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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO FORM 10-KSB
(Mark One)
[X] AMENDMENT TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE YEAR ENDED DECEMBER 31, 1999
Commission file number 0-10294
INTERNATIONAL LOTTERY & TOTALIZATOR SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
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CALIFORNIA 95-3276269
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2131 FARADAY AVENUE
CARLSBAD, CALIFORNIA 92008-7297
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code (760) 931-4000
Registrant's home page http://www.ilts.com
Securities registered pursuant to Section 12(g) of the Act:
(Title of Class)
COMMON SHARES
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 [ ]
Aggregate market value of voting stock held by non-affiliates of the Registrant
as of March 23, 2000 was approximately $6,184,299. Revenues for the year ended
December 31, 1999 were $5,650,000.
Number of common shares outstanding at March 23, 2000 was 12,943,000
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1999 Annual Report to Stockholders of the Registrant:
Part II
Portions of the Proxy Statement for 2000 Annual Meeting of Stockholders:
Part III
Transitional Small Business Disclosure Format Yes[ ] No [X]
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. Yes [ ]
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PART III
Pursuant to General Instruction E(3) of Form 10-KSB, the information required in
Part III, which is not contained in Registrant's Form 10-KSB filed on 30 March
2000, is herein provided in this Amendment No. 1 as follows:
ITEMS 9 & 11. DIRECTORS AND SECURITY OWNERSHIP
The following table sets forth certain information regarding the
beneficial ownership of the Company's common shares as of April 1, 2000 by (i)
each director of the Company, (ii) certain executive officers, (iii) executive
officers and directors of the Company as a group and (iv) each person or entity
who is a beneficial owner of more than 5% of the Company's outstanding common
shares. With respect to each director of the Company, the table also sets forth
his age, the year he was first elected as a director, employment history for the
past five years, and other directorships. For purposes of this report,
beneficial ownership of securities is defined in accordance with the rules of
the Securities and Exchange Commission and means generally the power to vote or
exercise investment discretion with respect to securities, regardless of any
economic interests therein. Except as otherwise indicated, the Company believes
that the beneficial owners of the securities listed below have sole investment
and voting power with respect to such shares, subject to community property laws
where applicable.
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SHARES OF COMMON STOCK
BENEFICIALLY OWNED AS OF APRIL 1, 2000
--------------------------------------
Percent
Name of Beneficial Owner Amount of Class
----------------- ----------
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Nominees for Director
FREDERICK A. BRUNN, 55, Director since 1989. 37,002 (A) *
President from February 1994 to May 1997. Chief Executive Officer, San Diego
Manufacturing Extension Center April 1998 to September 1999. Partner, California
Motorcycle Tours, 1999 to Present.
CHAN KIEN SING, 43, Director since June 1993. 12,668 (B) *
Group Executive Director of Berjaya Group Berhad since 1990.
THEODORE A. JOHNSON, 59, Director since 1979. President, 31,274 (B) *
Minnesota Cooperation Office for Small Business and Job Creation, Inc. from 1980
to present. Director of Surgidyne, Inc. & Humanetics Corp. for at least prior
five years.
M. MARK MICHALKO, 45, Director since February 1994 47,184 (C) *
President since May, 1997, Executive Vice President, from February 1994 to May
1997
ALAIN K. K. LEE, 44, Director since April 1999. Executive Vice
President, Roadhouse Grill, Inc. since July, 1998 and Director 0 (E) *
since January 1998. Director of several companies in the food industry
affiliated with Berjaya. Berjaya Group Chief Financial Officer and General
Manager of several Berjaya Group subsidiary companies from 1990 to 1997.
NG FOO LEONG, 49, Director since June 1993. 12,668 (B) *
Executive Director, Sports Toto Malaysia Sdn. Bhd., a lottery gaming company
from 1985 to present.
LEONARD G. MORRISSEY, 65, Consultant to the Company 26,668 (D) *
since November 1997. Senior Vice President of GTech Corporation, a lottery
service company, for five years prior to 1995.
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MARTIN J. O'MEARA, JR., 71, Director since 1979. 124,110 (B) *
President, The Budget Plan, Inc., a privately-owned company engaged in the
consumer loan business and has been so employed for more than five years.
MICHAEL G.R. SANDBERG, 72, Director since 1987. 40,335 (B) *
Private investor. Chairman and Chief Executive of the Hong Kong and Shanghai
Banking Corporation from 1977 to 1986. Director of Broadstreet Inc. a bank
holding company.
