<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 29, 1997
Commission File No. 0-23204
VISTA 2000, INC.
----------------
(Exact name of registrant as specified in its charter)
Delaware 58-1972066
-------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
736 Johnson Ferry Road
Building C, Suite 275
Marietta, Georgia 30068
------------------------------------------------------
(Address of principal executive offices)
(770) 971-4344
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(Issuer's telephone number)
Check 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 at least
the past 90 days. Yes No X
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
Class Outstanding at August 15, 1997
----- -------------------------------
Common Stock, $.01 par value 43,510,964
<PAGE>
PART I.- FINANCIAL INFORMATION
Item 1. Financial Statements
<PAGE>
Vista 2000, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except per share data)
ASSETS
<TABLE>
<CAPTION>
MARCH 29, 1997 DECEMBER 28,
(UNAUDITED) 1996
-------------- ------------
<S> <C> <C>
Current Assets
Cash and cash equivalents................... $ 453 $ 1,165
Accounts receivable, net of allowance for
doubtful accounts and returns of $1,494
and $1,405, respectively.................. 13,049 16,187
Inventories................................. 25,231 25,157
Prepaid expenses............................ 1,243 1,544
Other current assets........................ 131 205
-------- --------
Total current assets...................... 40,107 44,258
-------- --------
Property and Equipment, at cost............... 20,737 18,298
Less: accumulated depreciation.............. 3,086 2,371
-------- --------
Net property and equipment................ 17,651 15,927
-------- --------
Other Assets.................................. 149 1,586
-------- --------
$ 57,907 $ 61,771
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Note payable................................ $ 1,058 $ 908
Current portion of long-term debt........... 578 383
Accounts payable............................ 4,939 5,209
Accrued payroll and related expenses........ 2,828 3,596
Accrued liabilities......................... 2,546 3,595
-------- --------
Total current liabilities................. 11,949 13,691
-------- --------
Long-term debt, net of current portion........ 22,013 23,919
Commitments and Contingencies
Stockholders' Equity
Preferred stock $1 par value, 500,000 shares
4,220 and 4,220 shares issued and
outstanding, respectively authorized,....... 3,985 3,985
Common stock, $.01 par value, authorized
50,000,000 shares, issued and outstanding,
18,074,120 and 18,074,120, respectively..... 181 181
Additional paid-in capital.................... 62,108 62,108
Accumulated deficit........................... (40,547) (40,340)
Currency translation.......................... (32) (23)
-------- --------
25,695 25,911
Less: treasury shares and warrants - at cost.. 1,750 1,750
-------- --------
Total Stockholders' equity.............. 23,945 24,161
-------- --------
$ 57,907 $ 61,771
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
VISTA 2000, INC. AND SUBSIDIARIES
CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
QUARTER ENDED QUARTER ENDED
MARCH 29, 1997 MARCH 30, 1996
-------------- --------------
<S> <C> <C>
Net Sales..................................... $ 23,579 $ 28,103
Cost of Sales................................. 17,221 21,530
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Gross profit (loss)........................... 6,358 6,573
Operating expenses............................ 5,983 11,093
----------- -----------
Operating profit (loss)..................... 375 (4,520)
Other income and (expense)
Interest.................................. (542) (519)
Other..................................... (16) 78
----------- -----------
Income (loss) before income tax............... (183) (4,961)
Income tax (expense) benefit.................. (24)
----------- -----------
Net income (loss)......................... $ (207) $ (4,961)
----------- -----------
----------- -----------
Weighted average shares outstanding.......... 17,732,779 12,880,938
Loss per common share:
Net loss................................... $ (0.01) $ (0.39)
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
Vista 2000, Inc. and Subsidiaries
Consolidated Unaudited Statement of Stockholders' Equity (Deficit)
Quarter ended March 29, 1997
(Dollars and share amounts in thousands)
<TABLE>
<CAPTION>
PREFERRED STOCK
-----------------------------------------------------------------
TREASURY
STOCK
AND
SERIES A SERIES C SERIES D COMMON STOCK WARRANTS
-------------------------- ---------------------- ------------------------ ---------------------- -----------
SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS SHARES
------ ----------- ----------- --------- ------ --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December
28, 1996..... 1 $ 122 -- $ 1,098 3 $ 2,765 18,074 $ 181 (341)
Foreign
currency
translation
adjustment...
