<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 (FEE REQUIRED)
For the fiscal year ended December 30, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission File Number 0-23204
--------
VISTA 2000, INC.
----------------
(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, Marietta, Georgia 30068
- ----------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 971-4344
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock $.01 Par Value
---------------------------
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 $114,811,688 as of
December 30, 1995.
There were 11,626,475 shares of the Registrant's common stock and 2,300,000
Series A Warrants and 667,535 other warrants outstanding as of December 30,
1995.
<PAGE>
PART I
Item 1. Business
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, 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
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. (See Item 7 - Management's Discussion and Analysis of Financial Condition
and Results of Operations.) 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
$12,858,000 or $2.04 per share based on approximately 6.3
2
<PAGE>
million weighted average shares outstanding during the period. This loss has
been restated to $14,663,000 or $2.33 per share as presented in this Form 10-K.
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
(1) 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 announced 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 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 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. ACPI accounted for approximately 90%
of the consolidated revenues of the Company for fiscal 1995.
3
<PAGE>
Without an opinion to 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 nor The NASDAQ
Stock Market, Inc. ("NASDAQ") regarding the 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. As a result of performing these procedures, Grant
Thornton 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 Accountants' 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, is included with this Form 10-K.
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 manufactures
and markets 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 provides
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 assets to a company owned
by the former principals of PMI. The only assets and liabilities retained by PMI
were some automated telephone dialing equipment and an associated capital lease
on the equipment.
Effective June 30, 1995, the Company acquired all of the outstanding
shares of Intelock, a California manufacturer of digital lock mechanisms with
distribution through major homecenter and hardware retailers nationwide. 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.
4
<PAGE>
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 $4,116,000. 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 approximately 96% of
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.
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
The Company maintains its own engineering and development department to
conduct research activities relating to the improvement of existing products and
the development of new products.
5
<PAGE>
During fiscal 1995, through FSPI the Company developed and introduced
its line of SafetySiren gas detectors. These products, which include the
SafetySiren Carbon Monoxide Detector, the SafetySiren Propane and Methane
Detector, the SafetySiren Carbon Monoxide, Methane, and Propane Detector, and
the SafetySiren Radon Gas Detector, are marketed through the Company's Family
Safety Products, Inc. subsidiary. The Carbon Monoxide, Propane, and Methane Gas
Detectors generate an audible alarm when hazardous levels of these gases are
detected, indicating the need to take immediate action. Alternatively, radon gas
represents a long term exposure problem. The Radon Gas Detector is designed to
measure and display the long term exposure to Radon Gas in the home. The Company
obtained an exclusive license to the technology (which is patented) used to
manufacture the Radon Gas Detector. All of the SafetySiren gas detectors have
been listed to the appropriate Underwriter's Laboratories ("UL") standards.
To further enhance and differentiate the SafetySiren product line, the
SafetySiren Plus development was begun in 1995. The Plus series incorporates a
radio frequency transmitter into each of the SafetySiren gas detectors. When an
alarm condition is detected, the transmitter sends a signal to a remote alarm
unit. This product allows multiple gas sensors throughout the home to be
monitored from a remote location (such as a master bedroom). These products have
been prototyped and submitted for FCC approval. They will be submitted for UL
approval in 1996 and introduced to the market as soon as these regulatory
approvals are completed.
After the acquisition of ACPI effective September 30, 1995, the
Company's R&D department began working with ACPI's technical, marketing, and
manufacturing personnel on 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. Several technical issues remained to be resolved
at year end 1995 and development is expected to continue in 1996 and into 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, but the
overall business is not dependent upon any single patent or group of patents.
6
<PAGE>
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.
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 organization
under a collective bargaining agreement 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 30, 1995
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.
<TABLE>
<CAPTION>
THE REGISTRANT
- -------------------------------------------------------------------------------------------------------------------
Name Age Positions and Offices Held and
Principal Occupations or Employment during past 5 years
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Richard P. Smyth 39 Chairman of the Board and Chief Executive Officer (1)
- -------------------------------------------------------------------------------------------------------------------
Arnold E. Johns 53 President since February, 1995.(2) Prior to employment with the
Company, Mr. Johns served as Senior Managing Director, Buckhead
Financial Corporation from 6/93 to 2/95. From 1992 through 1993,
Mr. Johns was employed as Executive Vice President, Argent
Securities, Inc., a broker/dealer. From 1991 through 1992, Mr. Johns
was President of RTS, Inc.
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
7
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SUBSIDIARIES
- --------------------------------------------------------------------------------
Stephan Cole 49 Chief Executive Officer, ACPI Subsidiary
- --------------------------------------------------------------------------------
Richard Bern 49 President, ACPI Subsidiary
- --------------------------------------------------------------------------------
Daniel Norris 39 President, Alabaster Subsidiary
- --------------------------------------------------------------------------------
- ----------------------
(1) Mr. Smyth resigned as Chairman of the Board and Chief Executive Officer
effective April 16, 1996 and has no further position with the Company.
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.
Mr. Graziadio is the Chairman and Chief Executive Officer of Ginarra.
(2) Mr. Johns resigned as President effective June 7, 1996 and has no
further position with the Company.
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 30, 1995. The executive
offices are located in Marietta, Georgia, which is a leased facility occupying
approximately 29,164 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.
<TABLE>
<CAPTION>
Location City General Character Square Annual Lease
Feet Rent Expiration
- -----------------------------------------------------------------------------------------------------------------------
<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
- -----------------------------------------------------------------------------------------------------------------------
Arizona Phoenix Administrative Office n/a n/a owned
- -----------------------------------------------------------------------------------------------------------------------
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 Alpharetta Retail Store 339 $ 25,000 07/31/98
- -----------------------------------------------------------------------------------------------------------------------
Georgia Marietta Administrative Office 29,164 $ 21,780 02/28/01
- -----------------------------------------------------------------------------------------------------------------------
Illinois Kewanee Administrative Office 15,700 n/a owned
- -----------------------------------------------------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
8
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<TABLE>
<CAPTION>
Location City General Character Square Annual Lease
Feet Rent Expiration
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ohio Solon Manufacturing 202,000 $ 575,000 02/28/98
- -----------------------------------------------------------------------------------------------------------------------
Ontario, Canada Concord Manufacturing 18,400 $ 62,560 month-to-month
- -----------------------------------------------------------------------------------------------------------------------
Texas El Paso Manufacturing 1,770 $ 11,664 02/28/96
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Item 3. Legal Proceedings.
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.
Subsequent to December 30, 1995, the Company, together with certain
officers, 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 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 present and former officers,
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.
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
9
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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 (which shares have not yet been issued). 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".)
Item 4. Submission of Matters to a Vote of Security Holders.
On December 18, 1995, a special meeting of stockholders of the Company
was held with a quorum present at the Cleveland Marriott East Hotel located at
3663 Park East Drive, Beachwood, Ohio 44122. A proxy statement was filed by the
Company soliciting proxies for proposals described below with the number of
votes cast for, against, withheld and broker non-votes:
<TABLE>
<CAPTION>
Broker
Matter Voted Upon Votes Votes Absten- Non-
For Against tions Votes
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Adoption of Company's Employee Stock Purchase Plan 4,574,662 180,415 58,855 2,930,570
- -----------------------------------------------------------------------------------------------------------------------
Amendment to the Company's 1993 Non-Employee 4,238,001 462,426 81,909 2,962,166
Directors' Stock Option Plan
- -----------------------------------------------------------------------------------------------------------------------
Amendment to the Company's 1993 Incentive Stock Option 4,097,957 638,616 77,459 2,930,470
Plan
- -----------------------------------------------------------------------------------------------------------------------
Amendment to the Company's Certificate of Incorporation to 7,203,306 474,370 66,276 550
Increase the Authorized Capital Stock
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
A copy of the Notice of Special Meeting of Stockholders, together with
Proxy Statement for Special Meeting of Stockholders, is filed as an Exhibit
pursuant to Item 14 of this report.
10
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PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
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 I -
"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 October 25, 1994 thru
December 30, 1995(1) December 31, 1994
Quarters:
High Bid Low Bid High Bid Low Bid
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
First 2-5/8 1-1/2 N/A
Second 6-9/32 1-15/16 N/A
Third 7-3/8 5-3/16 N/A
Fourth 10-1/2 4-5/8 3-15/16 2-1/2
</TABLE>
- --------------------------------------------
(1) On December 30, 1995 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.
Item 6. Selected Financial Data.
