SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant [ X ]
Filed by a party other than the registrant [ _ ]
Check the appropriate box:
[ _ ] Preliminary proxy statement
[ X ] Definitive proxy statement
[ _ ] Definitive additional materials
[ _ ] Soliciting material pursuant to Rule 14a-11 or Rule 14a-12
GENIUS PRODUCTS, INC.
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(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
N/A
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(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of filing fee (check the appropriate box):
[ X ] No fee required
[ _ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) or 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule O-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4) Proposed aggregate value of transaction:
- --------------------------------------------------------------------
(5) Total fee paid:
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[ _ ] Fee paid previously with preliminary materials.
[ _ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11 (a) (2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration number,
or the Form or Schedule and date of filing.
(1) Amount previously paid:
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(2) Form, schedule or Registration Statement No.:
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(3) Filing party:
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(4) Date filed:
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GENIUS PRODUCTS, INC.
11250 El Camino Real, #100
San Diego, California 92130
(858) 793-8840
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 27, 2001
The Annual Meeting of the Shareholders of Genius Products, Inc. (the
"Company") will be held at our offices at 11250 El Camino Real, Suite 100, San
Diego, California, at 8:00 a.m. local time on Friday, July 27, 2001, for the
following purposes:
1. To elect a board of three Directors.
2. To approve an amendment to the Company's Articles of Incorporation
to increase the number of authorized shares of Common Stock from 6,250,000 to
25,000,000 shares.
3. To ratify the Company's 1997 Stock Option Plan.
4 To ratify the Company's 2000 Stock Option Plan.
5. To ratify the appointment of Cacciamatta Accountancy Corporation as
the Company's independent auditors for the fiscal year ended December 31, 2001.
6. To transact such other business as may properly be brought before
the meeting or any adjournments thereof.
Only shareholders of record at the close of business on May 29, 2001,
are entitled to notice of, and to vote at, the meeting and any adjournments
thereof.
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU PLAN TO ATTEND IN PERSON, YOU ARE URGED TO FILL IN
THE ENCLOSED PROXY AND TO SIGN AND FORWARD IT IN THE ENCLOSED BUSINESS REPLY
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IT IS
IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING IN ORDER THAT THE
PRESENCE OF A QUORUM MAY BE ASSURED. ANY SHAREHOLDER WHO SIGNS AND SENDS IN A
PROXY MAY REVOKE IT BY EXECUTING A NEW PROXY WITH A LATER DATE, BY WRITTEN
NOTICE OF REVOCATION TO THE SECRETARY OF THE COMPANY AT ANY TIME BEFORE IT IS
VOTED, OR BY ATTENDANCE AT THE MEETING AND VOTING IN PERSON.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES OF STOCK THAT
YOU HOLD. YOUR COOPERATION IN PROMPTLY RETURNING YOUR PROXY WILL HELP LIMIT
EXPENSES INCIDENT TO PROXY SOLICITATION.
By Order of the Board of Directors
/s/ Klaus Moeller
----------------------------------------
San Diego, California Klaus Moeller, Chairman of the Board and
June 25, 2001 Chief Executive Officer
GENIUS PRODUCTS, INC.
11250 El Camino Real, #100
San Diego, California 92130
(858) 793-8840
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PROXY STATEMENT
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SOLICITATION OF PROXIES
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Genius Products, Inc., a Nevada
corporation (the "Company") for use at the Annual Meeting of Shareholders to be
held at our offices at 11250 El Camino Real, Suite 100, San Diego, California,
at 8:00 a.m. local time on Friday, July 27, 2001, and at any and all
adjournments thereof (the "Annual Meeting"), for the purposes set forth in the
accompanying Notice of Annual Meeting of Shareholders. Accompanying this Proxy
Statement is the Board of Directors' Proxy for the Annual Meeting, which you may
use to indicate your vote as to the proposals described in this Proxy Statement.
In addition to solicitation by use of the mail, certain of the Company's
officers and employees may, without receiving additional compensation therefore,
solicit the return of proxies by telephone, telegram or personal interview. The
Company has requested that brokerage houses and custodians, nominees and
fiduciaries forward soliciting materials to their principals, the beneficial
owners of Common Stock, and has agreed to reimburse them for reasonable
out-of-pocket expenses in connection therewith.
REVOCATION OF PROXIES
All Proxies which are properly completed, signed and returned to the
Company prior to the Annual Meeting, and which have not been revoked, will be
voted in favor of the proposals described in this Proxy Statement unless
otherwise directed. A shareholder may revoke his or her Proxy at any time before
it is voted either by filing with the Secretary of the Company, at its principal
executive offices, a written notice of revocation or a duly executed proxy
bearing a later date or by attending the Annual Meeting and expressing a desire
to vote his or her shares in person.
RECORD DATE AND VOTING
The close of business on May 29, 2001, has been fixed as the record
date for the determination of shareholders entitled to notice of and to vote at
the Annual Meeting and any adjournment of the Annual Meeting. As of the record
date, the Company had outstanding 4,602,850 shares of Common Stock, par value
$.001 per share.