Net (Loss)....
------ ----------- ----------- --------- ------ --------- --------- ----------- -----------
Balance at
March 29,
1997......... 1 $ 122 -- $ 1,098 3 $ 2,765 18,074 $ 181 (341)
------ ----------- ----------- --------- ------ --------- --------- ----------- -----------
------ ----------- ----------- --------- ------ --------- --------- ----------- -----------
<CAPTION>
TOTAL
ADDITIONAL CUMULATIVE STOCKHOLDERS'
PAID-IN ACCUMULATED TRANSLATION EQUITY
DOLLARS CAPITAL (DEFICIT) ADJUSTMENT (DEFICIT)
--------- ----------- ------------ ------------- --------------
<S> <C> <C> <C> <C> <C>
Balance at
December
28, 1996..... $ (1,750) $ 62,108 $ (40,340) $ (23) $ 24,161
Foreign
currency
translation
adjustment... (9) (9)
Net (Loss).... (207) (207)
-------- -------- -------- ----- --------
Balance at
March 29,
1997........ $ (1,750) $ 62,108 $(40,547) $ (32) $ 23,945
-------- -------- -------- ----- --------
-------- -------- -------- ----- --------
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
VISTA 2000, INC. AND SUBSIDIARIES
CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
QUARTER ENDED QUARTER ENDED
MARCH 29, 1997 MARCH 30, 1996
-------------- --------------
<S> <C> <C>
Cash flows used by operating activities:
Net loss....................................... $ (207) $ (4,961)
Adjustments to reconcile net loss to net
cash used by operations:
Depreciation................................. 599 503
Loss on disposal of property and equipment... --
Stock based compensation expense............. 1,566
(Increase) decrease in operating assets:
Accounts receivable........................ 3,138 1,640
Inventories................................ (74) (5,895)
Prepaid expenses and other current assets.. 375 (327)
Deferred charges and other assets.......... 1,437 (385)
Increase (decrease) in operating liabilities:
Accounts Payable........................... (270) (2,072)
Accrued liabilities........................ (1,817) (1,706)
----------- -----------
Net cash provided (used) by operating
activities............................. 3,181 (11,637)
----------- -----------
Cash flows used by investing activities:
Purchases of property and equipment............ (2,323) (2,372)
Deposit on real property under contract
for purchase................................. (2,845)
----------- -----------
Net cash used by investing activities........ (2,323) (5,217)
----------- -----------
Cash flows provided by financing activities:
Net proceeds (payments) from short-term
borrowings................................... 150 (800)
Net proceeds (payments) from long-term debt.... (1,711) (112)
Proceeds from issuance of common stock, net
of issue costs............................... 1,800
Proceeds from issuance of preferred stock,
net of issue costs........................... 19,400
Proceeds from exercise of stock options and
warrants..................................... 1,038
Purchase of treasury stock..................... (555)
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Net cash provided by financing activities.... (1,561) 20,771
----------- -----------
Effect of exchange rates on cash and cash
equivalents.................................... (9) 3
----------- -----------
Net increase (decrease) in cash during period..... (712) 3,920
Cash and cash equivalents at the beginning of
the period...................................... 1,165 871
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Cash and cash equivalents at the end of
the period...................................... $ 453 $ 4,791
----------- -----------
----------- -----------
Supplemental disclosure:
Interest paid................................... $ 627 $ 519
Noncash investing and financing activities:
Conversion of debt to common stock.............. $ -- $ --
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE>
VISTA 2000, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 29, 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements as of March 29, 1997
and for the quarter then ended include the accounts of Vista 2000, Inc.
(Vista) and its wholly-owned subsidiaries, American Consumer Products, Inc.
(ACPI), Alabaster Industries, Inc. (Alabaster), Family Safety Products, Inc.
