PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
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[ ] Preliminary proxy statement
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Rule 14a-6(e)(2))
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[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
CREATIVE TECHNOLOGIES CORP.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement)
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it was determined.
CREATIVE TECHNOLOGIES CORP.
170 53RD STREET
BROOKLYN, NEW YORK 11232
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 29, 2002
TO OUR SHAREHOLDERS:
The Annual Meeting of Shareholders of Creative Technologies Corp. (the
"Company") will be held at the offices of the Company, 170 53rd Street,
Brooklyn, New York on July 29, 2002 at 10:00 A.M. New York time, to consider the
following proposals:
1. To elect directors, each to serve for a term of one year or until
his respective successor is elected and qualifies;
2. To ratify the appointment of Goldstein Golub Kessler LLP as the
Company's independent accountants; and
3. To transact such other business as may properly come before the
meeting.
Shareholders of record on the books of the Company at the close of business on
June 20, 2002 will be entitled to vote at the meeting or any adjournment
thereof. A copy of the annual report containing the financial statements of the
Company for the year 2001 is enclosed.
All shareholders are cordially invited to attend the meeting. Whether or not you
expect to attend, you are requested to sign, date and return the enclosed proxy
promptly. Shareholders who execute proxies retain the right to revoke them at
any time prior to the voting thereof. A return envelope which requires no
postage if mailed in the United States is enclosed for your convenience.
By Order of the Board of Directors
David Selengut
Secretary
Dated: New York, New York
June 25, 2002
CREATIVE TECHNOLOGIES CORP.
170 53RD STREET
BROOKLYN, NEW YORK 11232
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
JULY 29, 2002
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Creative Technologies Corp. (the "Company") of proxies in
the enclosed form for the Annual Meeting of Shareholders to be held at the
offices of the Company, 170 53rd Street, Brooklyn, New York on July 29, 2002, at
10:00 A.M. New York time, and for any adjournment or adjournments thereof, for
the purposes set forth in the foregoing Notice of Annual Meeting of
Shareholders.
At the Annual Meeting, the Shareholders will vote to:
1. Elect the directors of the Company;
2. Ratify the selection of Goldstein Golub Kessler LLP as the
Company's independent auditors; and
3. Transact such other business as may properly come before the
meeting.
The Company knows of no other matters to be presented at the Annual Meeting. If
any additional matters should be properly presented, proxies shall be voted in
accordance with the judgment of the proxy holders.
Each shareholder of the Company is requested to complete, sign, date and return
the enclosed proxy without delay in order to ensure that the shares owned by
such shareholder are voted at the Annual Meeting. Any shareholder may revoke a
proxy at any time before it is voted by: (i) delivering a written notice to the
Secretary of the Company, at the address of the Company set forth above, stating
that the proxy is revoked, or (ii) executing a subsequent proxy and delivering
it to the Secretary of the Company, or (iii) attending the Annual Meeting and
voting in person. Each properly executed proxy returned will be voted as
directed. In addition, if no directions are given or indicated, the persons
named in the accompanying proxy intend to vote proxies in favor of the foregoing
proposals.
The Company will bear the cost of soliciting proxies. Directors, officers and
employees of the Company may solicit proxies personally or by telephone,
telegram or mail. Such directors, officers and employees will not be
additionally compensated for such solicitation but may be reimbursed for
reasonable out-of-pocket expenses incurred in connection therewith. Arrangements
will also be made with brokerage houses and other custodians, nominees and
fiduciaries for the forwarding of proxy material to the beneficial owners of the
Common Stock held of record by such persons and the Company will, upon request,
reimburse such custodians, nominees and fiduciaries for reasonable out-of-pocket
expenses incurred in connection therewith.
1
The principal executive offices of the Company are located at 170 53rd Street,
Brooklyn, New York 11232. The approximate date on which this Proxy Statement and
the accompanying form of Proxy will first be sent or given to the Company's
shareholders is June 26, 2002.