Each shareholder of record is entitled to one vote for each share held
on all matters to come before the meeting, except that shareholders may have
cumulative voting rights with respect to the election of Directors. All proxies
which are returned will be counted by the Inspector of Elections in determining
the presence of a quorum and on each issue to be voted on for which a vote was
cast. An abstention from voting or a broker non-vote will not be counted in the
voting process.
The proxy process does not permit shareholders to cumulate votes. No
shareholder may cumulate votes unless the candidate or candidates' names for
which such votes are to be cast have been placed in nomination prior to voting
and a shareholder has given notice of the shareholder's intention to cumulate
the shareholder's votes at the meeting and prior to the voting. If any
shareholder has given such notice, all shareholders may cumulate their votes for
candidates in nomination. Shareholders who have completed the enclosed proxy,
and who do not revoke such proxy before voting occurs, grant the proxy holders
discretionary authority to cumulate the shareholder's votes for directors if
cumulative voting occurs. Management does not, at this time, intend to give
notice of cumulative voting or to cumulate the votes it may hold pursuant to the
proxies solicited herein unless the required notice by a shareholder is given in
proper format at the meeting, in which instance management intends to
cumulatively vote all of the proxies held by it in favor of the nominees for
office as set forth herein. In the event cumulative voting shall be utilized,
1
each shareholder may cast a number of votes equal to the number of directors to
be elected multiplied by the number of shares held in such shareholder's name as
of the record date. All of these votes may be cast for one nominee, or they may
be distributed among as many nominees as the shareholder sees fit. The
candidates receiving the highest number of votes of the shares entitled to be
voted for them, up to the number of directors to be elected by such shares, are
elected.
Shareholders may revoke any proxy before it is voted by attendance at
the meeting and voting in person, by executing a new proxy with a later date, or
by giving written notice of revocation to the Secretary of the Company.
The shares represented by proxies which are returned properly signed
will be voted in accordance with the shareholders' directions. If the proxy card
is signed and returned without direction as to how they are to be voted, the
shares will be voted as recommended by the Board of Directors.
MAILING OF PROXY STATEMENT AND PROXY CARD
The Company's Annual Report for 2000 is enclosed for your convenience
but is not to be considered part of the solicitation material. The Company will
pay the cost for preparing, printing, assembling and mailing this Proxy
Statement and the Proxy Card and all of the costs of the solicitation of the
proxies.
The Company's principal executive offices are located at 11250 El
Camino Real, #100, San Diego, California 92130. This Proxy Statement and the
accompanying Proxy Card is first being mailed to shareholders on or about June
25, 2001.
PROPOSAL 1
ELECTION OF THE DIRECTORS
In accordance with the Articles of Incorporation and Bylaws of the
Company, the Board of Directors consists of not less than two nor more than
seven members, the exact number to be determined by the Board of Directors. At
each annual meeting of the shareholders of the Company, directors are elected
for a one-year term, or until their successors are elected or appointed. The
Board of Directors is currently set at two members. The Board of Directors
proposes the election of the nominees named below.
Unless marked otherwise, proxies received will be voted FOR the
election of each of the nominees named below, unless authority is withheld. If
any such person is unable or unwilling to serve as a nominee for the office of
director at the date of the Annual Meeting or any postponement or adjournment
thereof, the proxies may be voted for a substitute nominee, designated by the
proxy holders or by the present Board of Directors to fill such vacancy. The
Board of Directors has no reason to believe that any such nominee will be
unwilling or unable to serve if elected a director.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE ELECTION OF THE DIRECTORS NOMINATED HEREIN.
The Board of Directors proposes the election of the following nominees
as members of the Board of Directors:
Klaus Moeller Deborah L. Cross Larry Balaban
If elected, the nominees are expected to serve until the 2002 Annual
Meeting of Shareholders.
INFORMATION WITH RESPECT TO EACH NOMINEE AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to each
nominee and executive officer of the Company as of March 31, 2001.
2
NAME AGE POSITION
- ---- --- --------
Klaus Moeller 40 Chairman of the Board, Chief Executive Officer,
Director and Director Nominee
Deborah L. Cross 45 Director and Director Nominee
Michael Meader 35 Executive Vice President
Larry Balaban 37 Senior Vice President and Director Nominee
Howard Balaban 40 Senior Vice President
KLAUS MOELLER has served as the Chief Executive Officer and as a director since
the Company acquired ITM in October 1997. Prior to the acquisition, Mr. Moeller
had been the Chairman of the Board and Chief Executive Officer of ITM since its
inception in 1992. Mr. Moeller has a background in marketing, advertising, real
estate and auditing.
DEBORAH LAW CROSS has served as a director of the Company since March 14, 2000.