The selected consolidated financial data of the Company shown below for
the three year and three month period ended December 30, 1995 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.
11
<PAGE>
<TABLE>
<CAPTION>
Year 3 Months Year Year
ended ended ended ended
12/30/95 12/31/94 9/30/94 9/30/93
-------------- --------------- --------------- --------------
Consolidated Balance Sheet Data (as of period end) (Amounts in thousands, except shares and per share data)
<S> <C> <C> <C> <C>
Working capital (deficit) $ 30,393 $ (212) $ (3,235) $ (566)
Total assets 65,311 1,597 1,430 1,583
Long-term debt, including current 23,636 695 1,036 761
Stockholders' equity (deficit) 21,125 (9) (3,178) (817)
Consolidated Statement of Operations Data
Net sales $ 32,422 $ 1 $ 137 $ 745
Cost of sales 28,244 26 314 593
----------- ----------- ----------- -----------
Gross profit (loss) 4,178 (25) (177) 152
Operating expenses 17,318 858 1,721 2,448
Loss from disposed business 1,147
----------- ----------- ----------- -----------
Operating loss (14,287) (883) (1,898) (2,296)
Interest expense (649) (143) (266) (231)
Other income (expense) 273 4 45
Net loss $ (14,663) $ (1,022) $ (2,119) $ (2,527)
=========== =========== =========== ===========
Loss per share $ (2.33) $ (0.36) $ (0.99) $ (1.28)
=========== =========== =========== ===========
Weighted average shares outstanding 6,294,361 2,813,293 2,131,226 1,970,706
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
OVERVIEW
The Company reported 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 1995 loss is primarily attributable to acquisition and
reorganization related costs, inventory liquidations below normal selling
prices, production start-up costs and related material and manufacturing costs
and high general overhead costs. The Company's substantial growth as
12
<PAGE>
discussed below resulted from two significant acquisitions during 1995. 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 $1,155,000 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 $1,790,000.
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 are in the process of being amended. These amendments will be necessary
to properly reflect certain year-end 1995 adjustments and corrections of
accounting errors determined as a result of the audit of the December 30, 1995
financial statements and the prior period accounting adjustments referred to
above related to the September 30, 1994 financial statements. The individual
quarterly effects of the adjustments has not yet been determined but the nature
of the adjustments is 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
13
<PAGE>
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.
ACQUISITIONS
During 1995 the Company completed the acquisitions of four businesses,
ACPI, Alabaster, Intelock and PMI. All acquisitions except PMI have been
accounted for as purchase combinations and accordingly, only the results of
operations of each subsidiary subsequent to the respective acquisition date have
been included in the Consolidated Statements of Income (Loss).
PMI has been accounted for as a purchase using the equity method and
accordingly, only the net results of operations are included in the consolidated
statements. PMI was acquired and disposed of during 1995.
ACPI, based in Cleveland, Ohio, through itself and its subsidiaries,
primarily Boss Manufacturing, manufactures and distributes a variety of consumer
hardware related products including key blanks, key accessories, letters,
numbers, signs, gloves, boots, rainwear, knives, builders hardware, pet
products, balloons and a number of other related items. ACPI's customers are
primarily hardware, mass merchandise, food and do-it-yourself ("DIY") retailers.
In addition Boss Manufacturing sells products to the industrial market.
Alabaster, based in Alabaster, Alabama manufactures and distributes
injection molded plastic products for the housewares industry. Alabaster's
customers are primarily mass merchandise retailers.
Intelock, formerly based in California but moved to Alabaster, Alabama
in the first quarter of fiscal year 1996 manufactures digital locking devices
primarily for residential application. Intelock's customers are primarily major
home center and hardware retailers. During the quarter ended September 28, 1996,
all operations of Intelock were closed and substantially all of the equipment
retained is not in service.
PMI, based in Marietta, Georgia, provides direct marketing services to
a variety of customers. Subsequent to the acquisition of PMI by Vista
substantially all of the operating assets and liabilities of PMI were sold to a
company owned by the former principals of PMI. PMI retained certain automated
telephone dialing and switching equipment and attendant workstations and the
related capital lease liability covering such equipment. Currently, all
operations of PMI have closed and substantially all of the equipment retained is
not in service.
These acquisitions were accomplished through the issuance of Vista
equity securities and cash to the sellers of the acquired businesses. The cash
proceeds were obtained through a number of securities offerings (see complete
discussion of capital activities later under this item).
14
<PAGE>
RESULTS OF OPERATIONS
Consolidated
Operating results for year-ended December 30, 1995 are compared to
year-ended September 30, 1994, since results of operations for the three months
ended December 31, 1994 are not material.
Net sales were $32.4 million for the year ended December 30, 1995
compared to $137,000 for the year ended September 30, 1994. The increase is
primarily a result of the acquisitions of ACPI and Alabaster during 1995.
Gross profit (loss) was $4.2 million for the year ended December 30,
1995 compared to $(177,000) for the year ended September 30, 1994. The increase
is primarily a result of the acquisitions of ACPI and Alabaster during 1995.
Gross profit was 12.9% of net sales for the year ended December 30,. 1995
compared to -129.2% of net sales for the year ended September 30, 1994. Gross
profit in 1995 was negatively affected as a result of inventory liquidations
below normal selling prices at Alabaster, production start-up costs and related
material and manufacturing costs at FSPI, obsolescence reserves at Intelock and
high general overhead costs.
Operating expenses were $17.3 million for the year ended December 30,
1995 compared to $1.7 million for the year ended September 30, 1994. The
increase is primarily a result of the acquisitions of ACPI, Alabaster and
Intelock as well as due to increased volumes at Family Safety Products, Inc.
("FSPI") and growth of parent company operations at Vista. Operating expenses
were 53.4% of net sales for the year ended December 30, 1995 compared to 1,256%
of net sales for the year ended September 30, 1994. Operating expenses were
negatively affected by non-recurring acquisition and reorganization related
operating costs, certain fees and costs associated with mergers and acquisitions
activity and related capital requirements, growth in parent company
administrative costs at Vista and numerous other less significant items.
Net loss for December 30, 1995 was $14.7 million compared to $2.1
million for the year ended September 30, 1994.
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 $2.0 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 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.
15
<PAGE>
Gross profit (loss) was $(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 1995 loss is due to a
number of factors, the most significant of which are:
- Start-up costs associated with commencement of production operations for
gas detection products.
- 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.
- Waste associated with excessive purchases of import distribution goods.
- 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 $9.7 million for the year ended December 30,
1995 compared to $858,000 for the three months ended December 31, 1994 and $1.7
million for the year ended September 30, 1994. The increase in operating
expenses during 1995 is 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 at the parent company, and
other less individually significant items. Operating expenses were 485% of net
sales for the year ended December 30, 1995 compared to 1,257% of net sales for
the year ended September 30, 1994.
Net loss was $13.7 million, $1.0 million and $2.1 million for the year
ended December 30, 1995, the three months ended December 31, 1994 and the year
ended September 30, 1994, respectively.
Intelock
Sales were $480,000 for the period from June 30, 1995 (acquisition
date) to December 30, 1995. Sales volumes were lower than anticipated due to
product quality and reliability problems resulting in significant returns and
customer credits.
Gross profit (loss) was ($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 $537,000 for the period from June 30, 1995
(acquisition date) to December 30, 1995. Operating expenses were 112% of net
sales.
16
<PAGE>
Net loss was $543,000 for the period from June 30, 1995 (acquisition
date) to December 30, 1995.
Alabaster
Sales were $3.9 million for the period from July 31, 1995 (acquisitions
date) to December 30, 1995. Sales levels were lower than anticipated due to
reorganization of the sales structure and marketing focus of the company
Gross profit was $142,000 or 3.6% for the period from July 31, 1995
(acquisitions date) to December 30, 1995. Gross profit 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 were high due to low manufacturing capacity utilization during the period.
1995 gross profit also decreased due to valuation reserves necessary to absorb
losses sustained from additional liquidations of 1995 year-end inventories
during the first quarter of 1996.
Operating expenses were $1.2 million for the period from July 31, 1995
(acquisition date) to December 30, 1995. Operating expenses were 30.8% of net
sales for the period from July 31, 1995 (acquisition date) to December 30, 1995.
Net loss was $1.1 million for the period from July 31, 1995
(acquisition date) to December 30, 1995.
ACPI
Sales were $26.0 million for the period from September 30, 1995
(acquisitions date) to December 30, 1995. Sales for the year ended December 30,
1995 (including amounts which are not included in the Company's consolidated
financial statements) were $105 million compared to $107 million for the year
ended December 31, 1994. The slight decline in sales was primarily attributable
to the sale of its Sharon Fasteners division.
