As filed with the Securities and Exchange Commission on May 5, 1998
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FORM 10-K/A-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Annual Report Pursuant to Section 13 or 15(d)
Of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1997
Commission file number 000-21153.
ALYN CORPORATION
----------------
(Exact name of registrant as specified in its charter)
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DELAWARE 33-0709359
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(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
16761 Hale Avenue, Irvine, CA 92606
-----------------------------------
(Address of principal executive offices, including zip code)
(714) 475-1525
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, par value $.001 per share
---------------------------------------
Title of Each 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. [ ]
The approximate aggregate market value of the voting stock held by
non-affiliates of the Registrant as of February 24, 1998 was $41,333,049, based
on the closing price of $9.44 on that date.
As of February 24, 1998, the aggregate number of outstanding shares of
common stock of the Registrant was 10,750,000 shares.
<PAGE>
TABLE OF CONTENTS
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS UNDER THE SECURITIES
LITIGATION REFORM ACT OF 1995 .................................................
PART I - Previously filed
PART II - Previously filed
PART III.......................................................................
10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT...............
11. EXECUTIVE COMPENSATION...........................................
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.....................................................
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................
PART IV - Previously filed
SIGNATURES.....................................................................
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS UNDER THE SECURITIES LITIGATION
REFORM ACT OF 1995
Except for historical information contained herein, this Amendment No. 1 to
Annual Report on Form 10-K (the "Annual Report") contains forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. These statements involve known and unknown risks and uncertainties that
may cause the Company's actual results or outcomes to be materially different
from those anticipated and discussed herein. Further, the Company operates in an
industry sector where securities values may be volatile and may be influenced by
factors beyond the Company's control. Important factors that the Company
believes might cause such differences are discussed in the cautionary statements
accompanying the forward-looking statements and in the risk factors detailed in
this Annual Report. In assessing forward-looking statements contained herein,
readers are urged to read carefully all cautionary statements and risk factors
contained in this Annual Report.
<PAGE>
PART III
10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors
The age (as of April 30, 1998), business experience, principal occupations
and employment, as well as the periods of service, of each of the Company's five
incumbent Directors and the one nominee for Director at the Company's 1998
Annual Meeting of Stockholders, scheduled to be held on June 3, 1998, during at
least the last five years are set forth below.
Steven S. Price, 42, has been President and Chief Executive Officer since
April 20, 1998, and a Director since April 14, 1998. Mr. Price is Chairman of
the Company's Executive Committee and a member of the Compensation Committee.
From 1995 to April 1998, he was President of AlliedSignal Automotive
Aftermarket, a division of AlliedSignal, Inc., which supplies automotive parts
and products to retail, wholesale and installer sales channels. From 1993 to
1995, he was General Manager of the Residential Division of NIBCO Incorporated,
a privately held manufacturer of plumbing fittings and valves. From 1989 to
1993, he was Vice President, Marketing for Black and Decker Corporation's
subsidiary Kwikset Corporation and from 1987 to 1989, he was a Director, Sales
and Marketing for Black and Decker's Power Tool Group. From 1977 to 1987, he was
with The Procter and Gamble Company in various brand management and marketing
positions. Mr. Price has a Bachelor of Arts degree in Economics from Brown
University.
Robin A. Carden, 40, is the founder of the Company and has been a Director
since the Company's formation in 1990. Mr. Carden is a member of the Company's
Executive Committee. From the Company's formation until April 1998, he was
President and Chief Executive Officer. Prior to 1990, Mr. Carden was employed by
Ceradyne Inc., a company engaged in the development and production of advanced
ceramics products, as Senior Sales Engineer, and was engaged in developing
civilian applications for advanced ceramics products originally developed for
military use. Mr. Carden graduated from Long Beach State University with a
Bachelor of Science degree. A number of United States patents have been issued
to Mr. Carden.
Walter R. Menetrey, 64, has been the Executive Vice President, Chief
Operating Officer and a Director of the Company since May 1996. From August 1992
to April 1996, he worked as an independent management consultant to numerous
companies engaged in, among other things, the security and software industries.
Prior to July 1992, Mr. Menetrey was Chief Executive Officer of Meret, Inc., a
company engaged in the manufacture and sale of fiber optics communication
equipment. Mr. Menetrey received a Bachelor of Science degree in Physics and a
Master of Science degree in Electrical Engineering from the California Institute
of Technology.
