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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 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
COMMISSION FILE NO. 0-10521
QUEST MEDICAL, INC.
(Name of small business issuer in its charter)
TEXAS 75-1646002
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
201 ALLENTOWN PARKWAY
ALLEN, TEXAS 75002
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (214) 390-9800
SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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<S> <C>
NONE NONE
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE EXCHANGE ACT:
TITLE OF CLASS
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Common Stock, $.05 Par Value
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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 / /
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation 5-B contained on 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/
Revenues for the Issuer for the Fiscal Year Ended December 31, 1995
- -- $25,320,990.
The approximate aggregate market value of voting stock held by
non-affiliates, computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock, as of March 21, 1996, was
$103,246,407. The number of shares of common stock outstanding as of March 21,
1996, was 8,212,243 shares.
DOCUMENTS INCORPORATED BY REFERENCE:
None
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PART Ill
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information regarding the directors, nominees
for director and executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Thomas C. Thompson 58 President, Chief Executive
Officer and Director
David O. Turner 49 Executive Vice President, Chief
Operating Officer
F. Robert Merrill III 46 Senior Vice President -
Finance, Chief Financial
Officer, Treasurer and
Secretary
James P. Calhoun 46 Vice President - Human
Resources
Scott F. Drees 38 Vice President
Eric D. Dufford 37 Vice President - Sales and
Marketing
Kenneth A. Jones 39 Vice President - Research and
Development
O. Mark Samples 46 Vice President - Manufacturing
W. Lynn Switzer 47 Vice President - Quality
Control
John A. Gula(1)(2) 56 Director
Linton E. Barbee(3) 57 Director
Hugh M. Morrison(1)(2) 49 Director
Robert C. Eberhart, Ph.D.(3) 59 Director
</TABLE>
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<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Michael J. Torma, M.D.(1) 53 Director
Richard A. Gilleland 51 Nominee for Director
Richard D. Nikolaev 57 Nominee for Director
</TABLE>
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(1) Member of the Compensation Committee of the Board of Directors
(2) Member of the Stock Option Committee of the Board of Directors
(3) Member of the Audit Committee of the Board of Directors
Directors hold office until their term expires and until their successors have
been elected and qualified. Officers are appointed annually and serve at the
discretion of the Board of Directors. There are no family relationships among
executive officers or directors and nominees for director of the Company.
Mr. Thompson co-founded the Company and has been President and Director of the
Company since May 1979 and Chief Executive Officer since May 1984.
Mr. Turner has been Executive Vice President and Chief Operating Officer of the
Company since April 1994. From August 1972 to April 1994, Mr. Turner was
employed by Texas Instruments in various capacities including Worldwide
Operations Manager of the Consumer Products Division from August 1990 to April
1994, Materials Manager Center Site and Operations Manager for the Defense
Group from October 1989 to August 1990 and as Quality Manager for the
Electro-Optics division of the Defense Group from July 1982 to October 1989.
Mr. Merrill has been Senior Vice President-Finance of the Company since July
1995, Chief Financial Officer since April 1994, Secretary since February 1989
and Vice President-Finance and Treasurer since February 1981. Mr. Merrill
joined the Company in October 1979 as Director of Manufacturing Operations.
Mr. Calhoun has been Vice President-Human Resources of the Company since April
1995. From May 1992 to April 1995, Mr. Calhoun was Executive Director of Hogan
Quality Institute, a management consulting firm. From February 1988 to May
1992, Mr. Calhoun was the Vice President of Human Resources and Corporate
Quality Programs of Harris Adacom Corporation, a data communications company.
Mr. Drees has been Vice President of the Company since April 1996. From
November 1987 to April 1996, Mr. Drees was employed by St. Jude Medical, Inc.,
a medical device company, where he held various positions within the sales and
marketing area, including Director, North American Sales from August 1990 to
April 1996.
