-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AJGp5DzCdy3TcNQIuCAaEGoPwueWszqg2WwDDOuRMCNCMdsCWlT7HvA4PDAc7KeH 0gqRXM5gbsCxBE2TDSHk8Q== 0000926236-03-000156.txt : 20031014 0000926236-03-000156.hdr.sgml : 20031014 20031014163921 ACCESSION NUMBER: 0000926236-03-000156 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20030630 FILED AS OF DATE: 20031014 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VPGI CORP CENTRAL INDEX KEY: 0000755229 STANDARD INDUSTRIAL CLASSIFICATION: HOUSEHOLD AUDIO & VIDEO EQUIPMENT [3651] IRS NUMBER: 751975147 STATE OF INCORPORATION: TX FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-13225 FILM NUMBER: 03939992 BUSINESS ADDRESS: STREET 1: 17300 NORTH DALLAS PARKWAY STREET 2: SUITE 2050 CITY: DALLAS STATE: TX ZIP: 75248 BUSINESS PHONE: 972 233 0900 MAIL ADDRESS: STREET 1: 17300 NORTH DALLAS PARKWAY STREET 2: SUITE 2050 CITY: DALLAS STATE: TX ZIP: 75248 FORMER COMPANY: FORMER CONFORMED NAME: CURTIS MATHES HOLDING CORP DATE OF NAME CHANGE: 19940609 FORMER COMPANY: FORMER CONFORMED NAME: ENHANCED ELECTRONICS CORP DATE OF NAME CHANGE: 19940527 FORMER COMPANY: FORMER CONFORMED NAME: ENTERTAINMENT EQUITY CORPORATION DATE OF NAME CHANGE: 19930910 10-K 1 vpg03q4.txt 10-K FOR FISCAL YEAR ENDED JUNE 30, 2003 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 2003 Commission file number 000-13225 VPGI CORP. ------------------------------------------------------ (Exact name of Registrant as specified in its charter) Texas 75-1975147 (State of incorporation) (I.R.S. Employer Identification No.) 17300 North Dallas Parkway, Suite 2050, 75248 Dallas, Texas (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code: (972) 233-0900 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Common Stock, par value $.001 per share (Title of class) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter 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 X NO ____ 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] Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). YES NO X As of December 31, 2002 the aggregate market value of the voting stock held by non-affiliates of the Registrant (3,669,213 shares) was approximately $128,422, based on the closing sale price of the Common Stock as reported by the OTC Bulletin Board[R] ($0.035). Shares of Common Stock held by each executive officer and director and by each person who owns 5% or more of the outstanding Common Stock, based on corporate records and Schedule 13G filings, have been excluded since such persons may be deemed affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes. At September 20, 2003 there were 5,242,120 shares of Registrant's Common Stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE: exhibits shown on the Exhibit Index. GENERAL INDEX Page Number ITEM l. BUSINESS............................................ 3 ITEM 2. PROPERTIES.......................................... 5 ITEM 3. LEGAL PROCEEDINGS................................... 5 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. 5 ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS................................. 6 ITEM 6. SELECTED FINANCIAL DATA.............................. 8 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................. 9 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK......................................... 15 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to Consolidated Financial Statements.......... 16 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE................. 16 ITEM 9A. CONTROLS AND PROCEDURES............................. 17 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.. 17 ITEM 11. EXECUTIVE COMPENSATION.............................. 18 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.......................................... 20 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...... 21 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.............. 21 ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K......................................... 22 SIGNATURES.................................................... 23 EXHIBIT INDEX................................................. 53 VPGI CORP. PART I ITEM l. BUSINESS (a) General Development of Business We were incorporated in Texas on July 13, 1984. We filed an S-18 registration statement in November 1984 and completed the registered offering in January 1985. In 1996 we introduced a digital media device (set top box), which enabled the display of Internet content on a television. In 1998 we added design and cabling services for voice/data networks and in 1999 we added computer telephony integration (CTI) capabilities to our product offerings with customized call center solutions. In December 2002, due to our financial position and the business outlook for the foreseeable future, we discontinued normal operations. All of our directors resigned, except for the CEO who remained as the sole director, and we laid off all of our remaining officers and employees, although some former employees continued to act in limited consulting roles to facilitate an orderly winding down process. We are continuing to evaluate various options and may consider a merger candidate, an acquisition of a viable business or positioning the Company for a buyer of the corporate entity. (b) Financial Information About Industry Segments Please refer to Note O of the Notes to Consolidated Financial Statements in this Form 10-K for information concerning Industry Segments. (c) Narrative Description of Business We have conducted no business operations since December 2002, except for managing assets and reducing liabilities. The following information, consequently, relates only to normal business operations conducted prior to that date. Major Markets, Products and Services Our digital media technology was available for licensing by customers wishing to manufacture and market a digital media device that provided easy and affordable access to the Internet through the television medium. The units offered video on demand, Internet access, broadcast entertainment programming and content streams. The digital media devices allowed users to save and store programming, rewind, and pause television shows in mid- broadcast; provided electronic programming guides that allowed users to select channels based on television show, actor, or theme and could be used to collect demographic information. Our CTI technologies offered customized products for customer contact centers, which could be designed to support a diverse network of sites, and managed voice and data transactions from multiple sources while allowing for intelligent routing and queuing. Patents, Trademarks and Licenses We owned or held rights to all patents, trademarks and licenses that we considered to be necessary in the conduct of our business. Manufacturing We did not own manufacturing facilities, but rather contracted all manufacturing to third parties. Environmental We were in compliance with all applicable environmental laws. Major Customers In fiscal year 2003, one customer accounted for approximately 39% of consolidated revenues. In fiscal year 2002, one customer accounted for approximately 44.6% of consolidated revenues and at June 30, 2002, one customer accounted for 58.1% and another customer accounted for 25.2% of trade accounts receivable. In fiscal year 2001, one customer accounted for approximately 24.9% of consolidated revenues and at June 30, 2001, one customer accounted for 49.8% of trade accounts receivable. Competition We operated in an intensely competitive industry. A number of companies had developed digital media devices and technologies similar to ours, including, among others, low-cost Internet access technologies, (ii) "set top" boxes, as well as (iii) video game devices that provide Internet access. Personal computer manufacturers offered products that offered television viewing combined with Internet access. CTI competitors included companies that marketed products with functionalities similar to ours. Employees As of June 30, 2003, the Company had no employees. Warranty The Company has no material outstanding warranty obligations. ITEM 2. PROPERTIES Until December 2002, we operated from the following locations, which were deemed suitable for our operations. At June 30, 2003, another business venture was utilizing the former corporate headquarters and making the lease payments. All other locations were closed. Location Purpose/Use Owned/Leased Square Footage -------- ----------- ------------ -------------- Dallas, TX Corporate Headquarters Leased 16,617 Dallas, TX Storage facility Leased 5,120 Tulsa, OK Subsidiary office Leased 7,500 ITEM 3. LEGAL PROCEEDINGS During 2003 one of our subsidiaries initiated an arbitration proceeding against Metrophone Telecommunications, Inc. and AT&T Solutions, Inc. alleging breach of contract. AT&T was subsequently dismissed and an arbitration award of approximately $300,000 against Metrophone was awarded by American Arbitration Association, Dallas division, in Case No. 71 181 00650 02, styled uniView Technologies Products Group, Inc. vs. Metrophone Telecommunications, Inc. and AT&T Solutions, Inc. Metrophone has closed its business and collection of the award appears doubtful. We were otherwise routinely a party to ordinary litigation incidental to our business, as well as to other litigation of a nonmaterial nature. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS We held a Special Shareholders' Meeting on July 17, 2003 to amend and restate the Articles of Incorporation of the Company, which resulted in a reduction of the par value of the Company's common stock from $.80 to $.001 per share. Of 4,486,120 common shares issued and outstanding as of June 13, 2003, the Record Date, 3,122,257 were represented in person or by proxy at the meeting, which constituted a quorum for the transaction of all business to come before the meeting. The following proposal was approved by the required number of shares represented at the meeting: 1. Adoption of director's proposal to amend and restate the Articles of Incorporation of the Company. FOR: 3,037,572 AGAINST: 78,930 ABSTAIN: 5,755 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Market Information Until September 13, 2002 our common stock, $.001 par value (the "Common Stock") traded on the NASDAQ SmallCap Market[SM]. It now trades on the OTC Bulletin Board under the symbol "VPGI." High and low trade price information for our Common Stock is presented below for each quarter in the last two fiscal years. Quarter Ending Date High Trade Low Trade ------------------- ---------- --------- Fiscal 2003 ----------- June 30, 2003 $ 0.19 $ 0.018 March 31, 2003 $ 0.045 $ 0.02 December 31, 2002 $ 0.20 $ 0.035 September 30, 2002 $ 0.85 $ 0.15 Fiscal 2002 ----------- June 30, 2002 $ 0.87 $ 0.35 March 31, 2002 $ 1.31 $ 0.57 December 31, 2001 $ 0.90 $ 0.35 September 30, 2001 * $ 4.08 $ 0.65 * Stock prices adjusted retroactively to reflect the effects of a one- for-eight reverse stock split on September 7, 2001. Holders As of June 30, 2003 there were approximately 11,500 record shareholders and individual participants in security position listings. Dividends We have never paid cash dividends on common shares and do not anticipate doing so in the foreseeable future. In addition, our Series 2002-G Convertible Preferred Stock contains preferential covenants that materially limit the discretion of our Board of Directors with respect to payment of dividends or making any other distribution to our common shareholders so long as Series 2002-G is outstanding or unconverted. Securities Authorized for Issuance Under Equity Compensation Plans The following table summarizes our equity compensation plans as of June 30, 2003: Number of Securities Number of Securities Remaining Available For To Be Issued Upon Weighted-average Future Issuance Under Exercise of Outstanding Exercise Price of Equity Compensation Plans Options, Warrants Outstanding Options, (Excluding Securities Plan Category and Rights Warrants and Rights Reflected in Column (a)) -------------------------------------------------------------------------------------------- (a) (b) (c) Equity Compensation Plans Approved by Security Holders 2,044,436 $ 4.13 2,973,064 Equity Compensation Plans Not Approved by Security Holders 215,000 $ 0.02 -0- --------- ------- --------- Total 2,259,436 $ 3.74 2,973,064 ========= ======= =========
Options issued and available for future issuance under stockholder- approved plans consist primarily of those authorized pursuant to our 1999 Equity Incentive Plan. Options issued under plans not approved by stockholders consist of a one-time grant to former employees for services rendered in connection with the winding down of normal Company operations and to consultants for prior services rendered. Recent Sales of Unregistered Securities Issuances of equity securities during the fourth fiscal quarter that were not registered under the Securities Act of 1933 consisted of the following: On June 4, 2003 we issued to some of our former employees and consultants, for services, warrants to purchase an aggregate of 190,000 shares of our Common Stock. The warrants are exercisable at any time through July 17, 2008 at a fixed exercise price of $0.02 per share. The issuance was made pursuant to the exemption from registration provided by Rule 506 of Regulation D and/or Section 4(2) of the Securities Act of 1933, in that (a) the investor or its purchaser representative is reasonably believed to have such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the investment, (b) the investor or its purchaser representative were provided with required information and an opportunity to obtain additional information a reasonable period of time prior to the transaction, (c) the investor or its purchaser representative were advised of the limitations on resale of the Common Stock, (d) the investor represented its intention to acquire the securities for investment only and not with view to or for sale in connection with any distribution thereof, and (e) appropriate legends were affixed to the instruments issued in the transactions. ITEM 6. SELECTED FINANCIAL DATA All financial data for the years referenced below were derived from our Consolidated Financial Statements for those years and the comparability of the information is affected by acquisitions, dispositions, and other transactions which are described in the footnotes which accompany those Consolidated Financial Statements, and which should be read in conjunction with this five-year financial summary. Other factors which may affect the comparability of the information for the more recent fiscal years are discussed further in Item 7 below. Year Ended June 30, ------------------------------------------------------------- 2003 2002 2001 2000 1999 ---- ---- ---- ---- ---- Consolidated Statement of Operations Data ------------------- Revenues $ 625,785 $5,369,311 $9,332,232 $ 9,145,705 $11,486,058 Operating loss (3,545,461) (3,894,502) (6,789,892) (10,631,655) (7,913,331) Net loss (3,475,604) (2,733,434) (6,622,458) (10,863,875) (6,297,353) Net loss attributable to common stockholders (2,163,804) (1,019,077) (284,658) (9,825,275) (10,879,960) Loss per Common Share (1) (0.52) (0.30) (0.08) (3.82) (7.02) Consolidated Balance Sheet Data -------------------- Total assets 22,831 4,842,203 8,837,360 12,523,204 14,080,768 Long term debt -- 14,938 1,388,126 595,324 3,823,210 Redeemable preferred stock -- 1,456,000 1,170,000 8,409,600 10,350,000 Stockholders' equity (deficit) 10,839 2,018,192 3,933,806 860,699 (2,013,022) Number of employees -- 25 67 104 79 (1) Basic and diluted loss per share which was computed based upon the weighted average number of common shares outstanding during each fiscal year.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion provides information to assist in the understanding of our financial condition and results of operations and should be read in conjunction with the Consolidated Financial Statements and related notes appearing elsewhere herein. Forward Looking Statements This report may contain "Forward Looking Statements," which are our expectations, plans, and projections which may or may not materialize, and which are subject to various risks and uncertainties, including statements concerning expected expenses and the adequacy of our sources of cash to finance our current and future operations. When used in this report, the words "plans," "believes," "expects," "anticipates," "estimates" and similar expressions are intended to identify forward-looking statements. Factors which could cause actual results to materially differ from our expectations include the following: general economic conditions and growth in the high tech industry; competitive factors and pricing pressures; changes in product mix; the timely development and acceptance of new products; and the risks described from time to time in our SEC filings. These forward-looking statements speak only as of the date of this report. We expressly disclaim any obligation or undertaking to release publicly any updates or change in our expectations or any change in events, conditions or circumstances on which any such statement may be based, except as may be otherwise required by the securities laws. Results of Operations Please refer to Note O of the Notes to Consolidated Financial Statements in this Form 10-K for additional information on our operating segments. FISCAL YEAR ENDED JUNE 30, 2003 COMPARED TO FISCAL YEAR ENDED JUNE 30, 2002 --------------------------------------------------------------------------- Revenues Total revenues for fiscal year 2003 decreased to $626,000, as compared to $5.37 million in 2002. Revenues for fiscal year 2003 are primarily comprised of revenues from the sale of CTI products and support services during the first half of the fiscal year before the Company discontinued all operations. Gross Margin Gross margin for fiscal year 2003 was $421,000, as compared to $3.11 million for 2002. This represents 67.2% of all revenue in fiscal year 2003, compared to 58% in the previous year. The increase as a percentage of revenue can be attributed to the virtual elimination of all costs associated with the sale of products and services due to the discontinuance of operations. Write-Off of Inventory and Software Development Costs We wrote off all remaining inventories, purchased software and product and software development costs in December 2002 for fiscal year 2003, as they were no longer being utilized. No inventories were written down or off and we did not capitalize any software development costs in fiscal year 2002. Operating Expenses Total operating expenses for fiscal year 2003 decreased to approximately $3.97 million, compared to approximately $7.0 million for the same period last year. Significant components of operating expenses for the fiscal years ended June 30, 2003 and 2002 consisted of the following: Year ended June 30, ------------------------------- 2003 2002 ----------- ----------- Compensation $ 537,859 $ 3,099,108 Facilities 156,560 578,423 Depreciation 439,621 494,112 Asset Impairment 1,793,534 -0- Amortization of software development costs, trademark, and goodwill 177,985 1,098,937 Online service expense 2,188 66,516 Legal expense and professional fees 205,411 141,489 Extinguishment of debt -0- 406,243 Sales and marketing 10,370 52,850 Other 642,524 1,070,460 ----------- ----------- Total $ 3,966,052 $ 7,008,138 =========== =========== "Other" expenses include public company cost, telephone, travel, office, insurance, and other general and administrative expenses. The decrease in operating expenses for fiscal year 2003 is attributable to the discontinuance of all Company operations in December 2002. Interest Expense Total interest expense for