SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1)
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.
-------------------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
N/A
- --------------------------------------------------------------------------------
(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:
_______________________________________________________________
(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): ______________________________________________
(4) Proposed aggregate value of transaction: ______________________
(5) Total fee paid: _______________________________________________
[ _ ] 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: _______________________________________
(2) Form, schedule or Registration Statement No.: _________________
(3) Filing party: _________________________________________________
(4) Date filed: ___________________________________________________
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 7, 2003
The Annual Meeting of the Shareholders of Genius Products, Inc. (the
"Company") will be held at the Marriott Hotel, 11966 El Camino Real, San Diego,
California at 8:30 a.m. local time on Monday, July 7, 2003, for the following
purposes:
1. To elect a board of six Directors.
2. To ratify our 2003 Stock Option Plan.
3. To ratify the appointment of Cacciamatta Accountancy Corporation as
our independent auditors for the fiscal year ended December 31, 2003.
4. 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 8, 2003,
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 ATTENDING 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,
May 30, 2003 Chief Executive Officer and Interim
Chief Financial Officer
GENIUS PRODUCTS, INC.
11250 El Camino Real, Suite 100
San Diego, California 92130
(858) 793-8840
____________________
PROXY STATEMENT
(Amendment No. 1)
____________________
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 the Marriott Hotel, 11966 El Camino Real, San Diego, California on
Monday, July 7, 2003, 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 our officers and employees may,
without receiving additional compensation therefore, solicit the return of
proxies by telephone, telegram or personal interview. We have requested that
brokerage houses and custodians, nominees and fiduciaries forward soliciting
materials to their principals, the beneficial owners of common stock, and have
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 us
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 8, 2003, 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,
we had outstanding 16,305,497 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,
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
1
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
Our Annual Report for 2002 is enclosed for your convenience but is not
to be considered part of the solicitation material. We 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.
Our principal executive offices are located at 11250 El Camino Real,
Suite 100, San Diego, California 92130. This Proxy Statement and the
accompanying Proxy Card is first being mailed to shareholders on or about May
14, 2003.
PROPOSAL 1
ELECTION OF THE DIRECTORS
In accordance with our Articles of Incorporation and Bylaws, 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 seven 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:
David Anderson Larry Balaban Richard Bermingham
Klaus Moeller Nancy Evensen Margaret Loesch
If elected, the nominees are expected to serve until the 2004 Annual
Meeting of Shareholders.
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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 May 8, 2003.
NAME AGE POSITION
- ---- --- --------
Klaus Moeller 42 Chairman of the Board, Chief Executive
Officer, Interim Chief Financial
Officer, Director and Director Nominee
Michael Meader 37 President
Larry Balaban 39 Executive Vice President of Marketing and
Production, Director and Director Nominee
Howard Balaban 42 Executive Vice President of New Business
Development
Julie Ekelund 41 Executive Vice President of Sales
David Anderson 61 Director and Director Nominee*
Richard Bermingham 64 Director and Director Nominee*
Deborah Law Cross 48 Director*
Nancy Evensen 47 Director and Director Nominee*
Margaret Loesch 57 Director and Director Nominee*
* Member of Audit and Compensation Committees.
KLAUS MOELLER has served as our Chief Executive Officer and as a
Director since October 1997. Mr. Moeller has served as our Interim Chief
Financial Officer since May 2001. Mr. Moeller had been the Chairman of the Board
and Chief Executive Officer of ITM, which we acquired in October 1997. Mr.
Moeller has a background in marketing, advertising, real estate and auditing.
MICHAEL MEADER has served as our Executive Vice President since April
of 1998, and our Executive Vice President - Distribution since January 2002. He
was appointed our President in May of 2002. Mr. Meader worked as an outside
consultant with us for a number of years prior to 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 our Executive Vice President of Marketing
and Production since January 1999, after having rendered consulting services to
us for approximately six months. He was elected to our Board of Directors in
July 2001. Before joining Genius, 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. Larry
and Howard Balaban are brothers.
HOWARD BALABAN has served as our Executive Vice President of New
Business Development since January 2002. He was previously appointed Senior Vice
President of Sales in January 1999 after having rendered consulting services to
us 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.
JULIE EKELUND was appointed as our Executive Vice President of Sales in
April 2002 after having rendered consulting services to us for a year. She has
also worked in sales with Ekelund & Associates since 1994.
