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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
Amendment No. 1
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ______ to ______
Commission File Number: 333-22895
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PIVOT RULES, INC.
(Name of small business issuer in its charter)
New York 13-3612110
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
42 West 39th Street, New York, NY 10018
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (212) 944-8000
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Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.01 par value
Redeemable Common Stock Purchase 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 there is no 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 [ ]
The issuer's revenues for its most recent fiscal year were: $10,323,000
The aggregate market value of the voting and non-voting common equity held by
non-affiliates as of March 24, 1998 based upon the last sale price of such
equity reported on the National Associated of Securities Dealers Automated
Quotation National Market System was approximately $3,951,112.
As of March 27, 1998, the issuer had outstanding 2,700,000 shares of Common
Stock, $.01 par value.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16 (A) OF THE EXCHANGE ACT
The executive officers and directors of the Company, their ages and their
positions are as follows:
NAME AGE POSITION
E. Kenneth Seiff 33 Chairman of the Board of Directors,
Chief Executive Officer, President
and Treasurer
William T. McLoone 42 Executive Vice President of Sales
Bradley A. Erickson 35 Chief Creative Officer
Meena N. Bhatia 30 Chief Financial Officer
Martin Miller 67 Director
Fred Rosenfeld 52 Director
Robert G. Stevens 44 Director
E. KENNETH SEIFF, the founder of the Company, has served as the Company's
Chairman of the Board, Chief Executive Officer and Treasurer since its
inception in April 1991. He became President of the Company in October 1996.
WILLIAM T. MCLOONE has served as Executive Vice President of Sales of the
Company since March 1997. From July 1996 to February 1997, Mr. McLoone was
unemployed. From July 1993 to June 1996, Mr. McLoone was Executive Vice
President of Sales and Marketing of Salant Corporation, a New York based
wholesaler. From September 1991 to July 1993, Mr. McLoone was Executive Vice
President of Sales and Marketing of Warnaco Inc., a New York based wholesaler.
BRADLEY A. ERICKSON has served as Chief Creative Officer of the Company since
September 1997. From June 1986 to September 1997, Mr. Erickson was the Creative
Director of Nautica International.
MEENA N. BHATIA has served as Chief Financial Officer of the Company since
January 1997. From June 1995 to January 1997, Ms. Bhatia was the Assistant
Treasurer of DVL, Inc. ("DVL"), a publicly traded commercial real estate and
finance company, and from June 1993 to January 1997, she was the Controller of
DVL. From November 1990 to June 1993, Ms. Bhatia was a member of the audit
staff at Richard A. Eisner & Company, LLP, the Company's former accounting
firm. Ms. Bhatia is a Certified Public Accountant.
MARTIN MILLER has served as a director of the Company since July 1991. Since
October 1997, Mr. Miller has been a partner in the Belvedere Fund, L.P., a fund
of hedge funds. From September 1986 to October 1997, Mr. Miller was President
and a director of Baxter International, Inc. ("Baxter"), a New York based
apparel wholesaler. From January 1990 to April 1996, Mr. Miller was Chairman of
Ocean Apparel, Inc., a Florida based sportswear firm.
FRED ROSENFELD has served as a director of the Company since July 1991. Mr.
Rosenfeld currently works as a consultant in the apparel industry. From October
1993 to December 1995, Mr. Rosenfeld was President of the Jockey Sportswear
Division of Baxter. From October 1991 to October 1993, he was a consultant in
the apparel industry.
ROBERT G. STEVENS has served as a director of the Company since December 1996.
Since December 1994, Mr. Stevens has been a Vice President of Mercer Management
Consulting, Inc. ("Mercer"), a management consulting firm. From November 1992
to December 1994, Mr. Stevens was a Principal at Mercer.
The Board of Directors has established an Audit Committee ("Audit Committee")
comprised of Fred Rosenfeld and Martin Miller. The Audit Committee is
responsible for recommending to the Board of Directors the appointment of the
Company's outside auditors, examining the results of audits, reviewing internal
accounting controls and reviewing related party transactions.
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The Board of Directors has also established an Option Plan/Compensation
Committee ("Option Plan/Compensation Committee") consisting of Robert G.
Stevens and Fred Rosenfeld. Mr. Stevens serves as chairman of this committee.
The Option Plan/Compensation Committee administers the Company's 1997 Stock
Option Plan ("Plan"), establishes the compensation levels for executive
officers and key personnel and oversees the Company's bonus plans.
The Company's executive officers are appointed annually by, and serve at the
discretion of, the Board of Directors. All directors hold office until the next
annual meeting of the Company or until their successors have been duly elected
and qualified. There are no family relationships among any of the executive
officers or directors of the Company.
