SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
FILED BY THE REGISTRANT [X]
FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, For Use Of The Commission Only (As Permitted By Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12.
COLOR IMAGING, 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)(1) and 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 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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COLOR IMAGING, INC.
4350 PEACHTREE INDUSTRIAL BOULEVARD
SUITE 100
NORCROSS, GEORGIA 30071
APRIL 23, 2004
TO OUR STOCKHOLDERS:
You are cordially invited to attend the Annual Meeting of Stockholders of Color
Imaging, Inc., which will be held at 10:00 a.m., local time, on May 18, 2004, at
the St. Ives Country Club, One St. Ives Country Club Drive, Duluth, GA 30097.
All holders of Color Imaging's outstanding common stock as of the close of
business on March 26, 2004 are entitled to vote at the annual meeting. Enclosed
is a copy of the Notice of Annual Meeting of Stockholders, proxy statement and
proxy card.
We hope you will be able to attend the annual meeting. Whether or not you expect
to attend, it is important that you complete, sign, date and return the proxy
card in the enclosed envelope in order to make certain that your shares will be
represented at the annual meeting.
Sincerely,
/s/ MORRIS E. VAN ASPEREN
Morris E. Van Asperen
Secretary
COLOR IMAGING, INC.
4350 PEACHTREE INDUSTRIAL BOULEVARD
SUITE 100
NORCROSS, GEORGIA 30071
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 18, 2004
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Color Imaging,
Inc. ("Color Imaging" or the "Company") will be held at 10:00 a.m., local time,
on May 18, 2004, at the St. Ives Country Club, One St. Ives Country Club Drive,
Duluth, GA 30097, for the following purposes:
1. To elect seven directors to serve until the next Annual Meeting of
Stockholders or until their respective successors are elected and qualified.
2. To ratify the selection of Lazar Levine & Felix LLP as Color Imaging's
independent accountants for the year ending December 31, 2004.
3. To transact such other business as may properly come before the annual
meeting or any adjournment thereof.
The board of directors has fixed the close of business on March 26, 2004, as the
record date for the determination of stockholders entitled to notice of and to
vote at the annual meeting and all adjourned meetings thereof.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ MORRIS E. VAN ASPEREN
Morris E. Van Asperen
Secretary
Dated: April 23, 2004
Please Complete, Date, Sign And Return The Enclosed Proxy Card In The Return
Envelope As Promptly As Possible, Whether Or Not You Plan To Attend The Annual
Meeting. If You Later Desire To Revoke Your Proxy For Any Reason, You May Do So
In The Manner Described In The Attached Proxy Statement.
COLOR IMAGING, INC.
4350 PEACHTREE INDUSTRIAL BOULEVARD
SUITE 100
NORCROSS, GEORGIA 30071
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is being furnished in connection with the solicitation of
proxies by the board of directors of Color Imaging, Inc. for use at the annual
meeting of stockholders to be held at 10:00 a.m., local time, on May 18, 2004,
at the St. Ives Country Club, One St. Ives Country Club Drive, Duluth, GA 30097,
and at any adjournment thereof. When such proxy is properly executed and
returned, the shares it represents will be voted in accordance with any
directions noted thereon. Any stockholder giving a proxy has the power to revoke
it at any time before it is voted by written notice to the Secretary of Color
Imaging or by issuance of a subsequent proxy. In addition, a stockholder
attending the annual meeting may revoke his or her proxy and vote in person if
he or she desires to do so, but attendance at the annual meeting will not of
itself revoke the proxy.
At the close of business on March 26, 2004, the record date for determining
stockholders entitled to notice of and to vote at the annual meeting, Color
Imaging had issued and outstanding 12,730,505 shares of common stock, including
14,000 shares which have been repurchased by Color Imaging and not yet
cancelled. Each share of common stock entitles the holder of record thereof to
one vote, non-cumulative, on any matter coming before the annual meeting. Only
stockholders of record at the close of business on March 26, 2004 are entitled
to notice of and to vote at the annual meeting or any adjournment thereof.
The enclosed Proxy, when properly signed, also confers discretionary authority
with respect to amendments or variations to the matters identified in the Notice
of Annual Meeting and with respect to other matters which may be properly
brought before the annual meeting. At the time of printing this proxy statement,
management of Color Imaging is not aware of any other matters to be presented
for action at the annual meeting. If, however, other matters which are not now
known to the management should properly come before the annual meeting, the
proxies hereby solicited will be exercised on such matters in accordance with
the best judgment of the proxy holders.
Shares represented by executed and unrevoked proxies will be voted in accordance
with the instructions contained therein or, in the absence of such instructions,
in accordance with the recommendations of the board of directors. Neither
abstentions nor broker non-votes will be counted for the purposes of determining
whether any of the proposals have been approved by the stockholders of Color
Imaging, although they will be counted for purposes of determining the presence
of a quorum.
Color Imaging will pay the expenses of soliciting proxies for the annual
meeting, including the cost of preparing, assembling, and mailing the proxy
solicitation materials. Proxies may be solicited personally, by mail, by telex,
or by telephone, by directors, officers, and regular employees of Color Imaging
who will not be additionally compensated therefor. It is anticipated that this
proxy statement and accompanying proxy card will be mailed on or about April 25,
2004 to all stockholders entitled to vote at the annual meeting.
Nominees for election as directors will be elected by a majority of the votes
cast by the holders of shares entitled to vote in the election. It is expected
that shares beneficially owned by current executive officers, directors and
affiliates of Color Imaging, which in the aggregate represent approximately 65
percent of the outstanding shares of common stock, will be voted in favor of
management's nominees for director.
The affirmative vote of holders of a majority of the outstanding shares of
common stock of Color Imaging entitled to vote and present in person or by proxy
at the annual meeting is required for the ratification of Lazar Levine & Felix
LLP as Color Imaging's independent accountants. It is expected that shares
beneficially owned by current executive officers, directors and affiliates of
Color Imaging, which in the aggregate represent approximately 65 percent of the
outstanding shares of common stock, will be voted in favor of management's
nominees for director, for ratification of Lazar Levine & Felix LLP as Color
Imaging's independent accountants. With respect to the election of directors,
abstentions, votes "withheld" and broker non-votes will be disregarded and will
have no effect on the outcome of the vote. Abstentions and votes "withheld" will
have the effect of a vote against the proposal to approve the proposal to ratify
Lazar Levine & Felix LLP as Color Imaging's independent accounts and broker
non-votes will be disregarded and will have no effect on the outcome of the
votes. There are no rights of appraisal or similar dissenters' rights with
respect to any matter to be acted upon pursuant to this proxy statement.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The board of directors of Color Imaging recommends a vote FOR the election of
each of the nominees named below for election as director, and FOR the
ratification of Lazar Levine & Felix, LLP as Color Imaging's independent
accountants.
ELECTION OF DIRECTORS
The proxy holders intend to vote "FOR" election of the nominees named below, who
are currently members of the board, as directors of Color Imaging, unless
otherwise specified in the proxy. Directors of Color Imaging elected at the
annual meeting to be held on May 18, 2004 will hold office until the next annual
meeting or until their successors are elected and qualified.
Each of the director nominees below has consented to serve on the board of
directors, if elected. Should any nominee for the office of director become
unable to accept nomination or election, which is not anticipated, it is the
intention of the persons named in the proxy, unless otherwise specifically
instructed in the proxy, to vote for the election of such other person as the
board may recommend.
The individuals listed below as nominees for the board of directors were
directors of Color Imaging during 2003. The name and age of each nominee, and
the period during which such person has served as a director, is set forth
below:
SERVED AS
NAME AGE DIRECTOR SINCE POSITION
------------------------- ------- --------------------- -------------------------------------------------
Jui-Kung Wang 60 September 2001 Chief Executive Officer and Chairman of the Board
Sueling Wang, PhD 50 June 2000 President and Vice Chairman of the Board
Morris E. Van Asperen 60 June 2000 Executive Vice President, Chief Financial Officer,
Secretary and Director
Yi Jen Wang 27 April 2003 Assistant Vice President and Director
Jui-Hung Wang 57 June 2001 Director
Jui-Chi Wang 47 June 2000 Director
Richard S. Eiswirth 34 April 2003 Director
JUI-KUNG (ELMER) WANG, Chief Executive Officer and Chairman of the Board since
August 2003, has served as a director of Color Imaging since September 2001. He
was a founder of Color Image, Inc. in 1989 and its Chairman until its merger
with Color Imaging. He is a co-founder and has served as a director of General
Plastic Industrial Co., Ltd, a leading Taiwan based manufacturer of after market
injection molded cartridges and accessories for copiers and laser printers since
1978. In 1998 Mr. Wang was a founding member of Kings Brothers LLC, which leases
space to Color Imaging we use for our headquarters and manufacturing facilities
in Norcross, Georgia. Mr. Wang has been a professor of management with Tung-Hai
University, Taiwan for over 20 years. He has received a bachelor's degree in
economics, and MBA and PhD degrees in management. Jui-Kung Wang is the brother
of Sueling Wang, Jui-Hung Wang and Jui-Chi Wang, and the uncle of Yi Jen Wang.