VOTING SECURITIES
Only holders of shares of Common Stock, par value $.09 per share and the holders
of shares of 1997 Preferred Stock (the "1997 Preferred Stock"), of record as at
the close of business on June 20, 2002 are entitled to notice of and to vote at
the Annual Meeting or any adjournment thereof. On the record date there were
17,198,831 shares of Common Stock issued and outstanding and 3,500 shares of
1997 Preferred Stock issued and outstanding. Each outstanding share of Common
Stock is entitled to one vote upon all matters to be acted upon at the meeting
and each share of 1997 Preferred Stock is entitled to 1,000 votes. The holders
of the 1997 Preferred Stock along with the holders of the shares of Common Stock
vote as one group. The holders of a majority of the votes shall constitute a
quorum. The affirmative vote of the holders of the majority of votes present at
the Annual Meeting and voting is necessary for the election of directors.
The holders of shares of Common Stock are entitled to receive such dividends, if
any, as may be declared, from time to time, by the Board of Directors from funds
legally available therefor, subject to the dividend preferences of the Preferred
Stock. Upon liquidation or dissolution of the Company, the holders of shares of
Common Stock are entitled to share ratably in all assets available for
distribution after payment of liabilities and liquidation preferences of the
Preferred Stock. Holders of shares of Common Stock have no preemptive rights, no
cumulative voting rights and no rights to convert their shares of Common Stock
into any other securities.
2
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of May 31, 2002, certain information as to
the stock ownership of each person known by the Company to own beneficially 5%
or more of the Company's outstanding Common Stock, by each director of the
Company who owns any shares, and by all officers and directors as a group. This
table includes the shares of 1997 Preferred Stock which have the right to cast
1000 votes per share of 1997 Preferred Stock.
Percentage of
Name of Beneficial Number of Shares of Class as of
Owner Common Stock Owned (1) May 31, 2002
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Bonnie Septimus (2) 7,165,661 32.9%
72 Lord Avenue
Lawrence, NY
David Guttmann (3) 7,407,893 28.2%
170 53rd Street
Brooklyn, NY 11235
Rochelle Guttmann (4) 3,785,714 18.3%
170 53rd Street
Brooklyn, NY 11235
Abraham Guttmann 3,853,178 18.6%
170 53rd Street
Brooklyn, NY 11235
Richard Helfman (5) 622,777 2.9%
170 53rd Street
Brooklyn, NY 11235
Lala Bessler (6) 210,046 1%
170 53rd Street
Brooklyn, NY 11235
Alan Miller (7) 794,100 3.7%
Alan Berger (8) 57,555 *
Robert Bruckstein (9) 654,557 3.1%
All officers and
directors as a
group (7 persons)(10) 13,600,106 48.3%
* Represents less then 1%
3
(1) Except as otherwise indicated, all shares are beneficially owned and
sole voting and investment power is held by the persons named.
(2) A portion of the Common Stock is owned by Mrs. Septimus as nominee for
certain members of her family and shares owned by her husband, as to
which she disclaims beneficial interest of. Also includes 1,100,000
shares of Common Stock issuable upon conversion of 1996-A Preferred
Stock and 1,324.5 shares of 1997 Preferred Stock, which represents the
right to 1,324,500 votes.
(3) A portion of the Common Stock is currently being held by Mr. Guttmann
as nominee for certain members of his immediate family. Also includes
4,500,000 shares of Common Stock issuable upon conversion of the 1996
and 1996-A Preferred Stock and the 1,357 shares of 1997 Preferred
Stock, which represents the right to 1,357,000 votes. Also includes
1,111,111 shares of Common Stock issuable upon conversion of 200 shares
of 2000 Preferred Stock owned by a family partnership. This amount does
not include shares owned by his wife, Rochelle Guttmann, listed below,
as to which he disclaims beneficial interest of.
(4) Does not include shares held by her husband, David Guttmann, listed
above, as to which she disclaims beneficial interest of.
(5) Includes 600,000 shares issuable upon exercise of stock options.