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Mr. Dufford has been Vice President-Sales and Marketing of the Company since
June 1994. From January 1991 to May 1994, Mr. Dufford was employed by St. Jude
Medical, Inc., a medical device company, where he held various positions within
the sales and marketing area, including Director of International Sales from
January 1993 to May 1994, and as Domestic Regional Manager from January 1991 to
December 1992. From June 1983 to December 1990, Mr. Dufford was employed by
Shiley, Inc. where he held various positions within the Cardiopulmonary
Division, including Regional Manager.
Mr. Jones has been Vice President-Research and Development of the Company since
March 1993. From August 1991 to February 1993, Mr. Jones was Director of
Research and Development of the Company. From March 1978 to July 1991, Mr.
Jones was employed by the Shiley Division of Pfizer, Inc. where he held various
positions in research and development including Manager of New Product
Development for Cardiopulmonary Products from March 1990 to July 1991.
Mr. Samples has been Vice President-Manufacturing of the Company since March
1990. From November 1983 to February 1990, Mr. Samples was Director of
Manufacturing of the Company. He joined the Company in April 1982 as a project
manager in the research and development group.
Mr. Switzer has been Vice President-Quality of the Company since April 1991 and
was Director of Quality of the Company from October 1990 to March 1991. From
September 1971 to September 1990, Mr. Switzer was employed by Baxter
International where he held various positions within the quality assurance
area, including Director of Regulatory Affairs and Quality Assurance.
Mr. Gula co-founded the Company and has served as a Director of the Company
since 1979. Since January 1986, Mr. Gula has been an independent healthcare
consultant. Prior to 1986, Mr. Gula served as Executive Vice President and
Secretary of the Company for seven years.
Mr. Barbee has served as a Director of the Company since 1983. Since October
1990, Mr. Barbee has been a partner with the law firm of Fulbright & Jaworski,
L.L.P. Prior to October 1990, Mr. Barbee was a partner with the law firm of
Hughes & Luce, L.L.P. for approximately four years.
Mr. Morrison has served as a Director of the Company since 1983. Since March
1996, Mr. Morrison has been President and Chief Executive Officer of Clean
Acquisition, Inc. and Pilgrim Cleaners, Inc. From January 1993 to February
1996 Mr. Morrison was an independent business consultant and investor. From
1989 throughout 1992, Mr. Morrison served as President and Chief Executive
Officer of American Funeral Services Corporation (formerly Golden Era Services,
Inc.). Mr. Morrison is a director of Owen Healthcare, Inc. and Equal Net
Holding Corp. From March 1984 to October 1991, Mr. Morrison served as a
director of Dow B. Hickham, Inc., a pharmaceutical company.
Dr. Eberhart has served as a Director of the Company since 1994 and also serves
on the Company's Board of Clinical Advisors. Since September 1984, Dr.
Eberhart has served as Chairman of the Board of the Biomedical Engineering
Program at the University of Texas Southwestern Medical Center at Dallas.
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Dr. Torma has served as a Director of the Company since 1994. Dr. Torma has
served as Chair of Surgical Services of Presbyterian Hospital of Dallas and
Chairman of the Institute for Surgical Sciences of Presbyterian Healthcare
Systems since October 1992. Prior to that time, Dr. Torma served as Command
Surgeon, Strategic Air Command of the USAF from August 1990 to September 1992
and Chief of Professional Affairs and Quality Assurance for the USAF Medical
Services from September 1988 to August 1990.
Mr. Gilleland is a nominee for Director of the Company at the annual meeting of
stockholders on June 27, 1996. Mr. Gilleland has served as President and
Chief Executive Officer of AMSCO International, Inc. since July 1995. From
July 1990 to June 1995, Mr. Gilleland was Chairman, President and Chief
Executive Officer of Kendall International, Inc. Mr. Gilleland is currently a
director of Ornda Healthcorp, Remington Arms Company, Inc., Tyco International,
Ltd., Physicians Resource Group and AMSCO International, Inc.