Harry Edelson, 61, has been a Director of the Company since May 1996. Mr.
Edelson is Chairman of the Company's Audit Committee. Since 1984, Mr. Edelson
has been the Managing Partner of Edelson Technology Partners, a series of four
venture capital funds with ten large corporations as the limited partners. The
focus of the funds is to provide the corporate partners with access to high
technology products and services. One of the funds, Edelson Technology Partners
III, is a principal stockholder of the Company. Edelson Technology Partners,
through its related funds, has invested in approximately 80 companies involved
in a wide range of technologies, including telecommunications, computers,
semiconductors, specialty chemicals, environmental and publishing. Prior to
founding Edelson Technology Partners, Mr. Edelson was a transmission engineer at
AT&T, a senior computer engineer for UNISYS and a technology analyst for three
leading investment banking firms, Merrill Lynch, Drexel Burnham Lambert and
First Boston. Mr. Edelson has a Bachelor of Science degree in Physics from
Brooklyn College and a Masters of Business Administration from New York
University.
Michael Markbreiter, 36, has been a Director of the Company since May 1996.
Mr. Markbreiter is a member of the Company's Executive, Audit and Compensation
Committees. Since August 1995, Mr. Markbreiter has been a portfolio manager for
private equity investments for Kingdon Capital Management Corp., a manager of
investment funds. In April 1994, he co-founded Ram Investment Corp., a venture
capital company. From March 1993 to January 1994, he served as a portfolio
manager for Kingdon Capital Management Corp. Prior to February 1993, he worked
as an analyst at Alliance Capital Management Corp. Since December 1997, Mr.
Markbreiter has been a Director of Global Pharmaceutical Corporation, a publicly
traded generic pharmaceutical manufacturing company. Mr. Markbreiter graduated
from Cambridge University with a degree in Engineering.
Udi Toledano, 47, has been a Director of the Company since May 1996 and
Chairman of the Board since January 1997. Mr. Toledano is Chairman of the
Company's Compensation Committee, and a member of the Company's Executive and
Audit Committees. Mr. Toledano has been the President of Andromeda Enterprises,
Inc., a private investment company, since December 1993. Prior to that he was
the President of CR Capital Inc., a private investment company, for more than
five years. Since May 1996, Mr. Toledano has been a Director of HumaScan Inc., a
publicly traded medical device company, and since April 1995, he has been a
Director of Global Pharmaceutical Corporation, a publicly traded generic
pharmaceutical manufacturing company. Since July 1994, Mr. Toledano has been a
Director of Universal Stainless & Alloy Products, Inc., a publicly traded
specialty steel producing company. Mr. Toledano has a Bachelor of Science degree
in Physics and a Masters of Business Administration from the Hebrew University
of Jerusalem.
Board of Directors Committees and Meetings
During 1997, the Board of Directors held five meetings. All members of the
Board of Directors attended all meetings. The Board of Directors has three
standing committees: the Executive Committee; the Audit Committee; and the
Compensation Committee.
The Executive Committee has all the powers of the Company's full Board of
Directors, except that it is not authorized to amend the Company's Certificate
of Incorporation, declare any dividends or issue shares of capital stock of the
Company. The Executive Committee consists of Messrs. Price (Chairman), Carden,
Markbreiter and Toledano. The Executive Committee held three meetings in 1997.
Following the Annual Meeting, if all nominees for director are elected, the
Executive Committee is expected to consist of Messrs. Price, Carden, Markbreiter
and Toledano.
The Audit Committee was established in June 1996. The functions of the
Audit Committee are to recommend annually to the Board of Directors the
appointment of the independent public accountants of the Company, review the
scope of the annual audit and other services the independent auditors are asked
to perform, review the report on the Company's financial statements following
the audit, review the accounting and financial policies of the Company and
review management's procedures and policies with respect to the Company's
internal controls. The Audit Committee consists of Messrs. Edelson (Chairman),
Markbreiter and Toledano. The Audit Committee held one meeting in 1997.