SUELING WANG, PHD became President and Vice-Chairman of Color Imaging in June
2000. From 1989 to 2000, he served as President and director of Color Image,
Inc., which was merged with Color Imaging. Dr. Wang was also a founder of Color
Image Inc. In 1998, Dr. Wang was a founding member of Kings Brothers LLC, which
leases space to Color Imaging used for our headquarters and manufacturing
facilities in Norcross, Georgia. Dr. Wang received a M.S. degree from the
University of Windsor, in Ontario, Canada and a PhD degree from the University
of Detroit. Dr. Wang's expertise in resin synthesis brought him into the toner
industry and led to the formation of Color Image, Inc. in 1989. Sueling Wang is
the brother of Jui-Kung Wang, Jui-Hung Wang and Jui-Chi Wang, and the uncle of
Yi Jen Wang.
MORRIS E. VAN ASPEREN has served as Executive Vice President, Chief Financial
Officer and director of Color Imaging since June 2000. In June 2001 he was made
Secretary and on July 14, 2003, he was given the additional responsibilities of
Marketing and Sales. From 1998 he served as director of Logical Imaging
Solutions and was from August 2000 its Executive Vice President, Chief Financial
Officer and Secretary until it was disposed of by Color Imaging in September
2002. In 1986 he was employed by the National Bank of California as Senior Vice
President, Corporate Banking, and when he left the bank in July 2000 he was its
Executive Vice President and Credit Administrator. Mr. Van Asperen also has
extensive experience as a financial and management consultant to businesses of
up to $50 million in revenues and 1,000 employees in construction, household
goods, industrial glass, electronics manufacturing and software development.
From 1977 to 1984, he served as Vice President & Chief Financial Officer of ATE
Associates, Inc., a supplier of test fixtures and software for numerous military
aircraft programs. Mr. Van Asperen received a B.S. degree in Mathematics from
the University of Oklahoma and an M.B.A. degree from Pepperdine University.
YI-JEN (TINA) WANG has served as a director of Color Imaging since April 2003,
and is an Assistant Vice President and Human Resources Manager, having first
been employed by Color Imaging in February 2003. Prior to that she is attend the
University of San Francisco, pursuing an MBA degree. From October 2000 to June
2001 Ms. Wang served as a property manager for Kings Brothers LLC. From June
1998 to August 2000 Ms. Wang served as controller for GPI-USA, Inc. until it
discontinued its warehouse and marketing activities in the United States. From
January 1997 to May 1998 Ms. Wang was a sales representative assistant for our
affiliate General Plastic Industrial Co Ltd, Taiwan, R.O.C. Ms. Wang received a
Bachelor of Arts degree in June 1998 from Providence University, Taiwan, R.O.C.
Yi-Jen Wang is the niece of Jui-Kung Wang, Sueling Wang, Jui-Hung Wang and
Jui-Chi Wang.
JUI-HUNG (JACK) WANG has served as a director of Color Imaging since June 2001
and was Chairman from June 2002 through August 2003. He was a founder and
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director of Color Image, Inc. until its merger with Color Imaging. He is a
founder and serves as Chairman of General Plastic Industrial Co., Ltd, a leading
Taiwan based manufacturer of after market injection molded cartridges and
accessories for copiers and laser printers. Since January 2001, Mr. Wang has
served as a director of Taiwan Yu-Tzu Company, a food company. In 1998, Mr. Wang
was a founding member of Kings Brothers LLC, which leases space to Color Imaging
used for our headquarters and manufacturing facilities in Norcross, Georgia.
From 1986 to 1994, Mr. Wang was mayor of Wu-Chi Town, Taiwan. Jui-Hung Wang is
the brother of Sueling Wang, Jui-Kung Wang and Jui-Chi Wang, and the father of
Yi Jen Wang.
JUI-CHI (JERRY) WANG has served as a director of Color Imaging since June 2000.
From 1994 until 2000, he served as a director of Color Image, Inc., which was
merged with Color Imaging. Since 1984, Mr. Wang has served as President of
General Plastic Industrial Co. Ltd (GPI), a Taiwan-based plastics manufacturer
specializing in injection moldings and more particularly toner cartridges and
accessories for copiers and laser printers. In 1998, Mr. Wang was a founding
member of Kings Brothers LLC, which leases space to Color Imaging used for our
headquarters and manufacturing facilities in Norcross, Georgia. Mr. Wang
received a Master's Degree in Computer Engineering from the University of
Southern California. Jui-Chi Wang is the brother of Sueling Wang, Jui-Hung Wang
and Jui-Kung Wang, and the uncle of Yi Jen Wang.
RICHARD S. EISWIRTH has been a Director of the Company since April 2003 and is
Chairman of the Audit Committee. Since April 2002 he has been involved in
capital raising efforts for several start-ups. From August 1999 to April 2002,
he was Senior Executive Vice President and Chief Financial Officer of Netzee,
Inc., a publicly owned affiliate of The Intercept Group. Mr. Eiswirth was
responsible for the initial public offering and the identification, evaluation
and negotiation of ten acquisitions that fortified Netzee's product offerings.
Additionally, he facilitated the disposition of three operating units during the
company's restructuring. He has extensive experience in managing investment
bankers, brokers, attorneys, and accountants. For nine years prior to joining
Netzee, Mr. Eiswirth worked for Arthur Andersen LLP, where he was a senior
manager. In this capacity he provided audit, accounting, due diligence, merger
and acquisition, and consulting services to a variety of industries including
real estate, technology, banking, insurance and financial services. A certified
public accountant (CPA), Eiswirth graduated cum laude from Wake Forest
University in 1991 with a Bachelor of Arts degree in accounting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF
EACH OF THE ABOVE-NAMED DIRECTOR NOMINEES.
INFORMATION ABOUT THE BOARD OF DIRECTORS
AND COMMITTEES OF THE BOARD
DIRECTOR NOMINATIONS
In accordance with Article III, Section 3.3 of the Bylaws of the Company,
nominees for election as a director may be proposed only by the directors or by
a stockholder entitled to vote for directors.
A stockholder who wishes to make a director nomination at a stockholder meeting
must follow these procedures. For an annual meeting, the stockholder must submit
a written notice to the Secretary of the Company by the earlier of ninety days
before the first anniversary of the most recent annual meeting of stockholders
held for the election of directors and the close of business on the third day
following the date on which notice of the annual meeting is first given to
stockholders. For a special meeting, the written notice must be submitted by the
close of business on the third day following the date on which notice of the
meeting is first given to stockholders for the election of directors. The notice
must include:
(a) the name and address of the stockholder who intends to make the
nomination and of the person or persons to be nominated,
(b) a representation that the stockholder is a holder of record of
stock of the Company entitled to vote at such meeting and intends
to appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice,
(c) a description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons
(naming such person or persons) pursuant to which the nomination
or nominations are to be made by the stockholder,
(d) such other information regarding each nominee proposed by such
stockholder as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and
Exchange Commission, and
(e) the consent of each nominee to serve as a director of the Company
if so elected.
The presiding officer of the meeting may refuse to acknowledge the nomination of
any person not made in compliance with this procedure. The address for notices
of nominations is Color Imaging, Inc., Attn: Corporate Secretary, 4350 Peachtree
Industrial Blvd., Suite 100, Norcross, Georgia 30071.
