-----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, U5aBLx4FLyF+IwktSbA1RnGhOVxqCbkzSJTvNW/PsMQMqA310ez5rwTB6TmN9/fY ny0sccislDTUjutuBMSQsA== 0000777844-03-000013.txt : 20031113 0000777844-03-000013.hdr.sgml : 20031113 20031113170133 ACCESSION NUMBER: 0000777844-03-000013 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20030731 FILED AS OF DATE: 20031113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMPUSONICS VIDEO CORP CENTRAL INDEX KEY: 0000777844 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-NONSTORE RETAILERS [5960] IRS NUMBER: 841001336 STATE OF INCORPORATION: CO FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-14200 FILM NUMBER: 03998910 BUSINESS ADDRESS: STREET 1: 32751 MIDDLEBELT RD STE B CITY: FARMINGTON HILLS STATE: MI ZIP: 48334 BUSINESS PHONE: 2488515651 MAIL ADDRESS: STREET 1: 32751 MIDDLEBELT RD STE B CITY: FARMINGTON HILLS STATE: MI ZIP: 48334 10KSB 1 d10kcvc31g.txt COMPUSONICS VIDEO CORPORATIONS 10K FOR 07-31-2003 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended: Commission file number: - -------------------------- ------------------------ July 31, 2003 0-14200 COMPUSONICS VIDEO CORPORATION (Exact name of Company as specified in its charter) Colorado 84-1001336 - ------------------------------------- ------------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification Number) 32751 Middlebelt Road, Suite B Farmington Hills, MI 48334 - ------------------------------------- ------------------ (Address of principal executive offices) (Zip Code) Company's telephone number, including area code: (248) 851-5651 Securities registered pursuant to Section 12 (b) of the Act: None Securities registered pursuant to Section 12 (g) of the Act: Common Stock, $.001 Par Value -------------------------------- (Title of Class) Indicate by check mark whether the Company (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 and, (2) has been subject to such filing requirements for the past 90 days: Yes X No As of November 03, 2003, a total of 160,006,250 shares of common stock, $.001 par value, were outstanding and the aggregate market value of the voting stock held by non-affiliates of the Company was approximately $8,000,313 based on the average of the bid and asked prices as of, November 03, 2003 of $0.05 as reported by the Over-The-Counter Bulletin Board (OTCBB). COMPUSONICS VIDEO CORPORATION FORM 10-KSB PART I ITEM 1. BUSINESS ----------- (a) General Development of Business. -------------------------------- CompuSonics Video Corporation ("Company") was organized under the laws of the State of Colorado on August 14, 1985. The Company's principal activities since inception have been devoted to obtaining equity capital for the development of a digital video recording and playback system with a view towards its manufacture, marketing or licensing. The Company's current operations are limited to the licensing of its patent portfolio related to an audio digital recording and playback system and an audio and video digital recording and playback system or parts thereof, that are covered by the Company's patents. On December 13, 1985, the Company concluded a public offering of 30,000,000 Units, each Unit consisting of one share of its common stock and one Class A Warrant, and received net proceeds of $727,971. On November 16, 1987, the Company acquired The Tyler-Shaw Corporation, a New York corporation ("Tyler- Shaw"), which was engaged in the business of direct mail marketing. Effective July 31, 1992, Tyler-Shaw was considered inactive. Tyler-Shaw has no operations, research and development, earnings, cash flows, product development or sources of financing. Effective April 30, 2001, the Registrant acquired the assets of the Delta product line of ScanLine Technologies. Those assets were principally the character generator (CG) technology of ScanLine. The Registrant was to retain and utilize the ScanLine Technologies and Quanta names. The Delta CG product line assets represented a business line with over 600 established customers within the TV broadcast and video production industry. Delta CG products are based upon proprietary hardware and software. Approximately 1700 Delta CG systems are in use today worldwide. The estimated installed base value of these Delta CG systems is over $43 Million. Delta CG systems are capable of both analog and Digital input/output support. This new business was not a successful enterprise for the Registrant, and currently is not considered as a source of revenue. The Registrant wrote off the assets of Delta as of July 31, 2003. (See note 13). The Registrant is currently in the litigation process with ScanLine Technologies, Inc and its president, Dave Scull. (See Item 3) On February 26, 2003 the Registrant's Chairman, Thomas W. Itin announced that the Registrant has entered an agreement with Target B.V. to assist in the corporate landing of the Registrant's patented technology in the European market and to assist in development of new business areas for the Registrant. Additionally, Target B.V. is willing to assist the Registrant in a substantial private placement to accredited investors interested in supporting this venture. On March 10, 2003 the Registrant's Chairman, Thomas W. Itin, announced that Registrant has entered into a non-binding Letter of Intent with TreeCAD Engineering, Ltd., located in Cyprus ("TreeCAD Engineering") (the former name was TreeCAD International Ltd.), a partner firm of TreeSoft GmbH & Co. KG ("TreeSoft Germany") located in Lindlar, Germany, to acquire newly formed TreeSoft USA, Inc. ("TreeSoft USA") in a stock-for-stock transaction. TreeSoft USA holds exclusive distribution rights under license from TreeCAD Engineering Ltd. to market and develop further in the NAFTA region the in Europe well- established TreeSoft software for electrical engineering. The definitive agreement among the parties was completed on March 24, 2003. On March 25, 2003 the Registrant signed the purchase agreement with TreeCAD Engineering Ltd. A stock for stock exchange of the Registrant and TreeSoft USA common stock was intended by the Registrant and TreeSoft USA. TreeCAD Engineering was desirous of establishing a presence in the United States markets through ownership of Registrant's preferred class "B" stock, convertible into common stock, and through the introduction and sale of its equipment via the Registrant and TreeSoft USA. The Registrant owns certain products and patented technologies, which it intends to establish within the broadcast and video industries through supplementary services of TreeSoft USA. Both parties concur that the American market offers great potential for the TreeCAD Engineering products and will be enjoyed by the American public, which the American public will learn about these great products through the combined marketing efforts by TreeSoft USA and the Registrant. TreeSoft USA has the localized software product in its hand and ready to take to market, provided TreeCAD Engineering, within eighteen (18) months pursuant to the terms of the purchase agreement between TreeCAD Engineering and The Company. The Company has made several public announcements related to the acquisition of TreeSoft USA. Present Status - -------------- TreeSoft USA - a Subsidiary of CompuSonics Video Corporation - ------------------------------------------------------------ TreeSoft USA, Inc. is a subsidiary of CompuSonics Video Corporation (OTC Bulletin Board: CPVD), which owns 100 % of the Company's shares. In March 2003 The Company agreed to purchased TreeSoft USA from TreeCAD Engineering Ltd, Cyprus, a partner firm of the German TreeSoft GmbH & Co. KG, the inventor of the TreeCAD and Better!Office software product family. TreeSoft USA, Inc., an in America operating software corporation, provides leading edge CAD(1) software, ERP (2) software, CRM (3) software, software customizing and related services to small and midsize enterprises (Small Business Software). TreeSoft USA owns distribution rights for the TreeCAD Engineering products (4) in the NAFTA (5). For the distribution of the software 10 % royalties are payable to TreeCAD Engineering Ltd. TreeSoft USA is located in Farmington Hills, Michigan (Detroit area). (1) Computer Aided Design is a general term referring to applications and methods to design things by computers. (2) ERP (Enterprise Resource Planning) is an industry term for the broad set of activities supported by multi-module application software that help an organization to manage key parts of its business, including Manufacturing, distribution, Human Resources and Accounts. ERP combines information from business units into a single, integrated software program running off one database allowing the business units to share information and communicate with each other. (3) CRM (Customer Relationship Management) is a comprehensive sales and marketing approach to build long-term customer relationships and improving business performance. CRM allows businesses to manage and streamline marketing, customer service, call centre, and sales force functions. CRM systems support multiple forms of customer interaction and CRM solutions improving customer care by building long-term relationships, improve end-user productivity and increase the integration of sales and customer care. (4) Better!Office and TreeCAD (5) North American Free Trade Agreement TreeCAD Engineering Ltd. localizes and delivers the technology and provides the support for the products of TreeSoft USA. TreeSoft USA is controlled by the Registrant. (b) Financial Information about Industry Segments. --------------------------------------------- During the year ended July 31, 2003, the Registrant was engaged in two business activities: (1) the licensing of the technology related to its patent portfolio, and (2) licensing and marketing of electrical engineering software. The Registrant did not have any revenues for the year Ended July 31,2003. The management concentrated his efforts in finding, and developing new business opportunities, and it has been successful in establishing the new business vision. The Registrant's management plans to introduce the new product from TreeSoft U.S.A in late spring of 2004. (c) Narrative Description of Business. ---------------------------------- The CompuSonics Video System - ----------------------------- In the late 1980s and early 1990s, the Company had developed a system, based on patents in which it had an interest, to make video recordings, digitize video images and playback digital data on a monitor. At that time, digitizing and random access capabilities represented significant improvements over conventional analog recorders. Conventional analog video recorders convert electrical impulses representing visual images into waveforms, which were then stored on magnetic tape or disk. On playback, waveforms were converted back into electrical impulses, which were converted to visual images through a television monitor or similar device. In an analog system, the accuracy of the reproduced image is dependent upon the quality of the recording medium, as well as the quality of the playback system itself. Further, the noise generated by the surface defects on the tape or disk was apparent when the image was played back. Advances in computer technology, particularly in digital memory devices, have been applied in the development of both audio and video digital recording and playback systems. CompuSonics Corporation, owner of 7.1% of the Common Stock of the Company, had produced audio digital systems that utilize microcomputer chips to record and reproduce audio signals using its proprietary digital audio technology, known as CSX. The Company had exclusive license to utilize the CSX technology in the development and production of its products. In the Company's system that it had developed, video signals would be converted into numerical data representing video images. Data would then be stored in a temporary buffer memory. Each video frame image would be processed, through licensed CSX technology, to reduce the amount of data to the minimum required to produce an image for playback closely resembling the image as initially recorded. Data representing the video image would be stored on a computer information storage medium. Playback of the digital data would occur on a monitor with a compatible signal receiving capability. The accompanying audio signal could be routed to a suitably equipped receiver set or through a conventional stereo system adjacent to the monitor. CompuSonics Corporation, a Colorado corporation, and a shareholder of the Company, had been engaged in marketing and promoting its CSX Technology licensing and engineering consulting services on a reduced and limited basis, but the Company believes, to the best of its knowledge, that CompuSonics Corporation is no longer performing this function. The Company has filed and kept current the renewal payments on its principal patents in the belief that these technologies, which were originally developed ten years ago, may represent a technology upon which some of the data compression and audio and video streaming technologies of today may be based. If this is the case, then a number of companies in today's market may be candidates for a license from the Company if their technology has a basis in the Company's technologies and