<PAGE> 1
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 2000.
COMMISSION FILE NO. 0-21061.
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LTI HOLDINGS, INC.
(Exact name of small business issuer in its charter)
Delaware 58-2044990
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
5115 New Peachtree Rd., Suite 200, Atlanta, GA 30341
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(Address of principal executive offices) (Zip Code)
(770) 454-7403
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(Issuer's telephone number)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Title of Class
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Common Stock, $.01 par value.
Redeemable Class A Warrants
Redeemable Class B Warrants
Units consisting of Common Stock, $.01 par value, Redeemable Class A Warrants
and Redeemable Class B Warrants.
Check whether the issuer (1) 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 [ ]
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will 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]
The issuer's revenues for the fiscal year ended March 31, 2000 were $553,002.
The aggregate market value of the voting stock (which consists solely of shares
of Common Stock) held by non-affiliates of the issuer as of April 28, 2000,
computed by reference to the price at which the registrant's Common Stock as
quoted by OTC Bulletin Board ("OTCBB") was sold on such date, was approximately
$814,913.
The number of shares of the issuer's Common Stock outstanding as of April 28,
2000 was 2,775,100.
Transitional Small Business Disclosure Format (check one) Yes [ ] No [X]
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PART I
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-KSB contains certain "forward-looking"
statements within the meaning of the Private Securities Litigation Reform Act of
1995, which provides a "safe harbor" for these types of statements. To the
extent statements in this Annual Report involve, without limitation, potential
business combinations, product development and introduction plans, the Company's
expectations for growth, estimates of future revenue, expenses, profit, cash
flow, balance sheet items sell-through or backlog, forecasts of demand or market
trends for the Company's various product categories and for the industries in
which the Company operates or any other guidance on future periods, these
statements are forward-looking statements. These risks and uncertainties include
those identified by the Company from time to time in the Company's filings with
the Securities and Exchange Commission, press releases and other communications.
The Company assumes no obligation to update forward-looking statements.
ITEM 1. DESCRIPTION OF BUSINESS
PRELIMINARY NOTE
As disclosed in a Form 8-K filed on July 8, 1999, with the Securities
and Exchange Commission, LTI Holdings, Inc. (the "Company") sold all of its
operating assets to another corporation on June 30, 1999 (the "Asset Sale"). At
the present time, the Company has no operating business and the Company's
management and Board of Directors are exploring opportunities to effect an
acquisition of the Company by merger, exchange or issuance of securities or
similar business combination (a "Business Combination"). The description of the
Company's business set forth below provides a discussion of the Company's past
business and is not meant to describe the company's present operations or
planned future operations.
On June 6, 2000, the Company announced that it had executed a letter of
intent to merge with Speedcom Wireless International Corporation (see "Recent
Events").
OVERVIEW
Laminating Technologies, Inc. was incorporated in Georgia, in March
1993, as New Cooler Corp., and subsequently changed its name to Laminating
Technologies, Inc. In April 1996, the Company was merged into Laminating Merger
Corporation, a Delaware corporation, which changed its name to Laminating
Technologies, Inc. In connection with the Asset Sale, the Company changed its
name to LTI Holdings, Inc.
The Company was a development stage company organized to research,
develop, design and market value-added packaging and specialty display products
manufactured using the Company's proprietary processing method ("LTI
Processed(R)").
The LTI Processed(R) process can be utilized to produce a wide variety
of packaging products and specialty displays. Prior to the Asset Sale, the
Company produced a number of commercial products, including bakery dessert
discs, pads and trays, catering HOT `N COOLER(R) containers, frozen food
shippers, point of purchase displays, pizza delivery boxes and medical shippers.
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PRODUCTS
On April 17, 1997, the Company announced "BAKE 'N SHIP(TM)", a new
product line, which was available for sale to the baking industry. BAKE'N
SHIP(TM) utilized the Company's patented and proprietary process, resulting in a
new material which was ovenable and freezable with the strength and structure of
corrugated material. This was the Company's first commercial product.
In February 1998, the Company introduced its new "HOT 'N COOLER(R)"
line of watertight containers that keep food and beverages hot or cold,
depending upon the application. Research conducted by an independent laboratory
showed that HOT 'N COOLER(R) cools down faster (cans and ice) than the
traditional hard plastic, soft bag or styrofoam coolers. Additionally, during
testing, HOT 'N COOLER(R) was proven to hold heat longer for food caterers of
beans, ribs, chicken, etc.
STRATEGY
Prior to the Asset Sale, the Company's strategy focused on: (i)
designing, developing and marketing value-added, niche LTI Processed(R) products
both directly and indirectly to focused market segments, (ii) leveraging these
developed markets to and through vertically integrated forest product companies
creating strategic alliances, and (iii) obtaining license agreements and/or
royalty arrangements favorable to the Company expanding both the uses and volume
for LTI Processed(R) products.
As discussed elsewhere in this annual report, because of the Asset
Sale, the Company has no operating business and the Company's management and
Board of Directors have been focusing their efforts on exploring business
combination opportunities. The Board has determined to maintain the Company as a
public "shell" corporation which will seek suitable business combination
opportunities. The Board believes that a business combination with an operating
company has the potential to create a greater value for the Company's
stockholders than a liquidation or similar distribution. On June 6, 2000, the
Company announced that it had executed a letter of intent to merge with Speedcom
Wireless International Corporation (see "Recent Events"). However, there can be
no assurances that the merger will be consummated. In the event that the merger
with Speedcom is not consummated, and another suitable business combination
opportunity is not identified, the Board may pursue alternative strategies,
which may include a dissolution or other distribution of assets. At the present
time, however, the Board intends to continue to pursue business combination
opportunities, including the merger with Speedcom.
EMPLOYEES
The Company currently has two full-time employees and one part-time
employee. None of the Company's employees is represented by a labor union and
the Company believes its relations with its employees to be satisfactory. On
April 1, 1997, the Company placed its employees with Paradyme, a Professional
Employer Organization. Under terms of the arrangement with Paradyme, the
Company's employees became employees of Paradyme, entitling the employees to
obtain superior benefits that the Company previously could not offer to its
employees. While the Company must pay for the payroll cost of the employees, and
a fee for this service, it avoids the overhead and additional administrative
costs typically associated with these benefits.
RECENT EVENTS
On June 6, 2000, the Company announced that it had executed a letter of
intent to merge with Speedcom Wireless International Corporation, a privately
held wireless broadband manufacturer based in Sarasota, Florida.
Under the terms of the letter of intent, the Company and Speedcom will
enter into a definitive merger agreement whereby the Company will acquire
Speedcom in return for shares of the Company's common stock. Upon completion of
the transaction, current Company stockholders will own approximately 8% of the
post-merger company and current Speedcom stockholders will own
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approximately 92% of the post-merger company, subject to potential adjustment
based on the net worth and cash position of the Company as of the closing.
The closing of the transaction is subject to customary conditions,
including the execution of a definitive merger agreement and the approval of the
stockholders of both the Company and Speedcom. There can be no assurances that
agreement on a definitive merger agreement will be reached, or that all of the
conditions to the merger will be satisfied.