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DAVID ANDERSON was appointed a Director in May 2002. Mr. Anderson has
been a private investor and consultant for the last six years since his
retirement from Burlington Northern Railway where he served as Executive Vice
President and CFO. He was previously a Senior Vice President and CFO of Federal
Express Corporation.
RICHARD BERMINGHAM was appointed to our Board of Directors in May 2002.
In 1994, after retiring from 27 years of service with Collins Foods/Sizzler,
including 15 years as President and 7 years as CEO, Mr. Bermingham served as
Vice Chairman of the Board for American Golf Corporation. He currently serves on
the boards of two private companies. He has also served as an active advisor to
and/or investor in various start-up companies.
DEBORAH LAW CROSS has served on our Board of Directors since March 14,
2000. In May 2001, Ms. Cross retired from her position as Director of Contract
Services at HearPO, a division of Sonus USA. which owns and operates hearing
care centers in the United States and Western Canada. As Director of Contract
Services, Ms. Cross designed, negotiated and implemented 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.
NANCY EVENSEN was appointed to our Board of Directors in May 2002. Ms.
Evensen joined North American Membership Group, a club-based affinity marketing
and publishing company in 1994 as Senior Vice President of Marketing to oversee
all marketing functions. She has served as President and CEO at North American
Membership Group since 1999. Ms. Evensen was previously a Senior Vice President
of Marketing at Nordic Track, after starting her career at Fingerhut and later
moving to CVN Companies, a home shopping and mail order business which was sold
to QVC.
MARGARET LOESCH was appointed to our Board of Directors in May 2002.
Ms. Loesch is currently co-owner and partner in East Carolina Radio Inc. and
East Carolina Radio of Elizabeth City, Inc. which owns and operates a group of
radio stations in eastern North Carolina. From 1998 to 2001, Ms. Loesch was the
founding President and Chief Executive Officer of Crown Media United States
where she headed the building and launching of the U.S. Hallmark Channel, as
well as its predecessor, Odyssey Network. Previously she was President of the
Jim Henson Television Group, Worldwide. From 1990 to 1997, Ms. Loesch was
founding President and CEO, as well as the key architect of FOX Kids Networks,
Worldwide. Ms. Loesch was previously President and CEO of Marvel Productions, a
company she helped build and maneuver through two subsequent ownership changes,
and has served as Executive Vice-President of Hanna-Barbera Productions. She was
also with NBC TV Network as its Director, Children's Programs and with ABC TV
Network, where she held a variety of production positions. Ms. Loesch is a
four-time Emmy Award winner, a George Foster Peabody Award winner, and recipient
of the prestigious Chair Award from the Caucus for Television Producers,
Writers, and Directors. Ms. Loesch is currently Vice-Chairman of the Academy of
Television Arts & Sciences Foundation.
During fiscal year 2002, the Board held four meetings. All directors
attended at least 75% of the meetings held by the Board of Directors and the
committees on which he or she served during 2002, except for David Anderson and
Deborah Law Cross who each attended one of the two meetings held by the
Compensation Committee. Directors do not receive cash compensation for their
services as directors but are reimbursed for expenses actually incurred in
connection with attending meetings of the Board of Directors. For the last two
quarters of fiscal year 2001 and the first two quarters of fiscal year 2002,
each director received 2,000 restricted shares of our common stock for each
quarter of service on the Board. A total of 24,000 shares was awarded at a value
of $1.30 per share, 8,000 shares each to Klaus Moeller, Larry Balaban and
Deborah Law Cross, the members of the Board at that time.
Each director appointed on or after April 2002 who is not also an
officer received an option to purchase 10,000 shares of our common stock for
joining the Board. The exercise price for these options is $2.59 per share which
was the closing price of our common stock on May 13, 2002, the date of the
grant. As of our 2002 Annual Meeting, each director who is not also an officer
received an option to purchase 25,000 shares of our common stock for a year of
service on the Board. These options vest following the year of service. The
exercise price for these options is $1.53 per share which was the closing price
of our common stock on July 8, 2002, the date of the grant. Directors and
executive officers are elected annually.
