27
<PAGE>
FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
Annual Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1996 Commission File no. 0-8995
COMPUTER DEVICES, INC.
----------------------------------------------
(Name of small business issuer in its charter)
Maryland 04-2446436
------------------------ ---------------------------------------
(State of incorporation) (I.R.S. Employer Identification Number)
34 Linnell Circle, Nutting Lake, Massachusetts 01865
------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (508) 663-4980
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Exchange on which registered
None
------------------- ----------------------------
Securities registered under Section 12(g) of the Exchange Act:
Preference Stock, $.01 Par Value (liquidation preference, convertible)
----------------------------------------------------------------------
(Title of class)
Class A Common Stock, $.01 Par Value
------------------------------------
(Title of class)
Class B Common Stock, $.01 Par Value
------------------------------------
(Title of class)
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 twelve 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 ninety days. Yes X No
----- -----
Check if there is no disclosure of delinquent filer in response to Item
405 of Regulation S-B 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]
Issuer's revenues for fiscal year ended December 31, 1996 are $931,000.
Based on average bid and asked prices quoted by registrant's market makers,
the aggregate market value of voting stock held by non-affiliates of the
registrant was approximately $613,000 as of February 28, 1997.
The number of shares outstanding of each of the registrant's classes of
common stock as of February 28, 1997 was 1,354,192 shares of Class A
Common Stock and 2,224,951 shares of Class B Common Stock.
1
<PAGE>
TABLE OF CONTENTS
ITEM TITLE PAGE
---- ----- ----
1 DESCRIPTION OF BUSINESS 3
2 DESCRIPTION OF PROPERTY 3
3 LEGAL PROCEEDINGS 3
4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 4
5 MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS 4
6 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION 5
7 FINANCIAL STATEMENTS 6
8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 17
9 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a)
OF THE EXCHANGE ACT 17
10 EXECUTIVE COMPENSATION 18
11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT 19
12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 20
13 EXHIBITS AND REPORTS ON FORM 8-K 21
SIGNATURES 22
INDEX TO EXHIBITS 23
2
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Business Development
- --------------------
Incorporated as a Massachusetts corporation in 1968 and
reincorporated in Maryland in 1986, Computer Devices, Inc. (the
"Company") is primarily engaged in the design, manufacture, sale
and service of computer peripheral products. In addition, the
Company is a non-exclusive distributor of similar products for
several manufacturers.
In the fourth quarter of 1996, the Company formed Voisys
International Corporation (Voisys), a start-up company whose
objective is to participate in the voice activated computer
control market. Its initial software product, Verbal Control
Suite, which enables complete voice control of any Windows95
based personal computer, was announced in November 1996.
In 1989, the Company acquired Neuro-Therapeutics, Inc. ("NTI"),
a development stage company whose objective is to commercialize
a novel rehabilitative therapy for stroke victims.
Business of Issuer
- ------------------
The Company's primary peripheral products consist of printers
manufactured by the Company and computer peripherals provided by
other manufacturers. The printer product line includes the
Series 2000 terminal/printer, several video printers and various
related supplies and services. The computer peripheral products
consist mainly of optical storage equipment. All of the
Company's product lines are sold both directly to end users and
to value-added systems integrators/resellers. In 1996 the
principal suppliers for optical storage equipment products were
Hewlett Packard, Panasonic and Sierra. Although the Company's
customer base is broad, less than twenty companies account for
the bulk of new orders.
During 1996 and 1995, the Company expended approximately $32,000
and $3,000 respectively, on engineering, research and
development efforts. All these expenditures for 1996 were
associated with Voisys.
As of February 28, 1997, the Company employed seven people of
whom six were full time.
ITEM 2. DESCRIPTION OF PROPERTY
The Company conducts its basic operations from an 11,550 square
foot leased facility in Nutting Lake (Billerica), Massachusetts.
The facility is under lease on a month to month basis.
ITEM 3. LEGAL PROCEEDINGS
Federal and state authorities, together with other private
parties, have sought to hold the Company responsible, along
with a number of other parties, for various environmental
cleanup costs and related penalties. In addition, from time to
time, the Company is involved in disputes and/or litigation
encountered in its normal course of business. The Company does
not believe that the ultimate impact of the resolution of any
outstanding matters will have a material effect on the Company's
financial condition or results of operations.