The Board of Directors has not established a nominating committee but instead
determines its director nominations as a full Board. The Board of Directors
includes one director meeting the definition of "independent director" under the
rules of the Nasdaq Stock Market, as well asthe Chairman and Chief Executive
Officer, the President, and the Chief Financial Officer of the Company, and two
other directors who are not independent by virtue of their family relationships
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with the Chairman and the President. The Board of Directors believes that the
determination of nominees is benefited by the knowledge and perspective of these
corporate officers. Due to the small size of its Board, the Company does not
foresee the need to establish a separate nominating committee. Future candidates
for director will either be (i) recommended by a majority of the independent
directors for selection by the Board or (ii) discussed by the full Board and
approved for nomination by the affirmative vote of a majority of the Board,
including the affirmative vote of a majority of the independent directors. The
Company does not have a nominating committee charter.
The Company has not engaged, nor does it believe that it is necessary to engage,
any third party to assist it in identifying director candidates, and it has
never received a proposed candidate from a source outside of the Company.
Historically, the Board of Directors has not entertained outside candidates for
board nominees given that the Company is a "controlled" company under the rules
of the Nasdaq Stock Market, with management and affiliates controlling an
aggregate of approximately 65% of the voting shares. In formulating its slate of
director nominees for the annual meeting each year, the Board of Directors may
consider director candidates recommended by stockholders. The Board of Directors
does not have a written policy for how it will consider such recommendations due
to the lack of experience with such recommendations and the need to evaluate
such recommendations on a case-by-case basis.
Before consideration by the Board, nominations must satisfy the requirements
listed above, except that the nominations must be received no later than the
date disclosed in the prior year proxy statement for inclusion of stockholder
proposals for the current year proxy statement. In addition, each such written
nomination must state the name, age, business or residence address of the
nominee, the principal occupation or employment of the nominee, the number of
shares owned either beneficially or of record by each such nominee and the
length of time such shares have been so owned. Prior to further consideration,
the nominee must acknowledge that he/she is willing to (i) be named as a
nominee, (ii) serve as a director, and (iii) complete an officer and director
questionnaire for necessary disclosure items. The Board of Directors has not
established minimum qualifications that must be met by a board-recommended
nominee. However, the Board evaluates candidates based on financial literacy,
knowledge of the Company's industry or other background relevant to the
Company's needs, status as a stakeholder in the Company, "independence" (for
purposes of compliance with the rules of the SEC and the listing standards of
the Nasdaq National Market), and willingness, ability and availability for
service. The Board of Directors is not bound to accept any candidate proposed by
a stockholder, and may reject a candidate in its sole discretion. Stockholders
may submit proposed candidates to the Corporate Secretary at the above address.
STOCKHOLDER COMMUNICATIONS
Stockholders may communicate with the Company's Directors in care of the
Secretary of the Company in writing to Color Imaging, Inc., Attn: Corporate
Secretary, 4350 Peachtree Industrial Blvd, Suite 100, Norcross, GA 30071 or via
e-mail to van@colorimaging.com. Communication by mail to any or all of the
directors in care of the Secretary of the Company will be forwarded to the
director(s). E-mails received by the Secretary of the Company for any or all of
the Company's Directors will be forwarded by the Secretary of the Company to the
director(s). All stockholder messages will be forwarded directly to the
Directors specified by the stockholder.
DIRECTOR ATTENDANCE AT STOCKHOLDER MEETINGS
At last year's annual meeting of stockholders, the following directors were in
attendance: Sueling Wang, Morris E. Van Asperen, Yi-Jen Wang and Richard S.
Eiswirth. The SARS outbreak in Asia during 2003 affected the travel plans from
Taiwan of the three (3) directors who did not attend the 2003 annual meeting of
the stockholders. The board does not have a formal policy on director attendance
at stockholder meetings. The Company's stockholder meetings historically have
had light attendance, with typically fewer than ten (10) stockholders attending
in person. All of the Directors intend to attend the 2004 meeting of the
stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
There were seven (7) meetings of the board of directors during 2003. Each
incumbent director who was a director during 2003 attended 75 percent or more of
the aggregate of all meetings of the board of directors and any committees on
which that director served, except Jui-Kung Wang who attended 71.4% of the
meetings.
DIRECTOR COMPENSATION
Each of Color Imaging's non-employee directors receives fees of $1,000.00 per
board meeting physically attended and $500.00 for other meetings of the board of
directors. Each director who is a member of the Audit Committee receives $500.00
for each meeting of the Audit Committee attended. In addition, each director is
reimbursed for certain out-of-pocket expenses incurred in connection with
attendance at board and committee meetings. Each of Color Imaging's non-employee
directors, on the date they are first elected or appointed to the board,
receives a grant of non-qualified stock options to purchase 25,000 shares of
Color Imaging's common stock at the fair market value of the common stock on the
date of grant. The directors' options vest in equal annual installments over a
five year period.
AUDIT COMMITTEE
The Audit Committee engages Color Imaging's independent public accountants,
reviews with the independent public accountants the plans and results of the
audit engagement, approves professional services provided by the independent
public accountants, reviews the independence of the independent public
4
accountants, considers the range of audit and any non-audit fees, and reviews
the adequacy of Color Imaging's internal accounting controls and financial
management practices. Until April 2003 the entire board of directors constituted
the Audit Committee, and thereafter the Audit Committee consisted of Mr. Richard
S. Eiswirth, CPA. There was one (1) meeting in March 2003 when the Committee was
comprised of the entire board of directors from which two (2) directors were
absent. From April 30, 2003, there were three (3) meetings of the Audit
Committee in 2003 with the incumbent member attending 75 percent or more of the
aggregate of all meetings of the Audit Committee.
The board of directors nominates and appoints the members of the Audit
Committee.
NOMINATING AND COMPENSATION COMMITTEES
The board of directors acts as the nominating and compensation committees of
Color Imaging.
Notwithstanding anything to the contrary that is or may be set forth in any of
Color Imaging's filings under the Securities Act of 1933 or the Securities
Exchange Act of 1934 that might incorporate Color Imaging filings, including
this proxy statement, in whole or in part, the following Reports and the
Performance Graph, shall not be incorporated by reference into any such filings.
5
REPORT OF AUDIT COMMITTEE
After the divestiture of Logical Imaging Solutions, Inc. on September 30, 2002
until April 18, 2003 when Richard S. Eiswirth, an independent director and
financial expert and sole member of the Audit Committee, was appointed to the
Board and made Chairman of the Audit Committee, the responsibilities of the
Audit Committee were performed by the Board of Directors. Since April 2003,
Color Imaging had an Audit Committee (the "Committee") composed entirely of
non-management directors and thereafter the oversight responsibility, authority
and specific duties of the Committee have been performed by the Committee in
accordance with the Audit Committee Charter of Color Imaging. The sole member of
the Committee, after April 2003, met the independence and experience
requirements of the NASD. The Committee met with Lazar Levine & Felix LLP, the
independent auditors, and management prior to issuance of Color Imaging's annual
report on Form 10-K for the year ending December 31, 2003. The Committee
reviewed the charter last amended on October 31, 2002, and determined that
further amendments were not needed at that time. The charter, as previously
amended, outlines the practices the Committee follows. A copy of the Committee
charter, as amended, was attached as Appendix A to the 2003 Proxy Statement.
The Committee recommended to the board of directors the engagement of Lazar
Levine & Felix LLP as Color Imaging's independent auditors and reviewed with
Color Imaging's financial managers and the independent auditors overall audit
scope and plans, the results of internal and external audit examinations,
evaluations by the auditors of Color Imaging's internal controls, and the
quality of Color Imaging's financial reporting.
The Committee has reviewed and discussed with management the audited financial
statements in the Annual Report, including a discussion of the quality, not just
the acceptability, of the accounting principles, the reasonableness of
significant judgments, and the clarity of disclosures in the financial
statements. In addressing the quality of management's accounting judgments,
members of the Audit Committee asked for management's representations that the
audited consolidated financial statements of Color Imaging have been prepared in
conformity with generally accepted accounting principles and have expressed to
both management and the independent auditors their general preference for
conservative policies when a range of accounting options is available.
In its meetings with representatives of Lazar Levine & Felix LLP, the
independent auditors, the Committee asks them to address, and discuss their
responses to, several questions that the Committee believes are particularly
relevant to its oversight. These questions include:
- Are there any significant accounting judgments made by management in
preparing the financial statements that would have been made
differently had the independent auditors themselves prepared and been
responsible for the financial statements?
- Based on the independent auditors' experience and their knowledge of
Color Imaging, do Color Imaging's financial statements fairly present
to investors, with clarity and completeness, Color Imaging's financial
position and performance for the reporting period in accordance with
generally accepted accounting principles and SEC disclosure
requirements?