fiscal year 2003 was $13,000 as compared to $101,000 in 2002. The decrease in interest expense is primarily attributable to the virtual elimination of our debt level at June 30, 2003, from approximately $240,000 at June 30, 2002. FISCAL YEAR ENDED JUNE 30, 2002 COMPARED TO FISCAL YEAR ENDED JUNE 30, 2001 --------------------------------------------------------------------------- Revenues Total revenues for fiscal year 2002 decreased to $5.37 million, as compared to $9.33 million in 2001. Revenues for fiscal year 2002 were primarily comprised of revenues from the sale of CTI products and support services, as well as revenues from infrastructure design and cabling services. CTI. Revenues for our CTI segment for fiscal year 2002 were approximately $2.68 million, compared to approximately $2.88 million for 2001. Much of the revenue for 2002 is attributable to the sale in January 2002 of a source code license to a major customer for $1.3 million in cash. This customer generated approximately $2.5 million of our revenues during the fiscal year ended June 30, 2001 and at the time of the sale represented our largest CTI customer. The transaction resulted in limited revenues from this customer after the sale, as the customer assumed the responsibility for its own CTI software operations. Sales from CTI products and support services since the date of the sale through June 30, 2002 totaled $172,500. In connection with the sale transaction, the customer also offered positions to some of our staff who had been assigned to manage and maintain the customer's contract and our CTI staff was reduced accordingly. Cabling services. Revenues for our infrastructure design and cabling services segment for fiscal year 2002 were approximately $2.5 million, compared to approximately $5.0 million for 2001. This segment historically offered computers and computer networks, primarily to school districts. During fiscal year 2001, we shifted our emphasis to providing infrastructure design and cabling services for high-speed voice/data networks. The decrease in revenues for 2002 is attributable to the transition period brought about by the change from primarily offering hardware to primarily offering higher margin services. Royalties. Due to the sale of the Curtis Mathes trademark in September 2001, we recognized only $50,000 in royalty revenue from the trademark during fiscal 2002, compared to $1.13 million during the previous year. Gross Margin Gross margin for fiscal year 2002 was $3.11 million, as compared to $4.35 million for 2001. As a percentage of total revenue, gross margin increased to 58% in fiscal year 2002, compared to 46.6% in the previous year. The increase as a percentage of revenue can be attributed to focusing resources on opportunities that yield better margins, as well as to the sale of the source code license. Inventory Write-Down and Software Development Costs We did not capitalize any additional software development costs in fiscal year 2002. In fiscal year 2001, we capitalized software development costs of $329,000, which were attributable to continued improvements and enhancements to the various models of our digital media device. Operating Expenses Total operating expenses for fiscal year 2002 decreased 37% to approximately $7.0 million, compared to approximately $11.14 million for the same period last year. Significant components of operating expenses for the fiscal years ended June 30, 2002 and 2001 consisted of the following: Year ended June 30, ------------------------------- 2002 2001 ----------- ----------- Compensation $ 3,099,108 $ 4,972,693 Facilities 578,423 729,766 Depreciation 494,112 583,229 Amortization of software development costs, trademark, and goodwill 1,098,937 1,332,948 Online service expense 66,516 853,053 Legal expense 141,489 0 Extinguishment of debt 406,243 0 Stock option expense 0 58,496 Other 1,123,310 2,611,785 ----------- ----------- Total $ 7,008,138 $ 11,141,970 =========== =========== "Other" expenses include public company cost, telephone, travel, office, insurance, and other general and administrative expenses. The decrease in online service expenses for 2002 compared to 2001 primarily consists of online television listings utilized in connection with our digital media products, which services were terminated in July 2001. The remaining decrease in operating expenses for fiscal year 2002 is primarily attributable to reduced compensation and other expenses due to a reduction in the number of employees and overall cost controls. Interest Expense Corporate interest expense for fiscal year 2002 was $90,000 as compared to $113,000 in 2001. The decrease in interest expense is primarily attributable to a decrease in our debt level from approximately $1.4 million at June 30, 2001 to approximately $240,000 at June 30, 2002. Products and services interest expense for fiscal year 2002 was $12,000 as compared to $64,000 in 2001. This decrease is due in part to phasing out a line of credit in fiscal 2001. The weighted average interest rate for our borrowings was 13.2% and 13.8% for the years ended June 30, 2002 and 2001, respectively. Liquidity and Capital Resources Cash and cash equivalents at June 30, 2003 were $9,883 compared to $724,000 at June 30, 2002. In the past we relied on available borrowing arrangements and sales of our common and preferred stock to supplement operations. However, during 2003 outside financial resources became unavailable to us and it was necessary to discontinue operations and close the Company. Cash Flows From Operations Cash used in operations for the fiscal year ended June 30, 2003 was $1.07 million compared to $2.15 million used in operations in 2002. The major components of cash used in operations during 2003 were comprised of a $3.48 million loss from operations, including depreciation and amortization of $440,000, asset and goodwill impairment of $1.7 million, and a discount on a note receivable of $300,000. Cash used in operations for the fiscal year ended June 30, 2002 was $2.15 million compared to $3.46 million in 2001. The major components of cash used in operations during 2002 were comprised of a $2.73 million loss from operations, including depreciation and amortization of $1.6 million (primarily capitalized software amortization) and a one-time gain of $1.1 million on the sale of the Curtis Mathes trademark, as well as a reduction in our investment in working capital. In addition, a loss of $406,000 for extinguishment of debt resulted from the assumption by the purchaser of the trademark of a $2 million note payable. (See Note H of the Notes to Consolidated Financial Statements in this Form 10-K for additional information on Long-Term Debt.) Cash used in operations for the fiscal year ended June 30, 2001 was $3.46 million. Major components of cash used in operations in fiscal year 2001 were a net loss from operations of $6.62 million and a reduction in deferred revenues of $719,000, consisting of fees received in advance for call center maintenance and other services, which were earned and recognized during fiscal year 2001, offset by the following: depreciation and amortization of $1.92 million; accounts receivable decreased by $529,000, primarily due to a slow down in sales during the fourth quarter of fiscal year 2001; prepaid expenses decreased by $730,000 primarily due to a reduction in prepaid expenses for television listings that expired during fiscal year 2001; and accounts payable and accrued liabilities increased by $313,000, primarily due to a $450,000 deposit on the trademark sale received in fiscal year 2001. Cash Flows From Investing Activities During fiscal year 2003, we discounted the outstanding principal balance of $850,000 of the note receivable received in the sale of the Curtis Mathes trademark and collected $550,000. We additionally redeemed a certificate of deposit for $25,000. During fiscal year 2002, we sold the Curtis Mathes trademark to an investment group for $4.5 million, which included $635,000 in cash ($450,000 of which was received in fiscal 2001) and $1,865,000 in a note receivable. The sale resulted in a release of a secured debt of $2 million as the buyer assumed the outstanding debt, providing additional operating capital. The value of the sale was based on an estimated four years of projected royalty stream from the Curtis Mathes brand. Payments received on the note receivable in fiscal 2002 totaled $1.02 million, and the outstanding principal balance of the note receivable at June 30, 2002 was $850,000. We additionally purchased approximately $12,000 of property and equipment during 2002 and purchased a long-term certificate of deposit for $25,000. During fiscal year 2001, we purchased property and equipment for $177,000, approximately $100,000 of which related to computers and computer software. Additional development costs of $329,000 were capitalized as expenditures relating to improvements in our digital media device and we received approximately $68,000 in cash from the sale of fully depreciated equipment. Cash Flows From Financing Activities Cash of $315,000 was used in financing activities during fiscal year 2003, consisting of payments on long-term and capital lease obligations. Cash of $100,000 was borrowed during fiscal year 2003. Cash flow from financing activities generated approximately $1.11 million during fiscal year 2002; major components include $500,000 from the issuance of preferred stock and $700,000 from proceeds of long term debt. Cash flow from financing activities generated $3.06 million during fiscal year 2001; major components include $2.00 million from the sale of Common Stock and $1.52 million from proceeds of long term debt. Additionally, net repayment of the bank line of credit totaled approximately $321,000 for the year. Other Matters Critical Accounting Policies The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The following critical accounting policies are utilized by management in the preparation of the consolidated financial statements. Redeemable Preferred Stock. Prior to April 2003, the Company's Series 1999-D1 and 2002-G preferred stock was redeemable at the option of the holder, and was therefore classified outside of stockholders' equity. The redemption value of these securities varies based on the market price of the Company's common stock. The Company adopted an accounting method provided in EITF Topic D-98 for these types of securities, which recognizes changes in redemption value immediately as they occur and adjusts the carrying value of the security to equal the redemption value at the end of each reporting period. The result of this accounting method is an increase in loss attributable to common shareholders and a decrease in stockholders' equity as the Company's common stock price increases, with the opposite effect when the Company's common stock price decreases. On April 16, 2003, the holder of the Company's Series 2002-G preferred stock agreed to modify the terms of the preferred stock, whereby any future redemption of the preferred stock shall be at the sole option of the Company. This modification to the terms of the preferred stock results in the preferred stock being accounted for as equity at June 30, 2003. Product and Software Development Costs. We capitalized product and software development costs beginning at the time technological feasibility of the product or software was established, until the product or software was ready for use in products. Research and development costs of products and software were expensed as incurred. The capitalized costs related to products or software which we expected to become an integral part of our revenue-producing products were amortized in relation to expected revenues from the product, or straight-line over a maximum of four years, whichever was greater. We regularly reviewed the carrying value of product or software development costs, and we would recognize a loss when the expected net realizable value of a product fell below the unamortized cost. Impairment of Long-lived Assets. The Company evaluated long-lived assets and intangibles held and used for impairment whenever events or changes in circumstances indicated that the carrying amounts may not be recoverable. Impairment was recognized when the undiscounted cash flows estimated to be generated by those assets were less than the carrying amounts of such assets. Revenue Recognition. We recognized revenue as follows: (a) service revenue - when the services were provided; (b) equipment and product sales - at the time of delivery and customer acceptance; (c) installation of software and hardware systems - the completed contract method; and (d) royalties - when earned as the customer sold royalty related products. Amounts for which revenue could not be recognized, such as uncompleted contracts or unearned maintenance services, were included in deferred revenue and were recognized as contracts were completed or ratably over the period covered by the maintenance agreement. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Prior to December 2002, we were exposed to market risk from changes in interest rates which could adversely affect our financial position, results of operations and cash flows. In seeking to minimize the risks from interest rate fluctuations, we managed exposures through our regular operating and financing activities. We did not use financial instruments for trading or other speculative purposes and we were not a party to any leveraged financial instruments. We were exposed to interest rate risk primarily through our borrowing activities, which are described in the "Long-Term Debt" Notes to the Consolidated Financial Statements, which are incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Consolidated Financial Statements and related Financial Statement Schedules are included immediately following the signature page of this Form 10-K. Selected Quarterly Financial Data (unaudited) The following tables set forth certain unaudited financial data for the quarters indicated: Fiscal 2003 Quarter Ended Fiscal 2002 Quarter Ended -------------------------------------------------- ------------------------------------------------------ Sept. 30, Dec. 31, March 31, June 30, Sept. 30, Dec. 31, March 31, June 30, 2002 2002 2003 2003 2001 2001 2002 2002 ---------- ---------- --------- ---------- ---------- ---------- ---------- ---------- Net Sales $ 437,503 $ 103,282 $ 0.00 $ 85,000 $ 1,639,662 $ 827,858 $ 2,393,752 $ 508,039 Gross Margin $ 243,985 $ 91,606 $ 0.00 $ 85,000 $ 1,003,082 $ 473,723 $ 1,713,433 $ (76,602) % of net sales 55.8% 88.7% 0% 100% 61.2% 57.2% 71.6% (15.1)% Operating income loss) $(1,820,458) $(1,574,644) $ (67,986) $ (82,373) $ (868,653) $(1,372,669) $ 81,350 $(1,328,287) % of net sales (416.1)% (1,524.6)% 0% (96.9)% (53.0)% (165.8)% 3.4% (261.5)% Net income (loss) $(1,806,122) $(1,555,195) $ (76,208) $ (38,079) $ (245,387) $(1,348,541) $ 112,581 $(1,252,087) % of net sales (412.8)% (1,505.8)% 0% (44.8)% (15.0)% (162.9)% 4.7% (246.5)% Net income (loss) attributable to common shareholders $(1,151,372) $ (926,095) $ (47,183) $ (39,154) $ 269,913 $(1,429,491) $ 11,855 $ 128,646 % of net sales (263.2)% (896.7)% 0% (46.1)% 16.5% (172.7)% 0.5% 25.3% Net income (loss) attributable to common shareholders per share - basic and diluted* $(0.31) $(0.24) $(0.01) $(0.01) $0.08 $(0.42) $0.00 $0.04 * Difference in per share amounts between quarterly financial data and year-end results are attributable to rounding.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE The client-auditor relationship between the Registrant and Grant Thornton LLP ended, with the approval of Registrant's audit committee, as of August 21, 2003. Grant Thornton declined to stand for reelection. During the Registrant's two most recent fiscal years and the subsequent interim period preceding termination of the relationship, there were no disagreements with the former accountant on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure. Although unrelated to the change, the former accountant's report on Registrant's financial statements for the fiscal year ended June 30, 2002 contained an opinion that was qualified concerning the Registrant's ability to continue as a going concern. The former accountant was provided with a copy of the foregoing disclosures and was requested to furnish the Registrant with a letter addressed to the Commission stating whether it agrees with the above statements and, if not, stating the respects in which it does not agree. The former accountant's letter is filed as Exhibit 16 to the Company's Form 8-K Report filed with the Commission dated August 21, 2003. A new independent accountant, Cheshier & Fuller, L.L.P., was engaged as of August 21, 2003 as the principal accountant to audit the Registrant's financial statements beginning with fiscal year ended June 30, 2003. ITEM 9A. CONTROLS AND PROCEDURES Our Chief Executive Officer has reviewed and evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 240.13a-15(e) or 15d-15(e)) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer has concluded that these disclosure controls and procedures are effective. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Board of Directors The following sets forth, with respect to each member of our Board of Directors as of June 30, 2003, his name, age, period served as director, present position, if any, with the Company and other business experience. All directors in the past have served one-year terms between annual meetings of shareholders. Patrick A. Custer, 54, is the sole member of the Board and Chief Executive Officer. Mr. Custer served as a director from 1984 to 1985, and from 1987 until the present. He served as President and Chief Executive Officer from 1984 to 1985 and from September 1992 until the present. From 1986 until 1990, Mr. Custer was an international business consultant for Park Central Funding (Guernsey), Ltd. From 1978 until 1982, Mr. Custer was a general securities principal and worked for a major brokerage firm as a corporate finance specialist and was owner of his own brokerage firm. He was responsible for structuring and funding IPO's, real estate, energy companies, and numerous high-tech start-up companies. Mr. Custer's technical experience includes engineering and management positions with Texas Instruments and Honeywell. Mr. Custer is a graduate of Texas Tech University in Finance and Management, with additional studies in Electrical Engineering and master studies in Finance. Executive Officers The following table lists the names and positions held by all executive officers as of June 30, 2003. Name Position ---- -------- Patrick A. Custer Sole Board member, President, Chief Executive Officer and Principal Financial Officer Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the 1934 Act ("Section 16(a)"), requires our directors, executive officers and persons who beneficially own more than 10% of a registered class of our equity securities ("10% Owners") to file reports of beneficial ownership of our securities and changes in such beneficial ownership with the Securities and Exchange Commission ("Commission"). Directors, executive officers and 10% Owners are also required by rules promulgated by the Commission to furnish us with copies of all forms they file pursuant to Section 16(a). Based solely upon a review of the copies of the forms filed pursuant to Section 16(a) furnished to us, or written representations that no year-end Form 5 filings were required for transactions occurring during fiscal year ended June 30, 2003, we believe that during the fiscal year ended June 30, 2003, all Section 16(a) filing requirements applicable to our directors, executive officers and 10% Owners were complied with. ITEM 11. EXECUTIVE COMPENSATION Summary Compensation Table The following table summarizes the compensation paid over the last three completed fiscal years to our Chief Executive Officer and any other executive officer who received compensation exceeding $100,000 during the fiscal year ended June 30, 2003. Long Term Compensation ------------------------------------ Annual Compensation Awards Payouts --------------------------------- --------------------------- ------- (a) (b) (c) (d) (e) (f) (g) (h) (i) All Other Name and Year Other Restricted Securities LTIP Compen- Principal Ended Annual Stock Underlying Payouts sation Position June 30 Salary($) Bonus($) Compensation($) Awards($) Options(#) ($) ($) - ---------- ------- -------- ------- -------------- ---------- -------------- ------- ------ Patrick A. Custer 2003 159,490 -0- (1) -0- 310,000 -0- -0- Sole member of the 2002 210,000 -0- (1) -0- 378,000 -0- -0- Board and CEO 2001 210,000 -0- (1) -0- 141,250 -0- -0- (1) Other annual compensation to this executive officer, including payment of a car allowance and other personal benefits, did not exceed the lesser of $50,000 or 10% of such executive officer's total annual salary and bonus for such fiscal year.
