<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
AMENDMENT #1
FORM 10-K/A
Annual Report pursuant to Section 13 or 15 (d) of the Securities Exchange Act
of 1934
For the Year Ended December 31, 1996
Commission file number 0-11630
INTELECT COMMUNICATIONS SYSTEMS LIMITED
(Exact Name of Registrant as Specified in Its Charter)
BERMUDA N/A
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1100 EXECUTIVE DRIVE, RICHARDSON, TEXAS 75081
(Address of Principal Executive Offices) (Zip Code)
972-367-2100
(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 SHARES PAR VALUE US$0.01 PER SHARE
(Title of 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 aggregate market value of voting stock held by non-affiliates of the
Registrant was approximately $40,726,569 as of March 31, 1997 (based upon the
average of the highest bid and lowest asked prices on such date as reported on
the Nasdaq National Market).
There were 17,148,029 shares of Common Stock outstanding as of March 31, 1997.
Documents Incorporated by Reference
None.
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PART III
ITEM 10, ITEM 11, ITEM 12 AND ITEM 13 TO THE REGISTRANT'S ANNUAL REPORT ON FORM
10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 ARE HEREBY AMENDED AND
RESTATED IN THEIR ENTIRETY AS SET FORTH BELOW.
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding the directors and executive officers is set
forth below. Directors were elected by the Shareholders at the Annual General
Meeting of Shareholders in June 1996, or subsequently by the Board to fill
vacancies created by resignations. Directors will serve for the remainder of
their respective terms or until their successors are elected.
<TABLE>
<CAPTION>
Name Age Office and Employment During Last Five Years
- ---- --- --------------------------------------------
<S> <C> <C>
Herman M. Frietsch 57 Chairman of the Board of the Company since 1989; Chief Executive
Officer since February 1997; Director since 1988; Executive Chairman
from 1995 to February 1997.
Peter E. Ianace 48 Vice President, Sales and Marketing of the Company since February 1997;
Vice President, Marketing and Distribution of the Company since June
1996; President of Intelect Network Technologies Company since November
1993; Chief Executive Officer of Intelect Network Technologies Company
since July 1995. President Opcom, Inc., a fiber optic products
manufacturer, January 1992 to March 1993.
R. Eugene Helms 46 Vice President, Chief Technology Officer of the Company since June
1996; President and Chief Executive Officer of DNA Enterprises, Inc.
since April 1996; President and Owner of TeleSolutions Inc., a
consulting firm, since January 1990; Vice President, Engineering of
Mizar, Inc., a DSP products manufacturer, from March 1994 to October
1995.
Prinz Anton von and zu 51 Director of the Company since 1980. Chairman of the Stock Option
Liechtenstein Committee and Member of the Audit Committee. First Managing Director
of the Company. Private Investor.
Philip P. Sudan, Jr. 45 Director of the Company since February 1997. Chairman of the Audit Committee
and Member of the Stock Option Committee. Partner, Ryan & Sudan,
L.L.P., a law firm in Houston, Texas, since 1990.
Edwin J. Ducayet, Jr. 57 Acting Chief Financial Officer of the Company since February 1997; Vice
President and Chief Financial Officer of Intelect Network Technologies
Co. since December 1991.
Peter G. Leighton 44 Director of the Company since 1984 and President since 1988, until his
resignation in March 1997.
</TABLE>
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<TABLE>
<S> <C> <C>
Name Age Office and Employment During Last Five Years
- ---- --- --------------------------------------------
Jeremy T.G. Posner 49 Director of the Company since 1987 until his resignation in March 1997.
Rhianon M. Pedro 35 Treasurer of the Company from January 1993 and Vice President, Chief
Financial Officer of the Company from December 1995 until February
1997.
</TABLE>
Messrs. Sudan and Liechtenstein are members of the Audit Committee and
the Stock Option Committee of the Board of Directors.
