gross profit losses at
FSPI.
Operating expenses were $34.2 million for the year ended December 28,
1996 compared to $17.3 million for the year ended December 30, 1995. The
increase is primarily a result of the acquisitions of ACPI and Alabaster, and
growth of parent company operations at Vista. Operating
14
<PAGE>
expenses were 30.8% of net sales for the year ended December 28, 1996
compared to 53.4% of net sales for the year ended December 30, 1995.
Net loss for the year ended December 28, 1996 was $19.4 million compared to
$14.7 million for the year ended December 30, 1995.
Separate Company Analysis
Following is an analysis of results of operations on a separate company
basis using financial data included in the consolidated financial statements.
Vista and FSPI (combined)
Sales were $2.9 million for the year ended December 28, 1996, compared to
$2.0 million for the year ended December 30, 1995, $1,000 for the three month
period ended December 31, 1994 and $137,000 for the year ended September 30,
1994. The increase in sales in 1996 is due to 1996 consisting of eight
months of sales of gas detection devices while 1995 represented only three
months of these sales. The increase in sales in 1995 compared to the prior
periods is due to introduction of FSPI home safety and security products
during 1995. These include home gas detection devices, home security devices
and other related products.
Gross profit (loss) was $(764,000) or (26.2%) for the year ended December
28, 1996, $(3.15) million or (157.5%) for the year ended December 30, 1995,
$(25,000) for the three month period ended December 31,1994 and $(177,000)
for the year ended September 30, 1994. The 1996 loss is due to a number of
factors, the most significant of which are:
- Excessive production costs related to gas detection products primarily
caused by product rework, excessive direct labor costs, high indirect
labor and engineering costs and high manufacturing overhead costs.
- Shrinkage caused by loss of control over costs and quantities of
physical inventories, primarily manufactured goods.
The losses for the three months ended December 31, 1994 and the year
ended September 30, 1994 are primarily due to the early stage of the Company,
low volume and high overhead costs.
Operating expenses were $9.2 million for the year ended December 28, 1996
compared to $9.7 million for the year ended December 30, 1995, $858,000 for
the three months ended December 31, 1994 and $1.7 million for the year ended
September 30, 1994. Operating expenses during 1996 decreased primarily as a
result of reduction in staffing at the Company's corporate office. The
increase in operating expenses during 1995 was due to higher sales volumes,
increased marketing and promotional costs, increased research and development
costs, costs associated with start-up of full production operations for gas
detection devices at FSPI, growth of parent company operations including
executive and management staff at the parent company, equity based
compensation awards
15
<PAGE>
at the parent company, and other less individually significant items.
Operating expenses were 324% of net sales for the year ended December 28,
1996 compared to 485% of net sales for the year ended December 30, 1995.
Net loss was $19.0 million, $13.7 million, $1.0 million and $2.1 million
for the year ended December 28, 1996, the year ended December 30, 1995, the
three months ended December 31, 1994 and the year ended September 30, 1994,
respectively. The net loss for 1996 includes a $8.8 million loss on the sale
of substantially all of the operating assets of FSPI.
Intelock
Sales were $262,000 for the year ended December 28, 1996 compared to
$480,000 for the period from June 30, 1995 (acquisition date) to December 30,
1995. Sales in 1996 were reduced as the Intelock operations wound down and
eventually ceased operating in the third quarter of 1996. Sales volumes in
1995 were lower than anticipated due to product quality and reliability
problems resulting in significant returns and customer credits.
Gross profit (loss) was $(32,000) or (12.2%) of sales for the year ended
December 28, 1996 compared to ($6,000) or (1.2%) for the period from June
30, 1995 (acquisition date) to December 30, 1995. The loss is primarily due
to low volume levels, product returns, excessive customer credits and
allowances related to product quality issues and inventory obsolescence
reserves.
Operating expenses were $207,000 for the year ended December 28, 1996
compared to $537,000 for the period from June 30, 1995 (acquisition date) to
December 30, 1995. Decreased operating expenses were primarily due to the
winding down of Intelock operations.
Net loss was $896,000 for the year ending December 28, 1996, compared to
$543,000 for the period from June 30, 1995 (acquisition date) to December 30,
1995. The 1996 loss includes a loss of $659,000 on writing down assets to net
realizable value.
Alabaster
Sales were $8.9 million for the year ended December 28, 1996 compared to
$3.9 million for the period from July 31, 1995 (acquisition date) to December
30, 1995.
Gross profit was $723,000 or 8.1% of net sales for the year ended
December 28, 1996 compared to $142,000 or 3.6% for the period from July 31,
1995 (acquisition date) to December 30, 1995. Gross profit in 1995 was
negatively impacted by liquidations of excess and slow moving inventory which
were not in accordance with management's sales and distribution strategies.
Additionally, inventory costs in 1995 were high due to low manufacturing
capacity utilization during the period. 1995 gross profit was also impaired
due to valuation reserves necessary to absorb losses sustained from
additional liquidations of 1995 year-end inventories during the first quarter
of 1996.
16
<PAGE>
Operating expenses were $2.3 million for the year ended December 28, 1996
compared to $1.2 million for the period from July 31, 1995 (acquisition date)
to December 30, 1995. Operating expenses were 25.6% of net sales for the
year ended December 28, 1996 compared to 30.8% of net sales for the period
from July 31, 1995 (acquisition date) to December 30, 1995. Operating
expense decrease was achieved primarily through reductions in administrative
staffing.
Net loss was $3.6 million for the year ended December 28, 1996 compared
to $1.1 million for the period from July 31, 1995 (acquisition date) to
December 30, 1995. The 1996 loss included a loss of $1.8 million on the write
down of assets to net realizable value.
ACPI
Sales for the year ended December 28, 1996 were $100 million compared to
$105 million for the year ended December 30, 1995 (including amounts which
are not included in the consolidated financial statements of Vista 2000,
Inc.) Sales were $26.0 million for the period from September 30, 1995
(acquisition date) to December 30, 1995. The decline in sales was primarily
attributable to a reduction in sales of the KA-BAR product line and the loss
of one half of Wal-Mart's key business. The loss of the Wal-Mart key
business was due to the introduction by an ACPI competitor of improved key
identification and cutting technology. In an effort to meet this competitive
challenge, ACPI has developed a computerized key duplication machine (see
Item 1 - Business - Product Development).
Gross profit for the year ended December 28, 1996 was $28.5 million or
28.4% compared to $26.9 million or 25.6% for the year ended December 30, 1995
(including amounts which are not included in the consolidated financial
statements of Vista 2000, Inc.) Gross profit was $7.2 million or 27.6% for
the period from September 30, 1995 (acquisition date) to December 30, 1995.
Operating expenses were $22.7 million for the year ended December 28,
1996 compared to $25 million for the year ended December 30, 1995 (including
amounts which were not included in the consolidated financial statements for
Vista 2000, Inc.) Operating expenses were $6.0 million for the period from
September 30, 1995 (acquisitions date) to December 30, 1995. Operating
expenses were 22.6% and 23.8% of net sales for the years ended December 28,
1996 and December 30, 1995 respectively. Operating expenses for the period
September 30, 1995 to December 30, 1995 were 23.1% of net sales. Operating
expenses for the year ended December 28, 1996 were favorably affected by
certain purchase accounting adjustments, primarily those related to valuation
of long-term assets, which result in significant decrease in annual
depreciation on existing assets. Operating results were also favorably
affected by reductions in operating cost from fewer employees in 1996, saving
$750,000.
Pretax income (loss) was $4.2 million for the year ended December 28,
1996 and ($774,000) for the year ended December 30, 1995 (including amounts
which were not included in the consolidated financial statements of Vista
2000, Inc.) Pre-tax income for the period from September 30, 1995
(acquisition date) to December 30, 1995 was $620,000.
17
<PAGE>
FINANCIAL CONDITION
Consolidated
Consolidated working capital at December 28, 1996 was $30.6 million
exclusive of the $20.4 million ACPI revolver debt which matures in April
1997. The ACPI credit facility was replaced in May 1997. The new loan
agreement expires in May, 2000.
During 1996, Vista raised approximately $21.2 million, net of issuance
costs, through convertible preferred stock offerings and common stock
offerings issued pursuant to the exemption from registration of Regulation S
under the Act. The proceeds of these offerings were used to fund operating
losses and working capital requirements.
Regarding the use of the Company's income tax loss carryforward, the
Company has experienced a change in control, as defined under Section 382 of
the Internal Revenue Service Code, during 1995 and 1996. Additionally,
management expects another change in control to occur during 1997 upon
issuance of the common stock in settlement of the class action lawsuit
described in Part I, Item 3. As a result, the utilization of a significant
portion of the tax loss carryforwards will be limited on an annual basis and
could expire unused.
Separate Company Analysis
ACPI
$30.0 million of consolidated working capital is from ACPI. As of
December 28, 1996, ACPI had $8.5 million available under its $28.9 million
revolving line of credit. Borrowings under the line of credit are based on a
formula which includes eligible accounts receivable and inventories. The
line of credit bears interest at the base rate plus 3/8% (8.625% at December
28, 1996) and is collateralized by accounts receivable, inventories and
equipment and is guaranteed by each of ACPI's subsidiaries. The ACPI
revolving credit facility does not provide for intercompany advances to
non-ACPI Vista affiliates other than for payment of dividends and trading
transactions occurring through the normal course of business.
The existing line of credit was replaced on May 7, 1997 with a new line
of credit in the total amount of $30 million. The line bears interest at the
prime rate plus .5% or LIBOR plus 2.5% and is collateralized by accounts
receivable, inventory, equipment and real estate. Borrowings under the line
of credit are based on a formula which includes eligible accounts receivable
and inventories. The revolving credit facility provides for intercompany
advances to non-ACPI Vista affiliates based upon a percentage of excess cash
flow as defined in the credit agreement.
18
<PAGE>
Alabaster
Working capital at Alabaster at December 28, 1996 was $500,000. In
September 1996, Alabaster entered into a revolving credit and demand loan
agreement. The amount of the credit is $2.5 million. As of December 28,
1996, availability under the credit agreement was $1.25 million of which
$908,000 had been borrowed. Interest is at the greater of 9% or prime plus
3-1/4%. The agreement is secured by substantially all of the assets of
Alabaster and is guaranteed by Vista. The agreement expires September, 1998.
Parent Company, FSPI and Intelock ("Vista Group")
Working capital at the Vista Group at December 28, 1996 was $100,000.
Due to the sale of FSPI assets and the closing and sale of Intelock, their
cash requirements are minimal. The staffing costs and overhead of the parent
company have been substantially reduced. Working capital for the Vista Group
is derived primarily through dividends and cost reimbursements from ACPI for
expenses advanced or paid on behalf of ACPI.
SIGNIFICANT SUBSEQUENT EVENTS
Litigation
On March 14, 1997, a settlement was confirmed by the entry of a Final
Judgment and Order of Dismissal with Prejudice. The settlement provides,
among other things, that the Company will issue shares of its common stock
(and provide certain anti-dilution protection) to the plaintiffs and the
Class in order to convey ownership of 40% of the Company's common stock. In
addition, the settlement provides that additional common shares will be
issued to the Class to maintain its 40% ownership interest in the Company if
the Company's outstanding convertible preferred stock is converted to common
stock at less than $1.35 per common share for the Series C preferred or $1.19
per common share for the Series A and D preferred, or, if the Company's
management is issued more than 20% of the common stock of the Company
pursuant to the grant of stock options. The number of shares to be issued
under the terms of this settlement is approximately 14,226,000 The Company's
insurance carrier also contributed $300,000 to the settlement. The
settlement is in satisfaction of all claims of the Class.
On May 6, 1997, the Company issued approximately 14,226,000 shares of its
common stock to the attorneys on behalf of the class, thereby fulfilling the
Company's obligation to convey the 40% ownership in the Company to the Class.
The SEC notified the Company in April 1996 that it had commenced an
informal investigation of the Company. The status of the investigation was
changed to a formal private investigation in January, 1997. The Company has
responded to the SEC's request for information and will continue to cooperate
with the SEC in this matter. Independently, the Company through
19
<PAGE>
its Audit Committee has conducted an internal investigation of the facts and
circumstances surrounding the investigation. (See Item 1 -- "Business --
Current Developments".)
Effects on Liquidity
Due to the combination of operating losses, significant 1996 cash
investments in inventories and capital assets, significant legal and
accounting expenses, the short-term and long-term liquidity positions of the
Company are being managed very closely. Management is also considering
means other than through operations by which financing can be obtained, which
could include, among other things, sales or dispositions of assets. No
assurance can be given that these actions will be successful.
Business Sale
On April 18, 1997, the Company sold all of its 94% interest in Intelock's
common stock to a company managed by a minority (4.2%) shareholder of
Intelock, who was an officer and director of Intelock, prior to the purchase
of Intelock by the Company in 1995. Proceeds from the sale were $5,000 and a
$95,000 promissory note. In deciding to sell Intelock, the Company's
management considered claims made by minority (6.3%) shareholders of
Intelock, regarding alleged false representations made by former officers and
directors of the Company during its purchase of Intelock and alleged
mismanagement of Intelock's assets, by the same former officers and
directors, following the purchase. These minority shareholder claims have
been withdrawn since the sale of Intelock by the Company. This sale will not
have a material impact on the Company's 1997 operating results since the net
operating assets of Intelock were written off during the third quarter of the
1996 fiscal year.
On June 19, 1997, the Company sold all of the stock of Alabaster for
$2,000,000. Payment consisted of $500,000 cash and a $1,500,000 note
receivable, secured by a first mortgage on the land and buildings which
comprise Alabaster's manufacturing, sales and administrative operations. The
Company will record an additional loss of approximately ($1,600,000) on the
sale in 1997. During the year ended December 28, 1996, the Company recorded
losses of approximately ($3,600,000) related to Alabaster as a result of
operating losses and asset write downs. Alabaster represented approximately
8% of the Company's consolidated sales for the year ended December 28, 1996.
Asset Sale Agreement
On June 30, 1997, the Company entered into an agreement to sell certain
assets of ACPI. These assets comprise primarily ACPI's key, key-making
machine, letters, numbers and signs manufacturing, certain real estate and
related businesses. The Company will retain Boss Manufacturing, Inc., Boss
Balloon, Inc. and the ACPI Warren Pet Division. The business assets being
sold accounted for approximately $57,000,000 or 51% of the Company's
consolidated sales for the year ended December 28, 1996. The closing of the
sale is not expected until August or September of 1997, pending regulatory
approval.
20
<PAGE>
Employment Agreements
On April 15, 1997, employment agreements with two officers of ACPI were
replaced with severance agreements. The severance agreements provide for
minimum annual payments of $169,000 each through 1997. The severance
agreements also provide for additional aggregate payments of up to $400,000
based upon the occurrence of certain events, as defined in the agreements.
Real Estate Purchase
On January 3, 1997, ACPI, through one of its wholly-owned subsidiaries,
purchased a manufacturing facility which had previously been leased by the
subsidiary from a corporation controlled by certain former officers of ACPI
for $1.2 million in cash and an assumption of a $842,000 mortgage note.
Stock Options
On December 31, 1996, the Company granted options to purchase 7,810,000
shares of common stock at an exercise price of $.03 per share to directors,
employees and consultants. The options were granted for prior and future
services. One half of the options are vested upon grant and the remaining
half vest on December 31, 1997. A compensation expense of $105,000 related to
these options was recognized during the year ended December 28, 1996. During
the second quarter of 1997, a total of 2,662,500 of these options were
exercised.
Convertible Preferred Stock
During the period from November 1996 through April 1997, the Company
engaged in negotiations with certain holders of various classes of the
Company's convertible preferred stock concerning a possible transaction in
which the Company would have repurchased and retired the preferred stock and
the holders of the preferred stock would have released the Company from all
purported claims by such holders against the Company, including claims
alleging fraudulent misrepresentation by the Company in the original issuance
of the preferred stock. However, the Company ultimately determined that such
a use of its resources would not be in its best interest and determined not
to accept the preferred shareholders' last offer. Thereafter, in May and
July 1997, in order to help the Company settle all claims by these preferred
shareholders, four of the Company's five directors, a consultant to the
Company and an unaffiliated third party (the "Individual Purchasers") agreed
to purchase shares held by such preferred shareholders on the same terms as
they, the preferred shareholders, had offered to the Company. The aggregate
number of shares of common stock issued to the Individual Purchasers upon the
conversion of such shares of preferred stock and issued by the Company in
consideration for the release of claims, was the same number of shares of the
Company's common stock originally offered to, but rejected by, the original
preferred shareholders. As a result, the Individual Purchasers acquired an
aggregate of 2,570 shares
21
<PAGE>
of the Company's Series C and D Convertible Preferred Stock for an aggregate
cash consideration of approximately $1 million and the preferred shareholders
granted to the Company the release described above. The shares of Series C
and D Convertible Preferred Stock acquired by the Individual Purchasers were
converted into an aggregate of 2,947,712 shares of the Company's common
stock. In addition, the Company issued an aggregate of 5,794,803 shares of
its common stock to the Individual Purchasers in consideration for obtaining
the release described above. The Company also agreed to issue additional
shares of its common stock to the Individual Purchasers and pay the same
consideration in the event that other holders of the Company's preferred
stock convert such preferred stock into the Company's common stock at a more
favorable conversion rate or receive additional consideration on a more
favorable basis than that provided to the Individual Purchasers.