- Based on the independent auditors' experience and their knowledge of
Color Imaging, has Color Imaging implemented internal controls and
internal audit procedures that are appropriate for Color Imaging?
The Committee believes that by thus focusing its discussions with the
independent auditors, it can promote a meaningful dialogue that provides a basis
for its oversight judgments.
The Committee discussed with Lazar Levine & Felix LLP, the independent auditors,
the matters required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees, as amended by the Auditing Standards Board
of the American Institute of Certified Public Accountants. The Committee also
received and reviewed the written disclosures and the letter from the
independent auditors required by Independence Standards Board Standard No. 1,
Independence Discussions with Audit committees, by the Independence Standards
Board, and have discussed the auditors' independence.
In performing all of these functions, the Audit Committee acts only in an
oversight capacity. The Committee, in its oversight role, necessarily relies on
the work and assurances of Color Imaging's management, which has the primary
responsibility for financial statements and reports, and of the independent
auditors, who, in their report, express an opinion on the conformity of Color
Imaging's annual financial statements to generally accepted accounting
principles.
In reliance on these reviews and discussions, and the report of Lazar Levine &
Felix LLP, the independent auditors, the Audit Committee recommended to the
board of directors, and the board approved, that the audited financial
statements be included in Color Imaging's Annual Report on Form 10-K for the
year ended December 31, 2003, for filing with the Securities and Exchange
Commission.
FEES PAID TO COLOR IMAGING'S INDEPENDENT AUDITORS
During fiscal 2003 and 2002 Color Imaging incurred the following fees for
services performed by Lazar Levine & Felix LLP:
Fiscal 2003 Fiscal 2002
-------------------- --------------------
Audit Fees $ 78,671 $ 91,717
Audit Related Fees 0 0
Tax Fees1 15,000 12,000
All Other Fees2 4,895 19,236
6
(1) The aggregate fees for all professional services related to tax
compliance and the preparation and filing of Federal and state income
tax returns.
(2) Other services included in fees in connection with the review of Color
Imaging's Registration Statement filings on Form SB-2 and the consent
to the inclusion of Color Imaging's financial statements contained
therein.
AUDIT FEES
The aggregated fees for professional services rendered for each of the fiscal
years 2003 and 2002 for the audit of Color Imaging's annual financial statements
and limited reviews of financial statements included in Forms 10-Q were
approximately $78,671 and $91,717, respectively.
AUDIT-RELATED FEES
There were no fees for professional services rendered for each of the fiscal
years 2003 and 2002 for assurance and related services that have not been
reported as Audit Fees.
TAX FEES
The aggregate fees for all professional services related to tax services and the
filing of Federal and state income tax returns during fiscal years 2003 and 2002
was approximately $15,000 and $12,000 in connection with Color Imaging's tax
returns for fiscal years 2002 and 2001, respectively.
ALL OTHER FEES
Aggregate fees billed for all other professional services for the fiscal years
2003 and 2002 were approximately $4,895 and $19,236, respectively, and were for
professional services in connection with Color Imaging's registration statement
filed with the SEC on Form SB-2.
The Company's audit committee approved all of the services described above. The
audit committee has determined that the payments made to its independent
accountants for these services are compatible with maintaining such auditors'
independence.
AUDIT COMMITTEE'S PRE-APPROVAL POLICES AND PROCEDURES
The Committee has the sole authority to appoint or replace, compensate, and
oversee the work of any independent auditor, who must be, when required, a
registered firm as defined by law, whose purpose is the preparation or issuance
of an audit report or related work. The independent auditor's reports and other
communications are to be delivered directly to the Committee, and the Committee
is responsible for the resolution of disagreements between management and the
independent auditor regarding financial reporting.
The Committee pre-approves all audit and non-audit services and all engagement
fees and terms in connection therewith, except as otherwise permitted by
regulation or the exchange.
The fees for professional services other than Audit Fees, in aggregate, for 2003
and 2002, approved by the Committee, were approximately $19,895 and $31,236. All
of the hours expended on the principal accountant's engagement to audit the
financial statements of Color Imaging for the years 2003 and 2002 were
attributable to work performed by full-time, permanent employees of the
principal accountant.
Management is responsible for planning Color Imaging's financial reporting
process and compliance of the consolidated financial statements with generally
accepted accounting principles. Color Imaging's independent auditors are
responsible for auditing those financial statements. The Audit Committee
necessarily must rely, without independent verification, on (a) management's
representation that the financial statements have been prepared with integrity
and objectivity and in conformity with accounting principles generally accepted
in the United States of America, and (b) on the representations of the
independent auditors included in their report on Color Imaging's financial
statements.
AUDIT COMMITTEE:
FEBRUARY 9, 2004
Richard S. Eiswirth
7
REPORT OF THE BOARD OF DIRECTORS ON
EXECUTIVE COMPENSATION
OVERVIEW
During the year ended 2003, the board of directors held primary responsibility
for determining the compensation for Jui-Kung Wang, Chairman of the board and
Chief Executive Officer (appointed August 15, 2003), principal executive
officer, Sueling Wang, Vice Chairman of the board and President, Morris E. Van
Asperen, Director and Executive Vice President and Chief Financial Officer,
principal accounting and financial officer, Charles R. Allison, Director and
Vice President Marketing and Sales (retired June 27, 2003), and Claude R.
Aubert, Vice President Technology (hired June 2, 2003), and the stock based
incentives for all the Named Executives. The compensation committee is comprised
of Color Imaging's board of directors over whose name this report is also
presented.
Color Imaging is engaged in a highly competitive industry. The actions of the
executive officers have a profound impact on the short-term and long-term
profitability of Color Imaging; therefore, the design of the executive officer
compensation package is very important. In order to retain key employees, Color
Imaging has an executive compensation package that is driven by an increase in
shareholder value, the overall performance of Color Imaging, and the individual
performance of the executive. The measures of Color Imaging's performance
include revenue growth, pretax profit achievement, and pretax profit improvement
over the past year.
Pursuant to the above compensation philosophy, the three main components of the
executive compensation package are base salary, a cash incentive plan
(discretionary bonus or commission based program), and stock-based incentive
plans.
BASE SALARY
The factors subjectively used in determining base salary include the recent
profit performance of Color Imaging, the magnitude of responsibilities, the
scope of the position, individual and overall departmental performance
improvements, and the salary received by peers in similar positions in the same
geographic area. These factors are not used in any specific formula or
weighting. The salaries of the Named Executives are reviewed annually. Further,
in connection with the appointment of the Chief Executive Officer on August 15,
2003, the responsibilities of the Vice Chairman and President, and certain of
the other Named Executives were reassessed and their compensation packages were
restructured. Increases in base salaries for the President and Executive Vice
President are set at a minimum of 5% per annum pursuant to their employment
agreements. However, for the year ended 2003, the Named Executives' base salary
increases ranged from nothing to a 6-month temporary salary reduction of
one-half, and effective August 1, 2003, the Executive Vice President's
employment agreement was modified to eliminate the 5% minimum per annum
increase. On June 27, 2003, the Vice President of Marketing and Sales retired
and the Executive Vice President assumed these additional responsibilities.
CASH BASED INCENTIVE PLANS
Other than commissions based on the achievement of certain sales objectives paid
to the Vice President Marketing and Sales and beginning August 1, 2003, to the
Executive Vice President to whom it is applicable, Color Imaging does not have
an annual cash based incentive compensation package for the Named Executives,
and instead Color Imaging utilizes discretionary annual bonuses based upon
performance objectives for the ensuing fiscal year. The Named Executives
participate in a performance bonus plan designed to encourage achievement of
short-term objectives. The plan's payouts are subjectively based on net income,
budget objectives, and other individual specific performance objectives. The
specific performance objectives relate to each executive improving the
contribution of his functional area of responsibility to further enhance the
earnings of Color Imaging. These performance objectives and incentive packages
are then reviewed by the board of directors and either accepted, amended, or
modified. There was, as a result, a discretionary bonus of $140,000 approved by
Color Imaging and paid to Sueling Wang, Vice Chairman and President during 2003.