3
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the
fourth quarter of 1996.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is quoted in the "NQB Non-NASDAQ
Price Report" published by the National Quotation Bureau. The
following table sets forth the range of high and low bid prices
per share of Class B Common Stock for each quarter within the
last two fiscal years. The prices reflect inter-dealer prices,
without retail mark-up, markdown or commission and may not
represent actual transactions:
High Bid Low Bid
1995 First Quarter $ .15 $ .10
1995 Second Quarter .15 .06
1995 Third Quarter .09 .06
1995 Fourth Quarter .09 .03
1996 First Quarter $ .04 $ .04
1996 Second Quarter .04 .04
1996 Third Quarter .04 .04
1996 Fourth Quarter .41 .01
In general, Class A Common Stock automatically converts to Class
B Common Stock upon sale. The approximate number of holders of
record of the Company's common stock as of February 28, 1997 was
1,800. The Company has no intention of paying cash dividends on
its common stock for the foreseeable future.
4
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Item 6 contains forward-looking statements as that term is
defined in the Private Securities Litigation Reform Act of 1995.
These forward-looking statements are subject to risks and
uncertainties which could cause actual results to differ
materially from those anticipated.
Revenues declined by 23% in 1996 from the previous year. Below
is a table listing revenues related to the following product
lines:
Year Ended
December 31, 1996 December 31, 1995
Printers $ 156,000 $ 204,000
Other computer peripherals 775,000 1,000,000
----------- -----------
Total $ 931,000 $1,204,000
=========== ===========
Revenues related to printers declined in 1996 by 24% when
compared with 1995. Evidence of this is shown by fewer units
sold, declining number of service calls, and an eroding rental
base. The Company expects this trend to continue in 1997.
Revenues related to computer peripherals decreased in 1996 by
23% when compared to the previous year. The Company competes
vigorously with other larger and better known distributors to
maintain market share. Because, in most cases, price is the
deciding factor in such sales, the Company can give no
assurances that it can maintain its current customer base in
future years.
Total gross profit declined by 14% in 1996 due to declining
sales. Gross profit margins remained consistent with those in
1995.
Total selling, general and administrative expenses increased in
1996 by $478,000 (77%) when compared with the previous year.
The increase was due to the establishment of a non-qualified
retirement obligation to the president of the Company ($408,000)
and expenses associated with start-up of Voisys ($105,000).
Expenses related to engineering, research and development
projects were $32,000 in 1996. The amount is attributed to
development expenses associated with Voisys' software product
(Verbal Control Suite).
In 1989 the Company acquired Neuro-Therapeutics, Inc., with the
intent of commercializing its novel rehabilitative therapy for
stroke victims. In addition to completing the development of
the system, the Company must complete tests to validate the
efficacy of the therapy and achieve technological acceptance in
the medical community. It is not clear how many years these
tasks will take, whether sufficient funding will be available,
or whether the results will be successful.
The Company has no intentions of paying cash dividends on Class
A or Class B common stock for the foreseeable future.
During 1996, cash from the beginning of the year was responsible
for the Company's liquidity. In the future, however, financing
may be necessary to support internal and/or external growth.
5
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
Report of independent public accountants 7
Consolidated financial statements of Computer Devices,
Inc. and Subsidiaries:
Consolidated statements of operations for the years ended
December 31, 1996 and December 31, 1995 8
Consolidated balance sheet at December 31, 1996 9
Consolidated statements of stockholders' equity (deficit) for
the years ended December 31, 1996 and December 31, 1995 11
Consolidated statements of cash flows for the years ended
December 31, 1996 and December 31, 1995 12
Notes to consolidated financial statements 13
6
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Computer Devices, Inc.:
We have audited the accompanying consolidated balance sheet of
Computer Devices, Inc. (a Maryland corporation) and subsidiaries
as of December 31, 1996, and the related consolidated statements
of operations, stockholders' equity (deficit) and cash flows for
each of the two years in the period ended December 31, 1996.
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these 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 audit 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 financial position
of Computer Devices, Inc. and subsidiaries as of December 31,
1996, and the results of their operations and their cash flows
for each of the two years in the period ended December 31, 1996,
in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 11, 1997
7
<PAGE>
COMPUTER DEVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts)
For the Years Ended
December 31,
1996 1995
------------------
REVENUES $ 931 $1,204
COST OF REVENUES 737 978
------------------
Gross profit 194 226
------------------
OPERATING EXPENSES:
Engineering, research and development 32 3
Selling, general and administrative 1,096 618
------------------
Total operating expenses 1,128 621
------------------
Operating loss (934) (395)
Interest income 28 51
Other income, net - 1
------------------
Net loss $(906) $(343)
==================
Net loss per common share (Note 10) $(.25) $(.10)
==================
Weighted average number of common
shares outstanding (Note 10) 3,579 3,490
==================
The accompanying notes are an integral part of
these consolidated financial statements.