Mr. Nikolaev is a nominee for Director of the Company at the annual meeting of
stockholders on June 27, 1996. Mr. Nikolaev has served as President and Chief
Executive Officer of Wright Medical Technology, Inc. since November 1995. From
August 1995 to November 1995, Mr. Nikolaev was President of OsteoBiologics,
Inc. From January 1995 to July 1995, Mr. Nikolaev was an independent business
consultant. From January 1992 to December 1994, Mr. Nikolaev served as
Chairman, President and Chief Executive Officer of Orthomet, Inc. From January
1991 to December 1991, Mr. Nikolaev served as President of Orthopedic Synergy.
Mr. Nikolaev is currently a director of Everest Medical, Wright Medical
Technology, Inc. and OsteoBiologics, Inc.
ITEM 10. EXECUTIVE COMPENSATION
EXECUTIVE OFFICERS
The following tables set forth certain information regarding compensation,
aggregate stock option grants and exercises during 1995 and year-end stock
option values for the Chief Executive Officer and the four most highly
compensated executive officers (the "Named Executive Officers") whose total
annual salary and bonus exceeded $100,000 for the last fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
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Annual Compensation Long-Term Compensation
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Awards Payouts
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Other Restricted Securities All other
Name and Annual Stock Underlying LTIP Compen-
Principal Salary Bonus Comp. Award(s) Options/ Payouts sation(1)
Position Year ($) ($) ($) ($) SARs (#) ($) ($)
- -------- --- ------ ----- ------ ---------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thomas C. 1995 $175,284 $41,677 -- -- -- -- $ 4,500
Thompson 1994 $168,480 $39,206 -- -- -- -- $ 4,500
(C.E.O) 1993 $164,077 $23,918 -- -- -- -- $ 4,497
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David O. 1995 $117,212 $22,806 -- -- -- -- $ 4,084
Turner 1994 $ 84,675 $18,911 -- -- -- -- $ --
(C.O.O.) 1993 $ -- -- -- -- -- -- $ --
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</TABLE>
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<TABLE>
<CAPTION>
=====================================================================================================
Annual Compensation Long-Term Compensation
------------------------------------ ---------------------------------
Awards Payouts
----------------------- -------
Other Restricted Securities All other
Name and Annual Stock Underlying LTIP Compen-
Principal Salary Bonus Comp. Award(s) Options/ Payouts sation(1)
Position Year ($) ($) ($) ($) SARs (#) ($) ($)
- -------- --- ------ ----- ------ ---------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
F. Robert 1995 $ 98,931 $17,534 -- -- -- -- $ 3,404
Merrill. III 1994 $ 92,150 $12,185 -- -- -- -- $ 3,057
(C.F.O.) 1993 $ 89,449 7,972 -- -- -- -- $ 2,937
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Eric D. 1995 $ 122,580 $22,255 -- -- -- -- $ 4,148
Dufford 1994 $ 66,000 $10,270 -- -- -- -- $ --
1993 $ -- $ -- -- -- -- -- $ --
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George L. 1995 $ 90,144 $41,800 -- -- -- -- $ --
Carlson (2) 1994 $ -- $ -- -- -- -- -- $ --
1993 $ -- $ -- -- -- -- -- $ --
=====================================================================================================
</TABLE>
(1) Reflects matching employer contributions under the Company's Employees
Savings Plan (401K).
(2) Mr. Carlson served as an executive officer of the Company from April 1995
through March 1996.
None of the Named Executive Officers received personal benefits, securities or
property in excess of the lesser of $50,000 or 10% of such individual's
reported salary and bonus.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)
<TABLE>
<CAPTION>
===============================================================================================
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO
OPTIONS/SARS EMPLOYEES IN EXERCISE OR BASE EXPIRATION
NAME GRANTED (#) FISCAL YEAR PRICE ($/SH) DATE
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<S> <C> <C> <C> <C>
Thomas C. 25,000 10.44% $12.125 07/05/05
Thompson (C.E.O.)
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F. Robert 15,000 6.26% $12.125 07/05/05
Merrill, III
(C.F.O.)