ITEM 2. PROPERTIES
The Company currently leases approximately 1,000 square feet of office
space in Atlanta, Georgia for its executive offices pursuant to a month-to-month
agreement for a monthly rent of $500.
ITEM 3. LEGAL PROCEEDINGS
The Company is not involved in any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of shareholders during the fourth
quarter of the fiscal year ended March 31, 2000.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
A. MARKET INFORMATION
LTI's Common Stock is traded on the OTC Bulletin Board under the
symbol, "LAMT". The Company's stock was previously traded on the Nasdaq SmallCap
Market under the same symbol prior to its delisting due to a failure to meet
certain Nasdaq listing requirements. The Company's stock was delisted on
December 17, 1998.
The following table sets forth the range of high and low bid
quotations or high and low sales prices for the Company's stock for each of the
periods indicated as reported by the OTC Bulletin Board and Nasdaq SmallCap
Market, as applicable. Bid quotations reflect interdealer prices without retail
markup, markdown or commission and may not necessarily represent actual
transactions. The Company's stock commenced public trading on October 9, 1996.
<TABLE>
<CAPTION>
Quarter Ended High Low
------------- ------ -----
<S> <C> <C>
Common Stock
June 30, 1998 1.0000 .2500
September 30, 1998 .6870 .1875
December 31, 1998 .3437 .1875
March 31, 1999 .3125 .1875
June 30, 1999 .5625 .2400
September 30, 1999 .5938 .4063
December 31, 1999 .5625 .3800
March 31, 2000 .8438 .5000
</TABLE>
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B. HOLDERS
The approximate number of record holders of shares of the Common Stock
of the Company outstanding as of May 19, 2000 was 81.
C. DIVIDENDS
The Company has never paid cash dividends on its Common Stock and
does not anticipate paying cash dividends in the foreseeable future. The
declaration and payment of future dividends, if any, will be at the sole
discretion of the Board of Directors and will depend upon factors deemed
relevant by the Board of Directors.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Company was a development stage company organized to develop,
design and market value-added packaging and specialty display products. Since
its inception, the Company's efforts were principally devoted to research,
development and design of products, marketing activities and raising capital.
Due to the Company's inability to find a sufficient market for its products, the
Company sold its operating assets as of June 30, 1999 and currently does not
have any operating business. Therefore, readers should note that the following
discussion of results of operations is being provided for historical comparison
purposes only and is not meant to describe the Company's present business or
planned future operations.
The following discussion should be read in conjunction with the
Financial Statements and notes thereto included elsewhere in this Form 10-KSB.
RESULTS OF OPERATIONS
Fiscal Years Ended March 31, 1999 and 2000. Net sales decreased from
approximately $1,878,000 in the twelve months ended March 31, 1999 (fiscal 1999)
to $553,000 in the twelve months ended March 31, 2000 (fiscal 2000). This
decrease is due to the Company selling its operating assets as of June 30, 1999.
Selling, general and administrative expenses decreased by 32% from
approximately $1,335,000 in fiscal 1999 to approximately $905,000 in fiscal
2000. This decrease is primarily due to the reduction in personnel due to the
Company selling its operating assets as of June 30, 1999.
Research and development expense decreased by 90% from approximately
$463,000 in fiscal 1999 to approximately $46,000 in fiscal 2000. This decrease
is due to the Company selling its operating assets as of June 30, 1999.
Interest expense decreased by $4,000 from approximately $5,000 for
fiscal 1999 to approximately $1,000 for fiscal 1999. The decrease is due to the
reduction in the outstanding balance of a note payable.
Investment income decreased from approximately $124,000 in fiscal 1999
to approximately $94,000 in fiscal 2000. This decrease is primarily due to the
amount of cash available for investing being greater in fiscal 1999 than in
fiscal 2000.
Net loss increased 8% from approximately $967,000, or $.35 per share,
in fiscal 1999 to approximately $1,040,000, or $.37 per share, in fiscal 2000,
as a result of the foregoing factors.
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LIQUIDITY AND CAPITAL RESOURCES
The Company received approximately $400,000 from the sale of its assets
on June 30, 1999 and this cash was added to the Company's existing cash balance.
Since this time the Company's cash has primarily been used to pay recurring
general and administrative expenses which run approximately $25,000 per month,
excluding any fees for legal, financial or other advisory services. The Company
currently had cash and short term investments of approximately $1.7 million.
Certain common stockholders had agreed to place 410,000 shares of
Common Stock of the Company into escrow ("Escrow Shares"). The Escrow Shares
would have been released from escrow only if certain financial conditions or
market prices for the Common Stock had been met or achieved. These financial
conditions or market prices were not achieved within the specified time and the
Escrow Shares have been canceled.
At March 31, 2000 the Company had net operating loss carry-forwards for
Federal Income Tax purposes of approximately $ 9,321,000. The net operating loss
and credit carry-forwards expire from March, 2009 through March, 2020.
Additionally, the Company's ability to utilize its net operating loss
carry-forwards may be subject to annual limitations pursuant to Section 382 of
the Internal Revenue Code.
INFLATION
The Company's financial statements are prepared in accordance with
Generally Accepted Accounting Principles, and therefore, do not reflect the
effect of inflation. The impact of changing prices on the financial statements
is not considered significant.
ITEM 7. FINANCIAL STATEMENTS
The Consolidated Financial Statements required by this Item are set
forth at the pages indicated in Item 13(a) below.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The names of the Directors and executive officers of the Company, their
ages and certain other information are set forth as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Michael E. Noonan 59 Chairman of the Board of Directors, President, Chief
Executive Officer and Director
Donald L. Aldridge 42 Chief Financial Officer
Ronald L. Christensen 62 Director
William J. Warren 61 Director
</TABLE>
MICHAEL E. NOONAN was appointed Chairman of the Board, President and
Chief Executive Officer of the Company on February 1, 1996. From 1994 to
February 1, 1996, Mr. Noonan was self-employed as a business consultant. From
1989 to 1994, Mr. Noonan was the Chief Executive Officer, President and sole
shareholder of Winning Image, Inc., an apparel marketing and manufacturing firm
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which was sold to Terry Manufacturing Company. From 1986 to 1989, Mr. Noonan was
a Senior Vice President of Domestic and North American Operations at the Mead
Packaging Division of Mead Corporation.
DONALD L. ALDRIDGE has served as Chief Financial Officer of the Company
on a part-time basis since December of 1997. Until September 30, 1999 he was a
Partner in Tatum CFO Partners, LLP, which provides Chief Financial Officer
expertise to both emerging growth companies and larger corporations. He had been
a Partner with Tatum since 1993. Prior to Tatum, Mr. Aldridge served as the
Chief Financial Officer of Southern Services, Inc. from 1990 to 1992. Mr.
Aldridge is a Certified Public Accountant who practiced with Deloitte & Touche
prior to his financial experience in industry. Mr. Aldridge has a Master's
Degree in Business Administration from Virginia Tech and a Bachelor's of Science
Degree in Accounting from Bob Jones University.