Since 1999, Ms. Cross has been the Director of Contract Services at HearPO, a
division of Sonus Corp. which owns and operates 99 hearing care centers in the
United States and Western Canada. As Director of Contract Services, Ms. Cross
designs, negotiates and implements managed care contracts. From 1996 to 1999,
Ms. Cross was an area manager for Sonus, during which she managed 21 audiology
clinics. From 1983 to 1996, Ms. Cross was the owner and president of Hearing
Dynamics, Inc. which owned and operated four audiology clinics. Ms. Cross sold
Hearing Dynamics to Sonus in 1996.
MICHAEL MEADER has served as the Company's Executive Vice President since April
of 1998. Mr. Meader worked as an outside consultant to the Company for a number
of years prior to his joining the Company. His expertise encompasses
distribution, category management and service for programs designed for
mass-market retailers. From 1994 to 1998, Mr. Meader served as Vice President of
Specialty Products at ARAMARK Corporation. While at ARAMARK, he controlled all
corporate operations related to ARAMARK's Music Division.
LARRY BALABAN has served as the Company's Senior Vice President of Marketing and
Production since January 1999 after having rendered consulting services to the
Company for just over six months. Prior to his appointment, Mr. Balaban was
president of Mr. B Productions, a non-traditional marketing firm based in New
York City, specializing in TV production, target marketing and membership
programs. From 1994-1997 Mr. Balaban was President of Virtual Reality
Productions, where he specialized in marketing, and coordinated specialized
audio productions for licensed products including Star Trek(TM), The Simpsons,
and the X-Files.
HOWARD BALABAN has served as the Company's Senior Vice President of Sales since
January 1999 after having rendered consulting services to the Company for just
over six months. Prior to his appointment, Mr. Balaban was a sales and marketing
consultant to various companies. From 1994-1997, Mr. Balaban was Senior Vice
President of Business Development for Future Call, Inc., a prepaid telephone
card company that he co-founded with William Shatner, and which held the rights
to all Star Trek(TM) properties associated with prepaid phone cards. From
1991-1995, he was the chief executive officer of 3B Telecommunications, a
company he founded and which acted as a master agent for telecom networks
reselling phone time and telecom services. Howard and Larry Balaban are
brothers.
During fiscal year 2000, the Board held no meetings as Board
resolutions were adopted by unanimous written consents. Directors do not receive
cash compensation for their services as directors but they are reimbursed for
expenses actually incurred in connection with attending meetings of the Board of
Directors. They may also receive options to acquire shares of the Company's
common stock. Directors and executive officers are elected annually. The Company
does not have an audit, nominating or compensation committee at this time.
3
AUDIT FEES
The aggregate fees billed by Cacciamatta Accountancy Corporation for
professional services rendered for the audit of the Company's annual financial
statements for the fiscal year ended December 31, 2000, and for the reviews of
the financial statements included in the Company's Quarterly Reports on Form
10-QSB for that fiscal year were $42,200.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION
There were no fees billed by Cacciamatta Accountancy Corporation for
professional services rendered for information technology services relating to
financial information systems design and implementation for the fiscal year
ended December 31, 2000.
ALL OTHER FEES
No fees were billed by Cacciamatta Accountancy Corporation for services
rendered to the Company for the fiscal year ended December 31, 2000, other than
for services described above under "Audit Fees".
COMPLIANCE WITH SECTION 16(a) OF EXCHANGE ACT
Form 3 filings for Klaus Moeller, Dorian Lowell and Michael Meader due
on January 3, 2000, were filed late on March 17, 2000. Minnesota Communications
Group, previously a beneficial owner of more than 10 percent of the Company's
issued and outstanding common stock, has not yet filed a Form 3 due on January
3, 2000 or Form 5 for the year 2000. Gerald Edick has not yet filed a Form 3,
due on January 3, 2000. No other person, who, at any time during the year ended
December 31, 2000, was a director, officer or beneficial owner of more than 10
percent of any class of equity securities of the Company registered pursuant to
Section 12 of the Exchange Act failed to file on a timely basis, as disclosed in
Form 3 filings, reports required by Section 16(a) of the Exchange Act during the
year ended December 31, 2000, or any prior years ended December 31. The
foregoing is based solely upon a review of Form 3 filings furnished to the
Company during the year ended December 31, 2000, and certain written
representations from officers, directors and shareholders who, to the best of
our knowledge, hold 10 percent or more of Company shares.
EXECUTIVE COMPENSATION
The compensation and benefits program of the Company is designed to
attract, retain and motivate employees to operate and manage the Company for the
best interests of its constituents.
Executive compensation is designed to provide incentives for those
senior members of management who bear responsibility for the Company's goals and
achievements. The compensation philosophy is based on a base salary, with
opportunity for significant bonuses to reward outstanding performance, and a
stock option program.
DIRECTOR COMPENSATION*
Directors receive no cash compensation for their services to the
Company as directors, but are reimbursed for expenses actually incurred in
connection with attending meetings of the Board of Directors. On March 14, 2000,
Deborah Cross was granted 7,500 options to purchase shares of our common stock
at an exercise price of $4.40. The market price of our shares on the date of
grant was $3.50. The rights to exercise the options vest in full on July 14,
2000, and the options expire as of March 14, 2010.
