<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM 10-KSB/A
(X) Annual Report under Section 13 or 15(d) of the Securities and Exchange Act
of 1934 for the fiscal year ended January 31, 1999
- or-
( ) Transition Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the transition period from ____ to ____
fine.com INTERNATIONAL CORP.
(NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
0-22805
(COMMISSION FILE NUMBER)
STATE OF WASHINGTON 91-1657402
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
1525 FOURTH AVENUE, SUITE 800
SEATTLE, WASHINGTON 98101
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(206) 292-2888
(ISSUER TELEPHONE NUMBER)
Securities registered under Section 12(b) of the Exchange Act: COMMON STOCK,
NO PAR VALUE
Securities registered under Section 12(g) of the Exchange Act: NONE
Check whether the registrant (1) filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the past 12 months (or for such shorter Yes /X/ No / /
period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the
past 90 days.
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 Yes / / No /X/
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.
Transitional Small Business Disclosure Format (check one) Yes / / No /X/
The registrant's revenues for its most recent fiscal year
were $6,133,275
As of April 21, 1999, there were 2,669,590 shares of the Registrant's common
stock issued and outstanding and the aggregate market value of common stock held
by non-affiliates was approximately $3,124,759 based on a price of $2.13 per
share, representing the average of the closing bid ($2.06) and closing ask
($2.19) prices on that date.
Documents Incorporated By Reference: See Part III, Item 13 regarding exhibits
incorporated by reference from
previously filed documents.
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EXPLANATORY NOTE
This Amendment No. 1 to the Registrant's Annual Report on Form 10-KSB is being
filed solely to include the following Items required in Part III of this Annual
Report, and amends and restates Part III in its entirety:
Item 9 - Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
Item 10 - Executive Compensation.
Item 11 - Security Ownership of Certain Beneficial Owners and Management.
Item 12 - Certain Relationships and Related Transactions.
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
Set forth below is biographical information for each current member on the
Company's Board of Directors.
DANIEL M. FINE, age 40, founded the Company in 1994 and since its inception has
served as its Chief Executive Officer and Chairman of the Board. From September
1991 through January 1994, Mr. Fine was a partner in Kobasic Fine Hadley, an
advertising agency, where he also served as Vice President of Marketing.
Kobasic Fine Hadley was created in 1990, after the merger of Kobasic Hadley, an
advertising agency, with Fine Advertising, an agency founded by Mr. Fine in
1987. From 1984 to 1986, Mr. Fine was an Associate Marketing/Media Manager with
the New York advertising agency of Levine, Huntley, Schmidt & Beaver. Mr. Fine
holds a B.A. from Washington State University. Mr. Fine is the son of Herbert
L. Fine, a current Director, and Mr. Fine is related by marriage to Mr. Hadam, a
current Director.
HERBERT L. FINE, age 67, has been a Director of the Company since October
1994. Since January 1996, Mr. Fine has been a partner of FINE/EDGE, a
marketing consulting firm which has been retained to provide services to
Toyota Motor Sales, USA., Inc. From March 1991 to December 1995, Mr. Fine
served as Senior Vice President, Chief Operating Officer and a director of
Kogei America, Inc., a sales promotion company. From 1974 to 1991, Mr. Fine
served Dancer-Fitzgerald-Sample Advertising as Vice President and Director of
Promotion Services. Mr. Fine holds a B.A. in Communication Arts from
Michigan State University. Mr. Herbert Fine is the father of Daniel M. Fine.
FRANK HADAM, age 70, has been a Director of the Company since October 1994. Mr.
Hadam retired in 1991. From 1986 to 1991, Mr. Hadam served as a communications
consultant to Bell Communications Research ("Bellcore"). Prior to that time,
Mr. Hadam served in various capacities at Michigan Bell, AT&T, Bell Labs, and
Bellcore where he worked on the design and implementation of international
private data networks. These analog and digital networks served both large
business customers and the U.S. Government. His experience includes development
and manufacture of electronic switching systems, electronic tandem networks,
private virtual networks, software-defined networks, T-1 transmission systems,
microwave transmission and fiber optics. Mr. Hadam holds a B.S. from Lyle
University. Mr. Hadam's daughter is married to Daniel M. Fine.
ANTHONY C. NAUGHTIN, age 43, has been a Director of the Company since December
1996. Mr. Naughtin founded InterNAP Network Services Corporation, a high
performance Internet/Intranet and IP network services outsourcing company, for
which he has served as President and Chief Executive Officer since May 1996.
From May 1995 to May 1996, Mr. Naughtin served as Vice President of Commercial
Network Services and a Director of ConnectSoft, Inc., a retail software and
network services company. From 1992 to May 1995, Mr. Naughtin served as
Director of Sales for NorthwestNet, Inc., which was a regional NSFNET/Internet
company. Mr. Naughtin holds a B.A. from the University of Iowa and a J.D. from
Creighton School of Law.