RONALD L. CHRISTENSEN has been a Director of the Company since March
1996. From 1993 to the present, Mr. Christensen has served as President and
Chief Executive Office of PrinTech Label Corporation, a printing and converting
firm. Since 1983 he has also served as President of Adrienne Associates, a
consulting services company to the printing and pressure sensitive materials
industry. Mr. Christensen graduated from Georgia Institute of Technology in 1960
with a Bachelor's Degree in Chemical Engineering.
WILLIAM J. WARREN has been a Director of the Company since March 1996.
Mr. Warren founded Mar-Lyn Container Corporation, a sheet converter, in 1967 and
was the President and majority shareholder of Mar-Lyn until the company was sold
in April 1997. Mr. Warren is now a management consultant for Lyn Marco. Mr.
Warren graduated from the University of California in 1961 with a Bachelor's
Degree in Industrial Management.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's Directors and Executive Officers and the holders of ten
percent of the Company's Common Stock to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
equity securities of the Company. Based on the Company's review of copies of
such reports received by it, or written representations from reporting persons,
the Company believes that during the period from April 1, 1999 to March 31,
2000, its Officers and Directors filed all reports on a timely basis.
ITEM 10. EXECUTIVE COMPENSATION.
The following table sets forth certain information covering the
compensation paid or accrued by the Company during the fiscal year indicated to
its President/Chief Executive Officer during the fiscal year ended March 31,
2000. No other executive officer received compensation, including salary and
bonus, in excess of $100,000 during the fiscal year ended March 31, 2000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG TERM COMPENSATION
COMPENSATION AWARDS
FISCAL YEAR
NAME AND ENDED NUMBER OF SECURITIES
PRINCIPAL POSITION MARCH 31 SALARY UNDERLYING OPTIONS
<S> <C> <C> <C>
Michael E. Noonan 2000 $144,000 --
Chairman of the Board, 1999 144,000 --
President, Chief Executive 1998 144,000 91,319(1)
Officer and Director
</TABLE>
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(1) Consists of 91,319 shares issuable upon exercise of options granted to
Mr. Noonan by Steve Gorlin.
The following table sets forth the number of securities underlying
options, the exercise price and the expiration date for stock options granted to
the President/Chief Executive Officer during the fiscal year ended March 31,
2000.
OPTION GRANTS IN FISCAL YEAR ENDED MARCH 31, 2000
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS GRANTED EXERCISE
UNDERLYING TO EMPLOYEES PRICE EXPIRATION
NAME OPTIONS GRANTED IN FISCAL YEAR ($/SHARE) DATE
<S> <C> <C> <C> <C>
Michael E. Noonan -- 0% -- --
</TABLE>
The following table sets forth the number of exercisable and
unexercisable options as of March 31, 2000, and the value of such options for
the President/Chief Executive Officer.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTIONS VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY
FISCAL YEAR END OPTIONS AT FY END
SHARES
ACQUIRED/ VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISED REALIZED UNEXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
Michael E. Noonan -- -- 91,319/-0- $12,100/$0
</TABLE>
DIRECTOR'S COMPENSATION
Non-employee Directors of the Company are entitled to compensation of
$500 for each Board of Directors meeting attended and are reimbursed for
expenses actually incurred in connection with such meeting. Directors are not
precluded from serving the Company in any other capacity and receiving
compensation therefor.
In addition, Directors are entitled to receive Director Options
pursuant to the Company's 1996 Stock Option Plan (the "Plan"). The provisions of
the Plan provide for the automatic grant of non-qualified stock options to
purchase shares of Common Stock ("Director Options") to Directors of the Company
who are not employees or principal stockholders of the Company ("Eligible
Directors"). Eligible Directors of the Company were granted a Director Option to
purchase 10,000 shares of Common Stock on or about October 9, 1996 at a per
share exercise price equal to $5.00. Future Eligible Directors will be granted a
Director Option to purchase 10,000 shares of Common Stock on the date that such
person is first elected or appointed a Director. Further, commencing on the day
immediately following the date of the annual meeting of stockholders for the
Company's fiscal year ending March 31, 1997, each Eligible Director, other than
Directors who received an Initial Director Option since the last annual meeting,
will be granted a Director Option to purchase 1,000 shares of Common Stock
("Automatic Grant") on the day immediately following the date of each annual
meeting of stockholders, as long as such director is a member of the Board of
Directors. The exercise price for each share subject to a Director Option shall
be equal to the fair market value of the Common Stock on the date of grant,
except for Directors who receive incentive options and who own more than ten
percent of the voting power, in which case the exercise price shall be not less
than 110 percent of the fair market value on the date of grant. Director Options
are exercisable in four
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equal annual installments, commencing six months from the date of grant.
Director Options will expire the earlier of ten years after the date of grant or
ninety days after the termination of the Director's service on the Board of
Directors.
EMPLOYMENT AND CONSULTING AGREEMENTS
In July 1996, the Company entered into a one-year employment agreement
with Michael E. Noonan, Chairman and Chief Executive Officer of the Company. The
agreement provides for an annual base salary of $144,000 per year and is
automatically renewable for successive one-year terms unless either party gives
six months' notice of termination to the other. The Company may terminate the
agreement without cause and, upon such termination, Mr. Noonan will be entitled
to receive his base salary for a period of one year (subject to a fifty percent
offset during the second six months for salary received from subsequent
employment). In addition, if the Company exercises its right not to renew the
agreement, Mr. Noonan will be entitled to six months of severance pay. The
agreement contains confidentiality and non-competition provisions.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of May 31, 2000, the number and
percentage of shares of Common Stock which, according to information available
to the Company, are beneficially owned by: (i) each person known by LTI to own
beneficially more than five percent of the outstanding Common Stock of LTI; (ii)
each director and named executive officer of LTI; and (iii) all executive
officers and directors of LTI as a group. Under rules adopted by the Securities
and Exchange Commission, a person is deemed to be a beneficial owner of common
stock with respect to which he has or shares voting power (which includes the
power to vote or to direct the voting of the security), or investment power
(which includes the power to dispose of, or to direct the disposition of, the
security). A person is also deemed to be the beneficial owner of shares with
respect to which he could obtain voting or investment power within 60 days of
May 31, 2000, such as upon the exercise of options or warrants.
<TABLE>
<CAPTION>
NAME AND ADDRESS(1) NO. OF SHARES(1) PERCENTAGE
------------------- ---------------- ----------
<S> <C> <C>
Michael E. Noonan...................................................... 116,271(2) 4.2%
Ronald L. Christensen.................................................. 10,750(3) *
William J. Warren...................................................... 10,750(3) *
Donald B. Sallee....................................................... 368,885(4) 13.3
Steven N. Bronson..................................................... 680,297(5) 24.5
J. Morton Davis........................................................ 319,465(6) 11.1
Kinder Investments, L. P............................................... 308,300(7) 11.1
Steve Gorlin........................................................... 234,662(8) 9.2
Ruki Renov............................................................. 277,440(9) 9.1
Esther Stahler......................................................... 277,440(10) 9.1
All executive officers and directors as a group (3 persons)............ 137,771(11) 4.6
</TABLE>
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* Less than 1 percent
(1) Except as otherwise indicated, each of the parties listed
above has sole voting and investment power over the shares
owned. Except as otherwise indicated, the address of each
stockholder is c/o LTI Holdings, Inc. 5115 New Peachtree Rd.,
Suite 200, Atlanta, Georgia 30341.
