SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
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| | Preliminary Proxy Statement
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|x| Definitive Proxy Statement
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USA VIDEO INTERACTIVE CORP.
---------------------------
Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------
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USA VIDEO INTERACTIVE CORP.
70 ESSEX STREET
MYSTIC, CONNECTICUT 06355
Dear Shareholder:
We invite you to attend our annual meeting of shareholders to be held on Friday,
June 28, 2002, in Groton, Connecticut. At the meeting you will hear a report on
our operations and have a chance to meet your directors and executives.
This mailing includes the formal notice of the meeting, the Report on Form 10-K
to the Securities and Exchange Commission, and the Proxy Statement. The Proxy
Statement tells you more about the agenda and procedures for the annual meeting.
It also describes how the Board of Directors operates and gives personal
information about our director candidates.
Even if you only own a few shares, we want your shares to be represented at the
meeting. I urge you to complete, sign, date, and return your proxy promptly in
the enclosed envelope.
To attend the meeting in person, please follow the instructions on page 2 of the
Proxy Statement.
Sincerely yours,
/s/ Edwin Molina
Edwin Molina
President
May 24, 2002
USA VIDEO INTERACTIVE CORP.
70 ESSEX STREET
MYSTIC, CONNECTICUT 06355
NOTICE OF 2002 ANNUAL MEETING OF SHAREHOLDERS
Time: 11:00 a.m., Eastern Time
Date: Friday, June 28, 2002
Place: Mystic Marriott
625 North Road Route 117
Groton, CT 06340
Purpose:
1. To elect directors
2. To ratify the appointment by the Board of Directors of Goldstein Golub
Kessler LLP as the Company's independent auditors for the current fiscal
year.
3. To conduct any other business properly brought before the meeting.
Only shareholders of record at the close of the business on May 20, 2002 may
vote at the annual meeting.
Your vote is important. Please complete, sign, date, and return your proxy
promptly in the enclosed envelope.
By Order of the Board of Directors
By: /s/ Anton J. Drescher
-----------------------------
May 24, 2002 Anton J. Drescher,
Secretary
USA VIDEO INTERACTIVE CORP.
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is being sent to you in connection with the solicitation of
proxies for the 2002 annual meeting of shareholders (the "Annual Meeting") by
the Board of Directors of USA Video Interactive Corp. (the "Company," "USA
Video," "we," or "us") to be held at the Mystic Marriott, 625 North Road Route
117, Groton, Connecticut, 06340 at 11:00 a.m., Eastern Time, on Friday, June
28th, 2002, and at any adjournments thereof
Who may vote
Only shareholders of the Company as recorded in our stock register at the close
of business on May 20, 2002 (the "Record Date") may vote at the Annual Meeting.
As of that date, there were 91,745,088 common shares outstanding, representing
the only voting securities of the Company (excluding warrants to purchase
10,800,000 common shares and shares reserved for the option plan of 8,190,000
common shares. Each common share is entitled to one vote on each matter
properly brought before the Annual Meeting.
How to vote
You may vote in person at the meeting or by proxy. We recommend that you vote
by proxy even if you plan to attend the Annual Meeting. You can always change
your vote at the Annual Meeting.
How Proxies work
Giving us your proxy means you authorize us to vote your shares at the Annual
Meeting in the manner you direct. You may vote for or not vote for the nominees
for director named in this Proxy Statement. You may also vote for or against
the proposal to ratify the appointment of Goldstein Golub Kessler LLP as the
Company's independent auditors or abstain from voting.
If you sign and return the enclosed proxy but do not specify how to vote, we
will vote your shares in favor of the nominees for director named in this Proxy
Statement and in favor of the other proposal described in this Proxy Statement.
In the discretion of the proxy holders, the proxies will also be voted for or
against such other matters as may properly come before the Annual Meeting. At
the date this Proxy Statement went to press we did not know of any other matters
to be raised at the Annual Meeting.
The persons named in the enclosed proxy are directors and officers of the
Company and you may strike out the names of the persons whom you do not wish to
act on your behalf. A shareholder has the right to appoint any person to attend
and act for him or her at the Annual Meeting. A SHAREHOLDER DESIRING TO APPOINT
A PERSON TO REPRESENT HIM AT THE ANNUAL MEETING MAY DO SO EITHER BY INSERTING
SUCH PERSON'S NAME IN THE BLANK SPACE PROVIDED AND STRIKING OUT THE PRINTED
NAMES IN THE FORM OF PROXY OR BY COMPLETING ANOTHER PROXY. In either case, the
proxy must be delivered to the offices of the Company's Transfer Agent, CIBC
Mellon Trust Company, Suite 600, 333 7th Avenue S.W., Calgary, Alberta, Canada
T2P 2Z3 on or before the day of the shareholders meeting.
You may receive more than one proxy depending on how you hold your shares.
Shares registered in your name are covered by one proxy. If you hold shares
through someone else, such as a bank or broker (that is, in street name) please
refer to your proxy card or the information forwarded by your bank, broker or
other holder of record for voting instructions. If you want to vote in person
at the Annual Meeting, and you hold your shares in street name, you must obtain
a proxy from your bank or broker and bring the proxy to the Annual Meeting.