Set forth below is biographical information for each of the Company's current
executive officers, other than Daniel M. Fine, the Company's Chief Executive
Officer.
TIMOTHY J. CARROLL, age 47, joined the Company in October of 1998 as the Vice
President of Finance. In November of 1998, he was appointed Executive Vice
President of Finance and Operations. From 1996 to 1998, Mr. Carroll served as
the Vice President of Strategic Planning and Investor Relations at Multiple
Zones International, Inc., a leading Internet and catalog reseller of computer
hardware and software products. From 1988 to 1996, Mr. Carroll served as the
Vice President of Investor Relations and External Communications for the
Hillhaven Corporation, one of the nation's largest health care providers. Mr.
Carroll holds a B.A. in Accounting from the University of Washington and is a
Certified Public Accountant.
WILLIAM G. POOLE JR., age 58, has served as the Company's Vice President of
PacWest Operations since November 1998. Mr. Poole previously served the Company
as Director of Project Management from September 1998 to November 1998 and as
the Director of Maintenance from February 1998 to September 1998. From January
1983 to
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February 1998, Mr. Poole served as the President of Pacific Analysis and
Computing, a computer consulting company that was acquired by the Company in
February 1998. Mr. Poole holds a Ph.D from the University of California.
KATHY L. BERNI, age 46, has served as the Company's Vice President of NorthEast
Operations since July 1998, as a result of the Company's acquisition of Meta4
Digital Design, Inc. From January 1997 to July 1998, Ms. Berni served as the
Chief Operating Officer for Meta4 Digital Design, Inc., an interactive
advertising agency located in New Jersey. From December 1995 to December 1996,
Ms. Berni was the President at Top Dog Digital, L.L.C, an interactive consulting
company. From September 1992 to December 1995 Ms. Berni was an independent
management consultant for various interactive agencies. Ms. Berni holds a B.A.
from Connecticut University.
INFORMATION REGARDING THE BOARD AND ITS COMMITTEES
The Board of Directors has an Audit Committee and a Compensation Committee.
There is no standing nominating committee. Messrs. Hadam and Naughtin currently
serve on the Audit Committee, which reviews the Company's internal controls and
recommends to the Board of Directors the engagement of the Company's independent
accountants, reviews with such accountants' plans for and the results of their
examination of the Company's financial statements and determines the
independence of such accountants. Mr. Naughtin currently serves on the
Compensation Committee, which reviews the compensation and bonuses of the Chief
Executive Officer and other executive officers of the Company, and approves the
grant of stock options to executive officers of the Company under its stock
option plan.
The Company has agreed with Coleman and Company Securities, Inc., the
representative of the several underwriters in the Company's initial public
offering ("Coleman"), that for a period of three years from the closing of the
initial public offering, through August 2000, the Company will allow an observer
designated by Coleman and acceptable to the Company to attend all meetings of
the Board of Directors. Such observer has no voting rights, but is reimbursed
for out-of-pocket expenses incurred in attending such meetings and receives
$1,500 per Board meeting attended.
During the fiscal year ended January 31, 1999 ("1999 Fiscal Year"), the Board of
Directors met by regular or special meeting eight times. Neither the Audit
Committee nor the Compensation Committee met during the 1999 Fiscal Year. All
of the directors attended at least 75% of the total number of meetings of the
Board of Directors.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company believes that, except as described below, during the 1999 Fiscal
Year all filing requirements pursuant to Section 16(a) of the Securities
Exchange Act of 1934 applicable to its officers, directors and greater than 10%
beneficial owners were complied with, based solely on its review of the copies
of such forms received by it. During the 1999 Fiscal Year, three Form 4 reports
for each of Herbert Fine, Norm Lauchner, Frank Hadam and Anthony C. Naughtin,
which were required to be filed solely to report the automatic grant of options
to each such non-employee directors, were filed late.
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ITEM 10. EXECUTIVE COMPENSATION.
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows, for the fiscal years ended January 31, 1999, 1998 and
1997, respectively, certain compensation awarded or paid to, or earned by, the
Company's Chief Executive Officer. No other executive officer of the Company
earned salary and bonus in excess of $100,000 in the 1999 Fiscal Year.
Summary Compensation Table
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<CAPTION>
ANNUAL COMPENSATION
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Name and Principal Position Fiscal Year Salary
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<S> <C> <C>
Daniel M. Fine . . . . . . . . . . . . . . . . . . 1999 $116,595
Chief Executive Officer 1998 86,750
1997 58,113
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STOCK OPTION GRANTS AND EXERCISES
No stock options were granted to or exercised by the Chief Executive Officer
during the 1999 Fiscal Year.
