TVI Corp., the Beltsville maker of fake army tanks, has illegally sold millions of shares of stock, does not have physical custody of its own corporate bank accounts and corporate records, cannot account for millions of dollars in company funds, and cannot find an accounting firm willing to help untangle its books.
That picture of a corporation in chaos is the core of an 11-page report the company has sent to stock owners in preparation for a Saturday shareholders meeting designed to elect a new board of directors to oversee the struggling supplier.
TVI, which won publicity as a supplier of canvas-covered fake tanks the Army used as decoys in the Persian Gulf war, also makes heat targets for gunnery practice, field tents that it says can be set up in less than five minutes and other military and police supplies.
But on April 12, the Nasdaq-traded company's stockholders, who have seen little but bad news as the firm has failed to emerge from 4-year-old bankruptcy proceedings and seen its stock price plunge from $1.50 a share to under 20 cents, forced out Brent Molovinsky, its chairman and chief executive officer, and installed an interim management.
"This is a company that has superior products and a fine staff and deserves to survive," Allen E. Bender, the interim chief executive officer, said yesterday.
But the new management immediately launched inquiries into the company's finances and discovered that two key bank accounts had Mr. Molovinsky's home address on them rather than the firm's office, that payments for many legally and illegally issued shares of stock also were sent to Mr. Molovinsky's home, and that records were in such disarray that the firm could not prepare a required final report that would have taken it out of bankruptcy, the message to stockholders says.
"We will not have financial statements for you, and none will be available for some time," Mr. Bender, a business consultant and retired naval officer, wrote in a letter accompanying the report.
Since the report and letter were mailed on June 6, Mr. Molovinsky has turned over some of the missing records, but "we are still quite some way from having all that we will need to PTC persuade an accountant to work with us," Mr. Bender said yesterday.
Mr. Molovinsky, who heads another Beltsville firm, Cellular Concrete Technology, did not return several telephone calls to his office yesterday.
"Initial investigations suggested significant malfeasance by Mr. Molovinsky," the report to shareholders said.
"Large contracts announced by the company were either subsequently canceled or were non-existent," the report said, and the firm turns out to have been, "operating at a very low level of sales and with a significant monthly loss," estimated at about $45,000.
Operating expenses of the 15-employee company appear to have been covered from the proceeds of both legal and illegal stock sales, which the report estimates at about $2.5 million, and from the proceeds of a 1993 private securities placement that appears to have brought in about $2 million.
The stock sale stemmed from an agreement with the bankruptcy court, approved by the Securities and Exchange Commission, permitting the firm to recapitalize by selling a maximum of 5,000 shares to each existing shareholder, for a total estimated at 2 million shares, and another 2 million for existing creditors.
But TVI went beyond the agreement, selling additional millions of shares to the public in direct violation of SEC rules, the report to shareholders said.
Proceeds from the stock sales "were deposited in at least three bank accounts, only one of which was authorized," and subsequently a total of $378,773 was disbursed to Mr. Molovinsky and members of his family for purposes not known to the new management, the report says.
In addition, a sum of $450,000, deposited in one unauthorized account, appears to neither have been delivered to the company nor accounted for.