(FSPI) and Intelock Technologies, Inc. (Intelock). The accompanying
consolidated financial statements as of March 30, 1996 and for the quarter
then ended also include the accounts of Vista, ACPI, Alabaster, FSPI and
Intelock.
INCOME TAXES
The Company accounts for income taxes under the asset and liability
method, in accordance with Statement of Financial Accounting Standards Number
109 ("SFAS 109"). Under SFAS 109, 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 statutory tax rates expected to apply to
taxable income in the years in which those temporary differences are expected
to be recovered or settled. Under SFAS 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. A valuation allowance is provided
for deferred tax assets when utilization of such asset is not reasonably
assured.
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 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 the these estimates.
STOCK BASED COMPENSATION
The Company's Stock Option Plans are accounted for under APB Opinion 25,
Accounting for Stock Issued to Employees, and related interprteations.
UNAUDITED INTERIM FINANCIAL INFORMATION
The interim financial information as of and for the three months ended
March 29, 1997 is unaudited and reflects all adjustments (consisting of
normal recurring adjustments) which are, in the opinion of management,
necessary for a fair statement of the results for the interim periods
presentde. The results for these interim periods are not necessarily
indicative of the results of a full year.
7
<PAGE>
VISTA 2000, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 29, 1997
(2) INVENTORIES
Inventories consist of the following at March 29, 1997:
<TABLE>
<S> <C>
Raw materials.................................................................. $5,235,000
Work-in-process................................................................ 1,364,000
Finished goods................................................................. 21,126,000
Reserve for obsolescence....................................................... (2,494,000)
----------
$25,231,000
----------
----------
</TABLE>
(3) STOCKHOLDER'S EQUITY
The company issued warrants, during 1995, to various consultants to
acquire up to 645,529 common shares at prices per share ranging from $2.00 to
$12.00. As of March 29, 1997, there were 375,529 of these warrants issued and
outstanding.
Upon completion of the Company's initial public offering, the company
agreed to sell to the underwriters warrants to acquire up to 100,000 shares
of common stock at an exercise price per share of $9.08. Each common share
carried two (2) warrants for the purchase of up to 200,000 shares of the
Company's common stock at $11.55 per share.
During the Company's initial public offering, which occurred in October,
1994, there were warrants issued for the purchase of 2,300,000 shares of the
Company's common stock. For the first two years after issuance the exercise
price per share was $7.00. During the subsequent two year period ending
October 26, 1998, the exercise price increases to $10.00 per share. As of
March 29, 1997, all of these warrants were issued and outstanding.
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 $2.50 per share and may be exercised for a
three year period commencing 24 months from the date of issuance, which was
March 1994. As of March 29, 1997 all of these warrants were issued and
outstanding.
On March 11, 1994, the Board of Directors authorized a one-for-two
reverse common stock split. On November 30, 1993, the Board of Directors
authorized a two-for-three reverse common stock split. All references to
number of shares and to stock warrants as well as per share information have
been adjusted to reflect the stock splits on a retroactive basis.
Warrants for the purchase of 26,085 shares of Company common stock that
were issued during 1993 in conjunction with debentures sold by the Company
were issued and outstanding at December 28, 1996. The warrants, which carried
an exercise price of $9.00 each, could have exercised in whole or in part at
any time during the two year period ended January 1997. These warrants
expired during the quarter ended March 29, 1997.
8
<PAGE>
(3) STOCKHOLDER'S EQUITY (CONTINUED)
The Company has adopted stock option plans providing for the issuance of
options covering up to 8,000,000 shares of common stock to be issued to
officers, directors, employees or consultants to the Company. Various vesting
conditions apply to these options. 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.
During the first fiscal quarter ended March 29, 1997 (the 1996 fiscal
year ended December 28, 1996), the Company granted 7,810,000 options to
purchase common stock at an exercise price of $.03 per share to directors,
certain employees and certain consultants. The options were granted effective
December 31, 1996 for prior and future services. One half of the options are
vested upon grant, with the remaining half vesting on December 31, 1997.