(6) Includes 2,190 shares owned by her husband as to which she disclaims
beneficial interest of and includes 200,000 shares issuable upon
exercise of stock options.
(7) Includes 700,000 shares issuable upon exercise of a warrant and 25,000
shares issuable upon exercise of stock options.
(8) Includes 32,555 shares owned by his wife, as to which he disclaims
beneficial interest of and 25,000 shares issuable upon exercise of
stock options.
(9) Includes 300,000 shares issuable upon exercise of a warrant, 25,000
shares issuable upon exercise of stock options and 200 shares of 1997
Preferred Stock, which represents the right to 200,000 votes. Half of
such Preferred Stock is owned by Dr. Brukstein's wife as to which he
disclaims beneficial interest of.
(10) Includes the shares described in footnotes (3), (5), (6), (7), (8) and
(9) above
DIRECTORS OF THE COMPANY
Name Age Title
--- --- -----
David Guttmann 55 Chairman of the Board
Richard Helfman 55 Director and President of the Company
and IHW
Lala Bessler 54 Director and President of Ace
Alan Miller 40 Director
Abraham Guttmann 52 Director
Alan Berger 34 Director
Robert Bruckstein 54 Director
4
David Guttmann has been a Director and Chief Executive Officer of the
Company since May 1994 and Chairman of the Board since May 1997. From June 1983
until May 1994, Mr. Guttmann was Chief Executive Officer of Applied Microbiology
Inc., and was its chairman until October 1995.
Richard Helfman has been a Director of the Company since April 1990 and
President since March 1990. He has also been President of IHW, Inc. since July
1997. From May 1987 to June 1989, Mr. Helfman was a commercial lending officer
at The First New York Bank for Business, and from 1979 until May 1987, was a
commercial lending officer at Extebank.
Lala Bessler has been a Director of the Company since December 1998 and
President of Ace Surgical Supply Co., Inc. since 1986.
Alan Miller has been a Director of the Company since December 2000. He
has been President of Miller Consulting for more than the past five years. He is
also a director and member of the compensation committee of Encore Marketing
Incorporated.
Abraham Guttmann has been a Director of the Company since December
2000. He has been Vice President in charge of operations since March 1993.
Alan Berger has been a Director of the Company since December 2000. He
has been the Chief Operating Officer of Cancer Advisors since July 2001, was
Chief Operating Officer of Pagetalk Inc. from August 1999 until July 2001 and
Chief Operating Officer of Bill's Internet Yellow Pages, Inc. from July 1996
until August 1999.
Robert Bruckstein has been a Director of the Company since December
2000. He has been a physician in private practice since 1975.
Each of the Company's Directors has been elected to serve until the
next annual meeting of the stockholders. The Company's executive officers are
appointed annually by the Company's Directors. Each of the Company's Directors
and Officers continues to serve until his successor has been elected and
qualified.
To the Company's knowledge, there were no delinquent 16(a) filers for
transactions in the Company's securities during the year ended December 31,
2001.
BOARD OF DIRECTORS AND COMMITTEES
During the year ended December 31, 2001, there were two (2) meetings of
the Board of Directors and one written consent by all of the Directors in lieu
of a board meeting . All directors attended at least 75% of these meetings.
In December 2000, the Board of Directors designated from among its
members an Audit Committee, which consists of Mr. Alan Miller, Mr. Alan Berger
and Mr. David Guttmann. Mr. Miller and Berger are independent members but Mr.
Guttmann is not independent since he is an executive officer and principle
shareholder of the Company. The Audit Committee, which reviews the Company's
financial and accounting practices and controls, held one meeting on December 3
2001. The Company
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does not have a nominating committee. The Company intends to establish a
compensation committee but has not done so to date.
REPORT OF THE AUDIT COMMITTEE
To the Board of Directors of Creative Technologies Corp.