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George L. Carlson 40,000 16.70% $ 7.125 04/06/05
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</TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
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Number of Securities Value of Unexercised
Shares Value Underlying Unexercised In-the-Money Options/SARs
Acquired Realized Options/SARs at FY-end(#) at FY-end ($)
Name on Exercise ($) ---------------------- -------------
(#) Exercisable Unexercisable Exercisable Unexercisable
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<S> <C> <C> <C> <C> <C> <C>
Thomas C. -- -- 116,170 25,000 $1,013,234 --
Thompson
(C.E.O)
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David O. -- -- 12,875 38,625 $ 74,250 $222,750
Turner
(C.O.O.)
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F. Robert 2,000 $22,350 43,320 15,000 $ 364,074 --
Merrill,
III
(C.F.O.)
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Eric D. -- -- 12,500 37,500 $ 72,030 $216,089
Dufford
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George L. -- -- -- 40,000 -- $130,000
Carlson
=================================================================================================
</TABLE>
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The Company does not have any deferred compensation, profit sharing, pension or
retirement plans, except for the Employees Savings Plan and Trust (the "Savings
Plan"), which was adopted by the Board of Directors effective as of January 1,
1988. The Savings Plan is available generally to any employee who has
completed at least six months of service and is at least 21 years of age. The
Savings Plan permits employees to elect salary deferral contributions of up to
15% of compensation (subject to limits imposed by the Internal Revenue Code)
and requires the Company to make matching contributions equal to 50% of a
participant's salary deferral contributions, to a maximum of salary deferral
contributions equal to 6% of the participant's total cash compensation, up to
$150,000. The amount of the matching employer contribution may be increased or
decreased at the discretion of the Board of Directors. During the year ended
December 31, 1995, the Company committed to contribute approximately $142,485
to the Savings Plan, of which $26,515 is to be contributed on behalf of the
following executive officers: Thomas C. Thompson--$4,500, Eric D.
Dufford--$4,148, Kenneth A. Jones--$3,015, F. Robert Merrill III--$3,404, O.
Mark Samples--$2,813, W. Lynn Switzer--$2,668, and David O. Turner--$4,084.
Robert E. Paysour, an executive officer of the Company until his resignation in
August 1995, received a contribution of $1,883.
COMPENSATION OF DIRECTORS
Non-management directors receive $1,000 for each Board of Director meeting
attended and reimbursement for expenses incurred in attending such meetings.
Non-management directors who serve on committees did not receive additional
compensation for serving on such committees.
In April 1980, the Company adopted the Quest Medical, Inc. Directors' Stock
Option Plan, (the "Directors' Plan"), which has been amended on several
different occasions, most recently in July 1992 to increase the number of
shares to be held by an advisory director at any time from 12,000 to 15,000.
Under the Directors' Plan, nontransferable stock options may be granted to
directors and advisory directors of the Company. Under the Directors' Plan,
the option price per share cannot be less than the fair market value per share
on the date the option is granted. The Directors' Plan further provides that
the exercise period for options cannot exceed six years. Under the Directors'
Plan, each option vests ratably over a four-year period. During the year ended
December 31, 1995, no directors were granted options under the Directors' Plan.
Three directors exercised options under the Directors' Plan during the year
ended December 31, 1995. During April 1995, Linton E. Barbee exercised options
to purchase 15,450 shares of common stock at an exercise price of $2.18 per
share which were scheduled to expire in August 1995. The net value of such
securities to Mr. Barbee (market value less exercise price) was approximately
$78,331. During April 1995, Hugh M. Morrison exercised options to purchase
6,180 shares of common stock at an exercise price of $1.45 per share which were
scheduled to expire in May 1995. The net value of such securities to
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Mr. Morrison was approximately $38,161. In June 1995, Michael J. Torma, M.D.