Gross profit was $7.2 million or 27.6% for the period from September
30, 1995 (acquisitions date) to December 30, 1995. Gross profit for the year
ended December 30, 1995 (including amounts which are not included in the
consolidated financial statements of Vista 2000, Inc.) was $26.9 million or
25.6% compared to $27.2 million or 25.4% for the year ended December 31, 1994.
The increase in margin for the period subsequent to the acquisition of ACPI
compared to 1995 and 1994 year-to-date amounts is primarily attributable to the
negative effects of LIFO inventory valuation on the 1995 and 1994 year-to-date
periods.
Operating expenses were $6.0 million for the period from September 30,
1995 (acquisition date) to December 30, 1995, Operating expenses for the year
ended December 30, 1995 (including amounts which are not included in the
Company's consolidated financial statements) were $25.0 million compared to
$23.6 million for the year ended December 31, 1994. Operating expenses were
23.1% of net sales for the period from September 30, 1995 (acquisition date) to
December 30, 1995
17
<PAGE>
and 23.8% and 22.1% of net sales for the years ended December 30, 1995 and
December 31, 1994, respectively. Operating expenses for the period from
September 30, 1995 (acquisition date) to December 30, 1995 were favorably
affected by certain purchase accounting adjustments, primarily those related to
valuation of long-term assets, which result in a significant decrease in annual
depreciation expense on existing assets.
Pre-tax net income was $620,000 for the period from September 30, 1995
(acquisition date) to December 30, 1995. Pre-tax income (loss)for the years
ended December 30, 1995 (including amounts which are not included in the
Company's consolidated financial statements) and December 31, 1994 was
$(774,000) and $767,000, respectively.
FINANCIAL CONDITION
Consolidated
Consolidated working capital at December 30, 1995 was $30.4 million
exclusive of the $22.6 million ACPI revolver debt which matures in April 1997.
Negotiations are continuing with prospective lenders and replacement of the
existing credit facility is expected in April 1997, although no assurance can be
given that this will be the case.
During 1995 Vista raised approximately $31.1 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 net proceeds of these offerings were used to effect business
combinations, pay down long-term debt and fund operating losses and working
capital requirements.
Separate Company Analysis
ACPI
$31.0 million of the Company's consolidated working capital is from
ACPI. As of December 30, 1995 ACPI had $5.0 million available under its $29.9
million revolving line of credit ($6.44 million at April 30, 1996). 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% (8.875% at December 30, 1995) 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 Company affiliates other than for payment of
dividends and trading transactions occurring through the normal course of
business.
Alabaster
Working capital at Alabaster at December 30, 1995 was a deficit of $1.2
million. Since acquisition Alabaster has generated negative cash flows which has
necessitated periodic working capital advances from Vista totaling $784,000 at
December 30, 1995. Through March 31, 1996
18
<PAGE>
Alabaster required $1.1 million of additional working capital from the parent
company. Alabaster will continue to require working capital advances from the
parent company until a working capital facility can be arranged. (See
"Significant Subsequent Events - Effects on Liquidity")
Parent Company, FSPI and Intelock ("Vista Group")
Working capital at the Vista Group at December 30, 1995 was $0.6
million. Intelock's operations have been scaled back substantially such that
current cash requirements are virtually nil. FSPI's operations have been reduced
to a level commensurate with revised sales forecasts recently estimated by
management. Based on management forecasts cash flows will be negative through
approximately September 1996 due to seasonal inventory building prior to the
Fall and Winter selling seasons for gas detection products. Subsequent to
September 1996 cash flows are projected to be positive with net cash flows for
the year of approximately $1 million. Vista parent company operations currently
absorb approximately $150,000 per month which should remain stable for the
remainder of 1996.
Consolidated operating cash flows of the Company (exclusive of ACPI)
are projected to be negative through the third quarter of 1996 primarily due to
seasonal inventory building at FSPI. Subsequent to the third quarter
consolidated operating cash flows are projected to be positive such that by
year-end 1996 the consolidated cash position (exclusive of ACPI) is anticipated
to be approximately $2 million. Management is exploring various available
financing alternatives to fund the seasonal cash flow requirements including
sale-leaseback transactions related to production machinery and real estate and
other alternatives.
SIGNIFICANT SUBSEQUENT EVENTS
1996 Securities Offerings
During the first quarter of 1996 Vista raised approximately $21,800,000
(gross proceeds) through two separate stock offerings issued pursuant to the
exemption from registration of Regulation S under the Act. The net proceeds of
these offerings were used for investment in inventories and production equipment
at FSPI, investment in production equipment at Alabaster, payment of the cash
portion of the purchase price of the real estate from affiliates of ACPI, and
funding of the general working capital needs and operating losses of the Company
and its subsidiaries.
Litigation
Subsequent to December 30, 1995, the Company, together with certain
former officers, 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
19
<PAGE>
of 1934, and Rule 10b-5 promulgated thereunder, and an 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 present and former officers,
directors and employees of the Company, all underwriters of the 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 were all individuals or entities
who acquired Vista common stock and/or warrants through Vista's employee profit
sharing, retirement, benefit or incentive program.
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. 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".)
Effects on Liquidity
Due to the combination of operating losses, significant 1996 cash
investments in inventories and capital assets, significant legal and accounting
expenses, and the uncertainties surrounding the litigation discussed above, 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 objectives
can be realized.
20
<PAGE>
In September, 1996, the Company arranged for $2.5 million of
asset-based financing for its Alabaster facility. Under the terms of the
financing, the loan is secured by all inventory, accounts receivable and certain
fixed assets. Alabaster has drawn approximately $950,000 under this facility for
working capital needs.
Asset Sale
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.
Discontinued Operations
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 $680,000 representing a write
down of assets to net realizable value.
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:
(i) Consolidated Statements of Operations, Cash Flows and
Shareholders' Equity for the year ended December 30, 1995,
three months ended December 31, 1994 and year ended September
30, 1994.
(ii) Consolidated Balance Sheet - December 30, 1995 and
December 31, 1994.
(iii) Notes to the Consolidated Financial Statements; and
Unqualified Opinion of Independent Accountants dated May 17,
1996.
Item 9. Changes in And Disagreements With Auditors on Accounting And Financial
Disclosures.
Not applicable.
21
<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 three directors. (1)
The following table sets forth certain information concerning the
members of the Board of Directors of the Company at December 30, 1995:
<TABLE>
<CAPTION>
Name Age Position
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
President since February, 1995. Prior to employment with the Company, Mr. Johns
served as Senior Managing Director, Buckhead Financial Corporation from 6/93 to
2/95. From 1992 through 1993, Mr. Johns was employed as Executive Vice President,
Arnold E. Johns (2) 53 Argent Securities, Inc., a broker/dealer. From 1991 through 1992, Mr. Johns was
President of RTS, Inc. Mr. Johns is a resident of Atlanta, Georgia and has a BS degree
from the University of North Carolina.
- ---------------------------------------------------------------------------------------------------------------------------
Director since February, 1995. Mr. Connell is an accountant and an enrolled agent
specializing in tax compliance and planning. Prior to 1980, Mr. Connell was with the
Victor E. Connell (2) 47 Internal Revenue Service. Mr. Connell is a resident of Atlanta, Georgia and has a
Bachelor's Degree from the University of South Florida.
- ---------------------------------------------------------------------------------------------------------------------------
Robert J. Cox (2) 54 Director since February, 1995. Mr. Cox is the Manager of the Atlanta Braves
Professional Baseball Team and serves as a member of the team's corporate board of
directors. Mr. Cox is a resident of Atlanta, Georgia.
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------
(1) Mr. Smyth resigned effective April 16, 1996 as Chairman of the Board
and Chief Executive Officer and has no further position with the
Company.
(2) Messrs. Johns, Connell and Cox resigned effective July 13, 1996 as
Directors of the Company.
As of the date of filing of this Report, the Board of Directors of the
Company consisted of Messrs. G. Louis Graziadio, III, Perry A. Lerner, Lee E.
Mikles, Paul A. Novelly and Richard D. Squires. See Item 1. "Business - Current
Developments."
There are no family relationships among any of the Company's directors
and executive officers.
22
<PAGE>
Item 11. Executive Compensation.