We do not have a nominating committee at this time. The Board of
Directors has a Compensation Committee whose members are David Anderson, Richard
Bermingham, Deborah Law Cross, Nancy Evensen and Margaret Loesch. The
Compensation Committee held two meetings during 2002. The Board of Directors
also has an Audit Committee that reviews the results and scope of the audit and
other accounting-related matters. The members of the Audit Committee are
currently David Anderson, Richard Bermingham, Deborah Law Cross, Nancy Evensen
and Margaret Loesch. Deborah Law Cross was the only member of the Audit
Committee prior to the appointment of additional outside directors in May of
2002. The Audit Committee held four meetings during 2002.
4
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, 2002, and for the reviews of
the financial statements included in the Company's Quarterly Reports on Form
10-QSB for that fiscal year were $62,144.
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, 2002.
ALL OTHER FEES
No fees were billed by Cacciamatta Accountancy Corporation for services
rendered to the Company for the fiscal year ended December 31, 2002, other than
for services described above under "Audit Fees."
AUDIT COMMITTEE CHARTER
Our Board of Directors has previously adopted a written charter for the
Audit Committee, which established operating guidelines for the Audit Committee.
AUDIT COMMITTEE REPORT
THE FOLLOWING REPORT OF THE AUDIT COMMITTEE SHALL NOT BE DEEMED TO BE
SOLICITING MATERIAL OR TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934 OR
INCORPORATED BY REFERENCE IN ANY DOCUMENT SO FILED.
AUDIT COMMITTEE REPORT
The Audit Committee has reviewed and discussed our audited financial
statements with our management and has discussed certain required matters with
our independent auditors, in accordance with Statement of Auditing Standards No.
61.
Our independent auditors also provided written documentation to the
Audit Committee, describing all relationships between the auditors and the
Company that might bear on the auditors' independence as required by
Independence Standards Board Standard No. 1. The Audit Committee discussed with
the auditors any relationships that may impact their objectivity and
independence and satisfied itself as to the auditors' independence.
Based on the above-mentioned reviews and discussions with management
and the independent auditors, the Audit Committee recommended to the Board that
our audited financial statements be included in our Annual Report on Form 10-KSB
for the fiscal year ended December 31, 2002. The Audit Committee also
recommended the re-appointment of the independent auditors and the Board
concurred in such recommendation. All members of the Audit Committee are
considered to be "independent directors," as defined in NASDAQ Marketplace Rule
4200.
AUDIT COMMITTEE
David Anderson
Richard Bermingham
Deborah Law Cross
Nancy Evensen
Margaret Loesch
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COMPLIANCE WITH SECTION 16(a) OF EXCHANGE ACT
The rules of the Security and Exchange Commission require that we
disclose late filings of stock ownership, or changes in ownership, by our
directors, officers and 10% shareholders. Based upon our review of the copies of
forms we received, or written representations from reporting persons that they
were not required to file a Form 5, we believe that, during 2002, all reports
required under Section 16(a) of the Securities Exchange Act for our directors,
officers and 10% shareholders were filed on a timely basis.
EXECUTIVE COMPENSATION
Our compensation and benefits program 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 our 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 do not receive cash compensation for their services as
directors but are reimbursed for expenses actually incurred in connection with
attending meetings of the Board of Directors. Directors do not receive cash
compensation for their services as directors but are reimbursed for expenses
actually incurred in connection with attending meetings of the Board of
Directors. For the last two quarters of fiscal year 2001 and the first two
quarters of fiscal year 2002, each director received 2,000 restricted shares of
our common stock for each quarter of service on the Board. A total of 24,000
shares was awarded at a value of $1.30 per share, 8,000 shares each to Klaus
Moeller, Larry Balaban and Deborah Law Cross, the members of the Board at that
time.
Each director appointed on or after April 2002 who is not also an
officer received an option to purchase 10,000 shares of our common stock for
joining the Board. The exercise price for these options is $2.59 per share which
was the closing price of our common stock on May 13, 2002, the date of the
grant. As of our 2002 Annual Meeting, each director who is not also an officer
received an option to purchase 25,000 shares of our common stock for a year of
service on the Board. These options vest following the year of service. The
exercise price for these options is $1.53 per share which was the closing price
of our common stock on July 8, 2002, the date of the grant.
EXECUTIVE OFFICER COMPENSATION
The following table sets forth compensation information for services
rendered to us 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.