* The number of shares and share prices disclosed reflect the reverse stock
split which occurred on April 10, 2001.
4
EXECUTIVE OFFICER COMPENSATION
The following table sets forth compensation information for services
rendered to the Company by certain executive officers in all capacities during
each of the prior three fiscal years. Other than as set forth below, no
executive officer's salary and bonus exceeded $100,000 in any of the applicable
years. The following information includes the dollar value of base salaries,
bonus awards, the number of stock options granted and certain other
compensation, if any, whether paid or deferred.
SUMMARY COMPENSATION TABLE*
Annual Compensation Long Term Compensation
------------------------- ----------------------------------------
Awards Payouts
-------------------------- -------------
Other Restricted Securities
Annual Stock Underlying LTIP All Other
Name and Position Year Salary Bonus Compensation Awards Options/SARs Payouts Compensation
$ $ $ $ # $ $
- --------------------- ----------- ------------ ---------- -------------- ----------- -------------- ------------- ------------
Klaus Moeller 2000 150,000/(1)/ 0 0 0 137,500 0 0
CEO 1999 146,000 0 0 0 0 0 0
1998 102,000 0 0 0 0 0 0
Dorian Lowell 2000 150,000 0 0 0 87,500 0 0
President 1999 63,249 0 0 0 187,500 0 0
1998 0 0 0 0 0 0 0
Michael Meader 2000 150,000/(1)/ 0 0 0 137,500 0 0
Executive VP 1999 146,000 0 0 0 0 0 0
1998 102,000 0 0 0 0 0 0
Larry Balaban 2000 110,000 0 0 0 237,500 0 0
Senior VP 1999 107,874 0 0 0 75,000 0 0
1998 0 0 0 0 12,500 0 0
Howard Balaban 2000 110,000 0 0 0 237,500 0 0
Senior VP 1999 113,892 0 0 0 75,000 0 0
1998 0 0 0 0 12,500 0 0
* The number of shares and share prices disclosed reflect the reverse stock
split which occurred on April 10, 2001.
(1) During 2000, in response to the Company's limited cash flow, Mr. Moeller and
Mr. Meader each agreed to accept approximately $12,000 of their salaries in the
form of shares of common stock based upon the closing price of the common stock
as of January 2, 2001, which was $0.80. Pursuant to these agreements, each of
Mr. Moeller and Mr. Meader shall be issued 14,583 shares of common stock.
The following table sets forth the options granted, if any, to the
persons named in the "Summary Compensation Table" during the Company's fiscal
year ended December 31, 2000.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(INCLUDES OPTIONS REPRICED IN LAST FISCAL YEAR)*
INDIVIDUAL GRANTS
- --------------------------------------------------------------------------------
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED (#) FISCAL YEAR(%) ($/SH) DATE
- --------------------------------------------------------------------------------
Klaus Moeller 87,500(1) 10% 0.80 05/25/10
50,000 5% 0.80 11/18/10
Dorian Lowell 87,500(1) 10% 0.80 05/25/10
Michael Meader 87,500(1) 10% 0.80 05/25/10
50,000 5% 0.80 11/18/10
Larry Balaban 87,500(1) 10% 0.80 05/25/10
150,000 16% 0.80 11/18/10
Howard Balaban 87,500(1) 10% 0.80 05/25/10
150,000 16% 0.80 11/18/10
* The number of shares and share prices disclosed reflect the reverse stock
split which occurred on April 10, 2001.
(1) Repriced on November 30, 2000, from an original exercise price of $2.16.
5
The following table sets forth information concerning the exercise of
stock options by each person named in the "Summary Compensation Table" during
the Company's fiscal year ended December 31, 2000, and the value of all
exercisable and unexercisable options at December 31, 2000.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES*
SHARES NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
ACQUIRED ON VALUE UNEXERCISED OPTIONS AT FY-END IN-THE-MONEY OPTIONS
NAME EXERCISE REALIZED (#) AT FY-END ($)(1)
-------------- ------------- --------------------------------- ---------------------------------
($) ($) Exercisable Unexercisable Exercisable Unexercisable
- ------------------- -------------- ------------- -------------- ------------------ -------------- ------------------
Klaus Moeller 338 994 324,375 0 0 0
Dorian Lowell 338 994 275,800 0 0 0
Michael Meader 338 994 324,375 0 0 0
Larry Balaban 338 994 324,375 0 0 0
Howard Balaban 338 994 324,375 0 0 0
* The number of shares and share prices disclosed reflect the reverse stock
split which occurred on April 10, 2001.
(1) Based on the closing price for the Company's common stock at the close of
market on December 31, 2000. On December 31, 1999, the price of the Company's
common stock was $0.80. The lowest exercise price of any outstanding option was
$0.80.