Separately, the Company agreed to pay $175,000 and $2,500 in attorneys'
fees to one of the original preferred shareholders as additional
consideration for the release of the claims associated with their preferred
shares. The $175,000 will be paid on January 2, 1999 with the interest
accruing on such amount at 8% per annum, payable quarterly. The Company
obtained from the Individual Purchasers a waiver of their rights to also
receive additional consideration paid by the Company in the form of a Note as
referenced above.
Common Stock
The total number of authorized shares of the Company's common stock was
50,000,000 on August 15, 1997. At that time, there were 43,510,964 shares of
the Company's common stock issued and outstanding. The following schedule
projects the effect on outstanding common shares of an assumed exercise of
outstanding common stock options:
Common Stock Issued 43,852,305 (1)
Less Treasury Shares (341,341)
Stock Options 5,266,050
-------------
48,777,014 (2)
(1) Common stock issued includes approximately 8,890,000 shares relating
to the conversion of the Company's convertible preferred stock and
the release of claims of the owners of the Company's convertible
preferred stock.
(2) This total does not include the effect of the exercise of outstanding
common stock warrants which have exercise prices ranging from $2.00 to
$12.00 per common share with varying expiration dates up to October,
1999.
Item 8. Financial Statements and Supplemental Data.
The following consolidated financial statements of the Company and its
Accountants' Opinion set forth in Part IV, Item 14, of this Report:
22
<PAGE>
(i) Consolidated Statements of Operations, Cash Flows and
Shareholders' Equity for the year ended December 28, 1996 and
year ended December 30, 1995.
(ii) Consolidated Balance Sheet -- December 28, 1996 and December 30,
1995.
(iii) Notes to the Consolidated Financial Statements; and Unqualified
Opinion of Independent Accountants dated March 4, 1997.
Item 9. Changes in And Disagreements With Auditors on Accounting And
Financial Disclosures.
Not applicable.
23
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information as to directors of the registrant is set forth below. The
information as to the executive officers of the registrant is included in
Part I hereof under the caption "Executive Officers of the Registrant."
Directors are elected by the stockholders at each annual meeting and serve
until the next annual meeting of stockholders, or until their successors are
duly elected and qualified. At the present time, the Company's Board of
Directors consists of five directors. The following table sets forth certain
information concerning the members of the Board of Directors of the Company
at December 28, 1996:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
G. Louis Graziadio, III(1).............. 47 Chief Executive Officer and Chairman of the Board
since June 1996.He is also the Chairman and CEO of
Ginarra Holdings, Inc., a holding company with
investments through various corporations, and a
director of Imperial Credit Industries, Inc.,
Imperial Bancorp, Imperial Trust, Imperial Financial
Group and Lynx Golf, Inc.
Perry A. Lerner......................... 54 Director since June 1996.Mr. Lerner is a Managing
Director of Crown Capital Group, Inc., a New
York-based investment company. A graduate of Harvard
Law School and Claremont McKenna College,Mr. Lerner
was a partner of the law firm O'Melveny & Meyers from
1984-1996 and is a member of the State Bar of New
York, State Bar of California and American Bar
Association.Mr. Lerner also serves on the Board of
Directors of Imperial Credit Industries, Inc. and
Imperial Financial Group.
Lee E. Mikles(1)........................ 41 Director since June 1996. Mr. Mikles is Chairman of
Mikles/Miller Management, Inc.Prior to the formation
of that company, he headed Mikles/Miller Group, an
affiliate of Shearson Lehman Brothers after serving
as First Vice President of the Corporate Finance
Department at Bateman Eichler, Hill Richards Inc. and
as First Vice President with Drexel Burnham Lambert,
Inc. from 1981 through 1989.Mr. Mikles also serves on
the Board of Directors of Imperial Bancorp, Imperial
Bank, Imperial Ventures,Coastcast Corporation and
Imperial Financial Group.
Paul A. Novelly......................... 53 Director since June 1996.Mr. Novellycontrols Apex Oil
Company in St. Louis, MO with a refinery in Long
Beach, CA; International Dunraine, Ltd., a
publicly-held company; and AIC, Limited, which,
headquarteredin Bermuda, trades petroleum products
internationally through its office in Monaco.Mr.
Novelly is a substantial shareholder and director of
Intrawest Corp.He also serves on the Board of
Directors of Apex Oil Company, Inc. International
Dunraine, Ltd., Coastcast Corporation, Imperial Bank
and Imperial Financial Group.
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Richard D. Squires...................... 39 Director since June 1996.Mr. Squires serves as
President of RS Holdings, Inc., a Dallas, Texas based
real estate and high-yield investment company, and as
President of R3 Realty Corporation, formerlyPace
Membership Warehouse, Inc., a former subsidiary of
K-Mart Corporation.Mr. Squires has previously served
as Chief Financial Officer of Ft. Worth Holdings,
Inc. and Vice President of Finance at American Hotels
Corporation and Second Vice President of Finance at
Punta Gorda Isles, Inc. Mr. Squires has a B.S. in
Accounting from Pennsylvania State University, and a
Masters of Business Administration from Harvard
University.
</TABLE>
- ------------------------
(1) Mr. Graziadio and Mr. Mikles are first cousins; otherwise, there are no
family relationships existing between the officers and directors of the
Company.
ITEM 11. EXECUTIVE COMPENSATION.
COMPENSATION TABLES
The compensation paid in fiscal 1996 to the Company's Chief Executive
Officer and to each of the other executive officers and of the subsidiaries
whose total compensation exceeded $100,000 are as follows:
<TABLE>
<CAPTION>
1996 SUMMARY COMPENSATION TABLE
THE REGISTRANT
LONG-TERM COMPENSATION
----------------------
ANNUAL OTHER AWARDS PAYOUTS ALL
COMPENSATION ANNUAL ------ ------- OTHER
------------ COMPEN- RESTRICTED OPTIONS LTIP COMPEN-
NAME AND SALARY BONUSES SATION STOCK SARS PAYOUT SATION
PRINCIPAL POSITION YEAR ($) ($) ($) AWARDS (#) ($) ($)
- -------------------- ----------- ------------ ----------- ---------- ----------- ------------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
G. Louis 1996 -0- -0- -0- $138,000
Graziadio, III(1)
CEO and
Chairman of the
Board
Richard P. Smyth,(2) 1996 43,750 -0- 2,019,000(4)
CEO and 1995 134,100 -0- -0- 400,000
Chairman of the 1994 138,333 -0- -0-
Board
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
THE SUBSIDIARIES
LONG-TERM COMPENSATION
---------------------------------
ANNUAL OTHER AWARDS PAYOUTS ALL
NAME COMPENSATION ANNUAL ---------------------- --------- OTHER
AND ----------------- COMPEN- RESTRICTED OPTIONS LTIP COMPEN-
PRINCIPAL SALARY BONUS SATION STOCK SARS PAYOUT SATION
POSITION YEAR ($) ($) ($) AWARDS (#) ($) ($)
- --------------------------------------------- -------- -------- -------- -------- ----------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stephan Cole,(3) 1996 280,000 -0- 372,000 --
CEO, ACPI Sub-sidiary (b) and (c) 1995 277,000 -0- -0- 100,000
Richard Bern, 1996 275,000 -0- 372,000 --
President ACPI Subsidiary (a) and (b) 1995 262,150 -0- -0- 100,000
Daniel Norris, 1996 140,000 -0- -0- --
President Alabaster Subsidiary (a) and (b) 1995 140,000 -0- -0- 40,000
</TABLE>
- ------------------------
(1) On June 6, 1996, Mr. Graziadio was elected Chief Executive Officer by the
Board of Directors. Compensation for his services is as periodically
determined by the Board's Compensation Committee, based on the type and
extent of services Mr. Graziadio provided.
(2) On April 16, 1996, Mr. Smyth resigned as Chief Executive Officer and
Chairman of the Board.
(3) Amended Base Salary of $150,000 pursuant to Employment Contracts commencing
September 1, 1995. Bonus compensation during the term of the Employment
Agreement together with amended salaries will equal 1995 Compensation.
(4) Represents compensation calculated on exercise of 200,000 stock options in
February 1996. The shares issued were subsequently forfeited under the terms
of the class action settlement in March 1997.
(a) The Company may also pay the Executive discretionary annual bonus
compensation following any fiscal year in an amount determined by the Board
of Directors of the Company or Compensation Committee, if such Committee is
operating, in its sole discretion to be proper and appropriate based upon
such factors as the Board of Directors or Compensation Committee, as the
case may be, deems appropriate, including (I) the Executive's contributions
to the success of the business operations and the pre-tax profits of the
Company, as determined in accordance with generally accepted accounting
principles, (ii) the revenues of the Company for its fiscal year, and (iii)
the general overall performance of the Company for its fiscal year.
(b) The Executive may receive additional compensation ("Additional
Compensation") by participating in an annual bonus pool for executives of
the Company in an amount equal to ten percent (10%) of pre-tax profits of
the Company for each fiscal year during the term of the agreement. The
Executive's percentage shall be determined by the Board of Directors or the
Compensation Committee, if there is one.
(c) The Company may also provide to the Executive a bonus ("Bonus
Compensation") in an amount to be determined by the Board of Directors of
the Company, or its Compensation Committee, if one exists.
26
<PAGE>
There were no options granted to the Executive Officers of the Company
and its subsidiaries during the fiscal year ending December 28, 1996. The
Company has no stock appreciation rights ("SARs") outstanding.
The following sets forth the value of options exercised during the year
and unexercised options held by the named executive officers on December 28,
1996:
Aggregated Options/SAR Exercises in the last Fiscal Year and Fiscal Year-End
Option/SAR Values
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/ SARS AT OPTIONS/SARS AT FISCAL
FISCAL YEAR END (#) YEAR-END($)(5)
SHARES VALUE -------------------- ----------------------
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE ($) UNEXERCISABLE UNEXERCISABLE
- ----------------------------------- ----------- ------------ -------------------- ----------------------
<S> <C> <C> <C> <C>
G. Louis Graziadio III............. -- -- 0 / 0 0 / 0
Richard P. Smyth(1)................ 200,000 $ 2,019,000 0 / 0 0 / 0
</TABLE>
- ------------------------
(1) The indicated value is based on an exercise price of $1.28 per share and
market value per share of $11.375 on the date of exercise for 200,000
shares.
27
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of August 15, 1997, certain information
regarding the bene-ficial ownership of Common Stock by (i) each person known by
the Company to be beneficial owner of more than five percent of the outstanding
shares of Common Stock, (ii) each director; (iii) each Named Executive Officer
(as defined below); and (iv) all directors and executive officers as a group.
This table includes 14,226,111 shares issued in the Class Action Settlement
(referred to in Item 3), 1,242,500 currently exercisable options granted to
directors, employees and consultants of the Company on December 31, 1996, and
approximately 8,890,000 shares issued relating to the conversion of preferred
stock and claims release (referred to in Item 7.)
<TABLE>
<CAPTION>
COMMON STOCK BENEFICIALLY
OWNED
---------------------------
NO. OF
NAME AND ADDRESS OF BENEFICIAL OWNER (1) SHARES % OF CLASS
- --------------------------------------------------------------------------------------- ------------ -------------
<S> <C> <C>
Mr. G. Louis Graziadio, III (2)(4)(5)(7)............................................... 3,202,420 7.2%
2325 Palos Verdes Drive West, Suite 211
Palos Verdes Estates, CA 90274
Mr. Perry A. Lerner (3)................................................................ 262,500 0.6%
660 Madison Ave., New York, NY 10022
Mr. Lee E. Mikles (3)(4)(5)............................................................ 1,719,620 3.8%
Mikles/Miller Management, Inc.
100 Wilshire Blvd., Santa Monica, CA 90401
Mr. Paul A. Novelly (3)(4)(5).......................................................... 1,919,620 4.3%
8182 Maryland Ave., St. Louis, MO 63105
Mr. Richard D. Squires (3)(4)(5)....................................................... 1,719,620 3.8%
4229 Cochran Chapel, Dallas, TX 75209
All Directors and Executive Officers as a
Group(5 Persons)....................................................................... 8,823,780 19.7%
Ellison C. Morgan...................................................................... 2,835,488 6.3%
One Embarcadero Center, Suite 2830
San Francisco, CA 94111
Class Action Shareholders (6).......................................................... 14,426,111 32.2%
c/o Carr, Tabb & Pope, 1355 Peachtree St., NE
Suite 2000, Atlanta, GA 30309
Shyam H. Gidumal (2)(4)(5)............................................................. 2,657,120 5.9%
660 Madison Ave., New York, NY10022
</TABLE>
28
<PAGE>
(1) Unless otherwise noted, the Company believes that all persons
named in the table have sole voting and investment power with
respect to all shares of common stock beneficially owned by them.
Under the rules of the Securities and Exchange Commission, a person
is deemed to be a "beneficial" owner of securities if he or she has
or shares the power to vote or direct the voting of such securities
or the power to direct the disposition of such securities. A person
is deemed to be the beneficial owner of any securities of which that
person has the right to acquire beneficial ownership within 60 days.
More than one person may be deemed to be a beneficial owner of the
same securities.
(2) Includes options previously exercised to acquire 1,200,000
shares of Common Stock. Does not include options for 1,200,000
shares which are not exercisable within 60 days of the date of this
Form 10-K.
(3) Includes presently exercisable options to acquire 262,500 shares
of Common Stock, except for Mr. Squires who has previously exercised
and acquired his 262,500 shares of common stock. Does not include
options for 262,500 shares which are not exercisable within 60 days
of the date of this Form 10-K.
(4) Includes 316,215 shares issued to each of four directors as a
result of their conversion of preferred stock and 641,868 shares
issued to each of four directors for obtaining releases of claims
against the Company in connection with their purchase of certain
shares of the Company's convertible preferred stock referred to in
Item 7.
(5) Includes 175,070 shares issued to each of four directors as a
result of their conversion of preferred stock and 323,967 shares
issued to each of four directors for obtaining releases of claims
against the Company in connection with their purchase of certain
shares of the Company's convertible preferred stock referred to in
Item 7.
(6) Shares have been issued in trust for subsequent issuance to
members of the Class. To receive their shares, a Class member must
submit their claim to the trustee prior to May 29, 1997 and the
claim must be validated. While held in trust, these shares cannot
be voted. Distribution of shares is not expected to occur until
1998.
(7) Mr. Graziadio disclaims the beneficial ownership of
approximately 978,000 of these shares which are owned by Ginarra
Holdings, Inc. and an additional 499,000 shares which are owned by
the Graziadio Family Trust.
Item 13. Certain Relationships and Related Transactions.
On April 16, 1996, the Company entered into an agreement with Richard P.
Smyth ("Smyth") setting forth the terms and conditions concerning Smyth's
resignation as Chairman of the Board of Directors and Chief Executive Officer
of the Company, the repayment of certain funds previously advanced to Smyth
by the Company, security for the repayment of the advances and exercise of
outstanding options. Smyth had previously received options to purchase
200,000 shares of the Company's stock at the purchase price of $5 per share.
Smyth had 90 days from April 16, 1996 to exercise such options. The
underlying shares are also pledged as collateral for the repayment of Smyth's
indebtedness to the Company. On May 21, 1996, Smyth was advised by the
Company that it did not intend to indemnify him against matters currently
pending against him as required by the Bylaws of the Company. No releases
have been executed between the Company and Mr. Smyth. (See Item 3 - Legal
Proceedings.) On July 17, 1996, the Company filed a complaint against Mr.
Smyth in the Superior Court of Cobb County, State of Georgia, seeking damages
in the approximate
-29-
<PAGE>
amount of $1 Million. Also, on that date, the exercise period for the 200,000
options expired and the options were cancelled.