Option Grants Table The following table shows individual grants of stock options made during fiscal year ended June 30, 2003 to each of the named executive officers. Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation Individual Grants for Option Term (2) - -------------------------------------------------------------------------------- --------------------- (a) (b) (c) (d) (e) (f) (g) Number of Securities % of Total Exercise Market Underlying Options or Base Price on Options Granted to Price the Date Expiration Name Granted(#) Employees ($/Sh) of Grant Date 5% ($) 10% ($) - ---- ------------- ---------- -------- -------- ---------- ------- --------- Patrick A. Custer 310,000 (1) 100% $ 0.02 $ 0.02 06/04/08 1,713 3,785 (1) These options are subject to the terms of our 1999 Equity Incentive Plan; they have a five-year life and vested immediately upon issuance. (2) Potential realizable values are net of exercise price, but before deduction of taxes associated with exercise. The indicated 5% and 10% values represent assumed rates of appreciation only and are provided to comply with Commission regulations. They do not necessarily reflect our views as to the likely trend in the stock price. Actual gains, if any, on stock option exercises and the sale of Common Stock holdings will be dependent upon, among other things, the success of management's endeavors to sell the corporate shell, merge with or acquire a viable business, the resulting future performance of the Common Stock, if any, and overall stock market conditions. The amounts reflected in this table may not be achieved.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values The following table shows aggregate exercises of options (or tandem stock appreciation rights) and freestanding stock appreciation rights during the fiscal year ended June 30, 2003 by each of the named executive officers. (a) (b) (c) (d) (e) Number of Securities Value of Underlying Unexercised Unexercised In-the-Money Options at Options at FY-End (#) FY-End ($)(1) Shares Acquired Value Exercisable (E)/ Exercisable (E)/ Name on Exercise(#) Realized($) Unexercisable (U) Unexercisable (U) - ------ -------------- ----------- ----------------- ----------------- Patrick A. Custer -0- -0- 746,500 (E) 27,900 (E) 189,000 (U) -0- (U) (1) At June 30, 2003, 310,000 of the options were considered "in-the- money," as the fair market value of the underlying securities on that date ($0.11) exceeded the exercise price of the options ($0.02). None of the remaining options were considered "in-the-money," as the fair market value of the underlying securities did not exceed the exercise price of the options.
Compensation of Directors Directors are not paid compensation as such, except for services performed in another capacity, such as an executive officer. Employment Contracts and Termination and Change-in-Control Arrangements At June 30, 2003, we had no employment agreement with any named executive officer. Compensation Committee Interlocks and Insider Participation Mr. Custer participated in advising the Board of Directors concerning certain aspects of executive officer compensation during the last completed fiscal year. Mr. Custer is Chairman of the Board, President and Chief Executive Officer. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information as of September 20, 2003 with respect to the beneficial ownership of Common Stock by (i) persons known to us to be the beneficial owners of more than 5% of the outstanding shares of Common Stock, (ii) all directors of the Company, (iii) each of the executive officers and (iv) all directors and executive officers of the Company as a group. The number of shares of Common Stock beneficially owned by each individual set forth below is determined under the rules of the Commission and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which an individual has sole or shared voting power or investment power and any shares which an individual presently, or within 60 days of September 28, 2003 (the date on which this Form 10-K is due at the Commission), has the right to acquire through the exercise of any stock option or other right. Unless otherwise indicated, each individual has sole voting and investment power (or shares such powers with his spouse) with respect to the shares of Common Stock set forth in the following table. The information is based upon corporate records, information furnished by each shareholder, or information contained in filings made with the Securities and Exchange Commission. Number of Shares Name and Address Amount and Nature Percent of Beneficial Owner of Beneficial Ownership of Class ------------------- ----------------------- -------- 5% Beneficial Owners Patrick A. Custer 1,072,508 (1) 17.91% 17300 N. Dallas Pkwy., Suite 2050 Dallas, Texas 75248 Peak Decision International Limited 350,000 (2) 7.80% Unit 1603, 16F Dina House, 11 Duddell Street, Central Hong Kong Trident Growth Fund, L.P. 423,815 (3) 8.80% (formerly known as Gemini Growth Fund, L.P.) 3602 McKinney Ave, Suite 220 Dallas, Texas 75204 Directors Patrick A. Custer 1,072,508 (1) 17.91% Executive Officers Patrick A. Custer 1,072,508 (1) 17.91% All Directors and Executive Officers as a Group 1,072,508 (4) 17.91% (1) Includes 290,188 shares owned outright by Mr. Custer; 746,500 shares issuable to Mr. Custer upon exercise of vested nonstatutory Employee Stock Options; 32,729 shares held of record by Custer Company, Inc., a family trust, over which Mr. Custer exercises voting control; 2,969 shares owned by his wife; 118 shares held by his wife for the benefit of his minor daughter; and 2 shares each held by Mr. Custer for the benefit of his two sons. (2) Common shares owned. (3) Includes 26,625 shares owned outright by Founders Equity Group, Inc., an affiliate of Beneficial Owner, 65,940 shares owned outright by Founders Partners IV, LLC, an affiliate of Beneficial Owner, and 331,250 shares issuable upon exercise of warrants. (4) Includes shares beneficially owned by all directors and Executive Officers shown above. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES Pursuant to SEC Release No. 33-8183 (as corrected by Release No. 33-8183A), the disclosure requirements of this Item are not effective until the Annual Report on Form 10-K for the first fiscal year ending after December 15, 2003. PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) (1) Financial Statements Reference is made to the financial statements filed as part of this report. (2) Financial Statement Schedules Reference is made to the financial statement schedules filed as part of this report. All other schedules are omitted because they are not applicable or not required, or because the required information is included in the financial statements or notes thereto. (3) Exhibits Reference is made to the Exhibit Index at the end of this Form 10-K for a list of all exhibits filed with and incorporated by reference in this report. (b) Reports on Form 8-K. During the last quarter of the period covered by this report the Company filed one Report on Form 8-K, dated August 21, 2003, reporting a change in accountants. 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. VPGI CORP. By: /s/ PATRICK A. CUSTER --------------------- Patrick A. Custer Chief Executive Officer and Principal Financial Officer October 14, 2003 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 Company and in the capacities and on the dates indicated. Principal Executive Officer and ------------------------------- Principal Financial and Accounting Officer ------------------------------------------ /s/ PATRICK A. CUSTER Chairman of the Board, October 14, 2003 Patrick A. Custer Chief Executive Officer and Director Independent Auditor's Report ---------------------------- Board of Directors VPGI Corp. and Subsidiaries We have audited the accompanying consolidated balance sheets of VPGI Corp. and Subsidiaries as of June 30, 2003, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for the year ended June 30, 2003. These consolidated financial statements are the responsibility of management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. The financial statements of VPGI Corp. and Subsidiaries as of June 30, 2002 and for each of the two years in the period then ended, were audited by other auditors whose report dated September 3, 2002, expressed an unqualified opinion on those statements. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of VPGI Corp. and Subsidiaries as of June 30, 2003, and the consolidated results of their operations and their consolidated cash flows for the year ended June 30, 2003 in conformity with accounting principles generally accepted in the United States of America. We have also audited Schedule II for the year ended June 30, 2003. In our opinion, this schedule presents fairly, in all material respects, the information required to be set forth therein. As shown in the consolidated financial statements, the Company incurred net losses of $3,475,604, $2,733,434 and $6,622,458 for the years ended June 30, 2003, 2002 and 2001, respectively. These factors, among others, as discussed in Note B to the consolidated financial statements raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are described in Note B. CHESHIER & FULLER, L.L.P Dallas, Texas September 29, 2003 Report of Independent Certified Public Accountants Board of Directors VPGI Corp. and Subsidiaries We have audited the accompanying consolidated balance sheets of VPGI Corp. (formerly uniView Technologies Corporation) and Subsidiaries as of June 30, 2002, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for each of the two years in the period ended June 30, 2002. These financial statements are the responsibility of management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of VPGI Corp. and Subsidiaries as of June 30, 2002, and the consolidated results of their operations and their consolidated cash flows for each of the two years in the period ended June 30, 2002 in conformity with accounting principles generally accepted in the United States of America. We have also audited Schedule II for the years ended June 30, 2002 and 2001. In our opinion, this schedule presents fairly, in all material respects, the information required to be set forth therein. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the financial statements, the Company incurred net losses of $2,733,434 and $6,622,458 for the years ended June 30, 2002 and 2001, respectively. These factors, among others, as discussed in Note B to the financial statements raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are described in Note B. The financial statements do not include any adjustments that might result from the outcome of these undertainties. GRANT THORNTON LLP Dallas, Texas September 3, 2002 VPGI Corp. and Subsidiaries CONSOLIDATED BALANCE SHEETS June 30, ASSETS 2003 2002 ----------- ----------- CURRENT ASSETS Cash and cash equivalents $ 9,883 $ 724,051 Trade accounts receivable, net of allowance for doubtful accounts of $-0- in 2003 and $13,637 in 2002 - 356,178 Note receivable from the sale of trademark - 850,000 Inventories - 49,929 Prepaid expenses - 285,271 Other current assets - 3,506 ----------- ----------- Total current assets 9,883 2,268,935 CERTIFICATE OF DEPOSIT - 25,000 PROPERTY AND EQUIPMENT, net of accumulated depreciation of $1,618,974 in 2002 - 150,033 OTHER ASSETS Purchased software, net of accumulated amortization of $1,783,263 in 2002 - 711,702 Product and software development costs, net of accumulated amortization of $522,476 in 2002 - 422,190 Intellectual property license - 129,500 Goodwill, net of accumulated amortization of $414,824 in 2002 - 1,005,509 Security deposit on corporate office 12,948 12,948 Pension surplus - 29,231 Other - 87,155 ----------- ----------- Total other assets 12,948 2,398,235 ----------- ----------- Total assets $ 22,831 $ 4,842,203 =========== =========== The accompanying notes are an integral part of these consolidated financial statements. VPGI Corp. and Subsidiaries CONSOLIDATED BALANCE SHEETS - CONTINUED June 30, LIABILITIES AND STOCKHOLDERS' EQUITY 2003 2002 ----------- ----------- CURRENT LIABILITIES Current maturities of long-term debt, net of debt discount of $52,500 in 2002 $ - $ 169,992 Current maturities of obligations under capital leases - 30,002 Trade accounts payable - 707,207 Accrued expenses 11,992 395,003 Deposits - - Deferred revenue - 50,869 ----------- ----------- Total current liabilities 11,992 1,353,073 LONG TERM DEBT, less current maturities - 13,445 OBLIGATIONS UNDER CAPITAL LEASES, less current maturities - 1,493 ----------- ----------- Total liabilities 11,992 1,368,011 REDEEMABLE PREFERRED STOCK Series 2002-G, -0- shares issued and outstanding at June 30, 2003 and 240 shares issued and outstanding at June 30, 2002, (liquidation preference of $6 million) - 1,456,000 STOCKHOLDERS' EQUITY Preferred stock, cumulative, $1.00 par value; 1,000,000 shares authorized: Series A, 30,000 shares issued and outstanding at June 30, 2003 and 2002 30,000 30,000 Series H, 2 shares issued and outstanding at June 30, 2003 and 2002 (liquidation preference of $50,000) 2 2 Series 2002-K, 20 shares issued and outstanding at June 30, 2003 and June 30, 2002 (liquidation preference of $500,000) 20 20 Series 2002-G, 196 shares issued and outstanding at June 30, 2003 (liquidation preference of $4.9 million) 196 - Common stock, $.001 par value; 80,000,000 shares authorized; 4,486,120 and 3,749,785 shares issued and outstanding at June 30, 2003 and 2002, respectively 4,486 3,750 Additional paid in capital 60,337,666 60,186,369 Accumulated deficit (60,361,531) (58,201,949) ----------- ----------- Total stockholders' equity 10,839 2,018,192 Total liabilities and stockholders' equity $ 22,831 $ 4,842,203 =========== =========== The accompanying notes are an integral part of these consolidated financial statements. VPGI Corp. and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS Years ended June 30, 2003 2002 2001 ---------- ---------- ---------- Revenues Product sales $ 127,730 $ 1,919,695 $ 5,434,527 Consulting and support services 498,055 3,399,463 2,765,958 Royalties - 50,153 1,131,747 ---------- ---------- ---------- Total revenues 625,785 5,369,311 9,332,232 Cost of products and services Cost of product sales 50,649 939,082 3,231,702 Cost of consulting and support services 154,545 1,316,593 1,748,452 ---------- ---------- ---------- Total cost of products and services 205,194 2,255,675 4,980,154 ---------- ---------- ---------- Gross margin 420,591 3,113,636 4,352,078 Operating expenses Selling 10,370 52,850 686,377 General and administrative 1,722,527 4,955,996 8,539,416 Depreciation and amortization 439,621 1,593,049 1,916,177 Extinguishment of debt -- 406,243 -- Asset impairment 1,793,534 -- -- ---------- ---------- ---------- 3,966,052 7,008,138 11,141,970 ---------- ---------- ---------- Operating loss (3,545,461) (3,894,502) (6,789,892) Other (income) expense Interest income (83,023) (95,445) (30,247) Interest expense 13,166 101,389 177,237 Other income, net - (63,966) (246,151) Gain on sale of assets - - (68,273) Gain on sale of trademark - (1,103,046) - ---------- ---------- ---------- Total other (income) expense (69,857) (1,161,068) (167,434) ---------- ---------- ---------- Net loss (3,475,604) (2,733,434) (6,622,458) ---------- ---------- ---------- Decrease in redemption value of redeemable preferred stock 1,316,100 2,168,657 7,239,600 Dividend requirements on preferred stock (4,300) (454,300) (901,800) ---------- ---------- ---------- Net loss attributable to common stockholders $(2,163,804) $(1,019,077) $ (284,658) ========== ========== ========== Per share amounts allocable to common stockholders - Basic and diluted Net loss $(0.52) $(0.30) $(0.08) ===== ===== ===== Weighted average common shares outstanding - Basic and diluted 4,133,160 3,404,172 3,387,645 ========== ========== ========== The accompanying notes are an integral part of these consolidated financial statements. VPGI Corp. and Subsidiaries CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY For the years ended June 30, 2003, 2002 and 2001 Common Stock Preferred Stock Additional ---------------------- -------------------- paid-in Accumulated Shares Amount Shares Amount capital deficit Total ---------- ---------- -------- ---------- ----------- ------------ ----------- Balances - July 1, 2000 3,307,065 $ 3,307 30,002 $ 30,002 $56,621,178 $ (55,793,788) $ 860,699 Sale of common stock 91,912 92 - - 1,999,908 - 2,000,000 Stock compensation for employees and directors - - - - 58,496 - 58,496 Issuance of warrants for services - - - - 212,619 - 212,619 Issuance of warrants in connection with long-term debt - - - - 188,600 - 188,600 Preferred stock dividends - - - - - (3,750) (3,750) Allocation for decrease in redemption value of redeemable preferred stock - - - - - 7,239,600 7,239,600 Net loss - - - - - (6,622,458) (6,622,458) ---------- ---------- -------- ---------- ----------- ------------ ----------- Balances - June 30, 2001 3,398,977 3,399 30,002 30,002 59,080,801 (55,180,396) 3,933,806 Adjustment to common stock for reverse stock split 808 1 - - (1) - - Issuance of common stock for investment in subsidiary 350,000 350 - - 129,150 - 129,500 Issuance of Series 2002-K preferred stock - - 20 20 499,980 - 500,000 Issuance of warrants for services - - - - 72,000 - 72,000 Issuance of warrants in connection with long-term debt - - - - 156,875 - 156,875 Repriced warrants in connection with long-term debt - - - - 179,064 - 179,064 Issuance of warrants in connection with the sale of trademark - - - - 68,500 - 68,500 Preferred stock dividends - - - - - (2,119) (2,119) Preferred stock dividends forgiven in exchange of Series D-1 for Series G preferred stock - - - - - (2,454,657) (2,454,657) Allocation for decrease in redemption value of redeemable preferred stock - - - - - 2,168,657 2,168,657 Net loss - - - - - (2,733,434) (2,733,434) ---------- ---------- -------- ---------- ----------- ------------ ----------- Balances - June 30, 2002 3,749,785 3,750 30,022 30,022 60,186,369 (58,201,949) 2,018,192 Conversion of Series 2002-G preferred to common stock 733,335 733 - - 60,767 - 61,500 Issuance of common stock in exchange for services 3,000 3 - - 66 - 69 Issuance of warrants for services - - - - 4,025 - 4,025 Issuance of warrants in connection with long-term debt - - - - 4,965 - 4,965 Issuance of warrants with sale of subsidiaries - - - - 3,270 - 3,270 Adjustment for Series 2002-G preferred - - 196 196 78,204 - 78,400 Allocation for decrease in redemption value of redeemable preferred stock - - - - - 1,316,022 1,316,022 Net loss - - - - - (3,475,604) (3,475,604) ---------- ---------- -------- ---------- ----------- ------------ ----------- Balances - June 30, 2003 4,486,120 $ 4,486 30,218 $ 30,218 $ 60,337,666 $ (60,361,531) $ 10,839 ========== ========== ======== ========== =========== ============ =========== The accompanying notes are an integral part of these consolidated financial statements.