The executive officers of the Company were elected in June 1996 or
subsequently to fill vacancies created by resignations or terminations. The
executive officers are elected by, and serve at the pleasure of, the Board of
Directors.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers (as defined in Rule 16a-1(f)), directors, and persons who
own more than ten percent of a registered class of the Company's equity
securities to file reports of ownership and changes in ownership with the
Securities and Exchange Commission ("SEC"). Such persons are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file. Based solely on its review of the copies of such forms received by it
and written representations from certain reporting persons that they have
complied with the relevant filing requirements, the Company believes that all
filing requirements applicable to its officers, directors and 10% stockholders
were timely complied with during the fiscal year ended December 31, 1996,
except that (i) Mr. Ianace filed a Form 5 rather than a Statement of Changes in
Beneficial Ownership on Form 4 due January 1997 reflecting one transaction;
(ii) Mr. Ducayet filed a Form 5 rather than a Statement of Changes in
Beneficial Ownership on Form 4 due January 1997 reflecting one transaction;
(iii) a Statement of changes in Beneficial Ownership on Form 4 due May 1996
reflecting one transaction was filed late by Mr. Frietsch; (iv) a Statement of
Changes in Beneficial Ownership on Form 4 due May 1996 reflecting one
transaction was filed late by Mr. Leighton; (v) a Statement of Changes in
Beneficial Ownership on Form 4 due November 1996 reflecting one transaction was
filed late by Ms. Pedro; (vi) a Statement of Changes in Beneficial Ownership on
Form 4 due May 1996 reflecting one transaction was filed late by Mr. Posner;
(vii) a Statement of Changes in Beneficial Ownership on Form 4 due May 1996
reflecting one transaction was filed late by Nancy E.H. Miracle; Vice President
of Intelect Network Technologies Company, and (viii) a Statement of Changes in
Beneficial Ownership on Form 4 due May 1996 reflecting one transaction was filed
late by Willard F. Barnett. Senior Vice President of Intelect Network
Technologies Company.
ITEM 11 - EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
COMPENSATION OF DIRECTORS
Directors currently receive no cash compensation for their services as
Directors or meeting attendance fees. Members of the Audit Committee and the
Stock Option Committee each receive a cash fee of $10,000 per annum for each
committee.
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SUMMARY COMPENSATION TABLE
The following table summarizes the compensation paid to Herman M.
Frietsch, Chief Executive Officer of the Company, and the other executive
officers who have earned more than $100,000 in salary and bonus during the last
three completed fiscal years ended December 31, 1996.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
----------------------------------- ----------------------------
Other Securities
Compen- Underlying
Fiscal Salary Bonus sation Options
Name and Principal Position Year ($) ($) ($) (#)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Herman M. Frietsch 1994 $ 20,000 $150,000 $ - 40,000
Chairman and Chief Executive Officer of 1995 $120,000 $120,000 $ - 150,000
Intelect Communications Systems Limited 1996 $250,000 $ - $ - 50,000
Peter E. Ianace 1995 $160,000 $ - $ - 350,000
President of Intelect Network 1996 $240,000 $ - $ 4,750 -
Technologies
R. Eugene Helms 1996 $131,538 $ 56,725 $ 8,827 100,000
President of DNA Enterprises
Peter G. Leighton(1) 1994 $125,000 $100,000 $ - 40,000
1995 $150,000 $150,000 $ - 150,000
1996 $250,000 $ - $ - 50,000
Jeremy T.G. Posner(2) 1994 $ - $ - $ - 15,000
1995 $ - $ - $ 150,000 30,000
1996 $ - $ - $ 125,000 15,000
Rhianon M. Pedro(3) 1995 $ 12,500 $ 20,000 $ - 10,000
1996 $ 83,333 $ - 40,000
</TABLE>
- ----------------------------
(1) Resigned as President and Director, Intelect Communications Systems Limited
in March 1997.
(2) Resigned as Director in March 1997.
(3) Terminated as Treasurer, Chief Financial Officer and Senior Vice President
of Intelect Communications Systems Limited in February 1997.
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The following table sets forth stock options granted in 1996 to each
of the Company's executive officers named in the Summary Compensation Table.