This Proxy Statement and the accompanying proxy card are first being mailed to
shareholders on or about May 24, 2002.
Revoking a Proxy
You may revoke your proxy before it is voted by submitting a new proxy with a
later date, by voting in person at the Annual Meeting, or by notifying our
Secretary in writing at 70 Essex Street, Mystic, Connecticut 06355.
Quorum
To conduct the business of the meeting, we must have a quorum. This means at
least a majority of the outstanding shares entitled to vote must be represented
at the Annual Meeting, either by proxy or in person.
Votes needed
The three nominees for director receiving a plurality of the votes cast at the
Annual Meeting or by proxy shall be elected. Approval to ratify the
appointment of Goldstein Golub Kessler LLP requires the affirmative vote of a
majority of the votes cast in person or by proxy at the Annual Meeting. If the
Annual Meeting is adjourned, your shares may be voted by the proxies on the new
meeting date unless you have revoked your proxy.
Only votes cast "for" or "against" a proposal are counted. Abstentions and
broker non-votes (or votes withheld" in the election of directors) will not be
counted, except for purposes of determining a quorum. Broker non-votes occur
when a broker returns a proxy but does not have authority to vote on a
particular proposal.
Attending in person
Only shareholders, their proxy holders, and USA Video's guests may attend the
Annual Meeting.
If you hold your shares through someone else, such as a bank or a broker, send
proof of your ownership to the Secretary at the address listed above, or you may
bring proof of ownership with you in order to be admitted to the Annual Meeting.
Acceptable proof could include an account statement showing that you owned USA
Video shares on May 20, 2002.
We will pay the expenses of soliciting proxies. Proxies may be solicited on our
behalf by directors, officers or employees in person or by telephone, email or
fax. We will also reimburse banks, brokers and other persons holding shares in
their names or in the names of their nominees for their reasonable out-of-pocket
expenses in forwarding proxies and proxy material to the beneficial owners of
such shares.
ITEM 1:
ELECTION OF DIRECTORS
The board of directors has nominated and recommends FOR election of all three of
its current directors for election at the Annual Meeting. The enclosed Proxy
will be voted FOR the persons nominated unless otherwise indicated. If any of
the nominees should be unable to serve or should decline to do so, the
discretionary authority provided in the Proxy will be exercised by the present
Board of Directors to vote for a substitute or substitutes to be designated by
the Board of Directors. The Board of Directors has no reason to believe that
any substitute nominee or nominees will be required.
Each nominee elected as a director will hold office until the next annual
meeting of shareholders and until his successor is elected and qualified, or
until his earlier death, resignation or retirement. Set forth below for each
nominee is his age and his position, if any, in the Company.
The information set forth below as to each nominee for director has been
furnished to the Company by the respective nominee.
Name Age Position Period of Service
- ----------------- --- ------------------------------------- -----------------
Edwin Molina. . . 46 Director, Chief Executive Officer and Since 1998
President
Anton J. Drescher 45 Director, Chief Financial Officer and Since 1994
Secretary
Robert Smith. . . 51 Director and Chief Operating Officer Since 2001
EDWIN MOLINA - CHIEF EXECUTIVE OFFICER AND PRESIDENT
Mr. Molina served as a Senior Administrator with the Company from June 1992 to
June 30, 1998, when he was appointed President and Chief Executive Officer and
elected a director. Mr. Molina was also a Senior Administrator with Adnet USA
LLC, a private California company involved in Internet advertising, from May
1996 to June 1998.
ANTON J. DRESCHER - CHIEF FINANCIAL OFFICER, SECRETARY AND DIRECTOR
Mr. Drescher has been Chief Financial Officer of USA Video since December 1994.
He has also been a director and President of Cal-Star, Inc. (formerly Future
Link Systems Inc.) a public company listed on the TSX Venture Exchange ("TSX")
(formerly the "Canadian Venture Exchange") which has been designated as an
inactive issuer; Director and Secretary/Treasurer of iQuest Networks Inc.
(formerly Interlink Systems Inc. and Glassmaster Industries, Inc.), a public
company listed on the TSX involved in digital audio distribution since 1996;
President of Westpoint Management Consultants Limited, a private company engaged
in tax and accounting consulting for business reorganizations since 1979;
President of Harbour Pacific Capital Corp., a private British Columbia company
involved in regulatory filings for businesses in Canada, since 1998; and, since
1991, a director and President of International Tower Hill Mines Limited, a
public British Columbia company listed on the TSX and involved in mineral
exploration. Mr. Drescher has been a Certified Management Accountant since 1981.
ROBERT D. SMITH, JR. - CHIEF OPERATING OFFICER AND DIRECTOR
Mr. Smith joined USA Video in August 2000 as Chief Operating Officer. Mr. Smith
was formerly a vice president at Sonalysts Inc., of Waterford, Connecticut,
where, for 22 years, he helped build that company into a $50 million, nearly
500-person international e-business, multimedia, software and engineering
corporation. Mr. Smith graduated with distinction from the U.S. Naval Academy,
where he was a Trident Scholar and earned a B.S. degree in oceanography and
engineering. He served in a variety of officer positions in the nuclear
submarine Navy prior to leaving active duty. Concurrent with his employment at
Sonalysts, Inc. he continued to serve in the Naval Reserve, having recently
retired with the rank of Captain.