We are responsible for considering management's recommendation of
independent certified public accountants for each fiscal year, recommending the
appointment or discharge of independent accountants to the Board of Directors
and confirming the independence of the accountants. It is also our
responsibility for reviewing and approving the scope of the planned audit, the
results of the audit and the accountant's compensation for performing such
audit; reviewing the Company's audited financial statements; and reviewing the
Company's internal accounting controls and discussing such controls with the
independent accountants.
We were designated as members of the Audit Committee on December 21,
2000 and adopted a written charter at that time, a copy of which was attached to
the proxy statement for the 2001 shareholders meeting.
In connection with the audit of the Company's financial statements for
the year ended December 31, 2001, we met with representatives from Goldstein
Golub Kessler LLP, the Company's independent certified public accountants as
required by Statements on Auditing Standards 61. In addition, we have reviewed
and discussed with management the Company's audited financial statements for the
year ended December 31, 2001.
Specifically, we have discussed with the independent certified public
accountants the matters required to be discussed by Statements on Auditing
Standards No. 61, COMMUNICATION WITH AUDIT COMMITTEES, as amended, by the
Auditing Standards Board of the American Institute of Certified Public
Accountants. In connection with the Company's year ended 2001 financial
statements, there was one meeting with the independent certified public
accountants and management. All audit committee members attended at least 75% of
these meetings.
The Audit Committee has been informed that Goldstein Golub Kessler LLP
has a continuing relationship with American Express Tax and Business Services,
Inc. (TBS) from which it leases auditing staff who are full time, permanent
employees of TBS and through which its partners provide non-audit services. As a
result of this arrangement, Goldstein Golub Kessler LLP has no full time
employees and therefore, none of the audit services performed were provided by
permanent full-time employees of Goldstein Golub Kessler LLP. Goldstein Golub
Kessler LLP manages and supervises the audit and audit staff, and is exclusively
responsible for the opinion rendered in connection with its examination.
The independent certified public accountants' fees for audit services
and non-audit services for the year ended December 31, 2001 were $48,000 and
$18,000, respectively. We have received the written disclosures and the letter
from the independent certified public accountants required by Independence
Standard No. 1, INDEPENDENCE DISCUSSIONS WITH AUDIT COMMITTEES, as amended, by
the Independence Standards Board, and have discussed with the public accountants
the accountants' independence.
6
Based on the review and discussion referred to above, we recommend to
the Board of Directors that the financial statements referred to above be
included in the Company's Annual report on Form 10-KSB for the year ended
December 31, 2001.
Alan Miller
Alan Berger
David Guttmann
EXECUTIVE COMPENSATION
The compensation paid to the Company's Chief Executive Officer and to
each of the other executive officers whose total compensation exceeded $100,000
during each of the proceeding three fiscal years are as follows:
SUMMARY COMPENSATION TABLE
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Annual Long-Term
Compensation Compensation
Other Annual Awards
Name and Principal Year Salary Compensation Options
Position ($) ($) (#)
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David Guttmann,
Chief Executive Officer 2001 $220,660
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2000 $200,660
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1999 $143,160
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Richard Helfman,
President 2001 $210,000 600,000
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2000 $180,000
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1999 $180,000
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Lala Bessler 2001 $121,540 200,000
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2000 $128,065
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1999 $117,625
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Abraham Guttmann 2001 $220,600
2000 $200,271
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OPTION GRANTS IN 2001
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Percent of Total Options
Options Granted to Employees in Exercise Expiration
Name Granted Fiscal Year 2001 Price Date
(a) (b) $
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Richard Helfman 600,000 37% $.07 06/06/06
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Lala Bessler 200,000 12% $.07 06/06/06
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7
AGGREGATED OPTION EXERCISES IN 2001 AND FOR YEAR-END OPTION VALUES
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Number of Value of
Unexercised Unexercised
Options in-the-Money
at Fiscal Options
Year-End at Fiscal
(#) Year-End ($)
Shares Value
Acquired on Realized Exercisable/ Exercisable/
Name Exercise (#) ($) Unexercisable Unexercisable
(a) (b) (c) (d) (e)
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David Guttmann -0- -0- 0/0 -0-
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Richard Helfman -0- -0- 600,000/0 -0-
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Lala Bessler -0- -0- 200,000/0 -0-
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Abraham Guttmann -0- -0- 0/0 -0-
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Barry Septimus and David Guttmann personally guaranteed certain
indebtedness of the Company in the amount of $2,341,000 as of December 31, 2001.