Named Executive Officers (excluding those listed above)
TIMOTHY R. GROTH, 51 19,421 (C) *
All directors and executive officers as a group (10 persons) 341,797 (A)(B)(C)(D) 2.5%
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SHARES OF COMMON STOCK
BENEFICIALLY OWNED AS OF APRIL 1, 2000
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Percent
Significant Shareholder Amount of Class
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BERJAYA LOTTERY MANAGEMENT (H.K.) LIMITED (BERJAYA) 9,245,317 (E) 71.4%
Level 28, Menara Shahzan Insas
Jalan Sultan Ismail
5020 Kuala Lumpur, Malaysia
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(A) Includes 4002 options exercisable under the 1997 Directors Option Plan and
33,000 options exercisable under Mr. Brunn's consulting agreement. (See
Certain Relationships and Related Transactions herein.)
(B) Includes a number of shares of Common Stock subject to unexercised stock
options which were exercisable within 60 days under the Company's 1997,
Directors Stock Option Plan which for each such outside director is 12,668
and 50,672 for all such directors as a group.
(C) Includes the number of shares of Common Stock subject to unexercised stock
options which are exercisable within 60 days under the Company's 1990
Employee Stock Option Plan as follows: 14,003 for Mr. Groth; 39,670 for Mr.
Michalko, totaling 53,673 for all executive officers as a group.
(D) Includes unexercised options 16,668 shares of Common Stock exercisable
within 60 days pursuant to Mr. Morrissey's consultant agreement. (See
Certain Relationships and Related Transactions herein).
(E) Messrs. Chan Kien Sing, Alain Lee and Ng Foo Leong are employees of an
affiliate of Berjaya. All three individuals disclaim beneficial ownership
of such shares.
* Less than one percent of the outstanding common shares.
During 1999, four meetings of the Board of Directors were held. Each
incumbent director attended all meetings of the Board of Directors held during
the year in which he was a director, except Lord Sandberg missed one meeting, Ng
Foo Leong missed two meetings and Chan Kien Sing missed two meetings. The
Company has an Executive Committee which consists of Messrs. Chan, Johnson and
Michalko. The Executive Committee held no meetings during the year. The
Executive Committee may exercise all the authority of the Board in the
management of the Company except for matters expressly reserved by law for board
action. The Board also has an Executive Compensation Committee consisting of
Messrs. Johnson and Chan. The Executive Compensation Committee met once during
the year. Its function is to establish compensation for all executive officers
of the Company and administer the Company's 1990 Employee Stock Option Plan. The
Company has an Audit Committee consisting of Messrs. Sandberg, Chan, Johnson and
Lee, which held one meeting during the year. The Audit Committee provides advice
and assistance regarding accounting, auditing and financial reporting practices
of the Company. Each year it recommends to the Board a firm of independent
public accountants to serve as auditors. The Audit Committee reviews with such
auditors the scope and result of their audit, fees for services and independence
in servicing the Company. The Company also has a Nominating Committee consisting
of Messrs. Chan, O'Meara, Johnson and Michalko. The Nominating Committee held
one meeting during the year. The Nominating Committee seeks out, evaluates and
recommends to the Board
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qualified nominees for election as directors of the Company and considers other
matters pertaining to the size and composition of the Board. The Nominating
Committee will give appropriate consideration to qualified persons recommended
by shareholders for nomination as directors provided that such recommendations
are accompanied by information sufficient to enable the Nominating Committee to
evaluate the qualifications of the nominee. The Affiliations Committee reviews
and approves the fairness to the Company of any transactions between the Company
and Berjaya. The members of the Committee are Messrs. Johnson, Brunn and
O'Meara. The Affiliations Committee held two meetings in 1999.