Compensation Tables
The compensation paid in fiscal 1995 to the Company's Chief Executive
Officer and to each of the other executive officers and of the subsidiaries
whose total compensation exceeded $100,000 are as follows:
<TABLE>
<CAPTION>
1995 SUMMARY COMPENSATION TABLE
- ----------------------------------------------------------------------------------------------------------------------------
THE REGISTRANT
- ----------------------------------------------------------------------------------------------------------------------------
All
Annual Other Other
Name and Principal Year Compensation Annual Long-Term Compensation Compen-
Position ------------------ Compen- ------------------------------------------ sation
Salary Bonus sation Awards Payouts
($) ($) ------------------------------------------
Restricted
Stock Options LTIP
Awards SARs(#) Payout($)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Richard Smyth,
CEO(1) (a) and (b)
Chairman of the 1995 134,100 -0- 400,000
Board
- ----------------------------------------------------------------------------------------------------------------------------
Arnold Johns,(1a) 1995 127,500 -0- 300,000
President (a) and (b)
- ----------------------------------------------------------------------------------------------------------------------------
THE SUBSIDIARIES
- ----------------------------------------------------------------------------------------------------------------------------
Stephan Cole,(2)
CEO, ACPI Sub- 1995 277,000 -0- 100,000
sidiary (b) and (c)
- ----------------------------------------------------------------------------------------------------------------------------
Richard Bern,
President ACPI 1995 262,150 -0- 100,000
Subsidiary (a) and (b)
- ----------------------------------------------------------------------------------------------------------------------------
Daniel Norris, 1995 140,000 -0- 40,000
President Alabaster
Subsidiary (a) and (b)
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------
(1) On April 16, 1996, Mr. Smyth resigned as Chairman of the Board and
Chief Executive Officer of the Company.
(1a) On July 13, 1996, Mr. Johns resigned as President of the Company.
(2) 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.
(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
23
<PAGE>
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.
The Company granted the following options to the Executive Officers of
the Company and its subsidiaries during the fiscal year ending December 30,
1995. The Company has no stock appreciation rights ("SARs") outstanding.
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Individual Grants Potential Realizable Value at
- ----------------------------------------------------------------------------------------- Assumed Annual Rates of
Number of Stock Price Appreciation for
Securities Percent of Total Exercise Option Term
Underlying Options/SARs of Base Expira-
Name Options/SA Granted to Price tion
Rs Granted Employees in ($/Share) Date
(#) Fiscal Year 0% 5% ($) 10%($)
========================= =============== =================== ============= =========== ========== =========== ===========
<S> <C> <C> <C> <C> <C> <C> <C>
Richard P. Smyth(1) 200,000 22.7 1.28 (1) 44,000 65,562 87,860
200,000 5.00 -- 39,200 78,400
- -------------------------------------------------------------------------------------------------------------------------------
Arnold E. Johns(2) 200,000 17.1 1.28 10 yrs 44,000 232,600 522,200
100,000 5.00 -- 314,400 796,900
- -------------------------------------------------------------------------------------------------------------------------------
Stephan Cole(3) 100,000 5.7 3.93 10 yrs 70,000 361,200 807,900
- -------------------------------------------------------------------------------------------------------------------------------
Richard Bern(3) 100,000 5.7 3.93 10 yrs 70,000 361,200 807,900
- -------------------------------------------------------------------------------------------------------------------------------
Daniel Norris 40,000 2.3 5.00 10 yrs -- 125,760 318,760
- -------------------------------------------------------------------------------------------------------------------------------
A. Richard Marshall(4) 60,000 9.1 2.31 10 yrs 24,600 102,660 260,100
100,000 5.00 -- 314,400 314,400
- -------------------------------------------------------------------------------------------------------------------------------
John P. Wenrich 60,000 3.4 5.00 10 yrs -- 188,640 478,140
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------
(1) Mr. Smyth resigned as Chairman of the Board of Directors and Chief
Executive Officer on April 16, 1996. All options must be exercised by
July 16, 1996.
(2) Mr. Johns exercised options to acquire 50,000 shares by using shares to
make the purchase, he acquired net shares of 43,679. On February 9,
1996, Mr. Johns exercised options to acquire 150,000 shares. Between
July 8, 1996 and July 21, 1996, Mr. Johns sold a total of 47,500
shares.
24
<PAGE>
(3) Exercised 50,000 options each on February 9, 1996 at a price of $3.93.
(4) Mr. Marshall exercised options to acquire 60,000 shares; by using
shares to make the purchase, he acquired net shares of 48,323.
The following sets forth the value of unexercised options held by the named
executive officers on December 30, 1995:
Aggregated Options/SAR Exercises in the last Fiscal Year
and Fiscal Year-End Option/SAR Values
<TABLE>
<CAPTION>
Number of Securities
Shares Value Underlying Unexercised Value of Unexercised In-
Name Acquired on Realized ($) Options/SARs at Fiscal the-Money Options/SARs
Exercise Year End (#) at Fiscal Year-End($)(5)
-------------------------- ----------------------------
Exercisable/ Exercisable/
Unexercisable Unexercisable
============================ ================= ================ ========================== ============================
<S> <C> <C> <C> <C> <C> <C>
Richard P. Smyth(1) -- -- 250,000 / 150,000 2,206,500 / 487,500
- ------------------------------------------------------------------------------------------------------------------------
Arnold E. Johns(2) 43,679 386,341 225,000 / 25,000 1,654,875 / 121,875
- ------------------------------------------------------------------------------------------------------------------------
A. Richard Marshall(3) 48,323 462,209 0 / 100,000 0 / 487,500
- ------------------------------------------------------------------------------------------------------------------------
John P. Wenrich(4) -- -- 0 / 60,000 0 / 292,500
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------
(1) The indicated value is based on an exercise price of $1.28 per share
and value per share of $9.875 at 12/30/95 for 200,000 shares and an
exercise price of $5.00 per share for 200,000 shares.
(2) The indicated value is based on an exercise price of $1.28 per share
and value per share of $9.875 at 12/30/95 for 150,000 shares and an
exercise price of $5.00 per share of 100,000 shares.
(3) The indicated value is based on an exercise price of $5.00 per share of
100,000 shares.
(4) The indicated value is based on an exercise price of $5.00 per share
and value per share of $9.875 at 12/30/95 for 60,000 shares.
(5) As of the date of this report, Mr. Smyth had exercised 200,000 options;
Mr. Johns has exercised 200,000 options; Mr. Marshall has exercised
60,000 options and Mr. Wenrich has exercised zero options. All
unexercised options are above market value.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of March 24, 1997, certain
information regarding the beneficial 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 does not include the effect of shares which will
be issued under the terms of the Class Action settlement):
25
<PAGE>
<TABLE>
<CAPTION>
Name and Address of Beneficial Owner (1) Common Stock Beneficially Owned
-------------------------------
No. of Shares Percent of
Class
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Mr. G. Louis Graziadio, III (2) 1,725,000 7.8 %
1650 So. Pacific Coast Highway, Suite 308
Redondo Beach, CA 90277
- -------------------------------------------------------------------------------------------------
Mr. Perry A. Lerner (3) 262,500 1.2 %
153 E. 53rd Street
New York, NY 10022
- -------------------------------------------------------------------------------------------------
Mr. Lee E. Mikles (3) 262,500 1.2 %
Mikles/Miller Management, Inc.
100 Wilshire Blvd., 15th Floor
Santa Monica, CA 90401
- -------------------------------------------------------------------------------------------------
Mr. Paul A. Novelly (3) 462,500 2.1 %
8182 Maryland Avenue, 5th Floor
St. Louis, MO 63105
- -------------------------------------------------------------------------------------------------
Mr. Richard D. Squires (3) 262,500 1.2 %
4229 Cochran Chapel
Dallas, TX 75209
- -------------------------------------------------------------------------------------------------
All Directors and Executive Officers as a Group 2,975,000 13.5 %
(5 Persons)
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
Ellison C. Morgan 2,835,488 12.8 %
One Embarcadero Center, Suite 2830
San Francisco CA 94111
- -------------------------------------------------------------------------------------------------
Mellon Bank Corp. 1,450,000 6.6 %
One Mellon Bank Center
Pittsburgh, PA 15258
- -------------------------------------------------------------------------------------------------
Shyam H. Gidumal (2) 1,200,000 5.4 %
415 Central Park West
New York, NY 10025
- -------------------------------------------------------------------------------------------------
</TABLE>
- ---------------------
(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.
26
<PAGE>
(2) Includes presently exercisable options 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 Proxy Statement.
(3) Includes presently exercisable options to acquire 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 Proxy Statement.