patents. TreeSoft USA products - --------------------- TreeSoft's vision is to become a market leader for E-CAD, ERP and CRM/CAS software for small enterprises (SMBs) in the NAFTA, especially for industrial production companies, electrical contractors and industrial component vendors within 5 years. By 2008, TreeSoft USA will be highly engaged in the development and distribution of software for the targeted market, especially for: -Drafting, constructing and engineering (CAD) -Estimating, quoting and billing (ERP) -Customer contact, service and project management (CRM) -Sales support and management (CAS) Furthermore it is TreeSoft's objective to become the market leader for OEM CAD and marketing software for electrical component and part manufacturers. The Company will be differentiated from its competitors by offering software Products -Which are especially designed for the use in local area networks up to 100 users -With extraordinary support of several server operating systems (e.g. Windows, Linux, Solaris) -With an unique information workflow concept between all software modules (programs) in the software product family (no data redundancy) -Which are highly customizable to meet the companies specific needs -Which are designed for vertical markets -Which are well suited for distribution by resellers and via Internet Our objective is $ 8,400,000 with sales by 2008 with a net profit margin of 20% until 2006, increasing the following years. We intend to achieve these objectives mostly by developing new software products and services for that specific market based on the experience and proven technology of TreeSoft GmbH & Co. KG (TreeSoft Germany) which delivers by TreeCAD Engineering Ltd. to TreeSoft USA (by contract) German engineering technology, products and related services. Within 5 years TreeSoft USA will be a leading participant in the business-to-business software industry in the NAFTA and be known for highly integrated high quality products that will set new standards in the targeted markets. TreeSoft USA wants to be known by it's customers and competitors as an innovator of the industry, especially as a company making great efforts to find new ways and new opportunities for the success of its customers and for products for a better working world. TreeSoft USA intends to be the leader for new software standards in our markets. TreeSoft USA wants to be known as for extraordinary attractive price/value ratio. Product and Service Offer - ------------------------- TreeSoft USA obtains the basic technologies for its business from its partner firm, TreeCAD Engineering Ltd. TreeCAD Engineering Ltd. acts as one localizing, Distribution and marketing partner firm for the products of TreeSoft Germany. In the NAFTA TreeSoft USA will repeat the European success of TreeSoft Germany by copying its proven marketing structures and support know how. TreeSoft will offer in 2004 the TreeCAD E-CAD product family first. The ERP and CAS products will follow in 2005 and later. TreeCAD Electrical CAD - ---------------------- The Electrical CAD software TreeCAD was one of the first available E-CAD systems for PC's under MS-DOS in the early 80's. In the 90's it was restructured and adopted for MS Windows. Since that time the TreeCAD E-CAD product family is well known as one of the technological leading stand-alone E-CAD products worldwide. The TreeCAD Engineering technology greatly increases the productivity of expensive design staff, eliminate times consuming and repetitive tasks, cut lead times, and increases product quality in all fields of electrical engineering and wiring. TreeCAD End-user Products - -------------------------- People who are working in the field of Control Engineering are responsible for: -Delivering information to process engineers about the operation of plants -Choosing measuring instruments to provide the plants with its "eyes", "ears" and "nose". This means selecting instruments to measure flow, level, pressure, temperature, composition, etc. Large plants require about 5,000 such instruments, very large plants more. -Deciding what is the best "brain" for the application. Frequently it is a so-called DCS or PLC - specialized programmable computer systems. -Deciding on the best type and size of end devices such as control valves, variable speed motors, etc. to carry out the commands of the control system. -Once these decisions have been made all these thousands of devices must be ordered and instructions given for their installation. -Next they have to provide wiring information for all of these devices to be connected to the control system. -Somewhere along the way the control system has to be programmed to carry out all the required functions including the relevant Documentation. Every machine, every plant is different. All these machines, systems, constructions and processes must be documented by specific electrical diagrams, schemes and lists. For an efficient realization every step has to be supported by appropriate software. TreeCAD is the perfect software tool to provide engineers with the complete functionality and automatism, which are required for the fulfillment of all tasks in an efficient and comfortable way. TreeCAD delivers circuit diagrams, terminal plans, terminal connection diagrams, wiring diagrams, wire lists, bill of materials, panel layouts and much more. TreeCAD OEM Products - -------------------- Beside the standardized E-CAD products the TreeCAD product family offers the flexibility to deliver customized applications for industrial part manufacturers, resellers for their product marketing purposes. Conclusion - ----------- Unspecialized CAD systems are governing the NAFTA E-CAD market. Most electrical engineers are working with "Standard CAD software" without branche specific functionalities. Therefore these users have not enough automation, very often only manual drawing schematics is possible. Consequently this causes high costs and low efficiency in design and documentation and opens up opportunities for more efficient and sophisticated products like TreeCAD. TreeCAD offers a significant higher level of automation and user convenience. ERP and CAS (6) Products - --------------------- Typical for the product category ERP and CRM/CAS is the huge growth potential in the SMB market. 25 years ago the new PC world offered opportunities for new start-ups to conquer the new PC market (e.g. for Microsoft, IBM was the "victim"). Now the fast growing SMB ERP and CRM/CAS market offers amazing chances for small companies like TreeSoft USA, which disposes of the technology of TreeCAD Engineering. (6) CAS (Computer Aided Selling) is a term, which defines applications for the Sales Support. It helps your sales and marketing department to support your existing customers and, at the same time, to develop new business. Within the Sales Support environment, all sales personnel in the field as well in the office can share valuable information about customers, sales prospects, competitors and their products, and contact people. Marketing - --------- In the next few years the Enterprise Software Market will experience a stable growth in the field of ERP, CRM and CAS. Recent studies show an annual increase of more than 10 %. One major reason for the fast growth of the software market is the increasing readiness of Small Businesses (SMBs) to invest in enterprise software. The key factors driving the companies to invest are: -the challenge to implement reliable, secure and fast software in the growing network environments (LAN and WAN) -the urgency to strengthen the relationship with customers and staff -the basic necessity to operate with highly integrated software instead to proceed with existing, mostly segregated or poorly connected software products -the necessity to optimize the work process for calculation, quoting, cost estimation and billing -the demand to reduce maintenance efforts for master data and software -the expectation to use well engineered, future oriented software In the next years these demands will change the structure of the Enterprise Software Market in a significant manner. During the last decade the business in the SMB market was influenced by many software products from companies with an effective marketing strategy. Many software companies invested more money in their marketing activities than in the development of reliable and secure software products. But today enterprises expect quality and reliability - characteristics that are typical for the products of TreeCAD Engineering. TreeSoft USA expects a substantial acceptance in the NAFTA market for its high quality enterprise software based on 20 years experience in the SMB software market. TreeSoft focuses on the Small Businesses Software Market. - ------------------------------------------------------- In the year 2002 more than 22 Mio Small Business companies have been listed in the U.S. according to the U.S. Small Business Administration. 52% of all U.S. employees work for small enterprises. Some 19.6 million Americans work for companies with less than 20 employees, 18.4 million work for firms with 20 to 99 employees, and 14.6 million work for firms with 100 to 499 workers, whereas 47.7 million Americans work for firms with 500 or more employees. Small businesses are a continuing source for the dynamic of the U.S. economy. From 1990 to today they produced three-fourths of the economy's new jobs. Specific markets for TreeSoft USA: -CAD products and services for engineers, contractors, industrial manufacturers and/or industrial suppliers -ERP and CRM products and services for engineers, contractors, industrial manufacturers, industrial suppliers and industrial sales companies or departments. -OEM software drafting marketing and service tools for industrial manufacturers and/or industrial suppliers (OEM customers) (7) Computer Aided Design (8) Enterprise Resource Planning (9) Customer Relationship Management These products are based on innovative product features and workflow management to meet the increasing demands of contractors, industrial and distribution companies for CAD and highly integrated ERP and CRM software in the targeted markets. TreeSoft USA will cover the markets with a diversified distribution strategy via direct marketing (web marketing) and operating with distributors/resellers/vendors in the USA, Canada and Mexico (NAFTA). We want to be known as a company that offers reliable and personalized services. Our goal is not necessarily to be the largest company in the market but to be a company that really cares about the success of its customers. The TreeSoft E-CAD software will be a real and desired alternative to the established E-CAD market leaders in the field of industrial and house building electrical engineering. Our additional intention is to be a market leader in the ERP software business for small and midsize industrial companies (SMBs), electrical contractors and industrial components vendors. We take on the challenge to develop a workflow driven, highly integrated software family (Small Business Framework) which meets all needs of targeted firms and markets by 2008 through the consequent usage of the engineering technologies delivered by TreeCAD Engineering Ltd. We are going to be a smoothly functioning organization with highly motivated employees, high profitability, growing sales, and will be recognized as a respected leader in our target markets. Unlike the old shareholder-centered companies, our vision is a balance between the different important stakeholders in our Company: 1. Our customers (end users and resellers) 2. Our Employees 3. Our shareholders By striving to serve all three adequately, we believe that we will best serve the interests of each group: Values for End User Customers: - ----------------------------- TreeSoft's mission is to strengthen the market position of US engineers, contractors and industrial manufacturers and distributors by creating, delivering and maintaining highly efficient CAD, ERP and CRM/CAS software for their daily demands. Values for Resellers and OEM Customers: - --------------------------------------- TreeSoft USA empowers industrial manufacturers, suppliers and distributors (OEM customers) to operate with innovative, custom designed software marketing and service tools (OEM products) to promote their sales or maintain their industrial products. Values for TreeSoft USA Employees: - ---------------------------------- TreeSoft USA offers interesting and save jobs in an attractive niche market with a high level of reputation. Employees with a higher-than-average engagement can expect to be a winning part during the huge growth phases of the Company. Values for CPVD Shareholders: - ----------------------------- To establish TreeCAD USA as a profitable company will ensure a constant growing safety for the investments of CPVD shareholders. CPVD shareholders are playing an important role with their investments in products, which will offer thousands of working people powerful and reliable products for creating a better world. The Company's business is not seasonally affected. No material portion of the Company's business is subject to renegotiations of profits or termination of contracts or subcontracts at the election of the government. During the period from August 1, 2001 through July 31, 2002, the