FORM 10-KSB/A
AMENDMENT NO. 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
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 No. 0-28282
THE LION BREWERY, INC.
(Exact Name of Small Business Issuer as Specified in Its
Charter)
PENNSYLVANIA 24-0645190
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
700 NORTH PENNSYLVANIA AVENUE, WILKES-BARRE, PA
18703
(Address of Principal Executive Offices)
Registrant's telephone number, including area code (717) 823-8801
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK
Indicate by check whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Exchange Act during the past 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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-B 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-KSB or any amendment to
this Form 10-KSB. [X]
State the aggregate market value of the registrant's shares held
by non-affiliates at December 22, 1997: $8,164,338.
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
December 22, 1997: 3,885,052 shares outstanding
State issuer's revenues for its most recent fiscal year:
$26,869,000
Transitional Small Business Disclosure Format (check one):
Yes _____No __X__
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTIONS 16(c) OF THE EXCHANGE ACT.
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The directors of the Company are as follows:
HAS
SERVED AS
DIRECTOR
NAME AGE SINCE POSITION
---- --- -------- --------
Donald J. Sutherland 67 1993 Chairman of the Board
Charles E. Lawson, Jr. 47 1994 President, Chief Executive
Officer and Director
Patrick E. Belardi 37 1997 Vice President, Chief
Financial Officer,
Treasurer and Director
Thomas S. Ablum 43 1993 Director
George W. Peck, IV 66 1993 Director
Carlo A. von Schroeter 34 1996 Director
Henry T. Wilson 38 1993 Director
DONALD J. SUTHERLAND was elected a Director and Chairman of the
Board of the Company in October 1993. Since 1975, Mr. Sutherland
has been President and sole employee of the general partner of
Quincy Partners, a buyout and management firm. Quincy Partners
is the general partner of the Company's largest shareholder. See
"Certain Relationships and Related Transactions."
CHARLES E. LAWSON, JR. joined the Company as Executive Vice
President in March 1994 and was appointed President, Chief
Executive Officer and a Director of the Company in May 1994.
Prior to joining the Company, Mr. Lawson had over twenty years
experience in the beverage packaging industry and from April 1992
until March 1994 was Director of Sales of the brewery and soft
drink divisions of Riverwood International, Inc. Prior thereto
Mr. Lawson was employed by Julian B. Slevin Co., Inc. in various
capacities since 1973 and from 1988 to 1992 was its Vice
President of Sales and Marketing.
PATRICK E. BELARDI joined the Company in October 1994 as Vice
President and Chief Financial Officer and was elected a director
in March 1997. Mr. Belardi, a certified public accountant, was
employed by Laventhol & Horwath from 1982 to 1990 and then was a
principal at Kronick Kalada Berdy & Co., P.C., a prior accounting
firm of the Company, from 1990 to October 1994.
THOMAS S. ABLUM was elected a Director of the Company in October
1993. He is president and general partner of Franklin Street
Equity Fund, a buyout firm, and has been a principal in Ablum,
Brown & Company, a private investment banking firm, since
February 1988.
<PAGE>
GEORGE W. PECK, IV was elected a Director of the Company in
October 1993. Since January 1997, Mr. Peck has been a special
limited principal of Kohlberg & Co. LLC, a private merchant bank
(formerly Kohlberg & Co.). From 1987 until December 1996, Mr.
Peck was a general partner of Kohlberg & Co., Mr. Peck serves as
a director for ABC Rail Products Corp., Northwestern Steel & Wire
Co. and ABT Building Products Corp.
CARLO A. VON SCHROETER was elected a Director of the Company in
May 1996. Mr. von Schroeter is a general partner with Weston
Presidio Capital, a venture capital firm. From 1992 until August
1996, Mr. von Schroeter was a principal at Weston Presidio
Capital. Mr. von Schroeter is also a limited partner of Weston
Presidio Management, LP, a general partner of Weston Presidio
Offshore Capital C.V.