Compensation expense of $105,000, related to these options was recognized
during the year ended December 28, 1996. During the second quarter of 1997, a
total of 2,662,500 of these options were exercised.
STOCK OPTIONS
Stock option transactions during the quarter ended March 29, 1997 are
summarized as follows:
<TABLE>
<S> <C>
Outstanding at December 28, 1996................................................. 118,550
Granted.......................................................................... 7,810,000
Exercised........................................................................ (0)
Canceled......................................................................... (0)
---------
Outstanding at March 29, 1997.................................................... 7,928,550
---------
---------
</TABLE>
SERIES CONVERTIBLE PREFERRED STOCK
The Company has designated 142,000 of its 500,000 authorized preferred
shares as follows:
<TABLE>
<CAPTION>
LIQUIDATION
SHARES SHARES PREFERENCE
AUTHORIZED OUTSTANDING PER SHARE
----------- ------------- ---------------------
<S> <C> <C> <C>
Series A......................................................... 100,000 1,250 $ 100
Series B......................................................... 20,000 0 $ 1,000
Series C......................................................... 2,000 120 $ 10,000
Series D......................................................... 20,000 2,850 $ 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 defined in the several subscription agreements. The preferred stock
is convetrible at various times after its issuance. The conversion price is
based on a discount to the listed price of the
9
<PAGE>
VISTA 2000, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 29, 1997
(3) STOCKHOLDER'S EQUITY (CONTINUED)
Company's common stock on the date of conversion. Because the Company's
common stock has been delisted by NASDAQ, there is uncertainty as to the
number of shares of the Company's common stock required to be issued in a
preferred stock conversion. In addition, under the terms of the Class Action
settlement (see also Part II, Item 1), if the preferred stock is converted to
common at a conversion price of less than $1.35 per common share for the
Series C or $1.19 per common share for the Series A and D, the Company will
be required to issue additional shares of it's common stock to maintain a 40%
ownership of the Company's common stock by the Class. The Company is working
with the convertible preferred stockholders to resolve this issue (see also
Part II, Item 5).
The Company may not pay any common stock dividends unless all preferred
stock dividends have been paid.
COMMON STOCK
The total number of authorized shares of the Company's common stock was
50,000,000 on August 15, 1997. At that time, there were 43,510,964 shares of
the Company's common stock issued and outstanding. The following schedule
projects the effect on outstanding common shares of an assumed exercise of
outstanding common stock options:
<TABLE>
<S> <C>
Common Stock Issued............................................................ 43,852,305(1)
Less Treasury Shares........................................................... (341,341)
Stock Options.................................................................. 5,266,050
-----------
............................................................................... 48,777,014(2)
-----------
-----------
</TABLE>
- ------------------------
(1) Common stock issued includes approximately 8,890,000 shares relating to
theconversion of the Company's convertible preferred stock and the
release ofclaims of the owners of the Company's convertible preferred
stock.
(2) This total does not include the effect of the exercise of outstanding
common stock warrants which have exercise prices ranging from $2.00 to
$12.00 per common share with varying expiration dates up to October, 1999.
(4) RELATED PARTY TRANSACTIONS
During the quarter ended March 29, 1997, ACPI, through one of its
wholly-owned subsidiaries, purchased a manufacturing facility, which was
previously under lease by the subsidiary, from a corporation controlled by
certain former officers of ACPI. The purchase price was $1,158,000 cash plus
assumption of a $842,000 mortgage note.
During the quarter ended March 29, 1997, the Company paid a turnaround
management company, S. Gidumal & Company, Inc. (SGC), approximately $169,000
for services rendered in settling the Class Action litigation, negotiating
the refinancing of the ACPI revolving line of credit and other additional
services as approved by the Company's Board of Directors. In addition, on
December 31, 1996, Mr. Shyam Gidumal, a principal of SGC, was granted options
to acquire 2,400,000 shares of the common stock of the Company at an exercise
price of $.03 per
10
<PAGE>
VISTA 2000, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 29, 1997
(4) RELATED PARTY TRANSACTIONS (CONTINUED)
share. Of the options granted, 1,200,000 were immediately exerciseable, with
the balance exerciseable on December 31, 1997. SGC's services continue to be
engaged in 1997 and are compensated on a basis that has been developed by the
Company's Board of Directors, which includes a fixed monthly component for
services and success components based on achievement of certain critical
objectives of the Company.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
All statements, other than statements of historical fact, included in this
Quarterly Report including, without limitation, the statements under "
"Management" 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 Vista or persons acting on the behalf of Vista are expressly
qualified in their entirety by such Cautionary Statements.