The Company maintains a "key person" life insurance policy in the amount of
$1.2 million on the life of Mr. Seiff.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), requires the Company's directors and executive officers and persons who
beneficially own more than ten percent of the Common Stock (collectively, the
"Reporting Persons") to file with the Securities and Exchange Commission (the
"Commission") initial reports of beneficial ownership and reports of changes in
beneficial ownership of the Common Stock. Reporting Persons are required to
furnish the Company with copies of all such reports. To the Company's
knowledge, based solely on a review of copies of such reports furnished to the
Company and certain representations of the Reporting Persons, the Company
believes that during the 1997 fiscal year all Reporting Persons complied with
all applicable Section 16(a) reporting requirements, except as set forth in the
following sentences. Meena N. Bhatia filed one late report covering the
acquisition of 500 shares of Common Stock and 500 shares of Redeemable Common
Stock Purchase Warrants in May 1997. William T. McLoone filed one late report
covering the acquisition of 300 shares of Common Stock and 300 shares of
Redeemable Common Stock Purchase Warrants in May 1997. Robert G. Stevens filed
one late report covering the acquisition of 1,000 shares of Common Stock and
1,000 shares of Redeemable Common Stock Purchase Warrants in May 1997. David
Lewis filed one late report covering the acquisition of 1,000 shares of Common
Stock and 1,000 shares of Redeemable Common Stock Purchase Warrants in May
1997.
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ITEM 10. EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
The Company's directors do not receive any cash compensation for their services
as members of the Board of Directors, although they are reimbursed for expenses
incurred on behalf of the Company. Each current non-employee director has
received options to purchase 5,000 shares of Common Stock under the Plan and is
automatically granted annual option grants to purchase 2,500 shares of Common
Stock under the Plan.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning the compensation paid by
the Company during the fiscal year ended December 31, 1997 to E. Kenneth Seiff,
the Company's Chief Executive Officer. No other executive officer of the
Company received a total compensation from the Company in excess of $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS PAYOUTS
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARDS OPTIONS (1) PAYOUTS COMPENSATION
- --------------------------- ---- ------ ----- ------------ ---------- ----------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
E. Kenneth Seiff 1997 $164,461 $ -- $1,235 $ -- 25,000 $ -- $ --
Chief Executive Officer,
President and Treasurer 1996 $ 89,115 $144,759 $ -- $ -- -- $ -- $ --
</TABLE>
(1) Options granted at an exercise price equal to the fair market value on the
date of grant.
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EMPLOYMENT AGREEMENTS
The Company has an employment contract, which was amended on May 21, 1997, with
its Chief Executive Officer ("CEO"). The amended employment agreement, which
expires on January 1, 2000, provides for a base salary of $165,000 subject to
increase by the Board of Directors, and an annual bonus to be determined by the
Board of Directors but not to exceed Mr. Seiff's annual salary for the year in
question. At the discretion of the Board of Directors, all or part of such
bonus may be paid through the issuance to Mr. Seiff of capital stock of the
Company or stock options issued pursuant to the Plan, provided that at the
request of Mr. Seiff a portion of such bonus sufficient to pay any income taxes
arising from such bonus will be paid in cash rather than in capital stock of
the Company. In addition, the Company maintains a $1.2 million key person life
insurance policy on the life of the CEO.
In March 1997, the Company entered into an employment agreement with its
Executive Vice President of Sales ("VP of Sales"). The employment agreement
expires on March 16, 2002. Pursuant to the employment agreement, the VP of
Sales is entitled to a base salary of $137,500 and is eligible for a
discretionary annual bonus in 1997 and in subsequent years a bonus contingent
on achieving certain performance objectives. Pursuant to the employment
agreement, the VP of Sales is also entitled to annual raises to be determined
by the Board of Directors in its discretion, but subject to certain specified
minimum amounts, as well as an annual option grant.
In September 1997, the Company entered into an employment agreement with its
Chief Creative Officer, which expires on December 31, 2000. The employment
agreement provides for a base salary of $125,000, discretionary annual bonuses,
and a one-time bonus. Such bonuses are contingent on achieving certain targeted
sales requirements. In addition, the employment agreement provides for annual
raises to be determined by the Board of Directors in its discretion but subject
to certain specified minimums, and an option grant upon commencement of
employment.
In October 1997, the Company entered into an employment agreement with its Vice
President of Corporate Sales, which expires on December 31, 2000. The
employment agreement provides for a base salary of $125,000 and annual bonuses
contingent on achieving certain specified performance objectives. In addition,
the employment agreement provides for annual raises and option grants, each
contingent upon meeting certain targeted sales requirements.