Following the Annual Meeting, if all nominees for director are elected, the
Audit Committee is expected to consist of Messrs. Edelson, Markbreiter and
Toledano. The Compensation Committee held two meetings in 1997. Its functions
are discussed in the Report on Executive Compensation which starts on page 13.
The Compensation Committee consists of Messrs. Toledano (Chairman), Price and
Markbreiter. Following the Annual Meeting, if all nominees for director are
elected, the Compensation Committee is expected to consist of Messrs. Toledano,
Price and Markbreiter.
<PAGE>
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of Messrs. Toledano, Price and
Markbreiter. Mr. Price is President and Chief Executive Officer of the Company.
Mr. Toledano is Chairman of the Board of the Company.
Director Compensation
Members of the Board of Directors of the Company presently receive no
annual remuneration for acting in that capacity. The Company compensates its
non-employee directors at the rate of $500 (plus reasonable expenses) for each
attended meeting of the Board of Directors. Certain members of the Board of
Directors of the Company are also eligible for the grant of options under the
1996 Stock Incentive Plan that provides for each non-employee Director
(currently, Messrs. Edelson, Markbreiter and Toledano) to receive an initial
grant of options to purchase 15,000 shares of Common Stock and an annual grant
of options to purchase 10,000 shares of Common Stock.
Executive Officers
See section captioned "Directors" above for information pertaining to
Messrs. Price and Menetrey, the Company's executive officers holding the offices
of President and Chief Executive Officer and Executive Vice President and Chief
Operating Officer, respectively. In addition to the foregoing executive
officers, Mr. Richard L. Little serves as the Company's Vice President, Finance
and Administration and Chief Financial Officer.
Richard L. Little, 53, has been the Vice President, Finance and
Administration and Chief Financial Officer of the Company since May 1997. Mr.
Little was Executive Vice President of d'Essence Designer Fragrances, a marketer
of fine perfumes and related products from 1995 to 1997 and President of
d'essence International from 1996 to 1997. From 1994 to 1995, he was Chief
Operating Officer and Chief Financial Officer of Graphix Zone, a publicly traded
producer of CD-ROMS. In 1989, Mr. Little co-founded Bainbridge International
Holdings, a merchant bank specializing in acquiring middle market companies.
From 1986 to 1989, Mr. Little was Chief Financial Officer, Vice President
Finance, Treasurer and Secretary of Teradata Corporation, a publicly traded
manufacturer and marketer of supercomputers for managing very large data bases.
Prior to joining Teradata, Mr. Little was Chief Financial Officer of Quotron
Systems, a publicly traded provider of on-line financial information services.
Mr. Little has a Bachelor of Science degree in Engineering and a Masters of
Business Administration in Finance from the University of California, Los
Angeles. He is also a CPA.
Executive officers of the Company serve at the discretion of the Board.
There are no family relationships between or among any of the Company's
directors or executive officers.
Employment Agreements with Key Employees
In April 1998, the Company entered into a two-year employment agreement
with Steven S. Price, the Company's President and Chief Executive Officer.
Subject to the termination provisions provided therein, the term of Mr. Price's
employment agreement shall automatically be renewed for a one-year term after
the expiration of the initial two-year term. The employment agreement provides
that Mr. Price's annual base salary shall be $200,000 during the initial year
and not less than $200,000, as determined by the Compensation Committee, during
the second year of the initial two-year term. In addition to his base salary
during the initial two-year term, Mr. Price is entitled to an annual bonus of up
to one hundred percent (100%) of his base salary, subject to a $100,000 minimum
guarantee. He will also receive a Company paid personal term life insurance
policy in an amount of not less than $1 million, reimbursement of certain
relocation costs and a customary benefits package. The employment agreement
provides that Mr. Price shall be granted options to purchase 400,000 shares of
the Company's common stock, to be vested in the following amounts and at the
times indicated: (I) 80,000 shares on the date of execution of his employment
agreement; (ii) 80,000 shares on the last day of the first year of employment;
and (iii) 40,000 shares upon completion of each succeeding six month period of
employment for a period of three years. Under the termination provisions of Mr.