SALES AND COST OF SALES
Total revenues for the quarter ended March 29, 1997 were $23,579,000 versus
$28,103,000 for the quarter ended March 30, 1996. The decrease in sales is
substantially attributable to the sale of FSPI subsequent to March 30, 1996 and
reduction of sales in ACPI's key manufacturing operations. Cost of sales for the
quarter ended March 29, 1997 were $17,221,000 compared to a cost of sales in the
corresponding 1996 quarter of $21,530,000. Gross margin for the quarter ended
March 29, 1997 was approximately 27% compared to 23% for the quarter ended March
30, 1996 . The increase in gross margin % is attributable to the sale of FSPI,
whose cost of sales exceeded its sales for the quarter ended March 30, 1996.
ACPI contributed approximately 93% of consolidated revenues during the quarter
ended March 29, 1997.
OPERATING EXPENSES
Operating expenses (selling, general and administrative expenses) totaled
$5,983,000 for the quarter ended March 29, 1997, as compared to $11,093,000 for
the same quarterly period of 1996. The decrease is substantially attributable
to; reduction of staff and expenses at the Company's corporate headquarters,
operations of FSPI ceasing during the third quarter of 1996 and $2,366,000 of
stock option expense and note receivable write-off which occurred in the first
quarter of 1996.
LIQUIDITY AND CAPITAL RESOURCES
As of the quarter ended March 29, 1997 the Company had $453,000 in cash and
equivalents. Under the ACPI revolving line of credit, the maximum amount of the
line was $28,900,000. The line availability as of March 29, 1997, was
$22,900,000, of which $17,800,000 had been drawn. On May 7, 1997, ACPI replaced
its then existing line of credit with financing provided by a new lender. The
new financing provides for borrowings up to $30,000,000 and carries an initial
term of three years.
Under the Alabaster revolving line of credit, which extends through
September 1998, the maximum amount of the line was $2,500,000. The line
availability as of March 29, 1997, was $1,150,000, of which $958,000 had been
drawn.
12
<PAGE>
Liquidity and Capital Resources--(continued)
Regarding the Company's use of its federal income tax loss carryforwards,
the Company has experienced a change in control, as defined under Section 382 of
the Internal Revenue Service Code, during 1995 and 1996. Additionally Management
expects another change in control to occur during 1997 upon issuance of the
common stock in settlement of the class action lawsuit described in PART II,
Item 1. As a result, the utilization of a significant portion of the tax loss
carryforwards will be limited on an annual basis and could expire unused.
13
<PAGE>
PART II.--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, the Company is involved in lawsuits in the ordinary
course of business. Such lawsuits have not resulted in any material losses to
date, and the Company does not believe that the outcome of any existing lawsuits
would have a material adverse effect on its business.
In July 1996, the Company commenced a legal action against Richard P. Smyth,
a former officer and director. The action alleged that Mr. Smyth committed
fraudulent and unlawful acts resulting in substantial harm to the Company and
its shareholders. The Company continues to pursue this action, however,
management and legal counsel are unable to determine the possible outcome of
this matter at this time.
During the quarter ended June 29, 1996, the Company together with certain
former officers, former directors and third parties was named as a defendant in
approximately seventeen (17) class action lawsuits, filed by persons and
entities who purchased the common stock and warrants of the company during the
period 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, the 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
("R&S"), P.C. ("R&S"), the Company's former outside auditor; and the principals
of R&S, Roger Roemmich and J. Alan Seymour.
The Complaint alleged that throughout the period from November 11, 1994
through April 15, 1996, Vista issued materially false and misleading financial
statements that caused the market price of Vista securities to trade at
artificially inflated prices.