STOCK BASED INCENTIVE PLANS
During the fiscal year 2003, the Vice President Technology, effective with his
employment by Color Imaging on June 2, 2003, was granted options to purchase
100,000 shares of Color Imaging's common stock at an exercise price of $0.77 per
share, with 25% vesting immediately and 25% vesting upon each anniversary date
of the grant thereafter and expiring 5 years from the respective date of
vesting. The other Named Executives were not granted any stock options or other
stock incentives. The grant of awards is purely discretionary, and is not based
on any specific formula and may or may not be granted in any given fiscal year.
The board of directors gives consideration to the overall performance of Color
Imaging and the performance of individual employees.
CHIEF EXECUTIVE OFFICER COMPENSATION
Color Imaging's principal executive officer's, compensation is determined by the
board of directors. For year ended 2003, the duties of the principal executive
officer were performed by Sueling Wang until August 15 and thereafter by
Jui-Kung Wang. The cash compensation of Sueling Wang, Vice Chairman and
President, was $281,029, including the $140,000 cash based incentive
compensation. This represents the total compensation for Dr. Sueling Wang, no
portion of which was in stock based incentive plans. The cash compensation of
Jui-Kung Wang, Chairman and Chief Executive Officer was $34,409, with none of it
being cash based incentive compensation. This represents the total compensation
for Mr. Jui-Kung Wang, no portion of which was in stock based incentive plans.
The Chief Executive's compensation is based upon the long-term growth in net
8
income, stockholder value improvements and the Chief Executive Officer's
individual performance. The decision of the board of directors is subjective and
is not based upon any specific formula or guidelines. The Chief Executive
Officer does not consult with the board when his compensation is determined and
voluntarily accepts amendments to his employment agreement, if applicable, as
required.
COMPENSATION COMMITTEE
FEBRUARY 17, 2004
Jui-Kung Wang
Sueling Wang
Morris E. Van Asperen
Jui-Hung Wang
Jui-Chi Wang
Yi-Jen Wang
Richard S. Eiswirth
9
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth the compensation earned by
our chief executive officer and the three other most highly compensated
executive officers who were serving as such as of December 31, 2003, 2002 and
2001 (collectively, the Named Executive Officers), whose aggregate compensation
for fiscal years 2003, 2002 and 2001 exceeded $100,000 for services rendered in
all capacities to Color Imaging and its subsidiaries for that fiscal year.
------------------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long Term Compensation
--------------------------------------- ----------------------------------------
All
Other Annual Restricted Securities LTIP Other
Compensation Stock Underlying Payments Compen-
Name and Principal Position Year Salary ($) Bonus ($) ($)(1) Awards ($) Options/SARS(#) ($) sation
----------------------------- --------- ------------ ----------- -------------- ------------ ------------------ -------- -----------
Jui-Kung Wang (2) 2003 29,908 -- 6,501 -- -- -- --
Chief Executive Officer 2002 N/A -- 1,000 -- -- -- --
2001 N/A -- -- -- 25,000 -- --
Dr. Sueling Wang (3) 2003 136,826 140,000 4,203 -- -- -- --
President 2002 158,439 -- 38,736 -- -- -- --
2001 158,423 -- -- 100,000 -- --
Morris E. Van Asperen (4)
Executive Vice President, 2003 162,001 -- 9,204 -- -- -- --
Chief Financial Officer & 2002 151,200 -- 14,353 -- -- -- --
Secretary 2001 146,714 -- 5,461 -- 100,000 -- --
------------------------------------------------------------------------------------------------------------------------------------
(1) For named executive officers the amount reported represents the cost of
group insurance benefits, Color Imaging's matching contribution to the
401(k) plan for the officer, other life insurance policies maintained for
him, and other compensation as further described in the notes for each
officer, respectively.
(2) Mr. Wang was employed by Color Imaging on August 15, 2003, and other annual
compensation included the personal benefit of his use of a company
automobile of $4,442 and group life insurance benefit payments were $59.
Also included in other annual compensation are the fees paid to the named
executive officer while he was an outside director which were $ 2,000,
$1,000 and $0 during 2003, 2002, and 2001, respectively. The options were
granted upon the officer's initial appointment to the board of directors in
September 2001 and vest ratably over the next five years upon the
anniversary date of the grant and expire three years from their respective
vesting dates. As of December 31, 2003, Mr. Wang had 25,000 options, 10,000
of which were vested, to purchase Color Imaging's common stock at an
exercise price of $2.75.
(3) Other annual compensation includes split dollar and group life insurance
premiums were $886, $22,773, and $13,526 during 2003, 2002 and 2001,
respectively. During 2003 the officer repaid the loan due to the Color
Imaging in connection with the split dollar life insurance policy and the
collateral assignment of the policy was released by Color Imaging and the
plan between Color Imaging and the officer was terminated. Options granted
by action of the board on March 21, 2001. 25% vested immediately and the
balance vest 25% per year upon each anniversary date of the grant. The
options expire five years after their respective vesting date(s). As of
December 31, 2003, Dr. Wang had 300,000 options, 275,000 of which were
vested, to purchase Color Imaging's common stock at exercise prices of
$2.00 and $2.75.
(4) Other annual compensation includes, by agreement, the reimbursement for a
supplemental life insurance policy for the benefit of the officer. The life
insurance premiums reimbursed or paid by Color Imaging, including those
that are part of Color Imaging's group plan, in 2003, 2002 and 2001 were
$5,525, $6,446, $0, respectively. In 2003 the officer voluntarily
terminated the life insurance reimbursement program previously funded by
Color Imaging; and, subsequently, the officer's employment agreement was
modified to delete the provision of the additional life insurance benefit.
Options granted by action of the board on March 21, 2001. 25% vested
immediately and the balance vest 25% per year upon each anniversary date of
the grant. The options expire five years after their respective vesting
date(s). As of December 31, 2003, Mr. Van Asperen had 300,000 options,
250,000 of which were vested, to purchase Color Imaging's common stock at
exercise prices of $2.00 and $2.75.
10
OPTION GRANTS TABLE
Options granted the Named Executive Officers during the year ended December 31,
2003 were:
------------------------------------------------------------------------------------------------------------------------------------
Potential realizable
value at assume annual Alternative
rates of stock price to (f) and
appreciation for the (g): grant
Individual Grants option term date value
----------------------------------------------------------------------------------------- -------------------------- ---------------
Number Percent of
of total
securities options/SARS
underlying granted Exercise or Grant date
Options/SARS employees in base price Expiration present
Name (#) fiscal year (%) ($/Share) date 5%($)(f) 10%($)(g) value $
------------------------------------------------------------------------------------------------------------------------------------
Jui-Kung Wang (2) None N/A N/A N/A N/A N/A N/A
Chief Executive Officer
Dr. Sueling Wang (3) None N/A N/A N/A N/A N/A N/A
President
Morris E. Van Asperen None N/A N/A N/A N/A N/A N/A
Executive Vice
President, Chief
Financial Officer
& Secretary
------------------------------------------------------------------------------------------------------------------------------------
OPTION EXERCISES AND YEAR-END VALUE TABLE
None of the Named Executive Officers exercised stock options during 2003. The
following table sets forth certain information regarding unexercised options
held at year-end by each of the Named Executive Officers.
AGGREGATED OPTION EXERCISES IN 2003 AND OPTION VALUES AT DECEMBER 31, 2003
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
OPTIONS
------------------------------------------
SHARES
ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE
------------------------- ---------------- --------------- ------------------ -------------------
Jui-Kung Wang 0 0 10,000 15,000
Sueling Wang 0 0 275,000 25,000
Morris E. Van Asperen 0 0 250,000 50,000
Based on the closing price of our common stock of $0.70 on December 31, 2003, no
unexercised options were in the money for the Named Executive Officers.
EMPLOYMENT AGREEMENTS
On June 28, 2000, Color Imaging entered into employment agreements with its
President, Chief Financial Officer and Vice President of Marketing and Sales.
Each of the employment agreements has a 5-year term. Color Imaging is obligated
to pay the President an annual salary of $150,000 with a guaranteed increase of
5% per annum over the term of the agreement. Color Imaging is obligated to pay
the Chief Financial Officer an annual salary of $144,000 with a guaranteed
increase of 5% over the term of his agreement. In addition to commissions earned
under Color Imaging's sales incentive program, Color Imaging is obligated to pay
the Vice President Marketing and Sales an annual salary of $89,250 with a
guaranteed increase of 5% per annum over the term of his agreement. Each
employee may terminate the agreement upon 6 months notice to Color Imaging.