Company did not expend any funds on research and development, other than expenses and equipment related to its website development maintenance business. The Company is not materially affected by the federal, state and local provisions that have been enacted or adopted regulating the discharge of materials into the environment or otherwise relating to the protection of the environment. As of July 31, 2003, the Company had no employees. (d) Information about Foreign and Domestic Operations and Export Sales. ----------------------------------------------------------------- ITEM 2. PROPERTIES ----------- The Company has been using space, at no charge, in offices of related entities for the purposes of administration and development. ITEM 3. LEGAL PROCEEDINGS ----------------- The Company is currently in litigation with ScanLine Technologies, Inc./Dave Scull. ScanLine Technologies, Inc. ("ScanLine") sued the Company in July 2002 for breach of an alleged asset purchase agreement in which ScanLine sold the so- called "Delta Assets" to the Company in exchange for Company stock. ScanLine has included claims against the Company, as well as individual directors, for breach of contract, fraud, misrepresentation, violation of 10b-5 of the federal securities law and violation of Utah securities law. A Third Party Complaint was later filed individually by David Scull ("Scull"), a principal in ScanLine, against the Company alleging breach of contract, unjust enrichment and breach of the covenant of good faith and fair dealing for an alleged failure of the Company to compensate him for the time he acted as President and CEO of the Company. Scull has also filed a claim for defamation for allegedly defamatory statements made in the Company's public filings. Management has responded by denying the allegations, filing courterclaims against both ScanLine and Scull for damage to the Company, and defending the case. The name of the Litigation is ScanLine Technologies, Inc. v CompuSonics Corporation, et.al. Civil No. 2:02-CV-0612J in the United States District Court for the District of Utah, Central Division. Discovery has been ongoing in the matter, including the depositions of both ScanLine and Scull as well as the deposition of CompuSonics Video Corporation. Neither ScanLine nor Scull could articulate a damage amount in deposition. The potential loss is therefore difficult to ascertain. However, ScanLine has in the past represented the value of the Company stock, which it was not paid in exchange for the Delta Assets, which still remain in the possession of ScanLine, to be worth $1.5 million. Scull has previously claimed a right to salary of approximately $225,000.00. Discovery cut-off is set for December 31, 2003 with a pre-trial conference set for January 9, 2004 at which time a trial date may be set. Settlement discussions have occurred but have been unsuccessful. There is always a possibility of an unfavorable outcome based upon the inherent uncertainty of litigation. However, management is confident in its version of events and that ScanLine and Scull are not entitled to any compensation. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ---------------------------------------------------- No matters were submitted to a vote of the Company's shareholders during the year ended July 31, 2003. PART II ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS ------------------------------------------------------------------ (a) Market Information ------------------ The principal market on which the Company's common stock, $.001 par value (the "Common Stock"), is traded is the over-the-counter market under the symbol "CPVD". Prices for the Common Stock have been reported in the National Daily Quotation Service "Pink Sheets" published by the National Quotation Bureau, Inc. since December 16, 1985 and the Over-The-Counter Bulletin Board (OTCBB) since January 1999. The range of high and low bid quotations for the Company's Common Stock since the quarter ended July 31, 2000 are as follows. The OTC electronic bulletin board pricing information reflects inter-dealer prices, without retail mark-up or markdown or commissions and may not necessarily represent actual transactions. HIGH BID LOW BID -------- ------- Fiscal 2002 - Quarters Ended: October 31, 2001 $0.028 $0.017 January 31, 2002 $0.05 $0.017 April 30, 2002 $0.037 $0.016 July 31, 2002 $0.059 $0.025 Fiscal 2003 - Quarters Ended: October 31, 2002 $0.058 $0.01 January 31, 2003 $0.021 $0.006 April 30, 2003 $0.060 $0.011 July 31, 2003 $0.054 $0.025 (b) Holders. --------- As of July 31, 2003, the number of record holders of the Company's Common Stock was approximately 5,200. (c) Dividends. --------- The Company has never paid a dividend with respect to its Common Stock and does not intend to pay a dividend in the foreseeable future. The shares of Series A Preferred Stock are entitled to a $1.00 per share annual preference, which must be paid before any dividends are payable on the Common Stock. ITEM 6. SELECTED FINANCIAL DATA ----------------------- July 31, 2003 2002 2001 2000 1999 -------- --------- --------- -------- -------- Working Capital (133,663) (230,895) 261,407 (942,970) (627,070) Cash 21,392 25 61 274 48,563 Total Assets 21,392 163,409 1,131,044 204,176 326,404 Total Liabilities 155,055 244,872 203,940 987,288 947,088 Shareholders' Equity (133,664) (71,897) 927,104 (783,112) (620,684) Operating Revenue 0 999 29,391 149,099 212,210 Gross Profit 0 999 24,964 149,099 212,210 Total Gen'l & Admin Expenses 66,472 38,914 45,091 211,444 147,058 Research & Development 0 0 360 0 0 Total other income/ (expense) (2,884) (73,154) 357,987 (114,524) 21,621 Net loss per common share *** *** *** *** *** *** -- Less than $.01 per share. ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ---------------------------------------------------------------- Liquidity and Capital Resources - ------------------------------- Working capital for the year ended July 31, 2003 increased by $97,232 compared to $(230,895) of working capital in 2002. The change is mainly due to these transactions: the extinguishments of debt owed to a related party in exchange for the investments in PGI, Pg.COM and WMCO; the extinguishment of debt owed to ScanLine Technologies, Inc; additional borrowings from another related party; increase in accrued consulting fees owed to related parties. Net effect all these transactions caused the increase in working capital for the year ended July 31, 2003. Net loss from operations was $(66,472), which comprised mainly professional and consulting fees, two extraordinary items are: 1) income from extinguishments of debt in the amount of $7,587, 2) income from writing off the so called Delta assets in the amount of $30,313. Other general expense was $66,472 for the year ended July 31, 2003 and includes professional and consulting fees. In the past the Company has, from time to time, relied on a related company to provide the working funds it has required but there is no assurance that this will continue in future years. The Company is anticipating the first revenues from the sale of TreeSoft USA products in late spring of 2004. The major source for revenues for the first five years will be the licensing business (software sales business). With an increasing saturation of the software market the revenues from the Software Maintenance contracts will become more and more important. We expect, that the revenues from services will measure up with the licensing business in ten years. The ERP software represents the most attractive licensing business. Through a network of specialized resellers the ERP product will be easily distributable. Management is working hard to accomplish this new enterprise successfully. Results of Operations - --------------------- Year ended July 31, 2003 Compared to July 31, 2002 Operating revenue for the years ended July 31, 2003 and 2002 were $0 and $999 respectively. General and administrative expenses were $66,472 for the year ended July 31, 2003 compared to $38,194 for the year ended July 31, 2002. Included in general and administrative expenses for year ended July 31, 2003 are; professional fees of $29,263, consulting fees to related parties of $36,664, other general and administrative expenses of $466. The expenses incurred for 2002 were $0 for staff salaries, patent fees of $799; management fees of $950 to a related company; professional fees of $35,891 for auditing services, stock transfer fees and other professional fees; other general and administrative expenses of $553. During the year ended July 31, 2002, other income and expense consisted of miscellaneous income of $999 and interest expense of $22,355 on notes payable. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA -------------------------------------------- Financial statements and supplementary data immediately follow the signature page of this document and are listed under Item 14 of Part IV of this Annual Report on the Form 10-K. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE ---------------------------------------------------------------- None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY ------------------------------------------------ (a) and (b) Identification of Directors and Executive Officers. Name Age Position - ---------------------------- -------- ----------------- Thomas W. Itin 69 Chairman of the Board and Treasurer Robert J. Flynn 67 Vice President, Director, and Secretary Salvatore Parlatore 29 Director Harald Engels 45 Director, Chairman of the Executive Committee, President of TreeSoft USA, Inc. Andreas Kuestermann 41 Director The directors of the Company are elected to hold office until the next annual meeting of shareholders and until their respective successors have been elected and qualified. Officers of the Company are elected by the Board of Directors and hold office until their successors are elected and qualified. Dave Scull held the position of the president in the Company from April 2001 until June 14, 2002, when he resigned from the Company. Harald Engels was engaged by Registrant, beginning at the closing date of the purchase agreement between CPVD and TreeCAD Engineering Ltd ("TreeCAD"), as a part-time consultant and officer in the position of President of TreeSoft USA, Inc. and as a Vice Chairman of the Board of Directors and Chairman of the Executive Committee of the Registrant, operating under a consulting agreement between The Company and TreeCAD Engineering Ltd. The annual compensation for TreeCAD Engineering Ltd. will be charged on a time and material basis (T & M basis) and is limited to $120,000 per year. Andreas Kuestermann and Harald Engels were elected in the position of the directors of the Registrant on March 25, 2003. (c) Identification of Certain Significant Employees. ------------------------------------------------ The Company is subject to Section 13(a) of the Securities Exchange Act of 1934 and is therefore not required to identify or disclose information concerning its significant employees. (d) Family Relationships. --------------------- There are no family relationships between any director, executive officer or person nominated or chosen by the Company to become a director or executive officer. (e) Business Experience. ------------------- (e) (1) Background. ---------- Thomas W. Itin was elected a director of the Board of the Company in April of 2001. Mr. Itin has been a director of Williams Controls, Inc., a publicly held company since its inception in November 1988. He also served as Chairman of the Board and Chief Executive Officer of Williams from March 1989 until January 2001 and also as President and Treasurer from June 1993 until January 2001. He has served as Chairman of the Board, Chief Executive Officer and Chief Operating Officer of LBO Capital Corp. since its inception. Mr. Itin has been Chairman, President and Owner of TWI International, Inc. since he founded the firm in 1967. TWI International acts as a consultant for mergers, acquisitions, financial structuring, new ventures and asset management. Mr. Itin also has been Owner and Principal Officer of Acrodyne Corporation since 1962. In May 2001, Mr. Itin became a director of Enercorp, Inc., a publicly held company. He received a Bachelor of Science degree from Cornell University and an MBA from New York University. Mr. Itin served on the Cornell University Council and was Chairman of the Technology Transfer Committee during the years 1994-2000. Robert J. Flynn has been Chairman of the Board of Funding Enterprises, a Southfield, Michigan based marketing company for 20 years. He has been active in the securities and insurance fields since 1963 and in the marketing of Real Estate securities since 1968. Mr. Flynn is licensed as a registered security representative and insurance agent. Since 1981, he has been Chairman of the Act 78 Southfield Police and Fire Commission. Mr. Flynn received a B.S. degree from Cornell University in 1958. Salvatore M. Parlatore was co-founder, Director of Operations and Director of Strategy, from 1997 - 2001 for Nexiv, Inc., a "startup" website, hosting and Internet services company. From 1997-1999, he was Senior Project Manager with Webstyles, LLC. Earlier he was retained or employed by Gettys Group, Inc. 1996-1997 as a management consultant, where he specialized in commercial