In July 1996, the Board of Directors contracted with a turnaround
management company, S. Gidumal & Company, Inc., and its affiliate, Strategic
Turnarounds & Investment Corp. (collectively "STIC"), to assist with the
restructuring of the Company, including operations, financing, litigation,
strategic planning and divestitures. Mr. Shyam Gidumal is a principal with
STIC and in September 1996 became a member of the Board of Directors of ACPI
and other subsidiaries of ACPI. STIC was involved in the resolution of the
Class Action Litigation, sale of the assets of FSPI and financings involving
ACPI and Alabaster. During 1996, STIC was paid approximately $308,000 for
its services. In addition, in December 1996, Mr. Gidumal was granted options
to acquire 2,400,000 shares of common stock of the Company at an exercise
price of $.03 per share. Of the options granted, 1,200,000 were immediately
exercisable, with the balance exercisable on December 31, 1997. STIC's
services continue to be engaged in 1997 and are compensated on a basis that
has been developed by the Company's Board of Directors, which includes a
fixed monthly component for services and success components based on the
achievement of certain critical objectives to the Company.
The Company has received a claim for indemnification from Arnold E.
Johns, a member of the Board of Directors and President of the Company,
pursuant to claims made against Mr. Johns by one or more shareholders,
pursuant to the purported class action lawsuits filed against the Company and
Mr. Johns, individually. This claim was settled and a release obtained for
Mr. Johns as part of the Class Action settlement in March 1997.
During May 1997, four of the Company's directors, together with Mr.
Gidumal, and an unaffiliated third party (the "Individual Purchasers")
purchased approximately 57% of the Company's outstanding Convertible
Preferred Stock directly from the security holders to settle potential and
substantial legal and fraud claims against the Company, which occurred prior
to the date the Company's current management and Board of Directors assumed
control of the Company. During July 1997, the Individual Purchasers
purchased an additional 1,250 preferred shares, or, approximately 30% of the
Company's outstanding Convertible Preferred Stock directly from the security
holder (See Item 7 - Significant Subsequent Events - Convertible Preferred
Stock.)
-30-
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules And Reports on Form 8-K.
(a) List of financial statements, financial statement schedules and exhibits:
(i) List of financial statements.
The following consolidated financial statements of Vista 2000, Inc. and
Report of Independent Accountants are attached to this report as follows:
Consolidated Statements of Operations, Cash Flows and Shareholders'
Equity - year ended December 28, 1996 and year ended December 30, 1995;
Consolidated Balance Sheet - December 28, 1996 and December 30, 1995;
Notes to the Consolidated Financial Statements; and
Report of Independent Accountants dated March 4, 1997.
(ii) list of financial statement schedules
The following financial statement schedules of Vista 2000, Inc. for the
years ended December 28, 1996, December 30, 1995, September 30, 1994 and
the three-month period ended December 31, 1994 are included pursuant to
Item 8:
Report of Independent Certified Public
Accountants on Schedules . . . . . . . . . . S-1
Schedule II Valuation and Qualifying Accounts . . . . . . . S-2
Schedules not listed above have been omitted because they are not
applicable or are not required for the information required to set
forth therein is included in the Financial Statements or notes
thereto.
The following consolidated financial statements schedules of Vista
2000, Inc. are included in this report:
Unqualified Opinion of Independent Accountants and Financial Statements
Schedule
-31-
<PAGE>
(b) Reports on Form 8-K:
A report on Form 8-K containing the consolidated financial statements for
the year ended December 30, 1995 was filed by the registrant on June 6,
1996.
(c) Exhibits:
The exhibits required by Item 601 of Regulation SKB are filed herewith.
(See Index of Exhibits.)
(d) Financial Statement Schedules:
The Financial Statement Schedules required by Regulation SX are filed
herewith.
-32-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Vista 2000, Inc.
By (Signature and Title) /s/ G. Louis Graziadio,III
------------------------------------------------------
G. Louis Graziadio, III, Chief Executive Officer and President
Date: August 22, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By (Signature and Title) /s/ G. Louis Graziadio,III
------------------------------------------------------
G. Louis Graziadio, III, Chairman of the Board
Date: August 22, 1997
By (Signature and Title) /s/ Perry A. Lerner
------------------------------------------------------
Perry A. Lerner, Director
Date: August 22, 1997
By (Signature and Title) /s/ Lee E. Mikles
------------------------------------------------------
Lee E. Mikles, Director
Date: August 22, 1997
By (Signature and Title) /s/ Paul A. Novelly
------------------------------------------------------
Paul A. Novelly, Director
Date: August 22, 1997
By (Signature and Title) /s/ Richard D. Squires
------------------------------------------------------
Richard D. Squires, Director
Date: August 22, 1997
-33-
<PAGE>
INDEX TO EXHIBITS
(2) Plan of Acquisition, Reorganization, Arrangements, Liquidation or
Succession.
Not applicable.
(3) (i) Articles of Incorporation
3.1(a) Certificate of Incorporation (Exhibit 3.1)
(ii) By-Laws
3.2(a) By-Laws (Exhibit 3.2)
(4) Instruments defining rights of security holders, including indentures
4.1(c) Specimen of Common Stock Certificate (Exhibit 4.1)
4.2(a) Form of Warrant Agreement covering Series A Warrants (Exhibit 4.2)
4.3(c) Specimen of Series A Warrant (Exhibit 4.3)
4.4(b) Form of Preferred Stock Certificate covering Series A Preferred Stock
(Exhibit 4.1)
4.5(b) Form of Preferred Stock Certificate covering Series B Preferred Stock
(Exhibit 4.2)
4.6(b) Form of Preferred Stock Subscription Agreement covering Series B
Preferred Stock (Exhibit 4.3)
4.7(b) Form of Preferred Stock Certificate covering Series C Preferred Stock
(Exhibit 4.4)
4.8(b) Form of Preferred Stock Certificate covering Series D Preferred Stock
(Exhibit 4.5)
4.9(b) Form of Preferred Stock Subscription Agreement covering Series D
Preferred Stock (Exhibit 4.6)
(9) Voting Trust Agreement
Not applicable.
(10) Material Contracts
10.1(a) Lease Agreement, dated January 5, 1993 between Roswell Business
Centers Associates, LP and the Company as amended. (Exhibit 10.1)
<PAGE>
10.2(a) Patent Rights Purchase Agreement, dated October 1, 1993 between Blue
Ridge Ventures, Inc. and the Company. (Exhibit 10.2)
10.3(a) 1993 Incentive Stock Option Plan (Exhibit 10.4)
10.4(b) 1993 Non-Employee Director Stock Option Plan, as amended. (Exhibit
10.2)
10.5(a) Form of Series 1992B 15% Subordinated Debenture, as amended. (Exhibit
10.8)
10.6(a) Form of 1992B Warrant to Purchase Common Stock. (Exhibit 10.9)
10.7(a) Form of Series 1993A 15% Subordinated Convertible Debenture. (Exhibit
10.10)
10.8(a) Form of 1993A Warrant to Purchase Common Stock. (Exhibit 10.11)
10.9(d) Form of Employment Agreement to be entered into between the Company
and Robert M. Fuller, Richard P. Smyth and Norman W. Wicks,
respectively. (Exhibit 10.12)
10.10(a) Nonstatutory Stock Option Agreement dated December 1, 1993 between
Robert M. Fuller and the Company. (Exhibit 10.27)
10.11(a) Nonstatutory Stock Option Agreement dated December 1, 1993 between
Richard P. Smyth and the Company. (Exhibit 10.28)
10.12(a) Nonstatutory Stock Option Agreement dated December 1, 1993 between
Norman W. Wicks and the Company. (Exhibit 10.29)
10.13(b) Prospectus for the Company's 1993 Incentive Stock Option Plan and 1993
Non-Employee Director Stock Option Plan. (Exhibit 10.1)
10.14(b) First Amendment to the Company's 1993 Incentive Stock Option Plan.
(Exhibit 10.1)
10.15(b) Employment Agreement between the Company and Arnold E. Johns, Jr.
(Exhibit 10.4)
10.16(b) Employment Agreement between the Company's subsidiary, American
Consumer Products, Inc., and Richard Bern. (Exhibit 10.5)
10.17(b) Employment Agreement between the Company's subsidiary, Alabaster
Industries, Inc., and Daniel A. Norris. (Exhibit 10.6)
10.18(b) Employment Agreement between the Company's subsidiary, American
Consumer Products, Inc., and Stephen W. Cole. (Exhibit 10.7)
10.19(e) Employment Agreement between the Company and Robert E. Altenbach
(Exhibit 10.19)
<PAGE>
10.20(f) Asset Purchase Agreement between Vista 2000, Inc., Family Safety
Products, Inc. and Therm Acquisition, Inc. dated August 23, 1996
(Exhibit 10.20)
10.21(f) Loan and Security Agreement between Alabaster Industries, Inc. and
Century Business Credit Corporation dated September 20, 1996
(Exhibit 10.21)
(11) Statement re Computation of Per Share Earnings
11.1 Statement re computation of per share earnings is included herein as
Exhibit 11.1 of this Report.
(12) Statements re Computation of Ratios
Not applicable.
(13) Annual Report to Security Holders, Form 10-Q or Quarterly Report to
Security Holders
Not applicable.
(16) Letter re Change in Certifying Accountant
Not applicable.
(18) Letter re Change in Accounting Principles
Not applicable.
(21) Subsidiaries of the Registrant
21.1 Subsidiaries of the Registrant are listed on Exhibit 21.1 included
in this Report.
(22) Published Report Regarding Matters Submitted to a Vote of Security
Holders
22.1(b) Proxy Statement for Special Meeting of Stockholders to be held
December 18, 1995. (Exhibit 20.1)
(23) Consents of Experts and Counsel
Not applicable.
(24) Power of Attorney
Not applicable.
(27) Financial Data Schedule (Filed only by Electronic Filers)
27.1 Financial Data Schedule
(28) Information from Reports Furnished to State Insurance Regulatory
Authorities
Not applicable.
-37-
<PAGE>
(99) Additional Exhibits
None.
- ------------------------
(a) Exhibit previously filed as part of and is incorporated herein by
reference to the Company's Registration Statement on Form SB-2
(Registration No. 33-73118-A). The exhibit number contained in
parenthesis refers to the exhibit number in such Registration Statement.
(b) Exhibit previously filed as part of and is incorporated herein by
reference to the Company's Current Report on Form 8-K dated June 9, 1996.
The exhibit number contained in parenthesis refers to the Exhibit number
in such Form 8-K.
(c) Exhibit previously filed as part of and is incorporated by reference
to Amendment No. 2 to the Company's Registration Statement on Form SC-2
(Registration No. 33-73118-A). The exhibit number contained in
parenthesis refers to the exhibit numbers in such Registration Statement.
(d) Exhibit previously filed as part of and is incorporated by reference
to Amendment No. 1 to the Company's Registration Statement on Form SC-2
(Registration No. 33-73118-A). The exhibit number contained in
parenthesis refers to the exhibit numbers in such Registration Statement.
(e) Exhibit previously filed as part of and is incorporated herein by
reference to the Company's Current Report on Form 10-Q for the quarter
ended March 30, 1996. The exhibit number contained in parenthesis refers
to the Exhibit number in such Form 10-Q.
(f) Exhibit previously filed as part of and is incorporated herein by
reference to the Company's Current Report on Form 10-Q for the quarter
ended September 28, 1996. The exhibit number contained in parenthesis
refers to the Exhibit number in such Form 10-Q.
-38-
<PAGE>
FINANCIAL STATEMENTS AND REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
VISTA 2000, INC. AND SUBSIDIARIES
December 28, 1996 and December 30, 1995
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Vista 2000, Inc.
We have audited the accompanying consolidated balance sheets of Vista 2000,
Inc. and subsidiaries as of December 28, 1996 and December 30, 1995, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits. The financial
statements of Vista 2000, Inc. for the three month period ended December 31,
1994 and for the year ended September 30, 1994, were audited by other auditors
whose report dated May 17, 1996, expressed an unqualified opinion on those
statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the 1996 and 1995 financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Vista 2000, Inc. and subsidiaries as of December 28, 1996 and December 30, 1995,
and the consolidated results of their operations and their consolidated cash
flows for the years then ended in conformity with generally accepted accounting
principles.
ATLANTA, GEORGIA
March 4, 1997, except for the second paragraph
of Note 4, as to which the date is April 4, 1997
and the fifth paragraph of Note 5 as to which
the date is April 14, 1997.