ITEM 10. EXECUTIVE COMPENSATION
The following table shows, for the years ended December 31, 1999, 1998,
and 1997, the compensation earned by the president and the only executive
officer of the Company earning in excess of $100,000 during 1999:
SUMMARY COMPENSATION TABLE
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LONG TERM COMPENSATION
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ANNUAL COMPENSATION AWARDS PAYOUTS
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Name and Principal Number of All Other
Position(s) Year Salary(1) Bonus(2) Options(3) Compensation(4)
--------------------- ---- -------- -------- ---------- ---------------
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M. Mark Michalko 1999 $151,421 0 65,000 0
President & Chief 1998 $144,518 0 0 0
Executive Office and 1997 $136,836 $11,917 80,000 $4,235
Director
Timothy R. Groth 1999 $122,762 0 30,000 0
Vice President, 1998 $123,852 0 0 0
Technical Operations 1997 $109,464 $4,270 20,000 $3,184
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(1) Perquisites in 1999, 1998 and 1997 are included under Salary and did not
exceed the lesser of $50,000 or 10% of the total salary and bonus for any
such officer.
(2) Amounts reflect lump sum distributions paid in November 1997 under a prior
compensation plan.
(3) All awards are incentive stock options, granted pursuant to the Company's
1990 Employee Stock Option Plan.
(4) All amounts are Company matching contributions to the Employee Stock Bonus
401(k) Plan in 1997. There were no Company matching contributions in 1998
and 1999.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Berjaya Transactions
The Company has entered into sales agreements to supply
terminals, spares and services to entities in which the Company's largest
shareholder, Berjaya, has a significant equity interest. Revenues related to
these agreements totaled $0.5 million in 1999. Payments received in 1999 were
$0.75 million. Included in the Company's accounts receivable and costs in excess
of billings on uncompleted contracts was $0.17 million at December 31, 1999,
relating to these customers. Included in the above amounts are software support
agreements, which the Company has with Natural Avenue Sdn Bhd of Malaysia,
which, during 1999 paid, and continues to pay, $4,700 per month to the Company.
During 1996 the Company entered into an agreement with Berjaya to
purchase specific inventory on behalf of Berjaya to enable the Company to
satisfy certain future potential orders in a timely manner. Title to the
inventory purchased resides with Berjaya. Advances received in excess of
inventory purchased aggregated approximately $304 thousand as of December 31,
1999.
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Consulting Agreements
Mr. Brunn
Pursuant to a Consulting Agreement in connection with Mr. Brunn's
resignation as President of the Company in 1996, the Company further agreed to
continue Mr. Brunn's health benefits through November, 1999 and to cause the
stock options held by Mr. Brunn to become immediately vested and exercisable and
to remain exercisable through the earlier of the original expiration date or May
16, 2001.
Mr. Morrissey
In November 16, 1998, the Company and Mr. Morrissey entered into a
Consulting Agreement pursuant to which Mr. Morrissey was paid a consulting fee
of $52,000 during 1999. In addition, Mr. Morrissey has been granted a
non-qualified stock option for 50,000 shares at the then fair market value of
$1.19 per share, which vested in quarterly installments during 1999 and is
exercisable beginning one year after the installment vesting date. The Agreement
also provided that Mr. Morrissey will be paid a commission from 1% to 3% of the
contract value (depending on the degree of contribution by Mr. Morrissey) of
specific prospective lottery contracts which are awarded to the Company. No
amounts were paid under this provision during 1999.
During the year 2000, Mr. Morrissey will continue as a consultant and
will receive an additional option grant the terms of which have not been
finalized.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
Contained in Form 10-KSB filed on March 30, 2000
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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.
INTERNATIONAL LOTTERY & TOTALIZATOR SYSTEMS, INC.
By: /s/ M. Mark Michalko
-------------------------------
M. Mark Michalko
President
Dated: April 28, 2000
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
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Signature Title Date
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/s/ Theodore A. Johnson Chairman of the Board April 28, 2000
- ----------------------------
Theodore A. Johnson
/s/ M. Mark Michalko Director, President April 28, 2000
- ---------------------------- Principal Financial Officer
M. Mark Michalko
/s/ Alain K.K. Lee Director April 28, 2000
- ----------------------------
Alain K. K. Lee
/s/ Frederick A. Brunn Director April 28, 2000
- ----------------------------
Frederick A. Brunn
/s/ Director
- ----------------------------
Ng Foo Leong
/s/ Martin J. O'Meara, Jr. Director April 28, 2000
- ----------------------------
Martin J. O'Meara, Jr.
/s/ Leonard G. Morrissey Director April 28, 2000
- ----------------------------
Leonard G. Morrissey
/s/ Director
- ----------------------------
Michael G. R. Sandberg
/s/ Chan Kien Sing Director April 28, 2000
- ----------------------------
Chan Kien Sing
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