VPGI Corp. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended June 30, 2003 2002 2001 ---------- ---------- ----------- Cash flows from operating activities Net loss $(3,475,604) $(2,733,434) $(6,622,458) Adjustments to reconcile net loss to cash used in operating activities: Gain on sale of assets - - (68,273) Depreciation and amortization 439,621 1,593,049 1,916,177 Asset impairment 1,793,534 - - Provision for bad debt 300,000 - - Bad debt expense - - 35,816 Gain on sale of Curtis Mathes trademark - (1,103,046) - Stock compensation expense 11,318 - 58,496 Issuance of warrants for services - 72,000 212,619 Amortization of debt discount - 53,545 12,250 Loss on extinguishment of debt - 406,243 - Conversion of preferred stock - Series 2002-G 196 - - Proceeds from issuance of common stock 736 - - Changes in assets and liabilities, net of effects from acquisitions and dispositions: Trade accounts receivable 356,178 205,079 529,388 Inventories 49,929 173,520 38,152 Prepaid expenses 314,503 (131,738) 729,736 Other current assets - 163,045 205,535 Other assets 90,661 81,286 (99,974) Accounts payable and accrued liabilities (904,433) (734,867) 312,527 Deferred revenue (50,869) (194,165) (718,996) ---------- ---------- ----------- Cash and cash equivalents used in operating activities (1,074,230) (2,149,483) (3,459,005) Cash flows from investing activities Purchase of property and equipment - (11,606) (177,234) Additions to product and software development costs - - (329,307) Collections on note receivable 550,000 1,015,000 - Proceeds from sale of trademark - 185,000 - Investment in certificate of deposit - (25,000) - Proceeds from certificate of deposit 25,000 - - Proceeds from sale of assets - - 68,273 Disposal of property and equipment - 23,019 - ---------- ---------- ----------- Cash and cash equivalents provided by (used in) investing activities 575,000 1,186,413 (438,268) Cash flows from financing activities Proceeds from long term debt 100,000 700,000 1,517,025 Proceeds from line of credit - - 1,746,003 Principal payments on line of credit - - (2,067,445) Principal payments on long-term debt (313,445) (19,621) (24,824) Principal payments on capital lease obligations (1,493) (71,740) (111,302) Dividends paid - (2,119) (3,750) Proceeds from issuance of preferred stock - Series 2002-K - 500,000 - Proceeds from issuance of common stock - - 2,000,000 ---------- ---------- ----------- Cash and cash equivalents provided by (used in) financing activities (214,938) 1,106,520 3,055,707 ---------- ---------- ----------- Net increase (decrease) in cash and cash equivalents (714,168) 143,450 (841,566) Cash and cash equivalents, beginning of year 724,051 580,601 1,422,167 ---------- ---------- ----------- Cash and cash equivalents, end of year $ 9,883 $ 724,051 $ 580,601 ========== ========== =========== Supplemental information Cash paid for interest $ 13,166 $ 80,965 $ 142,343 ========== ========== =========== See Note N for supplemental schedule of non-cash investing and financing activities. The accompanying notes are an integral part of these consolidated financial statements. VPGI Corp. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2003, 2002 and 2001 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Description of Business ----------------------- Until it discontinued normal operations in December 2002 (see Note B), VPGI Corp. (formerly uniView Technologies Corporation) and Subsidiaries (the Company), offered enhanced digital media solutions to customers worldwide. It also offered contact center customer service solutions through CIMphony[TM], a suite of computer telephony integration (CTI) software products and services. Principles of Consolidation --------------------------- The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Use of Estimates ---------------- The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the accompanying notes. Actual results could differ from those estimates. Cash Equivalents ---------------- All highly liquid debt investments with an original maturity of three months or less are considered to be cash equivalents. Inventories ----------- Inventories are stated at the lower of average cost or market. Inventories consist primarily of computer parts and peripherals to be used in network systems and products. Property and Equipment ---------------------- Property and equipment are stated at cost and are depreciated using the straight-line method over their estimated useful lives. Maintenance and repairs are expensed as incurred. Equipment leased under capital lease obligations is depreciated over the life of the lease using the straight- line method. Accounting for Impairment of Long-Lived Assets ---------------------------------------------- The Company evaluates long-lived assets and intangible assets, including goodwill, held and used for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. Impairment of goodwill is the condition that exists when the carrying amount of goodwill exceeds its implied fair value. Impairment of other assets is recognized when the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of such assets. Product and Software Development Costs -------------------------------------- The Company capitalizes product and software development costs incurred from the time technological feasibility of the product or software is established until the product or software is ready for use in products. Research and development costs related to product and software development are expensed as incurred. The capitalized costs related to the product or software which will become an integral part of the Company's revenue- producing products are amortized in relation to expected revenues from the product or straight-line, over a maximum of four years, whichever is greater. The carrying value of product or software development costs is regularly reviewed by the Company, and a loss is recognized when the net realizable value by product falls below the unamortized cost. Fair Value of Financial Instruments ----------------------------------- The Company's financial instruments consist of cash and cash equivalents, notes receivable, redeemable preferred stock and debt. The fair value of cash and notes receivable approximate the recorded amounts because of the liquidity and short term nature of these items. The fair value of debt approximates the recorded amounts. The fair value of redeemable preferred stock is reflected by the recorded amount as it represents fair value based on the market price of the Company's common stock. Stock-Based Compensation ------------------------ The Company accounts for stock-based compensation to employees using the intrinsic value method. Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company's stock at the date of the grant over the amount an employee must pay to acquire the stock. Redeemable Preferred Stock -------------------------- Prior to April 2003, the Company's Series 1999-D1 and 2002-G preferred stock was redeemable at the option of the holder, and was therefore classified outside of stockholders' equity. The redemption value of these securities varies based on the market price of the Company's common stock. The Company adopted an accounting method provided in EITF Topic D-98 for these types of securities, which recognizes changes in redemption value immediately as they occur and adjusts the carrying value of the security to equal the redemption value at the end of each reporting period. The result of this accounting method is an increase in loss attributable to common shareholders and a decrease in stockholders' equity as the Company's common stock price increases, with the opposite effect when the Company's common stock price decreases. Revenue Recognition ------------------- The Company recognizes service revenue as the services are provided. Equipment and product sales are recognized at the time of delivery and customer acceptance. Revenue from the installation of software and hardware systems is recognized on the completed contract method. Royalty revenue is recognized when earned as the customer sells royalty related products. Amounts for which revenue cannot be recognized such as uncompleted contracts or unearned maintenance services are included in deferred revenue and are recognized as contracts are completed or ratably over the period covered by the maintenance agreement. On January 16, 2002, the Company completed the sale of a source code license to one of its largest customers of its CTI product. The sale resulted in the Company receiving $1.3 million in cash (this revenue is included in consulting and support service revenue in the accompanying statements of operations). The buyer also hired six of the Company's employees. Advertising Costs ----------------- Advertising costs are charged to operations as incurred. Advertising costs for the years ended June 30, 2003, 2002, and 2001 were $319, $23,469, and $555,187, respectively. Reverse Stock Split ------------------- In September 2001, the Company's stockholders approved a one for eight reverse stock split. All share and per share data give effect to the reverse split applied retroactively as if it occurred at the beginning of the earliest period presented. The number of outstanding shares has been further adjusted to reflect the effects of rounding fractional shares to the next whole share after the reverse split. Loss Per Share -------------- Basic loss per common share is based on the weighted average number of common shares outstanding. Diluted loss per share is computed based on the weighted average number of shares outstanding, plus the number of additional common shares that would have been outstanding if dilutive potential common shares had been issued. In all years presented, all potential common shares were anti-dilutive. All share and per share data give retroactive effect to the one for eight reverse stock split approved by the stockholders in September 2001 as if the reverse split occurred at the beginning of the earliest period presented. Reclassifications ----------------- Certain reclassifications of the 2002 and 2001 financial statements and related notes have been made to conform with the 2003 presentation. New Pronouncements ------------------ In July 2002, the FASB issued Statement of Financial Accounting Standards No. 146 ("SFAS 146"), "Accounting for Costs Associated with Exit or Disposal Activities." The standard requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. SFAS 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. The Company expects no material impact to its financial statements upon adoption of SFAS 146. In December 2002, FASB issued Statement of Financial Accounting Standard No. 148 ("SFAS 148"), Accounting for Stock-Based Compensation - Transition and Disclosure - an amendment of FASB Statement No. 123. The standard provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this statement amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company is required to adopt SFAS 148 for fiscal years beginning after December 15, 2002. The Company does not believe that the adoption of this standard will have a material effect on its financial condition or results of operation. NOTE B - GOING CONCERN MATTERS The Company laid off all of its employees and discontinued normal operations in December 2002. The accompanying financial statements have been prepared accordingly. The Company incurred net losses of $3,475,604, $2,733,434 and $6,622,458 for the years ended June 30, 2003, 2002 and 2001, respectively. These conditions raise substantial doubt about the Company's ability to continue as a going concern. For the last several years, the Company had been developing its business plan with a focus in offering its technical expertise in information technology. The Company's product offerings included providing consulting services to niche markets, technology products through its digital media products and computer telephony integration products. The Company is continuing to evaluate all of its options and may consider seeking a buyer, a merger candidate or an acquisition of a viable business. The financial statements do not include any adjustment to reflect the possible effects on the recoverability and classification of assets or liabilities which may result from the inability of the Company to continue as a going concern. NOTE C - BUSINESS COMBINATIONS AND DIVESTITURES Effective September 22, 1999 the Company acquired assets of Zirca Corporation ("Zirca") for $300,000 cash and 45,000 restricted common shares of the Company valued at $675,000. The acquisition of Zirca was accounted for as a purchase and the Company allocated the excess purchase price over tangible assets acquired of approximately $360,000 to purchased software. In December 2001, the Company wrote off the remaining assets of $143,539 relating to prior acquisitions as these assets were no longer being utilized. Effective June 26, 2002, the Company acquired 60% of the outstanding capital stock of an Asian company for 350,000 shares of its common stock. The acquisition was accounted for as a purchase. The Company allocated the purchase price of approximately $129,500 to intellectual property license. In December 2002, the Company wrote off this asset, as it was no longer being utilized. All acquisitions have been accounted for as purchases and the operations of the purchased companies have been included in the Company's statement of operations since their date of acquisition. NOTE D - SUBSEQUENT EVENTS In July 2003, stockholders approved an amendment and restatement of the Company's articles of incorporation, resulting in a reduction in par value of the Company's common stock from $.80 per share to $.001 per share. The authorized number of shares was maintained at 80,000,000. All share and per share data give effect to the reduction in par value applied retroactively as if it occurred on July 1, 2000. NOTE E - DISPOSITION OF ASSETS AND SIGNIFICANT SALES TRANSACTIONS In September 2001, the Company sold the Curtis Mathes trademark for $4.5 million, consisting of cash and notes receivable. $450,000 in cash was received in June 2001. At June 30, 2002, a total of $1,650,000 of the purchase price had been received in cash, leaving a principal balance of $850,000 on a note receivable due in March 2003. In connection with the sale, the Company was released from approximately $2.0 million of long- term debt, which was assumed by the buyer of the trademark. As a result of the release of this long-term debt, the Company recorded an extraordinary loss on debt extinguishment of $406,243. The Company had issued warrants to the lender in connection with the loan and was amortizing these costs over the life of the loan. The carrying amount of the debt was $1,593,757 at the time of payment due to the value of the warrants and upon extinguishment of the debt, all of the costs were accelerated. The Company recorded a gain of $1,103,046 on the sale of the trademark. In January 2002, the Company sold a source code license of its CIMphony product to HSBC, its largest customer for that product, for $1.3 million in cash. In February 2002, as part of the agreement, the Company allowed HSBC to hire six of its employees who were principally involved in servicing this customer, while retaining adequate support staff for its other CTI customers. In addition to providing cash for operations, this transaction resulted in a reduction of overall employee expenses, while continuing to allow opportunities for sales of CIMphony source code licenses to other customers. However, the transaction was expected to result in limited revenues in the future from this customer, as it assumes the responsibility for its own CTI software operations. This customer generated approximately $241,000 and $2.4 million (including the sale of the source code license) in revenues during the years ended June 30, 2003 and 2002, respectively. In December 2002, the Company sold nine of its subsidiaries: Video Management, Inc., including its wholly owned subsidiary Network America, Inc., Corporate Network Solutions, L.C., Warranty Repair Corporation, FFL Corporation, including its wholly owned subsidiary Systematic Electronics Corp., uniView Technologies Advanced Systems Group, Inc., uniView Network America Corp., and uniView Xpressway Corporation. In the transaction, all of the issued and outstanding common stock of each of subsidiary was transferred to W. I. Technology Holding Company Inc. for a purchase price of $10. In connection with the sale, the Company issued warrants to purchase 150,000 shares of its common stock, exercisable through December 19, 2005 at a fixed exercise price of $.01 per share. The Company had no operations remaining after the sale. Due to the resulting suspension of ongoing development of its technologies, the Company wrote down all of the intellectual property values and goodwill associated with its technologies. The Company reported no gain or loss on the transaction as the assets of these subsidiaries had been written off or realized, and the liabilities on the books were satisfied prior to the sale. NOTE F - PROPERTY AND EQUIPMENT As a result of the cessation of all normal business activities, the Company wrote off all remaining property and equipment during 2003. Property and equipment at June 30 consist of the following: Useful life (in years) 2002 ----------- ---------- Equipment 3-5 $ 1,306,933 Furniture and fixtures 5 177,698 Computer software 3 102,603 Vehicles 3 116,503 Leasehold improvements lease term 65,270 ---------- 1,769,007 Less accumulated depreciation and amortization (1,618,974) ---------- $ 150,033 ========== Equipment under capital leases included above at June 30, 2003 and 2002 was $-0- and $102,921, respectively, and the related accumulated amortization amounted to $-0- and $78,935, respectively. Amortization of assets held under capital leases is included with depreciation expense. Depreciation expense for years ending June 30, 2003, 2002, and 2001 totaled $439,621, $494,112, and $583,229, respectively. NOTE G - OTHER ASSETS Other assets at June 30 consist of the following: 2003 2002 ---------- ---------- Purchased software $ - $ 2,494,965 Product and software development costs - 944,666 Intellectual property license - 129,500 Goodwill - 1,420,333 Security deposit on corporate office 12,948 12,948 Pension surplus - 29,231 Other - 87,155 ---------- ---------- 12,948 5,118,798 Less accumulated amortization - (2,720,563) ---------- ---------- $ 12,948 $ 2,398,235 ========== ========== Purchased software is normally amortized in relation to expected revenue from the product or straight-line over a maximum of four years, whichever is greater. Amortization expense for the years ended June 30, 2003, 2002, and 2001 was $177,985, $683,718, and $808,392, respectively. Revenue from these products was $241,026, $2,677,445 (including the $1.3 million sale of the source code license), and $2,972,504 for the years ended June 30, 2003, 2002, and 2001, respectively. In December 2002, the Company wrote off this asset, as it was no longer being utilized. Product and software development costs are normally amortized over their estimated useful life of three years. Amortization expense for the years ended June 30, 2003, 2002, and 2001 was $-0-, $273,060, and $178,867, respectively. Revenue from these products was $2,808, $93,623, and $22,423 for the years ended June 30, 2003, 2002 and 2001, respectively. In December 2002, the Company wrote