<PAGE>
Vista 2000, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands except per share data)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 30,
1996 1995
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents.......................................................... $ 1,165 $ 871
Accounts receivable, net of allowance for
doubtful accounts and returns of $1,405
and $2,230, respectively......................................................... 16,187 15,910
Inventories........................................................................ 25,157 33,378
Prepaid expenses................................................................... 1,564 217
Other current assets............................................................... 205 1,174
------------ ------------
Total current assets......................................................... 44,278 51,550
PROPERTY AND EQUIPMENT, NET.......................................................... 15,927 13,041
OTHER ASSETS......................................................................... 1,566 720
------------ ------------
$ 61,771 $ 65,311
------------ ------------
------------ ------------
</TABLE>
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 30,
1996 1995
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES
Note payable....................................................................... $ 908 $ --
Current portion of long-term debt.................................................. 383 607
Accounts payable................................................................... 5,209 12,542
Accrued payroll and related expenses............................................... 3,596 4,053
Accrued liabilities................................................................ 3,595 3,955
------------ ------------
Total current liabilities.................................................... 13,691 21,157
LONG-TERM LIABILITIES
Long-term debt..................................................................... 23,512 23,029
Other.............................................................................. 407 --
------------ ------------
Total long-term liabilities.................................................. 23,919 23,029
COMMITMENTS AND CONTINGENCIES........................................................ -- --
STOCKHOLDERS' EQUITY
Preferred stock $1 par value, 500,000 shares
authorized, 4,220 and 18,418 shares issued
and outstanding, respectively.................................................... 3,985 5,981
Common stock, $.01 par value, 50,000,000 shares
authorized, 18,074,120 and 11,626,475 shares
issued and outstanding, respectively............................................. 181 116
Additional paid-in capital......................................................... 62,108 36,201
Accumulated deficit................................................................ (40,340) (20,939)
Cumulative translation adjustment.................................................. (23) (19)
------------ ------------
25,911 21,340
Less:treasury shares--at cost 341,341 and
71,100 shares, respectively...................................................... 1,750 215
------------ ------------
Total stockholders' equity (deficit)......................................... 24,161 21,125
------------ ------------
$ 61,771 $ 65,311
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Vista 2000, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollar amounts in thousands except per share data)
<TABLE>
<CAPTION>
THREE MONTH
YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
DECEMBER 28, DECEMBER 30, DECEMBER 31, SEPTEMBER 30,
1996 1995 1994 1994
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Net sales.............................................. $ 110,955 $ 32,422 $ 1 $ 137
Cost of sales.......................................... 82,563 28,244 26 314
------------ ------------ ------------ -------------
Gross profit (loss).................................... 28,392 4,178 (25) (177)
Operating expenses..................................... 34,235 17,318 858 1,721
------------ ------------ ------------ -------------
(5,843) (13,140) (883) (1,898)
Loss on sale of operating assets....................... (8,311) (1,147) -- --
Writedown of operating assets.......................... (2,476) -- -- --
------------ ------------ ------------ -------------
Loss from operations................................... (16,630) (14,287) (883) (1,898)
Other income and (expense)
Interest expense....................................... (2,174) (649) (143) (266)
Other.................................................. (351) 273 4 45
------------ ------------ ------------ -------------
Net loss before income taxes........................... (19,155) (14,663) (1,022) (2,119)
Income tax expense..................................... (246) -- -- --
------------ ------------ ------------ -------------
Net loss .............................................. $(19,401) $(14,663) $(1,022) $(2,119)
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
Net loss per common share.............................. $(1.20) $(2.33) $(0.36) $(.99)
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
Weighted average shares outstanding.................... 16,133,508 6,294,361 2,813,293 2,131,226
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Vista 2000, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Year ended December 28, 1996, year ended December 30, 1995, three month
period ended December 31, 1994 and year ended September 30, 1994
(Dollars and share amounts in thousands)
<TABLE>
<CAPTION>
PREFERRED STOCK
------------------------------------------------------------------------
SERIES A SERIES B SERIES C SERIES D
---------------- ---------------- ---------------- ----------------
SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS
------ ------- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1993...... -- $ -- -- $ -- -- $ -- -- $ --
Distribution to stockholders....... -- -- -- -- -- -- -- --
Net loss........................... -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
------- ------- ------- -------
Balance at September 30, 1994...... -- -- -- -- -- -- -- --
Proceeds, net of issuance costs of
$1,339 from public offering of
common stock..................... -- -- -- -- -- -- -- --
Acquisitions of treasury stock and
warrants......................... -- -- -- -- -- -- -- --
Net loss........................... -- -- -- -- -- -- -- --
-- - - --
------- ------- ------- -------
Balance at December 31, 1994....... -- -- -- -- -- -- -- --
Issuance of stock in
acquisitions..................... -- -- -- -- -- -- -- --
Issuance of preferred stock, net of
issuance costs of $1,241......... 87 8,291 3 2,462 1 11,603 2 1,940
Preferred stock conversions........ (72) (6,852) (2) (1,232) (1) (10,231) -- --
Issuance of common shares, net of
issuance costs of $290........... -- -- -- -- -- -- -- --
Exercise of stock options, net of
12 shares exchanged.............. -- -- -- -- -- -- -- --
Exercise of warrants............... -- -- -- -- -- -- -- --
Common stock issued for services... -- -- -- -- -- -- -- --
Acquisitions of treasury stock..... -- -- -- -- -- -- -- --
Debt conversions................... -- -- -- -- -- -- -- --
Issuance of warrants for
services......................... -- -- -- -- -- -- -- --
Compensatory stock options......... -- -- -- -- -- -- -- --
Foreign currency translation
adjustment....................... -- -- -- -- -- -- -- --
Net loss........................... -- -- -- -- -- -- -- --
-- - - --
------- ------- ------- -------
Balance at December 30, 1995....... 15 1,439 1 1,230 -- 1,372 2 1,940
<CAPTION>
COMMON STOCK ADDITIONAL CUMULATIVE TREASURY STOCK TOTAL
--------------- PAID-IN ACCUMULATED TRANSLATION ---------------- STOCKHOLDERS'
SHARES DOLLARS CAPITAL DEFICIT ADJUSTMENT SHARES DOLLARS EQUITY (DEFICIT)
------ ------- ---------- ----------- ----------- ------ ------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1993...... 2,131 $ 21 $ 2,055 $ (2,894) $-- -- $-- $ (818)
Distribution to stockholders....... -- -- -- (241) -- -- -- (241)
Net loss........................... -- -- -- (2,119) -- -- -- (2,119)
------ ------- ---------- ----------- --- ------ ------- -------
Balance at September 30, 1994...... 2,131 21 2,055 (5,254) -- -- -- (3,178)
Proceeds, net of issuance costs of
$1,339 from public offering of
common stock..................... 1,150 12 4,975 -- -- -- -- 4,987
Acquisitions of treasury stock and
warrants......................... -- -- -- -- -- (69) (796) (796)
Net loss........................... -- -- -- (1,022) -- -- -- (1,022)
------ ------- ---------- ----------- --- ------ ------- -------
Balance at December 31, 1994....... 3,281 33 7,030 (6,276) -- (69) (796) (9)
Issuance of stock in
acquisitions..................... 550 5 1,096 -- -- 69 796 1,897
Issuance of preferred stock, net of
issuance costs of $1,241......... -- -- -- -- -- -- -- 24,296
Preferred stock conversions........ 4,086 41 18,274 -- -- -- --
Issuance of common shares, net of
issuance costs of $290........... 2,533 25 6,762 -- -- -- -- 6,787
Exercise of stock options, net of
12 shares exchanged.............. 196 2 214 -- -- -- -- 216
Exercise of warrants............... 250 3 622 -- -- -- -- 625
Common stock issued for services... 280 3 557 -- -- -- 560
Acquisitions of treasury stock..... -- -- -- -- -- (71) (215) (215)
Debt conversions................... 450 4 716 -- -- -- -- 720
Issuance of warrants for
services......................... -- -- 40 -- -- -- -- 40
Compensatory stock options......... -- -- 890 -- -- -- -- 890
Foreign currency translation
adjustment....................... -- -- -- -- (19) -- -- (19)
Net loss........................... -- -- -- (14,663) -- -- -- (14,663)
------ ------- ---------- ----------- --- ------ ------- --------
Balance at December 30, 1995....... 11,626 116 36,201 (20,939) (19) (71) (215) 21,125
</TABLE>
<PAGE>
<TABLE>
PREFERRED STOCK
------------------------------------------------------------------------
SERIES A SERIES B SERIES C SERIES D
---------------- ---------------- ---------------- ----------------
SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS
------ ------- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of preferred stock, net of
issuance costs of $600........... -- -- -- -- -- -- 20 19,400
Issuance of common stock........... -- -- -- -- -- -- -- --
Preferred stock conversions........ (14) (1,317) (1) (1,230) -- (274 ) (19) (18,575)
Treasury stock acquired for cash... -- -- -- -- -- -- -- --
Exercise of stock options.......... -- -- -- -- -- -- -- --
Exercise of warrants............... -- -- -- -- -- -- -- --
Compensatory stock options and
treasury shares acquired via
stock rescissions................ -- -- -- -- -- -- -- --
Foreign currency translation
adjustment....................... -- -- -- -- -- -- -- --
Net loss........................... -- -- -- -- -- -- -- --
--- ------ --- ------ --- ------- ---- -------
Balance at December 28, 1996....... 1 $ 122 -- $ -- -- $1,098 3 $2,765
--- ------ --- ------ --- ------- ---- -------
--- ------ --- ------ --- ------- ---- -------
<CAPTION>
COMMON STOCK ADDITIONAL CUMULATIVE TREASURY STOCK TOTAL
--------------- PAID-IN ACCUMULATED TRANSLATION ---------------- STOCKHOLDERS'
SHARES DOLLARS CAPITAL DEFICIT ADJUSTMENT SHARES DOLLARS EQUITY (DEFICIT)
------ ------- ---------- ----------- ----------- ------ ------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of preferred stock, net of
issuance costs of $600........... -- -- -- -- -- -- -- 19,400
Issuance of common stock........... 300 3 1,797 -- -- -- -- 1,800
Preferred stock conversions........ 5,491 55 21,341 -- -- -- -- --
Treasury stock acquired for cash... -- -- -- -- -- (50) (602) (602)
Exercise of stock options.......... 637 7 988 -- -- -- -- 995
Exercise of warrants............... 20 -- 40 -- -- -- -- 40
Compensatory stock options and
treasury shares acquired via
stock rescissions................ -- -- 1,741 -- -- (220) (933) 808
Foreign currency translation
adjustment....................... -- -- -- -- (4) -- -- (4)
Net loss........................... -- -- -- (19,401) -- -- -- (19,401)
------ ------- ---------- ----------- --- ------ ------- -------
Balance at December 28, 1996....... 18,074 $181 $62,108 $(40,340) $(23) (341) ($1,750) $24,161
------ ------- ---------- ----------- --- ------ ------- -------
------ ------- ---------- ----------- --- ------ ------- -------
</TABLE>
<PAGE>
VISTA 2000, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands except per share data)
<TABLE>
<CAPTION>
THREE MONTH
YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
DECEMBER 28, DECEMBER 30, DECEMBER 31, SEPTEMBER 30,
1996 1995 1994 1994
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Cash flows used by operating activities:
Net loss.............................................. $ (19,401) $ (14,663) $ (1,022) $(2,119)
Adjustments to reconcile net loss to net cash used by
operations:
Loss on sale of operating assets..................... 8,311 -- -- --
Writedown of operating assets........................ 2,476 -- -- --
Depreciation......................................... 2,108 611 9 41
Loss on disposal of property and equipment........... 400 84 -- --
Stock based compensation expense..................... 808 1,490 -- --
(Increase) decrease in operating assets, net of
businesses acquired:
Accounts receivable................................. (1,113) 2,722 (21) 157
Inventories......................................... (3,627) (2,264) (64) 232
Prepaid expenses and other current assets........... (385) 342 (30) 31
Other assets........................................ (1,143) (224) 435 (185)
Increase (decrease) in operating liabilities, net of
businesses acquired:
Accounts payable..................................... (4,222) 3,662 (875) (146)
Accrued liabilities.................................. (585) 1,996 (658) 837
------------ ------------ ------ ------
Net cash used by operating activities.............. (16,373) (6,244) (2,226) (1,152)
------------ ------------ ------ ------
Cash flows used by investing activities:
Acquisitions, net of cash acquired American Consumer
Products, Inc....................................... -- (13,925) -- --
Alabaster Industries, Inc............................ -- (157) -- --
Intelock Technologies................................. -- 754 -- --
Proceeds from sale of operating assets................ 2,806 -- -- --
Proceeds from sale of property and equipment.......... 54 -- -- --
Purchases of property and equipment................... (5,931) (2,365) (53) (8)
------------ ------------ ------ ------
Net cash used by investing activities.............. (3,071) (15,693) (53) (8)
------------ ------------ ------ ------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THREE MONTH
YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
DECEMBER 28, DECEMBER 30, DECEMBER 31, SEPTEMBER 30,
1996 1995 1994 1994
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Cash flows provided by financing activities:
Net proceeds (payment) from short-term borrowings...... 908 -- (1,128) 851
Net repayments on long-term revolving line of credit... (2,200) -- -- --
Proceeds from long-term debt........................... -- -- -- 24
Repayment of long-term debt............................ (599) (9,331) (340) --
Proceeds from issuance of common stock, net of issue
costs................................................ 1,800 6,787 4,987 --
Proceeds from issuance of preferred stock, net of issue
costs................................................ 19,400 24,296 -- --
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THREE MONTH
YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
DECEMBER 28, DECEMBER 30, DECEMBER 31, SEPTEMBER 30,
1996 1995 1994 1994
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Proceeds from exercise of stock options and warrants... 1,035 841 -- --
Purchase of treasury stock and warrants................ (602) (215) (796) --
------------ ------------ ------ ------
Net cash provided by financing activities.......... 19,742 22,378 2,723 875
------------ ------------ ------ ------
Effect of exchange rate changes on cash................ (4) (19) -- --
------------ ------------ ------ ------
Net increase (decrease) in cash during period.......... 294 422 444 (285)
Cash and cash equivalents at the beginning of the
period............................................... 871 449 5 290
------------ ------------ ------ ------
Cash and cash equivalents at the end of the period..... $ 1,165 $ 871 $ 449 $ 5
------------ ------------ ------ ------
------------ ------------ ------ ------
Supplemental disclosure:
Interest paid......................................... $ 2,750 $ 754 $ 392 $ 16
Income taxes paid..................................... 287 -- -- --
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THREE MONTH
YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
DECEMBER 28, DECEMBER 30, DECEMBER 31, SEPTEMBER 30,
1996 1995 1994 1994
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Noncash investing and financing activities:
Acquisition of treasury stock via
stock rescissions...................................... $ 933 $ -- $ -- $ --
Assets purchased under long-term
obligations............................................ $ 3,227 $ 170 $ -- $ --
Assets sold for assumption of
related obligation..................................... $ 169 $ -- $ -- $ --
Capital lease obligations incurred..................... $ -- $ 228 $ -- $ --
Conversion of debt to common stock..................... $ -- $ 720 $ -- $ --
Note payable issued for patent rights.................. $ -- $ -- $ -- $ 9
Note payable issued in excess of cost--of patent
rights............................................... $ -- $ -- $ -- $ 241
Acquisition of businesses
Fair value of assets acquired.......................... $ -- $ 63,330 $ -- $ --
Cash paid.............................................. -- (14,689) -- --
Common stock issued.................................... -- (1,897) -- --
------------ ------------ ------ ------
Liabilities assumed.................................... $ -- $ 46,744 $ -- $ --
------------ ------------ ------ ------
------------ ------------ ------ ------
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Vista 2000, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 28, 1996 and December 30, 1995
(Dollar amounts in thousands except per share data)
(1) Nature of Business and Summary of Significant Accounting Policies
Nature of Business
Vista 2000, Inc. and its subsidiaries, (the "Company"), are engaged primarily
in the manufacture, distribution and sale of specialty consumer products
including key blanks, letters and numbers, signs, fasteners, knives,
builder's hardware, pet products, balloons, gloves, boots, rainwear and
plastic housewares. The Company's customers are primarily hardware, mass
merchandisers, food and do-it-yourself retailers located throughout North
America.
Public Offerings
On October 24, 1994, the Company completed an initial public offering of its
common stock. The offering resulted in the sale of 1,000,000 units at $5.50
per unit before underwriting discounts and other offering expenses. Each
unit consisted of one share of Company common stock and Series A Warrants to
purchase two Company common shares. Each warrant entitled the holder to
purchase, for a period of 48 months ending October 26, 1998, one share of
common stock at an exercise price of $7.00 per share during the first 24
months and $10.00 per share thereafter, subject to adjustment in certain
circumstances. In December, 1994, an additional 150,000 of the units,
representing the underwriters' over-allotment option with respect to the
offering, were sold.
During 1995 the Company completed four preferred stock offerings and one
common stock offering pursuant to the exemption from registration under
Regulation S of the Securities Act of 1933. $24,296 and $6,787, net of
issuance costs, were raised through the preferred stock offerings and the
common stock offerings, respectively.
During 1996, the Company completed one preferred stock offering and one
common stock offering pursuant to the exemption from registration under
Regulation S of the Securities Act of 1993. $19,400 and $1,800, net of
issuance costs, were raised through the preferred stock offering and common
stock offering, respectively.
<PAGE>
Vista 2000, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 28, 1996 and December 30, 1995
(Dollar amounts in thousands except per share data)
(1) Nature of Business and Summary of Significant Accounting Policies -
Continued
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Vista 2000, Inc. ("Vista"), and its wholly-owned subsidiaries, American
Consumer Products, Inc. and subsidiaries ("ACPI"), Alabaster Industries, Inc.
("Alabaster"), Family Safety Products, Inc. ("FSPI"), and Intelock
Technologies ("Intelock"), collectively ("the Company"). All significant
intercompany balances and transactions have been eliminated in the
consolidated financial statements.
Change in Fiscal Year
During 1995, the Company elected to change its fiscal year-end from September
30 to a 52/53 week year ending on the last Saturday in the calendar year.
Accordingly, the consolidated financial statements presented herein include
the years ended December 28, 1996, December 30, 1995, the three month period
ended December 31, 1994 and the year ended September 30, 1994. Fiscal years
1996 and 1995 each contained 52 weeks.
Cash and Cash Equivalents
For purposes of the Statement of Cash Flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to
be cash equivalents.
Revenue Recognition
The Company recognizes revenue and provides for the estimated cost of returns
and allowances in the period the products are shipped.
Approximately 21% of the Company's revenue was from two customers in 1996,
accounting for approximately 11% and 10%, respectively, of total revenue.
Approximately 15% of revenue was from one customer in 1995.
<PAGE>
Vista 2000, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 28, 1996 and December 30, 1995
(Dollar amounts in thousands except per share data)
(1) Nature of Business and Summary of Significant Accounting Policies -
Continued
Inventories
Inventories are stated at the lower of average cost or market. Cost for
approximately 83% and 80% of inventories at December 28, 1996 and December
30, 1995, respectively, have been determined using the last-in, first-out
(LIFO) method. Cost for the remainder of the inventories has been determined
primarily using the first-in, first-out (FIFO) method.
Had the Company used the first-in, first-out (FIFO) method of accounting,
gross profit would have been substantially the same in 1996 and 1995.
Advertising Costs
The Company expenses the cost of advertising the first time advertising takes
place. Costs of trade shows and developing advertising materials are expensed
at the time of the trade shows or as the advertising materials are produced
and distributed to customers. At December 30, 1995, $159 of prepaid
advertising was included in prepaid expenses. There was no prepaid
advertising at December 28, 1996. Advertising expense for the year ended
December 28, 1996, year ended December 30, 1995, three months ended December
31, 1994 and year ended September 30, 1994 was $1,950, $1,685, $37 and $65,
respectively.
Income Taxes
The Company accounts for income taxes using the asset and liability method.
Under this method, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates applied to taxable income. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date. A valuation allowance is
provided for deferred tax assets when it is more likely than not that the
asset will not be realized.
<PAGE>
Vista 2000, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 28, 1996 and December 30, 1995
(Dollar amounts in thousands except per share data)
(1) Nature of Business and Summary of Significant Accounting Policies -
Continued
Property, Equipment, Depreciation and Amortization
Property and equipment are recorded at historical cost. The Company provides
for depreciation and amortization using the straight-line method over the
following estimated useful lives:
Machinery and equipment 3 to 10 years
Office Furniture and equipment 3 to 8 years
Buildings 35 years
Depreciation expense for the year ended December 28, 1996, year ended
December 30, 1995, three month period ended December 31, 1994 and year ended
September 30, 1994 was $2,108, $611, $9 and $41, respectively.
Warranty Costs and Returns
The Company provides for estimated warranty costs and returns at the time of
sale. Accrued costs applicable to warranty obligations and returns are
classified as accrued liabilities and are not material.
Research and Development Costs
Research and development costs are charged to expense as incurred and totaled
$590, $297, $36 and $307 for the year ended December 28, 1996, year ended
December 30, 1995, three month period ended December 31, 1994 and year ended
September 30, 1994, respectively.