(2) Includes 91,319 shares issuable upon exercise of immediately
exercisable options granted to Mr. Noonan by Steve Gorlin.
(3) As to each Director, includes 10,750 immediately exercisable
options to purchase Common Stock. Does not include 250 shares
(per Director) issuable upon exercise of options that are not
exercisable within sixty days.
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(4) The address of Mr. Sallee is 980 South Powers Court, N. W.,
Atlanta, Georgia 30327.
(5) The address of Mr. Bronson is 16 East 52nd Street, Suite 501,
New York, New York 10022
(6) Represents 52,360 shares underlying a Unit Purchase Option
("UPO") to purchase 13,090 Units owned by Mr. Davis, 52,360
shares underlying a UPO to purchase 13,090 Units owned by D.
H. Blair Investment Banking Corp. and 214,745 shares owned by
D. H. Blair Capital Corp. Mr. Davis is the Chairman of the
Board and sole stockholder of D. H. Blair Capital Corp. and D.
H. Blair Investment Banking Corporation. Mr. Davis has sole
power to vote or direct the vote, to dispose of or to direct
the disposition of the shares owned by D. H. Blair Capital
Corp. and D. H. Blair Investment Banking Corp. The address of
Mr. Davis is 44 Wall Street, New York, New York 10005.
(7) Kinder Investments, L P.; Peyser Associates, LLC, the general
partner of Kinder Investments; and Brian A. Wasserman, the
managing member of Petser share voting power and are
collectively the "Reporting Parties". The address of the
"Reporting Parties" is 1500 Hempstead Turnpike, East Meadow,
New York 11554.
(8) Includes 91,319 shares subject to options granted by Mr.
Gorlin to Michael E. Noonan. The address of Mr. Gorlin is 150
Gulf Shore Drive, Unit 601, Destin, Florida 32541. Mr. Gorlin
may be deemed a "founder" of the Company, as such term is
defined in the Securities Act of 1933.
(9) Includes 209,440 shares underlying a UPO to purchase 52,360
Units owned directly by Mrs. Renov and 68,000 shares
underlying a UPO to purchase 17,000 Units owned by D. H. Blair
& Co., Inc. ("Blair & Co."). Each Unit consists of one share
of LTI Common Stock, one Class A Common Stock Purchase Warrant
("Class A Warrant") and one Class B Common Stock Purchase
Warrant ("Class B Warrant"). See "Market for Common Equity and
Related LTI Stockholder Matters -- LTI Warrants." Mrs. Renov
has sole voting power of and dispositive control over shares
owned by her and shares voting power of and dispositive
control over shares owned by Blair & Co. Mr. and Mrs. Renov,
collectively, are principal shareholders of Blair & Co. The
address of Mrs. Renov is 172 Broadway, Lawrence, New York
11559.
(10) Includes 209,440 shares underlying a UPO to purchase 52,360
Units owned directly by Mrs. Stahler and 68,000 shares
underlying a UPO to purchase 17,000 Units owned by Blair & Co.
Mrs. Stahler has sole voting power of and dispositive control
over shares owned by her and shares voting power of and
dispositive control over shares owned by Blair & Co. Mr. and
Mrs. Stahler, collectively, are principal shareholders of
Blair & Co. The address of Mrs. Stahler is 10 Lakeside Drive,
Lawrence, New York 11559.
(11) Includes 112,819 shares issuable upon exercise of options that
are immediately exercisable. Does not include 500 shares
issuable upon exercise of options that are not exercisable
within sixty days.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Upon the conversion of the Series A Preferred Stock in connection with
the Company's initial public offering (the "1996 Offering") of 1,700,000 units
(the "IPO Units"), each IPO Unit consisting of one share of the Company's common
stock ("Common Stock"), one Class A Warrant and one Class B Warrant
(collectively, the "Warrants"), the Company paid to D. H. Blair Capital Corp.
approximately $150,000, representing the accumulated dividends on the Series A
Preferred Stock. The sole stockholder of D. H. Blair Corp. is J. Morton Davis,
who is also the sole stockholder of D. H. Blair Investment Banking Corp.
("Blair" or the "Underwriter"), the underwriter for the 1996 Offering. Blair
also acted as Placement Agent for certain bridge financing of the Company in
April and May 1996 for which it received a placement agent fee of $199,500 and a
non-accountable expense allowance of $59,850.
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Blair has the right to designate one individual for nomination to the
Company's Board of Directors for a period of five years after the completion of
the 1996 Offering, although it has not yet selected any such designee. Such
designee may be a director, officer, partner, employee or affiliate of Blair.
The Company has agreed to indemnify Blair against certain liabilities, including
liabilities under the Securities Act of 1933.
During the five-year period after the date of the 1996 Offering, in the
event Blair originates a financing or a merger, acquisition or transaction to
which the Company is a party, Blair will be entitled to receive a finder's fee
in consideration for origination of such transaction. The fee is based on a
percentage of the consideration paid in the transaction ranging from 7 percent
of the first $1,000,000 to 2 1/2 percent of any consideration in the excess of
$9,000,000.
The Company has agreed not to solicit Warrant exercises other than
through Blair, unless Blair declines to make such solicitation. Upon any
exercise of the Warrants after the one-year period after the 1996 Offering, the
Company will pay Blair a fee of 5 percent of the aggregate exercise price of the
Warrants, if (i) the market price of the Company's Common Stock on the date the
Warrants are exercised is greater than the then exercise price of the Warrants;
(ii) the exercise of the Warrants was solicited by a member of the NASD; (iii)
the warrant holder designates in writing that the exercise of the Warrant was
solicited by a member of the NASD and designates in writing the broker-dealer to
receive compensation for such exercise; (iv) the Warrants are not held in a
discretionary account; (v) disclosure of compensation arrangements was made both
at the time of the 1996 Offering and at the time of exercise of the Warrants;
and (vi) the solicitation of exercise of the Warrant was not in violation of
Regulation M.
Blair acted as the underwriter of the IPO Units in the 1996 Offering
for which it received underwriting discounts and commissions of $909,075 and a
non-accountable expense allowance of $293,250. In addition, in connection with
the 1996 Offering, the Company agreed to sell to Blair and its designees, for
nominal consideration, the option to purchase up to 170,000 IPO Units (the "Unit
Purchase Option") substantially identical to the IPO Units offered in the 1996
Offering, except that the Class A Warrants and Class B Warrants included therein
are each subject to redemption by the Company, in accordance with the terms of
the Warrant Agreement, at any time after the Unit Purchase Options have been
exercised and the underlying warrants are outstanding.