real estate evaluations and renovations nationally, particularly hotel projects. A summer 2002 internship at Whirlpool provided experience as an Associate Brand Manager. Currently Mr. Parlatore is employed by Whirlpool in the postion of Brand Manager for Kenmore. A native of Southampton, Long Island, Mr. Parlatore attended Brentwood College School, Vancouver Island, Canada then later earned a BS in Business Administration in 1996 at Cornell U., Ithaca - NY. He earned a MBA degree in May 2003 majoring in marketing and information technology at the University of Illinois, Urbana-Champaign. Mr. Parlatore is the nephew of the wife of the Chairman. Harald Engels, responsible for the consulting and management of TreeSoft USA, a co-owner of TreeSoft Germany and the Managing Director of TreeCAD Engineering Ltd., has over 20 years experience in the SMB software business. He was a Managing Director of TreeSoft Germany from 1988 until 2003, is now the Managing Director of TreeCAD Engineering Ltd. and is familiar with all aspects of software markets, software development, software distribution and software localization. From 2001 until February 2003, he was the Managing Director of the Target Holding B.V., a business development consulting firm in the Netherlands. Andreas Kuestermann is a co-owner and founder of TreeSoft Germany., He has over 20 years experience in the SMB software business. He is the managing director of TreeSoft Germany since 1985 and is familiar with all aspects of the industrial software market and software development. (e) (2) Directorships. -------------- Mr. Itin is a director of Woodward Partners, Inc., Pro Golf International, Inc., Enercorp, Inc., and Ajay Sports, Inc., the latter two of which are publicly-held companies. Mr. Flynn is Chairman of the Board of Funding Enterprises. (f) Involvement in Certain Legal Proceedings. ---------------------------------------- (f) (1) During the past five years, there have been no filings of petitions under the federal bankruptcy laws or any state insolvency laws, nor has there been appointed by any court a receiver, fiscal agent or similar officer by or against any director or executive officer of the Company or any partnership in which such person was a general partner or any corporation or business association of which he was an executive officer within two years before the time of such a filing, except as stated in Item 10 (e) (1), above. (f)(2) No director or executive officer of the Company has, during the past five years, been convicted in a criminal proceeding or is the named subject of a pending criminal proceeding. f)(3) During the past five years, no director or executive officer of the Company has been the subject of any order, judgment or decree not subsequently reversed, suspended or vacated by any court of competent jurisdiction permanently or temporarily enjoining him from or otherwise limiting the following activities: (i) acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or an investment advisor, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity; (ii) engaging in any type of business practice; or (iii) engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of federal or state securities laws or federal commodities law. (f)(4) During the past five years no director or executive officer of the Company has been the subject of any order, judgment or decree not subsequently reversed, suspended or vacated by any federal or state authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (f) (3) (i) of this Item or to be associated with persons engaged in any such activity. (f)(5) During the past five years no director or executive officer of the Company has been found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission to have violated any federal or state securities law. f)(6) During the past five years no director or executive officer of the Company was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any federal commodities law, which judgment or finding has not been subsequently reversed, suspended or vacated. f(7) Currently the Registrant is involved in the litigation with ScanLine Technologies, Inc. ScanLine Technologies, Inc. ("ScanLine") in July 2002 sued the Company for an alleged breach of asset purchase agreement in which ScanLine sold the so- called "Delta Assets" to the Company in exchange for the issuance of Company's preferred stock. ScanLine has included additional claims against the Company, as well as against individual directors, for an alleged breach of contract, fraud, misrepresentation, violation of SEC Rule 10b-5 of the Federal Securities Law and violation of Utah Securities Law. A Third Party Complaint was subsequently filed individually by David Scull ("Scull"), a principal in ScanLine, against the Company alleging breach of contract, unjust enrichment and breach of the covenant of good faith and fair dealing for an alleged failure by the Company to compensate him for the time he served as President and CEO of the Company. Scull has also filed a defamation claim for allegedly defamatory statements made by the Company in its public filings. Management has responded by denying these allegations, filing counterclaims against both ScanLine and Scull seeking recovery for damage done to the Company, and to recover the costs defending the case. The name of the Litigation is ScanLine Technologies, Inc. v CompuSonics Corporation, et.al. Civil No. 2:02-CV-0612J in the United States District Court for the District of Utah, Central Division. Discovery has been ongoing in this matter, including the depositions which have been taken of both ScanLine and Scull, as well as the deposition of CompuSonics Video Corporation. Neither ScanLine nor Scull could articulate a damage amount in these depositions. The potential loss is therefore difficult to ascertain. However, ScanLine has in the past represented the value of the Company preferred stock, which it was not paid in exchange for the Delta Assets, which still remain in possession of ScanLine, to be worth $1.5 million. Scull has previously claimed a right to salary of approximately $225,000.00. Discovery cut-off is set for December 31, 2003 with a pre-trial conference set for January 9, 2004, at which time a trial date may be set. .. The Company believes that Scanline and Scull are not entitled to anything. Settlement discussions have occurred but have been unsuccessful. There is a possibility of an unfavorable outcome predicated the inherent uncertainty of litigation. However, management is confident in its version of events and that ScanLine and Scull are not entitled to any compensation. ITEM 11 EXECUTIVE COMPENSATION ----------------------- (a) (1) Cash Compensation. ----------------- The following sets forth all remuneration paid in the fiscal year ended July 31, 2003, to all officers of the Company and the total amount of remuneration paid to the officers and directors as a group: Number of persons Capacities in Cash in group (2) which served compensation -------------------- --------------- ------------- All executive officers Various None as a group No officers or directors received remuneration exceeding $100,000 during the fiscal year ended July 31, 2003. (b) (1) Compensation Pursuant to Plans. ------------------------------ Incentive Stock Option Plan - --------------------------- The Board of Directors of the Company, in October 1985, adopted an Incentive Stock Option Plan (the "Plan") for key employees. Options covering a total of 7,000,000 shares of Common Stock are available for grant under the Plan. The Plan is administered by the Board of Directors, which is responsible for establishing the criteria to be applied in administering the Plan. The Board of Directors is empowered to determine the total number of options to be granted to any one optionee, provided that the maximum fair market value of the stock for which any employee may be granted options during a single calendar year may not exceed $100,000 plus one-half of the excess of $100,000 over the aggregate fair market value of stock for which an employee was granted options in each of the three preceding calendar years. The exercise price of the options cannot be less than the market value of the Common Stock on the date of grant (110% of market value in the case of options to an employee who owns ten percent or more of the Company's voting stock) and no option can have a term in excess of ten years. In the event of certain changes or transactions such as a stock split, stock dividend or merger, the Board of Directors has the discretion to make such adjustments in the number and class of shares covered by an option or the option price as they deem appropriate. Options granted under the Plan are nontransferable during the life of the optionee and terminate within three months upon the cessation of the optionee's employment, unless employment is terminated for cause in which case the option terminates immediately. Only one option has been granted under the plan and it has lapsed (b) (2) Pension Table. -------------- The Company has no defined benefit and actuarial plan providing for payments to employees upon retirement. (b) (3) Alternative Pension Plan Disclosure. ------------------------------------ The Company has no defined benefit and actuarial plan providing for payments to employees upon retirement. (b) (4) Stock Option and Stock Appreciation Rights Plans. ------------------------------------------------ During the period from August 1, 2002, through July 31, 2003, no stock options were granted. (c) Other Compensation. ------------------- No other compensation having a value of the lesser of $100,000 or ten percent of the compensation reported in the table in paragraph (a) (1) of this Item was paid or distributed to all executive officers as a group during the period from August 1, 2001, through July 31, 2002. (d) Compensation of Directors. -------------------------- (d) (1) Standard Arrangements. ---------------------- The Company reimburses its directors for expenses incurred by them in connection with business performed on the Company's behalf, including expenses incurred in attending meetings. No such reimbursements were made for the period from August 1, 2002 through July 31, 2003. The Company does not pay any director's fees. (d) (2) Other Arrangements. ------------------- There are no other arrangements pursuant to which any director of the Company was compensated during the period from August 1, 2002, through July 31, 2003, for services as a director other than as listed above in (d) (1). (e) Termination of Employment and Change of Control Arrangement. ---------------------------------------------------------- The Company received the resignation of Dave Scull on June 17, 2002 from his positions with the Company as President, CEO, COO and CFO. Thomas W. Itin was named to fill those positions until they can be filled by a new person. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT -------------------------------------------------------------- (a)(b) Security Ownership of Certain Beneficial Owners and Management. The following table sets forth the number of shares of the Company's common stock, its only class of voting securities, owned by executive officers and directors, individually, and beneficial owners of more than five percent of the Company's Common Stock, and executive officers as a group, as of November 13, 2003. Number of Shares and Nature of Beneficial Percent Name and address Ownership (1) of Class - --------------------------------- -------------- ---------- TICO, Inc. 12,000,000 7.5% 32751 Middlebelt Road, Suite B Farmington Hills, Michigan 48334 Acrodyne Profit Sharing Trust 9,617,594 6.0% 32751 Middlebelt Road, Suite B Farmington Hills, Michigan 48334 Thomas W. Itin 21,652,594 (2) 13.5% 32751 Middlebelt Road, Suite B Farmington Hills, Michigan 48334 Enercorp, Inc. 10,000,000 6.25% (1) All shares are beneficially owned of record unless otherwise indicated. (2) Mr. Itin has held in his name no shares of the Company. Mr. Itin may have beneficial ownership of the following: TICO, Inc. 12,000,000 TICO 35,000 Acrodyne Profit Sharing Trust 9,617,594 ---------- 21,652,594 ========== Mr. Itin is a controlling person in TICO, Inc. Mr. Itin is controlling partner in TICO. Shares in TICO Inc.'s name, are held as nominee for Thomas W. Itin or assigns. Mr. Itin is the trustee and beneficiary of Acrodyne Profit Sharing Trust, therefore, he can be considered as having beneficial ownership of the shares of these entities. Mr. Itin's wife is a trustee of certain other trusts holding a total of 20,000,000 shares. Mr. Itin is not a beneficiary of the above-mentioned trusts in which his wife is trustee and disclaims any beneficial ownership. (3) Includes only active management as of October 31, 2003. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ---------------------------------------------- (a) Transactions with Management and Others. ---------------------------------------- Purchase Agreement and Issuance of Preferred Stock - -------------------------------------------------- On March 25, 2003 a purchase agreement was signed between the Company and TreeCAD Engineering Ltd. (Cyprus) an international partner firm of TreeSoft GmbH & Co., KG, Germany, in which a stock-for-stock exchange is intended by the Company and TreeSoft USA, Inc. TreeCAD Engineering is desirous of establishing a presence in the United States markets through ownership of Registrant's preferred class "B" stock, convertible into common stock. The consideration for one hundred percent of the common stock of TresSoft USA shall be preferred shares in class "B" CompuSonics Video ("CPVD") in the amount of four million (4,000,000 restricted shares). These shares are convertible at a 1-for-22.7 rate into ninety million eight hundred thousand (90,800,000) shares of CPVD restricted or legended common stock within five (5) years of the closing date at the holder's discretion. However if the price of CPVD common shares closes at six ($0.06) cents per share or higher in the OTC market in the USA for ten consecutive trading days, then the conversion will be automatic and immediate at twenty-two point seven (22.7) shares of restricted common stock for each one (1) share of class "B" restricted preferred stock. The Registrant owns certain products and patented technologies, which it intends to establish within the broadcast and video industries through supplementary services of TreeSoft USA. Both parties concur that the American market offers great potential for the TreeSoft products and will be enjoyed by the American public, which the American public will learn about these great products through the combined marketing efforts by TreeSoft USA and the Registrant. TreeSoft USA has the localized product in it's hand and ready to take to market, provided TreeCAD acts within eighteen (18) months pursuant to the terms of this agreement. All the shares of preferred class B stock issuable to TreeCAD will be held in escrow pending the outcome of certain contingent events, as specified in the purchase agreement of March 25, 2003. With the acquisition of Delta CG product line, in April 2001, 40 Million shares of Series A Preferred stock convertible into 80,000,000 million shares of common stock to be exercised sometime in the future, were to be issued to ScanLine Technologies, Inc The Board of Directors has not been willing to transfer these shares of class A preferred stock to ScanLine Technologies, Inc, because they do not believe the Company owes ScanLine or Dave Scull anything. (See Involvement in certain legal proceedings, page 19). The Company issued respectively 3,832,000 and 168,000 shares of preferred Class B stock, convertible into shares of common stock, $0.001 par value per share, on the basis of ten shares of common stock for each share of Series B preferred stock, to Acrodyne Corporation and First Equity Corporation in exchange for the forgiveness of indebtedness to these companies. In August 2002 Acrodyne corporation forgave the principal of a note payable to the Company, which was carried in the books of its subsidiary, Tyler Shaw Corporation. In exchange for the debt forgiven Acrodyne received investments in Pro Golf International, Inc, ProGolf.Com, Inc. and Williams Controls, Inc. The Company issued 300,000 shares of Series A Preferred Stock to CompuSonics Corporation which were converted in September 1988 into 30,000,000 shares of Common Stock in return for the assignment by CompuSonics Corporation of its rights under United States and certain foreign patent applications, and all rights to a digital video recording and playback system. The assignment of patent application and all other rights to the digital video system gives the Company the right to develop or license the technology assigned. CompuSonics Corporation has relinquished the right to develop this video technology. (b) Certain Business Relationships. --------------------------------- (b) (1) During the Company's most recently completed fiscal year, none of its directors or nominees for election as directors have owned, of record or beneficially, in excess of ten percent of the equity interest in any business or professional entity that made during that year, or proposes to make during the Company's current year, payments to the Company for property or services in excess of five percent of: (i) the Company's consolidated gross revenues for its last full fiscal year or (ii) the other entity's consolidated gross revenues for its last full fiscal year. (b) (2) No nominee or director of the Company is, or during the last full fiscal year has been, an executive of or owns, or during the last full fiscal year has owned, of record or beneficially, in excess of a ten percent equity interest in any business of professional entity to which the Company has made during the Company's last full fiscal year or proposes to make during the Company's current fiscal year, payments for property or services in excess of five percent of (i) the Company's consolidated gross revenues for its last full fiscal year, or (ii) the other entity's consolidated revenues for its last full fiscal year. (b) (3) No nominee or director, except as disclosed under Item 13(a) Loan section of this report, of the Company is, or during the last full fiscal year has been, an executive of or owns, or during the last full fiscal year has owned, of record or beneficially in excess of ten percent equity interest in any business or professional entity to which the Company was indebted at the end of the Company's last full fiscal year in an aggregate amount in excess of five percent of the Company's total consolidated assets at the end of such fiscal year. (b) (4) No nominee or director of the Company is, or during the last fiscal year has been, a member of or of counsel to a law firm that the Company has retained during the last fiscal year or proposes to retain during the current fiscal year. (b) (5) No nominee for or director of the Company is, or during the last fiscal year has been, a partner or executive officer of any investment banking firm that has performed services for the Company, other than as a participating underwriter in a syndicate, during the last fiscal year or that the Company proposes to have performed services during the current year. (b) (6) The Company is not aware of any other relationship between nominees for election as directors or its directors and the Company that are similar in nature and scope to those relationships listed in paragraphs (b) (1) through (5) of this Item 13. (c) Indebtedness of Management. --------------------------- No director, executive, officer, nominee for election as a director, any member, except as disclosed under Item 13(a) Loan section of this report, of the immediate family of any of the foregoing, or any corporation or organization of which any of the foregoing persons is an executive officer, partner or beneficial holder of ten percent or more of any class of equity securities, or any trust or other estate in which any such person has a substantial beneficial interest or as to which such person serves as a trustee or in a similar capacity, was indebted to the Company in an amount in excess of $100,000 at any time since August 14, 1985. (d) Transactions with Promoters. --------------------------- This filing is not on a Form S-1 or Form 10 and therefore the Company is not required to report any information concerning transactions with promoters. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K ----------------------------------------------------------------- (a) The following documents are filed as a part of this report Form 10-K (b) immediately following the signature page. 1. Financial Statements and Supplementary Data. Page Independent Auditor's Report F-1 Consolidated Balance Sheets at July 31, 2003 and 2002 F-2-F3 Consolidated Statements of Operations for the years ended July 31, 2003, 2002 F-4 Consolidated Statements of Changes in Stockholders' Deficit for the years ended July 31, 2003, 2002 F-5 Statements of Cash Flows for the years ended July 31, 2003, 2002 F-6 Notes to Consolidated Financial Statements F-7 to F-14 2. Financial statement schedules required to be filed are listed below and may be found at the page indicated. Schedules of Investments at July 31, 2003 and 2002 F-15 Schedule of valuation and reserve accounts. F-16 3 Exhibits. (i) Target Holding B.V. Consulting Agreement* (ii) Purchase Agreement for TreeSoft (USA), Inc. * * Filed as attachments to 10-Q dated April 30, 2003 (b) Reports on Form 8-K A Form 8-K was filed on December 20, 2002 to announce the extension of Class A and Class B Warrants from December 31, 2002 to March 31, 2003. A Form 8-K was filed on March 24, 2003 to announce the extension of Class A and Class B Warrants from March 31, 2003 to June 30, 2003. A Form 8-K was filed on June 19, 2003 to announce the extension of Class A and Class B Warrants from June 30, 2003 to September 30, 2003. A Form 8-K was filed on September 26, 2003 to announce the extension of Class A and Class B Warrants from September 30, 2003 to December 31, 2003. (c) Exhibits required by Item 601 of Regulation S-K Exhibit 3.1 Articles of Incorporation* Exhibit 3.2 Bylaws * Exhibit 3.3 Designation of Series A Preferred Stock - Exhibit 11 Statement of Computation of Per Share Earnings (Loss) *Incorporated by reference from the Company's Registration Statement on Form S-18, No. 1-14200, and effective November 27, 1985 and prior SEC filings. Required exhibits are listed in Item 14 (a) (3) of this Annual Report on Form 10-K. (d) Financial Statement Schedules. ------------------------------- Required financial statement schedules are attached hereto and are listed in Item 14(a) (2) of this Annual Report on Form 10-K SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registration has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized. COMPUSONICS VIDEO CORPORATION -------------------------------- (Company) By: s/s Thomas W. Itin --------------------------- Thomas W. Itin, Chairman Date: November 13, 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 indicated on November 12, 2003. Signature s/s Thomas W. Itin -------------------- Thomas W. Itin Title: Chairman of the Board of Directors President, CEO Signature s/s Robert J. Flynn -------------------- Robert J. Flynn Title: Director Signature s/s Harald Engels --------------------- Harald Engels Title: Director Signature s/s Andreas Kuestermann ----------------------- Andreas Kuestermann Title: Director Signature s/s Salvatore M. Parlatore --------------------------- Salvatore M. Parlatore Title: Director INDEPENDENT AUDITOR'S REPORT Board of Directors CompuSonics Video Corporation and Subsidiaries We have audited the accompanying balance sheet of CompuSonics Video Corporation and Subsidiaries as of July 31, 2003 and 2002, and the related statement of income, changes in stockholders' deficit, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. 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 audits 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 financial position of CompuSonics Video Corporation and Subsidiaries as of July 31, 2003 and 2002 and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as whole. The schedules on F-15 and F-16 are presented for purposes of complying with the rules of the Securities and Exchange Commission and is not a required part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as whole. J L Stephan Co PC Traverse City, MI October 22, 2003 F-1 COMPUSONICS VIDEO CORPORATION & SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS July 31, 2003 July 31,2002 ------------- ------------- Current Assets Cash $21,392 $24 Accounts Receivable- Related Parties net of reserve for Delta net assets 0 0 Inventory net of reserve for Delta Net Assets 0 0 Marketable Equity Securities Available for Sale 0 13,953 -------- -------- Total Current Assets 21,392 13,977 Other Assets Investments 0 159,000 Patents 0 300,000 Less Amortization 0 (5,000) Leasehold Improvements 0 1,875 Less Accumulated Depreciation 0 (63) Equipment 0 61,954 Less Accumulated Depreciation 0 (4,425) Good Will 0 153,000 Reserve Other Assets for Delta Net Assets 0 (507,351) --------- --------- Total Other Assets 0 159,000 --------- --------- Total Assets $21,392 $172,977 LIABILITIES AND STOCKHOLDERS' DEFICIT Current Liabilities Notes Payable to Related Entities $77,050 $ 190,341 Reserve Note Payable for Delta Net Assets 0 (18,618) Accounts Payable and accrued Liabilities 34,772 48,047 Accounts Payable - Related Entities 43,233 25,710 Reserve for Accounts Payable -Related for Delta Net Assets 0 (607) --------- ---------- Total Liabilities 155,055 244,872 Stockholders' Deficit Preferred Stock - Series A. Convertible Stock. 20,000,000 Shares authorized, 4,000,000 Shares Issued and Outstanding 400,000 400,000 Preferred Stock - Series B Convertible Stock. 