Foreign Currency Translation
Assets and liabilities of the Company's Canadian subsidiary are translated
into U.S. dollars at fiscal year end exchange rates. Income and expense
accounts are translated into U.S. dollars at average rates of exchange
prevailing during the year. Adjustments resulting from translating the
Canadian accounts are reflected as a foreign currency translation adjustment
in stockholders' equity. Translation adjustments of the Mexican subsidiary,
for which the functional currency is U.S. dollars, and transaction gains and
losses are included in the results of operations for the year.
Net exchange losses included in the results of operations were not
significant in any of the reported periods.
<PAGE>
Vista 2000, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 28, 1996 and December 30, 1995
(Dollar amounts in thousands except per share data)
(1) Nature of Business and Summary of Significant Accounting Policies -
Continued
Net Loss Per Common Share
Net loss per common share has been calculated using the weighted average
number of shares of common stock outstanding during each period. Fully
diluted net loss per common share is not disclosed because the effect of
common stock equivalents would be antidilutive.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
Fair Value of Financial Instruments
The Company's financial instruments include cash, cash equivalents and
long-term debt. The carrying value of cash and cash equivalents approximates
fair value due to the relatively short period to maturity of the instruments.
The carrying value of the Company's long-term obligations approximates fair
value based upon borrowing rates currently available to the Company for
borrowings with comparable maturities.
Reclassifications
Certain amounts in the prior period financial statements have been
reclassified to conform to the 1996 presentation.
<PAGE>
VISTA 2000, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 28, 1996 AND DECEMBER 30, 1995
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(2) INVENTORIES
Inventories consist of the following :
DECEMBER 28, DECEMBER 30,
1996 1995
------------ ------------
Raw Materials...................................... $ 4,714 $ 7,665
Work in Progress................................... 2,154 3,605
Finished Goods..................................... 18,289 22,108
------------ ------------
$ 25,157 $ 33,378
------------ ------------
(3) PROPERTY AND EQUIPMENT
Property and Equipment consists of the following:
DECEMBER 28, DECEMBER 30,
1996 1995
------------ ------------
Machinery and equipment............................ $ 8,376 $ 8,947
Buildings and improvements......................... 7,419 3,737
Office furniture and equipment..................... 847 665
------------ ------------
Total property and equipment................... 16,642 13,349
Less accumulated depreciation...................... 2,372 680
------------ ------------
14,270 12,669
Land............................................... 1,657 372
------------ ------------
$ 15,927 $ 13,041
------------ ------------
------------ ------------
<PAGE>
VISTA 2000, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 28, 1996 AND DECEMBER 30, 1995
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(4) NOTES PAYABLE AND LONG-TERM LIABILITIES
NOTE PAYABLE
During 1996, Alabaster entered into a revolving credit and demand loan
agreement (the Agreement) with a financial institution which provides for
borrowings of up to $2,500, subject to certain restrictions as defined in the
Agreement. As of December 28, 1996, maximum allowable borrowings under the
Agreement were $1,250 of which $908 was outstanding. Interest is payable
monthly at the greater of the prime rate plus 3.25% or 9% (effective rate of
11.5% at December 28, 1996). The Agreement is collateralized by substantially
all of the assets of Alabaster and is guaranteed by Vista.
LONG-TERM DEBT
Long-term debt, including capital lease obligations, consists of the
following:
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 30,
1996 1995
------------ ------------
<S> <C> <C>
ACPI revolving line of credit........................................................ $ 20,400 $ 22,600
ACPI mortgage note payable to a lender. Requires
monthly payments of $37, including interest
at 10%, through December 1997. All outstanding
principal is due in January 1998. Collateralized
by certain real, personal and intangible property of
ACPI............................................................................... 3,207 --
Obligations under capital leases for equipment payable
monthly over various terms through 1998. Interest is
imputed at rates ranging from 7% to 18%. Future
minimum payments required under capital leases
total $338 at December 28, 1996.................................................... 255 762
Other................................................................................ 33 274
------------ ------------
Total long-term debt........................................................... 23,895 23,636
Less current maturities.............................................................. 383 607
------------ ------------
Long-term debt................................................................. $ 23,512 $ 23,029
------------ ------------
------------ ------------
</TABLE>
<PAGE>
VISTA 2000, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 28, 1996 AND DECEMBER 30, 1995
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(4) LONG-TERM DEBT - CONTINUED
Scheduled principal payments of long-term debt and capital lease obligations
are as follows:
FISCAL YEAR:
1997.............................................. $ 383
1998.............................................. 3,112
1999.............................................. --
2000.............................................. 20,400
---------
Total.......................................... $ 23,895
---------
---------
The ACPI revolving credit agreement is with two banks and provides for
borrowings on a revolving line of credit of up to $28,900. The agreement
expires in April 1997. Interest at the banks' base rate plus 3/8% (effective
rate of 8.6% and 8.9% at December 28, 1996 and December 30, 1995,
respectively) and a loan commitment fee of 3/8% on the unused portion of the
revolving credit commitment are payable quarterly. On April 4, 1997, the
Company entered into a commitment letter with another bank to refinance the
existing revolving credit facility. The new credit facility, which will
expire three years from closing, will provide for borrowings up to $30,000
and consist of a revolving line of credit and an overadvance facility. The
revolving line of credit provides for borrowings up to $28,000 based on a
formula that includes eligible accounts receivable and inventories. The
overadvance facility provides for additional borrowings of up to $2,000 upon
ACPI's request and based on the bank's sole discretion. Interest is payable
monthly at the bank's prime rate plus .5% or, at the ACPI's option, LIBOR
plus 2.50%. Available interest rates may decrease based upon financial
performance of the Company as defined. ACPI will incur an annual facility fee
of $33 payable at the beginning of each contract year and a monthly loan
commitment fee of 3/8% on the unused portion of the credit facility. The
credit facility provides for certain restrictive covenants including, among
others, limitations as to intercompany transfers and capital expenditures and
maintenance of minimum levels of net worth. The credit facility is secured by
essentially all the assets of the ACPI except for those owned by ACPI Real
Estate, Inc. and Boss Manufacturing Real Estate, Inc. and is guaranteed by
each of the ACPI's subsidiaries. The bank has also committed to $3,000 for
letters of credit as part of the maximum borrowings under the line of credit.
During 1995, the Company entered into debt conversion agreements with
officers or affiliates of officers whereby outstanding debt, plus accrued
interest, totaling $720, was converted into 450,000 shares of common stock.
The conversion share price of $1.60 was equal to approximately 85% of the
market value of the stock at the time of approval by the Board of Directors.
<PAGE>
VISTA 2000, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 28, 1996 AND DECEMBER 30, 1995
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(4) LONG-TERM DEBT - CONTINUED
OTHER
Other long-term liabilities consist of extended terms on certain trade
payables of Alabaster. The terms require monthly payments of approximately
$19 through 1999.
(5) COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company leases certain office and operating facilities and certain
equipment under operating lease agreements which expire on various dates
through 2000 and require the Company to pay all maintenance costs. Rent
expense under these leases was approximately $1,379, $809, $14, and $38 for
the year ended December 28, 1996, year ended December 30, 1995, three month
period ended December 31, 1994 and year ended September 30, 1994,
respectively.
Commitments under noncancelable operating leases are summarized as follows:
FISCAL YEAR:
1997............................................... $ 452
1998............................................... 318
1999............................................... 89
2000............................................... 55
---------
Total.............................................. $ 914
---------
---------
ACPI leased two facilities from related parties. The Company was responsible
for repairs and maintenance, taxes and insurance of these facilities.
Expenses for these operating leases were $639 and $735 in 1996 and 1995. ACPI
purchased one of these facilities in October 1996 and purchased the second of
these facilities subsequent to December 28, 1996 (see Note 8).
<PAGE>
VISTA 2000, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 28, 1996 AND DECEMBER 30, 1995
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(5) COMMITMENTS AND CONTINGENCIES - CONTINUED
CLASS ACTION LAWSUIT
In April 1996, the Company together with certain officers, directors and
third parties had been named as a defendant in seventeen (17) class action
lawsuits filed by stockholders of the Company in the United States District
Court for the Northern District of Georgia. The lawsuits alleged that the
Company violated the Federal Securities Laws, particularly Sections 10-b and
20-a of the Securities Exchange Act of 1934, as amended, and the rules and
regulations, including Rules 10-b-5 thereunder as well as common law claims.
In August 1996, the court certified the plaintiffs as representatives of a
class of all persons who purchased the Company's common stock or warrants
during the period October 24, 1994 through June 8, 1996, except for the
defendants and certain officers, directors and related parties. The Company
and the other defendants reached an agreement in principle to settle the
action in December 1996. Pursuant to the settlement, the Company will issue a
sufficient amount of shares of its common stock to the class to convey
ownership of forty percent (40%) of the common stock of the Company to the
class, based on common shares outstanding at December 1, 1996. The Company
expects to issue approximately 14,454,000 common shares in accordance with
the settlement. Approximately $903 has been charged to 1996 operations
related to this settlement and is included in accrued liabilities at December
28, 1996. The Company's insurance carrier will contribute $300 to the
settlement to cover certain expenses related to the settlement. The
settlement is in satisfaction of all claims of the class. The district court
approved the settlement and the judgment became final on April 14, 1997.
OTHER LITIGATION
In July 1996, the Company commenced an action against Richard P. Smyth, a
former officer and director, alleging that Mr. Smyth committed fraudulent and
unlawful acts resulting in substantial harm to the Company and its
shareholders. In September 1996, Mr. Smyth filed a counterclaim seeking,
among other things, indemnification in connection with the class action
lawsuit described above. The Company intends to vigorously pursue its action
and contest the allegations in the counterclaim; however, management and
legal counsel are unable to determine the possible outcome of this matter at
this time.
<PAGE>
VISTA 2000, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 28, 1996 AND DECEMBER 30, 1995
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(5) COMMITMENTS AND CONTINGENCIES (CONTINUED)
OTHER LITIGATION - CONTINUED
The Company is also a defendant or has been notified of claims in several
other actions against it. In the opinion of management, the ultimate outcome
of these actions will not have a material adverse effect on the financial
position of the Company.
SEC INVESTIGATION
The Company has been notified by the Securities and Exchange Commission
("SEC") that it had commenced a formal private investigation of the Company.
The Company intends to cooperate with the SEC in this matter. The Company
cannot predict the eventual outcome of this investigation. Independently, the
Company through its Audit Committee has conducted an internal investigation
of the facts and circumstances surrounding the investigation.
(6) STOCKHOLDER'S EQUITY
On March 11, 1994, the Board of Directors authorized a one-for-two reverse
common stock split. On November 30, 1993, the Board of Directors authorized a
two-for-three reverse common stock split. All references to number of shares
and to stock warrants as well as per share information have been adjusted to
reflect the stock splits on a retroactive basis.
WARRANTS
At December 30, 1995, warrants for the purchase of 36,408 shares of Company
common stock that were issued in conjunction with debentures sold by the
Company were issued and outstanding. These warrants expired as unexercised in
January 1997. In addition, in March 1994, the Company issued 235,598 of its
1994 convertible debenture warrants to all the former debenture holders that
acquired common stock of the Company on September 30, 1993 pursuant to their
right of conversion. The 1994 convertible debenture warrants each provide for
the purchase of one share of common stock at an exercise price of $2.50 per
share and may be exercised for a three year period commencing March 31, 1996.
2,000,000 Series A warrants were outstanding at December 28, 1996, which were
issued in connection with the Company's initial public offering. The warrants
are exercisable at an exercise price of $7.00 per share through October 28,
1998. Additionally, the Company agreed to sell to the Underwriters, as
additional compensation, warrants to acquire units representing up to 100,000
shares of common stock at $9.08 per share and up to 200,000 shares of common
stock underlying the Series A warrants at $11.55 per share.
<PAGE>
VISTA 2000, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 28, 1996 AND DECEMBER 30, 1995
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(5) STOCKHOLDER'S EQUITY - CONTINUED
WARRANTS--CONTINUED
During 1995, the Company issued warrants to various consultants to acquire up
to 645,529 common shares at prices per share ranging from $2.00 to $12.00. A
$40 expense was recorded during 1995 as a result of the issuance of these
warrants. During 1996 and 1995, warrants were exercised to acquire 20,000 and
250,000 common shares, respectively.
COMMON STOCK ISSUED FOR SERVICES IN LIEU OF CASH
During 1995, the Company issued 280,000 shares of common stock to various
consultants at per share market values at the agreement dates ranging from
$1.88 to $2.06. In connection with the issuance of these shares, the Company
recorded professional fees totaling $560.
STOCK OPTIONS
The Company has adopted two stock option plans providing for the issuance of
options covering up to 8,000,000 shares of common stock to be issued to
officers, directors, or consultants to the Company. Various vesting
conditions apply to these options, based on either tenure or certain
performance criteria. For options granted to employees at strike prices less
than the fair market value of the underlying shares on the date of the grant,
the difference in value is recognized as compensation expense over the
applicable vesting periods. Options granted to nonemployees are recognized
over the related service period based on the estimated fair value of the
options This resulted in charges to operations amounting to $808 and $900 for
the years ended December 28, 1996 and 1995, respectively.
Stock option transactions are summarized as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 28, 1996 DECEMBER 30, 1995 DECEMBER 31, 1994 SEPTEMBER 30, 1994
------------------------ ----------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE SHARES PRICE
----------- ----------- ---------- ----------- --------- ----------- --------- -----------
Outstanding, beginning of
period......................... 1,550,950 $ 3.46 225,000 $ 6.05 225,000 $ 6.05 -- $ --
Granted.......................... 420,000 3.63 1,759,350 3.24 -- -- 225,000 6.05
Exercised........................ (678,450) 2.15 (208,400) 1.60 -- -- -- --
Cancelled........................ (1,173,950) 4.18 (225,000) 6.05 -- -- -- --
----------- ----- ---------- ----- --------- ---- --------- -----
Outstanding, end of period....... 118,550 $ 4.51 1,550,950 $ 3.46 225,000 $ 6.05 225,000 $ 6.05
----------- ----- ---------- ----- --------- ----- --------- -----
----------- ----- ---------- ----- --------- ----- --------- -----
</TABLE>
<PAGE>
VISTA 2000, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 28, 1996 AND DECEMBER 30, 1995
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(6)STOCKHOLDER'S EQUITY - CONTINUED
STOCK OPTIONS - CONTINUED
The following table summarizes information about stock options outstanding at
December 28, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING AND EXERCISABLE
- ----------------------------------------------------------------
WEIGHTED
AVERAGE
NUMBER REMAINING WEIGHTED
EXERCISE OUTSTANDING AT CONTRACTUAL AVERAGE
PRICE DECEMBER 28, 1996 LIFE (YEARS) EXERCISE PRICE
- ----------- ----------------- --------------- ---------------
<S> <C> <C> <C>
$ 3.93 33,550 8.8 $ 3.93
4.50 45,000 .7 4.50
$ 5.00 40,000 8.8 5.00
--
------- -----
118,550 5.7 $ 4.51
--
--
------- -----
------- -----
</TABLE>
Subsequent to December 28, 1996, the Company granted 7,810,000 options to
purchase common stock at an exercise price of $.03 per share to directors,
employees and consultants. The options were granted effective December 31,
1996 for prior and future services. One half of the options are vested upon
sisuance and the remaining half vest on December 31, 1997. Compensation
expense of $105 related to these options was recognized during the year ended
December 28, 1996. The following table summarizes information about stock
options outstanding on December 31, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------- -----------------------
<S> <C> <C> <C> <C> <C>
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
NUMBER REMAINING AVERAGE AVERAGE
EXERCISE OUTSTANDING AT CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICE DECEMBER 31, 1996 LIFE (YEARS) PRICE EXERCISABLE PRICE
--------- ----------------- ------------- ----------- ---------- -----------
$0.03 7,810,000 10.0 $ 0.03 3,905,000 $ 0.03
3.93 33,550 8.8 3.93 33,550 3.93
4.50 45,000 0.7 4.50 45,000 4.50
$5.00 40,000 8.8 5.00 40,000 5.00
----------------- --- ----- ---------- -----
7,928,550 9.9 $ 0.14 4,023,550 $ 0.16
----------------- --- ----- ---------- -----
----------------- --- ----- ---------- -----
</TABLE>
<PAGE>
VISTA 2000, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 28, 1996 AND DECEMBER 30, 1995
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(6) STOCKHOLDER'S EQUITY - CONTINUED
STOCK OPTIONS - CONTINUED
The Company uses the intrinsic value method in accounting for its stock
options issued to employees. In applying this method, no compensation cost
has been recognized related to the granting of options to employees. Had
compensation cost for the Company's stock options plans been determined based
on the fair value at the grant dates for awards to employees under those
plans, the Company's net loss and loss per share would have resulted in the
pro forma amounts indicated below:
1996 1995
----------- -----------
Net loss As reported $ (19,401) $ (14,663)
Pro forma (19,414) (15,927)
Net loss per As reported $ (1.20) $ (2.33)
common share Pro forma (1.20) (2.53)
For purposes of the pro forma amounts above, the fair value of each option
grant was estimated on the date of grant using the Black-Scholes
options-pricing model with the following weighted-average assumptions used
for grants in 1996 and 1995; expected volatility of 295% and 107%, risk-free
interest rates of 5.9%-6.6%; and expected lives of 2 years.