The Board of Directors has no reason to believe that any nominee will not serve
if elected. If any nominee is unable to serve as a director, the shares
represented by all valid proxies may be voted for the election for such other
person(s) as the Board may recommend, unless the Board chooses to reduce the
number of directors serving on the Board. Proxies will be voted FOR each
nominee unless the shareholder specifies otherwise.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF
THE NOMINEES NAMED IN THIS PROXY STATEMENT. Proxies solicited by the Board of
Directors will be so voted unless shareholders specify otherwise on the
accompanying Proxy.
MEETINGS OF THE BOARD OF DIRECTORS
During 2001, the Board of Directors held a number of informal meetings, and took
action by unanimous written consent on 13 occasions.
The Board of Directors has an audit committee (the "Audit Committee"), which is
currently comprised of two directors - Anton J. Drescher and Robert D. Smith Jr.
The Audit Committee met informally on a number of occasions and signed two
consent resolutions during 2001. Because Mr. Drescher and Mr. Smith are
officers and shareholders of the Company, they are not considered to be
"independent" under the listing standards of the New York Stock Exchange, the
American Stock Exchange, or the National Association of Securities Dealers. The
Audit Committee is primarily concerned with the effectiveness of the audits of
the Company by its internal audit staff and by the independent auditors. Its
duties include: (1) recommending the selection of independent auditors; (2)
reviewing the scope of the audit to be conducted by them, as well as the results
of their audit; (3) reviewing the organization and scope of the Company's
internal system of audit and financial controls; (4) appraising the Company's
financial reporting activities (including its Proxy Statement and Annual Report)
and the accounting standards and principles followed; and (5) examining other
reviews relating to compliance by employees with important Company policies and
applicable laws. The Audit Committee has not adopted a written charter.
The Board of Directors currently has no other committees.
AUDIT COMMITTEE REPORT
The Audit Committee has reviewed and discussed the Company's audited financial
statements with management, which has primary responsibility for the financial
statements. Goldstein Golub Kessler LLP, the Company's independent auditors for
2001, are responsible for expressing an opinion on the conformity of the
Company's audited financial statements with generally accepted accounting
principles. The Audit Committee has discussed with Goldstein Golub Kessler LLP
the matters that are required to be discussed by Statement on Auditing Standards
No. 61 (Communication With Audit Committees). Goldstein Golub Kessler LLP have
provided to the Audit Committee the written disclosures and the letter required
by Independence Standards Board Standard No. 1 (Independence Discussions with
Audit Committees), and the Audit Committee discussed with Goldstein Golub
Kessler LLP that firm's independence.
Based on the considerations referred to above, the Audit Committee recommended
to the Board of Directors that the audited financial statements be included in
the Company's Annual Report on Form 10-K for 2001 and that Goldstein Golub
Kessler LLP be appointed independent auditors for the Company for 2002. The
foregoing report is provided by the following directors, who constitute the
Audit Committee:
Anton J. Drescher
Robert D. Smith Jr.
SECURITY OWNERSHIP OF DIRECTORS, OFFICERS,
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth as of May 20, 2002, the number of outstanding
common shares of USA Video beneficially owned by (i) each person known to USA
Video to beneficially own more than 5% of its outstanding common shares, (ii)
each director, (iii) each nominee for director, (iv) each executive officer
listed in the Summary Compensation Table, and (iv) all executive officers and
directors as a group.
Name Shares Owned Percentage of Class
- ---------------------------------------------------------------------------------------
Edwin Molina 4,824,424 (1) 5.18%
Anton J. Drescher 5,681,855 (2) 6.09%
Robert D. Smith 1,470,000 (3) 1.59%
All Executive Officers & Directors
as a Group [four persons] 11,977,079 (4) 12.44%
(1) Includes 900,000 shares underlying options and 450,000 shares underlying
warrants that are currently exercisable. Mr. Molina's address is 70 Essex
Street, Mystic, Connecticut.
(2) Includes 950,000 shares underlying options and 600,000 shares underlying
warrants that are currently exercisable. Mr. Drescher's address is 70 Essex
Street, Mystic, Connecticut.
(3) Includes 700,000 shares underlying options and 185,000 shares underlying
warrants. Mr. Smith's address is 70 Essex Street, Mystic, Connecticut.
(4) Includes 3,175,000 shares underlying options and 1,310,000 shares
underlying warrants.
DIRECTOR AND EXECUTIVE COMPENSATION AND
OTHER TRANSACTIONS WITH MANAGEMENT
The following table sets forth compensation awarded to, earned by or paid to the
Company's Chief Executive Officer (CEO), and to other persons serving as
executive officers of the Company as of December 31, 2001, whose salary and
bonus for such year exceeded $100,000 (collectively, the "Named Executive
Officers"), for the last three completed fiscal years.