55,000,000 Shares authorized, 40,000,000 Shares Issued and Outstanding 400,000 Common Stock $.001 Par Value, 300,000,000 Shares Authorized 160,006,250 Shares Issued and Outstanding in 2001 and 2000 160,006 160,006 Additional Paid-in Capital 692,997 1,247,981 Reserve Equity for Delta Net Assets 0 (924,671) F-2 COMPUSONICS VIDEO CORPORATION & SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Continued) Retained Earnings Other Comprehensive Income 0 0 Accumulated Deficit (1,386,667) (1,355,212) ----------- ---------- Total Stockholders' Deficit (133,664) 71,895 ----------- ---------- Total Liabilities and Stockholders' Deficit $21,392 $172,977 =========== ========== The accompanying notes are an integral part of this financial statement F-3 COMPUSONICS VIDEO CORPORATION & SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME For the Years Ended July 31, 2003, and 2002 2003 2002 -------- ---------- Revenues Miscellaneous Income -0- 999 -------- -------- Total Revenues -0- 999 Expenses General and Administrative Expense Professional fees 29,263 35,891 Management & Consulting Fees - Related Party 36,664 950 Patent Fees -0- 799 Travel and Entertainment 80 -0- All Other General and Administrative Expenses 466 553 -------- --------- Total General and Administrative Expenses 66,472 38,194 --------- --------- Income (Loss) from Operations before tax (66,472) (37,195) --------- ---------- Other Income Interest Expense 2,884 22,355 --------- --------- Total other Income (23,884) (22,355) --------- --------- Income tax expense -0- -0- Income before extraordinary item and cumulative effect of accounting change (69,356) (59,550) ---------- --------- Extraordinary Item Net of Tax 37,900 13,604 ----------- --------- Income before cumulative effect of accounting Change (31,456) (73,154) --------- -------- Cumulative effect of accounting change net of tax -0- -0- Net Income (31,456) (73,154) ------------ ---------- Other comprehensive income net of tax Unrealized gain on securities -0- (1,175) ------------ --------- Total other comprehensive income -0- -0- Comprehensive income (31,456) (44,329) =========== ========= Weighted Average Number of Common Shares 160,006,250 160,006,250 Net Income Per Common Share $(0.00) $0.00 =========== =========== The accompanying notes are an integral part of this financial statement F-4 COMPUSONICS VIDEO CORPORATION & SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT For the Years Ended July 31, 2003 , 2002, 2001 Convertible Addit'l Other Compre- Total Preferred Common Paid-in hensive Accum' Reserve Stockhdrs Stock Stock Capital Income Deficit Equity Deficit - -------------------------------------------------------------------------- - -------------------------------------------------------------- Shares Amount Shares Amount Balance at July 31, 2000 0 0 160,006,250 $160,006 $680,880 $16,045 $(1,640,044) $(783,113) - -------------------------------------------------------------------------- - -------------------------------------------------------------- Issuance of Preferred Stock 44,000,000 Net Income for the Year 44,000,000 $800,000 567,101 357,986 1,725,087 Unrealized Gain (Loss) on investments 44,000,000 (14,870) (14,870) Balance at July 31, 2001 - ------------------------ 44,000,000 $800,000 160,006,250 $160,006 $1,247,981 $1,175 $(1,282,059) $927,103 - -------------------------------------------------------------------------- - --------------------------------------------------------------- Additional Paid in Capital Net Income for the Year (73,154) (73,154) Reserve Equity for Delta Net Assets (924,671) (924,671) Unrealized Gain (Loss) on Investments (1,175) (1,175) Balance at July 31, 2002 - ------------------------- 44,000,000 $800,000 160,006,250 $160,006 $1,247,984 $ 0 $(1,355,213) (924,671) (71,897) - -------------------------------------------------------------------------- - --------------------------------------------------------------- Preferred Stock-B (400,000) Additional Paid in Capital (554,984) (554,984) Net Income for the Year (31,546) (31,456) Reserve Equity for Delta Net Assets 924,671 924,671 Unrealized Gain (Loss) on Investments 0 Balance at July 31, 2003 - ------------------------ 4,000,000 $400,000 160,006,250 $160,006 $692,997 $ 0 $(1,386,669) $ 0 $(133,666)
The accompanying notes are an integral part of this financial statement F-5 COMPUSONICS VIDEO CORPORATION & SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended July 31, 2003, and 2002 2003 2002 --------- --------- Cash Flows from Operating Activities Net Loss $(31,455) $(73,154) Adjustments to Reconcile Net Loss to Net Cash Used by Operating Activities Depreciation 0 355 Loss realized from marketable securities 0 13,604 Extraordinary Gain (Loss) (37,900) (999) (Increase) Decrease In Inventory 0 0 Accounts Receivable and Accrued Assets 0 426 Increase (Decrease) in Accounts Payable and Accrued Liabilities (13,274) 29,031 Accounts Payable Related Entities 39,547 22,900 ---------- --------- Total Adjustments (11,628) 65,318 Net Cash (Used For) Operations (43,083) (7,836) Cash Provided by Investing Activities 0 0 Net Cash (Used for) Investing Activities 0 0 Cash Provided by Financing Activities Proceeds From Notes Payable 0 5,000 Proceeds From Notes Payable-Related 64,450 2,800 Net Cash Provided by Financing Activities 64,450 7,800 Increase (Decrease) in Cash 21,367 (36) Balance at Beginning of year 25 61 Balance at End of Year $ 21,391 $ 25 Supplemental Disclosure of Non-Cash Investing and Financing Activities: Cancellation of the preferred stock class B $(400,000) $0 The accompanying notes are an integral party of this financial statement F-6 COMPUSONICS VIDEO CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS July 31, 2003 Note 1. Significant Accounting Policies A. Business History ---------------- CompuSonics Video Corporation (the "Company") was incorporated under the laws of the State of Colorado on August 14, 1985, for the purpose of developing, manufacturing and marketing a digital video recording and playback system. On December 13, 1985, the Company concluded a public offering of 30,000,000 Units, each Unit consisting of one share of its common stock and one Class A Warrant, and received net proceeds of $727,971. On November 16, 1987, the Company acquired The Tyler-Shaw Corporation, a New York corporation ("Tyler-Shaw"), which was engaged in the business of direct mail marketing. Effective July 31, 1992, Tyler-Shaw was considered inactive. Tyler-Shaw has no operations, research and development, earnings, cash flows, product development or sources of financing. On January 20, 1988, the Company acquired all the outstanding stock of TS Industries, Inc. ("TSI") in a transaction accounted for as a pooling of interests. (See Note 2). TSI was incorporated in the State of Colorado on July 28, 1987, but did not commence operations until the acquisition of The Tyler-Shaw Corporation, a New York Corporation ("TSC"). TSI acquired TSC from Edward B. Rubin, its sole shareholder, under an agreement dated July 23, 1987 (the "Agreement") between Mr. Rubin, Equitex, Inc. ("Equitex") and TICO, Inc. ("TICO"). On November 1, 1987, Equitex and TICO assigned all their rights under the Agreement to TSI. Equitex and TICO each owned 50% of the issued and outstanding capital stock of TSI, prior to the exchange of TSI stock for the Company's stock. This acquisition was accounted for under the purchase method of accounting (See Note 2). TSC acted as a syndicator of consumer products through direct mail marketing programs. As of July 31, 1992, TSC was considered inactive and all relating assets were written off along with the reversal of its prior accruals. CompuSonics Video Corporation has no proven products or operations in the digital equipment area. At this time, Tyler Shaw is without any operations. On April 19, 2001, negotiations began with ScanLine Technologies, Inc. As Part of the negotiations, ScanLine required that notes of the Company be Converted and interest forgiven to 4,000,000 shares of preferred Class A convertible stock, convertible at 10 to 1 (40,000,000) shares to be converted sometime in the future. F-7 Effective April 30, 2001, the Registrant acquired the assets of the Delta product line of ScanLine Technologies. Those assets were principally the character generator (CG) technology of ScanLine. As part of the acquisition, Dave Scull was to be issued 40,000,000 shares of preferred Class B convertible shares, convertible at 2 to 1 (80,000,000) shares, to be converted sometime in the future. This acquisition was not a successful enterprise, because not only the Company did not have any significant revenues from Delta product line, but also the Company is facing legal charges, which have been denied by the management. Counterclaims have been filed against ScanLine Technologies, Inc and Dave Scull, President, for damage to the Company. On February 26, 2003 the Registrant's Chairman, Thomas W. Itin, and Harald Engels, at that time, Managing Director of Target Holding B.V. of The Netherlands ("Target B.V."), jointly announced that the Registrant has entered an agreement with Target B.V. to assist in the corporate landing of the Registrant's patented technology in the European market and to assist in development of new business areas for the Registrant. Additionally, Target B.V. is willing to assist the Registrant in a substantial private placement to accredited investors interested in supporting this venture. On March 10, 2003 the Registrant's Chairman, Thomas W. Itin, announced that Registrant has entered into a non-binding Letter of Intent with TreeCAD Engineering, Ltd. (Cyprus) ("TreeCAD Engineering") (the former name was TreeCAD International Ltd.), an international partner firm of TreeSoft GmbH & Co. KG ("TreeSoft Germany") located in Lindlar, Germany, to acquire newly formed TreeSoft USA, Inc. ("TreeSoft USA") in a stock-for-stock transaction. TreeSoft USA holds exclusive distribution rights under license from TreeCAD Engineering Ltd. to market and develop further in the NAFTA region the in Europe well- established TreeSoft software for electrical engineering. The definitive agreement among the parties was completed on March 24, 2003. - - CompuSonics Video signs purchase agreement to acquire TreeSoft USA. On March 25, 2003 the Registrant signed the purchase agreement with TreeCAD Engineering Ltd.. A stock for stock exchange of the Registrant and TreeSoft USA common stock is intended by the Registrant and TreeSoft USA. TreeCAD Engineering is desirous of establishing a presence in the United States markets through ownership of Registrant's preferred class "B" stock, convertible into common stock.. The Registrant owns certain products and patented technologies, which it intends to establish within the broadcast and video industries through supplementary services of TreeSoft USA. Both parties concur that the American market offers great potential for the TreeSoft products and will be enjoyed by the American public, which the American public will learn about these great products through the combined marketing efforts by TreeSoft USA and the Registrant. TreeSoft USA has the localized software product ready to market in it's hand within eighteen (18) months pursuant to the terms of the purchase agreement. The Company has made several public announcements related to the acquisition of TreeSoft USA. F-8 B. Consolidation -------------- The consolidated financial statements include the consolidated financial information of TSI since that entity's inception. This consolidated financial information of TSI includes the operations of its wholly owned subsidiary, TSC, since its acquisition on November 16, 1987. All significant inter company balances and transactions have been eliminated in consolidation. C. Patents -------- Patent costs for the years ended July 31, 1991 and prior were amortized on the straight-line method over the estimated useful life of the patents of 17 years. Due to the lack of a marketable product, research and marketing development, and the lack of adequate capital to protect and take advantage of these patents, effective with the year ended July 31, 1992, all unamortized patent costs were fully amortized. All patent maintenance costs are expensed when incurred. During the year ended July 31, 2003 and 2002 the cost to maintain these patents and record them in foreign countries was $0 and $799 respectfully, which were recorded as patent fees expense. D. Income Taxes ------------ The Company and it's wholly owned subsidiaries file a consolidated federal income tax return. Due to the Company's net operating losses there is no provision for federal income taxes in these financial statements. Tax credits will be reflected in the income statement under the flow-through method as a deduction of income taxes in the year in which they are used. At July 31, 2003 the Company's carry forwards are as follows: Net General Year of Net Operating Loss Capital Business Expiration Book Tax Loss Credits 2003 329,338 326,211 -0- -0- 2004 66,722 110,507 -0- 0- 2005 55,215 137,222 -0- -0- 2006 80,080 60,911 730 -0- 2007 236,002 99,856 -0- -0- 2008 84,714 99,898 22,500 -0- 2009 55,673 55,664 -0- -0- 2010 57,605 57,495 -0- -0- 2011 63,576 63,577 -0- -0- 2012 48,566 48,566 -0- -0- 2019 59,261 59,261 -0- -0- 2021 114,360 114,360 -0- -0- 2022 69,116 60,547 -0- -0- 2023 31,455 31,455 -0- -0- F-9 The primary difference between the book and tax net operating loss carryforwards result from differences in depreciation and amortization methods and the treatment of unrealized loss of market value of certain investments. E. Net Loss (Gain) Per Common Share -------------------------------- The net loss (gain) per common share is computed by dividing the net loss (gain) for the period by the weighted average number of shares outstanding. All "cheap stock" issued prior to the public offering is included in the computation as if it were outstanding from inception. F. Cash Equivalents ----------------- The Company considers all highly liquid investments with maturity of three months or