STOCK RESCISSIONS
During 1996, certain shareholders rescinded approximately 220,000 shares of
common stock previously issued and returned the shares to the Company. The
Company holds these shares in treasury at amounts which were recorded when
the shares and related options were issued, totaling approximately $933.
<PAGE>
VISTA 2000, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 28, 1996 AND DECEMBER 30, 1995
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(6) STOCKHOLER'S EQUITY - CONTINUED
Series Convertible Preferred Stock:
The Company has designated 142,000 of its 500,000 authorized preferred shares
as follows:
SHARES AUTHORIZED LIQUIDATION PREFERENCE PER SHARE
----------------- --------------------------------
Series A 100,000 $ 100
Series B 20,000 $ 1,000
Series C 2,000 $10,000
Series D 20,000 $ 1,000
The remaining 358,000 authorized preferred shares have not been designated as
a series. The preferred stock is recorded net of issuance costs.
The Company's preferred stock was issued in several series pursuant to
separate subscription agreements.
The preferred stock is convertible into Company common stock based on a
formula defined in the subscription agreements and is convertible at various
times after its issuance. The conversion price is based on a discount to the
market price of the Company's common stock on the date of conversion. Because
the Company's common stock has been delisted by NASDAQ, there is uncertainty
as to the number of shares of the Company's common stock required to be
issued in a preferred stock conversion. The Company is working with the
convertible preferred stockholders to resolve this issue.
The Company may not pay any common stock dividends unless all preferred
dividends have been paid. Any remaining preferred shares will automatically
convert to common shares at various times in 1997.
COMMITMENT TO ISSUE COMMON STOCK
Management expects that the Company will issue approximately 14,454,000
shares of common stock during 1997 in connection with the settlement of a
class action lawsuit filed by certain stockholders (see Note 5)
<PAGE>
VISTA 2000, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 28, 1996 AND DECEMBER 30, 1995
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(7) EMPLOYEE RETIREMENT SAVINGS PLAN
ACPI contributes to employee retirement plans covering substantially all of
its employees. Charges to consolidated operations for these plans were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------
<S> <C> <C>
DECEMBER 28, DECEMBER 30,
1996 1995
--------------- ---------------
Discretionary Contribution Profit Sharing--401(k).................................... $ 225 $ 223
Multi-Employer Pension Plan.......................................................... 507 774
----- -----
$ 732 $ 997
----- -----
----- -----
</TABLE>
The contributions to the union sponsored, multi-employer pension plan were
determined based upon the number of employees working per week. At January 1,
1996, the date of the latest actuarial valuation, the plan administrator
determined that the subsidiary would have no withdrawal liability with
respect to the year ended December 28, 1996.
(8) RELATED PARTY TRANSACTIONS
At December 28, 1996, accrued expenses include $225 due to directors and an
officer for consulting services.
In October 1996, ACPI, through one of its wholly-owned subsidiaries,
purchased certain land and manufacturing facilities from a partnership
controlled by certain officers of ACPI for $1,773 cash and assumption of a
$3,227 mortgage note. This facility was previously leased by ACPI from the
related party.
Subsequent to December 28, 1996, ACPI, through one of its wholly-owned
subsidiaries, purchased a second manufacturing facility from a corporation
controlled by certain officers of ACPI for $1,158 cash and assumption of a
$842 mortgage note. This facility was previously leased by ACPI from the
related parties.
At December 28, 1996, the Company has a note receivable outstanding from a
former officer. This note is fully reserved pending final settlement with the
Company.
<PAGE>
VISTA 2000, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 28, 1996 AND DECEMBER 30, 1995
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(9) Income Taxes
The Company's temporary differences result in a deferred income tax asset
which is reduced to zero by a related valuation allowance, summarized as
follows:
DECEMBER 28, DECEMBER 30,
1996 1995
------------ -------------
Deferred tax assets:
Operating loss carryforwards................. $ 14,531 $ 6,643
Accounts receivable.......................... 790 1,025
Accruals..................................... 661 505
Compensation related......................... 636 433
Tax credit carryforwards..................... 236 210
Fixed assets................................. -- 80
Other........................................ 28 31
------------ ------------
Gross deferred tax assets.................. 16,882 8,927
Deferred tax asset valuation allowance..... (14,511) (7,516)
------------ ------------
Net deferred tax asset....................... 2,371 1,411
------------ ------------
Deferred tax liabilities:
Inventories.................................. 1,710 1,411
Fixed assets................................. 661 --
2,371 1,411
------------ ------------
Net deferred income tax asset.................. $ -- $ --
------------ ------------
------------ ------------
Included in the tax credit carryforward is approximately $206 of alternative
minimum tax credits available to reduce future income taxes payable. These
alternative minimum tax credits do not have an expiration date.
Income tax expense for 1996 consists primarily of current state taxes
attributable to ACPI and its subsidiaries.
<PAGE>
VISTA 2000, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 28, 1996 AND DECEMBER 30, 1995
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(9) INCOME TAXES - CONTINUED
At December 28, 1996, the Company had operating loss carryforwards for U.S.
income tax purposes of approximately $38,240 available to reduce future
taxable income, which expire as follows:
NET
YEAR OF OPERATING
EXPIRATION LOSS
------------- -----------
2002 $ 1,834
2006 377
2007 2,540
2008 1,693
2009 8,483
2010 4,500
2011 18,813
---------
$ 38,240
---------
---------
Included in the operating loss carryforward is $1,834 of losses which expire
in 2002 and which can only be utilized by the Boss Manufacturing subsidiary
of ACPI. Additionally, the loss carryforward which expires in 2010 includes
approximately $4,500 of losses, the utilization of which is limited to
approximately $750 annually through 2000.
The Company has experienced a change in control, as defined under Section 382
of the Internal Revenue Service Code, during 1995 and 1996. Additionally,
management expects another change in control to occur during 1997 upon
issuance of the common stock in settlement of the class action lawsuit
described in Note 5. As a result, the utilization of a significant portion of
the tax loss carryforwards will be limited on an annual basis and could
expire unused.
(10) Writedown of Operating Assets
During 1996, Alabaster continued to incur significant operating losses.
Management's estimates of future operations did not support the carrying
amount of Alabaster's net assets. Accordingly, a change of $1,817 was
recorded in the fourth quarter of 1996, representing management's estimate of
the excesss of Alabaster's net assets over their estimated net realizable value.
<PAGE>
VISTA 2000, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 28, 1996 AND DECEMBER 30, 1995
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(10) WRITEDOWN OF OPERATING ASSETS - CONTINUED
In September 1996, the Company closed the operations of Intelock and wrote
down all remaining Intelock assets to their estimated net realizable value.
Vista incurred a charge of $659 as a result of this write down. The assets
and liabilities of Intelock included in the accompanying December 28, 1996
consolidated balance sheet were not significant. Intelock, which was acquired
by Vista in 1995, was a manufacturer and distributor of digital locking
devices.
(11) ACQUISITIONS AND DISPOSITIONS
1996
In August 1996, the Company sold substantially all the assets of FSPI for
$1,800 cash and a $100 promissory note. The purchaser also assumed
substantially all operating liabilities of FSPI. Vista recognized a loss on
the sale of FSPI assets of $8,783. FSPI was a manufacturer and distributor of
gas detection devices and other home safety products.
In May 1996, ACPI sold the inventory, tooling and other supplies of a product
line for $1,059 in cash. The sale resulted in a gain of $472.
The assets and liabilities remaining from the FSPI and the disposed product
line operations included in the accompanying December 28, 1996 consolidated
balanced sheet were not significant.
1995
During fiscal 1995 Vista completed four acquisitions and made one disposition
which are summarized below.
Effective September 30, 1995, Vista acquired all of the outstanding common
stock of ACPI through a cash tender offer totaling approximately $13,834
exclusive of acquisition costs. ACPI manufactures and distributes consumer
hardware products including key blanks, related key accessories, knives,
letters, numbers, signs, gloves and pet products as well as other items.
<PAGE>
VISTA 2000, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 28, 1996 AND DECEMBER 30, 1995
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(11) ACQUISITIONS AND DISPOSITIONS - CONTINUED
1995 - CONTINUED
Effective July 31, 1995, Vista acquired all of the outstanding common stock
of Alabaster in exchange for 400,000 shares of common stock issued by Vista
valued at $2 per share or $800, exclusive of acquisition costs. Alabaster
manufactures and distributes injection molded plastic products for the
housewares industry.
Effective June 30, 1995, Vista acquired all of the outstanding common stock
of Intelock and certain manufacturing assets owned by the former parent of
Intelock in exchange for 219,200 shares of common stock of Vista and warrants
to acquire 138,400 common shares of Vista, together valued at $1,097,
exclusive of $5 cash paid and acquisition costs. Intelock manufactures and
distributes digital locking devices.
The acquisitions of ACPI, Alabaster and Intelock were accounted for as
purchases. Accordingly, each of the purchase prices were allocated to assets
and liabilities based on their estimated fair values at the date of
acquisition. Results of operations of ACPI, Alabaster and Intelock have been
included in the consolidated financial statements from the respective date of
each acquisition.
Effective May 1995, Vista acquired all of the outstanding common stock of
Promotional Marketing, Inc. (PMI) and executed a non-competition agreement
with former principals of PMI for a total of $610 exclusive of acquisition
costs. PMI provided direct marketing services to a variety of customers. The
acquisition has been accounted for as a purchase using the equity method of
accounting. Effective November 30, 1995, PMI sold substantially all of its
operating assets net of operating liabilities back to a company owned by the
former principals of PMI in exchange for a guaranty of payment on a note
receivable held by Vista. Vista recognized a loss of $1,147 on the sale of
PMI. The accompanying 1995 consolidated statement of operations includes
PMI's results of operations for the seven month period from the acquisition
date to the date of disposition of substantially all the operating assets and
liabilities of PMI. Assets and liabilities remaining from PMI operations
included in the December 30, 1995 consolidated balance sheet were not
significant.
<PAGE>
VISTA 2000, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 28, 1996 AND DECEMBER 30, 1995
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(11) ACQUISITIONS AND DISPOSITIONS - CONTINUED
1995 - CONTINUED
The pro forma results of operations which follow assume that the acquisitions
and dispositions of subsidiaries described above had occurred at the
beginning of each period presented and include Vista, ACPI and Alabaster. In
addition to combining the historical results of operations of the companies,
the pro forma calculations include adjustments for the estimated effects on
the Company's historical results of operations for depreciation, interest and
other purchase accounting adjustments related to the acquisitions. These
results are not necessarily indicative of the results that would have
occurred if the transactions had occurred at the beginning of each period
presented nor are the results indicative of future results.
<TABLE>
<CAPTION>
UNAUDITED
THREE MONTH
YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
DECEMBER 28, DECEMBER 30, DECEMBER 31, SEPTEMBER 30,
1996 1995 1994 1994
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Sales.................................................. $ 108,967 $ 115,150 $ 29,750 $ 118,998
Net earnings (loss).................................... (6,832) (8,272) (255) 588
Net earnings (loss) per
common share.......................................... $ (.43) $ (1.29) $ (.08) $ .23
</TABLE>
(12) NEW ACCOUNTING PRONOUNCEMENT
The FASB has issued Statement of Financial Accounting Standards No. 128,
Earnings Per Share, which is effective for financial statements issued after
December 15, 1997. Early adoption of the new standard is not permitted. The
new standard eliminates primary and fully diluted earnings per share and
requires presentation of basic and diluted earnings per share together with
disclosure of how the per share amounts were computed. The adoption of this
new standard is not expected to have a material impact on the disclosure of
earnings per share in the financial statements.
<PAGE>
VISTA 2000, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 28, 1996 AND DECEMBER 30, 1995
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(13) Events (Unaudited) Subsequent to the Date of Auditors' Report
On April 15, 1997, employment agreements with two officers of ACPI were
replaced with severance agreements. The severance agreements provide for
minimum annual payments of $169 each through 1997. The severance agreements
also provide for additional aggregate payments of up to $400 based upon the
occurrence of certain events, as defined in the agreements.
On April 18, 1997, Vista sold all of its Intelock common stock for $5 cash
and a $95 promissory note. The amount due under the note is subject to
certain adjustments, the most significant of which is a $50 reduction in the
amount of the note if principal payments of $45 are made within 120 days of
closing.
<PAGE>
Report of Independent Certified Public Accountants
on Schedule
Board of Directors
Vista 2000, Inc.
In connection with our audit of the consolidated financial statements of
Vista 2000, Inc. and subsidiaries referred to in our reported dated March 4,
1997 (April 4, 1997 as to the second paragraph of Note 4 and April 14, 1997
as to the fifth paragraph of Note 5), which is included in the annual report
to security holders and incorporated by reference in Part II of this form, we
have also audited Schedule II for the years ended December 28, 1996 and
December 30, 1995. In our opinion, this schedule presents fairly, in all
material respects, the information required to be set forth therein.
Atlanta, Georgia
March 4, 1997
<PAGE>
Vista 2000, Inc., and subsidiaries
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- ----------- -------------------------- ------------- ---------
BALANCE AT CHARGED CHARGED BALANCE
BEGINNING TO COSTS TO OTHER AT END
DESCRIPTION OF PERIOD AND EXPENSES ACCOUNTS DEDUCTIONS(1) OF PERIOD
----------- ----------- ------------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Year ended December 28, 1996
Allowance for doubtful accounts and returns...... $ 2,230 $ 493 $ -- $ 1,318 $ 1,405
Deferred tax asset valuation allowance........... 7,516 6,995 -- -- 14,511
Year ended December 30, 1995
Allowance for doubtful accounts and returns...... 40 2,190 -- -- 2,230
Deferred tax asset valuation allowance........... 2,310 5,206 -- -- 7,516
Three month period ended December 31, 1994
Allowance for doubtful accounts and returns.... 5 35 -- -- 40
Deferred tax asset valuation allowance......... 1,925 385 -- -- 2,310
Year ended September 30, 1994
Allowance for doubtful accounts and returns...... -- 5 -- -- 5
Deferred tax asset valuation allowance........... -- 1,925 -- -- 1,925
</TABLE>
(1) - bad debt write offs
<PAGE>
[LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Vista 2000, Inc.
We have audited the accompanying balance sheets of Vista 2000, Inc. as of
September 30, 1994, and December 31, 1994, and the related statement of income
(loss), stockholders' equity (deficit), and cash flows for the year ended
September 30, 1994 and the three month period ended December 31, 1994. 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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
On January 20, 1995, we originally reported on the September 30, 1994 financial
statements referred to above. This report was issued prior to the discovery of
the matters set forth in Note 13 to the financial statements, wherein revisions
of amounts previously reported as of September 30, 1994, and for the year then
ended are described.
In our opinion, the financial statements referred to above, present fairly, in
all material respects, the financial position of Vista 2000, Inc. as of
September 30, 1994, and December 31, 1994 and the results of its operations and
its cash flows for the year and three month period, respectively then ended, in
conformity with generally accepted accounting principles.
/s/ J. Allen Seymour, CPA, P.C.
Certified Public Accountants
Athens, Georgia
May 17, 1996
<PAGE>
- --------------------------------------------------------------------------------
VISTA 2000, INC.