The table also sets forth the hypothetical gains that would exist for the
options at the end of their ten-year terms at assumed compound rates of stock
appreciation of 5% and 10%. The actual future value of the options will depend
on the market value of the Company's Common Stock.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable Value
Number of % of Total at Assumed Annual Rates
Securities Options of Stock Price Appreciation
Underlying Granted to Exercise for Option Term (a)
Options Employees Price Expiration ----------------------------
Name Granted (#) in 1996 ($/Share) Date 5% ($) 10% ($)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Herman M. Frietsch 50,000 3.97% $6.500 4/15/06 $204,391 $517,966
Peter E. Ianace -
R. Eugene Helms 100,000 7.94% 5.350 4/1/06 336,459 852,652
Peter G. Leighton 50,000 3.97% 6.500 4/15/06 204,391 517,966
Jeremy T. G. Posner 15,000 1.19% 6.500 4/15/06 61,317 155,390
Rhianon M. Pedro 20,000 1.59% 4.313 2/23/06 54,242 137,460
7,000 0.56% 6.500 4/15/06 28,615 72,515
13,000 1.03% 7.250 10/4/06 59,273 150,210
</TABLE>
- -----------------------
(a) The amounts shown on this table represent hypothetical gains that could
be achieved for the respective options, if exercised at the end of the option
term. These gains are based on assumed rates of stock appreciation of 5% and
10% compounded annually from the date the respective options were granted to
their expiration date. The gains shown are net of the option exercise price,
but do not include deductions for taxes or other expenses associated with the
exercise. Actual gains, if any, on stock option exercises will depend on the
future performance of the common Shares, the optionholders' continued
employment through the option period, and the date on which the options are
exercised. These amounts are not intended to forecast possible future
appreciation, if any, of the Company's stock price.
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The following table sets forth the number of shares acquired on
exercise of stock options and the aggregate gains realized on exercise in 1996
by the Company's executive officers named in the Summary Compensation Table.
The table also sets forth the number of shares covered by exercisable and
unexercisable options held by such executives on December 31, 1996 and the
aggregate gains that would have been realized had these options been exercised
on December 31, 1996, even though these options were not exercised, and the
unexercisable options could not have been exercised, on December 31, 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options
Acquired on Value Options at FY-End (#) at FY-End(b) ($)
Exercise Realized(a) --------------------------- ------------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Herman M. Frietsch - $ - 226,667 63,333 $590,667 $ 28,333
Peter E. Ianace - - 70,000 280,000 105,000 420,000
R. Eugene Helms - - - 100,000 - -
Peter G. Leighton 135,000 692,525 91,667 63,333 176,267 28,333
Jeremy T. G. Posner - - 125,000 40,000 335,844 24,313
Rhianon M. Pedro - - 16,333 33,667 2,281 8,313
</TABLE>
- -----------------------------------
(a) Market value on the date of exercise of shares covered by options
exercised, less option exercise price.
(b) Market value of shares covered by in-the-money options on December 31,
1996, less option exercise price. Options are in-the-money if the market value
of the shares covered thereby is greater than the option exercise price.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors of the Company
during the last fiscal year consisted of Herman M. Frietsch and Peter G.
Leighton. During the last fiscal year, Mr. Frietsch served as the Chairman of
the Board and Mr. Leighton served as the President of the Company. Mr.
Leighton resigned as President and Director of the Company in March 1997. The
Compensation Committee is currently composed of Mr. Frietsch and Mr. Philip P.
Sudan, Jr. Mr. Sudan is a partner of Ryan & Sudan, L.L.P., outside counsel to
the Company. No other interlocking relationship exists between the Company's
Board of Directors and Compensation Committee and the board of directors or
compensation committee of any other company, nor has such interlocking
relationship existed in the past.
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PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return
on the Company's common shares (Nasdaq National Market trading symbol ICOMF)
with the cumulative total return (including reinvested dividends) of the
Standard & Poor's Small Cap Index and the Nasdaq Index. Amounts have been
rounded to the nearest dollar.
The information contained in the performance graph shall not be deemed
"soliciting material" or to be "filed" with the Securities and Exchange
Commission, nor shall such information be incorporated by reference into any
future filing under the Securities Act or Exchange Act, except to the extent
that the Company specifically incorporates it by reference into such filing.
The stock price performance on the following graph is not necessarily
indicative of future stock price performance.
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996 CAGR(1)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ICOMF 100 146 433 281 742 600 43.1%
S&P SMALLCAP 100 121 144 137 178 216 16.6%
NASDAQ US 100 116 134 131 185 227 17.8%
</TABLE>
(1) Compound annual growth rate for the five years ended December 31, 1996.