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SUMMARY COMPENSATION TABLE*
Annual Compensation Long-Term Compensation
----------------------- -----------------------------------
Awards Payouts
------------------------ ---------
All Other
Restricted Securities Compensation
Other Annual Stock Underslying LTIP $
Salary Bonus Compensation Awards Option/SARs Payouts (Car
Name and Position Year $ $ $ $ $ $ Allowance)
- ------------------------ ---- ----------- ----- ------------ ---------- ----------- ------- ------------
Klaus Moeller 2002 150,000(1) 0 0 47,619(1) 450,000 0 9,000
CEO and Interim CFO
2001 150,000(1) 0 0 117,560(1) 200,000 0 5,000
2000 150,000(1) 0 0 14,587(1) 137,500 0 0
Michael Meader 2002 150,000(2) 0 0 47,619(2) 450,000 0 9,000
President, formerly
Executive Vice
President -
Distribution and
Executive Vice President
2001 150,000(2) 0 0 42,560(2) 200,000 0 5,000
2000 150,000(2) 0 0 14,587(2) 137,500 0 0
Larry Balaban 2002 150,000(3) 0 0 47,619(3) 450,000 0 9,000
Executive VP of
Marketing and
Production
2001 150,000(3) 0 0 38,397(3) 200,000 0 5,000
2000 110,000 0 0 0 237,500 0 0
Howard Balaban 2002 150,000(3) 0 0 47,619(3) 450,000 0 9,000
Executive VP of New
Business Development
2001 150,000(3) 0 0 38,397(3) 200,000 0 5,000
2000 110,000 0 0 0 237,500 0 0
Julie Ekelund 2002 150,000(4) 0 0 20,000(4) 450,000 0 9,000
Executive VP of Sales Prior years are not applicable as Ms. Ekelund's employment commenced on April 1, 2002.
* The number of shares and share prices disclosed reflect the reverse
stock split which occurred on April 10, 2001.
(1) During 2001, in response to the Company's limited cash flow, Mr.
Moeller accepted approximately $12,000 of unpaid 2000 salary and
$75,000 of unpaid 2001 salary in the form of shares of common stock
based upon the closing price of the common stock on January 2, 2001,
which was $0.80 (as adjusted for the April 10, 2001 reverse stock
split). Pursuant to this agreement, Mr. Moeller was issued 108,337
shares of stock on June 10, 2001. Mr. Moeller received 23,810 shares
for an additional $15,000 of unpaid 2001 salary and agreed to accept
47,619 shares as a signing bonus for entering into a three-year
employment agreement as of January 3, 2002, with a $30,000 reduction of
2002 salary. These issuances were made as of January 3, 2002, at $0.63
per share.
(2) During 2001, in response to the Company's limited cash flow, Mr. Meader
accepted approximately $12,000 of unpaid 2000 salary and $15,000 of
unpaid 2001 salary 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 (as adjusted for the April 10, 2001 reverse stock split).
Pursuant to this agreement, Mr. Meader was issued 33,337 shares of
common stock on June 10, 2001. Mr. Meader received 23,810 shares for an
additional $15,000 of unpaid 2001 salary and agreed to accept 47,619
shares as a signing bonus for entering into a three-year employment
agreement as of January 3, 2002, with a $30,000 reduction of 2002
salary. These issuances were made as of January 3, 2002, at $0.63 per
share.
(3) During 2001, in response to the Company's limited cash flow, Mr. Larry
Balaban and Mr. Howard Balaban each accepted approximately $15,000 of
unpaid 2001 salary 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 (as adjusted for the April 10, 2001 reverse stock split).
Pursuant to this agreement, each were issued 18,750 shares of common
stock on June 10, 2001. Mr. Larry Balaban and Mr. Howard Balaban each
received 23,810 shares for an additional $15,000 of unpaid 2001 salary
and agreed to accept 47,619 shares as a signing bonus for entering into
a three-year employment agreement as of January 3, 2002, with a $30,000
reduction of 2002 salary. These issuances were made as of January 3,
2002, at $0.63 per share.
7
(4) Ms. Ekelund agreed to accept 20,000 shares of common stock as a signing
bonus for entering into a three-year employment agreement as of April
1, 2002, with a $30,000 reduction of 2002 salary. This issuance was
made as of April 1, 2002, at $1.50 per share.
The following table sets forth the options granted, if any, to the
persons named in the "Summary Compensation Table" during the Company's fiscal
year ended December 31, 2002.