HENRY T. WILSON was elected a Director of the Company in October
1993. Mr. Wilson is the Managing Director and special limited
partner of Northwood Ventures, a New York limited partnership
which invests in venture capital opportunities. From 1986 to
1991, Mr. Wilson was employed in the Investment Banking Division
of Merrill Lynch & Co., most recently as a Vice President.
COMMITTEES OF THE BOARD OF DIRECTORS
THE AUDIT COMMITTEE, which is currently comprised of Messrs.
Ablum, Sutherland, Peck and Wilson, with Mr. Ablum serving as
chairman, recommends the selection of the Company's independent
public accountants and consults with the independent public
accountants on the Company's internal accounting controls.
THE COMPENSATION COMMITTEE, which is currently comprised of
Messrs. Peck, Wilson and Sutherland, with Mr. Wilson serving as
chairman, recommends to the Board salaries and bonuses for the
Company's officers and administers the Company's 1996 Stock
Option Plan.
DIRECTOR COMPENSATION
Members of the Board of Directors who are not employees of the
Company receive an annual retainer of $1,500 for serving as
director and $500 per board meeting attended. The Chairman of
the Board receives $12,500 per quarter for serving in such
capacity and the Chairman of the Audit Committee receives an
additional $1,500 per year for serving in such capacity.
Directors are also reimbursed for out-of-pocket expense incurred
in attending meetings.
Directors hold office until the next annual meeting of
shareholders following their election, or until their successors
are elected and qualified. There are no family relationships
between any present director or officer and any other present
director and officer.
OTHER EXECUTIVE OFFICERS
Set forth below is certain information regarding the other
executive officers of the Company:
NAME AGE POSITION
---- --- --------
Donald R. Ladhoff 41 Vice President, Sales and Marketing
David Finn 47 Vice President, Packaging and
Warehousing
Robert Covert 46 Vice President, Logistics
Leo Orlandini 36 Head Brewmaster
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<PAGE>
DONALD R. LADHOFF joined the Company in March 1996 as Vice
President - Sales and Marketing. Prior to joining the Company,
Mr. Ladhoff was employed by the Canandaigua Wine Company, Inc.
from 1990 through 1995. Mr. Ladhoff has 19 years experience in
sales and marketing of alcoholic beverages.
DAVID FINN joined the Company in 1974 and has served as Vice
President - Packaging and Warehousing since 1990.
ROBERT COVERT joined the Company in 1974 and has served as Vice
President - Logistics since 1991.
LEO ORLANDINI joined the Company in 1988 as Quality Assurance
Manager. After attending brewing school at the Seibel Institute
of Technology in 1991, he returned to the Company and was
appointed Assistant Brewmaster in April 1992. In May 1995, he
was promoted to Head Brewmaster.
Officers are elected annually by the Board of Directors and serve
at the discretion of the Board.
The Company is not aware of any Section 16(a) filing
deficiencies.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth information concerning all cash
and non-cash compensation awarded to, earned by or paid to the
Company's Chief Executive Officer and one other executive officer
with total compensation in excess of $100,000 during the fiscal
years ended September 30, 1997, 1996 and 1995:
ANNUAL COMPENSATION
-------------------
NAME AND OTHER ANNUAL
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
------------------ ---- ------ ----- ------------
Charles E. Lawson, Jr. 1997 $159,558 $25,000 $ --
President, 1996 147,908 45,000 --
Chief Executive 1995 21,475(1)
Officer and Director
Donald R. Ladhoff 1997 78,096 10,000 32,328(1)
Vice President-Sales 1996 38,308 --
and Marketing
LONG-TERM
COMPENSATION
AWARDS
------------
SECURITIES
UNDERLYING
OPTIONS
NAME AND PRINCIPAL POSITION YEAR ----------
--------------------------- ----
Charles E. Lawson, Jr. 1997 --
President, Chief Executive 1996 106,350(2)
Officer and Director 1995 --
Donald R. Ladhoff 1997 --
Vice President-Sales and 1996 30,000(3)
Marketing
(1) Relocation expenses
(2) Options to purchase 70,900 shares of Common Stock are
presently exercisable; options to purchase the remaining 35,450
shares vest in May 1998.
