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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A NO. 2
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required]
For the fiscal year ended February 22, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from to
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COMMISSION FILE NUMBER 0-10558
ALPHA MICROSYSTEMS
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-3108178
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2722 SOUTH FAIRVIEW STREET, SANTA ANA, CA 92704
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (714) 957-8500
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK
(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 the 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. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant based on the closing sale price of its common stock on May 14, 1998
on the Nasdaq National Market, a date within 60 days prior to the date of
filing, was $33,757,348.
As of May 14, 1998, there were 10,914,112 shares of the registrant's common
stock outstanding.
The purpose of this amendment is to amend Item 14(a)(1) Notes to Consolidated
Financial Statements, Note No. 7 Shareholders' Equity to read as set forth
herein.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) The following financial statements are referenced in Part II Item 8
and submitted herewith:
PAGE NUMBER
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Notes to Consolidated Financial Statements 34
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ALPHA MICROSYSTEMS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 22, 1998
7. SHAREHOLDERS' EQUITY
COMMON STOCK
Under the terms of the Company's Stock Incentive Award Plan, the Board of
Directors is authorized to award up to 150,000 restricted shares of common
stock. These shares are issued subject to certain transfer restrictions,
including the passage of time, ranging from one to ten years. The Company has
granted 131,050 restricted shares of common stock to certain employees, without
cost. The shares are subject to forfeiture under certain circumstances, and 25%
of such shares will vest each year, beginning on the date of grant. As of
February 22, 1998, all restricted shares are vested. Unearned compensation was
recognized for the market value of the restricted shares on the date of grant
and is amortized ratably over the vesting period. The unamortized unearned
compensation value was recorded as a reduction of shareholders' equity in the
accompanying financial statements.
The Company's 1996 Non-employee Director Stock Compensation Plan provides to
non-employee directors the opportunity to receive shares of common stock in lieu
of cash compensation paid for services as a director, in an amount equal to the
value of cash compensation otherwise paid for service as a director. The total
number of shares reserved and available is 100,000 shares.
At February 22, 1998, 1,542,672 shares of the Company's common stock is reserved
for issuance pursuant to outstanding warrants and the Company's stock option
Plans.
WARRANTS
On May 14, 1996, the Company filed a Registration Statement to register
4,442,069 shares of Common Stock issuable upon the exercise of warrants issued
by the Company, of which 4,082,069 were issued in connection with its November
29, 1993, Shareholder Rights Offering and subsequent Public Offering, and the
remainder were issued in consideration of services rendered to the Company. The
Company redeemed its Redeemable Public Warrants on June 17, 1996, pursuant to
its notice of redemption issued on May 14, 1996. Total shares issued from the
exercise of redeemed warrants and other concurrently exercised warrants were
4,103,719, resulting in total gross proceeds of approximately $10,102,000. The
proceeds from the exercise of all warrants, net of expenses, were $9,486,000.
In connection with a public offering in fiscal 1993, Company granted to its
underwriter a warrant to purchase 139,315 Units, with an exercise price of $1.95
per Unit, expiring November 1, 1998. Each Unit consists of one share of common
stock and one Underlying Warrant to purchase one share of common stock. The
exercise price of the Underlying Warrants is $2.50 and expire November 1, 1998.
Pursuant to the terms of an amendment to the loan agreement signed in October
1996, the Company agreed to issue 25,000 warrants to the bank which are
exercisable for five years at $1.625 per share. Also in October 1996, the
Company issued a warrant to purchase 300,000 shares of common stock exercisable
for five years at $3.00 per share to its financial advisor.
As of February 22, 1998, the Company has 464,315 warrants outstanding (603,630
including the Underlying Warrants) and 1,004,939 options outstanding, or a total
of 1,469,254 shares under options and warrants (1,608,569 including the
Underlying Warrants).