Price's employment agreement, if he is not terminated for cause, he may not be
terminated during the first year of his employment. If terminated during the
second year of his employment other than for cause, he would be entitled to a
twelve (12) month continuation of salary and benefits, plus the minimum
guaranteed bonus. If terminated in the third year and thereafter other than for
cause, he would be entitled to a six (6) month continuation of salary and
benefits. The employment agreement prohibits Mr. Price from (i) competing with
the Company for a period of two years following termination of employment with
the Company and (ii) disclosing confidential information or trade secrets in any
unauthorized manner.
In May 1996, the Company entered into a three-year employment agreement
with Robin A. Carden, then the Company's President and Chief Executive Officer.
On April 20, 1998, Mr. Carden was replaced by Mr. Price as President and Chief
Executive Officer. Subject to the provisions for termination provided in his May
1996 agreement, the term of Mr. Carden's employment agreement shall
automatically be renewed for a one-year term after the expiration of the initial
three-year term, and for successive one-year terms thereafter for a maximum of
10 years. The employment agreement provides that Mr. Carden's annual base salary
shall be determined by the Board of Directors, but in no event shall such annual
salary be less than $150,000, which amount shall be increased annually in an
amount equal to at least the annual Consumer Price Index. In addition to his
base salary, Mr. Carden is entitled to bonus consideration and a customary
benefits package. The employment agreement prohibits Mr. Carden from (i)
competing with the Company for a period of two years following termination of
employment with the Company and (ii) disclosing confidential information or
trade secrets in any unauthorized manner.
In May 1996, Walter R. Menetrey entered into a two-year employment
agreement with the Company for the position of Chief Operating Officer. Subject
to the termination provisions provided therein, Mr. Menetrey's employment
agreement shall automatically be renewed for a one-year term after the
expiration of the initial two-year term, and for successive one-year terms
thereafter. Mr. Menetrey's agreement has been renewed for its first one-year
extension. His employment agreement provides for an annual base salary to be
determined by the Compensation Committee of the Board of Directors, but in no
event shall such annual salary be less than $100,000. In addition to an annual
base salary, Mr. Menetrey's employment agreement provides for bonus
consideration and a customary benefits package. In the event that the Company
terminates the employment agreement without cause, Mr. Menetrey would be
entitled to receive his base salary and benefits until the earlier of (i) the
expiration of the then current term of the employment agreement without any
further extensions or (ii) the date which is six months after the termination
date. The employment agreement prohibits Mr. Menetrey from (i) competing with
the Company for a period of two years following termination of employment with
the Company and (ii) disclosing confidential information or trade secrets in any
unauthorized manner.
In May 1997, Richard L. Little entered into a one-year employment agreement
with the Company for the position of Vice President, Finance and Administration
and Chief Financial Officer. Subject to the termination provisions provided
therein, Mr. Little's employment agreement shall automatically be renewed for a
one-year term after the expiration of the initial term, and for successive
one-year terms thereafter. Mr. Little's agreement has been renewed for its first
one-year extension. His employment agreement provides for an annual base salary
to be determined by the Compensation Committee of the Board of Directors, but in
no event shall such annual salary be less than $135,000. In addition to an
annual base salary, Mr. Little's employment agreement provides for a minimum
annual bonus of $20,000 and a customary benefits package. In the event that the
Company terminates the employment agreement without cause, Mr. Little would be
entitled to receive his base salary and benefits until the earlier of (i) the
expiration of the then current term of the respective employment agreement
without any further extensions or (ii) the date which is two months after the
termination date. The employment agreement prohibits Mr. Little from (i)
competing with the Company for a period of two years following termination of
employment with the Company and (ii) disclosing confidential information or
trade secrets in any unauthorized manner.
Section 16(A) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires certain
officers of the Company and its directors, and persons who own beneficially more
than ten percent of any registered class of the Company's equity securities, to
file reports of ownership and changes in ownership of Common Stock of the
Company with the SEC, the Nasdaq National Market and the Company. Based solely
on a review of the reports and representations provided to the Company by the
above-referenced persons, the Company believes that during 1997, all filing
requirements applicable to its reporting officers, directors and greater than
ten percent beneficial owners were properly and timely satisfied, except that
Richard Little, the Company's Chief Financial Officer, did not timely file his
Initial Statement of Beneficial Ownership on Form 3, which report has been
subsequently filed. In making these statements, the Company has relied on
representations of its directors, officers and greater than ten percent
beneficial owners, and copies of reports they have filed with the SEC.