7
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ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Set forth below is information as of April 30, 1997, with respect to
the number and percentage of outstanding shares owned beneficially by directors
and executive officers of the Company individually, and directors and executive
officers of the Company as a group. The Company is not aware of any person
beneficially owning more than five percent of the outstanding Common Shares.
<TABLE>
<CAPTION>
Name and Address Amount and Nature of Company's
of Beneficial Owner Beneficial Ownership Note Percent of Class
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Herman M. Frietsch 645,334 (1) 3.58%
1100 Executive Drive
Richardson, Texas
Peter E. Ianace 148,095 (2) 0.82%
1100 Executive Drive
Richardson, Texas
R. Eugene Helms 100,000 (3) 0.55%
269 W. Renner Parkway
Richardson, Texas
Anton Liechtenstein 277,400 1.54%
Administration and Trust Co.
Josepf Rheinbergerstrasse 6
Vaduz, Liechtenstein
Philip P. Sudan, Jr. 0
Two Houston Center, Suite 3900
Houston, Texas
Edwin J. Ducayet, Jr. 30,667 (4) 0.17%
1100 Executive Drive
Richardson, Texas
Peter G. Leighton(5) 515,000 2.86%
31 Church Street
Hamilton, Bermuda HM12
Rhianon M. Pedro(6) 10
31 Church Street
Hamilton, Bermuda HM12
All Directors and 1,201,496 (7) 6.66%
Executive Officers
as a group (6 persons)
</TABLE>
- ----------------
(1) Includes 243,334 options which are currently exercisable or become
exercisable by June 30, 1997. Includes 6,000 shares owned beneficially by
Mr. Frietsch's spouse as to which he disclaims beneficial ownership.
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(2) Includes 140,000 options which are currently exercisable or become
exercisable by June 30, 1997.
(3) Includes 100,000 options which are currently exercisable or become
exercisable by June 30, 1997.
(4) Includes 8,333 options which are currently exercisable or become
exercisable by June 30, 1997.
(5) Resigned as President and Director in March 1997.
(6) Terminated as Treasurer, Chief Financial Officer and Senior Vice
President in February 1997.
(7) Includes 491,667 options which are currently exercisable or become
exercisable by June 30, 1997.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Peter E. Ianace, a Vice President of the Company and President of
Intelect Network Technologies, a subsidiary, was indebted to the Company in the
amount of $91,000 at December 31 1996. The Note, whose original principal
amount was $135,000, bears interest at 5% per annum and is secured by a pledge
of common stock of the Company.
Philip P. Sudan, Jr., a director of the Company since February 1997,
is a partner of Ryan & Sudan, L.L.P., counsel for the Company.
The Company received from a company controlled by Peter G. Leighton a
short-term loan of $500,000 in July 1996, and repaid the loan in September
1996, including interest of $13,000. The Company paid $120,000 during 1996 for
management fees and rented facilities from a company controlled by Mr.
Leighton.
In January 1996, the Company amended employment agreements with Herman
M. Frietsch and Peter G. Leighton which, generally upon termination, provide
for continuation of salaries for three years following the current year of
employment.
A corporation owned by R. Eugene Helms was paid $156,338 and entered
into a royalty agreement in exchange for certain intellectual property rights
in connection with a pocket terminal product and DSP products.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Form 10-K/A amending its Annual Report on
Form 10-K for the fiscal year ended December 31, 1996 to be signed on its
behalf by the undersigned, thereunto duly authorized.
INTELECT COMMUNICATIONS SYSTEMS LIMITED
(Registrant)
Date: April 30, 1997 By: /s/ HERMAN M. FRIETSCH
------------------------
Herman M. Frietsch
Chief Executive Officer
Pursuant to the requirements of the Securities 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 date indicated.
/s/ HERMAN M. FRIETSCH /s/ PHILIP P. SUDAN, JR.
- ------------------------------------- ---------------------------------
Herman M. Frietsch Philip P. Sudan, Jr., Director
Chief Executive Officer and Director
(Principal Executive Officer)
/s/ EDWIN J. DUCAYET, JR.
- -------------------------------------
Edwin J. Ducayet, Jr.
Chief Financial Officer
(Principal Financial and
Accounting Officer)
10