The Company's executive offices and warehouse at 170 53rd Street,
Brooklyn, NY are subleased on a month-to-month basis at a cost of $13,860 per
month inclusive of real estate taxes from a company owned by the Company's
principal stockholders. Rent and expenses inclusive of real estate taxes for the
Brooklyn facility for 2001 was $161,000.
In December 1996, the Company obtained a line of credit from Century
Business Credit Corporation ("Century"). During 2000 Wells Fargo Credit
Corporation ("Wells") bought the division from Century. David Guttmann
guarantees up to $800,000 of the Company's obligations to Wells.
8
PROPOSAL 1
ELECTION OF DIRECTORS
At the Annual Meeting, seven Directors will be elected by the
shareholders to serve until the next annual meeting of the shareholders or until
their successors are elected and shall qualify. The accompanying form of Proxy
will be voted for the re-election as Directors of Lala Bessler, Richard Helfman,
Abraham Guttmann, Alan Miller, Alan Berger, Robert Bruckstein and David
Guttmann, unless the Proxy contains contrary instructions. See "Directors of the
Company" for a description of such nominees' business experience. Proxies cannot
be voted for a greater number of persons than the number of nominees named in
the Proxy Statement. Management has no reason to believe that any of the
nominees will not be a candidate or will be unable to serve. However, in the
event that any of the nominees should become unable or unwilling to serve as a
Director, the Proxy will be voted for the election of such person or persons as
shall be designated by the Directors.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" THE ELECTION OF
THE ABOVE NAMED NOMINEES. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO
VOTED UNLESS SHAREHOLDERS SPECIFY IN THEIR PROXIES A CONTRARY CHOICE.
PROPOSAL 2
APPROVAL OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors intends to appoint Goldstein Golub Kessler LLP,
independent public accountants, to audit the accounts of the Company for the
fiscal year ending December 31, 2002. Goldstein Golub Kessler LLP was initially
appointed by the Board of Directors in 1997 in connection with the audit of the
Company's accounts for the fiscal year ended December 31, 1997 and was
subsequently reappointed to audit the Company's accounts for fiscal year ended
December 31, 1998 through 2001. Goldstein Golub Kessler LLP has advised the
Company that neither the firm nor any of its members or associates has any
direct financial interest in the Company other than as auditors. Although the
selection and appointment of independent auditors is not required to be
submitted to a vote of shareholders, the Directors deem it desirable to obtain
the shareholders' ratification and approval of this appointment.
Representatives of Goldstein Golub Kessler LLP are expected to be
present at the Annual Meeting with the opportunity to make a statement if they
desire to do so and are expected to be available to respond to appropriate
questions.
Approval of the proposal requires the affirmative vote of the holders
of a majority of the Common Stock and the 1997 Preferred Stock, voting as a
group, with respect thereto. In the event the proposal is not approved, the
Board will consider the negative vote as a mandate to appoint other independent
auditors of the Company for the next fiscal year.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF THE AUDITORS
The Company will provide without charge to each person being solicited by this
Proxy Statement, on written request of any such person, a copy of the Annual
Report of the Company on Form 10-KSB for the year ended December 31, 2001 (as
filed with the Securities and Exchange Commission), including
financial statements. All such requests should be directed to Henry Lam at
Creative Technologies Corp., 170 53rd Street, Brooklyn, New York 11232.
All proposals of shareholders intended to be included in the proxy statement to
be presented in the 2003 Annual Meeting materials must be received by the
Company's executive offices in Brooklyn, New York, no later than March 1, 2003.
By Order of the Board of Directors
David Selengut
Secretary
DATED: JUNE 25 , 2002