off this asset, as it was no longer being utilized. The Company purchased the Curtis Mathes Corporation in 1993 and sold its only remaining asset, the Curtis Mathes trademark, in September 2001 for a gain of $1,103,046. The trademark was being amortized on a straight-line basis over 20 years. Amortization expense for the years ended June 30, 2002 and 2001 was $43,706 and $244,237, respectively. Goodwill totaling $1,420,333 from 1998 acquisitions of Video Management, Inc. (VMI) and Corporate Network Solutions (CNS) was being amortized over its estimated useful life of fourteen years. Amortization expense for each of the years ended June 30, 2002 and 2001 was $101,453. In October 2002, management and the Board of Directors of the Company determined, based on i) lower than expected revenues, ii) its inability to secure contracts it had expected to secure during the quarter ended September 30, 2002, and iii) its limited resources, the Company would not continue to support the operations of its subsidiary, Network America, Inc. (NWA). As a result of this decision, and based on the fair value of the subsidiary, the Company determined that the $1,005,509 of unamortized goodwill on the Company's books relating to NWA was impaired. Accordingly, the Company recorded an impairment expense for that amount to write off the goodwill as of September 30, 2002. NOTE H - LONG-TERM DEBT Long-term debt at June 30 consists of the following: 2002 ---------- Convertible note payable to a finance company collateralized by substantially all assets with interest at 14%. Interest payments due monthly, principal due May 31, 2003. $ 200,000 Other 35,937 ---------- 235,937 Less debt discount (52,500) ---------- 183,437 Less current portion (169,992) ---------- $ 13,445 ========== The weighted average interest rate of borrowings outstanding at June 30, 2002 was 13.19%. On May 10, 2002 the Company entered into a note payable with Gemini Growth Fund, L.P. for $200,000, at an annual interest rate of 14%, maturing on May 31, 2003. On November 12, 2002, the loan agreement was modified to change the loan amount from $200,000 to $300,000 and the Company entered into an additional note payable with Trident Growth Fund, L.P., formerly known as Gemini Growth Fund, L.P., for $100,000 at an annual interest rate of 14%, maturing on November 30, 2003. In connection with the $100,000 loan, the Company issued warrants to purchase 75,000 shares of its common stock, exercisable for three years at a fixed exercise price of $1.50 per share. The loans were collateralized by a security interest in the note received in connection with the sale of the Curtis Mathes trademark and other assets of the Company. Interest was payable monthly in cash. In December 2002, the Company received a notice of default and acceleration notice from Trident Growth Fund, accelerating the entire principal balance due on the notes. To satisfy this obligation, the Company negotiated a discount on the $850,000 note receivable it acquired in the sale of the Curtis Mathes trademark in exchange for a lump sum payment of $550,000 from the debtor, charging $300,000 to bad debt expense. Approximately $300,000 of the proceeds received by the Company were applied to pay the entire remaining principal balance, as well as accumulated interest and other fees, due on the note payable to Trident Growth Fund. NOTE I - COMMITMENTS AND CONTINGENCIES Lease Commitments ----------------- The Company leases equipment and facilities under various non-cancelable operating and capital leases which expire at various dates through fiscal 2005. The following are scheduled future minimum lease payments and sublease rental income at June 30, 2003: Operating Leases ---------------------------- Minimum Sublease Year ending lease rental June 30, payments income Totals -------- ------- ------- ------- 2004 $146,940 $ - $146,940 2005 61,224 - 61,224 ------- ------- ------- Total minimum lease payments $208,164 $ - $208,164 ======= ======= ======= Rental expense under operating leases for the years ended June 30, 2003, 2002 and 2001 was $128,197, $437,124 and $616,327, respectively. Litigation ---------- On July 26, 1999, the Company and a vendor agreed to settle a legal action. In return for a prepayment of $750,000 and 31,250 shares of its common stock whose market value at closing date was $16.00 per share, the Company received two years of television listing services from the vendor. The agreement required an additional annual fee of $70,000 and a nominal fee per customer. As of June 30, 2002, all fees associated with the agreement had been fully paid. The Company is routinely a party to ordinary litigation incidental to its business, as well as to other litigation of a nonmaterial nature, the outcome of which management does not expect, individually or in the aggregate, to have a material adverse effect on the financial condition or results of operations of the Company. NOTE J - CONCENTRATIONS OF CREDIT RISK During 2003, 2002 and 2001, one customer represented 39%, 45% and 25% of sales, respectively. At June 30, 2002, two customers accounted for 84% of trade accounts receivable. At June 30, 2001, one customer accounted for 50% of trade accounts receivable. Management provides an allowance for doubtful accounts which reflects its estimate of the uncollectible receivables. In the event of non- performance, the maximum exposure to the Company is the recorded amount of the receivable at the balance sheet date. The Company's receivables are generally not secured. NOTE K - STOCKHOLDERS' EQUITY AND REDEEMABLE PREFERRED STOCK Preferred Stock --------------- The Company has 1,000,000 shares authorized of $1.00 par value cumulative preferred stock. The Company's articles of incorporation allow the board of directors to determine the number of shares and determine the relative rights and preferences of any series of preferred stock to be issued. In December 1992, the Company issued 140,000 shares of Series A redeemable preferred stock (stated value $1 per share). In fiscal 2000, 100,000 shares were redeemed for cash, and 10,000 shares were converted to common stock, with the remaining 30,000 outstanding at June 30, 2003. Shares accumulate dividends at 6%, or $1,800 per year. Dividends in arrears at June 30, 2003 and 2002 on Series A shares totaled $12,150 and $10,350, respectively. In fiscal 1996, the Company issued 55 shares of Series H convertible preferred stock (stated value $25,000 per share). 52 shares were converted into common stock in fiscal 1997, and one share was converted in fiscal 2000, with the remaining two shares outstanding at June 30, 2003. Shares accumulate dividends at 5%, or $2,500 per year and are paid in May and November of each year. Shares are convertible based on 80% of the five day average closing bid price of the Company's common stock, with minimum and maximum conversion limits of $12 and $32 per share, respectively. Dividends of $2,500 and $-0- were in arrears on Series H shares at June 30, 2003 and 2002, respectively. In June 1999, the Company issued 720 shares of Series D-1 convertible preferred stock (stated value $25,000 per share). The shares accumulated dividends at 5%, or $900,000 per year and were convertible into common stock at $32 per share. In fiscal 2002, the Company exchanged these shares for 240 shares of Series 2002-G preferred stock (stated valued $25,000 per share). The new series of preferred stock has no provision for dividends and was convertible into 4,000,000 shares of common stock at $1.50 per share. All outstanding and unconverted shares of the new preferred stock as of June 30, 2004 shall be, at the Company's option, either converted into common stock or redeemed by the Company based on the market price of the Company's common stock. Cumulative dividends in arrears at June 30, 2001 totaled $1,850,000. In conjunction with the exchange of shares, all accumulated dividends associated with the D-1 preferred stock were released by mutual agreement. Dividends of $-0-, $2,119 and $3,750 on preferred stock were paid during the years ended June 30, 2003, 2002, and 2001, respectively. Cumulative dividends in arrears as of June 30, 2003 and 2002 amounted to $14,650 and $10,350, respectively. In June 2002, the Company issued 20 shares of Series 2002-K convertible preferred stock (stated value $25,000 per share). The shares have no provision for dividends and are convertible into common shares at $.80 per share. At any time, at the Company's sole discretion, the Company may redeem all or part of the outstanding preferred shares at a price per share of 120% of their face value. On April 16, 2003, the holder of the Company's Series 2002-G preferred stock agreed to modify the terms of the preferred stock, whereby any future redemption of the preferred stock shall be at the sole option of the Company rather than at the option of the Holder. This modification to the terms of the preferred stock resulted in the preferred stock being accounted for as equity as of June 30, 2003, rather than as liability. In addition, 44 shares of the preferred stock was converted into 733,335 shares of common stock for a total of $61,500. Stock Options ------------- The Company has periodically granted stock options for employment and outside services received during the years reported. These options are treated as fixed, compensatory awards. The Company has granted non-compensatory stock options to key employees and directors at market value at the date of grant. The options granted to directors have generally vested immediately, and the options granted to employees have generally vested over a 3-year period; however, during 2003, options covering 310,000 shares were granted that vested immediately. During 2002 and 2001, options covering 22,688 and 185,882 shares, respectively, were granted that vest over 3 years. During 2003 and 2002, options issued to employees and directors with exercise prices less than market on the grant date were immaterial and, accordingly, no compensation expense was recognized in those years. During 2001, options issued to employees and directors with exercise prices less than market value resulted in compensation expense under the intrinsic value method of $58,496. Had compensation cost been determined on the basis of fair value pursuant to FASB Statement No. 123, net loss and net loss per share for 2003, 2002 and 2001 would have been increased as follows: 2003 2002 2001 ---------- ---------- ---------- Net loss As reported $(3,475,604) $(2,733,434) $(6,622,458) Deduct: total stock-based employee compensation expense determined under fair value based method for all awards, net of income tax effect (261,578) (250,113) (3,133,230) ---------- ---------- ---------- Pro forma net loss $(3,737,182) $(2,983,547) $(9,755,688) ========== ========== ========== Loss per share As reported (0.52) (0.80) (2.22) Pro forma (0.90) (0.88) (2.88) The fair value of these options was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions: 2003 2002 2001 ---------- ---------- ---------- Expected volatility 150% 150% 150% Risk-free interest rate 1.15% - 1.3% 3.50% - 4.30% 4.33% - 5.75% Expected lives 2.7 to 5.5 years 3 years 1 to 3 years Dividend yield - - - Additional information with respect to all options outstanding at June 30, 2003, and changes for the three years then ended was as follows: Above Equal to Below market price market price market price ------------------ --------------- -------------- Weighted Weighted Weighted average average average exercise exercise exercise Total Options price Options price Options price Options ------- ------ ------ ----- ------- ----- ------- Outstanding at June 30, 2000 207,291 $ 20.24 12,500 $14.64 113,438 $15.60 333,229 Granted 275,679 14.80 6,250 14.48 9,026 16.48 290,955 Forfeited (28,040) 17.68 - - (6,563) 16.48 (34,603) ------- ------ ------ ----- ------- ----- ------- Outstanding at June 30, 2001 454,930 15.761 8,750 14.56 115,901 15.68 589,581 Granted 2,162,857 0.83 - - - - 2,162,857 Forfeited (540,820) 2.46 - - (11,147) 28.65 (551,967) ------- ------ ------ ----- ------- ----- ------- Outstanding at June 30, 2002 2,076,967 3.63 18,750 14.56 104,754 14.40 2,200,471 Granted - - 310,000 0.02 - - 310,000 Forfeited (466,035) 1.56 - - - - (466,035) ------- ------ ------ ----- ------- ----- ------- Outstanding at June 30, 2003 1,610,932 $ 4.13 328,750 0.85 104,754 $14.40 2,044,436 ========= ====== ====== ===== ======= ===== ========= Number Weighted of shares average underlying exercise options price ---------- ----- Options exercisable at June 30, 2001 558,519 $15.60 ========= ===== Options exercisable at June 30, 2002 1,061,555 $ 7.91 ========= ===== Options exercisable at June 30, 2003 1,855,436 $ 4.55 ========= ===== For 2003, options granted equal to market value had a weighted average fair value per share of $0.02. For 2002, options granted above market value had a weighted average fair value per share of $0.83. For 2001, options granted above, equal to, and below market value had a weighted average fair value per share of $11.20, $11.92 and $16.08, respectively. Information about stock options outstanding at June 30, 2003 is summarized as follows: Options outstanding Exercisable -------------------------------- ---------------------- Weighted average Weighted Weighted remaining average average Range of contractual exercise Number exercise exercise prices Number life price exercisable price ---------------- --------- ----- ------- ----------- -------- $0.02 310,000 4.90 $ 0.02 310,000 $ 0.02 $0.80 1,208,930 3.31 0.80 1,019,930 0.80 $12.00 to $16.48 506,756 1.58 14.11 506,756 14.11 $21.52 to $28.00 18,750 1.63 25.84 18,750 25.84 --------- --------- 2,044,436 1,855,436 ========= ========= Common stock warrants issued and outstanding at June 30, 2003 are summarized as follows: Weighted Weighted average average Range of exercise price Number remaining life exercise price ---------------------- ------- -------------- -------------- $0.01 to $0.02 365,000 3.98 $ 0.02 $1.50 to $6.72 381,250 1.94 2.01 $13.28 to $28.00 15,000 2.29 25.55 $32.00 to $48.00 170,000 1.51 33.76 All outstanding warrants are exercisable at June 30, 2003, with the exception of 100,000 warrants which become exercisable at various dates through February 2005. During the year ended June 30, 2003, warrants to purchase 25,000 shares of the Company's common stock were granted in connection with services provided. The warrants have an exercise price of $.01, expire in July 2008, and were valued at $548 at June 30, 2003. Additionally, warrants to purchase 190,000 shares of the Company's common stock were granted in connection with services provided. The warrants have an exercise price of $.02, expire in July 2008, and were valued at $3,477 at June 30, 2003. Additionally, warrants to purchase 75,000 shares of the Company's common stock were granted in connection with the issuance of long-term debt. These warrants have an exercise price of $1.50, with a provision to reprice at par value upon the satisfaction of the anti-dilution provisions of certain preferred stock, and expire in November 2005. The value of the warrants is $4,965 at June 30, 2003. Additionally, warrants to purchase 150,000 shares of the Company's common stock were granted in connection with the sale of subsidiaries. The warrants have an exercise price of $.01, expire in December, 2005, and were valued at $3,270. During the year ended June 30, 2002, warrants to purchase 150,000 shares of the Company's common stock were granted in connection with consulting services provided. The warrants have an exercise price of $1.50, expire in February 2007, and were valued at $72,000 and recorded as a prepaid expense, net of amortization of $6,000 at June 30, 2002. Additionally, warrants to purchase 150,000 shares of the Company's common stock were granted in connection with the issuance of long-term debt. These warrants have an exercise price of $1.50 and expire in April 2005. The value of the warrants, $60,000, is included as a discount on the debt net of accumulated amortization of $7,500. Warrants to purchase 50,000 shares of the Company's common stock were granted for a finder's fee in connection with the sale of the Curtis Mathes trademark. These warrants have an exercise price of $32.00 per share, with a provision to reprice at par value upon the satisfaction of the anti-dilution provisions of certain preferred stock. The value of the warrants, $68,500, was recorded as a reduction in the gain on the sale of trademark in the accompanying statement of operations. During the year ended June 30, 2001, warrants to acquire 168,750 shares of the Company's common stock (valued at $188,600) were granted in connection with the issuance of long-term debt. The value of the warrants was included as a discount on the debt net of accumulated amortization of $12,500 at June 30, 2001. In 2002, additional warrants to acquire 31,250 shares (valued at $96,875) related to this debt were issued, and the warrants issued in 2001 were repriced to $.80 per share (valued at $179,064). The warrants have an exercise price of $0.80 and expire between December 2003 and July 2006. In connection with the sale of the Curtis Mathes trademark in September 2001, this debt was assumed by the buyer of the trademark and these costs were accelerated and recorded as an extraordinary loss on extinguishment of debt. Additionally, warrants to purchase 12,500 and 2,500 shares of the Company's common stock were granted to a customer in connection with a sale of set-top boxes and to a consultant for services performed, respectively. The warrants have an exercise price of $28.00, expire in October 2005, and were valued at $180,000 and charged to selling expense during the fourth quarter 2001. NOTE L - INCOME TAXES A reconciliation of income tax benefit computed by applying the U.S. Federal tax rates to the net loss and recorded income tax expense (benefit) is as follows: 2003 2002 2001 ---------- ---------- ---------- Tax benefit at statutory rate $(1,338,107) $ (929,368) $(2,251,636) Non-deductible expenses - 3,134 93,572 Change in estimate for prior years - - - Sale of trademark - (610,842) - Adjustment of net operating loss carryforwards - - 2,164,423 Change in valuation allowance 1,338,107 1,502,582 (6,359) Other - 34,494 - ---------- ---------- ---------- $ - $ - $ - ========== ========== ========== The components of the Company's deferred income taxes at June 30, 2003 and 2002 are as follows: 2003 2002 ---------- ---------- Deferred tax assets Inventories $ - $ 13,600 Accounts receivable - 4,637 Fixed assets - 38,695 Accrued liabilities - 16,900 Deferred revenue - 12,250 Net operating loss carryforwards 21,041,871 19,703,764 ---------- ---------- 21,041,871 19,789,846 Deferred tax liabilities Software and product development costs - (86,402) ---------- ---------- Net deferred tax asset 21,041,871 19,703,444 Valuation allowance (21,041,871) (19,703,444) ---------- ---------- $ - $ - ========== ========== At June 30, 2003, the Company has net operating loss carryforwards for Federal income tax purposes of approximately $63,416,602 which may be used to offset future taxable income, subject to certain limitations and provisions of the Internal Revenue Code, and will expire in various amounts in the years 2008 through 2022 if not utilized. NOTE M - PENSION AND OTHER BENEFIT PROGRAMS Prior to a subsidiary's bankruptcy filing in 1992, the subsidiary had a defined benefit plan, which covered substantially all full-time employees. The following table sets forth the funded status of the Company's defined pension plan at June 30: 2003 2002 2001 -------- -------- -------- Actuarial present value of benefit obligations -------------------------- Accumulated benefit obligation $ 637,444 $ 637,444 $ 700,879 ======== ======== ======== Projected