On August 29, 1996 the district court certified plaintiffs as
representatives of a of a class of all persons who purchased the Company's
common stock and/or warrants during the period from October 24, 1994 through
June 8, 1996 (the "Class") except the defendants, all former officers, former
directors, 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 any such excluded party. Also specifically excluded from 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. Current officers and directors are not excluded from the Class, so long
as they meet the requirements for participation.
On March 14, 1997, a settlement was confirmed by the entry of a Final
Judgment and Order of Dismissal with Prejudice. The settlement provides, among
other things, that the Company will issue shares of its common stock (and
provide certain anti-dilution protection) to
14
<PAGE>
Item 1. Legal Proceedings--(continued)
the plaintiffs and the Class in order to convey ownership of 40% of the
Company's common stock. In addition, the settlement provides that additional
common shares will be issued to the Class to maintain its 40% ownership
interest in the Company if the company's outstanding convertible preferred
stock is converted to common stock at less than $1.35 per common share for
the Series C preferred or $1.19 per common share for the Series A and D
preferred. Furthermore, additional shares will also be issued, if the
Company's management is issued common stock through the Company's stock
option plan, resulting in management acquiring more than 20% of the common
stock of the Company. The number of shares to be issued under the terms of
this settlement is approximately 14,226,000 The Company's insurance carrier
also contributed $300,000 to the settlement. The settlement is in
satisfaction of all claims of the Class.
The Company has been notified by the Securities and Exchange Commission
("SEC") that it has 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.
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.
ITEM 2. CHANGES IN SECURITIES
There have been no material modifications in the instruments defining the
rights of shareholders. None of the rights evidenced by the shares of the
Company's common stock have been materially limited or qualified by the issuance
or modification of any other class of securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
There have been no material defaults in the payment of principal, interest,
sinking fund installment or any other material default not cured within 30 days,
with respect to any indebtedness of the Company exceeding five percent (5%) of
the total assets of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the period covered by this report, no matters were submitted to the
vote of the Security holders of the Company.
ITEM 5. OTHER INFORMATION
On April 15, 1997, employment agreements with two officers of ACPI were
replaced with severance agreements. The severance agreements provide for minimum
annual payments of $169,000 each through 1997. The severance agreements also
provide for additional aggregate
15
<PAGE>
Item 5. Other Information--(continued)
payments of up to $400,000 based upon the occurrence of certain events, as
defined in the agreements.
On April 18, 1997, the Company sold all of its 94% interest in Intelock's
common stock to a company managed by a minority (4.2%) shareholder of Intelock,
who was an officer and director of Intelock, prior to the purchase of Intelock
by the Company in 1995. Proceeds from the sale were $5,000 and a $95,000
promissory note. In deciding to sell Intelock, the Company's management
considered claims, made by minority (6.3%) shareholders of Intelock, regarding
alleged false representations made by former officers and directors of the
Company during its purchase of Intelock and alleged mis-management of Intelock's
assets, by the same former officers and directors, following the purchase. These
minority shareholder claims have been withdrawn since the sale of Intelock by
the Company. This sale will not have a material impact on the Company's 1997
operating results since the net operating assets of Intelock were written off
during the third quarter of the 1996 fiscal year.