8
<PAGE>
COMPUTER DEVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands except share amounts)
December 31, 1996
-----------------
ASSETS
- ------
CURRENT ASSETS:
Cash and cash equivalents $ 515
Accounts receivable, less reserve of $10 76
Inventories 12
Prepaid expenses 24
-------
Total current assets 627
-------
PROPERTY AND EQUIPMENT:
Property and equipment, at cost 261
Accumulated depreciation (236)
-------
25
-------
TOTAL ASSETS $ 652
=======
The accompanying notes are an integral part of
these consolidated financial statements.
9
<PAGE>
COMPUTER DEVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (continued)
(In thousands except share amounts)
December 31, 1996
-----------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
- -------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 127
Accrued expenses 189
-------
Total current liabilities 316
-------
LONG-TERM LIABILITIES:
Non-qualified retirement obligation 408
-------
COMMITMENTS AND CONTINGENCIES
(Notes 7 and 8)
STOCKHOLDERS' DEFICIT:
Preference stock, $.01 par value
Authorized - 64,000 shares
Issued and outstanding - 49,406 shares
Liquidation value - $4,941 --
Class A common stock, $.01 par value
Authorized - 49,968,000 shares
Issued and outstanding - 1,359,307 shares 14
Class B common stock, $.01 par value
Authorized - 49,968,000 shares
Issued and outstanding - 2,219,836 shares 22
Capital in excess of par value 2,001
Accumulated deficit (2,109)
-------
Total stockholders' deficit (72)
-------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 652
=======
The accompanying notes are an integral part of
these consolidated financial statements.
10
<PAGE>
COMPUTER DEVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(In thousands except share amounts)
For the Years Ended December 31, 1996 and 1995
Capital in Total S/H
Preference Stock Common Stock Excess of Accum. Equity
# Shares Par Val # Shares Par Val Par Value Deficit (Deficit)
-------- ------- -------- ------- --------- ------- ---------
At 12/31/94 49,406 $ -- 3,379,143 $ 34 $1,992 $(860) $1,166
Net loss -- -- -- -- -- (343) (343)
Exercise of
stock option -- -- 200,000 2 9 -- 11
----------------------------------------------------------------
At 12/31/95 49,406 -- 3,579,143 36 2,001 (1,203) 834
Net loss -- -- -- -- -- (906) (906)
----------------------------------------------------------------
At 12/31/96 49,406 $ -- 3,579,143 $ 36 $2,001 $(2,109) $ (72)
================================================================
The accompanying notes are an integral part of
these consolidated financial statements.
11
<PAGE>
COMPUTER DEVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the Years Ended
December 31,
1996 1995
----------------
Cash flows from operating activities:
Net loss $(906) $(343)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 18 16
Establishment of non-qualified
retirement obligation 408 --
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 36 (56)
Decrease (increase) in inventory 34 35
Decrease (increase) in prepaid expenses (8) 18
Increase (decrease) in accounts payable 96 30
Increase (decrease) in deferred revenue (1) (8)
Increase (decrease) in accrued expenses 110 43
----------------
Net cash used in operating activities: (213) (265)
Cash flows from investing activities:
Purchases of property and equipment (10) (21)
Proceeds from sale of marketable securities 470 327
----------------
Net cash provided by investing activities 460 306
----------------
Cash flows from financing activities:
Proceeds from exercise of stock option -- 11
----------------
Net cash provided by financing activities -- 11
----------------
Net increase in cash and cash equivalents 247 52
Cash and cash equivalents at beginning of year 268 216
----------------
Cash and cash equivalents at end of year $ 515 $ 268
================
The accompanying notes are an integral part of
these consolidated financial statements.
12
<PAGE>
COMPUTER DEVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
Note 1 - Operations
- -------------------
Incorporated as a Massachusetts corporation in 1968 and
reincorporated in Maryland in 1986, Computer Devices, Inc. (the
"Company") is primarily engaged in the design, manufacture, sale
and service of computer peripherals products. Business is
conducted primarily in the United States.