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OPTIONS
The Company has a non-qualified stock option plan (the "1984 Plan") which
provides for the grant, from time to time, of options to purchase up to 465,000
shares of Common Stock to eligible employees. In June 1996, the Board terminated
the 1984 Plan and no further options may be granted. Outstanding options will
remain exercisable.
As of February 22, 1998, the Company's 1993 Employee Stock Option Plan provides
for the Board to award up to 925,000 shares of common stock to employees of the
Company.
The Company's 1993 Director Stock Plan provides to non-employee directors
automatic grants of non-statutory stock options at exercise prices equal to the
fair market value of the Company's common stock on the date of grant, up to an
aggregate of 100,000 shares of common stock.
The following table contains a summary of transactions related to Incentive and
Non-Qualified Stock Options for the fiscal years 1996, 1997, and 1998:
<TABLE>
<CAPTION>
NON-QUALIFIED STOCK OPTIONS INCENTIVE STOCK OPTIONS
------------------------------ -----------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE
SHARES PRICE PER SHARE SHARES PRICE PER SHARE
------- ---------------- ------ ----------------
<S> <C> <C> <C> <C>
Outstanding at
February 26, 1995 327,653 $1.79 328,702 $1.88
Granted 15,000 $1.25 122,500 $1.47
Expired/canceled (110,568) $1.63 (136,763) $1.88
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Outstanding at
February 25, 1996 232,085 $1.64 314,439 $1.72
Granted 7,500 $2.69 621,000 $2.62
Expired/canceled (39,315) $2.84 (222,500) $2.50
Exercised (37,770) $1.73 (25,000) $1.63
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Outstanding at
February 23, 1997 162,500 $1.38 687,939 $2.28
Granted 7,500 $1.43 330,000 $1.23
Expired/canceled (10,000) $1.94 (133,000) $1.61
Exercised (40,000) $0.94 -- --
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Outstanding at
February 22, 1998 120,000 $1.71 884,939 $1.99
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Exercisable at
February 25, 1996 205,585 $1.78 253,189 $1.78
February 23, 1997 155,000 $1.57 313,439 $2.07
February 22, 1998 114,375 $1.74 380,939 $2.25
Available for grant:
February 25, 1996 236,978 235,561
February 23, 1997 57,500 212,061
February 22, 1998 50,000 15,061
</TABLE>
Options outstanding at February 22, 1998, under the non-qualified stock option
plan are exercisable at $1.94. The weighted average remaining life of these
options as of year-end is approximately 0.1 years.
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Options outstanding at February 22, 1998, under the incentive stock option plan
have exercise prices and weighted average remaining lives as follows: 22,500
shares at $0.78 with a remaining life of 2.2 years, 409,439 shares at $1.38 to
$1.88 with a remaining life of 2.6 years, 303,000 shares at $3.00 per share with
a remaining life of 3.3 years and 150,000 shares at $1.03 per share with a
remaining life of 4.8 years.
Pro forma information regarding net loss and loss per share is required by
Statement 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method of that Statement. The fair
value of these options was estimated at the date of grant using a Black-Scholes
option pricing method with the following weighted average assumptions: risk-free
interest rate of 6% for 1998, 1997, and 1996; volatility factors of the expected
market price of the Company's common stock of 0.6 for all three years; and a
weighted average expected life of the options of five years.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information follows:
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION) 1998 1997 1996
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<S> <C> <C> <C>
Pro forma net loss $(3,516) $(2,873) $(3,575)
Pro forma basic and diluted loss per share: $ (0.32) $ (0.30) $ (0.54)
</TABLE>
The per share weighted average fair value of options granted during 1998, 1997,
and 1996 were $0.71, $1.48, and $0.66, respectively. The effect of applying
Statement 123 for providing pro forma disclosures is not likely to be
representative of the effects on reported net income (loss) for future years.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: July 15, 1998 ALPHA MICROSYSTEMS
By: /s/ DOUGLAS J. TULLIO
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Douglas J. Tullio
President, Chief Executive Officer
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