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 has 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 amount of $1 Million.
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.
27
<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 30, 1995, three
months ended December 31, 1994 and year ended September 30,
1994;
Consolidated Balance Sheet - December 30, 1995 and December
31, 1994;
Notes to the Consolidated Financial Statements; and
Report of Independent Accountants dated May 17, 1996.
(ii) list of financial statement schedules
The following consolidated financial statements schedules of
Vista 2000, Inc. are included in this report:
Unqualified Opinion of Independent Accountants and Financial
Statements Schedule
(b) Reports on Form 8-K:
A report on Form 8-K was filed by the registrant for the
year ended December 30, 1995 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.
28
<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.
<TABLE>
<CAPTION>
(Registrant) Vista 2000, Inc.
<S> <C>
By (Signature and Title) /s/ G. Louis Graziadio, III
-------------------------------------------------------
G. Louis Graziadio, III, Chief Executive Officer
Date: April 18, 1997 and President
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, Chief Executive Officer
Date: April 18, 1997 and President
By (Signature and Title) /s/ Perry A. Lerner
-------------------------------------------------------
Perry A. Lerner, Director
Date: April 18, 1997
By (Signature and Title) /s/ Lee E. Mikles
-------------------------------------------------------
Lee E. Mikles, Director
Date: April 18, 1997
By (Signature and Title) /s/ Paul A. Novelly
-------------------------------------------------------
Paul A. Novelly, Director
Date: April 18, 1997
By (Signature and Title) /s/ Richard D. Squires
-------------------------------------------------------
Richard D. Squires, Director
Date: April 18, 1997
</TABLE>
29
<PAGE>
FINANCIAL STATEMENTS AND REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
VISTA 2000, INC. AND SUBSIDIARIES
December 30, 1995
<PAGE>
Report of Independent Certified Public Accountants
Board of Directors
Vista 2000, Inc.
We have audited the accompanying consolidated balance sheet of Vista 2000, Inc.
and subsidiaries as of December 30, 1995, and the related consolidated
statements of operations, stockholders' equity, and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit. The financial statements of Vista 2000, Inc. as
of and 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 audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our previous report dated May 17, 1996, we did not express an opinion on the
1995 consolidated financial statements of Vista 2000, Inc. and subsidiaries due
to the Company's inability to provide sufficient evidential matter supporting
the underlying transactions of the operations of certain subsidiaries. As
described in Note 2, subsequent to the issuance of the previous 1995
consolidated financial statements, management determined that those financial
statements contained errors related to the accounting records of Family Safety
Products, Inc. and Promotional Marketing, Inc., two of the Company's
subsidiaries. The Company has restated the accompanying 1995 consolidated
financial statements for these errors and has provided sufficient evidential
matter supporting the underlying transactions referred to above. Accordingly,
our present opinion on the 1995 consolidated financial statements, as presented
herein, is different from that expressed in our previous report.
<PAGE>
In our opinion, the 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 30, 1995, and the consolidated results of
their operations and their consolidated cash flows for the year then ended in
conformity with generally accepted accounting principles.
GRANT THORNTON LLP
Atlanta, Georgia
May 17, 1996 (except for Note 3
as to which the date is August 23, 1996
and Note 9, as to which the date is
January 9, 1997)
<PAGE>
Vista 2000, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands except per share data)
ASSETS
<TABLE>
<CAPTION>
December 30, December 31,
1995 1994
--------------- ------------
(as restated -
see Note 2)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 871 $ 449
Accounts receivable, net of allowance for
doubtful accounts and returns of $2,230
and $40, respectively 15,910 63
Inventories 33,378 688
Prepaid expenses 217 42
Other current assets 1,174 -
-------- ---------
Total current assets 51,550 1,242
------- ------
PROPERTY AND EQUIPMENT, NET 13,041 185
OTHER ASSETS 720 170
-------- -------
$65,311 $ 1,597
====== ======
</TABLE>
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
December 30, December 31,
1995 1994
--------------- -------------
(as restated -
see Note 2)
<S> <C> <C>
CURRENT LIABILITIES
Current portion of long-term debt $ 607 $ 543
Accounts payable 12,542 647
Accrued payroll and related expenses 4,053 22
Accrued liabilities 3,955 242
-------- ------
Total current liabilities 21,157 1,454
--------- -----
LONG-TERM DEBT, NET OF CURRENT PORTION 23,029 152
Commitments and contingencies
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock $1 par value, 500,000 shares authorized,
18,418 shares issued and outstanding 5,981 -
Common stock, $.01 par value, 50,000,000 shares
authorized, 11,626,475 and 3,281,226 issued and
outstanding, respectively 116 33
Additional paid-in capital 36,201 7,030
Accumulated deficit (20,939) (6,276)
Cumulative translation adjustment (19) -
--------- --------
21,340 787
Less: treasury shares and warrants - at cost
71,100 shares and 69,200 shares and warrants
to acquire 138,400 shares, respectively 215 796
--------- ------
Total stockholders' equity (deficit) 21,125 (9)
- ------- -------
$ 65,311 $ 1,597
========= ======
</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 September 30,
December 30, December 31, 1994 as restated
1995 1994 (see Note 4)
---------------- ----------------- ----------------
(as restated -
see Note 2)
<S> <C> <C> <C>
Net sales $ 32,422 $ 1 $ 137
Cost of sales 28,244 26 314
------------ ----------- -----------
Gross profit (loss) 4,178 (25) (177)
Operating expenses 17,318 858 1,721
------------ ----------- -----------
(13,140) (883) (1,898)
Loss on sale of operating assets of
Promotional Marketing, Inc. (1,147) - -
------------ ----------- -----------
Loss from operations (14,287) (883) (1,898)
Other income and (expense)
Interest expense (649) (143) (266)
Other income 273 4 45
------------ ----------- -----------
Net loss $ (14,663) $ (1,022) $ (2,119)
============ =========== ===========
Net loss per common share $ (2.33) $ (0.36) $ (.99)
============ =========== ===========
Weighted average shares outstanding 6,294,361 2,813,293 2,131,226
============ =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
Vista 2000, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
Year ended December 30, 1995, Three month period ended December 31, 1994 and
year ended September 30, 1994
(Dollars and share amounts in thousands)
Preferred Stock
-------------------------------------------------------------------
Series A Series B Series C Series D Common Stock
-------- -------- -------- -------- ------------
Shares Dollars Shares Dollars Shares Dollars Shares Dollars Shares Dollars
----- ------- ------ ------- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1993 -- $ -- -- $ -- -- $ -- -- $ -- 2,131 $21
Distribution to stockholders -- -- -- -- -- -- -- -- -- --
Net loss as restated (see note 2) -- -- -- -- -- -- -- -- -- --
----- ------- ------ ------- ------ ------- ------ ------- ------ -------
Balance at September 30, 1994 -- -- -- -- -- -- -- -- 2,131 21
----- ------- ------ ------- ------ ------- ------ ------- ------ -------
Proceeds, net of issuance costs of
$1,339 from public offering
of common stock -- -- -- -- -- -- -- -- 1,150 12
Acquisitions of Treasury stock
and warrants -- -- -- -- -- -- -- -- -- --
Net loss -- -- -- -- -- -- -- -- -- --
----- ------- ------ ------- ------ ------- ------ ------- ------ -------
Balance at December 31, 1994 -- -- -- -- -- -- -- -- 3,281 33
----- ------- ------ ------- ------ ------- ------ ------- ------ -------
Issuance of stock in acquisitions -- -- -- -- -- -- -- -- 550 5
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) -- -- 4,086 41
Issuance of common shares, net
of issuance costs of $290 -- -- -- -- -- -- -- -- 2,533 25
Exercise of stock options, net of
12 shares exchanged -- -- -- -- -- -- -- -- 196 2
Exercise of warrants -- -- -- -- -- -- -- -- 250 3
Common stock issued for services -- -- -- -- -- -- -- -- 280 3
Acquisitions of treasury stock -- -- -- -- -- -- -- -- -- --
Debt conversions -- -- -- -- -- -- -- -- 450 4
Issuance of warrants for services -- -- -- -- -- -- -- -- -- --
Compensatory stock options -- -- -- -- -- -- -- -- -- --
Foreign currency translation
adjustment -- -- -- -- -- -- -- -- -- --
Net loss -- -- -- -- -- -- -- -- -- --
----- ------- ------ ------- ------ ------- ------ ------- ------ -------
Balance at December 30, 1995
(as restated - see Note 2) 15 $ 1,439 1 $ 1,230 -- $ 1,372 2 $ 1,940 11,626 $116
=== ====== === ======= ====== ====== === ====== ====== ===
</TABLE>
The accompanying notes are an integral part of this statement.