(3) Options to purchase 10,000 shares of Common Stock were
exercisable at September 30, 1997; options to purchase an
additional 10,000 shares vest in each of November 1997 and
November 1998.
The Company maintains a noncontributory defined benefit pension
plan and a 401(k)/profit sharing plan covering nonunion
employees. The defined benefit pension plan provides benefits
based on years of service and compensation levels. Mr. Lawson
and other key employees of the Company participate in these
plans.
OPTION GRANTS
No options were granted in the fiscal year ended September 30,
1997.
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<PAGE>
AGGREGATE OPTION EXERCISES IN FISCAL 1997 AND FISCAL YEAR-END
OPTION VALUES
The following table provides information on the value of
unexercised stock options owned by the executive officers named
in the Summary Compensation Table as of September 30, 1997. No
options were exercised in fiscal 1997.
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT SEPTEMBER 30, 1997 SEPTEMBER 30, 1997(1)
----------------------------- -----------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
Charles E. Lawson, Jr. 128,151 35,450 $ 156,009 $ -0-
Donald R. Ladhoff 10,000 20,000 $ -0- $ -0-
(1) The dollar values have been calculated by determining the
difference between the fair market value of the securities
underlying the options at September 30, 1997 and the exercise
price of the options.
EMPLOYMENT AGREEMENTS
Charles Lawson currently is employed under a contract that
provides for an annual salary of $175,000 and a bonus at the
discretion of the Board of Directors in consideration of the
services rendered by him to the Company. Under the agreement,
Mr. Lawson is entitled to participate in all health benefits and
other employee benefit programs of the Company, including the
Company's defined benefit retirement plan, and is provided with
an automobile at the Company's expense. Pursuant to the
agreement, Mr. Lawson received options to purchase 57,251 shares
of the Company's Common Stock at an exercise price of $1.40
exercisable at any time prior to 2001 provided that Mr. Lawson is
then an employee. In the event that Mr. Lawson's employment with
the Company terminates, the agreement subjects Mr. Lawson to
certain non-compete restrictions. Upon termination of Mr. Lawson
by the Company without cause or upon a change in control of the
Company coupled with a diminishment of responsibilities, Mr.
Lawson is entitled to two years' severance, subject to mitigation
if he obtains other employment.
Patrick Belardi is employed under a contract that provides for an
annual salary of $80,000 and a bonus at the discretion of the
Board of Directors in consideration of the services rendered by
him to the Company.
The agreement has an anniversary date of October 1, and is
automatically renewable on a year to year basis. Under the
agreement, Mr. Belardi is entitled to participate in all health
benefits and other employee benefit programs of the Company,
including the Company's defined benefit retirement plan. Upon
termination of Mr. Belardi by the Company without cause, Mr.
Belardi is entitled to one year's severance, subject to
mitigation if he obtains other employment.
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<PAGE>
STOCK OPTION PLAN
The Company's 1996 Stock Option Plan (the "1996 Plan") permits
the granting of options to employees and directors of the
Company. An aggregate of 400,000 shares have been reserved for
issuance under the 1996 Plan. The Plan is administered by the
Compensation Committee of the Board of Directors, which generally
has the authority to select individuals who are to receive
options and to specify the terms and conditions of each option so
granted, including the number of shares covered by the option,
the type of option (incentive stock option or nonqualified stock
option), the exercise price (which in all cases must be at least
100% of the fair market value of the Common Stock on the date of
grant), vesting provisions and the overall option term. The
Company has granted options to purchase an aggregate of 268,431
shares of Common Stock to certain officers, a director and other
key employees of the Company. All of these options vest over a
period of two years commencing on the date of grant and have an
exercise price equal to $6 per share.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
SECURITY OWNERSHIP
The following table sets forth information as of December 22,
1997 regarding (i) persons known to the management of the Company
to be the beneficial owners of more than 5% of the Company's
Common Stock on such date, (ii) the ownership interest of each
director of the Company, (iii) the ownership interest of
executive officers and key employees of the Company based upon
currently exercisable options and (iv) the ownership interest of
all executive officers and directors as a group.