benefit obligation 637,444 637,444 700,879 Plan assets at fair value 637,444 666,675 609,637 -------- -------- -------- Excess projected benefit obligation - (29,231) 91,242 -------- -------- -------- Net pension (asset) liability $ - $ (29,231) $ 91,242 ======== ======== ======== Net pension cost includes the following components ------------------------ Interest on unfunded liability $ (2,046) $ 6,387 $ 8,660 Actuarial (gain) loss (16,420) (84,881) (5,187) -------- -------- -------- Net pension cost (benefits) $ (18,466) $ (78,494) $ 3,473 ======== ======== ======== The weighted average assumed discount rate used in determining the actuarial present value of the projected benefit obligation for 2003, 2002, and 2001 was 7%. The net pension asset is shown in other noncurrent assets in the consolidated balance sheet. NOTE N - NON-CASH INVESTING AND FINANCING ACTIVITIES 2003 2002 2001 ---------- ---------- ---------- SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES Issuance of common stock for purchase of assets $ - $ 129,500 $ - ========== ========= ========== Issuance of common stock for services $ 69 $ - $ - ========== ========= ========== Issuance of common stock warrants for services $ 4,025 $ 72,000 $ 212,619 ========== ========= ========== Stock compensation $ - $ - $ 58,496 ========== ========= ========== Issuance of warrants in connection with sale of trademark $ - $ 68,500 $ - ========== ========= ========== Issuance of warrants in connection with sale of subsidiaries $ 3,270 $ - $ - ========== ========= ========== Note receivable from sale of trademark $ - $1,865,000 $ - ========== ========= ========== Debt relieved upon sale of trademark $ - $2,000,000 $ - ========== ========= ========== Issuance of warrants in connection with long-term debt $ 4,965 $ 335,938 $ 188,600 ========== ========= ========== Conversion of preferred stock to common stock $ 61,500 $ - $ - ========== ========= ========== NOTE O - BUSINESS SEGMENT INFORMATION Until it discontinued normal operations in December 2002, the Company was primarily engaged in high technology product sales and consulting and support services. The following tables set forth certain information with respect to the years ended June 30: The Company had three segments for 2003, 2002 and 2001: Technology product sales, technology consulting and support services, and royalty from trademark licensing. The segments were differentiated by the products and services provided as follows: Product sales ------------- This segment consisted of set-top boxes, network equipment, computer cabling, computer telephony integration (CTI) and personal computer equipment and peripherals. Consulting and support services ------------------------------- This segment consisted of services for the implementation of e-business solutions, software support maintenance, and network development and support. Royalties --------- This segment consisted of royalty income from licensing the Curtis Mathes Trademark which was sold in September 2001. The Company's underlying accounting records are maintained on a legal entity basis. Segment disclosures are on a performance basis consistent with internal management reporting. The Company evaluates performance based on earnings from continuing operations before income taxes and other income and expense. The Corporate column includes corporate overhead related items. The accounting policies of the segments are the same as those described in the summary of significant accounting policies (Note A). 2003 2002 2001 ---------- ----------- ----------- Net revenues Product sales $ 127,730 $ 1,919,695 $ 5,434,527 Consulting and support services 498,055 3,399,463 2,765,958 Royalties - 50,153 1,131,747 ---------- ----------- ----------- $ 625,785 $ 5,369,311 $ 9,332,232 ---------- ----------- ----------- Operating loss Product sales $(1,147,212) $ (1,504,892) $ (2,924,871) Consulting and support services (1,125,619) (1,497,418) (1,937,387) Corporate (1,272,630) (485,949) (1,927,634) ---------- ----------- ----------- Total operating loss (3,545,461) (3,488,259) (6,789,892) Less interest expense (13,166) (101,389) (177,237) Other income (expenses) 83,023 159,411 344,671 Gain on sale of trademark - 1,103,046 - ---------- ----------- ----------- Loss before extraordinary item (3,475,604) (2,327,191) (6,622,458) Extraordinary item - (406,243) - ---------- ----------- ----------- Net loss $(3,475,604) $ (2,733,434) $ (6,622,458) ========== =========== =========== Identifiable assets Computer products and service $ - $ 213,030 $ 3,783,772 Corporate 22,831 4,629,173 5,053,588 ---------- ----------- ----------- $ 22,831 $ 4,842,203 $ 8,837,360 ========== =========== =========== Depreciation, amortization and write-down Computer products and service $ 2,402,218 $ 421,136 $ 306,213 Corporate 16,716 1,171,913 1,609,965 ---------- ----------- ----------- $ 2,418,934 $ 1,593,049 $ 1,916,178 ========== =========== =========== Capital expenditures Computer products and service $ - $ 11,606 $ 148,948 Corporate - - 28,286 ---------- ----------- ----------- $ - $ 11,606 $ 177,234 ========== =========== =========== International revenues for the years ended June 30, 2003, 2002 and 2001 totaled $156,334, $2,396,981 and $2,589,784, respectively. VPGI Corp. and Subsidiaries SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS For the years ended June 30, 2003, 2002 and 2001 Balance at Charged to Charged Balance beginning costs and to other at end Description of year expenses accounts Deductions of year ----------- --------- --------- -------- ---------- --------- Year ended June 30, 2001 Allowance for doubtful accounts 5,874 18,780 - (11,017) 13,637 Year ended June 30, 2002 Allowance for doubtful accounts 13,637 - - - 13,637 Year ended June 30, 2003 Allowance for doubtful accounts 13,637 42,851 - (56,488) - UNIVIEW TECHNOLOGIES CORPORATION and Subsidiaries EXHIBIT INDEX Exhibit Number Description of Exhibits Sequential Page Number ---------------------------------------------------------------------------- 3(i) * Articles of Incorporation of the Company, as amended and restated. 57 3(ii) Bylaws of the Company, as amended (filed as Exhibit "3(ii)" to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1999 and incorporated herein by reference.) N/A 4.1 Form of common stock Certificate of the Company (filed as Exhibit "4.2" to the Company's annual report on Form 10-K for the fiscal year ended June 30, 1994 and incorporated herein by reference.) N/A 4.2 1999 Equity Incentive Plan (filed as Exhibit "4.4" to the Company's Registration Statement on Form S-8 filed with the Commission on July 12, 2000 and incorporated herein by reference.) N/A 4.3 Series A Preferred Stock terms and conditions (filed as Exhibit "4.3" to the Company's annual report on Form 10-K for the fiscal year ended June 30, 1994 and incorporated herein by reference.) N/A 4.4 Series H Preferred Stock terms and conditions (filed as Exhibit "4.4" to the Company's Registration Statement on Form S-3 originally filed with the Commission on June 20, 1996 and incorporated herein by reference.) N/A 4.5 Series 2002-G Preferred Stock terms and conditions (filed as Exhibit "4.1" to the Company's Current Report on Form 8-K dated as of March 5, 2002 and incorporated herein by reference.) N/A 4.6 Form of warrant issued in connection with private placement to Bonanza Partners, Ltd. (filed as Exhibit "4.11" to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 1999 and incorporated herein by reference.) N/A 4.7 Form of warrant issued in connection with acquisition of certain assets of Softgen International, Inc. (filed as Exhibit "4.12" to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 1999 and incorporated herein by reference.) N/A 4.8 Form of warrant issued in connection with private placement to LBI Group, Inc. (filed as Exhibit "4.5" to the Company's Registration Statement on Form S-3 filed with the Commission on May 19, 2000 and incorporated herein by reference.) N/A 4.9 Form of warrant issued in connection with private placement to Founders Partners VI, LLC (filed as Exhibit "4.5" to the Company's Registration Statement on Form S-3 filed with the Commission on October 10, 2000 and incorporated herein by reference.) N/A 4.10 Form of warrant issued to Sagemark Capital, L.P. in connection with a loan to the Company (filed as Exhibit "4.11" to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2000 and incorporated herein by reference.) N/A 4.11 Form of warrant issued to Highland Holdings for a finder's fee in connection with the Sagemark loan to the Company (filed as Exhibit "4.12" to the Company's Quarterly Report on Form 10-Q/A for the fiscal quarter ended September 30, 2001 and incorporated herein by reference.) N/A 4.12 Form of warrant issued to Massive Capital, LLC for a finder's fee in connection with the sale of the Curtis Mathes trademark (filed as Exhibit "4.13" to the Company's Quarterly Report on Form 10-Q/A for the fiscal quarter ended September 30, 2001 and incorporated herein by reference.) N/A 4.13 Securities Purchase Agreement dated March 5, 2002 between registrant and Brown Simpson Partners I, Ltd. relating to the redemption of registrant's Series 1999- D1 Convertible Preferred Stock with Series 2002-G Convertible Preferred Stock (filed as Exhibit "99.2" to the Company's Current Report on Form 8-K dated as of March 5, 2002 and incorporated herein by reference.) N/A 4.14 Registration Rights Agreement dated March 5, 2002 between registrant and Brown Simpson Partners I, Ltd. relating to the registration of the shares of common stock underlying registrant's Series 2002-G Convertible Preferred Stock (filed as Exhibit "99.3" to the Company's Current Report on Form 8-K dated as of March 5, 2002 and incorporated herein by reference.) N/A 4.15 Settlement and Mutual Release Agreement dated March 5, 2002 between registrant and Brown Simpson Partners I, Ltd. relating to the redemption of registrant's Series 1999-D1 Convertible Preferred Stock with Series 2002-G Convertible Preferred Stock (filed as Exhibit "99.4" to the Company's Current Report on Form 8-K dated as of March 5, 2002 and incorporated herein by reference.) N/A 4.16 Form of warrant issued to Setfield Limited for services rendered (filed as Exhibit "4.18" to the Company's annual report on Form 10-K for the fiscal year ended June 30, 2002 and incorporated herein by reference.) N/A 4.17 Form of warrant issued to Gemini Growth Fund, L.P. in connection with a loan to the Company (filed as Exhibit "4.19" to the Company's annual report on Form 10-K for the fiscal year ended June 30, 2002 and incorporated herein by reference.) N/A 4.18 Series 2002-K Preferred Stock terms and conditions (filed as Exhibit "4.20" to the Company's annual report on Form 10-K for the fiscal year ended June 30, 2002 and incorporated herein by reference.) N/A 4.19 Form of warrant issued to Associates Funding Group, Inc. in connection with sale of nine subsidiaries (filed as Exhibit "4.18" to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2003, filed on May 20, 2003 and incorporated herein by reference.) N/A 4.20 Form of warrant issued to Akin, Gump, Strauss, Hauer & Feld, LLP. in connection with legal services rendered to the Company (filed as Exhibit "4.19" to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2003, filed on May 20, 2003 and incorporated herein by reference.) N/A 4.21 * First Amendment to Series 2002-G Preferred Stock terms and conditions. 62 4.22 * Form of 190,000 warrants issued to consultants during year ended June 30, 2003 in connection with services rendered to the Company. 65 10.1.1 Lease Agreement between the Company and CMD Realty Investment Fund II, L.P., dated October 18, 1999 pertaining to the property utilized as the corporate headquarters (filed as Exhibit "10.2" to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2000 and incorporated herein by reference.) N/A 10.1.2 First Amendment to Lease Agreement between the Company and CMD Realty Investment Fund II, L.P., dated November 10, 1999 pertaining to the property utilized as the corporate headquarters (filed as Exhibit "10.2.1" to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2000 and incorporated herein by reference.) N/A 10.1.3 Second Amendment to Lease Agreement between the Company and CMD Realty Investment Fund II, L.P., dated January 10, 2000 pertaining to the property utilized as the corporate headquarters (filed as Exhibit "10.2.2" to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2000 and incorporated herein by reference.) N/A 10.1.4 * Third Amendment to Lease Agreement between the Company and CMD Realty Investment Fund II, L.P., dated December 23, 2002 pertaining to the property utilized as the corporate headquarters. 70 21 * Subsidiaries of the Company. 72 23 * Consent of Independent Certified Public Accountants. 73 31 * Certification of Chief Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(a) or 15d- 14(a) of the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 74 32 * Certification of Chief Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 76 _______________ * Filed herewith. EX-3.I 3 exh3-i.txt ARTICLES OF INCORPORATION, AS AMENDED Exhibit 3(i) AMENDED AND RESTATED ARTICLES OF INCORPORATION OF UNIVIEW TECHNOLOGIES CORPORATION ARTICLE 1: NAME The name of the corporation is VPGI CORP. ARTICLE 2: DURATION The period of this corporation's duration is perpetual. ARTICLE 3: PURPOSES The purposes for which the corporation is organized are to transact any or all lawful business for which corporations may be incorporated under the Texas Business Corporation Act. ARTICLE 4: SHARE STRUCTURE The total number of shares of all classes of stock which the corporation shall be authorized to issue is 81,000,000 shares, divided into the following: (i) 1,000,000 shares of preferred stock, of the par value of $1.00 per share (hereinafter called "Preferred Stock"); and (ii) 80,000,000 shares of common stock, of the par value of $.001 per share (hereinafter called "Common Stock"). A description of the respective classes of stock and a statement of the designations, preferences, limitations and relative rights of such classes of stock and the limitations on or denial of the voting rights of the shares of such classes of stock are as follows: A. PREFERRED STOCK: 1. Issuance in Series. The Preferred stock may be divided into and issued in one or more series. The board of directors is hereby vested with authority from time to time to establish and designate such series, and within the limitations prescribed by law or set forth herein, to fix and determine the relative rights and preferences of the shares of any series so established, but all shares of Preferred Stock shall be identical except as to the following relative rights and preferences as to which there may be variations between different series: (a) the rate of dividend; (b) the price and at the terms and conditions on which shares may be redeemed; (c) the amount payable upon shares in event of involuntary liquidation; (d) the amount payable upon shares in event of voluntary liquidation; (e) sinking fund provisions for the redemption or purchase of shares; (f) the terms and conditions on which shares may be converted, if the shares of any series are issued with the privilege of conversion; and (g) voting rights. The board of directors shall exercise such authority by the adoption of a resolution as prescribed by law. 2. Dividends. The holders of each series of Preferred Stock at the time outstanding shall be entitled to receive, when and as declared to be payable by the board of directors, out of any funds legally available for the payment thereof, dividends at the rate theretofore affixed by the board of directors for such series of Preferred Stock that have theretofore been established, and no more, payable quarterly on the first days of January, April, July and October in each year. 3. Preferred Dividends Cumulative. Dividends on all Preferred Stock, regardless of series, shall be cumulative. No dividends shall be declared on shares of any series of Preferred Stock for any dividend period unless all dividends accumulated for all prior dividend periods shall have been declared or shall then be declared at the same time upon all Preferred Stock then outstanding. No dividends shall be declared on the shares of any series of Preferred Stock unless a dividend for the same period shall be declared at the same time upon all Preferred Stock outstanding at the time of such declaration in like proportion to the dividend rate then declared. No dividends shall be declared or paid on the Common Stock unless full dividends on all Preferred Stock then outstanding for all past dividend periods and for the current dividend period shall have been declared and the corporation shall have paid such dividends or shall have set apart a sum sufficient for the payment thereof. 4. Preference on Liquidation. In the event of any dissolution, liquidation or winding up of the corporation, whether voluntary or involuntary, the holders of each series of the then outstanding Preferred Stock shall be entitled to receive the amount fixed for such purpose in the resolution or resolutions of the board of directors establishing the respective series of Preferred Stock that might then be outstanding together with a sum equal to the amount of all accumulated and unpaid dividends thereon at the dividend rate fixed therefor in the aforesaid resolution or resolutions. After such payment to such holders of Preferred Stock, the remaining assets and funds of the corporation shall be distributed pro rata among the holders of the Common Stock. A consolidation, merger or reorganization of the corporation with any other corporation or corporations or a sale of all or substantially all of the assets of the corporation shall not be considered a dissolution, liquidation or winding up on the corporation within the meaning of these provisions. 