11. EXECUTIVE COMPENSATION(1)
The following table sets forth information for the years indicated
concerning the compensation awarded to, earned by or paid to the Chief Executive
Officer of the Company and the two most highly paid executive officers, other
than the Chief Executive Officer (collectively, the "Named Executive Officers")
for services rendered in all capacities to the Company during such period.
Salary Compensation Table
-------------------------
<TABLE>
<CAPTION>
Annual Compensation Number of
Securities
Name and Principal Other Annual Underlying All Other
Position Year Salary Bonus Compensation Options Compensation(1)
- - ------------------ ---- ------ ----- ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Robing A. Carden 1997 $156,667 -- -- -- $ 6,900
President and 1996 100,000 $28,500 -- -- 310,895
Chief Executive 1995 29,975 -- -- -- --
Officer
Walter R. Menetrey 1997 $117,708 -- -- -- --
Executive Vice 1996 5,000 $27,500 -- 50,000 --
President and 1995 -- -- -- -- --
Chief Operating
Officer
Richard L. Little 1997 $ 84,375 $20,000 -- 60,000 $ 1,500
Vice President, 1996 -- -- -- -- --
Finance and 1995 -- -- -- -- --
Administration
and Chief
Financial Officer
</TABLE>
(1) For 1997, represents car allowances for Mr. Carden of $6,900 and Mr.
Little of $1,500. For 1996, represents Mr. Carden's $4,800 car allowance,
$283,100 in deferred compensation and $22,995 interest on his loan to the
Company.
<PAGE>
REPORT ON EXECUTIVE COMPENSATION(1)
- - --------------------
1. Pursuant to Item 402(a)(9) of Regulation S-K promulgated by the SEC,
neither the "Report on Executive Compensation" nor the material under the
caption "Performance Measurement Comparison" shall be deemed to be filed
with the SEC for purposes of the Securities Exchange Act of 1934, as
amended, nor shall such report or such material be deemed to be
incorporated by reference in any past or future filing by the Company under
the Exchange Act or the Securities Act of 1933, as amended.
Introduction
Three of Alyn's directors, Messrs. Toledano (Chairman), Price and
Markbreiter, constitute the Compensation Committee, which, among other things,
is responsible for (1) reviewing and approving salaries, benefits and bonuses
for all executive officers of the Company; (2) reviewing and approving stock
option grants to employees of the Company; and (3) reviewing and recommending to
the Board of Directors matters relating to employee compensation and employee
benefit plans. The Board of Directors did not modify or reject any action or
recommendation of the Compensation Committee regarding compensation for the 1997
fiscal year.
This report sets out the Company's executive compensation philosophy and
objectives, describes the components of its executive compensation program and
describes the bases on which 1997 executive compensation determinations were
made with respect to the executive officers of the Company, including those
named in the Summary Compensation Table preceding this report.
Executive Compensation Philosophy and Objectives
In establishing and evaluating the effectiveness of compensation programs
for executive officers, as well as other employees of the Company, the
Compensation Committee is guided by three basic principles:
- The Company must offer competitive salaries to be able to attract
and retain highly-qualified and experienced executives and other
management personnel;
- Executive cash compensation in excess of base salaries should be
tied to Company and individual performance; and
- The financial interests of the Company's executives should be
aligned with the financial interests of the stockholders,
primarily through stock option grants and incentive compensation.
Compensation Program Components
Consistent with the Company's executive compensation objectives,
compensation for its senior executives consists of three elements: an annual
base salary, annual incentive compensation and long-term incentive compensation.
Annual Base Salary. The Compensation Committee annually reviews each
executive's base salary. Salary levels are generally targeted at and correspond
to the median of the range of compensation paid by similarly situated companies.
Actual salaries are based on individual performance contributions within a
competitive salary range for each position that is established through job
evaluation and market comparisons. Base pay levels for the executive officers
are competitive within a range that the Compensation Committee considers to be
reasonable and necessary to attract and retain qualified executives. Increases
in base salary are primarily the result of individual performance, which
includes meeting specific goals established by the Compensation Committee. The
criteria used in evaluating individual performance varies depending on the
executive's function, but generally include leadership inside and outside the
Company; advancing the Company's interests with customers, vendors and in other
business relationships; product quality and development; and advancement in
skills and responsibility.