COMPENSATION OF DIRECTORS
The Company has a stock-based compensation program for the non-employee
directors on the Board of Directors. Under the plan, each non-employee director
of the Company is automatically granted stock options to purchase 750 shares of
Common Stock for each regular and special meeting of the Board that he or she
attends (but not committee meetings on which such director serves), plus
reasonable expenses incurred in attending such Board meetings. The stock
options are immediately exercisable at an exercise price equal to the greater of
$6.50 or the fair market value of the Common Stock on such meeting date.
EMPLOYMENT AGREEMENTS
Daniel M. Fine has an employment agreement with the Company through September 1,
2000. The agreement is subject to automatic renewal for successive one-year
terms unless either Mr. Fine or the Company gives 90 days notice of an intention
to not renew such agreement. Mr. Fine's employment agreement provides for an
annual base salary of $140,000 (effective as of August 1, 1998), subject to
annual review by the Board of Directors. Mr. Fine may also receive
discretionary annual bonuses as determined by the Board of Directors.
Additionally, pursuant to a non-competition covenant contained in his employment
agreement, Mr. Fine has agreed not to compete with the Company for two years
following termination of his employment. Mr. Fine is also a party to the
Company's standard assignment of inventions and nondisclosure agreement, which
provides that he will endeavor to protect all intellectual property rights of
the Company and will not disclose confidential Company information to outside
parties during the term of his employment agreement and for a period of 18
months thereafter. Enforcement of non-competition covenants is a matter of
state law. There can be no assurance that a state court, or any other court of
competent jurisdiction, would enforce the non-competition covenants included in
the employment agreement of Mr. Fine.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership of
Company Common Stock as of May 20, 1999 by: (i) each director; (ii) the
Company's Chief Executive Officer; (iii) each person who is known by the Company
to beneficially own 5% or more of the outstanding shares of Common Stock; and
(iv) all directors and executive officers of the Company as a group. Unless
otherwise indicated, each person's address below is c/o the Company at 1525
Fourth Avenue, Suite 800, Seattle, Washington 98101.
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<TABLE>
<CAPTION>
Shares Of Common Stock
Beneficially Owned (1)
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Number Percent
Beneficial Owner Of Shares Of Total
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<C> <C> <C>
ARIS Corporation (2) . . . . . . . . . . . . . . . . . . . . . . . 1,076,291 40.3%
2229 - 112th Avenue N.E.
Bellevue, WA 98004
Daniel M. Fine (3) . . . . . . . . . . . . . . . . . . . . . . . . 633,323 23.7
Herbert L. Fine (4). . . . . . . . . . . . . . . . . . . . . . . . 217,859 8.1
Frank Hadam (5). . . . . . . . . . . . . . . . . . . . . . . . . . 219,859 8.2
Anthony C. Naughtin (6). . . . . . . . . . . . . . . . . . . . . . 5,250 **
All directors and executive officers as a group (seven persons) (7) 1,221,467 45.4%
</TABLE>
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** Less than 1%
(1) This table is based upon information supplied by directors, executive
officers and principal shareholders. Unless otherwise indicated in the
footnotes to this table and subject to community property laws where
applicable, each of the shareholders named in this table has sole voting
and investment power with respect to the shares shown as beneficially owned
by him or her.
(2) As described in a report on Schedule 13D filed by ARIS Corporation with the
Securities and Exchange Commission, pursuant to the merger agreement
entered into between the Company and ARIS Corporation on May 17, 1999, each
of the Company's directors and certain executive officers entered into a
voting agreement with ARIS Corporation, granting to ARIS certain voting
rights over their shares in connection with the proposed merger
transaction.
(3) Includes 47,499 shares subject to an option granted by Mr. D. Fine to
certain principals of Cairncross & Hempelmann, P.S., counsel to the
Company, and an aggregate of 100,000 shares subject to stock purchase
warrants granted by Mr. D. Fine to a Company executive officer and to a
consultant for the Company. All of such shares are subject to a voting
agreement between Mr. D. Fine and ARIS Corporation.
(4) Of this amount, 15,834 shares are subject to an option granted by Mr. H.
Fine to certain principals of Cairncross & Hempelmann, P.S., counsel to the
Company. Also includes 6,750 shares subject to stock options that are
exercisable within 60 days of May 20, 1999. All of such shares are subject
to a voting agreement between Mr. H. Fine and ARIS Corporation.
(5) Of this amount, 15,834 shares are subject to an option granted by Mr. Hadam
to certain principals of Cairncross & Hempelmann, P.S., counsel to the
Company. Also includes 6,750 shares subject to stock options that are
exercisable within 60 days of May 20, 1999. All of such shares are subject
to a voting agreement between Mr. Hadam and ARIS Corporation.