On February 28, 2000, by a unanimous consent of the board of directors
and the committee appointed by the board to manage the Company's non-qualified
stock option plan, the board resolved to:
1. reprice 12,500 options previously granted to Larry Balaban on December 1,
1998, from an original exercise price of $10.00 to $5.00;
2. reprice 75,000 options previously granted to Larry Balaban on January 6,
1999, from an original exercise price of $10.00 to $5.00;
3. reprice 12,500 options previously granted to Howard Balaban on December 1,
1998, from an original exercise price of $10.00 to $5.00;
4. reprice 75,000 options previously granted to Howard Balaban on January 6,
1999, from an original exercise price of $10.00 to $5.00;
5. reprice 37,500 options previously granted to Dorian Lowell on August 24,
1999, from an original exercise price of $10.52 to $5.00, and bring forward
the date on which the rights to exercise such options became fully vested
from March 1, 2000, to January 31, 2000;
6. reprice 37,500 options previously granted to Dorian Lowell on August 24,
1999, from an original exercise price of $10.52 to $5.00, and bring forward
the date on which the rights to exercise such options became fully vested
from July 1, 2000, to January 31, 2000; and
7. reprice 112,500 options previously granted to Dorian Lowell on September
30, 1999, from an original exercise price of $9.00 to $5.00.
On October 16, 2000, by a unanimous consent of the board of directors
and the committee appointed by the board to manage the Company's non-qualified
stock option plan, the board resolved to:
1. reprice 187,500 options granted to Klaus Moeller in previous years from a
price of $5.00 to $2.75;
2. reprice 187,500 options granted to Michael Meader in previous years from a
price of $5.00 to $2.75;
3. reprice 187,500 options granted to Dorian Lowell in previous years from a
price of $5.00 to $2.75;
4. reprice 87,500 options granted to Larry Balaban in previous years from a
price of $5.00 to $2.75; and
5. reprice 87,500 options granted to Howard Balaban in previous years from a
price of $5.00 to $2.75.
6
On November 30, 2000, by a unanimous consent of the board of directors
and the committee appointed by the board to manage the Company's non-qualified
stock option plan, the board resolved to:
1. reprice 187,500 options granted to Klaus Moeller in previous years from a
price of $2.75 to $0.80;
2. reprice 187,500 options granted to Michael Meader in previous years from a
price of $2.75 to $0.80;
3. reprice 187,500 options granted to Dorian Lowell in previous years from a
price of $2.75 to $0.80;
4. reprice 87,500 options granted to Larry Balaban in previous years from a
price of $2.75 to $0.80; and
5. reprice 87,500 options granted to Howard Balaban in previous years from a
price of $2.75 to $0.80.
The closing price of the Company's common stock on April 5, 2001, as
quoted on the OTC Bulletin Board, was $0.6248 (adjusted for the reverse stock
split of April 10, 2001). Since the original dates on which the above-described
options were granted, the price of our shares has significantly declined. We
believe that we will only retain executives of caliber and experience if they
are offered competitive compensation packages. Because we cannot afford to pay
high cash salaries, the granting of options is a critical component of the
overall compensation paid to our officers. We believe it is uncompetitive and a
disincentive to set the exercise price of options at unreasonable premiums over
the market price of the shares on the date of grant. Similarly, a decline in the
price of the shares over a period when our executives have made significant
contributions which is not offset by a reduction in the exercise price, is, we
believe, unfair to those executives. A decline in our share price results in an
effective increase in the premium of the exercise price over the market price
which penalizes the executives, and is potentially harmful to the Company if the
executive then takes the view that his or her overall compensation package is
becoming uncompetitive. We will continue to review the exercise prices and
vesting dates of options granted to our employees and may reprice and/or change
vesting dates as we deem appropriate based on the prevailing price of our shares
and our business operations and prospects.
PRINCIPAL SHAREHOLDERS
The following table* sets forth certain information known to the
Company with respect to the beneficial ownership of common stock as of April 6,
2001 by (i) each person who is known by the Company to own beneficially more
than 5% of common stock, (ii) each of the Company's directors and executive
officers, and (iii) all officers and directors of the Company as a group. Except
as otherwise listed below, the address of each person is c/o Genius Products,
Inc. 11250 El Camino Real, #100, San Diego, California 92130.
NAME AND ADDRESS OF OWNER SHARES BENEFICIALLY OWNED(1)
------------------------- ----------------------------
Number Percent
------ -------
Klaus Moeller, Director 369,375 6.01%(2)(3)(4)
Deborah L. Cross, Director 0 0%
Dorian Lowell, President 275,800 4.49%
Michael Meader, Executive Vice President 411,875 6.70%(5)
Larry Balaban, Senior Vice President 326,313 5.31%
Howard Balaban, Senior Vice President 326,250 5.31%
All officers and directors as a group (6 persons) 1,709,613 27.82%
- --------------------
* The number of shares and share prices reflect the reverse stock split which
occurred on April 10, 2001.
(1) Beneficial Ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock
issuable pursuant to options or warrants exercisable or convertible
currently, or within 60 days of April 9, 2001, are deemed outstanding for
computing the percentage of the person holding such option or warrant but
are not deemed outstanding for computing the percentage of any other
person. Except as noted or pursuant to applicable community property laws,
the persons named in the table have sole voting and investment power with
respect to all shares of Common Stock beneficially owned.