In April 1996, Steve Gorlin, a principal stockholder of the Company,
granted to Michael E. Noonan, Chairman, President and Chief Executive Officer of
the Company, options to purchase 91,319 shares of Common Stock owned by Mr.
Gorlin. The options are exercisable immediately at $0.68 per share and expire
ten years from the date of grant. The Company has granted Mr. Noonan demand and
piggyback registration rights with respect to the shares of Common Stock
issuable upon exercise of these options.
In April 1996, Donald B. Sallee, a stockholder of the Company, and
other debtholders of the Company converted an aggregate of $495,000 principal
amount of indebtedness of the Company into an aggregate of $495,000 in principal
amount of notes and 247,500 warrants in connection with the Company's bridge
financing. The Company agreed to pay the accrued interest on the indebtedness in
cash. The principal amount of the bridge notes and interest thereon at a rate of
10 percent per annum were paid to the holders of the bridge notes upon the
closing of the 1996 Offering.
ITEM 13. EXHIBITS AND REPORTS ON FORMS 8-K AND 8-K/A.
(a) Financial Statements
See "Contents to Consolidated Financial Statements."
(b) Reports on Forms 8-K and 8-K/A.
No reports on Forms 8-K or 8-K/A were filed by the Company
during the fourth quarter of the fiscal year ended March 31,
2000.
(c) Exhibits
The following exhibits are filed as part of this report:
11
<PAGE> 12
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- --------------------------------------------------------------
<S> <C>
2.1 --Asset Purchase Agreement between Packaging Atlanta
Corporation and Laminating Technologies Inc. dated April 26,
1999 (incorporated by reference in the Company's Definitive
Proxy Statement dated May 27, 1999)
3.1(1) --Restated Certificate of Incorporation of the Registrant
3.2(1) --By-laws of the Registrant
4.1(1) --Form of Bridge Note
4.2(1) --Form of Warrant Agreement
4.3(1) --Form of Underwriter's Unit Purchase Option
10.1(2) --Employment Agreement between the Registrant and Michael E.
Noonan
10.2(2) --Registration Rights Agreement between the Registrant and
Michael E. Noonan
10.3(1) --Escrow Agreement between the Registrant, American Stock
Transfer & Trust Company and certain security holders of the
Registrant
10.3A(2) --Amendment to Escrow Agreement between the Registrant,
American Stock Transfer & Trust Company and certain security
holders of the Registrant
10.4(1) --Form of Debt Conversion Agreement between the Registrant and
the Conversion Investors
10.5(1) --Memorandum of Understanding dated August 26, 1994, between
the Registrant and TMR, as amended.
10.6(1) --Outsourcing Agreement dated September 1, 1994, between the
Registrant and TMR
10.7(1) --Amended and Restated 1996 Stock Option Plan
10.8(1) --Form of Indemnification Agreement
27.1 --Financial Data Schedule (for SEC use only)
(1) Incorporated by reference to the Company's Registration Statement on
Form SB-2 (File No. 333-6711) filed with the Commission on June 24,
1996.
(2) Incorporated by reference to Amendment No. 1 to the Company's
Registration Statement on Form SB-2 (File No. 333-6711) filed with the
Commission on July 31, 1996.
</TABLE>
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange
Act, the Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
LTI Holdings, Inc.
By: /S/ Michael E. Noonan Chairman, President & CEO June 29, 2000
---------------------------------
Michael E. Noonan
</TABLE>
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Registrant and in the capacities and
on the dates specified.
<TABLE>
<S> <C> <C>
By: /S/ Michael E. Noonan Chairman, President & CEO June 29, 2000
--------------------------------- Principal Executive Officer
Michael E. Noonan
By: /S/ Donald L. Aldridge Chief Financial Officer June 29, 2000
--------------------------------- Principal Financial Officer
Donald L. Aldridge
By: /S/ Shirley A. Pigg Controller June 29, 2000
--------------------------------- Principal Accounting Officer
Shirley A. Pigg
By: /S/ Ronald L. Christensen Director June 29, 2000
---------------------------------
Ronald L. Christensen
By: /S/ William J. Warren Director June 29, 2000
---------------------------------
William J. Warren
</TABLE>
13
<PAGE> 14
CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-3
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS F-4
CONSOLIDATED STATEMENTS OF OPERATIONS F-5
CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY F-6
CONSOLIDATED STATEMENTS OF CASH FLOWS F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-8
</TABLE>
<PAGE> 15
Report of Independent Certified Public Accountants
Board of Directors and Stockholders
LTI Holdings, Inc.
Atlanta, Georgia
We have audited the accompanying consolidated balance sheets of LTI Holdings,
Inc. and subsidiary as of March 31, 2000 and 1999, and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for the
years then ended. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of LTI Holdings, Inc.
and subsidiary as of March 31, 2000 and 1999, and the consolidated results of
their operations, and their consolidated cash flows for the years then ended in
conformity with generally accepted accounting principles.