Long-Term Compensation
--------------------------------
Summary Compensation Table Awards Payouts
Annual Compensation ------------ ---------------
Name and ------------------------------------- Restricted Securities
Principal Other Annual Stock Underlying LTIP All Other
Position Year Salary Bonus Compensation Award(s) Options/SARs Payouts Compensation
---------- ------ ------- ------- ------------ ----------- ------------- -------- ------------
$ $ $ $ $ $ $
-------------------------------------------------------------------------------------------
Molina, 2001 $124,910 -0- $125,000(4) -0- -0- -0- -0-
Edwin 2000 $128,361 -0- $500,000(5) -0- -0- -0- -0-
(CEO) 1999 $120,999(1) -0- $200,665(6) -0- 1,200,000 -0- -0-
Drescher 2001 $120,000(2) -0- $200,000(7) -0- 200,000 -0- -0-
Anton, 2000 $120,000(2) -0- $500,000(8) -0- 200,000 -0- -0-
(CFO) 1999 $120,000(2) -0- $159,665(9) -0- 1,000,000 -0- -0-
Castagno, 2001 $82,496 -0- $25,000(10) -0- 1,100,000 -0- -0-
Anthony (EVP) 2000 $125,722 -0- $125,000(11) -0- 1,100,000 -0- -0-
1999 $120,000(3) -0- $194,300(12) -0- 250,000 -0- -0-
Smith, 2001 $89,412 -0- $22,900(13-15) -0- -0- -0- -0-
Robert
(1) Represents consulting fees paid to Mr. Molina for his services as an
executive officer of the company.
(2) Represents consulting fees paid to Mr. Drescher through Harbour Pacific
Capital Corp., a consulting firm wholly-owned by him, for his services as
an executive officer of the Company.
(3) Represents consulting fees paid to Mr. Castagno for his services as an
executive officer of the Company.
(4) In March 2001, Mr. Molina purchased 250,000 units (each comprised of one
common share and one warrant to acquire one common share at $0.66 per
share) at $0.54 per unit. This compensation resulted from the difference
between the $0.54 purchase price and the $0.66 warrant exercise price and
the fair market price of $0.84 of the common shares on the date of issuance
of the units.
(5) In July 2000, Mr. Molina purchased 200,000 units (each comprised of one
common share and one warrant to acquire one common share at $1.50 per
share) at $1.50 per unit. This compensation resulted from the difference
between the $1.50 purchase price and the $1.50 warrant exercise price and
the fair market price of $2.75 of the common shares on the date of issuance
of the units.
(6) From February through May, 1999, Mr. Molina exercised stock options for an
aggregate of 800,000 shares at an exercise price of $.067 per share,
resulting in compensation of $200,665.
(7) In March 2001, Mr. Drescher purchased 400,000 units (each comprised of one
common share and one warrant to acquire one common share at $0.66 per
share) at $0.54 per unit. This compensation resulted from the difference
between the $0.54 purchase price and the $0.66 warrant exercise price and
the fair market price of $0.84 of the common shares on the date of issuance
of the units.
(8) In July 2000, Mr. Drescher purchased 200,000 units (each comprised of one
common share and one warrant to acquire one common share at $1.50 per
share) at $1.50 per unit. This compensation resulted from the difference
between the $1.50 purchase price and the $1.50 warrant exercise price and
the fair market price of $2.75 of the common shares on the date of issuance
of the units.
(9) From February through June 1999, Mr. Drescher exercised stock options for
an aggregate of 1,000,000 common shares at an exercise price of $.067 per
share, resulting in compensation of $147,800. In 1999, Mr. Drescher
received interest totalling $12,965 on loans made to USA Video.
(10) In January 1998, Mr. Drescher exercised stock options for 500,000 common
shares at an exercise price of $.067 per share, resulting in compensation
of $10,050. In 1998, Mr. Drescher received interest totalling $24,379 on
loans made to USA Video.
(11) In March 2001, Mr. Castagno purchased 50,000 units (each comprised of one
common share and one warrant to acquire one common share at $0.66 per
share) at $0.54 per unit. This compensation resulted from the difference
between the $0.54 purchase price and the $0.66 warrant exercise price and
the fair market price of $0.84 of the common shares on the date of issuance
of the units.
(12) In July 2000, Mr. Castagno purchased 50,000 units (each comprised of one
common share and one warrant to acquire one common share at $1.50 per
share) at $1.50 per unit. This compensation resulted from the difference
between the $1.50 purchase price and the $1.50 warrant exercise price and
the fair market price of $2.75 of the common shares on the date of issuance
of the units.
(13) In July 1999, Mr. Castagno exercised stock options for 250,000 common
shares at an exercise price of $.067 per share, resulting in compensation
of $194,300.
(14) In March 2001, Mr. Smith purchased 40,000 units (each comprised of one
common share and one warrant to acquire one common share at $0.66 per
share) at $0.54 per unit. This compensation resulted from the difference
between the $0.54 purchase price and the $0.66 warrant exercise price and
the fair market price of $0.84 of the common shares on the date of issuance
of the units.
(15) In September 2001, Mr. Smith purchased 45,000 units (each comprised of one
common share and one warrant to acquire one common share at $0.35 per
share) at $0.27 per unit. This compensation resulted from the difference
between the $0.27 purchase price and the fair market price of $0.29 of the
common shares on the date of issuance of the units.
(16) In December 2001, Mr. Smith purchased 100,000 units (each comprised of one
common share and one warrant to acquire one common share at $0.26 per
share) at $0.20 per unit. This compensation resulted from the difference
between the $0.20 purchase price and the fair market price of $0.22 of the
common shares on the date of issuance of the units.