(6) Consists of 5,250 shares subject to stock options that are exercisable
within 60 days of May 20, 1999. All of such shares are subject to a voting
agreement between Mr. Naughtin and ARIS Corporation.
(7) Comprised of Messrs. D. Fine, H. Fine, Hadam, Naughtin, Poole and Carroll
and Ms. Berni. Includes 10,843 shares held indirectly by Ms. Berni through
Top Dog Digital, LLC, and 2,445 shares held by Ms. Berni that are pledged
to the Company to secure certain obligations arising out of the Company's
acquisition of Meta4 Digital Design, Inc. in July 1998. Also includes an
aggregate of 18,900 shares subject to stock options held by the group that
are exercisable within 60 days of May 20, 1999.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
InterNAP Network Services LLC ("InterNAP"), a company that Anthony C. Naughtin,
a Director of the Company, founded and for which he serves as President and
Chief Executive Officer, has provided the Company with Internet network and Web
server hosting services in the past. For the fiscal years ended January 31,
1999 and 1998 the Company paid InterNAP approximately $66,000 and $64,000,
respectively, for such services. The Company expects to continue to use
InterNAP's services during the current fiscal year, at levels comparable to
prior years. The Company believes that such services were provided on terms no
less favorable to the Company than could have been obtained from unaffiliated
parties.
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
a. EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C>
3.1* Articles of Incorporation, as amended
3.1A** Amendment to Articles of Incorporation filed April 2, 1998
3.2* Bylaws
4.1+ Specimen Common Stock Certificate
4.2* Form of Representative's Warrant (included as Exhibit A to
Representative's Warrant Agreement filed as Exhibit 10.12)
10.1* Incentive Stock Option Plan
10.2* 1997 Stock Option Plan
10.3+++ Employee Bonus Plan
10.4* Employment Agreement dated May 9, 1997 with Daniel M. Fine
10.4A+ First Amendment to Employment Agreement with Daniel M. Fine
10.5+ Employment Agreement dated November 24, 1998 with Timothy J.
Carroll
10.6+ Employment Agreement dated July 31, 1998 with Kathy L. Berni
10.7+++ Employment Agreement dated February 13, 1998 with Bill Poole
10.8A+++ Commitment Letter dated April 22, 1999 with U.S. Bank of
Washington
10.8B* Commercial Security Agreement dated March 31, 1997 for
$750,000 revolving line of credit
10.9A* Office Lease Agreement dated February 28, 1996 with Grand
Pacific Limited Partnership (former corporate headquarters)
10.9B* Personal Guaranty of Daniel M. Fine dated February 29, 1997
10.9C* First Amendment to Office Lease Agreement dated March 1997
10.9D* Sublease Agreement dated September 15, 1997 with Data Base
Designs, Inc.
10.10A* Lease Agreement dated November 19, 1997 with Third Avenue
Associates (current corporate headquarters)
10.10B* Amendment No. 1 to Lease Agreement, dated December 29, 1997
10.10C* Personal Guaranty of Daniel M. Fine for Office Lease, dated November 20, 1997
10.11A* Agreement dated August 31, 1995 between Pacific Analysis and
Computer Corporation and Amber Jack Ltd.
10.11B* Sublease Agreement dated July 31, 1997 with Haralson & Co., P.C.
10.12* Form of Representative's Warrant Agreement
10.13*** Agreement and Plan of Merger (exclusive of schedules and
exhibits) dated as of July 29, 1998 with Meta4 Digital
Design, Inc.
21.1+ List of Subsidiaries of fine.com International Corp.
27.1+++ Financial Data Schedule
</TABLE>
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* Incorporated herein by reference from Item 27 of the Company's Form SB-2
(No. 333-26855).
** Incorporated herein by reference from exhibit to Form 8-K filed April 13,
1998.
*** Incorporated herein by reference from exhibit to Form 8-K filed August 13,
1998.
+ Incorporated herein by reference from exhibit filed with the Company's Form
10-QSB for the quarter ended July 31, 1998.
++ Incorporated herein by reference from exhibit filed with the Company's Form
10-QSB for the quarter ended October 31, 1998.
+++ Previously filed with the Company's Form 10-KSB for the fiscal year ended
January 31, 1999, and incorporated herein by reference.
b. REPORTS ON FORM 8-K
No reports were filed by the Company during the fiscal quarter ended
January 31, 1999.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has
caused this Amendment No. 1 to its Annual Report on Form 10-KSB/A to be signed
on its behalf by the undersigned, thereunto duly authorized on
May 26, 1999.
fine.com International Corp.
By: /S/
-----------------------------------
Timothy J. Carroll
Executive Vice President of Finance and
Operations