\s\ GRANT THORNTON LLP
Atlanta, Georgia
April 15, 2000
F-3
<PAGE> 16
LTI Holdings, Inc. and Subsidiary
CONSOLIDATED BALANCE SHEETS
March 31,
ASSETS (Note B)
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 70,903 $ 210,271
Investments (Note A-2) 1,695,778 1,670,299
Accounts receivable, net of an allowance
for doubtful accounts of $0 and $33,210 -- 197,733
Inventories (Notes A-3 and C) -- 400,812
Prepaid expenses 8,230 59,972
Other current assets -- 1,544
------------ ------------
Total current assets 1,774,911 2,540,631
PROPERTY AND EQUIPMENT, NET
(Notes A-4 and D) -- 261,234
------------ ------------
$ 1,774,911 $ 2,801,865
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (Note E)
CURRENT LIABILITIES
Current maturity of note payable $ -- $ 39,840
Accounts payable - trade 328 50,148
Accrued expenses 177,700 100,080
------------ ------------
Total current liabilities 178,028 190,068
COMMITMENTS AND OTHER MATTERS (Note F) -- --
STOCKHOLDERS' EQUITY
Series A convertible preferred stock, par value $.01,
5,000,000 shares authorized, none issued -- --
Common stock, par value $.01, 20,000,000 shares
authorized, 3,185,100 shares issued with 2,775,100
and 3,185,100 shares outstanding for the years
ended 1999 and 1998, respectively. 27,751 31,851
Additional paid-in capital 11,713,354 11,709,254
Accumulated deficit (10,144,222) (9,103,931)
Accumulated other comprehensive earnings (loss) (Note A-2) -- (25,377)
------------ ------------
Total stockholders' equity 1,596,883 2,611,797
------------ ------------
$ 1,774,911 $ 2,801,865
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 17
LTI Holdings, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended March 31,
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
Net sales $ 553,002 $ 1,877,703
Cost of goods sold 399,341 1,283,642
------------ ------------
Gross profit 153,661 594,061
Selling, general and administrative
expenses 905,290 1,334,862
Research and development expense 46,142 463,182
------------ ------------
Operating loss (797,771) (1,203,983)
Interest expense (1,475) (5,136)
Investment income 94,444 124,421
Cancellation of debt -- 117,522
Loss on the sale of assets (335,489) --
------------ ------------
Net loss $ (1,040,291) $ (967,176)
============ ============
Net loss per common share
Basic $ (.37) $ (0.35)
============ ============
Weighted average number of common
shares outstanding 2,775,100 2,775,100
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 18
LTI Holdings, Inc. and Subsidiary
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Years ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
Deficit
Common stock Accumulated Accumulated
Par Value $.01 Additional During the Other
------------------------ Paid-in Development Comprehensive
Shares Amount Capital Stage Earnings (loss) Total
---------- -------- ----------- ------------ --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1998 3,185,100 $ 31,851 $11,709,254 $ (8,136,755) $ -- $ 3,604,350
Net loss for the year ended
March 31, 1999 -- -- -- (967,176) -- (967,176)
Other comprehensive earnings (loss)
Unrealized net losses on
marketable securities -- -- -- -- (25,377) (25,377)
-----------
Comprehensive earnings (loss) -- -- -- -- -- (992,553)
---------- -------- ----------- ------------ -------- -----------
Balance, March 31, 1999 3,185,100 31,851 11,709,254 (9,103,931) (25,377) 2,611,797
Net loss for the year ended
March 31, 2000 -- -- -- (1,040,291) -- (1,040,291)
Cancellation of forfeitable shares
returned to Treasury (Note E-3) (410,000) (4,100) 4,100 -- -- --
Other comprehensive earnings
Unrealized gain on marketable
securities -- -- -- -- 25,377 25,377
-----------
Comprehensive earnings (Loss) (1,014,914)
---------- -------- ----------- ------------ -------- -----------
Balance, March 31, 2000 2,775,100 $ 27,751 $11,713,354 $(10,144,222) $ -- $ 1,596,883
========== ======== =========== ============ ======== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-6
<PAGE> 19
LTI Holdings, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended March 31,
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,040,291) $ (967,176)
Adjustments to reconcile net loss to net
cash used in operating activities:
Loss on disposal of assets 335,489 --
Provision for doubtful accounts -- 8,210
Depreciation and amortization 18,305 93,006
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 68,998 (137,021)
Decrease (increase) in inventories 38,907 (2,508)
Decrease in other assets and prepaid expenses 51,741 92,069
Increase (decrease) in accounts payable
and accrued expenses 27,800 (160,531)
------------ ------------
Net cash used in operating activities (499,051) (1,073,951)
------------ ------------
Cash flows from investing activities:
Acquisitions of fixed assets -- (173,606)
(Purchase) sale of investments (102) 763,336
Proceeds from the sale of assets 399,625 --
------------ ------------
Net cash provided by investing activities 399,523 589,730
------------ ------------
Cash flows from financing activities:
Repayment of notes payable (39,840) (44,441)
------------ ------------
Net cash used in financing activities (39,840) (44,441)
------------ ------------
Net decrease in cash $ (139,368) $ (528,662)
Cash at beginning of period 210,271 738,933
------------ ------------
Cash at end of period $ 70,903 $ 210,271
============ ============
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for interest $ 1,475 $ 5,136
</TABLE>
The accompanying notes are an integral part of these statements.
F-7
<PAGE> 20
LTI Holdings, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000 and 1999
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
LTI Holdings, Inc. (formerly Laminating Technologies, Inc.) and
subsidiary (the "Company") was a development stage company formed to
research, develop, design and market packaging and specialty display
products using the Company's proprietary processing method. The Company
was incorporated on March 29, 1993 and in April 1993 acquired
substantially all of the assets and assumed substantially all of the
liabilities of Cool-R Enterprises, Inc. ("Cool-R"), obtaining the
rights to developed technology.
On December 17, 1998 the Company's stock and warrants were delisted.
This event occurred as a result of the Company's inability to maintain
a certain bid price and market capitalization requirements. The
Company's stock is currently traded on the NASD Supplemental Market
under the symbol "LAMT".
The Company sold substantially all of its operating assets and changed
its name to LTI Holdings, Inc. as of June 30, 1999. The Company uses
its remaining cash to pay on-going general and administrative expenses
and to seek suitable business combination candidates. (See Note B.)
1. Principles of Consolidation
The accompanying financial statements have been prepared on a
consolidated basis. They include the accounts of the Company and its
wholly owned subsidiary, Revenue Process Development, Inc. All
intercompany transactions and balances have been eliminated in
consolidation.
2. Investments
Investments consist primarily of commercial paper. These investments
are accounted for as available for sale securities and are stated at
fair value, which approximates cost. Unrealized gains or losses on
these investments are included in accumulated other comprehensive
earnings (loss).
3. Inventory
Inventory is recorded at lower of cost or market, using the first-in,
first-out (FIFO) cost flow method.
4. Property and Equipment
Machinery, furniture and equipment, including property under capital
lease arrangements, are carried at cost. Depreciation is provided using
the double declining balance method over the estimated useful lives of
the assets as follows:
<TABLE>
<S> <C>
Machinery and equipment 3-10 years
Furniture and fixtures 5 years
</TABLE>
F-8
<PAGE> 21
LTI Holdings, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 2000 and 1999
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
5. Advertising Expense
All advertising costs are expensed in the period incurred. Advertising
expense for the years ended March 31, 2000, and March 31, 1999 was
approximately $13,000 and $136,000, respectively.
6. Stock Based Compensation
The Company's stock option plans are accounted for under the intrinsic
value method in which compensation expense is recognized for the
amount, if any, that the fair value of the underlying common stock
exceeds the exercise price at the date of grant.
7. Income Taxes
The Company accounts for income taxes using the asset and liability
method. Under this method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates applied to taxable
income. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the
enactment date. A valuation allowance is provided for deferred tax
assets when it is more likely than not that the asset will not be
realized.
8. Loss Per Share
Basic net loss per common share is based upon the weighted average
number of common shares outstanding during the period. Diluted net loss
per common share is based upon the weighted average number of common
shares outstanding less contingently returnable shares plus dilutive
potential common shares, including options and warrants outstanding
during the period.
9. Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
F-9
<PAGE> 22
LTI Holdings, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 2000 and 1999
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
10. Fair Value of Financial Instruments
The Company's financial instruments recorded on the balance sheet
include cash, investments, accounts receivable, accounts payable and
debt. Because of their short maturities, the carrying amount of cash,
investments, accounts receivable and accounts payable approximates fair
market value. The fair value of the Company's long-term debt
approximates carrying value based on quoted market prices of similar
issues or on the current rates offered to the Company for debt of
similar terms.