The following table sets forth certain information concerning grants of stock
options to the Named Executive Officers during the year ended December 31, 2001.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential Realizable Value at
Assumed Annual Rate of Stock
Individual Grants Price Appreciation for Option Term
-----------------------------------------------------------------------------------
Number of % of Total Market
Securities Options/SARs Price on
Underlying Granted to Exercise Date of
Name Options/ SARs Employees in Price Grant Expiration 0% 5% 10%
Granted Fiscal Year(1) ($/Share) ($/Share) Date ($) ($) ($)
-----------------------------------------------------------------------------------------------
Molina, Edwin -0- -0- -0- -0- -0- -0- -0- -0-
Drescher, Anton -0- -0- -0- -0- -0- -0- -0- -0-
Castagno, Anthony -0- -0- -0- -0- -0- -0- -0- -0-
Smith, Robert -0- -0- -0- -0- -0- -0- -0- -0-
(1) A total of 250,000 stock options were granted to employees and consultants
in 2001.
The following table sets forth certain information concerning exercises of stock
options by the Named Executive Officers during the year ended December 31, 2001
and stock options held at year end.
Aggregated Option / SAR Exercises in Last Fiscal Year and FY-End Option / SAR
Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options / SARs Options / SARs
at FY-End (#) At FY-End ($)-
- --------------------------------------------------------------------------------------------------------------------
Shares Acquired on Value Realized Exercisable/ Exercisable/
Name Exercise (#) ($) Unexercisable Unexercisable(1)
- --------------------------------------------------------------------------------------------------------------------
Molina, Edwin -0- -0- 0 / 0 N/A / $0
Drescher, Anton -0- -0- 200,000 / 0 N/A(2) / $0
Castagno, Anthony -0- -0- 1,100,000 / 0 N/A(3) / $0
Smith, Robert -0- -0- 325,000 / 0 N/A(4) / $0
(1) On December 31, 2001, the average of the high and low bid prices of the
common shares on the OTC BB was $0.22 (the "December 31, 2001 OTC BB bid
price").
(2) Mr. Drescher's 200,000 options, with an exercise price of $1.00, were not
in the money based on the December 31, 2001 OTC BB bid price.
(3) Mr. Castagno's 1,100,000 options with an exercise prices of (300,000 @
$5.00, 100,000 @ $2.00 and 700,000 @ $1.00) were not in the money based on
the December 31, 2001 OTC BB bid price.
(4) Mr. Smith's 325,000 options with an exercise prices of (125,000 @ $2.00 and
200,000 @ $1.00) were not in the money based on the December 31, 2001 OTC
BB bid price.
Compensation of Directors
Directors receive no compensation for their service as such.
Employments Contracts
The Company had entered into Management Agreements with the following directors
and officers as of August 7th, 2001 for a term of one year from January 1, 2001
to December 31, 2001. All of the Agreements were subsequently renewed for
one-year terms:
- Edwin Molina - President and Chief Executive Officer
- Robert D. Smith, Jr. - Chief Operating Officer
- Kent Norton - Chief Information Officer and Chief Technical Officer
- Matt Kinnaman - Vice-President, Strategic Innovation
- Harbour Pacific Capital Corp. - financial services (owned by Anton J.
Drescher)
Subsequent to the year end, the Management Agreements with Robert D. Smith, Jr.,
Kent Norton and Matt Kinnaman were cancelled. The Management Agreements with
Edwin Molina and Harbour Pacific Capital Corp. will be cancelled on or before
June 30, 2002. Accordingly, the Company will not be seeking shareholder
ratification of the aforesaid Management Agreements.
USA Video does not have an employment contract with Mr. Molina or any other
Named Executive Officer. The Company has no obligation to provide any
compensation to Mr. Molina or any other Named Executive Officer in the event of
his resignation, retirement or termination, or a change in control of the
Company, or a change in any Named Executive Officers' responsibilities following
a change in control.
USA Video may in the future create retirement, pension, profit sharing,
insurance and medical reimbursement plans covering its Executive Officers and
Directors
Compensation Committee Interlocks and Insider Participation
The Company does not have a compensation committee. Decisions concerning the
compensation of the Company's executive officers are made by the Board of
Directors. All current members of the Board (Edwin Molina, Anton J. Drescher
and Robert D. Smith Jr.) and two former directors (Daniel Sciro, Anthony
Castagno) participated in the Board's deliberations concerning executive officer
compensation during the fiscal year ended December 31, 2001.
Board of Directors Report on Executive Compensation
The Board of Directors determines the compensation of the Company's executive
officers.
BOARD OF DIRECTORS: REPORT ON EXECUTIVE COMPENSATION
The Company does not have a formal compensation committee. The Company intends
to establish a compensation committee at such time as it is able to attract a
sufficient number of outside directors to the Board. The Company is unable to
state when it will be able to establish a formal compensation committee.
Pending establishment of the committee, the entire Board of Directors will
continue to be responsible for the Company's executive compensation policy. The
three current members of the Board are the Company's senior executive officers.
COMPENSATION PHILOSOPHY
The Company must compete for, attract, develop, motivate and retain high quality
executive management personnel. In order to do so, the Company offers a package
including a competitive salary, benefits and, on a discretionary basis,
additional compensation in the form of stock options.
