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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-K/A AMENDMENT NO. 1
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1997
OR
- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission file number 0-27502.
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Health Systems Design Corporation
(Exact name of registrant as specified in its charter)
DELAWARE 94-3235734
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
1330 BROADWAY, OAKLAND, CALIFORNIA 94612
(Address of principal executive offices) (Zip code)
(510) 763-2629
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each Class Name of each exchange on which registered
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. x
As of November 29, 1997, 6,534,807 shares of the registrant's common stock
were outstanding. The aggregate market value of the common stock held by non-
affiliates of the registrant on that date was approximately $27,532,563.
Documents incorporated by reference: NONE
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HEALTH SYSTEMS DESIGN CORPORATION
PART III
Item 10 of the Annual Report filed pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the fiscal year ended September 30, 1997 is
hereby amended in full as follows:
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The persons named below constitute the present Board of Directors. For
information regarding the Company's executive officers, see Item 1 above.
SERVED AS
BUSINESS EXPERIENCE DURING PAST FIVE DIRECTOR
NOMINEES FOR DIRECTOR AGE YEARS AND OTHER INFORMATION SINCE
- --------------------- --- -------------------------------------- ---------
Russell J. Harrison 52 President and Chief Executive Officer 1997
of the Company since August 1997. Mr.
Harrison was Vice President and Chief
Information Officer at Paris - based
SITA Globetel Company S.C. from March
1996 to August 1997. Mr. Harrison
served as Chairman of 3Net Systems, a
provider of client/server solutions to
the healthcare industry, from August
1993 to November 1995 and as President
of 3Net Systems from August 1993 to
September 1995. From September 1991 to
August 1993, Mr. Harrison served as
Chief Information Officer of McKesson
Corporation.
Richard C. Auger 54 Chairman of the Board of the Company 1988
since 1988. Mr. Auger is a co-founder
of the Company and served as Chief
Executive Officer of the Company from
August 1988 to August 1997 and President
January of the Company from August 1988
to January 1996.
Catherine C. Roth 47 Executive Director of Business 1988
Development of the Company since August
1997. Ms. Roth served as President of
the Company from January 1996 to August
1997 and as Chief Operating Officer of
the Company from April 1994 to August
1997. From 1988 to January 1996, Ms. Roth
was the Company's Executive Vice
President.
Christopher J. Herron 48 Chief Executive Officer of Nexgen Asia 1997
Pacific (a provider of Year 2000
correction software) since May 1997.
From 1995 to 1997, Mr. Herron was
President and Chief Executive Officer
of Convoy Corporation (a provider of
data migration software and services).
From 1987 to 1994, Mr. Herron was with
Synon Corporation (a provider of
software development tools and
services) where he held several
positions, including President and
Chief Executive Officer.
J. Matthew Mackowski 43 Partner of Mackowski & Shepler, a 1992
private investment partnership located
in San Francisco.
Arthur M. Southam 41 Chief Executive Officer of Health Net 1996
(a health maintenance organization)
since July 1996. From 1993 to July
1996, Dr. Southam was President and
Chief Executive Officer of CareAmerica
Health Plans and from 1986 to 1993 was
employed at CareAmerica Health Plans
in a number of capacities, including
Executive Vice President and Chief
Operating Officer.
2
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, directors and greater than ten-percent shareholders are required by
SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that, during the period from
October 1, 1996 to September 30, 1997 all filing requirements applicable to its
officers, directors, and greater than ten-percent beneficial owners were
complied with.