Color Imaging may terminate each employee upon 6 months notice by Color Imaging;
provided, however, that Color Imaging is obligated to pay to the employee his
annual base salary, commissions or bonuses earned, and benefits for a period of
12 months after the date of such notice.
Each of the officers voluntarily waived the annual increases to their salaries
that would have otherwise been payable upon the second anniversary of their
respective contracts. The President and Chief Financial Officer voluntarily
agreed to accept reduced annual increases upon the third anniversary of their
respective agreements in the amount of 2.5%. On December 27, 2002, the
employment agreement with the Vice President of Marketing and Sale was
terminated, and in connection with his Salary Continuation and Deferred
Compensation agreement of 1998 (the "SCDC Agreement") his salary was reduced to
$45,500 effective December 30, 2002, and would be further reduced to $35,750
effective March 24, 2003. Commissions were made payable to the Vice President of
Marketing and Sales on most of Color Imaging's sales, and his retirement date
was extended from February 1, 2003 to December 31, 2003. On July 14, 2003, the
Chief Financial Officer's employment agreement was modified, giving him the
additional duties of marketing and sales, provide for commissions, a reduced
base salary of $78,000 per annum and deleting the provision providing for a
minimum 5% annual salary increase. On October 1, 2003, the Chief Financial
11
Officers employment agreement was again amended to return his base salary to its
former level of $151,200 and his commission program on certain sales of Color
Imaging was modified.
The employment agreements with the above named officers also commits Color
Imaging to purchasing, for their benefit, certain life insurance plans. Color
Imaging pays the premiums and is the collateral assignee of four split dollar
life insurance policies owned by the President. Pursuant to the policies Color
Imaging will, upon his death or earlier liquidation of each such policy, be
entitled to the refund of all premium payments made by Color Imaging on the
policies, and the balance of the proceeds will be paid to the President's
designated beneficiaries. During 2003 the President repaid the loan due Color
Imaging in connection with the split dollar life insurance policies, Color
Imaging then released its collateral assignment of the policies and is no longer
required to pay any premiums in connection with the four policies. The split
dollar life insurance premiums paid by Color Imaging during 2003, 2002 and 2001
were $660, $22,773 and $13,526, respectively. The monies due from its President
in connection with these life insurance policies at the years ended December 31,
2003, 2002 and 2001 was $0, $134,877 and $112,103, respectively. For the periods
during which such plans were in place for the Chief Financial Officer for the
years ended December 31, 2003, 2002, and 2001, Color Imaging paid or reimbursed
the Chief Financial Officer $5,525, $6,446 and $0, respectively, for such
supplemental life insurance plans. On July 14, 2003, the Chief Financial
Officer's employment agreement was amended to delete the provision requiring
Color Imaging to pay or reimburse premiums in connection with his supplemental
life insurance policy. Color Imaging owns and is the beneficiary of a life
insurance policy on its Vice President of Marketing and Sales to fund the SCDC
Agreement. Upon the officer's retirement, he, or his beneficiaries, are to
receive 120 monthly payments of $2,500 per month or, as provided, the net
present value of any unpaid amounts. The life insurance premiums paid by Color
Imaging to fund the SCDC Agreement in 2003, 2002 and 2001 were $0, $20,882 and
$21,977, respectively. The SCDC Agreement was modified on December 27, 2002,
changing the retirement date of the Vice President Marketing and Sales from
February 1, 2003 to December 31, 2003. On June 27, 2003, the SCDC Agreement was
further amended, provided for the retirement of the Vice President of Marketing
and extended the date of his option to elect monthly payments or the assignment
of the life insurance policy to January 31, 2004. During January 2004 the former
Vice President of Marketing and Sales elected to have the life insurance policy
assigned to him, thereby canceling the obligation of Color Imaging to provide
the 120 monthly payments of $2,500. As of December 31, 2003, the accrued
liability of Color Imaging in connection with the future payments required under
the SCDC Agreement was $200,338 and the cash surrender value of the life
insurance policy was $188,138.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The entire board of directors of the Company serves as the Compensation
Committee of the Company. Directors Jui-Hung Wang, Jui-Kung Wang, Jui-Chi Wang,
are owners in and Chairman, Auditor and President, respectively, of General
Plastic Industrial Co., LTD (GPI), a Taiwanese manufacturer of injection molded
cartridges and accessories for copiers and laser printers. For the twelve months
ended December 31, 2003, 2002 and 2001 Color Imaging purchased $2,091,785,
$2,148,279 and $2,061,683, respectively, of injected molded products from GPI.
On March 6, 2003, Color Imaging received from Chi Fu Investment Co Ltd
$6,075,000 of subscription proceeds for the public sale of 4,500,000 of Color
Imaging's common shares at a price of $1.35 per share in our offering on Form
SB-2 filed with the Securities and Exchange Commission. Chi Fu Investment Co Ltd
is a wholly owned subsidiary of Color Imaging's affiliate General Plastic
Industrial Co., Ltd, and as of December 31, 2003 our directors Jui-Hung Wang,
Jui-Chi Wang and Jui-Kung Wang each own 9.69%, 10.17% and 1.77%, respectively,
of General Plastic Industrial Co., Ltd.
On June 1, 2003, Color Imaging entered into a Marketing and Licensing Agreement
(refer to Exhibit 10.14 filed with Form 10-Q on October 28, 2003) with its
affiliate General Plastic Industrial Co Ltd. Per the Marketing and Licensing
Agreement General Plastic Industrial Co Ltd agrees to indemnify and hold
harmless Color Imaging for any costs and expense arising from any defective
licensed product, and/or any recalled licensed product including litigation
arising therefrom. In addition, General Plastic Industrial Co Ltd agrees to
credit Color Imaging for product cost, shipping and related expenses arising
from any defective licensed product, and/or any recalled licensed product.
12
PERFORMANCE GRAPH
Set forth below is a line graph presentation comparing the cumulative
shareholder return on the Color Imaging's common stock (OTC: CIMG), on an
indexed basis, against cumulative total returns of the Nasdaq Stock Market (U.S.
Companies) Index and the MG Group Index, which is composed of 65 companies which
operate in the specialty chemical industry, the industry in which the financial
community has categorized Color Imaging. A list of the companies included in
this index will be furnished by Color Imaging to any stockholder upon written
request of the Corporate Secretary. The graph assumes that the value of the
investment in the common stock in each index was $100 on December 31, 1998. The
Performance Graph shows total return on investment for the period beginning
December 31, 1998 through December 31, 2003.
Note: Management cautions that the stock price performance information
shown in the graph below may not be indicative of current stock price levels or
future stock price performance.
[GRAPH OMITTED]
The performance graph was plotted using the following table:
1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ----
COLOR IMAGING, INC. 100.00 525.10 1106.17 1275.72 493.83 288.07
MG GROUP INDEX 100.00 96.62 95.18 102.35 85.00 109.40
NASDAQ MARKET
INDEX 100.00 176.37 110.86 88.37 61.64 92.68
13
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Directors, Jui-Hung Wang, Jui-Kung Wang, Sueling Wang and Jui-Chi Wang, own
Kings Brothers, LLC, the landlord from which we lease our Norcross, Georgia
plant. For the twelve months ended December 31, 2003, 2002 and 2001 we paid
Kings Brothers LLC $531,444, $518,484 and $505,836, respectively, in lease
payments. The lease was made on April 1, 1999, and upon unanimous approval of
the board of directors and the disinterested members of the board of directors,
it was amended February 5, 2003, to extend its expiration from March 31, 2009 to
March 31, 2013.
On November 19, 2001, we borrowed $200,000 on an unsecured basis from Kings
Brothers LLC. The revolving loan bears interest at the rate of 9% per annum,
matured on November 18, 2002 and is evidenced in writing. We paid the principal
and interest outstanding on December 10, 2001, paying $790.38 in total interest
to Kings Brothers. We borrowed this amount for general corporate purposes,
including working capital. On March 20, 2002 the revolving loan arrangement was
cancelled.
On June 1, 1999, the Development Authority of Gwinnett County, Georgia issued
$4,100,000 of industrial development revenue bonds on behalf of us and Kings
Brothers LLC. Pursuant to a certain joint debtor agreement we are jointly and
severally liable with Kings Brothers to pay the amounts borrowed under the bond.