Note 2 - Summary of Significant Accounting Policies
- ---------------------------------------------------
(a) Principles of Consolidation
- -------------------------------
The consolidated financial statements include the accounts of
Computer Devices, Inc. and its wholly-owned subsidiaries, Voisys
International Corporation and Neuro-Therapeutics, Inc. All
material intercompany accounts and transactions have been
eliminated in consolidation.
(b) Use of Estimates in 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.
(c) Cash, Cash Equivalents and Investments
- ------------------------------------------
The Company considers all highly liquid investments with
maturities of three months or less at the time of acquisition to
be cash equivalents. Included in cash equivalents at December
31, 1996 is approximately $385,000 of money market funds.
(d) Inventories
- ---------------
Inventories are stated at the lower of cost (first-in, first-
out) or market and consist primarily of purchased finished
goods.
(e) Revenue Recognition
- -----------------------
The Company recognizes revenue upon the shipment of its product
to a customer.
(f) Depreciation and Amortization
- ---------------------------------
Property and equipment are depreciated using the straight-line
method for financial reporting purposes over their estimated
useful lives of three to five years.
(g) Engineering, Research and Development Costs
- -----------------------------------------------
Engineering, research and development costs are charged to
operations as incurred.
(h) Stock-Based Compensation
- ----------------------------
The Company accounts for its stock-based compensation plans under
APB Opinion No. 25, Accounting for Stock Issued to Employees.
In October 1995, the Financial Accounting Standards Board issued
SFAS No. 123, Accounting for Stock-Based Compensation, which is
effective for fiscal years beginning after December 15, 1995.
SFAS No. 123 establishes a fair-value based method of accounting
for stock-based compensation plans. The Company has adopted
the disclosure-only alternative for grants to employees,
13
<PAGE>
COMPUTER DEVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(continued)
which requires disclosure of the pro forma effects on earnings
and earnings per share as if SFAS No. 123 had been adopted, as
well as certain other information.
Note 3 - Non-Qualified Retirement Obligation
- --------------------------------------------
The Company has established a non-qualified retirement annuity
for its president, effective at his retirement or other
separation from paid service of the Company, where by the
Company will be required to pay him for his lifetime a monthly
non-qualified retirement cash benefit of $4,000. These
payments have been recorded as a non-qualified retirement
obligation in the accompanying consolidated balance sheet at
December 31, 1996 at their present value as determined by an
actuary
Note 4 - Stockholders' Equity
- -----------------------------
(a) Class A Common Stock ($.01 par value)
- -----------------------------------------
Class A common stock has normal base equity characteristics
except that (a) it is convertible at the holder's option at any
time into Class B common stock, share for share, and (b) on
transfer of a beneficial interest (other than by gift or other
transaction not at arm's length or as part of the transfer of a
business) it converts automatically into Class B common stock,
share for share.
(b) Class B Common Stock ($.01 par value)
- -----------------------------------------
Class B common stock has the same characteristics as Class A
common stock except that (a) it has no reciprocal conversion
feature, (b) it votes at a multiple of 10% of the Class A common
stock rate, and (c) it pays 110% of any normal dividend of Class
A common stock.
(c) Preference Stock ($.01 par value, $100 nominal value)
- ---------------------------------------------------------
Preference Stock (a) carries no dividend, (b) has a liquidation
preference senior to common stock, at nominal value
($4,940,600), (c) has no sinking fund or mandatory redemption
rights, (d) is callable at any time, at nominal value, subject
to conversion rights (i.e., a call can be defeated by
conversion), (e) is convertible at the holder's option at any
time, at $2.925 per share, into either (i) Class B common stock
or (ii) Class A common stock until transfer of a beneficial
interest (other than by gift or other transaction not at arm's
length or as part of the transfer of a business), (f) is subject
to the issuer's right of repurchase for cash at the market price
for the common stock equivalent should the holder wish to
convert, (g) has standard convertible antidilution provisions
(i.e., the conversion price will be adjusted appropriately in
the event - but only in such event - of a stock dividend, split
or similar capital change involving the common stock and not,
for example, for new equity being introduced below the
conversion price), (h) votes only to protect its preferential
liquidation position (i.e., the Preference Stock does not carry
general voting rights), and (i) has the benefit of no protective
covenants (i.e., the issuer is free - within applicable legal
limits - to operate and dispose of the business without
restriction).
14
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COMPUTER DEVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(continued)
Note 5 - Income Taxes
- ---------------------
The Company accounts for income taxes, as set forth in SFAS No.