NOTE B - SALE OF OPERATING ASSETS AND CURRENT OPERATIONS
Since its inception, the Company has had limited sales and incurred
substantial operating losses from its principal operations. As of June
30, 1999, the Company sold substantially all of its operating assets
and entered into a covenant not to compete. This covenant states that
for a period of five years, the Company shall refrain from, directly or
indirectly, manufacturing, selling or marketing and distributing within
the United States any products or services competitive with the
purchaser. The sale of the assets is summarized as follows:
<TABLE>
<S> <C>
Net book value of assets sold $ 735,114
Proceeds received 399,625
----------
Loss from the sale of assets $ (335,489)
==========
</TABLE>
The Company is in the process of exploring opportunities to effect an
acquisition of the Company, by merger, exchange or issuance of
securities, or similar business combination.
NOTE C - INVENTORY
Inventories at March 31, 2000 and 1999 are summarized as follows:
<TABLE>
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
Raw materials $ -- $ 108,904
Work-in-process -- 45,488
Finished goods -- 246,420
--------- ---------
$ -- $ 400,812
========= =========
</TABLE>
F-10
<PAGE> 23
LTI Holdings, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 2000 and 1998
NOTE D - PROPERTY AND EQUIPMENT
Property and equipment at March 31, 2000 and 1999 are summarized as
follows:
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Machinery and equipment $ -- $353,623
Furniture and fixtures -- 118,246
-------- --------
-- 471,869
Less accumulated depreciation -- 210,635
-------- --------
$ -- $261,234
======== ========
</TABLE>
NOTE E - STOCKHOLDERS' EQUITY
1. Common Stock
Upon incorporation, the Company authorized 10,000,000 shares of its
$.01 par value common stock. The shares of common stock have unlimited
voting rights. In March 1996, the Company increased the number of
authorized common shares to 20,000,000.
2. Convertible Preferred Stock
In September 1993, the Company authorized and issued 250,000 shares of
its $.01 par value Series A convertible preferred stock (the
"Preferred") for $500,000. In August 1994, the Company increased the
number of authorized shares of Preferred to 2,500,000. In March 1996,
the Company increased the number of authorized shares of the Preferred
to 5,000,000.
The Preferred has no voting rights. The holders of the Preferred were
entitled to cumulative quarterly dividends of $.05 per share due upon
the redemption of the shares. The liquidation value of each share of
Preferred is equal to $2.00 plus cumulative dividends.
Concurrent with the public offering in October 1996, the entire 250,000
shares of the Preferred then outstanding were converted into 184,486
shares of common stock.
F-11
<PAGE> 24
LTI Holdings, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 2000 and 1999
NOTE E - STOCKHOLDERS' EQUITY - Continued
3. Initial Public Offering
In October and November 1996, the Company completed its initial public
offering and issued 1,955,000 units at a price of $5.00 per unit. Each
unit consists of one share of common stock, one Class A warrant and one
Class B warrant. Each Class A warrant entitles the holder to purchase
one share of common stock and one Class B warrant at an exercise price
of $6.50. Each Class B warrant entitles the holder to purchase one
share of common stock at an exercise price of $8.75. The warrants are
redeemable by the Company, under certain conditions, at any time after
October 9, 1997. As a result of the offering, the Company received net
proceeds of approximately $7,988,000.
In connection with the offering, the underwriter required, as a
condition of the offering, that an aggregate of 410,000 shares of the
Company's common stock be designated as forfeitable shares
("forfeitable shares") and placed in escrow. The forfeitable shares are
neither assignable nor transferable until certain earnings or market
criteria have been met. These conditions were not met by March 31, 2000
and all shares were returned to the Company as treasury shares for
cancellation thereof as a contribution to capital.
4. Stock Options and Warrants
In connection with the Company's initial public offering, the Company
granted to the underwriter an option to purchase 170,000 units at $6.00
per unit exercisable for a three-year period commencing October 9,
1998.
The Company has outstanding 2,952,400 Class A warrants and 1,955,100
Class B warrants exercisable for a five year period commencing October
9, 1996.
5. Shares Reserved for Issuance
The Company has 8,789,900 shares of common stock reserved for issuance
as follows:
<TABLE>
<S> <C>
Class A warrants 2,952,400
Class B warrants 4,907,500
Underwriter's Unit Purchase Option 680,000
1996 Stock Option Plan 250,000
---------
8,789,900
---------
</TABLE>
F-12
<PAGE> 25
LTI Holdings, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 2000 and 1999
NOTE F - COMMITMENTS AND OTHER MATTERS
1. Employment Contract
Effective June 1, 1996, the Company entered into a one-year employment
agreement with the Chairman and Chief Executive Officer of the Company.
The agreement provides for an annual base salary of $144,000 per year
and is automatically renewable for successive one-year terms unless
either party gives six months notice to the other. Upon termination,
the Officer is entitled to receive his base salary for a period of one
year (subject to a 50% offset during the second six months for salary
received from subsequent employment).
2. Operating Lease
During the year ended March 31, 1999, the Company terminated operating
leases for its office facility and a warehouse facility and began
leasing an office facility on a month to month basis. Total rental
expense under operating lease arrangements was approximately $35,992
and $123,519 for the years ended March 31, 2000 and March 31, 1999,
respectively.
NOTE G - NET LOSS PER COMMON SHARE
The following table sets forth the computation of basic and diluted
loss per share.
<TABLE>
<CAPTION>
March 31, March 31,
2000 1999
------------ ------------
<S> <C> <C>
Numerator for basic and diluted net loss per common share -
loss attributable to common stockholders $ (1,040,291) $ (967,176)
------------ ------------
</TABLE>
F-13
<PAGE> 26
LTI Holdings, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 2000 and 1999
NOTE G - NET LOSS PER COMMON SHARE - Continued
The following table sets forth the computation of basic and diluted
loss per share.
<TABLE>
<CAPTION>
March 31, March 31,
2000 1999
---------- ----------
<S> <C> <C>
Denominator for basic net loss per common
share - weighted average shares outstanding 2,775,100 2,775,100
Effect of dilutive options and warrants -- --
---------- ----------
Denominator for diluted net loss per common
share - adjusted weighted average shares
outstanding 2,775,100 2,775,100
========== ==========
Basic net loss per share $ (.37) $ (.35)
========== ==========
</TABLE>
Because the common stock equivalents have an antidilutive effect, no
diluted loss per share is presented.
NOTE H - INCOME TAXES
The Company's temporary differences result in a net deferred income tax
asset which is reduced to zero by a related valuation allowance
summarized as follows:
<TABLE>
<CAPTION>
March 31, March 31,
2000 1999
------------ ------------
<S> <C> <C>
Deferred income tax assets
Net operating loss carryforward $ 3,600,000 $ 3,220,000
Other 10,000 20,000
------------ ------------
Gross deferred tax assets 3,610,000 3,240,000
Deferred tax asset valuation allowance (3,610,000) (3,240,000)
------------ ------------
Net deferred tax asset $ -- $ --
============ ============
</TABLE>
The net increase of the deferred tax asset valuation allowance for the
year ended March 31, 2000 and 1999 was $370,000 and $266,000,
respectively.