- --------------------------------------------------------------------------------
BALANCE SHEETS AS OF SEPTEMBER 30, 1994* AND DECEMBER 31, 1994
ASSETS:
<TABLE>
<CAPTION>
* 9/30/94 12/31/94
---------- ----------
<S> <C> <C>
CURRENT ASSETS:
Cash and Cash Equivalents $ 4,235 $ 448,517
Accounts Receivable, Net of Allowance for Doubtful
Accounts of $4,875 and $39,876, respectively 41,791 62,629
Inventories 624,207 688,338
Prepaid Expenses 12,293 42,181
---------- ----------
TOTAL CURRENT ASSETS 682,526 1,241,665
---------- ----------
PROPERTY AND EQUIPMENT:
Property and Equipment, at cost 203,031 255,886
Less: Accumulated Depreciation 62,043 70,920
---------- ----------
PROPERTY AND EQUIPMENT, NET 140,988 184,966
---------- ----------
DEFERRED OFFERING COSTS 501,578 81,183
OTHER DEFERRED CHARGES 99,945 84,245
OTHER ASSETS 4,672 5,172
---------- ----------
TOTAL ASSETS $1,429,709 $1,597,231
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT):
CURRENT LIABILITIES:
Short-Term Debt $1,127,500 $0
Current Portion of Long Term Debt 346,729 543,056
Accounts Payable 1,522,580 647,143
Accrual for Loss Resulting From Questionable Sales 635,000 0
Accrued Liabilities 286,467 263,833
---------- ----------
TOTAL CURRENT LIABILITIES 3,918,276 1,454,032
---------- ----------
LONG-TERM DEBT 688,965 152,235
---------- ----------
TOTAL LIABILITIES 4,607,241 1,606,267
---------- ----------
STOCKHOLDERS' EQUITY
Preferred Stock, $1.00 par value,
authorized 500,000 shares,
no shares issued and outstanding
Common Stock, $.01 par value, authorized
10,000,000 shares;
issued and outstanding 3,281,226 shares 21,312 32,812
Paid-In Capital in Excess of Par Value 2,054,950 7,029,828
Accumulated Deficit (5,253,794) (6,275,893)
Less: Treasury Shares and Warrants - at cost,
69,200 shares and Warrants to acquire
138,400 shares (795,783)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY (3,177,532) (9,036)
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,429,709 $1,597,231
---------- ----------
---------- ----------
</TABLE>
* AS REVISED. SEE NOTE 13
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
Page 2
<PAGE>
- --------------------------------------------------------------------------------
VISTA 2000, INC.
- --------------------------------------------------------------------------------
STATEMENT OF INCOME
FOR THE YEAR ENDED SEPTEMBER 30, 1994* AND THE THREE-MONTH PERIOD ENDED
DECEMBER 31, 1994
<TABLE>
<CAPTION>
THREE-MONTH
* YEAR ENDED PERIOD ENDED
9/30/94 12/31/94
---------- ----------
<S> <C> <C>
NET SALES $136,678 $1,318
COST OF SALES 313,888 25,843
---------- ----------
GROSS MARGIN (177,210) (24,525)
---------- ----------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 1,721,190 858,649
---------- ----------
OPERATING INCOME (LOSS) (1,898,400) (883,174)
---------- ----------
OTHER INCOME AND EXPENSE:
Other Income 45,000 4,080
Interest Expense (266,100) (143,005)
---------- ----------
TOTAL OTHER INCOME AND EXPENSE (221,100) (138,925)
---------- ----------
NET INCOME (LOSS) ($2,119,500) ($1,022,099)
---------- ----------
---------- ----------
NET LOSS PER COMMON SHARE ($0.99) ($0.36)
---------- ----------
---------- ----------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 2,131,226 2,813,293
---------- ----------
---------- ----------
</TABLE>
* AS REVISED. SEE NOTE 13
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
Page 3
<PAGE>
- --------------------------------------------------------------------------------
VISTA 2000, INC.
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEAR ENDED SEPTEMBER 30, 1994* AND THE THREE-MONTH PERIOD ENDED
DECEMBER 31, 1994
<TABLE>
<CAPTION>
ADDITIONAL NET
COMMON STOCK PAID-IN ACCUMULATED TREASURY STOCK STOCKHOLDERS
SHARES DOLLARS CAPITAL DEFICIT SHARES DOLLARS EQUITY(DEFICIT)
------------------------- ---------- ---------- ---------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, SEPTEMBER 30, 1993 2,131,226 $21,312 $2,054,950 ($2,893,603) $0 ($817,341)
Distribution to Stockholders (240,691) (240,691)
Net Loss as Revised, See Note 13 (2,119,500) (2,119,500)
------------------------- ---------- ---------- ---------------- ----------
BALANCE SEPTEMBER 30, 1994 2,131,226 $21,312 $2,054,950 ($5,253,794) $0 (3,177,532)
Proceeds, Net of Issuance Costs of
$1,339,000 From Public
Offering of Common Stock 1,150,000 11,500 4,974,878 4,986,378
Acquisition of Treasury
Stock & Warrants 69,200 (795,783) (795,783)
Net Loss (1,022,099) (1,022,099)
------------------------- ---------- ---------- ---------------- ----------
BALANCE, DECEMBER 31, 1994 3,281,226 $32,812 $7,029,828 ($6,275,893) 69,200 ($795,783) ($9,036)
------------------------- ---------- ---------- ---------------- ----------
------------------------- ---------- ---------- ---------------- ----------
</TABLE>
* AS REVISED. SEE NOTE 13
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
Page 4
<PAGE>
- --------------------------------------------------------------------------------
VISTA 2000, INC.
- --------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 1994* AND THE THREE-MONTH PERIOD ENDED
DECEMBER 31, 1994
<TABLE>
<CAPTION>
THREE-MONTH
* YEAR ENDED PERIOD ENDED
9/30/94 12/31/94
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATIONS
Net Loss ($2,119,500) ($1,022,099)
Add: Charges Against Net Income Not Requiring
the Outlay of Cash - Depreciation 40,929 8,877
Increase (Decrease) In:
Accounts Payable (146,503) (875,437)
Accrued Liabilities 837,049 (657,634)
Decrease (Increase) In:
Notes and Accounts Receivable 157,185 (20,838)
Deferred Charges (99,945) 436,095
Inventories 231,998 (64,132)
Prepaid Expenses 31,466 (29,888)
Other Assets (500)
----------- -----------
TOTAL CASH FLOWS FROM OPERATIONS ($1,067,321) ($2,225,556)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Property and Equipment ($7,729) ($52,855)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Proceeds From (Repayment of)
Short-Term Borrowings 851,327 (1,127,500)
Net Proceeds From Long-Term Debt 24,109
Principal Repayments on Long-Term Debt (340,403)
Proceeds From Issuance of Common Stock 6,350,000
Offering Costs (476,578) (1,363,622)
Increase in Accounts Payable Attributable to
Deferred Offering Costs 390,912
Treasury Stock and Warrants Acquired (795,783)
----------- -----------
$789,770 $2,722,692
----------- -----------
TOTAL CASH FLOWS ($285,280) $444,281
CASH AT THE BEGINNING OF THE PERIOD 289,515 4,235
----------- -----------
CASH AT THE END OF THE PERIOD $4,235 $448,516
----------- -----------
----------- -----------
SUPPLEMENTAL DISCLOSURES:
Interest Paid $16,260 $392,844
----------- -----------
----------- -----------
Income Taxes Paid $0 $0
----------- -----------
----------- -----------
NONCASH INVESTING AND FINANCING ACTIVITIES:
Note Payable Issued For Patent Rights 9,309
Note Payable Issued For Excess Over Cost of
Patent Rights 240,691
----------- -----------
Total $250,000 $0
----------- -----------
----------- -----------
</TABLE>
* AS REVISED. SEE NOTE 13
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
Page 5
<PAGE>
- --------------------------------------------------------------------------------
VISTA 2000, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1994 AND DECEMBER 31, 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL - Vista 2000, Inc. ("the Company"), successor by merger to Firearm
Safety Products, Inc. ("Firearm") was organized to design, develop,
manufacture and market consumer products. Firearm was organized on
December 19, 1991 as Triggerguard, Inc., a Georgia corporation. Effective
August 10, 1992, the name of the Company was changed to Firearm Safety
Products, Inc. Pursuant to a Plan and Agreement of Merger entered into
October 20, 1993, Firearm was merged into VISTA 2000, Inc., ("Vista") a
newly formed Delaware corporation. In conjunction with the plan of merger,
Family Safety Products, Inc. ("FSPI"), a Georgia corporation was formed as
a wholly owned subsidiary of the Company, and assets and operations were
transferred to FSPI.
PUBLIC OFFERINGS - On November 1, 1994, the Company completed a $5,500,000
public offering of 1,000,000 units, each unit consisting of one share of
Company common stock and Series A Warrants to purchase two common shares.
Each warrant entitles the holder to purchase, for a period of 48 months
ending October 26, 1998, one share of common stock at an exercise price of
$7.00 per share during the first 24 months and $10.00 per share thereafter,
subject to adjustment in certain circumstances. In December, 1994, an
additional 150,000 of the units, representing the underwriters' over-
allotment option with respect to the offering, were sold. The proceeds of
this offering totaled $6,350,000. Offering costs, which consisted of
underwriting fees, and professional and consulting fees totaling
$1,338,622, were offset against the total proceeds.
CHANGE IN FISCAL YEAR - During 1995, the Company elected to change its
fiscal year-end from September 30, to a 52/53 week year ending on the last
Saturday in the calendar year.
CASH AND CASH EQUIVALENTS - For purposes of the statement of cash flows,
the Company considers all highly liquid debt instruments, purchased with a
maturity of three months or less, to be cash equivalents.
REVENUE RECOGNITION - The Company recognizes revenue and provides for the
estimated cost of returns and allowances in the period the products are
shipped.
INVENTORIES - Inventories are stated at the lower of average cost or
market.
PROPERTY AND EQUIPMENT - Property and equipment are recorded at historical
cost. Costs for maintenance, repairs, and minor replacements are expensed
as incurred. The Company provides for depreciation and amortization using
the straight-line method over the following estimated useful lives:
Machinery and Equipment. . . . . . . . . . 3 to 10 Years
Office Furniture and Equipment . . . . . . 3 to 8 Years
Depreciation expense for year ended September 30, 1994 and the three month
period ended December 31, 1994 was $40,929 and $8,877, respectively.
ADVERTISING - All advertising costs are charged to expense as incurred.
For the year ended September 30, 1994 and the three month period ended
December 31, 1994, advertising costs charged to expense were $65,002 and
$37,364, respectively.
Page 6
<PAGE>
INCOME TAXES - The Company accounts for income taxes using the asset and
liability method as prescribed in Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes. Under the asset and
liability method, deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. Under Statement 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.
RESEARCH AND DEVELOPMENT COSTS AND PRODUCT DEVELOPMENT COSTS - Research and
development costs are expensed as incurred, and totaled $307,079 for the
year ended September 30, 1994, and $36,017 for the three month period ended
December 31, 1994.
All product development costs are charged to expense as incurred until
technological feasibility has been established for the product. Product
development costs incurred after technological feasibility has been
established are capitalized and amortized, commencing with product release,
on a straight line basis over twelve months, or the estimated useful life
of the product whichever is shorter. No product development costs were
capitalized or amortized for the year ended September 30, 1994, or the
three month period ended December 31, 1994.
WARRANTY COSTS AND RETURNS - The Company provides for estimated warranty
costs and returns at the time of sale. Accrued costs applicable to
warranty obligations and returns are classified as accrued liabilities and
are not significant.
NET LOSS PER COMMON SHARE - Net loss per share amounts are computed by
dividing net loss for the period by the weighted average number of common
shares and common equivalent shares outstanding. Fully diluted net income
per common share is not disclosed because the effect of common stock
equivalents would be antidilutive.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS - The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures
of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The Company's financial instruments
include cash, cash equivalents, and long-term debt. The carrying value of
cash and cash equivalents approximates the fair value due to the relatively
short period to maturity of the instruments. The carrying value of the
Company's long-term obligations approximates fair value based upon
borrowing rates currently available to the Company for borrowings with
comparable maturities.
RECLASSIFICATIONS - Certain amounts in the prior period financial
statements have been reclassified to conform to the December 31, 1994
presentation.
Page 7
<PAGE>
2. INVENTORIES
As of September 30, 1994 and December 31, 1994, Inventories consisted of
the following:
9/30/94 12/31/94
--------- ---------
Raw Materials . . . . . . . . . . . . . . . . $ 676,755 $ 740,887
Work in Progress. . . . . . . . . . . . . . . 0 0
Finished Goods. . . . . . . . . . . . . . . . 30,722 30,722
--------- ---------
Total. . . . . . . . . . . . . . . . . . . 707,477 771,609
Less: Valuation and Return Allowance . . . . (83,271) (83,271)
--------- ---------
Net. . . . . . . . . . . . . . . . . . . . $ 624,206 $ 688,338
--------- ---------
--------- ---------
3. PROPERTY AND EQUIPMENT
As of September 30, 1994 and December 31, 1994, Property and Equipment were
as follows:
9/30/94 12/31/94
--------- ---------
Production Equipment. . . . . . . . . . . . . $ 164,345 $ 210,771
Office Furnishings and Equipment. . . . . . . 38,686 45,115
Total at Cost. . . . . . . . . . . . . . . 203,031 255,886
--------- ---------
Less: Accumulated Depreciation . . . . . . . (62,042) (70,920)
--------- ---------
Net. . . . . . . . . . . . . . . . . . . . $ 140,988 $ 184,966
--------- ---------
--------- ---------
4. DEFERRED OFFERING COSTS
Deferred offering costs are issuance costs to be offset against proceeds
from the sale of securities upon successful completion of a planned
securities offering. During the three month period ended December 31,
1994, $501,376 in offering costs deferred as of September 30, 1994 were
offset against the proceeds of the Company's initial public offering (See
Note 9). As of December 31, 1994 deferred offering costs totaled $81,183.
This amount was offset against the proceeds of a subsequent sale of stock
(See Note 12).
5. OTHER DEFERRED CHARGES
In the year ended September 30, 1994, the Company entered into agreements
with an advertising brokerage organization for the sale of certain products
of the Company, with payment in the form of purchase credits, to be applied
toward future advertising costs. The agreement allows the Company to
utilize the credits, when combined with a cash payment, to purchase
advertising media, products and/or services over a two year period and may
be renewed for an additional twelve months. Revenue of $99,945 was
recognized in this transaction which represented the cost to the Company of
the inventory exchanged. Deferred advertising costs arising from the
transaction will be amortized to advertising expense over the two year
period of the agreement.
Page 8
<PAGE>
6. SHORT TERM BORROWINGS:
Short-term borrowings at September 30, 1994 included a bank note in the
amount of $50,000, a loan from a stockholder of the company in the amount
of $30,000, and additional short-term notes from unaffiliated individuals.
All of these obligations were retired during the period October 1, 1994,
through December 31, 1994. The weighted average monthly interest rate on
the borrowings was 17.09% for the year ended September 30, 1994. As of
September 30, 1994, the weighted average interest rate on the unpaid
balance of these borrowings was 26.21%.
Short Term Borrowings Consisted of the Following as of September 30, 1994
and December 31, 1994:
9/30/94 12/31/94
----------- -----------
Bank Note . . . . . . . . . . . . . . . . . . $ 50,000 $ 0
Stockholder Loan. . . . . . . . . . . . . . . 30,000 0
Additional Short-Term notes . . . . . . . . . 1,047,500 0
----------- -----------
Total. . . . . . . . . . . . . . . . . . . $ 1,127,500 $ 0
----------- -----------
----------- -----------
7. LONG TERM DEBT
Long-term debt consisted of the following as of September 30, 1994 and
December 31, 1994:
9/30/94 12/31/94
----------- -----------
15% Convertible Debentures Due in 1994. . . . $ 328,000 $ 0
8% Note Payable to a Former Employee
in Quarterly Installments of $5,187
(See Note 11). . . . . . . . . . . . . . . 14,960 5,183
15% Demand notes payable to Officers of the
Company (See Note 11) . . . . . . . . . . . 288,100 286,165
10% Note payable to ADF, Inc., a Corporation
Owned by a Family Member of the Chairman
of the Board of Directors,
Due June 28, 1996. . . . . . . . . . . . . 150,000 150,000
Obligations Under a Capital Lease . . . . . . 4,634 3,944
8% Note Payable (See Note 11) . . . . . . . . 250,000 250,000
----------- -----------
Totals . . . . . . . . . . . . . . . . . . 1,035,694 695,292
Less: Current Maturities . . . . . . . . . . ( 346,729) ( 543,057)
----------- -----------
Total, Net of Current Maturities . . . . . $ 688,965 $ 152,235
----------- -----------
----------- -----------
Scheduled principal payments of long-term debt and capital lease
obligations are as follows:
Year Ending December 31, 1997. . . . . . . $ 152,235
-----------
-----------
Substantially all of the Company's inventory, property, and equipment have
been pledged as collateral for the Company's long-term debt.
Page 9
<PAGE>
8. LEASES
The Company leases its office and operating facilities and certain
equipment under operating lease agreements which expire on various dates
and require the company to pay all maintenance costs. Rent expense under
these leases was approximately $37,960 for the year ended September 30,
1994, and $14,211 for the three month period ended December 31, 1994.
Commitments under noncancelable operating leases are summarized as follows:
Year Ending
December 31
-----------
1995 . . . . . . . . . . . . . . . . . . . . . . . $ 26,282
1996 . . . . . . . . . . . . . . . . . . . . . . . 8,086
--------
Total. . . . . . . . . . . . . . . . . . $ 34,368
--------
--------
9. STOCKHOLDERS' EQUITY (DEFICIT)
COMMON STOCK SPLIT - On March 11, 1994, the Board of Directors authorized a
one-for-two reverse common stock split. On November 30, 1993, the Board of
Directors authorized a two-for-three reverse common stock split. All
references to number of shares and to stock warrants as well as per share
information have been adjusted to reflect the stock splits on a retroactive
basis.