(2) Includes 90,000 shares held by Shelly Moeller (as her sole property), who
is the wife of Klaus Moeller. Mr. Moeller disclaims all beneficial
ownership of such shares, including all voting, transfer and investment
powers relating thereto.
7
(3) Includes 37,500 shares held by Dorian Lowell as custodian for Tia Moeller,
who is the daughter of Klaus Moeller. Mr. Moeller disclaims all beneficial
ownership of such shares, including all voting, transfer and investment
powers relating thereto.
(4) Includes 37,500 shares held by Dorian Lowell as custodian for Hayden
Moeller, who is the son of Klaus Moeller. Mr. Moeller disclaims all
beneficial ownership of such shares, including all voting, transfer and
investment powers relating thereto.
(5) Includes 25,000 shares held by Suzanne Meader, who is the wife of Michael
Meader.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The number of shares and share prices disclosed below reflect the
reverse stock split which occurred on April 10, 2001.
In September 1999, Gerald Edick, a co-founder of ITM, left the Company
and resigned as President and as a member of the Company's Board of Directors.
In consideration of his services, the Company entered into a severance letter
agreement on October 26, 1999 with Mr. Edick under which the Company agreed to
pay him a severance of $200,000 in equal installments over one year, and
continue his medical benefits until September 30, 2000, unless he independently
secured medical benefits before that date. The Company also agreed to allow Mr.
Edick to retain all of his options to purchase 187,500 shares of common stock
which were granted to him on December 7, 1997, and which fully vested on January
1, 1999.
On March 1, 2000, the Company entered into a Consulting Agreement with
Gerald Edick to revise the terms of the severance letter of October 26, 1999.
Pursuant to the Consulting Agreement, Mr. Edick irrevocably revoked his rights
to the cash bonus and other benefits under the severance letter. Mr. Edick did,
however, retain his options to purchase 187,500 shares of common stock as set
forth in the severance letter. Under the Consulting Agreement, Mr. Edick was
paid $14,500 per month from March 1 through September 30, 2000, in consideration
for investor relations and fundraising services performed by Mr. Edick.
On December 31, 2000, Dorian Lowell left the Company and resigned as
President. Mr. Lowell retained his options to purchase 275,800 shares of common
stock.
The Company currently has employment and change of control agreements
in effect with its senior executives. The Company is presently negotiating
extensions of these Agreements.
PROPOSAL 2
AUTHORIZATION OF ADDITIONAL SHARES
The Company's Articles of Incorporation currently authorize 6,250,000
shares of Class A Common Stock (post-reverse stock split). An increase in our
authorized shares to 25,000,000 Common Stock shares needs to be approved by the
Company's shareholders to enable the Board of Directors to obtain access to
additional equity financing necessary to fund general working capital
requirements and the expansion of business operations. We have no current plans
to use this increase in stock for purposes of merger and/or acquisition.
If the proposed amendment is approved, the additional authorized, but
unissued shares of Common Stock will be identical in all respects to presently
authorized shares of Common Stock. The Board of Directors believes that an
increase in the number of authorized shares of Common Stock is desirable in
order to provide the Company with shares which will be available for issuance
from time to time, without further action or authorization by the shareholders,
as needed for such proper corporate purposes as may be determined by the Board
of Directors. Such corporate purposes might include, among other things, the
raising of capital funds through private or public offerings, the acquisition by
the Company of other companies, declaration of stock splits or stock dividends,
the issuance of stock under options granted or to be granted under various stock
incentive plans or other benefit plans for the Company's employees and
non-employee directors and the issuance of stock under warrants granted or to be
granted in the future.
8
It should be noted that the issuance of additional shares of Common
Stock could have a detrimental effect upon existing holders of the Company's
Common Stock since such issuance may, among other things, have a dilutive effect
on the earnings per share of Common Stock and the voting rights of holders of
the Common Stock. Although authorization of additional shares of Common Stock is
recommended by the Board of Directors for the reasons stated herein, and not
because of any possible anti-takeover effect, such additional authorization of
shares of Common Stock could be used by incumbent management to make more
difficult, and thereby discourage, an attempt to acquire control of the Company,
even though shareholders of the Company may deem such an acquisition desirable.
For example, the shares could be privately placed with purchasers who might
support the Board of Directors in opposing a hostile takeover bid. The issuance
of new shares could also be used to dilute the stock ownership and voting power
of a third party seeking to remove the Directors, replace incumbent Directors,
accomplish certain business combinations or alter, amend, or repeal portions of
the Articles of Incorporation.
Under Nevada law, an amendment of Articles of Incorporation to
effectuate a change in the number of shares of the authorized capital stock of a
corporation requires the approval of a majority of the outstanding stock
entitled to vote thereon. The approval of the increase in authorized shares by
the holders of a majority of Common Stock is currently sought.
The Board of Directors has unanimously approved and recommends that the
shareholders approve the increase to 25,000,000 authorized shares of Common
Stock.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL 2.