Item 11 of the Annual Report filed pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the fiscal year ended September 30, 1997 is
hereby amended in full as follows:
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
The compensation paid to the Company's Chief Executive Officer and other
executive officers who received compensation in excess of $100,000 for services
in all capacities to the Company and its subsidiaries during fiscal 1995, 1996
and 1997 is set forth below.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION AWARDS
-------------------- ------------------------------
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OTHER ANNUAL RESTRICTED SECURITIES ALL OTHER
--------------------------- ---- --------- -------- COMPENSATION($) STOCK AWARDS UNDERLYING COMPENSA-
---------------- ($) OPTIONS TION($)
------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
RUSSEL J. HARRISON 1997 $40,702 -- -- -- 350,000 --
President and Chief Executive -- -- -- -- --
Officer since August 1997 -- -- -- -- --
RICHARD C. AUGER 1997 $163,000 -- -- -- -- --
Chairman of the Board 1996 $156,067 -- -- -- -- --
1995 $137,742 -- -- -- -- --
CATHERINE C. ROTH 1997 $151,475 -- -- -- -- --
President until August 1997 1996 $145,011 -- -- -- -- --
1995 $127,809 -- -- -- -- --
</TABLE>
The following table sets forth certain information regarding stock options
granted during fiscal 1997 to the executive officers named in the foregoing
Summary Compensation Table. None of such persons received awards of stock
appreciation rights during fiscal 1997.
3
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<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
----------------------------------------------------------- VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
OPTION TERM(3)
----------------------
NAME NUMBER OF PERCENT OF EXERCISE OR EXPIRATION 5%($) 10%($)
---- SECURITIES TOTAL OPTIONS BASE PRICE DATE ----- -------
UNDERLYING GRANTED TO ($/SH)(2) -----------
OPTIONS EMPLOYEES IN ------------
GRANTED(#)(1) FISCAL YEAR
-------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Russell J. Harrison 350,000 46% $5.94 08/04/2007 $3,386,472 $5,392,391
Richard C. Auger -- -- -- -- -- --
Catherine C. Roth -- -- -- -- -- --
</TABLE>
(1) All options granted in fiscal 1997 are subject to a five year vesting
schedule commencing August 1998. Under the terms of the Company's Stock
Option Plan, the Compensation Committee retains discretion, subject to plan
limits, to modify the terms of outstanding options.
(2) All options were granted at fair market value at date of grant.
(3) Realizable values are reported net of the option exercise price. The
dollar amounts under these columns are the result of calculations at the 5%
and 10% rates (determined from the price at the date of grant, not the
stock's current market value) set by the Securities and Exchange Commission
and therefore are not intended to forecast possible future appreciation, if
any, of the Company's stock price. Actual gains, if any, on stock option
exercises are dependent on the future performance of the common stock as
well as the optionholder's continued employment through the vesting period.
The potential realizable value calculation assumes that the optionholder
waits until the end of the option term to exercise the option.
The following table sets forth certain information with respect to stock option
exercises during 1997 and stock options held by each of the Company's executive
officers named in the foregoing summary compensation table as of September 30,
1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NAME SHARES ACQUIRED ON VALUE REALIZED ($) NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
- ---- EXERCISE (#) ------------------ OPTIONS AT FY-END(#) IN-THE-MONEY OPTIONS
------------ EXERCISABLE/ UNEXERCISABLE AT FY-END($)
--------------------------- EXERCISABLE/ UNEXERCISABLE
--------------------------
<S> <C> <C> <C> <C>
Russell J. Harrison -0- -0- -0-/350,000 -0-/$1,508,500
Richard C. Auger -- -- -- --
Catherine C. Roth -- -- -- --
</TABLE>
COMPENSATION OF DIRECTORS
Directors other than Mr. Mackowski who are not employees of the Company are
paid directors fees consisting of $5,000 per year and $1,000 for each Board
meeting attended. Directors who attend meetings of the Audit Committee or
Compensation Committee receive an additional $1,000 for each meeting not held
on the same day as a Board meeting. In addition, under the Nonemployee
Director Stock Option Plan, each nonemployee director other than Mr.
Mackowski will be granted at the Annual Meeting and at each subsequent annual
meeting an option to purchase 5,000 shares of Common Stock at an exercise
period equal to the fair market value on the date of grant. Ms. Roth, who
was an executive officer of the Company until August 1997, continues as
Executive Director of Business Development and receives a salary of $12,623
per month.
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Item 12 of the Annual Report filed pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the fiscal year ended September 30, 1997 is
hereby amended in full as follows:
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table indicates, as to (i) each person who is known by
the Company to own beneficially more than 5% of the outstanding shares of Common
Stock, (ii) each director, (iii) each named executive officer and (iv) all
directors and executive officers as a group, the number of shares and percentage
of the Company's stock beneficially owned as of December 31, 1997.