Annual Incentive Compensation. The Compensation Committee annually
considers the performance of the Company and of each executive in determining
the amount of cash compensation to be paid in excess of base salaries. The
Compensation Committee also considers Management recommendations regarding bonus
compensation for all other employees, which are also based upon Company and
individual performance.
Long-Term Incentive Compensation. The 1996 Stock Incentive Plan authorizes
the Compensation Committee to make grants and awards of stock options to the
Company's employees. The stock options are granted with an exercise price equal
to the market price of the Company's Common Stock on the date of grant, have a
duration of ten years, and vest over three or four years. This approach is
designed to motivate management to increase stockholder value over the long-term
since, the full benefit of the compensation package cannot be realized unless
stock price appreciation occurs over a number of years. In determining the
number of options awarded, the Compensation Committee considers competitive
practices, the duties and scope of responsibilities of each officer's position
and the amount and terms of options already held by management.
Chief Executive Officer's Compensation. Mr. Carden's base salary was raised
from $150,000 to $160,000 effective May 1, 1997. Due to his significant
participation in the ownership of the Company, Mr. Carden did not receive a
grant of stock options in 1997. Mr. Price, who was appointed Chief Executive
Officer on April 20, 1998, has a base annual salary of $200,000, a guaranteed
minimum bonus compensation of $100,000 per year and in April 1998 received
options to purchase 80,000 shares of the Company's Common Stock.
Summary
The Compensation Committee believes that the compensation program for the
executives of the Company is comparable with the compensation programs provided
by comparable companies and serves the best interests of the stockholders of the
Company. The Compensation Committee also believes that annual performance pay is
appropriately linked to individual performance, annual financial performance of
the Company and stockholder value.
The Compensation Committee
Udi Toledano (Chairman)
Steven Price
Michael Markbreiter
<PAGE>
Stock Option Grants in Last Fiscal Year
The following table sets forth information regarding stock options granted
to each Named Executive Officer during fiscal year 1997 pursuant to the
Company's 1996 Stock Option Plan.
<TABLE>
<CAPTION>
% of Total
Awards Exercise or Grant Date
Options Granted to Base Present
Granted(1) Employees in Price(3) Expiration Value(4)
Name (#) Fiscal Year(2) ($/Sh) Date ($/Sh)
---- ---------- -------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Robin A. Carden -- -- -- -- --
Walter R. Menetrey -- -- -- -- --
Richard L. Little 60,000 26.1% 8.38 04/28/07 $5.44
- - --------------------
(1) Options are granted at fair market value at date of grant and are
exercisable in a series of three (3) equal and successive annual
installments over the optionee's period of service with the Company,
measured from the grant date, with the first installment exercisable one
year from the grant date. Each option must be exercised within 10 years of
the grant date, subject to earlier termination in the event of the
optionee's termination of employment with the Company. An incentive stock
option granted to a person owning more than 10% of the total combined
voting power of all classes of stock of the Company or of any parent or
subsidiary of the Company (a "Ten Percent Stockholder") must be exercised
within five years of the grant date. For incentive stock options granted to
a Ten Percent Stockholder, the exercise price shall not be less than 110%
of the Fair Value per share of Common Stock.
(2) A total of 260,500 options were granted for the fiscal year ended December
31, 1997. At December 31, 1997 524,500 shares were outstanding. Of these
138,894 options were exercisable. At December 31, 1997 there were 475,500
shares of common stock reserved under the plan for future stock option
grants. In October 1996, the Company granted options for the purchase of
383,000 shares of common stock at the initial public offering price, all of
which were outstanding at December 31, 1996. Of the options outstanding at
December 31, 1996, 25,000 options with an exercise price of $13.50 were
exercisable.
(3) The exercise price for each option granted under the 1996 Stock Option Plan
shall not be less than 100% of the fair market value (the "Fair Value") per
share of Common Stock on the date such option is granted, which with
respect to the options granted to Mr. Little was equal to $8.38 per share.
The exercise price may be paid in cash (by check), by transferring shares
of Common Stock owned by the option holder and having a Fair Value on the
date of surrender equal to the aggregate exercise price of the option or,
solely with respect to options other than those granted to non-employee
Directors, by cash payments in installments or pursuant to a full recourse
promissory note, in either case, upon the terms and conditions as the
Compensation Committee shall determine. Upon the exercise of any option,
the Company is required to comply with all applicable withholding tax
requirements.