5. Redemption. The whole or any part of the outstanding Preferred Stock or the whole or any part of any series thereof may be called for redemption and redeemed at any time at the option of the corporation, exercisable by the board of directors upon thirty (30) days' notice by mail to the holders of such shares as are to be redeemed, by paying therefor in cash the redemption price fixed for such shares in the resolution or resolutions of the board of directors establishing the respective series of which the shares to be redeemed are a part together with a sum equal to the amount of all accumulated and unpaid dividends thereon at the dividend rate fixed therefor in the aforesaid resolution or resolutions to the date fixed for such redemption. The corporation may redeem the whole or any part of the shares of any series, or of several series, without redeeming the whole or any part of the shares of any other series; provided, however, that if at any time less than the whole of the Preferred Stock of any particular series then outstanding shall be called for redemption, the particular shares called for redemption shall be determined by lot or by such other equitable method as may be determined by the board of directors. If, on the redemption date specified in any such notice, funds necessary for such redemption shall have been set aside by the corporation, separate and apart from its other funds, in trust for the pro rata benefit of the holders of the Preferred Stock so called for redemption, then, notwithstanding that any certificate for shares so called for redemption shall not have been surrendered for cancellation, the shares so called for redemption shall no longer be deemed to be outstanding, the right to receive dividends thereon shall cease to accrue from and after the date so fixed, and all rights of holders of Preferred Stock so called for redemption shall forthwith after such redemption date cease and terminate, excepting only the right of the holders thereof to receive the redemption price thereof, but without interest; and if, before the redemption date specified in any notice of the redemption of any Preferred Stock, the corporation shall deposit with the bank or trust company in the City of Dallas, Texas, having a capital and surplus of at least $50,000,000 according to its last published statement of condition, in trust to be applied to the redemption of the Preferred Stock so called for redemption, the funds necessary for such redemption, then, from and after the date of such deposit, the shares so called for redemption shall no longer be deemed to be outstanding and all rights of holders of the shares so called for redemption shall cease and terminate, excepting only the rights of holders thereof to receive the redemption price thereof, but without interest. Any interest accrued on funds so deposited shall be paid to the corporation from time to time. In case the holder of shares shall have been called for the redemption shall not, within six (6) years after the making of such deposit, claim the amount deposited with respect to the redemption of such shares, the bank or trust company in which such deposit was made shall upon demand pay over to the corporation such unclaimed amounts and thereupon such bank or trust company shall be relieved of all responsibility in respect thereof to such holder. Preferred Stock redeemed or otherwise retired by the corporation shall, upon the filing of such statement as may be required by law, assume the status of authorized by unissued Preferred Stock and may thereafter be reissued in the same manner as other authorized but unissued Preferred Stock, except that any shares of any series purchased or redeemed pursuant to the requirements of any sinking fund or purchase fund provided for such series shall not be reissued. B. COMMON STOCK: 1. Dividends. Subject to all the rights of the Preferred Stock or any series thereof, and on the conditions set forth in Part A of this Article Four or in any resolution of the board of directors providing for the issuance of any series of Preferred Stock, the holders of the Common Stock shall be entitled to receive, when, as and if declared by the board of directors, out of funds legally available therefor, dividends payable in cash, stock or otherwise. ARTICLE 5: PREEMPTIVE RIGHTS No holder of securities of the corporation shall be entitled as a matter of right, preemptive or otherwise, to subscribe for or purchase any securities of the corporation now or hereafter authorized to be issued, or securities held in the treasury of the corporation, whether issued or sold for cash or other consideration or as a dividend or otherwise. Any such securities may be issued or disposed of by the board of directors to such persons and on such terms as in its discretion it shall deem advisable. ARTICLE 6: SHAREHOLDER VOTING 6.01. With respect to any matter, the presence of the holders of a majority of the shares entitled to vote on that matter, either in person or by proxy, constitutes a quorum for the transaction of business. Once the presence of a quorum has been confirmed, business may continue despite any failure to maintain a quorum during the remainder of the meeting or the refusal of any shareholder to vote. 6.02. If with respect to any action taken by the shareholders of the corporation, any provision of the Texas Business Corporation Act would, but for this Article 6, require the vote or concurrence of the holders of shares having more than a majority of the votes entitled to be cast thereon, or of any class or series thereof, the vote or concurrence of the holders of shares having only a majority of the votes entitled to be cast thereon, or of any class or series thereof, shall be required with respect to any such action. 6.03. At each election for directors every shareholder entitled to vote at such election shall have the right to vote, in person or by proxy, the number of shares owned by him for as many persons as there are directors to be elected and for whose election he has a right to vote. It is expressly prohibited for any shareholder to cumulate his votes in any election of directors. 6.04. Any shareholder action required by the Texas Business Corporation Act to be taken at any annual or special meeting of shareholders, or any action which may be taken at any annual or special meeting of shareholders, may be taken without a meeting, without prior notice, and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holder or holders of shares having not less than the minimum number of votes that would be necessary to take such action at a meeting at which the holders of all shares entitled to vote on the action were present and voted. ARTICLE 7: SHARE REPURCHASE The corporation, without vote of shareholders, may purchase, directly or indirectly, its own shares to the extent of the aggregate of unrestricted capital surplus available therefor and unrestricted reduction surplus available therefor. ARTICLE 8: DIRECTOR LIABILITY A director of the Corporation shall not be personally liable to the Corporation or its shareholders for monetary damages for any act or omission in his capacity as a director, except to the extent otherwise expressly provided by a statute of the State of Texas. Any repeal or modification of this Article shall be prospective only, and shall not adversely affect any limitation of the personal liability of a director of the Corporation existing at the time of the repeal or modification. ARTICLE 9: INDEMNIFICATION To the extent permitted by the Texas Business Corporation Act, the corporation will indemnify any person who was, is, or is threatened to be made a named defendant or respondent in any threatened, pending, or completed proceeding, whether civil, criminal, administrative, arbitrative, or investigative, including all appeals, because that person is or was a director, officer, employee, or agent of the corporation. The corporation will also indemnify a person who is or was serving at the request of the corporation as a director, officer, partner, venturer, proprietor, trustee, employee, agent, or similar functionary of another foreign or domestic corporation, employee benefit plan, or other enterprise or entity. ARTICLE 10: MISCELLANEOUS PROVISIONS 10.01. The corporation will not begin business until it has received for issuing its shares consideration of the value of one thousand dollars consisting of money, labor done, or property actually received. 10.02. The street address of the registered office of the corporation is 17300 North Dallas Parkway, Suite 2050, Dallas, Texas 75248, and the name of the registered agent at this address is Patrick A. Custer. 10.03. The number of directors constituting the Board of Directors is one. The names and addresses of the persons serving as directors until the next annual shareholders' meeting or until their successors are elected and qualify are: Patrick A. Custer, 17300 North Dallas Parkway, Suite 2050, Dallas, Texas 75248. The undersigned has executed these Amended and Restated Articles of Incorporation on July 17, 2003. ____________________________ Patrick A. Custer, President EX-4.21 4 exh4-21.txt AMENDMENT TO SERIES 2002-G PREFERRED STOCK Exhibit 4.21 FIRST AMENDMENT TO UNIVIEW TECHNOLOGIES CORPORATION SERIES 2002-G CONVERTIBLE PREFERRED STOCK ----------------------------------------- uniView Technologies Corporation (the "Company") and Setfield Limited ("Holder") agree to the following modifications ("Amendment") to the Certificate of Designation of Series 2002-G Convertible Preferred Stock of uniView Technologies Corporation dated as of March 5, 2002 (the "Agreement"). STATEMENT OF AGREEMENT ---------------------- The terms of the Agreement shall continue to control all aspects of the transaction contemplated by this Amendment, except as otherwise expressly modified by this Amendment. 1. Section 7(f) of the Certificate of Designation shall be modified to read as follows: "7(f) Redemption Event. In case of (A) any reclassification of the Common Stock, excluding a reclassification intended primarily to effect a reduction in par value, (B) any Change of Control Transaction, (C) any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property, (D) the Company's notice to any Holder, including by way of public announcement, at any time, of its intention, for any reason, not to comply with proper requests for the conversion of any shares of Preferred Stock into shares of Common Stock or (E) a breach by the Company of any representation, warranty, covenant or other term or condition of the Purchase Agreement, the Registration Rights Agreement, this Certificate of Designation or any other agreement, document, certificate or other instrument delivered in connection with the transactions contemplated thereby or hereby, except to the extent that such breach would not have a Material Adverse Effect (as defined in Section 2.1(a) of the Purchase Agreement) and except, in the case of a breach of a covenant which is curable, only if such breach continues for a period of at least ten days after the Company knows or reasonably should have known of the existence of such breach (clauses (A) through (E) above are referred to as a "Redemption Event"), in the case of (A), (B) and (C), the Holders shall have the right thereafter to convert the shares of Preferred Stock for shares of stock and other securities, cash and property receivable upon or deemed to be held by holders of Common Stock following such Redemption Event, and the Holders shall be entitled upon such event to receive such amount of securities, cash or property as the shares of the Common Stock of the Company into which the shares of Preferred Stock could have been converted immediately prior to such Redemption Event (without taking into account any limitations or restrictions on the convertibility of the Preferred Stock) would have been entitled; provided, however, that in the case of a transaction specified in (B) in which holders of the Company's Common Stock receive cash, the Holders shall have the right to convert the shares of Preferred Stock for such number of shares of the surviving company equal to the amount of cash into which the shares of Preferred Stock are convertible divided by the fair market value of the shares of the surviving company on the effective date of the merger; provided, further, that on and after the date of any Redemption Event, the Company may elect, at the Company's sole option, either to (A) redeem, from funds legally available therefor at the time of such redemption, its shares of Common Stock immediately theretofore acquirable and receivable upon the conversion of such Holder's Preferred Stock (without taking into account any limitations or restrictions on the convertibility of the Preferred Stock) at a price per share equal to the product of (i) the Average Per Share Market Value immediately preceding (1) the effective date, the date of the closing, date of occurrence or the date of the announcement, as the case may be, of the Redemption Event triggering such redemption right or (2) the date of payment in full by the Company of the redemption price hereunder, whichever is greater, and (ii) the Conversion Ratio calculated on the effective date, the date of the closing, date of occurrence or the date of the announcement, as the case may be or, at the option of the Holder, on the date of submission of a Redemption Notice, or (B) convert such Holder's Preferred Stock pursuant to Section 9. If the Company elects to redeem the Preferred Stock, the entire redemption price shall be paid in cash, and the terms of payment of such redemption price shall be subject to the provisions set forth in Section 9(b). In the case of (A), (B) and (C), the terms of any such Redemption Event shall include such terms so as to continue to give to the Holders the right to receive the securities, cash or property set forth in this Section 7(f) upon any conversion or redemption following such Redemption Event. This provision shall similarly apply to successive Redemption Events. 2. Section 9(a) of the Certificate of Designation shall be modified to read as follows: "9. Mandatory Redemption. (a) All outstanding and unconverted shares of Preferred Stock on June 30, 2004 (the "Redemption Date") shall be, at the Company's sole option, converted pursuant to Section 5 or redeemed by the Company pursuant to this Section 9, from funds legally available therefor at a price per share equal to the product of (i) the Average Per Share Market Value immediately preceding (1) the Redemption Date or (2) the date of payment in full by the Company of the redemption price hereunder, whichever is greater, and (ii) the Conversion Ratio calculated on the Redemption Date. Thereafter, all shares of Preferred Stock shall cease to be outstanding and shall have the status of authorized but undesignated preferred stock. The entire redemption price shall be paid in cash." 3. Notwithstanding anything in the Agreement to the contrary, if and when any provision of the Agreement calls for redemption of the Preferred Stock, the Company shall have the sole option to redeem pursuant to Section 9 or to convert pursuant to Section 5 of the Certificate of Designation. The Agreement is, in all other respects, hereby ratified and affirmed. This Amendment may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by facsimile signature, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. Dated as of April 16, 2003. UNIVIEW TECHNOLOGIES CORPORATION By: /s/ Patrick A. Custer ---------------------- Patrick A. Custer, CEO SETFIELD LIMITED By: /s/ Harold L. Hutton -------------------------- Harold L. Hutton, Director EX-4.22 5 exh4-22.txt FORM OF WARRANTS ISSUED TO CONSULTANTS Exhibit 4.22 THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER ANY STATE SECURITIES OR BLUE SKY LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT. Date: June 4, 2003 Warrant No. UNIVIEW TECHNOLOGIES CORPORATION STOCK PURCHASE WARRANT This Warrant is issued for good and valuable consideration, receipt of which is hereby acknowledged, to ____________ (the "Holder") by uniView Technologies Corporation, a Texas corporation (the "Company"). 1. Purchase of Shares. Subject to the terms and conditions hereinafter set forth, the Holder is entitled, upon surrender of this Warrant at the principal office of the Company (or at such other place as the Company shall notify the Holder hereof in writing), to purchase from the Company _____________ (_______) shares of par value $.80 Common Stock of the Company (the "Shares"), as adjusted pursuant to the provisions of this Warrant. 2. Exercise Price. The exercise price for the Shares shall be Two Cents ($.02) per share. Such price shall be subject to adjustment pursuant to Section 8 hereof (such price, as adjusted from time to time, is herein referred to as the "Exercise Price"). The Company agrees to take such action as it deems necessary to reduce the par value of the Common Stock to $.01 per share or less, as soon as it deems it to be in the best interest of the Company to do so. 3. Exercise Period. This Warrant is exercisable at any time and from time to time and, except as provided below, shall remain so exercisable after and for five (5) years from the date that the Company reduces the par value of the Common Stock to $.01 per share or less. If the par value of the Common Stock has been reduced to $.01 or less, this Warrant shall immediately terminate upon the merger of the Company into or consolidation with any other entity in which at least fifty percent (50%) of the voting power of the Company is transferred to an unaffiliated third party. In the event of a transaction of the kind described above, the Company shall notify the Holder at least thirty (30) days prior to the consummation of such event or transaction. 4. Restricted Stock; Registration. The shares of Common Stock of the Company purchased upon exercise of this Warrant ("Restricted Stock") or purchasable upon exercise of this Warrant ("Underlying Stock") shall not be transferable except upon the conditions stated below, which are intended to insure compliance with federal and state securities laws. The certificates representing these shares of stock, unless the same are registered prior to exercise of this Warrant, shall be stamped or otherwise imprinted with a legend in substantially the following form: "The securities represented by this Certificate have not been registered under the Securities Act of 1933, as amended, or the securities laws of any state. The securities have been acquired for investment and may not be sold, offered for sale or transferred in the absence of an effective registration under the Securities Act of 1933, as amended, and any applicable state securities laws or an opinion of counsel satisfactory in form and substance to counsel for the Company that the transaction shall not result in a violation of state or federal securities laws." 5. Method of Exercise. While this Warrant remains outstanding and exercisable in accordance with Section 3 above, the Holder may exercise, in whole or in part, the purchase rights evidenced hereby. Such exercise shall be effected by: (i) the surrender of the Warrant, together with a duly executed copy of the form of exercise attached hereto, to the Secretary of the Company at its principal offices; and (ii) the payment to the Company of an amount equal to the aggregate Exercise Price for the number of Shares being purchased. 6. Certificates for Shares. Upon the exercise of the purchase rights evidenced by this Warrant, one or more certificates for the number of Shares so purchased shall be issued as soon as practicable thereafter, and in any event within thirty (30) days of the delivery of the subscription notice. 7. Reservation of Shares. The Company covenants that it will at all times, keep available such number of authorized shares of its Common Stock, free from all preemptive rights with respect thereto, which will be sufficient to permit the exercise of this Warrant for the full number of Shares specified herein (as may be adjusted pursuant to Section 8 hereof), upon exercise of this Warrant. The Company further covenants that such Shares, when issued pursuant to the exercise of this Warrant, will be duly and validly issued, fully paid and non-assessable and free from all taxes, liens and charges with respect to the issuance thereof. 8. Adjustment of Exercise Price and Number of Shares. The number of and kind of securities purchasable upon exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time as follows: (a) Subdivisions and Combinations. If the Company shall at any time prior to the expiration of this Warrant subdivide its Common Stock by split-up or otherwise, or combine its Common Stock, the number of Shares issuable on the exercise of this Warrant shall forthwith be proportionately increased in the case of a subdivision, or proportionately decreased in the case of a combination. Appropriate adjustments shall also be made to the purchase price payable per share, but the aggregate purchase price payable for the total number of Shares purchasable under this Warrant (as adjusted) shall remain the same. Any adjustment under this Section 8(a) shall become effective at the close of business on the date the subdivision or combination becomes effective. (b) Notice of Adjustment. When any adjustment is required to be made in the number or kind of shares purchasable upon exercise of the Warrant, or in the Warrant Price, the Company shall promptly notify the Holder of such event and of the number of shares of Common Stock or other securities or property thereafter purchasable upon exercise of the Warrant. 