During the period from November 1996 through April 1997, the Company
engaged in negotiations with certain holders of various classes of the
Company's convertible preferred stock concerning a possible transaction in
which the Company would have repurchased and retired the preferred stock and
the holders of the preferred stock would have released the Company from all
purported claims by such holders against the Company, including claims
alleging fraudulent misrepresentation by the Company in the original issuance
of the preferred stock. However, the Company was not prepared to convert the
preferred shares into the large number of common shares demanded by them, nor
did the Company have the cash resources to meet the purchase price demands of
these original preferred shareholders. Thereafter, in May and July 1997, in
order to help the Company settle all claims by these preferred shareholders,
four of the Company's five directors, a consultant to the Company and an
unaffiliated third party (the "Individual Purchasers") agreed to purchase
shares held by such preferred shareholders on the same terms as had been
offered to these original preferred shareholders by the Company. As a result,
the Individual Purchasers acquired an aggregate of 2,570 shares of the
Company's Series C and D Convertible Preferred Stock for an aggregate cash
consideration of approximately $1 million and the preferred shareholders
granted to the Company the release described above. The shares of Series C
and D Convertible Preferred Stock acquired by the Individual Purchasers were
converted into an aggregate of 2,947,712 shares of the Company's common
stock. In addition, the Company issued an aggregate of 5,794,803 shares of
its common stock to the Individual Purchasers in consideration for obtaining
the release described above. The Company also agreed to issue additional
shares of its common stock to the Individual Purchasers and pay the same
consideration in the event that other holders of the Company's preferred
stock convert such preferred stock into the Company's common stock at a more
favorable conversion rate or receive additional consideration on a more
favorable basis than that provided to the Individual Purchasers. The
aggregate number of shares of common stock issued to the Individual
Purchasers upon the conversion of such shares of preferred stock and issued
in consideration for the release of claims, was the same number of shares of
the Company's common stock originally offered to the preferred shareholders
by the Company.
Separately, the Company agreed to pay $175,000 and $2,500 in attorneys' fees
to one of the original preferred shareholders as additional consideration for
the release of the claims
16
<PAGE>
Item 5. Other Information--(continued)
associated with the preferred shares. The $175,000 will be paid on January 2,
1999 with the interest accruing on such amount at 8% per annum, payable
quarterly.
The Company obtained from the individual purchasers a waiver of their rights
to also receive the additional consideration paid by the Company in the form of
a Note.
On June 19, the Company sold all of the stock of Alabaster for $2,000,000.
Payment consisted of $500,000 cash and a $1,500,000 note receivable, secured by
a first mortgage on the land and buildings which comprise Alabaster's
manufacturing, sales and administrative operations. The Company will record an
additional loss of approximately ($1,600,000) on the sale in 1997. During the
year ended December 28, 1996, the Company recorded losses of approximately
($3,600,000), related to Alabaster, as a result of operating losses and asset
writedowns. Alabaster represented approximately 8% of the Company's consolidated
sales for the year ended December 28, 1996.
On June 30, 1997, the Company entered into an agreement to sell certain
assets of ACPI. These assets comprise primarily ACPI's key, key manufacturing,
letters, numbers and signs manufacturing and related businesses. The Company
will retain Boss Manufacturing, Inc., Boss Balloon, Inc. and the ACPI Warren Pet
Division. The business assets being sold accounted for approximately $57,000,000
or 51% of the Company's consolidated sales for the year ended December 28, 1996.
The closing of the sale is not expected until August or September of 1997,
pending regulatory approval.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) See Index to Exhibits
(b) During the three months ended March 29, 1997, the company did not file
any form 8-K's.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VISTA 2000, INC.
DATED: August 22, 1997 BY: /S/ G. LOUIS GRAZIADIO, III
----------------------------------------
G. LOUIS GRAZIADIO, III
CHIEF EXECUTIVE OFFICER (PRINCIPAL
EXECUTIVE OFFICER)
DATED: August 22, 1997 BY: /S/ LARRY C. COBB
----------------------------------------
LARRY C. COBB
INTERIM CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL OFFICER)
18
<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)
(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)
<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)
10.19(f) Employment Agreement between the Company and Robert E. Altenbach.
(Exhibit 10.19)
10.20(g) Asset Purchase Agreement between Vista 2000, Inc., Family Safety
Products, Inc. and Therm Acquisition, Inc. dated August 23, 1996.
(Exhibit 10.20)
<PAGE>
10.21(g) Loan and Security Agreement between Alabaster Industries, Inc. and
Century Business Credit Corporation dated September 20, 1996. (Exhibit
10.21)
(11) Statement re Computation of Per Share Earnings
11.1 Statement re computation of per share earnings is included herein
as Exhibit 11.1 of this Report.
(15) Letter re Unaudited Interim Financial Information
Incorporated by reference, see Page 7 of this Form 10-Q for the
Quarter ended March 29, 1997.