The 3.5% revenue bonds are payable in varying annual principal and monthly
interest payments through July 2019. The bonds are collateralized by all of our
assets and the real property leased by us and owned by Kings Brothers. The
majority of the proceeds $3,125,872 from the bond issue were used by us to
relocate our manufacturing plant, make leasehold improvements at the new
facility and to purchase certain manufacturing equipment. The remaining proceeds
in the amount of $974,128 was used by Kings Brothers to pay down the mortgage on
its real property, some of which is leased to us. The proceeds used by Kings
Brothers have been recorded as a receivable on our financial statements. We
entered into a Joint Debtor Agreement with Kings Brothers LLC concerning their
rights, duties and obligations in connection with the bonds. Kings Brothers and
we, collectively, are obligated to repay any outstanding debt under the bonds.
Amounts receivable from Kings Brothers are secured by a lien on all of Kings
Brothers' real estate, including the part we lease from them, and by personal
guarantees by the members of Kings Brothers. Principal due and paid by Kings
Brothers for the twelve months ended December 31, 2003, 2002 and 2001 was
$83,160, $79,596 and $76,032, respectively. Interest due and paid by Kings
Brothers for the twelve months ended December 31, 2003, 2002 and 2001was
$10,372, $14,612 and $30,368, respectively. As of December 31, 2003, the
principal outstanding was $3,095,000 and the portion due to us from Kings
Brothers was $735,340.
Directors Jui-Hung Wang, Jui-Kung Wang, Jui-Chi Wang, are owners in and
Chairman, Auditor and President, respectively, of General Plastic Industrial
Co., LTD (GPI), a Taiwanese manufacturer of injection molded cartridges and
accessories for copiers and laser printers. For the twelve months ended December
31, 2003, 2002 and 2001 we purchased $2,091,785, $2,148,279 and $2,061,683,
respectively, of injected molded products from GPI.
On March 14, 2002, we borrowed $500,000 from director, Sueling Wang, on an
unsecured basis. The interest rate on the loan was 12% per annum, matured on
March 14, 2003 and is evidenced in writing. On September 2, 2002, we entered
into a modification agreement with Sueling Wang to change the terms of the note,
extending the term to March 1, 2005, providing for a $100,000 principal payment,
decreasing the interest rate to 6% per annum, providing for interest only
payments through February 28, 2003, and providing for 24 monthly payments of
principal and interest beginning on April 1, 2003, in the amount of $17,735.67.
We borrowed the $500,000 amount to meet a supplier commitment for product.
Interest paid Sueling Wang on the note for the years ended December 31, 2003 and
2002 was $14,641 and $36,296, respectively. As of December 31, 2003 and 2002,
the principal outstanding was $105,000 and $400,000, respectively.
On August 21, 2002, we borrowed $100,000 from director, Jui-Chi Wang, on an
unsecured basis. The loan bears interest at the rate of 6% per annum, matures on
March 1, 2005 and is evidenced in writing. We borrowed this amount in order to
repay $100,000 borrowed from director Sueling Wang on March 14, 2002. The note
is interest only through February 28, 2003, and then is fully amortizing over 24
months with principal and interest payments payable monthly beginning April 1,
2003 in the amount of $4,434. As of December 31, 2003 and 2002, the interest
accrued and paid on the note was $ 5,115 and $2,170, respectively. As of
December 31, 2003 and 2002, the outstanding principal balance on the note was
$59,806 and $100,000, respectively.
On August 21 and September 2, 2002, we borrowed $200,000 and $300,000,
respectively, from director, Jui-Hung Wang, on an unsecured basis. The loan
bears interest at the rate of 6% per annum, matures on March 1, 2005 and is
evidenced in writing. We borrowed this amount in order to make a principal
payment due on our industrial development bond in the approximate amount of
$255,000, for the acquisition of capital equipment in the approximate of
$125,000 and for general corporate purposes. The note is interest only through
February 28, 2003, and then is fully amortizing over 24 months with principal
and interest payments payable monthly beginning April 1, 2003 in the amount of
$22,169.60. As of December 31, 2003 and 2002, interest accrued and paid on the
note was $ 25,577 and $10,259, respectively. As of December 31, 2003 and 2002,
the principal outstanding was $299,032 and $500,000, respectively.
Directors Jui-Chi Wang and Jui-Hung Wang purchased 350,000 and 50,000 Units
(each Unit consisted of one share of common stock and a warrant to purchase one
share of common stock at an exercise price of $2.00 per share) for $700,000 and
$100,000, including promissory notes, respectively. Jui-Chi Wang's $700,000
recourse promissory note without interest was made on December 1, 2001, due
December 31, 2001 and paid in full on December 18, 2001. Jui-Hung Wang's $99,500
recourse promissory note without interest was made on December 24, 2001, due
14
April 1, 2002 and paid in full on January 30, 2002. The terms of the notes were
consistent with the terms of notes of third parties who purchased Units in the
private placement from Color Imaging.
We believe that the terms of the loans and borrowings from affiliates were on
terms more favorable than were otherwise available from third parties.
On September 11, 2002, we entered into a share exchange agreement with four of
our directors, Messrs. Brennan, St. Amour, Langsam and Hollander, whereby a new
company, Digital Color Print, Inc., owned by them, acquired the capital stock of
our wholly owned subsidiary, Logical Imaging Solutions, in exchange for
approximately 1.6 million shares of the our common stock. On September 20, 2002,
we entered into an amendment to the share exchange agreement pursuant to which
the number of shares of the our common stock to be exchanged for the capital
stock of Logical Imaging Solutions was increased from 1.6 million to 1.7 million
and a requirement was added that Logical Imaging Solutions have at least
$100,000 on hand at closing. On September 30, 2002, the share exchange
transaction was closed, and the 1.7 million shares of our stock were received
and retired by our stock transfer agent (see Financial Statements "Note 3 -
Discontinued Operations").
On March 6, 2003, Color Imaging received from Chi Fu Investment Co Ltd
$6,075,000 of subscription proceeds for the public sale of 4,500,000 of our
common shares at a price of $1.35 per share in our offering on Form SB-2 filed
with the Securities and Exchange Commission. Chi Fu Investment Co Ltd is a
wholly owned subsidiary of our affiliate General Plastic Industrial Co., Ltd,
and as of December 31, 2003 our directors Jui-Hung Wang, Jui-Chi Wang and
Jui-Kung Wang each own 9.69%, 10.17% and 1.77%, respectively, of General Plastic
Industrial Co., Ltd.
On June 1, 2003, Color Imaging entered into a Marketing and Licensing Agreement
(refer to Exhibit 10.14 filed with Form 10-Q on October 28, 2003) with its
affiliate General Plastic Industrial Co Ltd. Per the Marketing and Licensing
Agreement General Plastic Industrial Co Ltd agrees to indemnify and hold
harmless Color Imaging for any costs and expense arising from any defective
licensed product, and/or any recalled licensed product including litigation
arising therefrom. Further General Plastic Industrial Co Ltd agrees to credit
Color Imaging for product cost, shipping and related expenses arising from any
defective licensed product, and/or any recalled licensed product.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information known to Color Imaging with respect
to the beneficial ownership of Color Imaging's common stock as of March 26, 2004
by:
o each stockholder known by Color Imaging to own beneficially more than 5% of
Color Imaging's common stock;
o each Named Executive Officer;
o each of Color Imaging's directors; and
o all directors and executive officers as a group.
Except as otherwise indicated in the footnotes, Color Imaging believes that the
beneficial owners of the common stock listed below, have sole voting power and
investment power with respect to such shares of common stock indicated. In
computing the number of shares beneficially owned by a person and the percent
ownership of that person, shares of common stock subject to options or warrants
held by that person that are currently exercisable or will become exercisable
within 60 days of the date of this report are deemed outstanding, while such
shares are not deemed outstanding for purposes of computing percent ownership of
any other person.
PERCENTAGE OF
NAME OF BENEFICIAL OWNER NO. OF SHARES OWNERSHIP(1)
---------------------------------- ---------------- ---------------
Sueling Wang (2) 1,981,551 15.2%
Morris E. Van Asperen (3) 380,906 2.9%
Jui-Chi Wang (4)(5) 5,209,450 40.9%
Jui-Hung Wang (5)(6) 5,209,178 40.9%
Jui-Kung Wang (5)(7) 4,826,209 37.9%
Claude R. Aubert (8) 25,000 *%
Yi-Jen Wang 30,000 *%
Richard S. Eiswirth 0 *%
Chi Fu Investment Co Ltd (5) 4,500,000 35.3%
General Plastic Industrial Co., Ltd (5) 4,500,000 35.3%
Executive officers and directors
as a group (7 persons) (9) 8,662,294 65.1%
----------------
* Less than 1%
15
(1) Percentage of ownership is calculated as required by Commission Rule
13d-3(d)(1). The table above includes the number of shares underlying
options and warrants which are exercisable within 60 days after the date of
this report.