exercised options to purchase 3,750 shares of common stock at an exercise price
of $6.375 per share. The net value of such securities to Dr. Torma at the time
of exercise was $19,688.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of April 24, 1996, the beneficial ownership
of each current director, each nominee for director, each Named Executive
Officer, all executive officers and directors as a group, and each stockholder
known to management of the Company to own beneficially more than 5% of the
outstanding common stock.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) OF CLASS(2)
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<S> <C> <C>
The Equitable Companies Incorporated 804,187(3) 9.8%
787 Seventh Avenue
New York, New York 10019
Strong Capital Management, Inc. 478,000(4) 5.8%
One Hundred Heritage Reserve
Milwaukee, Wisconsin 53201
Thomas C. Thompson 343,245(5) 4.1%
501 Lakewood Drive
McKinney, Texas 75069
John A. Gula 288,098(6) 3.5%
454 River Road
Fair Haven, New Jersey 07704
Linton E. Barbee 15,300(6) *
4446 Mill Creek Road
Dallas, Texas 75244
Robert C. Eberhart, Ph.D. 15,450(7) *
10519 Royal Springs
Dallas, Texas 75229
Hugh M. Morrison 25,750(6) *
2517 Bluebonnet Boulevard
Houston, Texas 77030
Michael J. Torma, M.D. -- --
8640 Breakers Point
Dallas, Texas 75243
</TABLE>
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<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) OF CLASS(2)
- ------------------------ ----------------------- -----------
<S> <C> <C> <C>
Richard A. Gilleland -- --
2829 Townsgate Road
West Lake Village, California 91361
George L. Carlson 10,000(8) *
2816 Round Rock Trail
McKinney, Texas 75070
Eric D. Dufford 25,001(8) *
912 Parkwood Court
McKinney, Texas 75070
F. Robert Merrill III 40,385(9) *
3329 Leigh Drive
Plano, Texas 75025
David O. Turner 25,750(8) *
2906 Country Club Road
Garland, Texas 75043
Richard D. Nikolaev -- --
Wright Medical Technology, Inc.
5677 Airline Rd.
Arlington, TN 38002
All directors and executive officers as a group, 893,263(10) 10.4%
including those names above (14 persons)
</TABLE>
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* Less than 1.0%
(1) Unless otherwise noted and subject to community property laws, where
applicable, the persons named in the table above have sole voting and
investment power with respect to all shares of common stock shown as
beneficially owned by them.
(2) Shares not outstanding but deemed beneficially owned by virtue of the
right of a person or member of a group to acquire them within 60 days are
treated as outstanding only when determining the amount and percent owned
by such person or group.
(3) Based on information obtained by the Company from Schedule 13G filed by
The Equitable Companies Incorporated ("The Equitable"), pursuant to a
Joint Filing Agreement among The Equitable, Alpha Assurances I.A.R.D.
Mutuelle, Alpha Assurances Vie Mutuelle, AXA Assurances I.A.R.D. Mutuelle,
AXA Assurances Vie Mutuelle, and Uni Europe Assurance Mutuelle, and AXA,
dated February 9, 1996. Alliance Capital Management L.P., a subsidiary of
The Equitable, is deemed to have beneficial ownership of 804,187 shares of
the Company's Common Stock, as of December 31, 1995.
(4) Based on information obtained from Schedule 13G filed by Strong Capital
Management, Inc., an Investment Advisor registered under Section 203 of
the Investment Advisors Act of 1940, and Richard S. Strong, Chairman and
principal shareholder of Strong Capital Management, Inc. dated February
13, 1996 and information obtained by the Company. Strong Capital
Management, Inc. is deemed to have beneficial ownership of 478,000 shares
of the Company's common stock, as of April 9, 1996.
(5) Includes 116,170 shares subject to options.
(6) Includes 10,300 shares subject to options.
(7) Includes 7,725 shares subject to options.
(8) Consists entirely of shares subject to options.
(9) Includes 40,320 shares subject to options.
(10) Includes 328,902 shares subject to options.
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ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has engaged the services of the law firm of Fulbright & Jaworski
L.L.P. located in Dallas, Texas. Mr. Barbee, a director of the Company, is a
partner of such firm.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
April 26, 1996
QUEST MEDICAL, INC.
By: /s/ F. Robert Merrill III
-----------------------------------
F. Robert Merrill III
Senior Vice President -- Finance
Secretary and Treasurer
(Principal Financial and
Accounting Officer)
10