PROPOSAL 3
RATIFICATION OF THE COMPANY'S
1997 STOCK OPTION PLAN
On December 9, 1997, the Board of Directors authorized the adoption of
the 1997 Stock Option Plan. This plan was amended on June 12, 2001. The proposal
to ratify the 1997 Stock Option Plan, as amended, is recommended by the Board of
Directors because it considers it to be in the best interests of the Company and
its shareholders. The Stock Option Plan was designed to serve as an incentive to
directors, officers, and key employees and contractors to focus their services
on achieving superior earnings performance and increasing the value of the
shareholders' proprietary interest in the Company. A maximum of 1,250,000
(post-reverse stock split) aggregate shares are reserved for issuance under the
1997 Stock Option Plan. The 1997 Stock Option Plan vests broad discretionary
power in the Plan Committee, including the power to (i) select eligible
optionees to be granted stock options, (ii) set the option exercise price
(subject to certain restrictions), (iii) establish the duration of each option
(not to exceed ten years), (iv) specify the method of exercise, and (v)
designate the medium and time of payment. The 1997 Stock Option Plan terminates
on December 8, 2007, unless sooner terminated by the Board. No options may be
granted after termination of the 1997 Stock Option Plan, although Options
outstanding at the time of termination will continue to be exercisable in
accordance with their terms. The issuance of shares of Common Stock upon the
exercise of options granted under the 1997 Stock Option Plan will dilute the
voting power of current shareholders. The extent of dilution will depend on the
number of options exercised and difference between the option exercise price and
the market price for the Common Stock at the time of exercise.
The foregoing summary of the 1997 Stock Option Plan is qualified in its
entirety by the terms of the plan, which is available for review at the
principal office of the Company. The Board of Directors believes that any effect
the 1997 Stock Option Plan will have in diluting the voting power of current
shareholders will be exceeded by the effect of the plan to attract and retain
the services of experienced and knowledgeable directors, officers, employees and
other eligible service-providers who will contribute to the profitability and
value of the current shareholders' holdings in the Company
The Board of Directors has unanimously approved and recommends that the
shareholders authorize and ratify the 1997 Stock Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 3.
9
PROPOSAL 4
RATIFICATION OF THE COMPANY'S
2000 STOCK OPTION PLAN
On May 25, 2000, the Board of Directors authorized the adoption of the
2000 Stock Option Plan. This plan was amended on June 12, 2001. The proposal to
ratify the 2001 Stock Option Plan is recommended by the Board of Directors
because it considers it to be in the best interests of the Company and its
shareholders. The Stock Option Plan was designed to serve as an incentive to
directors, officers, and key employees and contractors to focus their services
on achieving superior earnings performance and increasing the value of the
shareholders' proprietary interest in the Company. A maximum of 1,250,000
(post-reverse stock split) aggregate shares are reserved for issuance under the
2000 Stock Option Plan. The 2000 Stock Option Plan vests broad discretionary
power in the Plan Administrator, including the power to (i) select eligible
optionees to be granted stock options, (ii) set the option exercise price
(subject to certain restrictions), (iii) establish the duration of each option
(not to exceed ten years), (iv) specify the method of exercise, and (v)
designate the medium and time of payment. The 2001 Stock Option Plan terminates
on June 1, 2005, unless sooner terminated by the Board. No options may be
granted after termination of the 2000 Stock Option Plan, although Options
outstanding at the time of termination will continue to be exercisable in
accordance with their terms. The issuance of shares of Common Stock upon the
exercise of options granted under the 2000 Stock Option Plan will dilute the
voting power of current shareholders. The extent of dilution will depend on the
number of options exercised and difference between the option exercise price and
the market price for the Common Stock at the time of exercise.
The foregoing summary of the 2000 Stock Option Plan is qualified in its entirety
by the terms of the plan, which is available for review at the principal office
of the Company. The Board of Directors believes that any effect the 2000 Stock
Option Plan will have in diluting the voting power of current shareholders will
be exceeded by the effect of the plan to attract and retain the services of
experienced and knowledgeable directors, officers, employees and other eligible
service-providers who will contribute to the profitability and value of the
current shareholders' holdings in the Company. The Company cannot currently
determine the number of options which will be issued under the 2000 Stock Option
Plan or to whom options will be issued.
The Board of Directors has unanimously approved and recommends that the
shareholders authorize and ratify the 2000 Stock Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 4.
PROPOSAL 5
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has authorized the firm of Cacciamatta Accountancy
Corporation, independent certified public accountants, to serve as independent
auditors for the fiscal year ended December 31, 2001. A representative of
Cacciamatta Accountancy Corporation is expected to be present at the Annual
Meeting with the opportunity to make a statement and to be available to respond
to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL 5.
The Board of Directors does not know of any other matters which may
come before the Annual Meeting. However, if any other matter shall properly come
before the Annual Meeting, the proxy holders named in the proxy accompanying
this statement will have discretionary authority to vote all proxies in
accordance with their best judgment.