OPTION/SAR GRANTS IN LAST FISCAL YEAR*
INDIVIDUAL GRANTS
Number of Percent of Total
Securities Options/SARs
Underlying Granted to
Options/SARs Employees in Fiscal Exercise or Base
Name Granted (#) Year (%) Price ($/SH) Expiration Date
- ------------------------ --------------- ------------------- ----------------- ---------------
Klaus Moeller 450,000 13 $0.63 January 3, 2012
Michael Meader 450,000 13 0.63 January 3, 2012
Larry Balaban 450,000 13 0.63 January 3, 2012
Howard Balaban 450,000 13 0.63 January 3, 2012
Julie Ekelund 450,000 13 0.63 January 3, 2012
- -------------------------------------------------------------------------------------------------------------------
* The number of shares and share prices disclosed reflect the reverse
stock split which occurred on April 10, 2001.
The following table sets forth information concerning the exercise of
stock options by each person named in the "Summary Compensation Table" during
our fiscal year ended December 31, 2002, and the value of all exercisable and
unexercisable options at December 31, 2002.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
Number of Securities Underlying Value of Unexercised In-The-Money Options
Unexercised Options at FY-End (#) at FY-End ($) (1)
--------------------------------- -----------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- --------------------------- ----------- ------------- ----------- -------------
Klaus Moeller 150,000 300,000 $126,000 $252,000
Michael Meader 150,000 300,000 $126,000 $252,000
Larry Balaban 150,000 300,000 $126,000 $252,000
Howard Balaban 150,000 300,000 $126,000 $252,000
Julie Ekelund 160,000 300,000 $134,400 $252,000
- ---------------------------------------------------------------------------------------------------------------
(1) Based on the closing price for our common stock at the close of market
on December 31, 2002. On December 31, 2002, the price of our common
stock was $0.84. The lowest exercise price of any outstanding option at
December 31, 2001 was $0.63.
All executives signed three-year employment agreements which commenced
as of January 3, 2002, except for Julie Ekelund, whose agreement commenced as of
April 1, 2002. See "Certain Relationships and Related Transactions."
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information known to us with
respect to the beneficial ownership of common stock as of May 8, 2003, by (i)
each person who is known by us to own beneficially more than 5% of common stock,
(ii) each of our directors and executive officers and (iii) all of our officers
and directors as a group. Except as otherwise listed below, the address of each
person is c/o Genius Products, Inc., 11250 El Camino Real, Suite 100, San Diego,
California 92130.
8
Shares Beneficially Owned(1)
--------------------------------
Name and Address of Owner Number Percent(2)
- -------------------------------------------------------- ------------------- ------------
Klaus Moeller, Director, Director Nominee, Chairman of 1,006,284 (3)(4) 6.1
the Board, Chief Executive Officer and Interim Chief
Financial Officer
David Anderson, Director and Director Nominee 1,625,651 (5) 9.5
Richard Bermingham, Director and Director Nominee 30,000 (6) Less than 1
Deborah L. Cross, Director 32,500 (7) Less than 1
Nancy Evensen, Director and Director Nominee 10,000 (6) Less than 1
Margaret Loesch, Director and Director Nominee 13,000 (6) Less than 1
Michael Meader, President 866,641 (3)(8) 5.3
Larry Balaban, Executive Vice President, Director and 774,492 (3) 4.7
Director
Nominee
Howard Balaban, Executive Vice President 766,429 (3) 4.7
Julie Ekelund, Executive Vice President 500,731 (9) 3.0
Sean Goodchild 1,106,410 (10)
S G Consulting Inc. 1,106,410 (10) 6.8
All officers and directors as a group (10 persons) 5,625,728 31.1
____________________
(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
subject to options and warrants currently exercisable or convertible,
or exercisable or convertible within 60 days of May 8, 2003, 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 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) Percentages based on 16,305,497 shares outstanding which does not
include 1,786,431 shares of common stock issuable upon exercise of
outstanding warrants and 101,500 shares of common stock issuable upon
exercise of outstanding debentures.
(3) Includes an option to purchase 150,000 shares expiring on January 3,
2012, with an exercise price of $0.63 per share.
(4) Includes 90,000 shares held by Shelly Moeller (as her sole property),
who is the wife of Klaus Moeller and 75,000 shares held by Dorian
Lowell as custodian for 37,500 shares each for Tia and Hayden Moeller.