CASH COMPENSATION
The Company's executive salary levels are intended to be consistent with
competitive salary levels and job responsibilities and experience level of each
executive, as well as the Company's overall salary structure and financial
condition. Salary increases reflect competitive and economic trends, the
overall financial performance of the Company and the performance of the
individual executive. Salaries are reviewed annually by the Board.
STOCK OPTIONS
Stock options are designed to attract and retain executives who can make
significant contributions to the Company's success, reward executives for such
contributions, give executives a long-term incentive to increase shareholder
value, and align the interests of the Company's executive officers with those of
its shareholders.
The Board has made, and expects to continue to make, grants of stock options to
executive officers. Recipients of option grants, and the size of the grants,
are determined based on several factors, including the responsibilities of the
individual officers, their past and anticipated contributions to the Company's
success, the Company's overall performance, and prior option grants. All
options granted to executive officers have an exercise price at least equal to
the market price of the Company's common shares at the time of the grant. In
2001, the Company granted no stock options to its Directors or Executive
Officers.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
In setting the compensation payable for 2001 to Edwin Molina, the Company's
Chief Executive Officer, the Board generally considered the same factors
described above. Additionally, the Board intends that Mr. Molina's compensation
be competitive with compensation paid to chief executive officers of similar
sized companies in the Company's industry and to reward Mr. Molina for directing
the Company's efforts in initiating and expanding its streaming media business.
IRS LIMITS ON DEDUCTIBILITY OF COMPENSATION
The Company is subject to Section 162(m) of the Internal Revenue Code of 1986,
as amended, which limits the deductibility of certain compensation payments to
the Company's executive officers in excess of $1.0 million. The Board expects
that cash compensation in 2001 paid to the Chief Executive Officer or any other
executive officer to be well below $1.0 million. Section 162(m) also provides
for certain exemptions to the limitations on deductibility, including
compensation that is "performance-based" within the meaning of Section 162(m).
Because the Company does not currently have a compensation committee comprised
solely of outside directors, the Company currently cannot avail itself of the
"performance-based" compensation exemption under Section 162(m).
The Board of Directors:
Edwin Molina
Anton J. Drescher
Robert D. Smith Jr.
Performance Graph
The following graph compares USA Video's cumulative total shareholder returns
with the cumulative total return for the last five years of (i) Russell 2500,
and (ii) the Dow Jones - U.S. Technology, Software, Small Cap Index. The graph
shows the value of $100 invested at the closing price on December 31, 1996, in
USA Video common shares, the Dow Jones - U.S. Technology, Software, Small Cap
Index and the Russell 2500, and assumes that all dividends are reinvested.
Total Return Comparison
[TABLE BELOW IS ALSO REPRESENTED BY A LINE GRAPH HERE]
12/31/1996 12/31/1997 12/31/1998 12/31/1999 12/31/2000 12/31/2001
USA VIDEO . . . . . . . . $ 100.00 $ 119.73 $ 62.66 $1,327.94 $ 658.06 $ 283.97
RUSSELL 2500. . . . . . . $ 100.00 $ 124.36 $ 124.84 $ 154.98 $ 161.59 $ 163.56
DOW JONES US TECHNOLOGY,
SOFTWARE, SMALL CAP INDEX $ 100.00 $ 108.34 $ 112.94 $ 273.94 $ 136.32 $ 111.54
Certain Relationships and Related Transactions.
In 2001, the Company paid consulting fees of $120,000 to Harbour Pacific Capital
Corp., a company controlled by Anton J. Drescher, in consideration of Mr.
Drescher's services as an executive officer of the Company.
In March 2001, USA Video completed a private placement of 2,500,000 units (each
unit consisting of one common share and one warrant to purchase an additional
common share at $.66 per share) for $.54 per unit, of which 1,585,000 units were
sold to outside investors and 915,000 units were sold to officers, directors,
and employees of the Company. Because the rules of the TSX require that the
offering price for privately placed securities of listed companies be set when
the offering is first announced rather than upon closing, the sale price of the
units and the exercise price of the warrants were below the market price of
$0.84 of the common shares on the date of issuance. Units were sold to the
following officers and directors of the Company, in the amounts indicated: Edwin
Molina (250,000 units), Anton J. Drescher (400,000 units), Anthony J. Castagno
(50,000 units) and Robert Smith (40,000 units).
In September 2001, USA Video completed a private placement of 4,000,000 units
(each unit consisting of one common share and one warrant to purchase an
additional common share at $0.35 per share) for $0.27 per unit, of which
3,512,500 units were sold to outside investors and 487,500 units were sold to
officers, directors, and employees of the Company and their affiliates. Because
the rules of the TSX require that the offering price for privately placed
securities of listed companies be set when the offering is first announced
rather than upon closing, the sale price of the units and the exercise price of
the warrants were below the market price of $0.29 of the common shares on the
date of issuance. Units were sold to the following officers and directors of the
Company, and their affiliates, in the amounts indicated: Robert Smith (45,000
units) and Daniel Kinnaman (200,000 units).