<TABLE>
<CAPTION>
Treasury Stock Additional Cumulative Total
and Warrants Paid-in Accumulated Translation Stockholders'
Shares Dollars Capital Deficit Adjustment Equity (Deficit)
------ ------- ------- ------- --------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1993 - $ - $ 2,055 $ (2,894) $ - $ (818)
Distribution to stockholders - - - (241) - (241)
Net loss as restated (see note 2) - - - (2,119) - (2,119)
------- -------- --------- -------- -------- ---------
Balance at September 30, 1994 - - 2,055 (5,254) - (3,178)
------- -------- --------- -------- -------- ---------
Proceeds, net of issuance costs of
$1,339 from public offering
of common stock - - 4,975 - - 4,987
Acquisitions of Treasury stock
and warrants (69) (769) - - - (796)
Net loss - - - (1,022) - (1,022)
------- -------- --------- -------- -------- ---------
Balance at December 31, 1994 (69) (796) 7,030 (6,276) - (9)
------- -------- --------- -------- -------- ---------
Issuance of stock in acquisitions 69 796 1,096 - - 1,897
Issuance of preferred stock, net
of issuance costs of $1,241 - - - - - 24,296
Preferred stock conversions - - 18,274 - - -
Issuance of common shares, net
of issuance costs of $290 - - 6,762 - - 6,787
Exercise of stock options, net of
12 shares exchanged - - 214 - - 216
Exercise of warrants - - 622 - - 625
Common stock issued for services - - 557 - - 560
Acquisitions of treasury stock (71) (215) - - - (215)
Debt conversions - - 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
(as restated - see Note 2) (71) $(215) $36,201 $(20,939) $ (19) $ 21,125
=== ==== ====== ======= ===== =======
</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 September 30,
December 30, December 31, 1994 as restated
1995 1994 (see Note 4)
---------------- ----------------- ----------------
(as restated -
see Note 2)
Cash flows used by operating activities:
<S> <C> <C> <C>
Net loss $(14,663) $(1,022) $(2,119)
Adjustments to reconcile net loss to net
cash used by operations:
Depreciation 611 9 41
Loss on disposal of property and
equipment 84 - -
Stock based compensation expense 1,490 - -
(Increase) decrease in operating
assets, net of businesses acquired:
Accounts receivable 2,722 (21) 157
Inventories (2,264) (64) 232
Prepaid expenses and other
current assets 342 (30) 31
Other assets (224) 435 (100)
Increase (decrease) in operating
liabilities, net of businesses
acquired:
Accounts payable 3,662 (875) (146)
Accrued liabilities 1,996 (658) 837
------- ------ ------
Net cash used by operating
activities (6,244) (2,226) (1,067)
------- ------ ------
Cash flows used by investing activities:
Acquisitions, net of cash acquired
American Consumer Products, Inc. (13,925) - -
Alabaster Industries, Inc. (157) - -
Intelock Technologies, Inc. 754 - -
Purchases of property and equipment (2,365) (53) (8)
-------- ------- -------
Net cash used by investing
activities (15,693) (53) (8)
------- ------- -------
</TABLE>
<PAGE>
Vista 2000, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(Dollar amounts in thousands except per share data)
<TABLE>
<CAPTION>
Three month Year ended
Year ended period ended September 30,
December 30, December 31, 1994 as restated
1995 1994 (see Note 4)
---------------- --------------- ----------------
(as restated -
see Note 2)
<S> <C> <C> <C>
Cash flows provided by financing activities:
Net proceeds (payment) from short-term
borrowings -- (1,127) 851
Net proceeds from long-term debt -- -- 24
Repayment of long-term debt (9,331) (340) --
Proceeds from issuance of common stock,
net of issue costs 6,787 4,986 (85)
Proceeds from issuance of preferred stock,
net of issue costs 24,296 -- --
Proceeds from exercise of stock options
and warrants 841 -- --
Purchase of treasury stock and warrants (215) (796) --
-------- ------- -----
Net cash provided by financing activities 22,378 2,723 790
-------- ------- -----
Effect of exchange rate changes on cash (19) - --
-------- ------- -----
Net increase (decrease) in cash during period 422 444 (285)
Cash and cash equivalents at the beginning
of the period 449 5 290
-------- ------- -----
Cash and cash equivalents at the end of the
period $ 871 $ 449 $ 5
======== ======= =====
Supplemental disclosure:
Interest paid $ 754 $ 392 $ 16
Noncash investing and financing activities:
Assets purchased under capital lease
obligations $ 170 $ -- $ --
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 $ -- $ --
======== ======= =====
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
Vista 2000, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 and rainwear, gas
detection devices and other home safety and security products. 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 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 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.
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.
Vista 2000, Inc. and Subsidiaries
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 30, 1995
(Dollar amounts in thousands except per share data)
(1) Nature Of Business And Summary Of Significant Accounting Policies -
Continued
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 30, 1995 and September 30, 1994, and the three month period
ended December 31, 1994. Fiscal years 1995 and 1994 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 15% of the Company's revenue was from one customer for the year
ended December 30, 1995.
Inventories
Inventories are stated at the lower of average cost or market. Cost for
approximately 80% of inventories at December 30, 1995 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. All
of the inventory at December 31, 1994 was determined using the FIFO method.
Had the Company used the first-in, first-out (FIFO) method of accounting, gross
profit would have been substantially the same in 1995.
Vista 2000, Inc. and Subsidiaries
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 30, 1995
(Dollar amounts in thousands except per share data)
(1) Nature Of Business And Summary Of Significant Accounting Policies -
Continued
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 31,
1994. Advertising expense for the year ended December 30, 1995, three months
ended December 31, 1994, and year ended September 30, 1994 was $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.
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 30, 1995, three month period
ended December 31, 1994 and the year ended September 30, 1994 was $611, $9, and
$41, respectively.
Vista 2000, Inc. and Subsidiaries
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 30, 1995
(Dollar amounts in thousands except per share data)
(1) Nature Of Business And Summary Of Significant Accounting Policies -
Continued
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 and Product Development Costs
Research and development costs are charged to expense as incurred and totalled
$297, $36 and $307 for the year ended December 31, 1995, three month period
ended December 31, 1994 and year ended September 30, 1994, respectively.
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. Product development costs of approximately $295 are
included in other assets at December 30, 1995. Amortization expense charged to
operations was $20 for 1995. No product development costs were capitalized or
amortized for the three months ended December 31, 1994 and the year ended
September 30, 1994.
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.
Vista 2000, Inc. and Subsidiaries
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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 the 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 1995 presentation.
<PAGE>
Vista 2000, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 30, 1995
(Dollar amounts in thousands except per share data)
(2) Restatement Of 1995 Financial Statements
Subsequent to the issuance of the 1995 consolidated financial statements,
management determined that the previously issued 1995 consolidated financial
statements contained errors as a result of errors discovered in the accounting
records of Family Safety Products, Inc. and Promotional Marketing, Inc., two of
the Company's wholly-owned subsidiaries. Accordingly, the consolidated financial
statements as of and for the year ended December 30, 1995 have been restated to
reflect the correction of these errors. The following amounts have been affected
by the restatement.
<TABLE>
<CAPTION>
As
As previously
restated reported
-------- --------
<S> <C> <C>
Inventories $ 33,378 $ 35,036
Accrued liabilities 3,955 3,808
Accumulated deficit 20,939 19,134
Cost of sales 28,244 26,586
Loss on sale of assets of
Promotional Marketing, Inc. 1,147 1,000
Net loss (14,663) (12,858)
Net loss per common share $ (2.33) $ (2.04)
</TABLE>
(3) Sale Of Fspi
On August 23, 1996, the Company sold substantially all the assets of Family
Safety Products, Inc. (FSPI) for $1,800 cash and $100 promissory note. The
purchaser also assumed substantially all operating liabilities of FSPI. Vista
recognized a loss on the sale of FSPI assets of approximately $9,000 in the
third quarter of 1996.
<PAGE>
Vista 2000, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 30, 1995
(Dollar amounts in thousands except per share data)
(3) Sale Of Fspi - Continued
The pro forma results of operations which follow assume that this disposition
had occurred at January 1, 1995. These pro forma results of operations also
assume that the acquisitions and dispositions referred to in Note 15 had
occurred at January 1, 1995. 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 do not reflect any overhead costs which may be
eliminated as a result of these acquisitions and the results are not necessarily
indicative of the results that would have occurred if the transactions had
occurred at January 1, 1995 nor are the results indicative of future results.