Tia Moeller is the daughter of Klaus Moeller. Hayden Moeller is the son
of Klaus Moeller. Excludes 625,200 shares held by Algarvida LDA, an
entity controlled by Isable Moeller, who is the sister of Klaus
Moeller. Mr. Moeller disclaims all beneficial ownership of such shares.
(5) Includes an option to purchase 10,000 shares expiring on May 13, 2012,
with an exercise price of $2.59 per share, and a warrant to purchase
820,000 shares expiring on January 3, 2007, with an exercise price of
$0.63 per share.
(6) Includes an option to purchase 10,000 shares expiring on May 13, 2012,
with an exercise price of $2.59 per share.
(7) Includes an option to purchase 7,500 shares expiring on March 14, 2010,
with an exercise price of $0.80 per share.
(8) Includes 25,000 shares held by Suzanne Meader, who is the wife of
Michael Meader. Mr. Meader disclaims all beneficial ownership of such
Shares.
9
(9) Includes an option to purchase 10,000 shares expiring on July 1, 2006,
with an exercise price of $0.80 per share; an option to purchase
150,000 shares expiring on January 3, 2012, with an exercise price of
$0.63 per share; and a warrant to purchase 162,000 shares expiring on
April 1, 2007, with an exercise price of $0.63 per share.
(10) Includes 660,000 shares held by S G Consulting Inc. Sean Goodchild is
the control person for S G Consulting Inc.
(11) Includes 446,410 shares held by Sean Goodchild who controls S G
Consulting Inc.
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.
Effective January 3, 2002, we entered into new three-year employment
agreements with Klaus Moeller, our Chief Executive Officer, Chairman of the
Board, Interim Chief Financial Officer and a Director and Director Nominee;
Michael Meader, our President and former Executive Vice President -
Distribution; Larry Balaban, our Executive Vice President of Marketing and
Production and a Director and Director Nominee; and Howard Balaban, our
Executive Vice President of New Business Development. Effective April 1, 2002,
we entered into a three-year employment agreement with Julie Ekelund, our
Executive Vice President. Under each employment agreement, the senior executive
is entitled to an annual salary of $150,000 and a grant of options to purchase
up to 450,000 shares of common stock which vest one-third each year beginning on
December 31, 2002. The options granted will be exercisable for a period of 10
years at a price equal to $0.63 per share, the market price on the date of
grant. Under these employment agreements, if the senior executive dies or is
terminated without cause (as defined in the employment agreement) during the
first year of the employment agreement, the senior executive will receive
twenty-four months of salary as severance pay. If the senior executive dies or
is terminated without cause during the second year of the employment agreement,
the senior executive will receive eighteen months of salary as severance pay. If
the senior executive dies or is terminated without cause during the third year
of the employment agreement, the senior executive will receive twelve months of
salary as severance pay. Severance pay under these employment agreements is due
and payable in full immediately upon death or termination of the senior
executive. If we were required to make payments under the severance pay
provisions contained in one or more of these employment agreements, such would
have a material adverse effect upon our liquidity and results of operations.
On May 1, 2002, we entered into a sublease agreement with the Meader
Family Trust to sublet approximately 5,000 square feet of a warehouse facility
in Atlantic, Iowa for a monthly rent of $1,700. The sublease expires May 31,
2004. The Trustees of the Meader Family Trust are the parents of Michael Meader,
President of the Company.
1,285,200 restricted shares were issued upon the conversion of certain
warrants. The warrant exercise price was paid by secured promissory notes
totaling $728,400 with two related parties. Of the total, 660,000 shares with an
exercise price of $0.63 each ($312,600 total) were issued to S G Consulting
Inc., an entity controlled by Sean Goodchild, who is the owner of more than 5%
of our common stock when these shares are included in his ownership. The balance
of 625,200 shares with an exercise price of $0.50 each ($415,800 total) were
issued to Algarvida LDA, an entity that is controlled by Isabel Moeller, who is
the sister of our Chief Executive Officer, Klaus Moeller. The notes receivable
bear interest at 6% annually which is accrued in arrears, are repayable on
January 3, 2004, and are secured by the shares of common stock.
A total of $24,351, including interest, is currently outstanding for
advances previously made to Howard Balaban in the amount of $15,000 and to Larry
Balaban in the amount of $5,000. These advances are due on demand and bear
interest at 7% which is being accrued in arrears.