less cash equivalents. G. Equipment and Depreciation --------------------------- Equipment is stated at cost. Depreciation is computed for financial reporting purposes on a straight-line basis over an estimated life. Depreciation expense for the years ended July 31, 2003, and 2002 was $ 0 and $355 respectively. The Registrant wrote off the depreciation expense for the year ended July 31, 2002 because of the reserve recorded against Delta equipment. This asset is written off the books for the year ended July 31, 2003. The reason for this position is the failure of the agreement between the Company and ScanLine Technologies, Inc, "ScanLine" which owned the so-called Delta assets. (See note 13) H. Inventory ---------- A reserve of $436,129 was recorded against the inventory for the year ended July 31, 2002. There was no sale or purchase of the inventory by ScanLine Technologies, Inc. during year ending July 31, 2002. The inventory stated at $436,129 was written off the books of the Company for the year ended July 31, 2003. The inventory was part of the so called Delta assets, in exchange to which, the Company had to give to ScanLine Technologies, Inc "ScanLine" the consideration of forty (40) million shares of Series B preferred stock, convertible into eighty (80) million shares of common stock. (See note 13) I. Intangible Assets and Amortization ----------------------------------- Intangible assets included fonts and intellectual property obtained from ScanLine in April 2001, being amortized over an estimated useful life at 15 years. The Registrant recorded a reserve against these assets at July 31, 2002, and wrote off the books both the intangible asset and the reserve account in the amount of $ 295,000, at July 31, 2003. Fonts and intellectual property were part of the so-called Delta assets. ( See note 13) F-10 I. Long-Lived asset impairment. --------------------------- Our policy for determining when a long-lived asset or identifiable intangible asset is impaired, complies with SFAS 144. Impairment would be recorded only if the carrying amount of a long-lived asset is not recoverable and exceeds its fair value. Impairment loss is measured as the amount by which the carrying amount of a long-lived asset exceeds its fair value. Note 2. Marketable Securities --------------------- During the year ended July 31, 2002, the Company held common stock in Williams Controls, Inc. (Nasdaq: WMCO). The initial cost of stock was $27,558 and the fair market value at July 31, 2002 was $13,953. The Registrant decreased the cost basis of WMCO stock to fair market value as of July 31, 2002, complying with SFAS 115. The unrealized loss on this marketable security was converted to the realized loss and it is reflected in the statement of income and comprehensive income for the year ended July 31, 2002. In accordance with SFAS 115, the Company has classified the WMCO stock as an available-for-sale security and has reported it at its fair market value effective July 31, 2002. These securities were collateral for loans from Acrodyne Corporation, a related party with the Company. They were exchanged in August 2003 for the extinguishment of debt to Acrodyne Corporation. Note 3. Notes Payable and Notes Receivable ----------------------------------- A. Related Entity Notes Payable ---------------------------- Since the inception of the Company to October 2003, related companies have provided loans to meet the operating cash flow needs. These notes are rewritten as the loan amount increases. Notes payable to related entities bear interest at 10 to 12 percent per annum and are due and payable within 180 days or on demand and are dated as follows: Balance of account "note payable-related party" is composed of the following notes payable at July 31, 2003 and July 31, 2002. July31, 2003 July 31, 2002 -------------- ------------ Note payable to Acrodyne from Tyler Shaw $ -0- $ 159,123 Note-payable Delta -0- 18,618 Reserve note payable Delta -0- (18,618) Note payable Dearborn Wheels, Inc 60,000 -0- Note payable TICO 3,000 -0- Note payable First Equity Corporation 6,300 6,300 Note payable Acrodyne Corporation 7,750 6,300 --------- ---------- Total 77,050 $171,723 A Reserve account was recorded against Note Payable Delta, totaling $18,618. The note was dated July 31, 2001, and was due upon demand of Holder rather than on any date specified on the note. The note is written off the books as of July 31, 2003. Management does not believe that the Company owes to ScanLine anything. ( See note 13) F-11 The Registrant has borrowed $60,000 from Dearborn Wheels Inc. at 7% interest rate. The note was due on June 12, 2003. The Company borrowed $3,000 from TICO, a partnership in which the partner is Chairman of the Registrant. The note bears 7% interest rate and was due on June 23, 2003. The note was consequently paid off in September 2003. As of July 31, 2003 the Company had an outstanding balance of $6,300 owed to First Equity Corporation. The note bears a 10.50% interest rate and is due on June 14, 2003. The note was consequently paid off in September 2003. Also the Registrant borrowed $1,450 from Acrodyne Corporation during year ended July 31, 2003, bringing the total owing balance to $7,750. The interest rate on the note was 10.75% and the note was due on April 30, 2003. The note was consequently paid off in September 2003. Note 4. Accounts payable and Accrued Liabilities- Related Party. -------------------------------------------------------- The Registrant has accrued $ 13,332 of consulting fees owed to First Equity Corporation (FEC), and $ 13,332 of consulting fees owed to Dearborn Wheels Inc (DWI). FEC and DWI are both related parties to the Registrant. These consulting fees were recorded based on the consulting agreements between the Company and the above-related parties. The Registrant accrued $10,000 of consulting fees owed to Harald Engels, COO of Registrant for the month of July 2003. Harald Engels was engaged by Registrant, beginning at the closing date of the purchase agreement between CPVD and TreeCAD Engineering Ltd ("TreeCAD"), as a part-time consultant and officer in the position of President of TreeSoft USA, Inc. and as a Vice Chairman of the Board of Directors and Chairman of the Executive Committee of the Registrant, operating under a consulting agreement between The Company and TreeCAD Engineering Ltd. The annual compensation for TreeCAD Engineering Ltd. will be charged on a time and material basis (T & M basis) and is limited to $120,000 per year. Note 5. Stockholders' Equity --------------------- A. Preferred Convertible Stock --------------------------- Under the Company's Certificate of Incorporation, up to 75,000,000 shares of preferred stock, with classes and terms as designated by the Company, may be issued and outstanding at any point in time. The Company had 300,000 authorized shares of Series A Convertible Preferred Stock ($.001 par value) outstanding at July 31, 1988. In September 1988, all the outstanding shares were converted at $.001 per share, at the holder's option, into 30,000,000 shares of common stock. Series A Preferred Convertible stock. ------------------------------------- The Company issued forty (40) million shares Class A preferred stock convertible at 2 to 1 into eighty (80) million shares of common stock, to ScanLine Technologies, Inc, in exchange for assets purchased from ScanLine's Delta Division valued at $954,985. These shares were not delivered to ScanLine. Management does not believe that ScanLine is entitled to these shares of preferred stock. As of July 31, 2003 the forty (40) million shares of series B preferred stock were written off the books of the Company. (See note 13) F-12 Series B Preferred Convertible stock. --------------------------------------- The Company issued four (4) million shares of Series B preferred convertible stock, convertible at 10 to 1 into forty (40) million shares of common stock, to Dearborn Wheels, Inc. and First Equity Corporation, in exchange for the extinguishments of the indebtedness to these related parties totaling $412,117. Rights, preferences, privileges and restrictions of the Series A and B Convertible Preferred stock. - ----------------------------------------------------------------------- No Dividends. Holders of the Series B preferred stock are not entitled to dividends on their shares of series A and B of preferred stock. Liquidation preference. Upon the liquidation of the Company the holders of the series A and B preferred stock are entitled to receive out of the assets of the Company a distribution of respectively $0.02 and $.10 for each share of Series A and B preferred stock held. Conversion. Each share of series A and B Preferred stock is convertible respectively into two shares and ten shares of common stock. Voting rights. The holders of the Series A and B Preferred stock have voting rights as if the conversion to Common stock had taken place, and votes together with the Common stock as a single voting group except and to the extent the Colorado Business Corporation Act provides for voting rights as a separate class under section 7-110-104 or any successor statutory provision or as provided below. An affirmative vote of at least 60 percent of the holders of the series A and B preferred stock is required for a) change in the rights, preferences or privileges of the series A and B Preferred stock, b) an authorization, or issuance of additional shares of the same series, c) any change in the percent of series A and B preferred stock required to approve the forgoing. No preemptive rights. The series A and B preferred stock should have no preemptive rights as to any series of preferred stock issued subsequent to it. Registration rights. On one occasion at the request of the holders of at least 60% of the series A and B preferred stock, the Company shall register the shares of Common stock issued or issuable upon conversion of the series B preferred stock with the Securities and Exchange Commission. In addition, if the Company proposes to file a registration statement with the SEC under the securities act with respect to an offering of securities of the Company, then the Company shall give the holders of the series B Preferred Stock notice of its intention and an opportunity to include all or a portion of the shares of Common Stock issuable upon conversion of the series B preferred stock in the proposed registration statement. F-13 Notices. - --------- Any notice, request, demand, consent, approval or the other communication required or permitted hereunder shall be in writing and shall be delivered by personal service or agent, by registered or certified mail, return receipt requested, with postage thereon fully prepaid. Public Offering of Common Stock - -------------------------------- In December 1985, the Company completed a public offering of 30,000,000 units, each consisting of one share of the Company's common stock, $.001 par value, and one Class A purchase warrant. One Class A warrant entitles the holder to purchase one share of common stock plus a Class B warrant for $.05 during the twelve month period originally ending November 27, 1986 and currently extended to December 31, 2003. The Company may redeem the Class A warrants at $.001 per warrant if certain conditions are met. One Class B warrant entitles the holder to purchase one share of the Company's common stock for $.08 per share for a twelve-month period originally ended November 27, 1987 and currently extended to December 31, 2003. The offering was made pursuant to an underwriting agreement whereby the units were sold by the Underwriter on a "best efforts, all or none" basis at a price of $.03 per unit. The Underwriter received a commission of $.003 per unit and a non- accountable expense allowance of $27,000. The public offering was successfully completed on December 13, 1985 and the Company received $727,971 as the net offering proceeds for the 30,000,000 units sold. As of July 31, 2003, 6,250 Class A warrants have been exercised for total proceeds of $313. B. Incentive Stock Option Plan --------------------------- On October 4, 1985, the Company's board of directors authorized an Incentive Stock Option Plan covering up to 7,000,000 shares of the Company's common stock for key employees. The board of directors is authorized to determine the exercise price, the time period, the number of shares subject to the option and the identity of those receiving the options. Note 6. "Reserve Equity for Delta Net Assets" ------------------------------------- A Reserve account was recorded at July 31, 2002 in the amount of $924,671 against all of ScanLine's net assets previously acquired. The " Reserve Equity for Delta Net Assets" includes $400,000 of reserve against the Class A Preferred Stock that was to be given to ScanLine Technologies, Inc, and $ 524,671 of reserve against Paid in Capital. Total purchase price for the Delta CG product line of assets acquired from ScanLine was $954,985.03. This represented the total fair value of the assets received. F-14 Allocation of purchase price to the net assets acquired was as follows: Machinery and Equipment $61,953.61 Fonts and Intellectual Property 300,000.00 Office Improvements 1,875.00 Inventory-parts 309,156.42 Work-in-process/Inventory 58,000.00 Finished goods/Inventory 224,000.00 --------------- Total $954,985.03 As a consideration for Delta assets the Registrant issued 40 million shares of series B preferred stock to ScanLine, but the stock certificates were never delivered to it. (See note 13). There were forty (40) million shares of Series B preferred convertible stock held in escrow account, convertible into eighty (80) million shares of common stock. Series B of preferred convertible stock were written off as of July 31, 2003.The Registrant is currently in litigation with ScanLine Technologies, Inc. Note 7. Related Party Transactions ---------------------------- In August 1990 the Company entered into a management fee agreement with Acrodyne Corporation, a related entity, at the time, whereby the Company will pay direct labor cost plus overhead for management services rendered. Management fees expense totaled $0 and $950 for the years ended July 31, 2003 and 2002. The Company currently occupies office space, at no charge, in the office of Acrodyne, a related entity. TSC also utilizes space in a related entity at no charge for the purposes of accounting and administration. The Company believes its current facilities are sufficient for its presently intended business activity. The accounts payable, as of July 31, 2003 and 2002, include management fees owed to Acrodyne of $2,600. In August 2003, the investments in Pro Golf International, Inc, ("PGI"), ProGolf.Com, ("PG.com") and available for sale securities of Williams Control, Inc, ("WMCO") were exchanged for the extinguishments of the indebtedness to Acrodyne Corporation, a related party. The investments in PGI and PG.com were valued at cost, totaling $94,714 and $64,286 respectively. The available for sale securities, held in WMCO, had a fair market value of $13,953 on the day of the exchange. Total indebtedness of the Company to Acrodyne Corporation was $180,540. Extraordinary income of $7,587 was recorded in the books of the Company as a result of this exchange. Note 8. Cash Flows Disclosure ----------------------- Interest and income taxes paid for the years ended July 31, 2003 and 2002 were as follows: 2003 2002 ------- -------- Income Taxes $-0- $ -0- Interest $-0- $ -0- Note 9. Change in Management -------------------- Effective June 14, 2002, the President, CEO, COO and CFO, Dave Scull resigned from his positions as officer and director. Thomas W. Itin was elected to fill the positions vacated by Dave Scull. Harald Engels was engaged by Registrant, beginning at the closing date of the purchase agreement between The Company and TreeCAD Engineering Ltd., as a part- time consultant and officer in the position of President of TreeSoft USA, Inc. and as a Vice Chairman of the Board of Directors and Chairman of the Executive Committee of the Registrant, operating under a consulting agreement between The Company and TreeCAD Engineering Ltd. at an annual compensation on a T&M basis, limited to $120,000 per year. Andreas Kuestermann and Harald Engels were elected in the position of the directors of the Registrant on March 25, 2003. F-16 Note 10. Use of Estimates ------------------ The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Note 11. Investments ------------ The Company owned 0.26% of the total outstanding shares of Pro Golf International, Inc, and 0.97% of the total outstanding shares of ProGolf.Com as of July 31, 2002. Pro Golf International, Inc. (PGI) a majority-owned subsidiary of Ajay Sports, Inc., was formed during 1999, and owns 100 % of the outstanding stock of Pro Golf of America, Inc. (PGoA) and a majority of the stock of ProGolf.Com, Inc. (PG.com). PGoA is the franchiser of Pro Golf Discount Retail Stores. The Registrant's Chairman is also Chairman of Pro Golf International, Inc. ("PGI"). PG.com is a Company formed to help direct traffic to its franchise stores and to sell golf equipment and other golf-related products and services over the Internet. It is anticipated that traditional sales and distribution methods will be enhanced by the ProGolf.com Internet site. PG.com is a majority owned subsidiary of PGI. The Registrant's Chairman is also Chairman of PG.com. In August 2003, the investments in Pro Golf International, Inc, ("PGI"), PG.com and available for sale securities of Williams Controls, Inc, ("WMCO") were exchanged for the extinguishments of the indebtedness to Acrodyne Corporation, a related party. The investments in PGI and PG.com were valued at cost, totaling $94,714 and $64,286 respectively. The available for sale securities, held in WMCO, had a fair market value of $13,953 on the day of the exchange. Total indebtedness of the Company to Acrodyne Corporation was $180,540. Extraordinary income of $7,587 was recorded in the books of the Company as a result of this exchange. Note 12. Contingencies ------------- 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 has a net loss from operations of $(66,472) for the year ended July 31, 2003, and as of July 31, 2003 had a net working capital deficit of $(133,663) and net stockholders' equity of $(133,664). The Company had total earned income of $(66,472) and $(37,195), during the years ended July 31, 2003, 2002, and was mainly dependent upon a related party to fund its working capital for the current year. In addition, the Company anticipates additional capital from new investors in 2003, 2004. The Company's ability to continue as a going concern is partially dependent on the success of management implementing these plans. The financial statements do not include any adjustments that might result from the outcome of these uncertainties. F-17 Note 13. Legal Proceedings. ------------------ ScanLine Technologies, Inc. ("ScanLine") in July 2002 sued the Company for an alleged breach of asset purchase agreement in which ScanLine sold the so- called "Delta Assets" to the Company in exchange for the issuance of Company's preferred stock. ScanLine has included additional claims against the Company, as well as against individual directors, for an alleged breach of contract, fraud, misrepresentation, violation of SEC Rule 10b-5 of the Federal Securities Law and violation of Utah Securities Law. A Third Party Complaint was subsequently filed individually by David Scull ("Scull"), a principal in ScanLine, against the Company alleging breach of contract, unjust enrichment and breach of the covenant of good faith and fair dealing for an alleged failure by the Company to compensate him for the time he served as President and CEO of the Company. Scull has also filed a defamation claim for allegedly defamatory statements made by the Company in its public filings. Management has responded by denying these allegations, filing counterclaims against both ScanLine and Scull seeking recovery for damage done to the Company, and to recover the costs defending the case. The name of the Litigation is ScanLine Technologies, Inc. v CompuSonics Corporation, et.al. Civil No. 2:02-CV-0612J in the United States District Court for the District of Utah, Central Division. Discovery has been ongoing in this matter, including the depositions which have been taken of both ScanLine and Scull, as well as the deposition of CompuSonics Video Corporation. Neither ScanLine nor Scull could articulate a damage amount in these depositions. The potential loss is therefore difficult to ascertain. However, ScanLine has in the past represented the value of the Company preferred stock, which it was not paid in exchange for the Delta Assets, which still remain in possession of ScanLine, to be worth $1.5 million. Scull has previously claimed a right to salary of approximately $225,000.00. Discovery cut-off is set for December 31, 2003 with a pre-trial conference set for January 9, 2004, at which time a trial date may be set. .. The Company believes that Scanline and Scull are not entitled to anything. Settlement discussions have occurred but have been unsuccessful. There is a possibility of an unfavorable outcome predicated the inherent uncertainty of litigation. However, management is confident in its version of events and that ScanLine and Scull are not entitled to any compensation. Note 14. Extraordinary Item. -------------------- Two extraordinary events occurred during year ended July 31, 2003: 1) Extinguishment of indebtedness to Acrodyne Corporation, a related party, for the investments in PGI, PG.com, and the available for sale securities held in WMCO. As discussed in the note 10, the income of $7,587 from this transaction is classified as extraordinary in the statement of income and comprehensive income. F-18 2) Write off the so-called Delta Assets and the Series B of Preferred Convertible Stock. The Company had an agreement, effective April 2001, to buy the assets of ScanLine Technologies, Inc for the consideration of forty (40) million shares of Series B Preferred Stock convertible into eighty (80) million shares of common stock, par value $0.001 per share. Because of certain issues between the Company and the seller (" ScanLine"), the consideration was not delivered to the seller, and the assets and Series B of preferred convertible stock are written off as of July 31, 2003. Management believes that the Company does not owe anything to ScanLine or its president, Dave Scull. Income of $30,313 from this transaction is classified as extraordinary in the statement of income and comprehensive income. F-19 COMPUSONICS VIDEO CORPORATION AND SUBSIDIARIES Schedules of Investments At July 31, 2003 and 2002 Amount at Which Each Portfolio of Market Value of Equity Security Issues Name of Issuer Number of Cost of Each Issue at And Each Other Title of Each Shares or Each Balance Sheet Security Issue Carried Issue Units Issue Date In the Balance Sheet - ------------------------------------------------------------------------------- July 31, 2003 Common Stocks - --------------- * * Williams Controls, Inc. -0- -0- -0- 0- July 31, 2002 Common Stocks - ---------------- Williams Controls, Inc. * 27,558 $13,953 $13,953 $13,953 *See Note 2
F-20 CompuSonics Video Corporation Valuation and Qualifying Accounts and Reserves Balance at the Balance at the Beginning of Year Changes End of Year ------------------------------------------------- For the year ending July 31, 2002 - --------------------------------- Reserve A/R for Delta Net Assets $ .26 $(426) $ 0 Reserve Inventory for Delta net Assets 36,129 (436,129) 436,129 Reserve Net Patents for Delta Net Assets 295,000 (295,000) 0 Reserve Net Leasehold Improvements for Delta Net Assets 1,813 (1,813) 1,813 Reserve Net Equipment for Delta Net Assets 57,528 (57,528) 0 Reserve Good Will for Delta Net Assets 153,000 (153,000) 0 Reserve N/P Delta for Delta Net Assets 18,618 (18,618) 0 Reserve A/P Delta for Delta Net Assets 607 (607) 0 Reserve Equity for Delta Net Assets 924,617 (924,671) 0 F-21 CERTIFICATION PURSUANT TO 18 USC, SECTION 1350, AS ADOPTED PURSUANT TO SECTIONS 302 AND 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Registrant on Form 10-KSB for the year ended July 31, 2003 (the "Report"), as filed with the Securities and Exchange Commission on the date hereof, I, Thomas W. Itin, Chief Executive Officer and Chief Financial Officer of the Registrant, certify to the best of my knowledge, pursuant to 18 USC 1350, as adopted pursuant to Sec.302 and promulgated as 18 USC 1350 pursuant to Sec.906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report referenced above has been read and reviewed by the undersigned. 2. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934. 3. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Registrant. 4. Based upon my knowledge, the Report referenced above does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to makes the statements made, in light of the circumstances under which such statements were made, not misleading. 5. Based upon my knowledge, the financial statements, and other such financial information included in the Report, fairly present in all material respects the financial condition and results of operations of the Registrant as of, and for, the periods presented in the Report. 6. I acknowledge that the Chief Executive Officer and Chief Financial Officer: A. are responsible for establishing and maintaining "disclosure controls and procedures" for the Registrant; B. have designed such disclosure controls and procedures to ensure that material information is made known to us, particularly during the period in which the Report was being prepared; C. have evaluated the effectiveness of the Registrant's disclosure controls and procedures within 90 days of the date of the Report; and D. have presented in the Report our conclusions about the effectiveness of the disclosure controls and procedures based on the required evaluation. E. the Registrant (or persons fulfilling the equivalent function): (i) all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant's ability to record, process, summarize, and report financial data and have identified for the Registrant's auditors any material weaknesses in internal controls; (ii) and any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer's internal controls; and F-22 F. have indicated in the Report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. /s/ Thomas W. Itin - ----------------------- Chief Executive Officer and Chief Financial Officer Dated: November 13, 2003 F-23 -----END PRIVACY-ENHANCED MESSAGE-----