BENEFICIAL OWNERSHIP(1)
-----------------------
POSITION WITH THE
NAME COMPANY SHARES PERCENTAGE
---- ----------------- ------ ----------
Donald J. Sutherland Chairman of the 1,570,966(1) 40.2%
Board
Sans Peur Corporation None 1,545,184(2) 39.8%
c/o Quincy Partners
P.O. Box 154
Glen Head, NY 11545
Quincy Partners None 1,545,184(3) 39.8%
P.O. Box 154
Glen Head, NY 11545
Lion Partners Company None 1,495,184 38.5%
L.P.
c/o Quincy Partners
P.O. Box 154
Glen Head, NY 11545
Heartland Advisors, Inc. None 375,000 9.7%
790 North Milwaukee St.
Milwaukee, WI 53202
Charles E. Lawson, Jr. Chief Executive 131,151(4) 3.3%
Officer, President
and Director
Patrick E. Belardi Vice President, 33,210(5) *
Chief Financial
Officer, Treasurer
and Director
Donald R. Ladhoff Vice President - 20,000(6) *
Sales and Marketing
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<PAGE>
BENEFICIAL OWNERSHIP(1)
-----------------------
POSITION WITH THE
NAME COMPANY SHARES PERCENTAGE
---- ----------------- ------ ----------
Leo Orlandini Head Brewmaster 12,890(6) *
David Finn Vice President - 8,586(6) *
Packaging
Robert Covert Vice President - 8,586(6) *
Logistics
Carlo A. von Schroeter Director 2,200(7) *
George W. Peck, IV Director 1,000(8) *
Thomas S. Ablum Director -- (9) *
Henry T. Wilson Director -- (10)
All executive officers 1,788,589(11) 43.4%
and directors
as a group
(11 persons)
_____________________________________
* less than 1%
(1) Includes (i) 1,495,184 shares of Common Stock owned by Lion
Partners Company L.P. ("Lion Partners"), (ii) 50,000 shares
of Common Stock owned by Quincy Partners and (iii) presently
exercisable options to purchase 25,782 shares of Common
Stock held by Mr. Sutherland. Mr. Sutherland is the sole
stockholder of Sans Peur Corporation, which is the sole
general partner of Quincy Partners. Quincy Partners is the
sole general partner of Lion Partners. Lion Partners was
formed for the purpose of investing in the Company and its
sole asset consists of shares of Common Stock.
(2) Includes (i) 1,495,184 shares of Common Stock owned by Lion
Partners and (ii) 50,000 shares of Common Stock owned by
Quincy Partners. Sans Peur Corporation is the sole general
partner of Quincy Partners, which is the sole general
partner of Lion Partners.
(3) Includes (i) 1,495,184 shares of Common Stock owned by Lion
Partners and (ii) 50,000 shares of Common Stock owned
directly by Quincy Partners. Quincy Partners is the sole
general partner of Lion Partners.
(4) Includes presently exercisable options to purchase 57,251
shares of Common Stock at $1.40 per share and 70,900 shares
of Common Stock at $6.00 per share.
(5) Includes presently exercisable options to purchase 321,210
shares of Common Stock at $6.00 per share.
(6) Includes presently exercisable options to purchase shares of
Common Stock at $6.00 per share,
(7) Does not include (i) 150,000 shares of Common Stock owned
directly by Weston Presidio Offshore Capital C.V. or (ii)
shares of Common Stock attributable to a 16.67% limited
partnership interest in Lion Partners owned by Weston
Presidio Offshore Capital C.V. Mr. von Schroeter is a
limited partner of Weston Presidio Management LP, a general
partner of Weston Presidio Offshore Capital C.V
(8) Does not include shares of Common Stock attributable to a
4.76% limited partnership interest in Lion Partners owned by
Canbo Partners, of which Mr. Peck is the general partner.
(9) Does not include shares of Common Stock attributable to his
1. 19% limited partnership interest in Lion Partners.
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<PAGE>
(10) Does not include (i) 25,000 shares of Common Stock owned
directly by Northwood Ventures, a partnership of which Mr.