On March 1, 2000, we entered into a Consulting Agreement with Gerald
Edick which included a rescission of a severance letter of October 26, 1999.
Pursuant to the Consulting Agreement, Mr. Edick has irrevocably revoked his
rights to the cash bonus and other benefits under the severance letter. Under
the Consulting Agreement, Mr. Edick received options to purchase 187,500 shares
of our common stock. Mr. Edick also was to be paid $14,500 per month from March
1 through September 30, 2000, in consideration for investor relations and
fundraising services to be performed by him. All payments due to Mr. Edick have
been settled for $67,000.
10
PROPOSAL 2
AUTHORIZATION OF THE COMPANY'S
2003 STOCK OPTION PLAN
On April 18, 2003, the Board of Directors authorized the adoption of
the 2003 Stock Option Plan. The proposal to authorize the 2003 Stock Option Plan
is recommended by the Board of Directors because the Board considers it to be in
the best interests of the Company and its shareholders. The 2003 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 1,000,000 (post-reverse stock split of April 10,
2001) aggregate shares of common stock are reserved for issuance under the 2003
Stock Option Plan. The 2003 Stock Option Plan vests broad discretionary power in
the Board or a subcommittee of the Board, 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. Once the 2003 Stock Option Plan is
approved by the shareholders, options may be granted under the plan until April
18, 2013. The issuance of shares of common stock upon the exercise of options
granted under the 2003 Stock Option Plan will dilute the voting power of current
shareholders and may have other dilutive effects. 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 2003 Stock Option Plan is qualified in its
entirety by the terms of the plan, which is attached as Exhibit A. The Board of
Directors believes that any effect the 2003 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.
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information about the common stock that
may be issued upon the exercise of options, warrants and rights under all of our
existing equity compensation plans as of December 31, 2002.
Number of Securities Remaining
Number of Securities To Weighted-Average Available for Future Issuance
Be Issued upon Exercise Exercise Price of under Equity Compensation
of Outstanding Options, Outstanding Options, Plans (Excluding Securities
Plan Category Warrants and Rights(1) Warrants and Rights(2) Reflected in the Second Column)
- -------------------------- ------------------------- ----------------------- --------------------------------
Equity Compensation
Plans Approved by 4,133,092 $0.90 3,649,707(3)
Shareholders
None 1,000,000(4)
Equity Compensation
Plans Not Approved by
Shareholders
- -------------------------- -- ------------------------- -- ----------------------- -- --------------------------------
(1) 483,385 shares issuable upon exercise of outstanding options
granted under the 1997 Stock Option Plan and 3,649,707 shares
issuable upon exercise of outstanding options granted under
the 2000 Stock Option Plan.
(2) Option exercise prices range from $0.63 to $13.60.
(3) Reflects shares issuable upon exercise of options issued and
issuable under the Second 2000 Amended and Restated 2000
Non-Qualified Stock Option Plan.
11
(4) The 2003 Stock Option Plan is currently pending authorization.
Upon shareholder approval, up to 1,000,000 shares will be
issuable until April 18, 2013. The plan vests broad
discretionary power in the Board or a subcommittee of the
Board, 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 Board of Directors has unanimously approved and recommends that the
shareholders authorize the 2003 Stock Option Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL 2.
PROPOSAL 3
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, 2003. 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 3.
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.
SHAREHOLDER PROPOSALS FOR THE 2003 ANNUAL MEETING
Any shareholder who wishes to present a proposal for consideration at
the annual meeting of shareholders to be held in 2003 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 our proxy materials
relating to the 2004 Annual Meeting of Shareholders, the shareholder must submit
such proposal in writing to us so that it is received no later than February 17,
2004. Any shareholder proposal submitted with respect to our 2004 Annual Meeting
of Shareholders which proposal is received by us after May 4, 2004, will be
considered untimely for purposes of Rule 14a-4 and 14a-5 under the Exchange Act,
and we may vote against such proposal using our discretionary voting authority
as authorized by proxy.
ANNUAL REPORT TO SHAREHOLDERS
Our Annual Report for the fiscal year ended December 31, 2002, 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,
May 30, 2003 Chief Executive Officer and Interim
Chief Financial Officer
12
EXHIBIT A
[2003 STOCK OPTION PLAN]