F-14
<PAGE> 27
LTI Holdings, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 2000 and 1999
NOTE H - INCOME TAXES - Continued
At March 31, 2000, the Company had federal net operating loss
carryforwards of approximately $9,321,000 available to reduce future
taxable income which expire as follows:
<TABLE>
<CAPTION>
Net
Fiscal Operating
Year Loss
------ -----------
<S> <C>
2009 $ 1,289,000
2010 1,439,000
2011 1,303,000
2012 2,084,000
2013 1,281,000
2019 921,000
2020 1,004,000
-----------
$ 9,321,000
-----------
</TABLE>
Under Section 382 of the Internal Revenue Code, the Company is subject
to an annual limitation of approximately $350,000 on utilization of
certain of its net operating loss carryforwards because an ownership
change of more than 50% has occurred.
Reconciliations of statutory Federal tax rates to the effective tax
rate for the years ended March 31, 2000 and March 31, 1999 are as
follows:
<TABLE>
<CAPTION>
March 31, March 31,
2000 1999
--------- ---------
<S> <C> <C>
Income tax benefit at 34% (34)% (34)%
State taxes, net of Federal income tax effect (4) (4)
Tax benefit of losses not recognized 38 38
---- ----
Effective tax rate --% --%
==== ====
</TABLE>
F-15
<PAGE> 28
LTI Holdings, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 2000 and 1999
NOTE I - STOCK OPTION PLAN
In 1996, the Board of Directors adopted and the Company`s stockholders
approved the Amended and Restated 1996 Stock Option Plan (the "Plan").
Pursuant to the Plan, as amended, incentive stock options and
nonqualified stock options may be granted to purchase up to 250,000
shares of the Company's common stock through March 2006. Incentive
stock options are to be granted at a price not less than the fair
market value of the Company's common stock at the date of grant. If a
stockholder owns 10% or more of the Company's outstanding stock, the
exercise price may not be less than 110% of the fair market value of
the Company's common stock at the date of grant and its term must not
exceeds five years. Options may be granted to employees, consultants,
and directors of the Company and must be exercised within a ten-year
period after the date granted. Nonqualified stock options are
exercisable at a price to be determined by the Board of Directors for a
period of ten years after the grant date.
Additionally, the provisions of the Plan provide for the automatic
grant of nonqualified stock options to purchase shares of common stock
("Director Options") to directors of the Company who are not employees
or principal stockholders of the Company ("Eligible Directors"). Each
of the four Eligible Directors of the Company were granted Director
Options to purchase 10,000 share of common stock on July 15, 1996 at
$5.00 per share. Future Eligible Directors are to be granted a Director
Option to purchase 10,000 shares of common stock on the date of
election or appointment. Further, commencing on the day immediately
following the date of the annual meeting of stockholders for the
Company's fiscal year ending March 31, 1997, each Eligible Director,
other than directors who received an Initial Director Option since the
last annual meeting, are to be granted a Director Option to purchase
1,000 shares of common stock ("Automatic Grant") on the day immediately
following the date of each annual meeting of stockholders, as long as
such director is a member of the Board of Directors. The exercise price
for each share subject to a Director Option shall be equal to the fair
market value of the common stock on the date of grant, except for
directors who receive incentive options and who own more than 10% of
the voting power, in which case the exercise price shall be not less
than 110% of the fair market value on the date of grant. Director
Options are exercisable in four equal annual installments, commencing
six months from the date of grant. Director Options expire the earlier
of 10 years after the date of grant or 90 days after the termination of
the director's service on the Board of Directors.
F-16
<PAGE> 29
LTI Holdings, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 2000 and 1999
NOTE I - STOCK OPTION PLAN - Continued
Stock options activity is summarized as follows:
<TABLE>
<CAPTION>
March 31, 2000 March 31, 1999
------------------------ ------------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
------- -------- ------- --------
<S> <C> <C> <C> <C>
Outstanding, beginning of year 247,000 $ 3.09 247,000 $ 3.09
Granted -- -- -- --
Exercised -- -- --
Forfeited 195,000 3.00 -- --
------- ------- ------- -------
Outstanding end of year 52,000 3.43 247,000 3.09
======= ======= ======= =======
</TABLE>
The following table summarizes information about stock options
outstanding at March 31, 2000:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------ ---------------------------
Weighted
Average Weighted Weighted
Number Remaining Average Number Average
Exercise Outstanding at Contractual Exercise Exercisable at Exercise
Price March 31, 2000 Life (Years) Price March 31, 2000 Price
-------- -------------- ------------ -------- -------------- --------
<S> <C> <C> <C> <C> <C>
$ .75 20,000 7.99 $ .75 20,000 $ .75
4.00 -- 1.21 4.00 -- 4.00
5.00 30,000 5.04 5.00 30,000 5.00
6.75 2,000 7.39 6.75 1,542 6.71
------ ------ ------ ------ ------
52,000 3.93 $ 3.43 51,542 $ 3.37
====== ====== ====== ====== ======
</TABLE>
The following table summarizes information about stock options
outstanding at March 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------ ---------------------------
Weighted
Average Weighted Weighted
Number Remaining Average Number Average
Exercise Outstanding at Contractual Exercise Exercisable at Exercise
Price March 31, 1999 Life (Years) Price March 31, 1999 Price
-------- -------------- ------------ -------- -------------- --------
<S> <C> <C> <C> <C> <C>
$ .75 84,000 8.99 $ .75 56,000 $ 0.75
4.00 120,000 2.21 4.00 120,000 4.00
5.00 40,000 6.04 5.00 32,500 5.00
6.75 3,000 8.39 6.75 1,500 6.75
------- ------ ------ ------- ------
247,000 5.21 $ 3.09 210,000 $ 3.31
======= ====== ====== ======= ======
</TABLE>
F-17
<PAGE> 30
LTI Holdings, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 2000 and 1999
NOTE I - STOCK OPTION PLAN - Continued
The Company uses the intrinsic value method in accounting for its stock
option plans. In applying this method, no compensation cost has been
recognized in the accompanying financial statements. Had compensation
cost for the Company's stock option plans been determined based on the
fair value at the grant dates for awards under those plans, the
Company's net loss and loss per share would have resulted in the pro
forma amounts indicated below:
<TABLE>
<CAPTION>
March 31, 2000 March 31,1999
-------------- -------------
<S> <C> <C> <C>
Net loss As reported $ (1,040,291) $ (967,176)
Pro forma (1,065,621) (1,102,739)
Basic net loss per
common share As reported $ (.37) $ (0.35)
Pro forma (.38) (0.40)
Diluted net loss per As reported $ (.37) $ (0.35)
common share Pro forma (.38) (0.40)
</TABLE>
For purposes of the pro forma amounts above, the fair value of each
option grant was estimated on the date of grant using the Black-Scholes
options-pricing model with the following weighted-average assumptions
used for grants in the years ended March 31, 2000 and 1999; expected
volatility of 90%, risk-free interest rates of 6.7%; and expected lives
of 4 to 5 years.
F-18