Wilson is a special limited partner, or (ii) shares of
Common Stock attributable to a 16.67% limited partnership
interest in Lion Partners by Northwood Ventures.
(11) Includes presently exercisable options to purchase 236,205
shares of Common Stock held by the following persons: Donald
J. Sutherland (25,782); Charles E. Lawson, Jr. (128,151);
Patrick E. Belardi (32,210); Donald R. Ladhoff (20,000); Leo
Orlandini (12,890); David Finn (8,586) and Robert Covert
(8,586).
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In October 1993, the Company entered into a Stock Purchase
and Redemption Agreement (the Agreement") among the Company, Lion
Partners Company L.P. ("Lion Partners") and William J. Smulowitz,
Rochelle P. Smulowitz, Lester S. Smulowitz and Lynn Muchnick
(collectively, the "Prior Owners"). Under the Agreement the
Prior Owners sold to Lion Partners 1,495,184 shares of Common
Stock, representing 24.5% of the then issued and outstanding
shares of capital stock of the Company (collectively the
"Purchased Shares"), for a total purchase price of $2.1 million.
Immediately following the consummation of the purchase and sale
of the Purchased Shares, the Company redeemed from the Prior
Owners 4,254,165 shares of Common Stock (the "Redemption
Shares"), representing 69.7% of the then issued and outstanding
shares of capital stock of the Company, in exchange for $8.4
million, of which $4.4 million was used to discharge in full the
indebtedness for borrowed money of the Company. In October 1993,
the Company obtained revolving and term loan financing from
Norwest Bank Minnesota, N.A., and term loan financing from The
Marlborough Capital Investment Fund, L.P. ("Marlborough") and
Weston Presidio Offshore Capital C.V. ("Weston") (collectively,
the "Lenders") to finance the repurchase of the Redemption Shares
and for working capital. Neither of the Lenders are affiliates
of the Company. After giving effect to the sale of the Purchased
Shares and the redemption, the Prior Owners owned in the
aggregate 19.2% of the Common Stock of the Company and Lion
Partners owned 80.8% of the Common Stock of the Company. Prior
to this transaction, Lion Partners had no affiliation with the
Company. In connection with the financing provided by
Marlborough and Weston, the Company issued warrants to
Marlborough and Weston to purchase, for nominal consideration,
265,391 shares and 26,174 shares, respectively, of Common Stock.
In December 1995 each of Marlborough and Weston exercised in full
their warrants. Marlborough and Weston had the right to require
the Company to repurchase their shares of Common Stock for an
amount based upon the fair market value of the Common Stock (as
specified in the agreement relating to this put option) at any
time beginning September 1998 and ending upon the occurrence of
certain events. This right was terminated upon the consummation
of the initial public offering. The Company repurchased 132,696
shares of Common Stock from Marlborough for $950,000 upon the
closing of the offering.
Management Agreement. In October 1993, Quincy Partners, the
general partner of Lion Partners, entered into a management
agreement with the Company (the "Management Agreement"). Under
the Management Agreement, Quincy Partners provided management
consulting services (the "Services") to the Company in the areas
of financial management, marketing and general management. In
consideration for the performance by Quincy Partners of the
Services, the Company paid Quincy Partners $130,000 per year.
The Management Agreement terminated upon the closing of the
initial public offering. Following the termination, Donald J.
Sutherland, the President of the general partner of Quincy
Partners, receives a fee of S 12,500 per quarter for his services
as Chairman of the Board of the Company. In December 1995, Mr.
Sutherland was granted options to purchase 38,673 shares of
Common Stock at $6.00 per share, which shares vest over two
years. The Company paid $80,000 to Quincy Partners as an
advisory fee in connection with the initial public offering.
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<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the
Exchange Act, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Wilkes-Barre, State of Pennsylvania, on January 28,
1998.
THE LION BREWERY, INC.
By: /s/ Patrick E. Belardi
-----------------------------
Patrick E. Belardi
Vice President, Chief Financial
Officer and Treasurer