UNAUDITED
Year ended
December 30, 1995
-----------------
Sales $ 116,555
Net loss (11,315)
Pro forma weighted average shares 6,635,389
Net loss per common share $ (1.71)
(4) Prior Period Adjustments - 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 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 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 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. 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 $1,790.
<PAGE>
Vista 2000, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 30, 1995
(Dollar amounts in thousands except per share data)
(5) Inventories
Inventories consist of the following :
<TABLE>
<CAPTION>
December 30, December 31,
1995 1994
------------ -----------
<S> <C> <C>
Raw Materials $ 7,665 $ 657
Work in Progress 3,605 -
Finished Goods 22,108 31
------------ -----------
$ 33,378 $ 688
============ ===========
(6) Property And Equipment
Property and Equipment consists of the following:
December 30, December 31,
1995 1994
------------ -----------
Machinery and Equipment $ 8,897 $ 211
Buildings 3,737 -
Office Furniture and Equipment 665 45
Other 50 -
------------ -----------
Total Property and Equipment 13,349 256
Less accumulated depreciation 680 71
------------ -----------
12,669 185
Land 372 -
------------ -----------
$ 13,041 $ 185
============ ===========
</TABLE>
<PAGE>
Vista 2000, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 30, 1995
(Dollar amounts in thousands except per share data)
(7) Long-term Debt
Long-term debt, including capital lease obligations, consists of the following:
<TABLE>
<CAPTION>
December 30, December 31,
1995 1994
------------ -----------
<S> <C> <C>
Revolving line of credit payable by ACPI to a bank with
interest at prime plus .375% (8.875% at
December 30, 1995) $ 22,600 $ -
Industrial Development Bonds payable by a
subsidiary of ACPI, bearing an interest rate
at 4% and 79% of prime 187 -
10% notes payable to a corporation
owned by a family member of the former
Chairman of the Board of Directors 87 150
Obligations under capital leases for equipment payable
monthly over various terms through 1998. Interest is
imputed at rates ranging from 7.4% to 12.0% 762 4
15% demand notes payable to officers of the Company - 286
8% note payable to affiliated company - 250
Other notes payable - 5
------------ -----------
Total long-term debt 23,636 695
Less current maturities 607 543
------------ -----------
Net long-term debt $ 23,029 $ 152
============ ===========
</TABLE>
Property and equipment includes the following amounts for leases that have been
capitalized:
December 30,
1995
------------
Equipment $ 1,562
Accumulated depreciation (1,115)
------------
$ 447
=============
<PAGE>
Vista 2000, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 30, 1995
(Dollar amounts in thousands except per share data)
(7) Long-term Debt - (Continued)
Scheduled principal payments of long-term debt and capital lease obligations are
as follows:
Fiscal year:
1996 $ 607
1997 22,936
1998 92
1999 1
------------
Total $ 23,636
============
During 1995, ACPI entered into an amendment to its revolving credit which
extends the agreement through April 1997. Borrowings under the revolving line of
credit are based on a formula that includes the ACPI's eligible accounts
receivable and inventories. Interest at a base rate plus 3/8% (effective rate of
8.875% as of December 30, 1995) and a loan commitment fee of 3/8% on the unused
portion of the revolving credit commitment are payable quarterly. The agreement
provides for certain restrictive covenants relating to ACPI's financial
condition including, among others, limitations as to dividends and capital
expenditures. It also requires the maintenance of minimum levels of working
capital and net worth. The Company and ACPI were in compliance with these
covenants as of December 30, 1995. The agreement is collateralized by accounts
receivable, inventories, and equipment and is guaranteed by each of ACPI's
subsidiaries.
The industrial development bonds consist of two issues payable by the Company
annually through 1997. Interest is payable at a fixed rate of 4% and at 79% of
the prime rate. The bonds are collateralized by all real and personal property
at one of the Company's facilities.
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 30, 1995
(Dollar amounts in thousands except per share data)
(8) Commitments And Contingencies
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 $809, 14, and 38 for the fiscal year ended December 30,
1995, the three month period ended December 31, 1994 and the year ended
September 30, 1994, respectively.
Commitments under noncancelable operating leases are summarized as follows:
Fiscal Year:
1996 $ 559
1997 495
1998 370
1999 192
2000 202
Total $ 1,818
============
ACPI leases two facilities from related parties. The Company is responsible for
repairs and maintenance, taxes and insurance of these facilities. The leases
have initial lease terms expiring in 1999 and 2001 and three five year renewal
options. Expenses for these operating leases were $735 in 1995. The
non-cancelable future commitments as of December 30, 1995 are $735 in 1996, $735
in 1997, $735 in 1998, $655 in 1999, $575 in 2000, and $96 thereafter. During
1995, the Company entered into an agreement with the related parties to acquire
the aforementioned facilities for approximately $7 million. The agreement
provides for a cash payment of $2.7 million and assumption of liabilities of
$4.3 million on or before June 28, 1996.
<PAGE>
Vista 2000, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 30, 1995
(Dollar amounts in thousands except per share data)
(8) Commitments And Contingencies - Continued
During 1995, ACPI entered into three-year employment agreements with two
officers with aggregate minimum commitments of approximately $1,700. Commitments
totaling $1,555 remain as of December 30, 1995. The costs of these employment
agreements are being expensed as services are provided.
(9) SUBSEQUENT EVENTS
Stock Offerings
During the first quarter of 1996, the Company raised approximately $21,200
through two separate 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.
Class Action Lawsuit
Subsequent to December 30, 1995, the Company together with certain officers,
directors and third parties had been named as a defendant in twenty-four (24)
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.
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 have reached an agreement in principle to settle the action. 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. The Company's insurance carrier will
contribute $300,000 to the settlement to cover certain expenses related to the
settlement. The settlement will be in satisfaction of all claims of the class.
<PAGE>
Vista 2000, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 30, 1995
(Dollar amounts in thousands except per share data)
(9) Subsequent Events - Continued
Class Action Lawsuit - Continued
On January 9, 1997, the district court preliminarily approved the settlement for
purposes of sending notice to the class and scheduled a hearing for March 14,
1997 to determine court's final approval. The settlement will only become
effective upon approval of the court.
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.
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.
<PAGE>
Vista 2000, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 30, 1995
(Dollar amounts in thousands except per share data)
(10) Stockholder's Equity (Deficit)
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.
At December 30, 1995 warrants for the purchase of 36,408 shares of Company
common stock that was 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 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 Warrants
provide for the purchase of one share of common stock at an exercise price of
$7.50 per share and may be exercised for a three year period commencing March
31, 1996.
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.
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 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.
The Company has 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 operations amounting to $900 for the year ended December
30, 1995.
<PAGE>
Vista 2000, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 30, 1995
(Dollar amounts in thousands except per share data)
(10) Stockholder's Equity (Deficit) - Continued
During 1995, the board approved the adoption of an Employee Stock Purchase plan
and authorized the Company to reserve 800,000 shares for this plan.
Stock option transactions are summarized as follows:
<TABLE>
<CAPTION>
Three month Year ended
Year ended period ended September 30,
December 30, December 31, 1994 as restated
1995 1994 (see Note 4)
---------------- --------------- ----------------
<S> <C> <C> <C>
Outstanding, beginning of period 225,000 225,000 -
Granted 1,759,350 - 225,000
Exercised (208,400) - -
Cancelled (225,000) - -
---------- ----------- -----------
Outstanding, end of year 1,550,950 225,000 225,000
========= =========== ==========
Range of exercise price $1.65 - $5.00 $6.05 $6.05
</TABLE>
As of December 30, 1995, options covering approximately 1,311,000 shares were
exercisable.
The issuance of options and exercise of certain options resulted in the
recording of $900 of compensation expense during the year ended December 30,
1995.
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.
<PAGE>
Vista 2000, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 30, 1995
(Dollar amounts in thousands except per share data)
(10) Stockholder's Equity (Deficit) - Continued
Series Convertible Preferred Stock:
The Company has designated 142,000 of its 500,000 authorized preferred shares as
follows:
<TABLE>
<CAPTION>
Shares authorized Liquidation preference per share
----------------- --------------------------------
<S> <C> <C>
Series A 100,000 $100
Series B 20,000 $1,000
Series C 2,000 $10,000
Series D 20,000 $1,000
</TABLE>
The remaining 358,000 authorized preferred shares have not been designated as a
series. The preferred stock is recorded net of issuance costs.