9. No Fractional Shares. No fractional shares shall be issued upon the exercise of this Warrant, and the number of shares of stock issued upon exercise of this Warrant shall be rounded to the nearest whole share. 10. No Stockholder Rights. Prior to the exercise of this Warrant, the Holder shall not be entitled to any rights of a shareholder with respect to the Shares, including (without limitation) the right to vote such Shares, receive dividends or other distributions thereon, exercise preemptive rights or be notified of shareholder meetings, and such Holder shall not be entitled to any notice or other communication concerning the business or affairs of the Company. 11. Exchange of Warrant. Subject to any restriction upon transfer set forth in this Warrant, each Warrant may be exchanged for another Warrant or Warrants of like tenor and representing in the aggregate a like number of Warrants. Any Holder desiring to exchange a Warrant or Warrants shall make such request in writing delivered to the Company, and shall surrender, properly endorsed, the Warrant or Warrants to be so exchanged. 12. Mutilated or Missing Warrants. In case any Warrant shall be mutilated, lost, stolen or destroyed, the Company shall issue and deliver in exchange and substitution for and upon cancellation of the mutilated Warrant, or in lieu of and substitution for the Warrant lost, stolen or destroyed, a new Warrant of like tenor and representing an equivalent right or interest, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction of such Warrant and indemnity or bond, if requested, also reasonably satisfactory to the Company. An applicant for such substitute Warrant shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company may prescribe. 13. Payment of Taxes. The Company will pay all taxes (other than any income taxes or other similar taxes), if any, attributable to the initial issuance of the Warrant and the issuance of the Shares upon the exercise of the Warrant, provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of the issuance or delivery of any Warrant, or the transfer thereof, and no such issuance, delivery or transfer shall be made unless and until the person requesting such issuance or transfer has paid to the Company the amount of any such tax, or has established, to the satisfaction of the Company, that no such tax is payable or such tax has been paid. 14. Warrant Register. The Warrants shall be numbered and shall be registered on the books of the Company (the "Warrant Register") as they are issued. The Company shall be entitled to treat the registered holder of any Warrant on the Warrant Register as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such Warrant on the part of any other person, and shall not be liable for any registration or transfer of Warrants which are registered or to be registered in the name of a fiduciary or the nominee of a fiduciary unless made with the actual knowledge that a fiduciary or nominee is committing a breach of trust in requesting such registration of transfer, or with knowledge of such facts that its participation therein amounts to bad faith. 15. Transfer of Warrants. The Warrants shall be transferable on the Warrant Register only upon delivery thereof duly endorsed by the Holder or by his duly authorized attorney or representative, or accompanied by proper evidence of succession, assignment or authority to transfer. In all cases of transfer by an attorney, the original power of attorney, duly approved, or an official copy thereof, duly certified shall be deposited with the Company. In case of transfer by executors, administrators, guardians or other legal representatives, duly authenticated evidence of their authority shall be produced, and may be required to be deposited with the Company in its discretion. Upon any registration of transfer, the Company shall deliver a new Warrant or Warrants to the Person entitled thereto. Notwithstanding the foregoing, the Company shall have no obligation to cause Warrants to be transferred on its books to any Person, unless the Holder of such Warrants shall furnish to the Company evidence of compliance with the Securities Act of 1933, as amended, and applicable state blue sky laws. 16. Successors and Assigns. The terms and provisions of this Warrant shall inure to the benefit of, and be binding upon, the Company and the holders hereof and their respective successors and assigns. 17. Amendments and Waivers. This Warrant may be amended, modified, superseded or cancelled, and any of the terms, covenants, representations, warranties or conditions hereof may be waived, only by a written instrument signed by the parties to be bound thereby. Any waiver or amendment effected in accordance with this Section shall be binding upon each holder of any Shares purchased under this Warrant at the time outstanding (including securities into which such Shares have been converted), each future holder of all such Shares, and the Company. 18. Governing Law. This Warrant and the validity and enforceability hereof shall be governed by and construed and interpreted in accordance with the laws of the State of Texas without giving effect to conflict of laws rules or choice of laws rules thereof. IN WITNESS WHEREOF, the undersigned hereby executes this Stock Purchase Warrant as of the date first written above. UNIVIEW TECHNOLOGIES CORPORATION By: ______________________ Patrick A. Custer, CEO NOTICE OF EXERCISE To: uniView Technologies Corporation (the "Company") (1) The undersigned ("Holder") hereby elects to exercise its rights to purchase __________________________ shares of the Common Stock of the Company (the "Securities") pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price in full, together with all applicable transfer taxes, if any. (2) Please issue a certificate or certificates representing the Securities in the name of the undersigned Holder: _______________________________ (Name) _______________________________ (Address) (3) With respect to the Securities being purchased hereunder, the Holder makes, as of the date hereof, all of the representations and warranties set forth below: (a) Holder is aware of the Company's business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities. Holder is purchasing these Securities for its own account for investment purposes only and not with a view to, or for the resale in connection with, any "distribution" thereof for purposes of the Securities Act of 1933, as amended ("Securities Act"). (b) Holder understands that the Securities have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of its investment intent as expressed herein. In this connection, Holder understands that, in the view of the Securities and Exchange Commission ("SEC"), the statutory basis for such exemption may be unavailable if its representation was predicated solely upon a present intention to hold these Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one year or any other fixed period in the future. (c) Holder further understands that the Securities must be held indefinitely unless subsequently registered under the Securities Act or unless an exemption from registration is otherwise available. In addition, Holder understands that the instruments or certificates evidencing the Securities will be imprinted with a legend which prohibits the transfer of the Securities unless they are registered or such registration is not required in the opinion of counsel for the Company. (d) Holder is aware of the provisions of Rule 144, promulgated under the Securities Act, which in substance, permits limited public resale of "restricted securities" acquired, directly or indirectly, from the issuer thereof (or from an affiliate of such issuer), in a non-public offering subject to the satisfaction of certain conditions, including, among other things: the availability of certain public information about the Company; the resale occurring not less than one year after the party has purchased and paid for the securities to be sold; the sale being made through a broker in an unsolicited "broker's transaction" or in transactions directly with a market maker (as said term is defined under the Securities Exchange Act of 1934, as amended) and the amount of securities being sold during any three month period not exceeding the specified limitations stated therein. (e) Holder further understands that at the time Holder wishes to sell the Securities there may be no public market upon which to make such a sale, and that, even if such a public market then exists the Company may not be satisfying the current public information requirements of Rule 144, and that, in such event, Holder could be precluded from selling the Securities under Rule 144 even if the one-year minimum holding period had been satisfied. (f) Holder further understands that in the event all of the requirements of Rule 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rule 144 is not exclusive, the Staff of the SEC has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rule 144 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. __________________________ ______________________________ (Date) (Signature and Title) ______________________________ (Name printed) EX-10.1.4 6 exh10-14.txt THIRD AMENDMENT TO LEASE AGREEMENT Exhibit 10.1.4 LEASE AMENDMENT THREE (Space Reduction) THIS LEASE AMENDMENT THREE ("Amendment") is made and entered into as of the 23rd day of December, 2002, by and between CMD REALTY INVESTMENT FUND II, L.P., an Illinois limited partnership ("Landlord"), and UNIVIEW TECHNOLOGIES CORPORATION, a Texas corporation ("Tenant "). A. Landlord and Tenant are the current parties to that certain lease ("Original Lease") dated October 18, 1999, for premises currently known as Suites 2050 and 2070 (the, "Premises") in the building (the "Building") known as Bent Tree Green, located at 17300 North Dallas Parkway, Dallas, Texas (the "Property," as may be further described below), as amended by Lease Amendment One dated November 10, 1999, and Lease Amendment Two dated January 10, 2000 (collectively, and as amended herein, the "Lease"). B. Tenant desires to surrender a portion of the Premises to Landlord, and Landlord is willing to accept such surrender on the terms and provisions hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and other good and valuable consideration, the parties do hereby agree as follows: 1. Space Reduction; Remaining Premises. Effective on January 31, 2003 (the "Reduction Date"): a. the space known as a portion of Suite 2050 (the "Reduction Space"), which shall be deemed to contain 1,955 square feet of rentable area, the approximate location of which is shown on Exhibit A hereto, shall be subtracted from the Premises, and shall be deemed surrendered by Tenant to Landlord, and the Lease shall be deemed terminated with respect thereto, and b. the balance of the Premises shall consist of the space known as Suite 2070 and the remaining portion of 2050 (the "Remaining Premises"), which shall be deemed to contain 749 and 6,248 square feet of rentable area respectively, the approximate location of which is shown on Exhibit A hereto. 2. Base Rent; Additional Rent; Tenant's Share. Tenant shall continue to pay all rentals and other charges under the Lease until the Reduction Date. Commencing on February 1, 2003; (a) Tenant shall pay Base Rent through the expiration date under the Lease ("Expiration Date") in the amount of $12,244.75 per month, and (b) "Tenant's Share" shall be five and 054/1,000 percent (5.054%) with respect to the Remaining Premises. 3. Prorations. If the Reduction Date occurs other than on the beginning of the applicable payment period under the Lease, Tenant's obligations shall be prorated on a per diem basis. If any charges respecting the Reduction Space have not been determined by the Reduction Date, Tenant shall pay upon request Landlord's reasonable estimate of such charges, subject to adjustment after the actual charges have been determined (and Tenant shall remain liable for all rentals and other charges accruing with respect to the Reduction Space prior to the Reduction Date). 4. Parking, Signs, Demising Wall and Other Matters. On the Reduction Date: (a) any rights to parking spaces, directory board listings, or other items provided under the Lease on a quantity basis shall, at Landlord's option, be reduced pro rata based on the reduction in square footage hereunder (and any remaining parking spaces available to Tenant shall, at Landlord's option, be unreserved and/or uncovered), and (b) any other exterior or interior sign rights provided under the Lease shall be deleted (except any existing rights of Tenant under the Lease to have elevator lobby signs on floors during any periods when Tenant is leasing and occupying all rentable square footage thereon). Tenant shall promptly pay Landlord's reasonable charges for removing such directory board listings and signs, as additional rent; provided, at Landlord's option, Tenant shall cause such signs to be removed in a good and workmanlike manner, in accordance with the provisions of the Lease relating to work performed by Tenant, and as otherwise approved or directed in writing by Landlord. Landlord reserves the right to install a wall demising off the Reduction Space from the Remaining Premises; in such case, Tenant shall promptly reimburse Landlord's costs in connection therewith, as additional rent. 5. Other Terms; Certain Provisions Deleted. Tenant shall fully comply with all obligations under the Lease respecting the Reduction Space accruing through the Reduction Date, including those provisions relating to the condition of the Reduction Space, and removal of Tenant's personal property therefrom, upon termination or expiration of the Lease. On and after the Reduction Date, all terms and conditions then or thereafter in effect under the Lease, as amended herein, shall apply to the Remaining Premises, except as provided to the contrary herein. Notwithstanding the foregoing to the contrary, this Amendment is intended to supersede any rights of Tenant under the Lease to expand, reduce or relocate the Premises, or extend or renew the term of the Lease, or terminate the Lease early, and all such provisions are hereby deleted. 6. Representations. Tenant represents that, except for a sublease to Winterstone Financial, Ltd., it has not made any assignment, sublease, transfer, conveyance of the Lease or any interest therein or in the Reduction Space, and further represents that there is not and will not hereafter be any claim, demand, obligation, liability, action or cause of action by any other party respecting, relating to or arising out of the Reduction Space, and agrees to indemnify and hold harmless Landlord and its employees, agents and affiliates from all liabilities, expenses, claims, demands, judgments, damages or costs arising from any of the same, including without limitation attorney's fees. Tenant acknowledges that Landlord will be relying on this Amendment in entering leases for the Reduction Space with other parties. If Tenant shall violate any provision hereof, or if Tenant's representations herein shall be false or materially misleading, Landlord shall have the right to declare the reduction of the Premises under this Amendment null and void, and to reinstate the Lease with respect to the Reduction Space through the remainder of the current term, in addition, to and not in lieu of, any other rights or remedies available to Landlord. 7. Confidentiality. Tenant shall keep the content and all copies of this document and the Lease, all related documents or amendments now or hereafter entered, and all proposals, materials, information and matters relating thereto strictly confidential, and shall not disclose, disseminate or distribute any of the same, or permit the same to occur, with respect to any party other than Tenant's except to the extent reasonably required for proper business purposes by Tenant's employees, attorneys, insurers, auditors, lenders, and permitted successors and assigns (and Tenant shall obligate any such other parties to whom disclosure is permitted to honor the confidentiality provisions hereof), except as may be required by Law or court proceedings. 8. Real Estate Brokers. Tenant represents and warrants that Tenant has not dealt with any broker, agent or finder in connection with this Amendment, and agrees to indemnify and hold Landlord, and it employees, agents and affiliates harmless from all damages, judgments, liabilities and expenses (including reasonable attorneys' fees) arising from any claims or demands of any broker, agent or finder with whom Tenant has dealt for any commission or fee alleged to be due in connection with this Amendment. 9. Guarantors. This Amendment shall be of no force or effect unless and until accepted by any guarantors of the Lease, who by signing below shall further confirm that their guarantee shall apply to the Lease as amended herein. 10. Offer; Miscellaneous. Sections 11, 12, and 13 of Lease Amendment Two are incorporated herein as though fully set forth. IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first set forth above. LANDLORD: CMD REALTY INVESTMENT FUND II, L.P., --------- an Illinois limited partnership By: CMD/Fund II GP Investments, L.P., an Illinois limited partnership, its general partner By: CMD REIM II, Inc., an Illinois corporation, its general partner By: /s/ Robert C. Gibbons Robert C. Gibbons, Vice President TENANT: UNIVIEW TECHNOLOGIES CORPORATION ------- a Texas corporation By: /s/ Patrick A. Custer Patrick Custer, President EX-21 7 exh21.txt SUBSIDIARIES Exhibit 21 Subsidiaries VPGI Corp. ---------- June 30, 2003 State Date Name of Acquired/ ---- Incorporation Created Status (100% ownership, ------------- ------- ------ unless otherwise shown) uniView Technologies Products Group, Inc. Texas 08-10-98 Inactive uniView Softgen Corporation (61%) Texas 10-27-99 Inactive uniView Asia Limited (60%) Hong Kong 06-26-02 Inactive Curtis Mathes Corporation Delaware 11-12-93 Inactive EX-23 8 exh23.txt CONSENT Exhibit 23 Consent of Independent Certified Public Accountants We have issued our report dated September 29, 2003, accompanying the consolidated financial statements included in the Annual Report of VPGI Corp. on Form 10-K for the year ended June 30, 2003. We hereby consent to the incorporation by reference of said report in the following Registration Statements of VPGI Corp.: Form S-3 (File No. 333-97809 effective August 13, 2002); Form S-3 (File No. 333-68326 effective August 13, 2002); Form S-3 (File No. 333-62680 effective July 13, 2001); Form S-3 (File No. 333-47692 effective October 25, 2000); Form S-8 (File No. 333-39358 effective June 15, 2000); Form S-3 (File No. 333-31952 effective March 21, 2000); Form S-2 (File No. 333-06447 effective September 30, 1996). /s/ Cheshier & Fuller, L.L.P. Cheshier & Fuller, L.L.P. Dallas, Texas September 29, 2003 EX-31 9 exh31.txt CERTIFICATION Exhibit 31 CERTIFICATION I, Patrick A. Custer, certify that: 1. I have reviewed this Annual Report on Form 10-K of VPGI Corp.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. October 14, 2003 /s/ PATRICK A. CUSTER ----------------- Patrick A. Custer Chief Executive Officer and Principal Financial Officer EX-32 10 exh32.txt CERTIFICATION Exhibit 32 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report on Form 10-K of VPGI Corp. (the "Company") for the period ended June 30, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Patrick A. Custer, Chief Executive Officer and Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. S1350, as adopted pursuant to S906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge: 1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. October 14, 2003 /s/ PATRICK A. CUSTER ----------------- Patrick A. Custer Chief Executive Officer and Principal Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----