(18) Letter re Change in Accounting Principles
Not applicable.
(19) Report Furnished to Security Holders
Not applicable.
(21) Subsidiaries of the Registrant
21.1(e) Subsidiaries of the Registrant. (Exhibit 21.1)
(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
(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 29, 1996. The
exhibit number contained in parenthesis refers to the Exhibit number in
such Form 8-K.
<PAGE>
(c) Exhibit previously filed as part of and is incorporated by reference to
Amendment No. 2 to the Company's Registration Statement on Form SC-2
(Registration No. 33-73118-A). The exhibit number contained in parenthesis
refers to the exhibit numbers in such Registration Statement.
(d) Exhibit previously filed as part of and is incorporated by reference to
Amendment No. 1 to the Company's Registration Statement on Form SC-2
(Registration No. 33-73118-A). The exhibit number contained in parenthesis
refers to the exhibit numbers in such Registration Statement.
(e) Exhibit previously filed as part of and is incorporated herein by reference
to the Company's Current Report on Form 10-K for the fiscal year ended
December 30, 1995. The exhibit number contained in parenthesis refers to
the Exhibit number in such Form 10-K.
(f) Exhibit previously filed as part of and is incorporated herein by reference
to the Company's Current Report on Form 10-Q for the quarter ended March
30, 1996. The exhibit number contained in parenthesis refers to the
Exhibit number in such Form 10-Q.
(g) Exhibit previously filed as part of and is incorporated herein by reference
to the Company's Current Report on Form 10-Q for the quarter ended
September 28, 1996. The exhibit number contained in parenthesis refers to
the Exhibit number in such Form 10-Q.
<PAGE>
Exhibit 11.1
SHARE COMPUTATION
Quarter ended March 29,1997
<TABLE>
<CAPTION>
COMMON STOCK
-----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
WEIGHTED
PREFERRED TOTAL LESS AVERAGE
STOCK TOTAL TREASURY TREASURY SHARES
----------- ---------- ---------- ------------
Shares outstanding at beginning of quarter.......... 4,220 18,074,120 (341,341) 17,732,779 17,732,779
Treasury shares purchased........................... 0
Exercise of warrants................................ 0
Exercise of stock options........................... 0
Preferred stock sold................................ 0
Preferred converted to common....................... 0
Common stock sold................................... 0
--------- ----------- ---------- ------------ ------------
Shares outstanding at end of quarter................ 4,220 18,074,120 (341,341) 17,732,779 17,732,779
--------- ----------- ---------- ------------ ------------
--------- ----------- ---------- ------------ ------------
Net (Loss).......................................... $ (207,000)
Weighted average shares............................. 17,732,779
(Loss) per share.................................... ($0.01)
------------
------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH
29, 1997 UNAUDITED FINANCIAL STATEMENTS OF VISTA 2000, INC., AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS IN FORM 10-Q FOR THE
QUARTER ENDED MARCH 29, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-29-1997
<PERIOD-START> DEC-29-1996
<PERIOD-END> MAR-29-1997
<CASH> 453,000
<SECURITIES> 0
<RECEIVABLES> 14,543,000
<ALLOWANCES> 1,494,000
<INVENTORY> 25,231,000
<CURRENT-ASSETS> 40,107,000
<PP&E> 20,737,000
<DEPRECIATION> 3,086,000
<TOTAL-ASSETS> 57,907,000
<CURRENT-LIABILITIES> 11,949,000
<BONDS> 0
0
3,985,000
<COMMON> 181,000
<OTHER-SE> 19,868,000
<TOTAL-LIABILITY-AND-EQUITY> 57,907,000
<SALES> 23,579,000
<TOTAL-REVENUES> 23,579,000
<CGS> 17,221,000
<TOTAL-COSTS> 5,983,000
<OTHER-EXPENSES> 16,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 542,000
<INCOME-PRETAX> (183,000)
<INCOME-TAX> 24,000
<INCOME-CONTINUING> 375,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (207,000)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> 0
</TABLE>