109, Accounting for Income Taxes. SFAS No. 109 requires the
recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been
recognized in the Company's financial statements or tax returns.
Deferred tax assets are recognized, net of any valuation
allowance, for deductible temporary differences and operating
loss and credit carryforwards.
At December 31, 1996, the Company has estimated net operating
loss carryforwards of approximately $19,249,000 which expire in
the years 1998 through 2011. Certain substantial changes in the
Company's ownership may result in an annual limitation on the
amount of net operating loss carryforwards that could be
utilized. In addition, the Company has tax credit carryforwards
of $326,000 expiring from 1996 through 1999. The components of
the deferred tax amounts, carryforwards and the valuation
allowance as of December 31, 1996 are approximately as follows:
Net operating loss carryforwards $ 6,638,000
Tax credit carryforwards 326,000
Temporary differences 259,000
------------
7,223,000
Valuation allowance (7,223,000)
------------
$ --
============
A valuation allowance is provided as it is uncertain the Company
will realize the deferred tax asset. In 1996, the valuation
allowance increased by $59,000 as a result of current operating
losses partially offset by expiring tax credits.
Note 6 - Stock Options
- ----------------------
Under the provisions of the Company's Stock Incentive Plan,
Class A and Class B common stock have been made available by
option to Company employees. The number of shares authorized
under this plan is 2,051,282. Options on Class A common stock
have also been granted to non-employee directors of the Company.
In all cases, the option exercise price for the shares covered
by options is 100% of the market value on the date such options
are granted. The term of each option is five years.
Information with respect to options is as follows:
Weighted
Shares Price Range Avg. Price
------ ----------- ----------
Outstanding at December 31, 1994 1,125,000 $.04 to .15 $.10
Exercised (200,000) .06 .06
Forfeited or cancelled (125,000) .04 to .06 .05
----------
Outstanding at December 31, 1995 800,000 .04 to .15 .11
Granted 650,000 .04 .04
Forfeited or cancelled (165,000) .06 to .15 .14
----------
Outstanding at December 31, 1996 1,285,000 .04 to .15 .07
==========
Exercisable at December 31, 1996 920,000 $.04 to .15 $.06
==========
15
<PAGE>
COMPUTER DEVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(continued)
No options were granted in 1995. The Company has computed the
pro forma disclosures required under SFAS No. 123 for 1996 stock
options granted to employees as of December 31, 1996 using the
Black Scholes option pricing model prescribed by SFAS No. 123.
The assumptions used were as follows: (a) 6.37% risk-free
interest rate, (b) expected term of 5 years, (c) no dividend
yield, and (d) a volatility factor of 72%. The total value of
the options granted to employees during the year ended December
31, 1996 was computed as $20,000. Had this amount been charged
to operations, the Company's net loss and net loss per share
would have increased to the pro forma amount of ($926,000) and
($.26) respectively.
Note 7 - Commitments
- --------------------
At December 31, 1996, the Company had no operating leases with
terms of more than one year. Rental expense was $25,000 in 1996
and 1995.
The Company has an employment agreement with an officer which
provides for an annual salary of not less than $133,000. The
Company may terminate this agreement with twelve months notice
at any time after December 31, 1998.
Note 8 - Contingencies
- ----------------------
Federal and state authorities, together with other private
parties, have sought to hold the Company responsible, along with
a number of other parties, for various environmental cleanup
costs and related penalties. In addition, from time to time,
the Company is involved in disputes and/or litigation
encountered in its normal course of business. The Company does
not believe that the ultimate impact of the resolution of any
outstanding matters will have a material effect on the Company's
financial condition or results of operations.
Note 9 - Significant Customers
- ------------------------------
In 1996 and 1995, one customer accounted for 65% and 38% of
revenues, respectively.
Note 10 - Net Loss Per Common Share
- -----------------------------------
For 1996 and 1995, net loss per common share was computed based
on the weighted average number of outstanding common shares
during the period. Common share equivalents are not reflected
in the computation due to their antidilutive nature.
Note 11 - New Accounting Standard
- ---------------------------------
In March 1997, the Financial Accounting Standards Board issued
SFAS No. 128, Earnings Per Share. SFAS No. 128 establishes
standards for computing and presenting earnings per share and
applies to entities with publicly held common stock or potential
common stock. This statement is effective for fiscal years
ending after December 15, 1997 and early adoption is not
permitted. When adopted, the statement will require restatement
of prior years' earning per share. The Company will adopt this
statement for its fiscal year ended December 31, 1997. The
Company believes that the adoption of SFAS No. 128 will not have
a material effect on its financial statements.