SHARES BENEFICIALLY OWNED AS OF DECEMBER 31, 1997
EXECUTIVE OFFICER OR DIRECTOR NUMBER OF COMMON SHARES PERCENT
------------------------------ ----------------------- -------
Richard C. Auger (1).................. 1,590,800 24.3%
Catherine C. Roth (1)................. 1,207,609(2) 18.5%
J. Matthew Mackowski(1)............... 1,410,286(3) 21.4%
The D3 Family Fund, L.P(4)............ 388,000 5.9%
19605 N.E. 8th Street
Camas, Washington 98607
Amerindo Investment Advisors Inc.(5).. 422,500 6.5%
One Embarcadero Center,
Suite 2300
San Francisco, CA 94111
Russell J. Harrison.................. 0 0
Christopher J. Herron................ 0 0
Arthur M. Southam, M.D............... 5,300 .1
All directors and executive officers
as a group (seven persons).......... 4,215,595(6) 64.5%
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(*) Less than 1%.
(1) The address of Mr. Auger, Ms. Roth and Mr. Mackowski is 1330 Broadway,
Oakland, California 94612. Each of these persons may be deemed to be a
"control person" of the Company within the meaning of the rules and
regulations of the Securities and Exchange Commission by reason of his
stock ownership and positions with the Company.
(2) Includes 248,000 shares of Common Stock held by Ms. Roth's children.
(3) Includes 60,000 shares issuable upon exercise of outstanding warrants which
are immediately exercisable. Also includes 12,000 shares issuable upon
exercise of outstanding stock options exercisable within 60 days of
December 31, 1997.
(4) Based on Schedule 13D filed with the Company reflecting beneficial
ownership as of June 23, 1997.
(5) Based on a Schedule 13G filed with the Company reflecting beneficial
ownership as of December 31, 1996. Messrs. Alberto W. Vilar and Gary A.
Tanaka may each also be deemed to be the beneficial owner of 422,500 shares
based upon their capacity as the sole shareholders and directors of
Amerindo Investment Advisors Inc. ("Amerindo"). Amerindo is an
5
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investment advisor and purchased the securities in its capacity as such.
Amerindo and Messrs. Vilar and Tanaka each expressly disclaim beneficial
ownership of the shares.
(6) Includes 60,000 shares issuable upon exercise of outstanding warrants
which are immediately exercisable. Also includes 13,600 shares issuable
upon exercise of outstanding stock options exercisable within 60 days of
December 31, 1997.
Item 13 of the Annual Report filed pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the fiscal year ended September 30, 1997 is
hereby amended in full as follows:
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH THE COMPANY
Mackowski & Shepler, a private investment partnership of which Mr.
Mackowski is a partner and 50% owner, continues to provide financial and
strategic advisory services to the Company under an arrangement which commenced
in November 1994. Under this arrangement, Mackowski & Shepler received payments
totaling $90,000 in fiscal 1997 and will continue to receive $7,500 per month
until March 31, 1998.
6
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Health Systems Design Corporation
By: /s/ Russell J. Harrison
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Russell J. Harrison, President and
Chief Executive Officer
Date: January 28, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE DATE NAME & TITLE
--------- ---- ------------
<S> <C> <C>
/s/ Russell J. Harrison 1/28/98 Russell J. Harrison, President
- ---------------------------- -------- and Chief Executive Officer
(principal executive officer)
/s/ Richard C. Auger 1/28/98 Richard C. Auger, Chairman
- ---------------------------- -------- of the Board of Directors
/s/ Steven J. Correia 1/28/98 Steven J. Correia, Acting Chief
- ---------------------------- -------- Financial Officer (principal
financial officer and accounting
officer)
/s/ Catherine C. Roth 1/28/98 Catherine C. Roth, Director
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/s/ J. Matthew Mackowski 1/28/98 J. Matthew Mackowski, Director
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/s/ Arthur M. Southam M.D. 1/28/98 Arthur M. Southam M.D., Director
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/s/ Christopher Herron 1/28/98 Christopher Herron, Director
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</TABLE>