COMMON STOCK WARRANTS - At December 31, 1994, warrants for the purchase of
36,408 shares of Company common stock, that were issued in conjunction with
debentures sold by the Company, were issued and outstanding. The warrants
may be exercised in whole or in part at any time during the two year period
beginning on the second anniversary of the date of issue of the warrant
after which they expire. In addition, in May 1994, the Company issued
235,598 of its 1994 Convertible Debenture Warrants to all the former
debenture holders that acquired common stock of the Company on September
30, 1993, pursuant to their right of conversion. The 1994 Warrants provide
for the purchase of one share of common stock at an exercise price of $2.50
per share and may be exercised for a three year period commencing 24 months
from the date of issuance.
Upon completion of the Company's public offering, the Company agreed to
sell to the Underwriters as additional compensation, warrants to acquire
units representing up to 100,000 shares of common stock at $9.08 per share,
and up to 200,000 shares of common stock underlying the Series A Warrants
at $11.55 per share.
STOCK OPTION PLAN - On November 30, 1993, the Company adopted stock option
plans providing for the issuance of options covering up to 550,000 shares
of common stock to be issued to officers, directors or consultants to the
Company
On March 15, 1994, options to purchase 225,000 shares were granted to
officers and directors of the Company with an exercise price of $6.05
vesting at the rate of 75,000 shares annually from September 30, 1995
through September 30, 1997.
OPTIONS HELD BY FORMER EMPLOYEE - As a condition of separation from the
Company, 83,333 shares of common stock originally issued to a former
employee are held in escrow as collateral against the Company's obligation
to the former employee (see Note 7). The Company granted to the President
of the Company the right to purchase the 83,333 shares for $2,500 ($.03 per
share) when the obligation to the former employee has been repaid.
TREASURY STOCK AND WARRANTS - In November 1994, Greenway Capital
Corporation ("Greenway"), managing underwriter for the Company's initial
public offering, as agent for the Company (but without the
Page 10
<PAGE>
Company's knowledge or consent), repurchased 187,280 units for a total cost
of $1,325,388. Later in the month (again, without the Company's knowledge),
Greenway resold 120,000 of the units at a total price of $532,431. In
December 1994, approximately $204,000 was transferred to Company's
operating account. The Company held the remaining units in treasury and
utilized them in 1995 in connection with acquisition activity (See
Note 12).
In management's judgment, this unauthorized action by Greenway (which first
came to the Company's attention on Friday, January 27, 1995) violates the
underwriting agreement and other agreements between the Company and
Greenway. The amount of any potential liability to the Company, or claim by
the Company against Greenway Capital Corporation, resulting from these
transactions, cannot be determined at this time. The Company has
considered several courses of action to protect its interests, including
legal proceedings against Greenway and its principals. However, due to the
recent failure and subsequent liquidation of Adler Coleman Clearing
Corporation, the clearing firm for Greenway, the Company does not feel, at
this time, that further action would provide a reasonable return, though it
continues to evaluate available options against Greenway and Adler Coleman.
STOCK BUYBACK PROGRAM - On January 20, 1995, the Company announced a stock
buyback program, where up to 200,000 shares of the Company's stock may be
repurchased on the open market. The shares thus acquired were used in
acquisition activities (See Note 12).
10. INCOME TAXES
At December 31, 1994, the Company had net operating loss carryforwards for
federal income tax purposes of approximately $5 million which are available
to offset future federal taxable income, if any, through 2009. A valuation
allowance has been provided for the deferred tax asset resulting from the
net operating loss carryforwards. Other temporary differences are
insignificant.
11. RELATED PARTY TRANSACTIONS
During fiscal 1993, patent rights with respect to certain of the Company's
products were held by Blue Ridge Ventures, Inc. ("BRV"), a corporation
which was owned beneficially by the President and the Chairman of the Board
of the Company as of December 31, 1994. Pursuant to an agreement between
BRV and the Company, the Company acquired these patent rights on October 1,
1993 for $250,000 payable October 1, 1995 with interest at 8% per annum.
Under the terms of the agreement, the Company has the right to manufacture
and market the products which utilize this patented technology. No future
royalty payments will be due to BRV, and BRV has agreed to waive and
forgive all amounts that would have been due under the licensing agreement
through September 30, 1993. Accordingly, royalties of approximately $37,245
incurred by the Company in fiscal 1993 have been reported as additional
contributed capital. The Company paid legal costs of approximately $12,715
in connection with the patent applications. The stockholders of BRV
incurred expenses of approximately $9,300 in connection with the original
issuance of the patent rights. The excess of the purchase price for the
patent rights paid by the Company over the cost incurred by the
stockholders of BRV was accounted for by the Company as a distribution to
stockholders.
The Company borrowed $288,100 from the President of the Company and the
Chairman of the Board of Directors. These loans are due on demand, although
lenders have agreed not to seek repayment prior to fiscal year 1997.
Additionally, $150,000 was borrowed by the Company from a corporation owned
by a family member of the Chairman. Interest expense on these notes was
$9,519 in the year ended September 30, 1994, and $14,215 in the three
month period ended December 31, 1994.
Page 11
<PAGE>
12. SUBSEQUENT EVENTS
CLASS ACTION LAWSUITS - Subsequent to December 30, 1995, the Company,
together with certain officers, directors and third parties, has been named
as a defendant in fifteen (15) class action lawsuits filed by stockholders
of the Company in the United States District Court for the Northern
District of Georgia. The lawsuits allege that the Company violated the
Federal Securities Laws, particularly Sections 10-b and 20-a of the
Securities Exchange Act of 1934, as amended, and the rules and regulations,
including Rules 10-b-5 thereunder, as well as common law claims. All
plaintiffs are seeking certification of class action status. The
allegations collectively assert class action on behalf of persons who
purchased Company stock between the dates of its initial public offering on
or about August 1, 1994, and April 15, 1996. The courts have not yet ruled
on these class action motions. An estimate cannot be made at this time as
to the possible range of loss. The Company intends to defend its position
vigorously in all matters; however, management and legal counsel are unable
to determine the possible outcome of these matters at this time.
Accordingly, no liability for possible losses has been accrued for these
matters.
SEC INVESTIGATION - In April, 1996, the Company was notified by the
Securities and Exchange Commission ("SEC") that it had commenced an
informal investigation of the Company. The Company has responded to the
SEC's request for initial information and will continue to cooperate with
the SEC in these matters. The Company cannot predict the eventual outcome
of this investigation. Independently, the Company through its Audit
Committee has conducted an internal investigation of the facts and
circumstances surrounding the investigation.
DEBT CONVERSION AGREEMENTS - During 1995, the Company entered into debt
conversion agreements with officers or affiliates of officers whereby
outstanding debt, plus accrued interest, totaling $720,000 was converted
into 450,000 shares of common stock. The conversion share price of $1.60
was equal to approximately 85% of the market value of the stock at the time
of approval by the Board of Directors.
STOCK OFFERINGS - During 1995 the Company completed four preferred stock
offerings and one common stock offering pursuant to the exemption from
registration under Regulation S of the Securities Act of 1933.
Approximately $24,296,000 and $6,787,000, net of issuance costs, were
raised through the preferred stock offerings and the common stock
offerings, respectively.
During the first quarter of 1996, the Company raised approximately
$21,200,000 through two separate convertible preferred stock offerings
issued pursuant to Regulation S of the Securities Act of 1933. The net
proceeds of these offerings were used for investment in inventories and
production equipment and funding of the general working capital needs of
the Company.
STOCK WARRANTS - During 1995, the Company issued warrants to various
consultants to acquire up to 645,529 common shares at prices per share
ranging from $2.00 to $12.00. A $40,000 expense was recorded during 1995
reflecting the excess of the market price of the Company's common shares as
of the agreement date over the exercise price of the warrants. During
1995, warrants were exercised to acquire 250,000 of these common shares.
STOCK OPTION PLANS - During 1995, the Company adopted stock option plans
providing for the issuance of options covering up to 1,450,000 shares of
common stock to be issued to officers, directors, or consultants to the
Company. Various vesting conditions apply to these options, based on
either tenure or certain performance criteria. For options granted at
strike prices less than the fair market value of the underlying shares on
the date of the grant, the difference in value is recognized as
compensation expense over the applicable vesting periods. This resulted in
charges to income in 1995 of approximately $900,000.
EMPLOYEE STOCK PURCHASE PLAN - Subsequent to December 31, 1994, the Board
approved the adoption of an Employee Stock Purchase Plan and authorized the
Company to reserve 2,000,000 for this plan.
Page 12
<PAGE>
COMMON STOCK ISSUED FOR SERVICES IN LIEU OF CASH - Subsequent to
December 31, 1994, the Company issued 280,000 shares of common stock to
various consultants at per share market values at the agreement dates
ranging from $1.88 to $2.06. During 1995, in connection with the
issuance of these shares, the Company recorded professional fees totaling
$560,000.
SERIES CONVERTIBLE PREFERRED STOCK - Subsequent to December 31, 1994, the
Company designated 142,000 of its 500,000 authorized preferred shares as
follows:
Shares Authorized Liquidation Preference Per Share
----------------- --------------------------------
Series A 100,000 $ 100
Series B 20,000 $ 1,000
Series C 2,000 $10,000
Series D 20,000 $ 1,000
The remaining 358,000 authorized preferred shares have not been designated
as a series.
The preferred stock is convertible into Company common stock based on the
trading value of the stock (discounted at 18% to 20%) on the conversion
dates declared by the holder of the preferred stock. The preferred stock
is convertible at various times after issuance, but generally within 60 to
120 days.
The Company may not pay any common stock dividends unless all preferred
dividends have been paid. Any remaining preferred shares will
automatically convert to common shares at various times in 1997.
ACQUISITIONS AND DISPOSITIONS - Subsequent to December 31, 1994, the
Company completed four acquisitions and made one disposition which are
summarized below:
Effective September 30, 1995, the Company acquired approximately 96% of the
outstanding common stock of American Consumer Products ("ACPI") through a
cash tender offer totaling approximately $13,834,000, exclusive of
acquisition costs. ACPI manufactures and distributes consumer hardware
products including key blanks, related key accessories, knives, letters,
numbers, signs, gloves and pet products, as well as other items.
Effective July 31, 1995, the Company acquired all of the outstanding common
stock of Alabaster Industries, Inc. ("Alabaster") in exchange for 400,000
shares of common stock issued by Vista valued at $2 per share or $800,000,
exclusive of acquisition costs. Alabaster manufactures and distributes
injection molded plastic products for the housewares industry.
Effective June 30, 1995, the Company acquired all of the outstanding common
stock of Intelock Technologies ("Intelock") in exchange for 219,200 shares
of common stock of Vista and warrants to acquire 138,400 common shares of
Vista, together valued at $1,097,000, exclusive of $5,000 cash paid and
acquisition costs. Intelock manufactures and distributes digital locking
devices.
Effective May, 1995, the Company acquired all of the outstanding common
stock of Promotional Marketing, Inc. ("PMI"), and executed a non-
competition agreement with former principals of PMI, for a total of
$610,000, exclusive of acquisition costs. PMI provides direct marketing
services to a variety of customers. Effective November 30, 1995, PMI sold
substantially all of its operating assets, net of operating liabilities,
back to a company owned by the former principals of PMI in exchange for a
guaranty of payment on a note receivable held by the Company.
Page 13
<PAGE>
13. RESTATEMENT OF FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 1994.
The audited financial statements previously issued for the year ended
September 30, 1994, have been restated to correct two prior period
accounting adjustments. First, previously recognized revenue for the sale
of an exclusive license agreement for one of the Company's products,
consideration for which was substantially in the form of a $1,155,000 note
receivable, has been reversed as a result of a 1996 investigation initiated
by the Audit Committee of the Board of Directors. The investigation
revealed that the license agreement transaction and the related note had no
business substance. Second, $635,000 of previously reported sales have
been reversed also as a result of the Audit Committee investigation
referred to above. These sales transactions were determined to have been
fictitious. These two prior period adjustments resulted in a reduction of
revenue, an increase in net loss and an increase in accumulated deficit,
all in the amount of $1,790,000.
14. CONTINGENT LIABILITIES
The Company is involved in various lawsuits in the ordinary course of
business. These lawsuits primarily involve claims for damages arising out
of commercial disputes. Company management and its counsel are of the
opinion that no material liability will result from these matters.
* * * * * * * * * * * * * * * *
- --------------------------------------------------------------------------------
Page 14
<PAGE>
Exhibit 11.1
Share Computation
Year Ended
December 28, 1996
<TABLE>
<CAPTION>
Common Stock
--------------------------------------------------------------------
Prefered Total less Weighted
Stock Total Treasury Treasury Average Shares
------------- ------------ ---------- ----------------- -----------------------
<S> <C> <C> <C> <C> <C>
Shares outstanding at
December 30, 1995........ 18,418 11,626,475 (71,100) 11,555,375 11,555,375
Preferred stock
conversions.............. (14,198) 5,490,946 5,490,946 3,940,173
Issuance of common
shares................... 300,000 300,000 291,346
Exercise of stock
options.................. 636,699 636,699 562,824
Exercise of warrants....... 20,000 20,000 18,956
Acquisitions of treasury
stock.................... (270,241) (270,241) (235,166)
Debt conversions........... 0
------------- ------------ ---------- ----------------- ------------
Shares outstanding at
December 28, 1996........ 4,220 18,074,120 (341,341) 17,732,779 16,133,508
------------- ------------ ---------- ----------------- ------------
------------- ------------ ---------- ----------------- ------------
Net Loss................... $(19,401,000)
Weighted average shares.... 16,133,508
Loss per share............. ($1.20)
------------
------------
</TABLE>
<PAGE>
Exhibit 21.1
Subsidiaries
1. Family Safety Products, Inc., a Georgia corporation.
2. American Consumer Products, Inc., a Delaware corporation.
3. Alabaster Industries, Inc., an Delaware corporation.
4. Intelock Technologies, Inc., a California corporation.
5. Promotional Marketing, Inc., a Delaware corporation.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
December 28, 1996 audited financial statemetns of Vista 2000, Inc. and is
qualified in its entirety by reference to such financial statements in
form 10-K for the year ended December 28, 1996.
</LEGEND>
<S> <C> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR 3-MOS YEAR
<FISCAL-YEAR-END> DEC-28-1996 DEC-30-1995 DEC-31-1994 SEP-30-1994
<PERIOD-START> DEC-31-1995 JAN-01-1995 OCT-01-1994 OCT-01-1993
<PERIOD-END> DEC-28-1996 DEC-30-1995 DEC-31-1994 SEP-30-1994
<CASH> 1,165,000 871,000 449,000 4,000
<SECURITIES> 0 0 0 0
<RECEIVABLES> 17,592,000 18,140,000 103,000 47,000
<ALLOWANCES> 1,405,000 2,230,000 40,000 5,000
<INVENTORY> 25,157,000 33,378,000 688,000 624,000
<CURRENT-ASSETS> 44,258,000 51,550,000 1,242,000 683,000
<PP&E> 15,927,000 13,041,000 185,000 141,000
<DEPRECIATION> 0 0 0 0
<TOTAL-ASSETS> 61,771,000 65,311,000 1,597,000 1,430,000
<CURRENT-LIABILITIES> 13,691,000 21,157,000 1,454,000 3,916,000
<BONDS> 0 0 0 0
0 0 0 0
3,985,000 5,981,000 0 0
<COMMON> 181,000 116,000 33,000 21,000
<OTHER-SE> 19,995,000 15,028,000 (42,000) (3,199,000)
<TOTAL-LIABILITY-AND-EQUITY> 61,771,000 65,311,000 1,597,000 1,430,000
<SALES> 110,955,000 32,422,000 1,000 137,000
<TOTAL-REVENUES> 110,955,000 32,422,000 1,000 137,000
<CGS> 82,563,000 28,244,000 26,000 314,000
<TOTAL-COSTS> 34,235,000 17,318,000 858,000 1,721,000
<OTHER-EXPENSES> 10,787,000 1,147,000 0 0
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 2,174,000 649,000 143,000 266,000
<INCOME-PRETAX> (19,155,000) (14,663,000) (1,022,000) (2,119,000)
<INCOME-TAX> 246,000 0 0 0
<INCOME-CONTINUING> (16,630,000) (14,287,000) (883,000) (1,898,000)
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> (19,401,000) (14,663,000) (1,022,000) (2,119,000)
<EPS-PRIMARY> (1.20) (2.33) (0.36) (0.99)
<EPS-DILUTED> 0<F1> 0<F1> 0<F1>
0<F1>
<FN>
<F1>Not displayed since calculation would be anti-dilutive.
</FN>
</TABLE>