In December 2001, USA Video completed a private placement of 3,300,000 units
(each unit consisting of one common share and one warrant to purchase an
additional common share at $0.26 per share) for $0.20 per unit, of which
2,782,500 units were sold to outside investors and 517,500 units were sold to
officers, directors, and employees of the Company. Because the rules of the TSX
require that the offering price for privately placed securities of listed
companies be set when the offering is first announced rather than upon closing,
the sale price of the units and the exercise price of the warrants were below
the market price of $0.22 of the common shares on the date of issuance. Units
were sold to the following officers and directors of the Company, in the amounts
indicated: Robert Smith (100,000 units), Kent Norton (75,000 units), Daniel
Kinnaman (70,000 units) and Matthew Kinnaman (62,500 units).
ITEM 2:
RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
The firm of Goldstein Golub Kessler LLP has been appointed by the Board of
Directors to serve as the Company's independent auditors for the 2002 fiscal
year. A representative of Goldstein Golub Kessler LLP is expected to be at the
Annual Meeting and will be permitted to make a statement to the shareholders if
he or she desires and to respond to any appropriate questions addressed by
shareholders to the auditors.
On February 2, 2001, the Audit Committee of the Board of Directors approved the
engagement of Goldstein Golub Kessler LLP as the Company's independent auditors
for the year ended December 31, 2000, to replace Amisano Hanson Chartered
Accountants. Amisano Hanson resigned as auditors of the Company effective
February 2, 2001.
The reports of Amisano Hanson on the Company's consolidated financial statements
as of and for the years ended December 31, 1998 and 1999 did not contain an
adverse opinion or disclaimer of opinion and were not qualified or modified as
to uncertainty, audit scope, or accounting principles, except that the reports
were modified to include a paragraph regarding the Company's ability to continue
as a going concern. In connection with the audits of the Company's consolidated
financial statements for each of the years ended December 31, 1998 and 1999, and
in the subsequent period through February 2, 2001, there were no disagreements
with Amisano Hanson on any matters of accounting principles or practices,
financial statement disclosure, or auditing scope or procedures, which if not
resolved to the satisfaction of Amisano Hanson would have caused Amisano Hanson
to make reference to the matter in their report. During the years ended
December 31, 1998 and 1999, and in the subsequent period through February 2,
2001, there were no reportable events as defined in paragraphs (A) through (D)
of Regulation S-K Item 304(a)(1)(v). The Company received, and has filed with
the Securities and Exchange Commission, a letter from Amisano Hanson addressed
to the Securities and Exchange Commission stating that it agreed with the
statements in this paragraph and in the last sentence of the immediately
preceding paragraph.
During the Company's two fiscal years ended December 31, 2001, and the period
subsequent to such date and prior to engaging Goldstein Golub Kessler LLP, the
Company has not consulted Goldstein Golub Kessler LLP with respect to the
application of accounting principles to a specific transaction, either completed
or proposed, the type of audit opinion that might be rendered on the Company's
financial statements; or any disagreements with Amisano Hanson, or reportable
events, as defined or described in Items 304(a)(2)(i) or (ii) of Regulation S-K.
Audit Fees
The aggregate fees billed to the Company for professional services rendered for
the audit of the Company's annual financial statements for the fiscal year ended
December 31, 2001, and for the reviews of the financial statements included in
the Company's Quarterly Reports on Form 10-Q for that fiscal year, were $48,012,
of which $45,503was paid to Goldstein Golub Kessler LLP and $2,509 was paid to
Amisano Hanson.
Financial Information Systems Design and Implementation Fees
Neither Goldstein Golub Kessler LLP nor Amisano Hanson provided any professional
services to the Company with respect to financial information systems design and
implementation for the year ended December 31, 2001.
All Other Fees
Neither Goldstein Golub Kessler LLP nor Amisano Hanson were paid any other fees
for services rendered to the Company during the year ended December 31, 2001.
Goldstein Golub Kessler LLP has advised the Company as follows: Goldstein Golub
Kessler LLP has a continuing relationship with American Express Tax and Business
Services, Inc. ("TBS") from which it leases auditing staff who are full time,
permanent employees of TBS and through which its partners provide non-audit
services. As a result of this arrangement, Goldstein Golub Kessler LLP has no
full time employees and therefore, none of the audit services performed were
provided by permanent full-time employees of Goldstein Golub Kessler LLP.
Goldstein Golub Kessler LLP manages and supervises the audit and audit staff,
and is exclusively responsible for the opinion rendered in connection with its
examination.
Required Vote
The affirmative vote of a majority of the votes cast on this Item at the Annual
Meeting is required for the ratification of the appointment of Goldstein Golub &
Kessler LLP as the Company's auditors for the fiscal year ending December 31,
2002.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE RATIFICATION OF
GOLDSTEIN GOLUB KESSLER LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE
CURRENT FISCAL YEAR.
REQUIREMENTS, INCLUDING DEADLINES, FOR
SUBMISSION OF PROXY PROPOSAL, NOMINATION OF DIRECTORS
AND OTHER BUSINESS OF SHAREHOLDERS
Under the rules of the SEC, if a shareholder wants the Company to include a
proposal in its Proxy Statement and form of proxy for presentation at the
Company's 2003 Annual Meeting of Shareholders, the proposal must be received by
the Company, Attention: Mr. Anton J. Drescher, Secretary, at the Company's
principal executive offices no later than January 24, 2003.