10
SHAREHOLDER PROPOSALS FOR THE 2002 ANNUAL MEETING
Any shareholder who wishes to present a proposal for consideration at
the annual meeting of shareholders to be held in 2002 must submit such proposal
in accordance with the rules promulgated by the Securities and Exchange
Commission. In order for a proposal to be included in the Company's proxy
materials relating to the 2002 Annual Meeting of Shareholders, the shareholder
must submit such proposal in writing to the Company so that it is received no
later than March 28, 2002. Any shareholder proposal submitted with respect to
the Company's 2002 Annual Meeting of Shareholders which proposal is received by
the Company after June 11, 2002 will be considered untimely for purposes of Rule
14a-4 and 14a-5 under the Exchange Act and the Company may vote against such
proposal using its discretionary voting authority as authorized by proxy.
ANNUAL REPORT TO SHAREHOLDERS
The Company's Annual Report for the fiscal year ended December 31,
2000, is being mailed to shareholders along with this Proxy Statement. The
Annual Report is not to be considered part of the soliciting material.
By Order of the Board of Directors
/s/ Klaus Moeller
----------------------------------------
San Diego, California Klaus Moeller, Chairman of the Board and
June 25, 2001 Chief Executive Officer
11
PROXY - GENIUS PRODUCTS, INC.
ANNUAL MEETING OF SHAREHOLDERS - JULY 27, 2001
The undersigned shareholder(s) of Genius Products, Inc. (the "Company") hereby
appoints Klaus Moeller and Michael Meader, or each of them, the attorney, agent
and proxy of the undersigned, with full power of substitution, to vote all the
shares of the Company which the undersigned is entitled to vote at the Annual
Meeting of Shareholders to be held at 11250 El Camino Real, Suite 100, San
Diego, California, on July 27, 2001, at 8:00 a.m. local time, and any and all
adjournments thereof, as fully and with the same force and effect as the
undersigned might or could do if personally present thereat, as follows:
1. ELECTION OF DIRECTORS. To elect the following three (3) persons to the
Board of Directors of the Company to serve until the 2002 Annual Meeting of
Shareholders and until their successors are elected and have qualified:
KLAUS MOELLER DEBORAH L. CROSS LARRY BALABAN
[ ] FOR ALL NOMINEES LISTED ABOVE [ ] WITHHOLD AUTHORITY TO VOTE FOR
(EXCEPT AS MARKED TO THE CONTRARY) ALL NOMINEES LISTED ABOVE.
A SHAREHOLDER MAY WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEES BY DRAWING A LINE
THROUGH OR OTHERWISE STRIKING OUT THE NAME OF SUCH NOMINEE.
IF NO SPECIFICATION IS MADE, THE VOTES REPRESENTED BY THIS PROXY WILL BE CAST
FOR THE ELECTION OF THE NOMINEES LISTED ABOVE. THIS PROXY VESTS DISCRETIONARY
AUTHORITY TO CUMULATE VOTES FOR DIRECTORS.
2. AUTHORIZATION OF INCREASE IN AUTHORIZED SHARES OF COMMON STOCK OF THE
COMPANY TO 25,000,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
UNLESS OTHERWISE SPECIFIED, THE VOTES REPRESENTED BY THIS PROXY WILL BE CAST FOR
APPROVAL OF THE ABOVE PROPOSAL.
3. RATIFICATION OF THE COMPANY'S 1997 STOCK OPTION PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
UNLESS OTHERWISE SPECIFIED, THE VOTES REPRESENTED BY THIS PROXY WILL BE CASE FOR
RATIFICATION AND APPROVAL OF THE ABOVE PROPOSAL.
4. RATIFICATION OF THE COMPANY'S 2000 STOCK OPTION PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
UNLESS OTHERWISE SPECIFIED, THE VOTES REPRESENTED BY THIS PROXY WILL BE CAST FOR
RATIFICATION AND APPROVAL OF THE ABOVE PROPOSAL.
5. RATIFICATION OF THE SELECTION OF CACCIAMATTA ACCOUNTANCY CORPORATION TO
SERVE AS AUDITORS OF THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31,
2001.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
UNLESS OTHERWISE SPECIFIED, THE VOTES REPRESENTED BY THIS PROXY WILL BE CAST FOR
RATIFICATION AND APPROVAL OF THE ABOVE PROPOSAL.
6. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING AND ANY ADJOURNMENT(S)
THEREOF.
This Proxy when properly executed will be voted in the manner directed herein by
the undersigned shareholder. Shareholders who are present at the meeting may
withdraw their proxy and vote in person if they so desire. THIS PROXY IS
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
Please sign exactly as your name appears on your stock certificates. When shares
are held by joint tenants, both should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full title as such. If
a corporation, please sign in full corporate name by president or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
Dated: ______________________________, 2001
-------------------------------------------
Signature
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Signature, if held jointly
-------------------------------------------
Printed Name(s)
I (We) [ ] will [ ] will not attend the
Annual Meeting in person.
NO POSTAGE IS REQUIRED IF THIS PROXY IS RETURNED IN THE ENCLOSED ENVELOPE AND
MAILED IN THE UNITED STATES.