The preferred stock is convertible into Company common stock based on a formula,
as defined in the several subscription agreements, 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. As of December 30, 1995, substantially all of the outstanding preferred
shares were convertible into common shares.
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.
(11) Employee Retirement Savings Plan
One of the Company's subsidiaries contributes to employee retirement plans
covering substantially all its employees. Charges to consolidated operations for
these plans were as follows at December 30, 1995:
Discretionary Contribution Profit Sharing - 401 (K) $223
Multi-Employer Pension Plan 774
----
$997
====
The contributions to the union sponsored, multi-employer pension plan were
determined based upon the number of employees working per week. At January 1,
1995, 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 30, 1995.
<PAGE>
Vista 2000, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 30, 1995
(Dollar amounts in thousands except per share data)
(12) RELATED PARTY TRANSACTIONS
ACPI leases a building to house the corporate headquarters and certain
manufacturing and distribution operations from related parties (Note 8).
At December 30, 1995, the Company has a note receivable outstanding from a
former officer. This note is fully reserved pending final settlement with the
Company.
(13) 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:
<TABLE>
<CAPTION>
December 30, December 31, September 30,
1995 1994 1994
--------------- ---------------- ---------------
<S> <C> <C> <C>
Deferred tax assets:
Operating loss carryforwards $ 6,643 $ 2,310 $ 1,925
Accounts receivable 1,025 - -
Accruals 505 - -
Compensation related 433 - -
Tax credit carryforwards 210 - -
Fixed assets 80 - 80
Other 31 - -
--------------- ---------------- ---------------
Gross deferred tax assets 8,927 2,310 1,925
Deferred tax asset valuation allowance (7,516) (2,310) (1,925)
--------------- ---------------- ---------------
Net deferred tax asset 1,411 0 0
--------------- ---------------- ---------------
Deferred tax liabilities:
Inventories 1,411 - -
--------------- ---------------- ---------------
Net deferred income tax $ 0 $ 0 $ 0
=============== ================ ===============
</TABLE>
<PAGE>
Vista 2000, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 30, 1995
(Dollar amounts in thousands except per share data)
(13) Income Taxes - Continued
At December 30, 1995, the Company had operating loss carryforwards for U.S.
income tax purposes of approximately $17,256 available to reduce future taxable
income which expire at various dates through 2010. Included in the operating
loss carryforward is $1,744 of losses which can only be utilized by the Boss
manufacturing subsidiary of ACPI which expire at various dates through 2000.
Included in the tax credit carryforward is approximately $190 of alternative
minimum tax credits available to reduce future income taxes payable. These
alternative minimum tax credits do not have an expiration date.
The Company has experienced a change in control, as defined under Section 382 of
the Internal Revenue Service Code, during calendar year 1995. As a result, the
utilization of a significant portion of the tax loss carryforwards will be
limited on an annual basis.
(14) Recently Issued Accounting Standard
The Company currently accounts for the issuance of stock options to employees in
accordance with Accounting Principles Board Opinion ("APB") Number 25,
Accounting for Stock Issued to Employees. In October 1995, the FASB issued SFAS
Number 123 ("SFAS 123"), Accounting for Stock Based Compensation. SFAS
123 allows the continued use of the method prescribed by APB 25, referred to as
the intrinsic value method. SFAS 123 also provides an alternative method,
referred to as the fair value method. If the intrinsic value method of
accounting for the issuance of stock options is used, then SFAS 123 requires
disclosure of pro forma net earnings and earnings per share, as if the fair
value method had been used.
Management has determined that the Company will continue to account for the
issuance of stock options to employees in accordance with APB 25. Therefore, the
only effect of adopting SFAS 123 will be the new disclosure requirements. These
disclosure requirements are effective for the year ending December 31, 1996.
<PAGE>
Vista 2000, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 30, 1995
(Dollar amounts in thousands except per share data)
(15) Acquisitions And Dispositions
During fiscal 1995 Vista completed four acquisitions and made one disposition
which are summarized below.
Effective September 30, 1995, Vista acquired approximately 96% 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.
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.
<PAGE>
Vista 2000, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 30, 1995
(Dollar amounts in thousands except per share data)
(15) Acquisitions And Dispositions - Continued
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
provides 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.
The only assets and liabilities retained by PMI are certain automated telephone
dialing and switching equipment and workstations (estimated fair value of $150)
and the related capital lease liability (estimated fair value $208). The
accompanying consolidated balance sheet includes these assets and the related
capital lease liability. The accompanying 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.
The pro forma results of operations which follow assume that the acquisitions
had occurred at the beginning of each period presented. 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 do not reflect
any overhead costs which may be eliminated as a result of these acquisitions and
the 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.
UNAUDITED
<TABLE>
<CAPTION>
Three month
Year ended period ended Year ended
December 30, December 31, September 30,
1995 1994 1994
---------------- ---------------- ----------------
<S> <C> <C> <C>
Sales $ 118,537 $ 30,259 $ 121,170
Net loss (18,803) (871) (1,855)
Proforma weighted average shares 6,635,389 ,432,493 2,750,426
Net loss per common share $ (2.83) $ (.25) $ (.55)
</TABLE>
<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>
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)
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)
31
<PAGE>
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)
(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
32
<PAGE>
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.
(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.
33
<PAGE>
Share Computation
Year Ended
December 30,1995
<TABLE>
<CAPTION>
Common Stock
-------------------------------------------------------------
Prefered Total less Weighted
Stock Total Treasury Tresury Average Shares
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Shares outstanding at December 31, 1994 0 3,281,226 (69,200) 3,212,026 3,212,026
Issuance of stock in acqisitions 550,000 69,200 619,200 278,171
Issuance of preferred stock 93,636 0
Preferred stock conversions (75,218) 4,136,488 4,136,488 848,197
Issuance of common shares 2,482,511 2,482,511 1,345,609
Exercise of stock options 196,318 196,318 17,468
Exercise of warrants 250,000 250,000 49,315
Common stock issued for services 280,000 280,000 252,055
Acquisitions of treasury stock (71,100) (71,100) (47,470)
Debt conversions 449,932 449,932 338,990
===========================================================================
Shares outstanding at end of quarter 18,418 11,626,475 (71,100) 11,555,375 6,294,361
===========================================================================
Net Loss $ (14,663,000)
Weighted average shares 6,294,361
Loss per share ($2.33)
==================
</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
30, 1995 AUDITED FINANCIAL STATEMENTS 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 31, 1995.
</LEGEND>
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS YEAR
<FISCAL-YEAR-END> DEC-30-1995 DEC-31-1994 SEP-30-1994
<PERIOD-START> JAN-01-1995 OCT-01-1994 OCT-01-1993
<PERIOD-END> DEC-30-1995 DEC-31-1994 SEP-30-1994
<CASH> 871,000 449,000 4,000
<SECURITIES> 0 0 0
<RECEIVABLES> 18,140,000 103,000 47,000
<ALLOWANCES> 2,230,000 40,000 5,000
<INVENTORY> 33,378,000 688,000 624,000
<CURRENT-ASSETS> 51,550,000 1,242,000 683,000
<PP&E> 13,041,000 185,000 141,000
<DEPRECIATION> 0 0 0
<TOTAL-ASSETS> 65,311,000 1,597,000 1,430,000
<CURRENT-LIABILITIES> 21,157,000 1,454,000 3,918,000
<BONDS> 0 0 0
0 0 0
5,981,000 0 0
<COMMON> 116,000 33,000 21,000
<OTHER-SE> 15,028,000 (42,000) (3,199,000)
<TOTAL-LIABILITY-AND-EQUITY> 65,311,000 1,597,000 1,430,000
<SALES> 32,422,000 1,000 137,000
<TOTAL-REVENUES> 32,422,000 1,000 137,000
<CGS> 28,244,000 26,000 314,000
<TOTAL-COSTS> 17,318,000 858,000 1,721,000
<OTHER-EXPENSES> 1,147,000 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 649,000 143,000 266,000
<INCOME-PRETAX> (14,663,000) (1,022,000) (2,119,000)
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> (14,287,000) (883,000) (1,898,000)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (14,663,000) (1,022,000) (2,119,000)
<EPS-PRIMARY> (2.33) (0.36) (0.99)
<EPS-DILUTED> 0 0 0 <F1>
<FN>
<F1> Not displayed since calculation would be anti-dilutive.
</FN>
</TABLE>