16
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
No disclosure required by this item.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
ACT
The following information relates to the directors and executive
officers of the Company:
Age
(at 1/1/97) Company Position and Business Experience
----------- ----------------------------------------
M.E. Goulder 75 Director of the Company since
1970. President of M.E. Goulder
Enterprises Inc., a technical
consulting and investment counseling
firm, since 1973. Member of board of
directors of Bank of New Hampshire.
R. J. Moore 68 Director, President, Chairman and
Chief Executive Officer of the Company
since 1983.
R. J. Moore, Jr.(1) 36 Vice President of the Company since
1990. President of Voisys since 1996.
E. W. Rau 34 Treasurer of the Company since 1995.
R. L. Warren, Jr. 78 Director of the Company since 1972. Private
investor. Member board of directors of
Radio Frequency Company, Inc.
(1) R. J. Moore, Jr. is the son of R. J. Moore.
Compliance with Section 16(a) of the Exchange Act
- -------------------------------------------------
No disclosure required by this item.
17
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid for 1996 to
the Company's "named executive officers" as defined in Item 402
of SEC Regulation S-B.
Annual Compensation ($)
------------------------
Name and
Principal Other Annual All Other
Position Year Salary Bonus Compensation Compensation ($)
- ---------------------------------------------------------------------------
R. J. Moore 1994 133,000 - - 6,660 (1)
CEO 1995 133,000 - - 8,470 (1)
1996 133,000 - - 8,501 (1)
(1)Represent insurance premiums paid by the Company with respect to
term life insurance for the benefit of the named executive officer.
OPTION EXERCISES AND YEAR-END VALUE TABLE
The following table provides information on option exercises
during 1996 by the named executive officers and the number and
value of their unexercised options at year end.
Number of Value of
Securities Underlying Unexercised
Unexercised In-the Money
Options at Options at
Year End 1996(#) Year End 1996($)
Shares
Acquired on Exercisable * Exercisable *
Name Exercise (#) Unexercisable ** Unexercisable **
- ---------------------------------------------------------------------------
R. J. Moore - 100,000 * 0 * (1)
100,000 ** 0 ** (1)
(1) At fiscal year-end, the underlying market price was less than the
option price.
Employment Contracts
- --------------------
The Company and Mr. Moore are parties to an employment contract
terminable by the Company on twelve months' notice effective at
any time after December 31, 1998 and by Mr. Moore on three
months' notice. Under this contract, Mr. Moore is to serve the
Company as its president and CEO at an annual base rate of not
less than $133,000. Mr. Moore is also entitled to (a)
participate in Company benefit plans available to other
employees, (b) the use of an automobile at Company expense (with
a bargain purchase option at termination of employment), (c)
$1,000,000 in term life insurance (including that available
under non-contributory employee benefit plans), and (d) an
annual incentive cash bonus in an amount predetermined by the
board of directors as a function of base salary and performance
18
<PAGE>
against predetermined goals set by the board. In the event of
Mr. Moore's death or disability his compensation terminates
either on the last day of the month of death or on the last day
of the twelfth month after that in which the disability occurs,
as the case may be. In addition, the Company undertakes to
indemnify Mr. Moore, to the extent not prohibited by law,
against cost or other exposure in connection with any legal
proceedings arising out of his service.
Retirement Obligation
- ---------------------
The Company has established a non-qualified retirement annuity
for Mr. Moore, effective at his retirement or other separation
from paid service of the Company, where the Company will be
required to pay him for his lifetime a monthly non-qualified
retirement cash benefit of $4,000.
Compensation of Directors
- -------------------------
Non-employee directors of the Company receive $500 per board or
board committee meeting attended.
ITEM 11.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table presents certain information relating to the
ownership of the Company's Class A Common Stock as of February
28, 1997 by (a) any person known to the Company to be the
beneficial owner of more than 5% of the class, (b) each director
of the Company, (c) each of the named executive officers as
defined in Item 402 of SEC Regulation S-B, and (d) all directors
and executive officers of the Company as a group.