OPTIONS GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the grant of stock options
under the Plan to the named executives officers ("Named Executive Officers")
during the fiscal year ended December 31, 1997:
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
% OF TOTAL OPTIONS
NUMBER OF SECURITIES GRANTED TO
UNDERLYING OPTIONS EMPLOYEES IN EXERCISE OR EXPIRATION
NAME GRANTED(#) FISCAL YEAR(%) BASE PRICE ($) DATE
- ---- ---------- -------------- -------------- ----
<S> <C> <C> <C> <C>
E. Kenneth Seiff -- n/a n/a n/a
</TABLE>
For the fiscal year ended December 31, 1997, the Board of Directors awarded
Mr. Seiff a bonus consisting of 25,000 options exercisable at the fair market
value on the date of grant.
The Company does not currently grant stock appreciation rights.
OPTION HOLDINGS
The following table sets forth information with respect to the Named Executive
Officers concerning the exercise of options during the last fiscal year and the
unexercised options held at December 31, 1997. None of the Named Executive
Officers exercised any outstanding options during the fiscal year ended
December 31, 1997.
<TABLE>
<CAPTION>
SECURITIES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-MONEY
OPTIONS AT DECEMBER 31, 1997 (#) OPTIONS AT DECEMBER 31, 1997 ($)
---------------------------------- -----------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------- ----------------- --------------- ---------------
<S> <C> <C> <C> <C>
E. Kenneth Seiff n/a n/a n/a n/a
</TABLE>
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ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the capital stock of the Company as of April 7, 1998
for (i) each person who is known by the Company to own beneficially more than
5% of the capital stock, (ii) each of the Company's directors, (iii) the Named
Executive Officers, and (iv) all directors and executive officers as a group.
Unless otherwise indicated, the address of all persons named in the table is 42
West 39th Street, New York, New York 10018.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME BENEFICIALLY OWNED PERCENTAGE (1)
---- ------------------ --------------
<S> <C> <C>
E. Kenneth Seiff 505,157(2) 18.7%
Martin Miller 5,000(3) *
Fred Rosenfeld 5,000(3) *
Robert G. Stevens 19,939(3) (4) *
Joseph Boughton, Jr.(5) 207,548(6) 7.69
All directors and executive officers as a group (7 persons) 541,401(7) 20.0%
</TABLE>
*Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission ("Commission") and generally includes
voting or investment power with respect to securities. Shares of Common
Stock issuable upon the exercise of options or warrants currently
exercisable or exercisable within 60 days are deemed outstanding for
computing the percentage ownership of the person holding such options or
warrants but are not deemed outstanding for computing the percentage
ownership of any other person.
(2) Includes 3,000 shares of Common Stock issuable upon exercise of currently
exercisable options granted under the Plan to Nicole Seiff, a consultant
to the Company and the wife of E. Kenneth Seiff, as to which Mr. Seiff
disclaims beneficial ownership.
(3) Includes 5,000 shares of Common Stock issuable upon exercise of options
granted under the Plan, which are exercisable on May 15, 1998.
(4) Includes 1,000 shares of Common Stock issuable upon exercise of warrants,
which are exercisable on May 15, 1998.
(5) Mr. Boughton's address is c/o Middlemarket Capital Management Co., 2627
Sandy Plains Road, Suite 201, Marietta, Georgia 30066.
(6) Includes 70,000 shares of Common Stock issuable upon exercise of warrants,
exercisable on May 15, 1998, issued in connection with the Company's
initial public offering to Northstar Investment Group, Ltd. ("Northstar").
Mr. Boughton is the President of Northstar.
(7) Includes 535,096 shares of Common Stock issuable upon exercise of options
and warrants described in notes (2) through (6).
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In February 1992, the Company and Joseph J. Boughton, Jr., an approximately 16%
shareholder in the Company, entered into a loan agreement pursuant to which Mr.
Boughton loaned the Company $100,000. Under the terms of such loan agreement,
Mr. Boughton received preemptive rights such that he would have the opportunity
to maintain at least an 8% equity interest in the Company. In November 1996,
the Company and Mr. Boughton entered into a letter agreement pursuant to which,
in return for the right to subscribe to approximately 11.5% of the notes and
warrants issued by the Company in connection with the Company's bridge
financing in January 1997, Mr. Boughton agreed that his contractual preemptive
rights terminated upon the closing of the Company's initial public offering.
Pursuant to the terms of such letter agreement, Northstar, an entity controlled
by Mr. Boughton, purchased 1.75 of the 15 units sold in the bridge financing
upon the same terms and conditions as the other investors in the bridge
financing.
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SIGNATURES
Pursuant to the requirements of Section 12b-15 of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
PIVOT RULES, INC.
By: /s/ E. Kenneth Seiff
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E. Kenneth Seiff
President
April 30,
1998