In addition, the proxy solicited by the Board of Directors for the 2003 Annual
Meeting of Shareholders will confer discretionary authority to vote on any
shareholder proposal presented at that meeting, unless the Company is provided
with notice of such proposal no later than January 24, 2003.
The Board is not aware of any matters that are expected to come before the
Annual Meeting other than those referred to in this Proxy Statement. If any
other matter should come before the Annual Meeting, the persons named in the
accompanying proxy intend to vote the proxies in accordance with their best
judgment.
The chairman of the meeting may refuse to allow the transaction of any business
not presented beforehand, or to acknowledge the nomination of any person not
made in compliance with the foregoing procedures.
It is important that the proxies be returned promptly and that your shares be
represented. Shareholders are urged to mark, date, execute and promptly return
the accompanying proxy card in the enclosed envelope.
FORM 10-K
The Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2001, including the financial statements and a list of exhibits, is enclosed
with this Proxy Statement.
The Company will mail to any shareholder, without charge and upon written
request, a copy of any exhibit to the Annual Report. Requests should be sent to
USA Video Interactive Corp., 70 Essex Street, Mystic, Connecticut 06355, Attn:
Investor Relations.
By Order of the Board of Directors
/s/ Anton J. Drescher
--------------------------
Anton J. Drescher,
Secretary
May 24, 2002
USA VIDEO INTERACTIVE CORP.
PROXY
2002 ANNUAL MEETING OF SHAREHOLDERS
(SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS)
KNOW ALL MEN BY THESE PRESENTS, that the undersigned shareholder of USA Video
Interactive Corp., hereby constitutes and appoints Edwin Molina, Anton J.
Drescher and Robert D. Smith Jr., and each or any of them, or instead of any or
all of the foregoing, __________________ the attorneys and proxies of the
undersigned with full power of substitution to act and vote for an in the name,
place and stead of the undersigned, at the 2002 Annual Meeting of the
Shareholders of the Company, to be held at 11:00 a.m. on Friday, June 28, 2002,
and at any adjournments thereof, the number of votes the undersigned would be
entitled to cast if present upon all matters referred to below and described in
the Proxy Statement for the meeting and, at their discretion, upon any other
matters that may properly come before the meeting:
(1) ELECTION OF DIRECTORS:
VOTE FOR ALL NOMINEES LISTED BELOW | |
WITHHOLD AUTHORITY | |
Nominees:
Edwin Molina
Anton J. Drescher
Robert D. Smith Jr.
INSTRUCTIONS: To withhold authority to vote for any individual nominee(s)
listed above, write the nominee's name in the space provided below.
EXCEPTIONS _____________________________
(2) RATIFICATION OF APPOINTMENT OF GOLDSTEIN GOLUB KESSLER LLP AS INDEPENDENT
AUDITORS:
FOR | | AGAINST | | ABSTAIN | |
(3) In their discretion, to vote with respect to any other matters that may
properly come before the meeting or any adjournments thereof, including
matters incident to its conduct.
FOR | | AGAINST | | ABSTAIN | |
When properly executed, this Proxy will be voted in the manner specified by the
Shareholder. Unless you specify otherwise, this Proxy will be voted "FOR" the
election of all of the nominees as directors and "FOR" Item 2.
A majority of the proxies, or their substitutes at the meeting, or any
adjournments thereof may exercise all of the powers given by this Proxy. Any
Proxy to vote any of the shares for which the undersigned is or would be
entitled to vote previously given to any person or persons other than the
persons named above is hereby revoked.
IN WITNESS WHEREOF, the undersigned has signed and sealed this Proxy and
acknowledges receipt of a copy of the notice of said meeting and proxy statement
in reference thereto both dated May 24, 2002.
Dated: __________________, 2002
___________________________________
Number of Shares
___________________________________
PRINT NAME OF SHAREHOLDER
___________________________________
SIGNATURE OF SHAREHOLDER
Joint Owners should each sign. Attorneys-in-fact, administrators, custodians,
partners, or corporation officers should give full title.
NOTE: This proxy, properly completed, dated and signed, should be returned
immediately in the enclosed, envelope to CIBC Mellon Trust Company, Suite 600,
333 7th Avenue S.W., Calgary, Alberta, Canada T2P 2Z3.
USA VIDEO INTERACTIVE CORP.
REQUEST TO BE ADDED TO
SUPPLEMENTAL MAILING / EMAIL LIST
Please complete and return to:
USA Video Interactive Corp.
507, 837 West Hastings Street
Vancouver, British Columbia, Canada V6C 3N6
Attention: Anton J. Drescher
I hereby request that my name be added to the supplemental mailing / email list
maintained by the Corporation for the mailing / emailing of interim Financial
Statements in accordance with National Policy No. 41. I declare that I am a
shareholder of the Corporation.
- ---------------------------------------- -----------------------------------
PRINT NAME SIGNATURE
- ----------------------------------------
ADDRESS
- ----------------------------------------
CITY, PROVINCE/ STATE
- ----------------------------------------
POSTAL CODE/ ZIP CODE
- ----------------------------------------
EMAIL ADDRESS
- ----------------------------------------
DATE
Please note: Interim Financial Statements will only be sent to the shareholders
who return this request. We DO need your Postal Code or ZIP Code.