Percentage of
Number of Shares Outstanding
Name Owned Beneficially Shares so Owned
- ---- ------------------ ---------------
Morton E. Goulder 80,299 (1) 5.67%
Robert J. Moore 580,000 (2) 39.88
Robert J. Moore, Jr. 595,810 (3) 30.72
Robert L. Warren, Jr. 80,437 (1) 5.68
All directors and executive
officers as a group
(five persons) 1,392,267 (4) 62.74
(1)Includes 62,500 shares available within sixty days by
exercise of options.
(2)Includes 150,000 shares held by Mr. Moore's wife and
100,000 shares available within sixty days by exercise
of option.
(3)Includes 585,000 shares available within sixty days by
exercise of options.
(4)Includes 865,000 shares available within sixty days by
exercise of options and 150,000 shares held by Mr.
Moore's wife.
19
<PAGE>
The following table presents certain information relating to the
ownership of the Company's Class B Common Stock as of February
28, 1997 by (a) any person know to the Company to be the
beneficial owner of more than 5% of the class, (b) each director
of the Company, (c) each of the named executive officers as
defined in Item 402 of SEC Regulation S-B, and (d) all directors
and executive officers of the Company as a group.
Percentage of
Number of Shares Outstanding
Name Owned Beneficially Shares so Owned
- ---- ------------------ ---------------
Morton E. Goulder 114,299 (1) 4.96%
Harvey Houtkin 206,000 9.26
Walter P. Kroll 186,667 8.39
Robert J. Moore 580,000 (2) 20.68
Robert J. Moore, Jr. 595,810 (3) 21.12
Robert L. Warren, Jr. 80437 (4) 3.49
Berkun group 259,000 (5) 11.64
All directors and executive
officers as a group
(five persons) 1,426,267 (6) 39.43
(1) Includes 17,799 shares available within sixty days by
conversion of shares of Class A Common Stock and 62,500
shares available within sixty days by exercise of options.
(2) Consists of (a) 330,000 shares available within sixty days
by conversion of shares of Class A Common Stock, (b)
150,000 shares available within sixty days by conversion of
shares of Class A Common Stock held by Mr. Moore's wife,
and (c) 100,000 shares available within sixty days by
exercise of option.
(3) Includes 10,810 shares available within sixty days by
conversion of shares of Class A Common Stock and 585,000
shares available within sixty days by exercise of options.
(4) Includes 17,937 shares available within sixty days by
conversion of shares of Class A Common Stock and 62,500
shares available within sixty days by exercise of options.
(5) The Berkun group consists of Joseph Christie, Estee Levine,
Judy Levine, Miriam Moncyzk, Benny Moncyzk, Wijac Co., Bill
Vilner, Bruce George, Michael Chesler, Dave Moskin, Spencer
Lehman, Bill Krunchick, and Wen Inv. Inc..
(6) Includes (a) 377,267 shares available within sixty days by
conversion of shares of Class A Common Stock, (b) 150,000
shares available within sixty days by conversion of shares
of Class A Common Stock held by Mr. Moore's wife, and (c)
865,000 shares available within sixty days by exercise of
options.
No director or executive officer of the Company owned
beneficially any shares of the Company's Preference Stock as of
February 28, 1997.
20
<PAGE>
ITEM. 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
No disclosure is required by this item.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
Documents Filed as Part of This Report
- --------------------------------------
The following documents are filed as part of this report:
- The following financial statement items included in Item 7:
Report of independent public accountants
Consolidated financial statements of Computer Devices, Inc.
and Subsidiaries:
Consolidated statements of operations for the years ended
December 31, 1996, and December 31, 1995
Consolidated balance sheet at December 31, 1996
Consolidated statements of stockholders' equity (deficit) for
the years ended December 31, 1996 and December 31, 1995
Consolidated statements of cash flows for the years ended
December 31, 1996 and December 31, 1995
Notes to consolidated financial statements
- The exhibits listed in the accompanying Index to Exhibits.
Reports of Form 8-K
- -------------------
The Company did not file any reports on Form 8-K during the last
quarter of the fiscal year ended December 31, 1996.
21
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
COMPUTER DEVICES, INC.
By: S/ROBERT J. MOORE Date: MARCH 27, 1997
------------------------------ --------------
Robert J. Moore, President
In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of registrant and in
the capacities and on the dates indicated.