(4) Represents grant date valuation computed under the Black-Scholes option
pricing model adapted for use in valuing stock options. The actual value,
if any, that may be realized will depend on the excess of the stock price
over the exercise price on the date the option is exercised, so there can
be no assurance that the value realized will be at or near the value
estimated by the Black-Scholes model. Grant date values were determined
based in part on the following assumptions for 1997: risk-free rate of
return of 6.28%, no dividend yield, expected life of 5 years, and
historical volatility of 56.92%.
</TABLE>
<PAGE>
Option Exercises and Holdings as of December 31, 1997
No stock options were exercised in fiscal year 1997 by any of the Named
Executive Officers. The following table sets forth, as of December 31, 1997, the
number of unexercised options held by each Named Executive Officer and the value
thereof based on the closing price of the Common Stock of $10.50 on December 31,
1997.
Aggregated Option/Warrant Exercises in Last Fiscal Year
and Fiscal Year-End Option/Warrant Values
<TABLE>
<CAPTION>
Number of Unexercised Options/Warrants at Value of Unexercised In-the-Money
FY-End (#) Options/Warrants at FY-End ($)(1)
Name Exercisable/Unexercisable Exercisable/Unexercisable
---- ----------------------------------------- ---------------------------------
<S> <C> <C>
Robin A. Carden 0/0 0/0
Walter R. Menetrey 16,650/50,000 0/0
Richard L. Little 0/60,000 0/127,200
- - --------------------
(1) Represents (i) the number of shares of Common Stock underlying options
(including options the exercise price of which was more than the market
value of the underlying securities) multiplied by (ii) the closing price
at December 31, 1997 of $10.50 minus the exercise price.
</TABLE>
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth the number of shares of Common Stock
beneficially owned, as of April 4, 1998, by (i) each stockholder known to the
Company to be a beneficial owner of more than 5% of the Common Stock, (ii) each
director and nominee for director and (iii) the directors and officers of the
Company as a group. Unless otherwise noted, all shares are owned directly with
sole voting and dispositive powers.
Beneficial Ownership
--------------------
Name(1) No. of Shares % of Total
------ ------------- ----------
Robin A. Carden 3,044,500 27.84%
Kingdon Capital Management Corp.(2) 2,488,000 22.76%
Udi Toledano(3) 577,667 5.28%
Herbert V. Turk(4) 560,000 5.12%
Harry Edelson(5) 541,667 4.95%
Walter R. Menetrey(6) 242,650 2.22%
Steven S. Price(7) 80,000 *
Richard Little(8) 20,000 *
Michael Markbreiter(9) 21,667 *
All executive officers and directors 3,940,150 36.04%
of the Company as a group
(seven persons)(10)
- - --------------------
*Less than 1%.
(1) The address for each of the persons in the table below is c/o Alyn
Corporation, 16761 Hale Avenue, Irvine, California 92606.
(2) Includes shares of Common Stock held by M. Kingdon Offshore NV, Kingdon
Associates, L.P. and Kingdon Partners, L.P. Does not include the shares of
Common Stock underlying immediately exercisable options that appear in the
table above opposite the name of Michael Markbreiter, a Director of the
Company and an employee of Kingdon Capital Management Corp. Mr. Mark
Kingdon is the sole shareholder, director and executive officer of Kingdon
Capital Management Corp.
(3) Includes options immediately exercisable for 21,667 shares of Common Stock.
Also includes 276,000 shares of Common Stock held by Mr. Toledano's wife
and 80,000 shares of Common Stock held by a certain trust for the benefit
of their minor children. Also includes an aggregate of 48,000 shares of
Common Stock owned by certain other members of Mr. Toledano's family, with
respect to which Mr. Toledano disclaims beneficial ownership.
(4) Includes 344,000 shares of Common Stock held by Mr. Turk jointly with his
wife. Also includes 216,000 shares of Common Stock held by Mr. Turk's two
adult daughters, with respect to which Mr. Turk disclaims beneficial
ownership.