(2) Includes: (a) 600,000 shares owned by Sueling Wang's four children, (b)
141,204 shares owned by Yik-Li Sih, Sueling Wang's wife, in which Dr. Wang
may be deemed to have pecuniary interest. Dr. Wang disclaims beneficial
ownership of such 741,204 shares. Also includes 275,000 shares subject to
options that are currently exercisable.
(3) Includes 250,000 shares subject to options that are currently exercisable.
(4) Includes 15,000 shares subject to options that are currently exercisable.
(5) Includes 4,500,000 shares held by Chi Fu Investment Co Ltd ("CFI"). CFI is
a wholly owned subsidiary of General Plastic Industrial Co., Ltd ("GPI").
Jui-Hung Wang, Jui-Chi Wang and Jui-Kung Wang, owns 9.69%, 10.17% and
1.77%, respectively, of the outstanding common stock of GPI as of December
31, 2003. Each of Messrs. Wang disclaims beneficial ownership of the shares
held by CFI except to the extent of his pecuniary interest.
(6) Includes 10,000 shares subject to options that are currently exercisable.
(7) Includes 10,000 shares subject to options that are currently exercisable.
(8) Includes 25,000 shares subject to options that are currently exercisable.
(9) Includes 585,000 shares subject to options that are exercisable within 60
days after the date of this prospectus.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The members of the board of directors, certain executive officers of Color
Imaging and persons who hold more than 10% of Color Imaging's outstanding common
stock are subject to the reporting requirements of Section 16(a) of the Exchange
Act, which require them to file reports with respect to their ownership of
common stock and their transactions in common, stock. Based upon the copies of
Section 16(a) reports that the Color Imaging received from such persons for
their 2003 fiscal year transactions in the common stock and their common stock
holdings, Color Imaging believes that all reporting requirements under Section
16(a) for such fiscal year were met in a timely manner by its executive
officers, board members and greater than ten-percent stockholders, excepting (a)
the inadvertent late filing of a Form 3 by our affiliate General Plastic
Industrial Co Ltd in connection with its beneficial ownership of Chi Fu
Investment Co Ltd's greater than 10% holding of our common stock , (b) one late
Form 4 and one late Form 3 filed for a newly hired vice president, Claude R.
Aubert, reflecting one exempt option grant and (c) each of Michael W. Brennan
and Edwin C. St. Amour (former directors of Color Imaging) failed to file a Form
4 or a Form 5 for the year ended December 31, 2002, and (d) Digital Color Print,
Inc. (a former 10% stockholder) failed to file a Form 3, Form 4 or Form 5 for
the year ended December 31, 2002.
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
(ITEM NO. 2 OF THE PROXY CARD)
The board of directors has selected Lazar Levine & Felix LLP as Color Imaging's
independent accountants for the year ending December 31, 2004, and has further
directed that management submit the selection of independent accountants for
ratification by the stockholders at the annual meeting. Lazar Levine & Felix LLP
has no financial interest in Color Imaging and neither it nor any member or
employee of the firm has had any connection with Color Imaging in the capacity
of promoter, underwriter, voting trustee, director, officer or employee. The
Delaware General Corporation Law does not require the ratification of the
selection of independent accountants by Color Imaging's stockholders, but in
view of the importance of the financial statements to the stockholders; the
board of directors deems it advisable that the stockholders pass upon such
selection. A representative of Lazar Levine & Felix LLP is not expected to be
present at the annual meeting.
In the event the stockholders fail to ratify the selection of Lazar Levine &
Felix LLP, the Audit Committee will reconsider whether or not to retain the
firm. Even if the selection is ratified, the Audit Committee and the board of
directors in their discretion may direct the appointment of a different
independent accounting firm at any time during the year if they determine that
such a change would be in the best interests of Color Imaging and its
stockholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL.
16
OTHER BUSINESS
Color Imaging does not know of any other business to be presented to the annual
meeting and does not intend to bring any other matters before such meeting. If
any other matters properly do come before the annual meeting, however, the
persons named in the accompanying Proxy are empowered, in the absence of
contrary instructions, to vote according to their best judgment.
STOCKHOLDER PROPOSALS
Appropriate proposals of shareholders intended to be presented at Color
Imaging's 2005 Annual Meeting of Stockholders pursuant to Rule 14a-8 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), must
be received by Color Imaging by December 24, 2004 for inclusion in its proxy
statement and form of proxy relating to that meeting. In addition, all
shareholder proposals submitted outside of the shareholder proposal rules
promulgated pursuant to Rule 14a-8 under the Exchange Act must be received by
Color Imaging by March 9, 2005 in order to be considered timely. If such
shareholder proposals are not timely received, proxy holders will have
discretionary voting authority with regard to any such shareholder proposals
that may come before the 2005 Annual Meeting. With regard to such shareholder
proposals, if the date of the 2005 Annual Meeting is subsequently advanced or
delayed by more than 30 days from the date of the 2004 Annual Meeting, Color
Imaging shall, in a timely manner, inform shareholders of the change and the
date by which proposals must be received.
ANNUAL REPORT ON FORM 10-K
A copy of Color Imaging's Annual Report on Form 10-K for the calendar year ended
December 31, 2003 is being mailed to stockholders with this proxy statement.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ MORRIS E. VAN ASPEREN
Morris E. Van Asperen
Secretary
Norcross, Georgia
April 23, 2004
Please Complete, Date, And Sign The Enclosed Proxy Card And Return It Promptly
In The Enclosed Reply Envelope. No Postage Is Required If Mailed In The United
States.
17
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
COLOR IMAGING, INC.
The undersigned hereby appoints Sueling Wang, PhD and Morris E. Van Asperen,
attorneys and proxies, each with power to act without the other and with power
of substitution, and hereby authorizes them to represent and vote all of the
shares of stock of Color Imaging, Inc., standing in the name of the undersigned
with all powers which the undersigned would possess if present at the Annual
Meeting of Stockholders of Color Imaging to be held May 18, 2004 or any
adjournment or postponement thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH NOMINEE TO
SERVE AS A DIRECTOR, "FOR" PROPOSAL 2 TO RATIFY THE SELECTION OF LAZAR LEVINE &
FELIX LLP AS COLOR IMAGING'S ACCOUNTANTS. IF NO DIRECTION IS GIVEN IN THE SPACE
PROVIDED ON THE REVERSE SIDE, THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF
DIRECTORS, AND "FOR" PROPOSAL 2. IF ANY OTHER BUSINESS SHOULD COME BEFORE THE
MEETING, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE BEST JUDGMENT OF THE
PROXY HOLDER.
If you intend to attend the annual meeting, please be sure to check the "I plan
to attend the meeting" box on the reverse side of the Proxy.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF SHAREHOLDERS
COLOR IMAGING, INC.
May 18, 2004
- Please Detach and Mail in the Envelope Provided -
A [X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
FOR all nominees WITHHOLD NOMINEES: Jui-Kung Wang
listed at right AUTHORITY (to Sueling Wang, PhD
(except as marked vote for all Morris E. Van Asperen
to the contrary) nominees Yi-Jen Wang
listed at Jui-Hung Wang
right) Jui-Chi Wang
Richard S. Eiswirth
1. Election of [ ] [ ]
Directors
(INSTRUCTION: To withhold authority to vote for any individual
nominee, write the nominee's name on the line provided below.)
FOR AGAINST ABSTAIN
-----------------------------------------------------------------
2. Ratify the selection of Lazar Levine & Felix LLP as Color [ ] [ ] [ ]
Imaging's Accountants for the year ending December 31, 2004.
3. In their discretion upon such other business as may properly come
before the meeting or any adjournment or postponement thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE WITH RESPECT TO A
PROPOSAL, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE DIRECTORS AND FOR
PROPOSAL 2 AND OTHERWISE IN ACCORDANCE WITH THE BEST JUDGMENT OF THE PROXY
HOLDER.
PLEASE SIGN, DATE, AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
I plan to attend the meeting [ ]
Signature Signature Date:
------------------------- ------------------------- -----------------
NOTE: Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
1739843