S/ROBERT J. MOORE Date: MARCH 27, 1997
------------------------------ --------------
Robert J. Moore, President
(Principal Executive Officer)
S/EBERHARD W. RAU Date: MARCH 27, 1997
------------------------------ --------------
Eberhard W. Rau, Treasurer
(Principal Financial and Accounting
Officer)
* * * * *
S/MORTON E. GOULDER Date: MARCH 27, 1997
------------------------------ --------------
Morton E. Goulder, Director
S/ROBERT J. MOORE Date: MARCH 27, 1997
------------------------------ --------------
Robert J. Moore, Director
S/ROBERT L. WARREN, JR. Date: MARCH 27, 1997
------------------------------ --------------
Robert L. Warren, Jr., Director
22
<PAGE>
INDEX TO EXHIBITS
Page
3 - Articles of incorporation and bylaws
3.01 - Charter, as amended, of the registrant (1)
3.01 - Bylaws of the registrant (1)
4 - Instruments defining the rights of security holders,
including indentures n.a.
9 - Voting trust agreement n.a.
10 - Material contracts
10.01 - Lease to the registrant's Nutting Lake facilities
dated as of February 22, 1988 (2)
10.02 - Amendment to item 10.01 dated October 1, 1992 (4)
10.03 - Stock Incentive Plan of the registrant as amended
November 10, 1992 (4)
10.04 - Form of stock option granted to Morton E. Goulder
and Robert L. Warren, Jr. as of November 10, 1992 (4)
10.05 - Form of stock option granted to Morton E. Goulder
and Robert L. Warren, Jr. as of November 23, 1994 (5)
10.06 - Employment agreement with Robert J. Moore dated
as of October 1, 1985 (3)
10.07 - Extension of item 10.06 dated March 22, 1994 (5)
11 - Statement re computation of per share earnings 26
13 - Annual report to security holders, Form 10-Q or quarterly
report to security holders n.a.
16 - Letter on change in certifying accountant n.a.
18 - Letter on change in accounting principles n.a.
19 - Previously unfiled documents n.a.
22 - Subsidiaries of the registrant 27
23 - Published report regarding matters submitted to vote of
security holders n.a.
24 - Consent of experts and counsel n.a.
23
<PAGE>
25 - Power of attorney n.a.
28 - Additional exhibits n.a.
29 - Information from reports furnished to State Insurance
authorities n.a.
(1) Previously filed as an exhibit under the indicated exhibit
number to the Form 8-B registration statement of the
registrant dated September 30, 1986 and incorporated herein
by this reference:
Exhibit Number Corresponding
Above Exhibit Number
-------------- --------------
3.01 3.1
3.02 3.2
(2) Previously filed as an exhibit under the indicated exhibit
number to the Form 10-K report of the registrant filed April
14, 1988 and incorporated herein by this reference:
Exhibit Number Corresponding
Above Exhibit Number
-------------- --------------
10.01 10.04
(3) Previously filed as an exhibit under the indicated exhibit
number to the Form 10-K report of the registrant's predecessor
filed April 11, 1986 and incorporated herein by this
reference:
Exhibit Number Corresponding
Above Exhibit Number
-------------- --------------
10.06 10.13
(4) Previously filed as an exhibit under the indicated exhibit
number of Form 10-KSB report of the registrant's predecessor
filed April 16, 1993 and incorporated herein by this
reference:
Exhibit Number Corresponding
Above Exhibit Number
-------------- --------------
10.02 10.04
10.03 10.06
10.04 10.07
24
<PAGE>
(5) Previously filed as an exhibit under the indicated exhibit
number to the Form 10-KSB report of the registrant's
predecessor filed March 31, 1995 and incorporated herein by
this reference:
Exhibit Number Corresponding
Above Exhibit Number
-------------- --------------
10.05 10.05
10.07 10.08
25
<PAGE>
EXHIBIT 11
Statement Regarding Computation of Per Share Earnings
Weighted
Average Net Loss Loss
Period Shares Per Share
- ------ --------- ---------- ---------
First Quarter 3,579,143 $ (82,000) $(.02)
Second Quarter 3,579,143 (158,000) (.04)
Third Quarter 3,579,143 (73,000) (.02)
Fourth Quarter 3,579,143 (593,000) (.17)
----------
Fiscal 1996 3,579,143 $(906,000) (.25)
==========
26
<PAGE>
EXHIBIT 22
Subsidiaries of the registrant
Jurisdiction of Name Under Which
Name of Subsidiary Incorporation Doing Business
------------------ ------------- --------------
Neuro-Therapeutics, Inc. Massachusetts Neuro-Therapeutics, Inc.
Voisys International Corp. Maryland Voisys International Corp.
27
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