(5) Includes options immediately exercisable for 21,667 shares of Common Stock
held by Mr. Edelson. Also includes 520,000 shares of Common Stock held by
Edelson Technology Partners III, with respect to which Mr. Edelson
disclaims beneficial ownership.
(6) Includes options immediately exercisable for 16,650 shares of Common Stock.
(7) Includes options immediately exercisable for 80,000 shares of Common Stock.
(8) Includes options immediately exercisable for 20,000 shares of Common Stock.
(9) Represents options immediately exercisable for 21,667 shares of Common
Stock. Does not include 420,800 shares of Common Stock held by Kingdon
Partners, L.P. 420,800 shares of Common Stock held by Kingdon Associates,
L.P., and 1,246,400 shares of Common Stock held by M. Kingdon Offshore NV,
with respect to which Mr. Markbreiter disclaims beneficial ownership.
(10) Includes options immediately exercisable for 161,650 shares of Common
Stock. Does not include (i) 520,000 shares of Common Stock held by Edelson
Technology Partners III, with respect to which Mr. Edelson, a Director,
disclaims beneficial ownership, (ii) shares of Common Stock held by Kingdon
Partners, L.P., Kingdon Associates, L.P. and M. Kingdon Offshore NV, with
respect to which Mr. Markbreiter, a Director, disclaims beneficial
ownership and (iii) 48,000 shares of Common Stock owned by certain members
of Mr. Toledano's family, with respect to which Mr. Toledano, a Director,
disclaims beneficial ownership.
<PAGE>
Performance Measurement Comparison
The following graph provides a comparison of the cumulative total
shareholder return for the period from October 22, 1996 (the date on which the
Common Stock was issued in the Company's initial public offering at $13.50 per
share) through December 31, 1997 (assuming reinvestment of any dividends) among
the Company, the NASDAQ Stock Market - U.S. Index and the Russell 2000 Index.
COMPARISON OF 12 MONTH CUMULATIVE TOTAL RETURN
AMONG ALYN CORPORATION, THE NASDAQ STOCK MARKET-U.S. INDEX
AND THE RUSSELL 2000 INDEX FOR PERIOD ENDING DECEMBER 31, 1997*
[OBJECT OMITTED]
* Assumes that the value of the investment in Alyn Corporation Common Stock and
each index was $100 on December 31, 1996 and that all dividends were reinvested.
The foregoing graph is based upon the following data:
<TABLE>
<CAPTION>
Cumulative Total Return
12/31/96 3/31/97 6/30/97 9/30/97 12/31/97
-------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
ALYN CORPORATION 100 86 110 124 97
NASDAQ STOCK MARKET - 100 100 108 125 124
U.S. INDEX
RUSSELL 2000 INDEX 100 94 109 125 121
</TABLE>
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Andromeda Enterprises, Inc.
Andromeda Enterprises, Inc., a Delaware corporation ("Andromeda"), received
$60,000 from the Company in 1997 for sales, marketing and consulting services
performed by Andromeda on behalf of the Company. Mr. Udi Toledano, a Director,
principal stockholder and Chairman of the Board of the Company, is the President
of Andromeda and, together with his wife, beneficially owns all of its
outstanding capital stock.
<PAGE>
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.
ALYN CORPORATION
By: /s/ Steven S. Price
-------------------
Steven S. Price
President and Chief Executive Officer
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 Title Date
--------- ----- ----
<S> <C> <C>
/s/ Steven S. Price President, Chief Executive Officer and a Director May 5, 1998
- - ------------------- (principal executive officer)
Steven S. Price
/s/ Richard L. Little Vice President, Finance and Administration and May 5, 1998
- - --------------------- Chief Financial Officer
Richard L. Little (principal financial and accounting officer)
/s/ Robin A. Carden Director May 5, 1998
- - -------------------
Robin A. Carden
/s/ Walter R. Menetrey Executive Vice President, Chief Operating Officer May 5, 1998
- - ---------------------- and Director
Walter R. Menetrey
Director May , 1998
- - -----------------
Harry Edelson
/s/ Michael Markbreiter Director May 5, 1998
- - ----------------------
Michael Markbreiter
/s/ Udi Toledano Chairman of the Board and a Director May 5, 1998
- - ----------------
Udi Toledano
</TABLE>
